(State of Organization) | (I.R.S. Employer Identification Number) | ||||
(Address of principal executive offices) | (Zip Code) |
PART I FINANCIAL INFORMATION | ||||||||
PART II OTHER INFORMATION | ||||||||
HARTMAN vREIT XXI, INC. AND SUBSIDIARIES | |||||||||||
CONSOLIDATED BALANCE SHEETS | |||||||||||
(in thousands, except share data) | |||||||||||
June 30, 2020 | December 31, 2019 | ||||||||||
(Unaudited) | |||||||||||
ASSETS | |||||||||||
Real estate assets, at cost | $ | $ | |||||||||
Accumulated depreciation and amortization | ( | ( | |||||||||
Real estate assets, net | |||||||||||
Cash and cash equivalents | |||||||||||
Restricted cash | |||||||||||
Note receivable - related party | |||||||||||
Investment in unconsolidated entities | |||||||||||
Deferred lease commissions, net | |||||||||||
Accrued rent and accounts receivable, net | |||||||||||
Prepaid expenses and other assets | |||||||||||
Acquisition deposits | |||||||||||
Due from related parties | |||||||||||
Total assets | $ | $ | |||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Liabilities: | |||||||||||
Notes payable, net | $ | $ | |||||||||
Accounts payable and accrued expenses | |||||||||||
Tenants' security deposits | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies | |||||||||||
Special limited partnership interests | |||||||||||
Stockholders' equity: | |||||||||||
Common stock, Class A, $ | |||||||||||
Common stock, Class T, $ | |||||||||||
Preferred stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated distributions and net loss | ( | ( | |||||||||
Total stockholders' equity | |||||||||||
Total liabilities and total equity | $ | $ | |||||||||
The accompanying notes are an integral part of these consolidated financial statements. |
HARTMAN vREIT XXI, INC. AND SUBSIDIARIES | |||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||
(Unaudited, in thousands, except per share data) | |||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||
Revenues | |||||||||||||||||
Rental revenues | $ | $ | $ | $ | |||||||||||||
Tenant reimbursements and other revenues | |||||||||||||||||
Total revenues | |||||||||||||||||
Expenses (income) | |||||||||||||||||
Property operating expenses | |||||||||||||||||
Asset management fees | |||||||||||||||||
Organization and offering costs | |||||||||||||||||
Real estate taxes and insurance | |||||||||||||||||
Depreciation and amortization | |||||||||||||||||
General and administrative | |||||||||||||||||
Interest expense | |||||||||||||||||
Interest and dividend income | ( | ( | ( | ( | |||||||||||||
Total expenses, net | |||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||
Basic and diluted loss per common share: | |||||||||||||||||
Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||
Weighted average number of common shares outstanding, basic and diluted | |||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements. |
HARTMAN vREIT XXI, INC. AND SUBSIDIARIES | |||||||||||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | |||||||||||||||||
(Unaudited, in thousands) | |||||||||||||||||
Class A and Class T Common Stock | |||||||||||||||||
Shares | Amount | Additional Paid-in Capital | Accumulated Distributions And Net Loss | Total | |||||||||||||
Balance at March 31, 2019 | $ | $ | $ | ( | $ | ||||||||||||
Issuance of common shares | — | ||||||||||||||||
Redemptions | ( | — | ( | — | ( | ||||||||||||
Selling commissions | — | — | ( | — | ( | ||||||||||||
Dividends and distributions (stock) | — | — | ( | ( | |||||||||||||
Dividends and distributions (DRP) | — | — | — | ( | ( | ||||||||||||
Dividends and distributions (cash) | — | — | ( | ( | |||||||||||||
Net loss | — | — | — | ( | ( | ||||||||||||
Balance at June 30, 2019 | $ | $ | $ | ( | $ | ||||||||||||
Class A and Class T Common Stock | |||||||||||||||||
Shares | Amount | Additional Paid-in Capital | Accumulated Distributions And Net Loss | Total | |||||||||||||
Balance at March 31, 2020 | $ | $ | $ | ( | $ | ||||||||||||
Issuance of common shares | — | ||||||||||||||||
Redemptions | ( | — | ( | — | ( | ||||||||||||
Selling commissions | — | — | ( | — | ( | ||||||||||||
Dividends and distributions (DRP) | — | — | — | ( | ( | ||||||||||||
Dividends and distributions (cash) | — | — | — | ( | ( | ||||||||||||
Net loss | — | — | — | ( | ( | ||||||||||||
Balance at June 30, 2020 | $ | $ | $ | ( | $ | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements. |
HARTMAN vREIT XXI, INC. AND SUBSIDIARIES | |||||||||||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | |||||||||||||||||
(Unaudited, in thousands) | |||||||||||||||||
Class A and Class T Common Stock | |||||||||||||||||
Shares | Amount | Additional Paid-in Capital | Accumulated Distributions And Net Loss | Total | |||||||||||||
Balance at December 31, 2018 | $ | $ | $ | ( | $ | ||||||||||||
Issuance of common shares | — | ||||||||||||||||
Redemptions | ( | — | ( | — | ( | ||||||||||||
Selling commissions | — | — | ( | — | ( | ||||||||||||
Dividends and distributions (stock) | — | — | — | ( | ( | ||||||||||||
Dividends and distributions (DRP) | — | — | — | ( | ( | ||||||||||||
Dividends and distributions (cash) | — | — | — | ( | ( | ||||||||||||
Net loss | — | — | — | ( | ( | ||||||||||||
Balance at June 30, 2019 | $ | $ | $ | ( | $ | ||||||||||||
Class A and Class T Common Stock | |||||||||||||||||
Shares | Amount | Additional Paid-in Capital | Accumulated Distributions And Net Loss | Total | |||||||||||||
Balance at December 31, 2019 | $ | $ | $ | ( | $ | ||||||||||||
Issuance of common shares | — | ||||||||||||||||
Redemptions | ( | — | ( | — | ( | ||||||||||||
Selling commissions | — | — | ( | — | ( | ||||||||||||
Dividends and distributions (DRP) | — | — | — | ( | ( | ||||||||||||
Dividends and distributions (cash) | — | — | — | ( | ( | ||||||||||||
Net loss | — | — | — | ( | ( | ||||||||||||
Balance at June 30, 2020 | $ | $ | $ | ( | $ | ||||||||||||
The accompanying notes are an integral part of these consolidated financial statements. |
HARTMAN vREIT XXI, INC. AND SUBSIDIARIES | |||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
(Unaudited, in thousands) | |||||||||||
Six Months Ended June 30, | |||||||||||
2020 | 2019 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | |||||||||||
Stock based compensation | |||||||||||
Depreciation and amortization | |||||||||||
Deferred loan and lease commission costs amortization | |||||||||||
Bad debt provision (recovery), net | ( | ||||||||||
Changes in operating assets and liabilities: | |||||||||||
Accrued rent and accounts receivable | ( | ( | |||||||||
Deferred lease commissions | ( | ( | |||||||||
Prepaid expenses and other assets | ( | ||||||||||
Accounts payable and accrued expenses | ( | ||||||||||
Due to/from related parties | ( | ||||||||||
Tenants' security deposits | ( | ||||||||||
Net cash (used in) provided by operating activities | ( | ||||||||||
Cash flows from investing activities: | |||||||||||
Acquisition deposit | ( | ||||||||||
Additions to real estate | ( | ( | |||||||||
Note receivable - related party | ( | ||||||||||
Net cash used in investing activities | ( | ( | |||||||||
Cash flows from financing activities: | |||||||||||
Proceeds from issuance of common stock | |||||||||||
Payment of redemption of common stock | ( | ( | |||||||||
Dividends and distributions paid in cash | ( | ( | |||||||||
Payment of selling commissions | ( | ( | |||||||||
Borrowings under insurance premium finance note | |||||||||||
Deferred loan costs paid | ( | ( | |||||||||
Escrowed investor proceeds | ( | ||||||||||
Subscriptions for common stock | |||||||||||
Proceeds from revolving credit facility | |||||||||||
Repayments under revolving credit facility | ( | ( | |||||||||
Net cash provided by financing activities | |||||||||||
Net change in cash and cash equivalents and restricted cash | |||||||||||
Cash and cash equivalents and restricted cash, beginning of period | |||||||||||
Cash and cash equivalents and restricted cash, end of period | $ | $ | |||||||||
Supplemental cash flow information: | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Supplemental disclosures of non-cash investing and financing activities: | |||||||||||
Increase in distributions payable | $ | $ | |||||||||
Distributions paid in stock | $ | $ | |||||||||
The accompanying notes are an integral part of these consolidated financial statements. |
June 30, 2020 | December 31, 2019 | |||||||
Land | $ | $ | ||||||
Buildings and improvements | ||||||||
In-place lease value intangible | ||||||||
Less accumulated depreciation and amortization | ( | ( | ||||||
Total real estate assets, net | $ | $ |
June 30, 2020 | December 31, 2019 | |||||||
In-place lease value intangible | $ | $ | ||||||
In-place leases – accumulated amortization | ( | ( | ||||||
Acquired in-place lease intangible assets, net | $ | $ |
As reported | Revised | |||||||
Land | $ | $ | ||||||
Buildings and improvements | ||||||||
In-place lease intangible | ||||||||
Total | $ | $ |
Quarterly Period ended | Year ended | |||||||||||||||||||||||||
March 31, 2019 | June 30, 2019 | September 30, 2019 | December 31, 2018 | |||||||||||||||||||||||
As reported | Revised | As reported | Revised | As reported | Revised | As reported | Revised | |||||||||||||||||||
Land | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Building and improvements | ||||||||||||||||||||||||||
In-place lease value intangible | ||||||||||||||||||||||||||
Less accumulated amortization | ( | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||
Total real estate assets, net | $ | $ | $ | $ | $ | $ | $ | $ |
Quarterly Period ended | ||||||||||||||||||||
March 31, 2019 | June 30, 2019 | September 30, 2019 | ||||||||||||||||||
As reported | Revised | As reported | Revised | As reported | Revised | |||||||||||||||
Depreciation and amortization | $ | $ | $ | $ | $ | $ | ||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||
Three months ended March 31, 2019 | Six months ended June 30, 2019 | Nine months ended September 30, 2019 | ||||||||||||||||||
As reported | Revised | As reported | Revised | As reported | Revised | |||||||||||||||
Depreciation and amortization | $ | $ | $ | $ | $ | $ | ||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( |
June 30, 2020 | December 31, 2019 | |||||||
Tenant receivables | $ | $ | ||||||
Accrued rent | ||||||||
Allowance for uncollectible accounts | ( | ( | ||||||
Accrued rents and accounts receivable, net | $ | $ |
June 30, | Minimum Future Rents | ||||
2021 | $ | ||||
2022 | |||||
2023 | |||||
2024 | |||||
2025 | |||||
Thereafter | |||||
Total | $ |
Property/Facility | Current Maturity | Rate (1) | June 30, 2020 | December 31, 2019 | |||||||||||||
Richardson Tech Center (2) | March 2021 | L + | $ | $ | |||||||||||||
Master Credit Facility Agreement - EWB (3) | December 2021 | P - | |||||||||||||||
Master Credit Facility Agreement - EWB (4) | March 2023 | P - | |||||||||||||||
Less unamortized loan costs | ( | ( | |||||||||||||||
$ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||
Numerator: | ||||||||||||||
Net loss attributable to common stockholders (in thousands) | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
Denominator: | ||||||||||||||
Basic weighted average shares outstanding (in thousands) | ||||||||||||||
Basic loss per common share | $ | ( | $ | ( | $ | ( | $ | ( |
Period | Cash (1) | DRP & Stock (2) | Total | ||||||||
First Quarter 2017 | $ | $ | $ | ||||||||
Second Quarter 2017 | |||||||||||
Third Quarter 2017 | |||||||||||
Fourth Quarter 2017 | |||||||||||
First Quarter 2018 | |||||||||||
Second Quarter 2018 | |||||||||||
Third Quarter 2018 | |||||||||||
Fourth Quarter 2018 | |||||||||||
First Quarter 2019 | |||||||||||
Second Quarter 2019 | |||||||||||
Third Quarter 2019 | |||||||||||
Fourth Quarter 2019 | |||||||||||
First Quarter 2020 | |||||||||||
Second Quarter 2020 | |||||||||||
Total | $ | $ | $ |
Property type | April 2020 | May 2020 | June 2020 | July 2020 | ||||||||||
Retail | 89.6 | % | 94.0 | % | 96.9 | % | 98.3 | % | ||||||
Flex | 99.6 | % | 98.7 | % | 86.8 | % | 90.9 | % | ||||||
Office | 99.4 | % | 98.9 | % | 99.3 | % | 92.3 | % | ||||||
Total | 98.7 | % | 98.5 | % | 98.5 | % | 92.7 | % |
Property Name | Space Type | 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 | ||||||||||||||||
Village Pointe | Retail | San Antonio | 54,246 | 79 | % | $ | 599 | $ | 13.93 | $ | 13.70 | ||||||||||||
Richardson Tech Center | Flex/R&D | Dallas | 96,660 | 65 | % | 518 | 8.24 | 8.20 | |||||||||||||||
Spectrum | Office | San Antonio | 175,390 | 85 | % | 5,607 | 37.46 | 37.14 | |||||||||||||||
11211 Katy Freeway | Office | Houston | 78,642 | 53 | % | 639 | 15.46 | 15.39 | |||||||||||||||
1400 Broadfield | Office | Houston | 102,893 | 67 | % | 1,368 | 19.74 | 19.28 | |||||||||||||||
16420 Park Ten Place | Office | Houston | 83,760 | 48 | % | 939 | 23.48 | 21.43 | |||||||||||||||
Willowbrook Building | Office | Houston | 67,581 | 35 | % | 510 | 21.64 | 20.38 | |||||||||||||||
Timberway II | Office | Houston | 130,828 | 69 | % | 1,833 | 20.44 | 19.89 | |||||||||||||||
One Park Ten | Office | Houston | 34,089 | 42 | % | 288 | 19.86 | 19.74 | |||||||||||||||
Two Park Ten | Office | Houston | 57,126 | 83 | % | 1,048 | 22.12 | 21.41 | |||||||||||||||
Grand Total | 881,215 | 66 | % | $ | 13,349 | $ | 22.97 | $ | 22.46 |
(in thousands) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||
2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||
Same Store | ||||||||||||||||||||
Total revenues | $ | 1,577 | $ | 1,521 | $ | 56 | $ | 3,306 | $ | 3,103 | $ | 203 | ||||||||
Property operating expenses | 590 | 582 | 8 | 1,190 | 1,224 | (34) | ||||||||||||||
Asset management fees | 63 | 63 | — | 126 | 125 | 1 | ||||||||||||||
Real estate taxes and insurance | 290 | 243 | 47 | 542 | 471 | 71 | ||||||||||||||
General and administrative | 54 | 46 | 8 | 118 | 111 | 7 | ||||||||||||||
Same Store NOI | $ | 580 | $ | 587 | $ | (7) | $ | 1,330 | $ | 1,172 | $ | 158 | ||||||||
Reconciliation of Net loss to Same Store NOI | ||||||||||||||||||||
Net loss | $ | (581) | $ | (247) | $ | (334) | $ | (1,019) | $ | (508) | $ | (511) | ||||||||
Net loss from properties purchased in Q4 2019 | (510) | — | (510) | (941) | — | (941) | ||||||||||||||
General and administrative | 89 | 30 | 59 | 220 | 99 | 121 | ||||||||||||||
Organization and offering costs | 70 | 65 | 5 | 86 | 67 | 19 | ||||||||||||||
Depreciation and amortization | 1,597 | 717 | 880 | 3,059 | 1,353 | 1,706 | ||||||||||||||
Interest expense | 242 | 117 | 125 | 484 | 303 | 181 | ||||||||||||||
Interest and dividend income | (327) | (95) | (232) | (559) | (142) | (417) | ||||||||||||||
Same Store NOI | $ | 580 | $ | 587 | $ | (7) | $ | 1,330 | $ | 1,172 | $ | 158 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||
Net loss | $ | (581) | $ | (247) | $ | (1,019) | $ | (508) | ||||||
Depreciation and amortization of real estate assets | 1,597 | 717 | 3,059 | 1,353 | ||||||||||
FFO attributable to unconsolidated entity, Hartman SPE, LLC (1) | 261 | 120 | 397 | 407 | ||||||||||
Funds from operations (FFO) | 1,277 | 590 | 2,437 | 1,252 | ||||||||||
Organization and offering costs | 70 | 65 | 86 | 67 | ||||||||||
Modified funds from operations (MFFO) | $ | 1,347 | $ | 655 | $ | 2,523 | $ | 1,319 |
Hartman SPE, LLC (1) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||
Net Income (loss) | $ | 4,292 | $ | (1,236) | $ | 3,303 | $ | (1,244) | ||||||
Depreciation and amortization expense | $ | 6,268 | $ | 6,081 | $ | 12,759 | $ | 12,531 | ||||||
FFO | $ | 10,560 | $ | 4,845 | $ | 16,062 | $ | 11,287 | ||||||
Weighted average ownership | 2.47 | % | 2.47 | % | 2.47 | % | 3.61 | % |
Period | Cash (1) | DRP & Stock (2) | Total | ||||||||
First Quarter 2017 | $ | 27,000 | $ | 19,000 | $ | 46,000 | |||||
Second Quarter 2017 | $ | 62,000 | $ | 72,000 | $ | 134,000 | |||||
Third Quarter 2017 | $ | 105,000 | $ | 115,000 | $ | 220,000 | |||||
Fourth Quarter 2017 | $ | 127,000 | $ | 162,000 | $ | 289,000 | |||||
First Quarter 2018 | $ | 154,000 | $ | 192,000 | $ | 346,000 | |||||
Second Quarter 2018 | $ | 182,000 | $ | 245,000 | $ | 427,000 | |||||
Third Quarter 2018 | $ | 215,000 | $ | 293,000 | $ | 508,000 | |||||
Fourth Quarter 2018 | $ | 237,000 | $ | 345,000 | $ | 582,000 | |||||
First Quarter 2019 | $ | 305,000 | $ | 388,000 | $ | 693,000 | |||||
Second Quarter 2019 | $ | 388,000 | $ | 484,000 | $ | 872,000 | |||||
Third Quarter 2019 | $ | 499,000 | $ | 646,000 | $ | 1,145,000 | |||||
Fourth Quarter 2019 | $ | 746,000 | $ | 629,000 | $ | 1,375,000 | |||||
First Quarter 2020 | $ | 771,000 | $ | 543,000 | $ | 1,314,000 | |||||
Second Quarter 2020 | $ | 790,000 | $ | 605,000 | $ | 1,395,000 | |||||
Total | $ | 4,608,000 | $ | 4,738,000 | $ | 9,346,000 |
Total Number of Shares Requested to be Redeemed (1) | Total Number of Shares Redeemed | Average Price Paid per Share (2) | Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program (3) | |||||||||||
April 2020 | — | 5,058 | $ | 11.70 | ||||||||||
May 2020 | 2,520 | — | $ | — | ||||||||||
June 2020 | 6,116 | — | $ | — | ||||||||||
Total | 8,636 | 5,058 | $ | 11.70 |
Type of Expense | Amount (in thousands) | Estimated/Actual | ||||||
Selling commissions and dealer manager fees | $ | 6,327 | Actual | |||||
Finders’ fees | — | — | ||||||
Expenses paid to or for underwriters | — | — | ||||||
Other organization and offering costs | $ | 1,464 | Actual | |||||
Total expenses | $ | 7,791 |
Exhibit | Description | |||||||
3.1.1 | ||||||||
3.1.2 | ||||||||
3.2 | ||||||||
31.1* | ||||||||
31.2* | ||||||||
32.1* | ||||||||
101.INS* | XBRL Instance Document | |||||||
101.SCH* | XBRL Taxonomy Extension Schema Document | |||||||
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |||||||
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |||||||
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Par value of common stock (in dollars per share) | $ 0.01 | |
Shares of common stock authorized (in shares) | 900,000,000 | |
Par value of preferred stock (in dollars per share) | $ 0.01 | $ 0.01 |
Shares of preferred stock authorized (in shares) | 50,000,000 | 50,000,000 |
Preferred stock issued (in shares) | 0 | 0 |
Preferred stock outstanding (in shares) | 0 | 0 |
Class A | ||
Par value of common stock (in dollars per share) | $ 0.01 | $ 0.01 |
Shares of common stock authorized (in shares) | 850,000,000 | 850,000,000 |
Common stock issued (in shares) | 8,231,164 | 8,057,390 |
Common stock outstanding (In shares) | 8,231,164 | 8,057,390 |
Class T | ||
Par value of common stock (in dollars per share) | $ 0.01 | $ 0.01 |
Shares of common stock authorized (in shares) | 50,000,000 | 50,000,000 |
Common stock issued (in shares) | 463,988 | 454,256 |
Common stock outstanding (In shares) | 463,988 | 454,256 |
Organization and Business |
6 Months Ended |
---|---|
Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and Business | Organization and Business Hartman vREIT XXI, Inc. (the “Company”) is a Maryland corporation formed on September 3, 2015. The Company elected to be treated as a real estate investment trust (“REIT”) beginning with its taxable year ended December 31, 2017. The Company’s fiscal year end is December 31. In its initial public offering (the “Offering”), the Company offered to the public up to $250,000,000 in any combination of shares of Class A and Class T common stock and up to $19,000,000 in shares of Class A and Class T common stock to stockholders pursuant to its distribution reinvestment plan. The Company's follow-on offering (Registration No. 333-232308) was declared effective by the Securities and Exchange Commission on January 14, 2020. In its follow-on offering, the Company registered $180,000,000 in any combination of shares of Class A and Class T common stock to be offered to the public and $5,000,000 to be offered to shareholders pursuant to the distribution reinvestment plan. Effective September 7, 2019, the sale price of the Company's Class A and Class T common shares to the public was $13.00 and $12.48 per share, representing the net asset value per share as determined by the board of directors plus the applicable sales commissions and managing broker dealer fees. The sale price of Class A and Class T common shares to the Company's shareholders pursuant to the distribution reinvestment plan was $11.70 and $11.23 per share. Effective May 18, 2020, the sale price of the Company's Class A and Class T common shares to the public is $11.44 and $10.95 per share, representing the net asset value per share as determined by the board of directors plus the applicable sales commissions and managing broker dealer fees. The sale price of Class A and Class T common shares to the Company's shareholders pursuant to the distribution reinvestment plan is $10.30 per share. The Company’s board of directors may, in its sole discretion and from time to time, change the price at which the Company offers shares to the public in the primary offering or pursuant to its distribution reinvestment plan to reflect changes in estimated value per share and other factors that the board of directors deems relevant. The Company’s advisor is Hartman XXI Advisors, LLC (the “Advisor”), a Texas limited liability company and wholly owned subsidiary of Hartman Advisors, LLC. Hartman Income REIT Management, Inc., an affiliate of the Advisor, is the Company’s sponsor and property manager (“Sponsor” or “Property Manager”). Subject to certain restrictions and limitations, the Advisor is responsible for managing the Company’s affairs on a day-to-day basis and for identifying and making acquisitions and investments on behalf of the Company. Substantially all the Company’s business is conducted through Hartman vREIT XXI Operating Partnership, L.P., a Texas limited partnership (the “OP”). The Company is the sole general partner of the OP. The initial limited partners of the OP are Hartman vREIT XXI Holdings LLC, a wholly owned subsidiary of the Company (“XXI Holdings”), and Hartman vREIT XXI SLP LLC (“SLP LLC”), a wholly owned subsidiary of Hartman Advisors, LLC. SLP LLC has invested $1,000 in the OP in exchange for a separate class of limited partnership interests (the “Special Limited Partnership Interests”). As the Company accepts subscriptions for shares, it will transfer substantially all the net proceeds of the Offering to the OP as a capital contribution. The partnership agreement provides that the OP will be operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the OP will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), which classification could result in the OP being taxed as a corporation, rather than as a partnership. In addition to the administrative and operating costs and expenses incurred by the OP in acquiring and operating real properties, the OP will pay all the Company’s administrative costs and expenses and such expenses will be treated as expenses of the OP. As of June 30, 2020, the Company had accepted investors' subscriptions for, and issued 8,695,152 shares, net of redemptions, of its Class A and Class T common stock in its initial public offering, including 488,617 shares issued as stock distributions and pursuant to its distribution reinvestment plan, resulting in gross proceeds of $85,739,032.
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Summary of Significant Accounting Policies |
6 Months Ended |
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Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, 2019 are derived from our audited consolidated financial statements as of that date. The unaudited consolidated financial statements as of June 30, 2020, have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-Q and Regulation S-X, on a basis consistent with the annual audited consolidated financial statements. The unaudited consolidated financial statements presented herein reflect all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the consolidated financial position of the Company as of June 30, 2020, and the results of its consolidated operations for the three and six months ended June 30, 2020 and 2019, the consolidated statements of stockholders’ equity for the three and six months ended June 30, 2020 and 2019 and the consolidated statements of cash flows for the six months ended June 30, 2020 and 2019. The results for the six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020. The consolidated financial statements herein are condensed and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Amendment No. 2 to the Annual Report on Form 10-K/A for the year ended December 31, 2019. The Company’s consolidated financial statements include the Company’s accounts and the accounts of its subsidiaries over which the Company has control. All intercompany balances and transactions are eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Cash and cash equivalents as of June 30, 2020 and December 31, 2019 consisted of demand deposits at commercial banks. 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. Financial Instruments The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, note receivable, accrued rent and accounts receivable, accounts payable and accrued expenses, notes payable, net and balances with related parties. The Company considers the carrying value, other than notes payable, net, to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its notes payable approximates fair value. 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, 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. Investment in Unconsolidated Entities The Company's investments in Hartman SPE, LLC and Hartman Short Term Income Properties XX, Inc. are stated at cost and accounted for under the cost method. Allocation of Purchase Price of Acquired Assets Acquisitions of integrated assets and activities that do not meet the definition of a business are accounted for as asset acquisitions. The Company believes most of its future acquisitions of operating properties will qualify as asset acquisitions. Third party transaction costs, including acquisition fees paid to Advisor, associated with asset acquisitions will be capitalized while internal acquisition costs will continue to be expensed as incurred. Upon acquisition, the purchase price of properties is allocated to the tangible assets acquired, consisting of land, buildings and improvements, any assumed debt and asset retirement obligations, if any, based on their relative fair values. Acquisition costs, including acquisition fees paid to our advisor, are capitalized as part of the purchase price. Land and building and improvement fair values are derived based upon the Company’s estimate of fair value after giving effect to estimated replacement cost less depreciation or estimates of the relative fair value of these assets using discounted cash flow analysis or similar methods. The fair values of above-market and below-market in-place lease values, including below-market renewal options for which renewal has been determined to be reasonably assured, are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (a) the contractual amounts to be paid pursuant to the in-place leases and (b) an estimate of fair market lease rates for the corresponding in-place leases and below-market renewal options, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease. The above-market and below-market lease and renewal option values are capitalized as intangible lease assets or liabilities and amortized as an adjustment of rental income over the remaining expected terms of the respective leases. The fair values of in-place leases include direct costs associated with obtaining a new tenant, opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease, and tenant relationships. Direct costs associated with obtaining a new tenant include commissions, tenant improvements, and other direct costs and are estimated based on independent appraisals and management’s consideration of current market costs to execute a similar lease. These direct costs are included in intangible lease assets and are amortized to expense over the remaining terms of the respective leases. The value of opportunity costs is calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. Customer relationships are valued based on expected renewal of a lease or the likelihood of obtaining a particular tenant for other locations. These intangibles are included in real estate assets in the consolidated balance sheets and are being amortized to expense over the remaining term of the respective leases. The Company determines the fair value of any assumed debt by calculating the net present value of the scheduled mortgage payments using interest rates for debt with similar terms and remaining maturities that the Company believes it could obtain at the date of acquisition. Any difference between the fair value and stated value of the assumed debt is recorded as a discount or premium and amortized over the remaining life of the loan as interest expense. In allocating the purchase price of each of the Company’s acquired or purchased properties, the Company makes assumptions and uses various estimates, including, but not limited to, the estimated useful lives of the assets, the cost of replacing certain assets and discount rates used to determine present values. The Company uses Level 3 inputs to estimate fair value of the acquired properties. Many of these estimates are obtained from independent third-party appraisals. However, the Company is responsible for the source and use of these estimates. These estimates require judgment and are subject to being imprecise; accordingly, if different estimates and assumptions were derived, the valuation of the various categories of the Company’s properties or related intangibles could in turn result in a difference in the depreciation or amortization expense recorded in the Company’s consolidated financial statements. These variances could be material to the Company’s results of operations and financial condition. 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 is no impairment indicated in the carrying value of the Company’s real estate assets as of June 30, 2020. Accrued Rent and Accounts Receivable Accrued rent and accounts receivable include base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. An allowance for the uncollectible portion of accrued rent and accounts receivable is determined based upon customer credit-worthiness (including expected recovery of our claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. Prepaid expenses and other assets Prepaid expenses and other assets include prepaid insurance, subscription receivable and miscellaneous other assets and prepayments. As of June 30, 2020 and December 31, 2019, the Company had $431,000 and $573,000, respectively in prepaid expenses and other assets. Acquisition Deposits Acquisition deposits represent funds placed in escrow or advanced to a seller of property which the Company acquire. As of June 30, 2020 and December 31, 2019, the Company had acquisition deposits of $1,862,000 and $1,850,000, respectively, which are included in the consolidated balance sheets. Organization and Offering Costs As of June 30, 2020, total organization and offering costs incurred for the Offering amounted to $1,464,000. The total organizational and offering costs incurred by the Company (including selling commissions, dealer manager fees and all other underwriting compensation) will not exceed 15% of the aggregate gross proceeds from the sale of the shares of common stock sold in the Offering. Organization costs, when recorded by the Company, are expensed as incurred, and offering costs, which include selling commissions, dealer manager fees and all other underwriting compensation, are deferred and charged to stockholders’ equity as such amounts are reimbursed or paid by the Advisor, the dealer manager or their affiliates from gross offering proceeds. For the three and six months ended June 30, 2020 and 2019, such costs totaled $70,000,and $65,000, and $86,000 and $67,000, respectively. Income Taxes The Company elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code, commencing in the taxable year ended December 31, 2017. If the Company qualifies for taxation as a REIT, the Company generally will not be subject to federal corporate income tax to the extent it distributes its REIT taxable income to its stockholders, so long as it distributes at least 90 percent of its REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP.) REITs are subject to a number of other organizational and operational requirements. Even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income. Prior to qualifying to be taxed as a REIT, the Company is subject to normal federal and state corporation income taxes. For the three months ended June 30, 2020 and 2019, the Company had net loss of $581,000 and $247,000, respectively. For the six months ended June 30, 2020 and 2019, the Company had net loss of $1,019,000 and $508,000, respectively. The Company does anticipate forming a taxable REIT subsidiaries or otherwise generating future taxable income which may be offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded in light of the net loss carry forward would be properly offset by an equal valuation allowance in that no future taxable income is expected. Accordingly, no deferred tax benefit or deferred tax asset has been recorded in the consolidated financial statements. 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 as of June 30, 2020 and December 31, 2019, respectively. Loss Per Share The computations of 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 special limited partnership interests – see Note 11. For the three and six months ended June 30, 2020 and 2019, there were no common shares issuable in connection with these potentially dilutive securities. These potentially dilutive securities were excluded from the computations of diluted net loss per share for the three and six months ended June 30, 2020 and 2019. Concentration of Risk The Company maintains cash accounts in one U.S. financial institution. The terms of the Company’s deposits are on demand to minimize risk. The balances of the Company’s depository accounts may exceed the federally insured limit. No losses have been incurred in connection with these deposits. 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, relocations of businesses, increased competition or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders. Major tenants are defined as those tenants which individually comprise more than 10% of the Company’s total rental revenues. One tenant of the Spectrum Building represents more than 10% of total annualized rental revenue for the six months ended June 30, 2020 and 2019, respectively. Reclassification Certain items in the comparative consolidated financial statements have been reclassified to conform to the presentation adopted in the current period. The Consolidated Statement of Cash Flows presented for the six months ended June 30, 2019 was adjusted to present cash and cash equivalents and restricted cash, as restricted cash was previously reported as part of prepaid expenses and other assets. Recent Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): 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 January 2023, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on the consolidated financial statements when adopted.
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Real Estate |
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Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Real Estate | Real Estate The Company’s real estate assets consisted of the following, in thousands:
Depreciation expense for the three months ended June 30, 2020 and 2019 was $944,000 and $298,000, respectively and $1,783,000 and $526,000 for the six months ended June 30, 2020 and 2019, respectively. Amortization expense for the three months ended June 30, 2020 and 2019 was $653,000 and $419,000, respectively and $1,276,000 and $827,000 for the six months ended June 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, 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:
Acquisition fees incurred were $0 for the three months ended June 30, 2020 and 2019, respectively and $0 and $124,000 for the six months ended June 30, 2020 and 2019, respectively. The acquisition fees have been capitalized and added to the real estate assets, at cost, in the accompanying consolidated balance sheets. Asset management fees incurred were $144,000 and $63,000 for the three months ended June 30, 2020 and 2019, respectively and $288,000 and $125,000 for the six months ended June 30, 2020 and 2019, respectively. Asset management fees are captioned as such in the accompanying consolidated statements of operations. Correction of Immaterial Error In connection with the preparation of its financial statements for the year ended December 31, 2019, the Company has determined that its allocation of the purchase price of the Spectrum Building as December 31, 2018 was not correct. The corrected allocation of purchase price is illustrated as follows (in thousands):
These corrections had no material effect on the previously reported working capital or results of operations as of December 31, 2018 or for the year then ended. Real estate assets reported for the quarterly periods ended March 31, 2019, June 30, 2019 and September 30, 2019, would have been presented as follows if the correction had been recorded in such quarterly period (in thousands):
Depreciation and amortization expense and net loss for the quarterly periods ended March 31, 2019, June 30, 2019 and September 30, 2019, would have been presented as follows if the correction had been recorded in such quarterly period (in thousands):
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Investment in unconsolidated entities |
6 Months Ended |
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Jun. 30, 2020 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Investment in unconsolidated entities | Investment in unconsolidated entities Effective March 1, 2019, the Company's board of directors approved the exchange of 3.42% of the Company's 5.89% ownership interest in Hartman SPE, LLC for 700,302 shares of common stock of Hartman Short Term Income Properties XX, Inc. The exchange reduced the Company’s ownership interest in Hartman SPE, LLC from 5.89% to 2.47%. The Company's investment in Hartman SPE, LLC and Hartman Short Term Income Properties XX, Inc. is stated at cost and accounted for under the cost method. The aggregate carrying amount for cost method investments that the Company did not evaluate for impairment is $8,027,000. The fair value of the Company's cost method investments is not estimated because there are no identified events or changes in circumstances that may have a significant adverse effect of the fair values of the investments. The Company did not receive any distributions from Hartman SPE, LLC for the six months ended June 30, 2020 and 2019. For the three months ended June 30, 2020 and 2019, the Company recognized dividend income of $122,000 and $82,000, respectively, and for the six months ended June 30, 2020 and 2019, the Company recognized dividend income of $245,000 and $123,000, respectively, from Hartman Short Term Income Properties XX, Inc.
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Accrued Rent and Accounts Receivable, net |
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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:
As of June 30, 2020 and December 31, 2019, the Company had an allowance for uncollectible accounts of $147,000 and $72,000, respectively, related to tenant receivables that the Company has specifically identified as potentially uncollectible based on assessment of each tenant’s credit-worthiness. For the three months ended June 30, 2020 and 2019, the Company recorded bad debt (recovery) expense in the amount of $53,000 and $(35,000), respectively and $75,000 and $(13,000) for the six months ended June 30, 2020 and 2019, respectively. Bad debt expense and any related recoveries are included in property operating expenses in the accompanying consolidated statements of operations.
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Future Minimum Rents |
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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 future rentals to be received (exclusive of renewals, tenant reimbursements, and contingent rentals) under noncancellable operating leases in existence at June 30, 2020 is as follows, in thousands:
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Notes Payable, net |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable, net | Notes Payable, net The following table summarizes the Company's outstanding notes payable, net, in thousands:
(1) One-month LIBOR ("L"); Prime ("P") (2) Payable in monthly installments of interest only until the maturity date. The interest rate as of June 30, 2020 was 2.91%. (3)The Company is a party to a $20 million master credit facility agreement ("MCFA") with East West Bank. The borrowing base of the MCFA may be adjusted from time to time subject to the lender’s underwriting with respect to real property collateral which secure the amount available to be borrowed. As of June 30, 2020 the MCFA is secured by the Spectrum Building, the 11211 Katy Freeway Building, the 1400 Broadfield Building, the 16420 Park Ten Building and the 7915 FM 1960 Building. The interest rate as of June 30, 2020 was 2.75%. The outstanding balance under the MCFA was $19,500,000 as of June 30, 2020 and the amount available to be borrowed was $500,000. (4) On March 10, 2020, the Company entered into a second $20 million master credit facility agreement ("MCFA II") with East West Bank. The Village Pointe and Accesso Portfolio properties are collateral security for the credit facility. The initial loan availability under the credit agreement is $13,925,000. The credit agreement matures on March 9, 2023. The initial interest rate and the interest rate as of June 30, 2020 was 2.75%. After the initial interest period, the interest rate resets to Prime minus 50 basis points. The outstanding balance under the MCFA II was $4,626,000 as of June 30, 2020 and the amount available to be borrowed was $9,299,000. The Company was in compliance with all loan covenants as of June 30, 2020. Interest expense for the three months ended June 30, 2020 and 2019 was $242,000 and $117,000, respectively, including $42,000 and $26,000 of deferred loan cost amortization. Interest expense for the six months ended June 30, 2020 and 2019 was $484,000 and $303,000 respectively, including $85,000 and $52,000 of deferred loan cost amortization. Unamortized deferred loan costs were $310,000 and $203,000 as of June 30, 2020 and December 31, 2019, respectively. Interest expense of $80,000 and $61,000 was payable as of June 30, 2020 and December 31, 2019, respectively, and is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.
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Related Party Arrangements |
6 Months Ended |
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Jun. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Arrangements | Related Party Arrangements The Advisor is a wholly owned subsidiary of Hartman Advisors LLC, a Texas limited liability company owned 70% by Allen R. Hartman individually and 30% by the Property Manager. The Property Manager is a wholly owned subsidiary of Hartman Income REIT Management, LLC, which is wholly owned by Hartman Income REIT, Inc. and its subsidiaries ("HIREIT"), of which approximately 16% of the voting stock is owned by Allen R. Hartman, the Company's Chief Executive Officer and Chairman of the Board of Directors. The Advisor and certain affiliates of the Advisor will receive fees and compensation in connection with the Offering, and the acquisition, management and sale of the Company’s real estate investments. In addition, in exchange for $1,000, the OP has issued the Advisor a separate, special limited partnership interest, in the form of Special Limited Partnership Interests. See Note 12 (“Special Limited Partnership Interest”) below. The Advisor will receive reimbursement for organizational and offering expenses incurred on the Company’s behalf, but only to the extent that such reimbursements do not exceed actual expenses incurred by the Advisor and would not cause the cumulative selling commission, the dealer manager fee and other organization and offering expenses borne by the Company to exceed 15.0% of gross offering proceeds from the sale of shares in the Offering. The Advisor, or its affiliates, will receive an acquisition fee equal to 2.5% of the cost of each investment the Company acquires, which includes the amount actually paid or allocated to fund the purchase, development, construction or improvement of each investment, including acquisition expenses and any debt attributable to each investment. Acquisition fees of $0 were earned by the Advisor for the three months ended June 30, 2020 and 2019, respectively and $0 and $124,000 were earned by the Advisor for the six months ended June 30, 2020 and 2019, respectively. The Advisor, or its affiliates, will receive a debt financing fee equal to 1.0% of the amount available under any loan or line of credit originated or assumed, directly or indirectly, in connection with the acquisition, development, construction, improvement of properties or other permitted investments, which will be in addition to the acquisition fee paid to the Advisor. No debt financing fees were earned by the Advisor for the six months ended June 30, 2020 and 2019. The Company pays the Property Manager, an affiliate of the Advisor, property management fees equal to 3% of the effective gross revenues of the managed property. The Company pays and expects to pay the Property Manager leasing fees in an amount equal to the leasing fees charged by unaffiliated persons rendering comparable services in the same geographic location of the applicable property, provided that such fees will only be paid if a majority of the Company’s board of directors, including a majority of its independent directors, determines that such fees are fair and reasonable in relation to the services being performed. The Property Manager may subcontract the performance of its property management and leasing duties to third parties and the Property Manager will pay a portion of its property management fee to the third parties with whom it subcontracts for these services. The Company will reimburse the costs and expenses incurred by the Property Manager on the Company’s behalf, including the wages and salaries and other employee-related expenses of all employees of the Property Manager or its subcontractors who are engaged in the operation, management, maintenance or access control of our properties, including taxes, insurance and benefits relating to such employees, and travel and other out-of-pocket expenses that are directly related to the management of specific properties. Other charges, including fees and expenses of third-party professionals and consultants, will be reimbursed, subject to the limitations on fees and reimbursements contained in the Company's Articles of Amendment and Restatement (as amended and restated, the "Charter"). If the Property Manager provides construction management services related to the improvement or finishing of tenant space in the Company’s real estate properties, the Company pays the Property Manager a construction management fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the project; provided, however, that the Company will only pay a construction management fee if a majority of the Company’s board of directors, including a majority of its independent directors, determines that such construction management fee is fair and reasonable and on terms and conditions not less favorable than those available from unaffiliated third parties. The Company pays the Advisor a monthly asset management fee equal to one-twelfth of 0.75% of the higher of (i) the cost or (ii) the value of all real estate investments the Company acquires. If Advisor or affiliate provides a substantial amount of services, as determined by the Company’s independent directors, in connection with the sale of one or more assets, the Company will pay the Advisor a disposition fee equal to (1) in the case of the sale of real property, the lesser of: (A) one-half of the aggregate brokerage commission paid (including the disposition fee) or, if none is paid, the amount that customarily would be paid, or (B) 3% of the sales price of each property sold, and (2) in the case of the sale of any asset other than real property, 3% of the sales price of such asset. The Company will reimburse the Advisor for all expenses paid or incurred by the Advisor in connection with the services provided to the Company, subject to the limitation that, commencing four fiscal quarters after the Company’s acquisition of its first asset, the Company will not reimburse the Advisor for any amount by which its operating expenses (including the asset management fee) at the end of the four preceding fiscal quarters exceeds the greater of: (1) 2% of the Company’s average invested assets (as defined in the Charter), or (2) 25% of the Company’s net income determined without reduction for any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of the Company’s assets for that period. Notwithstanding the above, the Company may reimburse the Advisor for expenses in excess of this limitation if a majority of the Company’s independent directors determines that such excess expenses are justified based on unusual and non-recurring factors. On November 1, 2019, the Company issued an unsecured promissory note to Hartman Short Term Income Properties XX, Inc., an affiliate of the Advisor and the Property Manager, in the face amount of $10,000,000 with an interest rate of 10% annually. The outstanding balance of the note is $8,200,000 and $4,400,000 as of June 30, 2020 and December 31, 2019, respectively. The maturity date of the note is October 31, 2021. For the three months ended June 30, 2020 and 2019, the Company incurred property management fees and reimbursable costs of $335,000 and $176,000, respectively, payable to the Property Manager and asset management fees of $144,000 and $63,000, respectively, payable to the Advisor. For the six months ended June 30, 2020 and 2019, the Company incurred property management fees and reimbursable costs of $669,000 and $349,000, respectively, payable to the Property manager and asset management fees of $288,000 and $125,000, respectively, payable to the Advisor. Property management fees and reimbursable costs paid to the Property Manager are included in property operating expenses in the accompanying consolidated statements of operations. Asset management fees paid to the Advisor are included in asset management fees in the accompanying consolidated statements of operations. The Company pays construction management fees and leasing commissions to the Property Manager in connection with the construction management and leasing of the Company's properties. For the three months ended June 30, 2020 and 2019, the Company incurred construction management fees of $56,000 and $31,000, respectively. For the six months ended June 30, 2020 and 2019, the Company incurred construction management fees of $84,000 and $41,000, respectively. For the three months ended June 30, 2020 and 2019, the Company incurred $55,000 and $65,000, respectively for leasing commissions. For the six months ended June 30, 2020 and 2019, the Company incurred $379,000 and $73,000 for leasing commissions. Construction management fees are capitalized and included in real estate assets in the consolidated balance sheets. Leasing commissions are capitalized and reported net of the amortized amount in the consolidated balance sheets. As of June 30, 2020, the Company had $71,000 due to the Advisor, $2,762,000 due from Hartman Short Term Income Properties XX, Inc., $276,000 due to the Property Manager, and $22,000 due from other Hartman affiliates. As of December 31, 2019, the Company had $106,000 due to the Advisor, $417,000 due from Hartman Short Term Income Properties XX, Inc., $229,000 due from the Property Manager, and $10,000 due from other Hartman affiliates.
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Loss Per Share |
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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.
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Stockholders' Equity |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity Under the Charter, the Company has the authority to issue 900,000,000 shares of common stock, $0.01 per share par value, and 50,000,000 shares of preferred stock with a par value of $0.01 per share. The Company’s board of directors is authorized to amend the Charter, without the approval of the Company’s stockholders, to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. As of June 30, 2020, 850,000,000 shares were classifed and designated as Class A common stock and 50,000,000 shares were classifed and desingated as Class T commont stock. On May 12, 2020, the board of directors authorized the classification and designation of Class I and Class S common stock. As of July 23, 2020, the Company has the authority to issue 270,000,000 shares classified and designated as Class A common stock, 280,000,000 shares classified and designated as Class S common stock, 280,000,000 shares classified and designated as Class I common stock, and 70,000,000 shares classified and designated as Class T commont stock. The additional share classes have been included in an amendment to the Company's registration statement and prospectus which was declared effective by the Securities and Exchange Commission on July 27, 2020. Common Stock Shares of all classes 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. No classified or designated class of common stock has any preferences or preemptive conversion or exchange rights. On September 30, 2015, the Company sold 22,100 shares of common stock to Hartman Advisors, LLC at a purchase price of $9.05 per share for an aggregate purchase price of $200,005, which was paid in cash. Preferred Stock The board of directors, with the approval of a majority of the entire board of directors and without any action by the stockholders, may amend the Charter from time to time to increase or decrease the aggregate number of authorized shares of capital stock or the number of authorized shares of capital stock of any class or series. If the Company were to create and issue preferred stock or convertible stock with a distribution preference over common stock, payment of any distribution preferences of outstanding preferred stock or convertible stock would reduce the amount of funds available for the payment of distributions on our common stock. Further, holders of preferred stock are normally entitled to receive a preference payment in the event we liquidate, dissolve or wind up before any payment is made to our common stockholders, likely reducing the amount common stockholders would otherwise receive upon such an occurrence. In addition, under certain circumstances, the issuance of preferred stock or a separate class or series of common stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of our securities and the removal of incumbent management. Stock-Based Compensation The Company awards vested restricted common shares to non-employee directors as compensation in part for their service as members of the board of directors of the Company. For the three and six months ended June 30, 2020 and 2019, the Company granted 625 and 625 shares and 1,250 and 1,250 shares respectively, of restricted common stock to independent directors as compensation for services. The Company recognized $6,000 and $6,000 and $13,000 and $12,000 as stock-based compensation expense for the three and six months ended June 30, 2020 and 2019, respectively. Distributions The following table reflects the total distributions paid in cash and issued in shares of our common stock for the period from January 2017 (the month the Company first paid distributions) through June 30, 2020:
(1)Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately 20 days following the end of such month. (2)Amount of distributions paid in shares of common stock pursuant to our distribution reinvestment plan and stock dividend distribution.
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Incentive Plans |
6 Months Ended |
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Jun. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Incentive Plans | Incentive PlansThe Company has adopted a long-term incentive plan (the “Incentive Award Plan”) that provides for the grant of equity awards to employees, directors and consultants and those of the Company’s affiliates. The Incentive Award Plan authorizes the granting of restricted stock, stock options, stock appreciation rights, restricted or deferred stock units, dividend equivalents, other stock-based awards and cash-based awards to directors, officers, employees and consultants of the Company and the Company’s affiliates’ selected by the board of directors for participation in the Incentive Award Plan. Stock options and shares of restricted common stock granted under the Incentive Award Plan will not, in the aggregate, exceed an amount equal to 5.0% of the outstanding shares of the Company’s common stock on the date of grant or award of any such stock options or shares of restricted stock. Stock options may not have an exercise price that is less than the fair market value of a share of the Company’s common stock on the date of grant. Shares of common stock will be authorized and reserved for issuance under the Incentive Award Plan. The Company has adopted an independent directors’ compensation plan (the “Independent Directors Compensation Plan”) pursuant to which each of the Company’s independent directors will be entitled, subject to the plan’s conditions and restrictions, to receive an initial grant of 3,000 shares of restricted stock when the Company raises the minimum offering amount of $1,000,000 in the Offering. Each new independent director that subsequently joins the Company’s board of directors will receive a grant of 3,000 shares of restricted stock upon his or her election to the Company’s board of directors. The shares of restricted common stock granted to independent directors fully vest upon the completion of the annual term for which the director was elected. Subject to certain conditions, the non-vested shares of restricted stock granted pursuant to the Independent Directors Compensation Plan will become fully vested on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company. Awards under the Independent Directors Compensation Plan for the six months ended June 30, 2020 and 2019, respectively, consisted of 1,250 and 1,250 restricted, Class A common shares to our independent directors, valued at $10.30 and $10.00 per share based on the Offering price. The stock-based compensation expense is included in general and administrative expense in the accompanying consolidated statements of operations. |
Special Limited Partnership Interest |
6 Months Ended |
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Jun. 30, 2020 | |
Equity [Abstract] | |
Special Limited Partnership Interest | Special Limited Partnership InterestPursuant to the limited partnership agreement for the OP, SLP LLC, the holder of the Special Limited Partnership Interest, will be entitled to receive distributions equal to 15.0% of the OP’s net sales proceeds from the disposition of assets, but only after the Company’s stockholders have received, in the aggregate, cumulative distributions equal to their total invested capital plus a 6.0% cumulative, non-compounded annual pre-tax return on such aggregated invested capital. In addition, the holder of the Special Limited Partnership Interest is entitled to receive a payment upon the redemption of the Special Limited Partnership Interests. Pursuant to the limited partnership agreement for the OP, the Special Limited Partnership Interests will be redeemed upon: (1) the listing of the Company’s common stock on a national securities exchange; (2) the occurrence of certain events that result in the termination or non-renewal of the Company’s advisory agreement with the Advisor (“Advisory Agreement”) other than by the Company for “cause” (as defined in the Advisory Agreement); or (3) the termination of the Advisory Agreement by the Company for cause. In the event of the listing of the Company’s shares of common stock or a termination of the Advisory Agreement other than by the Company for cause, the Special Limited Partnership Interests will be redeemed for an aggregate amount equal to the amount that the holder of the Special Limited Partnership Interests would have been entitled to receive, as described above, if the OP had disposed of all of its assets at their fair market value and all liabilities of the OP had been satisfied in full according to their terms as of the date of the event triggering the redemption. Payment of the redemption price to the holder of the Special Limited Partnership Interests will be paid, at the holder’s discretion, in the form of (i) limited partnership interests in the OP, (ii) shares of the Company’s common stock, or (iii) a non-interest bearing promissory note. If the event triggering the redemption is a listing of the Company’s shares on a national securities exchange only, the fair market value of the assets of the OP will be calculated taking into account the average share price of the Company’s shares for a specified period. If the event triggering the redemption is an underwritten public offering of the Company’s shares, the fair market value will take into account the valuation of the shares as determined by the initial public offering price in such offering. If the triggering event of the redemption is the termination or non-renewal of the Advisory Agreement other than by the Company for cause for any other reason, the fair market value of the assets of the OP will be calculated based on an appraisal or valuation of the Company’s assets. In the event of the termination or non-renewal of the Advisory Agreement by the Company for cause, all of the Special Limited Partnership Interests will be redeemed by the OP for the aggregate price of $1. |
Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Economic Dependency The Company is dependent on the Sponsor and the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase and disposition of properties, management of the daily operations of the 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.
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Subsequent Events |
6 Months Ended |
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Jun. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent EventsThe Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that no events have occurred, other than as disclosed hereinabove, that would require adjustments to our disclosures in these consolidated financial statements. |
Summary of Significant Accounting Policies (Policies) |
6 Months Ended |
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Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements included in this report are unaudited; however, amounts presented in the consolidated balance sheet as of December 31, 2019 are derived from our audited consolidated financial statements as of that date. The unaudited consolidated financial statements as of June 30, 2020, have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-Q and Regulation S-X, on a basis consistent with the annual audited consolidated financial statements. The unaudited consolidated financial statements presented herein reflect all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the consolidated financial position of the Company as of June 30, 2020, and the results of its consolidated operations for the three and six months ended June 30, 2020 and 2019, the consolidated statements of stockholders’ equity for the three and six months ended June 30, 2020 and 2019 and the consolidated statements of cash flows for the six months ended June 30, 2020 and 2019. The results for the six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020. The consolidated financial statements herein are condensed and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Amendment No. 2 to the Annual Report on Form 10-K/A for the year ended December 31, 2019. The Company’s consolidated financial statements include the Company’s accounts and the accounts of its subsidiaries over which the Company has control. All intercompany balances and transactions are eliminated in consolidation.
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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Cash and Cash Equivalents | Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Cash and cash equivalents as of June 30, 2020 and December 31, 2019 consisted of demand deposits at commercial banks.
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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.
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Financial Instruments | Financial Instruments The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, note receivable, accrued rent and accounts receivable, accounts payable and accrued expenses, notes payable, net and balances with related parties. The Company considers the carrying value, other than notes payable, net, to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its notes payable approximates fair value.
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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, 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. |
Investment in Unconsolidated Entity | Investment in Unconsolidated Entities The Company's investments in Hartman SPE, LLC and Hartman Short Term Income Properties XX, Inc. are stated at cost and accounted for under the cost method.
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Real Estate | Allocation of Purchase Price of Acquired Assets Acquisitions of integrated assets and activities that do not meet the definition of a business are accounted for as asset acquisitions. The Company believes most of its future acquisitions of operating properties will qualify as asset acquisitions. Third party transaction costs, including acquisition fees paid to Advisor, associated with asset acquisitions will be capitalized while internal acquisition costs will continue to be expensed as incurred. Upon acquisition, the purchase price of properties is allocated to the tangible assets acquired, consisting of land, buildings and improvements, any assumed debt and asset retirement obligations, if any, based on their relative fair values. Acquisition costs, including acquisition fees paid to our advisor, are capitalized as part of the purchase price. Land and building and improvement fair values are derived based upon the Company’s estimate of fair value after giving effect to estimated replacement cost less depreciation or estimates of the relative fair value of these assets using discounted cash flow analysis or similar methods. The fair values of above-market and below-market in-place lease values, including below-market renewal options for which renewal has been determined to be reasonably assured, are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (a) the contractual amounts to be paid pursuant to the in-place leases and (b) an estimate of fair market lease rates for the corresponding in-place leases and below-market renewal options, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease. The above-market and below-market lease and renewal option values are capitalized as intangible lease assets or liabilities and amortized as an adjustment of rental income over the remaining expected terms of the respective leases. The fair values of in-place leases include direct costs associated with obtaining a new tenant, opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease, and tenant relationships. Direct costs associated with obtaining a new tenant include commissions, tenant improvements, and other direct costs and are estimated based on independent appraisals and management’s consideration of current market costs to execute a similar lease. These direct costs are included in intangible lease assets and are amortized to expense over the remaining terms of the respective leases. The value of opportunity costs is calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. Customer relationships are valued based on expected renewal of a lease or the likelihood of obtaining a particular tenant for other locations. These intangibles are included in real estate assets in the consolidated balance sheets and are being amortized to expense over the remaining term of the respective leases. The Company determines the fair value of any assumed debt by calculating the net present value of the scheduled mortgage payments using interest rates for debt with similar terms and remaining maturities that the Company believes it could obtain at the date of acquisition. Any difference between the fair value and stated value of the assumed debt is recorded as a discount or premium and amortized over the remaining life of the loan as interest expense. In allocating the purchase price of each of the Company’s acquired or purchased properties, the Company makes assumptions and uses various estimates, including, but not limited to, the estimated useful lives of the assets, the cost of replacing certain assets and discount rates used to determine present values. The Company uses Level 3 inputs to estimate fair value of the acquired properties. Many of these estimates are obtained from independent third-party appraisals. However, the Company is responsible for the source and use of these estimates. These estimates require judgment and are subject to being imprecise; accordingly, if different estimates and assumptions were derived, the valuation of the various categories of the Company’s properties or related intangibles could in turn result in a difference in the depreciation or amortization expense recorded in the Company’s consolidated financial statements. These variances could be material to the Company’s results of operations and financial condition. 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 is no impairment indicated in the carrying value of the Company’s real estate assets as of June 30, 2020.
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Accrued Rent and Accounts Receivable/Acquisition Deposits | Accrued Rent and Accounts Receivable Accrued rent and accounts receivable include base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. An allowance for the uncollectible portion of accrued rent and accounts receivable is determined based upon customer credit-worthiness (including expected recovery of our claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. Acquisition DepositsAcquisition deposits represent funds placed in escrow or advanced to a seller of property which the Company acquire. As of June 30, 2020 and December 31, 2019, the Company had acquisition deposits of $1,862,000 and $1,850,000, respectively, which are included in the consolidated balance sheets.
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Prepaid Expenses And Other Assets | Prepaid expenses and other assets Prepaid expenses and other assets include prepaid insurance, subscription receivable and miscellaneous other assets and prepayments. As of June 30, 2020 and December 31, 2019, the Company had $431,000 and $573,000, respectively in prepaid expenses and other assets.
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Organization and Offering Costs | Organization and Offering Costs As of June 30, 2020, total organization and offering costs incurred for the Offering amounted to $1,464,000. The total organizational and offering costs incurred by the Company (including selling commissions, dealer manager fees and all other underwriting compensation) will not exceed 15% of the aggregate gross proceeds from the sale of the shares of common stock sold in the Offering. Organization costs, when recorded by the Company, are expensed as incurred, and offering costs, which include selling commissions, dealer manager fees and all other underwriting compensation, are deferred and charged to stockholders’ equity as such amounts are reimbursed or paid by the Advisor, the dealer manager or their affiliates from gross offering proceeds. For the three and six months ended June 30, 2020 and 2019, such costs totaled $70,000,and $65,000, and $86,000 and $67,000, respectively.
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Income Taxes | Income Taxes The Company elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code, commencing in the taxable year ended December 31, 2017. If the Company qualifies for taxation as a REIT, the Company generally will not be subject to federal corporate income tax to the extent it distributes its REIT taxable income to its stockholders, so long as it distributes at least 90 percent of its REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP.) REITs are subject to a number of other organizational and operational requirements. Even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income. Prior to qualifying to be taxed as a REIT, the Company is subject to normal federal and state corporation income taxes. For the three months ended June 30, 2020 and 2019, the Company had net loss of $581,000 and $247,000, respectively. For the six months ended June 30, 2020 and 2019, the Company had net loss of $1,019,000 and $508,000, respectively. The Company does anticipate forming a taxable REIT subsidiaries or otherwise generating future taxable income which may be offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded in light of the net loss carry forward would be properly offset by an equal valuation allowance in that no future taxable income is expected. Accordingly, no deferred tax benefit or deferred tax asset has been recorded in the consolidated financial statements. 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 as of June 30, 2020 and December 31, 2019, respectively.
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Loss Per Share | Loss Per ShareThe computations of 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 special limited partnership interests – see Note 11. For the three and six months ended June 30, 2020 and 2019, there were no common shares issuable in connection with these potentially dilutive securities. These potentially dilutive securities were excluded from the computations of diluted net loss per share for the three and six months ended June 30, 2020 and 2019. |
Concentration of Risk | Concentration of Risk The Company maintains cash accounts in one U.S. financial institution. The terms of the Company’s deposits are on demand to minimize risk. The balances of the Company’s depository accounts may exceed the federally insured limit. No losses have been incurred in connection with these deposits. 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, relocations of businesses, increased competition or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders. Major tenants are defined as those tenants which individually comprise more than 10% of the Company’s total rental revenues. One tenant of the Spectrum Building represents more than 10% of total annualized rental revenue for the six months ended June 30, 2020 and 2019, respectively.
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Reclassification | Reclassification Certain items in the comparative consolidated financial statements have been reclassified to conform to the presentation adopted in the current period. The Consolidated Statement of Cash Flows presented for the six months ended June 30, 2019 was adjusted to present cash and cash equivalents and restricted cash, as restricted cash was previously reported as part of prepaid expenses and other assets.
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Recent Accounting Pronouncements Not Yet Adopted | Recent Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): 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 January 2023, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on the consolidated financial statements when adopted.
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Real Estate (Tables) |
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Real Estate [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Real Estate Assets | The Company’s real estate assets consisted of the following, in thousands:
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Schedule of 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:
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Schedule of Error Corrections and Prior Period Adjustments | Real estate assets reported for the quarterly periods ended March 31, 2019, June 30, 2019 and September 30, 2019, would have been presented as follows if the correction had been recorded in such quarterly period (in thousands):
Depreciation and amortization expense and net loss for the quarterly periods ended March 31, 2019, June 30, 2019 and September 30, 2019, would have been presented as follows if the correction had been recorded in such quarterly period (in thousands):
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Accrued Rent and Accounts Receivable, net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accrued Rent and Accounts Receivable, Net | Accrued rent and accounts receivable, net, consisted of the following, in thousands:
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Future Minimum Rents (Tables) |
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Future Rentals to be Received | A summary of future rentals to be received (exclusive of renewals, tenant reimbursements, and contingent rentals) under noncancellable operating leases in existence at June 30, 2020 is as follows, in thousands:
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Notes Payable, net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Notes Payable | The following table summarizes the Company's outstanding notes payable, net, in thousands:
(1) One-month LIBOR ("L"); Prime ("P") (2) Payable in monthly installments of interest only until the maturity date. The interest rate as of June 30, 2020 was 2.91%. (3)The Company is a party to a $20 million master credit facility agreement ("MCFA") with East West Bank. The borrowing base of the MCFA may be adjusted from time to time subject to the lender’s underwriting with respect to real property collateral which secure the amount available to be borrowed. As of June 30, 2020 the MCFA is secured by the Spectrum Building, the 11211 Katy Freeway Building, the 1400 Broadfield Building, the 16420 Park Ten Building and the 7915 FM 1960 Building. The interest rate as of June 30, 2020 was 2.75%. The outstanding balance under the MCFA was $19,500,000 as of June 30, 2020 and the amount available to be borrowed was $500,000. (4) On March 10, 2020, the Company entered into a second $20 million master credit facility agreement ("MCFA II") with East West Bank. The Village Pointe and Accesso Portfolio properties are collateral security for the credit facility. The initial loan availability under the credit agreement is $13,925,000. The credit agreement matures on March 9, 2023. The initial interest rate and the interest rate as of June 30, 2020 was 2.75%. After the initial interest period, the interest rate resets to Prime minus 50 basis points. The outstanding balance under the MCFA II was $4,626,000 as of June 30, 2020 and the amount available to be borrowed was $9,299,000.
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Loss Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Basic Earnings (Loss) Per Share | Basic loss per share is computed using net loss attributable to common stockholders and the weighted average number of common shares outstanding.
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Stockholders' Equity (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Distributions Paid in Cash and Issued in Shares of Common Stock | The following table reflects the total distributions paid in cash and issued in shares of our common stock for the period from January 2017 (the month the Company first paid distributions) through June 30, 2020:
(1)Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately 20 days following the end of such month. (2)Amount of distributions paid in shares of common stock pursuant to our distribution reinvestment plan and stock dividend distribution.
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Real Estate - Real Estate Assets (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
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Real Estate [Abstract] | ||||||
Land | $ 16,816 | $ 16,816 | $ 6,528 | $ 6,528 | $ 6,528 | $ 5,653 |
Buildings and improvements | 54,708 | 52,880 | 24,828 | 24,236 | 23,565 | 20,573 |
In-place lease value intangible | 7,477 | 7,477 | 4,143 | 4,143 | 4,143 | 3,449 |
Real estate assets, gross | 79,001 | 77,173 | 35,499 | 34,907 | 34,236 | 29,675 |
Less accumulated depreciation and amortization | (7,750) | (4,691) | (3,247) | (2,563) | (1,846) | (1,209) |
Real estate assets, net | $ 71,251 | $ 72,482 | $ 32,252 | $ 32,344 | $ 32,390 | $ 28,466 |
Real Estate - Narrative (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
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Real Estate [Line Items] | ||||
Depreciation expense | $ 944,000 | $ 298,000 | $ 1,783,000 | $ 526,000 |
Amortization expense | 653,000 | 419,000 | 1,276,000 | 827,000 |
Asset management fees incurred | 144,000 | 63,000 | 288,000 | 125,000 |
Acquisition Fees | Hartman Village Pointe LLC | ||||
Real Estate [Line Items] | ||||
Acquisition fees | $ 0 | $ 0 | $ 0 | $ 124,000 |
Real Estate - In-Place Lease Intangible Assets and Accumulated Amortization (Details) - In-Place Leases - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
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Finite-Lived Intangible Assets [Line Items] | ||
In-place lease value intangible | $ 7,477 | $ 7,477 |
In-place leases – accumulated amortization | (3,719) | (2,443) |
Acquired in-place lease intangible assets, net | $ 3,758 | $ 5,034 |
Real Estate - Schedule of Restated Amounts (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|---|---|---|---|
Real Estate [Line Items] | ||||||
Land | $ 16,816 | $ 16,816 | $ 6,528 | $ 6,528 | $ 6,528 | $ 5,653 |
Buildings and improvements | 54,708 | 52,880 | 24,828 | 24,236 | 23,565 | 20,573 |
In-place lease value intangible | 7,477 | 7,477 | 4,143 | 4,143 | 4,143 | 3,449 |
Real estate assets, gross | 79,001 | 77,173 | 35,499 | 34,907 | 34,236 | 29,675 |
Accumulated depreciation and amortization | (7,750) | (4,691) | (3,247) | (2,563) | (1,846) | (1,209) |
Real estate assets, net | $ 71,251 | $ 72,482 | 32,252 | 32,344 | 32,390 | 28,466 |
Spectrum Building | ||||||
Real Estate [Line Items] | ||||||
Land | 2,631 | |||||
Buildings and improvements | 12,862 | |||||
In-place lease value intangible | 1,458 | |||||
Real estate assets, gross | 16,951 | |||||
Previously Reported | ||||||
Real Estate [Line Items] | ||||||
Land | 5,163 | 5,163 | 5,163 | 4,289 | ||
Buildings and improvements | 24,437 | 23,844 | 23,174 | 20,181 | ||
In-place lease value intangible | 5,899 | 5,899 | 5,899 | 5,204 | ||
Real estate assets, gross | 35,499 | 34,906 | 34,236 | 29,674 | ||
Accumulated depreciation and amortization | (3,847) | (2,963) | (2,046) | (1,209) | ||
Real estate assets, net | $ 31,652 | $ 31,943 | $ 32,190 | 28,465 | ||
Previously Reported | Spectrum Building | ||||||
Real Estate [Line Items] | ||||||
Land | 1,267 | |||||
Buildings and improvements | 12,471 | |||||
In-place lease value intangible | 3,213 | |||||
Real estate assets, gross | $ 16,951 |
Real Estate - Schedule of Restated Quarterly Income and Expenses (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | ||||
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Jun. 30, 2020 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
Sep. 30, 2019 |
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Real Estate [Line Items] | |||||||
Depreciation and amortization | $ 1,597 | $ 684 | $ 717 | $ 636 | $ 3,059 | $ 1,353 | $ 2,037 |
Net loss | $ (581) | (340) | (247) | (261) | $ (1,019) | (508) | (848) |
Previously Reported | |||||||
Real Estate [Line Items] | |||||||
Depreciation and amortization | 884 | 917 | 836 | 1,753 | 2,637 | ||
Net loss | $ (540) | $ (447) | $ (461) | $ (908) | $ (1,448) |
Accrued Rent and Accounts Receivable, net (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
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Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
Dec. 31, 2019 |
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Receivables [Abstract] | |||||
Tenant receivables | $ 596 | $ 596 | $ 714 | ||
Accrued rent | 615 | 615 | 322 | ||
Allowance for uncollectible accounts | (147) | (147) | (72) | ||
Accrued rents and accounts receivable, net | 1,064 | 1,064 | $ 964 | ||
Provision (recovery) of doubtful accounts | $ 53 | $ (35) | $ 75 | $ (13) |
Future Minimum Rents (Details) $ in Thousands |
Jun. 30, 2020
USD ($)
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June 30, | |
2021 | $ 11,114 |
2022 | 8,253 |
2023 | 5,968 |
2024 | 4,590 |
2025 | 2,202 |
Thereafter | 1,189 |
Total | $ 33,316 |
Notes Payable, net - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
Dec. 31, 2019 |
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Debt Disclosure [Abstract] | |||||
Interest expense | $ 242 | $ 117 | $ 484 | $ 303 | |
Deferred loan cost amortization | 42 | $ 26 | 85 | $ 52 | |
Unamortized deferred loan costs | 310 | 310 | $ 203 | ||
Interest payable | $ 80 | $ 80 | $ 61 |
Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | ||||
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Jun. 30, 2020 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
Sep. 30, 2019 |
|
Numerator: | |||||||
Net loss attributable to common stockholders (in thousands) | $ (581) | $ (340) | $ (247) | $ (261) | $ (1,019) | $ (508) | $ (848) |
Denominator: | |||||||
Basic weighted average shares outstanding (in shares) | 8,661,000 | 5,072,000 | 8,617,000 | 4,501,000 | |||
Basic loss per common share (in dollars per share) | $ (0.07) | $ (0.05) | $ (0.12) | $ (0.11) |
Stockholders' Equity - Distributions (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 42 Months Ended | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2020 |
Mar. 31, 2020 |
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, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Jun. 30, 2020 |
Jun. 30, 2020 |
|
Dividends Payable [Line Items] | ||||||||||||||||
Dividends | $ 1,395 | $ 1,314 | $ 1,375 | $ 1,145 | $ 872 | $ 693 | $ 582 | $ 508 | $ 427 | $ 346 | $ 289 | $ 220 | $ 134 | $ 46 | $ 9,346 | |
Term before dividend payment is received | 20 days | |||||||||||||||
Cash | ||||||||||||||||
Dividends Payable [Line Items] | ||||||||||||||||
Dividends | 790 | 771 | 746 | 499 | 388 | 305 | 237 | 215 | 182 | 154 | 127 | 105 | 62 | 27 | 4,608 | |
DRP & Stock | ||||||||||||||||
Dividends Payable [Line Items] | ||||||||||||||||
Dividends | $ 605 | $ 543 | $ 629 | $ 646 | $ 484 | $ 388 | $ 345 | $ 293 | $ 245 | $ 192 | $ 162 | $ 115 | $ 72 | $ 19 | $ 4,738 |
Incentive Plans (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Restricted Shares | Common Stock | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Shares of restricted stock granted as compensation for services (in shares) | 625 | 625 | 1,250 | 1,250 |
Price per share (in usd per share) | $ 10.30 | $ 10.00 | $ 10.30 | $ 10.00 |
Incentive Award Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Amount of shares issued under plan as a percent of outstanding shares of common stock (up to) | 5.00% | |||
Independent Directors Compensation Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Initial grant upon election, shares per individual (in shares) | 3,000 | |||
Offering amount required for issuance of initial grant | $ 1,000,000 |
Special Limited Partnership Interest (Details) |
6 Months Ended |
---|---|
Jun. 30, 2020
USD ($)
| |
Equity [Abstract] | |
Distribution amount as a percent of net sales proceeds from the dispositions of assets | 15.00% |
Cumulative non-compounded pre-tax return rate on aggregated invested capital | 6.00% |
Aggregate redemption price | $ 1 |
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