Attached files
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EX-32.1 - Hartman Short Term Income Properties XX, Inc. | v184165_ex32-1.htm |
EX-32.2 - Hartman Short Term Income Properties XX, Inc. | v184165_ex32-2.htm |
EX-31.1 - Hartman Short Term Income Properties XX, Inc. | v184165_ex31-1.htm |
EX-31.2 - Hartman Short Term Income Properties XX, Inc. | v184165_ex31-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x
|
Quarterly
report pursuant to section 13 or 15(d) of the Securities Exchange Act of
1934
|
|
For
the quarterly period ended March 31, 2010
|
||
¨
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Transition
report pursuant to section 13 or 15(d) of the Securities Exchange Act of
1934
|
|
Commission
File Number 000-53912
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HARTMAN
SHORT TERM INCOME PROPERTIES XX, INC.
(Exact
name of registrant as specified in its charter)
Maryland
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26-3455189
|
(State
of Organization)
|
(I.R.S.
Employer Identification Number)
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2909
Hillcroft, Suite 420
Houston,
Texas
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77057
|
(Address
of principal executive offices)
|
(Zip
Code)
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(713)
467-2222
(Registrant’s
telephone number, including area code)
Units
(Each Unit is equal to one common share, no par value and one Series A preferred
share)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ¨
No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer ¨
|
Accelerated filer ¨
|
Non-accelerated filer ¨
|
Smaller reporting company x
|
(Do not check if a smaller reporting company)
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes ¨ No
x
As of May
14, 2010, there were 19,000 shares of the Registrant’s common shares issued and
outstanding, all of which were held by an affiliate of the
Registrant.
Hartman
Short Term Income Properties XX, Inc.
Table
of Contents
PART
I
|
FINANCIAL
INFORMATION
|
|
Item
1.
|
Financial
Statements
|
2
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
12
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risks
|
17
|
Item
4T.
|
Controls
and Procedures
|
17
|
PART
II
|
OTHER
INFORMATION
|
|
Item
1.
|
Legal
Proceedings
|
17
|
Item
1A.
|
Risk
Factors
|
17
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
18
|
Item
3.
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Defaults
Upon Senior Securities
|
18
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
18
|
Item
5.
|
Other
Information
|
18
|
Item
6.
|
Exhibits
|
18
|
1
PART
I
FINANCIAL
INFORMATION
Item
1.
Financial
Statements
Hartman
Short Term Income Properties XX, Inc.
(A
Development Stage Company)
BALANCE
SHEETS
March 31,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Cash
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$ | 1,100 | $ | 1,100 | ||||
Total
assets
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$ | 1,100 | $ | 1,100 | ||||
LIABILITIES
AND SHAREHOLDERS’ DEFICIT
|
||||||||
Accrued
expenses
|
2,086 | 4,607 | ||||||
Due
to an affiliated entity
|
$ | 168,747 | $ | 128,479 | ||||
Total
liabilities
|
$ | 170,833 | $ | 133,086 | ||||
Shareholders’
deficit
|
||||||||
Preferred
shares, $0.001 par value 200,000,000 shares authorized:
|
||||||||
Preferred
shares - Series One, convertible, non-voting, 1,000 shares issued and
outstanding
|
1 | 1 | ||||||
Common
shares, $0.001 par value, 750,000,000 authorized, 19,000 shares issued and
outstanding
|
19 | 19 | ||||||
Additional
paid-in-capital
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199,980 | 199,980 | ||||||
Deficit
accumulated during development stage
|
(369,733 | ) | (331,986 | ) | ||||
Total
shareholders’ deficit
|
(169,733 | ) | (131,986 | ) | ||||
Total
liabilities and shareholders’ deficit
|
$ | 1,100 | $ | 1,100 |
The
accompanying notes are an integral part of these financial
statements.
2
Hartman
Short Term Income Properties XX, Inc.
(A
Development Stage Company)
STATEMENTS
OF OPERATIONS
(Unaudited)
For the
Period from
|
For the
Period from
|
|||||||||||
|
February 5, 2009
|
February 5, 2009
|
||||||||||
Three
Months
ended
|
(Date of
Inception) through
|
(Date of
Inception) through
|
||||||||||
March 31, 2010
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March 31, 2009
|
March 31, 2010
|
||||||||||
Revenues
|
$ | - | $ | - | $ | - | ||||||
Expenses
|
||||||||||||
General
and administrative expenses
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37,747 | 85,606 | 369,733 | |||||||||
Total
expenses
|
37,747 | 85,606 | 369,733 | |||||||||
Net
loss
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$ | (37,747 | ) | $ | (85,606 | ) | $ | (369,733 | ) | |||
Loss
per common share - basic and diluted
|
$ | (1.99 | ) | $ | (856.06 | ) | $ | (45.67 | ) | |||
Weighted
average number of shares outstanding – basic and diluted
|
19,000 | 100 | 8,096 |
The
accompanying notes are an integral part of these financial
statements.
3
Hartman
Short Term Income Properties XX, Inc.
(A
Development Stage Company)
STATEMENTS
OF SHAREHOLDERS' DEFICIT
(Unaudited)
Additional
|
Deficit
Accumulated
During
|
|||||||||||||||||||||||||||
Preferred Stock
|
Common Stock
|
Paid-In-
|
Development
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Stage
|
Total
|
||||||||||||||||||||||
Balance,
February 5, 2009
|
- | $ | - | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||
Issuance
of common shares
|
- | - | 19,000 | 19 | 189,981 | - | 190,000 | |||||||||||||||||||||
Issuance
of convertible preferred shares
|
1,000 | 1 | - | - | 9,999 | - | 10,000 | |||||||||||||||||||||
Net
loss
|
- | - | - | - | - | (331,986 | ) | (331,986 | ) | |||||||||||||||||||
Balance,
December 31, 2009
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1,000 | $ | 1 | 19,000 | $ | 19 | $ | 199,980 | $ | (331,986 | ) | $ | (131,986 | ) | ||||||||||||||
Net
loss
|
- | - | - | - | - | (37,747 | ) | (37,747 | ) | |||||||||||||||||||
Balance,
March 31, 2010
|
1,000 | $ | 1 | 19,000 | $ | 19 | $ | 199,980 | $ | (369,733 | ) | $ | (169,733 | ) |
The
accompanying notes are an integral part of these financial
statements.
4
Hartman
Short Term Income Properties XX, Inc.
(A
Development Stage Company)
STATEMENTS
OF CASH FLOWS
(Unaudited)
For the
Period from
|
For the
Period from
|
|||||||||||
|
February 5, 2009
|
February 5, 2009
|
||||||||||
Three
Months
Ended
|
(Date of
Inception) through
|
(Date of
Inception) through
|
||||||||||
March 31, 2010
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March 31, 2009
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March 31, 2010
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
loss
|
$ | (37,747 | ) | $ | (85,606 | ) | $ | (369,733 | ) | |||
Adjustments
to reconcile net loss to cash used in operating
activities:
|
||||||||||||
Accrued
expenses
|
(2,521 | ) | - | 2,086 | ||||||||
Due
to an affiliated entity
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40,268 | 85,606 | 367,647 | |||||||||
Net
cash used in operating activities
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- | - | - | |||||||||
Cash
flows from financing activities:
|
||||||||||||
Proceeds
from the issuance of common shares
|
- | 1,000 | 1,000 | |||||||||
Proceeds
from the issuance of convertible preferred shares
|
- | 100 | 100 | |||||||||
Net
cash provided by financing activities
|
- | 1,100 | 1,100 | |||||||||
Net
change in cash
|
- | 1,100 | 1,100 | |||||||||
Cash
at the beginning of period
|
1,100 | - | - | |||||||||
Cash
at the end of period
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$ | 1,100 | $ | 1,100 | $ | 1,100 | ||||||
Supplemental
cash flow information:
|
||||||||||||
Cash
paid for:
|
||||||||||||
Interest
|
$ | - | $ | - | $ | - | ||||||
Income
taxes
|
$ | - | $ | - | $ | - | ||||||
Supplemental
disclosures of non-cash investing and financing
activities:
|
||||||||||||
Issuance
of common shares in exchange of advance made by an
affiliate
|
$ | - | $ | - | $ | 189,000 | ||||||
Issuance
of convertible preferred share in exchange of advances made by an
affiliated company
|
$ | - | $ | - | $ | 9,900 |
The
accompanying notes are an integral part of these financial
statements.
5
Hartman
Short Term Income Properties XX, Inc.
(A Development Stage Company)
Notes
to Financial Statements
As
of March 31, 2010
(Unaudited)
Note
1 — Organization
Hartman
Short Term Income Properties XX, Inc. (the “Company”), incorporated on February
5, 2009, is a newly formed Maryland corporation that intends to qualify as a
real estate investment trust (“REIT”) beginning with the taxable year that will
end December 31, 2010. The Company is in the development stage. The
Company intends to offer for sale a maximum of 25,000,000 common shares
(exclusive of 2,500,000 shares available pursuant to the Company’s dividend
reinvestment plan) at a price of $10.00 per share. Until the first closing of
the public offering of the Company’s shares, which will occur when the Company
has received and accepted subscriptions for 200,000 common shares, the Company
will be a majority owned subsidiary of Hartman XX Holdings, Inc. Hartman
XX Holdings, Inc. is a Texas corporation wholly owned by Allen R. Hartman.
The Company sold 19,000 shares to Hartman XX Holdings, Inc. at a price of $10.00
per share. The Company has also issued 1,000 shares of convertible
preferred shares to its advisor, Hartman Advisors LLC at a price of $10.00 per
share.
Hartman
Advisors LLC (the “Advisor”) is the Company’s advisor. The Advisor is owned 70%
by Allen R. Hartman and 30% by Hartman Income REIT Management, Inc. The
Company will seek to acquire and operate commercial real estate properties. All
such properties may be acquired and operated by the Company alone or jointly
with another party. As of the date of these financial statements, the Company
has neither purchased nor contracted to purchase any properties, nor has the
Advisor identified any properties in which there is a reasonable probability
that the Company will acquire. The Company may also acquire mortgages secured by
real estate.
The
management of the Company will be through the Advisor. Management of the
Company’s properties will be through Hartman Income REIT Management, Inc.
(“Property Manager”). American Beacon Partners, Inc. (formerly Pavek
Investments, Inc., the “Dealer Manager”) will serve as the dealer manager of the
Company’s public offering. These parties will receive compensation and fees for
services related to the offering and for the investment and management of the
Company’s assets. These entities will receive fees during the offering,
acquisition, operational and liquidation stages.
Note
2 — Summary of Significant Accounting Policies
Use
of Estimates in the Preparation of Financial Statements
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash
and Cash Equivalents
All
highly liquid investments with original maturities of three months or less are
considered to be cash equivalents.
Investment
in Real Estate Assets
The
Company makes subjective assessments as to the useful lives of depreciable
assets. The Company considers the period of future benefit of the asset to
determine the appropriate useful lives. These assessments, which are based on
estimates, have a direct impact on net income. The estimated useful lives of
assets by class are generally as follows:
Buildings
|
40
years
|
|
Tenant
improvements
|
Lesser
of useful life or lease term
|
|
Intangible
lease assets
|
Lesser
of useful life or lease
term
|
6
Hartman
Short Term Income Properties XX, Inc.
(A Development Stage
Company)
Notes
to Financial Statements
As
of March 31, 2010
(Unaudited)
Allocation
of Purchase Price of Acquired Assets
Upon the
acquisition of real properties, it is the Company’s policy to allocate the
purchase price of properties to acquired tangible assets, consisting of land and
buildings, and identified intangible assets and liabilities, consisting of the
value of above-market and below-market leases, other value of in-place leases
and leasehold improvements and value of tenant relationships, based in each case
on their fair values. The Company utilizes internal valuation methods to
determine the fair values of the tangible assets of an acquired property (which
includes land and buildings).
The fair
values of above-market and below-market in-place lease values, including
below-market renewal options for which renewal has been determined to be
reasonably assured, are recorded based on the present value (using an interest
rate which reflects the risks associated with the leases acquired) of the
difference between (a) the contractual amounts to be paid pursuant to the
in-place leases and (b) an estimate of fair market lease rates for the
corresponding in-place leases and below-market renewal options, which is
generally obtained from independent appraisals, measured over a period equal to
the remaining non-cancelable term of the lease. The above-market and
below-market lease and renewal option values are capitalized as intangible lease
assets or liabilities and amortized as an adjustment of rental income over the
remaining expected terms of the respective leases.
The fair
values of in-place leases include direct costs associated with obtaining a new
tenant, opportunity costs associated with lost rentals which are avoided by
acquiring an in-place lease, and tenant relationships. Direct costs associated
with obtaining a new tenant include commissions, tenant improvements, and other
direct costs and are estimated based on independent appraisals and management’s
consideration of current market costs to execute a similar lease. These direct
costs are included in intangible lease assets and are amortized to expense over
the remaining terms of the respective leases. The value of opportunity costs is
calculated using the contractual amounts to be paid pursuant to the in-place
leases over a market absorption period for a similar lease. Customer
relationships are valued based on expected renewal of a lease or the likelihood
of obtaining a particular tenant for other locations. These intangibles will be
included in intangible lease assets in the balance sheet and are amortized to
expense over the remaining term of the respective leases.
The
determination of the fair values of the assets and liabilities acquired requires
the use of significant assumptions with regard to the current market rental
rates, rental growth rates, discount rates and other variables. The use of
inappropriate estimates would result in an incorrect assessment of the purchase
price allocations, which could impact the amount of the Company’s reported net
income.
Valuation
of Real Estate Assets
The
Company will continually monitor events and changes in circumstances that could
indicate that the carrying amounts of real estate and related intangible assets
may not be recoverable. When indicators of potential impairment are present that
indicate that the carrying amounts of real estate and related intangible assets
may not be recoverable, management assesses the recoverability of the assets by
determining whether the carrying value of the assets will be recovered through
the undiscounted future operating cash flows expected from the use of the assets
and their eventual disposition. In the event that such expected undiscounted
future cash flows do not exceed the carrying value, the Company will adjust the
real estate and related intangible assets to the fair value and recognize an
impairment loss.
Projections
of expected future cash flows require management to estimate future market
rental income amounts subsequent to the expiration of current lease agreements,
property operating expenses, discount rates, the number of months it takes to
release the property and the number of years the property is held for
investment. The use of inappropriate assumptions in the future cash flow
analysis would result in an incorrect assessment of the property’s future cash
flow and fair value and could result in the overstatement of the carrying value
of our real estate and related intangible assets and net
income.
7
Hartman
Short Term Income Properties XX, Inc.
(A Development Stage
Company)
Notes
to Financial Statements
As
of March 31, 2010
(Unaudited)
Organization
and Offering Costs
The
Company has incurred certain expenses in connection with organizing the Company
and registering to sell common shares. These costs principally relate to
professional and filing fees. As of March 31, 2010, such costs totaled $369,733
which have been expensed as incurred since the date of inception, February 5,
2009.
Revenue
Recognition
Upon the
acquisition of real estate, certain properties will have leases where minimum
rent payments increase during the term of the lease. The Company will record
rental revenue for the full term of each lease on a straight-line basis. 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. In
accordance with ASC 605-10-S99, Revenue Recognition, the Company will defer the
recognition of contingent rental income, such as percentage rents, until the
specific target that triggers the contingent rental income is achieved. Cost
recoveries from tenants are included in tenant reimbursement income in the
period the related costs are incurred.
Share-Based
Compensation
The
Company will follow ASC 718- Compensation- Stock Compensation with regard to
issuance of stock in payment of services. ASC 718 covers a wide range of
share-based compensation arrangements including share options, restricted share
plans, performance-based awards, share appreciation rights, and employee share
purchase plans. ASC 718 requires that compensation cost relating to share-based
payment transactions be recognized in financial statements. The cost is measured
based on the fair value of the equity or liability instruments issued. The
Company plans to pay a portion of directors’ compensation with restricted common
stock.
Income
Taxes
The
Company expects to qualify as a REIT under the Internal Revenue Code of 1986, as
amended. To qualify as a REIT, the Company must meet certain organizational and
operational requirements, including a requirement to distribute at least 90% of
the Company’s annual REIT taxable income to stockholders (which is computed
without regard to the dividends-paid deduction or net capital gain and which
does not necessarily equal net income as calculated in accordance with
GAAP). As a REIT, the Company generally will not be subject to federal
income tax on income that it distributes as dividends to its stockholders.
If the Company fails to qualify as a REIT in any taxable year, it will be
subject to federal income tax on its taxable income at regular corporate income
tax rates and generally will not be permitted to qualify for treatment as a REIT
for federal income tax purposes for the four taxable years following the year
during which qualification is lost, unless the Internal Revenue Service grants
the Company relief under certain statutory provisions. Such an event could
materially and adversely affect the Company’s net income and net cash available
for distribution to stockholders. However, the Company believes that it is
organized and will operate in such a manner as to qualify for treatment as a
REIT.
Loss
Per Share
The
computations of basic and diluted loss per common share are based upon the
weighted average number of common shares outstanding and potentially dilutive
securities. The Company’s potentially dilutive securities include
preferred shares that are convertible into the Company’s common stock. As
of March 31, 2010, there were no shares issuable in connection with these
potentially dilutive securities. These potentially dilutive securities
were disregarded in the computations of diluted net loss per share for the
periods ended March 31, 2010 and March 31, 2009 because no shares are issuable
and inclusion of such potentially dilutive securities would have been
anti-dilutive.
8
Hartman
Short Term Income Properties XX, Inc.
(A Development Stage
Company)
Notes
to Financial Statements
As
of March 31, 2010
(Unaudited)
Recently
Issued Accounting Standards
In May
2009, the FASB issued ASC Topic 855, Subsequent Events (“ASC
855”). ASC 855 establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. ASC 855
requires the disclosure of the date through which an entity has evaluated
subsequent events and the basis for that date. This ASC also requires
public entities to evaluate subsequent events through the date that the
financial statements are issued. ASC 855 is effective for interim periods
and fiscal years ending after June 15, 2009. In February 2010, the FASB
issued Accounting Standards Update (“ASU”) No. 2010-09. ASU No. 2010-09
amends ASC 855 and eliminates the requirement to disclose the date through which
subsequent events have been evaluated for SEC filers. ASU No. 2010-09 is
effective upon issuance. The adoption of ASC 855 and ASU No. 2010-09 did
not have a material impact on the Company’s financial statements.
There are
no recently issued accounting standards that the Company expects to have a
material effect on its financial statements.
Note
3 — Investments
As of
March 31, 2010, the Company has not commenced operations. The Company has
not purchased or contracted to purchase any properties, nor has the Advisor
identified any properties in which there is a reasonable probability that the
Company will acquire.
Note
4 — Shareholders’ Equity and Related Party Transactions
The
Company initially issued 100 shares of its common stock to Hartman XX
Holdings, Inc. (“Holdings”) for $1,000. Holdings is a Texas corporation
wholly owned by Allen R. Hartman. Holdings was formed solely for the
purpose of facilitating the organization and offering of the initial offering of
the Company’s shares. Effective October 15, 2009 the Company issued an
additional 18,900 shares to Holdings for $189,000. Holdings contributed a
related party liability in the amount of $189,000 to the Company in exchange for
the issuance of an additional 18,900 common shares of the Company. The
transaction resulted in a total of 19,000 common shares issued since inception
for total consideration of $190,000.
The
Company issued the Advisor, Hartman Advisors LLC, 1,000 shares of non-voting
convertible preferred stock for $100. Effective October 15, 2009 the
Company received additional consideration of $9,900 with respect to the
non-voting convertible preferred stock. The Advisor contributed a related
party liability in the amount of $9,900 to the Company as donated capital
related to the convertible common stock previously issued by the Company to the
Advisor. Accordingly, the overall issue price for the 1,000 convertible
preferred shares is $10,000 or $10 per share. Upon the terms described
below, these shares may be converted into shares of the Company’s common stock,
resulting in dilution of the stockholders’ interest in the Company.
As a
result of the foregoing transactions the capitalization of the Company is
$200,000.
Hartman
Advisors LLC, is a Texas limited liability company owned 70% by Allen R. Hartman
individually and 30% by the Property Manager. The Property Manager is a
wholly owned subsidiary of Hartman Income REIT Management, LLC, which is wholly
owned by Hartman Income REIT of which Allen R. Hartman is the Chief Executive
Officer and Chairman of the Board of Trustees.
Common Stock Issuable Upon
Conversion of Convertible Stock - The convertible preferred stock will
convert to shares of common stock if (1) the Company has made total
distributions on then outstanding shares of the Company’s common stock equal to
the issue price of those shares plus a 6% cumulative, non-compounded, annual
return on the issue price of those outstanding shares, (2) the Company lists its
common stock for trading on a national securities exchange if the sum of prior
distributions on then outstanding shares of our common stock plus the aggregate
market value of our common stock (based on the 30-day average closing price)
meets the same 6% performance threshold, or (3) the Company’s
advisory agreement with Hartman Advisors, LLC expires without renewal or is
terminated (other than because of a material breach by our advisor), and at the
time of such expiration or termination the Company is deemed to have met the
foregoing 6% performance threshold based on the Company’s enterprise value and
prior distributions and, at or subsequent to the expiration or termination, the
shareholders actually realize such level of performance upon listing or through
total distributions. In general, the convertible stock will convert into shares
of common stock with a value equal to 15% of the excess of the Company’s
enterprise value plus the aggregate value of distributions paid to date on then
outstanding shares of common stock over the aggregate issue price of those
outstanding shares plus a 6% cumulative, non-compounded, annual return on the
issue price of those outstanding shares. With respect to conversion in
connection with the termination of the advisory agreement, this calculation is
made at the time of termination even though the actual conversion may occur
later, or not at all.
9
Hartman
Short Term Income Properties XX, Inc.
(A Development Stage
Company)
Notes
to Financial Statements
As
of March 31, 2010
(Unaudited)
Costs of Formation and Fees to
Related Parties - The Company is dependent upon its majority owned-parent
company, Hartman XX Holdings, Inc., its affiliates, the Advisor and the Property
Manager (collectively, the “Affiliates”) for financial support. The
Affiliates have been advancing the necessary financial support, including the
payments of various organizational and offering expenses made on behalf of the
Company.
The
Affiliates have agreed not to demand payment of these advances for at least one
year and a day from the date of the filing of this report. Furthermore,
the Affiliates will write off all advances made on behalf of the Company if the
Company does not raise at least $2,000,000 in our offering.
As of
March 31, 2010 the Company had a balance due to an affiliated entity, the
Property Manager of $168,747. The Property Manager has paid various organization
and offering expenses on behalf of the Company. The Advisor will reimburse
Hartman Income REIT Management, Inc., for expenses paid on behalf of the Company
from proceeds of the offering. Additional compensation will be paid as
outlined in the below compensation table below.
The
Company expects to pay the following fees to its Advisor and its affiliates
during its various stages of development:
Offering
Stage
|
||
Selling
Commission
|
The
Company will pay Dealer Manager up to 7.0% of the gross proceeds of the
primary offering; the Company will not pay any selling commissions on
sales of shares under the distribution reinvestment plan; Dealer Manager
will re-allow all selling commissions to participating
broker-dealers.
|
|
Dealer
Manager Fee
|
The
Company will pay Dealer Manager up to 2.5% of gross proceeds of the
primary offering; the Company will not pay a dealer manager fee with
respect to sales under the distribution reinvestment plan; Dealer Manager
may re-allow up to 2.5% of its dealer manager fees to participating
broker-dealers.
|
|
Other
Organization and Offering Expenses
|
The
Company will reimburse Hartman Advisors LLC up to 1.5% of gross offering
proceeds for organization and offering expenses.
|
|
Acquisition
and Development Stage
|
||
Acquisition
and Advisory Fee
|
The
Company will pay Hartman Advisors LLC 2.5% of the funds paid and or
budgeted in respect of the purchase, development, construction or
improvement of each asset acquired.
|
|
Acquisition
Expenses
|
The
Company will reimburse Hartman Advisors LLC for all third party expenses
related to the selection and acquisition of assets, whether or not
acquired.
|
10
Hartman
Short Term Income Properties XX, Inc.
(A Development Stage
Company)
Notes
to Financial Statements
As
of March 31, 2010
(Unaudited)
Debt
Financing Fee
|
The
Company will pay Hartman Advisors LLC 1% of the amount available under any
loan or line of credit made available to the Company.
|
|
Development
Fee
|
The
Company will pay Hartman Income REIT Management, Inc. a development fee in
an amount that is usual and customary for comparable services rendered to
similar projects in the geographic market of a project.
|
|
Operational
Stage
|
||
Property
Management and Leasing Fees
|
The
Company will pay Hartman Income REIT Management Inc., property management
fees up to 5% of the gross revenues of properties managed. The
Company will pay Hartman Income REIT Management, Inc. leasing fees for
leasing services provided an amount equal to the leasing fees charged by
unaffiliated persons rendering comparable services in the same geographic
location of the applicable property.
|
|
Asset
Management Fees
|
The
Company will pay Hartman Advisors LLC a monthly fee equal to 1/12th of
0.75% of the sum of the higher of the cost or value of each asset, where
the cost equals the amount actually paid or budgeted (excluding
acquisition fees and expenses). This fee is payable monthly in
advance on the first day of each month based on assets held by the Company
on that date, adjusted for appropriate closing dates for individual
property acquisitions.
|
|
Operating
Expenses
|
We
will reimburse Hartman Advisors LLC for all expenses paid or incurred by
Advisor in connection with the services provided to the Company, subject
to the limitation that we will not reimburse our advisor for any amount by
which our operating expenses (including the asset management fee) at the
end of the four preceding fiscal quarters exceeds the greater of: (A) 2%
of our average invested assets, or (B) 25% of our 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 our assets for that period. If we have already reimbursed our
advisor for such excess operating expenses, our advisor will be required
to repay such amount to us. We expect to reimburse the advisor for the
salaries and other compensation paid to the advisor’s employees and other
service providers for services performed on our behalf, subject to the
reimbursement limitation described above in this paragraph.
Notwithstanding the above, we may reimburse our advisor for expenses in
excess of this limitation if a majority of the independent directors
determines that such excess expenses are justified based on unusual and
non-recurring factors.
|
|
Liquidation
Stage
|
||
Disposition
Fee
|
If
our advisor provides a substantial amount of services, as determined by
our independent directors, in connection with the sale of one or more
assets, it will receive a disposition fee equal to (1) in the case of the
sale of real property, the lesser of: (A) one-half of the aggregate
brokerage commission paid (including the disposition fee) or, if none is
paid, the amount that customarily would be paid, or (B) 3% of the sales
price of each property sold, and (2) in the case of the sale of any asset
other than real property, 3% of the sales price of such
asset.
|
11
Hartman
Short Term Income Properties XX, Inc.
(A Development Stage
Company)
Notes
to Financial Statements
As
of March 31, 2010
(Unaudited)
Note
5 – Commitments and Contingencies
Economic
Dependency
The
Company is dependent on the Advisor and the Dealer Manager for certain services
that are essential to the Company, including the sale of the Company’s shares of
common stock and preferred stock available for issue; the identification,
evaluation, negotiation, purchase and disposition of properties’, management of
the daily operations of the Company’s real estate portfolio, and other general
and administrative responsibilities. In the event that these
companies are unable to provide the respective services, the Company will be
required to obtain such services from other services.
Note
6 – Incentive Awards Plan
The
Company has adopted an incentive plan (the “2009 Omnibus Stock Incentive Plan”
or the “Incentive Plan”) that provides for the grant of incentive stock options,
non-qualified stock options, stock appreciation rights, deferred stock awards,
restricted stock awards, dividend equivalent rights and other stock-based awards
within the meaning of Internal Revenue Code Section 422, or any combination of
the foregoing. We have initially reserved 5,000,000 shares of our common stock
for the issuance of awards under our stock incentive plan, but in no event more
than ten (10%) percent of our issued and outstanding shares. The number of
shares reserved under our stock incentive plan is also subject to adjustment in
the event of a stock split, stock dividend or other change in our
capitalization. Generally, shares that are forfeited or canceled from awards
under our stock incentive plan also will be available for future
awards. No awards have been granted as of March 31,
2010.
Note 7
– Subsequent Event
As of May 14, 2010, the Company has received one subscription in
the amount of $56,471.
Item
2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
Unless the context otherwise
requires, all references in this report to “we,” “us” or “our” are to Hartman
Short Term Income Properties XX, Inc..
Forward-Looking
Statements
This Form
10-Q contains forward-looking statements, including discussion and analysis of
our financial condition, anticipated capital expenditures required to complete
projects, amounts of anticipated cash distributions to our shareholders in the
future and other matters. These forward-looking statements are not historical
facts but are the intent, belief or current expectations of our management based
on its knowledge and understanding of our business and industry. Forward-looking
statements are typically identified by the use of terms such as “may,” “will,”
“should,” “potential,” “predicts,” “anticipates,” “expects,” “intends,” “plans,”
“believes,” “seeks,” “estimates” or the negative of such terms and variations of
these words and similar expressions. These statements are not guarantees of
future performance and are subject to risks, uncertainties and other factors,
some of which are beyond our control, are difficult to predict and could cause
actual results to differ materially from those expressed or forecasted in the
forward-looking statements.
Forward-looking
statements that were true at the time made may ultimately prove to be incorrect
or false. You are cautioned to not place undue reliance on forward-looking
statements, which reflect our management’s view only as of the date of this Form
10-Q. We undertake no obligation to update or revise forward-looking statements
to reflect changed assumptions, the occurrence of unanticipated events or
changes to future operating results. Factors that could cause actual results to
differ materially from any forward-looking statements made in this Form 10-Q
include:
|
●
|
the imposition of federal taxes
if we fail to qualify as a REIT in any taxable year or forego an
opportunity to ensure REIT
status;
|
|
●
|
uncertainties related to the
national economy, the real estate industry in general and in our specific
markets;
|
|
●
|
legislative or regulatory
changes, including changes to laws governing
REITS;
|
|
●
|
construction costs that may
exceed estimates or construction
delays;
|
|
●
|
increases in interest
rates;
|
12
|
●
|
availability of credit or
significant disruption in the credit
markets;
|
|
●
|
litigation
risks;
|
|
●
|
lease-up
risks;
|
|
●
|
inability to obtain new tenants
upon the expiration of existing
leases;
|
|
●
|
inability to generate sufficient
cash flows due to market conditions, competition, uninsured losses,
changes in tax or other applicable laws;
and
|
|
●
|
the potential need to fund tenant
improvements or other capital expenditures out of operating cash
flow.
|
The
forward-looking statements should be read in light of these factors and the
factors identified in the “Risk Factors” sections of the December 31, 2009 Form
10-K filed with the SEC on March 31, 2010.
Overview
We were
formed as a Maryland corporation on February 5, 2009 to invest in and operate
real estate and real estate-related assets on an opportunistic basis. We may
acquire a wide variety of commercial properties, including office, industrial,
retail, and other real properties. These properties may be existing,
income-producing properties, newly constructed properties or properties under
development or construction. In particular, we will focus on acquiring
properties with significant possibilities for short-term capital appreciation,
such as those requiring development, redevelopment or repositioning or those
located in markets with high growth potential. We also may invest in real
estate-related securities and, to the extent that our advisor determines that it
is advantageous, we may invest in mortgage loans. We expect to make our
investments in or in respect of real estate assets located in the United States
and other countries. The net proceeds of this offering will provide funds to
enable us to purchase properties and other real estate-related investments. As
of the date of this prospectus, we had not yet commenced operations or entered
into any arrangements to acquire any specific investments. The number of assets
we acquire will depend upon the number of shares sold in this offering and the
resulting amount of the net proceeds available for investment in properties.
We intend
to make an election under Section 856(c) of the Internal Revenue Code to be
taxed as a REIT, beginning with the taxable year ending December 31, 2010. If we
qualify as a REIT for federal income tax purposes, we generally will not be
subject to federal income tax on income that we distribute to our stockholders.
If we make an election to be taxed as a REIT and later fail to qualify as a REIT
in any taxable year, we will be subject to federal income tax on our taxable
income at regular corporate rates and will not be permitted to qualify for
treatment as a REIT for federal income tax purposes for four years following the
year in which our qualification is denied. Such an event could materially and
adversely affect our net income. However, we believe that we are organized and
will operate in a manner that will enable us to qualify for treatment as a REIT
for federal income tax purposes during the current year ending December 31,
2010, and we intend to continue to operate so as to remain qualified as a REIT
for federal income tax purposes.
The
following discussion and analysis should be read in conjunction with the
accompanying balance sheet and the notes thereto.
Critical
Accounting Policies and Estimates
Below is
a discussion of the accounting policies that management believes will be
critical once we commence operations. We consider these policies critical
because they involve difficult management judgments and assumptions, require
estimates about matters that are inherently uncertain and because they are
important for understanding and evaluating our reported financial results. These
judgments affect the reported amounts of assets and liabilities and our
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenue and expenses during the reporting
periods. With different estimates or assumptions, materially different amounts
could be reported in our financial statements. Additionally, other companies may
utilize different estimates that may impact the comparability of our results of
operations to those of companies in similar businesses. Our most sensitive
estimates will involve the allocation of the purchase price of acquired
properties and evaluating our real estate-related investments for
impairment.
13
Principles
of Consolidation and Basis of Presentation
Our
financial statements will include our accounts, the accounts of variable
interest entities (VIEs) in which we are the primary beneficiary and the
accounts of other subsidiaries over which we have control. All inter-company
transactions, balances and profits will be eliminated in consolidation.
Interests in entities acquired will be evaluated for consolidation based on
Financial Accounting Standards Board Interpretation Accounting Standards
Codification (“ASC”) (ASC 810-10-15), which requires the consolidation of VIEs
in which we are deemed to be the primary beneficiary. If the interest in the
entity is determined to not be a VIE, then the entity is evaluated for
consolidation under ASC 970-323-25.
There are
judgments and estimates involved in determining if an entity in which we have
made an investment is a VIE and if so, if we are the primary beneficiary. The
entity is evaluated to determine if it is a VIE by, among other things,
calculating the percentage of equity being risked compared to the total equity
of the entity. ASC 810-10-15 provides some guidelines as to what the
minimum equity at risk should be, but the percentage can vary depending upon the
industry and/or the type of operations of the entity and it is up to management
to determine that minimum percentage as it relates to our business and the facts
surrounding each of our acquisitions. In addition, even if the entity’s equity
at risk is a very low percentage, we are required by ASC
810-10-15, to evaluate the equity at risk compared to the entity’s
expected future losses to determine if there could still in fact be sufficient
equity at the entity. Determining expected future losses involves assumptions of
various possibilities of the results of future operations of the entity,
assigning a probability to each possibility and using a discount rate to
determine the net present value of those future losses. A change in the
judgments, assumptions and estimates outlined above could result in
consolidating an entity that should not be consolidated or accounting for an
investment on the equity method that should in fact be consolidated, the effects
of which could be material to our financial statements.
Real
Estate
Upon the
acquisition of real estate properties, we will allocate the purchase price of
those properties to the tangible assets acquired, consisting of land, land
improvements, buildings, building improvements, furniture, fixtures and
equipment, identified intangible assets, asset retirement obligations and
assumed liabilities based on their relative fair values in accordance with ASC
805-10 - Business Combinations, and ASC 350-10 Intangibles- Goodwill and
other identified intangible assets consist of the fair value of above-market and
below-market leases, in-place leases, in-place tenant improvements, tenant
relationships and other intangible assets. Initial valuations are subject to
change until our information is finalized, which is no later than 12 months from
the acquisition date.
The fair
value of the tangible assets to be acquired, consisting of land, land
improvements, buildings, building improvements, furniture, fixtures and
equipment, will be determined by valuing the property as if it were vacant, and
the “as-if-vacant” value will then be allocated to the tangible assets. Land
values will be derived from appraisals, and building and land improvement values
will be calculated as replacement cost less depreciation or management’s
estimates of the relative fair value of these assets using discounted cash flow
analyses or similar methods. Furniture, fixtures and equipment values will be
determined based on current reproduction or replacement cost less depreciation
and other estimated allowances based on physical, functional or economic
factors. The values of the buildings will be depreciated over 40 years using the
straight-line method. Tenant improvements and intangible lease assets
will be depreciated over the lesser of useful or the lease term.
We will
determine the value of above-market and below-market in-place leases for
acquired properties based on the present value (using an interest rate that
reflects the risks associated with the leases acquired) of the difference
between (1) the contractual amounts to be paid pursuant to the in-place leases
and (2) management’s estimate of current market lease rates for the
corresponding in-place leases, measured over a period equal to the remaining
non-cancelable terms of the respective leases. We will record the fair value of
above-market and below-market leases as intangible assets or intangible
liabilities, respectively, and amortize them as an adjustment to rental income
over the remaining non-cancelable terms of the respective leases and any bargain
renewal periods, if applicable.
The
total value of identified real estate intangible assets acquired will be further
allocated to in-place lease values, in-place tenant improvements, in-place
leasing commissions and tenant relationships based on management’s evaluation of
the specific characteristics of each tenant’s lease and our overall relationship
with that respective tenant. The aggregate value for tenant improvements and
leasing commissions will be based on estimates of these costs incurred at
inception of the acquired leases, amortized through the date of acquisition. The
aggregate value of in-place leases acquired and tenant relationships will be
determined by applying a fair value model. The estimates of fair value of
in-place leases will include an estimate of carrying costs during the expected
lease-up periods for the respective spaces considering current market
conditions. In estimating the carrying costs that would have otherwise been
incurred had the leases not been in place, management will include such items as
real estate taxes, insurance and other operating expenses as well as
lost rental revenue during the expected lease-up period based on current market
conditions. The estimates of the fair value of tenant relationships will also
include costs to execute similar leases including leasing commissions, legal and
tenant improvements, as well as an estimate of the likelihood of renewal as
determined by management on a tenant-by-tenant basis.
14
We will
amortize the value of in-place leases and in-place tenant improvements to
expense over the initial term of the respective leases. The value of tenant
relationship intangibles will be amortized to expense over the initial term and
any anticipated renewal periods, but in no event will the amortization period
for intangible assets exceed the remaining depreciable life of the building.
Should a tenant terminate its lease, the unamortized portion of the in-place
lease value and tenant relationship intangibles would be charged to
expense.
We will
determine the fair value of assumed debt by calculating the net present value of
the scheduled note payments using interest rates for debt with similar terms and
remaining maturities that we believe we could obtain. Any difference between the
fair value and stated value of the assumed debt will be recorded as a discount
or premium and amortized over the remaining life of the loan.
In
allocating the purchase price of each of our properties, management will make
assumptions and use various estimates, including, but not limited to, the
estimated useful lives of the assets, the cost of replacing certain assets,
discount rates used to determine present values, market rental rates per square
foot and the period required to lease the property up to its occupancy at
acquisition if it were vacant. Many of these estimates will be obtained from
independent third-party appraisals. However, management will be responsible for
the source and use of these estimates. A change in these estimates and
assumptions could result in the various categories of our real estate assets
and/or related intangibles being overstated or understated, which could result
in an overstatement or understatement of depreciation and/or amortization
expense. These variances could be material to our financial
statements.
Investment
Impairments
For real
estate we wholly own, our management will monitor events and changes in
circumstances indicating that the carrying amounts of the real estate assets may
not be recoverable. When such events or changes in circumstances are present, we
will assess potential impairment by comparing estimated future undiscounted
operating cash flows expected to be generated over the life of the asset and
from its eventual disposition to the carrying amount of the asset. In the event
that the carrying amount exceeds the estimated future undiscounted operating
cash flows, we will recognize an impairment loss to adjust the carrying amount
of the asset to estimated fair value.
For real
estate we own through an investment in a joint venture, tenant-in-common
interest or other similar investment structure, at each reporting date, we will
compare the estimated fair value of our investment to the carrying value. An
impairment charge will be recorded to the extent the fair value of our
investment is less than the carrying amount and the decline in value is
determined to be other than a temporary decline.
In
evaluating our investments for impairment, management will make several
estimates and assumptions, including, but not limited to, the projected date of
disposition of the properties, the estimated future cash flows of the properties
during our ownership and the projected sales price of each of the properties. A
change in these estimates and assumptions could result in understating or
overstating the book value of our investments, which could be material to our
financial statements.
Competition
The
current market for properties that meet our investment objectives is highly
competitive as is the leasing market for such properties. We compete with many
other entities engaged in real estate investment activities, including
individuals, corporations, bank and insurance company investment accounts,
REITs, other real estate limited partnerships, and other entities engaged in
real estate investment activities, many of which will have greater resources
than we will. We may also compete with other Hartman-sponsored programs to
acquire properties and other investments. In the event that an investment
opportunity becomes available that is suitable, under all of the factors
considered by our advisor, for both us and one or more other Hartman-sponsored
programs, and for which more than one of such entities has sufficient uninvested
funds, then the entity that has had the longest period of time elapse since it
was offered an investment opportunity will first be offered the investment
opportunity. It will be the duty of our advisor to ensure that this method is
applied fairly to us.
15
Results
of Operations
As of
March 31, 2010 we have not commenced any significant operations because we are
in our organization stage. We will not commence any significant operations until
we have raised at least $2,000,000 in our offering. Our management is not aware
of any material trends or uncertainties, other than national economic conditions
affecting real estate generally, that may reasonably be expected to have a
material impact, favorable or unfavorable, on revenues or income from the
acquisition and operation of real properties and real estate-related
investments, other than those referred to in this prospectus.
Liquidity
and Capital Resources
We will
not commence any significant operations until we have raised at least $2,000,000
in our offering. Our principal demands for funds will be for real estate
and real estate-related acquisitions, for the payment of operating expenses and
distributions, and for the payment of interest on our outstanding indebtedness.
Generally, we expect to meet cash needs for items other than acquisitions from
our cash flow from operations, and we expect to meet cash needs for acquisitions
from the net proceeds of our offering and from financings.
If the
minimum offering has not been received and accepted by February 9, 2011 (one
year after the effective date of the prospectus), then our offering will
terminate. However, if our offering minimum is achieved, then the offering will
continue until February 9, 2013. At which time the Company’s board of directors
can approve an extension of our offering.
There may
be a delay between the sale of our shares and the purchase of properties or
other investments, which could result in a delay in our ability to make
distributions to our stockholders. Some or all of our distributions will be paid
from other sources, such as from the proceeds of our offerings, cash advances to
us by our advisor, cash resulting from a waiver of asset management fees and
borrowings secured by our assets in anticipation of future operating cash flow
until such time as we have sufficient cash flow from operations to fund fully
the payment of distributions. We expect to have little, if any, cash flow from
operations available for distribution until we make substantial investments and
currently have no plans regarding when distributions will commence. In addition,
to the extent our investments are in development or redevelopment projects or in
properties that have significant capital requirements, our ability to make
distributions may be negatively impacted, especially during our early periods of
operation.
We intend
to borrow money to acquire properties and make other investments. There is no
limitation on the amount we may invest in any single property or other asset or
on the amount we can borrow for the purchase of any individual property or other
investment. We do not expect that the maximum amount of our indebtedness will
exceed 300% of our “net assets” (as defined by the NASAA REIT Guidelines) as of
the date of any borrowing; however, we may exceed that limit if approved by a
majority of our independent directors and if disclosed to the stockholders in
the next quarterly report along with the explanation for such excess borrowings.
Our board of directors has adopted a policy to generally limit our aggregate
borrowings to approximately 50% of the aggregate value of our assets unless
substantial justification exists that borrowing a greater amount is in our best
interests. Our policy limitation, however, does not apply to individual
real estate assets and only will apply once we have ceased raising capital under
this or any subsequent offering and invested substantially all of our
capital. As a result, we expect to borrow more than 50% of the contract
purchase price of each real estate asset we acquire to the extent our board of
directors determines that borrowing these amounts is prudent. Our
policy of limiting the aggregate debt to equity ratio to 50% relates primarily
to mortgage loans and other debt that will be secured by our
properties. The NASAA guideline limitation of 300% of our net assets
includes secured and unsecured indebtedness that we may issue. We do
not anticipate issuing significant amounts of unsecured and therefore we intend
to limit the balance of our borrowings to 50% of the purchase prices, in the
aggregate, of our property portfolio.
Our
advisor may, but is not required to, establish capital reserves from gross
offering proceeds, out of cash flow generated by operating properties and other
investments or out of non-liquidating net sale proceeds from the sale of our
properties and other investments. Capital reserves are typically utilized for
non-operating expenses such as tenant improvements, leasing commissions and
major capital expenditures. Alternatively, a lender may require its own formula
for escrow of capital reserves.
Potential
future sources of capital include proceeds from secured or unsecured financings
from banks or other lenders, proceeds from the sale of properties and
undistributed funds from operations. If necessary, we may use financings or
other sources of capital in the event of unforeseen significant capital
expenditures. There can be no assurance that we will be able to
secure such financing.
Contractual
Obligations
Our board
of directors has approved our entering into the Advisory Agreement, the Property
Management Agreement and the Dealer Management Agreement.
16
Off-Balance
Sheet Arrangements
As
of March 31, 2010, we had no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources.
Recent
Accounting Pronouncements
Management
does not believe that any recently issued, but not yet effective accounting
standards if currently adopted, would have a material effect on the accompanied
financial statements.
Item
3. Quantitative
and Qualitative Disclosures about Market Risks
We will
be exposed to interest rate changes primarily as a result of long-term debt used
to acquire properties and make loans and other permitted investments. Our
interest rate risk management objectives will be to limit the impact of interest
rate changes on earnings and cash flows and to lower overall borrowing costs. To
achieve these objectives, we expect to borrow primarily at fixed rates or
variable rates with the lowest margins available and, in some cases, with the
ability to convert variable rates to fixed rates. With regard to variable rate
financing, we will assess interest rate cash flow risk by continually
identifying and monitoring changes in interest rate exposures that may adversely
impact expected future cash flows and by evaluating hedging
opportunities.
Item
4T.
Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
In
connection with the preparation of this Form 10-Q, as of March 31, 2010, an
evaluation was performed under the supervision and with the participation of the
Company’s management, including the CEO and CFO, of the effectiveness of the
design and operation of our disclosure controls and procedures as defined in
Rule 13a-15(e) under the Exchange Act. In performing this evaluation, management
reviewed the selection, application and monitoring of our historical accounting
policies. Based on that evaluation, the CEO and CFO concluded that as of March
31, 2010, these disclosure controls and procedures were effective and designed
to ensure that the information required to be disclosed in our reports filed
with the SEC is recorded, processed, summarized and reported on a timely basis.
In designing and evaluating disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives. Management is required to apply judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
Changes
in Internal Control over Financial Reporting
There
have been no changes during the Company’s quarter ended March 31, 2010, in the
Company’s internal controls over financial reporting that have materially
affected, or are reasonably likely to materially affect, the Company’s internal
control over financing reporting.
PART
II
OTHER
INFORMATION
Item
1. Legal
Proceedings
None.
Item
1A. Risk
Factors
None.
17
Item
2. Unregistered
Sales of Equity Securities and Use of Proceeds
On
February 9, 2010, our Registration Statement on Form S-11 (File
No. 333-154750), registering a public offering of up to $250,000,000 in
shares of our common stock, was declared effective under the Securities Act of
1933, as amended, or the Securities Act, and we commenced our initial public
offering. We are offering up to 25,000,000 shares of our common stock to the
public in our primary offering at $10.00 per share and up to 2,500,000 shares of
our common stock pursuant to our dividend reinvestment plan at $9.50 per
share.
We may
not sell any shares in the offering until we have raised gross offering proceeds
of $2,000,000 from persons who are not affiliated with us or our advisor.
Pending satisfaction of this condition, all subscription payments will be placed
in an account held by our escrow agent in trust for subscribers’
benefit. The offering of our shares will continue until the earliest
of our selling shares equal to our maximum offering of $250,000,000, our board
of directors determines to terminate the offering or three years from the
effective date of February 9, 2010. The dealer manager of the
offering, American Beacon Partners, Inc., is not required to sell a specific
number or dollar amount of shares but will use its best efforts to sell
25,000,000 of our shares.
During
the three months ended March 31, 2010, we did not sell any equity securities
that were not registered under the Securities Act and we did not repurchase any
of our securities.
As of May
14, 2010, the Company has received one subscription in the amount of
$56,471.
Item
3. Defaults
Upon Senior Securities
None.
Item
4. Submission
of Matters to a Vote of Security Holders
None.
Item
5. Other
Information
None.
Item
6. Exhibits.
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (FILED
HEREWITH)
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (FILED
HEREWITH)
|
32.1
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (FILED
HEREWITH)
|
32.2
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (FILED
HEREWITH)
|
18
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
HARTMAN
SHORT TERM INCOME PROPERTIES XX, INC.
By:
|
/s/
Allen R. Hartman
|
Date:
May 14, 2010
|
|
Allen
R. Hartman,
Chairman
of the Board and
Chief
Executive Officer
(Principal
Executive Officer)
|
|||
By:
|
/s/
Louis T. Fox, III
|
Date:
May 14, 2010
|
|
|
Louis
T. Fox, III,
Chief
Financial Officer
(Principal
Financial and Principal Accounting Officer)
|
|
|
19