UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________

FORM 10-Q

____________

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

For the quarterly period ended ~~September 30, 2017~~

¨March 31, 2023

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

Commission File Number 000-53912

__________

~~HARTMAN SHORT TERM INCOME~~

SILVER STAR PROPERTIES ~~XX,~~REIT, INC.

(Exact name of registrant as specified in its charter)


Maryland			26-3455189
(State or Other Jurisdiction of Incorporation or of Organization)			(I.R.S. Employer Identification Number)

2909 Hillcroft
~~Maryland~~ Suite 420			~~26-3455189~~
~~(State of Organization)~~ Houston			~~(I.R.S. Employer Identification Number)~~
~~2909 Hillcroft, Suite 420 Houston,~~ Texas			77057
(Address of principal executive offices)			(Zip Code)

_______________

(713) 467-2222

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

None

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☒ 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of ~~November 10, 2017,~~June 1, 2023, there were ~~18,085,776~~34,894,496 shares of the Registrant’s common stock issued and ~~outstanding, 19,000 of which were held by an affiliate of the Registrant.~~

outstanding.

~~Hartman Short Term Income Properties XX, Inc. and Subsidiaries~~

Table of Contents




PART I FINANCIAL INFORMATION	2
Item 1.		Financial Statements	25 2
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	44 26
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	44 35
Item 4.		Controls and Procedures	35

PART II OTHER INFORMATION
Item 1.		Legal Proceedings	45 37
Item 1A.		Risk Factors	45 37
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	46 37
Item 3.		Defaults Upon Senior Securities	48 37
Item 4.		Mine Safety Disclosures	48 37
Item 5.		Other Information	48 38
Item 6.		Exhibits	48 38
		SIGNATURES

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

September 30, 2017

December 31, 2016
ASSETS

Unaudited

Real estate assets, at cost

$                          258,471

$                          253,099
Accumulated depreciation and amortization

                             (67,512)

                             (49,872)
Real estate assets, net

                             190,959

                             203,227

Cash and cash equivalents

                                    841

                                 3,254
Restricted cash

                                 2,371

                                 2,371
Accrued rent and accounts receivable, net

                                 7,232

                                 5,266
Notes receivable - related party

                               10,431

                               11,431
Deferred leasing commission costs, net

                                 5,850

                                 4,775
Goodwill

                                    250

                                    250
Prepaid expenses and other assets

                                 2,249

                                 1,662
Real estate held for disposition

                                      -

                                 7,050
Due from related parties

                                 2,856

                                      -
Investment in affiliate

                                 8,978

                                 8,978
Total assets

$                          232,017

$                          248,264

LIABILITIES AND EQUITY

Liabilities:

Notes payable, net

$                          115,746

$                          114,151
Note payable - real estate held for disposition, net

                                      -

                                 3,458
Accounts payable and accrued expenses

                               10,065

                               12,057
Due to related parties

                                      -

                                    343
Tenants' security deposits

                                 1,861

                                 1,824
Total liabilities

                             127,672

                             131,833

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.001 par value, 200,000,000 convertible, non-voting shares authorized, 1,000 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively

                                      -

                                      -
Common stock, $0.001 par value, 750,000,000 authorized, 18,085,776 shares and 18,164,878 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively

                                      18

                                      18
Additional paid-in capital

                             168,671

                             169,406
Accumulated distributions and net loss

                             (75,993)

                             (59,674)
Total stockholders' equity

                               92,696

                             109,750
Noncontrolling interests in subsidiary

                               11,649

                                 6,681
Total equity

                             104,345

                             116,431
Total liabilities and equity

$                          232,017

$                          248,264

The accompanying notes are an integral part of these consolidated financial statements.


SILVER STAR PROPERTIES REIT, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
	March 31, 2023		December 31, 2022
ASSETS	(Unaudited)
Real estate assets, at cost	$	570,383	$	580,602
Accumulated depreciation and amortization	(190,493)		(189,509)
Real estate assets, net	379,890		391,093

Cash and cash equivalents	380		334
Restricted cash	20,699		24,088
Accrued rent and accounts receivable, net	16,292		16,507
Note receivable - related party	1,726		1,726
Deferred leasing commission costs, net	8,846		9,826
Goodwill	250		250
Prepaid expenses and other assets	4,641		6,019
Real estate held for development	1,596		1,596
Real estate held for sale	14,719		25,963
Due from related parties, net	1,895		1,714
Investment in affiliate	201		201
Total assets	$	451,135	$	479,317

LIABILITIES AND EQUITY
Liabilities:
Notes payable, net	$	273,994	$	314,860
Accounts payable and accrued expenses	34,958		46,670
Tenants' security deposits	5,941		6,143
Total liabilities	314,893		367,673

Stockholders' equity:
Preferred stock, $0.001 par value, 200,000,000 convertible, non-voting shares authorized, 1,000 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	—		—
Common stock, $0.001 par value, 750,000,000 authorized, 34,894,496 shares and 34,894,496 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively	35		35
Additional paid-in capital	296,152		296,152
Accumulated distributions and net loss	(181,426)		(204,080)
Total stockholders' equity	114,761		92,107
Noncontrolling interests in subsidiaries	21,481		19,537
Total equity	136,242		111,644
Total liabilities and equity	$	451,135	$	479,317

The accompanying notes are an integral part of these consolidated financial statements.

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Revenues

Rental revenues
$              9,656

$              8,480

$            29,006

$            24,473

Tenant reimbursements and other revenues
                 1,273

                 1,452

                 3,892

                 3,855

Total revenues
               10,929

                 9,932

               32,898

               28,328

Expenses (income)

Property operating expenses
                 3,926

                 3,688

               10,913

                 9,756

Asset management and acquisition fees
                    440

                    372

                 1,320

                 1,593

Organization and offering costs
                       -

                       -

                       -

                     (44)

Real estate taxes and insurance
                 1,575

                 1,263

                 4,557

                 3,612

Depreciation and amortization
                 5,542

                 5,808

               17,640

               16,492

General and administrative
                    647

                    539

                 1,968

                 1,785

Interest and dividend income
                   (335)

                   (291)

                (1,001)

                   (704)

Interest expense
                 1,453

                    961

                 4,317

                 2,649

Total expenses, net
               13,248

               12,340

               39,714

               35,139

Loss from continuing operations
                (2,319)

                (2,408)

                (6,816)

                (6,811)

Loss from discontinued operations, net
                       -

                       -

                        8

                       -

Net loss
                (2,319)

                (2,408)

$             (6,824)

$             (6,811)

Net (loss) income attributable to noncontrolling interests
                     (18)

47

29

97

Net loss attributable to common stockholders
$             (2,301)

$             (2,455)

$             (6,853)

$             (6,908)

Net loss attributable to common stockholders per share
$               (0.13)

$               (0.13)

$               (0.38)

$               (0.40)

Weighted average number of common shares outstanding, basic and diluted
         18,111

         18,215

         18,135

         17,076

The accompanying notes are an integral part of these consolidated financial statements.

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
(in thousands)

Preferred Stock
Common Stock
Additional
Accumulated
Total

Paid-In
Distributions
Stockholders'
Noncontrolling
Total

Shares
Amount
Shares
Amount
Capital
and Net Loss
Equity (Deficit)
Interests
Equity (Deficit)
Balance, December 31, 2016
                     1
$-
            18,165
$18
$169,406
($59,674)
$109,750
$6,681
$116,431
Redemptions of common shares
                      -
                  -
                 (85)
                       -
               (814)
                       -
                 (814)
                       -
                      (814)
Issuance of common shares
                      -
                  -
                    6
                       -
                  79
                       -
                     79
                       -
                         79
Non-controlling capital
                      -
                  -
                     -
                       -
                     -
                       -
                       -
                6,700
                    6,700
Deconsolidation of Village Pointe
                      -
                  -
                     -
                       -
                     -
                       -
                       -
               (1,350)
                   (1,350)
Dividends and distributions (cash)
                      -
                  -
                     -
                       -
                     -
              (9,466)
               (9,466)
                 (411)
                   (9,877)
Net (loss) income
                      -
                  -
                     -
                       -
                     -
              (6,853)
               (6,853)
                     29
                   (6,824)
Balance, September 30, 2017
                     1
$-
            18,086
$18
$168,671
($75,993)
$92,696
$11,649
$104,345

The accompanying notes are an integral part of these consolidated financial statements.

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

Nine Months Ended September 30,

2017

2016
Cash flows from operating activities:

Net loss
$             (6,824)

$             (6,811)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Stock based compensation
59

76
Depreciation and amortization
17,640

16,492
Deferred loan and lease commission costs amortization
1,262

805
Bad debt provision
270

466
Loss on real estate held for disposition
27

-
Changes in operating assets and liabilities:

Accrued rent and accounts receivable
(2,236)

(1,813)
Deferred leasing commissions
(1,977)

(2,311)
Prepaid expenses and other assets
(607)

(745)
Accounts payable and accrued expenses
(2,067)

(1,830)
Due to/from related parties
(3,199)

(4,522)
Tenants' security deposits
37

178
Net cash provided by (used in) operating activities
2,385

(15)
Cash flows from investing activities:

Acquisition deposits
20

-
Restricted cash
-

4,529
Proceeds received - disposition of joint venture real estate held for disposition
2,214

-
Note receivable repayment (investment)
1,000

(7,231)
Investment in affiliate
-

(8,959)
Additions to real estate
(5,372)

(25,491)
Net cash used in investing activities
(2,138)

(37,152)
Cash flows from financing activities:

Distributions to common stockholders and non-controlling interest
(9,893)

(5,745)
Payment of selling commissions
-

(2,103)
Borrowings under insurance premium finance note
561

421
Repayment under insurance premium finance note
(449)

(337)
Noncontrolling interests capital
6,700

5,500
Payments of deferred loan costs
(76)

(139)
Proceeds under term loan notes
-

10,819
Repayments under term loan notes
(939)

(893)
Borrowings under revolving credit facility
3,750

29,400
Repayments under revolving credit facility
(1,500)

(40,946)
Proceeds from issuance of common stock
-

41,618
Redemptions of common stock
(814)

(1,179)
Net cash (used in) provided by financing activities
(2,660)

36,416
Net change in cash and cash equivalents
(2,413)

(751)
Cash and cash equivalents at the beginning of period
3,254

1,380
Cash and cash equivalents at the end of period
$                 841

$                 629

Supplemental cash flow information:

Cash paid for interest
$              3,896

$              2,477

Supplemental disclosures of non-cash investing and financing activities:

Increase in distribution payable
$                   -

$               (406)
Distributions made to common stockholders through common stock issuances pursuant to the distribution reinvestment plan
$                   -

$              2,988

The accompanying notes are an integral part of these consolidated financial statements.

SILVER STAR PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
Three Months Ended March 31,
2023 2022
Revenues
Rental revenues $ 23,706 $ 23,166
Management and advisory income 1,042 915
Total revenues 24,748 24,081
Expenses
Property operating expenses 4,821 5,524
Organization and offering costs — 9
Real estate taxes and insurance 4,268 3,333
Depreciation and amortization 5,720 6,517
Management and advisory expenses 2,358 3,218
General and administrative 3,090 3,223
Interest expense 6,070 2,083
Total expenses 26,327 23,907
Other income
Interest and dividend income — 43
Gain on sale of property 26,177 —
Net income 24,598 217
Net income attributable to noncontrolling interests 1,944 202
Net income attributable to common stockholders $ 22,654 $ 15
Net income attributable to common stockholders per share $ 0.65 $ 0.00
Weighted average number of common shares outstanding, basic and diluted 34,895 35,202

The accompanying notes are an integral part of these consolidated financial statements.


SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited, in thousands)


	Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Distributions and Net Loss		Total Stockholders' Equity		Noncontrolling Interests in Subsidiaries		Total Equity
Balance at December 31, 2021	1	—		35,111	35		297,335		(162,355)		135,015		22,303		157,318

Redemptions of common shares	—	—		(135)	—		(1,179)		—		(1,179)		—		(1,179)
Dividends and distributions (cash)	—	—		—	—		—		(3,958)		(3,958)		(231)		(4,189)
Net income	—	—		—	—		—		15		15		202		217
Balance at March 31, 2022	1	—		34,976	35		296,156		(166,298)		129,893		22,274		152,167

	Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Distributions and Net Loss		Total Stockholders' Equity		Noncontrolling Interests in Subsidiaries		Total Equity
Balance at December 31, 2022	1	$	—	34,895	$	35	$	296,152	$	(204,080)	$	92,107	$	19,537	$	111,644


Net income	—	—		—	—		—		22,654		22,654		1,944		24,598
Balance at March 31, 2023	1	$	—	34,895	$	35	$	296,152	$	(181,426)	$	114,761	$	21,481	$	136,242

The accompanying notes are an integral part of these consolidated financial statements.


SILVER STAR PROPERTIES REIT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net income	$	24,598	$	217
Adjustments to reconcile net income to net cash used in operating activities:
Stock based compensation	99		149
Depreciation and amortization	5,720		6,517
Deferred loan and lease commission costs amortization	570		608
Deferred loan cost write-off	541		—
Bad debt expense	—		(302)
Straight-line rent	187		217

Gain on disposed property	(26,177)		—


Unrealized loss on derivative instruments	655		—
Changes in operating assets and liabilities:
Accrued rent and accounts receivable	28		(2,097)
Deferred leasing commissions	(183)		(332)
Prepaid expenses and other assets	723		868
Accounts payable and accrued expenses	(11,811)		(9,764)
Due to/from related parties	(181)		(413)
Tenants' security deposits	(202)		11
Net cash used in operating activities	(5,433)		(4,321)
Cash flows from investing activities:

Additions to real estate	(1,100)		(3,114)
Proceeds from sale of property, net	44,827		—
Net cash provided by (used in) investing activities	43,727		(3,114)
Cash flows from financing activities:
Distributions to common stockholders	—		(3,958)
Distributions to non-controlling interests	—		(231)
Repayments to affiliates	(1,832)		—
Borrowing from affiliate	—		1,675


Repayments under term loan notes	(39,805)		(337)
Borrowings under term loan	—		2,645
Redemptions of common stock	—		(1,179)
Payment of deferred loan costs	—		(18)
Net cash used in financing activities	(41,637)		(1,403)
Net change in cash and cash equivalents and restricted cash	(3,343)		(8,838)
Cash and cash equivalents and restricted cash, beginning of period	24,422		19,257
Cash and cash equivalents and restricted cash, end of period	$	21,079	$	10,419
Supplemental cash flow information:
Cash paid for interest	$	5,097	$	1,846
Supplemental disclosure of non-cash activities:



Value of Director's stock compensation shares issued	$	—	$	461

The accompanying notes are an integral part of these consolidated financial statements.

~~HARTMAN SHORT TERM INCOME~~

SILVER STAR PROPERTIES ~~XX,~~REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED ~~FINACIAL~~FINANCIAL STATEMENTS

(Unaudited)

~~As used herein, the term “the Company” refers to Hartman Short Term Income Properties XX, Inc. and its consolidated subsidiaries, except where the context requires otherwise.~~

Note 1 —- Organization and Business

~~Hartman Short Term Income~~

Silver Star Properties ~~XX,~~REIT, Inc. (the “Company”), is a Maryland corporation formed on February 5, 2009. The Company elected to be treated as a real estate investment trust (“REIT”) beginning with the taxable year ~~ending~~ended December 31, 2011.

~~Effective March 31, 2016,~~ As used herein, the ~~Company terminated the offer~~"Company," "we," "us," or "our" refer to Silver Star Properties REIT, Inc. and ~~sale of~~ its common stock to the public in its follow-on offering. The sale of shares of the Company’s common stock to its stockholders pursuant to the Company’s distribution reinvestment plan terminated July 16, 2016.

~~The Company was originally a majority owned subsidiary of~~consolidated subsidiaries and partnerships, including Hartman XX ~~Holdings, Inc. Hartman XX Holdings, Inc. is~~Limited Partnership ("Operating Partnership") and SPE LLC, except where context requires otherwise.

On July 19, 2018, we entered into 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 stock to its advisor, Hartman Advisors LLC (“Advisor”), at a price of $10.00 per share. The Advisor is owned 70% by Allen R. Hartman, the Company’s Chief Executive Officer and Chairman of the Board of Directors and 30% by Hartman Income REIT Management, Inc. (the “Property Manager”). The Property Manager is a wholly owned subsidiary oflimited liability company agreement with our affiliates Hartman Income REIT, Inc. (“HIREIT”), Hartman Short Term Income Properties XIX, Inc. (“Hartman XIX”) and Hartman vREIT XXI, Inc. (“vREIT XXI”) to form Hartman SPE, LLC ("SPE LLC"), a special purpose entity.

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

Contemporaneously therewith and together with our affiliates HIREIT, Hartman ~~owns approximately 16%~~XIX and vREIT XXI, we contributed a total of 39 commercial real estate properties ("Properties") to SPE, LLC, subject to the then existing mortgage indebtedness encumbering the Properties, in exchange for membership interests in SPE LLC. Proceeds of the ~~voting common stock.~~

~~On April 11, 2014,~~Loan were immediately used to extinguish the ~~Company formed Hartman XX Limited~~existing mortgage indebtedness encumbering the Properties.

Substantially all of our business is conducted through our subsidiaries, the Operating Partnership ~~a Texas limited partnership (the “Operating Partnership”). On March 7, 2014, the Company formed~~and SPE LLC. Our wholly-owned subsidiary, Hartman XX REIT GP LLC, a Texas limited liability company, ~~to serve as~~is the sole general partner of the Operating Partnership. ~~The Company~~Our wholly-owned subsidiary, Hartman SPE Management, LLC ("SPE Management") is the ~~sole limited partner~~manager of ~~the Operating Partnership. The Company’s~~SPE LLC. Our single member interests in ~~its~~our limited liability company subsidiaries are owned by the Operating Partnership or its wholly owned subsidiaries.

On April 11, 2017, the Operating Partnership entered into a membership interest purchase agreement with Hartman vREIT XXI, Inc. (“vREIT XXI”), an affiliate of the Company. Pursuant to the terms of a membership interest purchase agreement between vREIT XXI and the Company, vREIT XXI may acquire up to $10,000,000 of the equity membership interest of Operating Partnership in Hartman Three Forest Plaza, LLC (“Three Forest Plaza LLC”).

As of September 30, 2017, vREIT XXI has acquired an approximately 37.6% equity interest in Three Forest Plaza LLC for $6,700,000. On October 19, 2017, vREIT XXI acquired and an additional 11.2% equity interest for $2,000,000 bringing its total equity interest to approximately 48.8%.

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 pursuant to an advisory agreement (the “Advisory Agreement”) by and among the Company and Advisor. Management of the Company’s properties is through the Property Manager. D.H. Hill Securities, LLLP was the dealer manager for the Company’s public offerings. These parties receive compensation and fees for services related to the investment, management and disposition of the Company’s assets.

As of September 30, 2017, the Company owned or held a majority ownership interest in 17 commercial properties comprising approximately 2,928,000 square feet plus three pad sites, all located in Texas. As of September 30, 2017, the Company owned nine properties located in Richardson, Arlington, and Dallas, Texas, six properties located in Houston, Texas and two properties located in San Antonio, Texas. As of September 30, 2016, the Company owned or held a majority interest in 16 commercial properties comprising approximately 2,562,000 square feet plus three pad sites, all located in Texas. As of September 30, 2016, the Company owned eight properties located in Richardson, Arlington, and Dallas, Texas, six properties located in Houston, Texas and two properties located in San Antonio, Texas.

~~HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINACIAL STATEMENTS~~

~~(Unaudited)~~

On July 21, 2017, the Company and Hartman ~~Short Term Income Properties~~ XIX, ~~Inc. (“Hartman XIX”),~~ entered into an agreement and plan of merger (the “XIX Merger Agreement”) ~~and (ii)~~. On July 21, 2017, as subsequently modified on May 8, 2018, the Company, the Operating Partnership, ~~Hartman Income REIT, Inc. (“HIREIT”)~~HIREIT and Hartman Income REIT Operating Partnership LP, the operating partnership of HIREIT, (“HIROP”), entered into an agreement and plan of merger (the “HIREIT Merger Agreement,” and together with the XIX Merger Agreement, the “Merger Agreements”).

~~Subject to the terms and conditions of the XIX Merger Agreement, including the satisfaction of all closing conditions set forth in~~

On May 14, 2020, the Merger Agreements were approved by the respective company shareholders. The effective date of the Mergers for financial reporting was July 1, 2020.

On December 20, 2022, Silver Star Properties REIT, Inc. (previously known as Hartman Short Term Income Properties XX, Inc.) filed an amendment to its Articles of Amendment with the Maryland Secretary of State to change its name from “Hartman Short Term Income Properties XX, Inc.” to “Silver Star Properties REIT, Inc.” The amendment was effective as of December 20, 2022.

As of March 31, 2023 and 2022, respectively, the Company ~~with~~owned 43 and 44 income-producing commercial properties comprising approximately 6.4 million square feet and 6.8 million square feet, respectively, plus one pad site. As of March 31, 2023 and 2022, the Company ~~surviving~~owned one and two land developments, respectively. All properties are located in Texas. As of March 31, 2023 and 2022, respectively, the ~~merger~~Company owned 15 properties located in Richardson, Arlington, Plano, and Dallas, Texas, 25 and 26 properties located in Houston, Texas and three properties located in San Antonio, Texas.

The Board of Directors (the ~~“Hartman XIX Merger”~~"Board")~~. Subject~~ of the Company established a share redemption program (the "Redemption Plan"), which permitted stockholders to sell their shares back to the ~~terms~~Company, subject to certain significant conditions and ~~conditions~~limitations. On July 8, 2022, the Board voted to suspend the Redemption Plan to support the long-term fiscal health of the ~~HIREIT Merger Agreement, (i) HIREIT will merge with and into the~~Company.

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company with HIREIT surviving the merger (the “HIREIT Merger,” and together with the Hartman XIX Merger, the “REIT Mergers”), and (ii) HIROP will merge and with and into the Operating Partnership, with the Operating Partnership surviving the merger (the “Partnership Merger,” and together with the REIT Mergers, the “Mergers”). The REIT Mergers are intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Partnership Merger is intended to be treated as a tax-deferred exchange under Section 721 of the Code.

Subject to the terms and conditions of the XIX Merger Agreement, (i) each share of common stock of Hartman XIX (the “XIX Common Stock”) issued and outstanding immediately prior to the Effective Time (as defined in the XIX Merger Agreement)does not anticipate that there will be ~~automatically cancelled and retired and converted into the right to receive 9,171.98~~any market for its shares of common stock ~~$0.01 par~~unless they are listed on a national securities exchange. The Executive Committee has adopted resolutions directing management to begin the process of listing the Company’s shares on an established securities exchange, and it is taking steps to accomplish the listing, including without limitation engaging the services of an investment bank to assist with the listing.

On October 14, 2022, the Company’s board of directors formed the Executive Committee, composed of independent directors, to continue the review of strategic alternatives with the objective of maximizing shareholder value ~~per share,~~and to streamline the communicating, reporting, and decision-making between the board and the Chief Executive Officer. To accomplish this objective and to communicate and manage the day-to-day communications and interactions with the Chief Executive Officer, the Executive Committee has all the authority of decision making of the ~~Company (“Company Common Stock”), (ii) each share~~whole board of ~~8% cumulative preferred stock~~directors. The Executive Committee performed a strategic review process to identify, examine, and consider a range of ~~Hartman XIX issued and outstanding immediately prior~~strategic alternatives available to the ~~Effective Time will be automatically cancelled and retired and converted~~Company. On April 6, 2023, the Executive Committee of the board of directors approved the previously-announced New Direction Plans to reposition the Company's assets into the ~~right to receive 1.238477 shares~~self-storage asset class and away from office, retail, and light industrial assets. The Executive Committee is in the process of ~~Company Common Stock, and (iii) each share of 9% cumulative preferred stock of Hartman XIX issued and outstanding immediately prior to~~carrying out the ~~Effective Time will be automatically cancelled and retired and converted into the right to receive 1.238477 shares of Company Common Stock.~~

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

Each Merger Agreement contains customary covenants, including covenants prohibiting HIREIT and Hartman XIX and their respective subsidiaries and representatives from soliciting, providing information or entering into discussions concerning proposals relating to alternative business combination transactions, subject to certain limited exceptions.

The Merger Agreements may be terminated under certain circumstances, including but not limited to (i) by the mutual written consent of all the parties to a Merger Agreement, (ii) by either the Company or HIREIT or Hartman XIX, as applicable, if a final and non-appealable order is entered prohibiting or disapproving the applicable Mergers, (iii) by either the Company or HIREIT or Hartman XIX, as applicable, if the required approval of the applicable Mergers by the stockholders of the Company or HIREIT or Hartman XIX, as applicable (the “Stockholder Approvals”), have not been obtained, (iv) by either the Company or HIREIT or Hartman XIX, as applicable, upon a material uncured breach by the other party that would cause the closing conditions in the applicable Merger Agreement not to be satisfied, or (v) by either the Company or HIREIT or Hartman XIX, as applicable, if the applicable Mergers have not been completed on or before December 31, 2017. No termination fees or penalties are payable by any party to any Merger Agreement in the event of the termination of any Merger Agreement.

~~HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINACIAL STATEMENTS~~

~~(Unaudited)~~

The Merger Agreements contain certain representations and warranties made by the parties thereto. The representations and warranties of the parties were made solely for purposes of the contract among the parties, and are subject to certain important qualifications and limitations set forth in confidential disclosure letters delivered by the parties to the Mergers to the other parties to the Mergers. Moreover, certain of the representations and warranties are subject to a contractual standard of materiality that may be different from what may be viewed as material to stockholders, and the representations and warranties are primarily intended to establish circumstances in which either of the parties may not be obligated to consummate the Mergers, rather than establishing matters as facts.

Each Merger Agreement sets forth certain conditions of the parties thereto to consummate the Mergers contemplated by such Merger Agreement, including (i) receipt of the applicable Stockholder Approvals, (ii) receipt of all regulatory approvals, (iii) the absence of any judgments, orders or laws prohibiting or restraining the consummation of the applicable Mergers, (iv) the effectiveness with the Securities and Exchange Commission (the “SEC”) of the registration statement on Form S-4 to be filed by the Company to register the shares of Company Common Stock to be issued as consideration in the REIT Mergers, (v) the delivery of certain documents, consents and legal opinions, and (vi) the truth and correctness of the representations and warranties of the respective parties, subject to the materiality standards contained in the Merger Agreements. In addition, the consummation of the HIREIT Merger and the Partnership Merger is a condition to the consummation of the Hartman XIX Merger, and vice versa. There can be no guarantee that the conditions to the closing of the Mergers set forth in the Merger Agreements will be satisfied.

maximizing shareholder value.

Note 2 — 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, ~~2016~~2022 are derived from our audited consolidated financial statements as of that date. The unaudited consolidated financial statements as of ~~September 30, 2017~~March 31, 2023 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 consolidated financial statements presented herein reflect all adjustments (consisting of normal recurring accruals and ~~adjustments)~~adjustments and the impact of the Company's restatement of its previously issued financial statements, as described below), which are, in the opinion of management, necessary to fairly present the financial position of the Company as of ~~September 30, 2017,~~March 31, 2023, and the results of consolidated operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016, the~~2022, consolidated ~~statement~~statements of ~~stockholders’~~ equity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~the~~2022, and consolidated statements of cash flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016.~~2022. The results of the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2017.~~

2023.

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 Annual Report on Form 10-K, for the year ended December 31, ~~2016.~~

2022.

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

Use of Estimates

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

~~HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINACIAL STATEMENTS~~

~~(Unaudited)~~

~~Reclassifications~~

~~The Company has reclassified certain prior period amounts in~~

Cash and Cash Equivalents

Cash and cash equivalents on the accompanying consolidated ~~financial statements in order to be consistent with the current period presentation. These reclassifications had no effect on the previously reported working capital or results of operations.~~

~~Cash~~balance sheets include all cash and ~~Cash Equivalents~~

~~All highly~~ liquid investments with ~~original~~ maturities of three months or ~~less are considered to be cash equivalents.~~less. Cash and cash equivalents as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016~~2022 consisted of demand deposits at commercial banks.

We maintain accounts which may from time to time exceed federally insured limits. We

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
have not experienced any losses in these accounts and believe that the Company is not exposed to any significant credit risk and regularly monitors the financial stability of these financial institutions.

Restricted Cash

Restricted cash ~~represents cash~~on the accompanying consolidated balance sheets consists of amounts escrowed for ~~which the use of funds is restricted~~future real estate taxes, insurance, capital expenditures and debt service reserves, as required by certain ~~loan documents.~~of our mortgage debt agreements. As of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, the Company had a restricted cash balance of ~~$2,371,000, which represents amounts set aside~~$20,699,000 and $24,088,000, respectively.

The following provides a reconciliation of cash, cash equivalents, and restricted cash as ~~impounds to be disbursed~~of March 31, 2023 and March 31, 2022 to the ~~Company upon achieving incremental occupancy and gross income thresholds at the Richardson Heights Property and the Bent Tree Green Property.~~

~~Pursuant to a reserve agreement among the Company and the lender, the Company’s right to draw upon restricted funds expired on December 31, 2016. The lender has the right to draw any~~corresponding consolidated statement of the remaining funds and apply the same to the outstanding loans at the lender’s sole discretion. The Company’s right to draw upon the restricted funds expires June 30, 2018 subject to the draw provisions of the original loan agreements.

cash flows, in thousands:

March 31, 2023 March 31, 2022
Cash and cash equivalents 380 81
Restricted cash 20,699 10,338
Total cash, cash equivalents, and restricted cash shown in consolidated statement of cash flows $ 21,079 $ 10,419

Financial Instruments

The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, accrued rent and accounts receivable, notes ~~receivable,~~payable, accounts payable and accrued expenses and balances due to/due from related parties, related party notes receivable, and derivatives. With the exception of derivative financial instruments and notes payable, ~~and due from (to) related parties. The~~the Company considers the carrying value 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~~Disclosure about the ~~Company for loans with similar terms, the carrying~~fair value of ~~its notes payable approximates~~financial instruments is based on relevant information available as of March 31, 2023 and December 31, 2022.

The Company does not hold or issue derivative financial instruments for trading or speculative purposes. Under our SASB loan, we are required to enter into an interest rate cap agreement. The interest rate cap is recorded at fair ~~value.~~

value on the consolidated balance sheets as an other asset. We have elected not to apply hedge accounting and the change in fair value of the the interest rate cap is recognized as a component of interest expense on the accompanying statements of operations.

Revenue Recognition

The ~~Company’s~~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~~terms of existing leases isare considered to commence as of the acquisition date for the purposes of this calculation. ~~Accrued~~The Company's accrued rents are included in accrued rent and accounts receivable, net. ~~In accordance with Accounting Standards Codification (“ASC”) 605-10-S99, Revenue Recognition, the~~The Company ~~will defer~~defers the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. ~~Cost recoveries~~

The Company’s revenue is primarily derived from ~~tenants~~leasing activities, which is specifically excluded from ASC 606, Revenue from Contracts with Customers ("ASC 606"). The Company’s rental revenue is also comprised of tenant reimbursements for real estate taxes, insurance, common area maintenance, and operating expenses. Reimbursements from real estate taxes and certain other expenses are ~~included~~also excluded from ASC 606 and accounted for under ASC 842 - Leases. The Company elected to utilize the practical expedient provided by Accounting Standards Update (“ASU”) 2018-11 related to the separation of lease and non-lease components and as a result, rental revenues related to leases are reported on one line in ~~tenant reimbursement~~the presentation within the consolidated statements of operations.

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In addition to our rental income, the Company also earns fee revenues by providing certain management and advisory services to related parties. These fees are accounted for within the scope of ASC 606 and are recorded as management and advisory income on the consolidated statements of operations. These services primarily include asset management and advisory, operating and leasing of properties, and construction management. These services are currently provided under various combinations of advisory agreements, property management agreements, and other ~~revenues~~service agreements (the "Management Agreements"). The wide variety of duties within the Management Agreements makes determining the performance obligations within the contracts a matter of judgment. We have concluded that each of the separately disclosed fee types in the ~~period~~below table represents a separate performance obligation within the ~~related~~Management Agreements.


Fee	Performance Obligation Satisfied	Timing of Payment	Description
Property Management	Over time	Due monthly	The Company provides property management services on a contractual basis for owners of and investors in office and retail properties. The Company is compensated for our services through a monthly management fee earned based on a fixed fee. We are also often reimbursed for our administrative and payroll costs directly attributable to the properties under management. Revenue is recognized at the end of each month.
Property Leasing and Property Acquisition Services	Point in time (upon close of a transaction)	Upon completion	The Company provides strategic advice and execution for owners, investors, and occupiers of real estate in connection with the leasing of office and retail space. The Company is compensated for our services in the form of a commission and, in some instances may earn various forms of variable incentive consideration. Commission is paid upon the occurrence of certain contractual event. For leases, the Company typically satisfies its performance obligation at a point in time when control is transferred. Revenue is recognized in an amount equal to the fees charged by unaffiliated persons rendering comparable services. For acquisitions, our commission is typically paid at the closing date of sale, which represents transfer of control of services to the customer.
Asset Management	Over time	Due monthly	The Company earns asset management advisory fees on a recurring, monthly basis for certain properties. The Company is compensated on a monthly basis based on a fixed percentage of respective asset value.
Construction Management	Point in time (upon close of project)	Upon completion	Construction management services are performed on a contractual basis for owners of an investors in office and retail properties. The Company is compensated for its services upon completion of a project, when its performance obligation has been completed.

Due to the nature of the services being provided under our Management Agreements, each performance obligation has a variable component. Therefore, when we determine the transaction price for the contracts, we are ~~incurred.~~

required to constrain our estimate to an amount that is not probable of significant revenue reversal. For most of these fee types, such as acquisition fees and leasing commissions, compensation only occurs if a transaction takes place and the amount of compensation is dependent upon the terms of the transaction. For our property and asset management fees, due to the large number and broad range of possible consideration amounts, we calculate the amount earned at the end of each month.

Real Estate

Allocation of Purchase Price of Acquired Assets

Upon the acquisition of real properties, it is the Company’s policy to allocate the purchase price of properties to acquired tangible assets, consisting of land and buildings, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and leasehold improvements and value of tenant relationships,

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

based in each case on their fair values. The Company utilizes internal valuation

~~HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINACIAL STATEMENTS~~

~~(Unaudited)~~

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 ofto rental ~~income~~revenues over the remaining expected terms of the respective leases.

The fair values of in-place leases include direct costs associated with obtaining a new tenant, opportunity costs associated with lost rentals which are avoided by acquiring an in-place lease, and tenant relationships. Direct costs associated with obtaining a new tenant include commissions, tenant improvements, and other direct costs and are estimated based on independent appraisals and management’s consideration of current market costs to execute a similar lease. These direct costs are included in intangible lease assets and are amortized to expense over the remaining terms of the respective leases. The value of opportunity costs is calculated using the contractual amounts to be paid pursuant to the in-place leases over a market absorption period for a similar lease. Customer relationships are valued based on expected renewal of a lease or the likelihood of obtaining a particular tenant for other locations. These intangibles are included in real estate assets in the consolidated balance sheets and are being amortized to expense over the remaining term of the respective leases.

The determination of the fair values of the assets and liabilities acquired requires the use of significant assumptions with regard to the current market rental rates, rental growth rates, discount rates and other variables. The use of inappropriate estimates would result in an incorrect assessment of the purchase price allocations, which could impact the amount of the Company’s reported net ~~loss.~~

income (loss).

Real Estate Joint Ventures and Partnerships

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

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

Partially owned, non-variable interest real estate joint ventures and partnerships over which we have a controlling financial interest are consolidated in our consolidated financial statements. In determining if we have a controlling financial interest, we consider factors such as ownership interest, authority to make decisions, kick-out rights and substantive participating rights. Partially owned real estate joint ventures and partnerships where we do not have a controlling financial interest, but have the ability to exercise significant influence, are accounted for using the equity method.

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

Depreciation and amortization

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

Impairment

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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~~During the three months ended March 31, 2023 and 2022, the Company concluded there ~~has been~~were no ~~impairment~~such events or changes in circumstances requiring review of the ~~carrying value of our~~Company's real estate ~~assets as of September 30, 2017 and December 31, 2016.~~

assets.

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~~re-lease the property and the number of years the property is held for investment. The use of ~~inappropriate~~inaccurate 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~~the Company’s real estate and related intangible assets and net income.

~~HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINACIAL STATEMENTS~~

~~(Unaudited)~~

Fair Value Measurement

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


~~Level 1:~~	~~Observable inputs such as quoted prices in active markets.~~
~~Level 2:~~	~~Directly or indirectly observable inputs, other than quoted prices in active markets.~~
~~Level 3:~~	~~Unobservable inputs in which there is little or no market data, which require a reporting entity to develop its own assumptions.~~
~~Assets and liabilities measured at fair value are based on one or more of the following valuation techniques:~~
~~Market Approach:~~	~~Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.~~
~~Cost Approach:~~	~~Amount required to replace the service capacity of an asset (replacement cost).~~
~~Income Approach:~~	~~Techniques used to convert future amounts to a single amount based on market expectations (including present-value, option-pricing, and excess-earnings models).~~

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

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

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

develop its own assumptions.

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

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

comparable assets or liabilities.

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

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

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

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

~~Accrued Rent~~

Recurring fair value measurements:

The carrying values of cash and ~~Accounts Receivable~~

~~Included in~~cash equivalents, restricted cash, accrued rent and accounts receivable, other assets and accounts payable and accrued expenses are reasonable estimates of fair values because of the short maturities of these instruments. For our disclosure of debt instrument fair value in Note 8, we use a discounted cash flow analysis based on borrowing rates currently available to the Company for loans with similar terms and maturities, discounting the future contractual interest and principal payments (categorized within Level 2 of the fair value hierarchy). For our disclosure of interest rate cap derivative fair value, refer to Note 6. Fair value determination of the interest rate cap derivative is based on Level 2 inputs.

Nonrecurring fair value measurements:

Property Impairments

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Accrued Rent and Accounts Receivable, net

Accrued rent and accounts receivable includes 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.

Deferred Leasing Commission Costs

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

Goodwill

GAAP requires the Company to test goodwill for impairment at least annually or more frequently whenever events or circumstances occur indicating goodwill might be impaired. The Company ~~has the option to perform~~applies a ~~qualitative assessment~~one-step quantitative test to determine if ~~it is more likely than not that~~ the estimated fair value is less than the carrying amount. If the ~~qualitative assessment determines that it is more likely than not that~~carrying amount exceeds the estimated fair value, ~~is less than the carrying amount, or if~~ the Company ~~elects~~will record a goodwill impairment equal to ~~bypass~~such excess, not to exceed the ~~qualitative assessment, the Company performs a two-step impairment test. In the first step, management compares its net book value of the Company to the carrying~~total amount of goodwill at the balance sheet date. In the event net book value of the Company is less than the carrying amount of goodwill, the Company proceeds to step two and assesses the need to record an impairment charge.goodwill. No goodwill impairment has been recognized in the accompanying consolidated financial statements.

~~HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINACIAL STATEMENTS~~

~~(Unaudited)~~

~~Organization and Offering Expenses~~

The Company has incurred certain organization and offering expenses in connection with the organization of the Company and the offering of the Company’s shares of common stock in the Company’s public offering. These costs principally relate to professional and filing fees. For the three months ended September 30, 2017 and 2016, such costs totaled $0 and $0, respectively. For the nine months ended September 30, 2017 and 2016, such costs totaled $0 and ($44,000), respectively.

Organization and offering expenses of the Company are paid directly by the Company or incurred by Advisor on behalf of the Company and reimbursed by the Company to the Advisor (subject to certain limitations). Pursuant to the Advisory Agreement, organization and offering expenses will be reimbursed by the Advisor to the Company following the completion of a public offering of the Company to the extent that total organization and offering expenses incurred by the Company in connection with such public offerings (excluding selling commissions and dealer manager fees) exceed 1.5% of gross offering proceeds from the completed public offerings. As of September 30, 2017, and December 31, 2016, respectively, the amount of offering and organizational expenses incurred in excess of 1.5% of gross offering proceeds was cumulatively $858,000 for the Company’s initial and follow-on public offerings, respectively. The Company terminated the offer and sale of its common stock to the public in its follow-on offering on March 31, 2016. The Company recorded a receivable from the Advisor and recorded a contra expense of $858,000 resulting in a net credit for organization and offering expenses of ($44,000) during the nine months ended September 30, 2016.

~~Real Estate Held for Disposition and Discontinued Operations~~

The Company considers a commercial property to be held for sale when it meets all of the criteria established under ASC 205, “Presentation of Financial Statements.” For commercial properties classified as held for sale, assets and liabilities are presented separately for all periods presented.

In accordance with ASC 205, a discontinued operation may include a component of an entity or a group of components of an entity. A disposal of a component of an entity or a group of components of an entity is reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results when the component of an entity or group of components of an entity is classified as held for sale, disposed of by sale or disposed of other than by sale, respectively. In addition, ASC 205 requires us to provide additional disclosures about both discontinued operations and the disposal of an individually significant component of an entity that does not meet the criteria for a discontinued operation.

Noncontrolling Interests

Noncontrolling interests is the portion of equity in a subsidiary not attributable to a parent. The ownership interests not held by the parent are considered noncontrolling interests. Accordingly, the Company has reported noncontrolling interests in equity on the consolidated balance sheets but separate from the Company's equity. On the consolidated statements of operations, subsidiaries are reported at the consolidated amount, including both the amount attributable to the Company and noncontrolling interests. The consolidated statement of changes in equity is included for quarterly financial statements, including beginning balances, activity for the period and ending balances for stockholders' equity, noncontrolling interests and total equity.

Stock-Based Compensation

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

~~HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINACIAL STATEMENTS~~

~~(Unaudited)~~

~~Advertising~~

The Company expenses advertising costs as incurred and such costs are included in general and administrative expenses in the accompanying consolidated statements of operations. Advertising costs totaled $14,000 and $15,000 for the three months ended September 30, 2017 and 2016, respectively. Advertising costs totaled $59,000 and $52,000 for the nine months ended September 30, 2017 and 2016, respectively.

Income Taxes

The Company has elected to be treated as a REIT under the Internal Revenue Code of 1986, as amended, beginning with its taxable year ended December 31, 2011. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of the Company’s annual REIT taxable income to stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax on income that it distributes as dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially and adversely affect the Company’s net income and net cash available for distribution to ~~stockholders. However,~~stockholders; however, the Company believes that it is organized and will continue to operate in such a manner as to qualify for treatment as a REIT.

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

For the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, the Company incurred a net ~~loss~~income of ~~$2,319,000~~$24,598,000 and ~~$2,408,000, respectively. For the nine months ended September 30, 2017 and 2016, the Company incurred a net loss of $6,824,000 and $6,811,000,~~$217,000, respectively. The Company ~~has~~ formed a taxable REIT subsidiary which may generate future taxable income which may be offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded in light of the net loss carry forward would be properly offset by an equal valuation allowance. Accordingly, no deferred tax benefit or deferred tax asset has been recorded in the ~~accompanying~~ consolidated financial statements.

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

~~Loss~~

Income Per Share

The computations of basic and diluted ~~loss~~income 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 ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, there were no shares issuable in connection with these potentially dilutive securities. These potentially dilutive securities were excluded from the computations of diluted net ~~loss~~income per share for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 because no shares ~~are issuable and inclusion of such potentially dilutive securities would have been anti-dilutive.~~

were issuable.

Concentration of Risk

The Company maintains cash accounts in two U.S. financial institutions. The terms of these deposits are on demand to minimize risk. The balances of these accounts may exceed the federally insured limits. No losses have been incurred in connection with these deposits.

~~HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINACIAL STATEMENTS~~

~~(Unaudited)~~

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~~relocation of businesses, increased competition or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to ~~stockholders~~

~~Major tenants~~stockholders. The product type concentration in office space, which accounts for approximately 74% of our base rental revenue for the three months ended March 31, 2023, is susceptible to any negative trends in the future demand for office space.

Going Concern Evaluation

Pursuant to ASC 205-40, “Presentation of Financial Statements – Going Concern,” management is required to evaluate the Company’s ability to continue as a going concern within one year after the date that these consolidated financial statements are ~~defined as those tenants which individually comprise more than 10%~~issued. The Hartman SPE, LLC loan agreement (the “SASB Loan”) had an initial maturity date of October 9, 2020.The SASB Loan provides for three successive one-year maturity date extensions. On October 9, 2022, SPE LLC executed the third and final maturity date option to extend the maturity to October 9, 2023.

The October 9, 2023 SASB Loan maturity date is within one year of the ~~Company’s total rental revenues. No tenant represents more than 10%~~issuance of ~~total rental revenues for three months and nine months ended September 30, 2017 and 2016.~~

~~Recent Accounting Pronouncements~~

In May 2014, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU No. 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. The standard permits the use of either the retrospective or cumulative effect transition method. In July 2015, the FASB voted to defer the effective date to January 1, 2018 with early adoption beginning January 1, 2017. We have begun to evaluate each of our revenue streams under the new model. Based on preliminary assessments, we do not expect the adoption of ASU No. 2014-09 to have a material effect on ourthese consolidated financial ~~position or our consolidated results of operations.~~

statements. Uncertainty as to the Company's ability to obtain financing to satisfy the existing SASB Loan obligation requires management to conclude, in accordance with guidance provided by ASU ~~2015-03, “Interest – Imputation of Interest (Subtopic 835-30) – Simplifying~~2014-15, that there is a substantial doubt about the ~~Presentation of Debt Issuance Costs.” requires that debt issuance costs related~~Company's ability to ~~a recognized debt liability be presented in the balance sheet~~continue as a ~~direct deduction from~~going concern within one year of the ~~carrying amount~~issuance date of these consolidated financial statements. The Company is working with our third party advisor on refinancing options that ~~debt liability, consistent~~align with ~~debt discounts.~~a range of strategic alternatives under evaluation. Management believes that the SASB Loan Borrower will be able to obtain financing to replace the SASB Loan prior to the October 9, 2023 maturity date, however, no assurances can be given that the Company will be successful in achieving a refinance. The ~~recognition and measurement guidance for debt issuance costs are not affected by~~Company's ability to continue as a going concern is dependent upon the ~~amendments in ASU 2015-03. We have adopted this guidance for all periods presented.~~

Company's ability to refinance the SASB Loan prior to the maturity date.

Recently Adopted Accounting Pronouncements

In ~~January~~June 2016, the FASB issued ASU ~~No. 2016-01, “Recognition and~~ 2016-13, Financial Instruments — Credit Losses (Topic 326):Measurement of Credit Losses on Financial ~~Assets and Liabilities,” which enhances~~Instruments. The Company adopted ASU 2016-13 effective January 1, 2023. The amendments in this update replaced the ~~reporting requirements surrounding the measurement of financial instruments~~incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires ~~equity securities~~consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASC 2018-19, Financial Instruments — Credit Losses (Topic 326): Codification Improvements, clarified that receivables arising from operating leases are not within the scope of ASC Topic 326. Instead, impairment of receivables arising from operating leases will be ~~measured at fair value~~accounted for in accordance with changes in the fair value recognized through net income for the period. ASU No. 2016-01 is effective for our fiscal year commencing on January 1, 2018. Based on preliminary assessments, we do not expect theASC 842. The adoption of ~~ASU No. 2016-01 to~~this standard did not have a material ~~effect~~

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

impact on our consolidated financial ~~position or~~statements as the majority of our ~~consolidated results~~financial instruments result from operating lease transactions, which are not within the scope of ~~operations.~~

this standard.

Recent Accounting Pronouncements Not Yet Adopted

In ~~February 2016,~~March 2020, the FASB issued ASU No. ~~2016-02, “Leases,” which changes lessee~~2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to ~~reflect the financial liability~~contracts, hedging relationships, and ~~right-of-use asset that~~other transactions affected by reference rate reform if certain criteria are ~~inherent to leasing an asset on the balance sheet. ASU No. 2016-02~~met. The standard is effective for ~~our fiscal year commencing on~~all entities as of March 12, 2020 through December 31, 2022. An entity can elect to apply the amendments as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to that date that the financial statements are available to be issued. In October 2022, the FASB approved a two-year extension of the temporary accounting relief provided under ASU 2020-04 to December 31, 2024.

For the period from January 1, ~~2019, but early adoption is permitted. Based on preliminary assessments, we do~~2020 (the earliest date the Company may elect to apply ASU 2020-04) through December 31, 2022, the Company did not ~~expect~~have any contract modifications impacting current reference rates. The Company's SASB Loan and derivative instrument use LIBOR as the ~~adoption of~~current reference rate. The optional expedients for hedging relationships described in ASU ~~No. 2016-02~~2020-04 are not expected to have an impact to the Company as the Company has elected to not designate its derivative instrument as a ~~material effect on our consolidated financial position or our consolidated results of operations.~~

In October 2016, the FASB issued ASU No. 2016-17, “Interest Held Through Related Parties That Are Under Common Control,” which amends the accounting guidance when determining the treatment of certain VIE’s to include the interest of related parties under common control in a VIE when considering whether or not the reporting entity is the primary beneficiary of the VIE when considering consolidation. We have adopted this guidance for all periods presented. Adoption of this guidance has no material effect on our consolidated financial position or our consolidated results of operations.

In November 2016, the FASB issued ASU No. 2016-18, “Classification of Restricted Cash,” which addresses the Statement of Cash Flow classification and presentation of restricted cash transactions. ASU No. 2016-18 is effective for our fiscal year commencing on January 1, 2018. The effect of this amendment is to be applied retrospectively and early adoption is permitted. We expect to adopt ASU No. 2016-18 for our fiscal year commencing on January 1, 2018. Based on preliminary assessments, we do not expect the adoption of ASU No. 2016-18 to have a material effect on our consolidated financial position or our consolidated results of operations.

~~HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINACIAL STATEMENTS~~

~~(Unaudited)~~

In January 2017, the FASB issued ASU No. 2017-01, “Clarifying the Definition of a Business,” with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as an acquisition of assets or a business. Based on preliminary assessments, we do not expect the adoption of ASU No. 2017-01 to have a material effect on our consolidated financial position or our consolidated results of operations.

hedge.

Note 3 — Real Estate

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

September 30, 2017
December 31, 2016
Land
$62,320
$62,320
Buildings and improvements
132,578
127,206
In-place lease value intangible
63,573
63,573

258,471
253,099
Less accumulated depreciation and amortization
(67,512)
967,512)
(49,872)
Total real estate assets
$190,959
$203,227

March 31, 2023 December 31, 2022
Land $ 129,880 $ 132,533
Buildings and improvements 346,686 352,060
In-place lease value intangible 93,817 96,009
570,383 580,602
Less: accumulated depreciation and amortization (190,493) (189,509)
Total real estate assets $ 379,890 $ 391,093

Depreciation expense for the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 was ~~$1,966,000~~$4,483,000 and ~~$1,742,000, respectively. Depreciation expense for the nine months ended September 30, 2017 and 2016 was $5,844,000 and $4,705,000,~~$4,714,000, respectively. Amortization expense of in-place lease value intangible was ~~$3,576,000~~$1,237,000 and ~~$4,066,000~~$1,803,000 for the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, respectively. ~~Amortization expense of in-place lease value intangible was $11,796,000 and $11,787,000 for the nine months ended September 30, 2017 and 2016, respectively.~~

Acquisition fees paid to Advisor were $0 and $0 for the three months ended September 30, 2017 and 2016, respectively. Acquisition fees paid to Advisor were $0 and $541,000 for the nine months ended September 30, 2017 and 2016, respectively. Asset management fees paid to Advisor were $440,000 and $372,000 for the three months ended September 30, 2017 and 2016, respectively. Asset management fees paid to Advisor were $1,320,000 and $1,052,000 for the nine months ended September 30, 2017 and 2016, respectively. Asset management and acquisition fees are captioned as such in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2017 and 2016, respectively.

On June 1, 2016, the Company acquired a three story office building containing approximately 166,000 square feet of office space located in Irving, Texas, commonly known as Westway One (the “Westway One Property”) by Hartman Westway One, LLC, a wholly owned subsidiary of the Operating Partnership. The Westway One Property was acquired for $21,638,000, exclusive of closing costs, from an unaffiliated third party seller. The Westway One Property was 100% occupied at the acquisition date. An acquisition fee of $541,000 was earned by the Advisor in connection with the purchase of the Westway One Property.

~~The following table summarizes the fair value of the assets acquired and liabilities assumed based upon the Company’s initial purchase price allocation as of the acquisition date, in thousands:~~

~~HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINACIAL STATEMENTS~~

~~(Unaudited)~~


	~~Westway One~~
~~Assets acquired:~~
~~Real estate assets~~	~~$ 21,638~~
~~Other assets~~	-
~~Total assets acquired~~	~~21,638~~

~~Liabilities assumed:~~
~~Accounts payable and accrued expenses~~	~~232~~
~~Security deposits~~	38
~~Total liabilities assumed~~	~~270~~

~~Fair value of net assets acquired~~	~~$ 21,368~~

~~On June 17, 2016, Hartman Westway One, LLC admitted an unrelated independent investor as a member for $5,500,000 in exchange for a 45.67% noncontrolling member interest.~~

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

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


	March 31, 2023		December 31, 2022
In-place lease value intangible	$	93,817	$	96,009
In-place leases – accumulated amortization	(88,972)		(89,926)
Acquired lease intangible assets, net	$	4,845	$	6,083

September 30, 2017
December 31, 2016
In-place lease value intangible
$                63,573
$                63,573
In-place leases – accumulated amortization
(46,431)
(34,635)
Acquired lease intangible assets, net
$                17,142
$                28,938

Real Estate Held for Development

The Company's investment in real estate assets held for development consists of one pad site development in progress acquired from HIREIT.

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Real Estate Held for Sale

The Company's real estate held for sale includes one land development, the Quitman Property, and the Cooper Street Property. The Quitman property was sold on April 6, 2023. Refer to Note 16 (Subsequent Events) for additional information.

Dispositions

On January 31, 2023, we sold the 17 acre development site located in Fort Worth, Texas to a third party. Net proceeds from the sale of the development site were approximately $4,317,000 and no gain or loss was recognized on the sale as the property was impaired as an asset held for sale and recognized at fair value less cost to sell as of December 31, 2022.

On March 10, 2023, we sold the Mitchelldale property to a third party. Net proceeds from the sale were approximately $40,510,000 and we recognized a gain on the sale of property of approximately $26,177,000 for the three months ended March 31, 2023.

Note 4 —- Accrued Rent and Accounts Receivable, net

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

September 30, 2017
December 31, 2016
Tenant receivables
$                3,609
$                  2,889
Accrued rent
5,099
3,583
Allowance for uncollectible accounts
(1,476)
(1,206)
Accrued rents and accounts receivable, net
$7,232
$                 5,266

March 31, 2023 December 31, 2022
Tenant receivables $ 11,589 $ 11,617
Accrued rent 10,931 11,118
Allowance for uncollectible accounts (6,228) (6,228)
Accrued rents and accounts receivable, net $ 16,292 $ 16,507

As of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, the Company had an allowance for uncollectible accounts of ~~$1,476,000~~$6,228,000 and ~~$1,206,000,~~$6,228,000, respectively. For the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, the Company recorded bad debt expense (recovery) in the amount of ~~$81,000~~$0 and ~~$223,000,~~$(302,000), respectively, related to tenant receivables that we have specifically identified as potentially uncollectible based on our assessment of each tenant’s credit-worthiness. For the nine months ended September 30, 2017 and 2016, the Company recorded bad debt expense in the amount of $270,000 and $508,000, respectively. For the nine months ended September 30, 2017 and 2016, the Company recorded write-offs of $0 and $42,000, respectively. Bad debt expense and any related recoveries are included in property operating expenses in the accompanying consolidated statements of operations.

~~HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINACIAL STATEMENTS~~

~~(Unaudited)~~

Note 5 — Deferred Leasing Commission Costs, net

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

September 30, 2017
December 31, 2016
Deferred leasing commissions costs
$              8,093
$                   6,116
Less: accumulated amortization
(2,243)
(1,341)
Deferred leasing commission costs, net
$              5,850
$                   4,775


	March 31, 2023		December 31, 2022
Deferred leasing commissions costs	$	19,705	$	21,244
Less: accumulated amortization	(10,859)		(11,418)
Deferred leasing commission costs, net	$	8,846	$	9,826

Note 6 - Derivative Financial Instruments

On October 5, 2022, the Company entered into an interest rate cap agreement with respect to the $259 million SASB Loan through the maturity date of October 9, 2023. The agreement capped the underlying one-month LIBOR rate at 3.75%. The Company has elected not to apply hedge accounting and the change in fair value of the the interest rate cap is recognized as a component of interest expense on the accompanying consolidated statements of operations.

The counterparty under the interest rate cap is a major financial institution. The Company paid a premium of $2,254,000 for the interest rate cap. As of March 31, 2023, the fair value of this cap was $1,696,000 and included in other assets in the Company's consolidated balance sheets. The Company recognized $403,000 of interest income from paid and accrued counterparty payments and $655,000 of loss from the change in fair value of the interest rate cap during the three months ended March 31, 2023. These amounts are recorded as a component of interest expense on the accompanying consolidated statements of operations.

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The fair value of this interest rate cap is determined using observable inputs other than quoted prices in active markets, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. These inputs are considered Level 2 inputs in the fair value hierarchy. In addition, any credit valuation adjustments are considered in the fair values to account for potential nonperformance risk to the extent they would be significant inputs to the calculation. It was determined that credit valuation adjustments were not considered to be significant inputs.

Note 7 — Future Minimum Rents

The Company leases the majority of its properties under noncancellable operating leases which provide for minimum base rentals. A summary of minimum future rentals to be received (exclusive of renewals, tenant reimbursements, and contingent rentals) under noncancellable leases in existence at March 31, 2023 is as follows, in thousands:


March 31,	Minimum Future Rents
2023	$	62,851
2024	50,056
2025	35,764
2026	26,710
2027	18,049
Thereafter	27,109
Total	$	220,539

Note 8 — Notes Payable

The ~~Company is~~Operating Partnership was a party to ~~a $30.0 million revolving credit agreement (the “TCB Credit Facility”)~~four, cross-collateralized, term loan agreements with ~~Texas Capital Bank.~~an insurance company. The ~~TCB Credit Facility is~~term loans were secured by the ~~Gulf Plaza, Parkway Plaza I&II, Timbercreek, Copperfield~~Richardson Heights Property, the Cooper Street Property, the Bent Tree Green Property and ~~One Technology Center properties.~~the Mitchelldale Property. The ~~borrowing base~~loans required monthly payments of principal and interest due and payable on the first day of each month. Monthly payments were based on a 27-year loan amortization. Each of the ~~collateral~~loan agreements were subject to customary covenants, representations and warranties which must be maintained during the term of the loan agreements. Each of the loan agreements provided for a fixed interest rate of 4.61%. Each of the loan agreements were secured by a deed of trust, assignment of licenses, permits and contracts, assignment and subordination of the management agreements and assignment of rents. The terms of the security instruments provided for the cross collateralization/cross default of the each of the loans.

On March 10, 2023, the Company completed the sale of its Mitchelldale property for a sale price of $40,510,000. Proceeds from the sale retired the four, cross collateralized term loans referenced above. The outstanding balance of the four loans was $0 and $39,324,000 as of March 31, 2023 and December 31, 2022, respectively.

On October 1, 2018, the Company, through SPE LLC and Goldman Sachs Mortgage Company entered into the $259,000,000 SASB Loan agreement. The Company together with its affiliates HIREIT, Hartman XIX and vREIT XXI, contributed a total of 39 commercial real estate properties to Hartman SPE, LLC in exchange for membership interests in SPE LLC.

The term of the SASB Loan is ~~$20.925 million.~~ comprised of an initial two-year term with three one-year extension options. Each extension option shall be subject to certain conditions precedent including (i) no default then outstanding, (ii) 30 days prior written notice, (iii) the properties must have a specified in-place net operating income debt yield and (iv) purchase of an interest rate cap as described below for the exercised option term or terms.

The ~~TCB Credit Facility note,~~outstanding principal of the SASB Loan bears interest at the ~~greater of 4.25% per annum or the bank’s prime~~one-month LIBOR rate plus ~~1% per annum.~~1.8%. The SASB Loan is subject to an interest rate cap arrangement which caps LIBOR at 3.75% during the initial term and any extensions of the SASB Loan.

On October 9, 2022, the SASB Loan Borrower exercised the third and final one-year maturity date extension agreement to extend the maturity date to October 9, 2023. The SASB Loan contains various customary covenants, including but not limited to financial covenants, covenants requiring monthly deposits in respect of certain property costs, such as taxes, insurance, tenant improvements, and leasing commissions, covenants imposing restrictions on indebtedness and liens, and restrictions on

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

investments and participation in other asset disposition, merger or business combination or dissolution transactions. The SASB Loan is secured by, among other things, mortgages on the properties. The Company is the sole guarantor.

On October 19, 2022, the SASB Loan Borrower received a notice from the loan servicer of the SASB Loan in connection with an event of default due to the noncompliance with the loan agreement's insurance requirements relating to a single property. The event of default was ~~5.25%~~previously waived for the sole purpose of exercising the option to extend the SASB Loan term. The event of default triggered cash management provisions under the SASB Loan agreement, which was implemented in November 2022. On April 6, 2023, the SASB Loan Borrower sold the single property responsible for the default, the Quitman property. To secure approval of the SASB Loan lender for the sale of the Quitman property, the SASB Loan Borrower agreed to continue the cash management provisions under the SASB Loan agreement until certain provisions are met. Cash management requires tenant receipts of the SASB Loan Borrower be deposited into a cash management account controlled by the loan servicer. On the 9th day of each month, distributions from the cash management account are made in the following priority: (i) property tax escrow, (ii) scheduled debt service (iii) budgeted operating expenses for the month of the payment date occurs, (iv) capital expenditure reserve, and ~~4.75% per annum~~(v) tenant improvement and lease commission reserve. All remaining amounts are disbursed to an excess cash flow reserve account, also maintained by the loan servicer. The SASB cash management account held $3,021,000 and $3,817,000 as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016. As~~2022, respectively. The excess cash flow reserve held $3,111,000 and $223,000 as of ~~April 1, 2017,~~March 31, 2023 and December 31, 2022, respectively. Both the cash management and excess cash flow reserve accounts are recorded in restricted cash on the consolidated balance sheets.

On February 10, 2022, the Company ~~will pay 0.25% per annum on the unused balance of the TCB Credit Facility. All borrowings under the TCB Credit Facility mature on May 9, 2018.~~

The outstanding balance under the TCB Credit Facility was $10,050,000 as of September 30, 2017 and $7,800,000 as of December 31, 2016, respectively. As of September 30, 2017 the amount available to be borrowed is $10,875,000. As of September 30, 2017, the Company was in compliance with all loan covenants under the TCB Credit Facility.

~~The Company is~~executed a party to a $15.52 million revolving credit agreement (the “EWB Credit Facility”) with East West Bank. The borrowing base of the EWB Credit Facility may be adjusted from time to time subject to the lender’s underwriting with respect to real property collateral. The EWB Credit Facility is secured by the Commerce Plaza Hillcrest, Corporate Park Place and 400 North Belt properties. The EWB Credit Facility$2,645,000 promissory note bears interest at the greater of 3.75% per annum or the bank’s prime rate plus 0.50%. The interest rate was 4.75% and 4.25% per annum as of September 30, 2017 and as of December 31, 2016, respectively. All loans under the EWB Credit Facility mature on August 24, 2018.

~~On October 8, 2015, the Company entered into a second revolving credit agreement~~ with East West Bank, ~~(the “EWB II Credit Facility”).~~resulting in net proceeds of $2,528,000. The borrowing base of the EWB II Credit Facility is $9.9 million and may be adjusted from time to time subject to the lender’s underwriting with respect to the real property collateral. The EWB II Credit Facility ispromissory note was secured by the ~~Ashford Crossing~~Company's 17 acre development site located in Fort Worth, Texas and ~~Skymark Tower properties.~~had a maturity date of February 25, 2023. The ~~EWB II Credit Facility note bears interest at~~remaining principal balance was paid out of proceeds from the greater of 3.75% per annum or the bank’s prime rate plus 0.50%. The interest rate was 4.75% and 4.25% per annum as of September 30, 2017 and as of December 31, 2016, respectively. The Company and East West Bank have agreed to a one-year extension and modificationsale of the ~~EWB Credit Facility and~~development site on January 31, 2023.

The following is a summary of the ~~EWB II Credit Facility. As modified the EWB Credit Facility and the EWB II Credit Facility will mature on August 24, 2018.~~

The aggregate outstanding balance under the EWB Credit Facility and EWB II Credit Facility was $21,900,000 as of September 30, 2017 and December 31, 2016. As of September 30, 2017, the aggregate amount available to be borrowed under the EWB Credit Facility and EWB II Credit Facility is $3,525,000. As of September 30, 2017,Company’s notes payable, in thousands:


Property/Facility	Payment	Maturity Date	Rate		March 31, 2023		December 31, 2022
Richardson Heights	P&I	July 1, 2041	4.61	%	$	—	$	15,556
Cooper Street	P&I	July 1, 2041	4.61	%	—		6,764
Bent Tree Green	P&I	July 1, 2041	4.61	%	—		6,764
Mitchelldale	P&I	July 1, 2041	4.61	%	—		10,240
Hartman SPE LLC (1)	IO	October 9, 2023	5.55	%	259,000		259,000
Hartman XXI	IO	October 31, 2022	10.00	%	15,336		17,168
Fort Worth - EWB	P&I	February 25, 2023	8.50	%	—		480
					$	274,336	$	315,972
Less: unamortized deferred loan costs					(342)		(1,112)
					$	273,994	$	314,860

(1) On October 9, 2022, the Company ~~was in compliance with all~~executed the third and final one-year maturity date extension to October 9, 2023.

The Company's loan ~~covenants under the EWB Credit Facility and EWB II Credit Facility.~~

~~HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINACIAL STATEMENTS~~

~~(Unaudited)~~

~~Loan~~ costs are amortized using the straight-line method over the terms of the loans, which approximates the interest method. Costs which have been deferred consist of the following, in thousands:

September 30, 2017

December 31, 2016
Deferred loan costs
$2,236

$                   2,160
Less: deferred loan cost accumulated amortization
(1,053)

(693)
  Total cost, net of accumulated amortization
$ 1,183

$                   1,467

~~The following is a summary of the Company’s notes payable as of September 30, 2017, in thousands:~~


	March 31, 2023		December 31, 2022
Deferred loan costs	$	4,930	$	5,471
Less: deferred loan cost accumulated amortization	(4,588)		(4,359)
Total cost, net of accumulated amortization	$	342	$	1,112

Property/Facility
Payment (1)
Maturity Date
Rate
September 30, 2017
December 31, 2016
Richardson Heights (2)
P&I
July 1, 2041
4.61%
$            18,877
$           19,200
Cooper Street (2)
P&I
July 1, 2041
4.61%
7,850
7,984
Bent Tree Green (2)
P&I
July 1, 2041
4.61%
7,850
7,984
Mitchelldale (2)
P&I
July 1, 2041
4.61%
11,892
12,096
Energy Plaza I & II
P&I
June 10, 2021
5.30%
9,863
10,007
Westway One
IO
June 1, 2019
3.73%
10,819
10,819
Three Forest Plaza
IO
December 31, 2019
4.03%
17,828
17,828
TCB Credit Facility
IO
May 9, 2018
5.25%
10,050
7,800
EWB Credit Facility
IO
August 24, 2018 2017 2018
4.75%
12,000
12,000
EWB II Credit Facility
IO
August 24, 2018
4.75%
9,900
9,900

$          116,929
$         115,618
Less unamortized deferred loan costs

(1,183)
(1,467)

$          115,746
$         114,151

~~(1)~~

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

~~(2)~~

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

Interest expense incurred for the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022 was ~~$1,453,000~~$6,071,000 and ~~$961,000,~~$2,082,000, respectively, which includes amortization expense of deferred loan costs. Interest expense ~~incurred~~also includes $541,000 of write off of deferred loan costs for the ~~nine~~three months ended ~~September 30, 2017 and 2016 was $4,317,000 and $2,649,000, respectively.~~March 31, 2023 due to the pay off of the insurance company loan mentioned

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

above. Interest expense of ~~$285,000~~$1,418,000 and ~~$224,000~~$1,117,000 was payable as of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, respectively, and is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.

On March 29, 2021, Hartman Income REIT Property Holdings, LLC ("HIRPH"), a wholly owned subsidiary of Hartman XX Limited Partnership, was added, by means of a joinder agreement, to a master credit facility agreement where Hartman vREIT XXI, Inc. is the guarantor. The Company’s Atrium II office property was added to the collateral security for the master credit facility agreement where the borrowing base of the facility increased by $1,625,000. The master credit facility has a maturity date of March 9, 2023. Refer to Note 714 (Commitments and Contingencies) for additional information regarding the review of the ownership of HIRPH's membership interest resulting from the joinder agreement.

As noted in Note 16 (Subsequent Events), on May 30, 2023, Hartman vREIT XXI, Inc. completed the refinance of the master credit facility where HIRPH was a borrower via the joinder agreement. The Atrium II property is no longer included in the master credit facility and is unencumbered as of the closing of the refinance. HIRPH is no longer a borrower nor is it jointly and severally liable with the other loan parties for repayment of the loan.

Fair Value of Debt

The fair value of the Company’s fixed rate notes payable, variable rate notes payable and secured revolving credit facilities aggregates to $269,908,000 and $308,286,000 as compared to book value of $274,336,000 and $315,972,000 as of March 31, 2023 and December 31, 2022, respectively. The fair value of our debt instruments is estimated on a Level 2 basis, as provided by ASC 820, using a discounted cash flow analysis based on the borrowing rates currently available to the Company for loans with similar terms and maturities, discounting the future contractual interest and principal payments. Disclosure about the fair value of notes payable is based on relevant information available as of March 31, 2023 and December 31, 2022.

Note 9 — ~~Loss~~Income Per Share

Basic ~~loss~~income per share is computed using net ~~loss~~income attributable to common stockholders and the weighted average number of common shares outstanding. Diluted ~~earnings per share~~weighted average shares outstanding reflect common shares issuable from the

assumed conversion of convertible preferred stock into common shares. Only those items that have a dilutive impact on basic earnings per share are included in the diluted earnings per ~~share, in thousands except per share data.~~

share.

Three months ended September 30,
Nine months ended September 30,

2017
2016
2017
2016
Numerator:

Net loss attributable to common stockholders
$(2,301)
$(2,455)
$(6,853)
$(6,908)
Denominator:

Basic and diluted weighted average common shares outstanding
18,111
18,215
18,135
17,076

Basic and diluted loss per common share:

Net loss attributable to common stockholders
$(0.13)
$(0.13)
$(0.38)
$(0.40)


	Three Months Ended March 31,
	2023		2022
Numerator:
Net income attributable to common stockholders (in thousands)	$	22,654	$	15
Denominator:
Weighted average number of common shares outstanding, basic and diluted (in thousands)	34,895		35,202
Basic and diluted income per common share:
Net income attributable to common stockholders per share	$	0.65	$	0.00

Note 810 — Income Taxes

Federal income taxes are not provided for because we qualify as a REIT under the provisions of the Internal Revenue Code and because we have distributed and intend to continue to distribute all of our taxable income to our stockholders. Our stockholders include their proportionate taxable income in their individual tax returns. As a REIT, we must distribute at least 90% of our real estate investment trust taxable income to our stockholders and meet certain income sources and investment restriction requirements. In addition, REITs are subject to a number of organizational and operational requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate tax rates.

~~For~~ The Company’s federal income tax returns for the ~~three months~~years ended December 31, 2016, 2017, 2018, 2019 and 2020 have not been examined by the Internal Revenue Service. The Company’s federal income tax return for the year ended December 31, 2016 may be examined on or before September 30, 2017 and 2016, the Company incurred a net loss of $2,319,000 and $2,408,000, respectively. For the nine months ended September 30, 2017 and 2016, the Company incurred a net loss of $6,824,000 and $6,811,000 respectively. 15, 2023.

The Company has formed ~~one~~a taxable REIT subsidiary which may generate future taxable income, which may be offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

may be recorded ~~considering~~in light of the net loss carry forward would be properly offset by an equal valuation ~~allowance in that no material current or future taxable income is expected.~~allowance. Accordingly, no deferred tax benefit or deferred tax asset has been recorded in the accompanying consolidated financial statements.

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

Note 911 — Related Party Transactions

~~The Advisor~~

Hartman Advisors LLC ("Advisor"), is a Texas limited liability ~~company owned 70% by Allen R. Hartman individually and 30% by the Property Manager. The~~company. Advisor is ~~a variable interest entity~~the sole member of Hartman vREIT XXI Advisor, LLC ("XXI Advisor"), which ~~consolidates~~is the advisor for ~~financial reporting purposes with~~ Hartman ~~Income REIT,~~vREIT XXI, Inc. ~~and subsidiaries, of which Allen R.~~ Hartman ~~our Chief Executive Officer~~vREIT XXI, Inc. ("vREIT XXI") pays acquisition fees and ~~Chairman of the Board of Directors, owns approximately 16% of the voting common stock.~~

~~For the three months ended September 30, 2017 and 2016 the Company incurred $440,000 and $372,000, respectively, for~~ asset management fees ~~payable~~ to the ~~Advisor. For~~Advisor in connection with the ~~nine months ended September 30, 2017~~acquisition of properties and ~~2016~~management of the Company incurred $1,320,000 and $1,052,000, respectively, for asset management fees payable to the Advisor. Acquisition fees paid to Advisor were $0 and $0 for the three months ended September 30, 2017 and 2016, respectively, and $0 and $541,000 for the nine months ended September 30, 2017 and 2016, respectively.

~~Property operating expenses include~~Company. vREIT XXI pays property management ~~fees~~ and ~~reimbursements due~~leasing commissions to the Property Manager in connection with the management and leasing of ~~$1,418,000~~vREIT XXI's properties.

The table below shows the related party balances the Company owes to and ~~$1,810,000 for~~is owed by, in thousands:


	March 31, 2023		December 31, 2022
Due from (to) vREIT XXI	543		429
Due from (to) other related parties	1,352		1,285
Total due from related parties	$	1,895	$	1,714

During the fourth quarter of 2019, the Company borrowed under an unsecured promissory note payable to Hartman vREIT XXI, Inc., an affiliate of the Advisor and the Property Manager, in the face amount of $10,000,000 with an interest rate of 10%. In addition to the balance due under this note, the Company received advances from vREIT XXI totaling $7,168,000 which were outstanding as of December 31, 2022 and which were not covered by the unsecured promissory note. The Company made principal payments of $1,832,000 during three months ended ~~September 30, 2017~~March 31, 2023 This note payable had an outstanding balance of $15,336,000 and ~~2016, respectively, and $5,204,000 and $5,060,000 for nine months ended September 30, 2017 and 2016, respectively.~~ ~~For the three months endedSeptember 30, 2017 and 2016, respectively, the Company incurred $368,000 and $823,000 for leasing commissions and $47,000 and $115,000 for construction management fees due to the Property Manager. For the nine months endedSeptember 30, 2017 and 2016~~, respectively, the Company incurred $1,977,000 and $2,311,000 for leasing commissions and $212,000 and $254,000 for construction management fees due to the Property Manager. Leasing commissions and construction management fees are included in deferred leasing commission costs and real estate assets, respectively, in the consolidated balance sheets.

As$17,168,000 as of ~~September 30, 2017,~~March 31, 2023 and December 31, ~~2016,~~2022, respectively, ~~the Company had a~~which is included in notes payable, net, ~~balance due (from) to the Property Manager of $(2,233,000) and due to $518,000.~~

The Company had a balance due from an affiliate, Hartman Short Term Income Properties XIX, Inc. (“Hartman XIX”), of $5,487,000 and $4,474,000 as of September 30, 2017 and December 31, 2016, respectively. The balance due from Hartman XIX includes a loan from the Company to Hartman XIX in the ~~original amount of $4,200,000, which is not evidenced by a promissory note.~~accompanying consolidated balance sheets. Interest has been accrued on the loan amount at an annual rate of 6%10%. The amount was advanced to Hartman XIX in connection with the affiliate stock purchase described below in this note. The $1,287,000 and $274,000 balance due from Hartman XIX as of September 30, 2017 and December 31, 2016, respectively, is included in Due to related parties, and the principal balance of the affiliate loan of $4,200,000 and is included in Notes receivable – related party, in the accompanying consolidated balance sheets. The Company recognized interest ~~income~~expense on the affiliate note in the amount of ~~$64,000~~$408,000 and ~~$64,000~~$131,000 for the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016 and $188,000 and $233,000 for the nine months ended September 30, 2017 and 2016,~~2022, respectively, which is included in interest ~~and dividend income~~expense in the accompanying consolidated statements of operations.

The Company owed the Advisor $448,000 and $243,000 for asset management fees as of September 30, 2017 and December 31, 2016, respectively. These fees are monthly fees equal to one-twelfth of 0.75% of the sum of the higher of the cost or value of each asset.

On January 26, 2016, the Company’s board of directors approved the acquisition by the Company of up to $13.0 million in shares of common stock of Hartman Income REIT, Inc. (“HIREIT”), an affiliate of the Company, in connection with a tender offer by Hartman XIX to acquire for its account up to $2.0 million in shares of HIREIT common stock. On February 5, 2016, the Company advanced $5,250,000 to Hartman XIX in connection with the contemplated acquisition of HIREIT shares. The Company acquired 1,561,523 shares of the common stock of HIREIT for $8,978,000. The shares were acquired by the Company in connection with a tender offer for shares of the common stock of HIREIT by Hartman XIX. The Company’s investment in the affiliate is accounted for under the cost method, ownership interest at 11% in HIREIT is less than a controlling stake, and is reflected as “Investment in Affiliate” on the accompanying consolidated balance sheets. The Company received dividend distributions from HIREIT of $142,000 and $106,000 for the three months ended September 30, 2017 and 2016, respectively, and $319,000 and $177,000 for the nine months ended September 30, 2017 and 2016, respectively which is included in interest and dividend income in the accompanying consolidated statements of operations.

In May ~~17,~~ 2016, the Company, through its taxable REIT subsidiary, Hartman TRS, Inc. (“TRS”), loaned $7,231,000 pursuant to a promissory note in the face amount of up to $8,820,000 to Hartman Retail II Holdings Company, Inc. (“Retail II Holdings”), an affiliate of the Advisor and the Property Manager, in connection with the acquisition of a retail shopping center by Hartman Retail II DST, a Delaware statutory trust sponsored by the Property Manager. Pursuant to the terms of the promissory note, TRS ~~will receive~~received a two percent (2%) origination fee of amounts advanced under the promissory note, and interest at ten percent (10%) per annum on the outstanding principal balance. The outstanding principal balance of the promissory note will be repaid as investor funds are raised by Hartman Retail II ~~DST.~~ DST or upon property sale.

The maturity date of the promissory note, as amended, is ~~May 17, 2019.~~June 30, 2024. This note receivable had an outstanding balance of $1,726,000 as of both March 31, 2023 and December 31, 2022, respectively, which is included in notes receivable – related party in the accompanying consolidated balance sheets. For the period ended December 31, 2022, the Company wrote off $1,022,000 of interest receivable and will cease to recognize interest income in future periods. For the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016, respectively,~~2022, the Company recognized interest ~~and dividend~~ income on this affiliate note in the ~~accompanying consolidated statements~~amounts of ~~operations includes $193,000~~$0 and $163,000 of interest income. For the nine months ended September 30, 2017 and 2016, respectively, interest and dividend income in the accompanying consolidated statements of operations includes $682,000 and $522,000 of interest income. As of September 30, 2017 and December 31, 2016, respectively, the balance due from TRS by Retail II Holdings is $44,000 and $144,000,$43,000, respectively.

~~Variable interest entities (“VIEs”)~~

VIEs are defined as entities with a level of invested equity that is not sufficient to fund future operations on a stand-alone basis, or whose equity holders lack certain characteristics of a controlling financial interest. For identified VIEs, an assessment must be made to determine which party to the VIE, if any, has both the power to direct the activities of the VIE that most

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

significantly impacts the performance of the VIE and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

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

The Company is a covenant guarantor for the secured mortgage indebtedness of each of the VIEs in the total amount of $24,165,000 and $24,276,000 as of March 31, 2023 and December 31, 2022, respectively.

On March 29, 2021, Hartman Income REIT Property Holdings, LLC, a wholly owned subsidiary of Hartman XX Limited Partnership, was added, by means of a joinder agreement, to a master credit facility agreement where Hartman vREIT XXI, Inc. is the guarantor. The Company’s Atrium II office property was added to the collateral security for the master credit facility agreement where the borrowing base of the facility increased by $1,625,000. The master credit facility has a maturity date of March 9, 2023. Refer to Note 14 (Commitments and Contingencies) for additional information regarding the review of the ownership of HIRPH's membership interest resulting from the joinder agreement.

As noted in Note 16 (Subsequent Events), on May 30, 2023, Hartman vREIT XXI, Inc. completed the refinance of ~~September 30, 2017,~~the master credit facility where HIRPH was a borrower via the joinder agreement. The Atrium II property is no longer included in the master credit facility and is unencumbered as of the closing of the refinance. HIRPH is no longer a borrower nor is it jointly and severally liable with the other loan parties for repayment of the loan.

Hartman vREIT XXI owns 1,198,228 shares of the Company's common stock and a 2.47% ownership interest in Hartman SPE, LLC.

Refer to Note 16 (Subsequent Events) for information regarding the Company's purchase of Southern Star Self-Storage Investment Company, where the Company's former Chief Executive Officer and Chief Financial Officer are equity holders.

Effective April 17, 2023, the Company ~~had a net balance due~~is no longer providing management and advisory services to Hartman vREIT XXI, ~~of $260,000.~~

~~Note 10 – Real Estate Held for Disposition~~

~~Pursuant to the terms of a membership unit purchase agreement between the Operating Partnership~~Inc. and Hartman vREIT XXI, Hartman vREIT XXI had the option to acquire from time to time up to all of the membership interest of the Operating Partnership in Hartman Village Pointe at a price equal to the Operating Partnership’s investment cost.

~~As of February 8, 2017, the Operating Partnership sold all~~ its interest in the joint venture for $3,675,000, of which $0 and $2,425,000 was received during the three and nine months ended September 30, 2017, respectively. The Company’s investment in the Village Pointe property joint venture is presented as real estate held for disposition in the accompanying consolidated balance sheets at December 31, 2016. The Company’s share of operations for the three and nine months ended September 30, 2017 is presented as loss from discontinued operations in the accompanying consolidated statements of operations.

~~Loss from discontinued operations with respect to the Village Pointe Property is as follows, in thousands:~~

affiliates.

Nine months ended September 30

2017
2016
Total revenues
$                    44
$                      -

Property operating expenses
6
-
Real estate taxes and insurance
8
-
Asset management fees
3
-
General and administrative
1
-
Interest expense
7
-
Total expenses
25
-

Loss on disposition
(27)
-

Net loss from discontinued operations
$                   (8)
$                      -

~~Property operating expenses include $2,000 in property management fees and reimbursements earned by the Property Manager. Asset management fees were earned by Advisor.~~

On April 11, 2017, the Operating Partnership entered into a membership interest purchase agreement with vREIT XXI, a related party, pursuant to which vREIT XXI may acquire up to $10,000,000 of the Operating Partnership’s equity ownership in Hartman Three Forest Plaza LLC. As of September 30, 2017 vREIT XXI had acquired an approximately 37.6% equity interest in Hartman Three Forest Plaza LLC for $6,700,000. On October 19, 2017, vREIT XXI acquired and an additional 11.2% equity interest for $2,000,000 bringing its total equity interest to approximately 48.8%. The Three Forest Plaza property is not currently classified as Real Estate Held for Disposition.

Note ~~11 –~~12 - Stockholders’ Equity

Under the Company’s articles of incorporation, the Company has authority to issue 750,000,000 shares of common stock, $0.001 par value per share, and 200,000,000 shares of preferred stock, $0.001 par value per share.

Common Stock

Shares of common stock entitle the holders to one vote per share on all matters which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law. The common stock has no preferences or preemptive, conversion or exchange rights.

Preferred Stock

Under the Company’s articles of incorporation, the Company’s board of directors has the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such stock, the board of directors ~~shall have~~has the power to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights, and privileges of such shares. As of ~~September 30, 2017,~~March 31, 2023 and December 31, ~~2016,~~2022, respectively, the Company has ~~issued~~ 1,000 shares of convertible preferred stock ~~to the Advisor at~~issued and outstanding, 300 shares of which are owned by a ~~price of $10.00 per share.~~

wholly-owned subsidiary.

Common Stock Issuable Upon Conversion of Convertible Preferred Stock

The convertible preferred stock issued to the Advisor will convert to shares of the Company’s 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

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

outstanding shares of the Company’s common stock plus the aggregate market value of the Company’s common stock (based on the 30-day ~~average~~average) closing meets the same 6% performance threshold, or (3) the Company’s advisory agreement with the Advisor expires without renewal or is terminated (other than because of a material breach by the Advisor), and at the time of such expiration or termination the Company is deemed to have met the foregoing 6% performance threshold based on the Company’s enterprise value and prior distributions and, at or subsequent to the expiration or termination, the stockholders actually realize such level of performance upon listing or through total distributions. In general, the convertible stock will convert into shares of common stock with a value equal to 15% of the excess of the Company’s enterprise value plus the aggregate value of distributions paid to date on then outstanding shares of common stock over the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares. With respect to conversion in connection with the termination of the advisory agreement, this calculation is made at the time of termination even though the actual conversion may occur later, or not at all.

Stock-Based Compensation

On July 26, 2022, the Board approved cash payments totaling $400,000 in lieu of unissued shares due to non-employee directors under the non-employee director's compensation plan. The ~~Company awards shares~~Incentive Plan that provides for the issuance of the restricted common stock awards to non-employee ~~directors as~~director has expired and requires stockholder approval for modification or reinstatement. All non-employee director compensation ~~in part for their service as members~~will be cash based until incentive stock is available.

The Company sponsors a defined contribution pension plan, the Hartman 401(k) Profit Sharing Plan, covering substantially all of ~~the board~~its full-time employees who are at least 21 years of ~~directors of the Company. These shares are fully vested when granted. These shares~~age. The Company matches 401(k) cash contributions with Company stock. The Company may ~~not be sold while an independent director is serving on the board of directors.~~make discretionary matching contributions. For the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016, respectively,~~2022, the Company ~~granted 1,500~~matched $99,000 and ~~1,500 shares~~$99,000, respectively. The Company had a stock match liability to the plan of ~~restricted common stock to independent directors~~$1,907,000 and $1,808,000 as ~~compensation for services~~of March 31, 2023 and recognized $19,000 and $19,000 as stock-based compensation expense. For the nine months ended September 30, 2017 and 2016, respectively, the Company granted 4,500 and 4,500 shares of restricted common stock to independent directors as compensation for services and recognized and $59,000 and $56,000 as stock based compensation expense. Share based compensation expense is based upon the estimated fair value per share. Stock-based compensation expense is included in general and administrative expenses in the accompanying consolidated statements of operations.

December 31, 2022, respectively.

Distributions

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

Quarter Paid
Distributions per Common Share

Total Distributions
2017

3rd Quarter
$                       0.175

$                       3,168
2nd Quarter
0.175

                       3,159
1st Quarter
                    0.175

                       3,134
Total 2017 year to date
$                       0.525

$                       9,461

2016

4^th Quarter
$                       0.175

$                       3,173
3^rd Quarter
0.175

3,213
2^nd Quarter
0.175

3,042
1^st Quarter
0.175

2,478
Total 2016
$                       0.700

$                     11,906

Quarter Paid Distributions per Common Share Total Distributions
2023
1st Quarter $ — —
Total 2023 Quarter to date $ — $ —
2022
4th Quarter $ — $ —
3rd Quarter — —
2nd Quarter 0.128 4,500
1st Quarter 0.112 3,958
Total 2022 $ 0.240 $ 8,458

Note ~~12 –Incentive~~13 - Incentive Award Plan

The Company ~~has~~previously adopted an incentive plan ~~(the “Omnibus~~called the Omnibus Stock Incentive ~~Plan” or the~~Plan, (the “Incentive Plan”) that provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, deferred stock awards, restricted stock awards, dividend equivalent rights and other stock-based awards within the meaning of Internal Revenue Code Section 422, or any combination of the foregoing. The Company has initially reserved 5,000,000 shares of the Company’s common stock for the issuance of awards under the Company’s stock incentive plan, but in no event more than ten (10%) percent of the Company’s issued and outstanding shares. The number of shares reserved under the Company’s stock incentive plan is also subject to adjustment in the event of a stock split, stock dividend or other change in the Company’s capitalization. Generally, shares that are forfeited or canceled from awards under the Company’s stock incentive plan also will be available for future awards.

The Compensation Committee of the Board of Directors approved an award of 1,000 shares of restricted common stock issued to each of two executives of the Property Manager during the nine months ended September 30, 2016. The Company recognized stock-based compensation expense of $0 and $0 and $0 and $20,000 with respect to these awards based on the offering price of $10 per share for the three and nine months ended September 30, 2017 and 2016, respectively.

Incentive Plan has expired pursuant to its terms and requires stockholder approval for modification or reinstatement. The Board approved the payment of accrued director's fees in cash, as stock compensation ~~expense is included in general and administrative expenses in the accompanying consolidated statements of operations.~~

was not available.

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note ~~13–~~14 - Commitments and Contingencies

~~Economic Dependency~~

~~The~~

Litigation

During February 2021, the state of Texas experienced a severe winter storm, unofficially referred to as Winter Storm Uri, which resulted in power outages and electrical grid failures across the state. Wholesale prices for electricity increased significantly during this period. As a result, the Company ~~is dependent on~~experienced a substantial increase in electricity billings for a number of our properties during the month of and after the storm.

On May 26, 2021, Summer Energy LLC (“Summer”) filed a lawsuit against Hartman Income REIT Management, Inc. (the “Property Manager”), a wholly owned subsidiary of the Company that manages our properties, in state court in Harris County, Texas. In this lawsuit, Summer seeks to collect approximately $8.4 million from the Property Manager that Summer claims that the Property Manager owes Summer under one or more electricity sales agreements (“Agreements”) related to Winter Storm Uri. Of the approximately $8.4 million claimed in the lawsuit, approximately $7.6 million relates to wholly owned properties of the Company. Under the Agreements, Summer provided electricity to buildings managed by the Property Manager at indexed prices.

On March 24, 2022, the court entered a judgment in favor of Summer against the Property Manager in the amount of $7,871,000 plus customary pre- and post-judgment interest and attorney's fees.The Company had recognized the ~~Advisor for certain services that are essential~~share of the judgment amount applicable to wholly owned properties of the Company, ~~including~~approximately $6,731,000, within the ~~identification, evaluation, negotiation, purchase~~Company's consolidated statements of operations for fiscal year 2021. The Company has also recognized $370,000 of pre-judgment interest and ~~disposition~~attorney fees in 2021 and $304,000 of ~~properties, management of the daily operations~~post-judgment interest in 2022. Many of the Company’s ~~real estate portfolio,~~leases contain provisions that require tenants to pay their allocable share of operating expenses, including utilities. The Company has completed its assessment of tenants' applicable share and has collected and recognized $1,530,000 of tenant's share to date, $866,000 was recognized in the first quarter of 2023.

On April 25, 2022, the Property Manager filed its supersedeas surety bond totaling $2,197,000 in order to suspend enforcement the judgment for the duration of the Property Manager's appeal. The share of the supersedeas surety bond applicable to wholly owned properties of the Company totaled $2,001,000 and is recorded in prepaid expenses and other ~~general~~assets on the Company's consolidated balance sheets.

The Property Manager continues to dispute the amount of litigation to Summer and ~~administrative responsibilities.~~had appeal the judgment, filing its Notice of Appeal on June 21, 2022. The outcome of the appeal is subject to significant uncertainty and we cannot provide any assurance that the Property Manager will ultimately prevail. Even if the Property Manager is ultimately successful in its appeal, it may take considerable time to resolve the matter.

Atrium II Joinder Agreement

Through the execution of the joinder agreement referenced in Note 8 (Notes Payable) and Note 11 (Related Party Transactions), certain organizational and loan documents reference Hartman vREIT XXI Operating Partnership LP (“Hartman XXI OP”), a wholly owned subsidiary of Hartman vREIT XXI, Inc., as the sole member.

Under the joinder agreement, HIRPH became a borrower under the loan and is jointly and severally liable with the other loan parties for the repayment of the loan. The Atrium II property is the sole asset of HIRPH with which to repay any debt under the loan. The loan is currently in an extension period to accommodate ongoing renewal terms. The outstanding balance of the loan which HIRPH is party totals $15,625,000 as of March 31, 2023. There are four other properties as named borrowers in the loan. If a renewal agreement is not reached, the Company may be required to relinquish ownership of the property to the lender in a foreclosure transaction or other alternative to foreclosure in satisfaction of the loan. The Company’s max potential loss in regards to its liability under the loan would be the value of the property. The Company’s maximum potential loss in regards to its liability under the loan would be the value of the property.

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Charter provision regarding liquidity or liquidation

The Company does not anticipate that there will be any market for its shares of common stock unless they are listed on a national securities exchange. In the event that ~~these companies~~Company shares of common stock are ~~unable~~not listed or traded on an established securities exchange prior to ~~provide~~ the ~~respective~~tenth anniversary of the completion or termination of the Company's initial public offering, which terminated on April 25, 2013, the Company's charter requires that the board of directors must seek the approval of the stockholders of a plan to liquidate assets, unless the board of directors has obtained the approval of the stockholders (1) to defer the liquidation of our assets or (2) of an alternate strategy. If the stockholders do not approve the proposal presented by the board of directors prior to the end of ten years after the termination of the Company’s initial public offering, the board of directors shall begin the process of liquidating the Company’s assets or listing the Company’s shares. The Executive Committee has adopted resolutions directing management to begin the process of listing the Company’s shares on an established securities exchange, and it is taking steps to accomplish the listing, including without limitation engaging the services of an investment bank to assist with the listing.

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 15 - Defined Contribution Plan

The Company sponsors a defined contribution pension plan, the Hartman 401(k) Profit Sharing Plan, covering substantially all of its full-time employees who are at least 21 years of age. Participants may annually contribute up to 100% of pretax annual compensation and any applicable catch-up contributions, as defined in the plan and subject to deferral limitations as set forth in Section 401(k) of the Internal Revenue Code. Participants may also contribute amounts representing distributions from other qualified benefit or defined contribution plans. The Company may make discretionary matching contributions. For the three months ended March 31, 2023 and 2022, the Company ~~will be required to obtain such services from other providers.~~

~~Litigation~~

matched $99,000 and $99,000, respectively. The Company had a stock match liability to the plan of $1,907,000 and $1,808,000 as of March 31, 2023 and December 31, 2022, respectively.

Note 16 - Subsequent Events

On April 6, 2023, the Company completed the sale of its Quitman property for a sale price for a sale price of $9,065,000. Proceeds from the sale were applied to the outstanding balance of the SASB Loan. The property is presented in real estate held for sale on the consolidated balance sheets as of March 31, 2023 and December 31, 2022. The disposal of the Quitman property granted us a one time waiver of event of default on the SASB Loan, subject to ~~various claims~~certain conditions. Most notably, the Company does have access to certain reserve accounts, however is still subject to cash management provisions until a 14% debt yield is reached.

On April 6, 2023, the Company agreed to purchase all of the equity interests in Southern Star Self-Storage Investment Company ("Southern Star") for approximately $3,000,000 in cash and ~~legal actions that arise~~301,659 restricted stock units of the Company's Common Stock. Mark T. Torok and Louis T. Fox III, CFO, are equity holders of Southern Star. On May 5, 2023, the Company completed the acquisition of Southern Star, which will operate as a subsidiary of the Company’s operating partnership alongside the Company’s current operations, utilizing its expertise in developing assets within Delaware Statutory Trusts.

On April 6, 2023, the ~~ordinary course~~Executive Committee and Managing General Partner of ~~business. Management~~the Operating Partnership approved and adopted the Silver Star Properties REIT, Inc. and Hartman XX Limited Partnership 2023 Incentive Award Plan (the “2023 Incentive Award Plan”) to promote the success and enhance the value of the Company ~~believes~~by retaining personnel that have the knowledge vision and ability not only with the Company but also in the capital markets as further described in the Employment Agreement included as Exhibit 10.3 to the Company’s Form 8-K filed April 10, 2023. The 2023 Incentive Award Plan recognizes that the ~~final disposition of such matters will not have a material adverse effect on~~entire Acquisition and the ~~financial position~~New Direction Plans were set up by the work and effort of the ~~Company.~~

~~Merger~~

~~On July 21, 2017,~~Chief Executive Officer and the Executive Committee, and it further serves to incentivize and retain the Chief Executive Officer and the Executive Committee, together, to execute the New Direction Plans and enable the Company and ~~Hartman XIX, entered into an agreement and plan~~its shareholders to realize the value created by the New Direction Plans. The 2023 Incentive Award Plan allows for grants of ~~merger and (ii) the Company,~~performance units (“Performance Units”) which are intended to constitute profits interests units in the Operating Partnership ~~HREIT~~convertible into Partnership Common Units of the Operating Partnership at the election of the participant which may be later exchanged for Common Stock of the Company based on a 1:1 ratio. The participant is also able to cause the redemption of the Performance Units, or the applicable Partnership Common Units received as a result of conversion, after three years from the Grant Date. The 2023 Incentive Award Plan includes a three-year vesting that is intended to ensure that the Executive Committee and ~~HIROP, entered into an agreement~~the Chief Executive Officer will stay in place and ~~plan~~provide continued services to the Company.

On April 6, 2023, pursuant to the 2023 Incentive Award Plan, the Executive Committee approved grants of ~~merger. See~~founders’ Performance Units to retain and incentivize the following members of the Executive Committee in carrying out the New Direction Plans, as defined below: Gerald Haddock, member of the Executive Committee, (1,053,035 Performance Units), Jack Tompkins, member of the Executive Committee, (1,053,035 Performance Units), and James Still, member of the Executive Committee, (1,053,035 Performance Units). Performance Units vest 1/3 of the grant per year, and the term of each Performance Unit is ten (10) years from the date of grant as further described in the 2023 Incentive Award Plan included as Exhibit 10.4 to the Company’s Form 8-K filed April 10, 2023. The Executive Committee engaged a third-party compensation consultant to assist in determining the compensation structure for the Executive Committee and to evaluate their compensation relative to the marketplace.

Mark Torok tendered his resignation as Chief Executive Officer of Silver Star Properties REIT, Inc. (the “Company”) citing personal reasons, effective April 28, 2023, Mr. Torok’s resignation as Chief Executive Officer was not the result of any disagreement with the Company on any matter relating to the Company's operations, policies or practices. Also effective April 28, 2023, the Executive Committee of Board of Directors of the Company appointed David Wheeler to serve as the Company’s Interim President and has elevated the role and duties of Michael Racusin, General Counsel and Secretary. A search is underway to identify a permanent CEO with self-storage experience. The Executive Committee of the Board of Directors has retained a nationally recognized executive search firm to assist in the process.

SILVER STAR PROPERTIES REIT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Effective April 17, 2023, the Company is no longer providing management and advisory services to Hartman vREIT XXI, Inc. and its affiliates.

On May 30, 2023, Hartman vREIT XXI, Inc. completed the refinance of the master credit facility referenced in Note 1.

14 (Commitments and Contingencies). The Atrium II property is no longer included in the master credit facility and is unencumbered as of the closing of the refinance. HIRPH is no longer a borrower nor is it jointly and severally liable with the other loan parties for repayment of the loan.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise requires, all references in this report to the “Company,” “we,” “us” or “our” are to ~~Hartman Short Term Income~~Silver Star Properties ~~XX,~~REIT, Inc.

Forward-Looking Statements

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

Forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs which involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. ~~Factors~~

Other factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:



●			●	the fact that we have had a net loss for each annual period since our inception;
●
	●	~~the risk that the pending Mergers (as defined below in) will not be consummated within the expected time period or at all;~~

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

	●	~~the failure to satisfy the conditions to completion of the pending Mergers;~~

	●	~~risks related to disruption of management~~’~~s attention from the ongoing business operations due to the pending Mergers;~~

	●	~~the effect of the announcement of the pending Mergers on our operating results and business generally;~~

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

	●	the imposition of federal taxes if we fail to qualify as a REIT in any taxable year or forego an opportunity to ensure REIT status;
●
	●	uncertainties related to the national economy, the real estate industry in general and in our specific markets;
●
	●	legislative or regulatory changes, including changes to laws governing REITS;
●				our ability to obtain financing on acceptable terms, satisfy our existing debt service obligations and negotiate maturity date extensions, particularly with our SASB Loan, or other modifications to the terms of our existing financing arrangements to the extent necessary
●			●	construction costs that may exceed estimates or construction delays;
●
	●	increases in interest rates;
●
	●	availability of credit or significant disruption in the credit markets;
●				litigation risks, including without limitation the outcome of pending litigation related to the pricing of electricity provided to certain of our properties during the severe winter weather experienced in Texas
●			●	~~litigation risks;~~

	●	risks inherent to the real estate business, including tenant defaults, potential liability related to environmental matters and the lack of liquidity of real estate investments;
●
	●	inability to renew tenant leases or obtain new tenants upon the expiration of existing leases at our properties;
●
	●	inability to generate sufficient cash flows due to market conditions, competition, uninsured losses, changes in tax or other applicable laws;
●
	●	the potential need to fund tenant improvements or other capital expenditures out of operating cash flow;
●
	●	~~the fact that we pay fees and expenses to our advisor and its affiliates that were not negotiated on an arm~~’~~s length basis and the fact that the payment of these fees and expenses increases the risk that our stockholders will not earn a profit on their investment in us;~~
	●	our ability to generate sufficient cash flows to ~~pay~~resume the payment of distributions to our stockholders;
●			the outcome of our pending legal appeal of a significant judgment against our Property Manager related to Winter Storm Uri (see Item 1. Legal Proceedings)
●			our ability to retain our executive officers and other key ~~personnel of our advisor~~personnel; and ~~other affiliates of our advisor; and~~
●			●	changes to generally accepted accounting principles, or GAAP.

The forward-looking statements should be read in light of these factors and the factors identified in the “Risk Factors” section of our Annual Report on Form 10-K (referred to herein as our Annual Report) for the year ended December 31, ~~2016 as filed with the SEC on April 11, 2017.~~

2022.

The following discussion and analysis should be read in conjunction with the accompanying interim consolidated financial information.

Overview

~~We were formed~~

Silver Star Properties REIT, Inc. (previously known as Hartman Short Term Income Properties XX, Inc.) is a Maryland corporation formed on February 5, 2009, to acquire and 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 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.

On February 9, 2010, we commenced our initial public offering of up to $250,000,000 in shares of our common stock to the public at a price of $10 per share and up to $23,750,000 in shares of common stock to our stockholders pursuant to our distribution reinvestment plan at a price of $9.50 per share. On April 25, 2013, we terminated our initial public offering. As of the termination of our initial public offering on April 25, 2013, we had accepted subscriptions for and issued 4,455,678 shares of our common stock, including 162,561 shares of our common stock issued pursuant to our distribution reinvestment plan, resulting in aggregate gross offering proceeds of $43,943,731.

On July 16, 2013, we commenced our follow-on public offering, or our “follow-on offering,” of up to $200,000,000 in shares of our common stock to the public at a price of $10.00 per share and up to $19,000,000 in shares of our common stock to our stockholders pursuant to our distribution reinvestment plan at a price of $9.50 per share. Effective March 31, 2016, we terminated the offer and sale of our common shares to the public in our follow-on offering. Effective July 16, 2016, we terminated the sale of additional shares of our common stock to our stockholders pursuant to our distribution reinvestment plan. As of December 31, 2016, we had accepted subscriptions for, and issued 14,118,783 shares of our common stock in our follow-on offering, including 1,053,679 shares of our common stock issued pursuant to our distribution reinvestment plan, resulting in aggregate gross proceeds of $137,392,749. As of December 31, 2016, we had accepted subscriptions for, and issued an aggregate of 18,574,461 shares of our common stock in our initial public offering and follow-on offering, including 1,216,240 shares of our common stock issued pursuant to our distribution reinvestment plan, resulting in aggregate gross proceeds from both offerings of $181,336,480.

~~We intend to invest any remaining net proceeds of our public offerings in~~ commercial real estate properties, including office buildings, retail shopping centers and ~~other~~flex and industrial properties. We have previously made investments in real ~~estate-related investments. As of September 30, 2017, we owned or held~~estate assets located in the United States, with a ~~majority ownership interest~~strategic focus on real estate properties located in ~~17 commercial real properties comprising approximately 2,928,000 square feet.~~

Texas. We ~~operate under~~recently began an initiative to pivot away from office, retail, and light industrial assets, and reposition our portfolio into the ~~direction~~self-storage asset class. We currently own substantially all of our ~~board of directors, the members of which are accountable to us~~assets and conduct our ~~stockholders. We are externally managed by~~operations through Hartman ~~Advisors, LLC,~~XX Limited Partnership, a Texas limited partnership, which we refer to as our ~~“advisor,~~“operating partnership.” ~~pursuant to an advisory agreement by and among us and our advisor, which we refer to as~~Our wholly-owned subsidiary, Hartman XX REIT GP LLC, is the “Advisory Agreement.” Subject to certain restrictions and limitations, our advisor manages our day-to-day operations and our portfolio of properties and real estate related assets. Our advisor sources and presents investment opportunities to our board of directors. Our advisor also provides investment management, marketing, investor relations and other administrative services on our behalf. The key personnelsole general partner of our ~~advisor are involved in the selection, acquisition, financing and disposition of our properties, and raising the capital~~operating partnership. We elected to purchase properties. The key personnel of our advisor have extensive experience in selecting and operating commercial real estate and in operating investment entities that acquire commercial real estate. Our affiliated property manager is Hartman Income REIT Management, Inc. which we refer tobe treated as our “property manager,” which is responsible for operating, leasing and maintaining our properties. Our property manager is the wholly owned subsidiary of Hartman Income REIT, Inc. which we refer to as “HIREIT,” a real estate investment trust, ~~that has investment objectives that are similar~~or REIT, for federal income tax purposes beginning with the taxable year ended December 31, 2011. References in this Quarterly Report to ~~those that~~“shares” and “our common stock” refer to the shares of our common stock.

As of March 31, 2023 we ~~employ.~~

~~Pending Mergers~~

owned 43 income-producing commercial real estate properties comprising approximately 6.4 million square feet plus one pad site and one land development, all located in Texas.

On ~~July 21, 2017,~~May 14, 2020, we ~~entered into~~completed: (i) ~~an agreement and plan of~~the merger ~~(the “XIX Merger Agreement”)~~ between us and Hartman Short Term Income Properties XIX, Inc.~~, a Texas corporation and a related party (“~~("Hartman ~~XIX”~~XIX"), and (ii) ~~an agreement and plan of~~the merger ~~(the “HIREIT Merger Agreement,” and together with the XIX Merger Agreement, the “Merger Agreements”)~~ by ~~and among~~ us, our operating partnership, Hartman Income REIT, Inc.~~, a Maryland corporation and a related party~~ (“HIREIT”), and Hartman Income REIT Operating Partnership LP, ~~a Delaware limited partnership, the operating partnership of HIREIT~~ (“HIREIT Operating Partnership”).

~~Subject to the terms and conditions~~ The effective date of the ~~XIX Merger Agreement,~~mergers ("Mergers") was July 1, 2020.

Prior to July 1, 2020 and subject to certain restrictions and limitations, Hartman ~~XIX will merge~~Advisors LLC ("Advisor") was responsible for managing our affairs on a day-to-day basis and for identifying and making acquisitions and investments on our behalf pursuant to an advisory agreement. Management of our properties is provided pursuant to property management agreements with Hartman Income REIT Management, Inc. (the "Property Manager"), formerly a wholly-owned subsidiary of HIREIT and ~~into us, with~~effective July 1, 2020, our ~~company surviving the merger (the “Hartman XIX Merger”). Subject to the terms and conditions~~wholly owned subsidiary. The Property Manager owned 30% of the HIREIT Merger Agreement, (i) HIREIT will merge with and into us, with our company surviving the merger (the “HIREIT Merger,” and together with the Hartman XIX Merger, the “REIT Mergers”), and (ii) HIREIT Operating Partnership will merge with and into our operating partnership, with our operating partnership surviving the merger (the “Partnership Merger,” and together with the REIT Mergers, the “Mergers”).

~~Subject to the terms and conditions of the XIX Merger Agreement, (i) each share of common stock of Hartman XIX (the “XIX Common Stock”) issued and outstanding immediately~~Advisor prior to the Mergers. Effective ~~Time (as defined in~~with the ~~XIX Merger Agreement) will be automatically cancelled~~Mergers and ~~retired~~the acquisition of the 70% interest of Advisor owned by affiliates of Allen R. Hartman, we are a self-advised and ~~converted~~self-managed REIT.

On December 20, 2022, we filed an amendment to our Articles of Amendment with the Maryland Secretary of State to change our name from “Hartman Short Term Income Properties XX, Inc.” to “Silver Star Properties REIT, Inc.”

On April 6, 2023, the Executive Committee of the board of directors approved our previously-announced New Direction Plans to reposition the Company's assets into the ~~right~~self-storage asset class and away from office, retail, and light industrial assets.

Going Concern Considerations

We have a $259,000,000 SPE Loan (the "SASB Loan") outstanding as of March 31, 2023 which has a maturity date of October 9, 2023, which is within one year of the date that this Quarterly Report was available to ~~receive 9,171.98 shares of~~be issued. We are on the third and final one year maturity date option under the SASB Loan. Management has determined that the our ~~common stock, (ii) each share of 8% cumulative preferred stock of Hartman XIX issued and outstanding immediately~~ability to continue as a going concern is dependent upon the our ability to refinance the SASB Loan prior to the ~~Effective Time~~maturity date.

On October 19, 2022, we received a notice from the loan servicer of the SASB Loan in connection with an event of default due to the noncompliance with the loan agreement's insurance requirements relating to a single property. The event of default was previously waived for the sole purpose of exercising the final one-year extension option to the SASB Loan term. The default triggers cash management provisions under the SASB Loan agreement, which was implemented in November 2022. Cash management implementation has restricted access to tenant receipts and limited the amount of cash available to meet our operating obligations. Refer to Note 8 (Notes Payable) to the consolidated financial statements in the Quarterly Report for additional information regarding the timing and priority of disbursements we receive from the cash management accounts and required excess cash flow reserves.

Notwithstanding cash management implementation, we believe that we will ~~be automatically cancelled~~have sufficient capital to meet our existing, monthly debt service and ~~retired~~other operating obligations for the next year and ~~converted into~~that we have adequate resources to fund our cash needs. We are working with our third party advisor on refinancing options that are in alignment with a range of strategic alternatives being evaluated. However, the ~~right to receive 1.238477 shares~~lack of lending activity in the debt markets, particularly in commercial office real estate markets, may have a direct impact on the value of our ~~common stock,~~real estate and ~~(iii) each share~~ability to refinance the properties in the SASB Loan due October 9, 2023. No assurances can be given we will meet our objective of ~~9% cumulative preferred stock of Hartman XIX issued and outstanding immediately~~refinancing the SASB Loan prior to the ~~Effective Time will be automatically cancelled and retired and converted into the right to receive 1.238477 shares of our common stock.~~

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

The Merger Agreements may be terminated under certain circumstances, including but not limited to (i) by the mutual written consent of all the parties to a Merger Agreement, (ii) by either us or HIREIT or Hartman XIX, as applicable, if a final and non-appealable order is entered prohibiting or disapproving the applicable Mergers, (iii) by either us or HIREIT or Hartman XIX, as applicable, if the required approval of the applicable Mergers by our stockholders or HIREIT or Hartman XIX, as applicable (the “Stockholder Approvals”), have not been obtained, (iv) by either us or HIREIT or Hartman XIX, as applicable, upon a material uncured breach by the other party that would cause the closing conditions in the applicable Merger Agreement not to be satisfied, or (v) by either us or HIREIT or Hartman XIX, as applicable, if the applicable Mergers have not been completed on or before December 31, 2017. No termination fees or penalties are payable by any party to any Merger Agreement in the event of the termination of any Merger Agreement.

Each Merger Agreement sets forth certain conditions of the parties thereto to consummate the Mergers contemplated by such Merger Agreement, including (i) receipt of the applicable Stockholder Approvals, (ii) receipt of all regulatory approvals, (iii) the absence of any judgments, orders or laws prohibiting or restraining the consummation of the applicable Mergers, (iv) the effectiveness with the SEC of the registration statement on Form S-4 to be filed by us to register the shares of our common stock to be issued as consideration in the REIT Mergers, (v) the delivery of certain documents, consents and legal opinions, and (vi) the truth and correctness of the representations and warranties of the respective parties, subject to the materiality standards contained in the Merger Agreements. In addition, the consummation of the HIREIT Merger and the Partnership Merger is a condition to the consummation of the Hartman XIX Merger, and vice versa. There can be no guarantee that the conditions to the closing of the Mergers set forth in the Merger Agreements will be satisfied.

~~Each party to the Merger Agreements will bear its own costs and expenses (including legal fees) related to the Merger Agreements and the transactions contemplated by the Merger Agreements.~~

maturity date.

Investment Objectives and ~~Strategy: Hartman Advantage~~

~~Our primary investment objectives are to:~~


	·	~~realize growth in the value of our investments;~~
	·	~~preserve, protect and return stockholders~~’ ~~capital contributions; and~~
	·	~~grow net cash from operations and pay regular cash distributions to our stockholders.~~

Strategy

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

~~The cornerstone of our investment strategy is our advisor’s discipline~~have invested in ~~acquiring~~ a diverse portfolio of real estate investments. As of March 31, 2023, we owned a total of 43 income-producing commercial properties, consisting of 29 office properties, 12 retail properties, and 2 industrial/flex properties. Historically, we have relied on a value add acquisition and development strategy, focused specifically properties ~~that are~~ located in Texas, ~~that offer a blend of current and potential income based on in place occupancy plus relatively significant potential for~~to realize growth in ~~income and value from re-tenanting; repositioning or redevelopment. We refer to this strategy as “value add” or the “Hartman Advantage.”~~

~~We rely upon~~ the value ~~add or Hartman Advantage~~of our investments, grow net cash from operations, and pay regular cash distributions to our stockholders.

The current economic slowdown, rising interest rate environment, inflation, and the COVID-19 pandemic have had a negative impact on us. Effective July 8, 2022, we suspended the payment of distributions and seek to preserve capital to secure our financial health on an ongoing basis.

We have changed our investment objectives and strategy to ~~evaluate numerous potential commercial real estate acquisition and investment opportunities per completed acquisition or investment.~~

~~Effective March 31, 2016 we terminated our follow-on offering. Our board of directors continues to evaluate potential liquidity events to maximize~~preserve the ~~total potential return to our stockholders, including, but not limited to, a listing~~long-term health of our ~~shares~~company and we do not anticipate acquiring any office properties in the near future. Management and the Executive Committee of ~~common stock on~~our Board of Directors have identified, examined, and evaluated a ~~national securities exchange. However,~~range of strategic alternatives and are in the process of carrying out our ~~board~~New Direction Plans with the objective of ~~directors has not made a decision to pursue any specific liquidity event, and there can be no assurance that we will complete a liquidity event on the terms described above, or at all.~~

maximizing shareholder value.

We do not anticipate that there will be any market for our shares of common stock unless they are listed on a national securities exchange. We recently engaged advisors to examine the possibility of listing our shares on a public exchange in conjunction with our previously-announced New Direction Plans. In the event that our shares of common stock are not listed or traded on an established securities exchange prior to the tenth anniversary of the termination of our initial public offering, which terminated on April 25, 2013, our charter requires that the board of directors must seek the approval of our stockholders of a plan to liquidate our assets, unless the board of directors has obtained the approval of our stockholders (1) to defer the liquidation of our assets or (2) of an alternate strategy.

~~We believe that we have sufficient capital~~ If the stockholders do not approve the proposal presented by the board of directors prior to ~~meet our existing debt service and other operating obligations for~~ the ~~next year and that we have adequate resources to fund our cash needs. However, our operations are subject to a variety~~end of ~~risks, including, but not limited to, changes in national economic conditions,~~ten years after the restricted availability of financing, changes in demographic trends and interest rates and declining real estate valuations. As a result of these uncertainties, there can be no assurance that we will meet our investment objectives or that the risks described above will not have an adverse effect on our properties or results of operations.

~~We elected under Section 856(c)~~termination of the ~~Internal Revenue Code~~Company’s initial public offering, the board of directors shall begin the process of liquidating the Company’s assets or listing the Company’s shares. The Executive Committee of the Board of Directors has adopted resolutions directing management to begin the process of listing the Company’s shares on an established securities exchange, and it is taking steps to accomplish the listing, including without limitation engaging the services of an investment bank to assist with the listing.

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

Our Real Estate Portfolio

As of ~~September 30, 2017,~~March 31, 2023, we owned ~~or held a majority ownership interest in the 17~~43 income-producing commercial ~~real estate~~ properties listed below. ~~Except as noted in the table below (and the footnotes thereto), we own a 100% ownership interest in each of our properties. Figures below in thousands.~~


Property Name	Location	Gross Leasable Area SF	Percent Occupied		Annualized Base Rental Revenue (in thousand)		Average Base Rental Revenue per Occupied SF		Average Net Effective Annual Base Rent per Occupied SF
Retail:
Promenade	Dallas	176,585	79	%	$	1,584	$	11.41	$	11.47
Prestonwood Park	Dallas	105,783	84	%	$	1,840	$	20.80	$	20.47
Richardson Heights	Dallas	201,433	76	%	$	3,157	$	20.56	$	18.87
Cooper Street	Dallas	127,696	95	%	$	1,578	$	13.06	$	13.12
One Mason SC	Houston	75,183	90	%	$	1,044	$	15.40	$	15.45
Chelsea Square SC	Houston	70,275	66	%	$	542	$	11.66	$	11.71
Mission Center SC	Houston	112,971	90	%	$	949	$	9.34	$	9.39
Garden Oaks SC	Houston	106,858	96	%	$	1,756	$	17.15	$	17.18
Harwin	Houston	38,813	59	%	$	261	$	11.46	$	12.26
Fondren	Houston	93,196	93	%	$	962	$	11.08	$	11.22
Northeast Square SC	Houston	40,525	76	%	$	432	$	14.06	$	14.12
Walzem Plaza SC	San Antonio	182,713	71	%	$	1,564	$	12.06	$	12.09
Total - Retail		1,332,031	82	%	$	15,669	$	14.38	$	14.17
Office:
North Central Plaza	Dallas	198,374	62	%	$	1,824	$	14.92	$	14.96
Gateway Tower	Dallas	266,412	63	%	$	1,994	$	11.89	$	11.87
Bent Tree Green	Dallas	139,609	70	%	$	1,940	$	19.83	$	20.41
Parkway Plaza I&II	Dallas	136,506	69	%	$	1,321	$	13.97	$	14.29
Hillcrest	Dallas	203,688	80	%	$	2,156	$	13.25	$	13.28
Skymark	Dallas	115,700	85	%	$	1,589	$	16.21	$	16.26
Corporate Park Place	Dallas	113,429	76	%	$	1,161	$	13.44	$	13.32
Westway One	Dallas	165,982	82	%	$	2,588	$	18.92	$	19.02
Three Forest Plaza	Dallas	366,549	75	%	$	5,085	$	18.96	$	18.88
Spring Valley	Dallas	94,304	66	%	$	961	$	15.37	$	15.57
Tower Pavilion	Houston	87,589	93	%	$	787	$	9.66	$	9.59
The Preserve	Houston	218,689	91	%	$	2,729	$	13.75	$	13.40
Westheimer Central	Houston	182,506	71	%	$	1,504	$	11.60	$	11.53
11811 N Freeway	Houston	156,362	63	%	$	1,375	$	13.90	$	13.93
Atrium I	Houston	118,461	82	%	$	1,392	$	14.38	$	14.55
Atrium II	Houston	111,853	94	%	$	1,202	$	11.16	$	11.48
3100 Timmons	Houston	111,265	84	%	$	1,561	$	16.68	$	16.79
Cornerstone	Houston	71,008	65	%	$	536	$	11.55	$	11.33
Northchase	Houston	128,981	63	%	$	978	$	12.02	$	12.29
616 FM 1960	Houston	142,194	60	%	$	1,139	$	13.28	$	13.28
601 Sawyer	Houston	88,258	90	%	$	1,359	$	17.12	$	16.96
Gulf Plaza	Houston	120,651	85	%	$	2,054	$	20.00	$	20.43
Timbercreek Atrium	Houston	51,035	73	%	$	439	$	11.75	$	11.72
Copperfield	Houston	42,621	97	%	$	651	$	15.79	$	15.41
400 N. Belt	Houston	230,872	43	%	$	1,155	$	11.67	$	12.03
Ashford Crossing	Houston	158,451	92	%	$	2,048	$	14.12	$	14.21
Regency Square	Houston	64,245	95	%	$	558	$	9.15	$	9.12
Energy Plaza	San Antonio	180,119	89	%	$	3,287	$	20.53	$	20.51
One Technology Ctr	San Antonio	196,348	90	%	$	4,493	$	25.33	$	25.36
Total -office		4,262,061	76	%	49,866		15.5		15.53

Industrial/Flex
Central Park	Dallas	73,099	91	%	$	585	$	8.79	$	9.81
Quitman	Houston	736,957	88	%	$	1,353	$	2.08	$	2.07
Total -Industrial/Flex		810,056	88	%	$	1,938	$	2.71	$	2.80

Grand Total		6,404,148	78	%	$	67,473	$	13.43	$	13.42

Property Name
Location
Gross Leasable Area SF
Percent Occupied
Annualized Base Rental Revenue (in thousand)
Average Base Rental Revenue per Occupied SF
Average Net Effective Annual Base Rent per Occupied SF
Retail:

Richardson Heights
Dallas
       201,433
74%
$         2,851
$        19.04
$                 20.56
Cooper Street
Dallas
       127,696
100%
$         1,546
$        12.10
$                 12.02
Total - Retail

       329,129
84%
$         4,397
$        15.85
$                 16.63
Office:

Bent Tree Green
Dallas
       139,609
85%
$         1,795
$        15.18
$                 15.61
Parkway Plaza I&II
Dallas
       136,506
72%
$         1,653
$        16.89
$                 18.29
Hillcrest
Dallas
       203,688
78%
$         2,245
$        14.12
$                 14.79
Skymark
Dallas
       115,700
82%
$         1,770
$        18.57
$                 19.59
Corporate Park Place
Dallas
       113,429
66%
$         1,001
$        13.31
$                 14.31
Westway One (1)
Dallas
       165,982
100%
$         3,095
$        18.65
$                 20.67
Three Forest Plaza (2)
Dallas
       366,549
79%
$         5,047
$        17.36
$                 17.41
Gulf Plaza
Houston
       120,651
100%
$         2,402
$        19.93
$                 19.87
Timbercreek Atrium
Houston
         51,035
97%
$            858
$        17.31
$                 17.81
Copperfield
Houston
         42,621
90%
$            698
$        18.28
$                 18.93
400 N. Belt
Houston
       230,872
63%
$         1,287
$          8.91
$                   9.32
Ashford Crossing
Houston
       158,451
52%
$         1,432
$        17.45
$                 18.46
Energy Plaza
San Antonio
       180,119
85%
$         3,249
$        21.13
$                 21.59
One Technology Ctr
San Antonio
       196,348
95%
$         4,365
$        23.46
$                 24.32
Total - office

     2,221,560
80%
$       30,897
$        17.39
$                 18.08
Flex/Industrial

Mitchelldale
Houston
       377,752
90%
$         2,171
$          6.36
$                   6.52
Total - Flex/Industrial

       377,752
90%
$         2,171
$          6.36
$                   6.52
Grand Total

     2,928,441
82%
$       37,465
$        15.64
$                 16.26

~~(1)~~

The Westway One property is owned by Hartman Westway One, LLC. On June 17, 2016, we sold a 45.67% minority interest in Hartman Westway One, LLC to an unrelated investor for $5,500,000. As of September 30, 2017, we own a 54.33% membership interest in Hartman Westway One, LLC.

~~(2)~~

On April 11, 2017, our Operating Partnership entered into a membership interest purchase agreement with Hartman vREIT XXI, Inc. (“vREIT XXI”), a related party, pursuant to which vREIT XXI may acquire up to $10,000,000 of our Operating Partnership’s ownership interest in Hartman Three Forest Plaza LLC. On April 11, 2017, pursuant to the membership interest purchase agreement, vREIT XXI acquired 160,000 membership units of Hartman Three Forest Plaza LLC, representing an approximately 9% interest in the members’ equity of Hartman Three Forest Plaza LLC, from the Operating Partnership for $1,600,000. On May 18, 2017, vREIT XXI acquired an additional 130,000 membership units of Hartman Three Forest Plaza LLC, representing an additional approximately 7% interest in the members’ equity of Hartman Three Forest Plaza LLC, from the Operating Partnership for $1,300,000. On June 8, 2017, vREIT XXI acquired an additional 195,000 membership units of Hartman Three Forest Plaza LLC, representing an additional approximately 11% interest in the members’ equity of Hartman Three Forest Plaza LLC, from the Operating Partnership for $1,950,000. On May 18, 2017, vREIT XXI acquired an additional 60,000 membership units of Hartman Three Forest Plaza LLC, representing an additional approximately 3% interest in the members’ equity of Hartman Three Forest Plaza LLC, from the Operating Partnership for $600,000. As of July 19, 2017, vREIT XXI acquired an approximately 6% equity interest in Three Forest Plaza LLC for $1,000,000. As of September 30, 2017, thevREIT XXI has acquired an approximately 37.6% equity interest in Three Forest Plaza LLC for $6,700,000. On October 19, 2017, vREIT XXI acquired an additional 11.2% equity interest for $2,000,000 bringing its total equity interest to approximately 48.8%.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our results of operations and financial condition, as reflected in the accompanying consolidated financial statements and related notes, require us to make estimates and assumptions that are subject to management’s evaluation and interpretation of business conditions, changing capital market conditions, and other factors related to the ongoing viability of our customers. With different estimates or assumptions, materially different amounts could be reported in our consolidated financial statements. A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2022, as filed with the SEC on ~~April 11, 2017,~~May 26, 2023 in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations."There have been no significant changes to these policies during the three ~~and nine~~ months ended ~~September 30, 2017.~~March 31, 2023. See also Note 2 (Summary of Significant Accounting Policies) to our consolidated financial statements in this Quarterly Report on Form 10-Q for a discussion of our significant accounting policies.

RESULTS OF ~~CONTINUING~~ OPERATIONS

Comparison of the three months ended ~~September 30, 2017~~March 31, 2023 versus ~~September 30, 2016.~~

March 31, 2022.

As of ~~September 30, 2017, we~~March 31, 2023 and 2022, respectively, the Company owned ~~or held a majority ownership interest in 17~~43 and 44 income-producing commercial properties comprising approximately ~~2,928,000~~6.4 million square feet and 6.8 million square feet, respectively, plus ~~three~~one pad ~~sites, all~~sites. As of March 31, 2023 and 2022, the Company owned one and two land developments, respectively. All properties are located in Texas. As of ~~September 30, 2017, we~~March 31, 2023 and 2022, respectively, the Company owned ~~nine~~15 properties located in Richardson, Arlington, Plano, and Dallas, Texas, ~~six~~25 and 26 properties located in Houston, Texas and ~~two~~three properties located in San Antonio, Texas. As of September 30, 2016, we owned or held a majority interest in 16 commercial properties comprising approximately 2,562,000 square feet plus three pad sites, all located in Texas. As of September 30, 2016, we owned eight properties located in Richardson, Arlington, and Dallas, Texas, six properties located in Houston, Texas and two properties located in San Antonio, Texas.

We define same store (“Same Store”) properties as those properties which we owned for the entirety of the three months ended September 30, 2017 and September 30, 2016. For purposes of the following discussion, Same Store properties refer to Richardson Heights, Cooper Street, Bent Tree Green, Parkway, Gulf Plaza, Mitchelldale, Energy Plaza, Timbercreek, Copperfield, Commerce Plaza Hillcrest, 400 North Belt, Ashford Crossing, Corporate Park Place, Skymark Tower and One Technology Center. New store (“New Store”) properties refer to Westway One and Three Forest Plaza.

Net operating income (property revenues minus property expenses), or “NOI,” is the measure used by management to assess property performance. NOI is not a measure of operating income or cash flows from operating activities as measured by accounting principles generally accepted in the United States, or “GAAP,” and is not indicative of cash available to fund cash needs. As a result, NOI should not be considered an alternative to cash flows as a measure of liquidity. Not all companies calculate NOI in the same manner. We consider NOI to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the operating results of our real estate. Set forth below is a reconciliation of NOI to net loss.

(in thousands)
Three months ended September 30,

2017
2016
Change
Same Store:

Revenue
$       9,374
$       9,932
$         (558)
Property operating expenses
3,676
3,688
(12)
Real estate taxes and insurance
1,129
1,263
(134)
Asset management fees
372
372
           -
General and administrative
629
539
90
Same Store NOI
$       3,568
$        4,070
$         (502)

New Store:

Revenue
$       1,555
   $                -
$         1,555
Property operating expenses
459
           -
             459
Real estate taxes and insurance
237
           -
             237
Asset management fees
68
           -
               68
General and administrative
18
           -
               18
New Store NOI
773
           -
             773
Property NOI
$        4,341
$        4,070
$            271

Reconciliation of Net loss to Property NOI

Net loss
$      (2,319)
$      (2,408)
$                89
Asset acquisition fees
                -
                -
                -
Organization and offering costs
                -
                -
                -
Depreciation and amortization
          5,542
          5,808
             (266)
Interest expense
          1,453
            961
          492
Interest and dividend income
            (335)
             (291)
(44)
Discontinued operations
                -
-
-
Property NOI
$          4,341
$         4,070
$             271

Revenues –- The primary source of our revenue is rental ~~revenues and tenant reimbursements.~~revenues. For the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022, we had total ~~rental~~ revenues of $24,748,000 and ~~tenant reimbursements of $10,929,000 and $9,932,000,~~$24,081,000, respectively. The $997,000 increase in total rental revenues and tenant reimbursements was primarily due to the fact that we owned 17 properties as of September 30, 2017, as compared to the 16 properties we owned as of September 30, 2016. Three Forest property was owned for three months of the three-month period ended September 30, 2017 (Three Forest was acquired December 22, 2016). Same Store property revenues decreased by $558,000, or approximately 5.9%, for the three months ended September 30, 2017 compared to the three months ended September 30, 2016 due to reduced occupancy at the Bent Tree, 400 North Belt and Ashford Crossing properties.

~~Operating~~

Property operating expenses –~~Operating~~ - Property operating expenses consist of ~~property operating expenses (contract~~contract services, repairs and maintenance, utilities and management ~~fees); real estate taxes and insurance; asset management~~ fees and ~~some general and~~property level administrative ~~expenses.~~expenses including bad debt expense. For the three months ended ~~September 30, 2017~~March 31, 2023 and ~~September 30, 2016~~2022, we had property operating expenses of ~~$6,588,000~~$4,821,000 and ~~$5,862,000,~~$5,524,000, respectively. ~~Same Store~~The decrease in property operating expenses ~~decreased by $56,000~~is primarily due to an overall decrease in normal course property repairs and improvements as well as decrease in utility costs.

Real estate taxes and insurance - Real estate taxes and insurance for the three months ended ~~September 30, 2017 as compared to the three months ended September 30, 2016.~~

~~Fees to affiliates~~ –~~We pay acquisition fees~~March 31, 2023 and ~~asset management fees to our advisor in connection with the acquisition of properties~~2022 were $4,268,000 and management of our company. Asset management fees incurred to our advisor were $440,000 and $372,000 for the three months ended September 30, 2017 and September 30, 2016, respectively. Acquisition costs related to the acquisition of our properties were $0 and $0 for the three months ended September 30, 2017 and September 30, 2016, respectively. We pay property management and leasing commissions to our Property Manager in connection with the management and leasing of our properties. For three months ended September 30, 2017 and September 30, 2016 we were charged by our Property Manager $1,418,000 and $1,810,000, respectively, for property management fees and expense reimbursements including $368,000 and $823,000, respectively, for leasing commissions and $47,000 and $115,000, respectively, for construction management fees due to the Property Manager. The increase in property management fees we were charged by our Property Manager from three months ended September 30, 2016 to three months ended September 30, 2017 was primarily due to the increase in revenues attributable to the Three Forest property.

~~Real estate taxes and insurance –~~~~Real estate taxes and insurance were $1,366,000 and $1,263,000 for the three months ended September 30, 2017 and 2016,~~$3,333,000, respectively. The increase in real estate taxes and insurance ~~from~~is attributable to increased premiums for commercial property insurance, driven by inflationary trends as well as volatile conditions in the three months ended September 30, 2016 versus the three months ended September 30, 2017 was primarily due to the fact that we owned 17 properties as of September 30, 2017, as compared to the 16 properties we owned as of September 30, 2016 which was offset by recovery ofcommercial insurance ~~proceeds and reduced insurance expense.~~

market.

Depreciation and amortization – - Depreciation and amortization ~~were $5,542,000 and $5,808,000~~ for the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022 were $5,720,000 and $6,517,000, respectively. ~~Depreciation~~The decrease is primarily related to assets classified as held for sale, where depreciation is not recognized, and ~~amortization decreased from~~impairment charges taken in the ~~three months ended September 30, 2016 to~~fourth quarter of 2022 which reduced the ~~three months ended September 30, 2017 primarily due to the decrease in in-place lease value intangible amortization.~~

depreciable base of a number of our assets.

General and administrative expenses -~~General and administrative expenses were $647,000 and $539,000 for the three months ended September 30, 2017 and 2016, respectively.~~ General and administrative expenses consist primarily of audit fees, transfer agent fees, other professional fees, and independent director compensation. ~~The increase in general~~General and administrative expenses ~~is due to increased leasing commission amortization, legal fee, certain recoverable and non-recoverable property operating expenses.~~

~~Organizational and offering costs -~~We have incurred certain expenses in connection with our organization and the sale of our shares of common stock. These costs principally relate to professional and filing fees. As of September 30, 2017, such costs totaled $3,020,000 and have been expensed as incurred since February 5, 2009, the date of our inception. For the three months ended September 30, 2017 and September 30, 2016, organization and offering costs were $0 and $0, respectively.

~~Net loss –~~~~We incurred net losses of $2,319,000 and $2,408,000~~ for the three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022 were $3,090,000 and $3,223,000, respectively. ~~The net loss~~

Interest expense - Interest expense for the three months ended ~~September 30, 2017 is primarily attributable to depreciation~~March 31, 2023 and ~~amortization expense attributable to real estate assets.~~

~~Comparison of the nine months ended September 30, 2017 versus September 30, 2016.~~

As of September 30, 2017, we owned or held a majority ownership interest in 17 commercial properties comprising approximately 2,928,000 square feet plus three pad sites, all located in Texas. As of September 30, 2017, we owned nine properties located in Richardson, Arlington,2022, was $6,070,000 and Dallas, Texas, six properties located in Houston, Texas and two properties located in San Antonio, Texas. As of September 30, 2016, we owned 16 commercial properties comprising approximately 2,562,000 square feet plus three pad sites, all located in Texas. As of September 30, 2016, we owned eight properties located in Richardson, Arlington, and Dallas, Texas, six properties located in Houston, Texas and two properties located in San Antonio, Texas.

For purposes of the following discussion, Same Store properties refer to Richardson Heights, Cooper Street, Bent Tree Green, Parkway, Gulf Plaza, Mitchelldale, Energy Plaza, Timbercreek, Copperfield, Commerce Plaza Hillcrest, 400 North Belt, Ashford Crossing, Corporate Park Place, Skymark Tower and One Technology Center. New Store properties refer to Westway One and Three Forest Plaza.

NOI is the measure used by management to assess property performance. NOI is not a measure of operating income or cash flows from operating activities as measured by GAAP and is not indicative of cash available to fund cash needs. As a result, NOI should not be considered an alternative to cash flows as a measure of liquidity. Not all companies calculate NOI in the same manner. We consider NOI to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the operating results of our real estate. Set forth below is a reconciliation of NOI to net loss.

(in thousands)
Nine months ended September 30,

2017
2016
Change
Same Store:

Revenue
$     25,615
$     27,115
$        (1,500)
Property operating expenses
9,875
9,498
377
Real estate taxes and insurance
2,430
3,478
(1,048)
Asset management fees
998
998
                -
General and administrative
1,900
1,727
               173
Same Store NOI
$       10,412
$     11,414
$         (1,002)

New Store:

Revenue
$       7,283
$          1,213
$         6,070
Property operating expenses
1,247
258
989
Real estate taxes and insurance
1,918
134
1,784
Asset management fees
322
54
268
General and administrative
68
58
10
New Store NOI
3,728
             709
3,019
Property NOI
$       14,140
$       12,123
$         2,017

Reconciliation of Net loss to Property NOI

Net loss
$      (6,824)
$      (6,811)
$           (13)
Asset acquisition fees
                -
541
(541)
Organization and offering costs
                -
(44)
44
Depreciation and amortization
        17,640
16,492
1,148
Interest expense
          4,317
2,649
1,668
Interest and dividend income
          (1,001)
(704)
(297)
Loss from discontinued operations
                8
-
8
Property NOI
$       14,140
$       12,123
$       2,017

~~Revenues –~~The primary source of our revenue is rental revenues and tenant reimbursements. For nine months ended September 30, 2017 and 2016 we had total rental revenues and tenant reimbursements of $32,898,000 and $28,328,000,$2,083,000, respectively. The $4,570,000 increase in total rental revenues and tenant reimbursements was primarily due to the fact that we owned 17 properties as of September 30, 2017, as compared to the 16 properties we owned as of September 30, 2016. Same Store property revenues decreased by $1,500,000, or approximately 5.9%, for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 due to reduced occupancy at the Bent Tree, 400 North Belt and Ashford Crossing properties.

~~Operating expenses~~ –Operating expenses consist of property operating expenses (contract services, repairs and maintenance, utilities and management fees); real estate taxes and insurance; asset management fees and some general and administrative expenses. For the nine months ended September 30, 2017 and September 30, 2016 we had operating expenses of $18,758,000 and $16,205,000, respectively. Same Store property operating expenses increased $2,553 due to received insurance proceeds that reduced insurance expense, and successful reduction in ad valorem tax controversies regarding taxable property values for the nine months ended September 30, 2017 over the nine months ended September 30, 2016.

~~Fees to affiliates~~ –We pay acquisition fees and asset management fees to our advisor in connection with the acquisition of properties and management of our company. Asset management fees paid to our advisor were $1,320,000 and $1,052,000 for the nine months ended September 30, 2017 and September 30, 2016, respectively. Acquisition costs related to the acquisition of our properties were $0 and $541,000 for the nine months ended September 30, 2017 and September 30, 2016, respectively. The increase in asset management fees is attributable to the Westway One property acquired June 1, 2016 and the Three Forest property acquired December 22, 2016. We pay property management and leasing commissions to our Property Manager in connection with the management and leasing of our properties. For nine months ended September 30, 2017 and September 30, 2016 we were charged by our Property Manager $5,204,000 and $5,060,000, respectively, for property management fees expense reimbursements and $1,977,000 and $2,311,000, respectively, for leasing commissions. The increase in property management fees we were charged by our Property Manager from nine months ended September 30, 2016 to nine months ended September 30, 2017 was primarily due to the increase in revenues attributable to the Westway One and Three Forest properties.

~~Real estate taxes and insurance –~~Real estate taxes and insurance were $4,348,000 and $3,612,000 for the nine months ended September 30, 2017 and 2016, respectively. The net increase in real estate taxes and insurance from the nine months ended September 30, 2016 to the nine months ended September 30, 2017 was primarily due to the fact that we owned 17 properties as of September 30, 2017, as compared to the 16 properties we owned as of September 30, 2016. Approximately 82% of the increase is attributable to the ~~New Store properties.~~

~~Depreciation~~impact of rising interest rates on our variable rate debt and ~~amortization –~~ ~~Depreciation~~increase in Notes Payable. The interest rate on our SASB Loan rose from 2.00% from March 2022 to 5.55% in March 2023, which includes the impact of our interest rate cap required under the loan.

Gain on sale of property - During the three months ended March 31, 2023, we sold the Mitchelldale property to a third party and ~~amortization were $17,640,000~~recognized a gain on the sale of property of approximately $26,177,000.

Net income - We generated a net income of $24,598,000 and ~~$16,492,000~~$217,000 for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2023 and ~~2016,~~2022, respectively. Depreciation and amortization increased from the nine months ended September 30, 2016 to the nine months ended September 30, 2017 primarily due to the fact that we owned 17 properties as of September 30, 2017, as compared to the 16 properties we owned as of September 30, 2016.

~~General and administrative expenses -~~General and administrative expenses were $1,968,000 and $1,785,000 for the nine months ended September 30, 2017 and 2016, respectively. General and administrative expenses consist primarily of audit fees, transfer agent fees, other professional fees, and independent director compensation. The increase in general and administrative expenses is due to increased leasing commission amortization, legal fee, certain recoverable and non-recoverable property operating expenses. We expect general and administrative expenses to increase only modestly in future periods as we acquire additional real estate and real estate related assets. We expect general and administrative expenses to decrease substantially as a percentage of total revenue.

~~Organizational and offering costs -~~We have incurred certain expenses in connection with our organization and the sale of our shares of common stock. These costs principally relate to professional and filing fees. As of September 30, 2017, such costs totaled $3,020,000and have been expensed as incurred since February 5, 2009, the date of our inception. For nine months ended September 30, 2017 and September 30, 2016, organization and offering costs (credit) were $0 and ($44,000), respectively.

~~Net loss –~~~~We incurred~~ net ~~losses of $6,824,000 and $6,811,000 for the nine months ended September 30, 2017 and 2016, respectively. The net loss for the nine months ended September 30, 2017~~income is primarily attributable to ~~depreciation and amortization expense attributable to real estate assets.~~

the gain on sale of property mentioned above.

Funds From Operations and Modified Funds From Operations

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

We define FFO, a non-GAAP measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, or the White Paper. The White Paper defines FFO as net income or loss computed in accordance with GAAP, excluding gains or losses from sales of property and asset impairment write-downs, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or is requested or required by lessees for operational purposes in order to maintain the value disclosed.

We believe that, since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Additionally, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges.

Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization and impairments, provides a more complete understanding of the our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO and MFFO, as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While other start up entities may also experience significant acquisition activity during their initial years, we believe that non-listed REITs are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after the acquisition activity ceases. We intend to use the remaining net proceeds raised in our follow-on offering to continue to acquire properties, and intend to begin the process of achieving a liquidity event (~~i.e.~~, the listing of our common stock on a national exchange, a merger or sale or our company or another similar transaction) within ten years of the completion of our initial public offering. The Investment Program Association, or “IPA,” an industry trade group, has standardized a measure known asdefine Modified Funds From Operations, or “MFFO,” which the IPA has recommended as a supplemental measure for publicly registered non-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income or loss as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate with a limited life and targeted exit strategy, as currently intended. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and other non-operating items included in FFO and also excludes acquisition fees and expenses that affect our operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (~~i.e.~~, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is in place. By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our public offering has been completed and our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our public offering and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our public offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on our operating performance during the periods in which properties are acquired.

~~We define~~ MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized.

Our MFFO calculation complies with the IPA’s Practice Guideline described above. In calculating MFFO, we exclude acquisition related expenses. We do not currently exclude amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Under GAAP, acquisition fees and expenses are characterized as operating expenses in determining operating net income. These expenses are paid in cash by us, and therefore such funds will not be available to distribute to investors. All paid and accrued acquisition fees and expenses negatively impact our operating performance during the period in which properties are acquired and will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. Accordingly, MFFO may not be an accurate indicator of our operating performance, especially during periods in which properties are being acquired. MFFO that excludes such costs and expenses would only be comparable to non-listed REITs that have completed their acquisition activities and have similar operating characteristics to us. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives and gains and losses from dispositions of assets as non-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective of on-going operations and are therefore typically adjusted for when assessing operating performance. The purchase of properties, and the corresponding expenses associated with that process, is a key operational feature of our business plan to generate operational income and cash flows in order to make distributions to investors. Acquisition fees and expenses will not be reimbursed by the advisor if there are no further proceeds from the sale of shares in our public offering, and therefore such fees and expenses will need to be paid from either additional debt, operational earnings or cash flows, net proceeds from the sale of properties or from ancillary cash flows.

Our management uses MFFO and the adjustments used to calculate it in order to evaluate our performance against other non-listed REITs which have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate it allow us to present our performance in a manner that reflects certain characteristics that are unique to non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors. For example, acquisitions costs are funded from the remaining net proceeds of our public offerings and other financing sources and not from operations. By excluding expensed acquisition costs, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance of different REITs, although it should be noted that not all REITs calculate FFO and MFFO the same way, so comparisons with other REITs may not be meaningful. FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of its liquidity, or indicative of funds available to fund its cash needs including its ability to make distributions to its stockholders. FFO and MFFO should be reviewed in conjunction with other GAAP measurements as an indication of our performance. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. FFO and MFFO are not useful measures

in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining FFO or MFFO.

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

The table below summarizes our calculation of FFO and MFFO for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2023 and ~~2016~~2022, including a reconciliation of such non-GAAP financial performance measures to our net ~~loss,~~income, in thousands.

Three months ended September 30,
Nine months ended September 30,

2017
2016
2017
2016
Net loss
$          (2,319)
$         (2,408)
$          (6,824)
$         (6,811)
Depreciation and amortization
5,542
5,808
17,640
16,492
Funds from operations (FFO)
3,223
3,400
10,816
9,681
Acquisition related expenses
––
––
––
                541
Modified funds from operations (MFFO)
$          3,223
$          3,400
$          10,816
$          10,222


	Three Months Ended March 31,
	2023		2022
Net income	$	24,598	$	217
Gain on sale of property	(26,177)		—
Depreciation and amortization of real estate assets	5,720		6,517
Funds from operations (FFO)	4,141		6,734
Organization and offering costs	—		9

Modified funds from operations (MFFO)	$	4,141	$	6,743

Distributions

The following table summarizes the distributions we paid in cash and pursuant to our distribution reinvestment plan for the period from January 2011 (the month we first paid distributions) through ~~September 30, 2017,~~March 31, 2023, in thousands:

Period
Cash (1)
DRIP (2)(3)
Total
First Quarter 2011
$21
$20
$41
Second Quarter 2011
45
51
96
Third Quarter 2011
70
70
140
Fourth Quarter 2011
119
101
220
First Quarter 2012
175
150
325
Second Quarter 2012
209
194
403
Third Quarter 2012
236
246
482
Fourth Quarter 2012
271
279
550
First Quarter 2013
316
311
627
Second Quarter 2013
373
388
761
Third Quarter 2013
442
412
854
Fourth Quarter 2013
550
483
1,033
First Quarter 2014
568
535
1,103
Second Quarter 2014
614
577
1,191
Third Quarter 2014
632
605
1,237
Fourth Quarter 2014
665
641
1,306
First Quarter 2015
703
714
1,417
Second Quarter 2015
803
876
1,679
Third Quarter 2015
927
1,020
1,947
Fourth Quarter 2015
1,042
1,108
2,150
First Quarter 2016
1,269
1,209
2,478
Second Quarter 2016
1,707
1,335
3,042
Third Quarter 2016
2,769
444
3,213
Fourth Quarter 2016 (4)
3,173
-
3,173
First Quarter 2017 (4)
3,139
-
3,139
Second Quarter 2017 (4)
3,154
-
3,154
Third Quarter 2017 (4)
3,168
-
3,168
Total
$ 27,160
$11,769
$38,929

Period Cash (1) DRIP (2)(3) Total
Year ended December 31, 2011 $ 255 $ 242 $ 497
Year ended December 31, 2012 891 869 1,760
Year ended December 31, 2013 1,681 1,594 3,275
Year ended December 31, 2014 2,479 2,358 4,837
Year ended December 31, 2015 3,475 3,718 7,193
Year ended December 31, 2016 8,918 2,988 11,906
Year ended December 31, 2017 12,650 — 12,650
Year ended December 31, 2018 12,555 — 12,555
Year ended December 31, 2019 12,811 — 12,811
Year ended December 31, 2020 15,797 — 15,797
Year ended December 31, 2021 13,917 — 13,917
Year ended December 31, 2022 8,458 — 8,458
Quarter ended March 31, 2023 — — —
Total $ 93,887 $ 11,769 $ 105,656

(1)

Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately 2040 days following the end of such month.

(2)

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

(3)

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

~~(4)~~

Distributions to non-controlling interests were ~~$208,000 for the year ended December 31, 2016. Distributions to non-controlling interests were $139,000~~$0 and $231,000 for the three months ended ~~September 30, 2017~~March 31, 2023 and ~~$411,000 for~~2022, respectively.

For the ~~nine~~three months ended ~~September 30, 2017~~

~~For nine months ended September 30, 2017,~~March 31, 2022, we paid aggregate distributions of ~~$9,461,000~~$0 in cash to common stockholders. During the same period, cash provided by operating activities was $3,735,000 and our FFO was $10,816,000. For nine months ended September 30, 2017, 39% of distributions were paid from cash provided by operating activities and 61% by other proceeds including proceeds received from the sale of membership interests in Three Forest Plaza. For the nine months ended September 30, 2016, we paid aggregate distributions of $8,733,000 including~~distributions paid in shares of common stock pursuant to our distribution reinvestment plan. During the same period, cash~~ used in operating activities was ~~$15,000~~$5,433,000 and our FFO was ~~$9,681,000. For the nine months ended September 30, 2016, 100% of distributions were paid from cash provided by offering proceeds.~~

For the period from inception (January 20, 2011 was the date we first paid distributions) to September 30, 2017, we paid aggregate distributions of $38,929,000. During the period from our inception to September 30, 2017, our cash provided by operating activities was $27,452,000, our net loss was $35,842,000 and our FFO was $31,791,000. Of the $38,929,000 in aggregate distributions paid to our stockholders from inception to September 30, 2017, approximately 71% was paid from net cash provided by operating activities and approximately 29% was funded from offering proceeds. For a discussion of how we calculate FFO, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations and Modified Funds From Operations.”

$4,141,000.

Liquidity and Capital Resources

As ~~of September 30, 2017,~~described above under "Overview - Going Concern Considerations," we ~~had issued 18,580,461 shares~~are under our final one year maturity date option of our ~~common stock~~SASB Loan due October 9, 2023 and have an ongoing event of default under the SASB Loan relating to the loan agreement's insurance requirements relating to a single property. The Company's ability to continue as a going concern is dependent upon the Company's ability to refinance the SASB Loan prior to the maturity date.

The event of default triggered cash management provisions under the loan agreement which have been in effect since November 2022. The action has restricted access to tenant receipts from the 39 properties in the loan and disrupted both the timing and amount of free cash flow on hand. Tenant receipts on these 39 properties are deposited into a cash management account controlled by the loan servicer. On the 9th day of each month, distributions from the cash management account are made in the following priority: (i) property tax escrow, (ii) scheduled debt service (iii) budgeted operating expenses for the month of the payment date occurs, (iv) capital expenditure reserve, and (v) tenant improvement and lease commission reserve. All remaining amounts are disbursed to an excess cash flow reserve account, also maintained by the loan servicer. As a result, our ~~initial~~unrestricted cash and ~~follow-on public offerings, including 1,216,200 shares~~cash equivalents on hand is limited. The SASB cash management account held $3,021,000 and $3,817,000 as of March 31, 2023 and December 31, 2022, respectively. The excess cash flow reserve held $3,111,000 and $223,000 as of March 31, 2023 and December 31, 2022, respectively. The remaining four of our ~~common stock pursuant to our distribution reinvestment plan, resulting in aggregate gross offering proceeds of $181,415,000. Effective March 31, 2016, we terminated~~43 income-producing properties are outside the ~~offer~~SASB Loan and ~~sale of our common shares~~are not subject to the ~~public in our follow-on offering. The sale of shares of our common stock to our stockholders pursuant to our distribution reinvestment plan terminated effective as of July 16, 2016.~~

provisions above.

Our principal demands for funds are ~~and will continue to be~~ for real estate and real estate-related acquisitions, for the payment of operating expenses, for the payment of interest on our outstanding indebtedness, and for the payment of distributions. Effective July 8, 2022, we have suspended the payment of distributions. Generally, we expect to meet cash needs for items other than acquisitions from our cash flow from operations; provided, that some or all of our distributions have been and may continue to be paid from sources other than cash from ~~operations (as discussed below).~~ operations.

We ~~expect to meet cash needs for acquisitions from~~have in the ~~remaining net proceeds of our follow-on offering and from financings.~~

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

We use, and intend to use in the future, secured and unsecured debt to acquire properties and make other investments. As of ~~September 30, 2017,~~March 31, 2023, our outstanding secured debt is ~~$116,929,000.~~$259,000,000. There is no limitation on the amount we may invest in any single property or other asset or on the amount we can borrow for the purchase of any individual property or other investment. Under our charter, we are prohibited from borrowing in excess of 300% of our “net assets” (as defined by our charter) as of the date of any borrowing; however, we may exceed that limit if approved by a majority of our independent directors and if such excess is disclosed to the stockholders in the next quarterly report along with the explanation for such excess borrowings. ~~In addition, our~~Our board of directors has adopted a policy to limit our aggregate borrowings to approximately 50% of the aggregate value of our assets unless substantial justification exists that borrowing a greater amount is in our best interests.

~~Our advisor may, but is~~ Such limitation, however, does not ~~required~~apply to ~~establish~~individual real estate assets and only will apply once we have ceased raising capital ~~reserves from remaining gross~~in our public offering ~~proceeds, out of cash flow generated by operating properties~~ and ~~other investments or out of non-liquidating net sale proceeds from the sale~~invested substantially all 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,~~capital. As a ~~lender may require its own formula for escrow~~result, we expect to borrow more than 50% of ~~capital reserves.~~

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.

Potential future sources of capital include proceeds from additional private or public offerings of our securities, 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.

Cash Flows from Operating Activities

We have used $5,433,000 and $4,321,000 of ~~September 30, 2017, we had continuing operations~~cash from ~~17 commercial real estate properties versus 16 properties as of September 30, 2016. During nine~~operating activities for the three months ended ~~September 30, 2017, net cash provided by operating activities was $2,385,000 versus $15,000 net~~March 31, 2023 and 2022. The increase in cash used in operating activities ~~for nine months ended September 30, 2016. The increase in cash flow from operating activities~~ is primarily ~~attributable~~due to the ~~increase~~rise in ~~amounts due from affiliates and the number~~interest costs of ~~operating properties we owned. We expect cash flows from operating activities to increase in future periods as a result of increased occupancy.~~

our variable rate debt.

Cash Flows from Investing Activities

~~During nine~~

For the three months ended ~~September 30, 2017,~~March 31, 2023 and 2022, net cash used in investing activities was $2,138,000 versus $37,152,000 for nine months ended September 30, 2016 and consisted primarily of cash provided by disposition of Village Pointe. We had no acquisitions during the nine months ended September 30, 2017, as compared to an $8,959,000 investment in the common stock of an affiliate, Hartman Income REIT, Inc., the repayment of $1,000,000 of a note receivable of $7,231,000 by our TRS and a $5,372,000 investment in additions to real estate during the nine months ended September 30, 2016. We received $0 versus $4,529,000 of restricted cash proceeds for the nine months ended September 30, 2017 and 2016, respectively.

~~Cash Flows from Financing Activities~~

Cash flows from financing activities consisted primarily of proceeds from our ongoing public offering and distributions paid to our common stockholders. Net cash (used in) and provided by financing activities for nine months ended September 30, 2017 and 2016, respectively, was ($2,660,000) and $36,416,000 and consisted of the following:

~~$0 and $41,618,000, respectively of cash provided by offering proceeds related to our public offering, net of payments of commissions on sales of common stock of $0 and $2,103,000 respectively;~~

~~$814,000 and $1,179,000, respectively, of cash used to redeem common stock pursuant to our share redemption plan;~~

~~$1,311,000 and ($1,620,000), respectively of~~ cash provided by (used in) ~~borrowing under term loan and revolving credit agreements, net repayments,~~

~~$9,893,000 and $5,745,000, respectively~~investing activities was $43,727,000 versus $(3,114,000), respectively. The increase in cash is mainly due proceeds from the to the sale of ~~net cash distributions, after giving effect~~property of $44,827,000. On January 31, 2023, we sold the 17 acre development site located in Fort Worth, Texas to ~~distributions reinvested by stockholders~~a third party. Net proceeds from the sale of ~~$0 and $2,988,000;~~

~~$112,000 and $84,000, respectively of insurance premium finance proceeds net of repayments;~~

~~$6,700,000 and $5,500,000, respectively of investment proceeds received from non-controlling interest investor; and~~

~~$76,000 and $139,000, respectively of deferred loan costs.~~

~~Discontinued Operations~~

the development site were approximately $4,317,000. On ~~November 14, 2016,~~March 10, 2023, we ~~acquired an interest in~~sold the Village Pointe property through an investment in Hartman Village Pointe, a joint venture between our operating partnership and our affiliate, Hartman vREIT XXI, Inc. The Village Pointe property was approximately 92% occupied at the acquisition date. Our operating partnership contributed $3,675,000 to Hartman Village Pointe in exchange for a 97.35% membership interest in Hartman Village Pointe and Hartman vREIT XXI, Inc. contributed $100,000 to Hartman Village Pointe in exchange for a 2.65% membership interest in Hartman Village Pointe. Our operating partnership also made a mortgage loan of $3,525,000, secured by the Village PointeMitchelldale property to ~~Hartman Village Pointe. On December 14, 2016, Hartman Village Pointe refinanced~~a third party. Net proceeds from the ~~Village Pointe~~sale were approximately $40,510,000.

Cash Flows from Financing Activities

We used $41,637,000 and $1,403,000 of cash from financing activities for the three months ended March 31, 2023 and 2022. The increase in cash used in financing activities is primarily due to repayments of term loans notes of $39,805,000 from property ~~with a bank mortgage. The affiliate mortgage loan was paid in full on that date.~~

~~As of February 8, 2017, Hartman vREIT XXI, Inc. acquired all our ownership interests in Hartman Village Pointe.~~

sales referenced above.

Contractual Commitments and Contingencies

We use, and intend to use in the future, secured and unsecured debt, as a means of providing additional funds for the acquisition of our properties and our real estate-related assets. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our investments. Under our charter, we are prohibited from borrowing in excess of 300% of our net assets, which generally approximates to 75% of the aggregate cost of our assets. We may borrow in excess of this amount if such excess is approved by a majority of the independent directors and disclosed to stockholders in our next quarterly report, along with a justification for such excess. In such event, we will monitor our debt levels and take action to reduce any such excess as practicable. Our aggregate borrowings are reviewed by our board of directors at least quarterly. As of ~~September 30, 2017,~~March 31, 2023, our borrowings were not in excess of 300% of the value of our net assets.

In addition to using our capital resources for investing purposes and meeting our debt obligations, we expect to use our capital resources to make certain payments to our advisor. We expect to make payments to our advisor or its affiliates in connection with the selection and origination or purchase of real estate and real estate-related investments, the management of our assets, the management of the development or improvement of our assets and costs incurred by our advisor in providing services to us.

As of ~~September 30, 2017,~~March 31, 2023, we had notes payable totaling an aggregate principal amount of ~~$116,929,000.~~$274,336,000. For more information on our outstanding indebtedness, see Note 68 (Notes ~~Payable, net)~~Payable) to the consolidated financial statements included in this report.

~~The following is a summary of our contractual obligations as of September 30, 2017, in thousands:~~

Contractual Obligations
Total
2017
2018-2019
2020-2021
Thereafter
Long-term debt obligations (1)
$       116,929
$        32,271
$      31,351
$       11,900
$       41,407
Interest payments on outstanding debt obligations (2)
34,319
948
7,249
4,685
21,437
Purchase obligations (3)
-
-
-
-
-
Total
$151,248
$33,219
$38,600
$16,585
$62,844

~~(1)~~

~~Amounts include principal payments only.~~

~~(2)~~

~~Projected interest payments are based on the outstanding principal amounts and weighted-average interest rates at September 30, 2017.~~

~~(3)~~

~~Purchase obligations were excluded from contractual obligations as there were no binding purchase obligations as of September 30, 2017.~~

Off-Balance Sheet Arrangements

As of ~~September 30, 2017~~March 31, 2023 and December 31, ~~2016,~~2022, 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.

The Company is a covenant guarantor for the secured mortgage indebtedness of VIEs in the total amount of $24,165,000 and $24,276,000 as of March 31, 2023 and December 31, 2022, respectively. The Company is not deemed to be the primary beneficiary of the VIEs. See Note 11 (Related Party Transactions). Refer to Note 14 (Commitments and Contingencies) regarding borrowing joinder agreement between one of the Company's wholly owned subsidiaries and Hartman vREIT XXI, Inc.

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective accounting standards, if currently adopted, would have a material effect on the accompanying consolidated financial statements. See Note 2 (Summary of Significant Accounting Policies) to the notes to the accompanying consolidated financial statements included in this ~~quarterly report.~~

Quarterly Report.

Related-Party Transactions and Agreements

We have entered into management and advisory agreements with our ~~advisor and its affiliates whereby we have paid, and may continue to pay, certain fees to, or reimburse certain expenses of, our advisor and its~~ affiliates. See Item 13, “Certain Relationships and Related Transactions and Director Independence” in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2022 filed with the SEC on ~~April 11, 2017,~~May 26, 2023 and Note 911 (Related Party Transactions) to the consolidated financial statements included in this Quarterly Report for a discussion of the various related-party transactions, agreements and fees.

Subsequent Events

Refer to Note 16 (Subsequent Events) to the consolidated financial statements included in this Quarterly Report for a discussion of subsequent events.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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 and interest rate cap opportunities.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Form 10-Q, as of ~~September 30, 2017,~~March 31, 2023, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). In performing this evaluation, management reviewed the selection, application and monitoring of our historical accounting policies. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of ~~September 30, 2017, these~~March 31, 2023, have concluded because of material weaknesses in our internal control over financial reporting discussed below, our disclosure controls and procedures were not effective ~~and~~as of March 31, 2023 at the reasonable assurance level.

Material Weaknesses

Our internal control over financial reporting is designed to ~~ensure~~provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements. A control system, no matter how well designed and operated, can only provide reasonable, not absolute, assurance that the ~~information required to~~objectives of the control system are met. Because of these inherent limitations, management does not expect that our internal control over financial reporting will prevent all error and all fraud. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. As disclosed in our ~~reports filed~~Annual Report on Form 10-K for the year ended December 31, 2022, we identified material weaknesses related to (i) the insufficient design and operation of controls over the review, approval, and disclosure of related party transactions and (ii) the insufficient design of controls related to the timing for revenue recognition of estimated recoveries of operating expense items under leasing arrangements.

Remediation Plans

Management has begun implementing remediation plans to address the material weaknesses in our internal control over financial reporting discussed above. The remediation plan for the first material weakness includes enhancing our policies and procedures around identifying related party transactions, approval thresholds, disclosure requirements, and strengthening documentation standards to ensure transactions with related parties are appropriately evaluated, reviewed, approved, and disclosed.

The formation of the ~~SEC under~~Executive Committee in October 2022, and the ~~Exchange Act~~actions taken thereafter, including changes in senior management, has resulted in a strengthened review process over the form, substance, and evaluation of related party transactions. Further, effective in the second quarter of 2023, the Company no longer serves in an advisory or management capacity to Hartman vREIT XXI, Inc. and its affiliates. The termination of this relationship will eliminate future related party transactions which gave rise to the first material weakness referenced above.

The remediation plan for the second material weakness includes implementation of a fiscal year-end evaluation procedure to determine if recognition of an estimated recovery is ~~recorded, processed, summarized~~warranted. We believe these actions will be sufficient to remediate the

identified material weaknesses and ~~reported as~~strengthen our internal control over financial reporting; however, some of these actions will take time to be fully integrated and ~~when required.~~

confirmed to be effective and sustainable. We will continue to monitor the effectiveness of our internal control over financial reporting and will make any further changes management determines appropriate.

Changes in Internal Control over Financial Reporting

There have been no changes ~~during the quarter ended September 30, 2017~~ in our internal controls over financial reporting that occurred during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over ~~financing~~financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

~~None.~~

During February 2021, the state of Texas experienced a severe winter storm, unofficially referred to as Winter Storm Uri, which resulted in power outages and electrical grid failures across the state. Wholesale prices for electricity increased significantly during this period. As a result, the Company experienced a substantial increase in electricity billings for a number of our properties during the month of and after the storm.

On March 24, 2022, the court entered a judgment in favor of Summer against the Property Manager in the amount of $7,871,000 plus customary pre- and post-judgment interest and attorney's fees. The Company had recognized the share of the judgment amount applicable to wholly owned properties of the Company, approximately $6,731,000, within the Company's consolidated statements of operations for fiscal year 2021. The Company has also recognized $370,000 of pre-judgment interest and attorney fees in 2021 and $304,000 of post-judgment interest in 2022. Many of the Company’s leases contain provisions that require tenants to pay their allocable share of operating expenses, including utilities. The Company has completed its assessment of tenants' applicable share and has collected and recognized $1,530,000 of tenant's share to date, $866,000 was recognized in the first quarter of 2023.

On April 25, 2022, the Property Manager filed its supersedeas surety bond totaling $2,197,000 in order to suspend enforcement the judgment for the duration of the Property Manager's appeal. The share of the supersedeas surety bond applicable to wholly owned properties of the Company totaled $2,001,000 and is recorded in prepaid expenses and other assets on the Company's consolidated balance sheets.

The Property Manager continues to dispute the amount of litigation to Summer and had appeal the judgment, filing its Notice of Appeal on June 21, 2022. The outcome of the appeal is subject to significant uncertainty and we cannot provide any assurance that the Property Manager will ultimately prevail. Even if the Property Manager is ultimately successful in its appeal, it may take considerable time to resolve the matter.

Item 1A. Risk Factors

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

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

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

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

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

Each Merger Agreement provides that either we or Hartman XIX or HIREIT, as applicable, may terminate the Merger Agreement if the applicable Merger has not occurred by December 31, 2017. Certain events may delay the consummation of the Mergers. Some of the events that could delay the consummation of the Mergers include difficulties in obtaining the approval of our stockholders and the stockholders of each of Hartman XIX and HIREIT or satisfying the other closing conditions to which the Mergers are subject.

~~Our stockholders will be diluted by the pending Mergers~~.

The Mergers will dilute the ownership position of our current stockholders and result in our stockholders (excluding stockholders affiliated with our advisor or sponsor) having an ownership stake in us that is smaller than their current stake in our company. In connection with the Mergers, we will issue up to approximately 19,192,000 shares of our common stock to the holders of shares of Hartman XIX and HIREIT capital stock, based on the exchange ratios set forth in the Merger Agreements and the shares of Hartman XIX and HIREIT capital stock issued and outstanding as of September 30, 2017. Our current stockholders (excluding stockholders affiliated with our advisor or sponsor) are expected to hold in the aggregate approximately 49% of the issued and outstanding shares of our common stock following the Mergers, based on the assumptions in the foregoing sentence and the 18,117,000 shares of our common stock issued and outstanding as of September 30, 2017. In addition, approximately 979,000 units of limited partnership interest in our operating partnership are issuable in connection with the Partnership Merger. Consequently, our stockholders (excluding stockholders affiliated with our advisor or sponsor), as a general matter, will have less influence over the management and policies of us after the Mergers than they exercised over the management and policies of us immediately prior to the Mergers.

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

~~If the Mergers are consummated, we will have assumed certain potential liabilities relating to Hartman XIX and HIREIT. These liabilities could have a material adverse effect on our business~~

Except to the extent ~~we have not identified~~additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such ~~liabilities or have underestimated~~risk factors (including, without limitation, the ~~amount~~matters discussed in Part I, “Item 2—Management’s Discussion and Analysis of ~~such liabilities.~~

~~The future results~~Financial Condition and Results of Operations”), there were no material changes to the ~~combined company will suffer if~~risk factors disclosed in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the ~~combined company does not effectively integrate and manage its expanded operations following the Mergers~~.

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

year ended December 31, 2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~During the three months ended September 30, 2017, we did not sell any equity securities that were not registered under the Securities Act of 1933, as amended.~~

~~The table below sets forth information regarding the shares of our common stock redeemed pursuant to our share redemption program during the three months ended September 30, 2017.~~

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)
July, 2017
-
-
-
(3)
August, 2017
31,176
31,176
$9.82
$306,507
September, 2017
-
-
-
(3)
Total
31,176
31,176
$9.82
$306,507

~~(1) We generally redeem shares in the month following the end of the fiscal quarter in which requests were received.~~

~~(2) Pursuant to the share redemption program, we currently redeem shares at prices determined as follows:~~

~~For shares that have been held at least one year, the lesser of 90.0% of the price paid to acquire the shares or 90.0% of the offering price of shares in our most recent offering;~~

~~For shares that have been held at least two years, the lesser of 92.5% of the price paid to acquire the shares or 92.5% of the offering price of shares in our most recent offering;~~

~~For shares that have been held at least three years, the lesser of 95.0% of the price paid to acquire the shares or 95.0% of the offering price of shares in our most recent offering;~~

~~For shares that have been held at least four years, the lesser of 97.5% of the price paid to acquire the shares or 97.5% of the offering price of shares in our most recent offering;~~

~~Thereafter, the lesser of 100.0% of the price paid to acquire the shares or 90.0% of the net asset value per share, as determined by the board of directors.~~

Notwithstanding the foregoing, the redemption price for redemptions sought upon a stockholder’s death or disability or upon confinement to a long-term care facility, is available only for stockholders who purchased their shares directly from us or the persons specifically set forth in the share redemption program.

(3) The number of shares that may be redeemed pursuant to our share redemption program will not exceed (i) 5% of the weighted-average number of shares outstanding during the 12-month period immediately prior to the effective date of the redemption and (ii) those share redemptions that can be funded with proceeds from our distribution reinvestment plan plus, if we had positive net operating cash flow for the previous fiscal year, 1% of all operating cash flow from the previous fiscal year.

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 to the public in our primary offering at a price of $10.00 per share and up to $23,750,000 in shares of common stock to our stockholders pursuant to our distribution reinvestment plan at $9.50 per share, was declared effective by the SEC and we commenced our initial public offering. We terminated our initial public offering on April 25, 2013. As of the termination our initial public offering on April 25, 2013, we had accepted subscriptions for and issued 4,455,678 shares of our common stock, including 162,561 shares of our common stock issued pursuant to our distribution reinvestment plan, resulting in offering proceeds of $43,943,731. On July 16, 2013, our Registration Statement on Form S-11 (File No. 333-185336) registering our follow-on public offering of up to $200,000,000 in shares of our common stock to the public at $10.00 per share and up to $19,000,000 in shares of our common stock to our stockholders pursuant to our distribution reinvestment plan at $9.50 per share, was declared effective by the SEC and we commenced our follow-on offering.

Effective March 31, 2016, we terminated the offer and sale of shares of our common stock to the public in our follow-on offering. The sale of shares of our common stock to our stockholders pursuant to our distribution reinvestment plan terminated effective as of July 16, 2016. As of September 30, 2017, we had accepted subscriptions for, and issued, 18,580,461 shares of our common stock in our initial public offering and our follow-on offering, including 1,216,240 shares of our common stock issued pursuant to our distribution reinvestment plan, resulting in aggregate gross offering proceeds of $181,415,000.

As of September 30, 2017, we had incurred selling commissions, dealer manager fees and organization and other offering costs in our initial public offering and our follow-on offering in the amounts set forth in the tables below (all figures in thousands). D.H. Hill Securities, LLLP, the dealer manager for our public offerings, reallowed all of the selling commissions and a portion of the dealer manager fees to participating broker-dealers.

~~Initial Public Offering:~~


~~Type of Expense~~	~~Amount~~	~~Estimated/Actual~~
~~Selling commissions and dealer manager fees~~	~~$ 2,942~~	~~Actual~~
~~Finders’ fees~~	-	—
~~Expenses paid to or for underwriters~~	-	—
~~Other organization and offering costs~~	~~472~~	~~Actual~~
~~Total expenses~~	~~$ 3,414~~

~~Follow-On Offering:~~


~~Type of Expense~~	~~Amount~~	~~Estimated/Actual~~
~~Selling commissions and dealer manager fees~~	~~$ 10,248~~	~~Actual~~
~~Finders’ fees~~	-	—
~~Expenses paid to or for underwriters~~	-	—
~~Other organization and offering costs~~	~~2,548~~	~~Actual~~
~~Total expenses~~	~~$ 12,796~~

As of September 30, 2017, the net offering proceeds to us from our initial public offering and our follow-on offering, after deducting the total expenses incurred as described above, were $153,572,000, excluding $11,554,000 in offering proceeds from shares of our common stock issued pursuant to our distribution reinvestment plan.

As of September 30, 2017, we had used $128,264,000 of the net proceeds from our public offerings, plus debt financing, to purchase our 17 investments in commercial properties. As of September 30, 2017, we had paid $6,013,000 of acquisition fees to our advisor.

None.

Item 3. Defaults Upon Senior Securities

~~None.~~

Refer to Note 8 (Notes Payable) or a description of an occurrence of an event of default related to the SASB Loan.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits


Exhibit		Description
~~Exhibit~~ 3.1		~~Description~~
~~3.1~~	First Articles of Amendment to Third Amended and Restated Articles of Incorporation of Hartman Short Term Income Properties XX, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-K filed on April 12, 2012)
3.2		Third Amended and Restated Articles of Incorporation of Hartman Short Term Income Properties XX, Inc. (incorporated by reference to Exhibit 1 to the Company’s registration statement on Form 8-A (SEC File No. 000-53912) filed on March 22, 2010)
3.3		Certificate of Correction - Hartman Short Term Income Properties XX, Inc. (incorporated by reference to Exhibit 3.3 to the Company's form 10-Q filed on May 11, 2018
3.4		Bylaws of Hartman Short Term Income Properties XX, Inc. (incorporated by reference to Exhibit 2 to the Company’s registration statement on Form 8-A (SEC File No. 000-53912) filed on March 22, 2010)
~~10.1~~ 31.1*		~~Agreement and Plan~~ Certification of Merger among Hartman Short Term Income Properties XX, Inc., Hartman XX Limited Partnership, Hartman Income REIT, Inc. and Hartman Income REIT Operating Partnership, L.P. dated July 21, 2017 (incorporated by referenceChief Executive Officer pursuant to ~~Exhibit 2.1 to~~Section 302 of the ~~Company’s Current Report on Form 8-K filed on July 24, 2017)~~ Sarbanes-Oxley Act of 2002
~~10.2~~ 31.2*		~~Agreement and Plan~~ Certification of ~~Merger among Hartman Short Term Income Properties XX, Inc., and Hartman Short Term Income Properties XIX, Inc. dated July 21, 2017 (incorporated by reference~~Chief Financial Officer pursuant to ~~Exhibit 2.2 to~~Section 302 of the ~~Company’s Current Report on Form 8-K filed on July 24, 2017)~~ Sarbanes-Oxley Act of 2002
~~32.1~~ 32.1*		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~(FILED HEREWITH)~~
~~32.2~~ 32.2*		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~(FILED HEREWITH)~~
~~101.INS~~ 101.INS*		XBRL Instance Document
~~101.SCH~~ 101.SCH*		XBRL Taxonomy Extension Schema Document
~~101.CAL~~ 101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
~~101.DEF~~ 101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
~~101.LAB~~ 101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
~~101.PRE~~ 101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

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~~

SILVER STAR PROPERTIES ~~XX,~~REIT, INC.

Date: ~~November 13, 2017~~

June 7, 2023

By: /s/ ~~Allen R. Hartman~~

~~Allen R. Hartman,~~

~~Chairman of the Board and Chief Executive Officer~~

David Wheeler

David Wheeler,

Interim President

(Principal Executive Officer)

Date: ~~November 13, 2017 ��~~

June 7, 2023

By: /s/ Louis T. Fox, III

Louis T. Fox, III,

Chief Financial Officer,

(Principal Financial and Principal Accounting Officer)


HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
	Three Months Ended September 30,		Nine Months Ended September 30,
	2017	2016	2017	2016
Revenues
Rental revenues	$ 9,656	$ 8,480	$ 29,006	$ 24,473
Tenant reimbursements and other revenues	1,273	1,452	3,892	3,855
Total revenues	10,929	9,932	32,898	28,328

Expenses (income)
Property operating expenses	3,926	3,688	10,913	9,756
Asset management and acquisition fees	440	372	1,320	1,593
Organization and offering costs	-	-	-	(44)
Real estate taxes and insurance	1,575	1,263	4,557	3,612
Depreciation and amortization	5,542	5,808	17,640	16,492
General and administrative	647	539	1,968	1,785
Interest and dividend income	(335)	(291)	(1,001)	(704)
Interest expense	1,453	961	4,317	2,649
Total expenses, net	13,248	12,340	39,714	35,139
Loss from continuing operations	(2,319)	(2,408)	(6,816)	(6,811)
Loss from discontinued operations, net	-	-	8	-
Net loss	(2,319)	(2,408)	$ (6,824)	$ (6,811)
Net (loss) income attributable to noncontrolling interests	(18)	47	29	97
Net loss attributable to common stockholders	$ (2,301)	$ (2,455)	$ (6,853)	$ (6,908)

Net loss attributable to common stockholders per share	$ (0.13)	$ (0.13)	$ (0.38)	$ (0.40)
Weighted average number of common shares outstanding, basic and diluted	18,111	18,215	18,135	17,076

The accompanying notes are an integral part of these consolidated financial statements.


HARTMAN SHORT TERM INCOME PROPERTIES XX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
(in thousands)
	Preferred Stock		Common Stock		Additional	Accumulated	Total
					Paid-In	Distributions	Stockholders'	Noncontrolling	Total
	Shares	Amount	Shares	Amount	Capital	and Net Loss	Equity (Deficit)	Interests	Equity (Deficit)
Balance, December 31, 2016	1	$-	18,165	$18	$169,406	($59,674)	$109,750	$6,681	$116,431
Redemptions of common shares	-	-	(85)	-	(814)	-	(814)	-	(814)
Issuance of common shares	-	-	6	-	79	-	79	-	79
Non-controlling capital	-	-	-	-	-	-	-	6,700	6,700
Deconsolidation of Village Pointe	-	-	-	-	-	-	-	(1,350)	(1,350)
Dividends and distributions (cash)	-	-	-	-	-	(9,466)	(9,466)	(411)	(9,877)
Net (loss) income	-	-	-	-	-	(6,853)	(6,853)	29	(6,824)
Balance, September 30, 2017	1	$-	18,086	$18	$168,671	($75,993)	$92,696	$11,649	$104,345

The accompanying notes are an integral part of these consolidated financial statements.


	March 31, 2023		March 31, 2022
Cash and cash equivalents	380		81
Restricted cash	20,699		10,338
Total cash, cash equivalents, and restricted cash shown in consolidated statement of cash flows	$	21,079	$	10,419


	September 30, 2017	December 31, 2016
Land	$62,320	$62,320
Buildings and improvements	132,578	127,206
In-place lease value intangible	63,573	63,573
	258,471	253,099
Less accumulated depreciation and amortization	(67,512) 967,512)	(49,872)
Total real estate assets	$190,959	$203,227



	September 30, 2017	December 31, 2016
Tenant receivables	$ 3,609	$ 2,889
Accrued rent	5,099	3,583
Allowance for uncollectible accounts	(1,476)	(1,206)
Accrued rents and accounts receivable, net	$7,232	$ 5,266


Property/Facility	Payment (1)	Maturity Date	Rate	September 30, 2017	December 31, 2016
Richardson Heights (2)	P&I	July 1, 2041	4.61%	$ 18,877	$ 19,200
Cooper Street (2)	P&I	July 1, 2041	4.61%	7,850	7,984
Bent Tree Green (2)	P&I	July 1, 2041	4.61%	7,850	7,984
Mitchelldale (2)	P&I	July 1, 2041	4.61%	11,892	12,096
Energy Plaza I & II	P&I	June 10, 2021	5.30%	9,863	10,007
Westway One	IO	June 1, 2019	3.73%	10,819	10,819
Three Forest Plaza	IO	December 31, 2019	4.03%	17,828	17,828
TCB Credit Facility	IO	May 9, 2018	5.25%	10,050	7,800
EWB Credit Facility	IO	August 24, 2018 2017 2018	4.75%	12,000	12,000
EWB II Credit Facility	IO	August 24, 2018	4.75%	9,900	9,900
				$ 116,929	$ 115,618
Less unamortized deferred loan costs				(1,183)	(1,467)
				$ 115,746	$ 114,151


	Nine months ended September 30
	2017	2016
Total revenues	$ 44	$ -

Property operating expenses	6	-
Real estate taxes and insurance	8	-
Asset management fees	3	-
General and administrative	1	-
Interest expense	7	-
Total expenses	25	-

Loss on disposition	(27)	-

Net loss from discontinued operations	$ (8)	$ -



Quarter Paid	Distributions per Common Share	Total Distributions
2017
3rd Quarter	$ 0.175	$ 3,168
2nd Quarter	0.175	3,159
1st Quarter	0.175	3,134
Total 2017 year to date	$ 0.525	$ 9,461

2016
4^th Quarter	$ 0.175	$ 3,173
3^rd Quarter	0.175	3,213
2^nd Quarter	0.175	3,042
1^st Quarter	0.175	2,478
Total 2016	$ 0.700	$ 11,906


Period	Cash (1)	DRIP (2)(3)	Total
First Quarter 2011	$21	$20	$41
Second Quarter 2011	45	51	96
Third Quarter 2011	70	70	140
Fourth Quarter 2011	119	101	220
First Quarter 2012	175	150	325
Second Quarter 2012	209	194	403
Third Quarter 2012	236	246	482
Fourth Quarter 2012	271	279	550
First Quarter 2013	316	311	627
Second Quarter 2013	373	388	761
Third Quarter 2013	442	412	854
Fourth Quarter 2013	550	483	1,033
First Quarter 2014	568	535	1,103
Second Quarter 2014	614	577	1,191
Third Quarter 2014	632	605	1,237
Fourth Quarter 2014	665	641	1,306
First Quarter 2015	703	714	1,417
Second Quarter 2015	803	876	1,679
Third Quarter 2015	927	1,020	1,947
Fourth Quarter 2015	1,042	1,108	2,150
First Quarter 2016	1,269	1,209	2,478
Second Quarter 2016	1,707	1,335	3,042
Third Quarter 2016	2,769	444	3,213
Fourth Quarter 2016 (4)	3,173	-	3,173
First Quarter 2017 (4)	3,139	-	3,139
Second Quarter 2017 (4)	3,154	-	3,154
Third Quarter 2017 (4)	3,168	-	3,168
Total	$ 27,160	$11,769	$38,929


Contractual Obligations	Total	2017	2018-2019	2020-2021	Thereafter
Long-term debt obligations (1)	$ 116,929	$ 32,271	$ 31,351	$ 11,900	$ 41,407
Interest payments on outstanding debt obligations (2)	34,319	948	7,249	4,685	21,437
Purchase obligations (3)	-	-	-	-	-
Total	$151,248	$33,219	$38,600	$16,585	$62,844


	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)
July, 2017	-	-	-	(3)
August, 2017	31,176	31,176	$9.82	$306,507
September, 2017	-	-	-	(3)
Total	31,176	31,176	$9.82	$306,507