SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

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

(Exact name of registrant as specified in its charter)

~~Securities registered pursuant to Section 12(g) 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, or 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.

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

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 August 1, ~~2020~~2021 there were ~~8,714,364~~8,954,089 shares of the registrant’s common stock issued and outstanding, 22,100 of which were held by an affiliate of the ~~registrant.~~registrant, consisting of 474,848 shares of Class T common stock, 8,461,093 shares of Class A common stock, 7,813 shares of Class I common stock and 10,336 shares of Class S common stock.

HARTMAN vREIT XXI, INC.

FINANCIAL INFORMATION

Item 1. Financial Statements

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, 2020 December 31, 2019
(Unaudited)
ASSETS
Real estate assets, at cost $ 79,001 $ 77,173
Accumulated depreciation and amortization (7,750) (4,691)
Real estate assets, net 71,251 72,482
Cash and cash equivalents 750 133
Restricted cash 76 278
Note receivable - related party 8,200 4,400
Investment in unconsolidated entities 8,027 8,027
Deferred lease commissions, net 635 314
Accrued rent and accounts receivable, net 1,064 964
Prepaid expenses and other assets 431 573
Acquisition deposits 1,862 1,850
Due from related parties 2,437 550
Total assets $ 94,733 $ 89,571
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable, net $ 26,336 $ 18,317
Accounts payable and accrued expenses 3,137 4,003
Tenants' security deposits 569 646
Total liabilities 30,042 22,966
Commitments and contingencies
Special limited partnership interests 1 1
Stockholders' equity:
Common stock, Class A, $0.01 par value, 850,000,000 shares authorized, 8,231,164 and 8,057,390 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively 82 80
Common stock, Class T, $0.01 par value, 50,000,000 shares authorized, 463,988 shares and 454,256 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively 5 5
Preferred stock, $0.01 par value, 50,000,000 shares authorized, 0 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively — —
Additional paid-in capital 79,423 77,573
Accumulated distributions and net loss (14,820) (11,054)
Total stockholders' equity 64,690 66,604
Total liabilities and total equity $ 94,733 $ 89,571
The accompanying notes are an integral part of these consolidated financial statements.


HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
	June 30, 2021		December 31, 2020
	(Unaudited)
ASSETS
Real estate assets, at cost	$	82,261	$	80,674
Accumulated depreciation and amortization	(13,635)		(10,849)
Real estate assets, net	68,626		69,825
Investment in tenant in common interest, net	3,584		3,926
Total	72,210		73,751

Cash and cash equivalents	633		408
Restricted cash	201		139
Notes receivable - related party	12,900		13,400
Investment in unconsolidated entities	11,734		11,734
Deferred lease commissions, net	1,027		760
Accrued rent and accounts receivable, net	2,351		1,849
Prepaid expenses and other assets	480		271
Acquisition deposits	125		125
Total assets	$	101,661	$	102,437

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable, net	$	37,644	$	35,213
Accounts payable and accrued expenses	4,200		4,109
Due to related parties	523		420
Subscriptions for common stock	0		130
Tenants' security deposits	639		577
Total liabilities	43,006		40,449

Special limited partnership interests	1		1
Stockholders' equity:
Common stock, Class A, $0.01 par value, 270,000,000 shares authorized, 8,425,185 and 8,342,318 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	84		83
Common stock, Class T, $0.01 par value, 70,000,000 shares authorized, 474,002 shares and 468,982 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	5		5
Common stock, Class S, $0.01 par value, 280,000,000 shares authorized, 10,336 shares and 0 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	0		0
Common stock, Class I, $0.01 par value, 280,000,000 shares authorized, 7,813 shares issued and 0 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	0		0
Preferred stock, $0.01 par value, 50,000,000 shares authorized, 0 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	0		0
Additional paid-in capital	81,627		80,519
Accumulated distributions and net loss	(23,062)		(18,620)
Total stockholders' equity	58,654		61,987
Total liabilities and total equity	$	101,661	$	102,437
The accompanying notes are an integral part of these consolidated financial statements.


HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
	Six Months Ended June 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(1,601)	$	(1,019)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Stock based compensation	50		13
Depreciation and amortization	2,786		3,059
Deferred loan and lease commission costs amortization	201		143
Equity in net loss of tenant in common interest	342		0
Bad debt provision	14		75
Changes in operating assets and liabilities:
Accrued rent and accounts receivable	(516)		(175)
Deferred lease commissions	(378)		(379)
Prepaid expenses and other assets	(209)		269
Accounts payable and accrued expenses	(419)		(1,259)
Due to/from related parties	103		(1,887)
Tenants' security deposits	62		(77)
Net cash provided by (used in) operating activities	435		(1,237)
Cash flows from investing activities:
Additions to real estate	(1,587)		(1,828)
Acquisition deposit	0		(12)
Receipts from notes receivable-related parties	4,063		0
Payments of notes receivable- related parties	(3,563)		(3,800)
Net cash used in investing activities	(1,087)		(5,640)
Cash flows from financing activities:
Proceeds from issuance of common stock	226		780
Payment of redemption of common stock	(235)		(85)
Distributions paid in cash	(1,683)		(1,561)
Payment of selling commissions	(26)		(143)
Borrowings under insurance premium finance note	446		367
Deferred loan costs paid	(38)		(192)
Change in subscriptions for common stock	(130)		0
Proceeds from revolving credit facility	2,400		8,601
Repayments of term loan	(21)		(475)
Net cash provided by financing activities	939		7,292

Net increase in cash and cash equivalents and restricted cash	287		415
Cash and cash equivalents and restricted cash, beginning of period	547		411
Cash and cash equivalents and restricted cash, end of period	$	834	$	826

Supplemental cash flow information:
Cash paid for interest	$	507	$	380
Supplemental disclosures of non-cash investing and financing activities:
Increase in distributions payable	$	14	$	42
Distributions paid in stock	$	1,144	$	1,148

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

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Six Months Ended June 30,
2020 2019
Cash flows from operating activities:
Net loss $ (1,019) $ (508)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Stock based compensation 13 12
Depreciation and amortization 3,059 1,353
Deferred loan and lease commission costs amortization 143 61
Bad debt provision (recovery), net 75 (13)
Changes in operating assets and liabilities:
Accrued rent and accounts receivable (175) (97)
Deferred lease commissions (379) (73)
Prepaid expenses and other assets 269 (69)
Accounts payable and accrued expenses (1,259) 78
Due to/from related parties (1,887) 549
Tenants' security deposits (77) 4
Net cash (used in) provided by operating activities (1,237) 1,297
Cash flows from investing activities:
Acquisition deposit (12) —
Additions to real estate (1,828) (5,052)
Note receivable - related party (3,800) —
Net cash used in investing activities (5,640) (5,052)
Cash flows from financing activities:
Proceeds from issuance of common stock 780 20,014
Payment of redemption of common stock (85) (93)
Dividends and distributions paid in cash (1,561) (693)
Payment of selling commissions (143) (1,533)
Borrowings under insurance premium finance note 367 —
Deferred loan costs paid (192) (20)
Escrowed investor proceeds — (394)
Subscriptions for common stock — 394
Proceeds from revolving credit facility 8,601 2,550
Repayments under revolving credit facility (475) (10,819)
Net cash provided by financing activities 7,292 9,406
Net change in cash and cash equivalents and restricted cash 415 5,651
Cash and cash equivalents and restricted cash, beginning of period 411 5,992
Cash and cash equivalents and restricted cash, end of period $ 826 $ 11,643
Supplemental cash flow information:
Cash paid for interest $ 380 $ 251
Supplemental disclosures of non-cash investing and financing activities:
Increase in distributions payable $ 42 $ 70
Distributions paid in stock $ 1,148 $ 873
The accompanying notes are an integral part of these consolidated financial statements.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Organization and Business

Hartman vREIT XXI, Inc. (the “Company”) is a Maryland corporation formed on September 3, 2015. The Company elected to be treated as a real estate investment trust (“REIT”) beginning with its taxable year ended December 31, 2017. The Company’s fiscal year end is December 31.

In its initial public offering, ~~(the “Offering”),~~ the Company offered to the public up to $250,000,000 in any combination of shares of Class A and Class T common stock and up to $19,000,000 in shares of Class A and Class T common stock to stockholders pursuant to its distribution reinvestment plan.

~~The Company's follow-on offering (Registration No. 333-232308) was declared effective by the Securities and Exchange Commission on January 14, 2020.~~ In its follow-on offering, the Company registered $180,000,000 in any combination of shares of Class A and Class T common stock to be offered to the public and $5,000,000 to be offered to shareholders pursuant to the distribution reinvestment plan.

On May 12, 2020, the Company's board of directors authorized the classification and designation of Class I and Class S common stock. As of June 30, 2021, 900,000,000 shares of capital stock were classified as common stock, par value $0.01 per share, 270,000,000 of which were classified and designated as Class A common stock (“Class A Shares”), 280,000,000 were classified and designated as Class S common stock ("Class S Shares"), 280,000,000 of which were classified as Class I common stock ("Class I Shares"), and 70,000,000 were designated as Class T Common stock (“Class T Shares”).

Effective ~~September 7, 2019,~~May 12, 2021, the sale price of ~~the Company's~~our Class A, Class S, Class I and Class T common shares to the public ~~was $13.00~~is $11.38, $10.61, $10.23, and ~~$12.48~~$10.89 per share, respectively, representing the net asset value per share as determined by the board of directors plus the applicable sales commissions and managing broker dealer fees. The sale price of ~~Class A and Class T~~all classes of common shares to ~~the Company's shareholders pursuant to the distribution reinvestment plan was $11.70 and $11.23 per share.~~

Effective May 18, 2020, the sale price of the Company's Class A and Class T common shares to the public is $11.44 and $10.95 per share, representing the net asset value per share as determined by the board of directors plus the applicable sales commissions and managing broker dealer fees. The sale price of Class A and Class T common shares to the Company'sour shareholders pursuant to the distribution reinvestment plan is ~~$10.30~~$10.23 per share.

The Company’s board of directors may, in its sole discretion and from time to time, change the price at which the Company offers shares to the public in the primary offering or pursuant to its distribution reinvestment plan to reflect changes in estimated value per share and other factors that the board of directors deems relevant.

The Company’s advisor is Hartman XXI Advisors, LLC (the “Advisor”), a Texas limited liability company and wholly owned subsidiary of Hartman Advisors, LLC. Hartman Income REIT Management, Inc., an affiliate of the Advisor, is the Company’s sponsor and property manager (“Sponsor” orand “Property Manager”). Effective July 1, 2020, the Advisor and the Property Manager are wholly owned subsidiaries of Hartman Short Term Income Properties XX, Inc. Subject to certain restrictions and limitations, the Advisor is responsible for managing the Company’s affairs on a day-to-day basis and for identifying and making acquisitions and investments on behalf of the Company.

Substantially all the Company’s business is conducted through Hartman vREIT XXI Operating Partnership, L.P., a Texas limited partnership (the “OP”). The Company is the sole general partner of the OP. The initial limited partners of the OP are Hartman vREIT XXI Holdings LLC, a wholly owned subsidiary of the Company (“XXI Holdings”), and Hartman vREIT XXI SLP LLC (“SLP LLC”), a wholly owned subsidiary of Hartman Advisors, LLC. SLP LLC has invested $1,000 in the OP in exchange for a separate class of limited partnership interests (the “Special Limited Partnership Interests”). As the Company accepts subscriptions for shares, it will transfer substantially all the net proceeds of the Offering to the OP as a capital contribution. The partnership agreement provides that the OP will be operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the OP will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), which classification could result in the OP being taxed as a corporation, rather than as a partnership. In addition to the administrative and operating costs and expenses incurred by the OP in acquiring and operating real properties, the OP will pay all the Company’s administrative costs and expenses and such expenses will be treated as expenses of the OP.

As of June 30, 2020, the Company had accepted investors' subscriptions for, and issued 8,695,152 shares, net of redemptions, of its Class A and Class T common stock in its initial public offering, including 488,617 shares issued as stock distributions and pursuant to its distribution reinvestment plan, resulting in gross proceeds of $85,739,032.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of June 30, 2021, the Company had accepted investors' subscriptions for, and issued 8,917,336 shares, net of redemptions, of its Class A, Class T, Class S, and Class I common stock in its initial public offering, including 713,964 shares issued as stock distributions and pursuant to its distribution reinvestment plan, resulting in gross proceeds of $88,227,080.

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, ~~2019~~2020 are derived from our audited consolidated financial statements as of that date. The unaudited consolidated financial statements as of June 30, ~~2020~~2021, have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-Q and Regulation S-X, on a basis consistent with the annual audited consolidated financial statements. The unaudited consolidated financial statements presented herein reflect all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management, necessary to fairly present the ~~consolidated~~ financial position of the Company as of June 30, ~~2020,~~2021, and the results of its consolidated operations, consolidated statements of stockholders' equity, and consolidated statements of cash flows for the three and six months ended June 30, ~~2020~~2021 and 2019, the consolidated statements of stockholders’ equity for the three and six months ended June 30, 2020 and 2019 and the consolidated statements of cash flows for the six months ended June 30, 2020 and 2019.2020. The results for the six months ended June 30, ~~2020~~2021 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2020.~~2021.

The consolidated financial statements herein are condensed and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s ~~Amendment No. 2 to the~~ Annual Report on Form ~~10-K/A~~10-K for the year ended December 31, ~~2019.~~2020.

The Company’s consolidated financial statements include the Company’s accounts and the accounts of its subsidiaries over which the Company has control. All intercompany balances and transactions are eliminated in consolidation.

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

Cash and Cash Equivalents

All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Cash and cash equivalents as of June 30, ~~2020~~2021 and December 31, ~~2019~~2020 consisted of demand deposits at commercial banks.

Restricted cash on the accompanying consolidated balance sheets consists of amounts escrowed for future real estate taxes, insurance, capital expenditures and debt service, as required by certain of our mortgage debt agreements.

Financial Instruments

The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, ~~note~~notes receivable, accrued rent and accounts receivable, accounts payable and accrued expenses, notes payable, net and balances with related parties. The Company considers the carrying value, other than notes payable, net, to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its notes payable approximates fair value.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company’s leases are accounted for as operating leases. Certain leases provide for tenant occupancy during periods for which no rent is due and/or for increases or decreases in the minimum lease payments over the terms of the leases. Revenue is recognized on a straight-line basis over the terms of the individual leases. Revenue recognition under a lease begins when the tenant takes possession of or controls the physical use of the leased space. When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. The Company’s accrued rents are included in accrued rent and accounts receivable, net, on the accompanying consolidated balance sheets. The Company will defer the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Additionally, cost recoveries from tenants are included in the Tenant Reimbursement and Other Revenues line item in the consolidated statements of operations in the period the related costs are incurred.

The Company’s revenue is primarily derived from leasing activities, which is specifically excluded from ASU 2014-09. The Company’s other revenue is 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 also excluded from ASU 2014-09.

Investment in ~~Unconsolidated Entities~~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 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.

The Company's investments in Hartman SPE, LLC and Hartman ~~Short Term Income Properties~~ XX ~~Inc.~~ are ~~stated~~accounted for in accordance with accounting standards for equity securities. Management has determined that the Hartman SPE, LLC and Hartman XX investments do not have readily determinable fair values and are recorded at cost ~~and~~minus impairment. The Company's investment in 3100 Weslayan is accounted for ~~under~~as an equity method investment.

The Company evaluates its investment in real estate joint ventures and partnerships for impairment each reporting period. The Company evaluates various factors, including operating results of the ~~cost method.~~investee, ability and intent to hold the investment and views on current market and economic conditions, when determining if there is a decline in the investment value. The Company will record an impairment charge if it's determined that a decline in the estimated fair value of an investment below its carrying amount is other than temporary. The ultimate realization is dependent on a number of factors, including the performance of each investment and market conditions. There is no certainty that impairments will not occur in the future if market conditions decline or if management’s plans for these investments change.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Allocation of Purchase Price of Acquired Assets

Acquisitions of integrated assets and activities that do not meet the definition of a business are accounted for as asset acquisitions. The Company believes most of its future acquisitions of operating properties will qualify as asset acquisitions. Third party transaction costs, including acquisition fees paid to Advisor, associated with asset acquisitions will be capitalized while internal acquisition costs will continue to be expensed as incurred.

Upon acquisition, the purchase price of properties is allocated to the tangible assets acquired, consisting of land, buildings and improvements, any assumed debt and asset retirement obligations, if any, based on their relative fair values. Acquisition costs, including acquisition fees paid to our advisor, are capitalized as part of the purchase price.

Land and building and improvement fair values are derived based upon the Company’s estimate of fair value after giving effect to estimated replacement cost less depreciation or estimates of the relative fair value of these assets using discounted cash flow analysis or similar methods.

The fair values of above-market and below-market in-place lease values, including below-market renewal options for which renewal has been determined to be reasonably assured, are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (a) the contractual amounts to be paid pursuant to the in-place leases and (b) an estimate of fair market lease rates for the corresponding in-place leases and below-market renewal options, which is generally obtained from independent appraisals, measured over a period equal to the remaining non-cancelable term of the lease. The above-market and below-market lease and renewal option values are capitalized as intangible lease assets or liabilities and amortized as an adjustment of rental income over the remaining expected terms of the respective leases.

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

The Company determines the fair value of any assumed debt by calculating the net present value of the scheduled mortgage payments using interest rates for debt with similar terms and remaining maturities that the

~~HARTMAN vREIT XXI, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Company believes it could obtain at the date of acquisition. Any difference between the fair value and stated value of the assumed debt is recorded as a discount or premium and amortized over the remaining life of the loan as interest expense.

In allocating the purchase price of each of the Company’s acquired or purchased properties, the Company makes assumptions and uses various estimates, including, but not limited to, the estimated useful lives of the assets, the cost of replacing certain assets and discount rates used to determine present values. The Company uses Level 3 inputs to estimate fair value of the acquired properties. Many of these estimates are obtained from independent third-party appraisals. However, the Company is responsible for the source and use of these estimates. These estimates require judgment and are subject to being imprecise; accordingly, if different estimates and assumptions were derived, the valuation of the various categories of the Company’s properties or related intangibles could in turn result in a difference in the depreciation or amortization expense recorded in the Company’s consolidated financial statements. These variances could be material to the Company’s results of operations and financial condition.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.

The Company reviews its real estate and other assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of the assets, including accrued rental income, may not be recoverable through operations. The Company determines whether an impairment in value has occurred by comparing the estimated future cash flows (undiscounted and without interest charges), including the estimated residual value of the property, with the carrying cost of the property. If impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. Management has determined that there is 0 impairment indicated in the carrying value of the Company’s real estate assets as of June 30, ~~2020.~~2021.

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 re-lease the property and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the property’s future cash flow and fair value and could result in the overstatement of the carrying value of the Company’s real estate and related intangible assets and net income.

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).

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.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Accrued Rent and Accounts Receivable

Accrued rent and accounts receivable include base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. An allowance for the uncollectible portion of accrued rent and accounts receivable is determined based upon customer credit-worthiness (including expected recovery of our claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends.

Prepaid expenses and other assets

Prepaid expenses and other assets include prepaid insurance, subscription receivable and miscellaneous other assets and prepayments. As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had ~~$431,000~~$480,000 and ~~$573,000,~~$271,000, respectively in prepaid expenses and other assets.

Acquisition Deposits

Acquisition deposits represent funds placed in escrow or advanced to a seller of property which the Company plans to acquire. As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had acquisition deposits of ~~$1,862,000 and $1,850,000, respectively,~~$125,000 which are included in the consolidated balance sheets.

~~HARTMAN vREIT XXI, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Organization and Offering Costs

As of June 30, ~~2020,~~2021, total organization and offering costs incurred for the Offering amounted to ~~$1,464,000.~~$1,777,000. The total organizational and offering costs incurred by the Company (including selling commissions, dealer manager fees and all other underwriting compensation) will not exceed 15% of the aggregate gross proceeds from the sale of the shares of common stock sold in the Offering.

Organization costs, when recorded by the Company, are expensed as incurred, and offering costs, which include selling commissions, dealer manager fees and all other underwriting compensation, are deferred and charged to stockholders’ equity as such amounts are reimbursed or paid by the Advisor, the dealer manager or their affiliates from gross offering proceeds.

For the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, such costs totaled ~~$70,000,~~$3,000 and ~~$65,000,~~$70,000, and $4,000, and $86,000, ~~and $67,000,~~ respectively.

The Company elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code, commencing in the taxable year ended December 31, 2017. If the Company qualifies for taxation as a REIT, the Company generally will not be subject to federal corporate income tax to the extent it distributes its REIT taxable income to its stockholders, so long as it distributes at least 90 percent of its REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with ~~GAAP.)~~GAAP). REITs are subject to a number of other organizational and operational requirements. Even if the Company qualifies for taxation as a REIT, it may be subject to certain state and local taxes on its income and property, and federal income and excise taxes on its undistributed income. Prior to qualifying to be taxed as a REIT, the Company is subject to normal federal and state corporation income taxes.

For the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the Company had net loss of ~~$581,000~~$534,000 and ~~$247,000,~~$581,000, respectively. For the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the Company had net loss of ~~$1,019,000~~$1,601,000 and ~~$508,000,~~$1,019,000, respectively. The Company ~~does anticipate forming~~formed a taxable REIT ~~subsidiaries or otherwise generating~~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 in that no future taxable income is expected.~~allowance. Accordingly, 0 deferred tax benefit or deferred tax asset has been recorded in the consolidated financial statements.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company is required to recognize in its consolidated financial statements the financial effects of a tax position only if it is determined that it is more likely than not that the tax position will not be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Management has reviewed the Company’s tax positions and is of the opinion that material positions taken by the Company would more likely than not be sustained upon examination. Accordingly, the Company has not recognized a liability related to uncertain tax positions as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

The computations of loss per common share are based upon the weighted average number of common shares outstanding and potentially dilutive securities. The Company’s potentially dilutive securities include special limited partnership interests – see Note ~~11.~~12. For the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, there were 0 ~~common~~ shares issuable in connection with these potentially dilutive securities. These potentially dilutive securities were excluded from the computations of diluted net loss per share for the three and six months ended June 30, ~~2020~~2021 and ~~2019.~~2020.

~~HARTMAN vREIT XXI, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Concentration of Risk

The Company maintains cash accounts in ~~one~~1 U.S. financial institution. The terms of the Company’s deposits are on demand to minimize risk. The balances of the Company’s depository accounts may exceed the federally insured limit. NaN losses have been incurred in connection with these deposits.

The geographic concentration of the Company’s real estate assets makes it susceptible to adverse economic developments in the State of Texas. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

Major tenants are defined as those tenants which individually comprise more than 10% of the Company’s total rental revenues. One tenant of the Spectrum Building represents ~~more than~~18% and 10% ~~of total annualized rental revenue~~ for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

~~Reclassification~~Going Concern Evaluation

~~Certain items in~~Pursuant to ASU 2014-15, “Presentation of Financial Statements – Going Concern,” management is required to evaluate the ~~comparative~~Company’s ability to continue as a going concern within one year after the date that these consolidated financial statements ~~have been reclassified~~are issued. The Company's has a $20 million revolving credit loan with a maturity date of December 27, 2021. In order to ~~conform~~renew or extend the revolving credit loan, the Company must meet the lenders underwriting criteria at the time of such renewal or extension request. The Company has a $2,499,000 term loan with an extended maturity date of March 14, 2022. In order to further extend the term loan maturity date, the Company must meet the second extension criteria set forth in the term loan agreement.

Management has concluded that there is substantial doubt about the Company's ability to continue as a going concern within one year of the issuance date of these consolidated financial statements due to the ~~presentation adopted in~~fact of the ~~current period. The Consolidated Statement~~uncertainty regarding the loan maturities. Management believes that the Company will be able to extend the maturity date or renew the loans for one year or longer which will mitigate the maturity dates issue within one year of ~~Cash Flows presented for~~ the ~~six months ended June 30, 2019 was adjusted to present cash and cash equivalents and restricted cash, as restricted cash was previously reported as part~~issuance date of ~~prepaid expenses and other assets.~~these consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The updated guidance requires measurement and recognition of expected credit losses for financial assets, including trade and other receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This is different from the current guidance as this will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets. Generally, the pronouncement requires a modified retrospective method of adoption. This guidance is effective for fiscal years and interim periods within those years beginning after

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

January 2023, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on the consolidated financial statements when adopted.

In March 2020, issued ASU No. 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 contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The standard is effective for 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. The Company is currently evaluating the impact this guidance will have on the consolidated financial statements when adopted.

Note 3 – Real Estate

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

Depreciation expense for the three months ended June 30, 2021 and 2020 was $920,000 and ~~2019 was~~ $944,000, ~~and $298,000,~~ respectively and $1,824,000 and $1,783,000, ~~and $526,000~~respectively for the six months ended June 30, ~~2020~~2021 and ~~2019, respectively.~~2020. Amortization ~~expense~~expenses for the three months ended June 30, 2021 and 2020 was $475,000 and ~~2019 was~~ $653,000, ~~and $419,000,~~ respectively and ~~$1,276,000~~$962,000 and ~~$827,000~~$1,276,000, for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

The Company identifies and records the value of acquired lease intangibles at the property acquisition date. Such intangibles include the value of acquired in-place leases and ~~above-~~above and below-market leases. Acquired lease

~~HARTMAN vREIT XXI, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

intangibles are amortized over the leases' remaining terms. With respect to all properties owned by the Company, the Company considers all of the in-place leases to be market rate leases.

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

Acquisition fees incurred were $0 for the three ~~months ended June 30, 2020~~ and ~~2019, respectively and $0 and $124,000 for the~~ six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The acquisition fees have been capitalized and added to the real estate assets, at cost, in the accompanying consolidated balance sheets. Asset management fees incurred were ~~$144,000~~$138,000 and ~~$63,000~~$144,000 for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively and ~~$288,000~~$276,000 and ~~$125,000~~$288,000 for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Asset management fees are captioned as such in the accompanying consolidated statements of operations.

~~Correction of Immaterial Error~~

In connection with the preparation of its financial statements for the year ended December 31, 2019, the Company has determined that its allocation of the purchase price of the Spectrum Building as December 31, 2018 was not correct. The corrected allocation of purchase price is illustrated as follows (in thousands):

As reported Revised
Land $ 1,267 $ 2,631
Buildings and improvements 12,471 12,862
In-place lease intangible 3,213 1,458
Total $ 16,951 $ 16,951

~~These corrections had no material effect on the previously reported working capital or results of operations as of December 31, 2018 or for the year then ended.~~

Real estate assets reported for the quarterly periods ended March 31, 2019, June 30, 2019 and September 30, 2019, would have been presented as follows if the correction had been recorded in such quarterly period (in thousands):

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Quarterly Period ended Year ended
March 31, 2019 June 30, 2019 September 30, 2019 December 31, 2018
As reported Revised As reported Revised As reported Revised As reported Revised
Land $ 5,163 $ 6,528 $ 5,163 $ 6,528 $ 5,163 $ 6,528 $ 4,289 $ 5,653
Building and improvements 23,174 23,565 23,844 24,236 24,437 24,828 20,181 20,573
In-place lease value intangible 5,899 4,143 5,899 4,143 5,899 4,143 5,204 3,449
34,236 34,236 34,906 34,907 35,499 35,499 29,674 29,675
Less accumulated amortization (2,046) (1,846) (2,963) (2,563) (3,847) (3,247) (1,209) (1,209)
Total real estate assets, net $ 32,190 $ 32,390 $ 31,943 $ 32,344 $ 31,652 $ 32,252 $ 28,465 $ 28,466

~~Depreciation~~On December 29, 2020, the Company completed its acquisition of tenant in common interests representing an ownership of approximately 83% of an office building located at 3100 Weslayan, Houston, Texas. The property comprises approximately 78,289 rentable square feet and ~~amortization expense~~is commonly referred to as Weslayan. The remaining 17% TIC ownership is owned by Allen Hartman. The tenant in common interests were acquired from unrelated third parties, for cash consideration of $3,758,000, and reflects the Company's share of the underlying net assets and liabilities of Weslayan. In connection with the Weslayan TIC purchase, the Company became party to a loan agreement where it is jointly and severally liable with the other TIC owner, Allen Hartman. The Weslayan property is collateral for the loan. As of June 30, 2021, the loan had an outstanding principal balance of $3,958,000 and a current interest rate of 4.66%. The maturity date of the loan is August 6, 2024. Installments of principal and interest are payable monthly. The Company incurred $168,000 of acquisition fees from our Advisor from the purchase. The Company exercises significant influence as a result of the Weslayan TIC ownership interest, but the company does not have financial and operating control. Weslayan is accounted for as an equity method investment and presented on the consolidated balance sheet within the "Investment in tenant in common interest, net" line item. The Company recognized equity in net loss of tenant in common interest of $47,000 and $0 for the ~~quarterly periods~~three months ended ~~March 31, 2019,~~ June 30, ~~2019~~2021 and ~~September~~2020, respectively and $342,000 and $0, respectively for the six months ended June 30, ~~2019, would have been presented as follows if~~2021 and 2020, respectively related to the ~~correction had been recorded in such quarterly period (in thousands):~~

Weslayan TIC interest.

Quarterly Period ended
March 31, 2019 June 30, 2019 September 30, 2019
As reported Revised As reported Revised As reported Revised
Depreciation and amortization $ 836 $ 636 $ 917 $ 717 $ 884 $ 684
Net loss $ (461) $ (261) $ (447) $ (247) $ (540) $ (340)
Three months ended March 31, 2019 Six months ended June 30, 2019 Nine months ended September 30, 2019
As reported Revised As reported Revised As reported Revised
Depreciation and amortization $ 836 $ 636 $ 1,753 $ 1,353 $ 2,637 $ 2,037
Net loss $ (461) $ (261) $ (908) $ (508) $ (1,448) $ (848)

Note 4 — Investment in unconsolidated entities

Effective March 1, 2019, the Company's board of directors approved the exchange of 3.42% of the Company's 5.89% ownership interest in Hartman SPE, LLC for 700,302 shares of common stock of Hartman Short Term Income Properties XX, Inc. ("Hartman XX"). The exchange reduced the Company’s ownership interest in Hartman SPE, LLC from 5.89% to 2.47%.

On April 14, 2020, the Company made a tender offer to shareholders of Hartman Income REIT, Inc. ("HIREIT") to acquire up to 500,000 shares of HIREIT common stock at a price of $4.00 per share. On May 1, 2020, the Company extended the term of the tender offer until May 13, 2020 and modified the offer to purchase up to 500,000 shares of HIREIT common stock at a price of $5.00 per share.

As of September 24, 2020, the Company completed the acquisition of 661,940 HIREIT common shares and 80,000 Hartman Income REIT Operating Partnership ("HIROP") OP units for consideration of $3,709,703.

The HIREIT common shares and HIROP OP units contemporaneously converted to 497,926 Hartman XX common shares and 60,178 Hartman XX Operating Partnership OP units.

The Company's investment in Hartman SPE, LLC and Hartman ~~Short Term Income Properties~~ XX ~~Inc. is stated~~do not have a readily determinable fair value and are recorded at cost ~~and accounted for under the cost method.~~minus impairment. The aggregate carrying amount for ~~cost method investments that~~ the ~~Company did not evaluate for impairment is $8,027,000. The fair value of the Company's cost method~~ investments is ~~not estimated because there are no identified events or changes in circumstances that may have a significant adverse effect of the fair values of the investments.~~$11,734,000. The Company did 0t receive any distributions from Hartman SPE, LLC for the six months ended June 30, ~~2020~~2021 and ~~2019.~~2020. For the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the Company recognized dividend income of ~~$122,000~~$115,000 and ~~$82,000,~~$122,000, respectively, and for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the Company recognized dividend income of ~~$245,000~~$225,000 and ~~$123,000,~~$245,000, respectively, from Hartman Short Term Income Properties XX, Inc.

~~HARTMAN vREIT XXI, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Note 5 — Accrued Rent and Accounts Receivable, net

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


	June 30, 2021		December 31, 2020
Tenant receivables	$	1,489	$	1,167
Accrued rent	1,023		829
Allowance for uncollectible accounts	(161)		(147)
Accrued rents and accounts receivable, net	$	2,351	$	1,849

June 30, 2020 December 31, 2019
Tenant receivables $ 596 $ 714
Accrued rent 615 322
Allowance for uncollectible accounts (147) (72)
Accrued rents and accounts receivable, net $ 1,064 $ 964

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had an allowance for uncollectible accounts of ~~$147,000~~$161,000 and ~~$72,000, respectively,~~$147,000, related to tenant receivables that the Company has specifically identified as potentially uncollectible based on assessment of each tenant’s credit-worthiness. For the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the Company recorded bad debt ~~(recovery)~~ expense in the amount of ~~$53,000~~$14,000 and ~~$(35,000),~~$53,000, respectively and ~~$75,000~~$14,000 and ~~$(13,000)~~$75,000 for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Bad debt expense and any related recoveries are included in property operating expenses in the accompanying consolidated statements of operations.

Note 6 — Future Minimum Rents

The Company leases the majority of its properties under noncancellable operating leases which provide for minimum base rentals. A summary of future rentals to be received (exclusive of renewals, tenant reimbursements, and contingent rentals) under noncancellable operating leases in existence at June 30, ~~2020~~2021 is as follows, in thousands:

Note 7 — Notes Payable, net

The following table summarizes the Company's outstanding notes payable, net in thousands:

(1) One-month LIBOR ("L"); Prime ("P")

~~HARTMAN vREIT XXI, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

(2) Payable in monthly installments of principal and interest ~~only~~ until the maturity date. The interest rate as of June 30, ~~2020~~2021 was ~~2.91%~~3.25%.

(3)The Company is a party to a $20 million master credit facility agreement ("MCFA") with East West Bank. The borrowing base of the MCFA may be adjusted from time to time subject to the lender’s underwriting with respect to real property collateral which secure the amount available to be borrowed. As of June 30, ~~2020~~2021 the MCFA is secured by the Spectrum Building and the 11211 Katy Freeway Building, the 1400 Broadfield Building, the 16420 Park Ten Building and the 7915 FM 1960 Building. The interest rate as of June 30, ~~2020~~2021 was 2.75%. The outstanding balance under the MCFA was ~~$19,500,000~~$20,000,000 as of June 30, ~~2020~~2021 and the amount available to be borrowed was ~~$500,000.~~$0.

(4) On March 10, 2020, the Company entered into a second $20 million master credit facility agreement ("MCFA II") with East West Bank. The Village Pointe and Accesso Portfolio properties are collateral security for the credit facility. The initial loan availability under the credit agreement is $13,925,000. The company entered into a joinder and amendment to the MCFA II facility dated March 29, 2021 which added an office property located in Houston, Texas and owned by Hartman Income REIT Property Holdings, LLC, an affiliate of the Company and Hartman XX, to the collateral security for the credit facility. The Company is a guarantor under the MCFA II credit facility. The borrowing base of the credit facility increased

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

from $13,925,000 to $15,550,000. The credit agreement matures on March 9, 2023. The ~~initial interest rate and the~~ interest rate as of June 30, ~~2020~~2021 was 2.75%. ~~After~~

On March 29, 2021, the ~~initial interest period,~~MCFA II credit facility was modified to add a collateral property owned by Hartman Income REIT Property Holdings, LLC ("HIRPH"), a wholly owned subsidiary of Hartman XX Operating Partnership, LP. HIRPH was added to the ~~interest rate resets to Prime minus 50 basis points.~~MCFA II credit facility by means of a joinder agreement. The borrowing base of the credit facility increased $1,625,000 as a result of the credit facility modification. The outstanding balance under the MCFA II was ~~$4,626,000~~$15,325,000 as of June 30, ~~2020~~2021 and the amount available to be borrowed was ~~$9,299,000.~~$225,000.

In connection with the Weslayan TIC purchase, the Company became party to a a loan agreement where it is jointly and severally liable with the other TIC owner, Allen Hartman. The ~~Company was in compliance with all~~3100 Weslayan property is collateral for the loan. The loan ~~covenants~~had an outstanding balance of $3,958,000 as of June 30, ~~2020.~~2021 and interest rate of 4.66%.

Interest expense for ~~the~~ three months ended June 30, 2021 and 2020 was $316,000 and ~~2019 was~~ $242,000, ~~and $117,000,~~ respectively, including ~~$42,000~~$47,000 and ~~$26,000~~$42,000 of deferred loan cost amortization. Interest expense for the six months ended June 30, 2021 and 2020 was $600,000 and ~~2019 was~~ $484,000, ~~and $303,000~~ respectively, including ~~$85,000~~$90,000 and ~~$52,000~~$85,000 of deferred loan ~~cost~~ amortization. Unamortized deferred loan costs were ~~$310,000~~$180,000 and ~~$203,000~~$232,000 as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Interest expense of ~~$80,000~~$87,000 and ~~$61,000~~$84,000 was payable as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively, and is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.

Note 8 — Related Party Arrangements

The Advisor is a wholly owned subsidiary of Hartman Advisors, ~~LLC, a Texas limited liability company owned 70% by Allen R. Hartman individually and 30% by the Property Manager.~~LLC. The Property Manager is ~~a wholly owned subsidiary of~~ Hartman Income REIT Management, ~~LLC,~~Inc., which iswas a wholly owned by Hartman Income REIT, Inc. Effective July 1, 2020 Hartman Advisors, LLC and ~~its subsidiaries ("HIREIT"), of which approximately 16% of the voting stock is~~Hartman Income REIT Management, Inc. are wholly owned by ~~Allen R.~~ Hartman ~~the Company's Chief Executive Officer and Chairman of the Board of Directors.~~Short Term Income Properties XX, Inc.

The Advisor and certain affiliates of the Advisor ~~will~~ receive fees and compensation in connection with the ~~Offering,~~offering, and the acquisition, management and sale of the Company’s real estate investments. In addition, in exchange for $1,000, the OP has issued the Advisor a separate, special limited partnership interest, in the form of Special Limited Partnership Interests. See Note 12 (“Special Limited Partnership Interest”) below.

The Advisor ~~will receive~~receives reimbursement for organizational and offering expenses incurred on the Company’s behalf, but only to the extent that such reimbursements do not exceed actual expenses incurred by the Advisor and would not cause the cumulative selling commission, the dealer manager fee and other organization and offering expenses borne by the Company to exceed 15.0% of gross offering proceeds from the sale of shares in the ~~Offering.~~offering.

The Advisor, or its affiliates, ~~will receive~~receives an acquisition fee equal to 2.5% of the cost of each investment the Company acquires, which includes the amount actually paid or allocated to fund the purchase, development, construction or improvement of each investment, including acquisition expenses and any debt attributable to each investment. Acquisition fees of $0 were earned by the Advisor for the three ~~months ended June 30, 2020~~ and ~~2019, respectively and $0 and $124,000 were earned by the Advisor for the~~ six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

The Advisor, or its affiliates, will receive a debt financing fee equal to 1.0% of the amount available under any loan or line of credit originated or assumed, directly or indirectly, in connection with the acquisition, development, construction, improvement of properties or other permitted investments, which will be in addition to the acquisition fee paid to the Advisor. NaN debt financing fees were earned by ~~the~~ Advisor for the six months ended June 30, ~~2020~~2021 and ~~2019.~~

~~HARTMAN vREIT XXI, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

2020.

The Company pays the Property Manager, an affiliate of the Advisor, property management fees equal to 3% of the effective gross revenues of the managed property. The Company pays and expects to pay the Property Manager leasing fees in an amount equal to the leasing fees charged by unaffiliated persons rendering comparable services in the same geographic location of the applicable property, provided that such fees will only be paid if a majority of the Company’s board of directors, including a majority of its independent directors, determines that such

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

fees are fair and reasonable in relation to the services being performed. The Property Manager may subcontract the performance of its property management and leasing duties to third parties and the Property Manager will pay a portion of its property management fee to the third parties with whom it subcontracts for these services. The Company will reimburse the costs and expenses incurred by the Property Manager on the Company’s behalf, including the wages and salaries and other employee-related expenses of all employees of the Property Manager or its subcontractors who are engaged in the operation, management, maintenance or access control of our properties, including taxes, insurance and benefits relating to such employees, and travel and other out-of-pocket expenses that are directly related to the management of specific properties. Other charges, including fees and expenses of third-party professionals and consultants, will be reimbursed, subject to the limitations on fees and reimbursements contained in the Company's Articles of Amendment and Restatement (as amended and restated, the "Charter").

If the Property Manager provides construction management services related to the improvement or finishing of tenant space in the Company’s real estate properties, the Company pays the Property Manager a construction management fee in an amount that is usual and customary for comparable services rendered to similar projects in the geographic market of the project; provided, however, that the Company will only pay a construction management fee if a majority of the Company’s board of directors, including a majority of its independent directors, determines that such construction management fee is fair and reasonable and on terms and conditions not less favorable than those available from unaffiliated third parties.

The Company pays the Advisor a monthly asset management fee equal to one-twelfth of 0.75% of the higher of (i) the cost or (ii) the value of all real estate investments the Company acquires.

If Advisor or affiliate provides a substantial amount of services, as determined by the Company’s independent directors, in connection with the sale of one or more assets, the Company will pay the Advisor a disposition fee equal to (1) in the case of the sale of real property, the lesser of: (A) one-half of the aggregate brokerage commission paid (including the disposition fee) or, if none is paid, the amount that customarily would be paid, or (B) 3% of the sales price of each property sold, and (2) in the case of the sale of any asset other than real property, 3% of the sales price of such asset.

The Company will reimburse the Advisor for all expenses paid or incurred by the Advisor in connection with the services provided to the Company, subject to the limitation that, commencing four fiscal quarters after the Company’s acquisition of its first asset, the Company will not reimburse the Advisor for any amount by which its operating expenses (including the asset management fee) at the end of the four preceding fiscal quarters exceeds the greater of: (1) 2% of the Company’s average invested assets (as defined in the Charter), or (2) 25% of the Company’s net income determined without reduction for any additions to reserves for depreciation, bad debts or other similar non-cash reserves and excluding any gain from the sale of the Company’s assets for that period. Notwithstanding the above, the Company may reimburse the Advisor for expenses in excess of this limitation if a majority of the Company’s independent directors determines that such excess expenses are justified based on unusual and non-recurring factors.

On November 1, 2019, the Company ~~issued~~received an unsecured promissory note tofrom Hartman Short Term Income Properties XX, Inc., an affiliate of the Advisor and the Property Manager, in the face amount of $10,000,000 with an interest rate of 10% annually. The outstanding balance of the note is ~~$8,200,000~~$6,352,000 and ~~$4,400,000~~$2,789,000 as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The maturity date of the note is October 31, 2021.

~~For the three months ended June 30,~~Effective August 4, 2020, ~~and 2019,~~ the Company ~~incurred property management fees~~transferred the balance due from Hartman Short Term Income Properties XX, Inc. in the amount of $8,200,000 together with additional advances in the amount of $2,412,000 for a total of $10,611,000, to a newly formed taxable REIT subsidiary, Hartman vREIT XXI TRS, Inc. The total amount is represented by two underlying notes from Hartman Retail III Holdings LLC and ~~reimbursable costs~~Hartman Ashford Bayou LLC. Each of ~~$335,000 and $176,000, respectively, payable to~~ the ~~Property Manager and asset management fees~~notes receivable bear interest at an annual interest rate of ~~$144,000 and $63,000, respectively, payable to~~10%. The maturity date of the ~~Advisor. For the six months ended June 30, 2020 and~~

notes is December 31, 2021.

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

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~2019,~~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 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 Hartman Retail III Holdings LLC or Hartman Ashford Bayou LLC, each of which qualifies as a VIE. Accordingly, the assets and liabilities and revenues and expenses of Retail III Holdings and Ashford Bayou have not been included in the accompanying consolidated financial statements.

For the three months ended June 30, 2021 and 2020, the Company incurred property management fees and reimbursable costs of ~~$669,000~~$343,000 and ~~$349,000,~~$335,000, respectively, payable to the Property ~~manager~~Manager and asset management fees of ~~$288,000~~$138,000 and ~~$125,000,~~$144,000, respectively. For the six months ended June 30, 2021 and 2020, the Company incurred property management fees and reimbursable costs of $674,000 and $669,000, respectively, payable to the ~~Advisor.~~Property Manager and asset management fees of $276,000 and 288,000, respectively. Property management fees and reimbursable costs paid to the Property Manager are included in property operating expenses in the accompanying consolidated statements of operations. Asset management fees paid to the Advisor are included in asset management fees in the accompanying consolidated statements of operations.

The Company pays construction management fees and leasing commissions to the Property Manager in connection with the construction management and leasing of the Company's properties. For the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the Company incurred construction management fees of $16,000 and $56,000, respectively, and ~~$31,000, respectively. For the six months ended June 30, 2020~~$250,000 and ~~2019, the Company incurred construction management fees of $84,000 and $41,000, respectively. For the three months ended June 30, 2020 and 2019, the Company incurred~~ $55,000, ~~and $65,000,~~ respectively, for leasing commissions. For the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the Company incurred construction management fees of $43,000 and $84,000, respectively and $378,000 and $379,000, ~~and $73,000~~respectively, for leasing commissions. Construction management fees are capitalized and included in real estate assets in the consolidated balance sheets. Leasing commissions are capitalized and reported net of the amortized amount in the consolidated balance sheets.

As of June 30, ~~2020,~~2021, the Company had ~~$71,000~~$403,000 and $2,623,000 due to the Advisor ~~$2,762,000~~and Property Manager, respectively, and $1,660,000 and $843,000 due from Hartman Short Term Income Properties XX, Inc., ~~$276,000 due to the Property Manager,~~ and ~~$22,000 due from~~ other Hartman ~~affiliates.~~affiliates, respectively. As of December 31, ~~2019,~~2020, the Company had ~~$106,000~~$126,000 due to the Advisor ~~$417,000~~and $1,323,000 Property Manger, respectively and $581,000 due from Hartman Short Term Income Properties XX, Inc., ~~$229,000 due from the Property Manager,~~ and ~~$10,000 due from~~$448,000 other Hartman affiliates.

Note 9 — Loss Per Share

Basic loss per share is computed using net loss attributable to common stockholders and the weighted average number of common shares outstanding.


		Three Months Ended June 30,						Six Months Ended June 30,							Three months ended June 30,				Six months ended June 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Numerator:	Numerator:									Numerator:
Net loss attributable to common stockholders (in thousands)	Net loss attributable to common stockholders (in thousands)	$	(581)	$	(247)	$	(1,019)	$	(508)	Net loss attributable to common stockholders (in thousands)	$	(534)	$	(581)	$	(1,601)	$	(1,019)
Denominator:	Denominator:									Denominator:
Basic weighted average shares outstanding (in thousands)	Basic weighted average shares outstanding (in thousands)	8,661		5,072		8,617		4,501		Basic weighted average shares outstanding (in thousands)	8,889		8,661		8,866		8,617
Basic loss per common share	Basic loss per common share	$	(0.07)	$	(0.05)	$	(0.12)	$	(0.11)	Basic loss per common share	$	(0.06)	$	(0.07)	$	(0.18)	$	(0.12)

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 10 – Stockholders’ Equity

Under the Charter, the Company has the authority to issue 900,000,000 shares of common stock, $0.01 per share par value, and 50,000,000 shares of preferred stock with a par value of $0.01 per share. The Company’s board of directors is authorized to amend the Charter, without the approval of the Company’s stockholders, to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. ~~As of June 30, 2020, 850,000,000 shares were classifed and designated as Class A common stock and 50,000,000 shares were classifed and desingated as Class T commont stock.~~

On May 12, 2020, the board of directors authorized the classification and designation of Class I and Class S common stock. As of ~~July 23, 2020, the Company has the authority to issue~~June 30, 2021, 900,000,000 shares of capital stock were classified as common stock, par value $0.01 per share, 270,000,000 ~~shares~~of which were classified and designated as Class A common stock (“Class A Shares”), 280,000,000 ~~shares~~were classified and designated as Class S common stock ("Class S Shares"), 280,000,000 ~~shares~~of which were classified ~~and designated~~ as Class I common stock ("Class I Shares"), and 70,000,000 ~~shares classified and~~were designated as Class T ~~commont stock.~~Common stock (“Class T Shares”). The additional share classes have been included in an amendment to the

~~HARTMAN vREIT XXI, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Company's registration statement and prospectus which was declared effective by the Securities and Exchange Commission on July 27, 2020.

Shares of all classes of common stock entitle the holders to 1 vote per share on all matters which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law. No classified or designated class of common stock has any preferences or preemptive conversion or exchange rights.

On September 30, 2015, the Company sold 22,100 shares of common stock to Hartman Advisors, LLC at a purchase price of $9.05 per share for an aggregate purchase price of $200,005, which was paid in cash.

The board of directors, with the approval of a majority of the entire board of directors and without any action by the stockholders, may amend the Charter from time to time to increase or decrease the aggregate number of authorized shares of capital stock or the number of authorized shares of capital stock of any class or series. If the Company were to create and issue preferred stock or convertible stock with a distribution preference over common stock, payment of any distribution preferences of outstanding preferred stock or convertible stock would reduce the amount of funds available for the payment of distributions on our common stock. Further, holders of preferred stock are normally entitled to receive a preference payment in the event we liquidate, dissolve or wind up before any payment is made to our common stockholders, likely reducing the amount common stockholders would otherwise receive upon such an occurrence. In addition, under certain circumstances, the issuance of preferred stock or a separate class or series of common stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of our securities and the removal of incumbent management. As of June 30, 2021, 50,000,000 shares were classified as preferred stock, par value $0.01 per share.

Stock-Based Compensation

The Company awards vested restricted common shares to non-employee directors as compensation in part for their service as members of the board of directors of the Company. For the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the Company granted ~~625~~4,203 and 625 shares, and ~~1,250~~4,888 and 1,250 shares respectively, of restricted common stock to independent directors as compensation for services. The Company recognized ~~$6,000~~$43,000 and $6,000 and ~~$13,000~~$50,000 and ~~$12,000~~$13,000 as stock-based compensation expense for the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table reflects the total distributions paid in cash and issued in shares of our common stock for the period from January 2017 (the month the Company first paid distributions) through June 30, ~~2020:~~2021 (in thousands):

(1)Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately 20 days following the end of such month.

(2)Amount of distributions paid in shares of common stock pursuant to our distribution reinvestment plan and stock dividend distribution.

Note 11 — Incentive Plans

The Company has adopted a long-term incentive plan (the “Incentive Award Plan”) that provides for the grant of equity awards to employees, directors and consultants and those of the Company’s affiliates. The Incentive Award Plan authorizes the granting of restricted stock, stock options, stock appreciation rights, restricted or deferred stock units, dividend equivalents, other stock-based awards and cash-based awards to directors, officers, employees and consultants of the Company and the Company’s affiliates’ selected by the board of directors for participation in the Incentive Award Plan. Stock options and shares of restricted common stock granted under the Incentive Award Plan will not, in the aggregate, exceed an amount equal to 5.0% of the outstanding shares of the Company’s common stock on the date of grant or award of any such stock options or shares of restricted stock. Stock options may not have an exercise price that is less than the fair market value of a share of the Company’s common stock on the date of grant. Shares of common stock will be authorized and reserved for issuance under the Incentive Award Plan. The Company has adopted an independent directors’ compensation plan (the “Independent Directors Compensation Plan”) pursuant to which each of the Company’s independent directors will be entitled, subject to the plan’s conditions and restrictions, to receive an initial grant of 3,000 shares of restricted stock when the Company raises the minimum offering amount of $1,000,000 in the Offering. Each new independent director that subsequently joins the Company’s board of directors will receive a grant of 3,000 shares of restricted stock upon his or her election to the Company’s board of directors. The shares of restricted common stock granted to independent

HARTMAN vREIT XXI, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

directors fully vest upon the completion of the annual term for which the director was elected. Subject to certain conditions, the non-vested shares of restricted stock granted pursuant to the Independent Directors Compensation Plan will become fully vested on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company. Awards under the

~~HARTMAN vREIT XXI, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Independent Directors Compensation Plan for the ~~six~~three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, consisted of ~~1,250~~4,203 and ~~1,250~~625 restricted, Class A common shares to our independent directors, valued at ~~$10.30~~$10.23 and ~~$10.00~~$11.70 per share based on the Offering price. The stock-based compensation expense is included in general and administrative expense in the accompanying consolidated statements of operations.

Note 12 — Special Limited Partnership Interest

Pursuant to the limited partnership agreement for the OP, SLP LLC, the holder of the Special Limited Partnership Interest, will be entitled to receive distributions equal to 15.0% of the OP’s net sales proceeds from the disposition of assets, but only after the Company’s stockholders have received, in the aggregate, cumulative distributions equal to their total invested capital plus a 6.0% cumulative, non-compounded annual pre-tax return on such aggregated invested capital. In addition, the holder of the Special Limited Partnership Interest is entitled to receive a payment upon the redemption of the Special Limited Partnership Interests. Pursuant to the limited partnership agreement for the OP, the Special Limited Partnership Interests will be redeemed upon: (1) the listing of the Company’s common stock on a national securities exchange; (2) the occurrence of certain events that result in the termination or non-renewal of the Company’s advisory agreement with the Advisor (“Advisory Agreement”) other than by the Company for “cause” (as defined in the Advisory Agreement); or (3) the termination of the Advisory Agreement by the Company for cause. In the event of the listing of the Company’s shares of common stock or a termination of the Advisory Agreement other than by the Company for cause, the Special Limited Partnership Interests will be redeemed for an aggregate amount equal to the amount that the holder of the Special Limited Partnership Interests would have been entitled to receive, as described above, if the OP had disposed of all of its assets at their fair market value and all liabilities of the OP had been satisfied in full according to their terms as of the date of the event triggering the redemption. Payment of the redemption price to the holder of the Special Limited Partnership Interests will be paid, at the holder’s discretion, in the form of (i) limited partnership interests in the OP, (ii) shares of the Company’s common stock, or (iii) a non-interest bearing promissory note. If the event triggering the redemption is a listing of the Company’s shares on a national securities exchange only, the fair market value of the assets of the OP will be calculated taking into account the average share price of the Company’s shares for a specified period. If the event triggering the redemption is an underwritten public offering of the Company’s shares, the fair market value will take into account the valuation of the shares as determined by the initial public offering price in such offering. If the triggering event of the redemption is the termination or non-renewal of the Advisory Agreement other than by the Company for cause for any other reason, the fair market value of the assets of the OP will be calculated based on an appraisal or valuation of the Company’s assets. In the event of the termination or non-renewal of the Advisory Agreement by the Company for cause, all of the Special Limited Partnership Interests will be redeemed by the OP for the aggregate price of $1.

Note 13 – Commitments and Contingencies

The Company is dependent on the Sponsor and the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase and disposition of properties, management of the daily operations of the Company’s real estate portfolio, and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other providers.

~~The Company is subject~~During February 2021, the state of Texas experienced a severe winter storm, unofficially referred to ~~various claims~~as Winter Storm Uri, which resulted in power outages and ~~legal actions that arise in~~electrical grid failures across the ~~ordinary course of business. Management of the Company believes that the final disposition of such matters will not have a material adverse effect on the financial position of the Company.~~

state. Wholesale prices for

electricity increased significantly during this period. As a result, we experienced a substantial increase in electricity charges for some 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”), an affiliate 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 $0.8 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. The Property Manager disputes the amount of liability to Summer and maintains that the pricing mechanism failed and that the prices claimed by Summer are not reasonable nor set in good faith. The Property Manager intends to vigorously defend itself against Summer’s claims. However, the outcome of the pending litigation 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 defending against Summer’s claims, it may take considerable time to resolve the matter.

The amount of the potential liability to Summer can only be reasonably estimable through billings received. Accordingly, the Company has elected to recognize the full amount of the electricity expense billed relating to Winter Storm Uri within the Company’s consolidated statement of operations.

Events related to the COVID-19 pandemic and the actions taken to contain it have created substantial uncertainty for all businesses, including the Company. The Company’s consolidated financial statements as of and for the three and six months ended June 30, 2021 have been prepared in light of these circumstances.

Proposed merger with Hartman XX

On November 6, 2020, the board of directors of the Company and the board of directors of Hartman XX each approved a merger of Hartman XX with and into the Company. On January 26, 2021, the respective boards determined to delay the proposed merger transaction. A definitive effective date for the merger remains to be determined.


Maryland			38-3978914
(State or Other Jurisdiction of Incorporation or of Organization)			(I.R.S. Employer Identification Number)
2909 Hillcroft
Suite 420
Houston
Texas			77057
(Address of principal executive offices)			(Zip Code)


PART I FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2425
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3637
Item 4.	Controls and Procedures	3637

PART II OTHER INFORMATION
Item 1.	Legal Proceedings	3738
Item 1A.	Risk Factors	3738
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3740
Item 3.	Defaults Upon Senior Securities	3941
Item 4.	Mine Safety Disclosures	3941
Item 5.	Other Information	3941
Item 6.	Exhibits	4142
	SIGNATURES	4243


HARTMAN vREIT XXI, INC. AND SUBSIDIARIES	HARTMAN vREIT XXI, INC. AND SUBSIDIARIES																		HARTMAN vREIT XXI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS	CONSOLIDATED STATEMENTS OF OPERATIONS																		CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
(Unaudited, in thousands except per share data)										(Unaudited, in thousands except per share data)

		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,					Six Months Ended June 30,
		2020		2019		2020		2019			2021		2020			2021		2020
Revenues	Revenues									Revenues
Rental revenues	Rental revenues	$	3,002	$	1,361	$	6,039	$	2,765	Rental revenues	$	2,932	$	3,002		$	5,896	$	6,039
Tenant reimbursements and other revenues	Tenant reimbursements and other revenues	221		160		553		338		Tenant reimbursements and other revenues	240		221			572		553
Total revenues	Total revenues	3,223		1,521		6,592		3,103		Total revenues	3,172		3,223			6,468		6,592

Expenses (income)	Expenses (income)									Expenses (income)
Property operating expenses	Property operating expenses	1,227		582		2,561		1,224		Property operating expenses	1,368		1,227			3,189		2,561
Asset management fees	Asset management fees	144		63		288		125		Asset management fees	138		144			276		288
Organization and offering costs	Organization and offering costs	70		65		86		67		Organization and offering costs	3		70			4		86
Real estate taxes and insurance	Real estate taxes and insurance	647		243		1,216		471		Real estate taxes and insurance	581		647			1,183		1,216
Depreciation and amortization	Depreciation and amortization	1,597		717		3,059		1,353		Depreciation and amortization	1,395		1,597			2,786		3,059
General and administrative	General and administrative	204		76		476		210		General and administrative	326		204			597		476
Interest expense	Interest expense	242		117		484		303		Interest expense	316		242			600		484
Interest and dividend income	Interest and dividend income	(327)		(95)		(559)		(142)		Interest and dividend income	(468)		(327)			(908)		(559)
Equity in net loss of tenant in common interest										Equity in net loss of tenant in common interest	47		0			342		0
Total expenses, net	Total expenses, net	3,804		1,768		7,611		3,611		Total expenses, net	3,706		3,804			8,069		7,611

Net loss	Net loss	$	(581)	$	(247)	$	(1,019)	$	(508)	Net loss	$	(534)	$	(581)		$	(1,601)	$	(1,019)
Basic and diluted loss per common share:	Basic and diluted loss per common share:									Basic and diluted loss per common share:
Net loss attributable to common stockholders	Net loss attributable to common stockholders	$	(0.07)	$	(0.05)	$	(0.12)	$	(0.11)	Net loss attributable to common stockholders	$	(0.06)	$	(0.07)		$	(0.18)	$	(0.12)
Weighted average number of common shares outstanding, basic and diluted	Weighted average number of common shares outstanding, basic and diluted	8,661		5,072		8,617		4,501		Weighted average number of common shares outstanding, basic and diluted	8,889		8,661			8,866		8,617

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


		June 30, 2020		December 31, 2019			June 30, 2021		December 31, 2020
In-place lease value intangible	In-place lease value intangible	$	7,477	$	7,477	In-place lease value intangible	$	7,477	$	7,477
In-place leases – accumulated amortization	In-place leases – accumulated amortization	(3,719)		(2,443)		In-place leases – accumulated amortization	(5,913)		(4,951)
Acquired in-place lease intangible assets, net	Acquired in-place lease intangible assets, net	$	3,758	$	5,034	Acquired in-place lease intangible assets, net	$	1,564	$	2,526


June 30,	June 30,	Minimum Future Rents		June 30,	Minimum Future Rents
2021		$	11,114
2022	2022	8,253		2022	$	9,423
2023	2023	5,968		2023	7,217
2024	2024	4,590		2024	5,756
2025	2025	2,202		2025	3,262
2026				2026	1,885
Thereafter	Thereafter	1,189		Thereafter	832
Total	Total	$	33,316	Total	$	28,375


	As reported		Revised
Land	$	1,267	$	2,631
Buildings and improvements	12,471		12,862
In-place lease intangible	3,213		1,458
Total	$	16,951	$	16,951


	Quarterly Period ended																	Year ended
	March 31, 2019						June 30, 2019						September 30, 2019				December 31, 2018
	As reported		Revised		As reported		Revised		As reported		Revised		As reported		Revised
Land	$	5,163	$	6,528	$	5,163	$	6,528	$	5,163	$	6,528	$	4,289	$	5,653
Building and improvements	23,174		23,565		23,844		24,236		24,437		24,828		20,181		20,573
In-place lease value intangible	5,899		4,143		5,899		4,143		5,899		4,143		5,204		3,449
	34,236		34,236		34,906		34,907		35,499		35,499		29,674		29,675
Less accumulated amortization	(2,046)		(1,846)		(2,963)		(2,563)		(3,847)		(3,247)		(1,209)		(1,209)
Total real estate assets, net	$	32,190	$	32,390	$	31,943	$	32,344	$	31,652	$	32,252	$	28,465	$	28,466


Property/Facility	Property/Facility	Current Maturity	Rate (1)	June 30, 2020		December 31, 2019		Property/Facility	Current Maturity	Rate (1)	June 30, 2021		December 31, 2020
Richardson Tech Center (2)	Richardson Tech Center (2)	March 2021	L + 275bps	$	2,520	$	2,520	Richardson Tech Center (2)	March 2022	L+275bps	$	2,499	$	2,520
Master Credit Facility Agreement - EWB (3)	Master Credit Facility Agreement - EWB (3)	December 2021	P - 50bps	19,500		16,000		Master Credit Facility Agreement - EWB (3)	December 2021	P - 50bps	20,000		20,000
Master Credit Facility Agreement - EWB (4)	Master Credit Facility Agreement - EWB (4)	March 2023	P - 50bps	4,626		—		Master Credit Facility Agreement - EWB (4)	March 2023	P - 50bps	15,325		12,925
				26,646		18,520					37,824		35,445
Less unamortized loan costs	Less unamortized loan costs			(310)		(203)		Less unamortized loan costs			(180)		(232)
				$	26,336	$	18,317				$	37,644	$	35,213


Period	Period	Cash (1)		DRP & Stock (2)		Total		Period	Cash (1)		DRP & Stock (2)		Total
First Quarter 2017	First Quarter 2017	$	27,000	$	19,000	$	46,000	First Quarter 2017	$	27	$	19	$	46
Second Quarter 2017	Second Quarter 2017	62,000		72,000		134,000		Second Quarter 2017	62		72		134
Third Quarter 2017	Third Quarter 2017	105,000		115,000		220,000		Third Quarter 2017	105		115		220
Fourth Quarter 2017	Fourth Quarter 2017	127,000		162,000		289,000		Fourth Quarter 2017	127		163		290
First Quarter 2018	First Quarter 2018	154,000		192,000		346,000		First Quarter 2018	154		192		346
Second Quarter 2018	Second Quarter 2018	182,000		245,000		427,000		Second Quarter 2018	182		245		427
Third Quarter 2018	Third Quarter 2018	215,000		293,000		508,000		Third Quarter 2018	215		293		508
Fourth Quarter 2018	Fourth Quarter 2018	237,000		345,000		582,000		Fourth Quarter 2018	237		346		583
First Quarter 2019	First Quarter 2019	305,000		388,000		693,000		First Quarter 2019	305		388		693
Second Quarter 2019	Second Quarter 2019	388,000		484,000		872,000		Second Quarter 2019	388		484		872
Third Quarter 2019	Third Quarter 2019	499,000		646,000		1,145,000		Third Quarter 2019	498		646		1,144
Fourth Quarter 2019	Fourth Quarter 2019	746,000		629,000		1,375,000		Fourth Quarter 2019	746		629		1,375
First Quarter 2020	First Quarter 2020	771,000		543,000		1,314,000		First Quarter 2020	771		543		1,314
Second Quarter 2020	Second Quarter 2020	790,000		605,000		1,395,000		Second Quarter 2020	790		605		1,395
Third Quarter 2020								Third Quarter 2020	798		605		1,403
Fourth Quarter 2020								Fourth Quarter 2020	821		620		1,441
First Quarter 2021								First Quarter 2021	566		566		1,132
Second Quarter 2021								Second Quarter 2021	1,117		578		1,695
Total	Total	$	4,608,000	$	4,738,000	$	9,346,000	Total	$	7,909	$	7,109	$	15,018


Property type	April 2020		May 2020		June 2020		July 2020

Retail	89.6	%	94.0	%	96.9	%	98.3	%
Flex	99.6	%	98.7	%	86.8	%	90.9	%
Office	99.4	%	98.9	%	99.3	%	92.3	%
Total	98.7	%	98.5	%	98.5	%	92.7	%


Property Name	Space Type	Location	Gross Leasable Area SF	Percent Occupied		Annualized Base Rental Revenue (in thousands)		Average Base Rental Revenue per Occupied SF		Average Net Effective Annual Base Rent per Occupied SF
Village Pointe	Retail	San Antonio	54,246	79	%	$	689	$	16.04	$	16.08
Richardson Tech Center	Flex/R&D	Dallas	96,660	71	%	648		9.39		9.39
Spectrum	Office	San Antonio	175,390	90	%	3,810		24.13		24.19
11211 Katy Freeway	Office	Houston	78,642	53	%	649		15.53		15.51
1400 Broadfield	Office	Houston	102,893	72	%	1,530		20.57		20.39
16420 Park Ten Place	Office	Houston	83,760	50	%	913		21.71		21.57
Willowbrook Building	Office	Houston	67,581	46	%	459		14.8		14.77
Timberway II	Office	Houston	130,828	57	%	1,364		18.26		18.16
One Park Ten	Office	Houston	34,089	62	%	338		15.94		15.47
Two Park Ten	Office	Houston	57,126	83	%	982		20.63		18.56
3100 Weslayan (1)	Office	Houston	78,289	67	%	$	1,188	$	18.27	$	18.17
Grand Total			959,504	69	%	$	12,570	$	18.83	$	18.63


(in thousands)	Three months ended June 30,										Six months ended June 30,
	2020		2019		Change		2020		2019		Change
Same Store
Total revenues	$	1,577	$	1,521	$	56	$	3,306	$	3,103	$	203
Property operating expenses	590		582		8		1,190		1,224		(34)
Asset management fees	63		63		—		126		125		1
Real estate taxes and insurance	290		243		47		542		471		71
General and administrative	54		46		8		118		111		7
Same Store NOI	$	580	$	587	$	(7)	$	1,330	$	1,172	$	158

Reconciliation of Net loss to Same Store NOI

Net loss	$	(581)	$	(247)	$	(334)	$	(1,019)	$	(508)	$	(511)
Net loss from properties purchased in Q4 2019	(510)		—		(510)		(941)		—		(941)
General and administrative	89		30		59		220		99		121
Organization and offering costs	70		65		5		86		67		19
Depreciation and amortization	1,597		717		880		3,059		1,353		1,706
Interest expense	242		117		125		484		303		181
Interest and dividend income	(327)		(95)		(232)		(559)		(142)		(417)
Same Store NOI	$	580	$	587	$	(7)	$	1,330	$	1,172	$	158


Hartman SPE, LLC (1)	Three Months Ended June 30,									Six Months Ended June 30,
	2020			2019			2020			2019
Net Income (loss)	$	4,292		$	(1,236)		$	3,303		$	(1,244)
Depreciation and amortization expense	$	6,268		$	6,081		$	12,759		$	12,531
FFO	$	10,560		$	4,845		$	16,062		$	11,287

Weighted average ownership	2.47		%	2.47		%	2.47		%	3.61		%


Hartman SPE, LLC	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Net (loss) income	$	(417)		$	4,292		$	(6,121)		$	3,303
Depreciation and amortization expense	6,270			6,268			11,932			12,759
FFO	$	5,853		$	10,560		$	5,811		$	16,062

Weighted average ownership	2.47		%	2.47		%	2.47		%	2.47		%


	Total Number of Shares Requested to be Redeemed (1)	Total Number of Shares Redeemed	Average Price Paid per Share (2)		Approximate Dollar Value of Shares Available That May Yet Be Redeemed Under the Program (3)
April 2020	—	5,058	$	11.70
May 2020	2,520	—	$	—
June 2020	6,116	—	$	—
Total	8,636	5,058	$	11.70


Type of Expense	Amount (in thousands)			Estimated/Actual
Selling commissions and dealer manager fees	$	~~6,327~~6,408		Actual
Finders’ fees	—			—
Expenses paid to or for underwriters	—			—
Other organization and offering costs	$1,777		~~1,464~~		Actual
Total expenses	$	~~7,791~~8,185


Exhibit						Description
3.1.1						Articles Supplementary to the Third Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on August 12, 2020.
3.1.2						Third Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.1 to Pre-Effective Amendment No. 3 to the Post-Effective Amendment No. 1 to the Company’s Registration statement on Form S-11 (Registration No. 333-207711) filed on January 12, 2017.)
3.2						Bylaws (incorporated by reference to Exhibit 3.2 to Pre-Effective Amendment No. 5 to the Company’s Registration statement on Form S-11 (Registration No. 333-207711) filed on May 23, 2016.)
31.1*						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*						Certification of Chief Executive Officer ~~and~~pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*						XBRL Instance Document
101.SCH*						XBRL Taxonomy Extension Schema Document
101.CAL*						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*						XBRL Taxonomy Extension Label Linkbase Document
101.PRE*						XBRL Taxonomy Extension Presentation Linkbase Document