Hartman Short Term Income Properties XX, Inc. - FORM 10-Q

Attached files

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EX-31.1 - Hartman Short Term Income Properties XX, Inc.	v222741_ex31-1.htm
EX-32.1 - Hartman Short Term Income Properties XX, Inc.	v222741_ex32-1.htm
EX-31.2 - Hartman Short Term Income Properties XX, Inc.	v222741_ex31-2.htm
EX-32.2 - Hartman Short Term Income Properties XX, Inc.	v222741_ex32-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

		For the quarterly period ended March 31, 2011

¨		Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
		Commission File Number 000-53912

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC.

(Exact name of registrant as specified in its charter)

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

2909 Hillcroft, Suite 420 Houston, Texas		77057
(Address of principal executive offices)		(Zip Code)

(713) 467-2222

(Registrant’s telephone number, including area code)

Units (Each Unit is equal to one common share, no par value and one Series A preferred share)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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 o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company x

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

As of May 18, 2011, there were 622,379.4872 shares of the Registrant’s common shares issued and outstanding, 19,000 of which were held by an affiliate of the Registrant.

Hartman Short Term Income Properties XX, Inc.

Table of Contents

PART I	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Defaults Upon Senior Securities	22
Item 4.	Reserved	22
Item 5.	Other Information	22
Item 6.	Exhibits	22
	SIGNATURES

PART I

FINANCIAL INFORMATION

Item 1.Financial Statements

Hartman Short Term Income Properties XX, Inc.
BALANCE SHEETS

	March 31, 2011			December 31, 2010
	(Unaudited)
ASSETS

Cash and cash equivalents	$	2,441,376		$	636,523
Investment in unconsolidated entities, net		1,934,113			1,916,719
Accrued interest receivable		-			22

	$	4,375,489		$	2,553,264

LIABILITIES AND SHAREHOLDERS’ EQUITY
Accrued expenses and accounts payable	$	116,375		$	92,366
Selling commissions payable		-			10,850
Dividends and distributions payable		30,061			1,467
Due to an affiliated entity		340,537			355,739

Total liabilities		486,973			460,422

SHAREHOLDERS’ EQUITY
Preferred shares, $0.001 par value 200,000,000 shares authorized Preferred shares - Series One, convertible, non-voting, 1,000 shares issued and outstanding		1			1
Common shares subscribed		-			100,000
Common shares, $0.001 par value, 750,000,000 authorized, 492,088 shares and 274,966 shares issued and outstanding at March 31, 2011 and December 31, 2010, respectively		492			275
Additional paid-in-capital		4,599,648			2,573,210
Accumulated distributions and net loss		(711,625	)		(580,644	)

Total shareholders’ equity		3,888,516			2,092,842

Total liabilities and shareholders’ equity	$	4,375,489		$	2,553,264

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

Hartman Short Term Income Properties XX, Inc.
STATEMENTS OF OPERATIONS
(Unaudited)

	Three Months ended
	March 31, 2011			March 31, 2010
Revenues	$	-		$	-

Expenses
Asset management and acquisition fees		3,591			-
Organization & offering costs		16,869			37,747
General and administrative		58,403			-
Total expenses		78,863			37,747

Loss from operations before equity in earnings of unconsolidated entities, net		(78,863	)		(37,747	)
Equity in earnings of unconsolidated entities		17,395			-
Net loss	$	(61,468	)	$	(37,747	)

Loss per common share - basic and diluted	$	(0.14	)	$	(1.99	)

Weighted average number of shares outstanding – basic and diluted		438,998			19,000

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

Hartman Short Term Income Properties XX, Inc.

STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

									Common			Additional			Accumulated
	Preferred Stock				Common Stock				Stock			Paid-In-			Distributions
	Shares		Amount		Shares		Amount		Subscribed			Capital			and Net Loss			Total

Balance, February 5, 2009		-	$	-		-	$	-	$	-		$	-		$	-		$	-
Issuance of common shares		-		-		19,000		19		-			189,981			-			190,000
Issuance of convertible preferred shares		1,000		1		-		-		-			9,999			-			10,000
Net loss		-		-		-		-		-			-			(331,986	)		(331,986	)
Balance, December 31, 2009		1,000	$	1		19,000	$	19	$	-		$	199,980		$	(331,986	)	$	(131,986	)
																			-
Issuance of common shares		-		-		255,966		256		-			2,472,922			-			2,473,178
Common shares subscribed		-		-		-		-		100,000			-			-			100,000
Selling commissions		-		-		-		-		-			(99,692	)		-			(99,692	)
Dividends and distributions		-		-		-		-		-			-			(1,467	)		(1,467	)
Net loss		-		-		-		-		-			-			(247,191	)		(247,191	)
Balance, December 31, 2010		1,000	$	1		274,966	$	275	$	100,000		$	2,573,210		$	(580,644	)	$	2,092,842
																			-
Issuance of common shares		-		-		217,122		217		-			2,164,639			-			2,164,856
Common shares subscribed		-		-		-		-		(100,000	)		-			-			(100,000	)
Selling commissions		-		-		-		-		-			(138,201	)					(138,201	)
Dividends and distributions		-		-		-		-		-			-			(69,513	)		(69,513	)
Net loss		-		-		-		-		-			-			(61,468	)		(61,468	)
Balance, March 31, 2011		1,000	$	1		492,088	$	492	$	-		$	4,599,648		$	(711,625	)	$	3,888,516

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

Hartman Short Term Income Properties XX, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)

	Three Months ended
	March 31, 2011			March 31, 2010
Cash flows from operating activities:
Net loss	$	(61,468	)	$	(37,747	)
Stock based compensation		11,250
Adjustments to reconcile net loss to cash used in operating activities
Changes in operating assets and liabilities:
Accrued interest receivable		22			-
Accounts payable and accrued expenses		1,909			(2,521	)
Due to affiliates		(15,202	)		40,268
Equity in earnings of unconsolidated Joint Venture		(17,395	)		-
Net cash used in operating activities		(80,884	)		-

Cash flows from financing activities:
Dividend distributions		(20,856	)		-
Payment of selling commissions		(138,201	)		-
Proceeds from the issuance of common shares		2,044,794			-
Net cash provided by financing activities		1,885,737			-

Net change in cash		1,804,853			-
Cash at the beginning of period		636,523			1,100
Cash at the end of period	$	2,441,376		$	1,100
Supplemental Disclosure of Non-Cash Financing Activity
Issuance of common stock from dividend reinvestment plan	$	20,062

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

Hartman Short Term Income Properties XX, Inc.

Notes to Financial Statements

As of March 31, 2011

(Unaudited)

Note 1 — Organization

Hartman Short Term Income Properties XX, Inc. (the “Company”), incorporated on February 5, 2009, is a Maryland corporation that intends to qualify as a real estate investment trust (“REIT”) beginning with the taxable year ending December 31, 2011. The Company is offering shares to the public in its primary offering (exclusive of 2,500,000 shares available pursuant to the Company’s dividend reinvestment plan) at a price of $10.00 per share. The Company was originally a majority owned subsidiary of Hartman XX Holdings, Inc. Hartman XX Holdings, Inc. is a Texas corporation wholly owned by Allen R. Hartman. The Company sold 19,000 shares to Hartman XX Holdings, Inc. at a price of $10.00 per share. The Company has also issued 1,000 shares of convertible preferred shares to its advisor, Hartman Advisors LLC at a price of $10.00 per share. Hartman Advisors LLC (the “Advisor”) is the Company’s advisor. The Advisor is owned 70% by Allen R. Hartman and 30% by Hartman Income REIT Management, Inc.

The Company will seek to acquire and operate commercial real estate properties. All such properties may be acquired and operated by the Company alone or jointly with another party. As of December 28, 2010, the Company entered into the limited liability company operating agreement of Hartman Richardson Heights Properties LLC (the “Joint Venture”). The Company made an initial capital contribution to the Joint Venture of $1.915 million representing a 10% interest in the Joint Venture. Hartman Short Term Income Properties XIX, Inc. (“Hartman XIX”), the other member of the Joint Venture is a REIT that is managed by affiliates of the Company’s manager and real property manager. Hartman XIX has made capital contributions totaling $17.235 million to the Joint Venture representing a 90% interest therein. The Company’s board of directors unanimously approved the Company’s entering into the Joint Venture.

The management of the Company is through the Advisor. Management of the Company’s properties will be through Hartman Income REIT Management, Inc. (“HIR Management” or the “Property Manager”). Allied Beacon Partners, Inc. (formerly American Beacon Partners, Inc., the “Dealer Manager”) serves as the dealer manager of the Company’s public offering. These parties will receive compensation and fees for services related to the offering and for the investment and management of the Company’s assets. These entities will receive fees during the offering, acquisition, operational and liquidation stages.

Note 2 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim financial statements as of March 31, 2011 and for the three month period ended March 31, 2010 have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission, including Form 10-Q and Regulation S-K. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments), which are, in the opinion of management necessary to fairly present the operating results for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America might have been condensed or omitted pursuant to such rules and regulations. The Company believes that the disclosures provided are adequate to make the information presented not misleading. These unaudited financial statements should be read in conjunction with the December 31, 2010 financial statements and footnotes thereto included in the Company's Form 10-K filed with the SEC on March 31, 2011. The results of the three month period ended March 31, 2011 are not necessarily indicative of the results to be expected for the full year ending December 31, 2011.

The financial statements as of December 31, 2010 have been derived from the audited financial statements at that date but do not include all disclosures required by the accounting principles generally accepted in the United States of America.

Effective January 1, 2011, we have determined that we are no longer a developmental stage company. In December 2010, we achieved our minimum offering requirement and on December 28, 2010 we made our first investment.

Use of Estimates in the Preparation of Financial Statements

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

Reclassifications

We have reclassified certain prior fiscal year amounts in the accompanying financial statements in order to be consistent with the current fiscal year presentation, including changes resulting from the reclassification of organization and offering costs separate from general and administrative expenses. These reclassifications had no effect on net income or equity.

Cash and Cash Equivalents

All highly liquid investments with original maturities of three months or less are considered to be cash equivalents.

Investment in Real Estate Assets

The Company makes subjective assessments as to the useful lives of depreciable assets. The Company considers the period of future benefit of the asset to determine the appropriate useful lives. These assessments, which are based on estimates, have a direct impact on net income. The estimated useful lives of assets by class are generally as follows:

Buildings		40 years
Tenant improvements		Lesser of useful life or lease term
Intangible lease assets		Lesser of useful life or lease term

Investment in Unconsolidated Joint Venture

Investment in unconsolidated joint venture as of March 31, 2011 consists of our interest in a joint venture that owns one multi-tenant property (the “Unconsolidated Joint Venture”). Consolidation of this investment is not required as the entity does not qualify as a variable interest entity and does not meet the control requirements for consolidation, as defined in ASC 810. Both the Company and the Unconsolidated Joint Venture partner must approve significant decisions about the Unconsolidated Joint Venture’s activities. As of March 31, 2011, the Unconsolidated Joint Venture held total assets of $29.1 million.

The Company accounts for the Unconsolidated Joint Venture using the equity method of accounting per guidance established under ASC 323, Investments – Equity Method and Joint Ventures (“ASC 323”). The equity method of accounting requires this investment to be initially recorded at cost and subsequently adjusted for the Company’s share of equity in the joint venture’s earnings and distributions. The Company evaluates the carrying amount of this investment for impairment in accordance with ASC 323. The Unconsolidated Joint Venture is reviewed for potential impairment if the carrying amount of the investment exceeds its fair value. To determine whether impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until the carrying value is fully recovered. The evaluation of an investment in a joint venture for potential impairment can require our management to exercise significant judgments. No impairment losses were recorded related to the Unconsolidated Joint Venture for the three months ended March 31, 2011 or the year ended December 31, 2010. During the three months ended March 31, 2010, the Company did not have any interests in joint ventures.

Allocation of Purchase Price of Acquired Assets

Upon the acquisition of real properties, it is the Company’s policy to allocate the purchase price of properties to acquired tangible assets, consisting of land and buildings, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and leasehold improvements and value of tenant relationships, based in each case on their fair values. The Company utilizes internal valuation methods to determine the fair values of the tangible assets of an acquired property (which includes land and buildings).

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

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

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

Valuation of Real Estate Assets

The Company will continually monitor events and changes in circumstances that could indicate that the carrying amounts of real estate and related intangible assets may not be recoverable. When indicators of potential impairment are present that indicate that the carrying amounts of real estate and related intangible assets may not be recoverable, management assesses the recoverability of the assets by determining whether the carrying value of the assets will be recovered through the undiscounted future operating cash flows expected from the use of the assets and their eventual disposition. In the event that such expected undiscounted future cash flows do not exceed the carrying value, the Company will adjust the real estate and related intangible assets to the fair value and recognize an impairment loss.

Projections of expected future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to release the property and the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the property’s future cash flow and fair value and could result in the overstatement of the carrying value of our real estate and related intangible assets and net income.

Organization and Offering Costs

The Company has incurred certain expenses in connection with organizing the Company and registering to sell common shares. These costs principally relate to professional and filing fees. As of March 31, 2011, such costs totaled $450,435 which have been expensed as incurred since the date of inception, February 5, 2009.

Organizational and offering costs will be reimbursed by the Advisor as set forth below in the “Costs of Formation and Fees to Related Parties” section, to the extent that organizational and offering costs ultimately exceed 1.5% of gross offering proceeds. As of March 31, 2011 the excess of offering and organizational expense incurred over the 1.5% of gross offering proceeds is $378,014. Selling commissions in connection with the offering are recorded and charged to additional paid-in-capital.

Revenue Recognition

Upon the acquisition of real estate, certain properties will have leases where minimum rent payments increase during the term of the lease. The Company will record rental revenue for the full term of each lease on a straight-line basis. When the Company acquires a property, the term of existing leases is considered to commence as of the acquisition date for the purposes of this calculation. In accordance with ASC 605-10-S99, Revenue Recognition, the Company will defer the recognition of contingent rental income, such as percentage rents, until the specific target that triggers the contingent rental income is achieved. Cost recoveries from tenants are included in tenant reimbursement income in the period the related costs are incurred.

Share-Based Compensation

The Company will follow ASC 718- Compensation- Stock Compensation with regard to issuance of stock in payment of services. ASC 718 covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. ASC 718 requires that compensation cost relating to share-based payment transactions be recognized in financial statements. The cost is measured based on the fair value of the equity or liability instruments issued. The Company plans to pay a portion of directors’ compensation with restricted common stock.

The Company recorded stock based compensation for non-employee directors of $60,000 for the issuance of 6,000 shares of restricted common stock at the current issue price of $10.00 per share at year end, December 31, 2010.

On April 19, 2011 the directors voted to change their compensation, including the share-based compensation. Each non-employee director who also serves as a director of more than one affiliated Hartman entity shall have his compensation divided and paid on a pro-rata basis by the total number of affiliated Hartman entity boards which that director serves. The accrual of share-based compensation, for the three months ended March 31, 2011, was $11,250 with the shares being valued at the current offering price of $10.00 per share

Income Taxes

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

For the three months ended March 31, 2011 and 2010, the Company incurred a net loss of $61,468 and $37,747, respectively. The Company intends to qualify as a REIT beginning in 2011. The Company does not currently anticipate forming any taxable REIT subsidiaries or otherwise generating future taxable income which may be offset by the net loss carry forward. The Company considers that any deferred tax benefit and corresponding deferred tax asset which may be recorded in light of the net loss carry forward would be properly offset by an equal valuation allowance in that no future taxable income is expected. Accordingly no deferred tax benefit or deferred tax asset has been recorded in the financial statements.

Loss Per Share

The computations of basic and diluted loss per common share are based upon the weighted average number of common shares outstanding and potentially dilutive securities. The Company’s potentially dilutive securities include preferred shares that are convertible into the Company’s common stock. As of March 31, 2011, there were no shares issuable in connection with these potentially dilutive securities. These potentially dilutive securities were disregarded in the computations of diluted net loss per share for the periods ended March 31, 2011 and March 31, 2010 because no shares are issuable and inclusion of such potentially dilutive securities would have been anti-dilutive.

Recently Issued Accounting Standards

In December 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-13 Compensation (Topic 718): Stock Compensation. This update will clarify the classification of an employee share based payment award with an exercise price denominated in the currency of a market in which the underlying security trades. This ASU was effective beginning December 15, 2010. The Company does not expect the provisions of ASU 2010-13 to have a material effect on the Company’s financial position, results of operations or cash flows.

In January 2010, the FASB issued Accounting Standards Update (the “ASU”) No. 2010-01, Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash (“ASU No. 2010-01”). This ASU clarifies that when the stock portion of a distribution allows stockholders to elect to receive cash or stock with a potential limitation on the total amount of cash that all stockholders can elect to receive in the aggregate, the distribution would be considered a share issuance as opposed to a stock dividend and the share issuance would be reflected in earnings per share prospectively. ASU No. 2010-01 is effective for interim and annual periods ending on or after December 15, 2009 and should be applied on a retrospective basis. The adoption of ASU No. 2010-01 has no impact on our financial statements.

Other recent accounting pronouncements issued by the FASB and the SEC did not, or are not believed by management to have a material impact on the Company's present or future financial statements.

Note 3 — Investments

On December 28, 2010, the Company entered into the operating agreement of Hartman Richardson Heights Properties LLC (the “Joint Venture”). The Company made an initial capital contribution to the Joint Venture of $1.915 million representing a 10% interest in the Joint Venture. Hartman Short Term Income Properties XIX, Inc. (“Hartman XIX”), the other member of the Joint Venture is a REIT that is managed by affiliates of the Company’s manager and real property manager. Hartman XIX has made capital contributions totaling $17.235 million to the Joint Venture representing a 90% interest therein. The Company’s board of directors unanimously approved the Company’s entering into the Joint Venture.

On December 28, 2010, the Joint Venture acquired a retail shopping center located in Richardson, Texas for an aggregate purchase price of $19.15 million on an all cash basis from the seller, LNR Partners, LLC. The property is located at 100 South Central Expressway, Richardson, Texas and commonly known as Richardson Heights Shopping Center. The property consists of approximately 201,000 square feet and is 56.7% occupied at the acquisition date. Richardson is a suburb of Dallas, Texas. The Company’s equity in earnings of unconsolidated entities from its investment in Richardson Heights Shopping Center was $17,395 for the three months ended March 31, 2011.

The following is summarized financial information for Hartman Richardson Heights, LLC at March 31, 2011:

Current assets	$	9,963,513
Non-current assets		19,155,555
Current liabilities		116,402
Non-current liabilities		9,661,504
Equity - controlling		1,934,116
Equity - non-controlling		17,407,046
Revenue		537,275
Property operating expenses		73,862
Net operating expenses		144,581
Depreciation and amortization		122,756
Interest income		62,761
Interest expense		84,884
Net income		173,953
Net income attributable to the Company	$	17,395

Note 4 — Shareholders’ Equity and Related Party Transactions

The Company initially issued 100 shares the Company’s common stock to Hartman XX Holdings, Inc. (“Holdings”) for $1,000. Holdings is a Texas corporation wholly owned by Allen R. Hartman. Holdings was formed solely for the purpose of facilitating the organization and offering of the initial offering of the Company’s shares. Effective October 15, 2009 the Company issued an additional 18,900 shares to Holdings for $189,000. Holdings contributed a related party liability in the amount of $189,000 to the Company in exchange for the issuance of an additional 18,900 common shares of the Company. The transaction resulted in a total of 19,000 common shares issued since inception for total consideration of $190,000.

The Company issued the Advisor, Hartman Advisors LLC, 1,000 shares of non-voting convertible preferred stock for $100. Effective October 15, 2009 the Company received additional consideration of $9,900 with respect to the non-voting convertible preferred stock. The Advisor contributed a related party liability in the amount of $9,900 to the Company as donated capital related to the convertible common stock previously issued by the Company to the Advisor. Accordingly, the overall issue price for the 1,000 convertible preferred shares is $10,000 or $10 per share. Upon the terms described below, these shares may be converted into shares of the Company’s common stock, resulting in dilution of the stockholders’ interest in the Company.

Hartman Advisors LLC, is a Texas limited liability company owned 70% by Allen R. Hartman individually and 30% by the Property Manager. The Property Manager is a wholly owned subsidiary of Hartman Income REIT Management, LLC, which is wholly owned by Hartman Income REIT of which Allen R. Hartman is the Chief Executive Officer and Chairman of the Board of Trustees.

As of March 31, 2011, the Company had accepted investor’s subscriptions for, and issued, 492,088 shares of the Company’s common stock in its public offering, resulting in gross proceeds to the Company of $4,828,034. The Company declared a dividend distribution payable as of March 31, 2011 to shareholders of record as of that date for a total distribution value of $26,672. The total dividend distribution paid to shareholders during the three months ended March 31, 2011 was $40,918 of which $20,856 was paid in cash and $20,062 was paid by issuance of 2,111.7574 shares of common stock under the dividend reinvestment plan.

Common Stock Issuable Upon Conversion of Convertible Stock - The convertible preferred stock will convert to shares of common stock if (1) the Company has made total distributions on then outstanding shares of the Company’s common stock equal to the issue price of those shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares, (2) the Company lists its common stock for trading on a national securities exchange if the sum of prior distributions on then outstanding shares of our common stock plus the aggregate market value of our common stock (based on the 30-day average closing price) meets the same 6% performance threshold, or (3) the Company’s advisory agreement with Hartman Advisors, LLC expires without renewal or is terminated (other than because of a material breach by our advisor), and at the time of such expiration or termination the Company is deemed to have met the foregoing 6% performance threshold based on the Company’s enterprise value and prior distributions and, at or subsequent to the expiration or termination, the shareholders actually realize such level of performance upon listing or through total distributions. In general, the convertible stock will convert into shares of common stock with a value equal to 15% of the excess of the Company’s enterprise value plus the aggregate value of distributions paid to date on then outstanding shares of common stock over the aggregate issue price of those outstanding shares plus a 6% cumulative, non-compounded, annual return on the issue price of those outstanding shares. With respect to conversion in connection with the termination of the advisory agreement, this calculation is made at the time of termination even though the actual conversion may occur later, or not at all.

Costs of Formation and Fees to Related Parties - The Company is dependent upon Hartman XX Holdings, Inc., its affiliates, the Advisor and the Property Manager (collectively, the “Affiliates”) for financial support. The Affiliates have advanced necessary financial support, including the payments of various organizational and offering expenses made on behalf of the Company during the Minimum Offering period.

As of March 31, 2011 the Company had a balance due to an affiliated entity, the Property Manager of $340,537. The Property Manager has paid various organization and offering expenses on behalf of the Advisor for the Company. The Advisor will reimburse Hartman Income REIT Management, Inc., for expenses paid on behalf of the Company from proceeds of the offering. The Company ultimately may not incur or make reimbursement for offering and organization expenses in excess of 1.5% of gross offering proceeds. Any amount in excess will be reimbursed to the Company by the Advisor.

The Company owes the Advisor $3,591 for asset management fees. These fees are monthly fees equal to one-twelfth of 0.75% of the sum of the higher of the cost or value of each asset. The asset management fee will be based only on the portion of the cost or value attributable to the Company’s investment in an asset, if we do not own all or a majority of an asset.

The Company will pay the Dealer Manager up to 7.0% of the gross proceeds of the primary offering for any selling commissions on sales of shares from participating retail broker-dealers, except those issued under the distribution reinvestment plan. The Company will also pay the Dealer manager up to 2.5% of its dealer manager fees to participating broker-dealers. At March 31, 2011, the Company did not owe the Dealer Manager for any selling commissions or dealer management fees.

Distributions - On December 17, 2010, the Company’s Board of Directors also authorized the payment of cash distributions to the Company’s shareholders. Distributions will (i) accrue daily to the Company’s shareholders of record as of the close of business each day commencing one day following the close of the acquisition of the joint venture interest and the property acquisition by the joint venture, (ii) be payable in cumulative amounts on or before the 20th day of each calendar month and (iii) be calculated at a rate of $0.001918 per share of common stock per day, a rate which, if paid each day over a 365-day period, is equivalent to a 7.0% annualized distribution rate based on a purchase price of $10.00 per share of common stock.

The Company declared a dividend as of March 31, 2011 for a total distribution value of $26,672. The cash distribution will be $11,211 and $15,461 will be issued in common stock (1,627.5079 shares of distribution reinvestment plan shares) payable in April 2011.

Note 5 – Commitments and Contingencies

Economic Dependency

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

Note 6 – Incentive Awards Plan

The Company has adopted an incentive plan (the “2009 Omnibus Stock Incentive Plan” or the “Incentive Plan”) that provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, deferred stock awards, restricted stock awards, dividend equivalent rights and other stock-based awards within the meaning of Internal Revenue Code Section 422, or any combination of the foregoing. We have initially reserved 5,000,000 shares of our common stock for the issuance of awards under our stock incentive plan, but in no event more than ten (10%) percent of our issued and outstanding shares. The number of shares reserved under our stock incentive plan is also subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization. Generally, shares that are forfeited or canceled from awards under our stock incentive plan also will be available for future awards. No awards have been granted as of March 31, 2011.

Note 7 – Subsequent Event

Fair value and Subsequent Purchases of Hartman Richardson Heights Properties LLC

At the meeting of the Board of Directors held on April 19, 2011, the Board resolved, that the executive officers of the Company are duly authorized and directed to consider a series of related acquisition transactions to acquire up to 100% of the Joint Venture interest owned by Hartman XIX in the Richardson Heights Shopping Center with such frequency as they shall determine to be reasonable and in such increments as they shall determine to be appropriate based upon the Company’s fund raising and liquidity at such time. Also, pursuant to this resolution each and any acquisition of the Joint Venture interest by the Company shall constitute the exercise of an offer to purchase and not an obligation to purchase.

At the same meeting the Board further resolved, for the reasons stated here: (1) that the Joint Venture was purchased less than four months before the meeting and (2) upon refinancing on or about February 1, 2011, the Joint Venture was the subject of a third party appraisal, engaged by the lending bank, Texas Capital Bank, who concluded a fair value of the Richardson Heights Shopping Center to be nominally in excess of the December 2010 purchase price; unanimously that the acquisition price remains equal to the current fair market value of the Richardson Heights Shopping Center.

On April 29, 2011 we acquired an additional 15% interest in the Joint Venture from Hartman XIX for $2,872,500 cash, bringing our total cash investment in the Joint Venture to $4,787,500 and representing a 25% interest therein.

Additional Investments

From April 1, 2011 to May 18, 2011 the Company issued an additional 130,291 common shares (including shares issued for dividend reinvestment plan) for gross proceeds of $1,092,091.

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

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

Forward-Looking Statements

This Form 10-Q contains forward-looking statements, including discussion and analysis of our financial condition, anticipated capital expenditures required to complete projects, amounts of anticipated cash distributions to our shareholders in the future and other matters. These forward-looking statements are not historical facts but are the intent, belief or current expectations of our management based on its knowledge and understanding of our business and industry. Forward-looking statements are typically identified by the use of terms such as “may,” “will,” “should,” “potential,” “predicts,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates” or the negative of such terms and variations of these words and similar expressions. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. You are cautioned to not place undue reliance on forward-looking statements, which reflect our management’s view only as of the date of this Form 10-Q. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results. Factors that could cause actual results to differ materially from any forward-looking statements made in this Form 10-Q include:


	●	the imposition of federal taxes if we fail to qualify as a REIT in any taxable year or forego an opportunity to ensure REIT status;

	●	uncertainties related to the national economy, the real estate industry in general and in our specific markets;

	●	legislative or regulatory changes, including changes to laws governing REITS;

	●	construction costs that may exceed estimates or construction delays;

	●	increases in interest rates;

	●	availability of credit or significant disruption in the credit markets;

	●	litigation risks;

	●	lease-up risks;

	●	inability to obtain new tenants upon the expiration of existing leases;

	●	inability to generate sufficient cash flows due to market conditions, competition, uninsured losses, changes in tax or other applicable laws; and

	●	the potential need to fund tenant improvements or other capital expenditures out of operating cash flow.

The forward-looking statements should be read in light of these factors and the factors identified in the “Risk Factors” sections of the December 31, 2010 Form 10-K filed with the SEC on March 31, 2011.

Overview

We were formed as a Maryland corporation on February 5, 2009 to invest in and operate real estate and real estate-related assets on an opportunistic basis. We may acquire a wide variety of commercial properties, including office, industrial, retail, and other real properties. These properties may be existing, income-producing properties, newly constructed properties or properties under development or construction. In particular, we will focus on acquiring properties with significant possibilities for short-term capital appreciation, such as those requiring development, redevelopment or repositioning or those located in markets with high growth potential. We also may invest in real estate-related securities and, to the extent that our advisor determines that it is advantageous, we may invest in mortgage loans. We expect to make our investments in or in respect of real estate assets located in the United States and other countries. The net proceeds of this offering will provide funds to enable us to purchase properties and other real estate-related investments. As of the date of this Form 10-Q, we have entered into the operating agreement of Hartman Richardson Heights Properties LLC. The number of assets we acquire will depend upon the number of shares sold in the current offering and the resulting amount of the net proceeds available for investment in properties.

We expect to make an election under Section 856(c) of the Internal Revenue Code to be taxed as a REIT, beginning with the taxable year ending December 31, 2011. Once we qualified as a REIT for federal income tax purposes, we will not generally be subject to federal income tax. Once we make an election to be taxed as a REIT and later fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which our qualification is denied. Such an event could materially and adversely affect our net income. However, we believe that we are organized and will operate in a manner that will enable us to qualify for treatment as a REIT for federal income tax purposes and we intend to continue to operate so as to remain, thereafter qualified as a REIT for federal income tax purposes.

The following discussion and analysis should be read in conjunction with the accompanying balance sheet and the notes thereto.

Critical Accounting Policies and Estimates

Below is a discussion of the accounting policies that management believes will be critical going forward. We consider these policies critical because they involve difficult management judgments and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. Our most sensitive estimates will involve the allocation of the purchase price of acquired properties and evaluating our real estate-related investments for impairment.

Principles of Consolidation and Basis of Presentation

Our financial statements will include our accounts, the accounts of variable interest entities (VIEs) in which we are the primary beneficiary and the accounts of other subsidiaries over which we have control. All inter-company transactions, balances and profits will be eliminated in consolidation. Interests in entities acquired will be evaluated for consolidation based on Financial Accounting Standards Board Interpretation Accounting Standards Codification (“ASC”) (ASC 810-10-15), which requires the consolidation of VIEs in which we are deemed to be the primary beneficiary. If the interest in the entity is determined to not be a VIE, then the entity is evaluated for consolidation under ASC 970-323-25.

There are judgments and estimates involved in determining if an entity in which we have made an investment is a VIE and if so, if we are the primary beneficiary. The entity is evaluated to determine if it is a VIE by, among other things, calculating the percentage of equity being risked compared to the total equity of the entity. ASC 810-10-15 provides some guidelines as to what the minimum equity at risk should be, but the percentage can vary depending upon the industry and/or the type of operations of the entity and it is up to management to determine that minimum percentage as it relates to our business and the facts surrounding each of our acquisitions. In addition, even if the entity’s equity at risk is a very low percentage, we are required by ASC 810-10-15, to evaluate the equity at risk compared to the entity’s expected future losses to determine if there could still in fact be sufficient equity at the entity. Determining expected future losses involves assumptions of various possibilities of the results of future operations of the entity, assigning a probability to each possibility and using a discount rate to determine the net present value of those future losses. A change in the judgments, assumptions and estimates outlined above could result in consolidating an entity that should not be consolidated or accounting for an investment on the equity method that should in fact be consolidated, the effects of which could be material to our financial statements.

Investment in Unconsolidated Joint Venture

Real Estate

Upon the acquisition of real estate properties, we will allocate the purchase price of those properties to the tangible assets acquired, consisting of land, land improvements, buildings, building improvements, furniture, fixtures and equipment, identified intangible assets, asset retirement obligations and assumed liabilities based on their relative fair values in accordance with ASC 805-10 - Business Combinations, and ASC 350-10 Intangibles- Goodwill and other identified intangible assets consist of the fair value of above-market and below-market leases, in-place leases, in-place tenant improvements, tenant relationships and other intangible assets. Initial valuations are subject to change until our information is finalized, which is no later than 12 months from the acquisition date.

The fair value of the tangible assets to be acquired, consisting of land, land improvements, buildings, building improvements, furniture, fixtures and equipment, will be determined by valuing the property as if it were vacant, and the “as-if-vacant” value will then be allocated to the tangible assets. Land values will be derived from appraisals, and building and land improvement values will be calculated as replacement cost less depreciation or management’s estimates of the relative fair value of these assets using discounted cash flow analyses or similar methods. Furniture, fixtures and equipment values will be determined based on current reproduction or replacement cost less depreciation and other estimated allowances based on physical, functional or economic factors. The values of the buildings will be depreciated over the estimated useful life of 15 years, and furniture, fixtures and equipment will be depreciated over estimated useful lives ranging from five to seven years using the straight-line method.

We will determine the value of above-market and below-market in-place leases for acquired properties based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (1) the contractual amounts to be paid pursuant to the in-place leases and (2) management’s estimate of current market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable terms of the respective leases. We will record the fair value of above-market and below-market leases as intangible assets or intangible liabilities, respectively, and amortize them as an adjustment to rental income over the remaining non-cancelable terms of the respective leases and any bargain renewal periods, if applicable.

The total value of identified real estate intangible assets acquired will be further allocated to in-place lease values, in-place tenant improvements, in-place leasing commissions and tenant relationships based on management’s evaluation of the specific characteristics of each tenant’s lease and our overall relationship with that respective tenant. The aggregate value for tenant improvements and leasing commissions will be based on estimates of these costs incurred at inception of the acquired leases, amortized through the date of acquisition. The aggregate value of in-place leases acquired and tenant relationships will be determined by applying a fair value model. The estimates of fair value of in-place leases will include an estimate of carrying costs during the expected lease-up periods for the respective spaces considering current market conditions. In estimating the carrying costs that would have otherwise been incurred had the leases not been in place, management will include such items as real estate taxes, insurance and other operating expenses as well as lost rental revenue during the expected lease-up period based on current market conditions. The estimates of the fair value of tenant relationships will also include costs to execute similar leases including leasing commissions, legal and tenant improvements, as well as an estimate of the likelihood of renewal as determined by management on a tenant-by-tenant basis.

We will amortize the value of in-place leases and in-place tenant improvements to expense over the initial term of the respective leases. The value of tenant relationship intangibles will be amortized to expense over the initial term and any anticipated renewal periods, but in no event will the amortization period for intangible assets exceed the remaining depreciable life of the building. Should a tenant terminate its lease, the unamortized portion of the in-place lease value and tenant relationship intangibles would be charged to expense.

We will determine the fair value of assumed debt by calculating the net present value of the scheduled note payments using interest rates for debt with similar terms and remaining maturities that we believe we could obtain. Any difference between the fair value and stated value of the assumed debt will be recorded as a discount or premium and amortized over the remaining life of the loan.

In allocating the purchase price of each of our properties, management will make assumptions and use various estimates, including, but not limited to, the estimated useful lives of the assets, the cost of replacing certain assets, discount rates used to determine present values, market rental rates per square foot and the period required to lease the property up to its occupancy at acquisition if it were vacant. Many of these estimates will be obtained from independent third-party appraisals. However, management will be responsible for the source and use of these estimates. A change in these estimates and assumptions could result in the various categories of our real estate assets and/or related intangibles being overstated or understated, which could result in an overstatement or understatement of depreciation and/or amortization expense. These variances could be material to our financial statements.

Investment Impairments

For real estate we wholly own, our management will monitor events and changes in circumstances indicating that the carrying amounts of the real estate assets may not be recoverable. When such events or changes in circumstances are present, we will assess potential impairment by comparing estimated future undiscounted operating cash flows expected to be generated over the life of the asset and from its eventual disposition to the carrying amount of the asset. In the event that the carrying amount exceeds the estimated future undiscounted operating cash flows, we will recognize an impairment loss to adjust the carrying amount of the asset to estimated fair value.

For real estate we own through an investment in a joint venture, tenant-in-common interest or other similar investment structure, at each reporting date, we will compare the estimated fair value of our investment to the carrying value. An impairment charge will be recorded to the extent the fair value of our investment is less than the carrying amount and the decline in value is determined to be other than a temporary decline.

In evaluating our investments for impairment, management will make several estimates and assumptions, including, but not limited to, the projected date of disposition of the properties, the estimated future cash flows of the properties during our ownership and the projected sales price of each of the properties. A change in these estimates and assumptions could result in understating or overstating the book value of our investments, which could be material to our financial statements.

Competition

The current market for properties that meet our investment objectives is highly competitive as is the leasing market for such properties. We compete with many other entities engaged in real estate investment activities, including individuals, corporations, bank and insurance company investment accounts, REITs, other real estate limited partnerships, and other entities engaged in real estate investment activities, many of which will have greater resources than we will. We may also compete with other Hartman-sponsored programs to acquire properties and other investments. In the event that an investment opportunity becomes available that is suitable, under all of the factors considered by our advisor, for both us and one or more other Hartman-sponsored programs, and for which more than one of such entities has sufficient uninvested funds, then the entity that has had the longest period of time elapse since it was offered an investment opportunity will first be offered the investment opportunity. It will be the duty of our advisor to ensure that this method is applied fairly to us.

Results of Operations

On December 28, 2010, we entered into the operating agreement of Hartman Richardson Heights Properties LLC (the “Joint Venture”). The Company made an initial capital contribution to the Joint Venture of $1.915 million representing a 10% interest in the Joint Venture. Hartman Short Term Income Properties XIX, Inc. (“Hartman XIX”), the other member of the Joint Venture is a REIT that is managed by affiliates of the Company’s manager and real property manager. Hartman XIX has made capital contributions totaling $17.235 million to the Joint Venture representing a 90% interest therein. Our equity in earnings of the Joint Venture was $17,395 for the three months ended March 31, 2011.

Funds From Operations

Funds From Operations (“FFO”) is a non-GAAP financial performance measure which is widely recognized by analysts and investors as one measure of operating performance of a real estate company. The National Association of Real Estate Investment Trusts (“NAREIT”) defines funds from operations (“FFO”) as net income (loss) available to common shareholders computed in accordance with U.S. generally accepted accounting principles (“GAAP”), excluding gains or losses from sales of operating real estate assets and extraordinary items, plus depreciation and amortization, including our share of unconsolidated real estate joint ventures and partnerships. We believe that we calculate FFO in a manner consistent with the NAREIT definition.

Management uses FFO as a primary measure to evaluate our operating performance. Accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Because real estate values have instead historically increased or decreased with market conditions. Management believes that the presentation of operating results for real estate companies that use historical cost accounting is insufficient by itself. Securities analysts, investors, and other interested parties use FFO as the primary metric for comparing the relative performance of equity REITs. All REITs may not calculate FFO the same way, therefore comparisons with other REITs may not be meaningful.

FFO should not be considered as an alternative to net income or other measurements under GAAP as an indicator of our operating performance or to cash flows from operating, investing or financing activities as a measure of liquidity. FFO does not reflect working capital changes, cash expenditures for capital improvements or principal payments on indebtedness.

Below is the calculation of FFO and the reconciliation to net income which is the most comparable GAAP financial measure. The Company was in the development stage from February 5, 2009 (the date of our inception) through December 31, 2010. The Company did not have operating activities for the quarter ended March 31, 2010 which results in no comparable FFO for that interim period.

	Three Months Ended March 31,
	2011			2010
Net loss	$	(61,468	)	$	(37,747	)
Organizational and offering expenses		16,869			37,747
Audit and directors fees not attributable to operations		50,050			-
Depreciation and amortization attributable to earnings of unconsolidated entities		12,276			-
FFO	$	17,727		$	-

Liquidity and Capital Resources

Subscription proceeds were held in an escrow account until we had received and accepted subscriptions to purchase at least $2.0 million of shares of common stock, which the Company reached in December 2010. As of March 31, 2011, the Company had issued 492,088 shares of common stock in its public offering, resulting in gross proceeds to the Company of $4,828,034. The Company declared a dividend distribution payable as of March 31, 2011 to be paid in April 2011. The total dividend accrued was $26,672 of which $11,211 was payable in cash and $15,461 was payable by issuance of 1,627.5079 shares of common stock under the dividend reinvestment plan in April 2011.

The Company issued an additional 130,291 common shares (including shares issued for dividend reinvestment plan) for gross proceed of $1,092,091 subsequent to March 31, 2011 through the filing date of this report.

Our principal demands for funds will be for real estate and real estate-related acquisitions, for the payment of operating expenses and distributions, and for the payment of interest on our outstanding indebtedness. Generally, we expect to meet cash needs for items other than acquisitions from our cash flow from operations, and we expect to meet cash needs for acquisitions from the net proceeds of this offering and from financings.

There may be a delay between the sale of our shares and the purchase of properties or other investments, which could result in a delay in our ability to make distributions to our stockholders. Some or all of our distributions will be paid from other sources, such as from the proceeds of this offerings, cash advances to us by our advisor, cash resulting from a waiver of asset management fees and borrowings secured by our assets in anticipation of future operating cash flow until such time as we have sufficient cash flow from operations to fund fully the payment of distributions. We expect to have little, if any, cash flow from operations available for distribution until we make substantial investments and currently have no plans regarding when distributions will commence. In addition, to the extent our investments are in development or redevelopment projects or in properties that have significant capital requirements, our ability to make distributions may be negatively impacted, especially during our early periods of operation.

We intend to borrow money to acquire properties and make other investments. There is no limitation on the amount we may invest in any single property or other asset or on the amount we can borrow for the purchase of any individual property or other investment. We do not expect that the maximum amount of our indebtedness will exceed 300% of our “net assets” (as defined by the NASAA REIT Guidelines) as of the date of any borrowing; however, we may exceed that limit if approved by a majority of our independent directors and if disclosed to the stockholders in the next quarterly report along with the explanation for such excess borrowings. Our board of directors has adopted a policy to generally limit our aggregate borrowings to approximately 50% of the aggregate value of our assets unless substantial justification exists that borrowing a greater amount is in our best interests. Our policy limitation, however, does not apply to individual real estate assets and only will apply once we have ceased raising capital under this or any subsequent offering and invested substantially all of our capital. As a result, we expect to borrow more than 50% of the contract purchase price of each real estate asset we acquire to the extent our board of directors determines that borrowing these amounts is prudent. Our policy of limiting the aggregate debt to equity ratio to 50% relates primarily to mortgage loans and other debt that will be secured by our properties. The NASAA guideline limitation of 300% of our net assets includes secured and unsecured indebtedness that we may issue. We do not anticipate issuing significant amounts of unsecured and therefore we intend to limit the balance of our borrowings to 50% of the purchase prices, in the aggregate, of our property portfolio.

Our advisor may, but is not required to, establish capital reserves from gross offering proceeds, out of cash flow generated by operating properties and other investments or out of non-liquidating net sale proceeds from the sale of our properties and other investments. Capital reserves are typically utilized for non-operating expenses such as tenant improvements, leasing commissions and major capital expenditures. Alternatively, a lender may require its own formula for escrow of capital reserves.

Potential future sources of capital include proceeds from secured or unsecured financings from banks or other lenders, proceeds from the sale of properties and undistributed funds from operations. If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures.

Contractual Obligations

Our board of directors has approved our entering into the Advisory Agreement, the Property Management Agreement and the Dealer Management Agreement.

Off-Balance Sheet Arrangements

As of March 31, 2011, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective accounting standards if currently adopted, would have a material effect on the accompanied financial statements. (See note to financial statements disclosed in Item 1 to this quarterly report.)

Item 3. Quantitative and Qualitative Disclosures about Market Risks

We will be exposed to interest rate changes primarily as a result of long-term debt used to acquire properties and make loans and other permitted investments. Our interest rate risk management objectives will be to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we expect to borrow primarily at fixed rates or variable rates with the lowest margins available and, in some cases, with the ability to convert variable rates to fixed rates. With regard to variable rate financing, we will assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Form 10-Q, as of March 31, 2011, an evaluation was performed under the supervision and with the participation of the Company’s management, including the CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act. In performing this evaluation, management reviewed the selection, application and monitoring of our historical accounting policies. Based on that evaluation, the CEO and CFO concluded that as of March 31, 2011, these disclosure controls and procedures were effective and designed to ensure that the information required to be disclosed in our reports filed with the SEC is recorded, processed, summarized and reported on a timely basis. In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Management is required to apply judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control over Financial Reporting

There have been no changes during the Company’s quarter ended March 31, 2011, in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financing reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

None.

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

As of March 31, 2011, we had issued 492,088 shares in the Offering for gross proceeds of $4,828,034, out of which we paid $237,893 in selling commissions and $450,434 in organization and offering costs. With the net offering proceeds, we have invested $1,915,000 in the unconsolidated Joint Venture representing a 10% interest in the Joint Venture. As of May 16, 2011 we have invested an additional $2,872,500 in the Joint Venture for an additional 15% interest in the Joint Venture.

Our board of directors has approved our further acquisition interest in the Joint Venture of up to 100% of the total equity of the Joint Venture. As of May 16, 2011, we owned a 25% interest in the Joint Venture.

Item 3 Defaults Upon Senior Securities

None.

Item 4. Reserved

None.

Item 5. Other Information

None.

Item 6. Exhibits.

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH)

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH)

32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH)

32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HARTMAN SHORT TERM INCOME PROPERTIES XX, INC.


Date: May 18, 2011	By:	/s/ Allen R. Hartman
		Allen R. Hartman,
		Chairman of the Board and
		Chief Executive Officer (Principal Executive Officer)


Date: May 18, 2011	By:	/s/ Louis T. Fox, III
		Louis T. Fox, III,
		Chief Financial Officer
		(Principal Financial and Principal Accounting Officer)

Attached files

Hartman Short Term Income Properties XX, Inc. Reports

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