Hartman Short Term Income Properties XX Inc., Hartman Income REIT Inc., and Hartman Short Term Income Properties XIX Inc., three affiliated real estate investment trusts, have disclosed additional information on their lower net asset values per share ahead of the companies’ proposed merger.
The NAV per share is calculated by totaling the value of the company’s assets, subtracting the value of its liabilities and dividing by the number of shares outstanding.
Hartman XX is a publicly registered non-traded REIT, while Hartman Income REIT and Hartman XIX are private REITs. As previously reported by The DI Wire, Hartman XIX and Hartman Income REIT plan to merge with and into Hartman XX, with Hartman XX surviving the merger. The proposal is subject to shareholder approval.
Hartman XX has a NAV per share of $12.55 as of December 31, 2017, a decline of approximately $0.24 per share or 1.9 percent compared to its previous NAV per share of $12.79, as of December 31, 2016.
The value of the Hartman XX property portfolio increased approximately $400,000, while the amount of cash on hand at the determination date fell approximately $1.5 million, the amount of debt decreased slightly, and the valuation reflected the sale of a minority interest in a joint venture to an affiliate. The company noted that the actual net operating income from the portfolio continued its upward trend and increased by approximately $2.0 million between December 31, 2016 and December 2017.
Hartman Income REIT has a NAV per share of $9.42 as of December 31, 2017, a decrease of $0.20 per share or approximately 2.1 percent compared to its previous NAV per share of $9.62, as of December 31, 2016.
The value of the Hartman Income REIT property portfolio increased by approximately $500,000, other liabilities increased by almost $3.2 million, and debt remained relatively the same. Actual net operating income from the portfolio continued its upward trend and increased by approximately $200,000 between December 31, 2016 and December 2017.
Hartman XIX has a NAV per share of $13.19 as of December 31, 2017, a decrease of $2.65 per share or 16.7 percent compared to its previous NAV per share of $15.84, as of December 31, 2016.
The value of the Hartman XIX property portfolio decreased by approximately $13 million, with one property (Northchase) accounting for $6.4 million in decreased value and two other properties accounting for $2.8 million (Sawyer) and $2.6 million (616 FM 1960) in decreased value.
The company said that in each instance, the drop in value was primarily due to a decline in the expected net operating income budgeted for each property based on changing tenant mix, market conditions, tenant move-outs, renewals, expenses, and anticipated new lease activity.
Additionally, other asset liabilities increased approximately $1.7 million, and debt increased by approximately $1.2 million. Actual net operating income from all the properties in Hartman XIX continued an upward trend and increased by approximately $800,000 from December 31, 2016 to December 2017.
Many have asked Hartman what effect, if any, the changing NAVs will have on the proposed mergers. The company explained that the consideration for the exchange of stock would not change due to a change in the operations or values of the companies.
“It is inherent that in any merger, particularly one that requires significant documentation and regulatory approvals, that the consideration be established and ‘frozen’ as of a particular date,” the company noted in a filing with the SEC. “That has been done here. The terms of the merger agreements were established based upon the NAV’s established for each company based upon the NAV’s as established as of December 31, 2016.”
The company added, “Practically speaking, changing the terms of the merger consideration would simply further delay the mergers and to do so would require new negotiations, new agreements and a separate and entirely new fairness opinion, without a significant concomitant benefit to the overall combination of the companies.”
Hartman XX’s offering was declared effected by the SEC in February 2010 and closed in March 2016 after raising $176 million in investor equity. The REIT owns 17 properties with a combined investment cost of $275.5 million, according to Summit Investment Research.
Hartman Income REIT is a private REIT formed in January 2008 that focuses on acquiring and operating income producing office, retail and light industrial properties and owns 19 properties in the Houston, Dallas and San Antonio, Texas metropolitan areas.
Hartman XIX, which owns nine assets, is a private REIT formed in January 2007 and focuses on acquiring office, retail and light industrial properties.