UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the quarterly period ended June 30, 2002.
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from _____________ to ______________
Commission file number 1-14462
AmeriVest Properties Inc.
(Exact name of small business issuer as specified in its charter)
Maryland 84-1240264
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1780 South Bellaire Street
Suite 515, Denver, Colorado 80222
(Address of principal executive offices) (Zip Code)
(303) 297-1800
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
As of August 13, 2002 the Registrant had outstanding 10,906,753 shares of common
stock, par value $.001.
Transitional Small Business Disclosure Format (check one):
Yes No X
Table of Contents
-----------------
Part I Page No.
------ --------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of
June 30, 2002 (unaudited) and December 31, 2001......... 3
Consolidated Statements of Operations for
the Three and Six Month Periods Ended June 30, 2002
and 2001 (unaudited).................................... 4
Consolidated Statements of Cash Flows for
the Six Month Periods Ended June 30, 2002 and 2001
(unaudited)............................................. 5
Notes to Consolidated Financial Statements
(unaudited)............................................. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............. 10
Part II
-------
Item 1. Legal Proceedings.............................................. 15
Item 4. Submission Of Matters To A Vote Of Security Holders............ 15
Item 6. Exhibits and Reports on Form 8-K............................... 15
2
AMERIVEST PROPERTIES INC.
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2002 2001
------------- -------------
(unaudited)
ASSETS
Investment in real estate-
Land $ 14,137,891 $ 14,137,891
Buildings and improvements 68,778,039 67,433,077
Furniture, fixtures and equipment 326,450 237,442
Tenant improvements 2,238,305 1,788,942
Tenant leasing commissions 374,335 302,337
Less: accumulated depreciation and amortization (4,441,680) (3,058,662)
------------- -------------
Net investment in real estate 81,413,340 80,841,027
Cash and cash equivalents 21,416,676 1,119,355
Escrow deposits 647,918 673,213
Investment in unconsolidated affiliate 1,212,560 1,243,298
Due from related party 2,456,831 2,403,595
Accounts receivable 837,054 495,950
Deferred rents receivable 511,157 374,392
Deferred financing costs, net of accumulated amortization
of $200,397 and $118,751, respectively 530,145 597,885
Prepaid expenses and other assets 1,237,639 272,569
------------- -------------
Total assets $ 110,263,320 $ 88,021,284
============= =============
LIABILITIES
Mortgage loans and notes payable $ 59,250,786 $ 58,408,424
Accounts payable and accrued expenses 990,452 838,605
Due to related party 182,173 494,531
Accrued real estate taxes 762,925 1,564,341
Prepaid rents and security deposits 956,429 883,116
Dividends payable 1,360,807 835,282
------------- -------------
Total liabilities 63,503,572 63,024,299
------------- -------------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value
Authorized - 5,000,000 shares
Issued and outstanding - none -- --
Common stock, $.001 par value
Authorized - 15,000,000 shares
Issued and outstanding - 10,886,454 and 6,682,259 shares,
respectively 10,886 6,682
Capital in excess of par value 54,325,242 31,132,650
Distributions in excess of accumulated earnings (7,576,380) (6,142,347)
------------- -------------
Total stockholders' equity 46,759,748 24,996,985
------------- -------------
Total liabilities and stockholders' equity $ 110,263,320 $ 88,021,284
============= =============
The accompanying notes are an integral part of these consolidated financial statements.
3
AMERIVEST PROPERTIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three For the Six
Month Periods Ended Month Periods Ended
June 30, June 30,
-------------------------- --------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited)
REAL ESTATE OPERATING REVENUE
Rental revenue $ 3,528,818 $ 2,819,810 $ 7,154,870 $ 4,798,891
REAL ESTATE OPERATING EXPENSES
Property operating expenses-
Operating expenses 887,391 681,249 1,773,486 1,267,898
Real estate taxes 257,799 226,222 624,822 374,202
Management fees 31,820 141,545 59,882 242,846
General and administrative expenses 379,326 195,336 731,634 358,281
Impairment of deferred rents receivable -- 326,113 -- 326,113
Interest expense 920,170 894,575 1,818,526 1,490,051
Depreciation and amortization expense 706,149 792,011 1,391,079 1,133,066
----------- ----------- ----------- -----------
3,182,655 3,257,051 6,399,429 5,192,457
----------- ----------- ----------- -----------
OTHER INCOME
Interest income 50,816 9,444 52,897 21,182
Equity in loss of unconsolidated affiliates (23,649) -- (44,046) (10,843)
----------- ----------- ----------- -----------
27,167 9,444 8,851 10,339
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE GAIN ON SALE OF
REAL ESTATE 373,330 (427,797) 764,292 (383,227)
----------- ----------- ----------- -----------
GAIN ON SALE OF REAL ESTATE -- 1,143,698 -- 1,143,698
----------- ----------- ----------- -----------
NET INCOME $ 373,330 $ 715,901 $ 764,292 $ 760,471
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE
Basic $ 0.04 $ 0.22 $ 0.10 $ 0.24
=========== =========== =========== ===========
Diluted $ 0.04 $ 0.21 $ 0.10 $ 0.23
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic 8,688,314 3,268,056 7,698,139 3,130,227
=========== =========== =========== ===========
Diluted 8,891,825 3,413,289 7,879,376 3,248,541
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
4
AMERIVEST PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Month Periods Ended
June 30,
----------------------------
2002 2001
------------ ------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 764,292 $ 760,471
Adjustments to reconcile net income to net cash
from operating activities-
Gain on sale of real estate -- (1,143,698)
Depreciation and amortization expense 1,391,079 1,133,066
Amortization of deferred financing costs 81,646 45,732
Amortization of warrants 9,209 29,869
Equity in loss of unconsolidated affiliates 44,046 10,843
Impairment of deferred rents receivable -- 326,113
Accrued interest added to mortgage loans -- 123,894
Increase (decrease) in cash due to changes in:
Accounts receivable 125,961 (122,213)
Deferred rents receivable (136,765) (74,861)
Prepaid expenses and other assets (100,976) (89,968)
Accounts payable and accrued expenses (250,281) 345,589
Other accrued liabilities (728,103) (605,133)
------------ ------------
Net cash from operating activities 1,200,108 739,704
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Improvements to real estate (1,889,161) (3,419,118)
Deposit on real estate acquisition (200,000) --
Net advances to unconsolidated affiliate (377,295) --
Net proceeds from the sale of real estate -- 458,030
Acquisition of Sheridan Plaza at Inverness, LLC,
net of cash acquired -- (344,432)
Leasing commissions paid (74,231) (45,838)
Decrease in escrow deposits 25,295 138,701
------------ ------------
Net cash from investing activities (2,515,392) (3,212,657)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to mortgage loans and notes payable 2,330,201 2,390,330
Payments on mortgage loans and notes payable (1,554,383) (423,599)
Deposit for establishment of long-term credit facility (664,094) --
Deferred financing costs paid (13,906) (23,507)
Net proceeds from equity offering 22,868,619 --
Net proceeds from exercising of options and warrants 164,780 972,093
Dividends paid (1,518,612) (768,541)
------------ ------------
Net cash from financing activities 21,612,605 2,146,776
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 20,297,321 (326,177)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,119,355 1,046,976
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 21,416,676 $ 720,799
============ ============
The accompanying notes are an integral part of these consolidated financial statements.
5
AMERIVEST PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Six Month Periods Ended
June 30,
-----------------------
2002 2001
---------- ----------
(unaudited) (unaudited)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest during the period $1,710,114 $1,321,243
========== ==========
NON-CASH FINANCING ACTIVITIES:
Stock issued to the Dividend Re-Investment Plan ("DRIP") $ 154,188 $ --
========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
6
AMERIVEST PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002 (unaudited)
1. Organization
------------
AmeriVest Properties Inc. (the "Company") was incorporated under the laws
of the State of Delaware on August 25, 1993 and was reincorporated in the State
of Maryland in 1999. Effective January 1, 1996, the Company commenced operating
as a real estate investment trust ("REIT"). The Company owns and operates,
through its wholly-owned subsidiaries, the following properties:
Property Location
-------- --------
Sheridan Plaza at Inverness Englewood, CO
Sheridan Center Denver, CO
Kellogg Building Littleton, CO
Panorama Falls (a) Englewood, CO
Arrowhead Fountains Peoria, AZ
Keystone Office Park Indianapolis, IN
Bank of America Buildings (b) Texas
State of Texas Buildings (c) Texas
(a) 20% of the property is owned by the Company, 80% of the property
is owned by Freemark Abbey Panorama, LLC as a tenant in common
with the Company.
(b) These four buildings are leased approximately 63% to Bank of
America. The buildings are located in Mineral Wells, Georgetown,
Henderson and Clifton, Texas.
(c) These thirteen buildings are leased primarily to various agencies
of the State of Texas. The buildings are located in Arlington,
Paris, Marshall, Amarillo, El Paso (2), Belleville, Mission,
Clint, Lubbock, Temple, Hempstead and Columbus, Texas.
2. Interim Financial Statements
----------------------------
The unaudited consolidated financial statements included herein were
prepared from the records of the Company in accordance with accounting
principles generally accepted in the United States and reflect all adjustments
which are, in the opinion of management, necessary to provide a fair statement
of the results of operations and financial position for the interim periods.
Such financial statements generally conform to the presentation reflected in the
Company's Form 10-KSB filed with the Securities and Exchange Commission for the
year ended December 31, 2001. The consolidated results of operations for the six
months ended June 30, 2002 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2002. These financial
statements and notes should be read together with the financial statements and
notes included in the Company's Form 10-KSB for the year ended December 31,
2001.
3. New Accounting Pronouncements
-----------------------------
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting for
Asset Retirement", which is effective for financial statements issued for fiscal
years beginning after June 15, 2002. SFAS No. 143 addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. The Company is
currently evaluating the potential impact, if any, the adoption of SFAS No. 143
will have on its financial position and results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which is effective for fiscal
periods beginning after December 15, 2001 and interim periods within those
fiscal years. SFAS No. 144 establishes an accounting model for impairment or
disposal of long-lived assets to be disposed of by sale. The Company's adoption
of SFAS No. 144 had no impact on its financial statements.
7
4. Agreement with Sheridan Realty Advisors, LLC
--------------------------------------------
Effective January 1, 2000 through December 31, 2001, all of the Company's
properties were managed under a Property Management and Advisory Agreement (as
amended on March 12, 2001, the "Agreement") with Sheridan Realty Advisors, LLC
("SRA"), which also managed the day-to-day operations of the Company and
assisted and advised the Board of Directors on real estate acquisitions and
investment opportunities. Certain senior members of SRA are members of the
Company's management team and of the Company's Board of Directors. In accordance
with the Agreement, SRA received an administrative fee, a property management
and accounting fee, an advisory fee and a capital project fee for these
services. The property management and accounting fee was calculated as 5% of
gross collected rents, the advisory fee is calculated as 5% of capital deployed
for real property acquisitions and the capital project fee is calculated as 3%
of the total cost of capital projects in excess of $100,000. For accounting
purposes, the advisory and capital project fees are capitalized with the related
acquisition and project costs.
The Agreement was further amended and restated as of December 31, 2001 to
provide for the Company's acquisition of SRA's administrative and property
management and accounting services business, along with the elimination of those
related fees, effective January 1, 2002. As a result, most of SRA's employees,
including three of the Company's senior executives, became employees of the
Company and manage the day-to-day operations. The three senior executives also
remain employees of SRA. SRA continues to advise the Company with respect to
capital markets activity, real estate acquisitions and dispositions and major
capital projects. For these services, SRA continues to earn the advisory and
capital project fees under the amended and restated Agreement.
During 2000, SRA received incentive compensation in the form of five-year
warrants to purchase up to 750,000 shares of common stock at $5.00 per share.
Issuance of the warrants was approved by the shareholders at the annual meeting
on June 6, 2000. According to the Agreement, 225,000 of these warrants were
granted and vested on the approval date. These vested warrants have an estimated
fair value of $73,668, which is being amortized over the life of the Agreement
through December 31, 2003. The remaining 525,000 warrants vest in an amount
equal to 2.1% of capital deployed for real property acquisitions. As of June 30,
2002, 436,457 of the remaining 525,000 warrants vested and have an estimated
fair value of $261,691, which has been capitalized with the related acquisition
costs.
5. Stock Offering
--------------
On May 9, 2002, our Registration Statement became effective with the
Securities and Exchange Commission for an offering of 3,600,000 shares of common
stock, with a 30-day option to the underwriters to purchase up to an additional
540,000 shares to cover over-allotments, at a price of $6.05 per share. On May
15, 2002, the Company received $20,209,850, net of the underwriting commissions
and expenses, from the sale of the 3,600,000 shares. On June 11, 2002, the
Company received $3,046,478, net of the underwriting commissions, from the sale
of the 540,000 over-allotment shares. After payment of approximately $400,000 in
additional offering expenses, the proceeds will be used to acquire properties,
to repay debt, for capital improvements and/or to increase working capital.
6. Mortgage Loans and Notes Payable
--------------------------------
On April 4, 2002, the Company drew down the remaining available amount of
$1,030,201 on its loan from US Bank for a total outstanding balance of
$10,500,000. The loan is secured by a mortgage on Sheridan Center.
During the second quarter of 2002, the Company was approved for a
$29,700,000 long-term credit facility with a major life insurance company. This
facility will replace the existing short-term, variable rate mortgage loans on
Arrowhead Fountains, the Kellogg Building and Sheridan Center and will bear
interest at a fixed rate of 7.4%. This refinancing is expected to close in
December 2002, however, the loan is subject to a number of contingencies and
there is no assurance that this refinancing will actually occur.
8
The Company has a short-term revolving credit line from US Bank in the
amount of $300,000 and a $1,500,000 short-term unsecured credit line from
Sheridan Investments, LLC, a related party. At June 30, 2002, the Company did
not have an outstanding balance on either of these lines of credit.
7. Subsequent Event
----------------
The Company has entered into a contract to acquire an office property
within the next 60 days. The contract is subject to a number of contingencies
and there is no assurance that this acquisition will occur.
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
-----------------------------------------------------------------------
The following discussion and analysis of the consolidated financial
condition and results of operations should be read in conjunction with the
consolidated financial statements and notes thereto included in this Form 10-QSB
and elsewhere.
Results Of Operations
---------------------
Comparison of the three month period ended June 30, 2002 to the three month
period ended June 30, 2001
---------------------------------------------------------------------------
Three Month Periods Ended
June 30,
--------------------------
2002 2001 Change
----------- ----------- -----------
Rental revenue $ 3,528,818 $ 2,819,810 $ 709,008
Property operating expenses-
Operating expenses 887,391 681,249 206,142
Real estate taxes 257,799 226,222 31,577
Management fees 31,820 141,545 (109,725)
General and administrative expenses 379,326 195,336 183,990
Impairment of deferred rents receivable -- 326,113 (326,113)
Interest expense 920,170 894,575 25,595
Depreciation and amortization expense 706,149 792,011 (85,862)
----------- ----------- -----------
3,182,655 3,257,051 (74,396)
----------- ----------- -----------
Other Income-
Interest income 50,816 9,444 41,372
Equity in loss of unconsolidated affiliate (23,649) -- (23,649)
----------- ----------- -----------
27,167 9,444 17,723
----------- ----------- -----------
Income (loss) before gain on sale of real estate 373,330 (427,797) 801,127
----------- ----------- -----------
Gain on sale of real estate -- 1,143,698 (1,143,698)
----------- ----------- -----------
Net Income $ 373,330 $ 715,901 $ (342,571)
=========== =========== ===========
Rental revenue
The increase in rental revenue is due primarily to the inclusion of the
operations of Arrowhead Fountains (acquired in November 2001) and the Kellogg
Building (acquired in December 2001), offset by the exclusion of the operations
of the Giltedge building (sold in June 2001) and the Panorama Falls building
(80% of which was sold in December 2001).
Property operating expenses
Operating expenses and real estate taxes increased as a result of the
above-mentioned transactions.
The decrease in management fees is due to the Company's acquisition of
Sheridan Realty Advisors, LLC ("SRA") administrative and property management and
accounting services business, along with the elimination of those related fees,
effective January 1, 2002. As a result, most of SRA's employees became employees
of the Company and manage the day-to-day operations. At that time, the Company
became a self-administered REIT. Subsequent to January 1, 2002, management fees
will decrease and general and administrative expenses will increase due to the
Company being internally managed versus externally managed in 2000 and 2001.
General and administrative expenses
The increase in general and administrative expenses is due to the
above-mentioned acquisition of SRA's administrative and property management and
accounting services business.
10
Impairment of deferred rents receivable
The charge recorded in 2001 represents an impairment of a deferred rent
receivable from a significant tenant, Rhythms NetConnections, Inc., which filed
for reorganization under Chapter 11 of the U.S. Bankruptcy Code in August 2001.
Rhythms no longer occupies any space in any of the Company's buildings.
Interest expense
The increase in interest expense is due to an increase in the average
outstanding debt balance for the three-month period ended June 30, 2002 by
approximately 37% from the prior year period. The increase in debt is primarily
due to the above-mentioned transactions. The effect of the increase in debt
level is partially offset by a decrease in interest rates, which resulted in
lower interest costs on the Company's variable rate debt.
Depreciation and amortization expense
The net decrease in depreciation and amortization expense is due to the
accelerated amortization of the Rhythms lease commission recorded during the
second quarter of 2001 offset by the overall increase in depreciable assets
resulting from the above-mentioned transactions.
Interest income
Interest income increased due to higher average outstanding cash balances
in interest bearing accounts in 2002 resulting from the Company's public
offering of 4,140,000 shares of common stock.
Equity in loss of unconsolidated affiliate
The equity in loss of unconsolidated affiliate recognized in 2002
represents the Company's share of the net loss of Panorama Falls. The Company
sold 80% of its interest in Panorama Falls in December 2001, retaining its
current 20% interest.
Gain on sale of real estate
The gain recognized in 2001 resulted from the sale of the Giltedge
building.
11
Comparison of the six month period ended June 30, 2002 to the six month period
ended June 30, 2001
------------------------------------------------------------------------------
Six Month Periods Ended
June 30,
--------------------------
2002 2001 Change
----------- ----------- -----------
Rental revenue $ 7,154,870 $ 4,798,891 $ 2,355,979
Property operating expenses-
Operating expenses 1,773,486 1,267,898 505,588
Real estate taxes 624,822 374,202 250,620
Management fees 59,882 242,846 (182,964)
General and administrative expenses 731,634 358,281 373,353
Impairment of deferred rents receivable -- 326,113 (326,113)
Interest expense 1,818,526 1,490,051 328,475
Depreciation and amortization expense 1,391,079 1,133,066 258,013
----------- ----------- -----------
6,399,429 5,192,457 1,206,972
----------- ----------- -----------
Other Income-
Interest income 52,897 21,182 31,715
Equity in loss of unconsolidated affiliates (44,046) (10,843) (33,203)
----------- ----------- -----------
8,851 10,339 (1,488)
----------- ----------- -----------
Income (loss) before gain on sale of real estate 764,292 (383,227) 1,147,519
----------- ----------- -----------
Gain on sale of real estate -- 1,143,698 (1,143,698)
----------- ----------- -----------
Net Income $ 764,292 $ 760,471 $ 3,821
=========== =========== ===========
Rental revenue
The increase in rental revenue is due primarily to the inclusion of the
operations of Sheridan Plaza at Inverness, LLC (acquired in April 2001) for the
full six months in 2002, Arrowhead Fountains (acquired in November 2001) and the
Kellogg Building (acquired in December 2001), offset by the exclusion of the
operations of the Giltedge building (sold in June 2001) and the Panorama Falls
building (80% of which was sold in December 2001).
Property operating expenses
Operating expenses and real estate taxes increased as a result of the
above-mentioned transactions.
The decrease in management fees is due to the afore-mentioned acquisition
of SRA's administrative and property management and accounting services
business.
General and administrative expenses
The increase in general and administrative expenses is due to the
afore-mentioned acquisition of SRA's administrative and property management and
accounting services business.
Impairment of deferred rents receivable
The charge recorded in 2001 represents an impairment of a deferred rent
receivable from Rhythms.
Interest expense
The increase in interest expense is due to an increase in the average
outstanding debt balance for the six-month period ended June 30, 2002 by
approximately 55% from the prior year period. The increase in debt is primarily
due to the above-mentioned transactions. The effect of the increase in debt
level is partially offset by a decrease in interest rates, which resulted in
lower interest costs on the Company's variable rate debt.
12
Depreciation and amortization expense
The net increase in depreciation and amortization expense is due to the
overall increase in depreciable assets resulting from the above-mentioned
transactions offset by the accelerated amortization of the Rhythms lease
commission recorded during the second quarter of 2001.
Interest income
Interest income increased due to higher average outstanding cash balances
in interest bearing accounts in 2002 resulting from the Company's public
offering of 4,140,000 shares of common stock.
Equity in loss of unconsolidated affiliates
The equity in loss of unconsolidated affiliate recognized in 2002
represents the Company's share of the net loss of Panorama Falls. The Company
sold 80% of its interest in Panorama Falls in December 2001, retaining its
current 20% interest.
The amount recognized in 2001 represents the Company's share of the net
loss of Sheridan Investments, LLC (which owned Sheridan Plaza at Inverness,
LLC). The original 9.639% interest in Sheridan Investments, LLC was acquired in
September 2000. This interest was then used as partial consideration for the
acquisition of 100% of Sheridan Plaza at Inverness, LLC in April 2001.
Gain on sale of real estate
The gain recognized in 2001 resulted from the sale of the Giltedge
building.
Liquidity And Capital Resources
-------------------------------
Liquidity
---------
Net cash from operations for the six month period ended June 30, 2002 was
approximately $1.2 million and is the primary source of liquidity to fund
distributions, debt service and capital expenditures. The Company also has lines
of credit available to assist with such cash needs. In May 2002, the Company
completed a public offering of common stock, which raised approximately $22.9
million, net of commissions and expenses. The proceeds will be used to acquire
properties, to repay debt, for capital improvements and/or to increase working
capital.
The Company has entered into a contract to acquire an office property
within the next 60 days. The contract is subject to a number of contingencies
and there is no assurance that this acquisition will occur.
Management believes that the cash flow from its existing properties and
future acquisitions, together with its existing lines of credit, will be
sufficient to meet the Company's working capital needs and distribution
requirements for the next year and beyond.
The Company desires to acquire additional properties. In order to do so, it
will need to raise additional debt or equity capital. The Company also intends
to obtain credit facilities for short and long-term borrowing with commercial
banks or other financial institutions. The issuance of such securities or
increase in debt for additional properties, of which there is no assurance,
could adversely affect the amount of cash available to pay dividends to
stockholders.
Financing
---------
Mortgage loans are collateralized by all properties. The following table
details the scheduled maturities of mortgages as of June 30, 2002:
2002 $ 266,127
2003 23,427,804
2004 9,654,927
2005 488,010
2006 14,579,886
Thereafter 10,834,032
-----------
Total $59,250,786
===========
13
Included in the 2003 maturities is the outstanding balance on the mortgage
loan on Panorama Falls in the amount of $3,071,038. Although the Company sold
80% of its interest in the property, the Company has retained 100% of the loan
balance on its balance sheet due to its continued obligation. As an offset, the
Company has recorded a receivable for 80% of this amount as due from related
party, with the remaining 20% included in the investment in unconsolidated
affiliate balance.
As of June 30, 2002, total mortgage loans (including the Panorama Falls
mortgage loan) consisted of approximately $27.0 million of fixed rate debt with
a weighted-average interest rate of approximately 7.9% and approximately $32.3
million of variable rate debt with a weighted-average interest rate of
approximately 4.5%.
On April 4, 2002, the Company drew down the remaining available amount of
$1,030,201 on its loan from US Bank for a total outstanding balance of
$10,500,000. The loan is secured by a mortgage on Sheridan Center.
During the second quarter of 2002, the Company was approved for a
$29,700,000 long-term credit facility with a major life insurance company. This
facility will replace the existing short-term, variable rate mortgage loans on
Arrowhead Fountains, the Kellogg Building and Sheridan Center and will bear
interest at a fixed rate of 7.4%. This refinancing is expected to close in
December 2002, however, the loan is subject to a number of contingencies and
there is no assurance that this refinancing will actually occur.
The Company has a short-term revolving credit line from US Bank in the
amount of $300,000 and a $1,500,000 short-term unsecured credit line from
Sheridan Investments, LLC, a related party. At June 30, 2002, the Company did
not have an outstanding balance on either of these lines of credit.
Inflation
---------
Management believes that inflation should not have a material adverse
effect on the Company. The Company's office leases require the tenants to pay
increases in operating expenses should any inflationary pressures materialize.
Forward-Looking Statements
--------------------------
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, and Section 21E of the Exchange Act
of 1934. Although the Company believes that the expectations reflected in the
forward-looking statements and the assumptions upon which the forward-looking
statements are based are reasonable, it can give no assurance that such
expectations and assumptions will prove to have been correct. See the Company's
Annual Report on Form 10-KSB for additional statements concerning important
factors, including occupancy and rental rates and operating costs that could
cause actual results to differ materially from the Company's expectations.
14
Part II. Other Information
Item 1. Legal Proceedings
-------------------------
No changes.
Item 4. Submission Of Matters To A Vote Of Security Holders
-----------------------------------------------------------
At the annual meeting of shareholders held May 23, 2002, shareholders
elected the following individuals to serve on the Board, each as a Class 3
Director:
Shares Voted Shares Voted Absentions and
Name in Favor Against Non-votes
---- -------- ------- ---------
William T. Atkins 6,298,695 -0- 17,925
Robert W. Holman 6,298,695 -0- 17,925
Item 6. Exhibits And Reports On Form 8-K
----------------------------------------
(a) On August 9, 2002, the Registrant filed a Current Report on Form 8-K
regarding a change of independent auditors.
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.
AMERIVEST PROPERTIES INC.
August 13, 2002
By: /s/ D. Scott Ikenberry
-----------------------------------
D. Scott Ikenberry
Chief Financial Officer
1. The undersigned are the Chief Executive Officer and the Chief Financial
Officer of AmeriVest Properties Inc. This Certification is made pursuant to
18 U.S.C.ss.1350 (Section 906 of the Sarbanes-Oxley Act of 2002). This
Certification accompanies the 10-QSB Report of AmeriVest Properties Inc.
for the quarter ended June 30, 2002.
2. We certify that such 10-QSB Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the
information contained in such 10-QSB Report fairly presents, in all
material respects, the financial condition and results of operations of
AmeriVest Properties Inc.
This Certification is executed as of August 13, 2002.
By: /s/ William T. Atkins
-----------------------------------
William T. Atkins
Chief Executive Officer
By: /s/ D. Scott Ikenberry
-----------------------------------
D. Scott Ikenberry
Chief Financial Officer
15