8-K/A 1 amerivest8ka11-12.txt 8-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A-1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): November 12, 2002 AmeriVest Properties Inc. ------------------------- (Exact name of small business issuer as specified in its charter) Maryland 1-14462 84-1240264 -------- ------- ---------- (State or other jurisdiction of (Commission File No.) (I.R.S. Employer incorporation or organization) Identification No.) 1780 South Bellaire Street Suite 515, Denver, Colorado 80222 ------------------------------------------------------------ (Address of principal executive offices) (303) 297-1800 -------------- (Registrant's telephone number) Item 2. Acquisition or Disposition of Assets Purchase of Denver Office Building. On November 12, 2002, we completed the acquisition of the Centerra office building (the "Property"). The Property is located in Denver, Colorado and contains approximately 186,000 rentable square feet and is located on 1.15 acres of land. The aggregate purchase price for the Property was $18,658,300, which was paid with $13,057,660 from the proceeds of a loan from Fleet National Bank (the "Fleet Loan") and the balance paid in cash from a portion of the proceeds of our May 2002 public offering. The Property was purchased from WHMAB Real Estate L.P. (the "Seller"), an unrelated party. The purchase price of the Property was determined through negotiations between the Seller and us. The Fleet Loan represents the initial draw on a $30,000,000 revolving credit facility from Fleet National Bank. An additional draw on the Fleet Loan was used to purchase the Chateau Plaza office building in Dallas, Texas. The Fleet Loan bears interest at LIBOR plus 275 basis points, due in monthly installments of interest only, with the principal balance and accrued interest due on November 12, 2005. This loan may be prepaid at any time without penalty and is secured by a mortgage on the property. For a more complete description of this transaction, please see the Agreement of Purchase and Sale between us and the Seller dated August 12, 2002 (the "Purchase Agreement"), a copy of which is attached hereto as Exhibit 2.1, and our press release dated November 12, 2002, a copy of which is attached to this Form 8-K as Exhibit 99.1. The schedules and exhibits to the Purchase Agreement, a listing of which are included therein, have not been filed herewith. The schedules and exhibits will be furnished supplementally to the Securities and Exchange Commission upon request.
Item 7. Financial Statements and Exhibits. (a) Financial Statements of Real Estate Property Acquired: Independent Auditors' Report F-1 Statements of Revenue and Certain Expenses for the nine months ended September 30, 2002 (unaudited) and for the year ended December 31, 2001 F-2 Notes to Statements of Revenue and Certain Expenses F-3 (b) Unaudited Pro Forma Financial Information: Pro Forma Financial Information (unaudited) F-5 Pro Forma Consolidated Balance Sheet as of September 30, 2002 (unaudited) F-6 Pro Forma Consolidated Statements of Operations (unaudited): For the nine months ended September 30, 2002 F-7 For the year ended December 31, 2001 F-8 Notes to Pro Forma Consolidated Financial Statements (unaudited) F-9 Statement of Estimated Taxable Operating Results and Cash to be Made Available by Operations based upon the Year ended December 31, 2001 (unaudited) F-11 Note to Statement of Estimated Taxable Operating Results and Cash to be Made Available by Operations (unaudited) F-12
(c) Exhibits: Exhibit Number Exhibit Title -------------- ------------- 2.1 Agreement of Purchase and Sale between AmeriVest Properties Inc. and WHMAB Real Estate L.P. dated August 12, 2002 (Centerra)* 10.1 Revolving Credit Agreement among AmeriVest Properties Inc. and Fleet National Bank, as administrative agent, and the lenders party thereto, dated November 12, 2002. 10.2 Revolving Credit Note, dated November 12, 2002, by AmeriVest Properties Inc. to Fleet National Bank, as agent. 99.1 Press Release dated November 12, 2002* * Previously filed. 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. December 30, 2002 By: /s/ D. Scott Ikenberry ---------------------------------- D. Scott Ikenberry Chief Financial Officer INDEPENDENT AUDITORS' REPORT The Board of Directors of AmeriVest Properties Inc.: We have audited the accompanying statement of revenue and certain expenses of the Centerra Office Building in Denver, Colorado (the "Property") for the year ended December 31, 2001. This financial statement is the responsibility of the Property's management. Our responsibility is to express an opinion on the financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion. The statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and for inclusion in the Form 8-K of AmeriVest Properties Inc., as described in Note 1. The presentation is not intended to be a complete presentation of the Property's revenues and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenue and certain expenses of the Centerra Office Building for the year ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP Denver, Colorado December 13, 2002 F-1 CENTERRA OFFICE BUILDING STATEMENTS OF REVENUE AND CERTAIN EXPENSES For the Nine For the Year Months Ended Ended September 30, December 31, 2002 2001 ----------- ---------- (unaudited) REVENUE: Rental revenue $2,212,431 $2,385,593 Other revenue 279,754 310,153 ---------- ---------- Total revenue 2,492,185 2,695,746 ---------- ---------- CERTAIN EXPENSES: Operating expenses 403,226 563,829 Repairs and maintenance 111,483 111,703 Utilities 174,161 241,075 Real estate taxes 250,731 334,308 Management fees 61,544 67,425 ---------- ---------- Total expenses 1,001,145 1,318,340 ---------- ---------- EXCESS OF REVENUE OVER CERTAIN EXPENSES $1,491,040 $1,377,406 ========== ========== The accompanying notes are an integral part of these financial statements. F-2 CENTERRA OFFICE BUILDING NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES DECEMBER 31, 2001 NOTE 1 - BASIS OF PRESENTATION The accompanying statement of revenue and certain expenses reflects the operations of the Centerra Office Building ("Centerra" or the "Property"). The Property consists of one office building located in Denver, Colorado. The Property contains approximately 186,000 rentable square feet and is located on 1.15 acres of land. As of September 30, 2002 and December 31, 2001, the Property had an occupancy percentage of 79% and 82%, respectively. The Property was acquired by AmeriVest Properties Inc. and subsidiaries ("AmeriVest") from an unrelated party on November 12, 2002 for $18,658,300, which was paid with $13,057,660 from the proceeds of a loan from Fleet National Bank and the balance paid in cash from a portion of the proceeds of the May 2002 public offering. In addition, AmeriVest incurred approximately $331,000 in related acquisition fees and costs, of which $281,470 represents the advisory fee earned by Sheridan Realty Advisors, LLC, a related party, in connection with the acquisition in accordance with the Property Management and Advisory Agreement. The advisory fee is expensed immediately upon the closing of the acquisition while the remaining acquisition costs, which are paid to unrelated third parties, are capitalized as a cost of acquiring the property. The accounting records of the Property are maintained on the accrual basis. The accompanying statement of revenue and certain expenses was prepared pursuant to the rules and regulations of the Securities and Exchange Commission, and exclude certain expenses such as mortgage interest, depreciation and amortization, professional fees and other costs not directly related to future operations of the Property. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Interim Information (unaudited) ------------------------------- In the opinion of the management of AmeriVest, the unaudited interim information as of September 30, 2002 included herein contains all adjustments necessary, which are of a normal recurring nature, to present fairly the revenue and certain expenses for the nine months ended September 30, 2002. Results of interim periods are not necessarily indicative of results to be expected for the year. Management is not aware of any material factors that would cause the information included herein to not be indicative of future operating results. F-3 NOTE 2 - OPERATING LEASES The Property's revenue is obtained from tenant rental payments as provided for under non-cancelable operating leases, many of which are renewable. Future minimum lease payments due under these leases, excluding tenant reimbursements of operating expenses, as of December 31, 2001, are as follows: Year Ending December 31: 2002 $ 2,637,798 2003 2,212,570 2004 1,661,994 2005 1,157,969 2006 903,045 Thereafter 1,064,952 ------------ $ 9,638,328 ============ Tenant reimbursements of operating expenses are included in other revenue on the accompanying statements of revenue and certain expenses. The following table exhibits those tenants who accounted for greater than 10% of the revenues for the year ended December 31, 2001, and the corresponding percentage of the future minimum revenues above: Percentage of Percentage of Future Tenant 2001 Revenues Minimum Revenues ------ ------------- ---------------- A 11.7% 10.4% B 10.2% 8.3% Tenant A is a real estate brokerage company and tenant B is an insurance company. On December 9, 2002, United Air Lines, Inc., a tenant in Centerra, filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. United Air Lines, Inc. occupies 19,229 square feet under a lease, which is scheduled to expire on November 30, 2008. The future minimum revenues provided by this lease account for 31.5% of the total disclosed above. F-4 AMERIVEST PROPERTIES INC. AND SUBSIDIARIES PRO FORMA FINANCIAL INFORMATION (unaudited) The accompanying unaudited pro forma consolidated balance sheet presents the historical financial information of AmeriVest as of September 30, 2002 as adjusted for the acquisition of Centerra, as if the transaction had occurred on September 30, 2002. The accompanying unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2002 and the year ended December 31, 2001 combine the historical operations of AmeriVest with the historical operations of Centerra as if the transaction had occurred on January 1, 2001. The unaudited pro forma consolidated financial statements have been prepared by AmeriVest management based upon the historical financial statements of AmeriVest and Centerra. These pro forma statements may not be indicative of the results that actually would have occurred if the combination had been in effect on the dates indicated or which may be obtained in the future. The pro forma financial statements and notes thereto should be read in conjunction with the historical financial statements included in AmeriVest's previous filings with the Securities and Exchange Commission. F-5
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 2002 (unaudited) AmeriVest Acquisition Pro Forma (Historical) of Centerra Combined ------------- ------------- ------------- ASSETS Investment in Real Estate Land $ 18,434,269 $ 776,400 (b) $ 19,210,669 Building and improvements 87,806,952 17,931,900 (b) 105,738,852 Furniture, fixtures and equipment 328,747 -- 328,747 Tenant improvements 2,561,879 -- 2,561,879 Tenant leasing commissions 421,677 -- 421,677 Less: accumulated depreciation and amortization (5,203,317) -- (5,203,317) ------------- ------------- ------------- Net Investment in Real Estate 104,350,207 18,708,300 123,058,507 Cash and cash equivalents 14,383,104 (5,729,007)(a) 8,654,097 Escrow deposits 1,755,049 -- 1,755,049 Investment in unconsolidated affiliate 1,263,275 -- 1,263,275 Due from related party 2,724,293 -- 2,724,293 Due from unconsolidated affiliate 782,397 -- 782,397 Accounts receivable 191,111 -- 191,111 Deferred rent receivable 571,390 -- 571,390 Deferred financing costs, net 541,695 415,000 (c) 956,695 Prepaid expenses, escrows and other assets 1,442,034 -- 1,442,034 ------------- ------------- ------------- Total Assets $ 128,004,555 $ 13,394,293 $ 141,398,848 ============= ============= ============= LIABILITIES Mortgage loans and notes payable $ 76,452,290 $ 13,057,660 (c) $ 89,509,950 Accounts payable and accrued expenses 1,253,611 -- 1,253,611 Due to related party 105,926 281,470 (d) 387,396 Accrued real estate taxes 1,453,284 250,731 (b) 1,704,015 Prepaid rents and security deposits 1,308,617 85,902 (b) 1,394,519 Dividends payable 1,426,964 -- 1,426,964 ------------- ------------- ------------- Total Liabilities 82,000,692 13,675,763 95,676,455 ------------- ------------- ------------- STOCKHOLDERS' EQUITY Common stock 10,977 -- 10,977 Capital in excess of par value 54,833,805 -- 54,833,805 Distributions in excess of accumulated earnings (8,840,919) (281,470)(d) (9,122,389) ------------- ------------- ------------- Total Stockholders' Equity 46,003,863 (281,470) 45,722,393 ------------- ------------- ------------- Total Liabilities and Stockholders' Equity $ 128,004,555 $ 13,394,293 $ 141,398,848 ============= ============= ============= See notes to the pro forma consolidated financial statements. F-6 AMERIVEST PROPERTIES INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 2002 (unaudited) Historical ---------------------------- Pro Forma Pro Forma AmeriVest Centerra Adjustments Combined ------------ ------------ ------------ ------------ REAL ESTATE OPERATING REVENUE Rental revenue $ 10,937,842 $ 2,492,185 $ -- $ 13,430,027 ------------ ------------ ------------ ------------ REAL ESTATE OPERATING EXPENSES Property Operating Expenses Operating expenses 2,725,931 677,294 -- 3,403,225 Real estate taxes 1,006,350 250,731 -- 1,257,081 Management fees 96,944 61,544 (61,544)(e) 96,944 General and administrative expenses 1,070,091 11,576 -- 1,081,667 Advisory fee 251,910 -- -- 251,910 Interest expense 2,774,083 -- 555,992 (f) 3,330,075 Depreciation and amortization expense 2,161,580 -- 336,223 (g) 2,497,803 ------------ ------------ ------------ ------------ 10,086,889 1,001,145 830,671 11,918,705 ------------ ------------ ------------ ------------ OTHER INCOME/LOSS Interest income 135,961 -- -- 135,961 Equity in loss of unconsolidated affiliate (60,197) -- -- (60,197) ------------ ------------ ------------ ------------ 75,764 -- -- 75,764 ------------ ------------ ------------ ------------ NET INCOME $ 926,717 $ 1,491,040 $ (830,671) $ 1,587,086 ============ ============ ============ ============ NET INCOME PER COMMON SHARE Basic $ 0.11 $ 0.18 ============ ============ Diluted $ 0.10 $ 0.18 ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic 8,785,796 8,785,796 ============ ============ Diluted 8,960,471 8,960,471 ============ ============ See notes to the pro forma consolidated financial statements. F-7 AMERIVEST PROPERTIES INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2001 (unaudited) Historical ---------------------------- Pro Forma Pro Forma AmeriVest Centerra Adjustments Combined ------------ ------------ ------------ ------------ REAL ESTATE OPERATING REVENUE Rental revenue $ 10,944,383 $ 2,695,746 $ -- $ 13,640,129 ------------ ------------ ------------ ------------ REAL ESTATE OPERATING EXPENSES Property Operating Expenses Operating expenses 2,643,448 904,207 -- 3,547,655 Real estate taxes 1,132,819 334,308 -- 1,467,127 Management fees 523,687 67,425 65,436 (e) 656,548 General and administrative expenses 677,845 12,400 -- 690,245 Advisory fee -- -- 281,470 (d) 281,470 Impairment of deferred rents receivable 326,113 -- -- 326,113 Interest expense 3,181,697 -- 970,409 (f) 4,152,106 Depreciation and amortization expense 2,244,435 -- 448,298 (g) 2,692,733 ------------ ------------ ------------ ------------ 10,730,044 1,318,340 1,765,613 13,813,997 ------------ ------------ ------------ ------------ OTHER INCOME/LOSS Interest income 135,075 -- -- 135,075 Equity in loss of unconsolidated affiliates (17,366) -- -- (17,366) ------------ ------------ ------------ ------------ 117,709 -- -- 117,709 ------------ ------------ ------------ ------------ INCOME BEFORE GAIN ON SALE OF REAL ESTATE 332,048 1,377,406 (1,765,613) (56,159) GAIN ON SALE OF REAL ESTATE 1,156,445 -- -- 1,156,445 ------------ ------------ ------------ ------------ NET INCOME $ 1,488,493 $ 1,377,406 $ (1,765,613) $ 1,100,286 ============ ============ ============ ============ NET INCOME PER COMMON SHARE Basic $ 0.32 $ 0.24 ============ ============ Diluted $ 0.31 $ 0.23 ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic 4,680,719 4,680,719 ============ ============ Diluted 4,801,307 4,801,307 ============ ============ See notes to the pro forma consolidated financial statements. F-8
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited pro forma consolidated financial statements are presented to reflect the acquisition of Centerra by AmeriVest. The accompanying unaudited pro forma consolidated balance sheet presents the historical financial information of AmeriVest as of September 30, 2002 as adjusted for the acquisition of Centerra as if the transaction had occurred on September 30, 2002. The accompanying unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2002 and the year ended December 31, 2001 combine the historical operations of AmeriVest with the historical operations of Centerra as if the transaction had occurred on January 1, 2001. These pro forma statements may not be indicative of the results that actually would have occurred if the combination had been in effect on the dates indicated or which may be obtained in the future. NOTE 2 - PRO FORMA ADJUSTMENTS The unaudited pro forma consolidated financial statements reflect the following pro forma adjustments: (a) The net cash paid for Centerra consists of the following: Purchase price $ 18,658,300 Estimated acquisition costs 50,000 Loan origination fees 415,000 Less: mortgage loan (13,057,660) Less: credit for accrued real estate taxes (250,731) Less: credit for security deposits (85,902) ------------ Cash paid $ 5,729,007 ============ (b) The purchase price of Centerra was allocated to the assets and liabilities based on estimated fair values. (c) The loan in the amount of $13,057,660 represents the initial draw on a $30,000,000 revolving credit facility from Fleet National Bank. The loan bears interest at LIBOR plus 275 basis points, due in monthly installments of interest only, with the principal and accrued interest due on November 12, 2005. This loan may be prepaid at any time without penalty. AmeriVest paid a 1.25% loan origination fee for the aggregate credit facility, plus additional loan costs, which have been capitalized and are being amortized over the life of the loan. F-9 (d) Advisory fee of $281,470 earned by Sheridan Realty Advisors, LLC in connection with the acquisition of Centerra in accordance with the Property Management and Advisory Agreement. This fee was capitalized on acquisitions completed prior to January 1, 2002. However, due to the amendment of the Property Management and Advisory Agreement effective January 1, 2002, the advisory fee is being expensed beginning in 2002. (e) Pursuant to the Property Management and Advisory Agreement, Sheridan Realty Advisors, LLC would have earned a 5% management fee through December 31, 2001 and there would be no management fee expense, with respect to Centerra, beginning January 1, 2002 due to the Company being internally managed. Adjustments to management fees are as follows: Nine Months Ended Year Ended September 30, December 31, 2002 2001 --------- --------- Management fees in accordance with the property management agreement $ -- $ 132,861 Less: historical management fees (61,544) (67,425) --------- --------- Pro forma adjustment $ (61,544) $ 65,436 ========= ========= (f) Interest expense to be recognized related to the mortgage loan. Includes loan interest (assumed interest rates of 4.62% and 6.37% for the nine months ended September 30, 2002 and the year ended December 31, 2001, respectively) and the amortization of the loan origination fee. (g) Depreciation expense calculated assuming a 40-year useful life. NOTE 3 - INCOME PER SHARE Pro forma income per common share for the nine months ended September 30, 2002 and the year ended December 31, 2001 is computed based on the weighted average number of common shares outstanding during the periods presented. F-10 AMERIVEST PROPERTIES INC. AND SUBSIDIARIES STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS AND CASH TO BE MADE AVAILABLE BY OPERATIONS BASED UPON THE YEAR ENDED DECEMBER 31, 2001 (unaudited) The following represents an estimate of the taxable operating results and cash to be made available by operations expected to be generated by AmeriVest (including the operations of Centerra) based upon the pro forma consolidated statement of operations for the year ended December 31, 2001. These estimated results do not purport to represent results of operations for these properties in the future and were prepared on the basis described in the accompanying notes, which should be read in conjunction herewith. Revenue $ 13,507,776 ------------ Expenses Operating expenses 3,547,655 Real estate taxes 1,467,127 Management fees 656,548 General and administrative expenses 690,245 Interest expense 4,152,106 Depreciation and amortization expense 1,606,175 ------------ Total expenses 12,119,856 ------------ Estimated Taxable Operating Income 1,387,920 Add: Depreciation and amortization expense 1,606,175 Less: Advisory fee (281,470) ------------ Estimated Cash to be Made Available by Operations $ 2,712,625 ============ F-11 AMERIVEST PROPERTIES INC. AND SUBSIDIARIES NOTE TO STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS AND CASH TO BE MADE AVAILABLE BY OPERATIONS (unaudited) NOTE 1 - BASIS OF PRESENTATION Depreciation has been estimated based upon an allocation of the purchase price of Centerra to land (4%) and building (96%) and assuming (for tax purposes) a 39-year useful life applied on a straight-line method. No income taxes have been provided because the Company is organized and operates in such a manner so as to qualify as a Real Estate Investment Trust ("REIT") under the provisions of the Internal Revenue Code (the "Code"). Accordingly, the Company generally will not pay Federal income taxes provided that distributions to its stockholders equal at least the amount of its REIT taxable income as defined under the Code. F-12