-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H2bkxLF1nuQjYYqC5KHLmZU8xLevgyuUIfCaE4HLgaBDZNFTb1zumXQCtt1AhnOK 3gVAQCdExvAMQgs2tItk1A== 0001050502-98-000392.txt : 19981120 0001050502-98-000392.hdr.sgml : 19981120 ACCESSION NUMBER: 0001050502-98-000392 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981119 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERIVEST PROPERTIES INC CENTRAL INDEX KEY: 0000927102 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 841240264 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-14462 FILM NUMBER: 98755272 BUSINESS ADDRESS: STREET 1: 2801 YOUNGFIELD STREET STREET 2: SUITE 300 CITY: GOLDEN STATE: CO ZIP: 80401 BUSINESS PHONE: 3032057870 MAIL ADDRESS: STREET 1: 7100 GRANDVIEW AVE STREET 2: SUITE 1 CITY: ARVADA STATE: CO ZIP: 80002 10QSB 1 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, DC 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 September 30, 1998. 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.) Delaware 1-14462 84-1240264 -------- ------- ---------- (State or other jurisdiction (Commission File (IRS Employer of incorporation) Number) Identification No.) 2801 Youngfield Street, Suite 300; Golden, Colorado 80401 --------------------------------------------------------- (Address of principal executive offices) (Zip Code) (303) 205-7870 -------------- (Issuer'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 November 13, 1998 the Registrant had outstanding 1,658,770 shares of common stock, par value $.001. Transitional Small Business Disclosure Format (check one): Yes No X AMERIVEST PROPERTIES INC. AND SUBSIDIARIES FORM 10-QSB SEPTEMBER 30, 1998 Table of Contents ----------------- Part I Item 1. Financial Statements Balance Sheets as of December 31, 1997 and September 30, 1998 2 Statements of Operations for the Three Months and Nine Months Ended September 30, 1997 and 1998 3 Statements of Cash Flows for the Nine Months Ended September 30, 1997 and 1998 4 Notes to Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 - 8 Part II Item 6. Exhibits and Reports on Form 8-K 8 - 9 1 AMERIVEST PROPERTIES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, September 30, 1997 1998 ---- ---- ASSETS (Unaudited) Investment in real estate Land $ 2,668,758 $ 4,719,540 Buildings and improvements 13,064,287 22,261,791 Furniture, fixtures and equipment 248,667 253,640 Tenant improvements 519,945 563,673 Less accumulated depreciation and amortization (5,118,271) (5,616,731) ------------ ------------ Net Investment in Real Estate 11,383,386 22,181,913 Cash and cash equivalents 99,334 231,384 Tenant accounts receivable 34,625 147,942 Deferred financing costs, net 85,956 572,333 Prepaid expenses and other assets 38,767 441,953 ------------ ------------ $ 11,642,068 $ 23,575,525 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Mortgage loans payable $ 7,413,077 $ 18,690,048 Accounts payable and accrued expenses 48,543 229,650 Accrued interest 56,219 115,634 Accrued real estate taxes 298,074 398,134 Prepaid rents and security deposits 120,799 79,090 Dividends payable 160,801 199,052 ------------ ------------ Total Liabilities 8,097,513 19,711,608 ------------ ------------ STOCKHOLDERS' EQUITY Common stock, $.001 par value Authorized - 10,000,000 shares Issued and outstanding - 1,429,070 shares (1997) 1,429 1,659 and 1,658,770 shares (1998) Capital in excess of par value 4,463,955 5,598,602 Distribution in excess of accumulated earnings (920,829) (1,736,344) ------------ ------------ Total Stockholders' Equity 3,544,555 3,863,917 ------------ ------------ $ 11,642,068 $ 23,575,525 ============ ============ See accompanying notes to financial statements. 2
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended Nine Months Ended September 30, September 30, ------------- ------------- 1997 1998 1997 1998 ---- ---- ---- ---- (Unaudited) (Unaudited) REAL ESTATE OPERATING REVENUES Rental revenue Commercial Properties $ 287,610 $ 800,756 $ 819,534 $ 1,461,757 Storage Properties 355,477 368,732 995,957 1,089,870 ----------- ----------- ----------- ----------- 643,087 1,169,488 1,815,491 2,551,627 ----------- ----------- ----------- ----------- REAL ESTATE OPERATING EXPENSES Property operating expenses Operating Expenses 147,590 303,286 397,516 605,377 Real estate taxes 65,049 120,343 185,353 269,946 Management fees 32,612 60,465 94,487 135,957 General and administrative 97,629 113,511 295,326 310,820 Interest 170,013 309,603 511,900 666,130 Expenses associated with debt refinancing -- 337,000 -- 337,000 Depreciation and amortization 148,286 236,790 433,424 531,544 ----------- ----------- ----------- ----------- 661,179 1,480,998 1,918,006 2,856,774 ----------- ----------- ----------- ----------- OTHER INCOME Interest income 9,780 898 36,599 2,640 ----------- ----------- ----------- ----------- NET (LOSS) $ (8,312) $ (310,612) $ (65,916) $ (302,507) =========== =========== =========== =========== NET (LOSS) PER COMMON SHARE $ (.01) $ (.19) $ (.05) $ (.20) =========== =========== =========== =========== NET (LOSS) PER COMMON SHARE ASSUMING DILUTION $ (.01) $ (.19) $ (.05) $ (.20) =========== =========== =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 1,412,670 1,618,703 1,393,137 1,498,281 =========== =========== =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ASSUMING DILUTION 1,412,670 1,618,703 1,393,137 1,498,281 =========== =========== =========== =========== See accompanying notes to financial statements. 3
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS Nine Months Ended September 30, ------------- 1997 1998 ---- ---- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) $ (65,916) $ (302,507) Adjustments to reconcile net (loss) to net cash provided by operating activities Depreciation and amortization 433,424 531,544 Write off of loan fees -- 33,348 Changes in assets and liabilities (Increase) in receivables (17,349) (113,317) Decrease (Increase) in prepaids 12,337 (404,458) (Decrease) Increase in accounts payable (7,282) 161,132 (Decrease) Increase in accruals (22,705) 146,338 ------------ ------------ Net cash provided by operating activities 332,509 52,080 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Additions to investments in real estate (1,195,433) (8,297,923) ------------ ------------ Net cash (used) by investing activities (1,195,433) (8,297,923) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short term borrowings 160,000 980,000 Repayments of short term borrowings -- (1,130,000) Proceeds from mortgage loans -- 15,700,000 Payments on mortgage loans (99,997) (6,137,216) (Increase) in loan costs -- (551,537) Dividends paid (311,146) (483,354) ------------ ------------ Net cash (used) provided by financing activities (251,143) 8,377,893 ------------ ------------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,114,067) 132,050 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,230,640 99,334 ------------ ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD $ 116,573 $ 231,384 ============ ============ See accompanying notes to financial statements. 4
AMERIVEST PROPERTIES INC. NOTES TO FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 1998 The unaudited financial statements included herein were prepared from the records of the Company in accordance with Generally Accepted Accounting Principles 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 31,1997. The current interim period reported herein should be read in conjunction with the Company's Form 10-KSB subject to independent audit at the end of the year. The results of operations for the nine months ended September 30, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. 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 the Company's Form 10-KSB and elsewhere. These financial statements present the operations of the Company prior and subsequent to the Company's acquisitions in August 1997; June 1998; July 1998; and August 1998. Results of Operations --------------------- Three Months Ended September 30, 1998, Compared With Three Months Ended September 30, 1997. - -------------------------------------------------------------------------------- The Company's results of operations for the three months ended September 30, 1998 include 24 operating properties, whereas the September 30, 1997 results of operations included nine operating properties. The additional 15 operating properties were acquired between June 30, 1998 and August 18, 1998. Revenues for the third quarter 1998 increased approximately $526,400, and operating expenses, real estate taxes, management fees, general and administrative, interest, and depreciation and amortization increased approximately $155,700, $55,300, $27,900, $16,000, $139,600, and $88,500 respectively. All increases resulted primarily from inclusion of the operations of the 15 new properties; one as of June 30, 1998, ten as of July 1, 1998 and four as of August 18, 1998. The loss on early retirement of debt increased $337,000 due to a one time prepayment charge of $337,000 in connection with the Company's refinance of its four self-storage properties. The net loss for the three months ended September 30, 1998 was $310,612 or $.19 per share, as compared to a net loss of $8,312 or $.01 per share, for the three months ended September 30, 1997. Of the $310,612 net loss for the three months ended September 1998, $337,000, or $.21 per share, relates to the one-time prepayment charge in connection with the Company's refinance of its four self-storage properties. 5 Nine Months Ended September 30, 1998, Compared With Nine Months Ended September 30, 1997. - -------------------------------------------------------------------------------- The Company's results of operations for the nine months ended September 30, 1998 include 24 operating properties, whereas the September 30, 1997 results of operations include nine properties. The additional 15 properties were acquired between June 30, 1998 and August 18, 1998. Revenues for 1998 increased approximately $736,100, and operating expenses, real estate taxes, management fees, general and administrative, interest, and depreciation and amortization increased approximately $207,900, $84,600, $41,500, $15,000, $154,200, and $98,100, respectively. All increases resulted primarily from inclusion of the operations of the 15 new properties; one as of June 30, 1998, ten as of July 1, 1998, and four as of August 18, 1998. The loss on early retirement of debt increased $337,000 due to a one-time prepayment charge of $337,000 in connection with the Company's refinance of its four self-storage properties. The Company also had interest income of $2,640 in 1998, as compared to $36,599 in 1997. The net loss for the nine months ended September 30, 1998 was $302,507 or $.20 per share, as compared with a net loss of $65,916 or $.05 per share, for the nine months ended September 30, 1997. Of the $302,507 net loss for the nine months ended September 30, 1998, $337,000, or $.22 per share, relates to the one-time prepayment charge in connection with the refinance of the Company's four self-storage properties. Financial Condition, Liquidity And Capital Resources ---------------------------------------------------- From December 31, 1997 to September 30, 1998, net investment in real estate increased approximately $10,731,000. The net increase was primarily due to the acquisition of 15 properties for $11,205,000 and other improvements less depreciation for the nine month period of $498,500. On June 29, 1998, the Company completed the purchase of a small office building in Odessa, Texas (the "Odessa Property"). On July 13, 1998 the Company completed the acquisition of ten additional small office buildings in Texas. The total purchase price included 207,200 shares of AmeriVest Common Stock (including 7,300 shares for the Odessa Property) and $6.3 million in cash (including $80,000 for the Odessa Property). The purchase was financed primarily with a $6 million loan from TransAtlantic Capital Corporation, an affiliate of Deutsche Bank Securities Inc., and debt to the seller of $192,000. The eleven buildings, with approximately 200,000 total square footage, are leased as long-term leases to the State of Texas. The Company anticipates that their 11 newly acquired properties to have annualized revenues of $1,470,000 and net operating income, before debt service, of $800,000. The mortgage loan from TransAtlantic Capital Corporation is a ten year term, amortized over 30 years at a fixed rate of 7.66 percent. On August 18, 1998, the Company purchased four small bank buildings in Texas. The buildings, which total approximately 60,200 square feet, are leased primarily to NationsBank under long-term leases, the total purchase price for the four office buildings included approximately $1,990,000 of cash and an assumption of the existing mortgage of approximately $1,635,000. The cash for the purchase of these properties was obtained through the refinancing of the Company's four self-storage facilities. The refinancing of three of the self-storage facilities was undertaken by an affiliate of Goldman Sachs & Company on a ten-year term, and the fourth self-storage facility was refinanced on a five-year bank note. 6 Tenant accounts receivable increased approximately $100,000 due to the timing of receipts from leases with the State of Texas, at September 30, 1998. This is a normal occurrence each September as a result of the beginning of the State's new fiscal year. As of November 10, 1998 the tenant accounts receivable from leases with the State of Texas were current. Deferred financing costs, net, increased approximately $486,000 due primarily to the costs associated with the refinance of the Giltedge Office Building in May 1998, the financing of ten of the eleven office buildings, leased to the State of Texas in July 1998, and the refinancing of the Company's four self-storage properties in August 1998. Prepaid expenses and other assets increased by approximately $403,000 due primarily to costs associated with the acquisition of the eleven Texas state leased buildings and the four bank office buildings discussed elsewhere in this report. The financing arrangements from the new properties require escrowing of property taxes, property insurance and a repair and maintenance reserve for ten of the office buildings leased to the State of Texas. At September 30, 1998, the Company had approximately $231,000 of cash and cash equivalents, including approximately $199,000 of cash in reserve for a stockholder dividend distribution which was paid on October 14, 1998. Mortgage loans payable increased approximately $11,277,000 primarily as a result of refinancing the Giltedge Office Building and the four self-storage properties, the financing of ten of the eleven office buildings leased to the State of Texas, discussed elsewhere in this report, and the assumption of debt in connection with the purchase of the four bank office buildings. Accounts payable and accrued expenses, accrued interest, and accrued property taxes and dividends payable increased approximately $181,000, $59,400, $100,000, and $38,300, respectively. All increases resulted primarily from inclusion of the 15 newly acquired properties. Prepaid rents and security deposits decreased approximately $41,700 primarily from timing differences in the course of normal operations. The Company desires to acquire additional properties and, 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 dividends paid to stockholders. Management believes that the cash flow from its properties will be sufficient to meet the Company's working capital needs for the next year. All properties have been maintained on an ongoing basis so that capital resources in excess of existing cashflow to upgrade the facilities in the near future are not anticipated. Management believes that inflation should not have a material adverse effect on the Company. The Company's leases of office and showroom space require the tenants to pay increases in operating expenses, and the self-storage leases are short-term so that there are not contractual restraints against increasing rents to attempt to respond to inflationary pressures, if any inflationary pressures should materialize. 7 Year 2000 Compliance. - --------------------- Year 2000 compliance is the ability of computer hardware and software to respond to the problems posed by the fact that computer programs traditionally have used two digits rather than four digits to define an applicable year. As a consequence, any of the Company's computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing interruption of operations, including temporary inability to send invoices or engage in normal business activities or to operate equipment such as elevators, air conditioning units, and external security systems installed in the Company's buildings. The Company currently is working with its service contractors to review the operation of elevators, air conditioners, and other equipment installed in the Company's buildings to confirm that this equipment is Year 2000 compliant. The Company believes that this review will be completed prior to year-end and that the cost of this review will be included in the cost of the Company's service contracts for this equipment. The Company also intends to contact its major tenants to determine their Year 2000 compliance. Failure of tenants to be Year 2000 compliant may lead to delays in payment of rent to the Company and lost revenue to the Company. The Company intends to complete its review of tenant compliance in the first quarter of 1999. The Company has purchased a new accounting and tenant service software that is Year 2000 compliant. The Company would have purchased new software to meet its needs regardless of potential Year 2000 issues with its prior system. The Company anticipates installing and receiving training concerning this new software prior to year end at an approximate cost of less than $25,000. Until the Company's Year 2000 review has been completed, the Company has no estimate of the cost to correct any deficiency in Year 2000 compliance for this equipment. Upon the completion of the Company's Year 2000 review, the Company intends to develop a contingency plan to address potential Year 2000 problems. 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. Part II. Other Information Item 6. Exhibits And Reports On Form 8-K. --------------------------------- (A) The following Exhibit is filed as part of this Quarterly Report on Form 10-QSB: 27. Financial Data Schedule 8 (b) During the quarter ended September 30, 1998, the registrant filed a Current Report on Form 8-K reporting an event occurring on July 13, 1998, which was filed on July 28, 1998 and amended by a Form 8-K/A1 filed on September 28, 1998, and a Current Report on Form 8-K reporting an event occurring on August 18, 1998, which was filed on August 21, 1998 and amended by a Form 8-K/A1 filed on November 2, 1998. These Current Reports on Form 8-K concerned the Registrant's acquisitions of properties during the quarter ended September 30, 1998. SIGNATURES ---------- Pursuant to the requirements of the Securities And 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. November 19, 1998 By: /s/ James F. Etter ---------------------------------- James F. Etter, President and Principal Financial Officer 9 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS 9-MOS DEC-31-1998 DEC-31-1998 JUL-01-1998 JAN-01-1998 SEP-30-1998 SEP-30-1998 231,384 231,384 0 0 147,942 147,942 0 0 0 0 0 0 27,798,644 27,798,644 (5,616,731) (5,616,731) 23,575,525 23,575,525 0 0 18,690,048 18,690,048 0 0 0 0 1,659 1,659 3,862,258 3,862,258 23,575,525 23,575,525 0 0 1,169,488 2,551,627 0 0 1,171,395 2,190,644 0 0 0 0 309,603 666,130 0 0 0 0 (310,612) (302,507) 0 0 0 0 0 0 (310,612) (302,507) (.19) (.20) (.19) (.20)
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