8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 4, 2005

AmeriVest Properties Inc.
(Exact name of small business issuer as specified in its charter)
Maryland	1-14462	84-1240264
(State or other jurisdiction of incorporation or organization)	(Commission File No.)	(I.R.S. Employer Identification No.)
1780 South Bellaire Street Suite 100, Denver, Colorado 80222
(Address of principal executive offices)
(303) 297-1800
(Registrant’s telephone number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o  Written communications pursuant to Rule 425 under the Securities Act

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act

o  Pre–commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

o  Pre–commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

Item 2.02.              Results of Operations and Financial Condition.

On May 4, 2005, AmeriVest Properties Inc. (“AmeriVest”) announced its consolidated financial results for the quarter ended March 31, 2005.  A copy of AmeriVest’s earnings press release is furnished as Exhibit 99.1 to this report on Form 8-K.  A copy of AmeriVest’s First Quarter 2005 Supplemental Operating and Financial Information package is furnished as Exhibit 99.2 to this report on Form 8-K.  The information contained in this report on Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by AmeriVest under the Securities Act of 1933, as amended.

Item 9.01.Financial Statements and Exhibits

(c)Exhibits:

Exhibit 99.1	Press Release, dated May 4, 2005.
Exhibit 99.2	First Quarter 2005 Supplemental Operating and Financial Information, dated May 4, 2005.

2

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.
Dated: May 5, 2005
	By:	/s/ Kathryn L. Hale
			Kathryn L. Hale
			Chief Financial Officer

3

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release, dated May 4, 2005.
99.2	First Quarter 2005 Supplemental Operating and Financial Information, dated May 4, 2005.

4

EX-99.1

Exhibit 99.1

	NEWS RELEASE
CONTACT:
Kim P. Boswood	1780 South Bellaire Street	Listed: AMEX
Investor Relations (ext. 118)	Suite 100	Trading Symbol: AMV
kimb@amvproperties.com	Denver, CO 80222	www.amvproperties.com
	Phone: (303) 297-1800
	Fax: (303) 296-7353

AMERIVEST ANNOUNCES PERFORMANCE AND OPERATING RESULTS FOR

FIRST QUARTER ENDED MARCH 31, 2005

DENVER, CO (May 4, 2005) — AmeriVest Properties Inc. (AMEX: AMV) reported results today for the quarter ended March 31, 2005.  Funds from operations (FFO) for the first quarter of 2005 was approximately $2,398,000 or $0.10 per diluted share, compared with approximately $1,878,000, or $0.11 per diluted share, for the same period in 2004.  The Company reported a net loss for the first quarter of 2005 of approximately $2,584,000, or $0.11 per share, compared with a loss of approximately $375,000, or $0.02 per share, for the same period of 2004.

                First quarter results were negatively impacted by the write off of deferred financing costs associated with the Texas State Buildings which were disposed of in March 2005, as well as Sarbanes-Oxley compliance costs. See the Summary Financial Information for a reconciliation of FFO and FFO per share to net loss and loss per share, the most directly comparable GAAP measures.

                Rental revenue for the first quarter of 2005 increased 37% over the prior year period due primarily to the Company’s growth. While revenues from properties acquired prior to 2003 declined year over year, revenues from our 2003 acquisitions more than offset that decline; however, most of the growth in revenues is attributable to our 2004 acquisitions.   The first quarter 2005 results include operations from the acquisition of Camelback Lakes (March 2004), Hackberry View (May 2004), Parkway Centre III (September 2004), and Hampton Court (November 2004).

                Property operating expenses for the first quarter of 2005 increased by 28% over the same period in 2004 due primarily to the Company’s growth and increases in property taxes and utility costs. General and administrative expenses increased approximately $383,000, or 41%, for the first quarter of 2005 compared with the same period in 2004.  This increase included approximately $335,000 in expenses related to the Company’s efforts to comply with Sarbanes-Oxley requirements, including increases in audit and consulting fees and related expenses.  During the first quarter of 2005, the Company also recognized approximately $144,000 of costs related to the continuing review of strategic alternatives.

First Quarter Highlights and Subsequent Events

• On March 3, 2005, the Company announced the completion of a Deed-in-Lieu Agreement to return 13 non-core properties in Texas to the lender. The properties were leased primarily to various agencies of the State of Texas and were located in 12 Texas cities. The Company recorded a loss of approximately $22,000 at disposition and wrote off unamortized deferred financing costs of approximately $216,000.

• On March 15, 2005 AmeriVest amended its loan facilities to provide liquidity to the company during its strategic alternative review and to waive and change certain covenants to bring the Company into compliance.  This amendment also imposed certain previously disclosed additional paydown requirements and accelerated the maturity date of the unsecured facility from November 12, 2007 to April 1, 2006, which increased the amortization of loan fees, a non-cash interest expense, by approximately $51,000 this quarter.

• On March 21, 2005, the Company announced the amendment and extension of the Dean Foods Company lease for 120,607 rentable square feet in the Chateau Plaza building in Dallas, Texas.  Under the terms of the amendment, the lease is extended for at least a one-year term commencing January 1, 2006 at a base rate of $19.75 per rentable square foot, plus electricity and parking.  The change in lease term and rate negatively impacted the Company’s rental revenue this quarter by approximately $11,000 in straight-line rent adjustment for the period March 15 through March 31.

• On April 25, 2005, the Company announced that William Atkins, Chairman and Chief Executive Officer, resigned as CEO of the Company on April 30, 2005.  Charles Knight, previously President and Chief Operating Officer, became the President and CEO effective May 1, 2005.

Update on Strategic Alternative Review

Since December 2004, the Board of Directors of the Company has been exploring and evaluating various strategic options for AmeriVest, including the identification of an institutional capital partner to assist in the Company’s growth, a sale or recapitalization of all or a portion of the Company’s properties, the potential sale or merger of the Company, and other possible transactions designed to enhance shareholder value.  The Board has not precluded any option and is continuing to explore a range of alternatives, including various strategies to recapitalize and strengthen its balance sheet, which may include raising additional debt or equity capital, selling or refinancing certain of the Company’s properties, acquiring additional assets individually or in portfolio transactions, operational improvements and reduction of general and administrative costs.  All of these measures are designed to stabilize the Company and position it for continued growth.

Supplemental Operating and Financial Information

The Supplemental Operating and Financial Information for the first quarter of 2005 is available online at the Company’s website, www.amvproperties.com by clicking the Investor Relations link and then the Supplemental Information link.

Conference Call Information

                The Company will hold an investor/analyst conference call on May 5, 2005, beginning at 11:30 am MST (1:30 pm EST, 12:30 pm CST and 10:30 am PST) to discuss its first quarter results.  To participate in the conference call, please dial (800) 548-8725 approximately ten minutes before the scheduled start of the call.  If you are calling from outside North America, please call (706) 634-5929.

                An audio replay will be available two hours after the completion of the conference call until May 10, 2005 by calling (800) 642-1687 or for participants outside North America, please call (706) 645-9291 and enter conference ID# 3657835.  A live web cast of the conference call will be available at www.amvproperties.com.  You must have Windows Media Player installed on your computer in order to listen to the web cast, which may be downloaded for free at the website listed above.

Company Information

                AmeriVest Properties Inc., with its principal office in Denver, Colorado, provides Smart Space for Small Business^SM in Denver, Phoenix, Dallas, and Indianapolis through the acquisition, repositioning and operation of multi-tenant office buildings in those markets. To receive AmeriVest’s latest news and information, visit our website at www.amvproperties.com.

In addition to historical information, this press release contains forward-looking statements and information under the federal securities laws.  These statements are based on expectations, estimates and projections about the industry and markets in which AmeriVest operates, management’s beliefs and assumptions made by management.  While AmeriVest management believes the assumptions underlying its forward-looking statements and information are reasonable, such information is necessarily subject to uncertainties and may involve certain risks, many of which are difficult to predict and are beyond management’s control.  As such, these statements and information are not guarantees of future performance, and actual operating results may differ materially from what is expressed or forecasted in this press release.  In particular, the factors that could cause actual operating results to differ materially include, without limitation, continued qualification as a real estate investment trust, the effects of general and local economic and market conditions, competition, regulatory changes, the ability to enter into new leases or renew leases on favorable terms, dependence on tenants’ financial condition, the uncertainties of real estate development and acquisition activity, development and construction costs, insurance risks, the costs and availability of financing, potential liability relating to environmental matters and liquidity of real estate investments and other risks and uncertainties detailed in AmeriVest’s 2004 Annual Report on Form 10-K and any amendments thereof and from time to time in the Company’s filings with the Securities and Exchange Commission.

AMERIVEST PROPERTIES INC.

Summary Financial Information

(unaudited)

	Three months ended March 31,
	2005				2004
Selected Income Statement Information:
Real Estate Operating Revenue
Rental revenue	$		12,639,220		$	9,208,874
Real Estate Operating Expenses
Property operating expenses -
Operating expenses	3,308,925				2,833,667
Real estate taxes	1,824,074				1,179,868
General and administrative expenses	1,315,813				932,549
Interest expense	3,826,087				2,612,254
Depreciation and amortization expense	4,783,989				2,697,096
Total operating expenses	15,058,888				10,255,434
Loss From Continuing Operations	(2,419,668			)	(1,046,560			)
Other Income/(Loss)
Interest income	10,739				15,363
Equity in loss of affiliate	—				(18,076			)
Minority interest	88,082				—
Total other income/(loss)	98,821				(2,713			)
Loss Before Discontinued Operations	(2,320,847			)	(1,049,273			)
Net Earnings/(Loss) from Discontinued Operations	(263,173			)	674,262
Net Loss	$		(2,584,020	)	$	(375,011		)
Loss Per Share
Basic and Diluted	$		(0.11	)	$	(0.02		)
Reconciliation to Funds from Operations (FFO):
Net loss	$	(2,584,020		)	$		(375,011	)
Depreciation and amortization expense	4,744,656				2,826,983
Loss on sale of depreciated real estate	21,804				(574,276			)
Deferred financing costs associated with the disposition of real estate	215,993				—
FFO	$	2,398,433			$		1,877,696
Funds from Operations per share - diluted	$	0.10			$		0.11
Weighted Average Common Shares Outstanding
Basic	24,011,672				17,567,414
Diluted	24,098,003				17,721,219

Funds from operations (FFO) is a non-GAAP financial measure.  We believe FFO, as defined by the Board of Governors of the National Association of Real Estate Investment Trusts (NAREIT) in the October 1999 White Paper (amended in April 2002), to be an appropriate measure of performance for an equity REIT, for the reasons, and subject to the qualifications, specified in the paragraph entitled “Non-GAAP Financial Measures” below.  The above summary financial information table reflects the reconciliation of FFO from net income or (loss) and a comparison to earnings or (loss) per share, the most directly comparable GAAP measure, for the periods presented.

AMERIVEST PROPERTIES INC.

Summary Financial Information (continued)

(unaudited)

	March 31,				December 31,
	2005				2004
Selected Balance Sheet Information:
Assets at cost	$		367,411,331		$	374,336,725
Less: accumulated depreciation and amortization	(28,706,186			)	(26,383,036			)
Total assets	$		338,705,145		$	347,953,689
Total mortgage loans, notes payable and unsecured line of credit	$		234,442,623		$	236,586,391
Total shareholders’ equity	$	91,005,042			$		93,469,915
Common shares issued and outstanding	24,022,597				23,982,233
Selected Property Information:
Number of operating properties owned	17				30
Total rentable square feet	2,508,115				2,732,957
Occupancy	89.0			%	88.3			%
Selected Stock Information:
Common share price (as of period end)	$	5.18			$		6.40
Equity market capitalization	$	124,437,052			$		153,486,291
Common share annualized dividends	N/A				$		0.52
Common share annualized dividend yield (as of period end)	N/A				8.1			%

Non-GAAP Financial Measures.  Funds from operations (FFO) is a non-GAAP financial measure.  FFO is defined as net income or loss, computed in accordance with generally accepted accounting principles (GAAP), excluding gains or losses from sales of properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures.  We believe that FFO is helpful to investors as a measure of the performance of an equity REIT because, it facilitates an understanding of the operating performance of its properties without giving effect to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes predictably over time.  Since real estate values have historically risen or fallen with market conditions, we believe that FFO provides a more meaningful and accurate indication of our performance.  We compute FFO in accordance with standards established by the Board of Governors of the National Association of Real Estate Investment Trusts (NAREIT), which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do.  FFO does not represent cash generated from operating activities determined by GAAP and should not be considered as an alternative to net income or loss (determined in accordance with GAAP) as an indication of our financial performance or to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions.  FFO may include funds that may not be available for our management’s discretionary use due to requirements to conserve funds for capital expenditures, debt repayments, property acquisitions and other commitments and uncertainties.

EX-99.2

Exhibit 99.2

Supplemental Operating and Financial Information
First Quarter 2005

Table of Contents

Corporate Information
Financial Information
	Selected Financial Data
	Consolidated Statements of Operations
	Same Store Property Results and Analysis
	Non-GAAP Financial Measures
	Consolidated Balance Sheets
	Debt Summary
Portfolio Information
	Property Summary
	Lease Expiration Information
	Other Property Information

Selected Financial Data

Company Overview

AmeriVest Properties Inc. is a real estate investment trust (REIT) which owns and operates commercial office buildings in selected markets catering to small and medium size businesses.  At March 31, 2005, AmeriVest owned, or had an ownership interest in, 17 properties totaling 2,508,115 square feet located in metropolitan Denver, Dallas, Phoenix and Indianapolis.

Strategy

We believe that office space for small to medium size businesses is a large and underserved market.  According to data compiled by the Office of Advocacy of the U.S. Small Business Administration, 89% of all U.S. businesses employed fewer than 20 employees.  As a result, we believe that many businesses have office space requirements of no more than 4,000 square feet.

Small to medium size businesses often have specific needs and limitations that are different from larger businesses.  For example, small and medium size businesses generally cannot afford large corporate staffs to manage their office leasing requirements.  These businesses have needs similar to larger firms, such as access to cutting edge technology, conference facilities, high quality telecommunications services and other amenities, but may not have a comparable budget.  Our strategy is to focus on providing an office product targeted to this large market and its unmet needs in a cost effective manner.  The key elements of our strategy include:

Provide a superior, consistent product - We provide amenities for the small and medium size businesses in our office properties that usually only larger companies would be able to obtain, such as conference rooms with the latest telecommunication and presentation equipment, high levels of common area and tenant finish, including well-designed, pre-built move-in ready space, and depending on the location, various other technology and service amenities relative to the needs of our targeted small business tenant.

Streamline the leasing process - Our leasing process is designed to meet the unique needs of a small to medium size tenant with limited real estate expertise, through our “no hassle” leasing philosophy which reduces the lease transaction time and cost for the tenant and us.

Provide a high level of service - With our deliberate focus on small and medium size businesses, we have developed a positive, service-oriented approach specifically tailored for our customer base.

Target select cities - We target cities that have excellent small business growth demographics, where we hope to build meaningful multi-property portfolios over both the near and long term.

As a result of our focused strategy, we believe that our properties provide office space that is particularly attractive for small and medium size businesses.  By executing on our strategy, we believe we have been able to maintain high occupancy rates while still maintaining strong rent per square foot trends in our core markets as compared to the general office market.

1

Directors and Executive Officers

Name	Position	Initial Date as Director
Charles K. Knight  (1)	Chief Executive Officer, President and Director	1999
Kathryn L. Hale	Chief Financial Officer and Secretary	—
John B. Greenman	Chief Investment Officer and Vice President	—
William T. Atkins	Director and Chairman of the Board	1999
Patrice Derrington	Outside Director	2003
Harry P. Gelles	Outside Director	2000
Alexander S. Hewitt	Director and Vice Chairman	2004
Robert W. Holman, Jr.	Lead Outside Director	2001
John A. Labate	Outside Director	1995
Jerry J. Tepper	Outside Director	2000
Corporate Headquarters	Investor Relations
1780 South Bellaire Street	Kim P. Boswood
Suite 100	(303) 297-1800 x 118
Denver, Colorado 80222	kimb@amvproperties.com
(303) 297-1800
Stock Exchange	Ticker
American Stock Exchange	AMV

(1)  Charles Knight replaced William Atkins as Chief Executive Officer on May 1, 2005.

2

Financial Information

Selected Financial Data

	As of and for the three months ended
	3/31/2005			12/31/2004			9/30/2004			6/30/2004			3/31/2004
	(amounts in thousands, except share, per share and property data)
Operating Data
Real estate operating revenue  (1)	$	12,639		$	12,252		$	11,046		$	11,016		$	9,209
General and administrative expenses	1,316			1,348			1,106			984			933
G&A as a percentage of revenue	10.4		%	11.0		%	10.0		%	8.9		%	10.1		%
Loss Per Share
Net loss	$	(2,584	)	$	(3,678	)	$	(1,302	)	$	(548	)	$	(375	)
Loss per share - basic	(0.11		)	(0.15		)	(0.05		)	(0.02		)	(0.02		)
Loss per share - diluted	(0.11		)	(0.15		)	(0.05		)	(0.02		)	(0.02		)
Funds from Operations (FFO) (2)
FFO	$	2,398		$	654		$	2,351		$	2,796		$	1,878
FFO per share - basic	0.10			0.03			0.10			0.12			0.11
FFO per share - diluted	0.10			0.03			0.10			0.12			0.11
Balance Sheet Data
Net investment in real estate	$	322,606		$	330,814		$	301,152		$	277,569		$	259,921
Total assets	338,705			347,954			317,767			294,877			275,911
Total liabilities	246,208			252,904			216,074			188,824			166,477
Minority interest	1,492			1,580			1,671			1,775			1,836
Total stockholders’ equity	91,005			93,470			100,022			104,278			107,598
Common Stock Data
Common shares outstanding	24,022,597			23,982,233			23,948,056			23,928,849			23,859,639
Weighted average shares - basic	24,011,672			23,959,656			23,934,094			23,898,957			17,567,414
Weighted average shares - diluted	24,098,003			24,076,729			24,050,124			24,011,520			17,721,219
Closing share price	$	5.18		$	6.40		$	6.68		$	5.89		$	6.75
Share price range for period (high - low)	$6.64 - $5.08			$7.30 -$6.26			$6.83 - $5.88			$6.93 - $5.48			$7.64 - $6.40
Dividends declared per share	$	—		$	0.13		$	0.13		$	0.13		$	0.13
Annualized dividend yield	N/A			8.1		%	7.8		%	8.8		%	7.7		%
Market value of common equity	$	124,437		$	153,486		$	159,973		$	140,941		$	161,053
Total liabilities	246,208			252,904			216,074			188,824			166,477
Total market capitalization	$	370,645		$	406,390		$	376,047		$	329,765		$	327,530
Property Data
Properties owned	17			30			29			28			27
Rentable square feet	2,508,115			2,732,957			2,628,044			2,480,232			2,365,640
Occupancy	89.0		%	88.3		%	86.2		%	85.1		%	84.5		%

(1)  All periods adjusted for discontinued operations.

(2)  See page 6 for a reconciliation of FFO to net loss and a comparison of FFO per share to loss per share, the most directly comparable GAAP measures.  FFO is not intended to be a measure of cash flow or liquidity.

3

Consolidated Statement of Operations

	Three months ended March 31,
	2005			2004
Real Estate Operating Revenue
Rental revenue	$	12,639,220		$	9,208,874
Real Estate Operating Expenses
Property operating expenses -
Operating expenses	3,308,925			2,833,667
Real estate taxes	1,824,074			1,179,868
General and administrative expenses	1,315,813			932,549
Interest expense	3,826,087			2,612,254
Depreciation and amortization expense	4,783,989			2,697,096
Total operating expenses	15,058,888			10,255,434
Loss From Continuing Operations	(2,419,668		)	(1,046,560		)
Other Income/(Loss)
Interest income	10,739			15,363
Equity in loss of affiliate	—			(18,076		)
Minority interest	88,082			—
Total other income/(loss)	98,821			(2,713		)
Loss Before Discontinued Operations	(2,320,847		)	(1,049,273		)
Net Earnings/(Loss) from Discontinued Operations (1)	(263,173		)	674,262
Net Loss	$	(2,584,020	)	$	(375,011	)
Loss Per Share
Basic	$	(0.11	)	$	(0.02	)
Diluted	$	(0.11	)	$	(0.02	)
Weighted Average Common Shares Outstanding
Basic	24,011,672			17,567,414
Diluted	24,011,672			17,567,414
Reconciliation to Funds from Operations (FFO): (2)
Net Loss	$	(2,584,020	)	$	(375,011	)
Depreciation and amortization expense on real estate investments	4,744,656			2,826,983
Loss on sale of depreciated real estate	21,804			(574,276		)
Loan costs associated with the disposition of real estate	215,993			—
FFO	$	2,398,433		$	1,877,696
Funds from Operations per share - diluted	$	0.10		$	0.11
Weighted Average Common Shares Outstanding-FFO Diluted		24,098,003			17,721,219

(1)  The following amounts reflect net income/(loss) from real estate investments classified as discontinued operations, including net gains/(losses) on properties sold:

Rental revenue	$	263,357		657,024
Property operating expenses	(162,474		)	(315,535		)
Interest expense	(72,476		)	(133,938		)
Deferred financing costs associated with the disposition of real estate	(215,993		)	—
Depreciation and amortization expense	(53,783		)	(107,565		)
Gain/(loss) on sale	(21,804		)	574,276
Net income/(loss)	$	(263,173	)	$	674,262

(2)  See page 6 for a reconciliation of FFO to net loss and a comparison of FFO per share, the most directly comparable GAAP measures.  FFO is not intended to be a measure of cash flow or liquidity.

4

Same Store Property Results and Analysis

	Three months ended March 31, (1)
	2005			2004			Change			% Change
Real Estate Operating Revenue
Rental revenue	$	9,050,912		$	9,031,585		$	19,327		0.2	%
Real Estate Operating Expenses
Property operating expenses -
Operating expenses	2,557,381			2,796,686			239,305			8.6	%
Real estate taxes	1,222,947			1,151,775			(71,172		)	-6.2	%
Total property operating expenses	3,780,328			3,948,461			168,133			4.3	%
Net Operating Income  (2)	$	5,270,584		$	5,083,124		$	187,460		3.7	%
Average rent per sq. foot at March 31,	$	20.56		$	20.44		$	0.12		0.6	%
Occupancy at March 31,	86.9		%	87.4		%				-0.5	%

(1)  Includes the following properties, which were operational during the entire three months ended March 31, 2004 and 2005:

Property	Sq Foot
AmeriVest Plaza at Inverness	118,720
Arrowhead Fountains	96,203
Centerra	186,582
Chateau Plaza	171,294
Financial Plaza	310,838
Greenhill Park	246,858
Kellogg Building	110,852
Keystone Office Park	114,879
Parkway Centre II	151,880
Scottsdale Norte	78,815
Sheridan Center	139,578
Southwest Gas Building	144,509
Total	1,871,008

(2)  See page 6 for a reconciliation of Same Store Net Operating Income to Loss from Continuing Operations.

5

Non-GAAP Financial Measures

Funds from Operations -

Funds from Operations (FFO) is a non-GAAP financial measure.  We believe FFO, as defined by the Board of Governors of the National Association of Real Estate Investment Trusts (NAREIT) in the October 1999 White Paper (amended in April 2002), to be an appropriate measure of performance for an equity REIT, for reasons, and subject to the qualifications, specified in the paragraphs entitled “Non-GAAP Financial Measures” below.  The following table reflects the reconciliation of FFO from net loss and a comparison of FFO per share to loss per share, the most directly comparable GAAP measures:

	Three months ended
	3/31/05			12/31/2004			9/30/2004			6/30/2004			3/31/2004
	(amounts in thousands, except share, per share and property data)
Funds from Operations (FFO) -
Net loss	$	(2,584	)	$	(3,678	)	$	(1,302	)	$	(548	)	$	(375	)
Depreciation and amortization expense	4,745			4,332			3,653			3,344			2,805
Share of depreciation and amortization expense of unconsolidated affiliate	—			—			—			—			22
Gain/loss on sale	22			—			—			—			(574		)
Loan costs associated with the disposition of real estate	216
FFO	$	2,398		$	654		$	2,351		$	2,796		$	1,878
Loss per share - diluted	$	(0.11	)	$	(0.15	)	$	(0.05	)	$	(0.02	)	$	(0.02	)
FFO per share - diluted	$	0.10		$	0.03		$	0.10		$	0.12		$	0.11
Common Stock Data -
Weighted average shares - diluted	24,098,003			24,076,729			24,050,124			24,011,520			17,721,219

Non-GAAP Financial Measures - Funds from Operations (FFO) is a non-GAAP financial measure.  FFO is defined as net income or loss, computed in accordance with generally accepted accounting principles (GAAP), excluding gains or losses from sale of properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures.  We believe that FFO is helpful to investors as a measure of the performance of an equity REIT because, it facilitates an understanding of the operations performance of its properties without giving effect to real estate depreciation and amortization, which assume that the value of real estate assets diminishes predictably over time.  Since real estate values have historically risen or fallen with market conditions, we believe that FFO provides a more meaningful and accurate indication of our performance.  We compute FFO in accordance with standards established by the Board of Governors of the National Association of Real Estate Investment Trusts (NAREIT), which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do.  FFO does not represent cash generated from operating activities determined by GAAP and should not be considered as an alternative to net income or loss (determined in accordance with GAAP) as an indication of our financial performance or to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions.  FFO may include funds that may not be available for our management’s discretionary use due to requirements to conserve funds for capital expenditures, debt repayments property acquisitions and other commitments and uncertainties.

Same Store Property Net Operating Income -

Net Operating Income (NOI) is defined as rental revenues less property operating expenses.  We rely on NOI for assessing property performance.  We also believe Same Store property NOI is a valuable means of comparing period-to-period property performance.  The following is a reconciliation of Same Store Property NOI to Loss From Continuing Operations:

	Three months ended March 31,
	2005			2004
	(amounts in thousands)
Same Store Property NOI	$	5,271		$	5,083
Non Same Store Property NOI	2,235			112
General and administrative expenses	(1,316		)	(933		)
Interest expense	(3,826		)	(2,612		)
Depreciation and amortization expense	(4,784		)	(2,697		)
Loss from Continuing Operations	$	(2,420	)	$	(1,047	)

6

Consolidated Balance Sheets

	March 31, 2005			December 31, 2004
Assets
Investment in real estate -
Land	$	57,228,891		$	58,338,781
Buildings and improvements	250,995,920			256,128,341
Furniture, fixtures and equipment	1,479,252			1,451,152
Tenant improvements	15,157,255			15,157,570
Tenant leasing commissions	3,460,141			3,101,178
Intangible assets	22,990,483			23,019,763
Less:  accumulated depreciation and amortization	(28,706,186		)	(26,383,036		)
Net investment in real estate	322,605,756			330,813,749
Cash and cash equivalents	789,177			1,859,660
Escrow deposits	7,391,244			7,726,652
Accounts receivable, net	697,759			671,251
Deferred rents receivable	3,886,484			3,430,609
Deferred financing costs, net	2,658,246			2,927,696
Prepaid expenses and other assets	676,479			524,072
Total assets	$	338,705,145		$	347,953,689
Liabilities
Secured mortgage loans and notes payable	$	205,382,327		$	211,729,328
Unsecured line of credit	29,060,296			24,857,063
Accounts payable and accrued expenses	3,891,671			4,524,282
Accrued real estate taxes	3,887,197			4,486,712
Prepaid rents, deferred revenue and security deposits	3,986,636			4,190,202
Dividends payable	—			3,116,130
Total liabilities	246,208,127			252,903,717
Minority Interest	1,491,976			1,580,057
Shareholders’ Equity
Preferred stock, $.001 par value
Authorized - 5,000,000 shares
Issued and outstanding - none	—			—
Common stock, $.001 par value
Authorized - 75,000,000 shares
Issued and outstanding - 24,022,597 and 23,982,233 shares, respectively	24,023			23,982
Capital in excess of par value	132,704,946			132,585,840
Distributions in excess of accumulated earnings	(41,723,927		)	(39,139,907		)
Total shareholders’ equity	91,005,042			93,469,915
Total liabilities and shareholders’ equity	$	338,705,145		$	347,953,689

7

Debt Summary

		March 31, 2005						December 31, 2004
Lender	Mortgaged Property	Maturity Date		Principal Balance		Interest Rate (1)			Principal Balance		Interest Rate (1)
Fixed Rate -
Teachers Insurance and Annuity Association of America	AmeriVest Plaza at Inverness	1/10/2006		$	14,370,197	7.90	%		$	14,412,347	7.90	%
Greenwich Capital Financial Products	Parkway Centre II Centerra Southwest Gas Building	10/1/2008		37,910,204		5.13	%		38,115,018		5.13	%
Metropolitan Life Insurance Company	Parkway Centre III	9/10/2009		15,070,941		4.47	%		15,154,645		4.47	%
Allstate Life Insurance Company	Financial Plaza	10/5/2010		24,045,098		5.25	%		24,173,324		5.25	%
Southern Farm Bureau Life Insurance Company	Scottsdale Norte	4/1/2011		6,553,731		7.90	%		6,568,596		7.90	%
J. P. Morgan Chase	Hackberry View - 1st	9/1/2012		11,387,931		6.57	%		11,424,345		6.57	%
J. P. Morgan Chase	Hackberry View - 2nd (2)	9/1/2012		960,839		8.00	%		967,654		8.00	%
Teachers Insurance and Annuity Association of America	Sheridan Center Arrowhead Fountains Kellogg Building	1/1/2013		28,733,061		7.40	%		28,852,678		7.40	%
Allstate Life Insurance Company	Camelback - 1st	9/5/2014		15,855,852		5.82	%		15,928,449		5.82	%
Allstate Life Insurance Company	Camelback - 2nd	9/5/2014		4,954,954		5.82	%		4,977,640		5.82	%
Security Life of Denver Insurance Company	Keystone Office Park - 1st	5/1/2022		4,207,994		8.00	%		4,236,333		8.00	%
Security Life of Denver Insurance Company	Keystone Office Park - 2nd	5/1/2022		472,286		8.63	%		474,284		8.63	%
GEMSA	Hampton Court	11/1/2007		7,900,000		5.48	%		7,900,000		5.48	%
Transatlantic Capital Company, LLC (3)	Texas State Buildings	8/1/2028		—		—			5,579,891		7.66	%
		Subtotal		$	172,423,088	6.09	%		$	178,765,204	6.14	%
Variable Rate -
KeyBank National Association - Senior Secured Line of Credit	Chateau Plaza Greenhill Park		(4)	$	32,900,000	5.35	%		$	32,900,000	4.96	%
KeyBank National Association -
Unsecured Line of Credit	Unsecured		(5)	29,060,296		5.53	%		24,857,063		5.63	%
		Subtotal		$	61,960,296	5.43	%		$	57,757,063	5.25	%
Other notes payable -
Lease Capital Corporation	Phone system	10/31/2007		59,239		11.11	%		64,124		11.11	%
		Subtotal		59,239		11.11	%		64,124		11.11	%
		Total debt		$	234,442,623	5.92	%		$	236,586,391	5.92	%

Scheduled maturities (for the years ended December 31,) - 

2005	40,207,412
2006	41,382,483
2007	11,167,321
2008	38,057,259
2009	15,526,679
Thereafter	88,101,469
Total	$	234,442,623
Debt information (for the three months ended March 31, 2005) -
Additions	$	5,203,233
Repayments	(6,565,859		)
Scheduled principal payments	(781,142		)
Net change in mortgage payable	$	(2,143,768	)

(1)  Interest only, does not include amortization of deferred financing costs or unused facility fees.

(2)  The amount recorded reflects a net present value calculation based on a fair market value rate of 8%.  The actual loan balance assumed was $697,847 at an interest rate of 15%.

(3)  On March 2, 2005, the Company completed a Deed-in-Lieu Agreement to return these properties to the lender to satisfy the outstanding balance of the mortgage payable.

(4)  The Secured Line of Credit has mandatory repayments of at least $2.5 million by July 1, 2005 and at least $10 million by September 1, 2005.  The line matures on November 12, 2005.

(5)  The Unsecured Line of Credit has mandatory repayments of at least $5.0 million by September 2005 and at least $10 million by January 2006.  The line matures on April 1, 2006.

8

Portfolio Information

Property Summary

			March 31, 2005				December 31, 2004
Building / Location	Year Acquired	Rentable Area (1)	Occupancy Rate (2)		Average Rent Per SF (3)		Occupancy Rate (4)		Average Rent Per SF (3)
Same Store -
Keystone Office Park
Indianapolis, IN	1999/2003	114,879	73.8	%	$	17.45	76.8	%	$	17.69
Sheridan Center
Denver, CO	2000	139,578	81.9	%	16.44		82.0	%	15.94
AmeriVest Plaza at Inverness
Englewood, CO	2001	118,720	81.2	%	20.06		93.9	%	21.03
Arrowhead Fountains
Peoria, AZ	2001	96,203	100.0	%	21.92		100.0	%	21.85
Kellogg Building
Littleton, CO	2001	110,852	94.0	%	19.87		93.0	%	19.56
Parkway Centre II
Plano, TX	2002	151,880	97.7	%	19.56		94.8	%	19.01
Centerra
Denver, CO	2002	186,582	84.7	%	18.06		85.2	%	18.09
Chateau Plaza
Dallas, TX	2002	171,294	97.3	%	23.48		99.5	%	23.42
Southwest Gas Building
Phoenix, AZ	2003	144,509	88.9	%	23.43		87.1	%	22.64
Financial Plaza
Mesa, AZ	2003	310,838	84.4	%	23.53		83.0	%	23.51
Scottsdale Norte
Scottsdale, AZ	2003	78,815	91.5	%	22.65		94.4	%	22.74
Greenhill Park
Addison, TX	2003	246,858	78.5	%	17.91		77.0	%	17.71
Camelback Lakes
Phoenix, AZ	2004	203,179	99.3	%	21.99		98.9	%	21.97
	Subtotal	2,074,187	88.1	%	$	20.72	88.5	%	$	20.61
Post March 31, 2004 Acquisitions -
Hackberry View
Irving, TX	2004	114,598	95.7	%	20.59		100.0	%	19.78
Parkway Centre III
Plano, TX	2004	152,391	93.9	%	20.69		93.8	%	20.94
Hampton Court
Dallas, TX	2004	108,183	100.0	%	21.27		100.0	%	21.13
	Subtotal	375,172	96.2	%	$	20.83	97.5	%	$	20.63
Joint Ventures -
Panorama Falls (5)
Englewood, CO	2000	58,756	75.8	%	19.54		64.8	%	19.84
	Subtotal	58,756	75.8	%	$	19.54	64.8	%	$	19.84
Non-Core -
Texas State Buildings
Texas	1997/1998	n/a	n/a		n/a		77.1	%	9.06
	Subtotal	n/a	n/a		n/a		77.1	%	$	9.06
	Total	2,508,115	89.0	%	$	20.71	88.3	%	$	19.78

(1)  Includes office space but excludes storage, telecommunications and garage space.

(2)  Includes approximately 34,000 square feet (1.5% of total rentable area) that has been leased but is not yet occupied and approximately 15,000 square feet (0.7% of total rentable area) that is leased but has been vacated.  Excludes approximately 14,500 square feet (0.7% of total rentable area) that expired on or about March 31, 2005.

(3)  Annualized cash basis revenue divided by leased area.

(4)  Includes approximately 73,000 square feet (2.7% of total rentable area) that has been leased but is not yet occupied and approximately 28,000 square feet (1.0% of total rentable area) that is leased but has been vacated.  Excludes approximately 9,000 square feet (0.3% of total rentable area) that expired on or about December 31, 2004.

(5)  20% of the property is owned by AmeriVest and 80% of the property is owned by one other investor as tenants in common. Beginning March 31, 2004, the balance sheet and results of operations for this joint venture are included in the Company’s consolidated financial statements as a result of adopting FIN46R.

9

Lease Expiration Information

The following schedules detail the tenant lease expirations for our 100%-owned properties at March 31, 2005 in total and by geographic region: (1) (2)

Consolidated

Year	Number of Leases	Square Footage	Annual Revenue (3)		Percentage of Total Annual Revenue
2005	82	265,024	5,615,665		12.7	%
2006	104	411,975	8,840,068		20.0	%
2007	106	444,548	9,100,153		20.6	%
2008	76	268,656	5,352,391		12.1	%
2009	57	331,590	7,107,448		16.1	%
2010	32	257,103	5,110,196		11.6	%
2011	10	67,538	1,411,911		3.2	%
2012	6	53,047	1,153,620		2.6	%
2013	—	—	—		—
2014	2	24,062	320,480		0.7	%
2015	3	7,884	109,706		0.2	%
Total	478	2,131,427	$	44,121,638	100.0	%

Denver

Year	Number of Leases	Square Footage	Annual Revenue (3)		Percentage of Total Annual Revenue
2005	46	89,855	1,838,152		22.7	%
2006	48	70,181	1,268,644		15.7	%
2007	47	80,757	1,477,094		18.2	%
2008	33	90,639	1,695,369		20.9	%
2009	19	45,382	811,547		10.0	%
2010	5	19,339	351,576		4.3	%
2011	4	14,532	273,303		3.4	%
2012	1	1,775	44,357		0.01
2013	—	—	—		—
2014	1	19,798	235,200		2.9	%
2015	3	7,884	109,706		1.4	%
Total	207	440,142	$	8,104,948	100.0	%

Phoenix

Year	Number of Leases	Square Footage	Annual Revenue (3)		Percentage of Total Annual Revenue
2005	13	89,624	1,998,210		11.7	%
2006	28	115,553	2,642,230		15.5	%
2007	31	150,393	3,423,989		20.1	%
2008	20	65,712	1,514,763		8.9	%
2009	23	171,448	4,070,363		23.8	%
2010	10	114,342	2,433,545		14.3	%
2011	2	19,119	437,497		2.6	%
2012	1	24,444	546,610		3.2	%
2013	—	—	—		—
2014	—	—	—		—
2015	—	—	—		—
Total	128	750,635	$	17,067,207	100.0	%

10

Dallas

Year	Number of Leases	Square Footage	Annual Revenue (3)		Percentage of Total Annual Revenue
2005	16	74,902	1,599,096		9.2	%
2006	18	194,774	4,357,849		24.9	%
2007	22	201,706	3,995,202		22.9	%
2008	20	107,850	2,066,390		11.8	%
2009	11	107,658	2,110,117		12.1	%
2010	14	109,439	2,087,407		11.9	%
2011	3	31,487	659,711		3.8	%
2012	3	23,741	512,489		2.9	%
2013	—	—	—		—
2014	1	4,264	85,280		0.5	%
2015	—	—	—		—
Total	108	855,821	$	17,473,541	100.0	%

Indianapolis

Year	Number of Leases	Square Footage	Annual Revenue (3)		Percentage of Total Annual Revenue
2005	7	10,643	180,207		12.2	%
2006	10	31,467	571,345		38.7	%
2007	6	11,692	203,868		13.8	%
2008	3	4,455	75,869		5.1	%
2009	4	7,102	115,421		7.8	%
2010	3	13,983	237,668		16.1	%
2011	1	2,400	41,400		2.8	%
2012	1	3,087	50,164		0.03
2013	—	—	—		—
2014	—	—	—		—
2015	—	—	—
Total	35	84,829	$	1,475,942	100.0	%

(1)  Excludes Kellogg Executive Suite and month-to-month tenants.

(2)  Does not include Panorama Falls.

(3)  Represents the annual base rent and excludes any adjustments for straight-line rent or expense recoveries.

11

Other Property Information

Geographic Distribution

The following chart illustrates the geographic distribution of our 100%-owned core properties (1) by square footage at March 31, 2005:

Portfolio by Lease Size (1)

Lease Size	Occupied Area	% of Occupied Area		Number of Leases	% of Total Leases
2,500 square feet and under	345,845	16.2	%	261	54.7	%
2,501 to 5,000 square feet	385,872	18.1	%	109	22.8	%
5,001 to 10,000 square feet	446,204	20.9	%	65	13.6	%
10,001 to 25,000 square feet	553,381	26.0	%	35	7.3	%
25,001 to 50,000 square feet	164,145	7.7	%	5	1.0	%
50,000 square feet and greater	235,980	11.1	%	3	0.6	%
	2,131,427	100.0	%	478	100.0	%

Ten Largest Customers

Tenant Name	Tenant Industry	Market	Lease Expiration	Square Feet	Annualized Rent (2)	% of Total Consolidated Annual Revenue (2)
Dean Foods Company	Wholesale trade/manufacturing	Dallas, TX	12/31/06	120,607	2,820,066	6.4	%
Southwest Gas Corporation	Energy	Phoenix, AZ	8/31/09	60,046	1,501,150	3.4	%
Capstar Radio Operating Co.	Entertainment	Phoenix, AZ	5/31/10	55,327	1,106,540	2.5	%
Hewitt Associates L.L.C.	Consulting/business services	Dallas, TX	1/31/10	43,137	938,230	2.1	%
First Health Group Corp.	Healthcare	Phoenix, AZ	4/30/05	36,833	791,910	1.8	%
Humana Health Plan, Inc.	Healthcare	Phoenix, AZ	3/14/06	29,848	597,830	1.4	%
DNA Productions	Computer systems and software	Dallas, TX	6/30/09	28,570	582,131	1.3	%
Allied Solutions	Financial services - insurance	Dallas, TX	12/31/09	25,757	450,747	1.0	%
Schlumberger Technology Corp.	Energy	Dallas, TX	7/31/07	24,606	472,284	1.1	%
Vision Offices Mesa, L.L.C.	Consulting/business services	Phoenix, AZ	10/31/12	24,444	546,610	1.2	%
				449,175	9,807,498	22.2	%

Tenant Diversification by Industry

The following table categorizes the leased area of our 100%-owned core properties by our tenant’s industry at March 31, 2005: (1)

Wholesale trade and manufacturing	11.2	%
Real estate	10.6	%
Healthcare	10.3	%
Consulting and business services	9.7	%
Financial services - advisement and brokerage	7.1	%
Financial services - mortgage	6.8	%
Legal	6.6	%
Financial services - insurance	6.3	%
Computer systems and software	6.2	%
Energy	5.7	%
Travel, entertainment and food service	4.0	%
Telecommunications	3.5	%
Accounting	2.8	%
Financial services - banks	2.1	%
Other	7.1	%

(1)  Does not include Panorama Falls.

(2)  Represents the annual base rent and excludes any adjustments for straight-line rent or expense recoveries.

12