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