SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended June 30, 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 84-1240264
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7100 Grandview Avenue, Suite 1
Arvada, Colorado 80002
- ---------------------------- -----
(Zip Code)
(303) 421-1224
--------------
(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 August 7, 1998 the Registrant had outstanding 1,645,270 shares of common
stock, par value $.001.
Transitional Small Business Disclosure Format (check one):
Yes No X
----- -----
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
FORM 10-QSB
JUNE 30, 1998
Table of Contents
-----------------
Page No.
Part I
Item 1. Financial Statements
Balance Sheets as of December 31, 1997 and
June 30, 1998 3
Statements of Operations for the Three Months and
Six Months Ended June 30, 1997 and 1998 4
Statements of Cash Flows for the Six Months Ended
June 30, 1997 and 1998 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 11
2
<PAGE>
<TABLE>
<CAPTION>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, June 30,
1997 1998
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
Investment in real estate
Land $ 2,668,758 $ 2,726,698
Buildings and improvements 13,064,287 13,192,757
Furniture, fixtures and equipment 248,667 249,675
Tenant improvements 519,945 539,490
Less accumulated depreciation and amortization (5,118,271) (5,399,504)
------------ ------------
Net Investment in Real Estate 11,383,386 11,309,116
Cash and cash equivalents 99,334 209,874
Tenant accounts receivable 34,625 33,811
Deferred financing costs, net 85,956 101,347
Prepaid expenses and other assets 38,767 617,150
------------ ------------
$ 11,642,068 $ 12,271,298
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Mortgage loans payable $ 7,413,077 $ 8,393,704
Accounts payable and accrued expenses 48,453 74,473
Accrued interest 56,219 56,219
Accrued real estate taxes 298,074 188,099
Prepaid rents and security deposits 120,799 89,913
Dividends payable 160,801 161,783
------------ ------------
Total Liabilities 8,097,513 8,964,191
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.001 par value
Authorized - 10,000,000 shares
Issued and outstanding - 1,429,070 shares (1997) 1,429 1,445
And 1,445,370 shares (1998)
Capital in excess of par value 4,463,955 4,540,938
Distribution in excess of accumulated earnings (920,829) (1,235,276)
------------ ------------
Total Stockholders' Equity 3,544,555 3,307,107
------------ ------------
$ 11,642,068 $ 12,271,298
============ ============
See accompanying notes to financial statements.
3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended Six Months Ended
June 30, 1998 June 30, 1998
------------------------------- -------------------------------
1997 1998 1997 1998
----------- ----------- ----------- -----------
(unaudited) (unaudited)
REAL ESTATE OPERATING REVENUE
<S> <C> <C> <C> <C>
Rental revenue
Commercial properties $ 241,255 $ 324,592 $ 531,924 $ 661,001
Storage properties 327,386 359,242 640,480 721,138
----------- ----------- ----------- -----------
568,641 683,834 1,172,404 1,382,139
----------- ----------- ----------- -----------
REAL ESTATE OPERATING EXPENSES
Property operating expenses
Operating expenses 128,929 147,972 249,926 302,091
Real estate taxes 60,122 75,060 120,304 149,603
Management fees - related 30,036 36,813 61,875 75,491
General and administrative 110,065 92,416 197,697 197,309
Interest 170,540 179,801 341,887 356,527
Depreciation and amortization 142,643 147,052 285,138 294,755
----------- ----------- ----------- -----------
642,335 679,114 1,256,827 1,375,776
----------- ----------- ----------- -----------
OTHER INCOME
Interest income 13,872 1,647 26,819 1,742
----------- ----------- ----------- -----------
NET (LOSS) INCOME $ (59,822) $ 6,367 $ (57,604) $ 8,105
=========== =========== =========== ===========
NET (LOSS) INCOME PER COMMON SHARE $ (.04) $ .00 $ (.04) $ .01
=========== =========== =========== ===========
NET (LOSS) INCOME PER COMMON SHARE
ASSUMING DILUTION $ (.04) $ .00 $ (.04) $ .01
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,382,870 1,438,110 1,382,870 1,438,110
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING ASSUMING DILUTION 1,382,870 1,443,110 1,382,870 1,443,110
=========== =========== =========== ===========
See accompanying notes to financial statements.
4
</TABLE>
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended
June 30
1997 1998
----------- -----------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (57,604) 8,105
Adjustments to reconcile net (loss) income to
net cash provided by operating activities
Depreciation and amortization 285,138 294,755
Changes in assets and liabilities
Decrease in receivables 3,955 814
Decrease (Increase) in prepaids 2,610 (578,970)
Decrease (Increase) in accounts payable (34,162) 25,929
(Decrease) in accruals (93,983) (140,861)
(Increase) in loan costs -- (28,324)
----------- -----------
Net cash provided (used) by operating activities 105,954 (418,552)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to investments in real estate (23,597) (129,964)
----------- -----------
Net cash (used) by investing activities (23,597) (129,964)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short term borrowings -- 680,000
Repayments of short term borrowings -- (830,000)
Proceeds from mortgage loan -- 1,154,618
Payments on mortgage loans (65,883) (23,991)
Dividends paid (155,573) (321,571)
----------- -----------
Net cash (used) provided by financing activities (221,456) 659,056
----------- -----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (139,099) 110,540
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 1,230,640 99,334
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,091,541 $ 209,874
=========== ===========
See accompanying notes to financial statements.
5
<PAGE>
AMERIVEST PROPERTIES INC.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1998
General
- -------
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 six months ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998.
Subsequent Events
- -----------------
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.
The eleven buildings, with approximately 200,000 total square footage, are
leased on long-term leases to the State of Texas. The acquisitions are expected
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 July 21, 1998, the Company announced on that it also had signed a
contract to purchase 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
includes approximately $1,990,000 of cash and an assumption of the existing
mortgage of approximately $1,635,000. The funds for the purchase of these
properties are being obtained through the refinancing of the Company's four
self-storage facilities. The refinancing of three of the self-storage facilities
is being undertaken by an affiliate of Goldman Sachs & Company on a ten-year
term, and the fourth self-storage facility is being refinanced on a five year
bank note. Although there is no assurance, the acquisition and refinance are
anticipated to be completed by August 19, 1998.
6
<PAGE>
AMERIVEST PROPERTIES INC.
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 acquisition of three
properties, effective August 1, 1997.
Results Of Operations
---------------------
Three Months Ended June 30, 1998, Compared With Three Months Ended June 30,
1997.
- --------------------------------------------------------------------------------
The Company's results of operations for the three months ended June 30,
1998 include nine operating properties, whereas the June 30, 1997 results of
operations include six operating properties. Revenues for second quarter 1997
increased approximately $115,000, and operating expenses, real estate taxes,
management fees, interest, and depreciation and amortization increased
approximately $19,000, $15,000, $7,000, $9,000 and $5,000 respectively, for a
total increase of $55,000 as compared with June 30, 1997. All increases resulted
primarily from inclusion of the operations of three new properties as of August
1, 1997. The general and administrative expenses decreased approximately $18,000
due primarily to timing of expenses during the period. The Company also had
interest income of $14,000 for the 1997 period, as compared with $2,000 for the
1998 period, primarily as a result of investment funds being held for real
estate acquisitions.
The net income for the three months ended June 30, 1998 was $6,367, or $.00
per share, as compared to a net loss of $58,822, or $.04 per share, for the
three months ended June 30, 1997.
Six Months Ended June 30, 1998, Compared With Six Months Ended June 30, 1997.
- -----------------------------------------------------------------------------
The Company's results of operations for the six months ended June 30, 1998
include nine operating properties, whereas the June 30, 1997 results of
operations include six operating properties. Revenues for 1998 increased
approximately $210,000, and operating expenses, real estate taxes, management
fees, interest, and depreciation and amortization increased approximately
$52,000, $19,000, $14,000 $14,000 and $9,000 respectively, for a total increase
of $108,000 as compared with June 30, 1997. All increases resulted primarily
from inclusion of operations of three new properties as of August 1, 1997. The
general and administrative expenses remained flat for the period being compared.
The Company also had interest income of $27,000 for 1997, as compared with
$2,000 for the 1998 period, primarily as a result of investment funds being held
for real estate acquisitions.
7
<PAGE>
The net income for the six months ended June 30, 1998 was $8,105, or $.01
per share, as compared with a net loss of $57,604, or $.04 per share, for the
six months ended June 30, 1997.
Financial Condition, Liquidity And Capital Resources
----------------------------------------------------
From December 31, 1997 to June 30, 1998, net investment in real estate
decreased approximately $74,000. The net decrease was primarily due to
depreciation for the six month period of $281,000 and the addition of one new
property of $116,000 and other tenant improvements.
Deferred financing costs, net, increased approximately $15,000 due
primarily to the costs associated with the refinance of the Giltedge Office
Building in May 1998. Prepaid expenses and other assets increased by
approximately $579,000 due primarily to costs associated with the acquisition
and financing of the eleven Texas state leased buildings and the pending
acquisition of the four bank office buildings discussed elsewhere in the report.
Mortgage loans payable increased by approximately $980,600 due primarily to
the refinance of the Giltedge Office Building, which was partially offset by
regular periodic amortization payments. The new mortgage loan provided proceeds
of approximately $1,155,000, of which $830,000 was used to repay short-term
borrowings. The remaining portion was used for working capital purposes.
Accounts payable and accrued expenses increased by approximately $26,000 during
the period, all of which result from timing differences in the course of normal
operations. Accrued real estate taxes and prepaid rents decreased approximately
$100,000 and $31,000 respectively, all of which resulted from timing differences
in the course of normal operations during the first six months of 1998.
At June 30, 1998, the Company had approximately $210,000 of cash and cash
equivalents, including approximately $162,000 of cash in reserve for a
stockholder dividend distribution which was paid on July 9, 1998.
The Company desires to acquire additional properties and, in order to do
so, it may 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.
As indicated in Item 5 and elsewhere herein, on July 13, 1998 the Company
completed the acquisition of eleven small office buildings, all leased to the
State of Texas. The Company also announced that on July 21, 1998 it signed a
contract to purchase four small bank office buildings.
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 additional capital
resources to upgrade the facilities in the near future are not anticipated.
8
<PAGE>
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.
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
and air conditioning units 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. Until this review has been completed, the Company has no
estimate of the cost to correct any deficiency in Year 2000 compliance for this
equipment. The Company also is in the process of evaluating new accounting and
tenant service software. The software systems being reviewed by the Company are
Year 2000 compliant. The Company anticipates purchasing, installing and
receiving training concerning this new software prior to year end at an
approximate cost of less than $25,000.
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.
9
<PAGE>
Part II. Other Information
Item 5. Other Information
-----------------
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.
The eleven buildings, with approximately 200,000 total square footage, are
leased on long-term leases to the State of Texas. The acquisitions are expected
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 July 21, 1998, the Company announced on that it also had signed a
contract to purchase 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
includes approximately $1,990,000 of cash and an assumption of the existing
mortgage of approximately $1,635,000. The cost for the purchase of these
properties is being obtained through the refinancing of the Company's four
self-storage facilities. The refinancing of three of the self-storage facilities
is being undertaken by an affiliate of Goldman Sachs & Company on a ten-year
term, and the fourth self-storage facility is being refinanced on a five year
bank note. Although there is no assurance, the acquisition and refinance are
anticipated to be completed by August 19, 1998.
Pursuant to Rule 14a-4(c) under the Securities Exchange Act of 1934, as
amended, the Company hereby notifies its stockholders that the proxies solicited
by the Company in connection with the Company's annual meeting to be held in
1999 will confer discretionary authority to vote on matters raised by
stockholders for which the Company did not have notice on or before March 1,
1999. In addition, if the Company receives notice on or before March 1, 1999 of
a matter that a stockholder intends to raise at the annual meeting of
stockholders to be held in 1999, the proxies solicited by the Company may
exercise discretion to vote on each such matter if the Company includes in its
proxy statement advice on the nature of the matter raised and how the Company
intends to exercise its discretion to vote on each such matter. However, the
Company may not exercise discretionary voting authority on a particular proposal
if the proponent of that proposal provides the Company with a written statement,
on or before March 1, 1999, that the proponent intends to deliver a proxy
statement and form of proxy to holders of at least the percentage of the
Company's voting shares required under applicable law to carry the proposal,
which would be a majority of the Company's common stock, if the proponent
includes the same statement in its proxy materials filed under Rule 14a-6, and
if the proponent, immediately after soliciting the holders of a majority of the
common stock, provides the Company with a statement from any solicitor or any
other person with knowledge that the necessary steps have been taken to deliver
a proxy statement and form of proxy to the holders of a majority of the
Company's outstanding common stock.
10
<PAGE>
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
(b) During the quarter ended June 30,1997, the Registrant did not file any
reports on Form 8-K.
11
<PAGE>
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.
August 7, 1998
By:
---------------------------------
James F. Etter, President and
Principal Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> APR-01-1998 JAN-01-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 209,874 209,874
<SECURITIES> 0 0
<RECEIVABLES> 33,811 33,811
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 243,685 243,685
<PP&E> 16,708,620 16,708,620
<DEPRECIATION> 5,399,504 5,399,504
<TOTAL-ASSETS> 12,271,298 12,271,298
<CURRENT-LIABILITIES> 570,487 570,487
<BONDS> 0 0
0 0
0 0
<COMMON> 1,445 1,445
<OTHER-SE> 3,305,662 3,305,662
<TOTAL-LIABILITY-AND-EQUITY> 12,271,298 12,271,298
<SALES> 683,834 1,382,139
<TOTAL-REVENUES> 683,834 1,382,139
<CGS> 0 0
<TOTAL-COSTS> 499,313 1,019,249
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 179,801 356,527
<INCOME-PRETAX> 6,367 8,105
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 6,367 8,105
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 6,367 8,105
<EPS-PRIMARY> .00 .01
<EPS-DILUTED> .00 .01
</TABLE>
