Registration Number 333-_______
U.S. Securities And Exchange Commission
Washington, D.C. 20549
Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AMERIVEST PROPERTIES INC.
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(Name of small business issuer in its charter)
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Maryland 6798 84-1240264
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(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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1800 Glenarm Place, Suite 500, Denver, Colorado 80202 (303) 297-1800
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(Address and telephone number of principal executive offices)
1800 Glenarm Place, Suite 500, Denver, Colorado 80202
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(Address of principal place of business
or intended principal place of business)
James F. Etter, 1800 Glenarm Place, Suite 500,
Denver, Colorado 80202 (303) 297-1800
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(Name, address and telephone number of agent for service)
With a copy to:
Alan L. Talesnick, Esq.
Francis B. Barron, Esq. Charles K. Knight, Esq.
Patton Boggs LLP AmeriVest Properties Inc.
1660 Lincoln Street 1800 Glenarm Place
Suite 1900 Suite 500
Denver, Colorado 80264 Denver, Colorado 80202
(303) 830-1776 (303) 297-1800
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Title of each class Proposed maximum Proposed maximum
of securities to be Amount to be offering price per Aggregate offering Amount of
registered Registered unit Price registration fee
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Units (1) 1,000,000 $10.00 $10,000,000 $ 2,640
Common stock that may
be issued upon exercise
of warrants to purchas
common stock included
in units 1,000,000 $ 5.00 $ 5,000,000 $ 1,320
TOTAL (2) $15,000,000 $ 3,960
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(1) Each consisting of two shares of common stock and one common stock purchase
warrant to purchase one share of common stock for $5.00 per share until
__________ [five years from effective date].
(2) This registration statement covers sales of up to a total of 3,000,000
shares of common stock. The 3,000,000 shares consist of up to 2,000,000
shares that will be issued upon consummation of sales of units as described
in this registration statement and up to 1,000,000 shares that may be
issued upon the exercise, if any, of warrants which are part of the units.
The Company hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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TABLE OF CONTENTS
Page
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PROSPECTUS SUMMARY..................................................... 2
RISK FACTORS........................................................... 5
9
USE OF PROCEEDS........................................................
PRICE RANGE OF COMMON STOCK............................................ 9
DIVIDEND POLICY........................................................ 10
BUSINESS AND PROPERTIES................................................ 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................... 20
MANAGEMENT............................................................. 22
EXECUTIVE COMPENSATION................................................. 25
BENEFICIAL OWNERS OF SECURITIES........................................ 29
TRANSACTIONS BETWEEN THE COMPANY AND RELATED PARTIES................... 31
DESCRIPTION OF SECURITIES.............................................. 33
PLAN OF DISTRIBUTION................................................... 36
SECURITIES AND EXCHANGE COMMISSION POSITION ON
CERTAIN INDEMNIFICATION........................................... 36
LEGAL MATTERS.......................................................... 37
EXPERTS................................................................ 37
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS AND
CAUTIONARY STATEMENTS.............................................. 37
WHERE YOU CAN FIND MORE AVAILABLE INFORMATION.......................... 38
FINANCIAL INFORMATION.................................................. F-1
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The information in this prospectus is not complete and may be changed. The
Company may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS DATED MARCH 3, 2000
SUBJECT TO COMPLETION
PROSPECTUS
AMERIVEST PROPERTIES INC.
200,000 Minimum/1,000,000 Maximum Units of Common Stock and Warrants
We are offering a minimum of 200,000 units and a maximum of 1,000,000 units
on a self-underwritten basis. Each unit consists of two shares of common stock
and one redeemable common stock purchase warrant. The shares of common stock and
the warrants may be detached from the units immediately. There is no market for
the warrants offered by this prospectus and no assurance that a market will
develop. We will use proceeds from the sale of these units, after payment of
expenses of this offering, to acquire real estate properties and to increase
working capital.
We will sell the units ourselves and we have not entered into any
underwriting arrangements. A brokerage fee or commission of up to 5% of the
offering price per Unit may be paid in connection with sales of the units.
However, we have no agreements with anyone to pay any such fees or commissions.
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Underwriting Proceeds To
Price To Public Discount And Commission Company
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Per Unit $10.00 $0 $10.00
Total minimum $ 2,000,000.00 $0 $ 2,000,000.00
Total maximum $10,000,000.00 $0 $10,000,000.00
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We are offering the units on a "best efforts" basis, subject to the
subscription and payment for not less than 200,000 units during the offering
period of 60 days. The Company's directors may extend the offering period for up
to 60 additional days. All funds collected from subscribers will be placed in an
escrow account at U.S. Bank in Denver, Colorado for which U.S. Bank Corporate
Trust Services will serve as escrow agent. Potential investors desiring to
purchase units should make their checks payable to "U.S. Bank, Escrow Agent for
AmeriVest Properties Inc.". If the minimum offering is not subscribed before
April 30, 2000, all funds will be promptly refunded to subscribers without
interest or deduction.
Our common stock is quoted on the American Stock Exchange under the symbol
"AMV". On February 25, 2000, the closing price of the common stock was $4.375
per share.
Investing in the common stock involves certain risks. See the "RISK
FACTORS" section beginning on page 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is March ___, 2000
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PROSPECTUS SUMMARY
The following summary highlights information contained in this prospectus.
You should read this entire prospectus carefully, including the "Risk Factors"
section, the financial statements and the notes to the financial statements,
before investing in the common stock.
The Company We operate and intend to continue to operate in a manner so
that we qualify as a real estate investment trust (a
"REIT"). Through our subsidiaries, we own a variety of
income-producing properties, including 20 office properties
and four self-storage facilities.
Business Strategy We are pursuing an acquisition and development strategy to
become a property-type specific REIT focusing on office
buildings with average tenant size of approximately 3,000
square feet in selected markets. We believe that the office
segment is the least management intensive category of real
estate where effective management can increase our return on
investment. Smaller average tenant size buildings serve more
than 97% of the potential tenants in the United States' of
have historically been shunned by large institutional
investors due to perceived management intensity. It is here
where our management team has developed an expertise for
adding value and where we are focused to increase total
returns to our stockholders.
We believe that the demand for office space will continue to
grow as the economy continues its transition from
manufacturing to service businesses. Within the growing
office sector, we believe a focus on properties serving
small average tenant sizes is appropriate due to the large
number of small firms.
We will limit our acquisitions to a select number of
metropolitan markets where we can build meaningful
multi-property and development portfolios over the short and
medium term. Our initial target cities for acquisitions or
development using the proceeds of this offering include
Phoenix, Denver and Indianapolis. Other cities where we hope
to build a portfolio include Salt Lake City, San Francisco,
San Diego, Minneapolis, San Antonio, Dallas and Houston. We
believe ou prospects for our selected tenant base within a
two-hour travel radius by air from our corporate
headquarters in Denver, Colorado.
Management All properties are managed under an agreement with Sheridan
Realty Advisors, LLC, which also manages our day-to-day
operations and assists and advises our Board of Directors on
real estate acquisitions and investment opportunities.
Sheridan Realty Advisors receives an administrative fee and
a property management and accounting fee for these services.
Our agreement with Sheridan Realty Advisors provides that
the costs to be paid for these services to Sheridan Realty
Ad no greater than the costs incurred by us for providing
these services ourselves or in obtaining them from outside
sources in fiscal year 1999. In addition, Sheridan Realty
Advisors will receive incentive compensation in the form of
five-year warrants to purchase our common stock at $5 per
share and an advisory fee based on new real property
acquisitions. Issuance of the warrants to Sheridan Realty
Advisors is subject to stockholder approval, which will be
requested at our next Annual Meeting of stockholders.
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Sale of Broadway On December 13, 1999, we completed the sale of our
Property industrial office and showroom building in Denver, Colorado
for $2.1 million, resulting in a gain on the sale of the
property of $720,000. We intend to reinvest the proceeds
from this transaction in a tax-deferred exchange under
Section 1031 of the Internal Revenue Code during 2000 and do
not presently intend to distribute any portion of the gain
to stockholders.
Purchase of On August 12, 1999, we completed the acquisition of three
Keystone office buildings, known as the Keystone Buildings, located
Buildings in suburban Indianapolis, Indiana. The Keystone Buildings
contain a total of 95,836 square feet of rentable space. The
total purchase price for the Keystone Buildings was
$7,944,000, which we paid by assuming $5,255,000 of existing
debt and $116,400 of related escrow balances on the
properties and issuing 541,593 shares of our common stock at
the rate of $4.75 per share. We will issue additional shares
if the weighted average trading price of our common stock is
not at least $4.75 for the 15 trading days preceding the
first anniversary of the acquisition of the Keystone
Buildings. In conjunction with the assumption of the debt,
we also agreed to indemnify the original guarantors of
certain environmental indemnities and other obligations in
connection with this debt.
Purchase of On February 24, 2000, we entered into an Agreement of Sale
Panorama Falls to purchase approximately six acres of land in Arapahoe
Building County, Colorado containing a three-story office building
with approximately 60,000 square feet for $5.9 million. The
transaction is subject to normal due diligence and title
review and is expected to close during the second quarter of
2000. The acquisition will be completed using approximately
$510,000 of funds being held in escrow as part of the "1031
Exchange" from the sale of the Broadway Property, proceeds
from this Offering and mortgage financing. We intend to
refurbish the building and lease it to tenants in our target
market. The Seller is expected to lease approximately 10,000
square feet for a period of two years from the closing date.
The Offering
Securities A minimum of 200,000 units and a maximum of 1,000,000 units.
Offered: Each unit consists of two shares of common stock and one
redeemable common stock purchase warrant to purchase one
share of common stock for $5 per share. The warrants are
exercisable for five years after the date of this
prospectus.
Offering Price: $10 per unit
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Outstanding Common stock outstanding
Securities:
Prior to the offering: 2,228,850 shares
After the minimum common stock
offering is sold: 2,628,000 shares
After the maximum common stock
offering is sold: 4,228,850 shares
Warrants outstanding:
Prior to the offering:
At $5.40 per share 2,049,435
At $8.25 per share 164,831
If the minimum offering is sold (in
addition to the previously
outstanding warrants):
At $5.00 per share 200,000
If the maximum offering is sold (in
addition to the previously
outstanding warrants):
At $5.00 per share 1,000,000
Redemption Of We may redeem the warrants at any time prior to their
Warrants exercise upon 30 days prior notice at $0.01 per warrant. To
redeem the warrants, the closing sales price for our common
stock for at least 15 of the 20 consecutive business days
ending on the third day prior to giving notice of redemption
must be at least 125 percent of the then effective exercise
price of the warrants. Holders of warrants may exercise the
warrants after the notice of redemption if it is still prior
to the redemption date.
Use Of Proceeds Assuming the minimum offering gross proceeds of $2 million,
net proceeds may be used to pay unpaid expenses of this
offering, to acquire or develop real estate properties, to
repay debt or to increase working capital. Any funds
received above the minimum offering amount will be used for
these purposes and also may be used to acquire or develop
additional real estate properties. We are targeting
multi-tenant office buildings in select markets with average
tenant size of between 2,500 and 3,000 square feet.
Company Offices Our offices are located at 1800 Glenarm Place, Suite 500,
Denver, Colorado 80202 and our telephone number is (303)
297-1800.
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RISK FACTORS
The purchase of units involves a high degree of risk. Before purchasing
units, you should read this entire prospectus and consider the following factors
concerning the Company in addition to the other information in this prospectus.
We face a strong competitive market.
The commercial real estate industry is highly competitive, and we compete
with substantially larger companies, including substantially larger REITs, for
the acquisition, development and operation of properties. Some of these
companies are national or regional operators with far greater resources than
ours. The presence of these competitors may be a significant impediment to the
continuation and development of our business.
Our debt level may have a negative impact on our income and asset value.
We have incurred indebtedness in connection with the acquisition of our
properties and we may incur new indebtedness in the future in connection with
our acquisition, development and operating activities. As a result of our use of
debt, we will be subject to the risks normally associated with debt financing.
The required payments on mortgages and on other indebtedness are not reduced if
the economic performance of any property declines. If any such decline occurs,
our ability to make debt service payments would be adversely affected. If a
property is mortgaged to secure payment of indebtedness and we are unable to
meet mortgage payments, that property could be transferred to the mortgagee with
a consequent loss of income and asset value.
Our debt to total capitalization ratio exceeds those normally carried by
our competitors and REITs in general. While we believe that our level of
leverage is normal for a direct private or institutional investor, our higher
leverage levels may make it difficult to obtain any additional financing based
on our current portfolio. Our high leverage levels may also adversely affect the
market value of our stock if we are perceived as more risky than our peers.
We may not pay dividends regularly.
Our ability to pay dividends in the future is dependent on our ability to
operate profitably and to generate cash from our operations. Although we have
done so in the past, we cannot guarantee that we will be able to pay dividends
on a regular quarterly basis in the future.
We may incur tax liabilities as a result of failing to qualify as a REIT.
We believe that we have been organized and operated so as to qualify as a
REIT under the Internal Revenue Code. However, we cannot assure that we will
continue to be qualified as a REIT. Qualification as a REIT involves the
application of highly technical and complex Internal Revenue Code provisions for
which there are only limited judicial or administrative interpretations. There
are no controlling authorities that deal specifically with many tax issues
affecting a REIT that operates self-storage facilities. The determination of
various factual matters and circumstances not entirely within our control may
affect our ability to qualify as a REIT. In addition, we cannot predict that
legislation, new regulations, administrative interpretations or court decisions
will not have a substantial adverse effect with respect to the qualification as
a REIT or the federal income tax consequences of that qualification.
If we are unable to qualify as a REIT in any taxable year, we would not be
allowed a deduction for distributions to shareholders in computing our taxable
income and would be subject to federal income tax (including any applicable
alternative minimum tax) on our taxable income at regular corporate rates.
Unless entitled to relief under certain Internal Revenue Code provisions, we
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also would be disqualified from treatment as a REIT for the four taxable years
following the year during which REIT qualification was lost. As a result, the
funds available for distribution to the shareholders would be reduced for each
of the years involved. In addition, we may incur substantial indebtedness or may
liquidate substantial investments in order to pay the resulting federal income
tax liabilities if differences in timing between the receipt of income and
payment of expenses and the inclusion of those amounts in arriving at our
taxable income. We may have to borrow in order to make the distributions to our
shareholders that are necessary to satisfy the distribution requirements
applicable to REITs. Although we currently intend to operate in a manner
designed to qualify as a REIT, it is possible that future economic, market,
legal, tax or other considerations may cause us to revoke the REIT election.
We may have to make distributions to shareholders.
In order to qualify as a REIT, we generally will be required each year to
distribute to our shareholders at least 95% of our REIT taxable income
(excluding any net capital gains). In addition, we will be subject to a 4%
nondeductible excise tax on the amount, if any, by which certain distributions
paid by us with respect to any calendar year are less than the sum of 85% of our
ordinary income plus 95% of our capital gain net income for that year.
We intend to make distributions to our shareholders to comply with the 95%
distribution requirement and to avoid the nondeductible excise tax. We may have
to borrow funds on a short-term basis to meet the 95% distribution requirement
and to avoid the nondeductible excise tax if differences in timing between
taxable income and cash available for distribution exist.
Some of our buildings are subject to special income tax considerations.
If we sell our self-storage facilities and our Giltedge Office Building
less than ten years after their acquisition, we will be required to pay tax at
the highest applicable corporate rates on the difference between their fair
market value and their adjusted bases at the time of our REIT election. By
utilizing a property exchange under Section 1031 of the Internal Revenue Code,
we may be able to defer the recognition of gain until after the 10-year period
expires in 2006 so that we are not subject to the highest applicable corporate
rates. If we are subject to the highest corporate rate, the amount of this tax
could be substantial and would be significantly more than if we would be
permitted to use our own adjusted basis. There is a risk that we would not have
sufficient cash available to pay the additional taxes resulting from the lower
adjusted bases for these properties. As long as these higher tax liabilities
apply, we currently do not intend to sell these properties unless other
economic, financial and business consequences of the sale would offset the
higher tax liabilities and lead us to believe it would be in our best interests
to effect such a sale. The factors we would consider at the time of selling
these properties include the price we are able to receive and our ability to
defer the taxes through a Section 1031 exchange.
We may incur tax liabilities if we fail to complete the Section 1031 exchange in
connection with the sale of the Broadway property.
On December 13, 1999, we completed the sale of our industrial office and
showroom building in Denver, Colorado for $2.1 million, resulting in a gain on
the sale of the property of $720,000. We intend to reinvest the proceeds from
this transaction in a tax-deferred exchange under Section 1031 of the Internal
Revenue Code during 2000 and do not presently intend to distribute any portion
of the gain to stockholders. We entered into an agreement to purchase a property
in which we intend to reinvest the proceeds. However, this property will require
additional cash beyond the proceeds received from the sale of the Broadway
property. If we are unable to close on a qualifying property on or before June
13, 2000 because we were unable to raise sufficient cash in this offering or for
any other reason, we will be obligated to distribute to stockholders a portion
of the gain. If we do not have sufficient cash to make that distribution, we may
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have to borrow funds to meet the distribution requirement. If we are unable to
meet the distribution requirement, we will be subject to certain penalties and
excise taxes as described above.
Real estate investments are inherently risky.
Real estate investments are subject to varying degrees of risk. The yields
available from equity investments in real estate depend on the amount of income
and capital appreciation generated by the properties held by the entity in which
the investment is made. If we acquire properties and they do not generate
sufficient operating cash flow to meet operating expenses, including debt
service, capital expenditures and tenant improvements, our income and ability to
pay dividends to our stockholders will be adversely affected. Income from
properties may be adversely affected by the general economic climate, local
conditions, the attractiveness of properties to tenants, zoning or other
regulatory restrictions, competition from other available storage facilities and
office buildings, and our inability to control certain operating costs,
including site maintenance, insurance premiums and real estate taxes. Income
from properties and real estate values also are affected by such factors as
applicable laws, including tax laws, interest rate levels and the availability
of financing.
Real estate development is inherently risky.
Real estate development is subject to other risks, including the following:
o the risks of difficult and complicated construction projects,
o the risks related to the use of contractors and subcontractors to
perform all construction activities,
o the risk of development delays, unanticipated increases in
construction costs, environmental issues and regulatory approvals; and
o financial risks relating to financing and construction loan
difficulties.
Additionally, the time frame required for development, construction and lease-up
of these properties means that we may have to wait a few years for a significant
cash return. Because we are required to make cash distributions to investors, if
the cash flow from operations or refinancing is not sufficient, we may be forced
to borrow to fund such distributions.
There is no assurance of tenant occupancy.
Although the properties currently have favorable occupancy rates, we cannot
predict that current tenants will renew their leases upon the expiration of
their terms. Alternatively, we cannot predict that current tenants will not
attempt to terminate their leases prior to the expiration of their current
terms. If this occurs, we may not be able to locate a qualified replacement
tenant and, as a result, we would lose a source of revenue while remaining
responsible for the payment of our obligations. Additionally, new properties we
may acquire with the proceeds of this Offering may not be fully leased and the
cash flow from existing operations may be insufficient to pay the operating
expenses and debt service associated with that property until the property is
fully leased.
There is limited liquidity in our real estate investments.
Real estate investments are relatively illiquid. Our ability to vary our
portfolio in response to changes in economic and other conditions will be
limited. We cannot ascertain whether we will be able to dispose of an investment
when we find disposition advantageous or necessary or that the sale price of any
disposition will recoup or exceed the amount of our investment.
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There is a limited market for the shares of common stock and warrants.
Historically, there has been an extremely limited public market for our
common stock and the warrants issued in connection with our initial public
offering in 1996. We cannot guarantee that the market will be sustained or will
expand. Because the terms of the warrants included in the units are different
from the terms of the warrants already outstanding, no market may develop for
the warrants included in the units we currently are offering. The prices of the
common stock and our publicly traded warrants are highly volatile. Due to the
limited trading volume and small capitalization of our common stock and
warrants, many investors may not be interested in owning our securities because
of the higher risks associated with limited trading volume and small market
capitalization such as the inability to sell a substantial block of stock at one
time without driving down prices. This could have an adverse effect on the
market for our common stock as well as the possibility of developing and
sustaining a market for the warrants included in the units. In addition, there
is no assurance that an investor will be in a position to borrow funds using our
securities as collateral because lenders may be unwilling to accept the pledge
of these securities because of the limited market.
Our equity market capitalization places us at the extreme low end of market
capitalization among all REITs. As a result of our small market cap,
substantially all of our investors are retail investors. Institutional investors
who have traditionally provided support for most REIT shares represent an
insignificant percentage of our total ownership. This limits the ability for
investors to acquire substantial blocks of our stock. This also places a
near-term cap on capital appreciation for our shares if significant stockholders
decide to sell.
We have arbitrarily determined the offering price of the units and exercise
price of warrants included in the units.
The offering price for the units and the exercise price were based upon our
assessment of recent trading prices for the common stock, our history and
prospects, our management's background, and current conditions in the securities
markets. There is no relationship between the offering price or the exercise
price and our assets, book value, net worth or any other economic or recognized
criteria of value.
Our uninsured and underinsured losses could result in loss of value of
properties.
We maintain comprehensive insurance on each of the properties, including
liability, fire and extended coverage. We believe this coverage is of the type
and amount customarily obtained for or by an owner on real property assets. We
will obtain similar insurance coverage on subsequently acquired properties.
However, there are certain types of losses, generally of a catastrophic nature,
such as earthquakes and floods, that may be uninsurable or not economically
insurable, as to which our facilities are at risk in their particular locales.
Our management will use its discretion in determining amounts, coverage limits
and deductibility provisions of insurance, with a view to requiring appropriate
insurance on our investments at a reasonable cost and on suitable terms. This
may result in insurance coverage that in the event of a substantial loss would
not be sufficient to pay the full current market value or current replacement
cost of our lost investment. Inflation, changes in codes and ordinances,
environmental considerations, and other factors also might make it not feasible
to use insurance proceeds to replace a facility after it has been damaged or
destroyed.
We may suffer environmental liabilities.
Under various environmental laws, a current or previous owner or operator
of real property may be liable for the costs of removal or remediation of
hazardous or toxic substances including, without limitation, asbestos-containing
materials that are located on or under the property. These laws often impose
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liability whether the owner or operator knew of, or was responsible for, the
presence of those substances. In connection with our ownership and operation of
properties, we may be liable for these costs. Also, our ability to arrange for
financing secured by that real property may be adversely affected because of the
presence of hazardous or toxic substances or the failure to properly remediate
any contamination.
Non-compliance with the Americans With Disabilities Act could result in fines.
Under the ADA, all public accommodations are required to meet certain
federal requirements related to physical access and use by disabled persons.
While we believe that our properties comply in all material respects with these
physical requirements (or would be eligible for applicable exemptions from
material requirements because of adaptive assistance provided), a determination
that we are not in compliance with the ADA could result in imposition of fines
or an award of damages to private litigants. If we were required to make
modifications to comply with the ADA, our ability to make expected distributions
to our stockholders could be adversely affected; however, we believe that this
effect would be minimal.
USE OF PROCEEDS
Assuming the minimum offering gross proceeds of $2,000,000 are received,
the net proceeds after the payment of expenses of this offering may be used to
acquire or develop real estate properties in accordance with our strategic plan,
repay debt or to increase working capital. Any funds received above the minimum
offering amount also will be used to acquire or develop additional real estate
properties. We are targeting multi-tenant office buildings with smaller average
tenant size located in our target growth cities. We may purchase these
properties for cash or a combination of cash, debt and stock. We may obtain
additional financing from a bank or other third party to purchase, rehabilitate
or develop some or all of these properties and may refinance the properties at
any time. There is no assurance that we will be able to locate appropriate
properties or to obtain those properties on terms we deem to be in our best
interests.
PRICE RANGE OF COMMON STOCK
Our common stock has traded on the American Stock Exchange under the symbol
"AMV" since January 27, 2000. Prior to that time, the common stock traded on the
Nasdaq SmallCap Stock Market under the symbol "AMVP". The warrants issued in our
initial public offering continue to be traded on the Nasdaq SmallCap Stock
Market under the symbol "AMVPW".
The table below presents the range of high and low sales prices for our
common stock and high and low bid and ask prices for our initial public offering
warrants during each of the quarters indicated, as reported by the Nasdaq
SmallCap Stock Market:
Common Stock Warrants
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High Low High Low
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March 31, 1998 4.875 4.313 .313 .125
June 30, 1998 4.938 4.625 .188 .125
September 30, 1998 4.720 3.938 .156 .094
December 31, 1998 4.563 3.813 .094 .094
March 31, 1999 4.375 3.500 .094 .031
June 30, 1999 4.750 3.969 .094 .063
September 30, 1999 5.438 4.000 .188 .063
December 31, 1999 4.938 3.750 .094 .031
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On February 25, 2000, the closing sale price for our common stock was
$4.375 per share, as reported by the American Stock Exchange.
Number Of Shareholders Of Record
On February 18, 2000, there were 192 holders of record of our common stock
and 43 holders of record of our publicly traded warrants. Based on information
provided by brokers and depositories who hold shares in their names on behalf of
others, there were approximately 500 beneficial owners of common stock, as of
February 18, 2000.
DIVIDEND POLICY
We paid a dividend of $.12 per share in each quarter of 1999. This
represents an annualized rate of $.48 per share. During 1998, we paid $.12 per
share during the third and fourth quarters, and a dividend of $.1125 per share
during the first and second quarters. We anticipate paying regularly quarterly
dividends in the future.
BUSINESS AND PROPERTIES
Overview
AmeriVest Properties Inc. was incorporated in 1993 in the State of Delaware
and was reincorporated in 1999 in the State of Maryland. We operate and intend
to continue to operate in a manner so that we qualify as a real estate
investment trust ("REIT"). Through our subsidiaries, we own a variety of
income-producing properties, including 20 office properties and four
self-storage facilities.
All properties are managed under an agreement with Sheridan Realty Advisors
which also manages our day-to-day operations and assists and advises our Board
of Directors on real estate acquisitions and investment opportunities. Sheridan
Realty Advisors receives an administrative fee and a property management and
accounting fee for these services. Our agreement with Sheridan Realty Advisors
provides that the costs to be paid for these services to Sheridan Realty
Advisors in fiscal year 2000 will be no greater than the costs incurred by us
for providing these services ourselves or in obtaining them from outside sources
in fiscal year 1999. In addition, Sheridan Realty Advisors will receive
incentive compensation in the form of five-year warrants to purchase our common
stock at $5 per share and an advisory fee based on new real property
acquisitions. Issuance of the incentive warrants is subject to stockholder
approval, which will be requested at our next Annual Meeting of stockholders.
Since 1999, we have refocused our efforts on becoming the only office REIT
to specialize on multi-tenant office buildings with an average tenant size of
between 2,500 and 3,000 square feet in selected markets. Since 1990, the
principals of Sheridan have operated almost exclusively in this property type
and we believe focusing our efforts on these properties will generate better
returns to our stockholders than investing in office buildings without this
focus.
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In November 1996, we sold an aggregate of 1,098,870 shares of common stock
and 549,435 common stock purchase warrants in our initial public offering. The
aggregate gross proceeds from the offering were approximately $5.5 million and
the net proceeds to us were approximately $4.5 million. These warrants have
different terms than the warrants included in the units offered by this
prospectus. See "Description of Securities" below.
On December 13, 1999, we sold our industrial office and showroom building
in Denver, Colorado for $2.1 million, resulting in a gain on the sale of the
property of $720,000. We intend to reinvest the proceeds from this transaction
in a tax-deferred exchange under Section 1031 of the Internal Revenue Code
during 2000 and do not presently intend to distribute any portion of the gain to
stockholders.
On August 12, 1999, we completed the acquisition of three office buildings,
known as the Keystone Buildings, located in suburban Indianapolis, Indiana. The
Keystone Buildings contain a total of 95,836 square feet of rentable space. The
total purchase price for the Keystone Buildings was $7,944,000, which we paid by
assuming approximately $5,255,000 of existing debt and $116,400 of related
escrow balances on the properties and issuing 541,593 shares of our common stock
at the rate of $4.75 per share. We are required to issue additional shares if
the weighted average trading price for our common stock is not at least $4.75
per share for the 15 trading days preceding the first anniversary of the
acquisition of the Keystone Buildings. In conjunction with the assumption of the
debt, we also agreed to indemnify the original guarantors of this debt if we
fail to repay it.
Our headquarters are located at 1800 Glenarm Place, Suite 500, Denver,
Colorado 80202, telephone number (303) 297-1800.
Proposed Purchase Of Panorama Property
On February 24, 2000, we entered into an Agreement of Sale to purchase
approximately six acres of land in Arapahoe County, Colorado containing a
three-story office building with approximately 60,000 square feet for $5.9
million. The site improvements include parking for approximately 277 cars,
exterior lighting and landscaping and a small waterfall and pond at the main
entrance. The building was constructed in 1983 and contains fully built-out
office space, common areas with a building conference room and a mechanical
basement area which contains the air conditioning and heating system for the
building.
The transaction is subject to normal due diligence and title review and is
expected to close during the second quarter of 2000. The acquisition will be
completed using approximately $510,000 of funds being held in escrow as part of
the "1031 Exchange" from the sale of the Broadway Property, proceeds from this
Offering and mortgage financing.
Since 1993, this building has been used as a corporate office by its
current owner who will lease approximately 10,000 square feet for two years from
the closing date. The building has been 100% occupied as a corporate office
until now. We expect the occupancy to be approximately 16% as of the closing
date and we intend to begin to actively market the property to tenants
immediately upon closing.
The property is located in a suburban business park where there is
substantial competition from existing buildings, many of which are newer than
the Panorama Property. Carr America, a large office building owner, owns several
properties nearby and will compete directly with the subject property. Sheridan
Plaza at Inverness, LLC, an affiliate of Sheridan Realty Advisors, our advisor,
owns two Class A office buildings aggregating 118,000 square feet that are
located within three miles of Panorama. Sheridan Plaza is almost 100% leased so
we do not believe it will be competitive with Panorama.
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Upon acquisition, we intend to make significant capital improvements to the
Panorama Property, including refurbishment of the exterior, parking lot,
landscaping, common areas, restrooms, elevators, signage and conference rooms.
Upon closing, we will begin to actively market the building to tenants in our
target market. We intend to hold the property for income purposes.
There is a vacant building pad on the property where we may be able to
build an additional building of up to 40,000 square feet. We will not proceed
with any development, however, until such time as we have substantially leased
the existing building and completed a development plan and feasibility analysis
regarding the proposed development.
Properties
At December 31, 1999, we owned and operated 24 properties in Texas,
Colorado, Wisconsin and Indiana. The following chart illustrates the geographic
distribution of our property portfolio as of December 31, 1999 by square
footage:
The following table lists the properties owned and contains a summary of
some of the operating information applicable to each property:
<TABLE>
<CAPTION>
Percentage
Year Leasable Occupancy Annual Rent
Location Type Acquired Sq. Footage (1) At 12/31/99 Per Sq. Ft.
- -------- ---- -------- --------------- ----------- -----------
OFFICE PROPERTIES
<S> <C> <C> <C> <C> <C>
Indianapolis, IN Office 1999 95,836 99.2 $14.77
Appleton, WI Office 1996 54,871 92.5 $15.94
Arlington, TX Office (1) 1998 36,326 63.0 $10.30
Paris, TX Office(1) 1998 33,312 100.0 $6.16
Marshall, TX Office(1) 1998 24,647 100.0 $6.89
Amarillo, TX Office (1) 1998 23,778 100.0 $7.65
Mineral Wells, TX Office(2) 1998 18,314 98.6 $14.48
El Paso, TX Office(1) 1997 17,913 100.0 $6.72
Belleville, TX Office(1) 1998 17,898 100.0 $8.97
Mission, TX Office(1) 1998 17,288 100.0 $9.09
Georgetown, TX Office(2) 1998 15,044 100.0 $16.50
Henderson, TX Office(2) 1998 14,623 95.0 $14.62
Odessa, TX Office(1) 1998 14,500 33.3 $12.14
Clint, TX Office(1) 1998 12,979 100.0 $9.59
Clifton, TX Office(2) 1998 12,308 100.0 $14.75
El Paso, TX Office(1) 1997 8,208 94.4 $12.61
Lubbock, TX Office(1) 1997 8,103 100.0 $7.33
Arvada, CO Office 1996 8,000 76.3 $7.59
Temple, TX Office(1) 1998 7,360 100.0 $8.61
Hempstead, TX Office(1) 1998 7,000 100.0 $9.09
Columbus, TX Office(1) 1998 6,574 94.1 $13.59
SELF-STORAGE FACILITIES
Denver, CO Self-Storage 1996 72,490 86.7 $5.34
Westminster, CO Self-Storage 1996 58,938 81.3 $5.79
Thornton, CO Self-Storage 1996 55,150 87.1 $8.34
Arvada, CO Self-Storage 1996 37,000 91.9 $6.88
</TABLE>
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- ------------------
(1) Buildings leased to the State of Texas. See description below
(2) Buildings leased approximately 63% to Bank of America. See description
below.
The Keystone Office Buildings and the Giltedge Office Building are our only
properties that have a book value in excess of ten percent of the total book
value of our assets. The following is a description of these properties.
Keystone Office Buildings. We acquired the Keystone Office Buildings in
Indianapolis, Indiana (the "Keystone Buildings") effective July 1, 1999. The
total purchase price was $7,944,000, which we paid by assuming approximately
$5,255,000 of existing debt and $116,400 of related escrow balances and issuing
541,593 shares of our common stock at a guaranteed price of $4.75 per share. The
Keystone Buildings consist of three two-story multi-tenant office buildings
located at 3021, 3077 and 3091 East 98th Street at the intersection of 98th
Street and North Keystone Avenue (US 431) in north central Indianapolis,
Indiana. These buildings comprise approximately 95,836 total rentable square
feet on approximately 9.041 acres of land with 336 surface parking spaces, plus
a 1,596 square foot free-standing maintenance building. The Keystone Buildings
were constructed and completed from 1984 to 1986, and Sheridan acquired the
Keystone Buildings in 1996.
The Keystone Buildings are leased to various business entities for general
office space purposes. We do not have any plans for major capital improvements
for the Keystone Buildings and intend to continue to operate and hold them for
income purposes. The Keystone Buildings must compete with several mid-rise
office buildings in the area including buildings owned by Duke-Weeks Realty
Corp., a dominant owner in the Indianapolis market.
The occupancy rate for the Keystone Buildings at December 31, 1999 was
99.2% There is one tenant occupying 10% or more of the rentable space of the
Keystone Buildings. The principal businesses of this tenant are insurance and
financial services. The following is a schedule as of January 1, 2000 of lease
expirations for the Keystone Buildings for the next ten years:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Percentage of
Number of Leases Total Area of Annual Revenue Gross Rents On
That Will Expire Expiring Leases of Expiring Leases Expiring Leases
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2000 7 15,281 $220,653 15.6%
2001 9 34,562 $500,166 35.3%
2002 14 28,364 $436,635 30.8%
2003 1 1,861 $30,707 2.2%
2004 3 15,002 $227,352 16.1%
2005 and after None 0 0 0
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Giltedge Office Building. The Giltedge Office Building is located at 4321
West College Avenue, Appleton, Wisconsin 54914 and was acquired in 1996 for
$2,778,846 in cash and assumption of mortgage debt. It is situated on
approximately 3.9 acres, and consists of approximately 55,072 total rentable
square feet. We have no plans for major capital improvements for the property
and intend to hold the property for income purposes. This property is subject to
the following competitive conditions: there are several mid-rise office
buildings in the area, but there is no dominant owner or building. The occupancy
rates for this property were: 93%, 94%, 96%, 99%, and 97%, in 1999, 1998, 1997,
1996 and 1995, respectively. There are two tenants occupying 10% or more of the
rentable space of the property. The principal businesses of these tenants are
telecommunications and paper supplies. For the last five fiscal years, the
average effective annual rentals per square foot for this property were $15.49,
$15.43, $14.64, $14.77 and $14.12, respectively. The following is a schedule of
lease expirations for the property for the next ten years:
13
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Percentage Of
Number Of Leases Total Area Of Annual Revenue Of Gross Rents On
That Will Expire Expiring Leases Expiring Leases Expiring Leases
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2000 7 22,080 $ 329,462 43.0
2001 3 2,952 $ 46,015 6.0
2002 6 8,922 $ 128,597 16.8
2003 3 4,387 $ 68,694 9.0
2004 2 2,627 $ 38,935 5.1
2005 and thereafter 1 9,960 $ 115,382 20.1
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Leases with Credit Tenants
Approximately 46% of our rental income in 1999 came from tenants that we
consider to be better than average "credit tenants", including the State of
Texas, Bank of America, Ameritech and the FDIC.
State of Texas Office Building Leases. Fourteen office buildings listed in
the above table and annotated with footnote (1) in the above table under
"Properties" are leased to the State of Texas with primary lease periods ranging
from six months to eight years. Most of the leases grant five multiple renewal
option periods of three years to five years at the election of the tenant. The
Hempstead, Amarillo, and Paris leases are the only leases that expire without
additional option periods, in August 2000, August 2003, and August 2002,
respectively.
Although the leases with the State of Texas regarding the State of Texas
Office Buildings each include a specific termination date, the State of Texas
may terminate a lease at any time that the legislature of the State of Texas
fails to appropriate funds necessary to pay required rents, or federally-funded
programs housed in a State of Texas Office Building are discontinued. Prior to
terminating the lease, the State of Texas may assign another agency to fill or
partially fill the rented space, and the lease would be adjusted accordingly.
Despite this risk, we have no information that would lead us to believe that the
State of Texas is considering any such terminations.
Bank Building Leases
Approximately 63% of each of the four buildings annotated with footnote (2)
in the above table under "Properties" are leased to Bank of America on a
long-term basis, with the primary lease through June 2012. The leases with the
Bank of America provide for automatic rent increases every three years at a
predetermined rate. They also provide for multiple renewal option periods for
Bank of America. The other leases in the Bank Buildings are with smaller tenants
and range from one year to three years in length.
Property Improvements
We currently intend to spend approximately $500,000 for capital
improvements (including tenant finish) on the Properties during 2000. These
amounts, which are anticipated to be paid from cash flow and/or working capital,
are in addition to amounts that will be expended for routine maintenance and
repairs.
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<PAGE>
Mortgages
Substantially all of our properties are secured by mortgages. The following
is a summary of our indebtedness:
Outstanding Balance At
Description of Indebtedness December 31, 1999
- --------------------------- -----------------
Note payable to Anchor Bank. Fixed interest at
7.75%, due in monthly installments of $22,295
based on a 30-year amortization through June 1,
2008 at which time a balloon payment of $2,797,181
is due. This note is secured by a mortgage on the
Giltedge Office Building. $ 3,157,022
Note payable to GMAC. Fixed interest at 7.15%, due
in monthly installments of $39,401 based on a
25-year amortization through September 1, 2008, at
which time a balloon payment of $4,358,574 is due.
This note is secured by a mortgage on the three
Self-Storage Facilities other than the Arvada,
Colorado facility. $ 5,403,042
Note payable to 1st National Bank of Arvada.
Interest at the Prime Rate, adjusted quarterly,
due in monthly installments of $8,678, based on a
20-year amortization, through September 14, 2003
at which time a balloon payment of $852,197 is
due. This note is secured by a mortgage on the
Arvada, Colorado Self-Storage Facility. $ 970,898
Note payable to ORIX Real Estate Capital Markets.
Fixed interest at 7.66%, due in monthly
installments of $42,612 through July 1, 2028. This
note is secured by a mortgage on the State Of
Texas Buildings. $ 5,927,602
Note payable to Jefferson Pilot. Fixed interest at
9.0%, due in monthly installments of $17,095,
through May 1, 2013. This note is secured by a
mortgage on the Bank Buildings. $ 1,595,118
Note payable to Arlington Building Partnership
(unsecured). Fixed interest at 8.5%, monthly
payments of interest only, principal balance due
June 15, 2000. $ 192,000
Note payable to Security Life of Denver Insurance
Interest at 8%, due in monthly payments of
principal and interest of $37,626 through May 1,
2022. Lender can call the outstanding balance due
on June 1, 2007, June 1, 2012 or June 1, 2017.
This note is secured by a mortgage on the Keystone
Buildings. $ 4,699,128
Note payable to Security Life of Denver
Insurance Company. Interest at 8.63% due in
monthly payments of principal and interest of
$4,403 through May 1, 2022. Lender can call the
outstanding balance due on June 1, 2007, June 1,
2012 or June 1, 2017. This note is secured by a
mortgage on the Keystone Buildings. $ 523,105
-----------
TOTAL $22,467,915
===========
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Insurance
We believe that each of our properties is adequately covered by insurance.
For a discussion of the treatment of the depreciation of the properties in the
financial statements, see "Financial Statements--Notes To Financial Statements".
Competition
The business of managing, leasing and operating office buildings is very
competitive and we compete for tenants with other office buildings, including
buildings owned by larger companies with more financial and other resources
available to them. The business of operating self-storage facilities also is
very competitive and we compete with many larger companies, including national
franchisers, with significantly more financial and other resources. We believe
that our niche focus on multi-tenant office buildings with smaller average
tenant sizes will improve our ability to compete. Competitive conditions
relating specifically to the Giltedge and Keystone Office Buildings are
described above under "--Properties".
Employees
Including the seven employees of Sheridan that spend the majority of their
time on our business, we had 28 employees as of February 25, 2000. This includes
seven senior executives as well as 21 administrative, support, and property
management personnel.
Environmental Matters
Under various federal, state and local laws and regulations, an owner or
operator of real property may be liable for the costs of removal or remediation
of certain hazardous or toxic substances on that property. These laws often
impose such liability regardless of whether the owner caused or knew of the
presence of hazardous or toxic substances and regardless of whether the storage
of those substances was in violation of a tenant's lease. Furthermore, the costs
of remediation or removal of those substances may be substantial, and the
presence of hazardous or toxic substances, or the failure to promptly remediate
those substances, may adversely affect the owner's ability to sell the property
or to borrow money using the property as collateral. In connection with the
ownership and operation of the properties, we may be potentially liable for such
costs.
We have obtained an environmental assessment of each of the properties.
Based on those assessments, management believes that the properties are in
compliance in all material respects with all applicable federal, state and local
ordinances and regulations regarding hazardous or toxic substances and other
environmental matters or that, to the extent that a property is not in
compliance, we will not be subject to material liability. In addition, we have
not been, nor do we have knowledge that any of the previous owners of the
properties have been, notified by any governmental authority of any material
noncompliance, liability or claim relating to hazardous or toxic substances or
other environmental substances in connection with any of the properties.
Although we have obtained environmental assessments of the properties, and
although we are not aware of any notifications by any governmental authority of
any material noncompliance, it is possible that the our assessments do not
reveal all environmental liabilities or that there are material environmental
liabilities of which we are unaware.
Policies and Objectives With Respect to Certain Activities
The following is a discussion of our policies with respect to investment,
financing and certain other activities. The polices with respect to these
activities have been determined by our Board Of Directors and, although the
Board currently does not contemplate any changes to these policies, the Board
may change these policies without a vote or other approval of stockholders.
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Acquisition, Development And Investment Policies.
Our business and growth strategies are designed to maximize total return to
stockholders over the medium and long term with a niche property-type and
geographic focus. Our current policies contemplate the possibility of (1) direct
ownership of real estate properties, including ownership through wholly-owned
subsidiaries, focusing on office properties with average tenant sizes of between
2,500 and 3,000 square feet, (2) indirect participation in those types of
properties through investments in corporations, business trusts, general
partnerships, limited partnerships, joint ventures and other legal entities, and
(3) development and acquisition of unimproved property or the acquisition and
conversion of existing structures. At the present time, all of our existing and
contemplated investments in real estate properties are held through direct
ownership as described in (1) above. Generally, we intend to hold our properties
for the long term. However, we may sell properties when we believe the economic
benefits, including the income tax consequences, to the stockholders warrant
such action. In the case of the Self-Storage Facilities and the Giltedge Office
Building, there are special income tax considerations that may require us to
hold them for 10 years from the date of their purchase, unless we are able to
structure a tax-deferred exchange. Our long-term view is to focus on
multi-tenant office buildings in select cities and dispose of non-core assets
and property types when economically and operationally feasible. See "Risk
Factors - Some of our buildings are subject to special income tax
considerations."
Although we have no formal policy as to the allocation of assets among our
investments, we generally intend to limit investment in a single property to a
maximum of 25% of our total assets. We expect to fund future development and
acquisitions utilizing funds from additional indebtedness, future offerings of
our securities, sale or exchange of existing properties and retained cash flow.
We believe our capital structure is advantageous because it permits us to
acquire additional properties by issuing equity securities in whole or in part
as consideration for the acquired properties. In order to maintain our
qualification as a REIT, we must make annual distributions to our stockholders
of at least 95% of our REIT taxable income (which does not include net capital
gains). This requirement may impair our ability to use retained cash flow for
future acquisitions.
Financing Policies.
We intend to make additional investments in properties and may incur
indebtedness to make those investments or to meet the distribution requirements
imposed by the REIT provisions of the Code, to the extent that cash flow from
our operations, investments and working capital is insufficient. Additional
indebtedness incurred by us may be secured by part or all of our real estate
properties. We have no limitation on the number or amount of secured
indebtedness or mortgages that may be placed on any one of our properties.
Secured indebtedness incurred by us may be in the form of purchase money
obligations to the sellers of properties, publicly or privately placed debt
instruments, or financing from banks, institutional investors or other lenders.
This indebtedness may be recourse to all or any part of our assets, or may be
limited to the particular property to which the indebtedness relates. The
proceeds from any borrowings by us may be used for refinancing existing
indebtedness, for financing development and acquisition of properties, for the
payment of dividends and for working capital.
If the Board determines to raise additional equity capital, the Board has
the authority, generally without stockholder approval, to issue additional
common stock, preferred stock or other of our capital stock in any manner (and
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on such terms and for such consideration) as it deems appropriate, including in
exchange for property. Existing stockholders have no preemptive right to
purchase shares issued in any offering, and any such offering might cause a
dilution of a stockholder's investment in us.
STRATEGIC PLAN
Focus on Multi-Tenant Office Buildings in Target Growth Cities
After acquisition of the Keystone Buildings and the addition of two
Sheridan principals to our Board, we evaluated our existing real estate
portfolio and elected to refocus our efforts on the acquisition and development
of multi-tenant office buildings with an average tenant size of between 2,500
and 3,000 square feet in certain select cities. In addition, we elected to
pursue the sale of our non-office assets, which at the time included one
industrial and four self-storage properties. As of the date of this prospectus,
we have completed the sale of our industrial property in Denver, Colorado, and
are evaluating the possibilities for sale of our self-storage properties. As
discussed under Risk Factors, however, we may be unable to sell our self-storage
properties until after 2006.
The Case for an Office Focus
We believe the public equity markets for REITs reward a strongly focused
strategy and that the office sector receives a relatively higher valuation than
do other property types. We believe the reason for this is that the demand for
office space has continued to grow as the economy has transitioned from
manufacturing to service businesses. We believe that demand will continue in our
target markets. Though much has been written recently about the "New Economy"
characterized by information technology, in fact this transition to a
knowledge-based economy has occurred steadily since the turn of the century.
According to Cognetics, Inc., a leading research firm in the area of economic
change and new company formation, the percentage of "white collar"/service
employment rose from 27% in 1900 to 71% in 1995.
The Case for Small Tenants
Within the growing office sector a niche focus on properties with small
average tenant sizes is appropriate due to the strongly positive "corporate
demographics" of small firms. According to data compiled by Cognetics, there
were more than eight million companies in the U.S. economy in 1997. Fully 98% of
these firms employ fewer than 100 employees, and this 98% now employs almost 50%
of all workers. Assuming each office worker occupies the national average of 150
square feet, most firms require less than 15,000 square feet of office space. In
fact, this research further reveals that 90% of all firms employ fewer than 20
employees, indicating an average office space requirement of no more than 3,000
square feet.
The two frequently cited concerns about the small and mid-sized tenant
office market are its perceived high level of credit risk and its management
intensity. As explained below, we have found that both these concerns are
overstated, and can be addressed by proper staffing and management systems
tailored to this tenant base. These perceived risks are higher than the actual
risks and hence we believe that they provide an effective barrier to entry for
competition and an attractive "expertise- arbitrage" opportunity for us.
Regarding credit risk, we maintain a high level of credit quality in our
largest office buildings through accounting and collection systems that flag any
late payments and rigorously impose late payment penalty charges. Eviction
action is quickly taken if a tenant does not make timely lease payments. These
control systems are centralized in our Denver headquarters, and monitored by an
experienced accounting staff with many years of service with Sheridan, our
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<PAGE>
advisor. As Sheridan's management team becomes more familiar with our day-to-day
operations, we believe that we can maintain and improve this high level of
credit quality in all our properties.
Our experience has shown that the issue of management intensity is largely
a matter of mind-set. Middle market tenants are viewed as problematic primarily
because most property managers are accustomed to giving priority to the large
users. With our deliberate focus on small to mid-size users, we bring a
positive, service-oriented mentality to our tenants.
Our largest buildings (Keystone and Giltedge) staff an on-site "Tenant
Relations Manager" whose job description is to interface regularly with all
tenants. There also is a building manager assigned to this property to deal with
physical maintenance. The Tenant Relations Manager, unlike a conventional
property manager, does not have responsibility for the physical operation of a
building, but rather is solely dedicated to tenant issues, personifies our
service-oriented mentality and is available to resolve minor tenant service
complaints before they fester into major issues.
Our Tenant Relations Manager reports directly to a senior manager in the
Denver headquarters, providing direct and regular feedback on tenant concerns.
We believe that as we acquire additional buildings of a size sufficient to
support a Tenant Relations Manager, we will improve our tenant retention rates
over those of our competitors. Over time, we believe that smaller tenants
actually are less demanding than large tenants, who use their economic leverage
not only in initial lease negotiations but throughout their tenancy as well.
AmeriVest Growth Cities
Within the niche of multi-tenant properties with smaller average tenant
size, we have elected to narrow our focus even further by restricting
acquisition or development activities to institutionally-sized product
(generally a building or project containing 100,000 square feet, unless adding
to an existing metropolitan portfolio) within certain target cities where we
hope to build meaningful multi-property portfolios over the short and medium
term. In order to employ our management resources in the most efficient manner,
these target cities were selected to be within a two-hour travel radius by air
from our Denver headquarters. The target cities also had to be large enough in
total office square footage to offer the possibility of multiple acquisitions
and liquidity in the event of a desired sale and had to have a high
concentration of firms of fewer than 20 employees as derived from the Cognetics
data discussed previously. Using a minimum of 45 million square feet of total
office space (this number includes both single-tenant and multi-tenant
properties), and at least 89% of firms under 20 employees, the top ten cities
(ranked in order of projected ten-year growth) within our targeted geographic
range are as follows:
1. Phoenix
2. Salt Lake City
3. San Francisco
4. San Diego
5. Denver
6. Minneapolis
7. San Antonio
8. Indianapolis
9. Dallas
10. Houston
The geographic logic of these proposed cities is strong. Sheridan has
experience owning and managing properties in both Phoenix and Dallas, as well as
its current activities in Denver and Indianapolis. We already have a large
existing portfolio of buildings in Texas that will be complemented by a focus on
the three largest cities in the state. Interestingly, all ten of our targeted
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cities score in the upper half of the 1999 edition of the "Momentum Index",
developed by the consulting firm of Landauer Real Estate Counselors to measure
the quality and sustained growth prospects of the 66 largest office markets
nationwide. Initially we intend to focus on the Denver, Phoenix and Indianapolis
markets.
Operating Performance and Stockholder Return
We believe that by focusing on a specific property type in cities with a
growing small tenant market, we should be able to increase our revenues, our
earnings, and our funds from operations (FFO). Although there is no assurance or
guarantee, it is our intention that growth in our revenues, earnings and FFO
will, over the long term, result in an increase in our stock price and the total
return to our stockholders and investors in this offering.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is a discussion and comparison of the financial condition and
results of operations of the Company as of and for the years ended December 31,
1999 and 1998. These discussions should be read in conjunction with our
financial statements, the notes to the financial statements, and the other
financial data included elsewhere in this prospectus.
Results of Operations
Comparison of year ended December 31, 1999 with year ended December 31, 1998
- ----------------------------------------------------------------------------
The Company acquired the Keystone Buildings effective July 1, 1999 and sold
the Broadway Building on December 13, 1999. At December 31, 1999, the Company
owned 24 properties. Revenues increased $2,160,588, or 57%, to $5,976,757 for
1999 as compared to $3,816,169 for 1998. The increase in revenues was due
primarily to the revenues of the Keystone Buildings being included subsequent to
their acquisition in the amount of $710,000 and the revenues for the 15 office
buildings acquired in 1998 being included for the entire year, which resulted in
an increase of approximately $1,360,000 over 1998. The net gain on the sale of
the Broadway Building and the Bank Building vacant land was approximately
$720,700.
Property operations, real estate taxes, general and administrative,
interest, depreciation and amortization increased by $680,509, $163,927,
$199,126, $610,838 and $330,855, respectively. All of the increases primarily
resulted from inclusion of the expenses attributable to the purchase of the
Keystone Buildings, subsequent to their purchase, the inclusion of the 15 office
buildings acquired during 1998 for a full year in 1999, and additional personnel
costs as a result of handling property management and accounting on an in-house
basis during 1999. Management fees decreased by $57,538. This was due to a
savings of $93,000 by bringing the property management and accounting functions
in-house and offset by management fees paid for the Keystone Buildings of
$35,500. Interest income increased in 1999 by $11,393 to $15,506 as compared to
$4,113 for 1998.
As a result of the above factors, the Company had a net income of $968,748,
or $.51 per share, in 1999 as compared with a net loss of $317,406, or $.21 per
share, in 1998. Of the $968,748 net income for the year ended December 31, 1999,
$720,712, or $.38 per share, relates to a gain on the sale of real estate.
20
<PAGE>
Comparison of year ended December 31, 1998 with year ended December 31, 1997
- ----------------------------------------------------------------------------
The Company acquired 15 properties in June, July and August 1998 (the "1998
Acquired Properties"). At December 31, 1998 the Company owned 24 properties.
Revenues increased $1,333,987, or 54%, to $3,816,169 for 1998 as compared to
$2,482,182 for 1997. The increase in revenues was due primarily to the revenues
of the 1998 Acquired Properties being included subsequent to their respective
acquisition dates in the amount of $1,050,000 and the revenues of the 1997
Acquired Properties (defined below) being included for the entire year, which
resulted in an increase of approximately $144,000 for the 1997 Acquired
Properties for the 1998 period that is comparable to the period that was not
included in 1997.
Property operations, real estate taxes, management fees, general and
administrative, interest, depreciation and amortization increased by $396,492,
$150,003, $51,373, $46,987, $350,958 and $181,285, respectively. All of the
increases primarily resulted from inclusion of the expenses attributable to each
of the 1998 Acquired Properties subsequent to their respective acquisition dates
and the 1997 Acquired Properties for a full year, as well as increased overhead
in additional personnel costs as a result of handling more property management
and accounting on an in-house basis rather than paying outside parties to
provide these services. The prepayment penalty and other expenses of $321,178
associated with debt refinancing was incurred in 1998 as part of the refinancing
of the mortgage on the Self-Storage Facilities, which resulted in decreasing the
annual interest rate on the mortgage from 9.9%, to 7.15%. Interest income
decreased in 1998 by $32,665 to $4,113 as compared to $36,778 for 1997 as a
result of the Company's utilizing most of its cash accounts for acquisition
purposes.
As a result of the above factors, the Company had a net loss of $317,406,
or $.21 per share, in 1998 as compared with a net loss of $120,452, or $.09 per
share, in 1997. Of the $317,406 net loss for the year ended December 31, 1998,
$321,178, or $.21 per share, relates to the one-time charge for prepayment
penalty and other expenses associated with the early retirement of the mortgage
described in the previous paragraph.
Liquidity and Capital Resources
From December 31, 1998 to December 31, 1999, net investment in real estate
increased approximately $6,000,000. This increase was due to the acquisition of
the Keystone Property less the sale of two vacant lots adjacent to our Bank of
America buildings in Texas, the sale of the Broadway Building, and normal
depreciation.
On August 12, 1999 the Company completed the acquisition of the three
Keystone office buildings in Indianapolis, Indiana. The effective date of this
acquisition was July 1, 1999. The Keystone Property contains an aggregate of
approximately 95,836 square feet. The purchase price for Keystone Property was
$7,944,000, which was paid by assuming approximately $5,255,000 of existing debt
and $116,400 of related escrow balances on the properties and issuing
approximately 541,600 shares of the Company s common stock at the rate of $4.75
per share. In conjunction with the assumption of the Debt, the Company also
assumed the obligations and liabilities of the original guarantors of the Debt
with an indemnification back for any obligations and liabilities accruing prior
to the acquisition.
On December 13, 1999, the Company sold the Broadway industrial showroom
property for $2.1 million with the proceeds being held in escrow for a
tax-deferred exchange under Section 1031 of the Internal Revenue Code.
On February 24, 2000, the Company signed a contract to purchase a 60,000
square foot office building in Denver, Colorado for $5,900,000. This purchase is
anticipated to be completed through the use of proceeds from the sale of the
21
<PAGE>
Broadway Building, sale of additional common stock, and additional debt
financing. The acquisition is expected to close in the second quarter of fiscal
year 2000.
Tenants accounts receivable increased approximately $13,000 due to normal
fluctuation in the collections cycle. Deferred financing costs decreased by
approximately $77,500 as a result of normal amortization and the sale of the
Broadway Building. Prepaid expenses and other assets increased by approximately
$155,700 due primarily to normal fluctuations in tax, maintenance and insurance
escrow reserves, and the acquisition of Keystone Property.
Mortgage Property loans payable increased by approximately $3,606,316 due
to the acquisition of the Keystone Property less the sale of the Broadway
Property.
Accounts payable and accrued expenses increased by approximately $65,500
during the period, all of which resulted from timing differences in the course
of normal operations and the addition of the Keystone Property. Accrued
interest, real estate taxes, prepaid rents and security deposits increased in
total by approximately $284,000. This increase was primarily the result of the
addition of the Keystone Property and the inclusion of the properties acquired
in 1998 for a full year.
At December 31, 1999, the Company had approximately $458,000 of cash and
cash equivalents, including approximately $267,500 of cash to be utilized for a
stockholder dividend distribution, which was paid on January 14, 2000, and
$510,000 in escrow for a tax-deferred property exchange, which is expected to
close during the second quarter of 2000.
The Company intends to meet its near-term working capital liquidity
requirements through cash flow provided from operations. The Company has a
short-term revolving credit line from Norwest Bank Colorado in the amount of
$300,000. At December 31, 1999 the Company had no outstanding balance on the
line of credit.
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.
Problems related to year 2000 compliance 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 our
buildings. Prior to December 31, 1999, we evaluated all our systems that may
have had year 2000 issues. We also surveyed our major vendors and suppliers for
year 2000 compliance. Our cost of year 2000 compliance was not material.
To date, neither we nor any of our service contractors have encountered any
year 2000 problems. Our contingency plans if year 2000 issues arise include
manual record keeping and use of alternate suppliers.
MANAGEMENT
Set forth in the following table are the names of our directors and
executive officers (including executive officers of our Advisor), their
respective positions and ages, and the year in which each director was first
elected. Each director has been elected for a three-year term until the
corresponding Annual Meeting of Shareholders and thereafter until his successor
is elected and has qualified. Approximately one-third of the director positions
are elected at each Annual Meeting of Shareholders. Additional information
concerning each of these individuals follows the table.
22
<PAGE>
<TABLE>
<CAPTION>
Position with the Company/ Director
Name Age Position with Sheridan Realty Advisors, LLC Since
- ---- --- ------------------------------------------------------------
<S> <C> <C> <C>
William Atkins 50 Chief Executive Officer and Director/ 1999
Chairman of the Advisor
James F. Etter(2) 57 President and Chief Operating 1995
Officer and a Director
Charles R. Hoffman(1) 63 Chairman Of The Board 1994
D. Scott Ikenberry 49 Chief Financial Officer/ N/A
Chief Financial Officer of the Advisor
Charles K. Knight 42 Secretary and Director/ 1999
President of the Advisor
John A. Labate(1)(2) 51 Director 1995
Robert J. McFann(2) 82 Director 1994
Alexander S. Hewitt 42 Vice President/ N/A
Vice Chairman of the Advisor
John B. Greenman 46 Vice President/
Senior Vice President of the Advisor N/A
</TABLE>
- ------------
(1) Member of the Audit Committee of the Board Of Directors (the "Board").
(2) Member of the Acquisitions Committee of the Board.
William Atkins has served as a director of the Company since August 1999
and, since December 1999, as our Chief Executive Officer and as Chairman and
Chief Executive Officer and managing member of Sheridan Realty Advisors, LLC.
Since 1990, he has served as President of Sheridan Realty Corp., of which he is
a principal shareholder and co-founder. Sheridan Realty Corp. is involved in the
commercial real estate business and serves as the general partner of Sheridan
Realty Partners, L.P, the former owner of the Keystone Buildings. Since 1996,
Mr. Atkins has also served as general partner of Atkins Ltd. Partnership, an
investment company. Since 1996, Mr. Atkins has served as a director of Rock
River Trust Company, which is involved in trust administration, and from 1996
through 1998 he served as President of Rock River Trust Company. Mr. Atkins
earned a Bachelor of Arts degree in economics from Stanford University in 1971.
James F. Etter has served as our President since May 1995, as our Chief
Financial Officer from July 1996 until December 1999 and as our Chief Executive
Officer from January 1997 until December 1999. From 1994 until May 1995, Mr.
Etter acted as a consultant with respect to real estate acquisitions not related
to us. Mr. Etter received his Masters of Business Administration and his
Bachelors of Business Administration degrees from the University of Cincinnati.
He is a member of the Financial Executives Institute and the National Investors
Relations Institute.
23
<PAGE>
Charles R. Hoffman has served as a director of the Company since August
1994 and as Chairman Of The Board since May 1995. Mr. Hoffman has also been a
member of the Audit Committee of the Board since July 1995. In July 1994, Mr.
Hoffman retired as President of Texaco Pipeline Inc. In that capacity he had
executive responsibility for more than 1,200 employees and over 2,900 miles of
pipeline. He also has experience in the crude oil terminal and transportation
business with Getty Pipeline, Inc., Getty Trading And Transportation Company,
and Skelly Pipe Line, Inc. He has served on the boards of directors of a number
of pipeline companies and as president of two pipeline systems. Mr. Hoffman
received his Bachelor of Science and Masters of Science/Civil Engineering
degrees from the Missouri School Of Mines And Metallurgy.
D. Scott Ikenberry has served as our Chief Financial Officer and as a
member of the Advisor since December 1999. Mr. Ikenberry has been Chief
Financial Officer of Sheridan Realty Corp. and other Sheridan Group companies
since August 1993. Mr. Ikenberry received his Bachelor of Science and Bachelor
of Arts degrees in Accounting from the University of Denver in 1972 and his
Master in Professional Accounting (Taxation) degree from the University of Texas
at Austin in 1976. He is a member of the American Institute of Certified Public
Accountants and the Colorado Society of Certified Accountants and is a licensed
real estate broker in Colorado.
Charles K. Knight has served as a director of the Company since August 1999
and, since December 1999, as our corporate Secretary and as the President and
managing member of the Advisor. Since 1998, Mr. Knight has served as Vice
President and a member of Sheridan Development, LLC. From 1996 through 1998, Mr.
Knight was the owner and served as the President of Abaco Investment Group, a
real estate investment company. From 1993 through 1996, Mr. Knight served as
Vice President - Sales and Marketing of Menda Scientific Products, Inc. Mr.
Knight received his Bachelor of Administration degree in Experimental Psychology
from the University of California at Santa Barbara in 1977, and his Juris Doctor
and Master of Business Administration degrees from the University of California
at Los Angeles in 1982. Mr. Knight is licensed to practice law in the States of
Colorado and New York and maintains an inactive license in California.
John A. Labate has served as a director of the Company since May 1995 and
as a member of both the Audit Committee and the Acquisitions Committee of the
Board since July 1995. Since September 1999, Mr. Labate has been Vice President
and Chief Financial Officer of Optical Security Group, Inc.. From 1997 to August
1999, Mr. Labate was Vice President and Chief Financial Officer of GeoBiotics,
Inc., a Denver based mineral technology company. Prior to 1997, Mr. Labate
served as the Chief Financial Officer, Secretary, and Treasurer of Crown
Resources Corporation, a publicly traded, Denver, Colorado based international
gold mining and exploration company. Mr. Labate received his Bachelor of Science
degree in accounting from San Diego State University.
Robert J. McFann has served as a director of the Company since August 1994.
He also served as our corporate Secretary from May 1995 until December 1999. Mr.
McFann has been a member of the Acquisitions Committee of the Company's Board
since July 1995. Prior to his retirement in 1996, Mr. McFann was the principal
owner and President of Hy Grade Meat Company, a private company which grew to a
mid-sized hotel and restaurant supply house under his direction. Prior to1996,
he also was a member of the Board Of Directors of the Bank Of Aurora.
Alexander S. Hewitt has served as a Vice President of the Company since
January 2000 and as Vice Chairman of the Advisor since December 1999. Since
1990, Mr. Hewitt has also served as Vice President of Sheridan Realty Corp., of
which he is a principal shareholder and co-founder and has held senior positions
with other Sheridan Group companies. Since 1996, Mr. Hewitt has served as a
director of Rock River Trust Company, which is involved in trust administration.
24
<PAGE>
Mr. Hewitt earned a Bachelor of Arts degree in economics and a Bachelor of
Science degree in Physics from Knox College in Galesburg, Illinois in 1982.
John B. Greenman has served as a Vice President of the Company since
January 2000, and as a Senior Vice President of the Advisor since December 1999.
Since 1994, he has served as Vice President of Sheridan Realty Corp. and as a
senior officer of other Sheridan Group companies. Mr. Greenman is a member of
the Urban Land Institute. He graduated from Amherst College in 1976 and in 1979
received his Master of Arts degree from the School of Advanced International
Studies at Johns Hopkins University.
Board and Committee Meetings
The Board maintains an Audit Committee and an Acquisitions Committee. The
Audit Committee was formed to perform the following functions: recommend to the
Board the independent auditors to be employed; discuss the scope of the
independent auditors' examination; review the financial statements and the
independent auditors' report; solicit recommendations from the independent
auditors regarding internal controls and other matters; review all related party
transactions for potential conflicts of interest; make recommendations to the
Board; and perform other related tasks as requested by the Board. During the
year ended December 31, 1999, the Audit Committee, currently consisting of
Messrs. Hoffman and Labate, met once.
The Acquisitions Committee was formed to perform the following functions:
recommend to the Board an acquisitions policy and strategy; review and update
the acquisitions policy and strategy periodically; review proposed acquisitions
and make recommendations to the Board concerning those acquisitions; review past
acquisitions and make recommendations to the Board; and perform other related
tasks as requested by the Board. During the year ended December 31, 1999, the
Acquisitions Committee, currently consisting of Messrs. Etter, Labate and
McFann, did not meet because its functions were conducted by the Board in full.
The Board Of Directors met 12 times during 1999 and each director
participated in at least 75 percent of those meetings.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act of 1934 requires our directors, executive
officers and holders of more than 10% of our common stock to file with the SEC
initial reports of ownership and reports of changes in ownership of common stock
and other of our equity securities. We believe that during the year ended
December 31, 1999, our officers, directors and holders of more than 10% of our
common stock complied with all Section 16(a) filing requirements. In making
these statements, we have relied upon the written representations of its
directors and officers and our review of the monthly statements of changes filed
with us by our officers and directors.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth in summary form the compensation received
during each of the last three completed fiscal years by William T. Atkins, our
Chief Executive Officer, and James F. Etter, our President. No other of our
employees received total salary and bonus exceeding $100,000 during any of the
last three fiscal years.
25
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------------- ----------------------------
Restricted
Other Annual Stock All other
Name and Fiscal Salary Bonus Compensation Awards Options Payouts Compensation
Principal Position Year ($)(1) ($)(2) ($)(3) ($) (#) ($)(3) ($)(4)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William Atkins (5) 1999 $ -0- -0- -0- -0- 12,000 -0- -0-
Chief Executive Officer
James F. Etter 1999 $120,750 $15,326 (6) $15,000(7) -0- -0- -0- -0-
President 1998 $115,000 $20,000 $15,000(7) -0- 10,000 -0- -0-
1997 $100,000 $15,000 $ 9,000(8) -0- 20,000 -0- -0-
</TABLE>
- -----------------
(1) The dollar value of base salary (cash and non-cash) received.
(2) The dollar value of bonus (cash and non-cash) received during the year
indicated.
(3) The Company does not have in effect any plan that is intended to serve as
incentive for performance to occur over a period longer than one fiscal
year except for our 1995 Stock Option Plan and 1998 Stock Option Plan. The
Company has entered into an agreement with Sheridan Realty Advisors, LLC
that provides for performance-based incentives.
(4) All other compensation received that the Company could not properly report
in any other column of the Summary Compensation Table including annual
Company contributions or other allocations to vested and unvested defined
contribution plans, and the dollar value of any insurance premiums paid by,
or on behalf of, the Company with respect to term life insurance for the
benefit of the named executive officer, and, the full dollar value of the
remainder of the premiums paid by, or on behalf of, the Company.
(5) Mr. Atkins became Chief Executive Officer of the Company on December 22
1999.
(6) Consists of $15,326 for accrued vacation time.
(7) Consists of $12,000 to reimburse for medical and life insurance coverage
and a $3,000 contribution to SIMPLE IRA Plan in 1999 and 2000 plus a
payment of $15,326 in accrued vacation from 1997 through December 31,
1999.
(8) Consists of $6,000 to reimburse for medical insurance coverage and a $3,000
contribution to a SIMPLE IRA Plan on behalf of Mr. Etter.
Option Grants Table
The following table sets forth information concerning individual grants of
stock options made during the fiscal year ended December 31, 1999 to each named
executive officer.
<TABLE>
<CAPTION>
Option Grants For Fiscal Year Ended December 31, 1999
% of Total Options
Options Granted to Employees Exercise or Base Expiration
Name Granted (#) in Fiscal Year Price ($/Share) Date
- ---- ----------- -------------- --------------- ----
<S> <C> <C> <C> <C> <C>
William Atkins 12,000 31.2% $4.813/share 8/12/04
James F. Etter -0- N/A N/A N/A
</TABLE>
26
<PAGE>
Employment Contracts And Termination Of Employment And Change-In-Control
Arrangements
Advisory Agreement With Sheridan Realty Advisors
Under an advisory agreement that we entered into with Sheridan Realty
Advisors, LLC effective January 1, 2000, Sheridan Realty Advisors will receive
incentive compensation in the form of an advisory fee based on new real property
acquisitions and up to 750,000 five-year warrants to purchase common stock at $5
per share. Issuance of these warrants is subject to the approval of stockholders
at our next annual meeting. William Atkins, our Chief Executive Officer and a
director of the Company, is the co-manager, chairman and a 20.00% owner of
Sheridan. Charles K. Knight, our Secretary and a director of the Company, is the
co-manager, president and a 20.00% owner of Sheridan. D. Scott Ikenberry, our
Chief Financial Officer is the chief financial officer and a 20.00% owner of
Sheridan. Messrs. Hewitt and Greenman, each of whom is a Vice President, are the
Vice-Chairman and Vice President, respectively, and 20.00% owners of Sheridan.
Employment Agreement With James F. Etter
We entered into an employment agreement (the "Etter Agreement") with James
F. Etter, our President, for the period from January 1, 1998 until December 31,
2000, which replaced a previous agreement effective as of January 1, 1996.
Pursuant to the Etter Agreement, Mr. Etter will devote substantially all his
business time to the Company. For the 1999 fiscal year, the Etter Agreement
provided for the payment of salary at the rate of $10,062.50 per month. For the
2000 fiscal year, the Etter Agreement provides for salary at the rate of
$10,565.63 per month. Bonuses are payable in the Board's discretion. The Etter
Agreement also provides that we will reimburse Mr. Etter for up to $12,000
annually for medical and insurance expenses paid by Mr. Etter until we adopt
health care plans covering these matters.
On December 9, 1998, the Board granted to Mr. Etter a bonus of $20,000 for
1998 and options to purchase 10,000 shares of common stock. On December 23 1999,
the Board authorized a payment to Mr. Etter a of $15,326 for unused accrued
vacation.
The Etter Agreement also provides that if we are acquired by another
company, and if the acquiring company does not offer Mr. Etter a position in the
Denver area at a salary level equal to or greater than his then current salary,
then all unexercised stock options held by Mr. Etter would immediately become
exercisable, and we would pay Mr. Etter an amount equal to one year's salary.
We have been negotiating with Mr. Etter concerning a termination and
severance agreement separate from the Etter Agreement. We tentatively have
agreed with Mr. Etter to continue paying him salary and benefits for 18 months
if he is terminated by the Company other than for cause. These payments would be
reduced by the amount of any severance payments made to Mr. Etter pursuant to
the Etter Agreement. We expect to keep this agreement in effect until Mr.
Etter's 65th birthday.
1995 Stock Option Plan
Pursuant to our 1995 Stock Option Plan (the "1995 Plan"), we may grant
options to purchase an aggregate of 130,000 shares of our common stock to key
employees, directors, and other persons who have contributed or are contributing
to our success. The options granted pursuant to the 1995 Plan may be incentive
options qualifying for beneficial tax treatment for the recipient or they may be
non-qualified options. With respect to options granted to persons other than our
27
<PAGE>
directors who are not also our employees, the 1995 Plan is administered by an
option committee that determines the terms of the options subject to the
requirements of the 1995 Plan. In May 1995, four outside directors were granted
an aggregate of 48,000 options with an exercise price of $5.00 per share
pursuant to the 1995 Plan, one-third of the options granted becoming exercisable
on each December 30 for three years thereafter, provided that the recipient was
still a director on that date. 12,000 of these options expired without being
exercised. In December 1997, three outside directors were granted an aggregate
of 36,000 options with an exercise price of $4.4375 per share pursuant to the
1995 Plan, and with one-third of the options granted becoming exercisable on
each December 30 for three years thereafter, provided that the recipient was
still a director on that date. At December 31, 1999, options to purchase an
aggregate of 125,000 shares of common stock were outstanding under the 1995
Plan. The option committee may grant additional options to purchase 5,000 shares
pursuant to the 1995 Plan.
1998 Stock Option Plan
Pursuant to our 1998 Stock Option Plan (the "1998 Plan"), we may grant
options to purchase an aggregate of 200,000 shares of common stock to key
employees, directors, and other persons who have or are contributing to our
success. The options granted pursuant to the 1998 Plan may be incentive options
qualifying for beneficial tax treatment for the recipient, non-qualified
options, or non-qualified non-discretionary options. The terms of the 1998 Plan
concerning incentive options and non-qualifie options are substantially the same
except that only our employees or employees of subsidiaries are eligible for
incentive options, and employees and other persons who have contributed or are
contributing to our success are eligible for non-qualified options.
Non-qualified non-discretionary options may be granted only to outside
directors. With respect to options granted to persons other than outside
directors, the 1998 Plan also is administered by an option committee that
determines the terms of the options subject to the requirements of the 1998
Plan. The portion of the 1998 Plan concerning non-qualified non-discretionary
options provides that outside directors automatically receive options to
purchase 12,000 shares pursuant to the 1998 Plan at the time of their initial
election as an outside director. The options held by outside directors are not
exercisable at the time of grant, but options to purchase 4,000 shares become
exercisable for each outside director on December 30 of each of the first three
years immediately following the date of grant of these options to the outside
director. The exercise price for the non-qualified non-discretionary options is
the fair market value of the common stock on the date these options are granted.
Shares acquired upon exercise of these options cannot be sold for six months
following the date of grant. If not previously exercised, non-qualified
non-discretionary options that have been granted expire upon the later to occur
of five years after the date of grant and two years after the date these options
first became exercisable. The non-qualified non-discretionary options also
expire 90 days after the optionholder ceases to be our director. At any time all
of an outside director's options have become exercisable, non-qualified
non-discretionary options to purchase an additional 12,000 shares, which are not
exercisable at the time of grant, shall be granted automatically to that outside
director.
All options granted under the 1998 Plan will become fully exercisable upon
the occurrence of a change in control of the Company or of certain mergers or
other reorganizations or asset sales described in the 1998 Plan. Options granted
pursuant to the 1998 Plan are not transferable during the optionee's lifetime.
Subject to the other terms of the 1998 Plan, the option committee has discretion
to provide vesting requirements and specific expiration provisions with respect
to the incentive options and non-qualified options granted. At December 31,
1999, options to purchase 47,000 shares of common stock were outstanding under
the 1998 Plan and options to purchase 153,000 were available to be granted
pursuant to the 1998 Plan.
28
<PAGE>
Sheridan Realty Advisors' Warrants
Under an advisory agreement that we entered into with Sheridan Realty
Advisors effective January 1, 2000, Sheridan Realty Advisors will receive
compensation designed to provide an incentive for its performance in the form of
an advisory fee based on new real property acquisitions and up to 750,000
five-year warrants to purchase common stock at $5 per share. Issuance of these
warrants is subject to the approval of stockholders, which will be requested at
our next annual meeting. Exercise of the warrants can occur after January 1,
2003 only if another vesting event has occurred. If approved by stockholders,
the warrants are to be issued as of January 1, 2000 and 225,000 warrants will
vest immediately. The balance of up to 525,000 warrants vest only upon
completion of an acquisition, purchase or long-term lease of real property by us
in an aggregate exercise price equal to 2.1% of the Equity Value of the property
acquired. "Equity Value" is equal to the acquisition price of the property
(before expenses of purchase) less any mortgage debt assumed or incurred in
connection with the acquisition plus any capital expenditures and lease-up costs
incurred in connection with the property during the first 12 months of
ownership. The total amount of Equity Value of real property subject to the
incentive compensation provision shall not exceed $25 million. As stated above,
even after a warrant vests, it is not exercisable until January 1, 2003.
Compensation Of Outside Directors
We compensate outside directors $250 per month plus $300 for each meeting
of the Board that they attend. We also reimburse directors for expenses incurred
in attending meetings and for other expenses incurred on our behalf. In
addition, each director who is not our employee or an employee of Sheridan
Realty Advisors automatically receives non-qualified non-discretionary options
to purchase shares of common stock.
BENEFICIAL OWNERS OF SECURITIES
As of February 25, 2000, there were 2,228,850 shares of our common stock
outstanding. The following table sets forth certain information as of February
25, 2000, with respect to the beneficial ownership of our common stock by each
director and nominee for director, by all executive officers and directors as a
group, and by each other person known by us to be the beneficial owner of more
than five percent of our common stock:
Name and Address of Number of Shares Percentage of
Beneficial Owner Beneficially Owned (1) Shares Outstanding
- ---------------- ---------------------- ------------------
William Atkins 119,176(2) 5.3%
1800 Glenarm Place, Suite 500
Denver, Colorado 80202
James F. Etter 76,479(3) 3.4%
1800 Glenarm Place, Suite 500
Denver, Colorado 80202
Charles R. Hoffman 79,500(4) 3.5%
208 Somerset
Bentonville, Arkansas 72712
D. Scott Ikenberry -0- 0.0%
1800 Glenarm Place, Suite 500
Denver, Colorado 80202
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Name and Address of Number of Shares Percentage of
Beneficial Owner Beneficially Owned (1) Shares Outstanding
- ---------------- ---------------------- ------------------
Charles K. Knight 13,343(5) *
1800 Glenarm Place, Suite 500
Denver, Colorado 80202
John A. Labate 24,000(3) 1.1%
5260 South Beeler Court
Englewood, Colorado 80111
Robert J. McFann 77,190(3) 3.4%
3260 Zephyr Court
Wheat Ridge, Colorado 80033
Alexander S. Hewitt 138,058 (6) 6.2 %
1800 Glenarm Place, Suite 500
Denver, CO 80202
John B. Greenman -0- 0.0%
1800 Glenarm Place, Suite 500
Denver, CO 80202
All Officers And Directors
As A Group (Nine Persons) 444,561(2-6) 18.72%
- ----------
*Less than one percent
(1) "Beneficial ownership" is defined in the regulations promulgated by the SEC
as having or sharing, directly or indirectly (i) voting power, which
includes the power to vote or to direct the voting, or (ii) investment
power, which includes the power to dispose or to direct the disposition, of
shares of the common stock of an issuer. Unless otherwise indicated, the
beneficial owner has sole voting and investment power.
(2) Includes 31,991 shares of common stock owned directly by Mr. Atkins; 83,185
shares owned by a trust company of which Mr. Atkins is a director and in
which he disclaims beneficial ownership; 4,000 shares of common stock
underlying currently exercisable options. Excludes up to 750,000 incentive
warrants to purchase common stock which could be issued to Sheridan Realty
Advisors, LLC, a limited liability company of which Mr. Atkins is a
managing member and 20% owner. These warrants are subject to shareholder
approval and are described above in "Executive Compensation - Sheridan
Realty Advisors Warrants" and below in Transactions Between The Company And
Related Parties Agreement With Sheridan Realty Advisors.
(3) Consists of an aggregate of 22,979 shares of common stock owned by Mr.
Etter, his wife, and minor daughter, 48,000 shares of common stock
underlying currently exercisable options, and an aggregate of 5,500 shares
of common stock underlying Warrants owned by Mr. Etter and his wife. See
"Executive Compensation--Employment Contracts And Termination Of Employment
And Change-In-Control Arrangements--Option Grants" for additional
information concerning Mr. Etter's options.
(4) Includes the following numbers of shares underlying options to purchase
shares of common stock that currently are exercisable that were granted to
each outside director pursuant to our 1995 and 1998 Stock Option Plans:
Charles Hoffman, 24,000; John Labate, 24,000; and Robert McFann, 24,000.
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The number of shares indicated also includes the following numbers of
shares underlying common stock purchase warrants ("Warrants") that
currently are exercisable that are held by each of the following persons:
Charles Hoffman, 8,000; and Robert J. McFann, 4,000.
(5) Includes 9,343 shares of common stock owned directly by Mr. Knight and
4,000 shares of common stock underlying currently exercisable options.
Excludes up to 750,000 incentive warrants to purchase common stock which
could be issued to Sheridan Realty Advisors, LLC, a limited liability
company of which Mr. Knight is a managing member and 20% owner. These
warrants are subject to shareholder approval and are described above in
"Executive Compensation - Sheridan Realty Advisors Warrants" and below in
Transactions Between The Company And Related Parties - Agreement With
Sheridan Realty Advisors".
(6) Includes 54,873 shares of common stock owned directly by Mr. Hewitt; 83,185
shares owned by a trust company of which Mr. Hewitt is a director on behalf
of various trust of which Mr. Hewitt is also a beneficiary. Mr. Hewitt
disclaims beneficial ownership of 28,496 of these shares.
TRANSACTIONS BETWEEN THE COMPANY AND RELATED PARTIES
We have been involved in the following transactions with our current and
past directors and officers and by persons known by us to be the beneficial
owners of five percent or more of our common stock.
Asset Purchases
Purchase Of State Of Texas Buildings
In June and July 1998, we acquired 11 office buildings in Texas that are
leased to various Texas government agencies. The aggregate purchase price for
these buildings included approximately $6,300,000 and 207,200 shares of our
common stock at the rate of $5.00 per share. As part of those transactions, the
sellers of the properties paid Colorado Bighorn Corporation aggregate
commissions of $75,830 and 4,390 shares of common stock. Maxine G. Hedlund, who
beneficially owned more than five percent of our outstanding common stock at the
time of the transaction, controls and is the President and a director of
Colorado Bighorn.
Purchase Of Four Office Buildings
In August 1998, we acquired four additional office buildings located in
Texas. The primary tenants in each building are branches of Bank Of America,
N.A. The aggregate purchase price for the four buildings was $3,625,000. As part
of that transaction, we paid Colorado Bighorn aggregate commissions of 13,500
shares of our common stock at the rate of $5.00 per share.
Purchase Of Keystone Buildings
On August 12, 1999, we completed the acquisition of three office buildings,
known as the Keystone Buildings, located in suburban Indianapolis, Indiana from
Sheridan Realty Partners, L.P., an affiliate of Sheridan Realty Advisors, LLC,
our advisor, and an affiliate of Messrs. Atkins, Ikenberry, Knight, Hewitt and
Greenman, senior members of our management team. The Keystone Buildings contain
a total of 95,836 square feet of rentable space. The total purchase price for
the Keystone Buildings was $7,944,000, which we paid by assuming approximately
$5,255,000 of existing debt and $116,400 of related escrow balances on the
properties and issuing 541,593 shares of our common stock at the rate of $4.75
per share. We will issue additional shares if the weighted average trading price
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of our common stock is not at least $4.75 for the 15 trading days preceding the
first anniversary of the acquisition of the Keystone Buildings. In conjunction
with the assumption of the debt, we also agreed to indemnify the original
guarantors of this debt if we fail to repay it.
As required pursuant to the Purchase And Sale Agreement with Sheridan
Realty Partners, L.P. regarding our acquisition of the Keystone Buildings, we
appointed William Atkins and Charles K. Knight to our Board. In December 1999,
Mr. Atkins was elected as our Chief Executive Officer. Mr. Atkins is the
President and a 16.5% owner of Sheridan Realty Corp., which is the general
partner of Sheridan Realty Partners. Sheridan Realty Corp. holds a one percent
interest in Sheridan Realty Partners as the general partner and an additional
3.1335% interest as a limited partner. In connection with the acquisition of the
Keystone Buildings, Mr. Atkins received approximately 30,196 of the shares of
our common stock paid by us as a portion of the purchase price. A trust company
for which Mr. Atkins serves as a director serves as trustee for trusts that also
received shares of our common stock. Mr. Atkins has no beneficial interest in
any shares held by the trust company. Mr. Atkins is also the Chairman and a
20.0% owner of Sheridan Realty Advisors, LLC.
We hired Sheridan Development, LLC to manage the Keystone Buildings for a
one-year term commencing on July 1, 1999. During that term, Sheridan Development
is responsible for all aspects of the management and operation of the Keystone
Buildings and coordinating the leasing of the Keystone Buildings. As
compensation, we pay a management fee equal to 5% of the gross monthly rental
income received from the Keystone Buildings. Mr. Atkins is the co-manager,
President and a 25.05% owner of Sheridan Development. Mr. Knight is a Vice
President and 9.9% owner of Sheridan Development and the President and a 20.0%
owner of Sheridan Realty Advisors, LLC. This management agreement was
effectively terminated as of January 1, 2000 when Sheridan Realty Advisors
became the property manager for all of our properties other than the Texas
properties.
After we purchased the Keystone Buildings, Charles K. Knight purchased from
the Crawford, Wilson, Ryan & Agulnick, P.C. Profit Sharing Plan (the "Plan"), a
partner in Sheridan Realty Partners, L.P., the 5,343 shares to be received by
the Plan as a portion of the purchase price. Mr. Knight paid the Plan $4.40 per
share. Mr. Knight was appointed to our Board pursuant to the terms of the
Purchase And Sale Agreement with Sheridan and, in December 1999, Mr. Knight was
elected as our Secretary.
Additionally, after our purchase of the Keystone Buildings, William Atkins
and the Alexander S. Hewitt Revocable Trust purchased 3,589 shares of common
stock from John B. Greenman at a price of $4.75 per share. John Greenman is an
employee of Sheridan Realty Advisors, LLC. Alexander S. Hewitt also received
approximately 53,079 of the shares of common stock paid by us as a portion of
the purchase price for the Keystone Buildings. Mr. Hewitt is Executive Vice
President and a 17.5% owner of Sheridan Realty Corp., which is the general
partner of Sheridan Realty Partners. The Alexander S. Hewitt Revocable Trust is
also a 2.5% owner of Sheridan Realty Corp. A trust company for which Mr. Hewitt
serves as a director serves as trustee for trusts that received an aggregate of
83,185 additional shares of common stock. Mr. Hewitt is also a beneficiary of
some of these trusts. Mr. Hewitt is also the Vice-Chairman and a 20.00% owner of
Sheridan Realty Advisors, LLC. Mr. Greenman, our Vice President, is also a Vice
President of Sheridan Realty Advisors, LLC. Mr. Ikenberry, our Chief Financial
Officer, is also the Chief Financial Officer of Sheridan Realty Advisors, LLC.
Both Mr. Greenman and Mr. Ikenberry are 20.0% owners of Sheridan Realty
Advisors, LLC
Other than as described in this section, there are no material
relationships between us and our directors, executive officers or known holders
of more than five percent of our common stock.
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Agreement With Sheridan Realty Advisors
Effective January 1, 2000, we entered into an agreement with Sheridan
Realty Advisors, LLC for it to assume responsibility for our day-to-day
operations. Sheridan Realty Advisors will manage our assets and will assist and
advise our Board on real estate acquisitions and investment opportunities. We
will pay Sheridan Realty Advisors an administrative fee and a property
management and accounting fee for these services. Our agreement with Sheridan
Realty Advisors provides that the costs for these services in fiscal 2000 will
be no greater than the costs incurred by us for providing these services
ourselves or in obtaining them from outside sources in fiscal year 1999. In
addition, Sheridan will receive incentive compensation in the form of five-year
warrants to purchase our common stock at $5 per share and an advisory fee based
on new real property acquisitions. Issuance of the warrants is subject to
stockholder approval, which will be requested at our next Annual Meeting of
Stockholders. Mr. Atkins is the co-manager, chairman and a 20.00% owner of
Sheridan Realty Advisors, LLC. Mr. Knight is the co-manager, President and a
20.00% owner of Sheridan Realty Advisors, LLC.
Conflicts Of Interest Policies
The Board and our officers are subject to certain provisions of Maryland
law which are designed to eliminate or minimize the effects of certain potential
conflicts of interest. In addition, the Bylaws provide that any transaction
between us and an interested party must be fully disclosed to the Board, and
that a majority of the directors not otherwise interested in the transaction
(including a majority of independent directors) must make a determination that
the transaction is fair, competitive and commercially reasonable and on terms
and conditions not less favorable to us than those available from unaffiliated
third parties.
All future transaction between us and our officers, directors and five
percent shareholders will be on terms no less favorable than could be obtained
from independent third parties and will be approved by a majority of
independent, disinterested directors of the Company. We believe that by
following these procedures, the Company will be able to mitigate the possible
effects of these conflicts of interest.
DESCRIPTION OF SECURITIES
Our authorized capital consists of 15,000,000 shares of $.001 par value
common stock and 5,000,000 shares of $.001 par value preferred stock. There were
2,228,850 shares of common stock issued and outstanding as of February 25, 2000,
and these outstanding shares were held by approximately 500 shareholders There
are no shares of preferred stock outstanding. As of February 28 2000, there are
outstanding warrants to purchase 2,049,435 shares of common stock at $5.40 per
share that are held by 43 holders until November 13, 2000 and additional
warrants to purchase 164,831 shares of common stock at $8.25 per share held by
one holder (the original underwriter of our initial public offering) until
November, 2000. The following is a description of our securities.
Common Stock
During the Annual Meeting of stockholders held on June 29, 1999, the
stockholders approved the reincorporation of AmeriVest in the State of Maryland,
including the increase of our authorized common stock from 10,000,000 shares to
15,000,000 shares.
Each share of the common stock is entitled to share equally with each other
share of common stock in dividends from sources legally available therefore,
when, as, and if declared by the Board and, upon liquidation or dissolution,
whether voluntary or involuntary, to share equally in our assets that are
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<PAGE>
available for distribution to the holders of the common stock. Each holder of
common stock is entitled to one vote per share for all purposes, except that in
the election of directors, each holder shall have the right to vote such number
of shares for as many persons as there are directors to be elected. Cumulative
voting shall not be allowed in the election of directors or for any other
purpose, and the holders of common stock have no preemptive rights, redemption
rights or rights of conversion with respect to the common stock. All outstanding
shares of common stock and all shares underlying the warrants when issued will
be fully paid and nonassessable by us. The Board is authorized to issue
additional shares of common stock within the limits authorized by our
Certificate Of Incorporation and without stockholder action.
Because all shares of common stock have equal voting rights and voting
rights are not cumulative, the holders of more than 50 percent of the shares of
common stock could, therefore, if they chose to do so and unless subject to a
voting agreement to the contrary, elect the entire Board.
Although we have paid dividends in the past, we cannot guarantee that we
will be able to pay dividends on a regularly quarterly basis in the future.
We have reserved a sufficient number of shares of common stock for issuance
upon the exercise of options under our 1995 Plan and 1998 Stock Option Plan.
Preferred Stock
We have available 5,000,000 shares of preferred stock for potential future
issuance. No shares of preferred stock currently are outstanding.
The preferred stock carries such relative rights, preferences and
designations as may be determined by the Board in its sole discretion upon the
issuance of any shares of preferred stock. The shares of preferred stock could
be issued from time to time by the Board in its sole discretion without further
approval or authorization by the shareholders, in one or more series, each of
which series could have any particular distinctive designations as well as
relative rights and preferences as determined by the Board. The relative rights
and preferences that may be determined by the Board in its discretion from time
to time, include but are not limited to the following:
o the rate of dividend and whether the dividends are to be cumulative
and the priority, if any, of dividend payments relative to other
series in the class;
o whether the shares of any such series may be redeemed, and if so, the
redemption price and the terms and conditions of redemption;
o the amount payable with respect to such series in the event of
voluntary or involuntary liquidation and the priority, if any, of each
series relative to other series in the class with respect to amounts
payable upon liquidation and sinking fund provisions, if any, for the
redemption or purchase of the shares of that series; and
o the terms and conditions, if any, on which the shares of a series may
be converted into or exchanged for shares of any class, whether common
or preferred, or into shares of any series of the same class, and if
provision is made for conversion or exchange, the times, prices,
rates, adjustments and other terms.
The existence of authorized but unissued shares of preferred stock could
have anti-takeover effects because we could issue preferred stock with special
dividend or voting rights that could discourage potential bidders.
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<PAGE>
Approval by the stockholders of the authorization of the preferred stock
gave the Board the ability, without stockholder approval, to issue these shares
with rights and preferences determined by the Board in the future. As a result,
we may issue shares of preferred stock that have dividend, voting and other
rights superior to those of the common stock, or that convert into shares of
common stock, without the approval of the holders of common stock. This could
result in the dilution of the voting rights, ownership and liquidation value of
current shareholders.
Warrants
Warrants Offered By This Prospectus
Each warrant offered by this prospectus entitles the register holder to
purchase one share of common stock at an exercise price of $5 per share, subject
to adjustment in certain events, at any time during the period commencing on the
date of this prospectus and expiring on the fifth anniversary of the date of
this prospectus. The warrants are subject to our redemption at $.01 per warrant
at any time prior to their exercise upon 30 days' prior notice to the holders of
the warrants, provided that the last trade price of the common stock reported on
the American Stock Exchange for at least 15 of the 20 consecutive days ending on
the third day prior to the date on which we give notice of redemption has been
at least 125 percent of the then effective exercise price of the warrants.
We do not intend to list the warrants for trading on any exchange and it is
unlikely that any significant over-the-counter market will develop for these
warrants.
Initial Public Offering Warrants
General. Each warrant that was issued in our initial public offering is
exercisable to purchase one share of common stock for $5.40 per share until
November 13, 2000. As of December 6, 1999, 2,049,435 of these warrants were
outstanding and an additional 164,831 warrants were reserved for issuance upon
the exercise of outstanding underwriters' warrants.
Current Registration Statement Required For Exercise. In order for a holder
to exercise that holder's warrants, there must be a current registration
statement on file with the SEC and with various state securities commissions to
continue registration of the issuance of the shares of common stock underlying
the warrants. We intend to maintain a current registration statement during the
period that the warrants are exercisable unless the market price of the common
stock underlying the warrants would create no economic incentive for exercise of
the warrants. To date, no material economic incentive for exercise has existed.
On July 29, 1999, the highest trading price for the common stock, as reported by
the Nasdaq Small Cap Market, was $5.43. During the past year, no other trading
price equaled or exceeded that figure. If these circumstances continue to exist
during the entire exercise period of the warrants issued in our public offering,
the warrants could expire without the holders having had an opportunity to
exercise their warrants and realize any material economic return.
Redemption. The warrants issued in our initial public offering are
redeemable by the Company at any time prior to their exercise upon 30 days prior
written or published notice, provided however, that the closing bid quotation
for the common stock for at least 15 of the 20 business days ending on the third
day prior to our giving notice of redemption has been at least 125% of the then
effective exercise price of the warrants. The redemption price for the warrants
is $.02 per warrant. Any warrant holder that does not exercise prior to the date
set forth in the notice of redemption will forfeit the right to exercise the
warrants and purchase the shares of common stock underlying those warrants. Any
warrants outstanding after the redemption date will be deprived of any value
except the right to receive the redemption price of $.02 per warrant.
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Transfer Agent And Registrar
Our transfer agent and registrar is GEMISYS Corporation, located at 7103 S.
Revere Parkway, Englewood, Colorado 80112, telephone number (303) 705-6000.
PLAN OF DISTRIBUTION
This prospectus relates to the sale of a minimum of 200,000 units and a
maximum of 1,000,000 units. The units are offered at $10 per unit. Each unit
consists of two shares of common stock and one redeemable common stock purchase
warrant to purchase one share of common stock. The shares of common stock and
the warrants may be detached from the units and traded separately.
We have not entered into any underwriting arrangements with respect to the
sale of these units. Brokerage fees or commissions of up to 5% may be paid to
broker-dealers registered with the SEC, the National Association of Securities
Dealers, Inc. and state authorities in connection with sales of the units,
however we have not entered into any agreement to pay such fees or commissions.
We are relying on the safe harbor provision of Rule 3a4-1 of the Exchange Act,
which exempts us from broker-dealer registration.
Our directors and executive officers are offering the units on a "best
efforts" basis, subject to the subscription and payment for not less than
200,000 units during the offering period of 60 days. We may extend the offering
period to June 30, 2000, in our discretion. All funds collected from subscribers
will be placed in an escrow account at U. S. Bank for which U.S. Bank Corporate
Trust Services will serve as escrow agent. Potential investors desiring to
purchase units should do the following:
o Complete and sign the subscription agreement included at the end of
this prospectus;
o Make checks payable to U.S. Bank, Escrow Agent for AmeriVest
Properties Inc.; and
o Send the completed subscription agreement and check to us at the
following address:
AmeriVest Properties Inc.
1800 Glenarm Place, Suite 500
Denver, Colorado 80202
Until the minimum offering amount of $2,000,000 is received, we will
forward the checks to the escrow agent on or before the next business day after
we receive them and completed subscription agreements. If the minimum offering
is not subscribed before April 30, 2000, all funds will be promptly refunded by
the escrow agent to subscribers without interest or deduction. If the minimum
offering amount is received on or before April 30, 2000, the escrow agent will
send us the funds held in escrow for the accepted subscriptions and we will
deliver stock certificates and warrant certificates representing the Units to
the subscribers.
SECURITIES AND EXCHANGE COMMISSION POSITION ON CERTAIN INDEMNIFICATION
The General Corporation Law of the State of Maryland (the "Maryland Code")
provides for mandatory indemnification against reasonable expenses incurred by
directors and officers of a corporation in connection with an action, suit or
proceeding brought by reason of their position as a director or officer if they
are successful, on the merits or otherwise, in defense of the proceeding. The
Maryland Code also allows a corporation to indemnify directors or officers in
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<PAGE>
such proceedings if the director or officer acted in good faith, in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, in the case of a criminal proceeding, he had no reasonable
cause to believe that his conduct was unlawful.
The Maryland Code permits a corporation to expand the rights to
indemnification by a provision in its bylaws, by an agreement, by resolution of
shareholders or directors not involved in the proceeding, or otherwise. However,
a corporation may not indemnify a director or officer if the proceeding was one
by or on behalf of the corporation and in the proceeding the director of officer
is adjudged to be liable to the corporation. Our Bylaws provide that we are
required to indemnify our directors and officers to the fullest extent permitted
by law, including those circumstances in which indemnification would otherwise
be discretionary.
In addition to the general indemnification described above, we have
adopted, in our articles of incorporation, a provision under the Maryland Code
that eliminates and limits certain personal liability of directors and officers
for monetary damages for breaches of the fiduciary duty of care.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, we have been informed that, in the opinion
of the SEC, that indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
LEGAL MATTERS
Patton Boggs LLP, Denver, Colorado, has acted as our counsel in connection
with this offering, including the validity of the issuance of the securities
offered in this prospectus. Attorneys employed by that firm beneficially own
9,650 shares of common stock and warrants to purchase 1,500 shares of common
stock.
EXPERTS
The audited financial statements of AmeriVest Properties Inc. appearing in
this prospectus have been examined by Wheeler Wasoff, P.C., independent
certified public accountants, as set forth in their report included in the
annual financial statements. Those financial statements are included in this
prospectus in reliance upon such report and upon the authority of that firm as
experts in auditing and accounting.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS AND
CAUTIONARY STATEMENTS
This prospectus and the documents incorporated into this prospectus by
reference include "forward-looking statements" within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act. All statements other
than statements of historical fact included in or incorporated into this
prospectus regarding our financial position, business strategy, plans and
objectives of management for future operations and capital expenditures are
forward-looking statements. Although we believe that the expectations reflected
in those forward-looking statements are reasonable, we can give no assurance
that those expectations will prove to have been correct.
Additional statements concerning important factors that could cause actual
results to differ materially from our expectations ("Cautionary Statements") are
disclosed in this prospectus, including the "Risk Factors" section, and in the
documents incorporated into this prospectus. All written and oral
forward-looking statements attributable to us or persons acting on our behalf
subsequent to the date of this prospectus are expressly qualified in their
entirety by the Cautionary Statements.
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WHERE YOU CAN FIND MORE AVAILABLE INFORMATION
This prospectus is part of a registration statement on Form SB-2 that we
filed with the SEC under the Securities Act. The registration statement on Form
SB-2, with any amendments, is referred to in this prospectus as the registration
statement. This prospectus does not contain all the information included in the
registration statement and exhibits to the registration statement, and
statements included in this prospectus concerning the content of any contract or
other document referred to are not necessarily complete. For further
information, please review the registration statement and the exhibits and
schedules filed with the registration statement. In each instance where a
statement contained in this prospectus regards the contents of any contract or
other document filed as an exhibit to the registration statement, you should
review the copy of that contract or other document filed as an exhibit to the
registration statement for complete information, and those statements are
qualified in all respects by this reference.
We are subject to the periodic reporting and other informational
requirements of the Exchange Act. The reports and other information that we file
with the SEC can be inspected and copied at the following public reference
facilities maintained by the SEC:
o 450 Fifth Street, N.W., Washington, D.C. 20549, Room 1024
o 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
o 7 World Trade Center, New York, New York 10048.
Copies of these materials also can be obtained at prescribed rates by
writing to the SEC, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Documents filed electronically by us with the SEC are
available at the SEC's world wide web site at http://www.sec.gov. The SEC's
world wide web site contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC.
Information about the operation of the SEC's public reference facilities may be
obtained by calling the SEC at 1-800-SEC-0330.
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INDEPENDENT AUDITOR'S REPORT
To The Board of Directors and Stockholders
AMERIVEST PROPERTIES INC.
We have audited the accompanying consolidated balance sheet of AmeriVest
Properties Inc. and Subsidiaries as of December 31, 1999, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the two years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of AmeriVest Properties
Inc. and Subsidiaries as of December 31, 1999, and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1999 in conformity with generally accepted accounting principles.
Wheeler Wasoff, P.C.
Denver, Colorado
February 7, 2000, except for Note 12,
as to which the date is February 24, 2000
F - 1
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
ASSETS
ASSETS
Investment in real estate
Land $ 6,052,418
Buildings and improvements 27,643,666
Furniture, fixtures and equipment 323,838
Tenant improvements 670,267
Less accumulated depreciation and amortization (6,610,743)
------------
Net Investment in Real Estate 28,079,446
Cash and cash equivalents 458,336
Escrow deposit 509,556
Tenant accounts receivable 61,886
Deferred financing costs, net 547,609
Prepaid expenses and other assets 657,625
------------
$ 30,314,458
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Mortgage loans and notes payable $ 22,467,915
Accounts payable and accrued expenses 186,802
Accrued interest 142,551
Accrued real estate taxes 624,880
Prepaid rents and security deposits 366,072
Dividends payable 267,462
------------
Total Liabilities 24,055,682
------------
COMMITMENTS AND CONTINGENCIES (Notes 2 and 7)
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value
Authorized - 5,000,000 shares
Issued and outstanding - none --
Common stock, $.001 par value
Authorized - 15,000,000 shares
Issued and outstanding - 2,228,850 shares 2,229
Capital in excess of par value 8,179,723
Distributions in excess of accumulated earnings (1,923,176)
------------
Total Stockholders' Equity 6,258,776
------------
$ 30,314,458
============
The accompanying notes are an integral part of
the consolidated financial statements.
F - 2
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1999
1998 1999
---------- -----------
REAL ESTATE OPERATING REVENUE
Rental revenue
Commercial properties $ 2,365,629 $ 4,561,479
Storage properties 1,450,540 1,415,278
----------- -----------
3,816,169 5,976,757
----------- -----------
REAL ESTATE OPERATING EXPENSES
Property operating expenses
Operating expenses 955,796 1,636,305
Real estate taxes 432,863 596,790
Management fees 181,649 124,111
General and administrative 458,223 657,349
Interest 1,036,387 1,647,225
Expenses associated with debt refinancing 321,178 --
Depreciation and amortization 751,592 1,082,447
----------- -----------
4,137,688 5,744,227
----------- -----------
OTHER INCOME
Interest income 4,113 15,506
Gain on sale of real estate -- 720,712
----------- -----------
4,113 736,218
----------- -----------
NET INCOME (LOSS) $ (317,406) $ 968,748
=========== ===========
NET INCOME (LOSS) PER COMMON SHARE
Basic $ (.21) $ .51
=========== ===========
Diluted $ (.21) $ .51
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
Basic 1,538,403 1,881,075
=========== ===========
Diluted 1,538,403 1,882,232
=========== ===========
The accompanying notes are an integral part of
the consolidated financial statements.
F - 3
<PAGE>
<TABLE>
<CAPTION>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1999
Distributions
Common Stock Capital in in Excess of
------------------------------- Excess of Accumulated
Shares Amount Par Value Earnings
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1998 1,429,070 $ 1,429 $ 4,463,955 $ (920,829)
Issuance of common stock for properties 229,700 230 1,143,770 --
Dividends declared (Note 1) -- -- -- (720,660)
Net (Loss) -- -- -- (317,406)
----------- ----------- ----------- -----------
Balance, December 31, 1998 1,658,770 1,659 5,607,725 (1,958,895)
Issuance of common stock for properties 570,080 570 2,571,998 --
Dividends declared (Note 1) -- -- -- (933,029)
Net Income -- -- -- 968,748
----------- ----------- ----------- -----------
Balance, December 31, 1999 2,228,850 $ 2,229 $ 8,179,723 $(1,923,176)
=========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements.
F - 4
</TABLE>
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1999
1998 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (317,406) $ 968,748
Income adjustments to reconcile net
income (loss) to net cash
provided by operating activities
Gain of sale of real estate -- (720,712)
Depreciation and amortization 751,592 1,082,447
Write off of unamortized loan fees 37,080 --
Changes in assets and liabilities
(Increase) in receivables (13,990) (13,271)
(Increase) in prepaids (464,384) (96,950)
Increase in accounts payable 72,781 65,475
Increase in accruals 407,375 217,912
----------- -----------
Net cash provided by operating activities 473,048 1,503,649
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to investments in real estate (2,425,617) (391,002)
Proceeds from the sale of real estate -- 569,699
Escrow deposit -- (509,556)
----------- -----------
Net cash (used) by investing activities (2,425,617) (330,859)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short term borrowing 1,075,000 --
Repayment of short term borrowing (1,225,000) --
Proceeds from refinancing of mortgages 3,908,134 --
Payments on mortgage loans (173,799) (291,152)
Dividends paid (682,406) (864,618)
Payment of deferred financing costs (607,378) --
----------- -----------
Net cash provided (used) by
financing activities 2,294,551 (1,155,770)
----------- -----------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 341,982 17,020
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 99,334 441,316
----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 441,316 $ 458,336
=========== ===========
The accompanying notes are an integral part of
the consolidated financial statements.
F - 5
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998 AND 1999
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
During the years ended December 31, 1998 and 1999, the Company made cash
payments for interest on indebtedness of $963,011 and $1,612,768 respectively.
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
In 1998 the Company acquired 15 commercial properties in the State of Texas. The
aggregate purchase price of these properties consisted of cash, debt and 220,700
shares of the Company's common stock (valued at $5 per share), as follows:
Purchase price $ 11,231,702
Mortgage loans payable and debt assumed (7,864,187)
Common stock issued (1,103,500)
------------
Net cash paid $ 2,264,015
============
In 1998 the Company refinanced certain mortgage loans as follows:
Mortgage loans obtained $ 9,075,219
Mortgage loans paid off/refinanced (5,167,085)
------------
Net cash received from refinancing $ 3,908,134
============
In 1999 the Company acquired an office building complex in Indiana. The purchase
price of $7,944,000, consisted of cash, the assumption of mortgage debt of
$5,255,000 and 541,593 shares of the Company's common stock valued at $2,572,568
($4.75 per share).
The accompanying notes are an integral part of
the consolidated financial statements.
F - 6
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
AmeriVest Properties Inc. (the Company) was incorporated under the laws of
the State of Delaware on August 25, 1993 and was reincorporated in the
State of Maryland in 1999. Effective January 1, 1996 the Company commenced
operating as a self-administered and self-managed real estate investment
trust ("REIT"). The Company owns and operates, through its wholly owned
subsidiaries, an office building in Appleton, Wisconsin, an office building
complex in Indianapolis, Indiana, eighteen commercial office properties in
the State of Texas, and four self-storage facilities in Denver, Colorado.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the consolidated
operations of the Company and its wholly owned subsidiaries, as follows:
AmeriVest Broadway Properties Inc. (ABP)
Consolidated Storage Properties Inc. (CSP)
Giltedge Office Building Inc. (GBI)
AmeriVest Properties Texas Inc. (APT)
AmeriVest Buildings Texas Inc. (ABT)
AmeriVest Properties Odessa Inc. (AOI)
AmeriVest Properties Arvada Inc. (APA)
AmeriVest Properties Indiana Inc. (API)
All significant intercompany accounts and transactions have been eliminated
in consolidation.
INVESTMENT IN REAL ESTATE
Real estate, property, and equipment are stated at cost. Depreciation and
amortization are computed on a straight-line basis over the estimated
useful lives as follows:
Description Estimated Useful Lives
----------- ----------------------
Land Not Depreciated
Buildings 15 to 40 years
Equipment 5 to 7 years
Tenant Improvements Corresponding term of tenant's lease
Maintenance and repairs are expensed as incurred and improvements are
capitalized. The cost of assets sold or retired and the related accumulated
depreciation and/or amortization are removed from the accounts and the
resulting gain or loss is reflected in operations in the period in which
such sale or retirement occurs.
F - 7
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company has adopted Statement of Financial Accounting Standard ("SFAS")
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of" which requires that long-lived assets to be held
and used be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of SFAS 121 has not had an impact on the
Company's consolidated financial statements, as the Company has determined
that no impairment loss for 1998 or 1999 need to be recognized for
applicable assets of continuing operations
REVENUE RECOGNITION
Rental revenue from real estate operations is recognized as earned, on a
monthly basis.
INCOME TAXES
Effective January 1, 1996 the Company elected to be taxed as a REIT under
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended
(the "Code"). As a REIT, the Company generally would not be subject to
federal income taxation at the corporate level to the extent it distributes
annually at least 95% of its REIT taxable income, as defined in the Code,
to its stockholders and satisfies certain other requirements. Accordingly,
no provision has been made for federal income taxes in the accompanying
consolidated financial statements.
Certain of the Company's subsidiaries are subject to certain state excise
and franchise taxes. The provision for such state taxes has been reflected
in general and administrative expense in the consolidated statement of
operations and has not been separately stated due to its insignificance.
For federal income tax purposes, the cash dividend paid to stockholders may
be characterized as ordinary income, return of capital (generally
non-taxable) or capital gains. Dividends for the year ended December 31,
1998 totaling $720,660 are characterized 100% as return of capital and
includes the dividend declared in the fourth quarter of 1998 of $199,052
($.12 per share) which was paid January 14, 1999. Dividends for the year
ended December 31, 1999 totaling $933,029 are characterized 46% as return
of capital and 54% ordinary income and includes the dividend declared in
the fourth quarter of 1999 of $267,462 ($.12 per share) which was paid
January 14, 2000.
SHARE BASED COMPENSATION
In October 1995, SFAS No. 123 "Accounting for Stock-Based Compensation" was
issued. This standard defines a fair value based method of accounting for
an employee stock option or similar equity instrument. This statement gives
entities a choice of recognizing related compensation expense by adopting
F - 8
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the new fair value method or to continue to measure compensation using the
intrinsic value approach under Accounting Principles Board (APB) Opinion
No. 25. The Company has elected to utilize APB No. 25 for measurement, and
will, pursuant to SFAS No. 123, disclose supplementally the pro forma
effects on net income and earnings per share of using the new measurement
criteria. During the years ended December 31, 1998 and 1999, the Company
issued options to purchase shares of its common stock (Note 5).
DEFERRED FINANCING COSTS
Deferred financing costs include fees and costs incurred to obtain
long-term financing. These fees and costs are being amortized over the
terms of the respective loans on a basis, which approximates the interest
method. Unamortized deferred financing fees are written-off when debt is
retired before the maturity date. In 1998 unamortized deferred financing
costs of $37,080 were charged to operations and are included in the
accompanying financial statements as a component of "Expenses associated
with debt refinancing". Accumulated amortization of deferred financing
costs was $70,154 at December 31, 1999.
TENANT LEASING COSTS
Fees and costs incurred in the successful negotiation of leases have been
deferred and are being amortized on a straight-line basis over the terms of
the respective leases.
CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers as cash
equivalents all highly liquid investments with a maturity of three months
or less at the time of purchase. On occasion, the Company has cash in banks
in excess of federally insured amounts.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
INCOME OR LOSS PER COMMON SHARE
Basic income (loss) per common share is calculated by dividing net income
(loss) by the weighted average number of common shares outstanding during
the year. Diluted income per common share is calculated by adjusting
outstanding shares, assuming conversion of all potentially dilutive stock
options. Convertible equity instruments, consisting of warrants and
options, are not considered in the calculation of loss per share for 1998,
as there inclusion would be antidilutive.
F - 9
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW TECHNICAL PRONOUNCEMENTS
In June 1998 SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities", was issued for fiscal years beginning after June 15,
1999. Adoption of SFAS No. 133 is not expected to have an impact on the
Company's financial statements.
In October 1998 SFAS No. 134, "Accounting for Mortgage Broker Securities",
was issued for fiscal years beginning after December 15, 1998. Adoption of
SFAS No. 134 does not have an impact on the Company's financial statements.
In February 1999 SFAS No. 135, "Rescission of FASB Statement No. 75 and
Technical Corrections" was issued for the fiscal years beginning after
February 15, 1999. Adoption of SFAS No. 135 is not expected to have an
impact on the Company's financial statements.
In June 1999 SFAS No. 136, "Transfers of Assets to a Not-For-Profit
Organization or Charitable Trust that Raises or Holds Contributions for
Others" was issued for fiscal years beginning after December 15, 1999.
Adoption of SFAS No. 136 is not expected to have an impact on the Company's
financial statements.
In June 1999 SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statements No.
133" was issued. Adoption of SFAS No. 137 is not expected to have an impact
on the Company's financial statements.
NOTE 2 - INVESTMENTS IN REAL ESTATE
In 1998 the Company, through its wholly owned subsidiaries APT and AOI,
acquired eleven office buildings in Texas under separate purchase
contracts. The primary tenants of each of these buildings are government
agencies of the State of Texas. The aggregate purchase price for the eleven
properties was $7,340,800, comprised of 207,200 shares of common stock,
valued at $5.00 per share, a promissory note to one of the sellers in the
amount of $192,000 and $6,112,800 cash, of which $6,000,000 was financed by
a first mortgage on the properties. Pursuant to the purchase agreements and
related subscription agreements executed by the seller, the seller will be
issued additional shares of common stock if either (a) the average last
sales price of the Company's common stock is not $5.00 per share or higher
during the 60 days immediately preceding the first anniversary of the
closing date or (b) the last sales price of common stock is not $5.00
higher on the 15 consecutive business days immediately preceding the first
anniversary of the closing date of the properties. The additional shares to
be issued will be based on the difference between the amounts as calculated
in (a) or (b) above and $5.00 per share. Accordingly, the shares issued
were valued at $5.00 per share. Twenty eight thousand four hundred and
eighty seven (28,487) additional shares were issued in 1999 in accordance
with this provision.
In 1998 the Company, through its wholly owned subsidiary ABT, acquired four
office buildings in Texas whose primary tenants are branch offices of a
commercial bank. The aggregate purchase price for the four properties,
which were acquired under one purchase contract, was $3,625,000. In
conjunction with the purchase the Company issued 13,500 shares of its
common stock, valued at $5.00 per share, as part of the sales commission on
the properties.
F - 10
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - INVESTMENTS IN REAL ESTATE (CONTINUED)
In 1999 the Company, through its wholly owned subsidiary API, acquired an
office building complex in Indiana (Keystone Buildings). These buildings
are part of an office park and they are multi-tenated with small to medium
sized tenants. The purchase price was $7,944,000. In conjunction with the
purchase, the Company assumed approximately $5,255,000 of existing debt and
issued 541,593 shares of its common stock valued at $2,572,568 ($4.75 per
share). Pursuant to the purchase agreements and related subscription
agreements executed by the seller, the seller will be issued additional
shares of common stock if either (a) the average last sales price of the
Company's common stock is not $4.75 per share or higher during the 60 days
immediately preceding the first anniversary of the closing date or (b) the
last sales price of common stock is not $4.75 higher on the 15 consecutive
business days immediately preceding the first anniversary of the closing
date of the properties. The additional shares to be issued will be based on
the difference between the amounts as calculated in (a) or (b) above and
$4.75 per share. Accordingly, the shares issued were valued at $4.75 per
share.
In August and September 1999 the Company sold two vacant lots adjacent to
its bank buildings in Texas with aggregate cash proceeds of approximately
$60,000.
In December 1999 the Company sold its industrial office and showroom
building in Colorado for $2.1 million resulting in a gain of approximately
$737,000. The net proceeds of approximately $510,000 are being held in
escrow to complete a tax-deferred exchange under Section 1031 of the
Internal Revenue Code by June 2000. If the exchange is not completed by
June 2000, the Company will be obligated to distribute to stockholders a
portion of the gain and may be subject to a tax liability if the
distribution requirement is not met.
Depreciation expense related to investment in real estate was $718,993 and
$1,023,560 for the years ended December 31, 1998 and 1999, respectively.
NOTE 3 - MORTGAGES AND NOTES PAYABLE
Mortgages payable are collateralized by substantially all properties and
require monthly principal and interest payments. Following is a summary of
the Company's mortgages and notes payable at December 31, 1999:
Note payable to Anchor Bank. Interest at
7.75%, due in monthly installments of
$22,295 based on a 30-year amortization
through June 1, 2008 at which time a
balloon payment of $2,797,181 is due.
This note is secured by a mortgage on
the Giltedge Office Building in
Appleton, Wisconsin. $3,157,022
Note payable to GMAC. Interest at 7.15%,
due in monthly installments of $39,401
based on a 25-year amortization through
September 1, 2008, at which time a
balloon payment of $4,358,574 is due.
This note is secured by a mortgage on
the three self-storage facilities in the
Denver, Colorado metropolitan area. 5,403,042
F - 11
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - MORTGAGES AND NOTES PAYABLE (CONTINUED)
Note payable to 1st National Bank of
Arvada. Interest at the Prime Rate (
8.25% at December 31, 1999), adjusted
quarterly, due in monthly installments
of $8,600, based on a 20-year
amortization, through September 14, 2003
at which time a balloon payment of
$852,197 is due. This note is secured by
a mortgage on the Arvada, Colorado
self-storage and office facility. 970,898
Note payable to ORIX Real Estate Capital
Markets. Interest at 7.66%, due in
monthly installments of $42,612 through
July 1, 2028. This note is secured by a
mortgage on 13 office buildings leased
to the State Of Texas. 5,927,602
Note payable to Jefferson Pilot. Interest
at 9.0%, due in monthly installments of
$17,095, through May 1, 2013. This note
is secured by a mortgage on the Bank
Buildings. 1,595,118
Note payable to Arlington Building
Partnership. Interest at 8.5%, monthly
payments of interest only, principal
balance due June 15, 2000. 192,000
Note payable to Security Life of Denver
Insurance Company. Interest at 8%, due
in monthly payments of principal and
interest of $37,626 through May 1, 2022.
Lender can call the outstanding balance
due on June 1, 2007, June 1, 2012 or
June 1, 2017. This note is secured by a
mortgage on the Keystone Buildings. 4,699,128
Note payable to Security Life of Denver
Insurance Company. Interest at 8.63%,
due in monthly payments of principal and
interest of $4,403 through May 1, 2022.
Lender can call the outstanding balance
due on June 1, 2007, June 1, 2012 or
June 1, 2017. This note is secured by a
mortgage on the Keystone Buildings. 523,105
-----------
TOTAL $22,467,915
===========
As of December 31, 1999, the scheduled maturities of mortgages is as
follows:
2000 $ 545,698
2001 382,624
2002 414,200
2003 1,315,382
2004 453,364
Thereafter 19,356,647
-----------
$22,467,915
===========
F - 12
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - MORTGAGES AND NOTES PAYABLE (CONTINUED)
At December 31, 1999 there were no advances outstanding under the Company's
$300,000 line of credit with Norwest Bank of Colorado, N.A, nor were there
any advances made during 1999. This line of credit is secured by a second
mortgage on the Company's Arvada self storage facility, with interest
payable monthly at Norwest prime interest rate plus 1% (9.5% at December
31, 1999). The line of credit matures in May 2000.
NOTE 4 - STOCKHOLDERS' EQUITY
COMMON STOCK
In 1998 the Company issued shares of its common stock as partial
consideration for the acquisition of commercial properties in the State of
Texas as follows:
o 9,000 shares valued at $40,500 ($4.50 per share) as additional
consideration for one property acquired in 1997.
o 7,300 shares valued at $36,500 ($5.00 per share) as partial
consideration for an office building in Odessa, Texas.
o 199,900 shares valued at $999,500 ($5.00 per share) as partial
consideration for ten office buildings in the State of Texas.
o 13,500 shares valued at $67,500 ($5.00 per share) for partial
consideration for a sales commission on the acquisition of four bank
buildings in the State of Texas.
In 1999 the Company issued shares of its common stock as follows:
o 28,487 shares were issued as a purchase price adjustment to the 1998
purchase of the office buildings in Texas.
o 541,593 shares valued at $2,572,568 ($4.75 per share) as partial
consideration for the acquisition of an office building complex in
Indiana.
WARRANTS
At December 31, 1999 the status of outstanding warrants is as follows:
Issue Shares Exercise Expiration
Date Exercisable Price Date
---- ----------- ----- ----
June, 1996 1,500,000 $5.40 November, 2000
October, 1996 549,435 $5.40 November, 2000
October, 1996 164,831 $8.25 November, 2000
At December 31, 1999 the per share weighted average exercise price of
outstanding warrants is $5.61.
F -13
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - STOCK OPTION PLAN
In March 1998, the Board of Directors approved the 1998 Stock Option Plan
(the "1998 Option Plan"). Pursuant to the Option Plan, the Company may
grant options to purchase an aggregate of 200,000 shares of the Company's
common stock to key employees, directors, and other persons who have or are
contributing to the success of the Company. The options granted pursuant to
the Option Plan may be either incentive options qualifying for beneficial
tax treatment for the recipient or non-qualified options. Directors who are
not also employees of the Company ("Outside Directors") automatically
receive options to purchase 12,000 shares pursuant to the Option Plan at
the time of their election as an Outside Director. None of these options
are exercisable at the time of grant. Options to purchase 4,000 shares
become exercisable for each Outside Director on December 30 of each of the
first three years immediately following the date of grant of the options to
that Outside Director. The exercise price for options granted to Outside
Directors is the fair market value of the common stock on the date of
grant, and all options granted to Outside Directors expire five years from
the date of grant. On the date that all of an Outside Director's options
have expired, options to purchase an additional 12,000 shares, none of
which is exercisable at that time, shall be granted to that Outside
Director. The 1998 option plan was adopted as the Company had issued
substantially all options available pursuant to the 1995 Stock Option Plan.
The status of outstanding options granted pursuant to the Company's Stock
Option Plans was as follows:
<TABLE>
<CAPTION>
Weighted
Number Average Weighted
of Exercise Average Fair Exercise
Shares Price Value Price
------ ----- ----- -----
<S> <C> <C> <C> <C>
Options Outstanding - January 1, 1998 122,000 $4.74 $4.44 - 5.00
(57,000 exercisable)
Granted 15,000 $3.97 $.24 $3.97
-------
Options Outstanding - December 31, 1998 137,000 $4.66 $3.97 - 5.00
(83,750 exercisable)
Granted 104,500 $4.58 $.48 $4.00 - 4.81
Forfeited (3,500) $4.00
Reissued (66,000) $5.00
--------
Options Outstanding - December 31, 1999 172,000 $4.66 $3.97 - 5.00
(122,000 exercisable) ========
</TABLE>
In October 1999 the expiration date on the outstanding Directors options
granted in 1995, and the options granted to the Company's President in May
1995 and December 1996 were extended to December 31, 2004. The exercise
price of the options remained at $5.00 per share and the fair value as of
the October 1999 grant date was $.43 per share.
The weighted average contractual life of options outstanding at December
31, 1999 was 5 years.
F - 14
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - STOCK OPTION PLAN (CONTINUED)
The Company has adopted the disclosure-only provisions of SFAS No. 123. Had
compensation cost for the Company's stock option plan been determined based
on the fair value at the grant date consistent with the provisions of SFAS
No. 123, the Company's net income (loss) and net income (loss) per share
for the years ended December 31, 1998 and 1999 would have been changed to
the pro forma amounts indicated below:
1998 1999
---------- --------
Net income (loss) applicable to
common stockholders - as reported $ (317,406) $968,748
========== ========
Net income (loss) applicable to
common stockholders - pro forma $ (325,741) $936,489
========== ========
Basic Income (Loss) per share - as reported $ (.21) $ .51
========== ========
Diluted Income (Loss) per share - as reported $ (.21) $ .51
=========== ========
Basic Income (Loss) per share - pro forma $ (.21) $ .50
========== ========
Diluted Income (Loss) per share - pro forma $ (.21) $ .50
========== ========
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants: dividend yield of 10.41% to 11.3%; expected
volatility of 21.5% to 43.48%; discount rate of 5.5% to 5.7%; and expected
lives of 5 years.
At December 31, 1998 the number of options exercisable was 83,750, the
weighted average exercise price of these options was $4.81, the weighted
average contractual life of the options was 5 years and the range of
exercise prices was $3.97 to $5.00 per share.
At December 31, 1999 the number of options exercisable was 122,000, the
weighted average exercise price of these options was $4.72, the weighted
average contractual life of the options was 5 years and the range of
exercise prices was $3.97 to $5.00 per share.
At December 31, 1998 and 1999 options to purchase 193,000 shares and
158,000 shares, respectively, were available to be granted pursuant to the
Company's 1995 and 1998 option plans.
NOTE 6 - LEASE AGREEMENTS
The following table summarizes future minimum base rent to be received
under noncancelable tenant leases for the Company's commercial properties
expiring each year, as of December 31, 1999:
2000 $ 4,527,197
2001 3,845,979
2002 3,075,975
2003 2,354,010
2004 1,856,185
Thereafter 8,017,238
-----------
$23,676,584
===========
F - 15
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - LEASE AGREEMENTS (CONTINUED)
Some leases also provide for additional rent based on increases in
operating expenses. These increases are generally payable annually in the
succeeding year. The Company's self-storage facilities are generally leased
on a month to month basis, and are therefore not included in the above
table.
NOTE 7 - FINANCIAL INSTRUMENTS
FAIR VALUE
The Company's financial instruments include tenant accounts receivable,
accounts payable, other accrued expenses and mortgage loans and notes
payable. The fair values of these financial instruments were not materially
different from their carrying or contract values.
CONCENTRATIONS OF CREDIT RISK
The Company leases office space to commercial businesses in Colorado,
Indiana, Wisconsin and Texas. The Company also leases office space to State
of Texas governmental agencies. The terms of the leases generally require
basic rent payments at the beginning of each month. Credit risk associated
with the lease agreements is limited to the amount of rents receivable from
tenants less any related security deposits. Leases with the State of Texas
governmental agencies may be canceled by the lessee should funding for the
specific government agency on a complete agency basis be decreased or
discontinued. The Company's self-storage facilities are generally leased on
a monthly basis. Credit risk associated with these leases is limited to the
amounts of rents receivable.
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of cash and cash
equivalents. The Company maintains cash accounts at two financial
institutions. The Company periodically evaluates the credit worthiness of
these financial institutions, and maintains cash accounts only in large
high quality financial institutions, thereby minimizing exposure for
deposits in excess of federally insured amounts. On occasion, cash on
deposit may exceed federally insured amounts.
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company's Colorado and Wisconsin properties were managed through
December 1998, under a management agreement, by an entity whose former
beneficial majority shareholder was a founder of the Company. The entity
managed all aspects of Colorado and Wisconsin property operations,
including leasing and bookkeeping. For these services, the Company was
charged a fee of 5% of gross revenues plus 5% of all personnel costs. In
addition, the entity provided bookkeeping services for the Company's Texas
properties, and was paid a fee at the rate of 2% of gross revenues from
these properties. During the year ended December 31, 1998, $150,520, was
incurred under the management agreement and for other administrative
services.
As required pursuant to the Company's acquisition of the Keystone Buildings
from Sheridan Realty Partners L.P. (Sheridan LP) certain principals of
Sheridan LP were appointed to the Company's Board of Directors and received
shares of the Company's common stock issued in conjunction with the
acquisition. The Keystone Buildings property was managed through December
1999 under a management agreement by Sheridan Development LLC., an
affiliate of Sheridan, L.P. by virtue of interlocking ownership and
management. The Company was charged a fee of 5% of gross revenues which
amounted to approximately $35,500 during 1999.
F - 16
<PAGE>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - RELATED PARTY TRANSACTIONS (CONTINUED)
Effective January 1, 2000 all of the Company's properties are managed under
an agreement with Sheridan Realty Advisors, LLC, which also manages
day-to-day operations of the Company and assists and advises the Board of
Directors on real estate acquisitions and investment opportunities.
Sheridan Realty Advisors LLC is an affiliate of Sheridan LP and certain
senior members of Sheridan LP are members of the Company's management team
and of the Company's Board of Directors. Sheridan Realty Advisors receives
an administrative fee and a property management and accounting fee for
these services. The agreement with Sheridan Realty Advisors provides that
the costs paid for these services in fiscal year 2000 will be no greater
than the costs incurred by the Company for the same services in fiscal year
1999. In addition, Sheridan Realty Advisors will receive incentive
compensation in the form of five-year warrants to purchase common stock at
$5 per share and an advisory fee based upon new real property acquisitions.
Issuance of the warrants is subject to shareholder approval.
NOTE 9 - COMPREHENSIVE INCOME
There are no adjustments necessary to net income (loss) as presented in the
accompanying consolidated statements of operations to derive comprehensive
income in accordance with SFAS No. 130, "Reporting Comprehensive Income".
NOTE 10 - SEGMENT REPORTING
In June 1997, SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information" was issued, which amends the requirements for a public
enterprise to report financial and descriptive information about its
reportable operating segments. Operating segments, as defined in the
pronouncement, are components of an enterprise about which separate
financial information is available that is evaluated regularly by the
Company in deciding how to allocate resources and in assessing performance.
The financial information is required to be reported on the basis that is
used internally for evaluating segment performance and deciding how to
allocate resources to segments.
The Company has reportable segments organized by the region in which they
operate as follows: Wisconsin, Indiana, Colorado and Texas.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance based upon income from real estate from the combined properties
in each segment.
In 1998 segment information for the State of Texas were classified as
"Leased to State" and "Bank Buildings", based on major tenants. These 1998
amounts have been reported under one segment for 1999 - "Texas". The 1998
amounts have been reclassified to conform to 1999 reportable segments.
F - 17
<PAGE>
<TABLE>
<CAPTION>
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1999 Wisconsin Indiana Texas Colorado Corporate Consolidated
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Rental income $ 852,313 $ 710,733 $ 2,706,982 $ 1,706,729 $ -- $ 5,976,757
Operating expenses 332,900 292,164 1,247,258 484,884 -- 2,357,206
Depreciation and amortization
132,202 79,595 409,967 450,614 10,069 1,082,447
------------ ------------ ------------ ------------ ------------ ------------
Income (loss) from property 387,211 338,974 1,049,757 771,231 (10,069) 2,537,104
operations
Percent of income from property 15.3% 13.3% 41.4% 30.4% (0.4)% 100.0%
operations
Interest income -- -- -- -- 15,506 15,506
Gain on sale of real estate -- -- (16,203) 736,915 -- 720,712
Interest expense 245,707 206,177 620,292 575,049 -- 1,647,225
General and administration 3,630 9,667 1,951 28,295 613,806 657,349
------------ ------------ ------------ ------------ ------------ ------------
Net Income (Loss) $ 137,874 $ 123,130 $ 411,311 $ 904,802 $ (608,369) $ 968,748
============ ============ ============ ============ ============ ============
Real estate investments, net $ 2,482,232 $ 7,925,552 $ 12,001,728 $ 5,624,711 $ 45,223 $ 28,079,446
============ ============ ============ ============ ============ ============
Additions to real estate $ (64,932) $ 7,925,552 $ (421,111) $ (1,477,132) $ 18,872 $ 5,981,249
investments ============ ============ ============ ============ ============ ============
Total Assets $ 2,566,012 $ 8,028,019 $ 12,688,698 $ 6,552,539 $ 479,190 $ 30,314,458
============ ============ ============ ============ ============ ============
1998
Rental income 778,929 $ -- $ 1,342,848 $ 1,694,392 $ -- $ 3,816,169
Operating expenses 398,119 -- 643,567 528,622 -- 1,570,308
Depreciation and amortization
115,698 -- 201,604 433,653 637 751,592
------------ ------------ ------------ ------------ ------------ ------------
Income (loss) from property 265,112 -- 497,677 732,117 (637) 1,494,269
operations
Percent of income from property 17.7% -- 33.3% 49.0% 100.0%
operations
Interest income 4,113 4,113
Expenses associated with
debt refinancing 321,178 321,178
Interest expense 208,099 -- 278,482 529,115 20,691 1,036,387
General and administration 3,250 -- 2,302 15,680 436,991 458,223
------------ ------------ ------------ ------------ ------------ ------------
Net Income (Loss) $ 53,763 $ -- $ 216,893 ($ 133,856) ($ 454,206) ($ 317,406)
============ ============ ============ ============ ============ ============
Real estate investments, net $ 2,547,164 $ -- $ 12,422,839 $ 7,101,843 $ 26,351 $ 22,098,197
============ ============ ============ ============ ============ ============
Additions to real estate $ 75,825 $ -- $ 11,274,046 $ 60,315 $ 25,528 $ 11,435,714
investments ========== ============ ============ ========== ========== =============
Total Assets $ 2,631,151 $ -- $ 13,007,051 $ 7,600,446 $ 476,286 $ 23,714,934
============ ============ ============ ============ ============ ============
F - 18
</TABLE>
<PAGE>
AMVERIVEST PROPERTIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - SEGMENT REPORTING (CONTINUED)
MAJOR CUSTOMERS
Rental income from one tenant, the State of Texas, of approximately
$1,764,974 comprised approximately 30% of consolidated revenues for the
year ended December 31, 1999. For the year ended December 31, 1998, rental
income from the State of Texas approximated $1,000,000 or 26% of
consolidated revenues.
NOTE 11 - NET INCOME (LOSS) PER SHARE
The following represents a reconciliation from basic income (loss) per
share to diluted income (loss) per share:
1998 1999
--------- ---------
Determination of shares
Weighted average common shares outstanding 1,538,403 1,881,075
Assumed conversion of stock options -- 1,157
--------- ---------
Diluted shares outstanding 1,538,403 1,882,232
========= =========
Basic income (loss) per common share $(.21) $.51
====== ====
Diluted income (loss) per common share $(.21) $.51
====== ====
NOTE 12 - SUBSEQUENT EVENT
On February 24, 2000 the Company entered into a purchase agreement to
acquire a 60,000 square foot office building in Denver, Colorado for
$5,900,000. The acquisition is expected to be completed by June 2000. The
acquisition will be completed using approximately $510,000 of funds being
held in escrow as part of the "1031 Exchange" from the sale of the Broadway
property, proceeds from the sale of additional common stock and mortgage
financing.
F - 19
<PAGE>
----------------------------
Dealer Prospectus Delivery Obligation
Until _________________, all dealers
that effect transactions in these securities,
whether or not participating in this
offering, may be required to deliver a
prospectus. This is in addition to the
dealers' obligation to deliver a prospectus
when acting as underwriters and with respect
to their unsold allotments or subscriptions.
AMERIVEST PROPERTIES INC.
Common Stock and Redeemable
Common Stock Purchase Warrants
-------------------------------
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY..................... 2
RISK FACTORS........................... 5
USE OF PROCEEDS........................ 9
PRICE RANGE OF COMMON STOCK............ 9
DIVIDEND POLICY........................ 10
BUSINESS AND PROPERTIES................ 10
MANAGEMENT'S DISCUSSION AND ________________________
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS............ 20 PROSPECTUS
MANAGEMENT............................. 21 ________________________
EXECUTIVE COMPENSATION................. 25
BENEFICIAL OWNERS OF SECURITIES........ 29
TRANSACTIONS BETWEEN THE
COMPANY AND RELATED PARTIES.......... 31
DESCRIPTION OF SECURITIES.............. 33
PLAN OF DISTRIBUTION................... 36
SECURITIES AND EXCHANGE
COMMISSION POSITION ON
CERTAIN INDEMNIFICATION.............. 36 March __, 2000
LEGAL MATTERS.......................... 37
EXPERTS................................ 37
DISCLOSURE REGARDING FORWARD-
LOOKING STATEMENTS AND
CAUTIONARY STATEMENTS................ 37
WHERE YOU CAN FIND MORE
AVAILABLE INFORMATION................ 38
FINANCIAL INFORMATION.................. F-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification Of Directors And Officers.
The General Corporation Law of the State of Maryland (the "Maryland Code")
provides for mandatory indemnification against reasonable expenses incurred by
directors and officers of a corporation in connection with an action, suit or
proceeding brought by reason of their position as a director or officer if they
are successful, on the merits or otherwise, in defense of the proceeding. The
Maryland Code also allows a corporation to indemnify directors or officers in
such proceedings if the director or officer acted in good faith, in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, in the case of a criminal proceeding, he had no reasonable
cause to believe that his conduct was unlawful.
The Maryland Code permits a corporation to expand the rights to
indemnification by a provision in its bylaws, by an agreement, by resolution of
shareholders or directors not involved in the proceeding, or otherwise. However,
a corporation may not indemnify a director or officer if the proceeding was one
by or on behalf of the corporation and in the proceeding the director of officer
is adjudged to be liable to the corporation. Our Bylaws provide that we are
required to indemnify our directors and officers to the fullest extent permitted
by law, including those circumstances in which indemnification would otherwise
be discretionary.
In addition to the general indemnification described above, we have
adopted, in our articles of incorporation, a provision under the Maryland Code
that eliminates and limits certain personal liability of directors and officers
for monetary damages for breaches of the fiduciary duty of care.
Item 25. Other Expenses Of Issuance And Distribution.
The following is an itemization of all expenses (subject to future
contingencies) incurred or to be incurred by the Company in connection with the
registration of the securities being offered. The selling shareholders will not
pay any of the following expenses.
Registration fee..................................... $ 3,960
American Stock Exchange additional listing fee....... $ 2,000
Printing *........................................... $ 5,000
Accounting fees *.................................... $ 2,500
Legal fees *......................................... $ 14,000
Registrar and Transfer Agent fee *................... $ 500
Blue Sky fees *...................................... $ 1,000
Miscellaneous *...................................... $ 1,040
--------
Total * $ 30,000
========
- -------------------
* Estimated
Item 26. Recent Sales Of Unregistered Securities.
Since January 1, 1997, the Company has had the following sales of
unregistered securities:
The Company issued 34,200 and 12,000 shares of common stock on August 28
and September 30, 1997, respectively, as part of the purchase consideration for
three office buildings in Texas that were acquired on those dates. These shares
<PAGE>
were issued to the three sellers of the buildings in reliance on an exemption
from registration underss.4(2) of the Securities Act. The sellers of the
buildings are sophisticated investors and were knowledgeable about the Company's
operations and financial condition at the time of receipt of the shares and were
able to evaluate the risks and merits of receipt of the shares.
The Company issued 204,300 shares of common stock at the rate of $5 per
share in June 1998, in consideration for the acquisition of eleven small office
buildings located in Texas. These shares were issued to the sellers of these
properties. As part of those transactions, the sellers of the properties paid
Colorado Bighorn Corporation aggregate commissions of 4,390 shares of common
stock. The Company issued 28,487 additional shares to the sellers of these
properties in July 1999 as an adjustment to the purchase price. These shares
were issued in reliance on an exemption from registration underss.4(2) of the
Securities Act. All persons receiving shares in this transaction are
sophisticated investors who were knowledgeable about the Company's operations
and financial condition at the time of receipt of the shares and were able to
evaluate the risks and merits of receipt of the shares.
The Company paid Colorado Bighorn Corporation aggregate commissions of
13,500 shares of common stock at the rate of $5 per share in August 1998, as
part of the acquisition of four office buildings located in Texas. These shares
were issued in reliance on an exemption from registration under ss. 4(2) of the
Securities Act. Colorado Bighorn Corporation has represented to the Company that
is a sophisticated investor and was knowledgeable about the Company's operations
and financial condition at the time of receipt of the shares and were able to
evaluate the risks and merits of receipt of the shares.
The Company issued 541,593 shares of common stock at the rate of $4.75 per
share on August 12, 1999 as part of the purchase consideration for the Keystone
Buildings. The seller of the property was a limited partnership and the shares
were issued to its limited partners and the shareholders of the corporate
general partner. These shares were issued in reliance on an exemption from
registration underss.4(2) of the Securities Act. Additional shares of common
stock may be issued as an adjustment to the purchase price in reliance on an
exemption from registration underss.4(2) of the Securities Act. The limited
partners have represented to the Company that they are sophisticated investors
who were knowledgeable about the Company's operations and financial condition at
the time of receipt of the shares and were able to evaluate the risks and merits
of receipt of the shares.
Item 27. Exhibits.
The following is a complete list of exhibits filed as part of this
registration statement, which exhibits are incorporated herein.
Number Description
- ------ -----------
2 Form Of Agreement And Plan Of Merger Of The Company And AMVP Inc.
(to reincorporate in Maryland) (1)
3.1 Articles Of Incorporation (2)
3.2 Bylaws (3)
4.1 Specimen Common Stock Certificate (4)
4.2 Form of Stock Warrant Agreement (5)
<PAGE>
Number Description
- ------ -----------
5 Opinion of Patton Boggs LLP concerning the legality of the securities
being registered
10.1 Purchase And Sale Agreement dated April 26, 1999 (Sheridan Realty
Partners, L.P.)(6)
10.2 Advisory Agreement with Sheridan Realty Advisors, LLC dated
January 1, 2000 (7)
10.3 1995 Stock Option Plan (8)
10.4 1998 Stock Option Plan (9)
10.5 Form of Commercial Contract To Buy And Sell Real Estate (10)
10.6 Schedule Of Material Terms Of Commercial Contracts To Buy And Sell
Real Estate (10)
10.7 Agreement Of Sale dated February 24, 2000 between AmeriVest Broadway
Properties Inc. and Jones Panorama Properties, Inc.
10.8 Form of Subscription Agreement
10.9 Form of Escrow Agreement between the Company and U.S. Bank
23.1 Consent of Patton Boggs LLP (included in Opinion in Exhibit 5)
23.2 Consent of Wheeler Wasoff, P.C.
24 Power of Attorney (included in Part II of Registration Statement)
- --------------------
(1) Incorporated by reference from Exhibit A of the Company's Proxy Statement
concerning the Company's June 29, 1999 Annual Meeting Of Shareholders.
(2) Incorporated by reference from Exhibit B of the Company's Proxy Statement
concerning the Company's June 29, 1999 Annual Meeting Of Shareholders.
(3) Incorporated by reference from Exhibit C of the Company's Proxy Statement
concerning the Company's June 29, 1999 Annual Meeting Of Shareholders.
(4) Incorporated by reference from Exhibit 4.1(a) of the Company's Registration
Statement on Form SB-2 filed with the SEC on June 21, 1996 (Registration
No. 333-5114-D).
(5) Incorporated by reference from Exhibit 4.1(b) of the Company's Registration
Statement on Form SB-2 filed with the SEC on June 21, 1996 (Registration
No. 333-5114-D).
(6) Incorporated by reference from Exhibit 10.1 of the Company's Proxy
Statement concerning the Company's June 29, 1999 Annual Meeting Of
Shareholders.
(7) Incorporated by reference from Exhibit 10.1 of the Company's Current Report
on Form 8-K filed on January 18, 2000.
<PAGE>
(8) Incorporated by reference from the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1997.
(9) Incorporated by reference from the Company's Proxy Statement concerning the
Company's May 21, 1998 Annual Meeting Of Shareholders filed with the SEC on
March 30, 1998.
(10) Incorporated by reference from the Company's Current Report on Form 8-K
dated July 13, 1998.
Item 28. Undertakings.
1. The Company hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to the Registration Statement:
(1) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(2) to reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information
in Registration Statement (or the most recent post-effective amendment
thereof); and
(3) to include any additional or changed material information on the
plan of distribution.
(b) That for determining liability under the Securities Act of 1933,
each post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
the securities at that time shall be deemed to be the initial bona fide
offering thereof;
(c) To file a post-effective amendment to remove from registration any
of the securities being registered which remain unsold at the end of the
offering.
2. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities And Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or a controlling person of the Company
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or a controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Denver,
State of Colorado, on March 3, 2000.
AMERIVEST PROPERTIES INC.
By: /s/ William Atkins
----------------------------------------
William Atkins, Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers and directors
of the Company, by virtue of their signatures appearing below to this
registration statement hereby constitute and appoint James F. Etter or Charles
K. Knight, and each or either of them, with full power of substitution, as
attorney-in-fact in their names, place and stead to execute any and all
amendments to this registration statement in the capacities set forth opposite
their name and hereby ratify all that said attorne in-fact and each of them or
his substitutes may do by virtue hereof.
In accordance with the requirements of the Securities Act, the registration
statement was signed by the following persons in the capacities and on the dates
indicated.
Signatures Title Date
---------- ----- ----
/s/ James F. Etter President and Director March 3, 2000
- ---------------------
James F. Etter
/s/ Charles R. Hoffman Director March 3, 2000
- ----------------------
Charles R. Hoffman
/s/ John A. Labate Director March 3, 2000
- ----------------------
John A. Labate
Director March _, 2000
- ----------------------
Robert J. McFann
/s/ William Atkins Chief Executive Officer March 3, 2000
- ---------------------- (Principal Executive Officer)
William Atkins and Director
<PAGE>
Signatures Title Date
---------- ----- ----
/s/ Charles K. Knight Secretary and Director March 3, 2000
- ----------------------
Charles K. Knight
/s/ D. Scott Ikenberry Chief Financial Officer March 3, 2000
- ---------------------- (Principal Financial Officer)
D. Scott Ikenberry
<PAGE>
EXHIBIT INDEX
The following is a complete list of exhibits filed as part of this
registration statement, which Exhibits are incorporated herein.
Number Description
- ------ -----------
2 Form Of Agreement And Plan Of Merger Of The Company And AMVP Inc.
(to reincorporate in Maryland) (1)
3.1 Articles Of Incorporation (2)
3.2 Bylaws (3)
4.1 Specimen Common Stock Certificate (4)
4.2 Form of Stock Warrant Agreement (5)
5 Opinion of Patton Boggs LLP concerning the legality of the securities
being registered
10.1 Purchase And Sale Agreement dated April 26, 1999 (Sheridan Realty
Partners, L.P.)(6)
10.2 Advisory Agreement with Sheridan Realty Advisors, LLC dated
January 1, 2000 (7)
10.3 1995 Stock Option Plan (8)
10.4 1998 Stock Option Plan (9)
10.5 Form of Commercial Contract To Buy And Sell Real Estate (10)
10.6 Schedule Of Material Terms Of Commercial Contracts To Buy And Sell
Real Estate (10)
10.7 Agreement Of Sale dated February 24, 2000 between AmeriVest Broadway
Properties Inc. and Jones Panorama Property, Inc.
10.8 Form of Subscription Agreement
10.9 Form of Escrow Agreement between the Company and U.S. Bank
23.1 Consent of Patton Boggs LLP (included in Opinion in Exhibit 5)
23.2 Consent of Wheeler Wasoff, P.C.
24 Power of Attorney (included in Part II of Registration Statement)
<PAGE>
- -------------
(1) Incorporated by reference from Exhibit A of the Company's Proxy Statement
concerning the Company's June 29, 1999 Annual Meeting Of Stockholders.
(2) Incorporated by reference from Exhibit B of the Company's Proxy Statement
concerning the Company's June 29, 1999 Annual Meeting Of Stockholders.
(3) Incorporated by reference from Exhibit C of the Company's Proxy Statement
concerning the Company's June 29, 1999 Annual Meeting Of Stockholders.
(4) Incorporated by reference from Exhibit 4.1(a) of the Company's Registration
Statement on Form SB-2 filed with the SEC on June 21, 1996 (Registration
No. 333-5114-D).
(5) Incorporated by reference from Exhibit 4.1(b) of the Company's Registration
Statement on Form SB-2 filed with the SEC on June 21, 1996 (Registration
No. 333-5114-D).
(6) Incorporated by reference from Exhibit 10.1 of the Company's Proxy
Statement concerning the Company's June 29, 1999 Annual Meeting Of
Shareholders.
(7) Incorporated by reference from Exhibit 10.1 of the Company's Current Report
on Form 8-K filed on January 18, 2000.
(8) Incorporated by reference from the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1997.
(9) Incorporated by reference from the Company's Proxy Statement concerning the
Company's May 21, 1998 Annual Meeting Of Stockholders filed with the SEC on
March 30, 1998.
(10) Incorporated by reference from the Company's Current Report on Form 8-K
dated July 13, 1998.
EXHIBIT 5
Patton Boggs LLP
1660 Lincoln Street
Suite 1900
Denver, Colorado 80264
(303) 830-1776
March 3, 2000
AmeriVest Properties Inc.
1800 Glenarm Place, Suite 500
Denver, Colorado 80202
Gentlemen and Ladies:
We have acted as counsel for AmeriVest Properties Inc., a Maryland
corporation (the "Company"), in connection with preparation of the Company's
Registration Statement on Form SB-2 (the "Registration Statement") under the
Securities Act of 1933, as amended, concerning registration of the issuance of
up to a minimum of 200,000 units and a maximum of 1,000,000 units, with each
unit consisting of two shares of the Company's $.001 par value common stock and
one redeemable common stock purchase warrant (a "Warrant") to purchase one share
of common stock.
We have examined the Articles Of Incorporation and the Bylaws of the
Company and the record of the Company's corporate proceedings concerning the
registration described above. We also have examined such other certificates,
agreements, documents and papers, and we have made such other inquiries and
investigations of law as we have deemed appropriate and necessary in order to
express the opinion set forth in this letter. In our examinations, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, photostatic, or conformed copies and the
authenticity of the originals of all such latter documents. In addition, as to
certain matters we have relied upon certificates and advice from various state
authorities and public officials, and we have assumed the accuracy of the
material and the factual matters contained therein.
Subject to the foregoing and on the basis of the aforementioned
examinations and investigations, it is our opinion that if units are sold as
described in the Registration Statement, (1) shares of common stock included in
the units will have been legally issued and will constitute fully paid and
non-assessable shares of the Company's common stock, and (2) the shares to be
issued upon the exercise, if any, of Warrants included in the units will have
been legally issued and will constitute fully paid and non-assessable shares of
the Company's common stock.
We hereby consent (a) to be named in the Registration Statement and in the
prospectus that constitutes a part of the Registration Statement as acting as
counsel in connection with the offering, including with respect to the issuance
of securities offered in the offering; and (b) to the filing of this opinion as
an exhibit to the Registration Statement.
This opinion is to be used solely for the purpose of the registration of
the common stock and may not be used for any other purpose.
Very truly yours,
/s/ PATTON BOGGS LLP
PATTON BOGGS LLP
PB: ALT/FBB
EXHIBIT 10.7
AGREEMENT OF SALE
-----------------
THIS AGREEMENT OF SALE (this "Agreement"), made this 24th day of February,
2000, by and between JONES PANORAMA PROPERTY, INC., a Colorado corporation
(hereinafter called "Seller"), and AMERIVEST BROADWAY PROPERTIES, INC., a
Colorado corporation, (hereinafter called "Buyer").
W I T N E S S E T H :
For and in consideration of the mutual undertakings contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby mutually acknowledged, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Property.
(a) Seller hereby agrees to sell and convey to Buyer who agrees to
purchase, all that certain lot, piece or parcel of ground (the "Land"), together
with the improvements located thereon (the "Improvements"), situated in Arapahoe
County, Colorado, and known as 9085 E. Mineral Circle, said lot, piece or parcel
being more particularly described on Exhibit "A" attached hereto and made a part
hereof (the Land, the Improvements are collectively referred to as the
"Property").
(b) The sale set forth in this Agreement shall also include (i) the
fixtures and systems which are located in the Improvements; (ii) all personal
property owned by Seller which is necessary to the operation of the Improvements
and now located in the Improvements; including the backup diesel power
generation system, telecommunications phone jacks, internal wiring and cabling,
and the right to use the name "Panorama Falls" (the "Personal Property"); (iii)
all certificates, licenses, permits, authorizations and approvals issued for or
with respect to the Property by governmental and quasi-governmental authorities
having jurisdiction ("Licenses, Permits and Approvals"), to the extent
transferrable; (iv) all interests, easements, rights, benefits, improvements,
attached fixtures and privileges appurtenant, pertaining or beneficial to the
Land or the Improvements, or both, together with all interests of Seller in
vacated streets and alleys adjacent to the Land ("Contracts"); and (v) all
appurtenances, easements and other rights and privileges in any way pertaining
or beneficial to the Land or the Improvements.
2. Purchase Price. The total consideration and purchase price (the
"Purchase Price"), which Buyer agrees to pay to Seller and which Seller agrees
to accept for the Property is FIVE MILLION NINE HUNDRED THOUSAND AND 00/100
DOLLARS ($5,900,000.00), payable as follows:
Cash or certified check at
signing of this Agreement
(the "Deposit") $ 100,000.00
The Deposit shall be non-refundable
to Buyer at the expiration of the Due
Diligence Period, except as set forth in
paragraph 12(b) hereof.
Cash, certified check or
federally wired funds at
Settlement $ 5,800,000.00
TOTAL $ 5,900,000.00
<PAGE>
The Deposit shall be paid to the Title Company (as hereinafter defined) and
shall be placed by Title Company in an interest bearing escrow account pending
Settlement (as hereinafter defined). Buyer warrants and represents that Buyer
has completely filled out the form W-9 attached hereto as Exhibit "B" and made a
part hereof and Buyer understands that no interest will be paid on the Deposit
unless and until such form W-9 is completed and delivered to Title Company. All
interest accrued on the Deposit will be paid to Buyer at Settlement or upon the
earlier termination of this Agreement, unless such termination shall be as a
result of Buyer's default, in which event all accrued interest shall be paid to
Seller.
Buyer's Federal Tax I.D. Number # 84-1314788
Seller's Federal Tax I.D. Number #___________
3. Evidence of Title: Title.
(a) Title Commitment. On or before seven (7) days following Seller's
execution of this Agreement (the "Title Deadline"), Seller shall cause to be
furnished to Buyer, at Seller's expense, a current commitment for owner's title
insurance policy issued by Chicago Title of Colorado (the "Title Company") in an
amount equal to the Purchase Price, committing to delete or insure over the
pre-printed standard exceptions (relating to parties in possession, unrecorded
easements, survey matters, any unrecorded mechanic's liens, gap protection (from
the date of commitment through the time of recording the Deed), and unpaid
taxes, assessments and unredeemed tax sales. Seller shall cause the title
insurance policy to be delivered to Buyer as soon as practicable after
Settlement.
(b) Title Documents. On or before the Title Deadline, Seller shall
cause to be delivered to Buyer copies of all plats, declarations, covenants, and
restrictions burdening the Property and copies of any other documents listed in
the schedule of exceptions to the title commitment ("Exceptions"). The title
commitment referred to in subparagraph 3(a) and the copies of the documents to
be furnished under this subparagraph are referred to as the "Title Documents."
(c) Title Review. Buyer shall have the right to inspect the Title
Documents. Written notice by Buyer of unmerchantability of title or of any other
unsatisfactory title condition shown by the Title Documents shall be given by
Buyer to Seller at least fifteen (15) days before the Settlement Date. If
written notice of unmerchantability of title or other unsatisfactory title
condition is not given by Buyer to Seller at least fifteen (15) days before the
Settlement Date, then Buyer accepts the condition of title as disclosed by the
Title Documents as satisfactory.
(d) Matters not of Record. Seller shall deliver to Buyer, on or before
the Title Deadline, true copies of all leases and surveys in Seller's possession
pertaining to the Property and shall disclose to Buyer all easements, liens or
other matters affecting title not shown by the public records of which Seller
has actual knowledge. Written notice by Buyer of any unsatisfactory conditions
affecting title disclosed by Seller or discovered by Buyer and not shown by the
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<PAGE>
Title Documents shall be given by Buyer to Seller at least fifteen (15) days
before the Settlement Date. If written notice of unsatisfactory conditions
affecting title disclosed by Seller or discovered by Buyer and not shown by the
Title Documents is not given by Buyer to Seller at least fifteen (15) days
before the Settlement Date, then Buyer accepts the condition of title subject to
such rights of third parties of which Buyer has actual knowledge.
(e) Right to Cure. If Seller receives written notice of
unmerchantability of title or any other unsatisfactory title conditions or
commitment terms as provided in this paragraph 3, then Buyer shall have the
option of either: (i) taking such title as Seller can give, without abatement of
the Purchase Price, or (ii) being repaid all monies paid on account by Buyer to
Seller, including the Deposit, and any interest accrued thereon, and thereafter
there shall be no further liability or obligations by either Seller or Buyer and
this Agreement shall be null and void and of no further effect (except for this
Section 3).
(f) Survey. Within ten (10) days following Seller's execution of this
Agreement, Seller shall furnish Buyer, at Seller's expense, with a current
survey of the Property prepared to meet the Urban ALTA/ASCM-1970 land title
survey standards, and certified to Buyer, Title Company and Buyer's lender.
4. Representations and Warranties. Seller represents to the best of its
knowledge, information and belief that at the time of the execution of this
Agreement and as of the date of Settlement:
(a) There exists no notice of an uncorrected violation of the housing,
building safety or fire ordinances, which has been received by Seller. Seller
will be responsible for the cost of all work, repairs, construction or
installations which may be required or called attention to by any such notice,
issued and/or served after the execution hereof, as well as by any notice issued
and/or served prior to Settlement by any other state, municipal or other
constituted public authority.
(b) No assessments for public improvements have been made against the
Property which remain unpaid. Seller will be responsible for the payment of any
assessments and charges hereafter made for any public improvements, if work in
connection therewith is begun prior to Settlement.
(c) It is validly existing and qualified to conduct its business in
the jurisdiction in which the Property is located and to carry on its business
as now being conducted. It has the right, power, legal capacity and authority,
without the approval of any State or Federal regulatory bodies, to enter into
and perform its obligations under this Agreement and the documents to be
executed and delivered pursuant hereto. The execution and delivery of this
Agreement and such documents have been duly and validly authorized by all
necessary action on its part to make this Agreement and such documents valid and
binding upon it.
(d) The execution and entry into this Agreement, the execution and
delivery of the documents and instruments to be executed and delivered by Seller
on the date of Settlement and the performance by Seller of Seller's duties and
obligations under this Agreement and of all other acts necessary and appropriate
for the full consummation of the purchase and sale of the Property as
contemplated by and provided for in this Agreement, are consistent with and not
in violation of, and will not create any default under, any contract, agreement
or other instrument to which Seller is a party, any judicial order or judgment
of any nature by which Seller or the Property is bound.
(e) There are no lease options or other rights allowing any tenants to
purchase any portion of the Property.
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<PAGE>
(f) Seller has not received any written notices from any governmental
authority that the Property is presently in violation in any respect with any
applicable statutes, ordinances, codes, rules and regulations of any
governmental authority having jurisdiction over the Property ("Laws"). Nor has
Seller received any written notices from any insurance carriers stating that the
Property is not in compliance with any Insurance Regulations or any notice of
cancellation of insurance coverage due to any condition or use of the Property.
(g) Neither Seller, nor, to the best of Seller's knowledge, any third
party under Seller's control has used, manufactured, stored or disposed of, on,
under or about the Property or transported to or from the Property any flammable
explosives, radioactive materials or wastes, Hazardous Materials or wastes,
toxic materials or wastes, asbestos, asbestos-containing materials or wastes as
defined in the Laws.
(h) To the best of Seller's knowledge, there are no filed actions,
filed suits or proceedings, or written claims pending, condemnation actions,
which would adversely affect Seller's ability to convey title in accordance with
this Agreement.
(i) There is no litigation pending or, to the best of Seller's
knowledge, threatened against the Property or against Seller that would have a
material adverse effect on Seller's ability to consummate the transactions
contemplated by this Agreement.
(j) Seller has not granted any easements or rights-of-way affecting
any or all of the Property, except as shown on the Survey or Title Documents.
(k) There are no structural defects on any improvement on the
Property. The heating, ventilating and air conditioning systems, electrical,
mechanical and plumbing systems are all in good working order and Seller knows
of no defect to such system.
5. Settlement.
(a) Settlement shall be within fifteen (15) days of the expiration of
the Due Diligence Period (as hereinafter defined) but in no event prior to April
1, 2000 ("Settlement Date") at 10:00 a.m. (prevailing time) at the off ice of
the Title Company, unless Seller and Buyer agree in writing to a different time
and place ("Settlement"). The date and time of Settlement is hereby agreed to be
of the essence of this Agreement.
(b) Real property taxes shall be apportioned on a per diem basis pro
rata as of the date of Settlement on the basis of the most recent levy and
assessment for the Property and shall be readjusted when the final tax bill is
available.
(c) All utility service charges for electricity, heat and air
conditioning service, other utilities, elevator maintenance, common area
maintenance, other expenses incurred in operating the Property that Seller
customarily pays, and any other costs incurred in the ordinary course of
business or the management and operation of the Property shall be prorated on an
accrual basis. Seller shall pay all such expenses that accrue prior to the date
of Settlement and Buyer shall pay all such expenses accruing on the date of
Settlement and thereafter. Seller and Buyer shall obtain billings and meter
readings as of the date of Settlement to aid in such prorations.
(d) State and local realty transfer taxes, if any, applicable to the
sale set forth in this Agreement shall be equally divided and half of each paid
by Seller and Buyer.
4
<PAGE>
(e) Possession of the Property is to be delivered by executed Deed (as
hereinafter defined) and keys to the Property at the time of Settlement. The
Deed shall be prepared by Seller and a copy presented to Buyer at least five (5)
days prior to the Settlement Date.
(f) Without limitation to other conditions set forth in this
Agreement, and notwithstanding anything contained herein to the contrary,
Buyer's obligation to close hereunder is expressly contingent upon the
satisfaction, or the express written waiver, of the following conditions:
(i) As of the Settlement, title to the Property shall be as
required by Section 3 of this Agreement;
(ii) All representations and warranties made by Seller in this
Agreement shall be true, complete and accurate in all material respects as of
the Settlement Date; and
(iii) Seller shall have performed, observed and complied with all
agreements, covenants and obligations to be performed by Seller under this
Agreement, including without limitation, the execution and/or delivery of all
documents required to be executed and/or delivered by or on behalf of Seller
hereunder.
If the conditions precedent in this Section 5(f) above are not satisfied as of
the Settlement Date, Buyer may exercise any of the remedies set forth in this
Agreement, as applicable, or waive such conditions in whole or in part and
proceed to Settlement.
6. Closing Documents.
(a) At the time and place of Settlement, Seller shall deliver or cause
to be delivered to Buyer the following:
(i) Seller shall execute and deliver a good and sufficient
general warranty deed to Buyer, conveying the Property free and clear of all
taxes, except the general taxes for the year of the Settlement, and free and
clear of all other liens and encumbrances, including governmental liens for
special improvements installed as of the date of Buyer's execution of this
Agreement, except those Exceptions accepted by Buyer in accordance with
subsection 3(c) of this Agreement, those matters not shown by the public records
disclosed by Seller and accepted by Buyer in accordance with subsection 3(d) of
this Agreement and inclusion of the Property in any special taxing district (the
"Deed");
(ii) a warranty bill of sale whereby Seller shall convey to Buyer
its title to the Personal Property (the "Bill of Sale");
(iii) an assignment whereby Seller will assign and Buyer shall
assume all of Seller's right, title, and interest, including all the obligations
of Seller, in, to and under any warranties, Licenses, Permits and Approvals
(hereinafter referred to as the "Assignment");
(iv) all original Licenses, Permits and Approvals, and as many
signed originals (or true and correct copies of same) of the items covered by
the Assignment as are in Seller's possession, unless previously delivered by
Seller to Buyer;
5
<PAGE>
(v) all equipment operating manuals and all equipment warranties
and equipment guarantees, if any, in Seller's possession;
(vi) all master and duplicate keys to all locks for the
Improvements which are in Seller's possession;
(vii) a non-foreign person certification; and
(viii) a Seller's title affidavit and such other documents as may
be reasonably requested by the Title Company.
(b) At the time and place of Settlement, Buyer shall deliver or cause
to be delivered to Seller the following:
(i) the balance of the Purchase Price;
(ii) the Assignment; and
(iii) such other documents as may be reasonably requested by
Seller to carry out the intent of this Agreement or by the Title Insurer.
7. Risk of Loss. All risk of loss shall be on Seller prior to Settlement.
In the event that there is a casualty or condemnation of all or any portion of
the Property, Buyer may either (i) continue to Settlement without an abatement
in Purchase Price, but Seller will assign any and all rights to Buyer for
insurance or condemnation awards, or (ii) terminate this Agreement in which the
Deposit, plus all accrued interest, shall be delivered to Buyer and this
Agreement shall be null and void and of no force or effect and all copies shall
be canceled.
8. Recording. This Agreement may not be recorded in the Office for
Recording of Deeds or in any other office or place of public record without
Seller's prior consent.
9. Seller's Obligations Before Closing.
(a) From and after the expiration of the Due Diligence Period until
the Settlement Date, Seller will not modify, extend, terminate or otherwise
change any of the terms, covenants or conditions of any leases affecting the
Property, or enter into new leases or any other obligations or agreements
affecting the Property without the prior written consent of Buyer, which consent
may be withheld by Buyer in its sole and absolute discretion.
(b) Prior to the date of Settlement, Seller shall operate, manage, and
insure the Property in a manner consistent with Seller's historic and customary
practice, shall maintain present services and shall perform when due all of
Seller's obligations under agreements relating to the Property. None of the
Personal Property shall be removed from the Property unless replaced by Personal
Property of equal or greater utility or value.
(c) From and after the mutual execution hereof, Seller will not make
any material alterations to the Property, unless approved by Buyer.
6
<PAGE>
(d) Seller shall use commercially reasonable efforts to preserve
intact and unimpaired any and all right-of-way, access, easements, grants,
appurtenances, rights, privileges, leases, contacts, agreements, and licenses in
favor of, relating to, or benefitting all or any portion of the Property.
10. Intentionally Deleted
11. Broker. Seller and Buyer acknowledge that Binswanger of Colorado, Inc.,
acting as Seller's agent, and Fuller and Company, acting as Buyer's agent are
the sole, moving, efficient and procuring causes of this sale and in
consideration of its services in making this sale Seller hereby agrees to pay to
Binswanger of Colorado, Inc. and Fuller and Company a commission of four percent
(4%) of the purchase price which shall be shared equally at the time of
Settlement.
12. Default.
(a) If Buyer is in default in the observance or performance of its
obligations hereunder, then Seller shall have the right on or before Settlement
to terminate this Agreement and to be paid the Deposit and all interest earned
thereon as liquidated damages for such breach. Upon such termination, Seller and
Buyer shall be released from all further liability and obligations hereunder, it
being understood that Seller's right to terminate this Agreement and to be paid
the Deposit shall be the sole remedy available to Seller in the event of Buyer's
default.
(b) If Seller is in default in the observance or performance of its
obligations hereunder, then Buyer shall have the right: (i) at Settlement to
terminate this Agreement and to be paid the Deposit and all interest earned
thereon liquidated damages for such breach; or (ii) Buyer may elect to seek
specific performance of this Agreement from Seller. If Buyer elects to terminate
this Agreement, Seller and Buyer shall be released from all further liability
and obligations hereunder.
13. Notices. All notices to be given to Agent, Seller and/or to Buyer shall
be mailed by registered or certified mail, return receipt requested or an
overnight service with receipt as follows:
Seller: JONES PANORAMA PROPERTY, INC.
1201 Market Street
Suite 2201
Wilmington, DE 19801
Attn: Abram E. Patlove
Fax: 302-658-1600
With a copy to: Comcast Corporation
1500 Market Street
Philadelphia, PA 19102
Attn: General Counsel
Agent: Binswanger
Two Logan Square
Fourth Floor
Philadelphia, PA 19103
Attn: Susan M. Sygenda
Fax: 215-448-6274
7
<PAGE>
Buyer: AMERIVEST BROADWAY PROPERTIES, INC.
c/o Sheridan Realty Advisors, LLC
1800 Glenarm Place, Suite 500
Denver, CO 80202-3871
Attn: John Greenman
Fax: 303-296-7353
With a copy to: Isaacson, Rosenbaum, Woods & Levy, P.C.
633 17th Street, Suite 2200
Denver, CO 80202
Attn: Steven G. Wright, Esq.
Fax: 303-292-3152
Notices given as provided in this section shall be deemed given on the date
received.
14. Intentionally Deleted.
15. Entire Agreement. This Agreement sets forth all the agreements,
promises, warranties, representations, understandings and promises between the
parties hereto, and the parties are not bound by any agreements, undertakings or
conditions except as expressly set forth herein. All additions, variations or
modifications to this Agreement shall be void and ineffective unless in writing
and signed by the parties.
16. Successors and Assigns; Assignment. This Agreement shall extend to, be
binding upon, and inure to the benefit of the heirs, executors, administrators
and successors of the parties hereto. Buyer shall not assign this Agreement or
any of its rights, duties or obligations hereunder to any other party without
Seller's prior consent.
17. Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Colorado.
18. FIRPTA. Under Section 1445 of the Internal Revenue Code of 1986 as
amended, and the regulations issued thereunder, Buyer is required to withhold up
to ten percent (10%) of the Purchase Price of the Property unless the Seller
provides Buyer with a "nonforeign certificate" indicating that Seller is not a
foreign person for purposes of the Internal Revenue Code. Agent may be subject
to liability if Seller issues a false "nonforeign certificate". Seller hereby
agrees to indemnify and hold harmless Agent from liability for any tax, penalty,
interest or other charge imposed upon Agent under Seller resulting from the
actions of Seller or Seller's agents.
19. Due Diligence.
(a) Within ten (10) days following Seller's execution of this
Agreement, Seller shall deliver to Buyer at Seller's expense the following items
which are in Seller's possession related to the Property:
(i) Copies of all soil tests, engineering reports and
environmental reports pertaining to the Property;
8
<PAGE>
(ii) Copies of all leases, if any, including amendments and
modifications thereto, and all other agreements permitting occupancy or use of
the Property;
(iii) Copies of all current Service Contracts;
(iv) Copies of any certificates of occupancy, licenses,
engineering reports relating to the Property;
(v) Copies of all written agreements with third parties,
governmental entities and utility companies, if any, relating to the Property,
and all licenses with respect to the Property or any use of the Property;
(vi) Copies of all listing agreements and commission agreements
between Seller and brokers or finders for the leasing of all or any portion of
the Property that are currently in effect or obligate Seller or any other owner
to pay a fee or commission hereafter;
(vii) Copies of expense statements, if any, related to the
operation of the Property;
(viii) Copies of the ad valorem real and personal property tax
statement pertaining to the Property for the three tax years prior to the date
of Settlement;
(ix) Copies of any written notices, or other documents pertaining
to the violation or alleged violation of the Laws.
(x) Itemized inventory of Personal Property.
(b) From and after the execution of this Agreement by the Seller up to
and including April 1, 2000 (the "Due Diligence Period"), Buyer shall have the
right to enter upon, go in, on or over the Property for the purpose of
conducting building surveys, inspections, soil tests, core drillings,
environmental testing and other examinations thereof as Buyer may desire. Buyer
shall repair any and all damage by reason of any such testing and shall
indemnify and save Seller harmless for any liability in connection therewith. In
the exercise of its rights pursuant to this Section 19, Buyer shall not
interfere with the conduct of Seller's operations being conducted on the
Property and shall give Seller reasonable advance notice of any such activities
Buyer plans to conduct on the Property. If during the Due Diligence Period Buyer
determines, in his sole discretion, that any condition of or relating to the
Property, including, but not limited to, its physical condition, economic
viability or any other factor Buyer deems of concern, is unsatisfactory to
Buyer, Buyer may before the end of the Due Diligence Period terminate this
Agreement by giving Seller written notice of termination and, thereafter, the
Deposit, plus all accrued interest, shall be paid to Buyer and this Agreement
shall become null and void and of no further effect (except for this Section
19).
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<PAGE>
20. Lease-Back. Upon Settlement, Buyer agrees to lease to Seller and Seller
agrees to lease from Buyer for a two (2) year period approximately 10,000
rentable square feet of space on an "AS IS" basis within the Improvements at
$20.50 per rentable square foot with a $7.00 per rentable square foot expense
stop (the "Lease"). The Lease shall be in substantially the same form as that
attached hereto as Exhibit "C" and shall be entered into and executed prior to
the expiration of the Due Diligence Period with the commencement date of the
Lease to be the date of Settlement.
21. Section 1031 Tax-Deferred Exchange. Either Buyer and/or Seller may
substitute a qualified intermediary, as that term is defined in the deferred
like-kind exchanges regulations of the Internal Revenue Code. Each party agrees
to cooperate fully with the party requesting such exchange in order to
facilitate a like-kind exchange of real property, whether simultaneously, a
deferred "Starker" exchange, or any other form of like-kind exchange (as the
requesting party may elect), pursuant to Section 1031 of the Internal Revenue
Code of 1986, as amended, and the regulations promulgated thereunder. The
parties specifically agree to execute such documents and instruments as are
reasonably necessary to effectuate such an exchange, provided that all costs and
expenses associated therewith are borne by the party for whose benefit the
exchange is being made and that Buyer shall not be required to take title to any
property other than the Property. Each party shall be solely responsible for
assuring that the structure its respective proposed exchange is effective for
its individual tax purposes. Furthermore, each party specifically agrees that
either party may assign this Agreement and any of its rights or obligations
hereunder as necessary or appropriate in furtherance of effectuate a Section
1031 like-kind exchange, provided that such assignment shall not serve to
relieve either party of their respective obligations hereunder. The party
requesting the cooperation of the other party shall indemnify, defend and
protect the other party from all costs, expenses and liability associated with
such cooperation.
IN WITNESS WHEREOF, the individual parties hereto have hereunto duly set
their hands and seals, and the corporate parties hereto have caused these
presents to be duly executed and their corporate seal to be duly attached by
their proper officers thereunto duly authorized, the day and year first above
written.
SELLER:
ATTEST: JONES PANORAMA PROPERTY, INC.
/s/ Abram E. Patlove By: /s/ Joseph J. Euteneuer
- -------------------------- ---------------------------------
Agent - Comcast Title: Vice President
BUYER:
ATTEST: AMERIVEST BROADWAY PROPERTIES, INC.
/s/ Charles K. Knight By: /s/ James F. Etter
- -------------------------- -----------------------------------
Secretary Its: President
EXHIBIT 10.8
SUBSCRIPTION AGREEMENT
AmeriVest Properties Inc.
1800 Glenarm Place, Suite 500
Denver, CO 80202
Gentlemen and Ladies:
The undersigned desires to invest in AmeriVest Properties Inc. (the
"Company") on the terms and conditions described in this subscription agreement
(the "Subscription Agreement") and the Company's Prospectus dated March __,
2000. The undersigned acknowledges that the undersigned has received, read and
understands the Prospectus.
1. Subscription
The undersigned hereby offers to purchase $_________ of Units offered by
the Company pursuant to the Prospectus. A check in that amount payable to "U.S.
Bank, Escrow Agent for AmeriVest Properties Inc." is enclosed.
2. Miscellaneous
(a) This subscription shall be irrevocable, and may not be assigned by the
undersigned. Subject to the foregoing, this Subscription Agreement shall be
binding upon and inure to the benefit of the heirs, executors, administrators,
legal representatives, successors and assigns of the undersigned.
(b) This Subscription Agreement will be construed and enforced in
accordance with and governed by the laws of the State of Colorado, except for
matters arising under the Act, without reference to principles of conflicts of
law.
With such full understandings and acknowledgements, the undersigned does
hereby affirm the undersigned's subscription to the purchase of the Units being
offered by the Company as described in the Prospectus and this Subscription
Agreement. The undersigned does further acknowledge the undersigned's
understandings of all the terms and provisions of this Subscription Agreement
and agrees to be bound by all of the terms and conditions of this Subscription
Agreement.
<PAGE>
Please complete the following:
Date:
--------------------------------
Exact Name in Which Title is to be Held
- ---------------------------------------- ----------------------------------
Signature Signature of Co-Owner
- ---------------------------------------- ----------------------------------
Print Name Print Name of Co-Owner
- ---------------------------------------- ----------------------------------
Social Security Number Social Security Number
or Taxpayer I.D. Number or Taxpayer I.D. Number
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City, State, Postal or Zip Code, Country
* If the Common Stock is to be held in joint tenancy or as tenants in
common, both persons must sign above and please indicate the manner in which the
Common Stock is to be held:
_____ Tenants in Common _____ Joint Tenants
This subscription is accepted by AmeriVest Properties Inc. on this _____
day of __________, 2000.
AMERIVEST PROPERTIES INC.
By:
--------------------------------
Signature
--------------------------------
Printed Name and Title
* * * * *
2
EXHIBIT 10.9
ESCROW AGREEMENT
----------------
THIS AGREEMENT (this "Agreement") is entered into as of this 7th day of
March, by and between AmeriVest Properties Inc. (the "Company") and U.S. Bank
National Association ("Escrow Agent"), a national banking association.
RECITALS
A. The Company is conducting a public offering of units at a price of $10
per Unit, each Unit consisting of two shares of common stock and one common
stock purchase warrant to purchase one share of common stock of the Company (the
"Units"), under applicable state and Federal laws and regulations (the
"Offering"). The Offering is hereby made pursuant to a Registration Statement on
Form SB-2 to be declared effective by the Securities and Exchange Commission, a
copy to be attached to this Agreement as Exhibit A (the Registration
Statement").
B. The Company wishes to assure those who subscribe for Units (the
"Subscriber") that the Subscribers' monies will be released to the Company only
if and when not less than $2,000,000 (the "Threshold Amount") in subscriptions
for at least 200,000 Units are accepted by the Company from the sale of Shares
and upon the direction of the Company.
C. The Company desires to provide for the safekeeping of the proceeds of
the Offering until such time as subscriptions for Shares totaling the Threshold
Amount (or such greater amount as the Company may direct in writing) have been
received and upon the direction of the Company, or until such time as Escrow
Agent is required to pay and return such proceeds to the Subscribers upon the
terms hereinafter provided.
AGREEMENT
1. Deposit and Disbursement.
-------------------------
a. Escrow Agent hereby agrees to receive and disburse the proceeds
from the offering of the Shares and any interest earned thereon in accordance
with the terms of this Agreement.
b. The Company or its authorized placement agents, on behalf of the
Subscribers, shall from time to time cause to be wired or deposited with Escrow
Agent all proceeds received from sales of Units to be placed in a special
interest-bearing escrow account at Escrow Agent designated as the "U.S. Bank,
Escrow Agent for AmeriVest Properties Inc. Escrow Account" (the "Escrow
Account") until the Threshold Amount (or such greater amount as the Company may
direct in writing) has been deposited in said account. All proceeds are to be
deposited in the Escrow Account within three (3) business days after receipt by
Escrow Agent.
<PAGE>
c. As deposits are made in the Escrow Account, Company shall cause to
be delivered to Escrow Agent with each such deposit a list showing the name,
address, and tax identification number of each Subscriber together with a copy
of a fully completed subscription agreement for each Subscriber. Escrow Agent
shall keep a current list of the persons who have subscribed for the Shares and
deposited money, showing name, date, address and amount of each subscription.
All funds so deposited shall remain the property of the Subscribers, subject to
the provisions of Paragraph 5 hereof. Escrow agent shall promptly forward to the
Company any subscription agreements which it may receive directly from
Subscribers.
d. If the Company rejects any subscriptions for which Escrow Agent has
already collected funds, Escrow Agent shall promptly issue a refund check to the
rejected Subscriber in the amount of the original deposit collected from such
Subscriber, without interest. If the Company rejects any subscription for which
Escrow Agent has not yet collected funds but has submitted the Subscriber's
check for collection, Escrow Agent shall promptly issue a check in the amount of
the rejected Subscriber's check upon receipt of collected funds. Escrow Agent
shall promptly remit the Subscriber's check directly to the Subscriber.
e. In the event that the Threshold Amount is not deposited with Escrow
Agent on or before April 30, 2000, as set forth in the Company's Registration
Statement (unless that date is extended in accordance therewith), a copy of
which has been attached as Exhibit A hereto, Escrow Agent shall promptly return
the funds which have been deposited in the Escrow Account to the respective
Subscribers, in the amount and to the addresses as shown on its records, without
any interest and without any deductions. All interest earnings on the Escrow
Account shall be the property of the Company. For purposes of reporting to tax
authorities, Escrow Agent will report all interest earned by the escrow as paid
upon distribution.
f. Upon receipt of (i) the Threshold Amount (or such greater amount as
the Company may direct in writing) and (ii) written confirmation from the
Company that funds may be released from escrow, Escrow Agent shall release the
escrow funds, plus accumulated interest income less any unpaid fees and
expenses, to the Company. At the Company's option, it may continue to deposit
proceeds from the sale of additional Shares (after receipt and/or distribution
of the Threshold Amount or any greater amount as directed in writing by the
Company) and to direct the disbursement from time to time of funds so deposited
after subscriptions for the Threshold Amount have been received.
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2. Responsibilities and Obligations of Escrow Agent.
-------------------------------------------------
a. Escrow Agent assumes no responsibilities, obligations, or
liabilities except those expressly provided for in this Agreement as follows:
(1) Escrow Agent shall have no responsibility, obligation or
liability to any person with respect to any action taken, suffered or omitted to
be taken by it in good faith under this Agreement and shall in no event be
liable hereunder except for its gross negligence or willful misconduct.
(2) Notwithstanding anything herein to the contrary, no reference
in this Agreement to any other agreement shall be construed or deemed to enlarge
the responsibilities, obligations, or liabilities of Escrow Agent set forth in
this Agreement, and Escrow Agent is not charged with knowledge of any other
agreement.
b. Escrow Agent shall be protected in relying upon the truth of any
statement contained in any requisition, notice, request, certificate, approval,
consent or other proper paper, and in acting on any such document, which on its
face and without inquiry as to any other facts, appears to be genuine and to be
signed by the proper party or parties, and is entitled to believe all signatures
are genuine and that any person signing any such paper who claims to be duly
authorized is in fact so authorized.
c. Escrow Agent shall be entitled to act on any instruction given to
it in writing and signed by an authorized signatory of the Company and shall be
fully protected in doing so.
d. Escrow Agent shall be entitled to act in accordance with any court
order or other final determination by any governmental authority with
jurisdiction of any matter arising hereunder.
e. Escrow Agent shall have no responsibility for, and makes no
representation as to the value, validity or genuineness of any article, asset or
document deposited with Escrow Agent in the Escrow Account under this Agreement,
provided that it will give notice to the Company of any check for money not
credited and the reason stated therefore and of any discrepancy with respect to
the value, validity or genuineness of any article, asset or document so
deposited if and when it has actual knowledge thereof.
f. Escrow Agent shall have no responsibility to make payments out of
the Escrow Account for any amount in excess of the amount of collected funds
deposited in the Escrow Account, together with any interest earnings thereon, at
the time any payment is to be made.
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g. If any controversy arises between the parties hereto or with any
third person relating to the Escrow Account , Escrow Agent shall not be required
to resolve the same or to take any action to do so but may at its discretion,
institute such interpleader or other proceedings as it deems proper. Escrow
Agent may rely on any joint written instructions as to the disposition of funds,
assets, documents or other assets held in escrow hereunder.
h. Escrow Agent may execute any of its powers or responsibilities
hereunder and exercise any of its rights hereunder either directly or by or
through its agents or attorneys. Nothing in this Agreement shall be deemed to
impose upon Escrow Agent any duty to qualify to do business or to act as a
fiduciary or otherwise in any jurisdiction. Escrow Agent shall not be
responsible for and shall not be under a duty to examine or pass upon the
validity, binding effect, execution or sufficiency of the Agreement or of any
agreement amendatory or supplemental hereto or of any other agreement.
3. Investment of Escrow Funds.
---------------------------
The Company will provide written investment direction to Escrow Agent. If
any funds on deposit in escrow are exchanged for any securities which have
voting rights, the Company will be entitled to exercise such rights in writing.
Escrow Agent shall have no duty or right to invest funds on deposit in the
Escrow Account unless written investment direction is provided by the Company.
Interest earned on the Escrow Account will be the property of the Company. The
Company hereby affirms that it has received and read the prospectus describing
investment advisory fees which may be paid to Escrow Agent and its affiliates.
Income from all investments shall be taxable to the person to whom such income
is disbursed, and Escrow Agent shall have no responsibility for preparing or
filing any Federal or State tax returns in connection therewith.
4. Compensation of Escrow Agent.
-----------------------------
Escrow Agent shall be paid for services hereunder and shall be reimbursed
for its out of pocket expenses for fees of counsel in setting up the escrow, all
in accordance with the fee schedule attached hereto as Exhibit B. Payment of all
fees shall be the responsibility of the Company and may, to the extent of unpaid
fees and expenses, be deducted from any property placed within the escrow with
Escrow Agent.
4
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In the event that Escrow Agent is made a party to litigation with respect to the
property held hereunder, or brings an action in interpleader or in the event
that the conditions of this escrow are not promptly fulfilled, or Escrow Agent
is required to render any service not provided for in this Agreement and fee
schedule, or there is any assignment of the interest of this escrow or any
modification hereof, Escrow Agent shall be entitled to reasonable compensation
for such extraordinary services and reimbursement for all fees, costs, liability
and expenses, including reasonable attorneys' fees. Escrow Agent may amend its
fee schedule from time to time on sixty (60) days prior written notice to the
Company, provided, however, that any fee increase shall not exceed 10% of the
amounts set forth on the existing fee schedule.
5. Indemnification of Escrow Agent.
--------------------------------
The Company hereby indemnifies and holds harmless Escrow Agent against any
and all claims, losses, and damages it may suffer in connection with its
carrying out the terms of this Agreement, including, without limitation, Escrow
Agent's unpaid fees and reimbursable expenses, but excluding any loss Escrow
Agent may sustain as a result of its gross negligence or willful misconduct.
Escrow Agent shall have a lien or right of setoff on all funds, monies or other
assets held hereunder, to the extent such funds become property of the Company,
to pay all of its fees and reimbursable expenses permitted under this Agreement.
The obligations of the Company under this Section 5 shall survive termination
for any reason of this Agreement or resignation or removal of Escrow Agent.
6. Termination and Resignation.
----------------------------
a. This Agreement shall terminate when (i) Escrow Agent or its
successor or assign receives written notification of termination from the
Company including final disposition instructions signed by the Company, and (ii)
there occurs the actual final disposition of the monies held in escrow hereunder
as provide in this Agreement. The rights and obligations of Escrow Agent shall
survive the termination of this Agreement.
b. Escrow Agent may resign at any time and be discharged from its
duties as escrow agent hereunder by giving the Company not fewer than sixty (60)
days prior written notice thereof. As soon as practicable after its resignation,
Escrow Agent shall turn over to a successor escrow agent appointed by the
Company all monies held hereunder upon presentation of the document from the
Company appointing a successor escrow agent and its acceptance of appointment.
Upon the designation of a successor escrow agent and the delivery to a resigning
escrow agent of the document appointing such successor escrow agent and its
acceptance of appointment, the resigning escrow agent shall be released from any
and all liabilities arising thereafter except as provided in Sections 2(a)(1)
and 5 of this Agreement.
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If no successor escrow agent is appointed by the Company within the sixty (60)
day period following such notice of resignation, Escrow Agent reserves the right
to forward the matter and all monies and other property held by Escrow Agent
pursuant to this Agreement to a court of competent jurisdiction at the expense
of the Company.
c. The Company may discharge Escrow Agent and appoint a successor
escrow agent hereunder at any time by giving Escrow Agent no fewer than sixty
(60) days prior written notice thereof. As soon as practicable after its
discharge, Escrow Agent shall turn over to the successor escrow agent appointed
by the Company all monies held hereunder upon presentation of the document from
the Company appointing such successor escrow agent and its acceptance of
appointment. Upon the designation of a successor escrow agent, the delivery to a
discharged escrow agent with its obligations pursuant to the immediately
preceding sentence, the discharged escrow agent shall be released from any and
all liabilities arising thereafter except as provided in Sections 2(a)(1) and 5
of this agreement.
7. Notices.
All notices provided for herein shall be in writing, shall be delivered by
hand or by registered or certified mail shall be deemed given when actually
received, and shall be addressed to the parties hereto at their respective
addresses, which may be changed by any party from time to time by written notice
to all other parties hereto as follows:
a. If to the Company:
AmeriVest Properties Inc.
1800 Glenarm Place, Suite 500
Denver, CO 80202
Attn: Charles K. Knight With Fax Copy to:
(303) 297-1800 Alan L. Talesnick
(303) 296-7353 (fax) (303) 894-9239
b. If to the Escrow Agent:
U.S. Bank Corporate Trust Services
180 East Fifth Street
St. Paul, MN 55101
Attn: Chad Myers With Fax Copy to:
(651) 244-8542 William MacMillan
(651) 244-3100 (fax) (303) 585-6865
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8. Disclosure.
-----------
The parties hereby agree not to use the name of U.S. Trust National
Association to imply an association with the Offering other than that of a legal
escrow agent.
9. Brokerage Confirmation.
-----------------------
The parties acknowledge that to the extent regulations of the Comptroller
of Currency or other applicable regulatory entity grant a right to receive
brokerage confirmations of security transactions of the escrow, the parties
waive receipt of such confirmations to the extent permitted by law. Escrow Agent
shall furnish a statement of security transactions on its regular monthly
reports to the Company.
10. Parties Bound.
--------------
This Agreement shall extend to and be binding upon the respective
successors, representatives, and assigns of the Company and Escrow Agent.
11. Entire Agreement.
-----------------
This Agreement constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof and cannot be modified, amended,
supplemented, or changed, nor can any provisions hereof be waived, except by
written instrument executed by the parties hereto.
12. Assignment.
-----------
Neither party may assign its rights or obligations under this Agreement
without the written consent of the other party hereto.
13. Applicable Law.
---------------
The Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of Colorado.
14. Severability.
-------------
If at any time subsequent to the date hereof, any provision of this
Agreement shall be held by a court of competent jurisdiction to be illegal,
void, or unenforceable, such provision shall be of no force or effect, and shall
be limited or expanded in scope so as to carry out the intent of the parties as
expressed herein to the greatest extent possible. The illegality or
unenforceability of any such provision shall have no effect upon and shall not
impair the enforceability of any other provision of this Agreement.
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15. Counterparts.
-------------
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
COMPANY:
AMERIVEST PROPERTIES INC.
By
-----------------------------------------
Title
--------------------------------------
U.S. BANK NATIONAL ASSOCIATION
- -------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
8
EXHIBIT 23.2
Wheeler Wasoff, P.C.
Certified Public Accountants
INDEPENDENT AUDITOR'S CONSENT
We consent to use in this Registration Statement of AmeriVest Properties
Inc. (the "Company") on Form SB-2 our report dated February 7, 2000, except for
Note 12 as to which the date is February 24, 2000 relating to the Company's
financial statements appearing in this Prospectus, which is part of this
Registration Statement.
We also consent to the reference to us under the heading "Experts" in this
Registration Statement.
WHEELER WASOFF, P.C.
/s/ Wheeler Wasoff, P.C.
Denver, Colorado
March 3, 2000
