UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 5, 2002
AmeriVest Properties Inc.
-------------------------
(Exact name of small business issuer as specified in its charter)
Maryland 1-14462 84-1240264
-------- ------- ----------
(State or other jurisdiction of (Commission File No.) (I.R.S. Employer
incorporation or organization) Identification No.)
1780 South Bellaire Street Suite 515, Denver, Colorado 80222
------------------------------------------------------------
(Address of principal executive offices)
(303) 297-1800
--------------
(Registrant's telephone number)
Item 2. Acquisition or Disposition of Assets
Purchase of Metropolitan Dallas Office Building. On September 5, 2002, we
completed the acquisition of the Parkway Centre II office building (the
"Property"). The Property is located in Plano, Texas and contains approximately
152,000 rentable square feet and is located on 6.4 acres of land. The aggregate
purchase price for the Property was $22,000,000, which was paid through the
assumption of the existing $17,000,000 loan from J.P. Morgan Chase Commercial
Mortgage Securities Corp. (the "J.P. Morgan Chase Loan") and the balance paid in
cash from a portion of the proceeds of our May 2002 public offering.
The Property was purchased from Tennessee Walker Ltd. (the "Seller"), an
unrelated party. The purchase price of the Property was determined through
negotiations between the Seller and us.
The J.P. Morgan Chase Loan bears interest at LIBOR plus 195 basis points, due in
monthly installments of interest only, with the principal balance and accrued
interest due on August 10, 2004. This loan may be prepaid at any time without
penalty.
For a more complete description of this transaction, please see the Agreement
for Purchase and Sale between us and the Seller dated June 17, 2002 (the
"Purchase Agreement"), a copy of which is attached hereto as Exhibit 2.1, and
our press release dated September 5, 2002, a copy of which is attached hereto as
Exhibit 99.1.
The schedules and exhibits to the Purchase Agreement, a listing of which are
included therein, have not been filed herewith. The schedules and exhibits will
be furnished supplementally to the Securities and Exchange Commission upon
request.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Real Estate Property Acquired:
Independent Auditors' Report F-1
Statements of Revenue and Certain Expenses for the six months ended
June 30, 2002 (unaudited) and for the year ended December 31, 2001 F-2
Notes to Statements of Revenue and Certain Expenses F-3
(b) Unaudited Pro Forma Financial Information:
Pro Forma Financial Information (unaudited) F-5
Pro Forma Consolidated Balance Sheet as of June 30, 2002 (unaudited) F-6
Pro Forma Consolidated Statements of Operations (unaudited):
For the six months ended June 30, 2002 F-7
For the year ended December 31, 2001 F-8
Notes to Pro Forma Consolidated Financial Statements (unaudited) F-9
Statement of Estimated Taxable Operating Results and Cash to be
Made Available by Operations for the Year ended December 31, 2001
(unaudited) F-11
Note to Statement of Estimated Taxable Operating Results and Cash
to be Made Available by Operations (unaudited) F-12
(c) Exhibits:
Exhibit Number Exhibit Title
-------------- -------------
2.1 Agreement for Purchase and Sale between AmeriVest Properties
Inc. and Tennessee Walker Ltd. dated June 17, 2002 (Parkway
Centre II)
99.1 Press Release dated September 5, 2002*
* Previously filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERIVEST PROPERTIES INC.
November 12, 2002
By: /s/ D. Scott Ikenberry
----------------------------------
D. Scott Ikenberry
Chief Financial Officer
INDEPENDENT AUDITORS' REPORT
The Board of Directors of
AmeriVest Properties Inc.:
We have audited the accompanying statement of revenue and certain expenses of
the Parkway Centre II Office Building in Plano, Texas (the "Property") for the
year ended December 31, 2001. This financial statement is the responsibility of
the Property's management. Our responsibility is to express an opinion on the
financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the financial statement. We believe that our audit provides a
reasonable basis for our opinion.
The statement of revenue and certain expenses was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission and for inclusion in the Form 8-K of AmeriVest Properties Inc., as
described in Note 1. The presentation is not intended to be a complete
presentation of the Property's revenues and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses of the Parkway Centre II
Office Building for the year ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States of America.
/s/ KPMG LLP
Denver, Colorado
October 4, 2002
F-1
PARKWAY CENTRE II OFFICE BULDING
STATEMENTS OF REVENUE AND CERTAIN EXPENSES
For the Six For the Year
Months Ended Ended
June 30, December 31,
2002 2001
---------- ----------
(unaudited)
REVENUE:
Rental revenue $1,567,925 $3,076,561
Other revenue 270,926 555,492
---------- ----------
Total revenue 1,838,851 3,632,053
---------- ----------
CERTAIN EXPENSES:
Operating expenses
186,196 393,840
Repairs and maintenance 19,169 33,380
Utilities 107,816 182,954
Real estate taxes 238,421 472,844
Management fees 38,994 81,539
---------- ----------
Total expenses 590,596 1,164,557
---------- ----------
EXCESS OF REVENUE OVER CERTAIN
EXPENSES $1,248,255 $2,467,496
========== ==========
The accompanying notes are an integral part of these financial statements.
F-2
PARKWAY CENTRE II OFFICE BULDING
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 2001
NOTE 1 - BASIS OF PRESENTATION
The accompanying statement of revenue and certain expenses reflects the
operations of the Parkway Centre II Office Building ("Parkway Centre II" or the
"Property"). The Property consists of one office building located in Plano,
Texas. The Property contains approximately 152,000 rentable square feet and is
located on 6.4 acres of land. As of December 31, 2001, the Property had an
occupancy percentage of 100%.
The Property was acquired by AmeriVest Properties Inc. and subsidiaries
("AmeriVest") from an unrelated party on September 5, 2002 for $22,000,000,
which was paid through the assumption of the existing $17,000,000 loan from J.P.
Morgan Chase Commercial Mortgage Securities Corporation and the balance paid in
cash from a portion of the proceeds of the May 2002 public offering. In
addition, AmeriVest incurred approximately $305,000 in related acquisition fees
and costs, of which $251,910 represents the advisory fee earned by Sheridan
Realty Advisors, LLC, a related party, in connection with the acquisition in
accordance with the Property Management and Advisory Agreement.
The accounting records of the Property are maintained on the accrual basis. The
accompanying statement of revenue and certain expenses was prepared pursuant to
the rules and regulations of the Securities and Exchange Commission, and exclude
certain expenses such as mortgage interest, depreciation and amortization,
professional fees and other costs not directly related to future operations of
the Property.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
Interim Information (unaudited)
-------------------------------
In the opinion of management, the unaudited interim information as of June 30,
2002 included herein contains all adjustments necessary, which are of a normal
recurring nature, to present fairly the revenue and certain expenses for the six
months ended June 30, 2002. Results of interim periods are not necessarily
indicative of results to be expected for the year. Management is not aware of
any material factors that would cause the information included herein to not be
indicative of future operating results.
F-3
NOTE 2 - OPERATING LEASES
The Property's revenue is obtained from tenant rental payments as provided for
under non-cancelable operating leases, many of which are renewable.
Future minimum lease payments due under these leases, excluding tenant
reimbursements of operating expenses, as of December 31, 2001, are as follows:
Year Ending December 31:
2002 $ 3,096,123
2003 2,850,131
2004 2,605,654
2005 1,114,978
2006 478,900
Thereafter 120,556
-----------
$10,266,342
===========
Tenant reimbursements of operating expenses are included in other revenue on the
accompanying statements of revenue and certain expenses.
The following table exhibits those tenants who accounted for greater than 10% of
the revenues for the year ended December 31, 2001, and the corresponding
percentage of the future minimum revenues above:
Percentage of Percentage of Future
Tenant 2001 Revenues Minimum Revenues
------ ------------- ----------------
A 14.2% 15.1%
B 15.6% 17.5%
Tenant A is an insurance company and tenant B is an information technology
company.
NOTE 3 - MANAGEMENT AGREEMENT
The Property is currently being managed by a third-party property manager for a
fee equal to 2% of the gross rental receipts.
F-4
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
PRO FORMA FINANCIAL INFORMATION
(unaudited)
The accompanying unaudited pro forma consolidated balance sheet presents the
historical financial information of AmeriVest as of June 30, 2002 as adjusted
for the acquisition of Parkway Centre II, as if the transaction had occurred on
June 30, 2002.
The accompanying unaudited pro forma consolidated statements of operations for
the six months ended June 30, 2002 and the year ended December 31, 2001 combine
the historical operations of AmeriVest with the historical operations of Parkway
Centre II as if the transaction had occurred on January 1, 2001.
The unaudited pro forma consolidated financial statements have been prepared by
AmeriVest management based upon the historical financial statements of AmeriVest
and Parkway Centre II. These pro forma statements may not be indicative of the
results that actually would have occurred if the combination had been in effect
on the dates indicated or which may be obtained in the future. The pro forma
financial statements and notes thereto should be read in conjunction with the
historical financial statements included in AmeriVest's previous filings with
the Securities and Exchange Commission.
F-5
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 2002
(unaudited)
Acquisition
AmeriVest of Parkway Pro Forma
(Historical) Centre II Combined
------------- ------------- -------------
ASSETS
Investment in Real Estate
Land $ 14,137,891 $ 3,980,537 (b) $ 18,118,428
Building and improvements 68,778,039 18,133,558 (b) 86,911,597
Furniture, fixtures and equipment 326,450 -- 326,450
Tenant improvements 2,238,305 -- 2,238,305
Tenant leasing commissions 374,335 -- 374,335
Less: accumulated depreciation and
amortization (4,441,680) -- (4,441,680)
------------- ------------- -------------
Net Investment in Real Estate 81,413,340 22,114,095 103,527,435
Cash and cash equivalents 21,416,676 (5,241,600)(a) 16,175,076
Escrow deposits 647,918 556,178 (b) 1,204,096
Investment in unconsolidated affiliate 1,212,560 -- 1,212,560
Due from related party 2,456,831 -- 2,456,831
Accounts receivable 837,054 -- 837,054
Deferred rent receivable 511,157 -- 511,157
Deferred financing costs, net 530,145 54,535 (c) 584,680
Prepaid expenses, escrows and other assets 1,237,639 -- 1,237,639
------------- ------------- -------------
Total Assets $ 110,263,320 $ 17,483,208 $ 127,746,528
============= ============= =============
LIABILITIES
Mortgage loans and notes payable $ 59,250,786 $ 17,000,000 (c) $ 76,250,786
Accounts payable and accrued expenses 990,452 -- 990,452
Due to related party 182,173 251,910 (d) 434,083
Accrued real estate taxes 762,925 238,421 (b) 1,001,346
Prepaid rents and security deposits 956,429 183,692 (b) 1,140,121
Dividends payable 1,360,807 -- 1,360,807
------------- ------------- -------------
Total Liabilities 63,503,572 17,674,023 81,177,595
------------- ------------- -------------
STOCKHOLDERS' EQUITY
Common stock 10,886 -- 10,886
Capital in excess of par value 54,325,242 61,095 (e) 54,386,337
Distributions in excess of accumulated
earnings (7,576,380) (251,910)(d) (7,828,290)
------------- ------------- -------------
Total Stockholders' Equity 46,759,748 (190,815) 46,568,933
------------- ------------- -------------
Total Liabilities and Stockholders' Equity $ 110,263,320 $ 17,483,208 $ 127,746,528
============= ============= =============
See notes to the pro forma consolidated financial statements.
F-6
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2002
(unaudited)
Historical
--------------------------
Parkway Pro Forma Pro Forma
AmeriVest Centre II Adjustments Combined
----------- ----------- ----------- -----------
REAL ESTATE OPERATING REVENUE
Rental revenue $ 7,154,870 $ 1,838,851 $ -- $ 8,993,721
----------- ----------- ----------- -----------
REAL ESTATE OPERATING EXPENSES
Property Operating Expenses
Operating expenses 1,773,486 303,948 -- 2,077,434
Real estate taxes 624,822 238,421 -- 863,243
Management fees 59,882 38,994 (3,625)(f) 95,251
General and administrative expenses 731,634 9,233 -- 740,867
Interest expense 1,818,526 -- 329,601 (g) 2,148,127
Depreciation and amortization expense 1,391,079 -- 226,669 (h) 1,617,748
----------- ----------- ----------- -----------
6,399,429 590,596 552,645 7,542,670
----------- ----------- ----------- -----------
OTHER INCOME/LOSS
Interest income 52,897 -- -- 52,897
Equity in loss of unconsolidated affiliate (44,046) -- -- (44,046)
----------- ----------- ----------- -----------
8,851 -- -- 8,851
----------- ----------- ----------- -----------
NET INCOME $ 764,292 $ 1,248,255 $ (552,645) $ 1,459,902
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE
Basic $ 0.10 $ 0.19
=========== ===========
Diluted $ 0.10 $ 0.19
=========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic 7,698,139 7,698,139
=========== ===========
Diluted 7,879,376 7,879,376
=========== ===========
See notes to the pro forma consolidated financial statements.
F-7
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2001
(unaudited)
Historical
----------------------------
Parkway Pro Forma Pro Forma
AmeriVest Centre II Adjustments Combined
------------ ------------ ------------ ------------
REAL ESTATE OPERATING REVENUE
Rental revenue $ 10,944,383 $ 3,632,053 $ -- $ 14,576,436
------------ ------------ ------------ ------------
REAL ESTATE OPERATING EXPENSES
Property Operating Expenses
Operating expenses 2,643,448 551,028 -- 3,194,476
Real estate taxes 1,132,819 472,844 -- 1,605,663
Management fees 523,687 81,539 99,521 (f) 704,747
General and administrative expenses 677,845 59,146 -- 736,991
Advisory fee -- -- 251,910 (d) 251,910
Impairment of deferred rents receivable 326,113 -- -- 326,113
Interest expense 3,181,697 -- 980,608 (g) 4,162,305
Depreciation and amortization expense 2,244,435 -- 453,339 (h) 2,697,774
------------ ------------ ------------ ------------
10,730,044 1,164,557 1,785,378 13,679,979
------------ ------------ ------------ ------------
OTHER INCOME/LOSS
Interest income 135,075 -- -- 135,075
Equity in loss of unconsolidated affiliates (17,366) -- -- (17,366)
------------ ------------ ------------ ------------
117,709 -- -- 117,709
------------ ------------ ------------ ------------
INCOME BEFORE GAIN ON SALE
OF REAL ESTATE 332,048 2,467,496 (1,785,378) 1,014,166
GAIN ON SALE OF REAL ESTATE 1,156,445 -- -- 1,156,445
------------ ------------ ------------ ------------
NET INCOME $ 1,488,493 $ 2,467,496 $ (1,785,378) $ 2,170,611
============ ============ ============ ============
NET INCOME PER COMMON SHARE
Basic $ 0.32 $ 0.46
============ ============
Diluted $ 0.31 $ 0.45
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic 4,680,719 4,680,719
============ ============
Diluted 4,801,307 4,801,307
============ ============
See notes to the pro forma consolidated financial statements.
F-8
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited pro forma consolidated financial statements are
presented to reflect the acquisition of Parkway Centre II by AmeriVest.
The accompanying unaudited pro forma consolidated balance sheet presents the
historical financial information of AmeriVest as of June 30, 2002 as adjusted
for the acquisition of Parkway Centre II as if the transaction had occurred on
June 30, 2002.
The accompanying unaudited pro forma consolidated statements of operations for
the six months ended June 30, 2002 and the year ended December 31, 2001 combine
the historical operations of AmeriVest with the historical operations of Parkway
Centre II as if the transaction had occurred on January 1, 2001.
These pro forma statements may not be indicative of the results that actually
would have occurred if the combination had been in effect on the dates indicated
or which may be obtained in the future.
NOTE 2 - PRO FORMA ADJUSTMENTS
The unaudited pro forma consolidated financial statements reflect the following
pro forma adjustments:
(a) The net cash paid for Parkway Centre II consists of the following:
Purchase price $ 22,000,000
Escrow deposits 556,178
Estimated acquisition costs 53,000
Loan origination fees 54,535
Less: mortgage loan (17,000,000)
Less: credit for accrued real estate taxes (238,421)
Less: credit for security deposits (183,692)
------------
Cash paid $ 5,241,600
============
(b) The purchase price of Parkway Centre II was allocated to the assets and
liabilities based on estimated fair values.
(c) The loan in the amount of $17,000,000 from J.P. Morgan Chase Commercial
Mortgage Securities Corporation bears interest at LIBOR plus 195 basis points,
due in monthly installments of interest only, with the principal and accrued
interest due on August 10, 2004. This loan may be prepaid at any time without
penalty. AmeriVest paid a 0.25% loan assumption fee plus additional loan costs,
which have been capitalized and are being amortized over the life of the loan.
F-9
(d) Advisory fee of $251,910 earned by Sheridan Realty Advisors, LLC in
connection with the acquisition of Parkway Centre II in accordance with the
Property Management and Advisory Agreement. This fee was capitalized on
acquisitions completed prior to January 1, 2002; however, due to the amendment
of the Property Management and Advisory Agreement, the advisory fee is being
expensed beginning in 2002.
(e) Fair value of 88,543 incentive warrants earned by Sheridan Realty Advisors,
LLC in connection with the acquisition of Parkway Centre II in accordance with
the Property Management and Advisory Agreement.
(f) Pursuant to the Property Management and Advisory Agreement, Sheridan Realty
Advisors, LLC would have earned a 5% management fee through December 31, 2001
and a third-party property manager would have earned a 2% management fee
effective January 1, 2002. Adjustment to management fees as follows:
Six Months Ended Year Ended
June 30, 2002 December 31, 2001
------------- -----------------
Management fees in accordance with the
property management agreements $ 35,369 $ 181,060
Less: historical management fees (38,994) (81,539)
--------- ---------
Pro forma adjustment $ (3,625) $ 99,521
========= =========
(g) Interest expense to be recognized related to the mortgage loan. Includes
loan interest (assumed interest rates of 3.77% and 5.66% for the six months
ended June 30, 2002 and the year ended December 31, 2001, respectively) and the
amortization of the loan origination fee.
(h) Depreciation expense calculated assuming a 40-year useful life.
NOTE 3 - INCOME PER SHARE
Pro forma income per common share for the six months ended June 30, 2002 and the
year ended December 31, 2001 is computed based on the weighted average number of
common shares outstanding during the periods presented.
F-10
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
AND CASH TO BE MADE AVAILABLE BY OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
(unaudited)
The following represents an estimate of the taxable operating results and cash
to be made available by operations expected to be generated by AmeriVest
(including the operations of Parkway Centre II) based upon the pro forma
consolidated statement of operations for the year ended December 31, 2001. These
estimated results do not purport to represent results of operations for these
properties in the future and were prepared on the basis described in the
accompanying notes, which should be read in conjunction herewith.
Revenue $14,471,752
-----------
Expenses
Operating expenses 3,194,476
Real estate taxes 1,605,663
Management fees 704,747
General and administrative expenses 736,991
Advisory fee 251,910
Interest expense 4,162,305
Depreciation and amortization expense 1,611,346
-----------
Total expenses 12,267,438
-----------
Estimated Taxable Operating Income 2,204,314
Add back depreciation and amortization expense 1,611,346
-----------
Estimated Cash to be Made Available by Operations $ 3,815,660
===========
F-11
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
NOTE TO STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
AND CASH TO BE MADE AVAILABLE BY OPERATIONS
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
Depreciation has been estimated based upon an allocation of the purchase price
of Parkway Centre II to land (18%) and building (82%) and assuming (for tax
purposes) a 39-year useful life applied on a straight-line method.
No income taxes have been provided because the Company is organized and operates
in such a manner so as to qualify as a Real Estate Investment Trust ("REIT")
under the provisions of the Internal Revenue Code (the "Code"). Accordingly, the
Company generally will not pay Federal income taxes provided that distributions
to its stockholders equal at least the amount of its REIT taxable income as
defined under the Code.
F-12