SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
| [X] | Quarterly report under Section 13 or 15 (d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2003
| [ ] | Transition report under Section 13 or 15 (d) of the Exchange Act |
For the transition period from ________ to ________
Commission file number: 000-24167
| EBS Building, L.L.C. |
| (Exact Name of Small Business Issuer as Specified in Its Charter) |
| Delaware | 43-1794872 | |
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
| c/o FTI Consulting, 1200 Abernathy Road, Suite 1700, 600 Northpark Town Center, Atlanta, GA 30328 |
| (Address of Principal Executive Offices) |
| (770) 551-8259 |
| (Issuer's Telephone Number, Including Area Code) |
| N/A |
| (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) |
Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrants filed all documents and reports required to be filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of June 30, 2003, there were 10,000,000 Class A Membership Units outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. The accompanying notes are an integral part of these financial statements. The accompanying unaudited financial statements, in the opinion of the Manager, include all adjustments necessary for a fair presentation of the results for the interim periods presented. These adjustments consist of normal recurring accruals. The financial statements are presented in accordance with the requirements of Form 10-QSB and consequently do not include all the disclosures required by generally accepted accounting principles. For further information, refer to the financial statements and notes thereto for the period ended December 31, 2002 included in the Company’s Annual Report on Form 10-KSB filed on March 31, 2003. The following table sets forth the computation of primary and fully diluted earnings (loss) per unit for the periods ended: Rental property consists of the following: Rents receivable include an accrual for the straight-line recognition of escalating tenant rental rates in accordance with Financial Accounting Standards Board Statement of Financial Accounting Standards No. 13,Accounting for Leases. Such tenant rents are recognized on a straight-line basis over the term of the lease. On May 31, 2001, the Company entered into a $18,600,000 revolving line of credit with Commerce Bank, N.A. (the “Line of Credit”). The Line of Credit, which expires in May 2004, replaced the $12,000,000 line of credit previously extended by FINPRO L.L.C. which became due and payable on May 31, 2001. The Company presently intends to use the Line of Credit for working capital needs, tenant improvements and lease commissions. Borrowings under the Line of Credit bear interest at a rate equal to the ninety (90) day LIBOR interest rate plus one hundred ninety (190) basis points. As of September 30, 2003, the Company had outstanding borrowings of $15,064,375 under the Line of Credit. During the forthcoming twelve months of operations, EBS Building, L.L.C. (the “Company”) intends to continue owning, managing, maintaining, repairing, leasing, selling, hypothecating, mortgaging or otherwise dealing with the building located at 501 North Broadway, St. Louis, Missouri (the “Building”). Further, the Company intends to continue actively marketing the Building for sale during the forthcoming twelve months as well as to continue to secure additional tenant leasing agreements. On May 31, 2001, the Company entered into an $18,600,000.00 credit facility (the “Credit Facility”) with Commerce Bank, N.A. in order to refinance its existing mortgage loan and obtain funds for improvements, interest carry and other working capital needs. Borrowings under the Credit Facility are at an interest rate equal to the ninety (90) day LIBOR interest rate plus one hundred ninety (190) basis points. Borrowings under the Credit Facility are secured by substantially all of the assets of the Company. Management believes that funds from operations and the Company’s present availability under its revolving line of credit provide sufficient resources to meet the Company’s present and anticipated financing needs. On May 21, 2003, the Commercial Property Management Agreement between the Company, as Owner, with Insignia/ESG, Inc. (“Insignia”), as Manager, was terminated. Pursuant to the terms of the termination agreement, Insignia was entitled to receive a cancellation fee equal to two times the management fee due and payable to Insignia for services rendered during the month of May 2003. In return, Insignia would waive the 60 day notice requirement for termination without cause as outlined in the original Commercial Property Management Agreement dated December 31, 1997. On May 23, 2003, the Company entered into a new Commercial Property Management Agreement (the “Agreement”) with Colliers Turley Martin Tucker Co. (“Colliers”) to replace Insignia as Manager of the Building. The initial term of the Agreement shall continue through May 31, 2005 with the Owner having the option to extend the term of the Agreement for consecutive, additional periods of one year each. Pursuant to the terms of the Agreement, the Management Fee payable to Colliers shall be paid monthly and will be equal to the greater of 2% of the gross receipts from operations from the preceding calendar month or $6,700 per month. During the nine months ended September 30, 2003, the Company’s rental income increased by 61.5%, from $2,869,375 in 2002 to $4,632,940 in 2003. This increase is primarily attributable to the commencement of rental payments on September 1, 2002 by Jacobs Engineering, Inc. The Jacobs Engineering, Inc. lease was entered into on February 22, 2001, however rental payments did not commence until September 1, 2002. Other income increased by $436,249 or 110.7% over the prior year for the nine months ended September 30, 2003. The primary contributor to this increase is additional revenue for parking fees, conference room usage, storage rental and other expenses from the Jacobs Engineering, Inc. lease. The Company’s total expenses for the first nine months of 2003 declined by $50,348, or 1.1%, from the prior year. The primary drivers of this decline included lower maintenance costs, general and administrative costs and interest expense. Maintenance expense declined from $906,340 for the first nine months of 2002 to $784,874 for the first nine months of 2003, a 13.4% decrease. This decrease was due to additional maintenance expenses incurred in 2002 for elevator repairs performed as a result of the state inspection. In addition, the janitorial contract was re-bid at the end of 2002 resulting in janitorial cost savings in 2003. General and administrative expenses declined by 18.5% from $454,052 for the nine months ended September 30, 2002 to $370,158 for the nine months ended September 30, 2003. This decrease was primarily attributable to a $61,071 decline in salaries and a $16,278 decline in related salary expenses over the prior year due to a reduction in maintenance staffing. A vacated chief engineer position was filled internally by a supervisor, whose position will not be replaced. Interest expenses declined from $472,635 for the first nine months of 2002 to $395,027 for the first nine months of 2003, a 16.4% decrease. The decline in interest expenses was primarily due to lower variable interest rates on the revolving credit facility versus the prior year. Other operating expenses increased by $81,357 or 38.9% for the nine months ended September 30, 2003 over the prior year. The contributors to this increase included a $16,663 increase in insurance expenses and a $64,694 increase in property management fees related to increased monthly management fees and the termination fee paid to Insignia in May 2003. Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Senior Managing Director of the Manager of the Company, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Senior Managing Director of the Manager of the Company concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company’s periodic SEC filings. There have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation. (a) Exhibits (listed by numbers corresponding to the Exhibit Table of Item 601 of Regulation S-B) (b) Reports on Form 8-K. The Issuer did not file any reports on Form 8-K during the second fiscal quarter. In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: November 14, 2003 Exhibit IndexPART I
FINANCIAL INFORMATIONItem 1. Financial Statements.
EBS BUILDING, L.L.C.
Balance Sheets September 30, 2003
(unaudited) December 31, 2002 Assets
Rental property, net $ 25,055,631 $ 25,646,046 Cash - operating 899,192 1,138,043 Security deposit escrow 10,439 10,381 Tax and insurance escrow 441,628 163,355 Rents receivable 1,204,568 1,051,297 Prepaid expenses 126,789 80,721 Lease commissions, net 1,853,483 2,047,564 Loan costs, net 89,337 135,630 Deposits 202 202 Total assets $ 29,681,269 $ 30,273,239 Liabilities Note payable $ 15,064,375 $ 16,853,140 Accounts payable 318 43,675 Accrued expenses 530,121 288,196 Tenant security deposits 9,477 9,902 Total liabilities 15,604,291 17,194,913 Members' equity: Membership Units (Class A - 10,000,000 authorized, issued and outstanding at September 30, 2003 and December 31, 2002) – – Paid-in capital 19,810,522 19,810,522 Retained earnings (deficit) (5,733,544 ) (6,732,196 ) Total members' equity 14,076,978 13,078,326 Total liabilities and members' equity $ 29,681,269 $ 30,273,239 EBS BUILDING, L.L.C.
Statements of OperationsFor the 3 months ended For the 9 months ended Sept. 30, 2003
(unaudited) Sept. 30, 2002
(unaudited) Sept. 30, 2003
(unaudited) Sept. 30, 2002
(unaudited) Income:
Rent $ 1,529,314 $ 1,208,004 $4,632,940 $ 2,869,375 Other 175,050 127,589 830,287 394,038 Total income 1,704,364 1,335,593 5,463,227 3,263,413 Expenses: Maintenance 316,289 277,863 784,874 906,340 Professional fees 138,906 110,468 431,484 379,594 Utilities 211,674 227,737 543,474 556,704 �� General and administrative 111,250 153,123 370,158 454,052 Depreciation and amortization 449,403 449,412 1,348,209 1,236,606 Real estate taxes 99,999 99,999 300,997 299,997 Interest expense 121,365 160,740 395,027 472,635 Other operating expenses 79,268 85,473 290,352 208,995 Total expenses 1,528,154 1,564,815 4,464,575 4,514,923 Net Income (Loss) $ 176,210 $ (229,222 ) $ 998,652 $ (1,251,510 ) Net income (loss) per Class A Unit - $ 0.02 $ (0.02 ) $ 0.10 $ (0.13 ) basic and diluted EBS BUILDING, L.L.C.
Statements of Changes in Members' Equity
For the Nine Months Ended September 30, 2003 Class A
Membership
Units Paid-In
Capital Retained
Earnings
(Deficit)Total Balance, December 31, 2002 10,000,000 $ 19,810,522 $ (6,732,196 ) $ 13,078,326 Net Income (unaudited) – – 998,652 998,652 Balance, Sept. 30, 2003 (unaudited) 10,000,000 $ 19,810,522 $ (5,733,544 ) $ 14,076,978 EBS BUILDING, L.L.C.
Statements of Cash Flows For the 9
months ended
Sept. 30, 2003
(unaudited) For the 9
months ended
Sept. 30, 2002
(unaudited)Cash flows from operating activities:
Net income (loss) $ 998,652 $ (1,251,510 ) Reconciliation of net income (loss) to cash flows provided by (used in) operating activities: Depreciation and amortization 1,348,209 1,236,606 Changes in assets and liabilities: (Increase) in escrows, rents receivable, prepaid expenses and deposits (477,669 ) (461,985 ) Increase in liabilities, excluding note payable 198,142 238,160 Cash flows provided by (used in) operating activities 2,067,334 (238,729 ) Cash flows from investing activities: Payments for lease commissions (10,566 ) – Additions to rental property (476,854 ) (648,506 ) Cash flows used in investing activities (487,420 ) (648,506 ) Cash flows from financing activities: Payments for loan fees (30,000 ) – (Payments on) proceeds from note payable (1,788,765 ) 1,255,811 Cash flows (used in) provided by financing activities (1,818,765 ) 1,255,811 Net (decrease) increase in cash (238,851 ) 368,576 Cash, beginning of period 1,138,043 198,160 Cash, end of period $ 898,192 $ 566,736 EBS BUILDING, L.L.C.
Notes to Financial Statements (unaudited)
September 30, 2003 and December 31, 20021. 2. For the 3 Months Ended For the 9 Months Ended Sept. 30, 2003
(unaudited) Sept. 30, 2002
(unaudited) Sept. 30, 2003
(unaudited) Sept. 30, 2002
(unaudited) Numerator: Net Earnings/(Loss) - Basic and Diluted $ 176,210 $ (229,222 ) $ 998,652 $ (1,251,510 ) Denominator: Weighted Average Units Outstanding - Basic 10,000,000 10,000,000 10,000,000 10,000,000 Effect of Potentially Dilutive Units – – – – Units Outstanding - Diluted 10,000,000 10,000,000 10,000,000 10,000,000 Basic and Diluted Earnings/(Loss) per Unit $ 0.02 $ (0.02 ) $ 0.10 $ (0.13 ) 3. Sept. 30, 2003
(unaudited) December 31, 2002 Land $ 2,250,520 $ 2,250,520 Building 17,765,629 17,765,629 Building Improvements 1,507,154 1,507,154 Tenant Improvements 8,806,810 8,806,810 Construction in progress 476,854 – 30,806,967 30,330,113 Less Accumulated Depreciation 5,751,336 4,684,067 $ 25,055,631 $ 25,646,046 The building and building improvements are depreciated using the straight-line method over their estimated useful life of 38 and 39 years, respectively. Tenant improvements are depreciated over the term of the tenant’s lease. 4. 5. Item 2. Management’s Discussion and Analysis or Plan of Operation.
Item 3. Controls and Procedures
PART II
OTHER INFORMATIONItem 6. Exhibits and Reports on Form 8-K.
3.1: Articles of Organization of the Issuer filed with the Delaware Secretary of State on September 24, 1997 incorporated by reference to the Issuer's Registration Statement on Form 10-SB filed on April 30, 1998, Exhibit 2.1. 3.2: Members Agreement of EBS Building, L.L.C. a Limited Liability Company, dated as of September 26, 1997 incorporated by reference to the Issuer's Registration Statement on Form 10-SB filed on April 30, 1998, Exhibit 2.2. 4: See the Members Agreement, referenced as Exhibit 3.2. 10: Commercial Property Management Agreement for One Financial Plaza between EBS Building, L.L.C. and Colliers Turley Martin Tucker Co. dated May 23, 2003 incorporated by reference from the Issuer's Form 10-QSB filed on June 30, 2003, Exhibit 10.30. 31: Certification of the Senior Managing Director of the Manager of the Company pursuant to Section 302 of Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350. 32: Certification of the Senior Managing Director of the Manager of the Company pursuant to Section 906 of Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350. SIGNATURES
REGISTRANT:
EBS Building, L.L.C.
By: FTI Consulting, as Manager By: /s/ Keith F. Cooper Keith F. Cooper, Senior Managing Director 3.1: Articles of Organization of the Issuer filed with the Delaware Secretary of State on September 24, 1997 incorporated by reference to the Issuer's Registration Statement on Form 10-SB filed on April 30, 1998, Exhibit 2.1. 3.2: Members Agreement of EBS Building, L.L.C. a Limited Liability Company, dated as of September 26, 1997 incorporated by reference to the Issuer's Registration Statement on Form 10-SB filed on April 30, 1998, Exhibit 2.2. 4: See the Members Agreement, referenced as Exhibit 3.2. 10: Commercial Property Management Agreement for One Financial Plaza between EBS Building, L.L.C. and Colliers Turley Martin Tucker Co. dated May 23, 2003 incorporated by reference from the Issuer's Form 10-QSB filed on June 30, 2003, Exhibit 10.30. 31: Certification of the Senior Managing Director of the Manager of the Company pursuant to Section 302 of Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350. 32: Certification of the Senior Managing Director of the Manager of the Company pursuant to Section 906 of Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350.