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 March 31, 2004
| [ ] | 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 of EBS Building, L.L.C. (the “Company”), 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 year ended December 31, 2003 included in the Company’s Annual Report on Form 10-KSB filed on March 30, 2004. The following table sets forth the computation of basic and diluted earnings 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. Certain 2003 amounts have been reclassified where appropriate to conform to the financial statement presentation used in 2003. On May 31, 2001, the Company entered into an $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, replaces 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 uses 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 March 31, 2004, the Company had outstanding borrowings of $14,891,507 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. In an effort to reinitiate marketing efforts for the Building, the Company entered into a new exclusive listing agreement (the “Subsequent Marketing Listing Agreement”), effective March 4, 2004, with Colliers Turley Martin Tucker, Inc. (“Colliers”), which agreement granted Colliers the exclusive right to sell the Building. The term of the Subsequent Marketing Listing Agreement is through August 1, 2004. Upon the sale of the Building, a commission of 1.25% of the Net Sales Price1, up to $34 million, plus 5% of the Net Sales Price in excess of $34 million up to $37 million, plus 7% of the Net Sales Price in excess of $37 million will be paid to Colliers, pursuant to a written sales contract that will be executed during the term of the agreement with a purchaser procured by Colliers. In conjunction with the Subsequent Marketing Listing Agreement, Colliers entered into an advisory agreement, effective March 4, 2004, (the “Advisory Agreement”) with Secured Capital Corp. (“SCC”), which granted SCC the right to market the Building to investors on a national basis. The term of the agreement is co-terminus with the Subsequent Marketing Listing Agreement. Upon the sale of the Building, Colliers must pay SCC a fee equal to 80% of the gross commission paid by the Company to Colliers. In addition, SCC will receive reimbursement from the Company for marketing expenses in an amount not to exceed $40,000. 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. The Credit Facility has a maturity date of May 31, 2004 (the “Maturity Date”), when all of the remaining outstanding principal balance and interest is due and payable. The Company is actively trying to sell the Building by the end of May 2004. If the Company is unsuccessful in selling the Building prior to the Maturity Date, the Company will pursue either an extension of financing with Commerce Bank or alternative financing with another lender. 1 Defined as the Gross Sales Price received by the Company less an allowance provided to the buyer for roof repair or replacement. During the three months ended March 31, 2004, the Company’s rental income increased slightly over the first quarter of the prior year, from $1,571,902 during the first quarter of 2003 to $1,573,449 during the first quarter of 2004. Other income decreased from $531,463 in the first quarter of 2003 to $161,788 in the same period in 2004. This significant decrease in other income was due to the one time termination fee related to the Banker’s Trust lease that was included in other income in the prior year. The Company’s total expenses decreased by 1.8% over the first quarter of the prior year, with the largest decreases in other operating expenses, interest expenses and general and administrative expenses. Other operating expenses declined by 32.0% from $103,177 for the three months ended March 31, 2003 to $70,090 for the three months ended March 31, 2004. This decrease was primarily due to a 73.8% decline in insurance expenses due to the negotiation of more favorable insurance rates by Colliers. Interest expenses declined by 27.5% over the prior year from $139,849 in first quarter 2003 to $101,444 in first quarter 2004. This decrease was a result of lower variable interest rates on the Credit Facility compared to the prior year. General and administrative expenses declined from $153,061 in the first quarter of 2003 to $118,449 in the first quarter of 2004, a 22.6% decline. This decrease was mainly due to a decline in maintenance salaries and related benefits expenses and administrative expenses. The decline in salaries and related benefits expenses resulted from a chief engineer position being vacated and filled internally. Professional fees and maintenance expenses experienced the largest increase over the prior year. Professional fees increased by 23.7% from $113,706 in the first quarter of 2003 to $140,599 in the first quarter of 2004. This was primarily driven by higher legal fees from an increase in leasing and marketing activity in the first quarter of 2004. Maintenance expenses increased from $236,274 for the three months ended March 31, 2003 to $271,131 for the same period in 2004 due to the deferral of various maintenance projects in the first quarter of 2003 into later quarters of the year. As of March 31, 2004, 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-15(e). 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) 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. 10.34: Exclusive Listing Agreement by and between EBS Building, L.L.C. and Colliers Turley Martin Tucker, Inc., dated March 4, 2004 incorporated by reference from the Issuer's Form 10-KSB filed on March 30, 2004, Exhibit 10.34. 10.35: Advistory Agreement by and between Colliers Turley Martin Tucker, Inc. and Secured Capital Corp., dated March 4, 2004 incorporated by reference from the Issuer's Form 10-KSB filed on March 30, 2004, Exhibit 10.35. 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. (b) Reports on Form 8-K. The Issuer did not file any reports on Form 8-K during the first 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: May 14, 2004 Exhibit Index 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. 10.34: Exclusive Listing Agreement by and between EBS Building, L.L.C. and Colliers Turley Martin Tucker, Inc., dated March 4, 2004 incorporated by reference from the Issuer's Form 10-KSB filed on March 30, 2004, Exhibit 10.34. 10.35: Advistory Agreement by and between Colliers Turley Martin Tucker, Inc. and Secured Capital Corp., dated March 4, 2004 incorporated by reference from the Issuer's Form 10-KSB filed on March 30, 2004, Exhibit 10.35. 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.PART I
FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS.
EBS BUILDING, L.L.C.
Balance Sheets March 31, 2004
(unaudited) December 31, 2003 Assets
Rental property, net $ 24,804,065 $ 25,136,102 Cash - operating 1,164,715 759,471 Security deposit escrow 10,464 10,454 Tax and insurance escrow 268,703 169,442 Rents receivable 1,263,150 1,247,957 Prepaid expenses – 70,059 Lease commissions, net 1,822,359 1,895,851 Loan costs, net 978 38,491 Deposits 202 202 Total assets $ 29,334,636 $ 29,328,029 Liabilities Note payable $ 14,891,507 $ 14,891,507 Accounts payable – 429,829 Accrued expenses 249,299 121,916 Tenant security deposits 23,422 9,476 Total liabilities 15,164,228 15,452,728 Members' equity: Membership Units (Class A - 10,000,000 authorized, issued and outstanding at March 31, 2004 and December 31, 2003) – – Paid-in capital 19,810,522 19,810,522 Retained earnings (deficit) (5,640,114 ) (5,935,221 ) Total members' equity 14,170,408 13,875,301 Total liabilities and members' equity $ 29,334,636 $ 29,328,029 EBS BUILDING, L.L.C.
Statement of Operations For the 3 months ended
March 31, 2004
(unaudited) For the 3 months ended
March 31, 2003
(unaudited) Income:
Rent $ 1,573,449 $ 1,571,902 Other 161,788 531,463 Total income 1,735,237 2,103,365 Expenses: Maintenance 271,131 236,274 Professional fees 140,599 113,706 Utilities 152,681 171,627 General and administrative 118,449 153,061 Depreciation & amortization 456,736 449,403 Real estate taxes 99,000 99,999 Interest expense 101,444 139,849 Other operating expenses 70,090 103,117 Other expense 30,000 – Total expenses 1,440,130 1,467,036 Net income $ 295,107 $ 636,329 Net income per Class A Unit - basic and diluted $0.03 $0.06 EBS BUILDING, L.L.C.
Statement of Changes in Members' Equity
For the Three Months Ended March 31, 2004 Class A
Membership
Units Paid In
Capital Retained
Earnings
(Deficit)Total Balance, December 31, 2003 10,000,000 $ 19,810,522 $ (5,935,221 ) $ 13,875,301 Net income (unaudited) – – 295,107 295,107 Balance, March 31, 2004 (unaudited) 10,000,000 $ 19,810,522 $ (5,640,114 ) $ 14,170,408 EBS BUILDING, L.L.C.
Statement of Cash Flows For the 3 months ended
March 31, 2004
(unaudited) For the 3 months ended
March 31, 2003
(unaudited) Cash flows from operating activities:
Net income $ 295,107 $ 636,329 Reconciliation of net income to cash flows provided by operating activities: Depreciation & amortization expense 456,736 449,403 Changes in operating assets and liabilities: (Increase) in escrows, rents receivable, prepaid expenses and deposits (34,405 ) (155,373 ) Increase/(decrease) in liabilities, excluding
note payable (318,180 ) 123,574 Cash flows provided by operating activities 399,258 1,053,933 Cash flows from investing activities: Payments for lease commissions – (10,566 ) Additions to rental property 5,986 (404,054 ) Cash flows provided/(used) by investing 5,986 (414,620 ) activities Cash flows from financing activities: Proceeds from note payable – – Cash flows provided by financing activities – – Net increase in cash 405,244 639,313 Cash, beginning of period 759,471 1,138,043 Cash, end of period $ 1,164,715 $ 1,777,356 EBS BUILDING, L.L.C.
Notes to Financial Statements (unaudited)
March 31, 2004 and December 31, 20031. 2. For the
3 Months Ended
March 31, 2004
(unaudited) For the
3 Months Ended
March 31, 2003
(unaudited) Numerator:
Net Earnings - Basic and Diluted $ 295,107 $ 636,329 Denominator: Weighted Average Units Outstanding - Basic 10,000,000 10,000,000 Effect of Potentially Dilutive Units – – Units Outstanding - Diluted 10,000,000 10,000,000 Basic and Diluted Earnings per Unit $ 0.03 $ 0.06 3. March 31, 2004
(unaudited) December 31, 2003 Land $ 2,250,520 $ 2,250,520 Building 17,765,629 17,765,629 Building Improvements 1,477,475 1,477,475 Tenant Improvements 8,806,810 8,806,810 Construction in progress 966,456 942,763 31,266,890 31,243,197 Less Accumulated Depreciation 6,462,825 6,107,095 $�� 24,804,065 $ 25,136,102 The building and building improvements are depreciated using the straight-line method over their estimated useful lives of 38 years. Tenant improvements are depreciated over the term of the tenant’s lease. 4. EBS BUILDING, L.L.C.
Notes to Financial Statements (unaudited)
March 31, 2004 and December 31, 20035. 6. The Credit Facility has a maturity date of May 31, 2004, when all of the remaining outstanding principal balance and interest is due and payable. The Company is actively trying to sell the Building by the end of May 2004. If the Company is unsuccessful in selling the Building prior to the maturity date of the Credit Facility, the Company will pursue either an extension of financing with Commerce Bank or obtain alternative financing with another lender. Item 2. Management’s Discussion and Analysis or Plan of Operation.
Item 3. Controls and Procedures
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
REGISTRANT: EBS BUILDING, L.L.C.
By: FTI Consulting, Inc., as Manager By: /s/ Keith F. Cooper Signature
Keith F. Cooper, Senior Managing Director
