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 June 30, 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, One Atlantic Center, 1201 W. Peachtree St., Suite 500, Atlanta, GA 30309 |
| (Address of Principal Executive Offices) |
| (404) 460-6259 |
| (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, 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 primary and fully 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 2004. 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 November 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 June 30, 2004, the Company had outstanding borrowings of $14,625,786 under the Line of Credit. During the forthcoming twelve months of operations, EBS Building, L.L.C. (the “Company”), intends to implement a wind down plan to pursue the distribution of the proceeds from the sale of the building located at 501 North Broadway, St. Louis, Missouri (the “Building”), to the existing shareholders of the Company. On June 17, 2004, the Company entered into a Purchase and Sale Agreement (“Purchase Agreement”) with Triple Net Properties, LLC (“Triple Net”), for the sale of the Building to Triple Net for $37,000,000, subject to certain adjustments and terms and conditions. The sale of the Building closed on August 6, 2004 (the “Sale”). Upon the Sale, commissions and the reimbursement of certain expenses, in the amount of $690,250, were paid to Collier Turley Martin Tucker, Inc. (“Colliers”), Secured Capital Corp. (“SCC”) and Heitman Capital Management, LLC (“Heitman”). Certain proration and adjustments, in the amount of $738,825, were made at the closing for security deposits, tenant improvements, rent adjustments, prepaid expenses and unpaid expenses as of the date of closing. In addition, other closing costs, in the amount of $62,227, were paid in connection with attorney’s fees, recording fees and escrow charges. The proceeds after all adjustments and fees was $35,508,698. As of August 10, 2004, the outstanding principal and interest under the Commerce Bank, N.A. (“Commerce”) Credit Facility in the amount of $14,655,646 was paid with the proceeds from the Sale. Accordingly, the net proceeds resulting from the Sale was $20,853,052. The Company entered into a new exclusive listing agreement (the “Subsequent Marketing Listing Agreement”), effective March 4, 2004, with Colliers, which granted Colliers the exclusive right to sell the Building. The terms of the Subsequent Marketing Listing Agreement which expired on August 1, 2004, provided that upon the Sale, 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 SCC, which granted SCC the right to market the Building to investors on a national basis. The term of the Advisory Agreement expired on August 1, 2004. Upon the Sale, 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 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 will be 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. On May 28, 2004, the Company entered into a Note, Deed of Trust and Loan Document Modification and Extension Agreement (“Extension Agreement”) with Commerce to extend the maturity date of its credit facility from May 31, 2004 to November 30, 2004. 1Defined as the Gross Sales Price received by the Company less an allowance provided to the buyer for roof repair or replacement. During the six months ended June 30, 2004, the Company’s rental income increased by 4.4% versus the first six months of the prior year, from $3,103,626 during the first half of 2003 to $3,239,077 during the first half of 2004. This increase is primarily driven by the commencement of the Federal Reserve rental payments in November 2003 and additional revenue from the expansion of rental space under the lease agreement with Baird, Kurtz & Dobson. Other income decreased by $338,606 or 51.7% over prior year for the six months ending June 2004. This decrease in other income is due to the one time termination fee related to the lease with Banker’s Trust that was included in other income in the prior year. The Company’s total expenses for the first six months of 2004 declined by $115,987 or 3.9% versus the prior year. This decline was mainly due to a decline in utility expenses, interest expense and other operating expenses. Utility expenses declined by $49,097, or 14.8%, for the first six months of 2004 versus the prior year. This decline is driven by energy efficiencies achieved after the chillers were rebuilt and through energy management measures put in place by Colliers. Interest expenses declined by 30.6% over the prior year from $273,662 in the first half of 2003 to $190,054 in the first half of 2004. This decrease was a result of lower variable interest rates on the Credit Facility compared to the prior year. Other operating expenses declined by 76.2% from $219,607 for the six months ended June 30, 2003 to $52,282 for the six months ended June 30, 2004. This decrease was primarily due to an insurance refund received in the second quarter of 2004, which reflected the unearned portion of the 2003 insurance policy that been put in place by Insignia, the former property manager. The total refund received was $89,704. In addition, insurance expenses have declined due to the negotiation of more favorable insurance rates by Colliers. Professional fees and maintenance expenses experienced the largest increase over the prior year. Professional fees increased by 7.9% from $292,579 in the first half of 2003 to $315,693 in the first half of 2004. This was primarily driven by higher legal fees from an increase in leasing and marketing activity in the first half of 2004. Maintenance expenses increased from $468,585 for the six months ended June 30, 2003 to $629,833 for the same period in 2004 due to the deferral of various maintenance projects in the first half of 2003 into later quarters of the year. As of June 30, 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-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) 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 to the Issuer's Registration Statement on Form 10-KSB filed on March 30, 2004, Exhibit 10.34. 10.35: Advisory Agreement by and between Colliers Turley Martin Tucker, Inc. and Secured Capital Corp., dated March 4, 2004 incorporated by reference to the Issuer's Registration Statement on Form 10-KSB filed on March 30, 2004, Exhibit 10.35. 10.36: Note, Deed of Trust and Loan Document Modification and Extension Agreement by and between EBS Building, L.L.C. and Commerce Bank, N.A., dated as of May 28, 2004. 10.37: Purchase and Sale Agreement by and between EBS Building, L.L.C. and Triple Net Properties, LLC, dated as of June 17, 2004. 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 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: August 13, 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 to the Issuer's Registration Statement on Form 10-KSB filed on March 30, 2004, Exhibit 10.34. 10.35: Advisory Agreement by and between Colliers Turley Martin Tucker, Inc. and Secured Capital Corp., dated March 4, 2004 incorporated by reference to the Issuer's Registration Statement on Form 10-KSB filed on March 30, 2004, Exhibit 10.35. 10.36: Note, Deed of Trust and Loan Document Modification and Extension Agreement by and between EBS Building, L.L.C. and Commerce Bank, N.A., dated as of May 28, 2004. 10.37: Purchase and Sale Agreement by and between EBS Building, L.L.C. and Triple Net Properties, LLC, dated as of June 17, 2004. 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 June 30, 2004
(unaudited) December 31, 2003 Assets
Rental property, net $ 24,473,147 $ 25,165,781 Cash - operating 1,796,684 759,471 Security deposit escrow 10,475 10,454 Tax and insurance escrow 172,537 169,442 Rents receivable 1,360,590 1,247,957 Prepaid expenses 103,386 35,059 Lease commissions, net 1,797,190 1,895,851 Loan costs, net – 73,491 Deposits 202 202 Total assets $ 29,714,211 $ 29,357,708 Liabilities Note payable $ 14,625,786 $ 14,891,507 Accounts payable – 459,508 Accrued expenses 374,162 121,916 Tenant security deposits/Prepaid rent 103,688 9,476 Total liabilities 15,103,636 15,482,407 Members' equity: Membership Units (Class A - 10,000,000 authorized, issued and outstanding at June 30, 2004 and December 31, 2003) – – Paid-in capital 19,810,522 19,810,522 Retained earnings (deficit) (5,199,947 ) (5,935,221 ) Total members' equity 14,610,575 13,875,301 Total liabilities and members' equity $ 29,714,211 $ 29,357,708 EBS BUILDING, L.L.C.
Statements of Operations For the 3 months ended For the 6 months ended June 30, 2004
(unaudited) June 30, 2003
(unaudited) June 30 2004
(unaudited) June 30, 2003
(unaudited) Income:
Rent $ 1,665,628 $ 1,531,724 $ 3,239,077 $ 3,103,626 Other 154,843 123,774 316,631 655,237 Total income 1,820,471 1,655,498 3,555,708 3,758,863 Expenses: Maintenance 358,703 232,311 629,833 468,585 Professional fees 175,094 178,872 315,693 292,579 Utilities 130,024 160,174 282,704 331,801 General and administrative 115,011 97,322 263,461 250,383 Depreciation and amortization 431,671 449,403 888,407 898,806 Real estate taxes 99,000 100,999 198,000 200,998 Interest expense 88,610 133,814 190,054 273,662 Other operating expenses (17,809 ) 116,491 52,282 219,607 Total expenses 1,380,304 1,469,386 2,820,434 2,936,421 Net Income $ 440,167 $ 186,112 $ 735,274 $ 822,442 Net income per Class A Unit - basic and diluted $ 0.04 $ 0.02 $ 0.07 $ 0.08 EBS BUILDING, L.L.C.
Statements of Changes in Members’ Equity
For the Six Months Ended June 30, 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) – – 735,274 735,274 Balance, June 30, 2004 (unaudited) 10,000,000 $19,810,522 $(5,199,947 ) $14,610,575 EBS BUILDING, L.L.C.
Statements of Cash Flows For the 6
months ended
June 30, 2004
(unaudited) For the 6
months ended
June 30, 2003
(unaudited) Cash flows from operating activities:
Net income $ 735,274 $ 822,442 Reconciliation of net income to cash flows provided by operating activities: Depreciation and amortization 888,407 898,806 Changes in operating assets and liabilities: (Increase) in escrows, rents receivable, prepaid expenses and deposits (139,077 ) (287,271 ) Increase/(decrease) in liabilities, excluding note payable (113,050 ) 56,309 Cash flows provided by operating activities 1,371,554 1,490,286 Cash flows from investing activities: Payments for lease commissions (50,006 ) (10,566 ) Additions to rental property (18,614 ) (458,903 ) Cash flows used in investing activities (68,620 ) (469,469 ) Cash flows from financing activities: Payment on note payable (265,721 ) – Cash flows used by financing activities (265,721 ) – Net increase in cash 1,037,213 1,020,817 Cash, beginning of period 759,471 1,138,043 Cash, end of period $ 1,796,684 $ 2,158,860 EBS BUILDING, L.L.C.
Notes to Financial Statements (unaudited)
June 30, 2004 and December 31, 20031. 2. For the 3 Months Ended For the 6 Months Ended June 30, 2004
(unaudited) June 30, 2003
(unaudited) June 30, 2004
(unaudited) June 30, 2003
(unaudited) Numerator: Net Earnings - Basic and Diluted $ 440,167 $ 186,112 $ 735,274 $ 822,442 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 per Unit $ 0.04 $ 0.02 $ 0.07 $ 0.08 3. June 30, 2004
(unaudited) December 31, 2003 Land $ 2,250,520 $ 2,250,520 Building 17,765,629 17,765,629 Building Improvements 1,477,475 1,507,154 Tenant Improvements 8,806,810 8,806,810 Construction in progress 991,056 942,763 31,291,490 31,272,876 Less Accumulated Depreciation 6,818,343 6,107,095 $24,473,147 $25,165,781 The building and building improvements are depreciated using the straight-line method over their estimated useful life of 38 years. Tenant improvements are depreciated over the term of the tenant’s lease. 4. 5. 6. The Line of Credit had a maturity date of May 31, 2004, when all of the remaining outstanding principal balance and interest was due and payable. On May 28, 2004, the Company entered into a Note, Deed of Trust and Loan Document Modification and Extension Agreement (“Extension Agreement”) with Commerce to extend the maturity date of its line of credit from May 31, 2004 to November 30, 2004. The Company recently completed the sale of the Building on August 6, 2004 to Triple Net Properties, LLC (“Triple Net”) pursuant to the Purchase and Sale Agreement between Triple Net and EBS Building, L.L.C. dated June 17, 2004. All outstanding borrowings and interest under the line of credit were repaid as of August 10, 2004, with the net proceeds from the sale of the Building. 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.
SIGNATURES
REGISTRANT: EBS BUILDING, L.L.C.
By: FTI Consulting, Inc., as Manager By: /s/ Keith F. Cooper Keith F. Cooper, Senior Managing Director