1
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, 2000
[ ] Transition report under Section 13 or 15 (d) of the Exchange Act
For the transition period from to
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Commission file number: 000-24167
EBS Building, L.L.C.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 43-1794872
- -------------------------------------------- ----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
c/o PricewaterhouseCoopers, LLP, 800 Market Street, St. Louis, Missouri
63101-2695
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(Address of Principal Executive Offices)
(314)206-8500
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(Issuer's Telephone Number, Including Area Code)
N/A
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(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
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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
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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 September 30, 2000,
there were 10,000,000 Class A Membership Units outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
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2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
EBS BUILDING, L.L.C.
BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
SEPTEMBER 30, 2000 DECEMBER 31, 1999
(UNAUDITED)
ASSETS
Rental property (net) $21,878,637 $22,387,946
Cash - operating 82,663 520,774
Security deposit escrow 112,198 216,376
Tax and incurance escrow 320,409 82,244
Rents receivable 545,693 454,855
Prepaid expenses 63,222 20,810
Lease commissions (net) 1,002,016 1,024,593
Lease restructuring costs (net) - 8,500
Loan costs (net) 80,974 174,600
Other assets 202 202
------------------------ -------------------------
Total assets $24,086,014 $24,890,900
======================== =========================
LIABILITIES
Note payable $6,996,637 $6,833,512
Accounts payable 10,712 44,744
Accrued professional fees 131,285 63,068
Accrued utilities 102,142 74,955
Accrued salaries 29,522 3,916
Accrued property taxes 280,620 -
Accrued payable - other 25,078 79,719
Tenant security deposits 105,999 213,186
Prepaid rent 10 6,165
------------------------ -------------------------
Total liabilities 7,682,005 7,319,265
------------------------ -------------------------
MEMBERS' EQUITY:
Membership Units (Class A - 10,000,000 authorized,
issued and outstanding at September 30, 2000 and December
31, 1999) - -
Paid-in capital 19,810,522 19,810,522
Retained earnings (3,406,513) (2,238,887)
------------------------ -------------------------
Total members' equity 16,404,009 17,571,635
------------------------ -------------------------
Total liabilities and members' equity $ 24,086,014 $24,890,900
======================== =========================
The accompanying notes are an integral part of these financial statements.
3
EBS BUILDING, L.L.C.
STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED SEPTEMBER 30, 1999 AND 2000
FOR THE 3 MONTHS ENDED FOR THE 9 MONTHS ENDED
-------------------------------------- --------------------------------------
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999 SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
Income:
Rent $ 808,204 $ 1,429,489 $ 2,591,241 $ 3,276,027
Other 25,119 32,807 97,889 86,450
------------------ ----------------- ------------------ -----------------
Total income 833,323 1,462,296 2,689,130 3,362,477
------------------ ----------------- ------------------ -----------------
Expenses:
Maintenance 196,694 200,540 617,771 653,076
Professional fees 171,148 136,731 504,115 470,305
Utilities 210,262 228,002 494,199 595,169
General and administrative 244,835 43,232 545,392 761,584
Depreciation and amortization 252,446 507,740 766,159 1,178,964
Taxes (including real estate taxes) 93,540 121,879 280,620 365,636
Interest Expense 174,816 133,586 513,178 292,854
Other operating expenses 47,195 49,251 135,322 145,420
------------------ ----------------- ------------------ -----------------
Total expenses 1,390,936 1,420,961 3,856,756 4,463,008
------------------ ----------------- ------------------ -----------------
Net income/(loss) $ (557,613) $ 41,335 $ (1,167,626) $ (1,100,531)
================== ================= ================== =================
Net income/(loss) per Class A Unit - $ (0.06) $ 0.004 $ (0.12) $ (0.11)
primary
Net income/(loss) per Class A Unit - $ (0.06) $ 0.004 $ (0.12) $ (0.11)
fully diluted
The accompanying notes are an integral part of these financial statements.
4
EBS BUILDING, L.L.C.
STATEMENT OF CHANGES IN MEMBERS' EQUITY
FOR THE PERIOD ENDED SEPTEMBER 30, 2000
CLASS A CLASS B
MEMBERSHIP MEMBERSHIP PAID IN RETAINED
UNITS UNITS CAPITAL EARNINGS TOTAL
Balance, December 31, 1999 10,000,000 - $19,810,522 $ (2,238,887) $17,571,635
Units transferred (unaudited) - - - - -
Year to date loss (unaudited) - - - (1,167,626) (1,167,626)
---------------- -------------- -------------- --------------- ---------------
Balance, September 30, 2000
(unaudited) 10,000,000 - $19,810,522 $ (3,406,513) $16,404,009
================ ============== ============== =============== ===============
The accompanying notes are in integral part of these financial statements.
5
EBS BUILDING, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED SEPTEMBER 30, 1999 AND 2000
FOR THE 9 MONTHS FOR THE 9 MONTHS
ENDED ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 1999
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net loss $ (1,167,626) $ (1,100,531)
Reconciliation of net loss to cash flows
provided by operating activities:
Depreciation expense 766,159 1,178,964
Changes in operating assets and liabilities:
Increase in rents receivable, prepaid expenses
escrows and deposits (267,237) (977,973)
Increase in liabilities, excluding note payable 199,615 511,663
------------------ -----------------
Cash flows provided by/(used in) operating activities (469,089) (387,877)
------------------ -----------------
Cash flows from investing activities:
Additions to rental property (74,756) (3,332,122)
Payments for lease commissions (57,391) (221,149)
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Cash flows used in investing acivities (132,147) (3,553,271)
------------------ -----------------
Cash flows from financing activities:
Proceeds from note payable 163,125 4,010,017
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Cash flows provided by financing activities 163,125 4,010,017
------------------ -----------------
Net increase/(decrease) in cash (438,111) 68,869
Cash, beginning of period 520,774 512
------------------ -----------------
Cash, end of period $ 82,663 $ 69,381
================== =================
Interest Paid $ 513,178 $ 292,854
================== =================
The accompanying notes are an integral part of these financial statements.
6
EBS BUILDING, L.L.C.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2000
PAGE 5
1. 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, 1999 included in the Company's Annual Report on Form 10-KSB filed
on March 31, 2000.
2. The following table sets forth the computation of primary and fully
diluted earnings (loss) per unit for the periods ended:
For the 3 Months Ended For the 9 Months Ended
---------------------- ----------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
(unaudited) (unaudited) (unaudited) (unaudited)
Numerator:
Net Earnings/(Loss) - Primary and Diluted $ (557,613) $ 41,335 $ (1,167,626) $ (1,100,531)
============= ============ =============== ==============
Denominator:
Weighted Average Units Outstanding -
Primary 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
============= ============= =============== ==============
Primary Earnings/(Loss) per Unit $ (0.06) $ 0.004 $ (0.12) $ (0.11)
============= ============= =============== ==============
Diluted Earnings/(Loss) per Unit $ (0.06) $ 0.004 $ (0.12) $ (0.11)
============= ============= =============== ==============
3. Rental Property consists of the following:
September 30, 2000 December 31, 1999
(unaudited)
------------ ------------
Land $ 2,250,520 $ 2,250,520
Building 17,765,629 17,765,629
Building improvements 658,134 658,134
Tenant improvements 3,328,452 3,340,646
Construction in progress 109,247 22,298
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24,111,982 24,037,227
Less accumulated depreciation (2,233,345) (1,649,281)
------------ ------------
$ 21,878,637 $ 22,387,946
============ ============
The building and building improvements are depreciated using the
straight-line method over its estimated useful life of 38 and
39 years, respectively. Tenant improvements are depreciated over
the term of the tenant's lease.
4. 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.
5. On June 18, 1999, the Company entered into a $12,000,000 revolving line
of credit with FINPRO, L.L.C. (the "Line of Credit"). The Company
presently intends to use the Line of Credit for working capital needs
and tenant improvements. Borrowings under the Line of Credit bear
interest at an annual rate of LIBOR plus 3.5%. As of September 30,
2000, the Company had outstanding borrowings of $6,996,637 under the
Line of Credit. The Line of Credit has a maturity date of May 31,
2001.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
During the forthcoming twelve months of operations, 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 August 17, 2000, the Company filed a motion with the United States
Bankruptcy Court, District of Delaware to reopen the bankruptcy case of Edison
Brothers Stores, Inc. for the limited purpose of extending the term of the
Company (the "Bankruptcy Proceedings"). Section 1.4 of the Company's Members
Agreement limits the Company's existence to three years subject to extension(s)
approved by the Bankruptcy Court for good cause shown. Therefore, the Company's
existence was set to expire on September 26, 2000 unless extended by the
Bankruptcy Court. In its motion, the Company argued that the value of the
Building and the opportunity to maximize amounts to be distributed to the
Company's members would be best served by permitting the Company to remain a
going concern and offering the Building for sale at full, fair market value. On
September 12, 2000, the Bankruptcy Court granted the Company's motion to extend
the existence of the Company for an additional two-year term.
As of September 30, 2000, the Building had an occupancy rate of 45%.
Edison Brothers currently leases 5,000 square feet of rentable space on a
month-to-month basis. Subsequent to the end of the current fiscal quarter, the
Company entered into a five-year lease for 35,005 square feet or approximately
8% of total rentable square footage. Upon commencement of this lease on February
1, 2001, the Building will have an occupancy rate of 53%. The Company continues
to actively market the Building for new tenant leasing agreements in order to
realize a higher market value.
During the three months ended September 30, 2000, the Company's rental
income decreased by 43.5% over the third quarter of the prior year, from
$1,429,489 during the third quarter of 1999 to $808,204 during the third quarter
of 2000. Such decrease was attributed to the reduction during the fourth quarter
of 1999 in the leased spaced occupied by Edison Brothers Stores, Inc. The
Company's total expenses decreased by 2.1% over the third quarter of the prior
year. Total operating expenses did not decline at the same rate as income during
the third quarter due to additional professional fees incurred in finalizing
leasing agreements and an increase in interest expense. In addition, the Company
recorded certain annual and semi-annual fees associated with its line of credit
during the third quarter of 2000. Such fees were recorded during the second
quarter of the prior year. Property taxes accrued during the third quarter of
2000 declined by 23.3% as compared to the prior year as the result of a
reassessment of the tax liability at the end of 1999. In addition, depreciation
and amortization expense declined by 50.3% during the third quarter of 2000 as
compared to the prior year. Such expense included the amortization of lease
restructuring costs related to the Edison Brothers Lease during 1999 that were
not incurred in 2000.
8
During June 1999, the Company entered into a $12,000,000 revolving line
of credit with FinPro, L.L.C. for tenant improvement and to cover any
shortfalls in cash flows (the "Line of Credit"). The Line of Credit has a
maturity date of May 31, 2001. The balance outstanding under the Line of Credit
as of September 30, 2000 was $6,996,637. Such funds were primarily used to
finance tenant improvement, lease commissions, and interest payments. In future
fiscal periods, funds may also need to be drawn to cover shortfalls in
cashflows from operations until the commencement of additional leases.
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.
Subsequent to the end of the current fiscal quarter, the Company plans
to enter into an Asset Management Agreement with Heitman Capital Management LLC
("Heitman"), effective as of September 26, 2000. This agreement will replace
the prior agreement with Heitman which expired in September of this year.
Pursuant to this agreement, Heitman will oversee the property management and
leasing activities relating to the Building, and will provide other consulting
and marketing services to the Company in connection with the continued
operation of the Building and the continued marketing of the Building for sale.
Heitman shall receive compensation for its services in the amount of $20,833.33
per month plus, if the Building is sold and the Company has not selected a
third party to market the Building for sale, then Heitmen shall receive a
commission equal to 1.5% of the gross sale price (1.25% if a buyer's broker is
involved) plus 5% of the portion of the sale price, if any, which exceeds
$42,000,000.
9
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
See the description of the Bankruptcy Proceedings provided under Management's
Discussion and Analysis of Plan of Operation, above.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(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.
10.22: Asset Management Agreement dated September 26, 2000
between EBS Building, L.L.C and Heitman Capital
Management LLC.
27: Financial Data Schedule.
(b) Reports on Form 8-K. The Issuer did not file any reports on Form 8-K
during the second fiscal quarter.
10
SIGNATURES
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.
REGISTRANT:
EBS Building, L.L.C.
By: PricewaterhouseCoopers LLP, as Manager
By: /s/ Keith F. Cooper
-----------------------------------
Keith F. Cooper, Partner
Date: November 14, 2000
11
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.
10.22: Asset Management Agreement dated September 26, 2000 between EBS
Building, L.L.C and Heitman Capital Management LLC.
27: Financial Data Schedule.