SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 12, 1999
AmeriVest Properties Inc.
-------------------------
(Exact name of registrant as specified in its charter)
Maryland 1-14462 84-1240264
-------- ------- ----------
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
3333 South Wadsworth Blvd., Suite D-216, Lakewood, Colorado 80227
-----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 980-1880
Item 2. Acquisition or Disposition of Assets
- --------------------------------------------
On August 12, 1999, Registrant completed the acquisition of three office
buildings (the "Acquired Buildings") in the State of Indiana. The Acquired
Buildings contain an aggregate of approximately 95,836 square feet. The
aggregate purchase price for the Acquired Buildings was $7,944,000, which was
paid by assuming approximately $5,255,000 of existing debt (the "Debt") and
$116,400 of related escrow balances on the properties and issuing approximately
541,600 shares of Registrant's common stock at the rate of $4.75 per share. In
conjunction with the assumption of the Debt, Registrant also assumed the
obligations and liabilities of the original guarantors of the Debt.
The Acquired Buildings were purchased from Sheridan Realty Partners, L.P.
("Sheridan"), a Delaware limited partnership. The purchase price of the Acquired
Buildings was determined through negotiations between Registrant and Sheridan.
As required pursuant to the terms of the Purchase And Sale Agreement
between Registrant and Sheridan regarding the acquisition by Registrant of the
Acquired Buildings, Registrant has appointed William T. Atkins and Charles K.
Knight to Registrant's Board Of Directors.
Mr. Atkins is the President and a 16.5% owner of Sheridan Realty Corp.
("Sheridan Realty"), which is the general partner of Sheridan. Sheridan Realty
holds a 1% interest in Sheridan as the general partner, and an additional
3.1335% interest as a limited partner. In connection with the acquisition of the
Acquired Buildings, Mr. Atkins received approximately 33,000 of the shares of
common stock paid by Registrant as a portion of the purchase price. A trust
company for which Mr. Atkins serves as a director serves as trustee for trusts
that received an aggregate of approximately 76,900 additional shares of common
stock. Mr. Atkins has no beneficial interest in any shares held by the trust
company. Mr. Knight did not receive any shares of common stock as a result of
the acquisition.
Registrant has hired Sheridan Development, LLC ("Sheridan Development") to
manage the Acquired Buildings for a one-year term commencing on July 1, 1999.
During that term, Sheridan Development is responsible for all aspects of the
management and operation of the Acquired Buildings and coordinating the leasing
of the Acquired Buildings. In exchange, Registrant will pay a management fee
equal to 5% of the gross monthly rental income received from the Acquired
Buildings. Mr. Atkins is the co- manager, President and a 25.05% owner and Mr.
Knight is a Vice President and 9.9% owner of Sheridan Development.
Other than as described in this Item 2, there are no material relationships
between Sheridan and any of Registrant, Registrant's directors or officers, or
associates of Registrant's directors or officers.
Item 5. Other Events.
- ---------------------
Press Release. The press release of Registrant dated August 12, 1999, which
is filed as Exhibit 99.1 to this Form 8-K, is incorporated into this Item 5 by
this reference.
2
Item 7. Financial Statements And Exhibits.
- ------------------------------------------
(a) Financial Statements Of Business Acquired.
KEYSTONE OFFICE PARK
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1998
TOGETHER WITH REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Management of
Keystone Office Park:
We have audited the statement of revenue and certain expenses of Keystone Office
Park for the year ended December 31, 1998. This financial statement is the
responsibility of the Property's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 financial statement presentation.
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 is not intended to be a complete presentation of the Property's
revenue and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenue and certain expenses of Keystone Office Park
for the year ended December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
-----------------------
Arthur Andersen LLP
Denver, Colorado,
February 25, 1999.
4
KEYSTONE OFFICE PARK
--------------------
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1998
1998
----
REVENUE:
Rental revenue (Note 2) $1,440,937
Other revenue 3,827
----------
Total revenue 1,444,764
----------
CERTAIN EXPENSES:
Repairs and maintenance 215,745
Utilities 127,466
Property taxes 119,774
Property management fees 71,942
Operating services 44,525
Insurance 16,663
----------
Total certain expenses 596,115
----------
EXCESS REVENUE OVER CERTAIN EXPENSES $ 848,649
==========
The accompanying notes are an integral
part of this financial statement.
5
KEYSTONE OFFICE PARK
--------------------
NOTES TO THE STATEMENT OF REVENUE
AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1998
(1) BASIS OF PRESENTATION
- -------------------------
The statement of revenue and certain expenses reflects the operations of
Keystone Office Park (the "Property"), located in Indianapolis, Indiana.
The Property is expected to be acquired by AmeriVest Properties, Inc. (the
"Company") from Sheridan Realty Partners, L.P. ("Sheridan") in July 1999. The
Property has an aggregate net rentable area of approximately 95,900 square feet
(97% leased as of December 31, 1998). This statement of revenue and certain
expenses is prepared pursuant to the rules and regulations of the Securities and
Exchange Commission.
The accounting records of the Property are maintained on the accrual basis. The
accompanying financial statements exclude certain expenses such as interest,
depreciation and amortization, professional fees, and other costs not directly
related to the future operations of the Property.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts revenue and expenses during the reporting period.
The ultimate results could differ from those estimates.
(2) OPERATING LEASES
- --------------------
Rental revenue presented for the year ended December 31, 1998, is recorded in
accordance with generally accepted accounting principles.
6
The Property is leased to tenants under operating leases with expiration dates
extending to the year 2003. Future minimum rentals under noncancellable
operating leases, excluding tenant reimbursements of operating expenses as of
December 31, 1998, are as follows:
1999 $1,269,789
2000 974,534
2001 602,438
2002 170,116
2003 88,259
----------
$3,105,136
==========
One tenant, in the insurance industry, who occupies 21% of the total rentable
square feet of Keystone, was responsible for approximately 25% of the rental
revenue for the year ended December 31, 1998, and is responsible for
approximately 23% of the total future minimum rentals in the above schedule.
Leases also include provisions requiring tenants to reimburse Sheridan for
operating expenses up to stipulated amounts.
(3) RELATED PARTY TRANSACTIONS
- ------------------------------
During 1998, the Property engaged a related party to perform activities related
to property management and certain repairs and maintenance. Amounts totaling
$119,456 were incurred by this related party and have been expensed in the
statement of revenue and certain expenses.
7
KEYSTONE OFFICE PARK
STATEMENT OF REVENUE AND CERTAIN EXPENSES
THREE MONTHS ENDED MARCH 31, 1999
(Unaudited)
REAL ESTATE OPERATING REVENUE
Rental Revenue $356,067
--------
CERTAIN OPERATING EXPENSES
Property operating expenses 110,019
Real estate taxes 29,616
Management fees 17,803
--------
157,438
--------
EXCESS OF REVENUE OVER CERTAIN
EXPENSES $198,629
========
8
(b) Pro Forma Financial Information.
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
PRO FORMA FINANCIAL INFORMATION
The accompanying pro forma consolidated balance sheet presents the historical
financial information of AmeriVest Properties Inc. and Subsidiaries (AmeriVest)
as of March 31, 1999, as adjusted for the acquisition of the Keystone Office
Buildings by AmeriVest, pursuant to a purchase and sale agreement entered into
April 26, 1999.
The accompanying pro forma consolidated statements of operations for the three
months ended March 31, 1999 and the year ended December 31, 1998 combine the
historical financial information of AmeriVest with the historical real estate
operating revenues and expenses of the Keystone Office Buildings as if the
acquisition had occurred at the beginning of the periods presented.
The pro forma consolidated financial statements have been prepared by AmeriVest
management based upon the historical financial statements of AmeriVest and the
Keystone Office Buildings. 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 should be read in conjunction with the historical
financial statements of AmeriVest for the year ended December 31, 1998 included
in AmeriVest's Form 10-KSB filed for the year ended December 31, 1998.
9
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(Unaudited)
AmeriVest Pro Forma Pro Forma
(Historical) Adjustments Combined
------------ ----------- --------
ASSETS
Investment in Real Estate
Land $ 4,745,754 $ 1,828,000 (a) $ 6,573,754
Building and improvements 22,381,607 6,156,000 (a) 28,537,607
Furniture, fixtures and equipment 291,651 -- 291,651
Tenant improvements 553,982 -- 553,982
Less accumulated depreciation and amortization (6,068,732) -- (6,068,732)
------------ ------------ ------------
Net Investment in Real Estate 21,904,262 7,984,000 29,888,262
Cash and cash equivalents 241,256 (40,000)(d) 207,256
6,000 (e)
Tenant accounts receivable 66,047 -- 66,047
Deferred financing costs, net 612,330 -- 612,330
Prepaid expenses and other assets 423,778 -- 423,778
------------ ------------ ------------
Total Assets $ 23,247,673 $ 7,950,000 $ 31,197,673
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Mortgage loans and notes payable $ 18,791,093 $ 5,255,000 (b) $ 24,046,093
Accounts payable and accrued expenses 141,301 6,000 (e) 147,301
Accrued interest 29,252 -- 29,252
Accrued real estate taxes 273,719 116,433 (f) 390,152
Prepaid rents and security deposits 290,325 -- 290,325
Dividends payable 199,107 -- 199,107
------------ ------------ ------------
Total Liabilities 19,724,797 5,377,433 25,102,230
------------ ------------ ------------
STOCKHOLDERS' EQUITY
Common stock 1,659 541 (c) 2,220
Capital in excess of par value 5,607,725 2,572,026 (c) 8,179,751
Distributions in excess of accumulated
earnings (2,086,508) -- (2,086,508)
------------ ------------ ------------
Total Stockholders' Equity 3,522,876 2,572,567 6,095,443
------------ ------------ ------------
$ 23,247,673 $ 7,950,000 $ 31,197,673
============ ============ ============
See notes to the pro forma consolidated financial statements.
10
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
(Unaudited)
Historical
Keystone Office Pro Forma Pro Forma
AmeriVest Buildings Adjustments Combined
--------- --------- ----------- --------
REAL ESTATE OPERATING REVENUE
Rental Revenue
Commercial properties $ 1,001,102 $ 356,067 $ -- $ 1,357,169
Storage properties 327,702 -- -- 327,702
----------- ----------- ----------- -----------
1,328,804 356,067 -- 1,684,871
----------- ----------- ----------- -----------
REAL ESTATE OPERATING EXPENSES
Property Operating Expenses
Operating expenses 280,751 110,019 -- 390,770
Real estate taxes 139,645 29,616 -- 169,261
Management fees 22,098 17,803 -- 39,901
General and administrative 207,208 -- -- 207,208
Interest 363,564 -- 105,700 (h) 469,264
Depreciation and amortization 243,781 -- 38,750 (g) 282,531
----------- ----------- ----------- -----------
1,257,047 157,438 144,450 1,558,935
----------- ----------- ----------- -----------
NET INCOME $ 71,757 $ 198,629 $ (144,450) $ 125,936
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE $ 0.06
===========
NET INCOME PER COMMON SHARE -
ASSUMING DILUTION $ 0.06
===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 2,200,363
===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES ASSUMING DILUTION 2,204,113
===========
See notes to the pro forma consolidated financial statements.
11
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(Unaudited)
Historical
Keystone Office Pro Forma Pro Forma
AmeriVest Buildings Adjustments Combined
--------- --------- ----------- --------
REAL ESTATE OPERATING REVENUE
Rental Revenue
Commercial properties $ 2,365,629 $ 1,444,764 $ -- $ 3,810,393
Storage properties 1,450,540 -- -- 1,450,540
----------- ----------- ----------- -----------
3,816,169 1,444,764 -- 5,260,933
----------- ----------- ----------- -----------
REAL ESTATE OPERATING EXPENSES
Property Operating Expenses
Operating expenses 955,796 404,399 -- 1,360,195
Real estate taxes 432,863 119,774 -- 552,637
Management fees 181,649 71,942 -- 253,591
General and administrative 458,223 -- -- 458,223
Interest 1,036,387 -- 426,500 (h) 1,462,887
Expenses associated with debt refinancing 321,178 -- -- 321,178
Depreciation and amortization 751,592 -- 155,000 (g) 906,592
----------- ----------- ----------- -----------
4,137,688 596,115 581,500 5,315,303
----------- ----------- ----------- -----------
OTHER INCOME
Interest income 4,113 -- -- 4,113
----------- ----------- ----------- -----------
NET (LOSS) INCOME $ (317,406) $ 848,649 $ (581,500) $ (50,257)
=========== =========== =========== ===========
NET (LOSS) PER COMMON SHARE -
Basic and Diluted $ (.02)
===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -
Basic and Diluted
2,079,996
===========
See notes to the pro forma consolidated financial statements.
12
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 the Keystone Office Buildings by
AmeriVest.
The accompanying pro forma consolidated balance sheet as of March 31, 1999
has been prepared to give effect to the acquisition of the Keystone Office
Buildings as if the acquisition occurred on March 31, 1999. The
accompanying pro forma consolidated statements of operations combine the
historical operations of AmeriVest for the three months ended March 31,
1999 and the year ended December 31, 1998 with the historical real estate
operating revenues and expenses of the Keystone Office Buildings for the
three months ended March 31, 1999 and the year ended December 31, 1998,
respectfully, and are presented as if the acquisition had occurred at the
beginning of each of the periods presented.
NOTE 2 - PRO FORMA ADJUSTMENTS
The unaudited pro forma consolidated financial statements reflect the
following pro forma adjustments:
a) Purchase price of Keystone Office Buildings.
b) Increase in mortgage loan related to debt assumed by AmeriVest for
acquisition of Keystone Office Buildings, $4,730,000 with interest at
8% and $525,000 with interest at 8.63%.
c) Issuance of 541,593 shares of common stock, valued at $4.75 per share,
as partial consideration for acquisition of Keystone Office Buildings.
d) Cash paid for additional costs of acquisition.
e) Capital improvement reserve.
f) Real estate taxes.
g) Depreciation expense on Keystone Office Buildings to be recognized by
AmeriVest.
h) Interest expense to be recognized by AmeriVest related to mortgage
debt assumed in conjunction with the acquisition of the Keystone
Office Buildings.
NOTES 3 - (LOSS) INCOME PER SHARE
Pro forma (loss) income per common share for the months ended March 31,
1999 and the year ended December 31, 1998 is computed based on the weighted
average number of common shares outstanding during the periods, assuming
that the 541,593 shares issued in conjunction with the acquisition of the
Keystone Office Buildings were issued at the beginning of each of the
periods.
13
(c) Exhibits.
Exhibit Index
-------------
Exhibit
Number Description
- ------ -----------
10.1 Purchase And Sale Agreement dated April 26, 1999 between
Registrant and Sheridan Realty Partners, L.P. (Incorporated by
reference from Exhibit 10.1 to Registrant's Definitive Proxy
Statement filed with the Commission on May 27, 1999)
99.1 Press release dated August 12, 1999.
14
SIGNATURE
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 hereunto duly authorized.
Date: August 12, 1999 AMERIVEST PROPERTIES INC.
---------------
By: /s/ James F. Etter
----------------------
James F. Etter
President
15