SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

 

ý    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

                For the quarterly period ended September 30, 2004.

 

or

 

o    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

                For the quarterly period ended September 30, 2004.

 

For the transition period from                                           to                                           

 

Commission file number 1-14462

 

AMERIVEST PROPERTIES INC.

(Exact name of registrant as specified in its charter)

 

Maryland

 

84-1240264

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

1780 South Bellaire Street Suite 100, Denver, Colorado

 

80222

(Address of principal executive offices)

 

(Zip Code)

 

 (303) 297-1800

(Registrant’s telephone number, including area code)   

 

                Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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   ý  No  o 

 

                Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes  ý  No  o                 

 

The number of shares of the registrant’s common stock outstanding as of November 3, 2004 was 23,940,919.  

 

 


 


Table of Contents

 

 

Page No.

Part I

Financial Information

 

 

 

 

Item 1.

Financial Statements:

 

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2004 (unaudited) and December 31, 2003

 

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2004 and 2003 (unaudited)

 

 

Condensed Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2004 (unaudited)

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2004 and 2003(unaudited)

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

 

 

 

Item 4.

Controls and Procedures

 

 

 

 

Part II

Other Information

 

 

 

 

Item 1.

Legal Proceedings

 

 

 

 

Item 2.

Changes in Securities and Use of Proceeds

 

 

 

 

Item 6.

Exhibits and Reports on Form 8-K

17

  i


 


AMERIVEST PROPERTIES INC.

 

Condensed Consolidated Balance Sheets

 

ASSETS

 

September 30,
2004
(unaudited)

 

December 31,
2003

 

Investment in real estate

 

 

 

 

 

Land

 

$

40,961,332

 

$

28,838,214

 

Buildings and improvements

 

244,540,282

 

184,519,890

 

Furniture, fixtures and equipment

 

1,273,552

 

799,730

 

Tenant improvements

 

13,030,911

 

6,144,440

 

Tenant leasing commissions

 

2,503,489

 

1,061,160

 

Intangible assets

 

21,125,721

 

11,468,120

 

Less: accumulated depreciation and amortization

 

(22,283,364

)

(12,134,025

)

Net investment in real estate

 

301,151,923

 

220,697,529

 

 

 

 

 

 

 

Cash and cash equivalents

 

2,563,176

 

1,477,585

 

Escrow deposits

 

7,129,571

 

5,778,427

 

Assets — held for sale

 

 

3,196,877

 

Investment in affiliate

 

 

1,364,032

 

Due from related party

 

 

3,371,526

 

Due from affiliate

 

 

262,347

 

Accounts receivable

 

666,333

 

296,377

 

Deferred rents receivable

 

2,786,040

 

1,401,455

 

Deferred financing costs, net

 

2,364,043

 

2,301,043

 

Prepaid expenses and other assets

 

1,105,200

 

353,264

 

Total assets

 

$

317,766,286

 

$

240,500,462

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Liabilities:

 

 

 

 

 

Mortgage loans and notes payable

 

$

202,312,186

 

$

158,237,661

 

Liabilities — held for sale

 

 

1,296,049

 

Accounts payable and accrued expenses

 

2,650,358

 

2,736,657

 

Accrued real estate taxes

 

4,317,366

 

3,169,183

 

Prepaid rents, deferred revenue and security deposits

 

3,681,158

 

2,694,335

 

Dividends payable

 

3,112,513

 

2,262,170

 

Total liabilities

 

216,073,581

 

170,396,055

 

Minority interest

 

1,671,092

 

 

Shareholders’ equity:

 

 

 

 

 

Preferred stock, $0.001par value

 

 

 

 

 

Authorized: 5,000,000 shares

 

 

 

 

 

Issued and outstanding: none

 

 

 

Common stock, $0.001 par value

 

 

 

 

 

Authorized: 75,000,000 shares

 

 

 

 

 

Issued and outstanding: 23,948,056 and 17,401,309 shares, respectively

 

23,948

 

17,401

 

Capital in excess of par value

 

132,342,983

 

91,706,371

 

Distributions in excess of accumulated earnings

 

(32,345,318

)

(21,619,365

)

Total shareholders’ equity

 

100,021,613

 

70,104,407

 

Total liabilities and shareholders’ equity

 

$

317,766,286

 

$

240,500,462

 

 

See accompanying notes to condensed consolidated financial statements.

 

1



 

AMERIVEST PROPERTIES INC.

 

Condensed Consolidated Statements of Operations

(unaudited)

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2004

 

2003

 

2004

 

2003

 

Real Estate Operating Revenue:

 

 

 

 

 

 

 

 

 

Rental revenues

 

$

11,435,128

 

$

6,895,235

 

$

32,431,672

 

$

20,124,585

 

 

 

 

 

 

 

 

 

 

 

Real Estate Operating Expenses:

 

 

 

 

 

 

 

 

 

Property operating expenses -

 

 

 

 

 

 

 

 

 

Operating expenses

 

3,381,971

 

1,929,966

 

9,293,204

 

5,139,566

 

Real estate taxes

 

1,393,953

 

832,051

 

4,109,575

 

2,346,828

 

Management fees

 

17,496

 

17,756

 

52,246

 

84,930

 

General and administrative expenses

 

1,105,901

 

777,579

 

3,022,715

 

2,357,432

 

Ground lease expense

 

160,542

 

 

482,225

 

 

Interest expense

 

3,069,512

 

1,809,933

 

8,622,861

 

5,316,903

 

Depreciation and amortization expense

 

3,740,880

 

1,636,449

 

9,963,605

 

4,378,968

 

Impairment of investment in real estate

 

 

 

 

1,465,932

 

Total operating expense

 

12,870,255

 

7,003,734

 

35,546,431

 

21,090,559

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

(1,435,127

)

(108,499

)

(3,114,759

)

(965,974

)

 

 

 

 

 

 

 

 

 

 

Other Income/(Loss):

 

 

 

 

 

 

 

 

 

Interest income

 

29,139

 

43,434

 

55,395

 

61,187

 

Equity in loss of affiliate

 

 

(14,537

)

(18,076

)

(38,451

)

Minority interest

 

104,094

 

-

 

165,212

 

-

 

Total other income

 

133,233

 

28,897

 

202,531

 

22,736

 

 

 

 

 

 

 

 

 

 

 

Loss before discontinued operations

 

(1,301,894

)

(79,602

)

(2,912,228

)

(943,238

)

 

 

 

 

 

 

 

 

 

 

Discontinued operations

 

 

56,134

 

687,735

 

214,683

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(1,301,894

)

$

(23,468

)

$

(2,224,493

)

$

(728,555

)

 

 

 

 

 

 

 

 

 

 

Loss per Share:

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.05

)

$

0.00

 

$

(0.10

)

$

(0.05

)

Diluted

 

$

(0.05

)

$

0.00

 

$

(0.10

)

$

(0.05

)

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

23,934,094

 

17,356,751

 

21,807,943

 

13,777,395

 

Diluted

 

23,934,094

 

17,356,751

 

21,807,943

 

13,777,395

 

 

See accompanying notes to condensed consolidated financial statements.

 

2



AMERIVEST PROPERTIES INC.

 

Condensed Consolidated Statement of Stockholders’ Equity

 

Nine Months Ended September 30, 2004

(unaudited)

 

 

 

 

 

 

Common Stock

 

Capital in Excess of Par Value

 

Distributions in Excess of Accumulated Earnings

 

Total

 

 

 

Shares

 

Amount

 

 

 

 

Balance at December 31, 2003

 

17,401,309

 

$

17,401

 

$

91,706,371

 

$

(21,619,365

)

$

70,104,407

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock:

 

 

 

 

 

 

 

 

 

 

 

Public offering, net of offering costs

 

6,325,000

 

6,325

 

39,889,104

 

 

39,895,429

 

Warrants exercised

 

98,062

 

98

 

88,952

 

 

89,050

 

Stock options exercised

 

75,753

 

76

 

386,322

 

 

386,398

 

Dividend Re-Investment Plan

 

5,570

 

6

 

38,549

 

 

38,555

 

Equity-based compensation

 

42,362

 

42

 

233,685

 

 

233,727

 

Dividends declared

 

 

 

 

(8,501,460

)

(8,501,460

)

Net loss

 

 

 

 

(2,224,493

)

(2,224,493

)

Balance at September 30, 2004

 

23,948,056

 

$

23,948

 

$

132,342,983

 

$

(32,345,318

)

$

100,021,613

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

3



AMERIVEST PROPERTIES INC.

 

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2004

 

2003

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

Net loss

 

$

(2,224,493

)

$

(728,555

)

Adjustments to reconcile net loss to net cash provided by

 

 

 

 

 

operating activities-

 

 

 

 

 

Depreciation and amortization expense

 

9,991,173

 

4,477,601

 

Impairment of investment in real estate

 

 

1,465,932

 

Gain on sale

 

(574,276

)

 

Amortization of deferred financing costs

 

541,199

 

399,448

 

Equity in loss of affiliate

 

18,076

 

38,451

 

Minority interest

 

(165,212

)

 

Equity-based compensation

 

233,727

 

187,650

 

Changes in assets and liabilities-

 

 

 

 

 

Accounts receivable

 

(352,137

)

(79,401

)

Deferred rents receivable

 

(1,510,687

)

(474,944

)

Prepaid expenses and other assets

 

(25,436

)

159,614

 

Accounts payable and accrued expenses

 

(227,581

)

590,272

 

Other accrued liabilities

 

1,996,953

 

1,349,500

 

Net cash flows provided by operating activities

 

7,701,306

 

7,385,568

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

Acquisitions of real estate, net

 

(59,983,705

)

(31,524,876

)

Capital expenditures

 

(3,538,766

)

(3,169,693

)

Tenant improvements

 

(6,253,622

)

(1,922,632

)

Leasing commissions

 

(1,303,538

)

(490,272

)

Deposits on pending real estate acquisitions

 

(726,500

)

(120,000

)

Proceeds from sale, net of closing costs

 

4,049,229

 

 

Ending cash balance of newly consolidated affiliate

 

92,732

 

 

Amounts (paid to)/received from affiliate

 

(76,384

)

24,629

 

Net cash flows used in investing activities

 

(67,740,554

)

(37,202,844

)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

Additions to mortgage loans and notes payable

 

93,227,462

 

91,500,000

 

Payments on mortgage loans and notes payable

 

(62,941,369

)

(88,555,915

)

Payment of deferred financing costs

 

(568,424

)

(1,326,409

)

Deposits for pending refinance

 

 

(132,600

)

Net proceeds from common stock offering

 

39,895,429

 

33,267,453

 

Net proceeds from exercising of options and warrants

 

475,448

 

1,488,271

 

Net change in escrow deposits

 

(1,351,144

)

(2,639,426

)

Dividends paid

 

(7,612,563

)

(4,929,020

)

Net cash flows provided by financing activities

 

61,124,839

 

28,672,354

 

 

 

 

 

 

 

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

1,085,591

 

(1,144,922

)

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

1,477,585

 

2,318,566

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

2,563,176

 

$

1,173,644

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

4


AMERIVEST PROPERTIES INC.

 

Condensed Consolidated Statements of Cash Flows (continued)

(unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2004

 

2003

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

Cash paid for interest

 

$

7,514,934

 

$

4,735,286

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

Mortgage loans assumed

 

$

12,492,383

 

$

24,750,000

 

Stock issued to the DRIP

 

$

38,555

 

$

264,614

 

 

 

SUPPLEMENTAL INFORMATION

Due to the Company’s adoption of Financial Accounting Standards Board (FASB) Interpretation (FIN) No. 46 (Revised), “Consolidation of Variable Interest Entities”, the assets and liabilities of Panorama Falls have been consolidated with those of the Company since March 31, 2004 (see Note 5 to the condensed consolidated financial statements).  The following table details the asset and liability amounts related to Panorama Falls property as of September 30, 2004:

 

Assets

 

 

 

Investment in real estate

 

 

 

Land

 

$

1,051,372

 

Buildings and improvements

 

5,420,757

 

Furniture, fixtures and equipment

 

29,426

 

Tenant improvements

 

965,752

 

Tenant leasing commissions

 

194,114

 

Less: accumulated depreciation and amortization

 

(957,977

)

Net investment in real estate

 

6,703,444

 

 

 

 

 

Cash and cash equivalents

 

30,413

 

Accounts receivable

 

7,349

 

Deferred rents receivable

 

137,618

 

Deferred financing costs, net

 

24,477

 

Total assets

 

$

6,903,301

 

 

 

 

 

Liabilities

 

 

 

Mortgage loans and notes payable

 

$

4,214,408

 

Accounts payable and accrued expenses

 

35,196

 

Accrued real estate taxes

 

108,522

 

Prepaid rents, deferred revenue and security deposits

 

73,581

 

Total liabilities

 

$

4,431,707

 

 

 

 

 

Minority interest

 

$

1,671,092

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

5


 

AMERIVEST PROPERTIES INC.

 

Notes to Condensed Consolidated Financial Statements

 

September 30, 2004

(unaudited)

 

1 — Organization

AmeriVest Properties Inc. (the Company) is incorporated under the laws of the State of Maryland and operates as a self-administered and self-managed real estate investment trust (REIT).  The Company primarily invests in and operates commercial office buildings in selective markets and leases the commercial office buildings to small and medium size tenants.  At September 30, 2004, the Company owned, through its wholly-owned subsidiaries, 29 office properties located in metropolitan Denver, Dallas, Phoenix and Indianapolis and several small cities in Texas.

 

2 — Interim Financial Statements

                The unaudited consolidated financial statements included herein were prepared from the records of the Company in accordance with accounting principles generally accepted in the United States of America and reflect all adjustments which are, in the opinion of management, necessary to provide a fair statement of the results of operations and financial position for the interim periods.  Such financial statements generally conform to the presentation reflected in the Company’s Form 10-KSB filed with the Securities and Exchange Commission for the year ended December 31, 2003.  The consolidated results of operations for the nine months ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.  These financial statements and notes therein should be read together with the financial statements and notes included in the Company’s Form 10-KSB for the year ended December 31, 2003.

 

                The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

                Certain prior period balances have been reclassified to conform to current period presentation.

 

3 — Equity-Based Compensation

The Company applies Accounting Principles Board (APB) Opinion No. 25 and related interpretations in accounting for its equity-based compensation.  Accordingly, the Company does not recognize compensation cost for options granted to employees whose exercise price is equal to or exceeds the fair value of the underlying stock as of the grant date and which qualify for fixed plan accounting.

 

Equity-based compensation issued to non-employees is accounted for based on the fair value of the equity instruments issued.  The measurement date is considered to be the issuance date, or if there are performance vesting provisions, when earned.

 

The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards (SFAS) No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure, an amendment of FASB Statement No. 123.”  Had compensation cost for the Company’s stock option plan been determined based on the fair value at the grant date consistent with the provisions of SFAS No. 148, the Company’s net loss and loss per share for the three and nine months ended September 30, 2004 and 2003 would have been changed to the pro forma amounts as indicated in the following table:

 

 

6



 

AMERIVEST PROPERTIES INC.

 

Notes to Condensed Consolidated Financial Statements — (continued)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2004

 

2003

 

2004

 

2003

 

Net loss — as reported

 

$

(1,301,894

)

$

(23,468

)

$

(2,224,493

)

$

(728,555

)

Plus: Recognized equity-based compensation

 

102,030

 

66,045

 

233,727

 

164,339

 

Less: Total equity-based compensation expense based on fair value

 

(123,943

)

(113,443

)

(330,486

)

(304,351

)

Net loss — pro forma

 

$

(1,323,807

)

$

(70,866

)

$

(2,321,252

)

$

(868,567

)

 

 

 

 

 

 

 

 

 

 

Loss per basic share — as reported

 

$

(0.05

)

$

0.00

 

$

(0.10

)

$

(0.05

)

Loss per diluted share — as reported

 

$

(0.05

)

$

0.00

 

$

(0.10

)

$

(0.05

)

 

 

 

 

 

 

 

 

 

 

Loss per basic share — pro forma

 

$

(0.06

)

$

0.00

 

$

(0.11

)

$

(0.06

)

Loss per diluted share — pro forma

 

$

(0.06

)

$

0.00

 

$

(0.11

)

$

(0.06

)

 

The fair value of each grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

 

 

 

2004

 

2003

 

Dividend yield

 

7.5

%

7.9

%

Volatility

 

27.0

%

27.0

%

Discount rate

 

2.7

%

2.9

%

Expected life (years)

 

5.0

 

4.6

 

 

4 — Transactions

Camelback Lakes acquisition

On March 16, 2004, the Company acquired the Camelback Lakes office complex located in Phoenix, Arizona.  The purchase price for Camelback Lakes was $31,980,000, which was paid with $21,000,000 from the $42,000,000 senior secured revolving line of credit with Fleet National Bank (the Secured Fleet Facility) and the balance in cash.

 

Texas Bank Buildings sale

On March 16, 2004, the Company sold its Texas Bank Buildings for $4,100,000.  The four properties are located in Clifton, Georgetown, Henderson and Mineral Wells, Texas.  The sale resulted in a gain of $574,276 which is included in discontinued operations on the accompanying consolidated statements of operations.  See Note 7 — Discontinued Operations for additional information.

 

Hackberry View acquisition

On May 7, 2004, the Company acquired the Hackberry View office property located in Irving, Texas.  The purchase price for Hackberry View was $16,800,000, which was paid with approximately $12,200,000 from the assumption of the existing first and second mortgage loans and the balance in cash.

 

Parkway Centre III acquisition

On September 10, 2004, the Company acquired the Parkway Centre III office property located in Plano, Texas.  The purchase price for Parkway Centre III was $23,400,000, which was paid with approximately $15,210,000 of mortgage debt, $2,700,000 in Section 1031 funds held in escrow from the sale of the Texas Bank Buildings and the balance in cash.

 

7



 

AMERIVEST PROPERTIES INC.

 

Notes to Condensed Consolidated Financial Statements — (continued)

 

Properties Under Contract

                During the quarter, the Company entered into a contract to acquire an office property in a submarket of Dallas.  The Company anticipates this transaction closing in the fourth quarter of 2004.

 

5 — Variable Interest Entity

                Effective March 31, 2004, the Company adopted FIN 46R and applied it to its investment in Panorama Falls.  The Company owns 20% of Panorama Falls as a tenant-in-common with the majority investor.  The Panorama Falls property is located in Englewood, Colorado.  The building has a carrying value of $6,700,000.  The Company financed the property through its $30,000,000 unsecured revolving line of credit with Fleet (the Unsecured Fleet Facility) (see Note 9 to the condensed consolidated financial statements for an update on the Unsecured Fleet Facility).   Panorama Falls is deemed to be a variable interest entity (VIE) as defined by FIN 46R.  In accordance with FIN 46R, the Company determined it is subject to the majority of the variability in the variable interests in the entity and has consolidated the assets and liabilities of Panorama Falls effective March 31, 2004 (see the note to the consolidated statements of cash flows for a detail of the assets and liabilities of Panorama Falls which have been consolidated).  With respect to the consolidated statements of operations, the investment was accounted for under the consolidation method of accounting beginning April 1, 2004 and under the equity method of accounting for prior periods.

 

6 — Common Stock Offering

                During March 2004, the Company completed an offering of 6,325,000 shares of common stock, including 825,000 shares to cover over-allotments, at a price of $6.75 per share.  The Company received approximately $39,895,000, net of underwriting commissions and expenses.  The proceeds were used to repay the outstanding balance on the Unsecured Fleet Facility and a portion of the outstanding balance on the Secured Fleet Facility.  The Company intends to use available amounts under these facilities to fund future property acquisitions and other working capital and cash needs of the business.

 

7 — Discontinued Operations

                On March 16, 2004, the Company sold its Texas Bank Buildings for $4,100,000.  The net cash proceeds of approximately $2,700,000 were being held in escrow and used to complete a tax deferred exchange under Section 1031 of the Internal Revenue Code on the Parkway Centre III acquisition on September 10, 2004.  In accordance with SFAS No. 144, the Company has classified the operations of these properties as discontinued operations for the three and nine months ended September 30, 2004 and 2003.  The following is a summary of the operating results of these properties:

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2004

 

2003

 

2004

 

2003

 

Rental revenue

 

$

 

$

269,089

 

$

272,003

 

$

801,984

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses -

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

120,522

 

82,141

 

308,215

 

Real estate taxes

 

 

19,923

 

16,373

 

60,549

 

Management fees

 

 

9,600

 

8,335

 

28,800

 

Interest expense

 

 

29,897

 

24,125

 

91,104

 

Depreciation and amortization expense

 

 

33,013

 

27,570

 

98,633

 

 

 

 

212,955

 

158,544

 

587,301

 

 

 

 

 

 

 

 

 

 

 

Gain on sale

 

 

 

574,276

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

 

$

56,134

 

$

687,735

 

$

214,683

 

 

 

8



 

AMERIVEST PROPERTIES INC.

 

Notes to Condensed Consolidated Financial Statements — (concluded)

 

8 — Loss Per Share

                There are no adjustments necessary to the basic weighted average common shares outstanding to arrive at the diluted weighted average common shares outstanding for the three and nine months ended September 30, 2004 and 2003 as the Company recognized a net loss and the impact would be anti-dilutive.

 

9 — Subsequent Events

                On October 20, 2004, KeyBank National Association (KeyBank) assumed the Company’s Unsecured Credit Facility.  The amended facility has a capacity of $40,000,000 and a maturity date of November 12, 2007.  In addition, the amended Unsecured Credit Facility has the option of a one-time increase to $50,000,000 available until December 31, 2005.   The amended facility has an interest rate of LIBOR plus 350 basis points or the Prime plus 275 basis points.  The Company paid a one-time commitment fee in October 2004 of $800,000.  The fee was capitalized and is being amortized into interest expense over the life of the loan agreement.

 

                On October 25, 2004, the Company acquired the land underlying its Greenhill Park office property for $14,500,000.  The Greenhill Park Building was subject to a ground lease with 80 years remaining on the term.  Prior to the acquisition, the Company accounted for the lease as an operating lease.

 

 

9



 

 

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

                The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto included in this Form 10-Q and elsewhere.

 

Forward-Looking Statements

Certain statements in this Form 10-Q that are not historical facts are “forward-looking statements” as that term is defined under the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are based on the Company’s current expectations, beliefs, assumptions, estimates and projections about the industry and markets in which the Company operates.  Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and variations of such words and similar expressions are intended to identify such forward-looking statements.  Information concerning expected investment balances, expected funding sources, planned investments, forecasted dates and revenue and expense growth assumptions are examples of forward-looking statements.  These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict and many of which are beyond the Company’s control.  Therefore, actual outcomes and results may differ materially from what is expressed, forecasted or implied in such forward-looking statements.  The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

 

The Company’s operating results depend primarily on income from its properties, which are substantially influenced by supply and demand for such properties, operating expense levels, property level operations and the pace and price at which the Company can develop, acquire or dispose of such properties.  Capital and credit market conditions, which affect the Company’s cost of capital, also influence operating results.  See the Company’s 2003 Form 10-KSB “Item 1. Description of Business” for a more complete discussion of risk factors that could impact the Company’s future financial performance.

 

Introduction

                AmeriVest is a REIT which owns and operates commercial office buildings in select markets catering to small and medium size businesses.  At September 30, 2004, we owned 29 properties totaling 2,628,044 square feet compared to 28 properties totaling 1,891,352 square feet at September 30, 2003.  We generate revenue primarily through the rental of office space at our properties.  The demand for our products is correlated, in general, to the national economy, and more specifically, to the demand for office space by small and medium size tenants in metropolitan Denver, Dallas, Phoenix and Indianapolis.

 

                Due to the sale of the Texas Bank Buildings, the operations of these properties, including the gain on sale, have been classified as discontinued operations for the periods presented in accordance with SFAS No. 144.

 

 

10



 

Results Of Operations

Comparison of the three months ended September 30, 2004 to September 30, 2003:

 

 

 

2004

 

2003

 

Change

 

REAL ESTATE OPERATING REVENUE

 

 

 

 

 

 

 

Rental revenue

 

$

11,435,128

 

$

6,895,235

 

$

4,539,893

 

 

 

 

 

 

 

 

 

REAL ESTATE OPERATING EXPENSES

 

 

 

 

 

 

 

Property operating expenses-

 

 

 

 

 

 

 

Operating expenses

 

3,381,971

 

1,929,966

 

1,452,005

 

Real estate taxes

 

1,393,953

 

832,051

 

561,902

 

Management fees

 

17,496

 

17,756

 

(260

)

General and administrative expenses

 

1,105,901

 

777,579

 

328,322

 

Ground rent expense

 

160,542

 

 

160,542

 

Interest expense

 

3,069,512

 

1,809,933

 

1,259,579

 

Depreciation and amortization expense

 

3,740,880

 

1,636,449

 

2,104,431

 

Total operating expense

 

12,870,255

 

7,003,734

 

5,866,521

 

 

 

 

 

 

 

 

 

LOSS FROM CONTINUING OPERATIONS

 

(1,435,127

)

(108,499

)

(1,326,628

)

 

 

 

 

 

 

 

 

OTHER INCOME/(LOSS)

 

 

 

 

 

 

 

Interest income

 

29,139

 

43,434

 

(14,295

)

Equity in loss of affiliate

 

 

(14,537

)

14,537

 

Minority interest

 

104,094

 

 

104,094

 

Total other income

 

133,233

 

28,897

 

104,336

 

 

 

 

 

 

 

 

 

LOSS BEFORE DISCONTINUED OPERATIONS

 

(1,301,894

)

(79,602

)

(1,222,292

)

 

 

 

 

 

 

 

 

DISCONTINUED OPERATIONS

 

 

56,134

 

(56,134

)

 

 

 

 

 

 

 

 

NET LOSS

 

$

(1,301,894

)

$

(23,468

)

$

(1,278,426

)

 

Rental revenue increased by $4,539,893, or 65.8%, from the third quarter of 2003 to the same period of 2004.  Approximately $2,582,800 of the increase is due to the inclusion of the operating results from the late-2003 acquisitions (Financial Plaza, Scottsdale Norte and Greenhill Park) and $2,004,400 is due to the inclusion of the 2004 acquisitions (Camelback Lakes and Hackberry View for a full quarter and Parkway Center III for a partial quarter).  Additionally, $147,000 of the increase is due to the inclusion of Panorama Falls due to the adoption of FIN 46R whereby its operations are consolidated with those of the Company beginning March 31, 2004.

 

                Property operating expenses increased by $2,013,647, or 72.4%, from the third quarter of 2003 to the same period of 2004.  Approximately $1,216,700 of the increase is due to the inclusion of the late-2003 acquisitions, $643,600 is due to the 2004 acquisitions and $105,350 is due to the consolidation of Panorama Falls.  The remaining increase of approximately $48,000, or 1.7%, was experienced in our existing portfolio (properties owned for the full quarter of both years).  The main components of the additional expense consisted of increases in property tax accruals, utilities and regional property management personnel.  The Company focuses on the control of operating expenses as a percent of revenue and as it continues to grow and gain scale in each of its markets, believes that it will be able to maintain or increase its operating margins.

 

                General and administrative expenses increased from $777,579, or 11.3% of revenue, for the third quarter of 2003 to $1,105,901, or 9.7% of revenue, for the same period in 2004.  Approximately $166,000 of the increase is related to accounting and consulting fees primarily related to the Company’s efforts in Sarbanes-Oxley compliance and the associated independent auditor’s review.  The Company anticipates recognizing in excess of $200,000 during the fourth quarter of 2004 related to Sarbanes-Oxley.  The remainder of the increase is primarily due to the addition of corporate personnel hired during the latter half of 2003 and the nine months ended September 30, 2004 to support the continued growth of the Company.

 

 

11



 

                The ground rent expense recognized in 2004 relates to the ground lease for Greenhill Park, acquired in December 2003.  On October 22, 2004, the Company acquired the land for $14,500,000 and therefore, no subsequent ground lease costs will be incurred.  Prior to the acquisition, the Company accounted for this lease as an operating lease.

 

                Interest expense increased by $1,259,579, or 69.6%, from the third quarter of 2003 to the same period of 2004.  This increase is due to the additional debt used to acquire the above-mentioned properties.  The average outstanding debt balance increased by approximately 76% from the third quarter of 2003 to the same period of 2004 and the weighted average interest rate on this debt was flat from 2003 to 2004.  The increase in interest expense is also attributable to the fees related to the Unsecured Fleet Facility.  This facility provides the Company with more flexibility and a readily available vehicle for financing acquisitions and other capital needs.  Additionally, the consolidation of Panorama Falls was attributable for $62,500 of the increase.

 

                The increase in depreciation and amortization expense of $2,104,431, or 129%, is due to the increase in depreciable assets resulting from the above-mentioned acquisitions and additional capital improvements, tenant improvements and leasing commissions for our current real estate investments.

 

                The minority interest component represents 80% of the net loss of Panorama Falls which is attributable to the majority shareholder.  The Company continues to own a 20% interest in the property.

 

                Included in discontinued operations are the operations of the Texas Bank Buildings which were sold on March 16, 2004.

 

Comparison of the nine months ended September 30, 2004 to September 30, 2003:

 

 

 

2004

 

2003

 

Change

 

REAL ESTATE OPERATING REVENUE

 

 

 

 

 

 

 

Rental revenue

 

$

32,431,672

 

$

20,124,585

 

$

12,307,087

 

 

 

 

 

 

 

 

 

REAL ESTATE OPERATING EXPENSES

 

 

 

 

 

 

 

Property operating expenses-

 

 

 

 

 

 

 

Operating expenses

 

9,293,204

 

5,139,566

 

4,153,638

 

Real estate taxes

 

4,109,575

 

2,346,828

 

1,762,747

 

Management fees

 

52,246

 

84,930

 

(32,684

)

General and administrative expenses

 

3,022,715

 

2,357,432

 

665,283

 

Ground rent expense

 

482,225

 

 

482,225

 

Interest expense

 

8,622,861

 

5,316,903

 

3,305,958

 

Depreciation and amortization expense

 

9,963,605

 

4,378,968

 

5,584,637

 

Impairment of investment in real estate

 

 

1,465,932

 

(1,465,932

)

Total operating expense

 

35,546,431

 

21,090,559

 

14,455,872

 

 

 

 

 

 

 

 

 

LOSS FROM CONTINUING OPERATIONS

 

(3,114,759

)

(965,974

)

(2,148,785

)

 

 

 

 

 

 

 

 

OTHER INCOME/(LOSS)

 

 

 

 

 

 

 

Interest income

 

55,395

 

61,187

 

(5,792

)

Equity in loss of affiliate

 

(18,076

)

(38,451

)

20,375

 

Minority interest

 

165,212

 

 

165,212

 

Total other income

 

202,531

 

22,736

 

179,795

 

 

 

 

 

 

 

 

 

LOSS BEFORE DISCONTINUED OPERATIONS

 

(2,912,228

)

(943,238

)

(1,968,990

)

 

 

 

 

 

 

 

 

DISCONTINUED OPERATIONS

 

687,735

 

214,683

 

473,052

 

 

 

 

 

 

 

 

 

NET LOSS

 

$

(2,224,493

)

$

(728,555

)

$

(1,495,938

)

 

 

12



 

Rental revenue for the nine months ended September 30 increased by $12,307,087 or 61.2%, from 2003 to 2004.  Approximately $8,195,800 of the increase is due to the inclusion of the operating results from the late-2003 acquisitions, $3,834,300 is due to the inclusion of the 2004 acquisitions and $369,800 is due to the consolidation of Panorama Falls.

 

                Property operating expenses for the nine months ended September 30 increased by $5,883,701 or 77.7%, from 2003 to 2004.  Approximately $3,782,100 of the increase is due to the inclusion of the late-2003 acquisitions, $1,252,400 is due to the 2004 acquisitions and $222,900 is due to the consolidation of Panorama Falls.  The remaining increase of approximately $626,000, or 8.3%, was experienced in our existing portfolio with the main components of the additional expense consisting of increases in property tax accruals, utilities and regional property management personnel.

 

                General and administrative expenses increased from $2,357,432, or 11.7% of revenue, for the nine months ended September 30, 2003 to $3,022,715, or 9.3% of revenue, for the same period in 2004.  Approximately $166,000 of the increase is related to accounting and consulting fees primarily related to the Company’s efforts in Sarbanes-Oxley compliance and the associated independent auditor’s review.  The Company anticipates recognizing in excess of $200,000 during the fourth quarter of 2004 related to Sarbanes-Oxley. The remainder of the increase is primarily due to the addition of corporate personnel hired during the latter half of 2003 and the nine months ended September 30, 2004 to support the continued growth of the Company.

 

 

                The ground rent expense recognized in 2004 relates to the ground lease for Greenhill Park, acquired in December 2003.  On October 22, 2004, the Company acquired the land for $14,500,000 and therefore, no subsequent ground lease costs will be incurred.  Prior to the acquisition, the Company accounted for this lease as an operating lease.

 

                Interest expense increased by $3,305,958, or 62%, from the nine months ended September 30, 2003 to the same period of 2004.  This increase is due to the additional debt used to acquire the above-mentioned properties.

 

                The increase in depreciation and amortization expense of $5,584,637, 127.5%, is due to the increase in depreciable assets resulting from acquisitions and additional capital improvements, tenant improvements and leasing commissions for our current real estate investments.

 

                The impairment charges recognized in 2003 related to two of the properties in the Texas State Building portfolio; no additional charges have been recorded in 2004.

 

                The minority interest component represents 80% of the net loss of Panorama Falls which is attributable to the majority shareholder.  The Company continues to own a 20% interest in the property.

 

                Included in discontinued operations are the operations of the Texas Bank Buildings.  These properties were sold on March 16, 2004 for $4,100,000.  This sale resulted in a gain of $574,276, which is reflected in the 2004 amount.

 

Liquidity and Capital Resources

Operating Activities

                Net cash flows provided by operations were approximately $7,701,000 for the nine months ended September 30, 2004.  This results primarily from the Company’s operating results adjusted for non-cash expenses and a general increase in our receivables in excess of the prior year period.  Cash flow from operations is the primary source to fund dividend payments, debt service and capital expenditures.

 

Investing Activities

                Net cash flows used in investing activities were approximately $67,741,000 for the nine months ended September 30, 2004, of which $59,984,000 was used to acquire Camelback Lakes, Hackberry View and Parkway Centre III, net of debt assumed.  The remainder is primarily composed of capital improvement, tenant improvement and leasing commission costs offset by the net proceeds from the sale of the Texas Bank Buildings of $4,049,000.

 

 

13



 

Financing Activities

Net cash flows provided by financing activities were approximately $61,125,000 for the nine months ended September 30, 2004.  Included in this amount is approximately $39,895,000 which represents the net proceeds from the March 2004 common stock offering; of this amount approximately $39,000,000 was immediately used to pay down the Company’s secured and unsecured credit facilities.  The Company subsequently recorded additions to mortgage loans and notes payable of approximately $61,500,000 related to Camelback Lakes, Hackberry View and Parkway Centre III properties.  The remainder of the change is primarily composed of scheduled principal payments on mortgage loans, dividend payments and payments into escrow accounts as required by certain lenders.

 

Future Sources of Capital

The Company receives base rent under non-cancelable tenant leases and most leases provide for additional rent based on increases in operating expenses.

 

The Company desires to acquire additional properties.  In order to do so, it will utilize current sources of debt financing and possibly incur additional debt and/or obtain additional equity capital.  The Company also intends to obtain credit facilities for short and long-term borrowing with commercial banks or other financial institutions.  The issuance of such securities or increase in debt to acquire additional properties, of which there is no assurance, could adversely affect the amount of cash available to pay dividends to stockholders.

 

At September 30, 2004, the Company has two credit facilities with Fleet National Bank.  At September 30, 2004, there was $20,650,000 outstanding with $21,350,000 available under the Secured Fleet Facility and there was $10,000,000 outstanding with $20,000,000 available under the Unsecured Fleet Facility.  In October 2004, the Company’s Unsecured Fleet Facility was assumed by KeyBank (Unsecured KeyBank Facility). The amended Unsecured KeyBank Facility has a total borrowing capacity of $40,000,000 and matures November 12, 2007.  Available amounts under the Secured and Unsecured Credit Facilities will be used to acquire and improve new and existing properties, as well as for working capital.

 

Future Uses of Capital, Contractual Commitments and Off-Balance Sheet Arrangements

                The following table details the contractual obligations for scheduled maturities of mortgage loans and notes payable at September 30, 2004.  The Company acquired the land underlying its Greenhill Park office property in October 2004, and accordingly, will not incur ground lease charges in subsequent months.

 

For the years ended December 31,

 

Mortgage Loans and Notes Payable

 

2004

 

$

741,421

 

2005

 

23,811,458

 

2006

 

17,416,022

 

2007 (1)

 

13,368,603

 

2008

 

38,171,976

 

Thereafter

 

108,802,706

 

Total

 

$

202,312,186

 

 


(1)                In October 2004, KeyBank National Association assumed the Company’s Unsecured Line of Credit.  The amended facility has a capacity of $40,000,000 and a maturity date of November 12, 2007.

 

Interest Rate Information

                As of September 30, 2004, approximately 85% of the total mortgage loans outstanding are fixed rate loans with a weighted-average interest rate of 6.2% and 15% are variable rate loans with a weighted-average interest rate of 5.0%.

 

 

14



 

Debt Covenants

Certain of the Company’s debt instruments contain covenants common to that type of facility or borrowing, including financial covenants establishing minimum debt service coverage and maximum leverage ratios.  The Company was in compliance with all financial covenants pertaining to its debt instruments during the three months and nine months ended September 30, 2004.

 

Critical Accounting Policies

The discussion and analysis of the Company’s financial condition and results of operations are based upon its condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.  The preparation of these financial statements require management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements.  Actual results may differ from these estimates under different assumptions or conditions.

 

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, which would potentially result in materially different results under different assumptions and conditions.  The Company believes that its critical accounting policies include those items described below.

 

Investment in Real Estate

Upon acquisition, the purchase price of a property is allocated to land, building and improvements and other intangible assets and associated liabilities as required by SFAS No. 141 “Business Combinations.”  The allocation to land is based on an estimate of its fair value based on all available information, including appraisals.  The allocation to other intangible assets represents the value associated with the in-place leases, including leasing commission, legal and other related costs.  Also required by SFAS No. 141 is the creation of an intangible asset or liability resulting from in-place leases being above or below the market rental rates on the date of acquisition.  This asset or liability is amortized over the life of the related in-place leases as an adjustment to revenue.

 

Investment in real estate is stated at cost.  Depreciation and amortization are computed on a straight-line basis over the estimated useful lives as follows:

 

Description

 

Estimated Useful Lives

 

Land

 

Not depreciated

 

Buildings and improvements

 

20 to 40 years

 

Furniture, fixtures and equipment

 

5 to 7 years

 

Tenant improvements, tenant leasing commissions and other intangible assets

 

Average term of related leases

 

 

Maintenance and repairs are expensed as incurred and improvements are capitalized.  The cost of assets sold or retired and the related accumulated depreciation and/or amortization are removed from the accounts and the resulting gain or loss is reflected in operations in the period in which such sale or retirement occurs.  Allocating the purchase price of a property to the different components of investment in real estate, determining whether expenditures meet the criteria for capitalization and assigning depreciable lives is considered to be critical because it requires management to exercise significant judgment.

 

Valuation of Real Estate Assets

Long-lived assets to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company continually evaluates the recoverability of its long-lived assets based on estimated future cash flows from and the estimated liquidation value of such long-lived assets, and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived asset.  Valuation of real estate assets is considered to be critical because the evaluation of impairment and the determination of fair values involve management’s assumptions relating to future economic events that could materially affect the determination of the fair value, and therefore the carrying value of real estate.

 

 

15



 

Revenue Recognition

Certain leases provide for tenant occupancy during periods for which no rent is due or where minimum rent payments increase during the term of the lease.  Rental revenue is recorded for the full term of each lease on a straight-line basis.  Accordingly, the Company records a receivable from tenants for rents that it expects to collect over the remaining lease term as deferred rents receivable.  When the Company acquires a property, the term of the existing leases is considered to commence as of the acquisition date for the purposes of this calculation.  Revenue recognition is considered to be critical because the evaluation of the realizability of such deferred rents receivable involves management’s assumptions relating to such tenant’s viability.

 

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

                Our future earnings, cash flows and fair values relevant to financial instruments depend upon prevalent market rates for those financial instruments.  Market risk is the risk of loss from adverse changes in market prices and interest rates.  We manage our market risk by matching projected cash inflows from operating, investing and financing activities with projected cash outflows to fund debt service, acquisitions, capital expenditures, dividends and other cash requirements.  The majority of our outstanding debt obligations have fixed interest rates which limit the risk of fluctuating interest rates.  At September 30, 2004, our interest rate risk only related to our $42,000,000 Secured Fleet Facility and our $30,000,000 Unsecured Fleet Facility, of which there was $20,650,000 and $10,000,000 outstanding, respectively.  In October 2004, the Company’s Unsecured Fleet Facility was assumed by KeyBank (Unsecured KeyBank Facility). The amended Unsecured KeyBank Facility has a total borrowing capacity of $40,000,000 and matures November 12, 2007.  Based on the amounts outstanding at September 30, 2004, the annual impact of a 1% change in interest rates would be approximately $306,500.

 

Item 4.    Controls and Procedures

                The Company carried out an evaluation under the supervision and with participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as of September 30, 2004.  Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that disclosure controls and procedures were effective as of the end of the period covered by this report to ensure that information required to be disclosed by the Company in its reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms.  There was no change in the Company’s internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

16



 

Part II.   Other Information

 

Item 1.    Legal Proceedings

No changes.

 

Item 2.    Changes in Securities and Use of Proceeds

 

                Issuance of Equity Securities Upon Exercise of Warrants

During the three month period ended September 30, 2004, the Company issued 5,100 shares of common stock upon exercise of previously issued warrants.  The issuance of the shares of common stock was made pursuant to an exemption from registration in accordance with Section 4(2) of the Securities Act based on a representation to us from the entity receiving the shares that such entity was a sophisticated investor who was knowledgeable about our operations and financial condition and was able to evaluate the risks and merits of receipt of the shares.

 

Purchase of Equity Securities

                Certain information regarding purchases made by or on behalf of the Company or any affiliate purchases (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended) of our common stock during the three months ended September 30, 2004, is provided below:

 

Period

 

Number of  Shares Purchased

 

Average Price Paid per Share

 

Total Number of Shares Purchased as Part of Publicly Announced Plans (1)

 

Maximum Number of Shares That May Yet Be Purchased Under the Plan (2)

 

July 2004

 

7,074

 

$6.11

 

7,074

 

N/A

 


(1)          On August 11, 2000, the Company’s Board of Directors approved the adoption of the Dividend Reinvestment Plan (the “Plan”).  Under the Plan, the Company is authorized to instruct the plan administrator to repurchase shares of its common stock from time to time, either directly or through agents, in the open market at prices and on terms satisfactory to the Company in order to offset some of all such shares issued pursuant to the Plan.  The Company announced the Plan in September 2000.  The Plan has no expiration date.

(2)          One million shares of Company common stock are registered for sale by the Company under the Plan.  The Plan has no limits as to the number of shares or dollar value that may be repurchased by the Company to satisfy the shares needed under the Plan.

 

Item 6.  Exhibits and Reports on Form 8-K

(a)          Exhibits

10.1         Mortgage note in the principal amount of $16,000,000 between AmeriVest Camelback Incorporated and Allstate Life Insurance Company of New York dated August 19, 2004.

10.2         Mortgage note in the principal amount of $5,000,000 between AmeriVest Camelback Incorporated and Allstate Life Insurance Company of New York dated August 19, 2004.

10.3         Deed of Trust, Assignment of Leases, Rents and Contracts, Security Agreement and Fixture Filing between AmeriVest Camelback Incorporated, Chicago Title Insurance Company and Allstate Life Insurance Company of New York, dated August 19, 2004.

                                                31.     Certifications of Chief Executive Officer and Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.

                                                32.     Certification of Chief Executive Officer and Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

 

(b)  Reports on Form 8-K

1.       Current report on Form 8-K dated August 25, 2004 (filed August 31, 2004).

2.       Current report on Form 8-K dated September 10, 2004 (filed September 15, 2004).

 

 

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SIGNATURES

 

                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 thereunto duly authorized.

 

 

AMERIVEST PROPERTIES INC.

 

 

 

 

 

 

November 5, 2004

 

 

 

By:

/s/ William Atkins

 

 

William Atkins

 

 

Chairman and Chief Executive Officer

 

 

 

 

 

 

 

 

 

 

By:

/s/ Kathryn L. Hale

 

 

Kathryn L. Hale

 

 

Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)

 

 

 

 

 

 

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