SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[Amendment No. ]
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AmeriVest Properties Inc.
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Not Applicable
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AMERIVEST PROPERTIES INC.
1780 South Bellaire Street, Suite 515
Denver, Colorado 80222
(303) 297-1800
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held June 13, 2001
The Annual Meeting Of Shareholders of AmeriVest Properties Inc.
("AmeriVest" or "we" or "us") will be held on June 13, 2001 at 10:00 a.m.
(Denver time) at the offices of Patton Boggs LLP, 1660 Lincoln Street, Suite
1900, Denver, Colorado 80264, for the following purposes:
1. To elect three Class 2 directors to our Board Of Directors;
2. To consider and vote upon a proposal recommended by the Board Of
Directors to issue shares of our common stock as a portion of the
purchase price for an entity whose sole assets are two office
buildings located in Denver, Colorado;
3. To ratify the selection of Arthur Andersen LLP to serve as our
independent certified accountants for the year ending December 31,
2001; and
4. To transact any other business that properly may come before the
meeting.
Only the shareholders of record as shown on the transfer books of AmeriVest
at the close of business on May 10, 2001 are entitled to notice of, and to vote
at, the shareholders meeting.
All shareholders, regardless of whether they expect to attend the meeting
in person, are requested to complete, date, sign and return promptly the
enclosed form of proxy in the accompanying envelope (which requires no postage
if mailed in the United States). The person executing the proxy may revoke it at
any time before it is exercised by delivering written notice of revocation to
us, by substituting a new proxy executed at a later date, or by requesting, in
person at the shareholders meeting, that the proxy be returned.
ALL SHAREHOLDERS ARE EXTENDED A CORDIAL INVITATION TO ATTEND THE
SHAREHOLDER MEETING.
By the Board Of Directors
ALEXANDER S. HEWITT
Corporate Secretary
Denver, Colorado
May 15, 2001
PROXY STATEMENT
AMERIVEST PROPERTIES INC.
1780 South Bellaire Street, Suite 515
Denver, Colorado 80222
(303) 297-1800
ANNUAL MEETING OF SHAREHOLDERS
to be held
June 13, 2001
This proxy statement is provided in connection with the solicitation of
proxies by the Board Of Directors of AmeriVest Properties Inc., a Maryland
corporation, to be voted at the Annual Meeting Of Shareholders of AmeriVest to
be held at 10:00 a.m. (Denver time) on June 13, 2001 at the offices of Patton
Boggs LLP, 1660 Lincoln Street, Suite 1900, Denver, Colorado 80264, or at any
adjournment or postponement of the meeting. We anticipate that this proxy
statement and the accompanying form of proxy will be first mailed or given to
shareholders on or about May 15, 2001.
The shares represented by all proxies that are properly executed and
submitted will be voted at the meeting in accordance with the instructions
indicated on the proxies. Unless otherwise directed, the shares represented by
proxies will be voted as follows: (1) for each of Robert W. Holman, Jr., Charles
K. Knight and Jerry J. Tepper as the nominees for Class 2 directors; (2) in
favor of the issuance of shares of our common stock as a portion of the purchase
price for Sheridan Plaza at Inverness, LLC, whose sole assets are two office
buildings located in Denver, Colorado; and (3) in favor of the selection of
Arthur Andersen LLP as our independent auditors, all as described in this proxy
statement.
A shareholder giving a proxy may revoke it at any time before it is
exercised by delivering written notice of revocation to us, by substituting a
new proxy executed at a later date, or by requesting, in person at the annual
meeting, that the proxy be returned.
The solicitation of proxies is to be made principally by mail; however,
following the original solicitation, further solicitations may be made by
telephone or oral communication with shareholders. Our officers, directors and
employees may solicit proxies, but without compensation for such solicitation
other than their regular compensation as employees of AmeriVest. Arrangements
also will be made with brokerage houses and other custodians, nominees and
fiduciaries to forward solicitation materials to beneficial owners of the shares
held of record by those persons. We may reimburse those persons for reasonable
out-of-pocket expenses incurred by them in so doing. All expenses involved in
preparing, assembling and mailing this proxy statement and the enclosed material
will be paid by us. A majority of the issued and outstanding shares of common
stock entitled to vote, represented either in person or by proxy, constitutes a
quorum at any meeting of the shareholders.
Unless the context indicates otherwise, the terms "us", "we", or
"AmeriVest" shall be used in the proxy statement to include AmeriVest Properties
Inc. and all its subsidiaries that existed during the period of reference.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
Our Articles Of Incorporation provide that our Board Of Directors is
divided into three classes, designated Class 1, Class 2 and Class 3. Directors
from each class are elected once every three years for a three-year term. John
Labate, James F. Etter and Harry P. Gelles serve as the Class 1 directors,
Robert W. Holman, Jr., Charles K. Knight and Jerry Tepper serve as the Class 2
directors, and Robert J. McFann and William T. Atkins serve as the Class 3
directors. The term of each of Mr. Holman, Mr. Knight and Mr. Tepper expires at
the annual meeting. The Board Of Directors previously elected Robert W. Holman,
Jr. to serve as a Class 2 director in the position created by the retirement of
Charles R. Hoffman. In addition, the Board Of Directors expanded the number of
directors from seven to eight and elected Jerry J. Tepper to the Board as a
Class 2 director. Because Messrs. Holman and Tepper were not elected by the
shareholders, our Articles Of Incorporation provide that their terms expire at
the annual meeting. At the annual meeting, the shareholders will elect three
Class 2 directors to hold office until the annual meeting of shareholders to be
held in the year 2004, and thereafter until their successors are elected and
have qualified. The affirmative vote of a majority of the shares represented at
the meeting is required to elect each director. Cumulative voting is not
permitted in the election of directors. Consequently, each shareholder is
entitled to one vote for each share of common stock held in the shareholder's
name. In the absence of instructions to the contrary, the person named in the
accompanying proxy shall vote the shares represented by that proxy for each of
Mr. Holman, Mr. Knight and Mr. Tepper as nominees of the Board Of Directors for
Class 2 directors of AmeriVest.
There is no nominating committee of the Board Of Directors. Our bylaws
provide that the Board Of Directors, or a nominating committee of the Board if
one is formed in the future, will consider nominations for directors submitted
by shareholders in accordance with the bylaws. To be considered, the nominations
generally must be submitted to the corporate Secretary of AmeriVest not less
than 53 days or more than 90 days prior to any meeting of the shareholders at
which directors are to be elected. Each notice of nomination of directors by a
shareholder must set forth the following:
o the name, age, business address and, if known, residence address of
each nominee proposed in that notice,
o the principal occupation or employment of each such nominee for the
five years preceding the date of the notice,
o the number of shares of stock of AmeriVest that are beneficially owned
by each nominee, and
o any arrangement, affiliation, association, agreement or other
relationship of the nominee with any shareholder of AmeriVest.
The chairman of any meeting of shareholders may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with
this procedure and that the defective nomination will be disregarded
Each of Messrs. Holman, Knight and Tepper has consented to be named in this
proxy statement as a nominee for director and to serve on the Board if elected.
It is not anticipated that any of Messrs. Holman, Knight and Tepper will become
unable or unwilling to accept nomination or election, but, if that should occur,
the persons named in the proxy intend to vote for the election of such other
person as the Board Of Directors may recommend.
The following table sets forth, with respect to each director, the
director's age, his positions and offices with AmeriVest, the expiration of his
term as a director, and the year in which he first became a director. Individual
background information concerning each of the directors follows the table. For
additional information concerning the directors, including ownership of the our
common stock and compensation for serving as a director, see "Executive
Compensation", and "Transactions Between AmeriVest And Related Parties".
2
Expiration Of Term Initial Date As
Name Age Position with AmeriVest As Director Director
---- --- ----------------------- ----------- --------
William T. Atkins 51 Chief Executive Officer, 2002 Annual Meeting 1999
Director (Class 3), and Chairman
of the Board
Charles K. Knight 44 President and Director (Class 2) 2001 Annual Meeting 1999
James F. Etter 58 Director (Class 1) 2003 Annual Meeting 1995
Harry P. Gelles* 67 Director (Class 1) 2003 Annual Meeting 2000
Robert W. Holman, Jr. 57 Director (Class 2) 2001 Annual Meeting 2001
John A. Labate* 52 Director (Class 1) 2003 Annual Meeting 1995
Robert J. McFann 85 Director (Class 3) 2002 Annual Meeting 1994
Jerry J. Tepper* 64 Director (Class 2) 2001 Annual Meeting 2000
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(*) Member of the Audit Committee of the Board.
William T. Atkins has served as a director of AmeriVest since August 1999,
since December 1999, as our Chief Executive Officer and, since December 2000 as
Chairman of the Board. He is also Chairman and a managing member of Sheridan
Realty Advisors, LLC. Since 1990, he has served as President of Sheridan Realty
Corp., of which he is a principal stockholder and co-founder. Sheridan Realty
Corp. is involved in the commercial real estate business and serves as the
general partner of Sheridan Realty Partners, L.P, the former owner of the
Keystone Buildings. Since 1996, Mr. Atkins has also served as general partner of
Atkins Ltd. Partnership, an investment company. Since 1996, Mr. Atkins has
served as a director of Rock River Trust Company, which is involved in trust
administration, and from 1996 through 1998 he served as President of Rock River
Trust Company. Mr. Atkins earned a Bachelor of Arts degree in economics from
Stanford University in 1971.
Charles K. Knight has served as our President since October 2000, as a
director of AmeriVest since August 1999 and, from December 1999 to October 2000,
as a Vice President and our corporate Secretary. He is also the President and a
managing member of Sheridan Realty Advisors, LLC. Since 1998, Mr. Knight has
served as Vice President and a member of Sheridan Development, LLC. From 1996
through 1998, Mr. Knight was the owner and served as the President of Abaco
Investment Group, a real estate investment company. From 1993 through 1996, Mr.
Knight served as Vice President - Sales and Marketing of Menda Scientific
Products, Inc. Mr. Knight received his Bachelor of Administration degree in
Experimental Psychology from the University of California at Santa Barbara in
1977, and his Juris Doctor and Master of Business Administration degrees from
the University of California at Los Angeles in 1982. Mr. Knight is licensed to
practice law in the States of Colorado and New York and maintains an inactive
license in California.
3
Robert W. Holman, Jr. has served as a director of AmeriVest since March
2001. Mr. Holman is also a director of I-Star Financial, a publicly-traded
finance company. He is the co-founder of TriNet Corporate Realty Trust and
served ten years as Chief Executive Officer and Chairman of the Board of TriNet
and its predecessor, Holman/Shidler Capital, Inc., until the 1999 merger of
TriNet and Starwood Financial. Starwood Financial changed its name to I-Star
Financial in April 2000. Mr. Holman graduated from the University of California
at Berkeley with a degree in economics, earned a Master's degree in economics
from Lancaster University, England, where he was a British Council Fellow, and
is a former Harvard University Loeb Fellow. He has served as a board member,
director or senior executive for a number of companies in the U.S., Britain and
Mexico in the building materials, construction, finance Internet commerce, real
estate and travel industries.
James F. Etter served as our President from May 1995 until October 2000, as
our Chief Financial Officer from July 1996 until December 1999 and as our Chief
Executive Officer from January 1997 until December 1999. From 1994 until May
1995, Mr. Etter acted as a consultant with respect to real estate acquisitions
not related to us. Mr. Etter received his Masters of Business Administration and
his Bachelors of Business Administration degrees from the University of
Cincinnati. He is a member of the Financial Executives Institute and the
National Investors Relations Institute.
Harry P. Gelles has served as a director of AmeriVest since June 2000. Mr.
Gelles has been a private investor since 1985. During 1998, Mr. Gelles briefly
served as a Managing Director of Cruttenden Roth, Inc., an investment banking
firm. Mr. Gelles has fifteen years experience in investment banking, serving as
a senior executive with White Weld & Co., Dean Witter, Goldman Sachs & Company
and Chelsea Management Company. Mr. Gelles also has extensive experience in real
estate with Del Webb Corporation for eight years and as a private investor in
several real estate development projects in Colorado Springs, Phoenix and
Sacramento. Mr. Gelles serves on the Board Of Directors of Investors Research
Fund, Inc., a public mutual fund company, and on numerous private and charitable
boards. Mr. Gelles received his Bachelor of Arts and Master of Business
Administration degrees from Harvard University.
John A. Labate has served as a director of AmeriVest since May 1995 and as
a member of both the Audit Committee and the Acquisitions Committee of the Board
since July 1995. Since September 1999, Mr. Labate has been Vice President and
Chief Financial Officer of Optical Security Group, Inc. From 1997 to August
1999, Mr. Labate was Vice President and Chief Financial Officer of GeoBiotics,
Inc., a Denver based mineral technology company. Prior to 1997, Mr. Labate
served as the Chief Financial Officer, Secretary, and Treasurer of Crown
Resources Corporation, a publicly traded, Denver, Colorado based international
gold mining and exploration company. Mr. Labate received his Bachelor of Science
degree in accounting from San Diego State University.
Robert J. McFann has served as a director of AmeriVest since August 1994.
He also served as our corporate Secretary from May 1995 until December 1999. Mr.
McFann has been a member of the Acquisitions Committee of our Board since July
1995. Prior to his retirement in 1996, Mr. McFann was the principal owner and
President of Hy Grade Meat Company, a private company that grew to a mid-sized
hotel and restaurant supply house under his direction. Prior to 1996, he also
was a member of the Board Of Directors of the Bank Of Aurora.
Jerry J. Tepper has served as a director of AmeriVest since 2000. Mr.
Tepper has been president of Tepco, Inc., a privately-held real estate
investment company, since 1997, president of CF Group Ltd., a privately-held
investment company in the retail food business, since 1964, and president of
Schoenberg Farms, Inc., a dairy product company, since 1987. Through Schoenberg
Farms, Inc., Mr. Tepper is the company's largest stockholder, owning more than
12 percent of the company's outstanding common stock. Prior to forming Tepco,
Mr. Tepper was also a director of Citizens Bank in Westminster, Colorado, when
it was purchased by Vectra Bank in 1999. From 1975 through 1980, Mr. Tepper was
a director of Regal Petroleum, and from 1979 to 1983 he was a member of the
United States Chamber of Commerce Food and Agriculture Committee.
4
Other Executive Officers
D. Scott Ikenberry, 50, has served as our Chief Financial Officer and as a
member of Sheridan Realty Advisors, LLC since December 1999. Mr. Ikenberry has
been Chief Financial Officer of Sheridan Realty Corp. and other Sheridan Group
companies since August 1993. Mr. Ikenberry received his Bachelor of Science
degree in Accounting from the University of Denver in 1972 and his Master in
Professional Accounting (Taxation) degree from the University of Texas at Austin
in 1976. He is a member of the American Institute of Certified Public
Accountants and the Colorado Society of Certified Accountants and is a licensed
real estate broker in Colorado.
Alexander S. Hewitt, 43, has served as a Vice President of AmeriVest since
January 2000, as corporate Secretary since October 2000 and as Vice Chairman of
the Advisor since December 1999. Since 1990, Mr. Hewitt has also served as Vice
President of Sheridan Realty Corp., of which he is a principal stockholder and
co-founder and has held senior positions with other Sheridan Group companies.
Since 1996, Mr. Hewitt has served as a director of Rock River Trust Company,
which is involved in trust administration. Mr. Hewitt earned a Bachelor of Arts
degree in economics and a Bachelor of Science degree in Physics from Knox
College in Galesburg, Illinois in 1982.
John B. Greenman, 46, has served as a Vice President of AmeriVest since
January 2000, and as a Senior Vice President of the Advisor since December 1999.
Since 1994, he has served as Vice President of Sheridan Realty Corp. and as a
senior officer of other Sheridan Group companies. Mr. Greenman is a member of
the Urban Land Institute. He graduated from Amherst College in 1976 and in 1979
received his Master of Arts degree from the School of Advanced International
Studies at Johns Hopkins University.
Committee And Meetings
The Board maintains an Audit Committee which was formed to perform the
following functions: recommend to the Board the independent auditors to be
employed; discuss the scope of the independent auditors' examination; review the
financial statements and the independent auditors' report; solicit
recommendations from the independent auditors regarding internal controls and
other matters; review all related party transactions for potential conflicts of
interest; make recommendations to the Board; and perform other related tasks as
requested by the Board. During the year ended December 31, 2000, the Audit
Committee, currently consisting of Messrs. Gelles, Labate and Tepper, met one
time. The functions of the Audit Committee and its activities during 2000 are
described below under the heading "Audit Committee Report". During the year
ended December 31, 2000, the Board examined the composition of the Audit
Committee in light of the adoption by the American Stock Exchange of new rules
governing audit committees. Based upon this examination, the Board confirmed
that all members of the Audit Committee are "independent" within the meaning of
the Exchange's new rules.
The Board Of Directors met ten times during 2000 and each director
participated in at least 90 percent of those meetings.
5
Audit Committee Report
The following Report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), except to the extent AmeriVest specifically incorporates this
Report by reference therein.
During the year ended December 31, 2000, the Audit Committee of the Board
Of Directors developed a charter for the Committee, which was adopted by the
full Board on June 6, 2000 and amended in May 2001. The complete text of the new
charter, which reflects standards set forth in new Securities and Exchange
Commission ("SEC") regulations and American Stock Exchange rules, is reproduced
in the appendix to this proxy statement.
The Audit Committee oversees AmeriVest's financial reporting process on
behalf of the Board Of Directors. Management has the primary responsibility for
the financial statements and the reporting process, including the systems of
internal controls. In fulfilling its oversight responsibilities, the Committee
reviewed and discussed with management the audited financial statements in
AmeriVest's Annual Report on Form 10-KSB for the year ended December 31, 2000.
The Committee discussed with the independent auditors, who are responsible
for expressing an opinion on the conformity of audited financial statements with
generally accepted accounting principles, the auditors' judgments as to the
quality, not just the acceptability, of AmeriVest's accounting principles and
such other matters as are required to be discussed by the auditors with the
Committee under Statement on Auditing Standards No. 61, as amended. In addition,
the Committee discussed with the independent auditors the auditors' independence
from management and AmeriVest, including the matters in the written disclosures
and the letter required by the Independence Standards Board Standard No. 1. The
Committee considered whether the auditors' providing services on behalf of
AmeriVest other than audit services is compatible with maintaining the auditors'
independence.
The Committee discussed with AmeriVest's independent auditors the overall
scope and plans for their respective audits. The Committee meets with the
independent auditors, with and without management present, to discuss the
results of the auditors' examinations, their evaluations of AmeriVest's internal
controls, and the overall quality of AmeriVest's financial reporting. The
Committee met once in 2000 and has thus far met once during fiscal 2001.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board Of Directors, and the Board has approved, that the
audited financial statements be included in the Annual Report on Form 10-KSB for
the year ended December 31, 2000 for filing with the SEC. The Committee also has
recommended to the Board the selection of AmeriVest's independent auditors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act of 1934, as amended, requires our
directors, executive officers and holders of more than 10 percent of our common
stock to file with the Securities And Exchange Commission initial reports of
ownership and reports of changes in ownership of common stock and other of our
equity securities. We believe that during the year ended December 31, 2000, our
officers, directors and holders of more than 10 percent of our common stock
complied with all Section 16(a) filing requirements, except that Alexander
Hewitt was late in filing a Form 4, Statement of Changes Of Beneficial Ownership
Of Securities, concerning one transaction and Jerry Tepper and Harry Gelles were
late in filing a Form 3, Initial Statement of Beneficial Ownership of
Securities. In making these statements, we have relied upon the written
representations of our directors and officers and our review of the monthly
statements of changes filed with us by our officers and directors.
6
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth in summary form the compensation received
during each of the last three successive completed fiscal years ended December
31, 2000 by William T. Atkins, our Chief Executive Officer, James F. Etter, our
former President, and Mr. Charles K. Knight, our President. No other employees
received total salary and bonus exceeding $100,000 during any of the last three
fiscal years.
Summary Compensation Table
--------------------------
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
-------------------------------------------------- ------------------------------
Other Annual Restricted All other
Name and Fiscal Salary Bonus Compensation Stock Options Payouts Compensation
Principal Position Year ($)(1) ($)(2) ($)(3) Awards(#) (#) ($)(3) ($)(4)
-------------------------------------------------------------------------------------------------------------------------
William T. Atkins 2000 $ -0- -0- -0- -0- -0- -0- -0-
Chief Executive Officer 1999 (5) $ -0- -0- -0- -0- 12,000 -0- -0-
Charles K. Knight 2000 (6) $ -0- -0- -0- -0- -0- -0- -0-
President
James F. Etter 2000 $126,788 (9) -0- $15,000 (8)(9) -0- 10,000 -0- -0-
Former President 1999 $120,750 $15,326 (7) $15,000 (8) -0- -0- -0- -0-
1998 $115,000 $20,000 $15,000 (8) -0- 10,000 -0- -0-
----------
(1) The dollar value of base salary (cash and non-cash) received.
(2) The dollar value of bonus (cash and non-cash) received during the year
indicated.
(3) AmeriVest does not have in effect any plan that is intended to serve as
incentive for performance to occur over a period longer than one fiscal
year except for our 1995 Stock Option Plan and 1998 Stock Option Plan.
AmeriVest has entered into an agreement with Sheridan Realty Advisors, LLC
that provides for performance-based incentives.
(4) All other compensation received that AmeriVest could not properly report in
any other column of the Summary Compensation Table including annual
AmeriVest's contributions or other allocations to vested and unvested
defined contribution plans, and the dollar value of any insurance premiums
paid by, or on behalf of, AmeriVest with respect to term life insurance for
the benefit of the named executive officer, and, the full dollar value of
the remainder of the premiums paid by, or on behalf of, AmeriVest.
(5) Mr. Atkins became Chief Executive Officer of AmeriVest on December 22,
1999.
(6) Mr. Knight became President of AmeriVest on October 2, 2000.
(7) Consists of $15,326 for accrued vacation time from 1997 through December
31, 1999.
(8) Consists of $12,000 to reimburse for medical and life insurance coverage
and a $3,000 contribution to SIMPLE IRA Plan for 2000, 1999 and 1998.
(9) Consists of compensation paid under the employment agreement and the
severance agreement described below.
7
Option Grants Table
The following table sets forth information concerning individual grants of
stock options made during the fiscal year ended December 31, 2000 to each named
executive officer.
Option Grants For Fiscal Year Ended December 31, 2000
-----------------------------------------------------
% of Total Options
Options Granted to Employees Exercise or Base Expiration
Name Granted (#) in Fiscal Year Price ($/Share) Date
---- ----------- -------------- --------------- ----
James F. Etter 10,000 29% $5.00/Share 01/01/05
Aggregated Option Exercises And Fiscal Year-End Option Value Table
The following table provides certain summary information concerning stock
option exercises during the fiscal year ended December 31, 2000 by the named
executive officers and the value of unexercised stock options held by the named
executive officers as of December 31, 2000.
Aggregated Option Exercises
For Fiscal Year Ended December 31, 2000
And Year-End Option Values (1)
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options
at Fiscal Year-End (#) (4) at Fiscal Year-End ($) (5)
-------------------------- --------------------------
Shares Acquired Value
Name on Exercise (2) Realized ($) (3) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ---------------- ----------- ------------- ----------- -------------
William T. Atkins 0 0 8,000 4,000 0 0
Charles K. Knight 0 0 8,000 4,000 0 0
James F. Etter 0 0 70,000 0 15,310 0
----------
(1) No stock appreciation rights are held by any of the named executive
officers.
(2) The number of shares received upon exercise of options during the year
ended December 31, 2000.
(3) With respect to options exercised during the year ended December 31, 2000,
the dollar value of the difference between the option exercise price and
the market value of the option shares purchased on the date of the exercise
of the options.
(4) The total number of unexercised options held as of December 31, 2000,
separated between those options that were exercisable and those options
that were not exercisable on that date.
(5) For all unexercised options held as of December 31, 2000, the aggregate
dollar value of the excess of the market value of the stock underlying
those options over the exercise price of those unexercised options. These
values are shown separately for those options that were exercisable, and
those options that were not yet exercisable, on December 31, 2000. As
required, the price used to calculate these figures was the closing sale
price of the common stock at year's end, which was $4.75 per share on
December 29, 2000.
Employment Contracts And Termination Of Employment And Change-In-Control
Arrangements
Advisory Agreement With Sheridan Realty Advisors
Under the advisory agreement that we entered into with Sheridan Realty
Advisors, LLC effective January 1, 2000, Sheridan Realty Advisors received
incentive compensation in the form of five-year warrants to purchase up to
750,000 shares of common stock at $5 per share (the "Advisor Warrants") as an
advisory fee based on new real property acquisitions. For additional information
concerning the Advisors Warrants, see below, "Sheridan Realty Advisors'
Warrants". William T. Atkins, our Chief Executive Officer and Chairman of our
8
Board, is the co-manager, Chairman and a 20 percent owner of Sheridan Realty
Advisors. Charles K. Knight, President and a director of AmeriVest, is the
co-manager, President and a 20 percent owner of Sheridan Realty Advisors. D.
Scott Ikenberry, our Chief Financial Officer, is the Chief Financial Officer and
a 20 percent owner of Sheridan Realty Advisors. Messrs. Alexander S. Hewitt and
John B. Greenman, each of whom is a Vice President, are the Vice-Chairman and
Vice President, respectively, and 20 percent owners of Sheridan Realty Advisors.
Employment Agreement With James F. Etter
We entered into an employment agreement (the "Etter Agreement") with James
F. Etter, our former President, for the period from January 1, 1998 until
December 31, 2000, which replaced a previous agreement effective as of January
1, 1996. For the 1999 fiscal year, the Etter Agreement provided for the payment
of salary at the rate of $10,062.50 per month. For the 2000 fiscal year, the
Etter Agreement provided for salary at the rate of $10,565.63 per month. The
Etter Agreement also provided that we would reimburse Mr. Etter for up to
$12,000 annually for medical and insurance expenses paid by Mr. Etter until we
adopted health care plans covering these matters. Effective January 1, 2000, Mr.
Etter was covered under the medical insurance plan maintained by Sheridan Realty
Advisors on behalf of all AmeriVest employees.
On December 9, 1998, the Board granted to Mr. Etter a bonus of $20,000 for
1998 and options to purchase 10,000 shares of common stock. On December 23,
1999, the Board authorized a payment to Mr. Etter of $15,326 for unused accrued
vacation.
The Etter Agreement also provided that if we were acquired by another
company, and if the acquiring company did not offer Mr. Etter a position in the
Denver area at a salary level equal to or greater than his then current salary,
then all unexercised stock options held by Mr. Etter would immediately become
exercisable, and we would pay Mr. Etter an amount equal to one year's salary.
Effective January 1, 2000, we entered into a Severance Protection Agreement
(the "Severance Agreement") with Mr. Etter that is separate from the Etter
Agreement. We agreed with Mr. Etter to continue paying him salary and benefits
for 18 months if he is terminated by AmeriVest other than for cause. These
payments would be reduced by the amount of any severance payments made to Mr.
Etter pursuant to the Etter Agreement.
Effective September 30, 2000 (the "Termination Date"), we entered into a
Separation Agreement And Release with Mr. Etter under which it was mutually
agreed to terminate Mr. Etter's employment. Mr. Etter agreed to resign from his
positions as an officer of AmeriVest and, as applicable, as an officer and
director of each of AmeriVest's subsidiaries and affiliates and AmeriVest agreed
to pay Mr. Etter the following compensation, benefits and options:
o During the period of October 1, 2000 through and including June 30,
2002 (the "Severance Period"), AmeriVest will pay Mr. Etter $10,565.63
per month, with payments being made on AmeriVest's usual payroll
dates. No additional compensation for vacation and sick days will
accrue or be payable to Mr. Etter after the Termination Date.
o During the Severance Period, AmeriVest will pay Mr. Etter an
additional $1,000 per month to be used by Mr. Etter to reimburse
AmeriVest for medical, dental and vision insurance premiums on behalf
of Mr. Etter and Mr. Etter's dependents and beneficiaries, or to pay
such premiums directly, including payment of premiums for life
insurance in effect on the Termination Date.
o As of the Termination Date, Mr. Etter received 15,000 of the Advisor
Warrants issued by AmeriVest to Sheridan Realty Advisors, LLC and
10,000 additional stock options from AmeriVest with the same terms and
conditions concerning vesting, term and exercise price as the Advisor
Warrants. The exercisability of the 15,000 Advisor Warrants allocated
to the benefit of Mr. Etter is governed by the terms of the Advisory
Agreement between AmeriVest and the Advisor. See below, "--Sheridan
Realty Advisors' Warrants."
1995 Stock Option Plan
Pursuant to our 1995 Stock Option Plan (the "1995 Plan"), we may grant
options to purchase an aggregate of 130,000 shares of our common stock to key
employees, directors and other persons who have contributed or are contributing
to our success. The options granted pursuant to the 1995 Plan may be incentive
options qualifying for beneficial tax treatment for the recipient or they may be
non-qualified options. With respect to options granted to persons other than our
directors who are not also our employees, the 1995 Plan is administered by an
option committee that determines the terms of the options subject to the
requirements of the 1995 Plan. Under the terms of the 1995 Plan, the Board Of
Directors is permitted to serve, and has served, as the option committee. In May
1995, four outside directors were granted an aggregate of 48,000 options with an
exercise price of $5.00 per share pursuant to the 1995 Plan, one-third of the
options granted becoming exercisable on each December 30 for three years
thereafter, provided that the recipient was still a director on that date.
12,000 of these options expired without being exercised. In December 1997, three
9
outside directors were granted an aggregate of 36,000 options with an exercise
price of $4.4375 per share pursuant to the 1995 Plan, and with one-third of the
options granted becoming exercisable on each December 30 for three years
thereafter, provided that the recipient was still a director on that date. At
December 31, 2000, options to purchase an aggregate of 123,500 shares of common
stock were outstanding under the 1995 Plan. The option committee or the Board
may grant additional options to purchase 6,500 shares pursuant to the 1995 Plan.
1998 Stock Option Plan
Pursuant to our 1998 Stock Option Plan (the "1998 Plan"), we may grant
options to purchase an aggregate of 200,000 shares of common stock to key
employees, directors and other persons who have or are contributing to our
success. The options granted pursuant to the 1998 Plan may be incentive options
qualifying for beneficial tax treatment for the recipient, non-qualified
options, or non-qualified non-discretionary options. The terms of the 1998 Plan
concerning incentive options and non-qualified options are substantially the
same except that only our employees or employees of subsidiaries are eligible
for incentive options, and employees and other persons who have contributed or
are contributing to our success are eligible for non-qualified options.
Non-qualified non-discretionary options may be granted only to outside
directors. With respect to options granted to persons other than outside
directors, the 1998 Plan also is administered by an option committee that
determines the terms of the options subject to the requirements of the 1998
Plan. Under the terms of the 1998 Plan, the Board Of Directors is permitted to
serve, and has served, as the option committee. The portion of the 1998 Plan
concerning non-qualified, non-discretionary options provides that outside
directors automatically receive options to purchase 12,000 shares pursuant to
the 1998 Plan at the time of their initial election as an outside director. The
options held by outside directors are not exercisable at the time of grant, but
options to purchase 4,000 shares become exercisable for each outside director on
December 30 of each of the first three years immediately following the date of
grant of these options to the outside director. The exercise price for the
non-qualified non-discretionary options is the fair market value of the common
stock on the date these options are granted. Shares acquired upon exercise of
these options cannot be sold for six months following the date of grant. If not
previously exercised, non-qualified non-discretionary options that have been
granted expire upon the later to occur of five years after the date of grant and
two years after the date these options first became exercisable. The
non-qualified non-discretionary options also expire 90 days after the
optionholder ceases to be our director. At any time all of an outside director's
options have become exercisable, non-qualified non-discretionary options to
purchase an additional 12,000 shares, which are not exercisable at the time of
grant, shall be granted automatically to that outside director.
All options granted under the 1998 Plan will become fully exercisable upon
the occurrence of a change in control of AmeriVest or of certain mergers or
other reorganizations or asset sales described in the 1998 Plan. Options granted
pursuant to the 1998 Plan are not transferable during the optionee's lifetime.
Subject to the other terms of the 1998 Plan, the option committee has discretion
to provide vesting requirements and specific expiration provisions with respect
to the incentive options and non-qualified options granted. At December 31,
2000, options to purchase 79,500 shares of common stock were outstanding under
the 1998 Plan and options to purchase 120,500 were available to be granted
pursuant to the 1998 Plan.
Sheridan Realty Advisors' Warrants
Under the advisory agreement that we entered into with Sheridan Realty
Advisors effective January 1, 2000, Sheridan Realty Advisors received
compensation designed to provide an incentive for its performance in the form of
an advisory fee based on new real property acquisitions and the Advisor Warrants
to purchase up to 750,000 shares of our common stock at $5.00 per share until
January 1, 2005. Exercise of the warrants can occur after January 1, 2003 only
if vesting has occurred. The warrants were issued as of January 1, 2000 and
225,000 warrants vested immediately. The balance of up to 525,000 warrants vest
only upon completion of an acquisition, purchase or long-term lease of real
property by us in an aggregate exercise price equal to 2.1 percent of the Equity
Value of the property acquired. "Equity Value" is equal to the acquisition price
10
of the property (before expenses of purchase) less any mortgage debt assumed or
incurred in connection with the acquisition plus any capital expenditures and
lease-up costs incurred in connection with the property during the first 12
months of ownership. The total amount of Equity Value of real property subject
to the incentive compensation provision shall not exceed $25 million.
Compensation Of Outside Directors
In 2000, we compensated outside directors $250 per month plus $300 for each
meeting of the Board that they attend. Commencing January 1, 2001, we began
compensating outside directors at a rate of $500 per month. We also reimburse
directors for expenses incurred in attending meetings and for other expenses
incurred on our behalf. In addition, each director who is not our employee or an
employee of Sheridan Realty Advisors automatically receives non-qualified
non-discretionary options to purchase shares of common stock.
BENEFICIAL OWNERS OF SECURITIES
As of March 31, 2001, there were 3,171,381 shares of our common stock
outstanding. The following table sets forth certain information as of that date
with respect to the beneficial ownership of our common stock by each director
and nominee for director, by all executive officers and directors as a group,
and by each other person known by us to be the beneficial owner of more than
five percent of our common stock:
Name and Address of Number of Shares Percentage of
Beneficial Owner Beneficially Owned (1) Shares Outstanding
---------------- ---------------------- ------------------
William T. Atkins 343,288 (2) 10.8%
1780 South Bellaire Street, Suite 515
Denver, Colorado 80222
James F. Etter 71,000 (3) 2.2%
31401 Shadow Mountain Drive
Conifer, CO 80433
Harry P. Gelles 10,094 (4) *
1114 State Street, Suite 236
Santa Barbara, California 93101
Alexander S. Hewitt 360,772 (5) 11.4%
1780 South Bellaire Street, Suite 515
Denver, CO 80222
Robert W. Holman, Jr. 13,501 (6) *
P.O. Box 8
Pebble Beach, CA 93921
Charles K. Knight 22,937 (7) *
1780 South Bellaire Street, Suite 515
Denver, Colorado 80222
11
Name and Address of Number of Shares Percentage of
Beneficial Owner Beneficially Owned (1) Shares Outstanding
---------------- ---------------------- ------------------
John A. Labate 12,000 (8) *
5260 South Beeler Court
Englewood, Colorado 80111
Robert J. McFann 62,190 (8)(9) 1.9%
3260 Zephyr Court
Wheat Ridge, Colorado 80033
Jerry J. Tepper 464,000 (10) 14.4%
7255 North Sheridan Street
Arvada, CO 80033
All Officers And Directors As A Group 1,359,783 (2-10) 40.7%
(11 Persons)
Schoenberg Farms, Inc. 350,000 (11) 10.9%
7255 North Sheridan Street
Arvada, CO 80002
Sheridan Realty Partners, L.P. 200,788 6.3%
1780 South Bellaire Street, Suite 515
Denver, CO 80222
----------
*Less than one percent
(1) "Beneficial ownership" is defined in the regulations promulgated by the SEC
as having or sharing, directly or indirectly (1) voting power, which
includes the power to vote or to direct the voting, or (2) investment
power, which includes the power to dispose or to direct the disposition, of
shares of the common stock of an issuer. Unless otherwise indicated, the
beneficial owner has sole voting and investment power.
(2) Includes 32,746 shares of common stock owned directly by Mr. Atkins;
217,093 shares in which Mr. Atkins has an indirect pecuniary interest,
194,801 shares of which he disclaims beneficial ownership; 8,000 shares of
common stock underlying currently exercisable options; 200 shares of common
stock held by his minor children and 100 shares of common stock underlying
currently exercisable warrants held by his minor children.
(3) Includes 1,000 shares of common stock owned directly by Mr. Etter; 70,000
shares of common stock underlying currently exercisable options held by Mr.
Etter. See "Executive Compensation--Employment Contracts And Termination Of
Employment And Change-In-Control Arrangements--Option Grants" for
additional information concerning Mr. Etter's options.
(4) Includes 4,000 shares of common stock owned directly by Mr. Gelles and
6,000 shares of common stock underlying currently exercisable options and
warrants held by Mr. Gelles.
12
(5) Includes 217,093 shares owned by entities in which Mr. Hewitt has an
indirect pecuniary interest. Mr. Hewitt disclaims beneficial ownership over
an aggregate of 174,448 shares of common stock.
(6) Includes 10,000 shares of common stock owned directly by Mr. Holman; 2,334
shares in which Mr. Holman has an indirect pecuniary interest; and 1,167
shares of common stock underlying currently exercisable warrants in which
Mr. Holman has an indirect pecuniary interest.
(7) Includes 13,364 shares of common stock owned directly by Mr. Knight; 9,500
shares of common stock underlying currently exercisable options and
warrants held by Mr. Knight; 200 shares of common stock held by his minor
children; and 100 shares of common stock underlying currently exercisable
warrants held by his minor children.
(8) Includes the following numbers of shares underlying options to purchase
shares of common stock that currently are exercisable that were granted to
each outside director pursuant to our 1995 and 1998 Stock Option Plans:
John Labate, 12,000; and Robert McFann, 12,000.
(9) Includes 50,190 shares of common stock directly owned by Mr. McFann.
(10) Includes 50,000 shares of common stock directly owned by Mr. Tepper;
360,000 shares of common stock in which Mr. Tepper has an indirect
pecuniary interest; 4,000 shares of common stock underlying currently
exercisable options held by Mr. Tepper; and 50,000 shares of common stock
underlying currently exercisable warrants in which Mr. Tepper has an
indirect pecuniary interest and in which he disclaims beneficial ownership
over a portion of interest.
(11) Includes 300,000 shares of common stock directly owned by Schoenberg Farms,
Inc. and 50,000 shares of common stock underlying currently exercisable
warrants.
TRANSACTIONS BETWEEN AMERIVEST AND RELATED PARTIES
We have been involved in the following transactions with our current and
past directors and officers and by persons known by us to be the beneficial
owners of five percent or more of our common stock.
Asset Purchases
Purchase Of Keystone Buildings
Effective July 1, 1999, we completed the acquisition of three office
buildings, known as the Keystone Buildings, located in suburban Indianapolis,
Indiana from Sheridan Realty Partners, L.P., an affiliate of Sheridan Realty
Advisors, LLC, our advisor, and an affiliate of Messrs. Atkins, Ikenberry,
Knight, Hewitt and Greenman, senior members of our management team. See below,
"--Relationships Among AmeriVest And Various Sheridan Group Entities". The
Keystone Buildings contain a total of 95,836 square feet of rentable space. The
total purchase price for the Keystone Buildings was $7,944,000, which we paid by
assuming approximately $5,255,000 of existing debt and $116,400 of related
escrow balances on the properties and issuing 541,593 shares of our common stock
at the rate of $4.75 per share. In conjunction with the assumption of the debt,
we also agreed to indemnify the original guarantors of this debt if we fail to
repay it.
As required pursuant to the Purchase And Sale Agreement with Sheridan
Realty Partners, L.P. regarding our acquisition of the Keystone Buildings, we
appointed William T. Atkins and Charles K. Knight to our Board. In December
1999, Mr. Atkins was elected as our Chief Executive Officer and Mr. Knight was
elected as our Secretary. Mr. Atkins is the President and a 16.5 percent owner
of Sheridan Realty Corp., which is the general partner of Sheridan Realty
Partners. Sheridan Realty Corp. holds a one percent interest in Sheridan Realty
13
Partners as the general partner and an additional 3.1335 percent interest as a
limited partner. In connection with the acquisition of the Keystone Buildings,
Mr. Atkins received approximately 30,196 of the shares of our common stock paid
by us as a portion of the purchase price. A trust company for which Mr. Atkins
serves as a director serves as trustee for trusts that also received 83,185
shares of our common stock. Mr. Atkins has no beneficial interest in any shares
held by the trust company. Mr. Atkins is also the Chairman and a 20 percent
owner of Sheridan Realty Advisors, LLC.
We hired Sheridan Development, LLC to manage the Keystone Buildings for a
one-year term commencing on July 1, 1999. During that term, Sheridan Development
was responsible for all aspects of the management and operation of the Keystone
Buildings and coordinating the leasing of the Keystone Buildings. As
compensation, we pay a management fee equal to five percent of the gross monthly
rental income received from the Keystone Buildings. This management agreement
was terminated as of January 1, 2000 when Sheridan Realty Advisors became the
property manager for all of our properties other than the Texas properties. See
below, "--Agreement With Sheridan Realty Advisors, LLC".
After we purchased the Keystone Buildings, Charles K. Knight purchased from
the Crawford, Wilson, Ryan & Agulnick, P.C. Profit Sharing Plan (the "Plan"), a
partner in Sheridan Realty Partners, L.P., the 5,343 shares to be received by
the Plan as a portion of the purchase price. Mr. Knight paid the Plan $4.40 per
share.
Also, after our purchase of the Keystone Buildings, William T. Atkins and
the Alexander S. Hewitt Trust purchased 3,589 shares of common stock from John
B. Greenman at a price of $4.75 per share. John Greenman is an employee of
Sheridan Realty Advisors, LLC. Alexander S. Hewitt also received 53,079 of the
shares of common stock paid by us as a portion of the purchase price for the
Keystone Buildings. The Alexander S. Hewitt Revocable Trust is a 20 percent
owner of Sheridan Realty Corp. A trust company for which Mr. Hewitt serves as a
director serves as trustee for trusts that received an aggregate of 83,185
additional shares of common stock. Mr. Hewitt is also a beneficiary of some of
these trusts. For additional information concerning the relationships of Messrs.
Greenman, Hewitt and Ikenberry with AmeriVest and various Sheridan entities, see
below, "--Relationships Among AmeriVest And Various Sheridan Group Entities".
In order to pay a portion of the purchase price for the Panorama Falls
Property, on May 25, 2000, we borrowed $225,000 from the Alexander S. Hewitt
Trust, using $200,000 in connection with the purchase. This loan accrued
interest at the prime rate, was due on demand after one year or five days after
closing of our August 2000 public offering of Units of Common Stock and Warrants
with proceeds to us of at least $2 million, and was unsecured. We had the right
to prepay this loan at any time without penalty and did so in August 2000 with
the proceeds of our public offering. Alexander S. Hewitt is a shareholder and
officer of AmeriVest, an owner and officer of Sheridan and a trustee and
beneficiary of the Alexander S. Hewitt Trust.
Purchase Of Sheridan Investments, LLC Interest
Effective July 1, 2000, we purchased, through our wholly owned subsidiary
AmeriVest Inverness Inc., from Sheridan Realty Partners, LP, a 9.639 percent
preferred limited liability company membership interest in Sheridan Investments,
LLC (the "LLC Interest"). Sheridan Investments owns all the ownership interests
of Sheridan Plaza at Inverness LLC, whose sole asset is a fee simple interest in
two multi-tenant office buildings located at 383 and 385 Inverness Drive South
in Denver, Colorado. The purchase price of the Sheridan Investments interest was
$658,918 payable in the form of 65,892 units, with each unit consisting of two
shares of our common stock and one redeemable common stock purchase warrant to
purchase one share of our common stock for $5.00 per share until July 12, 2005.
14
The agreement also provided for a reduction to the purchase price if, on or
before October 31, 2000, a member of Sheridan Investments sells a preferred
limited liability company membership interest at a price less than the purchase
price paid by us or Sheridan Investments issues additional preferred limited
liability company membership interests with substantially the same terms as the
Sheridan Investments interest at a price less than the purchase price paid by
us. No such transaction occurred and no reduction in the purchase price took
place. For information on our agreement to purchase 100 percent of Sheridan
Plaza at Inverness LLC, see below "--Purchase Of Sheridan Plaza At Inverness
LLC". For additional information on relationships of AmeriVest and Sheridan
Investments, LLC and Sheridan Plaza at Inverness LLC, see below,
"--Relationships Among AmeriVest And Various Sheridan Group Entities".
Purchase of Sheridan Plaza at Inverness LLC
In April 2001, we entered into an agreement with Sheridan Investments, LLC
for our AmeriVest Inverness Inc. subsidiary to purchase all the ownership
interests of Sheridan Plaza at Inverness LLC. The purchase price of $6,928,646
is to be paid by having Sheridan Investments, LLC redeem our 9.639 percent
preferred limited liability company membership interest in Sheridan Investments,
LLC and by our issuing 1,121,209 shares of common stock at the rate of $5.55 per
share. We are seeking shareholder approval for this transaction, which approval
will be solicited pursuant to a proxy statement meeting the requirements of the
SEC. For additional information on relationships of AmeriVest and Sheridan
Investments, LLC and Sheridan Plaza at Inverness LLC, see below,
"--Relationships Among AmeriVest And Various Sheridan Group Entities".
Purchase of Key Man Life Insurance Policy
On December 18, 2000, we authorized the purchase from Sheridan Investments,
LLC of the key man life insurance policy maintained on the life of William T.
Atkins, our Chairman and Chief Executive Officer. We agreed to pay $79,375.99
for this policy, which is the excess of the cash value of the policy over the
total loan outstanding on the policy. We agreed to pay this purchase price by
issuing shares of our restricted common stock valued at a price equal to the
volume-weighted average trading price of the Company's common stock for the five
most recent trading days preceding December 18, 2000. This resulted in a
purchase price of $4.868 per share and a total purchase price of 16,305 shares.
For additional information on relationships of AmeriVest and Sheridan
Investments, LLC, see below, "--Relationships Among AmeriVest And Various
Sheridan Group Entities".
Agreement With Sheridan Realty Advisors, LLC
Effective January 1, 2000, we entered into an agreement with Sheridan
Realty Advisors, LLC for it to assume responsibility for our day-to-day
operations. Sheridan Realty Advisors manages our assets and assists and advises
our Board on real estate acquisitions and investment opportunities. We pay
Sheridan Realty Advisors an administrative fee, a property management and
accounting fee and a construction management fee for these services. Our
agreement with Sheridan Realty Advisors provided that the costs for these
services in fiscal 2000 would be no greater than the costs incurred by us for
providing these services ourselves or in obtaining them from outside sources in
fiscal year 1999. In addition, Sheridan received incentive compensation in the
form of five-year warrants to purchase up to 750,000 shares of our common stock
at $5 per share and an advisory fee based on new real property acquisitions.
Issuance of the warrants was approved by our shareholders in the June 6, 2000
annual meeting of shareholders. Sheridan Realty Advisors, LLC plans to utilize
the warrants as incentive compensation to its employees and employees of
AmeriVest in amounts and subject to vesting requirements to be determined. For
additional information on relationships of AmeriVest and Sheridan Realty
Advisors, LLC, see below, "--Relationships Among AmeriVest And Various Sheridan
Group Entities" and above "Executive Compensation And Termination Of Employment
And Change-In-Control Arrangements--Employment Agreement With James F. Etter".
15
Relationships Among AmeriVest And Various Sheridan Group Entities
All of our executive officers and three of our directors have been
officers, directors or investors in various real estate investment companies,
which are related to our advisor. These partnerships, corporations and limited
liability companies have collectively been known as The Sheridan Group of
companies. The following table describes our officers and directors who have
relationships with The Sheridan Group of companies:
Name Positions With AmeriVest
---- ------------------------
William T. Atkins Chief Executive Officer, Director and Chairman of
the Board
Charles K. Knight President and Director
John Greenman Vice President
Alexander Hewitt Vice President and Secretary
D. Scott Ikenberry Chief Financial Officer
Robert W. Holman Director
The following table describes the various Sheridan Group entities which
have previously had or currently have a relationship with AmeriVest as described
elsewhere in this section, the nature of that relationship and the ownership of
officers, directors and principal shareholders in each entity.
Sheridan Group Entity Primary Relationship to Ownership of Sheridan Group Entity Management of Sheridan
AmeriVest Entity
--------------------------------------------------------------------------------------------------------------------------
Sheridan Realty Advisors, Advisor and Property William Atkins - 20% Mr. Atkins - Chairman
LLC Manager (1) Charles Knight - 20% Mr. Hewitt - Vice
John Greenman - 20% Chairman
Hewitt Trust - 20% Mr. Knight - President
D. Scott Ikenberry - 20% Mr. Greenman - Senior
Vice President
Mr. Ikenberry - Chief
Financial Officer
Sheridan Realty Partners, 6.3% shareholder (2) Sheridan Realty Corp. - 1% general Sheridan Realty Corp. -
L.P. partnership interest and 3.1335% limited General Partner
partnership interest
Alexander Hewitt - beneficiary of two
trusts which own 20.15%
Sheridan Realty Corp. None William Atkins - 16.5% Mr. Hewitt - Executive
Hewitt Trust - 20.0% Vice President
Mr. Holman - Director
Sheridan Investments, LLC 0.51% shareholder (3) Atkins Ltd. Partnership - 14.056%
Hewitt Trust - 16.064%
Sheridan Management Corp. - 8.835%
Sheridan Development, LLC - incentive
interest (4)
Sheridan Management Corp. None William Atkins - 50%
Hewitt Trust - 50%
Sheridan Development, LLC None William Atkins - 25.05% Mr. Atkins - Co-Manager
Hewitt Trust - 25.05% and President
John Greenman - 20.00% Mr. Knight - Vice
D. Scott Ikenberry - 15.00% President
Charles K. Knight - 14.90%
Sheridan Plaza at None (5) Sheridan Investments, LLC - 100%
Inverness, LLC
16
Notes:
(1) Sheridan Realty Advisors receives an administrative fee, a property
management and accounting fee, a construction management fee and
incentive compensation in the form of warrants to purchase up to
750,000 shares of AmeriVest common stock at $5 per share through
December 2005. See, "--Agreement With Sheridan Realty Advisors, LLC".
(2) Includes 197,676 shares issued in connection with the acquisition of a
9.639 percent limited liability company interest in Sheridan
Investments, LLC and additional shares from reinvestment of dividends
through our dividend reinvestment plan (DRIP). This interest will be
redeemed as part of the purchase price for our acquisition of Sheridan
Plaza at Inverness, LLC. See, "--Asset Purchases--Purchase Of Sheridan
Investments, LLC Interest" and "--Asset Purchases--Purchase Of
Sheridan Plaza At Inverness, LLC". We purchased the Keystone Buildings
from Sheridan Realty Partners effective July 1, 1999. See, "--Asset
Purchases--Purchase Of Keystone Buildings".
(3) Includes 16,305 shares issued in connection with the acquisition of a
key man life insurance policy on our Chairman and CEO. See, "--Asset
Purchases--Purchase Of Key Man Life Insurance Policy". The proposed
acquisition of Sheridan Plaza at Inverness by AmeriVest for 1,121,209
shares of AmeriVest common stock is not reflected in the table.
Sheridan Investments, LLC is the owner of Sheridan Plaza at Inverness,
LLC. See, "--Asset Purchases--Purchase Of Sheridan Plaza at Inverness,
LLC." After the acquisition, assuming no additional common shares
outstanding other than the shares issued to Sheridan Investments,
Sheridan Investments will beneficially own 26.5 percent of AmeriVest
for purposes of SEC regulations. Because of Internal Revenue Code
rules concerning the determination of ownership for purposes of
qualifying as a REIT differ from the SEC beneficial ownership rules,
this beneficial ownership will not cause a violation of IRS rules
concerning REIT share ownership.
(4) Sheridan Development receives a preferred distribution equal to 33 1/3
percent of distributions once other members have received a return of
their original capital contribution plus their preferred return.
(5) After the transaction described in note (3) above, this entity will be
100 percent owned by AmeriVest. See, "--Asset Purchases--Purchase Of
Sheridan Plaza at Inverness, LLC".
For a description of the beneficial ownership of our shares by each of Messrs.
Atkins, Hewitt and Knight and Sheridan Realty Partners, L.P., see above,
"Beneficial Owners Of Securities".
17
Conflicts Of Interest Policies
The Board and our officers are subject to certain provisions of Maryland
law which are designed to eliminate or minimize the effects of certain potential
conflicts of interest. In addition, the bylaws provide that any transaction
between us and an interested party must be fully disclosed to the Board, and
that a majority of the directors not otherwise interested in the transaction
(including a majority of independent directors) must make a determination that
the transaction is fair, competitive and commercially reasonable and on terms
and conditions not less favorable to us than those available from unaffiliated
third parties.
All future transaction between us and our officers, directors and five
percent shareholders will be on terms no less favorable than could be obtained
from independent third parties and will be approved by a majority of
independent, disinterested directors of AmeriVest. We believe that by following
these procedures, AmeriVest will be able to mitigate the possible effects of
these conflicts of interest.
Other than as described in this section, there are no material
relationships between us and our directors, executive officers or known holders
of more than five percent of our common stock.
PROPOSAL NO. 2 - TO APPROVE ISSUANCE OF SHARES OF COMMON STOCK
The Board Of Directors recommends that the shareholders approve a proposal
for AmeriVest to issue shares of common stock to Sheridan Investments, LLC
("Sheridan Investments") as a portion of the purchase price to acquire all the
ownership interests of Sheridan Plaza at Inverness, LLC ("Plaza"). Shareholder
approval by a majority of votes cast in person or by proxy is required under the
rules of the American Stock Exchange because some of the owners of Sheridan
Investments include certain of our officers and directors. See above,
"Transactions Between AmeriVest And Related Parties".
Interest To Be Acquired
Effective April 1, 2001, we entered into a purchase and sale agreement (the
"Agreement") with Sheridan Investments, which owns 100 percent of the limited
liability company membership interests in Plaza, AmeriVest Inverness Inc. (the
"Purchaser"), a wholly-owned subsidiary of AmeriVest and owner of a 9.639
percent preferred limited liability company membership interest in Seller, and
Plaza. Plaza's sole asset is a fee simple interest in two multi-tenant office
buildings located at 383 and 385 Inverness Drive South, Denver, Colorado,
consisting of approximately 118,000 total rentable square feet on approximately
6.7 acres of land with 403 total parking spaces, including 78 underground
parking spaces. These buildings are known as "Sheridan Plaza at Inverness" and
are referred to in this proxy statement as the "Property".
We do not have any plans for major capital improvements for the Property
and intend to hold the Property for income purposes. The Property must compete
with several mid-rise office buildings in the area, but there is no dominant
owner or building.
18
The occupancy rate for the Property at December 31, 2000 was 100 percent.
For 2000, the average effective annual rent per square foot for the Property was
$21.68. The following is a schedule as of March 1, 2001 of lease expirations for
the Property for the next ten years:
Percentage of
Number of Leases Total Area of Annual Revenue of Gross Rents On
That Will Expire Expiring Leases Expiring Leases Expiring Leases
---------------- --------------- --------------- ---------------
2001 (after March 1) 0 0 0 0
2002 6 10,738 254,690 9.3%
2003 7 13,805 326,042 11.9%
2004 14 38,006 878,681 32.2%
2005 15 56,171 1,272,710 46.6%
2006 and after 0 0 0 0
Terms Of Mortgage. Plaza is responsible for the payment of the Mortgage
secured by the Property, the terms of which include the following:
o Principal amount of $14,975,000 with interest from December 15, 2000
through and including January 10, 2006 at the fixed rate of 7.90
percent.
o Monthly installments of principal and interest of approximately
$108,840, calculated on a 30-year amortization schedule.
o Payment in full due on January 10, 2006.
General Nature Of Business Conducted In Sheridan Plaza at Inverness
The Property is leased to various business entities for general office
space purposes. After completing the purchase, we intend to continue to lease
the Property for general office space purposes and to hold the Property for
income from those leasing activities.
Contact Information
The following are the complete names, addresses and telephone numbers of
each of the principal executive offices of the parties to the Agreement:
AmeriVest Inverness Inc.
c/o President
1780 South Bellaire Street, Suite 515
Denver, Colorado 80222
Telephone: (303) 297-1800
Sheridan Investments, LLC
c/o Managers
1780 South Bellaire Street, Suite 515
Denver, Colorado 80222
Telephone: (303) 297-1800
Sheridan Plaza at Inverness, LLC
c/o Sheridan Investments, LLC
1780 South Bellaire Street, Suite 515
Denver, Colorado 80222
Telephone: (303) 297-1800
AmeriVest Properties Inc.
1780 South Bellaire Street, Suite 515
Denver, Colorado 80222
Telephone: (303) 297-1800
19
Summary Of Proposed Transaction
The following summary of the terms of the purchase and sale agreement is
qualified by reference to the Agreement:
o Purchase Price. The purchase price for Plaza is $6,928,646 payable as
follows: $705,934 by delivering the LLC Interest and the remaining
amount payable in 1,121,209 shares of our common stock, $.001 par
value, at the rate of $5.55 per share (the "AmeriVest Shares"). If the
shareholders do not approve the issuance of the AmeriVest Shares, the
Agreement terminates.
o Contingencies. The purchase of Plaza is contingent upon the occurrence
of the following:
o Our satisfaction with the review of the Property and its
operations, including the leases for Property, the Seller's
financial records concerning Plaza and the Property, and other
matters.
o Receipt of our shareholders' approval to the issuance of the
shares for the purchase of Plaza.
o Closing. The purchase of the Property is scheduled to close as soon as
practicable after the approval of the majority of our shareholders
sought in this proxy statement.
o Registration Rights.
o Demand: after one year from the closing date, Seller, or if the
shares issued as part of the purchase price have been transferred
to Seller's members, holders of at least 50 percent of the shares
issued as part of the purchase price, may request that we file a
registration statement to cover the resale of the shares; or
o Piggyback: anytime after one year and prior to the second
anniversary of the closing date, if we register the sale of
shares for our own account, we will register the transfer of any
of the shares issued as part of the purchase price for the
account of Seller or its members.
o Dividend Reinvestment Plan. Seller will enroll 50 percent of the
AmeriVest Shares in our Dividend Reinvestment Plan for a period of at
least two years after the closing date.
20
Determination Of Purchase Price; Appraisal
The purchase price of the Property was determined by negotiations among the
Purchaser, the Seller, Plaza and us. The purchase price was based on the excess
of Plaza's assets over its liabilities as shown on its March 31, 2001 balance
sheet. In evaluating the Property and negotiating the purchase price, we
considered the location and nature of the Property, the age and quality of the
buildings, local economic conditions, and the flexibility of paying a portion of
the purchase price in shares of our common stock. In addition, we reviewed a
copy of a December 2000 appraisal of $22 million for the Property from Cushman
and Wakefield of Colorado, Inc., a professional appraiser practicing in the
Colorado area.
Reasons For Purchasing The Property
We determined to purchase the Property because of the history of
performance of the buildings and the fit of the buildings in our profile of
acquiring small to medium sized office buildings. We also concluded that our
ability to purchase the Property utilizing stock, and without having to pay cash
as part of the purchase price, was beneficial to our shareholders and to
AmeriVest. See also, "--Determination Of Purchase Price; Appraisal" above.
Accounting Treatment Of Purchase Of The Property
The purchase of the Property will be treated as a purchase for accounting
purposes, utilizing the historical adjusted cost basis from the previous owner.
Such treatment is required because the purchaser and seller are deemed to be
related parties. As a result, the purchase price and expenses incurred by us in
connection with the purchase of the Property that relate to the buildings
themselves will be depreciated on a straight-line basis over a term of 38 years.
Federal Income Tax Consequences Of Purchase Of The Property
The purchase of the Property will not result in a taxable event for us
under federal income tax laws. The basis of the Property for federal income tax
purposes will be recorded using a carryover basis for the 9.639% currently
owned, with the remaining 90.361% recorded at fair market value.
Real Estate Taxes
For 2000, the real estate taxes for the Property were $286,893, which is
equal to 10.8 percent of the assessed value of the Property for real estate tax
purposes as determined by the Douglas County Assessors Office.
No Federal Or State Regulatory Requirements
We are not aware of any federal or state regulatory requirements that must
be met in order to acquire the Property, other than compliance with the
securities laws with respect to the solicitation of proxies and the issuance of
the shares for a portion of the purchase price.
Reports, Opinions, And Appraisals
The appraisal of the Property dated March 1, 2001 (the "Appraisal")
provided by Sheridan Investments to Purchaser was, to the best of Sheridan
Investments' knowledge, prepared by Cushman and Wakefield of Colorado, Inc. (the
"Appraiser") in accordance with industry standards and accurately reflects the
fair market value of the Property as of the date of the Appraisal. The Property
was inspected and valued as of March 2, 2001. The purpose of the Appraisal was
to conclude the market value of the Property. The Appraiser used a cost
approach, sales comparison approach and income capitalization approach and
concluded a market value of the Property using an income capitalization approach
of $22,000,000.
21
The Appraisers that inspected the Property and prepared the Appraisal
report is a Member of the Appraisal Institute and Directors of Cushman and
Wakefield of Colorado, Inc., Valuation Advisory Services. Together, the
Appraisers have more than 25 years of appraisal and real estate experience.
In connection with prior financings, the Appraiser previously appraised the
Property in October 1999 for Heller Financial, Inc. and in November 2000 for
Lend Lease Mortgage Capital, L.P. The Appraiser has also appraised Sheridan
Center, another office complex owned by AmeriVest, for the lender. The Appraiser
was paid a fee of $2,500 for the Appraisal.
Related Transactions
Sheridan Investments, LLC is a 0.51 percent shareholder of AmeriVest and is
an affiliate of Sheridan Realty Advisors, LLC, our advisor, and an affiliate of
our executive officers. Further information concerning transactions between and
among the parties to the Agreement in the last two years is described above
under "Proposal No. 1--Election of Directors--Relationships Among AmeriVest And
Various Sheridan Group Entities".
After giving effect to the issuance of additional shares of common stock in
the proposed acquisition and assuming no other issuance of shares of common
stock, Sheridan Investments, LLC will own 1,137,514 shares, or approximately
26.5 percent of our total outstanding shares. When added to the shares owned by
other Sheridan affiliates, including Sheridan Realty Partners, L.P., and shares
owned directly or indirectly by individual members of Sheridan Realty Advisors,
Sheridan and its affiliates will own 1,539,654 shares, or approximately 35.9
percent of our outstanding shares. Because Internal Revenue Code rules
concerning the determination of ownership for purposes of qualifying as a REIT
differ from the SEC beneficial ownership rules, this beneficial ownership will
not cause a violation of IRS rules concerning REIT share ownership.
Dissenters Rights
Dissenters to the approval of the issuance of the shares have no appraisal
rights.
Required Vote; Board Recommendation
The approval of a majority of the shares represented at the annual meeting
will be required to approve the issuance of shares to Plaza.
The Board Of Directors unanimously recommends a vote "FOR" the proposal to
approve the issuance of shares to Sheridan Investments, LLC.
Plaza Financial Statements And Pro Forma Financial Information
The following historical financial statements of Plaza were prepared by
Plaza and provided to AmeriVest for this proxy statement. The pro forma
financial information represents the historical financial information of
AmeriVest as of December 31, 2000 as adjusted for the acquisition of Plaza and
was prepared by AmeriVest based upon the historical financial statements of
AmeriVest and Plaza.
22
FINANCIAL INFORMATION
INDEX
(a) Financial Statements of Real Estate Properties Acquired:
Report of Independent Public Accountants F-1
Statements of Revenue and Certain Expenses for the years ended
December 31, 2000 and 1999 F-2
Notes to Statements of Revenue and Certain Expenses F-3
(b) Unaudited Pro Forma Financial Information:
Pro Forma Financial Information F-5
Unaudited Pro Forma Consolidated Balance Sheet as of
December 31, 2000 F-6
Unaudited Pro Forma Consolidated Statement of Operations for
the year ended December 31, 2000 F-7
Notes to Unaudited Pro Forma Consolidated Financial Statements F-8
(c) Statement of Estimated Taxable Operating Results and Cash to be Made
Available by Operations (unaudited) F-10
Note to Statement of Estimated Taxable Operating Results and
Cash to be Made Available by Operations (unaudited) F-11
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Management of
Sheridan Plaza at Inverness, LLC:
We have audited the accompanying statements of revenue and certain expenses of
Sheridan Plaza at Inverness, LLC (see Note 1) for the years ended December 31,
2000 and 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. 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 audits provide a reasonable basis for our
opinion.
The statements of revenue and certain expenses have been prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission and are not intended to be a complete presentation of the
Company's revenue and expenses and/or financial position.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the revenue and certain expenses of Sheridan Plaza at
Inverness, LLC for the years ended December 31, 2000 and 1999, in conformity
with accounting principles generally accepted in the United States.
/s/ Arthur Andersen LLP
-----------------------
Arthur Andersen LLP
Denver, Colorado,
March 23, 2001.
F-1
SHERIDAN PLAZA AT INVERNESS, LLC
STATEMENTS OF REVENUE AND CERTAIN EXPENSES
For the Years Ended
December 31,
---------------------------
2000 1999
---------- ----------
REVENUE:
Rental revenue $2,574,343 $ 379,631
Other revenue 855 3,153
---------- ----------
Total revenue 2,575,198 382,784
---------- ----------
CERTAIN EXPENSES:
Repairs and maintenance 210,871 39,917
Utilities 174,710 31,387
Property taxes 286,892 60,766
Property management fees 124,540 7,672
Operating services 75,700 48,713
---------- ----------
Total expenses 872,713 188,455
---------- ----------
EXCESS REVENUE OVER CERTAIN EXPENSES $1,702,485 $ 194,329
========== ==========
The accompanying notes are an integral part of these financial statements.
F-2
SHERIDAN PLAZA AT INVERNESS, LLC
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
DECEMBER 31, 2000 AND 1999
NOTE 1 - BASIS OF PRESENTATION
The accompanying statements of revenue and certain expenses reflect the
operations of Sheridan Plaza at Inverness, LLC ("Sheridan Plaza"). Sheridan
Plaza owns two office buildings located in Denver, Colorado (the "Property").
Construction of the Property began in 1998 and was complete in May 1999. The
Property contains approximately 119,000 net rentable square feet and is located
on approximately 6.7 acres of land. As of December 31, 2000 and 1999, the
Property had an occupancy percentage of 100% and approximately 61%,
respectively.
Sheridan Plaza is expected to be acquired by a subsidiary of AmeriVest
Properties Inc. and subsidiaries ("AmeriVest") from its parent company, Sheridan
Investments, LLC ("Sheridan Investments"), a related party, in June 2001.
The accounting records of Sheridan Plaza are maintained on the accrual basis.
The accompanying statements of revenue and certain expenses are prepared
pursuant to the rules and regulations of the Securities and Exchange Commission,
and 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 accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of revenue and expenses during
the reporting period. The ultimate results could differ from those estimates.
NOTE 2 - OPERATING LEASES
Sheridan Plaza's revenue is obtained from tenant rental payments as provided for
under non-cancelable operating leases, many of which are renewable.
Future minimum rentals on these leases, excluding tenant reimbursements of
operating expenses, as of December 31, 2000, are as follows:
Year Ending
December 31:
------------
2001 $ 2,806,196
2002 2,818,198
2003 2,312,601
2004 2,032,718
2005 554,486
-----------
$10,524,199
===========
F-3
One tenant, a law firm, accounted for approximately 10% and 12% of the revenues
for the years ended December 31, 2000 and 1999, respectively, and accounts for
approximately 12% of the future minimum rentals above.
NOTE 3 - RELATED PARTY TRANSACTIONS
Sheridan Plaza pays a management fee for property management services. Sheridan
Realty Advisors, LLC ("SRA") was the property manager in 2000 and Sheridan
Development, LLC ("SDC") was the property manager in 1999. Both SRA and SDC are
principally owned by two individuals who are founding members of Sheridan
Investments. The fee is 5% of gross rentals and other receipts from the
operations of the Property. During 2000 and 1999, Sheridan Plaza incurred
$124,540 and $7,672, respectively, in property management fees.
Certain costs of Sheridan Plaza, including operating, payroll and benefit costs,
were paid on its behalf by SRA and SDC in 2000 and 1999, respectively. These
costs were allocated to Sheridan Plaza and recorded at cost. For the years ended
December 31, 2000 and 1999, these costs totaled $73,405 and $16,290,
respectively.
NOTE 4 - SUBSEQUENT EVENT (UNAUDITED)
On May 1, 2001, AmeriVest announced an agreement with Sheridan Investments to
purchase 100% of the ownership interests of Sheridan Plaza, effective April 1,
2001. For accounting purposes, the purchase price for Sheridan Plaza is
$7,085,613, payable as follows: $705,934 by AmeriVest delivering its 9.639%
preferred limited liability company membership interest in Sheridan Investments
and $6,379,679 payable in 1,121,209 shares of AmeriVest common stock, $001 par
value, at a rate of $5.69 per share (based on an average market price of the
shares over a period of several days before and after the date of the
announcement of the acquisition). The agreement is contingent upon receipt of
majority shareholder approval, and is scheduled to close as soon as practicable
after such approval is obtained.
F-4
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited pro forma consolidated balance sheet presents the
historical financial information of AmeriVest as of December 31, 2000, as
adjusted for the acquisition of Sheridan Plaza, as if the acquisition had
occurred on December 31, 2000.
The accompanying unaudited pro forma consolidated statement of operations for
the year ended December 31, 2000 combines the historical operations of AmeriVest
with the historical operations of Sheridan Plaza as if the acquisition had
occurred on January 1, 2000.
The unaudited pro forma consolidated financial statements have been prepared by
AmeriVest management based upon the historical financial statements of AmeriVest
and Sheridan Plaza. 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, 2000 included in
AmeriVest's Form 10-KSB/A-2 filed for the year ended December 31, 2000.
F-5
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000
(Unaudited)
AmeriVest Sheridan Pro Forma Pro Forma
(Historical) Plaza Adjustments Combined
------------ ------------ ------------ ------------
ASSETS
Investment in Real Estate
Land $ 8,761,566 $ 1,526,331 -- $ 10,287,897
Building and improvements 32,210,274 14,257,505 1,932,048 (a) 48,399,827
Furniture, fixtures and equipment 68,793 73,123 (14,668)(a) 127,248
Tenant improvements 645,429 2,692,831 (2,692,831)(a) 645,429
Tenant leasing commissions 585,887 682,660 (682,660)(a) 585,887
Less: accumulated depreciation and
amortization (3,349,569) (1,458,111) 1,458,111 (a) (3,349,569)
------------ ------------ ------------ ------------
Net Investment in Real Estate 38,922,380 17,774,339 -- 56,696,719
Cash and cash equivalents 1,046,976 102,196 -- 1,149,172
Investment in unconsolidated affiliate, net 584,640 -- (584,640)(b) --
Accounts receivable 52,328 149,052 -- 201,380
Deferred rent receivable 524,581 313,565 -- 838,146
Deferred financing costs, net 411,634 168,249 -- 579,883
Prepaid expenses, escrows and other assets 821,258 298,424 -- 1,119,682
------------ ------------ ------------ ------------
Total Assets $ 42,363,797 $ 18,805,825 $ (584,640) $ 60,584,982
============ ============ ============ ============
LIABILITIES
Mortgage loans and notes payable $ 28,122,856 $ 14,975,000 -- $ 43,097,856
Accounts payable and accrued expenses 906,902 269,133 -- 1,176,035
Accrued interest 118,564 -- -- 118,564
Accrued real estate taxes 747,647 286,893 -- 1,034,540
Prepaid rents and security deposits 737,207 321,882 -- 1,059,089
Dividends payable 372,118 -- -- 372,118
------------ ------------ ------------ ------------
Total Liabilities 31,005,294 15,852,908 -- 46,858,202
------------ ------------ ------------ ------------
OWNERS' EQUITY
Members' equity -- 2,952,917 (2,952,917)(c) --
Common stock 2,977 -- 1,121 (d) 4,098
Capital in excess of par value 11,879,099 -- 6,378,558 (e) 18,257,657
Distributions in excess of accumulated
earnings (523,573) -- (4,011,402)(f) (4,534,975)
------------ ------------ ------------ ------------
Total Owners' Equity 11,358,503 2,952,917 (584,640) 13,726,780
------------ ------------ ------------ ------------
Total Liabilities and Owners' Equity $ 42,363,797 $ 18,805,825 $ (584,640) $ 60,584,982
============ ============ ============ ============
See notes to the pro forma consolidated financial statements.
F-6
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2000
(Unaudited)
AmeriVest Sheridan Pro Forma Pro Forma
(Historical) Plaza Adjustments Combined
------------ ------------ ------------ ------------
REAL ESTATE OPERATING REVENUE
Rental revenue
Commercial properties $ 6,360,902 $ 2,574,343 $ -- $ 8,935,245
Storage properties 861,535 -- -- 861,535
------------ ------------ ------------ ------------
7,222,437 2,574,343 -- 9,796,780
------------ ------------ ------------ ------------
REAL ESTATE OPERATING EXPENSES
Property Operating Expenses
Operating expenses 1,946,633 408,614 -- 2,355,247
Real estate taxes 668,224 286,892 -- 955,116
Management fees 344,636 124,540 -- 469,176
General and administrative 517,019 52,667 17,823(g) 587,509
Severance expense 255,442 -- -- 255,442
Interest 2,167,869 -- 1,606,059(h) 3,773,928
Depreciation and amortization 1,205,795 -- 465,489(i) 1,671,284
------------ ------------ ------------ ------------
7,105,618 872,713 2,089,371 10,067,702
------------ ------------ ------------ ------------
OTHER INCOME
Interest income 55,874 855 -- 56,729
Equity in loss of unconsolidated affiliate (52,808) -- 52,808(b) --
------------ ------------ ------------ ------------
3,066 855 52,808 56,729
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE GAIN ON SALE OF
REAL ESTATE 119,885 1,702,485 (2,036,563) (214,193)
------------ ------------ ------------ ------------
GAIN ON SALE OF REAL ESTATE 2,556,839 -- -- 2,556,839
NET INCOME $ 2,676,724 $ 1,702,485 $ (2,036,563) $ 2,342,646
============ ============ ============ ============
NET INCOME PER COMMON SHARE
Basic and diluted $ 1.07 $ 0.63
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic 2,492,584 3,711,731
============ ============
Diluted 2,495,919 3,715,066
============ ============
See notes to the pro forma consolidated financial statements.
F-7
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 Sheridan Plaza by AmeriVest.
The accompanying unaudited pro forma consolidated balance sheet presents the
historical financial information of AmeriVest as of December 31, 2000, as
adjusted for the acquisition of Sheridan Plaza, as if the acquisition had
occurred on December 31, 2000.
The accompanying unaudited pro forma consolidated statement of operations for
the year ended December 31, 2000 combines the historical operations of AmeriVest
with the historical operations of Sheridan Plaza as if the acquisition had
occurred on January 1, 2000.
NOTE 2 - PRO FORMA ADJUSTMENTS
The unaudited pro forma consolidated financial statements reflect the following
pro forma adjustments:
a) Real estate assets are recorded at the net book value at the date of
acquisition.
b) Represents the elimination of AmeriVest's 9.639% preferred limited
liability company membership interest at December 31, 2000 in Sheridan
Investments, the parent company of Sheridan Plaza, which was accounted for
under the equity method of accounting.
c) Elimination of Sheridan Plaza equity.
d) Par value of 1,121,209 shares of common stock issued as partial
consideration for the acquisition of Sheridan Plaza.
e) New shares issued in acquisition, valued at $5.69 per share, net of
$1,121 allocated to common stock.
f) Non-cash dividend resulting from acquisition being recorded at
historical cost for accounting purposes.
g) Actual professional fees incurred by Sheridan Plaza in 2000.
h) Actual interest expense incurred by Sheridan Plaza in 2000.
F-8
i) Pro forma depreciation expense to be recognized on the net book value of
the real estate assets acquired. Depreciation is calculated using a 38-year
remaining useful life.
NOTE 3 - INCOME PER SHARE
Pro forma income per common share for the year ended December 31, 2000 is
computed based on the weighted average number of common shares outstanding
during the year, assuming that the 1,121,209 shares issued in conjunction with
the acquisition of Sheridan Plaza were issued at the beginning of the year.
F-9
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
AND CASH TO BE MADE AVAILABLE BY OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(Unaudited)
The following represents an estimate of the taxable operating results and cash
to be made available by operations expected to be generated by AmeriVest
(including the operations of Sheridan Plaza) based upon the pro forma
consolidated statements of operations for the year ended December 31, 2000.
These estimated results do not purport to represent results of operations for
these properties in the future and were prepared on the basis described in the
accompanying notes, which should be read in conjunction herewith.
Revenue $9,796,780
Expenses:
Operating expenses 2,355,247
Real estate taxes 955,116
Management fees 469,176
General and administrative 587,509
Severance expense 255,442
Interest 3,773,928
Depreciation and amortization 453,553
----------
Total expenses 8,849,971
----------
Estimated Taxable Operating Gain 946,809
Add back depreciation and amortization 453,553
----------
Estimated Cash to be Made Available by Operations $1,400,362
==========
F-10
AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
NOTE TO STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
AND CASH TO BE MADE AVAILABLE BY OPERATIONS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
Depreciation has been estimated based upon an allocation of the purchase price
of Sheridan Plaza to land (12%) and building (88%) and assuming (for tax
purposes) a 39-year useful life applied on a straight-line method.
No income taxes have been provided because the Company is organized and operates
in such a manner so as to qualify as a Real Estate Investment Trust ("REIT")
under the provisions of the Internal Revenue Code (the "Code"). Accordingly, the
Company generally will not pay Federal income taxes provided that distributions
to its stockholders equal at least the amount of its REIT taxable income as
defined under the Code.
F-11
Required Vote; Board Recommendation
The Board Of Directors unanimously recommends a vote "FOR" the proposal to
approve the issuance of shares to Plaza.
PROPOSAL NO. 3 - TO RATIFY SELECTION OF ARTHUR ANDERSEN LLP AS AUDITORS
The Board Of Directors recommends that the shareholders vote in favor of
electing the certified public accounting firm of Arthur Andersen LLP of Denver,
Colorado as the auditors to audit financial statements, prepare tax returns, and
perform other accounting and consulting services for us for the fiscal year
ending December 31, 2001 or until the Board Of Directors, in its discretion,
replaces them.
On April 5, 2000, we dismissed Wheeler Wasoff, P.C. as our principal
accountant. On that date, AmeriVest engaged Arthur Andersen LLP as the principal
accountant to audit our financial statements. The Board Of Directors has
recommended and approved these actions.
The accountant's reports of Wheeler Wasoff, P.C. on our consolidated
financial statements as of and for the year ended December 31, 1999 did not
contain any adverse opinion or disclaimer of opinion, and were not qualified or
modified as to uncertainty, audit scope or accounting principles. There have
been no disagreements between management and Wheeler Wasoff, P.C. during our two
most recent fiscal years or during any subsequent period preceding Arthur
Andersen's engagement on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure of a nature which
if not resolved to the satisfaction of Wheeler Wasoff, P.C. would have caused it
to make reference in connection with its report to the subject matter of the
disagreements.
An affirmative vote of the majority of shares represented at the meeting is
necessary to ratify our selection of auditors. There is no legal requirement for
submitting this proposal to the shareholders; however, the Board Of Directors
believes that it is of sufficient importance to seek ratification. Whether the
proposal is approved or defeated, the Board may reconsider its selection of
Arthur Andersen LLP. It is expected that one or more representatives of Arthur
Andersen LLP will be present at the annual meeting and will be given an
opportunity to make a statement if they desire to do so and to respond to
appropriate questions from shareholders.
Independent Public Accountants
Audit Fees. AmeriVest agreed to pay Arthur Andersen LLP a total of $52,000
for professional services rendered for the audit of AmeriVest's financial
statements for the fiscal year ended December 31, 2000 and for their review of
the financial statements included in AmeriVest's Quarterly Reports on Form
10-QSB for the fiscal year ended December 31, 2000.
Financial Information Systems Design And Implementation Fees. Arthur
Andersen LLP did not perform any professional services during the fiscal year
ended December 31, 2000 relating to financial information systems design and
implementation.
All Other Fees. AmeriVest paid Arthur Andersen LLP a total of $34,400 for
all other services performed for AmeriVest during the fiscal year ended December
31, 2000.
23
Required Vote; Board Recommendation
The Board Of Directors unanimously recommends vote "FOR" the proposal to
ratify the selection of Arthur Andersen LLP as our certified independent
accountants.
OTHER BUSINESS
The Board Of Directors is not aware of any other matters that are to be
presented at the annual meeting, and it has not been advised that any other
person will present any other matters for consideration at the meeting.
Nevertheless, if other matters should properly come before the annual meeting,
the shareholders present, or the persons, if any, authorized by a valid proxy to
vote on their behalf, shall vote on such matters in accordance with their
judgment. See below, "Resolutions Proposed By Individual Shareholders;
Discretionary Authority To Vote Proxies".
VOTING PROCEDURES
Votes at the Annual Meeting Of Shareholders are counted by Inspectors Of
Election appointed by the chairman of the meeting. If a quorum is present, an
affirmative vote of a majority of the votes entitled to be cast by those present
in person or by proxy is required for the approval of items submitted to
shareholders for their consideration, including the election of directors, the
issuance of shares of common stock in connection with the acquisition of
Sheridan Plaza at Inverness, LLC, and the ratification of the selection of the
independent auditors, unless a different number of votes is required by statute
or our Articles Of Incorporation.
Abstentions by those present at the meeting are tabulated separately from
affirmative and negative votes and do not constitute affirmative votes. If a
shareholder returns his proxy card and withholds authority to vote for any or
all of the nominees, the votes represented by the proxy card will be deemed to
be present at the meeting for purposes of determining the presence of a quorum
but will not be counted as affirmative votes. Shares in the name of brokers that
are not voted are treated as not present.
RESOLUTIONS PROPOSED BY INDIVIDUAL SHAREHOLDERS;
DISCRETIONARY AUTHORITY TO VOTE PROXIES
In order to be considered for inclusion in our proxy statement and form of
proxy relating to the next annual meeting of shareholders following the end of
our 2001 fiscal year, proposals by individual shareholders must be received by
us no later than January 14, 2002. Shareholder proposals also must comply with
certain SEC rules and regulations.
In addition, the proxy solicited by the Board Of Directors for the next
annual meeting of shareholders will confer discretionary authority on any
shareholder proposal presented at that meeting, unless we are provided with
notice of such proposal no later than April 1, 2002.
24
AVAILABILITY OF REPORTS ON FORM 10-KSB
UPON WRITTEN REQUEST, AMERIVEST WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS
ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 TO ANY
OF AMERIVEST'S SHAREHOLDERS OF RECORD, OR TO ANY SHAREHOLDER WHO OWNS OUR COMMON
STOCK LISTED IN THE NAME OF A BANK OR BROKER AS NOMINEE, AT THE CLOSE OF
BUSINESS ON MARCH 10, 2001. ANY REQUEST FOR A COPY OF OUR ANNUAL REPORT ON FORM
10-KSB SHOULD BE MAILED TO THE SECRETARY, AMERIVEST PROPERTIES INC., 1780 SOUTH
BELLAIRE STREET, SUITE 515, DENVER, COLORADO 80222, (303) 297-1800.
INCORPORATION BY REFERENCE
We are incorporating by reference into this proxy statement the following
information included in a report that we filed with the SEC:
1. Items 6 (Management's Discussion And Analysis Of Financial Condition And
Results Of Operations) and 7 (Financial Statements) included in our Annual
Report on Form 10-KSB for the year ended December 31, 2000.
A copy of that report is being mailed to each shareholder with this proxy
statement.
This notice and proxy statement are sent by order of the Board Of
Directors.
Dated: May 15, 2001 Alexander S. Hewitt
Corporate Secretary
* * * * *
Appendix A
----------
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF
AMERIVEST PROPERTIES INC.
I. Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors of AmeriVest
Properties Inc. (the "Company") to assist the Board in fulfilling its
oversight responsibilities. The Audit Committee's primary duties and
responsibilities are as follows:
A. Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance.
B. Monitor the independence and performance of the Company's independent
auditors and the performance of the Company's accounting department.
C. Provide an avenue of communication among the independent auditors,
management, the Company's accounting department, and the Board of
Directors.
D. Recommend to the Board of Directors the independent auditors to be
employed by the Company.
E. Discuss the scope of the independent auditors' examination.
F. Review the financial statements and the independent auditors' report.
G. Review areas of potential significant financial risk to the Company.
H. Monitor compliance with legal and regulatory requirements.
I. Solicit recommendations from the independent auditors regarding
internal controls and other matters.
J. Establish guidelines for the Board of Directors to review related
party transactions for potential conflicts of interest.
K. Make recommendations to the Board of Directors.
L. Perform other related tasks as requested by the Board of Directors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct access to
the independent auditors as well as to anyone in the organization. The
Audit Committee has the ability to retain, at the Company's expense,
special legal, accounting, or other consultants or experts it deems
necessary in the performance of its duties.
A-1
II. Audit Committee Composition and Meetings
A. Audit Committee members shall meet the requirements of the American
Stock Exchange and/or any other exchange on which the Company's stock is
traded. The Audit Committee shall be comprised of three or more directors
as determined by the Board, each of whom shall be independent nonexecutive
directors, free from any relationship that would interfere with the
exercise of his or her independent judgment. All members of the Committee
shall have a basic understanding of finance and accounting and be able to
read and understand fundamental financial statements, and at least one
member of the Committee shall have accounting or related financial
management expertise.
B. Audit Committee members shall be appointed by the Board. If an
Audit Committee Chair is not designated or present, the members of the
Committee may designate a Chair by majority vote of the Committee
membership.
C. The Committee shall meet (either in person or telephonically) at
least four times annually, or more frequently as circumstances dictate. The
Audit Committee Chair shall prepare and/or approve an agenda in advance of
each meeting. The Committee should meet privately in executive session at
least annually with management, the Chief Financial Officer, the
independent auditors, and as a committee to discuss any matters that the
Committee or each of these groups believe should be discussed. In addition,
the Committee, or at least its Chair, should communicate with management
and the independent auditors quarterly to review the Company's financial
statements and significant findings based upon the auditors limited review
procedures.
III. Audit Committee Responsibilities and Duties
Review Procedures
-----------------
A. Review and reassess the adequacy of this Charter at least annually.
Submit the charter to the Board of Directors for approval and have the
document published at least every three years in accordance with
Securities And Exchange Commission ("SEC regulations").
B. Review the Company's annual audited financial statements prior to
filing or distribution. The review should include discussion with
management and independent auditors of significant issues regarding
accounting principles, practices, and judgments.
C. In consultation with the management, the independent auditors, and the
Chief Financial Officer, consider the integrity of the Company's
financial reporting processes and controls. Discuss significant
financial risk exposures and the steps management has taken to
monitor, control, and report such exposures. Review significant
findings prepared by the independent auditors and the Company's
accounting department together with management's responses.
D. Review with management the Company's quarterly financial results prior
to the release of earnings and/or the Company's quarterly financial
statements prior to filing or distribution. The Chair of the Committee
may represent the entire Audit Committee for purposes of this review.
A-2
Independent Auditors
--------------------
A. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee and the
Board of Directors shall be responsible for the selection, evaluation,
and replacement of the independent auditors. The Audit Committee shall
review the independence and performance of the auditors and annually
recommend to the Board of Directors the appointment of the independent
auditors or approve any discharge of auditors when circumstances
warrant.
B. Approve the fees and other significant compensation to be paid to the
independent auditors.
C. Review and discuss with the independent auditors all significant
relationships that the auditors and their affiliates have with the
Company and its affiliates in order to determine the auditors'
independence. The Audit Committee shall: (i) request, receive and
review on a periodic basis, a formal written statement from the
independent auditors delineating all relationships between the
independent auditors and the Company, (ii) discuss with the
independent auditors any disclosed relationships or services that may
impact the objectivity and independence of the independent auditors
and (iii) recommend that the Board take appropriate action in response
to the independent auditors' report to satisfy itself of the
independent auditors' independence.
D. Review the independent auditors' audit plan, including discussing
scope, staffing, locations, reliance upon management, and internal
audit and general audit approach.
E. Prior to releasing the year-end earnings, discuss the results of the
audit with the independent auditors. Discuss certain matters required
to be communicated to audit committees in accordance with AICPA SAS
61.
F. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in
its financial reporting.
Accounting Department and Legal Compliance
------------------------------------------
A. Review the budget, plan, changes in plan, activities, organizational
structure, and qualifications of the Company's accounting department,
as needed.
B. Review the appointment and performance of the Chief Financial Officer,
and review financial and accounting personnel succession planning with
the Company.
C. Review significant reports prepared by the Company's accounting
department together with management's response and follow-up to these
reports.
D. On at least an annual basis, review with the Company's counsel any
legal matters that could have a significant impact on the
organization's financial statements, the Company's compliance with
applicable laws and regulations, and inquiries received from
regulators or governmental agencies.
A-3
Other Audit Committee Responsibilities
--------------------------------------
A. Annually prepare a report to shareholders as required by the SEC. The
report should be included in the Company's annual proxy statement.
B. Perform any other activities consistent with this Charter, the
Company's bylaws, and governing law, as the Committee or the Board
deems necessary or appropriate.
C. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
D. Periodically perform a self-assessment of Audit Committee performance.
* * * * *
A-4
PROXY PROXY
For the Annual Meeting Of Stockholders of
AMERIVEST PROPERTIES INC.
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints William T. Atkins and Charles K. Knight, or
either of them, as proxies or __________________ (stockholders may strike the
person(s) designated by Management and insert the name and address of the
person(s) to vote the proxy and mail the proxy to the named proxy holder(s))
with power of substitution to vote all the shares of the undersigned with all of
the powers which the undersigned would possess if personally present at the
Annual Meeting Of Stockholders of AmeriVest Properties Inc. (the "Corporation"),
to be held at 10:00 a.m. on June 13, 2001, at Patton Boggs LLP, 1660 Lincoln
Street, Suite 1900, Denver, Colorado 80264, or any adjournments thereof, on the
following matters:
1. Election of the following directors:
FOR Robert W. Holman, Jr., Class 2 director [ ] WITHHOLD AUTHORITY to vote for Robert W. Holman, Jr. [ ]
FOR Charles K. Knight, Class 2 director [ ] WITHHOLD AUTHORITY to vote for Charles K. Knight [ ]
FOR Jerry J. Tepper, Class 2 director [ ] WITHHOLD AUTHORITY to vote for Jerry J. Tepper [ ]
2. Proposal to issue 1,121,209 shares of our common stock at $5.55 per share
as a portion of the purchase price for Sheridan Plaza at Inverness LLC
whose sole assets are two office buildings located in Denver, Colorado.
___ For ___ Against ___ Abstain
3. Proposal to ratify the selection of Arthur Andersen LLP to serve as our
independent certified accountants for the year ending December 31, 2001.
___ For ___ Against ___ Abstain
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Unless contrary instructions are given, the shares represented by this
proxy will be voted in favor of Items 1, 2 and 3. This proxy is solicited on
behalf of the Board Of Directors of AmeriVest Properties Inc.
(Continued and to be signed on the reverse side)
--------------------------------------------------------------------------------
5. In their discretion, the proxies are authorized to vote upon an adjournment
or postponement of the meeting.
[ ] YES [ ] NO [ ] ABSTAIN
6. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ]
Unless contrary instructions are given, the shares represented by this
proxy will be voted in favor of Items 1, 2, 3, 4 and 5. This proxy is solicited
on behalf of the Board of Directors of AmeriVest Properties Inc.
EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE, DATE, SIGN AND RETURN THIS
PROXY IN THE ACCOMPANYING ENVELOPE.
Dated:
----------------------------------------------------
Signature:
----------------------------------------------------
Signature:
----------------------------------------------------
Signature if held jointly
(Please sign exactly as shown on your stock certificate and
on the envelope in which this proxy was mailed. When signing
as partner, corporate officer, attorney, executor,
administrator, trustee, guardian, etc., give full title as
such and sign your own name as well. If stock is held
jointly, each joint owner should sign.)