UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-28378
AMREIT
(Name of Small Business Issuer in its Charter)
TEXAS 76-0410050
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
8 GREENWAY PLAZA, SUITE 824
HOUSTON, TX 77046
(Address of Principal Executive Offices) (Zip Code)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the issuer was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. [X] Yes [ ] No
As of March 31, 2004 there were 3,097,640 class A, 2,339,451 class B, and
3,007,529 class C common shares of beneficial interest of AmREIT, $.01 par value
outstanding.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMREIT AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 2004
(UNAUDITED)
ASSETS
Property:
Land $ 35,028,437
Buildings 33,906,917
Tenant improvements 611,982
-------------
69,547,336
Less accumulated depreciation and amortization (2,734,344)
-------------
Net real estate held for investment 66,812,992
Real estate held for sale, net 7,241,439
Net investment in direct financing leases held for investment 19,219,878
Cash and cash equivalents 2,179,002
Restricted cash 4,608,187
Accounts receivable 784,766
Accounts receivable - related party 1,696,214
Notes receivable 956,222
Escrow deposits 347,088
Prepaid expenses, net 230,221
Other assets:
Preacquisition costs 47,322
Loan acquisition cost, net of $147,867 in accumulated amortization 319,754
Leasing costs, net of $68,948 in accumulated amortization 392,123
Furniture, fixtures and equipment, net of $160,351 in accumulated depreciation 210,852
Accrued rental income 485,889
Intangible lease cost, net of $85,234 in accumulated amortization 591,740
Investment in non-consolidated affiliates 1,862,994
-------------
Total other assets 3,910,674
-------------
TOTAL ASSETS $ 107,986,683
=============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable $ 36,985,642
Accounts payable 2,744,535
Accounts payable - related party 4,840,356
Security deposit 97,040
Prepaid rent 6,561
-------------
TOTAL LIABILITIES 44,674,134
-------------
Minority interest 866,129
Shareholders' equity:
Preferred shares, $.01 par value, 10,000,000 shares authorized, none issued -
Class A Common shares, $.01 par value, 50,000,000 shares authorized,
3,122,767 shares issued 31,228
Class B Common shares, $.01 par value, 3,000,000 shares authorized,
2,339,451 shares issued 23,395
Class C Common shares, $.01 par value, 4,400,000 shares authorized,
3,007,529 shares issued 30,075
Capital in excess of par value 74,616,819
Accumulated distributions in excess of earnings (11,139,273)
Deferred compensation (954,945)
Cost of treasury shares, 25,127 shares (160,879)
-------------
TOTAL SHAREHOLDERS' EQUITY 62,446,420
-------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 107,986,683
=============
See Notes to Condensed Consolidated Financial Statements.
1
AMREIT AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
QUARTER ENDED MARCH 31,
2004 2003
----------- -----------
Revenues:
Rental income from operating leases $ 1,686,467 $ 1,098,900
Earned income from direct financing leases 507,202 494,280
Real estate fee income 367,359 130,752
Securities commission income 1,904,541 85,608
Asset management fee income 75,280 50,994
Interest and other income 11,452 3,113
----------- -----------
Total revenues 4,552,301 1,863,647
----------- -----------
Expenses:
General operating and administrative 1,435,764 770,405
Legal and professional 327,740 103,862
Securities commissions 1,423,632 65,035
Depreciation and amortization 246,481 207,288
Deferred merger costs 1,319,833 -
----------- -----------
Total expenses 4,753,450 1,146,590
----------- -----------
Operating (loss) income (201,149) 717,057
Income from non-consolidated affiliates 14,598 40,305
Federal income tax (expense) benefit for taxable REIT subsidiary (170,905) 73,000
Interest expense (619,031) (523,549)
Minority interest in income of consolidated joint ventures (44,265) (39,788)
----------- -----------
(Loss) income before discontinued operations (1,020,752) 267,025
Income from discontinued operations 655,735 190,812
----------- -----------
Net (loss) income $ (365,017) $ 457,837
Distributions paid to class B and class C shareholders (813,056) (452,543)
----------- -----------
Net (loss) income available to class A shareholders $(1,178,073) $ 5,294
=========== ===========
Net income per common share - basic and diluted
Loss before discontinued operations $ (0.62) $ (0.07)
Income from discontinued operations 0.22 $ 0.07
----------- -----------
Net (loss) income $ (0.40) $ 0.00
=========== ===========
Weighted average class A common shares used to
compute net income per share, basic and diluted 2,952,984 2,768,253
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
2
AMREIT AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
QUARTER ENDED MARCH 31,
2004 2003
------------ ------------
Cash flows from operating activities:
Net (loss) income $ (365,017) $ 457,837
Adjustments to reconcile net income to net cash
provided by operating activities:
Investment in real estate acquired for resale (666,838) -
Proceeds from sales of real estate acquired for sale 2,463,722 -
Gain on sales of real estate acquired for resale (607,887) -
Depreciation and amortization 255,485 229,697
Amortization of deferred compensation 64,283 59,928
Minority interest in net income of consolidated joint ventures 44,265 39,788
Deferred merger costs 1,319,833 -
(Increase) decrease in accounts receivable (208,925) 38,020
Increase in accounts receivable- related party (1,494,440) (55,909)
Decrease in prepaid expenses, net 60,888 14,077
Cash receipts from direct financing leases
(less) more than income recognized (3,097) 17,060
Decrease (increase) in accrued rental income 13,769 (49,519)
Decrease in other assets 11,019 83,091
Decrease in accounts payable (802,476) (547,924)
Increase (decrease) in accounts payable- related party 220,729 (33,986)
------------ ------------
Net cash provided by operating activities 305,313 252,160
------------ ------------
Cash flows from investing activities:
Improvements to real estate (300,417) (155,763)
Acquisition of investment properties - (2,688,157)
Notes receivable collections 43,555 -
Additions to furniture, fixtures and equipment (118,919) (24,040)
Investment in non-consolidating affiliates (1,318,102) (161,771)
Increase in preacquisition costs (34,140) (26,713)
------------ ------------
Net cash used in investing activities (1,728,023) (3,056,444)
------------ ------------
Cash flows from financing activities:
Proceeds from notes payable 2,964,517 2,367,799
Payments of notes payable (14,463,500) (101,163)
Purchase of treasury shares - (315,719)
Issuance of common shares 16,047,530 -
Issuance costs (1,795,539) -
Common dividends paid (1,157,705) (759,622)
Distributions to minority interests (25,031) (68,319)
------------ ------------
Net cash provided by financing activities 1,570,272 1,122,976
------------ ------------
Net increase (decrease) in cash and cash equivalents 147,562 (1,681,308)
Cash and cash equivalents, beginning of period 2,031,440 2,506,868
------------ ------------
Cash and cash equivalents, end of period $ 2,179,002 $ 825,560
============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
In 2004 the Company issued 134,695 shares of restricted stock to employees
and trust managers as
as part of their compensation plan. The restricted stock vests over a four
and three period respectively.
The Company recorded $875,518 in deferred compensation related to the
issuance of the restricted stock.
In 2003 the Company issued 24,257 shares of restricted stock to employees
and trust managers as
as part of their compensation plan. The restricted stock vests over a four
and three period respectively.
The Company recorded $152,819 in deferred compensation related to the
issuance of the restricted stock.
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest 620,688 524,189
Income taxes 48,600 31,103
See Notes to Condensed Consolidated Financial Statements.
3
AMREIT AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
AmREIT is a Texas real estate investment trust ("REIT") that has elected to be
taxed as a REIT for federal income tax purposes. AmREIT is a self-managed,
self-advised REIT with, along with its predecessor, a 19-year history and a
record of investing in quality income producing retail real estate. AmREIT's
class A common shares are traded on the American Stock Exchange under the symbol
"AMY". AmREIT's business structure consists of the publicly traded REIT and
three synergistic businesses that support the Company's platform of growth: a
real estate operation and development business, a securities business and a
retail partnership business. This unique combination provides AmREIT the ability
to access capital through both Wall Street and the independent financial
planning marketplace and strategically invest that capital in high quality
properties for flexibility and more dependable growth.
AmREIT's initial predecessor, American Asset Advisers Trust, Inc. was formed as
a Maryland Corporation in 1993. Following the merger of our external adviser
into the Company in June 1998, we changed our name to AmREIT, Inc., which was a
Maryland corporation. In December 2002, we reorganized as a Texas real estate
investment trust.
Our business organization consists of a portfolio of high-end single and
multi-tenant retail centers, a full service real estate operating and
development subsidiary, an NASD registered broker-dealer subsidiary, and a
retail partnership business. This unique combination provides AmREIT the
opportunity to access capital through both Wall Street and the independent
financial planning marketplace for flexibility and dependable growth. We finance
our growth and working capital needs with a combination of equity offerings and
a conservative debt philosophy. Currently, the Company is raising capital
through its class C common share offering, being offered exclusively through the
independent financial planning community. As of March 31, 2004, the Company had
raised approximately $30.1 million through its class C offering. Through its
by-laws, the Company's debt is limited to 55% recourse debt as compared to its
gross assets. As of March 31, 2004, the Company's debt to asset ratio was
approximately 41%.
Our operating strategy and investment criteria discussed herein are reviewed by
our Board of Trust Managers on a regular basis and may be modified or changed
without a vote of our shareholders.
Portfolio
We focus on acquiring "irreplaceable corners" - premier retail frontage
properties in high-traffic, highly populated areas - which create dependable
income and long-lasting value. These premium properties provide high leasing
income and high occupancy rates for a strong income stream. As of March 31,
2004, the occupancy rate at our properties was 94.8%. Our properties attract a
wide array of established commercial tenants, and offer attractive opportunities
for dependable monthly income and potential capital appreciation. These
properties are typically located in high traffic areas within a three-mile
radius of a population of 100,000 with an average household income of $70
thousand or more. On average, more than 30,000 cars per day pass by these
properties. In addition, management believes that the location and design of its
properties provide flexibility in use and tenant selection and an increased
likelihood of advantageous re-lease terms.
Our revenues are substantially generated by corporate retail tenants such as
Starbucks, Landry's, CVS Pharmacy, International House of Pancakes ("IHOP"),
Eckerd, Nextel, Washington Mutual, TGI Friday's, and others. We own, and may
purchase in the future, fee simple retail properties (we own the land and the
building), ground lease
4
properties (we own the land, but not the building and receive rental income from
the owner of the building) or leasehold estate properties (we own the building,
but not the land, and therefore are obligated to make a ground lease payment to
the owner of the land). AmREIT may also develop properties for its portfolio or
enter into joint ventures, partnerships or co-ownership for the development of
retail properties.
AmREIT owns a real estate portfolio consisting of 51 properties located in 18
states at March 31, 2004. Our multi-tenant shopping center properties are
primarily located throughout Texas and are leased to national, regional and
local tenants. Our single tenant properties are located throughout the United
States and are generally leased to corporate tenants where the lease is the
direct obligation of the parent company, not just the local operator, and in
most other cases, our leases are guaranteed by the parent company. In so doing,
the dependability of the lease payments is based on the strength and viability
of the entire company, not just the leased location. Properties that we acquire
are generally newly constructed or recently constructed at the time of
acquisition.
As of March 31, 2004, no single property accounted for more than 10% of the
Company's total assets. As of March 31, 2004, IHOP accounted for 14.5% of the
Company's total revenue and no other tenant accounted for more than 10% of the
Company's total revenue.
Real Estate Operating and Development Business
AmREIT's real estate operating and development subsidiary, AmREIT Realty
Investment Corporation ("ARIC") is a fully integrated group of brokers and real
estate professionals that provide brokerage, leasing, construction management,
development and property management services to our tenants as well as third
parties. This operating subsidiary, which is a taxable REIT subsidiary,
compliments our portfolio of retail properties by providing a high level of
service to our tenants, as well as maintaining our portfolio of properties to
meet our standards.
Having an internal real estate group also helps secure strong tenant
relationships for both us and our retail partnerships. Our growing roster of
leases with well-known national and regional tenants includes IHOP, Washington
Mutual, Starbucks, TGI Friday's, CVS Pharmacy, and others. Equally important, we
have affiliations with these parent company tenants that extend across multiple
sites.
Not only does our real estate operating and development company create value
through relationships, but it also provides an additional source of fee income
and profits. Through the development, construction, management, leasing and
brokerage services provided to our affiliated actively managed retail
partnerships, as well as for third parties, our real estate team continues to
generate fees and profits for us. Through ARIC, we are able to generate
additional profits through the selective acquisitions and dispositions of
properties within twelve to eighteen months. These assets are listed as real
estate held for sale on our consolidated balance sheet, and, at March 31, 2004,
these assets represented approximately $3.0 million of the $7.2 million reported
as real estate held for sale.
Securities Business
The part of our business structure and operating strategy that really separates
us from other publicly traded REITs is AmREIT Securities Company (ASC), a wholly
owned subsidiary of ARIC. Through ASC, we are able to raise capital through the
National Association of Securities Dealers (NASD) independent financial planning
community. Traditionally, we have raised capital in two ways: first for our
actively managed retail partnerships, and second, directly for AmREIT through
non-traded classes of common shares.
During 2003, ASC raised approximately $15 million for AmREIT Monthly Income &
Growth Fund, Ltd., an affiliated retail partnership sponsored by a subsidiary of
AmREIT. Additionally, as of March 31, 2004, ASC has raised approximately $30.1
million directly for us through a class C common share offering. During 2004,
through a combination of our actively managed retail partnerships, as well as
direct equity for AmREIT, ASC projects to raise approximately $60 million
directly through the NASD independent financial planning community. Since
5
capital is the lifeblood of any real estate company, having the unique
opportunity to raise capital through both Wall Street and the independent
financial planning community adds additional financial flexibility and
dependability to our income stream.
Retail Partnership Business
AmREIT has retail partnership subsidiaries that sell limited partnership
interests to retail investors, in which AmREIT indirectly invests through both
the general partner and as a limited partner. We wanted to create a structure
that aligns the interest of our shareholders with that of our unit holders.
Through our subsidiary general partners of the retail partnerships value is
created for AmREIT through managing money from the sponsored funds, and in
return, receiving management fees and profit participation interests.
AmREIT's retail partnerships are structured so that an affiliate, as the general
partner, receives a significant profit only after the limited partners in the
retail partnerships have received their targeted return, again, linking AmREIT's
success to that of its unit holders.
As of March 31, 2004, AmREIT directly managed, through its four actively managed
and previously sponsored retail partnerships, over $30 million in equity. These
four partnerships have entered or will enter their liquidation phases in 2003,
2009, 2010, and 2011 respectively. As these partnerships enter into liquidation,
we expect to receive economic benefit from our profit participation, after
certain preferred returns have been paid to the partnership's limited partners.
In accordance with generally accepted accounting principles, any unrealized
gains associated with this potential profit participation has not been reflected
on our balance sheet or statement of operations.
In August 2003 the Company began selling class C common shares. The offering is
a $44 million offering, issued on a best efforts basis through the independent
financial broker dealer community. The Company will primarily use the proceeds
for the acquisition of new properties and to pay down existing debt. As of March
31, 2004, the Company had issued approximately 3.0 million shares, representing
approximately $30.1 million in proceeds from selling class C shares.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and include all of
the disclosures required by accounting principles generally accepted in the
United States of America. The condensed consolidated financial statements
reflect all normal and recurring adjustments, which are, in the opinion of
management, necessary to present a fair statement of results for the three month
periods ended March 31, 2004 and 2003.
The condensed consolidated financial statements of AmREIT contained herein
should be read in conjunction with the consolidated financial statements
included in the Company's annual report on Form 10-KSB for the year ended
December 31, 2003.
REAL ESTATE HELD FOR SALE
Properties are classified as real estate held for sale if the properties were
purchased with intent to sell the properties within twelve to eighteen months or
if the properties are listed for sale. Additionally, if management has made the
determination to dispose of an operating property, the associated property is
reclassified to real estate held for sale and depreciation is ceased. An
evaluation for impairment is also performed. At March 31, 2004, AmREIT owned
four properties that are classified as real estate held for sale. The four
properties have a combined carrying value of $7.2 million. One of the properties
has a separate note payable, which has a one-year term and a balance of $1.7
million at March 31, 2004.
6
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of AmREIT and its
wholly or majority owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
NEW ACCOUNTING STANDARDS
In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51 ("FIN 46"), which
was amended in December 2003. This Interpretation, as amended requires a
variable interest entity to be consolidated by a company if that company is
subject to a majority of the risk of loss from the variable interest entity's
activities or entitled to receive a majority of the entity's residual return or
both. As amended the interpretation requires disclosures about variable interest
entities that a company is not required to consolidate, but in which it has a
significant variable interest. The adoption of FIN 46 for small business filers
is effective no later than December 31, 2004.
In May 2003, the Financial Accounting Standards Board issued Statement No. 150
("Statement 150") "Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity". Statement 150 requires certain
financial instruments that have characteristics of both liabilities and equity
to be classified as a liability on the balance sheet. Statement 150 is effective
for financial instruments entered into or modified after May 31, 2003 and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. Statement 150 will be effected by reporting the cumulative
effect of a change in accounting principle for contracts created before the
issuance date and still existing at the beginning of that interim period. The
adoption of Statement 150 did not have an impact on our consolidated financial
position, results of operations, or cash flows.
RECLASSIFICATION
Certain amounts in the interim unaudited 2003 condensed consolidated financial
statements have been reclassified to conform to the presentation used in the
interim unaudited 2004 condensed consolidated financial statements. Such
reclassifications had no effect on previously reported net income or loss or
shareholders' equity.
3. NOTES PAYABLE
In September 2003, the Company renewed its unsecured credit facility (the
"Credit Facility"), which is being used to provide funds for the acquisition of
properties and working capital. Under the Credit Facility, which has a term of
one year, the Company may borrow up to $30 million subject to the value of
unencumbered assets. The Credit Facility contains covenants which, among other
restrictions, require the Company to maintain a minimum net worth, a maximum
leverage ratio, specified interest coverage and fixed charge coverage ratios and
allow the lender to approve all distributions. Furthermore, the Credit Facility
contains concentration covenants and limitations, limiting property level net
operating income for any one tenant to no more than 15% (35% for IHOP) of total
property net operating income. At March 31, 2004, IHOP net operating income
represented approximately 32% of total property net operating income. At March
31, 2004, the Company was in compliance with all financial covenants. The Credit
Facility's annual interest rate varies depending upon the Company's debt to
asset ratio, from LIBOR plus a spread of 1.40% to LIBOR plus 2.35%. As of March
31, 2004, the interest rate was LIBOR plus 2.0%. As of March 31, 2004, $12.8
million was outstanding under the Credit Facility. Thus the Company has
approximately $17.2 million available under its line of credit, subject to
Lender approval on the use of the proceeds.
4. MAJOR TENANTS
7
As of March 31, 2004, there have been no significant changes in the tenant
make-up from year end December 31, 2003.
5. EARNINGS PER SHARE
Basic earnings per share has been computed by dividing net income (loss)
available to class A shareholders by the weighted average number of class A
common shares outstanding. Diluted earnings per share has been computed by
dividing net income (as adjusted) by the weighted average number of common
shares outstanding plus the weighted average number of potentially dilutive
common shares. Diluted earnings per share information is not applicable due to
the anti-dilutive nature of the common class B and class C shares.
The following table presents information necessary to calculate basic and
diluted earnings per share for the periods indicated:
Three months ended March 31,
2004 2003
-------- --------
BASIC EARNINGS PER SHARE
Weighted average class A common shares outstanding
(in thousands) 2,953 2,768
Basic and diluted (loss) earnings per share * ($ 0.40) $ 0.002
======== ========
EARNINGS (LOSS) FOR BASIC AND DILUTIVE COMPUTATION
(Loss) earnings to class A common
shareholders (in thousands) ($ 1,178) $ 5
======== ========
* The operating results for the three months ended March 31, 2004 include a
charge to earnings of $1.3 million, which was the market value of the class A
common shares issued to H. Kerr Taylor, President and CEO, related to the sale
of his advisory company to AmREIT in 1998. The charge was for the deferred
merger cost due from this sale that was triggered by the issuance of additional
class C common shares.
6. DISCONTINUED OPERATIONS
The operations of six properties were reported as discontinued operations. Two
of the properties were listed as held for sale at March 31, 2004, one of the
properties was sold in the second quarter of 2003, two of the properties were
sold in the fourth quarter of 2003 and one of the properties was sold in the
first quarter of 2004. The following is a summary of our discontinued operations
(in thousands, except for per share data):
Three months ended March 31,
2004 2003
-------- ------
Rental revenue $ 172 $ 238
Gain on sale of real estate held for sale 608 -
Depreciation and amortization - (15)
Bad debt expense (67) -
Interest expense (39) (28)
Property expense (18) (4)
-------- ------
Income from discontinued operations $ 656 $ 191
Basic and diluted income from discontinued
operations per common share $ 0.22 $ 0.07
======== ======
Gain on real estate held for sale is a result of selling one property acquired
during 2003 with the intent to resell after a short holding period. Through a
taxable REIT subsidiary, AmREIT actively seeks properties where there is an
opportunity to purchase undervalued assets, and after a short holding period and
value creation, dispose of the asset and capture the value created.
8
7. COMMITMENTS
The Company has signed a 63 month lease for office space. The lease commences on
the occupancy date which is expected to be May 14, 2004. The annual rent will be
$210 thousand. Rental expense for the three months ended March 31, 2004 and 2003
was $18 thousand and $22 thousand respectively.
As of March 31, 2004, the Company has contracted to purchase approximately $8.5
million of multi-tenant real estate projects that are anticipated to close
during the second quarter of 2004.
8. SEGMENT REPORTING
The operating segments presented are the segments of AmREIT for which separate
financial information is available, and revenue and operating performance is
evaluated regularly by senior management in deciding how to allocate resources
and in assessing performance.
AmREIT evaluates the performance of its operating segments primarily on revenue.
Because the real estate development and operating segment and securities and
retail partnership segment are both revenue and fee intensive, management
considers revenue the primary indicator in allocating resources and evaluating
performance.
The portfolio segment consists of our portfolio of single and multi-tenant
shopping center projects. This segment consists of 51 properties located in 18
states. Expenses for this segment include depreciation, interest, minority
interest, legal cost directly related to the portfolio of properties and the
property level expenses. The consolidated assets of AmREIT are substantially all
in this segment. Included in Corporate and Other are those costs and expenses
related to general overhead and personnel that are not solely responsible for
one of the reporting segments.
Real estate Securities &
operating & retail Corporate
Portfolio development partnerships and other Total
March 31, 2004:
Revenue $ 2,194 $ 367 $ 1,980 $ 11 $ 4,552
Income from non- consolidated affiliates - - 15 - 15
Expenses (910) (110) (1,485) (1,763) (4,268)
Deferred merger cost - - - (1,320) (1,320)
-------------------------------------------------------------
Net income (loss) before discontinued
operations 1,284 257 510 (3,072) (1,021)
March 31, 2003:
Revenue $ 1,593 $ 131 $ 137 $ 3 $ 1,864
Income from non-consolidated affiliates - - 40 - 40
Expenses (771) 57 (49) (874) (1,637)
-------------------------------------------------------------
Net income (loss) before discontinued
operations
822 188 128 (871) 267
9
9. PROPERTY ACQUISITIONS AND DISPOSITIONS
The following selected unaudited pro forma consolidated statement of operations
for AmREIT and subsidiaries gives effect to the acquisition of Uptown Plaza,
which assumes that the acquisition occurred on January 1, 2003. Uptown Plaza,
acquired in December 2003, is a 28,000 square foot retail complex located in
Houston, Texas, including a free-standing CVS drugstore and a retail shopping
center anchored by Grotto, a new concept of Landry's Restaurant, Inc.
2003
-------
Revenues
Rental income and earned income $ 1,794
Other income 271
-------
Total Revenues 2,065
Total Expenses 1,203
-------
Operating income 862
Income before discontinued operations 412
Income from discontinued operations 191
Pro forma net income 603
Distributions paid to class B and class C shareholders (453)
-------
Net income available to class A shareholders $ 150
=======
Net income per common share - basic and diluted
Loss before discontinued operations (0.015)
Income from discontinued operations 0.069
-------
Net income 0.054
=======
Weighted average common shares used to compute
net income per share, basic and diluted (in thousands) 2,768
=======
10. SUBSEQUENT EVENTS
On April 13, 2004, the Company filed a Form S-11 registration statement with the
SEC. The registration statement registered approximately 17 million shares of
the Company's class D common shares with the SEC. The class D common shares are
expected to be sold at $10 per share, will have dividends on par with those of
the class A common shares at a fixed rate of 6.5% per annum paid monthly, will
have the ability to convert into the class A common shares on the seventh
anniversary of the issuance of the class D common shares at a ratio of 1.077% of
initial capital invested, and are callable after one year. On April 22, 2004,
the Company received a comment letter
10
from the SEC, identifying one comment. The Company has responded to the SEC's
comment, and anticipates the registration statement being declared effective
during the second quarter 2004. The primary use of proceeds will be property
acquisitions, the pay down of debt and credit facilities and general working
capital.
The Company has contracted for a property located in Houston, Texas, which
includes a free standing Walgreens pharmacy and a 20,000 square foot shopping
center. The property is anticipated to close on or before June 30, 2004 for a
total purchase price of approximately $8.5 million. The acquisition is
anticipated to be funded with $3.9 million in cash and the assumption of
mortgage financing of $4.6 million.
The Company expects a charge to the second quarter operating results of
approximately $355 to $375 thousand, depending on the market value of the class
A common shares. The charge is for class A shares to be issued to H. Kerr
Taylor, President and CEO, related to the sale of his advisory company to AmREIT
in 1998. The charge for the deferred merger cost due from this sale was
triggered by the issuance of additional class C common shares.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD-LOOKING STATEMENTS
Certain information presented in this Form 10-QSB constitutes forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Although the Company
believes that the expectations reflected in these forward-looking statements are
based upon reasonable assumptions, the Company's actual results could differ
materially from those set forth in the forward-looking statements. Certain
factors that might cause such a difference include the following: changes in
general economic conditions, changes in real estate market conditions, continued
availability of proceeds from the Company's debt or equity capital, the ability
of the Company to locate suitable tenants for its properties and the ability of
tenants to make payments under their respective leases.
The condensed consolidated financial statements of AmREIT, and the following
discussion contained herein should be read in conjunction with the consolidated
financial statements and discussion included in the Company's annual report on
Form 10-KSB for the year ended December 31, 2003. Historical results and trends
which might appear should not be taken as indicative of future operations.
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto and the comparative summary of selective
financial data appearing elsewhere in this report. Historical results and trends
which might appear should not be taken as indicative of future operations.
EXECUTIVE OVERVIEW
AmREIT (AMEX: AMY) is a rapidly growing, self-managed and self-advised REIT with
a 19-year history of delivering results to its investors. Its business model
consists of a portfolio of retail properties, including "irreplaceable corners",
single tenant properties and multi-tenant properties, a full service real estate
operating and development business, NASD-registered broker dealer securities
business and a retail partnership business - a unique combination that provides
AmREIT the opportunity to access multiple sources of capital and generate fees
and profits from multiple sources, resulting in added financial flexibility and
the opportunity for dependable growth and income.
AmREIT's goal is to deliver increasing, dependable, monthly income for its
shareholders. In so doing, AmREIT strives to increase and maximize Funds from
Operations by issuing long term capital through both the NASD independent
financial planning marketplace as well as through Wall Street, and investing the
capital in accretive real estate properties, acquired or developed, on
irreplaceable corners. Additionally, we strive to maintain a conservative
balance sheet. To that regard, we strive to maintain a debt to total asset ratio
of less than 55%. As of March 31, 2004, our debt to total asset ratio was 41%.
At March 31, 2004, AmREIT owned a portfolio of 51 properties located in 18
states, subject to long term leases with retail tenants, either directly or
through its interests in joint ventures or partnerships. Forty six of the
properties are single tenant properties, and represent approximately 75% of the
rental income as of March 31, 2004. Five of the properties are multi-tenant and
represent approximately 25% of the rental income as of March 31, 2004. In
assessing the performance of the Company's properties, management evaluates the
occupancy of the Company's portfolio. Occupancy for the total portfolio was
94.8% based on leaseable square footage as of March 31, 2004. Additionally, the
Company anticipates that the majority of its rental income will consist of
rental income generated from multi-tenant shopping centers by the end of 2004.
We have been developing and acquiring multi-tenant shopping centers for over ten
years in our retail partnership business. During that time, we believe we have
developed the ability to recognize the high-end multi-tenant properties that can
create long-term value, and with the downward pressure on single tenant cap
rates, resulting in higher priced real estate, management anticipates
strategically increasing its holdings of multi-tenant shopping centers.
Management intends to increase total assets
12
from $101 million as of December 31, 2003 to approximately $200 million at the
end of 2004. Through its class C common share offering, the Company raised
approximately $30.1 million in capital through March 31, 2004.
Management intends to fund future acquisitions and development projects through
a combination of equity offerings and debt financing. During 2004, the Company
anticipates raising approximately $60 million of equity from various sources
including Wall Street and the independent financial planning community. We have
already raised an additional $16 million through our class C common share
offering for the three months ended March 31, 2004.
Management expects that single tenant, credit leased properties, will continue
to experience cap rate pressure during 2004 due to the low interest rate
environment and increased buyer demand. Therefore, as it has been, our continued
strategy will be to divest of properties which no longer meet our core criteria,
and replace them with multi-tenant projects or the development of single tenant
properties located on irreplaceable corners. With respect to additional growth
opportunities, we have over $50 million of projects in our pipeline at various
stages of evaluation. Each potential acquisition is subjected to a rigorous due
diligence process that includes site inspections, financial underwriting, credit
analysis and market and demographic studies. Therefore, there can be no
assurance that any or all of these projects will ultimately be purchased by
AmREIT. Management anticipates, and has budgeted for, an increase in interest
rates during 2004. As of March 31, 2004, approximately 60% of our outstanding
debt had a long term fixed interest rate with an average term of seven years.
Our philosophy continues to be matching long term leases with long term debt
structures while keeping our debt to total assets ratio less than 55%.
SUMMARY OF CRITICAL ACCOUNTING POLICIES
The results of operations and financial condition of the Company, as reflected
in the accompanying financial statements and related footnotes, are subject to
management's evaluation and interpretation of business conditions, retailer
performance, changing capital market conditions and other factors, which could
affect the ongoing viability of the Company's tenants. Management believes the
most critical accounting policies in this regard are the accounting for lease
revenues (including the straight line rent), the regular evaluation of whether
the value of a real estate asset has been impaired and the allowance for
doubtful accounts. We evaluate our assumptions and estimates on an on-going
basis. We base our estimates on historical experience and on various other
assumptions that we believe to be reasonable based on the circumstances.
Rental Income Recognition - In accordance with accounting principles generally
accepted in the United States of America, the Company accounts for rental income
under the straight line method, whereby we record rental income based on the
average of the total rent obligation due under the primary term of the lease.
The Company prepares a straight line rent schedule for each lease entered into.
Certain leases contain a provision for percentage rent. Percentage rent is
recorded in the period when the Company can reasonably calculate the amount of
percentage rent owed, if any. Generally, the Company records percentage rent in
the period in which the percentage rent payment is made, and can thereby be
calculated and verified. For the three months ended March 31, 2004, the Company
collected and recorded percentage rent from tenants of $65 thousand.
Real Estate Valuation - Real estate assets are stated at cost less accumulated
depreciation, which, in the opinion of management, is not in excess of the
individual property's estimated undiscounted future cash flows, including
estimated proceeds from disposition. Depreciation is computed using the
straight-line method, generally over estimated useful lives of 39 years for
buildings and over the primary term of the lease for tenant improvements. Major
replacements that extend the life of the property, or enhance the value of the
property are capitalized and the replaced asset and corresponding accumulated
depreciation are removed. All other maintenance items are charged to expense as
incurred.
Upon the acquisition of real estate projects, the Company assesses the fair
value of the acquired assets (including
13
land, building, acquired, out-of-market and in-place leases, as if vacant
property value and tenant relationships) and acquired liabilities, and allocates
the purchase price based on these assessments. The Company assesses fair value
based on estimated cash flow projections that utilize appropriate discount and
capitalization rates and available market information. Estimates of future cash
flows are based on a number of factors including the historical operating
results, known trends, and specific market and economic conditions that may
affect the property. Factors considered by management in our analysis of
determining the as if vacant property value include an estimate of carrying
costs during the expected lease-up periods considering current market
conditions, and costs to execute similar leases. In estimating carrying costs,
management includes real estate taxes, insurance and other operating expenses
and estimates of lost rentals at market rates during the expected lease-up
periods, up to 12 months depending on the property location, tenant demand and
other economic conditions. Management also estimates costs to execute similar
leases including leasing commissions, tenant improvements, legal and other
related expenses.
Costs incurred in the development of new operating properties, including
preacquisition costs directly identifiable with the specific project,
development and construction costs, interest and real estate taxes are
capitalized into the basis of the project. The capitalization of such costs
ceases when the property, or any completed portion, becomes available for
occupancy.
AmREIT's properties are reviewed for impairment if events or changes in
circumstances indicate that the carrying amount of the property may not be
recoverable. In such an event, a comparison is made of the current and projected
operating cash flows of each such property on an undiscounted basis, plus the
residual value of the property upon disposition, to the carrying value of such
property. The carrying value would then be adjusted, if needed, to estimate the
fair value to reflect an impairment in the value of the asset. As of March 31,
2004, no impairment was identified for any of the Company's properties.
Valuation of Receivables - An allowance for the uncollectible portion of accrued
rents, property receivables and accounts receivable is determined based upon an
analysis of balances outstanding, historical payment history, tenant credit
worthiness, additional guarantees and other economic trends. Balances
outstanding include base rents, tenant reimbursements and receivables attributed
to the accrual of straight line rents. Additionally, estimates of the expected
recovery of pre-petition and post-petition claims with respect to tenants in
bankruptcy is considered in assessing the collectibility of the related
receivables. During the three months ended March 31, 2004, the Company wrote off
receivables totaling approximately $67 thousand. The receivable is attributable
to the GAAP required accrual of straight line rents associated with Just for
Feet. The write off of the receivable from Just for Feet is included in income
from discontinued operations. The Company maintains a receivable related to
Wherehouse Entertainment of approximately $126 thousand. Based on discussions
with Wherehouse Entertainment, Blockbuster Entertainment Corporation, the
guarantor of the lease, and legal proceedings involving Wherehouse Entertainment
and Blockbuster Entertainment Corporation, the Company believes that these
receivables are collectable, and should be collected during 2004.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities and financing activities have been the
principal sources of capital to fund the Company's ongoing operations and
dividends. As AmREIT deploys the capital raised, and expected to be raised from
its equity offerings, into income producing real estate, we anticipate that cash
flow from operations will provide adequate resources for future ongoing
operations and dividends. AmREIT's cash on hand, internally-generated cash flow,
borrowings under our existing credit facilities, issuance of equity securities,
as well as the placement of secured debt and other equity alternatives, is
expected to provide the necessary capital to maintain and operate our properties
as well as execute and achieve our growth strategies. Cash provided by operating
activities as reported in the Consolidated Statements of Cash Flows increased
$53 thousand in 2004 when compared to 2003. Proceeds from sales of real estate
acquired for sale increased by $2.4 million. This increase in
14
cash was offset somewhat by an increase in accounts receivable related party of
$1.5 million.
During the first quarter 2004, AmREIT contracted to purchase approximately $8.5
million of retail real estate, representing a multi-tenant shopping center
located in Houston, Texas. The shopping center is anticipated to close during
the second quarter and will be funded with approximately $3.9 million in cash
and the assumption of a $4.6 million mortgage payable. Additionally, AmREIT sold
an IHOP located in Bridgeton, Missouri during the first quarter 2004, which was
previously classified as real estate held for sale. The Company realized a gain
on the sale of approximately $608 thousand. As part of its investment strategy,
AmREIT constantly evaluates its property portfolio, systematically selling off
any non-core or underperforming assets, and replacing them with "irreplaceable
corners" and other core assets. For the remainder of 2004, the Company
anticipates continuing the strategy of divesting its non-core properties, which
is estimated will generate between $10 and $15 million in sales proceeds. On
January 11, 2003, Wherehouse Entertainment filed for voluntary petition of
relief under Chapter 11 of the federal bankruptcy code. The Company owns two
Wherehouse Entertainment locations. The lease on one location has been amended
and assigned to Record Town. The Company is evaluating the alternatives on the
second location. On March 2, 2004, Footstar, the parent company of Just for Feet
filed for a voluntary petition of relief under Chapter 11 of the federal
bankruptcy code and has announced it intends to close all their Just for Feet
stores after an orderly liquidation of the remaining inventory. The Company
anticipates the closure of both of their Just for Feet locations this summer and
is evaluating the alternatives.
Cash flows used in investing activities has been primarily related to the
acquisition or development of retail properties. During the first quarter of
2004, AmREIT through one its taxable REIT subsidiaries, acquired a 25% equity
interest in a 45 acre retail redevelopment in Houston, Texas. The other partners
are affiliated partnerships. The investment was funded through a combination of
the $14.3 million of capital (net of $1.8 million in issuance costs) raised
through the class C common share offering and debt financing.
In addition, capitalized expenditures for improvements and additions to our
existing properties were approximately $300 thousand, which were funded through
excess cash flow and through the Company's revolving credit facility. Cash flows
used in investing activities as reported in the Consolidated Statements of Cash
Flows decreased from $3.1 million in the first three months of 2003 to $1.7
million in the first three months of 2004.
Cash flows provided by financing activities increased from $1.1 million through
March 31, 2003 to $1.6 million through March 31, 2004. Cash flows provided by
financing activities were primarily generated from our class C common share
offering. Through its class C common share offering, the Company is averaging
new capital raised of between $4 and $6 million per month. One advantage of
raising capital through the independent financial planning marketplace is the
capital is received on a monthly basis, allowing for a scaleable matching of
real estate projects. Our first priority is to deploy the capital raised, and
then to moderately leverage the capital, while maintaining our philosophy of a
conservative balance sheet. The Company was able to reduce debt by almost $11.5
million with the proceeds from it class C common share offering.
AmREIT has a $30 million unsecured revolving credit facility. The facility will
mature on September 4, 2004. The facility bears interest at a rate of LIBOR plus
a range of 1.40% to 2.35%, depending on the Company's debt to asset ratio. The
Credit Facility contains covenants which, among other restrictions, require the
Company to maintain a minimum net worth, a maximum leverage ratio, specified
interest coverage and fixed charge coverage ratios and allow the lender to
approve all distributions. Furthermore, the Credit Facility contains
concentration covenants and limitations, limiting property level net operating
income fro any one tenant to no more than 15% (35% for IHOP) of total property
net operating income. At March 31, 2004, IHOP net operating income represented
approximately 32% of total property net operating income. As of March 31, 2004,
the spread over LIBOR was 2.00. At March 31, 2004, approximately $12.8 million
was outstanding under the credit facility. In addition to the credit facility,
AmREIT utilizes various permanent mortgage financing and other debt instruments.
As of March 31, 2004, the Company had the following contractual obligations:
15
2004 2005 2006 2007 2008 Thereafter Total
Unsecured debt:
Revolving credit $12,777 $ - $ - $ - $ - $ - $12,777
facility
5.46% dissenter notes - - - - - 760 760
Secured debt 2,073 490 530 573 620 19,163 23,449
Total contractual $14,850 $ 490 $ 530 $ 573 $ 620 $19,923 $36,986
obligations
In order to continue to expand and develop its portfolio of properties and other
investments, the Company intends to finance future acquisitions and growth
through the most advantageous sources of capital available at the time. Such
capital sources may include proceeds from public or private offerings of the
Company's debt or equity securities, secured or unsecured borrowings from banks
or other lenders, acquisitions of the Company's affiliated entities or other
unrelated companies, or the disposition of assets, as well as undistributed
funds from operations.
In August 2003, the Company commenced the class C common share offering. This
offering is being exclusively made through the NASD independent financial
planning community. It is a $44 million offering, of which $4 million has been
reserved for the dividend reinvestment plan. As of March 31, 2004, 3.0 million
shares had been issued, resulting in approximately $30.1 million in gross
proceeds. The proceeds are being and will be used to finance the acquisition and
development of retail real estate projects, pay down the revolving credit
facility and provide working capital for the on going operation of the company
and its properties.
For the quarters ended March 31, 2004 and 2003, the Company paid dividends to
its shareholders of $1.158 million, and $760 thousand respectively. The class A
and class C shareholders receive monthly dividends and the class B shareholders
receive quarterly dividends. All dividends are declared on a quarterly basis.
The dividends by class follow (in thousands):
Class A Class B Class C
2004
First quarter $345 $434 $379
2003
Fourth quarter $320 $437 $156
Third quarter $308 $443 $15
Second quarter $310 $439 N/A
First quarter $307 $453 N/A
Until properties are acquired by the Company, the Company's funds are held in
short-term, highly liquid investments which the Company believes to have
appropriate safety of principal. This investment strategy has allowed, and
continues to allow, high liquidity to facilitate the Company's use of these
funds to acquire properties at such time as properties suitable for acquisition
are located. At March 31, 2004, the Company's cash and cash equivalents totaled
$2.2 million.
16
Cash flows from operating activities, investing activities, and financing
activities for the three months ended March 31, are presented below in
thousands:
2004 2003
------- -------
Operating activities $ 305 $ 252
Investing activities (1,728) (3,056)
Financing activities 1,570 1,123
INFLATION
Inflation has had very little effect on income from operations. Management
expects that increases in store sales volumes due to inflation as well as
increases in the Consumer Price Index (C.P.I.), may contribute to capital
appreciation of the Company properties. These factors, however, also may have an
adverse impact on the operating margins of the tenants of the properties.
FUNDS FROM OPERATIONS
AmREIT considers FFO to be an appropriate measure of the operating performance
of an equity REIT. The National Association of Real Estate Investment Trusts
(NAREIT) defines funds from operations (FFO) as net income or loss computed in
accordance with generally accepted accounting principles (GAAP), excluding gains
from sales of property, plus real estate related depreciation and amortization,
and after adjustments for unconsolidated partnerships and joint ventures. In
addition, NAREIT recommends that extraordinary items not be considered in
arriving at FFO. AmREIT calculates its FFO in accordance with this definition.
Most industry analysts and equity REITs, including AmREIT, consider FFO to be an
appropriate supplemental measure of operating performance because, by excluding
gains or losses on dispositions and excluding depreciation, FFO is a helpful
tool that can assist in the comparison of the operating performance of a
company's real estate between periods, or as compared to different companies.
There can be no assurance that FFO presented by AmREIT is comparable to
similarly titled measures of other REITs. FFO should not be considered as an
alternative to net income or other measurements under GAAP as an indicator of
our operating performance or to cash flows from operating, investing or
financing activities as a measure of liquidity.
Below is the calculation of FFO and the reconciliation to net income, which the
Company believes is the most comparable GAAP financial measure to FFO, in
thousands for the three months ended March 31:
2004 2003
-------- -------
(Loss) income before discontinued operations $ (1,021) $ 267
Income from discontinued operations 656 191
Plus depreciation of real estate assets - from operations 244 181
Plus depreciation of real estate assets - from discontinued operations - 38
Less class B and class C distributions (813) (453)
-------- -------
Total Funds From Operations available to class A shareholders * $ (934) $ 224
Cash dividends paid to class A shareholders $ 345 $ 307
Dividends in excess of FFO * $ (1,279) $ (83)
* Based on the adherence to the NAREIT definition of FFO, we have not added back
the $1.3 million charge to earnings during 2004 resulting from shares issued to
Mr. Taylor. Adding these charges back to earnings would result in $386 thousand
adjusted funds from operations available to class A shareholders, and class A
dividends paid less than adjusted FFO available to class A shareholders of $41
thousand.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2004 TO MARCH 31, 2003:
Rental revenue and earned income from direct financing leases increased by 38%,
or $600 thousand, from $1.6
17
million in 2003 to $2.2 million in 2004. Of this increase, $640 thousand is
related to acquisitions made after the first quarter of 2003. This is somewhat
offset by the loss of rental income of $100 thousand due to property
dispositions.
On January 21, 2003, Wherehouse Entertainment filed for a voluntary petition of
relief under Chapter 11 of the federal bankruptcy code. AmREIT owns two
Wherehouse Entertainment properties, one located in Independence, Missouri, and
the other located in Wichita, Kansas. Through court proceedings, the lease at
the Missouri location has been modified and assigned to Record Town. Wherehouse
Entertainment has vacated the Kansas location. On March 2, 2004, Footstar, the
parent company of Just for Feet filed for a voluntary petition of relief under
Chapter 11 of the federal bankruptcy code. Footstar has announced it intends to
close all their Just for Feet stores after an orderly liquidation of the
remaining inventory. AmREIT owns two Just for Feet locations, one in Tucson,
Arizona and the other is located in Baton Rouge, Louisiana.
Securities commission income increased by $1.8 million, from $86 thousand in
2003 to $1.9 million in 2004. This increase in securities commission income is
due to increased capital being raised through our broker dealer company, AmREIT
Securities Company (ASC). As ASC raises capital for either AmREIT or its
affiliated retail partnerships, ASC earns a securities commission of between 8%
and 10.5% of the money raised. During the first quarter of 2004, AmREIT and its
affiliated retail partnerships raised approximately $18.0 million, as compared
to approximately $834 thousand during the first quarter of 2003. This increase
in commission income is somewhat mitigated by a corresponding increase in
commission expense paid to other third party broker dealer firms. Commission
expense increased by $1.4 million, from $65 thousand in 2003 to $1.4 million in
2004.
General and operating expense increased $665 thousand, from $770 thousand in
2003 to $1.4 million in 2004. The increase in general and operating expense is
primarily due to additional personnel and the associated salary and benefits
costs related to these individuals. Since the first quarter of 2003, the Company
added members to each of the operating teams, five on the real estate team
(property management, legal, acquisitions and leasing), one on the securities
team and two clerical and administrative support positions. By building our
various teams, we have not only been able to grow revenue and Funds from
Operations, but believe that we will be able to sustain and further enhance our
growth. Compensation expense increased $462 thousand in 2004 as compared to
2003. In addition, property expense increased $131 thousand.
Deferred merger costs increased from $0 in the first quarter of 2003 to $1.3
million in the first quarter of 2004 . The deferred merger cost is related to
deferred consideration payable to Mr. Taylor as a result of the acquisition of
our advisor, which was owned by Mr. Taylor in 1998. In connection with the
acquisition, Mr. Taylor agreed to payment for this advisory company in the form
of common shares, paid as the Company increases its outstanding equity. To date,
Mr. Taylor has received approximately 847 thousand class A common shares, and is
eligible to receive an additional 53 thousand shares as additional equity is
raised by the Company.
18
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Chief Executive Officer Section 302 Certification
31.2 Chief Financial Officer Section 302 Certification
32.1 Chief Executive Officer certification pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Chief Financial Officer certification pursuant to 18 U.S.C Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
(b) Reports on Form 8-K
Current report on Form 8-K dated and filed with the Commission on
March 18, 2004 contained information under Item 7 (Financial
Statements, Pro Forma Financial Information and Exhibits) and Item 9
(Regulation FD Disclosure).
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the issuer
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
AmREIT
---------------------------------
(Issuer)
May 14, 2004 /s/ H. Kerr Taylor
------------ ---------------------------------
Date H. Kerr Taylor, President
May 14, 2004 /s/ Chad C.Braun
------------ ---------------------------------
Date Chad C. Braun (Principal Accounting Officer)
20
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
31.1 Chief Executive Officer Section 302 Certification
31.2 Chief Financial Officer Section 302 Certification
32.1 Chief Executive Officer certification pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Chief Financial Officer certification pursuant to 18 U.S.C Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.