REIT Executive Sees
A Buying Opportunity

DENVER -- AmeriVest Properties Inc. Chief Executive William Atkins said the company is holding up its office-building occupancy levels despite weakness in the markets where those buildings are located.

In the last 18 months, occupancies in those markets have fallen "pretty dramatically," to a point where they are posting vacancy rates of 17% to 20%, Mr. Atkins said. But there are "very high occupancies in our buildings," he said in a conference call discussing fourth-quarter results for the Denver-based office real estate investment trust.

In an interview after the conference call, AmeriVest President Charles Knight said the 17% to 20% represents vacancies for all classes of office buildings.

AmeriVest's occupancy percentage in its Indianapolis office building is in the high 90s, while the market as a whole is seeing occupancies in the low 80s, Mr. Atkins said. Occupancy in its Phoenix-area office building is in the low 90s, while occupancy in the market as a whole is just below 80%, he said.

In the Denver area, too, AmeriVest's occupancies are generally far outstripping market occupancies. The one exception is the Panorama Falls Building, which is 20% to 25% occupied, Mr. Knight said. Occupancy there was hurt by the bankruptcy filing by Rhythms NetConnections Inc. AmeriVest sold 80% of the building in the fourth quarter and retains a 20% interest. The company typically buys buildings of about 100,000 square feet, with lots of small and medium-sized tenants, spruces them up and raises the rent. Those buildings generally aren't attractive to large institutions because they are tough to manage. But with lots of small tenants, the risk of a big blow from the departure of any one tenant is diminished.

Some of the market weakness may present good acquisition opportunities for AmeriVest, according to Messrs. Atkins and Knight.

"We need to expand in Phoenix and Indianapolis," Mr. Atkins said, and that will be a focus for the rest of 2002. In addition, the Dallas and San Francisco markets are on the company's radar screen, he said.

The Dallas market is "very soft," which could mean an opportunity to buy at a low price, according to Mr. Atkins. San Francisco, which has always been too pricey, may present some opportunities in the wake of the tech-industry bust, he said.

Despite the sluggish markets, which have had a dampening effect on AmeriVest rents, executives are upbeat about 2002.

"We anticipate that 2002 is going to be an extraordinary year for us, with, again, revenue growth that I would anticipate is going to continue to be in line with the growth we've had for the last five years, and funds from operations growth in line with that," Mr. Atkins said.

Revenue has increased fourfold since 1997, when AmeriVest posted $2.5 million in revenue. Revenue rose 52% in 1998, to $3.8 million; 58% in 1999, to $6 million; 20% in 2000, to $7.2 million; and 51% in 2001, to $10.9 million.

Mr. Knight told Dow Jones Newswires the company would look at all its options in terms of funding growth in 2002. It has historically used borrowings or issuance of stock to buy buildings, he said.

With a market cap of about $42 million, AmeriVest is still below the radar screen of many investors.

"We need to get to be about a $100 million-sized company," Mr. Knight said.

AmeriVest posted fourth-quarter net income of $548,400, or 8 cents a diluted share, compared with net income of $42,700, or 1 cent a diluted share, a year ago.

Fourth-quarter funds from operations, which exclude certain items such as depreciation expense, were $1.1 million, a 165% rise compared with the $421,100 of a year ago. Fourth-quarter revenue rose 77%, to $3.5 million, from roughly $2 million a year ago.

Fourth-quarter revenue included $298,400 tied to the bankruptcy settlement with Rhythms.

AmeriVest said in a press release that it expects 2002 results to be helped by the leasing of the Sheridan Center in midtown Denver and by two acquisitions in the fourth quarter -- the 96,100-square-foot Arrowhead Fountains Office building in Peoria, Ariz., and the 112,700-square-foot Kellogg Building in Littleton, Colo.

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