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 September 30, 2003
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 September 30, 2003 there were 5,641,381 common shares of beneficial
interest of AmREIT, $.01 par value outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMREIT AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2003
(unaudited)
ASSETS
Property:
Land $21,531,368
Buildings 26,466,459
Tenant improvements 351,561
Furniture, fixtures and equipment 232,142
___________
48,581,530
Less accumulated depreciation (2,731,637)
___________
Net real estate held for investment 45,849,893
Real estate held for sale, net 8,850,670
Net investment in direct financing leases held for ivestment 22,048,739
Cash and cash equivalents 1,348,385
Accounts receivable 372,600
Accounts receivable - related party 150,432
Escrow deposits 257,925
Prepaid expenses, net 324,419
Other assets:
Preacquisition costs 17,088
Loan acquisition cost, net of $117,356 in accumulated
amortization 328,230
Accrued rental income 498,802
Intangible lease cost, net of $52,813 in accumulated
amortization 204,786
Investment in non-consolidated affiliates 519,873
___________
Total other assets 1,568,779
___________
TOTAL ASSETS $80,771,842
___________
___________
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Notes payable $38,308,124
Accounts payable 1,321,795
Accounts payable - related party 24,656
Security deposit 35,930
Prepaid rent 6,561
___________
TOTAL LIABILITIES 39,697,066
___________
Minority interest 821,380
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, 2,917,924 shares issued 29,179
Class B Common shares, $.01 par value, 3,000,000 shares
authorized, 2,384,002 shares issued 23,840
Class C Common shares, $.01 par value, 4,400,000 shares
authorized, 339,455 shares issued 3,395
Capital in excess of par value 50,058,297
Accumulated distributions in excess of earnings (8,935,391)
Deferred compensation (267,330)
Cost of treasury shares, 105,422 shares (658,594)
___________
TOTAL SHAREHOLDERS' EQUITY 40,253,396
___________
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $80,771,842
___________
___________
See Notes to Condensed Consolidated Financial Statements.
AMREIT AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Quarter ended September 30, Year to date September 30,
2003 2002 2003 2002
Revenues:
Rental income from operating leases $1,243,067 $ 1,007,891 $3,575,964 $ 2,259,905
Earned income from direct financing leases 681,309 594,429 1,950,637 1,222,780
Service fee income 944,530 725,967 2,004,390 1,465,641
Management fees 78,302 50,910 188,549 236,316
Income from non-consolidated affiliates 7,138 - 92,476 283,509
Gain on sales of real estate acquired for resale 237,579 (37,061) 237,579 (37,061)
Interest and other income 1,459 542 5,289 2,595
__________ ___________ __________ ___________
Total revenues 3,193,384 2,342,678 8,054,884 5,433,685
__________ ___________ __________ ___________
Expenses:
General operating and administrative 869,675 648,849 2,407,338 1,894,836
Legal and professional 864,535 365,400 1,597,211 694,861
Interest 598,189 519,665 1,743,535 1,183,345
Depreciation and amortization 216,375 226,049 617,946 454,356
Deferred merger costs - 1,904,370 - 1,904,370
__________ ___________ __________ ___________
Total expenses 2,548,774 3,664,333 6,366,030 6,131,768
__________ ___________ __________ ___________
Income (loss) before federal income taxes and
minority interest in income of consolidated joint
ventures 644,610 (1,321,655) 1,688,854 (698,083)
Federal income tax expense for taxable REIT
subsidiary (15,300) (75,000) - (90,000)
Minority interest in income of consolidated joint
ventures (45,841) (35,339) (128,790) (307,284)
__________ ___________ __________ ___________
Income from continuing operations 583,469 (1,431,994) 1,560,064 (1,095,367)
Income from discontinued operations 75,531 $ 61,966 205,917 $ 168,943
Net income (loss) $ 659,000 $(1,370,028) $1,765,981 $ (926,424)
Distributions paid to class B and class C
shareholders (457,343) (423,732) (1,349,010) (423,732)
__________ ___________ __________ ___________
Net income (loss) available to class A
shareholders $ 201,657 $(1,793,760) $ 416,971 $(1,350,156)
__________ ___________ __________ ___________
__________ ___________ __________ ___________
Basic income (loss) from continuing operations
per common share $ 0.045 $ (0.769) $ 0.076 $ (0.639)
__________ ___________ __________ ___________
__________ ___________ __________ ___________
Net income (loss) per common share - basic and
diluted $ 0.072 $ (0.744) $ 0.150 $ (0.568)
__________ ___________ __________ ___________
__________ ___________ __________ ___________
Weighted avergage common shares used to compute
net income per share, basic and diluted 2,805,753 2,412,544 2,788,303 2,376,569
__________ ___________ __________ ___________
__________ ___________ __________ ___________
See Notes to Condensed Consolidated Financial Statements.
AMREIT AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Quarter ended September 30, Year to date September 30,
2003 2002 2003 2002
Cash flows from operating activities:
Net income (loss) $ 659,000 $(1,370,028) $ 1,765,981 $ (926,424)
Adjustments to reconcile net income to net cash
provided by operating activities:
Investment in real estate acquired for resale - - (7,233,069) -
Proceeds from sales of real estate acquir 2,049,627 - 3,947,983 -
(Gain) loss on sales of real estate acquired for resale (237,579) 37,061 (237,579) 37,061
Depreciation and amortization 241,521 241,275 708,537 494,945
Amortization of (increase in) deferred compensation 15,457 15,457 90,842 (63,544)
Minority interest in net income of consolidated
joint ventures 45,841 35,339 128,790 307,284
Deferred merger costs - 1,904,370 - 1,904,370
(Increase) decrease in accounts receivable (85,708) 256,697 (198,941) 451,754
(Increase) decrease in accounts receivable
- related party (2,623) 821,982 (81,498) 1,263,680
Increase (decrease) in prepaid expenses, net 39,138 65,519 22,679 7,099
Cash receipts from direct financing leases
(less) more than income recognized (3,476) (81,282) 9,319 (158,047)
Increase in accrued rental income (79,431) (14,683) (159,278) (35,900)
(Increase) decrease in other assets (199,550) 105,554 (192,906) (1,019)
Increase (decrease) in accounts payable 452,309 256,568 175,111 (507,861)
Decrease in accounts payable- related party (155,042) (121,440) (181,467) (146,440)
(Decrease) increase in prepaid rent (84,418) (7,438) 384 -
Decrease in security deposits - 4,857 - (10,193)
___________ ___________ ___________ ___________
Net cash provided by (used in) operating activities 2,655,066 2,149,808 (1,435,112) 2,616,765
___________ ___________ ___________ ___________
Cash flows from investing activities:
Improvements to real estate (45,518) (71,107) (323,087) (497,169)
Acquisition of investment properties (1,474,694) (8,217,958) (4,163,689) (18,028,973)
Additions to furniture, fixtures and equipment (3,124) (8,329) (44,717) (12,503)
(Investment in) distributions from non-consolidating
affiliates 110,294 (91,001) 29,462 281,810
Proceeds from sale of investment property - 1,097,562 - 1,097,562
Increase in preacquisition costs (7,313) (204,056) (15,323) (275,615)
___________ ___________ ___________ ___________
Net cash provided by (used in) investing activities (1,420,355) (7,494,889) (4,517,354) (17,434,888)
___________ ___________ ___________ ___________
Cash flows from financing activities:
Proceeds from notes payable 1,900,000 7,885,573 11,160,758 17,382,782
Payments of notes payable (4,588,257) (1,440,734) (6,438,719) (1,479,971)
Loan acquisition costs - (46,584) - (9,446)
(Purchase) issuance of treasury shares (23,080) (8,442) (414,224) 176,678
Issuance of common shares 3,393,764 (2,000) 3,393,764 (2,000)
Issuance costs (514,689) - (514,689) -
Common dividends paid (765,467) (680,898) (2,274,526) (1,012,075)
Contributions from minority interests - 11,542 - 620,542
Distributions to minority interests (25,031) (35,339) (118,381) (334,485)
___________ ___________ __________ ___________
Net cash (used in) provided by financing (622,760) 5,683,118 4,793,983 15,342,025
___________ ___________ __________ ___________
Net increase (decrease) in cash and cash equiv 611,951 338,037 (1,158,483) 523,902
Cash and cash equivalents, beginning of period 736,434 412,982 2,506,868 227,117
___________ ___________ __________ ___________
Cash and cash equivalents, end of period $ 1,348,385 $ 751,019 $1,348,385 $ 751,019
___________ ___________ __________ ___________
___________ ___________ __________ ___________
Supplemental schedule of noncash investing and financing activities On July 23,
2002, the Company merged with three of its affiliated partnerships, AAA Net
Realty Fund IX, Ltd., AAA Net Realty Fund X, Ltd. and AAA Net Realty Fund XI,
Ltd. In conjunction with the merger, the Company acquired $23,890,318 worth of
property and issued 2,589,179 shares of Class B common shares.
Supplemental schedule of cash flow information:
Cash paid during the year for:
Interest 490,828 384,132 1,618,249 979,296
Income taxes 15,884 - 46,987 133,841
See Notes to Condensed Consolidated Financial Statements.
AMREIT AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(Unaudited)
1. 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 and nine-month periods ended September 30,
2003 and 2002.
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, 2002.
DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
AmREIT, formerly AmREIT, Inc. and previously American Asset Advisers
Trust, Inc. (the "Company"), was organized in the state of Maryland in
August 1993, is a real estate investment trust ("REIT") based in Houston ,
Texas, is listed on the American Stock Exchange (AMY) and re-organized in
the state of Texas in December 2002. AmREIT is both an owner of net-leased
properties and a sponsor of real estate direct participation programs to
the financial planning community. For more than 18 years, the Company (and
its predecessors) has established a track record of investing in
commercial real estate leased primarily to parent companies of corporate
tenants in the retail, financial services and banking, medical and
restaurant sectors. AmREIT's real estate team focuses on development,
management, brokerage and ownership of freestanding credit tenant leased
("CTL") and frontage shopping centers ("FSC") that are located contiguous
to major thoroughfares and traffic generators. AmREIT's customer list
includes national and regional tenants such as: Walgreens, Goodyear Tire,
Washington Mutual, IHOP, McDonald's, Herman Hospital, Sprint, Radio Shack,
Coldwell Banker, Guaranty Federal, Bennigan's, Chili's, Texas Children's
Pediatric Associates, Discount Tire, etc.
AmREIT owns a real estate portfolio that consists of 50 properties located
in 20 states. Its properties include single-tenant, free standing credit
tenant leased projects and multi-tenant frontage projects. The single
tenant projects are located coast to coast and are primarily leased to
corporate tenants where the lease is the direct obligation of the parent
companies. As a result, the dependability of lease payments is based on
the strength and viability of the entire company, not just that location.
The multi-tenant projects are situated primarily throughout Texas.
Supporting the real estate portfolio is an operating company subsidiary of
AmREIT that provides a complete range of services including development,
construction management, property management, brokerage and leasing.
On July 23, 2002, the Company completed a merger with three of its
affiliated partnerships, AAA Net Realty Fund IX, Ltd., AAA Net Realty Fund
X, Ltd., and AAA Net Realty Fund XI, Ltd. With the merger of these
affiliated partnerships, AmREIT increased its real estate assets by
approximately $24.3 million and issued approximately 2.6 million class B
common shares to the limited partners in the affiliated partnerships.
Approximately $760 thousand in 8 year, interest only, subordinated notes
were issued to limited partners of the affiliated partnerships who
exercised their dissenters' rights. The acquired properties are
unencumbered, single tenant, free standing properties on lease to national
and regional tenants, where the lease is the direct obligation of the
parent company. The following selected unaudited pro forma consolidated
statement of operations for AmREIT and subsidiaries gives effect to the
merger with its three affiliated partnerships, which assumes that the
merger occurred on January 1, 2002. Additionally, we have presented a
summary of assets acquired and liabilities assumed as of the date of the
merger, July 23, 2002.
Pro Forma Consolidated Operating Information
(Unaudited)
Three Months Ended Nine Months Ended
September 30, 2002 September 30, 2002
Revenues
Rental income and earned income $ 1,750,489 $ 4,668,458
Other income 768,699 1,867,007
______________ ____________
Total Revenues 2,519,188 6,535,465
______________ ____________
Total expenses 3,756,895 6,579,355
______________ ____________
Proforma income before minority interest in income of
consolidated joint ventures (1,237,707) (43,890)
Federal income tax benefit from taxable REIT subsidiary (75,000) (90,000)
Minority interest in income of consolidated joint ventures (9,795) (18,098)
______________ ____________
Pro forma net income (loss) $ (1,322,502) $ (151,988)
______________ ____________
______________ ____________
Summary of Assets Acquired and Liabilities Assumed
As of July 23, 2002,
Assets
Buildings $ 16,330,088
Land 7,560,231
Accounts receivable 1,105,612
Prepaid expenses 15,757
_____________
Total Assets $ 25,011,688
Liabilities 132,630
_____________
Net assets acquired $ 24,879,058
_____________
_____________
Class B common stock issued 24,118,648
Subordinated notes issued 760,410
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. At September 30, 2003, the Company had issued
approximately 339 thousand shares, representing approximately $3.4 in
proceeds from selling class C shares.
REAL ESTATE HELD FOR SALE
Properties are classified as real estate held for sale if the properties
were purchased with intent to hold the properties for less than a year or
if the properties are listed for sale. At September 30, 2003, AmREIT owned
five properties that are classified as real estate held for sale. The five
properties have a combined carrying value of $8.85 million. Three of the
properties have separate notes payable, which have a one year term and a
combined balance of $3.46 million at September 30, 2003.
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 November 2002, the FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others, an interpretation of FASB Statements
No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34. This
Interpretation elaborates on the disclosures to be made by a guarantor in
its interim and annual financial statements about its obligations under
guarantees issued. The Interpretation also clarifies that a guarantor is
required to recognize, at inception of a guarantee, a liability for the
fair value of the obligation undertaken. The disclosure requirements are
effective for financial statements of interim or annual periods ending
after December 15, 2002. The initial recognition and measurement
provisions of the Interpretation are applicable to guarantees issued or
modified after December 31, 2002 and did not have a material effect on our
consolidated financial position, results of operations, or cash flows.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement
No. 123. This Statement amends FASB Statement No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for
a voluntary change to the fair value method of accounting for stock-based
employee compensation. In addition, this Statement amends the disclosure
requirements of Statement No. 123 to require prominent disclosures in both
annual and interim financial statements. Certain of the disclosure
modifications are required for fiscal years ending after December 15,
2002, however, these disclosure modifications are not applicable to the
Company as the Company does not have stock based compensation other than
restricted stock grants. The Company has adopted SFAS 148 and the adoption
of SFAS 148 did not have a material impact on our consolidated financial
position, results of operations, or cash flows.
In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51. This
Interpretation addresses the consolidation by business enterprises of
variable interest entities as defined in the Interpretation. The
Interpretation applies immediately to variable interests in variable
interest entities created after January 31, 2003, and to variable
interests in variable interest entities obtained after January 31, 2003.
The implementation of the Interpretation has been delayed until periods
ending after December 15, 2003. The Interpretation requires certain
disclosures in financial statements issued after January 31, 2003 if it is
reasonably possible that the Company will consolidate or disclose
information about variable interest entities when the Interpretation
becomes effective. The Company believes it has no variable interest
entities which would require consolidation or disclosure.
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 2002 and 2003 condensed
consolidated financial statements have been reclassified to conform to the
presentation used in the interim unaudited 2003 condensed consolidated
financial statements. Such reclassifications had no effect on previously
reported net income or loss or shareholders' equity.
2. 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 $20 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. At September 30, 2003, the Company was in compliance with
all financial covenants. The Credit Facility's annual interest rate varies
depending upon leverage, from LIBOR plus a spread of 1.40% to LIBOR plus
2.35%. As of September 30, 2003, the interest rate was LIBOR plus 2.0%. As
of September 30, 2003, $15.0 million was outstanding under the Credit
Facility. Thus the Company has approximately $5.0 million available under
its line of credit, subject to Lender approval on the use of the proceeds.
3. MAJOR TENANTS
As of September 30, 2003, there have been no significant changes in the
tenant make-up from year end December 31, 2002.
4. EARNINGS PER SHARE
Basic earnings per share has been computed by dividing net income
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
class A common shares outstanding plus dilutive potential common shares.
The following table presents information necessary to calculate basic and
diluted earnings per share for the periods indicated:
Quarter Year to Date
2003 2002 2003 2002
---- ---- ---- ----
BASIC EARNINGS PER SHARE
Weighted average class A common shares outstanding 2,805,753 2,412,544 2,788,303 2,376,569
Basic earnings (loss) per share $ 0.072 $ (0.744) $ 0.150 $ (0.568)
_________ ___________ _________ ___________
_________ ___________ _________ ___________
EARNINGS (LOSS) FOR BASIC COMPUTATION
Net income (loss) available to class A common shareholders
(basic earnings (loss) per share computation) $ 201,657 $(1,793,760) $ 416,97 $(1,350,156)
_________ ___________ _________ ____________
_________ ___________ _________ ____________
Diluted earnings per share information is not disclosed due to the
accretive nature of the common class B and class C shares.
5. DISCONTINUED OPERATIONS
The operations of two properties listed as held for sale at September 30,
2003 were reported as discontinued operations. The following is a summary
of our discontinued operations:
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
9/30/2003 9/30/2002 9/30/2003 9/30/2002
--------- --------- --------- ---------
Rental revenue $82,540 $77,192 $247,618 $209,532
Depreciation and amortization - (15,226) (30,136) (40,589)
Property expenses (7,009) - (11,565) -
________ _______ ________ ________
Income from discontinued operations $ 75,531 $61,966 $205,917 $168,943
Basic income from discontinued operations
per common share $ 0.027 $ 0.026 $ 0.074 $ 0.071
6. COMMITMENTS
In June 1998, the AmREIT shareholders approved the acquisition of an
advisory company then owned by H. Kerr Taylor's, President and CEO of
AmREIT. In conjunction with this acquisition, Mr. Taylor agreed to defer a
portion of the consideration owed to him, which would be paid based on a
specified formula as if and when the Company raised additional equity to
grow AmREIT's equity and assets. As of September 30, 2003, Mr. Taylor is
eligible to receive an additional 384 thousand class A shares as the
Company raises additional equity. Based on equity raised through the class
C common share offering subsequent to September 30, 2003, and equity
anticipated to be raised through December 31, 2003, Mr. Taylor will be
issued between 150 thousand and 170 thousand of these additional class A
shares, valued at market price on the date of issuance. Upon issuance of
these shares, based on the terms of the deferred consideration agreement
which expires June 2006, approximately 234 thousand to 214 thousand shares
remain available to be issued to Mr. Taylor.
As of September 30, 2003, AmREIT has contracted for approximately $22.4
million of single tenant and multi-tenant real estate projects that are
anticipated to close during the fourth quarter 2003 and first quarter
2004.
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.
CRITICAL ACCOUNTING POLICIES
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto. Historical results
and trends which might appear should not be taken as indicative of future
operations. The results of operations and financial condition of the
Company, as reflected in the accompanying 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. Each of these issues requires management to make judgments that
are subjective in nature. Management relies on its experience, collects
historical data and current market data, and analyzes these assumptions in
order to arrive at what it believes to be reasonable estimates.
GENERAL
AmREIT, a Texas real estate investment trust, is listed on the American
Stock Exchange (AMY), and is committed to providing our shareholders with
an opportunity to earn dependable, monthly income through investing in
high-quality commercial retail real estate. Our strategy is to acquire or
develop high-quality properties that are leased to strong national or
regional parent companies. Today, AmREIT owns a portfolio of 50
properties, leased to 27 different tenants located in 20 states. As our
capital base continues to expand, we are forming additional relationships
in the real estate community, identifying investment opportunities that
fit our approach, and carrying out our pledge to our shareholders to
deliver dependable monthly income.
For 18 years we have established a track record of investing in commercial
real estate leased primarily to corporate tenants in the retail, financial
services and banking, medical and restaurant sectors. AmREIT's real estate
team focuses on development, management, brokerage and ownership of
freestanding credit tenant leased and frontage shopping center properties
that are located contiguous to major thoroughfares and traffic generators.
AmREIT's real estate customer list includes national and regional tenants
such as: Walgreens, Goodyear Tire, Washington Mutual, IHOP, McDonald's,
Herman Hospital, Radio Shack, Sprint, Coldwell Banker, Guaranty Federal,
Bennigan's, Chili's, Texas Children's Pediatric Associates and Discount
Tire.
AmREIT, or an affiliate, has previously sponsored 14 investment funds
through the NASD broker-dealer community. It is currently both a limited
partner and general partner in three of these funds. Through this
ownership, AmREIT receives commissions, fees and a carried interest in the
profits and cash flows of these investment funds. Although this carried
interest is not currently reflected in the balance sheet or statement of
operations of AmREIT, it is anticipated to generate profits and cash flows
to AmREIT as certain returns are met for the investors in these affiliated
investment funds.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations has been the principal source of capital to fund
the Company's ongoing operations. The Company's issuance of common shares
and the use of the Company's credit facility have been the principal
sources of capital required to fund its growth. 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 to the Company 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, a merger with certain affiliated partnerships
or other unrelated companies, or the disposition of assets, as well as
undistributed funds from operations.
Comparison of the Three Months Ended September 30, 2003 to September 30,
2002:
Net cash provided by operating activities increased $505 thousand for the
three months ended September 30, 2003 when compared with the three months
ended September 30, 2002. The increase in cash provided by operating
activities was due primarily to the following: (1) a $2.05 million
increase in proceeds from the sale of real estate acquired for resale,
from $0 in 2002 to $2.05 million in 2003; (2) net income increased $2.03
million, from a $1.37 million loss in 2002 to net income of $659 thousand
in 2003. The increase in net income is primarily due to a non-cash charge
of $1.9 million, representing deferred merger costs that were incurred in
2002, therefore, the transaction has no net effect on the cash flow; (3)
accounts payable increased by $297 thousand in 2003, compared to a $135
thousand increase in 2002. The above increases in cash are offset by the
following: (1) accounts receivable increased by $88 thousand in 2003,
compared to a $1.079 million decrease in 2002; (2) other assets decreased
$200 thousand in 2003, compared to a $106 thousand increase in 2002.
Net cash used in investing activities decreased $6.07 million for the
three month period ended September 30, 2003 when compared to the three
month period ended September 30, 2002. The decrease in cash used in
investing activities was primarily due to a $6.75 million decrease in cash
used for acquisitions of investment properties, from $8.22 million in 2002
to $1.47 million in 2003. This decrease in cash used is offset by a
decrease in proceeds from the sale of investment properties of $1.1
million, from $1.1 million in 2002 to $0 in 2003.
Net cash used in financing activities increased $6.31 million for the
three month period ended September 30, 2003 compared to the three month
period ended September 30, 2002. The increase was primarily due to a $5.99
million decrease in proceeds from notes payable, from $7.89 million in
2002 to $1.9 million in 2003. This increase in cash is offset by a $3.15
million increase in payments of notes payable, from $1.44 million in 2002
to $4.59 million in 2003.
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 pay
down existing debt. At September 30, 2003, the Company had issued
approximately 339 thousand shares, representing approximately $3.4 in
proceeds from selling class C shares .
Comparison of the Nine Months Ended September 30, 2003 to September 30,
2002:
Net cash used in operating activities increased $4.05 million for the nine
months ended September 30, 2003 when compared to the nine months ended
September 30, 2002. The increase in cash used in operating activities was
primarily due to the following: (1) investment in real estate acquired for
sale increased $7.23 million, from $0 in 2002 to $7.23 million in 2003;
(2) accounts receivable increased by $280 thousand in 2003, compared to a
$1.72 million decrease in 2002. The above increases in cash used are
offset by the following: (1) a $2.69 million increase in net income, from
a loss of $926 thousand in 2002 to net income of $1.76 million in 2003.
The increase in net income is primarily due to a non-cash charge of $1.9
million, representing deferred merger costs that were incurred in 2002,
therefore, the transaction has no net effect on the cash flow; (2) an
increase in proceeds from the sale of real estate acquired for resale of
$3.95 million, from $0 in 2002 to $3.95 million in 2003; (3) a decrease in
accounts payable of $6 thousand in 2003, compared to a decrease of $654
thousand in 2002.
Net cash used in investing activities decreased $12.92 million for the
nine months ended September 30, 2003 when compared to the nine months
ended September 30, 2002. The decrease in cash used was primarily due to a
decrease in acquisitions of investment properties of $13.87 million, from
$18.03 million in 2002 to $4.16 million in 2003. This decrease in cash
used is offset by a $1.1 million decrease in proceeds from the sale of
investment properties, from $1.1 million in 2002 to $0 in 2003.
Net cash provided by financing activities decreased $10.55 million for the
nine months ended September 30, 2003 compared to the nine months ended
September 30, 2002. The decrease was primarily due to the following
components: (1) a decrease in proceeds from notes payable of $6.22
million, from $17.38 million in 2002 to $11.16 in 2003; (2) an increase in
payments of notes payable of $4.96 million; (3) an increase in common
dividends paid of $1.26 million, from $1.01 million in 2002 to $2.27
million in 2003; (4) a decrease in contributions from minority interests
of $621 thousand; (5) an increase in the purchase of treasury shares of
$591 thousand. The above decreases in cash are offset by a $3.40 million
increase in the issuance of common shares.
Cash flows provided by (used in) operating activities, investing
activities, and financing activities for the three and nine months ended
September 30 are presented below in thousands:
Quarter Year to date
2003 2002 2003 2002
Operating activities $ 2,655 $ 2,150 $(1,435) $ 2,617
Investing activities $(1,420) $(7,495) $(4,517) $(17,435)
Financing activities $ (623) $ 5,683 $ 4,794 $ 15,342
On July 23, 2002, the Company completed a merger with three of its
affiliated partnerships, which increased the Company's real estate assets
by approximately $24.3 million. Pursuant to the merger, the Company issued
approximately 2.6 million class B common shares to the limited partners in
the Affiliated Partnerships. Approximately $760 thousand in 8 year,
interest only, subordinated notes were issued to limited partners of the
Affiliated Partnerships who exercised their dissenters rights. The
acquired properties are unencumbered, single tenant, free standing
properties on lease to national and regional tenants, where the lease is
the direct obligation of the parent company.
The Company's leases typically provide that the tenant bears
responsibility for substantially all property costs and expenses
associated with ongoing maintenance and operation, including utilities,
property taxes and insurance. In addition, the Company's leases generally
provide that the tenant is responsible for roof and structural repairs.
Some of the tenant's leases require the Company to be responsible for roof
and structural repairs. In these instances, the Company normally requires
warranties, and/or guarantees from the related vendors, suppliers and/or
contractors, to mitigate the potential costs of repairs during the primary
terms of the leases. Because many of the properties which are subject to
leases that place these responsibilities on the Company are recently
constructed, management anticipates that capital demands to meet
obligations with respect to these properties will be minimal for the
foreseeable future and can be met with funds from operations and working
capital. The Company may be required to use bank borrowings or other
sources of capital in the event of unforeseen significant capital
expenditures.
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 $20 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. At September 30, 2003, the Company was in compliance with
all applicable financial covenants. The Credit Facility's annual interest
rate varies depending upon leverage, from LIBOR plus a spread of 1.4% to
LIBOR plus 2.35%. As of September 30, 2003, the interest rate was LIBOR
plus 2.0%. As of September 30, 2003, $15.0 million was outstanding under
the Credit Facility. Thus the Company has approximately $5.0 million
available under its line of credit, subject to lender approval on the use
of the proceeds.
As of September 30, 2003, the Company owned 50 properties directly and,
since its inception, had invested $79 million, exclusive of any minority
interests, including certain acquisition expenses related to the Company's
investment in these properties. These expenditures resulted in a
corresponding decrease in the Company's liquidity.
Until properties are acquired by the Company, cash is held in short-term,
highly liquid investments that 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 September 30, 2003 and 2002, the Company's cash and cash
equivalents totaled $1.348 million and $751 thousand respectively.
The Company paid aggregate cash dividends to the holders of its class A,
class B and class C common shares, for the three months ended of September
30, 2003 and 2002 of $765 thousand and $681 thousand, respectively.
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
Funds from operations (FFO) increased $2.013 million to $874 thousand for
the three months ended September 30, 2003 from $(1.139) million for the
three months ended September 30, 2002. For the nine month period ended
September 30, 2003 FFO increased $2.871 million, from $(463) thousand in
2002 to $2.408 million in 2003. Management considers FFO to be an
appropriate measure of operating performance for an equity REIT. The
Company has adopted the National Association of Real Estate Investment
Trusts (NAREIT) definition of FFO. FFO is calculated as net income
(computed in accordance with generally accepted accounting principles)
excluding gains or losses from sales of depreciable operating property,
depreciation and amortization of real estate assets, and excluding results
defined as "extraordinary items" under generally accepted accounting
principles. We believe that in order to facilitate a clear understanding
of our historic operating results, FFO should be examined in conjunction
with net income as presented in the consolidated statement of operations
and data included elsewhere in this report. FFO should not be considered
an alternative to cash flows from operating, investing and financing
activities in accordance with generally accepted accounting principles and
is not necessarily indicative of cash available to meet cash needs. The
Company's computation of FFO may differ from the methodology for
calculating FFO utilized by other equity REITs and, therefore, may not be
comparable to such other REITs. FFO is not defined by generally accepted
accounting principles and should not be considered an alternative to net
income as an indication of the Company's performance. Below is the
reconciliation of net income to funds from operations in thousands for the
three and nine months ended September 30:
Quarter Year to Date
2003 2002 2003 2002
---- ---- ---- ----
Net income (loss) $ 659 $ (1,370) $ 1,766 $ (926)
Depreciation and amortization:
Continuing operations 215 216 612 422
Discontinued operations - 15 30 41
__________ ________ _______ _______
Total funds from operations * $ 874 $ (1,139) $ 2,408 $ (463)
__________ ________ _______ _______
__________ ________ _______ _______
Cash distributions paid to class A, B
and C shareholders $ 765 $ 681 $ 2,275 $ 1,012
FFO in excess of (less than) distributions* $ 109 $ (1,820) $ 133 $(1,475)
* Based on adherence to the NAREIT definition of FFO, we did not add back the
$1.904 million charge to earnings in the third quarter 2002 resulting from
shares issued to Mr. Taylor, president of the Company. Adding this $1.904
million charge to earnings back to earnings would result in adjusted funds from
operations of $765 thousand for the three months ended September 30, 2002 and
$1.441 million for the nine months ended September 30, 2002, respectively.
Adding the charge to earnings would also result in dividends paid being less
than adjusted FFO of $84 thousand for the three months ended September 30, 2002
and $429 thousand for the nine months ended September 30, 2002.
RESULTS OF OPERATIONS
Comparison of the Three Months Ended September 30, 2003 to September 30,
2002:
During the three months ended September 30, 2003 and September 30, 2002,
the Company earned $1.9 million and $1.6 million, respectively, in rental
income from operating leases and earned income from direct financing
leases. Additional property purchases resulted in the increased income
from rents and earned income from direct financing leases. Service fee
income increased $219 thousand, from $726 thousand in 2002 to $945
thousand in 2003. The increase in service fee income was primarily due to
an increase in commission income from an increase in equity raised in our
real estate investment sponsorship activities. Gain on sale of real estate
acquired for resale increased $275 thousand, from a loss of $37 thousand
in 2002 to a $238 thousand gain in 2003. The gain recorded in 2003 is
related to the sale of an IHOP property in Milwaukee, WI.
During the three months ended September 30, 2003 and September 30, 2002,
the Company's expenses were $2.5 million and $3.7 million, respectively.
The $1.2 million decrease in expenses is primarily attributable to a
non-recurring charge in 2002 of $1.9 million, which was a deferred payment
of merger related expenses. This decrease in expense was partially offset
by the following increases: (1) an increase in general operating and
administrative expense of $221 thousand, from $649 thousand in 2002 to
$870 thousand in 2003, which was primarily attributable to an increase in
salary expense due to additional positions; and (2) an increase in legal
and professional fees of $500 thousand, from $365 thousand in 2002 to $865
thousand in 2003, which was primarily due to an increase in commissions
paid to third party security brokerage companies.
Comparison of the Nine Months Ended September 30, 2003 to September 30,
2002:
During the nine months ended September 30, 2003 and September 30, 2002,
the Company earned $5.5 million and $3.5 million, respectively, in rental
income from operating leases and earned income from direct financing
leases. Additional property purchases as well as the merged properties
from the three affiliated partnerships resulted in the increased income
from rents and earned income from direct financing leases. Service fee
income increased $539 thousand, from $1.466 million in 2002 to $2.004
million in 2003. The increase is primarily due to an increase in
commission income, which is partially offset by a decrease in advisory fee
income. Gain on sale of real estate acquired for resale increased $275
thousand, from a loss of $37 thousand in 2002 to a $238 gain in 2003. The
gain recorded in 2003 is related to the sale of an IHOP property in
Milwaukee, WI.
During the nine months ended September 30, 2003 and September 30, 2002,
the Company's expenses were $6.37 million and $6.13 million, respectively.
The $234 thousand increase in expenses is primarily due to (1) an increase
in legal and professional fees of $902 thousand, from $695 thousand in
2002 to $1.6 million in 2003. The increase in legal and professional fees
is primarily attributable to increased commission expense paid to third
party security brokerage companies; (2) an increase in interest expense of
$560 thousand, from $1.2 million in 2002 to $1.7 million in 2003. The
increase in interest expense is due to additional debt used to finance the
acquisition of additional properties; (3) an increase in general operating
and administrative expenses of $513 thousand, from $1.9 million in 2002 to
$2.4 million in 2003, which is due to an increase in salary expense due to
additional positions. These increases in expense are offset by a decrease
in deferred acquisition costs of $1.9 million, which is attributable to
the deferred payment of merger related expenses that was expensed in 2002.
Discontinued Operations
The operations of two properties listed as held for sale at September 30, 2003
were reported as discontinued operations. The following is a summary of our
discontinued operations:
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
9/30/2003 9/30/2002 9/30/2003 9/30/2002
--------- --------- --------- ---------
Rental revenue $82,540 $77,192 $247,618 $209,532
Depreciation and amortization - (15,226) (30,136) (40,589)
Property expenses (7,009) - (11,565) -
_______ _______ ________ ________
Income from discontinued operations $75,531 $61,966 $205,917 $168,943
Basic income from discontinued operations
per common share $ 0.027 $ 0.026 $ 0.074 $ 0.071
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
On November 12, 2003, AmREIT (the "Company") issued a press
release announcing its consolidated financial results for the
quarter ended September 30, 2003.
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)
November 13, 2003 /s/ H. Kerr Taylor
----------------- -------------------------------------------
Date H. Kerr Taylor, President
November 13, 2003 /s/ Chad C. Braun
----------------- -------------------------------------------
Date Chad C. Braun, (Principal Accounting Officer)
Exhibit 31.1
FORM OF SARBANES-OXLEY SECTION 302(a) CERTIFICATION
I, H. Kerr Taylor, Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of AmREIT;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the consolidated financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this quarterly
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures presented in this report, our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: November 13, 2003 By:
---------------------------------------
H. Kerr Taylor, Chief Executive Officer
Exhibit 31.2
FORM OF SARBANES-OXLEY SECTION 302(a) CERTIFICATION
I, Chad C. Braun, Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of AmREIT;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the consolidated financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this quarterly
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and we have:
a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures presented in this report, our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: November 13, 2003 By:
-----------------------------------------
Chad C. Braun, Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of AmREIT (the "Company") on
Form 10-QSB for the period ended September 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, H.
Kerr Taylor, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that:
1. The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ H. Kerr Taylor
H. Kerr Taylor
Chief Executive Officer
November 13, 2003
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of AmREIT (the "Company") on
Form 10-QSB for the period ended September 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Chad
C. Braun, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of
2002, that:
1. The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Chad C. Braun
Chief Financial Officer
November 13, 2003