U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   FORM 10-KSB
 (Mark One)
            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1998

             [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
             For the transition period from __________ to __________

                         Commission file number 1-14462

                            AmeriVest Properties Inc.
                  --------------------------------------------
                 (Name of small business issuer in its charter)

                     Delaware                                 84-1240264
--------------------------------------------------------------------------------
         (State or other jurisdiction of                  (I.R.S. Employer
         incorporation or organization)                  Identification No.)

     2801 Youngfield Street, Suite 300, Golden, CO              80401
--------------------------------------------------------------------------------
         (Address of principal executive offices)             (Zip Code)

Issuer's telephone number  (303) 205-7870

       Securities registered under Section 12(b) of the Exchange Act: None

         Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, $.001 par value
                          ------------------------------
                                 Title of class

                    Redeemable Common Stock Purchase Warrants
                    -----------------------------------------
                                 Title of class

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing  requirements for the past 90 days. Yes X  No
                                                                       ---   ---

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B is not contained in this form,  and no disclosure  will be
contained,  to be the best of  registrant's  knowledge,  in definitive  proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

     The issuer's revenues for its most recent fiscal year were: $3,816,169

     The  aggregate  market  value of the issuer's  voting  Common Stock held by
non-affiliates  * of the issuer as of April 5, 1999 was $7,322,272  (computed on
the basis of $4.75 per share which was the  reported  closing  sale price of the
issuer's common stock on the Nasdaq SmallCap Stock Market on April 5, 1999).

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

     The number of shares  outstanding of the issuer's  Common Stock as of April
5, 1999 was 1,658,770

     Transitional Small Business Disclosure Format (check one): Yes    No   X
                                                                    ---    ---

*    Without  asserting that any director or executive  officer of the issuer is
     an  affiliate,  the shares of which they are  beneficial  owners  have been
     deemed to be owned by affiliates solely for this calculation.

<PAGE>

                                     PART I

ITEMS 1. and 2.  DESCRIPTION OF BUSINESS AND PROPERTY

General
-------

     AmeriVest  Properties Inc.  ("AmeriVest" or the "Company") was incorporated
in 1993 in the State of Delaware.  AmeriVest operates and intends to continue to
operate in a manner so that it qualifies as a self-administered and self-managed
real estate investment trust ("REIT"). Through its subsidiaries,  AmeriVest owns
an  industrial  office  and  showroom  building  (the  "Broadway  Property"),  a
commercial office building (the "Giltedge Office  Building"),  four self-storage
facilities (the "Self-Storage  Facilities"),  four Bank of America branch office
buildings (the "Bank  Buildings"),  and 14  state-leased  office  buildings (the
"State  Of  Texas  Buildings").  The  Broadway  Property,  the  Giltedge  Office
Building, the Self-Storage Facilities, the Bank Buildings and the State Of Texas
Buildings are collectively  referred to as the "Properties".  The Bank Buildings
are managed on behalf of the Company by Windsor Corporation  ("Windsor") and the
State Of Texas  Buildings  are  managed  on behalf  of the  Company  by  Melsama
Corporation ("Melsama"). See "--Property Management Contracts" below. In October
and November 1996,  the Company sold an aggregate of 1,098,870  shares of Common
Stock and 549,435 common stock purchase warrants in its initial public offering.
The aggregate gross proceeds from the offering were  approximately  $5.5 million
and the net proceeds to the Company were approximately $4.5 million.

     AmeriVest's  headquarters are located at 2801 Youngfield Street, Suite 300,
Golden,  Colorado 80401. Its telephone number is (303) 205-7870. As of April 30,
1999, the Company's  headquarters  will be at 3333 South Wadsworth Blvd.,  Suite
D-216, Lakewood, Colorado 80227, and there also may be a new telephone number at
that address.

Description Of Properties
-------------------------

     At December  31, 1998,  the Company  owned and  operated 24  properties  in
Texas,  Colorado and Wisconsin.  The following chart lists the properties  owned
and contains a summary of some of the operating  information  applicable to each
facility:
<TABLE>
<CAPTION>

                                                                   Percentage
                                     Year          Rentable        Occupancy           Annual Rent
Location               Type        Acquired       Sq. Footage     At 12/31/98          Per Sq. Ft.
--------               ----        --------       -----------     -----------          -----------
<S>                   <C>          <C>            <C>             <C>               <C> 

TEXAS PROPERTIES
  STATE OF TEXAS BUILDINGS

Amarillo              Office         1998           23,778          100.0                 $7.60
Arlington             Office         1998           36,326           63.0                $10.22
Bellville             Office         1998           17,898          100.0                 $8.91
Clint                 Office         1998           12,979          100.0                 $9.54
Columbus              Office         1998            6,574          100.0                $11.64
El Paso               Office         1997           17,913          100.0                 $6.72
El Paso               Office         1997            8,208          100.0                $10.67
Hempstead             Office         1998            7,000          100.0                 $8.96
Lubbock               Office         1997            8,103          100.0                 $7.33
Marshall              Office         1998           24,647          100.0                 $6.81
Mission               Office         1998           17,288          100.0                 $8.99
Odessa                Office         1998           14,500           33.3                $11.65
Paris                 Office         1998           33,312          100.0                 $6.16
Temple                Office         1998            7,360          100.0                 $8.52

                                                      2

<PAGE>


       BANK BUILDINGS


Clifton              Office          1998           12,308          100.0                $14.77
Georgetown           Office          1998           15,044           94.0                $16.26
Henderson            Office          1998           14,623           95.0                $14.60
Mineral Wells        Office          1998           18,314          100.0                $14.48


  COLORADO PROPERTIES

Arvada               Office          1996            8,000           80.0                 $7.72


  BROADWAY PROPERTY

Denver               Industrial      1995           50,280          100.0                 $4.87


  SELF-STORAGE FACILITIES

Arvada               Self-Storage    1996           37,000           95.0                 $6.71
Denver               Self-Storage    1996           72,490           97.0                 $6.45
Thornton             Self-Storage    1996           55,150           93.0                 $6.20
Westminster          Self-Storage    1996           58,938           89.0                 $5.40


  WISCONSIN PROPERTY
    GILTEDGE OFFICE BUILDING

Appleton             Office          1996           54,871           94.0                $15.43
</TABLE>


     Giltedge Office Building.  The Wisconsin property is the only property that
has a book value in excess of ten percent of the  Company's  total  assets.  The
Giltedge  Office  Building  is located at 4321 West  College  Avenue,  Appleton,
Wisconsin 54914. It is situated on approximately 3.9 acres. The Company does not
have any plans for major  capital  improvements  for the property and intends to
hold the property for income purposes. This property is subject to the following
competitive conditions: there are several mid-rise office buildings in the area,
but  there is no  dominant  owner or  building.  The  occupancy  rates  for this
property were 94%, 96%, 99%, 97% and 99%, in 1998,  1997,  1996,  1995 and 1994,
respectively.  There are two tenants occupying 10% or more of the rentable space
of   the   property.   The   principal   businesses   of   these   tenants   are
telecommunications  and paper supplies. For 1998, 1997, 1996, 1995 and 1995, the
average  effective annual rentals per square foot for this property were $15.43,
$14.64, $14.77, $14.12, and $13.65, respectively. The following is a schedule of
lease expirations for the property for the next ten years:
<TABLE>
<CAPTION>

          Number Of Leases       Total Area Of           Annual Revenue Of         Percentage Of Gross Rents
          That Will Expire      Expiring Leases           Expiring Leases             On Expiring Leases
          ----------------      ---------------           ---------------             ------------------

<S>             <C>                   <C>                     <C>                            <C> 
1999            6                     7,567                   $105,339                       14.0
2000            5                    18,867                   $287,186                       38.1
2001            3                     2,957                    $44,471                        5.9
2002            5                     8,627                   $119,692                       15.9
2003            3                     4,396                    $65,421                        8.6
2008            1                     8,827                   $132,405                       17.5
</TABLE>
                                                 3

<PAGE>


     State Of Texas Building Leases.  The State Of Texas Buildings are leased to
the State of Texas on a long-term  basis.  The primary  lease periods range from
three years to eight years. Most of the leases have five multiple option periods
of three years to five years. The Hempstead,  Amarillo, and Paris leases are the
only leases that expire  without  additional  option  periods,  in August  2000,
August 2003, and August 2002, respectively.
       
     Although  the leases with the State of Texas  regarding  the State Of Texas
Buildings  each  include a  specific  termination  date,  the State of Texas may
terminate  a lease at any time  that (i) the  legislature  of the State of Texas
fails  to  appropriate   funds   necessary  to  pay  required   rents,  or  (ii)
federally-funded  programs housed in a State Of Texas Building are discontinued.
Prior to terminating the lease,  the State of Texas may assign another agency to
fill or  partially  fill the  rented  space,  and the  lease  would be  adjusted
accordingly.

     Bank Building  Leases.  The Bank Buildings have  approximately  63% of each
facility leased to the Bank of America,  on a long-term basis,  with the primary
lease through June 2012.  The Bank of America  leases provide for automatic rent
increases every three years at a predetermined rate. The leases also provide for
multiple option periods for Bank of America.  The remaining leased space of each
facility is leased to smaller  tenants  under  leases  ranging  from one year to
three years in length.
         
     Property Improvement.  The Company currently intends to spend approximately
$150,000 for capital  improvements on the Properties  during 1999. These amounts
are in addition to amounts  that will be expended  for routine  maintenance  and
repairs.
         
     Mortgages. The following is a summary of the Company's indebtedness that is
secured by mortgages on substantially all of the Properties:

                                                         Outstanding Balance At
Description of Indebtedness                                 December 31, 1998
---------------------------                              ----------------------

Note payable to Commercial  Federal Mortgage Corp.
Interest at 7.625%, due in monthly installments of
$10,273  based on a 25 year  amortization  through
January 1, 2014,  at which time a balloon  payment
of  $872,793  is due.  This note is  secured  by a
mortgage on the Broadway Property.                            $ 1,375,000   


Note  payable  to Fox  Cities  Bank.  Interest  at
7.75%,  due in  monthly  installments  of  $22,295
based on a 30 year  amortization  through  June 1,
2008 at which time a balloon payment of $2,797,181
is due.  This note is secured by a mortgage on the
Giltedge Office Building.                                     $ 3,186,228  


Note  payable to GMAC.  Interest at 7.15%,  due in
monthly installments of $39,401 based on a 25 year
amortization  through  September 1, 2008, at which
time a balloon  payment of $4,358,574 is due. This
note  is  secured  by  a  mortgage  on  the  three
Self-Storage  Facilities  other  than the  Arvada,
Colorado facility.                                            $ 5,481,089 

                                        4

<PAGE>


Note  payable  to 1st  National  Bank  of  Arvada.
Interest  at the Prime Rate,  adjusted  quarterly,
due in monthly  installments of $8,678, based on a
20 year  amortization,  through September 14, 2003
at which  time a balloon  payment of  $852,197  is
due.  This note is secured  by a  mortgage  on the
Arvada, Colorado Self-Storage Facility.                       $   990,927

Note  payable to  BankOne  Mortgage,  Interest  at
7.66%,  due in  monthly  installments  of  $42,612
through  July 1,  2028.  This note is secured by a
mortgage on the State Of Texas Buildings.                     $ 5,982,558

Note payable to Jefferson Pilot. Interest at 9.0%,
due in monthly  installments  of $17,095,  through
May 1, 2013. This note is secured by a mortgage on
the Bank Buildings.                                           $ 1,653,797


Note  payable to Arlington  Building  Partnership.
Interest  at 8.5%,  monthly  payments  of interest
only, principal balance due June 15, 2000.                    $   192,000
                                                              -----------

                                                              $18,861,599
                                                              ===========

     Insurance.  The Company  believes that each of the Properties is adequately
covered  by  insurance.  For a  discussion  of the  financial  treatment  of the
depreciation of the Properties,  see "Notes To Financial Statements" in "ITEM 7.
FINANCIAL STATEMENTS".

Competition
-----------

     The business of managing,  leasing,  and operating office buildings is very
competitive  and the Company  competes for tenants with other office  buildings,
including  buildings  owned by larger  companies  with more  financial and other
resources available to them. The business of operating  self-storage  facilities
also  is  very  competitive  and the  Company  will  compete  with  many  larger
companies, including national franchisors, with significantly more financial and
other  resources  than the Company.  The Company  believes that by continuing to
focus on commercial properties,  the Company will be well positioned to compete.
Competitive conditions relating specifically to the Giltedge Office Building are
described above under "--Description Of Properties".

Employees
---------

     The Company has 16 employees as of January 1, 1999:  James F. Etter, who is
the  President,  Chief  Executive  Officer  and Chief  Financial  Officer of the
Company; a Controller;  and 14 administrative,  support, and property management
personnel.  Management services with respect to the Bank Buildings and the State
Of Texas Buildings are performed by Windsor and Melsama, respectively.

Environmental Matters
---------------------

     Under various federal,  state and local laws and  regulations,  an owner or
operator of real property may be liable for the costs of removal or  remediation
of certain  hazardous or toxic  substances  on that  property.  These laws often
impose such  liability  regardless  of whether  the owner  caused or knew of the
presence of hazardous or toxic  substances and regardless of whether the storage
of those substances was in violation of a tenant's lease. Furthermore, the costs


                                       5

<PAGE>

of  remediation  or  removal of those  substances  may be  substantial,  and the
presence of hazardous or toxic substances,  or the failure to promptly remediate
those substances,  may adversely affect the owner's ability to sell the property
or to borrow using the property as collateral.  In connection with the ownership
and operation of the Properties,  the Company may be potentially liable for such
costs.

     The  Company  has  obtained  an  environmental  assessment  of  each of the
Properties. Based on those assessments,  management believes that the Properties
are in compliance in all material  respects with all applicable  federal,  state
and local ordinances and regulations regarding hazardous or toxic substances and
other  environmental  matters or that,  to the extent  that a Property is not in
compliance  that the  Company  will not be subject  to  material  liability.  In
addition,  neither the Company nor, to the knowledge of the Company,  any of the
previous  owners of the  Properties,  have  been  notified  by any  governmental
authority  of  any  material  noncompliance,  liability  or  claim  relating  to
hazardous or toxic  substances or other  environmental  substances in connection
with any of the  Properties.  Although  the Company has  obtained  environmental
assessments  of the  Properties,  and  although  the Company is not aware of any
notifications by any governmental authority of any material noncompliance, it is
possible  that  the  Company's  assessments  do  not  reveal  all  environmental
liabilities  or that there are material  environmental  liabilities of which the
Company  is  unaware.  See  below,   "--Disclosure   Regarding   Forward-Looking
Statements And Cautionary Statements--C.  Real Estate Investment Risks--Possible
Environmental Liabilities".

Policies And Objectives With Respect To Certain Activities
----------------------------------------------------------

     The  following is a discussion  of the  Company's  policies with respect to
investment,  financing,  conflicts of interest and certain other activities. The
policies with respect to these  activities have been determined by the Company's
Board Of Directors and,  although the Board  currently does not  contemplate any
changes to these policies,  the Board may change these policies without the vote
of stockholders.

     Acquisition,  Development And Investment  Policies.  The Company's business
and growth  strategies are designed to increase both the Company's cash flow and
the value of the Company and its properties.  The Company's policies contemplate
the  possibility  of each of (i) direct  ownership  of real  estate  properties,
including  ownership  through  wholly-owned  subsidiaries,  focusing  on office,
industrial and  self-storage  properties,  (ii) indirect  participation in those
types of  properties  through  investments  in  corporations,  business  trusts,
general  partnerships,  limited  partnerships,  joint  ventures  and other legal
entities,  and (iii)  development and acquisition of unimproved  property or the
acquisition and conversion of existing structures.  At the present time, all the
Company's  existing and contemplated  investments in real estate  properties are
held through direct ownership as described in clause (i). The Company intends to
retain ownership of the Properties and any other acquired properties for the net
operating  income that the  Properties  generate.  The Company  will sell any of
these  Properties  when it believes  that the economic  benefits,  including the
income tax consequences, to the stockholders warrant such action. In the case of
the sale of the Self-Storage Facilities and the Giltedge Office Building,  there
are special income tax considerations  that may influence the Company to refrain
from  selling  them for 10 years  from the date of their  purchase.  See  below,
"--Disclosure Regarding Forward-Looking Statements And Cautionary Statements--B.
Tax Risks".

     Although the Company has no formal  policy as to the  allocation  of assets
among its  investments,  initially  the Company will limit its  investment  in a
single property to a maximum of 25% of the Company's  total assets.  The Company
expects  to fund  future  development  and  acquisitions  utilizing  funds  from
additional  indebtedness,  future  offerings of securities  of the Company,  and
retained cash flow. The Company  believes its capital  structure is advantageous
because it permits  the  Company to  acquire  additional  properties  by issuing
equity  securities  in  whole  or in part  as  consideration  for  the  acquired
properties.  In order to maintain its  qualification as a REIT, the Company must

                                       6

<PAGE>

make  annual  distributions  to its  stockholders  of at  least  95% of its REIT
taxable income (which does not include net capital gains).  This requirement may
impair the Company's ability to use retained cash flow for future acquisitions.

     Financing Policies.  The Company intends to make additional  investments in
properties and may incur  indebtedness to make those  investments or to meet the
distribution  requirements  imposed by the REIT  provisions  of the Code, to the
extent that cash flow from the Company's  operations,  investments,  and working
capital is insufficient.  Additional indebtedness incurred by the Company may be
secured  by  part  or all of the  Company's  real  estate  properties  ("Secured
Indebtedness"). The Company has no limitation on the number or amount of Secured
Indebtedness  or  mortgages  which  may be  placed  on any one of the  Company's
properties.

     Secured Indebtedness incurred by the Company may be in the form of purchase
money  obligations  to the sellers of properties,  publicly or privately  placed
debt  instruments,  or financing  from banks,  institutional  investors or other
lenders.  This  indebtedness may be recourse to all or any part of the assets of
the  Company,  or may be  limited  to  the  particular  property  to  which  the
indebtedness  relates.  The proceeds  from any  borrowings by the Company may be
used for  refinancing  existing  indebtedness,  for  financing  development  and
acquisition of properties, for the payment of dividends and for working capital.

     If the Board Of Directors  determines to raise  additional  equity capital,
the Board has the authority,  generally without stockholder  approval,  to issue
additional  Common Stock,  preferred stock or other capital stock of the Company
in any  manner  (and on such  terms  and for  such  consideration)  as it  deems
appropriate,  including in exchange for property.  Existing stockholders have no
preemptive  right  to  purchase  shares  issued  in any  offering,  and any such
offering might cause a dilution of a stockholder's investment in the Company.

Disclosure Regarding Forward-Looking Statements And Cautionary Statements
-------------------------------------------------------------------------

     Forward-Looking  Statements.  This Annual  Report on Form  10-KSB  includes
"forward-looking" statements within the meaning of Section 21E of the Securities
Exchange  Act of 1934,  as amended (the  "Exchange  Act") and Section 27A of the
Securities Act of 1933, as amended (the "Securities  Act"). All statements other
than  statements of historical  facts included in this Annual Report,  including
without limitation  statements under "ITEMS 1 AND 2. DESCRIPTION OF BUSINESS AND
PROPERTY-- Description Of Properties", "-Competition", "--Environmental Matters"
and "--Policies And Objectives With Respect To Certain Activities", and "ITEM 6.
MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR PLAN OF  OPERATION",  regarding  the
Company's  financial  position,  business strategy,  and plans and objectives of
management of the Company for future  operations and capital  expenditures,  are
forward-looking statements.  Although the Company believes that the expectations
reflected in the  forward-looking  statements and the assumptions upon which the
forward-looking  statements are based are  reasonable,  it can give no assurance
that  such  expectations  and  assumptions  will  prove  to have  been  correct.
Additional  statements  concerning  important  factors  that could cause  actual
results  to  differ  materially  from the  Company's  expectations  ("Cautionary
Statements") are disclosed below in the  "--Cautionary  Statements"  section and
elsewhere in this Annual Report. All written and oral forward-looking statements
attributable  to the Company or persons  acting on its behalf  subsequent to the
date of this Annual  Report are  expressly  qualified  in their  entirety by the
Cautionary Statements.

     Cautionary  Statements.  In addition to the other information  contained in
this Annual Report,  the following  Cautionary  Statements  should be considered
when evaluating the forward-looking statements contained in this Annual Report:
        
     

                                       7

<PAGE>
     A. General Risks
        -------------

     Competition. The commercial real estate industry is highly competitive, and
the Company will be competing with  substantially  larger  companies,  including
substantially  larger REITs,  for the  acquisition  and operation of properties.
Some of these  companies  are  national or  regional  operators.  The  Company's
primary competitors are significantly larger and have far greater resources than
those of the Company.  The presence of these  competitors  may be a  significant
impediment to the continuation and development of the Company's business.

     Debt And  Mortgage  Financing.  The Company has  incurred  indebtedness  in
connection  with the acquisition of the Properties and the Company in the future
may incur new  indebtedness  in connection  with its  acquisition  and operating
activities.  As a result  of the  Company's  use of debt,  the  Company  will be
subject to the risks  normally  associated  with debt  financing.  The  required
payments on mortgages and on other  indebtedness are not reduced if the economic
performance of any property declines.  If any such decline occurs, the Company's
ability to make debt service payments would be adversely affected. If a property
is mortgaged to secure payment of indebtedness and the Company is unable to meet
mortgage  payments,  that property  could be transferred to the mortgagee with a
consequent loss of income and asset value to the Company.

     Government  Regulation.  The Company is subject to government regulation of
its  business  operations  in  general,  such as  environmental  and other laws,
including  the  Americans  With  Disabilities  Act. See above,  "--Environmental
Matters",   and  see  below  "--C.   Real  Estate   Investment   Risks--Possible
Environmental  Liabilities" and "--Americans With Disabilities Act". There is no
assurance that subsequent  changes in laws and  regulations  will not affect the
Company's operations.

     Dependence  On Key  Personnel.  The  Company  is  highly  dependent  on the
services of James F. Etter,  its  President.  The loss of Mr. Etter could have a
material adverse affect on the Company.

     No Assurance of Dividends.  The  Company's  ability to pay dividends in the
future is dependent on its ability to operate  profitably  and to generate  cash
from its operations.  There is no assurance that the Company will be able to pay
dividends on a regular quarterly basis.

     B. Tax Risks
        ---------

     Tax  Liabilities  As A Consequence Of The Failure To Qualify As A REIT. The
Company  believes that it has been  organized and operated so as to qualify as a
REIT under the Internal  Revenue Code of 1986, as amended (the "Code");  however
no assurance can be given that the Company will qualify or remain qualified as a
REIT.  Qualification  as a REIT involves the application of highly technical and
complex  Code   provisions  for  which  there  are  only  limited   judicial  or
administrative  interpretations.  There are no controlling authorities that deal
specifically  with many tax issues  affecting a REIT that operates  self-storage
facilities.  The  determination of various factual matters and circumstances not
entirely  within the  Company's  control  may affect its ability to qualify as a
REIT. In addition, no assurance can be given that legislation,  new regulations,
administrative  interpretations  or court  decisions will not have a substantial
adverse effect with respect to the qualification as a REIT or the federal income
tax consequences of such qualification.

     If the Company were to fail to qualify as a REIT in any taxable  year,  the
Company would not be allowed a deduction for  distributions  to  stockholders in
computing  its  taxable  income  and would be  subject  to  federal  income  tax
(including  any  applicable  alternative  minimum tax) on its taxable  income at
regular   corporate  rates.   Unless  entitled  to  relief  under  certain  Code
provisions,  the Company also would be disqualified from treatment as a REIT for
the four taxable years  following the year during which REIT  qualification  was

                                       8

<PAGE>

lost. As a result,  the funds  available for  distribution  to the  stockholders
would be reduced for each of the years involved. In addition, failure to qualify
for even one taxable  year would  result in double  taxation and could result in
the Company's  incurring  substantial  indebtedness  or liquidating  substantial
investments  in order  to pay the  resulting  federal  income  tax  liabilities.
Differences  in timing between the receipt of income and payment of expenses and
the  inclusion  of those  amounts in arriving  at taxable  income of the Company
could  make it  necessary  for the  Company  to  borrow  in  order  to make  the
distributions to its stockholders that are necessary to satisfy the distribution
requirements  applicable  to REITs.  Although the Company  currently  intends to
operate in a manner  designed to qualify as a REIT,  it is possible  that future
economic,  market,  legal,  tax or other  considerations  may cause the Board Of
Directors,  with the  consent of a majority of the  stockholders,  to revoke the
REIT election.

     Distributions to  Stockholders.  In order to qualify as a REIT, the Company
generally will be required each year to distribute to its  stockholders at least
95% of its REIT taxable income  (excluding any net capital gains).  In addition,
the Company will be subject to a 4% nondeductible  excise tax on the amount,  if
any, by which certain distributions paid by it with respect to any calendar year
are less than the sum of 85% of its ordinary income plus 95% of its capital gain
net income for that year.

     The Company  intends to make  distributions  to its  stockholders to comply
with the 95% distribution requirement and to avoid the nondeductible excise tax.
The  Company's  income will  consist  primarily  of its share of the income from
operating the Properties.  Differences in timing between taxable income and cash
available  for  distribution  could  require  the  Company to borrow  funds on a
short-term  basis  to meet the 95%  distribution  requirement  and to avoid  the
nondeductible excise tax.

     Tax Liability Upon Sale Of Certain Properties Prior to 2006. If the Company
sells the Self-Storage  Facilities owned by the Company's  Consolidated  Storage
Properties,  Inc.  subsidiary  ("CSP") and the Giltedge Office Building owned by
the Company's  Giltedge Office Building,  Inc.  subsidiary ("GBI") less than ten
years after their  acquisition,  the Company  will be required to pay tax at the
highest  applicable  corporate rates on the difference between their fair market
value and their adjusted  bases at the time of the Company's REIT election.  The
amount of this tax could be substantial and would be significantly  more than if
the Company  would be permitted to use its own adjusted  basis.  There is a risk
that the Company would not have  sufficient cash available to pay the additional
taxes  resulting  from the lower adjusted bases of CSP and GBI. As long as these
tax  liabilities  apply,  the  Company  currently  does not intend to sell these
properties unless the other economic, financial and business consequences of the
sale would offset the tax  liabilities  and lead the Company to believe it would
be in its best interests to effect such a sale.

     C. Real Estate Investment Risks
        ----------------------------

     General Risks.  Real estate  investments  are subject to varying degrees of
risk. The yields available from equity  investments in real estate depend on the
amount of income and capital  appreciation  generated by the properties  held by
the entity in which the investment is made. If the Company  acquires  properties
and  they do not  generate  sufficient  operating  cash  flow to meet  operating
expenses,  including debt service, capital expenditures and tenant improvements,
the Company's  income and ability to pay dividends to its  stockholders  will be
adversely  affected.  Income from  properties  may be adversely  affected by the
general  economic  climate,  local  conditions,  such  as  an  oversupply  of or
reduction in demand for storage  facilities and office space, the attractiveness
of properties to tenants, zoning or other regulatory  restrictions,  competition
from other available storage facilities and office buildings, and the ability of
the Company to provide adequate  maintenance and insurance to control  operating
costs,  including site  maintenance,  insurance  premiums and real estate taxes.
Income from  properties and real estate values also are affected by such factors
as  applicable  laws,   including  tax  laws,   interest  rate  levels  and  the
availability of financing. See above, "-- Competition".

                                       9

<PAGE>


     No Assurance Of Tenants.  Although the Properties  currently have favorable
occupancy  rates,  there is no assurance  that current  tenants will renew their
leases upon the  expiration  of their  terms or that  current  tenants  will not
attempt to  terminate  their  leases prior to the  expiration  of their  current
terms.  In such an  instance,  the Company may not be able to locate a qualified
replacement  tenant and, as a result, the Company would lose a source of revenue
while remaining  responsible for the payment of the Company's  obligations.  See
"ITEMS  1  AND  2.  DESCRIPTION  OF  BUSINESS  AND  PROPERTY  -  Description  Of
Properties".

     Illiquidity Of Real Estate May Limit Its Value. Real estate investments are
relatively  illiquid.  The  ability  of the  Company  to vary its  portfolio  in
response to changes in economic and other conditions will be limited.  There can
be no assurance  that the Company will be able to dispose of an investment  when
it finds  disposition  advantageous  or  necessary or that the sale price of any
disposition will recoup or exceed the amount of the Company's investment.

     Uninsured  And  Underinsured  Losses  Could  Result  In  Loss Of  Value  Of
Properties.  The  Company  maintains  comprehensive  insurance  on  each  of the
Properties, including liability, fire and extended coverage. Management believes
such coverage is of the type and amount customarily  obtained for or by an owner
on real property assets.  The Company will obtain similar insurance  coverage on
subsequently  acquired facilities.  However,  there are certain types of losses,
generally of a catastrophic  nature, such as earthquakes and floods, that may be
uninsurable or not economically  insurable, as to which the Company's facilities
are at risk in their particular locales.  The Company's  management will use its
discretion in determining amounts,  coverage limits and deductibility provisions
of insurance,  with a view to requiring  appropriate  insurance on the Company's
investments  at a  reasonable  cost and on  suitable  terms.  This may result in
insurance  coverage  that  in the  event  of a  substantial  loss  would  not be
sufficient to pay the full current market value or current  replacement  cost of
the  Company's  lost  investment.  Inflation,  changes in codes and  ordinances,
environmental considerations,  and other factors also might make it not feasible
to use  insurance  proceeds to replace a facility  after it has been  damaged or
destroyed.

     Possible Environmental Liabilities. Under various federal, state, and local
environmental laws,  ordinances and regulations,  a current or previous owner or
operator of real property may be liable for the costs of removal or  remediation
of   hazardous   or   toxic   substances,    including,    without   limitation,
asbestos-containing  materials  ("ACMs")  that  are  located  on  or  under  the
property.  These laws often impose liability  whether the owner or operator knew
of, or was responsible for, the presence of those substances. In connection with
its  proposed  ownership  and  operation of the  Properties,  the Company may be
liable  for  such  costs.  In  addition,  the  presence  of  hazardous  or toxic
substances,  or  the  failure  to  properly  remediate  any  contamination,  may
adversely  affect  the  ability to arrange  for  financing  secured by that real
property.

     There are three types of  environmental  issues at the  Broadway  Property.
First, a test well near the northeast corner of the Broadway Property  indicates
the  presence of the  contaminants  pentachlorophenol  and  polycyclic  aromatic
hydrocarbons in the groundwater below the Broadway Property.  In September 1995,
the  Company  obtained   confirmation  from  the  United  States   Environmental
Protection   Agency   (the  "EPA")   that  the  facts   concerning   groundwater
contamination  under the Broadway  Property  were within the EPA's Policy of not
pursuing landowners for such contamination.  However,  even though the requested
confirmation was received,  the EPA's Policy expressly states that it is subject
to change and not binding on the EPA, and there can be no assurance that the EPA
would not take enforcement  action in the future.  In November 1995, the Company
received a letter from the  Colorado  Department  of Health  (the  "Department")

                                       10

<PAGE>

stating  that the  Department  was of the  opinion  that no  further  action  is
required  to assure  that the  Broadway  Property,  when  used for the  purposes
intended by the Company,  is  protective  of existing and proposed uses and also
stating that the Broadway  Property does not appear to pose an unacceptable risk
to human  health or the  environment  at the site.  This letter  states that the
Department's opinion applies only with respect to the conditions on the Broadway
Property and the  standards  of the State of Colorado  that exist at the time of
the Company's  application to the Department.  The Department's letter indicates
that it should not be  construed  to limit the  Department's  authority  to take
actions under existing  statutes as necessary should new information come to the
attention of the  Department.  Second,  Phase I Environmental  Site  Assessments
performed in 1990 and 1995 (the "Assessments") on the Broadway Property indicate
the  presence  of ACMs in small  amounts  at the  Broadway  Property,  including
asbestos  contained in vinyl floor tiles and mastic  adhesive.  The  Assessments
indicate these materials are in good  condition,  and the potential for asbestos
fiber hazards is minimal. Third, electric transformers mounted on electric poles
that belong to the Public  Service  Company of Colorado  ("PSC")  contain  PCBs.
According to PSC, these  transformers are contaminated and will be exchanged for
non-PCB transformers. With regard to the Broadway Property, the Company does not
believe it will be subject to material  liability but there is no assurance that
this  will  be  true.   See  "ITEMS  1  AND  2.   DESCRIPTION  OF  BUSINESS  AND
PROPERTY--Description Of Properties" and "--Environmental Matters".

     Americans With  Disabilities Act. Under the Americans with Disabilities Act
of 1990 (the  "ADA"),  all public  accommodations  are  required to meet certain
federal  requirements  related to physical  access and use by disabled  persons.
While the Company believes that the Properties  comply in all material  respects
with these physical requirements (or would be eligible for applicable exemptions
from  material  requirements  because  of  adaptive  assistance   provided),   a
determination that the Company is not in compliance with the ADA could result in
imposition of fines or an award of damages to private litigants.  If the Company
were  required  to make  modifications  to comply  with the ADA,  the  Company's
ability to make expected  distributions to its  stockholders  could be adversely
affected; however, management believes that such effect would be minimal.

ITEM 3.  LEGAL PROCEEDINGS

     The  Company is not a party to any  pending  legal  proceeding  (nor is the
Company's  property the subject of a pending legal  proceeding) that the Company
believes would have a material adverse effect on the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not applicable.



                                       11
<PAGE>



                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Market Information.  The Company's Common Stock (symbol: AMVP) and Warrants
(symbol: AMVPW) became listed for trading on the Nasdaq SmallCap Stock Market in
the over-the-counter market on November 6, 1996.
 
     The range of high and low sales prices of the Common Stock and Warrants for
each quarterly period during the Company's last two fiscal years, as reported by
the Nasdaq SmallCap market, is as follows:

                                  Common Stock                     Warrants
                                  ------------                     --------

Quarter Ended                High            Low          High            Low
-------------                ----            ---          ----            ---

March 31, 1997              4.75             3.00         .75            .25

June 30, 1997               4.5625           3.75         .3125          .25

September 30, 1997          4.9375           4.0625       .28125         .15625

December 31, 1997           5.00             4.25         .34375         .21875

March 31, 1998              4.875            4.313        .313           .125

June 30, 1998               4.938            4.625        .188           .000

September 30, 1998          4.750            3.938        .156           .094

December 31, 1998           4.563            3.813        .094           .094



     The closing  sales price for the Common  Stock on April 5, 1999 as reported
by Nasdaq SmallCap Stock Market was $4.75 per share.

     Holders.  The number of holders of Common  Stock of record on April 5, 1999
was 160. This number does not include  stockholders who own Common Stock through
a brokerage firm or other nominee.
         

     Dividends. The Company paid $.1125 per share dividends in each of the first
and second quarters and $.12 per share in the third and fourth quarters in 1998.
The Company also paid a dividend of $.12 per share in the first quarter of 1999,
which,  together  with the  dividends  paid in the third and fourth  quarters of
1998, represents an annualized rate of $.48 per share.
         
     During  1997,  the Company  paid four  quarterly  dividends of $.1125 each,
representing a 1997 total annual dividend of $.45 per share.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION

     The  following  discussion  and  analysis  of  the  consolidated  financial
condition  and  results of  operations  should be read in  conjunction  with the
Consolidated  Financial  Statements  and  notes  thereto  included  in  "ITEM 7.
FINANCIAL STATEMENTS".  These financial statements present the operations of the
Company prior and subsequent to the consummation of the Company's initial public
offering  on  October  29,  1996  (the  "IPO")  (see  Note  4 to  the  financial
statements).

                                       12

<PAGE>


Results Of Operations
---------------------

Comparison Of Year Ended December 31, 1998 With Year Ended December 31, 1997
----------------------------------------------------------------------------

     The Company acquired 15 properties in June, July and August 1998 (the "1998
Acquired  Properties").  At December 31, 1998 the Company  owned 24  properties.
Revenues  increased  $1,333,987,  or 54%, to $3,816,169  for 1998 as compared to
$2,482,182  for 1997. The increase in revenues was due primarily to the revenues
of the 1998 Acquired  Properties  being included  subsequent to their respective
acquisition  dates in the  amount of  $1,050,000  and the  revenues  of the 1997
Acquired  Properties  (defined below) being included for the entire year,  which
resulted  in an  increase  of  approximately  $144,000  for  the  1997  Acquired
Properties  for the 1998  period that is  comparable  to the period that was not
included in 1997.

     Property  operations,  real  estate  taxes,  management  fees,  general and
administrative,  interest,  depreciation and amortization increased by $396,492,
$150,003,  $51,373,  $46,987,  $350,958 and $181,285,  respectively.  All of the
increases primarily resulted from inclusion of the expenses attributable to each
of the 1998 Acquired Properties subsequent to their respective acquisition dates
and the 1997 Acquired  Properties for a full year, as well as increased overhead
in additional  personnel costs as a result of handling more property  management
and  accounting  on an in-house  basis  rather than  paying  outside  parties to
provide these  services.  The prepayment  penalty and other expenses of $321,178
associated with debt refinancing was incurred in 1998 as part of the refinancing
of the mortgage on the Self-Storage Facilities, which resulted in decreasing the
annual  interest  rate on the  mortgage  from 9.9%,  to 7.15%.  Interest  income
decreased  in 1998 by $32,665  to $4,113 as  compared  to $36,778  for 1997 as a
result of the  Company's  utilizing  most of its cash  accounts for  acquisition
purposes.

     As a result of the above  factors,  the Company had a net loss of $317,406,
or $.21 per share, in 1998 as compared with a net loss of $120,452,  or $.09 per
share,  in 1997. Of the $317,406 net loss for the year ended  December 31, 1998,
$321,178,  or $.21 per share,  relates  to the  one-time  charge for  prepayment
penalty and other expenses  associated with the early retirement of the mortgage
described in the previous paragraph.

Comparison Of Year Ended December 31, 1997 With Year Ended December 31, 1996
----------------------------------------------------------------------------

     In August and September  1997,  the Company  acquired  three  properties in
Texas  (the  "1997  Acquired  Properties").  The  Company  owned a total of nine
properties  at December  31, 1997.  Revenues  increased  $1,236,598,  or 99%, to
$2,481,182 for 1997 as compared to $1,245,584 for 1996. The increase in revenues
was due  primarily to the revenues of the 1997  Acquired  Properties of $105,934
being  included  for five months in 1997 and the  revenues of the 1996  Acquired
Properties (defined below) of $1,123,812 being included for the entire year. The
growth  in  revenues  was  directly  related  to the  Company's  acquisition  of
properties subsequent to its IPO.

     Property  operations,  real  estate  taxes,  management  fees,  general and
administrative,   interest  expense,   and  depreciation  and  amortization  all
increased  in  1997 to  $274,139,  $153,815,  $68,401,  $185,592,  $276,815  and
$266,842,  respectively.  All of  the  increases  primarily  resulted  from  the
inclusion of the expenses attributable to the five properties acquired effective
as of July 1, 1996, for a full year and those  attributable to the 1997 Acquired
Properties  for five  months.  As a result  of the above  factors,  the net loss
decreased from  $137,728,  or $.29 per share,  in 1996 to $120,452,  or $.09 per
share, in 1997.

                                       13


<PAGE>

Liquidity and Capital Resources
-------------------------------

     At December 31, 1997 the Company had under contract eleven office buildings
to be acquired.  Those eleven office buildings were acquired in June and July of
1998. As part of the  consideration  for the purchase of those office  buildings
the Company issued 207,200 shares of its common stock valued for purposes of the
transaction  at $5.00 per share,  or  $1,036,000.  The remaining  portion of the
purchase was financed through long-term debt.

     In August 1998, the Company acquired four bank office buildings through the
assumption of debt of approximately $1,672,000, issuance of 13,500 shares of its
common  stock  valued for  purposes of the  transaction  at $5.00 per share,  or
$67,500, and the remaining portion of $2,094,500 was paid from proceeds received
from the refinancing of other properties in the Company's real estate portfolio.

     In 1998,  the Company had one mortgage  loan mature and two other  mortgage
loans were  refinanced  with the objective of reducing the interest carry on the
existing  debt and to obtain  additional  funds to be used to  acquire  the Bank
Buildings.  The total loans  obtained in 1998,  other than debt assumed with the
acquisitions,  was $9,075,219.  The amount of mortgages paid  off/refinanced  in
1998 was  $5,167,085.  The net cash received from the  refinancing of $3,908,134
was applied to the purchase of the Bank Buildings,  to fund capital improvements
and for working capital.

     The  Company  intends  to meet  its  near-term  working  capital  liquidity
requirements  through cash flows  provided  from  operations.  The Company has a
short-term  revolving  credit line from Norwest  Bank  Colorado in the amount of
$300,000.  At December  31, 1998 the Company had no  outstanding  balance on the
line of credit.

Year 2000 Compliance
--------------------

     Year 2000  compliance  is the ability of computer  hardware and software to
respond to the problems posed by the fact that computer  programs  traditionally
have used two digits rather than four digits to define an applicable  year. As a
consequence,  any of the Company's  computer  programs that have  date-sensitive
software  may  recognize a date using "00" as the year 1900 rather than the year
2000.  This  could  result  in  a  system  failure  or  miscalculations  causing
interruption of operations,  including  temporary  inability to send invoices or
engage in normal business  activities or to operate equipment such as elevators,
air conditioning units, and external security systems installed in the Company's
buildings.  The Company  currently  is working with its service  contractors  to
review  the  operation  of  elevators,  air  conditioners,  and other  equipment
installed in the Company's buildings to confirm that this equipment is Year 2000
compliant.  Although the service contractors have responded with respect to most
of these systems indicating that they are Year 2000 compliant, the review of all
the systems is not yet complete.  The Company  believes that this review will be
completed  prior to June 30,  1999  and  that  the cost of this  review  will be
included in the cost of the Company's service contracts for this equipment.

     The Company  also intends to contact its major  tenants to determine  their
Year 2000  compliance.  Failure of tenants to be Year 2000 compliant may lead to
delays in payment of rent to the Company and lost  revenue to the  Company.  The
Company  intends  to  complete  its  review of tenant  compliance  in the second
quarter of 1999.

     The Company has purchased a new accounting and tenant service software that
is Year 2000  compliant.  The Company would have  purchased new software to meet
its needs  regardless of potential  Year 2000 issues with its prior system.  The
Company  anticipates  installing  and  receiving  training  concerning  this new
software at an approximate cost of less than $25,000.

                                       14

<PAGE>


     Until the Company's Year 2000 review has been completed, the Company has no
estimate of the cost to correct any deficiency in Year 2000  compliance for this
equipment.  Upon the completion of the Company's  Year 2000 review,  the Company
intends to develop a contingency plan to address potential Year 2000 problems.







                                       15
<PAGE>



ITEM 7.  FINANCIAL STATEMENTS.

                          INDEX TO FINANCIAL STATEMENTS

AmeriVest Properties Inc. and Subsidiaries

         Independent Auditor's Report                                     F-1
         Consolidated Balance Sheet as of December 31, 1998               F-2
         Consolidated Statements of Operations for the
            years ended December 31, 1998 and 1997                        F-3
         Consolidated Statements of Stockholders' Equity
            for the years ended December 31, 1998 and 1997                F-4
         Consolidated Statements of Cash Flows for the years
            ended December 31, 1998 and 1997                             F-5-6
         Notes to Consolidated Financial Statements                     F-7-19 


                                       16
                              


<PAGE>


                          INDEPENDENT AUDITOR'S REPORT


To The Board of Directors and Stockholders
AMERIVEST PROPERTIES INC.

We have  audited  the  accompanying  consolidated  balance  sheet  of  AmeriVest
Properties  Inc.  and  Subsidiaries  as of December  31,  1998,  and the related
consolidated  statements of operations,  stockholders' equity and cash flows for
each of the two years in the period ended  December 31,  1998.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of AmeriVest Properties
Inc.  and  Subsidiaries  as of  December  31,  1998,  and the  results  of their
operations  and their cash  flows for each of the two years in the period  ended
December 31, 1998 in conformity with generally accepted accounting principles.


                                            Wheeler Wasoff, P.C.


Denver, Colorado
March 15, 1999








                                      F - 1


<PAGE>

                   AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 1998

                                     ASSETS

ASSETS
   Investment in real estate
        Land                                                       $  4,745,754
        Buildings and improvements                                   22,363,656
        Furniture, fixtures and equipment                               284,993
        Tenant improvements                                             541,058
        Less accumulated depreciation and amortization               (5,837,264)
                                                                   ------------

           Net Investment in Real Estate                             22,098,197

   Cash and cash equivalents                                            441,316
   Tenant accounts receivable                                            48,615
   Deferred financing costs, net                                        624,917
   Prepaid expenses and other assets                                    501,889
                                                                   ------------

                                                                   $ 23,714,934
                                                                   ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
   Mortgage loans and notes payable                                $ 18,861,599
   Accounts payable and accrued expenses                                121,327
   Accrued interest                                                     108,810
   Accrued real estate taxes                                            558,745
   Prepaid rents and security deposits                                  214,912
   Dividends payable                                                    199,052
                                                                   ------------

           Total Liabilities                                         20,064,445
                                                                   ------------

COMMITMENTS AND CONTINGENCIES (Notes 2 and 7)

STOCKHOLDERS' EQUITY
   Common stock, $.001 par value
        Authorized - 10,000,000 shares
        Issued and outstanding - 1,658,770 shares                         1,659
   Capital in excess of par value                                     5,607,725
   Distributions in excess of accumulated earnings                   (1,958,895)
                                                                   ------------

           Total Stockholders' Equity                                 3,650,489
                                                                   ------------

                                                                   $ 23,714,934
                                                                   ============
                                           



               The accompanying notes are an integral part of the
                       consolidated financial statements.

                                      F - 2


<PAGE>

                   AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 1997 AND 1998


                                                        1997            1998
                                                     -----------    -----------
REAL ESTATE OPERATING REVENUE
   Rental revenue
        Commercial properties                        $ 1,132,849    $ 2,365,629
        Storage properties                             1,349,333      1,450,540
                                                     -----------    -----------

                                                       2,482,182      3,816,169
                                                     -----------    -----------

REAL ESTATE OPERATING EXPENSES
   Property operating expenses
        Operating expenses                               559,304        955,796
        Real estate taxes                                282,860        432,863
        Management fees                                  130,276        181,649
   General and administrative                            411,236        458,223
   Interest                                              685,429      1,036,387
   Expenses associated with debt refinancing                --          321,178
   Depreciation and amortization                         570,307        751,592
                                                     -----------    -----------

                                                       2,639,412      4,137,688
                                                     -----------    -----------

OTHER INCOME
   Interest income                                        36,778          4,113
                                                     -----------    -----------

NET (LOSS)                                           $  (120,452)   $  (317,406)
                                                     ===========    ===========

NET (LOSS) PER COMMON SHARE - Basic and Diluted      $      (.09)   $      (.21)
                                                     ===========    ===========

WEIGHTED AVERAGE NUMBER OF COMMON
   SHARES OUTSTANDING - Basic and Diluted              1,397,270      1,538,403
                                                     ===========    ===========

               The accompanying notes are an integral part of the
                       consolidated financial statements.

                                      F - 3


<PAGE>
<TABLE>
<CAPTION>

                                    AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                      YEARS ENDED DECEMBER 31, 1997 AND 1998

                                                                                                             Distributions
                                                               Common Stock                  Capital in        in Excess of
                                                         -------------------------           Excess of         Accumulated
                                                         Shares             Amount           Par Value           Earnings
                                                         ------             ------           ---------           --------
<S>                                                     <C>              <C>                <C>                <C>         
Balance, January 1, 1997                                1,382,870        $     1,383        $ 4,256,101        $  (168,981)

Issuance of common stock for properties                    46,200                 46            207,854               --

Dividends declared (Note 1)                                  --                 --                 --             (631,396)
Net (Loss)                                                   --                 --                 --             (120,452)
                                                      -----------        -----------        -----------        -----------
Balance, December 31, 1997                              1,429,070              1,429          4,463,955           (920,829)

Issuance of common stock for properties                   229,700                230          1,143,770               --

Dividends declared (Note 1)                                  --                 --                 --             (720,660)
Net (Loss)                                                   --                 --                 --             (317,406)
                                                                                                               -----------
Balance, December 31, 1998                              1,658,770        $     1,659        $ 5,607,725        $(1,958,895)
                                                      ===========        ===========        ===========        ===========



                The accompanying notes are an integral part of the consolidated financial statements.

                                                     F - 4

</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                 AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  YEARS ENDED DECEMBER 31, 1997 AND 1998


                                                                       1997                       1998
                                                                    -----------               -----------
<S>                                                                  <C>                        <C>  
CASH FLOWS FROM OPERATING ACTIVITIES
   Net (loss)                                                       $  (120,452)              $  (317,406)
   Adjustments to reconcile net (loss) to net cash
           provided by operating activities
        Depreciation and amortization                                   570,307                   751,592
        Write off of unamortized loan fees                                 --                      37,080
        Changes in assets and liabilities
           (Increase) in receivables                                     (4,611)                  (13,990)
           Decrease (increase) in prepaids                               11,588                  (464,384)
           (Decrease) increase in accounts payable                       (4,221)                   72,781
           Increase in accruals                                          78,276                   407,375
        Other                                                            (1,500)                     --
                                                                    -----------               -----------

   Net cash provided by operating activities                            529,387                   473,048
                                                                    -----------               -----------

CASH FLOWS FROM INVESTING ACTIVITIES
   Additions to investments in real estate                           (1,205,179)               (2,425,617)
                                                                    -----------               -----------

        Net cash (used) by investing activities                      (1,205,179)               (2,425,617)
                                                                    -----------               -----------

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from short term borrowing                                   260,000                 1,075,000
   Repayment of short term borrowing                                   (110,000)               (1,225,000)
   Proceeds from refinancing of mortgages                                  --                   3,908,134
   Payments on mortgage loans                                          (134,918)                 (173,799)
   Dividends paid                                                      (470,596)                 (682,406)
   Payment of deferred financing costs                                     --                    (607,378)
                                                                    -----------               -----------

   Net cash (used) provided by financing activities                    (455,514)                2,294,551
                                                                    -----------               -----------

NET (DECREASE) INCREASE IN CASH AND
   CASH EQUIVALENTS                                                  (1,131,306)                  341,982

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                          1,230,640                    99,334
                                                                    -----------               -----------

CASH AND CASH EQUIVALENTS, END OF YEAR                              $    99,334               $   441,316
                                                                    ===========               ===========

      The accompanying notes are an integral part of the consolidated financial statements.

                                                 F - 5

</TABLE>

<PAGE>

                   AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 1997 AND 1998


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

During  the years  ended  December  31,  1997 and 1998,  the  Company  made cash
payments for interest on indebtedness of $686,450 and $963,011 respectively.


SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

In 1997 the  Company  issued an  aggregate  46,200  shares of its common  stock,
valued at $207,900,  as partial  consideration  for the  acquisition by a wholly
owned  subsidiary  of the Company of three  commercial  properties in Texas (See
Note 2). An  additional  9,000  shares of common  stock  valued at $40,500  were
issued in 1998 as additional  consideration  in conjunction with the acquisition
of one of the properties.

In 1998 the Company acquired an additional 15 commercial properties in the State
of Texas. The aggregate  purchase price of these  properties  consisted of cash,
debt and 220,700 shares of the Company's  common stock (valued at $5 per share),
as follows:


Purchase price                                                    $ 11,231,702
Mortgage loans payable and debt assumed                             (7,864,187)
Common stock issued                                                 (1,103,500)
                                                                  ------------

Net cash paid                                                     $  2,264,015
                                                                  ============

In 1998 the Company refinanced certain
   mortgage loans as follows:

Mortgage loans obtained                                           $  9,075,219
Mortgage loans paid off/refinanced                                  (5,167,085)
                                                                  ------------

Net cash received from refinancing                                $  3,908,134
                                                                  ============



               The accompanying notes are an integral part of the
                       consolidated financial statements.

                                      F - 6


<PAGE>


                   AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          ORGANIZATION

          AmeriVest  Properties  Inc. (the Company) was  incorporated  under the
          laws of the State of Delaware on August 25,  1993,  and  completed  an
          initial public offering of its common stock in October 1996. Effective
          January 1, 1996 the Company commenced operating as a self-administered
          and self-managed  real estate  investment trust ("REIT").  The Company
          owns and operates,  through its wholly owned  subsidiaries,  an office
          building in Appleton,  Wisconsin,  18 commercial  office properties in
          the State of Texas and four self-storage  facilities and an industrial
          warehouse in the Denver, Colorado metropolitan area.

          BASIS OF PRESENTATION

          The  accompanying   consolidated   financial  statements  include  the
          consolidated   operations   of  the  Company  and  its  wholly   owned
          subsidiaries, as follows:

                         AmeriVest Broadway Properties Inc. (ABP)
                         Consolidated Storage Properties Inc. (CSP)
                         Giltedge Office Building Inc. (GBI)
                         AmeriVest Properties Texas Inc. (APT)
                         AmeriVest Buildings Texas Inc. (ABT)
                         AmeriVest Properties Odessa Inc. (AOI)
                         AmeriVest Properties Arvada Inc. (APA)

          All  significant  intercompany  accounts  and  transactions  have been
          eliminated in consolidation.

          INVESTMENT IN REAL ESTATE

          Real estate,  property, and equipment are stated at cost. Depreciation
          and  amortization  are  computed  on a  straight-line  basis  over the
          estimated useful lives as follows:

          Description                       Estimated Useful Lives
          -----------                       ----------------------

          Land                              Not Depreciated
          Buildings                         15 to 35 years
          Equipment                         5 to 7 years
          Tenant Improvements               Corresponding term of tenant's lease


          Maintenance and repairs are expensed as incurred and  improvements are
          capitalized.  The  cost of  assets  sold or  retired  and the  related
          accumulated  depreciation  and/or  amortization  are removed  from the
          accounts and the resulting  gain or loss is reflected in operations in
          the period in which such sale or retirement occurs.

                                      F - 7


<PAGE>


                   AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          The Company has adopted  Statement  of Financial  Accounting  Standard
          ("SFAS") 121 "Accounting  for the Impairment of Long-Lived  Assets and
          for  Long-Lived   Assets  to  Be  Disposed  of"  which  requires  that
          long-lived  assets  to be held and  used be  reviewed  for  impairment
          whenever events or changes in circumstances indicate that the carrying
          amount of an asset may not be  recoverable.  The  adoption of SFAS 121
          has  not  had  an  impact  on  the  Company's  consolidated  financial
          statements,  as the Company has determined that no impairment loss for
          1998  need  to be  recognized  for  applicable  assets  of  continuing
          operations

          REVENUE RECOGNITION

          Rental revenue from real estate operations is recognized as earned, on
          a monthly basis.

          ORGANIZATION COSTS

          Costs related to the organization of the Company have been capitalized
          and are being amortized over a period of five years.

          INCOME TAXES

          Effective  January 1, 1996 the  Company  elected to be taxed as a REIT
          under  Sections 856 through 860 of the Internal  Revenue Code of 1986,
          as amended (the "Code"). As a REIT, the Company generally would not be
          subject to  federal  income  taxation  at the  corporate  level to the
          extent  it  distributes  annually  at least  95% of its  REIT  taxable
          income,  as defined in the Code,  to its  stockholders  and  satisfies
          certain other  requirements.  Accordingly,  no provision has been made
          for federal income taxes in the  accompanying  consolidated  financial
          statements.

          Certain of the  Company's  subsidiaries  are subject to certain  state
          excise and  franchise  taxes.  The  provision for such state taxes has
          been   reflected  in  general  and   administrative   expense  in  the
          consolidated  statement  of  operations  and has not  been  separately
          stated due to its insignificance.

          For  federal   income  tax   purposes,   the  cash  dividend  paid  to
          stockholders  may be  characterized  as  ordinary  income,  return  of
          capital  (generally  non-taxable) or capital gains.  Dividends for the
          year ended December 31, 1997 totaling $631,396 are characterized  100%
          as return of capital and includes the dividend  declared in the fourth
          quarter of 1997 of $160,801  ($.1125 per share) which was paid January
          9, 1998.  Dividends  for the year ended  December  31,  1998  totaling
          $720,660 are characterized  100% as return of capital and includes the
          dividend  declared in the fourth quarter of 1998 of $199,052 ($.12 per
          share) which was paid January 14, 1999.

          SHARE BASED COMPENSATION

          In  October   1995,   SFAS  No.  123   "Accounting   for   Stock-Based
          Compensation"  was issued.  This  standard  defines a fair value based
          method of accounting  for an employee  stock option or similar  equity
          instrument.  This  statement  gives  entities a choice of  recognizing
          

                                      F - 8


<PAGE>


                   AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          related  compensation expense by adopting the new fair value method or
          to continue to measure compensation using the intrinsic value approach
          under  Accounting  Principles  Board (APB) Opinion No. 25. The Company
          has elected to utilize APB No. 25 for measurement;  and will, pursuant
          to SFAS No. 123, disclose  supplementally the pro forma effects on net
          income and earnings per share of using the new  measurement  criteria.
          During the years ended  December 31, 1997 and 1998, the Company issued
          options to purchase shares of its common stock (Note 5).

          DEFERRED FINANCING COSTS

          Deferred  financing  costs  include fees and costs  incurred to obtain
          long-term financing. These fees and costs are being amortized over the
          terms  of the  respective  loans on a basis,  which  approximates  the
          interest method.  Unamortized  deferred financing fees are written-off
          when  debt  is  retired   before  the   maturity   date.   Accumulated
          amortization  of deferred  financing costs was $23,090 at December 31,
          1998. In 1998  unamortized  deferred  financing  costs of $37,080 were
          charged to operations and are included in the  accompanying  financial
          statements   as  a  component  of  "Expenses   associated   with  debt
          refinancing".

          TENANT LEASING COSTS

          Fees and costs incurred in the  successful  negotiation of leases have
          been deferred and are being  amortized on a  straight-line  basis over
          the terms of the respective leases.

          CASH EQUIVALENTS

          For purposes of reporting  cash flows,  the Company  considers as cash
          equivalents  all highly  liquid  investments  with a maturity of three
          months or less at the time of purchase.  On occasion,  the Company has
          cash in banks in excess of federally insured amounts.

          USE OF ESTIMATES

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

          LOSS PER COMMON SHARE

          Loss per common share is computed based on the weighted average number
          of common shares  outstanding  during each period.  Convertible equity
          instruments, consisting of warrants and options, are not considered in
          the  calculation of net loss per share,  as their  inclusion  would be
          antidilutive.



                                      F - 9


<PAGE>


                   AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

          In  February  1997 SFAS No.  128,  "Earnings  Per  Share"  was  issued
          effective  for periods  ending after  December  15, 1997.  There is no
          impact on the Company's financial statements from adoption of SFAS No.
          128.

          NEW TECHNICAL PRONOUNCEMENTS

          In February 1998 SFAS No. 132,  "Employers'  Disclosure about Pensions
          and Other  Postretirement  Benefits",  was issued effective for fiscal
          years  beginning  after  December 15, 1997,  with earlier  application
          encouraged.  The Company has adopted SFAS No. 132  effective  with the
          fiscal year ending December 31, 1998. Adoption of SFAS No. 132 has not
          had any impact on the Company's financial statements.

          In June 1998 SFAS No. 133, "Accounting for Derivative  Instruments and
          Hedging Activities",  was issued for fiscal years beginning after June
          15, 1999.  Adoption of SFAS No. 133 is not expected to have a material
          impact on the Company's financial statements.

          In  October  1998  SFAS  No.  134,  "Accounting  for  Mortgage  Broker
          Securities",  was  issued.  SFAS No.  134 is not  expected  to have an
          impact on the Company's financial statements.

NOTE 2 - INVESTMENTS IN REAL ESTATE

          Effective  August  1,  1997 the  Company,  through  its  wholly  owned
          subsidiary,  APT,  acquired three real estate properties in Texas. The
          properties were acquired for an aggregate  $1,149,700 and an aggregate
          46,200  shares of common stock,  under  separate  purchase  contracts.
          Pursuant  to  the  purchase   agreements   and  related   subscription
          agreements   executed  by  the  seller,  the  seller  will  be  issued
          additional shares of common stock if either (a) the average last sales
          price of the  Company's  common stock is not $4.50 per share or higher
          during the 60 days immediately  preceding the first anniversary of the
          closing  date or (b) the last sale price of common  stock is not $4.50
          higher on the 15 consecutive  business days immediately  preceding the
          first  anniversary  of  the  closing  date  of  the  properties.   The
          additional shares to be issued would have been based on the difference
          between  the amounts as  calculated  in (a) or (b) above and $4.50 per
          share. Accordingly,  the shares issued were valued at $4.50 per share.
          As the trading price of the Company's  common stock exceeded $4.50 per
          share on the anniversary  date, no additional  shares were required to
          be  issued  in 1998  in  accordance  with  the  agreement.  In 1998 an
          additional  9,000 shares of common  stock,  valued at $4.50 per share,
          were  issued  in  conjunction  with  the  acquisition  of  one  of the
          properties due to the benefit of additional  office space being leased
          by an  existing  tenant.  These  shares  were  issued  pursuant to the
          original purchase agreement.

          In 1998 the  Company,  through  APT and AOI,  acquired  eleven  office
          buildings  in Texas under  separate  purchase  contracts.  The primary
          tenants of each of these  buildings  are  government  agencies  of the
          State of Texas. The aggregate purchase price for the eleven properties
          is $7,340,800,  comprised of 207,200 shares of common stock, valued at
          

                                     F - 10


<PAGE>


                   AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - INVESTMENTS IN REAL ESTATE (CONTINUED)

          $5.00 per share, a promissory note to one of the sellers in the amount
          of $192,000 and $6,112,800 cash, of which $6,000,000 was financed by a
          first mortgage on the properties.  Pursuant to the purchase agreements
          and related subscription agreements executed by the seller, the seller
          will be issued  additional  shares of common  stock if either  (a) the
          average  last sales price of the  Company's  common stock is not $5.00
          per share or higher during the 60 days immediately preceding the first
          anniversary  of the closing date or (b) the last sales price of common
          stock  is  not  $5.00  higher  on  the 15  consecutive  business  days
          immediately preceding the first anniversary of the closing date of the
          properties.  The  additional  shares to be issued will be based on the
          difference  between the amounts as  calculated in (a) or (b) above and
          $5.00 per share.  Accordingly,  the shares issued were valued at $5.00
          per share.

          In 1998 the Company,  through ABT,  acquired four office  buildings in
          Texas whose primary  tenants are branch offices of a commercial  bank.
          The  aggregate  purchase  price for the four  properties,  which  were
          acquired under one purchase contract,  was $3,625,000.  In conjunction
          with the  purchase  the  Company  issued  13,500  shares of its common
          stock,  valued at $5.00 per share, as part of the sales  commission on
          the properties.

          Depreciation expense related to investment in real estate was $544,400
          and  $718,993  for  the  years  ended  December  31,  1997  and  1998,
          respectively.


NOTE 3 - MORTGAGES AND NOTES PAYABLE

          Mortgages  payable are  collateralized by substantially all properties
          and require monthly  principal and interest  payments.  Following is a
          summary of the  Company's  mortgages and notes payable at December 31,
          1998:

          Mortgage payable to  Commercial  Federal
               Mortgage Corp.  Interest at 7.625%,
               due  in  monthly   installments  of
               $10,273   based   on  a   25   year
               amortization   through  January  1,
               2014,   at  which  time  a  balloon
               payment   of   $872,793   is   due.
               Collateralized  by  the  industrial
               warehouse   property   in   Denver,
               Colorado.                                            $1,375,000

          Mortgage  payable  to Fox  Cities  Bank.
               Interest  at 7.75%,  due in monthly
               installments  of $22,295 based on a
               30 year  amortization  through June
               1,  2008 at  which  time a  balloon
               payment  of   $2,797,181   is  due.
               Collateralized    by   an    office
               building in Appleton, Wisconsin.                      3,186,228

          Mortgage  payable to GMAC.  Interest  at
               7.15%, due in monthly  installments
               of  $39,401  based  on  a  25  year
               amortization  through  September 1,
               2008,   at  which  time  a  balloon
               payment  of   $4,358,574   is  due.
               Collateralized       by       three
               self-storage  facilities in Denver,
               Colorado.                                             5,481,089



                                       F - 11


<PAGE>


                       AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3 - MORTGAGES AND NOTES PAYABLE (CONTINUED)

          Mortgage payable to 1st National Bank of
               Arvada.  Interest at prime interest
               rate (8% as of December 31,  1998),
               due  in  monthly   installments  of
               $8,678,   based   on  a   20   year
               amortization, through September 14,
               2003  at  which   time  a   balloon
               payment   of   $852,197   is   due.
               Collateralized        by        the
               self-storage/office        building
               property in Arvada, Colorado                           990,927

          Mortgage  payable to  BankOne  Mortgage.
               Interest  at 7.66%,  due in monthly
               installments   of  $42,612  through
               July 1, 2028.  Collateralized by 13
               office  buildings  in the  State of
               Texas.                                               5,982,558

          Mortgage  payable  to  Jefferson  Pilot.
               Interest  at 9.0%,  due in  monthly
               installments  of  $17,095,  through
               May 1, 2013. Collateralized by four
               office  buildings  in the  State of
               Texas                                                1,653,797

          Note Payable   to   Arlington   Building
               Partnership.   Interest   at  8.5%,
               monthly  payments of interest only,
               principal   balance  due  June  15,
               2000.                                                 192,000
                                                                 -----------
                                                                 $18,861,599
                                                                 ===========



          As of December 31, 1998,  the scheduled  maturities of mortgages is as
          follows:

                  1999                                   $    270,243
                  2000                                        294,458
                  2001                                        318,386
                  2002                                        344,272
                  2003                                      1,211,422
                  Thereafter                               16,422,818
                                                          -----------

                                                          $18,861,599
                                                          ===========


          At  December  31, 1998 there were no  advances  outstanding  under the
          Company's  $250,000 line of credit.  The average  interest rate at the
          year ended  December 31, 1998 was 8.75%.  In January 1999, the Company
          renewed  its  revolving  line of credit  facility  with  Norwest  Bank
          Colorado,  N.A. The $300,000  note is secured by a second  mortgage on
          the Company's  Arvada self storage  facility,  with  interest  payable
          monthly at Norwest  prime  interest  rate plus 1%. The note matures in
          May 2000.


                                     F - 12


<PAGE>


                   AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4 - STOCKHOLDERS' EQUITY

          COMMON STOCK

          In 1997 the Company  issued an aggregate  46,200  shares of its common
          stock as partial consideration for the acquisition of three commercial
          properties in Texas.

          In 1998 the  Company  issued  shares of its  common  stock as  partial
          consideration  for the  acquisition  of  commercial  properties in the
          State of Texas as follows:

          *    9,000 shares  valued at $40,500  ($4.50 per share) as  additional
               consideration for one property acquired in 1997.

          *    7,300  shares  valued at  $36,500  ($5.00  per  share) as partial
               consideration for an office building in Odessa, Texas.

          *    199,900  shares  valued at $999,500  ($5.00 per share) as partial
               consideration for ten office buildings in the State of Texas.

          *    13,500  shares  valued at $67,500  ($5.00 per share) for  partial
               consideration  for a sales  commission on the acquisition of four
               bank buildings in the State of Texas.

          WARRANTS

          At December 31, 1998 the status of outstanding warrants is as follows:

             Issue               Shares          Exercise          Expiration
             Date             Exercisable         Price               Date
         -------------        -----------        --------        --------------
         June, 1996            1,500,000          $5.40          November, 2000
         October, 1996           549,435          $5.40          November, 2000
         October, 1996           164,831          $8.25          November, 2000


          At December 31, 1998 the per share weighted  average exercise price of
          outstanding warrants is $5.61.


                                     F - 13


<PAGE>


                   AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5 - STOCK OPTION PLAN

          In March 1998,  the Board of Directors  approved the 1998 Stock Option
          Plan (the  "1998  Option  Plan").  Pursuant  to the Option  Plan,  the
          Company may grant  options to purchase an aggregate of 200,000  shares
          of the Company's common stock to key employees,  directors,  and other
          persons who have or are  contributing  to the success of the  Company.
          The  options  granted  pursuant  to the  Option  Plan  may  be  either
          incentive  options  qualifying  for  beneficial  tax treatment for the
          recipient  or  non-qualified  options.  Directors  who  are  not  also
          employees of the Company ("Outside  Directors")  automatically receive
          options to purchase  12,000 shares  pursuant to the Option Plan at the
          time of their election as an Outside  Director.  None of these options
          are exercisable at the time of grant. Options to purchase 4,000 shares
          become exercisable for each Outside Director on December 30 of each of
          the first three years  immediately  following the date of grant of the
          options to that  Outside  Director.  The  exercise  price for  options
          granted to Outside  Directors  is the fair market  value of the common
          stock  on the  date of  grant,  and all  options  granted  to  Outside
          Directors  expire five years from the date of grant.  On the date that
          all of an Outside Director's options have expired, options to purchase
          an additional  12,000  shares,  none of which is  exercisable  at that
          time, shall be granted to that Outside Director.  The 1998 option plan
          was  adopted as the  Company  had  issued  substantially  all  options
          available pursuant to the 1995 Stock Option Plan.

          The status of outstanding  options  granted  pursuant to the Company's
          Stock Option Plans was as follows:
<TABLE>
<CAPTION>
                                                                Weighted
                                                  Number        Average        Weighted
                                                    of          Exercise        Average        Exercise
                                                  Shares         Price        Fair Value        Price
                                                  ------         -----        ----------        -----
 <S>                                            <C>                <C>          <C>            <C> 
Options Outstanding - January 1, 1997              66,000         $5.00                         $5.00
               (34,000 exercisable)
Granted                                            56,000         $4.44          $.43           $4.44
                                                 --------

Options Outstanding - December 31, 1997           122,000         $4.74                  $4.44 - 5.00
               (57,000 exercisable)
Granted                                            15,000         $3.97          $.24           $3.97
                                                 --------

Options Outstanding - December 31, 1998           137,000         $4.66                  $3.97 - 5.00
                                                  =======
               (83,750 exercisable)

</TABLE>

          The  weighted  average  contractual  life of  options  outstanding  at
          December 31, 1998 was 5 years.


                                     F - 14


<PAGE>


                   AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5 - STOCK OPTION PLAN (CONTINUED)

          The Company has adopted  the  disclosure-only  provisions  of SFAS No.
          123. Had  compensation  cost for the Company's  stock option plan been
          determined  based on the fair value at the grant date  consistent with
          the  provisions  of SFAS No. 123, the  Company's net loss and loss per
          share for the years ended  December  31, 1997 and 1998 would have been
          increased to the pro forma amounts indicated below:

                                                       1997             1998
                                                       ----             ----
          Net (loss) applicable to common
            stockholders - as reported               $(120,452)      $(317,406)
                                                     =========       =========
          Net (loss) applicable to common
            stockholders - pro forma                 $(122,741)      $(325,741)
                                                     =========       =========
          (Loss) per share - as reported             $    (.09)      $    (.21)
                                                     =========       =========
          (Loss) per share - pro forma               $    (.09)      $    (.21)
                                                     =========       =========

          The fair value of each option  grant is estimated on the date of grant
          using  the  Black-Scholes  option-pricing  model  with  the  following
          weighted-average  assumptions used for grants:  dividend yield of 9.5%
          to 10.41%;  expected  volatility of 21.5% to 25.52%;  discount rate of
          5.32% to 5.50%; and expected lives of 5 years.

          At December 31, 1998 the number of options exercisable was 83,750, the
          weighted  average  exercise  price of these  options  was  $4.81,  the
          weighted  average  contractual life of the options was 5 years and the
          range of exercise prices was $3.97 to $5.00 per share.

NOTE 6 - LEASE AGREEMENTS

          The following table summarizes future minimum base rent to be received
          under  noncancelable   tenant  leases  for  the  Company's  commercial
          properties expiring each year, as of December 31, 1998:

          1999                                    $  3,510,655
          2000                                       3,182,725
          2001                                       2,873,325
          2002                                       2,594,595
          2003                                       2,062,775
          Thereafter                                 9,646,870
                                                   -----------

                                                   $23,870,945
                                                   ===========

          Some leases also  provide for  additional  rent based on  increases in
          operating expenses.  These increases are generally payable annually in
          the  succeeding  year.  The  Company's  self-storage   facilities  are
          generally  leased on a month to month  basis,  and are  therefore  not
          included in the above table.



                                     F - 15


<PAGE>


                   AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 7 - FINANCIAL INSTRUMENTS

          FAIR VALUE

          The  Company's   financial   instruments   include   tenant   accounts
          receivable,  accounts  payable,  other  accrued  expenses and mortgage
          loans  and  notes  payable.   The  fair  values  of  these   financial
          instruments  were not  materially  different  from their  carrying  or
          contract values.

          CONCENTRATIONS OF CREDIT RISK

          The Company  leases  office and  warehouse  facilities  to  commercial
          businesses in Colorado and Wisconsin,  and State of Texas governmental
          agencies bank  buildings in Texas.  The terms of the leases  generally
          require  basic rent  payments at the  beginning of each month.  Credit
          risk associated with the lease  agreements is limited to the amount of
          rents  receivable  from  tenants less any related  security  deposits.
          Leases with the State of Texas  governmental  agencies may be canceled
          by the lessee should funding for the specific  government  agency on a
          complete  agency  basis be decreased or  discontinued.  The  Company's
          self-storage  facilities  are  generally  leased on a  monthly  basis.
          Credit risk  associated with these leases is limited to the amounts of
          rents receivable.

          Financial  instruments,  which  potentially  subject  the  Company  to
          concentrations  of credit risk,  consist  principally of cash and cash
          equivalents.  The Company  maintains  cash  accounts at two  financial
          institutions. The Company periodically evaluates the credit worthiness
          of these financial  institutions,  and maintains cash accounts only in
          large high quality financial institutions, thereby minimizing exposure
          for deposits in excess of federally insured amounts. On occasion, cash
          on deposit may exceed federally insured amounts.

NOTE 8 - RELATED PARTY TRANSACTIONS

          The Company's  Colorado and Wisconsin  properties were managed through
          December 1998, under a management agreement, by an entity whose former
          beneficial  majority  shareholder  was a founder of the  Company.  The
          entity  managed  all  aspects  of  Colorado  and  Wisconsin   property
          operations, including leasing and bookkeeping. For these services, the
          Company  was  charged  a fee of 5% of  gross  revenues  plus 5% of all
          personnel costs. In addition, the entity provided bookkeeping services
          for the Company's Texas properties,  and was paid a fee at the rate of
          2% of gross  revenues  from these  properties.  During the years ended
          December 31, 1997 and 1998, $141,136 and $150,520,  respectively, were
          incurred under the management  agreement and for other  administrative
          services.

NOTE 9 - COMPREHENSIVE INCOME

          There are no  adjustments  necessary to net (loss) as presented in the
          accompanying   consolidated   statements   of   operations  to  derive
          comprehensive  income  in  accordance  with SFAS No.  130,  "Reporting
          Comprehensive Income".


                                     F - 16


<PAGE>


                   AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 10 - SEGMENT REPORTING

          In  June  1997,  SFAS  No.  131,  "Disclosure  about  Segments  of  an
          Enterprise  and  Related  Information"  was issued,  which  amends the
          requirements   for  a  public   enterprise  to  report  financial  and
          descriptive  information  about  its  reportable  operating  segments.
          Operating segments, as defined in the pronouncement, are components of
          an enterprise about which separate financial  information is available
          that is evaluated regularly by the Company in deciding how to allocate
          resources and in assessing  performance.  The financial information is
          required  to be  reported  on the basis  that is used  internally  for
          evaluating segment  performance and deciding how to allocate resources
          to  segments.  The Company has adopted SFAS No. 131 for the year ended
          December 31, 1998.

          The Company has reportable  segments  organized by the region in which
          they operate as follows:  Wisconsin,  Colorado  and Texas.  Reportable
          segments for Texas are further classified by major tenants.

          The  accounting  policies  of the  segments  are  the  same  as  those
          described  in the  summary of  significant  accounting  policies.  The
          Company evaluates  performance based upon income from real estate from
          the combined properties in each segment.



                                     F - 17


<PAGE>
<TABLE>
<CAPTION>
                                                 AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
                                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                 TEXAS
                                                       -------------------------
                                                        Leased           Bank
1998                                   Wisconsin       to State        Buildings       Colorado       Corporate       Consolidated
----                                   ---------       --------        ---------       --------       ---------       ------------

<S>                                  <C>             <C>             <C>             <C>                              <C>         
Rental income                        $    778,929    $  1,003,330    $    339,518    $  1,694,392            --       $  3,816,169
Operating expenses                        398,119         483,560         160,007         528,622            --          1,570,308
Depreciation and
 amortization (1)                         115,698         159,497          42,107         433,653             637          751,592
                                     ------------    ------------    ------------    ------------    ------------     ------------
Income (loss) from
 property operations
                                          265,112         360,273         137,404         732,117            (637)       1,494,269

Percent of income from
 property operations                         17.7%           24.1%            9.2%           49.0%           --              100.0%

Interest income                              --              --              --              --             4,113            4,113
Expenses associated with
    Debt refinancing                         --              --              --           321,178            --            321,178
    Interest expense                      208,099         223,613          54,869         529,115          20,691        1,036,387
    General and administrative              3,250           1,215           1,087          15,680         436,991          458,223
                                     ------------    ------------    ------------    ------------    ------------     ------------

    Net income (loss)                $     53,763    $    135,445    $     81,448    ($   133,856)   ($   454,206)    ($   317,406)
                                     ============    ============    ============    ============    ============     ============

    Real estate investments,
     net (1)                         $  2,547,164    $  8,618,972    $  3,803,867    $  7,101,843    $     26,351     $ 22,098,197
                                     ============    ============    ============    ============    ============     ============

Additions to real estate
 investments                         $     75,825    $  7,428,072    $  3,845,974    $     60,315    $     25,528     $ 11,435,714
                                     ============    ============    ============    ============    ============     ============

Total Assets                         $  2,631,151    $  9,175,714    $  3,831,337    $  7,600,446    $    476,246     $ 23,714,934
                                     ============    ============    ============    ============    ============     ============
1997

Rental income                        $    782,000    $    105,934            --      $  1,594,248            --       $  2,482,182
Operating expenses                        354,935          54,503            --           556,901            --            966,339
Depreciation and amortization (1)         126,550          14,137            --           429,399             221          570,307
                                     ------------    ------------    ------------    ------------    ------------     ------------

Income (loss) from property
 operations                               300,515          37,294            --           607,948            (221)         945,536

Percent of income from property
 operations                                  20.1%            2.5%           --              40.7%           --               63.3%

Interest income                              --              --              --              --            36,778           36,778
Interest expense                          172,325            --              --           508,208           4,896          685,429
General and administrative                 11,927          22,955            --             7,595         374,860          417,337
                                     ------------    ------------    ------------    ------------    ------------     ------------

Net income (loss)                    $    116,263    $     14,339            --      $     92,145    ($   343,199)    ($   120,452)
                                     ============    ============    ============    ============    ============     ============


Real estate investments, net (1)     $  2,581,599    $  1,345,893            --      $  7,454,474    $      1,420     $ 11,383,386
                                     ============    ============    ============    ============    ============     ============

Additions to real estate
 investments                         $      5,458    $  1,359,880            --      $     46,191    $      1,550     $  1,413,079
                                     ============    ============    ============    ============    ============     ============

Total assets                         $  2,669,888    $  1,352,245            --      $  7,557,151    $     62,784     $ 11,642,068
                                     ============    ============    ============    ============    ============     ============

                                                                        F - 18
</TABLE>

<PAGE>

                   AMERIVEST PROPERTIES INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - SEGMENT REPORTING (CONTINUED)

          (1)  Real estate investments and related depreciation and amortization
               includes office equipment for corporate segment.

          MAJOR CUSTOMERS

          Rental income from one tenant,  the State of Texas,  of  approximately
          $1,000,000  comprised  approximately 26% of consolidated  revenues for
          the year  ended  December  31,  1998.  Revenues  from this  tenant are
          enclosed in the segment "Texas - Leased to State".  For the year ended
          December  31,  1997,  no  tenant  comprised  10% or  greater  of total
          consolidated revenues.

NOTE 11 - RECLASSIFICATIONS

          Certain   amounts  in  the  1997   financial   statements   have  been
          reclassified to conform to 1998 classifications.



                                     F - 19


<PAGE>





ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

     Not applicable.





                                       17

<PAGE>



                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.

Directors And Executive Officers
--------------------------------

     The officers and directors of the Company are as follows:

Name                         Age           Positions
----                         ---           ---------
James F. Etter                56           President; Chief Executive Officer;
                                           Chief Financial Officer; and Director
Charles R. Hoffman            62           Chairman Of The Board
John A. Labate                50           Director
Robert J. McFann              82           Director; and Secretary


     James F. Etter has served as President of  AmeriVest  since May 1995,  as a
director since December 1995, as Chief Executive Officer since January 1997, and
as Chief  Financial  Officer  since  July  1996.  From 1994  until he joined the
Company, Mr. Etter acted as a consultant with respect to acquisitions. Mr. Etter
served as President and Chief Executive Officer of Recycling  Management Company
from 1990 until  1994.  From 1988 until 1990,  Mr.  Etter acted as a real estate
consultant for real estate  development/resort  projects in South Carolina.  Mr.
Etter  received  his Masters of Business  Administration  and his  Bachelors  of
Business Administration degrees from the University of Cincinnati.

     Charles R. Hoffman has served as a director of AmeriVest  since August 1994
and as Chairman of the Board since May 1995.  Mr. Hoffman has served as a member
of the Audit  Committee of the Board Of Directors since July 1995. In July 1994,
Mr. Hoffman retired as President of Texaco Pipeline Inc. In that capacity he had
executive  responsibility  for more than 1,200 employees and over 2,900 miles of
pipeline.  He also has  experience in the crude oil terminal and  transportation
business  with  companies  such as  Getty  Pipeline,  Inc.,  Getty  Trading  And
Transportation  Company,  and Skelly Pipe Line, Inc. He has served on the boards
of  directors  of a number of pipeline  systems and as president of two pipeline
systems.   Mr.  Hoffman   received  his  Bachelor  of  Science  and  Masters  of
Science/Civil  Engineering  degrees  from  the  Missouri  School  Of  Mines  And
Metallurgy.

     John A. Labate has served as a director of  AmeriVest  since May 1995.  Mr.
Labate  has  served  as a  member  of each  of the  Audit  Committee  and of the
Acquisition  Committee of the Board Of Directors since July 1995. Mr. Labate has
served as Vice President and Chief Financial  Officer of GeoBiotics,  Inc. since
August 1997, a Denver based  mining  technology  company.  From 1992 to 1997 Mr.
Labate served as the Chief Financial Officer,  Secretary, and Treasurer of Crown
Resources Corporation,  a publicly traded, Denver,  Colorado based international
gold mining and exploration  company.  From 1987 through 1991, Mr. Labate served
as  Corporate  Controller  of Bond  International  Gold,  Inc., a New York Stock
Exchange  listed  international  mining and processing  company based in Denver,
Colorado.  Prior to 1987,  Mr. Labate served as controller  and manager of other
mining companies and equipment manufacturing  companies. Mr. Labate received his
Bachelor of Science degree in accounting from San Diego State University.

     Robert J. McFann has served as a director of  AmeriVest  since  August 1994
and as  Secretary  since  May 1995.  Mr.  McFann  has  served as a member of the
Acquisition  Committee of the Board Of Directors since July 1995. Mr. McFann has
been retired since 1996. He previously was the principal  owner and President of
Hy Grade Meat Company,  a private  company  which grew to a mid-sized  hotel and


                                       18

<PAGE>

restaurant supply house under his direction. Prior to this, he worked for Cudahy
Meat Company in its sales department as well as other  positions.  He has served
on the Board Of Directors of the Bank Of Aurora and for several  years managed a
diverse  family owned  investment  portfolio of commercial  real estate,  family
owned businesses and other investments.

Committees
----------

     The Board Of Directors  maintains  an Audit  Committee  and an  Acquisition
Committee.  The Audit  Committee was formed to perform the following  functions:
recommend to the Board Of  Directors  the  independent  auditors to be employed;
discuss the scope of the independent auditors' examination; review the financial
statements and the independent  auditors' report;  solicit  recommendations from
the independent  auditors regarding internal controls and other matters;  review
all related  party  transactions  for  potential  conflicts  of  interest;  make
recommendations  to the Board Of  Directors;  and perform other related tasks as
requested by the Board.  The  Acquisitions  Committee  was formed to perform the
following functions:  recommend to the Board Of Directors an acquisitions policy
and  strategy;   review  and  update  the   acquisitions   policy  and  strategy
periodically; review proposed acquisitions and make recommendations to the Board
concerning those acquisitions; review past acquisitions and make recommendations
to the Board;  and perform other  related  tasks as requested by the Board.  The
current members of the Audit Committee are Messrs.  Hoffman and Labate,  and the
current members of the Acquisition Committee are Messrs. Labate and McFann.

Classification Of The Board Of Directors
----------------------------------------

     The Board Of  Directors  of the  Company  is divided  into  three  classes,
designated  Class 1, Class 2 and Class 3.  Directors from each class are elected
once every three years for a three-year  term. John Labate and James Etter serve
as the Class 1 directors,  Charles  Hoffman serves as the Class 2 director,  and
Robert McFann serves as the Class 3 director.

Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------

     Section  16(a) of the  Securities  Exchange  Act of 1934,  as amended  (the
"Exchange  Act"),  requires  the  Company's  directors,  executive  officers and
holders  of more  than  10% of the  Company's  common  stock  to file  with  the
Securities And Exchange  Commission  initial reports of ownership and reports of
changes in ownership of common stock and other equity securities of the Company.
The Company believes that during the year ended December 31, 1998, its officers,
directors  and holders of more than 10% of the Company's  common stock  complied
with all Section  16(a) filing  requirements.  In making these  statements,  the
Company  has  relied  upon the  written  representations  of its  directors  and
officers and the  Company's  review of the monthly  statements  of changes filed
with the Company by its officers and directors.



                                       19
<PAGE>



ITEM 10.  EXECUTIVE COMPENSATION.

     Summary Compensation Table

     The following  table sets forth in summary form the  compensation  received
during each of the Company's last three completed  fiscal years by the Company's
President.  No other  employee of the Company  received  total  salary and bonus
exceeding $100,000 during any of the last three fiscal years.
<TABLE>
<CAPTION>


                                                  Annual Compensation
----------------------------------------------------------------------------------------------------------------------
                                 Fiscal                                          Long-Term
Name and                         Year                                            Compensation         Other Annual
Principal Position               Ended       Salary ($)(1)     Bonus ($)          Options             Compensation ($)
------------------               -----       -------------     ---------         ------------         ----------------
<S>                              <C>           <C>             <C>                  <C>                 <C>     <C>
James F. Etter, President        1998          $115,000        $20,000              10,000              $15,000 (2)
                                 1997          $100,000        $15,000              20,000               $9,000 (3)
                                 1996           $90,000         $5,000              10,000               $6,000 (4)
----------------------------------------------------------------------------------------------------------------------
</TABLE>

---------

(1)  The dollar value of base salary (cash and non-cash) received.
(2)  Consists of $12,000 to reimburse  for medical and life  insurance  coverage
     and a $3,000 contribution to SIMPLE IRA Plan.
(3)  Consists of $6,000 to reimburse for medical insurance coverage and a $3,000
     contribution to SIMPLE IRA Plan.
(4)  Reimbursement for medical insurance coverage.

     Option Grants Table

     The following table sets forth information  concerning individual grants of
stock  options  made  during the  fiscal  year ended  December  31,  1998 to the
Company's  President.  See "- Employment Contracts And Termination Of Employment
And  Change-In-Control  Arrangements  - 1995 Stock Option  Plan",  "- 1998 Stock
Option Plan", and "- Option Grants", below.

<TABLE>
<CAPTION>

                                 Option Grants For Fiscal Year Ended December 31, 1998
-----------------------------------------------------------------------------------------------------------------
                                                     % of Total Options
                                    Options          Granted to Employees        Exercise or Base      Expiration
Name                                Granted (#)      in Fiscal Year              Price ($/Share)       Date
-----------------------------------------------------------------------------------------------------------------
<S>                                  <C>                   <C>                   <C>                  <C>   <C>
James F. Etter, President            10,000                47%                   $3.969/Share         12/10/03
-----------------------------------------------------------------------------------------------------------------
</TABLE>

     Aggregated Option Exercises And Fiscal Year-End Option Value Table

     The following table indicates that there were no exercises of stock options
during the fiscal year ended December 31, 1998 by the Company's  President,  and
also sets forth information  concerning the fiscal year-end value of unexercised
options held by the President.

                                       20

<PAGE>
<TABLE>
<CAPTION>

                                              Aggregated Option Exercises
                                        For Fiscal Year Ended December 31, 1998
                                              And Year-End Option Values
-------------------------------------------------------------------------------------------------------------------------
                                                                              Number of                 Value of
                                                                              Unexercised               Unexercised
                                                                              Options                   In-The-Money
                                                                              at Fiscal                 Options at Fiscal
                                                                              Year-End (#)(3)           Year-End ($)(4)
                                Shares
                                Acquired on         Value                     Exercisable/              Exercisable/
Name                            Exercise (#)(1)     Realized ($)(2)           unexercisable             unexercisable
-------------------------------------------------------------------------------------------------------------------------
<S>                                <C>                   <C>                 <C>                        <C>
James F. Etter, President         -0-                   -0-                  34,500/25,500              $75/$225 (5)
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

---------

(1)  The number of shares  received upon  exercise of options  during the fiscal
     year ended December 31, 1998.
   
(2)  With respect to options  exercised  during the Company's  fiscal year ended
     December 31, 1998,  the dollar value of the  difference  between the option
     price and the market  value of the option  shares  purchased on the date of
     the exercise of the options.

(3)  The total  number of  unexercised  options  held as of  December  31,  1998
     separated  between  those options that were  exercisable  and those options
     that were not exercisable.

(4)  For all  unexercised  options held as of December 31, 1998,  the  aggregate
     dollar  value of the  excess is the  market  value of the stock  underlying
     those options over the exercise  price of those  unexercised  options.  For
     purposes of this table,  the market  value used for the Common Stock is its
     closing  sales price on December 31, 1998 of $4.00 per share as reported on
     the Nasdaq SmallCap Stock Market.

(5)  The amounts shown are for options to purchase  shares for $3.969 per share,
     2,500 of which were  exercisable and 7,500 of which were  unexercisable  at
     December 31, 1998. Mr. Etter's other options have exercise  prices of $5.00
     and $4.4375 per share,  which are greater  than the closing  sales price of
     $4.00 for the Common  Stock on December  31, 1998 as reported on the Nasdaq
     SmallCap Stock Market. These options therefore were not "in-the-money", did
     not have any value on December  31,  1998,  and are not  reflected  in this
     column.

     Employment  Contracts And  Termination Of Employment And  Change-In-Control
     Arrangements

     Employment  Agreement  With James F.  Etter.  The Company  entered  into an
employment agreement (the "Etter Agreement") with James F. Etter effective as of
January  1,  1998,  which  replaced a previous  agreement  between  the  parties
effective as of January 1, 1996. Pursuant to the Etter Agreement, Mr. Etter will
serve as the  President  and Chief  Executive  Officer of the  Company  and will
devote  substantially all his business time to the Company.  For the 1998 fiscal
year,  the Etter  Agreement  provided  for the  payment of salary at the rate of
$9,583 per month and a bonus to be  determined by the Board Of Directors at year
end. The Etter Agreement also provides that the Company will reimburse Mr. Etter
for up to $12,000 annually for medical/insurance expenses paid by Mr. Etter.

                                       21

<PAGE>


     Pursuant to the Etter  Agreement,  for the 1999 fiscal  year,  Mr.  Etter's
salary was increased to $10,062.50  per month and the Company agreed to consider
paying Mr. Etter a bonus at the end of each year of the Etter  Agreement,  which
bonus  will be at the  discretion  of the  Board  and will be based on  criteria
determined  by the Board.  On  December 9, 1998,  the Board also  granted to Mr.
Etter a bonus of $20,000  for 1998 and  options  to  purchase  10,000  shares of
Common Stock. See below, "--Option Grants".

     If the Company is acquired by another company, and if the acquiring company
does not offer Mr.  Etter a position in the Denver area at a salary  level equal
to or greater than his then current salary,  then all unexercised  stock options
held by Mr. Etter would immediately  become  exercisable,  and the Company would
pay Mr. Etter a bonus equal to one year's salary.

     1995 Stock Option Plan.  Pursuant to the  Company's  1995 Stock Option Plan
(the "1995  Plan"),  the Company may grant  options to purchase an  aggregate of
130,000 shares of the Company's  Common Stock to key employees,  directors,  and
other persons who have  contributed  or are  contributing  to the success of the
Company.  The options granted pursuant to the 1995 Plan may be incentive options
qualifying  for  beneficial  tax  treatment  for the  recipient  or they  may be
non-qualified  options.  With respect to options  granted to persons  other than
directors of the Company who are not also  employees  of the  Company,  the 1995
Plan is  administered  by an option  committee that  determines the terms of the
options subject to the requirements of the 1995 Plan. In May 1995,  directors of
the Company who are not also employees of the Company ("Outside Directors") were
granted an aggregate of 48,000 options with an exercise price of $5.00 per share
pursuant to the 1995 Plan,  12,000 of which  subsequently  expired without being
exercised.  In December 1997, the Outside Directors were granted an aggregate of
36,000  options with an exercise price of $4.4375 per share pursuant to the 1995
Plan. At December 31, 1998 options to purchase an aggregate of 122,000 shares of
Common Stock were  outstanding  under the 1995 Plan.  The option  committee  may
grant additional options to purchase 8,000 shares pursuant to that plan.

     1998 Stock Option Plan.  Pursuant to the  Company's  1998 Stock Option Plan
(the "1998  Plan"),  the Company may grant  options to purchase an  aggregate of
200,000  shares of Common Stock to key employees,  directors,  and other persons
who have or are contributing to the success of the Company.  The options granted
pursuant  to the 1998  Plan  may be  either  incentive  options  qualifying  for
beneficial   tax  treatment  for  the   recipient,   non-qualified   options  or
non-qualified  non-discretionary  options. The terms of the 1998 Plan concerning
incentive  options and  non-qualified  options are substantially the same except
that  only  employees  of the  Company  or its  subsidiaries  are  eligible  for
incentive  options and employees and other persons who have  contributed  or are
contributing  to the  success of the  Company  are  eligible  for  non-qualified
options. Non-qualified  non-discretionary options may be granted only to Outside
Directors who are  contributing  to the success of the Company.  With respect to
options  granted to persons other than directors of the Company who are not also
employees  of the  Company,  the 1998  Plan  also is  administered  by an option
committee that determines the terms of the options  subject to the  requirements
of the  1998  Plan.  The  portion  of the  1998  Plan  concerning  non-qualified
non-discretionary  options provides that Outside Directors automatically receive
options to purchase 12,000 shares pursuant to the 1998 Plan at the time of their
initial election as an Outside  Director.  The Options held by Outside Directors
are not  exercisable at the time of grant,  but Options to purchase 4,000 shares
become exercisable for each Outside Director on December 30 of each of the first
three  years  immediately  following  the date of grant of these  options to the
Outside  Director.  The exercise price for the  non-qualified  non-discretionary
options is the fair market value of the Company's Common Stock on the date these
options are granted.  Shares  acquired upon exercise of these options  cannot be
sold for six months  following the date of grant.  If not previously  exercised,


                                       22

<PAGE>

non-qualified  non-discretionary  options that have been granted expire upon the
later to occur of five  years  after the date of grant  and two years  after the
date these options first became exercisable. The non-qualified non-discretionary
options  also expire 90 days after the  optionholder  ceases to be a director of
the  Company.  At any time all of an  Outside  Director's  options  have  become
exercisable,  non-qualified non- discretionary options to purchase an additional
12,000 shares,  which are not exercisable at the time of grant, shall be granted
to that Outside Director.

     All options granted under the 1998 Plan will become fully  exercisable upon
the  occurrence  of a change in control of the Company or of certain  mergers or
other reorganizations or asset sales described in the 1998 Plan. Options granted
pursuant to the 1998 Plan are not transferable  during the optionee's  lifetime.
Subject to the other terms of the 1998 Plan, the option committee has discretion
to provide vesting requirements and specific expiration  provisions with respect
to the incentive  options and  non-qualified  options  granted.  At December 31,
1998,  options to purchase 15,000 shares of Common Stock were outstanding  under
the 1998 Plan and  options to  purchase  185,000  were  available  to be granted
pursuant to that plan.

     Compensation Of Outside Directors

     Outside Directors are paid $250 per month plus $300 for each meeting of the
Board Of  Directors  that they attend.  Directors  also will be  reimbursed  for
expenses  incurred in  attending  meetings  and for other  expenses  incurred on
behalf  of the  Company.  In  addition,  each  director  who is not an  employee
automatically receives options to purchase shares of Common Stock. See above, "-
1995 Stock Option Plan" and "- 1998 Stock Option Plan".

     Option  Grants.  In addition to the automatic  grants of options to Outside
Directors,  stock options have been granted  pursuant to the Company's 1995 Plan
and 1998 Plan on four  occasions.  In May 1995, the Company granted to Mr. Etter
options to  acquire  up to 20,000  shares of the  Company's  Common  Stock at an
exercise  price of $5 per share.  4,000 of these options  became  exercisable on
each of December 30, 1995,  1996,  1997 and 1998, an  additional  4,000 of these
options will become  exercisable  on December 30, 1999, and all of these options
expire on May 20, 2000.  On December 9, 1996,  the Company  granted to Mr. Etter
options to  purchase up to an  additional  10,000  shares of Common  Stock at an
exercise  price of $5 per  share.  On that date,  the last  sales  price for the
Company's  Common Stock on the Nasdaq SmallCap Stock Market was $4.50.  2,000 of
these options became exercisable on each of December 30, 1996, 1997 and 1998, an
additional  2,000 of these options will become  exercisable  on each of December
30, 1999 and 2000,  and all of these  options  expire on  December  9, 2001.  On
December 8, 1997, the Company  granted to Mr. Etter options to purchase up to an
additional  20,000 shares of Common Stock at an exercise price equal to the last
sales price for the Company's  Common Stock on the Nasdaq  SmallCap Stock Market
on December 30, 1997, which was $4.4375 per share. 5,000 of these options became
exercisable  on each of  December  30,  1997 and 1998,  an  additional  5,000 of
options will become  exercisable  on each of December 30, 1999 and 2000, and all
of these options  expire on December 8, 2002.  On December 9, 1998,  the Company
granted to Mr. Etter  options to purchase up to an  additional  10,000 shares of
Common  Stock  at an  exercise  price  equal  to the last  sales  price  for the
Company's  Common Stock on the Nasdaq SmallCap Stock Market on December 9, 1998,
which was  $3.969  per  share.  2,500 of these  options  became  exercisable  on
December 9, 1998, an additional 2,500 of options will become exercisable on each
of December 31, 1999, 2000 and 2001, and all of these options expire on December
10, 2003.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table summarizes certain information as of April 5, 1999 with
respect to the  beneficial  ownership of the  Company's  common stock (i) by the
Company's directors, (ii) by stockholders known by the Company to own 5% or more

                                       23

<PAGE>

of the  Company's  Common  Stock,  and (iii) by all officers and  directors as a
group.


                                                   As Of April 5, 1999
                                       -----------------------------------------


                                                             Percentage Of Class
Name And Address Of Beneficial Owner     Number Of Shares    Beneficially Owned
------------------------------------     ----------------    ------------------

Charles R. Hoffman                          70,500(1)               4.2%
208 Somerset
Bentonville, Arkansas 72712

John A. Labate                              15,000(1)                *
5260 South Beeler Court
Englewood, Colorado  80111

Robert J. McFann                            67,800(1)               4.1%
3260 Zephyr Court
Wheat Ridge, Colorado 80033

James F. Etter                              60,939(2)               3.6%
2801 Youngfield Street
Suite 300
Golden, Colorado 80401

All Officers And Directors As
   A Group (Four Persons)                  214,239                 12.2%

Maxine G. Hedlund                           84,985(3)               5.1%
7100 Grandview Ave., Suite 1
Arvada, Colorado  80002

---------------

*    Less than one percent.

(1)  Includes the  following  numbers of shares  underlying  options to purchase
     shares of Common Stock that currently are exercisable  that were granted to
     each Outside Director  pursuant to the Company's 1995 and 1998 Stock Option
     Plans:  Charles Hoffman,  15,000;  John Labate,  15,000; and Robert McFann,
     15,000.  The number of shares indicated also includes the following numbers
     of shares  underlying  common stock  purchase  warrants  ("Warrants")  that
     currently are exercisable  that are held by each of the following  persons:
     Charles Hoffman, 8,000; and Robert J. McFann, 4,000.

(2)  Consists  of an  aggregate  of 20,939  shares of Common  Stock owned by Mr.
     Etter, his wife, and minor daughter, 34,500 shares of Common Stock issuable
     upon the exercise of  currently  exercisable  options,  and an aggregate of
     5,500 shares of Common Stock  issuable upon the exercise of Warrants  owned
     by Mr. Etter and his wife.

(3)  Includes  9,775 shares  owned by the C.J.  Hedlund  Trust,  of which Maxine
     Hedlund  is the  beneficiary;  22,845  shares  owned  by  Colorado  Bighorn
     Corporation,  of which Mrs. Hedlund is the President and a director; 15,540
     shares owned by Continental Western Services Inc., of which Mrs. Hedlund is
     the President,  a director and the  beneficial  owner of  approximately  24
     percent of the  outstanding  stock;  14,400  shares  owned by the Maxine G.
     Hedlund Trust,  of which Mrs.  Hedlund is the  beneficiary;  and 600 shares
     owned by AmeriCo Realty Services Inc., 51 percent of which is owned by Mrs.
     Hedlund  and of which  she is a  director.  See  also,  "ITEM  12.  CERTAIN
     RELATIONSHIPS AND RELATED TRANSACTIONS".

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  Company  has been  involved  in the  following  transactions  with its
current and past  directors  and officers and by persons known by the Company to
be the beneficial owners of 5% or more of the Company's Common Stock.

                                       24

<PAGE>
     Property Management;  Administrative Services. The Company had entered into
property  management  contracts pursuant to which AmeriCo Realty Services,  Inc.
("AmeriCo") managed the following properties owned by the Company:  four private
self storage facilities located in Colorado (the "Self-Storage Facilities"),  an
office building in Appleton,  Wisconsin (the "Giltedge Office Building") and the
Broadway  Property.  These agreements were effective as of the date on which the
Company  acquired the  respective  property,  which was in 1995 for the Broadway
Property  and in 1996 for the  other  properties.  Pursuant  to the  termination
provisions  of each  agreement,  all of which  provided  that the Company  could
terminate any of them after one year, all of the agreements  were  terminated by
the Company as of January 1, 1999.  The Company and AmeriCo  continue to operate
under  a  month-to-month  agreement  pursuant  to  which  AmeriCo  continues  to
administer certain  personnel-related  matters in exchange for $4,000 per month,
and  which,  unless  earlier  terminated  by  the  Company,  will  automatically
terminate on June 30, 1999. In addition,  until the Company's offices were moved
to  Golden,  Colorado  in  October  1998,  AmeriCo  provided  the  Company  with
accounting and clerical  services as well as general office  support,  including
telephone,  fax, and other services,  for an aggregate cost of $1,250 per month.
Those  services and support costs are now  conducted  and borne  directly by the
Company.  Maxine Hedlund,  who is the beneficial owner of approximately  5.1% of
the Company's Common Stock, is a director of AmeriCo and  beneficially  owns 51%
of the outstanding common stock of AmeriCo.

     Property  Acquisition;  Brokerage Services.  C.J. Hedlund, the Company, and
Colorado  Bighorn  entered  into an  agreement  effective as of October 30, 1996
pursuant to which Mr.  Hedlund and Colorado  Bighorn  granted to the Company the
right of first refusal to  participate  in any real estate  transaction in which
Mr. Hedlund,  Colorado Bighorn, or any of their affiliated entities was involved
or for which Mr. Hedlund,  Colorado Bighorn, or any of their affiliated entities
otherwise received compensation,  except that the right of first refusal did not
apply to any  proposed  transaction  that related  solely to their  serving in a
brokerage  function,  such as a listing or selling broker.  Also as part of this
transaction,  the Company  entered into broker listing  agreements with Colorado
Bighorn  pursuant to which Colorado  Bighorn will serve as the Company's  broker
for all  purchase  and sale  transactions  during the  period of the  agreement.
Pursuant to these listing  agreements,  the Company will pay Colorado  Bighorn a
standard real estate  commission for each purchase or sale  transaction  entered
into by the  Company,  including  those  pursuant to the right of first  refusal
granted to the Company by Mr. Hedlund and Colorado  Bighorn.  This agreement and
the listing agreements were for one year terms beginning on October 30, 1996 and
have been renewed for  successive  one year terms until the Company  allowed the
agreements  to terminate as of October 30, 1998.  Pursuant to these  agreements,
the Company paid  Colorado  Bighorn the  commissions  described  below under "--
Purchase  Of  State  Of  Texas  Office  Buildings"  and  "--  Purchase  Of  Bank
Buildings".  Maxine  Hedlund  controls,  and is the President and a director of,
Colorado Bighorn. See above, " -- Property Acquisition; Brokerage Services."

     Purchase Of State Of Texas  Buildings.  In June 1998, the Company  acquired
eleven small office buildings  located in Texas that are leased to various Texas
government  agencies.  The aggregate purchase price for these buildings included
approximately $6,300,000 and 204,300 shares of the Company's Common Stock at the
rate of $5.00 per  share.  As part of those  transactions,  the  sellers  of the
properties  paid Colorado  Bighorn  aggregate  commissions  of $75,830 and 4,390
shares of the Company's Common Stock.

     Purchase Of Four Office  Buildings.  In August 1998,  the Company  acquired
four additional  office building  located in Texas.  The primary tenants in each
building are branches of NationsBank,  N.A. The aggregate purchase price for the
four buildings was  $3,625,000.  As part of that  transaction,  the Company paid
Colorado Bighorn aggregate  commissions of 13,500 shares of the Company's Common
Stock at the rate of $5.00 per share.  See  above,  " --  Property  Acquisition;
Brokerage Services."

     Conflicts Of Interest Policies

     The  Company's  Board Of Directors  and its officers are subject to certain
provisions  of Delaware  law which are  designed to  eliminate  or minimize  the
effects of certain  potential  conflicts  of interest.  In addition,  the Bylaws
provide that any transaction between the Company and an interested party must be
fully disclosed to the Board Of Directors,  and that a majority of the directors
not otherwise interested in the transaction (including a majority of independent
directors) must make a determination that such transaction is fair,  competitive
and  commercially  reasonable  and on terms and conditions not less favorable to
the Company than those available from unaffiliated third parties.

     All future  transactions  between the Company and the  Company's  officers,
directors and 5%  stockholders  will be on terms no less favorable than could be
obtained  from  independent  third parties and will be approved by a majority of
the independent,  disinterested  directors of the Company.  The Company believes
that by  following  these  procedures  it will be able to mitigate  the possible
effects of these conflicts of interest.

                                       25

<PAGE>


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a)      Exhibits.
                  --------

         Exhibit Index

         Number            Description
         ------            -----------

         3.1(a)     Certificate  Of   Incorporation   filed  with  the  Delaware
                    Secretary  Of State on August 25,  1993 is  incorporated  by
                    reference from Registrant's  Registration  Statement on Form
                    SB-2 dated August 30, 1996 (Registration No. 333-5114-D).

         3.1(b)     Amended and Restated Certificate Of Incorporation filed with
                    the  Delaware  Secretary  Of State on  January  17,  1996 is
                    incorporated  by reference  from  Registrant's  Registration
                    Statement on Form SB-2 dated  August 30, 1996  (Registration
                    No. 333-5114-D).

         3.2        Bylaws  are  incorporated  by  reference  from  Registrant's
                    Registration  Statement  on Form SB-2 dated  August 30, 1996
                    (Registration No. 333-5114-D).

         10.1       Form of Employment Agreement effective as of January 1, 1998
                    between the Company  and James F. Etter is  incorporated  by
                    reference from Exhibit 10.8 to Registrant's Annual Report on
                    Form 10-KSB for the year ended December 31, 1997.

         10.2       1995 Stock Option Plan is  incorporated  by  reference  from
                    Exhibit 10.9 to  Registrant's  Annual  Report on Form 10-KSB
                    for the year ended December 31, 1997.

         10.3       1998 Stock Option Plan is incorporated by reference from the
                    Company's Proxy  Statement  concerning the Company's May 21,
                    1998 Annual  Meeting Of  Stockholders  filed with the SEC on
                    March 30, 1998.

         10.4       Form Of  Commercial  Contract To Buy And Sell Real Estate is
                    incorporated by reference from  Registrant's  Form 8-K dated
                    July 13, 1998.

         10.5       Schedule Of Material  Terms Of  Commercial  Contracts To Buy
                    And Sell  Real  Estate is  incorporated  by  reference  from
                    Registrant's Form 8-K dated July 13, 1998.

         10.6       Agreement  dated June 11, 1998 between  AmeriVest  Buildings
                    Texas Inc. and Five N-B Properties, L.P.

         27.1       Financial Data Schedule.

       (b) Reports On Form 8-K. During the last quarter of the fiscal year ended
December 31, 1998,  the Company  filed,  on November 2, 1998, one report on Form
8-K/A for an event occurring August 18, 1998.
                 



                                       26

<PAGE>
                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                             AMERIVEST PROPERTIES INC.


Date:  April 13, 1999                        By: /s/ James F. Etter
                                                 ------------------------------
                                                 James F. Etter, President


     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.


Signature                     Title                                  Date
---------                     -----                                  ----

 /s/ James F. Etter           President, Chief Executive        April 13, 1999
--------------------------    Officer (Principal Executive
James F. Etter                and Director



 /s/ Charles R. Hoffman       Director                          April 13, 1999
--------------------------
Charles R. Hoffman



 /s/ John A. Labate           Director                          April 13, 1999
---------------------------
John A. Labate



                              Director                          April   , 1999
---------------------------
Robert J. McFann




<PAGE>

         Exhibit Index

         Number            Description
         ------            -----------
 
         3.1(a)     Certificate  Of   Incorporation   filed  with  the  Delaware
                    Secretary  Of State on August 25,  1993 is  incorporated  by
                    reference from Registrant's  Registration  Statement on Form
                    SB-2 dated August 30, 1996 (Registration No. 333-5114-D).

         3.1(b)     Amended and Restated Certificate Of Incorporation filed with
                    the  Delaware  Secretary  Of State on  January  17,  1996 is
                    incorporated  by reference  from  Registrant's  Registration
                    Statement on Form SB-2 dated  August 30, 1996  (Registration
                    No. 333-5114-D).

         3.2        Bylaws  are  incorporated  by  reference  from  Registrant's
                    Registration  Statement  on Form SB-2 dated  August 30, 1996
                    (Registration No. 333-5114-D).

         10.1       Form of Employment Agreement effective as of January 1, 1998
                    between the Company  and James F. Etter is  incorporated  by
                    reference from Exhibit 10.8 to Registrant's Annual Report on
                    Form 10-KSB for the year ended December 31, 1997.

         10.2       1995 Stock Option Plan is  incorporated  by  reference  from
                    Exhibit 10.9 to  Registrant's  Annual  Report on Form 10-KSB
                    for the year ended December 31, 1997.

         10.3       1998 Stock Option Plan is incorporated by reference from the
                    Company's Proxy  Statement  concerning the Company's May 21,
                    1998 Annual  Meeting Of  Stockholders  filed with the SEC on
                    March 30, 1998.

         10.4       Form Of  Commercial  Contract To Buy And Sell Real Estate is
                    incorporated by reference from  Registrant's  Form 8-K dated
                    July 13, 1998.

         10.5       Schedule Of Material  Terms Of  Commercial  Contracts To Buy
                    And Sell  Real  Estate is  incorporated  by  reference  from
                    Registrant's Form 8-K dated July 13, 1998.

         10.6       Agreement  dated June 11, 1998 between  AmeriVest  Buildings
                    Texas Inc. and Five N-B Properties, L.P.

         27.1       Financial Data Schedule.