-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M5OQxih1ryuewzh4+U2gWT8w3h2kOEt/thj+ybyWzQxM7s4iXQoyTnOSiN3c5L86 CWGI5lpO/R6n/WNOS/uHcQ== 0000950144-97-012509.txt : 19971119 0000950144-97-012509.hdr.sgml : 19971119 ACCESSION NUMBER: 0000950144-97-012509 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971001 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971118 SROS: AMEX SROS: CSX FILER: COMPANY DATA: COMPANY CONFORMED NAME: KOGER EQUITY INC CENTRAL INDEX KEY: 0000835664 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 592898045 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 333-20975 FILM NUMBER: 97723324 BUSINESS ADDRESS: STREET 1: 3986 BLVD CTR DR STE 101 CITY: JACKSONVILLE STATE: FL ZIP: 32207 BUSINESS PHONE: 9043983403 MAIL ADDRESS: STREET 1: 3986 BLVD CTR DR STREET 2: SUITE 101 CITY: JACKSONVILLE STATE: FL ZIP: 32207 8-K 1 KOGER EQUITY INC. FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) OCTOBER 1, 1997 KOGER EQUITY, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) FLORIDA - -------------------------------------------------------------------------------- (State of incorporation or organization) 1-9997 59-2898045 - -------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 3986 BOULEVARD CENTER DRIVE JACKSONVILLE, FLORIDA 32207 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (904) 398-3403 - -------------------------------------------------------------------------------- N/A - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) 2 ITEM 5. OTHER EVENTS. During the period from May 15, 1997 through October 1, 1997, Koger Equity, Inc. (the "Company") (i) acquired three office buildings and 5.26 acres of unimproved land in a suburban office park, (ii) acquired two individual office buildings, (iii) acquired an individual office building, (iv) acquired an office building adjacent to one of the Company's office parks, (v) acquired two office buildings and 2.4 acres of unimproved land and (vi) acquired an individual office building. These six individual transactions (collectively referred to as the "1997 Acquisitions") were with separate, unrelated sellers. The following is a brief description of the 1997 Acquisitions: (1) On May 15, 1997, the Company acquired three office buildings, containing approximately 134,000 net rentable square feet, and 5.26 acres of unimproved land located in Greenville, South Carolina. The properties were acquired for approximately $14.1 million, which was available from the Company's existing cash balance. (2) On June 4, 1997, the Company acquired two office buildings, containing approximately 214,100 net rentable square feet, located in San Antonio, Texas. The properties were acquired for approximately $15.6 million, which was available from the Company's existing cash balance. (3) On June 18, 1997, the Company acquired an office building, containing approximately 23,000 net rentable square feet, located in Jacksonville, Florida. The property was acquired for approximately $3.3 million, which was available from the Company's existing cash balance. (4) On August 4, 1997, the Company acquired an office building, containing approximately 80,500 net rentable square feet, located in Tallahassee, Florida. This office building is adjacent to the Company's Tallahassee Capital Circle Center. The property was acquired for approximately $9.6 million, which was made available primarily from drawing $8.0 million on the Company's secured revolving credit facility. (5) On September 23, 1997, the Company acquired two office buildings, containing approximately 46,400 net rentable square feet, and 2.4 acres of unimproved land located in El Paso, Texas. The properties were acquired for approximately $3.3 million, which was available from the Company's existing cash balance. (6) On October 1, 1997, the Company acquired an office building, containing approximately 154,100 net rentable square feet, located in Atlanta, Georgia. The property was acquired for approximately $21.3 million, which was made available primarily from drawing $18.0 million on the Company's secured revolving credit facility. Each of the 1997 Acquisitions was pursuant to individual agreements for the sale and purchase of each property between each selling entity and the Company. The Company considered various factors in determining the price to be paid for each of the 1997 Acquisitions. Factors considered include nature of the tenants and terms of leases in place, opportunities for alternative and new tenancies, historical and expected cash flow, occupancy rates, current operating costs on the properties and anticipated changes therein under Company ownership, the physical condition and location of the properties, need for capital improvements, the anticipated effect on the Company's financial results, and other factors. The Company takes into consideration capitalization rates at which it believes other comparable office buildings have recently sold. However, the Company determines the price it is willing to pay primarily on the factors discussed above relating to the properties themselves and their fit with the Company's existing operations. 1 3 No separate independent appraisals were obtained in connection with the 1997 Acquisitions. The Company, after investigation of the 1997 Acquisitions, is not aware of any material factors, other than those discussed above, that would cause the financial information reported not to be necessarily indicative of future operating results. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS Listed below are the financial statements, pro forma financial information and exhibits, if any, filed as part of this report. (a) Financial Statements of Real Estate Acquired. The Statements of Revenues and Certain Expenses included in this report encompass the following: - Audited Statement of Revenues and Certain Expenses of Greenville Park Central for the year ended December 31, 1996. - Audited Statement of Revenues and Certain Expenses of the Atrium Building and the Pacific Plaza Building for the year ended December 31, 1996. - Audited Statement of Revenues and Certain Expenses of the Ideon Building for the year ended December 31, 1996. - Audited Statement of Revenues and Certain Expenses of the Alexander Building for the year ended December 31, 1996. - Audited Statement of Revenues and Certain Expenses of Coventry Park West Buildings A and B for the year ended December 31, 1996. - Audited Statement of Revenues and Certain Expenses of the Lincoln Parkway Building for the year ended December 31, 1996. 2 4 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Koger Equity, Inc. Jacksonville, Florida We have audited the accompanying statement of revenues and certain expenses of the properties known as Greenville Park Central for the year ended December 31, 1996. This financial statement is the responsibility of management. Our responsibility is to express an opinion on the financial statement 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 statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and the 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. The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in the filing of Form 8-K of Koger Equity, Inc. as a result of the acquisition of these properties). Material amounts, described in Note 1 to the statement of revenues and certain expenses, that would not be comparable to those resulting from future operations of the acquired properties are excluded and the statement is not intended to be a complete presentation of the acquired properties' revenues and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of Greenville Park Central for the year ended December 31, 1996 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Jacksonville, Florida November 6, 1997 3 5 GREENVILLE PARK CENTRAL - GREENVILLE, SOUTH CAROLINA STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 1996 REVENUES: Rental income $1,960,943 Recoverable expenses 2,657 Other income 6,775 ---------- Total revenues 1,970,375 ---------- CERTAIN EXPENSES: Property operating 567,514 Real estate taxes 151,180 Management costs and fees 85,692 ---------- Total certain expenses 804,386 ---------- REVENUES IN EXCESS OF CERTAIN EXPENSES $1,165,989 ==========
See notes to statement of revenues and certain expenses. 4 6 GREENVILLE PARK CENTRAL - GREENVILLE, SOUTH CAROLINA NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 1996 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Greenville Park Central, an office park located in Greenville, South Carolina, was acquired by Koger Equity, Inc. on May 15, 1997. The statement of revenues and certain expenses includes information related to the operations of Park Central for the period from January 1, 1996 through December 31, 1996 as recorded by the office building's previous owner, Financial Enterprises III, a Virginia limited liability company. The accompanying historical financial statement information is presented in conformity with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission. Accordingly, the financial statement is not representative of the actual operations for the year ended December 31, 1996 as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of the acquired property, have been excluded. Expenses excluded consist of interest, depreciation and amortization, and other costs not directly related to the future operations of the acquired property. MANAGEMENT'S 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. RENTAL INCOME - Rental income is recognized on a straight-line basis over the terms of the related leases. PROPERTY OPERATING EXPENSES - Property operating expenses consist primarily of utilities, insurance, repairs and maintenance, security and safety, cleaning and other administrative expenses. MANAGEMENT COSTS AND FEES - The property was managed by the previous owner and the amount recorded represents its direct personnel and other costs for managing the office buildings. 2. OPERATING LEASES Operating revenue is principally obtained from business tenant rentals under operating leases. Certain of the leases in force at December 31, 1996 included early termination provisions. Future minimum rentals under all operating leases (including those with early termination provisions) of business tenants as of December 31, 1996 are approximately as follows:
YEAR ENDING DECEMBER 31, AMOUNT ------------------------ ---------- 1997 $1,974,144 1998 1,829,013 1999 1,521,071 2000 1,121,185 2001 700,565 Thereafter 802,364 ---------- Total $7,948,342 ==========
For the year ended December 31, 1996, one tenant, Industria, Inc., contributed more than ten percent of rental revenues. 5 7 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Koger Equity, Inc. Jacksonville, Florida We have audited the accompanying statement of revenues and certain expenses of the properties known as the Atrium Building and the Pacific Plaza Building for the year ended December 31, 1996. This financial statement is the responsibility of management. Our responsibility is to express an opinion on the financial statement 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 statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and the 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. The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in the filing of Form 8-K of Koger Equity, Inc. as a result of the acquisition of these properties). Material amounts, described in Note 1 to the statement of revenues and certain expenses, that would not be comparable to those resulting from future operations of the acquired properties are excluded and the statement is not intended to be a complete presentation of the acquired properties' revenues and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of the Atrium Building and the Pacific Plaza Building for the year ended December 31, 1996 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Jacksonville, Florida November 6, 1997 6 8 ATRIUM BUILDING AND PACIFIC PLAZA BUILDING - SAN ANTONIO, TEXAS STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 1996 REVENUES: Rental income $2,191,678 Recoverable expenses 73,331 Other income 16,136 ---------- Total revenues 2,281,145 ---------- CERTAIN EXPENSES: Property operating 649,839 Real estate taxes 204,078 Management costs and fees 190,032 ---------- Total certain expenses 1,043,949 ---------- REVENUES IN EXCESS OF CERTAIN EXPENSES $1,237,196 ==========
See notes to statement of revenues and certain expenses. 7 9 ATRIUM BUILDING AND PACIFIC PLAZA BUILDING - SAN ANTONIO, TEXAS NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 1996 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Atrium Building and Pacific Plaza Building, office buildings located in San Antonio, Texas, were acquired by Koger Equity, Inc. on June 4, 1997. The statement of revenues and certain expenses includes information related to the operations of the Atrium Building and the Pacific Plaza Building for the period from January 1, 1996 through December 31, 1996 as recorded by the office buildings' previous affiliated owners, Westoak Properties, a California general partnership, and Southwest Properties, a California general partnership, respectively. The accompanying historical financial statement information is presented in conformity with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission. Accordingly, the financial statement is not representative of the actual operations for the year ended December 31, 1996 as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of the acquired property, have been excluded. Expenses excluded consist of interest, depreciation and amortization, and other costs not directly related to the future operations of the acquired property. MANAGEMENT'S 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. RENTAL INCOME - Rental income is recognized on a straight-line basis over the terms of the related leases. PROPERTY OPERATING EXPENSES - Property operating expenses consist primarily of utilities, insurance, repairs and maintenance, security and safety, cleaning and other administrative expenses. MANAGEMENT COSTS AND FEES - The property was managed by an affiliate of the previous owners for a property management fee of 4% of rental and other revenues plus reimbursement of personnel and other costs related to management of the office buildings. 2. OPERATING LEASES Operating revenue is principally obtained from business tenant rentals under operating leases. Certain of the leases in force at December 31, 1996 included early termination provisions. Future minimum rentals under all operating leases (including those with early termination provisions) of business tenants as of December 31, 1996 are approximately as follows:
YEAR ENDING DECEMBER 31, AMOUNT ------------------------ ---------- 1997 $2,410,475 1998 1,836,744 1999 1,161,293 2000 682,711 2001 343,996 Thereafter 449,781 ---------- Total $6,885,000 ==========
For the year ended December 31, 1996, one tenant, North American Intelecom, contributed more than ten percent of rental revenues. 8 10 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Koger Equity, Inc. Jacksonville, Florida We have audited the accompanying statement of revenues and certain expenses of the property known as the Ideon Building for the year ended December 31, 1996. This financial statement is the responsibility of management. Our responsibility is to express an opinion on the financial statement 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 statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and the 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. The accompanying statement of revenues was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in the filing of Form 8-K of Koger Equity, Inc. as a result of the acquisition of this property). Material amounts, described in Note 1 to the statement of revenues, that would not be comparable to those resulting from future operations of the acquired property are excluded and the statement is not intended to be a complete presentation of the acquired property's revenues. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of the Ideon Building for the year ended December 31, 1996 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Jacksonville, Florida November 6, 1997 9 11 IDEON BUILDING - JACKSONVILLE, FLORIDA STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 1996 REVENUES: Rental income $352,788 -------- CERTAIN EXPENSES: Property operating 0 Real estate taxes 0 Management fees 0 -------- Total certain expenses 0 -------- REVENUES IN EXCESS OF CERTAIN EXPENSES $352,788 ========
See notes to statement of revenues and certain expenses. 10 12 IDEON BUILDING - JACKSONVILLE, FLORIDA NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 1996 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Ideon Building, an office building located in Jacksonville, Florida, was acquired by Koger Equity, Inc. on June 18, 1997. The statement of revenues and certain expenses includes information related to the operations of the Ideon Building for the period from January 1, 1996 through December 31, 1996 as recorded by the office building's previous owner, Centurion Parkway Partners, Ltd. The accompanying historical financial statement information is presented in conformity with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission. Accordingly, the financial statement is not representative of the actual operations for the year ended December 31, 1996 as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of the acquired property, have been excluded. Expenses excluded consist of interest, depreciation and amortization, and other costs not directly related to the future operations of the acquired property. MANAGEMENT'S 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 revenues during the reporting period. Actual results could differ from those estimates. RENTAL INCOME - Rental income is recognized on a straight-line basis over the terms of the related lease. PROPERTY OPERATING AND MANAGEMENT EXPENSES AND REAL ESTATE TAXES - All property operating and management expenses and real estate taxes are paid directly by the lessee and are, therefore, not included in the accompanying financial statement. 2. OPERATING LEASE Operating revenue is principally obtained from business tenant rentals under an operating lease. Future minimum rentals under the operating lease of the business tenant as of December 31, 1996 are approximately as follows:
YEAR ENDING DECEMBER 31, AMOUNT ------------------------ ---------- 1997 $ 366,900 1998 380,944 1999 392,372 2000 404,143 2001 416,268 Thereafter 357,297 ---------- Total $2,317,924 ==========
11 13 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Koger Equity, Inc. Jacksonville, Florida We have audited the accompanying statement of revenues and certain expenses of the property known as the Alexander Building for the year ended December 31, 1996. This financial statement is the responsibility of management. Our responsibility is to express an opinion on the financial statement 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 statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and the 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. The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in the filing of Form 8-K of Koger Equity, Inc. as a result of the acquisition of this property). Material amounts, described in Note 1 to the statement of revenues and certain expenses, that would not be comparable to those resulting from future operations of the acquired property are excluded and the statement is not intended to be a complete presentation of the acquired property's revenues and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of the Alexander Building for the year ended December 31, 1996 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Jacksonville, Florida November 6, 1997 12 14 ALEXANDER BUILDING - TALLAHASSEE, FLORIDA STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 1996 REVENUES: Rental income $1,420,505 ---------- Total revenues 1,420,505 ---------- CERTAIN EXPENSES: Property operating 263,672 Real estate taxes 123,971 Management costs and fees 71,517 ---------- Total certain expenses 459,160 ---------- REVENUES IN EXCESS OF CERTAIN EXPENSES $ 961,345 ==========
See notes to statement of revenues and certain expenses. 13 15 ALEXANDER BUILDING - TALLAHASSEE, FLORIDA NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 1996 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Alexander Building, an office building located in Tallahassee, Florida, was acquired by Koger Equity, Inc. on August 4, 1997. The statement of revenues and certain expenses includes information related to the operations of The Alexander Building for the period from January 1, 1996 through December 31, 1996 as recorded by the office building's previous owner, The Alexander Group, Inc. The accompanying historical financial statement information is presented in conformity with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission. Accordingly, the financial statement is not representative of the actual operations for the year ended December 31, 1996 as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of the acquired property, have been excluded. Expenses excluded consist of interest, depreciation and amortization, and other costs not directly related to the future operations of the acquired property. MANAGEMENT'S 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. RENTAL INCOME - Rental income is recognized on a straight-line basis over the terms of the related leases. PROPERTY OPERATING EXPENSES - Property operating expenses consist primarily of utilities, insurance, repairs and maintenance, security and safety, cleaning and other administrative expenses. MANAGEMENT COSTS AND FEES - The property was managed by SouthGroup Management, Inc. for a property management fee of 5% of rental revenue. 2. OPERATING LEASES Operating revenue is principally obtained from business tenant rentals under operating leases. Certain of the leases in force at December 31, 1996 included early termination provisions. Future minimum rentals under all operating leases (including those with early termination provisions) of business tenants as of December 31, 1996 are approximately as follows:
YEAR ENDING DECEMBER 31, AMOUNT ------------------------ ---------- 1997 $1,441,883 1998 1,463,278 1999 1,484,673 2000 1,497,632 2001 782,391 ---------- Total $6,669,857 ==========
For the year ended December 31, 1996, all of the rental revenues of this building were from three leases with a department of the State of Florida. 14 16 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Koger Equity, Inc. Jacksonville, Florida We have audited the accompanying statement of revenues and certain expenses of the properties known as Coventry Park West Buildings A and B for the year ended December 31, 1996. This financial statement is the responsibility of management. Our responsibility is to express an opinion on the financial statement 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 statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and the 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. The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in the filing of Form 8-K of Koger Equity, Inc. as a result of the acquisition of these properties). Material amounts, described in Note 1 to the statement of revenues and certain expenses, that would not be comparable to those resulting from future operations of the acquired properties are excluded and the statement is not intended to be a complete presentation of the acquired properties' revenues and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of Coventry Park West Buildings A and B for the year ended December 31, 1996 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Jacksonville, Florida November 6, 1997 15 17 COVENTRY PARK WEST BUILDINGS A AND B - EL PASO, TEXAS STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 1996 REVENUES: Rental income $631,971 Recoverable expenses 19,815 -------- Total revenues 651,786 -------- CERTAIN EXPENSES: Property operating 263,319 Real estate taxes 66,678 Management costs and fees 33,624 -------- Total certain expenses 363,621 -------- REVENUES IN EXCESS OF CERTAIN EXPENSES $288,165 ========
See notes to statement of revenues and certain expenses. 16 18 COVENTRY PARK WEST BUILDINGS A AND B - EL PASO, TEXAS NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 1996 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Coventry Park West Buildings A and B, office buildings located in El Paso, Texas, were acquired by Koger Equity, Inc. on September 23, 1997. The statement of revenues and certain expenses includes information related to the operations of Coventry Park West Buildings A and B for the period from January 1, 1996 through December 31, 1996 as recorded by the office buildings' previous owner, CK Properties, L.C. The accompanying historical financial statement information is presented in conformity with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission. Accordingly, the financial statement is not representative of the actual operations for the year ended December 31, 1996 as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of the acquired property, have been excluded. Expenses excluded consist of interest, depreciation and amortization, and other costs not directly related to the future operations of the acquired property. MANAGEMENT'S 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. RENTAL INCOME - Rental income is recognized on a straight-line basis over the terms of the related leases. PROPERTY OPERATING EXPENSES - Property operating expenses consist primarily of utilities, insurance, repairs and maintenance, security and safety, cleaning and other administrative expenses. MANAGEMENT COSTS AND FEES - The properties were managed by Leavell & Roberts, Inc. for a property management fee of 5% of rental revenues plus reimbursement of other costs related to management of the office buildings. 2. OPERATING LEASES Operating revenue is principally obtained from business tenant rentals under operating leases. Certain of the leases in force at December 31, 1996 included early termination provisions. Future minimum rentals under all operating leases (including those with early termination provisions) of business tenants as of December 31, 1996 are approximately as follows:
YEAR ENDING DECEMBER 31, AMOUNT ------------------------ ---------- 1997 $ 726,883 1998 623,621 1999 282,709 2000 220,329 2001 212,985 Thereafter 49,661 ---------- Total $2,116,188 ==========
For the year ended December 31, 1996, two tenants, Hunt Building Corporation and Southwestern Bell Yellow Pages, each contributed more than ten percent of rental revenues. 17 19 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Koger Equity, Inc. Jacksonville, Florida We have audited the accompanying statement of revenues and certain expenses of the property known as the Lincoln Parkway Building for the year ended December 31, 1996. This financial statement is the responsibility of management. Our responsibility is to express an opinion on the financial statement 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 statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and the 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. The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in the filing of Form 8-K of Koger Equity, Inc. as a result of the acquisition of this property). Material amounts, described in Note 1 to the statement of revenues and certain expenses, that would not be comparable to those resulting from future operations of the acquired property are excluded and the statement is not intended to be a complete presentation of the acquired property's revenues and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of the Lincoln Parkway Building for the year ended December 31, 1996 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Jacksonville, Florida November 6, 1997 18 20 LINCOLN PARKWAY BUILDING - ATLANTA, GEORGIA STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 1996 REVENUES: Rental income $2,679,852 Recoverable expenses 285,524 Other income 213,591 ---------- Total revenues 3,178,967 ---------- CERTAIN EXPENSES: Property operating 826,009 Real estate taxes 277,465 Management costs and fees 238,613 ---------- Total certain expenses 1,342,087 ---------- REVENUES IN EXCESS OF CERTAIN EXPENSES $1,836,880 ==========
See notes to statement of revenues and certain expenses. 19 21 LINCOLN PARKWAY BUILDING - ATLANTA, GEORGIA NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 1996 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Lincoln Parkway Building, an office building located in Atlanta, Georgia, was acquired by Koger Equity, Inc. on October 1, 1997. The statement of revenues and certain expenses includes information related to the operations of the Lincoln Parkway Building for the period from January 1, 1996 through December 31, 1996 as recorded by the office building's previous owner, California Public Employees' Retirement System. The accompanying historical financial statement information is presented in conformity with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission. Accordingly, the financial statement is not representative of the actual operations for the year ended December 31, 1996 as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of the acquired property, have been excluded. Expenses excluded consist of interest, depreciation and amortization, and other costs not directly related to the future operations of the acquired property. MANAGEMENT'S 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. RENTAL INCOME - Rental income is recognized on a straight-line basis over the terms of the related leases. PROPERTY OPERATING EXPENSES - Property operating expenses consist primarily of utilities, insurance, repairs and maintenance, security and safety, cleaning and other administrative expenses. MANAGEMENT COSTS AND FEES - The property was managed by La Salle Partners for a property management fee of 2.5% of rental revenues plus reimbursement of personnel and other costs related to management of the office building . 2. OPERATING LEASES Operating revenue is principally obtained from business tenant rentals under operating leases. Certain of the leases in force at December 31, 1996 included early termination provisions. Future minimum rentals under all operating leases (including those with early termination provisions) of business tenants as of December 31, 1996 are approximately as follows:
YEAR ENDING DECEMBER 31, AMOUNT ------------------------ ---------- 1997 $2,721,892 1998 2,348,307 1999 904,645 2000 561,723 2001 30,336 Thereafter 7,499 ---------- Total $6,574,402 ==========
During the year ended December 31, 1996, two tenants, Hanover Insurance and Ford Motor Company, each contributed more than ten percent of rental revenues. 20 22 (b) Pro Forma Financial Statements. The following unaudited pro forma financial statements set forth (i) the pro forma balance sheet as of September 30, 1997, as if the acquisition of an office building occurred on September 30, 1997, and (ii) the pro forma statements of operations for the year ended December 31, 1996 and the nine months ended September 30, 1997, as if the 1997 Acquisitions occurred on January 1, 1996. The pro forma financial statements are based upon assumptions contained in the notes thereto and should be read in conjunction with such notes. The following unaudited pro forma financial statements may not necessarily reflect the results of operations or financial position of the Company which would have actually resulted had the 1997 Acquisitions occurred as of the date and for the periods indicated, nor should they be taken as indicative of the future results of operations or the future financial position of the Company. Differences would result from various factors, including changes in the amounts of rents received and rental expenses paid in connection with operating the office buildings acquired and changes in the interest rates assumed on the Company's secured revolving credit facility. 21 23 KOGER EQUITY, INC. UNAUDITED PRO FORMA BALANCE SHEET SEPTEMBER 30, 1997 (IN THOUSANDS)
HISTORICAL PRO FORMA PRO FORMA 9/30/97 ADJUSTMENTS 9/30/97 ---------- ----------- ---------- ASSETS Operating properties: Real estate $639,595 $21,172 (a) $660,767 Furniture and equipment 2,042 99 (a) 2,141 Accumulated depreciation (98,395) (98,395) -------- ------- -------- Operating properties - net 543,242 21,271 564,513 Properties under construction 17,200 17,200 Undeveloped land held for investment 15,327 15,327 Undeveloped land held for sale 1,512 1,512 Cash and temporary investments 9,293 (2,915) (a) 6,378 Accounts receivable, net 4,961 4,961 Investment in Koger Realty Services, Inc. 384 384 Cost in excess of fair value of net assets acquired - net 1,912 1,912 Other assets 11,488 (286) (a) 11,202 -------- ------- -------- TOTAL ASSETS $605,319 $18,070 $623,389 ======== ======= ======== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Mortgages and loans payable $202,091 $18,000 (a) $220,091 Accounts payable 3,011 3,011 Accrued real estate taxes payable 6,859 56 (a) 6,915 Accrued liabilities - other 5,025 5,025 Dividends payable 3,283 3,283 Advance rents and security deposits 4,526 14 (a) 4,540 -------- ------- -------- Total Liabilities 224,795 18,070 242,865 -------- ------- -------- Shareholders' Equity Common stock 249 249 Capital in excess of par value 374,988 374,988 Retained earnings 33,745 33,745 Treasury stock, at cost (28,458) (28,458) -------- ------- -------- Total Shareholders' Equity 380,524 380,524 -------- ------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $605,319 $18,070 $623,389 ======== ======= ========
See accompanying notes to unaudited pro forma financial statements. 22 24 KOGER EQUITY, INC. PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
HISTORICAL PRO FORMA PRO FORMA 1996 ADJUSTMENTS 1996 ---------- ----------- --------- REVENUES Rental and other rental services $ 98,805 $ 9,856 (a) $108,661 Management fees 2,682 2,682 Interest 1,951 (1,225) (b) 726 Income from Koger Realty Services, Inc. 342 342 Gain on TKPL note to Southeast 292 292 -------- -------- -------- Total revenues 104,072 8,631 112,703 -------- -------- -------- EXPENSES Property operations 41,597 3,632 (a) 45,229 Depreciation and amortization 21,127 1,827 (c) 22,954 Mortgage and loan interest 18,701 3,138 (d) 21,839 General and administrative 6,623 6,623 Direct cost of management fees 1,884 1,884 Undeveloped land costs 517 12 (e) 529 Litigation costs 424 424 Loss on sale or disposition of assets 497 497 -------- -------- -------- Total expenses 91,370 8,609 99,979 -------- -------- -------- INCOME BEFORE INCOME TAXES 12,702 22 12,724 Income taxes 815 815 -------- -------- -------- INCOME BEFORE EXTRAORDINARY ITEM $ 11,887 $ 22 $ 11,909 ======== ======== -======= EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT SHARE BEFORE EXTRAORDINARY ITEM: Primary $ 0.61 $ 0.61 ======== ======== Fully Diluted $ 0.61 $ 0.61 ======== ======== WEIGHTED AVERAGE COMMON SHARES AND COMMON EQUIVALENT SHARES OUTSTANDING: Primary 19,500 19,500 ======== ======== Fully Diluted 19,576 19,576 ======== ========
See accompanying notes to unaudited pro forma financial statements. 23 25 KOGER EQUITY, INC. PRO FORMA STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN THOUSANDS)
HISTORICAL PRO FORMA PRO FORMA 9/30/97 ADJUSTMENTS 9/30/97 ---------- ----------- --------- REVENUES Rental and other rental services $80,250 $5,446 (a) $85,696 Management fees 2,209 2,209 Interest 1,084 (727) (b) 357 Income from Koger Realty Services, Inc. 489 489 Reduction in gain on TKPL note to Southeast (9) (9) ------- ------ ------- Total revenues 84,023 4,719 88,742 ------- ------ ------- EXPENSES Property operations 32,824 2,147 (a) 34,971 Depreciation and amortization 17,238 897 (c) 18,135 Mortgage and loan interest 12,264 1,729 (d) 13,993 General and administrative 4,256 4,256 Direct cost of management fees 1,553 1,553 Undeveloped land costs 341 6 (e) 347 Loss on early retirement of debt 144 144 Provision for loss on land held for sale (379) (379) ------- ------ ------- Total expenses 68,241 4,779 73,020 ------- ------ ------- INCOME BEFORE GAIN ON SALE OR DISPOSITION OF ASSETS 15,782 (60) 15,722 Gain on sale or disposition of assets 2,057 2,057 ------- ------ ------- INCOME BEFORE INCOME TAXES 17,839 (60) 17,779 Income taxes 189 189 ------- ------ ------- NET INCOME $17,650 $ (60) $17,590 ======= ====== ======= EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT SHARE: Primary $ 0.79 $ 0.79 ======= ======= Fully Diluted $ 0.79 $ 0.79 ======= ======= WEIGHTED AVERAGE COMMON SHARES AND COMMON EQUIVALENT SHARES OUTSTANDING: Primary 22,251 22,251 ======= ======= Fully Diluted 22,319 22,319 ======= =======
See accompanying notes to unaudited pro forma financial statements. 24 26 KOGER EQUITY, INC. NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION During the period from May 15, 1997 through October 1, 1997, the Company consummated the 1997 Acquisitions. These acquisitions were funded from working capital and by drawing $26 million under the Company's secured revolving credit facility. It is the intent of the Company's management to operate the ten office buildings acquired in a manner similar to the Company's existing office building portfolio. It is currently management's intent that the undeveloped land acquired, pursuant to these acquisitions, will be held as an investment for future development. 2. UNAUDITED PRO FORMA BALANCE SHEET The unaudited pro forma balance sheet as of September 30, 1997 is based on the historical balance sheet for the Company presented in the Quarterly Report on Form 10-Q for the period ended September 30, 1997. The unaudited pro forma balance sheet includes adjustments assuming the acquisition of an office building occurred as of September 30, 1997. Significant pro forma adjustments in the unaudited pro forma balance sheet include the following: (a) The Company acquired an office building in Atlanta, Georgia for $21,172,000 and related furniture and equipment which totaled $99,000. This purchase was partially funded with an $18,000,000 draw on the Company's secured revolving credit facility. 3. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 The unaudited pro forma statement of operations for the year ended December 31, 1996 is based on the historical statement of operations for the Company presented in the Annual Report on Form 10-K for the year ended December 31, 1996. The unaudited pro forma statement of operations includes adjustments assuming that the 1997 Acquisitions occurred as of January 1, 1996. Significant pro forma adjustments in the unaudited pro forma statement of operations include the following: (a) Adjustment required for the historical rental revenues and operating expenses for the ten office buildings acquired. Operating expenses do not include historical management costs and fees for those office buildings which the Company plans to manage with existing staff. (b) Adjustment required to reduce interest revenues based upon assumption that $25,000,000 of cash would have been used to purchase the 1997 Acquisitions on January 1, 1996. The average interest rate on temporary cash investments was estimated to be 4.9 percent. (c) Adjustment required to reflect depreciation ($1,472,000) on the office buildings and furniture and equipment acquired, based on the total cost of the 1997 Acquisitions. The Company uses the straight-line method for depreciation and amortization using an estimated life of 39 years for buildings and five to seven years for furniture and equipment. Also, an adjustment required to reflect amortization expense ($355,000) related to deferred financing costs for the secured revolving credit facility. 25 27 (d) Adjustment required to reflect interest expense related to the assumed amount drawn on the secured revolving credit facility ($42,111,000) to fund the 1997 Acquisitions. The estimated average interest rate on the secured revolving credit facility was 7.45 percent. (e) Adjustment required to reflect real estate taxes on the two parcels of unimproved land purchased as part of the 1997 Acquisitions. 4. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 The unaudited pro forma statement of operations for the nine months ended September 30, 1997 is based on the historical statement of operations for the Company presented in the Quarterly Report on Form 10-Q for the period ended September 30, 1997. The unaudited pro forma statement of operations includes adjustments assuming that the 1997 Acquisitions occurred as of January 1, 1996. Significant pro forma adjustments in the unaudited pro forma statement of operations for the nine months ended September 30, 1997 include the following: (a) Adjustment required for the rental revenues and operating expenses for the ten office buildings for the period prior to their acquisition. These amounts were estimated based on historical information available for portions of these periods. Operating expenses do not include management costs and fees for those office buildings which the Company plans to manage with existing staff. (b) Adjustment required to reduce interest revenues based upon assumption that $35,000,000 of cash would have been used to purchase the 1997 Acquisitions on January 1, 1996. The average interest rate on temporary cash investments was estimated to be 5.0 percent. (c) Adjustment required to reflect depreciation ($799,000) on the office buildings and furniture and equipment acquired, based on the total cost of the assets acquired. The Company uses the straight-line method for depreciation and amortization using an estimated life of 39 years for buildings and five to seven years for furniture and equipment. Also, an adjustment required to reflect additional amortization expense ($98,000) related to deferred financing costs for the secured revolving credit facility. (d) Adjustment required to reflect additional interest expense related to the assumed amount drawn on the secured revolving credit facility ($32,111,000) to fund the 1997 Acquisitions. The estimated average interest rate on the secured revolving credit facility was 7.60 percent. (e) Adjustment required to reflect real estate taxes on the two parcels of unimproved land acquired as part of the 1997 Acquisitions for the period prior to acquisition. 26 28 KOGER EQUITY, INC. UNAUDITED STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS AND ESTIMATED CASH TO BE MADE AVAILABLE BY OPERATIONS OF KOGER EQUITY, INC. FOR THE TWELVE MONTH PERIOD ENDED DECEMBER 31, 1996 (IN THOUSANDS) REVENUES Rental and other rental services $108,960 Management fees 2,682 Interest 726 Dividends received from Koger Realty Services, Inc. 490 Gain on TKPL note to Southeast 292 --------- Total revenues 113,150 --------- EXPENSES Property operations 44,938 Depreciation and amortization 19,027 Mortgage and loan interest 21,839 General and administrative 6,190 Direct cost of management fees 1,813 Other 953 Compensation - exercise of stock options 742 --------- Total expenses 95,502 --------- Estimated Taxable Operating Income 17,648 Add Back: Depreciation and Amortization 19,027 --------- Estimated Cash To Be Made Available By Operations $ 36,675 =========
Note 1: This statement of estimated taxable operating results and estimated cash to be made available by operations is an estimate of operating results of the Company for the twelve month period ended December 31, 1996 assuming that the 1997 Acquisitions occurred on the first day of the twelve month period. However, this statement does not purport to reflect actual results for any period. Note 2: Tax depreciation was determined based upon the actual tax depreciation for the Company's existing portfolio and based upon the assumption that the 1997 Acquisitions occurred on the first day of the twelve month period. 27 29 (c) Exhibits.
Exhibit Number Description -------------- ----------- 23 Consent of Deloitte and Touche LLP
28 30 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KOGER EQUITY, INC. Dated: November 18, 1997 By: JAMES L. STEPHENS -------------------------------- James L. Stephens Title: Vice President and Chief Accounting Officer 29 EX-23 2 CONSENT OF DELOITTE AND TOUCHE LLP 1 Exhibit 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 33-55179 of Koger Equity, Inc. on Form S-3, Registration Statement No. 33-54617 of Koger Equity , Inc. on Form S-8, Registration Statement No. 333-20975 of Koger Equity, Inc. on Form S-3 and Registration Statement No. 333-23429 of Koger Equity, Inc. on Form S-8 of our reports dated November 6, 1997, on the statement of revenues and certain expenses of Greenville Park Central, the Atrium Building and Pacific Plaza Building, the Ideon Building, the Alexander Building, the Coventry Park West Buildings A and B and the Lincoln Parkway Building for the year ended December 31, 1996 appearing in this Current Report on Form 8-K of Koger Equity, Inc., dated October 1, 1997. DELOITTE & TOUCHE LLP Jacksonville, Florida November 18, 1997 30 -----END PRIVACY-ENHANCED MESSAGE-----