-----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, NRFYBm3jtYodwJEweJAGaBjZeP2AviB8rRQJGDBLwRs7J6WTUaURcDNYZOOTZ5EP ofh5MCw/CZsnXSe3oF2wGg== 0000950144-98-003299.txt : 19980327 0000950144-98-003299.hdr.sgml : 19980327 ACCESSION NUMBER: 0000950144-98-003299 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980323 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980326 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: 98574530 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. 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) MARCH 23, 1998 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. On March 23, 1998, the due diligence period ended and Koger Equity, Inc. (the "Company") agreed to purchase (i) four office buildings containing approximately 318,000 gross square feet, (ii) a retail development consisting of seven buildings containing approximately 112,600 gross square feet and (iii) 22 acres of developable land (the "Colonnade Acquisition"). These properties will be acquired for approximately $58.4 million on or about March 31, 1998 and are located in Birmingham, Alabama. The funds required for this acquisition will be drawn from the Company's secured revolving credit facility. The Company considered various factors in determining the price to be paid for this acquisition. 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 properties 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 into the Company's existing operations. No separate independent appraisals were obtained in connection with this acquisition. The Company, after investigation, 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. The Company is currently engaged in negotiations for the acquisition of a property which would be made by a newly formed so-called "downREIT" limited partnership with the Company as general partner. This property includes an approximately 51-acre office park with buildings containing in excess of 530,000 square feet and additional property which will accommodate approximately 160,000 feet of office development. The purchase price of $53.8 million is payable by assumption of approximately $22.5 million of debt and under certain circumstances either (i) issuance of downREIT limited partnership units having a minimum value of approximately $17.5 million up to a maximum value of $23.3 million with the balance in cash, or (ii) in the alternative this acquisition may be accomplished by cash and assumption of debt. The partnership units would be convertible into a minimum of approximately 762,000 shares and a maximum of approximately 1,015,000 shares of the Company's Common Stock (or at the option of the Company such units may be redeemed for cash). No binding purchase agreement has been signed at this time, and there can be no assurance that this proposed acquisition will be consummated. Based on information supplied to the Company by the current owner, the rentals revenues and operating expenses (excluding management costs) of these properties for the twelve months ended December 31, 1997 were approximately $7.1 million and $2.4 million, respectively. David B. Hiley, a Director of the Company since 1993 and Chairman of the Finance/Investment Committee of the Company's Board of Directors is joining the Company as its Executive Vice President and Chief Financial Officer effective April 1, 1998. Mr. Hiley has had an extensive career in financial management, currently serving as a full-time consultant to Nortek, Inc., in Providence, Rhode Island. He formerly was Managing Director of Berkshire Capital Corporation; a Director and former Senior Executive Vice President and head of investment banking for Thomson McKinnon Securities, Inc.; and a Director of Newcity Communications, Inc. prior to its recent sale. Mr. Hiley is a graduate of Dartmouth College and received his M.B.A. degree from the Amos Tuck School; he is 59 years old. 1 3 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. Statement of Revenues and Certain Expenses of Birmingham Colonnade for the year ended December 31, 1997. 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 Birmingham Colonnade for the year ended December 31, 1997. 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 Birmingham Colonnade for the year ended December 31, 1997 in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Jacksonville, Florida March 19, 1998 3 5 BIRMINGHAM COLONNADE - BIRMINGHAM, ALABAMA STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 1997 REVENUES: Rental income $5,376,674 Recoverable expenses 2,089,307 Other income 88,208 ---------- Total revenues 7,554,189 ---------- CERTAIN EXPENSES: Property operating 2,259,761 Real estate taxes 331,756 Management costs and fees 479,355 ---------- Total certain expenses 3,070,872 ---------- REVENUES IN EXCESS OF CERTAIN EXPENSES $4,483,317 ==========
See notes to statement of revenues and certain expenses. 4 6 BIRMINGHAM COLONNADE - BIRMINGHAM, ALABAMA NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 1997 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Birmingham Colonnade, an office and retail development located in Birmingham, Alabama, will be acquired by Koger Equity, Inc. on or about March 31, 1998. The statement of revenues and certain expenses includes information related to the operations of Birmingham Colonnade for the period from January 1, 1997 through December 31, 1997 as recorded by the properties' previous owner, CSL Colonnade Associates, a Georgia joint venture. 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, 1997 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 3% of rental and other revenues plus reimbursement of personnel and other costs related to management of the properties. 2. OPERATING LEASES Operating revenue is principally obtained from business tenant rentals under operating leases. Certain of the leases in force at December 31, 1997 included early termination provisions. Future minimum rentals under all operating leases (including those with early termination provisions) of business tenants as of December 31, 1997 are as follows:
YEAR ENDING DECEMBER 31, AMOUNT - ------------------------ ------ 1998 $ 4,867,339 1999 4,460,724 2000 3,716,213 2001 3,023,805 2002 2,634,121 Thereafter 4,607,129 ----------- Total $23,309,331 ===========
For the year ended December 31, 1997, one tenant, UHC Management, contributed more than ten percent of rental revenues. 5 7 (b) Pro Forma Financial Statements The following unaudited pro forma financial statements set forth (i) the pro forma balance sheet as of December 31, 1997, as if the acquisition occurred on December 31, 1997, and (ii) the pro forma statement of operations for the year ended December 31, 1997, as if the acquisition occurred on January 1, 1997. 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 acquisition 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. 6 8 KOGER EQUITY, INC. UNAUDITED PRO FORMA BALANCE SHEET DECEMBER 31, 1997 (IN THOUSANDS)
HISTORICAL PRO FORMA PRO FORMA 12/31/97 ADJUSTMENTS 12/31/97 ---------- ----------- --------- ASSETS Operating properties: Real estate $679,029 $51,256 (a) $730,285 Furniture and equipment 2,220 2,220 Accumulated depreciation (104,700) (104,700) -------- ------- -------- Operating properties - net 576,549 51,256 627,805 Properties under construction 27,586 27,586 Undeveloped land held for investment 13,249 7,100 (a) 20,349 Undeveloped land held for sale 1,512 1,512 Cash and temporary investments 16,955 16,955 Accounts receivable, net 5,646 5,646 Investment in Koger Realty Services, Inc. 472 472 Cost in excess of fair value of net assets acquired - net 1,870 1,870 Other assets 12,258 12,258 -------- ------- -------- TOTAL ASSETS $656,097 $58,356 $714,453 ======== ======= ======== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Mortgages and loans payable $181,963 $58,356 (a) $240,319 Accounts payable 8,802 8,802 Accrued real estate taxes payable 3,294 3,294 Accrued liabilities - other 6,623 6,623 Dividends payable 6,352 6,352 Advance rents and security deposits 4,801 4,801 -------- ------- -------- Total Liabilities 211,835 58,356 270,191 -------- ------- -------- Shareholders' Equity Common stock 284 284 Capital in excess of par value 441,451 441,451 Retained earnings 30,947 30,947 Treasury stock, at cost (28,420) (28,420) -------- ------- -------- Total Shareholders' Equity 444,262 444,262 -------- ------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $656,097 $58,356 $714,453 ======== ======= ========
See accompanying notes to unaudited pro forma financial statements. 7 9 KOGER EQUITY, INC. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (IN THOUSANDS)
HISTORICAL PRO FORMA PRO FORMA 1997 ADJUSTMENTS 1997 ---------- ----------- --------- REVENUES Rental and other rental services $ 109,501 $ 7,553 (a) $117,054 Management fees 2,637 2,637 Interest 1,274 1,274 Income from Koger Realty Services, Inc. 577 577 --------- ------- -------- Total revenues 113,989 7,553 121,542 --------- ------- -------- EXPENSES Property operations 44,453 2,894 (a) 47,347 Depreciation and amortization 24,073 1,238 (b) 25,311 Mortgage and loan interest 16,517 4,170 (c) 20,687 General and administrative 6,374 6,374 Direct cost of management fees 1,896 1,896 Undeveloped land costs 413 7 (d) 420 Recovery of loss on land held for sale (379) (379) --------- ------- -------- Total expenses 93,347 8,309 101,656 --------- ------- -------- INCOME BEFORE GAIN ON SALE OR DISPOSITION OF ASSETS 20,642 (756) 19,886 Gain on sale or disposition of assets 1,955 1,955 --------- ------- -------- INCOME BEFORE INCOME TAXES 22,597 (756) 21,841 Income taxes 935 (151) 784 --------- ------- -------- INCOME BEFORE EXTRAORDINARY ITEM $ 21,662 $ (605) $ 21,057 ========= ======= ======== EARNINGS PER COMMON SHARE AND COMMON EQUIVALENT SHARE BEFORE EXTRAORDINARY ITEM: Basic $ 1.01 $ 0.99 ========= ======== Diluted $ 0.96 $ 0.94 ========= ======== WEIGHTED AVERAGE COMMON SHARES AND COMMON EQUIVALENT SHARES OUTSTANDING: Basic 21,374 21,374 ========= ======== Diluted 22,495 22,495 ========= ========
See accompanying notes to unaudited pro forma financial statements. 8 10 KOGER EQUITY, INC. NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION On or about March 31, 1998, the Company will consummate the Colonnade Acquisition. This acquisition will be funded by drawing approximately $58.4 million under the Company's secured revolving credit facility. It is the intent of the Company's management to operate the 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 this acquisition, will be held as an investment for future development. 2. UNAUDITED PRO FORMA BALANCE SHEET The unaudited pro forma balance sheet as of December 31, 1997 is based on the historical balance sheet for the Company presented in the Annual Report on Form 10-K for the period ended December 31, 1997. The unaudited pro forma balance sheet includes adjustments assuming this acquisition occurred as of December 31, 1997. Significant pro forma adjustments in the unaudited pro forma balance sheet include the following: (a) The Company will purchase the Colonnade Acquisition, which properties are located in Birmingham, Alabama, for approximately $58,356,000. This purchase will be funded with a $58,356,000 draw on the Company's secured revolving credit facility. 3. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 The unaudited pro forma statement of operations for the year ended December 31, 1997 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, 1997. The unaudited pro forma statement of operations includes adjustments assuming that the Colonnade Acquisition occurred as of January 1, 1997. 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 properties acquired. Operating expenses include management costs and fees calculated using an estimated management fee rate of 4% of total rental revenues of the properties. (b) Adjustment required to reflect depreciation ($1,030,000) on the properties acquired, based on the total cost of the Colonnade Acquisition. The Company uses the straight-line method for depreciation and amortization using an estimated life of 39 years for buildings. Also, an adjustment required to reflect amortization expense ($208,000) related to deferred financing costs for the secured revolving credit facility. (c) Adjustment required to reflect interest expense related to the assumed amount drawn on the secured revolving credit facility ($58,356,000) to fund the Colonnade Acquisition. The estimated average interest rate on the secured revolving credit facility was 7.145 percent. (d) Adjustment required to reflect real estate taxes on the unimproved land purchased as part of the Colonnade Acquisition. 9 11 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, 1997 (IN THOUSANDS) REVENUES Rental and other rental services $117,074 Management fees 2,637 Interest 1,274 Dividends received from Koger Realty Services, Inc. 364 -------- Total revenues 121,349 -------- EXPENSES Property operations 47,450 Depreciation and amortization 20,705 Mortgage and loan interest 20,687 General and administrative 6,106 Direct cost of management fees 1,866 Other 420 Compensation - exercise of stock options 3,852 -------- Total expenses 101,086 -------- Estimated Taxable Operating Income 20,263 Add Back: Depreciation and Amortization 20,705 -------- Estimated Cash To Be Made Available By Operations $ 40,968 ========
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, 1997 assuming that the Colonnade Acquisition 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 Colonnade Acquisition occurred on the first day of the twelve month period. 10 12 (c) Exhibits.
Exhibit Number Description -------------- ----------- 23 Consent of Deloitte and Touche LLP
11 13 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: March 26, 1998 By: JAMES L. STEPHENS ------------------------------- James L. Stephens Title: Vice President and Chief Accounting Officer 12 EX-23 2 CONSENT OF DELOITTE & TOUCHE 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, Registration Statement No. 333-23429 of Koger Equity, Inc. on Form S-8 and Registration Statement No. 333-37919 of Koger Equity, Inc. on Form S-3 of our report dated March 19, 1998, on the statement of revenues and certain expenses of Birmingham Colonnade for the year ended December 31, 1997 appearing in this Current Report on Form 8-K of Koger Equity, Inc., dated March 23, 1998. DELOITTE & TOUCHE LLP Jacksonville, Florida March 26, 1998 13 -----END PRIVACY-ENHANCED MESSAGE-----