-----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, EiovxTGcNmWq7a5bHzwI1n1207+ZAtfY2+2bhXbUDYsat4+8RfPVCZcQefBNRq0m KP3vaQhF8a0n6mV+ypfTOQ== 0001157523-04-000035.txt : 20040106 0001157523-04-000035.hdr.sgml : 20040106 20040106172745 ACCESSION NUMBER: 0001157523-04-000035 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20040106 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040106 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: 1934 Act SEC FILE NUMBER: 001-09997 FILM NUMBER: 04511071 BUSINESS ADDRESS: STREET 1: 8880 FREEDOM CROSSING TRAIL CITY: JACKSONVILLE STATE: FL ZIP: 32256 BUSINESS PHONE: 9047321000 MAIL ADDRESS: STREET 1: 8880 FREEDOM CROSSING TRAIL CITY: JACKSONVILLE STATE: FL ZIP: 32256 8-K 1 a4544013.txt KOGER EQUITY 8-K UNITED STATES 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): January 6, 2004 --------------- - -------------------------------------------------------------------------------- KOGER EQUITY, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) FLORIDA - -------------------------------------------------------------------------------- (State or other jurisdiction of incorporation) 1-9997 59-2898045 - -------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 225 NE Mizner Boulevard, Suite 200 Boca Raton, Florida 33432 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (561) 395-9666 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) N/A - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Item 2. Acquisition or Disposition of Assets. On January 6, 2004, the Company entered into a definitive purchase and sale agreement to acquire the Atlantic Center Plaza ("ACP") in Atlanta, Georgia for approximately $116.5 million and closing costs. ACP is a 23-floor office building containing approximately 502,000 square feet of rentable space that was constructed in 2001. ACP is immediately adjacent to Interstate 75, located at the intersection of West Peachtree Street and Fourteenth Street in the Midtown submarket. In connection with the transaction, the Company will assume an $86.0 million note payable that is secured by the property. In addition, it is estimated that approximately $32.8 million of the funds required for this transaction will be drawn from proceeds from the Company's recently announced common stock offering. ACP will be acquired from Atlantic Center Plaza, LLC, an unrelated third party. The Company considered various factors in determining the price to be paid for this acquisition. Factors considered included the nature of the tenants and terms of leases in place, opportunities for alternative and new tenancies, historical and expected cash flows, occupancy rates, current operating costs on ACP and anticipated changes therein under Company ownership, the physical condition and location of ACP, the need for capital improvements, the anticipated effect on the Company's financial results, and other factors. The Company took into consideration capitalization rates at which it believed other comparable properties had recently sold. However, the Company determined the price it was willing to pay primarily on the factors discussed above relating to ACP itself and its fit into the Company's existing operations. No separate independent appraisal was 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 intends to lease office space in ACP to tenants as it does the other office buildings contained in its portfolio. ACP will be managed and leased by a third party management company. 1 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 ACP for the year ended December 31, 2002. (b) Pro Forma Financial Statements The following unaudited pro forma financial statements set forth (i) the pro forma balance sheet as of September 30, 2003, as if the acquisition occurred on September 30, 2003, (ii) the pro forma statement of operations for the year ended December 31, 2002, as if the acquisition occurred on January 1, 2002, and (iii) the pro forma statement of operations for the nine months ended September 30, 2003, as if the acquisition occurred on January 1, 2003. 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 but not limited to changes in ACP's occupancy, rental rates and rental expenses. 2 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Koger Equity, Inc. Boca Raton, Florida: We have audited the accompanying statement of revenues and certain expenses of Atlantic Center Plaza ("ACP") for the year ended December 31, 2002. This financial statement is the responsibility of ACP's former management. Our responsibility is to express an opinion on the financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 a Form 8-K of Koger Equity, Inc. dated January 6, 2004 as a result of the acquisition of ACP). 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 ACP are excluded and, accordingly, the statement is not intended to be a complete presentation of ACP'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 ACP for the year ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Certified Public Accountants West Palm Beach, Florida January 6, 2004 3 ATLANTIC CENTER PLAZA STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 2002 REVENUES: Base rental income $ 7,079,672 Operating expense recovery 130,102 Parking, antennae, and other income 215,749 ------------- Total revenues 7,425,523 ------------- CERTAIN EXPENSES: Properties operating 1,672,096 Real estate and other taxes 925,306 Management costs and fees 290,727 ------------- Total certain expenses 2,888,129 ------------- ------------- REVENUES IN EXCESS OF CERTAIN EXPENSES $ 4,537,394 ============= See notes to statement of revenues and certain expenses. 4 ATLANTIC CENTER PLAZA NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 2002 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Atlantic Center Plaza ("ACP"), a 23-floor office building containing approximately 502,000 square feet of rentable space and located in Atlanta, Georgia, will be acquired from Atlantic Center Plaza, LLC, an unrelated third party, in January, 2004. The statement of revenues and certain expenses includes information related to the operations of ACP for the year ended December 31, 2002 as recorded by ACP's previous owners, subject to the adjustments described below. 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, 2002 as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of ACP, have been excluded. Expenses excluded consist of interest, depreciation and amortization, and other costs not directly related to the future operations of ACP. Management's Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Properties Operating Expenses - Properties operating expenses consist primarily of utilities, insurance, repairs and maintenance, security and safety, cleaning, bad debts and other administrative expenses. Management Costs and Fees - At the date of acquisition, ACP was being managed by a third party manager for a management fee of approximately three percent of rental and other revenues plus reimbursement of personnel and other costs related to management of ACP. 5 ATLANTIC CENTER PLAZA NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 2002 2. OPERATING LEASES Operating revenue is principally obtained from business tenant rentals under operating leases. Future minimum base rental income under all tenant operating leases as of December 31, 2002 are as follows: Year ending December 31, Amount ------------------------ ------------ 2003 $ 9,692,675 2004 11,051,225 2005 11,822,370 2006 11,670,803 2007 11,305,484 Thereafter 62,699,354 ------------ Total $118,241,911 ============ For the year ended December 31, 2002, a law firm known as Alston & Bird contributed approximately 59% of ACP's base rental income. 6
KOGER EQUITY, INC. UNAUDITED PRO FORMA BALANCE SHEET September 30, 2003 (In Thousands) Historical Pro Forma Pro Forma 9/30/2003 Adjustments 9/30/03 ----------------- ----------------- ----------------------- ASSETS Operating properties: Real estate $ 930,841 $ 118,836 (a) $ 1,049,677 Furniture and equipment 3,533 3,533 Accumulated depreciation (171,697) (171,697) ----------------- ----------------- ----------------------- Operating properties - net 762,677 118,836 881,513 Undeveloped land held for investment 9,995 9,995 Undeveloped land held for sale, net 3,041 3,041 Cash and cash equivalents 13,302 13,302 Restricted cash 14,520 14,520 Accounts receivable, net 14,575 14,575 Cost in excess of fair value of net assets acquired - net 595 595 Other assets 17,464 17,464 ----------------- ----------------- ----------------------- TOTAL ASSETS $ 836,169 $ 118,836 $ 955,005 ================= ================= ======================= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Mortgages and loans payable $ 394,128 $ 86,000 (a) $ 480,128 Accounts payable 3,764 3,764 Accrued real estate taxes payable 9,893 9,893 Accrued liabilities - other 10,846 10,846 Dividends payable 7,840 7,840 Advance rents and security deposits 5,343 5,343 ----------------- ----------------- ----------------------- Total Liabilities 431,814 86,000 517,814 ----------------- ----------------- ----------------------- Shareholders' Equity: Preferred stock 30 30 Common stock 299 16 (b) 315 Capital in excess of par value 544,689 32,820 (b) 577,509 Notes receivable from stock sales (5,266) (5,266) Accumulated other comprehensive loss (212) (212) Retained earnings (deficit) (3,566) (3,566) Treasury stock, at cost (131,619) (131,619) ----------------- ----------------- ----------------------- Total Shareholders' Equity 404,355 32,836 437,191 ----------------- ----------------- ----------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 836,169 $ 118,836 $ 955,005 ================= ================= =======================
See accompanying notes to unaudited pro forma financial statements. 7
KOGER EQUITY, INC. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS For the year ended December 31, 2002 (In Thousands except per Share Data) Historical Pro Forma Pro Forma 2002 Adjustments 2002 ----------------- ----------------- ----------------------- REVENUES Rental and other rental services $ 126,404 $ 7,425 (a) $ 133,829 Management fees 3,347 3,347 Interest 405 405 ----------------- ----------------- ----------------------- Total revenues 130,156 7,425 137,581 ----------------- ----------------- ----------------------- EXPENSES Properties operations 46,235 2,888 (a) 49,123 Depreciation and amortization 27,908 2,834 (b) 30,742 Mortgage and loan interest 25,145 3,372 (c) 28,517 General and administrative 11,381 479 (a) 11,860 Direct cost of management fees 3,335 3,335 Other 143 143 ----------------- ----------------- ----------------------- Total expenses 114,147 9,573 123,720 ----------------- ----------------- ----------------------- INCOME BEFORE GAIN ON SALE OF ASSETS, INCOME TAXES AND MINORITY INTEREST 16,009 (2,148) 13,861 Gain on sale of assets 21 21 ----------------- ----------------- ----------------------- INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 16,030 (2,148) 13,882 Income tax (benefit) provision (413) (413) ----------------- ----------------- ----------------------- INCOME BEFORE MINORITY INTEREST 16,443 (2,148) 14,295 Minority interest (20) (20) ----------------- ----------------- ----------------------- NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 16,423 $ (2,148) $ 14,275 ================= ================= ======================= EARNINGS PER COMMON SHARE: Basic $ .77 $ .63 ================= ======================= Diluted $ .77 $ .62 ================= ======================= WEIGHTED AVERAGE COMMON SHARES: Basic 21,269 1,561 22,830 ================= ================= ======================= Diluted 21,378 1,561 22,939 ================= ================= =======================
See accompanying notes to unaudited pro forma financial statements. 8
KOGER EQUITY, INC. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS For the nine months ended September 30, 2003 (In Thousands except per Share Data) Historical Pro Forma Pro Forma 2003 Adjustments 2003 ----------------- ------------------ --------------------- REVENUES Rental and other rental services $ 107,407 $ 7,051 (a) $ 114,458 Management fees 331 331 Interest 184 184 ----------------- ------------------ --------------------- Total revenues 107,922 7,051 114,973 ----------------- ------------------ --------------------- EXPENSES Property operations 41,949 2,864 (a) 44,813 Depreciation and amortization 24,537 2,125 (b) 26,662 Mortgage and loan interest 22,059 2,528 (c) 24,587 General and administrative 8,415 325 (a) 8,740 Direct cost of management fees 88 88 Other 103 103 ----------------- ------------------ --------------------- 7,842 Total expenses 97,151 104,993 ----------------- ------------------ --------------------- INCOME BEFORE GAIN ON SALE OF ASSETS, INCOME TAXES AND MINORITY INTEREST 10,771 (791) 9,980 Gain on sale of assets 589 589 ----------------- ------------------ --------------------- INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 11,360 (791) 10,569 Income tax (benefit) provision (22) (22) ----------------- ------------------ --------------------- (791) INCOME BEFORE MINORITY INTEREST 11,382 10,591 Minority interest ----------------- ------------------ --------------------- NET INCOME 11,382 (791) 10,591 Dividends on Preferred Stock (371) (371) ----------------- ------------------ --------------------- NET INCOME AVAILABLE TO COMMON SHAREHOLDERS 11,011 $ (791) 10,220 ================= ================== ===================== EARNINGS PER COMMON SHARE: Basic $ .52 $ .45 ================= ===================== Diluted $ .52 $ .45 ================= ===================== WEIGHTED AVERAGE COMMON SHARES: Basic 21,314 1,561 22,875 ================= ================== ===================== Diluted 21,377 1,561 22,938 ================= ================== =====================
See accompanying notes to unaudited pro forma financial statements. 9 KOGER EQUITY, INC. NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS 1. Basis of Presentation Atlantic Center Plaza ("ACP"), a 23-floor office building containing approximately 502,000 square feet of rentable space and located in Atlanta, Georgia, will be acquired from Atlantic Center Plaza, LLC, an unrelated third party, in January 2004. The statement of revenues and certain expenses includes information related to the operations of ACP for the year ended December 31, 2002 as recorded by ACP's previous owner, subject to the adjustments described below. 2. Unaudited Pro Forma Balance Sheet The unaudited pro forma balance sheet as of September 30, 2003 is based on the historical balance sheet for the Company presented in its Quarterly Report on Form 10-Q for the period ended September 30, 2003. The unaudited pro forma balance sheet includes adjustments assuming this acquisition occurred as of September 30, 2003. Significant pro forma adjustments in the unaudited pro forma balance sheet include the following: (a) The Company intends to purchase ACP, located in Atlanta, Georgia, for approximately $116.5 million and closing costs. The funds required for this acquisition will be drawn from the assumption of an $86.0 million mortgage secured by the Property and $32.8 million from the Company's recently announced common stock offering. The acquisition is reflected in rental properties in the pro forma balance sheet. A portion of the purchase price will ultimately be recorded as an intangible asset for the fair value of the in-place leases. The Company has not completed its valuation of the in-place leases. (b) Reflects a portion of the proceeds from the proposed issuance of common stock used to purchase ACP. 10 KOGER EQUITY, INC. NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (continued) 3. Unaudited Pro Forma Statements of Operations The unaudited pro forma statement of operations for the year ended December 31, 2002 includes adjustments assuming that the acquisition of ACP occurred as of January 1, 2002, and is based on the historical statement of operations for the Company presented in its Annual Report on Form 10-K for the year ended December 31, 2002. The unaudited pro forma statements of operations for the nine months ended September 30, 2003, include adjustments assuming that the acquisition of ACP occurred as of January 1, 2003 and is based on the historical statement of operations for the Company presented in its Quarterly Report on Form 10-Q for the period ended September 30, 2003. Significant pro forma adjustments in the unaudited pro forma statements of operations include the following: (a) Adjustment required for the historical rental revenues and operating expenses for ACP. Operating expenses include management costs and fees calculated using the historical management costs of ACP. ACP was managed by a third party manager for a management fee of approximately three percent of rental and other revenues plus reimbursement of personnel and other costs related to management of ACP. As of the year ended December 31, 2002 and the nine months ended September 30, 2003, ACP had occupancy rates of 68% and 79%, respectively. (b) Adjustment required to reflect depreciation on ACP, based on the total cost of the acquisition. The Company uses the straight-line method for depreciation and amortization using an estimated life of 39 years for ACP. As discussed in Note (a) to the pro forma balance sheet, the Company has not completed the valuation of the in-place leases. The amortization of the in-place lease value is not expected to have a material impact on the pro forma statements of operations. (c) Adjustment required to reflect interest expense related to the amounts drawn on the ACP's mortgage ($86 million). The estimated average interest rate on the ACP's mortgage was 2.9 percent on the first $76 million and 7.3 percent on the last $10 million. 11 KOGER EQUITY, INC. UNAUDITED STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS AND ESTIMATED CASH TO BE MADE AVAILABLE BY OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2002 (In Thousands)
Revenues Rental and other rental services $132,132 Management fees 3,347 Interest 405 -------- Total revenues 135,884 -------- Expenses Properties operations 49,482 Depreciation and amortization 26,123 Mortgage and loan interest 28,517 General and administrative 9,590 Direct cost of management fees 3,335 Other 143 Compensation - exercise of stock options 677 -------- Total expenses 117,867 -------- Estimated Taxable Operating Income 18,017 Add Back: Depreciation and Amortization 26,123 -------- Estimated Cash To Be Made Available By Operations $ 44,140 ========
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, 2002 assuming that the acquisition of Atlantic Center Plaza occurred on the first day of the twelve month period. However, this statement does not purport to reflect actual taxable 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 acquisition of Atlantic Center Plaza occurred on the first day of the twelve month period. 12 (c) Exhibits EXHIBIT INDEX The following designated exhibits are filed herewith: Exhibit Number Description of Exhibit ------- ---------------------- 23 Consent of Deloitte and Touche LLP 99 Koger Equity, Inc. News Release dated January 6, 2004. 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: January 6, 2004 By: /s/ Steven A. Abney ------------------- Steven A. Abney Title: Vice President, Finance and Chief Accounting Officer 14 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, Registration Statement No. 333-37919 of Koger Equity, Inc. on Form S-3, Registration Statement No. 333-33388 of Koger Equity, Inc. on Form S-8 and Registration Statement No. 333-38712 of Koger Equity, Inc. on Form S-8 of our report dated January 6, 2004 on the statement of revenues and certain expenses of Atlantic Center Plaza for the year ended December 31, 2002 appearing in this Current Report on Form 8-K of Koger Equity, Inc., dated January 6, 2004. DELOITTE & TOUCHE LLP West Palm Beach, Florida January 6, 2004 15 -----END PRIVACY-ENHANCED MESSAGE-----