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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File Number 1-9997
KOGER EQUITY, INC.
(Exact name of Registrant as specified in its Charter)
FLORIDA
(State or other jurisdiction of incorporation or organization)
59-2898045
(I.R.S. Employer Identification No.)
3986 Boulevard Center Drive, Suite 101
Jacksonville, Florida 32207
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: 904/398-3403
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Exchange on Which Registered
Common Stock, Par Value $.01 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No _________
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ( 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. __________
The aggregate market value of the voting stock held by non-affiliates of the
Registrant at March 1, 1994, was approximately $129,779,000.
The number of shares of Registrant's Common Stock outstanding on March 1,
1994, was 17,597,177.
Documents Incorporated by Reference
The Company's Proxy Statement to be filed pursuant to Regulation 14A under
the Securities Act of 1934 for the Annual Meeting of Shareholders to be
held on May 10, 1994, is incorporated by reference in Part III of this report.
TABLE OF CONTENTS
ITEM NO. DESCRIPTION PAGE NO.
PART I
1. BUSINESS . . . . . . . . . . . . . . . . . . . . . 1
2. PROPERTIES . . . . . . . . . . . . . . . . . . . . 3
3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . 12
4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS. . . . . . . . . . . . . 13
PART II
5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS . . . . . . . . . 14
6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . 15
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS . . . . . . . . . . . . . . . . . . 16
8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA. . . . . . . . . . . . . . . . 26
9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. . . . . . . . . . . . . . . 55
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT . . . . . . . . . . . . . . . . 55
11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . 56
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . . . . . 56
13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS. . . . . . . . . . . . . . . 56
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K . . . . . . . . . . . . . 57
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 63
PART I
Item 1. BUSINESS
General
Koger Equity, Inc. is engaged in acquiring and holding commercial
office buildings for the production of income (Koger Equity, Inc. and its
two wholly owned subsidiaries is hereafter referred to as the "Company").
As of December 31, 1993, the Company owned 219 commercial properties
in 16 metropolitan areas in the Southeast and Southwest. A total of 126
buildings were acquired from Koger Properties, Inc. ("KPI") or its
subsidiaries through 1990. As the result of the merger of KPI with and into
the Company (the "Merger") on December 21, 1993, the Company acquired an
additional 93 buildings. In addition, the Company provides property
management services for third parties, including the 20 buildings owned by
Centoff Realty Company, Inc., a subsidiary of Morgan Guaranty Trust Company
of New York, and 92 office buildings owned by The Koger Partnership, Ltd.
("TKPL"). The Company provides these services through its wholly owned
subsidiaries, Southeast Properties Holding Corporation, Inc. ("Southeast")
and Koger Real Estate Services, Inc. ("KRES"). The Company is currently
self-administered and self-managed.
The Company operates in a manner so as to qualify as a real estate
investment trust under the provisions of the Internal Revenue Code of 1986,
as amended (a "REIT"). As a REIT, the Company will not, with certain limited
exceptions, be taxed at the corporate level on taxable income distributed
to its shareholders on a current basis. Accordingly, the Company distributes
at least 95 percent of its annual real estate investment trust taxable income
to its shareholders. Since the Company intends to pay dividends equal to or
in excess of 95 percent of its annual real estate investment trust taxable
income and meets other qualifying criteria for a real estate investment
trust, no federal income tax provision has been recorded. To be eligible to
be a REIT, a corporation must meet five substantive tests: (a) at least 95
percent of its gross income must be derived from certain passive sources;
(b) at least 75 percent of its gross income must be derived from certain
real estate sources; (c) less than 30 percent of its gross income must be
derived from the sale or other disposition of certain items, including
certain real property held for less than four years; (d) at the close of
each calendar quarter, it must meet certain tests designed to ensure that
its assets are adequately diversified; and (e) each year, it must distribute
at least 95 percent of its REIT taxable income. Management fee revenue does
not qualify as passive income for purposes of determining whether the Company
has met the REIT requirement that at least 95 percent of the Company's gross
income is derived from passive sources. Accordingly, in the event the
Company derives income in excess of five percent from management and other
"non-passive" activities, the Company would no longer qualify as a REIT for
federal income tax purposes and would be required to pay federal income taxes.
No single tenant occupies 10 percent or more of the net rentable area
of the Company's buildings or contributes 10 percent or more of the Company's
rental revenues. Some of the Company's principal tenants are the State of
Florida, U. S. Government, Blue Cross/Blue Shield, Lumbermans Mutual Casualty
Company, Travelers Insurance Company, State of Texas, Aetna, FDIC, USAA
Federal Savings Bank and Bell South. Governmental tenants (including the
State of Florida and the United States Government), which account for 22
percent of the Company's leased space, may be subject to budget reductions
in times of recession and governmental austerity. There can be no assurance
that governmental appropriations for rents may not be reduced. Additionally,
with the current economic conditions related to the rental of office space,
certain of the private sector tenants which have contributed to the Company's
rent stream may reduce their current demands or curtail their need for
additional office space.
Merger of KPI and the Company; Resolution of KPI Chapter 11 Case
On September 25, 1991, KPI filed a petition under Chapter 11 of the
United States Bankruptcy Code (the "Bankruptcy Code") in the United States
Bankruptcy Court for the Middle District of Florida (the "Bankruptcy Court").
The Company was the single largest creditor of KPI in the KPI Chapter 11
Case (indebtedness to the Company of approximately $116 million). On
April 30, 1993, the Company and KPI jointly proposed a plan of reorganization
of KPI (the "Plan") which provided for the merger of KPI with and into the
Company in exchange for the issuance of shares of the Company's common stock
(the "Shares") to certain creditors of KPI and the issuance of warrants to
purchase Shares (the "Warrants") to shareholders of KPI and holders of
certain securities laws claims against KPI and the settlement of the
Company's claim against KPI. On August 11, 1993, the shareholders of the
Company approved the Merger and the issuance of the Shares and Warrants
pursuant thereto.
On December 8, 1993, the Plan was confirmed by the Bankruptcy Court
and the Merger became effective on December 21, 1993. Pursuant to the
Merger, 6,158,977 Shares, or approximately 35 percent of the Shares
outstanding after the Merger, and Warrants to purchase an aggregate of
644,000 Shares (3.5 percent of currently outstanding shares on a fully
diluted basis) were issued under the Plan and Merger. The Warrants are to
be exercisable until June 30, 1999 at $8.00 per share and are subject to
redemption at the option of the Company at prices ranging from $1.92 to
$5.24 per Warrant.
With the Merger, the Company succeeded to substantially all of the
assets of KPI, free and clear of all liens, claims and encumbrances, except
(i) encumbrances relating to certain secured indebtedness of KPI (aggregating
$182.6 million) which was restructured under the Plan and (ii) an option and
right of first refusal held by TKPL on certain developed buildings and
parcels of undeveloped land, which are located in TKPL office centers. KPI
assets acquired by the Company in the Merger included 93 buildings containing
3,848,130 net rentable square feet together with approximately 295 acres of
unimproved land suitable for development, and 1,781,419 Shares held by KPI.
As a result of the Merger, the Company assumed all of the leasing and other
management responsibilities for its properties including those acquired in
the Merger. In addition, KPI transferred all of its debt and equity
interests in TKPL to Southeast, which became the managing general partner
of TKPL.
Competition
The Company competes in the leasing of office space with a
considerable number of other realty concerns, both local and national, some
of which have greater resources than the Company. Through its ownership of
suburban office parks, the Company seeks to attract tenants by offering
office space convenient to residential areas and away from the congestion
and attendant traffic problems of the downtown business districts. In recent
years both local and national concerns have built competing office parks and
single buildings in suburban areas in which the Company's centers are
located. In addition, the Company competes for tenants with large high-rise
office buildings generally located in the downtown business districts of
these cities. Although competition from other lessors of office space varies
from city to city, the Company has been able to attain and maintain what it
considers satisfactory occupancy levels at satisfactory rental rates.
However, higher vacancy levels in metropolitan areas in which the Company's
properties are located have had an adverse affect on the Company's ability
to increase its rental rates while maintaining satisfactory occupancy levels.
Investment Policies
The Company is not currently engaged in the acquisition of additional
properties and does not contemplate acquiring any material additional
properties for the foreseeable future.
The investment policies of the Company may be changed by the Company's
directors at any time without notice to or a vote of security holders. The
Company has no current policy which limits the percentage of its assets which
may be invested in any one type of investment or the geographic areas in
which the Company may acquire properties. The Company, however, intends
to continue to operate so as to qualify for tax treatment as a REIT.
Although it has no current plans to do so, the Company may in the future
invest in other types of office buildings, apartment buildings, shopping
centers, and other properties. It also may invest in the securities
(including mortgages) of companies primarily engaged in real estate
activities, although the Company does not intend to become an investment
company regulated under the Investment Company Act of 1940.
For the year ended December 31, 1993, all of the Company's rental
revenues were derived from the buildings purchased from KPI or buildings
acquired pursuant to the Merger. All of the Company's 1993 interest revenues
were derived from temporary cash investments.
Employees
Prior to the Merger, the Company had seven full-time employees.
Through that date the Company paid Koger Management, Inc. ("KMI"), a wholly
owned subsidiary of KPI, five percent of gross rental income for property
management and leasing services. Salaries for property management and
leasing services were paid by KMI. With the consummation of the Merger, the
Company became fully self-managed. In connection with its current real
estate operations and property management agreements, the Company has a
combined financial, administrative, leasing, and center maintenance staff of
242 employees. A resident general manager is responsible for the leasing
and operations of all buildings in a center or city. The Company has
approximately 100 employees who perform maintenance activities.
Item 2. PROPERTIES
General
At December 31, 1993, the Company owned 219 office buildings located
in 21 Koger Centers in the 16 metropolitan areas of Jacksonville, Miami,
Orlando, St. Petersburg, and Tallahassee, Florida; Atlanta, Georgia;
Greenville, South Carolina; Charlotte, Greensboro and Raleigh, North
Carolina; Memphis, Tennessee; Austin, El Paso, and San Antonio, Texas;
Tulsa, Oklahoma; and Norfolk, Virginia. These centers have been developed
in campus-like settings with extensive Landscaping and ample tenant parking.
The buildings are generally one to five-story structures of contemporary
design and constructed of masonry, concrete and steel, with facings of brick,
concrete and glass. Each building contains lobby and lounge areas and is
centrally air-conditioned. All multi-story buildings contain elevators.
The centers are generally located with easy access, via expressways, to the
central business district and to shopping and residential areas in the
respective communities. The properties are well maintained and adequately
covered by insurance.
Leases on these properties vary between net leases (where the tenant
pays some operating expenses, such as utilities, insurance and repairs) and
gross leases (where the Company pays all such items). Most leases are on a
gross basis and are for terms varying from three to five years. In some
instances, such as when a tenant rents the entire building, leases are for
terms of up to 20 years. At December 31, 1993, the Company's buildings were
on average 88 percent leased and the average effective annual rent per net
rentable square foot was $13.26. The buildings are occupied by numerous
tenants, many of whom lease relatively small amounts of space, conducting a
broad range of commercial activities.
New leases and renewals of existing leases are negotiated at the
current market rate at date of execution. The Company endeavors to require
escalation provisions in all of its gross leases. As of December 31, 1993,
approximately 38 percent of the annualized gross rental revenues was derived
from existing leases containing rental escalation provisions based upon
changes in the Consumer Price Index (some of which contain maximum rates of
increase); approximately 56 percent was derived from leases containing
escalation provisions based upon real estate tax and operating expense
increases; and approximately 6 percent was derived from leases without
escalation provisions. Some of the Company's leases contain options which
allow the lessee to renew for varying periods, generally at the same rental
rate and subject, in most instances, to Consumer Price Index escalation
provisions.
The Company owns approximately 295 acres of unimproved land suitable
for development located in the metropolitan areas of Birmingham, Alabama;
Jacksonville, Miami, Orlando and St. Petersburg, Florida; Atlanta, Georgia;
Columbia and Greenville, South Carolina; Charlotte, Greensboro, and Raleigh,
North Carolina; Memphis, Tennessee; Austin and San Antonio, Texas; Tulsa,
Oklahoma; and Norfolk and Richmond, Virginia. A portion of this land has
been partially or wholly developed with streets and/or utilities.
Title to Property
No examinations of title to real properties have been made for the
purpose of this report. However, the Company obtained title insurance on all
of its properties acquired prior to the Merger at the time of their purchases.
Although no additional title insurance was obtained related to the properties
acquired from KPI pursuant to the Merger, the Company succeeded to KPI's
existing title policies on the properties acquired in the Merger. The
Company believes that all of the real estate described herein as owned by the
Company is owned in fee simple without encumbrances except for the leases and
mortgages described in this report and other encumbrances which do not
substantially interfere with the use of the properties or have a material
adverse effect upon their values.
Property Location and Other Information
The following table sets forth information relating to the properties
owned by the Company as of December 31, 1993.
Land
Number Net Improved Unimproved
of Rentable with Bldgs Land
Center Buildings Sq.Ft. (In Acres) (In Acres)
Atlanta Chamblee 22 947,920 76.2 2.5
Atlanta Gwinnett 31.0
Austin 12 370,860 29.6 1.8
Birmingham 30.0
Charlotte Carmel 1 109,600 7.6 27.0
Charlotte East 11 468,820 39.9 3.9
Columbia Spring Valley 1.0
El Paso 14 251,930 19.6
Greensboro South 13 610,470 46.0
Greensboro Wendover 18.5
Greenville 8 290,560 24.7 4.5
Jacksonville Baymeadows 4 467,860 34.6 13.3
Jacksonville Central 32 677,680 48.4 0.4
Memphis Germantown 3 258,400 18.4 16.2
Memphis Kirby Gate 23.0
Miami 1 96,800 5.6 8.1
Norfolk West 1 59,680 4.0 16.0
Orlando Central 22 565,220 46.0
Orlando University 2 159,600 11.6 15.5
Raleigh Crossroads 1 77,500 9.1 28.0
Richmond South 23.0
San Antonio 26 788,670 63.5 11.0
St. Petersburg 15 519,320 64.4 7.2
Tallahassee Apalachee Pkwy 14 408,500 33.7
Tallahassee Capital Circle 4 300,700 23.3
Tulsa North 2 103,520 9.1 13.4
Tulsa South 11 372,760 26.9
219 7,906,370 642.2 295.3
Occupancy
The following table sets forth, with respect to the Company's centers
at December 31, 1993, the number of buildings, number of leases, net rentable
square feet, weighted average leased rate, and the average effective annual
rent per net rentable square foot.
Avg. Effective
Net Weighted Annual Rent
Number Number Rentable Average Per
Of Of Square Leased Net Rentable
Center Buildings Leases Feet Rate (1) Sq. Ft. (2)
Atlanta Chamblee 22 194 947,920 83% $14.65
Austin 12 180 370,860 95% 11.90
Charlotte Carmel 1 14 109,600 99% 15.25
Charlotte East 11 168 468,820 76% 12.90
El Paso 14 195 251,930 93% 12.40
Greensboro South 13 186 610,470 94% 13.10
Greenville 8 143 290,560 80% 13.05
Jacksonville Baymeadows 4 32 467,860 100% 14.50
Jacksonville Central 32 265 677,680 68% 12.00
Memphis Germantown 3 59 258,400 99% 16.60
Miami 1 19 96,800 94% 18.45
Norfolk West 1 16 59,680 79% 16.40
Orlando Central 22 178 565,220 87% 13.25
Orlando University 2 39 159,600 88% 15.95
Raleigh Crossroads 1 8 77,500 100% 15.40
San Antonio 26 302 788,670 89% 10.35
St. Petersburg 15 163 519,320 80% 12.65
Tallahassee Apalachee Pkwy 14 95 408,500 93% 14.75
Tallahassee Capital Circle 4 9 300,700 100% 16.70
Tulsa North 2 29 103,520 83% 9.75
Tulsa South 11 155 372,760 81% 9.05
Total 219 2,449 7,906,370
Weighted Average 88% $13.26
(1) The percent leased rates have been calculated by dividing total net
rentable square feet leased in an office building by net rentable square
feet in such building, which excludes public or common areas.
(2) Rental rates are computed by dividing annual gross rental revenues for a
center by the net rentable square feet applicable to such gross rental
revenues. Annual rental is rounded to the nearest $.05.
Lease Expirations on the Company's Properties
The following schedule sets forth for each of the Company's centers (i)
the number of tenants whose leases will expire in calendar years 1994 through
2002, (ii) the total area in square feet covered by such leases, (iii) the
current annual rental represented by such leases, and (iv) the percentage of
gross annual rental for such center contributed by such leases. This
information is based on the buildings owned by the Company on December 31,
1993 and on the terms of leases in effect as of December 31, 1993, on the
basis of then existing base rentals, and without regard to the exercise of
options to renew. This table does not include tenants in possession where
leases were in process of execution but were not delivered to the Company at
December 31, 1993. Leases representing 23.0 percent, 28.5 percent and 16.2
percent of the Company's annual rentals at December 31, 1993 are due to
expire in 1994, 1995, and 1996, respectively.
Leases in Effect December 31, 1993, Expiring During the Calendar Years
1994 1995 1996 1997 1998 1999 2000 2001 2002 OTHER
ATLANTA CHAMBLEE
Number of Tenants 94 28 36 11 11 7 2 2 3
Number of Sq. Ft. 144,581 95,405 134,927 61,881 122,350 63,287 32,964 39,490 89,667
Annual Rental $ 1,994,078 1,350,561 2,086,746 792,403 1,721,141 916,029 647,733 518,790 1,482,679
% Gross Annual Rent 17.4% 11.7% 18.1% 6.9% 15.0% 8.0% 5.6% 0.0% 4.5% 12.8%
AUSTIN
Number of Tenants 74 45 51 5 5
Number of Sq. Ft. 132,088 108,219 86,398 18,150 8,031
Annual Rental $ 1,459,616 1,260,206 1,164,096 216,395 102,932
% Gross Annual Rent 34.7% 30.0% 27.7% 5.1% 2.5% 0.0% 0.0% 0.0% 0.0% 0.0%
CHARLOTTE EAST
Number of Tenants 97 34 23 10 4
Number of Sq. Ft. 171,569 89,341 54,816 15,901 24,130
Annual Rental $ 2,181,362 1,277,254 679,557 191,073 261,779
% Gross Annual Rent 47.5% 27.8% 14.8% 4.2% 5.7% 0.0% 0.0% 0.0% 0.0% 0.0%
CHARLOTTE CARMEL
Number of Tenants 2 2 3 6 1
Number of Sq. Ft. 2,402 6,530 59,570 38,849 1,054
Annual Rental $ 42,624 99,643 795,544 693,965 21,065
% Gross Annual Rent 2.6% 6.0% 0.0% 48.1% 42.0% 0.0% 1.3% 0.0% 0.0% 0.0%
EL PASO
Number of Tenants 86 35 56 9 8 1
Number of Sq. Ft. 73,786 51,167 73,967 15,018 16,190 4,726
Annual Rental $ 872,837 634,700 882,557 211,250 210,192 99,840
% Gross Annual Rent 30.0% 21.8% 30.3% 7.3% 7.2% 0.0% 3.4% 0.0% 0.0% 0.0%
GREENSBORO SOUTH
Number of Tenants 84 36 40 11 10 1 2 1 1
Number of Sq. Ft. 75,772 81,943 97,720 114,592 139,446 720 15,254 17,366 30,521
Annual Rental $ 1,051,701 1,185,330 1,293,010 1,620,547 1,640,152 9,000 125,128 199,564 378,328
% Gross Annual Rent 14.0% 15.8% 17.2% 21.6% 21.9% 0.1% 1.7% 2.7% 5.0% 0.0%
GREENVILLE
Number of Tenants 88 21 20 7 5 2
Number of Sq. Ft. 123,401 46,102 24,712 14,949 11,486 11,938
Annual Rental $ 1,564,713 631,657 313,113 197,418 140,700 190,797
% Gross Annual Rent 51.5% 20.8% 10.3% 6.5% 4.6% 0.0% 0.0% 0.0% 0.0% 6.3%
Leases in Effect December 31, 1993, Expiring During the Calendar Years
1994 1995 1996 1997 1998 1999 2000 2001 2002 OTHER
JACKSONVILLE BAYMEADOWS
Number of Tenants 2 14 5 5 5 1
Number of Sq. Ft. 4,924 381,641 24,063 5,825 23,226 23,900
Annual Rental $ 88,288 5,416,024 382,688 77,552 361,160 378,160
% Gross Annual Rent 1.3% 80.8% 5.7% 1.2% 5.4% 0.0% 5.6% 0.0% 0.0% 0.0%
JACKSONVILLE CENTRAL
Number of Tenants 107 53 48 20 27 6 4
Number of Sq. Ft. 113,296 12,045 99,577 58,316 91,340 43,308 23,406
Annual Rental $ 1,416,345 1,591,111 1,198,288 673,000 1,021,688 507,725 279,181
% Gross Annual Rent 21.2% 23.8% 17.9% 10.1% 15.3% 7.6% 0.0% 0.0% 0.0% 4.1%
MEMPHIS GERMANTOWN
Number of Tenants 17 11 17 9 5
Number of Sq. Ft. 98,490 15,521 75,795 49,042 16,597
Annual Rental $ 1,667,886 255,451 1,230,007 830,815 265,037
% Gross Annual Rent 39.3% 6.0% 28.9% 19.6% 6.2% 0.0% 0.0% 0.0% 0.0% 0.0%
MIAMI
Number of Tenants 3 9 5 1 1
Number of Sq. Ft. 24,399 46,803 11,391 823 7,746
Annual Rental $ 414,073 894,356 212,346 14,643 145,380
% Gross Annual Rent 24.6% 53.2% 12.6% 0.9% 0.0% 8.7% 0.0% 0.0% 0.0% 0.0%
NORFOLK WEST
Number of Tenants 7 4 2 2 1
Number of Sq. Ft. 23,432 11,492 2,615 4,822 5,030
Annual Rental $ 386,842 214,592 36,419 70,868 69,414
% Gross Annual Rent 49.7% 27.6% 4.7% 0.0% 9.1% 0.0% 0.0% 0.0% 0.0% 8.9%
ORLANDO CENTRAL
Number of Tenants 75 38 35 17 9 2 1 1
Number of Sq. Ft. 165,999 80,046 81,103 104,064 40,395 2,494 12,606 7,053
Annual Rental $ 2,217,442 1,123,425 1,040,580 1,341,690 505,724 33,647 170,522 92,535
% Gross Annual Rent 33.9% 17.2% 15.9% 20.6% 7.7% 0.5% 2.6% 0.0% 0.0% 1.6%
ORLANDO UNIVERSITY
Number of Tenants 13 6 9 6 3 1 1
Number of Sq. Ft. 19,569 34,040 20,130 24,768 12,230 26,876 3,171
Annual Rental $ 337,501 579,566 303,112 340,276 218,491 407,550 60,439
% Gross Annual Rent 15.0% 25.8% 13.5% 15.1% 9.7% 18.1% 0.0% 0.0% 0.0% 2.8%
RALEIGH CROSSROADS
Number of Tenants 4 1 2 1
Number of Sq. Ft. 3,859 1,525 43,794 28,252
Annual Rental $ 59,218 23,646 670,073 437,681
% Gross Annual Rent 5.0% 2.0% 56.3% 0.0% 0.0% 0.0% 36.7% 0.0% 0.0% 0.0%
SAN ANTONIO
Number of Tenants 142 72 47 14 21 4 2
Number of Sq. Ft. 175,399 227,267 89,323 39,399 136,164 15,655 17,918
Annual Rental $ 1,827,234 2,350,340 934,613 412,692 1,349,864 170,014 203,893
% Gross Annual Rent 25.2% 32.4% 12.9% 5.7% 18.6% 2.3% 0.0% 0.0% 0.0% 2.9%
Leases in Effect December 31, 1993, Expiring During the Calendar Years
1994 1995 1996 1997 1998 1999 2000 2001 2002 OTHER
ST. PETERSBURG
Number of Tenants 58 34 34 16 16 3 1 1
Number of Sq. Ft. 102,601 73,673 51,748 96,210 56,946 21,532 8,182 7,160
Annual Rental $ 1,370,142 1,069,677 685,490 905,626 735,732 273,865 110,387 127,278
% Gross Annual Rent 25.9% 20.3% 13.0% 17.2% 13.9% 5.2% 2.1% 0.0% 0.0% 2.4%
TALLAHASSEE APALACHEE PKWY
Number of Tenants 44 21 12 8 8 1 1
Number of Sq. Ft. 96,095 123,470 28,136 64,720 57,484 9,452 2,346
Annual Rental $ 1,383,573 1,910,093 373,370 987,100 796,661 140,042 31,392
% Gross Annual Rent 24.6% 34.0% 6.6% 17.6% 14.2% 2.5% 0.0% 0.0% 0.5% 0.0%
TALLAHASSEE CAPITAL CIRCLE
Number of Tenants 7 2
Number of Sq. Ft. 219,700 81,000
Annual Rental $ 3,623,111 1,401,150
% Gross Annual Rent 0.0% 72.1% 0.0% 27.9% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
TULSA NORTH
Number of Tenants 12 5 8 4
Number of Sq. Ft. 21,207 6,644 45,885 12,547
Annual Rental $ 188,667 61,080 451,284 140,879
% Gross Annual Rent 22.4% 7.3% 53.6% 0.0% 16.7% 0.0% 0.0% 0.0% 0.0% 0.0%
TULSA SOUTH
Number of Tenants 94 31 25 3 1 1
Number of Sq. Ft. 71,045 82,974 111,937 6,806 6,051 22,643
Annual Rental $ 664,616 716,593 1,004,964 64,706 50,580 229,165
% Gross Annual Rent 24.4% 26.2% 36.8% 2.4% 1.9% 8.3% 0.0% 0.0% 0.0% 0.0%
TOTAL OFFICE BUILDINGS
Number of Tenants 1,103 507 475 157 150 27 10 1 4 15
Number of Sq. Ft. 1,643,914 1,795,548 1,158,037 831,034 818,284 213,713 126,938 17,366 72,357 165,343
Annual Rental $ 21,188,758 26,268,416 14,942,313 11,073,880 10,287,545 2,832,417 1,990,516 199,564 928,510 2,506,216
% Gross Annual Rent 23.0% 28.5% 16.2% 12.0% 11.2% 3.1% 2.2% 0.2% 1.0% 2.6%
Fixed Rate Indebtedness on the Company's Properties
The following table shows indebtedness (dollars in thousands)
encumbering each of the Company's properties which have fixed interest rates
as of December 31, 1993.
Weighted
Mortgage Average
Loan Interest
Center Balance Rate
Atlanta Chamblee $ 34,101 8.12%
Atlanta Gwinnett 79 8.50%
Austin 3,453 9.55%
Birmingham 32 8.50%
Charlotte Carmel 9,443 6.69%
Charlotte East 14,702 8.22%
El Paso 1,674 9.15%
Greensboro South 23,953 8.74%
Greenville 7,296 6.40%
Jacksonville Baymeadows 35,773 6.67%
Jacksonville Central 13,521 6.75%
Memphis Germantown 13,554 8.57%
Memphis Kirby Gate 68 8.50%
Miami 8,061 6.68%
Norfolk West 4,028 9.97%
Orlando Central 18,625 8.20%
Orlando University 9,845 6.56%
Raleigh Crossroads 4,857 9.96%
San Antonio 7,407 8.14%
St. Petersburg 20,701 7.82%
Tallahassee Apalachee Pkwy 15,837 6.69%
Tallahassee Capital Circle 21,068 8.02%
Tulsa North 9 8.50%
Tulsa South 4,455 9.95%
Total $272,542 8.12%
For additional information concerning certain interest rate reset
provisions and reset dates for these loans see Note 5, "Loan and Mortgages
Payable" of the Notes to Consolidated Financial Statements.
Indebtedness with Variable Interest Rates
In addition to the above mortgage indebtedness, at December 31, 1993,
the Company had $58,861,000 of loans outstanding with variable interest
rates which are collateralized by mortgages on certain operating properties.
These loans bear interest at rates based upon such institutions' prime rates.
Information with respect to these loans is as follows (dollars in thousands):
Approximate Approximate
Balance Weighted Avg. Maximum Average Wtg Avg Int
Year Ended at End Int Rate at Amount Amount Rate During
December 31 of Period End of Period Outstanding Outstanding the Period(1)
1993 $58,861 6.6% $ 98,262 $ 95,110 6.2%
1992 98,262 6.0% 99,379 98,918 6.2%
1991 99,379 6.2% 101,163 96,481 7.9%
(1) The approximate weighted average interest rates during the periods
were computed by dividing the interest costs for the year by the
average balance outstanding during the year.
As of December 31, 1993, $27,625,000 of this indebtedness represents a
bank loan which bears interest at prime plus 1/2 percent and matures on
December 21, 1998, with an optional two year extension. Monthly payments
include interest and fixed payments of principal which increase annually.
This loan is collateralized by properties with a carrying value of
approximately $49,888,000 at December 31, 1993.
As of December 31, 1993, $10,278,000 of this indebtedness represents
junior bank mortgage debt which was assumed from KPI pursuant to the Merger.
This junior bank mortgage debt matures in December, 2000 and accrues interest
at the prime rate of the respective lender. Accrued interest on this debt
must be paid no later than December, 1998 and monthly interest payments are
required beginning in January, 1999. The accrued interest on this debt is
forgiven if the debt is paid in full prior to December, 1996. The junior
bank mortgage debt is secured by properties that also serve as collateral
for certain fixed rate senior bank mortgage debt assumed from KPI pursuant
to the Merger.
As of December 31, 1993, $20,958,000 of this indebtedness represents
the outstanding balance of other mortgage debt assumed from KPI pursuant to
the Merger. This debt bears interest at the respective institution's prime
rate plus one percent with a minimum rate of 6.62 percent and a maximum rate
of 10 percent. Interest only payments are due on a monthly basis and these
loans mature in June, 2001. These loans are collateralized by properties
with a carrying value of approximately $24,850,000 at December 31, 1993.
Management Agreement
Prior to the Merger, KMI was responsible for the leasing, operation,
maintenance and management of each of the Company's properties. The
management fee was five percent of the gross rental receipts collected on
the property managed for the Company by KMI. For the years ended December
31, 1993, 1992, and 1991, the Company incurred management fee expense to KMI
of $2,184,000, $2,314,000, and $2,281,000, respectively. With the Merger,
the Company assumed all of the leasing and other management responsibilities
for its properties including those acquired in the Merger.
Item 3. LEGAL PROCEEDINGS
An action in the U. S. District Court, Middle District of Florida (the
"District Court") was filed on October 11, 1990, by Gerald and Althea Best
and Jerome Wilem, shareholders of the Company, against KPI, the Company, two
subsidiaries of KPI (Koger Advisors, Inc. and KMI), Messrs. Allen R. Ransom
(a former director of the Company), Ira M. Koger (a former director of the
Company), S. D. Stoneburner, and W.F.E. Kienast (a former director of the
Company), alleging that various press releases, shareholder reports, and/or
securities filings failed to disclose and/or misrepresented the Company's
business policies and seeking damages therefore (the "Securities Action").
William L. Coalson, a shareholder of the Company, was subsequently added as
an additional plaintiff. The Company believes that the claims asserted in
the Securities Action are without merit and intends to vigorously contest
the Securities Action.
A derivative action in the District Court was commenced on October 29,
1990, by Howard Greenwald and Albert and Phyllis Schlesinger, shareholders
of the Company, against the Company, KPI, all of the then current directors
of the Company, including: Ira M. Koger, James B. Holderman, Allen R. Ransom,
Wallace F. E. Kienast, S. D. Stoneburner, Yank D. Coble, Jr., G. Christian
Lantzsch, A. Paul Funkhouser and Stephen D. Lobrano, alleging breach of
fiduciary duty by favoring KPI over the interest of the Company and failing
to disclose or intentionally misleading the public as to the Company's cash
flow, dividend and financing policies and status, and seeking damages
therefor (the "Derivative Action"). During the course of the Derivative
Action, the plaintiffs therein further alleged Mr. Lobrano was liable to the
Company for certain alleged acts of legal malpractice. The Company's Board
of Directors' Independent Litigation Committee, which was composed of outside
independent members of the Company's Board of Directors, completed an
extensive investigation of the facts and circumstances surrounding the
Derivative Action, including the allegations against Mr. Lobrano. It was
the conclusion of this committee that the ultimate best interest of the
Company and its shareholders would not be served in prosecuting this
litigation. Subsequently, the Company moved that the Derivative Action be
dismissed under the provisions of Florida law. Thereafter, the plaintiffs
filed a Second Amended and Supplemental Complaint which realleged the
original cause of action ("Count I"); and realleged the cause of action
against Stephen D. Lobrano ("Count II"); and a new cause of action against
the members of the Special Litigation Committee for alleged violation of
fiduciary duties in conducting its investigation ("Count III"). During
1993, the Company filed further motions seeking dismissal of the Second
Amended and Supplemental Complaint. On January 27, 1994, the United States
Magistrate issued his Report and Recommendation concerning the Derivative
Action, which recommended that (1) Count I should be dismissed pursuant to
the Special Litigation Committee Report, (2) Count III against the Special
Litigation Committee members should be dismissed, and (3) Count II should
not be dismissed. Both plaintiffs and the Company have filed objections to
portions of this Report and Recommendation, which is now pending before the
District Court.
Pursuant to Florida Statutes Section 607.0850, the Indemnification
Committee of the Company's Board of Directors has made an initial
determination that certain officers and directors and former officers and
directors of the Company who are defendants in each of the Securities Action
and the Derivative Action are entitled to the advancement of expenses in
defending these actions. This Committee will not make a final determination
on indemnification of these defendants until a final resolution of these
actions. The Committee has agreed to indemnify these defendants to the
extent permitted by law. Should it be determined that any defendant was not
entitled to indemnification, such defendant will be obligated to reimburse
the Company for any expenses it has incurred or reimbursed in the defense of
that defendant. In accordance with Florida law, each of the present and
former directors and officers, who are defendants in the suits described
above, have so agreed to reimburse the Company. Through December 31, 1993,
the Company had paid in attorneys' fees and expenses incurred on behalf of
itself, certain directors and officers and former directors and officers in
connection with the Securities Action and the Derivative Action $351,865.
On March 23, 1993, the Securities and Exchange Commission ("the
Commission") entered an Order directing a private investigation with respect
to KPI's accounting practices, including the accuracy of financial
information included in certain reports filed with the Commission, possible
insider trading in KPI's stock, and possible misleading statements concerning
the financial condition of KPI and its ability to pay dividends to its
shareholders. Prior to March 23, 1993, the Commission had been engaged in
a confidential investigation without a formal order. As a result of the
Merger of KPI with and into the Company, the Company has assumed
responsibility for responding to the requests and subpoenas of the Commission
staff in connection with this private investigation. Although the staff of
the Commission had subpoenaed KPI documents and former employees of KPI, who
are presently employees of the Company, for testimony, on February 8, 1994,
the Commission staff advised the Company, through its counsel, that the
scheduled depositions of former KPI employees and the review of documents of
KPI had been suspended. The Company has received no communication from the
Commission staff since the above notice of suspension. Based on the
information currently available to the Company, it is unable to determine
whether or not the private investigation will lead to formal legal
proceedings or administrative actions or whether or not such legal
proceedings or administrative actions will involve the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is listed on the American Stock Exchange.
The high and low closing sales prices for the periods indicated were:
Years
1993 1992 1991
Quarter High Low High Low High Low
March 31 $9 3/8 $4 3/8 $6 1/4 $4 1/8 $11 3/8 $7 1/2
June 30 8 1/2 7 1/8 5 5/8 4 5/8 11 8 1/2
September 30 9 7 1/8 5 5/8 4 3/4 9 3/4 4
December 31 9 1/4 7 3/4 5 1/4 3 1/2 6 3 1/4
The Company intends that the dividend payout in the last quarter of
each year will generally be adjusted to reflect the distribution of at least
95 percent of the Company's real estate investment trust taxable income as
required by the Federal income tax laws for qualification as a real estate
investment trust. Set forth below are the dividends per share for the three
years ended December 31, 1993.
Years
Quarter 1993 1992 1991
March 31 -- -- $.325
June 30 -- -- .325
September 30 -- -- .120
December 31 -- -- --
The terms of the Company's secured debt subjects the Company to certain
dividend limitations which, however, will not restrict the Company from
paying the dividends required to maintain its qualification as a REIT. In
the event that the Company no longer qualifies as a REIT, additional dividend
limitations would be imposed by the terms of such debt. In addition, two of
the Company's bank lenders have required that until the Company has raised
an aggregate of $50 million of equity the following limitations on dividends
will be applied: (a) in 1996 and 1997, $11 million unless imposition of the
limit would cause loss of REIT status and (b) in 1998 and 1999, $11 million
regardless of impact on REIT status.
On March 1, 1994, there were approximately 1,344 shareholders of record
and the closing price of the Company's stock on the American Stock Exchange
was $7.375.
Item 6. SELECTED FINANCIAL DATA
The following selected financial data sets forth certain financial
information of the Company as of or for the five periods ended December 31,
1993.
(In thousands except per share data)
Income Information 1993* 1992 1991 1990 1989
Rental revenues $46,108 $45,957 $45,393 $ 28,882 $ 17,561
Interest revenues 206 231 7,099 13,840 12,911
Total operating revenues 46,406 46,188 52,492 42,722 30,472
Property operating expenses 20,691 19,380 18,541 10,764 6,252
Mortgage and loan interest 11,471 11,530 13,065 4,860 0
Depreciation and amortization 8,958 8,089 7,484 4,417 2,548
Net income (loss) 2,452 933 (5,949) 21,204 20,479
Earnings (loss) per common share .18 .07 (.43) 1.48 1.68
Dividends per share - - .77 1.675 1.80
Weighted average shares outstanding 13,352 13,220 13,750 14,309 12,198
Balance Sheet Information
Operating properties (before depreciation) $566,770 $311,286 $308,293 $304,690 $167,204
Undeveloped land 40,036 0 0 0 0
Loans to Koger Properties, Inc.
foreclosed in-substance 0 94,889 99,484 0 0
Loans to Koger Properties, Inc.:
Term loans 0 0 0 88,025 100,475
Land Mortgage 0 0 0 28,254 0
Total assets 615,089 396,841 399,241 417,878 265,684
Debt 330,625 155,362 158,805 150,952 0
Shareholders' equity 275,450 235,514 234,581 261,412 264,291
* On December 21, 1993, KPI was merged with and into the Company. See
Notes to Consolidated Financial Statements for additional information with
respect to the Merger.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion should be read in conjunction with the selected
financial data and the consolidated financial statements appearing elsewhere
in this report. Historical results and percentage relationships in the
Consolidated Financial Statements, including trends which might appear,
should not be taken as indicative of future operations or financial position.
The Company has prepared and is responsible for the accompanying
consolidated financial statements and related consolidated financial
information included in this report. These consolidated financial statements
were prepared in accordance with generally accepted accounting principles and
include amounts determined using management's best judgments and estimates of
the expected effects of events and transactions that are being accounted for
currently.
The Company's independent auditors, Deloitte & Touche, have audited the
accompanying consolidated financial statements. The objective of their
audit, conducted in accordance with generally accepted auditing standards,
was to express an opinion on the fairness of presentation, in all material
respects, of the Company's consolidated financial position, results of
operations and cash flows in conformity with generally accepted accounting
principles. They evaluated the Company's internal control structure to the
extent considered necessary by them to determine the audit procedures
required to support their report on the consolidated financial statements
and not to provide assurance on such structure.
The Company maintains accounting and other control systems which
management believes provide reasonable assurance that assets are safeguarded
and that the books and records reflect the authorized transactions of the
Company, although there are inherent limitations in any internal control
structure, as well as cost versus benefit considerations. The Audit
Committee of the Company's Board of Directors, which is composed exclusively
of directors who are not officers of the Company, directs matters relating
to audit functions, annually appoints the auditors, reviews the auditors'
independence, reviews the scope and results of the annual audit, and
periodically reviews the adequacy of the Company's internal control
structure.
RECENT DEVELOPMENTS
Merger of KPI and the Company; Resolution of KPI Chapter 11 Case. On
September 25, 1991, KPI filed a petition under the Bankruptcy Code in the
Bankruptcy Court. The Company was the single largest creditor of KPI in the
KPI Chapter 11 Case (indebtedness to the Company of approximately $116
million). On April 30, 1993, the Company and KPI jointly proposed the Plan
which provided, among other things, for the merger of KPI with and into the
Company in exchange for the issuance of the Shares and Warrants and the
assumption of the restructured KPI indebtedness.
On December 8, 1993, the Plan was confirmed by the Bankruptcy Court and
the Merger became effective on December 21, 1993. Pursuant to the Merger,
6,158,977 Shares, or approximately 35 percent of the Shares outstanding after
the Merger, and Warrants to purchase an aggregate of 644,000 Shares (3.5
percent of currently outstanding shares on a fully diluted basis) were issued
under the Plan and Merger. The Warrants are to be exercisable until June 30,
1999 at $8.00 per share and are subject to redemption at the option of the
Company at prices ranging from $1.92 to $5.24 per Warrant.
With the Merger, the Company succeeded to substantially all of the
assets of KPI, free and clear of all liens, claims and encumbrances, except
(i) encumbrances relating to certain secured indebtedness of KPI (aggregating
$182.6 million) which was restructured under the Plan and (ii) an option and
a right of first refusal held by TKPL on certain developed buildings and
parcels of undeveloped land, which are located in TKPL office centers. KPI
assets acquired by the Company in the Merger included 93 buildings containing
3,848,130 net rentable square feet together with approximately 295 acres of
unimproved land suitable for development, and 1,781,419 Shares held by KPI.
As a result of the Merger, the Company assumed all of the leasing and other
management responsibilities for its properties including those acquired in
the Merger. The Company also acquired in connection with the Merger all of
the debt and equity interest in TKPL previously owned by KPI. Under the
provisions of the TKPL plan of reorganization, recovery of any value to
the Company in respect of the foregoing debt and equity interests in TKPL
is dependent upon the refinancing of the indebtedness restructured under the
TKPL plan (approximately $149.7 million as of December 31, 1993) or sales of
TKPL assets at prices sufficient to retire this indebtedness. The TKPL plan
sets forth benchmarks for the accomplishment of retirement of certain of this
indebtedness within four, five and six years, and requires that all such
indebtedness be retired by June 1, 2000. In the event that refinancing or
sale can be accomplished in the period prior to June 1, 1999, certain
indebtedness may be retired at a discount. In the event that benchmarks for
retirement of indebtedness are not met, the TKPL plan provides that an
alternate general partner will assume responsibilities for operation and
management of TKPL, and will initiate procedures to liquidate the assets of
TKPL on an expedited basis. There is no assurance that necessary
refinancing(s) and/or sale(s) can be achieved or that the alternate general
partner will not assume control of TKPL. In view of the foregoing and the
likelihood of satisfying such conditions, the Company has determined that
its debt and equity interests in TKPL have no recoverable value.
Debt Assumed Pursuant To The Merger. On December 21, 1993, the Company
assumed approximately $182.6 million of restructured debt from KPI in
connection with the Merger. Information with respect to such debt is as
follows (in thousands):
Balance
Assumed
KPI Restructured Debt 12/21/93
Senior Bank Mortgage Debt $ 83,992
Junior Bank Mortgage Debt 11,354
Insurance Company Mortgage Debt 60,707
Negative Amortization (Insurance
Company Debt) 80
Other Mortgage Debt 21,168
Tax Notes 5,040
Mechanics' Liens 287
Total $182,628
For additional information concerning terms, interest rates, and maturity
dates see "Loans and Mortgages Payable" footnote contained in the Notes to
Consolidated Financial Statements.
RESULTS OF OPERATIONS
Rental Revenues. Rental revenues increased $151,000 from the year ended
December 31, 1992, to the year ended December 31, 1993. This increase
resulted primarily from (i) the rental revenues (from December 21, 1993
through December 31, 1993) from the 93 buildings acquired pursuant to the
Merger (approximately $1,345,000) and (ii) increases in miscellaneous rental
revenues during 1993. These increases to rental revenues were substantially
offset by the decrease in rental revenues (approximately $1,311,000) on the
126 buildings which the Company owned the entire year. For 1992, rental
revenues increased $564,000 from the year ended December 31, 1991. This
increase resulted primarily from (i) increased billings to tenants for
contingent rental revenues and (ii) the effect of reductions in the
occupancy rate of the Company's buildings being partially offset by increased
rental rates. At December 31, 1993, the Company's buildings were on average
88 percent leased. At December 31, 1992 and 1991, the Company's buildings
were on average 88 and 91 percent leased, respectively.
Interest Revenues. Interest revenues declined $25,000 from the year ended
December 31, 1992 to the year ended December 31, 1993. This decline in
interest revenues was due to (i) lower interest rates earned on the Company's
temporary cash investments and (ii) the lower average balance of cash to
invest. For 1992, interest revenues decreased $6,868,000 from the year ended
December 31, 1991. This decrease resulted from the failure of KPI to pay
contractual interest due on or after September 30, 1991, under the Restated
Credit Agreement and the Land Credit Agreement.
During the KPI Chapter 11 Case, the Company ceased to record interest on
loans under the Restated Credit Agreement and the Land Credit Agreement. As
a result of declines in the estimated fair value of the collateral underlying
such loans to KPI prior to the Merger, which had been deemed foreclosed
in-substance, the Company recorded a provision for loss in the amount of
$18.7 million through December 21, 1993. This included a $2.0 million
provision recorded during 1992 based upon management's periodic evaluation
of collateral values.
During 1993, 1992, and 1991, interest revenues on loans to KPI under the
Credit Agreement and Restated Credit Agreement totalled $0, $0, and
$4,786,000, respectively. The Credit Agreement and Restated Credit Agreement
loans had floating interest rates based on the average yield of U. S.
Treasury Notes maturing in three years plus 2.5 percent, with an 11 percent
floor and a 13 percent ceiling. On the effective date of the Merger, the
Company received the collateral for the Restated Credit Agreement loans in
full satisfaction of these loans.
During 1993, 1992, and 1991, interest revenues on loans to KPI under the
Land Credit Agreement (the "Land Loans") totalled $0, $0, and $1,934,000.
The Land Loans contractually earned interest at a fixed rate of 10.25 percent
and were to mature in November, 2000. The Company did not receive any debt
service payments in respect of the Land Loans during the pendency of KPI's
Chapter 11 Case. On the effective date of the Merger, the Company received
the collateral for the Land Credit Agreement loans in full satisfaction of
these loans.
Management Fee Revenues. During 1993, the Company earned $92,000 of
management fees from TKPL and third party management contracts which it
assumed from KPI on the date of the Merger. Management fee revenue does not
qualify as passive income for purposes of determining whether the Company has
met the REIT requirement that at least 95 percent of the Company's gross
income is derived from passive sources. Accordingly, in the event the
Company derives income in excess of five percent from management and other
"non-passive" activities, the Company would no longer qualify as a REIT for
federal income tax purposes.
Expenses. Property operating expenses include such charges as utilities,
taxes, janitorial, maintenance, and property insurance. During 1993,
property operating expenses and management fees increased $1,311,000 or 6.8
percent, compared to 1992, primarily due to (i) the operating expenses (from
December 21, 1993 through December 31, 1993) on the 93 buildings acquired
pursuant to the Merger (approximately $546,000) and (ii) increases in real
estate taxes, utilities and maintenance costs on the 126 buildings owned by
the Company for the entire year. During 1992, property operating expenses
and management fees increased $839,000 or 4.5 percent primarily due to
increases in maintenance costs on the Company's buildings, which was
partially offset by reductions in real estate taxes and utility costs during
1992. For 1993, property operating expenses and management fees as a percent
of rental revenues were 44.9 percent. For 1992 and 1991, property operating
expenses and management fees as a percent of rental revenues were 42.2
percent and 40.8 percent, respectively. In 1993, the increase in the percent
of operating expenses and management fees to rental revenues was primarily
due to decreases in rental revenues and increases in real estate taxes,
utilities and maintenance costs on the 126 buildings owned by the Company for
the entire year. In 1992, the increase in the percent of operating expenses
and management fees to rental revenues was due to the increase in maintenance
costs of the Company's buildings.
Depreciation expense has been calculated on the straight-line method based
upon the useful lives of the Company's depreciable assets, generally 5 to 40
years. For 1993, depreciation expense increased $731,000 or 9.5 percent
compared to the prior year due to improvements made to the Company's existing
properties during 1993 and 1992. For 1992, depreciation expense increased
$544,000 or 7.6 percent compared to the prior year due to improvements made
to the Company's existing properties during 1991 and 1992.
For 1993, amortization expense increased $138,000 compared to the prior year
due to amounts incurred for loan financing costs, deferred tenant costs, and
goodwill related to the Merger during the year. For 1992, amortization
expense increased $61,000 compared to the prior year due to amounts incurred
for loan financing costs and deferred tenant costs during the year.
Under an advisory agreement with Koger Advisors, Inc. ("KA"), which was
terminated by the Company on December 31, 1991, the Company reimbursed KA for
actual costs incurred in performing advisory services. Advisory expenses
were 0.1 percent of average annualized invested assets for 1991.
General and administrative expenses were 0.6 percent, 1.0 percent, and 0.5
percent of average annualized invested assets for 1993, 1992, and 1991,
respectively. For 1993, general and administrative expenses decreased
$1,664,000 compared to the prior year primarily due to the reduction of
required legal and professional services for dealing with the KPI Chapter 11
Case. For 1992, general and administrative expenses increased $1,963,000
primarily due to (i) the transfer of general and administrative functions
from KA to the Company and (ii) increases in legal fees and professional
fees, principally related to the KPI Chapter 11 Case.
Total interest expense decreased by $59,000 during 1993 primarily because
the average outstanding balance of the Company's loans and mortgages payable
declined. This more than offset the interest expense on the KPI restructured
debt assumed pursuant to the Merger from December 21, 1993 to the end of the
year. Total interest expense decreased by $1,535,000 during 1992 primarily
as a result of the decline in the prime rate, which was the contractual
interest rate for the Company's bank loans. During 1993, 1992, and 1991,
the weighted average interest rate on the Company's variable rate loans was
6.2 percent, 6.2 percent, and 7.9 percent, respectively. The average amount
of these loans outstanding for the Company during 1993, 1992, and 1991 was
$95,110,000, $98,918,000, and $96,481,000, respectively.
Operating Results. Net income totalled $2,452,000 and $933,000 for 1993
and 1992, respectively, and net loss totalled $5,949,000 for 1991. For 1993,
net income increased over the prior year primarily because reductions in the
provision for loan losses and general and administrative expenses were
partially offset by increases in property operations expense and depreciation
and amortization expense. For 1992, the increase is primarily due to the
reduction in provision for loan losses (from $16.7 million to $2.0 million)
and the reduction in total interest expense (from $13.1 million to $11.5
million), which was largely offset by the reduction in interest revenues and
the increases in property operating expenses, depreciation and amortization
expense, and general and administrative expenses.
Management periodically reviews its investment in properties for evidence
of other than temporary impairments in value. Factors considered consist of,
but are not limited to, the following: current and projected occupancy rates,
market conditions in different geographic regions, and management's plans
with respect to its properties. Where management concludes that expected
cash flows will not enable the Company to recover the carrying amount of its
investments, losses are recorded and asset values are reduced. No such
impairments in value existed during 1993, 1992 or 1991.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities. The Company's primary internal sources of cash are
the collection of rents in respect of buildings owned and, prior to KPI's
bankruptcy filing in 1991, receipt of interest on its loans outstanding to
KPI under the Restated Credit Agreement and the Land Credit Agreement. On
the effective date of the Merger, the Company acquired all of the collateral
for the loans to KPI under the Restated Credit Agreement and the Land Credit
Agreement in full satisfaction of these loans. As a real estate investment
trust for Federal income tax purposes (a "REIT"), the Company is required to
pay out annually, as dividends, 95 percent of its REIT taxable income (which,
due to non-cash charges, including provision for losses and depreciation, may
be substantially less than cash flow). In the past, the Company has paid out
dividends in amounts at least equal to its taxable income. The Company
believes that its cash provided by operating activities will be sufficient to
cover debt service payments, and to pay the dividends required, if any, to
maintain REIT status through 1994.
As set forth in the Notes to Consolidated Financial Statements and in
Results of Operations above, because of a decline in the estimated fair value
of collateral which secured the loans to KPI foreclosed in-substance prior to
the Merger, the Company had recorded a total provision for loss on such loans
of $18.7 million through December 21, 1993.
The level of cash flow generated by rents depends primarily on the occupancy
rates of the Company's buildings and increases in effective rental rates on
new and renewed leases and under escalation provisions. As of December 31,
1993, approximately 94 percent of the Company's annualized gross rental
revenues were derived from existing leases containing provisions for rent
escalations. However, market conditions may prevent the Company from
escalating rents under said provisions.
At December 31, 1993, leases representing approximately 23.0 percent of the
gross annual rent from the Company's properties, without regard to the
exercise of options to renew, were due to expire during 1994. Leases were
renewed on approximately 74 percent and 60 percent of the Company's net
rentable square feet which expired during 1993 and 1992, respectively. With
the current economic conditions, certain of these tenants may not renew their
leases or may reduce their demand for space. Based upon the significant
amount of leases which will expire during 1994 and the intense competition
for tenants in the markets in which the Company operates, the Company has
and expects to continue to offer incentives to certain new and renewal
tenants, such as reduced rent during initial lease periods and payment of
tenant improvements costs, which the Company expects will require greater
capital expenditures in 1994 than in 1993. Although most of the Company's
leases permit it to increase rents annually to reflect increases in the
Consumer Price Index or increases in real estate taxes and certain operating
expenses, the Company has chosen, for competitive reasons, in certain cases
not to demand the full increase permitted. In addition, current market
conditions may require that rental rates at which leases are renewed or at
which vacated space is leased be lower than rental rates under existing
leases. These factors may result in reduced occupancy rates for the
Company's buildings which could result in reduced levels of cash flow
generated by operations. The Company cannot predict with any certainty the
degree to which the current economic conditions will affect its operations,
however, slower economic growth in the markets in which the Company owns
buildings may result in lower occupancy rates for, and reduced cash flow
from, the Company's properties.
Governmental tenants (including the State of Florida and the United States
Government) which account for 22 percent of the Company's leased space at
December 31, 1993, may be subject to budget reductions in times of recession
and governmental austerity. There can be no assurance that governmental
appropriations for rents may not be reduced. Additionally, with the current
economic conditions related to the rental of office space, certain of the
private sector tenants which have contributed to the Company's rent stream
may reduce their current demands or curtail their need for additional office
space.
Investing Activities. At December 31, 1993, all of the Company's invested
assets were in properties. Improvements to the Company's existing properties
have been financed through internal operations. During 1993, the Company's
expenditures for improvements to existing properties increased by $3,449,000
over the prior year due to (i) increased building improvement activity, (ii)
increased leasing activity and longer term renewal activity related to lease
expirations in 1993, and (iii) the acquisition of 93 buildings on December
21, 1993 pursuant to the Merger. Prior to the Merger, purchases of
properties were made from KPI under the Purchase Agreement. During 1992
and 1991, the Company did not purchase any buildings.
With the consummation of the Merger, the Company acquired 93 additional
buildings generally located in Koger Centers in which the Company previously
owned buildings. Management of the Company believes that the Merger will
result in advantages to the Company in three significant areas. First,
management believes that the Merger represented the most expeditious and
advantageous method of resolving the uncertainty about the financial
condition of the Company which existed because of the KPI Chapter 11 Case.
Second, by achieving common ownership and management of buildings within the
Koger Centers where the Company and KPI had both owned buildings, the
combined entity will be in a position to maximize the values of all assets.
Third, as one of the largest publicly-held REIT's, management believes that
the combined entity will have access to sources of new debt or equity capital
which neither of the Company nor KPI would have had alone, although there can
be no assurance additional debt or equity can be raised by the Company on
terms acceptable to it.
While the Company believes that the resolution of the KPI Chapter 11 Case,
and consummation of the Merger has provided such advantages, the terms of
the restructured indebtedness of KPI assumed by the Company and the modified
terms of the Company's existing indebtedness will require that a substantial
portion of any debt or equity financing achieved by the Company during the
foreseeable future be applied to the reduction of the current secured
indebtedness of the Company. The Company's restructured debt contains
provisions requiring the Company to use the first $50 million of proceeds
from any equity offering to pay down certain debt. To the extent that the
equity offering proceeds exceed $50 million, one half of the excess must be
used to pay down certain debt with the remainder being available for use at
the Company's discretion. In addition, the Company's bank loans contain
certain principal prepayment obligations in addition to normal principal
repayment. Two of these bank loans require that the Company make additional
principal payments totalling $10 million by December, 1998. Another bank
loan provides that the Company must reduce the principal balance of this
loan, which existed at the date of the Merger, by $5 million (less the amount
of scheduled principal payments which are $2,150,000 in the aggregate) by
December, 1996. Under such circumstances, it is unlikely that the Company
will have financial resources available to complete any significant
additional purchases of income-producing properties, even if the Company
determined that such purchases were otherwise available.
During the quarter ended June 30, 1991, the Company loaned $10 million to
KPI under a promissory note which was collateralized by a pledge of the
Company's stock owned by KPI. On June 29, 1991, the Company repurchased
1,081,081 shares of its common stock from KPI, payment for which was made by
giving KPI full credit against the $10 million loan.
Financing Activities. Historically, the Company's primary external sources
of cash have been bank borrowings, mortgage financings, and public offerings
of equity securities. The proceeds of these financings have been used by the
Company to acquire additional buildings under the Purchase Agreement and, in
anticipation of such acquisitions, had been loaned to KPI under the Restated
Credit Agreement and the Land Credit Agreement.
At December 31, 1993, the Company had no uncollateralized loans outstanding
to banks under short-term open lines of credit. During 1991, the Company
adopted a program to refinance its uncollateralized indebtedness with
financing which was more closely matched in term with the long-term nature of
its assets. Through March 31, 1991, the Company had converted $30 million of
an open line into a term loan which originally matured in January, 1992. The
maturity date on this loan was extended on several occasions through the date
of the Merger. The Company had a revolving line of credit with another bank
which bore interest at the bank's prime rate and matured on December 31, 1992,
at which time the outstanding balance of the loan, which also represented the
maximum amount available under this line of credit, was $43,648,000. On
January 1, 1993, this loan was converted to a term loan which would have been
amortized over 25 years by equal quarterly payments for principal reduction
plus interest at the bank's prime rate. The lender had the option to require
payment of the outstanding principal at the end of 24 months from the
commencement of the term period and at the expiration of each successive 24
month period thereafter. This loan renewed and modified an existing unsecured
line of credit in the original principal amount of $25 million. From the
proceeds of this loan, the Company also repaid an additional $20 million of
its uncollateralized lines of credit owed to another bank. During the quarter
ended June 30, 1991, the Company restructured an existing demand line of
credit with another bank and borrowed an additional $9,365,000 which increased
the total loan outstanding to $25,365,000. On September 30, 1991, the Company
borrowed an additional $458,000 which increased the total loan outstanding to
$25,823,000. The loan converted on that date to a two-year term loan
collateralized by certain properties.
In December, 1993, in connection with the Merger and the resolution of the
KPI Chapter 11 Case, the Company entered into agreements with its three major
bank lenders which provided for revised terms and conditions, including
extended maturity dates, interest rates and amortization schedules. With
respect to approximately $72.7 million of secured bank indebtedness, the
maturity of that indebtedness has been extended to December 21, 2000. During
the first three years of this term, the interest rate is fixed at 6.42
percent per annum for approximately $47.7 million and at 6.386 percent per
annum for approximately $25 million. During the remaining four years of the
term, the interest rate will be set at a rate equal to the sum of (x) the
effective interest rate prevailing on December 21, 1996 for U.S. Treasury
Obligations having a term to maturity of four years plus (y) 210 basis points,
subject to a maximum of 11 percent per annum. Amortization with respect to
this indebtedness will be based on equal monthly installments over a
twenty-five year amortization period. The Company will be required to make
additional principal payments totalling approximately $10 million on December
21, 1998, although the Company's obligation to do so would be reduced to the
extent that it had made prepayments in respect of secured indebtedness to
such lenders out of equity proceeds during the first three years after the
Merger. These lenders have required that until the Company has raised an
aggregate of $50 million of equity the following limitations on dividends
will be applied: (a) in 1996 and 1997, $11,000,000 unless imposition of the
limit would cause loss of REIT status and (b) in 1998 and 1999, $11,000,000
regardless of impact of REIT status.
With respect to approximately $27.6 million of bank indebtedness of the
Company, the maturity has been extended to December 21, 1998 with interest at
the prime rate of the specific bank plus one-half percent per annum. On or
before December 21, 1996, the Company will be required to repay not less than
$5 million of principal of this indebtedness. If the Company pays an
additional $5 million prior to December 21, 1998, the maturity will be
extended to seven years. Distributions of equity proceeds to this lender
made consistent with the terms of the Plan will be a credit against
approximately $8 million of these required principal payments.
In addition, each of these lenders have required affirmative and negative
covenants and other agreements which may become burdensome to the Company.
In particular, all three bank lenders have required that, commencing on the
fifth anniversary of the Effective Date, the Company maintain a debt to net
worth ratio of 1.0 to 1, that the Company maintain loan-to-value ratios
determined on the basis of periodic appraisals of bank collateral and that,
under certain circumstances, additional collateral be provided for
indebtedness to such bank. At December 31, 1993, the debt to net worth ratio
of the Company was 1.2 to 1.0. In addition, each of these bank lenders have
required other covenants generally similar to the provisions set forth in the
Plan with respect to the KPI restructured debt. These other covenants
include reporting requirements, provisions limiting the amount of annual
dividends, limitations regarding additional debt, and general and
administrative expense limitations. In addition, the Company is also
required to maintain certain financial ratios.
With the consummation of the Merger, the Company assumed approximately
$182.6 million of KPI restructured debt. At December 31, 1993, the
outstanding balance of this debt was approximately $181 million. For
additional information concerning terms, interest rates, and maturity dates
see "Loans and Mortgages Payable" footnote in the Notes to Consolidated
Financial Statements.
Based upon current interest rates and assuming only scheduled principal
payments for 1994, management expects total interest expense for 1994 to
increase to approximately $25.5 million. In addition, the high degree of
leverage of the Company may result in the impairment of its ability to obtain
additional financing, to make acquisitions, and to take advantage of
significant business opportunities that may arise, including activities which
require significant funding. This high degree of leverage may also increase
the vulnerability of the Company to adverse general economic and industry
conditions and to increased competitive pressures, especially rental
pressures from less highly leveraged competitors.
In order to generate funds sufficient to make principal payments in respect
of indebtedness of the Company over the longer term, as well as necessary
capital and tenant acquisition expenditures, the Company will be required to
successfully complete refinancings of its indebtedness or procure additional
equity capital. However, there can be no assurance that any such
refinancings or equity investments will be achieved or will generate adequate
funds on a timely basis for these purposes. If additional funds are raised by
issuing equity securities, further dilution to existing shareholders may
result. Moreover, under the terms of the Plan, the Company will be required
to utilize the first $50 million of any proceeds from the sale of equity
securities, as well as 50 percent of such proceeds in excess of $50 million,
to reduce secured indebtedness. The prepayments generally will be made pro
rata among the holders of secured indebtedness and will not generally relieve
the Company of the obligation to meet maturities on the remaining secured
indebtedness. Unfavorable conditions in the financial markets, the high
degree of leverage of the Company, restrictive covenants contained in its
debt instruments and various other factors may limit the ability of the
Company to successfully undertake any such financings and no assurance can
be given as to the availability of alternative sources of funds.
In addition, in the event the Company is unable to generate sufficient funds
to meet principal payments in respect of its indebtedness and distribution
requirements of 95 percent of annual REIT taxable income to its shareholders,
the Company may be unable to qualify for REIT status under the Internal
Revenue Code of 1986. In such an event, the Company will incur federal
income taxes and perhaps penalties, and may be required to decrease the
payment of dividends to its shareholders, and the market price of the
Company's Shares may decrease. The Company would also be prohibited from
requalifying for status as a REIT for tax purposes for five years.
IMPACT OF INFLATION
The Company may experience increases in its expenses as a result of
inflation; however, the amount of such increases cannot be accurately
determined. The Company attempts to pass on inflationary cost increases
through escalation clauses which are included in most leases. However,
market conditions may prevent the Company from escalating rents.
Inflationary pressure may increase operating expenses, including labor and
energy costs (and, indirectly, property taxes) above expected levels, at a
time when it may not be possible to increase lease rates to offset such
higher operating expenses. In addition, inflation can have secondary effects
upon occupancy rates by decreasing the demand for office space in many of the
markets in which the Company will operate. At December 31, 1993, 94 percent
of the Company's annualized rentals were subject to leases having annual
escalation clauses as described under Item 2 "Properties," above. At
December 31, 1992 and 1991, 94 percent of the Company's annualized rentals
were subject to leases having annual escalation clauses.
The interest rate on approximately $58,861,000 of the Company's debt is
floating. Interest rates on the Company's remaining debt is subject to reset
at various dates through December 21, 2003, based upon then current interest
rates for U.S. Treasury obligations. Therefore, the interest rates payable
from time to time on this debt will reflect changes in underlying market
rates of interest, and thus be subject to the effects of inflation.
Historically, inflation has often caused increases in the value of income-
producing real estate through higher rentals. The Company, however, can
provide no assurance that inflation will increase the value of its properties
in the future.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Page
Independent Auditors' Report 27
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1993
and 1992 28
Consolidated Statements of Operations for Each
of the Three Years in the Period Ended
December 31, 1993 29
Consolidated Statements of Changes in
Shareholders' Equity for Each of the Three
Years in the Period Ended December 31, 1993 30
Consolidated Statements of Cash Flows for Each
of the Three Years in the Period Ended
December 31, 1993 31
Notes to Consolidated Financial Statements for
Each of the Three Years in the Period Ended
December 31, 1993 32
Financial Statement Schedules:
Schedule IV - Indebtedness of Related Parties
for Each of the Three Years in the Period
Ended December 31, 1993 50
Schedule X - Supplementary Income Statement
Information for Each of the Three Years in
the Period Ended December 31, 1993 51
Schedule XI - Real Estate and Accumulated
Depreciation as of December 31, 1993 52
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Koger Equity, Inc.
Jacksonville, Florida
We have audited the accompanying consolidated balance sheets of Koger Equity,
Inc. and subsidiaries (the "Company") as of December 31, 1993 and 1992, and
the related consolidated statements of operations, changes in shareholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1993. Our audits also included the financial statement
schedules listed in the Index at Item 8. These financial statements and
financial statement schedules are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Koger Equity, Inc. and
subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1993 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken
as a whole, present fairly in all material respects the information set forth
therein.
As discussed in Note 9 to the consolidated financial statements the Company
is a defendant in a class action proceeding and a derivative action and has
an indemnity agreement with certain former directors of KPI. The ultimate
outcome of these uncertainties cannot presently be determined. Accordingly,
no provision for any loss that may result upon resolution of these matters
has been made in the accompanying consolidated financial statements.
DELOITTE & TOUCHE
Jacksonville, Florida
March 4, 1994
KOGER EQUITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1993 AND 1992
(In Thousands Except Share Data)
1993 1992
ASSETS
Real Estate Investments:
Operating properties $565,957 $311,261
Furniture and equipment 813 25
Accumulated depreciation (30,706) (22,300)
Operating properties - net 536,064 288,986
Undeveloped land held for investment 33,054
Undeveloped land held for sale, at
lower of cost or market value 6,982
Loans to Koger Properties, Inc.
foreclosed in-substance, net 94,889
Cash and temporary investments 18,566 9,283
Accounts receivable, net 3,030 1,910
Receivable from The Koger Partnership, Ltd. 634
Cost in excess of fair value of net assets
acquired from KPI, net of accumulated
amortization of $23 11,623
Other assets 5,136 1,773
TOTAL ASSETS $615,089 $396,841
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgages and loans payable $330,625 $155,362
Accounts payable 3,945 1,009
Payable to Koger Properties, Inc. 1,644
Accrued interest 294 823
Accrued real estate taxes payable 1,201 719
Dividends payable to Koger Properties, Inc. 214
Other liabilities 3,574 1,556
Total Liabilities 339,639 161,327
Commitments and Contingencies
(Notes 2, 3, 4 and 9) - -
Shareholders' Equity
Common stock, $.01 par value; 100,000,000
shares authorized; issued: 20,471,577 and
14,312,500 shares; outstanding 17,597,177
and 13,219,519 shares 205 143
Capital in excess of par value 318,574 267,824
Warrants 1,368
Accumulated dividends in excess of
net income (19,872) (22,324)
Treasury stock, at cost; 2,874,400 and
1,092,981 shares (24,825) (10,129)
Total Shareholders' Equity 275,450 235,514
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $615,089 $396,841
See Notes to Consolidated Financial Statements.
KOGER EQUITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR EACH OF THE THREE YEARS IN THE PERIOD
ENDED DECEMBER 31, 1993
(In Thousands Except Per Share Data)
1993 1992 1991
Revenues
Rental $46,108 $45,957 $45,393
Interest 206 231 7,099
Management fees ($89 from TKPL) 92
Total revenues 46,406 46,188 52,492
Expenses
Property operations 18,507 17,066 16,260
Management fee to Koger Management, Inc. 2,184 2,314 2,281
Depreciation and amortization 8,958 8,089 7,484
Mortgage and loan interest 11,471 11,530 13,065
General and administrative 2,411 4,075 2,112
Provisions for losses on loans to Koger
Properties, Inc. foreclosed in-substance 1,982 16,700
Provision for uncollectible rents 343 199
Direct cost of management fees 56
Undeveloped land costs 24
Advisory fee 539
Total expenses 43,954 45,255 58,441
Net Income(Loss) $ 2,452 $ 933 $(5,949)
Earnings(Loss) Per Common Share $ 0.18 $ 0.07 $ (0.43)
See Notes to Consolidated Financial Statements.
KOGER EQUITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS IN THE PERIOD
ENDED DECEMBER 31, 1993
(In Thousands Except Per Share Data)
Accumulated
Capital Dividends Total
Common Stock in Excess in Excess Share-
Shares Par of Par of Net Treasury holders'
Issued Value Value Warrants Income Stock Equity
BALANCE,
DEC. 31, 1990 14,313 $ 143 $267,824 $ (6,426) $ (129) $261,412
Treasury stock acquired (10,000) (10,000)
Net loss (5,949) (5,949)
Dividends ($.77 per share) (10,882) (10,882)
BALANCE,
DEC. 31, 1991 14,313 143 267,824 (23,257) (10,129) 234,581
Net income 933 933
BALANCE,
DEC. 31, 1992 14,313 143 267,824 (22,324) (10,129) 235,514
Common stock issued 6,159 62 50,750 50,812
Treasury stock acquired (14,696) (14,696)
Warrants issued $1,368 1,368
Net income 2,452 2,452
BALANCE,
DEC. 31, 1993 20,472 $ 205 $318,574 $1,368 $(19,872) $(24,825) $275,450
See Notes to Consolidated Financial Statements.
KOGER EQUITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD
ENDED DECEMBER 31, 1993
(In Thousands)
1993 1992 1991
Operating Activities
Net income (loss) $ 2,452 $ 933 $(5,949)
Adjustments to reconcile net income
(loss) to net cash
provided by operating activities:
Depreciation and amortization 8,958 8,089 7,484
Provision for losses on loans to KPI
foreclosed in-substance - 1,982 16,700
Provision for uncollectible rents 343 199 -
Amortization of mortgage discounts 267 216 -
Accrued interest added to principal 38 - -
Total 12,058 11,419 18,235
Changes in assets and liabilities, net
of effects from purchase
of assets from KPI:
Increase (decrease) in accounts payable,
accrued liabilities
and other liabilities (104) 270 924
Increase (decrease) in payable to KPI 1,287 (160) (709)
Increase in receivables and other assets (1,316) (1,076) (53)
Net cash provided by operating activities 11,925 10,453 18,397
Investing Activities
Improvements to properties (6,423) (2,974) (3,603)
Deferred tenant costs (598) (297) (189)
Additions to furniture and equipment - (19) -
Merger costs (4,221) - -
Cash acquired in purchase of assets
from KPI 15,596 - -
Investments in loans to KPI - - (10,000)
Payments received on loans to KPI -
Cash Collateral Order 1,392 1,181 95
Net cash provided by (used in) investing
activities 5,746 (2,109) (13,697)
Financing Activities
Proceeds from exercise of stock options 1 - -
Dividends paid - - (10,668)
Proceeds from loans - net - - 9,642
Principal payments on mortgages and loans (7,670) (2,227) (2,855)
Financing costs (719) - -
Net cash used in financing activities (8,388) (2,227) (3,881)
Net increase in cash and cash equivalents 9,283 6,117 819
Cash and cash equivalents - beginning
of year 9,283 3,166 2,347
Cash and cash equivalents - end of year $ 18,566 $ 9,283 $ 3,166
See Notes to Consolidated Financial Statements.
KOGER EQUITY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD
ENDED DECEMBER 31, 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Organization. Koger Equity, Inc. was incorporated in Florida on June 21,
1988. Koger Properties, Inc. ("KPI") had maintained a 20 percent interest in
Koger Equity, Inc. through June 28, 1991. On June 29, 1991, Koger Equity
repurchased 1,081,081 shares of its common stock from KPI, which reduced
KPI's percentage ownership to 13.5 percent of Koger Equity's issued and
outstanding shares. On December 21, 1993, KPI was merged with and into Koger
Equity, Inc. (the "Merger").
Principles of Consolidation. The consolidated financial statements include
the accounts of Koger Equity, Inc. and its wholly owned subsidiaries (the
"Company"). All material intercompany accounts have been eliminated in
consolidation.
Real Estate Investments. Operating properties, furniture and equipment, and
undeveloped land held for investment are stated at cost less accumulated
depreciation. Undeveloped land held for sale is carried at the lower of cost
or market value. The Company's debt and equity interest in The Koger
Partnership, Ltd. acquired from KPI were determined by management to have no
assignable value.
Periodically, management reviews its portfolio of operating properties and
undeveloped land held for investment and in those instances where properties
have suffered an impairment in value that is deemed to be other than
temporary, the properties will be reduced to their net realizable value. This
review includes a quarterly analysis of occupancy levels and rental rates for
the Company's properties in order to identify properties which may have
suffered an impairment in value. Management prepares estimates of future cash
flows for these properties to determine whether the Company will be able to
recover its investment. In making such estimates, management considers the
conditions in the commercial real estate markets in which the properties are
located, current and expected occupancy rates, current and expected rental
rates, and expected changes in operating costs. As of December 31, 1993,
there were no such impairments in value. Maintenance and repairs are charged
to operations. Acquisitions, additions, and improvements are capitalized.
Prior to the Merger, loans foreclosed in-substance consisted of loans to KPI
accounted for as foreclosed property even though actual foreclosure had not
occurred. The carrying value of these loans was reduced to the estimated
fair value of the underlying collateral, less estimated selling costs, in
1991 when in-substance foreclosure occurred. At that time, the Company
determined the estimated fair value of the underlying collateral by obtaining
appraisals on certain property and performing forecasted discounted cash flow
analyses on other property. The forecasted discounted cash flow analyses
were reviewed by an independent appraiser. The Company periodically reviewed
the estimated fair value of the underlying collateral and as a result had
established an additional allowance for loss in 1992. During 1992, this
review consisted of obtaining new appraisals, updating previous appraisals
and performing updated forecasted discounted cash flow analyses based on
market assumptions provided by an independent appraiser. During 1993, this
review consisted of performing updated discounted cash flow analyses. The
underlying collateral for these loans was obtained by the Company with the
consummation of the Merger.
Cash collateral order payments received on these loans were recorded as
reductions to principal.
Depreciation and Amortization. The Company uses the straight-line method
for depreciation and amortization. Acquisition costs and building and tenant
improvements are depreciated over the periods benefitted by the expenditures
which range from 5 to 40 years. Deferred tenant costs are amortized over the
term of the related leases. Deferred financing charges are amortized over
the terms of the related agreements. Cost in excess of fair value of net
assets acquired related to the Merger is being amortized over 15 years.
Revenue Recognition. Rentals are generally recognized as revenue over the
lives of leases according to provisions of the lease agreements. However, the
straight-line basis, which averages annual minimum rents over the terms of
leases, is used to recognize minimum rent revenues under leases which provide
for material varying rents over their terms. Interest income is recognized
on the accrual basis on interest-earning investments. Interest for which
payment was due, based upon the contractual provisions of the loans to KPI
under the Restated Credit Agreement and the Land Credit Agreement, after KPI
filed a petition under Chapter 11 of the United States Bankruptcy Code in
September 1991 and through the date of the Merger, was not accrued.
Federal Income Taxes. The Company is qualified and has elected tax
treatment as a real estate investment trust under the Internal Revenue Code
(a "REIT"). Accordingly, the Company distributes at least 95 percent of its
REIT taxable income to its shareholders. Since the Company had no REIT
taxable income in 1993 or 1992, no distributions to shareholders were made.
To the extent that the Company pays dividends equal to 100 percent of real
estate investment trust taxable income, the earnings of the Company are taxed
at the shareholder level.
Earnings (Loss) Per Common Share. Earnings (loss) per common share have
been computed based on the weighted average number of shares of common stock
outstanding (13,351,525 shares for the year ended December 31, 1993,
13,219,519 shares for the year ended December 31, 1992, and 13,749,693 shares
for the year ended December 31, 1991). There were no dilutive common
equivalent shares outstanding during the years ended December 31, 1993, 1992,
and 1991.
Fair Value of Financial Instruments. The Company believes that the carrying
amount of its financial instruments (cash and short-term investments,
accounts receivable, loans to KPI foreclosed in-substance, accounts payable,
and mortgages and loans payable) is a reasonable estimate of fair value of
these instruments.
Statements of Cash Flows. Cash in excess of daily requirements is invested
in short-term monetary securities. Such temporary cash investments have an
original maturity of less than three months and are deemed to be cash
equivalents for purposes of the statements of cash flows.
During 1993, KPI was merged with and into the Company. Pursuant to the
Merger, the Company received the collateral for the loans to KPI, which were
accounted for as foreclosed in-substance, in full satisfaction of those
loans. As of December 21, 1993, the loans to KPI foreclosed in-substance
had a carrying value of approximately $93,498,000 which was management's
best estimate of the fair value of the collateral received ($121,743,000)
less the mortgage debt related to such collateral ($28,245,000) which was
assumed by the Company.
In addition, the Company acquired the remaining assets and liabilities of
KPI by issuing 6,158,977 shares of the Company's common stock and warrants
to purchase 644,000 shares of the Company's common stock. The following
represents the fair value of the KPI assets acquired and liabilities assumed
by the Company pursuant to the Merger in exchange for the Company's common
stock and warrants (in thousands).
Fair value of assets and treasury stock
acquired, including cash of $15,596 $215,855
Fair value of common stock and warrants
issued and direct merger costs (56,461)
Fair value of liabilities assumed $159,394
During 1991, the Company converted $30,000,000, of a $50,000,000
uncollateralized line of credit, into a term loan collateralized by certain
buildings. The remaining $20,000,000 portion of this credit facility plus
$418,000 in related financing costs were repaid from the proceeds of a
revolving line of credit from another bank. In addition, in 1991 the
Company loaned $10,000,000 to KPI under a promissory note which was
collateralized by a pledge of the Company's stock owned by KPI. On June 29,
1991, the Company repurchased 1,081,081 shares of its common stock from
KPI, payment for which was made by giving full credit against the $10,000,000
loan. The purchase was based upon the composite closing price per share of
the Company's common stock on June 28, 1991, of $9.25.
For 1993, 1992, and 1991, total interest payments were $12,421,000,
$10,693,000, and $13,129,000, respectively, for the Company.
Reclassification. Certain 1992 amounts have been reclassified to conform
with 1993 presentation.
2. TRANSACTIONS WITH RELATED PARTIES.
General. The Company was incorporated for the purpose of investing in the
ownership of income producing properties, primarily commercial office
buildings developed by KPI. On September 25, 1991, KPI and The Koger
Partnership, Ltd. ("TKPL"), a Florida limited partnership of which KPI was
the managing general partner, filed petitions under Chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code"). On August 10, 1993, TKPL
completed the establishment of a $4.5 million reorganization financing
facility which represented the fulfillment and the final condition to TKPL's
emergence from bankruptcy and, as a result, the plan of reorganization for
the TKPL Chapter 11 Case became effective as of June 1, 1993. On December
21, 1993, KPI was merged with and into the Company.
Purchase Agreement. Under a purchase agreement (the "Purchase Agreement")
with KPI and its subsidiaries, through December 31, 1990, the Company
purchased an aggregate of 126 buildings for $299.9 million. In connection
with such purchases, the Company purchased $80.6 million of buildings in 1988
for cash. Subsequent buildings were purchased by either assuming previously
existing indebtedness of the selling entity secured by the purchased
properties or by reducing the amount of indebtedness outstanding under a
Credit Agreement between the Company as lender and KPI and its affiliates,
as borrowers, dated August 25, 1988, as amended (the "Credit Agreement").
The total of previously existing indebtedness assumed was $32,377,000
related to the purchase of 30 buildings. The Purchase Agreement established,
and the purchase transactions were accomplished with procedures, including
independent appraisals, which required that each purchase transaction be
conducted in good faith, and at purchase prices, which in the Company's
opinion, provided not less than a reasonably equivalent value to the seller
in each instance.
Loans to KPI Foreclosed In-Substance. As of December 31, 1990, the Company
and KPI entered into an Amended and Restated Credit Agreement (the "Restated
Credit Agreement") which replaced the Credit Agreement. These loans were
collateralized by first and second mortgages and assignments of rents on 62
completed office buildings and two parcels of land held for future
development which were owned by KPI and located in existing Koger Centers in
which the Company owned buildings or claimed rights under the Purchase
Agreement. These loans bore interest at a floating rate, adjusted quarterly
and determined by adding 2.5 percent to the average yield for the prior
quarter on U. S. Treasury Notes maturing three years after any date during
such quarter but not less than 11 percent or more than 13 percent. KPI
failed to make the interest payments due on this loan as of September 30,
1991, did not make contractual interest payments after that date, and was in
default by reason of such failure. Unpaid interest (amounting to $23,676,000
from the date of KPI's bankruptcy to December 20, 1993) has not been
recognized in the accompanying consolidated financial statements of the
Company. On October 17, 1991, the Bankruptcy Court entered an Order granting
KPI's Motion to Use Cash Collateral (the "Cash Collateral Order"). Under the
terms of the Cash Collateral Order, during the period of the KPI Chapter 11
Case, the Company was entitled to be paid debt service in respect of the
loans which were outstanding under the Restated Credit Agreement to the
extent of the net cash flow of the collateral for such loans, after provision
for payment of property-specific operating costs and expenses, a management
fee equal to five percent of rents received, an allocation of KPI's excess
overhead, certain escrows for property-specific capital and tenant
improvements costs, leasing commissions and taxes, and payment of debt
service on senior mortgages, if any. The Company recognized no interest on
these loans during 1993 and 1992. For the year ended December 31, 1991, KPI
paid the Company $4,786,000, for interest on these loans. All payments
received under the Cash Collateral Order ($94,910 in 1991, $1,180,447 in
1992 and $1,392,113 in 1993) were applied to the principal balance
outstanding. Immediately prior to the Merger, the loans outstanding
under the Restated Credit Agreement totalled approximately $85.4 million,
with a carrying value of approximately $67.0 million. On the date of the
Merger, the Company received the collateral for the loans to KPI under the
Restated Credit Agreement in full satisfaction of these loans.
As of December 31, 1990, the Company and KPI entered into an agreement (the
"Land Credit Agreement") under which the Company loaned $28.3 million to KPI.
The loans under the Land Credit Agreement were collateralized by mortgages
on land held for future development in existing Koger Centers in which the
Company owned buildings or claimed rights under the Purchase Agreement. The
interest rate on these loans was fixed at 10.25 percent. KPI failed to make
interest payments due on this loan as of September 30, 1991, did not make
contractual interest payments after that date, and was in default by reason
of such failure. Unpaid interest (amounting to $6,673,000 from the date of
KPI's bankruptcy to December 20, 1993) has not been recognized in the
accompanying consolidated financial statements of the Company. The Company
recognized no interest on this loan during 1993 and 1992. During 1991, KPI
paid the Company $1,934,000 for interest on this loan. Since none of the
properties which collateralized this loan generated cash flow, the Company
did not receive any debt service payments for this loan under the provisions
of the Cash Collateral Order. Immediately prior to the Merger, the loan
outstanding under the Land Credit Agreement totalled approximately $28.3
million, with a carrying value of $26.5 million, which was net of a $1.4
million discount. This discount was not being amortized as interest income
because management had discontinued recognition of interest income on this
loan. On the date of the Merger, the Company received the collateral for the
loan to KPI under the Land Credit Agreement in full satisfaction of this loan.
Through the date of the Merger, the Company continued to account for the
collateral for the loans under the Restated Credit Agreement and the Land
Credit Agreement as loans foreclosed in-substance and had recorded a
provision for loss in the amount of $18.7 million through December 21, 1993.
This included a $2 million provision recorded during 1992 based upon
management's continuing evaluation of collateral values.
Resolution of KPI Chapter 11 Case. On April 30, 1993, the Company and KPI
jointly proposed a plan of reorganization of KPI (the "Plan") which provided
for the merger of KPI with and into the Company in exchange for the issuance
of shares of the Company's common stock (the "Shares") to certain creditors
of KPI and the issuance of warrants to purchase Shares (the "Warrants") to
shareholders of KPI and holders of certain securities laws claims against
KPI and the settlement of the Company's claim against KPI. On August 11,
1993, the shareholders of the Company approved the Merger and the issuance of
the Shares and Warrants pursuant thereto. On December 8, 1993, the Plan was
confirmed by the Bankruptcy Court and the Merger became effective on December
21, 1993. See Note 3 "KPI Merger" for further discussion.
Advisory Agreement. Under the terms of an advisory agreement, Koger
Advisors, Inc. ("KA"), a former wholly owned subsidiary of KPI, managed the
Company's investment portfolio and provided advice and recommendations with
respect to all aspects of the Company's business through December 31, 1991.
For the year ended December 31, 1991, the Company reimbursed KA $539,000,
for out-of-pocket expenses incurred by KA in providing advisory services to
the Company. The term of the Advisory Agreement ended December 31, 1991.
Functions formerly performed by KA have been performed by the Company through
its officers and employees since January 1, 1992.
Management Agreement. Prior to the Merger, Koger Management, Inc. ("KMI")
was responsible for the leasing, operation, maintenance, and management of
each of the Company's properties. The management fee was five percent of
the gross rental receipts collected on the property managed for the Company
by KMI. For the years ended December 31, 1993, 1992, and 1991, the Company
incurred management fee expenses to KMI of $2,184,000, $2,314,000, and
$2,281,000, respectively, for property management services. The Management
Agreement expired on December 31, 1991, but had been extended on a month-to-
month basis. With the Merger, the Company assumed all of the leasing and
other management responsibilities for its properties including those acquired
in the Merger.
Other. A director of the Company is a Vice President of an affiliate of a
shareholder who along with certain of its affiliates owns 18 percent of the
Shares of the Company. The Company has entered into an agreement with this
shareholder to register shares owned by the shareholder and its affiliates
pursuant to the registration requirements of the Securities Act of 1933 in up
to four public offerings and include these Shares in an unlimited number of
public offerings which may be made on behalf of the Company or others for a
period of eight years following the effective date of the Merger, December
21, 1993. All expenses, except for brokerage discount, of any of these
offerings will be borne by the Company.
In addition, one of the agreements contains provisions which permit the
shareholder and certain of its affiliates to own the greater of (i) 23
percent of the outstanding Shares or (ii) 4,047,350 of the outstanding
Shares, as adjusted for recapitalization without triggering the Company's
common stock rights agreement. The Company has also covenanted that
following the effective date of the Merger, December 21, 1993, for a period
of eight years the Company would not amend, alter or otherwise modify the
common stock rights agreement or take any action, which would limit or
eliminate certain rights of the shareholder and its affiliates without
prior consent of the shareholder.
3. KPI MERGER.
On December 8, 1993, the Plan was confirmed by the Bankruptcy Court and the
Merger of KPI into the Company became effective on December 21, 1993.
Pursuant to the Merger, the Company received the collateral of 62 office
buildings and thirteen parcels of land and related restructured mortgages,
for the loans to KPI under the Restated Credit Agreement and the Land Credit
Agreement in full satisfaction of these loans. In addition, in exchange for
the remaining office buildings, land parcels, related restructured debt and
other net assets of KPI, the Company issued 6,158,977 Shares, or
approximately 35 percent of the Shares outstanding after the Merger, to
certain unsecured creditors of KPI. The KPI common stock outstanding
immediately prior to the Merger was converted into the right to receive one
Warrant for every 50 shares of KPI common stock. Holders of certain
securities law claims against KPI also received Warrants. A total of 644,000
Warrants were issued. Each Warrant gives the holder the right to purchase
one Share at a price of $8.00 per share, such rights to be exercisable until
June 30, 1999. The Warrants are subject to redemption at the option of the
Company at prices ranging from $1.92 to $5.24 per Warrant.
With the Merger, the Company acquired substantially all of the assets of
KPI, free and clear of all liens, claims and encumbrances, except (i)
encumbrances relating to certain secured indebtedness of KPI (aggregating
$182.6 million) which was restructured under the Plan and (ii) an option
and right of first refusal held by TKPL on certain developed buildings and
parcels of undeveloped land, which are located in TKPL office centers. KPI
assets acquired by the Company in the Merger included a total of 93 buildings
containing 3,848,130 net rentable square feet together with approximately
295 acres of unimproved land suitable for development, and 1,781,419 Shares
held by KPI. As a result of the Merger, the Company assumed all of the
leasing and other management responsibilities for its properties including
those acquired in the Merger. In addition, immediately prior to the Merger
KPI transferred all of its debt and equity interest in TKPL to a newly formed
wholly owned subsidiary of the Company, Southeast Properties Holding
Corporation, Inc., which became the managing general partner of TKPL.
The accounting treatment for the Merger has been separated into two
components: (i) the receipt by the Company of the collateral for the loans
to KPI made pursuant to the Restated Credit Agreement and the Land Credit
Agreement (loans to KPI foreclosed in-substance), in full satisfaction of
these loans; and (ii) the acquisition by the Company of the remaining assets
and restructured liabilities of KPI.
At the date of the Merger, the KPI real estate assets securing the loans
due from KPI and related restructured mortgage balances were recorded at
their relative fair values. The remaining assets and treasury stock acquired
and liabilities assumed in exchange for the Shares and Warrants issued were
recorded at their relative fair values under the purchase method of
accounting. The acquisition price for these net assets was established
based upon the value of Shares ($8.25 per Share) and Warrants ($2.125 per
Warrant) as of the consummation date of the Merger plus the direct
acquisition costs totaling $4,281,000 incurred by the Company. Cost in
excess of fair value of net assets acquired from KPI totalled $11,646,000
and is being amortized over 15 years.
Revenues and expenses of the assets and liabilities acquired from KPI are
reflected in the Consolidated Statements of Operations for the 11 days from
the date of the Merger, December 21, 1993, through December 31, 1993.
The following unaudited pro forma results of operations for the years ended
December 31, 1993 and 1992 assume the acquisition occurred as of the
beginning of the respective periods after giving effect to certain
adjustments including amortization of cost in excess of fair value of net
assets acquired from KPI, increased interest expenses on assumed debt and
increased depreciation expense on the new adjusted accounting bases of the
real estate assets acquired. The pro forma results have been prepared for
comparative purposes only and do not purport to indicate the results of
operations which would actually have occurred had the combination been in
effect on the dates indicated, or which may occur in the future.
(in thousands)
UNAUDITED
1993 1992
Total Revenues $94,459 $91,933
Total Expenses 91,183 90,530
Net Income $ 3,276 $ 1,403
Earnings Per Common Share $ 0.19 $ 0.08
4. INVESTMENTS IN THE KOGER PARTNERSHIP, LTD.
General. Pursuant to the Merger, Southeast Properties Holding Corporation,
Inc. ("Southeast"), a wholly owned subsidiary of the Company, became the
managing general partner of TKPL. Immediately prior to the Merger, KPI
transferred all of its debt and equity interest in TKPL to Southeast. These
interests included (1) 90,360 TKPL General and Limited Partnership Units (the
"Units") and (2) a restructured unsecured note from TKPL with a principal
amount of approximately $31 million. In light of the terms of the TKPL plan
of reorganization and its restructured debt, the Company has determined that
these investments have no value.
Basis of Accounting for the Investment in TKPL. Southeast has significant
influence over TKPL's activities because it owns 32 percent of TKPL's
outstanding Units. However, Southeast does not control TKPL for accounting
purposes and, accordingly, accounts for its investment using the equity
method. No losses of TKPL are allocated to Southeast because Southeast is
not obligated to fund losses of TKPL as stated in the Third Amended and
Restated Agreement of Limited Partnership dated August 3, 1993.
Duties to and Compensation from TKPL. Southeast, in its capacity as
Managing General Partner, generally has responsibility for all aspects of
TKPL's operations and receives as compensation for its services a management
fee equal to nine percent of the gross rental revenues derived from the
properties it manages for TKPL. All third-party leasing commissions incurred
on TKPL buildings are the responsibility of the Company. From the date of
the Merger, December 21, 1993, through December 31, 1993, the management
fees earned were approximately $89,000. In the event that certain benchmarks
for retirement of indebtedness are not met, the TKPL plan provides that an
alternate general partner will assume responsibilities for operation and
management of TKPL, and will initiate procedures to liquidate the assets of
TKPL on an expedited basis. There is no assurance that necessary
refinancing(s) and/or sale(s) can be achieved or that the alternate general
partner will not assume control of TKPL.
Option Agreement with TKPL. Pursuant to the Merger, the Company assumed an
Option Agreement, between KPI and TKPL, which granted TKPL the exclusive
right to acquire (the "Option") from KPI all of its interest in any or all
of the developed buildings and parcels of undeveloped land, which are located
in TKPL office centers (the "Option Property"). Under the Option Agreement,
TKPL was also granted a right of first refusal as to the Option Property.
The Option's exercise price will be based on the fair value of the subject
property determined as of a date within 180 days of exercise. The Option
Agreement will be effective until June, 2000.
Incentive Agreement with TKPL. Pursuant to the Merger, Southeast assumed
an incentive agreement, originally between KPI and TKPL. Under the terms of
this agreement, TKPL shall pay to Southeast, as long as Southeast is the
property manager for TKPL, an incentive fee (the "Incentive Fee") in respect
of any sale or refinancing of individual buildings (or buildings as unified
office parks). The Incentive Fee will be computed based on the net proceeds
received by TKPL in respect of such dispositions or refinancings (defined
generally as gross proceeds of such dispositions or refinancings, less any
repayment of certain obligations in respect of such disposed or refinanced
property, and payment of any related costs of sales or refinancing costs
(commissions to related parties not to exceed 3 percent of net proceeds))
and will decline according to the following schedule:
Twelve Month
Periods following Percentage of
June, 1993 Net Proceeds
1 through 4 15%
5 through 6 5%
Thereafter 0%
Pursuant to an agreement, the first $5 million of Incentive Fees which
otherwise would be payable to Southeast under the terms of the Incentive
Agreement will be required to be deposited into a special collateral account
to provide additional collateral to secure the payment of certain debt of
TKPL.
Summarized Financial Information. The condensed balance sheets of TKPL as
of December 31, 1993 and 1992 and the condensed statements of operations for
TKPL for the three years ended December 31, 1993, are summarized below
(in thousands).
BALANCE SHEET DATA: As Restated
(in thousands) 1993 1992
Total Assets $157,239 $175,072
Liabilities $188,740 $194,780
Deficiency in assets (31,501) (19,708)
Total Liabilities and Deficiency in Assets $157,239 $175,072
OPERATIONS DATA: As Restated As Restated
(in thousands) 1993 1992 1991
Revenues $ 35,753 $ 36,765 $ 36,342
Operating, Interest and Other Expenses (34,089) (31,957) (35,674)
Depreciation and Amortization (13,457) (15,201) (15,426)
Net loss $(11,793) $(10,393) $(14,758)
5. LOANS AND MORTGAGES PAYABLE.
During 1993, the Company's bank loans were modified and extended in
connection with the Merger. These bank loans had an outstanding balance of
$100,308,000 at December 31, 1993. Prior to the modification of the loans,
the loans bore interest at rates equal to such banks' prime rates. These
loans are collateralized by mortgages on certain operating properties. At
December 31, 1993, $47,656,000 of these loans bear interest at 6.42 percent
and have a final maturity date of December 21, 2000. This loan is
collateralized by properties with a carrying value of $69,137,000. At
December 31, 1993, $25,027,000 of these loans bear interest at 6.386 percent
and have a final maturity date of December 21, 2000. This loan is
collateralized by properties with a carrying value of $43,210,000. The
interest rate on both of these bank loans will be adjusted in December, 1996
to a rate equal to the sum of (i) the effective interest rate prevailing on
four year U.S. Treasury Obligations, plus (ii) 210 basis points, subject to
a maximum of 11 percent per annum. Monthly payments on these loans include
principal amortization based on a 25 year amortization period. In addition,
the Company will be required to make additional principal payments totalling
$10 million by December, 1998. At December 31, 1993, $27,625,000 of these
loans bear interest at the bank's prime rate plus one-half percent and has a
maturity date of December 21, 1998, with an optional two year extension.
Monthly payments on this loan include interest and fixed payments of
principal which increase annually. This loan is collateralized by properties
with a carrying value of $49,888,000. On or before December 21, 1996, the
Company will be required to repay not less than $5 million of principal of
this indebtedness. If the Company pays an additional $5 million prior to
December 21, 1998, the maturity will be extended to seven years.
At December 31, 1993, the Company had mortgages payable which total
$49,334,000. The mortgages payable represent the outstanding balance of
$22,917,000, which is net of a $170,000 discount, for debt assumed in
connection with property purchased from KPI through 1990 and the outstanding
balance of $26,417,000, which is net of a $1,121,000 discount, for mortgage
debt obtained from an insurance company. Such mortgages are generally
amortizing, bear interest at rates ranging from 7.75 percent to 10.125
percent, and are collateralized by office buildings with a carrying value of
$97,567,000 at December 31, 1993.
In connection with the Merger, the Company assumed approximately $182.6
million of restructured debt from KPI on December 21, 1993. Information
with respect to such debt is as follows (in thousands):
Outstanding Balance
KPI Restructured Debt 12/21/93 12/31/93
Senior Bank Mortgage Debt $ 83,992 $ 83,992
Junior Bank Mortgage Debt 11,354 10,278
Insurance Company Mortgage Debt 60,707 60,298
Negative Amortization (Insurance Company Debt) 80 118
Other Mortgage Debt 21,168 20,958
Tax Notes 5,040 5,040
Mechanics' Liens 287 287
$182,628 $180,971
Senior Bank Mortgage Debt, acquired in connection with the Merger, with
outstanding balances of approximately $84 million will mature in December,
2003. Interest payments are due monthly based on a 6.62 percent interest
rate with monthly amortization beginning in December, 1994. The interest
rate will adjust in April, 1998 to a rate equal to the sum of (i) the then
prevailing interest rate on five year U.S. Treasury Obligations plus (ii)
210 basis points with a maximum rate of 10 percent.
Junior Bank Mortgage Debt totaling approximately $10.3 million is secured
by properties that also serve as collateral for Senior Bank Mortgage Debt.
The Junior Bank Mortgage Debt matures in December, 2000 and accrues interest
at the prime rate of the lender (6 percent at December 31, 1993). Accrued
interest on Junior Bank Mortgage Debt must be paid no later than December,
1998. Monthly interest payments are required beginning in January, 1999.
Accrued interest on this debt will be forgiven if the outstanding balance is
paid in full prior to December, 1996. Interest accrued and forgiven will be
reflected as an adjustment to interest expense in the year forgiven.
Insurance Company Mortgage Debt with outstanding balances at December 31,
1993, of approximately $59.9 million were acquired in connection with the
Merger. This indebtedness is non-recourse to the Company, but is secured by
all former KPI properties on which each lender held mortgages. These
mortgages include provisions during the period ending December 21, 1996,
for a portion of the interest earned, equal to 25 percent, 20 percent and 15
percent in, respectively, the first, second and third years, may be deferred
at the option of the Company and added to principal, subject to a minimum
interest payment rate of seven and one-half percent per annum. The interest
rates will be reset on various dates, as defined. No reset interest rate
may be less than eight percent per annum. However, if any interest reset
rate would exceed ten percent per annum, the Company may elect to establish
the interest reset rate at ten percent per annum, in which case the maturity
of the indebtedness in question shall be the date on which a U.S. Treasury
Obligation purchased on the interest reset date in question with an effective
interest rate of 210 basis points below ten percent per annum would mature.
In the absence of an election to fix any interest reset rate at ten percent
per annum, all of such indebtedness matures on December 21, 2003. The loans
begin principal amortization in 1997. Additional Insurance Company Mortgage
Debt totalling $0.4 million which retained their existing balances and terms
were also acquired from KPI in connection with the Merger. The interest
rates on these loans range from 7.5 percent to 9.5 percent.
Other Mortgage Debt acquired in the Merger totals approximately $21 million
and matures in June, 2001. Interest payments are due monthly based on the
prime rate plus one percent with a minimum rate of 6.62 percent and a maximum
rate of 10 percent.
At December 31, 1993, approximately $4.5 million of Tax Notes were
outstanding to taxing authorities and banks for 1991 taxes on certain
properties acquired from KPI. The Tax Notes mature in December, 1999 and
bear interest at 8.5 percent. The notes are interest only for two years and
beginning in December, 1995 must be repaid in five equal annual installments
of principal. Other notes issued for outstanding taxes are unsecured with
an outstanding balance of $501,000. These notes mature September, 1997 and
accrue interest at 7.0 percent. Principal and interest are paid on a
quarterly basis commencing March, 1994.
Mechanics Liens of $287,000 mature in December, 2000. Payments are made
annually and bear interest at 8.5 percent.
The Company's restructured debt contains provisions requiring the Company
to use the first $50 million of proceeds from any equity offering to pay
down certain debt. To the extent that equity offering proceeds exceed $50
million, one half of the excess must be used to pay down debt with the
remainder being available for use at the Company's discretion.
In addition to reporting and other requirements, the restructured debt
agreements contain provisions limiting the amount of annual dividends,
limiting additional borrowings, and limiting general and administrative
expense. The Company is also required to maintain certain financial ratios.
The annual maturities of loans and mortgages payable, which are gross of
$1,291,000 of unamortized discounts, as of December 31, 1993, are summarized
as follows (dollars in thousands):
Year Ending
December 31, Total
1994 $ 3,252
1995 5,736
1996 8,901
1997 14,564
1998 18,920
Subsequent Years 280,543
Total $331,916
6. LEASES.
The Company's operations consist principally of owning and leasing of
office space. Most of the leases are for terms of three to five years.
Generally, the Company pays all operating expenses, including real estate
taxes and insurance. At December 31, 1993, 94 percent of the Company's
annualized rentals were subject to rent escalations based on changes in the
Consumer Price Index or increases in real estate taxes and certain operating
expenses. A substantial number of leases contain options that allow leases
to renew for varying periods.
The Company's leases are operating leases and expire at various dates
through 2003. Minimum future rental revenues from leases in effect at
December 31, 1993, determined without regard to renewal options, are
summarized as follows:
Year Ending Amount
December 31, (In thousands)
1994 $ 79,048
1995 58,728
1996 37,983
1997 24,618
1998 14,026
Subsequent Years 30,218
Total $244,621
The above minimum future rental income does not include contingent rentals
that may be received under provisions of the lease agreements. Contingent
rentals amounted to $1,407,000, $1,638,000, and $762,000 for the years 1993,
1992, and 1991, respectively.
7. STOCK OPTIONS AND RIGHTS.
1988 Stock Option Plan. The Company's Amended and Restated 1988 Stock
Option Plan (the "1988 Plan") provides for the granting of options to
purchase up to 500,000 shares of its common stock to key employees of the
Company and its subsidiaries. The 1988 Plan provides that the options
granted contain stock appreciation rights which may be exercised in lieu of
the option. To exercise the option, payment of the option price is required
before the option shares are delivered. Alternatively, the optionee may
elect to receive shares equal in value to the difference between the
aggregate fair market value of the shares exercised on the exercise date and
the aggregate exercise price of those shares. With the consent of the
Company's Compensation Committee, the optionee may also elect to exercise
the option in part by receiving cash equal to the minimum amount required
to be withheld for payroll tax purposes and the balance by receiving shares
equal to the difference between the aggregate fair market value and the
aggregate exercise price, less any cash received. All options originally
granted under the 1988 Plan on August 25, 1988, at an exercise price of
$20.00 per share were exercisable on December 31, 1993, and terminate August
24, 1995, seven years after the date of grant.
Pursuant to the 1988 Plan, the Compensation Committee of the Company's
Board of Directors granted options to purchase 286,250 shares on February
5, 1992 to the Company's officers at an exercise price of $5.125 per share,
which was the closing market price on the American Stock Exchange on the date
of the grant. These options expire seven years from the date of grant and
are exercisable beginning one year from the date of grant at a cumulative
annual rate of 20 percent of the shares covered by each option being fully
exercisable five years after the date of grant. The grant of certain of
these options was conditioned upon the surrender of previously granted and
outstanding options to purchase 23,825 shares at an exercise price of $20.00
per share.
1988 Stock Purchase Option Plan. As incentive compensation, on August 25,
1988, the Company granted a Stock Purchase Option to purchase up to 500,000
shares of its common stock to its former advisor, KA, which were assigned to
key employees of KA, KMI, KPI, and other affiliates of KA. The Stock
Purchase Option provides that upon exercise of an option, the optionee may
purchase shares for cash or may elect to receive shares equal in value to
the excess of the fair market value of shares exercised over the exercise
price. The shares became exercisable in March, 1990 and will expire June 29,
1995. Options to purchase shares under the Stock Purchase Option were
assigned by KA to its respective key employees and those of its affiliates
who are now employees of the Company.
Information concerning the options granted is summarized below.
Date of Shares Under Exercise Price
Plan Grant Option Per Share Total
1988 Stock
Option Plan 8/25/88 173,246 $20.000 $3,464,920
2/05/92 286,150 5.125 1,466,519
Stock
Purchase
Option 8/25/88 299,180 20.000 5,983,600
At December 31, 1993, there were 40,504 shares available for the granting
of options under the 1988 Plan. At December 31, 1993, options to purchase
100 shares had been exercised.
1993 Stock Option Plan. The Company's 1993 Stock Option Plan (the "1993
Plan") was approved by the Shareholders of the Company at its Annual Meeting
held on August 11, 1993. The 1993 Plan provides for the granting of options
to purchase up to 1,000,000 shares of its common stock to key employees of
the Company and its affiliates. The 1993 Plan provides that the options
granted contain stock appreciation rights which may be exercised in lieu of
the option. To exercise the option, payment of the option price is required
before the option shares are delivered. Alternatively, the optionee may
elect to receive shares equal in value to the difference between the aggregate
fair market value of the shares exercised on the exercise date and the
aggregate exercise price of those shares. With the consent of the Company's
Compensation Committee, the optionee may also elect to exercise the option in
part by receiving cash equal to the minimum amount required to be withheld
for payroll tax purposes and the balance by receiving shares equal to the
difference between the aggregate fair market value and the aggregate
exercise price, less any cash received. At December 31, 1993, no options
had been granted under the 1993 Plan. At December 31, 1993, there were
1,000,000 shares available for the granting of options under the 1993 Plan.
Shareholder Rights Plan. Pursuant to a Shareholder Rights Plan (the
"Rights Plan"), on September 30, 1990, the Board of Directors of the
Company declared a dividend of one Common Stock Purchase Right for each
outstanding share of common stock of the Company. Under the terms of the
Rights Plan, the rights which were distributed to the shareholders of record
on October 11, 1990, trade together with the Company's common stock and are
not exercisable until the occurrence of certain events (none of which have
occurred through December 31, 1993), including acquisition of, or
commencement of a tender offer for, 15 percent or more of the Company's
common stock. In such event, each right entitles its holder (other than
the acquiring person or bidder) to acquire additional shares of the Company's
common stock at a fifty percent discount from the market price. The rights
are redeemable under circumstances as specified in the Rights Plan. The
Rights Plan was amended effective December 21, 1993 for a certan shareholder
and its affiliates, see Note 2 for further discussion of this amendment.
8. DIVIDENDS.
The Company paid no dividends during 1993 or 1992. Dividends of $.77 per
share were paid during the year ended December 31, 1991, all of which was
ordinary income for income tax purposes. The Company intends that the
quarterly dividend payout in the last quarter of each year will be adjusted
to reflect the distribution of at least 95 percent of the Company's taxable
income as required by the Federal income tax laws.
The Company's taxable income/(loss) prior to the dividends paid deduction
for the years ended December 31, 1993, 1992, and 1991 was approximately
$(7,887,000), $(13,329,000), and $10,646,000, respectively. The difference
between net income for financial reporting purposes and taxable income
results primarily from different methods of accounting for bad debts,
depreciable lives related to the properties owned, and advance rents
received. At December 31, 1993, the net tax basis of the Company's assets
and liabilities exceeded the net book basis of assets and liabilities in the
amount of approximately $136,000.
Pursuant to the Plan and the Merger of KPI into the Company, the Company
will be subject to certain dividend limitations which, however, will not be
applied if they would cause loss of the Company's REIT status.
9. LITIGATION.
The Company, certain of its present and former officers and directors, and
KPI and certain of its subsidiaries are parties to a class action filed in
October, 1990 (the "Securities Action"). It is alleged in the Securities
Action that various press releases, shareholder reports, and/or securities
filings failed to disclose and/or misrepresented the Company's business
policies in violation of certain provisions of the federal securities law
and seeks unspecified damages therefore. The Company believes that claims
made in the Securities Action are without merit and intends to vigorously
contest the proceeding.
A derivative action in the District Court was commenced on October 29,
1990, by Howard Greenwald and Albert and Phyllis Schlesinger, shareholders
of the Company, against the Company, KPI, all of the then current directors
of the Company, including: Ira M. Koger, James B. Holderman, Allen R. Ransom,
Wallace F. E. Kienast, S. D. Stoneburner, Yank D. Coble, Jr., G. Christian
Lantzsch, A. Paul Funkhouser and Stephen D. Lobrano, alleging breach of
fiduciary duty by favoring KPI over the interest of the Company and failing
to disclose or intentionally misleading the public as to the Company's cash
flow, dividend and financing policies and status, and seeking damages
therefor (the "Derivative Action"). During the course of the Derivative
Action, the plaintiffs therein further alleged that Mr. Lobrano was liable
to the Company for certain alleged acts of legal malpractice. The Company's
Board of Directors' Independent Litigation Committee, which was composed of
outside independent members of the Company's Board of Directors, completed
an extensive investigation of the facts and circumstances surrounding the
Derivative Action, including the allegations against Mr. Lobrano. It was
the conclusion of this committee that the ultimate best interest of the
Company and its shareholders would not be served in prosecuting this
litigation. Subsequently, the Company moved that the Derivative Action be
dismissed under the provisions of Florida law. Thereafter, the plaintiffs
filed a Second Amended and Supplemental Complaint which realleged the
original cause of action ("Count I"); and realleged the cause of action
against Stephen D. Lobrano ("Count II"); and a new cause of action against
the members of the Special Litigation Committee for alleged violation of
fiduciary duties in conducting its investigation ("Count III"). During 1993,
the Company filed further motions seeking dismissal of the Second Amended
and Supplemental Complaint. On January 27, 1994, the United States
Magistrate issued his Report and Recommendation concerning the Derivative
Action, which recommended that (1) Count I should be dismissed pursuant to
the Special Litigation Committee Report, (2) Count III against the Special
Litigation Committee members should be dismissed, and (3) Count II should
not be dismissed. Both plaintiffs and the Company have filed objections to
portions of this Report and Recommendation, which is now pending before the
District Court.
At this time the Company's legal counsel is unable to determine whether the
outcome of the above litigation will have a material impact on the Company.
Accordingly, no provision has been made in the consolidated financial
statements for any liability that may result from this litigation.
Under the terms of the merger agreement between the Company and KPI, the
Company has agreed to indemnify each current and former non-officer director
of KPI other than Ira M. Koger (the "Indemnified Persons") in respect of
amounts to which such Indemnified Person would be otherwise entitled to
indemnification under Florida law, the articles of incorporation or the
by-laws of KPI arising out of acts or omissions prior to September 25, 1991
(the "Indemnity"). Certain of the former non-officer directors of KPI are
defendants in a Pension Plan class action suit. The Company is not named in
this suit. However, certain former non-officer directors of KPI may be
Indemnified Persons. The obligations, if any, of the Company under such
indemnification do not exceed (i) $1,000,000 in the aggregate and (ii)
$200,000 per Indemnified Person and are subject to certain other conditions
precedent. Based upon its investigation to date, the Company does not
believe that this suit will give rise to any material liability to
Indemnified Persons or to the Company. Accordingly, no provision has been
made in the Consolidated Financial Statements for any liability that may
result from the Indemnity.
10.INTERIM FINANCIAL INFORMATION (UNAUDITED).
Selected quarterly information for the two years in the period ended
December 31, 1993, is presented below (in thousands except per share amounts):
Net Earnings
Rental Total Income (Loss) Per
Quarters Ended Revenues Revenues (Loss) Common Share
March 31, 1992 $11,488 $11,529 $820 $.06
June 30, 1992 11,643 11,701 292 .02
September 30, 1992 11,356 11,423 (142) (.01)
December 31, 1992 11,470 11,535 (37) -
March 31, 1993 10,970 11,030 951 .07
June 30, 1993 10,982 11,037 610 .05
September 30, 1993 11,212 11,265 (26) -
December 31, 1993 12,944 13,074 917 .06
Schedule IV
KOGER EQUITY, INC. AND SUBSIDIARIES
INDEBTEDNESS OF RELATED PARTIES
FOR EACH OF THE THREE YEARS IN THE
PERIOD ENDED DECEMBER 31, 1993
1993
Balances (a) Balances
Name 1-1-93 Transfers Additions Reductions 12-31-93
Koger Properties, Inc. $ 94,889,172 $ 0 $ 0 $(94,889,172) $ 0
1992
Balances (a) Balances
Name 1-1-92 Transfers Additions Reductions 12-31-92
Koger Properties, Inc. $ 99,484,091 $ 0 $ 0 $ (4,594,919) $ 94,889,172
1991
Balances (a) Balances
Name 1-1-91 Transfers Additions Reductions 12-31-91
Koger Properties, Inc. $116,279,001 $ 0 $ 0 $(16,794,910) $ 99,484,091
(a) Through the date of the Merger, the Company continued to account for
the collateral for the loans under the Restated Credit Agreement and
the Land Credit Agreement, due from Koger Properties, Inc. ("KPI") as
loans foreclosed in-substance and had recorded a provision for loss
in the amount of $18.7 million to reduce such loans to estimated
fair value. On September 25, 1991, KPI filed a petition under
Chapter 11 of the U.S. Bankruptcy Code. KPI did not make contractual
interest payments on these loans which were due on or after September
30, 1991. On October 17, 1991, the Bankruptcy Court entered an Order
granting KPI's Motion to use cash collateral (the "Cash Collateral
Order"). Under the Cash Collateral Order, the Company received
$2,667,470 ($1,392,113 in 1993, $1,180,447 in 1992 and $94,910 in
1991) in debt service payments through December 21, 1993, which were
applied to principal. In 1992, a discount of approximately
$1,432,000 was recorded on the loans under the Land Credit Agreement
and related mortgage debt outstanding.
Schedule X
KOGER EQUITY, INC. AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR EACH OF THE THREE YEARS IN THE PERIOD
ENDED DECEMBER 31, 1993
(in thousands)
Year Ended Year Ended Year Ended
12-31-93 12-31-92 12-31-91
Maintenance and repairs $3,696 $3,282 $2,313
Utilities $7,020 $6,638 $6,761
Janitorial $2,570 $2,603 $2,614
Real estate taxes $4,076 $3,838 $3,926
The Company had no royalties or advertising costs during each of the three
years in the period ended December 31, 1993.
Schedule X
KOGER EQUITY, INC. AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
(in thousands)
COSTS CAPITALIZED
SUBSEQUENT
INITIAL COST TO ACQUISITION TOTAL COST (d) (a)
BLDGS & IMPROVE CARRYING BLDGS & (b)(c) ACCUM. MORT- DATE DEPRECIABLE
CENTER LAND IMPROV. MENTS COSTS LAND IMPROV. TOTAL DEPR. GAGES ACQUIRED LIFE
OPERATING REAL ESTATE:
ATLANTA CHAMBLEE $13,177 $63,211 $2,033 $ 0 $13,177 $65,244 $78,421 $5,641 $ 34,101 1988 - 1993 5 - 40 YRS.
ATLANTA GWINNETT 0 3 0 0 0 3 3 0 0 1993 5 - 40 YRS.
AUSTIN 4,274 13,650 216 0 4,274 13,866 18,140 179 3,453 1990 - 1993 5 - 40 YRS.
CHARLOTTE CARMEL 910 9,993 0 0 910 9,993 10,903 0 9,372 1993 5 - 40 YRS.
CHARLOTTE EAST 5,788 25,078 494 0 5,788 25,572 31,360 1,070 14,694 1989 - 1993 5 - 40 YRS.
EL PASO 3,108 10,107 1,102 0 3,108 11,209 14,317 947 1,674 1990 - 1993 5 - 40 YRS.
GREENSBORO SOUTH 6,391 38,700 1,886 0 6,391 40,586 46,977 2,266 23,953 1988 - 1993 5 - 40 YRS.
GREENSBORO WENDOVER 0 11 0 0 0 11 11 0 0 1993 5 - 40 YRS.
GREENVILLE 3,833 16,104 599 0 3,833 16,703 20,536 1,426 7,296 1988 - 1993 5 - 40 YRS.
JACKSONVILLE BAYMEADOWS 7,625 23,716 0 0 7,625 23,716 31,341 0 35,725 1993 5 - 40 YRS.
JACKSONVILLE CENTRAL 6,915 35,321 2,092 0 6,915 37,413 44,328 2,663 13,521 1989 - 1993 5 - 40 YRS.
MEMPHIS GERMANTOWN 3,518 21,820 451 0 3,518 22,271 25,789 1,880 13,505 1988 - 1993 5 - 40 YRS.
MEMPHIS KIRBY GATE 0 1 0 0 0 1 1 0 0 1993 5 - 40 YRS.
MIAMI 2,040 7,295 0 0 2,040 7,295 9,335 0 8,000 1993 5 - 40 YRS.
NORFOLK WEST 535 4,485 0 0 535 4,485 5,020 0 4,022 1993 5 - 40 YRS.
ORLANDO CENTRAL 8,342 30,575 2,250 0 8,342 32,825 41,167 3,687 18,625 1988 - 1993 5 - 40 YRS.
ORLANDO UNIVERSITY 2,900 12,218 166 0 2,900 12,384 15,284 522 9,806 1990 - 1993 5 - 40 YRS.
RALEIGH CROSSROADS 820 5,994 0 0 820 5,994 6,814 0 4,818 1993 5 - 40 YRS.
RICHMOND SOUTH 0 105 0 0 0 105 105 0 0 1993 5 - 40 YRS.
ST. PETERSBURG 6,657 29,525 1,022 0 6,657 30,547 37,204 2,277 20,667 1988 - 1993 5 - 40 YRS.
SAN ANTONIO 9,638 29,649 2,850 0 9,638 32,499 42,137 2,511 7,304 1990 - 1993 5 - 40 YRS.
TALLAHASSEE A. P. 6,063 28,043 1,713 0 6,063 29,756 35,819 2,772 15,837 1988 - 1993 5 - 40 YRS.
TALLAHASSEE C. C. 3,561 22,903 164 0 3,561 23,067 26,628 1,507 21,068 1988 - 1993 5 - 40 YRS.
TULSA NORTH 1,600 4,300 404 0 1,600 4,704 6,304 372 0 1990 5 - 40 YRS.
TULSA SOUTH 4,466 12,834 504 0 4,466 13,338 17,804 980 4,455 1990 - 1993 5 - 40 YRS.
SUBTOTALS 102,161 445,641 17,946 0 102,161 463,587 565,748 30,700 271,896
FURNITURE & EQUIPMENT 813 0 813 813 6 5 - 7 YRS.
IMPROVEMENTS IN PROGRESS 209 0 209 209
TOTAL OPERATING
REAL ESTATE $102,161 $446,454 $18,155 $ 0 $102,161 $464,609 $566,770 $30,706 $271,896
Schedule XI
KOGER EQUITY, INC. AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
(in thousands)
COSTS CAPITALIZED
SUBSEQUENT
INITIAL COST TO ACQUISITION TOTAL COST (d) (a)
BLDGS & IMPROVE CARRYING BLDGS & (b)(c) ACCUM. MORT- DATE DEPRECIABLE
CENTER LAND IMPROV. MENTS COSTS LAND IMPROV. TOTAL DEPR. GAGES ACQUIRED LIFE
UNIMPROVED LAND:
ATLANTA GWINNETT $ 5,780 $ 5,780 $ 5,780 $ 79 1993
BIRMINGHAM 1,750 1,750 1,750 32 1993
CHARLOTTE CARMEL 3,250 3,250 3,250 71 1993
CHARLOTTE EAST 468 468 468 8 1993
COLUMBIA SPRING VALLEY 150 150 150 0 1993
GREENSBORO WENDOVER 1,491 1,491 1,491 0 1993
GREENVILLE 949 949 949 0 1993
JACKSONVILLE BAYMEADOWS 2,319 2,319 2,319 48 1993
MEMPHIS GERMANTOWN 4,505 4,505 4,505 49 1993
MEMPHIS KIRBY GATE 3,474 3,474 3,474 68 1993
MIAMI 2,970 2,970 2,970 61 1993
NORFOLK WEST 2,265 2,265 2,265 6 1993
ORLANDO UNIVERSITY 2,880 2,880 2,880 39 1993
RALEIGH CROSSROADS 2,495 2,495 2,495 39 1993
RICHMOND SOUTH 1,860 1,860 1,860 0 1993
ST. PETERSBURG 1,000 1,000 1,000 34 1993
SAN ANTONIO 1,430 1,430 1,430 103 1993
TULSA NORTH 1,000 1,000 1,000 9 1993
TOTAL UNIMPROVED LAND 40,036 0 0 0 40,036 0 40,036 0 646
TOTAL $142,197 $446,454 $18,155 $ 0 $142,197 $464,609 $606,806 $30,706 $272,542
Schedule XI
KOGER EQUITY, INC. AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
(in thousands)
(a) At December 31, 1993, the outstanding balance of mortgages payable was
$272,542. In addition, the Company has loans outstanding with variable
interest rates which are collateralized by mortgages on pools of
buildings. At December 31, 1993, the outstanding balance of these loans
was $58,861.
(b) Aggregate cost basis for Federal income tax purposes was $633,181 at
December 31, 1993.
(c) Reconciliation of total real estate carrying value for the years ended
December 31, 1993, 1992 and 1991 is as follows:
1993 1992 1991
Balance at beginning of year $311,286 $308,293 $304,690
Additions during year:
Acquisitions 289,097 19 4
Improvements 6,423 2,974 3,599
Balance at close of year $606,806 $311,286 $308,293
Acquisitions of land and buildings during 1993 were made pursuant to
the merger of KPI with and into the Company.
(d) Reconciliation of accumulated depreciation for the years ended December
31, 1993, 1992 and 1991 is as follows:
1993 1992 1991
Balance at beginning of year $22,300 $14,625 $7,493
Additions during year:
Depreciation expense 8,406 7,675 7,132
Balance at close of year $30,706 $22,300 $14,625
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information about directors of the Company who are not executive
officers is contained in the Company's Proxy Statement (the "1994 Proxy
Statement") and is incorporated herein by reference.
The following tabulation lists the executive officers of the Company,
their ages and their occupations for the past five years:
S. D. Stoneburner . . . . .Chairman of the Board
Irvin H. Davis. . . . . . .President, Chief Executive Officer and Director
Victor A. Hughes, Jr. . . .Senior Vice President, Chief Financial Officer
and Director
James L. Stephens . . . . .Treasurer and Chief Accounting Officer
Mr. Stoneburner, age 75, was elected as Chairman of the Board of Directors
of the Company on December 20, 1991, and has been a Director of the Company
since June, 1988. He had also previously served the Company as President and
Chief Financial Officer from June 22, 1988 through March 6, 1990. Mr.
Stoneburner is the former Vice Chairman of the Board and former Chief
Financial Officer of KPI, having served in that capacity from 1973 through
June 21, 1988.
Mr. Davis, age 64, was elected President and Chief Executive Officer of
the Company on December 11, 1991. He has served as a Director of the Company
since August 15, 1991. He previously held the positions of President and
Chief Executive Officer pro tempore of the Company from August 15, 1991 to
December 10, 1991. Prior to that Mr. Davis served the Company as Senior Vice
President and Asset Manager from August 1, 1991 to August 14, 1991 and as
Senior Vice President/Asset Management from June, 1988 to February 1, 1991.
Mr. Davis was a Senior Vice President of KPI from 1982 to 1988 and also
served in that capacity from February, 1991 to August 1, 1991.
Mr. Hughes, age 58, has been the Chief Financial Officer of the
Company since March 31, 1991, Senior Vice President of the Company since
May 20, 1991, and Assistant Secretary of the Company from March 11, 1991
through December 21, 1993. Mr. Hughes was elected to the Board of Directors
of the Company on July 29, 1992. Mr. Hughes had previously held the position
of Vice President of the Company from April 1, 1990 to March 11, 1991. Mr.
Hughes was President of Koger Securities, Inc., a former wholly owned
subsidiary of KPI, from 1982 to March, 1990.
Mr. Stephens, age 36, has been the Treasurer and Chief Accounting
Officer of the Company since March 31, 1991. He also has held the position
of Assistant Secretary of the Company from May 20, 1991 through December 21,
1993. Mr. Stephens was the Accounting Manager of KA from December, 1990 to
March, 1991. He was a Division Controller of KPI from March, 1989 to
December, 1990 and Cost Accounting Manager of KPI from September, 1987 to
March, 1989.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers to file with the SEC and the
American Stock Exchange initial reports of ownership and reports of changes
in ownership of the common stock of the Company. Executive officers and
directors are required by the SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no
other reports were required, during the fiscal year ended December 31, 1993
all Section 16(a) filing requirements applicable to its executive officers
and directors were complied with.
Item 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is incorporated by
reference to the section headed "Executive Compensation" in the 1994 Proxy
Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The stock ownership of each person known to the Company to be the
beneficial owner of more than five percent (5%) of its outstanding common
stock is incorporated by reference to the section headed "Principal Holders
of Voting Securities" of the 1994 Proxy Statement. The beneficial ownership
of Common Stock of all directors of the Company is incorporated by reference
to the section headed "Election of Directors" contained in the 1994 Proxy
Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to Item 1. "Business," 2. "Properties," 3. "Lega
Proceedings," 7. "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" and Note 2 "Transactions With Related
Parties" to the Notes to Consolidated Financial Statements contained in this
Report and to the heading "Certain Relationships and Transactions" contained
in the 1994 Proxy Statement for information regarding certain relationships
and related transactions which information is incorporated herein by
reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a)(1) See "Item 8 - Financial Statements and Supplementary Data -
Index to Consolidated Financial Statements and Financial
Statement Schedules" for a list of the financial statements
included in this report. The financial statements for The
Koger Partnership, Ltd. are herein incorporated by reference
as filed in its Form 10-K for the year ended December 31,
1993 (Commission File No. 0-8891).
(2) The consolidated supplemental financial statement schedules
required by Regulation S-X are included on pages 50 through
54 in this Form.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter
ended December 31, 1993.
(c) The following exhibits are filed as part of this
report:
Exhibit
Number Description
2 Agreement and Plan of Merger, dated as of
December 21, 1993 between the Company and
Koger Properties, Inc.*
3 (a) Amended and Restated Articles of
Incorporation. Incorporated by reference
to Exhibit IV of the 1993 Proxy Statement
filed by the Registrant on June 30, 1993
(File No. 1-9997).
(b) Koger Equity, Inc. By Laws, as Amended and
Restated on May 5, 1992. Incorporated by
reference to Exhibit 3 of the Form 10-Q
filed by the Registrant for the quarter
ended March 31, 1993 (Filed No. 1-9997).
4 (a) Common Stock Certificate of Koger Equity,
Inc. See Exhibit 4(a) to Registration
Statement on Form S-11 (Registration No.
33-22890) which Exhibit is herein
incorporated by reference.
(b)(1)(A) Koger Equity, Inc. Rights Agreement (the
"Rights Agreement") dated as of September
30, 1990 between the Company and Wachovia
Bank and Trust Company, N.A. as Rights
Agent ("Wachovia"). See Exhibit 1 to a
Registration Statement on Form 8-A, dated
October 3, 1990, (File No. 1-9997) which
Exhibit is herein incorporated by
reference.
(b)(1)(B) First Amendment to the Rights Agreement,
dated as of March 22, 1993, between the
Company and First Union National Bank of
North Carolina, as Rights Agent ("First
Union"), entered into for the purpose of
replacing Wachovia. Incorporated by
reference to Exhibit 4(b)(4) of the Form
10-Q filed by the Registrant for the
quarter ended March 31, 1993
(File No. 1-9997).
Exhibit
Number Description
(b)(1)(C) Second Amendment to the Rights Agreement,
dated as of December 21, 1993, between
the Company and First Union. See Exhibit
5 to an Amendment on Form 8-A/A to a
Registration Statement on Form 8-A, dated
December 21, 1993, (File No. 1-9997) which
Exhibit is herein incorporated by
reference.
(b)(2) Form of Common Stock Purchase Rights
Certificate (attached as Exhibit A to the
Rights Agreement). Pursuant to the Rights
Agreement, printed Common Stock Purchase
Rights Certificates will not be mailed
until the Distribution Date (as defined
in the Rights Agreement).
(b)(3) Summary of Common Stock Purchase Rights
(attached as Exhibit B to the Rights
Agreement).
(c)(1) Warrant Agreement, dated as of December
21, 1993, between the Company and First
Union (the "Warrant Agreement"). See
Exhibit 2 to an Amendment on Form 8-A/A
to a Registration Statement on Form 8-A,
dated December 21, 1993, (File No. 1-
9997) which Exhibit is herein incorporated
by reference.
(c)(2) Form of a Common Share Purchase Warrant
issued pursuant to the Warrant Agreement.
See Exhibit 1 to an Amendment on Form
8-A/A to a Registration Statement on Form
8-A (File No. 1-9997) dated December 21,
1993, which Exhibit is herein incorporated
by reference.
10 Material Contracts
(a)(1) Purchase Agreement among Koger Equity,
Inc., Koger Properties, Inc., and The
Koger Company. Incorporated by reference
to Exhibit 10(a) of Form 10-K filed by the
Registrant for the period ended December
31, 1988 (File No. 1-9997).
(a)(2) First Amendment to Purchase Agreement.
Incorporated by reference to Exhibit
10(a)(2) of Form 10-Q filed by the
Registrant for the quarter ended June 30,
1989 (File No. 1-9997).
(b)(1) Credit Agreement among Koger Equity, Inc.,
Koger Properties, Inc. and The Koger
Company. Incorporated by reference to
Exhibit 10(b) of Form 10-K filed by the
Registrant for the period ended December
31, 1988 (File No. 1-9997).
(b)(2) First Amendment to Credit Agreement.
Incorporated by reference to Exhibit
10(b)(2) of Form 10-Q filed by the
Registrant for the quarter ended June 30,
1989 (File No. 1-9997).
(c) Advisory Agreement between Koger Equity,
Inc. and Koger Advisors, Inc.
Incorporated by reference to Exhibit 10(c)
of Form 10-K filed by the Registrant for
the period ended December 31, 1988 (File
No. 1-9997).
(d)(1) Management Agreement between Koger Equity,
Inc. and Koger Management, Inc.
Incorporated by reference to Exhibit 10(d)
of Form 10-K filed by the Registrant for
the period ended December 31, 1988 (File
No. 1-9997).
Exhibit
Number Description
(d)(2) Amended Schedule "A" to Management
Agreement between Koger Management, Inc.
and Koger Equity, Inc. Incorporated by
reference to Exhibit 10(d)(2) of Form 10-Q
filed by the Registrant for the quarter
ended September 30, 1989 (File No. 1-9997).
(e)(1)(A) Koger Equity, Inc. 1988 Stock Option Plan.
Incorporated by reference to Exhibit
10(e)(2) of Form 10-Q filed by the
Registrant for the quarter ended September
30, 1989 (File No. 1-9997).
(e)(1)(B) Koger Equity, Inc. Amended and Restated
1988 Stock Option Plan. Incorporated by
reference to Exhibit 10(e)(1)(A) of Form
10-Q filed by the Registrant for the
quarter ended June 30, 1992 (File No.
1-9997).
(e)(2)(A) Koger Equity, Inc. 1988 Stock Option
Agreement. Incorporated by reference to
Exhibit 10(e)(2) of Form 10-Q filed by the
Registrant for the quarter ended March
31, 1989 (File No. 1-9997).
(e)(2)(B) Form of Stock Option Agreement pursuant
to Koger Equity, Inc. 1988 Stock Option
Plan, as amended and restated.
Incorporated by reference to Exhibit
10(e)(2)(A) of Form 10-Q filed by the
registrant for the quarter ended June 30,
1992 (File No. 1-9997).
(f)(1) Stock Purchase Option between Koger
Equity, Inc. and Koger Advisors, Inc.
Incorporated by reference to Exhibit
10(f)(1) of Form 10-Q filed by the
Registrant for the quarter ended March
31, 1989 (File No. 1-9997).
(f)(2) Koger Equity, Inc. Assignment of Stock
Purchase Agreement. Incorporated by
reference to Exhibit 10(f)(2) of Form 10-Q
filed by the Registrant for the quarter
ended March 31, 1989 (File No. 1-9997).
(g) Addendum Agreement between Koger Equity,
Inc. and Koger Properties, Inc.
Incorporated by reference to Exhibit 10(g)
of Form 10-K filed by the Registrant for
the period ended December 31, 1988 (File
No. 1-9997).
(h) Agreement between KPI and the Company,
dated September 30, 1990. Incorporated
by reference to Exhibit 10(h) of Form
10-Q filed by the Registrant for the
quarter ended September 30, 1990
(File No. 1-9997).
(i) Land Credit Agreement dated December 31,
1990 between Koger Properties, Inc. and
the Company. Incorporated by reference
to Exhibit 10(i) of Form 10-K filed by the
Registrant for the year ended December 31,
1990 (File No. 1-9997).
(j) Second Amendment To Credit Agreement dated
as of March 30, 1990. Incorporated by
reference to Exhibit 10(j) of Form 10-K
filed by the Registrant for the year ended
December 31, 1990 (File No. 1-9997).
(k) Amended and Restated Credit Agreement
dated December 31, 1990. Incorporated by
reference to Exhibit 10(k) of Form 10-K
filed by the Registrant for the year ended
December 31, 1990 (File No. 1-9997).
Exhibit
Number Description
(l) Term Loan commitment with NCNB National
Bank of Florida dated January 25, 1991.
Incorporated by reference to Exhibit 10(l)
of Form 10-Q filed by the Registrant for
the quarter ended June 30, 1991 (File No.
1-9997).
(l)(2) Agreement to extend NCNB Loan Maturity
Date, dated February 4, 1992. Incorporated
by reference to Exhibit 10(1)(2) of the
Form 10-Q filed by the Registrant for the
quarter ended September 30, 1992 (File No.
1-9997).
(l)(3) Agreement to Extend NCNB Loan Maturity
Date, dated June 8, 1992. Incorporated
by reference to Exhibit 10(1)(3) of the
Form 10-Q filed by the Registrant for the
quarter ended September 30, 1992 (File
No. 1-9997).
(l)(4) Agreement to Extend NCNB Loan Maturity
Date, dated September 30, 1992.
Incorporated by reference to Exhibit 10(l)
(4) of the Form 10-Q filed by the
Registrant for the quarter ended
September 30, 1992 (File No. 1-9997).
(l)(5) Amendment to NCNB Loan Agreement, dated
January 28, 1993. Incorporated by
reference to Exhibit 10(l)(5) of the Form
10-K filed by the Registrant for the year
ended December 31, 1992 (File No. 1-9997).
(l)(6) Agreement to Extend NationsBank (NCNB)
Loan Maturity Date, dated April 30, 1993.
Incorporated by reference to Exhibit
10(l)(6) of the Form 10-Q filed by the
Registrant for the quarter ended March 31,
1993 (File No. 1-9997).
(l)(7) Commitment letter to Koger Equity, Inc.
from NationsBank of Florida, N.A., to
modify and extend mortgage loan, dated
October 13, 1993. Incorporated by
reference to Exhibit 10(l)(7) of Form
10-Q filed by the Registrant for the
quarter ended September 30, 1993
(File No. 1-9997).
(l)(8) Agreement to Extend NationsBank (NCNB)
Loan Maturity Date, dated as of October
15, 1993. Incorporated by reference to
Exhibit 10(l)(7) of Form 10-Q filed by
the Registrant for the quarter ended
September 30, 1993 (File No. 1-9997).
(l)(9) Restated Loan Agreement between
NationsBank of Florida, N.A., and Koger
Equity, Inc., dated December 21, 1993.*
(m) Loan Agreement with Barnett Bank of
Jacksonville, N.A. dated April 5, 1991.
Incorporated by reference to Exhibit 10(m)
of Form 10-Q filed by the Registrant for
the quarter ended June 30, 1991 (File No.
1-9997).
(m)(1) Commitment letter to Koger Equity, Inc.,
from Barnett Bank of Jacksonville, N.A.,
to modify and extend term loans, dated
September 22, 1993. Incorporated by
reference to Exhibit 10(m)(l) of Form 10-Q
filed by the Registrant for the quarter
ended September 30, 1993 (File No. 1-9997).
(m)(2) Consolidated Renewal Promissory Note between
Barnett Bank of Jacksonville, N.A., and
Koger Equity, Inc., dated December 21,
1993.*
(n)(1) Commitment Letter to Koger Equity, Inc.
with First Union National Bank of Florida
dated April 19, 1991. Incorporated by
reference to Exhibit 10(n)(1) of Form
10-Q filed by the Registrant for the
quarter ended June 30, 1991 (File No.
1-9997).
Exhibit
Number Description
(n)(2) Amendment to commitment Letter to Koger
Equity, Inc. with First Union National
Bank of Florida dated June 5, 1991.
Incorporated by reference to Exhibit
10(n)(2) of Form 10-Q filed by the
Registrant for the quarter ended June 30,
1991 (File No. 1-9997).
(n)(3) Commitment Letter to Koger Equity of
South Carolina, Inc. with First Union
National Bank of Florida dated May 31,
1991. Incorporated by reference to Exhibit
10(n)(3) of Form 10-Q filed by the
Registrant for the quarter ended June 30,
1991 (File No. 1-9997).
(n)(4) Commitment Letter to Koger Equity of South
Carolina, Inc. with First Union National
Bank of Florida dated May 31, 1991.
Incorporated by reference to Exhibit
10(n)(4) of Form 10-Q filed by the
Registrant for the quarter ended June 30,
1991 (File No. 1-9997).
(n)(5) Commitment Letter to Koger Equity of North
Carolina, Inc. with First Union National
Bank of Florida dated May 31, 1991.
Incorporated by reference to Exhibit
10(n)(5) of Form 10-Q filed by the
Registrant for the quarter ended June 30,
1991 (File No. 1-9997).
(n)(6) Amendment to Commitment Letter to Koger
Equity of North Carolina, Inc. with First
Union National Bank of Florida dated
June 5, 1991. Incorporated by reference
to Exhibit 10(n)(6) of Form 10-Q filed by
the Registrant for the quarter ended June
30, 1991 (File No. 1-9997).
(n)(7) Loan Extension Agreement and Modification
of Mortgage between Koger Equity, Inc.,
and First Union National Bank of Florida.
Incorporated by reference to Exhibit
10(n)(7) of Form 10-Q filed by the
Registrant for the quarter ended September
30, 1993 (File No. 1-9997).
(n)(8) Loan Extension Agreement and Modification
of Mortgage and Assignment of Leases
(and Consent of Guarantor) between Koger
Equity of South Carolina, Inc., Koger
Equity, Inc., and First Union National
Bank of Florida. Incorporated by
reference to Exhibit 10(n)(8) of Form 10-Q
filed by the Registrant for the quarter
ended September 30, 1993 (File No. 1-9997).
(n)(9) Loan Extension Agreement and Modification
of Deed of Trust (and Consent of Guarantor)
between Koger Equity of North Carolina,
Inc., Koger Equity, Inc., and First Union
National Bank of Florida. Incorporated by
reference to Exhibit 10(n)(9) of Form 10-Q
filed by the Registrant for the quarter
ended September 30, 1993 (File No. 1-9997).
(n)(10) Commitment letter to Koger Equity, Inc.,
with First Union National Bank of Florida
to restructure loan, dated October 19,
1993. Incorporated by reference to
Exhibit 10(n)(10) of Form 10-Q filed by
the Registrant for the quarter ended
September 30, 1993 (File No. 1-9997).
(n)(11) Consolidated Note between First Union
National Bank of Florida and Koger Equity,
Inc., dated December 21, 1993.*
Exhibit
Number Description
(o) Shareholders Agreement, dated August 9,
1993, between the Company and TCW Special
Credits, a California general partnership.*
(p) Registration Rights Agreement, dated as of
August 9, 1993, between the company and
TCW Special Credits, a California general
partnership.*
(q)(1) Amended and Restated Management Agreement,
dated August 3, 1993, between The Koger
Partnership, Ltd. and Koger Properties,
Inc.*
(q)(2) First Amendment to Amended and Restated
Management Agreement, dated December 21,
1993, between The Koger Partnership, Ltd.
and Koger Properties, Inc.*
(q)(3) TKP Co-Management Agreement, dated as of
December 21, 1993, between The Koger
Partnership, Ltd. and the Company and
Southeast Properties Holding Corporation,
Inc.*
(q)(4) Delegation of Duties Under TKP Co-
Management Agreement, dated as of December
21, 1993, between the Company and its
wholly owned subsidiary, Koger Real Estate
Services, Inc.*
(r)(1) Incentive Fee Agreement, dated August 3,
1993, between The Koger Partnership, Ltd.
and Koger Properties, Inc.*
(r)(2) First Amendment to Incentive Fee Agreement,
dated December 21, 1993, between The Koger
Partnership, Ltd, and Koger Properties,
Inc.*
(s) Limited Recourse Guaranty and Security
Agreement, dated August 3, 1993, by The
Koger Partnership, Ltd. and Koger
Properties, Inc. in favor of the holders
of the Basic Restructured Mortgages Notes
of The Koger Partnership, Ltd.*
(t) Option and Purchase and Sale Agreement,
dated August 3, 1993, between The Koger
Partnership, Ltd. and Koger Properties,
Inc.*
(u) Subordination Agreement, dated as of
August 3, 1993, executed
and delivered by Koger Properties, Inc.*
22 Subsidiaries of the Registrant.*
28 (a) Order Granting Debtor's Motion to Use Cash
Collateral entered in RE Chapter 11 of
Koger Properties, Inc. (Case No. 91-12294-
8P1) by United States Bankruptcy Court,
Middle District of Florida, Tampa
Division. Incorporated by reference to
Exhibit 28 of Form 10-K filed by the
Registrant for the year ended December 31,
1991 (File No. 1-9997).
(b) First Amended and Restated Disclosure
Statement, dated as of March 1, 1993,
pursuant to Section 1125 of the Bankruptcy
Code to accompany First Amended and
Restated Plan of Reorganization dated as
of March 1, 1993, for Koger Properties,
Inc., proposed jointly by Koger
Properties, Inc. and Koger Equity, Inc.,
including all exhibits thereto.
Incorporated by reference to Exhibit 29 of
Form 10-K filed by the Registrant for the
year ended December 31, 1992.
*Filed with this Report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant, Koger Equity, Inc., has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
KOGER EQUITY, INC.
By: IRVIN H. DAVIS
Irvin H. Davis, President and
Chief Executive Officer
Date: March 11, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Signature Title Date
IRVIN H. DAVIS President, Chief Executive Officer March 11, 1994
(Irvin H. Davis) and Director
VICTOR A. HUGHES Senior Vice President, Chief March 11, 1994
(Victor A. Hughes) Financial Officer and Director
JAMES L. STEPHENS Treasurer and Chief Accounting March 11, 1994
(James L. Stephens) Officer
S. D. STONEBURNER Chairman of the Board of March 11, 1994
(S. D. Stoneburner) Directors and Director
D. PIKE ALOIAN Director March 11, 1994
(D. Pike Aloian)
BENJAMIN C. BISHOP Director March 11, 1994
(Benjamin C. Bishop)
Director
(Charles E. Commander, III)
Director
(David B. Hiley)
G. CHRISTIAN LANTZSCH Director March 11, 1994
(G. Christian Lantzsch)
Director
(Thomas K. Smith, Jr.)
Director
(George F. Staudter)