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, 1994 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 59-2898045
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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 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. X
The aggregate market value of the voting stock held by
non-affiliates of the registrant at March 1, 1995, was
approximately $128,572,000.
The number of shares of registrant's Common Stock
outstanding on March 1, 1995, was 17,734,072.
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 16,
1995, is incorporated by reference in Part III of this
report.
<PAGE>
TABLE OF CONTENTS
ITEM NO. DESCRIPTION PAGE NO.
PART I
1. BUSINESS . . . . . . . . . . . . . . . . . . . . 1
2. PROPERTIES . . . . . . . . . . . . . . . . . . . 4
3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . 11
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. . . . . . . . . . . . . . . 27
9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. . . . . . . . . . . . . . 54
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT . . . . . . . . . . . . . . . 54
11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . 55
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT . . . . . . . . . . . . . 55
13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS. . . . . . . . . . . . . . 56
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K . . . . . . . . . . . . 57
SIGNATURES . . . . . . . . . . . . . . . . . . . 64
<PAGE>
PART I
Item 1. BUSINESS
General
Koger Equity, Inc. is currently engaged in owning and managing
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, 1994, the
Company owned 219 commercial properties located in 16 metropolitan
areas throughout the southeastern and southwestern United States.
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 office 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 in
conjunction with its wholly owned subsidiaries, Southeast
Properties Holding Corporation, Inc. ("Southeast") and Koger Real
Estate Services, Inc. ("KRES"). Since the Merger, the Company has
been totally 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 (the Code and a "REIT",
respectively). 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 REIT taxable income, as defined under the Code, to its
shareholders. To qualify as 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
be 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 as a business corporation.
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 except for a major
governmental tenant (the State of Florida, when all of its
departments and agencies which lease space in the Company's
buildings are combined) which accounts for an aggregate of 11.5
percent of the Company's total net rentable square feet
leased and 13.8 percent of the Company's total annualized rental
revenues at December 31, 1994. Some of the Company's principal
tenants are the State of Florida, the United States Government,
Blue Cross and Blue Shield of Florida, Lumbermans Mutual Casualty
Company, Aetna Life Insurance Company, the State of Texas,
Travelers Insurance Company, USAA Federal Savings Bank, General
Motors Acceptance Corporation and BellSouth Communications, Inc.
Governmental tenants (including the State of Florida and the United
States Government), which account for 22.7 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 (the KPI Chapter
11 Case ) 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 "KPI Plan") which provided for
the Merger 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 law 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 KPI 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 then
currently outstanding shares on a fully diluted basis) were issued
under the KPI 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 currently ranging
from $2.41 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 KPI 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, 1994, 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
1994 interest revenues were derived from temporary cash
investments.
Employees
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
249 employees. A resident general manager is responsible for the
leasing and operations of all buildings in a center or city. The
Company has approximately 101 employees who perform maintenance
activities.
Item 2. PROPERTIES
General
At December 31, 1994, 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; Charlotte, Greensboro and Raleigh, North
Carolina; Tulsa, Oklahoma; Greenville, South Carolina; Memphis,
Tennessee; Austin, El Paso, and San Antonio, Texas; 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. 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
generally ranging 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, 1994, the Company's
buildings were on average 90 percent leased and the average annual
rent per net rentable square foot leased was $13.35. 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, 1994, approximately 35 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 59 percent of such revenues was derived
from leases containing escalation provisions based upon real estate
tax and operating expense increases; and approximately 6 percent of
such revenues 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 272 acres of unimproved land
(269 acres of which are suitable for development) located in the
metropolitan areas of Birmingham, Alabama; Jacksonville, Miami,
Orlando and St. Petersburg, Florida; Atlanta, Georgia; Charlotte,
Greensboro, and Raleigh, North Carolina; Tulsa, Oklahoma; Columbia
and Greenville, South Carolina; Memphis, Tennessee; Austin and San
Antonio, Texas; and Norfolk and Richmond, Virginia. Each of these
land parcels 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.
<PAGE>
Property Location and Other Information
The following table sets forth information relating to the
properties owned by the Company as of December 31, 1994.
<TABLE>
<CAPTION>
Average Land
Number Age of Net Improved Unimproved
of Buildings Rentable with Bldgs. Land
Center Buildings (in Years)(1) Sq. Ft. (In Acres) (In Acres)
<S> <C> <C> <C> <C> <C>
Atlanta Chamblee 22 14 947,920 76.2 2.5
Atlanta Gwinnett 31.0
Austin 12 14 370,860 29.6 1.8
Birmingham 30.0
Charlotte Carmel 1 3 109,600 7.6 27.0
Charlotte East 11 14 468,820 39.9 3.9
Columbia Spring Valley 1.0
El Paso 14 22 251,930 19.6
Greensboro South 13 12 610,470 46.0
Greensboro Wendover 18.5
Greenville 8 12 290,560 24.7 4.5
Jacksonville Baymeadows 4 4 467,860 34.6 13.3
Jacksonville Central 32 22 677,680 48.4 0.4
Memphis Germantown 3 6 258,400 18.4 16.2
Miami 1 4 96,800 5.6 8.1
Norfolk West 1 8 59,680 4.0 16.0
Orlando Central 22 23 565,220 46.0
Orlando University 2 6 159,600 11.6 15.5
Raleigh Crossroads 1 7 77,500 9.1 28.0
Richmond South 23.0
San Antonio 26 17 788,670 63.5 11.0
St. Petersburg 15 14 519,320 64.4 7.2
Tallahassee Apalachee Pkwy 14 18 408,500 33.7
Tallahassee Capital Circle 4 5 300,700 23.3
Tulsa North 2 13 103,520 9.1 13.4
Tulsa South 11 16 372,760 26.9
Totals 219 7,906,370 642.2 272.3
Average 14
</TABLE>
(1) The age of each building was weighted by the net
rentable square feet for the building to determine
the weighted average age of the buildings in each
center and for the Company.
<PAGE>
Leased Percentage and Average Rental Rates
The following table sets forth, with respect to the Company's
centers at December 31, 1994, the number of buildings, number of
leases, net rentable square feet, percentage leased, and the
average annual rent per net rentable square foot leased.
<TABLE>
<CAPTION>
Net Average
Number Number Rentable Annual
of of Square Percentage Rent Per
Center Buildings Leases Feet Leased (1) Square Foot(2)
<S> <C> <C> <C> <C> <C>
Atlanta Chamblee 22 180 947,920 92% $13.88
Austin 12 190 370,860 95% 13.65
Charlotte Carmel 1 15 109,600 96% 15.53
Charlotte East 11 183 468,820 83% 12.52
El Paso 14 190 251,930 93% 12.61
Greensboro South 13 179 610,470 94% 13.30
Greenville 8 157 290,560 86% 13.45
Jacksonville Baymeadows 4 34 467,860 100% 14.52
Jacksonville Central 32 277 677,680 88% 11.30
Memphis Germantown 3 64 258,400 94% 15.61
Miami 1 19 96,800 100% 18.79
Norfolk West 1 17 59,680 76% 16.23
Orlando Central 22 189 565,220 88% 13.49
Orlando University 2 46 159,600 86% 16.15
Raleigh Crossroads 1 7 77,500 99% 15.93
San Antonio 26 307 788,670 78% 10.88
St. Petersburg 15 182 519,320 89% 12.47
Tallahassee Apalachee Pkwy 14 96 408,500 95% 15.27
Tallahassee Capital Circle 4 10 300,700 100% 17.41
Tulsa North 2 28 103,520 86% 10.32
Tulsa South 11 162 372,760 82% 9.20
Total 219 2,532 7,906,370
Weighted Average 90% $13.35
</TABLE>
(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 total annualized rents for a
center by the net rentable square feet applicable to such total
annualized rents.
<PAGE>
Lease Expirations on the Company's Properties
The following schedule sets forth for all of the Company's
office buildings (i) the number of leases which will expire in
calendar years 1995 through 2003, (ii) the total net rentable area
in square feet covered by such leases, (iii) the percentage of
total net rentable square feet leased represented by such leases,
(iv) the average annual rent per square foot for such leases, (v)
the current annual rental represented by such leases, and (iv) the
percentage of gross annual rental contributed by such leases. This
information is based on the buildings owned by the Company on
December 31, 1994 and on the terms of leases in effect as of
December 31, 1994, on the basis of then existing base rentals, and
without regard to the exercise of options to renew. Furthermore,
the information below does not reflect that some leases have
provisions for early termination for various reasons, including, in
the case of government entities, lack of budget appropriations.
Leases were renewed on approximately 61 percent and 74 percent of
the Company s net rentable square feet which were scheduled to
expire during 1994 and 1993, respectively.
<TABLE>
<CAPTION>
Percentage of Average Percentage of
Total Square Annual Rent of Total
Number of Number of Feet Leased per Square Total Annual Annual Rents
Leases Square Feet Represented by Foot Under Rents Under Represented by
Period Expiring Expiring Expiring Leases Expiring Leases Expiring Leases Expiring Leases
<S> <C> <C> <C> <C> <C> <C>
1995 1,164 2,388,497 33.6% $13.77 $32,888,236 34.7%
1996 545 1,256,904 17.7% 12.99 16,324,452 17.2%
1997 460 1,280,995 18.0% 13.43 17,207,255 18.1%
1998 194 933,803 13.1% 12.84 11,991,435 12.6%
1999 113 597,665 8.4% 12.78 7,635,627 8.0%
2000 30 247,067 3.5% 14.55 3,593,946 3.8%
2001 5 60,409 0.8% 12.09 730,132 0.8%
2002 3 72,357 1.0% 12.84 928,883 1.0%
2003 11 76,301 1.1% 13.74 1,048,031 1.1%
OTHER 7 195,877 2.8% 12.95 2,536,244 2.7%
TOTAL 2,532 7,109,875 100.0% $13.35 $94,884,241 100.0%
</TABLE>
Building Improvements, Tenant Improvements and Deferred Tenant
Costs on the Company's Properties
The following table sets forth certain information with
respect to the building improvements made, and tenant improvement
costs and deferred tenant costs (leasing commissions and tenant
relocation costs) incurred, by the Company during the three years
ended December 31, 1994. The information set forth below is not
necessarily indicative of future expenditures for these items.
<TABLE>
<CAPTION>
Number Building Improvements Tenant Improvements Deferred TenantCosts
of Office Per Net Sq. Per Net Sq. Per Net Sq.
Year Buildings Total Ft. Owned Total Ft. Owned Total Ft. Owned
<C> <C> <C> <C> <C> <C> <C> <C>
1992 126 $ 525,000 $0.13 $2,449,000 $0.60 $ 297,000 $0.07
1993(1) 126 1,680,000 0.41 4,534,000 1.12 598,000 0.15
1994 219 3,749,000 0.47 7,334,000 0.93 1,112,000 0.14
</TABLE>
(1) Excludes the 93 buildings acquired on December 21, 1993
pursuant to the Merger.
<PAGE>
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, 1994.
Weighted
Mortgage Average
Loan Interest
Center Balance Rate
Atlanta Chamblee $ 33,877 8.12%
Atlanta Gwinnett 79 8.50%
Austin 2,638 9.42%
Birmingham 32 8.50%
Charlotte Carmel 9,229 6.65%
Charlotte East 14,761 8.18%
El Paso 1,141 9.00%
Greensboro South 22,835 8.72%
Greenville 7,167 6.40%
Jacksonville Baymeadows 35,703 6.67%
Jacksonville Central 13,222 6.74%
Memphis Germantown 13,389 8.56%
Miami 8,052 6.68%
Norfolk West 4,127 10.00%
Orlando Central 18,337 8.14%
Orlando University 9,760 6.57%
Raleigh Crossroads 4,981 9.98%
San Antonio 6,344 7.95%
St. Petersburg 20,500 7.83%
Tallahassee Apalachee Pkwy 14,731 6.56%
Tallahassee Capital Circle 21,085 8.03%
Tulsa North 9 8.50%
Tulsa South 4,466 9.95%
Total $ 266,465 8.07%
For additional information concerning certain interest rate
reset provisions and reset dates for these loans see Note 5,
"Mortgages and Loans Payable" of the Notes to Consolidated
Financial Statements.
Indebtedness with Variable Interest Rates
In addition to the above mortgage indebtedness, at December
31, 1994, the Company had $58,352,000 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):
<PAGE>
<TABLE>
<CAPTION>
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)
<C> <C> <C> <C> <C> <C>
1994 $58,352 9.1% $59,028 $58,718 7.9%
1993 58,861 6.6% 98,262 95,110 6.2%
1992 98,262 6.0% 99,379 98,918 6.2%
</TABLE>
(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, 1994, $26,950,000 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 $50,069,000 at
December 31, 1994.
As of December 31, 1994, $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, 1994, $21,124,000 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 $24,738,000 at December 31, 1994.
Management Agreement
Prior to the Merger, Koger Management, Inc. ("KMI"), a
subsidiary of KPI, 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 and 1992, the Company incurred
management fee expense to KMI of $2,184,000 and $2,314,000,
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), (the "Securities Action"). The Securities Action
was settled effective December 31, 1994 (the Settlement ). Under
the Settlement, the Company paid, in settlement of all claims
against all defendants therein, the sum of $800,000 in cash plus
472,131 Warrants (the "Warrants") to purchase 472,131 shares of the
Company's common stock. Having the same terms as the Warrants
issued to the KPI shareholders in the Merger, the Warrants are
exercisable until June 30, 1999 at $8.00 per share and are subject
to redemption at the option of the Company at prices currently
ranging from $2.41 to $5.24 per Warrant. The Company has recorded
a provision of $1,685,000 relating to the Settlement of 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,
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 pendency of the litigation a Special Litigation
Committee, which was composed of outside independent members of the
Company's Board of Directors, was appointed to conduct an extensive
investigation of the facts and circumstances surrounding the
Derivative Action. Upon completion of its investigation, 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 for
legal malpractice ("Count II"); and a new cause of action against
the members of the Special Litigation Committee for alleged
violation of fiduciary duties in conducting their 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 against Mr. Lobrano should not be dismissed. The
District Court adopted the Report and Recommendations of the United
States Magistrate by order entered March 8, 1994. Subsequently,
Mr. Lobrano filed his answer denying all of the material
allegations of the Second Amended and Supplemental Complaint, and
raised affirmative defenses, including, without limitation, the
defense that Mr. Lobrano was at all times acting under the
direction of the officers and directors of KPI. Mr. Lobrano and
his law firm (the "Lobrano Defendants") also filed a counter claim
against the Company (the "Counter-Claim"), asserting that, in
connection with the matters complained of in the Second Amended and
Supplemental Complaint, Mr. Lobrano and his law firm acted under
the direction and control of the officers and directors of KPI,
that they had suffered out-of-pocket expenses and reputation damage
to their business due to the directions of the officers and
directors of KPI, and that they are entitled to contribution or
indemnity from the Company, as the successor of KPI under the
Merger consummated pursuant to the KPI Plan of Reorganization in
its Chapter 11 Bankruptcy Case, in respect of such damages. They
have brought similar cross claims against Ira M. Koger, Allen R.
Ransom and Wallace F. E. Kienast, former officers and directors of
KPI. The Company moved to dismiss the Counter-Claim, and moved in
the Bankruptcy Court for an order holding Mr. Lobrano, the other
members of his firm and his lawyers in contempt on the grounds that
any such claims against KPI were discharged in its Chapter 11 Case
and that the filing of the Counter-Claim against the Company is a
violation of the confirmation order in the Chapter 11 Case (the
"Confirmation Order"). On July 22, 1994, the Bankruptcy Court
entered its order finding that the filing of the Counter-Claim was
a violation of the Confirmation Order and in contempt of the
Bankruptcy Court. The Counter-Claim was then subsequently
dismissed. The Lobrano Defendants then filed an amended counter-
claim (the "Amended Counter-Claim") against the Company asserting,
among other things, that the Company, through its officers and
directors, improperly shaped and influenced the Special Litigation
Committee Report so that it contains inaccurate and false
statements about the Lobrano Defendants which have, in turn, caused
damage to the Lobrano Defendants. The Company moved to dismiss the
Amended Counter-Claim on various grounds and renewed its motion
that Mr. Lobrano, certain other members of his firm and their
lawyers be held in contempt of the Confirmation Order by reason of
the filing of the Amended Counter-Claim. On January 26, 1995,
the Bankruptcy Court held that the filing of the Amended Counter-
Claim violated the Confirmation Order, ordered that the Amended
Counter-Claim be dismissed with prejudice on or before February 10,
1995, and imposed a fine of $500 per day on the Lobrano Defendants
and their attorneys for each day thereafter that the Amended
Counter-Claim remained pending. On February 2, 1995, the Amended
Counter-Claim was dismissed with prejudice. The Company and the
other parties to the Deriviative Action and related cross-claims
and counterclaims have agreed on a settlement of all claims,
subject to the preparation of mutually satisfactory documentation
and the approval of the District Court. The Company does not
believe that the outcome of this litigation will materially affect
its operations or financial position.
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 by KPI 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, the Company 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.
<PAGE>
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
1994 1993 1992
Quarter High Low High Low High Low
March 31 $ 8 1/2 $6 1/2 $9 3/8 $4 3/8 $6 1/4 $4 1/8
June 30 9 5/8 6 3/8 8 1/2 7 1/8 5 5/8 4 5/8
September 30 10 1/2 8 1/4 9 7 1/8 5 5/8 4 3/4
December 31 8 7/8 6 7/8 9 1/4 7 3/4 5 1/4 3 1/2
The Company intends that the dividend payout in the last
quarter of each year will generally be adjusted if necessary to
reflect the distribution of at least 95 percent of the Company's
REIT taxable income as required by the Federal income tax laws for
qualification as a REIT. The Company declared no dividends during
the three years ended December 31, 1994.
The terms of the Company's secured debt subject 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 1995, 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, 1995, there were approximately 1,264 shareholders
of record and the closing price of the Company's stock on the
American Stock Exchange was $7.25.
<PAGE>
Item 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and notes thereto.
<TABLE>
<CAPTION>
(In thousands except per share and property data)
Income Information 1994 1993* 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Rental revenues $ 94,388 $ 46,108 $ 45,957 $ 45,393 $ 28,882
Interest revenues 1,062 206 231 7,099 13,840
Total operating revenues 100,376 46,406 46,188 52,492 42,722
Property operating expenses 39,499 20,691 19,380 18,541 10,764
Mortgage and loan interest 25,872 11,471 11,530 13,065 4,860
Depreciation and amortization 16,728 8,958 8,089 7,484 4,417
Net income (loss) 4,215 2,452 933 (5,949) 21,204
Earnings (loss) per common share .24 .18 .07 (.43) 1.48
Dividends per share - - - .77 1.675
Weighted average shares outstanding 17,719 13,352 13,220 13,750 14,309
Balance Sheet Information
Operating properties (before depreciation) $578,237 $566,770 $311,286 $308,293 $304,690
Undeveloped land 36,012 40,036 0 0 0
Loans to Koger Properties, Inc.
foreclosed in-substance 0 0 94,889 99,484 0
Loans to Koger Properties, Inc.:
Term loans 0 0 0 0 88,025
Land Mortgage 0 0 0 0 28,254
Total assets 613,806 615,089 396,841 399,241 417,878
Mortgages and loans payable 323,765 330,625 155,362 158,805 150,952
Shareholders' equity 280,601 275,450 235,514 234,581 261,412
Other Information
Funds from operations ** $ 23,884 $ 11,410 $ 11,004 $ 18,235 $ 25,621
Income before interest, taxes,
depreciation and amortization $ 47,042 $ 22,881 $ 20,552 $ 14,600 $ 30,481
Number of buildings (at end of period) 219 219 126 126 126
Percentage leased (at end of period) 90% 88% 88% 91% 95%
</TABLE>
* On December 21, 1993, KPI was merged with and into the Company.
See Note 3 to Consolidated Financial Statements for additional
information with respect to the Merger.
** The Company believes that Funds from Operations is one measure of the
performance of an equity REIT. Funds from Operations should not be
considered as an alternative to net income as an indication of the
Company s financial performance or to cash flow from operating
activities (determined in accordance with GAAP) as a measure of the
Company s liquidity, nor is it necessarily indicative of sufficient
cash flow to fund all of the Company s needs. Funds from Operations
is calculated as follows (in thousands):
<TABLE>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Net income (loss) $ 4,215 $ 2,452 $ 933 $(5,949) $21,204
Depreciation and amortization 16,728 8,958 8,089 7,484 4,417
Litigation settlement 1,902
Provision for loss on land held for sale 996
Loss on sale of assets 43
Provision for losses on loans to KPI 1,982 16,700
Funds from Operations $23,884 $11,410 $11,004 $18,235 $25,621
</TABLE>
<PAGE>
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 LLP,
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 subject
to ratification of the Board of Directors, 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 KPI Plan
which provided, among other things, for the Merger in exchange for
the issuance of the Shares and Warrants and the assumption of the
restructured KPI indebtedness.
On December 8, 1993, the KPI 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 then
outstanding shares on a fully diluted basis) were issued under the
KPI 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 currently ranging from $2.41 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 (which totalled $182.6 million) which was
restructured under the KPI 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 (the
TKPL Plan ), 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 $147.7 million, excluding accrued interest, as
of December 31, 1994) 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 repaid 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 60,787
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 "Mortgages and Loans Payable" footnote contained in the
Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
Rental Revenues. For 1994, rental revenues increased
$48,280,000 from the year ended December 31, 1993. This increase
resulted primarily from the rental revenues from the 93 buildings
acquired pursuant to the Merger (approximately $46,560,000).
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. At December 31, 1994, the Company's
buildings were on average 90 percent leased. At December 31, 1993
and 1992, the buildings owned by the Company were on average 88
percent leased.
Management Fee Revenues. The Company earned $4,926,000 and
$92,000 of management fees from TKPL and third party management
contracts, which it assumed from KPI, during 1994 and 1993,
respectively. On May 5, 1994, third party management contracts on
two buildings terminated due to a change of ownership for these
buildings. Management fee revenue related to the management of
these two buildings totalled approximately $106,000 during 1994.
Interest Revenues. For 1994, interest revenues increased
$856,000 from the year ended December 31, 1993. This increase was
due to (i) higher interest rates earned on the Company's temporary
cash investments and (ii) the higher average balance of cash
to invest. 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.
Expenses. Property operating expenses include such charges as
utilities, taxes, janitorial, maintenance, property insurance and
management cost. During 1994, property operating expenses
increased $18,808,000 or 91 percent, compared to 1993, primarily
due to the operating expenses on the 93 buildings acquired pursuant
to the Merger (approximately $18,722,000). 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. For 1994, property operating expenses as a percent of
rental revenues were 41.8 percent. For 1993 and 1992, property
operating expenses as a percent of rental revenues were 44.9
percent and 42.2 percent, respectively. In 1994, the decrease in
the percent of operating expenses to rental revenues was primarily
due to the fact that the 93 buildings acquired pursuant to the
Merger are generally newer and, therefore, had a lower percentage
of operating expenses to rental revenues than the 126 buildings
which the Company owned prior to the Merger. 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.
Interest expenses increased by $14,401,000 during 1994
compared to 1993 primarily due to the interest expense on the KPI
restructured debt assumed pursuant to the Merger. 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. During 1994, 1993, and
1992, the weighted average interest rate on the Company's variable
rate loans was 7.9 percent, 6.2 percent, and 6.2 percent,
respectively. The average amount of these loans outstanding for
the Company during 1994, 1993, and 1992 was $58,718,000,
$95,110,000, and $98,918,000 respectively.
Depreciation expense has been calculated on the straight-line
method based upon the useful lives of the Company's depreciable
assets, generally 4 to 40 years. For 1994, depreciation expense
increased $6,993,000 or 83 percent compared to the prior year due
to (i) the acquisition of 93 buildings pursuant to the Merger and
(ii) improvements made to the properties owned by the Company
during 1994 and 1993. 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 1994, amortization expenses increased $777,000 compared to
the prior year due to amounts incurred for deferred tenant costs
and due to having a full year of amortization of cost in excess of
the fair value of assets acquired in the Merger. For 1993,
amortization expense increased $138,000 compared to the prior year
due to amounts incurred for loan financing costs, deferred tenant
costs, and cost in excess of the fair value of assets acquired in
the Merger during the year.
General and administrative expenses were 1.0 percent, 0.6
percent, and 1.0 percent of average annualized invested assets for
1994, 1993, and 1992, respectively. For 1994, general and
administrative expenses increased $3,955,000 compared to the prior
year primarily due to the increased general and administrative
functions performed by the Company following the Merger. 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.
During 1994, the Company settled a pending class action
proceeding (the "Securities Action"). For detail information see
Item 3 "Legal Proceedings" above. The Company recorded a provision
of $1,685,000 relating to the settlement of the Securities Action
and incurred additional costs related to the settlement which
totalled $217,000.
In 1994, the Company recorded a provision for loss on land
held for sale which totalled $996,000. This provision for loss was
based upon contracts for the sale of two land parcels
(approximately 53 acres). The sale of one of these land parcels
(approximately 23 acres) was consummated during 1994, while the
contract for the sale of the other land parcel expired.
During 1994 and 1993, the Company incurred $3,649,000 and
$56,000, respectively, in direct costs to generate management fees
from TKPL and third party management contracts which it assumed
from KPI pursuant to the Merger.
During 1994 and 1993, real estate taxes and other costs
related to the unimproved land acquired pursuant to the Merger
totalled $667,000 and $24,000, respectively. On October 20, 1994,
the Company sold a parcel of unimproved land (approximately 23
acres). During 1994, the Company accrued $77,000 for real estate
taxes on this land parcel through the date of the sale.
Operating Results. Net income totalled $4,215,000,
$2,452,000 and $933,000 for 1994, 1993 and 1992, respectively. For
1994, net income increased over the prior year primarily due to the
positive effect on this period of the acquisition of the 93
buildings, pursuant to the Merger, which was partially offset by
the costs related to the litigation settlement and the provision
recorded for the loss on two land parcels held for sale. 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.
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 1994, 1993 or 1992.
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 income from management fees with respect to properties managed
for TKPL, Centoff Realty Company, Inc., and others. As 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 1995.
The level of cash flow generated by rents depends primarily on
the occupancy rates of the Company's buildings and increases in
rental rates on new and renewed leases and under escalation
provisions. As of December 31, 1994, 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. During the year ended December 31,
1994, the Company generated approximately $20.3 million in net cash
from operating activities. From December 31, 1993 to December 31,
1994, the Company has increased its balance of cash and cash
equivalents by $4,749,000 to $23,315,000.
At December 31, 1994, leases representing approximately 34.7
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 1995. This represents 1,164 leases for space in
buildings located in all of the 21 centers in which the Company
owns buildings. Certain of these tenants may not renew their
leases or may reduce their demand for space. Leases were renewed
on approximately 61 percent and 74 percent of the Company's net
rentable square feet which were scheduled to expire during 1994 and
1993, respectively. For those leases which renewed during 1994,
the average rental rate increased from $12.89 to $12.94. However,
current market conditions in certain markets 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. Based
upon the significant amount of leases which will expire during 1995
and the 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. These incentives
may include the payment of tenant improvement costs and in certain
markets reduced rents during initial lease periods. The Company's
percent leased rate has increased from 88 percent on December 31,
1993 to 90 percent on December 31, 1994. During 1994, the Company
has benefitted from improving economic conditions and reduced
vacancy levels for office buildings in many of the metropolitan
areas in which the Company owns buildings. The Company believes
that the southeastern and southwestern regions of the United States
provide significant economic growth potential due to their diverse
regional economies, expanding metropolitan areas, skilled work
force and moderate labor costs. However, the Company cannot
predict whether such economic growth will continue. Cash flow from
operations could be reduced if economic growth were not to continue
in the Company's markets and if this resulted in lower occupancy
rates for the Company's buildings.
Governmental tenants (including the State of Florida and the
United States Government) which account for 22.7 percent of the
Company's leased space at December 31, 1994, may be subject to
budget reductions in times of recession and governmental austerity;
therefore, there can be no assurance that governmental
appropriations for rents may not be reduced. Additionally, 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.
At the beginning of 1994, the Company had management contracts
for the management of 115 commercial office properties. On May 5,
1994, third party management contracts on two buildings terminated
due to a change of ownership for these buildings. On March 31,
1994, an agreement to manage 20 commercial office buildings was
extended to March 31, 1995. In addition, this management agreement
was modified to provide that so long as no default had occurred the
management agreement would be automatically extended from year to
year until such time as the management agreement is terminated.
The Company earned fees of $1,457,000 from this management
agreement during 1994. Another agreement to manage one commercial
office building has been extended to June 30, 1995. During 1994,
the Company earned management fees of $55,000 for the management of
this building.
Investing Activities. At December 31, 1994, all of the
Company's invested assets were in properties. Improvements to the
Company's existing properties have been financed through internal
operations. During 1994, the Company's expenditures for
improvements to existing properties increased by $4,660,000 over
the prior year primarily due to the acquisition of 93 buildings on
December 21, 1993, pursuant to the Merger. During 1994, the
Company did not purchase any buildings.
During 1994, the Company sold various items of furnishings and
equipment which it had acquired pursuant to the Merger for
approximately $518,000, net of selling costs. The Company expects
to complete the sale of furnishings, acquired pursuant to the
Merger, during 1995. At December 31, 1994, these furnishings had
a book value of approximately $90,000. Also during 1994, the
Company sold a parcel of land (23 acres) for approximately
$2,981,000, net of selling costs.
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 is 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 totaling $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.
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 were used by the Company to acquire
additional buildings from KPI.
The Company has no open lines of credit, but has a cash
balance of $23,315,000 at December 31, 1994. The Company had a
revolving line of credit with a 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.
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 $71.4 million of secured bank indebtedness, the
maturity of that indebtedness was extended to December 21, 2000.
Through December, 1996, the interest rate is fixed at 6.43 percent
per annum for approximately $46.8 million and at 6.386 percent per
annum for approximately $24.6 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 1995, 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 on REIT
status.
With respect to approximately $27.0 million of bank
indebtedness of the Company, the maturity was 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 ($675,000 of which had been repaid
through December 31, 1994). If the Company meets certain
conditions 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 KPI Plan will be a
credit against approximately $8 million of these required principal
payments.
In addition, each of these lenders 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 December 21, 1998, the Company
maintain a total liabilities to net worth ratio of 1.0 to 1.0, 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, 1994, the total liabilities to net
worth ratio of the Company was 1.19 to 1.0. In addition, each of
these bank lenders have required other covenants generally similar
to the provisions set forth in the KPI 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, 1994, the outstanding balance of this debt was approximately
$178.8 million. For additional information concerning terms,
interest rates, and maturity dates see "Mortgages and Loans
Payable" footnote in the Notes to Consolidated Financial
Statements.
Based upon interest rates in effect on December 31, 1994 and
assuming only scheduled principal payments for 1995, management
expects total interest expense for 1995 to increase to
approximately $26.2 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. During 1994, the Company fully
repaid 17 mortgages which were collateralized by 17 buildings which
contain 357,280 net rentable square feet. At December 31, 1994,
the Company had 51 buildings which contain 1,387,130 net rentable
square feet which were unencumbered. In addition, the Company
fully repaid $620,000 of Tax Notes and $287,000 of Mechanic's
Liens during 1994.
Loan maturities and normal amortization of mortgages and loans
payable are expected to total approximately $5,186,000 over the
next twelve months. The Company believes that these obligations
will be paid from cash provided by operations or from current cash
balances. Significant maturities of the Company's mortgages and
loans payable do not begin to occur until 1998.
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 financings 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
Company's existing secured debt, 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. On August 22, 1994, the Company
filed a shelf registration statement with respect to the possible
issuance of up to $100,000,000 of its common and or preferred
stock. However, due to existing market conditions, the Company has
not been able to go forward with an equity offering on terms which
it would consider satisfactory.
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 as a REIT. 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 requalifing as a REIT 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, 1994, 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, 1993 and 1992, 94 percent of the Company's annualized rentals
were subject to leases having annual escalation clauses.
The interest rate on approximately $58,352,000 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.
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Page
Independent Auditors' Report . . . . . . . . . . . . . . . . 28
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1994
and 1993 . . . . . . . . . . . . . . . . . . . . . . . . 29
Consolidated Statements of Operations for Each
of the Three Years in the Period Ended
December 31, 1994. . . . . . . . . . . . . . . . . . . . 30
Consolidated Statements of Changes in
Shareholders' Equity for Each of the Three
Years in the Period Ended December 31, 1994. . . . . . . 31
Consolidated Statements of Cash Flows for Each
of the Three Years in the Period Ended
December 31, 1994. . . . . . . . . . . . . . . . . . . . 32
Notes to Consolidated Financial Statements for
Each of the Three Years in the Period Ended
December 31, 1994. . . . . . . . . . . . . . . . . . . . 33
Financial Statement Schedule:
Schedule III - Real Estate and Accumulated
Depreciation as of December 31, 1994 . . . . . . . . . . 51
<PAGE>
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, 1994 and 1993, 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, 1994. Our
audits also included the financial statement schedule
listed in the Index at Item 8. These financial
statements and financial statement schedule are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these
financial statements and financial statement schedule
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, 1994 and 1993, and the results of their
operations and their cash flows for each of the three
years in the period ended December 31, 1994 in conformity
with generally accepted accounting principles. Also, in
our opinion, such financial statement schedule, when
considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
March 10, 1995
<PAGE>
KOGER EQUITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1994 AND 1993
(In Thousands Except Share Data)
<TABLE>
<CAPTION>
1994 1993
ASSETS
Real Estate Investments:
<S> <C> <C>
Operating properties:
Land $102,161 $102,161
Buildings 474,879 463,796
Furniture and equipment 1,197 813
Accumulated depreciation (46,106) (30,706)
Operating properties - net 532,131 536,064
Undeveloped land held for investment 33,054 33,054
Undeveloped land held for sale, at lower of cost or market value 2,958 6,982
Cash and temporary investments 23,315 18,566
Accounts receivable, net of allowance for uncollectible
rents of $362 and $651 4,276 3,030
Management fees and other receivables from TKPL 1,851 634
Cost in excess of fair value of net assets acquired from KPI,
net of accumulated amortization of $688 and $23 9,295 11,623
Other assets 6,926 5,136
TOTAL ASSETS $613,806 $615,089
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgages and loans payable $323,765 $330,625
Accounts payable 2,823 3,815
Accrued interest 1,047 294
Accrued real estate taxes payable 970 1,201
Accrued liabilities - other 1,268 132
Advance rents and security deposits 3,332 3,572
Total Liabilities 333,205 339,639
Commitments and Contingencies (Notes 2, 4 and 12) - -
Shareholders' Equity
Preferred stock, $.01 par value; 50,000,000 shares
authorized; issued: none
Common stock, $.01 par value; 100,000,000 shares
authorized; issued: 20,474,019 and 20,471,577 shares;
outstanding: 17,604,295 and 17,597,177 shares 205 205
Capital in excess of par value 318,589 318,574
Warrants; outstanding 1,114,889 and 644,000 2,251 1,368
Accumulated dividends in excess of net income (15,657) (19,872)
Treasury stock, at cost; 2,869,724 and 2,874,400 shares (24,787) (24,825)
Total Shareholders' Equity 280,601 275,450
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $613,806 $615,089
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
KOGER EQUITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR EACH OF THE THREE YEARS IN THE PERIOD
ENDED DECEMBER 31, 1994
(In Thousands Except Per Share Data)
1994 1993 1992
Revenues
Rental $ 94,388 $46,108 $45,957
Management fees ($3,288 and $89 from TKPL) 4,926 92
Interest 1,062 206 231
Total revenues 100,376 46,406 46,188
Expenses
Property operations 39,499 18,507 17,066
Management fee to Koger Management, Inc. 2,184 2,314
Mortgage and loan interest 25,872 11,471 11,530
Depreciation and amortization 16,728 8,958 8,089
General and administrative 6,366 2,411 4,075
Settlement of litigation and related costs 1,902
Provision for loss on land held for sale 996
Provision for uncollectible rents 212 343 199
Direct cost of management fees 3,649 56
Undeveloped land costs 667 24
Loss on sale of assets 43
Provisions for losses on loans to Koger
Properties, Inc. foreclosed in-substance 1,982
Total expenses 95,934 43,954 45,255
Income Before Income Taxes 4,442 2,452 933
Income taxes 227
Net Income $ 4,215 $ 2,452 $ 933
Earnings Per Common Share $ 0.24 $ 0.18 $ 0.07
See Notes to Consolidated Financial Statements.
<PAGE>
KOGER EQUITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS IN THE PERIOD
ENDED DECEMBER 31, 1994
(In Thousands)
<TABLE>
<CAPTION>
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,
<S> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1991 14,313 $143 $267,824 $(23,257)$ (10,129) $234,581
Net income 933 933
BALANCE,
DECEMBER 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,
DECEMBER 31, 1993 20,472 205 318,574 1,368 (19,872) (24,825) 275,450
Treasury stock reissued (3) 38 35
Warrants issued 885 885
Warrants exercised 1 12 (2) 10
Options exercised 1 6 6
Net income 4,215 4,215
BALANCE,
DECEMBER 31, 1994 20,474 $205 $318,589 $2,251 $(15,657) $(24,787) $280,601
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
KOGER EQUITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE THREE YEARS IN THE PERIOD
ENDED DECEMBER 31, 1994
(In Thousands)
<TABLE>
<CAPTION>
1994 1993 1992
Operating Activities
<S> <C> <C> <C>
Net income $ 4,215 $ 2,452 $ 933
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 16,728 8,958 8,089
Warrants issued - litigation settlement 885
Provision for loss on land held for sale 996
Loss on sale of assets 43
Amortization of mortgage discounts 219 267 216
Provision for losses on loans to KPI
foreclosed in-substance 1,982
Provision for uncollectible rents 212 343 199
Accrued interest added to principal 1,336 38
Changes in assets and liabilities, net of
effects from purchase of assets from KPI:
Increase (decrease) in accounts payable,
accrued liabilities and other liabilities 35 (104) 270
Increase (decrease) in payable to KPI 1,287 (160)
Increase in receivables and other assets (3,176) (1,316) (1,076)
Increase in receivable from TKPL (1,217)
Net cash provided by operating activities 20,276 11,925 10,453
Investing Activities
Tenant improvements to existing properties (7,334) (4,662) (2,449)
Building improvements to existing properties (3,749) (1,761) (525)
Deferred tenant costs (1,112) (598) (297)
Additions to furniture and equipment (383) (19)
Merger costs (344) (4,221)
Cash acquired in purchase of assets from KPI 2,316 15,596
Proceeds from sale of assets 3,499
Payments received on loans to KPI - Cash
Collateral Order 1,392 1,181
Net cash provided by (used in) investing activities (7,107) 5,746
(2,109)
Financing Activities
Proceeds from exercise of warrants and stock options 16 1
Proceeds from sale of stock under Stock Investment Plan 35
Principal payments on mortgages and loans (8,267) (7,670) (2,227)
Financing costs (204) (719)
Net cash used in financing activities (8,420) (8,388) (2,227)
Net increase in cash and cash equivalents 4,749 9,283 6,117
Cash and cash equivalents - beginning of year 18,566 9,283 3,166
Cash and cash equivalents - end of year $23,315 $18,566 $9,283
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
KOGER EQUITY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD
ENDED DECEMBER 31, 1994
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, undeveloped land held for investment and related
goodwill and in those instances where properties have suffered an
impairment in value that is deemed to be other than temporary,
the properties and related goodwill 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, 1994, 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 4 to 40
years. Deferred tenant costs (leasing commissions and tenant
relocation 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 pursuant 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. For 1994, the recognition of
rental revenues on this basis for applicable leases increased
rental revenues by $512,000 over the amount which would have been
recognized based upon the contractual provisions of these leases.
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 between the
Company and KPI, 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
1994, 1993 or 1992, no distributions to shareholders were made. To
the extent that the Company pays dividends equal to 100 percent of
REIT taxable income, the earnings of the Company are taxed at the
shareholder level. However, the use of net operating loss
carryforwards, which may reduce REIT taxable income to zero, are
limited for alternative minimum tax purposes.
Earnings Per Common Share. Earnings per common share have
been computed based on the weighted average number of shares of
common stock and common stock equivalents outstanding (17,718,757
shares for the year ended December 31, 1994, 13,351,525 shares for
the year ended December 31, 1993, and 13,219,519 shares for the
year ended December 31, 1992).
Fair Value of Financial Instruments. The Company believes
that the carrying amount of its financial instruments (cash and
short-term investments, accounts receivable, 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 1994, the fair value of the KPI assets acquired and
liabilities assumed pursuant to the Merger was adjusted as follows:
(1) assets acquired increased $2,250,000; (2) liabilities assumed
increased $243,000; and (3) additional direct merger costs were
incurred which totalled $344,000.
For 1994, 1993, and 1992, total interest payments were
$23,525,000, $12,421,000 and $10,693,000, respectively, for the
Company. For 1994, payments for income taxes totalled
approximately $227,000. There were no payments for income taxes
during 1993 or 1992.
Reclassification. Certain 1993 amounts have been reclassified
to conform with 1994 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 these loans 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. All payments received under the Cash Collateral Order
($2,667,470 through the date of the Merger) 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 loan under the Land Credit
Agreement was 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 this loan 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. 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 "KPI 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 law 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 KPI Plan was confirmed by the
Bankruptcy Court and the Merger became effective on December 21,
1993. See Note 3 "KPI Merger" for further discussion.
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 and 1992, the Company incurred
management fee expenses to KMI of $2,184,000 and $2,314,000,
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 an Assistant Vice
President of an affiliate of a shareholder who along with certain
of its affiliates owns approximately 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 five 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 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 or the right of the Company pursuant to its By
Laws to repurchase all Shares held by the shareholder and its
affiliates in excess of 9.8 percent of outstanding Shares. The
Company has also covenanted that following 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 KPI 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 currently ranging
from $2.41 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 KPI 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 under the purchase method of accounting.
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
at December 31, 1993. During 1994, the fair value of the KPI
assets acquired and liabilities assumed pursuant to the Merger was
adjusted as follows: (1) assets acquired increased $2,250,000; (2)
liabilities assumed increased $243,000; and (3) additional direct
acquisition costs were incurred which totalled $344,000. With
these adjustments, the total cost in excess of fair value of net
assets acquired from KPI totalled $9,983,000 at December 31, 1994.
For 1993, 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.
UNAUDITED
(in thousands)
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 (the TKPL Plan ) 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
approximately 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. During 1994, the
management fees earned were approximately $3,288,000. 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
August, 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, 1994 and 1993 and the condensed
statements of operations for TKPL for the three years ended
December 31, 1994, are summarized below (in thousands).
BALANCE SHEET DATA:
1994 1993
Total Assets $152,098 $157,239
Liabilities $193,276 $188,740
Deficiency in Assets (41,178) (31,501)
Total Liabilities and Deficiency in Assets $152,098 $157,239
OPERATIONS DATA:
1994 1993 1992
Revenues $ 36,840 $ 35,753 $ 36,765
Operating, Interest and Other Expenses (34,298) (34,089) (31,957)
Depreciation and Amortization (12,219) (13,457) (15,201)
Net Loss $ (9,677) $(11,793) $(10,393)
<PAGE>
5. MORTGAGES AND LOANS 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 $98,345,000 at December 31, 1994. 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,
1994, $46,798,000 of these loans bore interest at 6.43 percent and
have a final maturity date of December 21, 2000. This loan is
collateralized by properties with a carrying value of $67,809,000.
At December 31, 1994, $24,597,000 of these loans bore 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
$42,168,000. 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,
1994, one of these loans in the amount of $26,950,000 bore 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 $50,069,000 at December 31,
1994. On or before December 21, 1996, the Company will be required
to repay not less than $5 million of principal of this indebtedness
($675,000 of which has been repaid through December 31, 1994).
Each of these lenders 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 December 21, 1998, the Company maintain a total
liabilities to net worth ratio of 1.0 to 1.0, 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, 1994, the total liabilities to net
worth ratio of the Company was 1.19 to 1.0. In addition, each of
these bank lenders have required other covenants generally similar
to the provisions set forth in the KPI Plan with respect to the KPI
restructured debt.
At December 31, 1994, the Company had mortgages payable with
an outstanding balance of $46,566,000 which is net of a $1,072,000
discount. Such mortgages are generally amortizing, bear interest
at rates ranging from 8.5 percent to 10.125 percent, and are
collateralized by office buildings with a carrying value of
$84,834,000 at December 31, 1994.
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 12/31/94
Senior Bank Mortgage Debt $ 83,992 $ 83,893
Junior Bank Mortgage Debt 11,354 10,278
Insurance Company Mortgage Debt 60,787 59,390
Other Mortgage Debt 21,168 21,124
Tax Notes 5,040 4,148
Mechanics' Liens 287
$182,628 $178,833
Senior Bank Mortgage Debt, acquired in connection with the
Merger, with outstanding balances of approximately $83.9 million
will mature in December, 2003. Interest payments are due monthly
based on a 6.62 percent interest rate with monthly amortization
which began 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 totalling 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 (8.5 percent at December 31, 1994). 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, 1994, of approximately $59.2 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. The contractual interest rates on
these loans currently range from 8 percent to 10 percent. These
mortgages include provisions during the period ending December 21,
1996, that 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 $0.2 million which
retained their existing balances and terms were also acquired from
KPI in connection with the Merger. The interest rate on these
loans is 8.5 percent.
Other Mortgage Debt acquired in the Merger totals
approximately $21.1 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, 1994, approximately $4.1 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.
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 $1,072,000 of unamortized discounts, as of December
31, 1994, are summarized as follows (dollars in thousands):
Year Ending
December 31, Total
1995 $ 5,186
1996 8,377
1997 14,804
1998 20,392
1999 7,990
Subsequent Years 268,088
Total $324,837
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, 1994,
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 2004. Minimum future rental revenues from
leases in effect at December 31, 1994, determined without regard to
renewal options, are summarized as follows:
Year Ending Amount
December 31, (In thousands)
1995 $ 78,369
1996 55,281
1997 37,558
1998 23,067
1999 12,721
Subsequent Years 38,690
Total $245,686
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 $2,172,000,
$1,407,000 and $1,638,000 for the years 1994, 1993, and 1992,
respectively.
At December 31, 1994, annualized rental revenues totalled
approximately $13,062,000 for the State of Florida, when all of its
departments and agencies which lease space in the Company s
buildings are combined.
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 have either been surrendered or
forfeited.
Pursuant to the 1988 Plan, the Compensation Committee of the
Company's Board of Directors (the "Compensation Committee") 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. On January 27, 1994, the Compensation
Committee granted options to purchase 213,750 shares to certain
employees at an exercise price of $7.625 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 the grant
at the rate of 20 percent per annum of the shares covered by each
option on a cumulative basis 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 173,246 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, Koger Advisors, Inc. ("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.
1993 Stock Option Plan. The Company's 1993 Stock Option Plan
(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
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.
Pursuant to the 1993 Plan, the Compensation Committee granted
options to purchase 552,200 shares on January 27, 1994 to certain
key employees at an exercise price of $7.625 per share, which was
the closing market price on the American Stock Exchange on the date
of the grant. These options expire ten years from the date of
grant and are exercisable beginning one year from the date of the
grant at the rate of 20 percent per annum of the shares covered by
each option on a cumulative basis being fully exercisable five
years after the date of grant. In addition, the Compensation
Committee granted options to purchase 207,332 shares on May 9, 1994
to certain key employees at an exercise price of $7.625 per share,
which was the closing market price on the American Stock Exchange
on the date of the grant. These options expire ten years from the
date of grant with 115,000 shares fully exercisable six months from
the date of the grant and 92,332 shares exercisable beginning one
year from the date of the grant at the rate of 20 percent per annum
of the shares covered by each option on a cumulative basis being
fully exercisable five years from the date of grant. At December
31, 1994, options to purchase 759,532 shares pursuant to the 1993
Plan were outstanding which were at an exercise price of $7.625 per
share.
Summary of Options Granted. Information concerning the
options granted is summarized below.
<TABLE>
<CAPTION>
Options
Date of Shares Under Exercisable Exercise Price
Plan Grant Option at 12/31/94 Per Share Total
<C> <C> <C> <C> <C> <C>
1988 Stock Option Plan 1/27/94 213,750 0 $7.625 $1,629,844
2/05/92 284,950 113,980 5.125 1,460,369
1993 Stock Option Plan 1/27/94 552,200 0 $7.625 $4,210,525
5/09/94 207,332 115,000 7.625 1,580,907
Stock Purchase Option 8/25/88 299,180 299,180 20.000 $5,983,600
</TABLE>
At December 31, 1994, there were 240,468 shares available for
the granting of options under the 1993 Plan. Through December 31,
1994, options to purchase 1,300 shares had been exercised under the
1988 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, 1994), 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 certain shareholder and
its affiliates, see Note 2 for further discussion of this
amendment.
8. STOCK INVESTMENT PLAN.
The Company adopted a Monthly Stock Investment Plan (the
"Plan") which provides for regular purchases of the Company's
common stock by all employees and directors during 1994. The Plan
provides for monthly payroll and directors fees deductions up to
$1,700 per month with the Company making monthly contributions for
the account of each participant as follows: (i) 25 percent of
amounts up to $50; (ii) 20 percent of amounts between $50 and $100;
and (iii) 15 percent of amounts between $100 and $1,700, which
amounts are used by an unaffiliated Administrator to purchase
shares from the Company. The Company has reserved a total of
200,000 shares for issuance under the Plan. The Company's
contribution and the expenses incurred in administering the Plan
totalled approximately $7,900 for 1994. Through December 31, 1994,
4,675 shares have been issued under the Plan.
9. EMPLOYEE BENEFIT PLAN.
During 1994, the Company adopted a 401(k) Plan, which permits
contributions by employees. The Company's Board of Directors
approved a Company contribution to the 401(k) Plan for 1994. This
contribution is in the form of the Company's common stock and was
made during February, 1995. The contribution totalled 122,441
shares which had a value of approximately $887,000 on December 31,
1994.
10. DIVIDENDS.
The Company paid no dividends during the three years ended
December 31, 1994. 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 terms of the secured debt of the Company provide that the
Company will be subject to certain dividend limitations which,
however, will not restrict the Company from paying the dividends
required to maintain its qualifications 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
1995, 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.
11. FEDERAL INCOME TAXES.
The Company is operated in a manner so as to qualify and has
elected tax treatment as a REIT. The Company's taxable
income/(loss) prior to the dividends paid deduction for the years
ended December 31, 1994, 1993, and 1992 was approximately
$(15,166,000), $(7,887,000), and $(13,329,000), 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, advance rents received and net operating loss
carryforwards. At December 31, 1994, 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 $18,233,000.
On the Company s 1993 Federal income tax return, the Company
utilized approximately $5,094,000 of its 1992 net operating loss
carryforward to eliminate any REIT taxable income for 1993. The
Company s net operating loss carryforward available to offset REIT
taxable income for 1994 totals approximately $8,449,000, which can
be used to offset REIT taxable income through 2007. Pursuant to
the Merger, the Company succeeded to KPI s net operating loss
carryforward which, based upon KPI s final Federal income tax
return, totals approximately $98,000,000. However, the portion of
KPI s net operating loss carryforward which is usable each year by
the Company is limited to approximately $7,900,000. The use of net
operating loss carryforwards are limited for alternative minimum
tax purposes. The Company paid approximately $104,000 of
alternative minimum tax when its 1993 Federal income tax return was
filed. For 1994, the Company recorded a provision for alternative
minimum taxes of approximately $107,000.
The Company's 1992 and 1993 Federal income tax returns are
currently being examined by the Internal Revenue Service. The
Company does not believe that the results of this examination will
materially affect its operations or its REIT status.
12. LITIGATION.
The Company, certain of its present and former officers and
directors, and KPI and certain of its subsidiaries were parties to
a class action filed in October, 1990 (the "Securities Action").
The Securities Action was settled effective December 31, 1994 (the
Settlement). Under the Settlement, the Company paid, in
settlement of all claims against all defendants therein, the sum of
$800,000 in cash plus 472,131 Warrants (the "Warrants") to purchase
472,131 shares of the Company's common stock (which Warrants were
valued at $1.875 based on the closing price of the Warrants on
December 31, 1994 which was the effective date of issuance of the
Warrants). The Warrants are exercisable until June 30, 1999 at
$8.00 per share and are subject to redemption at the option of the
Company at prices currently ranging from $2.41 to $5.24 per
Warrant. The Company has recorded a provision of $1,685,000
relating to the Settlement of the Securities Action.
A derivative action against the Company in the District Court
which commenced on October 29, 1990, has been resolved in favor of
the Company. Various amended filings and counter-claims have been
filed against the Company of which the Company does not believe
that the outcome will materially affect its operations or financial
position. 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 the former non-officer
directors 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.
<PAGE>
13. INTERIM FINANCIAL INFORMATION (UNAUDITED).
Selected quarterly information for the two years in the period
ended December 31, 1994, 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, 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
March 31, 1994 23,554 24,908 2,692 .15
June 30, 1994* 23,407 24,678 (1,075) (.06)
September 30, 1994 23,781 25,494 1,432 .08
December 31, 1994 23,646 25,296 1,166 .07
*The results for the quarter ended June 30, 1994 were effected by the accrual
for the settlement of the Securities Action and the provision for loss on two
land parcels held for sale.
<PAGE>
KOGER EQUITY, INC. AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1994
(in thousands)
<TABLE>
<CAPTION>
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:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ATLANTA CHAMBLEE $ 13,177 $ 63,211 $ 4,109 $ 0 $ 13,177 $ 67,320 $ 80,497 $ 7,751 $ 33,877 1988 - 1993 4 - 40 YRS.
ATLANTA GWINNETT 0 3 0 0 0 3 3 0 0 1993 4 - 40 YRS.
AUSTIN 4,274 13,650 874 0 4,274 14,524 18,798 622 2,638 1990 - 1993 4 - 40 YRS.
CHARLOTTE CARMEL 910 9,993 1 0 910 9,994 10,904 250 9,158 1993 4 - 40 YRS.
CHARLOTTE EAST 5,788 25,078 932 0 5,788 26,010 31,798 1,828 14,753 1989 - 1993 4 - 40 YRS.
EL PASO 3,108 10,107 1,658 0 3,108 11,765 14,873 1,440 1,141 1990 - 1993 4 - 40 YRS.
GREENSBORO SOUTH 6,391 38,700 2,282 0 6,391 40,982 47,373 3,574 22,835 1988 - 1993 4 - 40 YRS.
GREENSBORO WENDOVER 0 11 0 0 0 11 11 2 0 1993 4 - 40 YRS.
GREENVILLE 3,833 16,104 1,215 0 3,833 17,319 21,152 1,992 7,167 1988 - 1993 4 - 40 YRS.
JACKSONVILLE BAYMEADOWS 7,625 23,716 124 0 7,625 23,840 31,465 603 35,658 1993 4 - 40 YRS.
JACKSONVILLE CENTRAL 6,915 35,321 3,129 0 6,915 38,450 45,365 3,947 13,222 1989 - 1993 4 - 40 YRS.
MEMPHIS GERMANTOWN 3,518 21,821 885 0 3,518 22,706 26,224 2,572 13,389 1988 - 1993 4 - 40 YRS.
MIAMI 2,040 7,295 9 0 2,040 7,304 9,344 191 7,991 1993 4 - 40 YRS.
NORFOLK WEST 535 4,485 83 0 535 4,568 5,103 127 4,121 1993 4 - 40 YRS.
ORLANDO CENTRAL 8,342 30,575 3,307 0 8,342 33,882 42,224 4,899 18,336 1988 - 1993 4 - 40 YRS.
ORLANDO UNIVERSITY 2,900 12,218 352 0 2,900 12,570 15,470 885 9,722 1990 - 1993 4 - 40 YRS.
RALEIGH CROSSROADS 820 5,994 26 0 820 6,020 6,840 154 4,943 1993 4 - 40 YRS.
RICHMOND SOUTH 0 105 0 0 0 105 105 7 0 1993 4 - 40 YRS.
ST. PETERSBURG 6,657 29,525 2,132 0 6,657 31,657 38,314 3,290 20,472 1988 - 1993 4 - 40 YRS.
SAN ANTONIO 9,638 29,649 4,166 0 9,638 33,815 43,453 3,899 6,268 1990 - 1993 4 - 40 YRS.
TALLAHASSEE A. P. 6,063 28,043 2,053 0 6,063 30,096 36,159 3,777 14,731 1988 - 1993 4 - 40 YRS.
TALLAHASSEE C. C. 3,561 22,903 170 0 3,561 23,073 26,634 2,107 21,085 1988 - 1993 4 - 40 YRS.
TULSA NORTH 1,600 4,300 501 0 1,600 4,801 6,401 564 0 1990 4 - 40 YRS.
TULSA SOUTH 4,466 12,834 705 0 4,466 13,539 18,005 1,421 4,466 1990 - 1993 4 - 40 YRS.
SUBTOTALS 102,161 445,641 28,713 0 102,161 474,354 576,515 45,902 265,973
FURNITURE & EQUIPMENT 1,197 1,197 1,197 204 4 - 7 YRS.
IMPROVEMENTS IN PROGRESS 525 525 525
TOTAL OPERATING
REAL ESTATE $102,161 $446,838 $29,238 $ 0 $102,161 $476,076 $578,237 $46,106 $265,973
</TABLE>
<PAGE>
KOGER EQUITY, INC. AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1994
(in thousands)
<TABLE>
<CAPTION>
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:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ATLANTA GWINNETT $ 5,780 $ 0 $ 0 $ 0 $ 5,780 $ 0 $ 5,780 $ 0 $ 79 1993
BIRMINGHAM 1,200 0 0 0 1,200 0 1,200 0 32 1993
CHARLOTTE CARMEL 3,250 0 0 0 3,250 0 3,250 0 71 1993
CHARLOTTE EAST 468 0 0 0 468 0 468 0 8 1993
COLUMBIA SPRING VALLEY 150 0 0 0 150 0 150 0 0 1993
GREENSBORO WENDOVER 1,491 0 0 0 1,491 0 1,491 0 0 1993
GREENVILLE 949 0 0 0 949 0 949 0 0 1993
JACKSONVILLE BAYMEADOWS 2,319 0 0 0 2,319 0 2,319 0 44 1993
MEMPHIS GERMANTOWN 4,505 0 0 0 4,505 0 4,505 0 0 1993
MIAMI 2,970 0 0 0 2,970 0 2,970 0 61 1993
NORFOLK WEST 2,265 0 0 0 2,265 0 2,265 0 6 1993
ORLANDO UNIVERSITY 2,880 0 0 0 2,880 0 2,880 0 39 1993
RALEIGH CROSSROADS 2,495 0 0 0 2,495 0 2,495 0 39 1993
RICHMOND SOUTH 1,860 0 0 0 1,860 0 1,860 0 0 1993
ST. PETERSBURG 1,000 0 0 0 1,000 0 1,000 0 28 1993
SAN ANTONIO 1,430 0 0 0 1,430 0 1,430 0 76 1993
TULSA NORTH 1,000 0 0 0 1,000 0 1,000 0 9 1993
TOTAL UNIMPROVED LAND 36,012 0 0 0 36,012 0 36,012 0 492
TOTAL $138,173 $446,838 $29,238 $ 0 $138,173 $476,076 $614,249 $46,106 $ 266,465
</TABLE>
<PAGE>
KOGER EQUITY, INC. AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1994
(in thousands)
(a) At December 31, 1994, the outstanding balance of mortgages payable was
$266,465. In addition, the Company has loans outstanding with variable
interest rates which are collateralized by mortgages on pools of buildings.
At December 31, 1994, the outstanding balance of these loans was $58,352.
(b) Aggregate cost basis for Federal income tax purposes was $645,810 at
December 31, 1994.
(c) Reconciliation of total real estate carrying value for the years ended
December 31, 1994, 1993 and 1992 is as follows:
1994 1993 1992
Balance at beginning of year $606,806 $311,286 $308,293
Acquisitions 384 289,097 19
Improvements 11,083 6,423 2,974
Provision for loss - 2 land parcels (996)
Sale of Memphis Kirby Gate land (3,028)
Balance at close of year $614,249 $606,806 $311,286
Acquisitions of land and buildings during 1993 were made pursuant to the
Merger.
(d) Reconciliation of accumulated depreciation for the years ended December
31, 1994, 1993 and 1992
is as follows:
1994 1993 1992
Balance at beginning of year $30,706 $22,300 $14,625
Depreciation expense:
Operating real estate 15,202 8,403 7,673
Furniture and equipment 198 3 2
Balance at close of year $46,106 $30,706 $22,300
<PAGE>
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 "1995 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
James C. Teagle. . . Senior Vice President of Finance
James M. Lawrence. . Senior Vice President of Operations
W. Lawrence Jenkins. Vice President of Administration and Corporate Secretary
Mr. Stoneburner, age 76, 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. Davis, age 65, 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 59, 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, 1993.
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 37, has been the Treasurer and Chief
Accounting Officer of the Company since March 31, 1991. He held
the position of Assistant Secretary of the Company from May 20,
1991 through December 21, 1993. Mr. Stephens was the Accounting
Manager of Koger Advisors, Inc. from December, 1990 to March,
1991. He was a Division Controller of KPI from March, 1989 to
December, 1990.
Mr. Teagle, age 53, has been the Senior Vice President of
Finance of the Company since May 10, 1994. He had previously held
the position of Vice President of the Company from December 21,
1993 to May 10, 1994. Mr. Teagle was a Vice President of KPI from
July, 1973 to December 21, 1993.
Mr. Lawrence, age 53, was the Senior Vice president of
Operations of the Company from May 10, 1994 to January 31, 1995, at
which time he resigned his position with the Company. He had
previously held the position of Vice President of the Company from
December 21, 1993 to May 10, 1994. Mr. Lawrence was a Senior Vice
President of KPI from December, 1991 to December 21, 1993.
Mr. Jenkins, age 51, has been the Corporate Secretary of the
Company since December 21, 1993, and Vice President of the Company
since May 10, 1994. Mr. Jenkins was a Vice President and Corporate
Secretary of KPI from August, 1990 to December 21, 1993.
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, 1994 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
1995 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 1995
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 1995 Proxy
Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to Item 1. "Business," 2. "Properties," 3.
"Legal 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 1995
Proxy Statement for information regarding certain relationships and
related transactions which information is incorporated herein by
reference.
<PAGE>
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, 1994
(Commission File No. 0-8891).
(2) The consolidated supplemental financial statement
schedules required by Regulation S-X are included on pages
51 through 53 in this Form.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the
quarter ended December 31, 1994.
(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. Incorporated by reference to
Exhibit 2 of Form 10-K filed by the Registrant
for the period ended December 31, 1993 (File No.
1-9997).
3(a) Amended and Restated Articles of Incorporation
of Koger Equity, Inc. Incorporated by reference
to Exhibit IV of the 1993 Proxy Statement filed
by the Registrant on June 30, 1993 (File No. 1-
9997).
3(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 (File 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.
4(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.
4(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
Number Description
Exhibit 4(b)(4) of the Form 10-Q filed by the
Registrant for the quarter ended March 31, 1993
(File No. 1-9997).
4(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.
4(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).
4(b)(3) Summary of Common Stock Purchase Rights
(attached as Exhibit B to the Rights Agreement).
4(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.
4(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(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).
10(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).
10(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).
10(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).
10(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).
10(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
10(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).
10(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).
10(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).
10(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).
10(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).
10(e)(3)(A) Koger Equity, Inc. 1993 Stock Option Plan.
See Exhibit II to Registrant s Proxy Statement
dated June 30, 1993 (File No. 1-9997) which is
incorporated herein by reference.
10(e)(3)(B) Form of Stock Option Agreement pursuant to
Koger Equity, Inc. 1993 Stock Option Plan.*
10(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).
10(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).
10(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).
10(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).
10(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).
10(j) Second Amendment To Credit Agreement dated as
of March 30, 1990. Incorporated by reference
to Exhibit 10(j)
Exhibit
Number Description
of Form 10-K filed by the Registrant for the
year ended December 31, 1990 (File No. 1-9997).
10(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).
10(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).
10(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).
10(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).
10(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).
10(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).
10(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).
10(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).
10(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).
10(l)(9) Restated Loan Agreement between NationsBank of
Florida, N.A., and Koger Equity, Inc., dated
December 21, 1993. Incorporated by reference
to Exhibit 10(1)(9) of Form 10-K filed by the
Registrant for the period ended December 31,
1993 (File No. 1-9997).
10(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).
Exhibit
Number Description
10(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).
10(m)(2) Consolidated Renewal Promissory Note between
Barnett Bank of Jacksonville, N.A., and Koger
Equity, Inc., dated December 21, 1993.
Incorporated by reference to Exhibit 10(m)(2)
of Form 10-K filed by the Registrant for the
period ended December 31, 1993 (File No. 1-9997).
10(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).
10(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).
10(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).
10(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).
10(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).
10(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).
10(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).
10(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
Exhibit
Number Description
Registrant for the quarter ended September 30,
1993 (File No. 1-9997).
10(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).
10(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).
10(n)(11) Consolidated Note between First Union National
Bank of Florida and Koger Equity, Inc., dated
December 21, 1993. Incorporated by reference
to Exhibit 10(n)(11) of Form 10-K filed by the
Registrant for the period ended December 31,
1993 (File No. 1-9997).
10(o) Shareholders Agreement, dated August 9, 1993,
between the Company and TCW Special Credits,
a California general partnership.
Incorporated by reference to Exhibit 10(o) of
Form 10-K filed by the Registrant for the
period ended December 31, 1993 (File No. 1-9997).
10(p) Registration Rights Agreement, dated as of
August 9, 1993, between the company and TCW
Special Credits, a California general
partnership. Incorporated by reference to
Exhibit 10(p) of Form 10-K filed by the
Registrant for the period ended December 31,
1993 (File No. 1-9997).
10(q)(1) Amended and Restated Management Agreement,
dated August 3, 1993, between The Koger
Partnership, Ltd. and Koger Properties, Inc.
Incorporated by reference to Exhibit 10(q)(1)
of Form 10-K filed by the Registrant for the
period ended December 31, 1993 (File No. 1-9997).
10(q)(2) First Amendment to Amended and Restated
Management Agreement, dated December 21, 1993,
between The Koger Partnership, Ltd. and Koger
Properties, Inc. Incorporated by reference to
Exhibit 10(q)(2) of Form 10-K filed by the
Registrant for the period ended December 31,
1993 (File No. 1-9997).
10(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.
Incorporated by reference to Exhibit 10(q)(3)
of Form 10-K filed by the Registrant for the
period ended December 31, 1993 (File No. 1-9997).
10(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.
Incorporated by reference to Exhibit 10(q)(4)
of Form 10-K
Exhibit
Number Description
filed by the Registrant for the period ended
December 31, 1993 (File No. 1-9997).
10(r)(1) Incentive Fee Agreement, dated August 3, 1993,
between The Koger Partnership, Ltd. and Koger
Properties, Inc.Incorporated by reference to
Exhibit 10(r)(1) of Form 10-K filed by the
Registrant for the period ended
December 31, 1993 (File No. 1-9997).
10(r)(2) First Amendment to Incentive Fee Agreement,
dated December 21, 1993, between The Koger
Partnership, Ltd, and Koger Properties, Inc.
Incorporated by reference to Exhibit 10(r)(2)
of Form 10-K filed by the Registrant for the
period ended December 31, 1993 (File No. 1-9997).
10(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
Ltd. Incorporated by reference to Exhibit
10(s) of Form 10-K filed by the Registrant for
the period ended December 31, 1993 (File No.
1-9997).
10(t) Option and Purchase and Sale Agreement, dated
August 3, 1993, between The Koger Partnership,
Ltd. and Koger Properties, Inc. Incorporated
by reference to Exhibit 10(t) of Form 10-K
filed by the Registrant for the period ended
December 31, 1993 (File No. 1-9997).
10(u) Subordination Agreement, dated as of August 3,
1993, executed and delivered by Koger
Properties, Inc. Incorporated by reference to
Exhibit 10(u) of Form 10-K filed by the
Registrant for the period ended December 31,
1993 (File No. 1-9997).
11 Earnings Per Share Computations.*
21 Subsidiaries of the Registrant.*
23 Independent Auditors' Consent.*
27 Financial Data Schedule.*
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).
28(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 (File No. 1-9997).
*Filed with this Report.
<PAGE>
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 20, 1995
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 March 20, 1995
(Irvin H. Davis) Officer and Director
VICTOR A. HUGHES Senior Vice President, Chief March 20, 1995
(Victor A. Hughes) Financial Officer and Director
JAMES L. STEPHENS Treasurer and Chief Accounting March 20, 1995
(James L. Stephens) Officer
S. D. STONEBURNER Chairman of the Board of March 20, 1995
(S. D. Stoneburner) Directors and Director
D. PIKE ALOIAN Director March 20, 1995
(D. Pike Aloian)
BENJAMIN C. BISHOP Director March 20, 1995
(Benjamin C. Bishop)
Director
(Charles E. Commander, III)
Director
(David B. Hiley)
G. CHRISTIAN LANTZSCH Director March 20, 1995
(G. Christian Lantzsch)
Director
(Thomas K. Smith, Jr.)
GEORGE F. STAUDTER Director March 20, 1995
(George F. Staudter)
EXHIBIT 10(e)(3)(B)
FORM OF
STOCK OPTION AGREEMENT
PURSUANT TO
KOGER EQUITY, INC.
1993 STOCK OPTION PLAN
THIS AGREEMENT, entered into as of the ____ day of
______________ (the "Date of Grant"), by and between
KOGER EQUITY, INC., (referred to herein as the
"Company" which definition sometimes includes its
subsidiaries), a Florida corporation, with its
principal office at 3986 Boulevard Center Drive,
Jacksonville, Florida 32207; and ___________________
(the "Employee"), who resides at
______________________.
WHEREAS, the Company has employed the Employee as a key
employee of the Company and considers it desirable and
in its best interest that the Employee be given an
inducement to acquire a proprietary interest in the
Company and an added incentive to advance the interests
of the Company in the form of options to purchase
common stock of the Company; and
WHEREAS, the Compensation Committee (the "Committee")
of the Board of Directors (the "Board") of the Company,
at a duly constituted meeting held on the Date of
Grant, pursuant to the provisions of the Company's 1993
Stock Option Plan adopted by the Board on March 16,
1993, and approved by shareholders on August 11, 1993
(the "Plan"), granted the Employee the option (the
"Option") described herein and so notified the
Employee; and
WHEREAS, the Option is a non-statutory type option and
not an Incentive Stock Option as contemplated under
Section 422A of the Internal Revenue Code of 1986;
NOW, therefore, in consideration of the mutual
covenants contained in this contract, the parties agree
as follows:
1. AGREEMENT
This Agreement contains all the terms and conditions of
the Option granted to the Employee by the Company on
the Date of Grant.
2. AMOUNT AND PRICE
The Company, subject to the terms, definitions and
provisions of this Agreement, grants to the Employee
the Option to purchase ______________ shares of common
stock of the Company; par value $.01 per share (the
"Common Stock"), at a price of $_______ per share, such
price being at least 100% of the fair market value of
the stock on the Date of Grant. The term "Option" shall
be deemed to include stock appreciation rights with
respect to the shares of stock subject to this
Agreement, as set forth in this Section and exercisable
in accordance with Section 3(b) and 3(c) of this
Agreement.
3. HOW EXERCISABLE
(a) The Employee shall exercise the Option by written
notice to the Company, which notice shall specify the
number of shares to be purchased and the date of
exercise (the "Date of Exercise") which date shall not
be more than seven (7) days after the day of the
mailing of such notice. On or before the Date of
Exercise, a certified check or, at the Employee's
election, shares of the Company's Common Stock
previously acquired and currently owned by the Employee
equal in fair market value to the full payment of the
Option price for such shares shall be delivered to the
Company at the office designated in this Agreement; and
until such payment, the Employee shall have no rights
in the optioned stock. In the event of any failure to
take and pay by cash or previously acquired shares, for
the number of shares specified in the notice of
election on the date stated therein, the Option shall
become inoperative and lapse as to such number of
shares, but shall continue with respect to any
remaining shares subject to the Option as to which
notice of exercise has not yet been made.
(b) Alternatively, by written notice the Employee may
elect to exercise the Option by receiving the number of
shares represented by the difference between the
aggregate fair market value of the shares exercised on
the date of Exercise by the Employee and the aggregate
exercise price of such shares, divided by the fair
market value of the Company's Common Stock on the Date
of Exercise.
(c) Alternatively, by written notice the Employee may
elect to exercise the Option on the Date of Exercise in
part by receiving for such Employee's benefit cash
equal to the minimum amount required to be withheld for
payroll tax purposes as described in Section 11 hereof
and the balance by receiving shares in the manner
prescribed in Section 3(b) of this Agreement. The
Committee shall have sole discretion to consent to or
disapprove any election of the Employee pursuant to
this Section 3(c), provided that the Committee shall,
in the exercise of such discretion, be subject to such
limitations as may be imposed on the administrators of
a plan by Rule 16b-3, as amended and adopted by the
Securities and Exchange Commission under Section 16(b)
of the Securities Exchange Act of 1934 as in effect on
the date hereof, and as the same may be hereafter
further amended, as a condition to the exemption from
the operation of Section 16(b) of transactions
substantially identical to that permitted by this
Section 3(c). Neither the Committee nor the Company
shall be under any liability to any person by reason of
the Committee's disapproval of such election.
(d) Within fifteen days after the Date of Exercise, the
Company shall deliver, or cause to be delivered, to the
Employee stock certificates for the number of shares
with respect to which the Option is being exercised, if
the Company has received the certification described in
Section 9 of this Agreement. Delivery of the shares may
be made at the office of the Company or at the offices
of a transfer agent appointed for transfer of the
shares of the Company, as the Company shall determine.
Shares shall be registered in the name of the Employee
or his or her personal representative, as the case may
be. Neither an Employee nor his or her personal
representative shall have any of the rights of a
shareholder until the shares are issued as herein
provided.
Anything herein to the contrary notwithstanding, if any
laws or any regulation of the Securities and Exchange
Commission or of any other body having jurisdiction
shall require the Company or the Employee to take any
action in connection with the shares specified in a
notice of election before such shares can be delivered
to such Employee, then the date stated therein for the
delivery of the shares shall be postponed until the
fifth business day next following the completion of
such action.
4. WHEN EXERCISABLE
The option may not be exercised prior to the later of
(1) six months after the Date of Grant or (2) the
effective date of the Plan. Thereafter, the Option
shall be exercisable on a cumulative basis as follows:
% Exercisable Date Exercisable
20% One (1) year after
Date of Grant
40% Two (2) years after
Date of Grant
60% Three (3) years after
Date of Grant
80% Four (4) years after
Date of Grant
100% Five (5) years after
Date of Grant
Terminates Ten (10) years after
Date of Grant (or such
earlier date as
provided otherwise herein)
In the event the Employee dies or becomes totally
disabled after the effective date of the Plan, at any
time after having been granted an Option, the Options
granted to the Employee shall immediately become fully
exercisable by his or her estate or heirs in the case
of death for the time period specified in Section 6(b)
of this Agreement and by the Employee or the Employee's
legal guardian in the case of total disability for the
full Option period specified in the first paragraph of
this Section 4.
When the employee elects to receive a portion of the
economic value of the Option, in the form of cash [as
described in Section 3(c) of this Agreement] and such
election is approved by the Committee, then such
exercise must be made in accordance with the
requirements of Section 3(c) of this Agreement.
5. TRANSFER
The Option shall not be assigned, pledged or
hypothecated in any way, shall not be subject to
execution and shall not be transferable by the Employee
otherwise than by will and the laws of descent and
distribution. During the lifetime of the Employee, the
Option shall be exercisable only by the Employee,
except as set forth in Section 4 and Section 6(b) of
this Agreement.
6. TERMINATION OF OPTIONS
(a) In the event of termination of employment of the
Employee for any cause, other than death, retirement,
or total disability of the Employee, whether by reason
of resignation or discharge, the Option shall terminate
immediately; provided, however, that with the consent
of the Committee, which shall be a matter of its sole
discretion, such Employee (if the Employee shall
voluntarily terminate the Employee's employment with
the Company) may, within the three months immediately
following such voluntary termination of employment and
subject to the provision of Section 4 of this
Agreement, exercise any unexercised Option which could
have been exercised on the day of such voluntary
termination.
(b) The Option shall terminate twelve (12) months from
the date of the Employee's death, provided the Employee
at the time of his death was in the employ of the
Company or retired from such employment, either as the
result of age or total disability, as determined by the
Company's Employee Policy Manual, (notwithstanding
Section 4 of this Agreement). In such event, the
Employee's personal representative(s) may exercise any
unexercised Option which the Employee held at the time
of the Employee's death, provided that such exercise
must be accomplished prior to the expiration of such
Option as provided by Section 4 of this Agreement and
within the twelve-month period after the date of the
Employee's death.
(c) Retirement, either as the result of age or total
disability as determined in accordance with the
Company's Employee Policy Manual, shall not cause an
early termination of the Option.
7. RECAPITALIZATION AND REORGANIZATION
(a) If any change is made in the stock subject to the
Plan by reason of stock dividends, a stock split-up, a
reverse stock split, or other recapitalization or
reclassification of the Company's stock, appropriate
action shall be taken by the Committee as to the number
of shares and price per share of the stock subject to
the Plan or to any Option granted under the Plan in
order to prevent dilution.
(b) In the case of a spin-off, merger or other
corporate transaction to which Section 425(a) of the
Internal Revenue Code of 1986, as amended, applies, the
Company and the spun-off corporation or surviving
corporation, as the case may be, shall assume, without
cost to any Employee, all Options outstanding under the
Plan or issue equivalent new Options and the Board
shall take any appropriate action required to
effectuate the intent of this Section 7(b).
(c) In the case of a reorganization, merger,
consolidation or spin-off of the Company while any
unexercised part of any Option granted hereunder
remains outstanding, there shall be substituted for the
shares subject to the unexercised portions of the
Option, an appropriate number of shares of each class
of stock or other securities of the reorganized or
merged or consolidated or spun-off entity which were
distributed to the shareholders of the Company in
respect of the Common Stock; provided, however, that
all such Options may be cancelled by the Company as of
the effective date of any such reorganization, merger,
consolidation or spin-off or of any dissolution or
liquidation of the Company, by action of the Committee,
by giving notice to the Employee or his or her personal
representative(s) or legal guardian(s) of its intention
to do so and by permitting, during the 30-day period
immediately preceding the effective date of any such
event, the exercise in whole or in part of the Option,
without regard to any installment provisions hereof,
but subject to any other litigation on the exercise of
the Option in effect on the Date of the Exercise.
(d) The Committee may make such additional adjustments
in the price and number of shares subject to Options as
it deems appropriate to prevent dilution on account of
any issuance of shares of the Company's Common Stock in
a merger or similar corporate transaction.
8. AMENDMENT OR TERMINATION OF THE PLAN
No modification, termination, or suspension of the Plan
shall adversely affect any right acquired by an
Employee under the terms of the Agreement, if the
Option is granted before the date of such termination,
suspension or modification unless the Employee shall
consent; provide, however, it shall be conclusively
presumed that any adjustment or changes in
capitalization as provided in Section 7 hereof does not
adversely affect the Option.
9. SECURITIES REGISTRATION
Prior to the delivery of a certificate(s) representing
the shares specified on any notice of election to
exercise any Option, the Employee or the Employee's
personal representative(s) or legal guardian(s) shall
certify to the Company in the form attached hereto and
marked Exhibit "A" that such Employee or personal
representative(s) or legal guardian(s) will receive and
hold the shares for investment and not with a view to
resale or distribution thereof to the public, if in the
opinion of the counsel of the Company such
certification is necessary or desirable to comply with
Federal or state securities laws.
The Company shall not be required, upon the exercise of
the Option, to issue or deliver any shares of stock
prior to: (a) the authorization of such shares for
listing on any stock exchange on which the Company's
Common Stock may then be listed, and (b) the completion
of such registration or other qualification as the
Company shall determine to be necessary or desirable.
The Company may at any time prepare and file, at its
own expense and without the consent of the Employee, a
registration statement under the Securities Act of
1933, as such law may then be in effect, with respect
to all or any shares subject to the Option or reserved
for or transferred under this Agreement, either
separately or together with other Common Stock or other
securities of the Company. In such event, the Employee
or person representative(s) or legal guardian(s) who
shall have given the certification referred to in the
first sentence of this Section 9 shall be determined to
be released therefrom upon the effective date of such
registration statement. Nothing in this Agreement or in
the Plan shall give the Employee the right to request
the Company to prepare or file such a registration
statement at any time.
10. WITHHOLDING
With respect to any amount the Employee must recognize
as compensation for income tax purposes, the Company
agrees to file the necessary payroll tax returns to
governmental agencies, to remit timely to such agencies
the necessary minimum payroll taxes and employee
withholding taxes, and to file timely the required
calendar year-end and payroll information returns to
the applicable governmental agencies and the Employee.
The Employee agrees to timely provide the Company with
the funds necessary to meet the minimum withholding
requirements (including FICA and Federal Withholding
Taxes) of applicable governmental agencies at the
time(s) such taxes must be paid. Notwithstanding any
other provision of this Plan to the contrary, any
exercise of any Option granted under this Plan is
contingent upon the Employee providing the Company the
funds necessary to meet the minimum withholding
requirements described herein and the Company shall not
be required, upon the exercise of any Option, to issue
or delivery any shares of stock prior to the Employee
providing to the Company the funds necessary to meet
such minimum withholding requirements. If the Employee
elects to exercise the Option in the manner provided in
Section 3(c) and if such election is approved by the
Committee, the Company shall withhold the cash payable
to the Employee under Section 3(c) to meet such minimum
withholding requirements.
11. CONTINUED EMPLOYMENT
The Employee shall have no right to continue in the
employ of the Company solely by reason of the grant,
acceptance or exercise of the Option or by the terms of
this Agreement.
12. STOCKHOLDER RIGHTS
The Employee shall not have any rights of a stockholder
by virtue of the Option except with respect to shares
actually issued to him or her and the issuance of
shares shall confer no retroactive right to dividends
or other distribution.
13. EFFECTIVE DATE
The Plan, as adopted by the Board, became effective on
March 16, 1993 with the approval thereof by the
affirmative vote of the holders of a majority of the
outstanding shares of Common Stock of the Company at a
meeting thereof at which a quorum was present and the
Plan has been deemed to be effective on the date of
such meeting, which occurred on August 11, 1993.
14. LAWS GOVERNING
The Option shall be construed and shall take effect in
accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.
KOGER EQUITY, INC.
(Corporate Seal) By:__________________________
President
Attest: _____________________
Secretary
Witnesses:
______________________________
______________________________
______________________________
Employee
EXHIBIT A
____________________
Date
Koger Equity, Inc.
3986 Boulevard Center Drive
Jacksonville, FL 32207
Gentlemen:
The undersigned is about to acquire ________ shares of
the common stock (the "Stock"), par value $.01 per
share, of Koger Equity, Inc. (the "Company") pursuant
to the Company's Stock Option Plan (the "Plan").
The undersigned warrants and represents that he (she)
is acquiring the Stock for his (her) own account for
investment, and that he (she) is not acquiring the
Stock with a view to dividing his (her) participation
with others with a view to, or in connection with, any
offering, distribution or sale thereof, and that the
(she) has no present intention of selling or otherwise
disposing of the Stock. The undersigned understands
that the Stock has not been registered under the
Securities Act of 1933, as amended, and the Stock may
not be sold, transferred, pledged, hypothecated,
alienated or otherwise assigned or disposed of without
either registration under the Securities Act of 1933 or
an opinion of counsel as hereafter provided. The
undersigned agrees that you shall not be required to
make, permit or recognize any exchange, transfer or
assignment of the Stock, unless the undersigned shall
furnish you at the time thereof with an opinion of
counsel satisfactory to you and your counsel to the
effect that the exchange, transfer, assignment or issue
would not involve any violation of the Securities Act
of 1933, as amended, or any similar or superseding
statute or statutes as then in effect, or any other
applicable statute or regulation, or alternatively, the
Securities and Exchange Commission shall have issued a
"No Action" letter with respect to the particular
transaction.
Sincerely,
_________________________
Signature
EXHIBIT 11
EARNINGS PER SHARE COMPUTATIONS
(In Thousands Except Per Share Data)
1994 1993 1992
EARNING PER COMMON AND DILUTIVE
COMMON EQUIVALENT SHARE:
Net Income $ 4,215 $ 2,452 $ 933
Shares:
Weighted average number of common
shares outstanding 17,599 13,352 13,220
Weighted average number of additional
shares issuable for common stock
equivalents (a) 120
Adjusted common shares 17,719 13,352 13,220
EARNINGS PER SHARE $ .24 $ .18 $ .07
EARNINGS PER COMMON SHARE ASSUMING
FULL DILUTION:
Net Income $ 4,215 $ 2,452 $ 933
Shares:
Weighted average number of common
shares outstanding 17,599 13,352 13,220
Additional shares issuable for all
dilutive common stock equivalents 120
Shares as adjusted for all dilutants 17,719 13,352 13,220
EARNINGS PER SHARE $ .24 $ .18 $ .07
(a) Shares issuable were derived using the Treasury Stock Method for all
dilutive common stock equivalents.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Name of State of
Subsidiaries * Incorporation
Koger Real Estate Services, Inc. Florida
Southeast Properties Holding Corporation, Inc. Florida
* All of the above subsidiaries are wholly owned by Koger Equity,
Inc.
EXHIBIT 23
INDEPENDENT AUDITORS CONSENT
We consent to the incorporation by reference in Registration
Statement No. 33-55179 of Koger Equity, Inc. on Form S-3 and
Registration Statement No. 33-54617 of Koger Equity, Inc. on
Form S-3 of our report dated March 10, 1995, appearing in this
Annual Report on Form 10-K of Koger Equity. Inc. for the year
ended December 31, 1994.
DELOITTE & TOUCHE LLP
Jacksonville, Florida
March 20, 1995
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
* The Company does not file a classified balance sheet, therefore, these
items are not provided.
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 23,315
<SECURITIES> 0
<RECEIVABLES> 6,489
<ALLOWANCES> 362
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 614,249
<DEPRECIATION> 46,106
<TOTAL-ASSETS> 613,806
<CURRENT-LIABILITIES> 0*
<BONDS> 323,765
<COMMON> 205
0
0
<OTHER-SE> 280,396
<TOTAL-LIABILITY-AND-EQUITY> 613,806
<SALES> 0
<TOTAL-REVENUES> 100,376
<CGS> 0
<TOTAL-COSTS> 43,148
<OTHER-EXPENSES> 26,702
<LOSS-PROVISION> 212
<INTEREST-EXPENSE> 25,872
<INCOME-PRETAX> 4,442
<INCOME-TAX> 227
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,215
<EPS-PRIMARY> .24
(EPS-DILUTED> .24
</TABLE>
