KOGER EQUITY INC, DEF 14A, 1999-04-22

KOGER EQUITY INC
DEF 14A, 1999-04-22
REAL ESTATE INVESTMENT TRUSTS

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<PAGE> 1

SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>

KOGER EQUITY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials:

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:
<PAGE> 2

KOGER EQUITY, INC.
8880 FREEDOM CROSSING TRAIL
JACKSONVILLE, FLORIDA 32256
(904) 732-1000

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

The Annual Meeting of Shareholders of Koger Equity, Inc. (the "Company")
will be held on Thursday, May 20, 1999, at 11:00 a.m., Eastern Daylight Saving
Time, at the Jacksonville Marriott Hotel, 4670 Salisbury Road, Jacksonville,
Florida, for the following purposes:

1. To elect a board of twelve (12) directors to serve for the ensuing
year or until their respective successors are elected and qualified;

2. To amend the Company's Articles of Incorporation to provide that
actions of shareholders may only be accomplished at a shareholders meeting
and not by written consent; and

3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.

The close of business on March 12, 1999, has been fixed as the record date
for the determination of shareholders entitled to receive notice of, and to vote
at, this meeting and any adjournment or postponement thereof. All shareholders
of record at that time are entitled to vote at this meeting and any adjournment
thereof.

A copy of the Company's Annual Report for the year ended December 31, 1998,
which report contains consolidated financial statements and other information of
interest with respect to the Company and its subsidiaries, is included herewith.

SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN THE ENCLOSED
PROXY. AN ENVELOPE IS ENCLOSED HEREWITH FOR YOUR CONVENIENCE. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.

By order of the Board of Directors
W. Lawrence Jenkins
Secretary

April 20, 1999
<PAGE> 3

KOGER EQUITY, INC.
8880 FREEDOM CROSSING TRAIL
JACKSONVILLE, FLORIDA 32256
(904) 732-1000

---------------------

PROXY STATEMENT
APRIL 20, 1999

---------------------

INTRODUCTION

The enclosed proxy is solicited on behalf of and by the Board of Directors
(the "Board of Directors") of Koger Equity, Inc., a Florida corporation (the
"Company"), for use at the Company's Annual Meeting of Shareholders to be held
on Thursday, May 20, 1999 (the "Annual Meeting"), and any adjournment thereof.
This Proxy Statement and the enclosed proxy have first been mailed or otherwise
given to shareholders on or about April 20, 1999.

If the enclosed proxy is executed and returned, it will be voted at the
Annual Meeting and any adjournment thereof, and where a choice has been
specified thereon, will be voted in accordance with such specifications, and
where no choice has been specified thereon, will be voted FOR the election of
the directors named herein and FOR the amendment of the Company's Articles of
Incorporation. If any other matters properly come before the Annual Meeting or
any adjournment thereof, the holders of the proxies are expected to vote in
accordance with their judgement on such matters. A proxy may be revoked at any
time to the extent that it has not been exercised. A shareholder may revoke his
or her proxy by writing the Secretary of the Company a letter of proxy
revocation, executing a subsequently dated proxy, or attending the Annual
Meeting or any adjournment thereof and voting his or her Shares (as defined
below) personally.

The close of business on March 12, 1999, was fixed as the record date for
determination of the shareholders entitled to vote at the Annual Meeting and any
adjournment thereof.

The number of the Company's shares of common stock, par value $.01 per
share, (the "Shares") outstanding at the close of business on March 12, 1999,
was 26,581,334 . There is no other class of voting securities of the Company
outstanding, and each Share is entitled to one (1) vote. A majority of the
Shares issued and outstanding as of the record date represented at the Annual
Meeting or any adjournment thereof, either in person or by proxy, shall
constitute a quorum. Victor A. Hughes, Jr., James C. Teagle and W. Lawrence
Jenkins have, and each of them has, been designated to vote the proxies
solicited hereby. The Shares are not subject to cumulative voting.

MATTERS TO BE CONSIDERED

The Company's shareholders will consider and act upon proposals (i) to
elect twelve (12) directors for the following year, (ii) to approve the
amendment to the Company's Articles of Incorporation to provide that actions of
the shareholders may only be accomplished at a shareholders meeting and not by
written consent, and (iii) such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.

ELECTION OF DIRECTORS

NOMINEES

The twelve (12) nominees listed in the table below are proposed for
election as directors for the ensuing year or until their successors have been
duly elected and qualified.

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<PAGE> 4

While management expects that all of the nominees will be able to serve as
directors, if, at the time of the Annual Meeting or any adjournment thereof, a
situation should arise making it impossible for any nominee to serve, the
proxies will be voted in accordance with the best judgement of the holders
thereof for another person recommended by the present Board of Directors in lieu
of such original nominee.

Each nominee has served in the principal occupations indicated in the table
below with the respective employers indicated in such table during the five-year
period ended on December 31, 1998. The table below also sets forth information
concerning each nominee to the Board of Directors, based on information
furnished by such nominee.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
FOLLOWING NOMINEES.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
PRINCIPAL OCCUPATION YEAR FIRST OF SHARES AT
FIVE-YEAR EMPLOYMENT HISTORY BECAME A FEBRUARY 24, 1999(1)
NAME AND OTHER DIRECTORSHIPS DIRECTOR AGE (PERCENT OF CLASS)
- ---- ---------------------------- ---------- --- ---------------------
<S> <C> <C> <C> <C>
D. Pike Aloian(2)............ Managing Director of Rothschild 1993 44 9,458(4)
Realty Inc. (a real estate (0.04%)
investment management and
advisory service firm);
Director, Charter Oak Group,
Ltd. (a privately held owner
and developer of factory outlet
and retail properties);
Director, Angeles Corporation
(a holder of loans to and
equity investments in
residential real estate);
Director, Merritt Properties,
LLC (a privately held owner and
developer of light industrial
buildings)

Benjamin C. Bishop, Jr.(3)... Chairman of the Board of Allen 1991 67 28,842(4)
C. Ewing & Co. (an investment (0.11%)
banking company); former
Director of Grubb & Ellis
Company (a national commercial
real estate brokerage company);
former Trustee of GMR
Properties (a real estate
investment trust); former
Director of Cousins Properties,
Inc. (a real estate investment
trust)

Irvin H. Davis............... Consultant and Vice Chairman of 1991 69 143,792(5)
Koger Equity, Inc.; former (0.54%)
President and Chief Executive
Officer of Koger Equity, Inc.
</TABLE>

2
<PAGE> 5

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
PRINCIPAL OCCUPATION YEAR FIRST OF SHARES AT
FIVE-YEAR EMPLOYMENT HISTORY BECAME A FEBRUARY 24, 1999(1)
NAME AND OTHER DIRECTORSHIPS DIRECTOR AGE (PERCENT OF CLASS)
- ---- ---------------------------- ---------- --- ---------------------
<S> <C> <C> <C> <C>
David B. Hiley............... Executive Vice President and 1993 60 57,611(6)
Chief Financial Officer (as of (0.22%)
April 1, 1998) and Director of
Koger Equity, Inc.; Director,
Executive Vice President and
Chief Financial Officer of
Koger Realty Services, Inc. (a
Koger Equity, Inc. related
entity and manager of office
properties in five markets);
formerly a financial
consultant; former Managing
Director of Berkshire Capital
Corporation (an investment
banking services firm);
Director and former Senior
Executive Vice President of
Thomson McKinnon Securities,
Inc. (a securities
broker-dealer); consultant,
Director and former Executive
Vice President of Thomson
McKinnon, Inc. (a financial
services holding company);
former Director of Newcity
Communications, Inc. (a
communications firm)

Victor A. Hughes, Jr......... Chairman and Chief Executive 1992 63 363,489(7)
Officer of Koger Equity, Inc.; (1.36%)
former President, Chief
Financial Officer, Senior Vice
President and Assistant
Secretary of Koger Equity,
Inc.; Director, Chairman and
Chief Executive Officer of
Koger Realty Services, Inc.

John R. S. Jacobsson(2)...... Partner responsible for 1997 30 5,952(4)(8)
investments at Apollo Real (0.02%)
Estate Advisors (manager of
three real estate investment
funds); Director of Metropolis
Realty Trust, Inc. (owner of
high rise office buildings);
Director of Roland
International, Inc. (a land
development company)
</TABLE>

3
<PAGE> 6

William L. Mack.............. Senior Partner of Apollo Real 1996 59 7,195(4)(8)
Estate Advisors; President and (0.03%)
a Senior Partner of the Mack
Organization (national owner,
developer and investor in
industrial buildings and other
real estate investments);
Director of The Bear Stearns
Companies, Inc. (an investment
banking firm); Director of
Mack-Cali Realty Corporation (a
national office real estate
investment trust); Chairman of
the Board of Metropolis Realty
Trust, Inc.; Director of Vail
Resorts, Inc. (owner and
operator of ski resorts)

Lee S. Neibart(3)............ Partner in charge of portfolio 1996 48 7,195(4)(8)
and asset management at Apollo (0.03%)
Real Estate Advisors; former
Executive Vice President and
Chief Operating Officer of the
Robert Martin Company (a real
estate development and
management firm); Director of
Atlantic Gulf Communities
Corporation (a land development
company); Director of
Meadowbrook Golf Group, Inc. (a
golf course management
company); Director and
President of Metropolis Realty
Trust, Inc.; Director of
NextHealth, Inc. (operator of
wellness and spa facilities)
and Director of Roland
International, Inc.
</TABLE>

4
<PAGE> 7

S. D. Stoneburner............ Director of Koger Equity, Inc.; 1988 80 23,964(4)(9)
former Chairman of the Board of (0.09%)
Directors, President and Chief
Financial Officer of Koger
Equity, Inc.

James C. Teagle.............. President, Chief Operating 1996 57 175,751(10)
Officer and Director of Koger (0.66%)
Equity, Inc.; former Executive
Vice President, Senior Vice
President and Vice President of
Koger Equity, Inc.; Director,
President and Chief Operating
Officer of Koger Realty
Services, Inc.
All Executive Officers
and Director Nominees as
a Group (15 persons).......................................................... 971,734(11)
(3.59%)
</TABLE>

- ---------------

(1) Unless otherwise noted, all Shares are owned directly, with sole voting and
dispositive power.

(2) Member of the Compensation Committee.

(3) Member of the Audit Committee.

(4) Includes 4,000 Shares which are subject to presently exercisable options.

(5) Includes 57,333 Shares which are subject to presently exercisable options,
or options which are exercisable within 60 days.

(6) Includes 45,666 Shares which are subject to presently exercisable options,
or options which are exercisable within 60 days.

(7) Includes 126,666 Shares which are subject to presently exercisable options,
or options which are exercisable within 60 days.

(8) Beneficial ownership excludes 5,559,895 shares of Common Stock of Koger
Equity, Inc. (the "Issuer"), owned by Apollo Real Estate Investment Fund
II, L.P. ("AREIF II") and AREIF II Realty Trust, Inc. ("ARTI"), a
subsidiary of AREIF II. The general partner of AREIF II is Apollo Real
Estate Advisors II, L.P. ("ARE Advisors II"). The general partner of ARE
Advisors II is Apollo Real Estate Capital Advisors II, Inc. ("ARECA II").
Messrs. Jacobsson, Neibart and Mack are officers of

5
<PAGE> 8

ARECA II and limited partners of ARE Advisors II. Each of Messrs.
Jacobsson, Neibart and Mack disclaim beneficial ownership of all securities
owned by ARTI, AREIF II and any of their affiliates.

(9) Includes 8,000 Shares which are held in a trust for which Mr. Stoneburner
is the income beneficiary.

(10) Includes 161,278 Shares which are subject to presently exercisable options,
or options which are exercisable within 60 days.

(11) Sole voting and dispositive power as to 971,734 Shares, and no Shares with
shared voting and dispositive power. Includes 498,825 Shares which are
subject to presently exercisable options, or options which are exercisable
within 60 days.

CORPORATE GOVERNANCE

The Board of Directors of the Company held five (5) meetings during the
last fiscal year. The Board of Directors maintains an Audit Committee (the
"Audit Committee") and a Compensation Committee (the "Compensation Committee"),
the members of which are elected by the Board of Directors. The Board of
Directors does not have a nominating committee.

The Audit Committee is composed exclusively of directors who are not
officers or employees of the Company. It recommends to the Board of Directors
the selection of independent auditors, reviews the scope of the audit procedures
and the results of the audit, reviews the matter of independence of the
auditors, including non-audit services provided by the auditors and considers
and makes recommendations to the Board of Directors on matters referred to it
relating to the audit function, such as financial and accounting standards and
principles and internal accounting, auditing and financial controls. The Audit
Committee held two (2) meetings during the last fiscal year and members of the
Audit Committee consulted with the officers of the Company and the independent
auditors at various times throughout the year.

The Compensation Committee is composed exclusively of directors who are not
officers or employees of the Company. The Compensation Committee held five (5)
meetings during, the last fiscal year. It sets the total compensation of the
Company's Chief Executive Officer, the Chief Operating Officer and the Chief
Financial Officer, and reviews the compensation proposed by management for all
other executive officers of the Company. The Compensation Committee is also
responsible for (i) making grants under the Company's stock option plans and the
equity and cash incentive plan, (ii) making contributions, subject to approval
by the Board of Directors, under the 401(k) Plan and any other plan or plans as
may be determined by the Board of Directors, and (iii) approving participation
in the Company's Supplemental Executive Retirement Plan (the "SERP").

Each of the directors attended at least 75% of the Board of Directors
meetings and meetings held by committees of the Board of Directors of which they
were members, except Messrs. William L. Mack and Lee S. Neibart.

Directors of the Company who are not officers receive a monthly retainer of
$1,667, plus fees of $2,000 for each meeting of the Board of Directors attended
and $500 for each meeting of any committee of the Board of Directors attended,
together with expenses of attendance. Mr. Davis, the Vice Chairman of the Board,
received an additional quarterly retainer of $2,500. Directors who are full-time
employees of the Company are not paid a director's fee or retainer. Directors
may elect to receive payment of part or all of their monthly retainer in Shares
by participating in the Stock Investment Plan. For more information concerning
the Stock Investment Plan, reference is made to the section "Executive
Compensation -- Stock Investment Plan" of this Proxy Statement.

6
<PAGE> 9

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The table below sets forth information concerning the annual and long-term
compensation of the Chief Executive Officer (the "CEO") and the other named
executive officers whose salary and bonus for the fiscal year ended December 31,
1998, exceeded $100,000 (collectively with the CEO, the "Executive Officers").

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS(2)
ANNUAL ---------------------
COMPENSATION ALL OTHER
----------------------- SECURITIES UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) OPTIONS/SARS(#)(3) ($)(4)
- --------------------------- ---- ------------ -------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
Victor A. Hughes, Jr............. 1998 $308,750 $156,058(5) 180,000 $ 10,711(6)
Chairman of the Board and 1997 268,750 275,770 -- 2,237,714
Chief Executive Officer 1996 230,917 240,533 135,833 15,318

James C. Teagle.................. 1998 $236,708 $104,645(5) 100,000 $ 8,850(6)
President and Chief 1997 198,750 204,423 -- 8,800
Operating Officer 1996 166,667 173,590 96,250 13,050

David B. Hiley(7)................ 1998 $150,000 $102,885(5) 125,000 $ 22,356(6)
Executive Vice President 1997 -- -- 4,000 40,690
and Chief Financial Officer 1996 -- -- -- 395,590

W. Lawrence Jenkins.............. 1998 $129,893 $ 27,599(8) 20,000 $ 7,867(6)
Vice President and 1997 120,833 41,467 -- 6,518
Corporate Secretary 1996 112,917 57,363 28,840 10,120

Robert N. Bridger................ 1998 $152,917 $ 47,044(8) 20,000 $ 96,039(6)
Senior Vice 1997 130,833 44,784 -- 126,102
President/Development 1996 122,575 57,634 28,801 13,233
</TABLE>

- ---------------

(1) Includes an amount of salary paid by KRSI for the 1998 salary for Mr.
Hughes of $68,784, Mr. Teagle of $76,096, Mr. Hiley of $32,933, and Mr.
Jenkins of $32,254.

(2) There were no restricted stock awards or long-term incentive plan payouts
for any of the last three fiscal years.

(3) For information concerning the number and market value of Shares subject to
the Company's stock option plans as to the Executive Officers, reference is
made to the "Option/SAR Exercises and Year-End Values" table and the notes
thereto.

The options granted to the CEO and the other named executive officers
during the fiscal year ended December 31, 1998, are described as follows:

As to Mr. Hughes, includes 180,000 options granted under the 1998 Equity
and Cash Incentive Plan at an exercise price of $21.875 per Share, which
option vests at a cumulative annual rate of 33.3% per year, commencing on
December 31, 1998, and will expire on March 10, 2008.

As to Mr. Teagle, includes 100,000 options granted under the 1998 Equity
and Cash Incentive Plan at an exercise price of $21.875 per Share, which
option vests at a cumulative annual rate of 33.3% per year, commencing on
March 10, 1999, and will expire on March 10, 2008.

As to Mr. Hiley, includes 125,000 options granted by the Company at an
exercise price of $22.8125 per Share, which option vests at a cumulative
annual rate of 33.3% per year, commencing on February 18, 1999, and will
expire on February 18, 2008.

As to Mr. Jenkins and Mr. Bridger, includes 20,000 options each, granted
under the 1998 Equity and Cash Incentive Plan at an exercise price of
$20.00 per Share, which option vests at a cumulative annual rate of 20% per
year, commencing on August 19, 1999, and will expire on August 19, 2008.

7
<PAGE> 10

(4) Includes the taxable portion of certain excess life insurance premiums (as
defined by the Internal Revenue Code) paid by the Company on behalf of each
qualifying employee, including the Executive Officers (the "Life Insurance
Premiums") and 401(k) Plan contributions, each of which were Company
benefits which did not discriminate in scope, terms or operation in favor of
the Executive Officers and were available generally to all salaried
employees of the Company.

(5) Includes a bonus which was earned for calendar year 1998 (the value of which
was paid in Shares on January 18, 1999, based on a per share value of
$14.50, which amount represents the closing price of the shares as reported
on the American Stock Exchange on that date), as to Mr. Hughes of $150,000,
by the issuance of 10,344 Shares; as to Mr. Teagle of $100,000, paid (after
withholding $32,048 for the payment of taxes) by the issuance of 4,686
Shares, and as to Mr. Hiley of $100,000, paid (after withholding $32,352 for
the payment of taxes) by the issuance 4,665 Shares.

(6) For 1998, includes a matching contribution in the form of Shares made by the
Company to the account of each qualifying employee, including each Executive
Officer, under the 401(k) Plan, which contribution was equal to 50% of such
employee's contributions to his or her account under the 401(k) Plan,
subject to a maximum employee contribution of 6% of eligible compensation,
and was based on the market value of the Shares on December 31, 1998, which
was $17.1875 per Share (the 401(k) Contribution").

As to Mr. Hughes, includes Life Insurance Premiums in the amount of $5,911,
and a 401(k) Contribution in the amount of $4,800.

As to Mr. Teagle, includes Life Insurance Premiums in the amount of $4,050,
and a 401(k) Contribution in the amount of $4,800.

As to Mr. Hiley, includes Life Insurance Premiums in the amount of $4,739, a
401(k) Contribution in the amount of $4,587, and director's fees and
retainer for the period January 1, 1998 to March 31, 1998 of $13,030.

As to Mr. Jenkins, includes Life Insurance Premiums in the amount of $3,067,
and a 401(k) Contribution in the amount of $4,800.

As to Mr. Bridger, includes Life Insurance Premiums in the amount of $5,739,
and a 401(k) Contribution in the amount of $4,800. Also includes $85,500 of
income associated with the exercise of options on 6,000 shares, all at an
exercise price of $7.625, on January 23, 1998, which shares were valued at
$21.875 on the date of exercise.

(7) Mr. Hiley was employed by the Company on April 1, 1998, when he became the
Company's Executive Vice President and Chief Financial Officer. Prior to
that time, Mr. Hiley served the Company as a member of the Board of
Directors. In 1997, Mr. Hiley was granted options on 4,000 Shares at an
exercise price of $19.8125 per Share and he was paid the regular fees paid
by the Company for attendance at meetings of the Board of Directors,
totaling $17,600, a Board member retainer of $20,000, and compensation
associated with his participation in the Company's Stock Investment Plan
totaling $3,090. In 1996, Mr. Hiley was paid Board fees of $22,500, a Board
member retainer of $20,000, compensation associated with his 1996
participation in the Company's Stock Investment Plan totaling $3,090, and
consulting fees totaling $350,000.

(8) Includes a cash bonus which was earned for calendar year 1998, which was
paid in 1999.

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<PAGE> 11

OPTION/STOCK APPRECIATION RIGHTS GRANTS

During the fiscal year ended December 31, 1998, the Company granted the
following options to its Executive Officers. The Company has no outstanding
stock appreciation rights.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE
PERCENT OF VALUE AT
TOTAL ASSUMED ANNUAL RATES
NUMBER OF OPTIONS/SARS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM
OPTIONS/SARS IN FISCAL BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#) YEAR ($/SH) DATE 5%($) 10%($)
- ---- ------------ ------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mr. Hughes.............. 180,000(1) 19.8% $21.88 03/10/2008 $2,476,273 $6,275,361
Mr. Teagle.............. 100,000(2) 11.0% $21.88 03/10/2008 $1,375,707 $3,486,312
Mr. Hiley............... 125,000(3) 13.75% $22.88 02/18/2008 $1,793,332 $4,544,656
Mr. Jenkins............. 20,000(4) 2.20% $20.00 08/19/2008 $ 251,558 $ 637,497
Mr. Bridger............. 20,000(5) 2.20% $20.00 08/19/2008 $ 251,558 $ 637,497
</TABLE>

AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES

The table below sets forth information with respect to (i) the aggregate
number of options exercised, and the values realized in respect thereof, by the
Executive Officers during the fiscal year ended December 31, 1998, and (ii) the
aggregate number of options and the value of the in-the-money options in each
case held by the Executive Officers at the end of such fiscal year. The Company
has no outstanding stock appreciation rights. In the event of a change of
control (as defined in the option agreements), all stock options become vested.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
SHARES FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(1)
- ---- ----------- ----------- ------------------ ---------------------
<S> <C> <C> <C> <C>
Victor A. Hughes, Jr............... -- -- 66,667 / 213,333 $120,834 / $60,417
James C. Teagle.................... -- -- 122,583 / 127,417 $734,651 / $133,005
David B. Hiley..................... -- -- 4,000 / 125,000 $-0- / $-0-
W. Lawrence Jenkins................ -- -- 33,786 / 41,861 $232,632 / $81,175
Robert N. Bridger.................. 6,000 $85,500 18,115 / 21,704 $82,937 / $79,666
</TABLE>

- ---------------

(1) The value reported herein is based on a per Share price of $17.1875, which
is the closing price of the Shares on December 31, 1998, as reported on the
American Stock Exchange.

LONG-TERM INCENTIVE PLAN AWARDS

The Company made no long-term incentive plan awards to any Executive
Officer during the fiscal year ended December 31, 1998.

9
<PAGE> 12

EXECUTIVE EMPLOYMENT AGREEMENTS

On June 21, 1996, the Company entered into three-year employment agreements
with both Messrs. Hughes and Teagle. Effective April 1, 1998, the Company
entered into new employment agreements with these executives for the primary
purpose of extending these agreements, in the case of Mr. Hughes, through
December 31, 2000, and, in the case of Mr. Teagle, through March 31, 2001. These
agreements provide for, among other things, an annual base salary for Mr. Hughes
of $300,000 and an annual base salary for Mr. Teagle of $230,000, which salaries
were increased to $315,000 and $241,500, respectively, on June 1, 1998. Also,
effective April 1, 1998, Mr. Hiley, a Director of the Company, was engaged as
the Company's Executive Vice President and Chief Financial Officer. In this
connection, the Company entered into a three-year employment agreement with Mr.
Hiley commencing April 1, 1998, at an initial annual base salary of $200,000,
and on February 18, 1998, granted him a ten-year option to purchase 125,000
Shares at an exercise price of $22.8125 per share, the fair market value on the
date of grant. In addition, he was made a participant in the Supplemental
Executive Retirement Plan for Executives of Koger Equity, Inc. and Participating
Related Entities (the "SERP"). The employment agreements referred to above
provide that the officers (1) serve the Company on a full-time basis, (2)
perform such duties and responsibilities as may be designated by the Board and
(3) devote substantially all of their business time and best efforts, business
judgement, skill and knowledge exclusively to the advancement of the business
and interests of the Company.

In the event of an early termination of employment other than for cause,
each employment agreement provides that, at the officer's option, (1) he may
either continue to receive his base salary for the term of the agreement or its
present value in a lump sum, and (2) continue to participate in the Company's
medical and life insurance arrangement for employees during the term of the
agreement or be paid a lump sum present value of the cost of such insurance
coverage. The officer will also be deemed to have satisfied the vesting
requirements for benefits under the SERP and all stock options, which would
otherwise become vested during the term of the employment agreement, in the
event of an early termination of employment other than for cause.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

The SERP provides additional retirement benefits for the named Executive
Officers. In the case of Messrs. Hughes and Teagle, the SERP provides (i) such
Executive Officer with a lifetime benefit of 50% of final three-year average
annual base salary, less social security benefits and the annuitized equivalent
of profit sharing contributions by the Company to the account of such Executive
Officer under the 401(k) Plan, and (ii) the surviving spouse of such Executive
Officer with a lifetime benefit of 50% of such Executive Officer's benefit. In
the case of Mr. Hiley, the SERP provides (i) him with a lifetime benefit of 35%
of final three-year average annual base salary less social security benefits and
the annuitized equivalent of profit sharing contributions by the Company to the
account of Mr. Hiley under the 401(k) Plan and (ii) his surviving spouse with a
lifetime benefit of 50% of his benefit. The SERP also provides Messrs. Hughes,
Teagle and Hiley and their spouses with lifetime medical coverage (which is
intended to be roughly equivalent to that provided by the Company for the
Executive Officers). In the case of each other Executive Officer, the SERP
provides a 15-year benefit equal to 40% of final three-year average annual base
salary, less social security benefits and the annuitized equivalent of profit
sharing contributions by the Company to the account of such Executive Officer
under the 401(k) Plan. Benefits under the SERP generally vest only if the
applicable Executive Officer remains in the Company's employ for a period
ranging from two to five years after commencement of his participation in the
SERP (depending upon such Executive Officer's age at the commencement of his
participation in the SERP). However, if a change of control of the Company (as
defined in the SERP) occurs and an Executive Officer leaves the employ of the
Company under certain circumstances, then (a) in the case of Messrs. Hughes,
Teagle and Hiley, such Executive Officer would be entitled to his benefits,
commencing immediately and without regard to the vesting requirement, and (b) in
the case of each other Executive Officer, such Executive Officer, at his option,
would be entitled to either a continuation of his base salary for a period of 18
months or his vested benefits under the SERP.

10
<PAGE> 13

The table below sets forth information with respect to the estimated annual
benefit (determined before any reduction for social security benefits and
401(k)Plan contributions as described above) payable to SERP participants
(except Mr. Hiley; see note below) upon age 65 retirement at different levels of
compensation and service.

PENSION PLAN TABLE

<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------
FINAL AVERAGE ANNUAL REMUNERATION 15 20 25 30 35
- --------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000................................ $ 37,500 $ 50,000 $ 50,000 $ 50,000 $ 50,000
150,000................................ 45,000 60,000 60,000 60,000 60,000
175,000................................ 52,500 70,000 70,000 70,000 70,000
200,000................................ 100,000 100,000 100,000 100,000 100,000
225,000................................ 112,500 112,500 112,500 112,500 112,500
250,000................................ 125,000 125,000 125,000 125,000 125,000
300,000................................ 150,000 150,000 150,000 150,000 150,000
350,000................................ 175,000 175,000 175,000 175,000 175,000
</TABLE>

The compensation base used by the SERP is average base salary for the final
three years of employment. As of December 31, 1998, the base salary and
estimated years of service credit for each Executive Officer is listed below:

<TABLE>
<S> <C> <C>
Mr. Bridger................................................. $155,000 36 years
Mr. Hiley................................................... $200,000 9 months
Mr. Hughes.................................................. $315,000 16 years
Mr. Jenkins................................................. $133,500 28 years
Mr. Teagle.................................................. $241,500 26 years
</TABLE>

Because the SERP generally provides a 50% gross benefit for life to Messrs.
Hughes and Teagle, and a 40% gross benefit for 15 years to the other Executive
Officers, the Pension Plan Table above reflects a 50% benefit for salaries above
$175,000 and a 40% benefit for salaries up to and including $175,000. Mr.
Hiley's age 65 annual SERP benefit is 35% of final three-year average annual
base salary, or $70,000. The benefits shown will be reduced by (i) the amount of
social security benefits received by the applicable Executive Officer and (ii)
the annuitized equivalent of profit sharing contributions made by the Company to
the account of such Executive Officer under the 401(k)Plan. At retirement,
benefits under the SERP are paid in annuity form.

STOCK INVESTMENT PLAN

The Company has a Stock Investment Plan (the "SIP") pursuant to which
participating employees and directors of the Company may purchase Shares. Under
the SIP, the Company is authorized to purchase up to an aggregate of 200,000
Shares on behalf of such participating employees and directors. Each
participating employee pays for his or her Shares pursuant to a monthly payroll
deduction plan established by the participating employees, and each
participating director pays for his Shares pursuant to a deduction from such
director's retainer. Pursuant to the SIP and subject to certain limitations, the
Company contributes a portion of the purchase price of such Shares, which
contribution equals the following percentage of the aggregate monthly deduction
from such employee's pay or such director's retainer: (i) 25% of each monthly
deduction less than or equal to $50; (ii) 20% of each monthly deduction greater
than $50 but less than or equal to $100; and (iii) 15% of each monthly deduction
greater than $100 but less than or equal to $1,700, the maximum permitted under
the SIP. The Company also pays all commissions and related expenses of the SIP.
The Company's contribution and expenses incurred in administering the SIP
totaled approximately $58,500 for the year ended December 31, 1998.

11
<PAGE> 14

During 1998, the Company paid the following amounts on behalf of the
following directors:

<TABLE>
<CAPTION>
STOCK INVESTMENT PLAN
COMPANY
DIRECTOR NAME CONTRIBUTION
- ------------- ---------------------
<S> <C>
D. Pike Aloian......................................... $ 3,090
Benjamin C. Bishop, Jr................................. 3,090
David B. Hiley......................................... 1,030
John R. S. Jacobsson................................... 3,090
G. Christian Lantzsch.................................. 3,090
William L. Mack........................................ 3,090
Lee S. Neibart......................................... 3,090
George F. Staudter..................................... 3,090
S. D. Stoneburner...................................... 3,090
-------
Total Contributed on behalf of Directors..... $25,750
=======
</TABLE>

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following report and
the information included under the "Shareholder Return Performance Presentation"
including the performance graph which follows shall not be deemed to be
incorporated by reference into any such filings.

The Compensation Committee consists of D. Pike Aloian, John R.S. Jacobsson
and George F. Staudter, Chairman, all of whom were outside directors of the
Company.

The Compensation Committee is responsible for setting the total
compensation of the Chairman of the Board and Chief Executive Officer (the
"CEO"), the President and Chief Operating Officer (the "COO") and the Executive
Vice President and Chief Financial Officer (the "CFO") and for reviewing the
compensation, including year-end bonuses, proposed by management for all other
Executive Officers of the Company. The Compensation Committee is also
responsible for (i) making grants under the Company's stock option and other
incentive plans, (ii) making contributions, subject to approval by the Board of
Directors, under the 401(k)Plan and any other plan or plans as may be determined
by the Board of Directors, and (iii) approving participation in the Supplemental
Executive Retirement Plan (the "SERP"). It is the Committee's objective to
structure executive compensation packages that have and will continue to provide
incentives to create shareholder value. Through stock options and other stock
related awards, the Compensation Committee has sought to forge a strong link
between Share performance and Executive Compensation. In addition, the Company
believes that the Executive Compensation program should attract, retain and
motivate a quality, performance-oriented management team.

The Company's strategy has been to improve its financial condition by
maintaining a high occupancy level, increasing revenues and broadening its asset
base. The Company has made significant progress in these areas. During 1998, the
Company continued to improve its operating efficiencies by (i) maintaining the
percent leased rate of its buildings at over 90%, (ii) increasing its average
rental rate per square foot from $15.02 to $15.82, or 5.3% over the prior year,
and (iii) increasing its rental and other rental services revenues by
approximately $24.2 million, or 22.1%. In December 1998, the Company increased
its $100 million revolving credit facility to $150 million for a new three-year
term at competitive rates.

During 1998, the Company completed construction on six new buildings
containing approximately 604,000 square feet and closed on the purchase of 20
buildings containing approximately 1.2 million square feet. The Company's
operating properties increased from 228 to 251, during 1998, with gross square
feet increasing from approximately 10.4 million to approximately 12.1 million,
or 16.6%. Also during 1998, the Company commenced construction of seven new
office buildings on some of its existing inventory of land held for development.

12
<PAGE> 15

While the Compensation Committee considered all of the foregoing and
although the Committee has from time to time reviewed the executive compensation
levels of other real estate investment trusts and referred to other available
information concerning the salaries of executive officers in peer group
companies, it did not, and has not as yet, set any specific criteria in arriving
at any particular Executive Officer's compensation. Accordingly, based on the
above, the Compensation Committee made a subjective determination in setting the
compensation of the CEO, COO and CFO and reviewed and approved the compensation
of the other Executive Officers.

In arriving at the compensation paid Victor A. Hughes, Jr., the Chairman of
the Board and CEO, during 1998, the Compensation Committee considered the
performance of the Company under his leadership as CEO, as well as his
experience in corporate finance.

In recognition of his performance as CEO, Mr. Hughes' annual salary was
increased by 5% from $300,000 in 1997, to $315,000 in 1998. In addition, in
February 1999, he was awarded a bonus of $150,000 for his 1998 performance,
payable with the issuance of 10,344 shares of the Company's Common Stock based
on the closing price of $14.50 per share on February 18, 1999, the date the
bonus was granted.

Conclusion. The Compensation Committee believes that the compensation
packages of the Company's Executive Officers have been generally commensurate
with the Company's financial performance and the total value received by its
shareholders. The Compensation Committee intends to continue to review Executive
Officers' compensation with the assistance of an outside compensation consultant
and will make such modifications in its approach to executive compensation as it
determines to be appropriate in light of the Company's financial condition, the
performance of its officers and peer group analysis.

The foregoing report has been furnished by the Compensation Committee.

D. Pike Aloian
John R. S. Jacobsson
George F. Staudter, Chairman

13
<PAGE> 16

SHAREHOLDER RETURN PERFORMANCE PRESENTATION

The line graph below sets forth the cumulative total shareholder return on
the Shares as compared with the cumulative total return of each of the American
Stock Exchange Market Value Index and the NAREIT Total Return Index, in each
case (i) on an annual basis for the period commencing December 31, 1993 and
ending December 31, 1998 and (ii) assuming that $100 was invested on December
31, 1993 and that all dividends were reinvested.

<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) KE AMEX NAREIT
<S> <C> <C> <C>
1993 100 100 100
1994 85 93 101
1995 125 120 119
1996 221 122 162
1997 263 152 192
1998 219 163 156
</TABLE>

The Company has used a different industry group for compensation
comparisons from that used for its shareholder return performance presentation.

14
<PAGE> 17

APPROVAL OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION

The Board of Directors of the Company proposes for shareholder
consideration and approval an amendment to the Company's Articles of
Incorporation, which would prohibit consents to action without a meeting of
shareholders. Florida law states that, unless otherwise provided in the
Company's Articles of Incorporation, any action which may or is required to be
taken by shareholders at a shareholders' meeting may be taken without a meeting
without prior notice and without a vote, if the action is consented to in
writing by the holders of the minimum number of shares required to take such
action at a meeting at which all shares entitled to vote were present and voted.
The proposed amendment to the Company's Articles of Incorporation would prohibit
the use of this written consent procedure, thereby requiring that all
shareholders of record are provided with prior notice of the proposal, that a
shareholders' meeting be held and that all the shareholders have an opportunity
to vote on the proposal.

The proposed amendment is intended to provide management and the
non-consenting shareholders with the opportunity to review any such shareholder
proposal, express their views and take any necessary action to protect the
interests of the remaining shareholders and the Company before any proposal is
adopted.

The Board of Directors believes that the use of the consent procedure in
lieu of a meeting and vote of shareholders is inappropriate for a publicly owned
as contrasted with closely-held corporation. The Board believes that all
shareholders of a publicly owned corporation should have an opportunity to
consider fully, and to participate in determining, any proposed action and to
express their views thereon.

The text of the proposed amendment, which would provide for a new Article
XI to the Company's Articles of Incorporation, is a follows:

ARTICLE XI

Actions shall be taken by the shareholders of the Company only
at annual or special meetings of shareholders, and shareholders
may not act by written consent.

Pursuant to agreement, Apollo Real Estate Investment Fund II, L.P., which
owns 20.92% of the outstanding Shares, will vote its Shares in favor of the
amendment. See "Certain Relationships and Transactions" and "Security Ownership
of Beneficial Owners and Management -- Security Ownership of Beneficial Owners."

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE
ARTICLES OF INCORPORATION.

CERTAIN RELATIONSHIPS AND TRANSACTIONS

In 1995 certain entities which are wholly owned subsidiaries of a
co-mingled pension trust for which Morgan Guaranty Trust Company of New York is
the Trustee and J. P. Morgan Investment Management, Inc. is the investment
manager (the "Morgan Entities"), acquired certain properties from the Company
and from a partnership of which a subsidiary of the Company was the corporate
general partner. In connection with this acquisition the Morgan Entities entered
into a Management Agreement with Koger Realty Services, Inc., a Delaware
corporation ("KRSI"), in which the Company has a significant economic interest,
pursuant to which KRSI will manage such properties for a five-year period,
subject to renewal on July 31, 2000.

KRSI was incorporated to provide, among other things, leasing and property
management services to owners of commercial office buildings. The Company owns
all of the preferred stock of KRSI, which currently represents in excess of 95%
(by value) of the economic benefits of KRSI. Such preferred stock is nonvoting
stock and is not convertible into the common stock of KRSI while held by the
Company. All of the outstanding common stock of KRSI was acquired by officers
and employees of KRSI, including: Victor A. Hughes, Jr., James C. Teagle, W.
Lawrence Jenkins, James L. Stephens, all of whom are officers of the Company,
and certain other employees of KRSI who are not employed by the Company. In
addition to serving as officers of KRSI, Messrs. Hughes, Teagle and Jenkins
comprise the Board of Directors of KRSI. In

15
<PAGE> 18

the event that any of the forgoing persons leave the employ of KRSI, KRSI has
the right to reacquire any Shares of common stock of KRSI held by such officer
or employee.

The Company accounts for its investment in the preferred stock of KRSI
using the equity method. During 1998, KRSI earned approximately $6.4 million in
management fees from the Morgan Entities and other entities for which it
performs services.

Messrs. Mack, Neibart and Jacobsson were elected to the Company's Board
under the terms of an agreement dated October 10, 1996, between the Company and
an affiliate of Apollo Real Estate Investment Fund II, L. P. ("Apollo") pursuant
to which Apollo purchased three million Shares from the Company for $43.5
million ($14.50 per share). Apollo has been granted registration rights and a
conditional exemption from certain of the Company's takeover defenses that
provide that for a period of three years (subject to earlier termination under
certain circumstances): (i) Apollo may purchase up to 25% of the Company's
outstanding stock; (ii) Apollo will be entitled to Board representation of up to
three directors on a board of not more than 12, (depending upon Apollo's level
of ownership of the common stock); and (iii) Apollo will not acquire more than
25% of the Company's outstanding stock and will vote its Shares as to certain
matters either in accordance with the recommendation of the Board or
proportionately with other shareholders, unless the Company breaches its
agreements or, without Apollo's consent, the Company takes certain significant
actions such as certain amendments of the Company's organizational documents,
liquidation, termination of REIT status, sale of the Company, acquisitions or
disposition over a certain size, issuance of more than 9.8% of the outstanding
common stock to a person or group or failure by the Company to employ its
takeover defenses against another person who holds (or tenders for) 15% or more
of the common stock. In addition, with certain exceptions, in the event the
Company sells Shares or securities convertible into Shares ("Equity
Securities"), Apollo has a preemptive right to acquire from the Company that
amount of Equity Securities that will increase its holdings to not more than 25%
of the Company's outstanding Equity Securities.

Irvin H. Davis retired as an employee of the Company on December 31, 1996,
but continues to serve the Company as a consultant. Pursuant to the Consulting
Agreement between Mr. Davis and the Company, he will receive a consulting fee of
$50,000 per year through December 31, 1999. During 1998, Mr. Davis received
income in the amount of $105,795 from the SERP and $1,361,000 of income
associated with the exercise of options on a total of 63,000 Shares, all at an
exercise price of $5.125, at various times from January 7, 1998 to July 10,
1998, which Shares were valued at prices ranging from $20.8875 to $22.0625 per
Share on the dates of exercise.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's directors and executive officers file with the Securities and Exchange
Commission (the "SEC") and the American Stock Exchange initial reports of
ownership and reports of changes in ownership of the Company's equity
securities. Directors and executive officers are required by regulations of the
SEC to furnish the Company with copies of all Section 16(a) forms they file.

Except for the late reporting of the exercise of stock options to purchase
Shares by James L. Stephens and by Irvin H. Davis, to the Company's knowledge,
based solely on review of the copies of such reports furnished to the Company
and written representations that no reports not previously reported were
required, during the fiscal year ended December 31, 1998, its directors and
executive officers complied with all Section 16(a) filing requirements.

16
<PAGE> 19

SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT

SECURITY OWNERSHIP OF BENEFICIAL OWNERS

The table below sets forth certain information available to the Company as
of February 24, 1999, with respect to the beneficial ownership of Shares by each
person known to the Company to be the beneficial owner of more than 5% of the
Shares. Except as noted below, each of the persons listed has sole dispositive
and voting power with respect to the Shares indicated.

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNER PERCENT OF CLASS BENEFICIALLY OWNED
- ------------------------------------ ---------------- ------------------
<S> <C> <C>
Apollo Real Estate
Investment Fund II, L. P.................................. 20.92% 5,559,895
1301 Avenue of the Americas
New York, New York 10019

Alliance Capital Management, Inc............................ 9.36% 2,487,393(1)
1290 Avenue of the Americas
New York, New York 10104

Public Employees Retirement System.......................... 7.53% 2,000,000
277 East Town Street
Columbus, Ohio 43215

AIM Management Group........................................ 5.01% 1,332,338(2)
1315 Peachtree Street NE
c/o INVESCO
Atlanta, Georgia 30309

EQSF Advisers Inc. et al.................................... 5.32% 1,411,336
767 Third Avenue
New York, New York 10017
</TABLE>

- ---------------

(1) Sole voting power as to 259,515 Shares; shared voting power as to 2,208,735
Shares; sole dispositive power as to 2,481,229 Shares and shared dispositive
power as to 6,164 Shares.

(2) Shared voting and dispositive power as to 1,332,338 Shares; and sole voting
and dispositive power as to no Shares.

17
<PAGE> 20

SECURITY OWNERSHIP OF MANAGEMENT

The table below sets forth certain information with respect to the
beneficial ownership of Shares held as of February 24, 1999, (i) individually by
each Executive Officer and each director of the Company and (ii) by all
Executive Officers and directors of the Company. Except as noted below, each of
the persons listed below has (a) sole dispositive and voting power or (b) shared
dispositive and voting power with a spouse, in each case with respect to the
Shares indicated. The address of each Executive Officer and director listed
below is in care of the Company.

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER PERCENT OF CLASS BENEFICIALLY OWNED
- ------------------------ ---------------- ------------------
<S> <C> <C>
D. Pike Aloian........................................... 0.04% 9,458(3)
Benjamin C. Bishop, Jr................................... 0.11 28,842(3)
Irvin H. Davis........................................... 0.54 143,792(1)(2)
David B. Hiley........................................... 0.22 57,611(1)(2)
Victor A. Hughes, Jr..................................... 1.36 363,489(1)(2)
John R. S. Jacobsson..................................... 0.02 5,952(3)
G. Christian Lantzsch.................................... 0.05 12,605(3)
William L. Mack.......................................... 0.03 7,195(3)
Lee S. Neibart........................................... 0.03 7,195(3)
George F. Staudter....................................... 0.05 12,172(3)
S. D. Stoneburner........................................ 0.09 23,964(3)
James C. Teagle.......................................... 0.66 175,751(1)(2)
W. Lawrence Jenkins...................................... 0.16 42,104(1)(2)
James L. Stephens........................................ 0.15 40,088(1)(2)
Robert N. Bridger........................................ 0.16 41,515(1)(2)
---- -------
Total Shares Held by All Executive Officers and Directors
as a Group (15 persons)................................ 3.59% 971,734
==== =======
</TABLE>

- ---------------

(1) Includes for Messrs. Davis, Hughes, Teagle, Hiley, Jenkins, Stephens and
Bridger 57,333; 126,666; 161,278; 45,666; 39,147; 13,416 and 23,319 Shares,
respectively, which such Executive Officers have the right to acquire
pursuant to the exercise of the options held.

(2) Includes for Messrs. Hughes, Teagle, Hiley, Jenkins, Stephens and Bridger
3,668; 3,345; 218; 2,957; 2,612 and 3,196 Shares, respectively, allocated to
the participant's account under the 401(k) Plan.

(3) Includes 4,000 Shares which such Director has the right to acquire pursuant
to the exercise of options.

INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

During the year ended December 31, 1998, the Company engaged Deloitte &
Touche LLP to provide certain audit services. The services included the audit of
the annual financial statements, a review of the quarterly data furnished by the
Company to the SEC for the quarters ended March 31, June 30, and September 30,
1998, services performed in connection with filing of this Proxy Statement and
the Annual Report on Form 10-K by the Company with the SEC, attendance at
meetings with the Audit Committee and consultation on matters relating to
accounting, tax and financial reporting. The Audit Committee approved all
services performed by Deloitte & Touche LLP in advance of their performance.
Deloitte & Touche LLP has acted as independent certified public accountants for
the Company since its organization on June 21, 1988. Neither Deloitte & Touche
LLP nor any of its associates have any relationship to the Company or any of its
subsidiaries except in its capacity as auditors.

It is expected that representatives of the independent public accountants
will attend the Annual Meeting and be available to respond to appropriate
questions and be permitted to make a statement concerning the Company should
they desire.

18
<PAGE> 21

As of the date hereof, the Board of Directors has not selected independent
public accountants to audit the books and accounts of the Company for the fiscal
year ending December 31, 1999. It is anticipated that auditors will be selected
later in the fiscal year.

OTHER BUSINESS

It is not anticipated that there will be presented to the Annual Meeting
any business other than the election of directors and the approval of the
amendment to the Articles of Incorporation. A reasonable time before this
solicitation of proxies, the Board of Directors was not aware of any other
matters to be presented for action at the Annual Meeting or any adjournment
thereof. If any other business should properly come before the Annual Meeting or
any Adjournment thereof, the persons named on the enclosed proxy will have
discretionary authority to vote such proxy in accordance with their best
judgement.

STOCKHOLDER PROPOSALS AND NOMINATIONS TO THE BOARD

If a shareholder intends to present a proposal for action at the 2000
Annual Meeting and wishes to have such proposal considered for inclusion in the
Company's proxy materials in reliance on Rule 14a-8 under the Securities
Exchange Act of 1934, the proposal must be submitted in writing and received by
the Company by December 19, 1999. Such proposals must also meet the other
requirements of the rules of the Securities and Exchange Commission relating to
shareholders' proposals.

The Bylaws of the Company establish an advance notice procedure with regard
to certain matters, including shareholder proposals and nominations of
individuals for election to the Board of Directors. In general, notice of a
shareholder proposal or a director nomination for a shareholders meeting must be
received by the Company not less than 70 days, nor more than 90 days before the
date of the annual meeting and must contain specified information and conform to
certain requirements, as set forth in the Bylaws. If the presiding officer at
any shareholders' meeting determines that a shareholder proposal or director
nomination was not made in accordance with the Bylaws, the Company may disregard
such proposal or nomination.

In addition, if a shareholder submits a proposal outside of Rule 14a-8 for
the 2000 Annual Meeting, and the proposal fails to comply with the advance
notice procedure prescribed by the Bylaws, then the Company's proxy may confer
discretionary authority on the persons who have been appointed as proxies on
behalf of management to vote on the proposal. Proposals and nominations should
be addressed to the Corporate Secretary of the Company, W. Lawrence Jenkins,
Koger Equity, Inc., Post Office Box 58120, Jacksonville, Florida 32241-8120.

GENERAL

The Company will bear the costs of solicitation of proxies. In addition to
the use of the mails, proxies may be solicited by personal interview, telephone
and telegram by directors, officers and employees of the Company, and no
additional compensation will be paid to such individuals. The Company also has
retained Morrow & Co., Inc., 909 Third Avenue, New York, New York 10022 to
solicit proxies by mail, personal interview, telephone, or telegraph, for which
service the Company anticipates a cost not in excess of $7,500 plus reasonable
out-of-pocket expenses. Arrangements may also be made with the stock transfer
agent and with brokerage houses and other custodians, nominees, and fiduciaries
who are record holders of Shares for the forwarding of solicitation material to
the beneficial owners of Shares. The Company will, upon the request of any such
entity, pay such entity's reasonable expenses for completing the mailing of such
material to such beneficial owners.

Consistent with state law and pursuant to the Company's bylaws, a majority
of the Shares entitled to vote on a particular matter, present in person or
represented by proxy, constitutes a quorum as to such matter.

The twelve nominees for election as directors at the Annual Meeting who
receive the greatest number of votes properly cast for the election of directors
will be elected directors. A majority of the votes properly cast is

19
<PAGE> 22

necessary to approve any other matter which comes before the Annual Meeting,
except as otherwise required by law, the Articles of Incorporation, or the
Company's Bylaws.

The Company will count the total number of votes cast "for" approval of
proposals, other than the election of directors, for purposes of determining
whether sufficient affirmative votes have been cast. The Company will count
Shares represented by proxies that withhold authority to vote for a nominee for
election as a director or that reflect abstentions and "broker non-votes" (i.e.,
Shares represented at the Annual Meeting held by brokers or nominees as to which
(i) instructions have not been received from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have the discretionary
voting power) only as Shares that are present and entitled to vote on the matter
for purposes of determining the presence of a quorum, but neither abstentions
nor broker non-votes will have any effect on the outcome of voting on the
matter.

The Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1998, which contains financial statements and other information, is
being mailed to shareholders with this Proxy Statement, but it is not to be
regarded as proxy soliciting material.

AN ADDITIONAL COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH
THE SEC MAY BE OBTAINED, WITHOUT CHARGE, BY ANY SHAREHOLDER UPON WRITTEN REQUEST
TO THE CORPORATE SECRETARY, KOGER EQUITY, INC., POST OFFICE BOX 58120,
JACKSONVILLE, FLORIDA 32241; PROVIDED, HOWEVER, THAT A COPY OF THE EXHIBITS TO
SUCH ANNUAL REPORT ON FORM 10-K, FOR WHICH THERE MAY BE A REASONABLE CHARGE,
WILL NOT BE SUPPLIED TO SUCH SHAREHOLDER UNLESS SPECIFICALLY REQUESTED.

20
<PAGE> 23

KOGER EQUITY, INC.
ANNUAL MEETING OF SHAREHOLDERS, MAY 20, 1999
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder(s). If no direction is made, this proxy will be
voted for Proposals 1 and 2.

1. ELECTION OF DIRECTORS

<TABLE>
<S> <C> <C> <C>
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY
(Except as marked to the contrary below) to vote for ALL nominees listed below
</TABLE>

INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below:

NOMINEES:

<TABLE>
<S> <C> <C>
D. Pike Aloian Victor A. Hughes, Jr. Lee S. Neibart
Benjamin C. Bishop, Jr. John R. S. Jacobsson George F. Staudter
Irvin H. Davis G. Christian Lantzsch S. D. Stoneburner
David B. Hiley William L. Mack James C. Teagle
</TABLE>

2. To amend the Company's Articles of Incorporation to provide that actions of
shareholders may only be accomplished at a shareholders meeting and not by
written consent.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE
<PAGE> 24

(KOGER LOGO)

KOGER EQUITY, INC.

ANNUAL MEETING OF SHAREHOLDERS

JACKSONVILLE MARRIOTT HOTEL
4670 Salisbury Road
Jacksonville, Florida

Thursday, May 20, 1999
11:00 A.M.

PROXY
This Proxy is Solicited by the Board of Directors
KOGER EQUITY, INC.

The undersigned hereby appoints Victor A. Hughes, Jr., James C. Teagle, and
W. Lawrence Jenkins, and each of them, his (their) true and lawful agents and
proxies with full power of substitution in each, and hereby authorizes them to
vote at the Annual Meeting of the Shareholders of Koger Equity, Inc. to be held
at the Jacksonville Marriott Hotel, 4670 Salisbury Road, Jacksonville, Florida,
on Thursday, May 20, 1999, at 11:00 a.m., Eastern Daylight Saving Time, and at
any adjournment or postponement thereof, all shares of Common Stock of Koger
Equity, Inc. that the undersigned would be entitled to vote if personally
present. The undersigned instructs such proxies, or their substitutes, to vote
as specified herein by the undersigned and to vote in such manner as they may
determine on any other matters that may properly come before the meeting or any
adjournment thereof.

__________, 1999
(Signature) (Date)

__________, 1999
(Signature if held
jointly) (Date)

THIS PROXY MUST BE SIGNED
EXACTLY AS
THE NAME(S) APPEARS HEREON

Executors, administrators,
trustees, etc. should give full
title as such. If the signer is
a corporation, please sign full
corporate name by fully
authorized officer. If shares
are held jointly, signature
should include both names.
<PAGE> 25

Koger Equity, Inc.
1998 Annual Report

Cover photo:
Colonnade Building, Birmingham, Alabama

Table of Contents

2 Financial Highlights
4 Message to our Shareholders
9 1998 - A Year of Accomplishment
14 Office Properties Map

Photograph:
Jackson Building, Jacksonville, Florida

<PAGE> 26

Financial Highlights

The following selected financial data sets forth certain financial information
of Koger Equity, Inc. as of and for each of the five years in the period ended
December 31, 1998 (in thousands except per share and property data):

<TABLE>
<CAPTION>
Income Information 1998 1997 1996 1995(1) 1994
<S> <C> <C> <C> <C> <C>
Rental revenues and other rental services $133,663 $109,501 $ 98,805 $ 95,443 $ 94,388
Total revenues $138,082 $113,989 $104,072 $125,750 $100,376
Property operations expenses $ 53,719 $ 44,453 $ 41,597 $ 40,830 $ 39,711
Depreciation and amortization $ 28,381 $ 24,073 $ 21,127 $ 19,102 $ 16,728
Mortgage and loan interest $ 16,616 $ 16,517 $ 18,701 $ 23,708 $ 25,872
Net income $ 29,602 $ 21,204 $ 10,501 $ 28,990 $ 4,215
Earnings per common share - basic $ 1.13 $ 0.99 $ 0.57 $ 1.64 $ 0.24
- diluted $ 1.10 $ 0.94 $ 0.54 $ 1.61 $ 0.24
Dividends declared per common share $ 1.15 $ 0.55 $ 0.05 -- --
Weighted average shares outstanding - basic 26,294 21,374 18,523 17,724 17,599
- diluted 26,901 22,495 19,500 18,011 17,719

<CAPTION>
Balance Sheet Information 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Operating properties (before depreciation) $872,183 $681,249 $582,972 $571,313 $578,237
Total assets $834,995 $656,097 $584,666 $578,756 $613,806
Mortgages and loans payable $307,903 $181,963 $203,044 $254,909 $323,765
Total shareholders' equity $464,763 $444,262 $364,135 $310,697 $280,601

<CAPTION>
Other Information 1998 1997 1996 1995(1) 1994
<S> <C> <C> <C> <C> <C>
Funds from operations $56,486 $42,324 $33,154 $36,707 $23,475
Funds from operations
- per diluted share/unit $ 2.08 $ 1.88 $ 1.70 $ 2.04 $ 1.32
Closing stock price as reported on AMEX
at year-end $ 17.19 $ 21.94 $ 18.75 $ 10.63 $ 7.25
Income before interest, income taxes,
depreciation and amortization $75,555 $62,729 $51,144 $71,866 $47,042
Number of buildings (at end of period) 251 228 215 216 219
Percent leased (at end of period) 90% 92% 92% 91% 90%
</TABLE>

(1) Includes $13,066 of interest revenue associated with mortgage notes
which the Company acquired during 1995. These mortgage notes were
retired during 1995.

<PAGE> 27

Photograph:
Laurel Building, Orlando, Florida

Graphs:

Four Bar Charts are displayed portraying information for the five calendar years
ended 1998 as described below:

Stock Price: (The Low and High Stock Prices of Koger Equity are portrayed on a
two color bar chart as described below)

Rental and Other Rental Services Revenues (in Millions of Dollars):

<TABLE>
<CAPTION>
Year Amount
<S> <C>
'94 $ 94,388
'95 $ 95,443
'96 $ 98,805
'97 $109,501
'98 $133,663
</TABLE>

Funds from Operations, Per Share * For 1995, excludes $0.73 per share of
interest revenue:

<TABLE>
<CAPTION>
Year Amount
<S> <C>
'94 $1.32
'95 $1.31
'96 $1.70
'97 $1.88
'98 $2.08
</TABLE>

Debt-To-Market Capitalization:

<TABLE>
<CAPTION>
Year Amount
<S> <C>
'94 72%
'95 57%
'96 34%
'97 25%
'98 39%
</TABLE>

<PAGE> 28

Message to Our Shareholders

In 1998, Koger Equity executed its strategy and exceeded its business
plan. The Company was successful in its operation of the existing portfolio,
acquisitions, development, and managing the balance sheet. There has been much
talk about public real estate organizations needing to go back to basics. We
don't have to go back to anywhere -- we already are full-service real estate
operators. We have an experienced team of real estate professionals, with the
executive and senior management group averaging 20 years with the organization.
Our general managers in each of our Koger city markets have been with us on
average for 15 years. We've had a national marketing program for more than 25
years. We have separate dedicated divisions for development and acquisitions.
We've been in the suburban office business more than 40 years, serving our
national, regional, and local corporate customers and our national and state
government customers.

As a fully integrated operating real estate company, Koger Equity has
always focused its strategy on developing and owning quality suburban office
buildings located in business parks or communities in the Southeast and
Southwest. We've developed 84 percent of our portfolio ourselves, ensuring
quality and cost control. Having the ability to build our business from multiple
concentrated established office communities has given us flexibility to better
serve our customers' space needs and allows us to benefit from economies of
scale. Nonetheless, real estate has always been a local business, and in-depth
knowledge of local real estate conditions is vital. We have on average 25 years'
operating experience and almost 25 percent market share in our submarkets, a
submarket being defined as a sphere of influence within a given market or metro
area.

We operate in the Sunbelt with its pro-business climate and lower cost
of living. This region has continued to experience employment and population
growth between 1.5 and 2.0 times the national average, as major companies have
migrated south to our markets. We've operated in the suburbs because demand has
increased for quality offices located in suburban locations, with easier access
and a better quality of life than that of the central business district.
Throughout the 1990s, these growth trends for the South and its suburbs have
been realized, and we fully expect that to continue as we move into the next
century.

Operations

In 1998, the Company's operating property portfolio experienced
accelerating growth and higher rental revenues, with rental and other rental
services revenues totaling $133.7 million, up 22 percent over 1997. Operating
cost as a percent of revenue was reduced from 40.6 percent to 40.2 percent this
year. Our overall average rental rate continued to increase to $15.82 per foot,
up 5.3 percent. Average rental rate on new leases increased to $17.87 per foot,
up 14 percent, and average rental rate on renewals increased to $16.22, up 8
percent over rates prior to renewal. Same store sales revenue increased by 5
percent per year for the last two years. Annualized rents at year-end were
$141.7 million, up 22 percent over 1997.

Acquisitions

In spite of capitalization rate declines early in the year, the Company
was able to make several excellent acquisitions. We acquired 20 buildings,
1,167,000 feet, for a total investment of $122 million, ahead of our business
plan, which called for $75 million. Nineteen of these buildings were in three
new submarkets: the Colonnade portfolio in Birmingham; the Vanguard portfolio in
Charlotte's I-77 corridor, and the Paragon Building in Richmond. Additionally,
we acquired one building in Jacksonville. Our acquisitions were 92 percent
leased at year-end. Our acquisition program has and will continue to emphasize
expanding into target submarkets in existing growing Koger cities, increasing
our critical mass, and acquiring operating business parks and sites in new
growth cities like Birmingham with excellent development opportunities.

Development

Our development feeds off the growth and success which our customers
experience in Koger office communities. For example, this year we are building
Landstar System's national headquarters,

<PAGE> 29
Photograph
Gwinnett Building, Atlanta, Georgia

180,000 feet in a new thriving submarket along the J. Turner Butler Boulevard
corridor in Jacksonville. Landstar has been our tenant in the Jacksonville
Central Center for the past eight years.

We completed six new buildings during 1998, adding approximately
604,000 feet to our portfolio. These buildings came on stream from March through
October and, as a group, were 81 percent leased at year-end, ahead of pro forma
projections, and are currently 88 percent leased. By year-end, three of the six
buildings had already reached 95 percent stabilized occupancy.

At year-end, we had nine buildings under construction totaling 943,000
feet. Three of the nine are now operational and ahead of our lease-up
projections. We purchased 70 acres of land in 1998, and we had 110 acres of land
inventory, available in 11 submarkets, at year-end. The land inventory has
infrastructure in place, is contiguous with our existing office communities, and
over time should produce future rents of $25 million at today's rates and 92
percent occupancy.

We've operated in good market conditions in 1998, as evidenced by our
development successes. Generally, our markets were in balance as to supply and
demand, even as we read and heard fears of development and acquisition excesses.
It is important to remember that we operate well-established office parks in
proven locations within mature submarkets, where we've been for a number of
years. Koger has a competitive advantage because there is very little land
available for new office development in the majority of our submarkets.

Our development success last year and for the next several years will
be the result of building out the last sites in our existing office parks. We
had no great exposure last year in any one market, since our development of new
buildings was spread over five metro markets. Over half of the leasing in our
new buildings last year came from existing tenant relationships. Koger Equity
has a distinctive strategy focused on the suburban office park in a campus-style
setting. The portfolio is 90 percent leased to a diversified base of
credit-quality tenants, located in 24 separate submarkets in 15 metro areas, a
total of 2,682 leases, plus more than 400 leases from our profitable third-party
management team. Looking forward, we continue to review forecasts predicting an
oversupply of office space in some major U.S. markets. While we have seen little
evidence of overbuilding in our submarkets, we are continually reviewing our
competitors to determine their impact on market conditions.

Our success across the board cannot disguise our disappointment with
the decline of the price of our common stock in the securities market. The total
return for Koger Equity in 1998 was -16.24 percent, compared to the NAREIT
office index total return of -17.35 percent, and the total return of all
companies in the index was -18.82 percent. This was the worst performance for
the All Company Index since NAREIT began publishing a real estate index in 1972.
Global capital markets dislocations, a potential economic slowdown, and investor
fears of overbuilding in the Southeast were important dynamics in public market
performance. Larger capitalization growth stocks have outperformed smaller
capitalization value stocks. Momentum investors were sellers of real estate
securities, as were both nondedicated managers and dedicated real estate funds,
who were selling REIT shares to meet redemption requirements. Although investor
sentiment has not been this negative since 1993, we remain confident both of the
successful future

[Photograph Description: Inset in the middle of the page contains a photograph
of the following officers of Koger Equity, Inc. - Victor A. Hughes, Jr.,
Chairman of the Board and CEO (standing), James C. Teagle, President and COO
(left) and David B. Hiley, Executive Vice President and CFO(right)]
<PAGE> 30
of the REIT industry and most certainly of our Company and its business
activities. It is interesting to note that over the past three and five years,
KE's average total return performance was 20.32 percent and 16.84 percent, very
competitive returns compared to the NAREIT office index. These returns are
especially impressive when realizing it has been only over the past two years
that the Company has resumed dividend payments and has begun to execute and see
the results of its acquisition and development strategy as a part of these total
returns.

Last year we increased the size of our portfolio by 17 percent (11.2
percent with acquisitions and 5.8 percent with development). Across all of our
markets, new buildings are being leased ahead of projections. Overall, our 1997
and 1998 acquisition and development program increased year-end annualized rents
by $20.8 million. This program has complemented our continued emphasis on same
store sales growth. We are moving into additional submarkets in growing cities
with new and attractive buildings. In spite of the financial uncertainty in the
markets during the fall, Koger Equity, unlike many other REITs, successfully
negotiated a new three-year revolving credit facility and increased its
borrowing capacity under that facility from $100 million to $150 million. With
our revolving credit facility in place and our existing balance sheet, we should
have a solid platform on which to accelerate our growth this year without going
to the equity market.

We are building revenue momentum from existing rent streams, additional
accretive acquisitions, and newly developed buildings. Our management team is
improving the Company's operating margins, as reflected by continued reductions
in operating expenses as a percentage of total revenue and general and
administrative expenses as a percentage of total revenue. Due to strong profit
gains, our quarterly dividend was increased 20 percent last year. We expect, as
a result of continued improvements across all of our business, to increase
dividends in 1999.

As we move into the year, Koger Equity's strategy will be driven by the
core strengths that have served us well in the past: local market expertise,
strong tenant relationships, and property management. Leveraging from these core
strengths, our business plan is focused on four objectives: maximizing same
store sales, building on remaining land in existing Koger Centers, expanding
into target submarkets in the existing Koger cities to increase critical mass,
and acquiring sites in new growth cities.

The fundamentals are in place to execute our strategy in 1999 with
demand in our markets remaining strong. To date, our development program is
ahead of schedule and exceeding projections. While we have no specific
acquisitions in our business plan for 1999, I expect the Company could make
several when we identify the right buy. This will result in a positive
repositioning of the portfolio with newer assets, when arranged in combination
with the planned sale of several older centers.

Since 1994, we have made great strides in restructuring and
repositioning Koger Equity, resulting in FFO per share combined annualized
growth rate of 12 percent. We accomplished this literally with one hand tied
behind our back, as the Company has had access to capital for only the past two
years. We would like to take this opportunity to thank our employees for their
daily efforts and our dedicated Board of Directors for their guidance. We are
committed to translating our focus on this special business franchise and its
future into higher shareholder value. We are now in a position to take Koger
Equity to the next level.

Respectfully,
/s/ VICTOR A. HUGHES, JR.
Victor A. Hughes, Jr.
Chairman and Chief Executive Officer

The foregoing message to the Shareholders contains forward-looking statements
concerning 1999. The actual results of operations for 1999 could differ
materially from those projected because of factors affecting the financial
markets, reactions of the Company's existing and prospective investors, the
ability of the Company to identify and execute development projects and
acquisition opportunities, the ability of the Company to renew and enter into
new leases on favorable terms, and other risk factors. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Cautionary Statement Relevant to Forward-Looking Information for Purpose of the
'Safe Harbor' Provisions of the Private Securities Litigation Reform Act of
1995" in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998.
<PAGE> 31
Photograph
Paragon Building, Richmond, Virginia

1998 - A Year of Accomplishment

1998 was a year of solid accomplishment for the Company in all aspects
of its operation. Some of the more significant achievements are listed below:

Financial Highlights

- Total Rental Revenues increased 22%, to $133.7 million.
- Net Operating Income was up 23%, to $79.9 million.
- Earnings per diluted share increased 17%, to $1.10.
- Funds From Operations per diluted share increased 10.6%, to
$2.08.
- Dividends paid per share were up 214%, to $1.10.
- On March 27, 1998, the Company sold one million shares of
common stock to Wheat First Securities, Inc. for an aggregate
sales price of $20.2 million.
- In December 1998, the secured revolving credit facility was
increased from $100 million to $150 million.

Development and Acquisition Activity

- The Company completed six buildings during the year,
containing 603,900 feet, in Jacksonville (2), Charlotte,
Greenville, Atlanta and Memphis. These buildings were
constructed at a cost of $46.5 million (including land but
excluding tenant improvement costs) and, at December 31, 1998,
were 81% leased.
- At December 31, 1998, the Company had nine buildings
containing 943,000 feet under construction in Greensboro,
Orlando, San Antonio, Jacksonville (2), Birmingham, El Paso,
Memphis and Atlanta. The projected construction costs for
these buildings, including land but excluding tenant
improvement costs, are $79.9 million.
- The Company purchased 20 buildings containing 1.2 million feet
for $121.9 million during the year.
- At December 31, 1998, those buildings were 92% leased. These
purchases included the following:
- A 154,300 foot building in Richmond, Virginia.
- A 26,000 foot building in Jacksonville, Florida.
- An office and retail complex containing 438,900 feet
in Birmingham, Alabama.
- An office park containing 548,200 feet in Charlotte,
North Carolina.
- The Company purchased a total of 70.3 acres of land in
Jacksonville (29.8 acres), Birmingham (23.4 acres), and
Charlotte (17.1 acres) for $13.58 million.

Leasing Activity

- At year-end, the office buildings contained 10 million net
rentable square feet and were approximately 90% leased at an
average annual rent of $15.82 per net rentable square foot.
- Eighty percent of all space in Koger Centers is leased by
national companies and federal and state governments, over
half of which lease offices in two or more Centers.
- The Company leased approximately 2.5 million feet in 1998,
including new leases and renewals at an average rental rate of
$16.97.
- Governmental tenants accounted for 20.6% of the Company's
leased space at December 31.
<PAGE> 32
- More than 25 years ago, the Koger Organization implemented a
national marketing program which focuses on developing strong
relationships with national and regional corporations -- many
of which are Fortune 500 companies, federal and state
governmental departments and agencies, and other large
prospective users of office space. This program has
contributed significantly to the success of our marketing
efforts.
- Major leases completed during the year included:
- 95,132 feet with Blue Cross & Blue Shield of Florida
in Jacksonville, Florida.
- 30,133 feet with Electronic Data Systems Corp. in
Austin, Texas.
- 180,700 feet for a new corporate headquarters
building for Landstar System Holdings, Inc. in
Jacksonville, Florida.
- 29,690 feet with Nova Tech Sciences Corporation in
Greensboro, North Carolina.
- 66,435 feet with Homeside Lending, Inc. in
Jacksonville, Florida.
- 74,801 feet with the State of Florida Department of
Health in Tallahassee, Florida.
- 76,956 feet with Travelers Indemnity in Charlotte,
North Carolina.
- 49,900 feet with the U.S. Government - Centers for
Disease Control in Atlanta, Georgia.
- 36,300 feet with Commercial Union Insurance in
Atlanta, Georgia.
- 46,500 feet with Reliance Electrical Industries in
Greenville, South Carolina.
- 33,400 feet with the U.S. Government - Centers for
Disease Control in Atlanta, Georgia.
- 26,300 feet with Balcom Chemicals in Memphis,
Tennessee. 21,000 feet with FMT Holding Company in
Memphis, Tennessee.

General

Koger Equity, Inc. is a self-administered and self-managed real estate
investment trust which owns, operates and manages a portfolio of suburban office
buildings primarily located in 20 office centers (the "Koger Centers") located
in 15 metropolitan areas throughout the southeastern and southwestern United
States.

As of December 31, 1998, the Company owned 251 office buildings, of
which 246 are in Koger Centers and five are outside Koger Centers but in
metropolitan areas where Koger Centers are located.

The General Managers responsible for successfully operating the Koger
Centers have been with the Koger Organization an average of 15 years, while our
seasoned team of department heads and senior management average 20 years of
service with the Company.

Photograph:
Oak Ridge Building, Memphis, Tennessee

<PAGE> 33
IT ALL STARTS WITH CONSTRUCTION

Footings are poured. Clean, functional lines of glass, steel and
concrete rise from the ground. Another Koger building nears completion.

That construction scenario was replayed a number of times in 1998.
Since the 1950s when Koger pioneered the office park concept, the Company has
been developing and building for its own account and from demand driven by its
own satisfied and successful customer base. Last year Koger added 604,000 feet
in six buildings to its nationwide inventory. Another 943,000 feet were under
construction.

Like the Company's ongoing development, even the earliest structures in
Koger office parks stand as testimony to foresight and planning. Their
appearance is contemporary, their mechanical aspects functioning at satisfactory
levels. Best of all, these early buildings still produce rent streams that
contribute handsomely to the Company's funds from operations.

Meanwhile Koger construction continues, along with acquisition. Today
the development process starts with a series of careful steps even before a
shovel turns the first piece of dirt. Koger Marketing, Real Estate, Development,
Operations, Finance and Accounting Departments each review the feasibility of a
new building. Each department must be assured that the proposed project meets
its litmus test. Will the market support the project? Is land available at the
right price? Can the project be brought in within budget, yet still meet tenant
requirements? Can it be leased at a rate to bring a favorable return? Only when
the hard questions draw a firm "yes" does the project move forward.

Once the building feasibility is approved, the Development Department
swings into action with design, engineering and permitting. Seasoned Koger
professionals work closely with independent architects who have been selected
for their understanding of project economics as well as their aesthetic talent.
They know Koger buildings must be pleasing to the eye and to the ledger.

Koger professionals check every detail. Nothing is left to chance. Bay
depths, floor loads, computer and communication needs, elevator accessibility,
restrooms, electrical and HVAC systems, lighting, parking, interior and exterior
finishes, and landscaping are scrutinized by a team that has years of experience
in bringing in projects on time and in budget.

Koger's staff construction managers and superintendents control the
project at every step. They ensure that the company receives the building it has
designed, at the cost it anticipated, and that tenants have an office home that
works -- an office that will help them meet their business objectives.

The Landstar Building (opposite) is a case in point. A five-story,
180,700-foot national headquarters, the building was designed to meet the
current and future needs of Landstar System, a robust and growing trucking
giant. Koger and Landstar teams meshed to create a highly functional,
aesthetically pleasing home for Landstar, a Koger tenant since 1991 and for
years to come.

It all starts with construction. It continues with customer
satisfaction. But the Koger commitment to excellence never ends.

Photograph:
Landstar Building (under construction)
Jacksonville, Florida
<PAGE> 34
THE KOGER CENTERS

(Key: H = Owned and managed by Koger Equity, Inc.
n = Managed by Koger Equity, Inc.
t = Managed by Koger Realty Services, Inc.)

H Atlanta
2951 Flowers Road South, #100
Atlanta, Georgia 30341
770-458-7231

H Austin
3420 Executive Center Drive, #100
Austin, Texas 78731
512-345-1893

H Birmingham
3800 Colonnade Parkway, #110
Birmingham, Alabama 35243
205-969-3030

H Charlotte
5445 77 Center Drive, #70
Charlotte, North Carolina 28217
704-527-7777

n Columbia
201 Executive Center Drive, #100
Columbia, South Carolina 29210
803-731-9440

H El Paso
444 Executive Center Boulevard, #120
El Paso, Texas 79902
915-532-3456

H Greensboro
2211 West Meadowview Road, #100
Greensboro, North Carolina 27407
336-294-6785

<PAGE> 35

H Greenville
150 Executive Center Drive, #100
Greenville, South Carolina 29615
864-288-5250

H Jacksonville
8875 Liberty Ridge Drive, #100
Jacksonville, Florida 32256
904-464-0900

n Little Rock
10809 Executive Center Drive, #111
Little Rock, Arkansas 72211
501-224-1200

H Memphis
65 Germantown Court, #108
Cordova, Tennessee 38018
901-757-8118

t Miami
8300 Northwest 53rd Street, #100
Miami, Florida 33166
305-592-0681

n Nashville
278 Franklin Road, #100
Brentwood, Tennessee 37027
615-373-2773

t Norfolk
#2 The Koger Center, #1
Norfolk, Virginia 23502
757-461-9477

H Orlando
930 Woodcock Road, #127
Orlando, Florida 32803
407-894-5851

t Raleigh
3700 National Drive, #100
Raleigh, North Carolina 27612
919-782-4240

Richmond
t West End
1500 Forest Avenue, #100
Richmond, Virginia 23229
804-282-5461

Richmond
H One Paragon Place
6800 Paragon Place
Richmond, Virginia 23230
804-288-4444

<PAGE> 36

H St. Petersburg
877 Executive Center Drive West, #100
St. Petersburg, Florida 33702
727-576-1400

H San Antonio
4538 Centerview Drive, #150
San Antonio, Texas 78228
210-736-2494

H Tallahassee
1311 Executive Center Drive, #101
Tallahassee, Florida 32301
850-877-3151

t Tampa
5415 Mariner Street, #103
Tampa, Florida 33609
813-286-7921

H Tulsa
9726 East 42nd Street, #100
Tulsa, Oklahoma 74146
918-628-0810

(Map of the southeastern and southwestern portion of the United States, with
each Koger Center's geographic location identified.)

Photograph:
Gunti Building, Jacksonville, Florida

The full text of the SEC Form 10-K is included in the 1998 Annual, which 10-K
was filed with the SEC previously.

General Information

Board of Directors
D. Pike Aloian
Benjamin C. Bishop, Jr.
Irvin H. Davis
David B. Hiley
Victor A. Hughes, Jr.
John R. S. Jacobsson
G. Christian Lantzsch
William L. Mack
Lee S. Neibart
George F. Staudter
S. D. Stoneburner
James C. Teagle

<PAGE> 37

Executive Officers
Victor A. Hughes, Jr., Chairman of the Board and
Chief Executive Officer
James C. Teagle, President and Chief Operating Officer
David B. Hiley, Executive Vice President and
Chief Financial Officer

Officers
Michael F. Beale, Vice President/Real Estate
Robert N. Bridger, Senior Vice President/Development
Philip J. Bruce, Vice President/Development
Bradford A. Chaffin, Vice President/ Third Party Management
G. Danny Edwards, Treasurer
Wade L. Hampton, Vice President/Special Marketing
Bryan F. Howell, Vice President/Operations
W. Lawrence Jenkins, Vice President/Administration
and Corporate Secretary
J. Velma Keen, II, Vice President/Division I
Luther W. Kiger, Vice President
Kenneth D. Lund, Vice President/Division II
Thomas C. McGeachy, Vice President/ Division III
Mary H. McNeal, Assistant Vice President/ Investor Relations
Diana R. Payne, Assistant Vice President/ Human Resources
James L. Stephens, Vice President and Chief Accounting Officer
James W. Walker, Vice President/Marketing

Counsel
Ropes & Gray
Boston, Massachusetts

Boling & McCart
Jacksonville, Florida

Martin, Ade, Birchfield & Mickler, P.A.
Jacksonville, Florida

Independent Certified Public Accountants
Deloitte & Touche LLP

Stock Listing
American Stock Exchange
Common Stock Symbol: KE

<PAGE> 38
Common Stock Transfer Agent,
Dividend Paying Agent and Registrar
First Union National Bank
Corporate Trust Client Services, NC-1153
1525 West W. T. Harris Boulevard, 3C3
Charlotte, North Carolina 28288-1153
(800) 829-8432

Dividend Reinvestment Plan
Stockholders may elect to have dividends
automatically reinvested in additional shares
of Koger Equity, Inc. common stock. For
information about dividend reinvestment,
contact First Union National Bank at (800) 829-8432.

Automatic Dividend Deposit
Stockholders may elect to have dividends
automatically deposited into the financial
institution of their choice. For information
about automatic dividend deposit, contact
First Union National Bank at (800) 829-8432.

Koger Equity, Inc.
Corporate Office
Post Office Box 58120(ZIP 32241-8120)
8880 Freedom Crossing Trail
Jacksonville, Florida 32256-8280
(904) 732-1000
Internet address: www.koger.com