SECURITIES and EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 31, 2002
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KOGER EQUITY, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA
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(State or other jurisdiction of incorporation)
1-9997 59-2898045
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(Commission File Number) (IRS Employer Identification No.)
433 Plaza Real, Suite 335
Boca Raton, Florida 33432
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(Address of principal executive offices) (Zip Code)
(561) 395-9666
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(Registrant's telephone number, including area code)
N/A
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(Former name or former address, if changed since last report)
Koger Equity, Inc. (the "Company") is amending its Form 8-K filed on February
11, 2002, to include (i) a Statement of Revenues and Certain Expenses for Three
Ravinia Drive for the year ended December 31, 2001 as required by Rule 3-14 of
Regulation S-X of the Securities and Exchange Commission and (ii) unaudited pro
forma financial statements including (a) the Company's pro forma balance sheet
as of December 31, 2001, as if the acquisition of Three Ravinia Drive occurred
on December 31, 2001, (b) the Company's pro forma statement of operations for
the year ended December 31, 2001, as if the acquisition of Three Ravinia Drive
occurred on January 1, 2001, and (c) a pro forma statement of estimated taxable
operating results and estimated cash to be made available by operations of the
Company for the year ended December 31, 2001, as if the acquisition of Three
Ravinia Drive occurred on January 1, 2001.
Item 2. Acquisition or Disposition of Assets.
On January 31, 2002, the Company, through a wholly-owned subsidiary, acquired
Three Ravinia Drive (the "Property"), an 805,972 square foot office building
located in Atlanta, Georgia, for approximately $125.0 million. The funds
required for this acquisition were drawn from the Company's existing cash
reserves and from its secured revolving credit facility. The Property was
acquired from Ravinia III Associates, Limited Partnership, a Georgia limited
partnership, an unrelated third party. Reference is made to the Company's Form
8-K, dated January 8, 2002, which disclosed that the Company had entered into a
contract to purchase the Property, which Form 8-K is incorporated herein by
reference.
The Company considered various factors in determining the price to be paid for
this acquisition. Factors considered included the nature of the tenants and
terms of leases in place, opportunities for alternative and new tenancies,
historical and expected cash flows, occupancy rates, current operating costs on
the Property and anticipated changes therein under Company ownership, the
physical condition and location of the Property, the need for capital
improvements, the anticipated effect on the Company's financial results, and
other factors. The Company took into consideration capitalization rates at which
it believed other comparable properties had recently been sold. However, the
Company determined the price it was willing to pay primarily on the factors
discussed above relating to the Property itself and its fit into the Company's
existing operations. No separate independent appraisal was obtained in
connection with this acquisition. The Company, after investigation, is not aware
of any material factors, other than those discussed above, that would cause the
financial information reported not to be necessarily indicative of future
operating results. The Company intends to lease office space in the Property to
tenants and manage the Property as it does the other office buildings contained
in its portfolio.
Reference is made to the information contained in Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Cautionary Statement Relevant to Forward-Looking Information for Purpose of
'Safe Harbor' Provisions of the Private Securities Litigation Reform Act of
1995" in the Company's Annual Report on its Form 10-K for the fiscal year ended
December 31, 2001, which information is incorporated herein by reference.
1
Item 7. Financial Statements and Exhibits
Listed below are the financial statements, pro forma financial information and
exhibits, if any, filed as part of this report.
(a) Financial statements of real estate acquired.
(1) Independent Auditors' Report.
(2) Statement of Revenues and Certain Expenses of Three Ravinia Drive
for the year ended December 31, 2001.
(b) Pro forma financial information.
(1) Unaudited Pro Forma Balance Sheet as of December 31, 2001.
(2) Unaudited Pro Forma Statement of Operations for the Year Ended
December 31, 2001.
(3) Unaudited Statement of Estimated Taxable Operating Results and
Estimated Cash to be Made Available by Operations for the Twelve
Months Ended December 31, 2001.
(c) Exhibits.
Exhibit
Number Description of Exhibit
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23 Consent of Deloitte & Touche LLP
99 Koger Equity, Inc. News Release, dated January 8, 2002,
which is Exhibit 99(a) to the Company's Current Report
on Form 8-K, dated January 8, 2002, is incorporated by
reference herein
2
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Koger Equity, Inc.
Boca Raton, Florida:
We have audited the accompanying statement of revenues and certain expenses of
the property known as Three Ravinia Drive (the "Property") for the year ended
December 31, 2001. On January 31, 2002, the Property was acquired by Koger
Ravinia LLC, a wholly owned subsidiary of Koger Equity, Inc. This financial
statement is the responsibility of the Property's former management. Our
responsibility is to express an opinion on the financial statement based on our
audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
the significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission (for inclusion in the filing of a Form 8-K/A of Koger
Equity, Inc. dated January 31, 2002 as a result of the acquisition of the
Property). Material amounts, described in Note 1 to the statement of revenues
and certain expenses, that would not be comparable to those resulting from
future operations of the Property are excluded and the statement is not intended
to be a complete presentation of the Property's revenues and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenues and certain expenses of the Property for the
year ended December 31, 2001 in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
Certified Public Accountants
West Palm Beach, Florida
March 1, 2002
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THREE RAVINIA DRIVE- ATLANTA, GEORGIA
STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 2001
REVENUES:
Base rental income $12,272,632
Operating expense recovery 5,767,663
Management fee recovery 543,731
Parking, antennae, and other income 707,662
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Total revenues 19,291,688
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CERTAIN EXPENSES:
Property operating 3,570,162
Real estate and other taxes 1,922,458
Management costs and fees 792,553
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Total certain expenses 6,285,173
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REVENUES IN EXCESS OF CERTAIN EXPENSES $13,006,515
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See notes to statement of revenues and certain expenses.
4
THREE RAVINIA DRIVE- ATLANTA, GEORGIA
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 2001
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Three Ravinia Drive (the "Property"), an 805,972 square foot office
building located in Atlanta, Georgia, was acquired by Koger Ravinia LLC, a
wholly owned subsidiary of Koger Equity, Inc. (the "Company") on January 31,
2002. The statement of revenues and certain expenses includes information
related to the operations of the Property for the year ended December 31, 2001
as recorded by the Property's previous owner, Ravinia III Associates, LP,
subject to the adjustments described below.
The accompanying historical financial statement information is presented in
conformity with Rule 3-14 of Regulation S-X of the Securities and Exchange
Commission. Accordingly, the financial statement is not representative of the
actual operations for the year ended December 31, 2001 as certain expenses,
which may not be comparable to the expenses expected to be incurred in the
future operations of the Property, have been excluded. Expenses excluded consist
of interest, depreciation and amortization, and other costs not directly related
to the future operations of the acquired property.
Management's Use of Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Rental Income - Rental income is recognized on a straight-line basis over
the terms of the related leases.
Property Operating Expenses - Property operating expenses consist primarily
of utilities, insurance, repairs and maintenance, security and safety, cleaning
and other administrative expenses.
Management Costs and Fees - The Property was managed by a third party
manager for a property management fee of three percent of rental and other
revenues plus reimbursement of personnel and other costs related to management
of the properties.
5
THREE RAVINIA DRIVE- ATLANTA, GEORGIA
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 2001
2. OPERATING LEASES
Operating revenue is principally obtained from business tenant rentals
under operating leases. Future minimum rentals under all tenant operating leases
as of December 31, 2001 are as follows:
Year ending December 31, Amount
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2002 $ 7,464,704
2003 7,334,638
2004 5,658,464
2005 4,919,483
2006 4,892,027
Thereafter 10,187,272
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Total $ 40,456,588
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For the year ended December 31, 2001, two tenants, MCI/WorldCom, Inc. and Six
Continents Hotels, Inc. f/k/a Bass Hotels & Resorts, Inc., contributed
approximately 47% and 41% of base rental revenues, respectively.
On October 31, 2001, MCI/WorldCom vacated all of its leased office space on the
first twelve floors of the Property or approximately 39% of the Property's
rentable office space. The Company expects to lease this vacant space over the
next three years.
6
Pro Forma Financial Statements
The following unaudited pro forma financial statements set forth (i) the pro
forma balance sheet as of December 31, 2001, as if the acquisition occurred on
December 31, 2001, (ii) the pro forma statement of operations for the year ended
December 31, 2001, as if the acquisition occurred on January 1, 2001, and (iii)
the unaudited statement of estimated taxable operating results and estimated
cash to be made available by operations for the twelve months ended December 31,
2001, as if the acquisition occurred on January 1, 2001. The pro forma financial
statements are based upon assumptions contained in the notes thereto and should
be read in conjunction with such notes.
The following unaudited pro forma financial statements may not necessarily
reflect the results of operations or financial position of the Company which
would have actually resulted had the acquisition occurred as of the date and for
the periods indicated, nor should they be taken as indicative of the future
results of operations or the future financial position of the Company.
Differences would result from various factors, including changes in the amounts
of rents received and rental expenses paid in connection with operating the
office building acquired, changes in the interest rates assumed on the Company's
secured revolving credit facility, and changes in the amount and form of debt
and equity capital used in the acquisition.
7
KOGER EQUITY, INC.
UNAUDITED PRO FORMA BALANCE SHEET
December 31, 2001
(In Thousands)
Historical Pro Forma Pro Forma
12/31/2001 Adjustments 12/31/2001
-------------------- ------------------- -----------------
ASSETS
Operating properties:
Real estate $ 660,204 $ 125,345 (a) $ 785,549
Furniture and equipment 3,082 3,082
Accumulated depreciation (123,999) (123,999)
-------------------- ------------------- -----------------
Operating properties - net 539,287 125,345 664,632
Undeveloped land held for investment 13,779 13,779
Undeveloped land held for sale, net 76 76
Cash and cash equivalents 113,370 (44,253) (a) 69,117
Accounts receivable, net 11,574 11,574
Cost in excess of fair value of net assets acquired - net 595 595
Other assets 11,904 11,904
-------------------- ------------------- -----------------
TOTAL ASSETS $ 690,585 $ 81,092 $ 771,677
==================== =================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgages and loans payable $ 248,683 $ 80,000 (a) $ 328,683
Accounts payable 4,962 4,962
Accrued real estate taxes payable 1,007 164 (a) 1,171
Accrued liabilities - other 9,206 842 (a) 10,048
Dividends payable 44,159 44,159
Advance rents and security deposits 5,103 86 (a) 5,189
-------------------- ------------------- -----------------
Total Liabilities 313,120 81,092 394,212
-------------------- ------------------- -----------------
Minority interest 22,923 22,923
-------------------- ------------------- -----------------
Shareholders' Equity:
Common stock 297 297
Capital in excess of par value 469,779 469,779
Notes receivable from stock sales (5,066) (5,066)
Retained earnings 21,180 21,180
Treasury stock, at cost (131,648) (131,648)
-------------------- ------------------- -----------------
Total Shareholders' Equity 354,542 354,542
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 690,585 $ 81,092 $ 771,677
==================== =================== =================
See accompanying notes to unaudited pro forma financial statements.
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KOGER EQUITY, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the year ended December 31, 2001
(In Thousands except per Share Data)
Historical Pro Forma Pro Forma
2001 Adjustments 2001
-------------------- ------------------- -----------------
REVENUES
Rental and other rental services $ 165,623 $ 19,292 (a) $ 184,915
Management fees 4,080 4,080
Interest 776 (443) (b) 333
Income from Koger Realty Services, Inc. 81 81
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Total revenues 170,560 18,849 189,409
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EXPENSES
Property operations 61,608 6,285 (a) 67,893
Depreciation and amortization 36,007 2,730 (c) 38,737
Mortgage and loan interest 25,204 4,800 (d) 30,004
General and administrative 8,412 8,412
Direct cost of management fees 3,378 3,378
Other 189 189
-------------------- ------------------- -----------------
Total expenses 134,798 13,815 148,613
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INCOME BEFORE GAIN ON SALE OF ASSETS,
INCOME TAXES AND MINORITY INTEREST 35,762 5,034 40,796
Gain on sale of assets 39,189 39,189
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INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 74,951 5,034 79,985
Income tax provision 684 163 (e) 847
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INCOME BEFORE MINORITY INTEREST 74,267 4,871 79,138
Minority interest 1,044 1,044
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NET INCOME $ 73,223 $ 4,871 $ 78,094
==================== =================== =================
EARNINGS PER COMMON SHARE:
Basic $ 2.76 $ 2.95
==================== =================
Diluted $ 2.75 $ 2.93
==================== =================
WEIGHTED AVERAGE COMMON SHARES:
Basic 26,517 26,517
==================== =================
Diluted 26,610 26,610
==================== =================
See accompanying notes to unaudited pro forma financial statements.
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KOGER EQUITY, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1. Basis of Presentation
On January 31, 2002, Koger Ravinia LLC, a wholly-owned subsidiary of Koger
Equity, Inc. (the "Company"), acquired Three Ravinia Drive (the "Property"), an
805,972 square foot office building in Atlanta, Georgia. This acquisition was
funded with the Company's existing cash reserves and $80.0 million from the
Company's secured revolving credit facility. It is the intent of the Company's
management to operate the Property in a manner similar to the Company's existing
office building portfolio.
2. Unaudited Pro Forma Balance Sheet
The unaudited pro forma balance sheet as of December 31, 2001 is based on
the historical balance sheet for the Company presented in the Annual Report on
Form 10-K for the year ended December 31, 2001. The unaudited pro forma balance
sheet includes adjustments assuming this acquisition occurred as of December 31,
2001. Significant pro forma adjustments in the unaudited pro forma balance sheet
include the following:
(a) The Company purchased the Property, located in Atlanta, Georgia, for
$125 million plus acquisition costs. This purchase was funded with
existing cash reserves and an $80 million draw on the Company's
secured revolving credit facility.
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KOGER EQUITY, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (continued)
3. Unaudited Pro Forma Statement of Operations
The unaudited pro forma statement of operations for the year ended December
31, 2001 is based on the historical statement of operations for the Company
presented in the Annual Report on Form 10-K for the year ended December 31,
2001. The unaudited pro forma statement of operations includes adjustments
assuming that the acquisition of the Property occurred as of January 1, 2001.
Significant pro forma adjustments in the unaudited pro forma statement of
operations include the following:
(a) Adjustment required for the historical rental revenues and operating
expenses for the Property. Operating expenses include management costs
and fees calculated using an estimated management fee rate of 3% of
total rental and other revenues of the Property.
The unaudited pro forma statement of operations includes approximately
$8.0 million of revenues from MCI/WorldCom, Inc. On October 31, 2001,
MCI/WorldCom vacated all of its leased space on the first twelve
floors of the Property or approximately 39% of the Property's rentable
space. The Company expects to lease this vacant space over the next
three years.
(b) Adjustment required to reflect forfeited interest income on cash paid
for the Property of approximately $44.3 million. The estimated average
interest rate used to calculate this adjustment was 1.0 percent.
(c) Adjustment required to reflect depreciation on the Property, based on
the total cost of the acquisition. The Company uses the straight-line
method for depreciation and amortization using an estimated life of 39
years for the Property.
(d) Adjustment required to reflect interest expense related to the assumed
amount drawn on the secured revolving credit facility ($80 million) to
fund the acquisition of the Property. The estimated average interest
rate on the secured revolving credit facility was 6.0 percent.
(e) Adjustment required to reflect applicable federal and state taxes on
the Property's taxable income. The Property's taxable income has been
reduced by ninety percent for dividends paid to the Company's
shareholders and by approximately $95,000 for a net operating loss
carryforward.
11
KOGER EQUITY, INC.
UNAUDITED STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS
AND ESTIMATED CASH TO BE MADE AVAILABLE BY OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2001
(In Thousands)
Revenues
Rental and other rental services $183,316
Management fees 4,080
Interest 333
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Total revenues 187,729
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Expenses
Property operations 68,190
Depreciation and amortization 30,263
Mortgage and loan interest 30,004
General and administrative 8,256
Direct cost of management fees 3,378
Other 189
Compensation - exercise of stock options 365
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Total expenses 140,645
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Estimated Taxable Operating Income 47,084
Add Back: Depreciation and Amortization 30,263
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Estimated Cash To Be Made Available By Operations $ 77,347
=========
Note 1: This statement of estimated taxable operating results and estimated
cash to be made available by operations is an estimate of operating
results of the Company for the twelve month period ended December 31,
2001 assuming that the acquisition of Three Ravinia Drive occurred on
the first day of the twelve month period. However, this statement does
not purport to reflect actual results for any period.
Note 2: Tax depreciation was determined based upon the actual tax
depreciation for the Company's existing portfolio and based upon the
assumption that the acquisition of Three Ravinia Drive occurred on the
first day of the twelve month period.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
KOGER EQUITY, INC.
Dated: April 12, 2002 By: /s/ ROBERT E. ONISKO
-----------------------------
Robert E. Onisko
Title: Chief Financial Officer
13
EXHIBIT INDEX
The following designated exhibit is filed herewith:
Exhibit
Number Description of Exhibit
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23 Consent of Deloitte & Touche LLP
99 Koger Equity, Inc. News Release, dated January 8, 2002,
which is Exhibit 99(a) to the Company's Current Report on
Form 8-K, dated January 8, 2002, is incorporated by
reference herein.
14
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-55179 of Koger Equity, Inc. on Form S-3, Registration Statement No. 33-54617
of Koger Equity, Inc. on Form S-8, Registration Statement No. 333-20975 of
Koger Equity, Inc. on Form S-3, Registration Statement No. 333-23429 of Koger
Equity, Inc. on Form S-8, Registration Statement No. 333-37919 of Koger Equity,
Inc. on Form S-3, Registration Statement No. 333-33388 of Koger Equity, Inc. on
Form S-8 and Registration Statement No. 333-38712 of Koger Equity, Inc. on Form
S-8 of our report dated March 1, 2002, on the statement of revenues and certain
expenses of Three Ravinia Drive for the year ended December 31, 2001 appearing
in this Current Report on Form 8-K/A of Koger Equity, Inc., dated January 31,
2002.
DELOITTE & TOUCHE LLP
West Palm Beach, Florida
April 12, 2002
15