As filed with the Securities and Exchange Commission on June 19, 2000
Registration No. ________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
COR DEVELOPMENT, LLC
(Exact name of registrant as specified in its charter)
Kansas 65528 EIN - 48-1229527
(State or other jurisdiction of Primary Standard Industrial (I.RS. Employer
incorporation or organization Classification Code Number) Identification No.)
13720 Roe
Leawood, KS 66224
913.897.0120
913.897.0361 (FAX)
(Address, including ZIP Code, and telephone number, including area code, of
registrant's principal executive offices)
-------------------------
Robert M. Adams
13720 Roe
Leawood, KS 66224
913.897.0120
913.897.0361 (FAX)
(Name, address, including ZIP Code, and telephone number, including area code,
of agent for service)
-------------------------
with copies to:
Arthur E. Fillmore, II, Esq.
Craft Fridkin & Rhyne, L.L.C.
1100 One Main Plaza
4435 Main Street
Kansas City, MO 64111
816.531.1700
816.753.3222 (FAX)
-------------------------
Approximate date of proposed sale to the public:
As soon as possible after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number under the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of each class of Amount to be Proposed maximum offering Proposed Amount
securities to be registered registered price per unit (1)(2) aggregate of registration fee
- --------------------------- ---------- --------------------- ------------ ----------------
Common Units 1,600,000 $10.00 $16.000,000 $4,224
Preferred Units 1,600,000 $10.00 collectively
(1) Unless subscriptions for 800,000 Units offered hereby are received within 60
days of the effective date of this registration statement or later if the
Company so elects, this offering will be terminated and all amounts received
from subscribers will be promptly returned in full, together with interest
accrued thereon, if any, and without deductions for expenses.
(2) The offering price has been set by the Company.
(3) The registration fee is calculated in accordance with Rule 457(c) of the
Securities Act of 1933.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The information in this Prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted,
PROSPECTUS, SUBJECT TO COMPLETION
1,600,000 Units
COR DEVELOPMENT, LLC
Common Units
Preferred Units
This is an initial public offering of Common Units and Preferred Units of
ownership interests of COR Development, LLC. We are offering the Common Units
and the Preferred Units directly to the public.
There has been no market for these units and it is currently contemplated
that there will be no public market for the units.
INVESTING IN THE COMMON UNITS AND THE PREFERRED UNITS IS SPECULATIVE AND
INVOLVES A HIGH DEGREE OF RISK. SEE RISK FACTORS BEGINNING ON PAGE 7.
Per Share Total
--------- -----
Public Offering Price $10.00 $16,000,000
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is ________ ___, 2000.
2
TABLE OF CONTENTS
WHERE CAN YOU GET MORE INFORMATION . . . . . . . . . . . . . . . . . . . . 5
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
THIS OFFERING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 12
USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
DETERMINATION OF OFFERING PRICE. . . . . . . . . . . . . . . . . . . . . . 12
DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SELLING SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS . . . . . . . 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . 14
DESCRIPTION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . 14
INTEREST OF NAMED EXPERTS AND COUNSEL. . . . . . . . . . . . . . . . . . . 14
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
DESCRIPTION OF BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. . . . . . . . . 16
TAX CONSEQUENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
DESCRIPTION OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . 17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . 17
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS . . . . . . . . . 18
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . 18
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
HOW TO SUBSCRIBE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3
WHERE CAN YOU GET MORE INFORMATION
At your request, we will provide you, without charge, a copy of any exhibits
to our registration statement incorporated by reference in this prospectus. If
you want more information, write or call us at:
COR Development, LLC
13720 Roe
Leawood, Kansas 66224
Telephone: (913) 897-0120
Fax: (913) 897-0361
The fiscal year for the Company ends on December 31. We intend to furnish our
holders of the Units with annual reports containing audited financial statements
and other appropriate reports. In addition, we intend to become a reporting
company and file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any reports, statements or other information we file at the public
reference room of the Securities and Exchange Commission in Washington, D.C.
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. You can also request
copies of these documents, upon payment of a duplicating fee, by writing the
Public Reference Section of the Securities and Exchange Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Our filings
with the Securities and Exchange Commission will also be available to the public
on the SEC Internet site at http://www.sec.gov.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this Prospectus.
This summary is not complete and may not contain all the information that you
should consider before investing in the Common Units or the Preferred Units. You
should read this entire Prospectus carefully, including the section entitled
"RISK FACTORS."
With the proceeds from this offering, COR Development, LLC a Kansas limited
liability company (the "Company"), will purchase 47 acres of real estate at the
intersection of 137th and Nall in Leawood, Kansas (the "Property") at a price of
$250,000 per acre for a total purchase price of $11,750,000. This intersection
is within a few miles of significant commercial development that has occurred in
southern Johnson County, Kansas. The Company will develop the Property and will
be involved in the following activities:
- Purchase of the Property and development and building of commercial
office and retail buildings on the real estate using a construction
management company;
- Sale of seven pad sites of undeveloped real estate over the next three
years;
- Donating 15 acres of the purchased real estate to the Church of the
Resurrection-United Methodist;
- Engaging a management company for the leasing of the space in the
buildings; and
- Overseeing the operations of the commercial buildings; and
- Permitting parking in the parking areas for the commercial buildings by
persons attending services, programs or activities at the Church of the
Resurrection-United Methodist.
We contemplate that most of the purchasers of the units will be members of the
Church of the Resurrection-United Methodist (the "Church"). With respect to the
oversight of the construction management company, which will be responsible for
managing the preparation of the pad sites for sale and the development and
construction of the commercial buildings, and the oversight of the management
company, which will be responsible for the leasing and maintenance of the
commercial buildings, these oversight services provided by the managers of the
Company will be donated or will be provided at minimal expense. The managers of
the Company will probably be members of the Church.
The proceeds of this offering will be used to fund the purchase of the
Property in the fast developing commercial real estate market in Johnson County,
Kansas. If proceeds of this offering exceed $11,750,000, any remaining proceeds
will be used to pay certain costs in acquiring the Property and in the
development of the Property, which is estimated currently to cost approximately
$25,400,000 in total. If the proceeds are less than $11,750,000, the Company
contemplates obtaining financing for the remainder of the purchase price.
We will generate revenue through three sources:
1) the sale of seven undeveloped pad sites over the next three years; and
2) the leasing of space in the commercial buildings; and
3) the sale of the commercial buildings after a period of operation and at
such time as holders of a majority of the Units shall approve the sale,
which is currently contemplated to be by the end of 2015.
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THIS OFFERING
Common Units and Preferred Units Offered Collectively...........1,600,000 Units
Common Units and Preferred Units to be Outstanding
after the Offering..............................................1,600,000 Units
Use of Proceeds ...... The Company will use the proceeds for the acquisition of
the Property and possibly for development costs.
Risk Factors ......... See "RISK FACTORS" and information included in this
Prospectus for a discussion of the factors you should
consider before you decide to acquire any of the Common
Units or Preferred Units.
Distribution Policy ... We contemplate that the Company will pay distributions
to the holders of the Preferred Units and to the holders
of the Common Units. SEE "DESCRIPTION OF SECURITIES."
Trading Symbol ........ There is no trading symbol or public market for any of
the Common Units or Preferred Units.
6
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND
THE OTHER INFORMATION IN THIS PROSPECTUS BEFORE DECIDING WHETHER TO INVEST IN
THE COMMON UNITS AND/OR THE PREFERRED UNITS. ADDITIONAL RISKS AND UNCERTAINTIES
NOT PRESENTLY KNOWN TO US OR THAT THE COMPANY CURRENTLY DEEMS IMMATERIAL MAY
ALSO IMPAIR ITS BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
IF ANY OF THE FOLLOWING RISKS OCCUR, OUR BUSINESS, RESULTS OF OPERATIONS AND
FINANCIAL CONDITION COULD BE MATERIALLY ADVERSELY AFFECTED. IN SUCH CASES, THE
ABILITY TO REALIZE ANY DISTRIBUTION IN RESPECT OF THE UNITS FROM THE OPERATION
OF THE COMPANY OR THE SALE OF THE PAD SITES OR THE COMMERCIAL BUILDINGS COULD
DECLINE AND YOU MAY LOSE PART OR ALL OF YOUR INVESTMENT.
THIS PROSPECTUS ALSO CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. THESE STATEMENTS REFER TO OUR FUTURE PLANS, OBJECTIVES,
EXPECTATIONS AND INTENTIONS. THESE STATEMENTS CAN BE IDENTIFIED BY THE USE OF
WORDS SUCH AS "EXPECTS," "ANTICIPATES," "INTENDS," "PLANS" AND SIMILAR
EXPRESSIONS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN SUCH FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CONTRIBUTE TO THESE
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW AND ELSEWHERE
IN THIS PROSPECTUS.
THE COMPANY IS AN EARLY-STAGE COMPANY WITH NO OPERATING HISTORY, AND THE
COMPANY EXPECTS TO ENCOUNTER RISKS FREQUENTLY FACED BY EARLY-STAGE COMPANIES IN
REAL ESTATE DEVELOPMENT IN GROWING MARKETS.
The Company cannot assure you that it will be successful in addressing such
risks. Given the level of planned operating and capital expenditures, the
Company anticipates that it will incur operating losses during the period of the
development and construction of the commercial buildings. The Company cannot
assure you that operating losses will not increase in the future or that it will
ever achieve or sustain profitability.
General Risks of Development of Real Estate
We are subject to the risks generally incident to the ownership and
development of real property. These include the possibility that cash generated
from operations will not be sufficient to meet fixed obligations whether from
changes in the level of sales of properties and leases of office and retail
space or changes in costs of construction or development; adverse changes in
economic conditions in Kansas, such as increased costs of labor, marketing and
production, restricted availability of financing, and adverse changes in the
market for real estate due to changes in local economic conditions and adverse
changes in national economic conditions; the need for unanticipated improvements
or unanticipated expenditures in connection with environmental matters; changes
in real estate tax rates and other operating expenses; delays in obtaining
permits or approvals for construction or development and adverse changes in
laws, governmental rules and fiscal policies; acts of God, including earthquakes
and tornadoes (which may result in uninsured losses); and other factors which
are beyond the control of the Company. Real estate ownership and development are
subject to unexpected increases in costs. There can be no assurance that the
Company's operations will generate sufficient revenue to cover operating
expenses and meet required payments on the debt obligations of the Company.
We intend, to the extent economically advantageous, to sell certain
undeveloped pad sites and to develop commercial lease space. Any sharp rise in
interest rates or downturn in the international, national or Kansas economy
could affect the Company's profitability. Such factors have tended to be
cyclical in nature. Sales of portions of the Property may be affected adversely
by such factors. Other factors that could affect the Company's business include
the availability of construction materials and labor and changes in the costs
thereof (including transportation costs). The success of the Company may be
affected by competition from other projects of a similar nature.
The Company's real estate activities may be adversely affected by possible
changes in the tax laws, including changes which may have an adverse effect on
commercial real estate development.
The Company's real property development will be located in Kansas. See
"Description of Business." As a result, the Company's cash revenues will be
exposed to the risks of investment in Kansas and to the attractiveness of, and
the economic conditions prevalent in, the Kansas real estate market. While the
Kansas real estate market is subject to national economic cycles, the Kansas
real estate values are also affected significantly by domestic investment cycles
and economic development in Kansas. Real estate values in Johnson County,
7
Kansas have been affected positively in recent years by the investment of
capital and any significant decrease in the level of such investment, whether
caused by economic, political or other reasons, could curtail such positive
effect on values. There can be no assurance that Kansas real estate values will
rise, or that, if such values do rise, the Company's development will benefit.
At this time, we do believe that the Property is appropriately zoned. There
is the possibility that changes could be made to the zoning regulations that may
adversely affect the development of the Property.
High rates of inflation adversely affect real estate development generally
because of their impact on interest rates and costs. High interest rates not
only increase the cost of borrowed funds to developers, but also have a
significant effect on the affordability of permanent mortgage financing for the
preparation of the pad sites and the development and construction of the
commercial buildings and to prospective purchasers. High rates of inflation may
permit the Company to increase the prices that it charges in connection with the
contemplated sales of the pad sites and the commercial buildings, subject to
economic conditions in the real estate industry generally and local market
factors.
Regulation
The Company's development projects will be subject to approval and regulation
by various federal, state, county and municipal agencies, especially insofar as
the nature and extent of improvements, zoning, building, environmental, health
and related matters are concerned. Generally, governmental entities have the
right to impose limits or controls on growth in their communities through
restrictive zoning, density reduction, impact fees and development requirements,
which have materially affected, and in the future may materially affect,
utilization of real properties and the costs associated with developing
properties. There can be no assurance that the Company will be successful in
obtaining necessary plan approvals and developmental permits.
In connection with seeking approvals from regulatory authorities of its
development plans, the Company may be required in the future to make significant
improvements in public facilities (such as roads), to dedicate property for
public use, to provide street lights and/or traffic signals and to make other
concessions, monetary or otherwise. The ability of the Company to perform its
development activities may be adversely affected in material respects by
restrictions that may be imposed by communities because of inadequate public
facilities, such as roads and sewer facilities, and by local opposition to
continued growth.
It is possible that in the future increasingly stringent requirements will be
imposed on developers in Johnson County, Kansas, where environmental and growth
concerns have become prevalent in recent years. Such requirements could result
in significant delays in the commencement of projects, discontinuance of certain
operations and substantial expenditures that could materially adversely affect
the Company's results of operations and the value of its land.
Risk of Insufficient Cash Flow
A substantial portion of the potential return on the Common Units and the
Preferred Units will be dependent upon the ability of the Company to generate
net cash flow. If we are not able to prepare and to sell the undeveloped pad
sites and to develop the commercial buildings in accordance with the proposed
time table, the additional carrying cost for the construction loan can adversely
affect the viability of the Company. No assurance can be given that the
development will occur as we currently contemplate, however, we will take any
necessary actions to work toward meeting such schedules.
Risk of Uncertain Development Costs
The costs of grading, storms sewers and water retention, utility extension,
roadway construction and other development costs necessary to the Company's
projects are uncertain because specifications have not been drawn or bids
secured and if these costs are more than anticipated it may result in
insufficient cash flow and additional indebtedness to the Company.
Risks of Secured and Unsecured Debt
The Common Units and the Preferred Units will be subordinate to all existing
and future indebtedness of the Company. The debt service on any such financing
would reduce net cash flow available to pay the return on the Preferred Units.
There can be no assurance that the Company will be able to obtain any needed
financing on favorable terms. In addition, the Company contemplates incurring
indebtedness for the payment of the purchase price for the Property not funded
through the proceeds of this offering and for the development of the Property.
In addition, it is anticipated that this indebtedness will be secured by liens
or mortgages upon the Property. Principal and interest payments on Company
indebtedness will generally have to be made regardless of cash generated from
Company operations. If the Company is unable to pay interest or principal on
such indebtedness when due, the holders of such debt could proceed against the
Company or specified collateral of the Company. If the Company defaults under
any of its agreements relating to such
8
indebtedness and if the payment of such debt is accelerated, there can be no
assurance that the assets of the Company would be sufficient to pay any amounts
to the holders of the Preferred Units or the Common Units.
Risks Associated with Donation
A planned gift of approximately 15 acres to the Church to be included in the
Church's campus or for road and access purposes represents approximately 32% of
the Property being purchased. Potential donation of this portion of the assets
of the Company substantially raises the net costs of the remaining property
available for development to a higher level than what the Company believes is a
current market value. There can be no assurance that the property remaining
available to the Company to develop will appreciate in value sufficiently to
support rental income or sales proceeds to pay the preferred return on the
Preferred Units.
Federal Income Tax Risks
At this time, we believe that the donation of 2 acres to the Church prior to
December 31, 2000 and the donation of an additional 13 acres to the Church
during the year ending December 31, 2002 will allow the holders of the Common
Units to receive charitable tax deductions for such donations. If the income tax
laws would change, it is possible that the holders of the Common Units would not
receive these tax deductions. In addition, given the fact that the contract for
the purchase of the Property is in the name of the Church and this contract is
being assigned to the Company, it is possible that the Internal Revenue Service
may analyze or otherwise take issue with these deductions. See "Description of
Business." See also "Tax Consequences." Because such donations will raise
proportionately the overall costs for the remaining acres of the Property, we
may need to receive some consideration from the Church for the transfer of the
15 acres. If the Church provides some consideration for this transfer, it is
uncertain how the proposed charitable deduction would be treated by the Internal
Revenue Service.
No Market for Units
There is no market at present for the Common Units or the Preferred Units.
While the Common Units and the Preferred Units will be freely transferable, the
Company has not listed nor will it list the Units on any national exchange or
any other securities markets. Because no such listing will occur, it is not
anticipated that any public market for the Units will develop. Consequently,
holders of the Units may not be able to liquidate their investment in the event
of emergency or for any other reason, and the Units may not be readily accepted
as collateral for a loan. Any investor should contemplate that they will not be
able to receive the return of their investment until the sale of the Property.
Arbitrary Purchase Price
The purchase price for each of the Preferred Units and the Common Units has
been arbitrarily determined by us based upon the value of the Property to be
acquired, and is not necessarily indicative of its value. No assurance is or can
be given that the Units, although transferable, could be sold for the purchase
price, or for any amount.
Management of Development and Leasing and Management of the Property
As stated above, we will employ a construction management company to manage
the development of the Property and the construction of the commercial buildings
and a leasing management company to manage the leasing and maintenance of the
commercial buildings. The Company contemplates that it will engage these
management companies upon terms consistent with industry practice and compensate
them at the prevailing market rates for such services. The managers of the
Company will oversee the actions and role of both the construction management
company and the leasing management company. The managers of the Company (as
opposed to the personnel of the management companies)are expected either to
donate their time or to provide such services at a minimal expense. Because
these individuals will be donating their time, they may not dedicate as much
time as a person providing these services who was employed by the Company.
Accordingly, reliance will be placed upon the construction management company
and the leasing management company to develop the Property and to build and to
lease the commercial buildings. If these companies are not effective in their
roles, the Company will be required to seek other companies to fulfill these
roles. Such a replacement could delay construction and may impede the operation
of the Company and the leasing of the commercial buildings. Either of these
occurrences could adversely effect the financial position of the Company and may
cause it to be unable to remain commercially viable.
Disproportionate Burdening of Costs or Property Improvements
The Property will be subject to substantial costs to install roadways, storm
sewers, water retention, improvements to existing roads on the north and west
boundaries and the addition of new roads on the south and east boundaries. It is
uncertain how much of the cost of road improvements and costs related to storm
water run off and detention, which facilities will also benefit the adjacent
property of the
9
Church to the south, will be paid by the Church. If these costs are not shared,
recovery of these costs will fall solely to the remaining lands to be developed
by the Company. The burdening of the Company's development land for such charges
which benefit larger areas increases the likelihood that the Company may be less
able to fully recover those costs either in rent to tenants or through
individual sales of the developed properties.
Risk of Use of Parking for Church Activities
Among the Company's purposes is to develop the commercial buildings in a
manner that provides parking fields that can be utilized by the Church for its
Sunday services and other programs and activities. Configuration of the parking
and the commercial buildings in a manner that supports this purpose is at
variance from normal commercial and office configurations. It is possible that
some office and retail users will be less willing to locate their establishment
in the buildings being developed for that reason. If it is more difficult to
secure tenants because of this configuration, then there are associated risks to
the project that an extended fill up period will be required for leasing the
commercial space, that the premises will not be fully rented or that the rents
that can be charged will not be optimized.
Competition
Competition is intense in the real estate development business generally and
in Johnson County, Kansas in particular. Competition in land development is
based primarily on location, land use, designation, availability of capital,
timing of development and price. The Company will encounter substantial
competition with respect to its sales of the pad sites and its leasing
operations. At this time, it appears that there will be a ready available market
for the commercial buildings to be located on the Property. It is possible that
when the space becomes available in the commercial buildings for lease, there
may not be a ready market for the space and the Company may not be able to
achieve the cash flow that it is projecting. Absorption rates for pad sites
cannot be predicted with any accuracy as the pad sites are commonly only a
portion of each new development in a company's project.
Repurchase of Preferred Units and Payment of Distributions to Holders of Units
We contemplate the preferred return on the Preferred Units, which will be
measured at 6.5%, will be paid and the Preferred Units will be retired during
the year ending December 31, 2005. We intend to use the proceeds of the
permanent financing for the Property to retire the Preferred Units. It is
uncertain whether any financial institution, providing this financing, will
allow the Company to retire the Preferred Units when the preferred participation
right of the Preferred Units is measured at 6.5%, while the interest rate to be
charged on the permanent financing will be higher. The financial institution may
question the reasonableness of the Company using the proceeds of the loan to
retire the Preferred Units, which will place a greater burden on the Company's
cash flow than would be required if the Preferred Units remained as part of the
equity of the Company. Accordingly, although the Company contemplates retiring
the Preferred Units during the year ending December 31, 2005, no assurance can
be given that this will occur.
We contemplate that the Company will pay the preferred return on the
Preferred Units and the Preferred Units will be retired during the year ending
December 31, 2005 and that the Company will provide withdrawals to the holders
of the Common Units as funds may be available starting in the year ending
December 31, 2006. As mentioned above, the financial institution, providing the
permanent financing, may place restrictions on the management's plans to pay
such amounts. The financial institution may require the Company to agree not to
pay any preferred return on the Preferred Units or to provide withdrawals to the
holders of the Common Units until the financial institution is ultimately paid
or until the Company meets certain financial ratios, such as its operations
providing net cash flow that is a given multiple of the debt service to be paid
to the financial institution. Although we intend to pay the preferred return and
provide withdrawals to the holders of the Common Units, the financial
institution may not allow us to make such payments.
No withdrawals can be provided, or distributions made, to the holders of the
Common Units until the preferred return on the Preferred Units has been paid and
the Preferred Units have been repurchased or retired. Accordingly, no assurance
can be given as to the exact time frame by which any distributions may be made
to the holders of the Common Units, if at all. We believe that the commercial
buildings will be sold after a period of operation and at such time as holders
of a majority of the Units shall approve the same, which is currently
contemplated to be by the end of 2015. We anticipate, but cannot guarantee, that
the holders of the Common Units will receive the return of their investments out
of the proceeds of this sale of the commercial buildings, after the payment of
any indebtedness and expenses of the Company.
Indemnification under Operating Agreement
Our operating agreement contains provisions that limit the liability of
managers of the Company for monetary damages and provides for indemnification of
managers under certain circumstances. These provisions may discourage members
from bringing a lawsuit against our managers for breaches of fiduciary duty and
may also reduce the likelihood of derivative litigation against the managers
even
10
though such action, if successful, might otherwise have benefitted our members.
In addition, a member's investment in the Company may be adversely affected to
the extent that costs of settlement and damage awards against our managers are
paid by the Company pursuant to the indemnification provisions of our operating
agreement. The impact on a member's investment in terms of the cost of defending
a lawsuit may deter a member from bringing suit against one of our managers.
FORWARD-LOOKING STATEMENTS
This Prospectus includes forward-looking statements which could differ from
actual future results.
Some of the matters discussed in this prospectus include forward-looking
statements. Statements that are predictive in nature, that depend upon or refer
to future events or conditions or that include words such as "expects,"
"anticipates," "intends," "plans." "believes," "estimates," "thinks," and
similar expressions are forward-looking statements. These statements involve
known and unknown risks, uncertainties, and other factors that may cause our
actual results and performance to be materially different from any future
results or performance expressed or implied by these forward-looking statements.
These factors include the following:
- general economic and business conditions, both nationally and in the
regions in which we operate;
- demographic changes;
- existing governmental regulations and changes in, or the failure to
comply with, governmental regulations;
- our ability to manage the contemplated construction and to find tenants
to occupy the proposed constructed space;
- liability and other claims asserted against us;
- competition in the commercial property lease marketplace;
- our ability to attract and retain qualified personnel;
- changes in generally accepted accounting principles;
- the availability and terms of capital to fund the contemplated
construction of the buildings; and
- changes in the tax laws that could adversely affect tax benefits
currently contemplated to be provided to the holders of the Common
Units.
Although we believe that these statements are based upon reasonable
assumptions, we can give no assurance that our goals will be achieved. Given
these uncertainties, prospective investors are cautioned not to place undue
reliance on these forward-looking statements. These forward-looking statements
are made as of the date of this Prospectus. We assume no obligation to update or
revise them or provide reasons why actual results may differ.
USE OF PROCEEDS
We estimate that the net proceeds that we will receive from the sale of the
Preferred Units and the Common Units will be at least approximately $7,900,000
and may be as much as approximately $15,900,000 after deducting the legal and
accounting fees and estimated offering expenses and other related fees that we
will pay. We currently intend to use the net proceeds from this offering for the
acquisition of the Property. We will acquire the Property from L & F Land
Company, a Kansas general partnership, for a price of $250,000 per acre for a
total purchase price of $11,750,000. If proceeds of this offering exceed
$11,750,000, any remaining proceeds will be used to pay certain costs in
acquiring the Property and in the development of the Property, which is
estimated currently to cost approximately $25,400,000 in total. If the proceeds
of the offering are less than the purchase price of the Property, the Company
will borrow funds to pay the remaining amount of this purchase price
DETERMINATION OF OFFERING PRICE
We determined the purchase price for each of the Preferred Units and the
Common Units based upon the value of the Property to be acquired, and this
purchase price is not necessarily indicative of its value. This determination is
in part arbitrary. Accordingly, no assurance is or can be given that the Units,
although transferable, could be sold for the purchase price, or for any amount.
See "RISK FACTORS."
11
DILUTION
There are currently no outstanding Units other than the Common Unit issued to
the sole manager of the Company, CORnerstone Development, LLC, a Kansas limited
liability company ("CORnerstone Development"). Accordingly, with the investment
by purchasers of the Common Units and the Preferred Units, there will be no
dilution. As well, after the purchase of the Property, we contemplate that
certain members of the congregation of the Church, who have extensive experience
in the construction of commercial buildings and the leasing, management and
maintenance of commercial buildings, will serve as additional managers of the
Company.
SELLING SHAREHOLDERS
As mentioned above, there are no current holders of the Units of the Company,
except CORnerstone Development. The unit held by CORnerstone Development will
not be involved in this offering.
PLAN OF DISTRIBUTION
We are offering for sale in this offering a total of 1,600,000 units of
Common Units and Preferred Units collectively at a purchase price of $10.00 per
unit to raise proceeds of up to $16,000,000 for the Company prior to the
deduction of any expenses of this offering. The minimum amount to be raised is
$8,000,000 and all proceeds will be received directly by us. We intend to sell
all of the Common Units and the Preferred Units offered by this Prospectus
directly to the public. We contemplate that the mix of the sale of Preferred
Units and Common Units will be 60% allocated to Preferred Units and 40%
allocated to Common Units.
The Units will be offered to the public through the managers of the Company.
No manager is or will be affiliated with a securities broker or dealer. No
commission or other sales compensation will be paid to any organizer in
connection with this offering. We have not entered into any marketing or
consulting agreement with a registered broker/dealer.
None of our managers or the managers of CORnerstone Development participating
in this offering is registered or licensed as a broker or dealer or an agent of
a broker or dealer. Our unlicensed managers will assist in sales activities in
connection with this offering pursuant to an exemption from registration as a
broker or dealer provided by Rule 3a4-1 promulgated under the Securities
Exchange Act (Rule 3a4-1). Rule 3a4-1 generally provides that an associated
person of an issuer of securities shall not be deemed a broker solely by
participating in the sale of securities of the issuer if the associate meets
certain conditions. Such conditions include, but are not limited to, that the
associate participating in the sale of an issuer's securities will not be
compensated at the time of participating, that the person will not be associated
with a broker or dealer and that such person will observe certain limitations on
his participation in the sole of securities. For purposes of this exemption, an
associated person of an issuer also means any person who is a director, officer
or employee of the issuer or a company that controls, is controlled by, or is
under common control with, the issuer.
This offering will remain open until all of the Units are sold unless sooner
terminated by us in our sole discretion.
Following our acceptance, subscriptions are binding on subscribers and may
not be revoked by subscribers. We reserve the right to reject, in whole or in
part and in our sole discretion, any subscription.
LEGAL PROCEEDINGS
The Company is involved in no legal proceedings.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The individuals who serve as the managers of CORnerstone Development have
extensive experience in the development of real estate, the building of
significant commercial buildings and the leasing and day-to-day management and
maintenance of commercial buildings. CORnerstone Development is currently the
sole manager of the Company.
After the purchase of the Property, we contemplate that certain members of
the congregation of the Church will serve as additional managers of the Company.
At least one of these individuals will have at least ten years experience in the
development of real estate and the building of significant commercial buildings.
As well, at least one of these individuals will have at least ten years
experience in the leasing and day-to-day management and maintenance of
commercial office buildings. These individuals will oversee the actions of the
construction management company in the preparation of the pad sites, the
development of the Property and the construction of the commercial buildings and
the actions of the leasing management company. These individuals will donate
their services to the Company or will provide such services at a minimal
expense.
12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At this time, CORnerstone Development holds the only Common Unit currently
issued and outstanding. This unit constitutes all of the outstanding Common
Units. After this offering, we contemplate that this holding will constitute far
less than 1% of the outstanding Units of the Company.
DESCRIPTION OF SECURITIES
The following discussion describes the securities of the Company:
General
We propose to offer Common Units and Preferred Units. The Company currently
has only one Common Unit issued and outstanding to CORnerstone Development, the
manager of the Company. Upon the closing of this offering, the Company could
have up to 1,600,001 Units issued and outstanding. The outstanding Common Unit
is fully paid for and nonassessable.
Voting Rights
Each Common Unit and Preferred Unit will have one vote with respect to the
management of any significant disposition by, or other significant action of,
the Company, but the managers of the Company will be selected by CORnerstone
Development. If at least one-half of the preferred return on the Preferred Units
to be paid to the holders of these Preferred Units has not been paid by the end
of December 2007, each of the Common Units and the Preferred Units will have one
vote to select the manager with one exception as described in the succeeding
sentence. If the preferred return on the Preferred Units has not been paid
because of the requirements of the financial institution that has provided or is
providing financing for the Company, and if the Company has at such time
retained sufficient cash or created a sufficient sinking fun to pay such
preferred returns but for the requirements of said financial institution, the
right to select the managers of the Company will remain with CORnerstone
Development. See "RISK FACTORS - Repurchase of Preferred Units and Payment of
Distributions to Holders of Units."
Distributions
The Preferred Units will receive a preferred participation right measured at
6.5%, compounded semi-annually. Common Units cannot receive any withdrawals from
the Company until this preferred return is paid and the Preferred Units are
retired or repurchased. We contemplate that the Company will pay the preferred
return on the Preferred Units and will retire the Preferred Units during the
year ending December 31, 2005 and will provide withdrawals to the holders of the
Common Units as funds may be available starting in the year ending December 31,
2006. See "RISK FACTORS - Repurchase of Preferred Units and Payment of
Distributions to Holders of Units" with respect to possible limitations on the
payment of preferred return or withdrawals. We believe that the commercial
buildings will be sold after a period of operation and at such time as holders
of a majority of the Units shall approve the same, which is currently
contemplated to be by the end of 2015. We anticipate, but cannot guarantee, that
the holders of the Common Units will receive the return of their investments out
of the proceeds of this sale of the commercial buildings, after the payment of
any indebtedness and expenses of the Company.
Change in Control of Company
There are no provisions in the articles of organization or the operating
agreement of the Company that will delay, defer or prevent a change of control
of the Company.
INTEREST OF NAMED EXPERTS AND COUNSEL
We did not hire any expert or counsel on a contingent basis and no expert or
counsel will receive a direct or indirect interest in the Company or was a
promoter or manager of the Company.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES
Our operating agreement provides that we may indemnify a person made a party
to a proceeding, because the person is or was a manager, against liability
incurred in the proceeding if:
(1) The person conducted himself or herself in a good faith; and
13
(2) The person reasonably believed:
(A) In the case of conduct in an official capacity with us, that his or
her conduct was in the Company's best interests; and
(B) In all other cases, that his or her conduct was at least not
opposed to our best interests; and
(3) In case of any criminal proceeding, the person had no reasonable cause
to believe his or her conduct was unlawful.
We may not indemnify a manager:
(1) In connection with a proceeding by us or in our right in which the
manager was adjudged liable to us; or
(2) In connection with any other proceeding charging that the manager
derived an improper personal benefit, whether or not involving action in
an official capacity, in which proceeding the manager was adjudged
liable on the basis that he or she derived an improper personal benefit.
Our operating agreement also provides that we must indemnify a person who was
wholly successful, on the merits or otherwise, in the defense of any proceeding
to which the person was a party because the person is or was a manager, against
reasonable expenses incurred by him or her in connection with the proceeding.
Under certain circumstances, we may pay for or reimburse the reasonable
expenses incurred by a manager who is a party to a proceeding in advance of
final disposition of the proceeding.
A manager who is or was a party to a proceeding may apply for indemnification
to the court conducting the proceeding or to another court of competent
jurisdiction.
We may purchase and maintain insurance on behalf of a person who is or was a
manager, employee, fiduciary or agent of the Company, or who, while a manager,
employee, fiduciary or agent of the Company, is or was serving at the request of
the Company as a director, officer, manager, partner, trustee, employee,
fiduciary or agent of another domestic or foreign corporation or other person or
of an employee benefit plan, against liability asserted against or incurred by
the person in that capacity or arising from his or her status as a director,
officer, manager, employee, fiduciary or agent, whether or not the Company would
have power to indemnify the person against the same liability under the
operating agreement.
RELATED TRANSACTIONS
There have been no transactions between the Company and any related party
other than the assignment by the Church to the Company of the Real Estate
Contract, dated January 24, 2000, between L & F Land Company, a Kansas general
partnership, and the Church. The Real Estate Contract was reinstated and amended
in accordance with the Reinstatement and Amendment of Real Estate Contract,
dated June 12, 2000, between L & F Land Company and the Church. This Real Estate
Contract is for the purchase of the Property. The Real Estate Contract was
assigned to the Company in consideration for the Company purchasing the
Property.
DESCRIPTION OF BUSINESS
The Company was formed on March 24, 2000 as a Kansas limited liability. Its
managing member is CORnerstone Development. The sole member of CORnerstone is
the Church. There are currently no employees of the Company and we contemplate
that the Company will employ very few, if any, individuals.
The Company was organized for the purchase and development of 47 acres
located at the intersection of 137th and Nall in Leawood, Kansas. This
intersection is within a few miles of significant commercial development that
has occurred in southern Johnson County, Kansas.
The Company proposes to accomplish four purposes with the purchase of the
Property. First, the Company anticipates that it will develop and sell certain
pad sites, two pad sites in the year 2001, three pad sites in the year 2002 and
two pad sites in the year 2003. Second, the Company anticipates that it will
develop and build commercial office and retail space using a construction
management company and will engage a management company to lease this space. The
Company anticipates that it will have approximately 210,000 square feet of
office space to lease upon completion of the commercial office space contained
in four buildings. Third, the Company contemplates that it will donate
approximately 15 acres to Church for use in the development of its worship and
educational facilities.
14
Based upon the current tax laws, the holders of the Common Units of the Company
may be able to claim a tax deduction for this gift. See "RISK FACTORS - Federal
Income Tax Risks." Fourth, the Company plans on developing the commercial
buildings in a manner that provides parking fields that can be utilized by the
Church for its Sunday services and other programs and activities.
There has been significant expansion of available commercial office space in
Johnson County, Kansas over the past ten years. The vacancy rate for commercial
office space in Johnson County, Kansas is generally broken down into northern
Johnson County and southern Johnson County. The Property is located in southern
Johnson County. In December 1998, the vacancy rate for commercial office space
in northern Johnson County was 2.97% and the vacancy rate for commercial office
space in southern Johnson County was 5.27%. In December 1999, the vacancy rate
for commercial office space in northern Johnson County was 5.02% and the vacancy
rate for commercial office space in southern Johnson County was 7.04%. As of
December 1999, the overall vacancy rate for commercial office space in all of
Johnson County was 6.31%. In addition, the average annual absorption of office
space in the Johnson County, Kansas is approximately 600,000 square feet per
year.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The primary sources of revenue for the Company will be:
1) the sale of seven undeveloped pad sites over the next three years;
2) the leasing of space in the commercial buildings; and
3) the sale of the commercial buildings after a period of operation and at
such time as holders of a majority of the Units shall approve the same,
which is currently contemplated to be by the end of 2015.
During the year ending December 31, 2001, we contemplate selling two pad sites.
We intend to sell three additional pad sites in 2002 and two additional pad
sites in 2003. We anticipate that the sale price for the pad sites will be
$14.50 per square foot. We estimate that the proceeds from these sales will be
approximately $5,548,000.
During the coming year, the Company will purchase the Property at a cost of
$11,750,000. If the proceeds of this offering are not sufficient, the Company
will seek financing to pay the balance of the purchase price and to provide for
working capital needs. We anticipate that the financing required to pay the
balance of the purchase price, assuming $10,000,000 from the proceeds of this
offering, and to provide for the site work for the development of the Property
will be approximately $6,000,000. It is currently estimated that the site work
will cost at least approximately $3,600,000. This preliminary cost estimate for
site work may increase depending upon whether the Company must remove
significant amounts of rock from the site and what may be required in providing
off site road construction to meet local government regulatory requirements.
Also, during the coming year, we will donate two acres of the Property to the
Church. During 2002, we anticipate donating an additional 13 acres of the
Property to the Church. It is estimated that these donations will yield a
deductible charitable contribution of approximately $3,208,000 for the Company
and the holders of the Common Units. See "RISK FACTORS - Federal Income Tax
Risks."
We currently believe that the construction of the commercial office and
retail space will begin in 2004 and will be completed by the end of 2005. The
cost for the construction of the commercial office space will be approximately
$21,800,000. We intend to obtain permanent financing during 2005 in the amount
of approximately $36,250,000. The proceeds of this financing would be used to
repay the $6,000,000 financing discussed above, to pay the cost of the
construction of the commercial office and retail space, to pay the capitalized
interest during construction and to retire the Preferred Units and to pay any
accrued, but unpaid, preferred return on the Preferred Units.
Based upon approximately 210,000 square feet of office space in the
commercial buildings with a vacancy rate of 10% and a rental rate of $25.00 per
square foot, it is anticipated that the leasing of this space will yield
approximately $4,000,000 to $5,000,000 of revenues during the first years of the
operation of the commercial office space. We also anticipate estimated operating
expenses of approximately $2,000,000 to $3,000,000 during this same time period.
After the deduction for financing expenses, we estimate that there will be cash
flow available to be withdrawn for members. The actual number of square feet in
the commercial buildings may vary depending on final site plans for the
Property, the requirements of tenants and applicable zoning requirements.
It is our intention to sell the Property after a period of operation and at
such time as holders of a majority of the Units shall approve the same, which is
currently contemplated to be by the end of 2015. Based upon a contemplated
capitalization rate of 12% of net operating income (excluding depreciation), it
is estimated that the Property would sell for approximately $40,596,000,
yielding a gain of approximately $16,000,000. From the proceeds of the sale, we
will repay the existing permanent financing and, after the payment of all
expenses of the Company, distribute the remainder of the proceeds to the holders
of the Common Units.
15
TAX CONSEQUENCES
For purposes of the federal tax and state income tax laws, the Company will
be subject to all of the provisions of Subchapter K of Chapter 1 of Subtitle A.
of the Internal Revenue Code and will file tax returns as a partnership. For
income tax purposes, the holders of the Common Units will be treated as partners
and will recognize their proportionate allocation of income or loss as the
Company realizes such income or loss. In addition, any charitable deductions
obtained by the Company should inure to the benefit of the holders of the Common
Units. See "RISK FACTORS - Federal Income Tax Risks." In contrast, for income
tax purposes, the holders of the Preferred Units will be treated as partners,
but they will only recognize income as they are paid the preferred return on the
Preferred Units and they will not receive any other allocable share of the
income or loss realized by the Company. Purchasers of either the Common Units or
the Preferred Units should consult their own tax advisors as to the
applicability of these tax consequences.
DESCRIPTION OF PROPERTY
With the proceeds of this offering, we contemplate purchasing the Property,
which consists of 47 acres at the intersection of intersection of 137th and Nall
in Leawood, Kansas. This intersection is within a few miles of significant
commercial development that has occurred in southern Johnson County, Kansas.
The Property is subject to that certain Real Estate Contract, dated January
24, 2000, between L & F Land Company, a Kansas general partnership, and the
Church. The Real Estate Contract lapsed by its terms on April 15, 2000. The Real
Estate Contract was reinstated and amended in accordance with the Reinstatement
and Amendment of Real Estate Contract, dated June 12, 2000, between L & F Land
Company and the Church. This Real Estate Contract is for the purchase of the
Property. The Real Estate Contract was assigned to the Company in consideration
for the Company purchasing the Property.
In accordance with the Reinstatement and Amendment of Real Estate Contract,
the purchase price for the Property is to be paid in two installments. The first
installment will be in the amount of $4,000,000, which will be paid at the
closing of the purchase of the Property. We contemplate that the closing of the
purchase will occur 60 days after the Registration Statement becomes effective.
The second installment will be in the amount of the remaining purchase price and
is to be paid on January 2, 2001. The obligation of the Company to pay the
second installment will be evidenced by a promissory note issued to L & F Land
Company and the promissory note will be secured by a first mortgage on the
Property.
The Company proposes to accomplish four purposes with the purchase of the
Property. First, the Company will develop and sell certain pad sites, two in the
year 2001, three pad sites in the year 2002 and two pad sites in the year 2003.
Second, the Company plans that it will develop and build commercial office and
retail space and will engage a management company to lease this space. The
Company anticipates that it will have approximately 210,000 square feet of
office space to lease upon completion of the commercial office and retail space.
Third, the Company contemplates that it will donate a total of approximately 15
acres to the Church for use in the development of its worship and educational
facilities. Based upon the current tax laws, the holders of the Common Units of
the Company may be able to claim a tax deduction for this gift. See "RISK
FACTORS - Federal Income Tax Risks." Fourth, the Company plans on developing the
commercial buildings in a manner that provides parking fields that can be
utilized by the Church for its Sunday services and other programs and
activities.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no transactions between the Company and any related party
other than the assignment by the Church to the Company of the Real Estate
Contract, dated January 24, 2000, between L & F Land Company, a Kansas general
partnership, and the Church. As stated above, the Real Estate Contract lapsed by
its terms on April 15, 2000. The Real Estate Contract was reinstated and amended
in accordance with the Reinstatement and Amendment of Real Estate Contract,
dated June 12, 2000, between L & F Land Company and the Church. This Real Estate
Contract is for the purchase of the Property. The Real Estate Contract was
assigned to the Company in consideration for the Company purchasing the
Property.
Although the purposes of the Company in acquiring the Property have been
stated to include a donation of additional land to the Church and cross-parking
rights, neither the Church of the Resurrection-United Methodist, the Missouri
West Annual Conference of the United Methodist Church, the Kansas East Annual
Conference of the United Methodist Church nor The United Methodist Church nor
any of its related organizations has any obligation to provide financial
assistance to the Company. Furthermore, neither The United Methodist Church, the
Missouri West Annual Conference of the United Methodist Church, the Kansas East
Annual Conference of the United Methodist Church nor the Church of the
Resurrection-United Methodist nor any of their related organizations will be
liable for any obligations of the Company, including, without limitation, the
obligation to make any payment to the holders of the Preferred Units or Common
Units issued by the Company.
16
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is currently no public market for the Common Units or the Preferred
Units. The Company has not listed nor will it list the Units on any national
exchange or any other securities markets. Accordingly, there will be no public
market for any of the Units.
EXECUTIVE COMPENSATION
We do not contemplate that there will be any compensation paid to any of the
managers of the Company. The services to be provided by any managers to the
Company will generally be donated or their expenses in providing such services
will be reimbursed.
FINANCIAL STATEMENTS
As the Company was formed on March 24, 2000, there are no historical
financial statements for the Company. The cash available for the operations of
the Company will be derived from this offering and possible loans to be obtained
by the Company for the acquisition of real estate and working capital needs. You
should read the section of this Prospectus entitled MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION to understand the
proposed operations of the Company.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the certified public
accountants who have been retained to provide services for the Company.
HOW TO SUBSCRIBE
All subscriptions must be made by completing a Subscription Agreement.
Additional copies of this Prospectus and the Subscription Agreement may be
obtained by contacting us at the address set forth below. Subscriptions will not
be binding on subscribers until accepted by us. SUBSCRIPTIONS WILL NOT BE
ACCEPTED UNLESS ACCOMPANIED BY PAYMENT IN FULL OF THE SUBSCRIPTION PRICE. We
reserve the right to reject any subscription, in whole or in part, with or
without cause, but will inform the subscriber of the reason for such rejection.
We will refuse any subscription by sending written notice to the subscriber by
personal delivery or first-class mail within ten calendar days after receipt of
the subscription, and the subscriber's Subscription Agreement and refund of
payment will accompany the notice, together with a statement as to the reason
for such rejection. Any Subscription Agreement which is completely and correctly
filled out, which is accompanied by proper and full payment and which is
physically received at our offices by any of our employees or agents, shall be
deemed to have been accepted if it is not refused as hereinbefore provided
within ten business days after such receipt.
A completed Subscription Agreement and payment in full (made in the manner
specified below) of the total subscription price for the number of shares
subscribed should be mailed to us at the following address:
COR Development, LLC
13720 Roe
Leawood, Kansas 66224
Subscriptions and payment in full also may be delivered in person to our
office at 13720 Roe, Leawood, Kansas 66224 between 10:00 a.m. and 5:00 p.m.,
Monday through Friday. All subscriptions are final and will not be refunded
unless the subscription is rejected by us.
IMPORTANT: PAYMENTS MUST BE MADE IN UNITED STATES FUNDS BY CHECK, BANK DRAFT
OR MONEY ORDER PAYABLE TO COR DEVELOPMENT, LLC. FAILURE TO INCLUDE THE FULL
SUBSCRIPTION PRICE WITH THE SUBSCRIPTION AGREEMENT WILL RESULT IN OUR RETURN OF
THE SUBSCRIPTION.
We will deliver an effective Prospectus to all persons to whom the securities
offered hereby are to be sold at least 48 hours prior to the acceptance or
confirmation of sale to such persons or we will send such a prospectus to such
persons under circumstances that it would normally be received by them 48 hours
prior to acceptance or confirmation of the sale. We expect to have multiple
closings.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares offered
hereby are being passed upon for us by Craft Fridkin &
17
Rhyne, L.L.C., Kansas City Missouri.
EXPERTS
There are no financial statements contained in this Prospectus. The Company has
engaged certified public accountants to work with it in its accounting matters.
18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Operating Agreement limits the liability of directors to the maximum
extent permitted by Kansas law. Kansas law provides that (a) subject to such
standards and restrictions, if any, as are set forth in its operating agreement,
a limited liability company may, and shall have the power to, indemnify and hold
harmless any member or manager or other person from and against any and all
claims and demands whatsoever; and (b) to the extent that a member, manager,
officer, employee or agent has been successful on the merits or otherwise or the
defenses of any action, suits or proceeding, or in defense of any issue or
matter therein, such director, officer, employee or agent shall be indemnified
against expenses actually and reasonably incurred by such person in connection
therewith, including attorney fees.
Our Operating Agreement provides that we shall indemnify our managers and may
indemnify our other employees and other agents to the fullest extent permitted
by law. We believe that indemnification under our Operating Agreement covers at
least negligence and gross negligence on the part of indemnified parties. Our
Operating Agreement also permit us to secure insurance on behalf of any manager,
employee or other agent for any liability arising out of his or her actions in
such capacity, regardless of whether the Operating Agreement would permit
indemnification.
At present, we are not aware of any pending or threatened litigation or
proceeding involving a manager, employee or agent in which indemnification would
be required or permitted. We are not aware of any threatened litigation or
proceeding that might result in a claim for such indemnification.
We are considering maintaining director and officer liability insurance.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our managers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
Document EXHIBIT NUMBER
- -------- --------------
Registrant's Operating Agreement . . . . . . . . . . . . 3(ii)
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table itemizes the expenses incurred by COR Development, LLC in
connection with the issuance and distribution of the Securities being
registered. All the amounts shown are estimates except the Securities and
Exchange Commission registration fee.
Registration fee - Securities and Exchange Commission. . . . . . . . . $4,224
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . *
Legal fees and expenses (other than blue sky). . . . . . . . . . . . . *
Blue sky fees and expenses, including legal fees . . . . . . . . . . . *
Printing; unit certificates. . . . . . . . . . . . . . . . . . . . . . *
Transfer agent and registrar fees. . . . . . . . . . . . . . . . . . . *
Consulting fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . *
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
* To be filed by amendment.
19
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Date # of Units Price per Share Total Amount Buyer
---- ---------- --------------- ------------ -----
3/31/00 1 $10.00 $10.00 CORnerstone
Development, LLC
ITEM 27.
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
3(i) Articles of Organization of Registrant
3(iii) Operating Agreement of Registrant
4 Specimen Unit Certificate of Registrant *
5 Opinion and Consent of Craft Fridkin & Rhyne, L.L.C.
10.1 Real Estate Contract
10.2 Reinstatement and Amendment of Real Estate Contract
10.3 Assignment of Real Estate Contract
23 Consent of Craft Fridkin & Rhyne, L.L.C. (to be included in
its opinion filed as Exhibit 5 hereto).
24 Power of Attorney (included on signature page).
- ------------------------------
* To be filed by Amendment
ITEM 28. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes to
a. File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
i. Include any prospectus required by Section 10(a) (3) of the
Securities Act;
ii. Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would mot exceed that
which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the
form of prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b) of the Securities Act of 1933
if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price
set forth in the Calculation of Registration Fee table in the
effective registration statement; and
iii. Include any additional or changed material information on the
plan of distribution.
b. File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to managers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a manager or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such manager or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by a
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For the purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and this offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Kansas City, State of Missouri, on June 19, 2000.
COR DEVELOPMENT, L.L.C.
BY: CORNERSTONE DEVELOPMENT, L.L.C.
BY:/s/ Robert M. Adams
Robert M. Adams
MANAGER
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints ROBERT M.
ADAMS , as his true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution, for him and his name, place and stead, in any
and all capacities, to sign any or all amendments (including post effective
amendments) to this Registration Statement and a new Registration Statement
filed pursuant to Rule 462(b) of the Securities Act of 1933 and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the foregoing, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or either of them, or their substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates stated.
SIGNATURE TITLE
/s/ Robert M. Adams Manager of CORnerstone Development, LLC June 19, 2000
Robert M. Adams which is the Manager of Registrant
21
EXHIBIT INDEX
FOR REGISTRATION STATEMENT
OF COR DEVELOPMENT, LLC
ON FORM SB-2
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- -------------------
3(i) Articles of Organization of Registrant
3(iii) Operating Agreement of Registrant
4 Unit Certificate of Registrant to be filed by Amendment
5 Opinion and Consent of Craft Fridkin & Rhyne, L.LC.
10.1 Real Estate Contract
10.2 Reinstatement and Amendment of Real Estate Contract
10.3 Assignment of Real Estate Contract
23 Consent of Craft Fridkin & Rhyne, L.L.C. (to be included in its
opinion filed as Exhibit 5 hereto)
24 Power of Attorney (included on signature page)