As filed with the Securities and Exchange Commission on June 19, 2000
Registration No. 333-41636
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM SB-2
AMENDMENT 1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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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.R.S. 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)
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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)
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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
Maximum
aggregate Amount of
Title of each class of securities Amount to be Proposed maximum offering offering price registration
to be registered registered (1) price per unit (2)(3) (4) fee(5)
- ----------------------------------- ------------------------- ------------------------------- ----------------- ------------------
Common Units 1,600,000 $10.00 $16,000,000 $4,224
Preferred Units 1,600,000 $10.00 collectively
(1) COR Development is offering the common units and the preferred units and is
not limiting the exact number of units that must be purchased of either type.
The only limitation on the number of either the common units or the preferred
units is that there will be no more units sold than provide for aggregate
proceeds in the amount of $16,000,000. The differences between the common units
and the preferred units are that the preferred units will receive a preferred
participation right measured at 6.5% compounded semi-annually and will receive a
preference on any liquidation of COR Development. The common units and the
preferred units have the same voting rights.
(2) Unless subscriptions for 800,000 units offered hereby are received within 60
days of the effective date of this registration statement or later if COR
Development 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.
(3) The offering price has been set by COR Development.
(4) The proceeds do not reflect payment of certain expenses, such as filing,
printing, legal, accounting and miscellaneous expenses of approximately $100,000
that COR Development must pay in connection with this offering resulting in net
proceeds to COR Development of approximately $7,900,000 when the minimum is sold
and $15,900,000 when the maximum is sold.
(5) 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 6.
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.
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TABLE OF CONTENTS
Prospectus Summary..........................................................4
This Offering...............................................................6
Risk Factors................................................................7
Where Can You Get More Information.........................................10
Forward-Looking Statements.................................................11
Use Of Proceeds............................................................11
Determination Of Offering Price............................................11
Dilution...................................................................11
Selling Shareholders.......................................................12
Plan Of Distribution.......................................................12
Legal Proceedings..........................................................12
Directors, Executive Officers, Promoters And Control Persons...............12
Security Ownership Of Certain Beneficial Owners And Management.............14
Description Of Securities..................................................14
Interest Of Named Experts And Counsel......................................15
Disclosure Of Commission Position On Indemnification For
Securities Act Liabilities..............................................15
Related Transactions.......................................................15
Description Of Business....................................................15
Management's Discussion And Analysis Or Plan Of Operation..................17
Tax Consequences...........................................................18
Description Of Property....................................................18
Certain Relationships And Related Transactions.............................19
Market For Common Equity And Related Stockholder Matters...................19
Executive Compensation.....................................................19
Financial Statements.......................................................19
Changes In And Disagreements With Accountants on Accounting And
Financial Disclosure....................................................19
How To Subscribe...........................................................20
Legal Matters..............................................................20
Experts....................................................................20
3
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete, but does contain the material 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".
COR Development, LLC a Kansas limited liability company ("COR Development"),
is offering the common units and the preferred units and is not limiting the
exact number of units that must be purchased of either type. The only limitation
on the number of either the common units or the preferred units is that there
will be no more units sold than provide for aggregate proceeds in the amount of
$16,000,000. The differences between the common units and the preferred units
are that the preferred units will receive a preferred participation right
measured at 6.5% compounded semi-annually and will receive a preference on any
liquidation of COR Development. The common units and the preferred units have
the same voting rights. Also, unless subscriptions for 800,000 units offered
hereby are received within 60 days of the effective date of this prospectus or
later if COR Development so elects, this offering will be terminated and all
amounts received from subscribers will be promptl returned in full, together
with interest accrued thereon, if any, and without deductions for expenses.
COR Development is a startup company in its developmental stage and has no
operating history and nominal assets and liabilities, other than the assignment
of a real estate contract to buy the real estate described in the next sentence.
With the proceeds from this offering, COR Development will purchase 47 acres of
real estate at the intersection of 137th and Nall in Leawood, Kansas at a price
of $250,000 per acre for a total purchase price of $11,750,000. COR Development
will develop the real estate and will be involved in the following activities:
- Purchase of the real estate 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;
- 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 of the Resurrection").
COR Development will engage a 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. COR Development will
also engage a leasing management company, which will be responsible for the
leasing and maintenance of the commercial buildings. With respect to the
oversight of the construction management company and the leasing management
company, these oversight services will be provided by the managers of COR
Development, who will donate their service or will provided their services at
minimal expense. After the purchase of the real estate is completed, it is
contemplated that the managers of COR Development will be members of the Church
of the Resurrection.
The current manager of COR Development is CORnerstone Development, LLC, a
Kansas limited liability company ("CORnerstone Development"). The only member or
entity with an interest in CORnerstone Development, LLC is the Church of the
Resurrection. With one exception, CORnerstone Development, LLC will select the
mangers of COR Development, who will be responsible for directing the operations
of COR Development. The only exception to the selection of the managers by
CORnerstone Development will occur 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. If this preferred return is not paid
by this date, 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 COR Development, and if COR Development has at that time
retained sufficient cash or created a sufficient sinking fund to pay such
preferred returns but for the requirements of said financial institution, the
right to select the managers of COR Development will remain with CORnerstone
Development.
The proceeds of this offering will be used to fund the purchase of the real
estate in a commercial real estate market in Johnson County, Kansas in which the
average annual absorption rate for office space is approximately 600,000 square
feet. If proceeds of this offering exceed $11,750,000, any remaining proceeds
will be used to pay any further costs in acquiring the real estate and pay costs
in the development of the real estate, which is estimated currently to cost
approximately $38,000,000 in total. If the proceeds are less than $11,750,000,
COR Development contemplates obtaining financing for the remainder of the
purchase price.
It is the intention of COR Development that 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
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3) the sale of the commercial buildings after a period of operation and at
the time that the holders of a majority of the units shall approve the
sale, which is currently contemplated to be by the end of 2015.
5
THIS OFFERING
Common Units and Preferred Units Offered
Collectively............................up to 1,600,000 Units
Common Units and Preferred Units to be
Outstanding after the Offering .........up to 1,600,000 Units
Use of Proceeds........ COR Development will use the proceeds for the
acquisition of the real estate 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.
DistributionPolicy...... We contemplate that COR Development 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 COR Development 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 COR Development 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 limite to, those discussed below and elsewhere
in this prospectus.
COR Development is an early-stage company with no operating history, and COR
Development expects to encounter risks frequently faced by early-stage companies
in real estate development in growing markets.
COR Development cannot assure you that it will be successful in addressing
such risks. Given the level of planned operating and capital expenditures, COR
Development anticipates that it will incur operating losses during the period of
the development and construction of the commercial buildings. COR Development
cannot assure you that operating losses will not increase in the future or that
it will ever achieve or sustain profitability.
If there is insufficient cash flow generated from our operations, there may be
no return on either the preferred units or the common units
A substantial portion of the potential return on the common units and the
preferred units will be dependent upon our ability 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 our
viability. 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.
Because the development costs for the real estate are uncertain, there may be
insufficient cash flow for COR Development to be viable or we may need to incur
additional indebtedness
The costs of grading, storms sewers and water retention, utility extension,
roadway construction and other development costs necessary to COR Development's
projects are uncertain because specifications have not been drawn or bids
secured. If these costs are more than anticipated, it may result in insufficient
cash flow that may cause COR Development not to be viable or we may need to
incur additional indebtedness to pay for the development costs.
Because the secured and unsecured debt owed by COR Development will be senior to
the common units and the preferred units and must be paid without regard to the
cash flow of COR Development, investors in the units may not receive any return
if COR Development would default on these obligations
The common units and the preferred units will be subordinate to all existing
and future indebtedness of COR Development. 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 COR Development will be able to
obtain any needed financing on favorable terms. In addition, COR Development
contemplates incurring indebtedness for the payment of the purchase price for
the real estate not funded through the proceeds of this offering and for the
development of the real estate. In addition, it is anticipated that this
indebtedness will be secured by liens or mortgages upon the real estate.
Principal and interest payments on the indebtedness of COR Development will
generally have to be made regardless of cash generated from COR Development's
operations. If COR Development is unable to pay interest or principal on such
indebtedness when due, the holders of such debt could proceed against COR
Development or specified collateral of COR Development. If COR Development
defaults under any of its agreements relating to such indebtedness and if the
payment of such debt is accelerated, there can be no assurance that the assets
of COR Development would be sufficient to pay any amounts to the holders of the
preferred units or the common units.
Because we intend to donate 15 acres of the real estate to the Church of the
Resurrection, we may have inadequate revenue to pay the preferred rate of return
on the preferred units
A planned gift of approximately 15 acres to the Church of the Resurrection to
be included in the Church of the Resurrection's
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campus or for road and access purposes represents approximately 32% of the real
estate being purchased. Potential donation of this portion of the assets of COR
Development substantially raises the net costs of the remaining property
available for development to a higher level than what COR Development believes
is a current market value. There can be no assurance that the real estate
remaining available to COR Development to develop will appreciate in value
sufficiently to support rental income or sales proceeds to pay the preferred
return on the preferred units.
Because there may be consideration for the donation of 15 acres to the Church of
the Resurrection, there is uncertainty as to whether the holders of the common
units will be able to take a tax deduction for this donation
At this time, we believe that the donation of 2 acres to the Church of the
Resurrection prior to December 31, 2000 and the donation of an additional 13
acres to the Church of the Resurrection 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 real estate is in the
name of the Church of the Resurrection and this contract is being assigned to
COR Development, 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 real estate, we may need to receive
some consideration from the Church of the Resurrection for the transfer of the
15 acres. If the Church of the Resurrection provides some consideration for this
transfer, it is uncertain how the proposed charitable deduction would be treated
by the Internal Revenue Service.
Because there is no market for either the common units or the preferred units,
investors may not be able to sell their units and may not be able to receive any
return on their investment until the sale of the real estate
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, COR
Development 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 othe 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 real
estate.
Because the purchase price for the common units and the preferred units was
based upon the real estate to be purchased, investors may not be able to sell
the units for the amount of the 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 real estate 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.
Because the holders of common units do not receive a set rate of participation
and cannot receive any distributions until the preferred units are retired, the
holders of common units have a greater risk of not receiving any distributions
than the holders of the preferred units
The holders of the preferred units are to receive a preferred participation
right of 6.5%, compounded semi-annually, while the holders of the common units
receive no set participation right. As well, the holders of the common units
cannot receive any withdrawals or distributions until the preferred return on
the preferred units has been paid and the preferred units have been repurchased
or retired. No assurance can be given as to the exact time frame by which any
distributions may be made to th holders of the common units, if at all. We
believe that the commercial buildings will be sold after a period of operation
and at the time that the holders of a majority of the units shall approve the
sale, 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 COR
Development.
Because the managers of COR Development who will oversee its operations will not
be compensated or employed on a full time basis, reliance will be placed on the
construction management company and the leasing management company and our
viability will depend upon these companies being effective in their roles
As stated above, we will employ a construction management company to manage
the development of the real estate and the construction of the commercial
buildings and a leasing management company to manage the leasing and maintenance
of the commercial buildings. COR Development 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 COR Development will oversee the actions and role of both the construction
management company and the leasing management company. The managers of COR
Development (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
COR Development. Accordingly, reliance will be placed upon the construction
management company and the
8
leasing management company to develop the real estate and to build and to lease
the commercial buildings. If these companies are not effective in their roles,
COR Development will be required to seek other companies to fulfill these roles.
Such a replacement could delay construction and may impede the operation of COR
Development and the leasing of the commercial buildings. Either of these
occurrences could adversely affect the financial position of COR Development and
may cause it to be unable to remain commercially viable.
Because certain of the individuals who will serve as managers of COR Development
conduct businesses in the real estate industry, they may have conflicts of
interest in the management decisions of COR Development
After the purchase of the real estate, there will be six other managers of
COR Development. One of the individuals who will serve as a manager of COR
Development is the owner and chief executive officer of a commercial
construction company. Another individual who will serve as a manager of COR
Development is involved in a company that leases and provides day-to-day
management and maintenance of commercial office buildings. See "DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS." Although these individuals'
experience will be helpful in managing the operations of COR Development, they
may have interests regarding the hiring of their companies by COR Development
for the construction of the commercial office buildings or the management and
leasing of the commercial office buildings. Their interests may be adverse to
COR Development with respect to the hiring of the companies in which they are
involved. In the meetings of the managers of COR Development, they may openly
discuss the merits of hiring their companies, but ultimately the other managers
of COR Development would control any vote regarding the hiring of any company to
provide services to COR Development.
If COR Development does not receive compensation or a sharing of the costs from
adjacent land owners for building improvements that will benefit adjacent land,
we may not be able to fully recover those costs
The real estate 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 Church of the Resurrection to the south, will be paid
by the Church of the Resurrection. If these costs are not shared, recovery of
these costs will fall solely to the remaining lands to be developed by COR
Development. The burdening of COR Development's development land for such
charges which benefit larger areas increases the likelihood that COR Development
may be less able to fully recover those costs either in rent to tenants or
through individual sales of the developed properties.
Because we contemplate allowing the Church of the Resurrection to use our
parking for its activities and will design the parking for that purpose as well,
the parking configuration may lessen tenants' interest in leasing our commercial
space which may negatively impact funds available to pay expenses and any
distributions to the holders of the units
Among our purposes is to develop the commercial buildings in a manner that
provides parking fields that can be utilized by the Church of the Resurrection
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. The result of this
lesser amount of rent could be that we cannot pay expenses or any distributions
to the holders of the common units or the preferred units.
Because of the competition in the leasing market in Johnson County, Kansas, we
may not be able to readily lease our commercial space and thus, we may not be
able to obtain the cash flow that we currently believe should be available
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. COR Development 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 real estate. 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 COR Development 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.
Because a financial institution may not allow us to pay the preferred return on
the preferred units or to repurchase the preferred units while we are indebted
to them and no return can be paid on the common units until the preferred units
are retired, we cannot give any assurance as to when any preferred return will
be paid to the preferred units and when any distribution will be paid to the
common 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 real estate to retire the preferred units. It is
uncertain whether any financial institution, providing this financing, will
allow COR Development to
9
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 COR Development using the proceeds of the loan to retire
the preferred units, which will place a greater burden on COR Development's cash
flow than would be required if the preferred units remained as part of the
equity of COR Development. Accordingly, although COR Development contemplates
retiring the preferred units during the year ending December 31, 2005, no
assurance can be given that this will occur.
We contemplate that COR Development 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 COR Development 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 COR Development
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 COR Development 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 the time that the
holders of a majority of the units shall approve the sale, 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 COR Development.
Because we have agreed to indemnify managers under our Operating Agreement,
holders of the units, who will be members of COR Development, may not wish to
file suit against managers if they will receive indemnification and the
obligation to indemnify managers for litigation costs, settlement costs and
damage awards may take needed cash flow from operations
Our operating agreement contains provisions that limit the liability of
managers of COR Development 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 though such action, if successful, might otherwise
have benefitted our members. In addition, a member' investment in COR
Development may be adversely affected to the extent that costs of settlement and
damage awards against our managers are paid by COR Development pursuant to the
indemnification provisions of our operating agreement. The payment of these
costs or damage awards would could take needed funds from our operations. 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.
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 COR Development 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 b available to the public on the SEC Internet site at
http://www.sec.gov.
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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
The minimum amount to be raised is $8,000,000 and all proceeds will be
received directly by us. 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. The amount of $7,900,000 represents the
minimum amount to be raised of $8,000,000 less the legal and accounting fees and
estimated offering expenses and other related fees. We currently intend to use
the net proceeds from this offering for the acquisition of the real estate. We
will acquire the real estate 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 any further costs in acquiring the real estate and
pay costs in the development of the real estate. The costs of development are
currently estimated to be approximately $38,000,000 in total. If the proceeds of
the offering are less than the purchase price of the real estate, COR
Development 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 cost of the real estate 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."
DILUTION
There are currently no outstanding units other than the common unit issued to
the sole current manager of COR Development, CORnerstone Development, LLC, a
Kansas limited liability company ("CORnerstone Development"). This unit was
issued to CORnerstone Development so CORnerstone Development could select
managers of COR Development to oversee this offering and its continued
operations. The only member or entity with an interest in CORnerstone
Development, LLC is the Church of the Resurrection.
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Given that only one unit was issued to CORnerstone Development, with the
investment by purchasers of the common units and the preferred units, there will
be no dilution.
SELLING SHAREHOLDERS
As mentioned above, there are no current holders of the units of COR
Development, 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 COR Development 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 differences between the common units and the
preferred units are that the preferred units will receive a preferred
participation right measured at 6.5% compounded semi-annually and will receive a
preference on any liquidation of COR Development. The common units and the
preferred units have the same voting rights.
The units will be offered to the public through the managers of COR
Development. 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 sale of securities. For purposes of this exemption, a
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
COR Development is involved in no legal proceedings.
DIRCTORS, EXECUTIVE OFFICERS, PRMOTERS AND CONTROL PERSONS
Managers of COR Development
The current manager of COR Development is CORnerstone Development. The only
member or entity with an interest in CORnerstone Development, LLC is the Church
of the Resurrection. With one exception, CORnerstone Development, LLC will
select the managers of COR Development, who will be responsible for directing
the operations of COR Development. The only exception to the selection of the
managers by CORnerstone Development will occur 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. If this preferred
return is not paid by this date, 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 COR Development, and if COR Development
has at that time retained sufficient cash or created a sufficient sinking fund
to pay such preferred returns but for the requirements of said financial
institution, the right to select the managers of COR Development will remain
with CORnerstone Development.
The individuals identified below currently serve as the managers of
CORnerstone Development, the manager of COR Development. After the purchase of
the real estate, these individuals, who are members of the congregation of the
Church of the Resurrection, will serve as additional managers of COR
Development. These individuals will oversee the actions of the construction
management company in the preparation of the pad sites, the development of the
real estate and the construction of the commercia buildings and the actions of
the leasing management company. They will be responsible for the operations of
COR Development and will
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vote on the management decisions to be made for COR Development. Each manager
will serve for one year or until his successor is chosen by CORnerstone
Development as described in the prior paragraph.
The individuals who will serve as managers and their business experience are
as follows:
Robert M. Adams is a manager of CORnerstone Development and will serve as a
manager of COR Development. Mr. Adams is 45 and has been an attorney for more
than 20 years. His practice focuses on real estate and corporate matters. Mr.
Adams has represented clients in real estate transactions involving the sale,
purchase and development of real estate, lease negotiation, environmental
matters and the financing of hotel, office, commercial, industrial and
residential properties on a regional and national basis. He has also been
involved in real estate lease enforcement, property tax protest and board of
zoning adjustment proceedings. He is a member of Lathrop & Gage L.C. Mr. Adams
has a B.S. from Northwestern University and a J.D. from the University of
Missouri-Kansas City.
Steven L. Eginoire is a manager of CORnerstone Development and will serve as
a manager of COR Development. Mr. Eginoire is 47 and has worked in the insurance
industry for more than 20 years. Since 1987, Mr. Eginoire has served as the
President and Chief Executive officer of Lockton Risk Services, Inc. Lockton
Risk Services is a subsidiary of Lockton Companies, Inc., the nation's tenth
largest insurance brokerage firm. Lockton Risk Services is an internet-based
marketing and insurance services company focusing on associations, franchises
and affinity groups. Mr. Eginoire received a B.S. in Insurance from the
University of Iowa. He was also past Chairman of the National Risk Retention
Association.
Arthur E. Fillmore, II is a manager of CORnerstone Development and will serve
as a manager of COR Development. Mr. Fillmore is 54 and has been an attorney for
more than 25 years. Mr. Fillmore's practice focuses on mergers and acquisitions,
corporate and commercial transactions, securities laws and international trade.
In addition to representing numerous closely held and publicly traded
corporations, he represents numerous technology companies in the start-up and
growth stages negotiating capital infusions from investment banking and venture
capital firms. Internationally, Mr. Fillmore has advised clients on transactions
in Canada, Mexico, the United Kingdom, Western and Central Europe, Hungary and
Vietnam. He is a member of Craft Fridkin & Rhyne, L.L.C. Mr. Fillmore has a B.A.
in Political Science and a J.D. from the University of Missouri-Columbia.
Estel Hipp is a manager of CORnerstone Development and will serve as a
manager of COR Development. Mr. Hipp is 57 and has been involved in commercial
real estate sale and development for over 26 years. Since 1998, he has been
associated with MC Real Estate Services, Inc., a wholly owned subsidiary of DST
Systems, Inc representing clients in the sale and leasing of commercial office
buildings. During the previous 14 years he developed and leased over 2.3 million
square feet of office buildings as Director of Office Leasing for Copaken, White
& Blitt. Mr. Hipp has a B.A. from Washburn University and an MBA from University
of Missouri-Kansas City.
James M. Selle is a manager of CORnerstone Development and will serve as a
manager of COR Development. Mr. Selle is 43 and has been an attorney for more
than 17 years. His practice is in the corporate area. He has experience in
commercial transactions, such as sales, acquisitions and financings, and in
business structurings. Mr. Selle is a shareholder in Stinson, Mag & Fizzell,
P.C. He is a member of the Board of Trustees of the Church of the Resurrection.
Mr. Selle has a B.S. in Business Administration and a J.D. from the University
of Missouri-Columbia.
Gregory R. Walton is a manager of CORnerstone Development and will serve as a
manager of COR Development. Mr. Walton is 53 and has been involved in commercial
construction for more than 20 years. In 1985, he founded Walton Construction
Co., Inc. Since 1985, he has served as President and Chief Executive Officer of
the company. The company currently has annual revenues of approximately
$300,000,000. The company's primary construction projects include medium and
low-rise office buildings, office/warehouse space, major shopping centers,
commercial and distribution facilities and heavy industrial and manufacturing
facilities. Mr. Walton has a B.S. in Civil and Structural Engineering from the
University of Missouri-Columbia. He is also a registered engineer in three
states.
As described above, one of the individuals who will serve as a manager of COR
Development is involved in a company that leases and provides day-to-day
management and maintenance of commercial office buildings. Another individual
who will serve as a manager of COR Development is the owner and chief executive
officer of a commercial construction company. Although these individuals'
experience will be helpful in managing the operations of COR Development, they
may have interests regarding the hiring of their companies by COR Development
for the construction of the commercial office buildings or the management and
leasing of the commercial office buildings. Their interests may be adverse to
COR Development with respect to the hiring of the companies in which they are
involved. In the meetings of the managers of COR Development, they may openly
discuss the merits of hiring their companies, but ultimately the other managers
of COR Development would control any vote regarding the hiring of any company to
provide services to COR Development.
Significant Employees
There are no significant employees who are expected to make a significant
contribution to COR Development.
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Family Relationships
There are no family relationships among the individuals who will serve
managers of COR Development.
Legal Proceedings
No individual, who will serve as a manager of COR Development, has been
involved in legal proceedings that would be material to an evaluation of our
management.
Compensation
The individuals, who will serve as managers of COR Development, will donate
their services to COR Development or will provide such services at a minimal
expense. Although attorneys in Mr. Fillmore's firm are charging fees for
representation regarding this offering, Mr. Fillmore is not charging any fees
for any services that he is providing to COR Development for this offering.
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 COR Development.
DESCRIPTION OF SECURITIES
The following discussion describes the securities of COR Development:
General
We propose to offer common units and preferred units. COR Development
currently has only one common unit issued and outstanding to CORnerstone
Development, the manager of COR Development. Upon the closing of this offering,
COR Development could have up to 1,600,001 Units issued and outstanding. The
outstanding common unit is fully paid for and nonassessable. The differences
between the common units and the preferred units are that the preferred units
will receive a preferred participation right measured at 6.5% compounded
semi-annually and will receive a preference on any liquidation of COR
Development. The common units and the preferred units have the same voting
rights.
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,
COR Development, but the managers of COR Development 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 COR Development, and if COR Development
has at that time retained sufficient cash or created a sufficient sinking fund
to pay such preferred returns but for the requirements of said financial
institution, the right to select the managers of COR Development will remain
with CORnerstone Development. See "RISK FACTORS."
Distributions
The preferred units will receive a preferred participation right measured at
6.5%, compounded semi-annually. Common units cannot receive any withdrawals from
COR Development until this preferred return is paid and the preferred units are
retired or repurchased. We contemplate that COR Development 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 fund may be available starting in the year ending
December 31, 2006. See "RISK FACTORS" 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 the time that holders
of a majority of the units shall approve the sale, 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 COR Development.
Change in Control of Company
There are no provisions in the articles of organization or the operating
agreement of COR Development that will delay, defer or prevent a change of
control of COR Development.
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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 COR Development or was a
promoter or manager of COR Development.
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
(2) The person reasonably believed:
(A) In the case of conduct in an official capacity with us, that his or
her conduct was in COR Development'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 COR Development, or who, while a
manager, employee, fiduciary or agent of COR Development, is or was serving at
the request of COR Development 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 COR Development would have power to indemnify the person against the same
liability under the operating agreement.
RELATED TRANSACTION
There have been no transactions between COR Development and any related party
other than the sale of one common unit to CORnerstone Development and the
assignment by the Church of the Resurrection to COR Development of the Real
Estate Contract, dated January 24, 2000, between L & F Land Company, a Kansas
general partnership, and the Church of the Resurrection. See "DILUTION" with
respect to the issuance of one common unit to CORnerstone Development. 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 of the Resurrection. This Real Estate Contract is for the
purchase of the real estate. The Real Estate Contract was assigned to COR
Development by written assignment.
DESCRIPTION OF BUSINESS
COR Development was formed on March 24, 2000 as a Kansas limited liability
company. Its managing member is CORnerstone Development. The sole member of
CORnerstone is the Church of the Resurrection. There are currently no employees
of COR Development and we contemplate that COR Development will employ very few,
if any, individuals.
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COR Development was organized for the purchase and development of 47 acres
located at the intersection of 137th and Nall in Leawood, Kansas.
COR Development proposes to accomplish four purposes with the purchase of the
real estate. First, COR Development anticipates that it will develop and sell
seven 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, COR Development 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. COR Development anticipate that it will have approximately 163,000
square feet of office space and approximately 156,000 square feet of retail
space to lease upon completion of the commercial office and retail space
contained in four buildings. Third, COR Development contemplates that it will
donate approximately 15 acres to Church of the Resurrection for use in the
development of its worship and educational facilities. Based upon the current
tax laws, the holders of the common units of COR Development may be able to
claim a tax deduction for this gift. See "RISK FACTORS - Federal Income Tax
Risks." Fourth, COR Development plans on developing the commercial buildings in
a manner that provides parking fields that can be utilized by the Church of the
Resurrection 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 real estate 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.
As well, 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 COR Development. Real estate ownership and development
are subject to unexpected increases in costs. There can be no assurance that COR
Development's operations will generate sufficient revenue to cover operating
expenses and meet required payments on the debt obligations of COR Development.
We intend, to the extent economically advantageous, to sell seven 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
COR Development's profitability. Such factors have tended to be cyclical in
nature. Sales of portions of the real estate may be affected adversely by such
factors. Other factors that could affect COR Development's business include the
availability of construction materials and labor and changes in the costs
thereof (including transportation costs). The success of COR Development may be
affected by competition from other projects of a similar nature.
COR Development'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.
COR Development's real property development will be located in Kansas. See
"DESCRIPTION OF PROPERTY." As a result, COR Development'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, 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, COR Development's development will benefit.
At this time, we do believe that the real estate can be appropriately
rezoned. There is the possibility that zoning consistent with the intended
development cannot be secured or that changes could be made to the zoning
regulations that may adversely affect the development of the real estate.
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 COR Development to increase the price that it charges in connection with
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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.
In addition, COR Development'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 COR Development will be
successful in obtaining necessary plan approvals and developmental permits.
In connection with seeking approvals from regulatory authorities of its
development plans, COR Development 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 COR Development 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
COR Development's results of operations and the value of its land.
MANAGEMET DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
It is contemplated that the primary sources of revenue for COR Development
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 the time that holders of a majority of the units shall approve the
sale, 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 $4,400,000.
At this time, we have incurred expenses for legal and accounting fees in the
amount of $10,492.35. The Church of the Resurrection has paid those fees, but
will receive repayment of such fees from the proceeds of this offering.
During the coming year, COR Development will purchase the real estate at a
cost of $11,750,000. If the proceeds of this offering are not sufficient, COR
Development 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 real
estate will be approximately $7,150,000. It is currently estimated that the site
work will cost at least approximately $5,400,000. This preliminary cost estimate
for site work may increase depending upon whether COR Development 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 real estate to
the Church of the Resurrection. During 2002, we anticipate donating an
additional 13 acres of the real estate to the Church of the Resurrection. It is
estimated that these donations will yield a deductible charitable contribution
of approximately $3,208,000 for COR Development and the holders of the common
units. See "RISK FACTORS."
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 and retail space will be
approximately $32,500,000. We intend to obtain permanent financing during 2005
in the amount of approximately $34,000,000. The proceeds of this financing and
proceeds from the sale of pad sites of approximately $4,100,000 would be used to
repay the $7,150,000 financing discussed above, to pay the cost of the
construction of the commercial office and retail space, to pay the capitalized
interest during construction, to pay any accrued, but unpaid, preferred return
on the preferred units and to retire preferred units.
Based upon approximately 163,000 square feet of office space and
approximately 156,000 square feet of retail space in the commercial buildings
with a vacancy rate of 5% and a rental rate of $25.00 per square foot for office
space and rates ranging from $8.75 to $18.00 per square foot for the retail
spaces (based upon retail space size and location), it is anticipated that the
leasing of this space will yield approximately $5,000,000 to $6,000,000 of
revenues during the first years of the operatio of the commercial office and
retail space. We also anticipate estimated operating expenses of approximately
$1,000,000 to $2,000,000 during this same time period. After the
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deduction for financing expenses, we estimate that there will be cash flow
available to be withdrawn for members first paying the preferred return on
preferred units, next retiring the remaining preferred units and then
withdrawals to holders of the common units. The actual number of square feet in
the commercial buildings may vary depending on final site plans for the real
estate, the requirements of tenants and applicable zoning requirements.
It is our intention to sell the real estate after a period of operation and
at the time that the holders of a majority of the units shall approve the sale,
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 real estate would sell for approximately
$55,000,000 an increase in value in excess of the development costs of
approximately $10,000,000. The derivation of this purchase price is described in
the succeeding paragraph. From the proceeds of the sale, we will repay the
existing permanent financing and, after the payment of all expenses of COR
Development, distribute the remainder of the proceeds to the holders of the
common units.
The net operating income (excluding depreciation), which was used in the
capitalization of net cash flow for determining the purchase price, was derived
from an initial rental rate of $25.00 per square foot for office space and rates
of $8.75 to $18.00 per square foot for retail space. These rental rates were
used in computing net operating income by multiplying the applicable rental rate
by 163,000 square feet of office space and 156,000 square feet of retail space,
which is the approximate amount of office and retail space that is to be
constructed on the real estate. We also assumed a vacancy rate of 5%. After the
initial leasing of space in 2005, the rental rate per square foot and the
expenses for the operation of the commercial buildings were both increased 3%
per year from 2005 to 2015. All of the foregoing calculations are estimates and
no assurance can be given that COR Development will achieve this level of
operating income and expenses or will be able to sell the real estate for this
price in 2015.
TAX CONSEQUENCES
For purposes of the federal tax and state income tax laws, COR Development
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 COR Development realizes such income or loss. In addition, any
charitable deductions obtained by COR Development should inure to the benefit of
the holders of the common units. See "RISK FACTORS." 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 COR Development.
We plan to a make a gift of approximately 15 acres to the Church of the
Resurrection to be included in the Church of the Resurrection's campus or for
road and access purposes. These 15 acres represent approximately 32% of the real
estate being purchased. We believe that the donation of 2 acres to the Church of
the Resurrection prior to December 31, 2000 and the donation of an additional 13
acres to the Church of the Resurrection during the year ending December 31, 2002
will allow the holders o the common units to receive charitable tax deductions
for such donations. Given the fact that the contract for the purchase of the
real estate is in the name of the Church of the Resurrection and this contract
is being assigned to COR Development, it is possible, however, that the Internal
Revenue Service may analyze or otherwise take issue with these deductions.
Because such donations will raise proportionately the overall costs for the
remaining acres of the real estate, we may need to receive some consideration
from the Church of the Resurrection for the transfer of the 15 acres. If the
Internal Revenue Service takes the position that the Church of the Resurrection
provided some consideration for this transfer either through the assignment of
the contract for the purchase of the real estate to COR Development or some
actual money paid by the Church of the Resurrection, the Internal Revenue
Service may disallow any proposed charitable deduction.
We will not be submitting a tax opinion that addresses the potential tax
benefits to the holders of the common units. Given the consideration provided
and possibly to be provided by the Church of the Resurrection for the real
estate, no unqualified opinion can be given regarding these tax benefits being
available to the holders of the common units. If the necessary assumptions are
made to render the tax opinion, the opinion will not address whether the
benefits can in fact be given. Accordingly, the 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 real
estate, which consists of 47 acres at the intersection of intersection of 137th
and Nall in Leawood, Kansas.
The real estate is subject to that certain Real Estate Contract, dated
January 24, 2000, between L & F Land Company, a Kansas general partnership, and
the Church of the Resurrection. 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 of the Resurrection.
This Real Estate Contract is for the purchase of the real estate. The Real
Estate Contract was assigned to COR Development.
In accordance with the Reinstatement and Amendment of Real Estate Contract,
the purchase price for the real estate 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 real
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estate. 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 COR Development 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 real estate.
COR Development proposes to accomplish four purposes with the purchase of the
real estate. First, COR Development will develop and sell seven pad sites, two
in the year 2001, three pad sites in the year 2002 and two pad sites in the year
2003. Second, COR Development plans that it will develop and build commercial
office and retail space and will engage a management company to lease this
space. COR Development anticipates that it will have approximately 163,000
square feet of office space and approximately 156,000 square feet of retail
space to lease upon completion of the commercial office and retail space. Third,
COR Development contemplates that it will donate a total of approximately 15
acres to the Church of the Resurrection for use in the development of its
worship and educational facilities. Based upon the current tax laws, the holders
of the common units of COR Development may be able to claim a tax deduction for
this gift. See "RISK FACTORS - Federal Income Tax Risks." Fourth, COR
Development plans on developing the commercial buildings in a manner that
provides parking fields that can be utilized by the Church of the Resurrection
for its Sunday services and other programs and activities.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no transactions between COR Development and any related party
other than the issuance of the one common unit to CORnerstone Development and
the assignment by the Church of the Resurrection to COR Development of the Real
Estate Contract, dated January 24, 2000, between L & F Land Company, a Kansas
general partnership, and the Church of the Resurrection. As stated above, the
Real Estate Contract lapsed by its terms on April 15, 2000. See "DILUTION" with
respect to the issuance of one common unit to CORnerstone Development. 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 of the Resurrection. This Real Estate Contract is for the
purchase of the real estate. The Real Estate Contract was assigned to COR
Development.
Although the purposes of COR Development in acquiring the real estate have
been stated to include a donation of additional land to the Church of the
Resurrection 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 COR Development. 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 COR
Development, including, without limitation, the obligation to make any payment
to the holders of the preferred units or common units issued by COR Development.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is currently no public market for the common units or the preferred
units. COR Development 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 COR Development. The services to be provided by any managers to COR
Development will generally be donated or their expenses in providing such
services will be reimbursed.
FINANCIAL STATEMENTS
As COR Development was formed on March 24, 2000, there are no historical
financial statements for COR Development. COR Development is a startup company
in its developmental stage and has no operating history and nominal assets and
liabilities, other than the assignment of a real estate contract to buy the real
estate. We have not commenced any operations. We have no contingent liabilities
and we have no commitments other than the purchase of the real estate if we
receive sufficient funds from this offering. The cash available for the
operations of COR Development will be derived from this offering and possible
loans to be obtained by COR Development 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 COR Development.
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 COR Development.
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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 subscribe 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 provided above 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 r
13720 Roe r
Leawood, Kansas 66224 r
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 concerning the validity of the units are being passed
upon for us by Craft Fridkin & Rhyne, L.L.C., Kansas City Missouri.
EXPERTS
There are no financial statements contained in this prospectus. COR Development
has engaged certified public accountants to work with it in its accounting
matters.
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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 permits 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.
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
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ITEM 27.
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- --------------------
3(i) Articles of Organization of Registrant *
3(iii) Operating Agreement of Registrant *
4 Specimen Unit Certificates of Registrant *
5 Opinion and Consent of Craft Fridkin & Rhyne, L.L.C. dated
September 8, 2000
10.1 Real Estate Contract *
10.2 Reinstatement and Amendment of Real Estate Contract *
10.3 Assignment of Real Estate Contract *
10.4 Form of Subscription Agreement
23 Consent of Craft Fridkin & Rhyne, L.L.C. (included
in its opinion filed as Exhibit 5 hereto).
24 Power of Attorney (included on signature page).
* Previously filed.
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 not 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 th 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 (othe
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.
22
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 September 7, 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 September 7, 2000
Robert M. Adams which is the Manager of Registrant
23
EXHIBIT INDEX
FOR REGISTRATION STATEMENT
OF COR DEVELOPMENT, LLC
ON FORM SB-2
AMENDMENT 1
EXHIBIT EXHIBIT DESCRIPTION
NO.
3(i) Articles of Organization of Registrant *
3(iii) Operating Agreement of Registrant *
4 Specimen Unit Certificates of Registrant
5 Opinion and Consent of Craft Fridkin & Rhyne, L.L.C. dated
September 8, 2000
10.1 Real Estate Contract *
10.2 Reinstatement and Amendment of Real Estate Contract *
10.3 Assignment of Real Estate Contract *
10.4 Form of Subscription Agreement
23 Consent of Craft Fridkin & Rhyne, L.L.C. (included in its opinion
filed as Exhibit 5 hereto)
24 Power of Attorney (included on signature page)
* Previously filed.
24