HomeMy WebLinkAboutColony Audit 96-97 The Colony Apartments -and
Various Other Related Properties
of the
Texas Student Housing Corporation,
a Component Unit
of the
Town of Westlake, Texas
Financial Statements
For the Year Ended August 31, 1997,
and the
Period Ended August 31, 1996
Prepared by:
Charles Haynes
Certified Public Accountant
TABLE OF CONTENTS
Independent Auditor's Report .................................................................................... 1
BalanceSheet ............................................................................................................. 2
Statement of Revenues and Expenses ........................................................................ 3
Statement of Cash Flows ...........................................................:............................... 4
Notes to Financial Statements .................................................................................... 5
Independent Auditor's Report on Additional Information.......................................... 9
Calculation of Amount Due to the Texas Student Housing Corporation
Pursuant to Section 10.04 of the Installment Sale Agreement.............................. 10
Charles Haynes, CPA
Certified Public Accountant
1903 Central Drive, Suite 300
Bedford, Texas 76021
(817) 545-1300
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Texas Student Housing Corporation
We have audited the accompanying financial statements of the Colony Apartments and various
other related properties (the "Project," more fully described in Note 1) of the Texas Student
Housing Corporation(the "TSHC"), a component unit of the Town of Westlake, Texas, as of and
for the year ended August 31, 1997. These financial statements are the responsibility of the
Texas Student Housing Corporation's management. Our responsibility is to express an opinion
on these financial statements based on our audit. We did not audit the financial statements of the
Project as of and for the period ended August 31, 1996. Those financial statements were audited
by other auditors whose report has been furnished to us, dated December 11, 1996 and in which
they expressed an unqualified opinion. Our opinion on the financial statements, insofar as it
relates to the amounts included for this period, is based on the report of the other auditors.
We conducted our audit in accordance with generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
As discussed in Note 1, the financial statements present only the Project and are not intended to
present fairly the financial position and results of operations of the TSHC, in conformity with
generally accepted accounting principles.
In our opinion, based on our audit and the report of the other auditors, the financial statements
referred to above present fairly, in all material respects, the financial position of the Project as of
August 31, 1997 and 1996, and the changes in its net assets and cash flows for the periods then
ended in conformity with generally accepted accounting principles.
Bedford, Texas
January 9, 1998
The Colony Apartments and Various Other Related Properties of the
Texas Student Housing Corporation, a Component Unit of the Town of Westlake, Texas
Balance Sheet
August 31, 1997
AUGUST 31,
1997 1996
CURRENT ASSETS:
Cash $ 97,060 $ 276,253
Trade accounts receivable 5,751 3,319
lnterproject receivable 89,315 9,872
Prepaid and other 7,457 5,816
199,583 295,260
PROPERTY AND EQUIPMENT:
Land 650,000 650,000
Buildings and improvements 4,470,160 4,372,601
Furniture, fixtures and equipment 92,875 50,000
5,213,035 5,072,601
Less:Accumulated depreciation 316,016 121,385
4,897,019 4,951,216
TOTAL ASSETS $5,096,602 $5,246,476
CURRENT LIABILITIES:
Trade accounts payable $ 48,199 $ 58,870
Property taxes payable 84,092 76,205
Scholarships awarded 17,053 -
Deferred income - 215,366
Other 45,024 47,335
194,368 397,776
LONG-TERM LIABILITIES:
Long-term debt 5,000,000 5,000,000
Accrued interest 316,315 170,291
5,316,315 5,170,291
TOTAL LIABILITIES 5,510,683 5,568,067
NET ASSETS - UNRESTRICTED (414,081) 321,591
TOTAL LIABILITIES AND NET ASSETS $5,096,602 $5,246,476
The accompanying notes are an integral part of these financial statements.
2
The Colony Apartments and Various Other Related Properties of the
Texas Student Housing Corporation, a Component Unit of the Town of Westlake, Texas
Statement of Revenues and Expenses
For the Year Ended August 31, 1997, and the Period Ended August 31, 1996
AUGUST 31,
1997 1996
OPERATING REVENUES:
Rents $ 1,265,131 $ 710,719
Daily rental 130,384 79,535
Property activity, processing and
maintenance fees 18,630 11,709
Other 10,606 6,305
1,424,751 808,268
OPERATING EXPENSES:
Property management 103,264 95,813
Food cost of sales 8,935 13,707
Phone expense 4,922 3,605
General and administrative 84,374 41,906
Energy costs 117,707 100,994
Real estate taxes and insurance 159,504 109,543
Maintenance and property operations 182,460 209,561
Management fees 32,520 21,680
Depreciation 195,188 121,385
888,874 718,194
EXCESS OF REVENUE OVER (UNDER) EXPENSE
FROM OPERATIONS 535,877 90,074
Interest expense 628,367 411,665
EXCESS OF REVENUE OVER (UNDER) EXPENSE (92,490) (321,591)
NET ASSETS AT BEGINNING OF PERIOD _ (321,591) -
NET ASSETS AT END OF PERIOD $ (414,081) $ {321,591}
The accompanying notes are an integral part of these financial statements.
3
The Colony Apartments and Various Other Related Properties of the
Texas Student Housing Corporation, a Component Unit of the Town of Westlake, Texas
Statement of Cash Flows
For the Year Ended August 31, 1997, and the Period Ended August 31, 1996
AUGUST 31,
1997" 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Excess of revenue over(under) expense $ (92,490) $ (321,591)
Adjustments to reconcile change in
net assets to net cash provided by
operating activities:
Depreciation 195,188 121,385
Changes in operating assets and liabilities:
(Increase) in accounts receivable (2,432) (3,319)
(Increase) in intercompany assets (79,443) (9,872)
(Increase) in other current assets (1,641) (5,816)
Increase (decrease) in trade payables (10,671) 58,870
Increase in property taxes payable 7,887 76,205
Increase in scholarships awarded 17,053 _
Increase (decrease) in deferred income (215,366) 215,366
Increase (decrease) in other liabilities (2,311) 47,335
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 184,226 178,563
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (140,434) (5,072,601)
(Gain) on sale of assets (557)
_ -
NET CASH (USED) IN INVESTING ACTIVITIES _ (140,991). (5,072,601)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term debt - 5,000,000
Increase in accrued interest 146,024 170,291
NET CASH PROVIDED BY FINANCING ACTIVITIES 146,024 5,170,291
Increase(decrease) in cash and cash equivalents (179,193) 276,253
Beginning cash and cash equivalents 276,253 -
ENDING CASH AND CASH EQUIVALENTS $ 97,060 $ 276,253
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 482,343 $ 241,374
Income taxes - _
The accompanying notes are an Integral part of these financial statements.
4
The Colony Apartments and Various Other Related Properties
of the
Texas Student Housing Corporation,
a Component Unit
of the
Town of Westlake, Texas
Notes to Financial Statements
August 31, 1997
Note 1 —Basis of Presentation and SummM of Significant Accounting Policies
Introduction
The accompanying financial statements relate to the operation of The Colony Apartments and
various other properties (the "Project") located in College Station, Texas. The Project is
owned by the Texas Student Housing Corporation (the "TSHC"), and is operated and
managed under agreement with SSRS, Inc., a professional property management firm. The
TSHC is a Component Unit of the Town of Westlake, Texas.
The Colony was constructed in 1975 and consists of 200 units. The other properties of the
Project are made up of ten (10) residences with four (4) living units each. Effective
December 29, 1995, the TSHC purchased the Project from Rossco Holdings, Incorporated for
$5,000,000. The accompanying financial statements for the Project reflect comparative
revenues and expenses and cash flows for the year ended August 31, 1997 and the period
from the effective date of the purchase through August 31, 1996.
Basis of presentation
Financial statement presentation follows the recommendations of the Financial Accounting
Standards Board in its Statement of Financial Accounting Standards (SFAS) No. 117,
Financial Statements of Not-for-Profit Organizations. Under SFAS No. 117, the TSHC is
required to report information regarding its financial position and activities according to three
classes of net assets: (1) unrestricted net assets, (2) temporarily restricted net assets, and (3)
permanently restricted net assets. All of the net assets of the TSHC are unrestricted.
Basis of accounting
The accompanying financial statements have been prepared using the accrual basis of
accounting and accordingly reflect all significant receivables, payables, and other assets
liabilities.
See independent auditor's report
5
Note 1 —Basis of Presentation and Summary of Si ificant Accounting Policies coat.
Revenue recognition
Revenues received in advance for housing leases, property activity fees, and maintenance fees
are deferred and recognized over the term of the leases. Housing leases are classified as
operating and are for periods ranging from five to twelve months. Revenue from non-
refundable processing and late charge fees is recognized when received.
Daily rental revenue is recorded daily on a check-in basis. All other daily rental revenue is
recognized when earned.
Cash and cash equivalents
For purposes of the statement of cash flows, all unrestricted highly liquid investments with
initial maturities of three months or less are considered to be cash equivalents.
Accounts receivable
The accounts receivable includes amounts due from tenants for leases, activity fees late
charges and maintenance fees, and are stated net of all known uncollectible accounts. The
Project uses historical experience to determine an allowance for doubtful accounts. At
August 31, 1997,management represented that no allowance was necessary.
Income tax status
TSHC is exempt from federal income tax under section 501 C(3) of the Internal Revenue
Code. However, income from certain activities not directly related to its tax-exempt purpose
is subject to taxation as unrelated business income.
Property and equipment
Property and equipment are carried at cost. Depreciation is computed using the straight-line
method over the estimated useful life. All expenditures for property and equipment greater
than or equal to $500 are capitalized. During the year ended August 31, 1997 certain assets
that were classified as Furniture, Fixtures and Equipment in the previous year were
transferred to Building and Improvements. This transfer was made in order to more
accurately represent the true nature of these assets.
Use of estimates
Management of the Project has made a number of estimates and assumptions relating to the
reporting of assets and liabilities, and the disclosure of contingent assets and liabilities to
prepare these financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
See Independent auditor's report
6
Note 2—Related Party Transactions
During the period ended August 31, 1997, the Project made payments on behalf of other
projects owned by the TSHC for various expenditures required in the ordinary course of
business. These advances to and from each project are classified as interproject payables and
receivables as appropriate in the accompanying balance sheet.
Note 3 --Future Minimum Rentals Under Housing Leases
The Project has entered into housing contracts with individuals which relate to contract lease
periods that extend beyond August 31, 1997. As of August 31, 1997, the future minimum
lease revenue under non-cancelable housing leases for housing within the Project is as
follows:
FOR THE YEAR
ENDING AUGUST 31,
1998 $845,032
1999 24,408
2000 2,000
TOTAL $871,440
Note 4- Obligations Under Leases
As of August 31, 1997 there are no obligations for future payments under operating leases.
Note_5--Long-Term Debt
TSHC has the following obligation pursuant to an Installment Sales Agreement (the
"Agreement")related to the Project:
Rossco Holdings,Inc.Mortgage Payable Bearing 12% Interest
• Payable in monthly installments including interest of variable
minimum amounts,as defined in the Agreement
• Unpaid portion due December 1,2020
a Secured by facilities,properties and net revenues of the Project $5,000,000
The Agreement provides for 2.5% of net operating income as therein defined to be retained
by the TSHC. The bylaws of the TSHC provide for these funds to be used to fund a student
assistance program that provides education and/or housing assistance to qualifying students.
See independent auditor's report
7
Note 5—Lon-Term Debt Cont.
The Agreement requires any remaining net operating income, after reduction for amounts
paid to the Reserve Replacement Fund (defined in the Agreement) and the amount due
TSHC, be applied to any outstanding and unpaid interest, and then principal. No repayment
of the principal portion of long-term debt is anticipated during the five-year period
subsequent to August 31, 1997.
See Independent auditors report
8
Charles Haynes, CPA
Certified Public Accountant
1903 Central Drive, Suite 300
Bedford, Texas 76021
(817) 545-1300
INDEPENDENT AUDITOR'S REPORT
ON ADDITIONAL INFORMATION
To the Board of Directors
Texas Student Housing Corporation
Our report on the accompanying financial statements of the Colony Apartments and various other
related properties (the "Project," more fully described in Note 1) of the Texas Student Housing
Corporation (the "TSHC"), a component unit of the Town of Westlake, Texas, as of and for the
year ended August 31, 1997 appears on page 1. Our audit was conducted for the purpose of
forming an opinion on the basic financial statements taken as a whole. The schedule,
"Calculation of Amount Due to the Texas Student Housing Corporation Pursuant to Section
10.04 of the Installment Sale Agreement" is not a required part of the basic financial statements.
This information has been subjected to the auditing procedures applied in the audit of the basic
financial statements. In our opinion, this information is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
Bedford, Texas
January 9, 1998
9
The Colony Apartments and Various Other Related Properties of the
Texas Student Housing Corporation, a Component Unit of the Town of Westlake, Texas
Calculation of Amount Due to the Texas Student Housing Corporation
Pursuant to Section 10.04 of the Installment Sale Agreement
August 31, 1997
Excess of revenue over(under) expense from operations $ 8.35,877
Add: Non-operating/maintenance expenses
Depreciation 195,188
Scholarships awarded 17,053
212,241
Less; Amounts deposited into the Replacement Reserve Fund 66,000
NET OPERATING INCOME $ 682,118
AMOUNT DUE TO THE TEXAS STUDENT HOUSING CORPORATION (2'/%) $ 17,053
10