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HomeMy WebLinkAboutColony Audit 97-98 The Colony Apartments and Various ether 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, 1998, and the Period Ended August 31, 1997 Prepared by; CharleLPublic s Cerllfleccountant 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, 1998. 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 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, 1998 and 1997, and the changes in its net assets and cash flows for the periods then ended in conformity with generally accepted accounting principles. Bedford, Texas May 25, 1999 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, 1998 AUGUST 31, 1998 1997 CURRENT ASSETS: Cash $ 205,021 $ 97,060 Trade accounts receivable 10,831 5,751 Interproject receivable 56,700 89,315 Prepaid and other 5,919 7,457 278,471 199,583 PROPERTY AND EQUIPMENT: Land 650,000 650,000 Buildings and improvements 4,470,160 4,470,160 Furniture, fixtures and equipment 155,143 92,875 5,275,303 5,213,035 Less: Accumulated depreciation 487,478 316,016 4,787,825 4,897,019 TOTAL ASSETS $5,066,296 $5,096,602 CURRENT LIABILITIES: Trade accounts payable $ 61,081 $ 48,199 Interproject payable $ 6,752 Property taxes payable 77,519 84,092 Scholarships awarded 12,211 17,053 Deferred Income 146,362 - Other 36,946 45,024 340,871 194,368 LONG-TERM LIABILITIES: Long-term debt 5,000,000 5,000,000 Accrued interest 443,908 316,315 5,443,908 5,316,315 TOTAL LIABILITIES 5,784,779 5,510,683 NET ASSETS - UNRESTRICTED (718,483) (414,081) TOTAL LIABILITIES AND NET ASSETS $5,066,296 $5,096,602 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, 1998, and the Period Ended August 31, 1997 AUGUST 31, 1998 1997 OPERATING REVENUES: Rents $1,112,751 $1,265,131 Daily rental 234,178 130,384 Property activity, processing and maintenance fees 28,314 18,630 Other 9,486 10,606 1,384,72.9 1,424,751 OPERATING EXPENSES: Property management 137,774 103,264 Food cost of sales 5,004 8,935 Phone expense 4,847 4,922 General and administrative 84,567 84,374 Energy costs 126,527 117,707 Real estate taxes and insurance 139,108 159,504 Maintenance and property operations 329,198 182,460 Management fees 32,520 32,520 Depreciation 184,758 195,188 1,044,303 888,874 EXCESS OF REVENUE OVER (UNDER) EXPENSE FROM OPERATIONS 340,426 535,877 Interest expense 644,828 628,367 EXCESS OF REVENUE OVER (UNDER) EXPENSE (304,402) (92,490) NET ASSETS AT BEGINNING OF PERIOD (414,081) (92,490) NET ASSETS AT END OF PERIOD $ 718,483 $ (184,980) 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, 1998, and the Period Ended August 31, 1997 AUGUST 31, 1997 1997 CASH FLOWS FROM OPERATING ACTIVITIES Excess of revenue over(under) expense $ (304,402) $ (92,490) Adjustments to reconcile change in net assets to net cash provided by Operating activities: Depreciation 184,758 195,188 Changes in operating assets and liabilities: (Increase) In accounts receivable (5,080) (2,432) (Increase) in intercompany assets 32,615 (79,443) (Increase) in other current assets 1,538 (1,641) Increase (decrease) in trade payables 12,882 (10,671) 6,752 Increase in property taxes payable (6,573) 7,887 Increase In scholarships awarded (4,842) 17,053 Increase (decrease) in deferred income 146,362 (215,356) Increase (decrease) In other liabilities (8,078) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 55,932 (184,226) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (62,268) (140,434) (Gain) on sale of assets - (557) NET CASH (USED) IN INVESTING ACTIVITIES (62,268)_ (140,991) CASH FLOWS FROM FINANCING ACTIVITIES = . Increase in long-term debt - _ - Increase in accrued interest 127,593 `146,024 NET CASH PROVIDED BY FINANCING ACTIVITIES 127,593 146,024 Increase (decrease) in cash and cash equivalents 107,961 (179,193) Beginning cash and cash equivalents 97,060 276,253 ENDING CASH AND CASH EQUIVALENTS $ 205,021 $ 97,060 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ 200,920 $ 241,374 Income taxes - - 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, 1998 Note 1 —Basis of Presentation and Summary 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, 1998 and the period from the effective date of the purchase through August 31, 1997. 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 Significant Accounting Policies Cont. Revenue recd nition 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, 1998, management represented that no allowance was necessary. Income tax status TSHC is exempt from federal income tax under section 50IC(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, 1998 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, 1998, 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, 1998. As of August 31, 1998, the future minimum lease revenue under non-cancelable housing leases for housing within the Project is as follows: FOR THE YEAR ENDING AUGUST 31, 1999 24,408 2000 2,000 TOTAL $26,408 Note 4- Obli ations Under Leases As of August 31, 1998 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 "Agreemenf) related to the Project: Rossco Holdings,Inc. Mortgage Payable Bearina 12%Interest • Payable in monthly installments including interest of variable minimum amounts,as defined in the Agreement • Unpaid portion due December 1, 2020 • 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 S —Long-Term Debt cunt. 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, 1998, See Independent auditor's report 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, 1998 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. Z-0 Bedford, Texas May 25, 1999 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, 1998 Excess of revenue over(under) expense from operations $ 352,638 Add: Non-operating / maintenance expenses Depreciation 184,758 Scholarships awarded 17,053 201,811 Less: Amounts deposited into the Replacement Reserve Fund 66,000 NET OPERATING INCOME $ 488,449 AMOUNT DUE TO THE TEXAS STUDENT HOUSING CORPORATION (2'/�%) $ 12,211 10