HomeMy WebLinkAboutColony Audit 99-00 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, 2000,
and the
Period Ended August 31, 1999
Prepared by:
Charles Haynes
C:'erlified Public.Accnunraur
TABLE OF CONTENTS
Independent Aud'itor's Report ................................................................................ 1
BalanceSheet ...................................................... ......... 2
Statement of Revenues and Expenses ..................................................................... 3
Statement of Cash Flows ........................................................................................ 4
Consolidated Statement of Revenues and Expenses,
Budget and Actual (Non-GAAP Budgetary Basis)......... ............ ... .............. 5
Notes to Financial Statements ................................................................................. 6
Independent Auditor's Report on Additional Information ........................................ 10
Calculation of Amount Due to the Texas Student Housing Corporation
Pursuant to Section 10.04 of the Installment Sale Agreement....................I........ 11
Charles Haynes, CPA
Certified Public Accountant
1903 Central Drive, Suite 304
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, 2000 and 1999. 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, the financial statements referred to above present fairly, in all
material respects, the financial position of the Project as of August 31, 2000 and 1999, and the
changes in its net assets and cash flows for the periods then ended in conformity with generally
accepted accounting principles.
Bedford, Texas
February 25, 2001
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, 2000 and 1999
AUGUST 31,
2000 1999
CURRENT ASSETS:
Cash $ 167,001 $ 94,286
Trade accounts receivable 2,862 4,579
Interproject receivable 174,165 274,130
Prepaid and other 11,964 3,669
355,992 376,664
PROPERTY AND EQUIPMENT:
Land 650,000 650,000
Buildings and improvements 4,836,293 4,634,361
Furniture, fixtures and equipment 226,673 190,705
5,712,966 5,475,066
Less; Accumulated depreciation 939,610 695,201
4,773,355 4,779,865
TOTAL ASSETS $ 5,129,347 $ 5,156,529
CURRENT LIABILITIES:
Trade accounts payable $ 41,256 $ 36,563
Interproject payable 50,000
Property taxes payable 68,378 75,921
Scholarships awarded 19,423 27,985
Deferred income - 166,620
Other 80,487 92,059
259,544 399,148
LONG-TERM LIABILITIES:
Long-term debt 5,000,000 5,000,000
Accrued interest 710,158 538,564
5,710,158 5,538,564
TOTAL LIABILITIES 5,969,702 5,937,712
NET ASSETS- UNRESTRICTED (840,355) (781,183)
TOTAL LIABILITIES AND NET ASSETS $ 5,129,347 $ 5,156,529
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 31,2000 and 1999
AUGUST 31,
2000 1999
OPERATING REVENUES:
Rents $ 1,225,419 $ 1,087,098
Daily rental 216,162 286,320
Property activity, processing and
maintenance fees 23,956 31,879
Other 9,033 7,147
1,474,570 1,412,444
OPERATING EXPENSES:
Property direct operations 139,447 127,775
Food cost of sales - -
Phone expense 21,904 4,874
General and administrative 119,002 86,074
Scholarship expense 15,774
Energy costs 109,336 108,392
Real estate taxes and insurance 133,294 141,002
Maintenance and property operations 91,920 227,050
Management fees 32,520 32,520
Depreciation 244,409 207,723
891,832 951,184
EXCESS OF REVENUE OVER (UNDER) EXPENSE
FROM OPERATIONS 582,738 461,260
Interest expense 622,487 523,960
Scholarship expense 19,423
EXCESS OF REVENUE OVER (UNDER) EXPENSE (59,172) (62,700)
NET ASSETS AT BEGINNING OF PERIOD (781,183) (718,483)
NET ASSETS AT END OF PERIOD $ (840,355) $ (781,183)
The accompanying notes are an Integral part of these flnanclal 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 31,2000 and 1999
AUGUST 31,
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Excess of revenue over(under) expense $ (59,172) $ (62,700)
Adjustments to reconcile change in
net assets to net cash provided by
operating activities:
Depreciation 244,409 207,723
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 1,717 (6,252)
(Increase) decrease in intercompany assets 99,965 217,430
(Increase) decrease in other current assets (8,297) 2,250
Increase (decrease) in trade payables 4,694 (24,518)
Increase (decrease) in intercompany payable 50,000
Increase (decrease) in property taxes payable (7,541) (1,598)
Increase (decrease) in scholarships awarded (8,562) 15,774
Increase (decrease) in deferred Income (166,620) 20,258
Increase (decrease) in other liabilities (11,572) 55,113
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 139,021 423,480
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (237,900) (199,763)
(Gain) on sale of assets -
NET CASH (USED) IN INVESTING ACTIVITIES (237,900) (199,763)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in long-term debt - -
Increase in accrued interest 171,594 94,656
NET CASH PROVIDED BY FINANCING ACTIVITIES 171,594 94,656
Increase (decrease) in cash and cash equivalents 72,715 (110,735)
Beginning cash and cash equivalents 94,286 205,021
ENDING CASH AND CASH EQUIVALENTS $ 167,001 $ 94,286
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 622,487 $ 523,960
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, 2000
Note 1 --Basis of Presentation and Summa 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) residencies 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, 2000, and August 31,
1999.
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 1
liabilities.
See independent auditor's report
5
Note 1 —Basis of Presentation and Summary of Significant Accounting Policies
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
Projects use historical experience to determine an allowance for doubtful accounts. At
August 31, 2000, management represented that no allowance was necessary.
Income tax status
TSHC is exempt from federal income tax under the Internal Revenue Code as an entity acting
on behalf of a municipality of the State of Texas.
Property and equipment
Property and equipment are carried at cost. Depreciation is computed using the straight-line
method over the estimated useful life of the asset. All expenditures for property and
equipment greater than or equal to $500 and has a useful life longer than two years or is an
improvement to the property which by the nature of the expenditure is not a repair or routine
maintenance, are capitalized.
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 Iiabilities to
See independent auditor's report
6
prepare these financial statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
Note 2 —Related Party Transactions
During the period ended August 31, 2000, 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 Projects have entered into housing contracts with individuals which relate to contract lease
periods that extend beyond August 31, 2000. As of August 31, 2000, the future minimum lease
revenue under non-cancelable housing leases for housing within the Project is $1,965.
Note 4- Obligations Under Leases
As of August 31, 2000 there are no significant obligations for future payments under
operating leases.
Note 5 —Prop erty and Equipment
The project's property and equipment at August 31, 2000 was comprised of the following:
Building& Furniture Machinery Accum.
Land Improvements &Fixtures &Equip. Depreciation Total
ColanY 650,000 4,836,293 226,673 0 936610 4,773,355
Note 6 —Long-Term Debt
TSHC has the following obligation pursuant to an Installment Sales Agreement (the
"Agreement") related to the Project. The mortgage debt payments at year end were being
paid to Colony Lodging, Inc. who assumed the obligation from the original party to the
Installment Sales Agreement, Rossco Holdings, Inc.
Colony Lodging,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
• Secured by facilities, properties and net revenues of the Project $5,000,000
See independent auditor's report
7
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.
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, 2000.
The Texas Student Housing Corporation is not currently in compliance with the provisions of
the "Rossco" Installment Obligation Agreement, which requires certain minimum payments to
be paid each fiscal year.
In the current year ended August 31, 2000, the minimum installment payments paid,
$450,893, versus the amount scheduled per the sales agreement and installment obligation of
$620,690 were underpaid by $169,797.
As of the date of issuance of this report, the note holder's legal representative has represented
that no demand for acceleration of the note is currently being sought and as in previous years
will continue to defer interest expense shortfalls of the minimum payments.
See Independent auditor's report
8
Charles Haynes, CPA
Certified Public Accountant
1903 Central Drive, Suite 304
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, 2000 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
February 28, 2001
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 31,2000
Excess of revenue over(under) expense from operations before
current year scholarships $ 582,738
Add. Non-operating 1 maintenance expenses
Depreciation 244,409
Scholarships awarded 15,774
260,183
Less;Amounts deposited into the Replacement Reserve f=und __ 66,000
NET OPERATING INCOME $ 776,921
AMOUNT DUE TO THE TEXAS STUDENT HOUSING CORPORATION (21/-,%) $ 19,423
10