HomeMy WebLinkAboutUniversity Tower and Fourm Audit 97-98 The University Tower and Forum (Lodgeco)
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:
Charles Haynes
Certified Public Accountant
TABLE OF CONTENTS
Independent Auditor's Report ................................................................................ 1
BalanceSheet ........................................................................................................ 2
Statement of Revenues and Expenses ..................................................................... 3
Statementof Cash Flows ........................................................................................ 4
Notes to Financial Statements ................................................................................ v
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 75021
(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 University Tower and Forum
(Lodgeco) 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 UNIVERSITY TOWER AND THE FORUM
(LODGECO) PROPERTIES OF THE
TEXAS STUDENT HOUSING CORPORATION, A COMPONENT UNIT
OF THE TOWN OF WESTLAKE, TEXAS
Balance Sheet
August 31, 1998 and 1997
AUGUST 31,
1998 1997
CURRENT ASSETS:
Cash and cash equivalents $ 1,644,081 $ 2,281,705
Trade accounts receivable 2,637,185 1,849,053
Interproject receivable 11,371 13,384
Inventory 49,177 29,538
Prepaid and other 29,371 28,109
4,371,185 4,201,789
PROPERTY AND EQUIPMENT:
Land 2,100,000 2,100,000
Buildings and improvements 21,367,999 21,132,494
Furniture, fixtures and equipment 1,835,299 1,692,715
25,303,298 24,925,209
Less: Accumulated depreciation 2,721,036 1,645,369
22,582,262 23,279,840
TOTAL ASSETS $ 26,953,447 $ 27,481,629
CURRENT LIABILITIES:
Trade accounts payable $ 185,612 $ 202,853
Notes payable - -
Interproject payable 61,319 102,699
Property taxes payable 108,910 106,887
Scholarships awarded 36,961 59,088
Deferred Income 5,971,240 4,272,794
Capital lease obligation 1,376 .9,816
Other 5,410 5,075
6,370,828 4,759,212
LONG-TERM LIABILITIES:
Capital lease obligation - -
Long-term debt 24,000,000 24,000,000
Accrued interest 3,484,276 2,719,530
27,484,276 26,719,530
TOTAL LIABILITIES 33,855,104 31,478,742
NET ASSETS(LIABILITIES)-UNRESTRICTED (6,901,657) (3,997,113)
TOTAL LIABILITIES AND NET ASSETS $ 26,953,447 $ 27,481,629
The accompanying notes are an Integral part of these financial statements
2
THE UNIVERSITY TOWER AND FORUM
(LODGECO) PROPERTIES OF THE
TEXAS STUDENT HOUSING CORPORATION, A COMPONENT UNIT
OF THE TOWN OF WESTLAK.E, TEXAS
Statement of Revenues and Expenses
For the Year Ended August 31, 1996 and the Period Ended August 31, 1997
AUGUST 31,
1998 1997
OPERATING REVENUES:
Rents $ 4,654,476 $ 4,875,735
Daily rental 35,295 23,691
Property activity, processing and maintenance fees 179,690 646,111
Dormitory phone service 209,371 215,527
Other 117,043 162,798
5,195,875 5,923,862
OPERATING EXPENSES:
Property management 732,440 813,670
Food cost of sales 424,135 374,066
Other food expense 433,353 383,776
Phone expense 242,073 194,427
General and administrative 315,079 240,653
Energy costs 417,173 466,623
Real estate taxes and insurance 287,191 317,303
Maintenance and property operations 771,492 427,431
Management fees 159,303 167,496
Depreciation ti 1,070,682 1,034,359
4,852,921 4,419,804
EXCESS OF REVENUE OVER (UNDER) EXPENSE
FROM OPERATIONS 342,954 1,504,058
Interest expense 3,247,498 3,147,504
EXCESS OF REVENUE OVER (UNDER) EXPENSE (2,904,544) (1,643,446)
NET ASSETS AT BEGINNING OF PERIOD (3,997,113) (2,353,667)
NET ASSETS AT END OF PERIOD $ (6,901,657) $ (3,997,113)
3
THE UNIVERSITY TOWER, FORUM, COLONY APARTMENTS
AND VARIOUS OTHER RELATED PROPERTIES OF THE
TEXAS STUDENT HOUSING CORPORATION, A COMPONENT UNIT
OF THE TOWN OF WESTLAKE, TEXAS
Consolidated Statement of Cash 'Flows
For the Year Ended August 31, 1998, and the Period Ended August 31, 1997
AUGUST 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Excess of revenue over(under) expense $ (2,904,544) $ (1,643,446)
Adjustments to reconcile change in
net assets to net cash provided by
operating activities:
Depreciation 1,070,682 1,034,359
Changes in operating assets and liabilities:
(Increase) decrease In accounts receivable (788,132) (2,353,668)
(Increase) in Inventories (19,639) (25,012)
(Increase) in other current assets (1,262) (35,362)
Increase(decrease) in trade payables (17,241) 277,954
Increase In property taxes payable 2,023 174,944
Increase In scholarships awarded (22,127) -
Increase(decrease) in deferred income 1,698,446 5,295,292
Increase(decrease) in other liabilities 335 68,851
NET CASH PROVIDED(USED) BY OPERATING ACTIVITIES (981,459) 2,793,912
CASK FLOWS FROM INVESTING ACTIVITIES
(Purchase) of property and equipment (378,089) (29,389,402)
(Gain) on sale of assets (2,790)
NET CASH (USED) IN INVESTING ACTIVITIES (380,879) (29,389,402)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in capital lease obligations (6,440) 16,062
Increase(decrease) in notes payable - .281,572
Increase in long-term debt - 29,000,000
Increase in accrued Interest 764,746 1,978,291
NET CASH PROVIDED BY FINANCING ACTIVITIES 756,306 31,275,925
Increase(decrease) in cash and cash equivalents (637,624) 3,348,891
Beginning cash and cash equivalents 2,281,705 (1,067,186)
ENDING CASH AND CASH EQUIVALENTS $ 1,644,081 $ 2,281,705
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 236,778 $ 242,569
Income taxes - -
5
THE UNIVERSITY TOWER AND FORUM
(LODGECO) 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 University 'Power (the
"Tower"), and the Forum (the "Forum") located in Bryan, Texas (collectively referred to as
the "Projects"). The Projects are owned by the Texas Student Housing Corporation (the
"TSHC"), and are operated and managed under an agreement with SSRS, Inc., a professional
property management firm. The TSHC is a Component Unit of the Town of Westlake, Texas.
The Tower is comprised of two attached and fully integrated buildings. The first portion, a
two-story structure, was constructed in 1963, and refurbished in 1989 and 1990. The second
portion, a seventeen-story tower, was constructed in 1985. Together, the Tower consists of
843 dormitory units.' The Forum was constructed in 1964 and consists of 236 units. Effective
January 20, 1996, the TSHC purchased the Tower, Forum and five (5) of the Other Properties
from Lodgeco Properties, Ltd. for $24,000,000.
The accompanying financial statements for the Projects reflect comparative revenues and
expenses and cash flows for the years ended August 31, 1998 and 1997.
Basis of presentatio n
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 Organization . 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 these TSHC "projects".
Basis of accounting
The accompanying financial statements have been prepared using the accrual basis of
accounting and accordingly reflect all significant receivables, payabies, and other assets 1
liabilities.
Revenue recognition
See Independent auditor's report
6
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 egquiva1mU
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 include 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 allowances for doubtful accounts, At August 31, 1998,
management represented that no allowances were necessary.
Income tax status
TSHC is exempt from federal income tax under section 501C(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.
Invento
Inventory consists of food and food related items consumed in the normal course of operation
of a dormitory establishment. It is recorded at the lower of cost or market on a first-in, first-
out basis.
Property and equipment
Property and equipment is 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 and that have an economic uselife life in excess of two years 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. The resulting classifications more accurately represent the true nature of these
assets.
Use of estimates
See Independent auditor's report
7
Management of the Projects 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.
Not 2—Related Party Transactions
During the period ended August 31, 1998, the Projects made payments and collected funds on
behalf of other properties within the TSHC for various reasons, all in the ordinary course of
business. These advances to and from each property are shown as interproject receivables and
payables which are shown at their gross amounts for these "Projects" in the accompanying
balance sheet.
Note 3 —Future Minimum Rentals under Housinp,Leases
The Projects have entered into housing contracts with individuals that 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 Projects is zero.
Not 4—Property and Equipment
The Projects' property and equipment at August 31, 1998 was comprised of the following:
Buildings& Furniture& Machinery& Accumulated
and lmprovmnts Eixture s ui ment Depreciation Total
Tower and 5
Other Properties $1,700,000 $18,791,059 $1,493,475 $131,794 ($2,402,919) $19,713,409
Forum 400,000 2,576,940 186,078 23,952 (318,117) 2,868,853
Totals $2,100,000 $21,367,999 $1,679,553 $155,746 ($2,721,036) $26,953,447
Note 5 — Obligations under Leases
As of August 31, 1998 there are no obligations for future payments under operating leases.
See Independent auditor's report
8
Note b—Long-Term Debt
TSHC has the following obligations for these "Projects" pursuant to Installment Sales
Agreement (the"Agreement") related to the Projects:
Lod2eco Properties,Ltd. Mortgage Payable Bearing 12% Interest
• Payable in monthly installments including interest of variable
minimum amounts,as defined in the Agreement
• Unpaid portion due January 19, 2021
Secured by facilities, properties and net revenues of the Tower,
Forum and five(5)of the Other Properties $24,000,000
The Agreements provide that 2.5% of net operating income as therein defined 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, 1998.
See Independent auditor's report
9
THE UNIVERSITY TOWER, FORUM, 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 10.01 of the Installment Sale Agreements
For the Year Ended August 31, 1998
Lodgeco
Properties, Ltd.
Excess of revenue over(under)
expense from operations $ 582,672
Add: Non-operating 1 maintenance expenses
Depreciation $ 1,070,682
Scholarships awarded 59,088
1,129,770
Less: Amounts deposited into the
Replacement Reserve Fund 234,000
NET OPERATING INCOME $ 1,478.442
AMOUNT DUE TO THE TEXAS STUDENT
HOUSING CORPORATION (2'/.%) $ 36,861
13