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HomeMy WebLinkAboutUniversity Tower, Colony, Fourm Audit 08-31-96 THE UNIVERSITY TOWERS, THE COLONY APARTMENTS AND THE FORUM (THE PROJECTS) OF THE TEXAS STUDENT HOUSING CORPORATION (A NON-PROFIT) FINANCIAL STATEMEN'T'S FOR THE PERIOD ENDED AUGUST 31, 1996 TABLE OF CONTENTS Independent Auditors' Report 1 Statements of Financial Position 2 Statements of Activities 3 Statements of Cash Flows 4 Notes to Financial Statements 5-9 Independent Auditors' Report on Additional Information 10 Operating Income Budget Analysis - The Forum 11 Operating Income Budget Analysis - The University Tower 12 Operating Income Budget Analysis - The Colony 13 Net Operating Income Available 14 CERTAIN PROJECTS OF THE TEXAS STUDENT HOUSING CORPORATION STATEMENTS OF FINANCIAL POSITION AUGUST 31, 1996 University The The Tower Forum Colonv CURRENT ASSETS: Cash $ 2,737,565 $ 335,073 $ 276,253 Trade Accounts Receivable 1,923,172 427,177 3,319 Inter-project receivable 10,418 733 9,872 Inventory° 18,243 6,769 - Prepaid and other 26,146 3,400 _ 5,816 Total current assets 4 7, 144 773,152 295,260 PROPERTY, PLANT AND EQUIPMENT: Land 1,700,000 400,000 650,000 Buildings and improvements 18,190,000 2,460,000 4,300,000 Furniture and fixtures _1,404,240 162,561 122,601 21,294,240 3,022,561 5,072,601 Accumulated depreciation _ 539,734 73.508 _ 121,385 20,754,506 2,949,053 4,951,216 TOTAL ASSETS $ 25,470,050 $ 3,722.205 $==5,246 476 CURRENT LIABILITIES: Trade accounts payable $ 178,908 $ 40,176 $ 58,870 Notes payable 281,572 - - Interproject payable 10,605 10,418 - Property taxes payable 79,771 18,968 76,205 Deferred income' 4,320,026 759,900 215,366 Capital lease obligation - 6,007 - Other _ 21,516 - _47,335 Total current liabilities 4.892,398 835,469 397376 LONG-TERM LIABILITIES: Capital lease obligation - 10,055 - Long-term debt 21,000,000 3,000,000 5,000,000 Accrued interest _1,582,000 226,000 170,291 22,582,000 3,236,055 5,170,291 V TOTAL LIABILITIES 27.474,398 4,071,524 5,568,067 NET ASSETS - UNRESTRICTED (2,004,348) _(349,319) X321,591) TOTAL LIABILITIES AND NET ASSETS $ 25.470.050 $ 205 $_5.246.476 The accompanying notes are an integral part of these financial statements. 2 9iom son, Berri &Slovacek 7 Woody Thompson, CPA/CFP 4500 Carter Creek Parkway Suite 201 Sharla Akin,CPA Andrea Derrig,CPA Bryan,Texas 77802-4456 Alline Briers,CPA Ed Slovacek,CPA/CFP (409)260-9696•FAX(409)260-9683 Gay Vick Craig,CPA Ronnie Craig,CPA Alice Monroe,CPA INDEPENDENT AUDITORS' REPORT Marian Rose Varisco,CPA December 11, 1996 To the Board of Directors of Texas Student Housing Corporation We have audited the accompanying statements of financial position of The University Towers, The Colony Apartments, and The Forum (the Projects) of Texas Student Housing Corporation (a non-profit organization) as of August 31, 1996, and the related statements of revenues and expenses and cash flows for the periods then ended. These financial statements are the responsibility of the Organization'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 In our opinion, the financial statements referred to above present fairly, in all material respects,the financial position of the Projects as of August 31, 1996, and the changes in its net assets and its cash flows for the periods then ended in conformity with generally accepted accounting principles, 7 t�, 'C. THOMPSON, DERRIG & SLOVACEE, P.C. CERTAIN PROJECTS OF THE TEXAS STUDENT HOUSING CORPORATION STATEMENTS OF ACTIVITIES FOR THE PERIODS ENDED AUGUST 31, 1996 University The The Tower Forum Co. lone OPERATING REVENUE: Dormitory $ 1,260,531 $ 226,151 $ 710,719 Hotel, food and beverage 102,467 - 79,535 Don-nitory activity, processing and maintenance fees 394,756 86,980 - Dorm phone service 40,906 8,688 - Other 78,580 8,334 18,014 1,877,240 330,153 808,268 OPERATING EXPENSES: Dormitory operating 371,661 93,733 95,813 Food cost of sales 92,414 38,377 13,707 Other food expense 115,614 40,181 - Phone expense 75,161 20,148 3,605 General and administrative 112,684 12,302 41,906 Energy costs 231,715 56,132 100,994 Real estate taxes and insurance 160,388 28,399 109,543 Maintenance and property operations 514,039 72,566 209,561 Management fees 86,178 16,931 21,680 Depreciation 539,734 73.508 15 2,299,588 _452,277 718,194 NET INCREASE (DECREASE) FROM OPERATIONS (422,348) (122,124) 90,074 INTEREST EXPENSE _ 1,582,000 227,195 411,665 DECREASE IN NET ASSETS $ (2,004,348)$ (349,319) $ 321.591) NET.ASSETS AT BEGINNING OF PERIOD - NET ASSETS AT END OF PERIOD $ (2,004,348)$ (349.319) $ 32 59 The accompanying notes are an integral part of these financial statements. 3 CERTAIN PROJECTS OF THE TEXAS STUDENT HOUSING CORPORATION STATEMENTS OF CASH FLOWS FOR PERIODS ENDED AUGUST 31, 1996 University The The Tower Forum Co lony CASH FLOWS FROM OPERATING ACTIVITIES: Decrease in net assets $ (2,004,348) $ (349,319) $ (321,591) Adjustments to reconcile change in net assets to net cash provided by Operating activities: Depreciation: 539,734 73,508 121,385 Changes in operating assets and liabilities: (Increase) in accounts receivable (1,923,172) (427,177) (3,319) (Increase) in intercompany assets (10,418) (733) (9,872) (Increase) in inventories (18,243) (6,769) - (Increase) in other current assets (26,146) (3,400) (5,816) Increase in trade payables 178,908 40,176 58,870 Increase in intercompany liabilities 10,605 10,418 - Increase in property taxes payable 79,771 18,968 76,205 Increase in deferred income 4,320,026 759,900 215,366 Increase in other liabilities 21.516, - 47,335 Net cash provided by operating activities 1.168.233 115.572 178.563 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment 021,294,240) (3.022.561) X5,072.601) Net cash used in investing activities (21,294,240) 0,022,561) (5.072,601) CASH FLOWS FROM FINANCING ACTIVITIES: Increase in capital lease obligations - 16,062 Increase in notes payable 281,572 - Increase in long-term debt 21,000,000 3,000,000 5,000,000 Increase in accrued interest 1,582,000 _226,000 _170,291 Net cash provided by financing activities 22,863,572 3-242,062 5,170,291 Increase in cash and cash equivalents 2,737,565 335,073 276,253 Beginning cash and cash equivalents - - Ending cash and cash equivalents. $ 37 565 $ 335.073 $ 76 253 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ - $ 1,195 $ 241,374 Income taxes $ _ $ _ $ The accompanying notes are an integral part of these financial'statements. 4 CERTAIN PROJECTS OF THE TES STUDENT HOUSING CORPORATION NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1996 Note I - Basis of Presentation and Summary of Significant Accounting Policies The accompanying financial statements relate to the operations of the University Tower (the Tower) and The Colony Apartments (The Colony) located in College Station, Texas and the Forum (the Forum) located in Bryan, Texas (collectively referred to as the Projects). The Projects are currently owned by Texas Student Housing Corporation (TSHC). The 17-story tower portion of the Tower was constructed in 1985, and the two-story complex portion was constructed in 1963 and upgraded in 1989-1990. The Tower consists of 843 dormitory spaces. The Forum was constructed in 1964, consisting of 120 rooms and 236 spaces. Effective January 20, 1996, TSHC purchased the Tower and the Forum from Lodgeco Properties, Ltd. for $24,000,000. The accompanying financial statements reflect revenues and expenses and cash flows from that effective date through August 31, 1996. The Colony was constructed in 1975, consisting of 200 units. Effective December 29, 1995, TSHC purchased the Colony and ten quadplexes managed by the Tower from Rossco Holdings, Incorporated for$5,000,000. The accompanying financial statements for the Colony reflect revenues and expenses and cash flows from that effective date 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-far-Profit OrcTanizations. Under SFAS No. 117, TSHC is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Basis of accounting The accompanying financial statements have been prepared on the accrual basis of accounting and accordingly reflect all significant receivables,payables, and other liabilities. See independent auditors' report. 5 CERTAIN PROJECTS OF THE TEXAS STUDENT HOUSING CORPORATION NOTES TO FINANCIAL STATEMENTS (CONT.) AUGUST 31, 1995 Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (Cont.) Revenue recocinition Revenues from the leases, dormitory activity fees, par?dng and maintenance fees are deferred and recognized over the term of the leases. Leases are classified as operating and are for a term of five, nine, or twelve months. Revenue from nonrefundable processing fees is recognized when received. Hotel revenue is recorded daily on a check-in basis. All other hotel revenue is recognized when earned. Cash and cash equivalents For purposes of the statements of cash flows, all unrestricted highly liquid investments with an initial maturity of three months or less are considered to be cash equivalents. Accounts receivable The accounts receivable includes amounts due from students for leases, dormitory activity fees and maintenance fees and are stated net of all known uncoRectible accounts. The Projects use historical experience to determine an allowance for doubtful accounts. At August 31, 1996, it was determined that no allowance was necessary. Inventories Inventories consist primarily of food items and are stated at lower of cost or market determined by the first-in, first-out method. Income tax status TSHC is exempt from federal income tax under section 5©1(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. See independent auditors' report. 6 CERTAIN PROJECTS OF THE TEXAS STUDENT HOUSING CORPORATION NOTES TO FINANCIAL STATEMENTS (CONTT.) AUGUST 31, 1996 Note 1 - Basis of Presentation and Summary of Significant Accounting Policies (Cont.) Property, Plant and Equipment Property, plant and equipment are carried at cost. Depreciation is computed using the straight-l<ne method over its estimated useful lives. All expenditures for property, plant and equipment greater than $500 are capitalized. Use of Estimates 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. Note 2 - Related Party Transactions During the period ended August 31, 1996, the Forum, the Tower and the Colony made payments on behalf of each other for services and supplies used during the course of ordinary business. These advances to and from each project are classified as interproject payables and receivables in the accompanying statements of financial position. Note 3 - Future Minimum Rentals Linder Operating Leases As of August 31, 1996, the future minimum lease revenue under noncancellable operating leases for the year ending August 31, 1997 is as follows: University The The Tower Forum Colony Dormitory $ 4,022,276 $ 704,912 $ 215,366 Dormitory activity and maintenance fees 90,187 20,812 - Phone 68,265 17,137 Pa'ldng 139,298 17.039 - $ . 4.320.02E $ _759.900 $ 2�X See independent auditors' report. 7 CERTAIN PROJECTS OF THE TEXAS STUDENT HOUSING CORPORATION NOTES TO FINANCIAL STATEMENTS (CONT.) AUGUST 31, 1996 Note 4 - Obligations Under Leases The Forum leases telephone equipment under a capital lease'.. The capitalized cost of $22,561 and related accumulated depreciation of $1,747 are included in the accompanying balance sheet. The following is a schedule of future minimum payments required under the lease together with their present value as of August 31, 1996. Years ending August 31: 1997 $ 7,798 1998 7,798 1999 1,949 Total future minimum lease payments 17,545 Less amount representing interest 1,483 Present value of future payments 16,062 Less current portion 6.007 Long-term portion $ 10.fl55 The Projects lease certain equipment under operating leases. Future minimum lease commitments are as follows: University The The Tower Forum Colony 1997 $ 38,756 $ 12,428 $ 10,195 1998 17,029 8,389 3,396 1999 2,424 1.320 400 $ 58.209 $ 22 1�3Z $ _ 13.991 Rent expense incurred under certain operating leases was $25,167, $9,028, and $6,247, for the Tower, the Forum and the Colony, respectively. See independent auditors' report. 8 CERTAIN PROJECTS OF THE TEXAS STUDENT HOUSING CORPORATION NOTES TO FINANCIAL STATEMENTS (CONT.) AUGUST 31, 199-0 Note 5 - Notes payable TSHC's notes payable relating to operations of the Tower at August 31, 1996 consisted of the following: SSRS, Inc., unsecured, beaming no interest, due March 1997 $ 41,900 SSRS, Inc., unsecured, bearing no interest, due June 1997 18,009 SSRS, Inc., unsecured, bearing no interest, due July 1997 221,663 $ 28152 Note 6 - Long-term debt TSHC has the following obligations under two Installment Sale Agreements: Lodgeco Properties, Ltd., mortgage payable bearing 12% interest, payable ninthly including interest beginning September, 1996 in variable minimum amounts as defined in the agreement,unpaid portion due January 1, 2021, secured by facilities and properties and net revenues of projects $ 24,000,000 Rossco Holdings, Inc., mortgage payable bearing 12% interest, payable monthly including interest in variable minimurn amounts as defined in the agreement, unpaid portion due December 1, 2020, secured by facilities, properties and net revenues of projects 5,000,000 29.000.400 The Installment Sale Agreement provides for 2.5% of net operating income as defined in the agreement to be retained by TSHC. The bylaws of the TSHC provide for these funds to be used to fund a student assistance program to provide education and/or housing assistance to deserving students. The Installment Sale Agreement requires any remaining net operating income, adjusted for amounts funded to the Reserve Replacement Fund and the 2.5% of net operating income due TSHC, be used to pay down on any outstanding deferred interest and then principal. No repayment of the principal portion of long-term debt is anticipated during the five-year period succeeding August 31, 1996. See independent auditors' report. 9 9hom son, Derlig &SCovdcek Woody Thompson,CPA/CFP 4500 Carter Creek Parkway Suite 201 Shada Akin,CPA Andrea Derrig,CPA Bryan,Texas 77802-4456 Alline Briers,CPA Ed Slovacek,CPA/CFP (409)260-9696•FAX(409)260-9683 Gay Vick Craig,CPA Ronnie Craig,CPA Alice Monroe,CPA INDEPENDENT AUDITORS' REPORT Marian Rose Varisco,CPA ON ADDITIONAL INFORMATION December 11, 1996 To the Board of Directors of Texas Student Housing Corporation Our report on our audit of the basic financial statements of the University Towers, The Colony Apartments, and the Forum (the Projects) of Texas Student Housing Corporation (a non-profit organization) for the periods ended August 31, 1996 appears on page 1. That audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules of compliance with approved operating income budget and net operating income available are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements; and, in our opinion, such information is fairly stated in all material respects in relation to the basic financial statements taken as a whole. THOMPSON, DERRIG & SLOVACEI , P.C. r TEXAS STUDENT HOUSING CORP THE FORUM OPERATING INCOME BUDGET ANALYSIS FOR THE PERIOD ENDED AUGUST 31, 1996 Budget Actual Variance OPERATING REVENUES Donor revenue $ 254,135 $ 226,151 $ (26,034) Dorm maint/process fees 100,000 86,980 (13,020) Other income 6,600 8,334 1,734 Phone revenue long distance 4,000 2,867 (1,133) Deferred phone revenue 5,439 5,821 382 TOTAL REVENUES 370,224 330,153 4s 0.071) EXPENSES Dorm operating - payroll 56,950 59,716 2,766 Dorm operating - other 24,800 34,017 9,217 Food cost of sales 35,800 38,378 2,578 Other food expense 4,850 4,567 (283) Payroll-food 33,900 35,613 1,713 Phone expense 11,675 20,148 8,473 General& administrative 13,900 12,302 (1,598) Energy costs 47,000 56,132 9,132 Real estate taxes and insurance 28,990 2.8,399 (591) Maintenance & property operations 51,200 72,566 21,366 Management fees 18,336 16,931 (1.40) TOTAL EXPENSES 327,401 378,769 51,368 NET OPERATING INCOME (LOSS) BEFORE DEPRECIATION AND INTEREST $ 42.823 48 6 6 $ (91.439} TEXAS STUDENT HOUSING CORPORATION UNIVERSITY TOWER OPERATING INCOME BUDGET ANALYSIS FOR THE PERIOD ENDED AUGUST 31, 1996 Budget Actual Variance OPERATING REVENUES Dorm full year (95/96) $ 977,658 $ 1,007,714 $ 30,056 Dorm full year (96/97) 183,131 162,533 (20,598) Dorm spring 96 20,786 29,459 8,673 Dorm sununer 96 32,500 60,825 28,325 Hotel revenue 324,000 394,756 70,756 Dorm maint/process fees 33,036 102,467 69,431 Other income 46,000 78,580 32,580 Phone revenue long distance 17,600 26,285 8,685 Deferred phone revenue 14,360 14.621 261 TOTAL REVENUES _1,649,071 1.877.240 228,169 EXPENSES Dorm operating - payroll 254,900 277,945 23,045 Dorm operating- other 76,400 93,716 17,316 Food cost of sales 123,900 92,414 (31,486) Other food expense 17,475 17,617 142 Payroll-food 100,800 97,997 (2,803) Phone expense 82,400 75,161 (7,239) General& administrative 109,700 112,684 2,984 Energy costs 266,000 231,715 (34,285) Real estate taxes and insurance 96,991 160,388 63,397 Maintenance &property operations 179,720 514,039 334,319 Management fees 93,328 86.178 (7.150) TOTAL EXPENSES 1,401.614 1,759,854 358.240 NET OPERATING INCOME BEFORE DEPRECIATION AND INTEREST $ 247.457 $ 117.386 $ 13f x,071) 12 TEXAS STUDENT HOUSING CORPORATION THE COLONY OPERATING INCOME BUDGET ANALYSIS FOR THE PERIOD ENDED AUGUST 31, 1996 Budget Actual Variance OPERATING REVENUES Rent, net of discounts and allowances $ 634,225 $ 609,628 $ (24,597) Dorm operating - other 112,224 101,091 (11,133) Dorm mai.nt/process fees 36,000 - (36,000) Maintenance fees 5,400 1,017 (4,383) Late charges 3,700 3,780 80 Vending income 7,200 6,912 (288) Other income 3,650 6,305 2,655 Extended stay --15,200 79,535 64,335 TOTAL REVENUES 817.599 808,268 (9,331 EXPENSES Dorm operating 32,400 39,935 7,535 Dorm utility 19,200 24,834 5,634 Dorm 19 meal program 35,863 13,707 (22,156) Payroll 50,858 55,878 5,020 General and administrative 32,130 45,511 13,381 Energy costs 87,807 76,160 (11,647) Real estate taxes and insurance 78,504 109,543 31,039 Maintenance and property operations 110,388 209,561 99,173 Management fees 21.680 21,680 TOTAL EXPENSES 468,830 596,809 127,979 NET OPERATING INCOME BEFORE DEPRECIATION AND INTEREST $ 348.769 $ 11 459 13 TEXAS STUDENT HOUSING CORPORATION NET OPERATING INCOME AVAILABLE AS DEFINED IN SECTION 10.04 OF INSTALLMENT SALE AGREEMENT AUGUST 31, 1996 Lodgeco Rossco Net operating income (loss) The Colony $ - $ 211,459 The Forum (48,616) - The Tourer 117,386 - Less: Replacement Reserve Fund (117,000) (44,000) $ 4 $ 167.459 Funds available to Texas Student Housing (21/a%) $ - $ 4.186 14