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Home My WebLink AboutUniversity Tower, Colony, Fourm Audit 98-99 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 Financial Statements For the Year Ended August 31, 1999, and the Period Ended August 31, 1998 Prepared by: Charles Haynes Certified Public Accountant TABLE OF CONTENTS Independent Auditor's Report ................................................................................ 1 Consolidated Balance Sheet ................................................................................... 2 Consolidated Statement of Revenues and Expenses ................................................ 3 Consolidated Statement of Cash Flows.............................. ......... ...... ......... 4 Notes to Financial Statements ................................................................................ 5 Independent Auditor's Report on Additional Information........................................ 10 Consolidating Balance Sheet .................................................................................. 11 Consolidating Statement of Revenues and Expenses ............................................... 12 Consolidated Statement of Revenues and Expenses, Budget and Actual (Non-GAAP Budgetary Basis) ............ ......... .......... 13 Calculation of Amount Due to the Texas Student Housing Corporation Pursuant to Section 10.04 of the Installment Sale Agreements........................... 14 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 University Tower, Forum, Colony Apartments and various other related properties (the Projects," 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, 1999 and 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 Projects and are not intended to present fairly the financial position and results of operations of the Texas Student Housing Corporation„ 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 Projects as of August 31, 1999 and 1998, and the changes in its net assets and cash flows for the periods then ended in conformity with generally accepted accounting principles. Bedford, Texas June 25, 2000 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 Balance Sheet August 31, 1999 and 1998 AUGUST 31, 1999 1998 CURRENT ASSETS: Cash and cash equivalents $ 1,963,982 $ 1,849,102 Trade accounts receivable 2,518,173 2,648,016 Inventory 41,952 49,177 Prepaid and other 192,154 35,290 4,716,261 4,581,585 PROPERTY ARID EQUIPMENT: Land 2,750,000 2,750,000 Buildings and improvements 26,706,485 25,838,159 Furniture, fixtures and equipment 2,175,507 1,990,442 31,631,992 30,578,601 Less: Accumulated depreciation 4,576,504 3,208,514 27,055,488 27,370,087 TOTAL ASSETS $ 31,771,749 $ 31,951,572 CURRENT LIABILITIES: Trade accounts payable $ 805,818 $ 246,693 Notes payable - - Property taxes payable 182,161 186,429 Scholarships awarded 118,280 49,172 Deferred income 4,694,064 6,117,602 Capital lease obligation - 1,375 Other 197,384 42,356 5,997,707 6,643,627 LONG-TERM LIABILITIES: Capital lease obligation - - Long-term debt 29,000,000 29,000,000 Accrued interest 6,638,195 3,928,184 35,638,195 32,928,184 TOTAL LIABILITIES 41,635,902 39,571,811 NET ASSETS (LIABILITIES)-UNRESTRICTED (9,864,153) (7,620,139) TOTAL LIABILITIES AND NET ASSETS $ 31,771,749 $ 31,951,672 The accompanying notes are an integral part of these financial statements 2 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 Revenues and Expenses For the Year Ended August 31, 1999 and 1998 AUGUST 31, 1999 1998 OPERATING REVENUES: Rents $ 7,069,840 $ 5,816,399 Daily rental 312,876 269,473 Property activity, processing and maintenance fees 377,361 208„004 Dormitory phone service 201,643 209,371 Other 128,489 126,529 8,090,209 6,629,776 OPERATING EXPENSES: Property management 1,163,342 870,214 Food cost of sales 595,613 429,139 Other food expense 528,291 433,353 Phone expense 246,591 246,920 Scholarship expense 69,108 49,172 General and administrative 427,131 399,646 Energy costs 601,802 543,700 Real estate taxes and insurance 415,777 426,299 Maintenance and property operations 923,992 1,100,690 Management fees 172,511 191,823 Depreciation 1,367,991 1,255,440 6,512,149 5,946,396 EXCESS OF REVENUE OVER (UNDER) EXPENSE FROM OPERATIONS 1,578,060 683,380 Interest expense 3,822,073 3,892,326 EXCESS OF REVENUE OVER (UNDER) EXPENSE (2,244,014) (3,208,946) NET ASSETS AT BEGINNING OF PERIOD (7,620,139) (4,411,193) NET ASSETS AT END OF PERIOD $ (9,864,153) $ (7,620,139) The accompanying notes are an integral part of these financial statements 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, 1999 and 1998 AUGUST 31, 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES Excess of revenue over(under) expense $ (2,244,014) $ (3,208,946) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 1,367,991 1,255,440 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable 129,843 (793,212) (Increase) decrease in inventories 7,225 (19,639) (Increase) decrease in other current assets (156,864) 276 Increase (decrease) in trade payables 559,125 (4,162) Increase(decrease) in property taxes payable (4,268) (4,550) Increase(decrease) in scholarships awarded 69,108 (26,969) Increase(decrease) in deferred income (1,423,538) 1,844,848 Increase (decrease) in other liabilities 155,027 (7,939) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (1,540,365) (964,893) CASH FLOWS FROM INVESTING ACTIVITIES (Purchase) of property and equipment (1,053,391) (440,357) (Gain) on sale of assets (2,790) NET CASH (USED) IN INVESTING ACTIVITIES (1,056,181) (440,357) CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in capital lease obligations (1,375) - Increase(decrease) in notes payable - - Increase in long-term debt Increase(decrease) in accrued interest 2,710,011 892,339 NET CASH PROVIDED BY FINANCING ACTIVITIES 2,708,636 892,339 Increase(decrease) in cash and cash equivalents 114,880 (529,663) Beginning cash and cash equivalents 1,849,102 2,378,765 ENDING CASH AND CASH EQUIVALENTS $ 1,963,982 $ 1,849,142 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: $ 3,822,073 $ 2,999,988 Interest Income taxes - - The accompanying notes are an integral part of these financial statements 4 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 Motes to Financial Statements August 31, 1999 Note 1 —Basis of Presentation and Summary of Significant Accounting Policies Introduction The accompanying financial statements relate to the operation of The University Tower (the "Tower"), Colony Apartments (the "Colony") and various other properties (the "Other Properties") located in College Station, Texas, 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 1959 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 Colony was constructed in 1975 and consists of 200 units. Effective December 29, 1995, the TSHC purchased the Colony and ten (10) of the Other Properties from Rossco Holdings, Incorporated for $5,000,000. The Other Properties of the Projects are made up of fifteen (15) residences with four (4) living units each. The accompanying financial statements for the Projects reflect comparative revenues and expenses and cash flows for the year ended August 31, 1999 and 1998. 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 assetso (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. See independent auditor's report 5 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 I liabilities. 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 Ieases 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 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, 1999, management represented that no allowances were 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. Inventory 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. See independent auditor's report 6 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 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 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, 1999, the Projects made payments and collected funds on behalf of other properties within the Projects for various reasons, all in the ordinary course of business. These advances to and from each property have been offset against one another and eliminated in the accompanying consolidated balance sheet. Note 3 —Future Minimum Rentals under Housing_ Lease eases The Projects have entered into housing contracts with individuals that relate to contract lease periods that extend beyond August 31, 1999. As of August 31, 1999, the future minimum lease revenue under non-cancelable housing leases for housing within the Projects is as follows: FOR THE YEAR ENDING AUGUST 31, 2000 $4,692,065 2001 2,000 TOTAL $4,694,065 See independent auditor's report 7 Note 4 —Property and Equipment The Projects' property and equipment at August 31, 1999 was comprised of the following: Buildings& Furniture& Machinery& Accumulated Land Improvements Fixtures Equipment Depreciation Total Tower and 5 Other Properties $1,700,000 $19,342,374 $1,564,808 $187,456 ($3,421,814) $19,372,824 Forum 400,000 2,729,750 197,585 34,953 (459,489) 2,902,799 Colony and 10 Other Properties 650,000 4,634,361 190,705 - (695,201) 4,779,865 Totals $2,750,000 $26,706,485 $1,953,098 $222,409 ($4,576,504) $27,055,488 Note 5 — Obligations under Leases As of August 31, 1999 there are no significant obligations for future payments under operating leases. Note 6 —Long-Term Debt TSHC has the following obligations pursuant to Installment Sales Agreements (the "Agreements") related to the Projects, The Colony's 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 Rossco Holdings,Inc. Mortgage Payable Bearing 12%Interest • Pavable in monthly installments including interest of variable nunimum amounts, as defined in the Agreement • Unpaid portion due December 1, 2020 • Secured by facilities,properties and net revenues of the Colony and ten(10)of the Other Properties $5,000,000 Lodacco Properties,Ltd. Morteaze 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 'Power, Forum and five(5) of the Other Properties $24,000,000 See independent auditor's report 8 Note 6 — Long-Term Debt — Continued 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 Agreements require any remaining net operating income, after reduction for amounts paid to the Reserve Replacement Fund (defined in the Agreements) 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, 1999. This installment agreement calls for minimum interest payments, at August 31, 1999, as shown below: Fiscal Year Total Payment Lod eco Share Colony Lod Sing Share 2000 3,600,000 2,979,310 620,690 2001 4,000,000 3,310,345 689,655 2002 4,000,000 3,310,345 689,655 2003 4,000,000 3,310,345 689,655 2004 4,000,000 3,310,345 689,655 2005 4,000,000 3,310,345 689,655 2006 4,000,000 3,310,345 689,655 2007 4,000,000 3,310,345 689,655 2008 4,000,000 3,310,345 689,655 2009 4,000,000 3,310,345 689,655 2010 4,000,000 3,310,345 689,655 2011 4,000,000 3,310,345 689,655 2012 4,000,000 3,310,345 689,655 2013 4,000,000 3,310,345 689,655 2014 4,000,000 3,310,345 689,655 2015 4,000,000 3,310,345 6189,655 2016 4,000,000 3,310,345 689,655 2017 4,000,000 3,310,345 689,655 2018 4,000,000 3,310,345 689,655 2019 - 4,000,000 3,310,345 689,655 2020 4,000,000 3,310,345 689,655 2021 4,000,000 3,310,345 689,655 Total of Future Payments at August 31, 1999 87,600,000 72,496,555 15,103,445 See Independent auditor's report 9 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 University Tower, Forum, Colony Apartments and various other related properties (the "Projects," 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 years ended August 31, 1999 and 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 Consolidating Balance Sheet, Consolidating Statement of Revenues and Expenses, the Consolidated Statement of Revenue and Expenses Budget to Actual (Non-GAAP Budgeting Basis) and the schedule entitled, "Calculation of Amount Due to the Texas Student Housing Corporation Pursuant to Section 10.04 of the Installment Sale Agreements" are not required parts 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 June 25, 2000 10 1998 University Colony Eliminations Tower Forum Apartments DR!(CR) Combined $ 1,450,191 $ 193,890 $ 205,021 $ - $ 1,849,102 2,118,735 518,450 10,831 - 2,648,016 4,619 6,752 56,700 (68,071) - 37,388 11,789 - 49,177 25,618 3,753 5,919 35,290 3,636,551 734,634 278,471 (68,071) 4,581,585 1,700,000 400,000 650,000 2,750,000 18,791,059 2,576,940 4,470,160 25,838,159 1,625,269 210,030 155,143 1,990,442 22,116,328 3,186,970 5,275,303 30,578,601 2,402,919 318,117 487,478 3,208,514 19,713,409 2,868,853 4,787,825 27,370,087 $ 23,349,960 $ 3,603,487 $ 5,066,296 $ (68,071) $ 31,951,672 $ 123,591 $ 62,021 $ 61,081 $ $ 246,693 56,700 4,619 6,752 68,071 - 89,177 19,733 77,519 186,429 30,679 6,282 12,211 49,172 5,101,422 869,818 146,362 - 6,117,602 - 1,375 - 1,375 5,410 - 36,946 - 42,356 5,406,979 963,848 340,871 68,071 6,643,627 21,000,000 3,000,000 5,000,000 29,000,000 2,729,099 755,177 443,908 3,928,184 23,729,099 3,755,177 5,443,908 - 32,928,184 29,136,078 4,719,025 5,784,779 68,071 39,571,811 (5,786,118) (1,115,538) (718,483) - (7„620,139) $ 23,349,960 $ 3,603,487 $ 5,066,296 $ 68,071 $ 31,951,672 1998 University Colony Eliminations Tower Forum Apartments DR 1 fCRi Combined $ 3,954,499 $ 736,938 $ 1,124,962 $ $ 5,816,399 35,295 - 234,178 - 269,473 - 179,690 28,314 - 208,004 168,270 41,101 - - 209,371 109,536 7,507 9,486 - 126,529 4,267,600 965,236 1,396,940 6,629,776 570,826 161,614 137,774 870,214 319,734 104,401 5,004 429,139 328,070 105,283 - - 433,353 181,622 60,451 4,847 - 246,920 278,956 36,123 84,567 399,646 32,495 4,466 12,211 49,172 315,332 101,841 126,527 543,700 236,701 50,490 139,108 426,299 517,845 253,647 329,198 1,100,690 139,995 19,308 32,520 191,823 946,991 123,691 184,758 1,255,440 3,868,567 1,021,315 1,056,514 5,946,396 399,033 (56,079) 340,426 683,380 2,841,561 405,937 644,828 3,892,326 (2,442,528) (462,016) (304,402) (3,208,946) (3,343,590) (653,523) (414,081) (4,411,193) $ (5,786,118) $ (1,115,539) $ (718,483) $ $ (7,620,139) 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 Revenues and Expenses Budget and Actual (Non-GAAP Budgetary Basis) For the Year Ended August 31, 1999 Variance Favorable! Budget Actual Unfavorable) OPERATING REVENUES: Rents $ 7,726,596 $ 7,069,840 $ (656,756) Daily rental 272,160 312,876 40,716 Property activity, processing and maintenance fees 24,550 377,361 352,811 Dormitory phone service 232,806 201,643 (31,163) Other 96,720 128,489 31,769 8,352,832 8,090,209 (262,623) OPERATING EXPENSES: Property management 1,180,488 1,163,342 17,146 Food cost of sales 505,815 595,613 (89,798) Other food expense 502,320 528,291 (25,971) Phone expense 283,868 246,591 37,277 Scholarship Expense - 69,108 (69,108) General and administrative 386,864 427,131 (40,267) Energy costs 624,400 601,802 22,598 Real estate taxes and insurance 456,265 415,777 40,488 Maintenance and property operations 960,060 923,992 36,068 Management fees 200,016 172,512 27,504 Capitalized improvements and equipment 300,000 (1) 1,053,391 (753,391) 5,100,096 6,197,550 (44,063) EXCESS OF REVENUE OVER (UNDER) EXPENSE FROM OPERATIONS $ 3,252,736 1,892,659 $ (1,360,077) ADJUSTMENTS TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES: add: Capitalized improvements and equipment 1,053,391 less: Depreciation expense 1,367,991 Interest expense 3,822,073 EXCESS OF REVENUE OVER (UNDER) EXPENSE (2,244,014) NET ASSETS AT BEGINNING OF PERIOD (7,620,139) NET ASSETS AT END OF PERIOD(GAAP BASIS) $ (9,864,153) (1)-This amount represents the amount budgeted for the reserve for replacement of capital improvements. integral part of these financial statements 13 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 10.04 of the Installment Sale Agreements For the Year Ended August 31, 1999 Rossco Holdings, Lodgeco Incorporated Properties, Ltd. Excess of revenue over(under) expense from operations $ 477,034 $ 1,170,133 Add: Non-operating 1 maintenance expenses Depreciation $ 207,723 $ 1,160,268 Scholarships awarded 12,211 36,961 219,934 1,197,229 Less: Amounts deposited into the Replacement Reserve Fund 66,000 234,000 NET OPERATING INCOME $ 630,968 $ 2,133,3612 AMOUNT DUE TO THE TEXAS STUDENT HOUSING CORPORATION (21/z%) $ 15,774 $ 53,334 14