Loading...
HomeMy WebLinkAboutBallpark Audit 08-31-04 TEXAS STUDENT HOUSING AUTHORITY -- BALLPARK AUSTIN PROJECT FINANCIAL REPORT AUGUST 31, 2004 CONTENTS Page INDEPENDENT AUDITOR'S REPORT ...................................................................................1 FINANCIAL STATEMENTS Statement of Net Assets..................................................................................................2 Statement of Revenues, Expenses, and Changes in Net Assets.....................................3 Statementof Cash Flows.................................................................................................4 Notes to Financial Statements.........................................................................................6 Auditors Report of Supplemental Schedules..................................................................15 SUPPLEMENTAL SCHEDULES Schedule I —Schedule of Revenues and Expenses.......................................................16 Schedule II — Certificate of the Fixed Charges Coverage Ratio .....................................17 INDEPENDENT AUDITOR'S REPORT WEAVED To the Board of Directors TID HELL Texas Student Housing Authority - Ballpark Austin Project L.L.P, We have audited the accompanying financial statements of Texas Student CERTIFIED PUBLIC Housing Authority-Ballpark Austin Project (the "Project"), as of and for the twenty Accou NTANTS AND CONSULTANTS month period ended August 31, 2004, as listed in the table of contents. These financial statements are the responsibility of the Project management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 do not purport to, and do not, present fairly the financial position of Texas Student Housing Authority as of August 31, 2004, and the changes in its financial position and cash flows, where applicable, for the twenty month period then ended in conformity with accounting principles generally accepted in the United States of America. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Texas Student Housing Authority — Ballpark Austin Project at August 31, 2004 and the results of its operations and cash flows for the twenty month period then ended in conformity with accounting principles generally accepted in the United States of America. Texas Student Housing Authority — Ballpark Austin Project has not presented DALLAS management discussion and analysis that accounting principles generally accepted in the United States of America has determined is necessary to 'hree Forest Plaza supplement, although not required to be part of the basic financial statements. 12231 Aleut Drive Smite 1400 Dalf ts, Texas 75251-2280 f} td..d•4 . 177.490.1970 Aaw"� F 977.:02.5321 FORT WORTH WEAVER AND TIDWELL, L.L.P. 1600 Melt Serrath Street Site 300 Fort Worth, Texas F.;-t 111orth. 7�x„F 76102-2566 March 14, 2005 Y 17.33 7.7905 F s17.429.59-36 4316 W WW.W EAVERANDTIDWELL.COM AN INDEPENDENT MEMBER OF BAKER TILLY I NTERNAT'lONAL Page 2 TEXAS STUDENT HOUSING AUTHORITY - BALLPARK AUSTIN PROJECT STATEMENT OF NET ASSETS AUGUST 31, 2004 ASSETS CURRENT ASSETS Cash $ 238,962 Restricted cash 3,566,901 Accounts receivable 40,951 Total current assets 3,846,814 CAPITAL ASSETS Land 4,788,265 Other capital assets, net of accumulated depreciation 24,946,058 Total capital assets 29,734,323 INTANGIBLE ASSETS Deferred financing costs, net of amortization 3,288,042 Total intangible assets 3,288,042 TOTAL ASSETS $ 36,869,179 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Trade accounts payable $ 71,991 Management fees payable 338,450 Deferred revenue 249,992 Tenant security deposits 41,071 Accrued interest 1,365,405 Other current liabilities 132,583 Development fee payable 158,033 Bonds payable 464,915 Total current liabilities 2,822,440 LONG TERM LIABILITIES Bonds payable 36,767,753 Deferred purchase price 1,460,000 Total long term liabilities 38,227,753 NET ASSETS Invested in capital assets, net of related debt ( 7,498,345) Restricted for debt service 2,116,652 Unrestricted 1,200,679 Total net assets ( 4,181,014) TOTAL LIABILITIES AND NET ASSETS $ 36,869,179 The Notes to Financial Statements are an integral part of this statement. Page 3 TEXAS STUDENT HOUSING AUTHORITY - BALLPARK AUSTIN PROJECT STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS FOR THE TWENTY MONTH PERIOD ENDED AUGUST 31, 2004 OPERATING REVENUES Rental income $ 5,955,286 Other income 47,466 Total operating revenue 6,002,752 OPERATING EXPENSES Personnel expenses 548,525 Contract services 65,748 Utilities 590,616 Repairs and maintenance 43,684 Turnover expenses 161,094 Advertising and promotion 114,709 Administration expenses 589,371 Management fees 448,360 Replacements 86,312 Depreciation expense 2,186,561 Amortization expense 300,633 Total operating expenses 5,135,613 OPERATING INCOME 867,139 NONOPERATING REVENUES (EXPENSES) Interest income 218,379 Interest expense { 4,131,917) TOTAL NONOPERATING LOSS { 3,913,538) CHANGE IN NET ASSETS { 3,046,399) NET ASSETS, AUGUST 31, 2003, AS PREVIOUSLY REPORTED ( 824,463) PRIOR PERIOD ADJUSTMENT { 310,152) NET ASSETS, AUGUST 31, 2003, RESTATED { 1,134,615) NET ASSETS, AUGUST 31, 2004 ($ 4,181,014) The Notes to Financial Statements are an integral part of this statement. Page 4 TEXAS STUDENT HOUSING AUTHORITY - BALLPARK AUSTIN PROJECT STATEMENT OF CASH FLOWS FOR THE TWENTY MONTH PERIOD ENDED AUGUST 31, 2004 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from tenants $ 5,978,140 Cash paid to employees { 543,424) Cash paid to suppliers 1,793,680) Net cash provided by operating activities 3,641,036 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES - CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Payments on bonds payable ( 770,000) Interest paid ( 4,094,526) Net cash used in capital and related financing activities ( 4,864,526 CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 218,379 Net cash provided by investing activities 218,379 Net change in cash and cash equivalents { 1,005,111) Cash and cash equivalents at beginning of year restated 4,810,974 Cash and cash equivalents at end of year $ 3,805,863 Cash $ 238,962 Restricted cash 3,566,901 Total cash and cash equivalents $ 3,805,863 The Notes to Financial Statements are an integral part of this statement. Page 5 TEXAS STUDENT HOUSING AUTHORITY - BALLPARK AUSTIN PROJECT STATEMENT OF CASH FLOWS FOR THE TWENTY MONTH PERIOD ENDED AUGUST 39, 2004 RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income $ 867,139 Adjustments to reconcile operating income to net cash used in operating activities Depreciation and amortization 2,487,194 Changes in operating assets and liabilities: Accounts receivable 36,669 Other assets 33,182 Trade accounts payable ( 37,275) Management fees payable 227,650 Deferred revenue ( 38,652) Tenant security deposits ( 22,629) Development fee payable 78,000 Other current liabilities 9,758 Net cash provided by operating activities $ 3,641,036 The Notes to Financial Statements are an integral part of this statement. Page 6 TEXAS STUDENT HOUSING AUTHORITY— BALLPARK AUSTIN PROJECT NOTES TO FINANCIAL STATEMENTS NOTE 1. GENERAL STATEMENT Texas Student Housing Authority (the "Authority"), a higher education authority, was established on January 23, 1995, as a duly constituted authority of the Town of Westlake, Texas, pursuant to Section 53.11 of Chapter 53 of the Texas Education Code, as amended. The Authority's purpose among other things is to acquire, finance, and operate student housing facilities. The Authority operates several student housing facilities in Texas and one of the housing projects is the Ballpark Austin Project (the "Project"). The Ballpark Austin Project was purchased from Jefferson Commons - Austin, L.P., a Delaware limited partnership on December 27, 2001. The Project obtained its financing through the issuance of Texas Student Housing Authority - Student Housing Revenue Bonds (Austin, Texas Project), Series 2001A, Series 2001B and Subordinate Series 2001C (the "Bonds"). The Bonds were issued through a Trust Indenture (the "Trust Indenture") by and between the Authority and The Bank of New York (the "Trustee"). The Series 2001A, 2001B and Subordinate Series 2001C bonds were issued in the face amounts of $34,175,000, $2,470,000 and $3,000,000, respectively. The accompanying financial statements present the operations of the one Project, whose revenue streams are pledged for the bonds described herein. The Project was operated and managed under the terms of the (a) Property Management and Leasing Agreement by and between the Authority and JPI Campus Quarters Management, L.P. ("JPI") and (b) the Asset Management Agreement by and between the Authority and JPI Apartment Management, L.P., up until May 31, 2004. The Project is now managed and operated by Asset Campus Management under the terms of a Property Management and Leasing Agreement dated June 1, 2004. The property management agreements are collectively referred to as the "Agreements". NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the Project's significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: Reporting Entity For financial reporting purposes, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth in GASB Statement No. 14 as amended by GASB statement No. 39. The criteria used is as follows: Financial Accountability - The primary government is deemed to be financially accountable if it appoints a voting majority of the organization's governing body and (1) it is able to impose its will on that organization or (2) there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government. Additionally, the primary government may be financially accountable if an organization is fiscally dependent Page 7 TEXAS STUDENT HOUSING AUTHORITY— BALLPARK AUSTIN PROJECT NOTES TO FINANCIAL STATEMENTS NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued Reporting Entity - continued on the primary government regardless of whether the organization has a separately elected governing board appointed by a higher level of government or a jointly appointed board. Measurement Focus and Basis of Accounting The Project uses the "net income and capital maintenance" measurement focus. This means that all assets, liabilities, equity, revenues, and expenses are accounted for using the accrual basis of accounting. Revenue is recognized when earned and expenses are recognized when they are incurred. In applying the requirements of GASB Statement No. 20, the Project has chosen to apply all applicable GASB pronouncements as well as Financial Accounting Standards Board pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. Income Taxes The Project is an instrumentality of the Town and, therefore, its income is not subject to federal income taxation pursuant to Section 115 of the Internal Revenue Code. Cash and Cash Equivalents The Project considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents. At August 31, 2004, the Project had no such investments included in cash and cash equivalents. The Project's cash of $238,962 (bank balance $456,158) is deposited in FDIC insured state or national banking corporations and is categorized as category one and three. Category one represents cash and cash equivalents that are insured in the amount of $100,000. Cash in excess of FDIC insured amounts are secured by a safekeeping receipt from Northwest Bank in the amount of$1,000,000 at August 31, 2004. In addition, the Project has restricted cash of $3,566,901 that is held by the Trustee for the Bonds payable under provisions of the Indenture. During the twenty month period ending August 31, 2004 the investment income received from the restricted cash was $215,392. Page 8 TEXAS STUDENT HOUSING AUTHORITY— BALLPARK AUSTIN PROJECT NOTES TO FINANCIAL STATEMENTS NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued Accounts Receivable Accounts receivable are stated at amounts management expects to collect from outstanding balances. Management writes-off uncollectible amounts through a reduction to revenue and a credit to accounts receivable based on its assessment of the outstanding receivables. At year end management assesses the accounts receivable balance and establishes a valuation allowance based on historical experience and an evaluation of the outstanding balances. As of August 31, 2004, management has determined that all accounts doubtful of collection have been charged to operations and an allowance is not required. Deferred Financing Costs Costs associated with the issuance of bonds are deferred and amortized over the terms of the bonds. Advertising Costs A[] advertising costs are expensed as they are incurred. Advertising costs for the twenty-month period ending August 31, 2004 were approximately $115,000. Capital Assets Property and equipment have been recorded at the date of acquisition at cost. Routine maintenance and repair costs to ready the units for the next period are expensed as incurred. Expenditures directly related to the improvement of property are capitalized at cost. The Project capitalizes the cost of roof replacements and expenditures for other major property improvements. The Indenture (dated December 1, 2001) provides for a repair and replacement fund requirement. The covenant states that no less frequently than every five years following the date of issuance of the Bonds, the Project will cause a professional engineer or firm of such engineers to conduct a physical assessment of the Project and to submit a written report concerning the physical condition of the Project and the engineer's recommendations for capital improvements needed at the Project. Depreciation is computed using the straight-line method over the estimated useful lives as follows: Building 30 years Furniture, fixtures and equipment 3 to 20 years Page 9 TEXAS STUDENT HOUSING AUTHORITY— BALLPARK AUSTIN PROJECT NOTES TO FINANCIAL STATEMENTS NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — continued Restricted Cash Restricted cash represents amounts placed on deposit in accounts and held by the Trustee, which are restricted for the payment of expenses as required by the Trust Indenture. At August 31, 2004, restricted cash consists of the following funds and accounts: Fund/Account Description Revenue Fund $ - Bond Fund - Series 2001A Senior Interest 251,732 Bond Fund - Series 2001 B Sub B 3 Bond Fund - Series 2001 C Sub C 15 Debt Service Reserve 2001A Senior 2,280,538 Debt Service Reserve 2001 B Sub B 195,875 Project Fund 50,324 Repair and Replacement Fund 182,615 Minimum Scholarship Fund 1,726 Surplus Fund Sub C Amortization 150,497 Surplus Fund Issuer Education 4,591 Trustee Fee Fund 1,057 Tax and Insurance Fund 100,296 Support Management Fee Account 124,805 Senior Bonds Principal 220,095 Sub B Bond 2,732 Residual Fund/Insurance Fund - Total $ 3,566,901 The following is a brief description of the funds and accounts making up the restricted cash balance at year end, as defined by the Trust Indenture: Revenue Fund - The revenue fund was established for monthly deposits from the depository account that holds general revenues of the Project. All monies are deposited in the revenue fund and then properly distributed to the other funds, as required by the Trust Indenture. Amounts in the fund at year end represent amounts that have not been distributed to the other funds due to timing of the interfund transfers, ,Bond Fund - The Trustee makes monthly deposits in the bond fund pursuant to the Trust Indenture. Amounts in the Bond Fund shall be used solely to fund the payment of principal and interest on the Bonds, for the redemption of the Bonds at or prior to maturity, and to purchase Bonds on the open market. In the event of default, amounts in this fund may pay the fees and expenses of the Trustee prior to making any payments to the bondholders. This fund has three accounts, the Series 2001A, 2001B and the Series 20010 accounts. Page 10 TEXAS STUDENT HOUSING AUTHORITY-- BALLPARK AUSTIN PROJECT NOTES TO FINANCIAL STATEMENTS NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- continued Repair and Replacement Fund- Amounts in the repair and replacement fund may be (a) used to pay the maintenance and repair costs related to the Ballpark Austin Property, which the Project is obligated to pay pursuant to the Trust Indenture and (b) transferred to the bond fund to pay principal of or interest on the Bonds to the extent there are insufficient monies in the bond fund. Surplus Fund-The trustee shall deposit any remaining amount in the revenue fund into the surplus fund. Amounts on deposit in the surplus fund will be released to the Project if certain release tests are satisfied. If the release tests are not satisfied, the Trustee will retain the monies on deposit in the surplus fund. Trustee Fee Fund- Amounts are deposited in the trustee fee fund on a monthly basis and are intended to pay the fees to the Trustee at year end. Series A Principal Fund - Amounts in the Series A principal fund represent sinking fund payments set aside for repayment of the principal balance on the Series A Bonds. Series B Principal Fund - Amounts in the Series B principal fund represent sinking fund payments set aside for repayment of the principal balance on the Series B Bonds. Operating Reserve Fund - Amounts in the operating reserve fund may be transferred to the property manager to fund operations if the transfer from the revenue fund is not sufficient to pay operating expenses. Amounts may also be transferred to the Bond Fund to pay principal and interest on the Bonds; to the extent there are insufficient monies in the Bond Fund on any interest payment date. Debt Service Reserve 2001A Account- The amounts on deposit in this account are to be used for the purpose of paying principal and interest on the Series 2001A Bonds as they become due in the event there should be insufficient funds in the Bond Fund. Debt Service Reserve 2009E Account-- The amounts on deposit in this account are to be used for the purpose of paying principal and interest on the Series 2001 B Bonds as they become due in the event there should be insufficient funds in the Bond Fund. Project Fund — Amounts in the project fund are held and disbursed for costs of the project. Residual Fund — Amounts in the residual fund relate to three accounts — the Subordinate Bond Amortization Account — Series C, the Issuer Education Account and the Supplemental Management Fee Account. Based on release, tests funds are then transferred to each respective account. In addition insurance funds are held to pay costs of maintaining insurance on the project. Page 11 TEXAS STUDENT HOUSING AUTHORITY— BALLPARK AUSTIN PROJECT NOTES TO FINANCIAL STATEMENTS NOTE 3. CAPITAL ASSETS Capital asset activity for the Project for the twenty month period ended August 31, 2004 was as follows: Beginning Ending Balance Additions Retirements Balance Capital assets not being depreciated: Land 4,788,265 $ - $ - $ 4,788,265 Total capital assets not being depreciated 4,788,265 - - 4,788,265 Capital assets being depreciated: Building 21,345,305 - - 21,345,305 improvements, furniture and fixtures 6,993,063 - - 6,993,063 Total capital assets being depreciated _28,338,368 - - 28,338.368 Totals at historical cost 33,126,633 - - 33,126,633 Less accumulated depreciation: Building 711,510 1,185,850 - 1,897,360 improvements, furniture and fixtures 494,239 1,000,711 - 1,494,950 Total accumulated depreciation 1,205,749 2,186,561 - 3,392,310 Capital assets, net $31.920.884 ($2,1, 86,561) $ - $29.734,323 NOTE 4. BONDS PAYABLE The Bonds are Tax-Exempt Governmental Obligations under the Internal Revenue Code. The Bonds payable represent amounts due to the bondholders, via the Trustee, and payable under the terms of the Trust Indenture dated December 1, 2001. The Bonds are payable solely from the revenues generated by the Project and are secured by the revenues pledged and assigned under the terms of the Trust Indenture. Interest rates on the bonds range from 4.00% to 11.00% and are payable semi-annually on July 1 and January 1 of each year thereafter. Page 12 TEXAS STUDENT HOUSING AUTHORITY— BALLPARK AUSTIN PROJECT NOTES TO FINANCIAL STATEMENTS NOTE 4. BONDS PAYABLE - continued At August 31, 2004, the Project had not made interest payments on the subordinate 2001C Bond series since July 2003 and the subordinate 2001C Bond is in default. In addition, the Project's fixed charges coverage ratio was not in compliance with the covenants of the Indenture. These events do not constitute an event of default that accelerates the bonds. As a result, the maturities are presented under the original repayment terms. The following is a summary of long-term debt transactions of the Project for the twenty month period ended August 31, 2004: Balance Balance December 31, August 31, Due Within 2002 Increases Decreases 2004 One Year Revenue Bonds 2001A Bonds $ 34,175,000 $ - ($ 725,000) $33,450,000 $ 495,000 2001B Bonds 2,470,000 - ( 45,000) 2,425,000 30,000 2001C Bonds 3,000,000 - - 3,000,000 - Less Discounts ( 1,742,474) - 100,142 ( 1,642,332) (^ 60.085) Total L37,902,526 .________ 37.232.668 $....464,915 The debt is to be amortized through 2033 with varying payment amounts ranging from $330,000 to $4,505,000 for interest and principal. The annual requirements to amortize all debts outstanding as of August 31, 2004 are as follows: Due Fiscal Year Ending August 31 Principal Interest Total 2005 $ 525,000 $ 2,255,211 $ 2,780,211 2006 545,000 2,232,586 2,777,586 2007 570,000 2,207,923 2,777,923 2008 595,000 2,180,920 2,775,920 2009 620,000 2,151,940 2,771,940 2010-2014 3,595,000 10,230,556 13,825,556 2015-2019 4,680,000 9,084,119 13,764,119 2020-2024 6,105,000 7,580,819 13,685,819 2025-2029 8,000,000 5,582,256 13,582,256 2030-2033 _ 1 3,640,000 2,467,756 16,1 07,756 Total Debt Service $ 38,875 000 $45,974,086 X84 849.086 NOTE 5. NET ASSETS Net assets represents the residual assets after liabilities are deducted. These assets are reported in the following categories. Page 13 TEXAS STUDENT HOUSING AUTHORITY— BALLPARK AUSTIN PROJECT NOTES TO FINANCIAL STATEMENTS NOTE 5. NET ASSETS - continued Invested in Capital Assets, Net of Related Debt consists of capital assets, net of accumulated depreciation and reduced by outstanding balances for bonds, notes, and other debt that are attributed to the acquisition, construction, or improvement of those assets. Restricted for Debt Service results when constraints placed on net asset use are either externally imposed by creditors, grantors and the like, or imposed by law through constitutional provisions or enabling legislation. NOTE 6. EMPLOYEE BENEFIT PLAN Employees of the Project are eligible to participate in the Asset Campus Management 401(k) as of August 31, 2004. Employee salary deferrals into the Plan are matched by the Project up to 1% of employee compensation as defined by the Plan. As of August 31, 2004 there were no participants. NOTE 7. MANAGEMENT FEES Previous to May 31, 2004 the Project paid JPI property management fees for the management of the Project. Subsequent to May 31, 2004 the Project paid Asset Campus Management for property management fees for the management of the Project. The Project recorded property management fees of approximately $448,500 for the twenty month period ending August 31, 2004. As of August 31, 2004, the Project has recorded approximately $338,450 in unpaid property and asset management fees to JPI. The management agreement with JPI states that if the management fees are not paid then the amounts past due will accrue interest at the lessor of 12% or the highest lawful rate of interest. The Project's financials include accrued interest of approximately $50,000 for the unpaid management fees to JPI for the twenty month period ending August 31, 2004. NOTE 8. CONCENTRATIONS The Project consists of one property in Austin, Texas and is dependent upon the Austin area and the higher education facilities in the Austin area for revenue. NOTE 9. PRIOR PERIOD ADJUSTMENT The Project has cash accounts which are held by the trustee and cash accounts held by the management company. The financial statements as of December 31, 2002 reported cash accounts that belonged to the Texas Student Housing Authority instead of the Project. These cash accounts have been removed from the financial statements with a resulting decrease in net assets of$310,152. Page 14 TEXAS STUDENT HOUSING AUTHORITY— BALLPARK AUSTIN PROJECT NOTES TO FINANCIAL STATEMENTS NOTE 10. RELATED PARTY TRANSACTIONS The Authority receives funds for administrative services and other transfers based on release tests from the Trustee on behalf of the Project. As of August 31, 2004 for the twenty month period then ended the Trustee paid approximately $266,000 to the Authority. NOTE 11.. COMMITMENTS The Project has a deferred purchase commitment for $1,460,000 as part of the original purchase of the Project. The deferred purchase price accrues interest at a rate of 11% per annum. The first deferred purchase price installment shall be payable on September 1 of the first year after the Series C Bonds have been paid in full (scheduled final payment on Series C Bonds is in 2033), and the remaining installments shall be paid on each anniversary thereafter until the deferred purchase price and all interest thereon has been paid in full. As of August 31, 2004 there have been no payments made on the deferred purchase price. Page 15 WEAVER TIDWELL L.L.R CERTIFIED PUBLIC ACcoUNTANTS AND CONSULTANTS To the Members of the Board of Directors Texas Student Housing Authority— Ballpark Austin Project Westlake, Texas Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedules on pages 10 and 17 are presented for purposes of additional analysis and is not a required part of the basic financial statements of the Texas Student Housing Authority — Ballpark Austin Project. The information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. wAv'e"� a4 ,f�'•f. WEAVER AND TIDWELL, L.L.P. Fort Worth, Texas March 14, 2005 DALLAS 12221 Merit Dive Steirr 1400 Dallis, Texas 7 5251-2 28 0 972.490.1970 F 972,702.83 21 I FORT WORTH 1600 Wrest Seven.,Street Suite 300 Fort Mordi, Tex,s 1-6102-2506 Y 17.332.7905 F81 7. 59.36 WW W.WEAVERAN DTI DWELL_COM AN INDEPENDENT MEMBER OF BAKER TILLY INTERNATIONAL a SUPPLEMENTAL SCHEDULES Page 16 TEXAS STUDENT HOUSING AUTHORITY - BALLPARK AUSTIN PROJECT SCHEDULE I -SCHEDULE OF REVENUES AND EXPENSES FOR THE TWENTY MONTH PERIOD ENDED AUGUST 31, 2004 Actual Budget Variance Revenue and other support: R� Rental income $ 5,955,286 $ 6,743,172 ($ 787,886) Other income 47,466 - 47,466 Interest income 218,379 90„000 128,379 Total revenue and other 6,221,131 6,833,172 ( 612,041) Operating expenses Personnel expenses 548,525 525,765 ( 22,760) Contract services 65,748 85,457 19,709 Utilities 590,616 596,523 5,907 Repairs and maintenance 43,684 43,688 4 Turnover expense 161,094 136,059 ( 25,035) Advertising and promotion 114,709 104,291 { 10,418) Administration expenses 589,371 597,700 8,329 Total operating expenses 2,113,747 2,089,483 ( 24,264) Revenue available for fixed charges 4,107,384 4,743,689 ( 636,305) Other expenses Management fees 448,360 328,261 ( 120,099) Replacements 86,312 80,217 ( 6,095) Depreciation and amortization 2,487,194 - ( 2,487,194) Interest expense 4,131,917 3,165,620 ( 966,297) Total other expenses 7,153,783 3,574,098 ( 3,579,685) Excess of expenses over revenue ($ 3,046,399) $ 1,169,591 ($ 4,215,990) Page 17 TEXAS STUDENT HOUSING AUTHORITY - BALLPARK AUSTIN PROJECT SCHEDULE II - CERTIFICATE OF THE FIXED CHARGES COVERAGE RATIO We are providing this letter, as required by the Trust Indenture by and between Texas Student Housing Authority - Ballpark Austin Project ("Project") and the Bank of New York ("Trustee"), dated December 1, 2001, relating to Texas Student Housing Authority - Ballpark Austin Project Student Housing Revenue Bonds the "Indenture", to certify the Fixed Charges Coverage Ratio as of August 31, 2004. The Fixed Charges Coverage Ratio is defined in the Indenture as the ratio of revenue available for fixed charges to fixed charges. Further, fixed charges are defined in the Indenture as the sum of all cash outflows related to the Project that the Issuer cannot avoid without violating long-term contractual or legal obligations (those obligations which extend for a period greater than one year), including, but not limited to, (i) interest on Indebtedness other than Short-Term Indebtedness, and (ii) scheduled payments of principal on Indebtedness other than Short-Term Indebtedness, provided that Maximum Annual Debt Service shall be used for purposes of computing (i) and (ii) above. The audited financial statements indicate revenue available for fixed charges for the twenty month period ended August 31, 2004 to be $4,107,384. Based on the above revenues and fixed charges utilizing Bond A and Bond B, we calculate that the Fixed Charges Coverage Ratio as of August 31, 2004 to be .87, which is based on twenty months of operations. Based on the above revenues and fixed charges utilizing Bond A, Bond B and Bond C, we calculate that the Fixed Charges Coverage Ratio as of August 31, 2004 to be .51, which is based on twenty months of operations. Based on the budgeted revenues and fixed charges utilizing Bond A and Bond B, we calculate that the Fixed Charges Coverage Ratio as of August 31, 2004, to be 1.01, which is based on twenty months of operations.