HomeMy WebLinkAboutCambridge Audit 08-31-12 TEXAS STUDENT HOUSING AUTHORITY
CAMBRIDGE AT COLLEGE STATION
FINANCIAL REPORT
AUGUST 31, 2012
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TEXAS STUDENT HOUSING AUTHORITY
CAMBRIDGE AT COLLEGE STATION
TABLE OF CONTENTS
AUGUST 31,2012
Page
Number
FINANCIAL SECTION
Independent Auditors' Report............................................................................................. 1 -2
Management's Discussion and Analysis ............................................................................ 3 - 5
Financial Statements:
Statement of Net Assets................................................................................................... 6
Statement of Revenues, Expenses and Changes in Net Assets........................................ 7
Statement of Cash Flows ................................................................................................. 8
Notes to Financial Statements.......................................................................................... 9- 17
SUPPLEMENTAL SCHEDULES
Schedule I— Schedule of Revenues and Expenses............................................................. 18
Schedule 11—Fixed Charges Coverage Ratio 19
.....................................................................
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PATTILLO, BROWN & HILL, I-L.P.
CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Texas Student Housing Authority—
Cambridge at College Station
Westlake, Texas
We have audited the accompanying financial statements of Texas Student Housing Authority —
Cambridge at College Station (the "Project"), as of and for the year ended August 31, 2012, which
collectively comprise the Project's basic financial statements as listed in the table of contents. Texas
Student Housing Authority — Cambridge at College Station is a component unit of the Town of
Westlake. These financial statements are the responsibility of the Project's 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 I, 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,
2012, and the changes in its financial position and, where applicable, cash flows, thereof for the 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 — Cambridge at College Station as of
August 31, 2012, and the respective changes in financial position and, where applicable, cash flows,
thereof for the year then ended in conformity with accounting principles generally accepted in the
United States of America.
The accompanying financial statements have been prepared assuming that Texas Student
Housing Authority — Cambridge at College Station will continue as a going concern. As discussed in
Note II, H to the financial statements, the Project is in default on its certificates. This gives the
certificate holders the right to accelerate and demand payment on the certificates in full. These
conditions raise substantial doubt about its ability to continue as a going concern. Management's plans
in regard to these matters are discussed in Note II, H. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
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401 WEST HIGHWAY 6■P.O.BOX 20725■WACO,TX 76702-0725■(254)772-4901 ■FAX:(254)772-4920■www.pbhcpa.com
AFFILIATE OFFICES:BROWNSVILLE,TX(956)544-7778■HILLSBORO,TX(254)582-2583
TEMPLE,TX(254)791-3460■ALBUQUERQUE,NM(505)266-5904
Accounting principles generally accepted in the United States of America require that the
management's discussion and analysis on pages 3 through 5 be presented to supplement the basic
financial statements. Such information, although not a part of the basic financial statements, is required
by the Governmental Accounting Standards Board, who considers it to be an essential part of financial
reporting for placing the basic financial statements in an appropriate operational, economic, or historical
context. We have applied certain limited procedures to the required supplementary information in
accordance with auditing standards generally accepted in the United States of America, which consisted
of inquiries of management about the methods of preparing the information and comparing the
information for consistency with management's responses to our inquiries, the basic financial
statements, and other knowledge we obtained during our audit of the basic financial statements. We do
not express an opinion or provide any assurance on the information because the limited procedures do
not provide us with sufficient evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming an opinion on the financial statements that
collectively comprise the Project's financial statements. The accompanying supplemental information
on pages 18 and 19 is presented for purposes of additional analysis and is not a required part of the
financial statements. The supplemental information is the responsibility of management and was
derived from and relates directly to the underlying accounting and other records used to prepare the
financial statements. The information has been subjected to the auditing procedures applied in the audit
of the financial statements and certain additional procedures, including comparing and reconciling such
information directly to the underlying accounting and other records used to prepare the financial
statements or to the financial statements themselves, and other additional procedures in accordance with
auditing standards generally accepted in the United States of America. In our opinion, the information is
fairly stated in all material respects in relation to the financial statements as a whole.
P.
January 7, 2013
2
MANAGEMENT'S
DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS
As staff of the Texas Student Housing Authority (the "Authority") — Cambridge College Station (the
"Project"), we offer the readers of the Project's financial statements this narrative overview and analysis
of the financial activities of the Project for the fiscal year ended August 31, 2012. We encourage readers
to consider the information presented herein in conjunction with the Project's financial statements which
follow this section. As the Authority is a component unit of the Town of Westlake and is thus
considered a governmental entity, Governmental Accounting Standards Board Statement 34, Basic
Financial Statements—and Management's Discussion and Analysis for State and Local Governments
has been implemented. The reader should note that this financial report addresses only the financial
condition of the Project itself.
FINANCIAL HIGHLIGHTS
• The liabilities of the Project exceeded its assets at the close of the fiscal year by
$10,992,744 due primarily to a decrease in net assets of$2,003,562.
• Major components of the expense overage were $984,738 in depreciation/
amortization, and$3,179,482 in interest expense.
• At the end of the current fiscal year, the total cash balances were $4,142,293 in
unrestricted cash and$2,189,987 in restricted cash.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the Project's basic financial
statements. The Project's report consists of three parts, Management's Discussion and Analysis, the
basic financial statements, and notes to financial statements. The basic financial statements include a
statement of net assets, statement of revenues, expenses and changes in net assets, a statement of cash
flows and supplemental schedules.
The Project is being treated as a going concern as the Project is in default on its C and D certificates.
They are considered an event of default by the Trustee, which gives the senior certificate holders the
right to accelerate and demand payment of the certificates in full. Management and the property
manager are in the process of developing plans to increase occupancy and rental rates at the property to
improve its financial performance.
The statement of net assets presents information on all of the Project's assets and liabilities with the
difference between the two reported as net assets.
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The statement of revenues, expenses and changes in net assets accounts for all of the Authority's
revenues and expenses regardless of when cash is paid or received.
The statement of cash flows recaps how cash changed during the year.
FINANCIAL ANALYSIS OF THE PROJECT'S FUNDS
Notes to financial statements. The notes provide additional information that is essential to a full
understanding of the data provided in the financial statements.
Restricted cash. Restricted cash represents monies held in escrow by the trustee and are restricted for
the payment of expenses as outlined in the Installment Sale Agreement. As of August 31, 2012, these
balances were as follows:
Replacement Fund $ 329,278
Series A Reserve Fund 598,776
Series B Reserve Fund 512,400
Series A Interest Account 157,708
Series A Principal Account 313,667
Series B Interest Account 153,750
Series B Principal Fund 86,758
Transaction Costs Payment Fund 32,650
Utility Deposits 5,000
Total $ 2,189,987
Nonrestricted cash. Nonrestricted cash is available for general use of the Project.
Installment note payable. The Project's developer refinanced the original Installment Sale Agreement
effective December 1, 2004, by issuing debt certificates in the following classes:
Series A $ 16,530,000
Series B 3,990,000
Series C 4,820,000
Series D 5,380,000
Total $ 30,720,000
The note is payable at the rate of$231,545 monthly.
Fixed Charge Coverage Ratio
The Installment Sale Agreement provides for a fixed charges coverage ratio of 1.10. At this time, the
Project has realized a ratio of 1.16 and is technically in compliance with the Agreement. Upon default,
the lender may accelerate maturity of the unpaid portion of the principal, however, it is not anticipated
that this event will incur since foreclosure by the certificate holders would result in the loss of the
Project's tax-exempt status.
4
ECONOMIC FACTORS AND NEXT YEAR'S BUDGET
Leases at the Project have a duration that encompasses the school year, primarily the months of
September through May. The June to August revenue is dependent on the ability to attract various
camps/meetings. As the Project is tax-exempt through the Texas Higher Education Act, only those
functions sponsored by the University are eligible for acceptance. The occupancy for this school year is
100%,thus the focus for this year will be on increasing this"summer"revenue.
All of the A and B certificate holders received all proceeds due to them. The 2012/2013 budget clearly
indicates that operating income will be sufficient to again service the A and B certificates.
CONTACTING THE PROJECT'S FINANCIAL MANAGEMENT
This financial report is designed to provide the reader with a general overview of the Project's finances
and to demonstrate the Project's accountability for the money it receives. If you have any questions
about this report, or need additional information,please contact Pete Ehrenberg at(817) 490-5723.
5
FINANCIALS
TEXAS STUDENT HOUSING AUTHORITY
CAMBRIDGE AT COLLEGE STATION
STATEMENT OF NET ASSETS
AUGUST 31,2012
ASSETS
Current assets:
Cash $ 4,142,293
Restricted cash 2,189,987
Accounts receivable,net of$64,045 allowance 388,890
Total current assets 6,721,170
Capital assets:
Land 2,899,597
Other capital assets,net of accumulated depreciation 20,578,444
23,478,041
Total capital assets 23,478,041
Total assets 30,199,211
LIABILITIES
Current liabilities:
Accounts payable 154,749
Accrued expenses 15,282
Unearned revenue and prepaid rent 2,726,546
Accrued interest 7,575,378
Installment loan payable 30,720,000
Total current liabilities 41,191,955
NET ASSETS
Invested in capital assets,net of related debt ( 7,241,959)
Unrestricted ( 3,750,785)
Total net assets $( 10,992,744)
The accompanying notes are an integral part of these financial statements.
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TEXAS STUDENT HOUSING AUTHORITY
CAMBRIDGE AT COLLEGE STATION
STATEMENT OF REVENUES,EXPENSES
AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED AUGUST 31,2012
OPERATING REVENUES
Rental $ 5,238,584
Other 579,501
Total operating revenues 5,818,085
OPERATING EXPENSES
Management fees 386,106
Administration and marketing 1,327,679
Cafeteria 516,793
Utilities 622,867
Repairs and maintenance 763,122
Insurance 41,166
Depreciation and amortization 984,738
Total operating expenses 4,642,471
OPERATING INCOME 1,175,614
NONOPERATING REVENUES (EXPENSES)
Interest revenue 306
Interest expense ( 3,179,482) j
Total nonoperating revenues(expenses) ( 3,179,176)
CHANGE IN NET ASSETS ( 2,003,562)
NET ASSETS,BEGINNING ( 8,989,182)
NET ASSETS,ENDING $( 10,992,744)
The accompanying notes are an integral part of these financial statements.
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TEXAS STUDENT HOUSING AUTHORITY
CAMBRIDGE AT COLLEGE STATION
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED AUGUST 31,2012
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from tenants $ 5,450,655
Other operating revenues 579,501
Cash paid to employees ( 840,747)
Cash paid to suppliers ( 2,790,983)
Net cash provided by operating activities 2,398,426
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Principal repayments on bonds ( 375,000)
Interest paid ( 1,490,350)
Net cash used by capital and related financing activities ( 1,865,350)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received 306
Net cash provided by investing activities 306
NET CHANGE IN CASH AND CASH EQUIVALENTS 533,382
CASH AND CASH EQUIVALENTS,BEGINNING 5,798,898
CASH AND CASH EQUIVALENTS,ENDING $ 6,332,280
Cash $ 4,142,293
Restricted cash 2,189,987
Total cash and cash equivalents $ 6,332,280
RECONCILIATION OF OPERATING INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Operating income $ 1,175,614
Adjustments to reconcile operating income to
net cash provided by operating activities:
Depreciation 984,738
Changes in operating assets and liabilities:
Accounts receivable ( 62,309)
Other assets 16,577
Accounts payable 9,649
Accrued liabilities ( 223)
Deferred revenue and prepaid rent 274,380
Net cash provided by operating activities $ 2,398,426
The accompanying notes are an integral part of these financial statements.
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TEXAS STUDENT HOUSING AUTHORITY—
CAMBRIDGE AT COLLEGE STATION
NOTES TO FINANCIAL STATEMENTS
AUGUST 31,2012
I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations
Texas Student Housing Authority — Cambridge at College Station (the "Project"), a duly
constituted authority of the Town of Westlake, Texas (the "Town") pursuant to Section 53.35(b)
of the Texas Education Code, as amended (the "Act"). The Authority was established to acquire
educational facilities and housing facilities to be used by the students, faculty and staff of
institutions of higher education within the State of Texas. The Project's purpose is to own and
operate a student housing facility known as Cambridge at College Station (the "College Station
Project") in College Station, Texas.
Cambridge at College Station was purchased from Cambridge Student Housing Development,
L.P. (the "Developer") effective September 1, 2004. The Project obtained its financing through a
seller-financed installment sale agreement. The accompanying financial statements present the
operations of the Project, whose revenues are pledged for the installment note described herein.
Cambridge at College Station is operated and managed under the terms of the First Amended and
Restated Property Project Management and Leasing Agreement by and between the Authority
and Asset Campus Housing, Inc. for the period audited.
The Project's significant accounting policies are as follows:
A. 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.
(continued)
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I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
A. Reporting Entity(Continued)
The criteria set forth require governmental reporting entities to determine their primary
government for the purposes of annual reporting. 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 regardless of whether the organization
has a separately elected governing board appointed by a higher level of government or a
jointly appointed board.
B. Measurement Focus and Basis of Accounting
Measurement focus refers to what is being measured; basis of accounting refers to when
revenues and expenditures are recognized in the accounts and reported in the financial
statements. The Authority uses the economic resources measurement focus and the accrual
basis of accounting. The economic resources measurement focus means all assets and
liabilities (whether current or noncurrent) are included on the statement of net assets and the
operating statement present increases (revenues) and decreases (expenses) in net total assets
under the accrual basis of accounting, revenues are recognized when earned, and expenses
are recognized at the time the liability is incurred.
Private-sector standards of accounting and financial reporting issued prior to December 1,
1989, generally are followed in both the government-wide and proprietary fund financial
statements to the extent that those standards do not conflict with or contradict guidance of the
Governmental Accounting Standards Board. Governments also have the option of following
subsequent private-sector guidance for their business-type activities and Enterprise Funds,
subject to this same limitation. The government has elected not to follow subsequent private-
sector guidance.
C. Capitalization,Depreciation and Impairment Policies
Property and Depreciation
Property and equipment are recorded at cost. Expenditures for routine maintenance and
repairs are expensed as incurred.
Property and equipment are depreciated using the straight-line method over the following
useful lives:
Buildings 30 years
Improvements 15 years
Equipment, furniture and fixtures 5 -20 years
(continued)
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I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Assets,Liabilities and Net Assets or Equity
Cash and Cash Equivalents
For the purpose of the statement of cash flows, the Project considers unrestricted cash and
highly liquid investments with maturities of three months or less at the date of purchase to be
cash and cash equivalents.
Concentration of Credit Risk
As of and during the year ended August 31, 2012, the Project had cash deposits with
financial institutions in excess of the $250,000 amount insured by the Federal Deposit
Insurance Corporation. Any amounts over the FDIC limit are insured with pledged securities
by the Project's depository.
Taxes
The Project is an instrumentality of the Town of Westlake, therefore, its income is not
subject to federal income taxation pursuant to Section 115 of the Internal Revenue Code.
Additionally, the Project is exempt from local property taxes.
Accounts Receivable
Accounts receivable are stated at amounts management expects to collect from outstanding
balances. Management writes off uncollectible amounts through a charge to expenses 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.
Advertising Costs
All advertising costs are expensed as they are incurred. Advertising costs for the year ended
August 31, 2012, were approximately$129,197.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
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II. DETAILED NOTES ON ALL FUNDS
A. Restricted Cash
Restricted cash represents amounts held in escrow, which are restricted for the payment of
expenses as required by the installment sale agreement. As of August 31, 2012, restricted
cash consists of the following:
Replacement Fund $ 329,278
Series A Reserve 598,776
Series B Reserve 512,400
Series A Principal 157,708
Series A Interest 313,667
Series B Principal 153,750
Series B Interest 86,758
TR Costs Pymt FD 32,650
Utility Deposits 5,000
$ 2,189,987
The following is a brief description of the funds and accounts comprising the restricted cash
balance at year-end, as defined by the installment sale agreement and the trust agreement:
Replacement Fund—Amounts in the Replacement Fund may be used to pay the
maintenance and repair costs related to the College Station Property, which the
Project is obligated to pay pursuant to the installment sale agreement.
Series A Reserve Fund—The amounts on deposit in this account were required to
be contributed by the Developer and are to be used for the purpose of paying
principal and interest on the Series A certificates as they become due in the event
there should be insufficient funds in the Debt Service Fund.
Series S Reserve Fund—The amounts on deposit in this account were required to
be contributed by the Developer and are to be used for the purpose of paying
principal and interest on the Series B certificates as they become due in the event
there should be insufficient funds in the Debt Service Fund.
Series A Principal Fund — Amounts in the Series A Principal Fund represent
payments set aside for the repayment of the principal balance on the Series A
certificates.
Transaction Costs Payment Fund— Amounts in the Transaction Costs Payment
Fund are to be used to pay for debt issuance costs.
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Emergency Operating Fund— Amounts in the Emergency Operating Fund may
be used to pay operating expenses in the event that funds from the depository
account are less than operating expenses.
(continued)
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II. DETAILED NOTES ON ALL FUNDS (Continued)
A. Restricted Cash (Continued)
Series D Interest Fund — Amounts in the Series D Interest Fund are used to
accumulate funds to pay interest on the Series D certificates.
Current Receipts Fund—Amounts in the Current Receipts Fund are to be used to
accumulate funds from the collections of rent payments and other income from
the College Station Project.
The Public Funds Investment Act (Government Code Chapter 2256) contains specific
provisions in the areas of investment practices, management reports and establishment of
appropriate policies relating to a governmental entity's cash and investments.
Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair
value of an instrument. Generally, the longer the maturity of an investment the greater the
sensitivity of its fair value to changes in market interest rates. The Project is not significantly
exposed to interest rate risk as all investments earn a variable rate.
Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to
the holder of the investment. This is measured by the assignment of a rating by a nationally
recognized statistical rating organization. The Public Funds Investment Act has a minimum
rating that is required for investments. The Project holds all of its cash and investments with
the bond trustee and commercial banks.
Concentration of Credit Risk
The investment policy of the Project is subject to the indenture agreement of the bonds. As
of August 31, 2012, the Project held all of its restricted cash balances with the trustee, which
represents 34.6% of the total cash and investments held at August 31, 2012.
(continued)
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II. DETAILED NOTES ON ALL FUNDS (Continued)
A. Restricted Cash (Continued)
Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository
financial institution, a government will not be able to recover its deposits or will not be able
to recover collateral securities that are in the possession of an outside party. The custodial
credit risk for investments is the risk that, in the event of the failure of the counterparty to a
transaction, a government will not be able to recover the value of its investment or collateral
securities that are in the possession of another party. The Public Funds Investment Act does
not contain legal or policy requirements that would limit the exposure to custodial credit risk
for deposits or investments, other than the following provision for deposits: The Public
Funds Investment Act requires that a financial institution secure deposits made by state or
local governmental units by pledging securities in an undivided collateral pool held by a
depository regulated under state law (unless so waived by the governmental unit). The
market value of the pledged securities in the collateral pool must equal at least the bank
balances less FDIC insurance at all times.
As of August 31, 2012, $3,722,232 of the Project's $4,222,232 bank balance was
collateralized with a Bank Deposit Guarantee Bond from the Project's depository. The
remaining balance, $500,000, was covered by FDIC insurance.
B. Installment Note Payable
The Project's installment note payable is summarized as follows:
Interest
Lender/Security/Due Date Rate Balance
Cambridge Student Housing Financing Company, L.P.;
substantially all assets and assignment of rents; due
November 1,2039. 8.00% $ 30,720,000
The Project's installment note is payable monthly with principal and interest payments of
$231,545 until November 1, 2039.
The following is a summary of long-term debt transactions of the Project for the year ended
August 31, 2012:
Amounts
Beginning Ending Due Within Interest
Balance Increases Decreases Balance One Year Paid
Installment note $ 31,095,000 $ - $ 375,000 $ 30,720,000 $ 410,000 $ 1,490,350
(continued)
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II. DETAILED NOTES ON ALL FUNDS (Continued)
B. Installment Note Payable(Continued)
The Project's original Developer refinanced the installment note through a secondary
offering with Cambridge Student Housing Financing Company, L.P. The debt certificates
were sold to private investors in the following classes:
Class(Series) Offering Total
A $ 16,530,000
B 3,990,000
C 4,820,000
D 5,380,000
Total $ 30,720,000
The debt is to be amortized through 2040 with varying payments. The annual requirements
to amortize Class A and B debts outstanding as of August 31, 2012 are as follows:
Year Ending Governmental Activities
August 31,2012 Principal Interest Total
2013 $ 410,000 $ 1,460,925 $ 1,870,925
2014 440,000 1,429,050 1,869,050
2015 470,000 1,394,925 1,864,925
2016 505,000 1,358,350 1,863,350
2017 545,000 1,318,950 1,863,950
2018-2022 3,510,000 5,873,550 9,383,550
2023-2027 2,320,000 4,787,050 7,107,050
2028-2032 3,245,000 3,821,575 7,066,575
2033-2037 4,560,000 2,467,950 7,027,950
2038-2042 4,515,000 574,925 5,089,925
Totals $ 20,520,000 $ 24,487,250 $ 45,007,250
Class C and D bonds are in default and the property does not generate enough revenue to pay
the debt obligations so the maturity schedules are not included. All of the Class C and D
bonds issued remain outstanding as of August 31, 2012.
Each class has certain rights and privileges, as contained in the private placement
memorandum. As a part of the offering, the Project entered into a trust agreement with J. P.
Morgan Trust Company, N.A. (the "Trustee") for the purpose of determining that each class
is paid in accordance with the private placement memorandum.
i
At August 31, 2012, the Project was in compliance with the fixed charge coverage ratio.
Should the project default, the lender may accelerate the maturity of the unpaid portion of the
principal payable under the installment sale agreement. However, the Authority does not
anticipate this event will occur, since foreclosure by private interests would result in the loss
of tax-exempt status for the Project.
(continued)
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II. DETAILED NOTES ON ALL FUNDS (Continued)
C. Capital Assets
Capital asset activity for the Project for the year ended August 31, 2012, was as follows:
Beginning Ending
Balance Increase Decrease Reclass Balance
Capital assets,not being depreciated:
Land $ 2,899,597 $ - $ - $ - $ 2,899,597
Total capital assets,
not being depreciated 2,899,597 - - - 2,899,597
Capital assets,being depreciated:
Building 27,727,646 - - 27,727,646
Furniture and fixtures 2,594,804 2,594,804
Total capital assets,
being depreciated 30,322,450 30,322,450
Less accumulated depreciation for:
Building ( 6,163,885) ( 896,177) - - ( 7,060,062)
Furniture and fixtures ( 2,595,383) ( 88,561) - - ( 2,683,944)
Total accumulated depreciation ( 8,759,268) ( 984,738) - - ( 9,744,006)
Total capital assets,
being depreciated,net 21,563,182 ( 984,738) - 20,578,444
Capital assets,net $ 24,462,779 $( 984,738) $ $ $ 23,478,041
D. Geography and Concentration
Resident leases generally have a duration that encompasses the school year. This enables the
Project to pass on inflationary increases in operating expenses on a timely basis; however,
this exposes the Project to rental rate decreases during economic downturns. Additionally,
competition from nearby university housing properties in College Station, Texas influences
the housing rates charged to students. Despite these risks, the Project believes there will be a
continued strong demand for its dwelling units.
E. Net Assets
Net assets represent the residual assets after liabilities are deducted. Net assets are reported
in the following categories.
Invested in Capital Assets, Net of Related Debt — The component of net assets
that reports the difference between capital assets less both the accumulated
depreciation and the outstanding balance of debt, excluding unspent proceeds,that
is directly attributable to the acquisition, construction, or improvement of these
capital assets.
(continued)
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II. DETAILED NOTES ON ALL FUNDS (Continued)
E. Net Assets (Continued)
Restricted Net Assets — The component of net assets calculated by reducing the
carrying value of restricted assets by the amount of any related debt outstanding.
Unrestricted—The difference between the assets and liabilities that is not reported
in net assets invested in capital assets, net of related debt and restricted net assets.
F. Management Fees/Related Party Transactions
The Project pays Asset Campus Housing asset management fees for the management of the
College Station Property. The Project recorded property management fees of approximately
$280,800 for the period ended August 31, 2012.
Administration and marketing expenses include approximately $105,306 for administrative
fees earned by Texas Student Housing Authority. There were no administrative fees
included in accounts payable at August 31, 2012.
G. Commitments and Contingencies
During fiscal year 2006, the Brazos County Tax — Assessor's office filed suit against the
Project in order to eliminate the Project's tax-exempt status. This would force the Project to
begin paying property taxes on the property owed by the Project. The County is also seeking
back property taxes previously not paid as the Project was under tax-exempt status. The
original suit filed by the Project was lost during a non jury trial. The Project appealed that
judgment and the case was assigned to the Seventh Court of Appeals. Oral arguments were
heard in October of 2012 and no decision has been reached. The ultimate status of this
appeal is unknown at this time and a liability has not been booked. Should the county
prevail, the Project would owe the county a material amount of property taxes, from both
current and prior periods.
The Project has not yet to have an arbitrage calculation performed for its outstanding debt.
After that analysis, the Project may incur a liability for interest earned in accordance with
Internal Revenue Service regulations.
H. Going Concern
The 2012 financial statements were prepared assuming the Project will continue as a going
concern. The Project's bonds payable are considered to be in default due to partial non-
payment of principal and interest payments. These are considered an event of default by the
Trustee, which gives the bondholders the right to accelerate and demand payment of the bonds
in full. This condition raises substantial doubt about the Project's ability to continue as a going
concern. Management and the property manager are in the process of developing and
implementing plans to increase occupancy and rental rates at the property to improve its
financial performance.
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SUPPLEMENTAL SCHEDULES
TEXAS STUDENT HOUSING AUTHORITY
CAMBRIDGE AT COLLEGE STATION
SCHEDULE I-SCHEDULE OF REVENUES AND EXPENSES
BUDGET AND ACTUAL
FOR THE YEAR ENDED AUGUST 31,2012
Budget Actual Variance
REVENUES AND OTHER SUPPORT
Rental $ 5,079,477 $ 5,238,584 $ 159,107
Other 594,804 579,501 ( 15,303)
Interest - 306 306
Total revenues and other support 5,674,281 5,818,391 144,110
OPERATING EXPENSES
Administrative and marketing 1,275,629 1,327,679 ( 52,050)
Management fees 382,884 386,106 ( 3,222)
Cafeteria 517,472 516,793 679
Utilities 748,048 622,867 125,181
Repairs and maintenance 710,887 763,122 ( 52,235)
Insurance 47,385 41,166 6,219
Total operating expenses 3,682,305 3,657,733 24,572
REVENUE AVAILABLE FOR FIXED CHARGES 1,991,976 2,160,658 168,682
OTHER EXPENSES
Depreciation and amortization - 984,738 ( 984,738)
Interest - 3,179,482 ( 3,179,482)
Total other expenses - 4,164,220 ( 4,164,220)
EXCESS OF EXPENSES OVER REVENUES $ 1,991,976 $( 2,003,562) $( 3,995,538)
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TEXAS STUDENT HOUSING AUTHORITY
CAMBRIDGE AT COLLEGE STATION
SCHEDULE II-FIXED CHARGES COVERAGE RATIO
FOR THE YEAR ENDED AUGUST 31,2012
CALCULATION OF FIXED CHARGES COVERAGE RATIO
Total gross revenues $ 5,818,391
Total expenses $( 7,821,953)
Add:
Interest 3,179,482
Depreciation and amortization 984,738
Adjusted expenses ( 3,657,733)
Adjusted net operating income available to pay fixed charges $ 2,160,658
Fixed charges/maximum principal and interest for
fiscal year-end(for A&B certificates) $ 1,865,350
Fixed charges coverage ratio 1.16
Required ratio 1.10
Pass or fail Pass
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