HomeMy WebLinkAboutSan Marcos Audit 2001TEXAS STUDENT HOUSING CORPORATION-
SAN MARCOS PROJECT
FINANCIAL STATEMENTS
Year Ended December 31,2001
and the Period from Inception
(December 11, 2000) through December 31, 2000
with Report of Independent Auditors
TEXAS STUDENT HOUSING CORPORATION-
SAN MARCOS PROJECT
For the Year Ended December 31,2001 and the Period from Inception
(December 11, 2000) through December 31, 2000
Table of Contents
Report of Independent Auditors......................................................................................................... 1
Financial Statements:
Statements ofFinancial Position........................................................................................... 2
Statements of Activities and Changes in Net Assets ................. ..................................... ...... 3
Statements of Cash Flow . . . . . . . .. . . . . ... . . .. . . . . .. . .. . . .. . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . . . . . . . ... . .. . . . .. . . . . ... .. . .. . . . 5
Notes to Financial Statements............................................................................................................ 6
Partners
WHITLEY PENN Larry G. Autrey, P. C.
CPAs AND PROFESSIONAL CONSULTANTS
Felix). Lozano Ill, P.C.
David L. Neal, P.C.
REPORT OF INDEPENDENT AUDITORS james C. Penn, P.C.
Thomas). Rein, P.C.
Mark A. Topel, P. C.
To the Board of Directors of
J. Alan White, P.C.
Texas Student Housing Corporation-San Marcos Project
We have audited the accompanying statements of financial position of Texas Student Housing
Corporation-San Marcos Project (the "Corporation") as of December 31, 2001 and 2000, and
the related statements of activities and changes in net assets and cash flows for the year ended
December 31, 2001 and for the period from inception (December 11, 2000) through December
31, 2000. These financial statements are the responsibility of the corporation's management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted out audits 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 misstatements.
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 audits provide a reasonable basis for our opinion.
B. Glen Whitley, P.C.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of Texas Student Housing Corporation -San Marcos Project as of
December 31, 2001 and 2000, and the changes in its net assets and its cash flows for the year
ended December 31, 2001 and for the period from inception (December 11, 2000) through
December 31, 2000 in conformity with accounting principles generally accepted in the United
States of America.
w/,;f/1:'/ZJ
Fort Worth, Texas
June 21, 2002
Fort Worth: 1701 River Run Road, Suite 507 • Fort Worth, Texas 76107 • (817) 258-9100 • metro (817) 498-0237 • fax (817) 877-3036
Mid-Cities: 86o West Airport Freeway, Suite 601 • Hurst, Texas 76054 • (817) 258-9100 • metro (817) 498-0237 • fax (817) 656-4013
www.wpcpa.com
TEXAS STUDENT HOUSING CORPORATION-SAN MARCOS PROJECT
STATEMENT OF FINANCIAL POSITION
December 31,
2001 2000
Assets
Cash $ 304,582 $ 152,325
Restricted cash 881,835 1,096,368
Accounts receivable 5,206
1,191,623 1,248,693
Property and equipment:
Land 1,552,207 1,512,759
Furniture, fixtures and equipment 750,961 733,429
Building 15,875,143 15,493,812
18,178,311 17,740,000
Less accumulated depreciation 623,772
17,554,539 17,740,000
Intangible assets:
Deferred financing costs 1,020,132 1,013,632
Less accumulated amortization 34,004
986,128 1,013,632
Total assets $ 19,732,290 $ 20,002,325
Liabilities and Net Assets
Liabilities:
Accounts payable and accrued liabilities $ 352,646 $
Deferred revenue 171,254 133,920
Tenant security deposits 37,270 102,325
Note payable 19,838,909 19,900,000
Total liabilities 20,400,079 20,136,245
Net assets:
Temporarily restricted (667,789) (133,920)
Total liabilities and net assets $ 19,732,290 $ 20,002,325
See accompanying notes. 2
TEXAS STUDENT HOUSING CORPORATION-SAN MARCOS PROJECT
STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS
Year Ended December 31, 2001 and the Period from Inception (December 11, 2000) through
December 31,2000
Revenue and Other Support:
Rental income
Other income
Total
Net assets released from restriction
Total Revenue and Other Support
Expenses:
Program services
Support Services
Total Expenses
Change in Net Assets
Net assets at beginning of year
Net assets at end of year
See accompanying notes.
Unrestricted
$
3,473,512
3,473,512
3,473,512
3,473,512
$
3
2001
Temporarily
Restricted
$ 2,563,725
375,918
2,939,643
(3,473,512)
(533,869)
(533,869)
(133,920)
$ (667,789)
Total
$2,563,725
375,918
2,939,643
2,939,643
3,473,512
3,473,512
(533,869)
(133,920)
$ (667,789)
TEXAS STUDENT HOUSING CORPORATION-SAN MARCOS PROJECT
STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS (continued)
Year Ended December 31, 2001 and the Period from Inception (December 11, 2000) through
December 31,2000
Revenue and Other Support:
Rental income
Other income
Total
Net assets released from restriction
Total Revenue and Other Support
Expenses:
Program services
Support Services
Total Expenses
Change in Net Assets
Net assets at beginning of year
Net assets at end of year
See accompanying notes.
Unrestricted
$
185,781
185,781
185,781
185,781
$
4
2000
Temporarily
Restricted
$ 30,611
21,250
51,861
(185,781)
(133,920)
(133,920)
$ (133,920)
Total
$ 30,611
21,250
51,861
51,861
185,781
185,781
(133,920)
$ (133,920)
TEXAS STUDENT HOUSING CORPORATION-SAN MARCOS PROJECT
STATEMENTS OF CASH FLOWS
Year Ended December 31,2001 and the Period from Inception (December 11, 2000) through
December 31,2000
Cash flows from operating activties:
Changes in net assets
Adjustments to reconcile changes in net assets
to net cash provided by operating activities:
Depreciation
Amortization
Changes in operating assets and liabilities
Restricted cash
Accounts receivable
Intangible assets
Accounts payable and accrued liabilities
Deferred revenue
Tenant security deposits
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of property and equipment
Net cash used by investing activities
Cash flows from financing activities:
Proceeds from notes payable
Repayments of notes payable
Net cash (used by) provided by financing activities
Net (decrease) increase in cash and cash equivalents
Cash at beginning of year
Cash at end of year
Supplemental disclosures of cash flow information:
Cash paid during year for interest
See accompanying notes. 5
2001
$ (533,869)
623,772
34,004
214,533
(5,206)
(6,500)
352,646
37,334
(65,055)
651,659
(438,311)
(438,311)
(61,091)
(61,091)
152,257
152,325
$ 304,582
$1,575,196
2000
$ (133,920)
(1,096,368)
(1,013,632)
133,920
102,325
(2,007,675)
(17,740,000)
(17,740,000)
19,900,000
19,900,000
152,325
$ 152,325
$
TEXAS STUDENT HOUSING CORPORATION-SAN MARCOS PROJECT
NOTES TO FINANCIAL STATEMENTS
December 31,2001
A. Nature of Business
Texas Student Housing Corporation-San Marcos Project (the "Corporation"), a Texas non-profit
organization, was created on December 11, 2000, as 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 Corporation's primary purpose was to purchase, own and operate a
student housing facility known as Jefferson Commons (the "San Marcos Property") in San
Marcos, Texas.
The San Marcos Property was purchased from Jefferson Commons-San Marcos, L.P. ("JPI") on
December 28,2000. The Corporation obtained its conduit financing through the City of Cameron
Education Corporation (the "City") under the terms of the Loan and Financing Agreement by and
between the City as Issuer and the Corporation as Borrower (the "Loan and Financing
Agreement").
The City funded its loan to the Corporation via the issuance of conduit or "no-commitment" debt
by issuing the City of Cameron Education Corporation Student Housing Revenue Bonds
(Southwest Texas State University Project) Series 2000 (the "Bonds") in the amount of
$19,900,000. The term conduit means that the City undertakes no commitment to pay or
guarantee the debt service payments, but merely gives the Corporation, as the underlying
obligator, access to a tax-exempt market. After issuance, the City irrevocably assigned all of its
rights pursuant to the terms of the Loan and Financing Agreement, which is evidenced by a note
made by and between the Corporation and the City as well as title, monies, and properties
pledged for payment of the Bonds to the Bank of New York as trustee (the "Trustee") for the
benefit of the bond holders.
The Corporation was also established to provide education and/or housing assistance to deserving
students residing in the Keller Independent School District, the Carroll Independent School
District, and the Northwest Independent School District at institutions of higher education that are
aided by the Corporation (the "Student Assistant Program").
The San Marcos Property is operated and managed under the terms of the (a) Property
Management and Leasing Agreement by and between the Corporation and JPI Campus Quarters
Management, L.P. and (b) the Asset Management Agreement by and between the Corporation
and JPI Apartment Development L.P., (collectively referred to as the "Agreements").
B. Summary of Significant Accounting Policies
A summary of the Corporation's significant accounting policies consistently applied m the
preparation of the accompanying financial statements follows:
Basis of Accounting
The financial statements of the Corporation have been prepared on the accrual basis of accounting
and accordingly reflect all significant receivables, payables, and other liabilities. The significant
accounting policies followed are described below to enhance the usefulness of the financial
statements to the reader.
6
TEXAS STUDENT HOUSING CORPORATION-SAN MARCOS PROJECT
NOTES TO FINANCIAL STATEMENTS (continued)
B. Summary of Significant Accounting Policies -continued
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 certain reported amounts and disclosures regarding certain types of assets
and liabilities. Such estimates primarily related to unsettled transactions and events as of the
financial statement date. Accordingly, actual results could differ from estimated amounts.
Cash
For purposes of the statements of cash flows, the Corporation considers all investments and
securities with original maturities of three months or less to be cash and cash equivalents. The
Corporation had no such investments or securities at December 31, 2001 and 2000.
Restricted Cash
Restricted cash represents amounts held by the Trustee, which are restricted for the payment of
expenses as required by the Loan and Financing Agreement by and between the City and the
Corporation.
Deferred Financing Costs and Amortization
Deferred financing costs represent certain costs incurred in connection with the issuance of the
Loan and Financing Agreement, which states that the Corporation will pay the City's closing fees
and other reasonable fees and expenses related to the issuance of bonds by the City. These costs
are being amortized straight-line over the life of the Bonds or 30 years.
Property and Equipment
Property and equipment have been recorded at the date of acquisition at cost. Routine
maintenance and repair costs are expensed as incurred. As assets are retired or disposed of the
associated cost of assets retired and the related accumulated depreciation are removed from the
accounts. There were no retirements during 2001 and 2000.
Expenditures directly related to the improvement of property are capitalized at cost. The
Corporation capitalizes the cost of roof replacement, appliances, and expenditures for other major
property improvements, as well as rehabilitation and repositioning costs incurred.
Depreciation is computed using the straight-line method over the estimated useful lives as
follows:
Building
Furniture, fixtures and equipment
7
30 years
7 years
TEXAS STUDENT HOUSING CORPORATION-SAN MARCOS PROJECT
NOTES TO FINANCIAL STATEMENTS (continued)
B. Summary of Significant Accounting Policies -continued
Revenue Recognition
Rental and other income are recorded on the accrual method of accounting and recognized as
earned.
Deferred Revenue
The Corporation reports prepaid rental income as revenue when the rental income is due from the
tenant. Such amounts received but not yet earned as of year end are reported as deferred revenue.
Financial Statement Presentation
The Corporation presents their financial statements in accordance with SF AS No. 117,
"Financial Statements of Not-for-Profit Corporations". Under SFAS No. 117, the Corporation is
required to report information regarding their financial position and activities according to three
classes of net assets: unrestricted, temporarily restricted, and permanently restricted. In addition,
the Corporation is required to present a statement of cash flows.
Restriction of Revenue
Rental income received from the operation of the San Marcos Property is restricted by terms of
the Loan and Financing Agreement for the purpose of satisfying the amounts owed by the
Corporation to the City and for the payment of operating expenses incurred by the San Marcos
Property.
C. Restricted Cash
Restricted cash are monies held by the Trustee as required by the Financing Agreement and the
Trust Indenture. At December 31, 2001 and 2000, restricted cash consists of the following funds
and accounts:
2001 2000
Debt service reserve fund $ 437,993 $ 424,087
Revenue fund 164,733
Early receipts account 160,139 155,170
Current receipts account 31,593 30,611
Replacement fund 67,934 35,000
Fee and expense fund 14,411
Cost of issuance fund 5,000 11,500
Tax and insurance fund 32 15,000
Deferred purchase price fund 425,000
$ 881,835 $ 1,096,368
The following is a brief description of the funds making up the restricted cash balance at year
end, as defined by the Agreement and the Bond Indenture:
8
TEXAS STUDENT HOUSING CORPORATION-SAN MARCOS PROJECT
NOTES TO FINANCIAL STATEMENTS (continued)
C. Restricted Cash -continued
Debt service reserve fund -Amounts held in this fund were initially funded by bond
proceeds and are only used in the event any principal or interest is not paid in
accordance with the terms of the Note.
Revenue fund -The revenue fund was established to collect monthly deposits made by
the Property and properly distribute appropriate amount to the other funds. The
revenue fund has other accounts, including the current receipts account and the early
receipts account.
Early receipts account -The early receipts account is a sub-account of the Revenue
Fund. Amounts in this account were established from the original proceeds of the
Note and will be held until early repayment of the Note is allowed. According to the
Loan and Financing Agreement, the note may be prepaid on or after January 1, 2011.
Excess revenues can be deposited and held in this account for early repayment,
however, these amounts are currently being held in the Revenue fund as defined
above.
Current receipts account -The current receipts account is also a sub-account of the
Revenue Fund. Monthly deposits into the Revenue fund are first deposited in the
current receipts account. From here they are appropriately distributed to other funds
in accordance with the Loan and Financing Agreement for payment of certain
expenses.
Replacement Fund -Amounts deposited into this account are to be held and disbursed as
required under the terms of the Loan and Financing Agreement for items replacement
purchases related to the San Marcos Property. The Loan and Financing Agreement
require monthly deposits to the Replacement Fund. The Trustee disburses amounts
from the Replacement Reserve Agreement, but only upon the receipt of a written
authorization from MuniMae Portfolio Services, LLC (the "Servicing Agent").
Fee and expense fund-Amounts deposited into this account are to be used to pay the
portion of the fees and expenses payable to the Servicing Agent, the Trustee or the
Issuer, which become due periodically throughout the year.
Cost of Issuance Fund -Amounts in this account were utilized by the Trustee at the date
closing for the payment of certain costs incurred in connection with the issuance of
the Bonds. These costs were capitalized and are being amortized over the life of the
Bonds.
Tax and Insurance Fund-Amounts deposited in this account are to be used to pay the
annual property taxes and premiums on insurance required by the Loan and
Financing Agreement.
9
TEXAS STUDENT HOUSING CORPORATION-SAN MARCOS PROJECT
NOTES TO FINANCIAL STATEMENTS (continued)
C. Restricted Cash -continued
Deferred Purchase Price Fund -Amounts in this account represent additional purchase
price funds to be paid to JPI subsequent to the closing date of the San Marcos
Property. In accordance with the Loan and Financing Agreement the additional
purchase price to be paid to JPI will occur once certain requirements have been met.
During 2001, those requirements were met and the additional purchase was paid to
JPI. The additional purchase was then appropriately allocated to property and
equipment in the accompanying financial statements.
D. Temporarily Restricted Net Assets
Temporarily restricted net assets represent excess of expenses over revenues in 2001 and 2000 the
amount of $533,869 and $133,920, respectively. Temporarily restricted net assets are restricted
for the operations of the San Marcos Property and the repayment of principal and interest
associated with the Loan and Financing Agreement entered into by the Corporation and the City.
E. Income Taxes
The Corporation is exempt from federal income taxes pursuant to the Act.
F. Note Payable
The note payable represents amounts due to bondholders, via the Trustee, and payable under the
terms of the Loan and Financing Agreement dated December 1, 2000. The note is payable solely
from the revenues generated by the San Marcos Property and is secured by the revenues pledged
and assigned under the terms of the Loan and Financing Agreement.
The note bears interest at 8.2% per annum and has additional interest due quarterly based on the
Net Cash Flow Available for Deferred Debt Service, as defmed in the Loan and Financing
Agreement, up to a maximum interest rate of 8.65% per annum. The Corporation paid
approximately $1,575,000 for interest during the year, of which approximately $68,000 was
related to additional quarterly interest payments.
Future minimum principal payments under the Financing Agreement are as follows:
Year ending
December 31,
2002 $ 72,231
2003 78,381
2004 85,056
2005 92,299
2006 100,158
Thereafter 19 410 784
$ 19,838,909
10
TEXAS STUDENT HOUSING CORPORATION-SAN MARCOS PROJECT
NOTES TO FINANCIAL STATEMENTS (continued)
G. Employee Benefit Plan
Employees of the San Marcos Property are eligible to participate in the JPI 401(k) Profit Sharing
Retirement Plan (the "Plan"). Employee salary deferrals into the Plan are matched by the
Corporation up to 3% of employee compensation as defined by the Plan. The Corporation's
contributions to the Plan were approximately $2,000 for the year ended December 31, 2001.
H. Related Party Transactions
The Corporation pays JPI property and asset management fees for the management of the San
Marcos Property. The Corporation recorded property and asset management fees of
approximately $171,000 and $35,000, respectively for the year ended December 31, 2001.
11