THC FY11 Financial Statements
Transcript of THC FY11 Financial Statements
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TENDERLOIN HOUSING CLINIC, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS' REPORT
June 30, 2011
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TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS REPORT 3
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 4
CONSOLIDATED STATEMENT OF ACTIVITIES 5
CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES 6
CONSOLIDATED STATEMENT OF CASH FLOWS 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
June 30, 2011
The accompanying notes are an integral part of this statement.4
CURRENT ASSETSCash and cash equivalents 2,115,406$
Cash held for clients 573,978
Cash - tenant security deposits 28,996
Investment in mutual fund 10,829
Prepaid expenses 119,870
Contracts and grants receivable 513,042
Contribution receivable 124,241
Attorney fee receivable 3,516
Other receivables 109,363
Total current assets 3,599,241
PROPERTY AND EQUIPMENT - net of accumulated depreciation 6,555,671
OTHER ASSETS
Deposits 304,608
Cash held for 495 Minna Street 29,472
Total other assets 334,080
TOTAL ASSETS 10,488,992$
CURRENT LIABILITIES
Accounts payable 307,253$Accrued payroll 150,859
Accrued vacation 333,541
Tenant security deposits 28,917
Client trust fund liability 576,996
Loans payable - current portion 19,700
Interest rate swap liability 8,460
Other 32,064
Total current liabilities 1,457,790
OTHER LIABILITIES
Funds held in trust for 495 Minna Street 29,472
Loans payable - long-term portion 930,391
TOTAL LIABILITIES 2,417,653
COMMITMENTS -
NET ASSETS
Unrestricted 8,071,339
TOTAL LIABILITIES AND NET ASSETS 10,488,992$
ASSETS
LIABILITIES AND NET ASSETS
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CONSOLIDATED STATEMENT OF ACTIVITIES
Year ended June 30, 2011
The accompanying notes are an integral part of this statement.5
Revenues and support: Unrestricted
Government contracts and grantsSRO Housing Program - Human Services Agency (HSA) 14,876,889$Family Housing Subsidy Program - HSA 516,949Modified Payment Program - HSA 601,811Assistance for Ellis Act Evictions - HSA 125,000Homelessness Prevention and Rapid Rehousing Program - HSA 478,955Shelter Plus Care - SF Housing Authority 329,066Central City SRO Collaborative - Department of Public Health 251,826CDBG grant - Mayor's Office of Housing 87,490Code Enforcement and Outreach Program - Department of Building Inspection 72,894La Voz Latina - Glide Foundation and First 5 80,317Community Challenge Grant Program - Mural Restorations 30,740Rent Board Grant 20,000
Hotel rental income 8,487,745Galvin Apartments rental income 369,037Attorney fees 174,663Reimbursed legal costs 61,805Other rental income 31,940Miscellaneous income 35,017495 Minna rental income 16,170Donations 5,943Investment return 1,828
Total revenues and support 26,656,085
Expenses:
Program services 24,870,474Management and general 1,844,263Total expenses 26,714,737
Unrealized loss from interest rate swap agreement (3,737)
Change in net assets (62,389)
Unrestricted net assets at beginning of year - as previously reported 8,256,048
Prior period adjustment (122,320)
Unrestricted net assets at beginning of year - as restated 8,133,728
Unrestricted net assets at end of year 8,071,339$
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CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended June 30, 2011
The accompanying notes are an integral part of this statement.7
Cash flows provided by (used in) operating activities
Change in net assets (62,389)$Adjustments to reconcile change in net assets to net cash provided by
operating activities:
Depreciation and amortization 513,057
Unrealized loss from interest rate swap agreement 3,737
Changes in operating assets and liabilities
Contracts and grants receivable 991,053
Cash held for clients 51,680
Attorney fees receivable 60,213
Contribution receivable (124,241)
Other receivables (60,403)Prepaid expenses (20,014)
Deposits (8,597)
Accounts payable (100,762)
Accrued payroll 6,789
Accrued vacation 30,099
Other current liabilities (194,846)
Net cash provided by operating activities 1,085,376
Cash flow provided by (used in) investing activitiesPurchases of equipment and improvements (182,721)
Net cash used in investing activities (182,721)
Cash flow provided by (used in) financing activities
Proceeds from refinance of 126 Hyde Street mortgage loan 250,000
Principal payment of 126 Hyde Street mortgage loan (127,178)
Expense related to the issuance of the interest rate swap 4,723
Net cash provided by financing activities 127,545
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,030,200
Cash and cash equivalents, beginning of year 1,085,206
Cash and cash equivalents, end of year 2,115,406$
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2011
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NOTE A - DESCRIPTION OF ORGANIZATION
Tenderloin Housing Clinic, Inc. (the Organization) was incorporated on June 3, 1980, as aCalifornia nonprofit corporation. The Organizations primary purposes are to preserve,expand and stabilize low-income housing in the Tenderloin and surrounding communities ofSan Francisco, California, assist tenants to assert their legal rights, provide culturallycompetent support services, and create employment and leadership opportunities for formerlyhomeless tenants.
On January 1, 2004, the Clinic merged with City Housing, Inc. (CHI), the exclusive agent thatoperated and managed all the hotels now master-leased by the Organization. TheOrganization assumed all the assets and liabilities of CHI and was the surviving corporation.
The Organization formed Beyond Chron, LLC on April 3, 2004 to operate an online website,under BeyondChron.org. The Organization is the sole member of this LLC.
All the Organization's properties are in San Francisco, California and its principal activitiesare as follows:
Single Room Occupancy (SRO) Housing Program: This program has provided supportivehousing to homeless tenants through master lease agreements with residential hotels in SanFrancisco, California since May 1, 1999. The Organization provides comprehensive propertymanagement services for sixteen master-leased hotels. The Organizations propertymanagement department manages tenants leases and compliance with hotel leases andensures the sanitation, safety, upkeep and code compliance of the hotels. The Organizationoffers voluntary comprehensive support services to tenants residing in these hotels. Thesupport services offered by the Organization help residents maintain housing, enrich their self-respect, confidence and awareness, improve quality of life, minimize and/or resolve issuesthat may jeopardize their housing, build a strong sense of community and access informationabout other helpful services. The hotels operating expenses, including lease payments, arefunded by a combination of rent collections and service contracts with the Human ServicesAgency of the City and County of San Francisco (HSA) since July 1, 2000.
Legal Assistance Program: This program assists tenants to assert their legal rights. Themajority of the funding for this program comes from settlements of lawsuits and court-awarded legal fees. HSA funds a portion of this program to provide legal representation to
long-term senior and disabled San Francisco tenants facing eviction under the Ellis Act. ACommunity Development Block Grant (CDBG) also funds a portion of the program. Theprogram has a mix of revenue and non-revenue generating litigation, as well as a substantialamount of non-litigation representation for low-income tenants where no fees of any kind arecharged or collected. Most of the revenue generating cases is on a contingency fee basis.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 30, 2011
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NOTE A - DESCRIPTION OF ORGANIZATION (continued)
Housing Service Program: This program provides housing, rental and payment assistancewhere the Organization acts as a disbursing agent. Comprehensive case management is alsooffered to adult clients under the Shelter plus Care Program and families through the FamilyHousing Subsidy Program. These services target to low-income individuals, low-incomefamilies and homeless individuals who may be mentally ill, have chronic substance abuseproblems, and/or be afflicted with disabling HIV, AIDS or related disorders. This program isfunded by federal and local government agencies under various contracts, with the majority offunding from HSA.
Community Organizing and Outreach: This program operates the Central City SROCollaborative (Collaborative), Code Enforcement Outreach Program (CEOP), La Voz Latinade la Ciudad Central (La Voz), Community Challenge Grant and Residential RentStabilization & Arbitration Board Outreach (Rent Board). Funding for this program is fromcontract and grants from local government agencies. The following City and County of SanFrancisco agencies fund this program: Department of Building Inspection, First 5 via GlideFoundation acting as a subcontractor for this program, Community Challenge Grant Programand the Rent Board. The Collaborative, CEOP and Rent Board programs provide communityoutreach, counseling and tenant organizing to SRO and low-income residents of SanFrancisco. The Collaborative operates a tenant representative program at various SRO hotelsto enhance stability in the hotels and address residential community concerns. Tenantrepresentatives, with the help of the Organization's community organizers, conduct regularmeetings and respond to tenant concerns. La Voz engages and educates Latino and immigrantfamilies living in the Tenderloin community of San Francisco. The Community ChallengeGrant is a onetime project for the restoration and creation of five murals at two sites in theTenderloin neighborhood of San Francisco.
Galvin Apartments: The Organization owns and manages a studio apartment building namedin honor of Sister Bernie Galvin of Religious Witness with Homeless People: refer to Note K.
Beyond Chron: This is a daily online news site that provides news and analysis about issuesprimarily related to San Francisco.
495 Minna Street: The Organization manages two artist live/work units and an art galleryspace located at 495 Minna Street, San Francisco, California.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Organizations significant accounting policies:
Basis of accounting
The Organization maintains its records using the accrual method of accounting.
Basis of presentation
The Organization reports information regarding its financial position and activitiesaccording to three classes of net assets: unrestricted, temporarily restricted andpermanently restricted.
Unrestricted Net Assets
The portion of net assets that is neither temporarily restricted nor permanently restrictedby donor restriction.
Temporarily Restricted Net Assets
The portion of net assets for which use by the Organization is limited by donor-imposedstipulations that expire by passage of time or can be fulfilled and removed by actions ofthe Organization. The Organization currently has no temporarily restricted net assets.
Permanently Restricted Net Assets
The portion of net assets for which use by the Organization is limited by donor-imposedstipulations that neither expire by passage of time nor can otherwise be removed byactions of the Organization. The Organization currently has no permanently restricted netassets.
Consolidation
The accompanying consolidated financial statements include the accounts of TenderloinHousing Clinic, Inc. and its wholly owned subsidiary Beyond Chron, LLC. All significantinter-company accounts and transactions have been eliminated in consolidation.
Cash and cash equivalents
For purposes of the consolidated statement of cash flows, the Organization considers allunrestricted, highly liquid investments with an initial maturity of three months or less tobe cash equivalents.
The Organization maintains its cash balances at two banks located in San Francisco,California. Certain balances are insured by the FDIC up to $250,000. At year-end andvarious times during the year, the Organization had cash in excess of insured amounts.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Investment in mutual fund
The investment in mutual fund is recorded at fair value, which is its quoted market price.
Property and equipment
Equipment purchase costs in excess of $1,000, with estimated useful lives in excess of oneyear, are capitalized at cost. Donated assets are capitalized at the fair market value on thedate of receipt. Depreciation is computed on the straight-line method using estimateduseful lives varying between five and forty years.
Leasehold improvements, in excess of $1,000, are recorded at cost and are amortizedusing the straight-line method over the estimated useful lives of the respective assets,ranging from three to seven years, but not more than the remaining term of the respectivelease.
Maintenance, repairs and renewals, which neither materially add to the value of theproperty nor appreciably prolong its life, are charged to expense as incurred.
Derivative financial instruments
The Organization enters into interest swap agreements to hedge its exposure tofluctuations in future cash flows resulting from interest rate payments on its variable-rate
term debt. The level of effectiveness of the hedge is measured by changes in the fair valueof the hedged term debt resulting from fluctuations in interest rates. As a matter of policy,the Organization does not enter into derivative transactions for trading or speculativepurposes.
The fair values of interest rate swap and cap agreements are obtained from dealer quotes.These values represent the estimated amount the Organization would pay to terminate theagreements taking into consideration current interest rates. Changes in fair values oninterest rate swaps are recorded as an asset or liability with corresponding reporting as anelement of unrestricted net assets.
Functional allocation of expenses
Expenses are charged to programs and management and general services on the basis ofperiodic time and expense studies in addition to estimates made by management.Management and general expenses include those expenses that are not directly identifiablewith any other specific function but which provide for the overall support and direction ofthe Organization.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Estimates
The preparation of financial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosures ofcontingent assets and liabilities (if any) at the date of the financial statements and thereported amounts of revenue and expenditures during the reporting period. Actual resultscould differ from those estimates. The most significant estimates are the allocation ofexpenses among the Organizations functions and the rates of depreciation for propertyand equipment.
Litigation expenses
Litigation expenses such as court costs, filing fees and courier charges are expensed whenincurred because those expenses may not be recoverable.
Income taxes
The Organization is exempt from paying federal and state income taxes under InternalRevenue Code Section 501(c)(3) and California Revenue and Taxation Code Section23701d. Accordingly, no provision has been made for such taxes in the accompanyingfinancial statements.
Each year, management considers whether any material tax position the Organization hastaken is more likely than not to be sustained upon examination by the applicable taxingauthority. Management believes that any positions the Organization has taken aresupported by substantial authority and, hence, do not need to be measured or disclosed inthe attached financial statements. Tax returns for years subsequent to June 30, 2007 aresubject to examination by federal and state tax authorities.
Revenue recognition
Attorney fees are recognized as revenue during the period in which a case is settled. Hotelrental income is reported net of any vacancy loss.
Contributions and grants are recognized when the donor/grantor makes an unconditionalpromise to give to the Organization. Amounts that are restricted by the donor/grantor arereported as increases in temporarily restricted net assets or permanently restricted netassets depending on the nature of the restrictions. When a restriction expires, temporarilyrestricted net assets are reclassified to unrestricted net assets.
Management reviews the collectability of contributions and pledges receivable andestablishes reserves for uncollectible amounts when needed.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Subsequent events
The Organization has evaluated subsequent events through February 27, 2012, whichrepresents the date the financial statements are available to be issued.
NOTE C PRIOR PERIOD ADJUSTMENT
The Organization has a 50% ownership interest in the building located at 126 Hyde Street. Amortgage note associated with the property was not previously recorded as a liability. Thiserror was discovered upon the refinance of the mortgage note in 2011. The adjustment records
50% of the mortgage note associated with the building as of June 30, 2011. Accordingly, anadjustment of $122,320 was made in the current year to decrease unrestricted net assets with acorresponding entry to record the mortgage note payable (refer to Note I). The effect of therestatement on net assets for prior years was not determined.
NOTE D - CASH HELD FOR CLIENTS
The Organization acts as an agent for its clients in receiving checks and disbursing money forrent and other expenditures on their behalf. It does this as part of the cash managementservices provided by the Housing Services Program. All client funds are segregated and held
separate from the Organization's funds. The Organization bears all expenses incurred tomaintain any agency bank accounts. At June 30, 2011, the balance in these accounts was$319,848. Under the Legal Assistance Program, the Organization maintains client trust bankaccounts. During legal proceedings, clients often remit rents, which are deposited into theclient trust bank account. The Organization pays rents to owners or returns them to clientswhen the respective lawsuits are settled. The trust account balance at June 30, 2011 was$254,130.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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NOTE E - CONTRACTS AND GRANTS RECEIVABLE
Contracts and grants receivable at June 30, 2011 consisted of the following:
Human Services Agency 353,853$
Department of Building Inspection 58,336
Department of Public Health 44,859
Glide Foundation 24,306
San Francisco Rent Board 20,000
Mayor's Office of Housing 11,688
513,042$
NOTE F - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
Land 906,225$
Buildings 4,707,275
Automobiles 37,114
Office furniture and equipment 736,189
Leasehold improvements 878,943
Building improvements 1,932,9169,198,662
Less: accumulated depreciation (2,642,991)
6,555,671$
The Organization has a 50% ownership interest in an office building located at 126 HydeStreet, San Francisco. The Organization occupies most of this building for its office (refer toNote G).
NOTE G - COMMITMENTS
The Organization owns half of the Hyde street building occupied by its administrative office.The Organization occupies the entire space and, in consequence, has a space lease agreementwith the other owner (tenant-in-common). The agreement is for five years beginning October2000 with automatic annual renewals. The starting monthly rent was $7,500, which increasesby 5% for each successive year. The rent compensates the tenant-in-common for use of thespace and covers substantially all normal operating costs of ownership. Rent expense for theyear ended June 30, 2011 was $112,800. As part of the arrangement, the Organization also
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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NOTE G - COMMITMENTS (continued)
Residential Hotels
The Organization master leases residential hotels from outside parties to provide housing tolow-income and homeless people. These leases have an initial one-year term and consecutiveone-year renewal terms at the Organizations option. The leases have different terminationdates, depending upon the inception and length of the agreement. As of June 30, 2011, themaster leases are as follows:
Name of Hotel Commencement Date Number of Units Term with Options
Seneca Hotel May 1, 1999 204 20 years
Mission Hotel October 1, 1999 248 20 years
Jefferson Hotel October 1, 1999 111 20 years
Vincent Hotel May 15, 2000 103 20 years
Hartland Hotel September 1, 2000 138 20 years
Looper Residence August 9, 2002 44 20 years
Royan Hotel May 20, 2003 69 20 years
Caldrake Hotel October 1, 2003 51 20 years
Graystone Hotel May 1, 2004 74 10 years
Allstar Hotel August 1, 2004 86 20 years
Pierre Hotel September 16, 2004 87 20 years
Union Hotel December 15, 2004 60 10 years
Raman Hotel September 9, 2005 85 20 years
Boyd Hotel February 13, 2006 82 20 years
Elk Hotel August 1, 2006 88 20 years
Mayfair Hotel July 1, 2010 76 20 years
Minimum future rental payments under the non-cancellable portion of these leases, usuallyone year for each hotel, totaled $2,873,416 as of June 30, 2011.
NOTE H - CONCENTRATIONS OF RISKThe Organization receives a substantial amount of its support from federal and localgovernment agencies. One of the agencies provides 64% of total revenue. A significantreduction in the level of this support could have a material adverse effect on theOrganization's programs and activities. Management does not believe this is likely becausethe Organization's contract with the Agency continues through 2015.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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NOTE I - LOANS PAYABLE
Hartland Hotel CDBG Loan
The Organization entered into a loan agreement for $317,100 with the City and County of SanFrancisco to fund rehabilitation of Hartland Hotel. This loan is interest-free and the principalis due twenty years from the date of the agreement, January 3, 2002. It requires HartlandHotel to comply with specified affordability and leasing restrictions until August 31, 2020.All principal and accrued interest will be forgiven at maturity, provided the Organizationremains in compliance with specified terms of the agreement.
If, with the City's prior written consent at any time while the affordability restrictions are stillin effect: (i) the Organization consents to the lessor's sale of the property; or (ii) the
Organization or its assignee fails to exercise the purchase option (as defined in the lease) forthe property, then the lessor may terminate the affordability restrictions by payment of arelease fee in an amount equal to the then remaining balance of the loan which is calculatedon the basis of a 5% reduction of the original principal balance on each anniversary of theloan closing date.
Mission Hotel CDBG Loan
The Organization entered into a loan agreement for $387,849 with the Mayor's Office ofHousing to fund part of the rehabilitation of Mission Hotel. This loan is interest-free and theprincipal is due fifteen years from the date of the deed, December 2, 2005. However, allprincipal and interest will be forgiven at maturity, provided the Organization remains incompliance with specified terms of the agreement. The agreement requires Mission Hotel tocomply with stated affordability and leasing restrictions.
If, with the City's prior written consent at any time while the affordability restrictions are stillin effect: (i) the Organization consents to the lessor's sale of the property; or (ii) theOrganization or its assignee fails to exercise the purchase option (as defined in the lease) forthe property, then the lessor may terminate the affordability restrictions by payment of arelease fee in an amount equal to the then remaining balance of the loan which is calculatedon the basis of a 5% reduction of the original principal balance on each anniversary of theloan closing date.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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NOTE I - LOANS PAYABLE (continued)
126 Hyde Street Mortgage Note
The 126 Hyde Street Mortgage was refinanced during the year. The loan provides for aninitial monthly principal payment of $3,239, of which the Organization is responsible for 50%or $1,620 per month. The loan requires escalating principal payments each year. The variableinterest rate is calculated using a 1-month LIBOR plus 2.6%. As of June 30, 2011 thevariable rate was 2.79%. As of June 30, 2011, the balance of the loan amounted to $490,284of which the Organization is responsible for $245,142 (50% of the balance).
Annual maturities of the mortgage note (50%) are as follows:
19,700$
20,778
21,920
23,120
16,040
143,584
245,142$
Thereafter
Year ending June 30,
2012
2013
2014
2015
2016
In connection with the refinance of the mortgage note, the Organization entered into aninterest rate swap agreement, with its lender for the 126 Hyde street mortgage note, to hedgeits exposure to fluctuations in future cash flows resulting from interest payments on itsvariable-rate term debt.
The interest rate swap agreement with the bank lender which (i) provides for net swapsettlement payments based on a fixed rate of 6.38%; (ii) matures in February 2016; and (iii) isalso secured by the deed of trust on the building at 126 Hyde Street. The swap agreementprovides for early termination (as defined) in the event of default.
At June 30, 2011, the fair value of the interest rate swap agreement is reported as an interestswap liability of $8,460. The change in the fair value (unrealized loss) of the swap agreementamounted to $3,737 and was recorded through the statement of activities.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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NOTE J - 495 MINNA STREET
The Organization renovated the ground-floor commercial space of a residential hotel at thecorner of Sixth and Minna Streets with funding from the San Francisco RedevelopmentAgency. The renovation created a lobby/sitting room for the hotel's tenants and created twoseparate housing units for use as artist live-work spaces. The Organization had a lease for aterm of 10 years with two 5-year renewal options for this space.
The Organization managed the space and held a surplus from prior years as a reserve forcontingencies and repairs. The arrangement with 495 Minna Street ended in May 2011 and theremaining reserve balance of $29,472 at June 30, 2011 is for continued repairs. The amountwill be distributed based on the direction of the San Francisco Redevelopment Agency.
NOTE K - GALVIN APARTMENTS
The Organization manages a 56-unit studio apartment building located at 785 Brannan Street(the Galvin Apartments). It rents the studio apartments to very low-income tenants who havepreviously lived in an SRO hotel. Rental revenue from the building pays for the expensesassociated with managing and operating the property. The Organization received the GalvinApartments in September 2007 without paying consideration.
NOTE L - 900 INNES
The Organization received title to a vacant lot located in the Bayview/Hunters Pointneighborhood of San Francisco (900 Innes) in December 2007. The Organization pays theproperty taxes and insurance costs for this lot, totaling $21,186 for the year ended June 30,2011.
Upon receipt of title to the land, the Organization executed a space lease agreement with thecurrent tenant, the donor. The lease expires upon the earlier of five years or commencementof construction on the property. The donor had created certain rights, title and interest inplans, permits and site improvements. He gave them to the Organization as considerationunder the terms of the lease, in lieu of cash payments valued at $400,000. The donor obtained
an appraisal of the property at $20,000,000 as of the date of transfer but the Organization hasnot recorded any value associated with this land or site improvements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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NOTE L - 900 INNES (continued)
Management is awaiting the outcome of a rezoning process affecting the property, whichbegan in 2007, before determining the best use of the property. Given the uncertainty of thefinal zoning, management believes it has no measurable basis to determine fair value of theparcel. Such lack of measurable value, and consequent omission in the financial statements ofthe Organization, constitutes a departure from U.S. generally accepted accounting principles(GAAP). This GAAP departure does not impact overall operations of the Organization inserving its mission.
NOTE M - CONTINGENCIES
The Organization receives monies from several grant/contract programs that are operated byvarious government agencies. Those programs are subject to financial and compliance auditsby the grantors/agencies or their representatives, to ensure compliance with conditions andrestrictions of the agreements. In the opinion of management, any liability for reimbursementthat may arise as the result of future audits is unlikely to be material.