EX-99.6 8 d401204dex996.htm EX-99.6 EX-99.6

Exhibit 99.6

MB Hospitality (AUSN), LP        

Financial Statements        

June 30, 2017 and 2016        

 

MB Hospitality (AUSN), LP

June 30, 2017 and 2016

Table of Contents

 

     Page(s)

Balance Sheets

    2

Statements of Operations

    3

Statements of Partners’ Capital

    4

Statements of Cash Flows

    5

Notes to Financial Statements

    6-8

MB Hospitality (AUSN), LP

Balance Sheets

 

     June 30,  
     2017     2016  
Assets     

Current assets

     

Cash and cash equivalents

    $ 589,605     $ 66,241  

Reserve and escrow accounts

      331,397       —    

Due from affiliate

      5,301       —    

Prepaid expenses and other current assets

      209,886       —    
  

 

 

    

 

 

  

Total current assets

      1,136,189       66,241  
  

 

 

    

 

 

  

Property and equipment

     

Land and land improvements

      1,446,162       1,446,162  

Buildings and improvements

      9,965,976       —    

Furniture, fixtures and equipment

      1,923,181       —    

Computer software and equipment

      1,080       —    

Construction in progress

      —         5,495,512  
  

 

 

    

 

 

  
     13,336,399       6,941,674  

Less accumulated depreciation

      (276,607 )      —    
  

 

 

    

 

 

  

Total property and equipment, net

      13,059,792       6,941,674  
  

 

 

    

 

 

  

Other assets, net of accumulate amortization

      151,027       204,606  
  

 

 

    

 

 

  

Total assets

    $ 14,347,008     $ 7,212,521  
  

 

 

    

 

 

  
Liabilities and Partners’ Capital     

Current liabilities

     

Accounts payable

    $ 24,964     $ 1,008,303  

Accrued expenses and other liabilities

      313,280       —    
  

 

 

    

 

 

  

Total current liabilities

      338,244       1,008,303  
  

 

 

    

 

 

  

Line of credit

      10,107,233       1,838,229  
  

 

 

    

 

 

  

Total liabilities

      10,445,477       2,846,532  
  

 

 

    

 

 

  

Commitments and contingencies

     

Partners’ capital

     

General partner

      390       437  

Limited partners

      3,901,141       4,365,552  
  

 

 

    

 

 

  

Total partners’ capital

      3,901,531       4,365,989  
  

 

 

    

 

 

  

Total liabilities and partners’ capital

    $ 14,347,008     $ 7,212,521  
  

 

 

    

 

 

  

See accompanying notes to financial statements.    

 

2

MB Hospitality (AUSN), LP

Statements of Operations

 

     Six Months Ended June 30,  
     2017     2016  

Revenues

    $ 1,514,499     $ —    

Costs and expenses

     

Rooms

      362,477       —    

General and administrative

      371,205       —    

Advertising and marketing

      37,346       —    

Repairs and maintenance

      20,207       —    

Utilities

      63,523       —    

Property taxes and insurance

      125,773       —    

Management fee and owners’ expense

      60,552       —    

Information and telecommunication systems

      29,460       —    

Other expenses

      2,217       —    
  

 

 

    

 

 

  

Total costs and expenses

      1,072,760       —    
  

 

 

    

 

 

  

Operating income

      441,739       —    
  

 

 

    

 

 

  

Interest expense

      201,880       33,130  

Depreciation and amortization

      276,607       —    
  

 

 

    

 

 

  

Net loss

    $ (36,748 )    $ (33,130 ) 
  

 

 

    

 

 

  

See accompanying notes to financial statements.    

 

3

MB Hospitality (AUSN), LP

Statements of Partners’ Capital

For the Six Months Ended June 30, 2017 and 2016

 

     General Partner     Limited Partners     Total  

Balance, January 1, 2016

    $ 440     $ 4,398,679     $ 4,399,119  

Net loss

      (3 )      (33,127 )      (33,130 ) 
  

 

 

    

 

 

    

 

 

  

Balance, June 30, 2016

    $ 437     $ 4,365,552     $ 4,365,989  
  

 

 

    

 

 

    

 

 

  

Balance January 1, 2017

    $ 419     $ 4,187,860     $ 4,188,279  

Distribution

      (25 )      (249,975 )      (250,000 ) 

Net loss

      (4 )      (36,744 )      (36,748 ) 
  

 

 

    

 

 

    

 

 

  

Balance, June 30, 2017

    $ 390     $ 3,901,141     $ 3,901,531  
  

 

 

    

 

 

    

 

 

  

See accompanying notes to financial statements.    

 

4

MB Hospitality (AUSN), LP

Statements of Cash Flows

 

     Six Months Ended June 30,  
     2017     2016  

Cash flows from operating activities:

     

Net loss

    $ (36,748 )    $ (33,130 ) 

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

     

Depreciation

      276,607       —    

Amortization of deferred financing costs

      33,130       33,130  

Amortization of franchise fees

      1,250       —    

Changes in operating assets and liabilities:

     

Reserve and escrow accounts

      (331,397 )      —    

Accounts receivable

      (5,301 )      —    

Prepaid expenses and other current assets

      (156,105 )      —    

Accounts payable

      (316,025 )      779,561  

Due to affiliate

      (142,176 )      (13,513 ) 

Accrued expenses and other liabilities

      313,119       —    
  

 

 

    

 

 

  

Net cash provided by (used in) operating activities

      (363,646 )      766,048  
  

 

 

    

 

 

  

Cash flows from investing activities:

     

Purchase of property and equipment

      (928,456 )      (4,776,480 ) 
  

 

 

    

 

 

  

Net cash used in investing activities

      (928,456 )      (4,776,480 ) 
  

 

 

    

 

 

  

Cash flows from financing activities:

     

Distribution to partners

      (250,000 )      —    

Proceeds from line of credit

      1,472,210       1,837,229  
  

 

 

    

 

 

  

Net cash provided by financing activities

      1,222,210       1,837,229  
  

 

 

    

 

 

  

Net decrease in cash and cash equivalents

      (69,892 )      (2,173,203 ) 

Cash and equivalents at beginning of period

      659,497       2,239,444  
  

 

 

    

 

 

  

Cash and equivalents at end of period

    $ 589,605     $ 66,241  
  

 

 

    

 

 

  

Supplemental disclosure of cash flow information:

     

Cash paid for interest

    $ 168,750     $ 8,192  
  

 

 

    

 

 

  

See accompanying notes to financial statements.    

 

5

MB Hospitality (AUSN), LP

Notes to Financial Statements

June 30, 2017 and 2016

Note 1 - Summary of Significant Accounting Policies

Description of business

MB Hospitality (AUSN), LP (“the Partnership”), a Texas limited partnership, was formed on January 22, 2015. The Partnership was formed to develop, own and operate a hotel in Austin, Texas consisting of 122 guest rooms and related amenities and facilities. The hotel opened on January 3, 2017.

Organization

The Partnership’s ownership structure is comprised of a General Partner with a 0.01% interest and two Limited Partners with 4.99% and 95.00% interests. Profit and losses are allocated proportionally to the partners based on their respective capital percentages. The partnership agreement has a term lasting until December 31, 2065, unless sooner dissolved in accordance with the agreement.

Cash equivalents

For purposes of the statements of cash flows, the Partnership considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.

Reserve and escrow accounts

The Partnership’s reserve and escrow accounts consists of escrow deposits to be used for future improvements to the property and for property and insurance tax payments.

Property and equipment

Property and equipment are stated at cost. Depreciation is calculated on the straight-line method based upon the estimated useful lives of the assets as follows:

 

    

Useful Lives

Building improvements    27.5 years
Building    39 years
Computer software and equipment    5 years
Furniture, fixtures and equipment    7 years
Land improvements    15 years

Improvements that extend the life of the asset are capitalized. Maintenance and repairs are charged to expense as incurred.

The Partnership reviews its properties whenever changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable through operations. If an impairment is indicated, a loss will be recorded for the amount by which the carrying value of the property exceeds its fair value. The Partnership does not believe that any such changes have occurred and as such there were no impairment losses recorded in 2017 or 2016.

 

6

MB Hospitality (AUSN), LP

Notes to Financial Statements

June 30, 2017 and 2016

Note 1 - Summary of Significant Accounting Policies (Continued)

 

Accounts receivable

Accounts receivable consist of unbilled hotel guest charges for guests staying at the hotel at period-end and corporate account customer charges from various times throughout the year. The Partnership estimates an allowance for doubtful accounts based on historical activity, with no allowance deemed necessary as of June 30, 2017 and 2016.

Other assets

Other assets include deferred franchise fees. Deferred franchise fees represent the initial fees to obtain the right to operate the hotel under the System Hotel name. Deferred franchise fees are amortized on a straight-line basis from the date the hotel opened for business through the expiration date of the franchise agreement.

Deferred financing costs

Deferred financing costs are incurred in connection with the issuance of long-term debt, and are capitalized and amortized using the straight-line method, which approximates the interest method, over the expected terms of the related debt agreements.

Income taxes

The Partnership is organized as a Texas limited partnership and therefore, income and losses are reported in the tax returns of the partners.

The Partnership recognizes in the financial statements the impact of an uncertain tax position only if that position is more likely than not of being sustained upon examination by the taxing authority. Should the Partnership be subject to examination by the taxing authority, any adjustments required would be passed through to the partners’ for their share of such adjustments.

Revenue recognition

Revenues are recognized when services have been performed, generally at the time of the hotel stay or at the point of sale.

Advertising

Advertising costs are expensed as incurred. Advertising expense was $37,346 and $0, for the six months ended June 30, 2017 and 2016, respectively, which is included in advertising and marketing on the accompanying statements of operations.

Concentrations of credit risk

The Partnership operates one hotel. Future operations could be affected by economic or other conditions in its geographical area or by changes in the travel and tourism industry.

 

7

MB Hospitality (AUSN), LP

Notes to Financial Statements

June 30, 2017 and 2016

Note 1 - Summary of Significant Accounting Policies (Continued)

Concentrations of credit risk (continued)

 

Financial instruments which potentially subject the Partnership to concentrations of credit risk are primarily cash and cash equivalents. The Partnership maintains cash accounts in major U.S. financial institutions. The balances of these accounts occasionally exceed the federally insured limits, although no losses have been incurred in connection with such cash balances.

Use of estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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.

Note 2 - Credit Facility

Effective November 18, 2015, the Partnership entered into a credit facility with a financial institution that allows for draws up to $10,290,000. Interest is due monthly with the outstanding principal balance and any accrued but unpaid interest due at maturity on November 18, 2018. The credit facility is secured by the hotel and partners’ guarantees. Interest accrues at a rate of LIBOR plus 3% per annum. As of June 30, 2017 and 2016, the interest rate was 4.23% and 3.47%, respectively.

For the six month ended June 30, 2016, the Partnership capitalized $8,192 of interest from the credit facility related to the construction of the hotel.

In connection with the credit facility, the Partnership incurred deferred financing costs of $198,779. The Partnership recorded $33,130 of interest expense related to the deferred financing costs of the credit facility for the six months ended June 30, 2017 and 2016. The unamortized debt financing cost was $88,346 and $154,606 at June 30, 2017 and 2016, respectively.

Note 3 - Related Party Transactions

For the six months ended June 30, 2017 and 2016, the Partnership incurred $22,690 and $0, respectively, in asset management fees, to a related party for hotel management functions. The management fee is calculated based on 1.5% of gross revenue.

Note 4 - Subsequent Events

Subsequent to June 30, 2017, the Partnership received a letter of intent for the purchase of the hotel from a public company. There is a due diligence period of 45 days with closing set to occur 30 days after the due diligence period.

The Partnership has evaluated for subsequent events through August 25, 2017, which is the date the financial statements were available to be issued and has determined that there are no other items that require disclosure.

 

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