UNCW CORPORATION
(A Component Unit of the University of North Carolina at Wilmington)
FINANCIAL REPORT
YEAR ENDED JUNE 30, 2015
Certified Public Accountants and Advisors Since 1947
Greensboro, NC | Raleigh, NC | Winston-Salem, NC
Member of a Global Association
of Independent Accounting
and Consultancy Firms
UNCW CORPORATION
Table of Contents
Page No.
Independent Auditor's Report …………………………………………………………………
1
Management's Discussion and Analysis………………………………………………………
3
Financial Statements
Statement of Net Position …………………………………………………………………
8
Statement of Activities and Changes in Net Position …………………………………
9
Statement of Cash Flows …………………………………………………………………
10
Notes to Financial Statements ………………….…………………………………………
11
Certified Public Accountants and Advisors Since 1947
Greensboro, NC | Raleigh, NC | Winston-Salem, NC
Independent Auditor's Report
To the Board of Directors
UNCW Corporation
Wilmington, North Carolina
Report on the Financial Statements
We have audited the accompanying financial statements of UNCW Corporation (the "Corporation"), (a
nonprofit corporation), which comprise the statement of net position as of June 30, 2015, and the
related statements of activities and changes in net position, and cash flows for the year then ended, and
the related notes to the financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor's Responsibility
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 from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the
Corporation's preparation and fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Corporation's internal control. Accordingly, we express no such opinion.
An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Page 1
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of UNCW Corporation as of June 30, 2015, and the changes in its financial position
and its cash flows for the year then ended in accordance with accounting principles generally accepted
in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's
discussion and analysis on pages 3 through 6 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.
Greensboro, North Carolina
September 8, 2015
Page 2
UNCW CORPORATION
Management's Discussion and Analysis
(Unaudited)
Financial Analysis
The UNCW Corporation (the "Corporation") provides the following Management’s Discussion and
Analysis ("MD&A") as an overview of the financial activities for the fiscal year ended June 30, 2015.
The MD&A identifies significant transactions that have financial impact and highlights favorable and
unfavorable trends. Comparative data for the previous year is presented to provide a better understanding
of the financial information.
Using the Financial Statements
The Corporation’s financial report includes three basic comprehensive financial statements that depict the
financial activity and fiscal condition of the Corporation for the current year: the Statement of Net
Position; the Statement of Activities and Changes in Net Position; and the Statement of Cash Flows.
These financial statements are prepared in accordance with Governmental Accounting Standards Board
("GASB") principles. The accrual basis of accounting has been used to prepare the statements. This
method of accounting requires that revenues and assets are recognized when the service is provided.
Expenses and liabilities are recognized when others provide services, regardless of when cash is
exchanged.
The Statement of Net Position includes all the Corporation's assets and liabilities. The Corporation’s net
position (the monetary difference between total assets and total liabilities) are one indicator of the
Corporation’s financial viability. Over time, changes in net position provide information on the
improvement or erosion of the Corporation’s financial condition when considered with non-financial facts.
The Statement of Activities and Changes in Net Position presents the revenues earned and expenses
incurred during the fiscal year. Financial activities are reported as either operating or non-operating.
Another important factor to consider when evaluating the financial viability of the Corporation is the
ability to meet financial obligations as they mature. The Statement of Cash Flows presents information
that allows the reader to evaluate the Corporation’s ability to meet its financial obligations on a current
basis.
Financial Highlights
The Corporation includes the activity of UNCW Corporation Housing I, LLC and UNCW Corporation
Housing II, LLC (the "LLCs") which are organizations responsible to develop, construct, own, finance,
manage, operate or otherwise deal with student housing facilities on or near the campus of the University
of North Carolina at Wilmington (the "University"). As a result, the Corporation leases these facilities to
the University for amounts equal to the required debt service payments associated with issued bonds to
finance these projects and administrative costs to manage the Corporation, with no incentive to create a
profit.
On December 29, 2014, Standard & Poor's Ratings Services credit rating review affirmed its 'A-' longterm rating and underlying rating ("SPUR") on the University of North Carolina at Wilmington Corp.
Housing ("UNCWCH") I, and UNCWCH II, LLCs' certificates of participation ("COPs")-series 2005,
2006, and 2008 issues, issued on behalf of the University of North Carolina at Wilmington ("UNCW").
The rating reflects solid debt service coverage and a trend of strong housing system occupancy at UNCW
as well as the University's strong managerial and financial commitment to its student housing projects.
Page 3
UNCW CORPORATION
Management's Discussion and Analysis
(Unaudited)
On May 12, 2015, the UNCW Corporation's single member LLCs refunded the 2005 Series Certificates of
Participation and advanced refunded the 2006 Series with Limited Obligation Bonds (LOBs) expected to
mature in 2037. The LOBs were issued through the UNCW Corporation. On April 14, 2015, Moody's
Rating Services affirmed the A2 ratings on the Series 2008 Certificates of Participation and assigned an
A2 rating, positive outlook, on the Series 2015 Refunding Limited Obligation Bonds, expected to mature
in 2037.
The Corporation issued $24,920,000 in Limited Obligation Bonds, Series 2015 with an average interest
rate of 4.38%. The bonds were issued for a current refunding of $27,360,000 of outstanding Series 2005
Certificates of Participation with an average interest rate of 4.93%. The refunding was undertaken to
reduce total debt service payments by $5,302,395 over the next 21 years and resulted in an economic gain
of $3,820,154.
The Corporation issued $34,630,000 in Limited Obligation Bonds, Series 2015 with an average interest
rate of 4.79%. The bonds were issued to advance refund $37,250,000 of outstanding bonds Series 2006
Certificates of Participation with an average interest rate of 4.93%. The net proceeds of the refunding
bonds were used to purchase U.S. government securities. These securities were deposited into an
irrevocable trust to provide for all future debt service payments on the refunded bonds. As a result, the
refunded bonds are considered to be defeased and the liability has been removed from the Corporation's
Statement of Net Position. This advance refunding was undertaken to reduce total debt service payments
by $4,369,214 over the next 22 years and resulted in an economic gain of $3,096,417. At June 30, 2015,
the outstanding balance was $36,825,000 for the defeased Series 2006 Certificates of Participation.
The UNCW Corporation Housing I, LLC that issued the 2005 Certificates, and the UNCW Corporation
Housing II, LLC, that issued the 2006 Certificates merged with the UNCW Corporation. Debt is no
longer issued through the LLCs and is issued through the UNCW Corporation.
Page 4
UNCW CORPORATION
Management's Discussion and Analysis
(Unaudited)
Statement of Net Position
The Statement of Net Position presents the assets, liabilities, and net position (total assets minus total
liabilities) of the Corporation. This statement provides a fiscal snapshot of the Corporation’s financial
position as of June 30, 2015. The data provides readers of this statement with information on assets
available to continue operations, amounts due to vendors, and the net position available for expenditure by
the Corporation.
Condensed Statement of Net Position
June 30, as indicated
2015
Assets
Restricted assets
Direct financing leases
Other assets
Total assets
$
766,030
123,518,706
1,035,898
$ 125,320,634
2014
Change
2,095,225
122,962,698
1,829,777
$ (1,329,195)
556,008
(793,879)
(63.44) %
0.45 %
(43.39) %
$ 126,887,700
$ (1,567,066)
(1.24) %
$
Deferred Outflows of Resources
Deferred losses on
refunding bonds
1,413,128
Liabilities
Long-term debt
Other liabilities
$ 124,125,488
1,195,146
$ 124,296,567
2,591,133
125,320,634
126,887,700
Total liabilities
Deferred Inflows of Resources
Deferred related party
revenue
Net Position
-
$
1,413,128
-
1,413,128
$
$
-
n/a
(171,079)
(1,395,987)
(0.14) %
(53.88) %
(1,567,066)
(1.24) %
1,413,128
$
% Change
-
n/a
-
%
At June 30, 2015, the Corporation's decreases in restricted assets and other assets relate to refinancing
long term debt. The debt required funding of the reserve fund and a significant amount of prepaid
insurance that was not required under the new debt. Increases in both deferred losses on refunding bonds
and unearned related party revenue relate to the refinancing of long term debt and will be amortized as the
new loan matures. The decline in other liabilities reflects an offset of amounts due to the University based
on the activity noted above.
Page 5
UNCW CORPORATION
Management's Discussion and Analysis
(Unaudited)
Statement of Activities and Changes in Net Position
Changes in total net position as presented on the Statement of Net Position section are based on the
activity reported in the Statement of Activities and Changes in Net Position. The purpose of this
statement is to present the revenues received by the Corporation and the expenses paid by the Corporation.
Operating revenues are received for providing goods and services to the various customers. Operating
expenses are used to acquire or produce the goods and services provided in return for the operating
revenue, and to carry out the mission of the Corporation.
Condensed Statement of Activities,
and Changes in Net Position
For the Year Ended June 30, as indicated
2015
Revenue
Direct financing
lease income
Other revenues
$
Total revenue
Expenses
Interest expense
Other expenses
Total expenses
2014
5,909,429
525,551
$
Change
5,961,999
100,968
$
(52,570)
424,583
6,434,980
6,062,967
372,013
5,909,429
525,551
5,961,999
100,968
(52,570)
424,583
6,434,980
6,062,967
372,013
Changes in net position
-
-
-
Net position, beginning
-
-
-
Net position, ending
$
-
$
-
$
% Change
(0.88) %
420.51 %
6.14 %
(0.88) %
420.51 %
6.14 %
-
Since the Corporation was set up to develop, construct, own, finance, manage, operate or otherwise deal
with student housing facilities near the University, and to lease these facilities to the University with no
motive to create a profit, the decrease in direct financing lease income during the current fiscal year is a
direct result of the decrease in interest expense relating to issued certificates of participation to finance the
construction of those facilities with increased principal payments on each certificate of participation.
Page 6
UNCW CORPORATION
Management's Discussion and Analysis
(Unaudited)
Statement of Cash Flows
The Statement of Cash Flows provides information about cash receipts and cash payments during the year.
The Statement of Cash Flows also helps users assess the Corporation’s:
• Ability to generate future net cash flows
• Ability to meet its obligations as they come due
• Need for external financing
Condensed Statement of Cash Flows
For the Year Ended June 30, as indicated
2015
Cash flow activities
Receipts from users
$ 7,454,916
Payments to suppliers
(95,357)
Acquisition and construction
of capital assets
Debt service payments
(7,359,559)
Investment proceeds
Net change in
cash flows
Cash, beginning
Cash, ending
2014
$
$
-
$
Change
% Change
6,016,998
(22,295)
$ 1,437,918
(73,062)
23.90 %
327.71 %
(4,785)
(6,563,056)
573,138
4,785
(796,503)
(573,138)
(100.00) %
12.14 %
(100.00) %
-
-
-
-
-
$
-
%
-
Changes in cash flow activities relate to the normal course of the Corporation’s activities; that is, paying
debt and receiving associated revenue from the University.
Contacting the Corporation’s Financial Management
This financial report is designed to provide a general overview of the Corporation’s finances and
demonstrate accountability of all funds. Additional financial information may be obtained by contacting
the Associated Entities Office at (910) 962-3139.
Page 7
UNCW CORPORATION
Statement of Net Position
June 30, 2015
ASSETS
Restricted assets
Net investment in direct financing leases, current
Net investment in direct financing leases, non-current
Prepaid insurance
Total Assets
$
766,030
2,124,115
121,394,591
1,035,898
125,320,634
DEFERRED OUTFLOWS OF RESOURCES
Deferred losses on refunding bonds
1,413,128
LIABILITIES
Accounts payable and accrued expenses
Funds held for others
Long-term debt payable, current
Long-term debt payable, non-current
Total Liabilities
445,779
749,367
1,695,000
122,430,488
125,320,634
DEFERRED INFLOWS OF RESOURCES
Deferred related party revenue
1,413,128
NET POSITION
Unrestricted
$
See Notes to Financial Statements
Page 8
-
UNCW CORPORATION
Statement of Activities and Changes in Net Position
Year Ended June 30, 2015
Revenues:
Direct financing lease income
Other revenues
Total revenue
$
Expenses:
Contracted services
Interest expense
Bond issuance cost
Other expenses
Total expenses
5,909,429
525,551
6,434,980
89,931
5,909,429
424,934
10,686
6,434,980
Changes in net position
-
Net position, beginning
-
Net position, ending
$
See Notes to Financial Statements
Page 9
-
UNCW CORPORATION
Statement of Cash Flows
Year Ended June 30, 2015
Cash flows from operating activities:
Receipts from users
Payments to suppliers
Net cash provided by operating activities
$
Cash flows from capital and related financing activities:
Interest paid on debt
Principal payments on certificates of participation
Net cash used in capital and related financing activities
7,454,916
(95,357)
7,359,559
(5,959,559)
(1,400,000)
(7,359,559)
Net change in cash
-
Cash, beginning
Cash, ending
$
-
$
-
Reconciliation of changes in net position to net cash
provided by operating activities:
Changes in net position
Adjustments to reconcile changes in net position to net cash
provided by operating activities:
Write off of bond issuance costs, premiums and discounts
Amortization of prepaid insurance
Donated service revenue
Donated service expense
Interest expense
Decrease in lease receivables, net
Net cash provided by operating activities
See Notes to Financial Statements
Page 10
$
511,778
72,571
(5,260)
5,260
5,909,429
865,781
7,359,559
UNCW CORPORATION
Notes to Financial Statements
NOTE 1 - NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
UNCW Corporation (the "Corporation") was organized as a North Carolina nonprofit corporation
on November 14, 2002, to enhance the University of North Carolina at Wilmington's (the
"University") educational mission, including, without limitation, overseeing and assisting with the
acquisition and financing of capital assets for the University. Although legally separate from the
University, the Corporation is considered a component unit of the University because the
University's governing body appoints the Corporation's Board of Directors. Therefore the
Corporation's financial statements are presented with those of the University.
Blended Component Units
UNCW Corporation Housing I, LLC and UNCW Corporation Housing II, LLC (the "LLCs") are
organizations that were organized as North Carolina nonprofit corporations on December 20, 2004
and February 8, 2006, respectively, to develop, construct, own, finance, manage, operate and
otherwise deal with student housing facilities on or near the campus of the University. The
Corporation established the LLCs and is the LLCs' sole member. The LLCs' operations are
exclusively for the benefit of the Corporation. On May 12, 2015, the LLCs filed articles of merger
with the Corporation.
A summary of the Corporation's significant accounting policies follows:
Basis of Presentation
The financial statements of the Corporation have been prepared using the economic resources
measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are
recognized when earned, and expenses are recorded when an obligation has been incurred.
In accordance with Governmental Accounting Standards Board ("GASB") Statement No. 20,
Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That
Use Proprietary Fund Accounting, the Corporation has elected not to apply Financial Accounting
Standards Board ("FASB") pronouncements issued after November 30, 1989, for proprietary
activities, unless the GASB amends its pronouncements to specifically adopt FASB
pronouncements issued after that date.
Principles of Reporting
The financial statements are presented in accordance with accounting principles generally accepted
in the United States of America as prescribed by GASB. The full scope of the Corporation's
activities is considered to be a single business-type activity ("BTA") and, accordingly, is reported
within a single column in the basic financial statements.
Direct Financing Leases
Under the direct financing method of accounting for leases, the total rentals receivable under the
lease contracts, net of unearned income are recorded as net investment in direct financing leases,
and the unearned income on each lease is recognized at a constant periodic rate of return on the
unrecovered investment on each lease payment.
Page 11
UNCW CORPORATION
Notes to Financial Statements
NOTE 1 - NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Long-Term Debt Obligations
Long-term debt obligations are reported as liabilities in the statement of net position. Premiums
and discounts on long-term debt obligations, as well as prepaid insurance expenses related to debt
financing, are deferred and amortized over the life of the obligations using the effective interest
method. Long-term debt obligations are reported net of the applicable premium or discount. Longterm debt issuance costs are reported as deferred charges and amortized over the term of the related
debt. Amortization expense for insurance cost for each of the next five years is approximately
$45,000.
Deferred Losses on Bond Refunding and Deferred Related Party Revenue
During the year ended June 30, 2015, the Corporation refunded its Series 2005 Certificates of
Participation ("COPs") and Series 2006 COPs debt. This refunding led to a loss of $1,421,788 that
is being recognized over the life of the new debt issued to pay for the refunding. The remaining
unamortized portion of the loss is shown on the statement of net position. Additionally, the
responsibility for the loss on the refunding is ultimately incurred by the University. Therefore, a
deferred revenue for the same amount as the loss on refunding is also included on the statement of
net position. Amortization for each of these balances for each of the next five years is
approximately $65,000.
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. Accordingly, actual results could differ from those
estimates.
Income Tax Status
The Corporation is exempt from federal income tax under the Internal Revenue Code ("IRC")
Section 501(c)(3).
It is the Corporation’s policy to evaluate all tax positions to identify any that may be considered
uncertain. All identified material tax positions are assessed and measured by a “more-likely-thannot” threshold to determine if the tax position is uncertain and what, if any, the effect of the
uncertain tax position may have on the financial statements. No material uncertain tax positions
were identified for 2015.
Net Position
Net position represents the difference between assets and liabilities in a statement of net position
and is displayed in three components – net investment in capital assets; restricted (distinguishing
between major categories of restrictions); and unrestricted. The Corporation has a net position of
zero.
Page 12
UNCW CORPORATION
Notes to Financial Statements
NOTE 2 - RESTRICTED ASSETS
Restricted assets consists of cash and money market accounts held by the trust division of the bank
that are carried at fair value. Amounts are restricted for maintenance, construction, or debt service
payments.
NOTE 3 - FUNDS HELD FOR OTHERS
According to each certificate of participation payable agreement (Note 5), the tenant of the direct
finance leased facilities is required to fund a maintenance and equipment reserve fund. The tenant
is required to initially reserve $175 per bed with annual increases of 3%. This fund was fully
funded as of June 30, 2015 in the amount of $749,367 which is included in restricted assets. The
Corporation will reimburse the tenant for certain maintenance and equipment disbursements made
for the leased properties.
NOTE 4 - INVESTMENT IN DIRECT FINANCING LEASES
The Corporation's leasing operations consist principally of the leasing of various types of property.
The composition of the net investment in direct financing leases at June 30, 2015 is as follows:
Total minimum lease payments receivable
Less unearned lease income
Net investment in direct financing leases
Less current portion
Net investment in direct financing leases
$195,912,093
(72,393,387)
123,518,706
(2,124,115)
$121,394,591
At June 30, 2015, the minimum future lease payments due under the direct financing leases are as
follows:
Fiscal Year Ending June 30,
2016
2017
2018
2019
2020
Thereafter
Page 13
$
7,267,956
7,423,300
7,743,700
8,303,913
8,660,563
156,512,661
$195,912,093
UNCW CORPORATION
Notes to Financial Statements
NOTE 5 - LONG-TERM DEBT PAYABLE
In fiscal 2005, the Corporation issued $28,710,000 of debt, at a premium of $630,913, in Series
2005 Certificates of Participation ("COPs") to finance the construction and acquisition of a 524-bed
apartment-style student housing facility and its related parking and recreational facilities on the
campus of the University. The COPs include coupon rates of 4.00% to 5.25%, a final maturity of
June 1, 2036, and are secured by a Leasehold Deed to Trust on the mortgaged property and an
assignment of future lease income earned from the property.
In fiscal 2006, the Corporation issued $38,290,000 of debt, at a premium of $772,838, in Series
2006 COPs to finance the construction and acquisition of a 609-bed apartment-style student
housing facility and its related parking and recreational facilities on the campus of the University.
The COPs include coupon rates of 4.00% to 5.00%, a final maturity of June 1, 2037, and are
secured by a Leasehold Deed to Trust on the mortgaged property and an assignment of future lease
income earned from the property.
In fiscal 2008, the Corporation issued $61,460,000 of debt, at a discount of $426,913, in Series
2008 COPs to finance the construction and acquisition of a 662-bed apartment-style student
housing facility and its related parking and recreational facilities on the campus of the University.
The COPs include coupon rates of 3.50% to 5.00%, a final maturity of June 1, 2038, and are
secured by a Leasehold Deed to Trust on the mortgaged property and an assignment of future lease
income earned from the property.
In fiscal 2015, the Corporation issued $59,550,000 of debt, at a premium of $6,372,195, in Series
2015 Refunding Limited Obligation Bonds ("LOBs") to refinance the Corporation's Series 2005
and 2006 COPs. The LOBs include coupon rates of 3.00% to 5.00%, a final maturity of June 1,
2037, and are secured by a Leasehold Deed to Trust on the mortgaged property originally financed
by Series 2005 and 2006 COPs and an assignment of future lease income earned from the property.
Long-term debt payable activity for the year ended June 30, 2015 is as follows:
Beginning
Balance
Certificates of
participation
Limited obligation
bonds
Premiums on debt
Discounts on debt
$ 123,605,000
1,033,097
(341,530)
$ 124,296,567
Additions
$
$
Page 14
59,550,000
6,372,195
65,922,195
Reductions
Ending
Balance
$ 65,185,000
$ 58,420,000
1,071,981
(163,707)
$ 66,093,274
59,550,000
6,333,311
(177,823)
$ 124,125,488
UNCW CORPORATION
Notes to Financial Statements
NOTE 5 - LONG-TERM DEBT PAYABLE (Continued)
Future debt principal maturities and interest expense is as follows:
Fiscal Year Ending
Principal
June 30,
Amount
2016
$
1,695,000
2017
2,035,000
2018
2,425,000
2019
3,085,000
2020
3,550,000
2021-2025
22,080,000
2026-2030
28,485,000
2031-2035
35,625,000
2036-2040
18,990,000
$ 117,970,000
Interest
$ 5,589,619
5,388,300
5,318,700
5,218,913
5,110,563
22,838,656
16,999,819
9,855,013
1,639,175
$ 77,958,758
NOTE 6 - COMMITMENTS
In relation to the apartment-style student housing facility and related parking and recreational
facilities noted above, the Corporation has an agreement to lease the land located under these
facilities from the State of North Carolina for $1 per year through 2040. Because the use of the
land is limited and it (along with improvements thereto) will ultimately be returned to the State of
North Carolina pursuant to the Lease Agreement, no value has been recorded for leased land.
NOTE 7 - RELATED PARTY TRANSACTIONS
During the year ended June 30, 2015, the Corporation's blended component units, the LLCs, which
constructed the student housing facilities, leased the ground on which the facilities are located from
the State of North Carolina ("State"), a related party. The land and facilities are leased back to the
State for lease payments sufficient to repay principal and interest on the debt related to the facilities
(see Note 3) plus additional rentals for the reasonable and customary expenses and fees of the
Corporation and the Trustee. At the end of the lease-back period, title to the facilities will be
transferred to the State. On May 12, 2015, the LLCs merged with the Corporation, and the lease
agreements with the State were amended to reflect this merger.
The University, a related party, has entered into a Use Agreement with the Corporation so it may
use the facilities and, in return, has obligated itself to pay rental payments directly to the Trustee for
the COPs in amounts sufficient to cover lease payments owed by the State to the Corporation.
Page 15
UNCW CORPORATION
Time and Costs for the Audit
Year Ended June 30, 2015
The UNCW Corporation's audit was conducted in approximately 80 hours at a total cost of $6,500.