The University of South Carolina
Development Foundation and Subsidiaries
Report on Consolidated Financial Statements
For the years ended June 30, 2015 and 2014
The University of South Carolina Development Foundation and Subsidiaries
Contents
Page
Independent Auditor’s Report .............................................................................................................................. 1-2
Financial Statements
Consolidated Statements of Financial Position ................................................................................................... 3
Consolidated Statement of Activities for the Year Ended June 30, 2015 ........................................................... 4
Consolidated Statement of Activities for the Year Ended June 30, 2014 ........................................................... 5
Consolidated Statements of Net Assets .............................................................................................................. 6
Consolidated Statements of Cash Flows ............................................................................................................. 7
Notes to Consolidated Financial Statements ................................................................................................ 8-25
Supplemental Schedules
1 - Consolidating Schedule of Assets, Liabilities and Net Assets/Members’ Deficit - June 30, 2015 ................26
2 - Consolidating Schedule of Revenues, Expenses and Changes in Net Assets/Members’ Deficit For the Year Ended June 30, 2015 ................................................................................................................27
3 - Consolidating Schedule of Assets, Liabilities and Net Assets/Members’ Deficit - June 30, 2014 ................28
4 - Consolidating Schedule of Revenues, Expenses and Changes in Net Assets/Members’ Deficit For the Year Ended June 30, 2014 ................................................................................................................29
Independent Auditor’s Report
Board of Directors
The University of South Carolina
Development Foundation and Subsidiaries
Columbia, South Carolina
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of The University of South Carolina
Development Foundation and Subsidiaries (the “Foundation”) which comprise the consolidated statements of
financial position as of June 30, 2015 and 2014, and the related consolidated statements of activities, changes in
net assets and cash flows for the years then ended and the related notes to the consolidated financial
statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated 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 consolidated financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States of America.
Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the consolidated 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 entity’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 consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Elliott Davis Decosimo | www.elliottdavis.com
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position of The University of South Carolina Development Foundation and Subsidiaries as of June
30, 2015 and 2014, and the changes in its net assets and its cash flows for the years then ended in accordance
with accounting principles generally accepted in the United States of America.
Report on Supplementary Information
Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements
taken as a whole. The accompanying supplementary information is presented for purposes of additional
analysis and is not a required part of the consolidated financial statements. Such information is the
responsibility of management and was derived from and relates directly to the underlying accounting and other
records used to prepare the consolidated financial statements. The information has been subjected to the
auditing procedures applied in the audits of the consolidated financial statements and certain additional
procedures, including comparing and reconciling such information directly to the underlying accounting and
other records used to prepare the consolidated financial statements or to the consolidated financial statements
themselves, and other additional procedures in accordance with auditing standards generally accepted in the
United States of America. In our opinion, the information is fairly stated in all material respect in relation to the
consolidated financial statements as a whole.
Columbia, South Carolina
October 16, 2015
2
The University of South Carolina Development Foundation and Subsidiaries
Consolidated Statements of Financial Position
As of June 30, 2015 and 2014
2015
Assets
Cash and cash equivalents
Investments in securities
Contributions receivable, net
Other receivables
Prepaid expenses
Property and equipment, net
Real estate held for investment
Other assets
Total assets
$
$
2014
2,104,221
35,897,932
2,280,315
163,229
26,428
67,998,678
25,305,723
487,003
134,263,529
$
6,820,850
21,250,076
8,513,600
54,957,967
4,977,137
442,682
296,708
20,000
97,279,020
$
$
3,226,414
31,387,655
2,183,627
332,739
21,857
21,706,986
28,631,363
172,735
87,663,376
Liabilities and Net Assets
Liabilities
Accounts payable and accrued expenses
Lines-of-credit
Notes payable
Bonds payable
Interest rate swaps
Funds held for others
Deferred revenue
Advances from members
Total liabilities
$
3,238,248
19,563,616
8,969,734
11,596,180
2,417,379
17,866
45,803,023
Net assets
Unrestricted net assets
Board designated for investments
Undesignated
Total unrestricted net assets
23,730,673
(14,538,154)
9,192,519
22,905,198
(7,270,099)
15,635,099
Temporarily restricted net assets
Permanently restricted net assets
Total Foundation net assets
Noncontrolling interest
Total net assets
Total liabilities and net assets
24,828,012
3,365,928
37,386,459
(401,950)
36,984,509
134,263,529
23,317,790
3,365,928
42,318,817
(458,464)
41,860,353
87,663,376
$
See Notes to Consolidated Financial Statements
3
$
The University of South Carolina Development Foundation and Subsidiaries
Consolidated Statement of Activities
For the year ended June 30, 2015
Temporarily
Restricted
Unrestricted
Revenues and support
Investment returns
Rental income
Room revenue
Other
Support
Net assets released from restrictions
Total revenues and support
$
1,089,563
782,391
3,783,140
462,939
13,475
217,045
6,348,553
$
445,719
11,498
1,270,050
(217,045)
1,510,222
Permanently
Restricted
$
-
Total
$
1,535,282
782,391
3,783,140
474,437
1,283,525
7,858,775
Expenses
Supporting services
Management and general
USC Hotel Associates
Program services
Investment services
Property services
Unrealized loss on interest rate swaps
Loss on sale of real estate held for investment
Total expenses
439,408
3,940,575
-
-
439,408
3,940,575
423,018
705,626
2,559,758
4,666,234
12,734,619
-
-
423,018
705,626
2,559,758
4,666,234
12,734,619
Change in net assets
(6,386,066)
-
(4,875,844)
-
(56,514)
Net change attributable to
noncontrolling interest in
USC Hotel Associates, LLC
Change in net assets
attributable to the Foundation
1,510,222
(56,514)
$
(6,442,580)
See Notes to Consolidated Financial Statements
4
-
$
1,510,222
$
-
$
(4,932,358)
The University of South Carolina Development Foundation and Subsidiaries
Consolidated Statement of Activities
For the year ended June 30, 2014
Unrestricted
Revenues and support
Investment returns
Rental income
Room revenue
Gain on sale of real estate held
for investment
Other
Support
Net assets released from restrictions
Total revenues and support
$
$
2,121,424
385,711
20,203
374,468
11,692,260
Expenses
Supporting services
Management and general
USC Hotel Associates
Program services
Investment services
Property services
Unrealized loss on interest rate swaps
Total expenses
Change in net assets
$
-
Total
$
5,073,460
779,335
3,472,989
-
2,121,424
511,759
846,898
12,805,865
512,802
3,666,552
-
-
512,802
3,666,552
405,341
1,042,472
1,206,717
6,833,884
-
-
405,341
1,042,472
1,206,717
6,833,884
-
5,971,981
1,113,605
(42,774)
$
535,330
-
Permanently
Restricted
126,048
826,695
(374,468)
1,113,605
4,858,376
Net change attributable to
noncontrolling interest in
USC Hotel Associates, LLC
Change in net assets
attributable to the Foundation
4,538,130
779,335
3,472,989
Temporarily
Restricted
4,815,602
See Notes to Consolidated Financial Statements
5
-
$
1,113,605
-
$
-
(42,774)
$
5,929,207
The University of South Carolina Development Foundation and Subsidiaries
Consolidated Statements of Net Assets
For the years ended June 30, 2015 and 2014
Net Assets
Unrestricted
Temporarily
Board Designated
Undesignated
Restricted
Balance, July 1, 2013
Change in net assets
Balance, June 30, 2014
Change in net assets
Balance, June 30, 2015
$
$
18,765,388
4,139,810
22,905,198
825,475
23,730,673
$
$
(7,945,891)
675,792
(7,270,099)
(7,268,055)
(14,538,154)
$
22,204,185
1,113,605
23,317,790
1,510,222
24,828,012
$
See Notes to Consolidated Financial Statements
6
Permanently
Restricted
$
$
3,365,928
3,365,928
3,365,928
Noncontrolling
Interest
$
$
(501,238)
42,774
(458,464)
56,514
(401,950)
Total
$
$
35,888,372
5,971,981
41,860,353
(4,875,844)
36,984,509
The University of South Carolina Development Foundation and Subsidiaries
Consolidated Statements of Cash Flows
For the years ended June 30, 2015 and 2014
2015
Cash flows from operating activities
Change in net assets
Adjustments to reconcile change in net assets
to net cash provided by operating activities
Provision for uncollectible contributions receivable
Discount on contributions receivable
Net realized and unrealized gains on investments
Loss on sale/disposal of property and equipment
Loss (gain) on sale of real estate held for investment
Net unrealized loss on interest rate swaps
Depreciation expense
Forgiveness of notes payable
Changes in deferred and accrued amounts
Decrease in other receivables
Decrease (increase) in contributions receivable
Decrease (increase) in prepaid expenses
Increase (decrease) in funds held for others
Decrease (increase) in other assets
Increase in accounts payable and accrued expenses
Increase in deferred revenue
Net cash provided by operating activities
$
(4,875,844)
2014
$
5,971,981
299,052
38,037
(1,535,282)
68,087
4,666,234
2,559,758
551,300
(13,333)
(148,546)
14,699
(4,897,900)
2,837
(2,121,424)
1,206,717
486,787
(13,333)
169,510
(433,777)
(4,571)
424,816
(314,268)
3,582,602
296,708
5,479,029
242,391
105,060
27,266
(437)
78,234
1,938,546
2,892,878
Cash flows from investing activities
Proceeds from sales of real estate held for investment
Purchases of real estate held for investment
Net purchases of investment securities
Increase in construction in progress
Purchases of property and equipment
Net cash used for investing activities
3,725,785
(5,066,379)
(2,974,995)
(46,430,594)
(480,486)
(51,226,669)
4,175,000
(350,426)
(467,404)
(5,461,923)
(815,160)
(2,919,913)
Cash flows from financing activities
Net borrowings on line-of-credit agreements
Proceeds on bonds payable
Advances from members
Principal payments on bonds payable
Principal payments on notes payable
Net cash provided by financing activities
Net change in cash and cash equivalents
1,686,460
43,691,893
20,000
(330,106)
(442,800)
44,625,447
(1,122,193)
3,136,337
(1,713,409)
(419,200)
1,003,728
976,693
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
$
3,226,414
2,104,221
$
2,249,721
3,226,414
Supplemental disclosures
Interest paid
$
850,799
$
902,068
Noncash investing and financing activities
Net unrealized loss on interest rate swaps
Forgiveness of notes payable
$
$
See Notes to Consolidated Financial Statements
7
(2,559,758)
13,333
$
$
(1,206,717)
13,333
University of South Carolina Development Foundation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2015 and 2014
Note 1.
Nature of Business and Significant Accounting Policies
Nature of business:
The University of South Carolina Development Foundation and Subsidiaries (the Foundation) was organized on
May 17, 1965, under the laws of South Carolina as an eleemosynary corporation. The primary purposes of the
Foundation are to acquire real and personal property; and to hold, rent, sell, or transfer such property in
accordance with the needs and demands of the University of South Carolina (the University). Because the primary
purpose of the Foundation is for the benefit of the University, the Foundation is considered a component unit of
the University and is thus included in the University's financial statements.
Principles of consolidation:
The consolidated financial statements include the accounts of The University of South Carolina Development
Foundation, and its wholly owned subsidiaries, Inn at USC, LLC; CDRC, LLC; Wheeler Hill Development, LLC; AdessoDF, LLC; Williams At Blossom, LLC; USC DF-West Campus, LLC; USC Innovation, LLC; and its 80% owned subsidiary
USC Hotel Associates, LLC. Significant intercompany accounts and transactions have been eliminated.
Basis of accounting:
The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in
accordance with accounting principles generally accepted in the United States of America. Financial statement
presentation follows the recommendations of the Financial Accounting Standards Board Accounting Standards
Codification (ASC). Under the ASC, the Foundation is required to report information regarding its financial position
and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets,
and permanently restricted net assets.
Cash and cash equivalents:
For financial reporting purposes, cash and cash equivalents are defined as cash and short-term highly liquid
investments that are readily convertible into cash and present an insignificant risk of change in value due to
interest rate changes because of their short-term maturity.
Investments in securities:
The Foundation's investments in securities are stated at fair market value in accordance with the ASC. Under the
ASC, investments in marketable securities with readily determinable fair values and all investments in debt
securities are valued at their fair values in the consolidated statement of financial position. Unrealized gains and
losses are included in the change in net assets in investment returns.
8
University of South Carolina Development Foundation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2015 and 2014
Note 1.
Nature of Business and Significant Accounting Policies, Continued
Derivative financial instruments:
The Foundation recognizes all derivative financial instruments on the consolidated statement of financial position
at fair value in accordance with the ASC. The fair value is obtained from the financial institution issuing the
instrument. Changes in the value of derivative financial instruments are recorded each period in current earnings.
The Foundation entered into interest rate swap agreements, which effectively exchange variable interest rate debt
for fixed interest rate debt. These agreements are used to reduce the exposure to possible increases in interest
rates and are accounted for as a cash flow hedge. The Foundation entered into these swap agreements with major
financial institutions. Interest rate swap settlements are recognized as adjustments to interest expense in the
consolidated statements of activities. Management believes that the derivative financial instruments are effective
in protecting the Foundation from interest fluctuations.
Contributions receivable:
The Foundation has adopted the provisions of the ASC for the accounting of contributions received and
contributions made. Under the ASC, contributions are required to be recognized when the donor makes a promise
to give that, in substance, is unconditional. All contributions are available for unrestricted use unless specifically
restricted by the donor. Contributions that are restricted by the donor are reported as increases in temporarily
restricted net assets or permanently restricted net assets depending on the nature of the restrictions.
Unconditional promises to give (pledges) are stated net of an allowance for doubtful accounts. Pledges are
periodically evaluated for collectability based on management’s assessment of the collectability of each pledge.
Unconditional promises to give due in the next year are recorded at their net realizable value. Unconditional
promises to give due in subsequent years are reported at the present value of their net realizable value, using
discount rates applicable to the years in which the promises are to be received.
Other receivables:
Management considers all other receivables balances to be fully collectible; therefore, no allowance for
uncollectible accounts is included in the consolidated financial statements.
Property and equipment:
Property and equipment are stated at cost. Donated property is stated at estimated fair value at the date of the
donation. Depreciation is computed principally by the straight-line method for financial reporting purposes over
estimated useful lives ranging from five to forty years.
The Foundation reviews the carrying values of its long-lived assets for possible impairment whenever events or
changes in circumstances indicate the carrying amount of the assets may not be recoverable. Any long-lived assets
held for sale are reported at the lower of their carrying amounts or fair value less estimated costs to sell.
9
University of South Carolina Development Foundation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2015 and 2014
Note 1.
Nature of Business and Significant Accounting Policies, Continued
Deferred revenue:
Deferred revenue represents lease payments received by USC DF – West Campus, LLC relating to future lease
periods.
Income taxes:
The Foundation is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. Further, it is
exempt from excise taxes and other restrictions because it has been determined by the Internal Revenue Service
that the Foundation is not a private foundation within the meaning of the Internal Revenue Code Section 509(a).
The Foundation recognizes income tax on certain unrelated business income under rules of the Internal Revenue
Service for nonprofit organizations, except as exempted by Section 514, for activities related to its mission to
support the University.
Accounting principles generally accepted in the United States of America require management to evaluate tax
positions taken by the Foundation and recognize a tax liability (or asset) if the Foundation has taken an
uncertain position that more likely than not would not be substantiated upon examination by the IRS.
Management has analyzed the tax positions taken by the Foundation, and has concluded that as of June 30,
2015 and 2014, there are no uncertain positions taken or expected to be taken that would require recognition
of a liability (or asset) or disclosure in the consolidated financial statements. The Foundation is subject to
routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
Management believes it is no longer subject to income tax examinations for the years prior to 2012.
Use of estimates:
The preparation of consolidated financial statements in conformity with 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 consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Material estimates that are particularly susceptible to significant change relate to the determination of the
allowance for uncollectible contributions receivable. It is at least reasonably possible that a change in this
estimate will occur in the near term.
Reclassifications:
Certain reclassifications have been made to the 2014 consolidated financial statement presentation to correspond
to the 2015 consolidated financial statement presentation.
Subsequent events:
In preparing these consolidated financial statements, the Foundation has evaluated events and transactions for
potential recognition or disclosure through October 16, 2015, the date the consolidated financial statements
were available to be issued.
10
University of South Carolina Development Foundation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2015 and 2014
Note 2.
Concentrations of Credit Risks
Financial instruments that potentially expose the Foundation to concentrations of credit and market risk consist
primarily of cash and cash equivalents and investments. Cash and cash equivalents are maintained at high-quality
financial institutions and credit exposure to any one institution is limited. The Foundation has not experienced any
losses on its cash and cash equivalents. The Foundation’s management believes that its investments do not
represent significant concentrations of market risk because the Foundation’s investment portfolio is adequately
diversified among issuers.
Note 3.
Fair Value Measurements
The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in
active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable
inputs (Level 3 measurements). The three levels of the fair value hierarchy are described as follows:
Level 1
Inputs to the valuation methodology are unadjusted quoted prices for identical assets or
liabilities in active markets that the Foundation has the ability to access.
Level 2
Inputs to the valuation methodology include:




Quoted prices for similar assets or liabilities in active markets;
Quoted prices for identical or similar assets or liabilities in inactive markets;
Inputs other than quoted prices that are observable for the asset or liability;
Inputs that are derived principally from or corroborated by observable market data by
correlation or other means.
If the asset or liability has a specific (contractual) term, the Level 2 input must be
observable for substantially the full term of the asset or liability.
Level 3
Inputs to the valuation methodology are unobservable and significant to the fair value
measurement.
The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level
of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the
use of observable inputs and minimize the use of unobservable inputs.
Following is a description of the valuation methodologies used for assets measured at fair value. There have been
no changes in the methodologies used at June 30, 3015 and 2014.
Money market funds: Valued on the active market on which it is traded, at amortized cost, which
approximates fair value.
Mutual and equity funds: Valued at the closing price reported on the active market on which the
individual securities are traded.
Hedge funds and private equity funds: Valued at fair market value, as determined by the managers of the
private equity funds or hedge funds as reported to them by the general partner of the underlying funds or
partnerships.
Interest rate swap: Valued at the carrying value of the interest rate swap, based on the interest rate
spread between the underlying contracts and current market interest rates.
11
University of South Carolina Development Foundation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2015 and 2014
Note 3.
Fair Value Measurements, Continued
The Foundation had the following levels of investments as defined in the framework measured on a recurring
basis:
June 30, 2015
Level 1
Level 2
Level 3
Total
Investments in securities:
Active Manager Equities
Large Cap Value
Small Cap Value
Small Cap Growth
Large Cap Growth
ETF Index Equities
Mutual Fund Equities
International Equities
Money Market Mutual Fund
Hedge Funds
Private Equities
Total investment in securities
Interest rate swap
$
6,527,090 $
- $
2,177,531
1,536,287
1,732,322
4,813,339
1,995,764
5,633,006
6,740,019
$ 31,155,358 $
- $
$
$ (4,977,137) $
Hedge
Funds
Beginning balance
Unrealized gains (losses)
Purchases, issuances, settlements
Realized gains
Cash distributions
Ending balance
$
$
Level 1
Investments in securities:
Active Manager Equities
Large Cap Value
Small Cap Growth
Large Cap Growth
ETF Index Equities
Mutual Fund Equities
International Equities
Money Market Mutual Fund
Hedge Funds
Private Equities
Total investment in securities
Interest rate swap
$
3,909,219 $
159,833
4,069,052 $
Level 3
Private
Equities
701,825 $
(77,185)
176,380
122,510
(250,008)
673,522 $
June 30, 2014
Level 2
Level 3
5,984,089 $
- $
2,323,062
1,609,027
5,598,574
1,746,382
5,783,781
3,731,696
$ 26,776,611 $
- $
$
$ (2,417,379) $
12
- $ 6,527,090
2,177,531
1,536,287
1,732,322
4,813,339
1,995,764
5,633,006
6,740,019
4,069,052
4,069,052
673,522
673,522
4,742,574 $ 35,897,932
- $ (4,977,137)
Total
4,611,044
82,648
176,380
122,510
(250,008)
4,742,574
Total
- $ 5,984,089
2,323,062
1,609,027
5,598,574
1,746,382
5,783,781
3,731,696
3,909,219
3,909,219
701,825
701,825
4,611,044 $ 31,387,655
- $ (2,417,379)
University of South Carolina Development Foundation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2015 and 2014
Note 3.
Fair Value Measurements, Continued
Hedge
Funds
Beginning balance
Unrealized gains
Purchases, issuances, settlements
Realized gains
Cash distributions
Ending balance
$
$
June 30, 2014
Level 3
Hedge Fund
Private
of Funds
Equities
2,103,885 $ 1,687,468 $
176,768
108,496
1,628,566
(1,795,964)
3,909,219 $
- $
Total
695,729 $
6,660
181,989
92,546
(275,099)
701,825 $
4,487,082
291,924
14,591
92,546
(275,099)
4,611,044
The following tables for June 30, 2015 and 2014 set forth a summary of the Foundation’s Level 3 investments at
NAV:
Investment
Hedge Funds
Och-Ziff Overseas Fund II, Ltd.
HBK Offshore Fund Ltd.
Claren Road Credit Fund, Ltd.
Fir Tree International Value Fund
Graham Global Investment Fund II SPC, Ltd.
Proprietary Matrix Segregated Portfolio
MKP Opportunity Offshore, Ltd.
Fair value
$
Private Equity
Siguler Guff Distressed Opportunity Funds III, LP
Kayne Anderson Energy Fund VI, L.P.
Venture Investment Association
NGP Natural Resources XI
$
Investment
Hedge Funds
Och-Ziff Overseas Fund II, Ltd.
HBK Offshore Fund Ltd.
Claren Road Credit Fund, Ltd.
Fir Tree International Value Fund
Graham Global Investment Fund II SPC, Ltd.
Proprietary Matrix Segregated Portfolio
MKP Opportunity Offshore, Ltd.
1,306,540 $
1,080,716
337,962
417,264
-
497,422
429,148
4,069,052
-
441,515
161,643
57,248
13,116
673,522
4,742,574 $
Fair value
$
Private Equity
Siguler Guff Distressed Opportunity Funds III, LP
Kayne Anderson Energy Fund VI, L.P.
$
June 30, 2015
Unfunded
Redemption
commitment
frequency
26,561
103,982
247,823
294,000
672,366
672,366
Redemption
notice period
(a)
(b)
(c)
(d)
(e)
(a)
(b)
(c)
(d)
(e)
(f)
(f)
(g)
(g)
(g)
(g)
(g)
(g)
(g)
(g)
June 30, 2014
Unfunded
Redemption
commitment
frequency
Redemption
notice period
1,216,772 $
1,070,631
407,075
414,970
402,621
-
(a)
(b)
(c)
(d)
(e)
(a)
(b)
(c)
(d)
(e)
397,150
3,909,219
-
(f)
(f)
(g)
(g)
(g)
(g)
623,931
77,894
701,825
4,611,044 $
13
61,977
166,855
228,832
228,832
University of South Carolina Development Foundation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2015 and 2014
Note 3.
Fair Value Measurements, Continued
(a) Redemptions from the Och-Ziff Overseas Fund II, Ltd. may occur on the last day of any fiscal quarter. The fund requires
written notice of intent to withdraw assets 30 days prior to the redemption date and the minimum redemption amount
is $50,000.
(b) The HBK Offshore Fund, Ltd. requires written notice of intent to withdraw assets 90 to 120 days prior to the redemption
date. The minimum redemption amount is $250,000, however, the Foundation may redeem up to 25% of its interest,
measured by net asset value, on any redemption date.
(c) The Claren Road Credit Fund, Ltd. requires written notice of intent to withdraw assets 45 to 60 days prior to the
redemption date. Redemptions may occur on the last day of any month, however, when the redemption is not at the
end of a quarter, the redemption is subject to a 4% liquidation fee. This fund reserves the right to withhold 5% of the
investment value if the Foundation liquidates 95% or more of the investment. The remaining 5% would be available to
the Foundation upon completion of the annual audit of this fund.
(d) Following the two year anniversary of capital contributed to the Fir Tree International Value Fund, the Foundation may
make withdrawals from this fund upon providing written notification 90 days prior to the redemption. The Foundation
will be eligible for subsequent redemptions from this fund on the two year anniversary of the initial redemption date.
(e) There is no minimum holding period for the Foundation’s interest in Graham Global Investment Fund II SPC, Ltd.
Proprietary Matrix Segregated Portfolio. This fund may be redeemed on the last day of each month upon written notice
of intent to withdraw assets three days prior to the redemption date.
(f) Redemptions from the MKP Opportunity Offshore, Ltd. require notification 60 days prior to the redemption date, which
may be the last business day of any calendar month. This fund reserves the right to withhold 5% of the investment
balance until year-end.
(g) The fund manager determines the amount, timing and form of all distributions made by this fund.
Note 4.
Investments in Securities
Investments purchased are recorded at cost. Securities or other investments donated are recorded at their fair
value at the date of the gift. Investments are carried at fair value with gains or losses being recognized and
reported in the consolidated statement of activities in the appropriate classes as prescribed by the ASC.
The Foundation pooled substantially all of their endowment funds along with funds of the USC Educational
Foundation, USC Business Partnership Foundation and the USC Alumni Association into one investment pool. The
funds of the Foundation in the investment pool are spread among twenty-three different funds and of those, six
are hedge funds, four are private equity funds, one is an index fund, five are active manager funds, and seven are
mutual funds. The Foundation has presented its pro rata share of these individual investments within these
consolidated financial statements, however all pooled investments are held in the name of the USC Educational
Foundation.
Note 5.
Contributions Receivable, net
The Foundation recognized unconditional promises to give as contributions receivable due to be collected as
follows as of June 30:
2015
2014
Less than one year
One to five years
Six or more years
$
Less allowance for uncollectible pledges
Less 8% discount for time value of money
$
14
1,528,099
2,859,402
195,748
4,583,249
1,664,271
638,663
2,280,315
$
$
1,273,908
2,610,034
265,530
4,149,472
1,365,219
600,626
2,183,627
University of South Carolina Development Foundation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2015 and 2014
Note 6.
Endowments
The Foundation’s endowments consist of approximately seven individual funds established for various
purposes. Its endowments include both donor-restricted funds and funds designated by the Board of Directors
to function as endowments. As required by GAAP, net assets associated with endowment funds, including funds
designated by the Board of Directors to function as endowments, are classified and reported based on the
existence or absence of donor-imposed restrictions.
Interpretation of relevant law
The Board of Directors of the Foundation has interpreted the South Carolina Uniform Prudent Management of
Institutional Funds Act (SCUPMIFA) as requiring the preservation of the fair value of the original gift as of the
gift date of the donor-restricted endowment funds. As a result of this interpretation, the Foundation classifies
as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b)
the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent
endowment made in accordance with the direction of the applicable donor gift instrument at the time the
accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not
classified in permanently restricted net assets is classified as temporarily restricted net assets until those
amounts are appropriated for expenditure by the Foundation in a manner consistent with the standard of
prudence prescribed by SCUPMIFA. In accordance with SCUPMIFA, the Foundation considers the following
factors in making a determination to appropriate or accumulate donor-restricted endowment funds:
1)
2)
3)
4)
5)
6)
7)
The duration and preservation of the various funds
The purposes of the donor-restricted endowment funds
General economic conditions
The possible effect of inflation and deflation
The expected total return from income and the appreciation of investments
Other resources of the Foundation
The Foundation’s investment policies.
Endowment Net Asset Composition by Type of Fund as of June 30, 2015
Unrestricted
Donor-restricted endowment funds
Board-restricted endowment funds
$
Temporarily
Restricted
- $
23,730,673
$ 23,730,673 $
15
Permanently
Restricted
731,953 $
731,953 $
Total
3,365,928 $ 4,097,881
23,730,673
3,365,928 $ 27,828,554
University of South Carolina Development Foundation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2015 and 2014
Note 6.
Endowments, Continued
Changes in Endowment Net Assets for the Fiscal Year Ended June 30, 2015
Unrestricted
Endowment net assets,
Beginning of year
Investment return:
Investment income
Net appreciation
(realized and unrealized)
Total investment return
Contributions/additions
Appropriation of endowment assets
for expenditure
Endowment net assets, end of year
Temporarily
Restricted
$ 22,905,198 $
Permanently
Restricted
686,468 $
Total
3,365,928 $ 26,957,594
266,771
9,677
-
276,448
789,668
1,056,439
-
42,991
52,668
1,200
-
832,659
1,109,107
1,200
(230,964)
$ 23,730,673 $
(8,383)
731,953 $
(239,347)
3,365,928 $ 27,828,554
Endowment Net Asset Composition by Type of Fund as of June 30, 2014
Unrestricted
Donor-restricted endowment funds
Board-restricted endowment funds
Temporarily
Restricted
$
- $
22,905,198
$ 22,905,198 $
Permanently
Restricted
686,468 $
686,468 $
Total
3,365,928 $ 4,052,396
22,905,198
3,365,928 $ 26,957,594
Changes in Endowment Net Assets for the Fiscal Year Ended June 30, 2014
Unrestricted
Endowment net assets,
Beginning of year
Investment return:
Investment income
Net appreciation
(realized and unrealized)
Total investment return
Contributions/additions
Appropriation of endowment assets
for expenditure
Endowment net assets, end of year
Temporarily
Restricted
$ 18,765,388 $
Permanently
Restricted
524,352 $
Total
3,365,928 $ 22,655,668
247,987
8,825
-
256,812
4,481,609
4,729,596
-
159,479
168,304
1,200
-
4,641,088
4,897,900
1,200
(589,786)
$ 22,905,198 $
(7,388)
686,468 $
(597,174)
3,365,928 $ 26,957,594
Funds with deficiencies
From time to time, the fair value of assets associated with individual donor-restricted endowment funds may
fall below the level that the donor or SCUPMIFA requires the Foundation to retain as a fund of perpetual
duration. There were no such deficiencies as of June 30, 2015 and 2014.
16
University of South Carolina Development Foundation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2015 and 2014
Note 6.
Endowments, Continued
Investment Return Objectives, Risk Parameters, and Strategies
The Foundation has adopted investment and spending policies, approved by the Board of Directors, for
endowment assets. These policies attempt to provide a predictable stream of funding to programs supported
by its endowment funds while also maintaining the purchasing power of those endowment assets over the
long-term. Endowment assets include those assets of donor-restricted funds that the Foundation must hold in
perpetuity or for donor-specified periods. Under this policy, as approved by the Board of Directors, the
endowment assets are invested in a manner that is intended to produce investment returns at least equal to
inflation (as measured by the Consumer Price Index) plus a 4.50% payout and 1% for associated fees while
assuming a moderate level of investment risk. Actual returns in any given year may vary from this amount. To
satisfy its long-term rate-of-return objectives, the Foundation relies on a total return strategy in which
investment returns are achieved through both capital appreciation (realized and unrealized) and current yield
(interest and dividends). The Foundation targets a diversified asset allocation that places a greater emphasis on
equity-based investments to achieve its long-term return objectives within prudent risk constraints.
Spending Policy
The Foundation has a policy of appropriating for distribution each year 4.50% of its endowment fund’s average
fair value over the prior five quarters through the calendar year-end proceeding the fiscal year in which the
distribution is planned. In establishing this policy, the Foundation considered the long-term expected return on
its investment assets, the nature and duration of the individual endowment funds, many of which must be
maintained in perpetuity because of donor-restrictions, and the possible effects of inflation. The Foundation
expects the current spending policy to allow its endowment funds to grow at an average of 7% to 8% annually.
This is consistent with the Foundation’s objective to maintain the purchasing power of the endowment assets
held in perpetuity or for a specified term, as well as to provide additional real growth through new gifts and
investment return.
Note 7.
Endowment Fund
A quasi-endowment fund was established in 1985 by the Board whereby the earnings generated by the fund would
be used for certain projects at the University. In a quasi-endowment fund, any portion of the fund may be
expended, and since 1985, the fund has been supplemented and used for various projects at the discretion of the
Board. The fund is managed by various investment management firms and is held in short-term government
money-market accounts, corporate stocks and equity mutual funds. Investment gains or losses increase or
decrease the fund.
Note 8.
Real Estate Held for Investment
Real estate held for investment is acquired by purchase or donation and is reported at either cost if purchased or
fair value at the time of the donation. Real estate purchased and unrestricted donated real estate is held for
subsequent lease or transfer to the University. This real estate is reviewed on an ongoing basis for impairment
based on comparison of carrying value against fair value. If a permanent impairment is identified, the assets
carrying amounts are adjusted to fair value in the year identified.
Included in real estate held is property on the South Carolina coast known as Pritchard’s Island (the Island) valued
at $3,100,000. The donor placed a restriction on the property which requires the Island to be maintained in its
wilderness state. The property is presently being used by the University as a research environment for the study of
various types of animals.
The remaining balance of real estate held primarily includes property located throughout the state of South
Carolina.
17
University of South Carolina Development Foundation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2015 and 2014
Note 9.
Property and Equipment, net
Property and equipment consists of the following as of June 30:
2015
Construction-in-progress (See Note 17)
Land
Land improvements
Buildings
Furniture, fixtures and equipment
2014
$ 51,892,517 $ 5,461,923
3,653,392
3,721,482
626,616
626,616
14,963,217
14,963,217
2,967,518
2,487,030
74,103,260
27,260,268
6,104,582
5,553,282
$ 67,998,678 $ 21,706,986
Less accumulated depreciation
Construction-in-progress includes capitalized interest and guarantee fee totaling $1,019,538 as of June 30, 2015.
Depreciation expense in the amount of $551,300 and $486,787 was included in total expenses for the years ended
June 30, 2015 and 2014, respectively.
Note 10. Lines-of-Credit
Lines-of-credit consist of the following at June 30:
On January 9, 2012, an unsecured line-of-credit with a bank
was entered into, in the amount of $8,500,000, interest at
30-day LIBOR (.18% at June 30, 2015) plus 1.20%. The lineof-credit matures on February 3, 2016.
On January 13, 2012, an unsecured line-of-credit with a bank
was entered into, in the amount of $15,000,000, interest at
30-day LIBOR (.18% at June 30, 2015) plus 1.20%. The line-ofcredit matures on January 13, 2016.
On June 11, 2014, an unsecured line-of-credit with a bank
was entered into, in the amount of $15,000,000, interest at
30-day LIBOR (.18% at June 30, 2015) plus 1.65%. The lineof-credit matured September 30, 2014 and was not renewed.
$
2015
2014
8,075,000 $
8,075,000
13,175,076
-
8,987,943
2,500,673
$ 21,250,076 $ 19,563,616
18
University of South Carolina Development Foundation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2015 and 2014
Note 11. Notes Payable
Notes payable consist of the following at June 30:
A note in the amount of $11,100,000; accrues interest at 30-day
LIBOR (.18% at June 30, 2015) plus 1%, due in monthly principal
payments ranging from $25,900 to $42,900 plus interest and a
balloon payment of $7,092,900 plus accrued interest due February 4,
2018, collateralized by the leasehold interest, building and personal
property at Pendleton Street, Columbia, South Carolina. The effective
interest rate for this note is fixed at 5.47% per the interest rate swap
agreement as noted below.
2015
2014
$
8,353,600 $
8,796,400
$
160,000
8,513,600
480,533
8,033,067 $
173,334
8,969,734
456,133
8,513,601
A $200,000 development incentive note with Wyndham Hotels and
Resorts, LLC. The note bears no interest unless it is defaulted upon or
is accelerated. Each year one-fifteenth of the original principal
amount is forgiven without payment, and the obligation to repay the
note is cancelled and discharged when the principal is completely
forgiven.
Less current maturities
Future scheduled maturities of notes payable are as follows for the years ending June 30:
2016
2017
2018
2019
2020
Thereafter
$
$
480,533
506,533
7,406,533
13,333
13,333
93,335
8,513,600
The floating interest rate for the $8,353,600 note payable above at June 30, 2015 varies based on 30-day LIBOR
plus 1%. The Foundation utilizes an interest rate swap agreement to reduce the impact of changes in interest rates
on its floating rate debt. The swap agreement is a contract to exchange floating rates for fixed rate payments
periodically over the life of the agreement without the exchange of the underlying notional amount. The swap
agreement effectively fixed the interest rate applicable to the note described above at a rate of 5.47%.
19
University of South Carolina Development Foundation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2015 and 2014
Note 12. Bonds Payable
During December 2010, the Foundation issued $19,135,000 of Economic Development Revenue Bonds (Series
2010 JEDA Bonds). The Series 2010 JEDA Bonds were issued for the purpose of purchasing real estate for the
University of South Carolina and to refinance certain notes payable incurred by the Foundation. During fiscal year
2014, in addition to the Foundation’s scheduled bond principal payment, an early payment of bond principal was
made in the amount of $1,359,217. Series 2010 JEDA Bonds payable at June 30, 2015 and 2014 were $11,266,074
and $11,596,180, respectively. The annual debt service to maturity for these bonds outstanding at June 30, 2015,
includes variable interest at 67% of 30-day LIBOR (.18% at June 30, 2015) plus .85%. The bond agreement requires
the Foundation and USC Educational Foundation, the guarantor, to maintain certain minimum financial ratios and
to perform or not perform certain actions. Future scheduled maturities of these bonds payable are as follows for
the years ending June 30:
2016
2017
2018
2019
2020
2021 - 2025
2026 - 2030
2031 - 2036
$
343,179
359,521
372,594
388,936
405,278
2,300,934
2,830,408
4,265,224
$ 11,266,074
During July 2014, USC DF - West Campus LLC issued $88,065,000 in tax exempt bonds (Series 2014A) with a
maturity date of August 1, 2046 and $4,635,000 in taxable bonds (Series 2014B) with a bond maturity date of
August 1, 2019 in order to finance the construction of a dormitory project (See Note 17). Notwithstanding the
maturity date, the lender has an option to call the tax exempt bonds on August 1, 2024. The tax exempt bonds
have a variable interest rate of 67% of the sum of 30-day LIBOR (.18% at June 30, 2015) plus 1.65%. The taxable
bonds have a variable bond rate of 30-day LIBOR plus 1.65%. Interest only payments are due during the
construction phase. Principal payments will begin after all construction is scheduled to be completed, with the first
principal payment due on August 1, 2016. For the USC Development Foundation, a guaranty of $15,000,000 is in
effect with lender until the put option date of August 1, 2024. The bond agreement requires the Foundation to
maintain certain minimum financial ratios and to perform or not perform certain actions. USC DF – West
Campus, LLC is currently receiving advances from this bond issuance to fund the construction of the dormitory
project. As of June 30, 2015, USC DF - West Campus, LLC has received bond proceeds totaling $43,691,893.
Inter-foundation Agreement
In conjunction with issuance of the Series 2014A and 2014B bonds to finance the student housing facility, in July
2014, the USC Development Foundation entered into an agreement with the USC Educational Foundation to
provide a guaranty to the lender. The USC Educational Foundation will receive fees from the USC Development
Foundation for the guaranty provided. The guaranty begins with a $75,000,000 contingent liability for the USC
Educational Foundation and could decrease to $0 over four years if certain obligations are met as presented in
the table below.
20
University of South Carolina Development Foundation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2015 and 2014
Note 12. Bonds Payable, Continued
Milestone Events
Amount of Guaranty
1% Fee
Begins at closing of Credit Facility
(August 1, 2014 – July 31, 2015)
$75,000,000
$ 750,000
At delivery of Phase 1
(July 31, 2015)
$50,000,000
500,000
At delivery of Phase 1A
(Estimated to be July 31, 2016)
$25,000,000
250,000
After Year 1 of stabilization
(Estimated to be July 31, 2017)
$15,000,000
150,000
After Year 2 of stabilization
(Estimated to be July 31, 2018)
$10,000,000
100,000
After Year 3 of stabilization
Guaranty decreases to $ 0
-
Total fees
$ 1,750,000
During June 2014, USC DF - West Campus, LLC, entered into an interest rate swap agreement that will begin on
July 1, 2015 with an initial notional amount of $60,000,000, which will effectively fix the rate of this debt at a
rate of 3.25%. This notional amount will increase by $32,700,000 on July 1, 2016. Under the terms of this
second interest rate swap agreement, this remaining debt from this bond issuance will also become fixed at
3.25% on July 1, 2016. This fixed rate will be effective until the put option date of August 1, 2024. Once all bond
proceeds have been advanced to USC DF – West Campus, LLC, future scheduled maturities of these bonds payable
will be due as follows for the years ending June 30:
2016
2017
2018
2019
2020
2021 - 2025
2026 - 2030
2031 - 2035
2036 - 2040
2041 - 2045
2046 - 2047
$
1,855,969
1,917,195
1,980,440
2,045,772
11,286,808
13,275,429
15,614,427
18,365,531
21,601,353
4,757,076
$ 92,700,000
21
University of South Carolina Development Foundation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2015 and 2014
Note 13. Related Party Transactions
The Foundation has engaged in a significant volume of transactions with the University and its various departments
and related organizations. For the years ended June 30, 2015 and 2014, the following amounts were paid to or
received from the University:
The Foundation leases parking spaces for Senate Plaza residents from the University at an annual cost of $28,440.
As the lease agreement for the parking spaces does not have a specific expiration date, the minimum annual lease
commitments for the next five years are as follows for the years ending June 30:
2016
2017
2018
2019
2020
$
$
28,440
28,440
28,440
28,440
28,440
142,200
The Foundation allows the University to use a Cockaboose during football season, to host donor events. The
Foundation provides the use of the Cockaboose free of charge to the University.
The Foundation (CDRC, LLC) leases floor space on the first floor of 1530 Wheat Street to the Children’s Center at
USC for child development at a rate of $12,420 per month. The minimum annual lease commitments for the next
five years are as follows for the years ending June 30:
2016
2017
2018
2019
2020
$
$
149,040
149,040
149,040
149,040
149,040
745,200
The Foundation leases floor space on the second floor of 1530 Wheat Street to the University at a rate of $2,080
per month, which expired June 30, 2013. This lease is still being operated on a month-to-month basis. During
2012, the Foundation entered into a lease with the University for additional space on the second floor of 1530
Wheat Street at a rate of $1,360 per month, which expires on June 30, 2016. The lease provides the option to be
renewed annually for the following five years.
The Foundation leases space at 1027 Barnwell Street, on a month-to-month basis, to the University of South
Carolina Educational Foundation at a rate of $15,500 per month. Rental income for this lease totaled $186,000
and $170,500 for the years ending June 30, 2015 and 2014, respectively.
The Foundation paid the University of South Carolina Educational Foundation $276,991 and $232,105 for various
operational cost including salaries, equipment and investment fees for the years ended June 30, 2015 and 2014,
respectively.
22
University of South Carolina Development Foundation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2015 and 2014
Note 13. Related Party Transactions, Continued
The Foundation owns thirty-five parking spaces at Stadium Place near the University football stadium. The
Foundation allows the University to use twenty-six of these spaces in exchange for reimbursement of the
Foundation’s assessments and property taxes on these spaces. The agreement between the Foundation and the
University commenced on November 5, 1997 for one year, and has since been renewed each year with the
University. The agreement has no specific expiration date.
During the year ended June 30, 2010, the Foundation entered into a lease with the University for Williams at
Blossom, LLC, for the property to be used for baseball parking. The Foundation received rental revenue of $86,718
and $80,827 from the University for the years ended June 30, 2015 and 2014, respectively.
The Foundation is currently leasing property at 707 Catawba Street to the University at a rate of $9,762 per month.
The lease expired September 30, 2010 with an option to extend as month-to-month for five years. As of June 30,
2015, the lease is still operating as a month-to-month agreement. The Foundation received rental revenue of
$117,144 for years ended June 30, 2015 and 2014.
On September 1, 2012, the Foundation entered into a lease with the University for property at 350 Wayne Street
for a period of twelve months to be used for general office and storage space. The University has continued to
lease the property on a month-to-month basis. The Foundation received rental revenue of $99,600 for the years
ended June 30, 2015 and 2014.
The Foundation has entered into a lease with the University for property at 737 Gadsden Street to be used for
playing fields or general parking. The lease commenced on April 1, 2013 for twelve months, at a rate of $8,084 per
month. The University has continued to lease the property on a month-to-month basis. The Foundation received
rental revenue of $97,008 for the years ended June 30, 2015 and 2014.
The Foundation purchased property at 807 Whaley Street in March 2014. The Foundation has entered into an
agreement with the University of South Carolina Educational Foundation whereby the Education Foundation will
purchase the property at 807 Whaley from the Development Foundation for the benefit of the University. The
purchase will take place over a three year period. The initial payment was made to the Foundation on June 30,
2014. Title will not be transferred until the final payment is made on June 30, 2016.
Note 14. Child Development/Research Center
CDRC, LLC, a Limited Liability Corporation (100% owned by the Foundation) constructed a Child Development
Research Center that is devoted to research in matters related to early childhood education. The Research Center
is built on land owned by CDRC, LLC and consists of two floors. The first floor of the Center is leased to the
Children’s Center at USC, for child development and the second floor of the Center is used by the University of
South Carolina.
23
University of South Carolina Development Foundation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2015 and 2014
Note 15. Derivatives and Off-Balance Sheet Risk
The Foundation has investments in hedge funds, which are fair value hedging instruments as defined in the ASC.
The Foundation does not engage in speculation. The effect of this practice is to help protect the Foundation from
losses which would result from price fluctuations of their traditional investments. As of June 30, 2015 and 2014,
the Foundation had cumulative unrealized net gains in its hedge funds of $880,896 and $727,813, respectively.
Note 16. The Inn at USC, LLC
On August 2, 2004, the Foundation participated with USC Hotel Investments, LLC to form a Limited Liability
Company named USC Hotel Associates, LLC. The Foundation has an eighty percent ownership interest in USC Hotel
Associates, LLC. Its purpose is to develop, own and operate “The Inn at USC”, a 117 room hotel located on
Pendleton Street adjacent to the Columbia, South Carolina campus.
In connection with the above development, the Foundation’s wholly owned LLC, Inn at USC, LLC, entered into a
ground lease with USC Hotel Associates, LLC, for the property it owns on Pendleton Street in Columbia, South
Carolina. The initial term of the ground lease was 40 years, with an annual rent of $303,000. During the fiscal year
ended June 30, 2011, the Foundation wrote-off all the rent receivable related to the ground lease and no
additional rental income or receivable was recognized while a new agreement was being negotiated.
On July 1, 2013, the Foundation and USC Hotel Investments, LLC approved amendments to the terms of their
original agreement. Under terms of the amended agreement, the annual rental income since August 1, 2005
was recalculated at an annual rent of $160,000 (minimum rental amount). Additional rent may also be due at
the end of each year if certain revenue levels are achieved by USC Hotel Associates, LLC. The amended
agreement also called for a required capital contribution from the Foundation to USC Hotel Associates, LLC, in
the amount of $2,020,000. This required capital contribution was made by the Foundation in 2014. All material
transactions between USC Hotel Associates, LLC and the Foundation and subsidiaries have been eliminated
during consolidation.
On February 4, 2008, USC Hotel Associates, LLC refinanced their initial loan used to develop "The Inn at USC." The
loan amount at June 30, 2015 and 2014 is $8,353,600 and $8,796,400, respectively, and is secured by the
leasehold interest, building, and personal property. The Foundation has also guaranteed $2,000,000 of the debt.
Note 17. USC DF-West Campus, LLC and USCInnovation, LLC
USC DF - West Campus, LLC Project
During 2014, the Foundation formed USC DF - West Campus, LLC to build an 878 bed dormitory project
including related parking and ground floor retail facilities on the campus of the University of South Carolina. On
May 13, 2014, the Foundation entered into a lump sum contract totaling $92,691,623, with a development
manager to develop this multi-phase mixed use student housing project. As of June 30, 2015 and 2014,
progress payments of $44,465,637 and $4,616,464, respectively, have been made related to this contract and
are included within construction-in-progress.
24
University of South Carolina Development Foundation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2015 and 2014
Note 17. USC DF-West Campus, LLC and USCInnovation, LLC, Continued
USCInnovation, LLC Project
On May 2, 2014, the Foundation formed USCInnovation, LLC to build an office building. The project is planned
to have 110,000 square feet and will be a taxable entity. When formed, the USC Development Foundation
owned 49% of this entity and had an option to obtain the remaining 51%. During 2015, the Foundation
executed its option to obtain full ownership of USC Innovation, LLC. On May 13, 2014, the Foundation entered
into a lump sum contract totaling $20,471,351 with a development manager to develop this office building. As
of June 30, 2015 and 2014, progress payments of $1,964,957 and $608,425, respectively, have been made
related to this contract and are included within construction-in-progress. USCInnovation, LLC has executed
long-term leases for approximately 55% of the available space in this building.
25
Supplemental Schedule 1
The University of South Carolina Development Foundation and Select Subsidiaries
Consolidating Schedule of Assets, Liabilities and Net Assets/Members' Deficit
As of June 30, 2015
The USC
Development
Foundation
Assets
Cash and cash equivalents
Investments in securities
Contributions receivable, net
Other receivables
Prepaid expenses
Property and equipment, net
Real estate held for investment
Other assets
Investment in subsidiary
Advances to USC Hotel Associates, LLC
Total assets
$
$
USC Hotel
Associates, LLC
1,583,278
34,412,885
2,280,315
204,709
4,674
8,585,355
25,305,723
122,756
3,595,632
80,000
76,175,327
$
429,837
20,650,076
11,266,074
6,000,199
442,682
38,788,868
$
$
USC DF - West
Campus, LLC
USCInnovation, LLC
205,278
57,519
21,754
7,520,806
32,887
7,838,244
$
520,008
8,513,600
714,328
100,000
9,847,936
$
$
137,203
1,485,047
2,573,382
4,195,632
$
600,000
600,000
$
$
Eliminations
178,462
49,319,135
331,360
49,828,957
$
5,970,004
43,691,893
4,262,809
296,708
54,221,414
$
$
Consolidated
(98,999)
(3,595,632)
(80,000)
(3,774,631)
$
(98,999)
(6,000,199)
(80,000)
(6,179,198)
$
$
2,104,221
35,897,932
2,280,315
163,229
26,428
67,998,678
25,305,723
487,003
134,263,529
Liabilities and net assets/members' deficit
Liabilities
Accounts payable and accrued expenses
Lines-of-credit
Notes payable
Bonds payable
Interest rate swaps
Deficit in investments in subsidiaries
Funds held for others
Deferred revenue
Advances from members
Total liabilities
$
Net assets/members' deficit
USC Development Foundation net assets
Net assets
Unrestricted
Board designated for investments
Undesignated
Temporarily restricted
Permanently restricted
USC Hotel Associates, LLC members' deficit
Members' deficit
Total Foundation net assets/members' deficit
Noncontrolling interest
Total net assets/members' deficit
Total liabilities and net assets/members' deficit
23,730,673
(14,538,154)
9,192,519
24,828,012
3,365,928
$
37,386,459
37,386,459
76,175,327
-
$
(2,009,692)
(2,009,692)
(2,009,692)
7,838,244
26
$
3,595,632
3,595,632
-
(4,392,457)
(4,392,457)
-
3,595,632
3,595,632
4,195,632
(4,392,457)
(4,392,457)
49,828,957
$
796,825
796,825
-
$
2,009,692
2,806,517
(401,950)
2,404,567
(3,774,631)
6,820,850
21,250,076
8,513,600
54,957,967
4,977,137
442,682
296,708
20,000
97,279,020
23,730,673
(14,538,154)
9,192,519
24,828,012
3,365,928
$
37,386,459
(401,950)
36,984,509
134,263,529
Supplemental Schedule 2
The University of South Carolina Development Foundation and Select Subsidiaries
Consolidating Schedule of Revenues, Expenses and Changes in Net Assets/Members' Deficit
For the year ended June 30, 2015
The USC
Development
Foundation
USC Hotel
Associates, LLC
USC DF - West
Campus, LLC
USCInnovation, LLC
Eliminations
Consolidated
Unrestricted net assets
Revenues and support
Investment returns
Rental income
Room revenue
Other
Support
Net assets released from restrictions
Total revenues and support
$
Expenses
Supporting services
Management and general
USC Hotel Associates
Program services
Investment services
Property services
Loss (gain) on investments in subsidiaries
Unrealized (gain) loss on interest rate swaps
Loss on real estate held for investment
Total expenses
Change in unrestricted
net assets
1,089,563
990,701
19,275
13,475
217,045
2,330,059
$
3,783,140
383,064
4,166,204
$
-
439,408
-
4,148,885
-
329,031
705,626
2,632,340
4,666,234
8,772,639
(265,249)
3,883,636
54
54
(6,442,580)
282,568
(54)
$
60,600
60,600
$
-
(208,310)
(208,310)
$
1,089,563
782,391
3,783,140
462,939
13,475
217,045
6,348,553
(208,310)
439,408
3,940,575
93,933
2,825,007
2,918,940
(2,632,340)
(2,840,650)
423,018
705,626
2,559,758
4,666,234
12,734,619
(2,858,340)
2,632,340
(6,386,066)
Temporarily restricted net assets
Investment income
Support
Other
Net assets released from restrictions
445,719
1,270,050
11,498
(217,045)
-
-
-
-
445,719
1,270,050
11,498
(217,045)
Change in temporarily
restricted net assets
1,510,222
-
-
-
-
1,510,222
Change in net assets/
members' deficit
(4,932,358)
Net change attributable to
noncontrolling interest in
USC Hotel Associates, LLC
Change in net assets/
members' deficit
282,568
-
$
(4,932,358)
(54)
-
$
(2,858,340)
-
282,568
27
$
(54)
-
$
(2,858,340)
$
2,632,340
(4,875,844)
(56,514)
(56,514)
2,575,826
$
(4,932,358)
Supplemental Schedule 3
The University of South Carolina Development Foundation and Select Subsidiaries
Consolidating Schedule of Assets, Liabilities and Net Assets/Members' Deficit
As of June 30, 2014
The USC
Development
Foundation
USC Hotel
Associates, LLC
USC DF - West
Campus, LLC
USCInnovation, LLC
Eliminations
Consolidated
Assets
Cash and cash equivalents
Investments in securities
Contributions receivable, net
Other receivables
Prepaid expenses
Property and equipment, net
Real estate held for investment
Other assets
Total assets
$
$
2,639,662
31,387,655
2,183,627
341,707
8,801,976
28,631,363
128,817
74,114,807
$
350,988
16,462,943
11,596,180
3,368,013
17,866
31,795,990
$
$
586,752
103,101
21,857
7,443,087
43,918
8,198,715
$
541,664
8,969,734
979,577
10,490,975
$
$
608,425
608,425
$
8,525
600,000
608,525
$
$
4,853,498
4,853,498
$
2,449,140
2,500,673
1,437,802
6,387,615
$
$
(112,069)
(112,069)
$
(112,069)
(3,368,013)
(3,480,082)
$
$
3,226,414
31,387,655
2,183,627
332,739
21,857
21,706,986
28,631,363
172,735
87,663,376
Liabilities and net assets/members' deficit
Liabilities
Accounts payable and accrued expenses
Lines-of-credit
Notes payable
Bonds payable
Interest rate swaps
Deficit in investments in subsidiaries
Funds held for others
Total liabilities
$
Net assets/members' deficit
USC Development Foundation net assets
Net assets
Unrestricted
Board designated for investments
Undesignated
Temporarily restricted
Permanently restricted
USC Hotel Associates, LLC members' deficit
Total Foundation net assets/members' deficit
Noncontrolling interest
Total net assets/members' deficit
Total liabilities and net assets/members' deficit
$
22,905,198
(7,270,099)
15,635,099
23,317,790
3,365,928
42,318,817
42,318,817
74,114,807
$
(2,292,260)
(2,292,260)
(2,292,260)
8,198,715
28
$
(100)
(100)
(100)
(100)
608,425
$
(1,534,117)
(1,534,117)
(1,534,117)
(1,534,117)
4,853,498
$
1,534,217
1,534,217
2,292,260
3,826,477
(458,464)
3,368,013
(112,069)
$
3,238,248
19,563,616
8,969,734
11,596,180
2,417,379
17,866
45,803,023
22,905,198
(7,270,099)
15,635,099
23,317,790
3,365,928
42,318,817
(458,464)
41,860,353
87,663,376
Supplemental Schedule 4
The University of South Carolina Development Foundation and Select Subsidiaries
Consolidating Schedule of Revenues, Expenses and Changes in Net Assets/Members' Deficit
For the year ended June 30, 2014
The USC
Development
Foundation
USC Hotel
Associates, LLC
USC DF - West
Campus, LLC
USCInnovation, LLC
Eliminations
Consolidated
Unrestricted net assets
Revenues and support
Investment returns
Rental income
Room revenue
Gain on sale of real estate held for investment
Other
Support
Net assets released from restrictions
Total revenues and support
Expenses
Supporting services
Management and general
USC Hotel Associates
Program services
Investment services
Property services
Loss on investments in subsidiaries
Unrealized (gain) loss on interest rate swaps
Total expenses
Change in unrestricted
net assets
$
4,538,130
971,405
2,121,424
17,291
20,203
374,468
8,042,921
512,802
-
Temporarily restricted net assets
Investment returns
Support
Other
Net assets released from restrictions
-
308,926
1,042,472
1,363,119
3,227,319
(231,085)
3,627,537
100
100
4,815,602
213,872
(100)
1,113,605
Change in net assets/
members' deficit
5,929,207
5,929,207
-
$
-
(192,070)
(192,070)
96,315
1,437,802
1,534,117
(1,363,119)
(1,555,189)
405,341
1,042,472
1,206,717
6,833,884
(1,534,117)
1,363,119
4,858,376
-
-
-
-
-
(1,534,117)
-
213,872
29
$
(100)
(1,534,117)
535,330
826,695
126,048
(374,468)
1,113,605
1,363,119
-
$
4,538,130
779,335
3,472,989
2,121,424
385,711
20,203
374,468
11,692,260
512,802
3,666,552
-
(100)
$
(192,070)
-
-
$
$
-
213,872
-
$
$
-
535,330
826,695
126,048
(374,468)
Net change attributable to
noncontrolling interest in
USC Hotel Associates, LLC
3,472,989
368,420
3,841,409
3,858,622
Change in temporarily
restricted net assets
Change in net assets/
members' deficit
$
5,971,981
(42,774)
$
1,320,345
(42,774)
$
5,929,207