EXHIBIT 99.7
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Extended Stay America, Inc.
Ft. Lauderdale, Florida
We have audited the accompanying balance sheet of Apartment Inn
Partners/Gwinnett, L.P. as of December 31, 1995 and the related statements of
operations and partners' capital and cash flows for the year then ended. These
financial statements are the responsibility of the partnership's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Apartment Inn
Partners/Gwinnett, L.P. at December 31, 1995 and the results of its operations
and its cash flows for the year then ended in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Spartanburg, South Carolina
June 25, 1996
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APARTMENT INN PARTNERS/GWINNETT, L.P.
BALANCE SHEETS
DECEMBER 31, MARCH 31,
1995 1996
ASSETS ------------ -----------
(UNAUDITED)
Current assets:
Cash and cash equivalents. $ 238,871 $ 308,635
Accounts receivable....... 14,560 28,556
Supply inventories........ 32,950 32,950
Prepaid expenses.......... 2,198
---------- ----------
Total current assets.... 286,381 372,339
---------- ----------
Property and equipment, net. 2,651,717 2,631,082
Other assets................ 10,575 10,575
---------- ----------
$2,948,673 $3,013,996
========== ==========
LIABILITIES AND PARTNERS'
CAPITAL
Current liabilities:
Accounts payable.......... $ 5,666 $ 17,927
Accrued salaries and re-
lated expenses........... 3,933 6,640
Other accrued expenses.... 24,601 28,496
Deferred revenue.......... 7,872 9,588
Current maturities of
long-term debt--related
party.................... 194,451 199,352
---------- ----------
Total current liabili-
ties................... 236,523 262,003
---------- ----------
Long-term debt--related par-
ty......................... 2,387,119 2,335,405
---------- ----------
Total liabilities....... 2,623,642 2,597,408
---------- ----------
Partners' capital........... 325,031 416,588
---------- ----------
$2,948,673 $3,013,996
========== ==========
The accompanying notes are an integral part of the financial statements.
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APARTMENT INN PARTNERS/GWINNETT, L.P.
STATEMENTS OF OPERATIONS AND PARTNERS' CAPITAL
FOR THE FOR THE FOR THE
YEAR ENDED THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31, MARCH 31,
1995 1995 1996
------------ ------------------ ------------------
(UNAUDITED) (UNAUDITED)
Revenue:
Room revenue.............. $1,231,786 $296,835 $320,753
Other revenue............. 62,187 18,465 14,050
---------- -------- --------
Total revenue........... 1,293,973 315,300 334,803
---------- -------- --------
Costs and expenses:
Property operating ex-
penses................... 588,760 143,286 135,319
Management fees expense... 88,662 9,439 19,976
Depreciation and amortiza-
tion..................... 109,636 25,971 23,800
---------- -------- --------
Total costs and ex-
penses................. 787,058 178,696 179,095
---------- -------- --------
Income from operations...... 506,915 136,604 155,708
Other expense:
Interest expense--related
party.................... 267,836 68,589 64,151
---------- -------- --------
Net income.............. 239,079 68,015 91,557
Partners' capital, beginning
of period.................. 85,952 85,952 325,031
---------- -------- --------
Partners' capital, end of
period..................... $ 325,031 $153,967 $416,588
========== ======== ========
The accompanying notes are an integral part of the financial statements.
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APARTMENT INN PARTNERS/GWINNETT, L.P.
STATEMENTS OF CASH FLOWS
FOR THE FOR THE FOR THE
YEAR ENDED THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31, MARCH 31,
1995 1995 1996
------------ ------------------ ------------------
(UNAUDITED) (UNAUDITED)
Cash flows from operating
activities:
Net income................ $239,079 $ 68,015 $ 91,557
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization........... 109,636 25,971 23,800
Change in:
Accounts receivable.... (2,391) (11,560) (13,996)
Prepaid and other
current assets........ 1,216 (569) (2,198)
Accounts payable....... (1,724) 9,975 12,261
Accrued expenses....... (5,844) 12,175 8,318
-------- -------- --------
Net cash provided by
operating activities. 339,972 104,007 119,742
-------- -------- --------
Cash flows from investing
activities:
Purchases of property and
equipment................ (8,577) (2,451) (3,165)
-------- -------- --------
Net cash used in
investing activities. (8,577) (2,451) (3,165)
-------- -------- --------
Cash flows from financing
activities:
Principal payments on
long-term debt--related
party.................... (176,019) (42,535) (46,813)
-------- -------- --------
Net cash used in
financing activities. (176,019) (42,535) (46,813)
-------- -------- --------
Net increase in cash........ 155,376 59,021 69,764
Cash at beginning of period. 83,495 83,495 238,871
-------- -------- --------
Cash at end of period....... $238,871 $142,516 $308,635
======== ======== ========
Supplemental cash flow
disclosure, interest paid.. $267,836 $ 68,589 $ 64,151
======== ======== ========
The accompanying notes are an integral part of the financial statements.
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APARTMENT INN PARTNERS/GWINNETT, L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business. Apartment Inn Partners/Gwinnett, L.P. (the
"Partnership") is a Georgia limited partnership that operates an extended stay
facility (known as the "Apartment Inn") in Lawrenceville, Georgia. On June 25,
1996, the Partnership's extended stay facility was acquired by Extended Stay
America, Inc.
Pervasiveness of Estimates. The preparation of 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 disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents. Cash and cash equivalents consist of cash on hand
and on deposit, and highly liquid instruments with maturities of three months
or less when purchased. The carrying amount of cash and cash equivalents is the
estimated fair value at December 31, 1995.
Supply Inventories. Supply inventories consist primarily of linen, cleaning
and other room supplies and are stated at the lower of cost or market.
Property and Equipment. Property and equipment is stated at cost.
Depreciation is computed using straight-line and accelerated methods over the
estimated useful lives of the assets. Maintenance and repairs are charged to
operations as incurred; major renewals and improvements are capitalized. The
gain or loss on the disposition of property and equipment is recorded in the
year of disposition.
The lives on the assets are as follows:
Building and improvements........................................ 39 years
Furniture, fixtures and equipment................................ 7 years
Income Taxes. Any income taxes relating to income earned by the Partnership
are paid by the partners.
Revenue Recognition. Room revenue and other income are recognized when
earned.
Unaudited Interim Financial Statements. The unaudited interim financial
statements have been prepared pursuant to generally accepted accounting
principles applicable to interim financial statements and include all
adjustments which are, in the opinion of management, necessary for a fair
presentation of the results for the interim periods presented. All such
adjustments are, in the opinion of management, of a normal recurring nature.
Results for the three months ended March 31, 1995 and 1996 are not necessarily
indicative of results to be expected for a full year. All data at March 31,
1996 and for each of the three-month periods ended March 31, 1995 and 1996 are
unaudited.
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APARTMENT INN PARTNERS/GWINNETT, L.P.
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
2. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at December 31, 1995:
Land.......................................................... $ 451,800
Building and improvements..................................... 2,144,300
Furniture, fixtures and equipment............................. 192,627
----------
2,788,727
Less accumulated depreciation................................. 137,010
----------
$2,651,717
==========
3. LONG-TERM DEBT:
Long-term debt consists of the following as of December 31, 1995:
Note payable, principal and interest payable to the general
partner of the Partnership at $36,988 monthly through Septem-
ber 2004, interest at 10%.................................... $2,581,570
Less current maturities....................................... 194,451
----------
Long-term debt, net of current maturities..................... $2,387,119
==========
The note payable is collateralized by substantially all of the Partnership's
property and equipment. Aggregate maturities of long-term debt are as follows:
1996--$194,451; 1997--$214,812; 1998--$237,305; 1999--$262,154; 2000--$289,606;
thereafter $1,383,242.
The Partnership believes that there is no material difference in the carrying
amount and estimated fair value of the long-term debt.
4. LITIGATION:
From time to time, the Partnership has been involved in various legal
proceedings. Management believes that all such litigation is routine in nature
and incidental to the conduct of its business, and that none of such
litigation, if determined adversely to the Partnership, would have a material
adverse effect on its financial condition.
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