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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission file number 0-11890
VISTA PROPERTIES
(Exact name of registrant as specified in its charter)
California 13-3179078
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
411 West Putnam Avenue Greenwich, CT 06830
(Address of principal executive offices)
(203) 862-7000
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
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<PAGE>
VISTA PROPERTIES
(A limited partnership)
FORM 10-Q - SEPTEMBER 30, 1996
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - September 30, 1996 and December 31, 1995
STATEMENTS OF OPERATIONS - For the three months ended September 30, 1996
and 1995 and the nine months ended September 30, 1996 and 1995
STATEMENT OF PARTNERS' DEFICIT - For the nine months ended September 30,
1996
STATEMENTS OF CASH FLOWS - For the nine months ended September 30, 1996
and 1995
NOTES TO FINANCIAL STATEMENTS
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
VISTA PROPERTIES
(A limited partnership)
BALANCE SHEETS
September 30, December 31,
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
Real estate, net ............................. $ 97,494,635 $ 115,705,376
Receivables and other assets ................. 9,768,750 9,896,778
Cash and cash equivalents .................... 1,485,515 2,404,119
------------- -------------
$ 108,748,900 $ 128,006,273
============= =============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Deferred interest payable .................... $ 110,779,045 $ 119,017,721
Mortgage loans payable ....................... 99,160,000 120,520,000
Due to affiliates ............................ 1,987,893 1,717,574
Accounts payable and accrued expenses ........ 836,120 691,829
Prepaid rents ................................ 215,381 505,664
------------- -------------
Total liabilities ......................... 212,978,439 242,452,788
------------- -------------
Commitments and contingencies
Partners' deficit
Limited partners' deficit (92,810 units issued
and outstanding) .......................... (101,662,754) (111,777,560)
General partners' deficit .................... (2,566,785) (2,668,955)
------------- -------------
Total partners' deficit ................... (104,229,539) (114,446,515)
------------- -------------
$ 108,748,900 $ 128,006,273
============= =============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VISTA PROPERTIES
(A limited partnership)
STATEMENTS OF OPERATIONS
For the three months ended For the nine months ended
September 30, September 30,
------------------------------ ------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues
Rental income ......................................... $ 5,012,289 $ 6,365,212 $ 15,393,222 $ 18,931,605
Interest income ....................................... 17,771 32,984 55,696 88,209
Other income .......................................... 450 250 273,676 1,300
------------ ------------ ------------ ------------
5,030,510 6,398,446 15,722,594 19,021,114
Costs and expenses
Mortgage loan interest expense ........................ 4,435,711 5,024,976 13,339,789 15,068,089
Operating expenses .................................... 2,278,232 2,137,918 6,328,739 6,034,551
Depreciation and amortization ......................... 1,532,532 1,418,479 4,172,645 4,253,987
Ground rent ........................................... 175,000 507,980 525,000 1,523,179
Property management fees .............................. 142,487 92,871 439,986 450,587
Administrative expenses ............................... 30,106 29,451 128,657 88,362
------------ ------------ ------------ ------------
8,594,068 9,211,675 24,934,816 27,418,755
(3,563,558) (2,813,229) (9,212,222) (8,397,641)
Gain on disposition of property, net ....................... -- -- 19,429,198 --
------------ ------------ ------------ ------------
Net (loss) income .......................................... $ (3,563,558) $ (2,813,229) $ 10,216,976 $ (8,397,641)
============ ============ ============ ============
Net (loss) income attributable to
Limited partners ...................................... $ (3,527,923) $ (2,785,097) $ 10,114,806 $ (8,313,665)
General partners
(35,635) (28,132) 102,170 (83,976)
------------ ------------ ------------ ------------
$ (3,563,558) $ (2,813,229) $ 10,216,976 $ (8,397,641)
============ ============ ============ ============
Net (loss) income per unit of limited partnership
interest (92,810 units outstanding) ................... $ (38.01) $ (30.01) $ 108.99 $ (89.58)
============ ============ ============ ============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VISTA PROPERTIES
(A limited partnership)
STATEMENT OF PARTNERS' DEFICIT
General Limited Total
Partners' Partners' Partners'
Deficit Deficit Deficit
------------- ------------- -------------
<S> <C> <C> <C>
Balance, January 1, 1996 ................. $ (2,668,955) $(111,777,560) $(114,446,515)
Net income for the nine months ended
September 30, 1996 ................... 102,170 10,114,806 10,216,976
------------- ------------- -------------
Balance, September 30, 1996 .............. $ (2,566,785) $(101,662,754) $(104,229,539)
============= ============= =============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VISTA PROPERTIES
(A limited partnership)
STATEMENTS OF CASH FLOWS
For the nine months ended
September 30,
-----------------------------
1996 1995
---- ----
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities
Net income (loss) ........................................ $ 10,216,976 $ (8,397,641)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities
Gain on disposition of property, net .............. (19,429,198) --
Deferred mortgage interest ........................ 6,215,382 5,989,916
Depreciation and amortization ..................... 4,172,645 4,253,987
Straight-line adjustment for stepped
lease rentals .................................. (229,960) (955,605)
Changes in assets and liabilities
Receivables and other assets .......................... 26,566 (1,848,065)
Due to affiliates ..................................... 270,319 253,772
Accounts payable and accrued expenses ................. 144,291 101,000
Prepaid rents ......................................... (290,283) --
------------ ------------
Net cash provided by (used in) operating activities 1,096,738 (602,636)
------------ ------------
Cash flows from investing activities
Capital improvements to real estate ...................... (2,015,342) (571,765)
Net decrease in cash and cash equivalents ..................... (918,604) (1,174,401)
Cash and cash equivalents, beginning of period ................ 2,404,119 2,809,266
------------ ------------
Cash and cash equivalents, end of period ...................... $ 1,485,515 $ 1,634,865
============ ============
Supplemental disclosure of cash flow information
Interest paid ............................................ $ 7,124,407 $ 9,078,173
============ ============
Supplemental disclosure of noncash investing and financing activities
See notes to financial statements.
</TABLE>
As discussed in Note 5, the Partnership's Florida property was forcelosed upon
in February 1996. As a result of this foreclosure action, $16,691,433 of real
estate, net and $35,814,058 of mortgage loans and deferred interest payable have
been removed from the accompanying balance sheet as of September 30, 1996.
<PAGE>
VISTA PROPERTIES
(A limited partnership)
NOTES TO FINANCIAL STATEMENTS
1 INTERIM FINANCIAL INFORMATION
The summarized financial information contained herein is unaudited;
however, in the opinion of management, all adjustments (consisting only
of normal recurring accruals) necessary for the fair presentation of
such financial information have been included. The accompanying
financial statements, footnotes and discussions should be read in
conjunction with the financial statements, related footnotes and
discussions contained in the Vista Properties (the "Partnership")
Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1995.
The results of operations for the nine months ended September 30, 1996
are not necessarily indicative of the results to be expected for the
full year.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Leases
The Partnership accounts for all of its leases under the operating
method. Under this method, revenue is recognized as rentals become due,
except for stepped leases, where revenue from the lease is averaged
over the life of the lease.
Depreciation
Depreciation is computed using the straight-line method over the useful
life of the property, which is estimated to be 40 years for buildings
and 20 years for improvements. The cost of the buildings represents the
initial cost of the buildings to the Partnership plus acquisition and
closing costs. Repairs and maintenance are charged to operations as
incurred.
Impairment of assets
In March 1995, the Financial Accounting Standards Board issued
Statement #121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed of" ("SFAS #121"). The adoption of
the statement was required for fiscal years beginning after December
15, 1995. The Partnership implemented SFAS #121 beginning January 1,
1996. The implementation of SFAS #121 did not result in a write-down of
the Partnership's assets.
Under SFAS #121 the initial test to determine if an impairment exists
is to compute the recoverability of the asset based on anticipated cash
flows (net realizable value) compared to the net carrying value of the
asset. If anticipated cash flows on an undiscounted basis are
insufficient to recover the net carrying value of the asset, an
impairment loss should be recognized, and the asset written down to its
estimated fair value. The fair value of the asset is the amount by
which the asset could be bought or sold in a current transaction
<PAGE>
VISTA PROPERTIES
(A limited partnership)
NOTES TO FINANCIAL STATEMENTS
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of assets (continued)
between willing parties, that is, other than in a forced or liquidation
sale. The net realizable value of an asset will generally be greater
than its fair value because net realizable value does not discount cash
flows to present value and discounting is usually one of the
assumptions used in determining fair value. The write-downs for
impairment do not affect the tax basis of the assets and the
write-downs are not included in the determination of taxable income or
loss.
Because the determination of both net realizable value and fair value
is based upon projections of future economic events such as property
occupancy rates, rental rates, operating cost inflation and market
capitalization rates which are inherently subjective, the amounts
ultimately realized at disposition may differ materially from the net
carrying value as of the balance sheet date. The cash flows used to
determine fair value and net realizable value are based on good faith
estimates and assumptions developed by management. Inevitably,
unanticipated events and circumstances may occur and some assumptions
may not materialize; therefore actual results may vary from our
estimate and the variances may be material. The Partnership may provide
additional losses in subsequent years if the real estate market or
local economic conditions change and such write-downs could be
material.
A write-down for impairment was not required for the nine months ended
September 30, 1996 or 1995.
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
IR Vista Realty Corp., the Management General Partner, IR Acquisitions
Corp., the Acquisitions General Partner and Presidio Boram Corp., the
Associate General Partner, are wholly-owned subsidiaries of Presidio
Capital Corp. ("Presidio"). Affiliates of the general partners are also
engaged in businesses related to the acquisition and operation of real
estate. Presidio is also the parent of other corporations that are or
may be in the future engaged in businesses that may be in competition
with the Partnership. Accordingly, conflicts of interest may arise
between the Partnership and such other businesses. Effective January 1,
1996, Wexford Management Corp. (formerly Concurrency Management Corp.)
assigned its agreement to provide management and administrative
services to Presidio and its subsidiaries to Wexford Management LLC
("Wexford"). During the three and nine months ended September 30, 1996,
reimbursable expenses to Wexford by the Partnership amounted to $10,891
and $32,893, respectively. Wexford is engaged to perform similar
services for other entities which may be in competition with the
Partnership.
<PAGE>
VISTA PROPERTIES
(A limited partnership)
NOTES TO FINANCIAL STATEMENTS
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
The Partnership has entered into a supervisory management agreement
with IR Vista Management Corp. ("Vista Management"), an affiliate of
the general partners, to perform certain functions relating to the
management of the properties of the Partnership. A portion of the
property management fees payable to Vista Management were paid to an
unaffiliated local management company which was engaged to provide
local property management for one of the Partnership's properties. For
the quarters ended September 30, 1996 and 1995, $142,478 and $92,871,
respectively, was earned for such services, of which $49,669 and
$60,000 was paid to the unaffiliated local management company for the
quarters ended September 30, 1996 and 1995, respectively. Fees are not
charged for properties net leased to tenants. The Management General
Partner suspended payment of these fees during 1991 in order to slow
the depletion of the Partnership's working capital reserve balance. The
amount due to affiliates of $1,987,893 at September 30, 1996 and
$1,717,574 at December 31, 1995, represents management fees payable to
Vista Management for management services.
The general partners are entitled to receive 1% of distributable cash
from the operations, sales, financing and working capital reserve
account, and an allocation of 1% of the net income or loss of the
Partnership. Such amounts allocated and distributed to the general
partners are apportioned 10% to the Management General Partner, 10% to
the Acquisitions General Partner and 80% to the Associate General
Partner.
For the quarter ended September 30, 1996 and 1995, the Management
General Partner, Acquisitions General Partner and Associate General
Partner were allocated net losses of $3,563, $3,563, and $28,509 and
$2,813, $2,813 and $22,506, respectively.
4 REAL ESTATE
Real estate is summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- -------------
<S> <C> <C>
Buildings and improvements ........... $ 148,348,944 $ 170,379,274
Accumulated depreciation ............. (50,854,309) (54,673,898)
------------- -------------
$ 97,494,635 $ 115,705,376
============= =============
</TABLE>
The net lease tenant at the Irving, Texas property, a three story
office building, assumed the lease after a default by the Partnership's
original tenant. The annual net lease rental was reduced to $459,000
from $776,000. Due to the soft market conditions in the Irving, Texas
area and the estimated net realizable value of the building, management
recorded a write-down for impairment of $3,000,000 during 1991.
Management has determined that no additional write-down for impairment
was required for the quarter ended September 30, 1996 or 1995.
<PAGE>
VISTA PROPERTIES
(A limited partnership)
NOTES TO FINANCIAL STATEMENTS
5 FORECLOSURE OF FLORIDA PROPERTY
On January 12, 1996, the Partnership entered into a Settlement
Agreement (the "Settlement Agreement") with AEW #2 Trust ("AEW") with
respect to a pending foreclosure of the mortgage loan made by AEW to
the Partnership in the original principal amount of $21,360,000 (the
"Loan"). The Loan was secured by a first mortgage lien on the leasehold
estate on a parcel of land located in Orange County, Florida, and the
improvements located thereon (the "Florida Property"), which had a
carrying value of $16,691,433 at the date of foreclosure.
The Loan became due and payable in accordance with its terms on October
26, 1995 and the Loan was not satisfied on such date. At November 30,
1995, the outstanding indebtedness of the Loan was comprised of the
principal amount of $21,360,000 plus accrued and unpaid interest
thereon in the amount of $14,454,058. The amount of such outstanding
indebtedness exceeded the fair market value of the Florida Property as
of such date and the Lender commenced an action to foreclose its
mortgage on December 7, 1995. A certificate of title was issued in
connection with such action on February 26, 1996.
Under the terms of the Settlement Agreement, AEW agreed to pay to the
Partnership a fee in the amount of $400,000 (the "Cooperation Payment")
and to bear all costs and expenses relating to the consummation of the
foreclosure action provided the Partnership agreed to cooperate with
AEW in connection with the foreclosure action. The Cooperation Payment
was released from escrow and paid to the Partnership on May 21, 1996
and amounted to approximately $307,000 after related expenses. As a
result of the above transaction, the Partnership recognized a gain from
the disposition of the Florida Property of $19,429,198 for the nine
months ended September 30, 1996 ($207.25 per unit of limited
partnership interest).
6 MORTGAGE LOANS PAYABLE
The mortgage loan on the New York Property (the "New York Mortgage")
permits the Partnership to defer payment of some or all of the interest
accrued on the New York Mortgage, provided, among other things, that
the Partnership does not defer interest in an amount that at any time
exceeds the aggregate debt service that would have been due for the
immediately preceding 84-month period. In August, 1996, the Partnership
received notice from the holder of the New York Mortgage (the "New York
Lender") that the interest deferred on the New York Mortgage exceeded
the permitted deferral and that the full debt service payment for
interest accrued during August 1996 (in the amount of $1,239,200) would
be due and payable on September 1, 1996 and that, if such payment was
not received, the New York Lender would be entitled to accelerate the
indebtedness secured by the New York Mortgage and exercise all
<PAGE>
VISTA PROPERTIES
(A limited partnership)
NOTES TO FINANCIAL STATEMENTS
6 MORTGAGE LOANS PAYABLE (continued)
available remedies (including the commencement of a foreclosure action
against the New York Property). The Partnership did not have sufficient
funds to make the payment on September 1, 1996, and, in October, 1996,
the New York Lender declared the entire outstanding principal balance
of $90,160,000, together with all accrued and unpaid interest,
immediately due and payable, and thereafter commenced an action to
foreclose upon the New York Property. The Partnership is reviewing all
options available to it with respect to the New York Property.
The mortgage loan on the Texas Property (the "Texas Mortgage") permits
the Partnership to defer payment of some or all of the interest accrued
on the Texas Mortgage, provided, among other things, that the
Partnership does not defer interest in an amount that at any time
exceeds $8,500,000. As of September 30, 1996, the aggregate interest
deferred on the Texas Mortgage was $7,004,444. The Partnership does not
expect to exceed that maximum deferral amount until May 1999. At that
time, unless the Partnership is able to refinance the Texas Mortgage or
agree with the holder of the Texas Mortgage (the "Texas Lender") on a
restructuring of the Texas Mortgage, the Texas Lender may accelerate
the indebtedness secured by the Texas Mortgage and exercise all
available remedies (including the commencement of a foreclosure against
the Texas Property). A foreclosure of the Texas Mortgage would have
significant adverse tax consequences to the limited partners of the
Partnership with no cash available for distribution to the limited
partners.
There is no assurance that the Partnership will be able to successfully
avoid a foreclosure of the New York Property, or refinance or
restructure the Texas Mortgage prior to the date that the Partnership
will have deferred the maximum amount of interest that may be deferred
under the terms of the Texas Mortgage.
In the event of a foreclosure of the New York Property or the Texas
Property, the limited partners of the Partnership would suffer
significant adverse tax consequences without cash available for
distribution to the limited partners. Any such foreclosure also would
have a significant impact on future operating revenues and expenses and
cash flow resulting from operations would be significantly reduced. If
both the New York Property and the Texas Property are foreclosed, the
Partnership would lose all sources of revenue and would be forced to
dissolve. See Treatment of Gain or Loss on Sale or Other Disposition of
Property and Tax Treatment of Mortgage Foreclosure at pp. 72-73 of the
Prospectus.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
All cash flow from properties is currently applied to satisfy debt
service requirements. The Partnership uses working capital reserves
provided from the net proceeds of its initial public offering to pay
administrative expenses. As of September 30, 1996, such reserves
amounted to approximately $641,000. Administrative expenses for the
three months ended September 30, 1996 aggregated approximately $30,000.
The Partnership suspended payment of property management fees to an
affiliate of the Management General Partner in 1991 in order to slow
the depletion of the Partnership's working capital reserve balance. At
September 30, 1996, $1,987,893 of fees were deferred due to the
suspension of property management fee payments, of which $270,319 were
accrued for the nine months ended September 30, 1996. The affiliate
whose fees have been deferred has indicated that it does not have a
present intention of enforcing its right to such fees, but reserves its
right to do so.
With the exception of the Partnership's working capital reserves, cash
and cash equivalents for the nine months ended September 30, 1996 were
held as short term investments prior to being applied to the operations
of, and the Partnership's mortgage obligation on, the New York
property.
The Partnership owns the Texas property, which is net leased to Showbiz
Pizza Time, Inc., and the New York property, which is leased to
approximately 25 tenants. As of September 30, 1996, occupancy rates at
the Texas and New York properties were 100% and 97%, respectively. The
net lease of the Texas property expires in 1998. At the New York
property, one lease comprising 24% of the total square footage expires
in 1997. As of September 30, 1996, substantially all of the tenants at
each property are meeting their obligations and the expiring leases are
subject to renegotiation.
The mortgage loan on the New York Property (the "New York Mortgage")
permits the Partnership to defer payment of some or all of the interest
accrued on the New York Mortgage, provided, among other things, that
the Partnership does not defer interest in an amount that at any time
exceeds the aggregate debt service that would have been due for the
immediately preceding 84-month period. In August, 1996, the Partnership
received notice from the holder of the New York Mortgage (the "New York
Lender") that the interest deferred on the New York Mortgage exceeded
the permitted deferral and that the full debt service payment for
interest accrued during August 1996 (in the amount of $1,239,200) would
be due and payable on September 1, 1996 and that, if such payment was
not received, the New York Lender would be entitled to accelerate the
indebtedness secured by the New York Mortgage and exercise all
available remedies (including the commencement of a foreclosure action
against the New York Property). The Partnership did not have sufficient
funds to make the payment on September 1, 1996, and, in October, 1996,
the New York Lender declared the entire outstanding principal balance
of $90,160,000, together with all accrued and unpaid interest,
immediately due and payable, and thereafter commenced an action to
foreclose upon the New York Property. The Partnership is reviewing all
options available to it with respect to the New York Property.
<PAGE>
Liquidity and Capital Resources (continued)
The mortgage loan on the Texas Property (the "Texas Mortgage") permits
the Partnership to defer payment of some or all of the interest accrued
on the Texas Mortgage, provided, among other things, that the
Partnership does not defer interest in an amount that at any time
exceeds $8,500,000. As of September 30, 1996, the aggregate interest
deferred on the Texas Mortgage was $7,004,444. The Partnership does not
expect to exceed that maximum deferral amount until May 1999. At that
time, unless the Partnership is able to refinance the Texas Mortgage or
agree with the holder of the Texas Mortgage (the "Texas Lender") on a
restructuring of the Texas Mortgage, the Texas Lender may accelerate
the indebtedness secured by the Texas Mortgage and exercise all
available remedies (including the commencement of a foreclosure against
the Texas Property). A foreclosure of the Texas Mortgage would have
significant adverse tax consequences to the limited partners of the
Partnership with no cash available for distribution to the limited
partners.
There is no assurance that the Partnership will be able to successfully
avoid a foreclosure of the New York Property, or refinance or
restructure the Texas Mortgage prior to the date that the Partnership
will have deferred the maximum amount of interest that may be deferred
under the terms of the Texas Mortgage.
In the event of a foreclosure of the New York Property or the Texas
Property, the limited partners of the Partnership would suffer
significant adverse tax consequences without cash available for
distribution to the limited partners. Any such foreclosure also would
have a significant impact on future operating revenues and expenses and
cash flow resulting from operations would be significantly reduced. If
both the New York Property and the Texas Property are foreclosed, the
Partnership would lose all sources of revenue and would be forced to
dissolve. See Treatment of Gain or Loss on Sale or Other Disposition of
Property and Tax Treatment of Mortgage Foreclosure at pp. 72-73 of the
Prospectus.
Real estate market
The Management General Partner believes that the real estate market has
not fully recovered from the adverse economic conditions of the 1980's,
which caused a substantial decline in real estate values. Market values
have been slow to recover and technological changes also may reduce the
office space needs of many users. These factors may continue to reduce
rental rates. As a result, the Partnership's potential for realizing
the full value of its investment in its properties is at increased
risk.
<PAGE>
Liquidity and Capital Resources (continued)
Impairment of assets
In March 1995, the Financial Accounting Standards Board issued
Statement #121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed of" ("SFAS #121"). The adoption of
the statement was required for fiscal years beginning after December
15, 1995. The Partnership implemented SFAS #121 beginning January 1,
1996. The implementation of SFAS #121 did not result in a write-down of
the Partnership's assets.
Under SFAS #121 the initial test to determine if an impairment exists
is to compute the recoverability of the asset based on anticipated cash
flows (net realizable value) compared to the net carrying value of the
asset. If anticipated cash flows on an undiscounted basis are
insufficient to recover the net carrying value of the asset, an
impairment loss should be recognized, and the asset written down to its
estimated fair value. The fair value of the asset is the amount by
which the asset could be bought or sold in a current transaction
between willing parties, that is, other than in a forced or liquidation
sale. The net realizable value of an asset will generally be greater
than its fair value because net realizable value does not discount cash
flows to present value and discounting is usually one of the
assumptions used in determining fair value. The write-downs for
impairment do not affect the tax basis of the assets and the
write-downs are not included in the determination of taxable income or
loss.
Because the determination of both net realizable value and fair value
is based upon projections of future economic events such as property
occupancy rates, rental rates, operating cost inflation and market
capitalization rates which are inherently subjective, the amounts
ultimately realized at disposition may differ materially from the net
carrying value as of September 30, 1996. The cash flows used to
determine fair value and net realizable value are based on good faith
estimates and assumptions developed by management. Inevitably,
unanticipated events and circumstances may occur and some assumptions
may not materialize; therefore actual results may vary from our
estimate and the variances may be material. The Partnership may provide
additional losses in subsequent years if the real estate market or
local economic conditions change and such write-downs could be
material.
The net lease tenant at the Texas property, a three story office
building, assumed the lease after a default by the Partnership's
original tenant. The annual net lease rental income was reduced to
$459,000 from $776,000. Due to the soft market conditions in the
Irving, Texas area and the estimated net realizable value of the
building, in 1991 management recorded a write-down for impairment of
$3,000,000. Management has determined that no additional write-down for
impairment was required for the quarters ended September 30, 1996 or
1995.
<PAGE>
Results of operations
The Partnership experienced a net loss of $3,563,558 for the three
months ended September 30, 1996 compared to a net loss of $2,813,229
for the same period in the prior year primarily due to a decrease in
revenues and expenses from the Florida Property that was foreclosed
upon in February 1996. The Partnership experienced net income of
$10,216,976 for the nine months ended September 30, 1996 compared to a
net loss of $8,397,641 for the same period in the prior year primarily
due to a gain on disposition from the foreclosed Florida Property
mentioned above and a decrease in revenues and expenses from the loss
of this property.
Revenues decreased to $5,030,510 for the three months ended September
30, 1996, from $6,398,446 for the same period in the prior year,
primarily as a result of the disposition of the Florida Property which
resulted in the loss of approximately $.9 million of rental income.
Revenues decreased to $15,722,594 for the nine months ended September
30, 1996, from $19,021,114 for the same period in the prior year,
primarily as a result of the disposition of the Florida property which
resulted in the loss of approximately $2.7 million in rental income.
This was partially offset by an increase in other income of
approximately $273,000, which represents cash proceeds received in
April, 1996 for Proof of Claims filed against Integrated in its Chapter
11 proceeding, which was resolved and approved by the Bankruptcy Court
in January 1996.
Expenses decreased to $8,594,068 for the three months ended September
30, 1996 from $9,211,675 for the same period in the prior year. The
decrease was primarily the result of reductions in mortgage loan
interest of approximately $589,000, ground rent expense of
approximately $333,000 and depreciation expense of approximately
$150,000, due to the disposition of the Florida Property. This decrease
was partially offset by an increase in operating expenses of
approximately $140,000, primarily due to increased professional fees
for the New York Property and an increase in depreciation expense of
approximately $266,000 on the New York Property due to fixed asset
additions in 1996. Expenses decreased to $24,934,816 for the nine
months ended September 30, 1996, from $27,418,755 for the same period
in the prior year primarily as a result of reductions in mortgage loan
interest of approximately $1,728,000, ground rent expense of
approximately $998,000 and depreciation expense of approximately
$457,000 due to the disposition of the Florida Property. This decrease
was slightly offset by an increase in depreciation expense of
approximately $375,000 on the New York Property due to fixed asset
additions and an increase in operating expenses of approximately
$294,000 primarily due to increased professional fees for the New York
Property.
Inflation is not expected to have a material impact on the
Partnership's operations and financial position during its period of
ownership of its properties. However, leases at the New York property
generally have provisions which provide for rent increases to reflect
increases in certain operating expenses and real estate taxes.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VISTA PROPERTIES
By: IR Vista Realty Corp.
Management General Partner
Dated: November 14, 1996 By: /s/ Frederick Simon
-------------------
Frederick Simon
Director and President
(Principal Executive Officer)
Dated: November 14, 1996 By: /s/ Jay L. Maymudes
-------------------
Jay L. Maymudes
Vice President, Secretary and
Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,485,515
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 108,748,900
<CURRENT-LIABILITIES> 1,051,501
<BONDS> 209,939,045
0
0
<COMMON> 0
<OTHER-SE> (104,229,539)
<TOTAL-LIABILITY-AND-EQUITY> 108,748,900
<SALES> 0
<TOTAL-REVENUES> 15,722,594
<CGS> 0
<TOTAL-COSTS> 6,328,739
<OTHER-EXPENSES> 5,266,288
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,339,789
<INCOME-PRETAX> (9,212,222)
<INCOME-TAX> 0
<INCOME-CONTINUING> 10,216,976
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