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, 1997
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 [ ]
<PAGE>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
FORM 10-Q - SEPTEMBER 30, 1997
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - September 30, 1997 and December 31, 1996 ...............
STATEMENTS OF OPERATIONS - For the three months ended September 30, 1997
and 1996 and for the nine months ended September 30, 1997 and 1996
STATEMENT OF PARTNERS' DEFICIT - For the nine months ended
September 30, 1997 ...............................................
STATEMENTS OF CASH FLOWS - For the nine months ended
September 30, 1997 and 1996 ......................................
NOTES TO FINANCIAL STATEMENTS ...........................................
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .....................................
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS .................................................
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)
(Debtor-in-Possession)
BALANCE SHEETS
September 30, December 31,
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Real estate, net .............................. $ 91,368,684 $ 93,890,271
Receivables and other assets .................. 11,480,677 10,151,747
Cash and cash equivalents ..................... 6,803,200 3,121,247
------------- -------------
$ 109,652,561 $ 107,163,265
============= =============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities subject to compromise
Deferred interest payable ..................... $ 122,538,704 $ 115,022,636
Mortgage loans payable ........................ 99,160,000 99,160,000
Due to affiliates ............................. 2,021,500 1,889,508
Accounts payable and accrued expenses ......... 390,909 544,797
Prepaid rents ................................. 209,927
------------- -------------
Total liabilities subject to compromise .... 224,111,113 216,826,868
------------- -------------
Commitments and contingencies
Partners' deficit
Limited partners' deficit (as restated) (92,810
units issued and outstanding) .............. (112,253,527) (107,506,527)
General partners' deficit (as restated) ....... (2,205,025) (2,157,076)
------------- -------------
Total partners' deficit .................... (114,458,552) (109,663,603)
------------- -------------
$ 109,652,561 $ 107,163,265
============= =============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
STATEMENTS OF OPERATIONS
For the three months ended For the nine months ended
September 30, September 30,
------------------------------ ------------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues
Rental income .................... $ 5,533,478 $ 5,012,289 $ 15,352,677 $ 15,393,222
Interest income .................. 19,238 17,771 60,558 55,696
Other income ..................... -- 450 200 273,676
------------ ------------ ------------ ------------
5,552,716 5,030,510 15,413,435 15,722,594
------------ ------------ ------------ ------------
Costs and expenses
Mortgage loan interest expense ... 393,244 4,435,711 8,695,799 13,339,789
Operating expenses ............... 1,826,635 2,278,232 5,949,526 6,328,739
Depreciation and amortization .... 1,299,000 1,532,532 3,955,975 4,172,645
Ground rent ...................... 175,000 175,000 525,000 525,000
Property management fees ......... 156,059 142,487 439,770 439,986
Administrative expenses .......... 6,719 30,106 110,472 128,657
------------ ------------ ------------ ------------
3,856,657 8,594,068 19,676,542 24,934,816
------------ ------------ ------------ ------------
1,696,059 (3,563,558) (4,263,107) (9,212,222)
Gain on foreclosure of property, net .. -- -- -- 19,429,198
------------ ------------ ------------ ------------
1,696,059 (3,563,558) (4,263,107) 10,216,976
Reorganization items
Professional fees ................ (45,000) -- (531,842) --
------------ ------------ ------------ ------------
Net income (loss) ..................... $ 1,651,059 $ (3,563,558) $ (4,794,949) $ 10,216,976
============ ============ ============ ===========
Net income (loss) attributable to
Limited partners ................. $ 1,634,548 $ (3,527,923) $ (4,747,000) $ 10,114,806
General partners.................. 16,511 (35,635) (47,949) 102,170
------------ ------------ ------------ ------------
$ 1,651,059 $ (3,563,558) $ (4,794,949) $ 10,216,976
============ ============ ============ ============
Net income (loss) per unit of limited
partnership interest (92,810 units
outstanding) ..................... $ 17.61 $ (38.01) $ (51.15) $ 108.99
============ ============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
STATEMENT OF PARTNERS' DEFICIT
General Limited Total
Partners' Partners' Partners'
Deficit Deficit Deficit
------------- ------------- -------------
<S> <C> <C> <C>
Balance, January 1, 1997 .................... $ (2,621,126) $(107,042,477) $(109,663,603)
Reallocation of partners' equity ............ 464,050 (464,050) --
------------- ------------- -------------
Balance, January 1, 1997 (as restated) ...... (2,157,076) (107,506,527) (109,663,603)
Net loss for the nine months ended
September 30, 1997 ...................... (47,949) (4,747,000) (4,794,949)
------------- ------------- -------------
Balance, September 30, 1997 ................. $ (2,205,025) $(112,253,527) $(114,458,552)
============= ============= =============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
STATEMENTS OF CASH FLOWS
For the nine months ended
September 30,
-------------------------------
1997 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities
Net (loss) income .............................. $ (4,794,949) $ 10,216,976
Adjustments to reconcile net (loss) income to
net cash provided by operating activities
Gain on foreclosure of property, net .... -- (19,429,198)
Deferred mortgage loan interest ......... 7,516,068 6,215,382
Depreciation and amortization ........... 3,955,975 4,172,645
Straight-line adjustment for stepped
lease rentals ........................ (423,345) (229,960)
Changes in assets and liabilities
Receivables and other assets ................ (1,206,966) 26,566
Due to affiliates ........................... 131,992 270,319
Accounts payable and accrued expenses ....... (153,888) 144,291
Prepaid rents ............................... (209,927) (290,283)
------------ ------------
Net cash provided by operating activities 4,814,960 1,096,738
------------ ------------
Cash flows from investing activities
Additions to real estate ....................... (1,133,007) (2,015,342)
------------ ------------
Net increase (decrease) in cash and cash equivalents 3,681,953 (918,604)
Cash and cash equivalents, beginning of period ...... 3,121,247 2,404,119
------------ ------------
Cash and cash equivalents, end of period ............ $ 6,803,200 $ 1,485,515
============ ============
Supplemental disclosure of cash flow information
Interest paid .................................. $ 1,179,731 $ 7,124,407
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
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 a 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 year ended December 31, 1996. The results of
operations for the nine months ended September 30, 1997 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 is recognized on a
straight-line basis 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.
Write-down for impairment
A write-down for impairment is established based upon a quarterly
review of each of the properties in the Partnership's portfolio. Real
estate property is carried at the lower of depreciated cost or
estimated fair value. In performing this review, management considers
the estimated fair value of the property based upon the undiscounted
future cash flows, as well as other factors such as the current
occupancy, the prospects for the property and the economic situation in
the region where the property is located. Because this determination of
estimated fair value is based upon future economic events, the amounts
ultimately realized upon a disposition may differ materially from the
carrying value.
A write-down is inherently subjective and is based upon management's
best estimate of current conditions and assumptions about expected
future conditions. The Partnership may provide for losses in the future
and such provisions could be material.
A write-down for impairment was not required for the nine months ended
September 30, 1997 and 1996.
<PAGE>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
NOTES TO FINANCIAL STATEMENTS
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently issued accounting pronouncements
The Financial Accounting Standards Board has recently issued several
new accounting pronouncements. Statement No. 128, "Earnings per Share"
establishes standards for computing and presenting earnings per share,
and is effective for financial statements for both interim and annual
periods ending after December 15, 1997. Statement No. 129, "Disclosure
of Information about Capital Structure" establishes standards for
disclosing information about an entity's capital structure, and is
effective for financial statements for periods ending after December
15, 1997. Statement No. 130, "Reporting Comprehensive Income"
establishes standards for reporting and display of comprehensive income
and its components, and is effective for fiscal years beginning after
December 15, 1997. Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information" establishes standards for the way
that public business enterprises report information about operating
segments in annual financial statements and requires that those
enterprises report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes
standards for related disclosures about products and services,
geographic areas, and major customers, and is effective for financial
statements for periods beginning after December 15, 1997.
Management of the Company does not believe that these new standards
will have a material effect on the Company's reported operating
results, per share amounts, financial position or cash flows.
3 PETITION FOR RELIEF UNDER CHAPTER 11
On June 19, 1997, the Partnership filed a voluntary petition for
reorganization under Chapter 11 of the Bankruptcy Code in the United
States Bankruptcy Court for the Northern District of California. The
filing of this petition acts as a stay of the foreclosure proceeding on
the New York Property (Note 6). The bankruptcy petition was filed to
enable the Partnership to reorganize its affairs under the protection
of Chapter 11 and to propose and confirm a plan of reorganization. The
Bankruptcy Court has entered orders approving the retention by the
Partnership of reorganization counsel and accountants. Pursuant to the
order of the Bankruptcy Court dated June 26, 1997, the President of the
management general partner of the Partnership has been designated as
the individual responsible for the duties and obligations of the
Partnership, as debtor and debtor in possession in the reorganization
proceeding. On October 10, 1997, the Partnership filed with the
Bankruptcy Court its Plan of Reorganization (the "Chapter 11 Plan") and
Disclosure Statement (the "Disclosure Statement"). At a hearing held on
<PAGE>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
NOTES TO FINANCIAL STATEMENTS
3 PETITION FOR RELIEF UNDER CHAPTER 11 (continued)
November 13, 1997, the Bankruptcy Court approved the Disclosure
Statement as providing adequate information to the holders of claims or
interests in the reorganization case to make an informed judgment
concerning the Chapter 11 Plan, the Disclosure Statement in the form
approved by the Bankruptcy Court, the Chapter 11 Plan, and other
documents will be transmitted to all creditors and Partners of the
Partnership. The hearing to consider the approval (confirmation) of the
Chapter 11 Plan has been scheduled to commence on January 28, 1998.
If the Chapter 11 Plan is confirmed, the terms thereof will, among
other things, effectuate the reorganization of the Partnership and the
restructuring of its debt through the infusion of new capital. Under
the Chapter 11 Plan, an entity organized or designated by Presidio
Capital Corp. (the "Investor") will commit $27.7 million to fund
certain secured and unsecured obligations under the Chapter 11 Plan. In
return, the Investor will receive all of the general and limited
partnership interests in Reorganized Vista. The limited partnership
interests will then be reallocated as follows (unles the Bankruptcy
Court determines that the allocation of these interests to current
Limited Partners results in non-confirmability of the Plan);
(a) One percent (1%) of the limited partnership interests of the
Investor will be allocated to present Limited Partners (except those
who affirmatively disclaim the interest), leaving 99% for the Investor;
and
(b) After allocation of one percent (1%) of the limited partnership
interests described above, twenty-five percent (25%) of the remaining
99% of the Investor's limited partnership interests will be made
available for purchase by present Limited Partners pursuant to the
terms of the Chapter 11 Plan, Disclosure Statement and a form of
Subscription Agreement to be transmitted to all Limited Partners as of
November 13, 1997.
The tax consequences and other details of the treatment of Limited
Partners are discussed in the Disclosure Statement. The actual issuance
of limited partnership interests is subject to a number of
contingencies described in a Subscription Agreement which will be
transmitted to all Partners.
It is possible that the Chapter 11 Plan as proposed may not be approved
by the Bankruptcy Court.
IR Vista Realty Corp., the Management General Partner and IR
Acquisitions Corp., the Acquisitions General Partner, are wholly-owned
subsidiaries of Presidio Capital Corp. ("Presidio"). The Associate
General Partner is Asta Associates Limited Partnership, whose general
partner is Z Square G Partners II, a general partnership comprised of
former officers and directors of Integrated. Affiliates of the general
partners are also engaged in businesses related to the acquisition and
<PAGE>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
NOTES TO FINANCIAL STATEMENTS
4 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
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.
Subject to the rights of the limited partners under the limited
partnership agreement, Presidio controls the Partnership through its
direct or indirect ownership of all of the shares of IR Vista Realty
Corp. and IR Acquisitions Corp. On November 2, 1997, the Administrative
Services Agreement with Wexford Management LLC ("Wexford"), the
administrator for Presidio, expired. Pursuant to that agreement,
Wexford had authority to designate directors of IR Vista Realty Corp.
and IR Acquisitions Corp. Effective November 3, 1997, Wexford and
Presidio entered into a new Administrative Services Agreement dated as
of November 3, 1997 (the "ASA") which expires on May 3, 1998. Under the
terms of the ASA, Wexford will provide consulting and administrative
services to Presidio and its affiliates, including IR Vista Realty
Corp, and IR Acquisitions Corp. for a term of six months. For the nine
months ended September 30, 1997, reimbursable expenses paid to Wexford
by the Partnership amounted to $14,963. Wexford is engaged to perform
similar services for other entities which may be in competition with
the Partnership.
Effective November 3, 1997, the officers and employees of Wexford that
had served as officers and/or directors of the General Partners
tendered their resignation. On the same date, the Board of Directors
appointed new individuals to serve as officers and/or directors of the
General Partners.
The Partnership has entered into a supervisory management agreement
with IR Vista Management Corp. ("Vista Management"), an affiliate of
the Management and Acquisitions 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, 1997 and
1996, $156,058 and $142,478, respectively, was earned for such
services, of which $104,185 and $49,669 was paid to the unaffiliated
local management company for the quarters ended September 30, 1997 and
1996, respectively. Fees are not charged for properties net leased to
tenants. The amount due to affiliates of $2,021,500 and $1,889,508 at
September 30, 1997 and December 31, 1996, respectively, represents
management fees payable to Vista Management for management services.
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.
<PAGE>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
NOTES TO FINANCIAL STATEMENTS
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 shall be apportioned 10% to the Management General Partner,
10% to the Acquisitions General Partner and 80% to the Associate
General Partner.
For the quarters ended September 30, 1997 and 1996, the Management
General Partner, Acquisitions General Partner and Associate General
Partner were allocated net income (losses) of $1,651, $1,651 and
$13,209 and $(3,563), $(3,563) and $(28,509), respectively.
5 REAL ESTATE
Real estate is summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------------- -------------
<S> <C> <C>
Buildings and improvements $ 145,605,124 $ 144,472,117
Accumulated depreciation (54,236,440) (50,581,846)
-------------- -------------
$ 91,368,684 $ 93,890,271
============= =============
</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
<PAGE>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
NOTES TO FINANCIAL STATEMENTS
5 REAL ESTATE (continued)
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 is required for
the quarters ended September 30, 1997 or 1996.
Florida property foreclosure
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").
The Loan became due and payable in accordance with its terms on October
26, 1995 and the Loan was not satisfied on such date. As of 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. The Lender commenced an action to foreclose its mortgage
on December 7, 1995 and 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 not to exceed $400,000 and to bear substantially 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. On May 21, 1996, the
Partnership received $306,572 with respect to this fee.
As a result of the above transaction, the Partnership recognized during
the nine months ended September 30, 1996, a gain from the foreclosure
of the Florida Property of $19,429,198 ($207.25 per unit of limited
partnership interest).
New York property
The holder of the mortgage loan on the New York property has asserted
that such mortgage loan became due and payable during 1996 and the
lender is currently attempting to foreclose on the New York property
(Note 6). In order to protect its interest in the property, on June 19,
1997 the Partnership filed a voluntary petition for reorganization
under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy
Court for the Northern District of California (Note 3).
<PAGE>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
NOTES TO FINANCIAL STATEMENTS
6 MORTGAGE LOANS PAYABLE
New York PM Note
The New York PM Note permits the Partnership to defer payment of some
or all of the interest accrued on the New York PM Note, provided, among
other things, that the Partnership does not defer interest in an amount
that 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 PM Note
asserting that the interest deferred exceeded the permitted deferral
and that the full debt service payment for interest accrued during
August 1996 (in the amount of $1,239,700) 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
requested 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 of
approximately $104,882,000, immediately due and payable, and thereafter
commenced an action to foreclose upon the New York Property. The total
outstanding indebtedness (including related deferred interest payable)
significantly exceeds the estimated fair market value of the New York
Property.
The Partnership was notified on November 12, 1996 that on November 7,
1996 the Supreme Court of the State of New York in the County of New
York appointed Darrell Paster, of Ferrer, Paster & Enriquez as a
receiver of all earnings, revenues, rents, issues, profits and income
with respect to the New York Property during the pendency of the
foreclosure action. On May 9, 1997 the lender moved for summary
judgement on the foreclosure issue. On June 19, 1997, the Partnership
filed a voluntary petition for reorganization under Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the Northern
District of California. The filing of this petition acts as a stay of
the foreclosure proceeding. This bankruptcy petition was filed to
enable the Partnership to reorganize its affairs under the protection
of Chapter 11 and to propose and confirm a plan of reorganization.
Consequently, the Partnership ceased accruing interest on the New York
PM Note as of June 19, 1997. At a hearing held before the Bankruptcy
Court on July 29, 1997, the Bankruptcy Court denied the Partnership's
request to permit the Partnership to collect and use the rents and
other income of the New York Property and approved the request of the
New York Lender that the Receiver remain in place and continue to
collect the rents and income and to manage, maintain and operate the
New York Property. See Note 3 for discussion of Chapter 11 Plan. If the
Chapter 11 Plan is confirmed, the terms thereof will effectuate the
reorganization of the Partnership, the restructuring of its debt to the
holder of the PM Note and the dismissal of the foreclosure action. It
is possible that the Chapter 11 Plan as proposed may not be approved by
the Bankruptcy Court.
<PAGE>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
NOTES TO FINANCIAL STATEMENTS
6 MORTGAGE LOANS PAYABLE (continued)
A foreclosure of the New York Property would result in adverse tax and
economic consequences to limited partners. If the New York Property is
foreclosed upon, the Partnership estimates that as required by
generally accepted accounting principles, the Partnership will
recognize a gain of approximately $103,000,000 ($1,099 per unit of
limited partnership interest). In addition, the Partnership estimates
that each limited partner would recognize a taxable gain of
approximately $1,412 per unit of limited partnership interest, with no
cash available for distribution to the 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.
Texas PM Note
The Texas PM Note permits the Partnership to defer payment of some or
all of the interest accrued on the Texas PM Note, provided, among other
things, that the Partnership does not defer interest in an amount that
at any time exceeds $8,500,000. The Partnership does not expect to
exceed that maximum deferral amount prior to the maturity date in
December 1998. 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. As of June 19,
1997, the Partnership ceased accruing interest on the Texas PM Note. In
June 1997, the Partnership and the Texas Lender entered into an
agreement, pursuant to which, among other things, the Partnership and
the Texas Lender agreed to the terms and conditions with respect to the
treatment of the claim of the Texas Lender against the Partnership in
the reorganization proceeding under a plan of reorganization and to
support the confirmation and vote in favor of a plan of reorganization
proposed by the Partnership containing the agreed upon terms and
conditions. Additionally, under the agreement, the Texas Lender agreed
to consent to the Partnership's use of the rent and other income of the
Texas Property to the extent necessary to make payment of the ground
rent and partial interest payments on a monthly basis during the
pendency of the reorganization case and the Partnership agreed to grant
the Texas Lender adequate protection for the Partnership's use of such
cash upon customary terms and conditions. The Bankruptcy Court approved
the foregoing arrangement pursuant to order dated October 6, 1997.
<PAGE>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
NOTES TO FINANCIAL STATEMENTS
6 MORTGAGE LOANS PAYABLE (continued)
If the Chapter 11 Plan is confirmed, the terms thereof will effectuate
the reorganizaiton of the Partnership and the approval of an agreement
with the Texas Lender as to the manner of the satisfaction of the
Partnership's indebtedness to the Texas Lender and the disposition of
the Texas Property. Under the Chapter 11 Plan, the indebtedness due to
the Texas Lender will be reduced from the currently due amount of
approximately $16,541,000 to the principal sum of $9,500,000. This
amount will be payable without interest. If the Chapter 11 Plan is
approved, the principal amount due will be paid down by $1,500,000
through funds contributed by the Investor. Additionally, under the
Chapter 11 Plan the Partnership is afforded an opportunity to market
the Texas Property and there can be no foreclosure on the Texas
Property until January 31, 1999. In the event a sale of the Texas
Property is consummated on or prior to January 31, 1999, the Texas
Lender has agreed to accept a gross purchase price of $8 million in
full and complete satisfaction, with any excess amounts, if any, to be
retained by Reorganized Vista. In the event that a Texas Property Sale
is not consummated on or prior to January 31, 1999, the Texas Property
shall be transferred to the Texas Lender in lieu of a foreclosure.
It is possible that the Chapter 11 Plan as proposed and the agreements
reached with the Texas Lender may not be approved by the Bankruptcy
Court.
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 maturity. 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.
7 PARTNERS' DEFICIT
The General Partners hold a 1% equity interest in the Partnership.
However, at the inception of the Partnership, the General Partners'
equity account was credited with only the actual capital contributed in
cash, $39,700. The Partnership's management determined that this
accounting does not appropriately reflect the Limited Partners' and the
General Partners' relative participations in the Partnership's net
assets, since it does not reflect the General Partners' 1% equity
interest in the Partnership. Thus, the Partnership has restated its
financial statements to reallocate $464,050 (1% of the gross proceeds
raised at the Partnership's formation) of the partners' equity to the
General Partners' equity account. This reallocation was made as of the
inception of the Partnership and all periods presented in the financial
statements have been restated to reflect the reallocation. The
reallocation has no impact on the Partnership's financial position,
results of operations, cash flows, distributions to partners, or the
partners' tax basis capital accounts.
<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 held in reserve to be
applied to debt service. The Partnership uses working capital reserves
to pay administrative expenses. As of September 30, 1997, such reserves
aggregated approximately $73,600. Reserves, which were initially
provided from the net proceeds of the Partnership's initial public
offering, increased during 1996 as a result of the receipt of (i) a
cooperation payment (approximately $307,000) in connection with the
foreclosure of the Florida Loan and (ii) $272,000 from the settlement
of a claim against Integrated in Integrated's Chapter 11 proceedings.
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. For
the nine months ended September 30, 1997, $131,991 of fees were
deferred due to the suspension of property management fee payments as
described above.
With the exception of the Partnership's working capital reserves of
approximately $73,600, cash and cash equivalents for the nine months
ended September 30, 1997 are being held by the managing agent appointed
by the Receiver prior to being applied to the operations of, and the
Partnership's mortgage obligation on, the New York Property.
The Partnership presently owns the Texas Property, which is net leased
to Showbiz Pizza Time, Inc., and the New York Property, which is leased
to approximately 30 tenants. Occupancy rates at the Partnership's
properties are 100% and 99.1% for the Texas Property and New York
Property, respectively. The net lease of the Texas Property expires in
1998. At the New York Property, one tenant occupies 17% of the total
square footage and this lease expires in 1997. The Receiver and the
Partnership have agreed in principle on the terms of the renewal of
such tenant's lease through the year 2007. As of September 30, 1997,
substantially all of the tenants at each property are meeting their
obligations and the expiring leases are subject to renegotiation.
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. The Partnership does not expect to
exceed that maximum deferral amount prior to the maturity date in
December 1998. 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). In June
1997, the Partnership and the Texas Lender entered into an agreement,
pursuant to which, among other things, the Partnership and the Texas
Lender agreed to the terms and conditions with respect to the treatment
<PAGE>
Liquidity and capital resources (continued)
of the claim of the Texas Lender against the Partnership in the
reorganization proceeding under a plan of reorganization and to support
the confirmation and vote in favor of a plan of reorganization proposed
by the Partnership containing the agreed upon terms and conditions. See
Notes 3 and 6 of Notes to Financial Statements for discussion of
Chapter 11 Plan. 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. As of June 19, 1997, the Partnership ceased accruing interest
on the Texas PM Note.
The mortgage loan on the New York Property 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 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
$1,239,700) 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 of approximately $104,882,000, immediately due and
payable, and thereafter commenced an action to foreclose upon the New
York Property. At such time, the total outstanding indebtedness
significantly exceeded the estimated fair market value of the New York
Property. See Notes 3 and 6 of Notes to Financial Statements for
discussion of Chapter 11 Plan.
The Partnership was notified on or about November 12, 1996 that on
November 7, 1996 the Supreme Court of the State of New York in the
County of New York appointed Darrell Paster, of Ferrer, Paster &
Enriquez as a receiver of all earnings, revenues, rents, issues,
profits and income with respect to the New York Property during the
pendency of the foreclosure action. On May 9, 1997 the lender moved for
summary judgement on the foreclosure issue. On June 19, 1997, the
Partnership filed a voluntary petition for reorganization under Chapter
11 of the Bankruptcy Code in the United States Bankruptcy Court for the
Northern District of California. The filing of this petition acts as a
stay of the foreclosure proceeding. This bankruptcy petition was filed
to enable the Partnership to reorganize its affairs under the
protection of Chapter 11 and to propose and confirm a plan of
reorganization. Consequently, the Partnership ceased accruing interest
on the New York PM Note as of June 19, 1997. At a hearing held before
the Bankruptcy Court on July 29, 1997, the Bankruptcy Court denied the
Partnership's request to permit the Partnership to collect and use the
rents and other income of the New York Property and approved the
request of the New York Lender that the Receiver remain in place and
continue to collect the rents and income and to manage, maintain and
operate the New York Property.
<PAGE>
Liquidity and capital resources (continued)
A foreclosure of the New York Property would result in adverse tax
consequences to limited partners. If the New York Property is
foreclosed upon, the Partnership estimates that as required by
generally accepted accounting principles, it will recognize a gain of
approximately $103,000,000 ($1,099 per Unit of limited partnership
interest). In addition, the Partnership estimates that each limited
partner would recognize a taxable gain of approximately $1,412 per
Unit, with no cash available for distribution to the partners. Any such
foreclosure also would have a significant impact on future operating
revenues and expenses and cash flow from operations would be
significantly reduced.
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. 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.
On January 12, 1996, the Partnership entered into the Settlement
Agreement with AEW with respect to a pending foreclosure of the Florida
Loan made by AEW to the Partnership in the original principal amount of
$21,360,000. The Florida 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 Loan became due and payable in accordance with its term on
October 26, 1995 and the Florida Loan was not satisfied on such date.
As of November 30, 1995, the outstanding indebtedness of the Florida
Loan was comprised of the principal amount of $21,360,000 plus accrued
and unpaid interest 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. AEW commenced an action to foreclose its
mortgage on December 7, 1995 and 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 an amount not to exceed $400,000 and to bear
substantially all costs and expenses relating to the consummation of
the foreclosure action provided the Partnership cooperated with AEW in
connection with the foreclosure action. After related expenses, the
Partnership received $306,572 from AEW on May 22, 1996.
As a result of the above transaction, the Partnership recognized during
the nine months ended September 30, 1996, a gain from the disposition
of the Florida Property of $19,429,198 ($207.25 per unit of limited
partnership interest).
<PAGE>
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. As a result, the Partnership's
potential for realizing the full value of its investment in its
properties is at risk.
Write-down for impairment
A write-down for impairment is established based upon a quarterly
review of each of the properties in the Partnership's portfolio. Real
estate property is carried at the lower of depreciated cost or
estimated fair value. In performing this review, management considers
the estimated fair value of the property based upon the undiscounted
future cash flows, as well as other factors such as the current
occupancy, the prospects for the property and the economic situation in
the region where the property is located. Because this determination of
estimated fair value is based upon future economic events, the amounts
ultimately realized upon a disposition may differ materially from the
carrying value.
The write-down is inherently subjective and is based upon management's
best estimate of current conditions and assumptions about expected
future conditions. The Partnership may provide for losses in the future
and such provisions could be material.
Results of operations
The Partnership experienced net income for the three months ended
September 30, 1997 compared to a net loss for the same period in the
prior year, primarily due to higher rental revenue and lower mortgage
loan interest and operating expenses.
The Partnership experienced a net loss for the nine months ended
September 30, 1997 compared to net income for the same period in the
prior year, primarily due to a gain on foreclosure of the Florida
Property (foreclosed upon in February 1996), recorded in the earlier
period.
Revenues increased for the three months ended September 30, 1997,
compared to the same period in the prior year, primarily due to higher
rental income from the New York Property. Revenues decreased for the
nine months ended September 30, 1997 compared to the same period in the
prior year primarily due to cash proceeds of $273,000 received in April
1996 relating to proofs of claims filed in the Integrated bankruptcy.
Costs and expenses decreased for the three and nine months ended
September 30, 1997 compared to the same period in the prior year,
primarily due to the Partnership ceasing to accrue interest on the
Texas and New York Mortgages.
<PAGE>
Inflation
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 1. LEGAL PROCEEDINGS
(a) See Management's Discussion and Analysis of Financial Condition and
Results of Operations and Notes to Financial Statements - Note 3 and
6 which is herein incorporated by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None.
(b) Reports on Form 8-K:
The Partnership filed a Report on Form 8-K dated August 7, 1997.
<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 19, 1997 By: /s/ Richard Sabella
-------------------
Richard Sabella
President
(Principal Executive Officer)
Dated: November 19, 1997 By: /s/ Kevin Reardon
-----------------
Kevin Reardon
Vice President, Secretary and
Treasurer
(Principal Financial and
Accounting Officer)
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