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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 March 31, 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)
FORM 10-Q - MARCH 31, 1997
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - March 31, 1997 and December 31, 1996 ...................
STATEMENTS OF OPERATIONS - For the three months
ended March 31, 1997 and 1996 ....................................
STATEMENT OF PARTNERS' DEFICIT - For the three months
ended March 31, 1997 .............................................
STATEMENTS OF CASH FLOWS - For the three months
ended March 31, 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)
BALANCE SHEETS
March 31, December 31,
------------- -------------
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Real estate, net .............................. $ 92,992,010 $ 93,890,271
Receivables and other assets .................. 10,014,760 10,151,747
Cash and cash equivalents ..................... 4,337,120 3,121,247
------------- -------------
$ 107,343,890 $ 107,163,265
============= =============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Deferred interest payable ..................... $ 118,910,944 $ 115,022,636
Mortgage loans payable ........................ 99,160,000 99,160,000
Due to affiliates ............................. 1,919,569 1,889,508
Accounts payable and accrued expenses ......... 459,434 544,797
Prepaid rents ................................. 37,449 209,927
------------- -------------
Total liabilities .......................... 220,487,396 216,826,868
------------- -------------
Commitments and contingencies
Partners' deficit
Limited partners' deficit (as restated) (92,810
units issued and outstanding) .............. (110,951,631) (107,506,527)
General partners' deficit (as restated) ....... (2,191,875) (2,157,076)
------------- -------------
Total partners' deficit .................... (113,143,506) (109,663,603)
------------- -------------
$ 107,343,890 $ 107,163,265
============= =============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VISTA PROPERTIES
(A limited partnership)
STATEMENTS OF OPERATIONS
For the three months ended
March 31,
-----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Revenues
Rental income .............................. $ 4,892,230 $ 5,075,514
Interest income ............................ 13,270 22,135
Other income ............................... -- 50
------------ ------------
4,905,500 5,097,699
Costs and expenses
Mortgage loan interest expense ............. 4,281,552 5,050,488
Operating expense .......................... 2,246,031 1,985,988
Depreciation and amortization .............. 1,317,760 1,394,740
Ground rent ................................ 175,000 175,000
Property management fees ................... 134,774 136,221
Administrative expenses .................... 230,286 39,658
------------ ------------
8,385,403 8,782,095
(3,479,903) (3,684,396)
Gain on foreclosure of property, net ............ -- 19,397,625
------------ ------------
Net (loss) income ............................... $ (3,479,903) $ 15,713,229
============ ============
Net (loss) income attributable to
Limited partners ........................... $ (3,445,104) $ 15,556,097
General partners ........................... (34,799) 157,132
------------ ------------
$ (3,479,903) $ 15,713,229
============ ============
Net (loss) income per unit of limited partnership
interest (92,810 units outstanding) ........ $ (37.12) $ 167.61
============= =============
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, 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 three months ended
March 31, 1997 ................... (34,799) (3,445,104) (3,479,903)
------------- ------------- -------------
Balance, March 31, 1997 .............. $ (2,191,875) $(110,951,631) $(113,143,506)
============= ============= =============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VISTA PROPERTIES
(A limited partnership)
STATEMENTS OF CASH FLOWS
For the three months ended
March 31,
-----------------------------
1997 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities
Net (loss) income ........................................ $ (3,479,903) $ 15,713,229
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities
Gain on foreclosure of property, net .............. -- (19,397,625)
Deferred mortgage loan interest ................... 3,888,308 2,278,716
Depreciation and amortization ..................... 1,317,760 1,394,740
Straight-line adjustment for stepped
lease rentals .................................. (141,115) (140,390)
Changes in assets and liabilities
Receivables and other assets .......................... 184,936 (147,473)
Due to affiliates ..................................... 30,061 76,221
Accounts payable and accrued expenses ................. (85,363) (84,719)
Prepaid rents ......................................... (172,478) 44,679
------------ ------------
Net cash provided by (used in) operating activities 1,542,206 (262,622)
------------ ------------
Cash flows from investing activities
Additions to real estate ................................. (326,333) (364,848)
------------ ------------
Net increase (decrease) in cash and cash equivalents .......... 1,215,873 (627,470)
Cash and cash equivalents, beginning of period ................ 3,121,247 2,404,119
------------ ------------
Cash and cash equivalents, end of period ...................... $ 4,337,120 $ 1,776,649
============ ============
Supplemental disclosure of cash flow information
Interest paid ............................................ $ 393,244 $ 2,771,772
============ ============
See notes to financial statements.
</TABLE>
<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 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 three months ended March 31, 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 three months ended
March 31, 1997 and 1996.
<PAGE>
VISTA PROPERTIES
(A limited partnership)
NOTES TO FINANCIAL STATEMENTS
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently issued accounting pronouncement
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" in February, 1997.
This pronouncement establishes standards for computing and presenting
earnings per share, and is effective for the Partnership's 1997
year-end financial statements. The Partnership's management has
determined that this standard will have no impact on the Partnership's
computation or presentation of net income per unit of limited
partnership interest.
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
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
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. assigned its
agreement to provide management and administrative services to Presidio
and its subsidiaries to Wexford Management LLC ("Wexford"). For the
three months ended March 31, 1997, reimbursable expenses to Wexford by
the Partnership amounted to $2,658. Wexford is engaged to perform
similar services for other entities which may be in competition with
the Partnership.
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 March 31, 1997 and
1996, $134,774 and $136,221, respectively, was earned for such
services, of which $104,713 and $60,000 was paid to the unaffiliated
local management company for the quarters ended March 31, 1997 and
1996, respectively. Fees are not charged for properties net leased to
tenants. The amount due to affiliates of $1,919,569 and $1,889,508 at
March 31, 1997 and 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)
NOTES TO FINANCIAL STATEMENTS
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES(continued)
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 quarter ended March 31, 1997, the Management General Partner,
Acquisitions General Partner and Associate General Partner were
allocated net losses of $3,480, $3,480 and $27,839, respectively.
4 REAL ESTATE
Real estate is summarized as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
<S> <C> <C>
Buildings and improvements ......... $ 144,798,450 $ 144,472,117
Accumulated depreciation ........... (51,806,440) (50,581,846)
------------- -------------
$ 92,992,010 $ 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 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 March 31, 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").
<PAGE>
VISTA PROPERTIES
(A limited partnership)
NOTES TO FINANCIAL STATEMENTS
4 REAL ESTATE (continued)
Florida property foreclosure (continued)
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 first quarter of 1996, a gain from the foreclosure of the Florida
Property of $19,397,625 ($206.91 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 5).
5 MORTGAGE LOANS PAYABLE
New York PM Note
The New York PM Note permits the Partnership to defer payment of some
or all of the interests 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,
<PAGE>
VISTA PROPERTIES
(A limited partnership)
NOTES TO FINANCIAL STATEMENTS
5 MORTGAGE LOANS PAYABLE (continued)
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. The Partnership's time to respond
is June 9, 1997.
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. The Partnership is reviewing the options available to it with
respect to the potential foreclosure of the New York Property. Such
options include vigorous defense of the foreclosure action (including
Lender's motion for summary judgement) and a settlement thereof with
the least adverse affect to the Partnership.
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.
<PAGE>
VISTA PROPERTIES
(A limited partnership)
NOTES TO FINANCIAL STATEMENTS
5 MORTGAGE LOANS PAYABLE (continued)
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.
6 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
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.
All cash flow from properties is currently applied to debt service. The
Partnership uses working capital reserves to pay administrative
expenses. As of March 31, 1997, such reserves aggregated approximately
$404,000. 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 three months ended March 31, 1997, $30,061 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 $404,000, cash and cash equivalents for the three months
ended March 31, 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.
On November 15, 1984, the Partnership terminated its initial public
offering upon the final admission of limited partners. The net proceeds
to the Partnership for the 92,800 Units sold pursuant to the public
offering amounted to $41,040,800 (the gross proceeds of $46,400,000
less underwriting commissions and organization and offering expenses
aggregating $5,359,200).
<PAGE>
Liquidity and Capital Resources (continued)
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 99.8% 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 March 31, 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). 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.
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.
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. The Partnership's time to
respond is June 9, 1997.
<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. The Partnership is reviewing options available
to it with respect to the potential foreclosure of the New York
Property. Such options include vigorous defense of the foreclosure
action (including lender's motion for summary judgement) and a
settlement thereof with the least adverse affect to the Partnership.
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. 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 first quarter of 1996, a gain from the disposition of the Florida
Property of $19,397,625 ($206.91 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. 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.
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 had a net loss of $3,479,906 for the three months ended
March 31, 1997 compared to net income of $15,713,229 for the three
months ended March 31, 1996 primarily due to a gain on disposition of
the Florida Property which was foreclosed upon in February 1996.
Revenues decreased to $4,905,500 for the three months ended March 31,
1997, from $5,097,699 for the same period in the prior year, primarily
as a result of the disposition of the Florida Property. Expenses
decreased to $8,385,403 for the three months ended March 31, 1997 from
$8,782,095 for the same period in the prior year, primarily as a result
of mortgage loan interest expense savings of approximately $700,000 due
to the disposition of the Florida Property offset by increases in
operating expenses at the New York Property and an increase in
administrative expense for legal fees and receiver fees resulting from
the foreclosure action at the New York Property.
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 5 which
is herein incorporated by reference.
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: May 15, 1997 By: /s/ Frederick Simon
-------------------
Frederick Simon
Director and President
(Principal Executive Officer)
Dated: May 15, 1997 By: /s/ Jay L. Maymudes
-------------------
Jay L. Maymudes
Vice President, Secretary and
Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,337,120
<SECURITIES> 0
<RECEIVABLES> 10,014,760
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 107,343,890
<CURRENT-LIABILITIES> 459,434
<BONDS> 218,070,944
0
0
<COMMON> 0
<OTHER-SE> (113,143,506)
<TOTAL-LIABILITY-AND-EQUITY> 107,343,890
<SALES> 0
<TOTAL-REVENUES> 4,905,500
<CGS> 0
<TOTAL-COSTS> 2,246,031
<OTHER-EXPENSES> 1,857,820
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,281,552
<INCOME-PRETAX> (3,479,903)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,479,903)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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