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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, 1998
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, Suite 270, Greenwich, CT 06830
(Address of principal executive offices)
(203) 862-7444
(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 - MARCH 31, 1998
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - March 31, 1998 and December 31, 1997
STATEMENTS OF OPERATIONS - For the three months ended March 31, 1998
and 1997
STATEMENT OF PARTNERS' DEFICIT - For the three months ended
March 31, 1998
STATEMENTS OF CASH FLOWS - For the three months ended
March 31, 1998 and 1997
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
March 31, December 31,
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Real estate, net ......................... $ 89,500,763 $ 90,292,630
Cash and cash equivalents ................ 9,965,374 8,569,410
Receivables and other assets ............. 11,242,894 11,175,897
------------- -------------
$ 110,709,031 $ 110,037,937
============= =============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities not subject to compromise
Accounts payable and accrued expenses .... $ 330,451 $ 484,985
------------- -------------
Liabilities subject to compromise
Deferred interest payable ................ 122,538,704 122,538,704
Mortgage loans payable ................... 99,160,000 99,160,000
Due to affiliates ........................ 2,134,124 2,088,670
Accounts payable and accrued expenses .... 187,396 230,335
------------- -------------
Total liabilities subject to compromise 224,020,224 224,017,709
------------- -------------
Total liabilities ............................. 224,350,675 224,502,694
------------- -------------
Commitments and contingencies
Partners' deficit
Limited partners' deficit (92,810
units issued and outstanding) ......... (111,444,787) (112,259,669)
General partners' deficit ................ (2,196,857) (2,205,088)
------------- -------------
Total partners' deficit ............... (113,641,644) (114,464,757)
------------- -------------
$ 110,709,031 $ 110,037,937
============= =============
</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
March 31,
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Revenues
Rental income ................................ $ 4,473,808 $ 4,892,230
Other income ................................. 350 --
Interest income .............................. -- 13,270
----------- -----------
4,474,158 4,905,500
----------- -----------
Costs and expenses
Operating expenses ........................... 1,811,157 2,246,031
Depreciation and amortization ................ 1,280,000 1,317,760
Mortgage loan interest expense ............... 196,047 4,281,552
Ground rent .................................. 175,000 175,000
Property management fees ..................... 131,686 134,774
Administrative expenses ...................... 31,333 230,286
----------- -----------
3,625,223 8,385,403
----------- -----------
Net income (loss) before reorganization items ..... 848,935 (3,479,903)
Reorganization items
Professional fees ............................ (54,089) --
Interest income .............................. 28,267 --
----------- -----------
(25,822) --
----------- -----------
Net income (loss) ................................. $ 823,113 $(3,479,903)
=========== ===========
Net income (loss) attributable to
Limited partners ............................. $ 814,882 $(3,445,104)
General partners ............................. 8,231 (34,799)
----------- -----------
$ 823,113 $(3,479,903)
=========== ===========
Net income (loss) per unit of limited partnership
interest (92,810 units outstanding) .......... $ 8.78 $ (37.12)
=========== ===========
</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, 1998 ............ $ (2,205,088) $(112,259,669) $(114,464,757)
Net income for the three months ended
March 31, 1998 .................. 8,231 814,882 823,113
------------- ------------- -------------
Balance, March 31, 1998 ............. $ (2,196,857) $(111,444,787) $(113,641,644)
============= ============= =============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
STATEMENTS OF CASH FLOWS
For the three months ended
March 31,
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities
Net income (loss) .................................... $ 823,113 $(3,479,903)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Deferred mortgage loan interest ............... -- 3,888,308
Depreciation and amortization ................. 1,280,000 1,317,760
Straight-line adjustment for stepped
lease rentals ............................. -- (141,115)
Changes in assets and liabilities
Receivables and other assets ...................... (156,997) 184,936
Due to affiliates ................................. 45,454 30,061
Accounts payable and accrued expenses ............. (197,473) (85,363)
Prepaid rents ..................................... -- (172,478)
----------- -----------
Net cash provided by operating activities ..... 1,794,097 1,542,206
----------- -----------
Cash flows from investing activities
Additions to real estate ............................. (398,133) (326,333)
----------- -----------
Net increase in cash and cash equivalents ................. 1,395,964 1,215,873
Cash and cash equivalents, beginning of period ............ 8,569,410 3,121,247
----------- -----------
Cash and cash equivalents, end of period .................. $ 9,965,374 $ 4,337,120
=========== ===========
Supplemental disclosure of cash flow information
Interest paid ........................................ $ 196,047 $ 393,244
=========== ===========
</TABLE>
Net cash provided by operating activities for the quarter ended March 31, 1998
includes $54,089 of professional fees paid and $28,267 of interest earned
resulting from the Partnership's Chapter 11 filing.
<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, 1997. The results of
operations for the three months ended March 31, 1998 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, 1998 and 1997.
<PAGE>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
NOTES TO FINANCIAL STATEMENTS
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). Under Chapter 11, certain claims
against the Partnership in existence prior to the filing are stayed
while the Partnership continues business operations as
Debtor-in-possession. These claims are reflected in the March 31, 1998
and December 31, 1997 balance sheets as "liabilities subject to
compromise." The Partnership's secured claims (mortgages and deferred
interest payable) are also stayed, although the holders of such claims
have the right to move the Bankruptcy Court for relief from the stay.
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 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. In February 1998, the Bankruptcy Court denied
confirmation of the Chapter 11 Plan. The Partnership has filed a notice
of appeal to the District Court for the Northern District of
California, and also has filed a motion for permission to file an
interlocutory appeal. The motion for appeal to file an interlocutory
appeal has been denied.
On May 11, 1998, the Partnership and certain of its affiliates entered
into an agreement with the New York Lender pursuant to which the
Partnership and its affiliates would cooperate with the New York Lender
in a plan of reorganization which, if confirmed, would result in a
transfer of the New York and Texas Properties to their respective
secured lenders and a probable dissolution of the Partnership. In that
connection, the New York Lender has purchased or agreed to purchase
various unsecured claims against the Partnership (including the claim
of IRVista Realty), and has committed that its plan of reorganization,
if confirmed, will result in the payment of valid unsecured and
priority claims in full. The secured creditor has committed no funds
for payment of limited partners, and no limited partner recovery is
anticipated. The Plan contemplated by the agreement described above is
subject to Bankruptcy Court approval.
<PAGE>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
NOTES TO FINANCIAL STATEMENTS
3 PETITION FOR RELIEF UNDER CHAPTER 11 (continued)
The financial statements have been prepared assuming the Partnership
will continue as a going concern. However, it is anticipated that the
confirmation of the secured creditor's plan of reorganization will
result in the eventual dissolution of the Partnership. In addition, the
Partnership does not have, and is not anticipated to have, sufficient
funds or liquidity to satisfy its mortgage loans which raises
substantial doubt about its ability to continue as a going concern in
any event.
4 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
IR Vista Realty Corp., the Management General Partner of the
Partnership, 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. 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 in
the future, be engaged in businesses that may be in competition with
the Partnership. Accordingly, conflicts of interest may arise between
the Partnership and such other corporations.
Presidio entered into a management agreement with NorthStar Presidio
Management Company, LLC ("NorthStar Presidio"). Under the terms of the
management agreement, NorthStar Presidio provides the day-to-day
management of Presidio and its direct and indirect subsidiaries and
affiliates. NorthStar Presidio is engaged to perform similar services
for other entities which may be in competition with the Partnership.
Presidio is a liquidating company. Although it has no immediate plans
to do so, it will ultimately seek to dispose of the interests it
acquired from Integrated through liquidation, however, there can be no
assurance of the timing of such transaction or the effect it may have
on the Partnership.
<PAGE>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
NOTES TO FINANCIAL STATEMENTS
4 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 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 unaffiliated local management companies which
were engaged to provide local property management for one of the
Partnership's properties. For the quarters ended March 31, 1998, and
1997, Vista Management was entitled to receive $131,686 and $134,774,
respectively, of which $86,231 and $104,713 was paid to the
unaffiliated local management companies. Fees are not charged for
properties net leased to tenants. The amount due to affiliates of
$2,134,124 and $2,088,670 at March 31, 1998 and December 31, 1997,
respectively, represents management fees payable to Vista Management
for its supervisory management services. The Management General Partner
suspended payment of these fees starting in 1991 in order to slow the
depletion of the Partnership's working capital reserve balance.
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 80% to the Management General Partner, 10% to
the Acquisitions General Partner and 10% to the Associate General
Partner.
<PAGE>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
NOTES TO FINANCIAL STATEMENTS
5 REAL ESTATE
Real estate is summarized as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------- -------------
<S> <C> <C>
Buildings and improvements $ 146,133,620 $ 145,735,487
Accumulated depreciation (56,632,857) (55,442,857)
------------- -------------
$ 89,500,763 $ 90,292,630
============= =============
</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 $852,500. 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, 1998 or 1997.
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).
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
<PAGE>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
NOTES TO FINANCIAL STATEMENTS
6 MORTGAGE LOANS PAYABLE (continued)
New York PM Note (continued)
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 above.
A foreclosure or transfer of the New York Property to the secured
lender, through a plan of reorganization or otherwise, would result in
adverse tax and economic consequences to limited partners. If the New
York Property is foreclosed upon or transferred as described above, the
Partnership estimates that as required by generally accepted accounting
principles, the Partnership will recognize a gain of approximately
$112,500,000 ($1,200 per unit of limited partnership interest). In
addition, the Partnership estimates that each limited partner would
recognize a taxable gain of approximately $1,400 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.
<PAGE>
VISTA PROPERTIES
(A limited partnership)
(Debtor-in-Possession)
NOTES TO FINANCIAL STATEMENTS
6 MORTGAGE LOANS PAYABLE (continued)
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.
The Bankruptcy Court refused to approve the Partnership's Plan of
Reorganization described above. Thereafter, the Partnership agreed to
cooperate with a secured creditor's plan of reorganization as described
in Note 3.
<PAGE>
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 debt service. The
Partnership uses working capital reserves to pay administrative
expenses. As of March 31, 1998 such reserves aggregated $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 payments aggregating approximately $579,000 in
connection with the foreclosure of the Partnership's Florida property
and the settlement of a claim against a former affiliate.
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 quarter ended March 31, 1998, $45,455 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 $26,750, cash and cash equivalents for the quarter ended
March 31, 1998 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% 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 expired 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. Substantially all of the
tenants at each property are meeting their obligations and the expiring
leases are subject to renegotiation.
On May 11, 1998, the Partnership and certain of its affiliates entered
into an agreement with the New York Lender pursuant to which the
Partnership and its affiliates would cooperate with the New York Lender
in a plan of reorganization which, if confirmed, would result in a
transfer of the New York and Texas Properties to their respective
secured lenders and a probable dissolution of the Partnership. In that
connection, the New York Lender has purchased or agreed to purchase
various unsecured claims against the Partnership (including the claim
of IRVista Realty), and has committed that its plan of reorganization,
if confirmed, will result in the payment of valid unsecured and
priority claims in full. The secured creditor has committed no funds
for payment of limited partners, and no limited partner recovery is
anticipated. The Plan contemplated by the agreement described above is
subject to Bankruptcy Court approval.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The financial statements have been prepared assuming the Partnership
will continue as a going concern. However, it is anticipated that the
confirmation of the secured creditor's plan of reorganization will
result in the eventual dissolution of the Partnership. In addition, the
Partnership does not have, and is not anticipated to have, sufficient
funds or liquidity to satisfy its mortgage loans which raises
substantial doubt about its ability to continue as a going concern in
any event.
There is no assurance that the Plan of Reorganization contemplated
above will be approved. If it is not approved, 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 or transfer as described above, the Partnership
would lose all sources of revenue and would be forced to dissolve. In
addition, a foreclosure or transfer as described above of the New York
Property would result in material and adverse tax and other
consequences to limited partners. If the New York Property is
foreclosed upon or transfer as described above, the Partnership
estimates that as required by generally accepted accounting principles,
it will recognize a gain of approximately $112,500,000 ($1,200 per Unit
of limited partnership interest). In addition, the Partnership
estimates that each limited partner would recognize a taxable gain of
approximately $1,400 per Unit, with no cash available for distribution
to the partners. Any such foreclosure or transfer as described above
also would materially and adversely affect future operating revenues
and expenses and cash flow from operations would be significantly
reduced.
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. As a result, the Partnership's
potential for realizing the full value of its investment in its
properties is at risk.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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 March
31, 1998 compared to a net loss for the same period in the prior year,
primarily due to lower mortgage loan interest and operating expenses,
partially offset by lower revenues.
Revenues decreased for the three months ended March 31, 1998, compared
to the same period in the prior year, primarily due to lower rental
income from the New York Property.
Costs and expenses decreased for the three months ended March 31, 1998
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.
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 - Notes 3 and
6 which are 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 14, 1998 By: /s/ Richard Sabella
-------------------
Richard Sabella
President
Dated: May 14, 1998 By: /s/ Lawrence Schachter
----------------------
Lawrence Schachter
Senior Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF THE MARCH 31, 1998 FORM 10-Q OF VISTA PROPERTIES AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 9,965,374
<SECURITIES> 0
<RECEIVABLES> 11,242,894
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 110,709,031
<CURRENT-LIABILITIES> 0
<BONDS> 221,698,704
0
0
<COMMON> 0
<OTHER-SE> (113,641,644)
<TOTAL-LIABILITY-AND-EQUITY> 110,709,031
<SALES> 0
<TOTAL-REVENUES> 4,474,158
<CGS> 0
<TOTAL-COSTS> 1,811,157
<OTHER-EXPENSES> 1,618,019
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 196,047
<INCOME-PRETAX> 823,113
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 823,113
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
