GOLF TRUST OF AMERICA INC, 10-K405, 1999-03-31

GOLF TRUST OF AMERICA INC
10-K405, 1999-03-31
LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES)

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<PAGE>

As Filed with the Securities and Exchange Commission on March 26, 1999

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K

(Mark One)

/x/ Annual report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year
ended DECEMBER 31, 1998.

/ / Transition report pursuant to section 13 or 15(d) of
the Securities Exchange Act of 1934 for the transition
period from ________ to ________.

Commission File Number 000-22091

GOLF TRUST OF AMERICA, INC.
(Exact name of registrant as specified in its charter)

Maryland 33-0724736
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification Number)

14 North Adger's Wharf, Charleston, South Carolina 29401; (843) 723-4653
(Address of principal executive offices) (Zip Code) (Telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $0.01 par value American Stock Exchange
(Title of each class) (Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark 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 / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/

On March 26, 1999 there were 7,682,956 common shares outstanding of the
registrant's only class of common stock. Based on the March 26, 1999 closing
price of $21.75 per share, the aggregate market value of the voting stock held
by nonaffiliates of the registrant was $167,104,293.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the Registrant's definitive Proxy Statement, to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A not later
than 120 days after the close of the Registrant's 1998 fiscal year, are
incorporated by reference in Part III of this Form 10-K; and certain exhibits to
the Company's prior reports on Forms 10-Q and 8-K, Registration Statements of
Employee Stock Purchase Plan and Employee Stock Option Plans on Forms S-8 (NOS.
333-46659 AND 333-46657), and Registration Statements on Form S-11 (NOS.
333-15965 AND 333-36847) are incorporated by reference in Part IV hereof.

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TABLE OF CONTENTS

<TABLE>
<S> <C>
PART I...........................................................................................................1
ITEM 1. BUSINESS..............................................................................................1
(a) GENERAL DESCRIPTION OF THE BUSINESS..................................................................1
COMPANY OVERVIEW........................................................................................1
SUBSIDIARIES AND THE OPERATING PARTNERSHIP..............................................................2
RECENT DEVELOPMENTS.....................................................................................3
ACQUISITIONS.....................................................................................3
LETTERS OF INTENT................................................................................4
CREDIT FACILITY..................................................................................4
LOANS TO OFFICERS................................................................................4
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS........................................................5
(c) NARRATIVE DESCRIPTION OF BUSINESS....................................................................6
BUSINESS OBJECTIVE AND STRATEGY.........................................................................6
INVESTMENT CRITERIA..............................................................................7
ACQUISITION STRATEGY.............................................................................8
INTERNAL GROWTH.................................................................................11
EMPLOYEES..............................................................................................14
ENVIRONMENTAL MATTERS..................................................................................14
TAX STATUS.............................................................................................15
GOVERNMENT REGULATION..................................................................................15
SOFTWARE DEFICIENCIES COULD ADVERSELY AFFECT THE COMPANY...............................................15
COMPETITION............................................................................................16
THE GOLF INDUSTRY......................................................................................16
COMPETITIVE CONDITIONS..........................................................................16
DEMOGRAPHICS....................................................................................18
SEASONALITY.....................................................................................19
(d) FOREIGN OPERATIONS.....................................................................................20
ITEM 2. PROPERTIES...........................................................................................21
RESORT COURSES.......................................................................................22
HIGH-END DAILY FEE COURSES...........................................................................23
PRIVATE CLUB COURSES.................................................................................24
THE PARTICIPATING LEASES.............................................................................25
ITEM 3. LEGAL PROCEEDINGS....................................................................................32
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................................................32

PART II.........................................................................................................33
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS................................33
MARKET INFORMATION..............................................................................33
SHAREHOLDER INFORMATION.........................................................................33
DIVIDENDS.......................................................................................34
RECENT SALES OF UNREGISTERED SECURITIES.........................................................35
ITEM 6. SELECTED FINANCIAL DATA..............................................................................36

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................38
Results of operations of the Company for the year ended December 31, 1998 and the period from
February 12 (inception) to December, 1997............................................................40
Liquidity and Capital Resources of the Company.......................................................41
Funds From Operations and Cash Available for Distribution............................................44
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........................................46
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..........................................................46
ITEM 9. CHANGES IN THE COMPANY'S CERTIFIED PUBLIC ACCOUNTANT.................................................46

</TABLE>

<PAGE>

<TABLE>
<S> <C>
PART III........................................................................................................47
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...................................................47
ITEM 11. EXECUTIVE COMPENSATION...............................................................................47
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......................................47
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................................................47

PART IV.........................................................................................................48
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.....................................48
a) FINANCIAL STATEMENTS.................................................................................48
FINANCIAL STATEMENTS............................................................................48
FINANCIAL STATEMENT SCHEDULES...................................................................48
EXHIBITS........................................................................................48
b) REPORTS ON FORM 8-K..................................................................................48
SIGNATURES......................................................................................................49
</TABLE>

<PAGE>

PART I

ITEM 1. BUSINESS

(a) GENERAL DESCRIPTION OF THE BUSINESS

COMPANY OVERVIEW

Golf Trust of America, Inc. ("GTA") is a self-administered real estate
investment trust ("REIT") formed to capitalize upon consolidation opportunities
in the ownership of upscale golf courses throughout the United States. GTA was
incorporated in Maryland on November 8, 1996. GTA holds its golf course
interests through Golf Trust of America, L.P., a Delaware limited partnership
and in one instance, through a wholly-owned affiliate of Golf Trust of America,
L.P. (collectively, the "Operating Partnership"), controlled by GTA. (In this
Annual Report, the term "Company" generally includes GTA, the Operating
Partnership, and their subsidiaries.) As of March 26, 1999, the Company holds
participating interests in 45 golf courses (the "Golf Courses"), 41 of which are
owned and four of which serve as collateral for a 30-year participating mortgage
loan made by the Company to the owner of the Westin Innisbrook Resort
("Participating Mortgage"). The Golf Courses are located in Florida (14), South
Carolina (7), Illinois (3.5), Ohio (3), Georgia (2), Virginia (2), California
(2), Michigan (2), Nebraska (1.5), Texas (1.5), Alabama, Kansas, Kentucky, North
Carolina, Missouri, and New Mexico.

The Golf Courses which the Company owns are leased to multiple
independent third party lessees (the "Lessees") pursuant to leases
("Participating Leases") which provide for payments ("Lease Payments") of fixed
base rent ("Base Rent") and participating rent ("Participating Rent") based on
growth in revenue at the Golf Courses. The interest payment under the
Participating Mortgage is structured similarly to the Participating Leases to
provide the Company with base interest payments and additional interest payments
based on growth in revenue at the Westin Innisbrook Resort. Neither the Company
nor its executive officers own any interest in, or participate in the management
of, the Lessees or the owner of the Westin Innisbrook Resort, Golf Host Resorts,
Inc. (the "Westin Innisbrook Resort Owner").

The Company's executive offices are located at 14 North Adger's Wharf,
Charleston, South Carolina 29401 and its telephone number is (843) 723-GOLF
(4653).

1
<PAGE>

SUBSIDIARIES AND THE OPERATING PARTNERSHIP

GTA has two wholly owned subsidiaries, GTA GP, Inc. ("GTA GP") and GTA
LP, Inc. ("GTA LP"), each of which is a Maryland corporation (collectively, the
"Subsidiaries"). The Subsidiaries exist solely to hold the Company's general and
limited partnership interests in the Operating Partnership. The board of
directors of each Subsidiary is comprised of the executive officers of GTA. The
Operating Partnership was formed in Delaware in November 1996.

The Operating Partnership owns the Golf Courses that are subject to the
Participating Leases and holds the Participating Mortgage. In addition, the
Operating Partnership owns approximately 95% of the economic interest in a
taxable subsidiary formed to hold title to a 14-acre development site adjacent
to the Sandpiper Golf Course, with the balance owned by Mr. Blair, President and
Mr. Young, a director of the Company. GTA currently holds a 58.9% interest in
the Operating Partnership, through its Subsidiaries. GTA GP is the sole general
partner of the Operating Partnership and GTA LP is a limited partner of the
Operating Partnership. The other limited partners include those Prior Owners who
received OP Units in exchange for the contribution of their Golf Courses
including Larry D. Young and the Westin Innisbrook Resort Owner. The limited
partners do not have day-to-day control over the Operating Partnership. However,
the limited partners are entitled to vote on certain matters, including the sale
of all or substantially all the Company's assets or the merger or consolidation
of the Operating Partnership, which decisions require the approval of the
holders of at least 66.7% of the interests in the Operating Partnership
(including GTA LP). Each of the limited partners (other than GTA LP), generally,
may exercise Redemption Rights (as herein defined) for up to 50% of its OP Units
beginning one year after transfer of their property to the Operating Partnership
and the remaining 50% beginning two years after completion of such transfer for
shares of Common Stock on a one-for-one basis or for cash at the election of the
Company.

The current relationship among GTA, its subsidiaries, the Operating
Partnership (including its wholly-owned affiliate), the limited partners
(including many Prior Owners and the Westin Innisbrook Resort Owner) and the
Operators is described in the following chart:

---------------------------
Golf Trust of America, Inc
100% Ownership
---------------------------

- ---------------------------------------- ----------------------------------
GTA GP, Inc. GTA LP, Inc.
General Partnership with a 0.2% Interest 58.7% Limited Partnership Interest
- ---------------------------------------- ----------------------------------

-------------------------------
- ----------------------- Golf Trust of America, L.P. and
Prior Owners, Operators subsidiaries
& Management 45 Golf Courses
- ----------------------- (the "Operating Partnership")
-------------------------------

--------
Lessees
--------

2
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RECENT DEVELOPMENTS

Since March 31, 1998, the filing date of the company's annual report on
Form 10-K for the year ended December 31, 1997, the following developments have
occurred:

ACQUISITIONS

The following is a summary of the acquisitions in 1998:

<TABLE>
<CAPTION>
INITIAL
ACQUISITION INVESTMENT
DATE COURSE NAME LOCATION (IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1/2/98 Bonaventure- Green Monster and The Resort Course Fort Lauderdale, FL $ 24,500
1/16/98 Mystic Creek Golf Club & Banquet Center Dearborn, MI 10,000
2/1/98 Emerald Dunes Golf Course West Palm Beach, FL 22,400
3/6/98 Sandpiper Golf Course (i) Santa Barbara, CA 36,500
3/9/98 Persimmon Ridge Country Club Louisville, KY 7,500
5/22/98 Eagle Ridge Inn & Resort Galena, IL 47,000
5/28/98 Tierra Del Sol Golf Course Albuquerque, NM 3,600
6/22/98 Silverthorn Country Club Brooksville, FL 4,700
7/10/98 Polo Trace Golf and Country Club Delray Beach, FL 12,300
7/17/98 Ohio Prestwick Country Club Akron, OH 6,400
8/28/98 Osage National Golf Course Lake of the Ozarks, MO 11,200
9/15/98 Sweetwater Country Club Orlando, FL 5,000
9/15/98 Wekiva Golf Club Orlando, FL 6,500
9/18/98 Cypress Creek Country Club Boynton Beach, FL 4,200
10/13/98 Cooks Creek Golf Course Ashville, OH 6,100
12/14/98 Brentwood Country Club White Lake, MI 7,000
12/22/98 Palm Desert Country Club Palm Desert, CA 5,800
-------------
$ 220,700
-------------
-------------
</TABLE>
(i) Includes adjacent development site of 14 acres

For the year ended December 31, 1998 the Company has purchased 22
golf courses for an aggregate initial investment of approximately $185.7
million in cash and repayment of indebtedness, deferred payments of $2.3
million, the acquisition of properties subject to liens of $18.0 million and
the issuance of $14.7 million in OP Units (approximately 524,000 OP Units).

3
<PAGE>

LETTERS OF INTENT

The Company has recently submitted non-binding offers to acquire
additional golf courses and is in various stages of discussions to acquire
additional golf courses. The Company is in various stages of negotiation and due
diligence review for each of these golf courses. Completion of these
transactions is subject to negotiation and execution of definitive purchase and
sale agreements, satisfactory completion of the Company's due diligence review
and certain other customary closing conditions. No assurances can be given that
the Company will continue to pursue or complete the acquisition of any of these
golf courses.

CREDIT FACILITY

The Company intends to draw upon the Credit Facility, or any successor
credit facility, to fund future acquisitions of additional golf courses. There
can be no assurance, however, that the Company will close any future
acquisitions or that the Company will continue to have access to sufficient debt
and equity financing to allow it successfully to pursue its acquisition
strategy.

LOANS TO OFFICERS

On September 19, 1997, the Company issued 70,000 restricted common
shares for $.01 when the market price was $26.1875 to officers of the Company
under the 1997 Stock-Based Incentive Plan. On January 1, 1998, the Company
issued an additional 20,939 restricted common shares for $.01 when the market
price was $29.00 to officers of the Company under the 1997 Stock-Based Incentive
Plan. Subsequent to these issuances, loans of approximately $772,000, secured by
OP Units and common stock, with interest rates of 4.4 to 6.0 percent were made
to officers of the Company for the payment of related taxes.

The Company has agreed to make additional loans of $2.0 million to the
Company's executive officers, the proceeds of which (i) must be used (at least
sixty percent in total) for the purchase of Company stock on the open market and
(ii) the remainder to be used for taxes. Loans of $1,121,000 have been made to
officers of the Company to purchase stock on the open market. These loans are
collateralized by the shares purchased, bear interest at 4.51% and are due at
the earlier time of sale greater than $25 per share, within 270 days of employee
termination or 5 years.

4
<PAGE>

(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The Company's principal business strategy is to acquire upscale golf
courses and thereafter lease the golf courses to qualified third party
operators, including affiliates of sellers. See the Consolidated Financial
Statements and notes thereto included in Item 8 on this Form 10-K for certain
financial information required to be included in response to this Item 1.

5
<PAGE>

BUSINESS OBJECTIVE AND STRATEGY

The Company's primary objectives are to increase its cash available for
distribution per share to stockholders and to enhance stockholder value. The
Company's main strategies for such growth are to acquire additional golf courses
that meet the Company's investment criteria and to participate in increased
revenues at its Golf Courses (internal growth). The Company believes market
conditions today are favorable for the acquisition of golf courses at attractive
returns.

The Company believes that its investments are consistent with its goal
of becoming a leading owner of, and participating in increased revenue from,
nationally or regionally recognized upscale golf courses. The Golf Courses
include a number of nationally recognized golf courses. Including Legends of
Stonehouse and Royal New Kent, each of which was named the "Best New Upscale
Course" by GOLF DIGEST in 1996 and 1997, respectively, and Oyster Bay Golf
Links, which was named Best New Resort Course in the United States in 1983 by
GOLF DIGEST. The Copperhead Course at the Westin Innisbrook Resort was ranked
43rd and the Emerald Dunes Golf Course ("Emerald Dunes") was ranked 63rd in the
1996 survey by GOLF MAGAZINE of the "Top 100 Courses You Can Play." The Island
Course at the Westin Innisbrook Resort was ranked as one of the "Top 75 Resort
Courses" by GOLF DIGEST in 1992. Heritage Golf Club was ranked in the Top 50
Public Golf Courses by GOLF DIGEST and Sandpiper Golf Course was included in the
"Top 75 Upscale Golf Courses" in the United States by GOLF DIGEST. The General
Course at the Eagle Ridge Inn and Resort was rated in the "Top 10 Best New
Upscale Public Course" by GOLF DIGEST in 1997. See "The Golf Courses." The
Company believes that the quality of the Golf Courses is further reflected in
the average green fees at the Golf Courses, which significantly exceed national
industry averages.

When the Company acquires a golf course, the course is either leased
back to its prior owner or leased to another qualified operator. Under the
Company's standard Participating Lease, the Company receives fixed Base Rent and
Participating Rent based on increases in Gross Golf Revenues (as herein defined)
if any, at such Golf Course. Each Lessee joins the Company's Lessee Advisory
Association ("Advisory Association"), which provides marketing information and
opportunities as well as potential economic benefits to the Lessees, such as
bulk purchasing power for certain golf course supplies and equipment.

In certain instances, state and federal tax laws make
purchase-leaseback transactions prohibitively expensive. Accordingly, in such
cases the Company may provide financing to a particular golf course, provided
the Company receives a participating interest in revenues at the golf course on
a basis comparable to the Company's standard Participating Lease. The Company
expects that the Company's loan would be secured by a first-lien on the
underlying golf course asset and would include an option to purchase the course
at the end of the loan's term. In considering any financing transactions,
including the Participating Mortgage, the Company seeks to obtain economic terms
similar to the standard Participating Lease.

To fund acquisitions, the Company has access to a variety of debt and
equity financing sources, including the Credit Facility and the ability to issue
OP Units.

6
<PAGE>

Described below are the Company's (i) investment criteria, (ii)
acquisition strategy and (iii) internal growth strategy.

(i) INVESTMENT CRITERIA

The Company intends to concentrate its investment activities on golf
courses, including multi-course portfolios, available at attractive prices that
meet one or more of the following criteria:

- upscale daily fee courses that target avid golfers, who the
Company believes are generally willing to pay the higher green
fees associated with upscale golf courses;

- private or semi-private golf courses with proven operating
histories that the Company believes have the potential for
significant cash flow growth;

- courses that offer superior facilities and service and attract a
relatively high number of affluent destination golfers;

- courses owned by multi-course owners and operators who have a
strong regional presence and afford the Company the opportunity
to expand in a particular region;

- newly developed, well-designed courses with high growth
potential; and

- upscale, well-maintained golf courses with proven operating
histories located in areas where significant barriers to entry
exist.

The Company will undertake an analysis with respect to golf courses to
be considered for acquisition, including an evaluation of the following:

- product and service differentiation;

- competitive position in market;

- barriers to entry in development of new golf courses such as
scarcity of land and long lead-times for course development;

- condition of the golf course and agronomy review;

- quantity, quality and cost of irrigation; and

- strength of the lodging industry, including hotels and
condominiums, in destination golf areas.

7
<PAGE>

(ii) ACQUISITION STRATEGY

The Company believes it has a distinct competitive advantage in the
acquisition of upscale golf courses, including those which might not otherwise
be available for purchase, because of:

- management's substantial industry knowledge, experience and
relationships within the golf community,

- the Company's ability to issue OP Units to golf course owners on
a tax-deferred basis,

- the Company's utilization of the multiple independent lessee
structure, and

- the Company's strategic alliances with prominent golf course
operators.

Besides acquiring new courses, the Company may also acquire expansion facilities
at its existing courses.

MANAGEMENT'S KNOWLEDGE, EXPERIENCE AND RELATIONSHIPS

Prior to joining the Company as its President, Chairman and Chief Executive
Officer, W. Bradley Blair, II served as Executive Vice President, Chief
Operating Officer and General Counsel of Legends Group, Ltd., a leading golf
course owner, developer and operator in the southeast and Mid-Atlantic regions
of the United States. As an officer of Legends Group Ltd., Mr. Blair was
responsible for all aspects of operations, including acquisitions, development
and marketing. Prior to joining the Legends Group Ltd., Mr. Blair had extensive
experience in the acquisition, disposition, development and financing of golf
courses and golf course development in his role as Managing Partner of Blair,
Conaway, Bograd and Martin, PA, attorneys at law. Prior to the IPO, David Dick
Joseph, the Company's Executive Vice President, worked with the Inland Group,
Inc. as a consultant specializing in real estate investment banking and golf
course finance. From 1983 to 1992 Mr. Joseph served as Vice President of
Development and Asset/Portfolio Management for Thoner & Birmingham Development
Corporation, a golf and country club community developer. Prior to joining the
Company as Chief Financial Officer, Mr. Peters served as Senior Vice President
and Chief Financial Officer of the Pacific Holding Company in Los Angeles, from
1992 through 1996, where he participated in the management of a 4,000 acre real
estate portfolio of residential, commercial and country club properties focusing
on master-planned golf communities. From 1988 to 1992, Mr. Peters served as
Senior Vice President and Chief Financial Officer of Castle & Cooke Homes, Inc;
and during 1990 and 1991 lectured on Real Estate Finance and Asset Management at
California State University at Bakersfield. Larry D. Young, a director of the
Company, is the founder of Legends Golf. Mr. Young has been involved in the golf
business for more than 25 years and has developed 10 golf courses during that
time, four of which were rated the best new course in their respective category
in the year developed by GOLF DIGEST.

8
<PAGE>

ISSUANCE OF OP UNITS

The Company has the ability to issue units of limited partnership
interest in the Operating Partnership ("OP Units"). OP Units may be issued to a
prospective golf course seller in exchange for his golf course. Holders of OP
Units generally have the right (the "Redemption Right") to cause the Company to
redeem their OP Units after certain holding periods for cash or, at the
Company's option, for Common Stock on a one-for-one basis. When the Company
acquires a golf course in exchange for OP Units, the golf course seller
generally will not recognize taxable income until it exercises the Redemption
Right. Thus, the issuance of OP Units can provide an attractive tax-deferred
transaction for sellers of golf courses.

MULTIPLE INDEPENDENT LESSEE STRUCTURE

The Company believes many golf course owners are single-business
entrepreneurs who could benefit from diversification but desire to remain
involved in the day-to-day operation of their courses. The Company believes such
golf course owners will continue to be attracted to the Company's multiple
independent lessee structure, in which the Company acquires a course and then
leases it back to an affiliate of the seller. Such structure satisfies the
owner's desire to remain involved in the day-to-day operation of his course,
while also satisfying his desire to obtain liquidity. Specifically the structure
offers prospective sellers:

- the ability to retain control over the operations of the golf
course by leasing it back;

- the tax deferral and increased liquidity associated with owning
OP Units;

- the ability to obtain additional OP Units through the Lessee
Performance Option (as described below);

- the marketing and purchasing economies of scale gained from
participation in the Lessee Advisory Association; and

- the ability to diversify the seller's investment by participating
as an equity owner in the Company's portfolio of golf courses.

9
<PAGE>

RELATIONSHIPS WITH STRATEGIC PARTNERS

The following table is a summary of the current golf course management and
development operations of the Company's current lessees/golf operators:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
GTA AND NON-GTA
COURSES UNDER
GTA COURSES UNDER MANAGEMENT/
MANAGEMENT DEVELOPMENT(1)
GOLF LESSEES/OPERATORS (18-HOLE (18-HOLE EQUIVALENTS)
EQUIVALENTS)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Troon Golf 8.5 38.0
Legends Group 7.0 8.0
Granite Golf Group 4.5 30.0
Emerald Dunes Golf Group 5.0 5.0
John Rainieri and Cook/Rainieri Management 3.0 3.0
Total Golf 2.5 7.0
Crescent Company 2.0 3.0
Stonehenge Golf Development 2.0 2.0
Diamond Players Club 2.0 4.0
Northgate Forest 1.5 1.5
Osage Golf Properties 1.5 1.5
Palm Desert Country Club 1.5 1.5
Craft Farms 1.0 3.0
Environmental Golf 1.0 5.0
Golf Classic Resorts 1.0 1.0
Properties of the Country 1.0 1.0
- ---------------------------------------------------------------------------------------------------------
TOTAL 18-HOLE EQUIVALENTS 45 114.5
- ---------------------------------------------------------------------------------------------------------

- -----------------------------
RESORT/HOTEL OPERATORS
- -----------------------------
Westin Hotels
Starwood Hotels and Resorts
- -----------------------------
</TABLE>

(1) GTA has no rights or interest in any non-GTA courses

10
<PAGE>

EXPANSIONS, IMPROVEMENTS AND WORKING CAPITAL LINES

Under certain circumstances, the Company agrees to make funds available
to the Lessees to fund significant capital improvements, to expand the existing
golf facilities and in limited circumstances to provide working capital. When
significant capital improvements are funded, the underlying Base Rent and Base
Interest is increased. Working capital lines are evidenced by promissory notes
or set forth in the lease agreement.

(iii) INTERNAL GROWTH

In addition to acquiring new golf courses and new participating
interests, the Company seeks to increase revenue from its current assets through
internal growth.

Based on the experience of its management, the Company believes the
Golf Courses offer opportunities for revenue growth through effective marketing
and efficient operations. The Participating Leases and the Participating
Mortgage have been structured to provide the operators with incentives to manage
and maintain the Golf Courses in a manner designed to increase revenue and, as a
result, increase payments to the Company under the Participating Leases and the
Participating Mortgage. The Company believes that management of the Lessees,
including Troon Golf and Granite Golf, each of which manages at least 30 golf
courses, have demonstrated expertise in the operation of the Golf Courses and
that the Golf Courses are positioned to benefit from favorable trends in the
golf industry. In 1997, the last year for which results are available, the
number of rounds played in the United States increased 15% to 547 million.

EXPANSIONS, IMPROVEMENTS AND WORKING CAPITAL LINES

PARTICIPATING LEASES

The Participating Leases generally provide that for any year the
Company will receive with respect to each leased Golf Course, the greater of (a)
Base Rent (as adjusted by the Base Rent Escalator described below) or (b)
Participating Rent. Participating Rent is generally established to be an amount
equal to the original (unescalated) Base Rent plus 33 1/3% of the difference
between that year's Gross Golf Revenue and Gross Golf Revenue at the Golf Course
in the year prior to the course's acquisition, as adjusted in determining the
original Base Rent. Base Rent under each Participating Lease generally increases
annually by the lesser of (i) 3% or (ii) a multiple of the change in the
Consumer Price Index ("CPI") for the prior year (the "Base Rent Escalator")
during each of the first five years of the Participating Lease and, if the
Lessee Performance Option is exercised, for an additional five years thereafter.
Annual increases in Lease Payments are generally limited to 5% to 7% during the
first five years of the lease terms.

11
<PAGE>

"Gross Golf Revenue" is generally defined as all revenues from a Golf
Course including green fees, golf cart rentals, range fees, membership dues,
member initiation fees and transfer fees, excluding, however, food and beverage
and merchandise revenue. In certain circumstances, the Company participates in
food and beverage revenue and merchandise revenue.

PARTICIPATING MORTGAGE

On June 23, 1997, the Operating Partnership closed and funded an
initial $69.975 million participating loan to Golf Host Resorts, Inc. ("Golf
Host Resorts"), which is affiliated with Starwood Capital Group LLC, and
agreed to fund an additional $9 million. The loan is secured by the
Innisbrook Resort, a 63-hole destination golf and conference facility located
near Tampa, Florida. The additional collateral includes, cash, excess land at
the Innisbrook Resort and a security interest in the Tamarron Golf Course,
which may be released upon the achievement of certain performance levels. The
operator of the resort, Westin, has guaranteed up to $2.5 million of debt
service for each of the first five years. The additional $9 million loan was
used for a nine-hole expansion and other improvements to the Innisbrook
Resort facilities.

The loan term is 30 years, with an initial base interest rate of
9.63% per annum, annual increases (of at least 5% but no more than 7%) in the
interest payment for the first five years, and a participating interest
feature throughout the term based upon the growth in revenues, if any, over
the base year.

LESSEE PERFORMANCE OPTION

The Participating Leases generally utilize an incentive-based
performance structure. This Performance Option structure is designed to
encourage the operators to seek aggressive growth in revenue at the Golf
Courses. The structure also is designed to attract potential sellers of golf
courses that the Company believes have high growth potential and that might not
otherwise be available for purchase. Generally leases with third party operators
do not contain a Lessee Performance Option. Under the Performance Option for the
Participating Leases, during years three through five of each Participating
Lease, the operator or its affiliate, subject to certain qualifications and
restrictions, may elect one time to increase the Base Rent in order to receive
additional OP Units or Common Stock. The Performance Option for the
Participating Leases may only be exercised if the current-year net operating
income of the operator of the applicable Golf Course, inclusive of a capital
replacement reserve, exceeds 113.5% of such Lessee's Lease Payment after taking
into account the increased amount of Base Rent. If the Performance Option is
exercised, the Base Rent is increased by an amount calculated to be accretive to
the Company's Funds From Operations on a per share basis. Following exercise of
the Lessee Performance Option, the adjusted Base Rent will be increased by the
Base Rent Escalator each year for a period of five years. An operator's ability
to exercise the Performance Option and the number of OP Units or Common Stock
issuable to such Prior Owner in connection therewith, will depend on future
operating results at the applicable Golf Course and therefore cannot be
determined in advance.

12
<PAGE>

PERFORMANCE OPTION FOR THE PARTICIPATING MORTGAGE

The structure of the Performance Option for the Participating Mortgage
is similar to the Performance Option for the Participating Leases. Under the
Performance Option for the Participating Mortgage, during years three and five
of the Participating Mortgage, the Westin Innisbrook Resort Owner, subject to
certain qualifications and restrictions, may elect one time to require the
Company to make an additional advance under the Participating Mortgage and the
Westin Innisbrook Resort Owner will be required to purchase additional OP Units
with that advance. The Performance Option for the Participating Mortgage may be
exercised only if the current-year net operating income of the Westin Innisbrook
Resort, inclusive of a capital replacement reserve, but exclusive of certain
management fees paid to Westin, exceeds 113.5% of such operator's Participating
Mortgage obligation after taking into account the increased amount of Base
Interest. If the Performance Advance is made, interest on the Performance
Advance will be calculated to be accretive to the Company's Funds From
Operations on a per share basis. Following exercise of the Performance Option
for the Participating Mortgage, the adjusted Base Interest will be increased by
3% per year for five years. The Westin Innisbrook Resort Owner's ability to
exercise the Performance Option will depend on future operating results and
therefore cannot be determined in advance.

13
<PAGE>

EMPLOYEES

The Company is self-administered and has 15 full-time employees, seven
of whom are devoted primarily to acquisitions.

ENVIRONMENTAL MATTERS

Operations of the Golf Courses involve the use and storage of various
hazardous materials such as herbicides, pesticides, fertilizers, motor oils and
gasoline. Under various federal, state and local laws, ordinances and
regulations, an owner or operator of real property may become liable for the
costs of removal or remediation of certain hazardous substances released on or
in its property. Such laws often impose such liability without regard to whether
the owner or operator knew of, or was responsible for, the release of such
hazardous substances. The presence of such substances, or the failure to
remediate such substances properly when released, may adversely affect the
owner's ability to sell such real estate or to borrow using such real estate as
collateral. The Company has not been notified by any governmental authority of
any material non-compliance, liability or other claim in connection with any of
the Golf Courses. All of the Golf Courses have been subjected to a Phase I
environmental audit (which does not involve invasive procedures, such as soil
sampling or ground water analysis) by an independent environmental consultant.

Based on the results of the Phase I environmental audits, the Company
is not aware of any existing environmental liabilities that the Company believes
would have a material adverse effect on the Company's business, assets, results
of operations or liquidity, nor is the Company aware of any condition which
would create such a liability. No assurance, however, can be given that these
reports reveal all potential environmental liabilities, that no prior or
adjacent owner created any material environmental condition not known to the
Company or the independent consultant, or that future uses or conditions
(including, without limitation, changes in applicable environmental laws and
regulations) will not result in imposition of environmental liability. The
Participating Leases provide that the Lessees will indemnify the Company for
certain potential environmental liabilities at the Golf Courses.

At Bonaventure Country Club, there was remediation work performed
respecting maintenance and facilities operations, including the construction of
a new maintenance area to remedy prior practices that resulted in low level soil
contamination at the property. In addition, underground storage tanks at the
property, which have subsequently been abandoned, have leaked, resulting in
localized soil contamination. The Company believes that the completed remedial
work and soil contamination will not have a material adverse effect on the
operation of the Company.

In addition, a significant portion of the Sandpiper Golf Course was
previously an operating oil field and there is significant residual oil
contamination on the property. In connection with the acquisition of the
property, the Company obtained an indemnification from Atlantic Richfield
Company ("ARCO") in a form and in an amount that the Company believes is
adequate to protect the Company from liability for such contamination. Certain
circumstances may require ARCO to enter the property and perform remediation
actions.

14
<PAGE>

TAX STATUS

The Company has elected to be taxed as a REIT under Section 856 through
860 of the Internal Revenue Code of 1986, as amended (the "Code"). If the
Company fails to qualify as a REIT in any taxable year, the Company will be
subject to federal income tax (including any applicable alternative minimum tax)
on its taxable income at regular corporate tax rates. The Company may be subject
to certain state and local taxes on its income and property and to federal
income and excise taxes on its undistributed income.

GOVERNMENT REGULATION

The Golf Courses are subject to the Americans with Disabilities Act of
1990, as amended (the "ADA"). The ADA has separate compliance requirements for
"public accommodations" and "commercial facilities" but generally requires
public facilities such as clubhouses and recreation areas are made accessible to
people with disabilities. These requirements became effective in 1992.
Compliance with the ADA requirements could require removal of access barriers
and other capital improvements at the Golf Courses.

Noncompliance could result in imposition of fines or an award of
damages to private litigants. Under the Participating Leases, the Lessees are
responsible for any costs associated with ADA compliance.

SOFTWARE DEFICIENCIES COULD ADVERSELY AFFECT THE COMPANY

The Company and the Lessees will rely upon a significant number of
computer software programs and operating systems in conducting their operations.
To the extent that these software applications contain source code that is
unable to appropriately interpret the upcoming calendar year "2000," some level
of modification or even possibly replacement of such source code or applications
will be necessary. Pursuant to the Leases, the Lessees will bear the costs
associated with determining whether their systems are "Year 2000" compliant and
the costs of any necessary modifying or replacing its source code or
application. Given the information known at this time, the Company believes its
systems are Year 2000 compliant. However, the Company will be dependent upon the
Lessees and other parties to determine that their systems and applications are
Year 2000 compliant.

15
<PAGE>

COMPETITION

The Golf Courses are, and any additional golf courses and related
facilities acquired by the Company will be, subject to competition for players
and members from other golf courses located in the same geographic areas.
Changes in the number and quality of golf courses in a particular area could
have a material effect on the revenues of the Golf Courses. In addition, the
Company will be subject to competition for the acquisition of golf courses and
related facilities with other purchasers of golf courses, including other golf
course acquisition companies. See "The Golf Industry--Competitive Conditions"
below.

THE GOLF INDUSTRY

UNLESS OTHERWISE NOTED, REFERENCES HEREIN TO NATIONAL INDUSTRY STATISTICS AND
AVERAGES ARE BASED ON REPORTS OF THE NATIONAL GOLF FOUNDATION ("NGF"), AN
INDUSTRY TRADE ASSOCIATION NOT AFFILIATED WITH THE COMPANY.

The Company believes the United States golf industry is entering a
period of significant growth. This belief is based, in part, on the fact that
people over the age of 50 play more golf than younger people, and the
expectation that over the next several years the number of people age 50 and
older will increase significantly as the "baby boomers" age. The Company expects
that the aging population will contribute to an increase in the number of rounds
played and Gross Golf Revenues at the Golf Courses and any golf courses
subsequently acquired by the Company.

COMPETITIVE CONDITIONS

The Company is one of two publicly traded REITs in the United States
focused exclusively on owning and acquiring golf courses.

Golf course ownership in the United States is highly fragmented.
There are approximately 15,000 golf courses (approximately 13,000
eighteen-hole equivalents) in the United States that are owned by
approximately 13,000 different entities. There are relatively few owners of
more than one course. The Company believes that the 15 largest golf course
owners in the United States collectively own fewer than 5% of the total
number of golf courses and that fewer than 10 golf course owners own more
than 10 golf courses. The Company believes that this fragmented ownership
provides it with an excellent opportunity for consolidation of the ownership
of upscale golf courses.

16
<PAGE>

The Company believes the current fragmentation of golf course ownership
is a result of a variety of factors, including a scarcity of capital, the
entrepreneurial nature of many golf course owners and operators and their
associated pride of ownership. The Company believes that the economies of scale
in owning and operating multiple golf courses, the growing significance of
professional financial management in the operation of golf courses and the
desire for liquidity by golf course owners could lead to consolidation of golf
course ownership. In particular, the Company believes golf course owners will be
attracted to the Company's multiple independent lessee structure, which permits
the Company to acquire a course and then lease it back to an affiliate of the
seller. Such structure satisfies the owner's desire to remain involved in the
day-to-day operation of his course, while also satisfying his desire to obtain
liquidity. The Company further believes its ability to issue OP Units in
exchange for a golf course will attract potential sellers, who generally can
defer recognition of taxable gain on the exchange until they exercise their
Redemption Right. By offering golf course owners the tax planning benefit of OP
Units and the economic benefit of participating in the independent lessee
structure, including resulting economies of scale in operating golf courses, the
Company believes it is able to acquire desirable upscale courses that may not
otherwise be available for purchase.

Largely in response to the popularity of golf, the construction of golf
courses in the United States has increased significantly in recent years. Since
1987, an average of approximately 280 new golf courses were opened each year,
with a high of 448 new golf course openings in 1998.

In 1998, the majority of golf courses in planning, under construction
or completed were daily fee facilities, while nearly a third of completed
courses were associated with real estate. For 1999, it is estimated that over
500 new courses will open, an all time high.

The emergence and popularity of younger professional golfers, including
Tiger Woods, Justin Leonard, Phil Mickelson and Karrie Webb, have increased
awareness and interest in golf. According to industry statistics, 19.4 million
homes watched the final round of the four major golf championships in 1996. In
1997, television viewership of the final four rounds of the four major golf
championships increased 56 percent to 30.3 million. The Company believes this
resurgent interest will result in increasing golf participation, including
increasing participation by women and younger golfers.

The Company believes the game of golf has exhibited strong growth in
popularity in the past 5 years as illustrated below:

<TABLE>
<CAPTION>
1993 1997 % Change
---- ---- --------
(millions)
<S> <C> <C> <C>
Number of Golfers . . . . . . . . . . . 24.6 26.5 10.1%
Rounds Played . . . . . . . . . . . . . . 499 548 2.4%
</TABLE>

According to current participation rates, it is expected that the
number of golfers will increase nearly 1% each year for the next 12 years.

17
<PAGE>

DEMOGRAPHICS

The Company believes the game of golf will benefit from favorable
demographic trends. The United States Census Bureau estimates that the
population age 50 and over will increase by 39% between 1996 and 2010, from 69.3
million to 96.3 million. The average number of rounds played per golfer on an
annual basis increases significantly as the golfer ages. Golfers in their 50's
play nearly twice as many rounds annually as golfers in their 30's, and golfers
age 65 and older generally play three times as many rounds annually as golfers
in their 30's. The Company believes that the number of golfers as well as the
total number of rounds played will increase significantly as the average age of
the population continues to increase. The Company believes that "baby boomers,"
the oldest of whom are now in their early 50's, will contribute to the growth in
total rounds played due to growing wealth and leisure time as well as the
suitability of golf as a sport for an aging population.

18
<PAGE>

SEASONALITY

The golf industry is seasonal in nature because of weather conditions
and the fewer available tee times during the rainy season and the winter months.
Each of the Lessees operating a daily fee course may vary green fees based on
changes in demand. The Company does not expect seasonal fluctuations in Lessee
revenues to have a significant impact on the Company's operating results. The
Company's Leases require Base Rent to be paid ratably throughout the year.

19
<PAGE>

(d) FOREIGN OPERATIONS

The Company does not engage in any foreign operations or derive any
revenue directly from foreign sources.

<PAGE>

ITEM 2. PROPERTIES

The Company believes its investments are consistent with its goal of
becoming a leading owner of, and participating in increased revenue from,
nationally or regionally recognized upscale golf courses. The Golf Courses
include a number of nationally recognized golf courses.

The Golf Courses include 23 upscale Daily Fee courses, 13.5 Resort
Courses and 8.5 Private Country Clubs. "Daily Fee" courses are open to the
public and generate revenues principally through green fees, golf cart
rentals, food and beverage operations, merchandise sales and driving range
charges. "Resort Courses" are Daily Fee golf courses that attract a
significant percentage of players from outside the immediate area in which
the golf course is located and generate a significant amount of revenue from
golf vacation packages. The Company considers its Daily Fee and Resort
Courses to be high-end golf courses because of the quality and maintenance of
each golf course. Private country clubs are generally closed to the public
and derive revenues principally from membership dues, initiation fees,
transfer fees, golf cart rentals, guest fees, food and beverage operations
and merchandise sales.

The Company believes that the overall quality of the Golf Courses is
reflected in the green fees charged at each Golf Course, which significantly
exceed national averages. The Company believes its focus on upscale Daily Fee
golf courses and private country clubs, which attract golfers with attractive
demographic and economic profiles, will result in stronger and less cyclical
revenue growth in comparison to golf courses with lower green fees.

Five of the Golf Courses are located in the Myrtle Beach, South
Carolina vicinity, a popular year-round golf destination area. Myrtle Beach
is considered one of the nation's premier golf resort locations with nearly
100 golf courses and approximately 3.9 million rounds played in 1996,
according to the MYRTLE BEACH GOLF HOLIDAY-TM-. In addition to golf courses,
Myrtle Beach offers a mix of entertainment, shopping and dining, as well as
proximity to beaches. All of the Golf Courses located in the Myrtle Beach
vicinity were developed and contributed to the Company by Legends Golf, a
leading golf course owner, developer and operator in the Southeast and
Mid-Atlantic regions of the United States.

Five of the Golf Courses are located near Tampa, Florida. Of these,
four are located at the Westin Innisbrook Resort, a destination golf resort
that includes one of the largest hotel and conference facilities in the
state. The fifth course, Lost Oaks of Innisbrook, is located near the Westin
Innisbrook Resort, and all five courses are near the Gulf of Mexico.
Additionally, the courses benefit from the millions of tourists annually that
visit Disney World-TM-, Busch Gardens-TM- and other regional recreational
attractions.

The Company owns a fee simple interest in each of the Golf Courses
with the exception of Oyster Bay and Mystic Creek, which are subject to
long-term ground leases, and the four Golf Courses at the Westin Innisbrook
Resort, where the Company holds a first lien on the Golf Courses and all of
the related facilities (other than the separately-owned condominium units
comprising the hotel). The Company additionally holds an option to purchase
the Westin

21
<PAGE>

Innisbrook Resort and such facilities at the expiration of the Participating
Mortgage for the lesser of its fair market value or a pre-determined number
of shares of Common Stock.

Certain information regarding each of the Golf Courses owned by or
in which the Company has an interest as of December 31, 1998, is set forth on
the following pages:

RESORT COURSES

Resort Courses are Daily Fee golf courses that draw a high
percentage of players from outside the immediate area in which the course is
located and generate a significant amount of revenue from golf vacation
packages. Some Resort Courses are semi-private, in that they offer membership
packages that allow members special privileges at the golf course, but also
allow public play.

<TABLE>
<CAPTION>
NO. OF
COURSE NAME CITY AND STATE HOLES YARDAGE YEAR OPENED
- -------------------------------------- ------------------------ ----------- -------------- -----------------------
<S> <C> <C> <C> <C>
Legends Resort
Heathland . . . . . . . . . . . . Myrtle Beach, SC 18 6,785 1990
Parkland . . . . . . . . . . . . . Myrtle Beach, SC 18 7,170 1992
Moorland . . . . . . . . . . . . . Myrtle Beach, SC 18 6,799 1990
Heritage Golf Club . . . . . . . . . Pawleys Island, SC 18 7,040 1986
Oyster Bay . . . . . . . . . . . . . Sunset Beach, NC 18 6,685 1983
Woodlands . . . . . . . . . . . . . Gulf Shores, AL 18 6,584 1994
Westin Innisbrook Resort
Copperhead Course . . . . . . . . Palm Harbor, FL 18 7,087 1972
Island Course . . . . . . . . . . Palm Harbor, FL 18 6,999 1970
Eagle's Watch . . . . . . . . . . Palm Harbor, FL 18 6,245 1971
Hawk's Run . . . . . . . . . . . . Palm Harbor, FL 18 6,245 1971
Lost Oaks of Innisbrook . . . . . . Palm Harbor, FL 18 6,450 1977
Eagle Ridge Inn and Resort
The General . . . . . . . . . . . Galena, IL 18 6,820 1997
North Course . . . . . . . . . . . Galena, IL 18 6,836 1977
South Course . . . . . . . . . . . Galena, IL 18 6,762 1984
East Course . . . . . . . . . . . Galena, IL 9 2,648 1991
</TABLE>

22
<PAGE>

HIGH-END DAILY FEE COURSES

The Company considers its Daily Fee courses to be high-end courses,
reflected in the quality and maintenance standards of the golf courses, and
the green fees, which are generally higher than other golf courses in their
respective markets. Some high-end daily fee courses are semi-private, in that
they offer membership packages but also allow public play.

<TABLE>
<CAPTION>
NO. OF YEAR
COURSE NAME CITY AND STATE HOLES YARDAGE OPENED
- ------------------------------------------------ ------------------------------ --------------- ------------- -----------------
<S> <C> <C> <C> <C>
Royal New Kent . . . . . . . . . . . . . . Williamsburg, VA 18 7,291 1996
Legends of Stonehouse . . . . . . . . . . Williamsburg, VA 18 6,963 1996
Olde Atlanta . . . . . . . . . . . . . . . Atlanta, GA 18 6,789 1993
Tiburon. . . . . . . . . . . . . . . . . . Omaha, NE 27 7,005 1989
Raintree . . . . . . . . . . . . . . . . . Akron, OH 18 6,886 1992
Eagle Watch . . . . . . . . . . . . . . . Atlanta, GA 18 6,896 1989
Black Bear Golf Club . . . . . . . . . . . Orlando, FL 18 7,002 1995
Bonaventure - Green Monster. . . . . . . . Ft. Lauderdale, FL 18 7,011 1970
Bonaventure - The Resort Course. . . . . . Ft. Lauderdale, FL 18 6,189 1978
Mystic Creek . . . . . . . . . . . . . . . Dearborn, MI 27 6,802 1996
Emerald Dunes Golf Course. . . . . . . . . West Palm Beach, FL 18 7,006 1990
Sandpiper Golf Course. . . . . . . . . . . Santa Barbara, CA 18 7,068 1972
Tierra Del Sol . . . . . . . . . . . . . . Albuquerque, NM 18 6,351 1982
Links at Polo Trace. . . . . . . . . . . . Delray Beach, FL 18 7,100 1989
Osage National . . . . . . . . . . . . . . Lake of the Ozarks, MO 27 7,150 1992
Wekiva Golf Club . . . . . . . . . . . . . Orlando, FL 18 6,640 1975
Cypress Creek. . . . . . . . . . . . . . . Boynton Beach, FL 18 6,808 1964
Cooks Creek. . . . . . . . . . . . . . . . Ashville, OH 18 7,000 1983
Brentwood. . . . . . . . . . . . . . . . . White Lake, MI 18 6,262 1995
Palm Desert. . . . . . . . . . . . . . . . Palm Desert, CA 27 6,678 1957
</TABLE>

23
<PAGE>

PRIVATE CLUB COURSES

Private clubs are generally closed to the public and generate
revenue principally through initiation fees and membership dues, golf cart
rentals and guest green fees. Initiation fees and membership dues are
determined according to the particular market segment in which the club
operates.

Revenue and cash flows of private country clubs generally are more
stable and predictable than those of public courses, because the receipt of
membership dues generally is independent of the level of course utilization.

<TABLE>
<CAPTION>
NO. OF YEAR
COURSE NAME CITY AND STATE HOLES YARDAGE OPENED
- ------------------------------------------- ---------------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Northgate Country Club. . . . . . . . . Houston, TX 27(1) 6,540 1984
Club of the Country . . . . . . . . . . Kansas City, KS 18 6,357 1979
Stonehenge Golf
Wildewood Country Club Columbia, SC 18 6,751 1974
Woodcreek Farms Columbia, SC 18 7,002 1997
Persimmon Ridge Country Club. . . . . . Louisville, KY 18 7,129 1989
Silverthorn Country Club. . . . . . . . Brooksville, FL 18 6,827 1994
Ohio Prestwick Country Club . . . . . . Akron, OH 18 7,066 1972
Sweetwater Country Club . . . . . . . . Orlando, FL 18 6,300 1980
</TABLE>

(1) The Company recently acquired an additional nine holes at this facility
which were recently constructed and just opened by the original developer.

24
<PAGE>

THE PARTICIPATING LEASES

THE FOLLOWING SUMMARY OF THE PARTICIPATING LEASES IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE PARTICIPATING LEASES, A FORM OF WHICH WAS
PREVIOUSLY FILED. THE FOLLOWING DESCRIPTION OF THE PARTICIPATING LEASES DOES
NOT PURPORT TO BE COMPLETE BUT CONTAINS A SUMMARY OF THE MATERIAL PROVISIONS
THEREOF. PURSUANT TO THE COMPANY'S MULTIPLE INDEPENDENT LESSEE STRUCTURE,
LEASES ARE INDIVIDUALLY NEGOTIATED AND CONSEQUENTLY VARY FROM ONE ANOTHER, AT
TIMES IN MATERIAL WAYS.

All of the Participating Leases contain the same basic provisions
described below. The leases for any golf course properties acquired by the
Company in the future will contain such terms and conditions as are agreed
upon between the Lessee and the Company at the time of such acquisitions, and
such terms and conditions may vary from the terms and conditions described
below with respect to the Participating Leases. The Company anticipates that
each new lease will be with an existing Lessee, with an affiliate of the
seller or with an unaffiliated third party experienced in the operation of
similar courses.

LEASE TERM

Each Participating Lease was entered into upon the conveyance to the
Company of the underlying Golf Course. Generally, the Company's interest in
each leased Golf Course includes the land, buildings and improvements,
maintenance equipment, related easements and rights, and fixtures
(collectively, the "Leased Property"). Each Leased Property is leased to the
respective Lessee under a Participating Lease which, generally, has a primary
term of 10 years (the "Fixed Term"). In addition, each Lessee generally has
an option to extend the term of its Participating Lease for up to six terms
of five years each (the "Extended Terms") subject to earlier termination upon
the occurrence of certain contingencies described in the Participating Lease.

In addition, at the expiration of the Fixed Term and the Extended
Terms, the Lessee will generally have a right of first offer to continue to
lease the Golf Course on the terms and conditions pursuant to which the
Company intends to lease the Golf Course to a third party.

USE OF THE GOLF COURSES

Each Participating Lease permits the Lessee to operate the Leased
Property as a golf course, along with a clubhouse and other activities
customarily associated with or incidental to the operation of a golf course
and other facilities located at the golf course, including, where applicable,
swim and tennis operations. Operations may include sale or rental of
golf-related merchandise, sale of memberships, furnishing of lessons,
operation of practice facilities and sales of food and beverages.

25
<PAGE>

BASE RENT; PARTICIPATING RENT

The Participating Leases provide for the Company to receive, with
respect to each Golf Course, the greater of Base Rent or an amount equal to
Participating Rent plus the initial Base Rent payable under each
Participating Lease. Participating Rent is generally equal to 33 1/3% of any
increase in Gross Golf Revenue over Gross Golf Revenue for the base year, as
adjusted in determining the initial Base Rent, which base year will be reset
to the year immediately preceding the date on which the Prior Owner exercises
the Lessee Performance Option, if applicable. Base Rent will generally be
increased annually by the Base Rent Escalator (generally, the lesser of (i)
3% or (ii) a multiple of the change in CPI for the prior year) during the
first five years of each Participating Lease term and, if the Lessee
Performance Option is exercised, an additional five years thereafter from the
date of exercise. Annual increases in Lease Payments are generally limited to
5% - 7% during the first five years of the initial lease terms. "Gross Golf
Revenue" generally is defined as all revenues from a Golf Course including
green fees, golf cart rentals, range fees, membership dues, membership
initiation fees and transfer fees, excluding, however, food and beverage and
merchandise revenue. In certain circumstances, the Company participates in
food and beverage and merchandise revenue. Base Rent is required to be paid
in twelve equal monthly installments in arrears on the first day of each
calendar month. Participating Rent is payable quarterly in arrears.

TRIPLE NET LEASES

The Participating Leases are structured as triple net leases under
which each Lessee is required to pay all real estate and personal property
taxes, insurance, utilities and services, golf course maintenance and other
operating expenses.

SECURITY DEPOSIT

As security for its affiliated Lessee's obligations under its
Participating Leases, each prior owner of each Golf Course generally is
obligated to pledge OP Units (or cash or other collateral acceptable to the
Company) with a value initially up to 15% of the purchase price for the
applicable Golf Course. The security deposit generally will not be released
for two years. Beginning in the third year and any time thereafter, one-third
of pledged collateral will be released if the net operating income to lease
payment coverage ratio (the "Coverage Ratio") of the Lessee for the two prior
fiscal years equals or exceeds 120%, 130% and 140%, respectively. If the
Coverage Ratio falls below 120% at any time following the release of pledged
collateral, then the Lessee shall be required to retain and not distribute
profits until such time as the Lessee has retained cash equal to at least
six-months of then-current Base Rent. In addition, the Participating Leases
with the Legends Lessees are cross-collateralized and cross-defaulted.

26
<PAGE>

The security deposit will be increased following the exercise of any
Lessee Performance Option to equal approximately 15% of the sum of the
initial purchase price of such Golf Course and the value of any additional OP
Units issued in connection with the exercise of the Lessee Performance
Option. If the Company acquires any Expansion Facility, the security deposit
also will be increased by an amount equal to approximately 15% of the
purchase price of the Expansion Facility.

In instances where the Golf Course is not leased to a prior owner,
the security deposit provided to the Company varies, and is generally less
than where a Golf Course is leased back to its Prior Owner and the Company
seeks to cross-collateralize any security deposits otherwise provided by such
Lessee or its affiliates to the Company.

ADVISORY ASSOCIATION

Each Lessee is a member of the Advisory Association, which
participates in cross-marketing of the Golf Courses and identified each Golf
Course as owned by the Company, thereby increasing the golfing consumer's
brand name awareness of the Company. Membership in the Advisory Association
is designed to provide the Lessees, collectively, greater purchasing power
with vendors than each would have individually. The Advisory Association
attempts to ensure a consistent, high-quality product at each member Golf
Course. In conjunction with management of the Company, the Advisory
Association will review and analyze any disputes between the Company and a
Lessee concerning annual capital and operating budgets and in conjunction
with the Company also will confirm each Lessee's compliance with its repair
and maintenance obligations under each Participating Lease.

MAINTENANCE AND MODIFICATIONS

Each Lessee, at its sole cost and expense, is required, to maintain
and operate its respective Leased Property in good order, repair and
appearance and to make such interior and exterior, structural and
non-structural, foreseen and unforeseen, and ordinary and extraordinary
repairs as are necessary and appropriate to keep such Leased Property in good
order, repair and appearance. Each Lessee also must maintain each Golf Course
it leases in substantially the same condition it was in at the commencement
of the Participating Lease and otherwise in a condition comparable to other
comparable golf courses in its vicinity. If the Company, in consultation with
the Advisory Association, determines that a Lessee has failed to comply with
its maintenance and operation obligations, then the Company shall provide a
written list to the Lessee of remedial work and/or steps to be performed. If
the Lessee disputes the Company's assertions, then the matter shall be
handled by a committee composed of members of the Advisory Association and
representatives of the Company.

The Company has generally established and will maintain, through the
payment of additional rent, with respect to each Golf Course, a capital
replacement reserve (a "Capital Replacement Fund") in an amount equal to between
2% and 5% of Gross Golf Revenue at such Golf Course, depending on certain
factors, including the condition of the structures and the age and condition of
the Golf Course. The Company and each Lessee will agree on the use of funds in
these reserves and the Company has the right to approve each Lessee's annual and
long-term

27
<PAGE>

capital expenditure budgets. Funds in the Capital Replacement Fund shall be
paid to a Lessee to reimburse such Lessee for expenditures made in connection
with approved capital replacements. The Lessees generally are obligated to
increase their lease payment each year in an amount equal to the increase in
the Capital Replacement Fund from the prior year. Amounts in the Capital
Replacement Fund will be deemed to accrue interest at a money market rate.
Generally, any amounts in the Capital Replacement Fund at the expiration of
the applicable Participating Lease will be retained by the Company, with
limited exceptions.

Except for its obligation to fund the Capital Replacement Fund and
except for certain improvements, the Company is not required to build or
rebuild any improvements on any Leased Property, or to make any repairs,
replacements, alterations, restorations or renewals of any nature or
description to any Leased Property, whether ordinary or extraordinary,
structural or non-structural, foreseen or unforeseen, or to make any
expenditure whatsoever with respect thereto, in connection with any
Participating Lease, or to maintain any Leased Property in any way. In the
event that the Company elects to fund additional capital improvements on a
Golf Course, the Company generally will condition such election on an
increase in minimum rent under the Participating Lease with respect to such
Golf Course to reflect such expenditures.

During the Fixed Term and each Extended Term, each Lessee, at its
sole cost and expense, may make alterations, additions, changes and/or
improvements ("Lessee Improvements") to each Leased Property, without the
Company's prior written consent, provided such alterations do not diminish
the value or appearance of the Golf Course. All such Lessee Improvements will
be subject to all the terms and provisions of each applicable Participating
Lease and will become the property of the Company upon termination of such
Participating Lease.

At the end of the Participating Lease, all remaining personal
property at each Leased Property will become the property of the Company.

INSURANCE

Each Lessee is required to maintain insurance on its Leased Property
under insurance policies providing for all-risk, liability, flood (if carried
by comparable golf course facilities in the area and otherwise available at
commercially reasonable rates) and worker's compensation coverage, which at
the time is usual and commonly obtained in connection with properties similar
in type of building size and use to the Leased Property located in the
geographic area where the Leased Property is located. Each insurance policy
names the Company as additional insured or loss payee, as applicable.

<PAGE>

ASSIGNMENT AND SUBLETTING

A Lessee, without the prior written consent of the Company (which
consent may generally be withheld by the Company in its sole discretion,
except in limited instances), may not assign, mortgage, pledge, hypothecate,
encumber or otherwise transfer any Participating Lease or any interest
therein, all or any part of the Leased Property or suffer or permit any lease
or the leasehold estate created thereby or any other rights arising under any
Participating Lease to be assigned, transferred, mortgaged, pledged,
hypothecated or encumbered, in whole or in part, whether voluntarily,
involuntarily or by operation of law. An assignment of a Participating Lease
will be deemed to include any change of control of such Lessee, as if such
change of control were an assignment of the Participating Lease. However,
each Lessee has the right to assign its Participating Lease to its affiliates.

Each Lessee, with the Company's prior approval, which approval the
Company may withhold in its discretion, may be permitted to sublease portions
of any Leased Property to sublessees to operate portions (but not the
entirety of the operations customarily associated with or incidental to the
operation of a golf course (e.g., driving range, restaurant, etc.).

COMPANY'S RIGHT OF FIRST OFFER

In the event a Lessee desires to sell its interest in its
Participating Lease to an unaffiliated third party, it must first offer the
Company or its designee the right to purchase such interest. The Lessee must
give the Company written notice of its intent to sell, which shall indicate
the terms and conditions upon which such Lessee intends to sell its interest
in the Participating Lease. The Company or its designee shall thereafter
generally have a period of 60 days to elect to purchase the leasehold
interest on the terms and conditions at which such Lessee proposes to sell
its interest. If the Company or its designee elects not to purchase the
interest of the Lessee, then such Lessee shall be free to sell its interest
to a third party, subject to the Company's approval as described above (see
"-- Assignment and Subletting"). However, if the terms on which the Lessee
intends to sell its interest are reduced by 5% or more, then such Lessee
generally shall again offer the Company the right to acquire its interest,
provided the Company shall have only 15 days to accept such offer.

LESSEE'S RIGHT OF FIRST OFFER

The Company may sell a Golf Course, but must first offer the Lessee
of such course the right to purchase the Golf Course. The Company must give
the relevant Lessee written notice of its intent to sell, which shall
indicate the terms and conditions upon which the Company intends to sell such
Golf Course. Such Lessee shall thereafter generally have a period of 60 days
to elect to purchase the Golf Course on the terms and conditions at which the
Company proposes to sell the Golf Course. If such Lessee elects not to
purchase the Golf Course, then the Company shall be free to sell the Golf
Course to a third party. However, if the price at which the Company intends
to sell the Golf Course is reduced by 5% or more from the price offered to
the Lessee, then generally the Company again shall offer such Lessee the
right to acquire the Golf Course at the reduced price provided that such
Lessee shall have only 15 days to accept such offer.

29
<PAGE>

DAMAGE TO, OR CONDEMNATION OF, A LEASED PROPERTY

In the event of damage to or destruction of any Leased Property
caused by an insured risk, the Lessee will be obligated to diligently restore
the Leased Property to substantially the same condition as existed
immediately prior to such damage or destruction and, to the extent the
insurance proceeds and the Capital Replacement Fund are insufficient to do
so, such Lessee will be obligated to contribute the excess funds needed to
restore the Leased Property. Any excess insurance proceeds will be paid to
the Company. Notwithstanding the foregoing, in the event the damage or
destruction of the Leased Property renders the Leased Property unsuitable for
use as a golf course for a period of 12 months or more, the Lessee may
terminate the Participating Lease.

INDEMNIFICATION GENERALLY

Under each Participating Lease, the Lessee has agreed to indemnify,
and hold harmless, the Company from and against all liabilities, obligations,
claims, actual or consequential damages, penalties, causes of action, costs
and expenses (including reasonable attorneys' fees and expenses) imposed upon
or asserted against the Company as owner of the applicable Leased Property on
account of, among other things, (i) any accident, injury to or death of a
person or loss of or damage to property on or about the Leased Property, (ii)
any use, non-use or misuse by such Lessee of the Leased Property, (iii) any
impositions (which are the obligations of the relevant Lessee to pay pursuant
to the applicable provisions of such Participating Lease) or the operations
thereon, (iv) any failure on the part of the Lessee to perform or comply with
any of the terms of the Participating Lease or any sublease, (v) any taxes
levied against the Leased Property and (vi) any liability the Company may
incur or suffer as a result of any permitted contest by the Lessee under any
Participating Lease.

30
<PAGE>

EVENTS OF DEFAULT

Events of Default are defined in each Participating Lease generally
to include, among others, the following:

(i) if a Lessee fails to make a rent payment when such payment
becomes due and payable and such failure is not cured by such
Lessee within a period of 10 days after receipt of written
notice thereof from the Company;

(ii) if a Lessee fails to observe or perform any material term,
covenant or condition of a Participating Lease and such
failure is not cured by such Lessee within a period of 30 days
after receipt by such Lessee of written notice thereof from
the Company, unless such failure cannot be cured with due
diligence within a period of 30 days, in which case such
failure will not constitute an Event of Default if such Lessee
proceeds promptly and with due diligence to cure the failure
and diligently completes the curing thereof within 120 days;

(iii) if a Lessee: (a) admits in writing its inability to pay its
debts generally as they become due, (b) files a petition in
bankruptcy or a petition to take advantage of any insolvency
act, (c) makes an assignment for the benefit of its creditors,
(d) is unable to pay its debts as they mature, (e) consents to
the appointment of a receiver for itself or of the whole or
any substantial part of its property or (f) files a petition
or answer seeking reorganization or arrangement under the
federal bankruptcy laws or any other applicable law or statute
of the United States of America or any state thereof;

(iv) if the Lessee is liquidated or dissolved;

(v) if the Lessee voluntarily ceases operations on the Leased
Property, except as a result of damage, destruction or a
partial or complete condemnation or other unavoidable delays;
or

(vi) if the Lessee or an affiliate thereof is in default under any
other Participating Lease with the Company.

If an Event of Default occurs and is continuing under a
Participating Lessee then upon not less than 10 days notice (only if required
by the Participating Lease) of such termination and upon the expiration of
such time, the Fixed or Extended Term, as the case may be, will terminate and
all rights of the Lessee under the Participating Lease shall cease.

GOVERNING LAW

The Participating Leases will be governed by and construed in
accordance with the law of the state where the Golf Course is located.
Because the Golf Courses are located in various states, the Participating
Leases may be subject to restrictions imposed by applicable local law.

31
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

Owners and operators of golf courses are subject to a variety of
legal proceedings arising in the ordinary course of operating a golf course,
including proceedings relating to personal injury and property damage. Such
proceedings are generally brought against the operator of a golf course, but
may also be brought against the owner. The Participating Leases provide that
each Lessee is responsible for claims based on personal injury and property
damage at the Golf Courses which are leased and require each Lessee to
maintain insurance for such purposes.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to the shareholders in the fourth quarter
of 1998.

32
<PAGE>

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

The Company's sole class of common stock is traded on the NASDAQ
American Stock Exchange (the "AMEX").

The following table sets forth for periods shown the high and low
sales price for the Company's Common Stock on AMEX and distributions
declared for the quarter.

<TABLE>
<CAPTION>
- -----------------------------------------------------------
HIGH LOW DISTRIBUTION
- -----------------------------------------------------------
<S> <C> <C> <C>
1998
First Quarter 32 3/8 27 5/8 $ 0.41
Second Quarter 35 1/8 30 1/4 $ 0.44
Third Quarter 35 1/2 26 $ 0.44
Fourth Quarter 29 9/16 24 $ 0.44
- -----------------------------------------------------------

- -----------------------------------------------------------
HIGH LOW DISTRIBUTION
- -----------------------------------------------------------
1997
First Quarter 26 1/8 22 3/4 $ 0.21
Second Quarter 28 3/4 23 5/8 $ 0.41
Third Quarter 28 11/16 26 $ 0.41
Fourth Quarter 29 3/8 25 1/4 $ 0.41
- -----------------------------------------------------------
</TABLE>

SHAREHOLDER INFORMATION

As of March 26, 1999, the number of holders of record of Common
Stock of the Company was approximately 100 and there were 7,682,956 shares
outstanding. On that date a total of 12,961,894 OP Units were held by 26
entities, excluding the Company's two subsidiaries.

33
<PAGE>

DIVIDENDS

The Company intends to continue to make regular quarterly
distributions to its stockholders. The Board of Directors, in its sole
discretion, will determine the actual distribution rate based on the
Company's actual results of operations, economic conditions, tax
considerations (including those related to REITs) and other factors. The
Company's distributions, for the year ended December 31, 1998, was $2.14 per
share of Common Stock. For the period ended December 31, 1998, and including
payments made for fourth quarter, the distributions represent 75% of cash
available for distribution. Holders of OP Units will receive distributions on
a per unit basis equal to the per share distributions to owners of Common
Stock, except that OP Units issued since the prior record date to partners
other that GTA GP or GTA LP will receive a pro rata distribution based on
duration of ownership.

The Company's actual cash available for distribution will be
affected by a number of factors, including Gross Golf Revenues generated at
the Golf Courses. The Company anticipates that cash available for
distribution will exceed earnings and profits due to non-cash expenses,
primarily depreciation and amortization, to be incurred by the Company.
Distributions by the Company to the extent of its current or accumulated
earnings and profits for federal income tax purposes, other than capital gain
dividends, will be taxable to stockholders as ordinary dividend income. Any
dividends designated by the Company, as capital gain dividends generally will
give rise to capital gain for stockholders. Distributions in excess of the
Company's current or accumulated earnings and profits generally will be
treated as a non-taxable reduction of a stockholder's basis in the Common
Stock to the extent thereof, and thereafter as capital gain. Distributions
treated as non-taxable reduction in basis will have the effect of deferring
taxation until the sale of a stockholder's Common Stock or future
distributions in excess of the stockholder's basis in the Common Stock. Based
upon the total estimated cash available for distribution, the Company
estimates that 75% of the Company's expected annual distribution would
represent a return of capital for federal income tax purposes. If actual cash
available for distribution or taxable income vary from these amounts, or if
the Company is not treated as the owner of one or more of the Initial
Courses, the percentage of distributions which represents a return of capital
may be materially different.

In order to maintain its qualification as a REIT, the Company must
make annual distributions to its stockholders of at least 95 percent of its
taxable income (excluding net capital gains). Based on the Company's results
of operations for year ended December 31, 1998, the Company was required to
distribute approximately $ million in order to maintain its status as a REIT.
Under certain circumstances, the Company may be required to make
distributions in excess of cash available in order to meet such distribution
requirements.

The Board of Directors, in its sole discretion, will determine the
actual distribution rate based on a number of factors, including the amount
of cash available for distribution, the Company's financial condition,
capital expenditure requirements for the Company's properties, the annual
distribution requirements under the REIT Provisions of the Code and such
other factors as the Board of Directors deems relevant.

34
<PAGE>

RECENT SALES OF UNREGISTERED SECURITIES

On December 14, 1998, the Operating Partnership issued 24,482 OP
Units to the prior owner of Brentwood Golf and Country Club for its interest
in Brentwood Golf and Country Club. On December 22, 1998, the Operating
Partnership issued 32,986 OP Units to the prior owner of Palm Desert Golf
Course as partial consideration for its interest in the Palm Desert Golf
Course. OP Units may generally be redeemed by their holder one-year after
issuance for cash or, at the option of the Company, shares of Common Stock on
a one-for-one basis. This issuance was effected in reliance upon an exemption
from registration under Section 4(2) of the Securities Act as a transaction
not involving a public offering.

35
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

The following tables set forth unaudited selected consolidated
actual and pro forma financial information for the Company. The pro forma
year ended December 31, 1997 is based on actual results of operations for
February 12 through December 31, 1997 and pro forma results of operations for
January 1 through February 11, 1997. The pro forma operating information for
is presented as if the transactions completed at the IPO had occurred as of
January 1, 1997.

SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
For the period
from For the year For the year
February 12 to ended ended
December 31, 1997 December 31, 1997 December 31, 1998
----------------- ----------------- -----------------
(Pro forma)
(Unaudited)
<S> <C> <C> <C>
Rent from affiliates $10,802 $12,240 $12,365
Rent $ 3,607 $ 3,912 $23,097
Mortgage interest $ 4,318 $ 4,318 $ 8,922
------------------------- ------------------- ------------------ --------------------
$18,727 $20,470 $44,384

Depreciation and $ 3,173 $ 3,621 $11,667
amortization
General and $ 2,532 $ 2,743 $ 5,416
administrative
Interest income $ (624) $ (624) $ (478)

Interest expense $ 1,879 $ 1,931 $ 9,673
Loss on disposal of - - 370
assets
------------------------- ------------------- ------------------ --------------------
Total Expenses $ 6,960 $ 7,671 $ 9,565
------------------------- ------------------- ------------------ --------------------
Net income before $11,767 $12,799 $17,736
minority interest
Income applicable to
minority interest $ 5,798 $ 6,328 $ 7,130
------------------------- ------------------- ------------------ --------------------
Net income applicable
to common stockholders $ 5,969 $ 6,471 $10,606
------------------------- ------------------- ------------------ --------------------
Earnings per common 1.32 1.47 1.39
share - basis
Weighted average number
of common shares - basis 4,535 4,401 7,635
Earnings per common 1.29 1.44 1.34
share -diluted
Weighted average number
of common shares -
diluted 4,626 4,492 7,905
Distribution declared 1.43 1.64 1.73
per share and unit (1)
Distribution paid per 2.14 1.03 -
share and unit
</TABLE>

36
<PAGE>

<TABLE>
<CAPTION>
For the period
from For the year For the year
February 12 to ended ended
December 31, 1997 December 31, 1997 December 31, 1998
----------------- ----------------- -----------------
(Pro forma)
(Unaudited)
<S> <C> <C> <C>
Cash Flow Information
Cash flows provided by 13,644 16,379 30,593
operating activities
Cash flows used in 148,738 148,738 201,504
investing activities
Cash flows provided by 150,062 15,062 157,834
financing activiites

Other information
Funds from operations (2) 16,379 29,773 14,899
Cash available for 13,652 15,012 27,221
distribtuion
Weighted average common 9,030 8,842 13,052
stock and OP Units
</TABLE>
BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
---------------------------------------------------
DECEMBER 31,
---------------------------------------------------
1997 1998
<S> <C> <C>
Investment in Golf Courses $101,044 $323,500
Mortgage Notes Receivable $ 65,129 $ 72,252
Total Assets $186,306 $411,981
------------------------- -------------------------

Mortgages and Notes Payable $ 4,325 $210,634
Total Liabilities $ 7,354 $225,722
Minority Interest $ 54,625 $ 76,510
Stockholders' Equity $124,327 $109,647
Total Liabilities and Stockholders' Equity $186,306 $411,981
------------------------- -------------------------
</TABLE>

(1) The 1997 quarterly distribution declared per share and unit includes
$.41 declared in January 1998 related to the fourth quarter of 1997.

(2) In accordance with the resolution adopted by the Board of Governors of
the National Association of Real Estate Investment Trusts, Inc.
("NAREIT"), Funds From Operations represents net income (loss)
(computed in accordance with generally accepted accounting principles),
excluding gains of real property, and after adjustments for
unconsolidated partnerships and joint ventures. Funds From Operations
should not be considered as an alternative to net income or other
measurements under generally accepted accounting principles as an
indicator of operating performance or to cash flows from operating,
investing or financial activities as a measure of liquidity. Funds From
Operations does not reflect working capital changes, cash expenditures
for capital improvements or principal payments on indebtedness. The
Company believes that Funds From Operations is helpful to investors as
a measure of the performance of an equity REIT, because, along with
cash flows from operating activities, financing activities and
investing activities, it provides investors with an understanding of
the ability of the Company to incur and service debt and make capital
expenditures. Compliance with the NAREIT definition of Funds From
Operations is voluntary. Accordingly, the Company's calculation of
Funds From Operations in accordance with NAREIT definition may be
different than similarly titled measures used by other REITs.

37
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

"Management's Discussion and Analysis of Financial Condition and
Results of Operations," and other sections of this report contain various
"forward-looking statements" which represent the Company's expectations
concerning future events including the following: statements regarding the
Company's continuing ability to target and acquire high-quality golf courses;
the expected availability of the Credit Facility, Bridge Loan and other debt
and equity financing; the Lessees' and Mortgagee's future cash flows and
ability to make Lease and Mortgage Payments; results of operations and
overall financial performance and the expected tax treatment of the Company's
operations; and the Company's beliefs about continued growth in the golf
industry. Because of the foregoing factors, the actual results achieved by
the Company in the future may differ materially from the expected results
described in the forward-looking statements. The following discussion should
read in conjunction with the accompanying Consolidated Financial Statements
appearing elsewhere herein.

OVERVIEW AND FORMATION

Golf Trust of America, Inc. (the "Company") conducts business
through Golf Trust of America, L.P. (the "Operating Partnership"), of which
the Company owns 58.9 percent interest through its two wholly owned
subsidiaries and is the general partner. Larry D. Young, a director of the
Company, along with his affiliates, owns 28.8 percent of the Operating
Partnership and is a significant lessee. Operators of the golf courses, their
affiliates and officers of the Company hold the remaining interest in the
Operating Partnership.

Concurrent with the initial public offering of the Company's stock,
the Company acquired ten initial golf courses in exchange for the issuance of
4.1 million OP units, the repayment of $47.5 million of notes payable and
affiliate debt, and $6.2 million cash. The seven golf courses acquired from
Legends Golf have been accounted for at a carryover basis as Legends Golf is
considered the accounting acquirer under APB Opinion No. 16. The value of the
OP units issued and debt assumed was approximately $73.7 million greater than
the carryover basis of Legends Golf.

38
<PAGE>

The Company was formed to capitalize upon consolidation
opportunities in the ownership of upscale golf courses in the United States.
The Company's principal business strategy is to acquire upscale golf courses
and then lease the golf courses to qualified third party operators which may
include the sellers of the courses. In addition to the ability to acquire
golf courses for cash and/or the assumption of indebtedness, the Company has
the ability to issue units of limited partnership interest ("OP Units") in
the Operating Partnership. OP Units are holders are partners who have the
right ("their Redemption Right"), subject to certain terms and conditions to
convert their OP Units to shares of Common Stock, or to cash at the
discretion of the Company. When the Company acquires a golf course in
exchange for OP Units, in most instances the seller of the course does not
recognize taxable income gain until it exercises the Redemption Right. OP
Units can thus provide an attractive tax-deferred sale structure for golf
course sellers. The Company believes its has a distinct competitive advantage
in the acquisition of upscale golf courses, including those which might not
otherwise be available for purchase, because of: (i) its utilization of a
multiple independent lessee structure (ii) management's substantial industry
knowledge, experience, and relationships within the golf community, (iii) the
Company's strategic alliances with prominent golf course operators and (iv)
its ability to issue OP Units to golf course owners on a tax-deferred basis.

The Company's primary sources of revenue are lease payments under
the participating leases and mortgage payments under the participating
mortgage. The Company generally participates in the increase in gross golf
revenues over the base year. Base rent will generally increase each year
between 3% and 5%. Annual increases in lease payments are generally limited
to a maximum of 5% to 7% for the first five years of the lease term.

Management believes the principal source of growth in gross golf
revenues at the golf courses will be increased green fees, cart fees, and
other related fees (due to increases in rounds and/or rates). In order to
achieve higher revenues, management believes the lessees will need to
continue to offer golfers a high quality golf experience as it relates to the
pace of play, condition of the golf course and overall quality of the
facilities and services.

GOLF COURSE ACQUISITIONS

During the year ended December 31, 1998, the Company acquired
interests in 22 additional eighteen hole equivalent golf courses for an
aggregate of approximately $220.7 million. The price is comprised of
approximately $185.7 million in cash and repayment of indebtedness, deferred
payments of $2.3 million, the acquisition of properties subject to liens of
$18.0 million and the issuance of $14.7 million in OP Units (approximately
524,000 OP Units).

39
<PAGE>

RESULTS OF OPERATIONS OF THE COMPANY FOR THE YEAR ENDED DECEMBER 31, 1998 AND
THE PERIOD FROM FEBRUARY 12 (INCEPTION) TO DECEMBER, 1997

For the year ended December 31, 1998 and the period from February 12
to December 31, 1997, the Company received $44,384,000 and $18,727,000,
respectively, in revenue from the participating leases and from the mortgage
note receivable. The increase in revenues of $25,657,000 or 237% is due to 1)
minimum increases in rent of approximately $422,000, 2) rent of $14,735,000
from new course acquisitions and expansions subsequent to December 31, 1997,
3) $4,604,000 of increased interest from the Mortgage Note Receivable, which
was issued June 20, 1997, 4) the $369,000 increase in Participating Rent, 5)
rent of $5,527,000 for a full year of operations for 1997 acquisitions.

Expenses totaled $17,083,000 and $5,705,000 for the year ended
December 31, 1998 and the period from February 12 to December 31, 1997,
respectively. The increase of $11,378,000 or 200%, reflects 1) additional
depreciation of $8,494,000 for the acquisitions made during 1998 and a full
year of depreciation for those courses added in 1997, and 2) additional
general and administrative costs of $2,884,000 for loan cost amortization,
for amortization of restricted stock compensation, additional salaries and
administrative costs.

For the year ended December 31, 1998, interest expense was
$9,673,000, compared to $1,879,000 for the period from February 12 to
December 31, 1997. The increase for $7,794,000 reflects the increase in
outstanding borrowings from $4,325,000 at December 31, 1997 to $210,634,000
at December 31, 1998. The proceeds of the current year borrowings
($188,600,000) and $14,968,000 of the proceeds of the Company's secondary
offering were used primarily to fund $195,541,000 of the cash paid for
acquisitions and improvements and advances of $5,963,000 under the mortgage
note receivable commitment.

The loss on disposal of assets occurred when the golf carts at one
course were traded in as part of a new leasing program and at another
location where a new clubhouse was built and the existing facility was
removed.

Net income for the period from February 12 to December 31, 1997 and
the year ended December 31, 1998 was $5,969,000 and $10,606,000, respectively.

For the year ended December 31, 1998 the diluted earnings per share
was $1.34, reflecting a $0.05, or 4%, increase over the period from February
12 to December 31, 1997.

40
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY

CASH FLOWS

Cash flow from operating activities for the year ended December
31,1998 was $30,593,000 compared to $13,644,000 for the period from February
12, 1997 to December 31,1997. This reflects net income before minority
interest, plus noncash charges to income for depreciation, loan cost
amortization and working capital changes. Cash flows used in investing
activities reflect increases in the mortgage notes receivable of $5,963,000
and golf course acquisitions of $195,541,000 for the year ended December
31,1998. This compares to acquisitions and capital additions of $84,332,000
and the increase in the mortgage noted receivable for $64,406,000 for the
period from February 12 to December 31,1997. Cash flows provided by financing
activities, totaling $157,834,000 represents the net borrowing of
$188,600,000 under the Credit Facility and Bridge Loan, less dividends and
partner distributions totaling $27,135,000 for the year ended December
31,1998. This compares to the initial and follow-on offering proceeds of
$155,720,000 and borrowings of $4,325,000 to fund the 1997 acquisitions and
the participating mortgage for the period from February 12, 1997 to December
31,1997. Distributions to partners and stockholders totaled $8,535,000
represented a partial period distribution of $.21 per share for the first
quarter of 1997 and $.41 per share for the remaining quarters through
December 31,1997.

FINANCING AND CAPITAL RESOURCES

The Company has a $125.0 million unsecured Revolving Credit Facility
("Credit Facility") with a consortium of banks led by NationsBank N.A., as
agent. Currently, the Credit Facility has only interest due with the
principal balances due in February 2001. Cash borrowings under the Credit
Facility typically bear interest at an adjusted Eurodollar rate plus an
applicable margin. The applicable margin between 1.35% and 1.75% over the
Eurodollar rate and is subject to adjustment based upon achieving certain
leverage ratios. At December 31,1998, all loans outstanding under the Credit
Facility (and Bridge Loan as discussed below) were based on the Eurodollar
rate and a margin of 1.75%.

A $100.0 million Bridge Loan (the "Bridge Loan") was obtained on
July 9, 1998 with NationsBank N.A. and Bank of America National Trust and
Savings Association. The Company currently has a commitment letter with the
consortium of banks to increase availability to $200.0 million and to extend
the term of the Credit Facility. The increased Credit Facility would replace
the Bridge Loan, which would be retired. The Company expects to have this
amendment completed by the end of the second quarter of 1999.

Financial covenants include net worth, liquidity, cash flow
covenants and minimum levels of unencumbered golf course assets.
Non-financial covenants include restrictions on loans outstanding,
construction in progress, loans to officers and changes to the Board of
Directors. At the present time, these covenants have been met.

41
<PAGE>

The Company believes that its current borrowing capacity and
anticipated cash flow from operations are sufficient to meet liquidity needs
for the foreseeable future. There can be no assurance that the Company will
be able to negotiate extensions of such facilities or borrow from other
lenders on similar terms. There can be no assurance that the impact of market
conditions on the debt and equity markets will not adversely affect the
Company's future needs for capital.

The Company intends to invest in additional golf courses as suitable
opportunities arise, but the Company will not undertake investments unless
adequate sources of financing are available. The Company anticipates that
future acquisitions would be funded with debt financing provided by the
Credit Facility, the Bridge Loan, the issuance of OP Units or with proceeds
of additional equity offerings. In the future, the Company may negotiate
additional credit facilities or issue corporate debt instruments. Any debt
issued or incurred by the Company may be secured or unsecured, long-term or
short-term, fixed or variable interest rate and may be subject to such other
terms as the Board of Directors deems prudent.

The Company is currently negotiating the terms and conditions of the
sale of preferred stock with a major institutional investor. The Company
expects to close this transaction in the second quarter of 1999, although no
assurances can be given that the transaction will close.

COMMITMENTS TO LESSEES

The participating leases generally require the Company to reserve
annually between 2% to 5% of the annual gross golf revenues of the golf
courses to fund capital expenditures, which are funded on a monthly basis
from the lessees in addition to the base rent. The lessees will fund any
capital expenditures in excess of such amounts.

Under certain circumstances, the underlying base rent for a course
will be increased when the Company agrees to pay for significant capital
improvements or to expand the existing golf facilities. Of the Company's
$28.0 million capital improvement commitments, approximately $17.1 million
has been funded to date.

In limited circumstances the Company agrees to provide working
capital loans to existing lessees. These loans are evidenced by promissory
notes or as set forth in the lease agreement and bear interest at fixed rates
between 9.0% and 10.5%. Of the Company's $8.2 million working capital
commitments, approximately $2.6 million has been funded to date. Typically,
the lessee is required to increase the pledged collateral for the funded
amounts.

The Company has agreed to maintain minimum loan balances of
approximately $17.2 million for up to ten years to accommodate certain prior
owners' efforts to seek to minimize certain adverse tax consequences from
their contribution of their courses to the Company.

42
<PAGE>

NEW COURSES

The Company is in various stages of negotiation and due diligence
review for several acquisitions. Completion of these transactions is subject
to negotiation and execution of definitive documentation and certain other
customary closing conditions. No assurances can be given that the Company
will continue to pursue or complete any of these golf course acquisitions.

COMMITMENTS TO OFFICERS

The Company has agreed to make loans to officers (i) related to tax
liabilities for stock grants, (ii) for the exercise of options and (iii) for
the purchase of Company shares, totaling $3.2 million. Of this commitment,
$1.9 million has been funded to date.

43
<PAGE>

FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION

Funds From Operations and Cash Available for Distribution are
calculated as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
(UNAUDITED)
-------------------------------------------------------------------------------------------
PERIOD FROM
YEAR ENDED FEBRUARY 12 TO YEAR ENDED YEAR ENDED
DECEMBER 31,1998 DECEMBER 31,1997 DECEMBER 31,1997** DECEMBER 31,1996*
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(PRO FORMA) (PRO FORMA)
Income before minority interest..... $ 17,736 $11,767 $ 12,799 $ 8,057
Loss on sale of assets............. 370 - - -
Depreciation and amortization for
real estate assets.................. 11,667 3,132 3,580 3,080
- ---------------------------------------------------------------------------------------------------------------------------------
Funds from Operations............... 29,773 14,899 16,379 11,137
- ---------------------------------------------------------------------------------------------------------------------------------

Adjustments:
Noncash mortgage interest
and straight line rents...... (1,417) (723) (723) -
Capital expenditure reserve (net). (1,135) (524) (644) (609)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash Available for Distribution..... $ 27,221 $13,652 $ 15,012 $ 10,528
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------

</TABLE>

*1996 Pro forma information is presented as if the initial ten courses were
acquired on January 1, 1996.

** 1997 includes the Pro forma period from January 1 to February 12, 1997 and
the actual results for the period from February 12 (inception) through
December 31, 1997.

Noncash mortgage interest revenue and straight line rents represents
the difference between interest revenue on the Participating Mortgage and the
rent recognized and reported by the Company in accordance with generally
accepted accounting principles ("GAAP") and the actual cash payments received
by the Company. The participating leases generally require the Company to
reserve annually between 2% to 5% of the gross golf revenues of the golf
courses to fund capital expenditures. The lessees will fund any capital
expenditures in excess of such amounts.

In accordance with the resolution adopted by the Board of Governors
of the National Association of Real Estate Investment Trusts, Inc.
("NAREIT"), Funds From Operations represents net income (computed in
accordance with GAAP), excluding gains (or losses) from debt restructuring or
sales of property, plus depreciation of real property, and after adjustments
for unconsolidated partnership and joint ventures. Funds From Operations
should not be considered as an alternative to net income or other
measurements under GAAP as an indication of operating performance or to cash
flows from operating investing or financial activities as a measure of
liquidity. Funds From Operations does not reflect working capital changes,
cash expenditures for capital improvements or principal payments on
indebtedness. The Company believes that Funds From Operations is helpful to
investors as a measure of the performance of an equity REIT, because along
with cash flows from operating activities, financing activities and investing
activities, it provides investors with an understanding of the ability of the
Company to incur and service debt and make capital expenditures. Compliance
with the NAREIT definition of Funds From Operations is voluntary.
Accordingly, the Company's calculation of Funds From Operations in accordance
with the NAREIT definition may be different than similarly titled measures
used by other REITs.

44
<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (SFAS No. 133) which establishes new accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
statement is effective for all fiscal quarters beginning after June 15, 1999.
Management is presently assessing the impact of the adoption of SFAS No.133
on its financial position.

INFLATION

The golf course leases generally provide for initial term of 10
years with base rent and participating rent features. Base rent will increase
by a base rent escalator for each year during the first five years of the
term of each lease and for an additional five years if certain conditions are
met. All of such leases are triple net lease requiring the lessees to pay for
all maintenance and repair, insurance, utilities and services. The
participating mortgage has a 5% increase in the base interest for up to five
years, and an additional 3% for an additional five years if the performance
option is exercised. As a result, the Company believes the effect of
inflation on the Company is not material.

SEASONALITY

The golf industry is seasonal in nature because of weather
conditions and fewer available tee times in the rainy season and the winter
months. The operator of each of the daily fee golf courses may vary greens
fees based on changes in demand. The Company does not expect seasonal
fluctuation in Lessee revenues to have a significant impact on the Company's
operating result. The Company's leases require Base Rent to be paid ratably
throughout to year.

IMPACT OF YEAR 2000

The Company has completed its internal assessment and believes that
its computer system will function properly with respect to dates in the Year
2000 and thereafter.

The Company anticipates that there is a possibility of significant
business disruptions involving Year 2000 problems with its vendors and
vendors to its lessees. The Company has not completed its assessment of the
readiness of third parties where the failure to be Year 2000 compliant could
have a material impact on the Company. For instance, financial service
providers, including lenders, may incur significant costs and even temporary
shutdowns as a result of computer problems. The Company is dependent upon its
lessees to determine that their systems and applications and those of other
parties utilized by them are Year 2000 compliant.

The ability of lenders to advance funds, or lessees to operate, may
be negatively impacted. Any problems with the foregoing systems may have a
material adverse effect on the Company and results of operations. The Company
will continue to address the readiness of such third parties and to the
extent appropriate, prepare contingency plans.

45
<PAGE>

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has not entered into any transactions using derivative
commodity instruments. The Company is subject to market risk associated with
changes in interest rates. Interest rate exposure is principally limited to
the $116.125 million of debt of the Company outstanding at December 31, 1998
that is priced at interest rates that float with the market. A 25 basis point
movement in the interest rate on the floating rate debt would result in an
approximate $.290 million annualized increase or decrease in interest expense
and cash flows. The remaining debt is fixed rate debt. The Company has an
ongoing program of refinancing its floating and fixed rate debt and believes
that this program allows it to vary its ratio of fixed to floating rate debt
to respond to changing market rate conditions. Reference is made to Item 2
above and Note 7 for additional debt information.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data required by
Regulation S-X are included in this Annual Report on Form 10-K commencing on
page F-1.

ITEM 9. CHANGES IN THE COMPANY'S CERTIFIED PUBLIC ACCOUNTANT

On February 26, 1997, the Company dismissed Price Waterhouse LLP as
independent accountants. Effective February 28, 1997, the Company engaged BDO
Seidman, LLP as principal accountants. The decision to change accountants was
approved by the Audit Committee and ratified by the Board of Directors of the
Company.

The Company was formed on November 8, 1996. Its balance sheet as of
November 8, 1996 was audited by Price Waterhouse LLP. The balance sheet and
the report of Price Waterhouse LLP thereon were included in the Company's
Form S-11 which was declared effective by the Securities and Exchange
Commission on February 6, 1997. In connection with Price Waterhouse LLP's
audit of the November 8, 1996 balance sheet and through February 26, 1997,
there were no disagreements between the Company and Price Waterhouse LLP on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not
resolved to the satisfaction of Price Waterhouse LLP would have caused them
to make reference thereto in their report on the November 8, 1996 balance
sheet and there were no reportable events (as defined in Regulation S-K Item
304(a)(1)(v)).

The report of Price Waterhouse LLP on the Registrant's November 8, 1996
balance sheet did not contain an adverse opinion or a disclaimer of opinion
and the report was not qualified or modified as to uncertainty, audit scope
or accounting principles.

46
<PAGE>

PART III

CERTAIN INFORMATION REQUIRED IN PART III IS OMITTED FROM THIS REPORT BUT WILL
BE INCLUDED IN A DEFINITIVE PROXY STATEMENT WHICH THE COMPANY WILL FILE
WITHIN 120 DAYS OF THE END OF ITS FISCAL YEAR PURSUANT TO REGULATION 14A FOR
ITS ANNUAL MEETING OF SHAREHOLDERS TO BE HELD IN MAY 1999 (THE "PROXY
STATEMENT").

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information contained in the Proxy Statement under the caption
"Directors and Officers" is incorporated herein by this reference.

ITEM 11. EXECUTIVE COMPENSATION

The information contained in the Proxy Statement under the caption
"Executive Compensation" is incorporated herein by this reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information contained in the Proxy Statement under the caption
"Security Ownership of Certain Beneficial Owners and Management" is
incorporated herein by this reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information contained in the Proxy Statement under the caption
"Certain Relationships and Related Transactions" is incorporated herein by
this reference.

47
<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

a. FINANCIAL STATEMENTS

1) FINANCIAL STATEMENTS

The financial statements filed as part of this Annual Report
on Form 10-K are listed on page F-1

2) FINANCIAL STATEMENT SCHEDULES

Schedule III - Real Estate and Accumulated
Depreciation (see page S-1)
Schedule IV - Mortgage Loans on Real Estate (see page S-2)

3) EXHIBITS

The exhibits filed as part of this Annual Report on Form 10-K
are listed in the Exhibit Index that follows the financial
statements.

b. REPORTS ON FORM 8-K

No Current Reports on Form 8-K were filed during the 4th Quarter of 1998.

FINANCIAL STATEMENTS

F-1

48
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Act of 1934, the Registrant has duly caused this report for the
year ended December 31, 1998 to be signed on its behalf by the undersigned,
thereunto duly authorized, in Charleston, South Carolina, on March 26, 1999.

GOLF TRUST OF AMERICA, INC.

By: /S/ W. Bradley Blair, II
-------------------------
W. Bradley Blair, II
PRESIDENT & CHIEF EXECUTIVE OFFICER

49
<PAGE>

POWER OF ATTORNEY

We, the undersigned officers and directors of Golf Trust of America,
Inc., do hereby constitute and appoint W. Bradley Blair, II and David Dick
Joseph, and each of them, our true and lawful attorneys-in-fact and agents,
each with full power of substitution and re-substitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all
amendments to this report, and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby, ratifying and
confirming all that each of said attorneys-in-fact and agents, or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the capacities and
on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------- ---------------------------------------------------------------- ----------------------
- -------------------------------- ---------------------------------------------------------------- ----------------------
<S> <C> <C>
/s/ W. Bradley Blair, II President, Chief Executive Officer and Chairman of the Board March 26, 1999
- -------------------------------- of Directors --------------
W. Bradley Blair, II

/s/ David Dick Joseph Executive Vice President and Director March 26, 1999
- -------------------------------- --------------
David Dick Joseph

/s/ Scott D. Peters Senior Vice President and Chief Financial Officer March 26, 1999
- -------------------------------- --------------
Scott D. Peters

/s/ Larry D. Young Director March 26, 1999
- -------------------------------- --------------
Larry D. Young

/s/ Roy C. Chapman Director March 26, 1999
- -------------------------------- --------------
Roy C. Chapman

/s/ Raymond V. Jones Director March 26, 1999
- -------------------------------- --------------
Raymond V. Jones

/s/ Fred W. Reams Director March 26, 1999
- -------------------------------- --------------
Fred W. Reams

/s/ Edward L. Wax Director March 26, 1999
- -------------------------------- --------------
Edward L. Wax

</TABLE>

50
<PAGE>

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, AND REPORTS ON EXHIBIT 8-K

<TABLE>
<CAPTION>
PAGE
<S> <C>
FINANCIAL STATEMENTS OF GOLF TRUST OF AMERICA, INC.
Report of Management........................................................................... F-2
Report of Independent Certified Accountants.................................................... F-3
Consolidated Balance Sheets as of December 31, 1997 and December 31, 1998...................... F-4
Consolidated Statements of Income for the Period from February 12, 1997 (inception) through
December 31, 1997 and for the Year Ended December 31, 1998..................................... F-5
Consolidated Statements of Stockholders' Equity for the Period from February 12, 1997
(inception) through December 31, 1997 and for the Year Ended December 31, 1998................. F-6
Consolidated Statements of Cash Flows for the Period from February 12, 1997 (inception)
through December 31, 1997 and the Year Ended December 31, 1998................................. F-7
Notes to Consolidated Financial Statements..................................................... F-9
GOLF TRUST OF AMERICA, INC. 1998 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN (1)
Report of Independent Certified Accountants.................................................... F-26
Statement of Financial Condition as of December 31, 1998....................................... F-27
Statement of Financial Changes in Plan Equity for the Period from
March 1, 1998 (inception) to December 31, 1998................................................. F-28
Notes to Financial Statements.................................................................. F-29
FINANCIAL STATEMENTS OF LEGENDS GOLF(2)
Report of Independent Certified Public Accountants............................................. F-32
Combined Balance Sheets as of December 31, 1997 and December 31, 1998.......................... F-33
Combined Statements of Operations for the Year Ended December 31,
1996, for the Year Ended December 31, 1997 and for the Year Ended
December 31, 1998.............................................................................. F-34
Combined Statements of Owner's Equity for the Year Ended December 31,
1996, for the Year Ended December 31, 1997 and for the Year Ended
December 31, 1998.............................................................................. F-35
Combined Statements of Cash Flows for the Year Ended December 31,
1996, for the Year Ended December 31, 1997 and for the Year Ended
December 31, 1998.............................................................................. F-36
Notes to Combined Financial Statements......................................................... F-37

REPORTS ON FORM 8-K
EXHIBITS
</TABLE>

(1) These financial statements are included here in lieu of filing a
separate Annual Report on Form 11-K.

(2) These financial statements are included here because of the significance
of Legends Golf as a lessee and the relationship of Larry D. Young, a
director of the Company and a significant OP Unit holder.

<PAGE>

REPORT OF MANAGEMENT

To the Directors and Stockholders of Golf Trust of America, Inc.:

The consolidated financial statements and other financial information
of Golf Trust of America, Inc. in this report was prepared by management that is
responsible for their contents. They reflect amounts based upon management's
best estimates and informed judgments. In management's opinion, the financial
statements present fairly the financial position, results of operations and cash
flows of the Company in conformity with generally accepted accounting
principles.

The Company maintains a system of internal accounting controls and
procedures which is intended, consistent with reasonable cost, to provide
reasonable assurance that transactions are executed as authorized, that they are
included in the financial records in all material respects, and that
accountability for assets is maintained. The accounting controls and procedures
are supported by careful selection and training of personnel and a continuing
management commitment to the integrity of the system.

The financial statements have been audited to the extent required by
generally accepted auditing standards by BDO Seidman, LLP independent auditors.
The independent auditors have evaluated the Company's internal control structure
and performed tests of procedures and accounting records in connection with the
issuance of their report on the fairness of the financial statements.

The Board of Directors has appointed an Audit Committee composed
entirely of directors who are not employees of the Company. The Audit Committee
meets with representatives of management and the independent auditors, both
separately and jointly. The Committee discusses with the independent auditors
and approves in advance the scope of the audit, reviews with the independent
auditors the financial statements and their auditor's report, consults with and
reviews management's administration of the system of internal accounting
controls. The Committee reports to the Board on its activities and findings.

/s/ W. BRADLEY BLAIR, II /s/ SCOTT D. PETERS
- ------------------------ -------------------
W. Bradley Blair, II Scott D. Peters
Chairman, President and Chief Executive Officer Senior Vice President
and Chief Financial Officer

F-2
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Directors and Stockholders of Golf Trust of America, Inc.:

We have audited the accompanying consolidated balance sheets of Golf
Trust of America, Inc. and subsidiaries as of December 31, 1997 and 1998 and the
related consolidated statements of income, stockholders' equity and cash flows
for the period from February 12, 1997 (inception) through December 31, 1997 and
the year ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Golf Trust
of America, Inc. at December 31, 1997 and 1998 and the results of its operations
and its cash flows for the period from February 12, 1997 (inception) through
December 31, 1997 and the year ended December 31, 1998 in conformity with
generally accepted accounting principles.

March 12, 1999
Charlotte, North Carolina /s/BDO SEIDMAN, LLP

F-3
<PAGE>

GOLF TRUST OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1998
---------------------------------
<S> <C> <C>
ASSETS

Property and equipment (Notes 1, 3 and 7):
Land............................................................................ $ 25,796 $ 55,462
Golf course improvements........................................................ 58,494 171,348
Buildings and improvements...................................................... 22,199 77,629
Furniture, fixtures, and equipment.............................................. 8,556 44,756
--------- ---------
Total property and equipment...................................................... 115,045 349,195
Less accumulated depreciation................................................... 14,001 25,695
--------- ---------
Property and equipment, net....................................................... 101,044 323,500
--------- ---------
Mortgage notes receivable (Notes 4 and 6)......................................... 65,129 72,252
Cash and cash equivalents ........................................................ 14,968 1,891
Receivable from affiliates (Note 13).............................................. 1,004 1,030
Other assets (Note 6)............................................................. 4,161 13,308
--------- ---------
Total assets...................................................................... $ 186,306 $ 411,981
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY

Debt (Note 7)..................................................................... $ 4,325 $ 210,634
Accounts payable and other liabilities............................................ 3,029 15,190
--------- ---------
Total liabilities................................................................. 7,354 225,824
--------- ---------

Commitments (Note 4, 6 and 7)

Minority interest (Note 12)....................................................... 54,625 76,510
--------- ---------

Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized,
no shares issued............................................................... - -
Common stock, $.01 par value, 90,000,000 shares authorized,
7,610,755 and 7,637,488 shares issued and outstanding, respectively............ 76 76
Additional paid-in capital...................................................... 127,488 120,253
Accumulated earnings (dividends in excess of accumulated earnings).............. 1,774 (3,958)
Unamortized restricted stock compensation (Note 8).............................. (1,713) (1,533)
Note receivable from stock sale (Note 4)........................................ (3,298) (3,298)
Loans to officers (Note 8)...................................................... - (1,893)
--------- ---------
Stockholders' equity.............................................................. 124,327 109,647
--------- ---------
Total liabilities and stockholders' equity........................................ $ 186,306 $ 411,981
--------- ---------
--------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

F-4

<PAGE>

GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 12
(INCEPTION)
THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1998
---------------------------------
<S> <C> <C>
REVENUES (Notes 4 and 5):
Rent from affiliates (Note 13)........................................ $ 10,802 $ 12,365
Rent.................................................................. 3,607 23,097
Mortgage interest .................................................... 4,318 8,922
-------- --------
Total revenues.......................................................... 18,727 44,384
-------- --------

EXPENSES:
Depreciation and amortization ........................................ 3,173 11,667
General and administrative............................................ 2,532 5,416
-------- --------
Total expenses.......................................................... 5,705 17,083
-------- --------
Operating income........................................................ 13,022 27,301
-------- --------

OTHER INCOME (EXPENSE):
Interest income....................................................... 624 478
Interest expense...................................................... (1,879) (9,673)
Loss on disposal of assets............................................ - (370)
-------- --------
Total other income (expense)............................................ (1,255) (9,565)
-------- --------
Net income before minority interest..................................... 11,767 17,736
Income applicable to minority interest.................................. 5,798 7,130
-------- --------
Net income.............................................................. $ 5,969 $ 10,606
-------- --------
-------- --------
Basic earnings per share................................................ $ 1.32 $ 1.39
-------- --------
-------- --------
Weighted average number of shares - basic............................... 4,535 7,635
-------- --------
-------- --------
Diluted earnings per share.............................................. $ 1.29 $ 1.34
-------- --------
-------- --------
Weighted average number of shares - diluted............................. 4,626 7,905
-------- --------
-------- --------
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>

GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED
EARNINGS
(DIVIDENDS
IN EXCESS UNEARNED NOTE
COMMON STOCK ADDITIONAL OF RESTRICTED RECEIVABLE LOANS TOTAL
----------------- PAID-IN ACCUMULATED STOCK FROM STOCK TO STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS) COMPENSATION SALE OFFICERS EQUITY
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, February 12, 1997..... - $ - $ - $ - $ - $ - $ - $ -
Proceeds from Initial Public
Offering....................... 3,910 39 82,071 - - - - 82,110
Payment of underwriters
discount and initial offering
costs.......................... - - (9,055) - - - - (9,055)
Issuance of shares in
exchange for note.............. 159 2 3,296 - - (3,298) - -
Issuance of shares for
acquisition.................... 22 - 600 - - - - 600
Issuance of restricted stock... 70 1 1,827 - (1,828) - - -
Proceeds from follow-on
offering....................... 3,450 34 88,372 - - - - 88,406
Payment of underwriters
discount and costs............. - - (5,741) - - - - (5,741)
Amortization of restricted
stock Compensation............. - - - - 115 - - 115
Adjustment for minority
interest in operating
partnership.................... - - (33,882) - - - - (33,882)
Dividends...................... - - - (4,195) - - - (4,195)
Net income..................... - - - 5,969 - - - 5,969
--------------------------------------------------------------------------------------------
BALANCE, December 31, 1997..... 7,611 76 127,488 1,774 (1,713) (3,298) - 124,327
--------------------------------------------------------------------------------------------
Issuance of restricted stock 21 - 607 - (607) - - -
Issuance of shares for option
exercise and employee stock
purchase plans................. 5 - 159 - - - - 159
Amortization of restricted
stock compensation............. - - - - 787 - - 787
Loans to officers.............. - - - - - - (1,893) (1,893)
Adjustment for minority
interest in operating
partnership.................... - - (8,001) - - - - (8,001)
Dividends...................... - - - (16,338) - - - (16,338)
Net income..................... - - - 10,606 - - - 10,606
--------------------------------------------------------------------------------------------
BALANCE, December 31, 1998..... 7,637 $ 76 $120,253 $(3,958) $(1,533) $(3,298) $(1,893) $109,647
--------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE>

GOLF TRUST OF AMERICA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 12 (INCEPTION)
THROUGH YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31,
1998
---------------------------------------------------
---------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................ $ 5,969 $ 10,606
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization................................... 3,173 11,667
Loss on disposal of assets...................................... - 370
Loan cost amortization.......................................... 280 588
Straight-line interest and rent................................. (723) (1,417)
Amortization of restricted stock compensation................... 115 787
Income applicable to minority interest.......................... 5,798 7,130
Increase in receivable from affiliate........................... (1,004) (26)
Increase in other assets........................................ (2,993) (8,265)
Increase in accounts payable and other liabilities.............. 3,029 9,153
---------------------------------------------------
Net cash provided by operating activities........................... 13,644 30,593
---------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Golf course acquisitions and improvements......................... (84,332) (195,541)
Increase in mortgage notes receivable............................. (64,406) (5,963)
---------------------------------------------------
Net cash used in investing activities............................... (148,738) (201,504)
---------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of credit.................................. 4,325 120,675
Payments on notes ................................................ - (292)
Bridge loan proceeds.............................................. - 67,925
Loan fees......................................................... (1,448) (1,213)
Loans to officers................................................. - (1,853)
Net proceeds from issuance of common stock........................ 155,720 159
Redemption of OP Units............................................ - (432)
Distributions to partners......................................... (4,340) (10,797)
Dividends paid.................................................... (4,195) (16,338)
---------------------------------------------------
Net cash provided by financing activities........................... 150,062 157,834
---------------------------------------------------
Net increase (decrease) in cash and cash equivalents................ 14,968 (13,077)
---------------------------------------------------
Cash and cash equivalents, beginning of period...................... - 14,968

Cash and cash equivalents, end of period............................ $ 14,968 $ 1,891
---------------------------------------------------
---------------------------------------------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE>

<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 12 YEAR ENDED
(INCEPTION) DECEMBER 31, 1998
THROUGH
DECEMBER 31, 1997
----------------------------------------
----------------------------------------
<S> <C> <C>
NON-CASH INVESTING AND FINANCING TRANSACTIONS
Net assets of Legends Golf transferred to the Company................. $ 981 $ 3,296
Accruals and deferrals of payment for property and equipment.......... $ - $ 4,523
OP Units issued in golf course acquisitions........................... $ 18,304 $ 14,687
Common stock issued in golf course acquisition........................ $ 600 $ -
Debt acquired with acquisitions....................................... $ - $ 18,001

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid during the period....................................... $ 1,829 $ 9,243
</TABLE>

See accompanying notes to consolidated financial statements.

F-8

<PAGE>

GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BASIS OF PRESENTATION.

Golf Trust of America, Inc. (the "Company") was incorporated in
Maryland on November 8, 1996. The Company is a self-administered real estate
investment trust ("REIT") formed to capitalize upon consolidation
opportunities in the ownership of upscale golf courses in the United States.
The principal business strategy of the Company is to acquire upscale golf
courses and to lease the golf courses pursuant to long-term triple net leases
to qualified third party operators, including affiliates of the sellers.
Title to the acquired courses, is held by Golf Trust of America, L.P., a
Delaware limited partnership (the "Operating Partnership" or "OP") or a
wholly owned subsidiary of the Operating Partnership. Golf Trust of America,
Inc., through its wholly owned subsidiaries GTA GP, Inc. ("GTA GP") and GTA
LP, Inc. ("GTA LP"), holds a 59.2 percent interest in the Operating
Partnership. GTA GP is the sole general partner of the Operating Partnership
and owns a 0.2 percent interest therein. GTA LP is a limited partner in the
Operating Partnership and owns a 59.0 percent interest therein. Larry D.
Young, a director of the Company, along with his affiliates, owns 28.8
percent of the Operating Partnership and is a significant lessee. Operators
of the golf courses, their affiliates and officers of the Company hold the
remaining interest in the Operating Partnership.

The Company commenced operations on February 12, 1997 with the
completion of its initial public stock offering ("IPO") which raised net
proceeds of approximately $73.0 million through the sale of 3,910,000 shares of
common stock. The Company contributed the net proceeds of the IPO to the
Operating Partnership in exchange for a then 48.6 percent interest in the
Operating Partnership. Concurrently with the closing of the IPO, the Operating
Partnership acquired ten golf courses in exchange for the issuance of 4.1
million OP Units, the repayment of $47.5 million of related debt and $6.2
million in cash. Seven of the courses were acquired from Legends Golf, a group
of companies controlled by Larry D. Young in exchange for 3,738,556 OP Units and
the repayment of debt. The courses acquired from Legends Golf have been
accounted for at a carryover basis as Legends Golf is considered the accounting
acquirer under APB Opinion No. 16. The value of the OP Units issued and debt
assumed was approximately $73.7 million greater than the carryover basis of
Legends Golf. In November 1997, the Company completed a follow-on equity
offering of 3,450,000 shares of common stock. The Company contributed the net
proceeds of approximately $82.7 million to the Operating Partnership to repay
approximately $60.6 million under the credit facility that had been used
primarily for golf course acquisitions and for golf course acquisitions
subsequent to the offering.

In order for the Company to maintain its qualification as a REIT, not
more than 50% in value of its Common Stock may be owned, directly or
constructively, by five or fewer individuals. For the purpose of preserving the
Company's REIT qualification, the Certificate of Incorporation prohibits direct
or constructive ownership of more than 9.8% of the Common Stock by any person.
Thus, although an OP Unit is convertible into a share of Common Stock, the
conversion of the majority of the OP Units owned by affiliates of Larry D. Young
is restricted by the Company through these ownership limitations in order to
preserve its REIT status.

F-9
<PAGE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts
of the Company, the Operating Partnership and their wholly owned subsidiaries.
All significant inter-company transactions and balances have been eliminated in
consolidation.

CASH EQUIVALENTS

The Company considers all highly liquid debt instruments with an
original maturity of three months or less to be cash equivalents.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company calculates the fair value of financial instruments and
includes this additional information in the notes to the consolidated financial
statements when the fair value is different than the carrying value. The
carrying value of receivables, the mortgage notes receivable and liabilities
reasonably approximates the fair value. The estimated fair value has been
determined using available market information and appropriate valuation
methodologies. However, considerable judgement is required in interpreting
market data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the Company
could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.

CONCENTRATION OF CREDIT RISK

The Company has cash and cash equivalents in a financial institution
which is insured by the Federal Deposit Insurance Corporation (FDIC) for amounts
up to $100,000 per institution. At December 31, 1998 and 1997, the Company had
amounts in excess of FDIC limits. The Company limits its risk by placing its
cash and cash equivalents in a high quality financial institution. Rents and
interest receivable from the Company's lessees and mortgagee, payable in arrears
for the preceding month, were collected subsequent to the issuance of this
report.
Concentration of credit risk with respect to the Company's portfolio of
45 golf courses for 1998 was:

<TABLE>
<CAPTION>
Revenue
Amounts
(in thousands) Percentage
--------------------------- ------------------------ ----------------------
<S> <C> <C>
Florida $ 16,173 36.4%
South Carolina (1) $ 9,769 22.0%
Virginia (1) $ 3,801 8.6%
Illinois $ 3,508 7.9%
California $ 2,733 6.2%
Other $ 8,400 18.9%
--------------------------- ------------------------ ----------------------

-------------------------- ------------------------ -----------------------
Total $ 44,384 100.0%
-------------------------- ------------------------ -----------------------
</TABLE>

(1) The courses located in VA and in the Myrtle Beach areas of NC and SC
operated by Legends Golf comprised approximately $12,365,000 in revenue or 27.8%
of the total revenues.

F-10
<PAGE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D).

CONCENTRATION OF CREDIT RISK (CONT'D)

The Company mitigates concentration of credit risk with respect to its
leases by requiring collateral of up to 15% of the initial purchase price. The
Company has assessed the credit worthiness of its lessees and is continually
evaluating and monitoring the ongoing and additional collateral requirements.
These collateral requirements are adjusted annually for working capital loans to
certain lessees and for capital improvements made at particular properties.

The Company is also subject to a concentration of credit risk from the
participating mortgage. The Company has evaluated the credit worthiness of the
borrower and its affiliates and has obtained a security interest in the property
and equipment of the borrower. The Company has also obtained a limited guarantee
of the debt service from the operator of the resort.

PROPERTY AND EQUIPMENT

Property and equipment is carried at the lower of cost or net
realizable value (except for the golf courses acquired from Legends Golf that
are carried at the prior basis of Legends Golf). Cost includes purchase price,
closing costs and other direct costs associated with the purchase. Depreciation
is computed on a straight-line basis over the estimated useful lives of the
assets as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------
<S> <C>
Golf course improvements 15 years
--------------------------------------------------------------------
Buildings and improvements 30 years
--------------------------------------------------------------------
Furniture, fixtures, and equipment 3-8 years
--------------------------------------------------------------------
</TABLE>

The leases presently provide that at the end or termination of the
existing leases, all improvements and fixtures placed on the rental property,
become property of the Company. In addition, the leases provide for a capital
replacement reserve to be established by the Company for each property. The
Company will approve disbursements from this fund for capital improvements to
the properties and the acquisition of equipment.

The Company assesses whether there has been a permanent impairment in
the value of rental property by considering factors such as expected future
operating income, trends and prospects, as well as the effects of demand,
competition and other economic factors. Such factors include a lessee's ability
to perform its duties and pay rent under the terms of the lease. If the property
was leased at a significantly lower rent, the Company may recognize a permanent
impairment of loss if the income stream were not sufficient to recover its
investment. Such a loss would be determined as the difference between the
carrying value and the fair value of the property. Management believes no
permanent impairment has occurred in its net property carrying values.

LOAN COSTS

Loan costs, included in other assets, are amortized over the
contractual term of the agreement. Accumulated amortization of these costs at
December 31, 1998 and 1997 was approximately $868,000 and $280,000,
respectively.

REVENUE RECOGNITION

The Company recognizes rental revenue on an accrual basis over the
terms of the leases. The Company recognizes interest income ratably over the
term of the loan.

F-11
<PAGE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D).

INCOME TAXES

The Company qualifies as a real estate investment trust ("REIT") under the
Internal Revenue Code of 1986, as amended (the "Code"). A REIT will generally
not be subject to federal income taxation to the extent that it distributes at
least 95% of its taxable income to its stockholders and complies with other
requirements. The Company paid distributions to stockholders of $2.14 per share
in 1998, of which $2.03 was ordinary income and $.11 was return of capital. The
Company paid distributions to stockholders of $1.03 per share in 1997 that was
ordinary income.

ACCOUNTING FOR STOCK-BASED COMPENSATION

The Company has adopted the disclosure provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. The Company uses the "intrinsic value" method of accounting for
its plan in accordance with Accounting Principle Board (APB) Opinion No. 25,
and, therefore, recognized no compensation expense for stock opinions. For
disclosure purposes only, the Black-Scholes option-pricing model was used to
calculate the "fair values" of stock options.

USE OF ESTIMATES

The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

F-12
<PAGE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D).

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for fiscal quarters of fiscal
years beginning after June 15, 1999. SFAS No. 133 requires recording all
derivative instruments as assets or liabilities measured at fair value. The
Company is presently evaluating the impact of this statement on its financial
statements.

3. ACQUISITION OF GOLF COURSES

The following is a summary of the acquisitions in 1998:

<TABLE>
<CAPTION>
Initial
Acquisition Investment
Date Course Name Location (In thousands)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1/2/98 Bonaventure- Green Monster and The Resort Course Fort Lauderdale, FL $ 24,500
1/16/98 Mystic Creek Golf Club & Banquet Center Dearborn, MI 10,000
2/1/98 Emerald Dunes Golf Course West Palm Beach, FL 22,400
3/6/98 Sandpiper Golf Course (i) Santa Barbara, CA 36,500
3/9/98 Persimmon Ridge Country Club Louisville, KY 7,500
5/22/98 Eagle Ridge Inn & Resort Galena, IL 47,000
5/28/98 Tierra Del Sol Golf Course Albuquerque, NM 3,600
6/22/98 Silverthorn Country Club Brooksville, FL 4,700
7/10/98 Polo Trace Golf and Country Club Delray Beach, FL 12,300
7/17/98 Ohio Prestwick Country Club Akron, OH 6,400
8/28/98 Osage National Golf Course Lake of the Ozarks, MO 11,200
9/15/98 Sweetwater Country Club Orlando, FL 5,000
9/15/98 Wekiva Golf Club Orlando, FL 6,500
9/18/98 Cypress Creek Country Club Boynton Beach, FL 4,200
10/13/98 Cooks Creek Golf Course Ashville, OH 6,100
12/14/98 Brentwood Country Club White Lake, MI 7,000
12/22/98 Palm Desert Country Club Palm Desert, CA 5,800

-----------------
$ 220,700
-----------------
</TABLE>

(i) Includes adjacent development site of 14 acres

For the year ended December 31, 1998, the Company has
purchased 22 golf courses for an aggregate initial investment of approximately
$185.7 million in cash and repayment of indebtedness, deferred payments of $2.3
million, the assumption of properties subject to liens of $18.0 million and the
issuance of $14.7 million in OP Units (approximately 524,000 OP Units).

F-13
<PAGE>

4. MORTGAGE NOTES RECEIVABLE

On June 23, 1997, the Operating Partnership closed and funded an initial
$69.975 million participating loan to Golf Host Resorts, Inc. ("Golf Host
Resorts"), which is affiliated with Starwood Capital Group LLC. The loan is
secured by the Innisbrook Resort, a 63-hole destination golf and conference
facility located near Tampa, Florida. The additional collateral includes, cash,
excess land at the Innisbrook Resort and a security interest in the Tamarron
Golf Course , which may be released upon the achievement of certain performance
levels. The operator of the resort, Westin, has guaranteed up to $2.5 million of
debt service for each of the first five years. The initial loan of $69.975
million is being followed by a $9 million loan, which is being used for a
nine-hole expansion and other improvements to the Innisbrook Resort facilities.

The loan term is 30 years, with an initial base interest rate of 9.63% per
annum, annual increases (of at least 5% but no more than 7%) in the interest
payment for the first five years, and a participating interest feature
throughout the term based upon the growth in revenues, if any, over the base
year. Participating interest of $243,000 was received for the year ended
December 31, 1998 and none for 1997.

Golf Host Resorts used $8,975,000 of the proceeds of the loan to purchase
274,039 OP Units, 159,326 shares of common stock of the Company and an option to
purchase an additional 150,000 shares of common stock of the Company at a price
(subject to certain adjustments) of $26 per share, exercisable before December
31, 1999 (subject to extension in certain circumstances). The $5,677,000 used to
purchase the OP Units has been recorded as a reduction in minority interest and
the $3,298,000 used to purchase common stock has been recorded as a reduction of
stockholders' equity. The OP Units and 79,663 shares are pledged as collateral
against the loan.

The Company recognizes interest income on a straight-line basis. Interest
income in excess of the cash received for this mortgage recognized was
approximately $1,160,000 and $723,000, respectively, for the year ended 1998 and
for the period from February 12 to December 31, 1997.

F-14
<PAGE>

5. LEASES

The non-cancelable leases generally provide for the Company to receive the
greater of the base rent escalation or an amount equal to Participating Rent
plus the Base Rent Escalator payable under each lease. Participating Rent will
generally be paid to the company each year in the amount, if any, by which the
sum of 33 1/3% of Gross Golf Revenue exceeds the cumulative Base Rent Escalation
since the commencement date of such leases. The Base Rent generally increases
annually by the lesser of (i) 3% to 5% or (ii) a multiple of the change in the
Consumer Price Index ("CPI"). Annual increases in lease payments are generally
limited to 5% to 7% during the first five years of the lease terms.
Participating rent was $657,000 for the year ended December 31, 1998 compared to
$280,000 for the period from February 12 through December 31, 1997.
Scheduled future minimum rents to be received by the Company under the
Leases are as follows for the year ending December 31:

<TABLE>
<CAPTION>
(in thousands) Amount
--------------------- ------------
<S> <C>
1999 $ 42,724
2000 42,983
2001 43,255
2002 39,536
2003 37,506
Thereafter $104,526
--------------------- ------------
</TABLE>

6. COMMITMENTS

LESSEES

Typically, the Company leases its golf courses to affiliates of the
prior owners and other qualified operators under non-cancelable lease agreements
for an initial period of ten years with options to extend the term of each lease
up to six consecutive times for a period of 5 years. From the minimum lease
payments, the Company is generally required to make available a reserve of 2% to
5% of the annual gross golf revenue of each course for capital expenditure
reimbursement to the lessee subject to approval by the Company. The capital
expenditure reserve is used for replacement and enhancement of the existing
facilities and is allocated to short and long term categories and therefore the
balance may not be currently available to the lessees. At December 31, 1998, the
amount reserved was $1,105,000 compared to $524,000 for December 31, 1997.

Under certain circumstances, the underlying base rent for a course will
be increased when the Company agrees to pay for significant capital improvements
or to expand the existing facilities. Of the Company's $28.0 million capital
improvement commitments, approximately $17.1 million has been funded to date.

F-15
<PAGE>

6. COMMITMENTS (CONT'D)

In limited circumstances the Company agrees to provide working capital
loans to existing lessees. Working capital lines are evidenced by promissory
notes or as set forth in the lease agreement and bear interest at fixed rates
between 9.0% and 10.5%. Of the Company's $8.2 million working capital
commitments, approximately $2.6 million has been funded to date. Typically, the
lessee is required to increase the pledged collateral for the funded amounts.

In summary, the Company has currently funded $19.7 million of these
commitments, and subject to certain conditions, anticipates it will fund an
additional $16.5 million over the next three years.

The Company has agreed to maintain minimum loan balances of
approximately $17.2 million for up to ten years to accommodate certain prior
owners' efforts to seek to minimize certain adverse tax consequences from their
contribution of their courses to the Company.

Under the Performance Option for the Participating Leases, during
years three through five of each Participating Lease, the operator or its
affiliate, subject to certain qualifications and restrictions, may elect one
time to increase the Base Rent in order to receive additional OP Units or
Common Stock. An operator's ability to exercise the Performance Option and
the number of OP Units or Common Stock issuable to such Prior Owner in
connection therewith, will depend on future operating results at the
applicable Golf Course and therefore cannot be determined in advance.

OTHER COMMITMENTS

The Company is in various stages of negotiation and due diligence
review for several acquisitions. Completion of these transactions is subject to
negotiation and execution of definitive documentation and certain other
customary closing conditions. No assurances can be given that the Company will
continue to pursue or complete any of these golf course acquisitions.

F-16

<PAGE>

GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. DEBT

Debt consists of the following at December 31:
<TABLE>
<CAPTION>
------------------------------------------------------------- ------------------- ------------------
(In thousands) 1997 1998
------------------------------------------------------------- ------------------- ------------------
<S> <C> <C>
REVOLVING CREDIT FACILITY $4,325 $125,000
$125.0 million unsecured revolver with weighted average
interest rates of 6.7% maturing February 2001

BRIDGE LOAN - 67,925
$100.0 million unsecured with weighted average interest
rates of 6.7% maturing April, 1999

NOTES PAYABLE - 17,709
Secured financing with net book value of the properties of
$33.7 million with interest rates from 8.75% to 10%
maturing through November 2016
------------------------------------------------------------- ------------------- ------------------
Total $4,325 $210,634
------------------------------------------------------------- ------------------- ------------------
</TABLE>

REVOLVING CREDIT FACILITY AND BRIDGE LOAN.

The Company has a $125.0 million unsecured Revolving Credit Facility
("Credit Facility") with a consortium of banks led by NationsBank N.A., as
agent. Currently, the Credit Facility has only interest due with the
principal balance due in February 2001. Cash borrowings typically bear
interest at an adjusted Eurodollar rate plus an applicable margin. The
applicable margin is between 1.35% and 1.75% over the Eurodollar rate and is
subject to adjustment based upon achieving certain leverage ratios. At
December 31, 1998, all amounts outstanding under the Credit Facility (and
Bridge Loan as discussed below) were based on the Eurodollar rate and a
margin of 1.75%.

A $100.0 million Bridge Loan (the "Bridge Loan") was obtained on
July 9, 1998 with NationsBank N. A. and Bank of America National Trust and
Savings Association. The Bridge Loan has the same interest rates and covenant
requirements as the $125.0 million Credit Facility. The Company currently has
a commitment letter with the consortium of banks to increase availability to
$200.0 million and to extend the term of the Credit Facility. The increased
Credit Facility would replace the Bridge Loan, which would be retired. The
Company expects to have this amendment completed by the the second quarter of
1999.

F-17
<PAGE>

GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. DEBT (CONT'D).

REVOLVING CREDIT FACILITY AND BRIDGE LOAN (CONT'D).

Financial covenants include net worth, liquidity, cash flow
covenants and minimum levels of unencumbered golf course assets.
Non-financial covenants include restrictions on loans outstanding,
construction in progress, loans to officers and changes in the Board of
Directors. At the present time, these covenants have been met.

DEBT MATURITIES

Aggregate maturities of long-term debt for each of the five years
following December 31, 1998, are as follows:

<TABLE>
<CAPTION>
------------------------------------------- --------------------
(IN THOUSANDS) AMOUNT
------------------------------------------- --------------------
<S> <C>
------------------------------------------- --------------------
1999 $73,251
------------------------------------------- --------------------
2000 $335
------------------------------------------- --------------------
2001 $125,365
------------------------------------------- --------------------
2002 $398
------------------------------------------- --------------------
2003 $435
------------------------------------------- --------------------
Thereafter $10,850
------------------------------------------- --------------------
</TABLE>

As previously discussed, when the Credit Facility is increased to $200.0
million, $72,944,000 of the amounts due in 1999 would be extended until 2001.

INTEREST RATE SWAP AGREEMENT

In September 1998, the Company entered into an interest rate swap
agreement with NationsBank N.A. to reduce the impact of changes in interest
rates on its floating rate Credit Facility. The agreement matures in February
2000 and has a total notional amount of $76,800,000. The swap agreement
effectively converts a portion of the Company's floating rate debt to a fixed
rate. The Company pays NationsBank a fixed rate of 5.08% per annum (for an
all inclusive rate of 6.83% for December 31, 1998). The Company is exposed to
credit loss in the event of nonperformance by NationsBank, however the
Company does not anticipate nonperformance by NationsBank.

F-18
<PAGE>

GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. STOCK OPTIONS AND AWARDS

EMPLOYEE STOCK OPTIONS AND AWARDS

The Compensation Committee of the Board of Directors ("Compensation
Committee") determines compensation, including stock options and awards.
Options are generally awarded with the exercise price equal to the market
price at the date of grant and become exercisable in three to five years.

In February 1997, the Company adopted the 1997 Stock Incentive Plan
(the "Stock Incentive Plan"). Under the Stock Incentive Plan, the
Compensation Committee granted stock awards relating to 500,000 shares of
Common Stock which vest ratably over a period of three years from the date of
grant and expire ten years from the date of grant.

In February 1997, the Company adopted the 1997 Non-Employee
Directors' Plan (the "Directors' Plan"). Under the Directors' Plan, the
Compensation Committee is authorized to grant stock awards to purchase up to
100,000 shares of the Company's common stock at prices equal to the fair
value of the stock on the date of grant. On February 6, 1997, 1998 and 1999,
respectively, 20,000 options were granted and vested immediately. As of
February 8, 1999, 40,000 shares remain available for options and restricted
stock grants.

In May 1997, the Company adopted the 1997 Stock-Based Incentive Plan
(the "New 1997 Plan"). Under the New 1997 Plan, the Compensation Committee is
authorized to grant awards of up to 600,000 shares of the Company's common
stock. Option grants generally vest ratably over a period of three years from
the date of grant and expire ten years from the date of grant. At December
31, 1998, 14,061 shares remained available for options and restricted stock
grants.

The New 1997 Plan provides that the Company may grant stock options
or restricted stock to executive officers and other key employees. Restricted
stock is subject to restrictions determined by the Company's Compensation
Committee. The shares of restricted stock will be sold at a purchase price
equal to $0.01 and will vest over four-year period. Restricted stock has the
same dividend and voting rights as other common stock and is considered to be
currently issued and outstanding.

On September 19, 1997, the Company issued 70,000 restricted common
shares for $.01 when the market price was $26.1875 to officers of the Company
under the New 1997 Plan. On January 1, 1998 the Company issued 20,939
restricted common shares for $0.01 when the market price was $29.00 to
officers of the Company under the New 1997 Plan. Subsequent to these
issuances, loans of approximately $772,000, secured by OP Units and common
stock, with interest rates of 4.4% to 6.0% due were made to officers of the
Company for the payment of related taxes. Compensation expense is determined
by reference to the market value on the date of grant and is being amortized
on a straight-line basis over the vesting period. Such expense amounted to
approximately $787,000 and $115,000 for the year ended December 31, 1998 and
for the period ended 1997, respectively.

F-19
<PAGE>

GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. STOCK OPTIONS AND AWARDS (CONT'D).

On November 11, 1998, the Company adopted the 1998 Stock-Based
Incentive Plan (the "1998 Plan") subject to approval by stockholders.
Concurrently with the plan approval,, the Compensation Committee granted
350,000 of the authorized 500,000 options.. These generally vest ratably over
a period of five years from the date of grant and expire ten years from the
date of grant.

The Company has agreed to make additional loans of $2.0 million to
the Company's executive officers, the proceeds of which (i) must be used (at
least sixty percent in total) for the purchase of Company stock on the open
market and (ii) the remainder to be used for taxes. Loans of $1,121,000 have
been made to officers of the Company to purchase stock on the open market.
These loans are collateralized by the shares purchased, bear interest at
4.51% and are due at the earlier of the time of sale greater than $25 per
share, within 270 days of employee termination or 5 years.

Transactions involving the plans are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
Option Shares SHARES EXERCISE PRICE
------------------ ------------ -----------------
<S> <C> <C>
Outstanding at February 12, 1997................................. - $ -
Granted.......................................................... 940,000 23.88
Exercised........................................................ - -
Expired and/or canceled.......................................... - -
--------- ------

Outstanding at December 31, 1997................................. 940,000 $23.88
--------- ------
--------- ------

Granted.......................................................... 445,000 26.08
Exercised........................................................ (4,666) (25.75)
Expired and/or canceled.......................................... - -
--------- ------

Outstanding at December 31, 1998................................. 1,380,334 $24.59
--------- ------
--------- ------
</TABLE>

<TABLE>
<CAPTION>
---------------------------------------------------------------- -----------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------------------- -----------------------------------
RANGE OF REMAINING AVERAGE
EXERCISE CONTRACTUAL EXERCISE
PRICE SHARES LIFE (YEARS) PRICE SHARES PRICE
---------------------------------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C>
$21 335,000 8.1 $21.00 125,000 $21.00
$24 - $26 950,334 8.9 $25.33 197,001 $25.48
$29 - $32 70,000 9.1 $29.00 20,000 $29.00
$32 - $35 25,000 9.4 $32.13 - -
</TABLE>

F-20
<PAGE>

GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. STOCK OPTIONS AND AWARDS (CONT'D).

Pro forma net income and earnings per share, as if the fair value method
in SFAS No. 123 had been used to account for stock-based compensation, and
the assumptions used, are as follows:

<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 12
THROUGH
DECEMBER 31, YEAR ENDED
1997 DECEMBER 31, 1998
------------------------------------------------------------------------------------------------
<S> <C> <C>
Basic earnings per share

As reported $1.32 $1.39
Pro forma $1.03 $1.16

Diluted earnings per share
As reported $1.29 $1.34
Pro forma $1.01 $1.12

Black-Scholes assumptions*

Risk-free interest rate 6.00% 5.47%

Dividend yield 5.66% 6.72%

Stock volatility 17.14% 27.21%

Expected option life 3 years 4.57 years
*Weighted-averages
------------------------------------------------------------------------------------------------
</TABLE>

EMPLOYEE STOCK PURCHASE PLAN

Effective March 1, 1998, the Company adopted an Employee Stock
Purchase Plan to provide substantially all employees an opportunity to
purchase shares of its common stock through payroll deduction, up to 10% of
eligible compensation with a $25,000 maximum deferral. Semi-annually,
participant account balances will be used to purchase shares of stock at the
lesser of 85 percent of the fair market value of shares at the beginning or
ending of such six-month period. The Employee Stock Purchase Plan expires on
February 28, 2008. A total of 250,000 shares will be available for purchase
under this plan. At June 30, 1998, 1,128 shares were issued. In January 1999,
an additional 1,768 were issued. Compensation expense related to the Employee
Stock Purchase Plan was $18,000 for 1998.

NON-AFFILIATED STOCK OPTIONS

In conjunction with the February 1998 purchase of the Emerald Dunes
Golf Course, Raymon Finch, Jr. and Ray Finch, III (collectively, the
"Finches"), were granted 50,000 options each, of which 25,000 in the
aggregate will vest when, in any calendar year, the Company acquires $25.0
million in golf courses identified by the Finches. After year five, all
options immediately vest if the stock price is $10.00 over the strike price
at which the options were issued ($28.00) and if the Finches have otherwise
undertaken to promote and market the Company.

In addition, options to acquire 20,000 shares of common stock were
granted to J. Graffeo, J. Galante, H. Rostoff, I. Smoley and A. Inelli as
partial consideration for their interest in the Polo Trace Golf Course.
10,000 of the options vested on January 4, 1999 at $26.75 and 10,000 will
vest on January 4, 2000, at the trailing 5-day closing price average
immediately prior to vesting, and expire on July 1, 2000.

F-21
<PAGE>

GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Summarized quarterly financial data is as follows (in thousands,
except per share amounts):

<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------
March 31* June 30 September 30 December 31
- ------------------------------- ------------------- ------------------ ------------------- --------------------
1997
- ------------------------------- ------------------- ------------------ ------------------- --------------------
<S> <C> <C> <C> <C>
Revenues $2,042 $3,998 $6,065 $6,622
Operating income $1,383 $2,598 $4,216 $4,825
Net income $ 716 $1,292 $1,615 $2,346
Basic earnings per share $ .19 $ .33 $ .40 $ .40
Diluted earnings per share $ .18 $ .32 $ .39 $ .39

- ------------------------------- ------------------- ------------------ ------------------- --------------------
1998
- ------------------------------- ------------------- ------------------ ------------------- --------------------
Revenues $ 8,920 $ 10,448 $ 12,039 $ 12,977
Operating income $ 5,943 $ 6,692 $ 7,646 $ 7,020
Net income $ 3,081 $ 2,639 $ 2,779 $ 2,107
Basic earnings per share $ .40 $ .35 $ .36 $ .28
Diluted earnings per share $ .39 $ .33 $ .35 $ .27
------------------- ------------------ ------------------- --------------------
</TABLE>

* A partial period from February 12 to March 31, 1997 is presented in the 1997
table.

11. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

The pro forma financial information set forth below is presented as if the
1998 acquisitions (Note 3) had been consummated as of January 1, 1997. The pro
forma financial information is not necessarily indicative of what actual results
of operations of the Company would have been assuming the acquisitions had been
consummated as of January 1, 1997, nor does it purport to represent a forecast
of the results of operations for future periods (in thousands, except per share
amounts).

<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998
------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $43,811 $58,157
Net income $4,774 $10,144
Basic earnings per share $.71 $1.33
Diluted earnings per share $.68 $1.31
</TABLE>

The pro forma financial information includes the following adjustments:
(i) an increase in depreciation and amortization expense; (ii) an increase in
general and administrative expenses to reflect a whole year of operations for
1997 only; (iii) an increase in interest expense; and (iv) an increase in income
applicable to minority interest.

F-22
<PAGE>

GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. MINORITY INTEREST

Minority interest represents the OP Units not held by GTA, GP and
GTA, LP. and is adjusted for the OP Unit holders', proportionate share of net
income and distributions. An OP Unit and share of Common Stock of the Company
have the same economic characteristics inasmuch as they effectively share
equally in the net income or loss and any distributions of the Operating
Partnership. OP Unit holders have the right, subject to certain terms and
conditions, to convert their OP Units to shares of Common Stock or to cash at
the discretion of the Company. In 1999, approximately 4,890,000 of the
5,325,000 OP Units will be convertible. The following activity occurred in
the OP Unit activity and the minority interest account:

<TABLE>
<CAPTION>
- ---------------------------------- -------------------------------- --------------------------------
PERIOD ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998
- ---------------------------------- -------------------------------- --------------------------------
(IN THOUSANDS) OP UNITS DOLLARS OP UNITS DOLLARS
- ---------------------------------- --------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Beginning Balance -- $ -- 4,815 $54,625
- ---------------------------------- --------------- ---------------- ---------------- ---------------
Purchase of golf courses 4,815 19,296 524 14,687
- ---------------------------------- --------------- ---------------- ---------------- ---------------
Redemption -- -- (14) (432)
- ---------------------------------- --------------- ---------------- ---------------- ---------------
Contribution of property -- -- -- 3,296
- ---------------------------------- --------------- ---------------- ---------------- ---------------
Adjustment of minority interest -- 33,882 -- 8,001
- ---------------------------------- --------------- ---------------- ---------------- ---------------
Distributions -- (4,351) -- (10,797)
- ---------------------------------- --------------- ---------------- ---------------- ---------------
Net income -- 5,798 -- 7,130
- ---------------------------------- --------------- ---------------- ---------------- ---------------
Ending Balance 4,815 $54,625 5,325 $76,510
- ---------------------------------- --------------- ---------------- ---------------- ---------------
</TABLE>

F-23
<PAGE>

GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. TRANSACTIONS WITH AFFILIATE AND SIGNIFICANT LESSEE

Legends Golf is a significant lessee of the golf courses in the
Company's portfolio. Legends Golf is a golf course management group
consisting of eight companies affiliated through common ownership that
operates a portfolio of golf courses owned by the Company under triple-net
leases. Legends Golf derives revenues from the operation of golf courses
principally through receipt of green fees, membership fees, golf cart
rentals, and sales of food, beverage and merchandise.

The following table sets forth certain combined condensed financial
information for Legends Golf.

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
(IN THOUSANDS) 1997 1998
------------------------------------------------------------------------------------
<S> <C> <C>

Current assets $2,454 $2,978
Non-current assets $19,765 $20,650
------------------------------
Total assets $22,219 $23,628
------------------------------
------------------------------

Payable to Golf Trust of America, L.P. $1,004 $1,030
Other current liabilities 1,721 1,340
Total long-term liabilities 10,897 20,916
Total owners' equity 8,597 342
------------------------------
Total liabilities and owners' equity $22,219 $23,628
------------------------------
------------------------------
</TABLE>

FOR THE YEAR ENDED DECEMBER 31,
(IN THOUSANDS) 1997 1998
-----------------------------------------------------------------------------------
<S> <C> <C>

Total Revenues $22,384 $22,874
Operating Loss $(4,983) $(4,685)
Net Income (loss) $(244) $746
</TABLE>

Total revenues from golf course operations for Legends Golf
increased by $.5 million or 3 percent to $22.9 million for the year ended
December 31, 1998. The increase was primarily attributed to slightly
increased green fees at all courses net of reduced cart rentals, pro shop
revenues and food and beverage revenues.

Operating loss decreased from $5.0 million to $4.7 million for the
years ended December 31, 1997 and 1998, respectively. Net income was $.8
million for the year ended December 31, 1998 compared to a net loss of $.2
million for the year ended December 31, 1997 primarily due to the increased
interest expense and the increase in the equity in the earnings of Golf Trust
of America, L.P.

F-24
<PAGE>

GOLF TRUST OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. TRANSACTIONS WITH AFFILIATE AND SIGNIFICANT LESSEE (CONT'D)

RELATED PARTY TRANSACTIONS

Concurrent with the acquisition of the Sandpiper Golf Course, the
Company formed Sandpiper-Golf Trust, LLC (of which the Operating Partnership
is the sole member), to hold title to the golf course. In addition, the
Operating Partnership owns approximately 95% of the economic interest in a
taxable subsidiary formed to hold title to a 14 acre development site
adjacent to the Sandpiper Golf Course, with the balance owned by Mr. Blair,
President, and Mr. Young, a director of the Company, in order to comply with
certain REIT restrictions imposed by the Internal Revenue Code.

14. SUBSEQUENT EVENTS

PAYMENT OF DIVIDENDS

On December 14,1998 the Board of Directors declared a quarterly dividend
distribution of $.44 per share for the quarter ended December 31, 1998, to
stockholders of record on December 31, 1998, which was paid on January 15,
1999.

F-25
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Compensation Committee of the Board of Directors
Golf Trust of America, Inc. 1998 Non-Qualified Employee Stock Purchase Plan:

We have audited the accompanying statement of financial condition of the Golf
Trust of America, Inc. 1998 Non-Qualified Employee Stock Purchase Plan (the
Plan) as of December 31, 1998, and the related statement of changes in plan
equity for the period from March 1, 1998 (inception) through December 31,
1998. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial condition of the Plan at December 31, 1998 and the
Plan's changes in plan equity for the period from March 1, 1998 through
December 31, 1998, in conformity with generally accepted accounting
principles.

Charlotte, North Carolina BDO Seidman, LLP
March 12, 1999

F-26
<PAGE>

GOLF TRUST OF AMERICA, INC.
1998 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
STATEMENT OF FINANCIAL CONDITION

DECEMBER 31, 1998
-----------------
<S> <C>
ASSETS:
Receivable from Golf Trust of America, Inc.:
Participant contributions $ 41,707
Employer contributions 7,354

----------------
NET ASSETS $ 49,061
----------------
----------------
</TABLE>

See accompanying notes to financial statements.

F-27
<PAGE>

GOLF TRUST OF AMERICA, INC.
1998 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
STATEMENT OF CHANGES IN PLAN EQUITY
FOR THE PERIOD FROM MARCH 1 (INCEPTION) TO DECEMBER 31, 1998

<TABLE>
<S> <C>
ADDITIONS:
Participant contributions $ 69,693
Employer contributions 18,143

---------
Total additions 87,836
---------
---------

Deductions:
Purchase and distribution of common stock
to participants 38,775

---------
NET ASSETS AT THE END OF THE YEAR $ 49,061
---------
---------

</TABLE>

See accompanying notes to financial statements.

F-28
<PAGE>

GOLF TRUST OF AMERICA, INC.
1998 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS

1. THE PLAN:

The Golf Trust of America, Inc. (the Company) 1998 Non-Qualified
Employee Stock Purchase Plan (the Plan) was adopted by the Company's Board of
Directors in March 1998 and became effective on March 1, 1998. The Plan is a
non-qualified voluntary contribution plan designed to enable eligible
employees and directors (the Participants) of the Company to purchase common
stock in the Company at a discount. The Plan allows each Participant to
purchase up to $25,000 per year of the Company's common stock. The Plan is
administered by the Company that has delegated certain administrative
responsibilities to the Compensation Committee of the Board of Directors of
the Company. The Plan provides for a series of six month purchase periods
("purchase period"). A purchase period is a period of six months beginning
each January 1 and July 1 and ending each June 30 and December 31,
respectively. The price of the shares of the common stock purchased is the
lesser of 85 percent of the closing price of such shares either on (a) the
first day of each purchase period, or (b) the last day of each purchase
period.

The Company has reserved 250,000 shares of common stock for
participants under the Plan.

PARTICIPANTS CONTRIBUTIONS:

Full time employees who have completed three months service with the
Company are eligible to participate in the Plan by payroll withholding at any
time during each purchase period. Participants elect to participate in the
Plan by completing and submitting an election form to the plan administrator.

EMPLOYER CONTRIBUTIONS:

Employer contributions represent the discount or aggregate
difference between the market value price of the Company's common stock and
the established discount purchase price at the end of a purchase period.

DISTRIBUTIONS:

The Company's transfer agent and registrar issues shares of common
stock upon receipt of participant and Company contributions. The transfer
agent and registrar then prepares stock certificates, which are registered in
the participant's name, and holds such certificates on behalf of the
participants or issues stock certificates to the participant upon their
written request. Accordingly, all shares purchased under the provisions of
the Plan are deemed to be immediately distributed to the participants.

WITHDRAWALS:

A participant may withdraw all or any part of the contributions made
during a purchase period by delivering an amended election form to the plan
administrator on or before the last day of such purchase period.

F-29
<PAGE>

GOLF TRUST OF AMERICA, INC.
1998 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS

1. THE PLAN (CONT'D).

PLAN TERMINATION:

The Board of Directors of the Plan may terminate this Plan and any
purchase period at any time (together with any related contribution
elections) or may terminate any purchase period (together with any related
contribution elections) at any time, provided, however, no such termination
shall be retroactive unless the Board determines that applicable law requires
a retroactive termination of this Plan.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF ACCOUNTING:

The accompanying financial statements have been prepared on the accrual
basis of accounting.

ADMINISTRATIVE EXPENSES:

All administrative expenses of the Plan are paid by the Company.

DISTRIBUTIONS:

Distributions are recorded when common stock has been distributed to
participants.

3. INTERNAL REVENUE SERVICE STATUS:

The Plan is not a qualified plan under Section 423(b) of the Internal
Revenue Code. Participants are subject to any required tax withholding by the
Company on the discount/compensation earned under the Plan.

4. DISTRIBUTIONS:

A summary of stock purchased and distributed on July 1, 1998 for the
purchase period ended June 30, 1998 is as follows:

<TABLE>

<S> <C>
Participant contributions $ 27,986
Employer contributions 10,789
--------
Market value of stock $ 38,775
--------
--------

Market value of stock purchased and
distributed per share $ 29.19
--------
Shares purchased and distributed 1,128
--------
--------
</TABLE>

F-30
<PAGE>

GOLF TRUST OF AMERICA, INC.
1998 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS

5. SUBSEQUENT EVENT:

On January 5, 1999, an additional 1,768 shares of common stock with a
market value of approximately $49,000 were purchased and distributed for the
purchase period ended December 31, 1998.

F-31
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors of Legends Golf
Myrtle Beach, South Carolina

We have audited the accompanying combined balance sheets of LEGENDS GOLF
(as defined in Note 1) as of December 31, 1997 and 1998, and the related
combined statements of operations, owners' equity, and cash flows for each of
the three years in the period ended December 31, 1998. These combined
financial statements are the responsibility of LEGENDS GOLF'S management. Our
responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

As more fully described in the notes to the combined financial
statements, LEGENDS GOLF has material transactions with its majority owner
and affiliates.

In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of LEGENDS
GOLF at December 31, 1997 and 1998, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1998,
in conformity with generally accepted accounting principles.

February 12, 1999

F-32
<PAGE>

LEGENDS GOLF

COMBINED BALANCE SHEETS

(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
1997 1998
-------------------------
<S> <C> <C>
ASSETS:
CURRENT:
Cash................................................................................. $ 569 $ 974
Accounts receivable (Note 3):
Golf packages....................................................................... 810 818
Related parties..................................................................... 95 398
Other............................................................................... 527 215
Inventories.......................................................................... 453 573
-------------------------
Total current assets............................................................. 2,454 2,978
-------------------------
Property and equipment, less accumulated depreciation and
amortization (Notes 4 and 7).......................................................... 3,630 1,083
-------------------------
Other assets:
Advances to affiliates (Note 3)...................................................... 13,148 14,401
Investment in GTA, LP (Notes 2 and 6)................................................ 2,940 5,126
Miscellaneous........................................................................ 47 40
-------------------------
Total other assets............................................................... 16,135 19,567
-------------------------
$ 22,219 $ 23,628
-------------------------
-------------------------

LIABILITIES AND OWNERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable..................................................................... $ 873 $ 550
Accrued expenses:
Rent................................................................................ 1,034 1,061
Other............................................................................... 448 278
Current maturities of long-term debt (Note 6)........................................ 370 481
-------------------------
Total current liabilities........................................................ 2,725 2,370
Advances from affiliates (Note 3)...................................................... 9,661 9,039
Long-term debt, less current maturities (Note 6)....................................... 1,236 11,877
-------------------------
Total liabilities................................................................ 13,622 23,286
-------------------------
Commitments and contingencies (Notes 5 and 7)

Owners' equity:
Common stock, $1 par--shares authorized, 300,000; outstanding, 3,000................. 3 3
Members' contributions............................................................... 7 7
Additional paid-in capital........................................................... 3,832 3,832
Members' accumulated deficit......................................................... (5,731) (10,610)
Retained earnings.................................................................... 10,486 7,110
-------------------------
Total owners' equity............................................................. 8,597 342
-------------------------
$ 22,219 $ 23,628
-------------------------
-------------------------
</TABLE>

See accompanying notes to combined financial statements.

F-33
<PAGE>

LEGENDS GOLF

COMBINED STATEMENTS OF OPERATIONS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1997 1998
------------------------------------
<S> <C> <C> <C>
REVENUES:
Green fees................................................................. $ 10,476 $ 12,081 $ 12,766
Cart rentals............................................................... 4,564 5,335 5,112
Membership dues............................................................ 159 149 175
Food and beverage sales.................................................... 2,095 2,464 2,579
Pro shop merchandise sales................................................. 2,089 2,355 2,242
------------------------------------
Total revenues......................................................... 19,383 22,384 22,874
------------------------------------
COSTS AND EXPENSES:
General and administrative (Note 3)........................................ 4,767 5,511 5,588
Repairs, maintenance, and other course operating expenses.................. 4,046 5,667 5,039
Depreciation and amortization.............................................. 2,400 958 219
Cost of merchandise sold................................................... 1,053 1,154 1,088
Rents (Note 7)............................................................. 1,098 11,068 12,601
Pro shop operations........................................................ 1,107 1,231 1,138
Cost of food and beverage sold............................................. 817 1,024 1,068
Food and beverage operations............................................... 668 754 818
------------------------------------
Total costs and expenses............................................... 15,956 27,367 27,559
------------------------------------
Operating income (loss)...................................................... 3,427 (4,983) (4,685)
------------------------------------
OTHER INCOME (EXPENSE):
Equity in earnings of GTA, LP (Note 2)..................................... - 4,887 5,197
Interest expense........................................................... (1,589) (347) (327)
Gain on sale of assets..................................................... - - 158
Miscellaneous.............................................................. 30 199 403
------------------------------------
Total other income (expense)........................................... (1,559) 4,739 5,431
------------------------------------
Net income (loss)............................................................ $ 1,868 $ (244) $ 746
------------------------------------
------------------------------------
</TABLE>

See accompanying notes to combined financial statements.

F-34
<PAGE>

LEGENDS GOLF

COMBINED STATEMENTS OF OWNERS' EQUITY

(IN THOUSANDS)

<TABLE>
<CAPTION>
MEMBERS' PAID-IN RETAINED ACCUMULATED
SHARES AMOUNT CONTRIBUTIONS CAPITAL EARNINGS DEFICIT
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1996............... 3 3 1 $ 300 $ 5,068 $ 956
Net income (loss)...................... - - - - 4,794 (2,926)
Cash dividends......................... - - - - (1,022) -
---------------------------------------------------------------------------
BALANCE, December 31, 1996............. 3 3 1 300 8,840 (1,970)
Capital contributions:
Cash................................. - - 6 - - -
Land (Note 2)........................ - - - 3,532 - -
Net income (loss)...................... - - - - 3,517 (3,761)
Cash dividends......................... - - - - (1,871) -
---------------------------------------------------------------------------
BALANCE, December 31, 1997............. 3 3 7 3,832 10,486 (5,731)
Net income (loss)...................... - - - - 4,514 (3,768)
Cash dividends......................... - - - - (7,890) (1,111)
---------------------------------------------------------------------------
BALANCE, December 31, 1998............. 3 $ 3 $ 7 $ 3,832 $ 7,110 $(10,610)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
</TABLE>

See accompanying notes to combined financial statements.

F-35
<PAGE>

LEGENDS GOLF

COMBINED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1997 1998
------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................................ $ 1,868 $ (244) $ 746
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization.......................................... 2,400 958 219
(Gain) loss on disposal of property and equipment...................... 78 - (158)
Equity in earnings of GTA, LP.......................................... (4,887) (5,197)
Decrease (increase) in:
Accounts receivable................................................... (627) 171 350
Inventories........................................................... (204) 45 (119)
Other assets.......................................................... (182) (157) 7
Increase (decrease) in:
Accounts payable...................................................... 987 (544) (323)
Accrued expenses...................................................... 355 791 (141)
------------------------------------
Net cash provided by (used in) operating activities........................ 4,675 (3,867) (4,616)
------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions......................................... (5,271) (2,014) (2,018)
Proceeds from sale of property and equipment............................. 612 - 807
Proceeds from transfer to GTA, LP........................................ - 523 -
Distributions from GTA, LP............................................... - 3,851 6,356
Increase in advances to affiliates....................................... (3,920) (988) (1,253)
------------------------------------
Net cash provided by (used in) investing activities........................ (8,579) 1,372 3,892
------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of dividends.................................................... (1,021) (1,871) (9,001)
Capital contribution..................................................... - 6 -
Proceeds from long-term debt............................................. 2,497 1,086 11,368
Payments on long-term debt............................................... (1,560) (226) (616)
Increase (decrease) in advances from affiliates.......................... 4,429 3,228 (622)
------------------------------------
Net cash provided by financing activities.................................. 4,345 2,223 1,129
------------------------------------
Net increase (decrease) in cash............................................ 441 (272) 405
Cash, beginning of period.................................................. 400 841 569
------------------------------------
Cash, end of period........................................................ $ 841 $ 569 $ 974
------------------------------------
------------------------------------
</TABLE>

See accompanying notes to combined financial statements.

F-36
<PAGE>

LEGENDS GOLF

NOTES TO COMBINED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION

The combined financial statements include the accounts of three
S-Corporations (Seaside Resorts, Ltd. d/b/a Oyster Bay Golf Club; Heritage
Golf Club, Ltd.; and Golf Legends, Ltd.) and five limited liability companies
(Legends of Virginia, LC; Legends Golf Management, LLC; Heritage Golf
Management, LLC; Oyster Bay Golf Management, LLC; and Virginia Legends Golf
Management, LLC). The entities, referred to collectively as Legends Golf (the
Company), are engaged in the operation of golf courses in North Carolina,
South Carolina, and Virginia.

The operations of the companies listed above are being presented on a
combined basis, as under the terms of the operating leases, the lease
obligations are cross-collateralized among all four Legends lessees. This
presentation better presents the ability of the lessees to service the leases.

All significant intercompany balances and transactions have been
eliminated. Additionally, certain classifications may vary from those of the
individual company's financial statements.

INVENTORIES

Inventories are valued at the lower-of-cost (first-in, first-out) or
market and consist primarily of food, beverages, golf equipment, and clothing.

REVENUE RECOGNITION

Revenue from green fees, cart rentals, food and beverage sales,
merchandise sales, and range income are generally recognized at the time of
sale.

CASH EQUIVALENTS

The Company considers all highly liquid debt instruments with a maturity
of three months or less to be cash equivalents.

INVESTMENT IN PARTNERSHIP

The Company accounts for its investments in Golf Trust of America, LP
(GTA, LP) under the equity method of accounting. Under this method, equity
earnings (losses) are recorded as increases (decreases) to the investment
account and dividend distributions, to the extent they do not lower the
investment below zero, are recorded as reductions in the investments.

F-37
<PAGE>

LEGENDS GOLF

NOTES TO COMBINED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is computed over
the estimated useful lives of the assets using straight-line methods.

Estimated useful lives for major asset categories approximate:

<TABLE>
<CAPTION>
DESCRIPTION YEARS
----------- -----
<S> <C>
Buildings................................................. 40
Machinery and equipment................................... 3-8
Furniture................................................. 8
Golf carts................................................ 5
</TABLE>

Major renewals and betterments are capitalized. Maintenance, repairs,
and minor renewals are expensed as incurred. When properties are retired or
otherwise disposed of, related cost and accumulated depreciation are removed
from the accounts. Golf course improvements, to the extent they are not
reimbursed by the Landlord, are amortized over the lesser of their useful
lives or the related lease term.

INCOME TAXES

For the S-Corporations, the absence of a provision for income taxes is
due to the election by the companies, and consent by their sole stockholder,
to include the taxable income or loss of the companies in his individual tax
returns. As a result, no federal or state income taxes are imposed on the
companies. For the limited liability companies, no provision has been made
for income taxes or related credits as under the Internal Revenue Code as a
limited liability company is treated as a partnership for income tax
purposes. Therefore, the results of operations are includable in the income
tax returns of the members.

USE OF ESTIMATES

The preparation of combined financial statements in conformity with
generally accepted accounting principles required management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the combined financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

RECLASSIFICATION

Certain 1997 amounts have been reclassified to conform with 1998
presentation.

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of trade receivables.

Concentration of credit risk with respect to trade receivables, which
consists primarily of golf packages from hotels and charges, is limited due
to the large number of hotels comprising the Company's customer base. The
trade receivables are billed and due monthly, and all probable bad debt
losses have been appropriately considered in establishing an allowance for
doubtful accounts. As of December 31, 1996, 1997, and 1998, the Company had
no significant concentration of credit risk.

F-38
<PAGE>

LEGENDS GOLF

NOTES TO COMBINED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ADVERTISING

The Company expenses advertising costs as incurred. Advertising costs
are included in general and administrative costs in the amounts of $672,
$626, and $655 for December 31, 1996, 1997, and 1998, respectively.

2. TRANSFER OF ASSETS AND INVESTMENT IN GTA, LP

On February 12, 1997, the Company transferred land and improvements,
buildings and certain equipment with a net book value of $36.3 million net of
related debt of $34.8 million to Golf Trust of America, LP (GTA, LP) for
approximately 3.7 million OP Units and reimbursement of approximately
$522,500 of out-of-pocket expenses. Immediately prior to the transfer, the
Company's majority owner contributed land, previously leased to the Company,
at a value of $3.5 million. The transfer was concurrent with an initial
public offering of the common stock of Golf Trust of America, Inc. (GTA,
Inc.), its general partner. OP Units are convertible, subject to certain
limitations as defined in the transfer agreement, to common shares of GTA,
Inc. At December 31, 1998, the common stock equivalent value of the OP Units
was approximately $104 million.

In addition, with the contribution of assets, the operations of the golf
courses were transferred to four newly formed management companies. These
companies entered into lease agreements with GTA, LP more fully described in
Note 7. During 1998, the Company completed construction of two clubhouses in
Virginia as required under the terms of the contribution agreement with GTA
at a cost of approximately $3.4 million. These assets were transferred to
GTA, Inc. during 1998.

3. RELATED PARTY TRANSACTIONS

The Company's majority owner owns and operates Marsh Harbour, Ltd.;
Heritage Plantation, Ltd.; Legends Golf Development, Ltd.; The Legends Group,
Ltd.; Legends Scottish Village, LLC; Legends Properties, LLC; Legends Golf
Resorts, LLC; and other related businesses.

The Legends Group, Ltd. provides various management and administrative
services including reservations, advertising, accounting, payroll and related
benefits, and telephone for all affiliated companies. These expenses are
allocated to the businesses using procedures deemed appropriate to the nature
of the expenses involved. The procedures utilize various allocation bases
such as relative investment and number of employees and direct effort
expended. Interest on allocated external debt is charged as incurred. The
Company's management believes the allocations are reasonable, but they are
not necessarily indicative of the costs that would have been incurred if the
businesses had operated as separate companies. Administrative fees paid by
the Company for such services are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, AMOUNT
----------------------- ------
<S> <C>
1996.......................................................... $ 1,185
1997.......................................................... $ 1,506
1998.......................................................... $ 1,585
</TABLE>

During 1996, 1997, and 1998, the Company recognized golf course revenue
of $1,422, $1,744, and $2,972, respectively, under golf packages with an
affiliated company.

Advances to and from affiliated companies, as shown on the combined
balance sheets, have no fixed payment/repayment provisions. Interest income
and expense on advances to and from affiliates is not recorded for financial
statement purposes.

F-39
<PAGE>

LEGENDS GOLF

NOTES TO COMBINED FINANCIAL STATEMENTS

4. PROPERTY AND EQUIPMENT

Major classes of property and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1997 1998
-------------------------
<S> <C> <C>
Golf course improvements......................................................... $ - $ 628
Buildings........................................................................ 539 539
Machinery and equipment.......................................................... 58 58
Furniture........................................................................ 288 288
Golf carts....................................................................... 1,111 15
Assets subject to transfer (Notes 2 and 7):
Equipment...................................................................... 201 -
Leasehold improvements......................................................... 802 -
Construction-in-progress....................................................... 1,302 -
-------------------------
4,301 1,528
Less accumulated depreciation.................................................... 671 445
-------------------------
Net property and equipment....................................................... $ 3,630 $ 1,083
-------------------------
-------------------------
</TABLE>

5. RETIREMENT PLAN

The Company sponsors a 401(k) profit sharing plan for all eligible
employees of the Company and other affiliated companies including officers.
Legends Group, Ltd. may annually elect to make matching contributions as
defined in the plan.

Expenses under the plans were:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, AMOUNT
<S> <C>
1996...................................................................................... $ 99
1997...................................................................................... $ -
1998...................................................................................... $ -
</TABLE>

F-40
<PAGE>

LEGENDS GOLF

NOTES TO COMBINED FINANCIAL STATEMENTS

6. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1997 1998
-------------------------
<S> <C> <C>
Payable to bank, under a $6 million loan agreement that the Company participates in,
along with Marsh Harbour, Ltd., an affiliated company. The note bears interest at
the 30-day LIBOR rate (5.06% at December 31, 1998) plus 175 basis points. The
outstanding balance for the Company and Marsh Harbour, Ltd. is payable in
graduated principal payments of $83 plus accrued interest; balance due May 2002.
The aforementioned companies are jointly liable for the debt and the majority
owner has guaranteed the loans. The loan is collateralized by certain OP Units.... $ 990 $ 2,000

Payable to bank, under a $12.5 million line-of-credit agreement. The line-of-credit
bears interest at the 30-day LIBOR rate plus 175 basis points. Interest is
payable in monthly installments, with the balance due April 2000. The majority
owner has guaranteed the line-of-credit. The loan is collateralized by certain OP
Units.............................................................................. - 4,858

Payable to financial institution, under a $12.5 million line-of-credit agreement.
The line-of-credit bears interest at the 30-day LIBOR rate (5.06% at December 31,
1998) plus 240 basis points. Interest is payable in monthly installments, with
the balance due April 2000. The majority owner has guaranteed the line-of-credit.
The loan is collateralized by certain OP Units..................................... - 5,500

Repaid in 1998....................................................................... 616 -
-------------------------
-------------------------

1,606 12,358
Less current maturities ............................................................. 370 481
-------------------------

$ 1,236 $ 11,877
-------------------------
-------------------------
</TABLE>
The $6 million loan agreement provides, among other covenants,
restrictions on certain financial ratios, capital expenditures, indebtedness,
liens, changes in the nature of the business and significant other
limitations as to the use of funds. The Company has obtained a waiver of
certain of the covenants as of December 31, 1998.

Total debt of all affiliated entities of which the Company is jointly
liable is approximately $21,870 at December 31, 1998.

The aggregate annual maturities for the above mortgage notes payable at
December 31, 1998, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, AMOUNT
-------------- ---------
<S> <C>
1999................................................................... $ 481
2000................................................................... 10,914
2001................................................................... 630
2002................................................................... 333
------------
Total.................................................................. $ 12,358
------------
------------
</TABLE>

F-41
<PAGE>

LEGENDS GOLF

NOTES TO COMBINED FINANCIAL STATEMENTS

6. LONG-TERM DEBT (CONTINUED)

Notes payable increased primarily due to disbursements made to the majority
owner. It is the intent of the Company to have this debt reduced in fiscal year
1999 upon the obtainment of a line-of-credit by the majority owner.

7. COMMITMENTS AND CONTINGENCIES

LEASES

Concurrent with the transfer of assets, as described in Note 2, the
Company entered into four lease agreements with GTA, LP. The leases provide
for initial annual payments aggregating approximately $12 million with annual
adjustments equal to the lesser of 3 percent or 200 percent of the consumer
price index. In addition, the leases provide for percentage rents based on
one-third of the increase in gross golf revenues, as defined in the
agreement, over the base year of 1996. The leases, which have an initial term
ending December 31, 2006, may be renewed for six additional periods of five
years each. In addition, the leases provide for reimbursements, subject to
landlord approval, up to 2 percent of gross golf revenues, of certain
qualified capital expenditures, as defined in the lease agreements. The
Company records these expenditures as leasehold improvements or equipment as
applicable until they are reimbursed by the Lessor. As of December 31, 1998,
the Lessor had approximately $182 available to the Company under these lease
agreements.

The Company also leases land from a third party under an agreement which
expires in 2032. The lease requires rental payments of 10 percent of monthly
green fees as defined in the lease agreement.

During 1996 and prior to the transfer of assets on February 12, 1997,
the Company leased land from the sole stockholder.

Total rental expense approximated the following:

<TABLE>
<CAPTION>
THIRD
YEAR ENDED DECEMBER 31, STOCKHOLDER PARTY GTA, LP
----------------------- ----------- ----- -------
<S> <C> <C> <C>
1996............................................ $ 726 $ 231 $ -
1997............................................ $ 25 $ 236 $ 10,807
1998............................................ $ - $ 236 $ 12,365
</TABLE>

The Company also leases certain equipment under noncancelable operating
leases. Total equipment lease expense approximated $162, $1,000, $604 for
1996, 1997, and 1998, respectively.

Minimum lease commitments for all noncancelable operating leases at
December 31, 1998, are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31. AMOUNT
------------------------ ------
<S> <C>
1999.................................................................... $ 12,606
2000.................................................................... 12,396
2001.................................................................... 12,299
2002.................................................................... 12,068
2003.................................................................... 12,057
Thereafter.............................................................. 36,171
--------------
Total................................................................... $ 97,597
--------------
--------------
</TABLE>

F-42
<PAGE>

LEGENDS GOLF

NOTES TO COMBINED FINANCIAL STATEMENTS

7. COMMITMENTS AND CONTINGENCIES (CONTINUED)

SELF-INSURANCE

The Company along with its affiliates maintain a self-insurance program
for that portion of health care costs not covered by insurance. The Company
is liable for claims up to $15 per employee annually with an annual aggregate
maximum liability under the program for all companies of $336. Cumulative
amounts estimated to be payable by the Company with respect to pending and
potential claims have been accrued as liabilities.

YEAR 2000 COMPLIANCE (UNAUDITED)

Like other companies, the Company could be adversely affected if the
computer systems we, our suppliers or customers use do not properly process
and calculate date-related information and data from the period surrounding
and including January 1, 2000. This is commonly known as the "Year 2000"
issue. Additionally, this issue could impact non-computer systems and devices
such as production equipment, elevators, etc. At this time, because of the
complexities involved in the issue, management cannot provide assurances that
the Year 2000 issue will not have an impact on the Company's operations.

The Company has implemented a plan to modify its business technologies
to be ready for the year 2000 and is in the process of converting critical
data processing systems. The project is expected to be substantially complete
by July 31, 1999 and to cost between $15,000 and $45,000. The Company does
not expect this effort to have a significant effect on operations.

8. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, AMOUNT
----------------------- ------
<S> <C>
1996................................................................... $ 2,012
1997................................................................... $ 578
1998................................................................... $ 332
</TABLE>

During 1996, equipment having a net book value of $711 and cash of $399
was exchanged for similar new equipment having a value of $1,110.

During 1997 and 1998, the Company transferred assets and related debt to
GTA, LP (see Note 2).

F-43
<PAGE>

SCHEDULE III
GOLF TRUST OF AMERICA
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998

<TABLE>
<CAPTION>
COST
CAPITALIZED
SUBSEQUENT
INITIAL COST TO ACQUISITION
------------------------------------------------
BUILDING &
PROPERTY/LOCATION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS OTHER
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Eagle Ridge Inn & Resort- Galena, IL - 7,087 39,913 1,020 -
Sandpiper Golf Course-Santa Barbara, CA - 2,668 33,832 - -
Bonaventure-Green Monster and The Resort Course-Ft. Lauderdale, FL - 2,912 21,588 3,461 -
Emerald Dunes Golf Course- West Palm Beach 12,690 3,348 19,052 212 -
Heathland, Parkland, and Moorland- Myrtle Beach, SC - 3,207 15,609 560 -
Miscellaneous investments 5,019 36,240 150,755 7,731 -

Total $ 17,709 $ 55,462 $ 280,749 $ 12,984 $ -

<CAPTION>
LIFE ON WHICH
GROSS AMOUNTS OF WHICH DEPRECIATION
CARRIED AT END OF PERIOD IN LATEST
--------------------------------- STATEMENT OF
BUILDING & ACCUMULATED DATE OF DATE OPERATION IS
PROPERTY/LOCATION LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED COMPLETED
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Eagle Ridge Inn & Resort- Galena, IL 7,087 40,933 48,020 1,618 1977 5/22/98 3-30 years
Sandpiper Golf Course-Santa Barbara, CA 2,668 33,832 36,500 694 1972 3/6/98 3-30 years
Bonaventure-Green Monster and The Resort
Course-Ft. Lauderdale, FL 2,912 25,049 27,961 1,102 1970 1/1/98 3-30 years
Emerald Dunes Golf Course- West Palm Beach 3,348 19,264 22,612 1,113 1990 2/1/98 3-30 years
Heathland, Parkland, and
Moorland-Myrtle Beach, SC 3,207 16,169 19,376 7,979 1990 2/12/97 3-30 years
Miscellaneous investments 36,240 157,606 193,846 13,189 Various Various Various

Total $ 55,462 $ 292,853 $ 348,315 $ 25,695
</TABLE>

<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
PROPERTY

Balance at the beginning of period: - 115,045

Additions during period
Acquisitions - cash and deferred payments 44,668 187,598
Acquisitions - issuance of OP Units and common shares 18,904 14,687
Assumption of debt 4,325 18,001
Improvements - 10,981
Transfer from Legends Golf at historical cost 47,148 3,296

Deductions during the period:
Disposals - (413)

-------------------------
Balance at the end of period 115,045 349,195
-------------------------

DEPRECIATION

Balance at the beginning of period: - 14,001

Additions during period
Expense 3,215 11,737
Transfer from Legends Golf at historical cost 10,786 -

Deductions during the period:
Disposals - (43)

-------------------------
Balance at the end of period 14,001 25,695
-------------------------
</TABLE>

F-44
<PAGE>
SCHEDULE IV
GOLF TRUST OF AMERICA, INC.
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1998

<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
CARRING OF LOANS SUBJECT TO
FACE AMOUNT AMOUNTS OF DELINQUENT PRINCIPAL
DESCRIPTION INTEREST RATE FINAL MATURITY DATE PRIOR LIENS OF MORTGAGE MORTGAGE OF INTEREST
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Golf Host Resorts, Inc. 9.88%-10.00% 6/20/27 $-- $70,000,000 $72,252,000 $--
</TABLE>

PERIOD PAYMENT TERMS
Note payable interest only of $587,295 at 9.88%
monthly with 5% increases continuing until 2002.
Amounts drawn on $9M Tranche I
bear interest at 10.00%

F-45
<PAGE>

EXHIBIT INDEX

Pursuant to Item 601(a) (2) of Regulation S-K, this exhibit index
immediately precedes the exhibits.

The following exhibits are part of this Annual Report on Form 10-K
for fiscal year 1998 (and are numbered in accordance with Item 601 of
Regulation S-K). Items marked with an asterick (*) are filed herewith.

<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
3.1 Articles of Amendment and Restatement of the Company, as
filed with the State Department of Assessments and Taxation
of Maryland on January 31, 1997, (previously filed as
Exhibit 3.1A to the Company's Registration Statement on
Form S-11 (Commission File No 333-15965) Amendment No. 2
(filed January 30, 1997) and incorporated herein by
reference).

3.2 Bylaws of the Company as currently in effect (previously
filed as Exhibit 3.2 to the Company's Registration
Statement on Form S-11 (Commission File No. 333-15965)
Amendment No. 1 (filed January 15, 1997) and incorporated
herein by reference).

10.1.0 First Amended and Restated Agreement of Limited Partnership
of the Operating Partnership (the "Partnership Agreement")
(previously filed as Exhibit 10.1 to the Company's Annual
Report on Form 10-K (Commission File No. 000-22091), filed
May 15, 1997, and incorporated herein by reference).

10.1.1* Exhibit A to the Partnership Agreement, as revised through
March 26, 1998.

10.1.2 First Amendment to the Partnership Agreement, dated as of
February 1, 1998.

21.1* List of Subsidiaries of the Company.

23.1* Consent of BDO Seidman, LLP.

24.1* Powers of Attorney (included under the caption "Signatures").

</TABLE>

F-46

<PAGE>

EXHIBIT A

SCHEDULE OF PARTNERS,
ALLOCATION OF PARTNERSHIP UNITS, PERCENTAGE INTERESTS
AND THE AGREED UPON VALUE OF NON-CASH CAPITAL CONTRIBUTIONS

Date Value of non-cash Partnership Approx. Percentage
Admitted Name and address of partners capital contribution units issued Interests
- -------- ---------------------------- -------------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
2/12/97 Golf Legends Ltd., Inc. $ 30,647,030 1,532,352 11.82%
1500 Legends Drive
Myrtle Beach, SC 29577
- ---------------------------------------------------------------------------------------------------------------------------
2/12/97 Seaside Resorts Ltd., Inc. $ 16,129,118 806,456 6.22%
1500 Legends Drive
Myrtle Beach, SC 29577
- ---------------------------------------------------------------------------------------------------------------------------
2/12/97 Heritage Golf Club, Ltd., Inc. $ 16,031,230 801,561
1500 Legends Drive
Myrtle Beach, SC 29577

1/6/99 Heritage (conversion) (11,700)

789,861 6.09%
- ---------------------------------------------------------------------------------------------------------------------------
2/12/97 Legends of Virginia L.C $ 11,963,738 598,187 4.61%
1500 Legends Drive
Myrtle Beach, SC 29577
- ---------------------------------------------------------------------------------------------------------------------------
2/12/97 Northgate $ 3,797,071 189,854
16450 Northgate Forest Drive
Houston, TX 77068

5/20/98 Northgate (redemption) $ (158,969) (5,000)

1/6/99 Northgate (conversion) $ - (30,000)

--------------- ---------
Northgate Total $ 3,638,102 154,854 1.19%
- ---------------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

4/13/98 Olde Atlanta (redemption) $ (62,837.60) (2,000)

5/20/98 Olde Atlanta (redemption) $ (64,017.60) (2,000)

8/21/98 Olde Atlanta (redemption) $ (52,387.50) (1,500)

12/10/98 Olde Atlanta (redemption) (30,166.11) (1,150)

1/19/99 Olde Atlanta (redemption) $ (66,078.50) (2,500)
--------------- ---------
Olde Atlanta Total $1,169,438.69 63,096 0.49%
- ---------------------------------------------------------------------------------------------------------------------
2/12/97 Bright's Creek Development Co. LLC $ 2,119,005 105,950 0.82%
104 Cotton Creek Drive
Gulf Shores, AL 36542
- ---------------------------------------------------------------------------------------------------------------------
10/31/96 David Dick Joseph $ - 12,500 0.10%
14 North Adger's Wharf
Charleston, SC 29401
- ---------------------------------------------------------------------------------------------------------------------
2/4/97 W. Bradley Blair, II $ - 12,500 0.10%
14 North Adger's Wharf
Charleston, SC 29401
- ---------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

Date Value of non-cash Partnership Approx. Percentage
Admitted Name and address of partners capital contribution units issued Interests
- -------- ---------------------------- -------------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
2/4/97 James Hoppenrath $ - 3,750 0.03%
109 E. Bay Street
Charleston, SC 29401
- ---------------------------------------------------------------------------------------------------------------------
6/20/97 Golf Host Resorts, Inc. $ - 274,039 2.11%
c/o Starwood Capital Group, LP
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
- ---------------------------------------------------------------------------------------------------------------------
9/2/97 John J. Rainieri, Sr $ 3,198,168 114,237 0.88%
Betty Rainieri
4350 Mayfair Road
Uniontown, OH 44685
- ---------------------------------------------------------------------------------------------------------------------
9/2/97 Raintree Country Club, Inc. $ 204,138 7,292 0.06%
4350 Mayfair Road
Uniontown, OH 44685
- ---------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

11/2/98 Eagle Watch Redemption $ (64,199) (2,150)

3/25/99 Eagle Watch Conversion -- (2,000)
------------ -------
Eagle Watch Total $ 1,826,483 66,008 0.50%
- ---------------------------------------------------------------------------------------------------------------------------
10/17/97 Properties of the Country, Inc. $ 500,000 19,231 0.15%
908 N. 2nd Street East
Louisburg, KS 66053
- ---------------------------------------------------------------------------------------------------------------------------
11/25/97 Granite Golf Corporation $ 650,000 24,424 0.19%
1510 N. Hayden Road, Suite 7
Scottsdale, AZ 85260
- ---------------------------------------------------------------------------------------------------------------------------
12/19/97 Stonehenge Golf Development, LLC $ 4,500,000 169,811 1.31%
90 Mallet Hill Road
Columbia, SC 29223
- ---------------------------------------------------------------------------------------------------------------------------
1/16/98 Mystic Creek Golf Club, Limited Partnership $ 1,500,000 52,724 0.41%
32605 West 12 Mile Road
Suite 350
Farmington Hills, MI 48334
- ---------------------------------------------------------------------------------------------------------------------------
2/1/98 Okeechobee Championship Golf, Inc. $ 6,138,369 227,347(1) 1.75%
2100 Emerald Dunes Drive
West Palm Beach, FL 33411
- ---------------------------------------------------------------------------------------------------------------------------
5/22/98 Eagle Ridge Lease Company LLC $ 1,198,750 35,794 0.28%
16100 N. Greenway-Hayden Loop
Scottsdale, AZ 85260
- ---------------------------------------------------------------------------------------------------------------------------
5/28/98 Golf Classic Resorts, LLC $ 879,995 26,357 0.20%
536 South Avenue
Glencoe, IL 60022
- ---------------------------------------------------------------------------------------------------------------------------
8/28/98 Osage National Golf Club LLC $ 3,451,068 124,700 0.96%
900 Hickory Street
St. Louis, MO 63104
EIN: 431735431
- ---------------------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

</TABLE>

<PAGE>

Date Value of non-cash Partnership Approx. Percentage
Admitted Name and address of partners capital contribution units issued Interests
- -------- ---------------------------- -------------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
2/4/97 GTA LP, Inc. $ - 7,657,385 59.08%
14 North Adger's Wharf
Charleston, SC 29401
- ---------------------------------------------------------------------------------------------------------------------------
2/4/97 GTA GP, Inc. $ - 25,571 0.20%
14 North Adger's Wharf
Charleston, SC 29401
- ---------------------------------------------------------------------------------------------------------------------------
-------------------------------
Total Partnership Units 12,961,894 100.00%
-------------------------------
</TABLE>

<PAGE>

Exhibit 21.1

List of Subsidiaries of Golf Trust of America, Inc.

GTA GP, Inc., a Maryland corporation
GTA LP, Inc., a Maryland corporation
Sandpiper GTA Development, Inc.

<PAGE>

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We consent to the incorporation by reference in the Registration Statements No.
333-46657 and No. 333-46659 on Form S-8 and Registration Statement No. 333-56251
on Form S-3 of our reports dated March 12, 1999, appearing in this Annual Report
on Form 10-K of Golf Trust of America, Inc. for the year ended December 31,
1998.

Charlotte, North Carolina /s/BDO SEIDMAN, LLP
March 25, 1999

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF GOLF TRUST OF AMERICA INC. & SUBSIDIARIES AS OF
12/31/97 AND 12/31/98 & THE RELATED CONSOLIDATED STATEMENTS OF INCOME,
STOCKHOLDERS' EQUITY AND CASH FLOWS FOR THE PERIOD FROM 2/12/97 (INCEPTION)
THROUGH 12/31/97 AND THE YEAR ENDED 12/31/98.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> OTHER YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> FEB-12-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 DEC-31-1998
<CASH> 14,968 1,891
<SECURITIES> 0 0
<RECEIVABLES> 1,004 1,030
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0<F1> 0<F1>
<PP&E> 115,045 349,195
<DEPRECIATION> 14,001 25,695
<TOTAL-ASSETS> 186,306 411,981
<CURRENT-LIABILITIES> 3,029<F1> 15,190<F1>
<BONDS> 4,325 210,634
0 0
0 0
<COMMON> 76 76
<OTHER-SE> 124,251 109,571
<TOTAL-LIABILITY-AND-EQUITY> 124,327 109,647
<SALES> 0 0
<TOTAL-REVENUES> 18,727 44,384
<CGS> 0 0
<TOTAL-COSTS> 5,705 17,083
<OTHER-EXPENSES> (624)<F2> (108)<F2>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,879 9,673
<INCOME-PRETAX> 5,969 10,606
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 5,969 10,606
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 5,969 10,606
<EPS-PRIMARY> 1.32 1.39
<EPS-DILUTED> 1.29 1.34
<FN>
<F1>AS A REAL ESTATE INVESTMENT TRUST, OUR BALANCE SHEET IS NOT CLASSIFIED BETWEEN
CURRENT AND NON CURRENT CATEGORIES.
<F2>COMPRISED OF INTEREST INCOME AND LOSS ON DISPOSAL OF ASSETS.
</FN>

</TABLE>