RIDGEWOOD PROPERTIES INC, 10-K, 1996-11-26

RIDGEWOOD PROPERTIES INC
10-K, 1996-11-26
REAL ESTATE DEALERS (FOR THEIR OWN ACCOUNT)

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 1996

[ ] 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 0-14019
Ridgewood Properties, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 58-1656330
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2859 Paces Ferry Road, Suite 700
Atlanta, Georgia 30339
- ---------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (770) 434-3670
--------------

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
----------------------------
(Title of Class)
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. _____

Aggregate market value of voting stock held by non-affiliates
on October 31, 1996 - cannot be determined due to an absence of
an established public trading market in the common stock.
Common shares outstanding on October 31, 1996 - 1,088,480 shares
(1) Portions of the registrant's Annual Report to Shareholders
for the fiscal year ended August 31, 1996 (the "1996 Annual
Report to Shareholders") are incorporated by reference in
Part II of this Report.
(2) Portions of the registrant's definitive Proxy Statement
relating to the 1997 Annual Meeting (the "1997 Proxy Statement")
to be filed with the Commission on or about December 1, 1996,
are incorporated by reference in Part III of this Report.

PART I

Item 1. Business

Ridgewood Properties, Inc. (the "Company") is primarily engaged in the
business of acquiring, developing, operating and selling real estate property
in the Southeast and "Sunbelt" areas. Additionally, the Company, through its
investment in a limited partnership, is engaged in acquiring and managing
hotel properties in the Southeast, as well as managing other hotels
throughout the country. The Company also owns and operates a hotel in
Longwood, Florida. All of the Company's other properties are land properties
held for sale, and no additional development is currently anticipated for the
land. The Company was incorporated under the laws of the State of Delaware
on October 29, 1985. Prior to December 31, 1985, the Company operated under
the name CMEI, Inc.

On August 16, 1995, RW Hotel Partners, L.P. was organized as a limited
partnership (the "Partnership") under the laws of the State of Delaware.
Concurrently, the Company formed Ridgewood Hotels, Inc., a Georgia
corporation ("Ridgewood Hotels") which became the sole general partner in the
Partnership with RW Hotel Investments, L.L.C. ("Investor") as the limited
partner. Ridgewood Hotels has a 1% base distribution percentage versus 99%
for the Investor. However, distribution percentages do vary depending on
certain defined preferences and priorities pursuant to the Partnership
Agreement ("Agreement") which are discussed below. The partnership was
originally formed to acquire a hotel property in Louisville, Kentucky. The
partnership consists of six hotel properties at August 31, 1996. The terms
of this partnership will serve as a guideline for other potential
acquisitions with this or other investors.

Income and loss are allocated to the Company and the limited partner
based upon the formula for allocating distributable cash as described below
but subject to an annual limitation which would result in no more than 88% of
partnership income or loss (as defined) being allocated to the limited
partner.

Distributable Cash is defined as the net income from the property before
depreciation plus any net sale proceeds and net financing proceeds less
capital costs. Distributions of Distributable Cash shall be made as follows:

- First, to the Investor until there has been distributed to the
Investor an amount equal to a 15% cumulative internal rate of return on the
Investor's investment.

- Second, to Ridgewood Hotels until the aggregate amount received by
Ridgewood Hotels equals the aggregate cash contributions made by Ridgewood
Hotels to the Partnership (as of August 31, 1996, Ridgewood Hotels had
contributed approximately $748,000).

- Third, 12% to Ridgewood Hotels and 88% to the Investor until there has
been distributed to the Investor an amount equal to a 25% cumulative internal
rate of return on Investor's investment.

- Fourth, 75% of the residual to the Investor and 25% to Ridgewood
Hotels.

A Management Agreement exists between the Partnership and the Company as
Manager ("Manager") for the purpose of managing hotels in Kentucky, Georgia
and South Carolina. The Manager shall be entitled to the following property
management fees:

(1) 2.5% of the gross revenues from the hotel property.

(2) 1% of the gross revenues from the hotel property as an incentive
fee if distributable cash equals or exceeds 13.5% of certain aggregate
acquisition costs. No management fees were payable with respect to the first
12-month period of management of the hotel in Kentucky.

A Construction Management Agreement exists between the Partnership and
the Manager for the purpose of managing future improvements to the
properties.

The Company currently has approximately $748,000 invested in the
Partnership. Also, at August 31, 1996, the Company recorded approximately
$209,000 equity in the income of the Partnership, bringing the total
investment in the limited Partnership to approximately $957,000. The
Partnership purchased a hotel in Louisville, Kentucky for approximately
$16,000,000. In December 1995 and January 1996, the Partnership purchased
four hotel properties in Georgia for approximately $15,000,000 and a hotel in
South Carolina for $4,000,000, respectively. The Company may make future
capital contributions to the Partnership. Management expects to fund such
capital contributions through available cash or from loans from the
Partnership. Additionally, the Company may invest in other partnerships to
acquire hotels in the future.

In December 1995, the Company acquired the Wesley Hotel Group, a hotel
management company located in Atlanta, Georgia. At the time of acquisition,
Wesley managed five hotels. In conjunction with the acquisition, the Company
issued 125,000 shares of common stock and assumed three promissory notes with
a combined outstanding principal of approximately $106,000.

The Company owns and operates one hotel and owns a number of land
parcels which are held for sale. The success of the Company's operations
continues to be dependent upon such unpredictable factors as the general and
local economic conditions to which the real estate industry is particularly
sensitive: zoning, labor, material and energy availability, weather
conditions and the availability of satisfactory financing.

The hotel management business has become very competitive. In order to
obtain management contracts, owners are frequently requiring management
companies to also have ownership in the hotel. The hotel industry has become
very attractive to many investors and, in turn, it has become very
competitive to purchase hotels. This has also prompted the building of many
new hotels in various markets. The Company believes that it is in an
attractive position to remain competitive in this industry. The Company has
the ability to generate equity to contribute to the acquisitions as well as
to provide the expertise to manage the acquisitions, operations and ultimate
disposition of properties for both the Company and third-party owners.

The annual average occupancy of the Company's only hotel was
approximately 65% for the fiscal year 1996.

The Company's principal office is located at 2859 Paces Ferry Road,
Suite 700, Atlanta, Georgia 30339 (telephone number: (770) 434-3670). The
Company employs approximately 90 persons (of which 19 are located at its
principal office) at August 31, 1996.

Item 2. Properties

The Company does not own any real property material to conducting the
administrative aspects of its business operations. Its principal office in
Atlanta, Georgia is leased until May 1997 and consists of approximately 6,200
square feet. As a result of its operations, the Company is the owner of
various other properties, including developed and undeveloped real estate.

The Company's operating properties are as follows:

Name of Hotel Location # of Rooms Ownership Interest

Ramada Inn (a) Longwood, FL 192 Owned
Holiday Inn Louisville, KY 267 Owned by Partnership (b)
Holiday Inn Orangeburg, SC 160 Owned by Partnership (b)
Holiday Inn Gainesville, GA 132 Owned by Partnership (b)
Holiday Inn Thomasville, GA 147 Owned by Partnership (b)
Holiday Inn Suwanee, GA 120 Owned by Partnership (b)
Holiday Inn
Express Commerce, GA 96 Owned by Partnership (b)

(a) The hotel serves as collateral for the Company's $2,771,000
term loan with a commercial lender.

(b) The Company has a 1% ownership in these hotels as the general partner in
a partnership.

The Company also holds eight land parcels for sale, three of
which are located in Florida, two in Georgia and one in Texas, Ohio
and Arizona.

For further information on such properties, see the accompanying
consolidated financial statements and Schedule III, Real Estate and
Accumulated Depreciation, contained elsewhere herein.

Item 3. Legal Proceedings

On May 2, 1995 a complaint was filed in the Court of Chancery of
the State of Delaware (New Castle County) entitled William N.
Strassburger v. Michael M. Early, Luther A. Henderson, John C.
Stiska, N. Russell Walden, and Triton Group, Ltd., defendants, and
Ridgewood Properties, Inc., nominal defendant, C.A. No. 14267 (the
"Complaint"). The plaintiff is an individual shareholder of the
Company who purports to file the Complaint individually,
representatively on behalf of all similarly situated shareholders,
and derivatively on behalf of the Company. The Complaint challenges
the actions of the Company and its directors in consummating the
Company's August 1994 repurchases of its common stock held by Triton
Group, Ltd. and Hesperus Partners Ltd. in five counts, denominated
Waste of Corporate Assets, Breach of Duty of Loyalty to Ridgewood,
Breach of Duty of Good Faith, Intentional Misconduct, and Breach of
Duty of Loyalty and Good Faith to Class. On July 5, 1995, the
Company filed a timely answer generally denying the material
allegations of the complaint and asserting several affirmative
defenses. This case is in the concluding stages of discovery. No
trial date has been set. The Company intends to vigorously contest
this matter.

On December 22, 1995, the Company and its wholly-owned
subsidiary, Cornerstone Management & Development, Inc., a Georgia
corporation ("Cornerstone Georgia"), sued Charles S. Taylor
("Taylor"), Deborah L. Cannon ("Cannon"), their affiliated
corporations, Cornerstone Management & Development, Inc., a Maryland
corporation ("Cornerstone Maryland") and Cornerstone Hospitality
Group, Inc. ("Cornerstone Hospitality") in the Superior Court of Cobb
County, Georgia (No. 95-1943805), for actions taken by the defendants
both before and after Taylor and Cannon were terminated as officers
and directors of Cornerstone Georgia. The complaint alleges that in
violation of their fiduciary duties and in violation of an Asset
Purchase Agreement among the parties, Taylor and Cannon
misappropriated assets and business from Cornerstone Georgia; that
since their termination by Cornerstone Georgia, Taylor and Cannon
have continued to misappropriate assets and to usurp business
opportunities and to interfere with business and contractual
relationships; and that this wrongful activity has been for the
benefit and with the assistance of Cornerstone Maryland and
Cornerstone Hospitality. The suit is for money damages, an
accounting, the imposition of a constructive trust, expenses of
litigation including attorneys' fees, and punitive damages. The
defendants have filed an Answer and Counterclaim, alleging that the
individual defendants were terminated in violation of the Agreement;
that the Company breached the Asset Purchase Agreement; that the
Company otherwise interfered with business and contractual
relationships; and for conversion. The counterclaim is for money
damages, restitution, expenses of litigation including attorneys'
fees, and punitive damages. The Company intends to vigorously pursue
this matter.

On August 23, 1996, Great American Resorts filed a complaint
in the Superior Court of Cobb County, State of Georgia, entitled
Great American Resorts, Inc. and Great American Casinos, Inc. v.
Charles Taylor, Deborah Lynn Cannon, Walter D. Hrab and Ridgewood
Properties, Inc., Civil Action File No. 9616398-05, alleging that the
Company and the other defendants are liable for breach of contract
and breach of fiduciary duty stemming from a contract between Great
American and one of the Company's subsidiaries. The complaint seeks
damages, attorneys' fees and pre-judgment interest. It also seeks an
order requiring that certain books and records be turned over to the
plaintiffs. On September 27, 1996, the Company filed a timely answer
generally denying the material allegations of the complaint and
asserting several affirmative defenses. The Company intends to
vigorously contest this matter.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders
during the fourth quarter of the Company's fiscal year ended August
31, 1996.

Item 4.5 Executive Officers of the Registrant

The following sets forth certain information regarding the
executive officers of the Company:

Name Age Present Positions

N. Russell Walden 58 President and Chief Executive
Officer, Director

Byron T. Cooper 46 Vice President -
Construction and Planning

Karen S. Hughes 41 Vice President, Chief Financial
Officer and Secretary

The officers of the Company, who are appointed by the Board of
Directors, hold office until their successors are chosen and
qualified, or until their earlier death, resignation or removal.

Mr. Walden has been President and Chief Executive Officer of the
Company since its formation on October 29, 1985. Mr. Walden was a
director of Sunbelt Nursery Group, Inc. ("Sunbelt") from 1983 until
1990. He is the former President, Chief Executive Officer and
director of CMEI, Inc. and a former director of Pier 1 Inc.

Mr. Cooper has been Vice President - Construction and Planning
of the Company since its formation.

Ms. Hughes has been Vice President, Chief Financial Officer and
Secretary of the Company since its formation.

PART II

Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters

Information regarding the market for the Company's common stock,
the Company's dividend policy and the approximate number of holders
of the common stock at October 31, 1996, is included under the
caption "Market for Registrant's Common Equity and Related
Stockholder Matters" on page 1 of the 1996 Annual Report to
Shareholders and is incorporated herein by reference.

Item 6. Selected Financial Data

A summary of selected financial data for the Company for the
fiscal years 1992 through 1996 is included under the caption entitled
"Selected Financial Data" on page 1 of the 1996 Annual Report to
Shareholders and is incorporated herein by reference.

Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations

Information regarding the Company's financial condition, changes
in financial condition and results of operations is included under
the caption entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 3 through 7
of the 1996 Annual Report to Shareholders and is incorporated herein
by reference.

Item 8. Financial Statements

Consolidated financial statements and notes thereto for the
Company, which are included on pages 8 through 31 of the 1996 Annual
Report to Shareholders under the following captions listed below, are
incorporated herein by reference.

Consolidated Balance Sheets at August 31, 1996 and 1995.

Consolidated Statements of Loss for the years ended August 31,
1996, 1995 and 1994.

Consolidated Statements of Shareholders' Investment for the
years ended August 31, 1996, 1995 and 1994.

Consolidated Statements of Cash Flows for the years ended August
31, 1996, 1995 and 1994.

Notes to Consolidated Financial Statements.

Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

The information required by this item with respect to directors
and with respect to Item 405 of Regulation S-K is incorporated by
reference to the Company's Proxy Statement for its 1997 Annual
Shareholder Meeting (the "1997 Proxy Statement"). Information
concerning the Company's executive officers is included in Item 4.5
in Part I of this report.

Item 11. Executive Compensation

Information regarding compensation of officers and directors of
the Company is set forth under the caption entitled "Executive
Compensation" in the Company's 1997 Proxy Statement and is
incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and
Management

Information regarding ownership of certain of the Company's
securities is set forth under the caption entitled "Beneficial
Ownership of the Company's Securities" in the Company's 1997 Proxy
Statement and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

Information regarding certain relationships and related
transactions with the Company is set forth under the caption entitled
"Certain Relationships and Related Transactions" in the Company's
1997 Proxy Statement and is incorporated herein by reference.

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K

(a)(1) The following financial statements, together with the
applicable report of independent public accountants, are set forth on
pages 8 through 31 of the 1996 Annual Report to Shareholders and are
incorporated by reference at Item 8 herein:

Report of Independent Accountants

Consolidated Balance Sheets at August
31, 1996 and 1995

Consolidated Statements of Loss
for the years ended August 31, 1996,
1995 and 1994

Consolidated Statements of Shareholders'
Investment for the years ended
August 31, 1996, 1995 and 1994

Consolidated Statements of Cash Flows for the
years ended August 31, 1996, 1995 and 1994

Notes to Consolidated Financial Statements

(a)(2) The following financial statement schedules, together
with the applicable report of independent public accountants, are
filed as a part of this Report.

Page Number
in Form 10-K

Report of Independent Accountants
on Schedules S-1

III - Real Estate and Accumulated
Depreciation - August 31, 1996 S-2 thru S-3

IV - Mortgage Loans on Real Estate
August 31, 1996 S-4 thru S-5

All other schedules are omitted because they are not applicable or
because the required information is given in the financial statements
or notes thereto.

(a)(3) The exhibits filed herewith or incorporated by
reference herein are set forth on the Exhibit Index on pages E-1
through E-9 hereof. Included in those exhibits are the following
Executive Compensation Plans and Arrangements:

10(a) Employment Agreement between N. R. Walden and CMEI,
Inc., dated March 28, 1985.

10(c) Ridgewood Properties, Inc. Supplemental Retirement
and Death Benefit Plan dated January 1, 1987 (filed
as an Exhibit to Registrant's Form 10-K for the
fiscal year ended August 31, 1988 and incorporated
herein by reference).

10(e) Post-Employment Consulting Agreement between N. R.
Walden and Ridgewood Properties, Inc. dated September
4, 1991 (filed as an Exhibit to Registrant's Form
10-K for the fiscal year ended August 31, 1991 and
incorporated herein by reference).

10(f) Post-Employment Consulting Agreement between Karen S.
Hughes and Ridgewood Properties, Inc. dated September
4, 1991 (filed as an Exhibit to Registrant's Form
10-K for the
fiscal year ended August 31, 1991 and incorporated
herein by reference).

10(g) Post-Employment Consulting Agreement between Byron T.
Cooper and Ridgewood Properties, Inc. dated September
4, 1991 (filed as an Exhibit to Registrant's Form
10-K for the fiscal year ended August 31, 1991 and
incorporated herein by reference).

10(h) Post-Employment Consulting Agreement between M. M.
McCullough and Ridgewood Properties, Inc. dated
September 4, 1991 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal year ended
August 31, 1991 and incorporated herein by
reference).

10(p) Ridgewood Properties, Inc. Stock Option Plan dated
March 30, 1993 and as amended September 14, 1993
(filed as an Exhibit to Registrant's Form 10-Q for
the quarter ended February 28, 1994, and incorporated
herein by reference).

10(q) Stock Option Agreement between Byron T. Cooper and
Ridgewood Properties, Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed as an Exhibit to
Registrant's Form 10-Q for the quarter ended February
28, 1994, and incorporated herein by reference).

10(r) Stock Option Agreement between Luther A. Henderson
and Ridgewood Properties, Inc. dated April 1, 1993
and as approved on January 12, 1994 (filed as an
Exhibit to Registrant's Form 10-Q for the quarter
ended February 28, 1994, and incorporated herein by
reference).

10(s) Stock Option Agreement between Karen S. Hughes and
Ridgewood Properties, Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed as an Exhibit to
Registrant's Form 10-Q for the quarter ended February
28, 1994, and incorporated herein by reference).

10(t) Stock Option Agreement between M. M. McCullough and
Ridgewood Properties, Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed as an Exhibit to
Registrant's Form 10-Q for the quarter ended February
28, 1994, and incorporated herein by reference).

10(u) Stock Option Agreement between N. R. Walden and
Ridgewood Properties, Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed as an Exhibit to
Registrant's Form 10-Q for the quarter ended February
28, 1994, and incorporated herein by reference).

10(v) Stock Option Agreement between Gregory T. Weigle and
Ridgewood Properties, Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed as an Exhibit to
Registrant's Form 10-Q for the quarter ended February
28, 1994, and incorporated herein by reference).

10(w) Stock Option Agreement between Karen S. Hughes and
Ridgewood Properties, Inc. dated January 31, 1994
(filed as an Exhibit to Registrant's Form 10-Q for
the quarter ended February 28, 1994, and incorporated
herein by reference).

10(x) Stock Option Agreement between N. R. Walden and
Ridgewood Properties, Inc. dated January 31, 1994
(filed as an Exhibit to Registrant's Form 10-Q for
the quarter ended February 28, 1994, and incorporated
herein by reference).

10(bb) Ridgewood Properties, Inc. 1993 Stock Option Plan, as
amended on October 26, 1994 (filed as an Exhibit to
Registrant's Registration Statement on Form S-8 filed
November 8, 1994 (No. 33-86084) and incorporated
herein by reference).

10(ii) Agreement and Plan of Merger between and among Ridgewood
Properties, Inc., Ridgewood Acquisition Corp., Wesley Hotel
Group, Inc., Wayne McAteer and Samuel King dated December
7, 1995 (filed as an Exhibit to Registrant's Form 10-Q for
the quarter ended November 30, 1995, and incorporated
herein by reference).

No reports on Form 8-K were filed during the fourth quarter of the
Company's fiscal year ended August 31, 1996.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

RIDGEWOOD PROPERTIES, INC.

By: /s/ N. R. Walden__________
N. Russell Walden,
President, Chief
Executive Officer
Dated: November 22, 1996

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

/s/ N. R. Walden_______________
N. Russell Walden, President,
Chief Executive Officer and
Director

/s/ Karen S. Hughes____________
Karen S. Hughes,
Vice President, Chief
Accounting and Financial
Officer and Secretary

/s/ Michael M. Earley__________
Michael M. Earley, Director

/s/ Luther A. Henderson________
Luther A. Henderson, Director

Dated: November 22, 1996

Report of Independent Accountants on
Financial Statement Schedules

October 11, 1996

To the Board of Directors
of Ridgewood Properties, Inc.

Our audits of the consolidated financial statements referred to in
our report dated October 11, 1996 appearing in the 1996 Annual
Report to Shareholders of Ridgewood Properties, Inc. (which report
and consolidated financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedules listed in Item 14(a) of
this Form 10-K. In our opinion, these Financial Statement
Schedules present fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements.

<TABLE>

RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES SCHEDULE III
------------------------------------------- Page 1 of 2
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
-------------------------------------------------------
AUGUST 31, 1996
---------------
(000'S Omitted)
<CAPTION>

Cost Capitalized Gross Amount at Which
Initial Cost Subsequent to Carried at August 31, 1996
to Company Acquisition (A)(B)(D)
------------------ ------------------ ----------------------------------
Building Building Accumu-
and Carry- and lated Date of
Encum- Improve- Improve- ing Improve- Deprecia- Construc- Date
Description brances Land ments ments Costs Land ments Total tion (C) tion Acquired
- ----------- -------- ---- -------- -------- ------ ---- -------- ----- -------- -----------------
LAND
- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Georgia -- 78 -- 1 -- 78 1 79 -- -- 12/75

Texas -- 5,338 -- 2 -- 5,338 2 5,340 -- -- 12/85
--
Florida -- 475 -- -- -- 475 -- 475 -- -- 3/85
Florida -- 302 -- 6 -- 302 6 308 -- -- 5/77
Florida -- 41 -- -- -- 41 -- 41 -- -- 6/78
Florida -- 80 -- -- -- 80 -- 80 -- -- 11/79
Florida -- 1,184 -- -- -- 1,184 -- 1,184 -- -- 2/85

Arizona -- 978 -- 110 -- 978 110 1,088 -- -- 3/85

Ohio -- 1,006 -- 168 -- 1,006 168 1,174 -- -- 12/77
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Non-
operating
properties -- 9,482 -- 287 -- 9,482 287 9,769 --
--------- --------- --------- --------- --------- --------- --------- --------- ---------

HOTEL
- --------------
Florida 2,771 439 1,921 1,050 -- 439 2,404 2,843 1,460 1973 9/74
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total
operating
properties 2,771 439 1,921 1,050 -- 439 2,404 2,843 1,460
-------- -------- -------- -------- -------- -------- -------- -------- --------

GRAND TOTAL $ 2,771 $ 9,921 $ 1,921 $ 1,337 $ -- $ 9,921 $ 2,691 $ 12,612 $ 1,460
========= ========= ========= ========= ========= ========= ========= ========= =========
</TABLE>

SCHEDULE III
Page 2 of 2

(A) Except as discussed in Note 2 to the "Notes to Consolidated
Financial Statements," real estate owned is carried at the lower
of cost or estimated net realizable value. At August 31, 1996,
the amount of the allowance for possible losses was approximately
$4,700,000, which related to real estate properties.

(B) Reconciliation of real estate properties:

<TABLE>
<CAPTION>
For the Year Ended
(000's omitted)
8/31/96 8/31/95 8/31/94
------- ------- -------
<S> <C> <C> <C>
Balance, beginning of year $12,934 $17,768 $39,911
Additions during the period:
Acquisitions -- 830 455
Capitalized costs 49 81 559

Deductions during the period:
Real estate sold or assets
retired (on which financing
was provided by the Company
in certain cases) 371 5,745 23,157
------- ------- -------

Balance, end of year $12,612 $12,934 $17,768
======= ======= =======
</TABLE>

(C) Operating properties and any related improvements are being
depreciated by the "straight line" method over the estimated
useful lives of such assets, which are generally 30 years for
buildings and 5 years for furniture and fixtures.

Reconciliation of accumulated depreciation:

<TABLE>
<CAPTION>
For the Year Ended
(000's omitted)
8/31/96 8/31/95 8/31/94
------- ------- -------
<S> <C> <C> <C>
Balance, beginning of year $1,369 $2,669 $7,239
Additions during the period 121 326 1,006
Depreciation associated with
assets sold or retired (30) (1,626) (5,576)
------ ------ ------
Balance, end of year $1,460 $1,369 $2,669
====== ====== ======

</TABLE>

(D) The aggregate cost for federal income tax purposes is approximately
$12,711,000 at August 31, 1996.

<TABLE>
RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES SCHEDULE IV
------------------------------------------ Page 1 of 2
SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE
-----------------------------------------
AUGUST 31, 1996
---------------
(000'S Omitted)
<CAPTION> ---------------
Principal Amount
Periodic Face Carrying of Loan Subject
Interest Final Payment Prior Amount of Amount of to Delinquent
Rate Maturity Terms Liens Mortgage Mortgage Principal or
Description (b) Date (d) (d) (d) (c) Interest
- ----------- -------- -------- -------- ----- --------- --------- ----------------

Land
- ----
<S> <C> <C> <C> <C> <C> <C> <C>
First Mortgage Loan, 10% 1/97 Principal and Interest -- 5 $ 5 --
Texas Payable Monthly

TOTALS $ 5
==========

</TABLE>

SCHEDULE IV
Page 2 of 2

NOTES:

(a) Reconciliation of mortgage loans on real estate: (000's
omitted)

Balance, August 31, 1993 $ 783

Principal payments received
on mortgage loans (60)
Reductions to mortgage loans -
Amortization of discounts 7
Charge-off of fully
reserved loan (227)
------
Balance, August 31, 1994 $ 503

Payment received on sale of
mortgage loans (342)
Principal payments received
on mortgage loans (36)
Discount on loans sold, net of
amortization of discounts (81)
------
Balance, August 31, 1995 $ 44

Principal received on sale of
mortgage loans (37)
Principal payments received on
mortgage loans (2)
------
Balance, August 31, 1996 5
======

(b) Interest rates shown include, where applicable,
amortization of discounts.

(d) Information is given in these columns only for loans
which exceed three percent of the total loans.

EXHIBIT INDEX

Report on Form 10-K for the fiscal year ended August 31, 1996

Page Number
Exhibit in Manually
Number Description Signed Original

3(a) Certificate of Incorporation of
Registrant.*

3(b) By-Laws of Registrant.*

3(c) Certificate of Amendment to the
Certificate of Incorporation (filed
as an Exhibit to Registrant's Form
10-K for the fiscal year ended August
31, 1987 and incorporated herein by
reference).

3(d) Certificate of Amendment to the
Certificate of Incorporation of the
Registrant (filed as an Exhibit to
Registrant's Form 10-K for the
fiscal year ended August 31, 1989 and
incorporated herein by reference).

3(e) Certificate of Amendment of the
Certificate of Incorporation of
Ridgewood Properties, Inc. dated May
23, 1991 (filed as an Exhibit
to Registrant's Form 10-K for the
fiscal year ended August 31, 1991 and
incorporated herein by reference).

3(f) Certificate of Amendment of the
Certificate of Incorporation of
Ridgewood Properties, Inc.
dated March 30, 1993 (filed as
Exhibit 3 to Registrant's Form 10-Q
for the fiscal quarter ended February
28, 1993 and incorporated herein by
reference).

3(g) Certificate of Amendment of the
Certificate of Incorporation of
Ridgewood Properties, Inc. dated
January 26, 1994 (filed as Exhibit 3
to Registrant's Form 10-Q for the
fiscal quarter ended February 28,
1994 and incorporated herein by
reference).

4(a) Stock Purchase Agreement between
Ridgewood Properties, Inc. and Triton
Group Ltd., dated as of August 15,
1994 (filed as an Exhibit to
Registrant's Form 8-K on August 15,
1994, and incorporated herein by
reference).

4(b) August 15, 1994 Press Release issued
by Ridgewood Properties, Inc. (filed
as an Exhibit to Registrant's Form
8-K on August 15, 1994, and
incorporated herein by reference).

4(c) Stock Purchase Agreement between
Ridgewood Properties, Inc. and
Hesperus Partners Ltd., dated as of
August 29, 1994 (filed as an Exhibit
to Registrant's Form 8-K on August
15, 1994, and incorporated herein by
reference).

4(d) Certificate of Designation,
Preferences and Rights of Series A
Convertible Preferred Stock of the
Registrant (filed as an Exhibit to
Registrant's Registration Statement
on Form S-8 filed on November 8, 1994
(No. 33-866084) and incorporated
herein by reference).

10(a) Employment Agreement between N. R.
Walden and CMEI, Inc., dated March
28, 1985.*

10(b) Bill of Sale and Assumption of
Liabilities between CMEI, Inc. and
Ridgewood Properties, Inc. dated
December 9, 1985.*

10(c) Ridgewood Properties, Inc.
Supplemental Retirement and Death
Benefit Plan dated January 1, 1987
(filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1988 and
incorporated herein by reference).

10(d) $15,000,000 Revolving Line of Credit
Agreement from First American Bank of
Georgia, N.A. to Ridgewood
Properties, Inc. dated November 22,
1989 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1989 and
incorporated herein by reference).

10(e) Post-Employment Consulting Agreement
between N. R. Walden and Ridgewood
Properties, Inc. dated September 4,
1991 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1991 and
incorporated herein by reference).

10(f) Post-Employment Consulting Agreement
between Karen S. Hughes and Ridgewood
Properties, Inc. dated September 4,
1991 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1991 and
incorporated herein by reference).

10(g) Post-Employment Consulting Agreement
between Byron T. Cooper and Ridgewood
Properties, Inc. dated September 4,
1991 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1991 and
incorporated herein by reference).

10(h) Post-Employment Consulting Agreement
between M. M. McCullough and
Ridgewood Properties, Inc. dated
September 4, 1991 (filed as an
Exhibit to Registrant's Form 10-K for
the fiscal year ended August 31, 1991
and incorporated herein by
reference).

10(i) Modification of $15,000,000 Line of
Credit Loan to Ridgewood Properties,
Inc. from First American Bank of
Georgia, N.A. dated March 1, 1991
(filed as an Exhibit to Registrant's
Form 10-Q for the quarter ended
February 28, 1991 and incorporated
herein by reference).

10(j) Second Amendment to $15,000,000 Line
of Credit Loan to Ridgewood
Properties, Inc. from First American
Bank of Georgia, N.A. dated May 8,
1991 (filed as an Exhibit to
Registrant's Form 10-Q for the
quarter ended May 31, 1991 and
incorporated herein by reference).

10(k) Consolidated Amendatory Agreement
between Ridgewood Properties, Inc.
and First American Bank of Georgia,
N.A. dated January 31, 1992 (filed as
an Exhibit to Registrant's Form 10-Q
for the quarter ended February 28,
1992 and incorporated herein by
reference).

10(l) Amendment to Loan Agreement between
Ridgewood Properties, Inc. and First
American Bank of Georgia, N.A. dated
March 26, 1992 (filed as an Exhibit
to Registrant's Form 10-Q for the
quarter ended February 28, 1992 and
incorporated herein by reference).

10(m) Amendment to Loan Agreement between
Ridgewood Properties, Inc. and First
American Bank of Georgia, N.A. dated
April 27, 1992 (filed as an Exhibit
to Registrant's Form 10-Q for the
quarter ended May 31, 1992 and
incorporated herein by reference).

10(n) Joint Venture Agreement between
Ridgewood Properties, Inc. and
Eagle's Lake, Inc. dated December 17,
1993 (filed as an Exhibit to
Registrant's Form 10-Q for the
quarter ended November 30, 1994, and
incorporated herein by reference).

10(o) Promissory Note between Ridgewood
Properties, Inc. and Triton Group
Ltd. dated December 6, 1993 (filed as
an Exhibit to Registrant's Form 10-Q
for the quarter ended November 30,
1994, and incorporated herein by
reference.)

10(p) Ridgewood Properties, Inc. Stock
Option Plan dated March 30, 1993 and
as amended September 14, 1993 (filed
as an Exhibit to Registrant's Form
10-Q for the quarter ended February
28, 1994, and incorporated herein by
reference).

10(q) Stock Option Agreement between Byron
T. Cooper and Ridgewood Properties,
Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed
as an Exhibit to Registrant's Form
10-Q for the quarter ended February
28, 1994, and incorporated herein by
reference).

10(r) Stock Option Agreement between Luther
A. Henderson and Ridgewood
Properties, Inc. dated April 1, 1993
and as approved on January 12, 1994
(filed as an Exhibit to Registrant's
Form 10-Q for the quarter ended
February 28, 1994, and incorporated
herein by reference).

10(s) Stock Option Agreement between Karen
S. Hughes and Ridgewood Properties,
Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed
as an Exhibit to Registrant's Form
10-Q for the quarter ended February
28, 1994, and incorporated herein by
reference).

10(t) Stock Option Agreement between M. M.
McCullough and Ridgewood Properties,
Inc. dated April 1, 1993 and as
approved on January 12, 1994 (filed
as an Exhibit to Registrant's Form
10-Q for the quarter ended February
28, 1994, and incorporated herein by
reference).

10(u) Stock Option Agreement between N. R.
Walden and Ridgewood Properties, Inc.
dated April 1, 1993 and as approved
on January 12, 1994 (filed as an
Exhibit to Registrant's Form 10-Q for
the quarter ended February 28, 1994,
and incorporated herein by
reference).

10(v) Stock Option Agreement between
Gregory T. Weigle and Ridgewood
Properties, Inc. dated April 1, 1993
and as approved on January 12, 1994
(filed as an Exhibit to Registrant's
Form 10-Q for the quarter ended
February 28, 1994, and incorporated
herein by reference).

10(w) Stock Option Agreement between Karen
S. Hughes and Ridgewood Properties,
Inc. dated January 31, 1994 (filed as
an Exhibit to Registrant's Form 10-Q
for the quarter ended February 28,
1994, and incorporated herein by
reference).

10(x) Stock Option Agreement between N. R.
Walden and Ridgewood Properties, Inc.
dated January 31, 1994 (filed as an
Exhibit to Registrant's Form 10-Q for
the quarter ended February 28, 1994,
and incorporated herein by
reference).

10(y) Promissory Note between Ridgewood
Properties, Inc. and Triton Group
Ltd. dated May 5, 1994 (filed as an
Exhibit to Registrant's Form 10-Q for
the quarter ended May 31, 1994, and
incorporated herein by reference).

10(z) Amendment to Loan Agreement between
Ridgewood Properties, Inc. and First
American Bank of Georgia, N.A. dated
June 21, 1994 (filed as an Exhibit to
Registrant's Form 10-Q for the
quarter ended May 31, 1994, and
incorporated herein by reference).

10(aa) Real Estate Note executed by Sun
Communities Operating Limited
Partnership and payable to the order
of Ridgewood Properties, Inc. dated
June 16, 1994 (filed as an Exhibit to
Registrant's Form 8-K on June 29,
1994 and incorporated herein by
reference).

10(bb) Ridgewood Properties, Inc. 1993 Stock
Option Plan, as amended on October
26, 1994 (filed as an Exhibit to
Registrant's Registration Statement
on Form S-8 filed on November 8, 1994
(No. 33-86084) and incorporated
herein by reference).

10(cc) Amended and Restated Basic Agreement
between RW Hotel Investment Partners,
L.P. and Ridgewood Hotels, Inc. dated
August 14, 1995 (filed as an Exhibit
to Registrant's Form 10-K for the
fiscal year ended August 31, 1995,
and incorporated herein by
reference).

10(dd) Amended and Restated Limited
Partnership Agreement of RW Hotel
Partners, L.P. dated September 8,
1995 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1995, and
incorporated herein by reference).

10(ee) Management Agreement (Holiday Inn
Hurstbourne) between RW Hotel
Partners, L.P. and Ridgewood
Properties, Inc. dated August 16,
1995 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1995, and
incorporated herein by reference).

10(ff) Mortgage, Assignment of Leases and
Rents and Security Agreement Between
Bloomfield Acceptance Company, L.L.C.
and Ridgewood Orlando, Inc. dated
June 30, 1995 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1995, and
incorporated herein by reference).

10(gg) Security Agreement between Ridgewood
Orlando, Inc. and Bloomfield
Acceptance Company, L.L.C. dated June
30, 1995 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal
year ended August 31, 1995, and
incorporated herein by reference).

10(hh) Mortgage Note between Bloomfield
Acceptance Company and Ridgewood
Orlando, Inc. dated June 30, 1995
(filed as an Exhibit to Registrant's
Form 10-K for the fiscal year ended
August 31, 1995, and incorporated
herein by reference).

10(ii) Agreement and Plan of Merger between
and among Ridgewood Properties, Inc.,
Ridgewood Acquisition Corp., Wesley
Hotel Group, Inc., Wayne McAteer and
Samuel King dated December 7, 1995
(filed as an Exhibit to Registrant's
Form 10-Q for the quarter ended
November 30, 1995, and incorporated
herein by reference).

10(jj) Shareholders' Agreement by and between
Samuel King and Ridgewood Properties,
Inc. dated December 1995.

13 1996 Annual Report to Shareholders.

22 Subsidiaries of Registrant.

23 Consent of Price Waterhouse LLP

27 Financial Data Schedule.

_____________________

* Previously filed as an Exhibit to Registrant's
Registration Statement on Form 10 filed on November 19,
1985 (Securities Exchange Act File No. 0-14019), and
incorporated herein by reference.

SHAREHOLDERS' AGREEMENT

THIS SHAREHOLDERS' AGREEMENT (the "Agreement") is made and
entered into this ____ day of December, 1995 (the "Effective
Date") by and between SAMUEL KING ("King") and RIDGEWOOD
PROPERTIES, INC., a Delaware corporation (the "Corporation").

W I T N E S S E T H:

WHEREAS, as of the date hereof, King owns twenty five
thousand (25,000) shares of $0.01 per share par value common
stock in the Corporation (the "Subject Stock"); and

WHEREAS, as of the date hereof, King has agreed to be
employed by the Corporation; and

WHEREAS, the parties wish to provide for the mandatory
purchase of the Subject Stock by the Corporation in the event of
King's election to require the same upon the terms and
conditions hereinafter specified.

NOW, THEREFORE, in consideration of King's agreement to
become employed by the Corporation, the mutual promises of the
parties hereto and of the mutual benefits to be gained by the
performance thereof, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties and intending to be legally bound
hereby the parties agree as follows:

1. Termination of Prior Agreements: The above recitations
are true and correct, and the parties hereby cancel and revoke
all prior written and oral agreements among them touching upon
these presents.

2. Put/Call: If at any time on or after the date which is
the two (2) year anniversary of the Effective Date (the "Second
Anniversary Date") but on or before the date which is ninety
(90) days after the Second Anniversary Date (the "Expiration
Date"), King desires to sell and require the Corporation
purchase all or any part of the Subject Stock, then King shall
deliver written notice (the "Put Notice") of such intention to
the Corporation on or before the Expiration Date which Put
Notice shall designate both (i) the number of shares of Subject
Stock which King desires to sell to the Corporation and (ii) a
closing date (the "Closing Date") which is not earlier than five
(5) days after the date of the Put Notice nor later than sixty
(60) days after the Put Notice. Upon the Corporation's receipt
of the Put Notice, the Corporation shall be obligated to
purchase that number of shares of the Subject Stock so
designated in the Put Notice for a purchase price of Four and
50/100s Dollars ($4.50) per share (i.e. the total purchase price
shall equal the product of $4.50 multiplied by the number of
shares of the Subject Stock designated in the Put Notice) as of
the Closing Date. From and after King's delivery of the Put
Notice to the Corporation, King may by written notice terminate
both King's and the Corporation's respective obligations under
this Agreement whereupon this Agreement shall be of no further
force or effect and neither party shall have any continuing
rights or obligations arising hereunder or by reason hereof or
the existence or delivery of the Put Notice. At 10:00 a.m.
Atlanta, Georgia time on the Closing Date, King and the duly
authorized representatives of the Corporation shall meet at the
principal offices of the Corporation (the "Closing"). At the
Closing, the Corporation shall pay to King the purchase price
for that number of shares of the Subject Stock designated in the
Put Notice in cash. Upon King's receipt of the aforesaid
purchase price, King shall execute and deliver to the
Corporation such stock certificates, endorsements, affidavits or
stock powers as are reasonably necessary and required to
transfer that number of shares of the Subject Stock designated
in the Put Notice to the Corporation free and clear of all liens
and encumbrances other than those restrictions placed thereon as
of the date of King's receipt of the same without further
representation or warranty.

3. Amendment or Revocation By Mutual Agreement: Except as
otherwise provided herein, this Agreement may be amended in
whole or in part only by a writing signed by both King (or his
legal representative) and the Corporation.

4. Binding Effect: This Agreement shall be binding not
only upon the parties hereto, but also upon their heirs,
executors, administrators, legal representatives, successors and
assigns; and the parties hereby agree for themselves and their
heirs, executors, administrators, legal representatives,
successors and assigns to execute any instruments and to perform
any acts which may be necessary or proper to carry out the
purposes of this Agreement.

5. Georgia Law and Invalid Provisions: This Agreement
shall be governed by the laws of the State of Georgia and if any
term or part of this Agreement shall be determined to be
invalid, illegal or unenforceable in whole or in part, the
validity of the remaining part of such term or the validity of
any other term of this Agreement shall not in any way be
affected.

6. Counterparts: This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original and all of which together shall comprise but a single
instrument.

7. Notices: All notices, communications and deliveries
under this Agreement shall be made in writing signed by the
party making the same and shall be deemed given on the date
delivered if delivered in person, one (1) business day after
being deposited with a nationally recognized next day delivery
service or on the third (3rd) business day after being deposited
with the United States Postal Service, registered mail, return
receipt requested (with postage prepaid) as follows:

To the Corporation: Ridgewood Properties, Inc.
2859 Paces Ferry Road
Suite 700
Atlanta, Georgia 30339

To King: Samuel King
120 Colonade Drive
Peachtree City, Georgia 30269

Any party may change any address at which it or he is to receive
notice hereunder by written notice to all other parties
delivered in accordance with this Item.

8. Representation of the Corporation. The Corporation and
those officers executing this Agreement on behalf of the
Corporation hereby represent and warrant to King that said
officers are duly authorized to execute this Agreement for and
on behalf of the Corporation whereupon this Agreement shall
serve as a legally binding and enforceable obligation of the
Corporation.

IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.

RIDGEWOOD PROPERTIES, INC.

By: _______________________
Its: President

Attest: __________________
Its: Secretary

(CORPORATE SEAL)

_____________________(SEAL)
SAMUEL KING

EXHIBIT 13

RIDGEWOOD
PROPERTIES, INC.

ANNUAL REPORT
1996

FINANCIAL STATEMENTS

Board of Directors Officers
Michael M. Earley N. Russell Walden
President - Triton Group Ltd. President

Luther A. Henderson Byron T. Cooper
President - Pirvest, Inc. Vice President, Construction and
Planning
N. Russell Walden
President - Ridgewood Karen S. Hughes
Properties, Inc. Vice President, Chief Financial
Officer and Secretary

Corporate Offices
2859 Paces Ferry Road, Suite 700
Atlanta, Georgia 30339
Telephone: (770) 434-3670

Market For Registrant's Common Equity and Related Stockholder Matters

The common stock, $0.01 par value per share (the "Common
Stock"), of the Company is listed in the broker-dealer "Pink Sheets"
and trades in the over-the-counter market. Prior to June 12, 1989,
the Common Stock was quoted in the automated quotation system of the
National Association of Securities Dealers (NASDAQ). Subsequent to
the deletion of the Common Stock from the automated quotation system
of NASDAQ, there has been an absence of an established public trading
market for the Common Stock.

Shares outstanding and per share amounts for all periods
presented have been retroactively adjusted for the twenty-for-one
stock split effected in the form of a stock dividend on December 31,
1992, two-for-one stock split effected in the form of a stock dividend
on August 31, 1993, and a three-for-one stock split effected in the
form of a stock dividend on October 31, 1994. On October 31, 1996,
there were 1,088,480 shares of common stock outstanding held by
approximately 222 shareholders of record. The Company paid its first
and only cash dividend on the common stock during fiscal year 1990.
The dividend paid was approximately $0.06 per share of common stock,
which totaled approximately $397,000. The Company may pay future
dividends if and when earnings and cash are available. The
declaration of dividends on the common stock is within the discretion
of the Board of Directors of the Company and is, therefore, subject to
many considerations, including operating results, business and capital
requirements and other factors.

<TABLE>

Selected Financial Data
<CAPTION>

-----------------------------------------------------------------
($000's omitted, except
per share data) 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>

Balance Sheet Data as of August 31
Total Assets $ 8,724 $ 9,673 $ 14,351 $ 34,655 $ 38,857
Term Loan(s) Payable 2,858 2,796 5,415 12,316 14,620
Shareholders' Investment 4,441 5,612 7,440 20,564 22,424
Income Statement Data
Year Ended August 31
Net Revenues 4,314 8,675 30,082 18,619 16,667
Net Loss (1,178) (1,656) (3,631) (1,860) (4,460)
Loss Per Common Share (1) $ (1.29) $ (1.90) $ (0.64) $ (0.32) $ (0.76)

<FN>
(1) Retroactively adjusted for the twenty-for-one stock split effected
in the form of a stock dividend on December 31, 1992, two-for-one
stock split effected in the form of a stock dividend on August 31, 1993,
and a three-for-one stock split effected in the form of a stock dividend
on October 31, 1994.
</FN>
</TABLE>

Management's Discussion and Analysis of Financial
Condition and Results of Operations

Liquidity and Capital Resources -

During fiscal year 1996, the Company received net proceeds of
approximately $634,000 primarily from the sale of undeveloped land in Ohio
and Georgia. The proceeds were used to provide additional working capital
to the Company.

In June 1995, the Company received a loan from a commercial
lender to refinance the Ramada Inn in Longwood, Florida. The loan
proceeds were $2,800,000. The loan is for a term of 20 years with an
amortization period of 25 years, at the rate of 10.35%. Principal and
interest payments will be approximately $26,000 per month beginning August
1, 1995. A portion of the proceeds from the loan was used to repay a term
loan, and the remaining proceeds of approximately $1,500,000 were used for
working capital. In addition, the Company is required to make a repair
escrow payment comprised of 4% of estimated revenues, as well as real
estate tax and insurance escrow payments. The total amount for these
items will be a payment of approximately $20,000 per month and can be
adjusted annually. The escrow funds are used as tax, insurance and repair
needs arise. As of August 31, 1996, there was approximately $150,000 of
escrowed funds related to this loan agreement.

On August 16, 1995, RW Hotel Partners, L.P. was organized as a
limited partnership (the "Partnership") under the laws of the State of
Delaware. Concurrently, the Company formed Ridgewood Hotels, Inc., a
Georgia corporation ("Ridgewood Hotels") which became the sole general
partner in the Partnership with RW Hotel Investments, L.L.C. ("Investor")
as the limited partner. Ridgewood Hotels has a 1% base distribution
percentage versus 99% for the Investor. However, distribution percentages
do vary depending on certain defined preferences and priorities pursuant
to the Partnership Agreement ("Agreement") which are discussed below. The
partnership was originally formed to acquire a hotel property in
Louisville, Kentucky. The Partnership consists of six hotel properties at
August 31, 1996. The terms of this partnership will serve as a guideline
for other potential acquisitions with this or other investors.

Income and loss are allocated to the Company and the limited
partner based upon the formula for allocating distributable cash as
described below but subject to an annual limitation which would result in
no more than 88% of partnership income or loss (as defined) being
allocated to the limited partner.

Distributable Cash is defined as the net income from the
property before depreciation plus any net sale proceeds and net financing
proceeds less capital costs. Distributions of Distributable Cash shall be
made as follows:

- First, to the Investor until there has been distributed to
the Investor an amount equal to a 15% cumulative internal rate of return
on the Investor's investment.

- Second, to Ridgewood Hotels until the aggregate amount
received by Ridgewood Hotels equals the aggregate cash contributions made
by Ridgewood Hotels to the Partnership (as of 8/31/96, Ridgewood Hotels
had contributed approximately $748,000).

- Third, 12% to Ridgewood Hotels and 88% to the Investor until
there has been distributed to the Investor an amount equal to a 25%
cumulative internal rate of return on Investor's investment.

- Fourth, 75% of the residual to the Investor and 25% to
Ridgewood Hotels.

A Management Agreement exists between the Partnership and the
Company as Manager ("Manager") for the purpose of managing hotels in
Kentucky, Georgia and South Carolina. The Manager shall be entitled to
the following property management fees:

(1) 2.5% of the gross revenues from the hotel property.

(2) 1% of the gross revenues from the hotel property as an
incentive fee if distributable cash equals or exceeds 13.5% of certain
aggregate acquisition costs. No management fees are payable with respect
to the first 12-month period of management of the hotel in Kentucky.

A Construction Management Agreement exists between the
Partnership and the Manager for the purpose of managing future
improvements to the properties.

The Company currently has approximately $748,000 invested in
the Partnership. Also, at August 31, 1996, the Company recorded
approximately $209,000 equity in the income of the partnership, bringing
the total investment in the limited partnership to approximately $957,000.
The Partnership purchased a hotel in Louisville, Kentucky for
approximately $16,000,000. In December 1995 and January 1996, the
Partnership purchased four hotel properties in Georgia for approximately
$15,000,000 and a hotel in South Carolina for $4,000,000, respectively.
The Company may make future capital contributions to the Partnership.
Management expects to fund such capital contributions through available
cash or from loans from the Partnership. Additionally, the Company may
invest in other partnerships to acquire hotels in the future.

In December 1995, the Company acquired the stock of the Wesley
Hotel Group, a hotel management company located in Atlanta, Georgia. At
the time of acquisition, Wesley managed five hotels. In conjunction with
the acquisition, the Company issued 125,000 shares of common stock and
assumed three promissory notes with a combined outstanding principal of
approximately $106,000.

Since the Company is not currently generating sufficient
operating cash to cover overhead and debt service, the Company must
continue to sell real estate, seek alternative financing or otherwise
recapitalize the Company. Due to the sale of land in Florida and Texas in
September and October 1996, respectively, there is available cash of
approximately $1.2 million. This available cash will be used to fund
operating losses until new sources of income can be generated. The
Company also intends to aggressively pursue the acquisition of hotels and
hotel management contracts through similar partnerships as described above
which would provide additional cash flow.

The Company owns one hotel, has 1% ownership in six other
hotels which it also manages and currently has five other hotels which it
manages but has no ownership. The success of the Company's operations
continues to be dependent upon such unpredictable factors as the general
and local economic conditions to which the real estate and hotel industry
is particularly sensitive: labor, environmental issues, weather
conditions, consumer spending or general business conditions and the
availability of satisfactory financing.

Results of Operations -

Sales of real estate properties for the fiscal year ended
August 31, 1996 decreased 88% compared to 1995 due to the sale of a hotel
and residential lots in 1995. The Company had gains from real estate
sales of approximately $281,000, $291,000 and $1,789,000 during fiscal
years 1996, 1995 and 1994, respectively. Gains or losses on real estate
sales are dependent upon the timing, sales price and the Company's basis
in specific assets sold and will vary considerably from period to period.

Revenues from real estate properties for fiscal year 1996
decreased $504,000, or 15%, compared to 1995. The decrease was due to the
sale of a hotel in 1995. Revenues from real estate properties for fiscal
year 1995 decreased $2,158,000, or 40%, compared to 1994. The decrease
was primarily due to the sale of the mobile home parks and apartments in
1994.

During fiscal year 1996, expenses of hotel management increased
$320,000, or 88%, compared to 1995. The increase was primarily due to
larger payroll costs associated with the increased staff necessary to
manage a larger number of hotels.

Revenues from hotel management for fiscal year 1996 increased
$410,000, or 143%, compared to 1995. The increase was due to a larger
number of hotels under management in 1996. There were no revenues from
hotel management in 1994 since the Company had not yet begun this
activity.

Expenses of real estate properties decreased $498,000, or 17%,
compared to 1995. The decrease was due to the sale of a hotel in 1995.
Expenses of real estate properties decreased $1,984,000, or 41%, for the
fiscal year ended August 31, 1995 compared to 1994 due to the sale of the
mobile home parks, apartments and hotel.

There were no mobile home sales or expenses during fiscal year
ended August 31, 1996 due to the sale of the mobile home parks in prior
years.

Due to the Company's investment in a limited partnership during
fiscal year 1996, the Company recognized equity in the income of the
partnership of approximately $209,000.

Income from loans and temporary investments decreased $70,000
and $68,000 for the fiscal year 1996 compared to 1995 and 1995 compared to
1994, respectively, due to less cash available for investment.

Other income remained relatively insignificant for all three
fiscal years ending August 31, 1996, 1995 and 1994. The provision of
$50,000 for possible losses in fiscal year 1995 pertains to a land parcel
in Atlanta, Georgia which has been sold. The provision of $1,638,000 for
possible losses in fiscal year 1994 pertains to land parcels in Dallas,
Texas; Phoenix, Arizona and Atlanta, Georgia. It was management's belief
that an additional provision in 1995 and 1994 was necessary to properly
reflect the current net realizable value of these properties.

Interest expense decreased by $65,000 during fiscal year 1996
compared to 1995 and $328,000 during fiscal year 1995 compared to 1994.
The decreases are primarily due to lower interest rates pertaining to the
Company's term loans.

General, administrative and other expenses have increased by
$99,000 for fiscal year 1996 compared to 1995 due to an overall increase
in costs associated with a larger business entity. General,
administrative and other expenses decreased by $323,000 for the fiscal
year 1995 compared to 1994. The decrease was due to management's effort
to reduce and control overhead in line with a smaller business entity.

Due to the Company's continuing aggressive movement into the
business of acquiring, developing, operating and selling hotel properties
throughout the country, the Company incurred business development costs of
$193,000 in fiscal year 1996 compared to $165,000 in fiscal year 1995.

In March 1995, the Financial Accounting Standards Board issued
Statement of Accounting Standards No. 121 (FAS 121), "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of."
FAS 121 establishes new standards for determining and measuring impairment
of long-lived assets held by an entity for investment purposes or for
disposal. According to the provisions of FAS 121, an entity should assess
impairment on assets held for investment or disposal whenever events or
changes in circumstances, whether economical or otherwise, indicate the
recorded amount of the asset may not be recoverable. FAS 121 is effective
for fiscal years beginning after December 15, 1995, although early
adoption is encouraged. The Company's management has elected to defer
early adoption of the effects of FAS 121; however, upon adoption,
management does not expect the effects of FAS 121 to have a material
adverse impact on the Company's financial statements.

Effect of Inflation -

Inflation tends to increase the Company's cash flow from income
producing properties since rental rates generally increase by a greater
amount than associated expenses. Inflation also generally tends to
increase the value of the Company's land portfolio.

Offsetting these beneficial effects of inflation are the
increased cost and decreased supply of investment capital for real estate
that generally accompany inflation.

<TABLE>

RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AUGUST 31, 1996 AND 1995

($000'S omitted, except per share data)

August 31, August 31,
ASSETS 1996 1995
------ --------- ---------
<S> <C> <C>
REAL ESTATE INVESTMENTS:
Real Estate Properties
Operating Properties $ 1,383 $ 1,461
Land Held for Sale 9,769 10,104
---------- ----------
11,152 11,565

Mortgage Loans 5 44
---------- ----------
Total real estate investments 11,157 11,609

Allowance for Possible Losses (4,700) (4,700)
---------- ----------
Net real estate investments 6,457 6,909

INVESTMENT IN LIMITED PARTNERSHIP 957 232

CASH AND CASH EQUIVALENTS 298 1,880

OTHER ASSETS 1,012 652
---------- ----------

$ 8,724 $ 9,673
========== ==========

<FN>

The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
</TABLE>

<TABLE>
<CAPTION>
August 31, August 31,
LIABILITIES AND SHAREHOLDERS' INVESTMENT 1996 1995
---------------------------------------- ---------- ----------
<S> <C> <C>
ACCOUNTS PAYABLE $ 103 $ 102

ACCRUED SALARIES, BONUSES AND
OTHER COMPENSATION 782 737

ACCRUED PROPERTY TAX EXPENSE 151 146

ACCRUED INTEREST AND OTHER LIABILITIES 389 280

TERM LOANS 2,858 2,796
---------- ----------
Total Liabilities 4,283 4,061
---------- ----------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' INVESTMENT
Series A Convertible Preferred Stock,
$1 par value, 1,000,000 shares
authorized, 450,000 shares
issued and outstanding in 1995 and 1996
liquidation preference
and callable at $3,600,000. 450 450
Common stock, $0.01 par value, 5,000,000
shares authorized, 963,480 and 1,088,480
shares issued and outstanding in 1995 and 11 10
1996, respectively.
Paid-in Surplus 16,202 16,196
Accumulated deficit since
December 30, 1985 (12,222) (11,044)
---------- ----------
Total Shareholders' Investment 4,441 5,612
---------- ----------
$ 8,724 $ 9,673
========== ==========
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
</TABLE>

<TABLE>
RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF LOSS

FOR THE YEARS ENDED AUGUST 31, 1996, 1995 AND 1994

($000's Omitted, except per share data)
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
REVENUES:
Revenues from real estate properties............... $ 2,748 $ 3,252 $ 5,410
Revenues from hotel management .................... 697 287 --
Sales of real estate properties ................... 617 5,018 19,848
Equity in net income of partnership ............... 209 -- --
Sales of mobile homes.............................. -- -- 4,594
Income from loans and temporary investments........ 43 113 181
Other.............................................. -- 5 49
---------- ---------- ---------
4,314 8,675 30,082
---------- ---------- ---------
COSTS AND EXPENSES:
Expenses of real estate properties................. 2,364 2,862 4,846
Expenses of hotel management ...................... 682 362 --
Costs of real estate sold ......................... 336 4,727 18,059
Costs of mobile homes sold......................... -- -- 5,757
Depreciation and amortization ..................... 268 512 1,147
Provision for possible losses ..................... -- 50 1,638
Interest expense, net of interest capitalized...... 345 410 738
General, administration and other.................. 1,304 1,205 1,528
Business development .............................. 193 165 --
---------- ---------- ---------
5,492 10,293 33,713
---------- ---------- ---------
LOSS BEFORE INCOME TAXES (1,178) (1,618) (3,631)

INCOME TAXES -- (38) --
---------- ---------- ---------
NET LOSS $ (1,178) $ (1,656) $ (3,631)
---------- ---------- ---------
LOSS PER COMMON SHARE (1.29) $ (1.90) (0.64)
========== ========== =========

<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>

<TABLE>
<CAPTION>
Ridgewood Properties, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended August 31, 1996, 1995 and 1994

($000's Omitted)

1996 1995 1994
Cash flows from operating activities: --------- --------- -----------
<S> <C> <C> <C>
Net loss ................................................... $ (1,178) $ (1,656) $ (3,631)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization .......................... 268 512 1,147
(Decrease) increase in allowance for possible losses.... -- (173) 1,638
Gain from sale of real estate properties ............... (293) (68) (1,788)
Equity in net income of partnership ........ ........... (209) -- --
Decrease in mobile home inventory ...................... -- -- 1,355
(Increase) decrease in other assets .................... (214) 134 342
Increase (decrease) in accounts payable
and accrued liabilities .............................. 115 (232) (370)
---------- ---------- ------------
Total adjustments ...................................... (333) 173 2,324
---------- ---------- ------------
Net cash used by operating activities .................. (1,511) (1,483) (1,307)
---------- ---------- ------------
Cash flows from investing activities:
Principal payments received on mortgage loans ............ 39 36 60
Investment in limited partnership ........................ (516) (232) --
Proceeds from sale of real estate ........................ 634 4,620 17,867
Additions to real estate properties ...................... (49) (915) (1,015)
---------- ---------- ------------
Net cash provided by investing activities .............. 108 3,509 16,912
---------- ---------- ------------
Cash flows from financing activities:
Dividends on preferred stock ............................. (135) (172) --
Purchase and retirement of common stock .................. -- -- (8,042)
Proceeds from issuance of debt ........................... -- 2,800 2,433
Debt financing costs ..................................... -- (159) --
Repayments of debt ....................................... (44) (5,419) (9,334)
---------- ---------- ------------
Net cash used by financing activities .................. (179) (2,950) (14,943)
---------- ---------- ------------
Net (decrease) increase in cash and cash equivalents ......... (1,582) (924) 662
Cash and cash equivalents at beginning of year ............... 1,880 2,804 2,142
---------- ---------- ------------
Cash and cash equivalents at end of year ..................... $ 298 $ 1,880 $ 2,804
========== ========== ============

<FN>

The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>

<TABLE>
<CAPTION>
Ridgewood Properties, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended August 31, 1996, 1995 and 1994

- -------------------------------------------------------------------------------------------------

Supplemental disclosures of cash flow information:

1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Interest paid ...................................... $ 345,000 $ 450,000 $ 698,000
Income taxes paid .................................. $ -- $ 38,000 $ --

- -------------------------------------------------------------------------------------------------

Supplemental disclosure of non-cash activity:
1996 1995 1994
------------ ------------ ------------

Issuance of 125,000 shares of common stock.......... $ 187,500 -- --

Assumption of term notes in conjunction with
purchase of hotel management company ..............$ 106,000 -- --

Charge-off of fully-reserved loan ................... -- -- $ 227,000

Issuance of preferred stock in exchange for shares of
common stock ........................................ -- -- $ 450,000

Purchase of common stock in exchange for note........ -- -- $ 1,450,000

- -------------------------------------------------------------------------------------------------

<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<TABLE>
RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
FOR THE YEARS ENDED AUGUST 31, 1996, 1995 AND 1994
($000's Omitted, except per share data)

Preferred Common
Stock Stock Accumulated Total
------------------------- ------------------------ Paid-in Earnings Shareholders'
Shares Amount Shares Amount Surplus (Deficit) Investment
---------- ---------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, August 31, 1993 -- $ -- 5,868,960 $ 59 $ 26,262 $ (5,757) $ 20,564

Purchase of common stock
for cash and issuance
of preferred stock 450,000 450 (4,365,840) (44) (8,449) -- (8,043)

Purchase of common
stock in exchange
for note -- -- (539,640) (5) (1,445) -- (1,450)

Net Loss -- -- -- -- -- (3,631) (3,631)
----------- ----------- ------------- ----------- ----------- ----------- -----------
Balance, August 31, 1994 450,000 $ 450 963,480 $ 10 $ 16,368 $ (9,388) $ 7,440

Dividends on
Preferred Stock -- -- -- -- (172) -- (172)
Net Loss -- -- -- -- -- (1,656) (1,656)
----------- ----------- ------------- ----------- ----------- ----------- -----------

Balance, August 31, 1995 450,000 $ 450 963,480 $ 10 $ 16,196 $ (11,044) $ 5,612

Dividends on
Preferred Stock -- -- -- -- (180) -- (180)
Issuance of Common Stock -- -- 125,000 1 186 -- 187
Net Loss -- -- -- -- -- (1,178) (1,178)
----------- ----------- ------------- ----------- ----------- ----------- -----------
Balance, August 31, 1996 450,000 $ 450 1,088,480 $ 11 $ 16,202 $ (12,222) $ 4,441
=========== =========== ============= =========== =========== =========== ===========

<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>

Ridgewood Properties, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
August 31, 1996, 1995 and 1994

1. Significant Accounting Policies

General -

The Company's common stock is listed in the broker-dealer "Pink
Sheets" and traded in the over-the-counter market (see Note 6). During
the fourth quarter of fiscal year 1994, the Company purchased and retired
all of the shares of common stock ("Triton Shares") owned by the Company's
then-majority stockholder, Triton Group, Ltd. ("Triton"). The cash used
to purchase the common stock was from the proceeds received by the Company
from the sale of its mobile home parks in June 1994. In conjunction with
this purchase, the Company issued 450,000 shares of Series A Convertible
Preferred Stock (the "preferred stock") to Triton. The preferred stock is
redeemable by the Company at $8.00 per share and accrues dividends at a
rate of $0.40 per share annually for the first two years and at a rate of
$0.80 per share annually thereafter. Dividends are payable quarterly
commencing on November 1, 1994. Each share of the preferred stock is
convertible into three shares of the Company's common stock effective
August 16, 1996 and is subject to certain anti-dilution adjustments. As
of August 31, 1996, no shares have been converted. In the event of any
liquidation, dissolution or winding up of the Company, whether voluntary
or involuntary, the holders of the shares of preferred stock shall be
entitled to receive $8.00 per share of preferred stock plus all dividends
accrued and unpaid thereon. So long as a minimum of 50,000 shares of
preferred stock is outstanding, Triton shall be entitled to elect one
additional director to serve on the Board of Directors of the Company.
The Company's President, N. Russell Walden, is the owner of approximately
37% of the Company's outstanding shares of common stock.

The Company also purchased and retired all the shares of common
stock owned by Hesperus Partners, Ltd. ("Hesperus") (the "Hesperus
Shares), formerly known as Harris Associates, L.P. The stock was
exchanged for a note the Company received from Sun Communities Operating
Limited Partnership in conjunction with the sale of the mobile home parks
(the "Note"). In addition to assigning the Note and the mortgage securing
the Note, the Company had agreed and did pay Hesperus interest on the
outstanding principal balance of the Note from the closing date through
June 15, 1995.

Since the Company is not currently generating sufficient operating
cash to cover overhead and debt service cost, the Company must continue to
sell real estate (see Note 12), seek alternative financing, or otherwise,
recapitalize the Company. It is currently reviewing the viability of all
of these alternatives.

Basis of Presentation and Consolidation -

The accompanying financial statements of the Company present the
historical cost basis amount of assets, liabilities, revenues, costs and
expenses and shareholders' investment of the real estate business,
formerly known as CMEI, for the periods presented.

Certain prior year amounts have been reclassified to conform with the
current presentation.

In fiscal year 1996, the Company purchased a hotel management
company, which is now a wholly-owned subsidiary of the Company. In
conjunction with this purchase, five other active corporations were
acquired, and all are wholly-owned subsidiaries. These subsidiaries
manage and employ the employees at various hotels. For financial
reporting purposes, subsidiaries are consolidated. In fiscal year 1995,
the Company formed two wholly-owned subsidiaries for the purpose of
managing hotels and another for the sole purpose of owning the hotel in
Longwood, Florida, which serves as collateral for the Company's term loan.
The lender required that a separate subsidiary own the hotel. One other
subsidiary remains, but is not operational.

The investment in the limited partnership is being accounted for
using the equity method of accounting (See Note 8).

All significant intercompany balances and transactions have been
eliminated.

Valuation of Real Estate Properties -

The Company carries its real estate properties at the lower of cost
or net realizable value. Where estimated net realizable value is lower
than cost, an allowance for possible losses is provided (see Note 2).

The allowance for possible losses relates to all real estate
investments, including mortgage loans and real estate properties. The
adequacy of the allowance for possible losses is evaluated by means of
periodic reviews of the investment portfolio on an individual asset basis.

Depreciation Policies -

The Company depreciates operating properties and any related
improvements by using the straight-line method over the estimated useful
lives of such assets, which are generally 30 years for building and land
improvements and 5 years for furniture, fixtures and equipment.

Capitalization Policies -

The Company capitalizes interest as a cost of properties while they
are under construction or development. Costs of planning and development
performed by outside contractors and all other direct costs related to
properties under construction or development are also capitalized.
Capitalization of interest and other costs is discontinued when a project
is substantially completed, or if active development ceases.

Total interest incurred and paid amounted to approximately $345,000,
$450,000, and $698,000 in 1996, 1995 and 1994, respectively. No interest
was capitalized; however, the effect on the financial statements from
capitalizing amounts permitted would not have been material.

Repairs and maintenance costs are expensed in the period incurred.
Major improvements to existing properties which increase the usefulness or
useful life of the property are capitalized.

Sale of Real Estate -

All revenue related to the sale of real estate is recognized at the
time of closing. The Company allocates costs of real estate sold using
the specific identification or relative sales value methods based on the
nature of the development. Profit recognition is based upon the Company
receiving adequate cash down payments and other criteria specified by
existing accounting literature.

Cash and Cash Equivalents -

For the purpose of the Statement of Cash Flows, cash includes cash
equivalents. Cash equivalents include all highly liquid investments with
maturities of three months or less.

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
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported grants of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

2. Real Estate Investments

The Company's real estate properties by type at August 31, 1996, and
1995 were as follows ($000's omitted):

Furniture,
August 31, 1996 Land & Fixtures &
Type of Project Buildings Equipment Total

Hotel $ 2,535 $ 308 $ 2,843
Less -- accumulated
depreciation (1,460)
-------
Net operating property 1,383
Land 9,769 -- 9,769
-------
Total $11,152
=======

Furniture
August 31, 1995 Land & Fixtures &
Type of Project Buildings Equipment Total

Hotels 2,535 295 2,830

Less -- accumulated
depreciation (1,369)

Net operating properties 1,461
Land 10,104 -- 10,104

Total $11,565
=======

Changes in the allowance for possible losses for the
years ended August 31, 1996, 1995 and 1994 were as follows
($000's omitted):

1996 1995 1994

Allowance, beginning of year $4,700 $4,873 $3,625
Provision for possible losses -- 50 1,638
Chargeoff and reversal of
reserves from the sales of
real estate assets -- (223) (163)
Chargeoff of fully reserved
loan -- -- (227)

Allowance, end of year $4,700 $4,700 $4,873
====== ====== ======

3. Commitments and Contingencies

In August 1991, each executive officer was offered a Post-Employment
Consulting Agreement (the "Consulting Agreement(s)") whereby the officer
agrees that if he or she is terminated by the Company for other than good
cause, the officer will be available for consulting at a rate equal to
their annual compensation immediately prior to termination. All officers
have chosen to enter into Consulting Agreements. In addition, three other
employees were offered and have chosen to enter into one year Consulting
Agreements. The executive, upon termination, agrees to sign an
unconditional release of all claims and liability in exchange for a one
year (four employees) or two year (two employees) consulting fee
arrangement, depending upon the years of service as an officer or the
designation as a senior executive officer.

On May 2, 1995 a complaint was filed in the Court of Chancery of the
State of Delaware (New Castle County) entitled William N. Strassburger v.
Michael M. Early, Luther A. Henderson, John C. Stiska, N. Russell Walden,
and Triton Group, Ltd., defendants, and Ridgewood Properties, Inc.,
nominal defendant, C.A. No. 14267 (the "Complaint"). The plaintiff is an
individual shareholder of the Company who purports to file the Complaint
individually, representatively on behalf of all similarly situated
shareholders, and derivatively on behalf of the Company. The Complaint
challenges the actions of the Company and its directors in consummating
the Company's August 1994 repurchase of its common stock held by Triton
Group, Ltd. and Hesperus Partners Ltd. in five counts, denominated Waste
of Corporate Assets, Breach of Duty of Loyalty to Ridgewood, Breach of
Duty of Good Faith, Intentional Misconduct, and Breach of Duty of Loyalty
and Good Faith to Class. On July 5, 1995, the Company filed a timely
answer generally denying the material allegations of the complaint and
asserting several affirmative defenses. This case is in the concluding
stages of discovery. No trial date has been set. The Company intends to
vigorously contest this matter. While the Company cannot predict the
outcome, Management believes the ultimate resolution of this matter will
not have a material effect on the Company's financial condition.

On December 22, 1995, the Company and its wholly-owned subsidiary,
Cornerstone Management & Development, Inc., a Georgia corporation
("Cornerstone Georgia"), sued Charles S. Taylor ("Taylor"), Deborah L.
Cannon ("Cannon"), their affiliated corporations, Cornerstone Management &
Development, Inc., a Maryland corporation ("Cornerstone Maryland") and
Cornerstone Hospitality Group, Inc. ("Cornerstone Hospitality") in the
Superior Court of Cobb County, Georgia (No. 95-1943805), for actions taken
by the defendants both before and after Taylor and Cannon were terminated
as officers and directors of Cornerstone Georgia. The complaint alleges
that in violation of their fiduciary duties and in violation of an Asset
Purchase Agreement among the parties, Taylor and Cannon misappropriated
assets and business from Cornerstone Georgia; that since their termination
by Cornerstone Georgia, Taylor and Cannon have continued to misappropriate
assets and to usurp business opportunities and to interfere with business
and contractual relationships; and that this wrongful activity has been
for the benefit and with the assistance of Cornerstone Maryland and
Cornerstone Hospitality. The suit is for money damages, an accounting,
the imposition of a constructive trust, expenses of litigation including
attorneys' fees, and punitive damages. The defendants have filed an
Answer and Counterclaim, alleging that the individual defendants were
terminated in violation of the Agreement; that the Company breached the
Asset Purchase Agreement; that the Company otherwise interfered with
business and contractual relationships; and for conversion. The
counterclaim is for money damages, restitution, expenses of litigation
including attorneys' fees, and punitive damages. The Company intends to
vigorously pursue this matter. While the Company cannot predict the
outcome, Management believes the ultimate resolution of this matter will
not have a material effect on the Company's financial condition.

On August 23, 1996, Great American Resorts filed a complaint in the
Superior Court of Cobb County, State of Georgia, entitled Great American
Resorts, Inc. and Great American Casinos, Inc. v. Charles Taylor, Deborah
Lynn Cannon, Walter D. Hrab and Ridgewood Properties, Inc., Civil Action
File No. 9616398-05, alleging that the Company and the other defendants
are liable for breach of contract and breach of fiduciary duty stemming
from a contract between Great American and one of the Company's
subsidiaries. The complaint seeks damages, attorneys' fees and
pre-judgment interest. It also seeks an order requiring that certain
books and records be turned over to the plaintiffs. On September 27,
1996, the Company filed a timely answer generally denying the material
allegations of the complaint and asserting several affirmative defenses.
The Company intends to vigorously contest this matter. While the Company
cannot predict the outcome, Management believes the ultimate resolution of
this matter will not have a material effect on the Company's financial
condition.

In conjunction with the acquisition of a hotel management company in
December 1995, 25,000 shares of the Company's common stock were issued to
the Senior Vice President of the hotel management company. The 25,000
shares are subject to a Put Agreement ("Agreement"). The Agreement states
that within ninety days after the two year anniversary of the effective
date of the Agreement (which was effective in December 1995), the Company
shall be obligated to purchase all or part of the 25,000 shares from the
Senior Vice President of Wesley at a purchase price of $4.50 per share.

As more fully described in Note 8, the Company is required to fund
certain capital contributions to RW Hotel Partners, L.P. as the
partnership acquires hotels.

4. Notes Payable

In June 1995, the Company entered into a loan with a commercial
lender to refinance the Ramada Inn in Longwood, Florida. The loan
proceeds are $2,800,000. The loan is for a term of 20 years with an
amortization period of 25 years, at the rate of 10.35%. Principal and
interest payments are approximately $26,000 per month beginning August 1,
1995. In addition, the Company is required to make a repair escrow
payment comprised of 4% of estimated revenues, as well as real estate tax
and insurance escrow payments. The total amount for these items will be a
payment of approximately $20,000 per month and can be adjusted annually.
The escrow funds will be used as tax, insurance and repair needs arise.
As of August 31, 1996, there was approximately $150,000 of escrowed funds
related to this loan agreement. Also, commitment fees and loan costs of
approximately $159,000 are being amortized over 20 years.

The approximate average amount of borrowings on the term loan during
fiscal year 1996 was $2,784,000, at an average interest rate of 10.35%.
The maximum amount of borrowings outstanding under this loan was
$2,796,000. The balance of the loan at August 31, 1996 was approximately
$2,771,000.

In December 1995 and in conjunction with the acquisition of a hotel
management company, the Company assumed three promissory notes dated
September 22, 1994 and payable to three different Georgia corporations.
The total combined outstanding principal was approximately $106,000. All
three notes are for a term of five years at a rate of 6.83%. Combined
principal and interest payments are approximately $2,667 per month through
October 1, 1999. The combined balance of these loans at August 31, 1996
was approximately $87,000.

The approximate average amount of borrowings on the combined term
loans during fiscal year 1996 was $97,000, at an average interest rate of
6.83%. The maximum amount of combined borrowings outstanding under these
loans was $106,000.

Maturities of long-term debt during the Company's next five fiscal
years are as follows: 1997 - $55,000; 1998 - $59,000; 1999 - $65,000;
2000 - $43,000; 2001 - $42,000; thereafter - $2,594,000.

5. Income Taxes

In September 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes".
Upon adoption, the Company changed its method of accounting for income
taxes from the deferred method (APB 11) to an asset and liability
approach. This approach requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases of
other assets and liabilities. The adoption of FAS 109 had no effect on
the Company's financial condition or results of operations for the year
ended August 31, 1994.

The Company's 1995 provision for income taxes is comprised of $38,000
in alternative minimum tax. There was no provision for income taxes for
the year ended August 31, 1996 or 1994.

Deferred tax assets (liabilities) are comprised of the following at
August 31, 1996, and September 1, 1995, respectively:

<TABLE>

<CAPTION>
(000's omitted)

1996 1995
<S> <C> <C>
Allowance for possible losses $ 1,598 $ 1,598
Excess of tax over book basis, land held
for sale or future development 11 14
Depreciation and amortization 139 105
Other 273 232
Tax loss carryforwards 4,227 3,759
------- --------
Gross deferred tax assets 6,248 5,708
------- --------
Excess of book over tax basis, land held
for sale or future development (39) (39)
Excess of book over tax basis, income
from partnership (38) --
------- --------
Gross deferred tax liabilities (77) (39)
------- --------
Deferred tax assets valuation allowance (6,171) (5,669)
------- --------
$ 0 $ 0
======= ========
</TABLE>

The net change in the valuation allowance for deferred tax assets was
an increase of $502,000. This change resulted primarily from an increase
in the Company's tax loss carryforward and other deferred tax assets.

Approximately $12,434,000 of tax loss carryforwards remain at August
31, 1996 for income tax purposes. The carryforwards expire $2,080,000 in
2005, $4,150,000 in 2006, $1,524,000 in 2007, $1,699,000 in 2008,
$1,602,000 in 2010 and $1,379,000 in 2011. As a result of a change in
control during fiscal year 1994, the amount of tax loss carryforwards
incurred prior to the change in control which may be utilized by the
Company in any one year period is limited to approximately $940,000.
In certain circumstances because of "built-in" gains on some properties,
the actual use of net operating loss carryforwards may exceed this amount.
The Company has unused net operating loss carryforwards in certain states
in which it operates which are available to offset future state taxable
income in those states. No benefit for the remaining loss carryforwards
has been recognized in the financial statements.

6. Shareholders' Investment

Authorized Shares of Common and Preferred Stock -

On January 4, 1995, the shareholders of the Company approved an
amendment to the Company's Certificate of Incorporation increasing the
authorized number of shares of the Company's common stock from 3,000,000
shares to 5,000,000 shares and to increase the number of authorized shares
of the Company's preferred stock, par value $1.00 per share, from 500,000
shares to 1,000,000 shares. In addition, the shareholders approved and
adopted a proposal to amend the Ridgewood Properties, Inc. 1993 Stock
Option Plan, increasing the number of shares of common stock reserved for
issuance or transfer upon the exercise of options to be granted from time
to time thereunder, from an aggregate of 900,000 to 1,200,000 shares of
common stock. Accordingly, 3,911,520 shares of common stock are available
for future issuance, of which 1,200,000 are reserved for the Company's
stock option plan. There are currently 1,088,480 shares of common stock
outstanding, of which approximately 37% is owned by the Company's
President, N. Russell Walden.

There are currently 1,000,000 authorized shares of the Company's
Series A Convertible Preferred Stock. On August 15, 1994, the Company
issued 450,000 shares of the Company's preferred stock (see "Purchase of
Common Shares" below), which represent the only outstanding preferred
shares. Accordingly, 550,000 shares of preferred stock are available for
future issuance.

Loss Per Common Share --

Loss per common share is calculated based upon the weighted average
number of shares outstanding during the period of approximately 1,055,000,
963,000 and 5,676,000 in 1996, 1995 and 1994, respectively.

Purchases of Common Stock by the Company -

As described in Note 1, on August 15, 1994, the Company purchased all
(4.38 million) of the shares of the Company's common stock, $0.01 par
value, held by the Company's then-majority stockholder, Triton Group Ltd.
The Triton Shares represented 74.4% of the 5.88 million shares of common
stock outstanding prior to the consummation of the transaction. In
consideration for the Triton Shares, the Company paid $8.0 million in cash
and authorized and issued 450,000 shares of the Company's preferred stock.
As of August 15, 1996, Triton's preferred stock may be converted into
three shares of the Company's common stock.

In addition, on August 29, 1994, the Company acquired all (539,640)
of the shares of common stock owned by Hesperus Partners Ltd., formerly
known as Harris Associates, L.P., in exchange for a note receivable in the
principal amount of $1.45 million executed by Sun Communities Operating
Limited Partnership and held by the Company (see Note 1). In addition to
assigning the Note and the mortgage securing the Note, the Company had
agreed and did pay to Hesperus interest on the outstanding principal
balance of the Note from the closing date through June 15, 1995.

Issuance of Common Shares and Mandatorily Redeemable Equity Securities --

In December 1995, the Company purchased a hotel management company in
part by issuing 125,000 shares of the Company's common stock: 100,000
shares and 25,000 shares to the President and Senior Vice President of
Wesley Hotel Group ("Wesley"), respectively. See also Note 11. The
25,000 shares issued to the Senior Vice President of Wesley are subject
to a Put Agreement ("Agreement"). The Agreement states that within ninety
days after the two year anniversary of the effective date of the Agreement
(which was effective in December 1995), the Company shall be obligated to
purchase all or part of the 25,000 shares from the Senior Vice President
of Wesley at a purchase price of $4.50 per share.

1993 Stock Option Plan --

On March 30, 1993, the Company granted options to purchase
378,000 shares of common stock at a price of approximately $1.83 per share
to its key employees and one director under the Ridgewood Properties, Inc.
1993 Stock Option Plan (the "Plan"). The options vested over a four year
period in 25% increments. All options expire ten years from the date of
grant, unless earlier by reason of death, disability, termination of
employment, or for other reasons outlined in the Plan. As of August 31,
1996, all of the options are exercisable.

On January 28, 1994, the Company granted options to purchase 375,000
and 75,000 shares of common stock at a price of $1.00 per share to its
President and Chief Financial Officer, respectively, under the Plan. The
options are exercisable immediately and expire on January 31, 1997. If
all vested options are exercised, the President and Chief Financial
Officer would hold 49% and 8%, respectively, of the total outstanding
shares of common stock.

On January 4, 1995, the shareholders approved an increase in the
number of authorized shares reserved for the Company's stock option plan
from 900,000 to 1,200,000.

In October 1995 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 123, "Accounting for
Stock-Based Compensation" (FAS 123) which establishes financial accounting
and reporting for stock based awards issued to employees and certain
non-employees. FAS 123 establishes a fair value based method using an
option pricing model to value options and determine compensation costs at
the date of grant. FAS 123 is effective for fiscal years beginning after
December 15, 1995, although early adoption is encouraged. The Company's
management has elected to defer early adoption of the effects of FAS 123;
however, upon adoption, management does not expect the effects of FAS 123
to have a material adverse impact on the Company's financial statements.

7. Supplemental Retirement and Death Benefit Plan

The Company implemented a non-qualified Supplemental Retirement and
Death Benefit Plan with an effective date of January 1, 1987. The Plan
supplements other retirement plans and also provides pre-retirement death
benefits to participants' beneficiaries.

Concurrent with the implementation of the Supplemental Retirement and
Death Benefit Plan, the Company purchased key-person life insurance
contracts on the lives of the Plan participants. The policies are owned
by and payable to the Company and are "increasing whole life" insurance.
The Company pays level annual premiums, may borrow against cash values
earned, and pays interest annually on any loans which may be cumulatively
outstanding. In March 1995, the Company borrowed approximately $381,000
against the cash values. The net proceeds to the Company were
approximately $358,000 due to the prepayment of interest on the loan. The
Company has recorded a total pension liability of approximately $726,000
as of August 31, 1996. At August 31, 1996 the cash surrender value
available to settle the outstanding pension liability was approximately
$777,000.

For the fiscal years ending August 31, 1996, 1995 and 1994, the
pension expense was approximately $33,000, $60,000 and $63,000,
respectively.

8. Investment in Limited Partnership

On August 16, 1995, RW Hotel Partners, L.P. was organized as a
limited partnership (the "Partnership") under the laws of the State of
Delaware. Concurrently, the Company formed Ridgewood Hotels, Inc., a
Georgia corporation ("Ridgewood Hotels") which became the sole general
partner in the Partnership with RW Hotel Investments Associates, L.L.C.
("Investor") as the limited partner. Ridgewood Hotels has a 1% base
distribution percentage versus 99% for the Investor. However,
distribution percentages do vary depending on certain defined preferences
and priorities pursuant to the Partnership Agreement ("Agreement") which
are discussed below. The partnership was originally formed to acquire a
hotel property in Louisville, Kentucky. The partnership consists of
six hotel properties at August 31, 1996. The terms of this partnership
will serve as a guideline for other potential acquisitions with this or
other investors.

Income and loss are allocated to the Company and the limited
partner based upon the formula for allocating distributable cash as
described below but subject to an annual limitation which would result in
no more than 88% of partnership income or loss (as defined) being
allocated to the limited partner.

Distributable Cash is defined as the net income from the property
before depreciation plus any net sale proceeds and net financing proceeds
less capital costs. Distributions of Distributable Cash shall be made as
follows:

- First, to the Investor until there has been distributed to the
Investor an amount equal to a 15% cumulative internal rate of return on
the Investor's investment.

- Second, to Ridgewood Hotels until the aggregate amount received by
Ridgewood Hotels equals the aggregate cash contributions made by Ridgewood
Hotels to the Partnership (as of 8/31/96, Ridgewood Hotels contributed
approximately $748,000).

- Third, 12% to Ridgewood Hotels and 88% to the Investor until there
has been distributed to the Investor an amount equal to a 25% cumulative
internal rate of return on Investor's investment.

- Fourth, 75% of the residual to the Investor and 25% to Ridgewood
Hotels.

A Management Agreement exists between the Partnership and the Company
as Manager ("Manager") for the purpose of managing hotels in Kentucky,
Georgia and South Carolina. The Manager shall be entitled to the
following property management fees:

(1) 2.5% of the gross revenues from the hotel property.

(2) 1% of the gross revenues from the hotel property as an incentive
fee if distributable cash equals or exceeds 13.5% of certain aggregate
acquisition costs. No management fees were payable with respect to the
first 12-month period of management of the hotel in Kentucky.

A Construction Management Agreement exists between the Partnership
and the Manager for the purpose of managing future improvements to the
properties.

The Company currently has approximately $748,000 invested in the
Partnership. Also, at August 31, 1996, the Company recorded approximately
$209,000 equity in the income of the partnership, bringing the total
investment in the limited partnership to approximately $957,000. The
equity method of accounting is used for accounting for the investment in
the Partnership. Also, the investment of $957,000 is after the
elimination of intercompany transactions. The Partnership purchased a
hotel in Louisville, Kentucky for approximately $16,000,000. In December
1995 and January 1996, the Partnership purchased four hotel properties in
Georgia for approximately $15,000,000 and a hotel in South Carolina for
$4,000,000, respectively. The Company may make future capital
contributions to the Partnership. Management expects to fund such capital
contributions through available cash or from loans from the Partnership.
Additionally, the Company may invest in other partnerships to acquire
hotels in the future.

The condensed balance sheet and statement of income of the
Partnership as of August 31, 1996 and from inception (August 16, 1995) to
August 31, 1996 are as follows:

<TABLE>
RW HOTEL PARTNERS, L.P.
CONDENSED BALANCE SHEET
AUGUST 31, 1996

ASSETS
($000'S Omitted)

<S> <C>
CURRENT ASSETS $ 1,915

PROPERTY AND EQUIPMENT, net (See Note) 36,441

INTANGIBLE ASSETS, net 525
-------------
TOTAL ASSETS $ 38,881
=============

LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES $ 2,405

LONG-TERM DEBT (See Note) 17,895
-------------
TOTAL LIABILITIES 20,300
-------------
PARTNERS' CAPITAL, net 18,581
-------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 38,881
=============
</TABLE>

RW HOTEL PARTNERS, L.P.
CONDENSED STATEMENT OF INCOME
FROM INCEPTION (AUGUST 16, 1995) TO AUGUST 31, 1996
($000'S Omitted)

<S> <C>
HOTEL OPERATIONS:
Revenues $ 14,971
Operating Expenses 9,941
------------
Income From Hotel Operations 5,030
------------
PARTNERSHIP OPERATIONS 3,486
------------
NET INCOME 1,544
============
<FN>

Note:
On December 8, 1995, the Partnership entered into a long-term debt
agreement with General Electric Capital Corporation ("GECC") in
the amount of $9,613,748 (the "Note"). Also, under the Note,
the Partnership may borrow up to an additional $386,252 for the
purpose of capital improvements at the Louisville property.
The capital improvements are subject to approval by GECC. The
note bears interest at 3% above the GECC composite commercial paper
rate and is due in monthly installments of $20,833 plus interest.
In addition, if the ratio of net operating income, as defined, to
average outstanding Note balance ("cash-on-cash yield") is
less than 18% for the preceding 12 months, as calculated
quarterly, 50% of excess cash flow, as defined, must be paid.
If the cash-on-cash yield is less than 14%, 100% of the excess
cash flow, as defined, must be paid. The outstanding principal
balance will be due upon maturity, November 30, 1999. The Note
cannot be prepaid until December 1996. The Note is secured
by a first mortgage on the Kentucky property and the
assignment of any revenues, rentals, and income of the property.
The Note also requires the Partnership to establish a reserve
for capital improvements.

On January 31, 1996, the Partnership and GECC amended and
restated the Note (the "Amended Note"). Under the Amended
Note, the Partnership obtained additional borrowings of
$8,144,000 (the "Additional Borrowings"). Also, under the
Amended Note, the Partnership may borrow up to an additional
$2,656,000 for the purpose of capital improvements at the
Georgia Hotels. The capital improvements are subject to
approval by GECC. The Amended Note is secured by Hurstbourne
and the Georgia Hotels. The Amended Note provides for a
two-year maturity extension option. The Additional Borrowings
bear interest at the GECC composite commercial paper rate plus
3.25%. Additional monthly installments of $45,000, plus
interest on the Additional Borrowings, commence on March 1, 1996.
The Additional Borrowings cannot be prepaid until January 1997.
The debt amount is now subject to be increased by $3,042,252,
allowing the potential liability under the note agreement to
increase to $20,800,000. The additional increase is subject
to approval of certain agreed-upon property improvements.

</FN>
</TABLE>

9. Employee Savings Plan

The Ridgewood Properties Employee Savings Plan ("Savings Plan") is a
savings and salary deferral plan which is intended to qualify for favorable
tax treatment under Sections 401(a) and 401(k) of the Internal Revenue
Code of 1986. The Savings Plan includes all employees of the Company who
have completed one year of service and have attained age twenty-one.

Each participant in the Savings Plan may elect to reduce his or her
compensation by any percentage, not to exceed 15% of compensation when
combined with any Matching Basic or Discretionary Employer Contributions
(below) made on behalf of the participant, and have such amount contributed
to his or her account under the Savings Plan. Elective employer
contributions are made prior to the withholding of income taxes on such
amounts. A participant may also elect to contribute to the Plan an amount
of cash or property equal to or up to 10% of his or her compensation
("Voluntary Contributions"). Voluntary Contributions are made on an
after-tax basis.

The Savings Plan provides for an employer matching contribution in
an amount equal to 50% of the elective employer contributions, provided
that in no event shall such employer matching contributions exceed 3% of
the participant's compensation. In addition, the Board of Directors of
the Company is authorized to make discretionary contributions to the
Savings Plan out of the Company's current or accumulated profits
("Discretionary Contributions"). Discretionary Contributions are
allocated among those participants who complete at least 1,000
hours of service during the plan year and are employed by the Company
on the last day of the plan year.

Employees are subject to a seven year graduated vesting schedule with
respect to Basic Employer Contributions, Matching Employer Contributions and
Discretionary Contributions.

Distributions from the Savings Plan will generally be available upon or
shortly following a participant's termination of employment with the Company,
with additional withdrawal rights with respect to Voluntary Contributions.

For the fiscal years ending August 31, 1996, 1995 and 1994, expense
for the Employee Savings Plan was approximately $21,000, $15,000 and $17,000,
respectively.

10. Sale of Operating Properties

In March 1994, the Company sold its apartments in Dallas, Texas, for
$4,100,000, resulting in a gain of approximately $1,227,000. The gross
purchase price included a $1,015,000 term loan secured by one of the
apartments which is insured by the Department of Housing and Urban
Development and which was assumed by the buyer at the time of purchase.
An additional $1,710,000 of the proceeds were used to reduce the Company's
debt. Net proceeds to the Company were approximately $1,100,000.

In June 1994, the Company sold its five mobile home parks for
$13,900,000, resulting in a gain of approximately $694,000. Net
proceeds to the Company were approximately $12,000,000. Approximately
$386,000 was applied to certain selling and operational costs. In
addition, the Company accepted a $1,450,000 note which is secured by
one of the mobile home parks. The note was subsequently exchanged
for common stock of the Company in August 1994 as discussed in Note 1.

In April 1995, the Company sold the Ridgewood Lodge, its weekly
rental hotel in Orlando, Florida. The net proceeds, after commissions,
were approximately $2,700,000. The gain on the sale was approximately
$250,000. The proceeds were used to reduce the outstanding balance of
the Company's term loan.

11. Acquisition of Hotel Management Company

In December 1995, the Company acquired the Wesley Hotel Group, a hotel
management company located in Atlanta, Georgia. At the time of acquisition,
Wesley managed five hotels. The acquisition has been accounted for using the
purchase method of accounting. The results of operations for Wesley are
included in the Company's results of operations for the period December
1995 through August 1996. In conjunction with the acquisition, the
Company issued 125,000 shares of common stock with a determined market
value of $1.50 per share (see Note 6) and assumed three promissory notes
with a combined outstanding principal of approximately $106,000, bringing
the total investment in Wesley to $293,000. The investment recorded by
the Company for the acquisition is being amortized over the useful life
of the assets acquired. Since approximately $103,000 of amortization
had been recognized, the net investment in Wesley as of August 31,
1996 is approximately $190,000. The consolidated financial statements
include the operating results of the Wesley Hotel Group from the date of
acquisition. Pro forma results of operations have not been presented
because the effects of this acquisition were not significant.

12. Subsequent Events

In September 1996, the Company sold a portion of its land in Maitland,
Florida for $1,435,000. Net proceeds to the Company were approximately
$1,221,000.

In October 1996, the Company sold a portion of its land in Dallas,
Texas for approximately $510,000. Net proceeds to the Company were
approximately $448,000.

Report of Independent Accountants

To the Board of Directors and
Shareholders of Ridgewood Properties, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of loss, of cash flows and of shareholders' investment
present fairly, in all material respects, the financial position of Ridgewood
Properties, Inc. and its subsidiaries at August 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years
in the period ended August 31, 1996, in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP
Atlanta, Georgia
October 11, 1996

Market Information

The Company's common stock is traded in the over-the-counter market
and is listed in the broker-dealer "Pink Sheets."

Transfer Agent and Registrar

Society National Bank, Dallas, Texas is the Company's stock transfer
agent and registrar. Society National Bank maintains the Company's shareholder
records. To change name, address or ownership of stock, to report lost
certificates, or to consolidate accounts, contact:

Society National Bank
Shareholder Services, Inc.
1201 Elm Street, Suite 5050
Dallas, Texas 75270
(214) 658-0200

General Counsel

Rogers & Hardin
2700 Cain Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303

Independent Accountants

Price Waterhouse LLP
50 Hurt Plaza
Suite 1700
Atlanta, Georgia 30303

Shareholder and General Inquiries

The Company is required to file an Annual Report on Form 10-K for its
fiscal year ended August 31, 1996 with the Securities and Exchange Commission.
Copies of this annual report may be obtained without charge upon written request
to:

Ridgewood Properties, Inc.
Shareholder Relations
2859 Paces Ferry Road
Suite 700
Atlanta, Georgia 30339
(770) 434-3670

EXHIBIT 22

RIDGEWOOD PROPERTIES, INC. AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT

Percentage
State or of Voting
Jurisdiction Securities
of Incorporation Owned
---------------- ----------

Florida Communities, Inc. Florida 100%
Ridgewood Orlando, Inc. Florida 100%
Ridgewood Hotels, Inc. Georgia 100%
Cornerstone Management &
Development, Inc. Georgia 100%
Wesley Hotel Group, Inc. Georgia 100%
Florida Beta Hotel Corp. Florida 100%
California Zeta Hotel Corp. California 100%
Capital Alpha Hotel Corp. Washington, DC 100%
California Eta Hotel Corp. California 100%
Pennsylvania Alpha Hotel Corp. Pennsylvania 100%

The foregoing subsidiaries are included in the
consolidated financial statements of the Company.

<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from
the Consolidated Balance Sheets, Statements of Consolidated Loss and
Consolidated Statement of Cash Flows and is qualified in its entirety
by reference to such financial statements.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<CASH> 298,000
<SECURITIES> 0
<RECEIVABLES> 255,000
<ALLOWANCES> 4,700,000
<INVENTORY> 14,000
<CURRENT-ASSETS> 0
<PP&E> 3,045,000
<DEPRECIATION> 1,566,000
<TOTAL-ASSETS> 8,724,000
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
450,000
<COMMON> 11,000
<OTHER-SE> 3,980,000
<TOTAL-LIABILITY-AND-EQUITY> 8,724,000
<SALES> 617,000
<TOTAL-REVENUES> 4,314,000
<CGS> 336,000
<TOTAL-COSTS> 3,650,000
<OTHER-EXPENSES> 1,497,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 345,000
<INCOME-PRETAX> (1,178,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,178,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,178,000)
<EPS-PRIMARY> (1.29)
<EPS-DILUTED> (1.29)

Exhibit 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 (No. 33-86084) of
Ridgewood Properties, Inc. of our report dated October 11,
1996 appearing in the Annual Report to Shareholders which
is incorporated in this Annual Report on Form 10-K. We
also consent to the incorporation by reference of our
report on the Financial Statement Schedules.

PRICE WATERHOUSE

Atlanta, Georgia
November 22, 1996