ARVIDA JMB PARTNERS L P, 10-K405, 1996-04-01

ARVIDA JMB PARTNERS L P
10-K405, 1996-04-01
LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES)

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the Fiscal Year
Ended December 31, 1995 Commission file no. 0-16976

ARVIDA/JMB PARTNERS, L.P.
(Exact name of registrant as specified in its charter)

Delaware 36-3507015
(State of organization) (IRS Employer Identification No.)

900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office)(Zip Code)

Registrant's telephone number, including area code 312/915-1987

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

Name of each exchange on
Title of each Class which registered
- ------------------- ------------------------------

None None

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

LIMITED PARTNERSHIP INTERESTS
AND ASSIGNEE INTERESTS THEREIN
(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 X

State the aggregate market value of the voting stock held by non-affiliates
of the registrant. Not applicable.

Portions of the Prospectus of the registrant dated September 16, 1987 and
filed with the Commission pursuant to Rules 424(b) and 424(c) under the
Securities Act of 1933 as well as the Report on Form 8-K dated December 6,
1993 are incorporated by reference in Parts II and III of this Annual
Report on Form 10-K.

TABLE OF CONTENTS

Page
----
PART I

Item 1. Business. . . . . . . . . . . . . . . . 1

Item 2. Properties. . . . . . . . . . . . . . . 4

Item 3. Legal Proceedings . . . . . . . . . . . 6

Item 4. Submission of Matters to a
Vote of Security Holders. . . . . . . . 8

PART II

Item 5. Market for the Partnership's Limited
Partnership Interests and
Related Security Holder Matters . . . . 9

Item 6. Selected Financial Data . . . . . . . . 10

Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations . . . . . . . . . 12

Item 8. Financial Statements and
Supplementary Data. . . . . . . . . . . 22

Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure. . . . . . . . . . 57

PART III

Item 10. Director and Executive Officers of
the Registrant. . . . . . . . . . . . . 57

Item 11. Executive Compensation. . . . . . . . . 60

Item 12. Security Ownership of Certain
Beneficial Owners and Management. . . . 62

Item 13. Certain Relationships and
Related Transactions. . . . . . . . . . 63

PART IV

Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K. . . 63

SIGNATURES . . . . . . . . . . . . . . . . . . . . 67

PART I

ITEM 1. BUSINESS

All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report.

The registrant, Arvida/JMB Partners, L.P. (the "Partnership"), is a
limited partnership formed in 1987 and currently governed under the Revised
Uniform Limited Partnership Act of the State of Delaware. The Partnership
was formed to own and develop substantially all of the assets of Arvida
Corporation (the "Seller"), a subsidiary of The Walt Disney Company, which
were acquired by the Partnership from the Seller on September 10, 1987. On
September 16, 1987, the Partnership commenced an offering to the public of
up to $400,000,000 in Limited Partnership Interests and assignee interests
therein ("Interests") pursuant to a Registration Statement on Form S-1
under the Securities Act of 1933 (No. 33-14091). A total of 400,000
Interests were sold to the public (at an offering price of $1,000 per
Interest before discounts) and the holders of 400,000 Interests were
admitted to the Partnership in October 1987. The offering terminated
October 31, 1987. In addition, a holder (an affiliate of the dealer-
manager of the public offering) of 4,000 Interests was admitted to the
Partnership in October 1987. Subsequent to admittance to the Partnership,
no holder of Interests (a "Limited Partner" or "Holder") has made any
additional capital contribution. The Limited Partners of the Partnership
generally share in their portion of the benefits of ownership of the
Partnership's real property investments and other assets according to the
number of Interests held.

Pursuant to the Partnership Agreement, the Partnership may continue in
existence until December 31, 2087; however, the General Partner shall elect
to pursue one of the following courses of action: (i) to cause the
Interests to be listed on a national exchange or to be reported by the
National Association of Securities Dealers Automated Quotation System at
any time on or prior to the date ten years from the termination date of the
offering of Interests; (ii) to purchase, or cause JMB Realty Corporation or
its affiliates to purchase, ten years from the termination of the offering
of Interests, all of the Interests at their then appraised fair market
value (as determined by an independent nationally recognized investment
banking firm or real estate advisory company); or (iii) to commence a
liquidation phase ten years from the termination of the offering of
Interests in which all of the Partnership's remaining assets will be sold
or disposed of by the end of the fifteenth year from the termination of the
offering.

The assets of the Partnership consist principally of interests in land
which is in the process of being developed into master-planned residential
communities (the "Communities") and, to a lesser extent, commercial and
industrial properties; mortgage notes and accounts receivable;
construction, brokerage and other support businesses; real estate assets
held for investment; certain club and recreational facilities; and a cable
television business serving one of its Communities. The Partnership is
principally engaged in the development of comprehensively planned resort
and primary home Communities containing a diversified product mix designed
for the middle and upper income segments of the various markets in which
the Partnership operates.

near Atlanta, Georgia; Highlands, North Carolina and, until March 1996, in
Orange County, California. Additional undeveloped properties owned by the
Partnership in or near its Communities are being considered for development
as commercial, office and industrial properties. The Partnership also owns
or manages certain club and recreational facilities within certain of its
Communities. Certain assets located in Florida were acquired by the
Partnership from the Seller by purchasing a 99.9% interest in a joint
venture partnership in which the General Partner acquired the remaining
joint venture partnership interest. In addition, other assets are owned by
various partnerships, the interests of which are held by certain indirect
subsidiaries of the Partnership and by the Partnership.

Arvida Company ("Arvida"), an affiliate of the General Partner,
provides certain development and management supervisory personnel to the
Partnership for the supervision of all of its projects and operations,
subject, in each case, to the overall control of the General Partner on
behalf of the Partnership. The Partnership, directly or through certain
subsidiaries, provides development and management services to the home
ownership associations within the Communities. At December 31, 1995, one
of the Partnership's Communities offered a cable television system to its
residents, which system is owned and operated by an entity owned by the
Partnership.

The business of the Partnership is cyclical in nature and certain
aspects of the development of Community projects are to some degree
seasonal. The Partnership does not expect that such seasonality will have
a material impact on its business. A presentation of information about
industry segments, geographic regions or raw materials is not applicable
and would not be material to an understanding of the Partnership's business
taken as a whole.

The Communities are in various stages of development. The remaining
estimated build-out time for the Communities ranges from one to nine years.

The Partnership generally follows the practice with respect to Communities
of (i) developing an overall master plan for the Community, (ii) creating a
unifying architectural theme that is consistent with the Community's master
plan, (iii) offering a variety of recreational facilities, (iv) imposing
architectural standards and other property restrictions on residents and
third-party developers, in order to enhance the long-term value of the
Community, (v) establishing property owners' associations to maintain
compliance with architectural, landscaping and other requirements and to
provide for ownership and maintenance of certain facilities, and/or (vi)
operating and controlling access to golf, tennis and other recreational
facilities.

The Partnership's development approach, individually or by joint
venture, is intended to enhance the value of real estate in successive
phases. The first step in the development of a property is to design a
Community master plan that addresses the appropriate land uses and product
mix, including residential, recreational and, where appropriate, commercial
and industrial uses. The Partnership then seeks to obtain the necessary
regulatory and environmental approvals for the development of the Community
in accordance with the master plan. This approval process is a major
factor in determining the viability and prospects for profitability of the
Partnership's development projects.

In addition, prior to or contemporaneously with zoning approval, the
Partnership, if subject to the applicable filing requirements, must obtain
"Development of Regional Impact" ("DRI") approval from the applicable local
governmental agency after review and recommendations from the appropriate
regional planning agency, with oversight by the Florida State Department of
Community Affairs. Receipt of DRI approval is a prerequisite to obtaining
zoning, platting, building permits or other approvals required to begin
development or construction. Obtaining such approvals can involve
substantial periods of time and expense and may result in the loss of
desired densities, and approvals may need to be resubmitted if there is any
subsequent deviation in current approved plans. The process may also
require committing land for public use and payment of substantial impact
fees. In addition, state laws generally provide further that a parcel of
land cannot be subdivided into distinct segments without having a plat
filed and finalized with the local or municipal authority, which will, in
general, require the approval of various local agencies, such as
environmental and public works departments. In addition, the Partnership
must secure the actual permits for development from applicable Federal
(e.g., the Army Corps of Engineers and/or the Environmental Protection
Agency with respect to coastal and wetlands developments, including
dredging of waterways) and state or local agencies, including construction,
dredging, grading, tree removal and water management and drainage district
permits. The Partnership may, in the process of obtaining such permits or
approvals for platting or construction activities, incur delays or
additional expenses; however, such permits and approvals are customarily
obtained in conjunction with the development process. Failure to obtain or
maintain necessary approvals, or rejection of submitted plans, would result
in an inability to develop the Community as originally planned and would
cause the Partnership to reformulate development plans for resubmission,
which might result in a failure to increase, or a loss of, market value of
the property. The foregoing discussion and the discussion which follows
are also generally applicable to the Partnership's commercial and
industrial developments.

Upon receipt of all approvals and permits required to be obtained by
the Partnership for a specific Community, other than actual approvals or
permits for final platting and/or construction activities, the Partnership
applies for the permits and other approvals necessary to undertake the
construction of infrastructure, including roads, water and sewer lines and
amenities such as lakes, clubhouses, golf courses, tennis courts and
swimming pools. These expenditures for infrastructure and amenities are
generally significant and are usually required early in the development of
a Community project, although the Partnership will attempt, to the extent
feasible, to develop Communities in a phased manner. See Note 12 for
further discussion regarding Tax Increment Financing Entities and their
involvement with infrastructure improvements.

Certain of the Florida Communities described below have applied for
and have been designated as Planned Unit Development's ("PUD") by the local
zoning authority (usually the governing body of the municipality or the
county in which the Community is or will be located). Designation as a PUD
generally establishes permitted densities (i.e., the number of residential
units which may be constructed) with respect to the land covered thereby
and, upon receipt, enables the developer to proceed in an orderly, planned
fashion. Generally, such PUD approvals permit flexibility between single-
unit and multi-unit products since the developer can plan Communities in
either fashion as long as permitted densities are not exceeded. As a
consequence, developments with PUD status are able to meet changing demand
patterns in housing through such flexibility. It should be noted that some
of the Communities, while not having received PUD approval, have obtained
the necessary zoning approvals to create a planned community development
with many of the benefits of PUD approval such as density shifting.

In developing the infrastructure and amenities of its Communities and
building its own housing products, the Partnership may function as a
general contractor although it may also from time to time hire firms for
general contracting work. The Partnership generally follows the practice
of hiring subcontractors, architects, engineers and other professionals on
a project-by-project basis rather than maintaining in-house capabilities,
principally to be able to select the subcontractors and consultants it
believes are most suitable for a particular development project and to
control fixed overhead costs. Although the General Partner does not expect
the Partnership to be faced with any significant material or labor
shortages, the construction industry in general has from time to time
experienced serious difficulties in obtaining certain construction
materials and in having available a sufficiently large and adequately
trained work force.

The Partnership's strategy includes the ownership and development of
certain commercial and industrial property not located in a Partnership
Community. In addition, certain of the Partnership's Communities contain
acreage zoned for commercial use, although, except for the Weston
Community, such acreage is generally not substantial. On both of such
types of properties, the Partnership, individually or with a joint venture
partner, may build shopping centers, office buildings and other commercial
buildings and may sell land to be so developed.

Certain of the Communities and operations are owned by the Partnership
jointly with third parties. Such investments by the Partnership are
generally in partnerships or ventures which own and operate a particular
property in which the Partnership or an affiliate (either alone or with an
affiliate of the General Partner) has an interest.

The principal assets in which interests have been acquired by the
Partnership are described in more detail under Item 2 below to which
reference is hereby made for a description of such assets.

The Partnership's real properties are subject to competition from
similar types of properties in the vicinities in which they are located,
including properties owned, advised or managed by affiliates of the General
Partner. The Partnership has no real estate assets located outside of the
United States.

In the opinion of the General Partner of the Partnership, all of the
investment properties held at December 31, 1995 are adequately insured.

The Partnership currently owns no patents, trademarks, licenses or
franchises other than those trademarks and tradenames in respect of the
names of its Communities. The Arvida name and the service marks with
respect to the Arvida name are owned by Arvida, subject to the Partner-
ship's non-exclusive right to use the name and the service marks under its
supervisory and management agreement with Arvida and subject to the non-
exclusive right of certain third parties to the limited use of the name.

The Partnership has approximately 690 employees.

The terms of transactions between the Partnership and the General
Partner and its affiliates are set forth in Items 10, 11, 12 and 13 filed
with this annual report to which reference is hereby made for a description
of such terms and transactions.

ITEM 2. PROPERTIES

The principal assets being developed or managed by the Partnership are
described below. The acreage amounts set forth herein are approximations
of the gross acreage of the Communities or other properties referred to or
described and are not necessarily indicative of the net developable acreage
currently owned by the Partnership or its joint ventures. All of the
Partnership's properties are subject to mortgages to secure the repayment
of the Partnership's indebtedness as discussed in detail in Note 8.

(a) Palm Beach County, Florida

The Partnership owns property in Broken Sound, a 970-acre Community
located in Boca Raton. The Community offered a wide range of residential
products built by the Partnership or third-party builders, all of which
were sold and closed as of December 31, 1995.

(b) Broward County, Florida

The Partnership owns property in Weston, a 7,500-acre Community in its
mid stage of development. The Community offers a complete range of housing
products built by the Partnership or third-party builders, as well as
tennis, swim and fitness facilities, two-18 hole golf courses and an
equestrian center. In addition, the Partnership owns commercial land, most
of which is currently undeveloped, located in the Weston Community.
Reference is made to Note 12 for a discussion of the Partnership's use of
certain tax-exempt financing in connection with the development of the
Weston Community.

The Partnership owns property on Longboat Key which is a barrier
island on Florida's west coast, approximately four miles from downtown
Sarasota and seven miles from Sarasota/Bradenton airport. The property is
in its mid stage of development. The Partnership also owns property in a
Community in the Tampa area known as River Hills Country Club which is a
1,200-acre Community in its mid stage of development. The Partnership
owned an interest in The Oaks Community in Sarasota, Florida which was sold
during 1993. Reference is made to Note 8 for a discussion of the sale of
the Partnership's interest in The Oaks property and the repayment of the
mortgage loan secured by such property.

(d) Jacksonville, Florida

The Partnership owns property in two Communities in Ponte Vedra Beach,
Florida, twenty-five miles from downtown Jacksonville, known as Sawgrass
Country Club and The Players Club at Sawgrass. These Communities are in
their final stages of development and were virtually sold out at December
31, 1995. The Partnership also owns property in a 730-acre Community known
as the Jacksonville Golf and Country Club which is in its mid to late stage
of development.

(e) Atlanta, Georgia

The Partnership owns properties in the Atlanta, Georgia area known as
Water's Edge and Dockside, which are in their mid and final stages of
development, respectively.

(f) Highlands, North Carolina

The Partnership owns a 600-acre Community near Highlands, North
Carolina known as The Cullasaja Club. The Community is in its mid stage of
development.

(g) Other

As of December 31, 1995, the Partnership also owned a 20% joint
venture interest in a 4,000-acre Community, known as Coto de Caza, located
in Southern Orange County, California. The Community is in its mid stage
of development. During March 1996, the Partnership sold its interest in
the Community to unaffiliated third parties for approximately $12 million.
Reference is made to Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations and Note 7 for further
discussion of this joint venture.

The Partnership also owns, either directly or through joint venture
interests, various commercial and industrial sites and buildings in
Sarasota, Tampa, Ocala, Pompano Beach and Palm Beach County, Florida which
are not located in its residential Communities. At December 31, 1995, the
joint venture property in Pompano Beach was encumbered by mortgages in the
aggregate principal amount of approximately $4.0 million. Reference is
made to Note 11 for further discussion of this venture and its related
indebtedness.

ITEM 3. LEGAL PROCEEDINGS

The Partnership was named a defendant in a number of homeowner
lawsuits, certain of which purported to be class actions, that allegedly in
part arose out of or related to Hurricane Andrew, which on August 24, 1992
resulted in damage to a former community development known as Country Walk.
The homeowner lawsuits alleged, among other things, that the damage
suffered by the plaintiffs' homes and/or condominiums within Country Walk
was beyond what could have been reasonably expected from the hurricane
and/or was a result of the defendants' alleged defective design,
construction, inspection and/or other improper conduct in connection with
the development, construction and sales of such homes and condominiums,
including alleged building code violations. The various plaintiffs sought
varying and, in some cases, unspecified amounts of compensatory damages and
other relief. In certain of the lawsuits injunctive relief and/or punitive
damages were sought.

Several of these lawsuits alleged that the Partnership was liable,
among other reasons, as a result of its own alleged acts of misconduct or
as a result of the Partnership's assumption of Arvida Corporation's
liabilities in connection with the Partnership's purchase of Arvida
Corporation's assets from The Walt Disney Company ("Disney") in 1987, which
included certain assets related to the Country Walk development. Pursuant
to the agreement to purchase such assets, the Partnership obtained
indemnification by Disney for certain liabilities relating to facts or
circumstances arising or occurring prior to the closing of the
Partnership's purchase of the assets. Over 80% of the Arvida-built homes
in Country Walk were built prior to the Partnership's ownership of the
Community. Where appropriate, the Partnership has tendered or will tender
each of the above-described lawsuits to Disney for defense and
indemnification in whole or in part pursuant to the Partnership's
indemnification rights. Where appropriate, the Partnership has also
tendered these lawsuits to its various insurance carriers for defense and
coverage. A number of these lawsuits have been settled, in some instances
with the settlement funded by one of the Partnership's insurance carriers,
subject to a reservation of rights. The Partnership is unable to determine
at this time to what extent damages in these lawsuits, if any, against the
Partnership, as well as the Partnership's cost of investigating and
defending the lawsuits, will ultimately be recoverable by the Partnership
either pursuant to its rights of indemnification by Disney or under
contracts of insurance.

As noted above, one of the Partnership's insurance carriers has been
funding settlements of various litigation related to Hurricane Andrew. In
some, but not all, instances the insurance carrier has provided the
Partnership with written reservation of rights letters. The aggregate
amount of the settlements funded to date by this carrier is approximately
$8.0 million. The insurance carrier that funded these settlements pursuant
to certain reservations of rights has stated its position that it has done
so pursuant to various non-waiver agreements. The carrier's position was
that these non-waiver agreements permitted the carrier to fund settlements
without barring the carrier from raising insurance coverage issues or
waiving such coverage issues. On May 23, 1995, the insurance carrier
rescinded the various non-waiver agreements currently in effect regarding
the remainder of the Hurricane Andrew litigation, allegedly without waiving
any future coverage defenses, conditions, limitations, or rights. For this
and other reasons, the extent to which the insurance carrier may recover
any of these proceeds from the Partnership is uncertain. Therefore, the
accompanying consolidated financial statements do not reflect any accruals
related to this matter.

Currently, the Partnership is involved in two subrogation actions. On
April 19, 1993, a subrogation claim entitled Village Homes at Country Walk
Master Maintenance Association, Inc. v. Arvida Corporation et al., was
filed in the 11th Judicial Circuit for Dade County. Plaintiffs filed this
suit for the use and benefit of American Reliance Insurance Company
("American Reliance"). In this suit, as amended, plaintiffs seek to
recover damages and pre- and post-judgment interest in connection with
$10,873,000 American Reliance has allegedly paid, plus amounts it may have
to pay in the future, to the condominium association at Country Walk in the
wake of Hurricane Andrew. Disney is also a defendant in this suit. The
Partnership believes that the amount of this claim that allegedly relates
to units it sold is approximately $3,600,000. Plaintiffs also seek a
declaratory judgement seeking to hold the Partnership and other defendants
responsible for amounts American Reliance must pay in the future to its
insured as additional damages beyond the $10,873,000 previously paid. The
Partnership has filed motions directed to the complaint, as amended, and
the litigation is in the discovery stage. The Partnership intends to
vigorously defend itself. The Partnership is also involved in a
subrogation action brought by the Insurance Company of North America
("INA") arising out of a claim that INA allegedly paid on a single home in
Country Walk. The Partnership intends to vigorously defend itself in this
action, as well. The Partnership could be named in other subrogation
actions, and in such event, the Partnership intends to vigorously defend
itself in such actions.

The Partnership was involved in a lawsuit captioned Berry v. Merrill
Lynch, Pierce Fenner & Smith, Arvida/JMB Partners, Limited Partnership,
Arvida/JMB Managers, Inc., JMB Realty Corporation and Does 1 through 100,
which was filed in the Superior Court of the State of California in and for
the County of San Diego, Case No. 669709. The lawsuit was purportedly
filed as a class action on behalf of the named plaintiffs and all other
persons or entities in the State of California who bought or acquired,
directly or indirectly, limited partnership interests ("Interests") in the
Partnership from September 1, 1987 through the present. The lawsuit
alleged, among other things, that the defendants made misrepresentations
and concealed various facts, breached fiduciary duties, and violated a
contractual covenant of good faith in connection with the sale of Interests
in the Partnership. The lawsuit further alleged that such conduct violated
California state law relating to fraud, constructive fraud, breach of
fiduciary duty, willful suppression of facts, breach of the covenant of
good faith, and conspiracy. The Partnership filed an answer denying the
material allegations of the complaint and setting forth various affirmative
defenses. Subsequent thereto, defendants settled the suit in order to put
to rest all controversy and to avoid further disruption to defendants'
ordinary business operations and the expense, burden and risk of protracted
litigation. The settlement, which has been concluded, is not an admission
of liability, which the defendants expressly denied. The settlement did
not result in the payment of a material amount by the defendants.

On or about October 16, 1995, a lawsuit was filed against the
Partnership and others in the Circuit Court of the 15th Judicial Circuit,
in and for Palm Beach County, Florida, entitled Council of Villages, Inc.
et al v. Arvida/JMB Partners, Arvida/JMB Managers, Inc., Arvida/JMB
Partners, Ltd., Broken Sound Club, Inc., and Country Club Maintenance
Association, Inc. The multi-count complaint, as amended, is brought as a
class action, and individually, on behalf of various residents of the
Broken Sound Community, and alleges that defendants engaged in various acts
of misconduct in, among other things, the establishment, operation,
management and marketing of the Broken Sound golf course and recreational
facilities, as well as the alleged improper failure to turn over such
facilities to the Broken Sound homeowners on a timely basis. Plaintiffs
seek, through various theories, including but not limited to breach of
ordinance, breach of fiduciary duty, fraud, unjust enrichment and civil
theft, damages in excess of $45 million, the appointment of receivers for
the Broken Sound Club and Country Club Maintenance Association, Inc., other
unspecified compensatory damages, the right to seek punitive damages,
treble damages, prejudgment interest, attorneys' fees and costs. The
Partnership believes that the lawsuit is without merit and intends to
vigorously defend itself in this matter.

Other than as described above, the Partnership is not subject to any
material pending legal proceedings, other than ordinary routine litigation
incidental to the business of the Partnership. Reference is made to Note 2
regarding certain other litigation involving the Partnership. Reference is
also made to Note 11 for a discussion of certain claims by Merrill Lynch
for indemnification by the Partnership and the General Partner against
losses and expenses that may be suffered by Merrill Lynch relating to
claims for arbitration asserted against it by certain investors in the
Partnership.

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

There were no matters submitted to a vote of security holders during
1994 and 1995.

PART II

ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS

As of December 31, 1995, there were 24,908 record Holders of Interests
of the Partnership. There is no public market for Interests, and it is not
anticipated that a public market for Interests will develop. Upon request,
the General Partner may provide information relating to a prospective
transfer of Interests to an investor desiring to transfer his Interests.
The price to be paid for the Interests, as well as any other economic
aspects of the transaction, will be subject to negotiation by the investor.

However, there are restrictions governing the transferability of these
Interests as described in "Transferability of Partnership Interests" on
pages A-31 to A-33 of the Partnership Agreement and limitations on the
rights of assignees of Holders of Interests as described in Sections 3 and
4 of the Assignment Agreement, which are hereby incorporated by reference
to Exhibit 99.1 to this report. Reference is made to Item 1. Business for
a discussion of the election to be made by the General Partner with respect
to causing Interests to be listed on a national exchange or to be reported
by the National Association of Securities Dealers Automated Quotation
System, purchasing or causing an affiliate or affiliates to purchase all of
the Interests at their then appraised fair market value, or commencing a
liquidation of all of the Partnership's assets.

Reference is made to Item 6. Selected Financial Data for a discussion
of cash distributions made to the Limited Partners. For a description of
the provisions of the Partnership Agreement relating to cash distributions,
see Note 14. Reference is made to Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations and Note 8 for a
discussion of the factors impacting the Partnership's ability to pay
distributions to its partners. As a result of certain restrictions on
distributions to partners contained in its credit facility agreement, the
Partnership made distributions to its partners in amounts substantially
less than the tax consequences attributable to the Federal taxable income
allocable to each partner multiplied by the maximum individual Federal
income tax rate for the years ended December 31, 1994 and 1993.

<TABLE>
ITEM 6. SELECTED FINANCIAL DATA

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

DECEMBER 31, 1995, 1994, 1993, 1992 AND 1991

(NOT COVERED BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT'S REPORT)

Total revenues . . . .$382,267,482 315,058,058 247,651,192 174,710,779 155,699,871
============ ======================== ========================

Net operating income
(loss). . . . . . . .$ 45,181,165 52,676,462 30,689,914 (23,337,245)(11,777,093)
============ ======================== ========================
Equity in earnings
(losses) of uncon-
solidated ventures. .$ 1,050,994 524,520 1,134,947 (2,225,531) (769,300)
============ ======================== ========================
Net income (loss). . .$ 41,836,686 47,197,532 29,293,058 (43,974,366)(30,667,969)
============ ======================== ========================
Net income (loss) per
Limited Partnership
Interest (a). . . . .$ 101.91 115.37 71.78 (160.42) (74.39)
============ ======================== ========================
Total assets (b) . . .$366,439,241 376,371,712 348,094,995 350,807,538 420,289,287
============ ======================== ========================
Total liabilities (b).$133,773,954 179,791,958 196,004,818 228,010,419 253,517,802
============ ======================== ========================
Cash distributions
per Interest (c). . .$ 13.49 6.35 -- -- --
============ ======================== ========================

The above selected financial data should be read in conjunction with the financial statements and the related
notes appearing elsewhere in this annual report.

<FN>

(a) The net income (loss) per Limited Partnership Interest is based
upon the average number of Limited Partner Interests outstanding during
each period.

(b) The Partnership does not present a classified balance sheet as a
matter of industry practice, and as such, does not distinguish between
current and non-current assets and liabilities.

(c) Cash distributions from the Partnership are generally not
equivalent to Partnership income as determined for Federal income tax
purposes or as determined under generally accepted accounting principles.
Cash distributions to the Limited Partners represent a return of capital
for Federal income tax purposes. During February 1995, the Partnership
made a distribution for 1994 of $5,421,680 to its Limited Partners ($13.42
per Interest). In addition, during the first quarter of 1995, the
Partnership remitted each Limited Partner's share of a North Carolina non-
resident withholding tax on behalf of each of the Limited Partners. Such
payment, which totalled $26,784 ($.07 per Interest), was deemed a
distribution to the Limited Partners. During February 1994, the
Partnership made a distribution for 1993 of $2,565,433 to its Limited
Partners ($6.35 per Interest). There were no cash distributions in 1991,
1992 and 1993.

</TABLE>

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

LIQUIDITY AND CAPITAL RESOURCES

All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report.

At December 31, 1995 and 1994, the Partnership had cash and cash
equivalents of approximately $20,171,000 and $22,024,000, respectively.
Bank overdrafts, which represent checks in transit, of approximately
$3,973,000 at December 31, 1995 were repaid from cash on hand during
January 1996. Remaining cash and cash equivalents were available for
future debt service, working capital requirements and distributions to
partners, subject to certain restrictions. The source of both short-term
and long-term future liquidity is expected to be derived primarily from the
sale of housing units, homesites and land parcels and through the
Partnership's credit facility, which is discussed below.

Due to the seasonal nature of its operations, a significant portion of
the Partnership's cash flow from operations (before debt service and
distributions) was generated from closings in the fourth quarter of 1995.
However, many of the expenditures related to such closings were incurred
prior to the fourth quarter. The increased closing activity in the latter
part of 1995 is the primary cause for the increase in cash and cash
equivalents at December 31, 1995 as compared to the cash balance reported
in the Partnership's quarterly filing at September 30, 1995. In addition,
each year numerous housing and homesite closings occur during the last
business days in December. Receipts generated from such closings are
sometimes not received by the Partnership until January of the following
fiscal year. The amount of proceeds to be received from such closings are
included in trade and other accounts receivable on the accompanying
consolidated balance sheets. The increase in the amount of closings which
occurred during the last business days in December 1995 as compared to the
same period in 1994 is the primary cause for the increase in trade and
other accounts receivable at December 31, 1995 as compared to 1994 on the
accompanying consolidated balance sheets.

The Partnership was able to generate significant cash flow before debt
service during 1995 and 1994. The Partnership utilized this cash flow to
make scheduled and additional principal repayments on its outstanding debt,
as required under the terms of the credit facility agreement, and to
increase its cash reserves. In February 1995, the Partnership made a
distribution for 1994 of $5,421,680 to its Limited Partners ($13.42 per
Interest) and $301,201 to the General Partner and Associate Limited
Partners, collectively. In addition, during the first quarter of 1995, the
Partnership remitted each Limited Partner's share of North Carolina non-
resident withholding tax. Such payment, which totalled $26,784 ($.07 per
Interest), was deemed a distribution to the Limited Partners. A
distribution of $1,488 was also paid at that time to the General Partner
and Associate Limited Partners, collectively, a portion of which was also
remitted to the North Carolina tax authorities on their behalf. During
February 1994, the Partnership made a distribution for 1993 of $2,565,433
to its Limited Partners ($6.35 per Interest) and $142,523 to the General
Partner and Associate Limited Partners, collectively. As a result of
certain restrictions on distributions to partners contained in its credit
facility agreement, the Partnership made distributions to its partners in
amounts substantially less than the tax consequences attributable to the
Federal taxable income allocable to each partner multiplied by the maximum
individual Federal income tax rate for the years ended December 31, 1994
and 1993.

At December 31, 1995, the Partnership's credit facility consists of a
term loan in the original amount of $85,252,520, a revolving line of credit
facility up to $20 million, an income property term loan in the original
amount of $18,233,326 and a $15 million letter of credit facility. The
term loan, the revolving line of credit and the letter of credit facility
are secured by recorded mortgages on all otherwise unencumbered real
property assets of the Partnership as well as an assignment of all
mortgages receivable, equity memberships, certain joint venture interests
or joint venture proceeds, and cash balances (with the exception of
deposits held in escrow). The income property term loan is secured by the
recorded first mortgage on a mixed-use center in Boca Raton, Florida.
Another office building also located in Boca Raton, known as Mizner Place,
which served as additional collateral for the income property term loan was
sold in May 1995. All of the notes under the facility are cross-
collateralized and cross-defaulted.

Under the term loan agreement, the Partnership made scheduled
principal payments of $10 million in March 1994, February 1995 and February
1996 and a $5 million principal payment in July 1995. In addition, the
term loan agreement provides for additional principal repayments to be made
upon the sale of certain assets as well as a specified percentage of annual
cash flow, as defined. During the year ended December 31, 1995, the
Partnership made such additional term loan payments totalling approximately
$25.9 million. A principal repayment of $5 million on the term loan is due
in July 1996. The remaining balance outstanding is due in July 1997.
Under the income property term loan, principal payments of $0.1 million are
required to be paid monthly until maturity. In addition to the scheduled
monthly payments, in May 1995 the Partnership used the net proceeds of
approximately $4 million from the sale of the Mizner Place office building
to pay down the income property term loan. The income property term loan
and the revolving line of credit were scheduled to mature in March 1996 and
December 1995, respectively. The Partnership has been negotiating with its
lenders for a renewal of its revolving line of credit and income property
term loan. During March 1996, the Partnership's lenders reached an
agreement in principle with each other whereby one of the lenders would
purchase the other's participating interest in the Partnership's credit
facilities. In addition, during March 1996, the successor lender agreed to
renew the Partnership's revolving line of credit, income property term loan
and letter of credit facility through July 1997. The Partnership's letter
of credit facility was scheduled to mature in July 1995, but was extended
for one year and will mature in July 1996. At December 31, 1995, all of
the term and income property term loan proceeds had been borrowed with
remaining outstanding balances of $32,531,048 and $12,766,746,
respectively. The balances outstanding on the revolving line of credit and
the letter of credit facilities at December 31, 1995 were $0 and
$9,236,746, respectively.

During March 1996, the Partnership closed on the sale of its 20% joint
venture interest in Coto de Caza including the related promissory note for
advances previously made to the joint venture, to unaffiliated third
parties for a cash sales price of $12.0 million. The Partnership used $2.0
million of the sale proceeds to paydown its term loan. The General Partner
believes that this sale was in the best interest of the Partnership given
current market conditions in Orange County, California. As a result of
this transaction, the Partnership has no future obligations with respect to
Coto de Caza. This transaction will result in a gain to be recognized in
1996 for financial reporting and Federal income tax purposes.

The Partnership has a $24.0 million revolving construction line of
credit for construction of the buildings and certain amenities within the
Partnership's condominium project on Longboat Key, Florida known as
Arvida's Grand Bay. This line of credit currently bears interest at the
lender's prime rate (8.50% at December 31, 1995) plus 1/2% per annum and
matures in January 1997. At December 31, 1995, approximately $11.7 million
was outstanding under this line of credit. The Partnership anticipates
that this amount will be repaid from the proceeds from the sale of
condominium units.

The Partnership owned an 80% general partnership interest in The Oaks
Community located near Sarasota, Florida. During the fourth quarter of
1991, the Partnership's joint venture partner failed to make capital
contributions required to fund ongoing operations and pursuant to the joint
venture agreement, was in default of the agreement. The Partnership
executed an agreement in August 1993 with its joint venture partner, CIS
Oaks, Ltd., ("CIS"), whereby CIS assigned its 20% interest in The Oaks to
the Partnership, thereby vesting 100% control of the assets of the joint
venture to the Partnership.

The assets of the Oaks joint venture were encumbered by two mortgage
loans. A $12,492,200 loan was scheduled to mature in January 1997 and a
$3,260,000 loan was scheduled to mature in December 1993. The joint
venture had guaranteed $2.7 million of the loans, and the guaranteed amount
was with recourse to the Partnership. The joint venture was in default
under the terms of these loan agreements as a result of its failure to make
principal payments of approximately $1.3 million in January 1993 to release
the minimum number of homesite lots as required under these agreements and
its failure to pay interest commencing with a payment due in April 1993.
The Partnership was able to reach an agreement with the lenders to pay off
the existing mortgage loans at a substantial discount from face value. On
September 3, 1993, the Partnership paid the joint venture's lenders $6.7
million in full satisfaction of the outstanding mortgage loans, accrued
interest and guaranty. This transaction was the cause of the approximate
$9.5 million extraordinary gain on the early extinguishment of debt for the
year ended December 31, 1993.

Given the finite amount of available capital to the Partnership, the
Partnership determined that it was in its best long-term interest to
utilize that capital for the development of its other properties and sold
its remaining land holdings in The Oaks Community and its interest in The
Oaks Club to an unaffiliated third party purchaser for $5.8 million. This
sale transaction occurred simultaneously with the repayment of the loans
and satisfaction of the mortgages described above. In light of the
Partnership's guarantee under the loan agreement of $2.7 million of the
outstanding mortgage loans, as well as other factors, these transactions
were pursued as the least costly alternative available to the Partnership.
These transactions resulted in a minimal net gain for Federal income tax
purposes.

The Partnership has been seeking a permit to develop 1,166 of the
approximate 2,475 gross acres contained in Increment III of the Weston
Community, portions of which are environmentally sensitive areas and are
subject to protection as wetlands. The Partnership's application for a
wetlands permit for Increment III, as modified on July 31, 1995, includes
wetlands mitigation of 1,553 acres. This includes approximately 226 acres
of land owned by the Partnership outside of Increment III, and
approximately 18 acres of land owned by the Florida Department of
Transportation (the "FDT") which is included in the mitigation response.
The land outside Increment III was acquired to augment the Partnership's
mitigation response to the United States Army Corps of Engineers (the
"Corps"), which is the governmental agency responsible for issuing permits
involving development of wetlands areas. The Partnership has reached an
agreement with the FDT whereby in exchange for the right to use the 18
acres of land owned by the FDT, the Partnership has agreed to remove
certain trees on the land due to their negative impact on the wetlands.
The mitigation plan calls for the improvement of the function and value of
the wetlands, including development of refuge habitat areas, and ongoing
maintenance and monitoring of the same. After the mitigation response, the
Partnership will have approximately 1,166 acres available for residential
and commercial development, less requirements for schools, parks, roads and
related development infrastructure.

The Corps has concluded its processing of the Partnership's
application, as modified, and on February 29, 1996, issued its Section 404
Permit on the same terms and conditions as set forth in the Partnership's
amended application. The U.S. Fish and Wildlife Service and the
Environmental Protection Agency have relinquished their rights to veto or
elevate the permit decision to higher governmental officials. Therefore,
issuance of the Section 404 Permit is subject only to collateral attacks by
unrelated third parties, the risk of which is remote.

Additionally, the Partnership has received analogous permits from both
Broward County and the State of Florida authorizing the development of
Increment III in accordance with the Partnership's current development
plans, subject only to a final modification to the Development of Regional
Impact Development Order for Increment III, which the Partnership believes
can be acquired in the ordinary course of business. However, if such
modification is not obtained, the Partnership would be required to revise
its development plans for the remaining portions of Increment I and II of
the Weston Community, as well as its development plans for Increment III.
Such revisions would have a material adverse impact on the timing and
amount of net income and net cash flow ultimately realized by the
Partnership from the development of the Weston Community.

In connection with the development of the mitigation response required
by the Corps, State of Florida and Broward County wetland fill permits, the
Indian Trace Community Development District (the "District") and the
Partnership have entered into a cost sharing agreement whereby the
Partnership contributes the land and technical expertise necessary to
obtain and implement the permit conditions and the District pays all
development costs and assumes the perpetual maintenance obligation. The
cost associated with the development and perpetual maintenance of the land
will be reimbursed through assessments charged by the District to the owner
of the property. Such assessments will be paid by the Partnership until
the land is sold through the Partnership's ordinary course of business.

The Partnership may be responsible for funding certain other ancillary
activities for related entities in the ordinary course of business which
the Partnership does not currently believe will have any material adverse
effect on its consolidated financial position or results of operations.

In June 1993, the Partnership executed an agreement with Equitable
South Florida Venture ("Equitable"), the successor in interest to Tishman
Speyer/Equitable South Florida Venture, the original purchaser of
approximately 390 acres of land in Increment III of the Partnership's
Weston Community, whereby, in exchange for $5.0 million, the Partnership
repurchased approximately 330 acres of the land and Equitable agreed to
relieve the Partnership of its obligations under certain provisions of the
Sale and Purchase Agreement dated December 15, 1983, which were assumed by
the Partnership in connection with the purchase of the assets of Arvida
Corporation in September 1987. Of the agreed upon price of $5 million,
$2.5 million was paid at the execution of the agreement in 1993 and the
balance of $2.5 million was to be paid in equal annual installments of
$500,000 together with interest thereon at 8% per annum. The Partnership
made the first two of these scheduled payments in May 1994 and 1995.
During October 1995, the Partnership repaid the remaining outstanding
principal balance of $1.5 million. As part of its efforts to obtain the
appropriate development permits discussed in the preceding paragraphs, the
Partnership has included this land as part of its mitigation plan for the
development of Increment III of its Weston Community.

The Partnership has been advised by Merrill Lynch that various
investors have sought to compel Merrill Lynch to arbitrate claims brought
by certain investors of the Partnership representing approximately 5% of
the total of approximately 404,000 Interests outstanding. Merrill Lynch
has asked the Partnership and its General Partner to confirm an obligation
of the Partnership and its General Partner to indemnify Merrill Lynch in
these claims against all loss, liability, claim, damage and expense,
including without limitation attorneys' fees and expenses, under the terms

of a certain Agency Agreement dated September 15, 1987 ("Agency Agreement")
with the Partnership relating to the sale of Interests through Merrill
Lynch on behalf of the Partnership. These claimants have sought and are
seeking to arbitrate claims involving unspecified damages against Merrill
Lynch based on Merrill Lynch's alleged violation of applicable state and/or
federal securities laws and alleged violations of the rules of the National
Association of Securities Dealers, Inc., together with pendent state law
claims. Reference is made to Note 11 for further information concerning
such claims. At this time, and based upon the information presently
available about the arbitration statements of claims filed by some of these
investors, the Partnership and its General Partner believe that they have
meritorious defenses to demands for indemnification made by Merrill Lynch
and intend to vigorously pursue such defenses. Although there can be no
assurance regarding the outcome of the claims for indemnification, at this
time, based on information presently available about such arbitration
statements of claims, the Partnership and its General Partner do not
believe that the demands for indemnification by Merrill Lynch will have a
material adverse effect on the financial condition of the Partnership.

Reference is made to Note 11 regarding the Partnership's financial
guarantees pursuant to the terms of a loan agreement for a
commercial/industrial joint venture in Pompano Beach, Florida in which the
Partnership owns a 50% interest. The Partnership also has certain
continuing obligations relative to this joint venture as referred to in
such Note.

Reference is made to Item 3. Legal Proceedings of this annual report
for a discussion of several lawsuits, in which the Partnership is a
defendant, allegedly arising out of or relating to Hurricane Andrew and
certain property damage allegedly suffered by the plaintiffs at a
previously developed community known as Country Walk.

RESULTS OF OPERATIONS

The results of operations for the years ended December 31, 1995, 1994
and 1993 are primarily attributable to the development and sale or
operation of the Partnership's assets. See Note 1 for a discussion
regarding the recognition of profit from sales of real estate.

For the year ended December 31, 1995, the Partnership (including its
consolidated ventures and its unconsolidated ventures accounted for under
the equity method) closed on the sale of 1,283 housing units, 554 homesite
lots, approximately 177 acres of developed and undeveloped residential or
commercial/industrial land tracts as well as an office building located in
downtown Boca Raton known as Mizner Place, and the Partnership's cable
operations in the Broken Sound Community. This compares to closings in
1994 of 899 housing units, 608 homesite lots, approximately 12 acres of
developed and undeveloped residential or commercial/industrial land tracts.

Closings in 1993 were for 626 housing units, 752 homesite lots,
approximately 91 acres of developed and undeveloped land tracts as well as
the sales of the Oak Bridge Club and the remaining real estate and equity
memberships at The Oaks Community. Outstanding contracts ("backlog") as of
December 31, 1995 were for 875 housing units, 22 homesites and
approximately 18 acres of developed and undeveloped land tracts. This
compares to a backlog as of December 31, 1994 of 897 housing units, 67
homesites, approximately 36 acres of developed and undeveloped land tracts
as well as the Mizner Place office building. The backlog as of December
31, 1993 was for 527 housing units, 127 homesites and approximately 47
acres of developed and undeveloped land tracts.

The Partnership's Communities are in various stages of development,
with estimated remaining build-outs ranging from one to nine years. The
Weston Community, located in Broward County, Florida, is the Partnership's
largest Community and is in its mid stage of development. Also in their
mid stages of development are the River Hills Country Club in Tampa,
Florida; Jacksonville Golf and Country Club in Jacksonville, Florida; the
Water's Edge Community in Atlanta, Georgia; The Cullasaja Club, near
Highlands, North Carolina and the Partnership's condominium project on
Longboat Key, Florida known as Arvida's Grand Bay. The Partnership's
remaining Communities known as Sawgrass Country Club, in Jacksonville,
Florida and Dockside in Atlanta, Georgia are in their final stages of
development with anticipated close-outs in 1996. In addition, the Broken
Sound Community, located in Boca Raton, Florida, is complete and had its
final closings in 1995. Future revenues will be impacted to the extent
that there are lower levels of inventories available for sale as these
Communities approach or undertake their final phases. In addition, due to
the close-out of the Partnership's higher profit margin products within
Broken Sound in 1995, future gross operating profit margins from housing
activities are not expected to be as high as recent years' margins.

Revenues from housing and homesite activities are recognized upon the
closing of homes built by the Partnership and developed lots, respectively,
within the Partnership's Communities. Land and property revenues are
generated from the closing of developed and undeveloped residential and/or
commercial land tracts, the sale of operating properties as well as gross
revenues earned from the sale of equity memberships in the clubs within the
Partnership's Boca Raton and Jacksonville, Florida Communities, and its
Community near Highlands, North Carolina.

Cost of revenues pertaining to the Partnership's housing sales reflect
the cost of the acquired assets as well as development and construction
expenditures, certain capitalized overhead costs, capitalized interest,
real estate taxes and marketing, as well as disposition costs. The costs
related to the Partnership's homesite sales reflect the cost of the
acquired assets, related development expenditures, certain capitalized
overhead costs, capitalized interest and real estate taxes, as well as
disposition costs. Land and property costs reflect the cost of the
acquired assets, certain development costs and related disposition costs,
as well as the cost associated with the sale of equity memberships.

Historically, a substantial portion of the Partnership's housing
revenues during the first six months of a given year are generated from the
closing of units contracted in the prior year. For the year ended December
31, 1995, the Partnership experienced a 43% net increase in the number of
housing units closed as compared to 1994. Closings during 1995 exceeded
those for 1994 at all of the Partnership's Communities, with the exception
of the Broken Sound Community which is complete and had its final closings
in May 1995. This increase in closing activity is the primary cause for
the increase in housing revenues for 1995 as compared to 1994. Closings in
the Partnership's Weston Community alone accounted for approximately 93% of
the overall net increase in unit closings. This increase is primarily
attributable to the substantial increase in the backlog of unclosed housing
units at Weston at December 31, 1994 as compared to December 31, 1993. The
increase in the number of closings in the Partnership's Jacksonville
Communities is also due primarily to an increase in the backlog of unclosed
units in those Communities at the end of 1994 as compared to 1993. Also
contributing to the favorable revenue variance is an increase in the amount
of revenues recognized under the percentage of completion method in 1995 at
Arvida's Grand Bay on Longboat Key, Florida. During 1995, the Partnership
recognized revenues from two buildings at Arvida's Grand Bay as compared to
one building in 1994.

Housing closings increased significantly in Weston during 1994 as
compared to 1993 due to the Partnership building more product lines within
this Community, as well as the introduction of several value-oriented
products in late 1992 and early 1993 which had their initial closings in
the third quarter of 1993. The continued success of these products, as
well as the success of several new product lines offered in late 1993 and
1994 contributed significantly to the overall increase in housing revenues.

Housing closings and revenues for 1994 also exceeded those for 1993 at the
Partnership's Communities in Tampa and Jacksonville, Florida due to the
introduction of products which had their initial closings in the fourth
quarter of 1993, as well as at the Partnership's Broken Sound Community.
Revenues increased at Broken Sound due to the continued sale of products
which had their initial closings in the second quarter of 1993, as well as
the introduction of a new product in 1993 which had its initial closings in
1994. Also contributing to the overall increase in housing revenues for
1994 as compared to 1993 is the initial recognition of revenues for the
first building at Arvida's Grand Bay during 1994.

The gross operating profit margin from housing activity decreased for
the year ended December 31, 1995 as compared to 1994 primarily as a result
of the substantial decline in the number of units closed at the
Partnership's Broken Sound Community. Due to the close-out of this
Community's higher priced, higher profit margin product built by the
Partnership, future gross operating margins from housing activities are not
expected to be as high as recent years' margins. In addition, South
Florida building code changes, which have been in effect since September 1,
1994, have impacted construction requirements in Broward County. These
building code changes have resulted in increased construction costs, not
all of which have been passed through to the home purchasers at this time.
As a result, the Partnership experienced some erosion in its gross
operating profit margins from housing sales during 1995 as compared to
1994.

The decrease in homesite revenues for the year ended December 31, 1995
as compared to 1994 is due primarily to the close-out of lots in the
Partnership's Sawgrass Country Club Community in 1995. Homesite revenues
also decreased at Weston due to lower sales prices generated on the higher
priced product sold in that Community. Revenues from homesite activities
decreased for the year ended December 31, 1994 as compared to 1993 due to
the implementation of the Partnership's decision to place more emphasis on
its home building operations. The decrease in homesite revenues in 1994 as
compared to 1993 was also due to reduced closings from the Partnership's
product offered on Longboat Key, Florida, due to the close out of these
lots in 1993. Slow sales at Waters Edge and Dockside due to weak market
demand for the products offered in this particular sub-market in Atlanta,
also contributed to the unfavorable revenue variance for 1994 as compared
to 1993.

The decrease in the gross operating profit margin from homesite
activities for the year ended December 31, 1995 as compared to 1994 is due
to the decreased closing activity within Sawgrass Country Club due to the
close-out of this Community in 1995, as well as reduced margins from
closings of the higher priced product in Weston resulting from decreased
sales prices, as discussed above. Also contributing to the decrease in the
gross operating profit margin are certain non-recurring adjustments made to
cost of sales in 1994 to reflect reductions in development cost estimates
for certain of the Partnership's products, primarily in the Weston
Community. Development estimates at that time indicated lower costs to be
incurred than were previously anticipated, therefore contributing to this
variance. The increase in the gross operating profit margin from homesite
activities for the year ended December 31, 1994 as compared to 1993 was due
primarily to the non-recurring adjustments to cost of sales recorded in
1994.

The increase in land and property revenues for 1995 is due primarily
to the increase in the volume of land and property sales closed in 1995 as
compared to 1994. Significant revenues were generated in 1995 from the
closings of approximately 86 acres of commercial land parcels throughout
Palm Beach and Broward Counties in Florida. In addition to these
commercial land parcels, the Partnership also closed on the sale of the
cable operation in its Broken Sound Community and the Mizner Place office
building located in downtown Boca Raton, Florida. Also contributing to the
increase in revenues is the sale of approximately 82 acres of undeveloped
land located near Sarasota, Florida, which was distributed to the
Partnership by one of its unconsolidated joint ventures. These closings
compare to approximately 12 acres of commercial and residential land
parcels closed during 1994.

The increase in the gross operating profit margin from land and
property sales for 1995 as compared to 1994 is due primarily to the low
cost basis of the land sales generated during 1995.

Land and property revenues for the year ended December 31, 1993
include approximately $5.8 million and $3.3 million in revenues generated
from the sale of the remaining real estate and equity memberships at the
Partnership's Oaks Community (see further discussion in Liquidity and
Capital Resources above) and the sale of the Oakbridge Club near
Jacksonville, Florida, respectively. The inclusion of revenues from these
closings in 1993 is the primary cause for the decrease in land and property
revenues for the year ended December 31, 1994 as compared to 1993. The
remaining unfavorable revenue variance for 1994 as compared to 1993 is due
to a decrease in the amount of revenues recognized for those land sales
closed in previous years which had been deferred for financial reporting
purposes, as well as a lower volume of other land sales in the Boca Raton
and Jacksonville, Florida and Atlanta, Georgia areas.

Despite the decrease in revenues, the gross operating profit margin
generated from land and property activities increased for 1994 due
primarily to 1993's margins being negatively impacted by the loss incurred
on the sale of the remaining real estate and equity memberships at the
Partnership's Oaks Community in 1993.

Operating properties represents activity from the Partnership's club
and hotel operations, commercial properties and certain other operating
assets. The increase in revenues from operating properties in 1995 as
compared to 1994 is due primarily to increased membership dues and fees
generated at the Partnership's club operations in Weston. This favorable
variance resulted from an increase in the number of club members as well as
an increase in rates charged in 1995 as compared to 1994. The favorable
revenue variance from the club operations was partially offset by decreased
revenues from the Partnership's cable operation in Broken Sound as well as
decreased revenues from Mizner Place due to the sale of these properties in
1995.

Revenues generated by the Partnership's operating properties increased
for the year ended December 31, 1994 as compared to 1993 primarily due to
increased revenues from the Partnership's club operations in Weston and
River Hills due to an increase in membership activity. Revenues for 1994
also exceeded those for 1993 at the Partnership's cable operations in
Weston. This increase resulted primarily from an increase in the number of
cable subscribers within that Community. These favorable revenue variances
were partially offset, however, as 1994 revenues do not include any
activity from the Oakbridge Club which was sold to an unaffiliated third
party in October 1993.

Brokerage and other operations represents activity from the sale of
unaffiliated third-party builders' homes within the Partnership's
Communities, activity from resale of real estate inside and outside the
Partnership's Communities, proceeds from the Partnership's property
management activities as well as fees earned from various management
agreements with joint ventures. The decrease in revenues from brokerage
and other operations for the year ended December 31, 1995 as compared to
1994 is due primarily to a decrease in the number of builder unit closings
in the Partnership's Weston Community resulting from a slow down in sales
of the higher priced product in that Community. Closings and revenues also
decreased due to the late stage of development of the Partnership's
Sawgrass Country Club Community and the sellout of its Broken Sound
Community.

The gross operating profit margin from brokerage and other operations
declined for the year ended December 31, 1995 as compared to 1994 due
primarily to an adjustment recorded to cost of revenues in the first
quarter of 1995 to properly reflect commissions paid in connection with the
sales of builders' homes within the Partnership's Communities which had
closed prior to December 31, 1994.

Selling, general and administrative expenses include all marketing
costs, with the exception of those costs capitalized in conjunction with
the construction of housing units, and project and general administrative
costs. These expenses are net of the marketing fees received from third
party builders. The increase in selling, general and administrative
expenses for the year ended December 31, 1995 as compared to 1994 is
primarily attributable to a decrease in marketing fees earned from builder
unit closings within the Partnership's Communities, due to the lower volume
of such closings as discussed above. The unfavorable variance also
resulted from an increase in project administrative costs, primarily at the
Partnership's Weston Community, related to the increased housing volume
discussed above. Selling, general and administrative expenses increased
for 1994 as compared to 1993 also due to increased project administrative
costs at the Partnership's Weston Community and at Arvida's Grand Bay.
These increased costs resulted from increased activity related to these
projects in 1994 as compared to 1993.

Writedowns to the carrying value of real estate inventories and other
assets represent adjustments to the book values of the Partnership's
projects based upon the analysis of each projects' estimated selling price
in the ordinary course of business less estimated costs of completion,
holding and disposal as compared to its recorded carrying value, or the
estimated fair value of the asset held for disposition. Writedowns to the
carrying value of real estate inventories and other assets for the year
ended December 31, 1995 represents a writedown of approximately $8.5
million, recorded in September 1995, to the carrying value of the
Partnership's investment in the Coto de Caza Joint Venture. The
Partnership had been evaluating its plans for its interest in this joint
venture and was considering a shorter holding period than originally
anticipated. Therefore, the Partnership recorded this writedown to reflect
the fair value of this investment held for disposition under market
conditions at that time. This writedown is the primary cause for the
decrease in Investments in and Advances to Joint Ventures on the
accompanying consolidated balance sheets at December 31, 1995 as compared
to December 31, 1994. Reference is made to Liquidity and Capital Resources
for a discussion of the sale of the Partnership's interest in Coto de Caza
during March 1996.

The Partnership recorded writedowns to the carrying value of real
estate inventories and other assets for the year ended December 31, 1993
totalling approximately $4.9 million resulting from the adverse impact of
reductions in housing prices on future anticipated lot values at the
Partnership's Water's Edge and Dockside Communities.

The increase in interest income since 1993 is due primarily to an
increase in the average amounts invested in short-term financial
instruments.

The increase in equity in earnings of unconsolidated ventures for the
year ended December 31, 1995 as compared to 1994 resulted primarily from
the recording of the Partnership's share of income generated from a land
sale by its commercial joint venture located in Ocala, Florida. Equity in
earnings of unconsolidated ventures decreased for the year ended December
31, 1994 as compared to 1993 due primarily to the reduction in earnings
from the two joint ventures in Weston which had been formed during the
second half of 1992 to construct homes within that Community. Those homes
had been completed and were virtually closed out by December 31, 1993.

Interest and real estate taxes decreased for the year ended December
31, 1995 as compared to 1994 due primarily to a decrease in the average
amount of borrowings outstanding during the period. Also contributing to
the favorable variance is a decrease in real estate taxes incurred, due
primarily to the high volume of closings during 1995. Interest and real
estate taxes decreased for the year ended December 31, 1994 as compared to
1993 due primarily to an overall decrease in the Partnership's average debt
balance outstanding, as well as the maturity of both of the Partnership's
interest rate swap arrangements during 1994.

In March 1995, the Financial Accounting Standards Board Issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of". This Statement requires
impairment losses to be recorded on long-lived assets used in operations
when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-
lived assets that are expected to be disposed of, and requires that assets
to be disposed of be reported in the balance sheet at the lower of their
carrying amount or fair value less cost to sell. The Partnership adopted
Statement 121 effective January 1, 1995 and, as a result, recorded an
impairment loss of $2.2 million to the carrying value of its Cullasaja
Community located near Highlands, North Carolina. This loss was recorded
based upon an analysis of estimated discounted cash flows used to determine
the Community's fair value. The fair value analysis estimates sell out of
the remaining houses, homesites and equity memberships in the Community by
the year 2000. As a result of this adjustment, Cullasaja's carrying value
is recorded at approximately $7.1 million at December 31, 1995.

INFLATION

Although the relatively low rates of inflation in recent years
generally have not had a material effect on the Community development
business, inflation in future periods can adversely affect the development
of Communities generally because of its impact on interest rates. High
interest rates not only increase the cost of borrowed funds to developers,
but also have a significant effect on the affordability of permanent
mortgage financing to prospective purchasers. Any increased costs of
materials and labor resulting from high rates of inflation may, in certain
circumstances, be passed through to purchasers of real properties through
increases in sales prices, although such increases may reduce sales volume.

To the extent such cost increases are not passed through to purchasers,
there would be a negative impact on the ultimate margins realized by the
Partnership.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

INDEX

Reports of Independent Certified Public Accountants

Consolidated Balance Sheets, December 31, 1995 and 1994

Consolidated Statements of Operations for the years ended
December 31, 1995, 1994 and 1993

Consolidated Statements of Changes in Partners' Capital Accounts
(Deficit) for the years ended December 31, 1995, 1994 and 1993

Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993

Notes to Consolidated Financial Statements

SCHEDULES NOT FILED:

All schedules have been omitted as the required information is
inapplicable or immaterial, or the information is presented in the
consolidated financial statements or related notes.

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Partners of
ARVIDA/JMB PARTNERS, L.P.

We have audited the accompanying consolidated balance sheets of
Arvida/JMB Partners, L.P. and Consolidated Ventures as of December 31, 1995
and 1994, and the related consolidated statements of operations, changes in
partners' capital accounts, and cash flows for each of the three years in
the period ended December 31, 1995. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Arvida/JMB Partners, L.P. and Consolidated Ventures at December
31, 1995 and 1994, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles.

As discussed in Note 16 to the financial statements, in 1995, the
Partnership changed its method of accounting for long-lived assets.

ERNST & YOUNG LLP

Miami, Florida
February 23, 1996

<TABLE>
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1995 AND 1994

ASSETS
------
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Cash and cash equivalents (note 3) . . . . . . . . . . . . . $ 20,171,289 22,024,390
Restricted cash (note 3) . . . . . . . . . . . . . . . . . . 13,852,395 14,232,540
Trade and other accounts receivable (net of allowance
for doubtful accounts of $236,052 and $229,542
at December 31, 1995 and 1994, respectively) . . . . . . . 28,056,262 18,209,957
Mortgages receivable, net (note 4) . . . . . . . . . . . . . 1,994,583 1,094,223
Real estate inventories (notes 5 and 8). . . . . . . . . . . 199,372,799 207,874,438
Property and equipment, net (notes 6 and 8). . . . . . . . . 71,842,531 69,114,559
Investments in and advances to joint ventures, net (note 7). 13,955,093 23,178,951
Equity memberships (note 9). . . . . . . . . . . . . . . . . 7,367,266 10,536,864
Amounts due from affiliates (note 10). . . . . . . . . . . . 1,131,697 524,556
Prepaid expenses and other assets. . . . . . . . . . . . . . 8,695,326 9,581,234
------------ -----------
Total assets . . . . . . . . . . . . . . . . . . . $366,439,241 376,371,712
============ ===========

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS - CONTINUED

LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)
-----------------------------------------------------

1995 1994
------------ -----------
Liabilities:
Bank overdrafts. . . . . . . . . . . . . . . . . . . . . . $ 3,972,987 --
Accounts payable . . . . . . . . . . . . . . . . . . . . . 22,918,450 24,142,890
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . 23,825,499 27,082,766
Accrued expenses and other liabilities . . . . . . . . . . 12,718,654 13,418,777
Notes and mortgages payable, net (note 8). . . . . . . . . 70,338,364 115,147,525
------------ -----------
Commitments and contingencies (notes 7, 8, 10, 11 and 12)

Total liabilities. . . . . . . . . . . . . . . . . 133,773,954 179,791,958
------------ -----------
Partners' capital accounts (note 14)
General Partner and Associate Limited Partners:
Capital contributions . . . . . . . . . . . . . . . . . 20,000 20,000
Cumulative net income . . . . . . . . . . . . . . . . . 34,994,723 34,328,454
Cumulative cash distributions . . . . . . . . . . . . . (33,912,035) (33,609,346)
------------ -----------
1,102,688 739,108
------------ -----------
Limited partners:
Initial Limited Partner:
Capital contributions, net of offering costs. . . . . . 364,841,815 364,841,815
Cumulative net income (loss). . . . . . . . . . . . . . 8,815,556 (32,354,861)
Cumulative cash distributions . . . . . . . . . . . . . (142,094,772) (136,646,308)
------------ -----------
231,562,599 195,840,646
------------ -----------
Total partners' capital accounts . . . . . . . . . 232,665,287 196,579,754
------------ -----------
Total liabilities and partners' capital. . . . . . $366,439,241 376,371,712
============ ===========

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

<TABLE>
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)

AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Housing. . . . . . . . . . . . . . . . . . $245,700,339 195,077,922 105,135,532
Homesites. . . . . . . . . . . . . . . . . 41,429,110 49,775,550 59,171,109
Land and property. . . . . . . . . . . . . 37,065,413 11,050,339 25,646,960
Operating properties . . . . . . . . . . . 28,205,307 26,719,132 26,326,255
Brokerage and other operations . . . . . . 29,867,313 32,435,115 31,371,336
------------ ------------ ------------

Total revenues . . . . . . . . . . 382,267,482 315,058,058 247,651,192
------------ ------------ ------------

Cost of revenues:
Housing. . . . . . . . . . . . . . . . . . 205,949,253 152,838,691 84,598,055
Homesites. . . . . . . . . . . . . . . . . 27,815,676 28,980,971 37,025,954
Land and property. . . . . . . . . . . . . 17,141,616 6,488,326 18,431,543
Operating properties . . . . . . . . . . . 27,892,903 26,648,781 27,552,287
Brokerage and other operations . . . . . . 26,986,730 26,733,988 25,113,709
------------ ------------ ------------

Total cost of revenues . . . . . . 305,786,178 241,690,757 192,721,548
------------ ------------ ------------

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)

AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED

1995 1994 1993
------------ ------------ ------------

Gross operating profit . . . . . . . . . . . 76,481,304 73,367,301 54,929,644

Selling, general and administrative expenses 22,755,471 20,690,839 19,343,730
Writedown to the carrying value of real estate
inventories and other assets
(notes 1, 5 and 7) . . . . . . . . . . . . 8,544,668 -- 4,896,000
------------ ------------ ------------

Net operating income . . . . . . . 45,181,165 52,676,462 30,689,914

Interest income. . . . . . . . . . . . . . . 1,201,172 1,068,011 672,000
Equity in earnings of unconsolidated
ventures (notes 1 and 7) . . . . . . . . . 1,050,994 524,520 1,134,947
Interest and real estate taxes, net (note 1) (3,396,645) (7,071,461) (12,739,584)
------------ ------------ ------------

Income before extraordinary
item and cumulative effect
due to change in accounting for
long-lived assets. . . . . . . . 44,036,686 47,197,532 19,757,277

Extraordinary item:
Gain on early extinguishment
of debt (note 8) . . . . . . . -- -- 9,535,781

Cumulative effect due to change
in accounting for long-lived
assets (note 16) . . . . . . . . (2,200,000) -- --
------------ ------------ ------------
Net income . . . . . . . . . . . . $ 41,836,686 47,197,532 29,293,058
============ ============ ============
Net income per Limited
Partnership Interest . . . . . . $ 101.91 115.37 71.78
============ ============ ============
Cash distribution per Limited
Partnership Interest . . . . . . $ 13.49 6.35 --
============ ============ ============

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

<TABLE>
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL ACCOUNTS

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<CAPTION>
GENERAL PARTNER AND ASSOCIATE LIMITED PARTNERS LIMITED PARTNERS (404,000 INTERESTS)
- ----------------------------------------------------------------------------------------------------------
NET
CONTRIBU- NET CASH INCOME
TIONS INCOME DISTRIBUTIONS TOTAL CONTRIBUTIONS (LOSS) DISTRIBUTIONS TOTAL
--------- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
Decem-
ber 31,
1992. . .$20,00033,446,823(33,466,823) -- 364,841,815(107,963,820)(134,080,876)122,797,119
Net income
(note 14) -- 292,930 -- 292,930 -- 29,000,128 -- 29,000,128
----------------- ----------- ----------- ----------- ----------------------- -----------
Balance
Decem-
ber 31,
1993. . .20,00033,739,753 (33,466,823) 292,930 364,841,815 (78,963,692)(134,080,876)151,797,247
Net income
(note 14) -- 588,701 (142,523) 446,178 -- 46,608,831 (2,565,432) 44,043,399
----------------- ----------- ----------- ----------- ----------------------- -----------
Balance
Decem-
ber 31,
1994. . .20,00034,328,454 (33,609,346) 739,108 364,841,815 (32,354,861)(136,646,308)195,840,646
Net income
(note 14) -- 666,269 (302,689) 363,580 -- 41,170,417 (5,448,464) 35,721,953
----------------- ----------- ----------- ----------- ----------------------- -----------
Balance
Decem-
ber 31,
1995. . .$20,00034,994,723(33,912,035) 1,102,688 364,841,815 8,815,556(142,094,772)231,562,599
================= =========== =========== =========== ======================= ===========

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

<TABLE>
ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net income . . . . . . . . . . . . . . . . . $ 41,836,686 47,197,532 29,293,058
Charges (credits) to net income not
requiring (providing) cash:
Depreciation and amortization. . . . . . . 5,661,479 5,556,524 6,232,092
Equity in earnings of unconsolidated
ventures . . . . . . . . . . . . . . . . (1,050,994) (524,520) (1,134,947)
Provision for doubtful accounts. . . . . . 6,511 136,395 269,400
(Gain) loss on sale of property and equipment (3,530,599) 32,888 34,827
Writedowns to the carrying value of real estate
inventories and other assets
(notes 1, 5 and 7) . . . . . . . . . . . 8,544,668 -- 4,896,000
Extraordinary gain on early extinguishment
of debt (note 8) . . . . . . . . . . . . -- -- (9,535,781)
Cumulative effect due to change in
accounting for long-lived assets
(note 16). . . . . . . . . . . . . . . . 2,200,000 -- --
Changes in:
Restricted cash. . . . . . . . . . . . . . 380,145 (1,586,862) (4,690,427)
Trade and other accounts receivable. . . . (9,852,816) (11,047,638) (499,618)
Real estate inventories:
Additions to real estate inventories . . (230,936,219) (195,200,305) (131,513,189)
Cost of revenues . . . . . . . . . . . . 250,906,545 188,307,988 140,055,552
Capitalized interest . . . . . . . . . . (8,336,902) (8,278,441) (7,738,179)
Capitalized real estate taxes. . . . . . (3,448,313) (4,024,528) (3,179,099)
Equity memberships . . . . . . . . . . . . 2,003,598 5,572,166 6,091,919
Amounts due from affiliates. . . . . . . . (607,141) (436,167) 268,408
Prepaid expenses and other assets. . . . . 312,157 (1,177,376) (134,749)
Accounts payable, accrued expenses and
other liabilities. . . . . . . . . . . . (2,028,810) 12,225,653 1,484,062
Deposits . . . . . . . . . . . . . . . . . (3,257,267) 5,072,358 (1,740,546)
------------ ------------ ------------
Net cash provided by operations. . 48,802,728 41,825,667 28,458,783
------------ ------------ ------------

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

1995 1994 1993
------------ ------------ ------------
Investing activities:
Mortgages receivable . . . . . . . . . . . (900,360) 1,846,738 1,196,370
Acquisitions of property and equipment . . (11,312,321) (7,116,040) (3,470,360)
Proceeds from disposals of property
and equipment. . . . . . . . . . . . . . 7,027,220 5,190 1,121,253
Joint venture distributions, net . . . . . 1,177,194 1,667,346 3,916,119
Payments from (advances to) joint ventures (60,235) 220,232 3,956,980
Proceeds from acquisition of joint
venture interest . . . . . . . . . . . . -- -- 6,614
------------ ------------ ------------

Net cash provided by (used in)
investing activities . . . . . . (4,068,502) (3,376,534) 6,726,976
------------ ------------ ------------
Financing activities:
Proceeds from notes and long-term borrowings 55,814,878 20,132,159 28,095,548
Payments of notes and long-term borrowings (100,624,039) (52,755,626) (52,008,948)
Proceeds from (payments of) bank overdrafts 3,972,987 (1,659,930) 1,659,930
Distributions to General Partner and
Associate Limited Partners . . . . . . . (302,689) (142,522) --
Distributions to Limited Partners. . . . . (5,448,464) (2,565,433) --
------------ ------------ ------------
Net cash used in financing
activities . . . . . . . . . . . (46,587,327) (36,991,352) (22,253,470)
------------ ------------ ------------
Increase (decrease) in cash
and cash equivalents . . . . . . (1,853,101) 1,457,781 12,932,289
Cash and cash equivalents,
beginning of year. . . . . . . . 22,024,390 20,566,609 7,634,320
------------ ------------ ------------
Cash and cash equivalents,
end of year. . . . . . . . . . . $ 20,171,289 22,024,390 20,566,609
============ ============ ============

Supplemental disclosure of cash
flow information:
Cash paid for mortgage and other
interest, net of amounts capitalized . . $ -- 3,838,458 7,387,204
============ ============ ============

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

1995 1994 1993
------------ ------------ ------------

Non-cash investing and financing
activities:
Distribution of land from unconsolidated
joint venture (note 7) . . . . . . . . $ 717,472 -- --
Acquisition of joint venture
interests (note 7) . . . . . . . . . . -- -- 324,169
------------ ------------ ------------
$ 717,472 -- 324,169
============ ============ ============

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

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) OPERATIONS AND BASIS OF ACCOUNTING

Operations

The assets of the Partnership consist principally of interests in land
which is in the process of being developed into master-planned residential
communities (the "Communities") and, to a lesser extent, commercial and
industrial properties; mortgage notes and accounts receivable; construc-
tion, brokerage and other support businesses; real estate assets held for
investment; certain club and recreational facilities; and a cable
television business serving one of its Communities. The Partnership's
Communities contain a diversified product mix with both resort and primary
homes designed for the middle and upper income segments of the various
markets in which the Partnership operates.

The Partnership sells individual residential lots and parcels of
partially developed and undeveloped land. The third-party builders and
developers to whom the Partnership sells homesites and land parcels are
generally smaller local builders who require project specific financing for
their developments and whose operations are more susceptible to
fluctuations in the availability and terms of financing. In addition,
within the Communities, the Partnership constructs, or causes to be
constructed, a variety of products, including single-family homes, town-
houses and condominiums to be developed for sale, as well as related
commercial and recreational facilities. The Communities are located
primarily throughout the State of Florida, with Communities also located
near Atlanta, Georgia; Highlands, North Carolina and, until March 1996, in
Orange County, California. Additional undeveloped properties owned by the
Partnership in or near its Communities are being considered for development
as commercial, office and industrial properties. The Partnership also owns
or manages certain club and recreational facilities within certain of its
Communities.

Principles of Consolidation

The consolidated financial statements include the accounts of
Arvida/JMB Partners, L.P. (the "Partnership") and its consolidated ventures
(Note 7). All material intercompany balances and transactions have been
eliminated in consolidation. The equity method of accounting has been
applied in the accompanying consolidated financial statements with respect
to those investments where the Partnership's ownership interest is 50% or
less, with the exception of the Partnership's investment in the Coto de
Caza joint venture which is accounted for in accordance with the cost
method of accounting. Reference is made to note 7 for a discussion of the
sale of the Partnership's interest in the Coto de Caza joint venture.

Recognition of Profit from Sales of Real Estate

For sales of real estate, profit is recognized in full when the
collectability of the sales price is reasonably assured and the earnings
process is virtually complete. When the sale does not meet the require-
ments for recognition of income, profit is deferred until such requirements
are met. For sales of residential units, profit is recognized at the time
of closing or if certain criteria are met, on the percentage-of-completion
method.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make
estimates and assumptions that affect the amounts reported or disclosed in

the financial statements and accompanying notes. Actual results could
differ from those estimates.

Real Estate Inventories and Cost of Real Estate Revenues

Real estate inventories are carried at cost, including capitalized
interest and property taxes, but not in excess of the net realizable value
determined by the evaluation of individual projects. Management's
evaluation of net realizable value is based on each projects' estimated
selling price in the ordinary course of business less estimated costs of
completion, holding and disposal. These estimates are reviewed
periodically and compared to each project's recorded book value.
Adjustments to book value, as they become necessary, are reported in the
period in which they become known. The total cost of land, land
development and common costs are apportioned among the projects on the
relative sales value method. Costs pertaining to the Partnership's
housing, homesite, and land and property revenues reflect the cost of the
acquired assets as well as development costs, construction costs,
capitalized interest, capitalized real estate taxes and capitalized
overheads. Certain marketing costs relating to housing projects, including
exhibits and displays, and certain planning and other pre-development
activities, excluding normal period expenses, are capitalized and charged
to housing cost of revenues as related units are closed. A warranty
reserve is provided as residential units are closed. This reserve is
reduced by the cost of subsequent work performed.

Effective January 1, 1995, the Partnership adopted Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", which was issued by the Financial Accounting
Standards Board ("FASB") in March 1995. Reference is made to Note 16 for a
discussion regarding the implementation of this Statement.

Capitalized Interest and Real Estate Taxes

Interest and real estate taxes incurred are capitalized to qualifying
assets, principally real estate inventories. Such capitalized interest and
real estate taxes are charged to cost of revenues as sales of real estate
inventories are recognized. Interest, including the amortization of loan
fees, of $8,481,343, $11,257,464 and $14,786,169 was incurred for the years
ended December 31, 1995, 1994 and 1993, respectively, of which $8,336,902,
$8,278,441 and $7,738,179 was capitalized for the years ended December 31,
1995, 1994 and 1993, respectively. Interest payments, including amounts
capitalized, of $7,937,153, $12,116,899 and $15,125,383 were made for the
years ended December 31, 1995, 1994 and 1993, respectively.

Real estate taxes of $6,700,517, $8,116,966 and $8,870,693 were
incurred for the years ended December 31, 1995, 1994 and 1993,
respectively, of which $3,448,313, $4,024,528 and $3,179,099 were
capitalized for the years ended December 31, 1995, 1994 and 1993,
respectively. Real estate tax payments of $6,690,152, $8,212,002 and
$8,733,910 were made for the years ended December 31, 1995, 1994 and 1993,
respectively. The preceding analysis of real estate taxes does not include
real estate taxes incurred or paid with respect to the Partnership's club
facilities and operating properties as these taxes are included in cost of
revenues for operating properties.

Property and Equipment and Other Assets

Property and equipment are carried at cost less accumulated
depreciation and are depreciated on the straight-line method over the
estimated useful lives of the assets, which range from two to forty years.
Provisions for value impairment are recorded with respect to such assets
whenever the estimated future undiscounted cash flows from operations and
projected sales proceeds are less than the net carrying value. Expendi-
tures for maintenance and repairs are charged to expense as incurred.
Costs of major renewals and improvements which extend useful lives are
capitalized.

Other assets are amortized on the straight-line method, which
approximates the interest method, over the useful lives of the assets which
range from one to five years. Amortization of other assets, excluding loan
fees, of approximately $221,000, $216,000 and $247,000 was incurred for the
years ended December 31, 1995, 1994 and 1993, respectively. Amortization
of loan fees, which is included in interest expense, of approximately
$353,000, $388,000 and $588,000 was incurred for the years ended December
31, 1995, 1994 and 1993, respectively.

Reference is made to note 16 for a discussion regarding the impairment
of long-lived assets.

Investments in and Advances to Joint Ventures, Net

In general, the equity method of accounting has been applied in the
accompanying consolidated financial statements with respect to those
investments for which the Partnership does not have majority control and
where the Partnership's ownership interest is 50% or less. The cost method
of accounting has been applied in the accompanying consolidated financial
statements with respect to the Coto de Caza joint venture. The cost method
of accounting is used when a limited partner has virtually no influence
over venture operations and financial policies. Under the cost method,
income is generally recorded only to the extent of distributions received.
Reference is made to Note 7 for further discussion of this Joint Venture.

Investments in the remaining joint ventures are carried at the
Partnership's proportionate share of the ventures' assets (not in excess of
their net realizable value determined by evaluation of individual
projects), net of their related liabilities and adjusted for any basis
differences. Basis differences result from the purchase of interests at
values which differ from the recorded cost of the Partnership's
proportionate share of the joint ventures' net assets.

The Partnership periodically advances funds to its joint ventures in
which it holds ownership interests when deemed necessary and economically
justifiable. Such advances are generally interest bearing and are
repayable to the Partnership from amounts earned through joint venture
operations.

Equity Memberships

The amenities within certain of the Partnership's Boca Raton and
Jacksonville, Florida Communities, as well as its Community near Highlands,
North Carolina are conveyed to the respective homeowners through the sale
of equity memberships. The amounts recorded as equity memberships in the
accompanying consolidated balance sheets represent the accumulation of
costs incurred in constructing clubhouses, golf courses, tennis courts and
various other related assets, less amounts allocated to memberships sold,
not in excess of their net realizable value determined by evaluations of
individual amenities. Equity membership revenues and related cost of
revenues are included in land and property in the accompanying Consolidated
Statements of Operations.

Reference is made to note 16 for a discussion regarding the impairment
of long-lived assets.

Partnership Records

The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments where applicable to reflect
the Partnership's accounts in accordance with GAAP and to consolidate the
accounts of the ventures as described above. Such GAAP and consolidation
adjustments are not reflected on the records of the Partnership. The net
effect of these items is summarized as follows:

<TABLE>

1995 1994
------------------------------------------------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>

Total assets . . . . . . . . . $366,439,241 547,369,361 376,371,712 489,068,975
Partners' capital accounts:
General Partner and
Associate Limited Partners 1,102,688 395,919 739,108 25,362
Limited Partners . . . . . 231,562,599 337,607,004 195,840,646 301,194,400
Net income:
General Partner and
Associate Limited Partners 666,269 673,245 588,701 148,605
Limited Partners . . . . . 41,170,417 41,861,069 46,608,831 39,794,281
Net income per Limited
Partnership Interest . . . . 101.91 103.62 115.37 98.50
============ ============ ============= =============

</TABLE>

Reference is made to Note 14 for further discussion of the allocation
of profits and losses to the General Partner, Associate Limited Partners
and Limited Partners.

The net income (loss) per Limited Partnership Interest is based upon
the average number of Limited Partnership Interests outstanding during each
period.

Reclassifications

Certain reclassifications have been made to the 1994 and 1993
financial statements to conform to the 1995 presentation.

Income Taxes

No provision for state or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership. However, in certain instances, the Partnership has been
required under applicable state law to remit directly to the state tax
authorities amounts representing withholding on applicable taxable income
allocated to partners. In such regard, the cash distributions per Limited
Partnership Interest made during the year ended December 31, 1995 includes
$.07 which represents each Limited Partner's share of a North Carolina non-
resident withholding tax which was paid directly to the state tax
authorities on behalf of the Limited Partners.

(2) INVESTMENT PROPERTIES

The Partnership's assets consist principally of interests in land
which is in the process of being developed into master-planned residential
Communities (the "Communities") and, to a lesser extent, commercial
properties; mortgage notes and accounts receivable; construction, brokerage
and other support activities; real estate assets held for investment; club
and recreational facilities; and a cable television business serving its
Weston Community.

The Partnership's Communities are in various stages of development,
with estimated remaining build-outs ranging from one to nine years. The
Weston Community, located in Broward County, Florida is the Partnership's
largest Community and is in its mid stage of development. Also in their
mid stages of development are the River Hills Country Club in Tampa,
Florida; Jacksonville Golf and Country Club in Jacksonville, Florida; the
Water's Edge Community in Atlanta, Georgia and The Cullasaja Club, near
Highlands, North Carolina and the Partnership's condominium project on
Longboat Key, Florida known as Arvida's Grand Bay. The Partnership's
remaining Communities known as Sawgrass Country Club, in Jacksonville,
Florida and Dockside in Atlanta, Georgia are in their final stages of
development with anticipated close-outs in 1996. In addition, the Broken
Sound Community, located in Boca Raton, Florida, is complete and had its
final closings in 1995. Future revenues will be impacted to the extent
that there are lower levels of inventories available for sale as these
Communities approach or undertake their final phases.

On August 27, 1991, the General Partner, on behalf of the Partnership,
initiated a lawsuit in the Circuit Court of Cook County (County Department,
Chancery Division), Illinois against The Walt Disney Company ("Disney").
The litigation arises out of the Partnership's acquisition of substantially
all of the real estate and other assets of Arvida Corporation, a subsidiary
of Disney, in September 1987. In the complaint filed on its behalf, the
Partnership alleges that under the terms of the contract with Disney for
the acquisition, the purchase price of the assets was to be reduced by the
amount of certain payments made prior to the closing (the "Closing") of the
transaction out of funds of Arvida Corporation in order to satisfy certain
obligations that were not assumed by the Partnership. The complaint also
alleges that the contract entitles the Partnership to (i) reimbursement by

Disney for amounts advanced by the Partnership to pay certain other claimed
obligations of Arvida Corporation, including certain post-Closing
adjustments, in connection with the acquisition and (ii) indemnification by
Disney for additional costs and expenses incurred by the Partnership
subsequent to the Closing in order to remedy certain environmental
conditions that existed prior to the Closing. The complaint further
alleges that the Partnership has made various demands on Disney for payment
of these amounts and that Disney has refused to make such payments. The
Partnership seeks declaratory judgments that the Partnership is entitled to
a purchase price reduction from Disney and reimbursement or indemnification
by Disney for amounts advanced or costs and expenses incurred by the
Partnership for certain obligations of Arvida Corporation, together with
interest on all such amounts and costs. During the second quarter of 1992,
the Partnership received approximately $0.8 million in settlement of
portions of this claim. There is no assurance as to what amounts, if any,
the Partnership will recover as a result of the litigation with regard to
the remaining open issues under the initially filed complaint. During July
1993, Disney filed an answer denying the substantive allegations of the
Partnership's complaint and raising various affirmative defenses. The
Partnership believes Disney's defenses are without merit and will continue
to pursue its claims. In addition, Disney has filed a three count
counterclaim in which it seeks among other things: a complete accounting
of liabilities allegedly assumed but not discharged by the Partnership to
ascertain whether certain funds, not to exceed $2.9 million, are due Disney
in accordance with the purchase agreement; an unspecified amount of damages
exceeding $500,000 allegedly representing workers compensation and warranty
payments made by Disney, which Disney alleges are obligations of the
Partnership; an accounting for funds disbursed from a claims pool in the
amount of $3,000,000 established by the parties; and attorney fees and
costs. The Partnership believes it has meritorious defenses to these
counterclaims and will defend itself vigorously against them.

(3) CASH, CASH EQUIVALENTS AND RESTRICTED CASH

At December 31, 1995 and 1994, cash and cash equivalents primarily
consisted of U.S. Government obligations with original maturities of three
months or less, money market demand accounts and repurchase agreements, the
cost of which approximated market value. Cash and cash equivalents include
treasury bills generally being held to maturity with original maturities of
three months or less of approximately $0 and $1,777,000 at December 31,
1995 and 1994, respectively. Included in restricted cash are amounts
restricted under various escrow agreements. Credit risk associated with
cash, cash equivalents and restricted cash is considered low due to the
high quality of the financial institutions in which these assets are held.

(4) MORTGAGES RECEIVABLE

Mortgages receivable generally range in maturity from one to three
years, certain of which are collateralized by liens on the property sold
and bear interest with stated rates up to 10% per annum. All mortgages
receivable with below market rates are discounted at the market rate
prevailing at the date of issue or purchase. The resulting effective
interest rates on mortgages receivable range from approximately 9% to 16% -
per annum. The outstanding principal balances of mortgages receivable at
December 31, 1995 and 1994 are summarized as follows:

1995 1994
------------ ----------

Total gross mortgages receivable . $ 2,946,521 2,078,433
Unamortized discount and
valuation allowances . . . . . . (951,938) (984,210)
----------- ----------

Mortgages receivable, net . . $ 1,994,583 1,094,223
=========== ==========

(5) REAL ESTATE INVENTORIES

Real estate inventories at December 31, 1995 and 1994 are summarized
as follows:
1995 1994
------------ -----------
Land held for future development
or sale. . . . . . . . . . . . .$ 9,815,055 16,132,750
Community development inventory:
Work in progress and
land improvements. . . . . . . 165,914,109 155,287,977
Completed inventory. . . . . . . 23,643,635 36,453,711
------------ -----------

Real estate inventories . . .$199,372,799 207,874,438
============ ===========

Reference is made to note 16 for a discussion regarding the impairment
of long-lived assets.

(6) PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1995 and 1994 are summarized as
follows:
1995 1994
------------ ----------

Land . . . . . . . . . . . . . .$ 5,971,614 6,566,045
Land improvements. . . . . . . . 27,762,792 18,258,457
Buildings. . . . . . . . . . . . 50,663,162 52,101,080
Equipment and furniture. . . . . 23,111,070 21,765,981
Construction in progress . . . . 1,847,685 4,595,610
------------ ------------
Total . . . . . . . . . . . 109,356,323 103,287,173
Accumulated depreciation. . (37,513,792) (34,172,614)
------------ ------------
Property and equipment, net$ 71,842,531 69,114,559
============ ============

Depreciation expense of approximately $5,088,000, $4,953,000 and
$5,397,000 was incurred for the years ended December 31, 1995, 1994 and
1993, respectively.

Reference is made to note 16 for a discussion regarding the impairment
of long-lived assets.

(7) INVESTMENTS IN AND ADVANCES TO JOINT VENTURES, NET

The Partnership has numerous investments in real estate joint ventures
with ownership interests ranging from approximately 33% to 50%. The
Partnership's joint venture interests accounted for under the equity method
are as follows:

LOCATION OF
NAME OF VENTURE % OF OWNERSHIP PROPERTY
- --------------- -------------- ------------

Arvida Boose
Joint Venture 50 Florida

Arvida Corporate
Park Associates 50 Florida

Arvida Pompano Associates
Joint Venture 50 Florida

H.A.E. Joint Venture 33-1/3 Florida

Mizner Court Associates
Joint Venture 50 Florida

Mizner Tower Associates
Joint Venture 50 Florida

Ocala 202 Joint Venture 50 Florida

Tampa 301 Associates
Joint Venture 50 Florida

Windmill Lake Estates
Associates
Joint Venture 50 Florida

Arvida/RBG I Joint Venture 40 Florida

Arvida/RBG II Joint Venture 40 Florida

The following is combined summary information of joint ventures
accounted for under the equity method.

<TABLE>

<CAPTION>
ASSETS
------

DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Real estate inventories. . . . . . . . . . . . . . . . . . . . . $10,221,791 11,776,133
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 2,118,207 3,324,472
----------- -----------

Total assets . . . . . . . . . . . . . . . . . . . . . $12,339,998 15,100,605
=========== ===========

LIABILITIES AND PARTNERS' CAPITAL
---------------------------------

Accounts payable, deposits and other liabilities . . . . . . . . $ 426,049 664,459
Notes and mortgages payable. . . . . . . . . . . . . . . . . . . 4,122,947 4,067,506
----------- -----------

Total liabilities. . . . . . . . . . . . . . . . . . . 4,548,996 4,731,965

Venture partners' capital. . . . . . . . . . . . . . . . . . . . 3,097,200 4,853,916
Partnership's capital. . . . . . . . . . . . . . . . . . . . . . 4,693,802 5,514,724
----------- -----------

Total liabilities and partners' capital. . . . . . . . $12,339,998 15,100,605
=========== ===========

</TABLE>

<TABLE>

COMBINED RESULTS OF OPERATIONS
------------------------------

<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------ ------------ -------------
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . $ 3,079,514 1,102,242 32,846,925
=========== ============ ============
Net income (loss). . . . . . . . . . . . . . . . $ 1,763,264 (210,087) 2,409,483
=========== ============ ============
Partnership's proportionate share of
net income (loss). . . . . . . . . . . . . . . $ 908,994 (126,207) 953,165
=========== ============ ============
Partnership's equity in earnings of
unconsolidated ventures. . . . . . . . . . . . $ 1,050,994 524,520 1,134,947
=========== ============ ============

The following is a reconciliation of the Partnership's Capital accounts within the joint ventures
to its investments in and advances to joint ventures as reflected on the accompanying Consolidated Balance
Sheets:

DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994 1993
------------ ------------ ------------

Partnership's Capital, equity method . . . . . . $ 4,693,802 5,514,724 7,263,586
Partnership's Capital, cost method . . . . . . . 5,836,000 5,836,000 5,836,000
Basis difference . . . . . . . . . . . . . . . . (752,135) 7,711,036 7,294,843
----------- ------------ ------------

Investments in joint ventures. . . . . . . . . . 9,777,667 19,061,760 20,394,429
Advances to joint ventures, net. . . . . . . . . 4,177,426 4,117,191 4,337,423
----------- ------------ ------------
Investments in and advances to
joint ventures, net . . . . . . . . . . . $13,955,093 23,178,951 24,731,852
=========== ============ ============

</TABLE>

The Partnership's share of net income (loss) is based upon its
ownership interest in numerous investments in joint ventures which are
accounted for in accordance with the equity method of accounting. Equity
in earnings (losses) of unconsolidated ventures represents the
Partnership's share of each venture's net income (loss), and may reflect a
component of purchase price adjustments included in the Partnership's
basis. Such adjustments are generally amortized to income in relation to
the cost of revenue of the underlying real estate assets. These factors
contribute to the differential in the Partnership's proportionate share of
the net income (loss) of the joint ventures and its equity in earnings
(losses) of unconsolidated ventures as well as to the basis differential
between the Partnership's investments in joint ventures and its equity in
underlying net assets, as shown above.

There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership. In addition, under
certain circumstances, either pursuant to the joint venture agreements or
due to the Partnership's obligations as a general partner, the Partnership
may be required to make additional cash advances or contributions to
certain of the ventures.

During September 1995, the Partnership recorded an approximate $8.5
million writedown to the carrying value of its investment in the Coto de
Caza Joint Venture. The Partnership had been evaluating its plans for its
interest in this joint venture and was considering a shorter holding period
than originally anticipated. Therefore, the Partnership recorded this
writedown to reflect the fair value of this investment under market
conditions at that time. This writedown is the primary cause for the
decrease in Investments in and Advances to Joint Ventures on the
accompanying consolidated balance sheets at December 31, 1995 as compared
to December 31, 1994. During March 1996, the Partnership closed on the
sale of its 20% joint venture interest in Coto de Caza, including the
related promissory note for advances previously made to the joint venture,
to unaffiliated third parties for a cash sales price of $12.0 million. The
Partnership used $2.0 of the sale proceeds to pay down its term loan. The
General Partner believes that this sale was in the best interest of the
Partnership given current market conditions in Orange County, California.
As a result of this transaction, the Partnership has no future obligations
with respect to Coto de Caza. This transaction will result in a gain, to
be recognized in 1996, for financial reporting and Federal income tax
purposes.

During April 1995, the Partnership received a distribution of
approximately 82 acres of undeveloped land near Sarasota, Florida from the
Arvida Corporate Park Associates Joint Venture. This transaction is
reflected as a non-cash investing and financing activity for the year ended
December 31, 1995 on the accompanying consolidated statements of cash
flows. The Partnership subsequently sold this land parcel to an
unaffiliated third party during April 1995.

During 1992, the Partnership sold 60% of its interest in two land
parcels located in its Weston Community to unaffiliated third-party
purchasers. Subsequent to these transactions, the Partnership and the
purchasers each contributed their interests in these land parcels to joint
ventures established for the purpose of developing housing products within
Weston. The Partnership entered into development management agreements
with these joint ventures. Pursuant to the terms of these agreements, the
Partnership agreed to fund all development and construction costs, as well
as certain overheads, incurred on behalf of the joint venture projects.
Amounts funded are reimbursed by the joint ventures from sales revenues
generated by each joint venture. Amounts advanced by the Partnership to
each respective joint venture earned interest at 8.5% for the first year
and prime plus 2% per annum thereafter. During 1993, one of the joint

ventures obtained third-party, project specific financing to fund its
development and construction activities. In accordance with the provisions
of this financing agreement, the Partnership had been reimbursed the
majority of amounts previously advanced to the joint venture as of December
31, 1993 and the remaining amounts were reimbursed during 1994. Due to
significant sales activity, amounts previously advanced to the
Partnership's other joint venture were reimbursed in full during 1993. All
of the homes built by these joint ventures have been completed and closed
as of December 31, 1994.

During the first quarter of 1993, the Partnership reached a settlement
agreement with AOK Group, its joint venture partner in a property located
in Ocala, Florida, whereby in exchange for its joint venture partner's 50%
interest in the venture, the Partnership agreed to dismiss a lawsuit
previously filed against its joint venture partner for failure to perform
in accordance with the terms of a $1,600,000 note which had been issued to
the Partnership by the joint venture. This agreement was pursued as a more
favorable remedy to other alternatives available to the Partnership. As a
result of this transaction, the Partnership changed from the equity method
of accounting to the consolidated method of accounting for the joint
venture effective March 1, 1993. This transaction resulted in an increase
in the Partnership's total assets of approximately $324,000. This
transaction is reflected as a non-cash investing and financing activity for
the year ended December 31, 1993 on the accompanying consolidated
statements of cash flows.

The Partnership incurs certain general and administrative expenses
which are paid by the Partnership on behalf of the joint ventures in which
it holds interests. The Partnership receives reimbursements from the joint
ventures for such costs. For the years ended December 31, 1995 and 1994,
the Partnership was entitled to receive approximately $251,900 and
$378,000, respectively, from certain of the joint ventures in which it
holds interests. At December 31, 1995, approximately $88,900 was owed to
the Partnership, of which approximately $78,600 was received as of March
15, 1996.

(8) NOTES AND MORTGAGES PAYABLE

Notes and mortgages payable at December 31, 1995 and 1994 are
summarized as follows:

1995 1994
------------ ------------
Term loan credit facility of
$85,252,250 bearing interest
at approximately 8.4% and
8.7% per annum at December 31,
1995 and 1994, respectively (A) . $32,531,048 73,452,970

Income property term loan of
$18,233,326 bearing interest
at approximately 8.5% and 8.6%
per annum at December 31, 1995
and 1994, respectively (A). . . . 12,766,746 17,933,326

Revolving line of credit of
$20,000,000 at December 31,
1995 and 1994, respectively (A) . -- --

Other notes and mortgages
payable (B). . . . . . . . . . . 25,040,570 23,761,229
----------- ------------

Total. . . . . . . . . . $70,338,364 115,147,525
=========== ============

(A) At December 31, 1995, the Partnership's credit facility consists
of a term loan in the original amount of $85,252,520, a revolving line of
credit facility up to $20 million, an income property term loan in the
original amount of $18,233,326 and a $15 million letter of credit facility.

The term loan, the revolving line of credit and the letter of credit
facility are secured by recorded mortgages on all otherwise unencumbered
real property assets of the Partnership, as well an assignment of all
mortgages receivable, equity memberships, certain joint venture interests
or joint venture proceeds and cash balances (with the exception of deposits
held in escrow). The income property term loan is secured by the recorded
first mortgage on a mixed-use center in Boca Raton, Florida. Another
office building known as Mizner Place, also located in Boca Raton, which
served as additional collateral for the income property loan, was sold in
May 1995, and the net sale proceeds of approximately $ 4 million were
applied to reduce the outstanding principal amount of the loan. All of the
notes under the facility are cross-collateralized and cross-defaulted. At
December 31, 1995, the term loan, the revolving line of credit and the
income property term loan bear interest based, at the Partnership's option,
on one of the lenders' prime rate plus 1.25% per annum or the relevant
London Inter-Bank Offering Rate (LIBOR) plus 2.50% per annum. For the year
ended December 31, 1995, the effective interest rate for the combined term
loan, income property term loan and revolving line of credit facility was
approximately 9.6% per annum.

Under the term loan agreement, the Partnership made scheduled
principal payments of $10 million in March 1994, February 1995 and February
1996 and a $5 million principal payment in July 1995. In addition, the
term loan agreement provides for additional principal repayments based upon
a specified percentage of available cash flow and upon the sale of certain
assets. During the year ended December 31, 1995, the Partnership made such
additional term loan payments totalling approximately $25.9 million. A
principal repayment of $5 million on the term loan is due in July 1996.
The remaining balance outstanding is due in July 1997. Under the income
property term loan, principal payments of $0.1 million are required to be
paid monthly until maturity. The income property term loan and the
revolving line of credit were scheduled to mature in March 1996 and
December 1995, respectively. The Partnership has been negotiating with its
lenders for a renewal of its revolving line of credit and income property
term loan. During March 1996, the Partnership's lenders reached an
agreement in principle with each other whereby one of the lenders would
purchase the other's participating interest in the Partnership's credit
facilities. In addition, during March 1996, the successor lender agreed to
renew the Partnership's revolving line of credit, income property term loan
and letter of credit facility through July 1997. The Partnership's letter
of credit facility was scheduled to mature in July 1995, but has been
extended for one year and will mature in July 1996. At December 31, 1995,
all of the term and income property term loan proceeds had been borrowed
with remaining outstanding balances of $32,531,048 and $12,766,746,
respectively. The balances outstanding on the revolving line of credit and
the letter of credit facilities at December 31, 1995 are $0 and $9,236,746,
respectively.

The credit agreement contains significant restrictions with respect to
the payment of distributions to partners, the maintenance of certain loan-
to-value ratios, the use of proceeds from the sale of the Partnership's
assets and advances to the Partnership's joint ventures.

Loan fees incurred in connection with the restructuring of the
Partnership's credit facility have been capitalized and are being amortized
over the lives of the loans included in the credit facility using the
straight-line method, which approximates the interest method.

(B)Other notes and mortgages payable are collateralized by certain
real estate inventories, property and equipment and certain investments
with a net book value of approximately $31.0 million at December 31, 1995.
These notes and mortgage notes have a weighted average annual effective
interest rate of approximately 7.0% and 8.6% at December 31, 1995 and 1994,
respectively, and mature in varying amounts through 2017. One such note,
which is collateralized by a retail shopping center within the
Partnership's Weston Community, matures during July 1996. The Partnership
is currently in the process of negotiating for a refinancing of such note.
However, there is no assurance that such refinancing will be obtained.

The Partnership has a $24.0 million revolving construction line of
credit for the buildings and certain amenities within the Partnership's
condominium project on Longboat Key, Florida known as Arvida's Grand Bay.
This line of credit currently bears interest at the lender's prime rate
(8.50% at December 31, 1995) plus 1/2% per annum and matures in January
1997. At December 31, 1995, approximately $11.7 million was outstanding
under this line of credit. The Partnership anticipates that this amount
will be repaid from the proceeds from the sale of condominium units.

The Partnership owned an 80% general partnership interest in The Oaks
Community located near Sarasota, Florida. The Partnership's joint venture
partner was in default under the terms of the joint venture agreement due
to its failure to make capital contributions to fund ongoing operations.
In August 1993, the Partnership's joint venture partner assigned its 20%
interest in The Oaks to the Partnership thereby vesting 100% control of the
joint venture assets in the Partnership.

The assets of The Oaks joint venture were encumbered by two mortgage
loans. A $12,492,200 loan was scheduled to mature in January 1997 and a
$3,260,000 loan was scheduled to mature in December 1993. The joint
venture had guaranteed $2.7 million of the loans, and the guaranteed amount
was with recourse to the Partnership. The joint venture was in default
under the terms of these loan agreements as a result of its failure to make
principal payments of approximately $1.3 million in January 1993 to release
the minimum number of homesite lots as required under these agreements and
its failure to pay interest commencing with a payment due in April 1993.
The Partnership was able to reach an agreement with the lenders to pay off
the existing mortgage loans at a substantial discount from face value. On
September 3, 1993, the Partnership paid the joint venture's lenders $6.7
million in full satisfaction of the outstanding mortgage loans, accrued
interest and guaranty. This transaction was the cause of the approximate
$9.5 million extraordinary gain on the early extinguishment of debt as of
December 31, 1993.

Given the finite amount of available capital to the Partnership, the
Partnership determined that it was in its best long-term interest to
utilize that capital for the development of its other properties and sold
its remaining land holdings in The Oaks Community and its interest in The
Oaks Club to an unaffiliated third party purchaser for $5.8 million. This
transaction occurred simultaneously with the repayment of the loans and
satisfaction of the mortgages described above. In light of the
Partnership's guarantee under the loan agreement of $2.7 million of the
outstanding mortgage loans, as well as other factors, the above
transactions were pursued as the least costly alternative available to the
Partnership. These transactions resulted in a minimal net gain for Federal
income tax purposes in 1993.

Following is a schedule of the maturities of notes and mortgages
payable at December 31, 1995.

1996 . . . . . . . . . . . . . . $37,956,571
1997 . . . . . . . . . . . . . . 29,097,793
1998 . . . . . . . . . . . . . . --
1999 . . . . . . . . . . . . . . --
2000 . . . . . . . . . . . . . . --
Thereafter . . . . . . . . . . . 3,284,000
-----------
Total notes and
mortgages payable. . . . . $70,338,364
===========

(9) EQUITY MEMBERSHIPS

Equity memberships represent the accumulation of costs incurred in
constructing club houses, golf courses, tennis courts and various other
related assets, less amounts allocated to memberships sold, not in excess
of their net realizable values determined by evaluation of individual
amenities. These amenities are conveyed to homeowners through the sale of
equity memberships.

Reference is made to note 16 for a discussion regarding the impairment
of long-lived assets.

(10) TRANSACTIONS WITH AFFILIATES

Fees, commissions and other expenses required to be paid by the
Partnership to affiliates of the General Partner as of December 31, 1995
and for the years ended December 31, 1995, 1994 and 1993 are as follows:

<TABLE>

<CAPTION>
UNPAID AT
DECEMBER 31,
1995 1994 1993 1995
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
Property management fees
(note 15). . . . . . . . . . . . $ 62,913 147,446 153,088 --
Insurance commissions. . . . . . . 272,316 298,697 287,639 --
Reimbursement (at cost)
for accounting services . . . . . 73,326 63,633 61,881 --
Reimbursement (at cost)
for portfolio management
services. . . . . . . . . . . . . 83,884 -- -- --
Reimbursement (at cost)
for legal services. . . . . . . . 41,470 64,949 31,821 --
Reimbursement (at cost)
for other administrative
and out-of-pocket expenses. . . . 78,960 15,345 20,534 55,936
-------- -------- -------- -------

$612,869 590,070 554,963 55,936
======== ======== ======== =======

</TABLE>

The Partnership receives reimbursements from or reimburses other
affiliates of the General Partner engaged in real estate activities for
certain general and administrative costs including, and without limitation,
salary and salary-related costs relating to work performed by employees of
the Partnership and certain out-of-pocket expenditures incurred on behalf
of such affiliates. For the year ended December 31, 1995, the total of
such costs incurred by the Partnership on behalf of these affiliates
totalled approximately $509,000. Approximately $272,200 was outstanding at
December 31, 1995, of which approximately $29,500 was received as of March
15, 1996. For the year ended December 31, 1994 and 1993, the Partnership
was entitled to receive reimbursements of approximately $505,300 and
$171,000, respectively.

In accordance with the Partnership Agreement, the General Partner and
Associate Limited Partners have deferred a portion of their distributions
of net cash flow from the Partnership totaling approximately $1,208,700 as
of December 31, 1995. This amount does not bear interest and is expected
to be paid in future periods, subject to certain restrictions contained in
the Partnership's credit facility agreement.

Arvida Company ("Arvida"), pursuant to an agreement with the Partner-
ship, provides development, construction, management and other personnel
and services to the Partnership for all of its projects and operations.
Pursuant to such agreement, the Partnership reimburses Arvida for all of
its out-of-pocket expenditures (including salary and salary-related costs),
subject to certain limitations. The total of such costs for the years
ended December 31, 1995, 1994 and 1993 was approximately $6,233,600,
$6,802,300 and $6,686,100, respectively, of which approximately $50,900 was
unpaid as of December 31, 1995 and all of which was paid as of March 15,
1996.

The Partnership and Arvida/JMB Partners, L.P.-II (a publicly-held
limited partnership affiliated with the General Partner) each employ
project-related and administrative personnel who perform services on behalf
of both partnerships. In addition, certain out-of-pocket expenditures
related to such services and other general and administrative costs are
incurred and charged to each partnership as appropriate. The Partnership
receives reimbursements from or reimburses Arvida/JMB Partners, L.P.-II for
such costs (including salary and salary-related costs). For the year ended
December 31, 1995, the Partnership was entitled to receive approximately
$1,021,800 from Arvida/JMB Partners, L.P.-II. At December 31, 1995,
approximately $307,200 was outstanding, all of which was received as of
March 15, 1996. In addition, for the year ended December 31, 1995, the
Partnership was obligated to reimburse Arvida/JMB Partners, L.P.-II
approximately $245,100. At December 31, 1995, approximately $83,100 was
unpaid, all of which was paid as of March 15, 1996. The net reimbursements
paid to the Partnership for the years ended December 31, 1994 and 1993 were
approximately $801,200 and $1,263,100, respectively.

The Partnership pays for certain general and administrative costs on
behalf of its clubs, homeowners associations and maintenance associations.
The Partnership receives reimbursements from the affiliates for such costs.

For the year ended December 31, 1995, the Partnership was entitled to
receive approximately $350,700 from its affiliates. At December 31, 1995,
approximately $167,000 was owed to the Partnership, of which approximately
$115,200 was received as of March 15, 1996. The reimbursements paid to the
Partnership for the years ended December 31, 1994 and 1993 were
approximately $594,200 and $366,400, respectively. In addition, the
Partnership owes its equity clubs for certain costs incurred by the clubs
which are obligations of the Partnership. For the year ended December 31,
1995, the Partnership was obligated to reimburse its equity clubs
approximately $56,300. At December 31, 1995, approximately $51,100 was
unpaid, of which approximately $3,200 was paid as of March 15, 1996.

The Partnership also funds operating deficits of its equity clubs, as
deemed necessary. Such amounts are expensed by the Partnership, but may be
reimbursed by these clubs from future cash flow. At December 31, 1995, the
Partnership was owed approximately $539,100 for such reimbursements, none
of which was paid as of March 15, 1996.

The Partnership periodically incurs salary and salary-related costs on
behalf of an affiliate of the General Partner of the Partnership. The
Partnership was entitled to receive approximately $31,400 for such costs
for the year ended December 31, 1995, all of which was outstanding as of
December 31, 1995 and March 15, 1996.

Effective October 1, 1995, the General Partner of the Partnership
engaged independent third parties to perform certain administrative
services for the Partnership which were previously performed by, and
partially reimbursed to, affiliates of the General Partners. Use of such
third parties is not expected to have a material effect on the operations
of the Partnership.

(11) COMMITMENTS AND CONTINGENCIES

As security for performance of certain development obligations, the
Partnership is contingently liable under standby letters of credit and
bonds for approximately $9,236,700 and $4,284,000, respectively, at
December 31, 1995. As of December 31, 1994, the Partnership was
contingently liable under standby letters of credit and bonds for
approximately $10,169,800 and $7,589,000, respectively. In addition,
certain joint ventures in which the Partnership holds an interest are also
contingently liable under bonds for approximately $1,020,000 at December
31, 1995 and 1994.

The Partnership leases certain building space for its management
offices, sales offices and other facilities, as well as certain equipment.
The building and equipment leases expire over the next two to nine years.
Minimum future rental commitments under non-cancelable operating leases
having a remaining term in excess of one year as of December 31, 1995 are
as follows:

1996. . . . . . . . . . . $ 1,474,506
1997. . . . . . . . . . . 1,443,224
1998. . . . . . . . . . . 1,151,134
1999. . . . . . . . . . . 521,000
2000. . . . . . . . . . . 389,197
Thereafter. . . . . . . . 254,005
----------
$5,233,066
==========

Rental expense of $2,095,932, $2,001,171 and $2,063,568 was incurred
for the years ended December 31, 1995, 1994 and 1993, respectively.

The homeowner lawsuits alleged, among other things, that the damage
suffered by the plaintiffs' homes and/or condominiums within Country Walk
was beyond what could have been reasonably expected from the hurricane
and/or was a result of the defendants' alleged defective design,
construction, inspection and/or other improper conduct in connection with
the development, construction and sales of such homes and condominiums,
including alleged building code violations. The various plaintiffs sought
varying and, in some cases, unspecified amounts of compensatory damages and
other relief. In certain of the lawsuits injunctive relief and/or punitive
damages were sought.

Several of these lawsuits allege that the Partnership was liable,
among other reasons, as a result of its own alleged acts of misconduct or
as a result of the Partnership's assumption of Arvida Corporation's
liabilities in connection with the Partnership's purchase of Arvida
Corporation's assets from Disney in 1987, which included certain assets
related to the Country Walk development. Pursuant to the agreement to
purchase such assets, the Partnership obtained indemnification by Disney
for certain liabilities relating to facts or circumstances arising or
occurring prior to the closing of the Partnership's purchase of the assets.

Over 80% of the Arvida-built homes in Country Walk were built prior to the
Partnership's ownership of the Community. Where appropriate, the
Partnership has tendered or will tender each of the above-described
lawsuits to Disney for defense and indemnification in whole or in part
pursuant to the Partnership's indemnification rights. Where appropriate,
the Partnership has also tendered these lawsuits to its various insurance
carriers for defense and coverage. The Partnership is unable to determine
at this time to what extent damages in these lawsuits, if any, against the
Partnership, as well as the Partnership's cost of investigating and
defending the lawsuits, will ultimately be recoverable by the Partnership
either pursuant to its rights of indemnification by Disney or under
contracts of insurance.

The Partnership entered into a court-approved settlement which
resolved substantial portions of the pending homeowners' lawsuits that had
been filed. Homeowners of approximately 85% of the units in Country Walk
accepted the settlement which cost approximately $2.5 million. The
settlement was funded by one of the Partnership's insurers, subject to a
reservation of rights.

In addition, the Partnership was a party to a number of claims brought
by condominium and patio homeowners, all of whom declined to accept the
terms of the class action settlement. These actions have been settled for
approximately $520,000. One of the Partnership's insurers has funded these
settlements.

The Partnership has also resolved a claim brought by the Villages of
Country Walk Homeowners' Association, Inc., and related entities, for
damages to the common elements of the condominium units at Country Walk. A
settlement in the amount of $2,740,000 was paid by the Partnership's
insurance carriers. A reservation of rights was issued by one of the
Partnership's insurance carriers in connection with payment of
approximately $740,000 of the settlement.

The Partnership was involved in subrogation lawsuits or threatened
subrogation actions with Prudential Property and Casualty Company,
Travelers Insurance Company ("Travelers"), Allstate Insurance Company
("Allstate") and State Farm Insurance Company. These insurance companies
sought to recover damages, costs and interest in connection with amounts
allegedly paid to their insureds living in Country Walk at the time of
Hurricane Andrew. The Partnership settled these claims and all settlement
proceeds were funded by one of the Partnership's insurance carriers. The
aggregate amount of these settlements is approximately $4.5 million. The
Allstate and Travelers settlements in the amount of approximately $1.1
million were funded subject to a reservation of rights by one of the
Partnership's insurance carriers.

As noted above, one of the Partnership's insurance carriers has been
funding settlements of various litigation related to Hurricane Andrew. In
some, but not all, instances, the insurance carrier has provided the
Partnership with written reservation of rights letters. The aggregate
amount of the settlements funded to date by this carrier is approximately
$8.0 million. The insurance carrier that funded these settlements pursuant
to certain reservations of rights has stated its position that it has done
so pursuant to various non-waiver agreements. The carrier's position was
that these non-waiver agreements permitted the carrier to fund settlements
without barring the carrier from raising insurance coverage issues or
waiving such coverage issues. On May 23, 1995, the insurance carrier
rescinded the various non-waiver agreements currently in effect regarding

the remainder of the Hurricane Andrew litigation, allegedly without waiving
any future coverage defenses, conditions, limitations, or rights. For this
and other reasons, the extent to which the insurance carrier may recover
any of these proceeds from the Partnership is uncertain. Therefore, the
accompanying consolidated financial statements do not reflect any accruals
related to this matter.

In addition, the Partnership has been advised by Merrill Lynch that
various investors have sought to compel Merrill Lynch to arbitrate claims
brought by certain investors of the Partnership representing approximately
5% of the total of approximately 404,000 Interests outstanding. Merrill
Lynch has asked the Partnership and its General Partner to confirm an
obligation of the Partnership and its General Partner to indemnify Merrill
Lynch in these claims against all loss, liability, claim, damage and
expense, including without limitation attorneys' fees and expenses, under
the terms of a certain Agency Agreement dated September 15, 1987 ("Agency
Agreement") with the Partnership relating to the sale of Interests through
Merrill Lynch on behalf of the Partnership. These claimants have sought
and are seeking to arbitrate claims involving unspecified damages against
Merrill Lynch based on Merrill Lynch's alleged violation of applicable
state and/or federal securities laws and alleged violations of the rules of
the National Association of Securities Dealers, Inc., together with pendent
state law claims. The Partnership believes that Merrill Lynch has resolved
some of these claims through litigation and otherwise, and that Merrill
Lynch is defending other claims. The Agency Agreement generally provides
that the Partnership and its General Partner shall indemnify Merrill Lynch
against losses occasioned by any actual or alleged misstatements or
omissions of material facts in the Partnership's offering materials used in
connection with the sale of Interests and suffered by Merrill Lynch in
performing its duties under the Agency Agreement, under certain specified

conditions. The Agency Agreement also generally provides, under certain
conditions, that Merrill Lynch shall indemnify the Partnership and its
General Partner for losses suffered by the Partnership and occasioned by
certain specified conduct by Merrill Lynch in the course of Merrill Lynch's
solicitation of subscriptions for, and sale of, Interests. The Partnership
is unable to determine at this time the ultimate investment of investors
who have filed arbitration claims as to which Merrill Lynch might seek
indemnification in the future. At this time, and based upon the
information presently available about the arbitration statements of claims
filed by some of these investors, the Partnership and its General Partner
believe that they have meritorious defenses to demands for indemnification
made by Merrill Lynch and intend to vigorously pursue such defenses.
Although there can be no assurance regarding the outcome of the claims for
indemnification, at this time, based on information presently available
about such arbitration statements of claims, the Partnership and its
General Partner do not believe that the demands for indemnification by
Merrill Lynch will have a material adverse effect on the financial
condition of the Partnership.

On or about October 16, 1995, a lawsuit was filed against the
Partnership and others in the Circuit Court of the 15th Judicial Circuit,
in and for Palm Beach County, Florida, entitled Council of Villages, Inc.
et al v. Arvida/JMB Partners, Arvida/JMB Managers, Inc., Arvida/JMB
Partners, Ltd., Broken Sound Club, Inc., and Country Club Maintenance
Association, Inc. The multi-count complaint, as amended, is brought as a
class action, and individually, on behalf of various residents of the
Broken Sound Community, and alleges that defendants engaged in various acts
of misconduct in, among other things, the establishment, operation,
management and marketing of the Broken Sound golf course and recreational
facilities, as well as the alleged improper failure to turn over such
facilities to the Broken Sound homeowners on a timely basis. Plaintiffs
seek, through various theories, including but not limited to breach of
ordinance, breach of fiduciary duty, fraud, unjust enrichment and civil
theft, damages in excess of $45 million, the appointment of a receiver for
the Broken Sound Club, other unspecified compensatory damages, the right to
seek punitive damages, treble damages, prejudgment interest, attorneys'
fees and costs. The Partnership believes that the lawsuit is without merit
and intends to vigorously defend itself in this matter.

The Partnership is also a defendant in several actions brought against
it arising in the normal course of business. It is the belief of the
General Partner, based on knowledge of facts and advice of counsel, that
the claims made against the Partnership in such actions will not result in
any material adverse effect on the Partnership's consolidated financial
position or results of operations.

The Partnership owns a 50% joint venture interest in 31 commercial/
industrial acres in Pompano Beach, Florida, which is encumbered by a
mortgage loan in the principal amount of approximately $4 million at
December 31, 1995. As a result of the Partnership's previous determination
that the development of the land was no longer economically profitable,
during April 1992, the Partnership and its joint venture partner each
tendered payment in the amount of approximately $3.1 million to the lender
for their respective shares of the guarantee payment required under the
loan agreement and certain other holding costs, the majority of which
reduced the outstanding mortgage loan to its current balance. The venture
also intended at that time to convey title to the property to the lender;
however, such conveyance is pending until resolution of certain general
development obligations of the venture as well as certain environmental
issues. The Partnership had been negotiating with the lender regarding the
scope of the development work required to be done. Negotiations with the
lender were unsuccessful, and the lender has filed a lawsuit with the
Broward County Circuit Court in which the lender asserts, among other
things, that the mortgage loan is with recourse to the joint venture
partners as a result of the partners' failure to perform in accordance with

the terms of the loan agreement. The lender is demanding payment of the
outstanding loan balance plus interest thereon. The Partnership believes
this claim is without merit and is vigorously defending the lawsuit. With
respect to the environmental issues, the previous owner remains obligated
to undertake the clean up pursuant to, among other things, a surviving
obligation under the purchase and sale agreement. The clean-up began in
July 1994, and the first phase of the remedial action plan was completed in
October 1994. Further action plans are now underway. If the previous
owner is unable to fulfill all its obligations as they relate to this
environmental issue, the venture and ultimately the Partnership may be
obligated for such costs. Should this occur, the Partnership does not
anticipate the cost of this clean-up to be material to its operations.

its development plans for the remaining portions of Increment I and II of
the Weston Community, as well as its development plans for Increment III.
Such revisions would have a material adverse impact on the timing and
amount of net income and net cash flow ultimately realized by the
Partnership from the development of the Weston Community.

(12) TAX INCREMENT FINANCING ENTITIES

In connection with the development of the Partnership's Weston
Community, bond financing is utilized to construct certain on-site and off-
site infrastructure improvements, including major roadways, lakes, other
waterways and pump stations, which the Partnership would otherwise be
obligated to finance and construct as a condition to obtain certain
approvals for the project. This bond financing is obtained by The Indian
Trace Community Development District ("District"), a local government
district operating in accordance with Chapter 190 of the Florida Statutes.
Under this program, the Partnership is not obligated directly to repay the
bonds. Rather, the bonds are expected to be fully serviced by special
assessment taxes levied on the property, which effectively collateralizes
the obligation to pay such assessments until land parcels are sold. At
such point, the liability for the assessments related to parcels sold will
be borne by the purchasers through a tax assessment on their property.
These special assessment taxes are designed to cover debt service on the
bonds, including principal and interest payments, as well as the operating
and maintenance budgets of the District. The use of this type of bond
financing is a common practice for major land developers in South Florida.

The District issued $64,660,000 of variable rate bonds in November
1989 and $31,305,000 of variable rate bonds in July 1991. These bonds
mature in various years commencing in May 1991 through May 2011. In order
to reduce the exposure of variable rate debt, the District pursued a new
bond issuance. During March 1995, the District issued approximately $99
million of bonds at fixed rates of interest ranging from 4.0% to 8.25% per
annum. These bonds mature in various years commencing May 1999 through May
2011. The proceeds from this offering were used to refund the outstanding
1989 and 1991 bonds described above, as well as to fund the issuance costs
incurred in connection with this offering and deposits to certain reserve
accounts for future bond debt service requirements. At December 31, 1995,
the amount of bonds issued and outstanding totalled $91,385,000. For the
twelve months ended December 31, 1995, the Partnership paid special
assessments related to these bonds of approximately $4.2 million.

In addition, during December 1995, the District issued an additional
$13,340,000 of fixed rate bonds. The bonds bear interest at 6.875% and
mature in April 2010; however, mandatory principal redemptions commence in
1998 and continue through maturity.

(13) STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107
("SFAS 107") - DISCLOSURES ABOUT FAIR VALUE OF
FINANCIAL INSTRUMENTS

SFAS 107 requires the disclosure of the SFAS 107 values of all
financial assets and liabilities for which it is practicable to estimate.
Value is defined in SFAS 107 as the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than in a
forced or liquidation sale. The Partnership believes the carrying amount
of its financial instruments approximates SFAS 107 value at December 31,
1995 and 1994.

(14) PARTNERSHIP AGREEMENT

Pursuant to the terms of the Partnership Agreement (and subject to
Section 4.2F which allocates Profits, as defined, to the General Partner
and Associate Limited Partners), profits or losses of the Partnership will
be allocated as follows: (i) profits will be allocated such that the
General Partner and the Associate Limited Partners will be allocated
profits equal to the amount of cash flow distributed to them for such
fiscal period with the remainder allocated to the Limited Partners, except
that in all events, the General Partner shall be allocated at least 1% of
profits and (ii) losses will be allocated 1% to the General Partner, 1% to
the Associate Limited Partners and 98% to the Limited Partners.

In the event profits to be allocated in any given year do not equal or
exceed cash distributed to the General Partner and the Associate Limited
Partners for such year, the allocation of profits will be as follows: The
General Partner and the Associate Limited Partners will be allocated
profits equal to the amount of cash flow distributed to them for such year.

The Limited Partners will be allocated losses such that the sum of amounts
allocated to the General Partner, Associate Limited Partners, and Limited
Partners equals the profit for the given year.

For the years ended December 31, 1995 and 1994, the Partnership had
net income for financial reporting and Federal income tax purposes. In
accordance with Section 4.2A of the Partnership Agreement, the amount of
net income allocated, collectively, to the General and Associated Limited
Partners for financial reporting and tax purposes for the year ended
December 31, 1995 was approximately $666,000 and $673,000, respectively.
This allocation was based on 1995 cash distributions made to the Associate
Limited Partners and an allocation of 1% of profits to the General Partner
in accordance with Section 4.2A of the Partnership Agreement. In
accordance with Section 4.2A of the Partnership Agreement, the amount of
net income allocated, collectively, to the General and Associate Limited
Partners for financial reporting and tax purposes for the year ended
December 31, 1994 was approximately $589,000 and $149,000, respectively.

In general, and subject to certain limitations, the distribution of
Cash Flow (as defined) after the initial admission date is allocated 90% to
the Holders of Interests and 10% to the General Partner and the Associate
Limited Partners (collectively) until the Holders of Interests have
received cumulative distributions of Cash Flow equal to a 10% per annum
return (non-compounded) on their Adjusted Capital Investments (as defined)
plus the return of their Capital Investments; provided, however, that
4.7369% of the 10% amount otherwise distributable to the General Partner
and Associate Limited Partners (collectively) will be deferred, and such
amount will be paid to the Holders of Interests, until the Holders of
Interests receive Cash Flow distributions equal to their Capital
Investments. Any deferred amounts owed to the General Partner and
Associate Limited Partners (collectively) will be distributable to them out
of Cash Flow to the extent of one-half of Cash Flow otherwise distributable
to the Holders of Interests at such time as the Holders of Interest have
received total distributions of Cash Flow equal to their Capital
Investments. Thereafter, all distributions of Cash Flow will be made 85%

to the Holders of Interests and 15% to the General Partner and the
Associate Limited Partners (collectively); provided, however, that the
General Partner and the Associate Limited Partners (collectively) shall be
entitled to receive an additional share of Cash Flow otherwise
distributable to the Holders of Interests equal to the lesser of an amount
equal to 2% of the cumulative gross selling prices of any interests in real
property of the Partnership (subject to certain limitations) or 13% of the
aggregate distributions of Cash Flow to all parties pursuant to this
sentence.

(15) MANAGEMENT AGREEMENTS - OTHER THAN VENTURES

Certain of the Partnership's properties are managed by affiliates of
the General Partner or their assignees for fees computed as a percentage of
certain receipts of the properties. In December 1994, one of the
affiliated property managers sold substantially all of its assets and
assigned its interest in its management contracts to an unaffiliated third
party. In addition, certain of the management personnel of the property
manager became management personnel of the purchaser and its affiliates.
The successor to the affiliated property manager's assets is acting as the
property manager of the office and retail components of the Partnership's
mixed-use center known as Arvida Parkway Center after the sale and
assignment of the management contracts on the same terms that existed prior
to the sale. The successor to the affiliated property manager's assets
also acted as the property manager of the Mizner Place office building
until it was sold by the Partnership in May 1995.

(16) IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In March 1995, the FASB issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". This Statement requires impairment losses to be recorded on long-
lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying amount. Statement 121 also addresses
the accounting for long-lived assets that are expected to be disposed of,
and requires that assets to be disposed of be reported in the balance sheet
at the lower of their carrying amount or fair value less cost to sell. The
Partnership adopted Statement 121 effective January 1, 1995 and, as a
result, recorded an impairment loss of $2.2 million to the carrying value
of its Cullasaja Community located near Highlands, North Carolina. This
loss was recorded based upon an analysis of estimated discounted cash flows
used to determine the Community's fair value. This analysis estimates sell
out of the remaining houses, homesites and equity memberships in this
Community by the year 2000. As a result of this adjustment, Cullasaja's
carrying value is recorded at approximately $7.1 million at December 31,
1995.

(17) SUBSEQUENT EVENTS

Reference is made to Note 7 for a discussion of the sale of the
Partnership's interest in the Coto de Caza Joint Venture during March 1996.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE

There were no changes or disagreements with auditors during 1995 and
1994.

PART III

ITEM 10. DIRECTOR AND EXECUTIVE OFFICERS OF THE REGISTRANT

The General Partner of the Partnership is Arvida/JMB Managers, Inc., a
Delaware corporation, of which all of the outstanding shares of stock are
owned by Northbrook Corporation, a Delaware corporation, substantially all
of the outstanding shares of which are owned by JMB Realty Corporation, a
Delaware corporation ("JMB") and certain of its officers, directors and
members of their families. Substantially all of the shares of JMB are
owned by its officers, directors and members of their families. Arvida/JMB
Managers, Inc. was substituted as general partner of the Partnership as a
result of a merger on March 30, 1990 of an affiliated corporation that was
the then general partner of the Partnership into Arvida/JMB Managers, Inc.,
which, as the surviving corporation of such merger, continues as General
Partner. All references herein to "General Partner" include Arvida/JMB
Managers, Inc. and its predecessor, as appropriate. The General Partner
has responsibility for all aspects of the Partnership's operations.
Arvida/JMB Associates, an Illinois general partnership, of which certain
officers and affiliates of JMB are partners and Arvida/JMB Limited
Partnership, an Illinois limited partnership, of which Arvida/JMB
Associates is the general partner, are the Associate Limited Partners of
the Partnership. Various relationships of the Partnership to the General
Partner and its affiliates are described under the caption "Conflicts of
Interest" at pages 21-24 of the Prospectus, which description is hereby
incorporated herein by reference to Exhibit 99.1 to this report.

The director and the executive and certain other officers of the
General Partner of the Partnership are as follows:

SERVED IN
NAME OFFICE OFFICE SINCE
---- ------ ------------

Judd D. Malkin Chairman 04/08/87
Neil G. Bluhm President 04/08/87
H. Rigel Barber Vice President 04/08/87
Ira J. Schulman Vice President 04/09/87
Gailen J. Hull Vice President 04/09/87
Howard Kogen Vice President
and Treasurer 04/08/87
Gary Nickele Vice President,
General Counsel 04/08/87
and Director 12/18/90
James D. Motta Vice President 04/09/87
John Grab Vice President 04/09/87

There is no family relationship among any of the foregoing director or
officers. The foregoing director has been elected to serve a one-year term
until the annual meeting of the General Partner to be held on August 13,
1996. All of the foregoing officers have been elected to serve one-year
terms until the first meeting of the Board of Directors held after the
annual meeting of the General Partner to be held on August 13, 1996. There
are no arrangements or understandings between or among any of said director
or officers and any other person pursuant to which any director or officer
was selected as such.

The foregoing director and certain of the officers are also officers
and/or directors of various affiliated companies, including JMB, which is
the corporate general partner of Carlyle Real Estate Limited
Partnership-VII ("Carlyle-VII"), Carlyle Real Estate Limited Partnership-IX
("Carlyle-IX"), Carlyle Real Estate Limited Partnership-X ("Carlyle-X"),
Carlyle Real Estate Limited Partnership-XI ("Carlyle-XI"), Carlyle Real
Estate Limited Partnership-XII ("Carlyle-XII"), Carlyle Real Estate Limited
Partnership-XIII ("Carlyle-XIII"), Carlyle Real Estate Limited
Partnership-XIV ("Carlyle-XIV"), Carlyle Real Estate Limited Partnership-XV
("Carlyle-XV"), Carlyle Real Estate Limited Partnership-XVI ("Carlyle-
XVI"), Carlyle Real Estate Limited Partnership-XVII ("Carlyle-XVII"), JMB
Mortgage Partners, Ltd. ("Mortgage Partners"), JMB Mortgage Partners,
Ltd.-II ("Mortgage Partners-II"), JMB Mortgage Partners, Ltd.-III
("Mortgage Partners-III"), JMB Mortgage Partners, Ltd.-IV ("Mortgage
Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus") and
Carlyle Income Plus, Ltd.-II ("Carlyle Income Plus-II") and the managing
general partner of JMB Income Properties, Ltd.-IV ("JMB Income-IV"), JMB
Income Properties, Ltd.-V ("JMB Income-V"), JMB Income Properties, Ltd.-VI
("JMB Income-VI"), JMB Income Properties, Ltd.-VII ("JMB Income-VII"), JMB
Income Properties, Ltd.-IX"), JMB Income Properties, Ltd.-X ("JMB
Income-X"), JMB Income Properties, Ltd.-XI ("JMB Income-XI"), JMB Income
Properties, Ltd.-XII ("JMB Income-XII") and JMB Income Properties, Ltd.-
XIII ("JMB-XIII"). JMB is also the sole general partner of the associate
general partner of most of the foregoing partnerships. Most of the
foregoing director and officers are also officers and/or directors of
various affiliated companies of JMB including Arvida/JMB Managers-II, Inc.
(the general partner of Arvida/JMB Partners, L.P.-II ("Arvida-II")) and
Income Growth Managers, Inc. (the corporate general partner of IDS/JMB
Balanced Income Growth, Ltd. ("IDS/BIG")). The director and most of such
officers are also partners, directly or indirectly, of certain partnerships
(the "Associate Partnerships") which are associate general partners in the
following real estate limited partnerships: Carlyle-VII, Carlyle-IX,
Carlyle-X, Carlyle-XI, Carlyle-XII, Carlyle-XIII, Carlyle-XIV, Carlyle-XV,
Carlyle-XVI, Carlyle-XVII, JMB Income-VI, JMB-VII, JMB Income-IX, JMB
Income-X, JMB Income-XI, JMB Income-XII, JMB Income-XIII, Mortgage
Partners, Mortgage Partners-II, Mortgage Partners-III, Mortgage Partners-
IV, Carlyle Income Plus, Carlyle Income Plus-II and IDS/BIG. The foregoing
director and officers are partners, indirectly through other partnerships,
of the Associate Limited Partners of the Partnership and of the associate
limited partner of Arvida-II.

The business experience during the past five years of the director and
such officers of the Corporate General Partner of the Partnership includes
the following:

Judd D. Malkin (age 58) is Chairman of the Board of JMB, an officer
and/or director of various JMB affiliates and a partner, directly or
indirectly, of the Associate Partnerships. He is also an individual
general partner of JMB Income Properties-IV and JMB Income Properties-V.
Mr. Malkin has been associated with JMB since October, 1969. Mr. Malkin is
a director of Urban Shopping Centers, Inc., an affiliate of JMB that is a
real estate investment trust in the business of owning, managing and
developing shopping centers. He is a Certified Public Accountant.

Neil G. Bluhm (age 58) is President and a director of JMB, an officer
and/or director of various JMB affiliates and a partner, directly or
indirectly, of the Associate Partnerships. He is also an individual
general partner of JMB Income Properties-IV and JMB Income Properties-V.
Mr. Bluhm has been associated with JMB since August, 1970. Mr. Bluhm is a
director of Urban Shopping Centers, Inc., an affiliate of JMB that is a
real estate investment trust in the business of owning, managing and
developing shopping centers. He is a member of the Bar of the State of
Illinois and a Certified Public Accountant.

H. Rigel Barber (age 46) is Chief Executive Officer and Executive Vice
President of JMB, an officer of various JMB affiliates and a partner,
directly or indirectly, of various Associate Partnerships. Mr. Barber has
been associated with JMB since March, 1982. He received a J.D. Degree from
the Northwestern Law School and is a member of the Bar of the State of
Illinois.

Ira J. Schulman (age 44) is an officer of various JMB affiliates and a
partner, directly or indirectly, of various Associate Partnerships. Mr.
Schulman has been associated with JMB since February 1983. He holds a
Masters Degree in Business Administration from the University of
Pittsburgh.

Gailen J. Hull (age 47) is a Senior Vice President of JMB, an officer
of various JMB affiliates and a partner, directly or indirectly, of various
Associate Partnerships. Mr. Hull has been associated with JMB since March,
1982. He holds a Masters degree in Business Administration from Northern
Illinois University and is a Certified Public Accountant.

Howard Kogen (age 60) is Senior Vice President and Treasurer of JMB,
an officer of various JMB affiliates and a partner, directly or indirectly,
of various Associate Partnerships. Mr. Kogen has been associated with JMB
since March, 1973. He is a Certified Public Accountant.

Gary Nickele (age 43) is Executive Vice President and General Counsel
of JMB, an officer of various JMB affiliates and a partner, directly or
indirectly, of various Associate Partnerships. Mr. Nickele has been
associated with JMB since February, 1984. He holds a J.D. degree from the
University of Michigan Law School and is a member of the Bar of the State
of Illinois.

James D. Motta (age 39) has been President and Chief Executive Officer
of Arvida since April 1, 1995. Prior thereto, he was Executive Vice
President and Chief Operating Officer of Arvida (May, 1994 to March, 1995).

Prior thereto, he was President-Community Development Division of Arvida
(August, 1993 - April, 1994), President-Southeast Division of Arvida (July,
1992 to July, 1993) and President-South Florida Division of Arvida
(January, 1989 to July, 1992). Mr. Motta is also an officer or partner of
various affiliates of Arvida.

John R. Grab (age 39) is Vice President and General Manager -
Club/Hotel Operations of Arvida. Prior thereto, he was Vice President and
Project General Manager - Weston Hills of Arvida (October 1990 to October
1993) and Vice President and Project General Manager - Jacksonville Golf &
Country Club of Arvida (June 1988 to October 1990). He is a Certified
Public Accountant. Mr. Grab is also an officer or partner of various
affiliates of Arvida.

ITEM 11. EXECUTIVE COMPENSATION

The officers and the director of the General Partner receive no direct
remuneration in such capacities from the Partnership. The General Partner
and the Associate Limited Partners are entitled to receive a share of cash
distributions, when and as cash distributions are made to the Limited
Partners, and a share of profits or losses as described under the caption
"Cash Distributions and Allocations of Profit and Losses" at pages 61 to 64
of the Prospectus and at pages A-9 to A-16 of the Partnership Agreement,
which descriptions are incorporated herein by reference to Exhibit 99.1, to
this report. Reference is also made to Notes 1 and 14 for a description of
such distributions and allocations. The General Partner and the Associate
Limited Partners, collectively, received a cash distribution in 1995 of
$302,689. Under certain circumstances they will be entitled to
approximately $1,208,700 which has been deferred through December 31, 1995.

Such payment is subject to certain restrictions contained in the
Partnership Agreement and the Partnership's credit facility. Pursuant to
the Partnership Agreement, the General Partner and Associate Limited
Partners were allocated profits for tax purposes for 1995 of approximately
$673,200. Reference is made to Note 14 for further discussion of this
allocation.

The Partnership is permitted to engage in various transactions
involving the General Partner and its affiliates, as described under the
captions "Management of the Partnership" at pages 56 to 59, "Conflicts of
Interest" at pages 21-24 of the Prospectus and "Rights, Powers and Duties
of the General Partner" at pages A-16 to A-28 of the Partnership Agreement,
which descriptions are hereby incorporated herein by reference to Exhibit
99.1 to this report. The relationships of the General Partner (and its
director and executive officers and certain other officers) and its
affiliates to the Partnership are set forth above in Item 10.

Arvida is reimbursed fully for all of its out-of-pocket expenditures
(including salary and salary-related expenses) incurred while supervising
the development and management of the Partnership's properties and other
operations, subject to the limitation that such reimbursement may not
exceed 5% of the aggregate gross revenues from the business of the
Partnership. In 1995, such expenses were approximately $6,233,600, of
which approximately $50,900 was unpaid as of December 31, 1995.

The Partnership and Arvida/JMB Partners, L.P.-II (a publicly-held
limited partnership affiliated with the General Partner) each employ
project related and administrative personnel who perform services on behalf
of both partnerships. In addition, certain out-of-pocket expenditures
related to such services and other general and administrative expenses are
incurred and allocated to each partnership as appropriate. The Partnership
receives reimbursements from or reimburses Arvida/JMB Partners, L.P.-II for
such costs (including salary and salary-related expenses). The Partnership
was entitled to receive approximately $1,021,800 from Arvida/JMB Partners,
L.P.-II for such costs and services incurred in 1995, approximately
$307,200 of which was outstanding as of December 31, 1995. In addition,
the Partnership was obligated to reimburse Arvida/JMB Partners, L.P.-II
approximately $245,100 for the year ended December 31, 1995, of which
approximately $83,100 was unpaid at December 31, 1995.

JMB Insurance Agency, Inc., an affiliate of the General Partner,
earned and received insurance brokerage commissions in 1995 of
approximately $272,300 in connection with providing insurance coverage for
certain of the properties of the Partnership, all of which were paid as of
December 31, 1995. Such commissions are at rates set by insurance
companies for the classes of coverage provided.

The General Partner of the Partnership or its affiliates are entitled
to property management fees and may be reimbursed for their direct expenses
or out-of-pocket expenses relating to the administration of the Partnership
and the acquisition, development, ownership, supervision, and operation of
the Partnership assets. In 1995, the General Partner of the Partnership or
its affiliates were due reimbursement for such direct or other
administrative and out-of-pocket expenses and property management fees in
the amount of approximately $141,900, of which $55,900 was paid as of
December 31, 1995. Additionally, the General Partner and its affiliates
are entitled to reimbursements for legal, accounting and portfolio
management services. Such costs for 1995 were approximately $198,700, all
of which was paid as of December 31, 1995.

The Partnership was also entitled to receive reimbursements from
affiliates of the General Partner for certain general and administrative
expenses including, and without limitation, salary and salary-related
expenses relating to work performed by employees of the Partnership and
certain out-of-pocket expenditures incurred on behalf of such affiliates.
For the year ended December 31, 1995, the total of such costs totalled
approximately $509,000. Approximately $272,200 was outstanding as of
December 31, 1995.

Amounts payable by the Partnership to the General Partner and its
affiliates do not bear interest.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT

(a) No person or group is known by the Partnership to own bene-
ficially more than 5% of the outstanding Interests of the Partnership.

(b) The General Partner and its officers and director own the
following Interests of the Partnership:

NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------

Limited PartnershipGeneral Partner None --
Interests and its officers
and director as
a group

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

No officer or director of the General Partner of the Partnership
possesses a right to acquire beneficial ownership of Interests of the
Partnership.

(c) There exists no arrangement, known to the Partnership, the
operation of which may at a subsequent date result in a change in control
of the Partnership.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There were no significant transactions or business relationships with
the General Partner, affiliates or their management other than those
described in Items 10, 11 and 12 above.

PART IV

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

(a) The following documents are filed as part of this report:

1. Financial Statements. (See Index to Financial
Statements filed with this annual report on Form 10-K).

2. Exhibits.

3. Amended and Restated Agreement of Limited
Partnership.**

4.0 Assignment Agreement by and among the General
Partner, the Initial Limited Partner and the Partnership.**

4.1 Amended and Restated Credit Agreement dated
October 7, 1992, among Arvida/JMB Partners, L.P., Arvida/JMB Partners,
Southeast Florida Holdings, Inc., Center Office Partners, Center Retail
Partners, Center Hotel Limited Partnership, Weston Hills Country Club
Limited Partnership and Chemical Bank and Nationsbank of Florida, N.A. is
herein incorporated by reference to Exhibit No. 4.4 to the Partnership's
Report on Form 10Q (File number 0-16976) dated November 11, 1992.

4.2 Security Agreement dated as of October 7, 1992
made by Arvida/JMB Partners, L.P., Arvida/JMB Partners, Southeast Florida
Holdings, Inc., Center Office Partners, Center Retail Partners, Center
Hotel Limited Partnership and Weston Hills Country Club Limited Partnership
(as "grantors") in favor of Chemical Bank and Nationsbank of Florida, N.A.
(as "lenders") is herein incorporated by reference to Exhibit No. 4.5 to
the Partnership's Report on Form 10Q (File number 0-16976) dated November
11, 1992.

4.3 Pledge Agreement dated as of October 7, 1992
among Arvida/JMB Partners, L.P., Arvida/JMB Partners, Southeast Florida
Holdings, Inc., Center Office Partners, Center Retail Partners, Center
Hotel Limited Partnership and Weston Hills Country Club Limited
Partnership (as "pledgors") and Chemical Bank and Nationsbank of Florida,
N.A. (as "lenders") is herein incorporated by reference to Exhibit No. 4.6
to the Partnership's Report on Form 10Q (File number 0-16976) dated
November 11, 1992.

4.4 Various mortgages and other security interests
dated October 7, 1992 related to the assets of Arvida/JMB Partners, Center
Office Partners, Center Retail Partners, Center Hotel Limited Partnership,
Weston Hills Country Club Limited Partnership which secure loans under the
Amended and Restated Credit Agreement referred to in Exhibit 4.1 are herein
incorporated by reference to Exhibit No. 4.7 the Partnership's Report on
Form 10Q (File number 0-16976) dated November 11, 1992.

4.7. $24,000,000 Consolidated Revolving Promissory
Note dated January 14, 1994 by and between Arvida Grand Bay Limited
Partnership-I, Arvida Grand Bay Limited Partnership-II, Arvida Grand Bay
Limited Partnership-III, Arvida Grand Bay Limited Partnership-IV, Arvida
Grand Bay Limited Partnership-V and Arvida Grand Bay Limited Partnership-VI
and Barnett Bank of Broward County, N.A. ***

4.8. Amended and Restated Mortgage and Security
Agreement dated January 14, 1994 by and between Arvida Grand Bay Limited
Partnership-I, Arvida Grand Bay Limited Partnership-II, Arvida Grand Bay
Limited Partnership-III, Arvida Grand Bay Limited Partnership-IV, Arvida
Grand Bay Limited Partnership-V, Arvida Grand Bay Limited Partnership-VI
and Arvida Grand Bay Properties, Inc. and Barnett Bank of Broward County,
N.A. ***

4.9. Construction Loan Agreement dated January 14,
1994 by and between Arvida Grand Bay Limited Partnership-I and Arvida Grand
Bay Properties, Inc. and Barnett Bank of Broward County, N.A. ***

4.10. Second Amended and Restated Credit Agreement
dated November 29, 1994, among Arvida/JMB Partners, L.P., Arvida/JMB
Partners, Southeast Florida Holdings, Inc., Center Office Partners, Center
Retail Partners, Center Hotel Limited Partnership, Weston Hills Country
Club Limited Partnership and Chemical Bank and Nationsbank of Florida, N.A.
****

4.11. Affirmation and Amendment of Security
Documents dated November 29, 1994, among Arvida/JMB Partners, Arvida/JMB
Partners, L.P., Southeast Florida Holdings, Inc., Center Office Partners,
Center Retail Partners, Center Hotel Limited Partnership, Weston Hills
Country Club Limited Partnership and Chemical Bank. ****

4.12. Modification of Mortgage and Security
Agreement and Other loan Documents dated November 29, 1994, among
Arvida/JMB Partners, Weston Hills Country Club Limited Partnership and
Chemical Bank. ****

4.13. Modification of First Mortgage and Security
Agreement and Other Loan Documents dated November 29, 1994, among
Arvida/JMB Partners, Center Office Partners, Center Retail Partners, Center
Hotel Limited Partnership and Chemical Bank. ****

4.14. Credit Agreement extension dated July 28, 1995
made by Arvida/JMB Partners, L.P., Arvida/JMB Partners, Southeast Florida
Holdings, Inc., Center Office Partners, Center Retail Partners, Center
Hotel Limited Partnership, Weston Hills Country Club Limited Partnership
and Chemical Bank is incorporated by reference to the Partnership's Report
for June 30, 1995 on Form 10-Q (File No. 0-16976) dated August 9, 1995.

4.15. Letter Agreement dated January 17, 1996, among
Arvida/JMB Partners, L.P., Arvida/JMB Partners, Southeast Florida Holdings,
Inc., Center Office Partners, Center Retail Partners, Center Hotel Limited
Partnership, Weston Hills Country Club Limited Partnership and Chemical
Bank and Nationsbank of Florida, N.A. regarding the release of a certain
parcel from the lender's lien is filed herewith.

4.16. Letter Agreement dated March 1, 1996 among
Arvida/JMB Partners, Arvida/JMB Partners, L.P., Southeast Florida Holdings,
Inc., Center Office Partners, Center Retail Partners, Center Hotel Limited
Partnership, Weston Hills Country Club Limited Partnership and Chemical
Bank and Nationsbank of Florida, N.A. regarding the sale of the
Partnership's interest in the Coto de Caza Joint Venture and the extension
of the maturity date of the revolving line of credit facility and the
income property term loan is filed herewith.

10.1. Agreement between the Partnership and The Walt
Disney Company dated January 29, 1987 is
hereby incorporated by reference to Exhibit
10.2 to the Partnership's Registration Statement on Form S-1 (File No. 33-
14091) under the Securities Act of 1933 filed on May 7, 1987.

10.2. Management, Advisory and Supervisory Agreement
is hereby incorporated by reference to Exhibit 10.2 to the Partnership's
Form 10-K (File No. 0-16976) dated March 27, 1991.

10.3. Letter Agreement, dated as of September 10,
1987, between the Partnership and The Walt Disney Company, together with
exhibits and related documents.*

10.4. Joint Venture Agreement dated as of September
10, 1987, of Arvida/JMB Partners, a Florida general partnership. *

21. Subsidiaries of the Registrant.

27. Financial Data Schedule.

99.1. Pages 21-24, 56-59, 61-64, A-9 to A-28, A-31
to A-33, and B-2 of the Partnership's Prospectus dated September 16, 1987
are filed herewith.

* Previously filed with the Securities and Exchange
Commission as Exhibits 10.4 and 10.5, respectively, to the Partnership's
Registration Statement (as amended) on Form S-1 (File No. 33-14091) under
the Securities Act of 1933 filed on September 11, 1987 and incorporated
herein by reference.

** Previously filed with the Securities and Exchange
Commission as Exhibits 3 and 4, respectively, to the Partnership's Form 10-
K Report (File No. 0-16976) filed on March 27, 1990 and hereby incorporated
herein by reference.

*** Previously filed with the Securities and Exchange
Commission as Exhibits 4.7, 4.8 and 4.9, respectively, to the Partnership's
Form 10-K Report (File No. 0-16976) filed on March 24, 1994 and hereby
incorporated herein by reference.

**** Previously filed with the Securities and Exchange
Commission as Exhibits 4.10, 4.11, 4.12 and 4.13, respectively to the
Partnership's Form 10-K Report (File No. 33-14091) under the Securities Act
of 1993 filed on March 27, 1995 and incorporated herein by reference.

The Partnership agrees to furnish to the Securities and
Exchange Commission upon request a copy of each instrument with respect to
long-term indebtedness of the Partnership and its consolidated
subsidiaries, the authorized principal amount of which is 10% or less than
the total assets of the Partnership and its subsidiaries on a consolidated
basis.

(b) Reports on Form 8-K

No Reports on Form 8-K were required or filed since the
beginning of the last quarter of the period covered by this report.

No annual report or proxy material for the fiscal year 1995 has been
sent to the Partners of the Partnership. An annual report will be sent to
the Partners subsequent to this filing.

SIGNATURES

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

ARVIDA/JMB PARTNERS, L.P.

BY: Arvida/JMB Managers, Inc.
(The General Partner)

GAILEN J. HULL
By: Gailen J. Hull
Vice President
Date: March 25, 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 dates indicated.

BY: Arvida/JMB Managers, Inc.
(The General Partner)

NEIL G. BLUHM
By: Neil G. Bluhm, President
(Principal Executive Officer)
Date: March 25, 1996

JUDD D. MALKIN
By: Judd D. Malkin, Chairman
(Principal Financial Officer)
Date: March 25, 1996

GARY NICKELE
By: Gary Nickele, Vice President,
General Counsel and Director
Date: March 25, 1996

GAILEN J. HULL
By: Gailen J. Hull, Vice President
(Principal Accounting Officer)
Date: March 25, 1996

<TABLE>
ARVIDA/JMB PARTNERS, L.P.

EXHIBIT INDEX

DOCUMENT
INCORPORATED SEQUENTIALLY
EXHIBIT NO. EXHIBIT BY REFERENCE NUMBERED PAGE
- ----------- ------- ------------ -------------
<S> <C> <C> <C>
3. Amended and Restated Agree-
ment of Limited Partnership
of the Partnership. Yes

4.0. Assignment Agreement by and
among the General Partner, the
Initial Limited Partner and the
Partnership Yes

4.1. Amended and Restated Credit
Agreement dated October 7, 1992,
among Arvida/JMB Partners, L.P.,
Arvida/JMB Partners, Southeast Florida
Holdings, Inc., Center Office Partners,
Center Retail Partners, Center Hotel
Limited Partnership, Weston Hills Country
Club Limited Partnership and Chemical
Bank and Nationsbank of Florida, N.A. Yes

4.2. Security Agreement dated as of October 7,
1992 made by Arvida/JMB Partners, L.P.,
Arvida/JMB Partners, Southeast Florida Holdings,
Inc., Center Office Partners, Center Retail
Partners, Center Hotel Limited Partnership and
Weston Hills Country Club Limited Partnership
(as "grantors") in favor of Chemical Bank and
Nationsbank of Florida, N.A. (as "lenders") Yes

DOCUMENT
INCORPORATED SEQUENTIALLY
EXHIBIT NO. EXHIBIT BY REFERENCE NUMBERED PAGE
- ----------- ------- ------------ -------------

4.3. Pledge Agreement dated as of October 7, 1992
among Arvida/JMB Partners, L.P., Arvida/JMB Partners,
Southeast Florida Holdings, Inc., Center Office
Partners, Center Retail Partners, Center Hotel
Limited Partnership and Weston Hills Country
Club Limited Partnership (as "pledgors") and
Chemical Bank and Nationsbank of Florida, N.A.
(as "lenders"). Yes

4.4. Various mortgages and other security interests
dated October 7, 1992 related to the assets of
Arvida/JMB Partners, Center Office Partners,
Center Retail Partners, Center Hotel Limited
Partnership, Weston Hills Country Club Limited
Partnership which secure loans under the Amended
and Restated Credit Agreement referred to in
Exhibit 4.1. Yes

4.7. $24,000,000 Consolidated Revolving Promissory Note
dated January 14, 1994 by and between Arvida Grand
Bay Limited Partnership-I, Arvida Grand Bay Limited
Partnership-II, Arvida Grand Bay Limited Partner-
ship-III, Arvida Grand Bay Limited Partnership-IV,
Arvida Grand Bay Limited Partnership-V and Arvida
Grand Bay Limited Partnership-VI and Barnett
Bank of Broward County, N.A. Yes

4.8. Amended and Restated Mortgage and Security Agreement
dated January 14, 1994 by and between Arvida Grand Bay
Limited Partnership-I, Arvida Grand Bay Limited Partner-
ship-II, Arvida Grand Bay Limited Partnership-III,
Arvida Grand Bay Limited Partnership-IV, Arvida Grand
Bay Limited Partnership-V, Arvida Grand Bay Limited
Partnership-VI and Arvida Grand Bay Properties, Inc.
and Barnett Bank of Broward County, N.A. Yes

4.9. Construction Loan Agreement dated January 14, 1994 by
and between Arvida Grand Bay Limited Partnership-I and
Arvida Grand Bay Properties, Inc. and Barnett Bank of
Broward County, N.A. Yes

DOCUMENT
INCORPORATED SEQUENTIALLY
EXHIBIT NO. EXHIBIT BY REFERENCE NUMBERED PAGE
- ----------- ------- ------------ -------------

4.10. Second Amended and Restated Credit Agreement dated
November 29, 1994, among Arvida/JMB Partners, L.P.,
Arvida/JMB Partners, Southeast Florida Holdings, Inc.,
Center Office Partners, Center Retail Partners, Center
Hotel Limited Partnership, Weston Hills Country Club
Limited Partnership and Chemical Bank and Nationsbank
of Florida, N.A. Yes

4.11. Affirmation and Amendment of Security Documents dated
November 29, 1994, among Arvida/JMB Partners,
Arvida/JMB Partners, L.P., Southeast Florida Holdings,
Inc., Center Office Partners, Center Retail Partners,
Center Hotel Limited Partnership, Weston Hills Country
Club Limited Partnership and Chemical Bank. Yes

4.12. Modification of Mortgage and Security Agreement and
Other loan Documents dated November 29, 1994, among
Arvida/JMB Partners, Weston Hills Country Club Limited
Partnership and Chemical Bank. Yes

4.13. Modification of First Mortgage and Security Agreement
and Other Loan Documents dated November 29, 1994,
among Arvida/JMB Partners, Center Office Partners,
Center Retail Partners, Center Hotel Limited
Partnership and Chemical Bank. Yes

4.14. Credit Agreement extension dated July 28, 1995 made
by Arvida/JMB Partners, L.P., Arvida/JMB Partners,
Southeast Florida Holdings, Inc., Center Office Partners,
Center Retail Partners, Center Hotel Limited Partnership,
Weston Hills Country Club Limited Partnership and
Chemical Bank. Yes

4.15. Letter Agreement dated January 17, 1996, among
Arvida/JMB Partners, L.P., Arvida/JMB Partners,
Southeast Florida Holdings, Inc., Center Office
Partners, Center Retail Partners, Center Hotel
Limited Partnership, Weston Hills Country Club
Limited Partnership and Chemical Bank and Nationsbank
of Florida, N.A. regarding the release of a certain
parcel from the lender's lien. No

DOCUMENT
INCORPORATED SEQUENTIALLY
EXHIBIT NO. EXHIBIT BY REFERENCE NUMBERED PAGE
- ----------- ------- ------------ -------------

4.16. Letter Agreement dated March 1, 1996 among
Arvida/JMB Partners, Arvida/JMB Partners, L.P.,
Southeast Florida Holdings, Inc., Center Office
Partners, Center Retail Partners, Center Hotel
Limited Partnership, Weston Hills Country Club
Limited Partnership and Chemical Bank and Nationsbank
of Florida, N.A. regarding the sale of the
Partnership's interest in the Coto de Caza Joint
Venture and the extension of the maturity date
of the revolving line of credit facility and the
income property term loan. No

10.1. Agreement between the Partnership and
The Walt Disney Company dated January 29, 1987. Yes

10.2. Management, Advisory and
Supervisory Agreement. Yes

10.3. Letter Agreement, dated as of
September 10, 1987, between the
Partnership and The Walt Disney
Company, together with exhibits
and related documents. Yes

10.4. Joint Venture Agreement
dated as of September 10, 1987,
of Arvida/JMB Partners, a
Florida general partnership. Yes

21. Subsidiaries of the Registrant No

27. Financial Data Schedule No

99.1. Pages 21-24, 56-59, 61-64 and
A-9 to A-28, A-31 to A-33, and B-2 of
the Partnership's Prospectus
dated September 16, 1987 filed
pursuant to Rules 424(b) and
424(c) are filed herewith. No

</TABLE>

January 17, 1996

Arvida/JMB Partners
Arvida/JMB Partners, L.P.
Southeast Florida Holdings, Inc.
Center Office Partners
Center Retail Partners
Center Hotel Limited Partnership
Weston Hills Country Club Limited Partnership
7900 West Glades Road
Suite 200
Boca Raton, FL 33429

Re: Arvida Lakes Plaza, Weston, Florida

Gentlemen:

Reference is made to that certain Second Amended and Restated
Revolving Credit and Security Agreement dated as of November 30, 1994 among
ARVIDA/JMB PARTNERS, L.P., a Delaware limited partnership ("Arvida LP"),
ARVIDA/JMB PARTNERS, a Florida general partnership ("Arvida GP"), SOUTHEAST
FLORIDA HOLDINGS, INC., an Illinois corporation ("Southeast"), CENTER
OFFICE PARTNERS, a Florida general partnership ("Office Partners"), CENTER
RETAIL PARTNERS, a Florida general partnership ("Retail Partners"), CENTER
HOTEL LIMITED PARTNERSHIP, a Delaware limited partnership ("Hotel
Partnership") and WESTON HILLS COUNTRY CLUB LIMITED PARTNERSHIP, a Delaware
limited partnership ("Weston Partnership"; Weston Partnership, Arvida LP,
Arvida GP, Southeast, Office Partners, Retail Partners and Hotel
Partnership being hereinafter collectively referred to as the "Borrowers"),
CHEMICAL BANK and NATIONSBANK OF FLORIDA, N.A. (collectively, "Lenders")
and CHEMICAL BANK, AS AGENT ("Agent"), as amended by letter agreements
dated May 24, 1995 and December 21, 1995 (as so amended, the "Credit
Agreement"). Unless otherwise defined herein, all capitalized terms shall
have the same meaning as in the Credit Agreement.

By various communications including a letter dated December 5, 1995
from Borrowers' counsel to counsel for the Lenders, the Borrowers have
sought the consent of Lenders to the release of an approximately 12.72 acre
parcel of real property securing Borrowers' obligations under the Credit
Agreement which real property is more particularly described on Exhibit A
attached hereto (the "Lakes Parcel") and is a portion of the property
identified on Schedule 1.4 of the Credit Agreement as "Weston -
Office/Retail/Restaurant Sector 4, 3, 6, 8" (the "Weston Office/Retail
Property"). Borrowers have also sought Lenders' consent to the conveyance
of the Lakes Parcel to a newly-formed Subsidiary known as Arvida/Lakes
Plaza, L.P., a Florida limited partnership ("Lakes LP"), and the incurring
by such Subsidiary of a construction and semi-permanent mortgage loan from
Barnett Bank of Broward County, N.A. (the "Lakes Lender") to finance the
development of a Publix anchored retail shopping center and related
improvements on the Lakes Parcel (the "Lakes Project"). The specific
requests are for Lenders to:

(i) consent to the conveyance of the Lakes Parcel to Lakes
LP;

(ii) release the Lakes Parcel from the lien of Lenders'
Mortgage (the "Lakes Property Release") upon the payment to Lenders of the
release price described below; and

(iii) consent to the creation of $7,500,000 principal amount of
indebtedness in favor of the Lakes Lender, to the filing of certain liens
to secure such indebtedness, and to the guaranty of such indebtedness by
Arvida LP (the ("Lakes Guaranty"), all as described in the commitment
letter ("Commitment Letter") from the Lakes Lender to Lakes LP dated August
14, 1995 (the "Lakes Construction Loan").

The pending request is based on Borrowers' representations that (i)
Lakes LP has satisfied all of the requirements of paragraphs 7 through 10
of the Commitment Letter for initial funding of the loan proceeds, and (ii)
Borrowers have delivered to Lenders true and complete copies of the final
form of the Construction Loan Agreement to be dated as of January 2, 1996
among Lakes LP and the Lakes Lender (the "Lakes Loan Agreement"), and all
related loan documents, including the Lakes Guaranty, (collectively, the
"Lakes Loan Documents").

Based on the foregoing, the Lenders are prepared to deliver the Lakes
Property Release upon the following terms and conditions:

1. Agent must simultaneously receive, by wire transfer of
immediately available funds, the sum of $1,940,000 as a release payment in
respect of the Lakes Property Release (the "Lakes Release Payment"). This
payment will be acceptable notwithstanding any failure by Borrowers to meet
the advance notice requirements of Sections 2.13(a), 5.4(m) or 5.4(s) of
the Credit Agreement. The amount of the Lakes Release Payment has been
determined, and is acceptable to the parties, notwithstanding the
provisions of Section 2.13(g) of the Credit Agreement.

2. Borrowers shall deliver the following, in form and substance
satisfactory to counsel for Lenders, prior to the delivery of the Lakes
Property Release:

a. an endorsement of, or marked up commitment to endorse,
Lenders' title insurance policy updating the title to Parcels F and G of
the Sectors 3 and 4 Boundary Plat and insuring continued access to the
unreleased portions of such property; and

b. evidence of closing of the loan with the Lakes Lender on
the terms set forth in the Lakes Loan Agreement, including copies of the
final detailed construction budget and the survey of the property
encumbered in favor of the Lakes Lender, with a complete set of Lakes Loan
Documents to follow after recordation of the necessary instruments.

3. Lenders' unconditional delivery of the Lakes Property Release
shall evidence Lenders' consent to: (a) the Lakes Construction Loan
notwithstanding the provisions of Sections 6.1 and 6.2 of the Credit
Agreement, (b) the guaranty thereof notwithstanding the provisions of
Section 6.1 of the Credit Agreement, (c) the lien of the mortgage in favor
of the Lakes Lender notwithstanding the provisions of Sections 6.1 and 6.2
of the Credit Agreement, and (d) the conveyance of the Lakes Parcel to
Lakes LP notwithstanding the provisions of Sections 6.4, 6.5 and 6.11 of
the Credit Agreement. Such consent is in consideration of Borrowers'
agreement (made herein) to provide Lenders, promptly following the request
of either Lender, a copy of each draw request under the Lakes Construction
Loan, and to promptly give notice to Lenders in the manner set forth in
Section 9.1 of the Credit Agreement of the existence of any event or
condition which would require the contribution of additional equity under
the Lakes Construction Loan, any Event of Default under the Lakes
Construction Loan or any demand made by the Lakes Lender under the Lakes
Guaranty. Such consent is further conditioned upon the understanding that
(x) for purposes of calculating the Borrowing Base under the Credit
Agreement, neither the value of the property released from the Mortgage nor
the equity value, if any, of Lakes LP shall be included as part of the Real
Estate Portfolio, and (y) effective upon the release of the Lakes Release
Property and the consummation of the other matters described herein, the
following provisions shall apply in lieu of Section 6.4 of the Credit
Agreement:

In lieu of the provisions of clauses (a), (b) and (c) of
Section 6.4, which shall not apply to any advances, loans or contributions
made by Borrowers or any Subsidiaries of Borrower to Lakes LP for the
purpose of (i) completing construction of the Lakes Project, and (ii) for
paying interest on the Lakes Construction Loan (collectively, "Lakes
Advances"), the following shall apply: no Lakes Advances shall be made by
Borrowers or any Subsidiaries of Borrowers during any time that the Lakes
Construction Loan is in default. While the Lakes Construction Loan is not
in default, Borrowers and their Subsidiaries may make loans, advances or
contributions to Lakes LP solely for the purposes set forth in clauses (i)
and (ii) above so long as (A) the aggregate amount of any such loans,
advances and contributions (including any payments made to Banks for the
release of any portion of the Lakes Project collectively "Release
Payments")) made since inception, when added to the total amount of the
Lakes Construction Loan which is either used or available to be used to
construct the Lakes Project does not exceed $10,300,000, and (ii) the
aggregate amount of any such loans, advances and contributions made after
the date hereof (including the initial Lakes Release Payment of $1,940,000)
does not exceed $3,300,000.

4. The Borrowers acknowledge and understand that this letter
relates only to the specific releases and consents described herein and not
to any other requests for waiver of, consent to deviation from, or
extension of, the terms of the Credit Agreement, including without
limitation, any subsequent requests by Borrowers for the release of
additional property within the Weston Office/Retail Property for future
phases of the Lakes Project or for Lenders to permit additional transfers,
loans, advances, contributions or guaranties by Borrowers or their
Subsidiaries to, or for the benefit of, the Lakes LP in order for such
entity to fulfill its obligations under any of the documents consented to
by Lenders herein. Except as expressly modified and amended in paragraph 3
hereof, Borrowers covenant and agree that all of the terms, covenants,
promises, warranties, representations and conditions of the Credit
Agreement and the other loan documents shall remain in full force and
effect. Borrowers acknowledge that the provisions of Section 9.5 of the
Credit Agreement apply to any out-of-pocket expenses, legal fees and other
expenses incurred by Lenders in connection with the Subordination
Agreement, including without limitation, any litigation in connection
therewith. Lenders reserve all rights and remedies available to them for
the full protection and enforcement of their rights under the Credit
Agreement and the other loan documents and under applicable law.
Furthermore, nothing contained herein or therein shall constitute an
agreement by Lenders to continue discussion with Borrowers under any
circumstances, to extend any Loan or Loan Commitment made under the terms
of the Credit Agreement, or to forbear from exercising any of their rights
or remedies under the Credit Agreement, any other loan document or under
applicable law.

Please countersign below to indicate your agreement with the
foregoing.

Sincerely,

CHEMICAL BANK, individually and
as Agent

By:
Name:
Title:

NATIONSBANK OF FLORIDA, N.A.

By:
Name:
Title:

Accepted and Agreed this ___ day of
January, 1996.

ARVIDA/JMB PARTNERS, L.P.

By: ARVIDA/JMB MANAGERS,
INC., as General Partner

By:
Title:

ARVIDA/JMB PARTNERS

By: ARVIDA/JMB MANAGERS,
INC., as General Partner

By:
Title:

SOUTHEAST FLORIDA HOLDINGS,
INC.

By:
Title:

CENTER OFFICE PARTNERS

By: ARVIDA/JMB PARTNERS, L.P.,
as General Partner

By: ARVIDA/JMB MANAGERS, INC.,
as General Partner

By:
Title:

CENTER RETAIL PARTNERS

By: ARVIDA/JMB PARTNERS, L.P.,
as General Partner

By: ARVIDA/JMB MANAGERS,
INC., as General Partner

By:
Title:

CENTER HOTEL LIMITED
PARTNERSHIP

By: JMB/PCH CORPORATION,
as General Partner

By:
Title:

WESTON HILLS COUNTRY CLUB
LIMITED PARTNERSHIP

By: WHCC, INC., as General
Partner

By:
Title:

Exhibit "A"

[Legal Description of Lakes Parcel]

March 1, 1996

Re: Revolving Credit Loans; I/P Loans; Coto de Caza

Gentlemen:

Reference is made to that certain Second Amended and Restated
Revolving Credit and Security Agreement dated as of November 30, 1994 among
ARVIDA/JMB PARTNERS, L.P., a Delaware limited partnership ("Arvida LP"),
ARVIDA/JMB PARTNERS, a Florida general partnership ("Arvida GP"), SOUTHEAST
FLORIDA HOLDINGS, INC., an Illinois corporation ("Southeast"), CENTER
OFFICE PARTNERS, a Florida general partnership ("Office Partners"), CENTER
RETAIL PARTNERS, a Florida general partnership ("Retail Partners"), CENTER
HOTEL LIMITED PARTNERSHIP, a Delaware limited partnership ("Hotel
Partnership") and WESTON HILLS COUNTRY CLUB LIMITED PARTNERSHIP, a Delaware
limited partnership ("Weston Partnership"; Weston Partnership, Arvida LP,
Arvida GP, Southeast, Office Partners, Retail Partners and Hotel
Partnership being hereinafter collectively referred to as the "Borrowers"),
CHEMICAL BANK and NATIONSBANK OF FLORIDA, N.A. (collectively, "Lenders")
and CHEMICAL BANK, AS AGENT ("Agent"), as amended by letter agreement dated
May 24, 1995, letter agreement dated December 21, 1995, letter agreement
dated January 17, 1996 and letter agreement dated February 14, 1996 (as so
amended, the "Credit Agreement"). Unless otherwise defined herein, all
capitalized terms shall have the same meaning as in the Credit Agreement.

By various communications, Borrowers have requested that Lenders
extend both the Revolving Credit Loan Maturity Date and the I/P Loan
Maturity Date and waive certain provisions of the Credit Agreement in order
to permit the Partnership to sell its interest in the Coto de Caza Joint
Venture.

Based on the foregoing, the Lenders and Borrowers agree as follows:

1. The definition of "Revolving Credit Loan Maturity Date"
contained in Article I of the Credit Agreement is hereby amended to read as
follows:

"Revolving Credit Loan Maturity Date" shall mean March
31, 1996; provided, however, that if the Banks agree to extend their
Revolving Credit Loan Commitments, the Revolving Credit Loan Maturity Date
shall mean the date to which the Revolving Credit Loan Commitments have
been extended.

2. The definition of "I/P Loan Maturity Date" contained in Article
I of the Credit Agreement is hereby amended to read as follows:

"I/P Loan Maturity Date" shall mean March 31, 1996.

3. The first sentence of the third paragraph of each of the
Chemical I/P Note and the NationsBank I/P Note is hereby amended to read as
follows:

The principal amount of the indebtedness evidenced hereby
shall be payable in the amounts and on the dates specified in the Credit
Agreement, and, if not sooner paid, all principal, interest and other
amounts due hereunder shall be due and payable on the I/P Loan Maturity
Date.

4. The term "I/P Notes" as used in the Credit Agreement and all
other Loan Documents shall hereinafter be deemed to refer to the Chemical
I/P Note and the NationsBank I/P Note, as amended hereby, together with all
further amendments, modifications and supplements thereto.

5. The definition of "Net Cash Proceeds" contained in Article I of
the Credit Agreement is hereby amended to read as follows:

"Net Cash Proceeds" shall mean cash payments received by the
Borrowers, any of their Subsidiaries or Cullasaja Joint Venture from any
Sale of any real estate asset, or from any Sale of any interest in a Joint
Venture, in each case net of the amount of (i) brokers' commissions, title
insurance and other customary costs of sale payable in connection with such
Sale, (ii) all transfer taxes payable as a consequence of such Sale, and
(iii) reasonable legal fees attributable to such Sale; provided, however,
that in the case of any such broker's commission paid to an Affiliate of
the Borrowers, such commission shall be no less favorable to the Borrowers
than the Borrowers could reasonably obtain on an arm's-length basis in a
transaction with an unrelated third party.

6. Lenders hereby consent to the sale (the "Coto Sale") by the
Partnership of its interest in the Coto de Caza Joint Venture and in any
promissory note made by the Coto de Caza Joint Venture in favor of the
Partnership (collectively, the "Coto Interest") notwithstanding any
contrary provisions of Section 6.11 of the Credit Agreement if the
following conditions are timely satisfied:

(a) the Coto Sale results in Net Cash Proceeds to the
Partnership which are equal to or greater than $10,000,000;

(b) Agent receives, by wire transfer of immediately available
funds pursuant to the wire transfer instructions attached hereto as Exhibit
"A", not later than the first business day following the date of the
closing of the Coto Sale, an amount equal to one hundred percent (100%) of
the Net Cash Proceeds from the Coto Sale (the "Coto Funds"). The Coto
Funds shall be deposited and held in a cash collateral account maintained
at Chemical Bank (the "Coto Account") and will remain subject to the valid,
properly perfected first and senior lien and security interest in favor of
the Agent on the terms and conditions set forth in that certain Collateral
Assignment of Partnership Interest dated as of October 7, 1992 by Arvida LP
in favor of the Agent, as heretofore amended; and

(c) on the closing date of the Coto Sale, no Event of Default
or Default under the Credit Agreement has occurred and is continuing.

Lender shall release the Coto Interest from the lien of the Collateral
Documents pursuant to a Partial Release of Collateral Assignment of
Partnership Interest and Financing Statements ("Partial Release") in the
form attached hereto as Exhibit "B", which Partial Release shall be
effective upon satisfaction of the conditions specified in that certain
escrow letter to First American Title Insurance Company in the form
attached hereto as Exhibit "C".

7. The Borrowers hereby irrevocably release the Lenders and their
respective officers, directors, present and former employees and agents
from any and all claims or liabilities of any kind and nature whatsoever
relating to (i) the Credit Agreement, (ii) any prior restructurings or
attempted restructurings of the Borrowers' debt or (iii) the transactions
contemplated by this letter and arising prior to the date of this letter
agreement.

8. The Borrowers acknowledge and understand that this letter
agreement relates only to the specific amendments, waivers, releases and
consents described herein and not to any other requests for waiver of,
consent to deviation from, or extension of, the terms of the Credit
Agreement. Except as expressly modified and amended herein, all of the
terms, covenants, promises, warranties, representations and conditions of
the Credit Agreement and the other loan documents shall remain in full
force and effect. Borrowers acknowledge that the provisions of Section 9.5
of the Credit Agreement apply to any out-of-pocket expenses, legal fees and
other expenses incurred by Lenders in connection with this letter
agreement, including without limitation, any litigation in connection
therewith. Lenders reserve all rights and remedies available to them for
the full protection and enforcement of their rights under the Credit
Agreement and the other loan documents and under applicable law.
Furthermore, nothing contained herein or therein shall constitute an
agreement by Lenders to continue discussion with Borrowers under any
circumstances, to extend any Loan or Loan Commitment made under the terms
of the Credit Agreement, or to forbear from exercising any of their rights
or remedies under the Credit Agreement, any other loan document or under
applicable law. This letter agreement is entered into by the parties
hereto solely for the purpose of extending and modifying the Credit
Agreement and certain of the other Loan Documents, and is not intended by
the parties, nor shall it be construed, as a novation or cancellation of
the existing obligations of the Borrowers.

Please countersign below to indicate your agreement with the
foregoing.

Sincerely,

CHEMICAL BANK, individually and
as Agent

By:
Name:
Title:

NATIONSBANK OF FLORIDA, N.A.

By:
Name:
Title:

Accepted and Agreed this ___ day of
March, 1996.

ARVIDA/JMB PARTNERS, L.P.

By: ARVIDA/JMB MANAGERS,
INC., as General Partner

By:
Title:

ARVIDA/JMB PARTNERS

By: ARVIDA/JMB MANAGERS,
INC., as General Partner

By:
Title:

SOUTHEAST FLORIDA HOLDINGS,
INC.

By:
Title:

CENTER OFFICE PARTNERS

By: ARVIDA/JMB PARTNERS, L.P.,
as General Partner

By: ARVIDA/JMB MANAGERS, INC.,
as General Partner

By:
Title:

CENTER RETAIL PARTNERS

By: ARVIDA/JMB PARTNERS, L.P.,
as General Partner

By: ARVIDA/JMB MANAGERS,
INC., as General Partner

By:
Title:

CENTER HOTEL LIMITED
PARTNERSHIP

By: JMB/PCH CORPORATION,
as General Partner

By:
Title:

WESTON HILLS COUNTRY CLUB
LIMITED PARTNERSHIP

By: WHCC, INC., as General
Partner

By:
Title:

EXHIBIT "A"

Wire Transfer Instructions for Chemical Bank

EXHIBIT 21

LIST OF SUBSIDIARIES

The Partnership is a general partner in Arvida/JMB Partners, Center Office
Partners and Center Retail Partners, all of which are Florida general
partnerships. The Partnership is the owner of Southeast Florida Holdings,
Inc., an Illinois corporation. The Partnership is a limited partner in
Arvida Management Limited Partnership, Arvida Contractors Limited
Partnership, Gulf and Pacific Communications Limited Partnership, Boca
Raton Communications Limited Partnership and Jax Cable Limited Partnership,
Center Hotel Limited Partnership, Weston Athletic Club Limited Partnership,
Arvida Realty Sales Limited Partnership, Arvida/Weston Retail Sales Limited
Partnership and Arvida Grand Bay Limited Partnerships I through VI, each of
which is a Delaware limited partnership. The Partnership is also a partner
in the following partnerships with third party developers: Addison Joint
Venture, Arvida Boose Joint Venture, Arvida Corporate Park Associates,
Arvida Pompano Associates Joint Venture, Coto De Caza, Ltd., Cullasaja
Joint Venture, H.A.E. Joint Venture, Mizner Court Associates Joint Venture,
Mizner Tower Associates Joint Venture, Ocala 202 Joint Venture, Tampa 301
Associates Joint Venture, Windmill Lake Estate Associates Joint Venture,
Arvida/RBG I Joint Venture and Arvida/RBG II Joint Venture.

<ARTICLE> 5

<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>

<CIK> 0000814046
<NAME> ARVIDA/JMB PARTNERS, L.P.

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995

<CASH> 34,023,684
<SECURITIES> 0
<RECEIVABLES> 28,292,314
<ALLOWANCES> 236,052
<INVENTORY> 199,372,799
<CURRENT-ASSETS> 0
<PP&E> 109,356,323
<DEPRECIATION> 37,513,792
<TOTAL-ASSETS> 366,439,241
<CURRENT-LIABILITIES> 133,773,954
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 232,665,287
<TOTAL-LIABILITY-AND-EQUITY> 366,439,241
<SALES> 0
<TOTAL-REVENUES> 382,267,482
<CGS> 305,786,178
<TOTAL-COSTS> 330,737,122
<OTHER-EXPENSES> 7,493,674
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 44,036,686
<INCOME-TAX> 0
<INCOME-CONTINUING> 44,036,686
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (2,200,000)
<NET-INCOME> 41,836,686
<EPS-PRIMARY> 101.91
<EPS-DILUTED> 101.91

</TABLE>

Further, although the Partnership is intended to be an
operating company producing taxable income rather than net losses
for Federal income tax purposes, prospective investors should note
that if such net losses were to arise, certain considerations
which typically arise in a so-called "tax shelter" may become
relevant, including considerations involving the profit motives of
the Partnership and the Holders and the ability to utilize such
net losses.

IN VIEW OF THE COMPLEXITY OF THE INCOME TAX CONSIDERATIONS
RELATING TO INVESTMENT IN THE PARTNERSHIP, PARTICULARLY IN LIGHT
OF RECENT CHANGES IN THE LAW AND THE FACT THAT THE INCOME TAX
CONSIDERATIONS WILL NOT BE THE SAME FOR ALL INVESTORS, PROSPECTIVE
INVESTORS ARE STRONGLY ADVISED TO CONSULT THEIR TAX ADVISORS WITH
SPECIFIC REFERENCE TO THEIR OWN TAX SITUATIONS PRIOR TO INVESTMENT
IN THE PARTNERSHIP.

_________________________________________________________________

CONFLICTS OF INTEREST
_________________________________________________________________

The Partnership is and will be subject to various conflicts
of interest arising out of its relationships with the General
Partner and its affiliates (including Arvida) as well as the fact
that the General Partner and its affiliates are engaged in a wide
range of real estate activities. Where conflicts arise from
anticipated transactions with affiliates of the General Partner,
certain provisions and limitations described below have been
adopted to protect the interests of the Holders of Interests.
Where no such provisions and limitations are described, none has
been adopted and these conflicts may be resolved only through the
exercise of the General Partner's judgement consistent with its
fiduciary obligations to the Partnership and the Holders as set
forth in the Partnership Agreement. See "Fiduciary Responsibility
of the General Partner" below. The conflicts of interest to which
the Partnership is and will be subject include those described
below.

DETERMINATIONS BY THE GENERAL PARTNER

The General Partner and the Associate Limited Partners have
certain interests in the Cash Flow and Profits or Losses of the
Partnership (see "Cash Distributions and Allocations of Profits or
Losses"). Because the timing and amount of Cash Flow and Profits
or Losses of the Partnership received by, or allocated to, the
General Partner and the Associate Limited Partners may be affected
by various determinations by the General Partner under the
Partnership Agreement, including whether or not to refinance or
sell any property and the timing of any such sale or refinancing,
the establishment and maintenance of reasonable reserves, the
allocation of certain tax items under the Partnership Agreement,
the timing of expenditures, the level of amortization of
indebtedness and other matters, the General Partner may have a
conflict of interest with respect to such determinations.

The Partnership Agreement provides that the General Partner
shall elect, in its sole discretion, to cause a Listing of the
Interests, or, on the date ten years from the termination of this
offering, to purchase (or to cause JMB or its affiliates to
purchase) the interests at their appraised fair market value, or
commence liquidation of the Partnership on the date ten years from
the termination of this offering and sell all properties within
fifteen years from the termination of this offering. In the event
the General Partner elects to commence a liquidations phase, JMB
and its affiliates will be permitted to purchase at appraised fair
market value any of the joint interests held by the Partnership in
Communities and Future Communities in which JMB or any of its
affiliates (other than the Partnership) has an interest. In the
event the General Partner elects, in accordance with the
foregoing, to purchase, or to cause the purchase of, the
Interests, or to commence a liquidation phase of the Partnership
and to purchase any affiliate
In the event that the proceeds of this offering plus maximum
initial aggregate indebtedness are not sufficient to permit the
payment of the cost of acquiring the assets from the Seller, the
General Partner expects to cause the Partnership to enter into a
joint venture or joint participation with affiliates of the
General Partner under which the assets acquired from the Seller
would be owned and developed. Any joint investment made by the
Partnership in any Community with an affiliate of the General
Partner will be on a strictly pro rata basis with the investment
made by another JMB affiliate. In addition, each party will pay
only its allocable share of Arvida's expenses in developing and
managing the project. However, at any particular time, it is
possible that the Partnership, the other investing JMB affiliate
and Arvida may have differing interests with respect to certain
decisions affecting such joint investments, including the timing
of expenditures, sale of certain assets and other matters. Thus,
there exists the possibility of an impasse in the event the joint
venture partners disagree. See "Risks of Joint Ventures".
However, in the event of a disagreement regarding a proposed sale
or other disposition of the property, the party desiring not to
sell or otherwise dispose would have a right of first refusal to
purchase the affiliated joint venture partner's interest in the
property. Such right of first refusal would be exercisable at the
pro rata share of the proposed sale price or other disposition
price to any unaffiliated third party; however, there can be no
assurance that the Partnership would have the financial resources
to exercise its right of first refusal at any such time.

The Partnership may permit an affiliate of the General
Partner and JMB to invest jointly with the Partnership and its
joint venturer in a portion of an approximately 200-acre parcel of
land located near Sarasota which may be suitable for development
as a regional shopping mall. See "Business of the Partnership--
Description of Current Developments--Commercial and Industrial".
This affiliate has expertise in the development and operation of
regional shopping malls. Neither the Partnership nor Arvida
currently has expertise in these matters. In the event of such a
joint venture investment, the Partnership and the Partnership's
unaffiliated joint venturer would contribute the land at appraised
value and the JMB affiliate would contribute a pro rata share of
capital. It should be noted that appraisals are only estimates of
value and should not be relied upon as measures of realizable
value. The JMB affiliate would be entitled to earn certain
development fees from the joint venture for its services, subject
to certain limitations. See "Management of the Partnership--
Management Compensation".

PARTNERSHIP'S PARTICIPATION IN NET CASH FLOW OF FUTURE COMMUNITIES

While Arvida has no current intent to move its principal
business away from Community development, it is under no
obligation to maintain Community development as its principal
business. Arvida's only obligation in respect of future
developments to the Partnership is to permit the Partnership to
receive a 10% interest in net cash flow (in excess of certain base
amounts) from Future Communities, subject to the limitations set
forth under "Description of Business-Future Developments". The
Partnership will not participate in any other future developments.

Arvida is not restricted to development of Community properties
and may participate or assist in the development and management of
other types of real property investments developed by affiliates
of JMB and Arvida. Different parcels of the same tract of land
may be developed by various JMB affiliates, including Arvida. In
certain cases, the most significant portions of such properties,
principally office or other commercial buildings, may be developed
by JMB and affiliates other than Arvida, and the Partnership will
not participate in the net cash flow in respect of those
developments.

POSSIBLE COMPETITION BY THE PARTNERSHIP WITH AFFILIATES

A substantial number of real estate investment partnerships
and other entities are presently managed or advised by or through
affiliates of JMB (see "Management of the Partnership--JMB Realty
Corporation"). JMB and its affiliates also invest in real estate
for their own accounts. JMB is presently planning to form and to
manage or advise, directly or through affiliates, additional real
estate investment partnerships and other investment entities in
the future, and expects to continue to invest in real estate for
its own account. JMB and certain of these affiliates engage in
the development of retail, commercial and office projects,
although none (either individually or in the aggregate) presently
engage in the business of Community development to the extent that
the Partnership and Arvida do. See "Business of the Partnership"
and "Management of the Partnership--Affiliate Supervisory
Agreement". The Partnership Agreement expressly provides that
neither the General Partner nor any affiliate of the General
Partner (including JMB and Arvida) will be obligated to present to
the Partnership any particular investment or development
opportunity that comes to its attention; provided, however, that
the Partnership shall be entitled to receive a 10% interest in net
cash flow (in excess of certain base amounts) with respect to each
Future Community, subject to the limitations set forth under
"Business of the Partnership--Future Community Developments". See
"Fiduciary Responsibility of the General Partner".

JMB and existing or future real estate investment entities
advised or managed by JMB or its affiliates may be in competition
under some circumstances with Arvida, and thereby the Partnership,
for real property investments. Such conflicts could arise, for
example, if the purchase of a particular undeveloped property
should appear to be suitable for development for more than one
purpose including as an Arvida-sponsored Community development.
In addition, JMB or its affiliates may acquire and develop
properties located nearby or adjacent to Communities or proposes
Arvida Community developments, and the Partnership shall have no
right to receive an interest in such developments. As a result of
its relationship with its affiliates and the nature of such
affiliates' development business, Arvida may be unable to develop
certain properties in the manner, and to the extent, which it
otherwise would, and, as a result, the Partnership may not be able
to receive an interest in certain development projects. Arvida
and its staff may supply certain development and management
services to other JMB affiliates and may develop properties for
such affiliates independent of Future Communities.

Affiliates of the General Partner may also be in competition
with the Partnership in connection with the sale or operation of
properties under some circumstances. For example, the Partnership
may own certain interest in Community properties adjacent to
properties owned by JMB or other affiliated entities. As a
result, the Partnership and one or more affiliated entities may be
competing in particular geographical markets for residents or for
tenants in commercial or office projects. There may also be
similar sorts of competition in connection with the sales of
property in certain markets. Any adjacent commercial properties
owned by the Partnership and an affiliated entity will offer
economic terms for tenant leases in such adjacent properties which
are comparable considering all relevant factors including, but not
limited to, age and quality of construction.

RELATIONSHIP OF AFFILIATES TO PARTNERSHIP

JMB or its affiliates are not prohibited from providing
services to, and otherwise dealing or doing business with, persons
who deal with the Partnership. However, no rebates or "giveups"
may be received by the General Partner or any affiliate of the
General Partner, nor may the General Partner or any such affiliate
participate in any reciprocal business arrangements which would
have the effect of circumventing any of the provisions of the
Partnership Agreement. JMB and its affiliates may provide certain
services to the Partnership as described under "Management of the
Partnership". If any other transactions between the Partnership
and JMB or its affiliates occur, they must also be negotiated on a
basis not less favorable to the Partnership than that available
from third parties providing comparable services and shall be
terminable on 60 days' notice.

REMUNERATION OF JMB, ARVIDA AND AFFILIATES

JMB and its affiliates, including Arvida, will receive
substantial compensation and other amounts from the Partnership,
regardless of whether the Partnership achieves its investment
objectives. See "Management of the Partnership--Management
Compensation" and" --Affiliate Supervisory Agreement".

PARTICIPATION OF AN AFFILIATE AS A SELECTED DEALER

JMB Securities Corporation, a broker-dealer affiliated with
JMB, is expected to participate as a Selected Dealer in the
offering of Interests and will be entitled to the same selling
commission as other dealers. See "Plan of Distribution". JMB
Securities Corporation may be subject to a conflict of interest in
performing any "due diligence" obligations that may arise out of
its participation in the offering because of its affiliation with
the General Partner.

RELATIONSHIP OF MERRILL LYNCH TO AFFILIATE

An affiliate of Merrill Lynch, the Selling Agent for this
offering, is purchasing Interests to 1% of the total Interests
sold to the public pursuant to this offering at a cost of $1 per
Interest and is a limited partner in one of the Associate Limited
Partners. As a result, Merrill Lynch as selling agent may be
subject to a conflict of interest in performing any "due
diligence" obligations that may arise out of its participation in
the offering because of such relationship with its affiliate. In
addition, the issuance of such Interests at $1 per Interest to the
Merrill Affiliate effectively dilutes the Interests purchased by
other Holders of Interests.

LEGAL REPRESENTATION

As noted under "Legal Matters", counsel for the Partnership
in connection with the offering ia also counsel to JMB and various
affiliates, including the General Partner of the Partnership, on
various matters. No counsel has been independently retained to
represent the Holders of Interests. In the event any controversy
arises following the termination of the offering in which the
interests of the Partnership appear to be in conflict with those
of JMB or its affiliates, other counsel would be retained for one
or both of the parties.

FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER

The General Partner is accountable to the Partnership as a
fiduciary and consequently must exercise good faith and integrity
in handling Partnership affairs. This is an uncertain area of the
law, and Holders of Interests who have questions concerning the
fiduciary duties of the General Partner should consult with their
counsel.

The Partnership Agreement provides that neither the General
Partner nor any affiliate thereof engaged in the performance of
services on behalf of the Partnership (the "Indemnified Parties")
will be liable to the Partnership or the Holders of Interests for
any loss or liability resulting from any act or omission performed
or omitted by them if the General Partner or its affiliates have
determined, in good faith, that the act or omission which caused
the loss or liability, was in the best interests of the
Partnership and such loss or liability was not the result of
misconduct or negligence and that, subject to certain limitations,
the Indemnified Parties will be indemnified by the Partnership
against any loss or liability suffered by them if the General
Partner or its affiliates have determined, in good faith, that the
act or omission which caused the loss or liability was in the best
interests of the Partnership and such loss or liability was not
the result of misconduct or negligence. See "Summary of the
Partnership Agreement--Indemnification of the General Partner".
Thus, the Limited Partners or Holders of Interests, as the case
may be, may have a more limited right of action than would
otherwise be the case absent such provisions. In the opinion of
the Securities and Exchange Commission, indemnification for
liabilities arising under the Securities Act of 1933, as amended,
is contrary to public policy and therefore unenforceable.

The Partnership Agreement expressly provides that neither
the General Partner nor any affiliate of the General Partner will
be obligated to present to the Partnership any particular
investment opportunity that comes to its attention. See "Business
of the Partnership" and "Conflicts of Interest--Possible
Competition by Partnership with Affiliates".

OWNERSHIP OF GENERAL PARTNER

All of the outstanding shares of the General Partner are
owned by JMB Holdings Corporation, an Illinois corporation, 75% of
the outstanding shares of which are owned by JMB Realty
Corporation and the remaining 25% of which is owned by certain
officers and directors of JMB. The General Partner is not
prohibited from paying dividends to its stockholder. The
Partnership Agreement provides that the purchasers of Interests
will acquire no interest in the stock or assets of the General
Partner, or in any proceeds of any sales thereof by virtue of
acquiring or owning Interests and becoming Holders.

MANAGEMENT COMPENSATION

The following describes the types and estimated amounts of
fees, compensation, and other payments, and distributions that the
General Partner and its affiliates (including the Associate
Limited Partners) will or may receive in connection with the
business of the Partnership and/or the acquisition of its assets.
These amounts were not determined by arm's-length bargaining.

Acquisition and Financing Guaranty Fee. The Partnership is
obligated to pay JMB or its affiliates an Acquisition and
Financing Guaranty Fee equal to $20,000,000 (subject to reduction
as set forth below and in the Partnership Agreement) for services
of JMB and such affiliates in negotiating and arranging, and
guaranteeing repayment of the Acquisition Notes and certain other
obligations incurred in connection with, the acquisition of the
assets by the Partnership from the Seller. Such fee will be
payable upon the date of the admission of Holders of Interests to
the Partnership ("Admission Date"), or, in the event of multiple
Admission Dates, pro rata upon each Admission Date based upon the
percentage of the maximum offering sold (without giving effect to
the right to increase the size of the offering to 400,000
Interests); to the extent that less than all of the Interests are
sold, therefore, the Acquisition and Financing Guaranty Fee will
be proportionately less than $20,000,000.

Fees for Property Management and Other Services. The
Partnership may engage affiliates of the General Partner for
property management, insurance brokerage, or other services to be
performed, if necessary, in connection with the properties of the
Partnership. Property management fees may be charged at rates
prevailing for comparable services in the localities where
properties are located, in the event such services are provided,
but not to exceed 6% of the gross receipts from a commercial or
industrial property (if leasing and re-leasing services are
performed by such affiliate; otherwise the maximum fee is 3% of
the gross receipts) and 3% of the gross receipts (reduced to 1%
after the first five years) from a commercial or industrial
property leased for ten years or more on a net basis. Subject to
certain limitations in the Partnership Agreement, insurance
brokerage services may be performed and commissions may be
received at rates prevailing for comparable classes of coverage in
the localities where the properties are located. If affiliates of
the General Partner perform other services for the Partnership,
the fee for such services must be not less favorable to the
Partnership than that available from third parties providing
comparable services and the arrangement in respect of such
services shall be terminable, without penalty, on 60 days' notice.

As described under "Business of the Partnership--Description
of Current Developments", an affiliate of JMB which develops malls
and shopping centers nationally may participate as a joint venture
partner with a joint venture between the Partnership and an
unaffiliated third party in the development of a regional shopping
mall at Sarasota, Florida on property owned (including under an
option) by a joint venture in which the Partnership is a 50%
partner; in such event, the affiliate would be entitled to receive
development fees equal to the lesser of 5% of the cost of
development or the amount which would be charged by an independent
third party rendering comparable services, together with allocable
reimbursements of allocable expenses. In the event of a joint
venture between the Partnership and its joint venture partner and
an affiliate of JMB, the joint venture shall obtain a report of
the appraised value of the mall or shopping center upon completion
of the property. To the extent that the actual costs of
development, including the development fees paid to such
affiliate, exceed the appraised value of the project, the
development fees will be remitted by such affiliate to the extent
of the excess, if any, of such development costs over such
appraised value.

Distributive Share of Cash Flow. Following admission of
Limited Partners, the General Partner and the Associate Limited
Partners (collectively) will be entitled to receive (i) until the
Holders of Interests have received cumulative distributions of
Cash Flow equal to a cumulative 10% per annum return (on a non-
compounded basis) on their adjusted capital Investments (which
shall be deemed return (on a non-compound basis) on their Adjusted
Capital Investments), 5% of the distibutions of Cash Flow
remaining after Cash Flow distributions to the General Partner and
the Associate Limited Partners (collectively) equal to 1% per
annum of the Gross Asset Value of the Partnership (subject to
certain limitations set forth in the Partnership Agreement);
provided, however, that until such time as the Holders of
Interests have received total distributions of Cash Flow equal to
their Capital Investments, receipt by the General Partner and the
Associate Limited Partners (collectively) of their 5% share of
Cash Flow shall be deferred (the "Deferred Amount") until receipt
by the Holders of Interests of Cash Flow distributions equal to a
12% per annum cumulative, non-compounded return on their initial
Capital Investments; any Deferred Amount shall be distributable to
the General Partner and the Associate Limited Partners
(collectively), (x) out of any Cash Flow otherwise distributable
to the Holders of Interests at such time as the Holders of
Interests have received a 12% per annum cumulative, non-compounded
return on their Capital Investments, or (y) in any event, to the
extent of one-half of Cash Flow otherwise distributable to the
Holders of Interests at such time as the Holders of Interests have
received total distributions of Cash Flow equal to their Capital
Investments; and (ii) thereafter, 15% of all distributions of Cash
Flow shall be made to the General Partner and the Associate
Limited Partners (collectively) and 85% to the Holders of
Interests; provided, however, that the General Partner and the
Associate Limited Partners (collectively) shall be entitled to
receive an additional share of Cash Flow otherwise distributable
to the Holders of Interests under clause (ii) equal to the lesser
of (a) 13% of the aggregate distributions of Cash Flow under
clause (ii) to all parties or (b) an amount equal to 2% of the
gross selling prices of all interests in real property of the
Partnership (subject to certain limitations). See "Cash
Distributions and Allocations of Profits or Losses".

The General Partner and Arvida/JMB Associates (collectively)
will be entitled to receive a distribution of Cash Flow of the
Partnership in an amount equal to $20,000,000 on September 30,
1987. The definition of Cash Flow includes, and this distribution
may be paid from, the proceeds of sales or other dispositions of
assets in the ordinary course of business and the proceeds of
borrowings of the Partnership. See "Acquisition of Assets".

Reimbursable Expenses. The Partnership will reimburse the
General Partner and its affiliates (including Arvida) for their
direct expenses relating to this offering and relating to the
administration of the Partnership and the acquisition,
development, ownership, supervision and operation of the
Partnership assets (subject to certain limitations contained in
Section 5.1D of the Partnership agreement). In addition, certain
other expenses of JMB and its affiliates will be reimbursed as
described below. JMB and its affiliates will be reimbursed by the
Partnership and all expenses of the offering, sale and
distribution of Interests, and the cost of goods, materials and
services used for or by the Partnership and obtained from entities
which are not affiliated with the General Partner.

Except for organizational expenses incurred in the creation
of the Partnership and offering, selling and distribution expenses
incurred in selling and distribution expenses incurred in the sale
of Interests, JMB and the General Partner will not be reimbursed
by the Partnership for the salaries and related salary expenses of
any of the Director, the Chairman, President or any Executive Vice
President of JMB or the General Partner or any individual who
holds 5% or more of an equity interest in JMB or the General
Partner or has the power to direct or cause the direction of JMB
or the General Partner, whether through ownership of voting
securities, by contract or otherwise, or for any indirect, general
or administrative overhead expenses incurred in performing
services for the Partnership which are not directly attributable
to such services. The Partnership, however, will subject to
certain limitations in 5.1D of the Partnership Agreement,
reimburse JMB and its affiliates for salaries (and related salary
expenses) for services which could be performed directly for the
Partnership by independent parties, such as legal, accounting,
transfer agent, data processing, duplicating and other services.
The amounts charged to the Partnership for such services will not
exceed the lesser of the actual cost of such services, or 90% of
the amount which the Partnership would be required to pay to
independent parties for comparable services. It is estimated that
such reimbursements for such services will be approximately
$175,000 in 1987. In the Partnership's annual report to Holders
of Interests, there will be provided an itemized breakdown of
reimbursements made to JMB and its affiliates in the categories of
legal, accounting, transfer agent, data processing and duplicating
services. Such reimbursement of expenses will be made regardless
of whether any distributions are made to the Holders of Interests.

Pursuant to the Supervisory Agreement, the Partnership shall
reimburse Arvida fully for all of its out-of-pocket expenses
(including salary and salary-related expenses) incurred while
supervising the development and management of the Partnership's
properties and other operations; provided, however, such
reimbursements shall not exceed 5% of the gross revenues from the
business of the Partnership. Such reimbursements will be made
regardless of whether any distributions are made to the Holders of
Interests.

CAPITAL CONTRIBUTIONS OF THE GENERAL PARTNER AND THE ASSOCIATE
LIMITED PARTNERS

The General Partner and the Associate Limited Partners have
made capital contributions to the Partnership aggregating $1,000
and will make additional capital contributions so that total
capital contributions of the General Partner and the Associate
Limited Partners will aggregate at least $20,000. Except under
certain limited circumstances upon liquidation of the Partnership
or its Partnership interest (see "Summary of the Partnership
Agreement--Dissolution and Liquidation"), the General Partner, in
its capacity as such, will make no additional capital
contributions to the Partnership. JMB Investor Services
Corporation made a capital contribution to the Partnership of
$5,000 when it purchased five Interests as the Initial Limited
Partner of the Partnership.

AFFILIATE SUPERVISORY AGREEMENT

Arvida, an affiliate of JMB and the General Partner, will
provide development and management supervisory personnel for the
Partnership for all of its projects and operations in accordance
with the objectives and criteria set forth under "Business of the
Partnership". Pursuant to the Supervisory Agreement, Arvida will
provide such supervisory management personnel at cost for the
duration of the Partnership; provided, however, that the
Supervisory Agreement may be terminated without cause by the
Partnership without penalty upon sixty days' written notice.
Arvida may terminate the Supervisory Agreement if the General
Partner ceases to be an affiliate of JMB or if the Partnership is
in material breach of the Supervisory Agreement which breach
continues for a period of sixty days. See "Management of the
Partnership--Management Compensation--Reimbursable Expenses".
While these personnel will function primarily in an advisory and
supervisory role with respect the Partnership's own operating
employees, Arvida personnel will also assist Partnership personnel
in the Partnership's management, development and sale of
properties. These personnel will supervise the identification of
Partnership-owned land for development, the design of a Community
master plan, the obtaining of regulatory and governmental
approvals, and assist with the installation of infrastructure and
amenities, the sale of developed parcels and homesites to third-
party developers and the construction of residential units and
commercial and industrial properties. Arvida intends to follow
the Seller's practice of hiring subcontractors and consulting
firms on a project-by-project basis rather than maintaining in-
house capabilities, in order to be able to select suitable
professionals for a particular project. Arvida has granted the
Partnership a non-exclusive license to the "Arvida" name for its
use pursuant to, and for the term of, the Supervisory Agreement.

Arvida intends, but has no obligation, to continue to seek
to develop, among other real estate projects, additional Future
Communities. The Partnership will be entitled to receive a 10%
interest in net cash flow (above certain base amounts) from Future
Communities. See "Business of the Partnership--Future Community
Developments".

Arvida will be reimbursed directly by the Partnership for
all of its out-of-pocket expenses (including an allocable share of
its salary and salary-related expenses) incurred while supervising
the development and management of the Partnership's properties.
Arvida will not be entitled to receive any fees or other payments,
direct or indirect, from the Partnership. Arvida will reimburse
the Partnership for any goods, services or facilities of the
Partnership which it may use in connection with projects unrelated
to the Partnership's business.

Pursuant to the Supervisory Agreement, Arvida and each of
its directors, officers and employees shall be indemnified for any
liability arising out of their activities under the Supervisory
Agreement, except for fraud, bad faith or negligence by them.

Arvida may develop new commercial and industrial projects,
which will be wholly separate and distinct from any future
Communities developed under the name "Arvida"; the Partnership
will not be entitled to participate in the net cash flow of any
such projects. Arvida may participate in the development of
Community projects for others without use of the name "Arvida" in
which case the Partnership would have no right to participate.

_________________________________________________________________

DESCRIPTION OF ASSIGNEE INTERESTS

__________________________________________________________________

ASSIGNMENT OF INTERESTS

An investor in the Partnership will hold all of his interest
in the Partnership by virtue of an assignment to the investor of
Interests held by the Initial Limited Partner which have been
acquired with the subscription proceeds of such investor. The
Initial Limited Partner will be the Limited Partner of record for
the Interests purchased and held by the Assignee Holders, but all
of the economic benefits of the Interests (including cash
distributions or allocations of Profits or Losses) will be
distributed or allocated to the Assignee Holders. The discussion
in this Prospectus with respect to receipt of such Partnership
distributions and allocations refers to Holders of Interests,
rather than Limited Partners. Purchasers of such assigned
Interests will not themselves become Limited Partners, unless they
elect or are required to do so, as explained below.

Attached to this Prospectus as part of Exhibit C is a form
of Subscription Agreement Signature Page. Investors may subscribe
to the Partnership through Merrill Lynch or Selected Dealers
without executing the Subscription Agreement Signature Page
(except where required by state law). By the payment of his
subscription proceeds and acceptance by the General partner as an
Assignee Holder, each investor will be recognized by the
Partnership as an Assignee Holder of Interests and each investor
will be bound by all the terms of the Subscription Agreement, as
well as the Partnership Agreement and Assignment Agreement. Under
the Assignment Agreement, included as Exhibit B to this
Prospectus, among the Partnership, the Initial Limited Partner,
the General Partner and each investor becoming an Assignee Holder
pursuant to this offering, all of the ownership attributes of the
Interests are granted to such Assignee Holders, including voting
rights and rights to their proportionate percentage interest in
the Partnership's income, gains, losses, deductions, credits and
distributions, and Assignee Holders are bound by the terms of the
Partnership Agreement.

An Assignee Holder who wishes to become a Substituted
Limited Partner may do so upon complying with the provisions
pertaining to transfer of Interests under the Partnership
Agreement. See "Transferability of Interests" below. An Assignee
Holder who effects such a transfer and becomes a Substituted
Limited Partner will not be permitted subsequently to reassign its
Limited Partnership Interests to the Initial Limited Partner and
once more become an Assignee Holder. The Initial Limited Partner
holds five Interests for its own account and has all rights
attributable to such Interests under the Partnership Agreement.

An assignee Holder who wishes to become a Substituted
Limited Partner may do so upon complying with the provisions
pertaining to transfer of Interests under the Partnership
Agreement. See "Transferability of Interests" below. An Assignee
Holder who effects such a transfer and becomes a Substituted
Limited Partner will not be permitted subsequently to reassign its
Limited Partnership Interests to the Initial Limited Partner and
once more become an Assignee Holder. The Initial Limited Partner
holds five Interests for its own account and has all rights
attributable to such Interests under the Partnership Agreement.

No transfer (except for intra-family and certain other
transfers, including transfers by gift or inheritance) will be
recognized if following the transfer either the transferor or the
transferee would hold fewer than five Interests. Additional
restrictions on transfer of Interests are imposed in some states
by their respective securities laws.

No transfer may be made to any person that is a non-resident
alien individual or foreign corporation or other entity or that
may be subject to tax under Section 511 of the Code or to any
"tax-exempt entity" (within the meaning of Section 168(h) of the
Code for purposes of Section 168(h)(2) of the Code for purposes of
Section 168(h)(6)(A) of the Code), except in the sole discretion
of the General Partner.

In the case of any transfer of Interests, the General
Partner will impose upon the transferee the suitability
requirements of state blue sky laws. Any member of the National
Association of Securities Dealers ("NASD") assisting in such
transfer will impose upon the transferee the suitability
requirements imposed by the NASD.

The rights of any transferee of an Interest who does not
become a Substituted Limited Partner will be limited to his share
of Partnership Profits or Losses and cash distributions as
described above. The voting rights of a transferor (other than
the Initial Limited Partner) who transfers an Interest will
terminate with respect to such Interest upon such transfer,
whether or not the transferee thereof is admitted as a Substituted
Limited Partner with respect thereto.

MERRILL LYNCH INVESTOR SERVICE

It is not anticipated that a public market for the Interests
will develop. However, Merrill Lynch may provide certain investor
services which may assist investors desiring to sell their
Interests. Merrill Lynch, acting as an agent of persons who
desire to buy or sell Interests, will use its best efforts to
match any buy order it receives with any sell order it receives,
at specified prices (or price ranges) only, but will not solicit
any sell orders for Interests. Any solicitation in respect of buy
orders will be done in accordance with Federal securities laws.
This service will be made available only after the Final Admission
Date and only to investors who are not Substituted Limited
Partners and who maintain or establish an account with Merrill
Lynch. Any transactions effected through this service are subject
to any restrictions on transfer imposed by applicable state
securities laws. This service will not be available to residents
of the State of California unless and until the Department of
Corporations of the State of California modifies or waives its
policy with respect to such service.

To facilitate such transactions, Merrill Lynch will make
available upon request, information as to the prices at which
Interests have recently been sold. However, Merrill Lynch will
not set the price at which Interests will be sold. Since this
arrangement will not constitute a market for the Interests, no
"market orders" or "stop orders" can be accepted by Merrill Lynch.

Accordingly, it is possible that no buy orders will be received by
Merrill Lynch at the prices specified in the sell orders which
Merrill Lynch receives, and in that case it will not be possible
for Merrill Lynch to arrange any sales. For its services in
acting as agent for the buyer and seller in such transactions,
Merrill Lynch will charge an appropriate fee or commission.
Further information about this service can be obtained from
Merrill Lynch. Merrill Lynch is under no obligation to provide
this service to Holders of Interests, and this service may be
discontinued or suspended at any time without notice.

_________________________________________________________________

CASH DISTRIBUTIONS AND ALLOCATIONS OF PROFITS OR LOSSES
_________________________________________________________________

In the event the minimum number of Interests is subscribed
for, a Holder of Interests will be entitled to receive from the
Partnership a distribution of Cash Flow (without regard to the
distribution to the General Partner and Arvida/JMB Associates of
Cash Flow (including the proceeds of any financings) on September
30, 1987, as described under "Management of the Partnership--
Management Compensation") in an amount equal to such Holder's
Capital Investment from the day after his subscription proceeds
are received in the Partnership escrow account through the end of
the fiscal quarter in which the Final Admission Date occurs
multiplied by an initial rate of 5% per annum. This rate,
however, may be increased prospectively (in the sole discretion of
the General Partner) at the end of any week or weeks, commencing
with the following week. Such Cash Flow will be distributed
within 60 days following the end of such fiscal quarter in which
the First Admission Date occurs and each fiscal quarter thereafter
through the fiscal quarter in which the Final Admission Date
occurs. See "Plan of Distribution--Allocations of Benefits During
the Offering Period".

Beginning with the first fiscal quarter following the
termination of the offering of Interests to the public, Cash Flow
shall be distributed on a quarterly basis, within 60 days
following the end of each fiscal quarter, as follows:

(i) until the Holders of Interests have received
cumulative distributions of Cash Flow equal to a 10% per annum
return (on a non-compounded basis) on their Adjusted Capital
Investments (as defined below) plus the return of their Capital
Investments (which shall be deemed returned to the Holders of
Interests only to the extent of cumulative distributions of Cash
Flow to Holders of Interests in excess of 10% per annum (on a non-
compounded basis) of their Adjusted Capital Investments), (a)95%
to the Holders of Interests and 5% to the General Partner and
Associate Limited Partners (collectively) remaining after (b) Cash
Flow distributions to the General Partner and the Associate
Limited Partners (collectively) equal to 1% per annum of the Gross
Asset Value (as defined below) of the Partnership (subject to
certain limitations set forth in the Partnership Agreement);
provided, however, that until such time as the Holders of
Interests have received total distributions of Cash Flow equal to
their Capital Investments, receipt by the General Partner and the
Associate Limited Partners (collectively) of their 5% share of
Cash Flow under clause (a) above shall be deferred (the "Deferred
Amount") to receipt by the Holders of Interests of Cash Flow
distributions equal to a 12% per annum cumulative, non-compounded
return on their Capital Investments; and Deferred Amount shall be
distributable to the General Partner and the Associate Limited
Partner (collectively), (x) out of any Cash Flow otherwise
distributable to the Holders of Interests under clause (a) above
at such time as the Holders of Interests have received a 12% per
annum cumulative, non-compounded return on their Capital
Investments, or (y) in any event, to the extent of one-half of
Cash Flow otherwise distributable to the Holders of Interests
under clause (a) above at such time as the Holders of Interests
have received total distributions of Cash Flow equal to their
Capital Investments; and

(ii) thereafter, all distribution of Cash Flow shall
be made 85% to the Holders of Interests and 15% to the General
Partner and the Associate Limited Partners (Collectively);
provided, however, that the General Partner and the Associate
Limited Partners (collectively) shall be entitled to receive an
additional share of Cash Flow otherwise distributable to the
Holders of Interests under this clause (ii) equal to the lesser of
(x) an amount equal to 2% of the gross selling prices of any
interests in real property of the Partnership (subject to certain
limitations) or (y) 13% of the aggregate distributions of Cash
Flow under this clause (ii) to all parties.

"Gross Asset Value" shall mean the dollar amount reflected
on the books and records maintained by the Partnership, at the
Final Admission Date, of the gross assets (including all of the
Partnership's interests in joint venture assets) acquired by the
Partnership, directly or indirectly, or, if sold or otherwise
disposed, of the proceeds of such assets, increased by the dollar
amount reflected on the books and records maintained by the
Partnership, at the time of their respective acquisition, of any
gross assets (including all of the Partnership's interests in
joint venture assets) which the Partnership subsequently acquires,
directly or indirectly, from the Seller or as otherwise
contemplated by the Acquisition Agreement or this Prospectus.
Distributions will be made on or before the last day of May,
August, November and February of each year in respect of
operations for the preceding fiscal quarter.

"Adjusted Capital Investments", with respect to any fiscal
quarter, shall mean the Capital Investments of the Holders of
Interests reduced, as of the first day of any fiscal quarter
following the fiscal quarter with respect to which a distribution
is made, by cumulative, non-compounded distributions of Cash Flow
to the Holders in excess of 10% per annum of their Adjusted
Capital Investments for all prior fiscal quarters.

The amount equal to 2% of the aggregate selling price of
Partnership properties, which shall determine the amount of Cash
Flow distributable to the General Partner under clause (ii) above,
is subject to limitations as set forth in section 4.1 of the
Partnership Agreement. These limitations include, but are not
limited to, the following: such amount with respect to any
Partnership property shall not exceed 50% of the compensation
customarily changes in connection with sales of similar properties
in arm's length transactions by non-affiliates of JMB rendering
similar services as an ongoing public activity in the same
geographical location and for comparable property, and the amount
of such distribution plus the real estate commission paid to
anyone (other than the Partnership) in connection with the sale of
a Partnership property will not exceed the lesser of (i) 6% of the
gross purchase price for the property or (ii) the amount
customarily charged in connection with sales of properties in
arm's-length transactions by non-affiliates of JMB rendering
similar services as an ongoing public activity in the same
geographical location and for comparable properly.

If in any fiscal quarter the General Partner should
determine that reserves of the Partnership exceed the amount
deemed sufficient in connection with the Partnership's operations,
such reserves might be reduced and, if so, the amount of such
reduction for a particular quarter would be included in and
distributed as a portion of Cash Flow.

As described under "Plan of Distribution", the Merrill
Affiliate, in consideration of consulting services rendered to the
Partnership and the payment of $1 per Interest, will acquire
Interests (which are subject to certain limitations) equal to 1%
of the total Interests sold to the public hereby. In the event
the General Partner causes a Listing of the Interests and the
Merrill Affiliate's Interests are so listed, the Partnership
Agreement provides for an allocation of Profits (in the form of
gross income) in order to cause the capital account for each of
the Merrill Affiliate's Interests to equal the capital accounts of
other Holders for their Interests. As a result of such
allocation, in the event of a liquidation of the Partnership after
such allocation and such a listing, the Merrill Affiliate might be
entitled, in some circumstances, to a larger share of the
liquidation proceeds which share corresponds to such capital
account increase.

Except as set forth under "Plan of Distribution--Allocation
of Benefits During the Offering Period", the portion of Cash Flow
distributed to the Holders of Interests will be made pro rata to
the persons recognized on the books of record of the Partnership
as the Holders of Interests. See "Description of Assignee
Interests--Transferability of Interests".

As more fully described under "Business of the Partnership",
the Partnership intends to invest amounts in additional
development of its Communities, which amounts would otherwise be
available for distribution as Cash Flow, subject to the limitation
described in the following sentence. Under the Partnership
Agreement, the General Partner must use its best efforts to
distribute Cash Flow in amounts at least equal to Federal taxable
income (or components thereof) allocable to the Holders,
multiplied by the maximum individual Federal income tax rate for
the year in which such taxable income (or component thereof) is
realized.

All Profits or Losses of the Partnership for each fiscal
year (or portion thereof) beginning on or after the first date
designated by the General Partner on which Assignee Holders are
recognized as such generally will be allocated as follows: (i)
Profits will be allocated such that the General Partner and the
Associate Limited Partners will be allocated Profits equal to the
amount of Cash Flow distributed to them and the Holders will be
allocated the remaining Profits, and (ii) Losses will be allocated
2% to the General Partner and the Associate Limited Partners
(collectively) and 98% to the Holders. Except as set forth under
"Description of Assignee Interests--Transferability of Interests",
all such allocations of Profits or Losses to the Holders of
Interests generally will be made in proportion to the number of
Interests owned by each Holder at the end of the fiscal year in
which such Profits or Losses are incurred.

_________________________________________________________________

SUMMARY OF THE PARTNERSHIP AGREEMENT
_________________________________________________________________

The Partnership Agreement to be executed by the General
Partner and each Limited Partner is included as Exhibit A to this
Prospectus and each prospective purchaser should read it in full.
Certain provisions of the Partnership Agreement have been
described elsewhere in this Prospectus. With regard to fees,
payments and distributions to be made to the General Partner and
affiliates, the distribution of cash from the Partnership and the
allocation of Partnership Profits or Losses, see "Management of
the Partnership" and "Cash Distributions and Allocations of
Profits or Losses"; with regard to various transactions and
relationships of the Partnership with the General Partner and
affiliates, see "Conflicts of Interest"; with regard to the
Partnership's business objectives and policies, see "Business of
the Partnership"; with regard to the management of the
Partnership, see "Management of the Partnership"; with regard to
the voting rights and certain other rights of Assignee Holders and
as to the possibility of investors being admitted as Limited
Partners of the Partnership, see "Description of Assignee
Interests--Assignment of Interests"; and with regard to the
transfer of interests, see "Description of Assignee Interests--
Transferability of Interests".

The following briefly summarizes certain provisions of the
Partnership Agreement which are not described elsewhere in this
Prospectus. All statements made below and elsewhere in this
Prospectus relating to the Partnership Agreement are hereby
qualified in their entirety by reference to the Partnership
Agreement attached hereto as Exhibit A.

ALL ASSIGNEE HOLDERS WILL BE BOUND BY THE PROVISIONS OF THE
PARTNERSHIP AGREEMENT, THE ASSIGNMENT AGREEMENT AND THE
SUBSCRIPTION AGREEMENT ATTACHED TO THIS PROSPECTUS AS EXHIBIT C
UPON PAYMENT OF THE SUBSCRIPTION AMOUNT AND ACCEPTANCE BY THE
PARTNERSHIP.

LIABILITY OF PARTNERS TO THIRD PARTIES

The General Partner will be liable for all general
obligations of the Partnership to the extent not paid by the
Partnership. JMB Realty Corporation and JMB Holdings Corporation,
affiliates of the General Partner, will not be liable for any such
obligations (except to the extent of any note issued by JMB
Holdings Corporation to the General Partner).

The Partnership Agreement provides that Limited Partners
will not be personally liable for the debts of the Partnership
beyond the amount committed by them to the capital of the
Partnership.

Assuming that a Holder of Interests does not take part in
the control of the business of the Partnership and otherwise acts
in conformity with the provisions of the Partnership Agreement,
the liability of such Holder will, under the Delaware Revised
Uniform Limited Partnership Act (the "Delaware Act"), be limited,
subject to certain possible exceptions, generally to the amount
contributed by such Holder or such Holder's predecessor in
interest to the capital of the Partnership. Under the Delaware
Act, (i) a Holder would be liable, for a period of one year after
the date of the return to the Holder of any part of such Holder's
capital contribution returned without violation of the Partnership
Agreement or the Delaware Act, for the amount of the returned
contribution to the extent necessary to discharge liabilities of
the Partnership to creditors who extended credit while the
returned contribution was held by the Partnership, and (ii) a
Holder would be liable, for a period of six years after the date
of the return to the Holder of any part of the Holder's capital
contribution returned in violation of the Partnership Agreement or
the Delaware Act, for the amount of the returned contribution.
Under the Delaware Act, a Holder may not receive a distribution
from the Partnership if, at the time of the distribution and after
giving effect thereto, the<PAGE>
all things which it deems to be necessary, convenient, appropriate
or advisable in connection therewith, including, but not limited
to, the preparation and filing on behalf of the Partnership of a
registration statement with the Securities and Exchange Commission
and the securities commissions (or similar agencies or offices) of
such jurisdictions as the General Partner shall determine and the
execution or performance of agreements with underwriters and
others concerning the marketing of Additional Limited Partnership
Interests on such basis and upon such terms as the General Partner
shall determine.

G. Notwithstanding any other provision of this Section 3.3
(i) within ten days after the commencement of the public offering
contemplated by Section 3.3A, ML Real Estate Associates II may
acquire an interest in the Partnership as provided herein upon its
payment of $100.00 and (ii) to evidence such interest in the
Partnership, as of the First Admission Date and any Later
Admission Dates, the General Partner may issue Additional Limited
Partnership Interests to the Initial Limited Partner for
assignment to ML Real Estate Associates II (which shall be an
Assignee Holder thereof for purposes of this Agreement) in an
amount equal to 1% of the Additional Limited Partnership Limited
Partnership Interest. It is hereby understood that such
Additional Limited Partnership Interests shall be registered with
the Securities and Exchange Commission contemporaneously with
those described in Section 3.3A.

SECTION 3.4 Partnership Capital

A. No Partner shall be paid interest on any Capital
Investment.

B. No Partner shall have the right to withdraw, or receive
any return of, his Capital Investment, except as may be
specifically provided herein.

C. Under circumstances requiring a return of any Capital
Investment, no Partner shall have the right to receive property
other than cash, except as may be specifically provided herein.

SECTION 3.5 Liability of Partners

No Limited Partner shall be liable for the debts,
liabilities, contracts or any other obligations of the
Partnership. Except as specifically provided herein with respect
to the Associate Limited Partners, a Limited Partner shall be
liable only to make the Capital Investment with respect to the
Limited Partnership Interests which he holds and shall not be
required to lend any funds to the Partnership or, after the
Capital Investments with respect to such Interests shall have been
paid, to make any further capital contribution to the Partnership.

Subject to the provisions of Section 5.8, no General Partner shall
have any personal liability for the repayment of the Capital
Investments with respect to Limited Partnership Interests. No
Limited Partner shall be entitled to the withdrawal or return of
his capital contributions, except to the extent, if any, that
distributions made pursuant to this Agreement or upon termination
of the Partnership may be considered as such by law and then only
to the extent provided for therein.

ARTICLE FOUR

CASH DISTRIBUTIONS; ALLOCATIONS OF PROFITS AND LOSSES

SECTION 4.1 Distributions of Cash Flow

Beginning with the first fiscal quarter following the fiscal
quarter in which the offering of Additional Limited Partnership
Interests to the public terminates as contemplated by Section 3.3,
all Cash Flow of the Partnership shall be distributed quarterly
within sixty (60) days after the close of each fiscal quarter as
follows:

(i) 90% to the Holders of Interests and 10% to the General
Partner and Associate Limited Partners (collectively) until the
Holders of Interests have received a cumulative, non-compounded,
10% per annum return on their Adjusted Capital Investments plus
the return of their Capital Investments; and

(ii) thereafter, all Cash Flow shall be distributed 85% to
the Holders of Interests and 15% to the General Partner and the
Associate Limited Partners (collectively); provided, however, that
the General Partner and the Associate Limited Partners
(collectively) shall be entitled to receive distributions of
amounts otherwise distributable to the Holders of Interests under
this clause (ii) to the extent such additional amounts do not
exceed the lesser of (A) 2% of the total cumulative selling price
of all interests in real property of the Partnership which have
been sold or otherwise disposed of subsequent to the First
Admission Date and (B) 13% of the cumulative amount distributed
under this clause (ii) to all Persons.

Notwithstanding the foregoing clause (i), the 10% of Cash Flow
distributable to the General Partner and Associate Limited
Partners (collectively) under such clause (i) shall be limited as
follows:

(A) to the extent, if any, that one percent (1%) of the
Gross Asset Value (as defined below) is less than 5.2631% of Cash
Flow, the amount, distributed to the General Partner and Associate
Limited Partners (collectively) shall be reduced by the amount of
any such deficiency and the Holders of Interests shall receive
additional Cash Flow in the amount of such reduction;

(B) the receipt by the General Partner and the Associate
Limited Partners (collectively) of 4.7369% of total Cash Flow
under said clause (i) (the "Remainder") shall be deferred (and
such deferred amount shall be distributed to the Holders of
Interests) unless the Holders of Interests have received Cash Flow
distributions equal to a 12% per annum cumulative, non-compounded
return on their Capital Investments; provided, however, that such
deferral shall terminate at such time as the Holders of Interest
have received total distributions of Cash Flow equal to their
Capital Investments; any deferred amount of the Remainder shall be
distributable to the General Partner and the Associate Limited
Partners (collectively), (x) out of any Cash Flow otherwise
distributable to the Holders of Interests under the foregoing
clause (i) at such time as the Holders of Interests have received
a 12% per annum cumulative, non-compounded return on their Capital
Investments, or (y) in any event, to the extent of one-half of
Cash Flow otherwise distributable to the Holders of Interests at
such time as the Holders of Interests have received total
distributions of Cash Flow equal to their Capital Investments.

"Gross Asset Value" shall mean the dollar amount reflected on the
books and records maintained by the Partnership, at the Final
Admission Date, of the gross assets (including all of the
Partnership's interests in joint venture assets) acquired by the
Partnership, directly or indirectly, or, if sold or otherwise
disposed of, the proceeds of such assets, increased by the dollar
amount reflected on the books and records maintained by the
Partnership, at the time of their respective acquisition, of any
gross assets (including all of the Partnership's interests in
joint venture assets) which the Partnership subsequently acquires,
directly or indirectly, from the Seller or otherwise as
contemplated by the Acquisition Agreement or the Prospectus.

No amounts computed as 2% of the selling price of any real
property in connection with sale of a Property under (ii) above
shall exceed 50% of the amount customarily charged in connection
with sales of real properties in arm's-length transactions by non-
affiliates of JMB rendering services as an ongoing public activity
in the same geographical location and for comparable real
property; provided, however, that the amount computed as 2% of the
selling price of any Property plus the real estate commission paid
to anyone (other than commissions which inure to the benefit of
the (Partnership) in connection with the sale of a Property shall
in no event exceed the lesser of (i) 6% of the gross purchase
price of the Property or (ii) the amount customarily charged in
connection with sales or real properties in arm's-length
transactions by non-affiliates of JMB rendering real estate
brokerage services as an on-going public activity in the same
geographical location and for comparable real property.

The General Partner shall use its best efforts to operate
the Partnership so that such operation will provide sufficient
Cash Flow (including distributions under Section 3.3B) in order
that the aggregate Cash Flow distributions for each year
distributable to the Holders (other than ML Real Estate Associates
II) are at least equal to Federal taxable income (or components
thereof) allocable to the Holders (other than ML Real Estate
Associates II), multiplied by the maximum individual Federal
income tax rate for the year in which such taxable income (or
component thereof) is realized. Except as otherwise provided in
this Agreement, this Section 4.1 shall apply in determining Cash
Flow distributions upon dissolution.

If, upon the completion of the liquidation and termination
of the Partnership and final distribution of all Partnership
funds, the aggregate capital contributions with respect to Limited
Partnership Interests issued under Section 3.3A exceed the sum of
the distributions of Cash Flow with respect to such number of such
Limited Partnership Interests under clause (i) of Section 4.1,
distributions with respect to such number of such Limited
Partnership Interests under Section 8.3C of Liquidation proceeds
and distributions, if any, with respect to such number of such
Limited Partnership Interests made with the proceeds of any
capital contributions made by the General Partner and Arvida/JMB
Associates (said excess is hereinafter referred to as the "Excess
Amount"), then the General Partner, the Associate Limited Partners
and ML Real Estate Associates II (excluding its successors and
assigns and except as provided in the succeeding paragraph) shall
make aggregate payments to the Holders (other than ML Real Estate
Associates II but including any unaffiliated successor or assign
thereof) in an amount equal to the lesser of the Excess Amount or
the amounts of Cash Flow received by the General Partner, the
Associate Limited Partners and ML Real Estate Associates II
pursuant to Section 4.1(i), such payments to be made by the
General Partner, the Associated Limited Partners and ML Real
Estate Associates II based upon the relative cumulative
distributions of Cash Flow received by each of them pursuant to
Section 4.1(i) up to the time of such payments.

In the event that the General Partner shall elect under
Section 5.5(i)(a) to cause Interests to be listed and quoted on a
United States national exchange or to be reported by the National
Association of Securities Dealers Automated Quotation System and
the Interests issued to ML Real Estate Associates II under Section
3.3G are to be so listed and quoted or reported, the obligation of
ML Real Estate Associates II to make payments pursuant to the
preceding paragraph shall terminate on the date on which such
Interests are first listed and quoted or reported pursuant to such
election; provided that ML Real Estate Associates II, by prompt
notification to the General Partner, may elect to cause all (but
not less than all) of the Interests issue to ML Real Estate
Associates II under Section 3.3G not to be so listed and quoted or
reported. In the event of such an election by ML Real Estate
Associates II, ML Real Estate Associates II may subsequently
notify the general Partner that such Interests issued to ML Real
Estate Associates II under Section 3.3G shall be so listed and
quoted or reported and the General Partner shall cause such
Interests to be so listed and quoted or reported, provided that ML
Real Estate Associates II shall have agreed to pay all costs and
expenses of such listing and quotation or reporting. Any such
subsequent listing and quotation or reporting of such Interests of
ML Real Estate Associates II shall be treated for purposes of this
Section 4.1 and Section 4.3G as made pursuant to the election of
the General Partner under Section 5.5(i)(a). Except as aforesaid,
the obligation of ML Real Estate Associates II to make payments
under the preceding paragraph shall constitute the personal
obligation of ML Real Estate Associates II, and such obligation
shall continue to exist whether or not ML Real Estate Associates
II owns or holds any additional Limited Partnership Interests at
the time payments are required to be made pursuant to the
preceding paragraph.

Notwithstanding anything to the contrary in the foregoing
provisions of this Section 4.1, on September 30, 1987, subject to
the making by the General Partner of the determination provided
below, a distribution of Cash Flow of the Partnership in an amount
equal to $20,000,000 shall be made to the General Partner and
Arvida/JMB Associates. Such distribution shall be made whether or
not the Partnership receives any Capital Investments with respect
to Additional Limited Partnership Interests in connection with the
public offering contemplated by Section 3.3A. Prior to making
such distribution, the General Partner shall determine that there
is sufficient working capital available or sufficient funds
available from debt financing to permit such distribution to be
made.

SECTION 4.2 Allocation of Profits or Losses

A. The Profits or Losses for each fiscal year of the
Partnership (or portion thereof) during the term of this Agreement
for any period beginning on or after the First Admission Date
shall, except as provided in Sections 4.2F and 4.3G, be allocated
as follows: (i) Profits shall be allocated, with respect to any
such fiscal period, such that the General Partner, each of the
Associate Limited Partners and ML Real Estate Associates II shall
be allocated Profits equal to the amount of Cash Flow actually
distributed to each of them, respectively, for such fiscal period
(without taking into account any distribution made pursuant to
the last paragraph of Section 4.1), except that in all events the
General Partner shall be allocated at least 1% of Profits, and the
Holders (other than ML Real Estate Associates II) shall be
allocated the remaining Profits and (ii) Losses shall be
allocated, with respect to any such fiscal period, 1% to the
General Partners 1% to the Associate Limited Partners
(collectively) and 98% to the Holders, except that, if ML
fungibility is achieved as provided in Section 4.3G, then with
respect to any fiscal period which commences on or after the date
on which Interests are first listed and quoted or reported
pursuant to an election made by the General Partner under Section
5.5J(i)(a), for the purpose of allocating Profits under clause (i)
above. ML Real Estate Associates II shall not be allocated
Profits equal to the amount of Cash Flow actually distributed to
it but instead shall be treated for such purpose as a Holder
(other than ML Real Estate Associates II).

The Profits of the Partnership for each fiscal year of the
Partnership (or portion thereof) during the term of this Agreement
for any period ending prior to the First Admission Date shall,
except as provided in Section 4.2F, be allocated 1% to the General
Partner, 98% to the Associate Limited Partners (collectively), and
1% to the Initial Limited Partner and (commencing on its
acquisition of a Partnership interest under Section 3.3G) ML Real
Estate Associates II, and the Losses of the Partnership for each
such fiscal year (or portion thereof) shall be allocated 70% to
the General Partner, 29% to the Associate Limited Partners
(collectively), and 1% to the Initial Limited Partner and
(commencing on its acquisition of a Partnership interest under
Section 3.3G) ML Real Estate Associates II. Such Profits or
Losses shall be determined on the basis of an interim closing of
the Partnership's books on the First Admission Date.

B. Syndication commissions for any fiscal year of the
Partnership shall be allocated to the Holders of Interests in an
amount equal to the syndication commission actually paid by the
Partnership in connection with the acquisition of the Interest of
such Holder. Such allocation shall take into account the
existence of any discount applicable to the syndication commission
of a particular Holder.

C. No allocation of Losses (which include items thereof)
under Section 4.2A shall be made to any Holder to the extent that
such allocation (a) would create a deficit balance in such
Holder's Capital Account which in absolute amount exceeds the
Minimum Gain allocable to such Holder as of the end of the fiscal
year for which such allocation would be made or (b) in the good
faith judgment of the General Partner and upon advice by the
Partnership's independent certified public accountants or legal
counsel, would otherwise likely not be respected under Section
704(b) of the Code. In any such event, the allocation of such
Losses thereof to such Holder shall be reduced to that extent.

D. Any credits of the Partnership as determined for Federal
income tax purposes for a fiscal year shall be allocated as
Profits of the Partnership in accordance with Section 4.2A. In
the event the adjusted tax basis of any "Section 38 property"
(within the meaning of Section 48 of the Code) of the Partnership
is increased pursuant to Section 48(q)(2) of the Code, such
increase shall be allocated among the Partners (as if such item
were in the nature of income or gain) in the same proportions as
the investment tax credit that is recaptured with respect to such
property is shared among the Partners. Any reduction in the
adjusted tax basis or cost of (or the qualified investment in)
such Section 38 property made pursuant to Section 48(q)(1) of the
Code shall be allocated among the Partners (as if such item were
in the nature of an expense or loss) in the same proportions as
the credit for such Section 38 property is allocated under this
Section 4.2D.

E. Notwithstanding anything to the contrary that may be
expressed or implied in this Agreement, the interest of the
General Partner, in each material item of Partnership income,
gain, loss, deduction or credit will be equal to at least 1% of
each such item at all times during the existence of the
Partnership. In determining the General Partner's interest in
such items, Limited Partnership interests owned by the General
Partner shall not be taken into account.

F. Beginning on and after September 30, 1987, any gain
which is realized by the Partnership (or any partnership or joint
venture through which the Partnership holds Property) on the sale
or other disposition of Property which constitutes Distributed
Gain (as defined below) allocable to such Property shall be
allocated to the General Partner and Arvida/JMB Associates.
"Distributed Gain" with respect to all Properties shall be equal
to an amount equal to (i) the product of the Built-In Gain (as
defined below) multiplied by a fraction, the numerator of which is
the amount of Cash Flow distributed to the General Partner and
Arvida/JMB Associates under the last paragraph of Section 4.1 and
the denominator of which is the Built-In Gain, minus (ii) the
amount of any Profit allocated to the General Partner and
Arvida/JMB Associates pursuant to the third succeeding sentence of
this Section 4.2F. "Built-In Gain" shall be equal to the amount
of net gain which would be realized in the aggregate by the
Partnership for Federal income tax purposes if, on September 30,
1987, all Properties were sold for their fair market value as
determined by the General Partner. The General Partner shall
determine the portion of Built-In Gain attributable to each
Property and shall allocate at such time or times as may be
required under this Agreement Distributed Gain among Properties to
which Built-In Gain is attributable on a proportionate basis based
upon the ratio that the portion of Built-In Gain attributable to
each Property bears to the aggregate Built-In Gain.
Notwithstanding any allocation contained in this Agreement (but
subject to Section 4.2E and the succeeding sentences of this
Section 4.2F), if at any time Profit is realized by the
Partnership, any current or anticipated reduction of the share of
the Partnership's indebtedness (including the Partnership's share
of partnership or joint venture indebtedness) of any, some or all
of the General Partner, Arvida/JMB Associates, Arvida/JMB
Partners or ML Real Estate Associates II or any anticipated cash
distribution to the General Partner, Arvida/JMB Associates,
Arvida/JMB Partners or ML Real Estate Associates II would cause
the deficit balances in absolute amount in the Capital Accounts of
any, some or all of the General Partner, Arvida/JMB Associates,
Arvida/JMB Partners or ML Real Estate Associates II to be greater
than its or their share of the Partnership's indebtedness
(including the Partnership's share of partnership or joint venture
indebtedness) after such reduction or distribution, then the
allocation of Profit under this Article Four to the General
Partner, Arvida/JMB Associates/ Arvida/JMB Partners and ML Real
Estate Associates II shall be increased (to be shared by them in
proportion to the deficit balances in their respective Capital
Accounts) to the extent necessary to cause the deficit balance in
the Capital Account of each of the General Partner, Arvida/JMB
Associates, Arvida/JMB Partners and ML Real Estate Associates II
to be no less than their respective shares of the Partnership's
indebtedness (including the Partnership's share of partnership or
joint venture indebtedness) after such reduction or distribution;
provided, however, that the allocation of Profit contained in this
sentence shall not apply to ML Real Estate Associates II if at the
times as of which such allocation is made ML Fungibility has been
achieved as provided in Section 4.3G, and further provided that to
the extent the amount of Profit allocated under this sentence is
insufficient to cause the deficit balance in the Capital Account
of each of the General Partner, Arvida/JMB Associates, Arvida/JMB
Partners and ML Real Estate Associates II to be no less than their
respective shares of the Partnership's indebtedness (including the
Partnership's share of partnership or joint venture indebtedness)
after such reduction or distribution, such Profit shall be
allocated, until Profit in an aggregate amount equal to
$20,000,000 has been allocated under this Section 4.2F to the
General Partner and Arvida/JMB Associates for the current and
prior Partnership years, first to the General Partner and
Arvida/JMB Associates (in proportion to the respective deficit
balances in their Capital Accounts), in preference and priority to
Arvida/JMB Partners and ML Real Estate Associates II, to the
extent necessary to cause the deficit balance in the Capital
Account of each of the General Partner and Arvida/JMB Associates
to be no less than their respective shares of the Partnership's
indebtedness (including the Partnership's share of partnership or
joint venture indebtedness) after such reduction or distribution.
Not withstanding anything to the contrary in this Agreement (but
after giving effect to Section 8.2 and subject to the last
sentence of this Section 4.2F), if the General Partner or
Arvida/JMB Associates has a deficit balance in its Capital Account
following the Liquidation of its interest in the Partnership, as
determined after taking into account all Capital Account
adjustments for the Partnership taxable year during which such
Liquidation occurs (other than any adjustment for a capital
contribution made pursuant to this sentence) and after adjusting
Capital Accounts for actual or anticipated Profits or Losses
allocable among the Partners in accordance with, or as if there
had been (in accordance with adjustments under the first sentence
of Section 11.4), an actual disposition of the Partnership
properties at their fair market value, the General Partner and
Arvida/JMB Associates will make capital contributions in an
aggregate amount (to be shared by them in proportion to the
deficit balances in their respective Capital Accounts) which is
equal to the smaller of (i) such deficit balances or (ii)
$20,000,000; provided, however, that neither the $20,000,000
amount specified in (ii) nor the General Partner's share of such
amount shall limit any contribution which the General Partner is
required to make under Section 8.2. Such capital contributions
shall be made on or before the end of the Partnership taxable year
during which such Liquidation occurs (or, if later, within 90 days
after the date of such Liquidation). Notwithstanding the
foregoing, if the distributions to the General Partner and
Arvida/JMB Associates under the last paragraph of Section 4.1 were
determined not to cause (without taking into account any Profit or
Loss which might arise from such distribution), in the fiscal year
in which such distribution occurs, an aggregate reduction in their
capital accounts (as determined under Section 704(b) of the Code)
equal to the amount of such distribution, then the first four
sentences of this Section 4.2F shall not apply for any period.

SECTION 4.3 Determination of Allocations and Distributions Among
Partners

A. Any Assignee Holder of an Additional Limited Partnership
Interest who is recognized as such pursuant to Section 7.2 shall
be allocated all Profits or Losses of the Partnership allocable,
and shall be entitled to all Cash Flow distributable, with respect
to such Additional Limited Partnership Interest as herein
provided; provided, however, that without limitation the share of
Profits allocable with respect to Additional Limited Partnership
Interests held by ML Real Estate Associates II shall be as
provided in Sections 4.2A, 4.2F and 4.3G. Except as otherwise
provided in Sections 4.2C, 4.3D, 4.3E, 4.3F and 4.3G and subject
to the proviso in the preceding sentence, all Profits or Losses
allocable with respect to Limited Partnership Interests and,
except as provided in Section 3.3B, all Cash Flow distributable
with respect to Limited Partnership Interests, shall be allocated
or distributed, as the case may be, to each of the Holders of
Interests entitled to such allocation or distribution in the ratio
which the Capital Investments with respect to such Limited
Partnership Interests bear to the aggregate Capital Investments
with respect to all Limited Partnership Interests entitled to such
allocation or distribution.

B. Except as provided in Sections 4.3C, 4.3E and 4.3G, all
Profits or Losses allocable with respect to Limited Partnership
Interests shall be allocated, and all Cash Flow distributable with
respect to Limited Partnership Interests shall be distributed, as
the case may be, to the Holders of Interests recognized as such as
of the last day of the fiscal period for which such allocation or
distribution is to be made.

C. Except in the case of Limited Partnership Interests held
by ML Real Estate Associates II during any fiscal quarter before
or which is the fiscal quarter in which ML Fungibility is achieved
as provided in Section 4.3G, to the extent permitted by law, all
Profits or Losses of the Partnership for a fiscal year allocable
with respect to any Limited Partnership Interest which may have
been transferred during such year shall be allocated between the
transferor and the transferee based upon the number of quarterly
periods that each was the recognized Holder of Interests, without
regard to the results of Partnership operations during particular
quarterly periods of such fiscal year and without regard to
whether cash distributions were made to the transferor or
transferee.

D. Except as provided in the last paragraph of Section 4.1
and subject to the second paragraph of Section 4.1, the General
Partner's and Associate Limited Partners' distributive share of
Cash Flow shall be distributed 10.1% to Arvida/JMB Partners, to
the General Partner in an amount equal to 1% of the total Cash
Flow being distributed at such time under Section 4.1 (i) on 4.1
(ii), as the case may be, and the remainder to Arvida/JMB
Associates. Profits or Losses allocable to the Associate Limited
Partners (collectively) under the second paragraph of Section 4.2A
and Losses allocable to the Associate Limited Partners under the
first<PAGE>
paragraph of Section 4.2A shall be allocated 89.0% to Arvida/JMB
Associates and 11.0% to Arvida/JMB Partners. Except as otherwise
provided in Section 4.2F, distributive shares of Cash Flow and
Distributed Gain allocable to the General Partner and Arvida/JMB
Associates under the last paragraph of Section 4.1 and under
Section 4.2F shall be distributed or allocated, respectively, 1%
to the General Partner and 99% to Arvida/JMB Associates. Profits
or Losses allocable to the Initial Limited Partner and ML Real
Estate Associates II under the second paragraph of Section 4.2A
shall be allocated between them in the ratio of the respective
amounts paid by them for their Partnership Interests at that time.

Notwithstanding anything to the contrary in Section 4.2A and this
Section 4.3D, any Partnership deduction directly resulting from
the receipt of a Partnership Interest by any Partner or Holder
(other than a Holder which is not ML Real Estate Associates II)
shall be allocated entirely to such Partner or Holder.

E. In the event that there are Later Admission Dates, all
Profits or Losses allocable to the Holders of Interests for the
period from the First Admission Date or any such Later Admission
Date through the next succeeding Later Admission Date will be
allocated in accordance with Section 4.3A solely to the Holders of
Interests as of or prior to such preceding First Admission Date or
Later Admission Date. For purposes of this Section 4.3E, Holders
of Interests will be deemed to have acquired their Limited
Partnership Interests on the first day or such other day as the
General Partner may determine of the month in which such
Additional Limited Partnership Interests have been assigned to
such Persons. Profits or Losses incurred for the period from any
such First Admission Date or Later Admission Date through the next
succeeding Later Admission date will be allocated on the basis of
an interim closing of the Partnership's books on such Later
Admission Date. The General Partner may, in its sole and absolute
discretion and at any time, adopt any other convention or
conventions (including without limitation a daily, semi-monthly or
full-month convention) regarding the distribution of Cash Flow or
the allocation of Profits or Losses with respect to any Limited
Partnership Interest that may be or may have been transferred
during any year.

F. Subject to Section 4.2C, if at the time of an allocation
pursuant to Section 42.A of Profits or Losses for a fiscal year of
the Partnership (or portion thereof) during the term of this
Agreement for a period beginning on or after the Final Admission
Date the Capital Accounts with respect to each Limited Partnership
Interest (other than any Limited Partnership Interest held by ML
Real Estate Associates II) are not then equal:

(i) Profits allocated to the Holders (other than ML Real
Estate Associates II) pursuant to Section 4.2A shall be allocated
to the Holder (other than ML Real Estate Associates II) of a
Limited Partnership Interest with a Capital Account which is
smaller in amount (or greater in deficit) than the Capital Account
for any other such Interest (other than any Limited Partnership
Interest held by ML Real Estate Associates II) until the balance
in such Capital Account equals the balance of the Capital Account
of such Limited Partnership Interest (other than any Limited
Partnership Interest held by ML Real Estate Associates II) which
was next smallest in amount (or next greatest in deficit) before
such allocation, and thereafter such Profits shall continue to be
allocated to each successive Holder or groups of Holders of
Interests (other than ML Real Estate Associates II) with Capital
Accounts which are smallest in amount (or greatest in deficit),
until either the balances of all Capital Accounts with respect to
Limited Partnership Interests (other than any Limited Partnership
Interest held by ML Real Estate Associates II) are equal or all
such Profits have been allocated; and

(ii) Losses allocated to the Holders pursuant to Section
4.2A shall be allocated to the Holder (other than ML Real Estate
Associates II) of a Limited Partnership Interest with a Capital
Account which is greater in amount (or smaller in deficit) than
the Capital Account for any other such Interest (other than any
Limited Partnership Interest held by ML Real Estate Associates II)
until the balance in such Capital Account equals the balance of
the Capital Account of such Limited Partnership Interest (other
than any Limited Partnership Interest held by ML Real Estate
Associates II) which was next greatest in amount (or next smallest
in deficit) before such allocation, and thereafter such Losses
shall continue to be allocated to each successive Holder or groups
of Holders of Interests (other than ML Real Estate Associates II)
with Capital Accounts which are greatest in amount (or smallest in
deficit), until either the balances of all Capital Accounts with
respect to Limited Partnership Interests (other than any Limited
Partnership Interest held by ML Real Estate Associates II) are
equal or all such Losses have been allocated.

The foregoing subparagraphs (i) and (ii) shall not apply to,
or with reference to, any Limited Partnership Interest held by ML
Real Estate Associates II.

G. In the event that the General Partner shall elect under
Section 5.5(i)(a) to cause Interests to be listed and quoted on a
United States national exchange or to be reported by the National
Association of Securities Dealers Automated Quotation System and
Interests of ML Real Estate Associates II are so listed and quoted
or reported, to the extent permitted by law and subject to Section
4.2F, for the fiscal year of the Partnership during the term of
this Agreement in which such Interests are first listed and quoted
or reported pursuant to such election, Profits (in the form of
gross income) realized by the Partnership during the portion of
such fiscal year ending on the day immediately preceding the date
on which such Interests are first so listed and quoted or reported
shall be allocated to ML Real Estate Associates II in such amount
as is necessary to cause the Capital Account for each Limited
Partnership Interest held by ML Real Estate Associates II and
issued to it under Section 3.3G to equal the largest balance in
the Capital Account for any Limited Partnership Interest held by a
Holder (other than ML Real Estate Associates II (the completion of
such equalization pursuant to this Section 4.3G or another
provision of this Agreement and such listing and quotation or
reporting is herein referred to as "ML Fungibility"). Such
allocation of Profits (in the form of gross income) to ML Real
Estate Associates II shall be made as of the end of the day
immediately preceding the date on which such Interests are first
listed and quoted or reported pursuant to the aforementioned
election.

ARTICLE FIVE

RIGHTS, POWERS AND DUTIES OF GENERAL PARTNER

SECTION 5.1 Management and Control of the Partnership

A. Subject to the Consent of the Limited Partners where
required by this Agreement, the General Partner, within the
authority granted to it under this Agreement, shall have the
exclusive right to manage the business of the Partnership and is
hereby authorized to take any action of any kind and to do
anything and everything it deems necessary in accordance with the
provisions of this Agreement.

B. No Limited Partner (except one who may also be a General
Partner, and then only in its capacity as General Partner within
the scope of its authority hereunder) shall participate in or have
any control over the Partnership business or shall have any
authority or right to act for or bind the Partnership. The
Limited Partners hereby Consent to the exercise by the General
Partner of the powers conferred on it by this Agreement.

C. The General Partner shall initially, upon completion of
the offering contemplated by the Prospectus, establish Reserves
for working capital and to pay taxes, insurance, Debt Service,
repairs, replacements or renewals, or other costs and expenses
incident to the ownership or operation of the Properties and for
such other purposes, as the General Partner may determine, in an
amount equal to not less than 2% of the Gross Proceeds of the
Offering and thereafter shall maintain such Reserves in such
amounts as the General Partner deems appropriate under the
circumstances from time to time.

D. All of the Partnership's expenses shall be billed
directly to and paid by the Partnership. Reimbursements to the
General Partner or any Affiliates shall not be allowed (other than
for Organization and Offering Expenses, which shall be allowed),
except for (i) the actual cost to the General Partner or such
Affiliates of goods, materials and services used for or by the
Partnership and obtained from entities which are not affiliated
with the General Partner; (ii) salaries and related salary
expenses for administrative services which could be performed
directly for the Partnership by independent parties, such as
legal, accounting, transfer agent, data processing, duplicating
and other such services; (iii) Partnership reports and
communications to investors; (iv) other administrative services,
provided that such services are necessary to the prudent operation
of the Partnership; and (v) reimbursements to Arvida in connection
with its carrying out the duties described in the Management and
Supervisory Agreement authorized in Section 5.2 a (ix) hereof. No
reimbursement under clause (ii) through (v) above shall be
permitted for services for which the General Partner or its
Affiliates receive a separate fee. No reimbursement under clause
(ii) through (iv) above shall be permitted for (a) the salaries of
and related salary expenses incurred by any Controlling Person (as
defined hereinafter) and (b) any indirect general or
administrative overhead expenses, such as rent, travel expenses
and other items generally falling under the category of overhead,
incurred in performing services for the Partnership which are not
directly attributable to such services. "Controlling Person" for
purposes of this Section 5.1D shall mean any Person, regardless of
title, who performs executive or senior management functions for
the Sponsor or the General Partner similar to those of directors,
executive management and senior management, or any Person who
either holds a 5% or more equity interest in the Sponsor or the
General Partner or has the power to direct or cause the direction
of the Sponsor or the General Partner, whether through the
ownership of voting securities, by contract, or otherwise, or, in
the absence of a specific role or title, any Person having the
power to direct or cause the direction of the management level
employees and policies of the Sponsor or the General Partner. It
is not intended that every Person who carries a title such as vice
president, senior vice president, secretary or treasurer be
included in the definition of Controlling Person. In no event
shall any amount charged to the actual cost of such services or
(b) in the case of reimbursements under clause (ii) through (iv)
above 90% of the amount which the Partnership would be required to
pay to independent parties for comparable services. In the
Partnership's annual report to Limited Partners, there shall be
provided an itemized breakdown of reimbursements made pursuant to
this Section 5.1D. The reimbursement for expenses provided for in
this Section 5.1D shall be made regardless of whether any
distributions are made to the Limited Partners under the
provisions of Section 4.1. The provision of any goods, material
or services for which reimbursements are authorized under Section
5.1D(i) shall be set forth in a written contract which precisely
describes the goods, materials or services to be provided and all
compensation therefor. Such contract shall provide that it may be
modified only with the consent of Limited Partners holding a
majority of the then outstanding Limited Partnership Interests
(except as to immaterial or conforming modifications, which shall
require only the consent of the General Partner) and that it shall
be terminable by either party, without penalty, upon sixty (60)
days' prior written notice.

E. In the event the General Partner deems the approximately
200-acre site near Sarasota which is owned by an existing joint
venture in which the Partnership owns an interest to be suitable
for development as a regional shopping mall or other shopping
center, development of such Property may be done jointly with
Affiliates of JMB. In the event of such a development through a
joint venture with Affiliates of JMB, the existing joint venture's
interest in the land would be valued at its appraised fair market
value, and the Affiliate would make a pro rata cash contribution.
All other contributions would be strictly pro rata. Such joint
venture development shall not be entered into by the Partnership
unless (x) there are no duplicate property management or other
fees, and (y) the Partnership and such Affiliate each enjoy a
right of first refusal as regards the sale of the equity interest
of the other.

SECTION 5.2 Authority of the General Partner

A. Except to the extent otherwise provided herein, the
General Partner, for, and in the name and on behalf of, the
Partnership is hereby authorized:

(i) to acquire, either directly or indirectly through
any joint venture, joint participation, partnership (other than
any public or privately offered limited partnership) or otherwise,
by purchase, lease, exchange or otherwise any real or personal
property (including the Properties) which may be necessary,
convenient or incidental to the accomplishment of the purposes of
the Partnership; provided, however, that real properties shall not
be acquired at an aggregate purchase price in excess of their
aggregate appraised value as determined by appraisals prepared by
competent independent appraisers, and further provided that
investments by the Partnership in other partnerships or ventures
shall be limited to partnerships or ventures which own and operate
(directly or through an interest in another partnership or joint
venture) a particular Property in which the Partnership (either
alone or with an Affiliate of the General Partner) acquires a
controlling interest and which do not involve duplicate property
management or other fees;

(ii) to operate, maintain, finance, improve, own,
grant options with respect to, sell, convey, assign, mortgage,
exchange or lease and to cause to have constructed any real estate
and any personal property necessary, convenient or incidental to
the accomplishment of the purposes of the Partnership and to
perform construction work or hire contractors to perform
construction work in connection with any of the foregoing:

(iii) to execute any and all agreements, contracts,
documents, certifications and instruments necessary or convenient
in connection with the development, management, maintenance and
operation of the Properties;

(iv) to borrow money and issue evidences of
indebtedness necessary, convenient or incidental to the
accomplishment of the purposes of the Partnership, and to secure
the same by mortgage, pledge or other lien on any Properties or
other assets of the Partnership; provided, however, that in
connection with the borrowing of money, recourse for the repayment
of which is limited solely to property of the Partnership, no
lender shall be granted or acquire, at any time as a result of
making such a loan, any direct or indirect interest in the
profits, capital or property of the Partnership other than as a
secured creditor;

(v) to execute, in furtherance of any or all of the
purposes of the Partnership, any deed, lease, mortgage, mortgage
note, bill of sale, contract or other instrument purporting to
convey, exchange or encumber the real or personal property of the
Partnership;

(vi) to prepay in whole or in part, refinance, recast,
increase, modify or extend any mortgages affecting the Properties
and in connection therewith to execute any extensions or renewals
of mortgages on any of the Properties;

(vii) to execute an agency agreement with Merrill
Lynch, Pierce, Fenner & Smith Incorporated pursuant to which said
firm would assist the Partnership in the sale of Interests and
pursuant to which the Partnership would agree, subject to the
final four sentences of Section 5.8, to indemnify and hold
harmless said firm or any selected dealer from any liability
incurred by it in so acting as agent for the Partnership;

(viii) to deal with, or otherwise engage in business
with, or provide service to and receive compensation therefor
from, any Person who has provided or may in the future provide any
services to, lend money to, sell property to, or purchase property
from, any Affiliate of the General Partner; provided, however,
that no such dealing, engaging in business or providing services
may involve any direct or indirect payment by the Partnership of
any rebate or any reciprocal arrangement which would have the
effect of circumventing any restriction set forth herein upon
dealings with Affiliates of the General Partner;

(ix) to execute the Management and Supervisory
Agreement with Arvida;

(x) to, in its sole discretion, make or revoke (and in
the case of any partnership or joint venture through which the
Partnership holds an interest in property, cause to be made or
revoked) the election referred to in Section 754 of the Code;

(xi) to request such information from any Holder as
may be reasonably required (as determined by the General Partner)
to comply with any Federal, state or local tax laws;

(xii) to, in its sole discretion, designate itself or
any other General Partner as the Tax Matters Partner within the
meaning of Section 6231(a)(7) of the Code;

(xiii) to engage in any kind of activity and to
perform and carry out contracts of any kind necessary to, or in
connection with, or incidental to the accomplishment of the
purposes of the Partnership, as may be lawfully carried on or
performed by a partnership under the laws of each state in which
the Partnership is then formed or qualified; and

(xiv) to obtain consulting services from ML Real
Estate Associates II or its Affiliates.

In the case of the making or revocation of any election under (x)
above or any designation under (xii) above, each of the Partners
will, upon request, supply such information and execute such
documents as are necessary to effectuate such election or
revocation, or such designation. In the case of any request for
information under (xi), any Holder to which any such request is
sent shall comply with such request.

B. Any Person dealing with the Partnership or the General
Partner may rely upon a certificate signed by the General Partner,
thereunto duly authorized, as to:

(i) the identity of any General Partner or Limited
Partner hereof;

(ii) the existence or non-existence of any fact or
facts which constitute a condition precedent to acts by a General
Partner or which are in any other manner germane to the affairs of
the Partnership;

(iii) the Persons who are authorized to execute and
deliver any instrument or document of the Partnership; or

(iv) any act or failure to act by the Partnership or
as to any other matter whatsoever involving the Partnership or any
Partner.

C. The General Partner shall maintain in its records for
at least five years any appraisal required to be obtained under
the provisions of clause (i) of section 5.2A.

SECTION 5.3 Authority of Partners to Deal with Partnership

A. Without limitation upon the other powers set forth
herein, the General Partner is expressly authorized (and where
indicated, directed), in the name of and on behalf of the
Partnership, to do the following:

(i) The General Partner shall commit a percentage of
Gross Proceeds of the Offering to Investment in Properties which,
at a minimum, is equal to the greater of: (i) 80% of the Gross
Proceeds of the Offering reduced by .1625% for each 1% of the
aggregate indebtedness of the Partnership; or (ii) 67% of Gross
Proceeds of the Offering. For purposes of this calculation,
"aggregate indebtedness" is the percentage resulting when such
aggregate indebtedness is divided by the aggregate purchase price
of all Properties, excluding Front-End Fees. If the Front-End
Fees must be reduced for the Partnership to commit the minimum
percentage of Gross Proceeds of the Offering to Investment in
Properties as set forth above, the General Partner shall cause JMB
or its Affiliates to reimburse the Partnership for the amount of
any such excess Acquisition Fees and Acquisition and Financing
Guaranty Fee received by them.

(ii) The General Partner may enter into an agency
agreement with Merrill Lynch, Pierce, Fenner & Smith Incorporated
providing for the payment of commissions to JMB Securities
Corporation for participating as a selected dealer in the offering
of Additional Limited Partnership Interests to the public pursuant
to Section 3.3; provided, however, that there shall be no selling
commissions paid or received by any Person in connection with the
sale of Additional Limited Partnership Interests to (and for the
account of) any Assignee Holder who is the General Partner, an
Affiliated Person of the General Partner or an officer, director,
shareholder, employee or partner thereof.

(iii) The General Partner may, subject to the
conditions of this Agreement, enter into agreements with and pay
fees to JMB or other Affiliated Persons of the General Partner in
consideration of property management and leasing services
respecting commercial and industrial Properties which are
necessary to the prudent operation of the Partnership (it being
understood and agreed that the provision of such property
management and leasing services does not constitute a part of the
duties or obligations of the General Partner as a general partner
of the Partnership); provided, however, that the General Partner
shall not enter into any agreement for property management with an
Affiliate on terms less favorable to the Partnership than those
customarily charged for similar services in the relevant
geographical area and in no event shall fees to an Affiliate of
the General Partner for property management and leasing services
exceed the following schedule:

(a) in the case of industrial or commercial
Property other than that described in the following subparagraph
(b), the maximum fee from such Property shall be 6% of the gross
receipts from the Property being managed where the Affiliate of
the General Partner performs leasing, re-leasing and leasing-
related services, and the maximum fee shall be 3% of gross
receipts from the Property being managed if the Affiliate of the
General Partner does not perform leasing, re-leasing and leasing-
related services with respect to the Property; and

(b) in the case of industrial or commercial
Properties which are leased for ten or more years on a net (or a
similar) basis, the maximum fee shall be 1% of the gross receipts
from the Property being managed, except for a one-time initial
leasing fee of 3% of the gross receipts on each lease payable over
the first five full years of the original term of the lease.

Where a property management agreement with an
Affiliate has been entered into with respect to a Property, no
fees in addition to those payable to such Affiliate under such
agreement shall be paid by the Partnership to any Persons in
consideration of their performance of property management,
bookkeeping services or other property management services with
respect to the same Property. Any property management agreements
with Affiliates shall be terminable by either party, without
penalty, upon sixty (60) days' prior written notice and may be
modified only with the consent of the Holders of the majority of
the Interests (except as to immaterial or conforming amendments
which shall require only the consent of the General Partner).

(iv) The General Partner may pay or cause to be paid
brokerage commissions to JMB Insurance Agency, Inc. or other
Affiliated Persons of the General Partner in connection with
insurance covering the Properties subject to the conditions that:
(a) before any such brokerage services are provided, there will
have been received quotations from two independent insurance
brokers or carriers or underwriters relating to the proposed
coverage, which quotations shall be upon coverage and terms
comparable to those proposed to be provided by JMB Insurance
Agency, Inc., and such agency shall not provide such insurance
brokerage services unless it can obtain such insurance at a cost
which is no greater than the lower of the two unaffiliated
entities; (b) if at any time JMB Insurance Agency, Inc. ceases to
derive at least 75% of its income from its business with entities
which are not sponsored by JMB and its Affiliates, JMB Insurance
Agency, Inc. shall not earn income from any additional insurance
placements on behalf of the Partnership or any Property then owned
by it; and (c) any agreement with Affiliates to provide insurance
brokerage services to the Partnership shall be terminable by
either party, without penalty, upon sixty (60) days' prior written
notice.
(v) The General Partner may, in the event that Gross
Proceeds of the Offering are less than $325,000,000, in its
discretion, (a) obtain additional financing to pay the costs of
owning the Properties; (b) if the additional financing under the
immediately preceding clause (a) is insufficient, to enter into a
joint venture or joint participation with an Affiliate or
Affiliates of the General Partner which would provide for the
ownership of such Properties on a pro rata basis; provided,
however, that with respect to such investment with an Affiliate,
(s) the Partnership and such Affiliate, considered together, have
or acquire a controlling interest in any ventures or partnerships
which own the Properties, (t) there are no duplicate property
management or other fees, (u) the Partnership's investment is on
substantially the same terms and conditions as the investment of
such Affiliate, (v) the purchase price of the Partnership's
investment has been confirmed by independent appraisal as not
greater than the appraised value of such investment, (w) such
investment shall not result in the breach, abrogation or
circumvention of any of the terms, conditions or provisions of
this Agreement, (x) the investments are not in publicly or
privately offered limited partnerships or other publicly offered
real estate investment entities, (y) the compensation to the
General Partner, JMB and their Affiliates received attributable to
such investment is substantially identical to the compensation
received by the general partners and sponsors of such Affiliate
and by the Affiliates of such general partners and sponsors
attributable to such investment, and (z) the Partnership and such
Affiliate must each enjoy a right of first refusal as regards the
sale of the equity interest of the other.

(vi) The General Partner may, notwithstanding any
other provision of this Agreement, pay or cause to be paid to an
Affiliate allocable reimbursements of overhead expenses with
respect to any Partnership Property being developed pursuant to
Section 5.1E as a mall or shopping center through a joint venture
with one or more Affiliates of JMB, together with development fees
in connection therewith in an amount equal to the lesser of 5% of
the cost of development or the amount which would be charged by an
independent third party rendering comparable services; provided,
however, that such joint venture shall obtain a report from an
independent appraiser of the appraised value of the mall or
shopping center upon completion of the Property; provided,
further, that to the extent that the actual costs of development,
including the development fees paid to such Affiliate, exceed such
appraised value of the project, the development fees will be
remitted by such Affiliate to the Partnership to the extent of the
excess, if any, of such development costs over such appraised
value. Development services provided by such Affiliate shall be
embodied in a written contract which describes the terms thereof
and the compensation to be paid therefor. Such contract shall be
terminable by either party, without penalty, upon sixty (60) days'
written notice, and may be modified only with the consent of the
Holders of the majority of the Interests (except as to immaterial
or conforming amendments which shall only require the consent of
the General Partner). Such contract shall be disclosed to all
Partners in the reports provided pursuant to Sections 9.4A and
9.4C (stating the compensation paid to such Affiliate). Such
Affiliate must be independently engaged in performing development
services rendered for the development of shopping malls or
shopping centers.

(vii) The validity of any transaction, agreement or
payment involving the Partnership and the General Partner or any
Affiliate thereof not otherwise prohibited by the terms of this
Agreement shall not be affected by reason of the relationship
between the Partnership and the General Partner or such Affiliate.

All transactions, agreements or payments involving the Partnership
and the General Partner or any Affiliate thereof shall be on terms
no less favorable to the Partnership than those available to the
Partnership in similar dealings with unaffiliated third parties.

B. The General Partner shall be subject to the following
prohibitions: (i) except to the extent that related commissions
inure to the benefit of the Partnership neither the General
Partner nor any Affiliate of the General Partner shall be given
the exclusive right to sell or exclusive employment to sell any
Community Property of the Partnership and no amounts shall be
computed under Section 4.1 as 2% of the selling price of a
Community Property under Section 4.1(ii) unless the General
Partner or Affiliates of the General Partner perform substantial
services in connection with the sale of a Community Property; (ii)
neither any General Partner nor any Affiliated Person of the
General Partner shall receive directly or indirectly a commission
or fee in connection with the reinvestment of the proceeds of the
sale, exchange or refinancing of any Property; (iii) neither any
General Partner nor any Affiliated Person of the General Partner
shall loan money to the Partnership unless (a) the principal
amount of such financing shall be scheduled to be paid over a
period of less than 48 months, and more than 50% of the principal
amount of such financing shall be scheduled to be paid during the
first 24 months and (b) the interest rates and other finance
charges and fees shall not be in excess of the lessor of (x) if
the loan was made in connection with a particular Property, the
amounts that are charged by unrelated banks on comparable loans
for the same purpose in the locality of the Property in connection
with which the loan was made or (y) the rate per annum equal to 2%
plus the reference rate of Continental Illinois National Bank and
Trust Company of Chicago, or provide permanent financing to the
Partnership on a Property owned by the Partnership or make loans
with a prepayment charge or penalty which are evidenced or secured
by either a first or junior or all-inclusive note or mortgage
except to the extent that such prepayment charge or penalty is
attributable to an underlying encumbrance. In the event the
Partnership utilizes any all-inclusive note, said note shall
provide that (a) the Partnership shall receive credit on its
obligation under said note for payments made by the Partnership
directly on the underlying encumbrance; (b) that a bank, escrow
company or other paying agent shall collect payments (other than
amounts not to be applied to the underlying encumbrance) on the
all inclusive note and make disbursements therefrom to the holder
of the underlying encumbrance prior to making any disbursement to
the holder of the all-inclusive note or, in the alternative, all
payments on the all-inclusive note and underlying notes shall be
made directly by the Partnership; and (c) the rate of any interest
charged by the General Partner or an Affiliated Person on such
all-inclusive note will not exceed the rate of interest payable to
the holder on the underlying encumbrance.

C. Any agreements, contracts and arrangements with the
General Partner or Affiliated Person of the General Partner
permitted by Section 5.3(iii) and Section 5.3A(vii) (with respect
to both such sections to the extent not otherwise specifically
authorized in this Agreement) shall be subject to the following
conditions:

(i) any such agreements, contracts or arrangements
shall be embodied in a written contract which describes the
subject matter thereof and all compensation to be paid therefor;

(ii) no rebates or "give-ups" may be received by the
General Partner or any such Affiliated Person, nor may the General
Partner or any such Affiliated Person participate in any
reciprocal business arrangements which would have the effect of
circumventing any of the provisions of this Agreement;

(iii) neither the General Partner (in any capacity
other than a General Partner) nor any such Affiliated Person may
act as paying or purchasing agent for the Partnership and no funds
of the Partnership may be paid to the General Partner or any such
Affiliated Person by way of reimbursement for Partnership expenses
other than Organization and Offering Expenses or expenses as
permitted by Section 5.1D and the amount of compensation paid to
the General Partner or any such Affiliated Person may not exceed
90% of the amount which the Partnership would be required to pay
to independent parties;

(iv) any such agreements, contracts or arrangements
shall be fully and promptly disclosed to all Partners in the
reports provided in Sections 9.4A and 9.4C (stating the
compensation to be paid by the Partnership);

(v) any such agreements, contracts or arrangements
shall be terminable by either party, without penalty, upon sixty
(60 days' prior written notice and may be modified only with the
Consent of the Holders of a majority of the Interests (except as
to immaterial or conforming amendments which shall only require
the consent of the General Partner); and

(vi) the General Partner or the Affiliated Person
performing the services for the Partnership previously shall have
been independently engaged in performing services of the type to
be performed for the Partnership for a period of at least two
years.

SECTION 5.4 Restrictions on Authority of General Partner

A. Without the Consent of all the Limited Partners, the
General Partner shall not have the authority to:

(i) do any act in contravention of this Agreement;

(ii) do any act which would make it impossible to
carry on the ordinary business of the Partnership;

(iii) confess a judgment against the Partnership;

(iv) possess Partnership Property, or assign its
rights in specific Partnership Property, for other than a
Partnership purpose;

(v) admit a Person as a General Partner, except as
provided in this Agreement;

(vi) admit a Person as a Limited Partner, except as
provided in this agreement;

(vii) knowingly perform any act that would subject any
Limited Partner to liability as a general partner in any
jurisdiction; or

(viii) invest in junior trust deeds or similar
obligations, except that the Partnership may advance a portion of
the purchase price of a Property to the seller in the form of a
loan, the except that junior trust deeds or similar obligations
may be taken back from purchasers of Properties in connection with
the sale thereof by the Partnership.

B. Except as provided in Section 5.5J and subject to
Section 10.3, without the Consent of a majority in interest of the
Limited Partners, the General Partner shall not have the authority
to:

(i) sell or otherwise dispose of all or substantially
all of the Partnership's real property developments and
investments in real property (except for the sale or other
disposition of real property developments or investments in real
property (or portions thereof) in the ordinary course of business
as contemplated by the Prospectus, including the sale or other
disposition of the final real property development or investment
in real property remaining as a result of such sales or
dispositions); or

(ii) elect to dissolve the Partnership.

C. The General Partner on behalf of the Partnership shall
not purchase, lease or acquire any Property from any General
Partner or any Affiliated Person of any General Partner or from
any Person in which any General Partner or any Affiliated Person
of any General Partner has a material interest. Notwithstanding
the foregoing, the General Partner or an Affiliate may purchase
Property in its own name, and assume loans in connection therewith
and temporarily hold title thereto for the purpose of facilitating
the acquisition of such Property or the borrowing of money or
obtaining of financing for the Partnership, or completion of
construction of the Property, provided that such Property is
purchased by the Partnership for an investment no greater than the
cost of such Property to the General Partner (or such Affiliate),
that there is no amendment to the stated interest rate of any note
secured by such Property between the time it is acquired by the
General Partner (or such Affiliate) and the time it is acquired by
the Partnership and that no other benefit directly or indirectly
arising out of such transaction (other than those incidental to
the ownership of the property during the time it was held by the
General Partner or such Affiliate) is received by any General
Partner or Affiliated Person thereof apart from compensation
otherwise permitted by this Agreement. Except as otherwise
provided herein, the Partnership shall not sell Property to any
General Partner or any Affiliated Person of a General Partner.
The General Partner or its Affiliates may lease office space in
Properties; provided, however, that any such lease (a) shall be
for rentals and on terms not less favorable to the Partnership
than those available to the Partnership from unaffiliated tenants,
(b) shall be terminable on 60 days' prior written notice by the
Partnership without penalty and (c) shall provide that any rentals
from subleases relating thereto which are in excess of the rentals
from such lease shall be paid to the Partnership and, provided
further, that no more than 3% of the office space of the
Properties shall be leased to JMB or its Affiliates (other than
the Partnership and Arvida). The Partnership shall not make any
loans to any General Partner or any Affiliate of the General
Partner nor to any other Person except as provided in Section
5.4A(viii). The foregoing provision shall not, however, prohibit
(i) transfers incident to the formation of joint ventures with
Affiliates of the General Partner permitted by Sections 5.1E and
5.3A(v), (ii) the making of loans or advances by the Partnership
to a joint venture partnership which owns a particular property as
provided for in Section 5.2A(i) or (iii) advancing a portion of
the purchase price of a Property to a seller which is not an
Affiliated Person of the General Partner in the form of a loan.

D. The General Partner shall not on behalf of the
Partnership acquire any Property (other than cash) in exchange for
Interests in the Partnership.

E. The General Partner, in its capacity as such, or in its
capacity as a general partner in any partnership or joint venture
which may hold title to any Property under Section 5.3A(v), shall
not do or cause the Partnership to do, any act which would not be
permitted under this Agreement to be done by it as the General
Partner if title to such Property were held directly by the
Partnership, and shall, in general, act, and cause the Partnership
to act, in such capacity in the same manner as if title to such
Property were held directly by the Partnership.

SECTION 5.5 Duties and Obligations of the General Partner

A. The General Partner shall take action which may be
necessary or appropriate (i) for the continuation of the
Partnership's valid existence as a limited partnership under the
laws of the State of Delaware (and of each other jurisdiction in
which such existence is necessary to the limited liability of the
Limited partners or to enable the Partnership to conduct the
business in which it is engaged) and (ii) for the acquisition,
development, maintenance, preservation and operation of the
Properties as contemplated by the Prospectus in accordance with
the provisions of this Agreement and applicable laws and
regulations (it being understood and agreed, however, that the
performance of day-to-day development and property management
services for specific Properties is not the obligation of the
General Partner of the Partnership).

B. The General Partner shall devote to the Partnership such
time as may be necessary for the proper performance of its duties
hereunder, but neither the officers nor the directors of the
General Partner shall be expected to devote their full time to the
performance of such duties.

C. The General Partner shall at all times use its best
efforts to maintain its net worth at a sufficient level to meet
all requirements of the Code, under currently applicable rulings,
regulations and policies of the Internal Revenue Service and as
hereafter interpreted by the Internal Revenue Service, any agency
of the Federal government or the courts, to assure that the
Partnership will be classified for Federal income tax purposes as
a partnership and not as an association taxable as a corporation,
and shall, irrespective of such requirements, maintain its net
worth at an amount at least equal to the lessor of 10% of the
aggregate capital contributions to the Partnership or $25,000,000.

The General Partner shall use its best efforts to cause JMB
Holdings Corporation to comply in all respects with the terms of
its obligation which shall be comparable to the General Partner's
obligation and which shall be set forth in a written commitment of
JMB Holdings Corporation to be received by the Partnership prior
to the issuance of Additional Limited Partnership Interests under
Section 3.3A.

D. The General Partner shall take such action as may be
necessary or appropriate in order to form or qualify the
Partnership under the laws of any jurisdiction in which the
Partnership is doing business or in which such formation or
qualification is necessary in order to protect the limited
liability of the Limited Partners or in order to continue in
effect such formation or qualification. The General Partner shall
file or cause to be filed for recordation in the office of the
appropriate authorities of the State of Delaware, and in the
proper office or offices in each other jurisdiction in which the
Partnership is formed or qualified, such certificates (including
limited partnership and assumed name certificates) and other
documents as are required by the applicable statutes, rules or
regulations of any such jurisdiction or are required to reflect
the identity of the Partners and the amounts of the Capital
Investments with respect to the Interests.

E. The General Partner shall prepare or cause to be
prepared and shall file on or before the due date (or any
extension thereof) any Federal state or local information or tax
returns required to be filed by the Partnership. The General
Partner shall cause the Partnership to pay any taxes payable by
the Partnership unless the General Partner determines in its sole
discretion to contest the payment of such taxes.

F. The General Partner shall obtain and keep in force
during the term hereof fire and extended coverage, workmen's
compensation and public liability insurance in favor of the
Partnership with such insurers and in such amounts as the General
Partner shall deem advisable, but in amounts not less ( and with
deductible amounts not greater) than those customarily maintained
with respect to properties comparable to the Properties.

G. The General Partner shall be under a fiduciary duty to
conduct the affairs of the Partnership in the best interests of
the Partnership and of the Limited Partners, including the
safekeeping and use of all Partnership funds and assets for the
exclusive benefit of the Partnership, whether or not in its
immediate possession or control.

H. In the case of any vote, Consent or other action by the
Limited Partners pursuant to the terms of this Agreement which
shall become binding upon the General Partner, the General
Partner, in acting on behalf of the Partnership in the
Partnership's capacity as a partner in any partnership or joint
venture which may hold title to any Property, shall, to the extent
permitted by the partnership agreement relating to such
partnership or joint venture, take corresponding or identical
action or cause an Affiliate of the General Partner in its
capacity as a general partner of such partnership or joint venture
to take such action pursuant to the terms of the partnership
agreement relating to such partnership or joint venture and, in
general, shall not act on behalf of the Partnership in such
capacity in a manner inconsistent with any such vote, Consent or
other action pursuant to this Agreement.

I. The General Partner shall use its best efforts to
assure that the Partnership shall not be deemed an investment
company as such term is defined in the Investment Company Act of
1940.

J. (i) The General Partner shall elect to pursue one of the
following courses of action: (a) to cause the Interests of the
Holders to be listed and quoted on a United States national
exchange or to be reported by the National Association of
Securities Dealers Automated Quotation System (which may be done
at any time on or prior to the date ten years from the Offering
Termination Date); (b) to purchase, or to cause JMB or its
Affiliates to purchase, on the date ten years from the offering
Termination date all of the Interests of the Holders at their ten
appraised fair market value in accordance with the procedure set
forth in subparagraph (ii) below; or (c) to commence a liquidation
phase on the date ten years from the Offering Termination date
which liquidation shall be completed within fifteen years after
the Offering Termination Date; provided, however, that if the
General Partner elects to pursue the course of action set forth in
clause (a) above, the General Partner shall have the authority to
cause the Interests of the Holders to be delisted or otherwise not
so listed and quoted if the General Partner determines that such
listing or quoting may result in adverse tax consequences to the
Partnership or any Holder.

(ii) In the event that the General Partner elects to
purchase, or to cause JMB or its Affiliates to purchase, all of
the Interests of the Holders on the date ten years from the
Offering Termination Date, an independent appraiser shall be
selected by ML Real Estate Associates II and proposed by the
General Partner for approval by the Limited Partners. Such
appraiser shall be deemed approved by the Limited Partners unless
objected to in writing by the Holders of a majority of the then
outstanding Limited Partnership Interests within 45 days after
Notification thereof is sent by the General Partner. The
appraisal shall be requested by the General Partner sufficiently
in advance to be received by the date ten years from the Offering
Termination Date. The appraisal shall value the Interests as
limited partnership interests in the Partnership with all of the
rights and obligations pertinent thereto. The cost of obtaining
the appraisal shall be borne equally by the Partnership and the
purchaser of the Interests. The General Partner shall then submit
the appraisal of the value of the Interests to an independent
nationally-recognized investment banking firm or real estate
advisory company, which shall be retained by the General Partner
specifically with respect to the determination of such value. The
purchase of the Interests shall not be consummated unless the
General Partner has obtained from such investment banking firm or
real estate advisory company a letter of opinion, addressed to the
Partnership, concluding that the appraised fair market value and
the terms of the purchase are fair to the Holders of Interests.
The General Partner shall have 120 days from receipt of a
favorable letter of opinion to purchase, or to cause JMB or its
Affiliates to purchase, the Interests from the Holders at their
appraised fair market value.

(iii) In the event the General Partner elects to commence a
liquidation phase of the Partnership on the date ten years from
the Offering Termination Date as provided in subparagraph (i)
above, JMB and its Affiliates will be permitted to purchase at
appraised fair market value any of the interests held by the
Partnership in Properties in which JMB or any of its Affiliates
(other than the Partnership) has an interest. The purchase price
for the interest of the Partnership shall be determined by
independent appraisal in the same manner as set forth in
subparagraph (ii) above; provided, however, that the General
Partner may not permit the sale of such interest of Partnership to
JMB or any Affiliate unless and until the Partnership has received
a letter of opinion from an independent nationally recognized
investment banking firm or real estate advisory company, addressed
to the Partnership, to the effect that the appraised sales price
and the other terms of the purchase are fair to the Partnership.

K. In the event Arvida uses any goods, services or
facilities of the Partnership in connection with any developments
or activities in which the Partnership does not own an interest,
then the General Partner shall require Arvida to reimburse the
Partnership for its allocable cost of such services or assets to
the extent the Partnership does not own an interest in such
development or activity.

SECTION 5.6 Compensation of General Partner

The General Partner shall not in its capacity as General
Partner receive any salary, fees, profits or distributions except
profits, distributions, fees and allocations to which it may be
entitled under Articles Four, Five, Eight and Eleven, it being
understood, however that the Partnership is obligated to pay JMB
or its Affiliates an Acquisition and Financing Guaranty Fee equal
to $20,000,000 (subject to reduction as provided below) for
services of JMB and such Affiliates in negotiating and arranging,
and guaranteeing repayment of certain indebtedness and certain
other obligations incurred in connection with, the acquisition of
the assets by the Partnership under the Acquisition Agreement.
The obligation to pay such fee in the event at least the minimum
offering amount under Section 3.3A is obtained will be required to
be satisfied as follows: on or about each Admission Date, the
Partnership shall pay to JMB or its Affiliates a portion of the
maximum amount of such Acquisition and Financing Guaranty Fee
based upon the ration that the number of Additional Limited
Partnership Interests being issued under Section 3.3A on such
Admission Date bears to 325,000; to the extent that less than an
aggregate of 325,000 Additional Limited Partnership Interests are
issued under Section 3.3A for all Admission dates, the
corresponding proportion of the Acquisition and Financing
Guaranty Fee will not be paid by the Partnership. In no event
shall the total of the Acquisition and Financing Guaranty Fee paid
to JMB or its Affiliates plus any Acquisition Fees paid to all
parties exceed the lesser of (a) the compensation customarily
charged in arm's-length transactions by others rendering similar
services as an ongoing public activity in the same geographical
location and for comparable property or (b) an amount equal to 18%
of the Capital Investments in the Partnership.

SECTION 5.7 Other Business of Partners

Any Partner may engage independently or with others in
business venturers of every nature and description, including,
without limitation, the rendering of advice or services of any
kind to other investors and the making or management of other
investments. Nothing in this Agreement shall be deemed to
prohibit the General Partner or any Affiliate of the General
Partner or any officer, director, employee, shareholder or partner
of the General Partner or any such Affiliate from dealing, or
otherwise engaging in business with, Persons transacting business
with the Partnership or from providing service relating to the
purchase, sale, management, development or operation of real
property and receiving compensation therefor, not involving any
rebate or reciprocal arrangement which would have the effect of
circumventing any restriction set forth herein upon dealing with
Affiliates of the General Partner. Neither the Partnership nor
any Partner shall have any right by virtue of this Agreement or
the partnership relationship created hereby in or to such other
ventures or activities or to the income or proceeds derived
therefrom, and the pursuit of such ventures shall not be deemed
wrongful or improper. Except as provided in the Management and
Supervisory Agreement referred to in Section 5.2 a (ix), neither
the General Partner nor any Affiliate of any General Partner shall
be obligated to present any particular investment opportunity to
the Partnership. The General Partner and Limited Partners agree
that the Partners have no right to expect that the Partnership's
Properties will consist of anything other than the assets acquired
in connection with the Acquisition Agreement and the interest of
the Partnership in future communities as described in and subject
to the terms and limitations set forth in the Management and
Supervisory Agreement.

SECTION 5.8 Limitation on Liability of General Partner;
Indemnification

Neither the General Partner nor any affiliate (for purposes
of this Section 5.8 hereof "affiliate" shall mean any person
performing services on behalf of the Partnership who (1) directly
controls, is controlled by, or is under common control with, the
General Partner or the Associate Limited Partners; or (2) owns or
controls 10% or more of the outstanding voting securities of the
General Partner or the Associate Limited Partners; or (3) is an
officer, director, partner or trustee of the General Partner or
the Associate Limited Partners; or (4) if the General Partner is
an officer, director, partner or trustee, any company for which
the General Partner acts in any such capacity) thereof engaged in
the performance of services on behalf of the Partnership (the
"Indemnified Parties") shall be liable, responsible or accountable
in damages or otherwise to any Holder for any act or omission
performed or omitted by such Indemnified Party pursuant to the
authority granted to such Indemnified Party by this Agreement or
by law if the General Partner or its affiliates have determined,
in good faith, that the act or omission which caused the loss or
liability was in the best interests of the Partnership and such
liability was not the result of misconduct or negligence. The
Partnership shall indemnify and hold harmless each Indemnified
Party from and against any loss or liability suffered or sustained
by him by reason of any acts, omissions or alleged acts or
omissions arising out of his activities on behalf of the
Partnership or in furtherance of the interests of the Partnership,
including, but not limited to, any judgment, award, settlement,
reasonable attorneys' fees and other costs or expenses incurred in
connection with the defense of any pending or threatened action,
proceeding or claim and including any payments made by the General
Partner to any of its officers or directors who are affiliates
pursuant to an indemnification agreement no broader than this
Section 5.8; provided that the General Partner or its affiliates
have determined, in good faith, that the act or omission which
caused the loss or liability was in the best interests of the
Partnership and such loss or liability was not the result of
misconduct or negligence by such Indemnified Party. The
satisfaction of any indemnification and any saving harmless shall
be from thereof. Notwithstanding the foregoing, the Indemnified
Parties and any person acting as a broker-dealer shall not be
indemnified for any loss or damage incurred by them in connection
with any claim involving allegations that Federal or state
securities laws were violated, unless: (1) there has been a
successful adjudication on the merits of each count involving
alleged securities law violations and a court approves
indemnification of litigation costs; (2) such claim has been
dismissed, with prejudice on the merits, by a court of competent
jurisdiction and a court approves indemnification of litigation
costs; or (3) such claim has been settled, and a court of
competent jurisdiction approves indemnification of litigation
costs (specifically, the settlement of any claim against the
Indemnified Parties and finds that indemnification of the
settlement and related costs should be made). Additionally, such
a court shall have been advised by the party seeking
indemnification as to the current position of the Securities and
Exchange Commission, the California Commissioner of Corporations,
the Securities Division of the Office of the Secretary of the
Commonwealth of Massachusetts, the Tennessee Securities Division,
the Texas State Securities Board and the securities commissioners
of the states which subscribe to the provisions of the North
American Securities Administrators, Association, Inc. Statement of
Policy Regarding Real Estate Programs effective on January 1, 1987
regarding indemnification for violations of securities laws.
Notwithstanding the foregoing, the Indemnified Parties shall not
be indemnified for any liability, loss, expense or damage incurred
by them in connection with any judgment entered arising from or
out of a violation of Federal or state securities laws which were
violated by any Indemnified Party in connection with the offer or
sale of the Interests. In addition, the Partnership may not incur
the cost of that portion of liability insurance which insures the
Indemnified Parties for any liability as to which the Indemnified
Parties are prohibited from being indemnified as described above.

ARTICLE SIX

ADMISSION OF SUCCESSOR AND ADDITIONAL GENERAL PARTNERS

SECTION 6.1 Admission of Successor and Additional General
Partners

A. With the Consent of the General Partner and of such
number of the Limited Partners as are then required under the
Revised Uniform Limited Partnership Act of the State of Delaware,
and under the applicable laws of such other jurisdictions in which
the Partnership is formed or qualified, to Consent to or ratify
the admission of a General Partner, but in no event with the
Consent of less than a majority of all the outstanding Limited
Partnership Interests, the General Partner may at any time
designate one or more Persons to be successors to such General
Partner or to be additional General Partners, in each case with
such participation in such General Partner's Interest as such
General Partner and such successor or additional General Partners
may agree upon, provided that the Interests of the Limited
Partners shall not be adversely affected thereby. Each such
designee shall become a successor or additional General Partner
upon satisfying the conditions of Section 11.2.

B. Except in connection with a transfer to a successor or
additional General Partner pursuant to Section 6.1A, the General
Partner shall not have any right to retire or withdraw voluntarily
from the Partnership or to sell, transfer or assign its Interest,
except that (i) it may substitute in its stead as General Partner
any entity which has, by merger, consolidation or otherwise,
acquired substantially all of its assets or stock and continued
its business or (ii) it may cause to be admitted to the
Partnership an additional General Partner or Partners to enable
the aggregate net worth of the General Partners to comply with the
provisions of Section 5.5C. Each such successor or additional
General Partner shall be admitted as such to the Partnership upon
satisfying the conditions of Section 11.2. Each Limited Partner
hereby Consents to the admission of any additional or successor
General Partner pursuant to this Section 6.1B, and no further
Consent or approval shall be required.

C. Any voluntary withdrawal by the General Partner from the
Partnership or any sale, transfer or assignment by such General
Partner of its Interest shall be effective only upon the admission
in accordance with Section 6.1A or Section 6.1B, whichever is
applicable, of a successor or additional General Partner, as the
case may be,and full discharge for all amounts owing to the General Partner
and the Associate Limited Partners on account of their respective
Interests in the Partnership. For purposes of this Section 6.6
the independent appraiser selected by the Limited Partners shall
be selected by ML Real Estate Associates II (excluding for this
purpose its assigns) and proposed by the General Partner for
selection by the Limited Partners. Such appraiser shall be deemed
selected by the Limited Partners unless objected to in writing by
the Holders of a majority of the then outstanding Limited
Partnership Interests within 45 days after Notification thereof is
sent by the General Partner.

B. In the event that a replacement General Partner is
elected by the Limited Partners under Section 10.2 such
replacement or successor General Partner (the "Acquiring Partner")
shall purchase from the Partnership, within 60 days of the date on
which it becomes a General Partner, the Interests in the
Partnership which the Partnership purchased from the Person
ceasing to be a General Partner as provided in Section 6.6A above
and from the Associate Limited Partners. For such Interests, the
Acquiring Partner shall pay the amounts determined pursuant to
Section 6.6A to be the fair market values of such Interests.
Payment for the Interests shall be made by promissory notes
bearing simple interest at a rate per annum equal to the lesser of
the reference rate from time to time announced by Continental
Illinois National Bank and Trust Company of Chicago plus 2% per
annum or 10% interest per annum on the unpaid principal amount of
such promissory notes and shall be secured, on a pro rata basis
according to the face amount of each promissory note, by
assignment by the Acquiring Partner to the Partnership of all its
future distributions of Cash Flow from the Partnership to the
Acquiring Partner.

ARTICLE SEVEN

TRANSFERABILITY OF PARTNERS' INTERESTS

SECTION 7.1 Restrictions on Transfers of Interests

A. No transfer or assignment with respect to any Limited
Partnership Interest or any Additional Limited Partnership
Interest, or any fraction thereof, shall be effective if such
transfer or assignment would, in the opinion of counsel for the
Partnership, result in the termination of the Partnership or the
treatment of the Partnership as an association taxable as a
corporation, for purposes of the then applicable provisions of the
Code.

B. No transfer or assignment with respect to any Limited
Partnership Interest, or any fraction thereof, shall be effective
if counsel for the Partnership shall be of the opinion that such
transfer or assignment would be in violation of any state
securities or "Blue Sky" laws (including any investment
suitability standards) applicable to the Partnership.

C. No purported transfer or assignment with respect to a
Limited Partnership Interest, or any fraction thereof, after which
the transferor or the transferee would hold an Interest
representing a Capital Investment of less than $5,000 will be
permitted or recognized or be valid for any purpose (except for
transfers by gift, inheritance or family dissolution, transfers to
Affiliates or intra-family transfers). Prior to the first date on
which an Additional Limited Partnership Interest is issued to an
Assignee Holder (other than ML Real Estate Associates II), no
purported transfer or assignment with respect to any Interest, or
any fraction thereof, shall be permitted or recognized or be valid
for any purpose.

D. No transfer or assignment with respect to any Limited
Partnership Interest or any Additional Limited Partnership
Interest, or any fraction thereof, shall be effective if as a
result of such transfer or assignment such limited partnership
Interest or Additional Limited Partnership Interest (or fraction
thereof) would be held by any person that is a non-resident alien
individual or foreign corporation or other entity or that may be
subject to tax under Section 511 of the Code, or by any "tax-
exempt entity" (within the meaning of Section 168(h)(2) of the
Code for purposes of Section 168(h)(6)(A) of the Code), except
that the foregoing restriction shall not apply to any transfer or
assignment permitted in the sole discretion of the General
Partner.

SECTION 7.2 Assignees and Substituted Limited Partners

A. If a Limited Partner dies, his executor, administrator
or trustee or, if he is adjudicated incompetent (including by
reason of insanity), his committee, guardian or conservator, or,
if he becomes bankrupt, the receiver or trustee of his estate,
shall have all the rights of a Limited Partner for the purpose of
settling or managing his estate and such power as the decedent or
incompetent or bankrupt Person possessed to assign all or any part
of his Interest and to join with the assignee thereof in
satisfying conditions precedent to such assignee becoming a
Substituted Limited Partner. The death, dissolution, adjudication
of incompetence or bankruptcy of a Limited Partner shall not
dissolve the Partnership.

B. The Partnership shall recognize as the Assignee Holder
of Additional Limited Partnership Interests each Person to whom
the Initial Limited Partner assigns Additional Limited Partnership
Interest which are purchased in the public offering pursuant to
section 3.3 (including pursuant to Section 3.3G) as of such dates
from time to time during the offering period as the General
Partner shall determine (which in no event shall be later than the
date on which the funds of such Assignee Holder are released from
the escrow deposit account) provided that (a) the Partnership has
received the capital set forth on Schedule A with respect to the
Additional Limited Partnership Interests of such Assignee Holder
and (b) the Initial Limited Partner has executed an instrument of
assignment, in form and substance satisfactory to the General
Partner, setting forth the name and address of such Assignee
Holder to whom such Additional Limited Partnership Interests are
being assigned.

C. Except as provided in Section 7.2B above, the
Partnership shall not recognize for any purpose any assignment
with respect to all or any fraction of a Limited Partnership
Interest unless there shall have been filed with the Partnership a
duly executed and acknowledged counterpart of the instrument
making such assignment and such instrument evidences the written
acceptance by the assignee of all of the terms and provisions of
this Agreement and represents that such assignment was made in
accordance with all applicable laws and regulations (including
investment suitability requirements). Such instrument shall be
accompanied by a transfer fee not in excess of $100 that shall be
paid to the Partnership or an Affiliate of the General Partner to
cover all actual, necessary and reasonable expenses, fees and
filing costs in connection with such transfer. Any assignee of a
Limited Partnership Interest shall, for the purposes of Section
4.3C, be recognized as a Holder of Interests as of the first day
of the fiscal quarter next succeeding the fiscal quarter in which
the General Partner actually receives the instrument of assignment
that complies with the requirements of this Section 7.2C;
provided, however, that except as provided in Section 7.2B above,
no assignee of a Limited Partnership Interest shall be recognized
as a Holder of Interests prior to the first fiscal quarter
following the fiscal quarter during which the final issuance of
Additional Limited Partnership Interests pursuant to Section 3.3
occurs.

D. Any Person who is an Assignee Holder of all or any
fraction of a Limited Partnership Interest may become a
Substituted Limited Partner only when such Person shall have
satisfied the conditions of Section 7.2C and Section 11.2. The
General Partner agrees to inform such Assignee Holder, within 60
days of receipt by the Partnership of the items set forth in
Sections 7.2C and 11.2A herein, if he has been rejected a s
Substituted Limited Partner. Assignee Holders (and any assignees
with respect to any Limited Partnership Interests of such Assignee
Holders) who effect such a transfer and become Substituted Limited
Partners will not be permitted subsequently to reassign their
Limited Partnership Interests to the Initial Limited Partner and
once more become Assignee Holders. The right of an assignee to
become a Substituted Limited Partner shall be subject to the
written Consent of the General Partner, which Consent may be
granted or denied in the sole and absolute discretion of the
General Partner and prior to the giving of such Consent, such
substitution shall not be effective. The written Consent or a
notice of denial of Consent shall be given to the assignee not
later than the last day of the calendar month following the month
the General Partner actually receives the executed Signature Page
and Power of Attorney and such other document or documents as may
reasonably be requested by the General Partner and payment of an
amount (not in excess of $100) required to cover all actual,
necessary and reasonable expenses, fees and filing costs in
connection with such substitution. The voting rights of a
Substituted Limited Partner who transfers his entire economic
interest in any Additional Limited Partnership Interests will
terminate with respect to such Additional Limited Partnership
Interests upon such transfer.

SECTION 7.3 Indemnification and Terms of Admission

A. Each Holder of Interests shall indemnify and hold
harmless the Partnership, the General Partner and every Holder who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by
reason of or arising from any actual misrepresentation or
misstatement of facts or omission to state facts made (or omitted
to be made) by such Holder in connection with any facts or
omission to state facts made (or omitted to be made) by such
Holder in connection with any assignment, transfer, other
disposition or encumbrance of all or any part of any Interest in
the Partnership, or the admission of an Assignee Holder as a
Substituted Limited Partner to the Partnership, against expenses
for which the Partnership or such other Person has not otherwise
been reimbursed (including attorneys' fees, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by it
or him in connection with such action, suit or proceeding.

B. Any Person who acquires an Interest as an Assignee
Holder (whether or not such Person becomes a Substituted Limited
Partner) or who is admitted to the Partnership as a Substituted
Limited Partner or as a successor or additional General Partner
shall be subject to and bound by all the provisions of this
Agreement as if originally a party to this Agreement.

ARTICLE EIGHT

DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP

SECTION 8.1 Events Causing Dissolution

The Partnership shall terminate upon the happening of any of
the following events:

(i) the bankruptcy, death, dissolution, adjudication
of incompetence or withdrawal of a sole General Partner;

(ii) the reduction to cash or cash equivalents of all
the assets of the Partnership;

(iii) the election by the General Partner pursuant to
Section 5.5), Section 5.4B, or the vote by the Limited Partners
pursuant to Section 10.2(ii), to dissolve the Partnership; or

(iv) the happening of any other event causing the
dissolution of the Partnership under the laws of the State of
Delaware.

Dissolution of the Partnership shall be effective on the day on
which the event occurs giving rise to the dissolution, but the
Partnership shall not terminate until the Partnership's
certificate of limited partnership shall have been canceled and
the assets of the Partnership shall have been distributed as
provided in Section 8.3. Notwithstanding the dissolution of the
partnership, prior to the termination of the Partnership, as
aforesaid, the business of the Partnership and the affairs of the
Partners, as such, shall continue to be governed by this
Agreement.

In the event of the bankruptcy, dissolution or withdrawal of
a General Partner which is not then the sole General Partner at
any time during the life of the Partnership, the remaining General
Partner or General Partners shall promptly give the Limited
Partners notice of the occurrence of any event constituting such
bankruptcy, dissolution or withdrawal. The General Partner shall
give the Limited Partners sixty (60) days' notice of its intent to
withdraw voluntarily as a General Partner of the Partnership
unless, prior to such withdrawal, written notice has been given to
the Limited Partners as provided in the preceding sentence, and
the Limited Partners have (or have not) elected to exercise their
right pursuant to Section 10.2 (and subject to the conditions set
forth in Section 10.3 to elect a new General Partner.
Notwithstanding anything to the contrary in this Agreement, if any
event specified in clauses (i) through (iii) of Section 8.1 occurs
prior to the first date on which an Additional Limited Partnership
Interest is issued to an Assignee Holder (other than ML Real
Estate Associates II), no Partner or Partners shall have any right
to cause the Partnership to be continued, and if any event
specified in clause (iv) of Section 8.1 occurs prior to such date,
no Partner or Partners shall have any right to cause the
Partnership to be continued unless all Partners (including ML Real
Estate Associates II and Arvida/JMB Partners, which shall consent
for this purpose only with the affirmative approval of ML Real
Estate Associates II as a partner therein) Consent to continue the
Partnership.

SECTION 8.2 Capital Contribution upon Dissolution

Subject to Section 5.8 each Limited Partner shall look
solely to the assets of the Partnership for all distributions with
respect to the Partnership and his capital contribution thereto
and share of Profits or Losses thereof, and, except as provided in
Section 4.1 shall have no recourse therefor however, that upon
dissolution and termination of the Partnership, the General
Partner shall contribute to the Partnership an amount equal to the
amount which is determined to be the smaller of (i) the deficit
balance in its Capital Account or (ii) the excess of 1.01% of the
Capital Investments with respect to Limited Partnership Interests
held by Holders over the aggregate capital contributions made by
the General Partner as provided in Schedule A and otherwise under
this Agreement. If Arvida/JMB Associates shall in writing assume
or otherwise agree to be personally liable on Partnership
indebtedness owed to a third party, during the period that such
assumption or other personal liability exists, Arvida/JMB
Associates shall be obligated to contribute to the Partnership an
amount equal to the amount of such indebtedness which it has
assumed or on which it has otherwise agreed to be personally
liable if needed to satisfy such Partnership indebtedness.

No Limited Partner shall have any right to demand or receive
property, other than cash, upon dissolution and termination of the
Partnership.

SECTION 8.3 Liquidation

A. Upon dissolution of the Partnership, the General Partner
shall dispose of the assets of the Partnership, apply and
distribute the proceeds thereof as contemplated by this Agreement
and cause the cancellation of the Partnership's certificate of
limited partnership.

B. Notwithstanding the foregoing, in the event the General
Partner shall determine that an immediate sale of part or all of
the Partnership assets would cause undue loss to the Partners, the

General Partner, in order to avoid such loss, may (after having
given Notification to all the Limited Partners), subject to
Section 8.3C and to the extent not then prohibited by the Limited
Partnership Act of any jurisdiction in which the Partnership is
then formed or qualified and applicable in the circumstances,
defer disposition of and withhold from distribution for a
reasonable time any assets of the Partnership except those
necessary to satisfy the Partnership's debts and obligations.

C. Notwithstanding anything to the contrary in Articles
Four and Six, upon Liquidation of the Partnership the proceeds of
such Liquidation shall be distributed in the ratios of the
positive Capital Account balances of the Partners, and upon
Liquidation of any Partner's Interest in the Partnership the
proceeds of such Liquidation shall be distributed in accordance
with the positive Capital Account balance of such Partner, in each
case as determined after taking into account all Capital Account
adjustments for the Partnership taxable year during which such
Liquidation occurs (other than those adjustments made pursuant to
this sentence), by the end of such taxable year (or, if later,
within 90 days after the date of such Liquidation), except that in
the case of a Liquidation of the Partnership the proceeds of such
Liquidation shall not be required to be distributed by the end of
such taxable year (or, if later, within 90 days after the date of
such Liquidation) to the extent such proceeds constitute (i)
reserves reasonably required to provide for liabilities
(contingent or otherwise) of the Partnership or (ii) installment
obligations owed to the Partnership, so long as such withheld
amounts are distributed as soon as practicable and in the ratios
of the Partner's positive Capital Account balances.

2. Instrument of Assignment. Effective upon the transfer
to the Partnership of the required capital contributions in
respect of Additional Limited Partnership Interests from time to
time during the Public Offering, and upon the amendment of the
Certificate of Limited Partnership of the Partnership to reflect
the issuance of Additional Limited Partnership Interests to the
Initial Limited Partner, the Initial Limited Partner shall execute
an Instrument of Assignment transferring and assigning all of its
rights and interests in and to such Additional Limited Partnership
Interests to the Assignee Holders. The names and addresses of the
Assignee Holders who have purchased the Additional Limited
Partnership Interests shall be set forth on such Instrument and,
upon its receipt and acknowledgement by the General Partner, such
instrument of Assignment shall be binding in all respects upon the
Partnership, the General Partner, the Initial Limited Partner and
the Assignee Holders name therein; provided that any such
Instrument of Assignment may be amended by written instrument
executed by the Initial Limited Partner and the General Partner
for the purpose of correcting any error or omission contained
therein. Notification of the name and address of an Assignee
Holder set forth on any such Instrument of Assignment shall be
mailed, postage prepaid, to such Assignee Holder named therein;
and thereafter any address contained therein shall be subject to
change only upon the receipt by the Initial Limited Partner of
written notification of a change of an Assignee Holder's address
signed by such Assignee Holder.

3. Subsequent Assignments. Any subsequent transfer or
assignment or reassignment of Additional Limited Partnership
Interests by any Assignee Holder to any other Person must conform
in all respects with the requirements of Section 7.2 of the
Partnership Agreement and shall be subject to all restrictions on
transfer provided in Section 7.1 of the Partnership Agreement.

4. Voting. The Initial Limited Partner hereby agrees that,
with respect to any matter on which a vote of Limited Partners is
taken in accordance with the Partnership Agreement or as to which
any Consent is requested, it will vote the Additional Limited
Partnership Interests transferred to Assignee Holders pursuant to
this Agreement or grant or withhold such Consent solely for the
benefit of, and in accordance with the written instructions of,
the respective Assignee Holders with respect to their respective
Interests; provided, however, that the voting rights of an
Assignee Holder who transfers Additional Limited Partnership
Interests will terminate with respect to such Interests upon such
transfer, whether or not the transferee thereof is admitted as a
Substituted Limited partner with respect thereto. Additional
Limited Partnership Interests assigned to Assignee Holders who do
not provide such written instructions to the Initial Limited
Partner will not be voted nor any Consent granted on any such
matter. The Initial Limited partner will provide notice to the
Assignee Holders containing information regarding any matters to
be voted upon or as to which any Consent is requested sufficiently
in advance of the date of the vote for which such Consent is
requested to permit sufficiently in advance of the date of the
vote for which such Consent is requested to permit such Assignee
Holders to provide such written instructions and shall otherwise
establish reasonable procedures for any such voting or the
granting of such Consent. The Partnership and the General Partner
hereby agree to permit Assignee Holders to attend any meetings of
Limited Partners and the Initial Limited Partner shall, upon
written request of Assignee Holders owning Additional Limited
Partnership Interests which represent in the aggregate 10% or more
of all of the outstanding Limited Partnership Interest, request
the General Partner to call a meeting of Limited Partners or to
submit a matter to the Limited Partners without a meeting pursuant
to the Partnership Agreement.

5. Reports. The Initial Limited Partner will mail to any
Assignee Holder (at the address provided under paragraph 2 above)
any report, financial statement or other communication received
from the Partnership or the General Partner with respect to the
Additional Limited Partnership Interests transferred to such
Assignee Holder. In lieu of the mailing of any such document by
the Initial Limited Partner, the Initial Limited Partner may, at
its option, request the Partnership to mail any such
communications directly to the Assignee Holders, and the Initial
Limited Partner shall be deemed to have satisfied its obligations
under this paragraph 5.