ARVIDA JMB PARTNERS L P, 10-K405, 1998-03-31

ARVIDA JMB PARTNERS L P
10-K405, 1998-03-31
OPERATIVE BUILDERS

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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, 1997 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 [ ]

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.

<PAGE>

TABLE OF CONTENTS

Page
----
PART I

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

Item 2. Properties. . . . . . . . . . . . . . . . . . 5

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

Item 4. Submission of Matters to a
Vote of Security Holders. . . . . . . . . . . 10

PART II

Item 5. Market for the Partnership's Limited
Partnership Interests and
Related Security Holder Matters . . . . . . . 11

Item 6. Selected Financial Data . . . . . . . . . . . 12

Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . 14

Item 7A. Quantitative and Qualitative
Disclosures About Market Risk . . . . . . . . 23

Item 8. Financial Statements and
Supplementary Data. . . . . . . . . . . . . . 24

Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure. . . . . . . . . . . . . 61

PART III

Item 10. Director and Executive Officers of
the Registrant. . . . . . . . . . . . . . . . 61

Item 11. Executive Compensation. . . . . . . . . . . . 65

Item 12. Security Ownership of Certain
Beneficial Owners and Management. . . . . . . 68

Item 13. Certain Relationships and
Related Transactions. . . . . . . . . . . . . 70

PART IV

Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K. . . . . . 70

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 75

<PAGE>

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 "Holder" or "Holder of Interests") has made any
additional capital contribution. The Holders of Interests 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 was to
elect to pursue one of the following courses of action on or before October
31, 1997: (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; (ii) to purchase, or cause JMB Realty
Corporation or its affiliates to purchase 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 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. On October 23,
1997, the Board of Directors of the General Partner met and approved a
resolution selecting the option to commence an orderly liquidation of the
Partnership's remaining assets that is to be completed by October 2002.

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. In addition, the Partnership, directly or
through certain subsidiaries, provides development and management services
to the homeowners associations within the Communities.

<PAGE>

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. 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.

Pursuant to a management agreement with the Partnership, through
December 31, 1997, Arvida Company ("Arvida"), an affiliate of the General
Partner, provided development and management supervisory and advisory
services and the personnel therefor to the Partnership for all of its
projects and operations, subject, in each case, to the overall control of
the General Partner on behalf of the Partnership. In November 1997, St.
Joe Corporation, an unaffiliated third party, completed its acquisition of
a majority interest in St. Joe/Arvida Company, L.P. ("St. Joe/Arvida"),
which acquired the major assets of Arvida. In connection with this
transaction, Arvida entered into a sub-management agreement with St.
Joe/Arvida, effective January 1, 1998, whereby St. Joe/Arvida provides (and
is reimbursed for) a substantial portion of the development and management
supervisory and advisory services (and personnel with respect thereto) to
the Partnership that Arvida would otherwise provide pursuant to its
management agreement with the Partnership. Effective January 1, 1998, St.
Joe/Arvida employs most of the same personnel previously employed by
Arvida, and the services provided to the Partnership pursuant to the sub-
management agreement are provided by the same personnel. Affiliates of JMB
Realty Corporation own a minority interest in St. Joe/Arvida. The
transaction did not involve the sale of any assets of the Partnership, nor
the sale of the General Partner's interest in the Partnership.

The Partnership, directly or through certain subsidiaries, provides
development and management services to the homeowners associations within
the Communities. At December 31, 1997, 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 eight
years. Notwithstanding the estimated duration of the remaining build-outs,
the Partnership currently expects to complete its orderly liquidation by
October 2002. The Partnership generally follows the practice with respect
to Communities of (i) developing an overall master plan for the Community,

<PAGE>

(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.

<PAGE>

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, 1997 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 were owned by Arvida, subject to the
Partnership's non-exclusive right to use the Arvida name and service marks

<PAGE>

under a license agreement with Arvida (and subject to the non-exclusive
rights of certain third parties to the limited use of the name). As
discussed above, St. Joe/Arvida acquired the major assets of Arvida,
including the Arvida name and service marks with respect to the Arvida
name. In connection with the acquisition of Arvida's assets, St.
Joe/Arvida was assigned Arvida's rights and obligations under the license
agreement with the Partnership.

The Partnership has approximately 650 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 owned 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 known as Arvida's Grand Bay 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.

(d) Jacksonville, Florida

The Partnership owned 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. All units in these
Communities were sold and closed as of December 31, 1996. The Partnership
also owns property in a 730-acre Community known as the Jacksonville Golf
and Country Club which is in its late stage of development.

<PAGE>

(e) Atlanta, Georgia

The Partnership owns properties in the Atlanta, Georgia area known as
Water's Edge and Dockside. Water's Edge is in its mid stage of
development. All of the units in the Partnership's Dockside Community were
sold and closed as of December 31, 1996.

(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. 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, Ocala, Pompano Beach and Palm Beach County, Florida which are not
located in its residential Communities. At December 31, 1997, the joint
venture property in Pompano Beach was encumbered by mortgages in the
aggregate principal amount of approximately $3.4 million. Reference is
made to Note 11 for further discussion of this venture and its related
indebtedness.

ITEM 3. LEGAL PROCEEDINGS

(A) On or about September 27, 1996, a lawsuit entitled Vanderbilt
Income and Growth Associates, L.L.C. and Raleigh Capital Associates L.P.,
individually and derivatively on behalf of Arvida/JMB Partners, L.P. v.
Arvida/JMB Managers, Inc., Judd D. Malkin, Neil G. Bluhm, Burton E. Glazov,
Stuart C. Nathan, A. Lee Sacks, John G. Schreiber, BSS Capital II, L.L.C.,
Starwood Capital Group I, L.P., Starwood/Florida Funding, L.L.C., Starwood
Opportunity Fund, IV, L.P. and Barry Sternlicht, Defendants, and Arvida/JMB
Partners, L.P., nominal defendant, was filed in the Court of Chancery of
the State of Delaware in and for New Castle County, Civil Action No. 15238
("Raleigh action"). The Raleigh action was filed as a verified complaint
for declaratory and injunctive relief. Plaintiffs claimed that the
defendants, in entering into a financing commitment letter for a proposed
$160 million term loan from Starwood/Florida Funding L.L.C. (the "Starwood
financing"), violated, or aided and abetted, or participated in the
violation of, fiduciary duties owed to the Partnership and the Holders of
Interests, and put their personal interests ahead of the interests of the
Partnership and the Holders of Interests. In the first claim for relief,
plaintiffs sought a declaratory judgment that the terms of the Starwood
financing be declared null, void and unenforceable. In the second claim
for relief, plaintiffs asserted a claim, derivatively on behalf of the
Partnership, alleging, among other things, that the financing commitment
letter for the Starwood financing was not the product of a valid exercise
of business judgment. In addition to the relief described above,
plaintiffs sought to preliminarily and permanently enjoin any actions in
furtherance of the financing commitment letter, an award of compensatory
damages, interest, costs and disbursements, including reasonable attorneys'
and experts' fees and such other relief as the Court might deem just and
proper. The General Partner and the Partnership filed a motion to dismiss
the Raleigh action which motion was granted on November 7, 1996. In
granting the motion, the Court held that Raleigh was not a Limited Partner
and did not have standing to file the derivative claims. The Court further
determined that Raleigh did not have the right to vote. Plaintiffs asked
the Court to reconsider its ruling, but the Court denied the request to
change its ruling.

<PAGE>

Plaintiffs appealed the November 7, 1996 dismissal order. On
December 12, 1996, the Delaware Supreme Court reversed the trial court
order on a procedural ground. The Delaware Supreme Court concluded that
the trial court should not have considered matters outside of the pleadings
in dismissing the Raleigh action without providing the plaintiffs some
limited discovery. Accordingly, the Delaware Supreme Court remanded the
case back to the trial court for further proceedings.

On December 16, 1996, the Partnership filed a counterclaim against
Vanderbilt Income and Growth Associates, L.L.C. and Raleigh Capital
Associates L.P. ("Raleigh"), seeking a declaratory judgment that Raleigh
had no right to vote on Partnership matters. On January 28, 1997, the
trial court granted plaintiffs leave to dismiss their own complaint
concerning the Starwood financing, leaving the Partnership's counterclaim
pending.

By letter dated January 10, 1997, Raleigh requested admission as a
Substituted Limited Partner of the Partnership. The Partnership referred
the request to a special committee (the "Special Committee") consisting of
certain directors of the General Partner. On February 11, 1997, the
Special Committee denied the request. Thereafter, the Partnership
supplemented its counterclaim, as amended, to seek a court declaration that
Raleigh was not entitled to be admitted as a Substituted Limited Partner.
On February 20, 1997, Raleigh filed a reply and counterclaim against the
Partnership, the General Partner, and the Special Committee. The reply
counterclaim seeks, among other things, a declaration that Raleigh has
voting rights in the Partnership and that defendants breached their
fiduciary duties by failing to admit Raleigh as a Substituted Limited
Partner. The reply counterclaim also sought to enjoin the Partnership, the
General Partner, and the Special Committee from refusing to admit Raleigh
as a Substituted Limited Partner, an award of damages, interest, fees, and
costs.

On or about February 28, 1997, Gladys Beasley, individually and as a
representative of a class of persons similarly situated, filed an
intervenor complaint for declaratory relief against the Partnership. In
the intervenor complaint, plaintiff sought a declaration that purchasers
who obtained Interests in the Partnership in the public offering and
subsequent Holders of Interests in the Partnership by assignment from
original Holders have the same voting rights in the Partnership, among
other things, to remove and replace the General Partner. In addition,
plaintiff Gladys Beasley, sought an order adjudging and decreeing that the
intervenor action be properly maintained as a class, an award of her costs
and expenses of the litigation, and such other relief as the Court deemed
appropriate.

The trial of all claims in the Raleigh action was held on April 7,
1997 through April 9, 1997. In a memorandum opinion dated May 23, 1997,
the Court concluded that, while neither the partnership agreement nor the
assignment agreement of the Partnership expressly states whether subsequent
Holders of Interests have voting rights, a reasonable investor could have
read the operative agreements as providing that subsequent Holders of
Interests, such as Raleigh, have voting rights. The Partnership believes,
among other things, that the Court erred in its application of the law to
the facts on this issue and is appealing the Court's decision on this
aspect of the case. On the issue of whether the Special Committee properly
denied Raleigh's request for admission as a Substituted Limited Partner,
the Court upheld the denial of Raleigh's request.

(B) 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

<PAGE>

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 alleged 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 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.

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.

<PAGE>

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. On or about May 10, 1996, a
subrogation claim entitled Juarez et al. v. Arvida Corporation et al. was
filed in the Circuit Court of the Eleventh Judicial Circuit in and for Dade
County. Plaintiffs filed this suit for the use and benefit of American
Reliance. In this suit, plaintiffs seek to recover damages, pre-and post-
judgment interest, costs and any other relief the Court may deem just and
proper in connection with $3,200,000 American Reliance allegedly paid on
specified claims at Country Walk in the wake of Hurricane Andrew. Disney
is also a defendant in this suit. The Partnership is advised that the
amount of this claim that allegedly relates to units it sold is
approximately $350,000. The Partnership intends to defend itself
vigorously in this matter. The Partnership was 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 has settled this claim for approximately
$45,600 with the settlement being funded by the Partnership's insurance
carrier. The Metropolitan Property and Casualty Company ("Metropolitan")
has advised the Partnership of its intent to file a subrogation action
allegedly in connection with an unspecified number of Arvida-built homes.
Currently, Metropolitan has advised the Partnership of three claims,
totalling approximately $505,000. The Partnership could be named in other
subrogation actions, and in such event, the Partnership intends to
vigorously defend itself in such actions. Due to the uncertainty of the
outcome of these subrogation actions, the accompanying consolidated
financial statements do not reflect any accruals related to these matters.

(C) 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 said
facilities to the Broken Sound homeowners on a timely basis. Plaintiffs
seek, through various theories, including but not limited to breach of
ordinance, fiduciary duty, fraud, 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.

(D) On or about July 30, 1996, Savoy v. Arvida/JMB Partners,
Arvida/JMB Managers, Inc., Arvida/JMB Partners, Ltd., and Broken Sound
Club, Inc. was filed against the Partnership and others in the Circuit
Court of the 15th Judicial Circuit, in and for Palm Beach County, Florida.
The lawsuit is filed as a three-count complaint for dissolution of the
Broken Sound Club, Inc. ("Club"), and seeks, among other things, the
appointment of a custodian or receiver for the Club, a determination that
certain acts be deemed wrongful, the return to the Club of in excess of
$2.5 million in alleged "operating profits", an injunction against the
charging of certain dues, an injunction requiring the Club to produce
certain financial statements, and such other relief as the Court deems
just, fair and proper. This action has been consolidated with the Council
of Villages case. The Partnership believes the lawsuit is without merit
and intends to vigorously defend itself.

<PAGE>

In April 1997, the Court issued an order certifying as a class action
claims respecting the alleged violation of the Boca Raton ordinances. Both
plaintiffs and defendants have appealed the certification order.
Plaintiffs in the Savoy action moved for an appointment of a receiver over
the club. The Partnership moved to strike the motion and the Court granted
the Partnership's motion. The Partnership has filed a third-party
complaint for indemnification and contribution against the Walt Disney
Company in these consolidated actions in the event the Partnership is held
liable for acts taken by a subsidiary of Walt Disney Company prior to the
Partnership's involvement in the club and property.

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.

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

There were no matters submitted to a vote of security holders during
1996 and 1997.

<PAGE>

PART II

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

As of December 31, 1997, there were 17,872 record Holders of the
404,000 Interests outstanding in 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 made
on October 23, 1997 by the General Partner with respect to commencing an
orderly 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 Holders of Interests. For a description
of the provisions of the Partnership Agreement relating to cash
distributions, see Note 14.

<PAGE>

<TABLE>
ITEM 6. SELECTED FINANCIAL DATA

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

DECEMBER 31, 1997, 1996, 1995, 1994 AND 1993

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

Total revenues. . . . . . $355,904,056 342,813,269 382,267,482 315,058,058 247,651,192
============ ============ ============ ============ ============

Net operating
income . . . . . . . . . $ 47,146,182 29,301,748 45,181,165 52,676,462 30,689,914
============ ============ ============ ============ ============
Equity in earnings
(losses) of uncon-
solidated ventures . . . $ 211,217 (177,864) 1,050,994 524,520 1,134,947
============ ============ ============ ============ ============
Net income. . . . . . . . $ 46,558,308 28,011,424 41,836,686 47,197,532 29,293,058
============ ============ ============ ============ ============
Net income per
Interest (a) . . . . . . $ 105.30 67.47 101.91 115.37 71.78
============ ============ ============ ============ ============
Total assets (b). . . . . $326,622,856 340,640,143 366,439,241 376,371,712 348,094,995
============ ============ ============ ============ ============
Total liabilities (b) . . $129,384,146 90,988,318 133,773,954 179,791,958 196,004,818
============ ============ ============ ============ ============
Cash distributions
per Interest (c) . . . . $ 235.04 25.85 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.

<PAGE>

<FN>

(a) The net income per Interest is based upon the average number of
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 Holders of Interests represent a return of
capital for Federal income tax purposes. During February 1997, the
Partnership made a distribution for 1996 of $24,240,000 to its Holders of
Interests ($60.00 per Interest). During August 1997, the Partnership made
a distribution of $70,700,000 to its Holders of Interests ($175 per
Interest). In addition, during 1997 distributions totaling $15,457
(approximately $.04 per Interest) were deemed to be paid to the Holders of
Interests, $15,372 of which was remitted to North Carolina tax authorities
on their behalf for the 1996 non-resident withholding tax. During March
1996, the Partnership made a distribution for 1995 of $10,419,160 to its
Holders of Interests ($25.79 per Interest). In addition, during 1996, the
Partnership remitted each Holder of Interests' share of a North Carolina
non-resident withholding tax on behalf of each Holder of Interests. Such
payments, which totaled $25,476 (approximately $.06 per Interest), were
deemed distributions to the Holders of Interests. During February 1995,
the Partnership made a distribution for 1994 of $5,421,680 to its Holder of
Interests ($13.42 per Interest). In addition, during the first quarter of
1995, the Partnership remitted each Holder of Interests' share of a North
Carolina non-resident withholding tax on behalf of each Holder of
Interests. Such payment, which totaled $26,784 ($.07 per Interest), was
deemed a distribution to the Holders of Interests. During February 1994,
the Partnership made a distribution for 1993 of $2,565,433 to its Holders
of Interests ($6.35 per Interest). There were no cash distributions in
1993.

</TABLE>

<PAGE>

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

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1997 and 1996, the Partnership had cash and cash
equivalents of approximately $79,411,000 and $53,636,000, respectively.
Cash and cash equivalents were available for future debt service, working
capital requirements and distributions to partners. 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.

The Partnership generated substantial receipts during the fourth
quarter of 1997 resulting from the closing of numerous land and property
sales, as discussed below in Results of Operations. Such receipts are the
primary cause for the increase in Cash and cash equivalents at December 31,
1997, as compared to the cash balance reported in the Partnership's
quarterly filing at September 30, 1997. Also, due to the cyclical nature
of its operations, a significant portion of the Partnership's cash flow
from operations (before debt service and distributions) was generated from
closings of homes in the fourth quarter of 1997. 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 1997 also
contributed to the increase in Cash and cash equivalents at December 31,
1997, as compared to the cash balance reported in the Partnership's
quarterly filing at September 30, 1997. 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 year, and are therefore
included in Trade and other accounts receivable on the accompanying
consolidated balance sheets. An increase in the amount of such proceeds
receivable at December 31, 1997 as compared to December 31, 1996
contributed to the increase in Trade and other accounts receivable on the
accompanying consolidated balance sheets.

Pursuant to Section 5.5 J of the Partnership Agreement, on October 23,
1997, the Board of Directors of the General Partner met and approved a
resolution selecting the option set forth in Section 5.5 J (i)(c) of the
Partnership Agreement for the Partnership to commence an orderly
liquidation of its remaining assets that is to be completed by October
2002.

The Partnership was able to generate significant cash flow before debt
service during each of the four years ended December 31, 1997. The
Partnership utilized this cash flow to make scheduled and additional
principal repayments on its previous and existing credit facilities, make
distributions to its partners and Holders of Interests, and to increase its
cash reserves. During February 1998, the Partnership made a distribution
for 1997 of $30,300,000 to its Holders of Interests ($75 per Interest) and
$1,683,314 to the General Partner and Associate Limited Partners,
collectively. During February 1997, the Partnership made a distribution
for 1996 of $24,240,000 to its Holders of Interests ($60 per Interest) and
$1,346,651 to the General Partner and Associate Limited Partners,
collectively. During August 1997, the Partnership made a distribution of
$70,700,000 to its Holders of Interests ($175 per Interest) and $2,668,455
to its General Partner and Associate Limited Partners, collectively. In
connection with the settlement of certain litigation, the General Partner
and Associate Limited Partners also deferred approximately $1,259,000 of
their share of the August 1997 distribution which otherwise was
distributable to them, and such deferred distribution amount was used by
the Partnership to pay a portion of the legal fees and expenses in such
litigation. In addition, during 1997 distributions totaling $15,457
(approximately $.04 per Interest) were deemed to be paid to the Holders of
Interests, $15,372 of which was remitted to North Carolina tax authorities
on their behalf for the 1996 non-resident withholding tax. Distributions
totaling $860 were also paid during 1997 on behalf of the General Partner
and Associate Limited Partners, collectively, a portion of which was also

<PAGE>

remitted to the North Carolina tax authorities on their behalf. During
March 1996, the Partnership made a distribution for 1995 of $10,419,160 to
its Holders of Interests ($25.79 per Interest) and $578,835 to the General
Partner and Associate Limited Partners, collectively. In addition, during
1996, the Partnership remitted each Holder of Interests' share of the 1995
North Carolina non-resident withholding tax. Such payments, which totaled
$25,476 (approximately $.06 per Interest), were deemed distributions to the
Holders of Interests. Distributions totaling $1,416 were also paid during
1996 on behalf of the General Partner and Associate Limited Partners,
collectively, a portion of which was also remitted to the North Carolina
tax authorities on their behalf. As a result of certain restrictions on
distributions contained in its previous credit facility agreement, the
Partnership made distributions in amounts substantially less than the tax
consequences attributable to the Federal taxable income allocable to each
Holder of Interests multiplied by the maximum individual Federal income tax
rate for the year ended December 31, 1995.

The Partnership's previous revolving line of credit, income property
term loan and letter of credit agreement matured in July 1997. On July 31,
1997, the Partnership obtained a new credit facility from certain banks.
The proceeds from the new financing were used to make the August 1997
distributions, and to payoff the remaining balance outstanding under the
Partnership's previous credit facility. The new credit facility consists
of a $75 million term loan, a $20 million revolving line of credit and a $5
million letter of credit facility. The new facility has a term of four
years with annual scheduled principal repayments of $12.5 million, as well
as additional annual principal repayments based upon a specified percentage
or amount of the Partnership's available cash. The maximum principal
repayments, including the scheduled repayments, generally will not exceed
$18.75 million per annum. The remaining outstanding balance on the new
facility is due upon maturity. Interest on the facility is based, at the
Partnership's option, on the relevant LIBOR plus 2.25% per annum or one of
the lender's prime rate. The Partnership has obtained interest rate swaps
for two-thirds of the outstanding balance of the term loan. Loan fees
totaling 1% of the total facility were paid by the Partnership upon the
closing of the loan. Such fees have been capitalized and are being
amortized over the life of the loan. The payment of these fees is the
primary cause for the increase in Prepaid expenses and other assets on the
accompanying consolidated balance sheets at December 31, 1997 as compared
to December 31, 1996. Due to the replacement of the Partnership's existing
letter of credit facility by the new credit facility, the Partnership was
required to post approximately $4.2 million cash as collateral with its
previous lender for letters of credit which continue to be obligations of
that lender. The letters of credit are expected to be replaced by either
letters of credit issued under the new facility or by bonds, at which time
the cash collateral will be released to the Partnership. As of December
31, 1997, approximately $1.3 million of such cash collateral had been
released to the Partnership due to the replacement of the letters of credit
issued by the previous lender, leaving a balance outstanding under this
previous letter of credit facility of approximately $2.9 million. The term
loan, revolving line of credit and letter of credit facility are secured by
recorded mortgages on real property of the Partnership (including certain
of its consolidated ventures) and pledges of certain other assets. All of
the loans under this new facility are cross-collateralized and cross-
defaulted. At December 31, 1997, the balances outstanding under the term
loan, the revolving line of credit and the letter of credit facility were
approximately $68,750,000, $0 and $1,018,200, respectively.

<PAGE>

line of credit bears interest at the lender's prime rate (8.50% at
December 31, 1997) plus 1/2% per annum. At December 31, 1997, there was
approximately $4.6 million outstanding under this line of credit. The
Partnership currently anticipates that it will borrow additional funds
under this line of credit during 1998 for the remaining building to be
constructed within Arvida's Grand Bay.

During October 1997, Metrodrama Joint Venture entered into a contract
for the sale of approximately 29 acres of undeveloped commercial property
to an unaffiliated third party. The closing is subject to the satisfaction
of various conditions, and there can be no assurance the closing will
occur. The sale, if consummated, is expected to generate a profit for
financial reporting and Federal income tax purposes in 1998.

During October 1997, the Partnership closed on the sale of its mixed-
use center in Boca Raton, Florida known as Parkway Center to an
unaffiliated third party for $38.5 million. The Partnership made certain
representations, warranties and indemnities for the benefit of the buyer
under the Sale and Purchase Agreement which will survive the closing for a
period of one year from the date of closing. Parkway Center consists of
approximately 258,000 square feet of space in a mix of offices, retail
shops, and a Radisson Suite Hotel. The sale generated a profit for
financial reporting and Federal income tax purposes.

During November 1997, the Partnership closed on the sale of the Cabana
Club, located within its Sawgrass Community, to an unaffiliated third party
for $3.5 million. The sale generated a profit for financial reporting and
Federal income tax purposes.

During December 1997, the Partnership closed on the sale of its two
retail shopping centers located in Weston to an unaffiliated third party
for a combined sales price of $26.3 million. A portion of the proceeds
from the sale were used to pay off the principal balances outstanding on
the loans encumbering the shopping centers. The sale generated a profit
for financial reporting and Federal income tax purposes.

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. This transaction
resulted in gains of approximately $1.8 million and $1.1 million in 1996
for financial reporting and Federal income tax purposes, respectively.

The Holders of Interests have received several unsolicited offers to
purchase their Interests in the Partnership. The General Partner of the
Partnership has established a special committee (the "Special Committee")
consisting of certain directors of the General Partner to review such
offers and make a recommendation to the Holders of Interests with respect
to the offers. In addition, the Partnership has engaged Lehman Brothers
Inc. ("Lehman") as a financial advisor to assist the Special Committee in
evaluating and responding to the offers. Lehman was asked to render its
estimate of the present discounted value ("Estimated Liquidation Value") of
an Interest based on the assumption that the Partnership commences an
orderly liquidation in October 1997 and completes that liquidation by
October 2002. In preparing its Estimated Liquidation Value, Lehman has
relied upon the Partnership's estimate of the gross cash distributions that
a Holder of Interests would receive through the assumed liquidation period,
discounted to reflect the present value of such distributions. Certain
assumptions and other factors, including risk factors, that should be
considered when analyzing the projected budgets which were the basis of
such estimate of gross distributions can be found in the Partnership's
Schedule 14D-9 dated July 3, 1996, as amended, which was filed with the
Securities and Exchange Commission. Reference to such Schedule 14D-9 is
hereby made for a discussion of such assumptions and other factors.

<PAGE>

During April 1997, Smithtown Bay, L.L.C. ("Smithtown") commenced an
offer to acquire up to 17,000 Interests, which represents approximately
4.2% of the outstanding Interests in the Partnership. Smithtown's offer had
a purchase price of $475 and expired on May 30, 1997. In connection with
the Smithtown offer, Lehman prepared an Estimated Liquidation Value as of
March 31, 1997 (the "March Estimated Liquidation Value"). In arriving at
the March Estimated Liquidation Value, Lehman relied upon the Partnership's
estimate of the gross cash distributions that the Holders of Interests
would receive through the assumed liquidation period. These estimated
gross distributions were then discounted to reflect the present value of
such distributions as of March 31, 1997, which ranged from $540 to $585 per
Interest, depending on the different discount rates used.

Based on its analysis and its consultation with its advisors, the
Special Committee determined that with respect to Holders of Interests who
had the expectation of retaining their Interests through an anticipated
orderly liquidation of the Partnership's assets by October 2002 and who had
no current or anticipated need or desire for liquidity, the Smithtown offer
was inadequate and not in the best interests of such Holders of Interests.
Accordingly, the Special Committee recommended that such Holders of
Interests reject the Smithtown offer and not tender their Interests
pursuant to such offer. However, the Special Committee recommended that
Holders of Interests who had a current need or desire for liquidity tender
their Interests to Smithtown.

During July 1997, Lafayette Bay, LLC ("Lafayette") commenced an offer
to acquire up to 10,400 Interests, which represents approximately 2.6% of
the outstanding Interests in the Partnership. Lafayette's offer had a
purchase price of $540 per Interest. However, under the terms of
Lafayette's offer, Lafayette reduced its offer price of $540 per Interest
by the $175 per Interest distributed to the Holders of Interests during
August 1997 (for a new purchase price under the Lafayette offer of $365 per
Interest). Lafayette's offer expired on August 29, 1997. During November
1997, Lafayette re-commenced its offer at $365 per Interest but reduced the
maximum number of Interests to be acquired to 8,000 Interests, which
represents approximately 2.0% of the outstanding Interests in the
Partnership. Lafayette's offer was scheduled to expire in December 1997.

The Special Committee expressed no opinion and remained neutral in
regard to the Lafayette offer for those Holders of Interests who had no
current or anticipated need or desire for liquidity and who expect to
retain the Interests through an anticipated orderly liquidation of the
Partnership by October 2002. However, the Special Committee recommended
that Holders of Interests who had a current need or desire for liquidity
tender their Interests to Lafayette. Lehman was not requested to render,
and did not render, any opinion as to the adequacy or fairness of the
Lafayette offer.

The Partnership's estimate of the present discounted value (the
"Partnership's Estimated Liquidation Value") of an Interest on a
liquidation basis, as of June 30, 1997, was a range of approximately $590
to $640 per Interest. The Partnership's Estimated Liquidation Value is
based on the Partnership's projected budgets and the underlying assumptions
thereto, and the assumption that the Partnership completes an orderly
liquidation of its assets by October 2002. The Partnership's Estimated
Liquidation Value represents the Partnership's estimate of the gross cash
distributions that a Holder of Interest would receive per Interest from
June 30, 1997, through the assumed liquidation, discounted to reflect the
present value of such distributions. Based upon its estimate of the gross
cash distributions to be received, the Partnership believes that a Holder
of Interest would receive total distributions from June 30, 1997, through
October 2002 in excess of $1,000, including the distribution of $175 per
Interest made in August 1997 and $75 per Interest made in February 1998
from the proceeds of the new credit facility discussed above.

<PAGE>

The Partnership began incurring significant expenditures in connection
with various tender offers for Interests during the third quarter of 1996.
Payment of these costs in 1997 is the primary cause for the decrease in
Accrued expenses and other liabilities on the accompanying consolidated
balance sheets at December 31, 1997 as compared to 1996.

Pursuant to a management agreement with the Partnership, through
December 31, 1997, Arvida Company ("Arvida"), an affiliate of the General
Partner, provided development and management supervisory and advisory
services (and the personnel therefor) to the Partnership for all of its
projects and operations, subject, in each case, to the overall control of
the General Partner on behalf of the Partnership. In November 1997, St.
Joe Corporation, an unaffiliated third party, completed its acquisition of
a majority interest in St. Joe/Arvida Company, L.P. ("St. Joe/Arvida"),
which acquired the major assets of Arvida. In connection with this
transaction, Arvida entered into a sub-management agreement with St.
Joe/Arvida, effective January 1, 1998, whereby St. Joe/Arvida provides (and
is reimbursed for) a substantial portion of the development and management
supervisory and advisory services (and personnel with respect thereto) to
the Partnership that Arvida would otherwise provide pursuant to its
management agreement with the Partnership. Effective January 1, 1998, St.
Joe/Arvida employs most of the same personnel previously employed by
Arvida, and the services provided to the Partnership pursuant to this sub-
management agreement are provided by the same personnel. Affiliates of JMB
Realty Corporation own a minority interest in St. Joe/Arvida. The
transaction did not involve the sale of any assets of the Partnership, nor
the sale of the General Partner's interest in the Partnership.

The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define a year. Consequently, any
computer programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business
activities.

The Partnership has completed an internal assessment and determined it
will need to upgrade portions of its software so its computer system will
function properly respect to dates in the year 2000 and thereafter. This
upgrade was initiated in October 1997, and is expected to be completed in
June 1998, with no material impact to the Partnership's operating results.
The Partnership believes once the upgrade is completed, the Year 2000 issue
will not pose any significant operational problems for its computer
systems.

RESULTS OF OPERATIONS

The results of operations for the years ended December 31, 1997, 1996
and 1995 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, 1997, the Partnership (including its
consolidated ventures and its unconsolidated ventures accounted for under
the equity method) closed on the sale of 1,104 housing units, 282 homesite
lots, an approximate six acre developed commercial land tract, its mixed-
use center in Boca Raton known as Parkway Center, the Cabana Club and two
retail shopping centers located in Weston. This compares to closings in
1996 of 1,291 housing units, 294 homesite lots and approximately 39 acres
of developed and undeveloped residential or commercial/industrial land
tracts. Closings in 1995 were for 1,283 housing units, 554 homesite lots,
approximately 177 acres of developed and undeveloped 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.
Outstanding contracts ("backlog") as of December 31, 1997 were for 550
housing units, 37 homesites and approximately 57 acres of developed and
undeveloped land tracts. This compares to a backlog as of December 31,
1996 of 538 housing units, 31 homesites and approximately 24 acres of

<PAGE>

developed and undeveloped land tracts. The backlog as of December 31, 1995
was for 875 housing units, 22 homesites and approximately 18 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 eight years.
Notwithstanding the estimated duration of the build-outs, the Partnership
currently expects to complete its orderly liquidation by October 2002. 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; 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 Jacksonville Golf & Country Club Community in Florida is in
its late stage of development. All of the remaining units in the
Partnership's Sawgrass Country Club and Dockside Communities in
Jacksonville, Florida and Atlanta, Georgia, respectively, closed during
1996. In addition, the Broken Sound Community, located in Boca Raton,
Florida, had its final closings in 1995; however, the Partnership still has
equity memberships in the Broken Sound Club to sell. Future revenues will
be impacted to the extent that there are lower levels of inventories
available for sale as the Partnership's remaining Communities approach or
undertake their final phases.

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. 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. 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.

The decrease in housing revenues for 1997 as compared to 1996 is due
primarily to a decrease in revenues recognized on the condominiums at
Arvida's Grand Bay. Substantial revenues were recognized from three of the
buildings at Arvida's Grand Bay in 1996. The remaining revenues from two
of these buildings and a substantial portion of the remaining revenues from
the third building were recognized during 1997. The Partnership commenced
construction on one of the two buildings still to be completed at Arvida's
Grand Bay during the second quarter of 1997. However, the initial revenues
from this building are not expected to be recognized until the latter part
of 1998. Deposits received for contracts for units in this building are
held by an escrow agent on the Partnership's behalf. These deposits
contributed to the increase in Trade and other accounts receivable, and are
the primary cause for the increase in Deposits on the accompanying
consolidated balance sheets at December 31, 1997 as compared to 1996. The
decrease in revenues is also attributable to a lower volume of units closed
in Jacksonville Golf & Country Club due to the late stage of development of
the community and decreased levels of inventory as it nears completion, as
well as the close-out of the remaining units in Sawgrass Country Club and
Dockside during 1996. In addition, revenues decreased at Waters Edge and
Weston due to lower volumes of units closed in 1997 as compared to 1996.
The lower volume of units closed in Waters Edge is attributable to a

<PAGE>

decrease in the availability of lower priced product within the Community,
and sales of higher priced product have been slower than anticipated due to
competition from third party builders. These unfavorable variances are
partially offset by an overall increase in the average sales price for
units closed in 1997 as compared to 1996.

The decrease in housing revenues for 1996 as compared to 1995 is due
primarily to the close-outs of the Partnership's Broken Sound Community in
1995, as well as the close-out in 1996 of the remaining units in the
Partnership's Sawgrass Country Club and Dockside Communities. Revenues
generated at these three Communities during 1996 decreased approximately
$16.8 million as a direct result of the close-outs. This reduction in
revenues was partially offset by increased revenues generated at the
Partnership's Weston Community due primarily to an increase in the number
of townhomes sold in 1996 as compared to 1995. In addition, the
Partnership generated more closings and revenues at its Water's Edge
Community in Atlanta due to the introduction of several new housing
products in 1995 which had their initial closings in 1996.

The increase in homesite revenues for 1997 as compared to 1996 is due
primarily to an increase in the average sales price of lots closed in
Weston and Waters Edge. Revenues also increased due to a higher volume of
lots closed in the Partnership's River Hills Community. These favorable
variances are partially offset by a reduced number of closings in
Jacksonville Golf & Country Club due to the late stage of development of
the Community. The decrease in homesite revenues for 1996 as compared to
1995 is due primarily to fewer lot closings in Weston as a result of the
close-out of several of the lower priced products in that Community, as
well as a slow down in sales of higher priced products. Also contributing
to the decrease in revenues is the close-out of lots in the Partnership's
Sawgrass Country Club and Dockside Communities in 1995 and 1996,
respectively.

The increase in land and property revenues for 1997 as compared to
1996 is due primarily to the closings of several of the Partnership's
operating properties in the fourth quarter of 1997. These closings include
the Partnership's mixed-use center in Boca Raton, Florida (consisting of
retail shops, an office building, and a hotel) during October 1997, the
Cabana Club located within its Sawgrass Community during November 1997, and
the Partnership's two retail shopping centers in Weston during December
1997. Revenues for 1997 also include the closing of an approximate six
acre developed commercial parcel in Weston. The decrease in land and
property revenues for 1996 as compared to 1995 is due to a lower volume of
land and property sales closed in 1996. Revenues for 1996 were generated
primarily from the sale of the Partnership's 20% joint venture interest in
Coto de Caza as well as the related promissory note for advances previously
made to the joint venture. Revenues for 1996 also include proceeds from
closings of several developed commercial parcels in Weston totaling
approximately 21 acres, the closing of an approximate 16 acre developed
commercial parcel located in Palm Beach County, Florida, and the closing of
an approximate two acre undeveloped commercial parcel in Cobb County,
Georgia. 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 included in 1995 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.

Operating properties represents activity from the Partnership's club
and hotel operations, commercial properties and certain other operating
assets. The increase in operating properties revenues for 1997 as compared
to 1996 is due primarily to rental income generated at one of the
Partnership's retail shopping centers in Weston, which opened in the fourth
quarter of 1996. This shopping center was sold in December 1997, as
discussed above. Revenues also increased at the Partnership's cable
operation in Weston due to an increase in the number of subscribers, and at

<PAGE>

the Partnership's club operations in Weston and River Hills due to an
overall increase in membership dues and golf revenues. These favorable
variances were partially offset by decreased revenues from the
Partnership's hotel operation and its office and retail properties due to
the October 1997 sale of the mixed-use center in Boca Raton, Florida.
Future revenues from operating properties will be substantially less than
previous years' revenues due to the sales of Parkway Center and the
Partnership's two retail shopping centers in Weston. Revenues from
operating properties increased in 1996 as compared to 1995 due primarily to
an increase in the number of members and the associated dues collected at
Weston Hills Country Club, as well as an increase in revenues generated by
the cable operation in Weston due to an increased number of subscribers.
Increased room revenues at the Partnership's hotel operation in Boca Raton,
Florida, resulting from increased occupancy and room rates, also
contributed to the favorable variance. These variances were partially
offset by decreased revenues resulting from the May 1996 closing of the
Partnership's restaurant located in Weston, as well as decreased revenues
associated with the sale of the Mizner Place office building in May 1995.

The increase in the gross operating profit margin from operating
properties activities for 1997 as compared to 1996 is due primarily to the
elimination of depreciation expense recorded on the Partnership's operating
properties held for disposal. Due to their intended sale, and in
accordance with FASB Statement 121, the Partnership discontinued recording
depreciation on its two retail shopping centers and cable operation in
Weston, the Cabana Club in Jacksonville, Florida, as well as its mixed-use
center in Boca Raton, Florida.

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, and fees earned from various management agreements
with joint ventures. The decrease in revenues from brokerage and other
operations for 1997 as compared to 1996 is due to a decrease in the volume
of resale brokerage activity in Palm Beach County, Florida, as well as the
Partnership's sale of its resale operation located on Longboat Key near
Sarasota, Florida in October 1996 to an unaffiliated third party purchaser.

Also contributing to the unfavorable variance are decreased commissions
earned from the sales of builders' homes within Weston due to a decrease in
the number of builder units closed in 1997 as compared to 1996. The
decrease in revenues from brokerage and other operations for 1996 as
compared to 1995 is due primarily to decreased resale brokerage activity
resulting from the closing of certain of the Partnership's Palm Beach
County sales offices, and the sale of the resale operation on Longboat Key
in October 1996. No land and property revenues were recognized as a result
of this sale as such revenues are contingent upon future operations of the
sales office. Also contributing to the decrease in revenues for 1996 as
compared to 1995 is a decrease in commissions earned from the sale of
builders' homes within the Partnership's Broken Sound, Sawgrass Country
Club and Dockside Communities due to the close-out of products in those
Communities.

The increase in the gross operating profit margin from brokerage and
other operations for the year ended December 31, 1997 as compared to 1996
is primarily due to the expansion and improved operating results of the
mortgage brokerage operation in Weston, as well as an increase in
management fees received from the various homeowners associations in
Weston.

<PAGE>

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. Despite the significant expenditures incurred in the third
and fourth quarters of 1996 in connection with the various tender offers
for Partnership Interests, selling, general and administrative expenses
decreased for the year ended December 31, 1996 as compared to 1995. This
favorable variance is due primarily to reduced marketing and project
administrative costs incurred resulting from the close-out of the
Partnership's Broken Sound, Sawgrass Country Club and Dockside Communities.

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.

In December 1997, the Partnership recorded an inventory impairment of
$4.5 million to the carrying value of its River Hills Community. This loss
was recorded based upon an analysis of estimated discounted cash flows used
to determine the fair value of the Community. This analysis estimated the
sell-out of the remaining houses, homesites and land and property in this
Community by the year 2001. As a result of this adjustment, River Hill's
carrying value is recorded at approximately $11.6 million at December 31,
1997.

The increase in interest income since 1995 is due primarily to an
increase in the average amounts invested in short-term financial
instruments.

During July 1997, the Partnership entered into a joint venture
agreement with an unaffiliated third party to form A&D Title, L.P. The
joint venture was formed to act as an agent in connection with the issuance
of title insurance, primarily related to closings in the Partnership's
Weston Community. The Partnership obtained a 50% ownership interest in the
joint venture, and is accounting for its investment in accordance with the
equity method of accounting. Recognition of the Partnership's share of
this joint venture's profits are the primary cause for the increase in
Equity in earnings (losses) of unconsolidated ventures on the accompanying
consolidated statements of operations for 1997 as compared to 1996. In
addition, during August 1997, the remaining property owned by the Tampa 301
Associates Joint Venture and substantially all of the remaining property
owned by the Ocala 202 Joint Venture were sold. The net profit generated
by the sales of these properties resulted in approximately $91,000 of
earnings for the Partnership, which also contributed to the increase in
Equity in earnings (losses) of unconsolidated ventures on the accompanying
consolidated statements of operations for the year ended 1997 as compared
to 1996. The decrease in Equity in earnings of unconsolidated ventures for
1996 as compared to 1995 resulted from the Partnership recording its share
of income generated from a land sale by the commercial joint venture
located in Ocala, Florida during the first quarter of 1995. No land sales
were generated by the unconsolidated joint ventures in which the
Partnership holds interests during 1996.

<PAGE>

The increase in interest and real estate tax expense for 1997 as
compared to 1996 is due to a decrease in the amount of interest eligible
for capitalization. The decrease in interest and real estate tax expense
for 1996 as compared to 1995 is due to a reduction in real estate taxes
incurred in 1996.

The Partnership adopted 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", effective January 1,
1995. As a result, an impairment loss of $2.2 million was recorded to the
carrying value of its Cullasaja Community located near Highlands, North
Carolina in 1995. 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. This
loss is reflected as the Cumulative effect due to change in accounting for
long-lived assets on the accompanying consolidated statements of operations
for the year ended December 31, 1995. As a result of this adjustment,
Cullasaja's carrying value is recorded at approximately $4.1 million and
$5.4 million at December 31, 1997 and December 31, 1996, respectively.

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 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

INDEX

Report of Independent Certified Public Accountants

Consolidated Balance Sheets, December 31, 1997 and 1996

Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995

Consolidated Statements of Changes in Partners' Capital Accounts
for the years ended December 31, 1997, 1996 and 1995

Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995

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.

<PAGE>

REPORT OF ERNST & YOUNG LLP,
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Partners
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, 1997
and 1996, 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, 1997. 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, 1997 and 1996, and the consolidated results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.

Miami, Florida
February 20, 1998

<PAGE>

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

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1997 AND 1996

ASSETS
------
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Cash and cash equivalents (note 3). . . . . . . . . . . . . . . . . $ 79,411,195 53,635,737
Restricted cash (note 3). . . . . . . . . . . . . . . . . . . . . . 12,444,016 11,833,522
Trade and other accounts receivable (net of allowance
for doubtful accounts of $692,940 and $261,326
at December 31, 1997 and 1996, respectively). . . . . . . . . . . 14,062,505 3,582,995
Mortgages receivable (net of valuation allowances of
$1,086,839 and $951,839 at December 31, 1997 and 1996,
respectively) (note 4). . . . . . . . . . . . . . . . . . . . . . 384,445 1,269,460
Real estate inventories (notes 5 and 8) . . . . . . . . . . . . . . 163,423,873 174,638,454
Property and equipment, net (notes 6 and 8) . . . . . . . . . . . . 35,279,528 79,373,444
Property and equipment held for disposition or sale . . . . . . . . 6,484,713 --
Investments in and advances to joint ventures, net (note 7) . . . . 2,151,694 2,739,842
Equity memberships (note 9) . . . . . . . . . . . . . . . . . . . . 4,180,733 5,457,880
Amounts due from affiliates, net (note 10). . . . . . . . . . . . . 665,134 1,003,732
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . 8,135,020 7,105,077
------------ -----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . $326,622,856 340,640,143
============ ===========

<PAGE>

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

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

1997 1996
------------ -----------
Liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . $ 16,260,574 21,532,400
Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,930,275 17,287,325
Accrued expenses and other liabilities. . . . . . . . . . . . . . 13,057,290 15,324,815
Notes and mortgages payable, net (note 8) . . . . . . . . . . . . 78,136,007 36,843,778
------------ -----------
Commitments and contingencies

Total liabilities . . . . . . . . . . . . . . . . . . . . 129,384,146 90,988,318
------------ -----------
Partners' capital accounts (note 14)
General Partner and Associate Limited Partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . 20,000 20,000
Cumulative net income. . . . . . . . . . . . . . . . . . . . . 39,766,027 35,750,061
Cumulative cash distributions. . . . . . . . . . . . . . . . . (38,508,251) (34,492,285)
------------ -----------
1,277,776 1,277,776
------------ -----------
Holders of Interests (404,000 Interests):
Initial Holder of Interests:
Capital contributions, net of offering costs . . . . . . . . . 364,841,815 364,841,815
Cumulative net income. . . . . . . . . . . . . . . . . . . . . 78,613,984 36,071,642
Cumulative cash distributions. . . . . . . . . . . . . . . . . (247,494,865) (152,539,408)
------------ -----------
195,960,934 248,374,049
------------ -----------
Total partners' capital accounts . . . . . . . . . . . . 197,238,710 249,651,825
------------ -----------
Total liabilities and partners' capital . . . . . . . . . $326,622,856 340,640,143
============ ===========

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

<PAGE>

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

AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Housing . . . . . . . . . . . . . . . . . . . . . $202,735,713 236,236,822 245,700,339
Homesites . . . . . . . . . . . . . . . . . . . . 25,952,527 23,652,202 41,429,110
Land and property . . . . . . . . . . . . . . . . 70,824,676 25,979,069 37,065,413
Operating properties. . . . . . . . . . . . . . . 30,219,498 29,985,372 28,205,307
Brokerage and other operations. . . . . . . . . . 26,171,642 26,959,804 29,867,313
------------ ------------ ------------

Total revenues. . . . . . . . . . . . . . 355,904,056 342,813,269 382,267,482
------------ ------------ ------------

Cost of revenues:
Housing . . . . . . . . . . . . . . . . . . . . . 170,961,122 202,965,915 205,949,253
Homesites . . . . . . . . . . . . . . . . . . . . 16,578,471 15,486,069 27,815,676
Land and property . . . . . . . . . . . . . . . . 44,074,899 18,554,274 17,141,616
Operating properties. . . . . . . . . . . . . . . 26,392,730 28,560,746 27,892,903
Brokerage and other operations. . . . . . . . . . 23,815,043 25,389,876 26,986,730
------------ ------------ ------------

Total cost of revenues. . . . . . . . . . 281,822,265 290,956,880 305,786,178
------------ ------------ ------------

<PAGE>

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

AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED

1997 1996 1995
------------ ------------ ------------

Gross operating profit. . . . . . . . . . . . . . . 74,081,791 51,856,389 76,481,304

Selling, general and administrative expenses. . . . (22,435,609) (22,554,641) (22,755,471)
Writedown of the carrying value of real estate
inventories and other assets
(notes 1, 5 and 7). . . . . . . . . . . . . . . . -- -- 8,544,668
Inventory impairment. . . . . . . . . . . . . . . . 4,500,000 -- --
------------ ------------ ------------

Net operating income. . . . . . . . . . . 47,146,182 29,301,748 45,181,165

Interest income . . . . . . . . . . . . . . . . . . 2,186,358 1,567,646 1,201,172
Equity in earnings (losses) of unconsolidated
ventures (notes 1 and 7). . . . . . . . . . . . . 211,217 (177,864) 1,050,994
Interest and real estate taxes, net (note 1). . . . (2,985,449) (2,680,106) (3,396,645)
------------ ------------ ------------

Income before cumulative effect
due to change in accounting for
long-lived assets . . . . . . . . . . . 46,558,308 28,011,424 44,036,686

Cumulative effect due to change
in accounting for long-lived
assets (note 16). . . . . . . . . . . . -- -- (2,200,000)
------------ ------------ ------------
Net income. . . . . . . . . . . . . . . . $ 46,558,308 28,011,424 41,836,686
============ ============ ============
Net income per Interest . . . . . . . . . $ 105.30 67.47 101.91
============ ============ ============
Cash distribution per Interest. . . . . . $ 235.04 25.85 13.49
============ ============ ============

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

<PAGE>

<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, 1997, 1996 AND 1995

<CAPTION>
GENERAL PARTNER AND ASSOCIATE LIMITED PARTNERS HOLDERS OF INTERESTS (404,000 INTERESTS)
----------------------------------------------------------------------------------------------------------
NET
CONTRIBU- NET INCOME
TIONS INCOME DISTRIBUTIONS TOTAL CONTRIBUTIONS (LOSS) DISTRIBUTIONS TOTAL
--------- --------- ------------- ----------- ------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
Decem-
ber 31,
1994 . . .$20,000 34,328,454 (33,609,346) 739,108 364,841,815 (32,354,861)(136,646,308) 195,840,646
1995 act-
ivity
(note 14). -- 666,269 (302,689) 363,580 -- 41,170,417 (5,448,464) 35,721,953
------- ---------- ----------- ----------- ----------- ----------- ------------ -----------
Balance
Decem-
ber 31,
1995 . . . 20,000 34,994,723 (33,912,035) 1,102,688 364,841,815 8,815,556 (142,094,772) 231,562,599

1996 act-
ivity
(note 14). -- 755,338 (580,250) 175,088 -- 27,256,086 (10,444,636) 16,811,450
------- ---------- ----------- ----------- ----------- ----------- ------------ -----------
Balance
Decem-
ber 31,
1996 . . . 20,000 35,750,061 (34,492,285) 1,277,776 364,841,815 36,071,642 (152,539,408) 248,374,049

1997 act-
ivity
(note 14). -- 4,015,966 (4,015,966) -- -- 42,542,342 (94,955,457) (52,413,115)
------- ---------- ----------- ----------- ----------- ----------- ------------ -----------
Balance
Decem-
ber 31,
1997 . . .$20,000 39,766,027 (38,508,251) 1,277,776 364,841,815 78,613,984 (247,494,865) 195,960,934
======= ========== =========== =========== =========== =========== ============ ===========

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

<PAGE>

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net income. . . . . . . . . . . . . . . . . . . . . $46,558,308 28,011,424 41,836,686
Charges (credits) to net income not
requiring (providing) cash:
Depreciation and amortization . . . . . . . . . . 4,003,923 5,896,551 5,661,479
Equity in (earnings) losses of
unconsolidated ventures . . . . . . . . . . . . (211,217) 177,864 (1,050,994)
Provision for doubtful accounts . . . . . . . . . 201,869 77,203 6,511
Loss (gain) on sale of property and equipment . . (25,536,155) 487,237 (3,530,599)
Writeoff of abandoned property and equipment. . . -- 147,600 --
Writedowns of the carrying value of real estate
inventories and other assets
(notes 1, 5 and 7). . . . . . . . . . . . . . . -- -- 8,544,668
Inventory impairment (note 16). . . . . . . . . . 4,500,000 -- --
Cumulative effect due to change in
accounting for long-lived assets
(note 16) . . . . . . . . . . . . . . . . . . . -- -- 2,200,000
Changes in:
Restricted cash . . . . . . . . . . . . . . . . . (610,494) 2,018,873 380,145
Trade and other accounts receivable . . . . . . . (10,681,378) 24,396,064 (9,852,816)
Real estate inventories:
Additions to real estate inventories. . . . . . (203,502,849) (187,982,662) (214,451,976)
Cost of revenues. . . . . . . . . . . . . . . . 216,801,511 221,449,211 234,422,302
Capitalized interest. . . . . . . . . . . . . . (4,416,322) (4,672,972) (8,336,902)
Capitalized real estate taxes . . . . . . . . . (2,167,759) (3,144,609) (3,448,313)
Equity memberships. . . . . . . . . . . . . . . . 1,277,147 1,909,386 2,003,598
Amounts due from affiliates . . . . . . . . . . . 338,598 127,965 (607,141)
Prepaid expenses and other assets . . . . . . . . (1,698,687) 1,523,541 312,157
Accounts payable, accrued expenses and
other liabilities . . . . . . . . . . . . . . . (7,158,716) 1,144,176 (2,028,810)
Deposits. . . . . . . . . . . . . . . . . . . . . 4,642,950 (6,538,174) (3,257,267)
------------ ------------ ------------
Net cash provided by operations . . . . . 22,340,729 85,028,678 48,802,728
------------ ------------ ------------

<PAGE>

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

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

1997 1996 1995
------------ ------------ ------------
Investing activities:
Mortgages receivable, net . . . . . . . . . . . . 885,015 725,123 (900,360)
Acquisitions of property and equipment. . . . . . (3,127,344) (13,748,825) (11,312,321)
Proceeds from sales and disposals of
property and equipment. . . . . . . . . . . . . 62,937,522 24,899 7,027,220
Joint venture distributions (contributions),
net . . . . . . . . . . . . . . . . . . . . . . 418,730 (79,776) 1,177,194
Payments from (advances to) joint ventures. . . . -- 4,167,035 (60,235)
Proceeds from disposition of
joint venture interest. . . . . . . . . . . . . -- 6,111,440 --
------------ ------------ ------------

Net cash provided by (used in)
investing activities. . . . . . . . . . 61,113,923 (2,800,104) (4,068,502)
------------ ------------ ------------
Financing activities:
Proceeds from notes and long-term borrowings. . . 89,216,128 33,944,724 55,814,878
Payments of notes and long-term borrowings. . . . (47,923,899) (67,710,977) (100,624,039)
Proceeds from (payments of) bank overdrafts . . . -- (3,972,987) 3,972,987
Distributions to General Partner and
Associate Limited Partners. . . . . . . . . . . (4,015,966) (580,250) (302,689)
Distributions to Holders of Interests . . . . . . (94,955,457) (10,444,636) (5,448,464)
------------ ------------ ------------
Net cash used in financing
activities. . . . . . . . . . . . . . . (57,679,194) (48,764,126) (46,587,327)
------------ ------------ ------------
Increase (decrease) in cash
and cash equivalents. . . . . . . . . . 25,775,458 33,464,448 (1,853,101)
Cash and cash equivalents,
beginning of year . . . . . . . . . . . 53,635,737 20,171,289 22,024,390
------------ ------------ ------------
Cash and cash equivalents,
end of year . . . . . . . . . . . . . . $ 79,411,195 53,635,737 20,171,289
============ ============ ============
Supplemental disclosure of cash
flow information:
Cash paid for mortgage and other
interest, net of amounts capitalized. . . . . . $ 892,939 110,275 --
============ ============ ============

<PAGE>

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

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

1997 1996 1995
------------ ------------ ------------

Non-cash investing and financing
activities:
Consolidation of Partnership's interest in
the Arvida Boose Joint Venture (note 7) . . . $ -- 914,623 --
Notes payable recorded in conjunction with
the settlement of certain litigation related
to the Partnership's retail plaza in Boca
Raton, Florida. . . . . . . . . . . . . . . . -- 271,667 --
Distribution of land from unconsolidated
joint venture (note 7). . . . . . . . . . . . -- -- 717,472
------------ ------------ ------------

$ -- 1,186,290 717,472
============ ============ ============

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

<PAGE>

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 Arvida/JMB Partners, L.P. (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'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.

Principles of Consolidation

The consolidated financial statements include the accounts of the
Partnership and its consolidated ventures (note 7). All material inter-
company 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 was
accounted for in accordance with the cost method of accounting until March
1996 when the Partnership sold its interest in the joint venture.
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.

<PAGE>

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. 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 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 $4,909,453, $4,672,972 and $8,481,343 was incurred for the years
ended December 31, 1997, 1996 and 1995, respectively, of which $4,416,322,
$4,672,972 and $8,336,902 was capitalized for the years ended December 31,
1997, 1996 and 1995, respectively. Interest payments, including amounts
capitalized, of $5,309,261, $4,783,247 and $7,937,153 were made for the
years ended December 31, 1997, 1996 and 1995, respectively.

Real estate taxes of $4,660,077, $5,824,715 and $6,700,517 were
incurred for the years ended December 31, 1997, 1996 and 1995,
respectively, of which $2,167,759, $3,144,609 and $3,448,313 were
capitalized for the years ended December 31, 1997, 1996 and 1995,
respectively. Real estate tax payments of $4,785,651, $5,773,005 and
$6,690,152 were made for the years ended December 31, 1997, 1996 and 1995,
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, as discussed
in note 16. Expenditures for maintenance and repairs are charged to
expense as incurred. Costs of major renewals and improvements which extend
useful lives are capitalized.

<PAGE>

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 $382,000, $50,000 and $180,000 was recorded for the
years ended December 31, 1997, 1996 and 1995, respectively. The increase
in amortization of other assets for 1997 as compared to 1996 and 1995 is
due to the Partnership fully amortizing the balance of prepaid commissions
paid with respect to its mixed-use center in Boca Raton and its two retail
shopping centers in Weston, in conjunction with the 1997 closings of these
properties. Amortization of loan fees, which is included in interest
expense, of approximately $287,000, $288,000 and $394,000 was recorded for
the years ended December 31, 1997, 1996 and 1995, respectively.

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 joint
venture 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 was applied in the accompanying consolidated
financial statements with respect to the Coto de Caza Joint Venture until
March 1996 when the Partnership sold its interest in the joint venture.
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, 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 the 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. 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:

<PAGE>

<TABLE>

1997 1996
------------------------------ ------------------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>

Total assets. . . . . . . . . . . $326,622,856 490,261,048 340,640,143 596,588,980
Partners' capital accounts:
General Partner and
Associate Limited Partners . 1,277,776 531,570 1,277,776 533,032
Holders of Interests. . . . . 195,960,934 297,091,456 248,374,049 350,658,940
Net income:
General Partner and
Associate Limited Partners . 4,015,966 4,014,504 755,338 717,363
Holders of Interests. . . . . 42,542,342 41,387,973 27,256,086 23,496,573
Net income per Interest. . . . . 105.30 102.45 67.47 58.16
=========== ============ ============= =============

</TABLE>

<PAGE>

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

The net income per Interest is based upon the average number of
Interests outstanding during each period.

Impact of Year 2000

Reclassifications

Certain reclassifications have been made to the 1996 and 1995
financial statements to conform to the 1997 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 the General Partner, Associate Limited Partners and Holders of
Interests. In such regard, during the first quarter of 1998, the
Partnership remitted each Holder of Interests' share of the 1997 North
Carolina non-resident withholding tax to the state tax authorities on
behalf of each of the Holder of Interests. Such payments, of approximately
$.06 per Interest, are deemed distributions to the Holders Of Interests for
1997. In addition, the cash distributions per Interest made during the
years ended December 31, 1997 and 1996 include $.04 and $.06, respectively,
which represent each Holder of Interests' share of a North Carolina non-
resident withholding tax which was paid directly to the state tax
authorities on behalf of the Holders of Interests for the 1996 and 1995 tax
years, respectively.

(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 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.

<PAGE>

Also in their mid stages of development are the River Hills Country Club in
Tampa, 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 Jacksonville Golf & Country Club Community in Florida is
in its late stage development. All of the remaining units in the
Partnership's Sawgrass Country Club and Dockside Communities were sold and
closed as of December 31, 1996. In addition, the Broken Sound Community,
located in Boca Raton, Florida, 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.

<PAGE>

(3) CASH, CASH EQUIVALENTS AND RESTRICTED CASH

Cash and cash equivalents may consist 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. At December 31, 1997 and 1996, no funds were invested in treasury
bills. 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 10.0% 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 7.0% to
10.0% per annum.

(5) REAL ESTATE INVENTORIES

Real estate inventories at December 31, 1997 and 1996 are summarized
as follows:

1997 1996
------------ -----------
Land held for future development
or sale . . . . . . . . . . . . $ 4,439,164 7,777,701
Community development inventory:
Work in progress and
land improvements . . . . . . 134,375,807 135,441,247
Completed inventory . . . . . . 24,608,902 31,419,506
------------ -----------
Real estate inventories. . . $163,423,873 174,638,454
============ ===========

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, 1997 and 1996 are summarized as
follows:
1997 1996
----------- ----------

Land. . . . . . . . . . . . . . . . $ 1,422,465 8,437,581
Land improvements . . . . . . . . . 22,953,706 30,398,047
Buildings . . . . . . . . . . . . . 22,669,373 56,800,858
Equipment and furniture . . . . . . 12,419,754 23,292,495
Construction in progress. . . . . . 416,535 539,275
----------- ------------

Total. . . . . . . . . . . . . 59,881,833 119,468,256
Accumulated depreciation . . . (24,602,305) (40,094,812)
----------- ------------
Property and equipment, net. . $35,279,528 79,373,444
=========== ============

<PAGE>

Depreciation expense of approximately $3,335,000, $5,558,000 and
$5,088,000 was incurred for the years ended December 31, 1997, 1996 and
1995, respectively. The decrease in depreciation expense for 1997 as
compared to 1996 and 1995 is due to the elimination of depreciation expense
for certain assets which have been classified as held for disposition in
accordance with FASB Statement 121, as further discussed in note 16.

The decrease in Property and equipment at December 31, 1997 as
compared to December 31, 1996 is due to the closings on the sales of
several of the Partnership's operating properties in the fourth quarter of
1997. These closings include the Partnership's mixed-use center in Boca
Raton, Florida (consisting of retail shops, an office building, and hotel)
during October 1997, the Cabana Club located within its Sawgrass Community
during November 1997, and the Partnership's two retail shopping centers in
Weston during December 1997.

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 (a) 50 Florida

A&D Title, L.P. 50 Florida

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

Arvida Corporate
Park Associates 50 Florida

Arvida Pompano Associates
Joint Venture 50 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

<PAGE>

(a) On December 31, 1996, the Partnership purchased its joint venture
partner's 50% interest in the Arvida Boose Joint Venture for a purchase
price of approximately $1.8 million, and formed a new joint venture in the
name of Metrodrama Joint Venture. 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
December 31, 1996. During October 1997, Metrodrama Joint Venture entered
into a contract for the sale of approximately 29 acres of undeveloped
commercial property to an unaffiliated third party. The closing is subject
to the satisfaction of various conditions, and there can be no assurance
the closing will occur. The sale, if consummated, is expected to generate
a profit for financial reporting and Federal income tax purposes in 1998.

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

<PAGE>

<TABLE>

<CAPTION>
ASSETS
------

DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Real estate inventories . . . . . . . . . . . . . . . . . . . . . . . . $ 6,411,653 8,570,695
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,377,297 866,667
----------- -----------

Total assets. . . . . . . . . . . . . . . . . . . . . . . . . $ 8,788,950 9,437,362
=========== ===========

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

Accounts payable, deposits and other liabilities. . . . . . . . . . . . $ 296,511 555,568
Notes and mortgages payable . . . . . . . . . . . . . . . . . . . . . . 3,652,837 3,969,139
----------- -----------

Total liabilities . . . . . . . . . . . . . . . . . . . . . . 3,949,348 4,524,707

Venture partners' capital . . . . . . . . . . . . . . . . . . . . . . . 2,294,636 2,104,308
Partnership's capital . . . . . . . . . . . . . . . . . . . . . . . . . 2,544,967 2,808,347
----------- -----------

Total liabilities and partners' capital . . . . . . . . . . . $ 8,788,950 9,437,362
=========== ===========

</TABLE>

<PAGE>

<TABLE>

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

<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ -------------
<S> <C> <C> <C>
Revenues. . . . . . . . . . . . . . . . . . . . . . . $ 3,939,124 9,485 3,079,514
=========== ============ ============
Net income (loss) . . . . . . . . . . . . . . . . . . $ 493,870 (414,137) 1,763,264
=========== ============ ============
Partnership's proportionate share of
net income (loss) . . . . . . . . . . . . . . . . . $ 269,048 (197,121) 908,994
=========== ============ ============
Partnership's equity in earnings (losses)
of unconsolidated ventures. . . . . . . . . . . . . $ 211,217 (177,864) 1,050,994
=========== ============ ============

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,
1997 1996 1995
------------ ------------ ------------

Partnership's Capital, equity method. . . . . . . . . $ 2,544,967 2,808,347 4,693,802
Partnership's Capital, cost method. . . . . . . . . . -- -- 5,836,000
Basis difference. . . . . . . . . . . . . . . . . . . (403,664) (78,896) (752,135)
----------- ------------ ------------

Investments in joint ventures . . . . . . . . . . . . 2,141,303 2,729,451 9,777,667
Advances to joint ventures, net . . . . . . . . . . . 10,391 10,391 4,177,426
----------- ------------ ------------
Investments in and advances to
joint ventures, net. . . . . . . . . . . . . . $ 2,151,694 2,739,842 13,955,093
=========== ============ ============

</TABLE>

<PAGE>

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 August 1997, the remaining properties owned by the Tampa 301
Associates Joint Venture and substantially all of the remaining property
owned by the Ocala 202 Joint Venture were sold. The net profit generated
by the sales of these properties resulted in approximately $91,000 of
earnings for the Partnership, which also contributed to the increase in
Equity in earnings (losses) of unconsolidated ventures on the accompanying
consolidated statements of operations for 1997 as compared to 1996.

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 reflected in Writedowns of the
carrying values of real estate inventories and other assets on the
accompanying consolidated statements of operations for the year ended
December 31, 1995. 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. As a
result of this transaction, the Partnership has no future obligations with
respect to Coto de Caza. This transaction resulted in gains of
approximately $1.8 million and $1.1 million in 1996, for financial
reporting and Federal income tax purposes, respectively.

<PAGE>

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, the proceeds of which are
included in Land and property revenues on the accompanying consolidated
statements of operations for the year ended December 31, 1995.

The decrease in Equity in earnings of unconsolidated ventures for 1996
as compared to 1995 resulted from the Partnership recording its share of
income generated from a land sale by the commercial joint venture located
in Ocala, Florida during the first quarter of 1995. No land sales were
generated by the unconsolidated joint ventures in which the Partnership
holds interests during 1996.

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, 1997, 1996 and
1995, the Partnership was entitled to receive approximately $0, $1,800 and
$251,900, respectively, from certain of the joint ventures in which it
holds interests, all of which was received as of December 31, 1997.

(8) NOTES AND MORTGAGES PAYABLE

Notes and mortgages payable at December 31, 1997 and 1996 are
summarized as follows:

1997 1996
----------- -----------
Term loan credit facility of
$85,252,250 bearing interest
at approximately 8.2% per annum
at December 31, 1996
(Retired in January 1997) (B). . . . $ -- 5,234,008

Income property term loan of
$18,233,326 bearing interest
at approximately 8.0% per annum
at December 31, 1996 (Retired in
July 1997) (B) . . . . . . . . . . . -- 11,566,746

Term loan credit facility of
$75,000,000 bearing interest
at approximately 8.00% at
December 31, 1997 (A). . . . . . . . 68,750,000 --

Revolving line of credit of
$20,000,000 bearing interest
at approximately 8.00% at
December 31, 1997 (A). . . . . . . . -- --

Revolving line of credit of
$20,000,000 (Retired in July 1997) (B) -- --

Other notes and mortgages
payable (C) . . . . . . . . . . . . 9,386,007 20,043,024
----------- -----------

Total . . . . . . . . . . . $78,136,007 36,843,778
=========== ===========

<PAGE>

(A) On July 31, 1997, the Partnership obtained a new credit facility
from certain banks. The new credit facility consists of a $75 million term
loan, a $20 million revolving line of credit and a $5 million letter of
credit facility. The new term loan has a term of four years with annual
scheduled principal repayments of $12.5 million, as well as additional
annual principal repayments based upon a specified percentage or amount of
the Partnership's available cash. The maximum required principal
repayments, including the scheduled repayments, generally will not exceed
$18.75 million per annum. The remaining outstanding balance on the new
facility is due upon maturity. Interest on the facility is based, at the
Partnership's option, on the relevant LIBOR plus 2.25% per annum or one of
the lender's prime rate (8.5% at December 31, 1997). The Partnership
obtained interest rate swaps for two thirds of the outstanding balance of
the term loan. Loan fees totaling 1% of the total facility were paid by
the Partnership upon the closing of the loan. Such fees have been
capitalized and are being amortized over the life of the loan. The payment
of these fees is the primary cause for the increase in Prepaid expenses and
other assets on the accompanying consolidated balance sheets at December
31, 1997 as compared to December 31, 1996. The term loan, revolving line
of credit and letter of credit facility are secured by recorded mortgages
on real property of the Partnership (including certain of its consolidated
ventures) and pledges of certain other assets. All of the loans under this
new facility are cross-collateralized and cross-defaulted. The proceeds
from the new financing were used to make a distribution during August 1997
in the amount of approximately $73.4 million, including a distribution of
$175 per Interest to the Holders of Interests, and to pay off the remaining
balances outstanding under the Partnership's previous credit facility, as
discussed below. At December 31, 1997, the balances outstanding on the
term loan, the revolving line of credit and the letter of credit facility
were approximately $68,750,000, $0 and $1,018,200, respectively. For the
year ended December 31, 1997, the combined effective interest rate for the
Partnership's credit facilities, including the amortization of loan
origination fees, was approximately 9.80% per annum.

Due to the replacement of the Partnership's previous letter of credit
facility by the new credit facility, which is discussed above, the
Partnership was required to post approximately $4.2 million in cash as
collateral with its previous lender for the letters of credit which
continue to be obligations of that lender. Such letters of credit are
expected to be replaced by either letters of credit issued under the new
credit facility or by bonds. Once the letters of credit are replaced, the
cash collateral will be released to the Partnership. As of December 31,
1997, approximately $1.3 million of such cash collateral had been released
to the Partnership due to the replacement of the letters of credit issued
by the previous lender, leaving a balance outstanding under this previous
letter of credit facility of approximately $2.9 million.

(B) At December 31, 1996, the Partnership's credit facility consisted
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, revolving line of credit and letter of credit facility were
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 was 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.
All of the notes under the facility were cross-collateralized and cross-
defaulted. At December 31, 1996, the term loan, the revolving line of
credit and the income property term loan bore 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.

<PAGE>

Under the previous term loan agreement, the Partnership made scheduled
principal payments of $10 million in March 1994, February 1995 and February
1996 and $5 million principal payments in July 1995 and July 1996. The
term loan agreement also provided 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, 1996, the Partnership
made such additional term loan payments totaling approximately $12.3
million. During January 1997, the Partnership paid off the remaining
principal balance of $5,234,008 outstanding under the term loan. Under the
income property term loan, principal payments of $0.1 million were required
to be paid monthly until maturity. The terms of the Partnership's credit
facility required that upon satisfaction of the principal due under the
term loan, the additional term loan principal repayments described above
would be applied to the principal outstanding under the income property
term loan. Accordingly, the Partnership made such additional income
property term loan repayments totaling approximately $1.3 million during
1997. The Partnership utilized a portion of the proceeds from its new
credit facility, which is discussed in detail above, as well as operating
cash on hand to pay off the remaining principal balance outstanding under
the income property term loan of $9,522,126 in July 1997.

(C) 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 $13,348,700 million at December 31,
1997. These notes and mortgage notes have a weighted average annual
effective interest rate of approximately 9.5% and 8.2% at December 31, 1997
and 1996, respectively, and mature in varying amounts through 2017.

During April 1996, the Partnership refinanced the loan on one of its
retail properties located in its Weston Community with a different lender.
The outstanding principal balance on such loan was repaid during
December 1997 from the proceeds of the sale of such property.

In addition, $3.1 million of subordinated debt attributable to the
Cullasaja Joint Venture is included in Notes and mortgages payable at
December 31, 1997.

During 1997, the Partnership borrowed against its revolving
construction line of credit to fund the construction of one of the two
remaining buildings within Arvida's Grand Bay. This line of credit had a
borrowing capacity up to $24 million, and was originally scheduled to
mature in January 1997; however, it was subsequently renewed with a revised
borrowing capacity of $21 million, and its term extended to August 1999.
The line of credit bears interest at the lender's prime rate (8.50% at
December 31, 1997) plus 1/2% per annum. At December 31, 1997, there was
approximately $4.6 million outstanding under this line of credit. The
Partnership currently anticipates that it will borrow additional funds
under this line of credit during 1998 for the remaining building to be
constructed within Arvida's Grand Bay.

During January 1996, the Partnership executed a note for a $7.5
million construction loan for the construction and development of a second
retail shopping center located in its Weston Community. The Partnership
sold this shopping center during December 1997, at which time the
Partnership repaid the remaining outstanding principal balance on this
loan.

<PAGE>

Following is a schedule of the maturities of notes and mortgages
payable at December 31, 1997.

1998 . . . . . . . . . . . . . . . . $ 14,201,292
1999 . . . . . . . . . . . . . . . . 23,370,524
2000 . . . . . . . . . . . . . . . . 18,750,000
2001 . . . . . . . . . . . . . . . . 18,750,000
2002 . . . . . . . . . . . . . . . . --
Thereafter . . . . . . . . . . . . . 3,064,191
-----------
Total notes and
mortgages payable. . . . . . . $78,136,007
===========

(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. 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, 1997
and for the years ended December 31, 1997, 1996 and 1995 are as follows:

UNPAID AT
DECEMBER 31,
1997 1996 1995 1997
-------- -------- -------- ------------
Property management
fees (note 15) . . . . .$ 68,600 68,053 62,913 --
Insurance commissions . . 235,456 260,793 272,316 --
Reimbursement (at cost)
for accounting
services . . . . . . . . 39,003 45,408 73,326 --
Reimbursement (at cost)
for portfolio manage-
ment services. . . . . . 32,304 67,038 83,884 --
Reimbursement (at cost)
for legal services . . . 234,631 319,196 41,470 --
Reimbursement (at cost)
for other administra-
tive and out-of-pocket
expenses . . . . . . . . 155,564 60,247 78,960 --
-------- -------- -------- -------
$765,558 820,735 612,869 --
======== ======== ======== =======

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, 1997, the amount of
such costs incurred by the Partnership on behalf of these affiliates
totaled approximately $1,956,100. Approximately $394,500 was outstanding
at December 31, 1997, of which approximately $232,300 was received as of
February 20, 1998. For the years ended December 31, 1996 and 1995, the
Partnership was entitled to receive reimbursements of approximately
$387,200 and $509,000, respectively.

<PAGE>

The General Partner and the Associate Limited Partners, collectively,
received cash distributions in 1997 totaling $4,015,996. In connection
with the settlement of certain litigation, the General Partner and the
Associate Limited Partners deferred approximately $1,259,000 of their share
of the August 1997 distribution which was otherwise distributable to them,
and such deferred distribution amount was used by the Partnership to pay a
portion of the legal fees and expenses in such litigation. The General
Partner and Associate Limited Partners will be entitled to receive such
deferred amount after the Holders of Interests have received a specified
amount of distributions from the Partnership after July 1, 1996. In
addition, under certain circumstances, they will be entitled to
approximately $6,476,000 which has been deferred through December 31, 1997
pursuant to the terms of the Partnership Agreement. Such payment is
subject to certain restrictions contained in the Partnership Agreement and
the Partnership's credit facility.

Through December 31, 1997, Arvida Company ("Arvida"), pursuant to an
agreement with the Partnership, provided development and management
supervisory and advisory services and the personnel therefor 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, 1997, 1996 and 1995 was approximately $6,189,700, $5,931,300
and $6,233,600, respectively, all of which was paid as of December 31,
1997. In addition, at December 31, 1997, the Partnership was owed
approximately $83,800 from Arvida for overpayments of salary and salary-
related costs, and for work performed by certain of the Partnership's
employees on behalf of Arvida, of which approximately $39,600 was received
by the Partnership as of February 20, 1998.

In November 1997, St. Joe Corporation, an unaffiliated third party,
completed its acquisition of a majority interest in St. Joe/Arvida Company,
L.P. ("St. Joe/Arvida"), which acquired the major assets of Arvida. In
connection with this transaction, Arvida entered into a sub-management
agreement with St. Joe/Arvida, effective January 1, 1998, whereby St.
Joe/Arvida provides (and is reimbursed for) a substantial portion of the
development and management supervisory and advisory services (and personnel
with respect thereto) to the Partnership that Arvida would otherwise
provide pursuant to its management agreement with the Partnership.
Effective January 1, 1998, St. Joe/Arvida employs most of the same
personnel previously employed by Arvida, and the services provided to the
Partnership pursuant to this sub-management agreement are provided by the
same personnel. Affiliates of JMB Realty Corporation own a minority
interest in St. Joe/Arvida. The transaction did not involve the sale of
any assets of the Partnership, nor the sale of the General Partner's
interest in the Partnership.

Prior to June 1996, the Partnership and Arvida/JMB Partners, L.P.-II
(a publicly-held limited partnership affiliated with the General Partner)
each employed project-related and administrative personnel who performed
services on behalf of both partnerships. In addition, certain out-of-
pocket expenditures related to such services and other general and
administrative costs were incurred and charged to each partnership as
appropriate. The Partnership received reimbursements from or reimbursed
Arvida/JMB Partners, L.P.-II for such costs (including salary and salary-
related costs). Subsequent to June 1996, Arvida/JMB Partners, L.P. - II no
longer employed any project-related or administrative personnel, and
incurred no costs on behalf of the Partnership. For the year ended
December 31, 1997, the Partnership was entitled to receive approximately
$112,900 from Arvida/JMB Partners, L.P.-II. At December 31, 1997,
approximately $9,900 was outstanding, all of which was received as of
February 20, 1998. For the years ended December 31, 1996 and 1995, the
Partnership was entitled to receive from Arvida/JMB Partners, L.P. -II
approximately $1,021,800 and $1,338,900, respectively, and the Partnership
was obligated to reimburse Arvida/JMB Partners, L.P.-II approximately
$245,100 and $537,700, respectively.

<PAGE>

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, 1997, the Partnership was entitled to
receive approximately $438,700 from its affiliates. At December 31, 1997,
approximately $213,700 was owed to the Partnership, of which approximately
$210,500 was received as of February 20, 1998. The reimbursements paid to
the Partnership for the years ended December 31, 1996 and 1995 were
approximately $459,200 and $350,700, respectively.

The Partnership, pursuant to certain agreements provides management
and other personnel and services to its equity clubs. Pursuant to this
agreement, the Partnership is entitled to receive management fees for the
services provided to the clubs. For the years ended December 31, 1997,
1996 and 1995, the Partnership was entitled to receive approximately
$652,300, $730,700 and $472,200. At December 31, 1997, approximately
$356,600 was owed to the Partnership, none of which was received as of
February 20, 1998.

The Partnership also funds certain capital expenditures and operating
deficits of its equity clubs as well as operating deficits of its
homeowners associations, as deemed necessary. At December 31, 1997, the
Partnership owed approximately $431,501 for such expenditures, none of
which was paid as of February 20, 1998.

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 $943,700 for such costs
for the year ended December 31, 1997. At December 31, 1997, approximately
$37,400 was outstanding, none of which was received as of February 20,
1998.

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 $1,018,200 and $9,721,800, respectively, at
December 31, 1997. 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, 1997.

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, 1997 are
as follows:

1998. . . . . . . . . . . . $1,379,413
1999. . . . . . . . . . . . 825,506
2000. . . . . . . . . . . . 517,302
2001. . . . . . . . . . . . 278,582
2002. . . . . . . . . . . . 174,379
Thereafter. . . . . . . . . 338,827
----------
$3,514,009
==========

<PAGE>

Rental expense of $1,963,491, $1,949,770 and $2,095,932 was incurred
for the years ended December 31, 1997, 1996 and 1995, respectively.

In November 1997, the Partnership entered into a contract to purchase
approximately 55 acres of land in Weston. Reference is made to note 17 for
further discussion of this purchase.

On or about September 27, 1996, a lawsuit entitled Vanderbilt Income
and Growth Associates, L.L.C. and Raleigh Capital Associates L.P.,
individually and derivatively on behalf of Arvida/JMB Partners, L.P. v.
Arvida/JMB Managers, Inc., Judd D. Malkin, Neil G. Bluhm, Burton E. Glazov,
Stuart C. Nathan, A. Lee Sacks, John G. Schreiber, BSS Capital II, L.L.C.,
Starwood Capital Group I, L.P., Starwood/Florida Funding, L.L.C., Starwood
Opportunity Fund, IV, L.P. and Barry Sternlicht, Defendants, and Arvida/JMB
Partners, L.P., nominal defendant, was filed in the Court of Chancery of
the State of Delaware in and for New Castle County, Civil Action No. 15238
("Raleigh action"). The Raleigh action was filed as a verified complaint
for declaratory and injunctive relief. Plaintiffs claimed that the
defendants in entering a financing commitment letter for a proposed $160
million term loan from Starwood/Florida Funding L.L.C. (the "Starwood
financing") violated, or aided and abetted, or participated in the
violation of, fiduciary duties owed to the Partnership and the Holders of
Interests, and put their personal interests ahead of the interests of the
Partnership and the Holders of Interests. In the first claim for relief,
plaintiffs sought a declaratory judgment that the terms of the Starwood
financing be declared null, void and unenforceable. In the second claim
for relief, plaintiffs asserted a claim, derivatively on behalf of the
Partnership, alleging, among other things, that the financing commitment
letter for the Starwood financing was not the product of a valid exercise
of business judgment. In addition to the relief described above,
plaintiffs sought to preliminarily and permanently enjoin any actions in
furtherance of the financing commitment letter, an award of compensatory
damages, interest, costs and disbursements, including reasonable attorneys'
and experts' fees and such other relief as the Court might deem just and
proper. The General Partner and the Partnership filed a motion to dismiss
the Raleigh action which motion was granted on November 7, 1996. In
granting the motion, the Court held that Raleigh was not a Limited Partner
and did not have standing to file the derivative claims. The Court further
determined that Raleigh did not have the right to vote. Plaintiffs asked
the Court to reconsider its ruling, but the Court denied the request to
change its ruling.

<PAGE>

By letter dated January 10, 1997, Raleigh requested admission as a
Substituted Limited Partner of the Partnership. The Partnership referred
the request to a special committee (the "Special Committee") consisting of
certain directors of the General Partner. On February 11, 1997, the
Special Committee denied the request. Thereafter, the Partnership
supplemented its counterclaim, as amended, to seek a court declaration that
Raleigh is not entitled to be admitted as a Substituted Limited Partner.
On February 20, 1997, Raleigh filed a reply and counterclaim against the
Partnership, the General Partner, and the Special Committee. The reply
counterclaim seeks, among other things, a declaration that Raleigh has
voting rights in the Partnership and that defendants breached their
fiduciary duties by failing to admit Raleigh as a Substituted Limited
Partner. The reply counterclaim also sought to enjoin the Partnership, the
General Partner, and the Special Committee from refusing to admit Raleigh
as a Substituted Limited Partner, an award of damages, interest, fees, and
costs.

On or about February 28, 1997, Gladys Beasley, individually and as a
representative of a class of persons similarly situated, filed an
intervenor complaint for declaratory relief against the Partnership. In
the intervenor complaint, plaintiff sought a declaration that purchasers
who obtained Interests in the Partnership in the public offering and
subsequent Holders of Interests in the Partnership by assignment from
original Holders have the same voting rights in the Partnership, among
other things, to remove and replace the General Partner. In addition,
plaintiff Gladys Beasley sought an order adjudging and decreeing that the
intervenor action be properly maintained as a class, an award of her costs
and expenses of the litigation, and such other relief as the Court deemed
appropriate.

The trial of all claims in the Raleigh action was held from April 7,
1997 through April 9, 1997. In a memorandum opinion dated May 23, 1997,
the Court concluded that, while neither the partnership agreement nor the
assignment agreement of the Partnership expressly states whether subsequent
Holders of Interests have voting rights, a reasonable investor could have
read the operative agreements as providing that subsequent Holders of
Interests, such as Raleigh, have voting rights. The Partnership believes,
among other things, that the Court erred in its application of the law to
the facts on this issue and is appealing the Court's decision on this
aspect of the case. On the issue of whether the Special Committee properly
denied Raleigh's request for admission as a Substituted Limited Partner,
the Court upheld the denial of Raleigh's request.

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.

<PAGE>

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. The Partnership has tendered
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.

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
preventing 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 liabilities related to
this matter.

Currently, the Partnership is involved in two subrogation lawsuits.
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 built and sold is approximately $3,600,000. Plaintiffs also
seek a declaratory judgment 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. On or about May 10, 1996, a
subrogation claim entitled Juarez et al. v. Arvida Corporation et al. was
filed in the Circuit Court of the Eleventh Judicial Circuit in and for Dade
County. Plaintiffs filed this suit for the use and benefit of American
Reliance. In this suit, plaintiffs seek to recover damages, pre-and post-
judgment interest, costs and any other relief the Court may deem just and
proper in connection with $3,200,000 American Reliance allegedly paid on
specified claims at Country Walk in the wake of Hurricane Andrew. Disney
is also a defendant in this suit. The Partnership is advised that the
amount of this claim that allegedly relates to units it sold is
approximately $350,000. The Partnership intends to defend itself
vigorously in this matter. 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 has settled this claim for approximately
$45,600 with the settlement being funded by the Partnership's insurance
carrier. The Metropolitan Property and Casualty Company ("Metropolitan")

<PAGE>

has advised the Partnership of its intent to file a subrogation action
allegedly in connection with an unspecified number of Arvida-built homes.
Currently, Metropolitan has advised the Partnership of three claims,
totalling approximately $505,000. The Partnership could be named in other
subrogation actions, and in such event, the Partnership intends to
vigorously defend itself in such actions. Due to the uncertainty of the
outcome of these subrogation actions, the accompanying consolidated
financial statements do not reflect any liabilities related to these
matters.

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. Merrill Lynch may seek indemnification
from the Partnership against liabilities and expenses Merrill Lynch incurs
in these claims. 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 said
facilities to the Broken Sound homeowners on a timely basis. Plaintiffs
seek, through various theories, including but not limited to breach of
ordinance, fiduciary duty, fraud, 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.

<PAGE>

On or about July 30, 1996, Savoy v. Arvida/JMB Partners, Arvida/JMB
Managers, Inc., Arvida/JMB Partners, Ltd., and Broken Sound Club, Inc. was
filed against the Partnership and others in the Circuit Court of the 15th
Judicial Circuit, in and for Palm Beach County, Florida. The lawsuit is
filed as a three-count complaint for dissolution of the Broken Sound Club,
Inc. ("Club"), and seeks, among other things, the appointment of a
custodian or receiver for the Club, a determination that certain acts be
deemed wrongful, the return to the Club of in excess of $2.5 million in
alleged "operating profits", an injunction against the charging of certain
dues, an injunction requiring the Club to produce certain financial
statements, and such other relief as the Court deems just, fair and proper.

This action has been consolidated with the Council of Villages case. The
Partnership believes the lawsuit is without merit and intends to vigorously
defend itself.

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 $3.4 million at
December 31, 1997. During April 1992, as a result of the Partnership's
previous determination that the development of the land was no longer
economically profitable, 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 was deferred until resolution of certain general
development obligations of the venture as well as certain environmental
issues. The joint venture 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 filed a lawsuit entitled
Bankers' Trust Company v. Arvida/JMB Partners, L.P., et al., Case No. 95-
2780 in the Broward County Circuit Court in which the lender asserted,
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. On or about July 18,
1997, the parties entered into an agreement for the settlement of the
lawsuit which provided for, among other things, the payment of $300,000 by
the Partnership, $300,000 on behalf of the joint venture partner, the
payment of back taxes on the property by the joint venture in the amount of
$302,398, a commitment by the joint venture to remediate the property on or
before June 30, 2000 in accordance with the settlement agreement, issuance
of a new non-recourse note, a mortgage modification and dismissal of the
lawsuit with prejudice and without costs. With respect to the
environmental issues, the previous owner remains obligated to undertake the

<PAGE>

clean up. 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 being discussed with state environmental officials. If the
previous owner is unable to fulfill all its obligations as they relate to
this environmental issue, the joint 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.

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.

(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.

Prior to July 1991, the District had issued variable rate bonds
totaling approximately $96 million which were to mature in various years
commencing in May 1991 through May 2011. During 1995, in order to reduce
the exposure of variable rate debt, the District pursued new bond
issuances. As a result, during March and December 1995, the District
issued approximately $99 million and $13.3 million of bonds, respectively,
at fixed rates ranging from 4.0% to 8.25% per annum with maturities
commencing in May 1995 through May 2011. The proceeds from these bond
offerings were used to refund the bonds issued prior to July 1991 described
above, as well as to fund the issuance costs incurred in connection with
the offerings and deposits to certain reserve accounts for future bond debt
service requirements. In July 1997, the District issued another
approximate $41.6 million of fixed rate bonds. These bonds bear interest
ranging from 4.0% to 5.0% (payable in May and November each year until
maturity or prior redemption), with maturities commencing in May 1999
through May 2027 (the "Series 1997 Bonds"). The Series 1997 Bonds were
issued for the purpose of paying costs of certain improvements to the
District's water management system, as well as to fund certain issuance
costs incurred in connection with the offerings, deposit funds into certain
reserve accounts, and pay capitalized interest on these bonds. At December
31, 1997, the amount of bonds issued and outstanding totaled approximately
$137.1 million. For the twelve months ended December 31, 1997, the
Partnership paid special assessments related to the bonds of approximately
$1.6 million.

(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
such values. Value is defined in SFAS 107 as the amount at which the
instrument could be exchanged in a current transaction between willing

<PAGE>

parties, other than in a forced or liquidation sale. The Partnership
believes the carrying amounts of its financial instruments approximates
SFAS 107 values at December 31, 1997 and 1996.

(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 Holders of Interests,
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 Holders of Interests.

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

For the years ended December 31, 1997, 1996 and 1995, 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 Associate Limited
Partners for financial reporting and tax purposes for the year ended
December 31, 1997 was approximately $4,016,000 and $4,015,000,
respectively. 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, 1996 was approximately $755,000 and
$717,000, respectively. 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, 1995 was approximately $666,000 and $673,000,
respectively. These allocations are based on cash distributions made
during each year 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 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 Interests 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

<PAGE>

aggregate distributions of Cash Flow to all parties pursuant to this
sentence.

Pursuant to the Partnership Agreement, the Partnership may continue in
existence until December 31, 2087; however, the General Partner was to
elect to pursue one of the following courses of action on or before
October 31, 1997: (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; (ii) to purchase, or cause JMB Realty
Corporation or its affiliates to purchase, 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 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. On October 23,
1997, the Board of Directors of the General Partner met and approved a
resolution selecting the option for the Partnership to commence an orderly
liquidation of its remaining assets that is to be completed by October
2002.

(15) MANAGEMENT AGREEMENTS - OTHER THAN VENTURES

Certain of the Partnership's properties were 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.
Prior to the October 1997 sale of the Partnership's mixed-use center, as
discussed in note 6, the successor to the affiliated property manager's
assets acted as the property manager of the office and retail components of
the mixed-use center under the same terms that existed prior to the sale
and assignment of the management contracts. The successor to the
affiliated property manager's assets also acted as the property manager of
the Mizner Place office building until such property 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 at such time, and is reflected
as the Cumulative effect due to change in accounting for long-lived assets
on the accompanying consolidated statements of operations. This analysis
estimated the 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 $4.1
million and $5.4 million at December 31, 1997 and 1996, respectively.

<PAGE>

carrying value is recorded at approximately $11.6 million at December 31,
1997.

The results of operations for the Partnership's cable operation in
Weston, which is held for disposition at December 31, 1997, totaled
approximately $1.1 million as of December 31, 1997, and are included in
operating properties revenues and cost of revenues on the accompanying
consolidated statements of operations.

(17) SUBSEQUENT EVENTS

On January 30, 1998, the Partnership acquired approximately 55 acres
of land zoned for industrial/office/commercial use in Weston from an
unaffiliated third party seller for a purchase price of approximately $2.3
million.

During February 1998, the Partnership made a distribution for 1997 of
$30,300,000 to its Holders of Interests ($75 per Interest) and $1,683,314
to the General Partner and Associate Limited Partners, collectively.

The Partnership was required to make a principal repayment on its term
loan in the amount of $12.5 million during July 1998. However, the
Partnership made such principal repayment during February 1998.

<PAGE>

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

Not applicable.

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 stock of which is owned by JMB Realty Corporation, a
Delaware corporation ("JMB") and certain of its officers, directors,
members of their families and their affiliates. Substantially all of the
shares of JMB are owned by its officers, directors, members of their
families and their affiliates. 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 directors 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
and Director 05/31/96
Neil G. Bluhm President 04/08/87
and Director 05/31/96
H. Rigel Barber Vice President 04/08/87
Gailen J. Hull Vice President 04/09/87
Howard Kogen Vice President
and Treasurer 04/08/87
Gary Nickele Vice President and
General Counsel 04/08/87
Burton E. Glazov Director 05/31/96
Stuart C. Nathan Director 05/31/96
A. Lee Sacks Director 05/31/96
John G. Schreiber Director 05/31/96
James D. Motta Vice President 04/09/87
John Grab Vice President 04/09/87

<PAGE>

Effective May 31, 1996, the Board of Directors of the General Partner
was expanded to provide for six directors. Judd D. Malkin, Neil G. Bluhm,
Burton E. Glazov, Stuart C. Nathan, A. Lee Sacks and John G. Schreiber were
elected to the Board of Directors of the General Partner, and Gary Nickele,
who had been the sole director of the General Partner since December 1990,
resigned as Director. In addition, the Board of Directors of the General
Partner established a special committee, consisting of Messrs. Malkin,
Glazov, Nathan, Sacks and Schreiber, to deal with all matters relating to
tender offers for Interests as well as certain other matters.

There is no family relationship among any of the foregoing directors
or officers. The foregoing directors have been elected to serve a one-year
term until the annual meeting of the General Partner to be held on
August 11, 1998. 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 11, 1998.
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 directors 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-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.-III ("Mortgage Partners-III"), JMB Mortgage Partners, Ltd.-IV
("Mortgage Partners-IV"), Carlyle Income Plus, Ltd. ("Carlyle Income Plus")
and Carlyle Income Plus, L.P.-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.-VII ("JMB Income-VII"), 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 directors 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 directors and certain 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-XI, Carlyle-XII, Carlyle-XIII, Carlyle-XIV, Carlyle-XV, Carlyle-
XVI, Carlyle-XVII, JMB-VII, JMB Income-X, JMB Income-XI, JMB Income-XII,
JMB Income-XIII, Mortgage Partners-III, Mortgage Partners-IV, Carlyle
Income Plus, Carlyle Income Plus-II and IDS/BIG. Most of the foregoing
directors 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.

<PAGE>

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

Judd D. Malkin (age 60) is Chief Financial Officer, Chairman 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. Malkin has been associated with JMB since
October, 1969. Mr. Malkin is also a director of Urban Shopping Centers,
Inc. ("USC, 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 60) 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
also a principal of Walton Street Real Estate Fund I, L.P. and a director
of USC, Inc. He is a member of the Bar of the State of Illinois and a
Certified Public Accountant.

Burton E. Glazov (age 59) is a director of JMB. He has been
associated with JMB since June, 1971 and served as an Executive Vice
President of JMB until December 1990. He is a member of the Bar of the
State of Illinois and a Certified Public Accountant.

Stuart C. Nathan (age 56) is Executive Vice President and a director
of JMB. He has been associated with JMB since July, 1972. He is a member
of the Bar of the State of Illinois.

A. Lee Sacks (age 64) is a director of JMB. He has been associated
with JMB since December, 1972. He is also President and a director of JMB
Insurance Agency, Inc.

John G. Schreiber (age 51) is a director of JMB. He has been
associated with JMB since December, 1970 and served as an Executive Vice
President of JMB until December 1990. Mr. Schreiber is President of
Schreiber Investments, Inc., a company which is engaged in the real estate
investing business. He is also a senior advisor and partner of Blackstone
Real Estate Advisors L.P., an affiliate of the Blackstone Group, L.P., a
trustee of Amli Residential Property Trust and a director of a number of
investment companies advised by T. Rowe Price Associates and its
affiliates. He holds a Masters degree in Business Administration from
Harvard University Graduate School of Business.

H. Rigel Barber (age 48) 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.

Gailen J. Hull (age 49) 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 62) 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.

<PAGE>

Gary Nickele (age 45) is Executive Vice President and General Counsel
of JMB and an officer of various JMB affiliates. 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 42) has been President and Chief Executive Officer
of Arvida since April 1995, and President and Chief Executive Officer of
St. Joe/Arvida Company, L.P. ("St. Joe/Arvida"), a joint venture among
affiliates of St. Joe Corporation and JMB for real estate development,
ownership and management, since November 1997. Previously, Mr. Motta 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) and President-Southeast
Division of Arvida (July, 1992 to July, 1993). Mr. Motta is also an
officer or partner of various affiliates of Arvida.

John R. Grab (age 41) is Vice President and Project General Manager -
Atlanta and since November 1997 has been Vice President of St. Joe/Arvida.
Previously he was Vice President and General Manager - Club/Hotel
Operations of Arvida from 1993 to 1997. Prior thereto, he was Vice
President and Project General Manager - Weston Hills of Arvida (October
1990 to October 1993). Mr. Grab joined Arvida in 1981. He is also an
officer or partner of various affiliates of Arvida.

Neil G. Bluhm is an Executive Vice President, a director and Vice
Chairman of the Board of Directors of Liberty House, Inc., and Judd D.
Malkin is Executive Vice President, a director and Chairman of the Board of
Directors of Liberty House, Inc. Until May 1, 1997, Howard Kogen was a
Vice President and Treasurer of Liberty House, Inc. On March 19, 1998,
Liberty House, Inc. filed a voluntary petition under Chapter 11 of the
United States Bankruptcy Code. Liberty House, Inc., which owns and
operates department stores in Hawaii and Guam, filed the Chapter 11
proceeding in part to enable it to achieve an orderly reorganization of its
debt to serviceable levels.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires, among others, persons who beneficially own more than 10% of the
Interests to file reports of changes in ownership of the Interests on Form
4 or Form 5 with the Securities and Exchange Commission ("SEC"). Such
persons are also required by SEC rules to furnish the Partnership a copy of
such reports filed with the SEC. Based on its failure to receive copies of
reports on Form 4 or Form 5, the Partnership believes that Raleigh Capital
Associates, L.P. and its general partners, Raleigh GP Corp., Rockland
Partners, Inc. and Zephyr Partners, did not report changes in their
respective beneficial ownership of Interests during 1997. It appears that
each such person failed to file two reports (i.e., one Form 4 and one Form
5) relating to one transaction, the acquisition by Raleigh Capital
Associates L.P. of 26,504 Interests pursuant to a tender offer closed in
April 1997.

<PAGE>

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 Holders of
Interests, 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 cash distributions in 1997
totaling $4,015,996. In connection with the settlement of certain
litigation, the General Partner and the Associate Limited Partners deferred
approximately $1,259,000 of their share of the August 1997 distribution
which was otherwise distributable to them, and such deferred distribution
amount was used by the Partnership to pay a portion of the legal fees and
expenses in such litigation. The General Partner and Associate Limited
Partners will be entitled to receive such deferred amount after the Holders
of Interests have received a specified amount of distributions from the
Partnership after July 1, 1996. In addition, under certain circumstances,
they will be entitled to approximately $6,476,000 which has been deferred
through December 31, 1997 pursuant to the terms of the Partnership
Agreement. Such payment is subject to certain restrictions contained in
the Partnership Agreement. Pursuant to the Partnership Agreement, the
General Partner and Associate Limited Partners were allocated profits for
tax purposes for 1997 of approximately $4,015,000. Reference is made to
Note 14 for further discussion of this allocation.

In July 1996 the General Partner, its directors and certain other
parties were named as defendants in a lawsuit entitled Jack H. Carlstrom,
et al. v. Arvida/JMB Managers, Inc., et al. brought derivatively on behalf
of the Partnership and individually on behalf of the named plaintiffs and a
purported class of other Holders of Interests (the "Carlstrom action").
The Carlstrom action challenged, among other things, the Partnership's
proposed $160 million term loan from Starwood/Florida Funding, L.L.C. (the
"Starwood financing"). The Carlstrom action, which was consolidated with
another earlier filed action, was brought as a four-count complaint
alleging breaches of fiduciary duty and conspiracy and collusion to breach
fiduciary duty. The plaintiffs sought, among other things, damages and an
injunction against completion of the Starwood financing. In May 1997 the
Carlstrom action was settled, and such settlement provided, among other
things, that the Partnership would not pursue the Starwood financing but
would seek (and it later obtained) certain bank financing in the aggregate
amount of $100 million (the "Barnett financing") and that the claims in the
Carlstrom action would be released.

In September 1996 the General Partner, its directors and certain other
parties were named as defendants in a lawsuit entitled Vanderbilt Income
and Growth Associates, L.L.C. and Raleigh Capital Associates L.P.
("Raleigh"), individually and derivatively on behalf of Arvida/JMB
Partners, L.P. v. Arvida/JMB Managers, Inc., et al. (the "Raleigh action"),
which also sought, among other things, to enjoin completion of the Starwood
financing. In January 1997 the plaintiffs in the Raleigh action
voluntarily dismissed these claims. The Partnership, by way of
counterclaims in the Raleigh action, sought declarations that Raleigh was
not entitled to vote on the Partnership matters and was not entitled to be
admitted as a Substituted Limited Partner in the Partnership. Raleigh
filed a reply counterclaim seeking a declaration that it has voting rights
in the Partnership and that the defendants breached their fiduciary duties
by failing to admit Raleigh as a Substituted Limited Partner. For further
information concerning the Raleigh actions, reference is made to Subsection
(A) under Item 3. Legal Proceedings.

As part of the settlement of the Carlstrom action, the Partnership
paid approximately $1.8 million for the plaintiffs' attorneys fees and
expenses. Pursuant to the settlement of the Carlstrom action, the General

<PAGE>

Partner and Associate Limited Partners deferred a portion of the
distribution otherwise payable to them from the proceeds of the Barnett
financing, and such deferred amount was used to pay a portion of the legal
fees and expenses in the Carlstrom action. However, as provided in such
settlement, the General Partner and Associated Limited Partners will be
entitled to receive such deferred amount, provided that the Holders of
Interests have received a specified amount of distributions from the
Partnership after July 1, 1996. In addition, the Partnership has paid and
expects to pay all other litigation and related expenses (consisting
primarily of legal fees and expenses) incurred for defending or
prosecuting, as the case may be, the various claims (including
counterclaims) in the Carlstrom action and the Raleigh action on behalf of
itself, the General Partner and its directors.

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
directors 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 1997, such expenses were approximately $6,189,700, of
which approximately $83,800 was unpaid as of December 31, 1997.

The Partnership and Arvida entered into an information systems sharing
agreement that sets forth (i) the Partnership's and Arvida's mutual
ownership rights with respect to certain proprietary computer software
jointly developed by the Partnership and Arvida, and (ii) the arrangement
for the sharing by Arvida of certain computer hardware and software owned,
leased or licensed by the Partnership and its affiliates and various
related information systems services (collectively, the "Information
Resources"), provided that Arvida pays its allocable share of the costs of
using such Information Resources.

In November 1997, St. Joe/Arvida acquired the major assets of Arvida,
including the Arvida name and service marks with respect to the Arvida
name. Pursuant to a license agreement with Arvida, the Partnership has a
non-exclusive right to use the Arvida name and service marks with respect
to the Arvida name. In connection with the acquisition of Arvida's assets,
St. Joe/Arvida was assigned Arvida's rights and obligations under the
license agreement with the Partnership. In addition, St. Joe/Arvida was
assigned Arvida's rights and obligations under the information systems
sharing agreement discussed above.

St. Joe/Arvida also entered into a sub-management agreement with
Arvida, effective January 1, 1998, whereby St. Joe/Arvida provides a
substantial portion of the development and management supervisory and
advisory services (and the personnel therefor) to the Partnership that
Arvida would otherwise provide pursuant to its management agreement with
the Partnership. Effective January 1, 1998, St. Joe/Arvida employs most of
the personnel previously employed by Arvida, and the services provided to
the Partnership pursuant to the sub-management agreement are provided by
the same personnel. St. Joe/Arvida is reimbursed for such services and
personnel on the same basis as Arvida under its management agreement, and
such reimbursements may be made directly to St. Joe/Arvida by the
Partnership. St. Joe Corporation owns a majority interest in St.
Joe/Arvida, and affiliates of JMB own a minority interest in St.
Joe/Arvida.

<PAGE>

Prior to June 1996, the Partnership and Arvida/JMB Partners, L.P.-II
(a publicly-held limited partnership affiliated with the General Partner)
each employed project related and administrative personnel who performed
services on behalf of both partnerships. In addition, certain out-of-
pocket expenditures related to such services and other general and
administrative expenses were incurred and allocated to each partnership as
appropriate. The Partnership received reimbursements from or reimbursed
Arvida/JMB Partners, L.P.-II for such costs (including salary and salary-
related expenses). Subsequent to June 1996, Arvida/JMB Partners, L.P. - II
no longer employed any project-related or administrative personnel, and
incurred no costs on behalf of the Partnership. The Partnership was
entitled to receive approximately $112,900 from Arvida/JMB Partners, L.P.-
II for such costs and services incurred in 1997, approximately $9,900 of
which was outstanding as of December 31, 1997. The Partnership was not
obligated to reimburse Arvida/JMB Partners, L.P.-II any amounts for the
year ended December 31, 1997.

JMB Insurance Agency, Inc., an affiliate of the General Partner,
earned and received insurance brokerage commissions in 1997 of
approximately $235,000 in connection with providing insurance coverage for
certain of the properties of the Partnership, all of which was paid as of
December 31, 1997. 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 reimbursement 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 addition, in 1997, the General Partner 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
$224,200, all of which was paid as of December 31, 1997. Additionally, the
General Partner and its affiliates are entitled to reimbursements for
legal, accounting and portfolio management services. Such costs for 1997
were approximately $305,900, all of which was paid as of December 31, 1997.

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, 1997, the total of such costs was
approximately $1,956,000. Approximately $394,500 was outstanding as of
December 31, 1997.

Amounts payable to the General Partner or its affiliates do not bear
interest.

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT

(a) The following have reported beneficial ownership of more than 5%
of the outstanding Interests of the Partnership.

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

Limited Partnership Raleigh Capital 106,747 Interests 26.4%
Interests and Associates L.P. directly (1)
Assignee Interests 100 Jericho Quadrangle
therein Suite 214
Jericho, New York
11735-2717

Limited Partnership Raleigh GP Corp. 106,747 Interests 26.4%
Interests and 100 Jericho Quandrangle indirectly (2)
Assignee Interests Suite 214
therein Jericho, New York
11735-2717

Limited Partnership Rockland Partners, Inc. 106,752 Interests 26.4%
Interests and c/o Tiger/Westbrook indirectly (3)
Assignee Interests Real Estate Fund, L.P.
therein 599 Lexington Avenue
Suite 3800
New York, New York
10022

Limited Partnership Zephyr Partners 106,747 Interests 26.4%
Interests and 100 South Bedford Road indirectly (4)
Assignee Interests Mount Kisco, New York
therein 10549

(1) Reflects beneficial ownership of Interests held by Raleigh Capital
Associates L.P. ("Raleigh") for which Raleigh has shared dispositive power.

(2) Reflects beneficial ownership of Interests held by Raleigh (of which
Raleigh GP Corp. is a general partner) for which Raleigh GP Corp. has
shared dispositive power.

(3) Reflects beneficial ownership of (i) 5 Interests held by Rockland
Partners, L.P. (of which Rockland Partners, Inc. is the general partner)
for which Rockland Partners, Inc. has shared dispositive power, and (ii)
106,747 Interests held by Raleigh (of which Rockland Partners, Inc. is a
general partner) for which Rockland Partners, Inc. has shared dispositive
power.

(4) Reflects beneficial ownership of Interests held by Raleigh (of which
Zephyr Partners is a general partner) for which Zephyr Partners has shared
dispositive power.

Each of the persons listed in the above table has reported that it has
shared voting power with respect to the Interests beneficially owned by it.

However, the Partnership and the General Partner do not believe that such
Interests have voting rights associated with them. On May 23, 1997, the
Delaware Chancery Court rendered a decision in Arvida/JMB Partners, L.P. v.
Vanderbilt Income and Growth Associates, L.L.C. et. al, (Civil Action No.
15238), filed in the Court of Chancery of the State of Delaware in and for

<PAGE>

New Castle County, a case presenting the issue of voting rights, to the
effect that assignee holders, regardless of whether they acquired their
Interests in the Partnership's public offering, have voting rights with
respect to their Interests. The Partnership and the General Partner
believe that the Delaware Chancery Court erred in its decision and are
appealing the decision. Reference is made to Subsection (A) under Item 3.
Legal Proceedings for a discussion of this litigation with respect to the
Partnership's and the General Partner's position that the Interests held by
Raleigh, as a subsequent transferee of the Interests, do not have voting
rights associated with them.

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

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

Limited Partnership General Partner None --
Interests and and its executive
Assignee Interests officers and
therein directors as
a group

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

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

(c) In October 1996, Raleigh Capital Associates L.P. ("Raleigh") filed
preliminary proxy materials with the Securities and Exchange Commission in
connection with a possible solicitation of consents for the removal and
replacement of Arvida/JMB Managers, Inc. ("Managers") as the General
Partner of the Partnership with an affiliate of Raleigh. Reference is made
to Item 12(a) above for certain information concerning Raleigh and its
general partners and the issue of voting rights with respect to Interests
beneficially owned by Raleigh and its general partners. Reference is made
to subsection (A) under Item 3. Legal Proceedings for a discussion of
pending litigation involving the issue of voting rights. As of the date of
this report, Raleigh has not commenced a solicitation of consents to remove
Managers.

<PAGE>

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.

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

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

4.1. 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.

4.2. 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.
***

4.3. 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. ***

4.4. 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. ***

<PAGE>

4.5. 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. ***

4.6. 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.

4.7. 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 incorporated by reference to Exhibit 4.15
to the Partnership's Form 10-K (File No. 0-16976) dated March 25, 1996.

4.8. 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 incorporated by reference to Exhibit 4.16 to
the Partnership's Form 10-K (File No. 0-16976) dated March 25, 1996.

4.9. Commitment for a Term Loan by and between
Arvida/JMB Partners, L.P. and Starwood/Florida Funding, L.L.C. dated
September 12, 1996 is incorporated by reference to Exhibit 4.1 to the
Partnership's Form 8-K (Form No. 0-16976) dated September 12, 1996.

4.10. Commitment Letter dated March 12, 1997, from
Barnett Bank of Broward County, N.A. is hereby incorporated herein by
reference to Exhibit 4.10 to the Partnership's Report on Form 10-K (File
No. 0-16976) dated March 21, 1997 (as amended).

4.11 Credit Agreement dated July 31, 1997 between
Barnett Bank, N.A. and The Other Lenders and Arvida/JMB Partners, L.P. is
hereby incorporated by reference to the Partnership's Report for June 30,
1997 on Form 10-Q (File No. 0-16976) dated August 8, 1997, as amended.

<PAGE>

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. *

10.5. Stipulation of Settlement dated April 1, 1997,
filed in the Circuit Court of Cook County, Illinois, Chancery Department.

10.6. Agreement for Sale and Purchase of Real
Property dated July 25, 1997 by and between Center Retail Partners, Center
Office Partners, Center Hotel Limited Partnership, and Arvida/JMB Partners,
L.P. and Stanford Hotels Corporation for the sale of Arvida Parkway Center
is incorporated herein by reference to Exhibit 2.1 to the Partnership's
report on Form 8-K (File No. 0-16976) dated July 25, 1997.

10.7 Agreement for Purchase and Sale dated
August 22, 1997 by and between Arvida/Lakes Plaza L.P. and Principal Mutual
Life Insurance Company with respect to Weston Lakes Plaza.****

10.8 Agreement for Purchase and Sale dated
August 22, 1997 by and between Country Isles Associates and Principal
Mutual Life Insurance Company with respect to Country Isles Plaza.****

10.9 Agreement for Purchase and Sale dated October
21, 1997 by and between Metrodrama Joint Venture and AutoNation USA
Corporation.****

10.10 Agreement for Purchase and Sale dated
October 8, 1997 by and between Arvida/JMB Partners and PV Resort, Inc.
joined by Resort Holdings I, Ltd. for the sale of the Cabana Club.****

10.11 Amendment dated August 22, 1997 to Agreement
for Sale and Purchase by and between Center Retail Partners, Center Hotel
Limited Partnership, Center Office Partners and Arvida/JMB Partners, L.P.
and Stanford Hotels Corporation.****

<PAGE>

10.12 Second Amendment dated October 17, 1997 to
Agreement for Sale and Purchase by and between Center Retail Partners,
Center Hotel Limited Partnership, Center Office Partners and Arvida/JMB
Partners, L.P. and Stanford Hotels Corporation.****

10.13 First Amendment dated September 29, 1997 to
Agreement for Purchase and Sale by and between Country Isles Associates and
Principal Mutual Life Insurance Company is filed herewith.

10.14 Second Amendment dated October 2, 1997 to
Agreement for Purchase and Sale by and between Country Isles Associates and
Principal Mutual Life Insurance Company is filed herewith.

10.15 Information Systems Sharing Agreement dated
November 6, 1997 between Arvida/JMB Partners, L.P. and Arvida Company is
filed herewith.

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 4.10, 4.11, 4.12 and 4.13, respectively, to the
Partnership's Form 10-K Report (File No. 0-16976) under the Securities Act
of 1993 filed on March 27, 1995 and incorporated herein by reference.

**** Previously filed with the Securities and Exchange
Commission as Exhibits 10.7, 10.8, 10.9, 10.10, 10.11 and 10.12,
respectively, to the Partnership's Report on Form 10-Q (File No. 0-16976)
filed on November 12, 1997 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.

<PAGE>

(b) The following reports on Form 8-K have been filed during the
last quarter of the period covered by this report.

The Partnership's Report dated October 17, 1997
describing the sale of Arvida Parkway Center.

No annual report or proxy material for the fiscal year 1997 has been
sent to the Partners of the Partnership. An annual report will be sent to
the Partners subsequent to this filing.

<PAGE>

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, 1998

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.

JUDD D. MALKIN
By: Judd D. Malkin, Chairman, Chief
Financial Officer and Director
Date: March 25, 1998

BURTON E. GLAZOV
By: Burton E. Glazov, Director
Date: March 25, 1998

GAILEN J. HULL
By: Gailen J. Hull, Vice President
(Principal Accounting Officer)
Date: March 25, 1998

A. LEE SACKS
By: A. Lee Sacks, Director
Date: March 25, 1998

STUART C. NATHAN
By: Stuart C. Nathan, Director
Date: March 25, 1998

<PAGE>

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

EXHIBIT INDEX

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

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

4.1. 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

4.2. 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

4.3. 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

4.4. 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

<PAGE>

DOCUMENT
INCORPORATED SEQUENTIALLY
EXHIBIT NO. EXHIBIT BY REFERENCE NUMBERED PAGE
- ----------- ------- ------------ -------------
4.5. 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

4.6. 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

4.7. 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. Yes

4.8. 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. Yes

4.9. Commitments for a Term Loan by and between
Arvida/JMB Partners, L.P. and Starwood/Florida
Funding, L.L.C. dated September 12, 1996. Yes

4.10. Commitment Letter dated March 12, 1997, from
Barnett Bank of Broward County N.A. Yes

4.11. Credit Agreement dated July 31, 1997
between Barnett Bank, N.A. and The Other
Lenders and Arvida/JMB Partners, L.P. Yes

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

<PAGE>

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

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

10.5. Stipulation of Settlement dated
April 1, 1997, filed in the Circuit
Court of Cook County, Illinois,
Chancery Department Yes

10.7 Agreement for Purchase and Sale dated
August 22, 1997 by and between Arvida/Lakes
Plaza L.P. and Principal Mutual Life
Insurance Company with respect
to Weston Lakes Plaza Yes

10.8 Agreement for Purchase and Sale dated
August 22, 1997 by and between Country Isles
Associates and Principal Mutual Life Insurance
Company with respect to Country Isles Plaza Yes

10.9 Agreement for Purchase and Sale dated
October 21, 1997 by and between Metrodrama
Joint Venture and AutoNation USA Corporation Yes

10.10 Agreement for Purchase and Sale dated
October 8, 1997 by and between Arvida/JMB Partners
and PV Resort, Inc. joined by Resort Holdings I,
Ltd. for the sale of the Cabana Club Yes

<PAGE>

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

10.11 Amendment dated August 22, 1997 to
Agreement for Sale and Purchase by and
between Center Retail Partners, Center Hotel
Limited Partnership, Center Office Partners
and Arvida/JMB Partners, L.P. and
Stanford Hotels Corporation Yes

10.12 Second Amendment dated October 17, 1997 to
Agreement for Sale and Purchase by and
between Center Retail Partners, Center Hotel
Limited Partnership, Center Office Partners
and Arvida/JMB Partners, L.P. and Stanford
Hotels Corporation Yes

10.13 First Amendment dated September 29, 1997
to Agreement for Purchase and Sale by and
between country Isles Associates and
Principal Mutual Life Insurance Company No

10.14 Second Amendment dated October 2, 1997
to Agreement for Purchase and Sale by
and between Country Isles Associates
and Principal Mutual Life Insurance
Company No

10.15 Information Systems Sharing Agreement dated
November 6, 1997 between Arvida/JMB Partners,
L.P. and Arvida Company No

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>

EXHIBIT 10.13
- -------------
(Arvida)

September 29, 1997

VIA FACSIMILE (561) 479-1227 VIA FACSIMILE (561) 479-1227

Arvida/Lakes Plaza, L.P. Arvida Company
c/o Arvida Company Attention: General Counsel
Attention: James Motta 7900 Glades Road
7900 Glades Road, Suite 200 Suite 200
Boca Raton, Florida 33434 Boca Raton, Florida 33434

VIA FACSIMILE (954) 523-1722

Gunster, Yoakley, Valdes-Fauli & Stewart, P.A.
Attn: Daniel M. Mackley, Esq.
500 East Broward Boulevard, Suite 1400
Fort Lauderdale, Florida 33394

RE: Agreement for Purchase and Sale (the "Agreement") dated August 22,
1997 by and between Country Isles Associates ("Seller") and
Principal Mutual Life Insurance Company ("Buyer") with respect
to Country Isles Plaza, Weston, Broward County, Florida ("Property")

Gentlemen:

Pursuant to the above referenced Agreement and that letter agreement dated
September 22, 1997, the Inspection Period, as defined in the Agreement,
expires on September 29, 1997.

With this letter agreement, Buyer and Seller hereby agree to effectively
modify the Agreement as follows:

1. The Inspection Date in Section 1 of the Agreement shall now be
defined as that period of time commencing on August 22, 1997 and
terminating at 5:00 p.m. (E.S.T.) on October 2, 1997.

2. The Committee Approval Period in Section 1 of the Agreement
shall now be defined as that period of time terminating at 5:00 p.m.
(E.S.T.) on October 3, 1997.

3. The Scheduled Closing Date shall now be that date which is (10)
days after the Committee Approval of Buyer, which, if given, shall be
October 14, 1997 (as October 13th falls on Columbus Day, a holiday where
the federal reserve system is not in operation to enable the wire transfer
of funds.)

<PAGE>

It is agreed upon by Buyer and Seller that all terms, covenants,
conditions, representations and warranties contained in the Agreement,
which are not modified or amended by this specific letter agreement, are
hereby ratified, confirmed and held to be in full force and effect.

SELLER BUYER
- ------ -----

ARVIDA/LAKES PLAZA, L.P., a PRINCIPAL MUTUAL LIFE INSURANCE
Delaware limited partnership COMPANY, an Iowa corporation

By: ARVIDA/LAKES MANAGERS, INC. By: _________________________
a Delaware corporation,
its general partner Its: _________________________

By: __________________________ By: _________________________
John Baric, Vice President
Its: _________________________

EXHIBIT 10.14
- -------------
(Arvida)

October 2, 1997

VIA FACSIMILE (561) 479-1227 VIA FACSIMILE (561) 479-1227

VIA FACSIMILE (954) 523-1722

Gunster, Yoakley, Valdes-Fauli & Stewart, P.A.
Attn: Daniel M. Mackley, Esq.
500 East Broward Boulevard, Suite 1400
Fort Lauderdale, Florida 33394

RE: Agreement for Purchase and Sale (the "Agreement") dated
August 22, 1997 by and between Country Isles Associates ("Seller")
and Principal Mutual Life Insurance Company ("Buyer") with respect
to Country Isles Plaza, Weston, Broward County, Florida ("Property")

Gentlemen:

Pursuant to the above referenced Agreement and that letter agreement dated
September 29, 1997, the Inspection Period, as defined in the Agreement,
expires on October 2, 1997.

Pursuant to the terms of the Agreement, Buyer has performed due diligence
on the Property during the Inspection Period, and has raised certain issues
by various communications to Seller. Communications include, but are not
limited to, that Title/Survey Defect Notice dated September 17, 1997 from
Rudnick and Wolfe, that September 22, 1997 letter to Chuck Edgar from
Rudnick and Wolfe, and facsimiles to Daniel Brown and Danielle DeVito
Hurley addressing missing lease information and/or correctional changes to
tenant estoppels required per the Agreement. As of this date, these issues
have not all been effectively resolved to the satisfaction of Buyer. Buyer
still wishes to move forward with the transaction, however, subject to
Buyer's final Committee Approval, and further subject to a resolution
satisfactory to Buyer of the following matters:

1. Correction of the Title/Survey Defects stated in that September
17, 1997 letter mentioned above. (WE HAVE RECEIVED THAT COMMUNICATION
DATED SEPTEMBER 23, 1997 FROM GOLD COAST TITLE, AND HAVE RECEIVED CERTAIN
REVISIONS TO THE SURVEY FROM CRAIG A. SMITH & ASSOCIATES, WHICH TOGETHER
APPEAR TO CLEAR UP MANY OF THE ITEMS.)

<PAGE>

2. Mutual agreement between Buyer and Seller as to the specific
deed restrictions identified as Restrictive Covenants and Conditions.

3. Satisfactory amendment(s) to the Amended and Restated
Declaration of Town Foundation Covenants such that the architectural
approval provisions are acceptable to Buyer and limit the ability of The
Foundation and associated decision making bodies defined therein to act in
an unreasonable manner.

4. Satisfactory amendment(s) to the Declaration of Neighborhood
Covenants, Conditions and Restrictions, which amendments(s) may include,
but may not be limited to, assignment of Developer's rights to amend said
document and the rights to approve the architectural and construction work
addressed therein.

5. Receipt and approval by Buyer of all information with respect
to the CDD addressed in the September 22, 1997 letter to Chuck Edgar
mentioned above.

6. Buyer's receipt of a revocable license agreement between
Broward County and Buyer, providing the right to Buyer to erect and/or
maintain a sign for the Property in the public right-of-way near the Weston
Road entrance. (BUYER IS CURRENTLY ATTEMPTING TO OBTAIN SUCH AGREEMENT.)

7. Amendment of the access easement referenced as Item 44 in
Schedule B-Section 2 of the preliminary title commitment, and further
addressed in the September 17 and September 22 letters mentioned above, to
exclude areas enroaching under the building improvements.

8. Assumptions of the USG loan in accordance with terms,
conditions, and documentation acceptable to Buyer. (GENERAL CONSENT HAS
BEEN PROVIDED, BUT SPECIFIC DOCUMENTATION TO EFFECTUATE THE ASSUMPTION HAS
NOT YET BEEN PREPARED, IN PART BECAUSE LENDER'S COMMITMENT HAS NOT YET BEEN
EXECUTED BY BUYER AND SELLER.)

9. Receipt of executed tenant estoppels in accordance with the
Agreement, and corrections to estoppels already provided such that the
expiration dates mirror the rent rolls certified by Seller. (SELLER
RESERVES THE RIGHT TO RESCIND BUYER'S TERMINATION OF THE AGREEMENT SOLELY
ON THE BASIS OF FAILURE TO PROVIDE THE ESTOPPELS BY THE CLOSING DATE IN
ACCORDANCE WITH THE SELLER'S RIGHTS AND OBLIGATION THEREUNDER.)

10 Amendment of the Agreement to reflect a new Purchase Price of
$13,130,000.00.

If the transaction is approved by Buyer's Investment Committee,
Buyer and Seller agree to the following:

A. Buyer and Seller shall cooperate with each other in an
attempt to timely resolve the above matters.

B. Seller shall have until November 3, 1997 to entirely
resolve the above matter or satisfy Buyer that they will be resolved on or
before a closing date of November 13, 1997.

<PAGE>

C. If, by November 3, 1997, the above matters are not
resolved or Buyer is not satisfied that said matters will be resolved on or
before a closing date of November 13, 1997, Buyer shall have a right to
either:

1. Waive satisfaction of any outstanding items, close
the transaction on November 13, 1997 without further reduction in purchase
price, or

2. Terminate the Agreement and receive back the
Deposit.

D. BUYER AGREES THAT SELLER SHALL HAVE THE ABILITY TO
RESOLVE SAID MATTERS AT ANY TIME PRIOR TO NOVEMBER 3,1 997. BUYER AGREES
THAT IN THE EVENT OF EARLIER RESOLUTION OF ALL SUCH MATTERS, THE CLOSING
DATE SHALL BE THAT DATE WHICH IS 10 DAYS AFTER SAID DATE. (Buyer
acknowledges certain matter may not be resolved until the closing date.
Accordingly, Buyer agrees the 10 days used to determine the closing date
shall commence at such time as Buyer determines all of the issues that can
be resolved have been resolved and those matters that may remain can and
will be resolved on the date the transaction closes.)

Buyer and Seller further acknowledges that the closing of this transaction
is still tied to the closing of the transaction for Weston Lakes Plaza. If
the matters identified by that letter of even date herewith for Weston
Lakes Plaza are not resolved pursuant to the terms therein, Buyer shall
have the right to terminate both Agreements or close both transactions with
a waiver of outstanding items involving both Properties. Buyer and Seller
agree that if resolution of all outstanding matters for one Property occurs
prior to November 3, 1997, and prior to resolution of those matters
affecting the other Property, Buyer shall have at least 5 business days
after resolution of matters affecting the second property to close both
transactions.

It is agreed upon by Buyer and Seller that all terms, covenants,
conditions, representations and warranties contained in the Agreement and
that letter agreement dated September 29, 1997, which are not modified or
amended by this letter agreement which are not modified or amended by this
specific letter agreement, are hereby ratified, confirmed and held to be in
full force and effect.

SELLER BUYER
- ------ -----

ARVIDA/LAKES PLAZA, L.P., a PRINCIPAL MUTUAL LIFE INSURANCE
Delaware limited partnership COMPANY, an Iowa corporation

By: ARVIDA/LAKES MANAGERS, INC. By: ________________________
a Delaware corporation,
its general partner Its: _______________________

By: ____________________________ By: ________________________
John Baric, Vice President
Its: _______________________

EXHIBIT 10.15
- -------------
(Arvida)

INFORMATION SYSTEMS SHARING AGREEMENT
-------------------------------------

This INFORMATION SYSTEMS SHARING AGREEMENT (this "Agreement"), dated
as of November 6, 1997, (the "Effective Date"), by and between ARVIDA/JMB
PARTNERS, L.P., a limited partnership organized and operating under the
laws of Delaware (the "Partnership"), and ARVIDA COMPANY, formerly known as
Arvida Management Company, a corporation organized and operating under the
laws of Illinois ("Arvida").

WHEREAS, the Partnership and Arvida are parties to that certain
Management, Advisory and Supervisory Agreement (the "Management Agreement")
dated as of September 10, 1987, pursuant to which Arvida provides certain
management, advisory and supervisory services to the Partnership;

WHEREAS, pursuant to the Management Agreement, Arvida manages the
Partnership's information systems function;

WHEREAS, Arvida and the Partnership have collaborated on the
development of certain computer software, and now wish to document their
ownership and use rights in such computer software;

AND WHEREAS, Arvida uses the computer hardware and software owned,
leased or licensed by the Partnership and its affiliated entities and
various related information systems services ("Partnership IS Resources")
to perform services for legal entities other than the Partnership, and the
parties hereto now wish to formalize the procedures under which Arvida
reimburses the Partnership for Arvida's share of the cost of the
Partnership IS Resources;

NOW, THEREFORE, the Partnership and Arvida agree as follows:

SECTION 1.1 CERTAIN TERMS. The following terms shall have the
meanings set forth below:

(a) "A/P, Job Cost and G/L Record Count" means the cumulative year
to date number of data records created and stored in data files by the
Partnership's accounts payable, job cost and general ledger systems (not
including backup copies or other duplicates of such records).

(b) "Intellectual Property" means confidential information,
copyrights, patents, mask works, trademarks, trade secrets and all other
intellectual property rights.

(c) "Owned Software" means any and all software jointly developed
by the Partnership and Arvida (including all intermediate and partial
versions thereof and the look and feel thereof), including without
limitation the software commonly referred to by the parties hereto as Sales
Tracking and Reporting (a/k/a STAR), Event Tracking, Design Options,
Construction Purchase Orders, Prospect Tracking, Inventory and Customer
Service.

<PAGE>

(d) "Shared IS Resource Costs" means the total costs that the
Partnership incurs to create, obtain or provide Partnership IS Resources
that are used to provide services to both the Partnership and its
subsidiaries, joint ventures and other entities controlled by the
Partnership (collectively with the Partnership, the "Partnership Entities")
and to some legal entities other than the Partnership Entities. The Shared
IS Resource Costs include, without limitation, the following amounts:

(i) The costs of (A) leasing, maintaining and operating the
Partnership's AS/400 processor, (B) development of applications software
and (C) providing LAN and desktop support.

(ii) The compensation and benefits of the Partnership's
employees who are dedicated to providing Partnership IS Resources that are
used to provide services both to one or more Partnership Entities and to
some legal entities that are not Partnership Entities.

(iii) The out-of-pocket expenses (whether as single period
expenses or as reflected by amortization or depreciation) incurred solely
to provide the Partnership IS Resources.

(iv) The product of (x) the cost of rent, power,
communications and other utilities, HVAC services, real and personal
property taxes, janitorial and other facility maintenance services and
other costs related to the operation of each of the Partnership's offices
where the Partnership IS Resources are housed multiplied by (y) a fraction,
the numerator of which is the number of square feet occupied by the
Partnership IS Resources in such facility and the denominator of which is
the number of square feet occupied by the Partnership in such facility
determined on an annual basis.

(v) The product of (x) the Partnership's total cost for Human
Resources and payroll administration MULTIPLIED BY (y) a fraction, the
numerator of which is the number of employees whose payroll is administered
by the Partnership who are dedicated to providing the Partnership IS
Resources and the denominator of which is the total number of employees
whose payroll is administered by the Partnership determined on a quarterly
basis.

(vi) The product of (x) the Partnership's total cost for
administering accounts payable MULTIPLIED BY (y) a fraction, the numerator
of which is the cumulative, year to date number of invoices paid by the
Partnership that are solely to provide Partnership IS Resources and the
denominator of which is the cumulative, year to date number of invoices
paid by the Partnership updated on a quarterly basis.

SECTION 1.2 OWNERSHIP. Arvida and the Partnership shall jointly and
equally own the Owned Software (including all Intellectual Property
inherent therein or appurtenant thereto), and each of them shall have the
right to fully exercise the rights of an owner with respect to the Owned
Software. Arvida and the Partnership each hereby assign to such joint and
equal ownership all of their right, title and interest in the Owned
Software. Arvida and the Partnership each waive any rights to an
accounting or a share of profits from the use of other exploitation of the
Owned Software.

<PAGE>

SECTION 1.3 WORKS MADE FOR HIRE. All copyrightable aspects of any
Owned Software created after the Effective Date are "works made for hire"
within the meaning of the Copyright Act of 1976, as amended (the "Act"), of
which Arvida and the Partnership are to be the "authors" within the meaning
of the Act. All such copyrightable works, as well as all copies of such
works (in whatever medium fixed or embodied), shall be owned by Arvida and
the Partnership on their creation, Arvida and the Partnership shall have
joint and equal ownership of the Owned Software, regardless of whether the
Owned Software or any part or element thereof is found as a matter of law
not to be a "work made for hire" within the meaning of the Act.

SECTION 1.4 FURTHER ASSURANCES. At all times during the term of
this Agreement and thereafter, Arvida and the Partnership shall assist each
other in protecting their respective ownership of the Owned Software,
provided that the other party shall reimburse such party for its out-of-
pocket costs incurred in rendering such assistance. Such assistance shall
include, without limitation, providing such assistance as may be necessary
for each of them to obtain registrations for their respective rights in
Intellectual Property in the Owned Software and to enforce their respective
rights in such Intellectual Property. Each of Arvida and the Partnership
agrees to execute and deliver all documents and provide all testimony
reasonably requested by the other in connection therewith.

SECTION 1.5 SURVIVAL. This Article I shall survive the termination
of this Agreement.

ARTICLE II

PERMITTED USE OF PARTNERSHIP INFORMATION SYSTEMS RESOURCES

SECTION 2.1 RIGHT TO USE. The Partnership hereby authorizes Arvida
to use, and ratifies Arvida's part use of, the Partnership IS Resources to
provide management, advisory, supervisory and other related services to
itself or any legal entity other than the Partnership Entities, but only to
the extent that the Partnership IS Resources exceed those required to meet
the Partnership's needs for the service to be provided by Arvida to the
Partnership Entities pursuant to the Management Agreement. The term
"Partnership IS Resources" does not include the Owned Software or any
Intellectual Property rights therein. The Partnership is providing Arvida
use of the Partnership IS Resources "AS IS" and "WHERE IS" with no
warranties whatsoever. ARVIDA EXPRESSLY WAIVES, AND THE PARTNERSHIP
EXPRESSLY DISCLAIMS, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE.

SECTION 2.2 INDEMNITY. Arvida shall indemnity, defend and hold the
Partnership and each of its partners and employees harmless from any claims
by third parties based on Arvida's use of any Partnership IS Resources to
provide services to third parties.

SECTION 2.3 PAYMENT. Arvida shall pay the Partnership an amount
equal to the aggregate direct or allocable cost of providing the
Partnership IS Resources to Arvida (the "Arvida Cost") and any sales,
service, excise, value added or other similar taxes as may be assessed in
connection with such payments (other than taxes based on Arvida's net
income, assets or corporate organization) ("Taxes"). The Partnership shall
determine the Arvida Cost and the Taxes for each month within fifteen (15)
days of the end of such month. Arvida shall pay the Arvida Cost and the
Taxes to the Partnership within thirty (30) days of the end of such month.
Alternatively, Arvida may set off its obligation to pay the Arvida Cost
against amounts that the Partnership would otherwise be required to pay to
Arvida pursuant to the Management Agreement.

<PAGE>

SECTION 2.4 DETERMINATION OF ARVIDA COST.

(a) CALCULATION. Arvida Cost shall include the sum of:

(i) The total cost that the Partnership incurs to create,
obtain or provide Partnership IS Resources that Arvida uses solely to
provide service to itself or any other legal entity other than the
Partnership Entities; PLUS

(ii) The product of (x) the cumulative, year to date Shared IS
Resource Costs MULTIPLIED BY (y) a fraction, the numerator of which is the
cumulative, year to date A/P, Job Cost and the G/L Record Count for legal
entities other than the Partnership Entities and the denominator of which
is the cumulative, year to date total A/P, Job Cost and G/L Record Count.

(b) ALLOCATION METHODS. All allocations not otherwise described in
this Agreement shall be made using reasonable, fair, common, consistent and
documented methods of allocation that are based on consumption metrics that
are closely related to the type, amount and/or levels of the cost or costs
being allocated. Without limiting the generality of the foregoing,
allocation methods in use as of the Effective Date shall initially be used
to determine the Arvida Cost but may be modified as appropriate under the
circumstances to allocate the Arvida Cost in a fair and reasonable manner
and consistent with the manner in which costs are incurred in regard to the
Partnership Entities, on the one hand, and Arvida and any other legal
entities, on the other hand. Such allocation methods in effect at any time
shall be described in reasonable detail upon the request of either party
hereto.

(c) COMPATIBILITY. The practices for charging and allocating costs
shall be consistent with Arvida's methods with respect to its other
customers and shall not unfairly disadvantage the Partnership relative to
Arvida or its other customers.

(d) CONSISTENT ACCOUNTING PRINCIPLES. All costs shall be
accounted for and determined in accordance with generally accepted
accounting principles applied uniformly in preparing the Partnership's
financial statements, and cost accounting principles utilized consistently
by the Partnership in calculating costs. Modifications or additions to
such principles which would reduce the portion of Shared IS Resource Costs
that are allocated to Arvida shall apply to calculations for this purpose
only to the extent that they have been approved by the Partnership.

(e) REVIEW OF COSTS. The Partnership shall cause its professional
accounting staff to monitor and audit all charges or allocations using
processes which identify any inconsistencies in recordkeeping. These
processes shall be as stringent as those that Arvida uses to monitor and
audit similar costs that shall be borne entirely by Arvida without
reimbursement in a cost-plus or similar arrangement.

(f) OPEN BOOKS. Each party shall have full access to all
information (including source documents) related to any cost charged or
allocated to the Partnership or the Shared IS Resource Costs, and any
method of allocation used in any such calculation. The Partnership shall
provide Arvida any assistance reasonably requested by Arvida in
understanding such costs.

<PAGE>

ARTICLE III

TERM AND TERMINATION

SECTION 3.1 TERM. The term of this Agreement shall be from the
Effective Date until the expiration or earlier termination of the
Management Agreement.

SECTION 3.2 OTHER TERMINATIONS. If this Agreement is terminated
other than upon or in connection with the dissolution of the Partnership,
Arvida and the Partnership shall each provide the other such termination
assistance and cooperation as may reasonably be requested to assure a
smooth transition and termination of this Agreement.

ARTICLE IV

MISCELLANEOUS

SECTION 4.1 RELATIONSHIP OF THE PARTIES. By virtue of this
Agreement, the Partnership and Arvida are not partners or joint venturers
with each other and nothing contained herein shall be construed so as to
make them such partners or joint venturers in respect of this Agreement or
to impose any liability as such on either of them.

SECTION 4.2 NOTICES. Any notice required or permitted to be given
hereunder shall be in writing unless some other method of giving notice is
accepted by the party to whom it is given. Notice shall be effective upon
delivery by mail, air courier, or other appropriate means to the following
addresses of the parties hereto:

To the Partnership:

900 North Michigan Avenue, Suite 1900
Chicago, Illinois 60611
Attention: Stephen A. Lovelette
and Gary Nickele

To Arvida:

7900 Glades Road,
Boca Raton, Florida 33434

and

900 North Michigan Avenue, Suite 1900
Chicago, Illinois 60611

Either party hereto may at any time give notice in writing to the
other party of a change of this Section 4.2.

SECTION 4.3 AMENDMENT. This Agreement shall not be changed,
modified, terminated or discharged in whole or in part except by an
instrument in writing signed by both parties hereto, or their respective
permitted successors or assigns, or as otherwise provided herein.

SECTION 4.4 HEADINGS. The Article and Section headings hereof have
been inserted for convenience of reference only and shall not be construed
to affect the meaning, construction or effect of this Agreement.

<PAGE>

SECTION 4.5 ASSIGNMENT. This Agreement may be assigned by any party
hereto in connection with (and to the same assignee as) an assignment of
the Management Agreement by such party in accordance with Section 9.2 of
the Management Agreement. Arvida may assign and transfer its rights and
obligations under this Agreement to any entity that acquires the "Arvida"
name without the prior consent of the Partnership. Except as otherwise
provided in this Section 4.5, neither party may assign or transfer its
rights or obligations under this Agreement without the prior written
consent of the other party, which consent may be granted or withheld in the
sole discretion of such other party.

SECTION 4.6 SUCCESSORS AND ASSIGNS. This Agreement shall bind any
successors or assigns of the parties hereto as herein provided.

SECTION 4.7 CHOICE OF LAW. The provisions of this Agreement shall
be construed and interpreted in accordance with, and be governed by, the
laws of the State of Illinois as at the time in effect.

SECTION 4.8 NO THIRD PARTY BENEFICIARIES. It is agreed and
understood that no person other than Arvida, the Partnership and Arvida/JMB
Managers, Inc. (the general partner of the Partnership) will be entitled to
rely upon or enforce any of the provisions hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers thereunto duly authorized as of the Effective
Date.

ARVIDA COMPANY

By: _____________________________
Name:
Title:

ARVIDA/JMB PARTNERS, L.P.

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

By: ___________________________
Name:
Title:

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: A&D Title,
L.P., Arvida Corporate Park Associates, Arvida Pompano Associates Joint
Venture, Cullasaja Joint Venture, H.A.E. Joint Venture, Mizner Court
Associates Joint Venture, Mizner Tower Associates Joint Venture, Ocala 202
Joint Venture and Tampa 301 Associates 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, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997

<CASH> 91,855,211
<SECURITIES> 0
<RECEIVABLES> 14,654,970
<ALLOWANCES> 692,940
<INVENTORY> 163,423,873
<CURRENT-ASSETS> 0
<PP&E> 69,496,688
<DEPRECIATION> 27,732,447
<TOTAL-ASSETS> 326,622,856
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 197,238,710
<TOTAL-LIABILITY-AND-EQUITY>326,622,856
<SALES> 355,904,056
<TOTAL-REVENUES> 355,904,056
<CGS> 281,822,265
<TOTAL-COSTS> 281,822,265
<OTHER-EXPENSES> 27,523,483
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 46,558,308
<INCOME-TAX> 0
<INCOME-CONTINUING> 46,558,308
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,558,308
<EPS-PRIMARY> 105.30
<EPS-DILUTED> 105.30

</TABLE>

EXHIBIT 99.1
- ------------
(ARVIDA-I)

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 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

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.