ARVIDA JMB PARTNERS L P, 10-K, 1999-03-31

ARVIDA JMB PARTNERS L P
10-K, 1999-03-31
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, 1998 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 are incorporated by reference in Part 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 . . . . . . . . . . 11

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. . . . . . . . 24

Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . 25

Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . 60

PART III

Item 10. Director and Executive Officers of
the Registrant . . . . . . . . . . . . . . . 60

Item 11. Executive Compensation . . . . . . . . . . . 63

Item 12. Security Ownership of Certain
Beneficial Owners and Management . . . . . . 66

Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . 66

PART IV

Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K . . . . . 67

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 73

<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; accounts receivable; construction, brokerage and
other support businesses; real estate assets held for investment; certain
club and recreational facilities; and until October 1998, 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>

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

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 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 five 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,
(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.

<PAGE>

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 11 for
further discussion regarding Tax Increment Financing Entities and their
involvement with infrastructure improvements.

Certain of the Florida Communities described below have applied for
and have been designated as Planned Unit Development's ("PUD") by the local
zoning authority (usually the governing body of the municipality or the
county in which the Community is or will be located). Designation as a PUD
generally establishes permitted densities (i.e., the number of residential
units which may be constructed) with respect to the land covered thereby
and, upon receipt, enables the developer to proceed in an orderly, planned

<PAGE>

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, 1998 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
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 550 employees.

<PAGE>

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 7.

(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 which
is 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 11 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 late 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 &
Country Club which is nearing completion.

(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.

<PAGE>

(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 6 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, 1998, the joint
venture property in Pompano Beach was encumbered by a mortgage in the
aggregate principal amount of approximately $3.4 million. Reference is
made to Note 10 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.

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.

<PAGE>

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 sought, among other things, a declaration that Raleigh had
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 read
the operative agreements as providing that subsequent Holders of Interests,
such as Raleigh, have voting rights. The Partnership believed, 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. By order dated June 9, 1998, and
after appeal of this matter, the Delaware Supreme Court affirmed the trial
court on all issues.

On December 22, 1998, the Partnership and General Partner entered into
a settlement and release agreement with Raleigh pursuant to which the
Partnership and the General Partner, on behalf of themselves and their
respective officers, directors, partners and affiliates (including without
limitation members of the Special Committee), on the one hand, and Raleigh,
on behalf of itself and its partners and affiliates, on the other hand,
released their respective claims that were brought or could have been
brought in the Raleigh action. In addition, pursuant to the settlement and
release agreement, and to resolve, among other things, Raleigh's claim for
attorneys' fees and expenses, the Partnership paid Raleigh approximately
$2,047,000. Counsel for the intervenor class and Gladys Beasley has filed
its own petition for attorneys' fees in the amount of $600,000 and expenses
in the amount of approximately $8,000. The Partnership intends to
vigorously defend against the petition; however, there is no assurance as
to the outcome for such petition.

<PAGE>

(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
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 The Walt Disney Company ("Disney") in 1987, which
included certain assets related to the Country Walk development. Pursuant
to the agreement to purchase such assets, the Partnership obtained
indemnification by Disney for certain liabilities relating to facts or
circumstances arising or occurring prior to the closing of the
Partnership's purchase of the assets. Over 80% of the Arvida-built homes
in Country Walk were built prior to the Partnership's ownership of the
Community. Where appropriate, the Partnership has tendered 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 $8.13 million.
The insurance carrier that funded these settlements pursuant to certain
reservations of rights has stated its position that it has done so pursuant
to various non-waiver agreements. The carrier's position was that these
non-waiver agreements permitted the carrier to fund settlements without
barring the carrier from raising insurance coverage issues or waiving such
coverage issues. On May 23, 1995, the insurance carrier rescinded the
various non-waiver agreements currently in effect regarding the remainder
of the Hurricane Andrew litigation, allegedly without waiving any future
coverage defenses, conditions, limitations, or rights. For this and other
reasons, the extent to which the insurance carrier may recover any of these
proceeds from the Partnership is uncertain. Therefore, the accompanying
consolidated financial statements do not reflect any accruals related to
this matter.

Currently, the Partnership is involved in two subrogation 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

<PAGE>

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 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 "Council of Villages case"). 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.

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>

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 Disney
in these consolidated actions in the event the Partnership is held liable
for acts taken by a subsidiary of Disney prior to the Partnership's
involvement in the Club and property. The parties to the Council of
Villages case have filed cross motions for summary judgment on various
issues related to the case and these motions are pending before the Court
for decision. The Partnership can give no assurances as to the outcome of
these motions. The Council of Villages case is set for trial on August 9,
1999, on all issues remaining after the ruling on summary judgment.

(D) 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. 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.

By order dated July 29, 1998, the court granted the Partnership's
motion for summary judgment against Disney on the issue of whether the
Partnership is entitled to a purchase price reduction under the terms of
the contract with Disney for the acquisition of substantially all of the
real estate and other assets of Arvida Corporation. By an order of the
same date, the court denied Disney's motion for summary judgment on the
issue of whether the Partnership is entitled to indemnification for various
environmental issues. The case is set for trial on June 7, 1999 on the
issue of damages the Partnership may be entitled to on the purchase price
reduction claim. Trial on all other issues is scheduled for July 26, 1999.

There are no assurances relating to the amount of damages that the
Partnership may receive or the amount of liability that the Partnership may
incur in connection with the remaining issues to be addressed by the court.

<PAGE>

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
1997 and 1998.

PART II

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

As of December 31, 1998, there were 17,611 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.

No transfer will be effective until the first day of the next succeeding
calendar quarter after the requisite transfer form satisfactory to the
General Partner has been received by the General Partner. The transferee
consequently will not be entitled to receive any cash distributions or any
allocable share of profits or losses for tax purposes until such next
succeeding calendar quarter. Profits or losses of the Partnership for a
calendar year in which a transfer occurs will, to the extent permitted by
law, be allocated between the transferor and the transferee based upon the
number of quarterly periods for which each was recognized as the Holder of
the Interests, without regard to the results of the Partnership's
operations during particular quarterly periods and without regard to
whether cash distributions were made to the transferor or transferee. Cash
distributions to a Holder of Interests will be distributed to the person
recognized as the Holder of the Interests as of the last day of the
quarterly period preceding the quarter in which such distribution is made.

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 that is to be
completed by October 2002.

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 13.

Reference is made to Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations for a discussion of an
unsolicited tender offer from an unaffiliated third party.

<PAGE>

<TABLE>
ITEM 6. SELECTED FINANCIAL DATA

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

DECEMBER 31, 1998, 1997, 1996, 1995 AND 1994

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

Total revenues. . . . . . $351,125,675 355,904,056 342,813,269 382,267,482 315,058,058
============ ============ ============ ============ ============

Net operating
income . . . . . . . . . $ 64,437,327 47,146,182 29,301,748 45,181,165 52,676,462
============ ============ ============ ============ ============
Equity in earnings
(losses) of uncon-
solidated ventures . . . $ 335,893 211,217 (177,864) 1,050,994 524,520
============ ============ ============ ============ ============
Net income. . . . . . . . $ 65,862,245 46,558,308 28,011,424 41,836,686 47,197,532
============ ============ ============ ============ ============
Net income per
Interest (a) . . . . . . $ 148.02 105.30 67.47 101.91 115.37
============ ============ ============ ============ ============
Total assets (b). . . . . $316,031,135 326,622,856 340,640,143 366,439,241 376,371,712
============ ============ ============ ============ ============
Total liabilities (b) . . $106,260,609 129,384,146 90,988,318 133,773,954 179,791,958
============ ============ ============ ============ ============
Cash distributions
per Interest (c) . . . . $ 125.06 235.04 25.85 13.49 6.35
============ ============ ============ ============ ============

The above selected consolidated financial data should be read in conjunction with the consolidated 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 reflect distributions paid
during the calendar year and represent a return of capital for Federal
income tax purposes. During February 1998, the Partnership made a
distribution for 1997 of $30,300,000 to its Holders of Interests ($75.00
per Interest). During September 1998, the Partnership made a distribution
of $20,200,000 to its Holders of Interests ($50.00 per Interest). In
addition, during 1998, distributions totaling $22,705 (approximately $.06
per Interest) were deemed to be paid to the Holders of Interests, all of
which was remitted to North Carolina tax authorities on their behalf for
the 1997 non-resident withholding tax. 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 ($175.00 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).

</TABLE>

<PAGE>

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

LIQUIDITY AND CAPITAL RESOURCES

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.

At December 31, 1998 and 1997, the Partnership had unrestricted cash
and cash equivalents of approximately $82,104,000 and $79,411,000,
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 cash receipts during the fourth
quarter of 1998 resulting primarily from the closing of units in Arvida's
Grand Bay, the construction of which was completed in October 1998, and
from the sale of its cable operation in Weston in October 1998. Such
receipts are the primary cause for the increase in Cash and cash
equivalents at December 31, 1998 as compared to the cash balance reported
in the Partnership's third quarter report at September 30, 1998. The cash
receipts generated from the closings at Arvida's Grand Bay are also the
primary cause for the decrease in Trade and other accounts receivable at
December 31, 1998 as compared to the balance at September 30, 1998.

The Partnership was able to generate significant cash flow before debt
service during each of the five years ended December 31, 1998. 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 March 1999, the Partnership made a distribution for
1998 of $58,580,000 to its Holders of Interests ($145.00 per interest) and
$3,254,407 to its General Partner and Associate Limited Partners,
collectively. During September 1998, the Partnership made a distribution
of $20,200,000 to its Holders of Interest ($50.00 per Interest) and
$1,122,209 to its General Partner and Associate Limited Partners,
collectively. During February 1998, the Partnership made a distribution
for 1997 of $30,300,000 to its Holders of Interests ($75.00 per Interest)
and $1,683,314 to the General Partner and Associate Limited Partners,
collectively. In addition, during 1998, distributions totaling $22,705
(approximately $.06 per Interest) were deemed to be paid to the Holders of
Interests, all of which was remitted to North Carolina tax authorities on
their behalf for the 1997 non-resident withholding tax. Distributions
totaling $2,201 were also paid during 1998 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. 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. 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. 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 remitted to the North
Carolina tax authorities on their behalf.

<PAGE>

In accordance with the Partnership Agreement, the General Partner and
Associate Limited Partners have deferred a portion of their distributions
of net cash flow from the Partnership totaling approximately $11,934,000 as
of the date of this report. This amount does not bear interest and is
expected to be paid in future periods subject to certain restrictions
contained in the partnership agreement of the Partnership. In addition, 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.

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,
with Barnett Bank, N.A. ("Barnett") being the primary agent on the
facility. The credit facility consists of a $75 million term loan, a $20
million revolving line of credit and a $5 million letter of credit facility
and matures on July 31, 2001. The term loan has 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.

Prior to September 1, 1998, interest on the facility was based, at the
Partnership's option, on the relevant LIBOR plus 2.25% per annum or
Barnett's prime rate. The Partnership also obtained interest rate swaps
covering two-thirds of the original term loan commitment which are
amortized annually until termination of the swap agreements on July 31,
2001. Loan origination 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 to interest expense over the life of
the loan. 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. The credit facility also requires that certain
financial covenants such as loan-to-value, net worth and debt ratios be
maintained throughout the loan term. All of the loans under this facility
are cross-collateralized and cross-defaulted. At December 31, 1998, the
balances outstanding on the term loan, the revolving line of credit and the
letter of credit facility were approximately $41,667,000, $0 and $867,000,
respectively. For the year ended December 31, 1998, the combined effective
interest rate for the Partnership's credit facilities, including the
amortization of loan origination fees and the effect of the interest rate
swap agreements was approximately 8.7% per annum.

Due to the replacement of the Partnership's previous letter of credit
facility by the new credit facility in July 1997, 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. Such letters of credit are expected to be replaced by either
letters of credit issued under the new facility or by bonds. Once the
letters of credit are replaced, the cash collateral will be released to the
Partnership. As of December 31, 1998, approximately $1.9 million of such
cash collateral had been released to the Partnership leaving a balance
outstanding under this previous letter of credit facility of approximately
$2.3 million.

<PAGE>

In February 1998, the Partnership prepaid the $12.5 million principal
repayment on the term loan scheduled for July 1998. In addition, in
exchange for a rate reduction of 50 basis points on its credit facility,
the Partnership made an additional $7.25 million prepayment on the term
loan in August 1998. As a result of this transaction, interest on the
credit facility is now based, at the Partnership's option, on the relevant
LIBOR plus 1.75% per annum or the lender's prime rate (7.75% at
December 31, 1998). In November 1998, the Partnership also prepaid
$7,333,333 of the $12.5 million principal repayment on the term loan
scheduled for July 1999.

Effective September 1, 1998, First Union National Bank became the
successor agent on the credit facility replacing Barnett as the primary
agent by paying off the outstanding principal balances as of August 31,
1998 owed to Barnett and one of the other lenders on the facility. In
connection with this transaction, the Partnership paid all interest accrued
on the facility through August 31, 1998, as well as certain fees and
closing costs. With the exception of the interest rate reduction discussed
above, all of the terms of the original loan agreement remain the same.

During 1998, the Partnership continued to borrow against its $21
million revolving construction line of credit to fund the construction of
one of the two remaining buildings at Arvida's Grand Bay. Construction of
this building was completed in October 1998, and the outstanding principal
balance on this line of credit was paid in full during the fourth quarter
of 1998 with proceeds from the sale of units within this building.
Construction of the final building at Arvida's Grand Bay commenced in 1998,
and in February 1999, the Partnership closed on a new line of credit to
fund its construction. This line of credit has a borrowing capacity of
$23,150,000, matures on February 4, 2001 and bears interest, at the
Partnership option, at the relevant LIBOR plus 2.00% per annum or the
lender's prime rate.

In 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 sale price of $12.0 million. This sale generated a
profit for financial reporting and Federal income tax purposes.

In October 1997, the Partnership closed on the sale of its mixed-use
center in Boca Raton known as Parkway Center for a sales price of $38.5
million. Parkway Center consists of approximately 258,000 square feet of
space in a mix of offices, retail shops, and a Radisson Suites Hotel. The
Partnership also closed on the sales of its Cabana Club located within its
Sawgrass Community for a sale price of $3.5 million and its two retail
shopping centers located in Weston for a combined sales price of $26.3
million in November 1997 and December 1997, respectively. All of these
sales were made to unaffiliated third parties and generated profits for
financial reporting and Federal income tax purposes.

In January 1998, the Partnership sold its approximate 33% interest in
the H.A.E. Joint Venture to one of its joint venture partners for a sale
price of approximately $1.7 million. In May 1998, the Partnership sold its
remaining Sawgrass Country Club memberships to the Sawgrass Country Club,
Inc. for a total sales price of approximately $2.4 million. In October
1998, the Partnership closed on the sale of its cable operation in Weston
for a sale price of $31.2 million to an unaffiliated third party. This
sale is the reason for the decrease in Property and equipment held for
disposition or sale on the accompanying consolidated balance sheets at
December 31, 1998 as compared to December 31, 1997. All of these sales
generated profits for financial reporting and Federal income tax purposes.

All of the above mentioned sales are reflected in land and property
revenues and cost of revenues on the accompanying consolidated statements
of operations for the years ended December 31, 1996, 1997 and 1998,
respectively. Reference is made to Results of Operations below for a
further discussion of land and property transactions.

<PAGE>

In April 1998, control of the Jacksonville Golf & Country Club
("JG&CC") was turned over to the club's members. As a result, effective
April 1, 1998, the Partnership is no longer involved in the ownership or
management of JG&CC and has no further responsibility to fund JG&CC's
operations. In addition, all outstanding balances owed between the
Partnership and JG&CC were settled, resulting in an approximate $19,800 net
payment to JG&CC upon the turnover of the club to its members.

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, The
St. Joe Company ("St. Joe"), 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.

In November 1998, the General Partner entered into an agreement (the
"Buy/Sell Agreement") with Raleigh Capital Associates, L.P. ("Raleigh") and
St. Joe, which resulted in St. Joe acquiring all of the approximate 26%
Interests owned by Raleigh. Pursuant to the Buy/Sell Agreement, the
General Partner and St. Joe delivered a notice to Raleigh on November 11,
1998, that contained the price (the "Buy/Sell Price") at which St. Joe had
agreed to purchase all of Raleigh's Interests, $430 per Interest. The
General Partner had agreed that the Buy/Sell Price would be the basis for
determining the sale price for the assets to be acquired by Raleigh from
the General Partner and the Associate Limited Partners, and this sale price
was included in the notice to Raleigh. Raleigh had until December 10, 1998
to determine whether it would sell all of its Interests to St. Joe or
purchase the assets of the General Partner and the Associate Limited
Partners. Had it elected to purchase, Raleigh would have been required to
make a tender offer for any and all Interests not owned by Raleigh at a
price equal to or greater than the Buy/Sell Price and on other terms and
conditions set forth in the Buy/Sell Agreement. On December 10, 1998,
Raleigh elected to sell all of its Interests to St. Joe for the Buy/Sell
Price, and on December 22, 1998, these Interests were purchased by St. Joe.

On December 22, 1998, the Partnership and General Partner also entered
into a settlement and release agreement with Raleigh pursuant to which the
Partnership and the General Partner, on behalf of themselves and their
respective officers, directors, partners and affiliates (including without
limitation members of the Special Committee described below), on the one
hand, and Raleigh, on behalf of itself and its partners and affiliates, on
the other hand, released their respective claims that were brought or could
have been brought in their litigation. Reference is made to subpart (A) in
Item 3. Legal Proceedings for a discussion of such litigation. In
addition, pursuant to the settlement and release agreement, and to resolve,
among other things, Raleigh's claim for attorneys' fees and expenses, the
Partnership paid Raleigh approximately $2,047,000. Counsel for the
intervenor class and Gladys Beasley has filed its own petition in such
litigation for attorneys' fees in the amount of $600,000 and expenses in
the amount of approximately $8,000. The Partnership intends to vigorously
defend against the petition; however, there is no assurance as to the
outcome for such petition.

<PAGE>

The General Partner has established a special committee (the "Special
Committee") consisting of certain directors of the General Partner to
review unsolicited offers for Interests. In addition, the Partnership has
engaged Lehman Brothers Inc. ("Lehman") as a financial advisor to assist
the Special Committee in evaluating and responding to such offers. Lehman
was asked to render its estimate of the discounted present value (the
"Estimated Liquidation Value") of an Interest as of August 31, 1998 based
on the assumption that the Partnership commences an orderly liquidation in
October 1997 and completes the liquidation by October 2002.

During February 1999, First Commercial Guarantee ("FCG") commenced an
offer to acquire up to approximately 19,600 Interests, which represents
approximately 4.9% of the outstanding Interests. FCG's offer had a
purchase price of $300 per Interest (which was to be reduced by the $145
per Interest distribution made in February 1999 for an adjusted offer price
of $155 per Interest) and was scheduled to expire in March 1999. In
arriving at the Estimated Liquidation Value, Lehman relied upon the
Partnership's estimate of the gross cash distributions that the Holders of
Interests would receive from August 31, 1998 (exclusive of the $50 per
Interest distribution made in September 1998). (These estimated gross
distributions are based on certain assumptions that may or may not prove to
be true. There are a number of factors, including risk factors, that may
cause the actual gross cash distributions to vary from such estimates, and
such variations could be material.) These estimated gross distributions
were then discounted to reflect the present value of such distributions as
of August 31, 1998, which ranged from $425 to $455 per Interest, depending
on the different discount rates used. (Such amounts include the
distribution of $145 per Interest made in February 1999).

Based on its analysis, 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 for
liquidity, the FCG 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 offer and not tender their
Interests pursuant to such offer. With respect to all other Holders of
Interests, the Special Committee expressed no opinion and remained neutral
in regard to the offer.

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 or engage in other normal business activities. To be year
2000 compliant, a computer system must be able to do two things. First, it
must be capable of storing date related information in a format that can
discern between the 20th and 21st centuries. Secondly, all computer
programs which access the stored information must be able to sort, collate,
and perform calculations properly on information that involves the current
and next century. In addition to computer programs, other date sensitive
electronic devices including, but not limited to, copy machines,
thermostats, elevators, telephones and traffic lights could experience
various operational difficulties as a result of not being year 2000
compliant.

The Partnership has organized a team to review and prepare its
computer systems for the Year 2000 compliancy. This team has completed an
internal assessment of its information system technology and determined a
need to upgrade portions of the Partnership's hardware and software so that
its computer systems would function properly with respect to dates in the
year 2000 and thereafter. The software upgrade was initiated in October
1997 and completed in May 1998 at an approximate cost of $110,000. A plan
has been developed to upgrade the Partnership's computer hardware including

<PAGE>

its file servers, which is currently estimated to cost approximately
$300,000. This estimate includes the cost of testing the upgraded computer
systems and replacing equipment which is not year 2000 compliant. The
Partnership has commenced its implementation of the hardware upgrade, which
was previously scheduled to be completed in the first quarter of 1999.
However, such implementation has been delayed due to the Partnership's
decision to utilize internal resources rather than incur the expense of
outside consultants to complete the hardware installations, and is
currently expected to be completed in the third quarter of 1999. The
Partnership began testing its computer systems in November 1998 to
determine compliance with the year 2000. Testing of certain of the
Partnership's mission critical computer systems, including financial, human
resources and payroll, is complete. As a result of this testing, it was
concluded that these mission critical systems are year 2000 compliant, and
the Partnership does not intend to develop a contingency plan for these
aspects of its information technology system. A test of the Partnership's
internally developed software packages, which are also deemed mission
critical, is currently expected to be completed in the second quarter of
1999. The Partnership has not determined at this time whether any
contingency plan is necessary with respect to the internally developed
software packages. Testing performed to date has shown that the hardware
upgrades currently planned are the only such upgrades that will be
required.

In addition, all third party software vendors such as banks, insurance
companies and governmental agencies who exchange digital information with
the Partnership have been identified and contacted regarding their year
2000 compliancy. Responses have been received from some, but not all of
these institutions. The Partnership will contact any of these companies
from which no response is received by the end of the first quarter of 1999.

These software applications are not deemed critical to the operations of
the Partnership.

The Partnership is in the process of identifying its non-information
technology systems such as, but not limited to alarms, security gates,
locks and phone systems, and contacting the various vendors of those
systems for determining their year 2000 compliance. As of the date of this
report, the Partnership is waiting for responses from these vendors. To
the extent such responses are not received in the near future, the
Partnership will follow up with additional requests or research other
publicly available systems information to determine the year 2000
compliance of such systems. At this time, the Partnership does not have an
estimate of the amount of costs, if any, for remediation relative to its
non-information technology systems.

The Partnership's general brokerage operation utilizes an accounting
software package for internal reporting purposes. The vendor has completed
its year 2000 upgrade of this package. The Partnership will request the
upgrade from the vendor, which is to be provided at no additional cost to
the Partnership as such upgrade is included in its annual maintenance fee
paid to the vendor. Certain costs which have not yet been estimated may be
incurred in connection with the installation of the upgraded software.
However, such costs, if incurred, are not expected to be material to the
Partnership's operations.

The Partnership does not exchange digital information with any of its
suppliers utilized in connection with the development and construction of
its communities. However, all vendors which are key to the success of its
operations such as suppliers of dry wall, lumber, and other materials were
sent a questionnaire to determine their year 2000 readiness. Responses
have been received from some, but not all, of these vendors. The
Partnership will attempt to contact any of these vendors from which no
response is received in the near future. To the extent such suppliers are
unable to perform services due to their year 2000 related issues, the
Partnership would expect to seek other similar suppliers who are capable of
performing development and construction services. However, there is no
assurance the Partnership will be able to find alternative suppliers in
each instance.

<PAGE>

If the steps taken by the Partnership, its vendors and third parties
with whom the Partnership has material relationships (i.e., banks,
insurance companies and state agencies) to be year 2000 compliant are not
successful, the Partnership could experience various operational
difficulties. These could include, among other things, an inability to
process transactions to the correct accounting period, difficulties in
posting general ledger interfaces, an inability to process computer
generated checks, bank transactions posted to the wrong periods, and the
failure of scheduling applications which are date sensitive. If steps
taken by the Partnership to address non-information technology systems are
not successful, the Partnership could experience various operational
difficulties. These could include, among other things, interruptions in
obtaining the materials and supplies necessary in the Partnership's
homebuilding operation, interruptions in services provided by the
Partnership's country clubs, the inability to provide security services at
the entrances to the Partnership's communities, and disruptions in office
services such as telephones, elevators and heating and cooling systems. In
addition, year 2000 failures experienced in government services could delay
essential services provided to the Partnership such as permitting and
inspections.

The foregoing discussion of year 2000 issues and the Partnership's
responses thereto are based on information presently known. The
Partnership is continuing its assessment and evaluation of various year
2000 issues, particularly with respect to its non-information technology
systems. The Partnership will also be relying on third parties,
particularly suppliers of construction-related materials as to their year
2000 compliance. Accordingly, information concerning year 2000 issues, and
the Partnership's responses thereto including the nature, extent, timing
and cost of the Partnership's remediation efforts, and related costs are
subject to change, and such changes could be material.

RESULTS OF OPERATIONS

The results of operations for the years ended December 31, 1998, 1997
and 1996 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, 1998, the Partnership (including its
consolidated ventures and its unconsolidated ventures accounted for under
the equity method) closed on the sale of 1,086 housing units, 137
homesites, approximately 78 acres of developed and undeveloped residential
or commercial/industrial land tracts, as well as the remaining Sawgrass
Country Club memberships owned by the Partnership, and its cable operation
in Weston. This compares to closings in 1997 of 1,104 housing units, 282
homesites, approximately six acres of developed and undeveloped residential
or commercial/industrial land tracts, its mixed-use center in Boca Raton,
Florida known as Parkway Center, the Cabana Club, and two retail shopping
centers located in Weston. Closings in 1996 were for 1,291 housing units,
294 homesites and approximately 39 acres of developed and undeveloped land
tracts. Outstanding contracts ("backlog"), as of December 31, 1998 were
for 756 housing units, 14 homesites and approximately 26 acres of developed
and undeveloped land tracts. This compares to a backlog as of December 31,
1997 of 550 housing units, 37 homesites and approximately 57 acres of
developed and undeveloped land tracts. The backlog as of December 31, 1996
was for 538 housing units, 31 homesites and approximately 24 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 five 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 and The Cullasaja
Club, near Highlands, North Carolina. The Partnership's condominium
project on Longboat Key, Florida known as Arvida's Grand Bay and the

<PAGE>

Jacksonville Golf & Country Club Community in Florida are both in their
late stages of development. Only builder units remain to be sold at
Jacksonville Golf and Country Club at December 31, 1998. All of the
remaining units in the Partnership's Sawgrass Country Club, The Players
Club at Sawgrass and Dockside Communities in Jacksonville, Florida and
Atlanta, Georgia 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; however, the Partnership still has equity
memberships in the Broken Sound Club to sell.

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 and construction costs and related
disposition costs, as well as the cost associated with the sale of equity
memberships.

In October 1998, construction was completed on one of the two
remaining buildings at Arvida's Grand Bay. Substantial revenues recognized
from closings of these units during 1998 are the primary cause for the
increase in housing revenues as compared to 1997. Revenues also increased
at the Partnership's Weston Community despite decreased closings as
compared to 1997 due to a variance in the mix of product closed as certain
higher priced units first offered for sale in 1997 had their initial
closings in 1998. In addition, revenues increased at Water's Edge due to
an increase in closings at that community. These favorable variances were
partially offset by decreased revenues at Jacksonville Golf & Country Club
due to the close out of the remaining units in the fourth quarter of 1998.
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 decrease in revenues
from 1996 to 1997 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 available for sale, 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
decrease in the availability of lower priced product within the Community,
and sales of higher priced product were 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 Partnership's current plan for the Weston Community includes an
increase in its home building operations, thereby resulting in a reduced
number of lots available for sale to third-party builders. This is the
primary cause for the decrease in homesite revenues for 1998 as compared to
1997. The increase in homesite revenues for 1997 as compared to 1996 is

<PAGE>

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.

Land and property revenues for 1998 were generated primarily from the
closings of the Partnership's cable operation in Weston, approximately 29
acres of undeveloped commercial property owned by the Metrodrama Joint
Venture, the sale of the Partnership's remaining Sawgrass Country Club
memberships, and approximately 24 acres of developed residential land in
Weston. In addition, the Partnership sold its approximate 33% interest in
the H.A.E. Joint Venture to one of its venture partners. These compared to
1997 closings of the Partnership's mixed-use center in Boca Raton, Florida
(consisting of retail shops, an office building, and a hotel), the Cabana
Club in Jacksonville and the Partnership's two retail shopping centers in
Weston. Revenues for 1996 were generated 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 the closing of approximately
21 acres of developed commercial land in Weston, a 16-acre developed
commercial parcel in Palm Beach County, Florida, and a two acre undeveloped
commercial parcel in Cobb County, Georgia.

Operating properties represents activity from the Partnership's club
and hotel operations, commercial properties and certain other operating
assets. The decrease in revenues and related costs of revenues from
operating properties for 1998 as compared to 1997 is due primarily to the
closings of several of the Partnership's operating properties during the
fourth quarter of 1997 as discussed above. These properties contributed to
the higher gross operating profit recognized in previous years, and the
sale of these properties is the primary cause for the decrease in gross
operating profit margins in 1998 as compared to 1997. In October 1998, the
Partnership closed on the sale of its cable operation in Weston for a sale
price of $31.2 million. This sale generated a profit for financial
reporting and Federal income tax purposes. 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 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.

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. Revenues from brokerage and other operations
increased in 1998 as compared to 1997 due primarily to increased
commissions generated by the Partnership's resale operations in Weston,
Boca Raton, Jacksonville and Atlanta. Also contributing to the increase in
revenues is the receipt of property management fees in 1998 which had been
reserved in prior years due to the uncertainty of the collection of such

<PAGE>

fees. These favorable variances were partially offset by a decrease in the
amount of commissions earned from the sales of builders' homes within
Weston due to the Partnership's decision to increase its home building
operations in that Community. 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 increase in the gross operating profit margins from Brokerage and
other operations for 1998 as compared to 1997 and 1996 is due primarily to
decreased office overheads resulting from the consolidation of several of
the Partnership's resale offices in 1997.

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.

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 $9.0 million and $11.6 million
at December 31, 1998 and 1997, respectively.

The increase in Interest income since 1996 is due primarily to an
increase in the average amounts invested in short-term financial
instruments.

The increase in Equity in earnings (losses) of unconsolidated ventures
on the accompanying consolidated statements of operations for 1998 and 1997
as compared to 1996 is due to the Partnership's recognition of its share of
the earnings generated by A&D Title, L.P., a joint venture in which the
Partnership obtained a 50% ownership interest in July 1997. 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 1997 as compared to 1996.

Changes in the amount of interest eligible for capitalization are the
primary cause for the fluctuations in Interest and real estate taxes since
1996.

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.

<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At December 31, 1998, the Partnership had variable rate debt which is
subject to market risk related to changes in interest rates. In order to
minimize this interest rate risk, the Partnership has entered into interest
rate swap agreements with respect to amounts borrowed under its term loan.
The Partnership also has, or expects to have in the future, variable rate
borrowings under its revolving line of credit and its line of credit
secured by the remaining building at its Arvida Grand Bay project.
However, in the event the Partnership's effective borrowing rates were to
increase by 100 or 150 basis points, there would be no expected material
impact to the Partnership's financial statements.

<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, 1998 and 1997

Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996

Consolidated Statements of Changes in Partners' Capital Accounts
for the years ended December 31, 1998, 1997 and 1996

Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996

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, 1998
and 1997, 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, 1998. 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, 1998 and 1997, and the consolidated results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.

Miami, Florida
February 22, 1999, Exept for Note 15 as
to which the date is March 1, 1999 and
the second to last paragraph of Note 10
as to which the date is March 19, 1999

<PAGE>

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

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1998 AND 1997

ASSETS
------
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Cash and cash equivalents (note 3). . . . . . . . . . . . . . . . . . $ 82,103,559 79,411,195
Restricted cash (note 3). . . . . . . . . . . . . . . . . . . . . . . 13,337,171 12,444,016
Trade and other accounts receivable (net of allowance
for doubtful accounts of $198,548 and $692,940
at December 31, 1998 and 1997, respectively). . . . . . . . . . . . 13,989,093 14,446,950
Real estate inventories (notes 4 and 7) . . . . . . . . . . . . . . . 160,922,604 163,423,873
Property and equipment, net (notes 5 and 7) . . . . . . . . . . . . . 33,816,203 35,279,528
Property and equipment held for disposition or sale (note 5). . . . . -- 6,484,713
Investments in and advances to joint ventures, net (note 6) . . . . . 1,217,327 2,151,694
Equity memberships (note 8) . . . . . . . . . . . . . . . . . . . . . 1,839,165 4,180,733
Amounts due from affiliates, net (note 9) . . . . . . . . . . . . . . 1,438,690 665,134
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . 7,367,323 8,135,020
------------ -----------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . $316,031,135 326,622,856
============ ===========

<PAGE>

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

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

1998 1997
------------ -----------
Liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,447,904 16,260,574
Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,655,567 21,930,275
Accrued expenses and other liabilities. . . . . . . . . . . . . . . 15,815,334 13,057,290
Notes and mortgages payable (note 7). . . . . . . . . . . . . . . . 46,341,804 78,136,007
------------ -----------
Commitments and contingencies

Total liabilities . . . . . . . . . . . . . . . . . . . . . 106,260,609 129,384,146
------------ -----------
Partners' capital accounts (note 13)
General Partner and Associate Limited Partners:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . 20,000 20,000
Cumulative net income. . . . . . . . . . . . . . . . . . . . . . 45,828,157 39,766,027
Cumulative cash distributions. . . . . . . . . . . . . . . . . . (41,315,975) (38,508,251)
------------ -----------
4,532,182 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. . . . . . . . . . . . . . . . . . . . . . 138,414,099 78,613,984
Cumulative cash distributions. . . . . . . . . . . . . . . . . . (298,017,570) (247,494,865)
------------ -----------
205,238,344 195,960,934
------------ -----------
Total partners' capital accounts . . . . . . . . . . . . . 209,770,526 197,238,710
------------ -----------
Total liabilities and partners' capital accounts. . . . . . $316,031,135 326,622,856
============ ===========

<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, 1998, 1997 AND 1996

<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Housing . . . . . . . . . . . . . . . . . . . . . $231,511,130 202,735,713 236,236,822
Homesites . . . . . . . . . . . . . . . . . . . . 13,654,463 25,952,527 23,652,202
Land and property . . . . . . . . . . . . . . . . 56,943,569 70,824,676 25,979,069
Operating properties. . . . . . . . . . . . . . . 19,865,338 30,219,498 29,985,372
Brokerage and other operations. . . . . . . . . . 29,151,175 26,171,642 26,959,804
------------ ------------ ------------

Total revenues. . . . . . . . . . . . . . 351,125,675 355,904,056 342,813,269
------------ ------------ ------------

Cost of revenues:
Housing . . . . . . . . . . . . . . . . . . . . . 186,604,676 170,961,122 202,965,915
Homesites . . . . . . . . . . . . . . . . . . . . 9,091,986 16,578,471 15,486,069
Land and property . . . . . . . . . . . . . . . . 23,927,979 44,074,899 18,554,274
Operating properties. . . . . . . . . . . . . . . 18,596,429 26,392,730 28,560,746
Brokerage and other operations. . . . . . . . . . 24,942,325 23,815,043 25,389,876
------------ ------------ ------------

Total cost of revenues. . . . . . . . . . 263,163,395 281,822,265 290,956,880
------------ ------------ ------------

<PAGE>

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

AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED

1998 1997 1996
------------ ------------ ------------

Gross operating profit. . . . . . . . . . . . . . . 87,962,280 74,081,791 51,856,389

Selling, general and administrative expenses. . . . (23,524,953) (22,435,609) (22,554,641)
Inventory impairment (note 14). . . . . . . . . . . -- (4,500,000) --
------------ ------------ ------------

Net operating income. . . . . . . . . . . 64,437,327 47,146,182 29,301,748

Interest income . . . . . . . . . . . . . . . . . . 3,583,937 2,186,358 1,567,646
Equity in earnings (losses) of unconsolidated
ventures (notes 1 and 6). . . . . . . . . . . . . 335,893 211,217 (177,864)
Interest and real estate taxes, net of amounts
capitalized (note 1). . . . . . . . . . . . . . . (2,494,912) (2,985,449) (2,680,106)
------------ ------------ ------------

Net income. . . . . . . . . . . . . . . . $ 65,862,245 46,558,308 28,011,424
============ ============ ============
Net income per Interest . . . . . . . . . $ 148.02 105.30 67.47
============ ============ ============
Cash distribution per Interest. . . . . . $ 125.06 235.04 25.85
============ ============ ============

<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, 1998, 1997 AND 1996

<CAPTION>
GENERAL PARTNER AND ASSOCIATE LIMITED PARTNERS HOLDERS OF INTERESTS (404,000 INTERESTS)
----------------------------------------------------------------------------------------------------------
CONTRIBU- NET NET
TIONS INCOME DISTRIBUTIONS TOTAL CONTRIBUTIONS INCOME DISTRIBUTIONS TOTAL
--------- --------- ------------- ----------- ------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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 13). -- 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 13). -- 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

1998 act-
ivity
(note 13). -- 6,062,130 (2,807,724) 3,254,406 -- 59,800,115 (50,522,705) 9,277,410
------- ---------- ----------- ----------- ----------- ----------- ------------ -----------
Balance
Decem-
ber 31,
1998 . . .$20,000 45,828,157 (41,315,975) 4,532,182 364,841,815 138,414,099 (298,017,570) 205,238,344
======= ========== =========== =========== =========== =========== ============ ===========

<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, 1998, 1997 AND 1996

<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Operating activities:
Net income. . . . . . . . . . . . . . . . . . . . $65,862,245 46,558,308 28,011,424
Charges (credits) to net income not
requiring (providing) cash:
Depreciation and amortization . . . . . . . . . 3,709,561 4,315,485 5,896,551
Equity in (earnings) losses of
unconsolidated ventures . . . . . . . . . . . (335,893) (211,217) 177,864
Provision for doubtful accounts . . . . . . . . 32,536 201,869 77,203
Gain on disposition of joint venture interest . (450,546) -- --
(Gain) loss on sale or disposition of property
and equipment . . . . . . . . . . . . . . . . (22,298,796) (25,536,155) 487,237
Writeoff of abandoned property and equipment. . -- -- 147,600
Inventory impairment (note 14). . . . . . . . . -- 4,500,000 --
Changes in:
Restricted cash . . . . . . . . . . . . . . . . (893,155) (610,494) 2,018,873
Trade and other accounts receivable . . . . . . 425,322 (9,796,363) 25,121,187
Real estate inventories:
Additions to real estate inventories. . . . . (196,086,427) (203,502,849) (187,982,662)
Cost of revenues. . . . . . . . . . . . . . . 207,240,063 216,801,511 221,449,211
Capitalized interest. . . . . . . . . . . . . (6,020,204) (4,416,322) (4,672,972)
Capitalized real estate taxes . . . . . . . . (2,632,163) (2,167,759) (3,144,609)
Equity memberships. . . . . . . . . . . . . . . 2,341,568 1,277,147 1,909,386
Amounts due from affiliates . . . . . . . . . . (773,556) 338,598 127,965
Prepaid expenses and other assets . . . . . . . 23,412 (2,010,249) 1,523,541
Accounts payable, accrued expenses and
other liabilities . . . . . . . . . . . . . . 2,977,086 (7,158,716) 1,144,176
Deposits. . . . . . . . . . . . . . . . . . . . 5,725,292 4,642,950 (6,538,174)
------------ ------------ ------------
Net cash provided by operating activities 58,846,345 23,225,744 85,753,801
------------ ------------ ------------

<PAGE>

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

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

1998 1997 1996
------------ ------------ ------------
Investing activities:
Acquisitions of property and equipment. . . . . . (3,049,364) (3,127,344) (13,748,825)
Proceeds from sales and disposals of
property and equipment. . . . . . . . . . . . . 30,330,922 62,937,522 24,899
Joint venture distributions (contributions),
net . . . . . . . . . . . . . . . . . . . . . . 167,931 418,730 (79,776)
Payments from joint ventures. . . . . . . . . . . -- -- 4,167,035
Proceeds from disposition of
joint venture interest. . . . . . . . . . . . . 1,521,162 -- 6,111,440
------------ ------------ ------------

Net cash provided by (used in)
investing activities. . . . . . . . . . 28,970,651 60,228,908 (3,525,227)
------------ ------------ ------------
Financing activities:
Proceeds from notes and long-term borrowings. . . 8,834,318 89,216,128 33,944,724
Payments of notes and long-term borrowings. . . . (40,628,521) (47,923,899) (67,710,977)
Payments of bank overdrafts . . . . . . . . . . . -- -- (3,972,987)
Distributions to General Partner and
Associate Limited Partners. . . . . . . . . . . (2,807,724) (4,015,966) (580,250)
Distributions to Holders of Interests . . . . . . (50,522,705) (94,955,457) (10,444,636)
------------ ------------ ------------
Net cash used in financing
activities. . . . . . . . . . . . . . . (85,124,632) (57,679,194) (48,764,126)
------------ ------------ ------------
Increase in cash and cash equivalents . . 2,692,364 25,775,458 33,464,448
Cash and cash equivalents,
beginning of year . . . . . . . . . . . 79,411,195 53,635,737 20,171,289
------------ ------------ ------------
Cash and cash equivalents,
end of year . . . . . . . . . . . . . . $ 82,103,559 79,411,195 53,635,737
============ ============ ============
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

1998 1997 1996
------------ ------------ ------------

Non-cash investing and financing
activities:
Consolidation of Partnership's interest in
the Arvida Boose Joint Venture (note 6) . . . $ -- -- 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
------------ ------------ ------------

$ -- -- 1,186,290
============ ============ ============

<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; accounts receivable;
construction, brokerage and other support businesses; real estate assets
held for investment; certain club and recreational facilities; and until
October 1998, a cable television business serving one of its Communities.
The Partnership's Communities contain a diversified product mix with both
resort and primary homes designed for the middle and upper income segments
of the various markets in which the Partnership operates.

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

Principles of Consolidation

The consolidated financial statements include the accounts of the
Partnership and its consolidated ventures. All material intercompany
balances and transactions have been eliminated in consolidation. The
equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to those investments where
the Partnership's ownership interest is 50% or less, with the exception of
the Partnership's investment in the Coto de Caza Joint Venture which 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 6 for a discussion of the sale of the
Partnership's interest in the Coto de Caza Joint Venture.

<PAGE>

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. In certain circumstances, contracts for sales of real estate
contain provisions which allow the Partnership to repurchase the real
estate in the event certain conditions are not met. Profits generated from
sales subject to these provisions are generally deferred until the
Partnership no longer has any repurchase rights. For sales of residential
units, profit is recognized at the time of closing or if certain criteria
are met, on the percentage-of-completion method.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make
estimates and assumptions that affect the amounts reported or disclosed in
the financial statements and accompanying notes. Actual results could
differ from those estimates.

Real Estate Inventories and Cost of Real Estate Revenues

Real estate inventories are carried at cost, including capitalized
interest and property taxes. 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 overhead. 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.

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 $6,020,204, $4,909,453 and $4,672,972 was incurred for the years
ended December 31, 1998, 1997 and 1996, respectively, of which $6,020,204,

$4,416,322 and $4,672,972 was capitalized for the years ended December 31,
1998, 1997 and 1996, respectively. The increase in interest incurred for
the year ended December 31, 1998 as compared to 1997 is due to an increase
in the average amount of debt outstanding during the period as a result of
the Partnership obtaining a new credit facility on July 31, 1997 (note 7).
Interest payments, including amounts capitalized, of $5,589,418, $5,309,261
and $4,783,247 were made for the years ended December 31, 1998, 1997 and
1996, respectively.

Real estate taxes of $5,127,075, $4,660,077 and $5,824,715 were
incurred for the years ended December 31, 1998, 1997 and 1996,
respectively, of which $2,632,163, $2,167,759 and $3,144,609 were
capitalized for the years ended December 31, 1998, 1997 and 1996,
respectively. Real estate tax payments of $5,691,066, $5,043,336 and
$5,954,450 were made for the years ended December 31, 1998, 1997 and 1996,
respectively. In addition, real estate tax reimbursements totaling
$543,796, $257,685 and $181,445 were received from the Partnership's escrow
agent during 1998, 1997 and 1996, 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.

<PAGE>

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 14. Expenditures for maintenance and repairs are charged to
expense as incurred. Costs of major renewals and improvements which extend
useful lives are capitalized.

Other assets are amortized on the straight-line method, which
approximates the interest method, over the useful lives of the assets which
range from one to five years. Amortization of other assets, excluding loan
origination fees, of approximately $394,000, $702,000 and $81,000 was
recorded for the years ended December 31, 1998, 1997 and 1996,
respectively. The increase in amortization of other assets for 1997 as
compared to 1998 and 1996 is due primarily 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. The
Partnership also began amortizing certain other capitalized loan costs in
August 1997 which were paid in connection with obtaining the new credit
facility on July 31, 1997 (note 7). Amortization of loan origination fees,
which is included in interest expense, of approximately $351,000, $279,000
and $257,000 was recorded for the years ended December 31, 1998, 1997 and
1996, 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.

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.

<PAGE>

Interest Rate Swaps

The Partnership has entered into interest rate swap agreements to
manage its exposure to market risks related to changes in interest rates
associated with its variable rate debt. The interest-rate swap agreements
cover a portion of the principal balance outstanding under its term loan
through maturity. These agreements involve the exchange of amounts based
on a fixed interest rate for amounts based on variable interest rates over
the life of the loan without an exchange of the notional amount upon which
the payments are based. The differential to be paid or received as
interest rates change is calculated and paid monthly by the appropriate
party. Such payments or receipts are recorded as adjustments to interest
expense in the periods in which they are incurred.

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>

1998 1997
------------------------------ ------------------------------
GAAP BASIS TAX BASIS GAAP BASIS TAX BASIS
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>

Total assets. . . . . . . . . . . . $316,031,135 435,796,825 326,622,856 490,261,048
Partners' capital accounts:
General Partner and
Associate Limited Partners . . 4,532,182 3,625,680 1,277,776 531,570
Holders of Interests. . . . . . 205,238,344 300,590,376 195,960,934 297,091,456
Net income:
General Partner and
Associate Limited Partners . . 6,062,130 6,060,834 4,015,966 4,014,504
Holders of Interests. . . . . . 59,800,115 53,861,625 42,542,342 41,387,973
Net income per Interest. . . . . . 148.02 133.32 105.30 102.45
=========== ============ ============= =============

</TABLE>

<PAGE>

Reference is made to note 13 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.

Reclassifications

Certain reclassifications have been made to the 1997 and 1996
financial statements to conform to the 1998 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. Such payments are deemed distributions to the Holders of
Interests. The cash distributions per Interest made during the years ended
December 31, 1998, 1997 and 1996 include $.06, $.04 and $.06, respectively,
which represent each Holder of Interests' share of a North Carolina non-
resident withholding tax paid directly to the state tax authorities on
behalf of the Holders of Interests for the 1997, 1996 and 1995 tax years,
respectively.

(2) INVESTMENT PROPERTIES

Also in their mid stages of development are the River Hills Country Club in
Tampa, Florida; the Water's Edge Community in Atlanta, Georgia and the
Cullasaja Club, near Highlands, North Carolina. The Partnership's
condominium project on Longboat Key, Florida known as Arvida's Grand Bay
and the Jacksonville Golf & Country Club Community in Florida are both in
their late stages of development. Only builder units remain to be sold at
Jacksonville Golf & Country Club at December 31, 1998. All of the
remaining units in the Partnership's Sawgrass Country Club, the Players
Club at Sawgrass 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.

(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, 1998 and 1997, no funds were invested in treasury
bills. Included in Restricted cash are amounts restricted under various
escrow agreements as well as cash collateralizing letters of credit as
discussed in note 7. 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.

<PAGE>

(4) REAL ESTATE INVENTORIES

Real estate inventories at December 31, 1998 and 1997 are summarized
as follows:

1998 1997
------------ -----------
Land held for future development
or sale . . . . . . . . . . . . . $ 2,292,958 4,439,164
Community development inventory:
Work in progress and
land improvements . . . . . . . 144,150,322 134,375,807
Completed inventory . . . . . . . 14,479,324 24,608,902
------------ -----------
Real estate inventories. . . . $160,922,604 163,423,873
============ ===========

Reference is made to note 14 for a discussion regarding the impairment
of long-lived assets.

(5) PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1998 and 1997 are summarized as
follows:
1998 1997
----------- ----------

Land. . . . . . . . . . . . . . . . . $ 1,422,465 1,422,465
Land improvements . . . . . . . . . . 23,164,038 22,953,706
Buildings . . . . . . . . . . . . . . 22,501,357 22,669,373
Equipment and furniture . . . . . . . 13,472,140 12,419,754
Construction in progress. . . . . . . 698,466 416,535
----------- ------------

Total. . . . . . . . . . . . . . 61,258,466 59,881,833
Accumulated depreciation . . . . (27,442,263) (24,602,305)
----------- ------------
Property and equipment, net. . . $33,816,203 35,279,528
=========== ============

Depreciation expense of approximately $2,965,000, $3,335,000 and
$5,558,000 was incurred for the years ended December 31, 1998, 1997 and
1996, respectively. The decrease in depreciation expense since 1996 is due
to the Partnership discontinuing the recording of depreciation on its
assets held for disposal in the first quarter of 1997, in accordance with
FASB Statement 121, as further discussed in note 14.

In October 1998, the Partnership closed on the sale of its cable
operation in Weston for a sale price of $31.2 million. This sale generated
a profit for financial reporting and Federal income tax purposes, and is
reflected in Land and property revenues and cost of revenues on the
accompanying consolidated statements of operations for the year ended
December 31, 1998. The cable operation was classified as Property and
equipment held for disposition or sale on the accompanying consolidated
balance sheets at December 31, 1997.

<PAGE>

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

The Partnership has or had 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
- --------------- -------------- ------------

A&D Title, L.P. 50 Florida

Arvida Boose Joint Venture 50 Florida

Arvida Corporate
Park Associates 50 Florida

Arvida Pompano Associates
Joint Venture 50 Florida

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

Mizner Court Associates
Joint Venture 50 Florida

Mizner Tower Associates
Joint Venture 50 Florida

Ocala 202 Joint Venture 50 Florida

Tampa 301 Associates
Joint Venture 50 Florida

Windmill Lake Estates
Associates
Joint Venture 50 Florida

Arvida/RBG I Joint Venture 40 Florida

Arvida/RBG II Joint Venture 40 Florida

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

<PAGE>

<TABLE>

<CAPTION>
ASSETS
------

DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Real estate inventories . . . . . . . . . . . . . . . . . . . . . . . . $ 4,495,534 6,411,653
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,447,106 2,377,297
----------- -----------

Total assets. . . . . . . . . . . . . . . . . . . . . . . . . $ 6,942,640 8,788,950
=========== ===========

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

Accounts payable, deposits and other liabilities. . . . . . . . . . . . $ 790,424 296,511
Notes and mortgages payable . . . . . . . . . . . . . . . . . . . . . . 3,369,028 3,652,837
----------- -----------

Total liabilities . . . . . . . . . . . . . . . . . . . . . . 4,159,452 3,949,348

Venture partners' capital . . . . . . . . . . . . . . . . . . . . . . . 1,391,594 2,294,636
Partnership's capital . . . . . . . . . . . . . . . . . . . . . . . . . 1,391,594 2,544,967
----------- -----------

Total liabilities and partners' capital . . . . . . . . . . . $ 6,942,640 8,788,950
=========== ===========

</TABLE>

<PAGE>

<TABLE>

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

<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------ ------------ -------------
<S> <C> <C> <C>
Revenues. . . . . . . . . . . . . . . . . . . . . . . . $ 1,501,217 3,939,124 9,485
=========== ============ ============
Net income (loss) . . . . . . . . . . . . . . . . . . . $ 601,117 493,870 (414,137)
=========== ============ ============
Partnership's proportionate share of
net income (loss) . . . . . . . . . . . . . . . . . . $ 300,559 269,048 (197,121)
=========== ============ ============
Partnership's equity in earnings (losses)
of unconsolidated ventures. . . . . . . . . . . . . . $ 335,893 211,217 (177,864)
=========== ============ ============

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,
1998 1997 1996
------------ ------------ ------------

Partnership's Capital, equity method. . . . . . . . . . $ 1,391,594 2,544,967 2,808,347
Partnership's Capital, cost method. . . . . . . . . . . -- -- --
Basis difference. . . . . . . . . . . . . . . . . . . . (184,658) (403,664) (78,896)
----------- ------------ ------------

Investments in joint ventures . . . . . . . . . . . . . 1,206,936 2,141,303 2,729,451
Advances to joint ventures, net . . . . . . . . . . . . 10,391 10,391 10,391
----------- ------------ ------------
Investments in and advances to
joint ventures, net. . . . . . . . . . . . . . . $ 1,217,327 2,151,694 2,739,842
=========== ============ ============

</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.

In January 1998, the Partnership sold its interest in the H.A.E. Joint
Venture to one of its venture partners for a sale price of approximately
$1.7 million. This sale is reflected in Land and property revenues and
cost of revenues on the accompanying consolidated statements of operations
for 1998, and is the primary cause for the decrease in Investments in and
advances to joint ventures on the accompanying consolidated balances sheets
at December 31, 1998 as compared to December 31, 1997.

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. In April 1998, the Metrodrama Joint Venture closed on the sale
of approximately 29 acres of undeveloped commercial property to an
unaffiliated third party. This sale generated a profit for financial
reporting and Federal income tax purposes, and is also reflected in Land
and property revenues and cost of revenues on the accompanying consolidated
statements of operations for 1998.

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 1998 as compared to 1997 and
1996.

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.

<PAGE>

(7) NOTES AND MORTGAGES PAYABLE

Notes and mortgages payable at December 31, 1998 and 1997 are
summarized as follows:

1998 1997
----------- -----------
Term loan credit facility of
$75,000,000 bearing interest
at approximately 7.4% at
December 31, 1998(A) . . . . . . . . . $41,666,667 68,750,000

Revolving line of credit of
$20,000,000 (A). . . . . . . . . . . . -- --

Other notes and mortgages
payable (B) . . . . . . . . . . . . . 4,675,137 9,386,007
----------- -----------

Total . . . . . . . . . . . . $46,341,804 78,136,007
=========== ===========

(A) 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 with Barnett Bank, N.A. ("Barnett") being the primary agent on the
facility. The credit facility consists of a $75 million term loan, a $20
million revolving line of credit and a $5 million letter of credit facility
and matures on July 31, 2001. The term loan has 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 prior to
maturity, 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. Prior to September 1, 1998, interest on the
facility was based, at the Partnership's option, on the relevant LIBOR plus
2.25% per annum or Barnett's prime rate. The Partnership also obtained
interest rate swaps covering two-thirds of the original balance of the term
loan commitment which are amortized annually until termination of the swap
agreements on July 31, 2001. Loan origination 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 to interest expense
over the life of the loan. 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, the carrying value of which
exceeds the balance outstanding under the credit facility at December 31,
1998. The credit facility also requires that certain financial covenants
such as loan-to-value, net worth and debt ratios be maintained throughout
the loan term. All of the loans under this facility are cross-
collateralized and cross-defaulted. At December 31, 1998, the balances
outstanding on the term loan, the revolving line of credit and the letter
of credit facility were approximately $41,667,000, $0 and $867,000,
respectively. For the year ended December 31, 1998, the combined effective
interest rate for the Partnership's credit facilities, including the
amortization of loan origination fees, and the effect of the interest rate
swap agreements was approximately 8.7% per annum.

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. Such
letters of credit are expected to be replaced by either letters of credit
issued under the new facility or by bonds. Once the letters of credit are
replaced, the cash collateral will be released to the Partnership. As of
December 31, 1998, approximately $1.9 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 $2.3 million.

<PAGE>

(B) Other notes and mortgages payable are collateralized by certain
investments with a net book value of approximately $1.6 million at December
31, 1998, as well as $3.1 million of subordinated debt attributable to the
Cullasaja Joint Venture.

During 1997 and 1998, 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 (7.75% at
December 31, 1998) plus 1/2% per annum. Construction of this building was
completed in October 1998, and the outstanding principal balance on this
line of credit was paid in full during the fourth quarter of 1998 with
proceeds from the sale of units within this building. Construction of the
final building at Arvida's Grand Bay commenced in 1998, and in February
1999, the Partnership closed on a new line of credit to fund its
construction. This line of credit has a borrowing capacity of $23,150,000,
matures on February 4, 2001 and bears interest, at the Partnership option,
at the relevant LIBOR plus 2.00% per annum or lender's prime rate.

Following is a schedule of the maturities of notes and mortgages
payable at December 31, 1998:

1999 . . . . . . . . . . . . . . . . $ 4,166,667
2000 . . . . . . . . . . . . . . . . 20,360,946
2001 . . . . . . . . . . . . . . . . 18,750,000
2002 . . . . . . . . . . . . . . . . --
2003 . . . . . . . . . . . . . . . . --
Thereafter . . . . . . . . . . . . . 3,064,191
-----------
Total notes and
mortgages payable. . . . . . . $46,341,804
===========

(8) 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.

<PAGE>

In April 1998, control of the Jacksonville Golf & Country Club
("JG&CC") was turned over to the club's members. As a result, effective
April 1, 1998, the Partnership is no longer involved in the ownership or
management of JG&CC and has no further responsibility to fund JG&CC's
operations (note 9). However, the Partnership still has equity memberships
in JG&CC to sell.

In May 1998, the Partnership sold its remaining Sawgrass Country Club
memberships to the Sawgrass Country Club, Inc. for a sale price of
approximately $2.4 million. This transaction is reflected in Land and
property revenues and cost of revenues on the accompanying consolidated
statements of operations for the year ended December 31, 1998, and is the
primary cause for the decrease in equity memberships on the accompanying
consolidated balance sheets at December 31, 1998 as compared to
December 31, 1997.

(9) TRANSACTIONS WITH AFFILIATES

Fees, commissions and other expenses paid by the Partnership to
affiliates of the General Partner for the years ended December 31, 1998,
1997 and 1996 are as follows:

1998 1997 1996
-------- -------- --------

Property management fees. . . . . . $ -- 68,600 68,053
Insurance commissions . . . . . . . 161,708 235,456 260,793
Reimbursement (at cost) for
accounting services. . . . . . . . 89,872 39,003 45,408
Reimbursement (at cost) for
portfolio management services. . . 60,922 32,304 67,038
Reimbursement (at cost) for
treasury services. . . . . . . . . 65,897 -- --
Reimbursement (at cost) for
legal services . . . . . . . . . . 39,707 234,631 319,196
Reimbursement (at cost) for
other administrative and
out-of-pocket expenses . . . . . . 73,645 155,564 60,247
-------- -------- --------
$491,751 765,558 820,735
======== ======== ========

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, 1998, the amount of
such costs incurred by the Partnership on behalf of these affiliates
totaled approximately $1,855,000. Approximately $333,300 was outstanding
at December 31, 1998, of which approximately $181,800 was received as of
February 22, 1999. For the years ended December 31, 1997 and 1996, the
Partnership was entitled to receive reimbursements of approximately
$1,956,100 and $387,200, respectively.

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
management agreement, the Partnership reimbursed 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 and 1996 was approximately $6,189,700 and
$5,931,300, respectively, all of which was paid as of December 31, 1997.
In addition, at December 31, 1998, the Partnership was owed approximately
$32,300 from Arvida for services performed by employees of the Partnership
on behalf of Arvida, none of which was received by the Partnership as of
February 22, 1999.

<PAGE>

In November 1997, The St. Joe Company completed its acquisition of a
majority interest in St. Joe/Arvida Company, L.P. ("St. Joe/Arvida"), which
acquired the major assets of 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. 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. St. Joe/Arvida is
reimbursed for such services and personnel on the same basis as Arvida
under the management agreement, and such reimbursements are made directly
by the Partnership. Affiliates of JMB Realty Corporation own a minority
interest in St. Joe/Arvida.

For the year ended December 31, 1998, the Partnership reimbursed St.
Joe/Arvida or its affiliates approximately $4,376,000 for the services
provided to the Partnership by St. Joe/Arvida personnel pursuant to the
sub-management agreement discussed above. In addition, at December 31,
1998, the Partnership owed St. Joe/Arvida approximately $116,300 for
general and administrative costs including, and without limitation, salary
and salary-related cost relating to work performed by employees of St.
Joe/Arvida on behalf of the Partnership, all of which was paid as of
February 22, 1999. The Partnership also receives reimbursement from St.
Joe/Arvida for certain general and administrative costs including, and
without limitation, salary and salary-related costs relating to work
performed by employees of the Partnership on behalf of St. Joe/Arvida. For
the year ended December 31, 1998, the Partnership was entitled to receive
approximately $1,005,000 from St. Joe/Arvida or its affiliates. Of this
amount, $186,500 was owed to the Partnership at December 31, 1998, all of
which was received as of February 22, 1999.

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 year ended December 31, 1996, the Partnership
was entitled to receive approximately $1,021,800 from Arvida/JMB Partners,
L.P.-II and the Partnership was obligated to reimburse Arvida/JMB Partners,
L.P.-II approximately $245,100.

The Partnership pays for certain general and administrative costs on
behalf of its clubs, homeowners associations and maintenance associations
(including salary and salary-related costs and legal fees). The
Partnership receives reimbursements from these entities for such costs.
For the year ended December 31, 1998, the Partnership was entitled to
receive approximately $1,321,000 from these entities. At December 31,
1998, approximately $150,000 was owed to the Partnership, of which
approximately $108,100 was received as of February 22, 1999. For the years
ended December 31, 1997 and 1996, the Partnership was entitled to
reimbursements of approximately $1,563,900 and $459,200, respectively, from
these entities.

<PAGE>

The Partnership, pursuant to certain agreements, provides management
and other personnel and services to certain of its equity clubs and
homeowners associations. Pursuant to these agreements, the Partnership is
entitled to receive management fees for the services provided to these
entities. For the years ended December 31, 1998, 1997 and 1996, the
Partnership was entitled to receive approximately $1,396,600, $1,315,500
and $1,359,500. At December 31, 1998, approximately $887,900 was owed to
the Partnership, of which $24,900 was received as of February 22, 1999.

The Partnership funds working capital advances and operating deficits
of its equity clubs, as well as operating deficits of its homeowners
associations as required or deemed necessary. The working capital advances
are non-interest bearing, short-term in nature, and are expected to be
reimbursed from future cash flows of the equity clubs. The funding of
operating deficits is expensed by the Partnership. The Partnership also
funds, at its option, certain capital expenditures of its equity clubs.
Upon the turnover of JG&CC as discussed in note 8, all outstanding balances
owed between the Partnership and JG&CC were settled, resulting in an
approximate $19,800 net payment to JG&CC. At December 31, 1998, the
Partnership owed one of its homeowners associations approximately $65,600
for amounts funded by the association during 1998 which are the
Partnership's obligation, all of which was paid as of February 22, 1999.

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 $366,100, $943,700 and
$399,000 for such costs for the years ended December 31, 1998, 1997 and
1996, respectively. At December 31, 1998, approximately $30,500 was owed
to the Partnership, none of which was received as of February 22, 1999.

The General Partner and the Associate Limited Partners, collectively,
received cash distributions in 1998 totaling $2,807,724. 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
distributions of approximately $11,934,000 which have been deferred through
the date of this report 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.

(10) 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 $867,000 and $14,673,000, respectively, at December
31, 1998. 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, 1998.

<PAGE>

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, 1998 are
as follows:

1999. . . . . . . . . . . . . $1,735,357
2000. . . . . . . . . . . . . 1,480,583
2001. . . . . . . . . . . . . 1,163,059
2002. . . . . . . . . . . . . 555,815
2003. . . . . . . . . . . . . 213,934
Thereafter. . . . . . . . . . 43,599
----------
$5,192,347
==========

Rental expense of $2,206,337, $1,963,491 and $1,949,770 was incurred
for the years ended December 31, 1998, 1997 and 1996, respectively.

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 sought, among other things, a declaration that Raleigh had
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 read
the operative agreements as providing that subsequent Holders of Interests,
such as Raleigh, have voting rights. The Partnership believed, among other
things, that the Court erred in its application of the law to the facts on
this issue and appealed 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. By order dated June 9, 1998, and after
appeal of this matter, the Delaware Supreme Court affirmed the trial court
on all issues.

<PAGE>

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.

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 $8.13 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.

<PAGE>

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 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.

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 or 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. 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.

<PAGE>

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 "Council of Villages case"). 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.

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.

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 appealed the certification order. On appeal, the
appellate court approved certification of a class action for the following
counts: breach of ordinance, breach of fiduciary duty, civil theft (treble
damages), breach of a constructive trust and unjust enrichment. The
Partnership has filed a motion for rehearing of the issues before the
appellate court. 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 Disney
in these consolidated actions in the event the Partnership is held liable
for acts taken by a subsidiary of Disney prior to the Partnership's
involvement in the Club and property. The parties to the Council of
Villages case have filed cross motions for summary judgment on various
issues related to the case and these motions are pending before the Court
for decision. The Partnership can give no assurances as to the outcome of
these motions. The Council of Villages case is set for trial on August 9,
1999, on all issues remaining after the ruling on summary judgment.

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.

<PAGE>

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, 1998. 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 was with recourse to the joint
venture partners as a result of the partners' failure to perform in
accordance with the terms of the loan agreement. The lender demanded
payment of the outstanding loan balance plus interest thereon. The lawsuit
has been resolved. 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.

In March 1999, the joint venture closed on the sale of its
commercial/industrial property on an "as is" basis to an unaffiliated third
party for a sale price of $2.9 million. In accordance with the July 1997
settlement agreement discussed above, the net closing proceeds totaling
approximately $2.7 million were disbursed to the joint venture's lender in
full satisfaction of the remaining balance outstanding on the mortgage loan
encumbering the property. As a result of the property's sale, the joint
venture and the Partnership have no future obligation to the purchaser to
fund costs related to the environmental clean-up of this property. With
respect to the environmental issues, the clean-up which began in July 1994
is in a "monitoring only" phase pursuant to an informal arrangement with
state environmental officials. There are no assurances that further clean-
up will not be required. If further action is required and 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 to the state 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.

<PAGE>

(11) 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, 1998, the amount of bonds issued and outstanding totaled approximately
$131.8 million. For the year ended December 31, 1998, the Partnership paid
special assessments related to the bonds of approximately $3.6 million.

(12) FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS #107 requires the disclosure of the fair 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 parties, other than
in a forced or liquidation sale. The Partnership believes the carrying
amounts of its financial instruments approximates their fair values at
December 31, 1998 and 1997.

(13) 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.

<PAGE>

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, 1998, 1997 and 1996, the Partnership
had net income for financial reporting and Federal income tax purposes.
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, 1998 was approximately $6,062,000 and $6,061,000,
respectively. 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, 1997 was approximately $4,016,000
and $4,015,000, respectively. 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, 1996 was
approximately $755,000 and $717,000, respectively. These allocations are
based on cash distributions to the General Partner and the Associate
Limited Partners with an allocation of at least 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
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.

<PAGE>

(14) IMPAIRMENT OF LONG-LIVED ASSETS

(15) SUBSEQUENT EVENTS

During March 1999, the Partnership made a distribution for 1998 of
$58,580,000 to its Holders of Interests ($145.00 per Interest) and
$3,254,407 to the General Partner and Associate Limited Partners,
collectively.

<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. An affiliate of Merrill
Lynch, Pierce, Fenner & Smith Incorporated is the limited partner of
Arvida/JMB Limited 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 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

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.

<PAGE>

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 10, 1999. 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 10, 1999.
There are no arrangements or understandings between or among any of said
directors 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-XI
("Carlyle-XI"), Carlyle Real Estate Limited Partnership-XIII
("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XIV
("Carlyle-XIV"), Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV")
and Carlyle Income Plus, L.P.-II ("Carlyle Income Plus-II") and the
managing general partner of JMB Income Properties, Ltd.-V ("JMB Income-V"),
JMB Income Properties, Ltd.-VII ("JMB Income-VII"), JMB Income Properties,
Ltd.-X ("JMB Income-X") and JMB Income Properties, Ltd.-XI ("JMB
Income-XI"). 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. 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-XI, Carlyle-XIII,
Carlyle-XIV, Carlyle-XV, JMB-VII, JMB Income-X, JMB Income-XI, and Carlyle
Income Plus-II. Most of the foregoing directors and officers are partners,
indirectly through other partnerships, of the Associate Limited Partners of
the Partnership.

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 61) is Chief Financial Officer, Chairman and a
director of JMB and an officer and/or director of various JMB affiliates.
He is also an individual general partner of 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., an affiliate of JMB that
is a real estate investment trust in the business of owning, managing and
developing shopping centers. He is also a director of Chisox Corporation,
which is the general partner of a limited partnership that owns the Chicago
White Sox Major League Baseball team, and CBLS, Inc., which is the general
partner of the general partner of a limited partnership that owns the
Chicago Bulls National Basketball Association Team. He is a Certified
Public Accountant.

Neil G. Bluhm (age 61) is President and a director of JMB and an
officer and/or director of various JMB affiliates. He is also an
individual general partner of JMB Income Properties-V. Mr. Bluhm has been
associated with JMB since August, 1970. Mr. Bluhm is also a principal of
Walton Street Capital, L.L.C., which sponsors real estate investment funds,
and a director of Urban Shopping Centers, Inc. He is a member of the Bar
of the State of Illinois and a Certified Public Accountant.

Burton E. Glazov (age 60) 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. Mr. Glazov is currently retired. He
is a member of the Bar of the State of Illinois.

Stuart C. Nathan (age 57) is Executive Vice President and a director
of JMB and an officer and/or director of various JMB affiliates. He has
been associated with JMB since July, 1972. He is a member of the Bar of
the State of Illinois.

<PAGE>

A. Lee Sacks (age 65) 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 52) 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., 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., Mr.
Schreiber is also a director of Urban Shopping Centers, Inc., Host Marriott
Corporation, The Brickman Group, Ltd., which is engaged in the landscape
maintenance business, and a number of investment companies advised or
managed by T. Rowe Price Associates, Inc. and its affiliates and a trustee
of Amli Residential Property Trust. He holds a Masters degree in Business
Administration from Harvard University Graduate School of Business.

H. Rigel Barber (age 50) is Chief Executive Officer and Executive Vice
President of JMB and an officer of various JMB affiliates. 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 50) is a Senior Vice President of JMB and an
officer of various JMB affiliates. 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 63) is Senior Vice President and Treasurer of JMB
and an officer of various JMB affiliates. Mr. Kogen has been associated
with JMB since March, 1973. He is a Certified Public Accountant.

Gary Nickele (age 46) 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 43) 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 The St. Joe Company 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).

John R. Grab (age 42) has been Vice President of St. Joe/Arvida since
November 1997. From 1993 until 1997, he was Vice President and General
Manager - Club/Hotel Operations 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.

<PAGE>

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 their beneficial 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 GP Corp., and Rockland Partners, Inc., which formerly
were general partners of Raleigh Capital Associates, L.P., did not report
changes in their respective beneficial ownership of Interests during 1998.
It appears that each such person failed to file two reports (i.e., one Form
4 and one Form 5) relating to the change in their respective beneficial
ownership of Interests indirectly through Raleigh Capital Associates, L.P.
that resulted from the redemption of their partnership interests in Raleigh
Capital Associates, L.P.

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 13 for a description of
such distributions and allocations. The General Partner and the Associate
Limited Partners, collectively, received cash distributions in 1998
totaling $2,807,724 and in February 1999 totaling $3,254,407. 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 distributions of approximately $11,934,000 which have been
deferred through the date of this report 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. Pursuant to the Partnership Agreement, the General Partner and
Associate Limited Partners were allocated profits for tax purposes for 1998
of approximately $7,156,000. Reference is made to Note 13 for further
discussion of this allocation.

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 a proposed
$160 million 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 had 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 action, reference is made to Subpart (A)
under Item 3. Legal Proceedings.

<PAGE>

On December 22, 1998, the Partnership and General Partner entered into
a settlement and release agreement with Raleigh pursuant to which the
Partnership and the General Partner, on behalf of themselves and their
respective officers, directors, partners and affiliates (including without
limitation members of the Special Committee consisting of certain directors
of the General Partner), on the one hand, and Raleigh, on behalf of itself
and its partners and affiliates, on the other hand, released their
respective claims that were brought or could have been brought in the
Raleigh action. In addition, pursuant to the settlement and release
agreement, and to resolve, among other things, Raleigh's claim for
attorneys' fees and expenses, the Partnership paid Raleigh approximately
$2,047,000. The Partnership has paid to the attorneys for the Partnership,
the General Partner and members of the Special Committee fees and expenses
of approximately $1,634,000 in connection with the Raleigh action.

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.

At December 31, 1998, the Partnership was owed approximately $32,300
from Arvida for services performed by employees of the Partnership on
behalf of Arvida, none of which was received by the Partnership as of
February 22, 1999.

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 are made directly to St. Joe/Arvida by the Partnership.

The total of such costs for the year ended December 31, 1998, was
approximately $4,376,000. Approximately $116,300 was outstanding at
December 31, 1998, all of which was paid as of February 22, 1999. The
Partnership also receives reimbursement from St. Joe/Arvida for certain
general and administrative costs including, and without limitation, salary

<PAGE>

and salary-related costs relating to work performed by employees of the
Partnership on behalf of St. Joe/Arvida. For the year ended December 31,
1998, the Partnership was entitled to receive approximately $1,005,000 from
St. Joe/Arvida or its affiliates. Of this amount, $186,500 was owed to the
Partnership at December 31, 1998, all of which was received as of February
22, 1999. The St. Joe Company owns a majority interest in St. Joe/Arvida,
and affiliates of JMB own a minority interest in St. Joe/Arvida.

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 $366,100 for such costs
for the year ended December 31, 1998. At December 31, 1998, approximately
$30,500 was outstanding, none of which was received as of February 22,
1999.

JMB Insurance Agency, Inc., an affiliate of the General Partner,
earned and received insurance brokerage commissions in 1998 of
approximately $161,700 in connection with providing insurance coverage for
certain of the properties of the Partnership, all of which was paid as of
December 31, 1998. 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 1998, 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
$73,600, all of which was paid as of December 31, 1998. Additionally, the
General Partner and its affiliates are entitled to reimbursements for
legal, accounting and portfolio management services. Such costs for 1998
were approximately $256,400, all of which was paid as of December 31, 1998.

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, 1998, the total of such costs was
approximately $1,855,000. Approximately $333,300 was outstanding as of
December 31, 1998, of which $181,800 was received as of February 22, 1999.

Amounts payable to or by 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 St. Joe Capital II, Inc.106,200.4399 26.3%
Interests and c/o Griffin Corporate Interests
Assignee Interests Services directly (1)
therein 300 Delaware Avenue,
9th floor
Wilmington, Delaware 19801

Limited Partnership The St. Joe Company 106,200.4399 26.3%
Interests and 1650 Prudential Drive, Interests
Assignee Interests Suite 400 indirectly (2)
therein Jacksonville, Florida 32207

(1) Reflects beneficial ownership of Interests held directly by St. Joe
Capital-II, Inc. ("St. Joe Capital") for which St. Joe Capital has shared
voting and dispositive power.

(2) Reflects beneficial ownership of Interests held by St. Joe Capital
for which The St. Joe Company has shared voting and dispositive power. St.
Joe Capital is a wholly owned subsidiary of The St. Joe Company.

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

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

<PAGE>

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. ***

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. ***

<PAGE>

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.

4.12 Amendment to Credit Agreement dated September
1, 1998 is hereby incorporated herein by reference to Exhibit 4.1 to the
Partnership's Report for September 30, 1998 on Form 10-Q (File No. 0-16976)
dated November 11, 1998.

<PAGE>

Absolute Assignment of Mortgages and Other
Documents for $11,250,000 Term Loan Promissory Note, $3,000,000 Line of
Credit Promissory Note, and $750,000 Demand Note Letter of Credit
Promissory Note.

Absolute Assignment of Mortgages and Other
Documents for $28,125,000 Term Loan Promissory Note, $7,500,000 Line of
Credit Promissory Note, and $1,875,000 Demand Note Letter of Credit
Promissory Note.

Absolute Assignment of Deed to Secure Debt and
Other Documents.

4.13 Consolidated and Restated Term Loan Promissory
Note of the Certain Term Loan Promissory Note dated July 31, 1997 in favor
of Barnett Bank, N.A., First Union National Bank, BankBoston, N.A., and
Bank United is hereby incorporated herein by reference to Exhibit 4.2 to
the Partnership's Report for September 30, 1998 on Form 10-Q (File No. 0-
16976) dated November 11, 1998.

Term Loan Promissory Note dated September 1,
1998 Payable to the Order of First Union National Bank.

Consolidated and Restated Line of Credit
Promissory Note of the Certain Line of Credit Promissory Notes dated July
31, 1997 in Favor of Barnett Bank, N.A., First Union National Bank,
BankBoston, N.A., and Bank United.

Line of Credit Promissory Note dated September
1, 1998 Payable to the Order of First Union National Bank.

Consolidated and Restated Demand Note Letter
of Credit Line Promissory Note of the Certain Consolidated and Restated
Demand Note Letter of Credit Line Promissory Note dated July 31, 1997 in
favor of Barnett Bank, N.A., First Union National Bank, BankBoston, and
Bank United.

Letter of Credit Line Demand Note dated
September 1, 1998 Payable to the Order of First Union National Bank.

4.14 Bifurcation of Note Agreement of that Certain
Consolidated and Restated Term Loan Promissory Note dated September 1, 1998
is hereby incorporated herein by reference to Exhibit 4.3 to the
Partnership's Report for September 30, 1998 on From 10-Q (File No. 0-16976)
dated November 11, 1998.

Exhibit A to Bifurcation of Note Agreement -
Term Loan Promissory Note dated September 1, 1998 Payable to the Order of
First Union National Bank

Exhibit B to Bifurcation of Note Agreement -
Term Loan Promissory Note dated September 1, 1998 Payable to the Order of
First Union National Bank.

<PAGE>

Bifurcation of Note Agreement of that Certain
Consolidated and Restate Line of Credit Promissory Note dated September 1,
1998.

Exhibit A to Bifurcation of Note Agreement -
Line of Credit Promissory Note dated September 1, 1998 Payable to the Order
of First Union National Bank.

Exhibit B to Bifurcation of Note Agreement -
Line of Credit Promissory Note dated September 1, 1998 Payable to the Order
of First Union National Bank.

Bifurcation of Note Agreement of that Certain
Consolidated and Restated Demand Note Letter of Credit dated September 1,
1998.

Exhibit A to Bifurcation of Note Agreement -
Letter of Credit Line Demand Note dated September 1, 1998 Payable to the
Order of First Union National Bank.

Exhibit B to Bifurcation of Note Agreement -
Letter of Credit Line Demand Note dated September 1, 1998 Payable to the
Order of First Union National Bank.

4.15 Renewal Term Loan Promissory Note dated
September 1, 1998 is hereby incorporated herein by reference to Exhibit 4.4
to the Partnership's Report for September 30, 1998 on Form 10-Q (File No.
0-16976) dated November 11, 1998.

Renewal Line of Credit Promissory Note dated
September 1, 1998.

Renewal Demand Note Letter of Credit Line
dated September 1, 1998.

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.

<PAGE>

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.****

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 hereby incorporated herein by
reference to Exhibit 10.13 to the Partnership's Report for December 31,
1997 on From 10-K (File No. 0-16976) dated March 25, 1998.

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 hereby incorporated herein by
reference to Exhibit 10.14 to the Partnership's Report for December 31,
1997 on form 10-K (File No. 0-16976) dated March 25, 1998.

<PAGE>

10.15 Information Systems Sharing Agreement dated
November 6, 1997 between Arvida/JMB Partners, L.P. and Arvida Company is
hereby incorporated herein by reference to Exhibit 10.15 to the
Partnership's Report for December 31, 1997 on Form 10-K (File No. 0-16976)
dated March 25, 1998.

10.16 Asset Purchase Agreement by and between Gulf
and Pacific Communications Limited Partnership and Schurz Communications,
Inc. dated as of July 15, 1998 is incorporated by reference toExhibit 10.1
to the Partnership's Form 10-Q Report(File No. 0-16976) filed on November
11, 1998.

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.

(b) No reports on Form 8-K have been filed during the last
quarter of the period covered by this report.

No annual report or proxy material for the fiscal year 1998 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 22, 1999

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 22, 1999

BURTON E. GLAZOV
By: Burton E. Glazov, Director
Date: March 22, 1999

GAILEN J. HULL
By: Gailen J. Hull, Vice President
(Principal Accounting Officer)
Date: March 22, 1999

A. LEE SACKS
By: A. Lee Sacks, Director
Date: March 22, 1999

STUART C. NATHAN
By: Stuart C. Nathan, Director
Date: March 22, 1999

<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

<PAGE>

DOCUMENT
INCORPORATED SEQUENTIALLY
EXHIBIT NO. EXHIBIT BY REFERENCE NUMBERED PAGE
- ----------- ------- ------------ -------------
4.12 Amendment to Credit Agreement dated
September 1, 1998 Yes

Absolute Assignment of Mortgages and Other
Documents for $11,250,000 Term Loan Promissory
Note, $3,000,000 Line of Credit Promissory Note,
and $750,000 Demand Note Letter of Credit
Promissory Note.

Absolute Assignment of Mortgages and Other
Documents for $28,125,000 Term Loan Promissory
Note, $7,500,000 Line of Credit Promissory Note,
and $1,875,000 Demand Note Letter of Credit
Promissory Note.

Absolute Assignment of Deed to Secure Debt and
Other Documents.

4.13 Consolidated and Restated Term Loan Promissory Note
of the Certain Term Loan Promissory Note dated
July 31, 1997 Yes

Term Loan Promissory Note dated September 1, 1998
Payable to the Order of First Union National bank.

Consolidated and Restated Line of Credit Promissory
Note of the Certain Line of Credit Promissory Notes
dated July 31, 1997

Line of Credit Promissory Note dated September 1, 1998
Payable to the Order of First Union National Bank.

Consolidated and Restated Demand Note Letter of Credit
Line Promissory Note of the Certain Consolidated and
Restated Demand Note Letter of Credit Line Promissory
Note dated July 31, 1997

Letter of Credit Line Demand Note dated September 1,
1998 Payable to the Order of First Union National Bank.

<PAGE>

DOCUMENT
INCORPORATED SEQUENTIALLY
EXHIBIT NO. EXHIBIT BY REFERENCE NUMBERED PAGE
- ----------- ------- ------------ -------------
4.14 Bifurcation of Note Agreement of that Certain
Consolidated and Restated Term Loan Promissory Note
dated September 1, 1998 Yes

Exhibit A to Bifurcation of Note Agreement - Term Loan
Promissory Note dated September 1, 1998 Payable to the
Order of First Union National Bank

Exhibit B to Bifurcation of Note Agreement - Term Loan
Promissory Note dated September 1, 1998 Payable to the
Order of First Union National Bank.

Bifurcation of Note Agreement of that Certain
Consolidated and Restate Line of Credit Promissory
Note dated September 1, 1998.

Exhibit A to Bifurcation of Note Agreement - Line of
Credit Promissory Note dated September 1, 1998
Payable to the Order of First Union National Bank.

Exhibit B to Bifurcation of Note Agreement - Line of
Credit Promissory Note dated September 1, 1998
Payable to the Order of First Union National Bank

Bifurcation of Note Agreement of that Certain
Consolidated and Restated Demand Note Letter of Credit
dated September 1, 1998.

Exhibit A to Bifurcation of Note Agreement - Letter of
Credit Line Demand Note dated September 1, 1998
Payable to the Order of First Union National Bank.

Exhibit B to Bifurcation of Note Agreement - Letter of
Credit Line Demand Note dated September 1, 1998
Payable to the Order of First Union National Bank.

4.15 Renewal Term Loan Promissory Note dated September 1,
1998. Yes

Renewal Line of credit Promissory Note dated
September 1, 1998.

Renewal Demand Note Letter of Credit Line
dated September 1, 1998.

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 Yes

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 Yes

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

10.16 Asset Purchase Agreement by and between Gulf
and Pacific Communications Limited Partnership
and Schurz Communications, Inc. dated as of
July 15, 1998 is incorporated by reference to
Exhibit 10.1 to the Partnership's Form 10-Q Report
(File No. 0-16976) filed on November 11, 1998. Yes

21. Subsidiaries of the Registrant No

27. Financial Data Schedule No

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

</TABLE>

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, Center Hotel Limited Partnership,
Weston Athletic Club Limited Partnership, Arvida Realty Sales Limited
Partnership, Arvida/Weston Retail Sales Limited Partnership, Arvida Grand
Bay Limited Partnerships I through VI, each of which is a Delaware limited
partnership, Cullasaja Joint Venture, Metrodrama Joint Venture and AOK
Group. The Partnership is also a partner in the following partnerships
with third parties: A&D Title, L.P., Arvida Corporate Park Associates,
Arvida Pompano Associates Joint Venture, Country Isles Associates 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, 1998 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-31-1998
<PERIOD-END> DEC-31-1998

<CASH> 95,440,730
<SECURITIES> 0
<RECEIVABLES> 14,187,641
<ALLOWANCES> 198,548
<INVENTORY> 160,922,604
<CURRENT-ASSETS> 0
<PP&E> 61,258,466
<DEPRECIATION> 27,442,263
<TOTAL-ASSETS> 316,031,135
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 209,770,526
<TOTAL-LIABILITY-AND-EQUITY>316,031,135
<SALES> 351,125,675
<TOTAL-REVENUES> 351,125,675
<CGS> 263,163,395
<TOTAL-COSTS> 263,163,395
<OTHER-EXPENSES> 22,100,035
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 65,862,245
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,862,245
<EPS-PRIMARY> 148.02
<EPS-DILUTED> 148.02

</TABLE>