ARVIDA JMB PARTNERS L P II, 10-Q, 1996-11-14

ARVIDA JMB PARTNERS L P II
10-Q, 1996-11-14
OPERATORS OF NONRESIDENTIAL BUILDINGS

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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 10-Q

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the quarter ended September 30, 1996 Commission file number 0-19245

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

Delaware 58-1809884
(State of organization) (IRS Employer Identification No.)

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

Registrant's telephone number, including area code 312/440-4800

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 a shorter period that
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

Item 1. Financial Statements . . . . . . . . . . . . . . . 3

Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . 16

PART II OTHER INFORMATION

Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . 19

Item 3. Defaults Upon Senior Securities. . . . . . . . . . 20

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 21

<TABLE>
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ARVIDA/JMB PARTNERS, L.P.-II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 1996 AND DECEMBER 31, 1995

(UNAUDITED)

ASSETS
------

<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- -----------
<S> <C> <C>

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 307,849 1,387,313
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . 955,736 2,552,834
Trade and other accounts receivable (net of allowance
for doubtful accounts of $77,009 at September 30, 1996
and $18,431 at December 31, 1995) . . . . . . . . . . . . . . . . . . 163,132 1,218,015
Real estate inventories . . . . . . . . . . . . . . . . . . . . . . . . 48,115 10,766,333
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . 2,583,066 6,404,217
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . 923,344 1,910,446
------------ ------------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,981,242 24,239,158
============ ============

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

Liabilities:
Bank overdrafts. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 61,508 550,666
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,621 450,129
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,359 1,121,423
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . 32,254,187 39,137,504
Amounts due to affiliates. . . . . . . . . . . . . . . . . . . . . . . 7,619,765 7,591,889
Notes and mortgages payable (in default) . . . . . . . . . . . . . . . 78,871,459 100,175,208
------------ ------------

Commitments and contingencies

Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . 118,968,899 149,026,819
------------ ------------

Partners' capital accounts (deficits):
General Partner and Associate Limited Partner:
Capital contributions. . . . . . . . . . . . . . . . . . . . . . . . 2,000 2,000
Cumulative net loss. . . . . . . . . . . . . . . . . . . . . . . . . (8,188,962) (5,809,930)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . (246,771) (246,771)
------------ ------------
(8,433,733) (6,054,701)
------------ ------------
Limited partners:
Capital contributions, net of offering costs . . . . . . . . . . . . 209,753,671 209,753,671
Cumulative net loss. . . . . . . . . . . . . . . . . . . . . . . . . (306,086,421) (319,265,457)
Cumulative cash distributions. . . . . . . . . . . . . . . . . . . . (9,221,174) (9,221,174)
------------ ------------
(105,553,924) (118,732,960)
------------ ------------
Total partners' deficits . . . . . . . . . . . . . . . . . . . . (113,987,657) (124,787,661)
------------ ------------
Total liabilities and partners' deficits . . . . . . . . . . . . $ 4,981,242 24,239,158
============ ============

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

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

CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------------- --------------------------
1996 1995 1996 1995
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Housing . . . . . . . . . . . . . . . . . . . . $ -- 953,318 140,810 6,037,570
Homesites . . . . . . . . . . . . . . . . . . . -- 1,312,845 1,244,069 6,071,945
Land and property . . . . . . . . . . . . . . . 225,000 -- 20,285,819 --
Operating properties. . . . . . . . . . . . . . 220,059 1,342,172 3,101,190 4,150,019
Brokerage and other operations. . . . . . . . . 139,424 703,646 701,052 2,072,732
----------- ---------- ----------- -----------
Total revenues. . . . . . . . . . . . . 584,483 4,311,981 25,472,940 18,332,266

Cost of revenues:
Housing . . . . . . . . . . . . . . . . . . . . 2,813 1,006,654 336,186 5,396,370
Homesites . . . . . . . . . . . . . . . . . . . 11,592 984,508 1,075,568 4,697,408
Land and property . . . . . . . . . . . . . . . -- -- 14,050,234 --
Operating properties. . . . . . . . . . . . . . 355,604 1,206,164 3,094,135 3,911,758
Brokerage and other operations. . . . . . . . . 46,471 568,951 581,265 1,905,550
----------- ---------- ----------- -----------
Total cost of revenues. . . . . . . . . 416,480 3,766,277 19,137,388 15,911,086

Gross operating profit. . . . . . . . . . . . . . 168,003 545,704 6,335,552 2,421,180
Selling, general and administrative expenses. . . (225,242) (1,047,528) (1,565,204) (3,635,283)
----------- ---------- ----------- -----------
Net operating income (loss) . . . . . . (57,239) (501,824) 4,770,348 (1,214,103)

Interest income . . . . . . . . . . . . . . . . . -- 28,991 15,433 168,430
Interest and real estate taxes, net . . . . . . . (4,212,747) (5,143,680) (13,985,777) (15,914,711)
----------- ---------- ----------- -----------
Net loss before extraordinary
item. . . . . . . . . . . . . . . . . (4,269,986) (5,616,513) (9,199,996) (16,960,384)
Extraordinary item:
Gain due to forgiveness of interest . . . . . . 20,000,000 -- 20,000,000 --
----------- ---------- ----------- -----------
Net income (loss) . . . . . . . . . . . $15,730,014 (5,616,513) 10,800,004 (16,960,384)
=========== ========== =========== ===========
Loss before extraordinary
item per Limited Partner-
ship Interest . . . . . . . . . . . $ (17.36) (19.52) (28.26) (48.33)
=========== ========== =========== ===========
Net income (loss) per
Limited Partnership
Interest. . . . . . . . . . . . . . $ 67.16 (19.52) 56.26 (48.33)
=========== ========== =========== ===========

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

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

CONSOLIDATED STATEMENT OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

(UNAUDITED)

<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,800,004 (16,960,384)
Charges to net loss not requiring cash:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . 283,551 384,208
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . 58,578 (2,909)
Loss (gain) on disposition of property and equipment. . . . . . . . . . . 1,765,143 (2,702)
Extraordinary gain due to forgiveness of interest . . . . . . . . . . . . (20,000,000) --
Changes in:
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,597,098 (2,697,780)
Trade and other accounts receivable . . . . . . . . . . . . . . . . . . . 996,305 279,004
Real estate inventories:
Additions to real estate inventories. . . . . . . . . . . . . . . . . . (4,743,770) (1,161,601)
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,461,988 10,093,778
Capitalized interest. . . . . . . . . . . . . . . . . . . . . . . . . . -- (279,639)
Capitalized real estate taxes . . . . . . . . . . . . . . . . . . . . . -- (42,535)
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . 923,648 2,899,326
Accounts payable, accrued expenses and other liabilities. . . . . . . . . 12,790,175 10,432,228
Deposits and unearned income. . . . . . . . . . . . . . . . . . . . . . . (1,083,064) (398,735)
Amounts due to affiliates . . . . . . . . . . . . . . . . . . . . . . . . 27,876 428,570
------------ -----------
Net cash provided by operating activities . . . . . . . . . . . . 18,877,532 2,970,829
------------ -----------
Investing activities:
Proceeds from disposal of property and equipment. . . . . . . . . . . . . 1,835,911 2,702
Acquisitions of property and equipment. . . . . . . . . . . . . . . . . . -- (180,641)
------------ -----------
Net cash provided by (used in) investing activities . . . . . . . 1,835,911 (177,939)
------------ -----------
Financing activities:
Payments of notes and mortgages payable . . . . . . . . . . . . . . . . . (21,303,749) (10,842,395)
Repayments of bank overdrafts . . . . . . . . . . . . . . . . . . . . . . (489,158) (781,557)
------------ -----------
Net cash used in financing activities . . . . . . . . . . . . . . (21,792,907) (11,623,952)
------------ -----------
Decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . (1,079,464) (8,831,062)

Cash and cash equivalents,
beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,387,313 9,526,271
------------ -----------

Cash and cash equivalents,
end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 307,849 695,209
============ ===========

Supplemental disclosure of cash flow information:
Cash paid for mortgage and other
interest, net of amounts capitalized. . . . . . . . . . . . . . . . . . $ -- --
============ ===========
Non-cash investing and financing activities . . . . . . . . . . . . . . . $ -- --
============ ===========

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

ARVIDA/JMB PARTNERS, L.P.-II
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1996 AND 1995

(UNAUDITED)

Readers of this quarterly report should refer to the Partnership's
audited financial statements for the fiscal year ended December 31, 1995,
which are included in the Partnership's 1995 Annual Report on Form 10-K
(File No. 0-19245) filed on March 25, 1996, as certain footnote disclosures
which would substantially duplicate those contained in such audited
financial statements have been omitted from this report. Capitalized terms
used but not defined in this quarterly report have the same meanings as in
the Partnership's 1995 Annual Report.

GENERAL

Capitalized Interest and Real Estate Taxes

Interest, including the amortization of loan fees, of $7,976,346 and
$10,258,987 was incurred for the nine months ended September 30, 1996 and
1995, respectively, of which $0 and $279,639 was capitalized, respectively.

There were no interest payments made during the three and nine month
periods ended September 30, 1996 and 1995. Interest, including the
amortization of loan fees, of $2,319,157 and $3,287,549 was incurred for
the three months ended September 30, 1996 and 1995, respectively, none of
which was capitalized. The Partnership has not made the required monthly
interest payments on its credit facility since September 1994.

Real estate taxes of $6,009,431 and $5,977,898 were incurred for the
nine months ended September 30, 1996 and 1995, respectively, of which $0
and $42,535 was capitalized, respectively. Real estate tax payments of
$517,358 and $382,842 were made for the nine months ended September 30,
1996 and 1995, respectively. Real estate taxes of $1,893,590 and
$1,856,131 were incurred for the three months ended September 30, 1996 and
1995, respectively, none of which were capitalized. Real estate tax
payments of $0 and $12,604 were made during the three months ended
September 30, 1996 and 1995, respectively. In addition, the Partnership
received $74,171 of real estate tax refunds (not included in the real
estate tax payments reported above) during the three months ended September
30, 1996. 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 other operating properties as these taxes are included in
cost of revenues for operating properties.

Property and Equipment and Other Assets

Depreciation expense of $220,097 and $318,963 was incurred for the
nine month periods ended September 30, 1996 and 1995, respectively.
Amortization of other assets of $63,454 and $65,245 was incurred for the
nine months ended September 30, 1996 and 1995, respectively. Depreciation
expense of $40,602 and $102,087 was incurred for the three months ended
September 30, 1996 and 1995, respectively. Amortization of other assets of
$9,149 and $692 was incurred for the three months ended September 30, 1996
and 1995, respectively.

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

There are no treasury bills or other short-term investments with
original maturity dates of three months or less included in cash and cash
equivalents at September 30, 1996 and December 31, 1995. Included in
restricted cash are amounts restricted under various escrow agreements and
approximately $955,100 remaining from the original $3 million which was
deposited into a restricted collateral account in March 1995 pursuant to an
agreement between the Partnership and its lender.

NOTES AND MORTGAGES PAYABLE (IN DEFAULT)

The Partnership's credit facilities consist of a $52.5 million term
loan, a $67.5 million term loan, a revolving line of credit of
approximately $14.3 million and approximately $4.3 million of outstanding
letters of credit securing performance obligations of the Partnership.
There is also a $5 million letter of credit facility which secures
performance obligations of the Partnership. At September 30, 1996,
approximately $11.4 million, $56.0 million and $11.5 million was
outstanding under the $52.5 million term loan, the $67.5 million term loan
and the revolving line of credit facility, respectively.

For the nine month period ended September 30, 1996, the effective
interest rate for the combined term loans and the revolving line of credit
facility was approximately 11.9% per annum. The Partnership has not made
the required interest payments on its credit facilities since September
1994. The amount of interest which remains payable at September 30, 1996
totals approximately $14.4 million.

On October 31, 1995, the Partnership and its lender reached an
agreement to amend the March 1995 Forbearance Agreements agreeing to, among
other things, a new plan whereby the Partnership would attempt to sell its
remaining assets (other than the Talega Property) in accordance with set
minimum sales prices for each of the assets over the course of a six-month
period with payment of certain operational, development and marketing costs
to be made out of available funds in a restricted collateral account. The
agreement was subject to the lender's continued forbearance from the
exercise of its remedies under the credit facilities and its right to cease
funding costs not yet then incurred.

During September 1996, the Partnership and its lender agreed to
another amendment of the March 1995 Forbearance Agreement agreeing to,
among other things, a revised plan whereby the Partnership would sell its
remaining assets by no later than March 31, 1997. This amended agreement
is subject to the lender's continued forbearance from the exercise of its
remedies under the credit facilities and its right to cease funding costs
not yet incurred. Upon the execution of the amended agreement, the
Partnership's lender agreed to forgive, waive and cancel a portion of the
unpaid interest on the Partnership's credit facilities in the aggregate
amount of $20 million, of which $2 million was allocated to interest on the
revolving line of credit and $18 million was allocated to one of the term
loans. The forgiveness of this interest is reflected as an extraordinary
gain on the accompanying Consolidated Statements of Operations for the
three and nine months ended September 30, 1996, and is the primary cause
for the decrease in Accrued expenses and other liabilities on the
accompanying Consolidated Balance Sheets at September 30, 1996 as compared
to December 31, 1995. The amended agreement also includes the forgiveness,
by the Partnership's lender, of any remaining outstanding principal balance
and accrued interest on the Partnership's credit facilities upon the
satisfaction of certain specified conditions, including, among other
things, the sale of the Partnership's remaining real estate assets at
specified minimum prices, the payment of the net proceeds from such sales
to the Partnership's lender, and the assignment of any other net assets of
the Partnership to the lender. However, if such specified conditions have
not occurred by March 31, 1997, the lender's obligations under such
agreement will terminate.

Proceeds from the sales of housing units, homesites, land parcels and
other collateral securing the credit facilities, net of brokerage
commissions and certain other customary selling expenses are to be
delivered to the lender to be applied against the outstanding principal
balances on both of the term loans. Through September 30, 1996, the
Partnership has remitted proceeds totalling approximately $40.2 million
from sales made after becoming subject to this requirement in September
1994.

During June 1996, the Heathrow joint venture, in which the Partnership
is the managing general partner, closed on the sale of the remaining land,
the country club and certain related assets within the Partnership's
Heathrow Community. This transaction is reflected in Land and property
operations on the accompanying Consolidated Statements of Operations. This
sale is the primary cause for various significant changes on the
accompanying Consolidated Balance Sheets at September 30, 1996 as compared
to December 31, 1995 and on the accompanying Consolidated Statements of
Operations for the three and nine months ended September 30, 1996 as
compared to the same periods in 1995. The net proceeds from this sale,
after prorations and closing costs, of approximately $18.4 million were
paid to the Partnership's lender and applied against the outstanding
principal balance on both of the Partnership's term loans. The sale
resulted in a gain for financial reporting purposes and a loss for Federal
income tax purposes.

During September 1996, the Partnership reached an agreement with an
unaffiliated third party for the sale of the Talega Property. The closing
of the sale is subject to the satisfaction of various conditions, and there
can be no assurance that the sale will be consummated. The proceeds from
such sale, if consummated, would be paid to the Partnership's lender and
applied against the outstanding principal balance on the Partnership's term
loans. The sale, if consummated, would result in a gain for financial
reporting purposes and a loss for Federal income tax purposes during 1996.

During April 1996, the Heathrow venture entered into a non-binding
letter of intent with an unaffiliated third party for the sale of the
retail shopping plaza at its Heathrow Community. This letter of intent
subsequently expired by its terms without the sale of the shopping plaza
being consummated. The Partnership continues to actively market this
Property for sale.

Although there can be no assurance, the Partnership is currently
working to dispose of all of its remaining assets by December 31, 1996 in
accordance with the plan agreed upon with its lender. The Partnership's
ability to dispose of all of its assets during 1996 is dependent upon,
among other things, the Partnership closing on the sale of its Talega
Property, as well as the Heathrow venture contracting for the sale, and
closing the sale of the shopping plaza at the Heathrow Community, by the
end of the year. It is expected that any proceeds from the sale or other
disposition of such assets, in excess of the costs of sale and general and
administrative expenses attributable thereto, will be paid to the lender or
other creditors of the Partnership. In addition, the Partnership is
currently involved in certain litigation, as discussed in Part II. Item 1.
Legal Proceedings in this report, to which reference is hereby made. Upon
completion of the sale of the Partnership's remaining assets, the
Partnership expects to terminate. However, the termination of the
Partnership could be delayed until resolution (or other acceptable
treatment) of the pending litigation. The Holders of Interests should not
expect to receive any future distributions from the Partnership.

The possibility still remains that the lender may pursue its remedies
under the credit facilities, including realizing upon substantially all of
the Partnership's remaining assets, which are collateral security for the
credit facilities. These issues raise substantial doubt about the
Partnership's ability to continue as a going concern. If the Partnership
is unable to continue as a going concern, it may be forced to dispose of
its Properties in a manner that would realize less than would be realized
under its current plan for an orderly disposition. If this were to occur,
any proceeds received could be less than the current carrying values of the
Properties, resulting in the recognition of additional losses by the
Partnership. The accompanying Consolidated Financial Statements do not
include any adjustments that might result from the outcome of this
uncertainty.

TRANSACTIONS WITH AFFILIATES

The General Partner of the Partnership or its affiliates may be
reimbursed for their direct expenses or out-of-pocket expenses relating to
the administration of the Partnership and its assets. For the nine months
ended September 30, 1996, the General Partner of the Partnership or its
affiliates were due reimbursements for such direct or out-of-pocket
expenditures in the amount of approximately $1,800, all of which was paid
as of September 30, 1996. The total of such reimbursements for the nine
months ended September 30, 1995 was approximately $39,200.

In addition, the General Partner and its affiliates are entitled to
reimbursements for salaries and salary-related costs relating to the
administration of the Partnership and the operation of the Partnership's
Properties. Such costs were approximately $19,000 for the nine months
ended September 30, 1996, all of which was paid as of September 30, 1996.
The total of such costs for the nine months ended September 30, 1995 was
approximately $47,700.

The Partnership also receives reimbursements from, or reimburses,
affiliates of the General Partner 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. The
Partnership was entitled to receive approximately $13,400 and $8,500 for
such costs for the nine months ended September 30, 1996 and 1995,
respectively, none of which was outstanding as of September 30, 1996. In
addition, the Partnership was obligated to reimburse one of its affiliates
approximately $23,500 for the nine months ended September 30, 1995, for
costs incurred by the affiliate on behalf of the Partnership, none of which
was outstanding at September 30, 1996.

The Partnership and Arvida/JMB Partners, L.P. (a publicly-held limited
partnership affiliated with the General Partner, "Arvida/JMB-I") each
employ project-related and administrative personnel who perform services on
behalf of both partnerships. In addition, certain out-of-pocket
expenditures related to such services and other general and administrative
expenditures are incurred and charged to each partnership as appropriate.
The Partnership reimburses or receives reimbursements from Arvida/JMB-I for
such costs (including salary and salary-related costs). For the nine month
period ended September 30, 1996, the Partnership was obligated to reimburse
Arvida/JMB-I approximately $1,242,300. At September 30, 1996,
approximately $27,400 was unpaid, all of which was paid as of November 4,
1996. In addition, for the nine month period ended September 30, 1996, the
Partnership was entitled to receive approximately $113,700 from Arvida/JMB-
I, all of which was received as of September 30, 1996. For the nine months
ended September 30, 1995, the Partnership was obligated to reimburse
Arvida/JMB-I approximately $839,500 and the Partnership was entitled to
receive reimbursements from Arvida/JMB-I of approximately $195,900.

Arvida Company ("Arvida"), pursuant to an agreement with the
Partnership, provides development, construction, management and other
personnel and services to the Partnership for all of its projects and
operations. Pursuant to such agreement, the Partnership reimburses Arvida
for all of its salary and salary-related costs incurred in connection with
work performed on behalf of the Partnership. The total of such costs for
the nine month periods ended September 30, 1996 and 1995 were approximately
$177,000 and $692,900, respectively, all of which was paid as of September
30, 1996. In addition, Arvida owed the Partnership approximately $1,900 at
September 30, 1996 resulting from an excess reimbursement, all of which was
received as of November 4, 1996.

Pursuant to a requirement under the Partnership's credit facilities, a
portion of the reimbursements paid to Arvida and Arvida/JMB-I as well as
portions of the Partnership's insurance and loan refinancing costs incurred
in 1992 and 1993, have been funded on the Partnership's behalf by advances
from the General Partner. Such advances, which do not bear interest,
totalled approximately $4,609,400 at September 30, 1996. The repayment of
such advances is subordinated to the receipt by the Holders of Interests of
certain levels of return, and therefore is not expected to be made. In
addition, the Partnership was entitled to receive approximately $12,900
from an affiliate of the General Partner for salary and salary-related
costs incurred by the Partnership on behalf of such affiliate of the
General Partner, all of which was outstanding as of September 30, 1996 and

November 4, 1996.

Prior to the sale during June 1996 of the remaining land within the
Heathrow Community, the Partnership incurred certain general and
administrative expenses, including insurance premiums, which were paid by
the Partnership on behalf of its affiliated homeowners associations. The
Partnership receives reimbursements from the affiliates for such costs.
For the nine month period ended September 30, 1996, the Partnership was
entitled to receive approximately $9,000 from such affiliates. At
September 30, 1996, approximately $7,500 was owed to the Partnership, none
of which was received as of November 4, 1996. For the nine months ended
September 30, 1995, the Partnership was entitled to receive approximately
$20,300 from such affiliates.

Prior to the sale during June 1996 of the remaining land within the
Heathrow Community, Arvida provided development management services to the
Heathrow joint venture. For the nine months ended September 30, 1996,
management fees of approximately $212,200 had been incurred, the payment of
which has been deferred. The cumulative amount of such deferred management
fees as of September 30, 1996 was approximately $3,005,200. Such deferred
fees do not bear interest and remain payable. The ultimate payment of
these management fees is not expected to be made as it is subordinated to
certain levels of return to the Holders of Interests.

In accordance with the Partnership Agreement, the General Partner and
Associate Limited Partner have deferred a portion of their distributions of
net cash flow from the Partnership totalling approximately $247,000. This
amount, which does not bear interest, is not expected to be paid.

COMMITMENTS AND CONTINGENCIES

As security for performance of certain development obligations,
including the Partnership's obligations with respect to the Santa Margarita
Water District, the Partnership is contingently liable under standby
letters of credit and bonds at September 30, 1996 for approximately
$2,590,500 and $428,000, respectively.

The Partnership has been named a defendant in a lawsuit filed in the
Circuit Court in and for the Eighteenth Judicial Circuit, Seminole County,
Florida entitled Land Investment I, Ltd., Heathrow Land & Development
Corporation, Heathrow Shopping Center Associates, and Paulucci Investments
v. Arvida/JMB Managers-II, Inc., Arvida/JMB Partners, L.P.-II, Arvida
Company and JMB Realty Corporation. The complaint, as amended, includes
counts for breach of the management agreement, breach of fiduciary duty,
fraud in the inducement and conspiracy to commit fraud in the inducement,
breach of the partnership agreement and rescission in connection with the
purchase and management of the Heathrow development. Plaintiffs seek,
among other things, unspecified compensatory damages, the right to add a
claim for punitive damages, rescission, attorneys fees, costs, and such
other relief as the Court deems appropriate. The Partnership believes that
the lawsuit is without merit and intends to vigorously defend itself in
this matter.

On or before October 31, 1996, a lawsuit entitled Seagate At San
Clemente, L.L.C. v. Arvida/JMB Partners, L.P.-II, and does 1 through 20 was
filed in the Superior Court of the State of California for the County of
Orange. In the verified complaint for specific performance of contract,
plaintiff claims that on October 10, 1996 it entered into an oral agreement
with the Partnership for the purchase of the Talega Property. The
complaint purports to set forth the essential terms of the deal and claims
that plaintiff reasonably relied on various representations of the
Partnership in obtaining financing to close the alleged deal on October 31,
1996. Plaintiff seeks a judgment against the Partnership that it execute
and deliver a complete conveyance of the Talega Property in accordance with
the parties' alleged agreement, costs, and such other relief as the court
may deem just and proper. The plaintiff has filed a lis pendens on the
Property. The Partnership believes that the action is without merit and
intends to defend itself vigorously in this matter.

The Partnership has been advised by Merrill Lynch that various
investors of the Partnership have sought to compel Merrill Lynch to
arbitrate claims brought by certain investors of the Partnership, and has
been named as a respondent in various arbitrations, representing
approximately 11% of the total Interests outstanding. These claimants have
sought and are seeking to arbitrate claims involving unspecified damages
based on Merrill Lynch's alleged violations 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 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
attorney's fees and expenses, under the terms of a certain Agency Agreement
dated October 23, 1989 ("Agency Agreement") with the Partnership relating
to the sale of Interests through Merrill Lynch on behalf of the
Partnership. The Agency Agreement generally provides that the Partnership
and its General Partner shall indemnify Merrill Lynch against losses
occasioned by an actual or alleged misstatement or omission of material
facts in the Partnership's offering material used in connection with the
sale of Interests and suffered by Merrill Lynch in performing its duties
under the Agency Agreement, under certain specified conditions. The Agency
Agreement also generally provides, under certain conditions, that Merrill
Lynch shall indemnify the Partnership and its General Partner for losses
suffered by the Partnership and occasioned by certain specified conduct by
Merrill Lynch in the course of Merrill Lynch's solicitation of
subscriptions for, and sale of, Interests. The Partnership is unable to
determine the ultimate investment of investors who have filed arbitration
claims as to which Merrill Lynch might seek indemnification in the future.
At this time, and based upon the information presently available about the
arbitration statements of claims filed by some of these investors, the
Partnership and its General Partner believe that they have meritorious
defenses to demands for indemnification made by Merrill Lynch and intend to
vigorously pursue such defenses. Although there can be no assurance
regarding the outcome of the claims for indemnification, at this time,
based on information presently available about such arbitration statements
of claims, the Partnership and its General Partner do not believe that the
demands for indemnification by Merrill Lynch will have a material adverse
effect on the financial condition of the Partnership.

In addition, the Partnership could potentially be liable for certain
amounts incidental to other matters, the amount of which could be
substantial.

TAX-EXEMPT BOND FINANCING

In connection with the development of Talega (which was suspended
during 1990), the Partnership has utilized bond financing to construct
certain on-site and off-site water and sewer infrastructure improvements
which the Partnership would otherwise be obligated to finance and construct
as a condition to obtain certain approvals for the project. As of
September 30, 1996, $58,350,000 of the bonds were outstanding.
Approximately $46.5 million of proceeds from the sale of bonds was expended
by the District on infrastructure improvements through September 30, 1996.
The Partnership has not made any of the required payments to the District
for assessments to pay principal and interest on the bonds or standby
charges and operating expenses of the District since July 1994 when the
District drew down an $11.4 million letter of credit which served as
additional collateral securing payments of assessments attributable to
principal and interest due on bonds. As discussed above, the Partnership
has reached an agreement with an unaffiliated third party for the sale of
its Talega Property. One condition of such sale is the satisfactory
release of the Partnership's obligation under such bonds, subject to the
payment by the Partnership of certain past-due amounts and prorated items
related to such bonds. The payment of these items would be made from the
proceeds of the sale of the Property.

ADJUSTMENTS

In the opinion of the General Partner, all adjustments (consisting of
normal recurring adjustments) necessary for a fair presentation have been
made to the accompanying consolidated financial statements as of September
30, 1996 and December 31, 1995 and for the three and nine month periods
ended September 30, 1996 and 1995 (assuming the Partnership continues as a
going concern).

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Reference is made to the notes to the accompanying consolidated
financial statements ("Notes") contained in this report for additional
information concerning certain of the Partnership's investments.

As discussed below, there is substantial doubt about the Partnership's
ability to continue as a going concern.

At September 30, 1996 and December 31, 1995, the Partnership had cash
and cash equivalents of approximately $307,800 and $1,387,300,
respectively. Bank overdrafts representing checks in transit of
approximately $61,500 and $551,000 at September 30, 1996 and December 31,
1995, respectively, were repaid from cash on hand in October and January
1996, respectively. Remaining cash and cash equivalents were available for
working capital requirements. The Partnership had suspended cash
distributions to its Partners in late 1990 due to, among other things,
deteriorating market conditions. The Partnership has been unable to
reinstate distributions due to its financial condition and the operations
of its Properties, which are also discussed more fully below. In addition,
the Partnership is currently in default of the terms of its credit
facilities and a default has been asserted concerning Tax-Exempt Bond
Financing. The source of the Partnership's liquidity is dependent upon its
lender continuing to forbear from exercising its remedies under the
Partnership's credit facility agreements and permitting the Partnership to
use funds in a restricted cash collateral account and certain sales
proceeds to finance the Partnership's limited operations, as more fully
discussed in Part II - Item 3. (Defaults upon Senior Securities).

During June 1996, the Heathrow joint venture, in which the Partnership
is the managing general partner, closed on the sale of the remaining land,
the country club and certain related assets within the Partnership's
Heathrow Community. This transaction is reflected in Land and property
operations on the accompanying Consolidated Statements of Operations. This
sale is the primary cause for various significant changes on the
accompanying Consolidated Balance Sheets at September 30, 1996 as compared
to December 31, 1995 and on the accompanying Consolidated Statements of
Operations for the three and nine month periods ended September 30, 1996 as
compared to the same periods in 1995. The net proceeds from this sale,
after prorations and closing costs, of approximately $18.4 million were
paid to the Partnership's lender and applied against the outstanding
principal balances on both of the Partnership's term loans. The sale
resulted in a gain for financial reporting purposes and a loss for Federal
income tax purposes in 1996.

During September 1996, the Partnership and its lender agreed to
another amendment of the March 1995 Forbearance Agreement agreeing to,
among other things, a revised plan whereby the Partnership would sell its
remaining assets by no later than March 31, 1997. Upon the execution of
the amended agreement, the Partnership's lender agreed to forgive, waive
and cancel a portion of the unpaid interest on the Partnership's credit
facilities in the aggregate amount of $20 million, of which $2 million was
allocated to interest on the revolving line of credit and $18 million was
allocated to one of the term loans. The forgiveness of this interest is
reflected as an extraordinary gain on the accompanying Consolidated
Statements of Operations for the three and nine months ended September 30,
1996, and is the primary cause for the decrease in accrued expenses and
other liabilities on the accompanying Consolidated Balance Sheets at
September 30, 1996 as compared to December 31, 1995. The amended agreement
also includes the forgiveness, by the Partnership's lender, of any
remaining outstanding principal balance and accrued interest on the
Partnership's credit facilities upon the satisfaction of certain specified
conditions, including, among other things, the sale of the Partnership's
remaining real estate assets at specified minimum prices, the payment of
the net proceeds from such sales to the Partnership's lender, and the
assignment of any other net assets of the Partnership to the lender.
However, if such specified conditions have not occurred by March 31, 1997,
the lender's obligations under such agreement will terminate.

During October 1996, the Partnership reached an agreement with an
unaffiliated third party for the sale of the Talega Property. The closing
of the sale is subject to the satisfaction of various conditions. The
proceeds from such sale, if consummated, would be paid to the Partnership's
lender and applied against the outstanding principal balance on the
Partnership's term loans. The sale, if consummated, would result in a gain
for financial reporting purposes and a loss for Federal income tax purposes
during 1996.

During April 1996, the Partnership entered into a non-binding letter
of intent with an unaffiliated third party for the sale of the retail
shopping plaza at its Heathrow Community. This letter of intent
subsequently expired by its terms without the sale of the shopping plaza
being consummated. The Partnership continues to actively market this
Property for sale.

Although there can be no assurance, the Partnership is currently
working to dispose of all of its remaining assets by December 31, 1996 in
accordance with the plan agreed upon with its lender. The Partnership's
ability to dispose of all of its assets during 1996 is dependent upon,
among other things, the Partnership closing on the sale of its Talega
Property by the end of the year, as well as the Heathrow venture
contracting for the sale, and closing the sale, of the shopping plaza at
the Heathrow Community. It is expected that any proceeds from the sale or
other disposition of such assets, in excess of the costs of sale and
general and administrative expenses attributable thereto, will be paid to
the lender or other creditors of the Partnership. In addition, the
Partnership is currently involved in certain litigation, as discussed in
Part II. Item 1. Legal Proceedings in this report, to which reference is
hereby made. Upon completion of the sale of the Partnership's remaining
assets, the Partnership expects to terminate. However, termination of the
Partnership could be delayed until resolution (or other acceptable
treatment) of the pending litigation. Holders of Interests should not
expect to receive any future distributions from the Partnership.

RESULTS OF OPERATIONS

Due to the Partnership's financial condition and the sale of the
remaining land, the country club and certain related assets within the
Partnership's Heathrow Community during June 1996, the results of
operations for the three and nine months ended September 30, 1996 reflect
the limited activity of its remaining assets.

Housing revenues for the three and nine months ended September 30,
1996 have been negatively impacted by the prohibition placed on the
Partnership by its lender regarding the construction of new homes within
Heathrow. All construction of the homes for which the lender agreed to
advance funds has been completed. During the nine months ended September
30, 1996, the Partnership closed on one housing unit in its Heathrow
Community. Due to the sale of the Partnership's Heathrow Community, as
discussed above, no units remain in inventory as of September 30, 1996.

The decrease in homesite revenues for the nine months ended September
30, 1996 as compared to the same period in 1995 is due to a decrease in the
availability of lots for sale at the Partnership's Heathrow and Atlanta
Communities. The Partnership generated homesite revenues for the nine
months ended September 30, 1996 from 20 lot closings within these
Communities. Three lots remain unsold at the Partnership's Eagle Watch
Community. The decline in the gross operating profit margin for the nine
months ended September 30, 1996 as compared to the same period in 1995 is
due primarily to the reduction in the number of closings of higher margin
product at the Partnership's Heathrow Community.

Land and property revenues for the nine months ended September 30,
1996 were generated primarily from the sale of the remaining land, the
country club and certain related assets within the Partnership's Heathrow
Community, as discussed above. Land and property revenues for the three
months ended September 30, 1996 represent the deposit retained by the
Partnership in connection with the agreement entered into in March 1996 for
the sale of the Talega Property. This contract subsequently expired by its
terms without the sale of the Property being consummated.

Revenues from operating properties decreased for the three and nine
months ended September 30, 1996 as compared to the same periods in 1995 due
primarily to the June 1996 sale of the country club and cable operations
within the Partnership's Heathrow Community, as discussed above.

Brokerage revenues decreased for the three and nine months ended
September 30, 1996 as compared to the same periods in 1995 due primarily to
the sale of the remaining land in the Partnership's Heathrow Community as
well as a reduction in the number of closings of homes built by
unaffiliated third-party builders within the Partnership's Eagle Watch
Community.

Selling, general and administrative expenses continued to decrease
during the three and nine months ended September 30, 1996 as compared to
the same periods in 1995 due primarily to a reduction in marketing and
administrative costs incurred, which is a direct result of the restrictions
placed on development and construction by the Partnership's lender, and the
Partnership's current financial condition.

Interest and real estate taxes decreased for the three and nine months
ended September 30, 1996 as compared to the same periods in 1995 due
primarily to a decrease in the average amount of borrowings outstanding
during the period.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Partnership is not subject to any other material pending legal
proceedings, other than ordinary litigation incidental to the business of
the Partnership. However, reference is made to Notes for a discussion of
certain claims asserted by Merrill Lynch for indemnification by the
Partnership and the General Partner in connection with claims for
arbitration filed by certain investors in the Partnership.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

The Partnership's $67.5 million term loan has a certain loan-to-value
covenant relative to the Partnership's Talega Property. Based upon an
independent appraisal of Talega which was prepared on behalf of the
Partnership's lender, the Partnership has not been in compliance with this
covenant. On March 4, 1994, pursuant to the terms of this loan-to-value
covenant, the Partnership received a notice of default from its lender.
The Partnership was required to make a term loan payment, including
accrued interest, of approximately $59 million in order to cure this
default. The Partnership did not have the funds to make such payment. In
addition, the Partnership's credit facilities matured on December 30, 1994.

However, the Partnership did not have the funds to pay off the balances
outstanding under the credit facilities. The Partnership has not made the
required interest payments on its credit facilities since September 1994.
The aggregate amount outstanding, including principal and all accrued and
unpaid interest, on the Partnership's term loans and revolving line of
credit at September 30, 1996 is approximately $93.3 million. In addition,
as of September 30, 1996, the Partnership is liable under standby letters
of credit for approximately $2,590,500. To date, the Partnership's lender
has not pursued all of its remedies under the credit facility agreements
relative to these defaults, which could include, among other things, the
lender realizing upon its security interest in the Partnership's
Properties. In March 1995, the Partnership and its lender entered into
Forbearance Agreements pursuant to which, among other things, $3 million
was deposited in a restricted collateral account to pay direct operational
costs and general and administrative expenses of the Partnership's limited
operations, subject to the approval of the lender of such costs and
expenses and its continued forbearance from the exercise of its other
remedies under the credit facility agreements. The Forbearance Agreement
was modified on October 31, 1995 and September 24, 1996. Upon the
execution of the September 24, 1996 amended agreement, the Partnership's
lender agreed to forgive, waive and cancel a portion of the unpaid interest
on the Partnership's credit facilities in the aggregate amount of $20
million, of which $2 million was allocated to interest on the revolving
line of credit and $18 million was allocated to one of the term loans. The
Partnership is currently operating under a plan currently being negotiated
to dispose of its remaining assets by no later than March 31, 1997. It is
expected that any proceeds from the sale or other disposition of such
assets, in excess of the costs and general and administrative expenses
attributable thereto, will be paid to the lender or other creditors of the
Partnership. Reference is made to Part I. Financial Information, Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations for a further discussion of the Partnership's liquidity and
capital resources.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

3. Amended and Restated Agreement of Limited Partnership
incorporated herein by reference.*

4.1. Assignment Agreement by and among the Partnership, the General
Partner, the Initial Limited Partner and the Holders of Interests
incorporated herein by reference.*

4.2. $225 million Credit Agreement dated April 15, 1990 between
Arvida/JMB Partners, L.P.-II and Continental Bank N.A. and Bank of America
National Trust and Savings Association is incorporated herein by
reference.**

4.3. Amended and Restated Credit Agreement dated June 23, 1992
between Arvida/JMB Partners, L.P.-II and Continental Bank N.A. and Bank of
America National Trust and Savings Association is incorporated herein by
reference.**

4.4. Various mortgages and other security interests dated April 30,
1992 related to Arvida/JMB Partners, L.P.-II's Heathrow, Talega, Wesmere,
Wycliffe, Eagle Watch, Burnt Hickory Lakes, Rock Creek and SouthRidge Lakes
properties which secure loans under the Amended and Restated Credit
Agreement referred to in Exhibit 4.3 are incorporated herein by
reference.**

4.5. Revolving Loan and Letter of Credit Facility Credit Agreement
dated June 23, 1992 between Arvida/JMB Partners, L.P.-II and Continental
Bank N.A. and Bank of America National Trust and Savings Association is
incorporated herein by reference.**

4.6. Various mortgages and other security interests dated June 23,
1992 related to Arvida/JMB Partners, L.P.-II's Heathrow, Talega, Wesmere,
Wycliffe, Eagle Watch, Burnt Hickory Lakes, Rock Creek and SouthRidge Lakes
properties which secure loans under the Revolving Loan and Letter of Credit
Facility Credit Agreement referred to in Exhibit 4.5 are incorporated
herein by reference.**

4.7. Interim Bank Letter Agreement dated March 25, 1992 between
Arvida/JMB Partners, L.P.-II and Continental Bank N.A., Bank of America
National Trust and Savings Association, and Unibank is incorporated herein
by reference.**

4.8. Promissory Note effective July 1, 1992 between Arvida/JMB
Partners, L.P.-II and Arvida/JMB Managers-II, Inc. is herein incorporated
by reference. ****

4.9. Letter dated September 20, 1994 from the Partnership to Bank
of America regarding the Partnership's acknowledgement that all proceeds
from the sale of Collateral shall be delivered immediately to Co-Lenders is
herein incorporated by reference to Exhibit 4.9 to the Partnership's Report
on Form 10-Q (File No. 0-19245) filed on November 11, 1994.

4.10. Forbearance and Modification Agreement (Credit Agreement)
dated March 21, 1995 by and among Arvida/JMB Partners, L.P.-II, Heathrow
Development Associates, Ltd., Eagle Watch Partners, Bank of America
Illinois and Bank of America National Trust and Savings Association is
incorporated herein by reference. *****

4.11. Forbearance and Modification Agreement (Amended and Restated
Credit Agreement) dated March 21, 1995 by Amendment of Forbearance and
Modification Agreement dated September 24, 1996 is incorporated herein by
reference. *****

4.12. Letter Agreement dated October 31, 1995 supplementing
Forbearance Agreements with Lenders is herein incorporated by
reference.******

4.13 Amendment of Forbearance and Modification Agreement dated
September 24, 1996 is filed herewith.

10.1. Management, Advisory and Supervisory Agreement between the
Partnership and Arvida Company is herein incorporated by reference.**

10.2. Revolving Credit Agreement dated September 27, 1989 between
Arvida/JMB Partners, L.P.-II and Continental Bank N.A. is incorporated
herein by reference.***

10.3. First Amendment Credit Agreement dated December 21, 1989 to
the Credit Agreement dated May 5, 1989 between Arvida/JMB Partners, L.P.-II
and Continental Bank N.A. is incorporated herein by reference.***

10.4. Second Amendment Credit Agreement dated January 31, 1990 to
the Credit Agreement dated May 5, 1989 between Arvida/JMB Partners, L.P.-II
and Continental N.A. is incorporated herein by reference.***

10.5. Credit Agreement dated May 5, 1989 between Arvida Talega
Limited Partnership and Continental Bank N.A. is incorporated herein by
reference.***

10.6. First Amendment Credit Agreement dated December 21, 1989 to
the Revolving Credit Agreement dated September 27, 1989 between Arvida/JMB
Partners, L.P.-II and Continental Bank N.A. is incorporated herein by
reference.***

10.7. First Amended and Restated Limited Partnership Agreement of
Heathrow Development Associates, Ltd. and Assignment of Partnership
Interests dated January 17, 1990 are herein incorporated by reference.**

10.8. Amended and Restated Heathrow Management Agreement dated
January 17, 1990 is herein incorporated by reference.**

10.9. Eagle Watch Partners General Partnership Agreement dated
December 27, 1989 is herein incorporated by reference.**

10.10. Letter of Credit Agreement dated July 27, 1990 between
Arvida/JMB Partners, L.P.-II and Santa Margarita Water District regarding
collateral for Tax-Exempt Bond Financing is herein incorporated by
reference.**

10.11. Agreement for the Payment of the Diemer Intertie Sublease
Payments, Principal and Interest of Bonds of Improvement District No. 7 and
Annual Budget Deficits Between Arvida/JMB Partners, L.P.-II and Santa
Margarita Water District dated January 15, 1990 is herein incorporated by
reference.*

10.12. Sale and Purchase Agreement dated August 3, 1993 by and
between EW Golf Club, L.P., Eagle Watch Partners and Cloverleaf
Investments, Inc. for the sale of the club facilities and other assets of
the Eagle Watch Golf Club is herein incorporated by reference.****

10.13. Stipulation and Settlement dated October 19, 1993 and Final
Judgement and Order dated March 31, 1994 pertaining to the class action
lawsuit is incorporated herein by reference.****

10.14. Agreement for Purchase and Sale dated August 14, 1995 by and
between Arvida/JMB Partners, L.P.-II and Heritage Development South, Inc.
for the sale of certain real property within the Wesmere Community is
incorporated herein by reference.******

10.15. Agreement for Sale and Purchase of Real Property dated March
22, 1996 among Heathrow Development Associates, Ltd., Heathrow Cable
Limited Partnership and Associates and Country Club, L.P. and 4/46A
Corporation for the sale of the remaining land and certain related assets
within the Heathrow Community is incorporated herein by reference to
Exhibit 10.15 to the Partnership's report for March 31, 1996 on Form 10-Q
(File No. 0-19245) filed with the Securities and Exchange Commission dated
May 10, 1996.

10.16. Agreement for Purchase and Sale of Real Property dated October
25, 1996 by and between Arvida/JMB Partners, L.P.-II and Starwood/Talega
Associates, L.L.C. for the sale of certain real property within the Talega
Property is filed herewith.

* Previously filed with the Securities and Exchange Commission as
Exhibit 3., 4.1 and 10.11 to the Partnership's Form 10-K (File No. 0-19245)
filed on April 12, 1993 and incorporated herein by reference.

** Previously filed with the Securities and Exchange Commission as
Exhibits 4.2, 4.3, 4.4, 4.5, 4.6, 4.7, 10.1, 10.7, 10.8, 10.9 and 10.10,
respectively, to the Partnership's Form 10-K Report (File No. 0-19245)
filed on April 13, 1992 and are herein incorporated by reference.

*** Previously filed with the Securities and Exchange Commission as
Exhibits 10.2, 10.3, 10.4, 10.5 and 10.6 to the Partnership's Form 10-K
Report (File No. 0-19245) under the Securities Act of 1934 filed on March
28, 1990 and incorporated herein by reference.

**** Previously filed with the Securities and Exchange Commission as
Exhibits 4.8, 10.12 and 10.13, respectively, to the Partnership's Form 10-K
(File No. 0-19245) filed on April 13, 1994 and incorporated herein by
reference.

***** Previously filed with the Securities and Exchange Commission as
Exhibits 4.9 and 4.10, respectively, to the Partnership's Form 10-Q (File
No. 0-19245) filed on November 9, 1995 and incorporated herein by
reference.

****** Previously filed with the Securities and Exchange Commission as
Exhibits 4.12, 10.14 and 10.15, respectively, to the Partnership's Form 10-
K Report (File No. 0-19245) under the Securities Act of 1934 filed on March
25, 1996 and incorporated herein by reference.

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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.

ARVIDA/JMB PARTNERS, L.P.-II

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

By: GAILEN J. HULL
Gailen J. Hull, Vice President
Date: November 8, 1996

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following person in the capacity
and on the date indicated.

GAILEN J. HULL
Gailen J. Hull, Principal Accounting Officer
Date: November 8, 1996

ARVIDA/JMB PARTNERS, L.P.-II
SEPTEMBER 30, 1996 - FORM 10Q
EXHIBIT 4.13

AMENDMENT OF
FORBEARANCE AND MODIFICATION AGREEMENTS

THIS AMENDMENT OF FORBEARANCE AND MODIFICATION AGREEMENTS (this
"AMENDMENT") is made as of this 24 day of September, 1996, by and among
ARVIDA/JMB PARTNERS, L.P.-II, a Delaware limited partnership ("BORROWER"),
HEATHROW DEVELOPMENT ASSOCIATES, LTD., a Florida limited partnership
("HEATHROW PARTNERSHIP"), and EAGLE WATCH PARTNERS, a Georgia general
partnership ("EAGLE WATCH PARTNERSHIP") (Borrower, Heathrow Partnership,
and Eagle Watch Partnership may be referred to herein as the "BORROWER
PARTIES"), BANK OF AMERICA ILLINOIS ("BAI"), formerly known as Continental
Bank N.A. and Continental Bank, in its capacities as Managing Co-Agent and
Lender under the Co-Lenders' Agreement for the benefit of the Lenders and
under the Amended and Restated Credit Agreement (as defined herein) and as
Agent and Lender under the Credit Agreement (as defined herein), and BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION ("BA NT&SA") in its
capacities as Co-Agent and Lender under the Co-Lenders' Agreement for the
benefit of the Lenders and under the Amended and Restated Credit Agreement
and as Lender under the Credit Agreement. BAI and BA NT&SA may be referred
to herein as the "CO-LENDERS."

RECITALS

A. The Co-Lenders and Borrower have entered into that certain
Amended and Restated Credit Agreement dated as of June 23, 1992 (the
"AMENDED AND RESTATED CREDIT AGREEMENT"), pursuant to which, among other
things, (i) Borrower has executed and delivered certain promissory notes in
the aggregate principal amount of $130,698,161.30, and (ii) the Borrower
Parties have executed and delivered the "SECURITY DOCUMENTS," including the
"MORTGAGES" (all as defined in the Amended and Restated Credit Agreement).
The indebtedness and obligations of the Borrower Parties under such notes
and Security Documents are collectively referred to as the "SENIOR
OBLIGATIONS."

B. Co-Lenders and Borrower have entered into that certain Credit
Agreement dated as of June 23, 1992 (the "CREDIT AGREEMENT"), pursuant to
which, among other things, (i) Borrower has executed and delivered certain
promissory notes in the aggregate principal amount of $14,301,838.70, and
(ii) the Borrower Parties have executed and delivered certain mortgages,
deeds of trust, and other security instruments creating liens that are
junior and subordinate in priority to the liens of the Security Documents
and Mortgages referred to in the preceding paragraph. The indebtedness and
obligations of the Borrower Parties under such notes, mortgages, deeds of
trust and other security instruments are collectively referred to as the
"SUBORDINATE OBLIGATIONS." The Senior Obligations and the Subordinate
Obligations are sometimes hereinafter collectively called the "CREDIT
FACILITIES."

C. Borrower's obligations under the Credit Agreement and the
Amended and Restated Credit Agreement are in default. Co-Lenders have
forborne from exercising certain of their rights and remedies on account of
such defaults but Co-Lenders have no obligation to continue such
forbearance and may discontinue such forbearance at any time.

D. The Co-Lenders and the Borrower Parties have entered into that
certain Forbearance and Modification Agreement (Amended and Restated Credit
Agreement) dated March 21, 1995 (the "SENIOR FORBEARANCE AND MODIFICATION
AGREEMENT") modifying certain terms of the Amended and Restated Credit
Agreement and that certain Forbearance and Modification Agreement (Credit
Agreement) dated March 21, 1995 (the "SUBORDINATE FORBEARANCE AND
MODIFICATION AGREEMENT") modifying certain terms of the Credit Agreement.
The Senior Forbearance and Modification Agreement and the Subordinate
Forbearance and Modification Agreement have been modified by certain letter
agreements between the Co-Lenders and the Borrower Parties dated
October 3, 1995, October 31, 1995, March 28, 1996, June 3, 1996 and June
6,1996. The Senior Forbearance and Modification Agreement and the
Subordinate Forbearance and Modification Agreement as so modified are
herein collectively referred to as the "FORBEARANCE AGREEMENTS."

E. The Senior Obligations and the Subordinate Obligations are
secured by liens on certain real property located in Orange County,
California together with certain related personal property (collectively,
the "TALEGA PROPERTY"), certain real property located in Seminole County,
Florida together with certain related personal property (collectively, the
"MARKET SQUARE PROPERTY"), certain real property located in Cherokee
County, Georgia consisting of (2) Lots in the development known as "Eagle
Watch" together with certain related personal property (collectively, the
"EAGLE WATCH LOTS") and certain real property located in Orange County,
Florida, consisting of the sales office at the development known as
"Wesmere" together with certain related personal property (collectively,
the "WESMERE SALES OFFICE") The Talega Property, the Market Square
Property, the Eagle Watch Lots and the Wesmere Sales Office are sometimes
hereinafter collectively called the "REAL PROPERTY ASSETS." The Borrower
Parties are attempting to sell the Real Property Assets and desire to
continue such sales efforts.

F. In addition to the Real Property Assets, Borrower owns (a) a
claim (the "PALM BEACH CLAIM") which was filed as part of that certain
Chapter 11 bankruptcy proceeding entitled IN RE LANDMARK LAND COMPANY OF
FLORIDA INC. (Civil Action No. 2:91-3291-1/5291-1), currently pending in
the U.S. District Court for South Carolina (Charleston Div.) sitting in
bankruptcy and (b) certain other assets (herein collectively called the
"OTHER ASSETS") including cash and refundable deposits.

G. In order to facilitate the Borrower Parties' efforts to sell
the Real Property Assets and reduce their obligations under the Senior
Obligations and the Subordinate Obligations, the Borrower Parties have
requested that the Co-Lenders agree to forbear from exercising certain
rights and remedies for Borrower's defaults until March 31, 1997, agree to
release the Real Property Assets upon the payment of certain release
payments as described below, which payments are to be applied to the Senior
Obligations and the Subordinate Obligations, and agree to cancel certain
portions of the Senior Obligations and the Subordinate Obligations. The
Co-Lenders are willing to so agree on the terms and conditions set forth
herein.

AGREEMENTS

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants, agreements, representations and warranties set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:

SECTION 1. FORBEARANCE.

(a) Subject to the terms and conditions set forth herein, the
Co-Lenders agree to forbear from taking any or all of the following actions
on account of the defaults under the Credit Agreement and/or the Amended
and Restated Credit Agreement prior to the Termination Date (as defined
below):
(i) Filing suit to collect any of the Senior
Obligations or the Subordinate Obligations.
(ii) Commencing foreclosure proceedings against any of the
Real Property Assets.
(iii) Commencing any action for the appointment of a
receiver for any of the Real Property Assets.

(b) Nothing in this Amendment shall obligate the Co-Lenders to
forbear from exercising any other right or remedy for the defaults under
the Credit Agreement and the Amended and Restated Credit Agreement in the
Co-Lenders' sole and absolute discretion including, without limitation,
giving notices of default, accelerating any obligation, demanding payment
or performance of any obligation, imposing or collecting late charges,
default interest, advancing funds to preserve and protect collateral, and
engaging counsel and other professionals.

(c) The Co-Lenders' agreement to forbear shall terminate
automatically and without demand, notice, grace period or right to cure
upon the date (the "TERMINATION DATE") the first of any of the following
events (each, a "TERMINATION EVENT") occurs:

(i) The close of business on March 31, 1997.
(ii) The filing by or against any of the Borrower
Parties of a petition under Title 11 U.S.C. which
is not dismissed within sixty (60) days.
(iii) The filing by any Borrower Party of any action
against any Co-Lender for damages, injunctive
relief or any other relief relating to the Credit
Agreement or the Amended and Restated Credit
Agreement or the Senior Obligations
or the Subordinate Obligations or any collateral
therefor.
(iv) The occurrence after the date hereof of (A) any
Event of Default (excluding any Event of Default
existing as of the date of this Amendment) under
the Credit Agreement or the Amended and Restated
Credit Agreement which materially and adversely
affects any real or personal property collateral
for the Senior Obligations or the Subordinate
Obligations or any of the Co-Lenders' interests
therein, or (B) any default by any of the
Borrower Parties under this Agreement.

SECTION 2. RELEASE OF TALEGA PROPERTY. In the event that Borrower
consummates a sale of the Talega Property (the "TALEGA SALE") prior to the
occurrence of the Termination Date, the Co-Lenders shall release the Talega
Property from the liens of all security instruments in favor of the
Co-Lenders provided that the following conditions have been satisfied by
the Borrower Parties:

(a) Immediately upon the closing of such sale, the Co-Lenders
shall receive a release payment (the "TALEGA RELEASE PAYMENT") equal to the
greater of (i) all net proceeds of the sale or (ii) TWENTY MILLION AND
NO/100 DOLLARS ($20,000,000.00). Not less than ELEVEN MILLION AND NO/100
DOLLARS ($11,000,000.00) of the Talega Release Payment shall be paid to the
Co-Lenders in cash in immediately available funds. Not more than NINE
MILLION AND NO/100 DOLLARS ($9,000,000.00) of the Talega Release Payment
may, at Borrower's election, be paid by a fully assignable promissory note
(the "TALEGA SALE NOTE") executed by the purchaser to the order of
Borrower, bearing no interest (provided that the Talega Sale Note shall
bear interest upon default) and payable by periodic principal reductions,
maturing not later than six (6) years after the date thereof, and which is
secured by a deed of trust (the "TALEGA SALE DEED OF TRUST") encumbering
the Talega Property and assigned to the Co-Lenders pursuant to an
assignment of note and deed of trust, in recordable form, (the "TALEGA SALE
ASSIGNMENT").

(b) The Talega Sale Note, if any, shall be delivered to the Co-
Lenders, and the Talega Sale Deed of Trust and the Talega Sale Assignment
shall be recorded in the Official Records of Orange County, California.

(c) BA NT&SA shall have no further liability under the Talega
Letters of Credit and BA NT&SA shall be protected from liability for draws
thereon either by the return of the Talega Letters of Credit to BA NT&SA or
by such other means as BA NT&SA may, in its sole and absolute discretion,
accept.

(d) The Co-Lenders shall have no obligation to pay any costs or
expenses of the closing of the Talega Sale; provided that Borrower's share
of such costs and expenses may be deducted from the proceeds of such sale,
subject to paragraph (a) of this Section 2.

(e) Not less than three (3) business days prior to the closing,
the Co-Lenders shall have received and approved a pro forma closing statement
prepared by the escrow agent and immediately after the closing shall
receive a copy of the final closing statement prepared by the escrow
officer which shall not vary substantially from the pro forma closing
statement previously approved.

SECTION 3. RELEASE OF MARKET SQUARE PROPERTY. In the event that
Heathrow Partnership consummates a sale of the Market Square Property (the
"MARKET SQUARE SALE") prior to the occurrence of the Termination Date, the
Co-Lenders shall release the Market Square Property from the liens of all
security instruments in favor of the Co-Lenders provided that the following
conditions are satisfied by the Borrower Parties:

(a) Immediately upon the closing of such sale, the Co-Lenders
shall receive a release payment (the "MARKET SQUARE RELEASE PAYMENT") equal
to the greater of (i) all net proceeds of the sale or (ii) FIVE MILLION AND
NO/100 DOLLARS ($5,000,000.00) paid to the Co-Lenders in cash in
immediately available funds.

(b) The Co-Lenders shall have no obligation to pay any costs or
expenses of the closing of the Market Square Sale; provided that Heathrow
Partnership's share of such costs and expenses may be deducted from the
proceeds of such sale, subject to paragraph (a) of this Section 3.

(c) Not less than three (3) business days prior to the closing,
the Co-Lenders shall have received and approved a pro forma closing statement
prepared by the escrow agent and immediately after the closing shall
receive a copy of the final closing statement prepared by the escrow
officer which shall not vary substantially from the pro forma closing
statement previously approved.

SECTION 4. RELEASE OF EAGLE WATCH LOTS. In the event that one of
Eagle Watch Partnership consummates a sale of either or both of the Eagle
Watch Lots (each, an "EAGLE WATCH LOT SALE") prior to the occurrence of the
Termination Date, the Co-Lenders shall release the affected Eagle Watch Lot
from the liens of all security instruments in favor of the Co-Lenders
provided that the following conditions are satisfied by the Borrower
Parties:

(a) Immediately upon the closing of each such sale, the Co-Lenders
shall receive a release payment (the "EAGLE WATCH LOT RELEASE PAYMENT")
paid to the Co-Lenders in cash in immediately available funds in an amount
equal to the greater of (i) all net proceeds of the sale or (ii) the sum of
(A) THIRTY THOUSAND AND NO/100 DOLLARS ($30,000.00) for Lot #279 and (B)
THIRTY-FIVE THOUSAND AND NO/100 DOLLARS ($35,000.00) for Lot #108.

(b) The Co-Lenders shall have no obligation to pay any costs or
expenses of the closing of an Eagle Watch Lot Sale; provided that Eagle
Watch Partnership's share of such costs and expenses may be deducted from
the proceeds of such sale, subject to paragraph (a) of this Section 4.

(c) Not less than three (3) business days prior to the closing
of an Eagle Watch Lot Sale, the Co-Lenders shall have received and approved a
pro forma closing statement prepared by the escrow agent and immediately
after the closing shall receive a copy of the final closing statement
prepared by the escrow officer which shall not vary substantially from the
pro forma closing statement previously approved.

SECTION 5. RELEASE OF WESMERE SALES OFFICE. In the event that one of
the Borrower Parties consummates a sale of the Wesmere Sales Office (the
"WESMERE SALE") prior to the occurrence of the Termination Date, the Co-
Lenders shall release the Wesmere Sales Office from the liens of all
security instruments in favor of the Co-Lenders provided that the following
conditions are satisfied by the Borrower Parties:

(a) Immediately upon the closing of such sale, the Co-Lenders
shall receive a release payment (the "WESMERE RELEASE PAYMENT") paid to the
Co-Lenders in cash in immediately available funds in an amount equal to the
greater of (i) all net proceeds of the sale or (ii) NINETY THOUSAND AND
NO/100 DOLLARS ($90,000.00) .

(b) The Co-Lenders shall have no obligation to pay any costs or
expenses of the closing of the Wesmere Sale; provided that Borrower's share
of such costs and expenses may be deducted from the proceeds of such sale,
subject to paragraph (a) of this Section 5.

SECTION 6. ADDITIONAL PROVISIONS RELATING TO SALES OF THE REAL
PROPERTY ASSETS.

(a) If Borrower desires to consummate any one or all of the Talega
Sale, the Market Square Sale, the Eagle Watch Lot Sales and the Wesmere
Sale and any condition set forth herein to any such Sale has not been
satisfied, at the request of Borrower the Co-Lenders may, in their sole and
absolute discretion but without any obligation to do so, do either of the
following with respect to each such unsatisfied condition: (i) waive any
such condition in whole or in part in writing or (ii) permit the Sale to be
consummated in accordance with Section 2, Section 3, Section 4 or Section
5, as applicable, notwithstanding that any such condition is not satisfied,
in which event the Borrower Parties shall remain liable to satisfy such
condition. Any such condition may only be waived in writing executed by
the Co-Lenders and stating the intent of the Co-Lenders to waive such
condition. No oral waiver shall be effective and no waiver shall be
inferred or implied by any conduct or statement of Co-Lenders or receipt or
acceptance of all or any proceeds of either or both such Sales. The
Borrower Parties agree to execute and deliver to the Co-Lenders written
agreements reasonably satisfactory to the Co-Lenders to satisfy any
unwaived conditions not satisfied prior to Sale.

(b) The Talega Release Payment, the Market Square Release Payment,
the Eagle Watch Lot Release Payments and the Wesmere Release Payment, as
applicable, shall be applied by the Co-Lenders to the Senior Obligations
and/or the Subordinate Obligations as the Co-Lenders shall, in their sole
and absolute discretion, determine.

(c) All funds comprising the Talega Release Payment, the Market
Square Release Payment, each of the Eagle Watch Lot Release Payments and
the Wesmere Release Payment, as applicable, shall be provided by the
purchaser or purchasers through the respective purchase price and no
portion of the Talega Release Payment or the Market Square Release Payment
shall be provided by Borrower from Borrower's funds.

(d) No Borrower Party shall enter into any agreement for the sale
any Real Property Assets unless BA NT&SA shall have approved the same.

SECTION 7. DEBT CANCELLATION.
(a) Upon the full execution and delivery of this Amendment by the
parties hereto, the Co-Lenders hereby forgive, waive and cancel a portion
of the accrued and unpaid interest on the Credit Facilities (the "CANCELED
INTEREST") in the aggregate amount of TWENTY MILLION AND NO/100 DOLLARS
($20,000,000.00), of which Two Million and no/100 DOLLARS ($2,000,000.00)
shall be allocated to interest on the Credit Facility known as the
"Revolver" and Eighteen Million and no/100 DOLLARS ($18,000,000.00) shall
be allocated to interest on the Credit Facility known as the "Term B Loan."
The cancellation of the Canceled Interest shall not obligate the Co-Lenders
to refund to the Borrower Parties any interest, principal or other amounts
previously or hereafter received from any Borrower Party or otherwise
received by the Co-Lenders in respect of the Credit Facilities. The
foregoing cancellation of the Canceled Interest shall constitute only a
reduction in the indebtedness of the obligations of the Borrower Parties
concurrently owing to the Co-Lenders in respect of the Credit Facilities.

(b) During the period from the date of this Amendment to the
Forgiveness Date (as defined below), Borrower:

(i) shall use diligent, good faith efforts to sell all
of its Real Property Assets for cash prices (net of the expenses of
sale) which are not less than those shown on the Cash Flow
Projections attached hereto as Exhibit A.

(ii) shall maintain operating expenses at the levels
set forth on the Cash Flow Projection and shall not incur any new
or additional liabilities of any kind except in the ordinary course
of business of Borrower and shall not in any event incur any
liabilities of any kind to the Borrower Parties or to any of their
respective affiliates other than as set forth in the Cash Flow
Projections without the prior written consent of the Co-Lenders,
which the Co-Lenders may grant or withhold in their sole and
absolute discretion.

(iii) shall apply all cash receipts from the sales of Real
Property Assets after paying the expenses of sale and all cash
receipts from other operations after paying the expenses referenced
in subsection (ii) to make principal reductions payments in cash
(including the Talega Release Payment, the Market Square Release
Payment, the Eagle Watch Lot Release Payments and the Wesmere Release
Payment, as applicable, but excluding the amount of the Talega Sale
Note) in the aggregate amount of not less than FOURTEEN MILLION THREE
HUNDRED TWENTY-THREE THOUSAND AND NO/100 DOLLARS ($14,323,000.00).
(iv) shall pay to the Co-Lenders immediately upon
Borrower's receipt thereof all recoveries relating to the Palm
Beach Claim received by Borrower.

(c) The Co-Lenders agree to forgive, waive and relinquish all of
the then unpaid principal balances of the Credit Facilities together with
all then accrued and unpaid interest thereon, all then accrued and unpaid
letter of credit fees and all other amounts then owing and unpaid in
respect of the Credit Facilities, upon the Forgiveness Date (as defined
below); provided, however, that if the Forgiveness Date has not occurred by
March 31, 1997, then the Co-Lenders' obligations under this Section 7(c)
shall terminate and the forgiveness, waiver and relinquishment set forth in
this Section 7(c) shall be null and void and of no force or effect;
provided further, that the Co-Lenders' agreement is made subject to the
express condition subsequent that Borrower shall fully and timely satisfy
its obligations under Section 7(d) below. The "FORGIVENESS DATE" shall
mean the date on which all of the following events shall have occurred:

(i) Borrower shall have made the payment specified in
Section 7(b)(iii) above.

(ii) Borrower shall have executed and delivered to the Co-Lenders
an Affidavit of Financial Condition in a form acceptable to the Co-Lenders
listing all of Borrower's assets, interests and debts as of the Forgiveness
Date.

(iii) Borrower shall have executed and delivered to the Co-Lenders
all documents necessary or appropriate to assign absolutely and transfer to
the Co-Lenders any and all rights of Borrower to any further recoveries
(net of expenses and subject to existing contingent fee arrangements)
relating to the Palm Beach Claim that may arise from and after the date of
such assignment, all of which documents shall be in form and content
reasonably acceptable to the Co-Lenders. To that end, Borrower and any
other parties with an interest in the Palm Beach Claim shall have executed
any and all additional assignments or other documents reasonably required
by the Co-Lenders to effectuate the foregoing including, without
limitation, any substitutions of parties or counsel required by the Co-
Lenders to enable the Co-Lenders (or the Co-Lenders' designee) to prosecute
the Palm Beach Claim following such assignment. Neither anything in this
Agreement, any assignment of the Palm Beach Claim to the Co-Lenders, the
substitution of Co-Lenders or the Co-Lenders' designee as a party to the
proceeding in which the Palm Beach Claim is pending, or the receipt by the
Co-Lenders of any recoveries on the Palm Beach Claim shall constitute an
assumption by the Co-Lenders of, or otherwise operate to make the Co-
Lenders liable for, any liabilities, costs, judgments, expenses or other
obligation relating to the Palm Beach Claim whether by way of judgment on
any counterclaim, cross claim or cross complaint, award of court costs,
sanctions or attorneys' fees or, except as expressly agreed to by the
Co-Lenders in writing, any attorneys' fees, disbursements, witness fees or
other costs or expenses owing to the plaintiff's counsel or other person.

(iv) Borrower shall have assigned and conveyed to the Co-Lenders
all of its right, title and interest in and to any of its Real Property Assets
which shall not have been previously sold pursuant to the terms hereof.

(v) Borrower shall have assigned to the Co-Lenders all of its
right, title and interest in and to all of its Other Assets except for a
cash reserve in an amount reasonably acceptable to the Co-Lenders to cover
the costs and expenses of the dissolution of Borrower.

(vi) Borrower shall execute any and all additional assignments or
other documents and take any and all other actions as may reasonably be
required by the Co-Lenders to effectuate the assignment and transfer of its
Other Assets and its remaining Real Property Assets and all such documents
shall be in form and content reasonably acceptable to the Co-Lenders.

(vii) Borrower shall have performed all of its obligations under
this Amendment and shall not be in default under this Amendment in any
material respect.

(d) In consideration of the cancellation of debt by the
Co-Lenders as set forth in Section 7(c) above, Borrower agrees as follows:

(i) Borrower shall not incur any material debts or any
material liabilities of any kind from and after the Forgiveness Date.

(ii) On the Forgiveness Date, Borrower shall take all
steps necessary or appropriate to dissolve Borrower, and shall
proceed with the winding up of Borrower as quickly as possible
thereafter.
Borrower shall provide to the Co-Lenders each month a written
accounting of the progress of the winding up (including without
limitation, names and claims of and amounts paid to all creditors).

(iii) As the final step in winding up its business,
Borrower shall assign and transfer to the Co-Lenders all of
Borrower's remaining net assets and interests. Borrower shall
execute any and all additional assignments or other documents
and take any and all other actions as reasonably may be required
by the Co-Lenders to effectuate such assignment and transfer and
all such documents shall be in form and content reasonably
acceptable to the Co-Lenders.

SECTION 8. DEFAULT.

(a) The occurrence of any of the following shall constitute a
default by the Borrower Parties under this Amendment: (i) the failure by
any of the Borrower Parties to take any required act or refrain from taking
any prohibited act under this Amendment in any material respect, or
(ii) the occurrence of any "Event of Default" or default by any of the
Borrower Parties under any of the Amended Agreements (as defined in
Section 9(a) below) from and after the date of this Amendment other than
any Event of Default or other default existing as of the date hereof. The
Borrower Parties hereby waive any notice, demand, presentment and all other
conditions (precedent or otherwise) to the acceleration of any and all such
Senior Obligations.

(b) By reason of the occurrence of any such Event of Default,
the Co-Lenders do and at all times hereafter shall have the right to pursue
and obtain any and all remedies at law, in equity or under or pursuant to
any of the Amended Agreements at any time and without further notice.

SECTION 9. MISCELLANEOUS.

(a) Except as modified hereby, the Forbearance Agreements, the
Credit Agreement, the Amended and Restated Credit Agreement and all other
agreements between the Co-Lenders and the Borrower Parties relating to the
Senior Obligations and the Subordinate Obligations (collectively, the
"AMENDED AGREEMENTS") shall remain in full force and effect.

(b) This Amendment is subject to the provisions of Section 9.29
of the Forbearance Agreements.

(d) If any court of competent jurisdiction determines any
provisions of this Amendment to be invalid, illegal or unenforceable, that
portion shall be deemed severed from the remainder of this Amendment and
the remainder of this Amendment shall remain in full force and effect as
though such invalid, illegal or unenforceable portion had never been a part
of this Amendment.

(e) Time is of the essence of this Amendment and each and
every provision hereof.

IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.

ARVIDA/JMB PARTNERS, L.P.-II,
a Delaware limited partnership

By: Arvida/JMB Managers-II, Inc.,
General Partner

By:
Name:
Title:

HEATHROW DEVELOPMENT ASSOCIATES, LTD., a Florida
limited partnership

By: Arvida/JMB Partners, L.P.-II,
General Partner

By: Arvida/JMB Managers-II, Inc.,
General Partner

By:
Name:
Title:

EAGLE WATCH PARTNERS,
a Georgia general partnership

By: Arvida/JMB Partners, L.P.-II,
General Partner

By: Arvida/JMB Managers-II, Inc.,
General Partner

By:
Name:
Title:

BANK OF AMERICA ILLINOIS,
an Illinois banking corporation
in its capacity as Managing Co-Agent

By:
Name:
Title:

BANK OF AMERICA ILLINOIS,
an Illinois banking corporation
in all capacities hereunder other than
as Managing Co-Agent

By:
Name:
Title:

BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
a national trust and savings association

By:
Name:
Title:

ARVIDA/JMB PARTNERS, L.P.-II
Exhibit 10.16

AGREEMENT FOR PURCHASE AND SALE

REAL PROPERTY

AND

ESCROW INSTRUCTIONS

THIS AGREEMENT FOR PURCHASE AND SALE OF REAL PROPERTY AND ESCROW
INSTRUCTIONS ("Agreement") is made and entered into this 25th day of
October, 1996, by and between ARVIDA/JMB PARTNERS, L.P.-II, a Delaware
limited partnership ("Seller"), and STARWOOD/TALEGA ASSOCIATES, L.L.C., a
Delaware limited liability company ("Buyer").

R E C I T A L S

WHEREAS, Seller is the owner in fee simple of those certain parcels
of real property (collectively, the "Land") located in southeast Orange
County, California, which are situated partially within the incorporated
limits of the City of San Clemente and partially within the unincorporated
territory of the County of Orange, all of which are legally described in
EXHIBIT A, which is attached hereto and by this reference made a part
hereof and all buildings, structures and improvements located thereon
(collectively, the "Improvements"); and

WHEREAS, Buyer desires to purchase from Seller and Seller desires to
sell to Buyer the Land, the Improvements and the other property as
hereinafter described at an agreed upon price and under specified terms and
conditions.

NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

ARTICLE 1

Description, Scope and Disposition of the Property

Section 1.01 DESCRIPTION AND SCOPE OF THE PROPERTY. For
purposes of this Agreement, the term "Property" shall include the
following:

(a) the Land and Improvements, together with all of Seller's right,
title and interest, if any, in and to all tenements, hereditaments,
privileges, and appurtenances in any way belonging or appertaining thereto;

(b) all tangible personal property related exclusively to the Land
now owned by Seller which such personal property is listed on SCHEDULE
1.01(b), which is attached hereto and by this reference made a part hereof
(collectively, the "Personal Property");

(c) all right, title and interest of Seller to land, if any, lying
in the bed of any street, road, or avenue, open or proposed, at the foot
of, adjoining or below the Land and in and to any strips and gores
adjoining the Land;

(d) all of the Seller's right, title and interest in and to all
contracts or other similar instruments in connection with the ownership,
management, development, operation and maintenance of the Land and
Improvements which are "Assumed Contracts" (as hereinafter defined);

(e) all of Seller's right, title and interest in and to all plans
and specifications, all drawings, surveys, maps, engineering and
environmental reports and other technical descriptions, test results,
reports and studies relating to the Land and Improvements (the "Plans and
Specifications");

(f) all financial statements, income and expense reports relating
to the Land and Improvements; and

(g) all of Seller's right, title and interest in and to all
documents, instruments and agreements relating to the "Bond Debt" (as
hereinafter defined).

(h) all of Seller's right, title and interest in and to any
intangible property owned or held by Seller in connection with the Land or
the Improvements, including, without limitation, the following
(collectively, the "Intangible Property"): (i) all development
entitlements and agreements related to development of the Land or
Improvements (to the extent Seller may assign its interest in such
agreements to Buyer); (ii) any and all entitlements Seller may own, if any,
to water and sewer capacity to serve the Property; (iii) all transferable
licenses, warranties and guaranties relating to the Land or the
Improvements or any part thereof, including without limitation, those
identified on the list of material licenses and warranties as SCHEDULE
1.01(h)(iii), which is attached hereto and by this reference made a part
hereof (the "Licenses"); (iv) all transferable consents, authorizations,
variances or waivers, all legislative and adjudicative or quasi-judicial
approvals, including, without limitation, any planned unit development
permits, conditional use permits, development agreements, tentative or
final subdivision or parcel maps, use permits, coastal development permits,
building or grading permits, covenants or other agreements running with the
Land, all documentation prepared pursuant to the California Environmental
Quality Act, California Public Resources Code Sec. 21000 et seq., any
ordinances, resolutions, or any other approvals from any governmental
agency, bureau, board, commission, court, department, official, political
subdivision, tribunal or other instrumentality of any government, whether
federal, state or local, domestic or foreign (collectively, a "Governmental
Authority") relating to the Land or the Improvements or any part thereof
(collectively, "Entitlements"); and (v) all building and trade names;
provided, however, that Buyer shall not receive any right, title or
interest in or to, or right to use the names "Arvida," "JMB," "Arvida/JMB,"
or any derivatives thereof.

Buyer acknowledges that, except as specifically set forth in Article
5 of this Agreement, Seller is making no representation or warranty as to
the condition of title to the Land, to the existence, validity or status of
any entitlements to develop the Land, to the accuracy or efficacy of any
architectural or engineering documents related to development of the Land
or to the availability, validity and sufficiency of any water and sewer
infrastructure and infrastructure capacity to satisfy requirements to
develop the Land.

Section 1.02 DISPOSITION OF THE PROPERTY. It is the intention
of the parties hereto that following conveyance of the Property to Buyer in
accordance with the terms of the Agreement, Seller shall have no interest
in the Property, with the exception of a note secured by a deed of trust
for a portion of the "Purchase Price" (as hereinafter defined).

ARTICLE 2

Terms and Purchase and Sale

Section 2.01 PURCHASE AND SALE OF PROPERTY. Subject to the
provisions, terms and conditions of this Agreement, Buyer shall purchase
from Seller and Seller shall sell to Buyer the Property.

Section 2.02 CONDITIONS TO SELLER'S OBLIGATIONS. The obligation
of Seller to sell the Property to Buyer is contingent upon the satisfaction
of the following conditions, unless waived by Seller in Seller's sole and
absolute discretion:

(a) BONDS. Buyer hereby acknowledges that the Land and
Improvements are encumbered by a debt in favor of the Santa Margarita Water
District ("District") and/or Improvement District nos. 7 and 7A of the
District in the amount of approximately Sixty-Two Million and No/100
Dollars ($62,000,000.00) ("Bond Debt"). The Bond Debt was incurred as a
result of a bond issue and sale by the District, the proceeds of which were
used to finance certain water and sewer infrastructure benefiting the Land.

The annual debt service required to repay the bonds is approximately Six
Million and No/100 Dollars ($6,000,000.00) per year. Buyer further
acknowledges that the District levies standby charges, ad valorem taxes and
assessments on the Land to pay the debt service on the bonds and to finance
other facilities and operations of the District that benefit the Land and
Improvements. Sale of the Property by Seller to Buyer is contingent upon
(1) a full and unconditional release (in form and substance satisfactory to
Seller in its reasonable discretion) of Seller by the District from all
liabilities and obligations connected with the Bond Debt and standby
charges, ad valorem taxes, reimbursements and assessments for payment of
debt service on the Bond Debt and other facilities and operations of the
District, including, but not limited to, liabilities or obligations arising
out of that certain Agreement for Payment of Diemer Intertie Sublease
Payments, Principal and Interest on Bonds of Improvement District No. 7 and
Annual Budget Deficits, by and between Seller and the District, dated as of
January 15, 1990, and that certain Letter of Credit Agreement by and
between Seller and the District, dated July 27, 1990, given at or before
conveyance of the Property to Buyer; and (2) a release by the District of
its statutory lien against the Property and termination and dismissal (with
prejudice) of the statutory foreclosure action, against the Property,
Seller hereby agreeing to make the payments to the District required under
Section 8.01 in order to obtain the releases under this Section 2.01(a)(2);

(b) BANK OF AMERICA. Buyer hereby acknowledges that the Property
is encumbered by a deed of trust in favor of Bank of America NT&SA ("Bank
of America"). The sale of the Property from Seller to Buyer is contingent
upon the approval of such sale in accordance with the terms and conditions
of this Agreement by Bank of America, a full and unconditional release of
Seller by Bank of America, on term and conditions satisfactory to Seller in
its reasonable discretion, from any and all liability, including, without
limitation, any deficiency resulting from the difference between the amount
of the encumbrance represented by the deed of trust and the "Purchase
Price" (as hereinafter defined) and a full reconveyance of said deed of
trust as it relates to the Property;

(c) SECURITY. Seller has posted security in the form of
subdivision improvement bonds, letters of credit and other security
instruments (the "Security Instruments) with the City of San Clemente,
County of Orange, and other government entities in compliance with
California law, local ordinances and development approval conditions. Sale
of the Property by Seller to Buyer is contingent upon Buyer delivering to
the holders of the Security Instruments replacement Security Instruments in
the form and substance satisfactory to such holders;

(d) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Buyer set forth in this Agreement and in
the "Buyer Ancillary Documents" (as hereinafter defined) shall be true and
correct in all material respects on the Closing Date with the same force
and effect as though made on and as of such date;

(e) PERFORMANCE OF AGREEMENTS. Buyer shall have timely complied in
all material respects with all of its covenants and agreements set forth in
this Agreement and in any Buyer Ancillary Document to be performed by Buyer
on or prior to the Closing Date;

(f) BUYER'S CERTIFICATES. Buyer shall have delivered to Seller a
certificate, dated the Closing Date and signed by an authorized
representative, certifying as to its compliance with Sections 2.02(c) and
(d);

(g) BUYER ANCILLARY DOCUMENTS. Buyer shall have delivered to
Seller the Buyer Ancillary Documents; and

(h) ASSUMPTION AND RELEASE. Sale of the Property by Seller to
Buyer is contingent upon assumption of Seller's obligations by Buyer and/or
release of Seller from any and all liability under the Assumed Contracts
arising out of events occurring from and after the Closing Date.

As used in this Section 2.02, "Seller" shall mean Arvida/JMB
Partners, L.P.-II, each present or future "Constituent Partner" (as
hereinafter defined) in or agent of Seller, and each of the present and
future shareholders, officers, directors, members, managers, employees,
trustees, beneficiaries or agents of any corporation or other entity that
is or becomes a Constituent Partner in Seller.

Section 2.03 CONDITIONS TO BUYER'S OBLIGATIONS. The obligation
of Buyer to purchase the Property from Seller is contingent upon the
satisfaction of the following conditions, unless waived by Buyer in Buyer's
sole and absolute discretion:

(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller set forth in this Agreement and in
the "Seller Ancillary Documents" (as hereinafter defined) shall be true and
correct in all material respects on the Closing Date with the same force
and effect as though made on and as of such date;

(b) PERFORMANCE OF AGREEMENTS. Seller shall have timely complied
in all material respects with all of its covenants and agreements set forth
in this Agreement and in any Seller Ancillary Document to be performed by
Seller on or prior to the Closing Date;

(c) SELLER'S CERTIFICATES. Seller shall have delivered to Buyer a
certificate, dated the Closing Date and signed by an authorized
representative, certifying as to its compliance with Sections 2.03(a) and
(b);

(d) MATERIAL ADVERSE CHANGE. There shall not have occurred any
material adverse change in the condition of the Property;

(e) SELLER ANCILLARY DOCUMENTS. Seller shall have delivered to
Buyer the Seller Ancillary Documents; and

(f) REPLACEMENT SECURITY. The City of San Clemente, the County of
Orange and the other governmental entities which hold the Security
Instruments shall have accepted replacements to such Security Instruments
from Buyer.

Section 2.04 PURCHASE PRICE. The purchase price to be paid by
Buyer for the Property shall be Thirty-Three Million and No/100 Dollars
($33,000,000.00) ("Purchase Price"), as hereinafter provided.

Section 2.05 TERMS OF PAYMENT OF PURCHASE PRICE. The Purchase
Price shall be paid by Buyer to Seller, as follows:

(a) Within five (5) business days of the execution of this
Agreement by Buyer, Buyer shall tender the sum of Five Hundred Thousand and
No/100 Dollars ($500,000.00) ("Deposit") to First American Title Insurance
Company, 114 East Fifth Street, Santa Ana, California 92701 ("Escrow
Holder") for deposit in the escrow established pursuant to Section 4.01 of
this Agreement, which Deposit shall be applied to the Purchase Price at
Closing. The Escrow Holder shall invest the Deposit in an insured money
market account at a nationally recognized bank selected by the Escrow
Holder.

(b) The sum of Twenty-Six Million Five Hundred Thousand and No/100
Dollars ($26,500,000.00) to be applied to the Purchase Price shall be paid
to Escrow Holder for deposit in escrow by wire transfer on the Closing
Date.

(c) The balance of the Purchase Price shall be paid to Seller in
the form of a promissory note executed by Buyer ("Note") in favor of Seller
in the amount of Six Million and No/100 Dollars ($6,000,000.00), which Note
shall be secured by first a deed of trust ("Deed of Trust") encumbering the
Property, which Deed of Trust shall designate Seller as the beneficiary
thereunder. The Note shall bear no interest and shall be payable on or
before June 30, 1997. The Deed of Trust shall not be subordinate to any
liens on the Property securing any financing except for the assessments,
standby charges and ad valorem taxes relating to the Bond Debt. The forms
of the Note and Deed of Trust are attached as Exhibit B hereto.

Section 2.06 BROKERAGE COMMISSION. Buyer has engaged the
services of O'Donnell, Atkins Company and The Overland Company as real
estate brokers in conjunction with the transaction contemplated by this
Agreement. Brokerage commissions in the amount of Three Hundred Fifty-Five
Thousand and No/100 Dollars ($355,000.00) and One Hundred Seventy-Seven
Thousand Five Hundred and No/100 Dollars ($177,500.00) ("Brokerage
Commissions") shall be payable to O'Donnell, Atkins Company and The
Overland Company respectively by Escrow Holder from proceeds due Seller
hereunder, and from no other source, in accordance with Sections 3.04(c)
and (d) of this Agreement; provided, however, payment of the Brokerage
Commissions is contingent upon O'Donnell, Atkins Company and The Overland
Company providing satisfactory evidence to Seller that each shall have been
possessed of a valid Real Estate Broker's License issued by the Department
of Real Estate of the State of California during the entire pendency of the
transaction contemplated by this Agreement. In the event either or both
O'Donnell, Atkins Company and/or The Overland Company is unable to provide
Seller such satisfactory evidence, no Brokerage Commissions shall be
payable to such entity(ies). Payment of the Brokerage Commissions is
contingent upon the Close of Escrow of the transaction contemplated herein
in accordance with Article 4 of this Agreement. Buyer and Seller each
represent and warrant to the other that neither has employed any real
estate agent, broker, finder or adviser (other than Buyer's employment of
O'Donnell Atkins Company and the Overland Company) as its adviser or broker
in connection with this transaction. Seller agrees to and does hereby
indemnify, defend and forever hold Buyer harmless from all loss, damage,
cost, or expense (including reasonable attorney's fees) that Buyer may
suffer as a result of any claim or action brought by any other agent,
broker, finder or adviser acting or allegedly acting on behalf of Seller in
connection with this transaction. Buyer agrees to and does hereby
indemnify, defend and hold forever Seller harmless from all loss, damage,
cost or expense (including reasonable attorneys' fees) that Seller may
suffer as a result of any claim or action brought by any other agent,
broker, finder or adviser acting or allegedly acting on behalf of Buyer in
connection with this transaction.

Section 2.07 APPEAL OF REAL PROPERTY TAX ASSESSMENTS. Seller
has appealed the assessments of the Orange County Tax Assessor on the
various parcels comprising the Land for the current and prior tax years.
In the event Seller prevails in such appeal, Seller shall be entitled to
the full and complete refund of real property taxes resulting from the
appeal other than any portion of such refund which applies to the period
following the Closing Date, to which Buyer shall be entitled. In the
further event any such refund is paid subsequent to the Close of Escrow,
Buyer shall pay Seller all such sums within five (5) days of receipt
thereof. This Section 2.07 shall survive the Closing and any termination
of this Agreement.

ARTICLE 3

Due Diligence Period; Title and Survey

Section 3.01 TITLE INSURANCE. Seller has delivered to Buyer a
preliminary title report (the "Title Report") from First American Title
Insurance Company (the "Title Company") dated August 13, 1996. In
addition, within five (5) days of the date hereof, Seller shall cause to be
furnished to Buyer, at Seller's sole cost and expense, a commitment (the
"Title Commitment") to issue to Buyer at Closing an ALTA Extended Coverage
Owner's Title Policy (the "Title Policy") describing the Property, listing
Buyer as the prospective named insured, and showing the Purchase Price as
the amount of insurance coverage, together with legible true copies of all
instruments referred to in the Title Commitment as conditions or exceptions
to title to the Property (the "Exception Documents"). Seller shall pay for
all costs of the Title Report and the Title Commitment.

Section 3.02 SURVEY. On or before November 15, 1996, Seller
shall deliver to Buyer, at Seller's sole cost and expense, a survey of the
Land prepared by a licensed land surveyor, and certified as having been
prepared in accordance with ALTA Land Survey Standards and complying with
the specifications set forth on EXHIBIT C, which is attached hereto and by
this reference made a part hereof (the "Survey"), for the benefit of
Seller, Buyer, Buyer's lender, if any, and Title Company.

Section 3.03 OBJECTIONS TO TITLE AND SURVEY. If Buyer objects
to any exception set forth on the Title Commitment or any matters set forth
on the Survey, Buyer may give written notice to Seller (the "Title Notice")
of Buyer's disapproval of such exceptions ("Disapproved Title Exceptions")
on or before the later to occur of (a) five (5) days after receipt of the
Title Commitment, the Exception Documents and the Survey, and (b) the
expiration of the Due Diligence Period. All exceptions to which Buyer does
not disapprove in the Title Notice shall be deemed "Permitted Exceptions."
If Buyer fails to deliver the Title Notice to Seller on or before the later
to occur of (a) and (b) above, all such exceptions shall be deemed
Permitted Exceptions.

With regard to Disapproved Title Exceptions, Seller may but shall not
have the obligation to notify Buyer within five (5) business days of
receipt of the Title Notice whether Seller shall cure (including, without
limitation, by causing the Title Company to remove) such Disapproved Title
Exceptions from the Title Commitment. If Seller delivers notice electing
to cure all or any such Disapproved Title Exceptions, the same shall be
removed by Seller, at Seller's sole cost and expense on or before the
Closing Date. The removal by Seller of the Disapproved Title Exceptions,
after delivery of election to cure, shall constitute a condition precedent
to Buyer's obligation hereunder. If Seller does not so notify Buyer, with
respect to any Disapproved Title Exception within such five (5) business
day period, Buyer may either waive its objection and proceed towards
closing or terminate this Agreement by giving written notice to Seller of
its election within five (5) additional business days. If Buyer waives its
objection in writing, such Disapproved Title Exceptions (other than those
which Seller has elected to cure) shall be Permitted Exceptions. If Buyer
does not give such written notice within such five (5) additional days,
Buyer shall be deemed to have elected its right to terminate this Agreement
pursuant to this Section 3.03. If any Disapproved Title Exception is to be
cured by Seller pursuant to a title endorsement, such endorsement shall be
approved by Buyer in Buyer's reasonable discretion, prior to the Closing
Date. Seller shall deliver to Buyer an updated Title Commitment from the
Title Insurer evidencing the Title Insurer's willingness to issue such
title endorsement, and the issuance of such an endorsement shall constitute
a condition precedent to Buyer's obligation to purchase the Property.

Section 3.04 DUE DILIGENCE PERIOD. The "Due Diligence Period"
shall be the period commencing on the date hereof and terminating on
December 2, 1996 (the "Due Diligence Period"). As soon as reasonably
possible, but in any event, within ten (10) days of the date hereof, Seller
shall deliver, or make available, to Buyer true, correct and complete
copies of the following which are in Seller's possession or control
(collectively, the "Property Information"):

(a) all "Contracts" (as hereinafter defined);

(b) all Plans and Specifications;

(d) the Entitlements;

(e) real estate and/or personal property tax statements and/or
reassessment notices for the Property for 1993, 1994, 1995 and 1996;

(f) all agreements and plans relating to the availability or
furnishing of sewer, water and other utilities to the Property;

(g) all financial statements, income and expense reports relating
to the Land and Improvements;

(h) all feasibility and market studies pertaining to the Property
which were prepared during the past three (3) years;

(i) all agreements relating to the planning and zoning of the
Property, including, without limitation, the Property's designations under
all applicable general and specific plans, the Local Coastal Program and
Redevelopment Plans;

(j) all appraisals of the Property which were prepared during the
past three (3) years (to the extent Seller has the same in its possession
or can obtain them from its lender);

(k) all engineering, environmental, topographical, soil suitability
and other similar studies and reports relating to the Land;

(l) all documents, instruments and agreements relating to the
defaults or alleged defaults under the Bond Documents; and

(m) all other agreements, reports, correspondence, memoranda,
Entitlements, applications, whether or not actually filed with the
appropriate Governmental Authority, and other materials which pertain to
the current status of the Property; provided, however, that Seller shall
have no duty to deliver to Purchaser any matters which (i) are subject to
an attorney-client privilege in favor of Seller, (ii) address internal
partnership matters of Seller and (iii) do not specifically address matters
relating to the Property.

Section 3.05 CONDUCT OF DUE DILIGENCE. During the Due Diligence
Period, Buyer and its officers, employees, agents, advisers, attorneys,
accountants, architects and engineers shall have the right to review the
submittals described in Section 3.04 above and shall have the right, and
are hereby authorized, to enter upon the Land and Improvements to conduct
inspections and investigations relating to the Property, to conduct
environmental assessments and engineering studies and for all other
reasonable purposes. Seller shall reasonably and in good faith cooperate
in Buyer's due diligence efforts, including, if so requested by Buyer,
notifying any Governmental Authorities of Buyer's due diligence efforts.
All costs and expenses of Buyer's due diligence shall be paid by Buyer. If
Buyer elects to proceed with the transaction, Seller shall continue to
provide Buyer and Buyer's officers, employees, agents, advisers, attorneys,
accountants, architects, engineers and prospective lenders access to the
Property, all drawings, plans and specifications for the Property, all
engineering and other reports relating to the Property, correspondence
relating to the Property, and the financial books and records relating to
the ownership, operation, development and management of the Property, at
all reasonable times to make such inspections, tests, copies and
verifications as Buyer considers reasonably necessary. Buyer shall
indemnify, defend and hold harmless Seller (as defined in Section 2.02 of
the Agreement) from and against any loss, damage, cost or expense for
personal injury or property damage arising out of the inspections and
investigations. Buyer shall promptly restore the Property to the condition
existing immediately prior to such inspections and investigations.

Section 3.06 RIGHT TO TERMINATE.

(a) If Buyer, in its sole and absolute discretion, is satisfied
with the results of its due diligence and accepts the condition of the
Property, then on or before the expiration of the Due Diligence Period,
Buyer shall serve written notice on Seller of its election to proceed with
the transaction contemplated by this Agreement.

(b) If Buyer fails to give such notice to Seller, the condition
contained in this Section shall not be deemed satisfied and this Agreement
shall be deemed terminated.

(c) The parties hereto acknowledge that Buyer has incurred
substantial costs in connection with the negotiation and execution of this
Agreement, will incur substantial additional costs in conducting the
inspections contemplated by Section 3.04 and that Buyer would not have
entered into this Agreement without the availability of the Due Diligence
Period. Therefore, the parties agree that adequate consideration exists to
support Seller's obligations hereunder, even before the expiration of the
Due Diligence Period.

Section 3.07 TERMINATION. In the event this Agreement is
terminated in accordance with this Article 3, Buyer shall be entitled to a
return of the Deposit, together with accrued interest thereon, and Seller
and Buyer shall jointly instruct Escrow Holder to so refund to Buyer the
Deposit, accrued interest thereon, if any, and instruments deposited by
Buyer in the escrow established by Section 4.01 of this Agreement, and
neither Buyer nor Seller shall have any further obligation or liability
under this Agreement. As a condition precedent to release of said Deposit
and instruments, Escrow Holder shall have first caused to be recorded the
"Quitclaim Deed" (as hereinafter defined).

ARTICLE 4

Escrow and Closing Procedures

Section 4.01 ESCROW. This Agreement shall also constitute
escrow instructions of the parties hereto to First American Title Insurance
Company, 114 East Fifth Street, Santa Ana, California 92701 ("Escrow
Holder"). Upon receipt of an original counterpart of this Agreement
executed by both parties hereto, Escrow Holder shall immediately establish
an escrow for the purpose of consummating the transaction contemplated by
this Agreement. Supplementary escrow instructions may be prepared by
Escrow Holder and, if so prepared and agreed to by Seller and Buyer, shall
be executed by both parties hereto.

Section 4.02 QUITCLAIM DEED. Concurrent with the execution of
this Agreement, Buyer shall deliver to Escrow Holder a fully executed and
notarized quitclaim deed ("Quitclaim Deed") in the form of EXHIBIT D, which
is attached hereto and by this reference made a part hereof. The Quitclaim
Deed shall be recorded by Escrow Holder only.

Section 4.03 TITLE. On the Closing Date, title to the Property
is to be free of liens and encumbrances other than the Permitted Exceptions
and Disapproved Title Exceptions waived by Buyer in writing. On the
Closing Date, the Title Company shall deliver to Buyer an ALTA Extended
Coverage Policy of Title Insurance in conformance with the previously
delivered Title Commitment and those endorsements set forth on EXHIBIT E,
which is attached hereto and by this reference made a part hereof, each in
form and content reasonably satisfactory to Buyer, subject only to
Permitted Exceptions and Disapproved Title Exceptions waived by Buyer (the
"Title Policy"). Seller shall pay for the costs of the Title Commitment
and Title Policy.

Section 4.04 ESCROW COSTS AND CHARGES. All costs and charges of
Escrow Holder incurred in establishing, maintaining and closing the escrow
established pursuant to Section 4.01 of this Agreement ("Escrow Costs")
shall be paid by Seller. The cost of the Title Policy shall be paid to the
Title Company by Escrow Holder and, together with the Escrow Costs, which
shall include payment of the documentary transfer tax assessed by the
County of Orange, debited from funds deposited in escrow by Buyer that are
due Seller on the Closing Date. Buyer may direct Escrow Holder to cause
payment of the documentary transfer tax to be evidenced by an affidavit
rather than placement of documentary transfer tax stamps on the face of the
grant deed conveying the Property from Seller to Buyer.

Section 4.05 CLOSING: TIME AND PLACE. The consummation of the
transaction contemplated by this Agreement shall take place on or before
December 16, 1996 ("Closing Date"), at the offices of Escrow Holder.

Section 4.06 DEPOSITS BY SELLER. Not later than one (1) day
prior to the Closing Date, Seller shall execute and acknowledge, as
necessary, and deliver to Escrow Holder the following documents for the
purpose of consummating the transaction contemplated by this Agreement, all
of which shall be in form and substance reasonably acceptable to Buyer and
Seller (collectively, the "Seller Ancillary Documents"):

(a) a grant deed conveying title to the Land from Seller to Buyer
subject to only the Permitted Exceptions, in the form to be agreed upon by
Seller and Buyer in their reasonable discretion on or before ten (10) days
after the date hereof (the "Grant Deed");

(b) a bill of sale evidencing sale of the Personal Property, in the
form to be agreed upon by Seller and Buyer in their reasonable discretion
on or before ten (10) days after the date hereof (the "Bill of Sale");

(c) an assignment and assumption agreement memorializing assignment
of all of Seller's right, title and interest in and to the Assumed
Contracts, Intangible Property and all of the remaining Property not
conveyed by the Grant Deed or the Bill of Sale and the assumption of
Seller's obligations thereunder by Buyer, in the form to be agreed upon by
Seller and Buyer in their reasonable discretion on or before ten (10) days
after the date hereof (the "Assignment");

(d) any affidavits or documents required by the Title Company to
issue the Title Policy;

(e) originals of the Licenses, Permits and Assumed Contracts (or
certified copies thereof if originals are not available);

(f) originals of all financial statements, income and expense
reports relating to the Land and Improvements (or copies if originals are
not available);

(g) originals of all Plans and Specifications (or copies, if
originals are not available) (which may be delivered to Buyer's engineers
or representatives directly and not deposited into escrow);

(h) an executed affidavit of Seller sufficient in form and
substance to relieve Buyer of any and all withholding obligations under
Section 1445 of the Internal Revenue Code;

(i) all releases and termination statements required to release and
terminate all mortgages, financing statements and other security
instruments with respect to any loan secured by the Property which is not a
Permitted Exception;

(j) a certified copy of resolutions of the General Partner of
Seller authorizing the transactions contemplated by the Agreement and the
Seller Ancillary Documents and authorizing the execution, delivery and
performance of this Agreement and the Seller Ancillary Documents; and

(k) such other documents and instruments as may be reasonably
required to consummate the transaction contemplated under this Agreement.

If, subsequent to delivery thereof by Seller to Buyer, Seller, or any
Affiliate of Seller, requires access to any document delivered by Seller to
Buyer pursuant to this Agreement in connection with any governmental or
quasi-governmental investigation or inquiry or threatened or pending
litigation, business transaction or other purpose, Buyer agrees promptly to
make the original or a certified copy (if the same satisfies Seller's
needs) thereof (if Seller delivered this original to Buyer) available to
Seller until Seller's needs therefore has been satisfied.

Section 4.07 DEPOSITS BY BUYER. Buyer shall deposit the Deposit
with Escrow Holder in accordance with Sections 2.05(a) and, if applicable,
2.05(b) of this Agreement. On or prior to the Closing Date, Buyer shall
deposit Twenty-Six Million Five Hundred Thousand and No/100 Dollars
($26,500,000.00) in accordance with Section 2.05(b) of this Agreement. No
later than one (1) day prior to the Closing Date, Buyer shall deliver to
Escrow Holder the following for the purpose of consummating the transaction
contemplated by this Agreement, all of which shall be in form and substance
reasonably acceptable to Buyer and Seller (collectively, the "Buyer
Ancillary Documents"):

(a) a fully executed Note and Deed of Trust;

(b) an executed counterpart to the Assignment; and

(c) such other documents and instruments as may be required to
consummate the transaction contemplated under this Agreement.

Section 4.08 CLOSING PROCEDURES. Provided the contingencies set
forth in Sections 2.02 and 2.03 of this Agreement have been satisfied, and
all other obligations of Seller and Buyer under this Agreement have been
met, Escrow Holder shall proceed to close the escrow established pursuant
to Section 4.01 of this Agreement by taking the following actions in the
order set forth:

(a) obtain an executed closing and proration statement from each of
Seller and Buyer (and Seller and Buyer each hereby agree to deliver the
same to Seller);

(b) date all undated documents as of the Closing Date;

(c) complete all blanks in all documents deposited with Escrow
Holder which are intended to be completed by Escrow Holder on the Closing
Date;

(d) cause to be recorded the Grant Deed deposited with Escrow
Holder by Seller;

(e) deliver to or at the direction of Seller by wire transfer or
other similarly expeditious means the Purchase Price less Seller's share of
the Escrow Costs, the cost of the Title Policy, any prorations or credits,
and the Brokerage Commissions, if payable;

(f) deliver to O'Donnell, Atkins Company and The Overland Company
checks in the amount of the Brokerage Commissions provided Seller has first
instructed Escrow Holder in writing to pay the Brokerage Commissions;

(g) cause to be recorded the Deed of Trust and deliver the Note to
Seller;

(h) deliver to Buyer a conformed copy of the Grant Deed deposited
with Escrow Holder by Seller;

(i) deliver to Buyer the original Bill of Sale, an original
Assignment and an original closing and proration statement;

(j) deliver to Seller an original Assignment and an original
closing and proration statement; and

(k) deliver to the respective counsel for the parties listed in
Section 8.03 hereof copies of all other documents and supplementary escrow
instructions required by, or made pursuant to, this Agreement.

Section 4.09 RIGHTS OF ESCROW HOLDER.

(a) If the escrow established pursuant to Section 4.01 of this
Agreement shall be the subject of or in any way involved in any litigation
or controversy, the parties hereto shall jointly and severally hold Escrow
Holder free and harmless from and against any loss or expense that may be
suffered by it by reason of such litigation or controversy.

(b) In the event conflicting demands are made or notices served
upon Escrow Holder with respect to this escrow, the parties hereto
expressly agree that Escrow Holder shall have the absolute right, at its
election, to do either or both of the following:

(1) Withhold and stop all further proceedings in, and
performance of, the escrow; or

(2) File a suit in interpleader and obtain an order from the
court requiring the parties to interplead and litigate in such court their
several claims and rights amongst themselves. In the event such
interpleader suit is brought, Escrow Holder shall ipso facto be fully
released and discharged from all obligations to further perform any and all
duties or obligations imposed upon it by this Agreement.

(c) Escrow Holder shall not be held liable for sufficiency or
correctness of the form, manner of execution or validity of any instrument
that may be deposited into the escrow, nor as to the identity, authority or
rights of any person executing the same, or for failure to comply with any
provisions of any agreement, contract or other instrument filed herein, and
Escrow Holder's duties hereunder shall be limited to the safekeeping of
such money, instruments, or other documents received by it as Escrow
Holder, and for the disposition of same in accordance with the written
instructions set forth herein and any supplementary escrow instructions
executed by both parties hereto, and as accepted by Escrow Holder in the
escrow.

(d) Prior to the Closing Date or termination of this Agreement in
accordance with the terms hereof, neither party shall have the right to
withdraw the instruments or monies deposited by it with Escrow Holder,
except as otherwise provided in this Agreement or in supplementary escrow
instructions executed by both parties hereto.

(e) The escrow instructions contained in this Agreement may be
supplemented by any form instructions customarily used by Escrow Holder
that are signed by both parties hereto, provided that in the event of
conflict, this Agreement shall in all events control.

Section 4.10 CLOSING RESPONSIBILITIES OF ESCROW HOLDER. The
parties hereto hereby designate Escrow Holder as the party responsible for
closing the transaction contemplated by this Agreement and filing all
required forms prepared by the parties hereto, if any, with the appropriate
governmental authorities.

ARTICLE 5

Representations, Warranties, Disclaimers and Disclosures

Section 5.01 REPRESENTATIONS AND WARRANTIES OF SELLER. Except
for the express representations, warranties and covenants of Seller set
forth herein, Buyer shall acquire the Property "As Is," "where is" and
"with all faults" and Seller makes no representations or warranties with
respect to the Property. Seller hereby makes the following representations
and warranties to Buyer, which are true and correct as of the date of this
Agreement and will remain so as of the Closing Date:

(a) ORGANIZATION AND QUALIFICATION. Seller is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite power and authority to
own and operate its properties and to carry on its business as it is now
being conducted, is duly qualified or licensed as a foreign limited
partnership in the State of California.

(b) AUTHORITY RELATIVE TO THIS AGREEMENT. Seller has all necessary
power and authority to execute and deliver this Agreement and the Seller
Ancillary Documents to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the Seller Ancillary Documents by Seller and the consummation
by Seller of the transactions contemplated hereby have been duly and
validly authorized by all necessary action and no other proceedings are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and, assuming the due authorization, execution and
delivery thereof by the other parties hereto, constitutes the legal, valid
and binding obligation of Seller, enforceable against Seller in accordance
with its terms, except as enforcement may be limited by bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights
generally and by equitable principles to which the remedies of specific
performance and injunctive and similar forms of relief are subject.

(c) CONSENTS AND APPROVALS; NO VIOLATION. The execution and
delivery by Seller of this Agreement, the consummation by Seller of the
transactions contemplated hereby and compliance by Seller with the
provisions hereof will not (i) conflict with, result in a breach of, or
require the consent or approval of any person under any provision of the
limited partnership agreement of Seller; (ii) except as set forth in
SCHEDULE 5.01(c), require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Authority; (iii)
except as set forth in SCHEDULE 5.01(c) which is attached hereto and by
this reference made a part hereof, conflict with, or, with or without
notice or the passage of time or both, result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
agreement or instrument to which Seller is a party, or give to any third
party any right of termination, cancellation, amendment or acceleration
under any agreement or instrument to which Seller is a party or result in
the creation of a lien or encumbrance on the Property; or (iv) to Seller's
knowledge, violate or conflict with any judgment, order, writ, injunction,
decree, statute, law, rule or regulation applicable to Seller or the
Property.

(d) LITIGATION. Except as set forth on SCHEDULE 5.01(d), which is
attached hereto and by this reference made a part hereof, (i) Seller has
not received written notice of any action, suit or proceeding before any
judicial or quasi-judicial body, by any Governmental Authority or other
third party, pending, or to Seller's knowledge, threatened, against or
affecting all or any portion of the Property, (ii) Seller has not received
written notice of any attachments, execution proceedings, assignments for
the benefit of creditors, insolvency, bankruptcy, reorganization or other
proceedings pending, or, to its knowledge, threatened, against Seller;
(iii) Seller has not received written notice of any order, decree,
injunction, judgment, ruling, decision, opinion, writ or award made by any
court, arbitrator or Governmental Authority to which the Property is
subject; and (iv) Seller has not received written notice of a violation of
any of the terms and requirements of each order to which the Property is
subject. Seller has delivered to Buyer copies of all material written
pleadings, correspondence and other documents in Seller's control or
possession relating to all pending actions, suits and proceedings, that
involve or affect the Property.

(e) CONTRACTS. SCHEDULE 5.01(e), which is attached hereto and by
this reference made a part hereof, sets forth a list of all contracts
currently in effect to which Seller is a party relating to the ownership,
management, development, operation and maintenance of the Property (the
"Contracts"). Seller has delivered to Buyer true, correct and complete
copies of each Contract, together with any and all amendments thereto. To
Seller's knowledge, except as set forth on SCHEDULE 5.01(e), (i) each of
the Assumed Contracts is in full force and effect and constitutes legal,
valid and binding obligations of the respective parties thereto; (ii) there
have not been and there currently are not any defaults under any of the
Assumed Contracts by any party thereto; (iii) no event has occurred which
(whether with or without notice, lapse of time, or the happening or
occurrence of any other event) would constitute a material default under
any of the Assumed Contracts; (iv) no party to any Assumed Contract has any
defense or claim against Seller with respect to or arising out of such
Assumed Contract; (v) all amounts due and owing under the Contracts have
been paid in full; and (vi) no party to any Contract is entitled to any
concession, rebate, set-off, allowance, or other benefit. Seller has not
assigned or granted any interest in any of the Assumed Contracts to any
party or person.

(f) LICENSES; ENTITLEMENTS. Except as set forth on SCHEDULE
5.01(f), which is attached hereto and by this reference made a part hereof,
Seller has not received written notice from any issuer of a License or
Permit that any License or Permit is invalid or in default.

(g) LEASES. Except as set forth in SCHEDULE 5.01(g) which is
attached hereto and by this reference made a part hereof, to Seller's
knowledge, there are no leases, licenses or other agreements granting any
occupancy or possession rights to any party affecting all or any portion of
the Property.

(h) REASSESSMENTS. Except as set forth in SCHEDULE 5.01(h) which
is attached hereto and by this reference made a part hereof, to Seller's
knowledge, Seller has not received written notice from any taxing or
assessing authority of any contemplated or actual reassessment of the
Property for general real estate tax purposes, excluding statutory
reassessments occurring upon transfer of ownership.

(i) SPECIAL ASSESSMENTS. To Seller's knowledge, except as set forth
on SCHEDULE 5.01(i) which is attached hereto and by this reference made a
part hereof or in the Title Commitment, no unpaid special assessments have
been levied against the Property nor, are there any proposed special
assessments against the Property presently pending.

(j) EMINENT DOMAIN. Except as set forth on SCHEDULE 5.01(j), which
is attached hereto and by this reference made a part hereof, Seller has not
received written notice of any pending, nor to Seller's knowledge is any
Governmental Authority presently actively deliberating, the taking by
exercise of the power of eminent domain, or in any other manner, for a
public or quasi-public purpose, of all or any part of the Property. To
Seller's knowledge, no party has asserted any right (either through adverse
possession or otherwise in writing) to possess or claim title to, any
portion of the Property. Except as set forth on SCHEDULE 5.01(j), to
Seller's knowledge, there is no plan, study or effect by any Governmental
Authority or agency which materially adversely affects or which could
materially adversely affect the present or future use, zoning, entitlements
or development of the Property.

(k) COMPLIANCE WITH LAW. Seller has not received written notice
from any Governmental Authority that the Property violates any applicable
existing health, safety or zoning laws, rules, regulations, ordinances or
codes. Without limitation of the foregoing, Seller has not received any
written notice from any insurer that any portion of the Property contains
any defects or conditions that could materially adversely affect the
insurability of the Property.

(l) ENVIRONMENTAL MATTERS.

(i) For purposes of this Agreement, "Hazardous Material"
means and includes any hazardous, toxic or dangerous waste, substance or
material defined as such in (or for purposes of): (A) the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), (B) any
so-called "Superfund" or "Superlien" law, or any other Federal, state or
local statute, law, ordinance code, rule, regulation, order or decree
regulating, relating to, or imposing standards of conduct or liability
concerning any hazardous, toxic or dangerous waste, substance or material,
as now in effect (collectively, the "Related Legislation"), and (C) whether
or not included in the definition set forth in CERCLA or Related
Legislation, any other hazardous, toxic or dangerous waste, substance,
material, pollutant or contaminant, including, without limitation,
asbestos, asbestos containing materials, polychlorinated biphenyls, and
other chemicals which are dangerous to the environment or to human beings.

(ii) to Seller's knowledge, except as set forth on SCHEDULE
5.01(l), which is attached hereto and by this reference made a part hereof,
(A) during Seller's ownership thereof, no part of the Land or Improvements
has ever been used as a sanitary land fill, waste dump site or for the
generation, manufacture, refinement, transportation, treatment, storage,
handling or disposal of any Hazardous Material in violation of CERCLA or
Related Legislation, (B) except as disclosed in Section 5.05(b) below,
there is no Hazardous Material present upon, in or under the Land and/or
Improvements in violation of CERCLA or Related Legislation and no portion
of the Improvements has been constructed with the use of, or contains any
Hazardous Material, (C) except as disclosed in Section 5.05(b) below,
during Seller's ownership thereof, no release of Hazardous Material has
occurred at, on or from the Land and/or Improvements, (D) no underground
tanks are present on the Land, and (E) except as disclosed in Section
5.05(b) below, no written notice of violation or other written
communication has been received by Seller, by any predecessor in title from
any governmental agency or any person or entity alleging or suggesting any
environmental law violation on the Land or Improvements.

(m) INTENTIONALLY OMITTED.

(n) MECHANICS' LIENS.To Seller's knowledge, Seller has received no
written notice of any claims for mechanics' liens for any labor, services
or materials rendered, delivered or provided for the benefit of the
Property that have not been released. No work of improvement will be done
on the Property by or on behalf of Seller prior to the Closing Date that
will remain unpaid as of the Closing Date. Seller shall indemnify, defend
and hold Buyer harmless from and against any all demands, claims, suits,
actions, proceedings, losses, damages, liabilities, obligations, costs or
expenses (including, without limitation, attorneys' fees, court costs and
costs of appeal) incurred by Buyer as a direct or indirect result of any
claims for mechanic's liens for any labor, services or materials contracted
to be performed for, or performed for, the benefit of the Property prior to
the Closing Date. The indemnity obligations set forth in this subparagraph
shall survive Closing.

(o) TITLE TO PERSONAL PROPERTY. Seller is the sole and lawful
owner of the Personal Property. On the Closing Date, the Personal Property
shall be free from all liens, claims and encumbrances and Seller will have
the right to sell the Personal Property.

(p) ERISA. The Property does not constitute "assets of an employee
benefit plan" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974.

(q) REPRESENTATIONS AND WARRANTIES. No representation or warranty
made by Seller in this Agreement or in any Exhibit attached hereto, in the
Seller Ancillary Documents, or in any certificate or other document
furnished by Seller pursuant to this Agreement contains any untrue
statement of material fact or omits any material fact necessary to make any
statement contained herein or therein not misleading.

(r) BONDS. To Seller's knowledge, SCHEDULE 5.01(s), which is
attached hereto and by this reference made a part hereof, sets forth a
true, correct and complete list of all material indentures, loan
agreements, letters of credit and all other agreements and documents
evidencing or securing the Bond Debt (collectively the "Bond Documents").
To Seller's knowledge, Seller has previously delivered to Buyer true,
correct and complete copies of each of the Bond Documents.

(s) PROPERTY INFORMATION. To Seller's knowledge, the list of
Personal Property and the list of Contracts are accurate and complete in
all material respects and the Property Information delivered by Seller to
Buyer is all of the Property Information in Seller's possession or control.

(t) SECURITY INSTRUMENTS. Except as set forth in SCHEDULE 5.01(t),
which is attached hereto and by this reference made a part hereof, to
Seller's knowledge, Seller has performed all obligations whose performance
is secured by the Security Instruments required to be performed as of the
date hereof. To Seller's knowledge, except as set forth on SCHEDULE
5.01(t), no holder of the Security Instruments has any basis to draw on
the Security Instruments as a result of the failure of Seller to perform
the obligations secured by the Security Instruments.

As used in this Agreement, the phrase "Seller's Knowledge" and
similar phrases shall mean the actual knowledge of only Eric Kaplan, James
Motta, Glen Allen and Stephen A. Lovelette. "Seller's Knowledge" shall not
include implied, inferred or imputed knowledge of any person whomsoever,
but shall include the information contained in Seller's files relating to
the Property. Seller acknowledges and agrees that Buyer is relying on each
of Seller's representations, warranties, covenants and indemnities
contained herein in entering into and consummating the transactions
contemplated by this Agreement. Therefore, Seller shall not be released
from, nor shall Buyer be deemed to have waived its rights under the
representations, warranties, covenants and indemnifications of Seller
contained herein as a result of Buyer accepting the condition of the
Property in accordance with Section 3.06 of this Agreement. Buyer agrees
that if and to the extent that Buyer has actual knowledge of a breach
hereunder by Seller of a representation or warranty and Buyer closes the
transaction contemplated hereby despite actual knowledge at time of closing
of such a breach, Buyer shall have no right to bring any action against
Seller as a result of such a breach. For purposes hereof, "actual
knowledge" of Buyer shall mean the actual knowledge of only Eugene A. Gorab
and S. John Robinson but shall not include implied, inferred or imputed
knowledge of any person whomsoever.

Section 5.02 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer
hereby makes the following representations and warranties to Seller, which
are true and correct as of the date hereof and will remain so as of the
Closing Date:

(a) ORGANIZATION. Buyer is a limited partnership duly organized
and validly existing and in good standing in accordance with the laws of
the State of Delaware, is (or shall be when and as required) authorized to
do business in California and is possessed of all power and authority
necessary to enter into and perform its obligations under this Agreement.

(b) AUTHORITY OF SIGNATORY. The person whose signature is affixed
to this Agreement on behalf of Buyer has been duly authorized to execute
this Agreement by Buyer.

(c) ENFORCEABILITY. The execution, delivery and performance of
this Agreement has been duly and validly authorized and approved by all
necessary corporate action on behalf of Buyer. This Agreement has been
fully and validly executed and delivered by or on behalf of Buyer and,
assuming this Agreement has been duly authorized, executed and delivered by
Seller, constitutes the legal, valid and binding obligation of Buyer,
enforceable against it in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratoria, fraudulent conveyance and other
similar laws affecting the rights and remedies of creditors generally, as
well as principles of equity, regardless of whether the application of such
principles is considered in a proceeding in equity or at law.

Section 5.03 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Buyer
and Seller agree that the representations and warranties contained herein
shall survive Closing for one (1) year after the Closing Date (i.e., the
claiming party shall have no right to make any claim against the other
party after the date one (1) year immediately following the Closing Date
for a breach of a representation or warranty).

Section 5.04 DISCLAIMER BY SELLER. Other than the
representations and warranties set forth in Section 5.01 of this Agreement,
Seller makes no representations or warranties regarding any aspect of the
transaction contemplated by this Agreement, the status of title to the
Property, or any liens and/or encumbrances thereon, the entitlements
governing development of the Property, any other matter affecting the
business, legal status and economic viability of the Property, the value of
the Property, or the suitability of the Property for acquisition,
investment or any other disposition by Buyer. Buyer hereby agrees, except
for the representations and warranties of Seller contained herein, that it
has not relied on any representations or statements made by Seller, its
general partner or any of their officers, directors, employees, agents or
attorneys regarding the Property or any aspect thereof in determining
whether to enter into this transaction.

Section 5.05 DISCLOSURES BY SELLER. Seller hereby makes the
following disclosures regarding the location and condition of the Property:

(a) The Property is, or may be, impacted by various regional
elements. These include, but are not necessarily limited to: proximity to
the Camp Pendleton Marine Corps facility, the San Onofre Nuclear Generating
Station, the TRW Capistrano Test Facility, the Prima Deshecha Regional Park
and Landfill, overflight from military and/or civilian aircraft from Tustin
and El Toro Marine Corps Air Stations and Camp Pendleton, proximity to high
voltage electrical transmission facilities, and the proposed Foothill
Transportation Corridor. In addition, most properties throughout south
Orange County, including the Property, are subject to various road and
public facility impact fees and other conditions of development.

(b) On January 11, 1990, the contents of a canister containing O--
chlorobenzylidene malononitrile (Agent cs), which is designated an
extremely hazardous substance in Title 22 California Code of Regulations
Section 66680, was spilled on the Property, contaminating an area of
approximately 200 square feet at the location depicted on EXHIBIT G, which
is attached hereto and by this reference made a part hereof. Such affected
area was subjected to a decontamination process under the supervision of
the Orange County Health Care Agency; however, no representation is made by
Seller as to the effectiveness of such decontamination process.

Seller makes no representations whatsoever with respect to the
matters set forth in this Section 5.05, including, without limitation, a)
with regard to the severity of the impacts disclosed in the disclosures
listed above, nor the degree to which such impacts will inhibit or prevent
development of all or a portion of the Property or interfere with the quiet
use and enjoyment of the Property; or b) whether such impacts are inclusive
of all potential adverse impacts that may inhibit or prevent development of
all or a portion of the Property or interfere with the quiet use and
enjoyment of the Property. There may be additional adverse impacts as of
the date of this Agreement. Buyer hereby acknowledges the disclosures
listed above, and agrees that it is the duty of Buyer to thoroughly
investigate the Property, including, but not limited to, an investigation
of environmental/toxic contamination of the Property, the environs of the
Property, and plans for development of surrounding properties, and
determine what impacts, if any, may exist or potentially exist that could
inhibit or prevent development of all or a portion of the Property or
interfere with the quiet use and enjoyment of the Property.

ARTICLE 6

COVENANTS

Section 6.01 SELLER'S COVENANTS. Seller covenants and agrees
with Buyer that from and after the date hereof up to Closing or earlier
termination of this Agreement, Seller shall conduct the business involving
the Property as follows, and during such period will, at its sole cost and
expense:

(a) refrain from transferring any of the Property or creating on
the Property any leases, licenses, easements, liens, mortgages,
encumbrances or other interests;

(b) not, without obtaining the prior written consent of Buyer,
which consent will not be unreasonably withheld, extend, renew, terminate,
replace or amend any Contract or enter into any new contracts or agreements
with respect to the Property which will survive Closing or otherwise affect
the use, operation or enjoyment of the Property after Closing;

(c) not take any affirmative action which Seller believes in its
good faith, reasonable business judgment would have a material adverse
affect on the Property or the prospect for the future development thereof.
From and after the date hereof to the Closing Date Seller shall either (i)
perform and otherwise continue to meet all obligations with respect to the
Property, including all contractual obligations under the Assumed Contracts
and all obligations under the Licenses and Entitlements, or (ii) if Seller
elects, in its sole discretion, to not perform any such obligation, Seller
shall promptly notify Buyer of such obligations and Seller's decision to
not perform such obligation. If Seller notifies Buyer in accordance with
clause (ii) above, Buyer may terminate this Agreement within five (5)
business days of receipt of such notice by giving written notice to Seller,
in which event Buyer shall be entitled to return of the Deposit, together
with accrued interest thereon, and Seller and Buyer shall jointly instruct
Escrow Holder to so refund to Buyer the Deposit, and accrued interest
thereon, if any, and neither Buyer nor Seller shall have any further
obligation or liability under this Agreement;

(d) deliver or cause to be delivered to Buyer, promptly upon
receipt thereof by Seller, copies of all notices or other correspondence
received or given by Seller after the date hereof alleging any violation of
any applicable law, rule, regulation or code, any default under any Bond
Document, Contract, License, Permit or insurance policy and report to
Buyer, from time to time, the status of any alleged violation or default;

(e) make all reasonable good faith efforts to comply with all
notices of violation or alleged violation by the Seller relating to the
Property of all state, county, city or municipal laws, ordinances, codes,
regulations, orders or requirements of departments of housing, buildings,
fire, labor, health, or departments of other Governmental Authorities
having jurisdiction over or affecting the Property or the ownership,
development, operation and management thereof; provided, however that if
such compliance requires the expenditure of money, Seller may elect, in its
sole and absolute discretion, to not comply with such notice in which event
Seller shall promptly notify Buyer of such violations and Seller's decision
to not comply with the notice thereof. If Seller so notifies Buyer of its
election to not comply, Buyer may terminate this Agreement within five (5)
business days of receipt of such notice by giving written notice to Seller,
in which event Buyer shall be entitled to return of the Deposit, together
with accrued interest thereon, and Seller and Buyer shall jointly instruct
Escrow Holder to so refund to Buyer the Deposit and accrued interest
thereon, if any, and neither Buyer nor Seller shall have any further
obligation or liability under this Agreement;

(f) continue to operate and manage the Property in the ordinary
course of business consistent with historical practices;

(g) maintain, in accordance with its regular and normal practices,
the Property in good repair, order and condition, ordinary wear and tear
and damage by fire or other unavoidable casualty excepted;

(h) consult with Buyer on all extraordinary decisions relating to
the Property;

(i) maintain insurance in full force and effect with responsible
companies, or through self-insurance as provided on a historical basis,
comparable in amount, scope and coverage to that in effect on the date of
this Agreement;

(j) shall use reasonable good faith efforts to satisfy the
conditions of Seller's obligations hereunder set forth in Section 2.02 of
this Agreement; and

(k) not, without the prior written consent of Buyer, take any
action or file or proceed with any matter which could in any material
respect affect the zoning, land use or entitlements applicable to the
Property or the proposed development thereof.

Section 6.02. BUYER'S COVENANTS. Buyer covenants and agrees with
Seller that from and after the date hereof up to Closing or earlier
termination of this Agreement, Buyer shall, at its sole cost and expense,
use commercially reasonable efforts to satisfy the conditions to Buyer's
obligations hereunder set forth in Section 2.03 of this Agreement.

Section 6.03 FURTHER ACTION, REASONABLE EFFORTS; CONSENTS AND
APPROVALS. Upon the terms and subject to the conditions hereof, each of
the parties hereto shall use reasonable good faith efforts to take, or
cause to be taken, all appropriate action, and to do, or cause to be done,
all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby, including, without limitation, using reasonable good faith efforts
to obtain all licenses, permits, consents, approvals, authorizations,
certificates, qualifications and orders of, and make all filings and
required submissions with, all Governmental Authorities, and all lenders
and partners of, and parties to contracts with, any of Seller or the Buyer
and all other persons, in each case, as are necessary or desirable for the
consummation of the transactions contemplated hereby (collectively
"Consents"). Seller shall, as soon as possible prior to the Closing,
deliver to Buyer copies of all Consents obtained by Seller. Buyer shall,
as soon as possible prior to the Closing, deliver to Seller copies of all
Consents obtained by Buyer. In case at any time after the Closing Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, Buyer and Seller shall use reasonable good faith efforts to take
all such action. Each party shall use its best efforts not to take any
action, or enter into any transaction, that would cause any of its
representations or warranties contained in this Agreement to be untrue or
result in a breach of any covenant made by it in this Agreement.

Section 6.04 CONDEMNATION. In the event that prior to the Closing
Date, written notice shall be received by Seller of any action, suit or
proceeding to condemn or take all or any part of the Property under the
power of eminent domain, Seller shall promptly send written notice thereof
to Buyer and Buyer shall have the right to terminate its obligations under
this Agreement by notice in writing to Seller given within ten (10) days
after receiving Seller's notice. In the event that Buyer shall not elect
to terminate its obligations under this Agreement pursuant to this Section
6.04, Buyer shall receive an absolute assignment on the Closing Date of the
entire proceeds of such condemnation award, the Purchase Price shall be the
full amount provided in Article 2 and Seller shall convey the Property
subject to the condemnation proceeding or, if such condemnation proceeding
shall have been completed, Buyer shall receive a credit against the
Purchase Price in the amount of the condemnation award and Seller shall
convey the Property to Buyer less that part taken in such proceeding, as
the case may be.

Section 6.05 TERMINATION OF CONTRACTS. Provided the same are
terminable by Seller without cause and without penalty, other than the
first _____ Contracts listed on SCHEDULE 5.01(e), Buyer may elect by notice
in writing to Seller prior to the expiration of the Due Diligence Period,
to have any or all of the Contracts terminated by Seller, and Seller agrees
to terminate said Contracts, effective as of the Closing Date. All
Contracts which Buyer does not elect to have terminated in accordance with
this Section 6.05 shall be deemed "Assumed Contracts."

Section 6.06 DISTRICT ESTOPPEL. Seller will use reasonable good
faith efforts to obtain an estoppel certificate and consent from the
District in favor of Buyer in the form of EXHIBIT I, which is attached
hereto and by this reference made a part hereof; provided, however, that
the delivery of such to Buyer is not a condition to either party's
obligations hereunder.

ARTICLE 7

Defaults; Remedies; Indemnifications

Section 7.01 DEFAULT BY BUYER. IF THIS AGREEMENT IS NOT TERMINATED
ON OR BEFORE THE EXPIRATION OF THE DUE DILIGENCE PERIOD OR AS A RESULT OF
THE RIGHT OF BUYER TO TERMINATE THIS AGREEMENT AS EXPRESSLY SET FORTH IN
THIS AGREEMENT, AND IN THE EVENT OF A DEFAULT OF THE BUYER UNDER THE
PROVISIONS OF THIS AGREEMENT FOLLOWING THE DUE DILIGENCE PERIOD, SELLER
SHALL RETAIN ALL OF THE EARNEST MONEY, TOGETHER WITH ACCRUED INTEREST
THEREON, AS SELLER'S SOLE RIGHT TO DAMAGES OR ANY OTHER REMEDY. THE
PARTIES HAVE AGREED THAT SELLER'S ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT
BY BUYER, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICAL TO DETERMINE.
THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT
THE EARNEST MONEY HAS BEEN AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES'
REASONABLE ESTIMATE OF SELLER'S DAMAGES, WHICH SHALL BE SELLER'S SOLE AND
EXCLUSIVE REMEDY.

Buyer's Initials
Seller's Initials

Section 7.02 SELLER'S DEFAULT. IF THE TRANSACTION CONTEMPLATED BY
THIS AGREEMENT IS NOT COMPLETED BECAUSE OF SELLER'S FAILURE TO COMPLY WITH
ANY OF ITS OBLIGATIONS TO BE PERFORMED BY SELLER HEREUNDER ON OR PRIOR TO
CLOSING, BUYER SHALL BE ENTITLED TO EITHER (1) SEEK SPECIFIC PERFORMANCE OR
(2) HAVE THE RIGHT TO TERMINATE THIS AGREEMENT AND, IF BUT ONLY IF THE
TRANSACTION CONTEMPLATED BY THIS AGREEMENT IS NOT COMPLETED BECAUSE OF AN
INTENTIONAL DEFAULT HEREUNDER BY SELLER, OBTAIN FROM SELLER ITS ACTUAL OUT-
OF-POCKET DAMAGES (BUT SPECIFICALLY EXCLUDING ANY CONSEQUENTIAL DAMAGES)
ARISING FROM SUCH DEFAULT IN AN AMOUNT NOT TO EXCEED $150,000.00. FOR
PURPOSES OF THIS AGREEMENT "INTENTIONAL DEFAULT" SHALL MEAN THE FOLLOWING:

(1) SELLER'S UNREASONABLE FAILURE TO AGREE ON THE RELEASE FROM THE
DISTRICT AND THE RELEASE FROM BANK OF AMERICA, AS CONTEMPLATED BY SECTIONS
2.02(A) AND 2.02(B), RESPECTIVELY, OF THIS AGREEMENT;

(2) SELLER'S FAILURE TO DELIVER ANY OF THE CLOSING DOCUMENTS DESCRIBED IN
SECTION 4.06 OF THIS AGREEMENT; AND

(3) SELLER'S BREACH OF THE COVENANTS CONTAINED IN SECTION 6.01(A) OR (B)
OF THIS AGREEMENT.

Buyer's Initials
Seller's Initials

IF BUYER BRINGS AN ACTION FOR SPECIFIC PERFORMANCE, BUYER SHALL BE
DEEMED TO HAVE WAIVED ANY AND ALL BREACHES BY SELLER OF REPRESENTATIONS,
WARRANTIES AND COVENANTS OF WHICH BUYER HAS ACTUAL KNOWLEDGE EXCEPT FOR
THOSE BREACHES OF THE COVENANTS CONTAINED IN SECTION 6.01(A) OR 6.01(B) OF
THIS AGREEMENT.

Section 7.03 SELLER'S INDEMNIFICATION. Subject to the provisions of
Section 8.02 below, Seller hereby agrees to protect, defend, indemnify and
hold Buyer harmless from and against any and all liabilities, obligations,
losses, costs, damage or expense, including attorneys' fees and court
costs, Buyer may incur or suffer on account of or in connection with all
obligations, liabilities or claims relating to ownership, leasing,
management, maintenance or operation of the Property prior to the Closing
Date, except to the extent Buyer shall receive a proration credit therefor.

Section 7.04 BUYER'S INDEMNIFICATIONS. Buyer hereby agrees to
protect, defend, indemnify and hold Seller harmless from and against any
and all liabilities, obligations, losses, costs, damage or expense,
including attorneys' fees and court costs, Seller may incur or suffer on
account of or in connection with any obligations, liabilities or claims
relating to the ownership, leasing, management, maintenance or operation of
the Property from and after the Closing Date or to the extent Buyer has
received a proration credit therefor.

ARTICLE 8

Miscellaneous

Section 8.01 PRORATIONS. The following items shall be
apportioned at the Closing as of 12:01 a.m., local time, as of the Closing
Date, without duplication: (a) real estate and personal property taxes,
sewer rents and charges and other state, county, school, municipal or other
taxes, charges and assessments affecting the Property or any portion
thereof, on the basis of the fiscal year for which the same are levied,
imposed or assessed; (b) charges for water, electricity, gas, telephone and
all other utilities; (c) charges under the Assumed Contracts; (d) standby
charges, assessments and ad valorem taxes due to the District for the
District's 1996/1997 fiscal year and (e) all other items of expense. If
the rate of any such taxes, rents, charges or assessments shall not be
fixed prior to the Closing, the adjustment thereof at the Closing shall be
upon the basis of the rate for the preceding fiscal year applied to the
latest assessed valuation (or other basis of valuation) and shall be
readjusted after Closing when the precise amount of such taxes, rents,
charges or assessments are finally known. If any error in calculating any
amount due hereunder is made, such error shall be corrected as soon as
practical after its discovery, but in all events (other than ad valorem
taxes) within ninety (90) days of the Closing Date. Seller shall pay or
otherwise discharge all delinquent ad valorem taxes and assessments on or
before the Closing Date. In addition, at Closing, Seller shall pay to the
District all delinquent assessments, standby charges and ad valorem taxes
for the 1995/1996 fiscal year together with amounts advanced by the
District in 1995 to pay debt service on the Bond Debt.

Section 8.02 NON-RECOURSE. Notwithstanding anything to the
contrary in this Agreement or in any other agreement, instrument or
certificate delivered in connection herewith, neither any present or future
Constituent Partner in or agent of Seller, nor any shareholder, officer,
director, member, manager, employee, trustee, beneficiary or agent of any
corporation or other entity that is or becomes a Constituent Partner in
Seller, shall be personally liable, directly or indirectly, under or in
connection with this Agreement or any other agreement, instrument or
certificate delivered in connection herewith, or any amendments or
modifications to any of the foregoing made at any time or times; the
recourse of Buyer and each of its successors and assigns under or in
connection with this Agreement and such other agreements, instruments and
certificates, and any such amendments or modifications, shall be limited to
Seller's interest in the Property only, and Buyer and each of its
successors and assigns waive any such personal liability. As used in this
Section 8.02, a "Constituent Partner" in Seller means any direct partner in
Seller and any person or entity that is a partner in any partnership that,
directly or indirectly through one or more other partnerships, is a partner
in Seller. This Section 8.02 shall survive the Closing and any termination
of this Agreement. Notwithstanding anything to the contrary in this
Agreement or in any other agreement, instrument or certificate delivered in
connection herewith, after the Closing, Seller shall have no personal
liability in connection with this Agreement or any other agreement,
instrument or certificate delivered in connection herewith or any
amendments or modifications to any of the foregoing made at any time or
times; provided, however, Buyer shall have the right to set-off against the
amounts owing under the Note any monetary obligations owed to Buyer from
Seller arising out of a breach of any representation, warranty or covenant
of Seller contained in this Agreement or the failure of Seller to comply
with any other term or provision of this Agreement or any other agreement,
instrument or certificate delivered in connection herewith or any
amendments or modifications to any of the foregoing made at any time or
times; provided further, however, that Buyer's right to setoff against
amounts owing under the Note as a result of a breach of a warranty,
representation or covenant hereunder shall be capped at $900,000.00.

Section 8.03 NOTICES. Any notice, demand or document any party
is required or may desire to give or deliver to or make upon any other
party shall be in writing and delivered in person, given or made by
commercial delivery service (such as Federal Express) or given or made by
United States registered or certified mail, postage prepaid, return receipt
requested, addressed to such party at its address set forth below, subject
to the right of any party to designate a different address by notice
similarly given. Any notice, demand or document served personally shall be
deemed delivered upon receipt, and if served by mail or commercial delivery
service shall be deemed delivered on the date of receipt as shown by the
addressee's registry or certification receipt or on the date receipt at the
appropriate address is refused, as shown on the records or manifest of the
U.S. Postal Service or commercial delivery service. The addresses for
Seller and Buyer are:

For Seller: Stephen A. Lovelette, Treasurer
Arvida Company
c/o JMB Realty
900 North Michigan Avenue
Chicago, IL 60611-1575
(312) 440-4800
(312) 915-2310 (Fax)
With copies to: Arvida Company
7900 Glades Road
Boca Raton, FL 33434
Attention: General Counsel
(407) 479-1100
(407) 479-1226 (Fax)

Nossaman, Guthner, Knox & Elliott, LLP
18101 Von Karman Avenue
Suite 1800
Irvine, CA 92715
Attention: Gregory W. Sanders, Esq.
(714) 833-7800
(714) 833-7878 (Fax)

White & Case
First Union Financial Center
200 South Biscayne Boulevard
Suite 4900
Miami, Florida 33131-2352
H. Williams Walker, Jr., Esq.
(305) 371-2700
(305) 358-5744 (Fax)

For Buyer: Starwood Opportunity Fund IV, L.P.
c/o Starwood Capital Group, L.L.C.
Three Pickwick Plaza, Suite 253
Greenwich, CN 05330
Attention: Eugene A. Gorab
Managing Director
(203) 861-2100
(203) 861-2101 (Fax)

With copies to: Starwood Opportunity Fund IV, L.P.
c/o Starwood Development Company, L.P.
5090 North 40th Street, Suite 190
Phoenix, AZ 95018
Attention: Samuel Robinson, Director
(602) 952-1515
(602) 952-1880 (Fax)

Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, IL 60661
Attention: David J. Bryant, Esq.
(312) 902-5380
(312) 902-1061 (Fax)

Section 8.04 OTHER DOCUMENTS. The parties hereto shall
cooperate in good faith to accomplish the objectives of this Agreement and
to that end shall execute and deliver from time to time such other and
further instruments and documents as may be necessary and convenient to the
fulfillment of those purposes.

Section 8.05 EFFECT OF INVALIDATION. If any one or more of the
provisions of this Agreement is for any reason held to be invalid, illegal
or unenforceable in any respect by any court of competent jurisdiction,
such invalidity, illegality and unenforceability shall not affect the
validity and enforceability of the other provisions hereof, and this
Agreement shall be construed as though such invalid, illegal or
unenforceable provision had never been contained herein.

Section 8.06 ENTIRE AGREEMENT. This Agreement contains the
entire agreement between the parties hereto with respect to the matters set
forth herein, supersedes all prior agreements, understandings and
representations by or between the parties with respect thereto, and may not
be modified, amended or terminated except by written agreement signed by
the party against whom enforcement is sought.

Section 8.07 COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall for all purposes be deemed
to be an original and all of which together shall constitute one and the
same agreement of the parties. Any signature page to any counterpart may
be detached from such counterpart without impairing the legal effect of the
signatures thereon and thereafter attached to another counterpart identical
thereto, except having attached to it any such additional signature pages.

Section 8.08 CAPTIONS. Captions of the Articles and Sections of
this Agreement are for convenience only and shall not be considered or
referred to in resolving questions of interpretation or construction.

Section 8.09 ATTORNEY'S FEES. Should either or both of the
parties hereto institute any action or proceeding in any court to enforce
any provision(s) of this Agreement, the prevailing party shall be entitled
to receive from the losing party reasonable attorneys' and expert witness
fees and costs incurred in such action or proceeding, whether or not such
action or proceeding is prosecuted to judgment, and in any appeals, in such
amount as the court determines is reasonable.

Section 8.10 GOVERNING LAW. This Agreement and the transaction
contemplated herein shall be governed by and construed under the laws of
the State of California.

Section 8.11 TIME OF THE ESSENCE. Time is of the essence of all
matters set forth in this Agreement.

Section 8.12 NO WAIVER. No waiver by any party of any breach by
any other party of any provisions of this Agreement shall be effective
unless in writing signed by the waiving party. No such waiver shall be
deemed or construed to be a waiver of any subsequent or continuing breach
of the same or any other provisions of this Agreement; nor shall any
forbearance by any party from the exercise of a remedy for any such breach
be deemed or construed to be a waiver by such party of any of its rights or
remedies with respect to such breach.

Section 8.13 NUMBER AND GENDER. Masculine terms used in this
Agreement shall include the feminine and vice versa; neuter terms shall
include both masculine and feminine; and the singular shall include the
plural and vice versa, whenever the context shall require it.

Section 8.14 ASSIGNMENT. Seller shall not have the right to
assign this Agreement without the prior written consent of Buyer, and any
purported assignment without such consent shall be void and, at the option
of Buyer, shall constitute a material default. Buyer shall not have the
right to assign its interest in this Agreement without the prior written
consent of the Seller; provided, however, that Buyer shall have the right
to assign this Agreement upon notice to, but without the consent of, Seller
to a general or limited partnership or limited liability company controlled
directly or indirectly by Buyer or under common control with Buyer or its
general partner and Buyer will remain liable for all obligations of "Buyer"
hereunder.

Section 8.15 CALCULATION OF TIME. The time in which any act
required or permitted by this Agreement is to be performed shall be
determined by excluding the day upon which the event occurs from whence the
time commences. If the last day upon which performance would otherwise be
required or permitted is a Saturday, Sunday or national holiday of the
United States, then the time for performance shall be extended to the next
day which is not a Saturday, Sunday or holiday of the United States.

Section 8.16 RELATIONSHIP. Nothing contained in this Agreement
shall be deemed or construed by the parties or by any third person to
create a relationship of principal and agent or partnership or a joint
venture between Seller and Buyer or between either or both of them and any
third party.

Section 8.17 ESCROW CANCELLATION CHARGES. If the Escrow
established pursuant to Section 3.01 of this Agreement fails to close by
reason of Seller's default hereunder, Seller shall pay all escrow
cancellation charges. If the escrow fails to close by reason of Buyer's
default hereunder, Buyer shall pay for all escrow cancellation charges. If
the escrow fails to close for any reason other than the foregoing, Seller
shall pay the escrow cancellation charges.

Section 8.18 REPRESENTATION BY ATTORNEY. Each party
acknowledges that he or it has been represented by experienced and
knowledgeable legal counsel in negotiating the form and contents of this
Agreement.

Section 8.19 RECITALS INCORPORATED BY REFERENCE. The Recitals
of this Agreement are incorporated herein by this reference and made a part
of this Agreement.

Section 8.20 CONFIDENTIALITY. Prior to closing, this Agreement,
and the provisions, terms and conditions hereof, shall not be disclosed to
any third party without the consent of the nondisclosing party; provided,
however, any party may disclose the existence of this Agreement and the
provisions, terms and conditions hereof to such party's partners,
investors, lenders, representatives, agents, attorneys and consultants or
when required to do so in order to comply with filing and/or reporting
requirements of any governmental regulatory agency or any lawful order
thereof.

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

SELLER

ARVIDA/JMB PARTNERS, L.P.-II,
a Delaware limited partnership

By: Arvida/JMB Managers-II, Inc.,
a Delaware corporation, its
General Partner

By:
Its:

BUYER

STARWOOD/TALEGA ASSOCIATES L.L.C., a
Connecticut limited liability company

By: Starwood Opportunity Fund IV, L.P., a
Delaware limited partnership

By: SOFI IV Management, L.L.C., a
Connecticut limited liability company

By: Starwood Capital Group,
L.L.C., a Connecticut limited liability company

By:____________________________
Eugene A. Gorab,
Its:
__________________________

1A/245795

LIST OF EXHIBITS AND SCHEDULES

Exhibit A - Legal Description
Exhibit B - Form of Note and Deed of Trust
Exhibit C - Survey Specifications
Exhibit D - Form of Quitclaim Deed
Exhibit E - Title Commitment
Exhibit F - Estoppel Certificate
Exhibit G - Location of Hazardous Substance Spill

Schedule 1.01(b) - Personal Property
Schedule 1.01(h)(iii) - Licenses
Schedule 1.01(h)(iv) - Entitlements
Schedule 2.02(b) - Security Instruments
Schedule 5.01(c) - Consents and Approvals
Schedule 5.01(d) - Litigation
Schedule 5.01(e) - Contracts
Schedule 5.01(f) - Licenses and Entitlements
Schedule 5.01(g) - Leases
Schedule 5.01(h) - Reassessments
Schedule 5.01(i) - Special Assessments
Schedule 5.01(j) - Eminent Domain
Schedule 5.01(l) - Environmental
Schedule 5.01(s) - Bond Documents
Schedule 5.01(t) - Security Instruments

DOCUMENT #: CHGO01A (77795-00047-8) 245795.16;DATE:10/25/96/TIME:15:01

<ARTICLE> 5

<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
INCLUDED IN SUCH REPORT.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996

<CASH> 1,263,585
<SECURITIES> 0
<RECEIVABLES> 240,141
<ALLOWANCES> 77,009
<INVENTORY> 48,115
<CURRENT-ASSETS> 0
<PP&E> 2,583,066
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,981,242
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (113,987,657)
<TOTAL-LIABILITY-AND-EQUITY> 4,981,242
<SALES> 25,472,940
<TOTAL-REVENUES> 25,472,940
<CGS> 19,137,388
<TOTAL-COSTS> 19,137,388
<OTHER-EXPENSES> 15,535,548
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (9,199,996)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,199,996)
<DISCONTINUED> 0
<EXTRAORDINARY> 20,000,000
<CHANGES> 0
<NET-INCOME> 10,800,004
<EPS-PRIMARY> 56.26
<EPS-DILUTED> 56.26

</TABLE>