Item 1. Business

(a) General Development Of Business

         Royal Palm Beach Colony,  Limited Partnership (the "Partnership" or the
"Registrant")   was  organized  under  the  Delaware   Revised  Uniform  Limited
Partnership  Act. The  Partnership  is a successor  to Royal Palm Beach  Colony,
Inc.,  (the  "Predecessor  Company") a Florida  corporation  organized  in 1963.
Pursuant to a Plan of Complete Liquidation (the "Plan"), the Predecessor Company
transferred  all of its  assets,  subject  to  all  of its  liabilities,  to the
Partnership  in exchange for a number of  partnership  units  ("Units")  exactly
equal to the  number  of  shares  of  common  stock of the  Predecessor  Company
outstanding on July 11, 1985 (the "Effective Date").

          On the  Effective  Date,  the Units  were  distributed  to the  former
holders of common stock of the Predecessor  Company on the basis of one (1) Unit
for each share of common stock of the Predecessor Company. The Partnership, as a
successor to the Predecessor  Company, has registered its Units under Section 12
(b) of the  Securities  Exchange  Act of 1934.  Under the Amended  Agreement  of
Limited  Partnership  of the  Registrant,  the term of the  Partnership  expires
December  31,  2005,  unless  extended by vote of a majority of the  partnership
units.   Trading  in   Partnership   Units  The  Units  are  currently   trading
over-the-counter under the symbol "RPAMZ."

Results of Liquidation Activities

         The Partnership's  principal  business has been to operate,  manage and
dispose of the assets which were  transferred to it on the Effective Date by the
Predecessor  Company.  Since the  Effective  Date of the  Predecessor  Company's
liquidation,  the  Partnership  has  engaged in a program  of asset  disposition
resulting  in the  sale  of  assets  for an  aggregate  gross  consideration  of
$68,172,020.  As of December  31,  1997,  the  Partnership  had  distributed  an
aggregate  of  $29,156,000,  or $6.50  per  Unit,  to the  general  and  limited
partners.  See Item 5 Market for the  Registrant's  Common  Equity  and  Related
Stockholder  Matters  "Prior  Distributions."  As of  September  30,  1997,  the
Partnership's  remaining  assets  consisted  principally of; (1) 154 residential
lots plus commercial property and multifamily-zoned land in the Village of Royal
Palm Beach (the  "Village"),  a portion of which is now under  development  (see
Item 2 --  Properties  --  "Village  of  Royal  Palm  Beach"),  which  land  was
reacquired in January,  1992 by  foreclosure of a mortgage and which is included
in the balance sheet at $3,948,208 (this tract is hereinafter referred to as the
"Crestwood"  tract),  (2) unsold  land in Palm Beach  County,  Florida  which is
included in the balance  sheet at its book value of $503,005 (3) a tract of land
in the Village  reacquired  by  foreclosure  in 1993 and included in the balance
sheet at  $288,726,  (4)  contingent  receivables  relating  to a prior  sale of
utility assets with a maximum  future  undiscounted  value of $5,476,000  (which
amount,  other than $228,660  earned as of September 30, 1997 but not payable to
the Partnership until January,  1998, has not been included in the balance sheet
due to its contingent  nature -- see Note 10 to the Financial  Statements),  and
(5) a mortgage  note  receivable  in the amount of $101,250  and (7) cash in the
amount of $48,738. Through December 31, 1997, there had been no material changes
in the Partnership's  real estate assets,  except for the closing of sales of 17
residential  lots  for  aggregate  gross  proceeds  of  $484,500.  See  Item 2 -
"Residential Lots Within the Crestwood Tract."

          Factors Affecting Future Operations and Distributions

         The  availability  of cash for  distribution  in the future will depend
upon a variety of factors not currently determinable.
<PAGE>
          (1) Current Activities

         In early 1992,  a large  portion of the  Partnership's  remaining  land
consisted of the undeveloped 165 acre "Crestwood"  Tract described above,  which
had been sold during the process of the Partnership's liquidation but reacquired
by the Partnership in 1992 when the purchaser was unable to service the interest
and  amortization  payments to the  Partnership  on a $5,039,952  purchase money
mortgage.  Management's attempts to remarket the Crestwood Tract on a bulk basis
were  unsuccessful.  Management  perceived that due to changes in the market for
real estate in  southern  Florida,  the  Crestwood  Tract  would  continue to be
difficult to market at acceptable  prices.  Among other factors  depressing  the
local market was the  "overhang" of large  undeveloped  tracts which were on the
market as the result of bank  insolvencies.  Although  management has considered
several  options  concerning the most  advantageous  manner of disposing of this
tract,  including  possible  business  combinations  with other companies in the
construction  business,  it was  determined  that  unitholder  values could most
effectively be increased if some or all of the Crestwood Tract were  temporarily
withheld from sale and selectively developed. In the judgment of management, the
prospective  incremental  increase  in  selling  prices of  developed  land over
amounts which might  reasonably be anticipated  from the sale of the land in its
raw state  would  substantially  exceed the cost of  developing  such land,  and
warranted   investment  of  a  portion  of  the  Partnership's  cash  assets  in
development  activities.  Management  therefore commenced the development of one
portion of the Crestwood  Tract,  consisting of originally of 170 lots zoned for
single family housing  (increased in a revised  site-plan to 198 lots), in order
to enhance its sale value.  Management's  decision to commence  development  was
influenced,  in part, by an appraisal  obtained in 1992 of the  Crestwood  Tract
which  indicated  that such tract had a then  current  fair market  value in the
approximate amount of $4,500,000 and could have a significantly  higher value if
rezoning and re-permitting work were accomplished. Management was further of the
opinion that the  Crestwood  Tract would have an  indefinite  but  substantially
higher value if developed with roads and a utility infrastructure. See Item 2 --
Properties -"Village of Royal Palm Beach."

         While  management  might  consider  a  business   combination  with  an
appropriate  operating  business,  it is not  presently  actively  seeking  such
transactions.  The  Partnership  is  proceeding  with  the  liquidation  of  its
remaining  assets.  In  connection  therewith,  the  Partnership   substantially
completed  development of the residential lots in the Crestwood tract during the
1997 fiscal year,  and may develop other  properties if such  development  would
enhance   liquidation  values.  The  status  of  real  estate  dispositions  and
development is discussed in Item 2 below.

          (2) Cash Available for Distribution

         Management intends to continue to invest in the development of portions
of the Partnership's remaining land in Palm Beach County as a means of achieving
a higher return upon sale. Because of a substantial  reduction in sales revenues
in 1993 and 1994, and the cash requirements for such land development activities
in 1995,  together  with  cash  expenditures  in  connection  with the  proposed
transaction with Regency Homes, Inc. and normal operating expenses,  no cash has
been  available for  distribution  since  December  1992.  Although at currently
targeted sales prices the Partnership could realize gross cash proceeds from the
sale of the Crestwood lots owned as of the end of the fiscal year  (including 97
<PAGE>
lots then under  contract) in a range of  $4,500,000,  there can be no assurance
that currently targeted prices will be realized, and initial sales proceeds will
be  applied  to  repayment  of  debt,   including  bank  financing   aggregating
approximately  $1,675,972  as of the end of the  fiscal  year.  It is  presently
uncertain whether that cash will be available for distribution in 1998. See Item
2 -  "Development  and Sale of  Residential  Lots;"  and  Item 7 --  "Management
Discussion  and  Analysis  of  Financial  Condition  --  Liquidity  and  Capital
Resources."

          The timing of the resumption of liquidating  distributions will depend
largely  upon the timing of future  sales of the  Partnership's  remaining  land
(developed or  undeveloped)  and future  collections  of contingent  receivables
relating to a prior sale of a utility  plant.  See Item 2 --  Properties,  for a
discussion of other sources of and anticipated  timing of the receipt of revenue
which will affect future distributions.

 (b) Financial Information About Industry Segments

                  Not applicable.

(c) Narrative Description Of The Business

         Regulation

         Development  and sales  operations of the  Partnership  or by potential
purchasers of real estate from the  Partnership  have been subject to regulation
by a number of local,  state and  federal  agencies  concerning  the  nature and
extent of improvements, and compliance with zoning regulations,  building codes,
health requirements and environmental protection.  The Partnership believes that
it has been in substantial  compliance with all such laws and regulations  which
affect its  properties  and that it has developed  the  properties to the extent
required  by  contract  or law.  If such laws or  regulations  are  amended,  in
particular those  concerning  environmental  protection,  the cost of compliance
could be increased. Reference is made to the discussion concerning the impact of
land use regulatory issues affecting  salability of certain properties remaining
in Palm Beach County in Item 2 --  Properties -- "Acreage in the Vicinity of the
Village."

         Competition

         The  real  estate  business  conducted  by the  Partnership  is  highly
competitive.  The  Partnership's  sales of its remaining  land will compete with
surrounding  developments,  and with owners of tracts of land in the area of all
its  properties.  There are  substantial  tracts of vacant  land and land  under
development  in the general  area of most of the  Partnership's  remaining  real
estate. These competitive considerations could affect the decisions of potential
purchasers  of the  Partnership's  remaining  properties.  The  Partnership  has
historically  marketed its properties  through direct mail  advertising to major
brokers and developers,  advertisements in major regional  newspapers and direct
contacts  between  officers  of the  Managing  General  Partner  and real estate
developers and brokers.  The  Partnership  is currently  marketing its remaining
properties through local real estate brokers, including Randy Rieger, who served
as interim  Vice  President  and Chief  Operating  Officer of the  Partnership's
managing  general partner  between  September 1995 and February 1996. Mr. Rieger
currently provides services as an independent  consultant to the Partnership for
management  services in addition to ongoing brokerage  services.  See Item 13 --
"Certain Relationships and Related Transactions."

         Impact of General Economic Conditions

         The  development  and sale of real estate occurs within a  historically
cyclical market, and is significantly influenced by general economic conditions.
<PAGE>
Sales of housing units and sales of tracts to builders are particularly affected
by the costs and  availability  of mortgage  financing  and the rise and fall of
interest  rates in general.  Interest  rates have moved in a narrow range during
1996 and 1997. If  significant  increases  occur in the future,  the real estate
market could suffer as a result.

          Personnel. 

         As of December 31, 1997, Stein Management Company, Inc.  ("Steinco")the
Managing General Partner, employed 1 person, who acts as an an adminstrator. The
balance of the  Partnership's  affairs are carried out by  independent  brokers,
contractors and other  consultants under the direction of the Board of Directors
of Steinco. See Item 10.
          

          Office Facilities The Partnership's executive headquarters are located
at 2501 S. Ocean Drive,  Hollywood,  Florida 33019. The premises are owned by an
affiliate of Hasam Realty Limited  Partnership ("Hasam L.P."), a general partner
of the  Partnership,  and are being  made  available  to the  Partnership  as an
accommodation without charge.

Item 2.  Properties

Palm Beach County, Florida

          The Company originally owned  approximately  2,000 acres in Palm Beach
County,  in  southeastern  Florida,  approximately  4,200 of which were  located
within the Village. The Village of Royal Palm Beach The Village, an incorporated
municipality,  is  approximately  eight miles from the Palm Beach  International
Airport and eleven miles west of Palm Beach.  Two major area highways,  Southern
Boulevard and Okeechobee  Road,  lead directly from Palm Beach through West Palm
Beac to the Village. The Village has a population of approximately 16,000 and is
primarily  residential.  The Village has been  developed  in  accordance  with a
master plan and includes  schools,  shopping  facilities,  community  recreation
areas, and its own police and fire departments.

The Crestwood Tract

          Although the Partnership had previously sold nearly all of its land in
the Village,  it reacquired in 1992, through foreclosure of a defaulted purchase
money mortgage, the 165 acre Crestwood Tract of undeveloped land in the Village.
When reacquired, the Crestwood Tract was zoned and preliminary approval had been
obtained for the development of 172 single-family  homesites (the "Single Family
Tract")  and 625  multi-family  units.  The  Crestwood  Tract is  bisected  by a
principal  Village  road  and has  access  to all  utilities,  but is  otherwise
undeveloped  with the  exception  of the  existence  of  portions  of a drainage
system.

         Commercial Land within the Crestwood Tract

         In order to  enhance  the  market  value of the  Crestwood  Tract,  the
Partnership  obtained the rezoning of a 28 acre portion of the  Crestwood  Tract
previously zoned for multi-family housing to permit the Partnership to develop a
14 acre portion for use as a shopping  center  site.  The  Partnership  received
site-plan  approval in mid-1996.  The  Partnership  has executed an agreement to
sell the entire 28 acre portion to an  unaffiliated  shopping  center  developer
("Purchaser") in four phases.

          The closing on the first phase of the Commercial Site, consisting of a
11.8-acre shopping center site, occurred in February,  1997,  resulting in gross
proceeds of approximately $1,538,757.
<PAGE>
          The second and third phases consist of two  additional  parcels in the
14 acre portion rezoned as described above, and adjoin the shopping center site,
but  as  to  which  building  permits  are  not  expected  to be  available  for
approximately four years. As to such parcels,  the Partnership has agreed, for a
period ending in February, 2002, to accord an option to the Purchaser to acquire
the  parcels,  with the price to be paid  dependent  on the terms upon which the
Purchaser  leases or sells such parcels to an unaffiliated  third party. In such
event the Purchaser will pay to the Partnership,  (i) in the event of a lease, a
sum equal to the five times the average annual rental under the lease,  and (ii)
in the event of a sale,  50% of the net proceeds of the sale;  provided that the
Partnership  is not required to accept less than $3.50 per square  foot.  If the
Partnership itself obtains an unsolicited offer to lease or purchase the parcels
which the  Partnership  desires to accept,  th Purchaser may exercise a right of
first  refusal in which case the  Partnership  must accept (i) in the event of a
lease,  a sum equal to five times the  average  annual  rental to be paid by the
third party during the first five years of the proposed  lease,  and (ii) in the
event of a sale,  50% of the net  proceeds  to be paid by the third  party.  The
Partnership and the Purchaser are presently seeking approval from the Village to
accelerate the as of which certain of these parcels may be developed with retail
uses;  this  process,  if successful  (as to which there is no assurance)  would
accelerate exercise of the options and payment to the Partnership

          The final phase  relates to a  contiguous  14-acre  parcel as to which
rezoning  from the current  multi-family  to  commercial  use is not  considered
feasible for several years. The Purchaser has been granted an option ending four
years  after the first  closing to acquire  this parcel at $3.50 per square foot
(approximately  $2,129,000 subject to survey). However, after two years from the
first  closing,  the  Partnership  is  entitled  to  market  this  property  for
multi-family residential purposes only. If the Partnership receives an offer for
a price which is less than the option  price,  it must offer to the  Purchaser a
right of first refusal at the same price.

         Randy Rieger, who became  vice-president of the Partnership's  managing
general partner in September,  1995 for an interim period following the death of
its  President,  is entitled to a  commission  of 10% of the net proceeds to the
Partnership on all of the above-described transactions. See Item 13.

          Residential Lots within the Crestwood Tract

          As a result  of  management's  decision  to  develop  portions  of the
Crestwood Tract,  the Partnership has replanned the  configuration of the entire
tract.  This project has included a redesign of the Single Family Tract, and the
Partnership  has now received  final plat approval to increase to 198 the number
of  residential  lots which may be developed for single family use  (hereinafter
the "Residential Tract." "Development," as such term is applied to single-family
lots,  entails the completion of all necessary zoning,  land use,  environmental
and other required regulatory procedures,  the installation of roads and utility
connections to each lot and the provision of drainage facilities.

          Between 1995 and 1997,  the  Partnership  substantially  completed the
off-site and on-site  improvements  required for the development of the 198 lots
in the Crestwood single-family  residential subdivision.  The total construction
cost was financed  partially  through the issuance of bonds and  partially  with
development  financing  obtained  from  Union  Bank of  Florida.  (See Item 13 -
"Certain  Relationships  and Related  Transaction").  A total of $2,355,972  was
borrowed from Union Bank of Florida,  of which  $1,675,972 was outstanding as of
September 30, 1997. The loan, which bears interest at 2%
<PAGE>
above the bank's prime  lending  rate,  was  originally to mature on January 31,
1998 but has been  extended  until June 30,  1998.  As closings of lot sales are
held,  the  Partnership is obligated to pay down the bank at the rate of $20,000
per lot. The remaining cost of the development  has been financed  utilizing the
net proceeds  ($1,074,000)  of bonds  issued by the Indian  Trail Water  Control
District,  a governmental  authority.  The bonds are a direct  obligation of the
District  (and not of the  Partnership)  and are  repayable as to principal  and
interest  from  taxes  levied  on the  lots in the  Crestwood  subdivision.  The
issuance  of the bonds  increased  the  annual  real  estate  tax on the  entire
subdivision by  approximately  $117,000,  or $600 per lot. As lots are sold, the
responsibility  for payment of the taxes passed from the  Partnership to the lot
purchasers.

          Under the Partnership's  agreement with Lennar Homes, Inc. ("Lennar"),
executed in August,  1996, Lennar contracted to purchase 86 lots over a two year
period in Phase II of the  Residential  Tract for an aggregate of $2,451,000.  A
closing on 8 lots  occurred  prior to  September  30,  1997,  resulting in gross
proceeds to the Partnership of  approximately  $225,500 and net proceeds,  after
mandatory loan reductions of $20,000 per lot and brokerage commissions and other
and closing costs, of approximately  $43,000. An additional 17 lots were sold to
Lennar and one lot to another builder during the quarter ended December 31, 1997
for aggregate gross proceeds of $484,500 and net proceeds,  after mandatory loan
reductions  of $20,000 per lot and brokerage  commissions  and other selling and
closing costs, of approximately $96,000.

          During the 1997 fiscal year,  the  Partnership  conveyed a total of 35
(including  the 8 lots sold to Lennar as described  above) for  aggregate  gross
proceeds of $1,014,500.  As of September 30, 1997, a total of 97 additional were
under contract to Lennar and another  homebuilder  as to which,  if all closings
were held  thereunder,  aggregate  gross sale  proceeds of  $2,764,500  would be
generated.  These  contracts  are not  subject to any  contingencies  other than
completion of the on-site  improvements and acceptance thereof by the Village of
Royal Palm Beach, and the Partnership's ability to convey good title.

          The  Company has entered  into a contract  to sell  approximately  7.7
acres in the  multi-family  zoned land to a church for $350,000  subject only to
site plan  approval.  The Company has received an offer from a major real estate
development  firm to  purchase a  substantial  portion of the  remainder  of the
multi-family zoned land (comprising land zoned for approximately 288 residential
units),  subject to a number of contingencies  and the purchaser's  satisfactory
due diligence.

Other Acreage Within the Village

         In March,  1993 the  Partnership  reacquired  a separate  tract of 4.54
acres in the Village by  accepting a deed in lieu of  foreclosure  on a mortgage
with a principal balance of $300,000 (See Item 7 --"Foreclosure  Transactions").
This parcel is bordered by a golf course and a principal  Village road, is zoned
for  approximately  100 multi-family  residential units and is being offered for
sale in its present state without further development. An agreement to sell this
acreage for $325,000 was  terminated  by the purchaser in November  1996 and the
property is currently being remarketed.

Utility Contingent Receivable

         In 1983 the  Partnership's  Predecessor  Company sold to the Village of
Royal Palm Beach a water and sewage  treatment  system  servicing  the  Village.
Pursuant to the agreement of sale ("Utility Contract"),  the Predecessor company
<PAGE>
received $2,510,000 on closing, and was entitled to future payments to a maximum
of $10,900,000 as future connections,  measured by consumption  increases,  were
made to the system over a period ending August,  2001. As of September 30, 1997,
$5,257,000 had not been received or earned.  The Utility  Contract also provided
for contingent  extension  periods  aggregating  not more than three  additional
years to compensate for possible  future  governmental  building  moratoriums or
water use restrictions.  The Partnership's  consultants have advised it that the
term has been  extended  through  2003 as a result of water  usage  restrictions
imposed by the South  Florida  Water  Management  District  in 1990 and 1991 and
moratorium  actions  taken by the  Village of Royal Palm Beach in 1985 and 1986.
The Utility Contract also calls for payments to the Partnership  equal to 25% of
any  "Guaranteed   Revenues"   (payment  by  developers  to  secure   guaranteed
allocations of plant capacity)  collected by the Village to a maximum payment of
$500,000,  of which  $281,000 has already been  received.  It is not possible to
predict the amount or timing of future  revenues to the  Partnership  under this
program.

         To date, the  Partnership has received the following  Utility  Contract
payments:
<TABLE>
<CAPTION>
                                             Amount Received Based On                
       Fiscal Year Ended           ---------------------------------------------         
         September 30               Consumption               Guaranteed Amounts
         ------------               -----------               ------------------
<S>                                <C>                           <C>
             1984                  $  919,000
             1985                     830,000
             1986                     637,000
             1987                     859,000
             1988                     240,000                    $   30,000
             1989                     761,000                        45,000
             1990                         -0-                        35,000
             1991                     293,000                        21,000
             1992                     357,000                        37,000
             1993                     168,000                        47,000
             1994                      58,000                        27,000
             1995                     413,000                        20,000
             1996                     108,000                        19,000
             1997*                       --                            --
             Total                 $5,643,000                    $  281,000
</TABLE>
* The Partnership received $229,000 in January, 1998.



          The Utility Contract with extensions  management believes have already
accumulated  will expire in 2003,  subject to extensions of up to one additional
year.  The ability of the  Partnership to realize the maximum price is dependent
upon the rate at which the population in the Village grows,  and levels of water
consumption  which in turn depends upon  economic,  social and climatic  factors
which cannot be predicted.  Historically,  water  consumption  tends to increase
based upon increases in population.  During most of fiscal 1990, however, due to
drought  conditions  existing in most Southern Florida,  the South Florida Water
Management District imposed mandatory water usage  restrictions.  The imposition
of these  restrictions  resulted in a decrease in aggregate water consumption in
the area from which the  Partnership's  receipts are projected while  population
was increasing.
<PAGE>
         Management  believes  that there remain  sufficient  potential new home
water  hookups in the area  served by the utility to enable the  Partnership  to
realize  the maximum  remaining  $5,257,000  in  contingent  payments  under the
Utility Contract.  Nevertheless,  it is now considered unlikely that the rate of
new construction or water  consumption in such area will be sufficient to enable
the  Partnership  to  receive  the full  amount  of such  payments  prior to the
expiration of the contingent payment term.

         Acreage in the Vicinity of the Village

          Substantially all of the property  previously owned by the Predecessor
Company  in  Palm  Beach  County  outside  of  the  Village  limits,  originally
aggregating approximately 23,800 acres, was sold under the Predecessor Company's
retail installment sales program, which terminated prior to the inception of the
Partnership.  The Partnership  currently retains three tracts in the vicinity of
the Village.

          The first tract  originally  consisted  of 208  one-acre  lots located
approximately  eight  miles  northwest  of the  Village.  These  lots  have been
improved with graded unpaved access roads and drainage facilities.  One lot from
this  tract  was sold  during  1996 for  $12,000,  and 36 were  sold in 1997 for
$190,188, leaving a balance of 171 lots.

          All of such lots are  subject  to  numerous  governmental  regulations
under  which  new  development  may  not be  permitted  unless  adequate  public
facilities (such as roads and drainage) must be in place  concurrently  with the
impacts of such development.  The Indian Trail Water Control District prepared a
drainage  plan which would  result in an  exemption  for such lots from  further
compliance with such  concurrency  requirements  and would allow the issuance of
building  permits  for  single-family  residences  on such  lots.  Such plan was
opposed by other  governmental  agencies,  however,  and the Palm  Beach  County
Health  Department  denied  an  application  for  septic  tank  permits,  due to
inadequate  drainage.  Numerous  additional permits are required before building
can be  commenced,  and there is no  assurance  that all of such  permits can be
obtained.

          Palm Beach County has adopted land development regulations under which
new development will not be permitted unless adequate public facilities (such as
roads) will be in place  concurrently with the impacts of such development.  The
Indian Trail Improvement District (formerly named the Indian Trail Water Control
District (the  "District") is currently  preparing a revised drainage plan which
could result in an exemption  for such lots from  further  compliance  with such
concurrency  requirements  and would allow the issuance of building  permits for
single-family   residences   on  such  lots.   Following  the   institution   of
administrative  proceedings  to compel the issuance of septic tank permits,  the
Partnership was successful in obtaining approval for such permits for 3 of the 4
lots  for  which   application   was  made;   the  4th  lot  was   wetland   and
requiredadditional  mitigation.  A plan  covering  all  lots  and  allowing  for
development  has  been  opposed  by  certain  governmental  agencies,  and it is
uncertain whether the plan will be adopted. If the plan is not approved, not all
of  the  lots  may  be  usable  for  residential  purposes.   Nevertheless,  the
Partnership  believes  that its success in obtaining  some septic  permits could
ultimately  substantially increase the value of such lots and that the aggregate
realizable value of all such lots will be  substantially  above their book value
of $147,981.
<PAGE>
         The second tract, consisting of 470 acres, had been reserved for use by
the District, in part, as a water retention area for such revised drainage plan.
The Partnership is presently evaluating possible alternative uses of this tract,
which  contains a significant  amount of wetlands.  The use of this land is also
dependent on the extension of roads, and development  activity on this tract may
meet with  opposition  from  governmental  agencies  concerned with wildlife and
wetlands  preservation.  In 1996 the Partnership rejected an offer of $1,100,000
for this tract from the Nature  Conservancy on behalf of Palm Beach County,  and
retained  Condemnation  Counsel to negotiate a higher price.  Subsequently,  the
Partnership received an offer to purchase the 470 acre tract for $1,450,000 from
a user wishing to develop the property with a residential school and golf course
(with the Partnership also to retain a potentially  valuable development site of
approximately  20 acres at the  entrance  to the  larger  parcel).  The offer is
contingent upon completing the purchaser's due diligence to its satisfaction and
thereafter the obtaining of necessary land use approvals.  There is no assurance
that this  transaction  will be completed or, if not, that a higher price can be
negotiated with the Nature  Conservancy.  However,  management is of the opinion
that its realizable value is in excess of its current book value of $213,421.

          The timing of future sales of the land discussed  above, the manner in
which they may be developed and the ultimate realizable prices for this land are
dependent  upon a complex  and  interrelated  number of factors  arising  out of
governmental regulations concerning permissible land use.

         The  third  tract  in the  vicinity  of  the  Village  the  Partnership
previously held a disputed claim to approximately 24 acres of undeveloped  land.
This claim had not originally been accorded value on the  Partnership's  balance
sheet and was considered to have little or no value.  During 1994, in connection
with the resolution of this claim with  adjoining  land owners,  and in order to
give value to such claim,  the Partnership  relinquished a portion of its claim,
acquired five  adjoining  acres for $141,879,  and executed a joint  development
agreement with one of such adjoining  landowners  relating to the  Partnership's
acreage and such landowner's acreage  (comprising  approximately 22 acres in the
aggregate  of which  the  Partnership  now owns  approximately  12  acres).  The
Partnership  and the joint  developer have entered into an agreement to sell the
entire combined parcel for a price of $1.90 per square foot,  subject to survey,
which would result in a gross selling price of  approximately  $1,986,000  (less
selling  commissions) of which the  Partnership's  share would be  approximately
$993,000.  The sale is subject to the  purchaser's  ability to have the premises
rezoned for use as a shopping  center,  approval of the premises as a site for a
supermarket by a major supermarket chain, the provision of necessary  utilities,
and the issuance of all necessary  building and other permits.  The closing date
(subject to all of the  foregoing)  was  originally to be no later than June 30,
1997.  The  closing  date has been  extended  until June 30,  1998.  There is no
assurance that such permits will be obtained,  nor can the  Partnership  predict
whether  the  rezoning  process,   which  involves  proceedings  before  several
governmental bodies, or the sale of the aforesaid residence,  could be completed
or obtained within the required time frame.