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 $69,878,241.

         As of September 30, 1998, 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, 1998, the  Partnership's  remaining
assets  consisted  principally  of; (1) 99  residential  lots (all of which were
under contract for sale) plus commercial property and multifamily-zoned  land in
the "Crestwood"  tract in the Village of Royal Palm Beach (the "Village"),  (see
Item  2 --  Properties  --  "Village  of  Royal  Palm  Beach"  - 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
$734,584 (3) a tract of land in the Village  reacquired by  foreclosure  in 1993
and  included in the  balance  sheet at  $288,724,  (4)  contingent  receivables
relating to a prior sale of utility  assets with a maximum  future  undiscounted
value of $5,247,000  (which amount,  other than $438,573  earned as of September
30, 1998 but not payable to the  Partnership  until January,  1999, has not been
included in the balance sheet due to its contingent  nature -- see Note 8 to the
Financial Statements), and (5) cash in the amount of $6,553. Since September 30.
1998,  there have been  substantial  additional real estate sales.  See Item 2 -
"Residential Lots Within the Crestwood Tract."
<PAGE>
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.

(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. Thereafter, management commenced the development of one portion of the
Crestwood  Tract,  consisting  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. See Item 2 --Properties -"Village of Royal Palm Beach."

(2) Cash Available for Distribution

Management has now  substantially  completed 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. In addition,  portions of
the  sales  proceeds  from the  sale of  residential  lots  must be  applied  to
repayment of bank financing  aggregating  $1,321,750.  Distributions may be made
during fiscal 1999, however, if the sales described herein under Item 2 close as
scheduled.  See Item 2 - "Development and Sale of Residential  Lots;" and Item 7
-- "Management  Discussion and Analysis of Financial  Condition -- Liquidity and
Capital Resources." Future collections of contingent  receivables  relating to a
prior sale of a utility plant would also affect future distributions. 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."
<PAGE>
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 RTL Realty,  of which
Randy Rieger is a partner. Mr. Rieger 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. 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 moved in a narrow  range during 1996 and 1997
and declined  during the past six months as the result of federal  interest rate
cuts. If significant increases occur in the future, the real estate market could
suffer as a result.

Personnel:

As of December 30, 1998, Stein Management Company, Inc.  ("Steinco")the Managing
General Partner, employed 1 person, who acts as an adminstrator of its books and
records. 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 26,000 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
<PAGE>
Boulevard and Okeechobee  Road,  lead directly from Palm Beach through West Palm
Beach 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 an approximately 14 acre portion of the Crestwood Tract
previously zoned for multi-family housing to permit the Partnership to develop a
14 acre shopping center site. The  Partnership  received  site-plan  approval in
mid-1996.  The  Partnership has executed an agreement to sell the entire 14 acre
portion  to an  unaffiliated  shopping  center  developer  ("Purchaser")  in two
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.

The second  phase  consists  of two  additional  parcels in the 14 acre  portion
rezoned as described  above,  which adjoin the shopping  center site,  but as to
which building permits are not expected to be available until January,  2000. As
to such parcels, the Partnership has agreed 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.
The  Partnership  and the  Purchaser  have  entered  into a contract  to sell an
additional 1.6 acres adjoining the  above-described 14 acre shopping center site
for a gross purchase price of approximately $250,000. The purchaser is presently
preparing to seek the  appropriate  approvals  from the Village and  anticipates
approvals by June, 1999.


Residential Lots within the Crestwood Tract

         As a  result  of  management's  decision  to  develop  portions  of the
Crestwood  Tract,  the  Partnership  replanned the  configuration  of the entire
tract.  The project  included a redesign  of the Single  Family  Tract,  and the
Partnership  received  final  plat  approval  to  increase  to 198 the number of
residential  lots  for  development  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  regulatory  procedures,   the  installation  of  roads  and  utility
connections to each lot and the provision of drainage facilities.
<PAGE>
         Between  1995 and 1997,  the  Partnership  completed  the  off-site and
on-site  improvements  required  for  the  development  of the  198  lots in the
Residential  Tract. 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
Transactions").  "). A total of  $3,201,749  was  borrowed  from  Union  Bank of
Florida (including  $293,152 for working capital purposes),  of which $1,321,750
was  outstanding as of September 30, 1998. The loan,  which bears interest at 1%
above the bank's prime lending rate,  matures on September 17, 1999. 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  was 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  Residential  Tract.
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.

         In the aggregate,  and through  December 30, 1998, the  Partnership has
sold and conveyed  178 of the 198 lots in the  Residential  Tract,  resulting in
gross  proceeds to the  Partnership  of  approximately  $5,285,000  and net cash
proceeds,  after mandatory loan  reductions and brokerage  commissions and other
closing costs, of approximately $930,000. (The gross proceeds include $1,298,500
owed to the  Partnership  by  Morrison  Homes of  Florida,  Inc.,  which debt is
secured  by a first  mortgage  on 45 of the  lots it  purchased,  requiring  the
payment of $687,000 on June 29, 1999 and the balance on September  29, 1999.) Of
the  foregoing,  during the 1998 fiscal year only,  the  Partnership  conveyed a
total of 59 lots (including 37 lots sold to Lennar Homes of Florida,  Inc. - see
below)  for  aggregate  gross  proceeds  of  $1,684,000.  After  mandatory  loan
reductions of $20,000 per lot and brokerage commissions and other closing costs,
net cash proceeds to the Company were $324,000

         The remaining 20 lots in the Residential  Tract are the last of a total
of 86 lots contracted for sale to Lennar Homes of Florida, Inc. The sale of such
20 lots is scheduled to be completed by June 30, 1999,  and will result in gross
proceeds of $570,000 and  estimated  net cash  proceeds,  after  mandatory  loan
reduction and brokerage  commissions and other closing costs,  of  approximately
$130,000.

         During November 1998 the  Partnership  completed the sale of a 7.7 acre
parcel in the multi-family zoned land in Crestwood to a church for $350,000.

         In March 1998 the Partnership entered into a sale contract with TCR SFA
Apartments,  Inc.,  an  affiliate  of  Trammell  Crow  Residential  (a  national
residential  builder)  covering  a  substantial  part  of the  remainder  of the
multi-family zoned land (comprising land zoned for approximately 290 residential
units).   The   affiliate   has  assigned  the  sale  contract  to  Gables  East
Construction,  Inc. which has acquired Trammell Crow Residential. The completion
of the sale,  which is  subject to the buyer  obtaining  necessary  permits  and
approvals,  is scheduled  for March 19, 1999 with the buyer having the option to
extend  the  closing  for up to 60  days.  The  sale  price  being  paid  to the
Partnership  for the  land  will  generate  approximately  $2,175,000  in  gross
proceeds,  and approximately  $1,800,000 in net proceeds after costs of sale and
brokerage fees.
<PAGE>
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 80 multi-family residential units and is being offered for sale in
its present state without further development. An agreement to sell this acreage
for $350,000 was  terminated  by the  purchaser in June 1997 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  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, 1998,
$5,050,000 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 $303,000 has already been received.

To date, the Partnership has received the following Utility Contract payments:

                                             Amount Received Based On
Fiscal Year Ended                   --------------------------------------------
September 30                        Consumption               Guaranteed Amounts
------------                        -----------               ------------------
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                                  207,000                          22,000
Total                              $5,850,000                       $ 303,000
--------------
* The Partnership is also entitled to receive approximately $438,000 in January,
1999.
<PAGE>
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.  Management believes that there is sufficient capacity presently
available in the area served by the utility to enable the Partnership to realize
the  maximum  remaining  $5,050,000  in  contingent  payments  under the Utility
Contract.  Although the amount to be received by the  Partnership  in respect of
1998 represents a substantial increase from receipts in the two preceding years,
it is  nevertheless  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. There were no sales of these lots in 1998.

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
originally  denied an  application  for septic tank  permits,  due to inadequate
drainage.  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 required additional  mitigation.  However, the South
Florida Water Management  District has refused to permit development to proceed,
and the Partnership is currently  engaged in  administrative  proceedings to set
aside such refusal. Numerous additional permits are required before building can
be  commenced,  and  there  is no  assurance  that  all of such  permits  can be
obtained.  The  Partnership  believes  that  should  it  eventually  succeed  in
obtaining septic permits for at least some of the lots, this would substantially
increase the value of such lots and that the aggregate  realizable  value of all
such lots will  substantially  exceed their book value of  $379,560.  Should the
Partnership be unsuccessful in overturning the  administrative  denial of septic
tank  permits,  the  Partnership  may  elect to  pursue  other  legal  remedies,
including a possible claim for "inverse condemnation." There can be no assurance
that any such litigation would be successful.
<PAGE>
The Partnership is presently  evaluating possible alternative uses of the second
tract,  consisting  of  approximately  470 acres,  which  contains a significant
amount of wetlands.  This property is presently zoned for agricultural  use. The
use of this land is  dependent  on  rezoning  and the  extension  of roads,  and
development  activity on this tract may meet with opposition  from  governmental
agencies  concerned  with  wildlife  and  wetlands  preservation.  In  1997  the
Partnership  received  an offer of  $1,385,000  for this  tract  from the Nature
Conservancy on behalf of Palm Beach County.  Negotiations  have been  protracted
and is no assurance that this transaction will be completed. However, management
is of the opinion that the realizable value of this property 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 the
land may be developed and therefore 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 parcel has been  rezoned by Palm Beach  County for
commercial  use,  but the sale is subject to 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 April 1999.  There
is no assurance that such permits and approvals will be obtained,  which involve
proceedings  before  several  governmental  bodies,  or  could be  completed  or
obtained within the required time frame.