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.

American Stock Exchange Listing

         On January 16, 1996 the American Stock  Exchange  halted trading in the
Partnership's Units pending a review of, among other matters,  the Partnership's
inability to meet the Exchange's listing standards.  The Partnership's units did
not resume trading on the Exchange and, following such review,  were delisted on
March 28, 1996.  See Item 5. The Units are  currently  trading  over-the-counter
under the symbol "YYGHA."

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 $65,298,575.  As of December
31, 1996, 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, 1996, the Partnership's  remaining assets consisted
principally  of; (1) a 165 acre tract of 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 $4,476,742  (this tract is hereinafter  referred to as the  "Crestwood"
tract),  (3) unsold land in Palm Beach County,  Florida which is included in the
<PAGE>
balance sheet at its book value of $485,596,  (4) a tract of land in the Village
reacquired by foreclosure in 1993 and included in the balance sheet at $287,650,
(5)  contingent  receivables  relating to a prior sale of utility  assets with a
maximum  future  undiscounted  value of  $5,603,000  (which  amount,  other than
$129,000  earned as of  September  30, 1996 but not  payable to the  Partnership
until  January,  1997,  has not been  included in the  balance  sheet due to its
contingent nature -- see Note 11 to the Financial  Statements),  and (6) cash in
the amount of $41,451.  Through  December 31,  1996,  there had been no material
changes in the Partnership's real estate assets.

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)  Recent Efforts to Resume Active Business 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.

         Management also concluded that the market for developed land -- defined
for purposes of this discussion as buildable lots which have been properly zoned
and  developed  with  grading,  roads and utility  lines brought to the property
boundaries -- was tightening,  with local and national builders  competing for a
shrinking supply of such developed land. With the liquidation of the Partnership
having  progressed to the point at which the major portion of the  Partnership's
assets had been  liquidated,  management  began to consider  the most  effective
means  to  maximize  unitholder  value  with  respect  to  the  balance  of  the
Partnership's assets.

         After study,  management  concluded that the  Partnership's  continuing
liquidation should proceed along two tracks.

         First, 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
<PAGE>
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."

         Second, management concluded that generally strengthening conditions in
the south  Florida  real  estate  market  might  present an  opportunity  to the
Partnership to capitalize on its status as a publicly  traded  entity.  In early
1994  the  Partnership  retained  a  private  consultant  to  determine  whether
unitholder values could further be enhanced by utilizing the Partnership's  cash
and  remaining  land  as  a  vehicle  for  the  resumption  of  active  business
operations,  either  in  the  land  development  business  or by  expanding  its
activities into home building and other real estate-related  fields.  Management
also wished to obtain an independent  review of its  assumption  that the market
value  of  the  Partnership's  units  might  be  enhanced  over  time  were  the
Partnership to convert from a liquidating to an active business mode.

         Management also concluded that its decision to develop  portions of its
remaining  Palm Beach  County  real  estate  would be  consistent  either with a
decision  to proceed  with the  Partnership's  complete  liquidation,  to resume
business   operations,   or  to  complete  its   liquidation  by  acquiring  and
distributing  to unitholders the securities of another entity in connection with
a business  combination.  It  therefore  proceeded  with the  development  plans
described above, and at the same time explored the business and tax implications
of the  resumption  of business  activities  and/or  business  combination  with
another entity.  The progress of such land development,  and financing  recently
obtained therefor,  is discussed under Item 2 -- Properties -- "Village of Royal
Palm Beach."

         Management  ultimately  concluded  that the most logical course for the
Partnership  to follow would involve the addition of home  building  operations.
After  several  potential   affiliations   were  identified,   a  memorandum  of
understanding   was   executed   with   Regency   Homes,   Inc.,   a  prominent,
privately-owned  South Florida home builder,  envisioning a business combination
of  the  two  entities.  However,  protracted  negotiations  with  Regency  were
suspended in early December 1995 and terminated in late December, 1995.

         While  management  might  consider  a  business   combination  with  an
appropriate operating business, it is not actively seeking such transactions and
no discussions concerning any such transaction have taken place. The Partnership
is proceeding  with the liquidation of the its remaining  assets.  In connection
therewith,  the Partnership is continuing to develop the residential lots in the
Crestwood  tract,  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
<PAGE>
been  available for  distribution  since  December  1992.  Although at currently
targeted sales prices the Partnership  could realize cash proceeds from the sale
of the Crestwood lots in a range exceeding $5,000,000, 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  incurred  for
development  work  expected to total  approximately  $2,625,000  It is therefore
considered  doubtful that cash will be available for  distribution  in 1997. See
Item 2 - Properties - 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.
<PAGE>
         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.
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
the past year, and declined slightly in December 1995. If significant  increases
occur in the future, the real estate market could suffer as a result.

Personnel

         As of January 31, 1997, Stein Management Company,  Inc. ("Steinco") the
Managing General Partner, employed 2 persons.

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  28,000 acres in Palm Beach
County,  in  southeastern  Florida,  approximately  4,200 of which were  located
within the Village.

The Villaqe 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 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.
<PAGE>
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 first phase  relates to an 11.8 acre tract to be sold for $3.00 per
square foot (approximately  $1,542,024 subject to final survey).  The closing on
this phase was  subject to soil  testing,  availability  of  sufficient  utility
connections,  environmental  matters,  site-plan  approval  and  approval of the
premises by a major  supermarket  chain as a site for a new supermarket.  All of
such conditions  have now been satisfied,  the parties are awaiting the issuance
of a  building  permit  and the  satisfaction  of  other  conditions  which  are
considered  likely to occur  during  January,  1997.  The  closing is  therefore
expected  to take place by the end of  February,  1997.  Were the  Purchaser  to
refuse to close,  which is considered highly unlikely,  its only liability would
be its loss of deposits presently aggregating $71,000.

         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, during
a five-year  period  following the pending closing on the first phase, 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, the 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.
<PAGE>
         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 for multi-family residential purposes only, for a
price which is less than the option price,  subject to the Purchaser's  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.

         In 1995, the Partnership completed the off-site utility  infrastructure
for the entire  Crestwood Tract.  The cost of such  construction,  approximating
$975,000,  was financed with the proceeds of a $975,000  construction  loan from
Union  Bank  of  Florida,   ("Union  Bank  Loan  "  --  See  Item  13  -"Certain
Relationships and Related Transactions").  See Item 7 -Management Discussion and
Analysis -- "Liquidity." Under the terms of the Union Bank Loan, the Partnership
is paying  interest at a rate equal to 2% above the bank's prime  lending  rate.
The Union  Bank's  aggregate  commitment  in respect of the  Residential  Tract,
originally  $2,175,000,  has been  increased to $2,625,000  (which  includes the
$975,000 advanced for infrastructure for the entire Crestwood Tract and $350,000
advanced  for  on-site  improvement  of Phase I of the  Residential  Tract  (see
below.)  The Union Bank Loan,  which is secured by a first  mortgage  on the 198
undeveloped  homesites,  is due in full on January 31, 1998. The  Partnership is
required  to apply  $20,000 of the  proceeds  of each lot sale to payment of the
Union Bank Loan.

         The Partnership is developing the residential lots in three phases,  of
which Phase I, comprising 32 lots, has been developed with on-site improvements,
financed  by  $350,000  in  borrowings  under the Union Bank  Loan.  Five of the
residential  lots in Phase I were purchased for the aggregate sum of $170,000 by
Regency Homes,  Inc. under an option which covered all 32 lots. The option as to
the balance of the lots has terminated  because of Regency's failure to purchase
a specified minimum number of lots per month, although the Partnership continues
to negotiate with Regency and others for the sale of individual lots.
<PAGE>
         In addition,  on August 12, 1996, the Partnership executed an agreement
with Lennar Homes, Inc. ("Lennar"), a prominent South Florida developer, for the
purchase of 86 lots in Phase II of the  Residential  Tract for an  aggregate  of
$2,451,000.  The Partnership holds deposits under letters of credit  aggregating
$490,200.  The agreement  contemplates  that all lots will be taken and paid for
over an 18-month period after completion by the Partnership of development work.
It is anticipated  that closing on at least 22 of the lots will occur during the
summer of 1997,  resulting in gross proceeds to the Partnership of approximately
$612,000.

         The Partnership  intends to finance on-site development of the 166 lots
in Phases II and III of the Residential Tract,  anticipated to cost in the range
of $1.9  million,  with the balance of the borrowing  available  under the Union
Bank Loan and the net proceeds of a public bond financing  effected in November,
1996 by the Indian Trail Water Control District (the "District"), which produced
net available funds for the project of approximately $1,074,000. The bonds are a
direct  obligation of the District and not of the Partnership,  and interest and
principal  on the  bonds  will  payable  from  taxes  levied  on the lots in the
Residential  Tract. Such bond issue resulted in an increase in an aggregate real
estate tax of approximately  $117,000 per annum on the entire Residential Tract,
of which amount $600 is allocable to each lot individually.

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
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, 1995,
$5,365,000 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  $262,657 has already been  received.  It is not possible to
predict the amount or timing of future  revenues to the  Partnership  under this
program.
<PAGE>
         To date, the  Partnership has received the following  Utility  Contract
payments:


<TABLE>
<CAPTION>

                                  Amount Received Based On
          Fiscal Year Ended             consumption            Guaranteed
           September 30,                 Increases              Revenues
           -------------                 ---------              --------
               <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*                       
               Total                    $5,535,000             $262,000
                                        ==========             ======== 
</TABLE>
----------------------------------
* The Partnership anticipates receipt of $129,000 in late January, 1997.

 

         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 remain  sufficient  potential new home
water  hookups in the area  served by the utility to enable the  Partnership  to
realize  the maximum  remaining  $5,365,000  in  contingent  payments  under the
Utility Contract. There can be no assurance, particularly in view of the decline
in  payments  from  1995 to 1996,  that the  rate of new  construction  or water
consumption in such area will be sufficient to enable the Partnership to receive
the full  amount or even a  substantial  portion of such  payments  prior to the
expiration of the contingent payment term.
<PAGE>
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 206  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.

         In  October,   1996,  the  County  of  Palm  Beach  Nature  Conservancy
purchased,  for approximately  $100,000, 18 lots within this parcel for use as a
conservation  easement.  The County has also agreed to purchase an additional 16
such  lots for  $84,000,  with a closing  anticipated  in late  February,  1997.
Assuming that this sale is closed,  the Partnership will retain 171 lots in this
tract.

         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 Water  Control  District  ("District")  is  currently  preparing a
revised  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 has  been  opposed  by  other  governmental  agencies,  however,  and it is
uncertain  whether the plan will be adopted.  If the plan is not approved  these
lots may not be usable  for  residential  purposes.  Further,  even  assuming  a
favorable  result,  the  administrative  process leading to the  availability of
building permits cannot be expected to be completed before mid-1998.

         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.  Since 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,  it is not possible to estimate the realizable  value of
this land. However, in 1996 the Partnership  rejected an offer of $1,100,000 for
this  tract and  alternatives  to such sale are  being  examined  with a view to
obtaining a higher  price.  Accordingly,  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,
<PAGE>
acquired 5  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,  and the issuance of all  necessary
building  and  other  permits,  with  a  closing  date  (subject  to  all of the
foregoing)  no later than June 30,  1997.  The  agreement  is also  subject  the
ability of the Partnership to cause the owner of an adjoining  residence,  which
is not owned by the Partnership or its joint  developer,  to sell such residence
to the purchaser.  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.

Hernando County, Florida

         The Predecessor Company originally owned approximately  17,600 acres in
Hernando  County,  Florida,  located 56 miles from Tampa,  with 13 miles of road
frontage along U.S.  Highway 19, a major area highway.  In 1994 the  Partnership
sold a 14 acre  tract  in this  area for  $125,000.  The  Partnership  presently
retains approximately 20 acres in this area with negligible value.

Lake County,  Florida

         The Predecessor Company originally owned approximately  12,300 acres in
Lake County,  Florida,  located in Central Florida on the outskirts of the Ocala
National Forest  approximately 39 miles from Ocala and 6 miles from Deland. Lake
County is  predominantly  rural with a population of  approximately  14,000.  At
September 30, 1992, the Partnership  owned no property in Lake County;  however,
in March of 1993 the  Partnership  accepted a deed in lieu of  foreclosure  on a
mortgage on a 1400 acre  portion of this  property  with a principal  balance of
$706,000. See Item 7 -- "Foreclosure Transactions." Approximately 1,000 acres of
this  property  which  are  remote,  undeveloped  and  may be  unsuited  for any
development,  were sold by the Partnership for a cash price of $350,000 in June,
1993. The balance of the tract was sold in 1994 in two  transactions  for prices
aggregating  $360,000,  of which  $248,000 was  represented  by a purchase money
mortgage  payable over a five year term. In November 1995 this mortgage having a
principal  balance of $222,471  and  deferred  profit of  $48,958,  was sold for
$168.962.