March 31, 1999

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C.  20549-1004

RE:      GRANITE DEVELOPMENT PARTNERS, L.P.
         COMMISSION FILE  #033-80104
         CIK  #0000925171

Dear Sir or Madam:

Granite  Development  Partners,  L.P.  filed its form 10-Q for the third quarter
ended October 31, 1998 on Tuesday, December 15, 1998 via EDGAR.

The third  quarter  ended  October  31,  1998 has been  restated  to reflect the
correction of the computation of cost of sales in the Silver Canyon Partnership.
This error was identified during the fourth quarter of 1998.

The restatement  relates to the allocation of certain net  development  costs to
land sales.  These  adjustments to cost of sales had the affect of reducing cost
of sales and  increasing  net income for the third  quarter of 1998 by $668,850.
The restatement is described in Note L.

The Silver Canyon Partnership operating income for the nine months ended October
31,  1998  was  originally  reported  at  $2,064,998;   the  correct  amount  is
$3,093,998.  Correspondingly,  net loss was originally reported as $883,911; the
correct amount is net income of $145,089.

The  correction  is also  reflected on the Granite  Development  Partners,  L.P.
Statement of Operations.  For the nine months ended October 31, 1998,  loss from
joint ventures was reported as $120,064, and net loss was originally reported as
$2,842,101;  the correct  amount for income from joint  ventures is $548,786 and
the  correct  amount  for net loss is  $2,173,251.  For the three  months  ended
October 31, 1998,  loss from joint ventures was  originally  reported as $36,759
and net loss was  originally  reported as  $1,242,592;  the  correct  amount for
income from joint  ventures is $632,091  and the correct  amount for net loss is
$573,742.

On the Granite  Development  Partners,  L.P. Balance Sheets,  Investments in and
Advances to joint  ventures was  originally  reported as  $31,872,334  and total
assets  was  originally  reported  as  $50,164,066.   The  correct  amounts  for
Investments in and Advances to joint  ventures and total assets are  $32,541,184
and  $50,832,916,  respectively.  Partners'  Deficit was originally  reported as
$10,670,703  and  total  liabilities  and  equity  was  originally  reported  as
$50,164,066. The correct amounts for Partner's Deficit and Total Liabilities and
Equity are $11,339,553 and $50,832,916, respectively.

On the Granite  Development  Partners,  L.P.  Statement  of Changes in Partners'
Deficit,  net loss for the nine months ended  October 31, 1998  (unaudited)  was
originally reported as $710,525 for FC-Granite,  Inc. and $2,131,576 for Limited
Partners,  totaling $2,842,101.  The balance at October 31, 1998 (unaudited) was
originally  reported as  $(12,271,178)  for FC-Granite,  Inc. and $1,600,475 for
Limited  Partners,  totaling  $(10,670,703).  The  correct  amounts for the nine
months ended October 31, 1998 (unaudited) are $543,313 for FC-Granite,  Inc. and
$1,629,938 for Limited Partners,  totaling  $2,173,251.  The correct amounts for
the balance at October 31, 1998  (unaudited) are  $(12,103,966)  for FC-Granite,
Inc. and $2,102,113 for Limited Partners, totaling $(10,001,853).

The  correction  is also  reflected on the Granite  Development  Partners,  L.P.
Statement of Cash Flows for the nine months ended October 31, 1998. Net loss was
originally  reported as $2,842,101;  the correct amount is $2,173,251.  Net loss
from joint ventures was originally  reported as $120,064;  the correct amount is
income from joint ventures of $548,786.

The correct  Silver  Canyon  Partnership  Statement  of  Operations  for October
31,1998,  and corrected  Statement of Operations,  Balance Sheets,  Statement of
Changes and  Partners'  Deficit,  Statement  of Cash Flows and FDS  schedule for
Granite Development Partners, L.P. for October 31, 1998 will be filed under Form
10Q/A.

Very truly yours,


Mark A. Ternes
Controller
F.C. Granite, Inc.
Terminal Tower
50 Public Square, Suite 1250
Cleveland, Ohio  44113


<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM 10-K
(Mark One)
            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
            SECURITIES EXCHANGE ACT OF 1934

            For the fiscal year ended

                                       OR

      X     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
      -                                                              
            SECURITIES EXCHANGE ACT OF 1934

            For the transition period from FEBRUARY 1, 1998 to DECEMBER 31, 1998
                                           ----------------    -----------------

Commission file number 0330-080104
                       -----------

                       GRANITE DEVELOPMENT PARTNERS, L.P.
                       ----------------------------------
             (Exact name of registrant as specified in its charter)

            Delaware                                        34-1754061
---------------------------------------------   -------------------------------
(State or other jurisdiction of incorporation  (IRS Employer Identification No.)
 or organization)

1250 Terminal Tower           50 Public Square        Cleveland, Ohio   44113
-------------------------------------------------------------------------------
(Address of principal executive offices)

Registrant's telephone number, including area code          216-416-6060
                                                            ------------
Securities registered pursuant to Section 12(b) of the Act:
                                      None

Securities registered pursuant to Section 12(g) of the Act:
                                      None

Indicate  by check  mark  whether  the  registrant  (1) has filed all  reports
required to be filed by Section 13 or 15(d) of the Securities  Exchange Act of
1934  during the  preceding  12 months (or for such  shorter  period  that the
registrant  was  required to file such  reports),  and (2) has been subject to
such filing requirements for the past 90 days.  YES   X           NO
                                                     ---             ---
Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. ( )

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None


<PAGE>


                                     PART I

Item 1.      Business
---------------------
      Granite Development  Partners,  L.P.  ("Partnership"),  a Delaware limited
partnership,  was formed on November 15, 1993 for the purpose of  investing  in,
acquiring,  owning,  developing,  selling and otherwise disposing of undeveloped
and developed land acquired by the Partnership (the  "Partnership  Properties").
The  Partnership  also may act as a joint  venture  partner  with respect to the
acquisition,  ownership,  development, sale or disposition of certain properties
(also the "Partnership Properties").  The Partnership will terminate on December
31,  2013 or upon  disposition  of assets or  certain  other  events.  Effective
December 16,  1998,  the  Partnership  has decided to change its fiscal year end
from January 31 to December 31.

      The  majority  of  the  acquisition   and  development   expenses  of  the
Partnership  occurred  in the first two years of  operation.  In order to offset
this large outflow of cash and allow the  Partnership to make interest  payments
on the senior  notes,  a number of mature  properties  have been included in the
Partnership  Properties  portfolio.  The  Partnership  expects  sales of all its
properties  to be complete by the year 2003,  at which time the  Partnership  is
expected to dissolve and terminate.

      Silver Canyon,  a Nevada limited  partnership  originally owned 55% by the
Partnership and 45% by Silver Canyon Corporation ("SCC"), is owner and developer
of an  approximately  1,300 acre master planned  community  located  outside Las
Vegas,  Nevada.  On January 30, 1996, the  Partnership  sold 21 2/3% interest in
Silver  Canyon  (the  "Partnership  Interest")  to American  Nevada  Seven Hills
Limited  Partnership  ("ANC"),  a Nevada limited  partnership  and subsidiary of
American Nevada Corporation, a Nevada corporation,  for $2,990,000. In addition,
SCC  sold 11  2/3% of its  partnership  interest  in  Silver  Canyon  (the  "SCC
Interest")  to ANC for  $1,610,000.  After giving  effect to the transfer of the
Partnership Interest and the SCC Interest, the Partnership, SCC and ANC each own
an equal 33 1/3% interest in Silver Canyon.

Investment Objectives and Policies

      The  principal   investment   objectives  of  the   Partnership   are  the
preservation  of Limited  Partners'  capital and  appreciation  of such  capital
through  sales of land at increased  values.  There is no  assurance  that these
investment  objectives  will  be  achieved.  The  Partnership  has  invested  in
undeveloped  land or in  partnerships  or joint  ventures that hold interests in
such land on an all-cash basis and intends to realize  appreciation of such land
upon resale. The Partnership Properties, the majority of which will be developed
as residential  tracts,  have been acquired and developed with the proceeds from
the sale of the senior notes and the warrants  exercisable for Partnership Units
and the  proceeds  from the sale of  Partnership  Properties  allocated  to such
acquisition and development in the future. The Partnership  Properties  acquired
are in various stages of development  ranging from fully developed and ready for
sale to third  parties,  to projects with sales not expected to be completed for
another three or four years.  Larger  projects,  such as Silver Canyon,  are not
expected to fully mature for another four to five years. The Partnership expects
sales of all  Partnership  Properties to be completed by the year 2003, at which
time the Partnership will dissolve and terminate.
<PAGE>
      The Partnership  will develop each of the properties it acquires at a rate
which will  approximate  the absorption rate in the relevant real estate market.
Once  development is completed,  the properties  will be marketed and sold. Upon
completion of the sale of all of the Partnership  Properties,  all proceeds will
be returned to the senior note holders and the Partnership will be dissolved and
terminated.

Formation of the Partnership

      All of the Partnership  Properties will be acquired,  owned, developed and
sold by the  Partnership  or a joint  venture  in  which  the  Partnership  or a
wholly-owned  subsidiary  of the  Partnership  is a joint venture  partner.  The
formation  of  the  Partnership  was  designed  to  facilitate   development  of
Partnership  Properties  under the control of a single entity,  the Partnership,
with greater access to the public and private capital markets and to enhance the
potential for future growth.

Competition

      Competition   in  this  segment  is  dominated  by  price,   location  and
availability of properties.

Item 2.       Properties

      The following  properties remain in the Partnership  property portfolio as
of December 31, 1998:

NAME               DESCRIPTION
Day Drive          Located  in  Parma,  Ohio.   Approximately  nine  (9)  acres
                    commercially zoned   property remain.
Drake Estates      Located  in  Strongsville,  Ohio.  One  acre  zoned  general
                    business remain.
Cambridge Park     Located in North Royalton, Ohio.  Consists of thirty-six (36)
                    one-half acre single family lots of which seven lots remain.
North Olmsted      Located  in North  Olmsted,  Ohio.  Approximately  3.5 acres
    Industrial      improved industrial property.
    Park           
Royal Valley       Located  in North  Royalton,  Ohio.  Consists  of three  (3)
                    one-quarter acre lots within a 237 acre planned residential
                    community.
Solon Estates      Located  in Solon,  Ohio.  Consists  of 250 acres  zoned for
    (Thornbury)     one (1) acre single family lots and cluster homesites.
Silver Canyon      Located in Henderson,  Nevada.  A 1,293 acre master  planned
                    residential community currently  under  development.  
                    Consists  of  3,400  lots of which 2,317 lots are sold.
Eaton Estates      Located in  Sagamore  Hills,  Ohio.  Consists  of a 593 acre
                    property zoned for a planned unit  development  and 43 acres
                    of land  zoned  for  single family lots. Seven single family
                    lots and a 208 apartment site remains.
SSK Parcels        Located  in  Twinsburg,  Ohio.  Consists  of  133  acres  of
                    unimproved land being developed into a 174 lot single family
                    development  of which 48 lots remain unsold.
Music Street       Located in Newbury Township, Geauga County, Ohio. Consists
                    of  thirty (30)  three (3)acre lots of which seven lots 
                    remain.
Fairfax Meadows    Located in Medina,  Ohio. Consists of 73 acres zoned for 142
                    single family  residential sublots of which 98 lots remain.

<PAGE>

Item 3.  Legal Proceedings
--------------------------
      The Partnership is involved in two separate instances of litigation claims
related to its operations. The Partnership and several affiliates are defendants
in a  proceeding  arising  out of the  October  1996  sale of the  194th  Street
property located in Miami Beach,  Florida. The plaintiff is a third-party broker
seeking a commission on the premise that the plaintiff initiated contact between
the ultimate buyer and the  Partnership.  In the opinion of management and legal
counsel  the  maximum  damages  related  to this  litigation  are  approximately
$400,000  at December  31,  1998,  the  Partnership  has  recorded an accrual of
$100,000  relating  to this  litigation.  However,  the  Partnership  and  other
defendants  deny that any  commission has been earned by the Plaintiff and legal
counsel of the  Partnership  have filed a motion for summary  judgement  and are
awaiting the courts ruling.

      Silver Canyon Partnership,  a Nevada Limited  Partnership,  owned 33.3% by
the  Partnership,  is the owner and  developer  of an  approximately  1,300 acre
master planned  community  located in Henderson,  Nevada.  The property is being
developed  in  conjunction  with a golf course.  In August 1997, a  class-action
lawsuit was filed by the current  homeowners  in Seven Hills  against the Silver
Canyon  Partnership,  the golf  course  developers  and the other  entities.  In
addition,  a separate  lawsuit was filed by some of the production  homebuilding
companies at Seven Hills,  against some of the same  parties.  Both suits seek a
commitment  for the right of Seven Hills  homeowners to play on the golf course,
as well as  damages.  Recently,  the trial  court  determined  that Seven  Hills
homeowners  do have a right to play on the  golf  course,  providing  they pay a
greens  fee of $300  per  round.  An  additional  hearing  on  damages  has been
scheduled for October 1999. The owner of the golf course has filed a cross-claim
against the  Partnership,  Silver  Canyon,  and the other entities in the damage
claim.  It is anticipated  that the present owner of the golf course will appeal
the ruling granting play rights to Seven Hills  homeowners  after the hearing on
damages.  The  Partnership  and  Silver  Canyon  believe  they have  meritorious
defenses  to these  claims  and  intend  to  continue  to  defend  against  them
vigorously.   Parties  to  the  lawsuits  are  currently  engaged  in  discovery
proceedings.  Sales efforts are continuing at the Seven Hills  development,  and
because these events are recent,  it is not yet possible to determine the extent
of any impact on the Partnership's or Silver Canyon's financial performance.

Item 4.       Submission of Matters to a Vote of Security Holders

      No matters were submitted to a vote of security  holders during the eleven
months ended December 31, 1998.
<PAGE>

                                     PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters
--------------------------------------------------------------------------------
      The securities offered of Granite Development Partners,  L.P., were 36,000
warrants,  each of which  entitled  the holder  thereof to purchase  one unit of
limited partnership interest of the Partnership, at an exercise price of $111.11
per Partnership Unit and up to 36,000  Partnership  Units issuable upon exercise
of the warrants.  The warrants were exercisable at any time prior to December 3,
1996. On December 3, 1996, all 36,000 warrants were exercised.
The securities are not traded on a public market.

Item 6.  Selected Financial Data
--------------------------------
<TABLE>         

                      Fiscal       Fiscal       Fiscal        Fiscal       Fiscal
                      1998*        1997**       1996***      1995****    1994*****
                   ----------- -------------- ------------ ------------ -------------
<CAPTION>
<S>                <C>          <C>          <C>            <C>          <C>

Operating Results
Gross Sales        $ 8,417,447  $ 5,709,083  $  12,367,374  $ 7,035,769  $ 8,506,100
Net Income (Loss)  $   225,883  $  (357,213) $     966,815  $  (158,487) $(3,903,155)

                   December 31, January 31,   January 31,  January 31,  January 31,
                       1998         1998         1997          1996         1995
                   ----------- -------------- ------------ ------------ -------------
Financial Position
Total assets       $51,082,266  $48,015,304  $  50,492,484  $49,013,469  $41,084,314
Land and land
  improvements     $ 3,203,853  $ 6,360,771  $   6,948,665  $12,278,824  $13,415,890
Restricted cash
  equivalents      $         -  $   481,287  $   4,602,891  $ 1,308,453  $ 4,039,263
Investments in and
  advances to joint
    ventures       $ 33,662,431 $29,748,165  $  25,866,537  $22,686,561  $16,694,226
Long-term debt,
  including mortgage
    debt           $ 36,776,659 $37,242,514  $  36,910,472  $41,110,025  $37,348,370

<FN>

                 * Fiscal 1998 results are for the eleven months ended December 31, 1998
                ** Fiscal 1997 results are for the year ended January 31, 1998
               *** Fiscal 1996 results are for the year ended January 31, 1997
              **** Fiscal 1995 results are for the year ended January 31, 1996
             ***** Fiscal 1994 results are for the year ended January 31, 1995
</FN>

</TABLE>
<PAGE>


Item 7.       Management's Discussion and Analysis of Financial Condition and
              Results of Operations
-------------------------------------------------------------------------------

Results of Operations

The results of operations  discussed below reflect the change in the Partnership
year-end  from  January 31 to December  31. This change in year-end  was to make
consistent  the  Partnership's  tax  year  with  the  fiscal  year to  make  the
Partnership's  fiscal year end  consistent  with its two major  joint  ventures,
Eaton  Estates  Partnership  and Silver Canyon  Partnership.  Silver Canyon also
changed its fiscal year-end from January 31 to December 31 concurrently with the
Partnership. The Partnership's results of operations for the eleven months ended
December 31, 1998, and the years ended January 31, 1998,  1997, and 1996 include
the  Financial  Results,  accounted  for on the equity  basis,  of Eaton  Estate
Partnership for the fiscal years ended December 31, 1998,  1997, 1996, and 1995,
respectively, and Silver Canyon Partnership for the eleven months ended December
31,  1998  and  the  fiscal  years  ended  January  31,  1998,  1997  and  1996,
respectively. The results of Eaton Estates  reflects twelve months of operation,
which is consistent with prior periods presented.

      Sales of  developed  property for the eleven  months ended  December 31,
1998  totaled  $8,417,447  versus  $5,709,083  for the year ended  January 31,
1998.  The  following  significant  sales  occurred in fiscal 1998: 1) 87 lots
in The Ledges  development  Phases 1 and 2 for $5,088,947;  2) 8 lots in River
Oaks for $960,000;  3) 18 lots in Cambridge  Park for $938,000;  4) 20 lots in
Fairfax for $794,000.

      Sales of developed  property  for the year ended  January 31, 1998 totaled
$5,709,083 versus $12,367,374 for the year ended January 31, 1997. The following
significant sales occurred in fiscal 1997: 1) 17 lots in The Ledges  development
phase 1A for $952,000; 2) 10 lots in the Ledges phase 2A for $555,000; 3) a 6.11
acre parcel of Drake Estates in  Strongsville  for $366,792;  4) 7 single family
sublots in Cambridge Park for $348,250;  and 5) 6 lots in the Ledges development
for  $336,000.  The  decrease in sales from January 31, 1998 to January 31, 1997
was largely due to the sale of the 194th Street parcel for  $7,927,770 in fiscal
1996. This significant transaction represented the last of the North Miami Beach
parcels.

      Sales of developed  property  for the year ended  January 31, 1997 totaled
$12,367,374 versus $7,035,769 for the year ended January 31, 1996. The following
significant sales occurred in fiscal 1996: 1) the 6.3 acre oceanfront portion of
194th Street in Miami Beach, Florida for $7,927,770;  2) the remaining 1.5 acres
of 194th Street for $601,600; 3) two cluster sites in the West Grove development
for a total of  $1,552,947;  and 4) four single family sublots in the River Oaks
subdivision  in Ohio for $460,000.  The increase in sales for fiscal 1996 versus
fiscal  1995 is  mainly  the  result of the sale of the  194th  Street  property
located in Miami Beach, Florida.

      Eaton Estate Partnership, a joint venture of the Partnership accounted for
under the equity method,  reported sales of $8,429,232,  $7,257,167,  $9,328,118
and $9,224,344 for the years ended  December 31, 1998,  January 31, 1998,  1997,
1996, respectively.  The level of sales activity is expected to decrease in 1999
as there is a limited amount of land remaining to be developed and sold.

      The  Silver  Canyon  Partnership,  a  joint  venture  of  the  Partnership
accounted for under the equity method,  reported  sales of  $31,791,859  for the
eleven months ended December 31, 1998 versus sales of  $23,911,279,  $15,028,556
and  $2,941,692   for  the  years  ended  January  31,  1998,   1997  and  1996,
respectively. The level of sales activity is expected to remain strong in fiscal
1999.
<PAGE>
      As of  December  31,  1998,  the  following  significant  sales were under
contract:  five lots of The Ledges  subdivision  located in Twinsburg,  Ohio for
$290,000 and 515 lots within the Silver Canyon development in Henderson,  Nevada
for $18,366,221. None of the contracts are guaranteed to close.

      Interest  income  totaled  $1,452,474 for the eleven months ended December
31, 1998 versus $1,150,137 for the year ended January 31, 1998.  Interest income
is comprised of interest earned on notes  receivable from the sales of developed
property,  from funds  advanced to the joint ventures and from the investment of
proceeds from sales in short-term  commercial  paper.  Interest income earned on
funds advanced to the Silver Canyon  Partnership is being deferred (see footnote
A.) The increase in interest income in fiscal 1998 is mainly attributable to the
recognition  of  deferred  interest  income  of $1,508,044 related  to the funds
advanced  to the  Silver  Canyon  Partnership.

      Interest  income  totaled  $1,150,137  for the year ended January 31, 1998
versus  $1,165,599 for the year ended January 31, 1997. The decrease in interest
income in fiscal 1997 is mainly attributable to the paydown of notes receivable.

      Interest  income  totaled  $1,165,599  for the year ended January 31, 1997
versus  $383,508 for the year ended  January 31, 1996.  The increase in interest
income in fiscal  1996 is due to the  increase  in the  outstanding  balance  of
mortgage notes  receivable and the  recognition of deferred  interest  income of
$644,104 related to the funds advanced to the Silver Canyon Partnership.

      Other income  totaled  $359,984 for the eleven  months ended  December 31,
1998  versus  $352,173  for the year ended  January  31,  1998.  Commissions  of
$504,182 and $453,965  were  recorded for the eleven  months ended  December 31,
1998 and for the year ended  January 31,  1998,  respectively.  Other  income is
mainly comprised of deferred development fees and management fees related to the
Silver  Canyon  Partnership.  Development  fees of $317,962  and  $290,685  were
recorded for the eleven  months  ended  December 31, 1998 and for the year ended
January 31, 1998, respectively.

      Other income  totaled  $352,173 for the year ended January 31, 1998 versus
$189,904  for the year ended  January 31,  1997.  Commissions  of  $453,965  and
$192,588  were  recorded  for  the  years  ended  January  31,  1998  and  1997,
respectively.  The Partnership recognized development fee income of $290,685 and
$126,990  for the years  ended  January  31,  1998 and 1997,  respectively.  The
increase in commissions  and the  recognition  of  development  fees is directly
correlated  to the  increase  in sales  activity  related to the  Silver  Canyon
Partnership.

      Other income  totaled  $189,904 for the year ended January 31, 1997 versus
$117,936  for the year ended  January 31,  1996.  Commissions  of  $192,588  and
$98,759  were   recorded  for  the  years  ended  January  31,  1997  and  1996,
respectively.  The Partnership recognized development fee income of $126,990 and
$40,306 for the years ended January 31, 1997 and 1996, respectively.
<PAGE>
      Interest  expense totaled  $3,953,210 for the eleven months ended December
31, 1998 versus $4,251,226 for the year ended January 31, 1998. Interest expense
is mainly  comprised  of  interest  accrued  for Senior  Notes,  Special  Units,
operating  loans and mortgage notes payable.  Interest expensed for Senior Notes
was $3,617,220  for the eleven months ended December 31, 1998 versus  $3,952,950
for the year ended January 31, 1998.

      Interest  expense  totaled  $4,251,226 for the year ended January 31, 1998
versus  $4,345,499  for the year ended  January 31, 1997.  Interest  accrued for
Senior Notes was  $3,952,950 and $3,898,800 for the years ended January 31, 1998
and January 31, 1997, respectively.

      Interest  expense  totaled  $4,345,499 for the year ended January 31, 1997
versus  $4,446,764  for the year ended  January 31, 1996.  Interest  accrued for
Senior Notes was  $3,898,800  for both years ended  January 31, 1997 and January
31, 1996.

      Partner fees totaled  $1,057,112  for the eleven months ended December 31,
1998,  versus  $746,638 for the year ended  January 31,  1998.  Partner fees are
comprised of development fees, administrative fees and commissions.  Commissions
and  development  fees were  $877,368 and  $510,624 for the eleven  months ended
December  31, 1998 and for the year ended  January 31, 1998,  respectively.  The
increase in commissions  and the  recognition of development  fees is related to
the increase in sales activity.

      Partner  fees  totaled  $746,638  for the year ended  January 31, 1998 and
$1,445,192 for the year ended January 31, 1997. Commissions and development fees
were  $510,624  and  $1,088,070  for the years ended  January 31, 1998 and 1997,
respectively.  The decrease in  commissions  and the  recognition of development
fees is directly correlated to the decrease in sales activity.

      Operating and other expenses  totaled $426,826 for the eleven months ended
December 31, 1998 versus $177,541 for the year ended January 31, 1998. Operating
and other expenses are mainly comprised of legal fees, other  professional fees,
title fees and escrow fees. Other  professional  fees increased from $24,794 for
the year ended January 31, 1998 to $65,144 for the eleven months ended  December
31, 1998.  Marketing  research increased from $10,570 for the year ended January
31, 1998 to $48,422 for the eleven  months ended  December  31, 1998.  Title and
escrow  fees  increased  from  $54,369  for the year ended  January  31, 1998 to
$85,694 for the eleven months ended December 31, 1998 . During the eleven months
ended  December  31,  1998,  an accrual of $100,000 was recorded for the maximum
damages  relating to the litigation  proceedings  for the 194th Street  property
located in Miami Beach, Florida.

      Operating and other expenses  totaled  $177,541 for the year ended January
31,  1998  versus  $515,445  for the year  ended  January  31,  1997.  Legal and
professional  fees  decreased  from  $277,532  at January 31, 1997 to $95,059 at
January 31, 1998.  Title and escrow fees  decreased from $139,112 at January 31,
1997 to $54,369 at January 31, 1998.

      Income from Joint  Ventures  was  $1,393,985  for the eleven  months ended
December 31, 1998 versus  $1,663,201 for the year ended January 31, 1998. Income
from Joint Ventures  consists of income from Silver Canyon  Partnership an Eaton
Estate  Partnership,  both being  recorded by the  Partnership  under the equity
method.  The decrease in joint venture in fiscal 1998 is mostly due to increases
in  project  costs  and,  therefore,   cost  of  sales  for  the  Silver  Canyon
Partnership.
<PAGE>
      The  Partnership  reported  net income of $225,883  for the eleven  months
ended December 31, 1998 versus a net loss of $357,213 for the year ended January
31,  1998.  The  increase  in net  income is mainly  the  result of net sales of
$2,479,013 for the eleven months ended  December 31, 1998 versus  $2,088,020 for
the year ended January 31, 1998 and an increase in interest income of $1,452,474
for the eleven  months ended  December 31, 1998 versus  $1,150,137  for the year
ended January 31, 1998.

      For the year ended January 31, 1998, the Partnership  reported net loss of
$357,213  versus a net income of $966,815  for the year ended  January 31, 1997.
The decrease in net income is the result of a decrease in land sales revenue.

      For the year ended January 31, 1997, the  Partnership  reported net income
of $966,815 versus net loss of $158,487 for the year ended January 31, 1996. The
increase in net income resulted from an increase in land sales  revenues.  While
revenues  from  land  sales  increased  from  fiscal  1995 to fiscal  1996,  the
Partnership  earned a lower  margin  on  fiscal  1996  sales.  Sales of land and
related  earnings  vary  from  period to  period,  depending  upon  management's
decisions  regarding the  disposition of undeveloped  land parcels.  Included in
fiscal 1995 were sales of  residential  tracts of land where the buyer  invested
large  development  costs instead of the Partnership.  Fiscal 1995 revenues from
sales are not  indicative of results for subsequent  years.  The increase in net
income can also be attributed to the increase in interest and other income,  and
a decrease in operating expenses.

Financial Condition and Liquidity

      The net cash  provided by  operating  activities  was  $2,032,572  for the
eleven months ended December 31, 1998 versus cash provided of $3,901,203 for the
year ended January 31, 1998.  The decrease is mainly the result of a decrease in
restricted cash equivalents of $481,287 for the eleven months ended December 31,
1998 versus  $4,121,604  for the year ended  January 31, 1998 which is partially
offset by an increase in unpaid partner fees of $1,057,112 for the eleven months
ended December 31, 1998 versus a decrease of $728,651 for the year ended January
31, 1998.

      The net cash provided by operating  activities was $3,901,203 for the year
ended  January 31, 1998 versus cash  provided of $765,988 for fiscal  1996.  The
increase in net cash provided by operating  activities is mainly attributable to
a decrease in  mortgage  notes  receivable  and a decrease  in  restricted  cash
equivalents.

      The net cash  provided by operating  activities  was $765,988 for the year
ended  January 31, 1997 versus cash  provided of  $1,696,727  for the year ended
January 31, 1996.  The decrease in net cash provided by operating  activities is
mainly the result of an increase in restricted cash equivalents.

      Net cash used in investing  activities  was  $2,520,281 and $2,218,427 for
the eleven  months ended  December  31, 1998 and for the year ended  January 31,
1998, respectively.  The increase in funds used was mainly due to an increase in
funds  advanced for  development  expenditures  at the Silver  Canyon  property,
partially offset by a $750,000 cash distribution from Eaton Estate Partnership.
<PAGE>
      Net cash used in investing  activities  was  $2,218,427 for the year ended
January 31, 1998 versus  $1,173,703  for the year ended  January 31,  1997.  The
increase in funds used was mainly the result of an  increase  in funds  advanced
for the Silver Canyon property.

      Net cash used in investing  activities  was  $1,173,703 for the year ended
January 31, 1997 versus  $3,070,945  for the year ended  January 31,  1996.  The
decrease in funds used is  attributable  to the  decrease in funds  advanced for
development expenditures at the Silver Canyon property offset by the proceeds of
$2,990,000  received  in  fiscal  1995  from  the  sale  of  a  portion  of  the
Partnership's interest in the Silver Canyon Partnership.

      Net cash provided by financing  activities  was  $1,694,158 for the eleven
months ended  December 31, 1998 versus net cash used in financing  activities of
$1,745,606 for the year ended January 31, 1998. The net cash provided was due to
funds loaned from Sunrise Land Company  $2,395,951 which was partially offset by
repayments of mortgage notes payable of $465,855.

      Net cash used in financing activities for the year ended January 31, 1998,
was $1,745,606 versus net cash used of $2,940,875 for the year ended January 31,
1997. The net cash used was mainly  attributable to the paydown of the loan from
Sunrise Land Company of $921,768,  partially  offset by proceeds  from  mortgage
notes payable of $922,472.

      Net cash used in financing  activities  was  $2,940,875 for the year ended
January 31, 1997 versus net cash provided by financing  activities of $4,457,722
for the year ended  January 31, 1996.  The net cash used during  fiscal 1996 was
the result of the  repayment of mortgage  notes  payable of  $4,953,515  and the
distribution  of  $1,914,202  of  interest  earned on the  special  units to the
general  partner offset by proceeds  received of $2,999,880 from the exercise of
the 36,000 warrants by the limited partners.

      The Partnership is involved in two separate instances of litigation claims
related to its operations. The Partnership and several affiliates are defendants
in a  proceeding  arising  out of the  October  1996  sale of the  194th  Street
property located in Miami Beach,  Florida. The plaintiff is a third-party broker
seeking a commission on the premise that the plaintiff initiated contact between
the ultimate buyer and the  Partnership.  In the opinion of management and legal
counsel  the  maximum  damages  related  to this  litigation  are  approximately
$400,000  at December  31,  1998,  the  Partnership  has  recorded an accrual of
$100,000  relating  to this  litigation.  However,  the  Partnership  and  other
defendants  deny that any  commission has been earned by the Plaintiff and legal
counsel of the  Partnership  have filed a motion for summary  judgement  and are
awaiting the courts ruling.

      Silver Canyon Partnership,  a Nevada Limited  Partnership,  owned 33.3% by
the  Partnership,  is the owner and  developer  of an  approximately  1,300 acre
master planned  community  located in Henderson,  Nevada.  The property is being
developed  in  conjunction  with a golf course.  In August 1997, a  class-action
lawsuit was filed by the current  homeowners  in Seven Hills  against the Silver
Canyon  Partnership,  the golf  course  developers  and the other  entities.  In
addition,  a separate  lawsuit was filed by some of the production  homebuilding
companies at Seven Hills,  against some of the same  parties.  Both suits seek a
commitment  for the right of Seven Hills  homeowners to play on the golf course,
as well as  damages.  Recently,  the trial  court  determined  that Seven  Hills
homeowners  do have a right to play on the  golf  course,  providing  they pay a
greens  fee of $300  per  round.  An  additional  hearing  on  damages  has been
scheduled  for  October,  1999.  The  owner  of the  golf  course  has  filed  a
cross-claim  against the Partnership,  Silver Canyon,  and the other entities in
the damage claim.  It is  anticipated  that the present owner of the golf course
will appeal the ruling granting play rights to Seven Hills  homeowners after the
hearing  on  damages.  The  Partnership  and  Silver  Canyon  believe  they have
meritorious  defenses to these  claims and intend to continue to defend  against
them  vigorously.  Parties to the  lawsuits are  currently  engaged in discovery
proceedings.  Sales efforts are continuing at the Seven Hills  development,  and
because these events are recent,  it is not yet possible to determine the extent
of any impact on the Partnership's or Silver Canyon's financial performance.
<PAGE>
      The Partnership  intends to finance the acquisition and development of the
majority  of the  Partnership  properties  as  residential  tracts for  eventual
resale;  however,  certain  properties  have been  acquired  and  developed  for
commercial or industrial uses. Pursuant to the Partnership's  business plan each
of the targeted Partnership  properties have been acquired and will be developed
and marketed for sale.  All net  proceeds  raised from the sales of  properties,
after the payment of development and partnership  expenses,  will be returned to
the senior note holders and partners pursuant to the partnership  agreement once
all of the properties have been sold.  Management  believes that the Partnership
will have adequate funds available  throughout  fiscal 1999 to fund  development
expenditures and to pay the semi-annual interest payments on the senior notes.

YEAR 2000

BACKGROUND

      The  Partnership  has  undertaken a program to prepare the  financial  and
operating  computer  systems and ancillary  embedded  applications  for the Year
2000. All necessary  modifications are expected to occur in a timely manner at a
cost  which  is not  expected  to be  material  to the  Partnership's  operating
results.  During  1997,  the  Partnership  completed  the  final  phases  of the
replacement  of older  mainframe  systems.  All major systems were replaced with
newly purchased Year 2000 compliant  software or software with definitive  plans
for upgrades to Year 2000 code.

II.    PLAN

      The  Partnership's  plan concentrates on testing the compliant systems and
identifying other systems,  such as embedded  systems,  that are not part of the
new software. The specific steps of the plan include:

 . Capturing an inventory of all systems including: 
         > The new Year 2000 compliant software.
         > Computer related hardware and peripherals.
         > Internal  systems that may have been developed  utilizing the
           compliant code.
         > Embedded or operational systems,  including our telephone,  heating 
           and air conditioning  systems, fire alarm systems, security  systems,
           and elevator systems.
 . Obtaining  compliance  letters  from all vendors in the  inventory; 
 . Testing systems for compliance; 
 . Upgrading or replacing software and operational or embedded systems as needed;
 . Contacting our major business partners (suppliers,  contractors,  utilities,
  financial  institutions,  etc.) to insure  that they have an active Year 2000
  compliance program.

<PAGE>

III.  STATUS

      The Partnership has completed a software inventory and obtained compliance
letters from most vendors and considers its software  assessment  complete.  The
Partnership  is completing  the inventory of embedded  systems and is contacting
its  vendors  to  determine  their  Year  2000  readiness.  This  phase  of  the
assessment,  originally planned for completion in the 3rd quarter 1998, will now
be  completed  in the 1st  quarter  1999.  The  responses  have not always  been
definitive and reliance,  in some cases, must be made on the MD&A discussions in
the  quarterly  and  yearly  filings  of  certain  vendors  and  partners  where
appropriate.

      The Partnership  has also promptly  responded to requests for its own Year
2000 readiness and will update those responses  quarterly by providing a copy of
the most current SEC MD&A discussion related to the Year 2000.

      The Partnership is actively  testing its systems for Year 2000 compliance.
Software has been  acquired to review  systems,  which have been written in Year
2000 compliant code, but may be generating non-compliant dates or logic. Testing
has discovered some Year 2000 issues,  which have been corrected.  Specifically,
certain data  communications  equipment was not compliant and has been replaced.
The project cost  accounting  software,  originally  documented by the vendor as
compliant,  is not compliant.  The Partnership escalated the upgrade to the next
version  and that  software is now  compliant.  The  general  ledger  system had
generated some  historical data with dates that might not be compliant and these
were corrected. Finally, The Partnership discovered a possible issue with one of
the  automated  software  scheduling  systems,   which  will  be  upgraded.  The
Partnership  expects to complete the testing phase by the end of the 2nd quarter
1999  and does  not  foresee  any  major  difficulties  in  becoming  Year  2000
compliant.

IV.    COSTS

      At the end of 1997 the Partnership  completed the migration of the general
ledger and reporting system from the older mainframe environment.  The intent of
this  conversion was to move from the mainframe to newer  technology and improve
our reporting systems. As a by-product, Year 2000 compliant software or software
with  planned  upgrades to be  compliant  was  installed.  We avoided the costly
process of  converting  our  internally  developed  systems into Year 2000 code.
Through testing,  it has been determined that some hardware will need replacing.
Regardless of the Year 2000 issue,  this hardware  would have been upgraded in a
normal replacement  cycle. Most all of the required software upgrades,  are part
of our normal  operating  expenses  and have not  generated  additional  expense
specifically  for Year 2000  compliance.  The  Partnership  does not foresee any
major  additional  costs and does not feel that the costs  incurred  will have a
material impact on operations.
<PAGE>
V.     RISKS/CONTINGENCY PLANS

      Since the major  hardware,  software and  embedded  systems are or will be
compliant, the Partnership does not foresee any major risks. The Partnership has
identified  concerns  in each area and the  contingency  plan to respond to each
concern.  Related to hardware, the most likely worst case scenario would be if a
specific  computer  or  server  would  not be  compatible.  In  that  case,  the
Partnership    would   use   other   hardware,    provided   by   our   business
continuity/disaster  recovery  program,  that is  compliant  and  available  and
regenerate  data from the backup systems.  Related to software,  the most likely
worst case scenario  would be if the  automated  scheduling  routines  would not
properly  schedule  beyond the Year  2000.  Each of these  automated  scheduling
systems has a manual  function,  which has been tested,  and the  Partnership is
confidant that the scheduling  software can be reset to perform  properly in the
Year 2000 and beyond. Related to the embedded systems, the Partnership's primary
concern is that these systems,  despite testing,  would not function properly as
we move into the Year 2000. All of these systems have manual reset functions and
Year 2000 date issues can be corrected.  Additionally  there will be appropriate
personnel and outside contractors if necessary,  on site starting the evening of
December 31, 1999 and the ensuing weekend to reset the functions if necessary.

VI.  SUMMARY

      Similar to other  companies,  the  Partnership  is highly  dependent  upon
systems  in the public  sector,  such as  utilities,  mail,  and  transportation
systems.  Failures  in  those  systems,  upon  which we have no  control,  could
materially  affect our operations.  The  Partnership has well defined  emergency
plans in place, and these would be activated if necessary.

      The Year 2000 plan is aimed at identifying  and correcting all issues upon
which the  Partnership  has direct  control or  indirect  control  through  it's
vendors and business partners.

      The  Partnership  feels that the  successful  completion  of the Year 2000
program will minimize the effect on operations.


Information Relating to Forward-Looking Statements

      This  Annual  Report,  together  with  other  statements  and  information
publicly disseminated by the Partnership,  contains  forward-looking  statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.  Such statements
reflect  management's current views with respect to financial results related to
future events and are based on  assumptions  and  expectations  which may not be
realized and are inherently  subject to risks and  uncertainties,  many of which
cannot  be  predicted  with  accuracy  and  some  of  which  might  not  even be
anticipated.  Future  events and actual  results,  financial or  otherwise,  may
differ from the results discussed in the forward-looking  statements.  Risks and
other  factors  that might cause  differences,  some of which could be material,
include, but are not limited to, the effect of economic and market conditions on
a nation-wide  basis as well as regionally in areas where the  Partnership has a
geographic  concentration of land; failure to consummate financing arrangements;
development risks,  including lack of satisfactory  financing,  construction and
cost overruns;  the level and volatility of interest rates;  the rate of revenue
increases versus expenses increases;  as well as other risks listed from time to
time in the  Partnership's  reports  filed  with  the  Securities  and  Exchange
Commission.   The  Partnership  has  no  obligation  to  revise  or  update  any
forward-looking  statements  as a result  of future  events or new  information.
Readers are  cautioned  not to place  undue  reliance  on such  forward  looking
statements.

<PAGE>

Item 7A.  Quantitive and Qualitative Disclosures About Market Risk
------------------------------------------------------------------


The  Partnership's  primary  market  risk  exposure is  interest  rate risk.  At
December 31, 1998, the Partnership had $776,659 of variable rate debt.

Management  has and will continue to manage  interest rate risk by maintaining a
conservative  ratio of fixed rate,  long-term  debt to total debt to insure that
variable rate exposure is kept at an acceptable level.

The  table  below  provides   information  about  the  Partnership's   financial
instruments   that  are  sensitive  to  changes  in  interest  rates.  For  debt
obligation's,  the table  presents  principal  cash flows and  related  weighted
average interest rates by expected maturity dates.
<TABLE>
<CAPTION>


                                                           Expected Maturity Date
                              --------------------------------------------------------------------------------------
                                    1999                2000             2001            2002             2003
                              ------------------   ---------------  --------------- ---------------   --------------
                    
<S>                           <C>                  <C>              <C>             <C>               <C>

Fixed:
------
Senior notes                          $       -         $       -        $       -      $        -     $ 36,000,000

Weighted average interest rate            10.83%            10.83%           10.83%          10.83%           10.83%
                              ------------------   ---------------  --------------- ---------------   --------------
  Total fixed rate debt               $       -         $       -        $       -      $        -     $ 36,000,000

Variable:
---------
Variable rate mortgage debt           $ 260,000         $ 140,000        $ 376,659      $        -     $          -
                                                                                                       
                              ------------------   ---------------  --------------- ---------------   --------------
Total variable rate debt              $ 260,000         $ 140,000        $ 376,659      $        -     $          -
                              ------------------   ---------------  --------------- ---------------   --------------
                                      $ 260,000         $ 140,000        $ 376,659      $        -     $ 36,000,000
                              ==================   ===============  =============== ===============   ==============




                                                    Fair Market
                                    Total              Value
                              ------------------   ---------------
Fixed:
------
  Senior notes                     $ 36,000,000      $ 36,000,000

Weighted average interest rate            10.83%                -
                              ------------------   ---------------
  Total fixed rate debt            $ 36,000,000      $ 36,000,000

Variable:
---------
  Variable rate mortgage debt      $    776,659      $    776,659
                                                    
                              ------------------   ---------------
  Total variable rate debt         $    776,659      $    776,659
                              ------------------   ---------------
                                   $ 36,776,659      $ 36,776,659
                              ==================   ===============


 
</TABLE>






<PAGE>


Item 8.  Financial Statements and Supplementary Data
----------------------------------------------------
                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Partners of
Granite Development Partners, L.P.

In our opinion,  the accompanying  balance sheets and the related  statements of
operations, changes in partners' equity and of cash flows present fairly, in all
material respect, the financial position of Granite Development  Partners,  L.P.
(A Delaware Limited  Partnership) as of December 31, 1998, January 31, 1998, and
January 31, 1997,  and the results of its  operations and its cash flows for the
eleven months ended  December 31, 1998,  and for each of the years ended January
31, 1998,  1997,  and 1996, in conformity  with  generally  accepted  accounting
principles.   These  financial   statements  are  the   responsibility   of  the
Partnership's  management;  our responsibility is to express an opinion of these
financial  statements  based on our  audits.  We  conducted  our audits of these
statements  in accordance  with  generally  accepted  auditing  standards  which
require that we plan and perform the audit to obtain reasonable  assurance about
whether the financial  statements  are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for the opinion expressed above.




                                               /S/ PricewaterhouseCoopers, LLP
                                               -------------------------------
                                                   PricewaterhouseCoopers, LLP







Cleveland, Ohio
March 31, 1999

<PAGE>
<TABLE>
                       GRANITE DEVELOPMENT PARTNERS, L.P.
                        (A Delaware Limited Partnership)
                                 BALANCE SHEETS
<CAPTION>



                                            December 31, January 31, January 31,
                                             ----------- ----------- -----------
                                                1998        1998        1997
                                             ----------- ----------- -----------
<S>                                          <C>         <C>         <C> 
                                                                      
ASSETS

LAND                                         $ 1,772,580 $ 3,081,890 $ 4,472,219
LAND IMPROVEMENTS                              1,431,273   3,278,881   2,476,446
                                             ----------- ----------- -----------
                                               3,203,853   6,360,771   6,948,665

RESTRICTED CASH EQUIVALENTS                           -      481,287   4,602,891

MORTGAGE NOTES RECEIVABLE                      2,955,344   3,149,565   6,323,446

INVESTMENTS IN AND ADVANCES TO                                        
JOINT VENTURES                                33,662,431  29,748,165  25,866,537

OTHER ASSETS
 Mortgage procurement costs, net of accumulated
  amortization of  $2,280,601 at 
  December 31, 1998, $1,906,317 at 
  January 31, 1998 and $1,446,575 at
  January 31, 1997                                     -     374,284     826,126

Organization costs, net of accumulated 
 amortization of  $748,117 at 
 December 31, 1998, $668,805
 at January 31, 1998 and $449,697 
 at January 31, 1997                                  -       79,312     298,420
 

Cash                                           1,430,607     224,158     286,988

Interest receivable                            9,629,531   7,397,262   5,207,019

Other                                             25,500      80,500      55,000

Commission receivable                                  -           -      17,392

Administrative fee receivable                    175,000     120,000      60,000
                                             ----------- ----------- -----------
                                              11,260,638   8,275,516   6,750,945
                                             ----------- ----------- -----------

                                             $51,082,266 $48,015,304 $50,492,484
                                             =========== =========== ===========

<FN>

See notes to financial statements.
</FN>


</TABLE>
<PAGE>
<TABLE>
                       GRANITE DEVELOPMENT PARTNERS, L.P.
                        (A Delaware Limited Partnership)
                           BALANCE SHEETS (continued)

<CAPTION>

                                     December 31,   January 31,    January 31,
                                     -------------  -------------  ------------
                                         1998           1998          1997
                                     -------------  -------------  ------------
<S>                                  <C>            <C>            <C>  
                                                                    
LIABILITIES
PARTNERS' SPECIAL UNITS
& PARTNERS' DEFICIT
 
SENIOR NOTES PAYABLE                 $  36,000,000  $  36,000,000  $ 36,000,000
MORTGAGE NOTES PAYABLE                     776,659      1,242,514       910,472
LOAN PAYABLE - SUNRISE                   2,395,951              -       921,768
LOAN PAYABLE - EATON                       878,462      1,114,400             -
OTHER LIABILITIES
 Accounts payable                          962,805        463,373        48,632
 Accrued fees, partners                  1,264,257        207,145       935,796
 Accrued interest                          924,057        975,845     1,009,139
 Accrued real estate taxes                  99,953        143,899       134,913
 Deposits                                    3,579        819,077     3,199,100
 Deferred income                         6,379,262      5,877,653     4,656,074
                                     -------------  -------------  ------------
                                         9,633,913      8,486,992     9,983,654
PARTNERS' EQUITY (DEFICIT)
 
 Partners' special units                 9,000,000      9,000,000     9,000,000
 Partners' deficit                      (7,602,719)    (7,828,602)   (6,323,410)
                                     -------------  -------------  ------------
                                         1,397,281      1,171,398     2,676,590
                                     -------------  -------------  ------------
 
                                      $ 51,082,266   $ 48,015,304  $ 50,492,484
                                     =============  =============  ============
 
<FN>

See notes to financial statements.
</FN>

</TABLE>

<PAGE>
<TABLE>
                       GRANITE DEVELOPMENT PARTNERS, L.P.
                        (A Delaware Limited Partnership)
                            STATEMENTS OF OPERATIONS

<CAPTION>

                                    For the 11 months For the year For the year   For the year
                                          ended         ended         ended          ended
                                       December 31,   January 31,  January 31,    January 31,
                                          1998           1998          1997          1996
                                       ------------   -----------  -------------  ------------

<S>                                     <C>            <C>         <C>            <C>
                                                                                   
REVENUES
 Sales of developed property            $ 8,417,447    $ 5,709,083  $ 12,367,374   $ 7,035,769
 Cost of sales                           (5,938,434)   (3,621,063)    (7,736,755)   (2,992,237)
                                       ------------   -----------  -------------  ------------
                                          2,479,013     2,088,020      4,630,619     4,043,532

 Interest                                 1,452,474     1,150,137      1,165,599       383,508
 Commission                                 504,182       453,965        192,588        98,759
 Other                                      359,984       352,173        189,904       117,936
                                       ------------   -----------  -------------  ------------
                                          4,795,653     4,044,295      6,178,710     4,643,735
                                       ------------   -----------  -------------  ------------

EXPENSES
 Interest                                 3,953,210     4,251,226      4,345,499     4,446,764
 Fees, partners                           1,057,112       746,638      1,445,192     1,696,385
 Real estate taxes                           73,012       210,453        276,309       393,695
 Operating and other                        426,826       177,541        515,445       572,913
 Amortization                               453,595       678,851        635,723       613,855
                                       ------------   -----------  -------------  ------------
                                          5,963,755     6,064,709      7,218,168     7,723,612
                                       ------------   -----------  -------------  ------------
                                         (1,168,102)   (2,020,414)    (1,039,458)   (3,079,877)

Gain on sale of partnership interest              -             -              -     2,144,190
Income from joint ventures                1,393,985     1,663,201      2,006,273       777,200
                                       ------------   -----------  -------------  ------------

NET INCOME (LOSS)                         $ 225,883    $ (357,213)     $ 966,815    $ (158,487)
                                       ============   ===========  =============  ============
 





<FN>

See notes to financial statements.
</FN>


</TABLE>

<PAGE>
<TABLE>
                       GRANITE DEVELOPMENT PARTNERS, L.P.
                        (A Delaware Limited Partnership)
                   STATEMENT OF CHANGES IN PARTNERS' DEFICIT

<CAPTION>
                                Sunrise     FC-Granite      Limited
                                Land Co.       Inc.         Partners       Total
                                ---------  -------------   -----------  ------------

<S>                             <C>          <C>           <C>           <C>

Balance at January 31, 1995       (38,932)    (9,178,564)            -    (9,217,496)
 
Net loss                           (1,585)      (156,902)            -      (158,487)
                                ---------  -------------   -----------  ------------

Balance at January 31, 1996       (40,517)    (9,335,466)            -    (9,375,983)

Capital contribution -
 exercise of warrants                   -              -     3,999,960     3,999,960

Withdrawal of original
 limited partner                   40,517        (40,517)            -             -

Distribution of interest
 on special units                       -     (1,914,202)            -    (1,914,202)

Net income                              -        966,815             -       966,815
                                ---------  -------------   -----------  ------------

Balance at January 31,1997              -    (10,323,370)    3,999,960    (6,323,410)

Distribution of interest
 on special units                       -     (1,147,980)            -    (1,147,980)

Net loss                                -        (89,303)     (267,909)     (357,212)
                                ---------  -------------   -----------  ------------

Balance at January 31, 1998             -    (11,560,653)    3,732,051    (7,828,602)

Net income for the eleven months        -        225,883             -       225,883
                                ---------  -------------   -----------  ------------
 
Balance at December 31, 1998    $       -  $ (11,334,770)  $ 3,732,051  $ (7,602,719)
                                =========  =============   ===========  ============
<FN>

See notes to financial statements.
</FN>

</TABLE>

<PAGE>
<TABLE>
                       GRANITE DEVELOPMENT PARTNERS, L.P.
                        (A Delaware Limited Partnership)
                            STATEMENTS OF CASH FLOW
<CAPTION>

                                                  For the 11 months  For the year  For the year  For the year
                                                         ended          ended         ended         ended
                                                     December 31     January 31,   January 31,   January 31,
                                                         1998            1998          1997          1996
                                                 ------------------  ------------  ------------  ------------
<S>                                              <C>                 <C>           <C>           <C>
                                                                                       
Cash Flow from Operating Activities
  Net income (loss)                              $          225,883  $   (357,213) $    966,815  $   (158,487)
  Adjustments to reconcile net income (loss) to
   net cash provided by operating activities:
   Amortization                                             453,595       678,851       635,723       613,855
   Income from joint ventures                            (1,393,985)   (1,663,201)   (2,006,273)     (777,200)
   Gain on sale of partnership interest                           -             -             -    (2,144,190)
  Changes in operating assets and liabilities:
   Decrease in land and land improvements                 3,156,919       587,894     5,330,159     1,137,066
   Decrease (increase) in restricted cash equivalents       481,287     4,121,604    (3,294,438)    2,730,810
   Decrease (increase) in mortgage notes receivable         194,221     3,173,881    (1,910,357)   (1,746,626)
   Increase in organization costs                                 -             -             -       (50,586)
   Increase in interest receivable                       (2,232,269)   (2,190,243)   (2,259,325)   (1,985,517)
   Decrease (increase) in other assets                       55,000       (25,500)      (55,000)            -
   Decrease in development fee receivable                         -             -             -       402,133 
   Decrease (increase) in commission receivable                   -        17,392       (17,392)            -
   (Increase) decrease in administrative fee receivable     (55,000)      (60,000)      (60,000)       81,250
   Increase (decrease) in accounts payable                  499,432       414,741       (85,303)       33,754
   Increase (decrease) in accrued fees, partners          1,057,112      (728,651)      762,576             -
   (Decrease) increase in accrued interest                  (51,788)      (33,294)       38,023        65,576
   (Decrease) increase in accrued real estate taxes         (43,946)        8,986      (146,972)      208,318
   (Decrease) increase in deposits                         (815,498)   (1,265,623)    1,580,586     1,116,514
   Increase in deferred income                              501,609     1,221,579     1,287,166     2,170,057
                                                 ------------------   -----------  ------------  ------------

   Net cash provided by operating activities              2,032,572     3,901,203       765,988     1,696,727
                                                 ------------------   -----------  ------------  ------------  
Cash Flow from Investing Activities
   Proceeds from sale of partnership interest                     -             -             -     2,990,000
   Distribution from affiliates                             750,000       642,600        93,530             -
   Investments in and advances to affiliates             (3,270,281)   (2,861,027)   (1,267,233)   (6,060,945)
                                                 ------------------  ------------  ------------  ------------

     Net cash used in investing activities               (2,520,281)   (2,218,427)   (1,173,703)   (3,070,945)
                                                 ------------------  ------------  ------------  ------------


Cash Flow from Financing Activities
   Proceeds from exercise of warrants                             -             -     2,999,880             -
   Proceeds from loan payable - Sunrise                   2,395,951             -       190,000       731,768
   Repayment of loan payable - Sunrise                            -      (921,768)            -             -
   Proceeds from loan payable - Eaton                     2,580,890             -             -             -
   Repayment of loan payable - Eaton                     (2,816,828)            -             -             -
   Distribution of interest on special units                      -    (1,147,980)   (1,914,202)            -
   Proceeds from mortgage notes payable                           -       922,472       753,962     4,480,000
   Repayment of mortgage notes payable                     (465,855)     (590,430)   (4,953,515)     (718,345)
   Increase in mortgage procurement cost                          -        (7,900)      (17,000)      (35,701)
                                                 ------------------  ------------  ------------  ------------
 

     Net cash provided by (used in) 
      financing activities                                1,694,158    (1,745,606)   (2,940,875)    4,457,722
                                                 ------------------  ------------  ------------  ------------
 
Increase (decrease) in cash                               1,206,449       (62,830)   (3,348,590)    3,083,504
Cash at beginning of the period                             224,158       286,988     3,635,578       552,074
                                                 ------------------  ------------  ------------  ------------
Cash at end of the period                        $        1,430,607  $    224,158  $    286,988  $  3,635,578
                                                 ==================  ============  ============  ============
<FN>

See notes to financial statements.
</FN>

</TABLE>
<PAGE>
<TABLE>

                       GRANITE DEVELOPMENT PARTNERS, L.P.
                        (A Delaware Limited Partnership)
                       STATEMENTS OF CASH FLOW (continued)

<CAPTION>

                                                  For the 11 months    For the year      For the year      For the year
                                                        ended              ended              ended             ended
                                                     December 31,        January 31,        January 31,       January 31,
                                                        1998                1998              1997              1996
                                                   ----------------   -----------------   --------------    --------------
<S>                                                   <C>                 <C>              <C>              <C>
                                                                                                                                

Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest                                              $ 4,004,998         $ 4,284,520      $ 4,307,476       $ 4,381,188
Real estate taxes                                     $   116,958         $   201,467      $   423,281       $   185,377

Supplemental Disclosure of Non-Cash Activities:
Exercise of warrants
                                                      $         -         $         -      $ 1,000,080       $         -



</TABLE>



<PAGE>




                       GRANITE DEVELOPMENT PARTNERS, L.P.
                        (A Delaware Limited Partnership)
                        NOTES TO THE FINANCIAL STATEMENTS

NOTE A  -   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization
------------
Granite  Development  Partners,  L.P.,  a  Delaware  Limited  Partnership  ("the
Partnership"),  was formed on November 15, 1993 to acquire,  develop, market and
sell partnership  properties,  located  principally in Ohio and Nevada,  and may
include  acting as a joint venture  partner with respect to certain  properties.
The Partnership  will terminate on December 31, 2013 or earlier upon disposition
of assets.  Effective  December 16, 1998, the  Partnership has decided to change
its fiscal year end from January 31 to December 31 (See Note K).

The results of operations  discussed below reflect the change in the Partnership
year end from  January 31 to  December  31.  This change in year end was to make
consistent the  Partnership's  tax year with the fiscal year end and to make the
Partnership's  fiscal year end  consistent  with its two major  joint  ventures,
Eaton Estates  Partnership  and Silver  Canyon  Partnership.  The  Partnership's
results of  operations  for the eleven months ended  December 31, 1998,  and the
years ended  January 31, 1998,  1997,  and 1996 include the  Financial  Results,
accounted for on the equity basis,  of Eaton Estate  Partnership  for the fiscal
years ended  December 31, 1998, 1997, 1996, and 1995, respectively.  The results
of Eaton Estates  reflects twelve months of operations, which is consistent with
prior periods presented.

The  sole  general   partners  is   FC-Granite,   Inc.,   an  Ohio   corporation
("FC-Granite").  FC-Granite has made an initial  capital  contribution  of $300.
FC-Granite is a wholly-owned subsidiary of Sunrise Land Company ("Sunrise"), the
land  division  subsidiary of Forest City  Enterprises,  Inc.  ("Forest  City").
Sunrise made an initial  capital  contribution of $100 and acted as the original
limited  partner until the outstanding  warrants to acquire limited  partnership
interests  were  exercised  on  December  3, 1996.  When the first  warrant  was
exercised,  Sunrise withdrew as the original limited partner.  FC-Granite owns a
25% interest and the limited partners own a 75% interest in the Partnership.

On December 3, 1996,  FC-Granite  exercised  9,000 warrants to purchase  limited
partnership  units,  representing  a 25%  ownership  of the limited  partnership
units.

FC-Granite  contributed  properties  with  assigned  values  of  $7,234,482  and
$2,765,518 of cash related to properties  originally  intended to be contributed
by  FC-Granite  but were  sold  prior to the  formation  of the  Partnership  in
exchange for $10,000,000 special units valued at $1,111.11 per special unit. The
historical  cost basis of the contributed  properties was $4,097,400.  Until the
senior  notes  payable are paid in full,  $9,000,000  of the special  units bear
interest at 10.83% and will be paid pari-passu with interest on the senior notes
payable and have  accordingly  been treated as partners'  special  units and the
remaining  $1,000,000  has  been  reflected  as  a  capital  contribution.   The
difference of $3,137,082  between the partners' special units of $10,000,000 and
the  historical  cost basis of the  contributed  properties  of  $4,097,400  and
contributed  cash of $2,765,518 is reflected as a reduction of partners'  equity
for  FC-Granite.  The properties  have been presented at their  historical  cost
basis  because of the  affiliated  ownership  and common  management of Sunrise,
FC-Granite and the Partnership.
<PAGE>
                       GRANITE DEVELOPMENT PARTNERS, L.P.
                        (A Delaware Limited Partnership)
                  NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE A -    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
            (continued)

Sunrise has withdrawn from the  Partnership  upon the exercising of the warrants
in fiscal 1996. With this change in the Partnership structure,  all profits will
be allocated to  FC-Granite,  the general  partner,  until all prior year losses
initially  allocated  to  FC-Granite  are  recovered.  As of December  31, 1998,
$3,731,856  in  losses  allocated  to  FC-Granite  under  the old  Partnership's
structure have not been recovered.  Once FC-Granite  recoups the full allocation
of losses from prior years as noted above, profits and losses of the Partnership
will be allocated in accordance  with the Partnership  agreement.  The agreement
states that  FC-Granite  owns a 25% interest and the limited  partners own a 75%
interest in the Partnership.

Land Sales
----------
The  Partnership  follows the provisions of Statement of Financial  Accounting
Standards No. 66,  "Accounting  for Sales of Real  Estate",  for reporting the
disposition of properties.

Land and Land Improvements
--------------------------
Land and land  improvements  are  recorded at cost.  Upon  sales,  costs will be
reported in cost of sales using the specific  identification  method.  Land held
for sale is recorded at the lower of carrying  amount or fair value less cost to
sell.

Restricted Cash Equivalents
---------------------------
In accordance  with the  partnership  agreement,  the net proceeds of the senior
notes  payable  and  warrants  will be  restricted  to fund the  development  of
partnership  properties and joint ventures. The Partnership considers short-term
commercial paper with maturities of three months or less as cash equivalents.

Investments In Joint Ventures
-----------------------------
The Partnership has invested in two joint ventures which have been accounted for
under the equity method.  These  investments are recorded  initially at cost and
subsequently adjusted for net equity in income (loss) and cash contributions and
distributions.

The advances to the ventures  represent  loans which are to be repaid within the
next three years.

Mortgage Procurement Costs
--------------------------
Mortgage procurement costs are being amortized over the life of the debt.

Organization Costs
------------------
Costs  incurred in  connection  with the  organization  of the  Partnership  are
deferred and amortized over five years using the straight-line method.

Income Taxes
------------
No  provision  or  benefit  for  income  taxes  is  included  in  the  financial
statements.  Income  taxes,  if any, are the  responsibility  of the  individual
partners.
<PAGE>
                       GRANITE DEVELOPMENT PARTNERS, L.P.
                        (A Delaware Limited Partnership)
                  NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
                   POLICIES (continued)

Estimates
---------
The Partnership is required to make estimates and assumptions when preparing its
financial  statements  and  accompanying  notes  in  conformity  with  generally
accepted  accounting   principles.   Actual  results  could  differ  from  those
estimates.

Deferred Income
---------------
Deferred  income  consists  of fees and  interest  due from the  joint  ventures
accounted for under the equity method. The deferred income will be recognized as
the fees and interest capitalized on the joint ventures is recognized as cost of
sales by the joint ventures.

Fair Value of Financial Instruments
-----------------------------------
The Partnership's financial instruments consists principally of cash, restricted
cash,  mortgage notes  receivable,  accounts  receivable,  accounts  payable and
accrued  expenses  in which  the  fair  value  of  these  financial  instruments
approximates the carrying value.  The Partnership  determined the estimated fair
value of its debt by  aggregating  the  various  types  (i.e.  fixed rate versus
variable rate debt) and discounting  future cash payments at interest rates that
the Partnership believes  approximates the current market. There was no material
difference  in  the  carrying  amount  and  the  estimated  fair  value  of  the
Partnership's total debt.

Reclassifications
-----------------
Certain  amounts in the year ended  January 31, 1998 have been  reclassified  to
conform to the current year's presentation.

Change in Fiscal Year End
-------------------------
On December 16, 1998, the Partnership announced a change in fiscal year end. The
change is effective with the Partnership's  fourth fiscal quarter of 1998 which,
under the old fiscal  calendar,  would have ended on January 31, 1999. Under the
new fiscal  calendar,  the fourth  fiscal  quarter of 1998 ended on December 31,
1998.  The change was made to be  consistent  with the  existing tax year end of
December 31.

Business Segment Information
----------------------------
In June  1997,  the FASB  issued  Statement  of  Financial  Accounting  Standard
("SFAS")  No.  131-  Disclosure  about  Segments  of an  Enterprise  and Related
Information.  SFAS 131  establishes  standards for  disclosure  about  operating
segments in annual  financial  statements  and selected  information  in interim
financial reports.  It also establishes  standards for related disclosures about
the  products  and  services,  geographic  areas and major  customers.  The sole
business of the Partnership is to acquire,  develop, market and sell Partnership
properties.  The Partnership evaluates operating results and allocates resources
on a  property-by-property  basis. The Partnership does not distinguish or group
its operations on a geographic basis. Accordingly, the
<PAGE>


                       GRANITE DEVELOPMENT PARTNERS, L.P.
                        (A Delaware Limited Partnership)
                  NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
                   POLICIES (continued)

Partnership  believes it has a single reportable  segment for SFAS 131 purposes.
Further, all operations are within the United States.  Therefore,  no additional
disclosure relating to the adoption of SFAS 131 is considered necessary.

NOTE B - SENIOR NOTES PAYABLE

The  Partnership  has issued  unsecured  senior notes payable  ("Senior  Notes")
limited to the aggregate principal amount of $36,000,000.  The Senior Notes bear
interest at a fixed annual rate of 10.83%, payable semi-annually,  and include a
negative  pledge  covenant   relating  to  the  assets  and  operations  of  the
Partnership,  allowing only a collateralized  working capital line not to exceed
$5,000,000 and subordinated indebtedness of $5,000,000.  Commencing May 15, 1995
and until such time as the principal of the Senior Notes and interest thereon is
repaid in full, 100% of the cash flow of the Partnership,  as defined,  shall be
applied to repay the Senior Notes.  The Senior Notes will mature on November 15,
2003, but are subject to earlier redemption.

Additionally, the Partnership may defer two interest payments if minimum working
capital, as defined, falls below $5,000,000. During the period interest payments
are  deferred,  interest  shall  accrue at 12.83% and shall remain at that level
until all deferred interest and interest thereon has been paid.

NOTE C - WARRANTS

In  connection  with the  issuance of the Senior  Notes,  the  Partnership  sold
pro-rata to the  purchasers  of the Senior  Notes  36,000  warrants at $27.78 to
purchase  limited  partnership  units.  Each  warrant  represented  the right to
purchase  one  limited  partnership  unit at an  exercise  price of  $83.33.  On
December 3, 1996, all 36,000 warrants were exercised.

NOTE D - PARTNERS' SPECIAL UNITS

Until the senior notes  payable are paid in full,  $9,000,000  of the  partners'
special units bear interest at 10.83% and will be paid  pari-passu with interest
on the Senior Notes.  Interest  incurred on the partners'  special units for the
eleven months ended  December 31, 1998, and for the years ended January 31, 1998
and 1997,  totaled  $904,305,  $974,700  and  $985,530,  respectively.  Interest
incurred from November 15, 1993  (inception)  through January 31, 1996,  totaled
$2,136,218.   During  the  years  ended   January  31,  1998,   1997  and  1995,
respectively,  $1,147,980,  $1,914,202  and $963,870 of the interest  earned was
distributed to FC-Granite,  the holder of the partners' special units. As of the
eleven months ended  December 31, 1998,  $988,237 of the interest  earned on the
special  units is  undistributed  and will be  distributed  pari-passu  with the
interest on the Senior Notes when funds are available.
<PAGE>

                       GRANITE DEVELOPMENT PARTNERS, L.P.
                        (A Delaware Limited Partnership)
                  NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE E - MORTGAGE NOTES PAYABLE

The  Partnership has outstanding  mortgage notes payable  aggregating  $776,659,
$1,242,514  and  $910,472  at  December  31, 1998 and January 31, 1998 and 1997,
respectively.  The proceeds of these mortgage loans was used to purchase certain
properties. Amounts borrowed of $656,659 and $120,000 at December 31, 1998, bear
interest at a rate of 8.25% and 8% per annum, respectively.  Amounts borrowed of
$831,659,  $322,080, and $88,775 at January 31, 1998, bear interest at a rate of
9%,  8.5%,  and 8% per annum,  respectively.  Amounts  borrowed  of  $597,510 at
January 31, 1997, bear interest at a rate of 8% per annum. The notes payable are
collateralized  by  mortgages  on the  properties.  Principal  and  interest are
generally payable one year after the date of the notes payable.

Aggregate  annual  principal  payments  for the next three  years are:  1999 -
$260,000;  2000 - $140,000;  2001 - $376,659.

During  the  year  ended  January  31,  1998,  the  Partnership  entered  into a
construction loan agreement collateralized by a first mortgage lien in an amount
not to exceed  $1,400,000.  The principal amount outstanding bears interest at a
rate  one-half  of one  percent  (1/2%) in excess  of the prime  rate  (7.75% at
December 31,  1998) and matures on November  21, 2000.  As of December 31, 1998,
the  outstanding  balance  related  to this  loan  was  $656,659.  The  loan was
established for the funding of the Thornbury development.

During  the  year  ended  January  31,  1997,  the  Partnership  entered  into a
construction loan agreement collateralized by a promissory note in an amount not
to exceed  $1,600,000.  The note bears interest at the prime rate and matured on
August 1, 1998.  Outstanding balances were $-0- and $88,775 at December 31, 1998
and January 31, 1998,  respectively.  The loan was retired in the fourth quarter
of  1998.  The loan was  established  for the  funding  of the  Fairfax  Meadows
development.

NOTE F - TRANSACTIONS WITH AFFILIATES

FC-Granite  and Sunrise are reimbursed for all direct costs of operations of the
Partnership's affairs and development activities.

FC-Granite is paid a monthly administrative fee as compensation for its services
in administering  the business of the partnership which is equal to one-sixth of
1%  of  the  book  value  of  the  partnership  properties,  as  defined.  Total
administrative  fees accrued for the eleven  months ended  December 31, 1998 and
for the years ended  January 31, 1998,  1997 and 1996 were  $179,744,  $236,014,
$357,122, and $853,097,  respectively.  The Partnership paid administrative fees
of $431,513, $212,664 and $853,097 during the years ended January 31, 1998, 1997
and 1996, respectively.

<PAGE>

                       GRANITE DEVELOPMENT PARTNERS, L.P.
                        (A Delaware Limited Partnership)
                  NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE F - TRANSACTIONS WITH AFFILIATES (continued)

Pursuant to a management  agreement,  Sunrise is paid a semi-annual  development
fee equal to 4% of gross sales of the Partnership  and the joint venture,  Eaton
Estate,  as  compensation  for its services in managing the  development  of the
partnership  properties.  Total  development  fees accrued for the eleven months
ended December 31, 1998 and for the years ended January 31, 1998,  1997 and 1996
were $467,929,  $272,333,  $580,304, and $449,754 respectively.  The Partnership
paid development fees of $556,792, $250,641 and $449,754,  respectively,  during
the years ended January 31, 1998, 1997 and 1996, respectively.

In addition,  real estate  commissions equal to 3.5% of gross sales,  payable to
FC-Granite  accrued for the eleven months ended  December 31, 1998,  and for the
years ended January 31, 1998, 1997 and 1996, were $409,439,  $238,291,  $507,766
and $393,534,  respectively. Real estate commissions paid during the years ended
January  31,  1998,  1997  and  1996,  were  $487,194,  $219,311  and  $393,534,
respectively.

Pursuant to the Amended and Restated Silver Canyon  Partnership  agreement,  the
Partnership is to receive a monthly  administrative fee in the amount of $5,000.
Total fees of $55,000 were accrued for the year eleven months  December 31, 1998
and total fees of $60,000 were  accrued for each of the years ended  January 31,
1998 and 1997.

In addition,  the Partnership is to receive a commission equal to 1.67% of gross
sales,  as  defined  in the  Amended  and  Restated  Silver  Canyon  Partnership
agreement,  as compensation  for its services in conducting  marketing and sales
duties and authorization of sales contracts.  Commissions of $504,182, $453,965,
$192,588,  and $98,759 were earned during the eleven  months ended  December 31,
1998, and for the years ended January 31, 1998, 1997 and 1996, respectively.

The  Partnership has advanced  $26,665,660 at December 31, 1998,  $23,395,379 at
January  31,  1998 and  $20,710,431  at January  31,  1997 to the Silver  Canyon
Partnership (see Note H).

Interest  earned on the advances were  $2,327,615,  $2,422,265,  $2,058,260  and
$1,883,707  for the eleven  months ended  December  31, 1998,  and for the years
ended January 31, 1998, 1997 and 1996 respectively, and was recorded as deferred
income.  During the eleven  months ended  December  31, 1998,  and for the years
ended  January 31, 1998,  1997 and 1996,  $1,508,044,  $750,624,  $644,104,  and
$87,084 of the deferred income has been recognized as interest income.

FC-Granite  purchased  $9,000,000 of the Senior Notes and 9,000 of the warrants.
As of January 31, 1995,  FC-Granite sold $9,000,000 of the Senior Notes to other
investors.  During the year ended  January 31, 1997,  FC-Granite  exercised  the
9,000 warrants.

During the eleven months ended December 31, 1998, Sunrise loaned the Partnership
$2,395,951  to fund  additional  development  expenditures  at the Silver Canyon
project. Total interest of
<PAGE>
                       GRANITE DEVELOPMENT PARTNERS, L.P.
                        (A Delaware Limited Partnership)
                  NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE F - TRANSACTIONS WITH AFFILIATES (continued)

$154,054 at a fixed rate of 10% has been accrued  during the eleven months ended
December 31, 1998.

During the eleven  months  ended  December 31,  1998,  Eaton Estate  Partnership
loaned the Partnership $2,580,890 to fund additional development expenditures at
the Silver Canyon project. Total interest of $143,830 at a fixed rate of 10% has
been accrued during the eleven months ended December 31, 1998.

Included in  restricted  cash  equivalents  and deposits at January 31, 1998 and
1997 is $481,287 and $3,124,950,  respectively,  which represents sales proceeds
invested on behalf of Eaton Estate  Partnership in short-term  commercial paper.
The funds,  together  with  interest  earned,  were returned to the Eaton Estate
Partnership during the eleven months ended December 31, 1998.

NOTE G - GAIN ON SALE OF PARTNERSHIP INTEREST

Silver Canyon,  a Nevada limited  partnership,  was originally  owned 55% by the
Partnership and 45% by Silver Canyon Corporation  ("SCC").  On January 30, 1996,
the  Partnership  sold 21 2/3%  interest  in  Silver  Canyon  (the  "Partnership
Interest") to American Nevada Seven Hills Limited Partnership,  a Nevada limited
partnership and subsidiary of American Nevada Corporation,  a Nevada corporation
("ANC"),  for $2,990,000.  The Partnership  recorded a gain of $2,144,190 on the
sale of the Partnership Interest during the year ended January 31, 1996.

NOTE H - INVESTMENTS IN AND ADVANCES TO JOINT VENTURES

Through  January 30, 1996, the  Partnership  had a 55% interest in Silver Canyon
Partnership.  On  January  30,  1996,  the  Partnership  sold  21  2/3%  of  its
Partnership interest in the Silver Canyon Partnership to ANC. Prior to the sale,
the  Partnership's  investment in Silver Canyon  Partnership at January 31, 1996
and 1995, was $2,147,055 and $1,808,461,  respectively.  Subsequent to the sale,
the  Partnership's  investment in Silver Canyon  Partnership at January 31, 1996
was  $1,301,245.  Pursuant to the Amended and  Restated  Partnership  Agreement,
subsequent to the sale the  Partnership  has a 33 1/3% interest in Silver Canyon
Partnership.  The  Partnership's  investment  in Silver  Canyon  Partnership  at
December 31, 1998 and January 31, 1998 and 1997 was  $4,740,318,  $4,003,748 and
$2,929,217, respectively.

In addition, the Partnership has a 30% interest in Eaton Estate Partnership. The
Partnership's  investment in Eaton Estate  Partnership at December 31, 1998, and
January  31,  1998  and  1997,  was   $2,454,662,   $2,546,597  and  $2,332,049,
respectively.  The Partnership has also received a distribution of $750,000 from
Eaton Estates.

The  Partnership   has  also  advanced   $26,665,660  at  December  31,  1998,
$23,395,379  at January  31, 1998 and  $20,710,431  at January 31, 1997 to the
Silver Canyon  Partnership.  Pursuant to the Amended and Restated  Partnership
Agreement for the Silver Canyon Partnership, the
<PAGE>
                       GRANITE DEVELOPMENT PARTNERS, L.P.
                        (A Delaware Limited Partnership)
                  NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE H - INVESTMENTS IN AND ADVANCES TO JOINT VENTURES (continued)

Partnership's original obligation to make loans to Silver Canyon Partnership was
capped at  $19,443,198.  The agreement also provides that the  Partnership is to
provide  up to  two-thirds  of  $9,000,000  as  additional  loans as  funds  are
required.  Funds  advanced to Silver Canyon  Partnership as of January 31, 1996,
bear interest at ten percent (10%) and funds advanced  subsequent to January 31,
1996 bear  interest  at the rate of prime  plus 1 3/4%  (7.75% at  December  31,
1998).  Shown below is summarized  financial  information  relative to the joint
ventures, Silver Canyon Partnership and Eaton Estate Partnership.

<TABLE>
<CAPTION>


                               December 31,     January 31,       January 31,
                                   1998            1998              1997
                             ---------------    ------------     -------------
<S>                            <C>               <C>             <C>

Balance Sheet
-------------
Assets,     primarily          $  72,781,623     $65,400,486     $  63,987,341 
 undeveloped land    
Liabilities,     primarily        56,054,962     $49,499,560        49,202,632
 long-term debt              ---------------     -----------     -------------
Partners' equity                  16,726,661      15,900,926        14,784,709
Less:   Outside  partners'
equity                             9,532,331       9,350,581         9,523,443
                             ---------------     -----------     -------------
Investment in Joint            $   7,194,330     $ 6,550,345     $   5,261,266
  Ventures                   ===============     ===========     =============
                                                 
                                                  

Operating Results
-----------------
Revenues                           8,175,060       7,848,137         7,094,772
Expenses                           4,849,325       4,232,777         3,238,009
                             ---------------     -----------     ------------- 
Net Income                   $     3,325,735     $ 3,615,360     $   3,856,763
                             ===============     ===========     =============
</TABLE>
                                                           

For the eleven months ended  December 31, 1998,  the Silver  Canyon  Partnership
generated  income of  $1,132,184  of which  $735,920  has been  recorded  by the
Partnership  under the equity  method.  For the year ended January 31, 1998, the
Silver Canyon  Partnership  generated income of $1,653,124,  of which $1,074,531
has been recorded by the Partnership under the equity method. For the year ended
January 31, 1997, the Silver Canyon Partnership  income of $2,595,760,  of which
$1,627,972 has been recorded by the Partnership under the equity method.

For the year ended  December 31, 1998,  the Eaton Estate  Partnership  generated
income of  $2,193,551  of which  $658,065 has been  recorded by the  Partnership
under the equity  method.  For the year ended January 31, 1998, the Eaton Estate
Partnership  generated  income of  $1,962,236  primarily  from the proceeds from
sales of developed property offset by real estate taxes,  commissions,  interest
and other miscellaneous  expenses,  of which $588,671,  has been recorded by the
Partnership  under the equity  method.  For the year ended January 31, 1997, the
Eaton Estate  Partnership  generated  income of $1,261,003 of which $378,301 has
been recorded by the Partnership under the equity method.

NOTE I - PARTICIPATION IN CASH FLOWS

Once the senior notes payable and partners' special units have been paid in full
and the capital  accounts of the general and limited  partners have been repaid,
FC-Granite will receive  distributions of 25% of available cash, as defined.  No
amounts are due under the terms of this participation.
<PAGE>

                       GRANITE DEVELOPMENT PARTNERS, L.P.
                        (A Delaware Limited Partnership)
                  NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE J - LITIGATION

The  Partnership  is involved in two  separate  instances of  litigation  claims
related to its operations. The Partnership and several affiliates are defendants
in a  proceeding  arising  out of the  October  1996  sale of the  194th  Street
property located in Miami Beach,  Florida. The plaintiff is a third-party broker
seeking a commission on the premise that the plaintiff initiated contact between
the ultimate buyer and the  Partnership.  In the opinion of management and legal
counsel  the  maximum  damages  related  to this  litigation  are  approximately
$400,000  at December  31,  1998,  the  Partnership  has  recorded an accrual of
$100,000  relating  to this  litigation.  However,  the  Partnership  and  other
defendants  deny that any  commission has been earned by the Plaintiff and legal
counsel of the  Partnership  have filed a motion for summary  judgement  and are
awaiting the courts ruling.

The Partnership owns a 33.3% interest in the Silver Canyon Partnership  ("Silver
Canyon").  Silver  Canyon is  developing  the Seven  Hills  project,  located in
Henderson,  Nevada,  in  conjunction  with a golf  course.  In  August  1997,  a
class-action  lawsuit was filed by the current homeowners in Seven Hills against
Silver Canyon,  the golf course  developers and other entities.  In addition,  a
separate lawsuit was filed by some of the production  homebuilding  companies at
Seven Hills, against some of the same parties.  Both suits seek a commitment for
the  right of Seven  Hills  homeowners  to play on the golf  course,  as well as
damages.  Recently,  the trial court  determined that Seven Hills  homeowners do
have a right to play on the golf course, providing they pay a greens fee of $300
per round.  An  additional  hearing on damages has been  scheduled  for October,
1999.  The  owner  of the  golf  course  has  filed a  cross-claim  against  the
Partnership,  Silver Canyon,  and the other entities in the damage claim.  It is
anticipated  that the  present  owner of the golf  course will appeal the ruling
granting play rights to Seven Hills homeowners after the hearing on damages. The
Partnership  and Silver Canyon believe they have  meritorious  defenses to these
claims and intend to continue to defend against them vigorously.  Parties to the
lawsuits are  currently  engaged in  discovery  proceedings.  Sales  efforts are
continuing at the Seven Hills development,  and because these events are recent,
it  is  not  yet  possible  to  determine  the  extent  of  any  impact  on  the
Partnership's or Silver Canyon's financial performance.

NOTE K - CHANGE IN YEAR END

In December  1998,  the  Partnership  announced a change is fiscal year end. The
change is effective with the Partnership's  fourth fiscal quarter of 1998 which,
under the old fiscal  calendar,  would have ended on January 31, 1999. Under the
new fiscal  calendar,  the fourth  fiscal  quarter of 1998 ended on December 31,
1998.  The change was made to be  consistent  with the  existing tax year end of
December 31.

<PAGE>



                       GRANITE DEVELOPMENT PARTNERS, L.P.
                        (A Delaware Limited Partnership)
                  NOTES TO THE FINANCIAL STATEMENTS (continued)

<TABLE>

The following table presents certain financial information for the eleven months
ended December 31, 1998 and 1997, respectively:
<CAPTION>

NOTE K - CHANGE IN YEAR END (continued)
                                                   Eleven  months ended
                                                        December 31,
                                            ----------------------------------
                                                1998                 1997
                                            -------------        -------------
                                                                   (unaudited)
<S>                                           <C>                 <C> 
 
 REVENUES
        Operating income                      $4,795,653          $3,694,333

  EXPENSES
        Interest                               3,953,210           3,823,488
        Fees, partners                         1,057,112             539,733
        Real estate taxes                         73,012             197,712
        Operating and other                      426,826             158,037
        Amortization                             453,595             627,151
                                            -------------        -------------
              Subtotal                         5,963,755           5,346,121
                                            -------------        -------------
  INCOME FROM JOINT VENTURES                   1,394,635             981,250
                                            -------------        -------------
  NET INCOME (LOSS)                           $  226,533         $  (670,538)
                                            =============        =============
</TABLE>

NOTE L  -   RESTATEMENT OF THIRD QUARTER - UNAUDITED

The third  quarter  ended  October  31,  1998 has been  restated  to reflect the
correction of the computation of cost of sales in the Silver Canyon Partnership.
This error was identified during the fourth quarter of 1998.

The restatement  relates to the allocation of certain net  development  costs to
land sales.  These  adjustments to cost of sales had the affect of reducing cost
of sales and increasing net income for the third quarter of 1998 by $668,850.

The following table summarizes the impact to the amounts previously reported:
<TABLE>

                                          UNAUDITED
                 ----------------------------------------------------------------
                    For the                       For the nine
                 three months      For the        months ended     For the nine
                     ended          three         October 31,      months ended
                  October 31,    months ended         1998         October 31,
                    1998 as      October 31,     as previously         1998
                  previously         1998           reported       as restated
                   reported      as restated
                 --------------  -------------   ---------------  ---------------
<S>              <C>             <C>             <C>              <C>

Total Partners' 
  Equity         $(1,242,592)    $ (573,742)     $(1,670,703)     $(1,001,853)
Income from
  Joint Ventures $   (36,759)    $  632,091      $  (120,064)     $   548,786          

Net Income       $(1,242,592)    $ (573,742)     $(2,842,101)     $(2,173,251)
                 


</TABLE>

<PAGE>

REPORT OF INDEPENDENT ACCOUNTS

To the Partners of
Silver Canyon Partnership

In our opinion,  the accompanying  balance sheets and the related  statements of
operations, changes in partners' equity and of cash flows present fairly, in all
material respect,  the financial position of Silver Canyon Partnership (A Nevada
General  Partnership) as of December 31, 1998, January 31, 1998, and January 31,
1997,  and the results of its operations and its cash flows for the eleven month
period  ended  December 31,  1998,  and for each of the years ended  January 31,
1998,  1997,  and  1996,  in  conformity  with  generally  accepted   accounting
principles.   These  financial   statements  are  the   responsibility   of  the
Partnership's  management;  our responsibility is to express an opinion on these
financial  statements  based on our  audits.  We  conducted  our audits of these
statements  in accordance  with  generally  accepted  auditing  standards  which
require that we plan and perform the audit to obtain reasonable  assurance about
whether the financial  statements  are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for the opinion expressed above.








                                               /S/ PricewaterhouseCoopers, LLP
                                               -------------------------------
                                                   PricewaterhouseCoopers, LLP














Cleveland, Ohio
March 31, 1999


<PAGE>
<TABLE>

                            SILVER CANYON PARTNERSHIP
                         (A Nevada General Partnership)
                                 BALANCE SHEETS

<CAPTION>
                                                   December 31,   January 31,  January 31,
                                                   -------------  ------------ -------------
                                                       1998          1998          1997
                                                   -------------  ------------ -------------
<S>                                                <C>            <C>          <C>
                                                                                
ASSETS

LAND                                               $ 14,230,638   $18,354,050  $ 21,202,006
LAND IMPROVEMENTS                                    44,505,628    32,650,268    30,007,910
                                                   -------------  ------------ -------------
                                                     58,736,266    51,004,318    51,209,916

RESTRICTED CASH                                         157,111     1,465,311       189,666
                                                    
MORTGAGE NOTES RECEIVABLE                               963,032       963,032       963,032

OTHER ASSETS
Mortgage procurement costs, net of accumulated
 amortization of  $442,793 at December 31, 1998,
 $387,328 at January 31, 1998 and $220,931 at
 January 31, 1997                                             -        55,465       221,862
Organization costs, net of accumulated amortization
 amortization of  $144,577 at December 31, 1998,
 $110,366 at January 31, 1998 and $73,312
 January 31, 1997                                        49,159        93,817       152,850
Fixed assets, net of accumulated depreciation
 of $10,973 at December 31, 1998, $8,738
 at January 31, 1998 and $6,096 at January 31, 1997       3,362         5,597         8,239
Cash                                                    974,322     1,604,418       302,081
Accounts receivable                                   3,208,392             -             -
Funds in escrow                                         583,218     1,002,007     1,311,087
Other assets                                                  -       143,756       137,689
                                                   -------------  ------------ -------------
                                                      4,818,453     2,905,060     2,133,808
                                                   -------------  ------------ -------------

                                                    $64,674,862   $ 56,337,721 $ 54,496,422
                                                   =============  ============ =============
 
<FN>


 
See notes to financial statements.
</FN>
</TABLE>


<PAGE>
<TABLE>

                            SILVER CANYON PARTNERSHIP
                         (A Nevada General Partnership)
                           BALANCE SHEETS (continued)

<CAPTION>

                                     December 31,   January 31,    January 31,
                                     -------------  -------------  ------------
                                         1998           1998          1997
                                     -------------  -------------  ------------
<S>                                  <C>            <C>            <C>
                                                                    
LIABILITIES AND
PARTNERS' EQUITY   
 
LOAN PAYABLE - GMAC                     $ 350,972    $ 5,751,820   $14,672,880
LOAN PAYABLE - GRANITE                 26,665,660     23,395,379    20,710,431
LOAN PAYABLE - ANC                      5,476,514      3,427,393     2,140,336

OTHER LIABILITIES                                                   
Accounts payable, trade                 5,331,990      3,767,765     3,290,935
Accounts payable, management fee          205,000        150,000       326,667
Accrued interest payable               10,254,842      7,559,778     5,099,891
Accrued development fees, partners      2,557,055      1,484,805       666,013
Accrued commissions                             -              -        78,109
Accrued expenses                                -              -       107,960
Accrued salaries                          132,946        132,946       211,551
Accrued real estate taxes                   4,123              -        33,063
Deposits                                4,180,866      1,936,125       430,000
Deferred income                           400,000        750,000       400,000
                                     -------------  -------------  ------------
                                       23,066,822     15,781,419    10,644,189

ADVANCE TO PARTNER                       (580,000)      (580,000)     (580,000)
PARTNERS' EQUITY                        9,693,894      8,561,710     6,908,586
                                     -------------  -------------  ------------
                                        9,113,894      7,981,710     6,328,586
                                     -------------  -------------  ------------
 
                                     $ 64,673,862   $ 56,337,721   $ 54,496,422
                                     =============  =============  ============
 
<FN>

 

See notes to financial statements.
</FN>
</TABLE>


<PAGE>
<TABLE>
 

                           SILVER CANYON PARTNERSHIP
                         (A Nevada General Partnership)
                            STATEMENTS OF OPERATIONS

<CAPTION>

                                    For the 11 months For the year   For the year   For the year
                                           ended         ended          ended          ended
                                        December 31,  January 31,    January 31,    January 31,
                                           1998           1998           1997          1996
                                        ------------  -------------  -------------  ------------
<S>                                     <C>           <C>            <C>            <C>
                                                                                     
REVENUES
Sales of developed property             $31,791,859   $ 23,911,279   $ 15,028,556   $ 2,941,692
Grading revenue                                   -              -        210,426        87,637
Cost of sales                           (26,599,980)   (18,957,867)   (10,693,499)   (1,768,314)
                                        ------------  -------------  -------------  ------------
                                          5,191,879      4,953,412      4,545,483     1,261,015

Other                                       (46,778)       194,290        180,373       132,033
                                        ------------  -------------  -------------  ------------
                                          5,145,101      5,147,702      4,725,856     1,393,048
                                        ------------  -------------  -------------  ------------
EXPENSES
Interest expense                                  -              -              -           221
Fees, partners                              110,000        120,000        120,000        75,000
Commissions                               2,909,047      2,546,330      1,054,765       126,976
Salaries and benefits                             -              -         78,605        35,893
Legal and professional                      410,404         72,126        132,131        95,842
Travel and entertainment                     36,303         53,679         56,398       106,703
Operating and other                         455,252        496,351        502,164       231,215
Depreciation and amortization                91,911        206,092        186,033       105,573
                                        ------------  -------------  -------------  ------------
                                          4,012,917      3,494,578      2,130,096       777,423
                                        ------------  -------------  -------------  ------------

NET INCOME                              $ 1,132,184    $ 1,653,124    $ 2,595,760     $ 615,625
                                        ============  =============  =============  ============

<FN>


See notes to financial statements.
</FN>
</TABLE>

<PAGE>
<TABLE>


                            SILVER CANYON PARTNERSHIP
                         (A Nevada General Partnership)
                    STATEMENT OF CHANGES IN PARTNERS' EQUITY

<CAPTION>
                                              Granite
                                               Silver
                                 Silver     Development     American
                                 Canyon      Partners,       Nevada       
                               Corporation      L.P.       Corporation      Total
                               -----------  -------------  ------------  ------------
<S>                            <C>           <C>            <C>          <C>  

Balance at January 31, 1995    $1,888,740    $ 1,808,461    $        -   $ 3,697,201

Net income                        277,031        338,594             -       615,625
                               -----------  -------------  ------------  ------------

Subtotal                        2,165,771      2,147,055             -     4,312,826
                                
Purchase of partnership
interest by ANC                  (561,496)      (845,810)    1,407,306             -
                               -----------  -------------  ------------  ------------

Subtotal                        1,604,275      1,301,245     1,407,306     4,312,826
                                
Advance to Partner               (580,000)             -             -      (580,000)
                               -----------  -------------  ------------  ------------
 
Balance at January 31, 1996     1,024,275      1,301,245     1,407,306     3,732,826

Net income                        905,397      1,627,972        62,391     2,595,760
                               -----------  -------------  ------------  ------------
                                                                          
Balance at January 31, 1997     1,929,672      2,929,217     1,469,697     6,328,586
 
Net income                        578,593      1,074,531             -     1,653,124
                               -----------  -------------  ------------  ------------
                                                                          
Balance at January 31, 1998     2,508,265      4,003,748     1,469,697     7,981,710
                                                                          
Net income for the eleven months  396,264        735,920             -     1,132,184
                               -----------  -------------  ------------  ------------
                                                                          
Balance at December 31, 1998   $2,904,529    $ 4,739,668   $ 1,469,697   $ 9,113,894
                               ===========  =============  ============  ============
 

 
 
<FN>
 

See notes to financial statements.
</FN>
</TABLE>

<PAGE>
<TABLE>
                            SILVER CANYON PARTNERSHIP
                         (A Nevada General Partnership)
                            STATEMENTS OF CASH FLOW

<CAPTION>

                                          For the 11 months  For the year For the year For the year
                                                  ended         ended        ended       ended
                                                December 31,  January 31,   January 31, January 31,
                                                  1998           1998         1997        1996
                                                 ----------  ------------  ----------  ----------
<S>                                             <C>          <C>          <C>          <C>

Cash Flow from Operating Activities                                                    
Net income                                     $1,132,184   $1,653,124   $2,595,760     $615,625
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization                      91,911       206,092     186,033      105,573
Write off of organization costs                    10,447        21,980      28,988            -
Changes in operating assets and liabilities:
(Increase) decrease in land and land 
 improvements                                  (7,730,948)      205,598    (143,831) (15,537,736)
Decrease (increase) in mortgage notes receivable        -             -     574,749   (1,537,781)
Decrease (increase) in restricted cash          1,308,200    (1,275,645)     30,269     (219,935)
Increase in accounts receivable                (3,208,392)            -           -            -
Increase in organization costs                          -             -           -      (64,623)
Decrease in accounts receivable                         -             -           -       43,048
Decrease (increase) in funds in escrow            418,789       309,080    (641,087)    (670,000)
Decrease (increase) in other assets               143,756        (6,067)    (89,305)     (46,198)
Increase (decrease) in accounts 
 payable - trade                                1,564,225       476,830   1,842,905   (2,442,159)
Increase (decrease) in accounts 
 payable - management fee                          55,000      (176,667)    326,667      (81,250)
Increase in accrued interest                    2,695,064     2,459,887   2,165,975    2,033,293
Increase (decrease) in accrued 
 development fees, partners                     1,072,250       818,792     666,013     (402,133)
(Decrease) increase in accrued commissions              -       (78,109)     78,109            -
(Decrease) increase in accrued expenses                 -      (107,960)    107,960            -
(Decrease) increase in accrued salaries                 -       (78,605)     78,605      132,946
Increase (decrease) in accrued real estate taxes    4,123       (33,063)    (36,161)     (87,188)
Increase (decrease) in deposits                 2,244,741     1,506,125    (175,000)     605,000
(Decrease) increase in deferred income           (350,000)      350,000     400,000            -
                                                ----------  ------------  ----------  ----------

Net cash provided by (used in) 
 operating activities                            (548,650)    6,251,392   7,996,649   (17,553,518)
                                                ----------  ------------  ----------  ----------

Cash Flow from Financing Activities:
Repayment of mortgage loans payable                     -             -           -   (10,071,290)
Repayment of notes payable                              -             -           -    (3,191,074)
Proceeds from loan payable - GMAC              13,400,345    13,020,447  12,849,355    24,185,691
Repayment of loan payable - GMAC              (18,801,193)  (21,941,507)(22,362,166)            -
Proceeds from loan payable - GRANITE            3,270,281     2,684,948   1,267,233     6,058,962
Proceeds from loan payable - ANC                2,049,121     1,287,057     490,336     1,650,000
Increase in mortgage procurement costs                  -             -    (112,793)     (330,000)
Advance to partner                                      -             -           -      (580,000)
                                                ----------  ------------  ----------    ----------

Net cash (used in) provided by financing
 activities                                       (81,446)   (4,949,055)  (7,868,035)  17,722,289

Increase in cash                                 (630,096)    1,302,337     128,614       168,771
Cash at beginning of the period                 1,604,418       302,081     173,467         4,696
                                                ----------  ------------  ----------    ----------
Cash at end of the period                       $ 974,322   $ 1,604,418   $ 302,081     $ 173,467
                                                ==========  ============  ==========    ==========

Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
 Interest                                        $666,318    $1,460,278  $2,345,627    $1,778,518
 Real estate taxes                               $343,680      $178,847    $166,876      $248,445
<FN>

See notes to financial statements.
</FN>
</TABLE>

<PAGE>

                            SILVER CANYON PARTNERSHIP
                         (A Nevada General Partnership)
                        NOTES TO THE FINANCIAL STATEMENTS

NOTE A -  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization
------------
Silver Canyon Partnership ("the Partnership"),  was formed on January 7, 1994 to
acquire, own, plan, develop,  operate,  improve, ease, manage, sell, finance and
refinance and otherwise deal with Partnership  properties  located in Henderson,
Nevada.  The  Partnership  will  terminate  on December 31, 2013 or earlier upon
disposition of assets.

The original  partners  include  Granite Silver  Development  Partners,  L.P., a
Delaware  Limited  Partnership  ("Granite"),  and Silver Canyon  Corporation,  a
Nevada  Corporation  ("SCC").  SCC made an initial capital  contribution of land
with an assigned value agreed upon by the partners of $4,500,000.  As of January
31, 1995, Granite made a total initial cash capital  contribution of $2,250,000.
The cash from Granite's contribution was distributed to SCC. Through January 30,
1996,  Granite  owned  a 55%  interest  and  SCC  owned  a 45%  interest  in the
Partnership.  On January 30, 1996,  Granite sold to American Nevada  Corporation
("ANC") a 21 2/3% partnership interest in the Partnership.  SCC sold to ANC a 11
2/3% partnership interest in the Partnership.  Upon the execution of the Amended
and Restated  Partnership  Agreement,  ANC acquired interests in the Partnership
representing in the aggregate a 33 1/3% interest.

Profits,  losses and  distributions are allocated to the partners as provided in
the Amended and Restated Partnership Agreement.

Land Sales
----------
The  Partnership  follows the provisions of Statement of Financial  Accounting
Standards No. 66,  "Accounting  for Sales of Real  Estate",  for reporting the
disposition of properties.

Land and Land Improvements
--------------------------
Land and land  improvements  are  recorded  at cost.  Upon  sale,  costs will be
reported  in cost of sales  on the  basis of the  relative  sales  value of each
parcel.  Land held for sale is recorded at the lower of carrying  amount or fair
value less cost to sell.

Restricted Cash
---------------
Pursuant  to the loan  agreement  with  General  Motors  Acceptance  Corporation
Residential  Funding  Corporation   ("GMAC"),  a  restricted  cash  account  was
established to pay qualified project expenditures as determined by GMAC.

Mortgage Procurement Costs
--------------------------
Mortgage procurement costs are being amortized over the life of the debt.





<PAGE>


                            SILVER CANYON PARTNERSHIP
                         (A Nevada General Partnership)
                  NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE A -  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
                    POLICIES (continued)

Organization Costs
------------------
Costs  incurred in  connection  with the  organization  of the  Partnership  are
deferred and amortized over five years using the straight-line method.

Fixed Assets
------------
Fixed assets are recorded at cost.  Depreciation  is provided on a straight-line
basis over the estimated useful lives of owned assets.

Income Taxes
------------
No  provision  or  benefit  for  income  taxes  is  included  in  the  financial
statements.  Income  taxes,  if any, are the  responsibility  of the  individual
partners.

Estimates
---------
The Partnership is required to make estimates and assumptions when preparing its
financial  statements  and  accompanying  notes  in  conformity  with  generally
accepted  accounting   principles.   Actual  results  could  differ  from  those
estimates.

Deferred Income
---------------
Deferred income consists of revenue from sales recorded on an option basis.  The
deferred  income related to sales recorded on an option basis will be recognized
when the last option pertaining to the sale of a parcel is exercised.

Fair Value of Financial Instruments
-----------------------------------
The Partnership's financial instruments consists principally of cash, restricted
cash,  mortgage notes  receivable,  accounts  receivable,  accounts  payable and
accrued  expenses  in which  the  fair  value  of  these  financial  instruments
approximate  the carrying value.  The Partnership  determined the estimated fair
value of its debt by  aggregating  the  various  types  (i.e.  fixed rate versus
variable rate debt) and discounting  future cash payments at interest rates that
the Partnership believes  approximates the current market. There was no material
difference  in  the  carrying  amount  and  the  estimated  fair  value  of  the
Partnership's total debt.

Change in Fiscal Year End
-------------------------
In December  1998,  the  Partnership  announced a change is fiscal year end. The
change is effective with the Partnership's  fourth fiscal quarter of 1998 which,
under the old fiscal  calendar,  would have ended on January 31, 1999. Under the
new fiscal  calendar,  the fourth  fiscal  quarter of 1998 ended on December 31,
1998.  The change was made to be  consistent  with the  existing tax year end of
December 31.




<PAGE>


                            SILVER CANYON PARTNERSHIP
                         (A Nevada General Partnership)
                  NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE B -  LOAN PAYABLE - GMAC

The  Partnership  entered into a loan agreement  with GMAC, to fund  development
expenditures  of the  property.  GMAC has agreed,  in  accordance  with the loan
agreement, to make loans to the Partnership in an aggregate amount not to exceed
$30,000,000.  The loan bears interest at one and three-fourths percent above the
prime rate (7.75% at December 31, 1998).  Interest on the outstanding  principal
balance is due and payable monthly in arrears. The loan was due on June 7, 1998.

The loan was extended to September 15, 1998.  The  Partnership  has an agreement
with  Residential  Funding  Corporation  to  postpone  the final  payment of the
balance due until new financing is secured.  The  outstanding  balance due as of
December 31, 1998 was $350,972.  In January,  1999, the Partnership obtained new
financing from Ohio Savings Bank of Cleveland,  Ohio (OSB).  OSB has agreed,  in
accordance  with the loan  agreement,  to make  loans to the  Partnership  in an
aggregate amount not to exceed $12,000,000.  The loan bears interest at 1% above
prime rate  (7.75% at December  31,  1998).  Effective  January  28,  1999,  the
Partnership refinanced the loan. (See Note F).

NOTE C -  TRANSACTIONS WITH AFFILIATES

Granite,  SCC, and ANC are  reimbursed for all direct costs of operations of the
Partnership's affairs and development activities.

Pursuant  to the Amended  and  Restated  Silver  Canyon  Partnership  Agreement,
Granite is to receive a monthly  administrative  fee in the amount of $5,000 per
month.  Total fees of $55,000 were accrued for the eleven months ended  December
31,  1998 and total fees of $60,000  were  accrued  for each of the years  ended
January 31, 1998 and January 31, 1997.

Granite was paid a monthly  administrative fee of $6,250 as compensation for its
services in  administering  the business of the Partnership  through January 31,
1996. Total administrative fees incurred and paid for the year ended January 31,
1996 were $75,000.

Pursuant to the Amended and Restated Silver Canyon Partnership agreement, SCC is
to  receive a  monthly  fee of $5,000  per  month  for the  coordination  of the
construction  and  operation  of the golf  course.  Total fees of  $55,000  were
accrued for the eleven months ended  December 31, 1998 and total fees of $60,000
were accrued for each of the years ended January 31, 1998 and January 31, 1997.

Pursuant to the Amended and Restated  Partnership  Agreement,  as of January 31,
1996,  American Nevada Corporation ("ANC") will be paid a fee equal to 4% of all
project  costs,  as  defined,   incurred  on  behalf  of  the  Partnership,   as
compensation  for its services in managing the  development  of the  Partnership
Properties. Total development fees incurred for the eleven months ended December
31,  1998,  and the years  ended  January  31,  1998 and  January  31, 1997 were
$2,382,055, $1,364,805, and $606,013 respectively.



<PAGE>


                            SILVER CANYON PARTNERSHIP
                         (A Nevada General Partnership)
                  NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE C -  TRANSACTIONS WITH AFFILIATES (continued)

Development  fees  incurred are  capitalized  to land held for  development  and
written off through cost of sales as sales of developed properties occur.

In addition, ANC shall be paid a fee equal to 4.5% of gross production sales and
6.5% of gross  estate  sales as  compensation  for its  services  in  conducting
marketing  and sales duties and  authorization  of sales  contracts.  Total fees
earned and paid to ANC for the eleven  months ended  December 31, 1998,  and the
years  January 31, 1998 and January  31, 1997 were  $1,531,546,  $1,317,755  and
$695,337,  respectively.  Also, in  consideration  of substantial  pre-marketing
activities  undertaken  by SCC  and  other  marketing  activities  performed  by
Granite,  each is to be paid a marketing fee of one percent of gross sales.  For
the eleven months ended December 31, 1998,  marketing fees earned by and paid to
SCC and Granite were  $353,890 and  $504,182,  respectively.  For the year ended
January 31,  1998,  marketing  fees  earned by and paid to SCC and Granite  were
$361,541  and  $453,965,  respectively.  For the year ended  January  31,  1997,
marketing  fees earned and paid to SCC and Granite were  $166,840 and  $192,588,
respectively.

Granite has advanced  $26,665,660  at December 31, 1998,  $23,395,379 at January
31, 1998 and $20,710,431 at January 31, 1997 to the Partnership. Pursuant to the
Amended and Restated  Partnership  Agreement for the Silver Canyon  Partnership,
Granite's  original  obligation to make loans to Silver Canyon  Partnership  was
capped at the current level of funding at January 31, 1996.  The agreement  also
provides that Granite is to provide up to two-thirds of $9,000,000 as additional
loans as funds are  required.  Pursuant  to the  agreement,  Granite  loaned the
Partnership  an additional  $3,270,280,  $2,684,948  and  $1,267,233  during the
eleven months ended  December 31, 1998, and the years ended January 31, 1998 and
1997,  respectively.  Funds advanced to Silver Canyon  Partnership as of January
31, 1996,  bear interest at ten percent (10%) and funds  advanced  subsequent to
January  31,  1996  bear  interest  at the rate of prime  plus 1 3/4%  (7.75% at
December 31,  1998).  In  accordance  with the Amended and Restated  Partnership
Agreement,  the  loans  have no  maturity  date and will be repaid  through  the
distribution  of cash flow.  Total  interest  incurred on the loans  amounted to
$2,327,615,  $2,239,532,  $2,058,260, and $1,883,707 for the eleven months ended
December  31,  1998 and the  years  ended  January  31,  1998,  1997,  and 1996,
respectively.

On September 28, 1998,  Silver Canyon  Partnership  issued a Capital Call to its
three  partners  in the amount of $552,095  each.  One of the  partners,  Silver
Canyon Corporation, failed to pay its Capital Call of $552,095 and was therefore
in default.  Pursuant  to the terms of the  Partnership  Agreement,  each of the
other two partners,  Granite Silver Development  Partner,  L.P.  ("Granite") and
American  Nevada  Seven  Hills  Limited  Partnership  ("ANC")  elected  to  make
"Shortfall Loans", each in the amount of $276,047 to the partnership. Such loans
bear  interest  at  the  rate  of  25%  per  annum  and  are  payable  from  all
distributions, fees or compensation which may otherwise be due to the defaulting
partner.




<PAGE>


                            SILVER CANYON PARTNERSHIP
                         (A Nevada General Partnership)
                  NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE C -  TRANSACTIONS WITH AFFILIATES (continued)

Pursuant to the Amended and  Restated  Partnership  Agreement,  the  Partnership
advanced  to SCC  $580,000  on January 31,  1996.  The  advance is  non-interest
bearing and will be repaid from future cash flow distributions. Accordingly, the
advance has been reflected as a reduction of the partners' equity.

In addition,  pursuant to the Amended and Restated  Partnership  Agreement,  ANC
loaned to the  Partnership  $1,650,000  as of January 31,  1996.  The loan bears
interest  at one and  three-fourths  percent  above the  prime  rate and will be
repaid through the  distribution  of cash flow. The agreement also provides that
ANC is to provide up to one-third of $9,000,000 as additional loans as funds are
required.  Pursuant to the agreement,  ANC loaned the  Partnership an additional
$2,049,121,  $1,287,057  and $490,336  during the years ended  December 31, 1998
and, January 31, 1998 and 1997, respectively.

NOTE D -  CAPITALIZED INTEREST AND REAL ESTATE TAXES

 Interest  expense  and real  estate  tax  expense  allocated  to land  held for
 development is capitalized.  For the eleven months ended December 31, 1998, and
 for the years ended  January 31, 1998 and 1997,  total  interest  charges  were
 $3,397,733,  $3,920,165  and  $4,511,602 of which  $3,397,733,  $3,920,165  and
 $4,511,60 were capitalized  respectively . For the eleven months ended December
 31, 1998 and for the years ended  January 31, 1998 and 1997,  total real estate
 taxes were $347,803,  $145,784 and $104,601,  respectively,  of which $347,803,
 was  capitalized at December 31, 1998,  $145,784 was capitalized at January 31,
 1998 and $104,601 was capitalized at January 31, 1997.

NOTE E -  LITIGATION

In August 1997, a  class-action  lawsuit was filed by the current  homeowners in
Seven  Hills  against the  Partnership,  the golf  course  developers  and other
entities.  In addition,  a separate  lawsuit was filed by some of the production
homebuilding  companies at Seven Hills,  against some of the same parties.  Both
suits seek a commitment  for the right of Seven Hills  homeowners to play on the
golf course, as well as damages. Recently, the trial court determined that Seven
Hills homeowners do have a right to play on the golf course,  providing they pay
a greens  fee of $300 per round.  An  additional  hearing  on  damages  has been
scheduled  for  October,  1999.  The  owner  of the  golf  course  has  filed  a
cross-claim  against the Partnership,  Silver Canyon,  and the other entities in
the damage claim.  It is  anticipated  that the present owner of the golf course
will  appeal the ruling  granting  play rights to Seven  Hills  homeowners.  The
Partnership  and Silver Canyon believe they have  meritorious  defenses to these
claims and intend to continue to defend against them vigorously.  Parties to the
lawsuits are  currently  engaged in  discovery  proceedings.  Sales  efforts are
continuing at the Seven Hills development,  and because these events are recent,
it  is  not  yet  possible  to  determine  the  extent  of  any  impact  on  the
Partnership's or Silver Canyon's financial performance.


<PAGE>


                            SILVER CANYON PARTNERSHIP
                         (A Nevada General Partnership)
                  NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE F - CHANGE IN YEAR END

In December  1998,  the  Partnership  announced a change is fiscal year end. The
change is effective with the Partnership's  fourth fiscal quarter of 1998 which,
under the old fiscal  calendar,  would have ended on January 31, 1999. Under the
new fiscal  calendar,  the fourth  fiscal  quarter of 1998 ended on December 31,
1998.  The change was made to be  consistent  with the  existing tax year end of
December 31.

The following table presents certain financial information for the eleven months
ended December 31, 1998 and 1997, respectively:
<TABLE>


                                                     Eleven months ended
                                                        December 31,
                                            ----------------------------------
                                                1998                 1997
                                            -------------         ------------
                                                                   (unaudited)
<S>                                           <C>                  <C>

  REVENUES
        Operating income                      $5,145,101           $4,952,437

  EXPENSES
        Fees, partners                           110,000              110,000
        Commissions                            2,909,047            2,381,683
        Legal and professional                   410,404               33,406
        Travel and entertainment                  36,303               50,636
        Operating and other                      455,252              456,277
        Depreciation and amortization             91,911              188,875
                                            -------------         ------------
              Subtotal                         4,012,917            3,220,877
                                            -------------         ------------
  NET INCOME                                  $1,132,184           $1,731,560
                                            =============         ============

</TABLE>

NOTE G - ACCOUNTS RECEIVABLE

On December 31, 1998, two land sales took place which resulted in an increase in
accounts  receivable.  Net proceeds  from one of the land sales were remitted to
GMAC, resulting in an overpayment to GMAC of $2,208,392. The funds were returned
to the  Partnership  on  January  15,  1999.  The other  transaction  involves a
$1,000,000 land sale receivable which is due to the Partnership by July, 1999.





<PAGE>


                            SILVER CANYON PARTNERSHIP
                         (A Nevada General Partnership)
                  NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE H - SUBSEQUENT EVENT

On January 28, 1999, the Partnership  entered into a Development  Loan agreement
with Ohio Savings Bank of Cleveland  (OSB). The loan, which is to be in the form
of a revolving line of credit,  is not to exceed the maximum principal amount of
twelve million dollars and the maximum loan proceeds  disbursed  during the term
of the loan shall not exceed  $35,858,758.  Amounts  borrowed bear interest at a
rate of one percent  above the prime  rate.  The loan will mature on January 28,
2001.  The loan  agreement  contains two debt  service  coverage  ratios,  which
requires the Partnership to maintain a certain level of net worth.  Had the loan
agreement been outstanding at December 31, 1998, the Partnership would have been
in compliance with the covenants.  This  development loan replaces the GMAC loan
which was paid off in full on January 6, 1999.




<PAGE>


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

       None



                                    PART III

Item 10.  Directors  and  Executive  Officers of the  General  Partner of the
            Registrant
-------------------------------------------------------------------------------
      The following  table sets forth the names of the officers and directors of
the General Partner:

                  NAME                          OFFICE

                  Robert F. Monchein            President
                  Samuel H. Miller              Vice President, Director
                  Thomas G. Smith               Secretary
                  Nathan Shafran                Treasurer
                  Albert B. Ratner              Director
                  Charles A. Ratner             Director

      Robert F. Monchein,  age 54, is the President of the General Partner and
Sunrise.  Mr.  Monchein  joined  Forest City in 1979 and assumed the office of
President of Sunrise in 1983.

      Samuel H. Miller,  age 77, is the Vice President of the General  Partner
and  Sunrise.  Mr.  Miller  is also a  director  of the  General  Partner  and
Sunrise.  Mr.  Miller  joined  Forest  City in 1945 and  assumed the office of
Vice President of Sunrise in 1986.

      Thomas G. Smith,  age 58, is the Secretary of the General  Partner.  Mr.
Smith joined Forest City in 1985 as Senior Vice President and Chief  Financial
Officer.

      Nathan  Shafran,  age 85, is the Treasurer of the General  Partner.  Mr.
Shafran  joined  Forest  City in 1939 and is  currently  Vice  Chairman of the
Board of Directors.

      Albert B.  Ratner,  age 71, is a Director  of the  General  Partner  and
Sunrise.  Mr.  Ratner  joined  Forest  City in 1951  and has  served  as Chief
Executive  Officer and Vice  Chairman of the Board since 1993.  Mr.  Ratner is
also a director of American Greetings Corporation.

      Charles A.  Ratner,  age 57, is a Director of the General  Partner.  Mr.
Ratner  joined  Forest City in 1966 and has served as its  President and Chief
Operating Officer since 1993.






<PAGE>


Item 11.  Executive Compensation
--------------------------------
      The officers and directors of the General Partner are neither  employed by
nor compensated by the Partnership.  All compensation  paid to affiliates of the
General  Partner are defined in a management  agreement  between the Partnership
and Sunrise Land Company, an affiliate of the General Partner.

Item 12.  Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------
            None

Item 13.  Certain Relationship and Related Transactions
-------------------------------------------------------
      There are certain  family  relationship  among the  executive  officers of
Forest City,  Sunrise and the General Partner.  Charles A. Ratner is the brother
of James A. Ratner and Ronald A. Ratner, and the cousin of Albert B.
Ratner.

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K
--------------------------------------------------------------------------
(a)         (1)  The  following  financial  statements  of  Granite  Development
            Partners,  L.P. and the report of the  independent  accountants  are
            included in Part II, Item 8:

            Report of Independent Accountants

            Financial Statements:

                  Balance Sheets - December 31, 1998, January 31, 1998 and 1997.
                  Statements of Operations  for the eleven months ended December
                  31, 1998, and for the years ended January 31, 1998,  1997, and
                  1996.  Statements  of Changes  in  Partners'  Deficit  for the
                  eleven months ended  December 31, 1998 and for the years ended
                  January 31, 1998, 1997, and 1996. Statements of Cash Flows for
                  the eleven  months  ended  December 31, 1998 and for the years
                  ended January 31, 1998, 1997, and 1996. Notes to the Financial
                  Statements

(a)    (2)  The following  financial  statements of Silver Canyon  Partnership
and the report of the independent accountants are included:

            Report of Independent Accountants







<PAGE>


Item 14. Exhibits,  Financial Statements  Schedules,  and Reports on Form 8-K
            (continued)

            Financial Statements:

                  Balance  Sheets - December  31,  1998 and January 31, 1998 and
                  1997.  Statements  of  Operations  for the eleven months ended
                  December  31, 1998 and for the years ended  January 31,  1998,
                  1997, and 1996.  Statements of Changes in Partners' Equity for
                  the eleven  months  ended  December 31, 1998 and for the years
                  ended  January 31, 1998,  1997,  and 1996.  Statements of Cash
                  Flows for the eleven  months  ended  December 31, 1998 and for
                  the years ended  January 31, 1998,  1997,  and 1996.  Notes to
                  Financial Statements.

(a)         (3) The following financial statement schedules are included in Part
            IV, Item 14(d):

            Schedule III - Real Estate and Accumulated Depreciation

            Schedules  other than those  listed above are omitted for the reason
            that they are not  required or are not  applicable,  or the required
            information is shown in the financial statements or notes thereto.

(a)     (4) Exhibits:

            No.         3.1  Summary  of the  Partnership  Agreement  of Limited
                        Partnership adopted November 15, 1993 was filed with the
                        Registration  Statement  on Form  S-11  filed  with  the
                        Commission   on   November   4,   1994  and  is   hereby
                        incorporated by reference.

            No.         4.1 The  Prospectus  for the  S-11  offering  of  36,000
                        warrants and  partnership  units and the  Prospectus for
                        the S-4 Offer to  Exchange  Senior  Notes was filed with
                        the  Commission  on  November  4,  1994  and  is  hereby
                        incorporated by reference.

            No.  5.1    The Prospectus for the Post-Effective  Amendment No. 1
                        to the  Registration  Statement on Form S-11 was filed
                        with  the  Commission  on  September  6,  1996  and is
                        hereby incorporated by reference.

(b)          Reports on Form 8-K

            A current  report on Form 8-K dated  December 16, 1998, was filed to
            report the company's change is fiscal year-end.




<PAGE>



                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                    GRANITE DEVELOPMENT PARTNERS, L.P.
                                    ----------------------------------
                                    (Registrant)

DATE:      March 31, 1999           /s/ Robert F. Monchein
           --------------           ----------------------
                                    Robert F. Monchein
                                    President
                                    FC-Granite,  Inc.,  the  general  partner of
                                     Granite Development Partners, L.P.

      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.


Principal Executive Officer:  President, FC-Granite, Inc.   Date: March 31, 1999
/s/ Robert F. Monchein        the general partner of Granite
---------------------------    Development Partners, L.P.
Robert F. Monchein             

Principal Financial and       Controller, FC-Granite, Inc., Date: March 31, 1999
Accounting Officer            the general partner of Granite
/s/ Mark A. Ternes             Development Partners, L.P.
------------------
Mark A. Ternes

/s/ Samuel H. Miller          Vice President, Director      Date: March 31, 1999
--------------------
Samuel H. Miller

/s/ Thomas G. Smith           Secretary                     Date: March 31, 1999
-------------------
Thomas G. Smith

/s/ Nathan Shafran            Treasurer                     Date: March 31, 1999
------------------
Nathan Shafran

                              Director                      Date: March 31, 1999
--------------------
Albert B. Ratner

                              Director                      Date: March 31, 1999
---------------------
Charles A. Ratner
<PAGE>
<TABLE>
                       Granite Development Partners, L.P.
                       Schedule I I I - Real Estate Owned
<CAPTION>
                                                                                                         Cost capitalized
                                                   Amount of                Initial cost               subsequent to acquisition
                                                  encumbrance                to Company               ---------------------------
                                                at December 31,      ----------------------------                        Carrying
Description of property                              1998                Land        Improvements     Improvements        Costs
-----------------------                         ---------------      ------------    ------------     ---------------------------
<S>                                               <C>                 <C>            <C>              <C>             <C> 

Undeveloped land, North Miami Beach, Florida        $         -       $ 9,712,620                               $ -
Developed and undeveloped land, Kirtland and
Kirtland Hills, Ohio                                                    1,660,876                                 -
Undeveloped commercial land, Strongsville, Ohio                           617,957                             5,590
Undeveloped commercial land, Parma, Ohio                                  554,664                             4,026
Undeveloped land, Middleburg Heights, Ohio                                718,683                                 -
Undeveloped land, North Royalton, Ohio                                    232,049                           239,512
Undeveloped land, Solon, Ohio                           656,659           464,825                           656,218
Undeveloped commercial land, North Olmsted, Ohio                          305,923                            24,091
Developed land, North Royalton, Ohio                                      160,397                               660
Undeveloped land, Twinsburg, Ohio                                       1,179,875                           234,085
Undeveloped land, Olmsted Falls, Ohio                                   1,102,526                                 -
Undeveloped land, Newbury Township, Ohio                                  460,842                           117,854
Undeveloped land, Medina, Ohio                           120,000           42,545                           149,237
Undeveloped land, Medina, Ohio                                            131,382                                 -
Senior Notes Payable                                  36,000,000                -
                                               ------------------    -------------   -------------    --------------   ------------
                                                    $ 36,776,659     $ 17,345,164             $ -       $ 1,431,273            $ -
                                               ==================    =============   =============    ==============   ============


                                                                 Gross amount at which
                                                                  carried at close of
                                                                   December 31, 1998
                                                    ---------------------------------------------
Description of property                              Land            Improvements     Total (A)
-----------------------                             ------------     ------------     ----------- 
Undeveloped land, North Miami Beach, Florida                 $ -              $ -             $ -
Developed and undeveloped land, Kirtland and
Kirtland Hills, Ohio                                           -                -               -
Undeveloped commercial land, Strongsville, Ohio           34,653            5,590          40,243
Undeveloped commercial land, Parma, Ohio                  51,216            4,026          55,242
Undeveloped land, Middleburg Heights, Ohio                     -                -               -
Undeveloped land, North Royalton, Ohio                    60,893          239,512         300,405
Undeveloped land, Solon, Ohio                            549,317          656,218       1,205,535
Undeveloped commercial land, North Olmsted, Ohio          76,148           24,091         100,239
Developed land, North Royalton, Ohio                      65,671              660          66,331
Undeveloped land, Twinsburg, Ohio                        311,946          234,085         546,031
Undeveloped land, Olmsted Falls, Ohio                          -          117,854               -
Undeveloped land, Newbury Township, Ohio                 143,222          149,237         261,076
Undeveloped land, Medina, Ohio                           479,514                -         628,751
Undeveloped land, Medina, Ohio                                 -                -               -
Senior Notes Payable                                                                            -
                                               ------------------    -------------   -------------
                                                     $ 1,772,580      $ 1,431,273     $ 3,203,853
                                               ==================    =============   =============
<FN>

(A)  Land held by the unconsolidated joint ventures, included in Note H to the 
      financial statements, also encumbered by the senior notes payable totals $14,469,704.
(B)  Reconciliations of total real estate carrying value are as follows:
</FN>


                                                   December 31,       January 31,
                                                       1998               1998
                                               ------------------    -------------
Balance at beginning of period                       $ 6,360,771      $ 6,948,665
Additions during period -
 Improvements                                          2,673,290        2,994,636
Other acquisition                                              -                -
                                               ------------------    -------------
                                                       9,034,061        9,943,301
Deductions during period -
 Cost of real estate sold                             (5,830,208)      (3,582,530)

                                               ------------------    -------------
Balance at end of period                             $ 3,203,853      $ 6,360,771
                                               ==================    =============
</TABLE>
<PAGE>

<TABLE>
                            Silver Canyon Partnership
                       Schedule I I I - Real Estate Owned
<CAPTION>


                                               Amount of                Initial cost                    Cost capitalized
                                              encumbrance                to Company                  subsequent to acquisition
                                              at December 31,   -------------------------------    ------------------------------
Description of property                          1998                Land          Improvements      Improvements  Carrying Costs
-----------------------                     ----------------    ---------------  --------------    --------------  --------------
<S>                                             <C>               <C>              <C>               <C>            <C> 

Developed land, Henderson, Nevada                 $ 350,972       $ 23,323,784                      $ 44,505,628

                                            ----------------    ---------------  --------------    --------------   -------------
                                                  $ 350,972       $ 23,323,784             $ -      $ 44,505,628             $ -
                                            ================    ===============  ==============    ==============   =============


                                                             Gross amount at which
                                                              carried at close of
                                                               December 31, 1998
                                            ---------------------------------------------------
Description of property                          Land             Improvements     Total (A)
-----------------------                     ----------------    ---------------  --------------          

Developed land, Henderson, Nevada              $ 14,230,638       $ 44,505,628    $ 58,736,266

                                            ----------------    ---------------  --------------
                                               $ 14,230,638       $ 44,505,628    $ 58,736,266
                                            ================    ===============  ==============


(A)  Reconciliations of total real estate carrying value are as follows:

                                               December 31,      January 31,
                                                 1998                1998
                                            ----------------    ---------------
Balance at beginning of period                 $ 51,004,318       $ 51,209,916
Additions during period -
Improvements                                     32,701,498         16,803,009
Other acquisition                                         -                  -
                                            ----------------    ---------------
                                                 83,705,816         68,012,925
Deductions during period -
Cost of real estate sold                        (24,969,550)       (17,008,607)
                                            ----------------    ---------------
Balance at end of period                       $ 58,736,266       $ 51,004,318
                                            ================    ===============
</TABLE>