<PAGE>
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
 
  /X/    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934
 
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
                                       OR
 
  / /    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934
 
        FOR THE TRANSITION PERIOD FROM ______________ TO ______________
 
                        COMMISSION FILE NUMBER: 0-22299
                            ------------------------
 
                              SAXTON INCORPORATED
 
             (Exact name of registrant as specified in its charter)
 
                   NEVADA                              88-0223654
      (State, or other Jurisdiction of        (IRS Employer Identification
      Incorporation, or Organization)                    Number)
 
         5440 WEST SAHARA AVENUE, THIRD FLOOR, LAS VEGAS, NEVADA 89146
                                 (702) 221-1111
 
    (Address, including zip code, and telephone number, including area code,
                  of Registrant's principal executive offices)
                            ------------------------
 
       SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:  NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
 
                         COMMON STOCK, $.001 PAR VALUE
                                (Title of Class)
 
    Indicate by check mark whether the registrant: (1) has filed reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act 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. /X/
 
    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 the 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.
 
    As of March 12, 1999, 7,732,922 shares of the registrant's common stock were
outstanding. The aggregate market value of common stock held by non-affiliates
of the registrant as of March 12, 1999 was approximately $14,199,245 based on a
closing price of $6.188 for the common stock as reported on the Nasdaq Stock
Market on such date. For purposes of the foregoing computation, all executive
officers, directors and five percent beneficial owners of the registrant are
deemed to be affiliates. Such determination should not be deemed to be an
admission that such executive officers, directors or five percent beneficial
owners are, in fact, affiliates of the registrant.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
                           Exhibit index in Item 14.
 
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--------------------------------------------------------------------------------
<PAGE>
                              SAXTON INCORPORATED
                        1998 ANNUAL REPORT ON FORM 10-K
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>          <C>                                                                                             <C>
PART I
Item 1.      Business......................................................................................           1
Item 2.      Properties....................................................................................          21
Item 3.      Legal Proceedings.............................................................................          21
Item 4.      Submission of Matters to Vote of Security Holders.............................................          21
 
PART II
Item 5.      Market for the Registrant's Common Equity and Related Security Holder Matters.................          22
Item 6.      Selected Financial Data.......................................................................          22
Item 7.      Management's Discussion and Analysis of Financial Condition and Results of Operations.........          25
Item 7A.     Quantitative and Qualitative Disclosures About Market Risk....................................          35
Item 8.      Financial Statements and Supplementary Data...................................................          36
Item 9.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..........          36
 
PART III
Item 10.     Directors and Executive Officers of the Company...............................................          37
Item 11.     Executive Compensation........................................................................          39
Item 12.     Security Ownership of Certain Beneficial Owners and Management................................          44
Item 13.     Certain Relationships and Related Transactions................................................          46
 
PART IV
Item 14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K...............................          48
</TABLE>
 
                                       i
<PAGE>
                                     PART I
 
ITEM 1. BUSINESS
 
GENERAL
 
    Saxton Incorporated ("Saxton" or the "Company") is a leader in the
affordable housing industry and a diversified real estate development company
operating in the fast growing Las Vegas, Phoenix, Salt Lake City, Tucson and
Reno markets. The Company's business is comprised of four components: (i) the
design, development, construction and sale of single-family homes; (ii) the
performance of design-build services for third-party clients, including tax
credit partnerships ("design-build services"); (iii) the design, development and
construction of income producing portfolio properties; and (iv) property
operations and management. The properties consist of office and industrial
buildings, retail centers, apartments, single-family homes and land in various
phases of development. The Company also has non-controlling interests in joint
ventures that are engaged in the acquisition, development, ownership and
operation of real property.
 
    The Company's development experience and expertise enable it to identify and
take advantage of market opportunities and to minimize the risk of real estate
cycles. In 1995, management recognized the need for affordable housing in the
Las Vegas market and began to develop value-priced single-family detached homes.
The Company opened its first single-family home development in April 1996 and
its second home development in early 1997. During 1998, the Company sold 251
homes, at an average price of $110,100, an increase from 134 homes sold at an
average price of $82,500 in 1997. The Company was ranked second in the number of
single-family homes sold priced at $90,000 to $120,000 in the Las Vegas area in
1998. Reflecting the Company's commitment to expand it homebuilding activities,
in March 1998, the Company acquired Maxim Homes, Inc. ("Maxim") and in November
1998, acquired Diamond Key Homes, Inc. ("Diamond Key"). Maxim, a Salt Lake City,
Utah homebuilder, specialized in building homes generally ranging in price from
$145,000 to $185,000. Diamond Key, an Arizona homebuilder and construction
company, specialized in entry-level and move-up homes generally ranging in price
from $90,000 to $120,000. The Company, including Maxim and Diamond Key, had 21
residential community developments in process, in three states, as of December
31, 1998.
 
    The Company also provides its design-build development services to clients
which have included large, nationally recognized public companies as well as
smaller regional businesses. The Company believes it benefits from a reputation
for delivering high quality projects on time and on budget.
 
    The Company's portfolio of 14 income producing properties at December 31,
1998 included approximately 357,577 square feet of office, retail and industrial
facilities. Management monitors the market for the Company's properties on an
ongoing basis to take advantage of opportunities for strategic sales of its
holdings when conditions are favorable. The Company also provides property
management services for apartment properties owned by the tax credit
partnerships.
 
INITIAL PUBLIC OFFERING
 
    On June 24, 1997, the Company completed its initial public offering (the
"Offering") of 2,275,000 shares of the Company's common stock ("Common Stock")
at $8.25 per share. The net proceeds of approximately $17.3 million were used as
follows: (i) $8.1 million to repay indebtedness, of which $3.4 million
represented indebtedness to the Company's principal stockholders and $1.7
million represented indebtedness to other related parties; (ii) $5.6 million to
acquire land for future development; (iii) $2.8 million to acquire the interests
of various third-party partners in certain properties; and (iv) approximately
$800,000 for development activities and general corporate purposes.
 
    Concurrently with the closing of the Offering, certain stockholders of the
Company (the "Contributing Stockholders") contributed their partnership
interests in certain properties to the Company. In addition, certain obligations
to the Contributing Stockholders represented by subordinated dividend notes
 
                                       1
<PAGE>
(the "Notes") were satisfied as follows: (i) approximately $700,000 of
outstanding amounts due to the Company by the principal stockholders were offset
against the Notes; (ii) $3.7 million was repaid through the issuance by the
Company of 384,256 shares of Common Stock; and (iii) $1.0 million was repaid
through the issuance by the Company of warrants for 400,000 shares of Common
Stock, which lapsed unexercised. See "--The Reorganization."
 
DEVELOPMENT ACTIVITIES
 
GENERAL
 
    LAND ACQUISITION.  The Company selects land for its home and other
development projects based upon a variety of factors, including (i) internally
and externally generated demographic and marketing studies, (ii) soil and other
physical conditions of the site, (iii) financial and legal reviews as to the
feasibility of the proposed project, including projected profitability, (iv) the
ability to secure necessary financing and additional governmental approvals and
entitlements, (v) environmental due diligence, (vi) competition, (vii) proximity
to local traffic corridors and community facilities, (viii) infrastructure
requirements for grading, drainage, utilities and streets and (ix) management's
judgment and experience as to the real estate market and economic trends in a
particular market.
 
    The Company generally seeks opportunities to purchase undeveloped land and
management invests the time and resources to obtain all necessary entitlements
to develop the land. By acquiring unentitled land, the Company (i) minimizes its
capital investment because the land can generally be purchased at a discount,
compared to land with entitlements and because the purchase is generally not
consummated until all necessary entitlements are obtained, (ii) realizes greater
returns on its investment in land due to the significant value that is added
once entitlements are obtained and subdivision or parcel maps are filed and
(iii) is provided a greater degree of involvement and control over the design
and development process. Once entitlements are obtained, the Company undertakes
final engineering, site grading and development of infrastructures including the
construction of roads, utilities and other improvements.
 
    The Company utilizes contingent purchase agreements and options to control
land while it performs its preliminary review. The Company typically obtains all
necessary development approvals, completes a satisfactory environmental
assessment of the site, secures any necessary financing and completes other due
diligence deemed appropriate by the Company prior to becoming obligated to
complete the purchase or exercising its option. The use of contingent purchase
agreements and options reduces the risks normally associated with the purchase
of undeveloped land and reduces the Company's land carrying costs. The Company
typically acquires land in contemplation of a specific development project which
is scheduled to be completed within six to nine months following the
acquisition; it does not generally inventory undeveloped land. In certain cases,
however, the Company may acquire a site larger than required for the specified
project with the intent of using the balance of the site for future development.
 
    The following table presents certain information as of December 31, 1998
regarding parcels of land that the Company owned for residential development:
 
<TABLE>
<CAPTION>
                                          NUMBER OF   PROPOSED NUMBER   PROPOSED NUMBER
                                          ACRES(1)    OF COMMUNITIES       OF UNITS
                                          ---------   ---------------   ---------------
<S>                                       <C>         <C>               <C>
Arizona.................................      99             6                 749(2)
Nevada..................................     213             8               1,517
Utah....................................      34             3                 582
                                             ---           ---               -----
  Total.................................     346            17               2,848
                                             ---           ---               -----
                                             ---           ---               -----
</TABLE>
 
------------------------
 
(1) Excludes 344 acres planned for 1,424 units that are under option or in
    escrow.
 
(2) Includes 272 planned rental apartment units.
 
                                       2
<PAGE>
    At December 31, 1998, the Company also owned approximately 64.2 acres of
land planned for commercial and industrial development at eight locations in the
Las Vegas area.
 
    The continuation of the Company's development activities over the long term
will be dependent upon its continued ability to locate, enter into contracts to
acquire, obtain governmental approval for, consummate the acquisition of and
improve suitable parcels of land.
 
    CONSTRUCTION.  The Company currently employs a licensed architect who
directs and oversees the preparation of design plans for all of the Company's
projects by its design staff. Engineering plans are prepared by consultants
retained by the Company. The Company acts as the general contractor for all of
its development projects and each is assigned a project manager with
responsibility for all planning, scheduling and budgeting operations and an
on-site superintendent who oversees the subcontractors. The Company supervises
the construction of each project, coordinates the activities of subcontractors
and suppliers, subjects their work to quality and cost controls and assures
compliance with zoning and building codes. In addition, the Company performs
certain construction services, including concrete, masonry, wood framing,
painting, drywall and landscaping. Management believes that the Company's
ability to perform construction services provides the Company with a competitive
advantage by enabling it to better control the costs, timing and therefore
profitability of its projects.
 
    The Company subcontracts to specialty contractors for trades not
specifically performed by the Company. Subcontractors typically are retained on
a project-by-project basis to complete construction at a fixed price. Agreements
with the Company's subcontractors are generally entered into after competitive
bidding on an individual basis. The Company generally obtains information from
prospective subcontractors and suppliers with respect to their financial
condition and ability to perform under their agreements prior to commencement of
a formal bidding process. The services performed for the Company by
subcontractors are generally readily available from a number of qualified
subcontractors.
 
    The Company uses, to the extent feasible, standardized designs and materials
in its commercial construction and homebuilding operations in order to permit
efficiencies in construction and materials purchasing that can result in higher
margins. In addition, by integrating its development and construction
operations, the Company is able to offer affordable homes with a wide range of
amenities.
 
    The Company generally negotiates the purchase of major raw material
components such as concrete, lumber and structural steel. Where possible, the
Company negotiates price and volume discounts with suppliers on behalf of itself
and its subcontractors in order to take advantage of its volume of production.
Raw materials used in the Company's operations are generally readily available
from a number of sources but prices of such raw materials may fluctuate due to
various factors, including supply and demand.
 
HOMEBUILDING
 
    In 1995, the Company began applying its construction expertise to the
development of value-priced single-family detached homes to meet the demand for
affordable housing in the Las Vegas market. In 1998, the Company expanded its
homebuilding activities into Utah and Arizona through the acquisitions of Maxim
and Diamond Key. The Company currently sells homes in Nevada, Utah and Arizona,
including entry-level, "move-up" and semi-custom homes. The Company emphasizes
affordable housing, including townhomes, cluster homes, single-family
residences, condominiums and duplexes.
 
    The Company's objective in its entry-level and move-up homebuilding
activities is to deliver superior value to low and moderate income families by
pricing its homes competitively and assisting buyers in locating financing,
while providing innovative designs, quality construction and features and
amenities not usually found in other affordable housing. The Company currently
plans to offer a range of value-priced homes at each residential development,
including at least one design that is the lowest priced comparable product in
the market. The Company has been able to minimize the cost of its homes by
integrating and performing many of the development functions as well as
utilizing high-density site plans configured with
 
                                       3
<PAGE>
the lots having minimal frontage area. This type of site design enables the
Company to reduce certain infrastructure construction costs, such as streets and
sewer lines, in order to increase potential profitability.
 
    Revenues from the Company's homebuilding business segment for the years
ended December 31, 1996, 1997 and 1998 were $13.0 million, $11.1 million and
$27.6 million, respectively.
 
    NEVADA PRODUCT DESCRIPTION.  The Company's Nevada homebuilding operations
focus on quality homes for working families who are generally first time
homebuyers. The Company markets its homes in Nevada under the "Perrenial Homes"
brand name. A typical neighborhood built by the Company consists of a gated
community with a community recreation building and swimming pool. The Company
also provides a "complete home" package included in the purchase price. The
"complete home" package includes name brand appliances, decorative window
coverings, security system and garage door opener. The "complete home" package
concept gives homebuyers protection against the hidden costs of moving and
typically results in a lower overall cost.
 
    The Company's single-family detached home communities generally offer at
least three different floor plans, with two, three or four bedrooms and two-car
garages and range from 991 square feet to 1,600 square feet. The townhouses have
two or three bedrooms, with two and one-half baths and either a one- or two-car
attached garage. The Company's cluster home developments generally consist of
seven to eight single-family detached homes sharing a common cul-de-sac. The
Company's planned duplex units will be single-story units, modeled after the two
bedroom plan of the Company's first home development, Summit Hills. Each duplex
unit will share a common wall with one other duplex unit.
 
    The base sales price ranges for homes in the Company's Nevada communities as
of December 31, 1998 were as follows:
 
<TABLE>
<CAPTION>
<S>                                                                      <C>
Sunrise Ridge..........................................................  $   87,850 - $ 98,850
Sutter Creek...........................................................      94,990 -  122,490
Crescendo at Silver Springs............................................      93,990 -  127,490
Sterling at Silver Springs.............................................      94,490 -  114,490
</TABLE>
 
    While the Company's primary geographic focus in Nevada has been in the Las
Vegas area, during 1998 the Company opened office facilities in Reno, Nevada and
is currently constructing a 102 townhome project in Sparks, near Reno, known as
Kendall Creek.
 
                                       4
<PAGE>
    The following table presents certain information relating to the Company's
completed, under development and planned home developments in Nevada during 1998
as of December 31, 1998:
 
<TABLE>
<CAPTION>
                                                                                                         ESTIMATED       ACTUAL
                                                       NUMBER OF    NUMBER OF   NUMBER OF    NUMBER OF    AVERAGE    AVERAGE SALES
                                                        HOMES AT      HOMES     HOMES SOLD   HOMES IN    PRICE PER   PRICE PER HOME
PROJECT NAME                   HOME TYPE    LOCATION   COMPLETION    SOLD(1)     IN 1998     BACKLOG(2)   HOME(3)     SOLD IN 1998
---------------------------  -------------  ---------  ----------   ---------   ----------   ---------   ---------   --------------
<S>                          <C>            <C>        <C>          <C>         <C>          <C>         <C>         <C>
Construction Completed:
  Summit Hills.............  Detached       Las Vegas      219         219          --          --       $ 75,834       $    --
  Hillcrest................  Detached       Las Vegas       90          90           2          --         85,172        84,490
  Sunrise Ridge............  Townhomes      Las Vegas      154         145         145           5         89,474        89,185
                                                         -----         ---         ---         ---
    Total construction completed.....................      463         454         147           5
 
Under Development:
  Crescendo at Silver
    Springs................  Cluster homes  Las Vegas      285          --          --          22        111,795            --
  Sutter Creek.............  Detached       Las Vegas      150           1           1          37        112,070        97,475
  Sterling at Silver
    Springs................  Cluster homes  Las Vegas      240          --          --          11        104,782            --
  Kendall Creek............  Townhomes      Sparks         102          --          --          --        107,157            --
                                                         -----         ---         ---         ---
    Total under development..........................      777           1           1          70
 
Planned (4):
  Silver Springs Phase A...  Cluster homes  Las Vegas      236          --          --          --        105,000            --
  Townhomes at Taylor
    Ranch..................  Townhomes      Las Vegas      102          --          --          --         96,350            --
  Taylor Ranch.............  Cluster homes  Las Vegas      253          --          --          --        102,377            --
  Madre Mesa North.........  Townhomes      Las Vegas      160          --          --          --         96,500            --
  Madre Mesa South.........  Cluster homes  Las Vegas      178          --          --          --        106,000            --
  Sharlands Townhomes......  Townhomes      Reno           246          --          --          --         96,000            --
                                                         -----         ---         ---         ---
    Total planned....................................    1,175          --          --          --
                                                         -----         ---         ---         ---
    Grand total......................................    2,415         455         148          75
                                                         -----         ---         ---         ---
                                                         -----         ---         ---         ---
</TABLE>
 
------------------------------
 
(1) "Number of Homes Sold" represents home sales which have been closed.
 
(2) "Number of Homes in Backlog" represents homes that have sales contracts but
    not yet closed.
 
(3) "Estimated Average Price" represents the average sales price per home of
    actual homes sold and the proposed offering price of homes to be built in
    future phases or in development.
 
(4) The Company owns or otherwise controls the land for each planned home
    development. In most cases, the planned home development requires additional
    entitlements, permits or other actions prior to construction, and there can
    be no assurance that all regulatory approvals can be obtained.
 
    UTAH PRODUCT DESCRIPTION.  The Company's Utah homebuilding operations focus
on semi-custom homes with prices ranging from $115,000 to $180,000. The Company
markets its homes in Utah under the "Maxim Homes" brand name. The targeted
market is for moderate-income households, focusing on the move-up buyer.
 
    The current developments are located in the Salt Lake City area. The homes
include fully landscaped front yards, garage door openers and are pre-wired for
security systems. The following table presents
 
                                       5
<PAGE>
certain information relating to the Company's under development and planned home
developments in Utah as of December 31, 1998:
 
<TABLE>
<CAPTION>
                                                                                                                         ACTUAL
                                                                                                         ESTIMATED   AVERAGE SALES
                                                       NUMBER OF    NUMBER OF   NUMBER OF    NUMBER OF    AVERAGE    PRICE PER HOME
                                                        HOMES AT      HOMES     HOMES SOLD   HOMES IN    PRICE PER      SOLD IN
PROJECT NAME              HOME TYPE      LOCATION      COMPLETION    SOLD(1)    IN 1998(2)   BACKLOG(3)   HOME(4)       1998(5)
------------------------  ---------  ----------------  ----------   ---------   ----------   ---------   ---------   --------------
<S>                       <C>        <C>               <C>          <C>         <C>          <C>         <C>         <C>
Under Development:
  Wood Ranch (6)........  Detached   South Jordan          70           57          41            5      $212,359       $184,259
  Riverwalk (6).........  Detached   American Fork         13           --          --            2       170,000             --
  Sunrise Pointe I......  Detached   West Valley City      77           --          --           --       138,000             --
                                                          ---          ---         ---          ---
    Total under development..........................     160           57          41            7
 
Planned (7)
  Murfield..............  Detached   Syracuse             142           --          --           --       132,000             --
  The Falls at
    Overlake............  Detached   Tooele                49           --          --           --       125,000             --
  The Landings at Eagle
    Mountain............  Detached   Eagle Mountain        78           --          --           --       120,000             --
  West Haven
    Townhomes...........  Townhomes  Roy                  186           --          --           --        95,800             --
                                                          ---          ---         ---          ---
    Total planned....................................     455           --          --           --
                                                          ---          ---         ---          ---
    Grand total......................................     615           57          41            7
                                                          ---          ---         ---          ---
                                                          ---          ---         ---          ---
</TABLE>
 
------------------------------
 
(1) "Number of Homes Sold" represents home sales which have closed in prior
    periods.
 
(2) "Number of Homes Sold in 1998" represents home sales since the Maxim
    acquisition in March 1998.
 
(3) "Number of Homes in Backlog" represents homes that have sales contracts but
    not yet closed.
 
(4) "Estimated Average Price" represents the average sales price per home of
    actual homes sold or the proposed offering price of homes to be built in
    future phases or in development.
 
(5) "Actual Average Sales Price Per Home Sold in 1998" represents the average
    price per home sold since the Maxim acquisition in March 1998.
 
(6) Open for sales as of December 31, 1998.
 
(7) The Company owns or otherwise controls the land for each planned home
    development. In most cases, the planned home development requires additional
    entitlements, permits or other actions prior to construction, and there can
    be no assurance that all regulatory approvals can be obtained.
 
                                       6
<PAGE>
    ARIZONA PRODUCT DESCRIPTION.  The Company's Arizona homebuilding operations
have historically included a wide range of homes in the Phoenix and Tucson
areas, but in 1997, the focus began to shift to entry-level homes. The Company
markets its homes in Arizona under the "Diamond Key Homes" brand name. The
targeted market is low to moderate income households.
 
    The following table presents certain information relating to the Company's
completed, under development and planned home developments in Arizona as of
December 31, 1998:
 
<TABLE>
<CAPTION>
                                                                                                                         ACTUAL
                                                                                                          ESTIMATED      AVERAGE
                                                        NUMBER OF    NUMBER OF   NUMBER OF    NUMBER OF    AVERAGE     SALES PRICE
                                                         HOMES AT      HOMES     HOMES SOLD   HOMES IN    PRICE PER   PER HOME SOLD
PROJECT NAME                HOME TYPE     LOCATION      COMPLETION    SOLD(1)    IN 1998(2)   BACKLOG(3)   HOME(4)     IN 1998(5)
--------------------------  ---------  ---------------  ----------   ---------   ----------   ---------   ---------   -------------
<S>                         <C>        <C>              <C>          <C>         <C>          <C>         <C>         <C>
Construction Completed:
  Neely Ranch Estates.....  Detached   Gilbert               65           65          2           --      $122,884      $149,160
  Rancho Cimarron 3.......  Detached   Gilbert               66           66         --           --       109,549            --
  Tatum Ranch.............  Detached   Phoenix               87           87         --           --       218,184            --
  Diamond Vista...........  Detached   Glendale              31           31         --           --       226,922            --
  Neely Ranch.............  Detached   Gilbert               21           21         --           --       148,241            --
  Desert Ridge............  Detached   Phoenix               34           34         --           --       286,932            --
                                                          -----      ---------      ---          ---
    Total construction completed......................      304          304          2           --
 
Under Development:
  Amberlea (6)............  Detached   Phoenix              129          128         --            1       104,505            --
  Rancho Cimarron 1.......  Detached   Gilbert               63           62         --            1       180,594            --
  Rancho Vistoso..........  Detached   Oro Valley            17           16          3           --       206,419       206,823
  Sunrise Canyon 1........  Detached   Apache Junction      250          120         16           29        94,984        97,989
  Sunrise Canyon 2........  Detached   Apache Junction      150           32          9            9       103,434       104,013
  Bolero Court............  Detached   Phoenix              130           43         11           25        98,062       100,237
  Copper Creek............  Detached   Oro Valley            61           14          2            2       112,445       107,883
  Castle Rock.............  Detached   Phoenix              166           34         --            1       147,037            --
  Desert Vista 1..........  Detached   Oro Valley            40           32         --            1       200,744            --
  Rita Ranch 1............  Detached   Tucson                72           16          2            6       103,101       109,787
  Stonehenge..............  Detached   Gilbert               58           54          3            4       184,642       196,933
  Suncliff 1..............  Detached   Peoria               246          202          6            5        91,023        98,068
  Sonoran Vista 1.........  Detached   Gilbert              150          145          8            3       109,276       124,202
  Sonoran Vista 2.........  Detached   Gilbert               24            2         --           --       221,689            --
                                                          -----      ---------      ---          ---
    Total under development...........................    1,556          900         60           87
 
Planned (7):
  Desert Vista 2..........  Detached   Oro Valley            33           --         --           --       150,000            --
  Suncliff 3..............  Detached   Peoria                28           --         --           --        95,000            --
  Suncliff 4..............  Detached   Peoria               135           --         --           --        95,000            --
  El Mirage...............  Detached   El Mirage            653           --         --           --        80,000            --
  Rita Ranch 2............  Detached   Tucson                63           --         --           --           N/A            --
  Sunrise Canyon 3........  Detached   Apache Junction       81           --         --           --        95,000            --
  Pueblo Seco.............  Townhomes  Mesa                 166           --         --           --        96,500            --
  Tangerine Hills.........  Detached   Tucson               450           --         --           --           N/A            --
                                                          -----      ---------      ---          ---
    Total planned.....................................    1,609           --         --           --
                                                          -----      ---------      ---          ---
    Grand total.......................................    3,469        1,204         62           87
                                                          -----      ---------      ---          ---
                                                          -----      ---------      ---          ---
</TABLE>
 
------------------------------
 
(1) "Number of Homes Sold" represents home sales which have been closed in prior
    periods.
 
(2) "Number of Homes Sold in 1998" represents home sales since the Diamond Key
    acquisition in November 1998.
 
(3) "Number of Homes in Backlog" represents homes that have sales contracts but
    not yet closed.
 
                                       7
<PAGE>
(4) "Estimated Average Price" represents the average sales price per home of
    actual homes sold or the proposed offering price of homes to be built in
    future phases or in development.
 
(5) "Actual Average Sales Price Per Home Sold in 1998" represents the average
    price per home sold since the Diamond Key acquisition in November 1998.
 
(6) The Company has no future interests in these communities, except speculative
    homes and pre-sold homes under development as of December 31, 1998.
 
(7) The Company owns or otherwise controls the land for each planned home
    development. In most cases, the planned home development requires additional
    entitlements, permits or other actions prior to construction, and there can
    be no assurance that all regulatory approvals can be obtained.
 
    PRODUCTION STRATEGY.  The Company attempts to limit the number of unsold
units under construction by limiting the size of each construction phase and
closely monitoring sales activity. However, the Company commences construction
prior to obtaining sales contracts for all homes within a given phase. The
Company strives to match construction starts to its sales rates. Building homes
of the same product type in phases also allows the Company to utilize production
techniques that reduce its construction costs. The size of these phases depends
on such factors as current sales and cancellation rates, the type of buyer
targeted for a particular residential project, the time of the year and the
Company's assessment of prevailing and anticipated economic conditions.
Depending on the design, time of year, local labor situation, governmental
approvals, availability of materials and supplies, and other factors, the
Company generally completes a home in three to four months, most of which are
sold by completion of construction. The Company has historically implemented
this production strategy in Nevada and intends to phase it into its homebuilding
operations in Arizona and Utah, where Diamond Key and Maxim have historically
built most homes to order.
 
    MARKETING AND SALES.  The Company sells its homes through licensed sales
representatives who typically work from sales offices located in the model homes
at the development site. Sales representatives assist potential buyers by
providing them with basic floor plans, price information, development and
construction timetables, tours of model homes and the selection of options. The
Company's sales representatives are provided training by the Company and
generally have had prior experience selling new homes in the local market. The
Company also markets its homes for sale through direct mailing to identified
populations of prospective buyers and, to a lesser extent, through other media,
including newspaper, television and radio advertising, billboard and other
signage.
 
    The Company has built and decorated model homes at each of its residential
communities to display the homes' design features. Model homes play a key role
in helping buyers understand the efficiencies and value provided by each plan
type of the Company's homes. The Company intends to utilize model homes at each
of its planned residential communities.
 
    Homes are typically sold prior to or during construction using sales
contracts which are accompanied by small cash deposits. Purchasers are permitted
to cancel sales contracts if they are unable to qualify for financing and under
certain other circumstances. The Company believes that its cancellation rate is
consistent with that generally experienced at other affordable home
developments. Although cancellations can delay the sale of the Company's homes,
they have not had a material impact on sales, operations or liquidity because
the Company closely monitors the progress of prospective buyers in obtaining
financing and monitors and adjusts its construction plans to better match the
level of demand for its homes.
 
    To assist in the marketing of its homes and to limit the Company's liability
for certain construction defects, the Company sells the homes subject to a
limited warranty which includes, among other things, coverage from an insurance
company for the cost to repair major structural defects for ten years. The
Company is liable for such repair costs during only the first two years and,
subject to the following limitations, such liability is covered by the Company's
builders' policy. The foregoing repair costs are limited by the Company's
builders' policy to the repair, replacement or payment of the reasonable cost of
repair or replacement of such warranted items not to exceed an aggregate amount
equal to the final sales
 
                                       8
<PAGE>
price of the home covered by the warranty The choice to repair, replace or make
payments is the Company's during the first two years and the insurance company's
thereafter. Typically, under certain conditions, the Company also has the right
to buy back the home at the original purchase price plus specified costs by the
buyer. In addition, all other warranties, express or implied, including but not
limited to, all implied warranties of fitness, merchantability or habitability
are disclaimed and excluded to the extent allowed by law.
 
    CUSTOMER FINANCING.  The Company does not provide financing to prospective
home buyers but works closely with mortgage brokers or lenders who assist the
Company's home buyers in obtaining financing. The Company provides mortgage
brokerage services through its wholly-owned subsidiary, HomeBanc Mortgage
Corporation, to purchasers of homes in Arizona. At the on-site office, sales
representatives provide prospective home buyers with information regarding the
qualifying criteria for mortgage financing. In addition, the Company prices its
homes to meet the applicable requirements for a home buyer's mortgage loan to be
insured by the Federal Housing Administration (the "FHA") or guaranteed by the
Veterans Administration (the "VA"). FHA and VA financing generally enables home
buyers who satisfy certain income and other requirements to purchase homes with
lower down payments than the down payments required by conventional mortgage
lenders. The Nevada Housing Division's mortgage purchase programs generally
enable such buyers to obtain mortgage financing at less than prevailing rates.
During 1998, the Company offered a program to buyers to allow a minimum 1% down
payment, which generally affords these buyers to move into a new home for less
than or equivalent to the cost of renting an apartment. The Company also intends
to work with other federal, state and nonprofit sponsors which provide down
payment assistance to qualifying home buyers. Management believes that the
availability of the foregoing financing programs broadens the pool of potential
purchasers for the Company's homes.
 
    CUSTOMER SERVICE AND QUALITY.  Management believes that strong customer
relations and an adherence to high quality control standards are fundamental to
the Company's continued success. The Company employs a quality assurance process
which is intended to provide a positive atmosphere for each customer throughout
the pre-sale, sale, building, closing and post-closing periods. The Company
employs full-time customer service employees, who, working as a team with the
Company's sales representatives and on-site construction supervisor, oversee
compliance with the Company's quality control standards. These employees as a
group have responsibility for (i) overseeing the entire project from land
development through construction, (ii) overseeing performance by the Company's
subcontractors and suppliers, (iii) reviewing the progress of each home and
conducting formal inspections as specific stages of construction are completed,
(iv) regularly updating each buyer on the progress of such buyer's home, (v)
preparing homeowner orientation materials and (vi) scheduling and performing all
service calls to handle "punch-list", warranty and other items immediately
before and after the home sale.
 
PORTFOLIO PROPERTIES
 
    The Company designs, develops and owns commercial income producing
properties for its own portfolio. At December 31, 1998, the Company owned and
operated a portfolio of 14 properties comprised of approximately 357,577 square
feet of space. At December 31, 1998, the Company had seven new portfolio
properties in the initial stages of development. The estimated aggregate cost to
construct such projects is approximately $13.9 million, substantially all of
which is expected to be financed with construction loans. Management monitors
the market for the Company's properties on an ongoing basis to take advantage of
opportunities for strategic sales of its holdings when conditions are favorable.
See "--Property Operations and Management--Operations."
 
    The Company builds retail and office properties which typically are located
within commercial corridors near traffic generators such as regional malls,
business developments and major thoroughfares. Management believes the benefits
of such locations include high visibility to passing traffic, ease of access and
tenant control over the site's operating hours and maintenance standards. The
Company typically builds industrial properties in areas where other industrial
properties are located. The Company's
 
                                       9
<PAGE>
commercial and industrial properties have the potential to be easily adapted to
a variety of tenants and have relatively low re-leasing costs which provide the
Company with flexibility in use and tenant selection when the properties are
vacated upon lease termination.
 
    Revenues for the Company's Sale of Commercial Property business segment for
the years ended December 31, 1996, 1997 and 1998 were $4.8 million, $11.5
million and $7.8 million, respectively.
 
DESIGN-BUILD SERVICE
 
    The Company provides its design-build services to third-party clients,
including Tax Credit Partnerships. See "--Tax Credit Projects." During the five
years ended December 31, 1998, the Company completed 36 design-build projects,
comprised of 12 industrial facilities, 14 other commercial properties, 3 schools
and 7 apartment complexes. At December 31, 1998, the Company had six uncompleted
design-build projects, representing an aggregate contract amount of
approximately $57.8 million. The Company manages its design and construction
process through a coordinated, cooperative team approach. The Company's primary
goal is to achieve the owner's cost and schedule objectives while producing a
facility of the highest standards of quality.
 
    Revenues from the Company's Design-Build Services business segment for the
years ended December 31, 1996, 1997 and 1998 were $41.9 million, $31.7 million
and $51.5 million, respectively.
 
    Under design-build services, the Company conducts all phases of the project
including architectural design, the selection and review of engineering
professionals and the performance of all general contractor responsibilities.
Design-build projects permit accelerated construction because the Company can
perform work on certain aspects of a project while other aspects are still being
designed. Design-build contracting enables the Company to provide customers with
comprehensive project management, providing a coordinated team approach from the
pre-construction development stage through construction and completion of a
project.
 
    Design-build projects are undertaken on a fixed-price basis and may be built
on land (i) owned by the Company which is then sold to the client, (ii) owned by
the client or (iii) identified by the client which is then either purchased by
the client or by the Company for resale to the client. The typical design-build
contract requires the Company to obtain all necessary government permits and
approvals, perform or oversee all architectural and engineering services,
construct the project and, in many cases, arrange, on the client's behalf, any
needed land, construction and permanent financing. The Company's design-build
projects are generally the result of referrals by former clients, brokers or
others in the real estate business.
 
    Fixed-price contracts require the Company to accurately estimate the cost
and quantities of materials, labor and equipment necessary and the amount of
time required to complete a project. The Company generally bears the risks of
construction cost overruns. In order to arrive at the contract price, the
Company uses a computer-based estimating program to develop a comprehensive
estimate for the project for which separate labor, equipment, material,
subcontractor, overhead and profit estimates are compiled. Once a project
begins, the estimate is used to measure and monitor ongoing project costs. The
Company's ability to estimate project costs accurately has been a key component
of its success and profitability. Fixed-price contracts provide the opportunity
for greater profits to the extent the contractor is able to hold down costs
below those originally anticipated.
 
    The Company bills its client, or the project construction lender, for work
performed and pays the subcontractors from funds received. The Company is
responsible for the performance of the entire contract, including work assigned
to subcontractors. Accordingly, the Company is subject to liability resulting
from the failure of subcontractors to perform as required under the contract.
Typically, pursuant to construction industry practice, a portion of billings,
generally not exceeding 10%, is retained by the client until the project is
completed. The Company recognizes revenue and profit on its construction
contracts under the percentage-of-completion method.
 
                                       10
<PAGE>
    The Company has not been required to furnish bonds guaranteeing its
performance and, because the Company thoroughly investigates its subcontractors
prior to entering into subcontracts, the Company generally does not require
completion bonds from its subcontractors. To date, the Company has not been
denied a construction job because of its unwillingness to furnish a completion
bond.
 
    STAGES OF A PROJECT.  The Company's design and construction process is
intended to be accomplished through a coordinated, cooperative team approach.
The Company's primary goal is to achieve the owner's cost and schedule
objectives while producing a facility of the highest standards of quality.
Following is a summary of the Company's approach at the pre-construction,
construction and post-construction stages of a project:
 
        PRE-CONSTRUCTION STAGE.  The Company's approach for providing
    pre-construction services involves establishing a project team that advises
    and assists the client on all aspects of design and development for the
    project. The Company assists its clients in the financial planning for the
    project through preparation of cash flow projections, accounting procedures,
    detailed cost budgets and comparative cost analysis studies. The Company (i)
    works with the client to establish completion dates for all stages of the
    project, (ii) analyzes market conditions with a view toward material
    availability, cost strategies, construction techniques, manpower levels and
    similar matters, (iii) develops a bid-packaging program to encourage maximum
    bidder interest and fully define the work to minimize contingencies for
    unknown circumstances, (iv) thoroughly reviews and defines the project
    schedule, critical materials required, delivery dates and performance
    criteria with the selected subcontractors and (v) advises and incorporates
    considerations regarding construction safety and public agency requirements.
    The Company also assists in or manages the development of the architectural,
    civil, mechanical, electrical and structural plans and specifications, and
    advises in the areas of land selection, construction feasibility, possible
    economies, availability and utilization of materials, and labor and time
    requirements for procurement, construction and project costs.
 
        CONSTRUCTION STAGE.  As general contractor, the Company assumes
    responsibility for managing the construction of a project and directs the
    field execution of the concepts and objectives established during the
    pre-construction stage. The Company maintains a full-time supervisory staff
    at the job site to coordinate and provide general direction of the work and
    progress of the subcontractors, including framing, paving and permitting,
    establishing an on-site organization to carry out the overall plans of the
    project team and directing the work being performed until final completion
    and delivery to the owner. In 1996, the Company began to perform many of the
    functions previously performed by subcontractors, including concrete,
    masonry, wood framing, painting, drywall and landscaping. The Company
    intends to integrate certain additional construction trades to further
    increase its profitability and strengthen its competitive position.
 
        POST-CONSTRUCTION STAGE.  As a project nears completion, the Company
    works with the project team to assist in an orderly project close-out and
    transition from construction to actual use in the areas of quality control,
    documentation and building turnover.
 
    TAX CREDIT PROJECTS.  Substantially all of the Company's design-build
contracts for apartment complexes have been Tax Credit Projects developed for
Tax Credit Partnerships formed to take advantage of the low income housing tax
credit provided by Section 42 of the Internal Revenue Code (the "Housing Tax
Credit"). The Company has completed the construction of six Tax Credit Projects.
In a typical Tax Credit Project, the Company is retained by the Tax Credit
Partnership to develop the project pursuant to a fixed-price construction
contract. Included in the fixed price are the Company's customary contractor and
developer fees and, where market conditions permit, a markup on the sale of the
underlying land. The cost of developing the Company's Tax Credit Project is
generally financed approximately as follows: loan proceeds, 60% to 70%; partner
equity, 15% to 30%; and deferred developer fees, 5% to 15%. In addition, the
Company may be entitled to earn, upon completion or over a period of time
following completion, certain additional fees, including property management
fees based on property rental income. During the
 
                                       11
<PAGE>
construction period, the Company, as general partner of the Tax Credit
Partnerships, bears the developer's risk on the fully recourse construction
loans. Upon completion of construction and lease-up, the construction loans
convert to non-recourse permanent loans. See Note 21 of Notes to Consolidated
Financial Statements and "--Property Operations and Management--Management and
Leasing" and "--Regulatory and Environmental Matters--Resident Income and Other
Limitations."
 
    The Company structures the Tax Credit Partnership and generally retains or
purchases up to a 1% general partner interest. As the developer and general
partner for these projects, the Company is generally entitled to between 66% and
85% of any distributions of net cash from operation of the Tax Credit Project
and from its sale over its expected 15 year life. Since none of the Company's
Tax Credit Partnerships have sold a Tax Credit Project, the Company has received
no distribution of sales proceeds There can be no assurance that the Company
will receive any distribution of sales proceeds upon the eventual sale of the
Tax Credit Projects. The Company's capital contribution for its general partner
interest is funded in cash or as a contribution of all or a portion of its
equity in the land on which the Tax Credit Project is to be constructed. In
addition to its capital contribution, the Company is typically obligated to make
operating expense loans, up to a stated maximum, to meet operating deficits of
the Tax Credit Partnership. Under the terms of the partnership agreements of two
Tax Credit Partnerships, the Company is required to withdraw as a general
partner upon receipt of all amounts due the Company for developer fees and
interest. An unaffiliated third-party investor group is the limited partner of
the Tax Credit Partnership and contributes all or substantially all of the
equity capital to the Tax Credit Partnership in exchange for substantially all
of the benefit of the Housing Tax Credit. The investor limited partner's equity
is generally contributed in installments over a period of approximately 24
months. Approximately 40% of such contribution is funded upon admission of the
investor limited partner to the Tax Credit Partnership and the balance is
contributed from time to time when specified conditions are satisfied.
 
    The Tax Credit Projects to date have been structured to be eligible for
financing through one or more of the tax-exempt private activity revenue bond
programs sponsored by the Nevada Housing Division. The programs of the Nevada
Housing Division are intended to provide incentives for the construction,
ownership and financing of housing for persons and families of low and moderate
income. These incentives may include lower interest rates on construction and
permanent financing with respect to the eligible project. Nevada Housing
Division bond financing typically involves substantially greater origination
fees and expenses than those associated with conventional financing. The Company
believes the return on its investment provided by the lower interest rates over
the term of the loan more than compensates for the additional fees and expenses.
Arizona and Utah also have similar tax credit housing programs.
 
    The Company has completed the construction of six Tax Credit Projects and
has two projects currently under construction. The following table sets forth
information regarding the Tax Credit Projects. The Company holds a general
partner interest in each Tax Credit Partnership, which holds fee simple title to
 
                                       12
<PAGE>
the project. The following table represents certain information relating to the
Company's completed, under development and planned Tax Credit Partnerships as of
December 31, 1998 (dollars in thousands):
 
<TABLE>
<CAPTION>
                                                                DATE OF
                                                               COMPLETION     TOTAL    TOTAL                           OCCUPANCY AT
                                                              OR ESTIMATED   PROJECT  CONTRACT   CARRYING    NUMBER    DECEMBER 31,
TAX CREDIT PROJECT(1)                               TYPE       COMPLETION    COST(2)   AMOUNT     VALUE     OF UNITS       1998
----------------------------------------------  ------------  ------------   -------  --------   --------   --------   ------------
<S>                                             <C>           <C>            <C>      <C>        <C>        <C>        <C>
COMPLETED:
  Saratoga Palms East I.......................  Sr. Citizens      2/96       $13,556  $16,923     $2,833      360           92%
  Lake Tonopah................................  Sr. Citizens      8/96        13,348   15,745      4,305      356           92
  Paseo del Prado.............................  Family           10/96         5,026    6,761      1,976      120           88
  Saratoga Palms East II......................  Family            6/97        12,002   16,767      3,485      256           91
  Saratoga Palms North II.....................  Family            7/97        13,873   16,590      4,298      252           74
  Rancho Mesa (3).............................  Family           12/98        16,135   22,458      6,734      272           52
 
UNDER DEVELOPMENT:
  South Valley Apartments.....................  Family           11/99        15,100   22,192      5,403      272           --
  Spanish Hills Apartments....................  Family            6/99         9,902   13,101      2,963      152           --
 
PLANNED:
  Peoria......................................  Family           04/01        19,167   22,418         --      228           --
</TABLE>
 
------------------------------
 
(1) All are located in the greater Las Vegas area except for Spanish Hills, in
    Sparks, Nevada and Peoria in Peoria, Arizona.
 
(2) Represents all actual and anticipated costs of the project including land,
    construction, development, lease-up and financing costs, estimated at
    December 31, 1998.
 
(3) This property is in initial lease-up.
 
    The ability of the Company to continue to develop Tax Credit Projects is
subject to the continued availability of the Housing Tax Credit and the ability
of the Company to utilize revenue bond financing for its projects from various
state and local agencies.
 
                                       13
<PAGE>
PROPERTY OPERATIONS AND MANAGEMENT
 
    OPERATIONS.  The Company's property operations provide it with flexibility
with respect to the disposition of its portfolio properties and enable it to
diversify its sources of revenues. The following table sets forth certain
information regarding each of the Company's operating portfolio properties as of
December 31, 1998. The Company holds fee simple title to each property, all of
which are located in Nevada.
 
<TABLE>
<CAPTION>
                                                                                           OCCUPANCY
                                                                         APPROXIMATE          AT            CURRENT
                                                                            SQUARE       DECEMBER 31,      ANNUALIZED
PORTFOLIO PROPERTY(1)                                                      FOOTAGE           1998         BASE RENT(2)
-----------------------------------------------------------------------  ------------  -----------------  ------------
<S>                                                                      <C>           <C>                <C>
RETAIL:
  Nellis Express Village...............................................       16,260              92%      $  176,376
  Levitz (3)...........................................................      102,400             100          948,832
  Levitz II (Furniture Expo)...........................................       37,260              73          425,412
  Woody's Furniture....................................................        4,926             100           82,688
  Turtle Stop (4)......................................................        4,430              --               --
  Sahara/Decatur Retail................................................        3,627              44           88,860
  Nellis/Stewart.......................................................        4,571             100           71,858
 
OFFICE:
  Las Vegas Sun........................................................       15,452             100          243,276
  Americana (5)........................................................       17,154             100          283,841
  General Services Administration......................................       16,414             100          180,455
  Sahara Vista A (5)...................................................       38,525             100          810,547
  Sahara Vista B.......................................................       38,608              17          264,079
 
INDUSTRIAL:
  Arcata Industrial Park (5)...........................................       24,200              25          139,392
  Northpark III........................................................       33,750              40          210,600
                                                                         ------------                     ------------
Total..................................................................      357,577                       $3,926,216
                                                                         ------------                     ------------
                                                                         ------------                     ------------
</TABLE>
 
------------------------
 
(1) Excludes a property operated by the Company under a sale/leaseback
    arrangement.
 
(2) Represents an annualized amount of the monthly base rent of occupied space
    at December 31, 1998, which should approximate the estimated rental revenue
    for 1999.
 
(3) During 1997, Levitz Furniture declared bankruptcy and has not yet affirmed
    or rejected the lease. Levitz is current on its rental payments.
 
(4) The property is vacant and listed for sale.
 
(5) The occupancy rate has been calculated including space occupied by the
    Company. See Item 2. "Properties."
 
    All of the Company's leases for its retail and industrial properties are on
a triple-net basis and the leases of its office properties are on either a
triple-net or full-service gross basis. Under a triple-net lease, tenants pay
their utilities and a pro rata share of all building insurance, property taxes
and common area services. Under a full-service gross lease, the landlord
provides and pays for all utilities to the tenants' premises, as well as all
building insurance, property taxes and common area services, except that in most
cases the Company's office tenants are required to reimburse the Company for
their pro rata share of increases in building operating costs each year over
those incurred in the base year, which is generally the year in which a
particular tenant's lease commences.
 
                                       14
<PAGE>
    Revenues from the Company's Property Operations and Management business
segment for the years ended December 31, 1996, 1997 and 1998 were $3.9 million,
$3.6 million and $3.5 million, respectively.
 
    Leases for the Company's commercial and industrial properties typically have
terms ranging from one to five years, with renewal options of various periods,
and provide for periodic rent increases in either stated amounts or based upon
increases in the consumer price index. Management believes that as the leases
expire, either the tenants will renew their leases or the Company will be able
to re-lease the vacated space at market rents.
 
    The Company regularly repairs and maintains its operating properties,
including making the capital improvements, on an as needed basis utilizing
available working capital. There are no current plans for any renovation or
improvement of any operating property and no funds have been reserved for such
purpose.
 
    MANAGEMENT AND LEASING.  The Company provides property management and
leasing services with respect to all operating properties held in its portfolio.
The Company also provides such services for six Tax Credit Projects. Property
management agreements with third parties generally provide for the Company to be
paid a management fee of 5% of a property's gross rental income and generally
have a minimum term of five years, although some agreements provide for earlier
termination without cause. To date, the Company's revenue from third-party
property management has not been significant. While management anticipates that
the Company's revenues from its property management operations will increase as
a result of its increased development of Tax Credit Projects, such operations
are not anticipated to be material to the Company overall. Revenue from
management and leasing activities are included in Other Revenue on the Company's
Consolidated Statements of Income.
 
    Other than design-build properties which are to be occupied by the Company's
client, the Company strives to pre-lease its commercial properties before and
during construction through the use of on-site billboards, print advertising and
direct mail flyers. Although the Company has not previously charged a separate
leasing brokerage commission, the Company will, where possible, negotiate a
separate leasing commission for its services in leasing properties owned by
third parties. Tenants for the apartment complexes are generally obtained
through a combination of print advertising, on-site billboards and walk-in
traffic. As manager of residential properties, the Company is responsible for
the lease-up of the property and its daily maintenance. All maintenance
services, other than non-routine plumbing and electrical, are provided by
employees of the Company. See "--Regulatory and Environmental Matters--Resident
Income and Other Limitations."
 
THE REORGANIZATION
 
    Concurrently with the closing of the Offering, in June 1997, the
transactions described below (collectively, the "Reorganization") were
consummated by the Company and others for the principal purpose of transferring
to the Company the ownership of all investment properties and all interests in
partnerships which owned properties which were owned by the Contributing
Stockholders, alone or with one or more third parties. In addition, as part of
the Reorganization, certain outstanding indebtedness between the Company and the
Contributing Stockholders was satisfied.
 
    The Reorganization was comprised of the transactions summarized below:
 
    ACQUISITION OF PARTNERSHIP INTERESTS OF THIRD PARTIES.  The Company acquired
the non controlling partnership or other ownership interests of five third-party
investors, including Paul Eisenberg, a Director of the Company, in four limited
and general partnerships which owned an aggregate of six operating properties
and approximately 3.3 acres of undeveloped land, for an aggregate of
approximately $2.8 million in cash from the net proceeds of the Offering. No
third-party determination of the value was sought or obtained in connection with
the acquisition by the Company of the partnership interests. The consideration
paid was based on the value of the partnerships' real property and other assets
as determined by negotiation between the Company and the third-party partners.
 
                                       15
<PAGE>
    CONTRIBUTION OF PARTNERSHIP INTERESTS OF THE CONTRIBUTING STOCKHOLDERS.  The
Contributing Stockholders contributed to the Company (a) their interests in the
partnerships described in the preceding paragraph and (b) their interests in
three additional limited and general partnerships which owned an aggregate of
six operating properties, two properties under construction and approximately
5.6 acres of undeveloped land. All interests in partnerships acquired from the
Contributing Stockholders were acquired by the Company as additional capital
contributions of such stockholders. The portion of the book value of the
properties contributed by the Contributing Stockholders attributable to their
partnership interests was approximately $10.6 million at March 31, 1997
 
    Upon completion of the acquisitions and contributions of partnership
interests described above, the Company held 100% of the economic interest in the
partnerships; therefore the partnerships were dissolved by operation of law and
all assets, subject to all liabilities, of such partnerships were transferred to
the Company.
 
    ADDITIONAL CONTRIBUTIONS BY JAMES C. SAXTON.  Mr. Saxton also contributed to
the Company, as an additional capital contribution, (a) his direct or indirect
general partner interest in four Tax Credit Partnerships and (b) an assignment
of his 50% economic interest in an unconsolidated general partnership with Paul
Eisenberg, a Director of the Company, which owns two small retail properties
(the "Retail Partnership"). The portion of the book value of the properties
attributable to the partnership interests contributed by Mr. Saxton was
approximately $520,000 on March 31, 1997.
 
    SATISFACTION OF OUTSTANDING INDEBTEDNESS.  As of March 31, 1997, the Company
was indebted to the Contributing Stockholders in the aggregate amount of $8.1
million, which amount was represented by non-interest bearing notes of the
Company, with original terms of 10 years and subordinated to all existing
Company debt (the "Subordinated Dividend Notes"). Of such Subordinated Dividend
Notes, $6.5 million in aggregate principal amount was distributed to the
Contributing Stockholders in December 1994 and represented the Company's
estimated undistributed S corporation earnings as of December 31, 1994. The $1.6
million balance of the Subordinated Dividend Notes was issued to the
Contributing Stockholders in September 1996 in connection with loans of equal
amount to the Company by the Contributing Stockholders. The Company was also
indebted to Mr. Saxton in the amount of $695,440 on account of a non-interest
bearing demand loan made by Mr. Saxton to the Company in July 1996. At March 31,
1997, the Contributing Stockholders were indebted to the Company in the
aggregate amount of approximately $727,000.
 
    The Company and the Contributing Stockholders satisfied their respective
obligations to the other as follows: (a) the approximately $727,000 outstanding
balance of loans by the Company to the Contributing Stockholders was offset
against an equal amount of Subordinated Dividend Notes; (b) the Company issued
384,256 shares of Common Stock to the Contributing Stockholders in satisfaction
of approximately $3.7 million of Subordinated Dividend Notes, based on a per
share price of $9.50; (c) the Company issued warrants for 400,000 shares of
Common Stock, exercisable at $9.90 per share if the Company achieved specified
levels of after tax net income in 1997 and 1998, in satisfaction of $1.0 million
of Subordinated Dividend Notes; and (d) the Company utilized a portion of the
net proceeds of the Offering to repay the $2.7 million balance of Subordinated
Dividend Notes and $695,440 of other indebtedness. The warrants for 400,000
shares of Common Stock lapsed unexercised. See Item 13. "Certain Relationships
and Related Transactions."
 
    Upon consummation of the Reorganization, ownership of all the real property
interests held by the Contributing Stockholders, other than their personal
residences, were transferred to the Company. The Contributing Stockholders
intend to engage in the real estate business exclusively through the Company.
 
                                       16
<PAGE>
STRATEGIES
 
    The Company's business and growth strategies include the following key
elements:
 
    PURSUING GROWTH THROUGH STRATEGIC ACQUISITIONS.  The Company believes that
there are significant opportunities to acquire existing homebuilding companies,
particularly in and around the Las Vegas area and selected markets in the
southwestern United States. The Company intends to pursue strategic acquisitions
to provide the Company with additional market share, desirable land and local
market experience, although there can be no assurance that the Company will be
able to consummate any such acquisition.
 
    PURSUING GEOGRAPHIC EXPANSION.  While the Company continues to believe that
the outlook for the Las Vegas market is favorable, geographic expansion is a key
element in achieving long-term stability and growth. In this regard, the Company
recently expanded its operations into the Phoenix, Tucson, Salt Lake City and
Reno markets and intends to further capitalize on its experience and
demonstrated capabilities in real estate by targeting other viable geographic
markets, including other selected markets in the southwestern United States.
 
    EXPANDING BUSINESS OPPORTUNITIES BY TAKING ADVANTAGE OF GOVERNMENT-SPONSORED
PROGRAMS.  The Company has expanded its business opportunities by building
projects which are eligible for various government-sponsored programs that
provide down payment assistance or lower cost financing. These
government-sponsored programs include private activity revenue bonds, small
business loans and mortgage loan programs of federal agencies. By building
properties which are eligible for such programs, the Company is able to expand
the pool of qualified purchasers for its homes and other properties.
 
    REDUCING THE RISK OF ECONOMIC AND REAL ESTATE CYCLES THROUGH OPERATING
DIVERSIFICATION.  The Company seeks to enhance its financial stability and
reduce the potential impact of economic and real estate cycles by operating in
four components of the real estate business: (i) the design, development,
construction and sale of single-family homes, (ii) the design, development and
construction of portfolio properties, (iii) design-build services for
third-party clients and (iv) property operations and management.
 
    ENHANCING PROFITABILITY THROUGH AN OPPORTUNISTIC APPROACH TO
DEVELOPMENT.  The Company seeks to take advantage of market opportunities by
employing its experience and expertise to identify and enter new markets. Most
recently, in response to the identified shortage of affordable housing, the
Company expanded its development operations to include value-priced homes and
increased its development of apartments for low and middle income families and
senior citizens.
 
    REDUCING DEVELOPMENT RISKS THROUGH CONSERVATIVE LAND POLICIES.  The Company
seeks to maximize its return on capital by limiting its investment in land while
maintaining an inventory of owned and controlled sites sufficient to accommodate
demand for its homes and other development requirements. The Company seeks to
further maximize its return by acquiring undeveloped land and using its
expertise to obtain all entitlements and develop the land. To implement this
strategy and to reduce the risks associated with investments in land, the
Company uses options or conditional land sales contracts to control land
whenever possible and seeks to purchase land only for specific developments.
 
    INCREASING PROFIT MARGINS THROUGH VERTICAL INTEGRATION.  The Company's real
estate and construction expertise allows the integration of most aspects of
development and construction, thereby enabling the Company to provide one-stop
shopping to its customers, maintain greater control over its projects and
generate higher operating margins. The Company intends to integrate certain
additional construction trades to further increase its profitability and
strengthen its competitive position.
 
                                       17
<PAGE>
LAS VEGAS MARKET
 
    The Company currently focuses most of its real estate activities in Clark
County, Nevada. The Company believes that Clark County provides a favorable
environment for its real estate activities due to the rapid, continuing economic
growth of Las Vegas and the surrounding areas and positive demographic trends
associated with such growth. The area has experienced increasing levels of
business and employment over the past decade, which have helped to drive large
increases in population and demand for new construction of both commercial and
residential developments. These businesses are attracted, by among other
factors, the absence of state income taxes for both corporations and individuals
and favorable unemployment and workers' compensation tax rates. As a result, the
Company believes that Clark County will continue to experience economic growth
over a broader range of businesses in the next several years.
 
OTHER MARKETS
 
    Phoenix was the fastest growing large labor market in the nation for three
consecutive years and ended 1997 ranked for the seventh consecutive year in
sales among the top five single-family housing markets in the nation. The
economic stability of the Salt Lake City market has proven to be a magnet for
real estate development. The Company also believes that Reno currently has the
following primary housing needs, which the Company believes may offer real
estate opportunities: the need for more affordable housing and the abatement of
overcrowded conditions. See Note 3 of Notes to Consolidated Financial
Statements.
 
COMPETITION
 
    The real estate industry in all of the Company's markets is highly
competitive. The Company competes for desirable properties, financing, raw
materials and skilled labor. In each of its business components, the Company
competes against numerous developers and others in the real estate business,
many of which are larger and have greater financial resources and better access
to capital markets than the Company. The Company competes on the basis of a
complete package of real estate services it offers its clients, as well as its
reputation for fair pricing and quality construction. The Company also competes
with other owners and operators of real properties for tenants and buyers of
portfolio properties it owns and operates.
 
INSURANCE
 
    The Company maintains numerous commercial insurance policies with limits and
coverage, it believes consistent with its risk of loss. The Company carries
general liability insurance with an aggregate limit of $2.0 million. With
respect to all of the properties it owns, the following coverages are included
in an all-risk, replacement-cost package policy with customary policy
specifications, insured limits and deductibles: property, boiler and machinery,
crime and auto, which includes hired auto coverage. The Company carries similar
insurance with respect to its unimproved land, and maintains separate and
distinct coverage in the form of an all-risk course of construction and inland
marine policy.
 
    Workers' compensation insurance is maintained under a self-funded program,
with excess workers' compensation and employers liability insurance with a limit
of $1.0 million for all Nevada operations. All other interstate operations are
covered under a separate, blanket workers' compensation policy subject to
statutory limits.
 
    All of the above provide underlying limits to a commercial umbrella
insurance policy with a limit of $50.0 million, except for construction
liability, which maintains its own policy coverage, limits, specifications, etc.
All are believed by management to be adequate for its current and anticipated
future activities.
 
    Some of the Company's ancillary coverages include key man life insurance
with a $5.0 million death benefit on James C. Saxton, President and Chief
Executive Officer of the Company, architects and
 
                                       18
<PAGE>
engineers professional liability, real estate errors and omissions coverage,
directors' and officers' professional liability, and employment practices
liability insurance.
 
REGULATORY AND ENVIRONMENTAL MATTERS
 
    In addition to the obtaining of all building permits and authorizations
normally associated with the development of real property and customary and
routine business permits and licenses, the Company's business and operations are
subject to additional regulation as described below.
 
    AMERICANS WITH DISABILITIES ACT.  The Company's properties must comply with
Title III of the Americans with Disabilities Act of 1990 ("ADA") to the extent
that such properties are "public accommodations" and/or "commercial facilities"
as defined by the ADA. In the case of existing properties, compliance with the
ADA requirements could require removal of structural barriers to handicapped
access in certain public areas of the projects where such removal is "readily
achievable." The Company believes that all of its properties are in substantial
compliance with present requirements under the ADA and any applicable state
laws. Noncompliance could result in imposition of fines or an award of damages
to private litigants. The Company intends to construct all future properties in
compliance with any then-existing requirements of the ADA and any applicable
state law.
 
    FAIR HOUSING AMENDMENTS ACT OF 1988.  The Fair Housing Amendments Act of
1988 ("FHAA") requires multifamily communities first occupied after March 13,
1990 to be accessible by the disabled. Noncompliance with the FHAA could result
in the imposition of fines or an award of damages to private litigants. The
Company believes that its properties that are subject to the FHAA are in
compliance with such law.
 
    RESIDENT INCOME AND OTHER LIMITATIONS.  The Company's development of Tax
Credit Projects to date has been financed with the proceeds of tax-exempt
multifamily housing revenue bonds issued by the Nevada Housing Division, a
division of the Department of Business and Industry of the State of Nevada. As a
condition to obtaining such financing, the Company is required to enter into
certain regulatory and other agreements with the Nevada Housing Division, the
terms of which require that the owner of such properties (i) set aside a
specified percentage of the units (generally 100%) for residents whose incomes
do not exceed a specified percentage of the area median income ("Lower Income
Tenants") and (ii) hold all vacant units in the project (for a reasonable period
consistent with maintaining the project's financial viability) for rent or
occupancy by Lower Income Tenants. These restrictions terminate approximately 15
years following the date of initial occupancy of the project. During the period
that the restrictions apply, any sale or transfer of the project, or the sale or
transfer of the Company's interest in the partnership which owns the project,
will be subject to regulatory approval.
 
    The Tax Credit Partnerships intend to operate their respective projects to
qualify for the Housing Tax Credit. Generally, the Housing Tax Credit is
available only with respect to residential rental projects in which a specified
minimum percentage of the residential rental units are occupied by individuals
with incomes not in excess of a specified percentage of the area median income,
as adjusted for family size (the "minimum set-aside"). The Tax Credit
Partnerships have generally elected to set aside 100% of the units for
individuals with incomes not in excess of 60% of the area median income. (Units
occupied by individuals meeting the income test are referred to herein as the
"Low-Income Units.") All units comprising the minimum set-aside must be suitable
or residential occupancy and used on a non-transient basis. Additionally, in
order to qualify for the Housing Tax Credit, the gross rent (including the cost
of any utilities other than telephone service) charged to tenants of Low-Income
Units comprising the minimum set-aside generally cannot exceed 30% of the
applicable income limits for an apartment of its size (the "rent restriction
test"). A project must, in general, continuously meet the requirements with
respect to the minimum set-aside and the rent restriction test during the period
commencing not later than the date 12 months after the date such project is
placed in service and ending 15 years thereafter.
 
                                       19
<PAGE>
    The Company, as manager of the Tax Credit Projects and a general partner of
Tax Credit Partnerships, will be responsible for ensuring compliance with any
tenant and rent restrictions under the regulatory agreement or necessary for the
continued eligibility for the Housing Tax Credit. The Company may be liable to
the investors in the Tax Credit Partnerships for any lost tax credits resulting
from any failure to so comply and any such liability could be substantial.
 
    ENVIRONMENTAL MATTERS.  The Company and its competitors are subject to a
variety of local, state and federal statutes, ordinances, rules and regulations
concerning the protection of health and the environment. The particular
environmental laws which apply to any given property vary greatly according to
the property, its environmental condition and its present and former use.
Environmental laws may result in delays and cause the Company to incur
substantial compliance or other costs or prohibit or severely restrict
development in certain environmentally sensitive regions or areas. In addition,
environmental regulations can have an adverse impact on the availability and
price of certain raw materials such as lumber.
 
    Certain environmental laws can impose liability on owners of property, among
other parties, to the extent that hazardous or toxic substances are or were
present during their ownership period. A transfer of the property does not
relieve an owner of such liability. Thus, the Company may have liability with
respect to properties it has sold. There is also a risk that the Company may be
liable for such costs as an "owner" of real estate with respect to the
properties it owns or as an "operator" of real estate with respect to properties
that the Company does not own, but manages for a fee.
 
    Prior to purchasing a parcel of land, the Company evaluates such land for
the presence of hazardous or toxic materials, wastes or substances. In addition,
the Company typically engages independent environmental engineers to perform
"Phase I" environmental assessments (which involve physical inspections without
soil or groundwater analyses) on the land. Since assessments are generally
performed at the time of the Company's acquisition or financing of a property,
many of the assessments of properties currently owned by the Company were
obtained more than one year ago and in one case was obtained over eight years
ago. None of the assessments revealed any hazardous or toxic materials, wastes
or substances that the Company believes would have a material adverse effect on
the Company's financial position or results of operations. The Company has not
been notified by any governmental authority of any material noncompliance,
liability or other claim in connection with any property currently or formerly
owned by the Company nor is the Company otherwise aware of any environmental
liability relating to the properties that it believes would have a material
adverse effect on its business, assets or results of operations. Nevertheless,
it is possible that the environmental assessments did not reveal all
environmental liabilities with respect to the properties, that environmental
liabilities have developed with respect to the properties since the
environmental assessments were prepared or that there are material environment
liabilities of which the Company is unaware with respect to the properties.
Moreover, no assurance can be given that (i) future laws, ordinances or
regulations will not impose material environmental liabilities or (ii) the
current environmental condition of the properties will not be affected by the
Company or other tenants or occupants of the properties, by the uses or
condition of properties in the vicinity of the properties or by third parties
unrelated to the Company.
 
EMPLOYEES
 
    As of December 31, 1998, the Company had 878 employees (of whom 307 were
full-time, 8 were part-time and 563 were occasional construction workers). The
Company employs construction workers on an as-needed basis, depending upon the
level and type of its construction activities. The total number of employees can
fluctuate in proportion to the timing and nature of construction activity. None
of the Company's employees is represented by a labor union and the Company
considers its employee relations to be good.
 
                                       20
<PAGE>
ITEM 2. PROPERTIES
 
    The Company's corporate executive offices are located in approximately
20,000 square feet at its Sahara Vista A office building in Las Vegas. The
Company also occupies approximately 8,700 square feet at its adjacent Americana
office building and approximately 6,100 square feet at its Arcata Industrial
Park. The Company's Reno offices of approximately 396 square feet are leased, on
a month-to-month basis, in an office building located in Reno, Nevada.
 
    Diamond Key leases approximately 10,000 square feet of office space in
Phoenix, Arizona and 2,098 square feet in Tucson, Arizona. The Phoenix office
lease expires on September 30, 2001 and the Tucson office lease expires on
February 28, 2000.
 
    Maxim leases approximately 960 square feet of office space in Draper, Utah,
30 miles southeast of Salt Lake City. The lease expires in June 2000.
 
    The Company anticipates that its existing spaces will satisfy its space
requirements for the foreseeable future. See Item 1. "Business--Portfolio
Properties and Property Operations and Management."
 
ITEM 3. LEGAL PROCEEDINGS
 
    The Company is involved in litigation arising from the ordinary course of
its business, none of which, in the opinion of the Company, will have a material
effect on the Company's financial position, results of operations or cash flows.
 
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
 
    No matters were submitted to a vote of the Company's security holders during
the fourth quarter of the year ended December 31, 1998.
 
                                       21
<PAGE>
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
  MATTERS
 
MARKET INFORMATION
 
    The Company's Common Stock is traded in the over-the-counter market and
since the effective date of the Offering on June 24, 1997, prices have been
quoted on the Nasdaq Stock Market ("Nasdaq") under the trading symbol "SXTN."
The following table sets forth the high and low sales prices of the Common Stock
as reported on the Nasdaq Stock Market:
 
<TABLE>
<CAPTION>
                                                                               HIGH        LOW
                                                                             ---------  ---------
<S>                                                                          <C>        <C>
1997
Second Quarter (June 24-30, 1997)..........................................  $   8.750  $   8.125
Third Quarter..............................................................      8.500      6.375
Fourth Quarter.............................................................      9.500      6.750
 
1998
First Quarter..............................................................      8.750      6.813
Second Quarter.............................................................      7.375      6.188
Third Quarter..............................................................      8.000      5.000
Fourth Quarter.............................................................      7.875      4.750
 
1999
First Quarter (through March 12, 1999).....................................      6.750      5.875
</TABLE>
 
    As of March 12, 1999, there were approximately 33 holders of record and
1,246 beneficial holders of the 7,732,922 shares of Common Stock. The closing
sale price per share for the Common Stock on March 12, 1999 was $6.188.
 
    The Company currently intends to retain all future earnings for use in the
Company's business and therefore does not anticipate declaring or paying
dividends on its Common Stock in the foreseeable future. The Company's loan
agreements generally have provisions restricting the payment of dividends,
unless certain conditions are met. Any future determination as to the payment of
dividends will be subject to restrictions in the loan agreements and at the
discretion of the Board of Directors of the Company and will depend on the
Company's financial condition, results of operations, capital requirements and
such other factors as the Board of Directors deems relevant.
 
ITEM 6. SELECTED FINANCIAL DATA
 
    The following tables set forth selected financial and operating information
for the Company on a historical consolidated basis. The historical consolidated
financial and operating information is comprised of the operations, assets and
liabilities of the Company and certain properties, which were owned and operated
by entities affiliated with and controlled by the Company during the periods
presented. These operations and properties were acquired by the Company in
connection with the consummation of the Reorganization and the Offering. The
following information should be read in conjunction with all of the financial
statements and notes thereto included elsewhere in this Annual Report on Form
10-K.
 
                                       22
<PAGE>
    This table should be read in conjunction with Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements, the notes thereto and other financial
information appearing elsewhere herein.
 
<TABLE>
<CAPTION>
                                                           YEARS ENDED DECEMBER 31,
                                            -------------------------------------------------------  PRO FORMA
                                             1994(3)    1995(3)     1996        1997        1998      1998(4)
                                            ---------  ---------  ---------  ----------  ----------  ----------
                                                    (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S>                                         <C>        <C>        <C>        <C>         <C>         <C>
INCOME STATEMENT DATA (1) (2):
Revenue:
  Construction revenue....................  $  10,863  $  22,090  $  41,875  $   31,707  $   51,524  $   51,524
  Sales of homes..........................         --         --     12,963      11,058      27,634      74,742
  Sales of commercial properties..........      8,072      9,850      4,772      11,540       7,823       7,823
  Rental revenue..........................      3,288      3,531      3,922       3,583       3,515       3,515
  Other...................................        137         99        536       1,508       1,676       2,595
                                            ---------  ---------  ---------  ----------  ----------  ----------
    Total revenue.........................     22,360     35,570     64,068      59,396      92,172     140,199
                                            ---------  ---------  ---------  ----------  ----------  ----------
Cost of revenue:
  Cost of construction....................     10,713     18,194     33,078      26,981      40,863      40,863
  Cost of homes sold......................         --         --     10,967      10,139      23,754      65,027
  Cost of commercial properties sold......      6,027      9,373      3,444       7,127       7,710       7,710
  Rental operating cost...................        635        631        784         724         815         815
                                            ---------  ---------  ---------  ----------  ----------  ----------
    Total cost of revenue.................     17,375     28,198     48,273      44,971      73,142     114,415
                                            ---------  ---------  ---------  ----------  ----------  ----------
      Gross profit........................      4,985      7,372     15,795      14,425      19,030      25,784
                                            ---------  ---------  ---------  ----------  ----------  ----------
General and administrative expenses.......      1,736      1,957      3,425       2,746       5,042       7,732
Depreciation and amortization.............        745        722      1,079       1,393       1,687       2,079
                                            ---------  ---------  ---------  ----------  ----------  ----------
Operating income..........................      2,504      4,693     11,291      10,286      12,301      15,973
Other income (expense):
  Joint venture earnings (loss)...........          6      1,131        (43)         16         (25)        (25)
  Interest expense........................     (1,972)    (2,393)    (2,820)     (3,086)     (2,337)     (2,371)
  Interest income.........................        497        266         72         985       1,105       1,147
                                            ---------  ---------  ---------  ----------  ----------  ----------
    Total other expense...................     (1,469)      (996)    (2,791)     (2,085)     (1,257)     (1,249)
                                            ---------  ---------  ---------  ----------  ----------  ----------
Income before provision for income
  taxes...................................      1,035      3,697      8,500       8,201      11,044      14,724
Income taxes (3)..........................         --         67      2,517       2,350       3,313       4,553
                                            ---------  ---------  ---------  ----------  ----------  ----------
Net income................................  $   1,035  $   3,630  $   5,983  $    5,851  $    7,731  $   10,171
                                            ---------  ---------  ---------  ----------  ----------  ----------
                                            ---------  ---------  ---------  ----------  ----------  ----------
 
Earnings per share (5):
Basic:
Net income.................................................................  $     0.92  $     1.01  $     1.33
                                                                             ----------  ----------  ----------
                                                                             ----------  ----------  ----------
Weighted-average number of common shares outstanding.......................   6,341,879   7,656,189   7,656,189
                                                                             ----------  ----------  ----------
                                                                             ----------  ----------  ----------
 
Diluted:
Net income.................................................................  $     0.92  $     1.01  $     1.33
                                                                             ----------  ----------  ----------
                                                                             ----------  ----------  ----------
Weighted-average number of common shares outstanding assuming dilution.....
                                                                              6,363,219   7,674,119   7,674,119
                                                                             ----------  ----------  ----------
                                                                             ----------  ----------  ----------
</TABLE>
 
                                       23
<PAGE>
<TABLE>
<CAPTION>
                                                           YEARS ENDED DECEMBER 31,
                                            -------------------------------------------------------  PRO FORMA
                                              1994       1995       1996        1997        1998      1998(4)
                                            ---------  ---------  ---------  ----------  ----------  ----------
                                                                  (DOLLARS IN THOUSANDS,
                                                        EXCEPT AVERAGE SALES PRICE PER HOME CLOSED)
OPERATING DATA (2):
<S>                                         <C>        <C>        <C>        <C>         <C>         <C>
EBITDA (6)................................  $   3,752  $   6,812  $  12,399  $   12,680  $   15,068  $   19,174
  Interest capitalized....................  $     455  $     355  $   1,271  $    1,159  $    4,859  $    6,049
  Interest expense incurred...............  $   2,427  $   2,748  $   4,091  $    4,245  $    7,196  $    8,420
EBITDA to interest expense incurred.......       1.55       2.48       3.03        2.99        2.09        2.28
 
Cash flows:
  Used in operating activities............  $  (1,552) $  (1,465) $  (3,708) $  (12,470) $  (35,874)        N/A
  Provided by (used in) investing
    activities............................  $  (1,420) $  (3,317) $     818  $     (964) $  (19,020)        N/A
  Provided by financing activities........  $   2,680  $   5,221  $   3,988  $   12,954  $   55,115         N/A
Single-family homes:
  Closings................................         --         --        173         134         251         634
  Backlog (at year end) (7)...............         --         --         37          --         184         184
  Homes remaining for sale (at year
    end)..................................         --         --          9           2       1,365       1,365
  Aggregate sales value of backlog........  $      --  $      --  $   2,970  $       --  $   19,730  $   19,730
  Average sales price per home closed.....  $      --  $      --  $  74,930  $   82,521  $  110,096  $  117,890
Design-build projects:
  Number of contracts awarded.............         10          4          6           2           3           3
  Backlog (at year end) (8)...............  $  31,464  $  52,075  $  21,130  $   36,420  $   20,338  $   20,338
Portfolio properties:
  Number of properties developed..........          5          3          5           1           4           4
  Number of properties sold...............          7          3          3           3           4           4
  Number of properties owned (at year
    end)..................................         14         14         16          14          14          14
<CAPTION>
 
                                                                                                     PRO FORMA
                                              1994       1995       1996        1997        1998      1998(4)
                                            ---------  ---------  ---------  ----------  ----------  ----------
                                                                      (IN THOUSANDS)
<S>                                         <C>        <C>        <C>        <C>         <C>         <C>
BALANCE SHEET DATA (2):
  Cash and cash equivalents...............  $      53  $     492  $   1,590  $    1,110  $    1,331  $    1,331
  Real estate properties, net.............     25,154     31,966     38,808      51,298     103,884     103,884
  Total assets............................     35,682     49,580     67,957      90,120     170,995     170,995
  Total debt..............................     31,952     39,969     49,710      44,449     101,440     101,440
  Stockholders' equity....................        908      3,693      6,291      29,644      38,187      38,187
</TABLE>
 
------------------------
 
(1) In accordance with Generally Accepted Accounting Principles ("GAAP"), the
    income statement does not include construction revenue and costs incurred in
    connection with portfolio construction, but does include construction
    revenue and costs incurred in connection with the construction for entities
    which the Company does not control. Costs of portfolio construction are
    capitalized as improvements on the Company's Consolidated Balance Sheets and
    profit, if any, in connection with such activities is recognized only upon
    sale of the property.
 
(2) See Note 1 to the Company's Consolidated Financial Statements regarding the
    Company's organization and basis of presentation prior to the Offering.
 
                                       24
<PAGE>
(3) Prior to October 1, 1995, the Company's predecessor operated as an S
    corporation for income tax purposes and was, therefore, subject to no income
    taxes until October 1, 1995, at which time the Company was taxable as a C
    corporation. In addition, certain of the consolidated entities were
    partnerships for federal income tax purposes until consummation of the
    Offering and were, therefore, not subject to income taxes. The income taxes
    for 1994 and 1995 computed at a marginal effective rate of 34% would have
    been $352,000 and $1,257,000, respectively.
 
(4) Represents certain summary unaudited pro forma information for the year
    ended December 31, 1998, as if the acquisition of Diamond Key
    ("Acquisition") had occurred as of January 1, 1998. The information
    presented reflects increased amortization of goodwill, increased interest
    expense and certain income tax adjustments related to the Acquisition that
    would have been incurred had the Acquisition occurred on such date. The
    unaudited summary pro forma information is not necessarily indicative of the
    results of operations of the Company had the Acquisition occurred on such
    date, nor is it necessarily indicative of future results.
 
(5) On June 24, 1997, the Company completed its initial public offering and
    became a public entity; therefore no earnings per share prior to 1997 are
    presented.
 
(6) Earnings Before Interest Expense Incurred, Income Taxes, Depreciation and
    Amortization ("EBITDA") is a supplemental financial measurement used by the
    Company in the evaluation of its business. EBITDA is calculated by adding
    interest expense incurred, income taxes, depreciation and amortization
    expense to net income. EBITDA should not be construed as an alternative to
    income from operations or cash flows from operating activities (as
    determined in accordance with GAAP). EBITDA as calculated by the Company may
    not be comparable to similarly captioned measures used by other companies.
 
(7) Represents the number of homes subject to pending sales contracts which have
    not closed.
 
(8) Represents the uncompleted portion of design-build construction under signed
    fixed-price contracts.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS
 
OVERVIEW
 
    The following discussion is based primarily on the consolidated financial
statements of the Company and should be read in conjunction with the
consolidated financial statements, including the notes thereto and other
financial information appearing elsewhere herein. The consolidated financial
statements of the Company are comprised of the operations, assets and
liabilities of the Company and of certain properties which were owned and
operated by entities affiliated with and controlled by the Company prior to the
completion of its initial public offering. These operations and properties were
acquired by the Company in connection with the consummation of the
Reorganization. See Item 1. "Business-- The Reorganization."
 
    The Company is an integrated real estate development company which engages
in: (i) the design, development, construction and sale of single-family homes,
(ii) the performance of design-build services for third-party clients, including
tax credit partnerships; (iii) the design, development and construction of
portfolio properties; and (iv) property operations and management, which
generate rental income and management fees. During the past three years, the
Company has added residential property development to its business focus with
its entry into the single-family home development business in 1995, which first
generated sales in 1996, and its increased development of Tax Credit Projects.
 
    Revenue from home sales and portfolio property sales is recognized based
upon the sales price at the time of closing. Revenue from construction contracts
is recognized on the percentage-of-completion method, based upon the ratio of
costs incurred to total estimated costs. All other revenue is based on accrual
accounting. Revenue resulting from the sales of homes and portfolio properties
as well as from the award and timing of design-build construction contracts may
vary significantly from period to period.
 
                                       25
<PAGE>
    The following table represents the Company's results of operations expressed
as percentages for the past three years.
 
RESULTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                                           YEARS ENDED DECEMBER 31,
                                                                                        -------------------------------
                                                                                          1996       1997       1998
                                                                                        ---------  ---------  ---------
<S>                                                                                     <C>        <C>        <C>
Revenue:
  Construction revenue................................................................       65.4%      53.4%      55.9%
  Sales of homes......................................................................       20.2       18.7       30.0
  Sales of commercial properties......................................................        7.4       19.4        8.5
  Rental revenue......................................................................        6.1        6.0        3.8
  Other revenue.......................................................................        0.9        2.5        1.8
                                                                                        ---------  ---------  ---------
    Total revenue.....................................................................      100.0      100.0      100.0
Cost of revenue:
  Cost of construction (1)............................................................       79.0       85.1       79.3
  Cost of homes sold (1)..............................................................       84.6       91.7       86.0
  Cost of commercial properties sold (1)..............................................       72.2       61.8       98.6
  Rental operating cost (1)...........................................................       20.0       20.2       23.2
                                                                                        ---------  ---------  ---------
    Total cost of revenue.............................................................       75.3       75.7       79.4
                                                                                        ---------  ---------  ---------
    Gross profit......................................................................       24.7       24.3       20.6
 
General and administrative expenses...................................................        5.3        4.7        5.5
Depreciation and amortization.........................................................        1.7        2.3        1.8
                                                                                        ---------  ---------  ---------
    Operating income..................................................................       17.7       17.3       13.3
Other income (expense):
  Joint venture loss..................................................................       (0.1)        --         --
  Interest expense, net...............................................................       (4.3)      (3.5)      (1.3)
                                                                                        ---------  ---------  ---------
    Total other expense...............................................................       (4.4)      (3.5)      (1.3)
                                                                                        ---------  ---------  ---------
    Income before provision for income taxes..........................................       13.3%      13.8%      12.0%
                                                                                        ---------  ---------  ---------
                                                                                        ---------  ---------  ---------
</TABLE>
 
------------------------
 
(1) Shown as a percentage of the corresponding revenue item.
 
                                       26
<PAGE>
1998 COMPARED TO 1997
 
    REVENUE.  Total revenue was $92.2 million in 1998, representing a $32.8
million, or 55.2%, increase from $59.4 million in 1997. Construction revenue was
$51.5 million in 1998, representing a $19.8 million, or 62.5%, increase from
$31.7 million in 1997. The increase in construction revenue was primarily due to
the start of construction on the South Valley and Spanish Hills apartments
projects; the near completion of the Corte Madera design-build project, which
started in late 1997; and the completion of the Rancho Mesa apartment project
which started in mid-1997. Sales of homes were $27.6 million in 1998,
representing a $16.6 million, or 149.9%, increase from $11.1 million in 1997,
due to 251 home sales in 14 communities during 1998 compared to 134 homes sold
in two communities during 1997. Diamond Key, acquired in November 1998,
contributed 62 home sales. Sales of commercial properties were $7.8 million in
1998, representing a $3.7 million, or 32.2%, decrease from $11.5 million in
1997. The decrease in sales of commercial properties was primarily due to six
commercial property sales during 1997 compared to only four commercial property
sales during 1998. Rental revenue was $3.5 million in 1998, representing a
$68,000, or 1.9%, decrease from $3.6 million in 1997. Other revenue increased by
$168,000, to $1.7 million or 11.1%, from $1.5 million in 1997. The increase was
primarily due to income received by HomeBanc Mortgage Corporation (an affiliate
of Diamond Key, acquired in December 1998) for fees collected from customers for
loan originations, commitments and premiums.
 
    COST OF REVENUE.  Total cost of revenue was $73.1 million in 1998,
representing a $28.2 million, or 62.6%, increase from $45.0 million in 1997.
Cost of construction was $40.9 million in 1998, representing a $13.9 million, or
51.5%, increase from $27.0 million in 1997, primarily due to a corresponding
increase in construction revenue. Cost of construction as a percentage of
construction revenue decreased to 79.3% in 1998, as compared to 85.1% in 1997,
which was primarily due to increased volume, resulting in lower construction
overhead and absorption rates per project. Cost of homes sold was $23.8 million
in 1998, representing a $13.6 million, or 134.3%, increase from $10.1 million in
1997, which was primarily due to the increase in sales of homes. Cost homes sold
as a percentage of home sales revenue decreased to 86.0% in 1998 from 91.7% in
1997 primarily due to decreased construction costs as a result of increased
efficiencies. Cost of commercial properties sold was $7.7 million in 1998,
representing a $583,000, or 8.2%, increase from $7.1 million in 1997, due
primarily to smaller commercial properties sold with lower cost basis during
1997 compared to 1998. Cost of commercial properties sold as a percentage of
sales of commercial properties increased to 98.6% in 1998 compared to 61.8% in
1997, primarily due to the sale of one commercial property at a loss during
1998. Rental operating costs were $815,000 in 1998, representing a $91,000, or
12.6%, increase from $724,000 in 1997. Gross profit as a percentage of revenue
decreased to 20.6% in 1998 compared to 24.3% in 1997, generally due to increased
construction costs and higher cost of commercial properties sold.
 
    GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
were $5.0 million in 1998, representing a $2.3 million, or 83.6%, increase from
$2.7 million in 1997, primarily due to an increase in salary expense associated
with an increase in the number of employees related to the Company's expansion
and growth in Reno, Nevada, Utah and Arizona and the write-off of a $405,000
receivable, representing delinquent rent and advances, during the second quarter
of 1998. General and administrative expenses as a percentage of total revenue
increased to 5.5% in 1998 compared to 4.7% in 1997, primarily due to lower sales
of commercial properties in 1998 and the write-off of the receivable.
 
    DEPRECIATION AND AMORTIZATION.  Depreciation and amortization expense was
$1.7 million in 1998, representing a $294,000, or 21.1%, increase from $1.4
million in 1997, primarily due to more operating properties held in the
Company's portfolio throughout 1998 compared to 1997 and an increase in the
amortization of financing fees associated with borrowings incurred for land
acquisition and development.
 
    INTEREST EXPENSE, NET.  Interest expense, net was $1.2 million in 1998,
representing an $869,000, or 41.4%, decrease from $2.1 million in 1997,
primarily due to an increase in the amount of interest capitalized on
construction financing during 1998 compared to 1997, resulting from an increase
in notes
 
                                       27
<PAGE>
payable from $40.6 million at December 31, 1997 to $88.3 million at December 31,
1998. Interest income increased from $985,000 at December 31, 1997 to $1.1
million at December 31, 1998 due to increased TCP interest recognized. Total
interest capitalized was $4.9 million and $1.2 million for the years ended
December 31, 1998 and 1997, respectively.
 
    INCOME BEFORE PROVISION FOR INCOME TAXES.  As a result of the foregoing
factors, income before provision for income taxes was $11.0 million,
representing a $2.8 million, or 34.7%, increase from $8.2 million in 1997.
Income before provision for income taxes as a percentage of total revenue
decreased to 12.0% in 1998 compared to 13.8% in 1997.
 
1997 COMPARED TO 1996
 
    REVENUE.  Total revenue was $59.4 million in 1997, representing a $4.7
million, or 7.3%, decrease from $64.1 million in 1996. Construction revenue was
$31.7 million in 1997, representing a $10.2 million, or 24.3%, decrease from
$41.9 million in 1996. This decrease was primarily due to greater construction
activity in 1996 for five multi-family communities compared to three
multi-family communities in 1997, one of which was a multi-family community in
its initial stages of development at the end of 1997. This decrease was
partially offset by the addition of two relatively large design-build projects
under construction in 1997. Sales of homes were $11.1 million in 1997,
representing a $1.9 million, or 14.7%, decrease from $13.0 million in 1996,
primarily due to a larger single-family residential community sold in 1996
compared to the single-family residential community sold in 1997. Sales of
commercial properties were $11.5 million in 1997, representing a $6.7 million,
or 141.8%, increase from $4.8 million in 1996. This increase was primarily due
to three property sales and three land sales in 1997 that yielded higher gross
margins as compared to three property sales and two land sales in 1996. Rental
revenue was $3.6 million in 1997, representing a $339,000, or 8.6%, decrease
from $3.9 million in 1996, primarily due to sales of two commercial properties
in 1996. Other revenue increased by $972,000 or 179.9%, from $536,000 in 1996 to
$1.5 million in 1997. The increase was primarily due to additional commission
income, management fees associated with new multi-family complexes and a gain on
the sale of a real estate investment.
 
    COST OF REVENUE.  Total cost of revenue was $45.0 million in 1997,
representing a $3.3 million, or 6.8%, decrease from $48.3 million in 1996. Cost
of construction was $27.0 million in 1997, representing a $6.1 million, or
18.4%, decrease from $33.1 million in 1996, primarily due to a corresponding
decrease in construction revenue. Cost of construction as a percentage of
construction revenue increased to 85.1% in 1997 as compared to 79.0% in 1996,
which was primarily due to a loss on a design-build project and an increase in
indirect costs allocated to jobs. The loss was due to additional costs incurred
which were not part of the original contract. Cost of homes sold was $10.1
million in 1997, representing a $828,000, or 7.6%, decrease from $11.0 million
in 1996, which was primarily due to the decrease in sales of homes. Cost of
homes sold as a percentage of home sales revenue increased to 91.7% in 1997 from
84.6% in 1996 primarily due to increased construction costs and increased
indirect cost allocation. Cost of commercial properties sold was $7.1 million in
1997, representing a $3.7 million, or 106.9%, increase from $3.4 million in
1996, due primarily to the increase in sales of commercial properties. Cost of
commercial properties sold as a percentage of sales of commercial properties
decreased to 61.8% in 1997 compared to 72.2% in 1996, primarily due to higher
gross margins on three property sales and three land sales in 1997 compared to
1996. Rental operating costs were $724,000 in 1997, representing a $60,000, or
7.7%, decrease from $784,000 in 1996. Gross profit as a percentage of revenue
decreased slightly to 24.3% in 1997 compared to 24.7% in 1996 generally due to
increased construction costs.
 
    GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
were $2.7 million in 1997, representing a $679,000, or 19.8%, decrease from $3.4
million in 1996, primarily due to an increase in indirect costs allocated to
jobs partially offset by an increase in salary expense associated with an
increase in the number of employees related to the Company's expansion and
growth. General and administrative
 
                                       28
<PAGE>
expenses as a percentage of total revenue were 4.7% in 1997 compared to 5.3% in
1996, primarily due to a lower revenue base in 1997.
 
    DEPRECIATION AND AMORTIZATION.  Depreciation and amortization was $1.4
million in 1997, representing a $314,000, or 29.1%, increase from $1.1 million
in 1996, primarily due to increases in equipment purchases from the further
expansion into certain subcontracting trades as well as an increase in the
amortization of financing fees associated with borrowings incurred for land
acquisition and development.
 
    INTEREST EXPENSE, NET.  Interest expense, net, was $2.1 million in 1997
representing a $647,000, or 23.5%, decrease from $2.7 million in 1996, primarily
due to additional debt associated with the conversion of construction financing
into permanent or mini-permanent financing for portfolio projects, which was
partially offset by debt retirement associated with the sale of commercial
properties and the recognition of $865,000 in interest income from Tax Credit
Partnerships.
 
    INCOME BEFORE PROVISION FOR INCOME TAXES.  As a result of the foregoing
factors, income before provision for income taxes was $8.2 million, representing
a $299,000, or 3.5%, decrease from $8.5 million in 1996. Income before provision
for income taxes as a percentage of total revenue increased to 13.8% in 1997
compared to 13.3% in 1996.
 
LIQUIDITY AND CAPITAL RESOURCES
 
    On June 24, 1997, the Company completed its initial public offering of
2,275,000 shares of Common Stock at $8.25 per share. The net proceeds of
approximately $17.3 million were used as follows: (i) $8.1 million to repay
indebtedness, of which $3.4 million represented indebtedness to the Company's
principal stockholders and $1.7 million represented indebtedness to other
related parties, (ii) $5.6 million to acquire land for future development, (iii)
$2.8 million to acquire the interests of various third-party partners in certain
properties and (iv) approximately $800,000 for development activities and
general corporate purposes.
 
    Concurrently with the closing of the Offering, the Contributing Stockholders
contributed their partnership interests in certain properties to the Company. In
addition, certain obligations to the Contributing Stockholders represented by
the Notes were satisfied as follows: (i) approximately $700,000 of outstanding
amounts due to the Company by the principal stockholders were offset against the
Notes, (ii) $3.65 million was repaid through the issuance by the Company of
384,256 shares of Common Stock and (iii) $1.0 million was repaid through the
issuance by the Company of warrants for 400,000 shares of Common Stock. The
warrants were exercisable at $9.90 per share if the Company achieved specified
levels of after-tax net income in 1997 and 1998. The actual level of after-tax
net income in 1997 was below the specified level and therefore the warrants
lapsed.
 
    The Company has historically relied upon land and project financing, as
applicable, partner and joint venture contributions in the form of land or cash,
developer's equity (value in excess of cost), other forms of debt, including
loans from affiliates, and cash flow from operations to provide capital for land
acquisitions and portfolio construction. The Company intends to continue to
provide for its capital requirements from some or all of these sources.
Management believes that cash generated from operations, funds available from
external sources of debt and equity financing, together with cash on hand at
December 31, 1998 will be sufficient to provide for its capital requirements for
at least the next 12 months. The Company is exploring the refinancing of these
and other indebtedness through the issuance of up to $60.0 million of longer
term notes during 1999. There can be no assurance that the Company will be able
to do so.
 
    During the fourth quarter of 1998, the Company's President and principal
stockholder, James C. Saxton, pledged 3,111,560 shares of Common Stock, or
approximately 40.6% of its outstanding shares, as collateral for two personal
loans to Mr. Saxton. Mr. Saxton reloaned the proceeds from such loans to the
Company for use in connection with the acquisition of Diamond Key. The two notes
payable to Mr. Saxton
 
                                       29
<PAGE>
aggregating $7,575,000, bear interest at 12% per annum and mature on August 1,
1999. The Company intends to refinance the loans from Mr. Saxton prior to their
maturities. The Company understands that Mr. Saxton intends to repay, in full,
the loans from the two lenders upon repayment of the loans he has made to the
Company.
 
    Net cash used in operating activities for the years ended December 31, 1996,
1997 and 1998 was $3.7 million, $12.5 million and $35.9 million, respectively.
This increase was primarily due to increases in properties in development, Tax
Credit Partnership receivables and construction contracts receivable. Properties
under development increased from $21.6 million in 1997 to $79.4 million in 1998.
The number of properties under development increased from 10 in 1997 to 41 in
1998. Receivables from Tax Credit Partnerships increased from $17.4 million in
1997 to $32.0 million in 1998, primarily due to increased land acquisition costs
and increased construction cost receivables on the Company's Rancho Mesa,
Spanish Hills and South Valley Apartments projects. Construction contracts
receivable also increased from $3.0 million in 1997 to $8.8 million in 1998
primarily due to increased design-build construction costs related to two
projects.
 
    Net cash provided by (used in) investing activities for the years ended
December 31, 1996, 1997 and 1998 was $818,000, $(964,000) and $(19.0) million,
respectively. The decrease from 1996 to 1997 in cash provided by investing
activities is primarily due to an increase in notes receivable and capital
contributions to joint ventures, which were partially offset by an increase in
proceeds from sales of commercial properties. The increase in cash used in
investing activities from 1997 to 1998 is primarily due to the $793,000 of cash
utilized in connection with the acquisition of Maxim in March 1998 and $10.9
million of cash utilized in connection with the acquisition of Diamond Key in
November 1998. Expenditures for property acquisitions and improvements increased
from $7.0 million in 1997 to $14.2 million in 1998 due to an increase in the
development of portfolio properties. The Company added three new portfolio
properties under development during 1998 compared to two during 1997.
 
    Net cash provided by financing activities for the years ended December 31,
1996, 1997 and 1998 was $4.0 million, $13.0 million and $55.1 million,
respectively. The increase from 1996 to 1997 was primarily due to the net effect
of the proceeds from the Offering and certain amounts paid in conjunction with
the Offering. The increase in cash provided by financing activities from 1997 to
1998 is primarily due to net proceeds from notes payable of $47.6 million during
1998 compared to $2.4 million in 1997.
 
    Interest costs incurred, expensed and capitalized were as follows (in
thousands):
 
<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER
                                                                                     31,
                                                                             --------------------
                                                                               1997       1998
                                                                             ---------  ---------
<S>                                                                          <C>        <C>
Interest incurred:
  Residential..............................................................  $   2,220  $   4,674
  Commercial...............................................................      2,025      2,522
                                                                             ---------  ---------
    Total incurred.........................................................  $   4,245  $   7,196
                                                                             ---------  ---------
                                                                             ---------  ---------
Interest expensed:
  Residential..............................................................  $   1,247  $     117
  Commercial...............................................................      1,839      2,220
                                                                             ---------  ---------
    Total expensed.........................................................  $   3,086  $   2,337
                                                                             ---------  ---------
                                                                             ---------  ---------
Interest capitalized at end of year:
  Residential..............................................................  $     973  $   4,557
  Commercial...............................................................        186        302
                                                                             ---------  ---------
    Total interest capitalized.............................................  $   1,159  $   4,859
                                                                             ---------  ---------
                                                                             ---------  ---------
</TABLE>
 
                                       30
<PAGE>
    The Company has utilized, and may continue to utilize, options and
contingent sales contracts as a method of controlling and subsequently acquiring
land. By controlling land through these methods on the future discretionary
purchase of land, the Company attempts to minimize its cash outlays and reduce
its risk from changing market conditions. While the Company attempts to
prudently manage its acquisition and development of property, the development of
such property can have a negative impact on liquidity due to the timing of
acquisition and development activities.
 
    If strategic acquisitions or joint venture opportunities arise, the capital
resources of the Company may be utilized to undertake such opportunities. The
timing and nature of these opportunities cannot be predicted and the financing
of any future strategic acquisition or joint venture may take a variety of
forms.
 
    The Company anticipates that development of portfolio projects during 1999
will cost approximately $10.7 million in the aggregate, substantially all of
which is expected to be financed with construction loans. The real estate
development business is capital intensive and requires significant up-front
expenditures to acquire and entitle land and commence development. The Company
typically finances, and will continue to finance, its land acquisition and
portfolio development activities utilizing the proceeds of institutional loans
secured by real property. In some cases, the Company plans to utilize private
financing, typically on a short-term or interim basis. In cases where the
Company holds a property after completion of construction, the Company generally
seeks to obtain permanent financing secured by the property. The Company also
expects to purchase approximately $1.0 million of construction and computer
equipment during 1999.
 
    At December 31, 1998, the Tax Credit Partnerships were indebted to the
Company in the aggregate amount of approximately $32.0 million, representing
developer fees and land and construction costs. Of such amount, approximately
$8.0 million is payable to the Company by the Tax Credit Partnerships from loan
proceeds and additional capital contributions of the investor limited partners.
The Company anticipates that approximately $6.1 million will be paid in 1999 and
$1.9 million will be paid to the Company during 2000. Approximately $24.0
million is payable to the Company from the net operating cash flows of the Tax
Credit Partnerships. While management believes that these projects will generate
sufficient cash flow to pay the amounts due, there can be no assurance that the
receivable will be paid in full or at all.
 
    The Company has made its capital contributions to the six Tax Credit
Partnerships. The Company is obligated, however, to make operating expense
loans, not to exceed an aggregate of $2.7 million, to meet operating deficits,
if any, of such Tax Credit Partnerships.
 
    On February 9, 1998, the Company signed an agreement for a $10.0 million
revolving line of credit with a financial institution. The line of credit
provides for borrowings up to $1.0 million for general working capital
requirements, $4.0 million for acquisition and development, including strategic
acquisitions and $5.0 million for land acquisitions. Borrowings under the line
of credit are secured by the pledge of certain Company receivables and any land
acquired with borrowings under the line of credit. These borrowings bear
interest at one percent over the lender's prime rate in effect from time to
time. The agreement also subjects the Company to certain financial covenants. As
of December 31, 1998, the Company had outstanding indebtedness of $5,000,000 and
available borrowings of $5,000,000 under this agreement.
 
    With regard to the Company's lines of credit and related party transactions,
see Notes 10 and 11 of Notes to Consolidated Financial Statements.
 
BACKLOG
 
    The Company's homes are generally offered for sale in advance of their
construction. The majority of the Company's homes are sold pursuant to standard
sales contracts entered into prior to commencement of construction. Such sales
contracts are typically subject to certain contingencies, such as the buyer's
ability to qualify for financing. Homes covered by such sales contracts are
considered by the Company as backlog. The Company does not recognize revenue on
homes covered by such contracts until the sales are
 
                                       31
<PAGE>
closed and the risk of ownership has been legally transferred to the buyer. At
December 31, 1997 and 1998, the Company had 0 homes and 184 homes, respectively,
in backlog, representing aggregate sales values of approximately $0 and $19.7
million, respectively.
 
    As part of its sales and marketing efforts, the Company builds and maintains
model homes in each of its active communities. The Company also builds homes
which are under construction or completed for which the Company does not yet
have sales contracts ("speculative homes") on a project-by-project basis. See
Item 1. "Business--Development Activities--Homebuilding--Marketing and Sales."
It is possible that, in the event of adverse economic or other business
conditions affecting home buying activity in the Company's markets, the Company
may be required to reduce prices or provide sales incentives to liquidate its
inventory of model or speculative homes. It is also possible that the Company
could be required to reduce prices or provide sales incentives sell its model
homes at the conclusion of a particular community. Either of these actions, if
taken, could have the effect of depressing the Company's gross margin for the
relevant periods.
 
    The Company is also involved in the design-build development of commercial
projects. Backlog for such commercial projects is defined as the uncompleted
work remaining under a signed fixed-price contract. The Company uses the
percentage of completion method to account for revenue from its design-build
contracts. At December 31, 1997 and 1998, the Company had backlog under its
design-build contracts of approximately $36.4 million and $20.3 million,
respectively.
 
EFFECTS OF CHANGING PRICES, INFLATION AND INTEREST RATES
 
    Management believes that inflation has not had a material impact on the
Company's operations. Substantial increases in labor costs, workers'
compensation rates and employee benefits, equipment costs, material or
subcontractor costs could adversely affect the operations of the Company for
future periods to the extent that the Company is unable to pass such increases
on to its construction clients or the purchasers of its properties. The Company
had outstanding approximately $60.9 million of floating rate debt (exclusive of
the indebtedness of unconsolidated partnerships of which the Company is a
general partner), currently bearing a weighted-average interest rate of 8.83%
per annum at December 31, 1998. If the interest rates on the floating rate debt
increase in accordance with changes to the indices upon which the rates are
based, debt service obligations of the Company will increase.
 
    The potential adverse impact of inflation on the Company's rental operations
is mitigated by the inclusion of rent adjustment clauses in its longer-term
nonresidential leases and by generally requiring tenants to pay their share of
operating expenses, including common area maintenance, real property taxes,
insurance and utilities. The Company's shorter-term nonresidential leases and
its residential leases, which are typically for terms of 6 or 12 months, permit
the Company to seek increased rents upon renewal or re-letting of the leased
space.
 
    Management believes that the Company's future homebuilding activities may be
affected by fluctuations in interest rates and changing prices. Higher interest
rates may decrease the demand for new homes by making it more difficult for
homebuyers to qualify for mortgages or to obtain mortgages at interest rates
that are acceptable to the potential buyers. In addition, the Company, as well
as the homebuilding industry in general, may be adversely affected during
periods of high inflation, primarily as a result of higher land acquisition and
land development costs, as well as higher costs of labor and materials. The
Company attempts to pass on to its customers any increase in costs through
higher sales prices. There can be no assurance that inflation will not have a
material impact on the Company's future results of operations.
 
VARIABILITY OF RESULTS AND SEASONALITY
 
    The Company historically has experienced, and in the future expects to
continue to experience, variability in revenue on a quarterly basis. Factors
expected to contribute to this variability include, among others, (i) the timing
of home and other property sale closings, (ii) the Company's ability to continue
to
 
                                       32
<PAGE>
acquire land and options thereon on acceptable terms, (iii) the timing of
receipt of regulatory approvals for the construction of homes and other
development projects, (iv) the condition of the real estate market and the
general economic conditions in the greater Las Vegas, Salt Lake City, Phoenix,
Tuscon and Reno metropolitan areas, (v) the prevailing interest rates and the
availability of financing, both for the Company and for the purchasers of the
Company's homes and other properties, (vi) the timing of the completion of
construction of the Company's homes and other portfolio properties and (vii) the
cost and availability of materials and labor. The Company's historical financial
performance is not necessarily a meaningful indicator of future results and, in
particular, the Company expects its financial results to vary from project to
project and from quarter to quarter. In addition, although the Company has not
previously experienced significant seasonality in its business, management
expects that the Company's increased focus on homebuilding activities may cause
it to experience seasonal variations in its home sales as a result of the
preference of home buyers to close new home purchases either prior to the start
of a new school year or prior to the end of year holiday season.
 
RECENT ACCOUNTING PRONOUNCEMENTS
 
    The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") SFAS No. 130, REPORTING COMPREHENSIVE
INCOME, ("SFAS 130") in June 1997 which is effective for fiscal years beginning
after December 15, 1997. SFAS 130 requires companies to classify items of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of the statement of financial position. The
adoption of SFAS 130, in 1998, did not affect the consolidated financial
statements of the Company.
 
    In 1998, the Company adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE RELATED INFORMATION ("SFAS 131"). SFAS 131 supersedes SFAS No. 14,
FINANCIAL REPORTING FOR SEGMENTS OF A BUSINESS ENTERPRISE replacing the
"industry segment" approach with the "management" approach. The management
approach designates the internal organization that is used by management for
making operating decisions and assessing performance as the source of the
Company's reportable segments, SFAS 131 also requires disclosures about products
and services, geographic areas and major customers. The adoption of SFAS 131, in
1998, did not affect the consolidated financial statements of the Company.
 
    In February 1998, the FASB issued SFAS No. 132, EMPLOYERS' DISCLOSURE ABOUT
PENSIONS AND OTHER POST-RETIREMENT BENEFITS--AN AMENDMENT OF SFAS NOS. 87, 88
AND 106 ("SFAS 132"). SFAS 132 standardized the disclosure requirements for
pensions and other post-retirement plans, requires additional information on
changes in the benefit obligations and fair value of plan assets and eliminates
certain disclosures previously required under SFAS Nos. 87, 88 and 106. SFAS 132
is effective for fiscal years beginning after December 31, 1997. The adoption of
SFAS 132, in 1998, did not affect the consolidated financial statements of the
Company.
 
    In June 1998, the FASB issued, SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS 133"). SFAS 133 establishes accounting
and reporting standards for derivative instruments and hedging activities. SFAS
133 requires recognition of all derivative instruments in the statement of
financial position as either assets or liabilities and the measurement of
derivative instruments at fair value. SFAS 133 is effective for fiscal years
beginning after June 15, 1999. The adoption of SFAS 133 is not expected to
affect the consolidated financial statements of the Company.
 
    In October 1998, the FASB issued SFAS No. 134, ACCOUNTING FOR
MORTGAGE-BACKED SECURITIES RETAINED AFTER THE SECURITIZATION OF MORTGAGE LOANS
HELD FOR SALE BY A MORTGAGE BANKING ENTERPRISE, AND AMENDMENT OF SFAS NO. 65
("SFAS 134"). SFAS 134 requires mortgage banking enterprises to classify loans
held for sale that they have securitized, based on their intent to sell or hold
those investments. SFAS 134 is effective for the first fiscal quarter beginning
after December 15, 1998. The adoption of SFAS 134 is not expected to affect the
consolidated financial statements of the Company.
 
                                       33
<PAGE>
YEAR 2000
 
    The Company's process for becoming Year 2000 ("Y2K") compliant has been to
perform an ongoing comprehensive study and review of computer hardware, software
and systems, both internal and external, and non-computer related systems which
may be affected by certain computerized functions. The Company does not believe
the non-computer related systems, whether Y2K compliant or not, will have a
material impact on the Company's operations. The Company has contacted or will
contact its significant service providers, vendors, suppliers, subcontractors,
financial institutions, consultants and various government agencies, to obtain
information regarding the assurance of Y2K compliance. However, there can be no
guarantee that the systems of others upon which the Co any's systems rely will
be Y2K compliant in a timely manner. Failure to convert by an external source or
provider or the failure to convert properly would have a material adverse effect
on the Company, as would the Company's failure to convert, or convert properly,
an internal system.
 
    The Company has also increased the awareness of the Y2K issue across the
Company, assessed the Company's Y2K issues, determined proposed resolutions,
validated those proposed resolutions and implemented most system solutions. The
Company has substantially completed its assessment of applications within the
Company that are not Y2K compliant and is in varying stages of determining
appropriate resolutions to the issues identified. The Company currently expects
to complete all business critical internal hardware and software modification
and testing by the end of the second quarter of 1999.
 
    Given the information known at this time about the Company's systems and
such issues, coupled with the Company's ongoing, normal course-of-business
efforts to upgrade or replace business critical systems and software
applications as necessary, it is currently expected that Y2K costs, the majority
of which are expected to be incurred in fiscal 1999, will approximate
$100,000-$150,000. Current Y2K expenditures have been negligible thus far due to
much of the work performed by existing internal staff. Any further costs will be
incorporated into the Company's operating plan for fiscal 1999. These costs
include incremental personnel costs, consulting costs and costs for the
modification of or replacement of existing hardware and software. These costs
will be funded through cash flows from operations and are expensed as incurred.
Purchased hardware and software will be capitalized in accordance with the
Company's normal accounting policy. The costs of the project and the timing in
which the Company believes it will complete the necessary Y2K modifications are
based on management's best estimates, which were derived utilizing numerous
assumptions of future events, including the continued availability of certain
resources, third-party modification plans and other factors. However, there can
be no guarantee that these estimates will be achieved and actual results could
differ materially from those anticipated.
 
    Specific factors that might cause such material differences include, but are
not limited to, the success of the Company in identifying systems and programs
having Y2K issues, the nature and amount of programming required to upgrade or
replace the affected programs, the availability and cost of personnel trained in
this area and the extent to which the Company might be adversely impacted by
third-party (vendors, subcontractors, lenders, bond trustees, etc.) failure to
remediate their own Y2K issues. Failure by the Company and/or its vendors and
subcontractors and in particular, the local governments, on which the Company is
materially dependent to complete Y2K compliance work in a timely manner could
have a material adverse effect on the Company's operations. The Company believes
that its business operations are not heavily dependent on Y2K compliance of its
systems and that, should a reasonably likely worst case Y2K situation occur, the
Company, because of the basic nature of its systems, many of which can be
executed manually, would not likely suffer material loss or disruption in
remedying the situation.
 
    The Company currently has not established a formal contingency plan in the
event the Company is not successful with its attempts to be fully Y2K compliant;
however, the Company believes that it will develop a more formal contingency
plan that may include the stockpiling of construction raw materials, automated
reports and the development of back-up systems as an alternative to computers in
the months prior to December 31, 1999.
 
                                       34
<PAGE>
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
 
    THE FOREGOING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS AND BUSINESS SECTIONS CONTAIN CERTAIN FORWARD-LOOKING
STATEMENTS AND INFORMATION RELATING TO THE COMPANY THAT ARE BASED ON THE BELIEFS
OF MANAGEMENT AS WELL AS ASSUMPTIONS MADE BY AND INFORMATION CURRENTLY AVAILABLE
TO MANAGEMENT. SUCH FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, THE
COMPANY'S EXPECTATION AND ESTIMATES AS TO THE COMPANY'S BUSINESS OPERATIONS,
INCLUDING THE INTRODUCTION OF NEW PRODUCTS AND FUTURE FINANCIAL PERFORMANCE,
INCLUDING GROWTH IN REVENUES AND NET INCOME AND CASH FLOWS. IN ADDITION,
INCLUDED HEREIN THE WORDS "ANTICIPATES," "BELIEVES," "ESTIMATES," "EXPECTS,"
"PLANS," "PROPOSES," "INTENDS" AND SIMILAR EXPRESSIONS, AS THEY LATE TO THE
COMPANY OR ITS MANAGEMENT, ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
SUCH STATEMENTS REFLECT THE CURRENT VIEWS OF THE COMPANY'S MANAGEMENT, WITH
RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND
ASSUMPTIONS. IN ADDITION, THE COMPANY SPECIFICALLY WISHES TO ADVISE READERS THAT
THE FACTORS LISTED UNDER THE CAPTIONS "LIQUIDITY AND CAPITAL RESOURCES,"
"EFFECTS OF CHANGING PRICES, INFLATION AND INTEREST RATES" AND OTHER RISK
FACTORS INCLUDING BUT NOT LIMITED TO: THE PRIMARY DEPENDENCE ON THE GREATER LAS
VEGAS AND PHOENIX AREAS; INSUFFICIENT HISTORY IN GEOGRAPHIC AREAS OTHER THAN LAS
VEGAS; RISKS OF HOMEBUILDING AND OTHER REAL ESTATE DEVELOPMENT AND INVESTMENTS;
INDEBTEDNESS; POTENTIAL INABILITY TO OBTAIN FUTURE FINANCING; VARIABILITY,
ERRATIC WEATHER CONDITIONS AND SEASONALITY OF RESULTS; DEPENDENCE ON KEY
PERSONNEL; CONTROL BY CURRENT STOCKHOLDERS; REGULATORY AND ENVIRONMENTAL RISKS;
AND EXPANSION INTO NEW MARKETS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENT. SHOULD ONE OR MORE OF
THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE
INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DISCUSSED HEREIN AS
ANTICIPATED, BELIEVED, ESTABLISHED OR EXPECTED.
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
    The Company is exposed to changes in interest rates primarily as a result of
its borrowing activities, which includes borrowings under lines of credit. These
lines, along with cash flow from operations, are used to maintain liquidity and
fund business operations. The Company typically replaces borrowings under its
lines of credit, as necessary, with long-term fixed rate and shorter termed
variable rate financing generally secured by real estate. The nature and amount
of the Company's debt may vary as a result of business requirements, market
conditions and other factors. The extent of the Company's interest rate risk is
not quantifiable or predictable because of the variability of interest rates and
business financing requirements, but the Company does not believe such risk is
material. The Company does not currently use derivative instruments to adjust
the Company's interest rate risk profile.
 
    The table below presents principal amounts and related weighted-average
interest rates by year of maturity for the Company's debt obligations at
December 31, 1998 (in thousands):
 
<TABLE>
<CAPTION>
                                                               YEAR ENDING DECEMBER 31,
                           ------------------------------------------------------------------------------------------------
                                                                                                          FAIR MARKET VALUE
                             1999       2000       2001       2002       2003     THEREAFTER     TOTAL          1998
                           ---------  ---------  ---------  ---------  ---------  -----------  ---------  -----------------
<S>                        <C>        <C>        <C>        <C>        <C>        <C>          <C>        <C>
Fixed....................  $  31,904  $     131  $   1,483  $      42  $      --   $   7,017   $  40,577      $  41,518
Average int. rate........      14.36%     13.00%     10.13%     10.00%        --%       8.21%      13.13%            --
Variable.................  $  41,669  $   5,826  $     137  $   1,698  $      14   $  11,519   $  60,863      $  60,863
Average int. rate........       8.96%      9.04%      9.55%      9.29%     10.00%       8.15%       8.83%            --
</TABLE>
 
    The Company does not utilize financial instruments for trading or other
speculative purposes, nor does it utilize leveraged financial instruments. On
the basis of the fair value of the Company's market sensitive instruments at
December 31, 1998, the Company does not consider the potential near-term losses
in future earnings, fair values and cash flows from reasonably possible
near-term changes in interest rates to be material.
 
                                       35
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
    The information required by this item is included under Item 14. of Part IV
of this report on Form 10-K.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE
 
    On December 9, 1998, the Company dismissed KPMG LLP as the Company's
principal accountant and advised KPMG LLP that they would not be engaged to
conduct the audit of the Company's financial statements for the fiscal year
ended December 31, 1998. KPMG LLP's reports on the financial statements of the
Company for the past two fiscal years ended December 31, 1997 did not contain
any adverse opinion or disclaimer of opinion and were not qualified as to
uncertainty, audit scope or accounting principals.
 
    During the two most recent fiscal years and the interim periods subsequent
to the Company's year ended December 31, 1997, there have been no disagreements
with KPMG LLP on any matter of accounting principals or practices, financial
statement disclosure, auditing scope or procedure, or any reportable events as
defined in Item 304 (a) (1) (v) of Regulation S-K, except during the quarter
ended September 30, 1998 there was a disagreement as to the proper application
of generally accepted accounting principals to a real estate transaction. The
disagreement was ultimately resolved to the satisfaction of KPMG LLP without
discussion with the Audit Committee of the Board of Directors of the Company.
The Company has authorized the former accountant to respond fully to the
inquiries of the successor accountant concerning the subject matter of such
disagreement.
 
    The Company provided KPMG LLP with a copy of this disclosure and requested
that KPMG LLP furnish it with a letter addressed to the Securities and Exchange
Commission (the "SEC") stating whether it agreed or disagreed with the above
statements. A copy of KPMG LLP's letter to the SEC, dated December 16, 1998, was
filed as Exhibit 16 to the Company's report on Form 8-K, dated December 9, 1998.
 
    The Company selected Deloitte & Touche, LLP as independent accountants for
the Company's fiscal year ended December 31, 1998 to replace KPMG LLP. The
Company's Board of Directors approved the selection of Deloitte and Touche, LLP
as independent accountants upon the recommendation of the Company's Audit
Committee.
 
                                       36
<PAGE>
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
 
    The following table sets forth certain information with respect to the
executive officers and Directors of the Company as of December 31, 1998:
 
<TABLE>
<CAPTION>
NAME                                      AGE                                   POSITION(S)
------------------------------------      ---      ---------------------------------------------------------------------
<S>                                   <C>          <C>
James C. Saxton.....................          62   Chairman of the Board of Directors, Chief Executive Officer and
                                                     President
Douglas W. Hensley..................          44   Executive Vice President of Corporate Development and Services and
                                                     Director
Marc S. Hechter.....................          46   Senior Vice President of Business Affairs and Director
Michele Saxton-Pori.................          30   Executive Vice President and Director
Timothy J. Adams....................          37   Vice President, General Counsel, Secretary and Director
Kirk Scherer........................          40   Executive Vice President of Finance and Chief Financial Officer
Jeffrey A. Pori.....................          32   Vice President of Marketing and Commercial Development
Paul Eisenberg......................          72   Director
Bernard J. Mikell, Jr...............          60   Director
Robert L. Seale.....................          57   Director
</TABLE>
 
    JAMES C. SAXTON founded the Company in 1986 and has served as its Chairman,
Chief Executive Officer and President since its formation. For the two years
prior to the formation of the Company, Mr. Saxton concentrated on the
development in Las Vegas of privately owned construction projects financed
through private investments. From 1970 to May 1984, Mr. Saxton was employed by
Intel Corporation in various sales and management positions.
 
    DOUGLAS W. HENSLEY has served as Executive Vice President of Corporate
Development and Services since August 1998. Prior to that time, Mr. Hensley had
been the Chief Financial Officer since March 1990, Executive Vice President
since January 1994 and a Director since June 1997. Mr. Hensley joined the
Company as Corporate Controller in February 1990. Prior to joining the Company,
Mr. Hensley was with Henson, Stewart & Hensley, Certified Public Accountants,
for six years, the last three years as a partner.
 
    MARC S. HECHTER has served as Senior Vice President of Business Affairs
since January 1998 and a Director of the Company since June 1997, having served
from May 1995 to January 1998 as Senior Vice President of Finance. From July
1993 to May 1995, Mr. Hechter served as a director of Jayne, Hechter and
Company, Inc., a consulting firm providing strategic planning and financial
advice. In such position, Mr. Hechter served as a financial consultant to the
Company from March 1994 to May 1995. Mr. Hechter served as Assistant General
Manager of Administration for the Nevada State Industrial Insurance System from
December 1991 to July 1993, and as Vice President of Wadhams and Associates,
Inc. from August 1990 to December 1991. Mr. Hechter is a past Administrator of
the Nevada Housing Division.
 
    MICHELE SAXTON-PORI, Executive Vice President and a Director, has served the
Company in various capacities with increasing levels of responsibility since
June 1990. The positions included: planning assistant, planning director,
marketing representative, financial analyst, Vice President of Development and
as a Director since the Company's formation. Ms. Saxton-Pori is James Saxton's
daughter.
 
    TIMOTHY J. ADAMS has served as General Counsel of the Company since October
1996 and a Director of the Company since June 1997. From July 1987 to September
1996, Mr. Adams was engaged in the private practice of law, most recently as a
partner of Adams & Tobler, Ltd.  Mr. Adams has acted as counsel to the Company
since 1993.
 
                                       37
<PAGE>
    KIRK SCHERER has served as Executive Vice President of Finance and Chief
Financial Officer since August 1998. From July 1995 to August 1998, Mr. Scherer
was Treasurer and Chief Financial Officer of Paul-Son Gaming Corporation and
from May 1993 to June 1995 Mr. Scherer was Chief Financial Officer of American
Nutritional Corporation. Mr. Scherer was in private practice from May 1988 to
April 1993.
 
    JEFFREY A. PORI has served as Vice President of Marketing and Commercial
Development of the Company since April 1995. Mr. Pori also serves as President
of the Company's licensed real estate brokerage subsidiary. Mr. Pori joined the
Company as Leasing Manager in April 1991 and was promoted to Director of
Marketing in December 1992. Prior to joining the Company, Mr. Pori served as a
sales representative for Nevada Advertising from October 1990 to March 1991. Mr.
Pori is married to Michele Saxton-Pori and is James C. Saxton's son-in-law.
 
    PAUL EISENBERG has served as a Director since June 1997 and is a retired
certified public accountant. Prior to his retirement in 1991, Mr. Eisenberg was
a partner in Eisenberg & Kimmell, Certified Public Accountants, for five years.
 
    BERNARD J. MIKELL, JR. has served as a Director since June 1997 and has been
engaged in the private practice of law, legislative advocacy and financial
consulting since August 1995. From July 1994 to August 1995, Mr. Mikell served
as Senior Vice President, Public Finance for Sutro & Co. Incorporated. From
April 1991 to July 1994, Mr. Mikell was engaged in the private practice of law
and financial consulting. Other previous positions include Vice President,
Municipal Finance for Goldman, Sachs & Co., Vice President, Public Finance for
Dean Witter Reynolds Inc. and General Counsel of the California Housing Finance
Agency.
 
    ROBERT L. SEALE has served as a Director since June 1997. Mr. Seale has
served as the elected Treasurer of the state of Nevada since January 1991. Prior
thereto, Mr. Seale was Managing Partner of Pangborn & Co., Ltd., Certified
Public Accountants, from 1983 to 1989. Mr. Seale is a past president of the
National Association of State Treasurers.
 
    Each Director holds office until the next annual meeting of stockholders or
until his or her successor has been elected and qualified. Officers serve at the
pleasure of the Board of Directors.
 
    The Board of Directors has established an Audit Committee and a Compensation
Committee. The Audit Committee is comprised of Messrs. Eisenberg, Mikell and
Seale, with Mr. Seale serving as chairman. The Audit Committee is responsible
for reviewing the audited financial statements of the Company and making
recommendations to the full Board on matters concerning the Company's audits and
the selection of independent public accountants.
 
    The Compensation Committee is comprised of Messrs. Mikell, Eisenberg and
Seale, as outside Directors, with Mr. Mikell serving as chairman. The
Compensation Committee is responsible for establishing salaries, bonuses and
other compensation for the Company's executive officers and administering the
Company's Management Stock Option Incentive Plan. See Item 11. "Executive
Compensation-- Stock Option Plans--Management Stock Option Incentive Plan."
 
DIRECTOR COMPENSATION
 
    Directors do not currently receive any compensation for their services.
Directors who are not employees of the Company receive a fee of $625 per Board
meeting attended and are reimbursed for certain expenses incurred in attending
Board and committee meetings. No fee is payable for participation in Board
committee meetings. In addition, such Directors are eligible to participate in
the Company's Non-Employee Director Stock Option Plan. See Item 11. "Executive
Compensation--Stock Option Plans-- Non-Employee Director Stock Option Plan."
Directors who are employees of the Company do not receive additional
compensation for service as a Director.
 
                                       38
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
    Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Company's Directors and executive officers, and persons who own
more than ten percent of the Company's outstanding shares of Common Stock to
file with the SEC initial reports of ownership and reports of changes in
ownership of the Common Stock. Such persons are required by SEC regulations to
furnish the Company with copies of all such reports they file.
 
    To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, Directors and greater than ten percent beneficial owners have been
satisfied, except that Messrs. Scherer, Adams, Seale, Mikell and Eisenberg each
filed one late report, each relating, respectively, to one transaction. Mr. Pori
and Ms. Saxton-Pori each filed one late report, each relating, respectively, to
four transactions. Mr. Larison P. Clark filed one late report relating to two
transactions.
 
ITEM 11. EXECUTIVE COMPENSATION
 
    The following table sets forth a summary of the compensation paid by the
Company in the two fiscal years ended December 31, 1998 and 1997 to the
Company's Chief Executive Officer and each of its other most highly compensated
executive officers (collectively "Named Executive Officers"). The Named
Executive Officers include: (i) each person who served as Chief Executive
Officer during 1998 (one person); (ii) each person who (a) served as an
executive officer at December 31, 1998, (b) was among the four most highly paid
executive officers of the Company, not including the Chief Executive Officer,
during 1998, and (c) received over $100,000 in compensation in 1998 (three
persons); (iii) up to two persons who would be included under clause (ii) above
had they served as an executive officer at December 31, 1998 (0 persons); and
(iv) certain persons who served as executive officers of a subsidiary of the
Company (0 persons).
 
SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                             ANNUAL COMPENSATION                 LONG-TERM COMPENSATION
                               ------------------------------------------------      AWARDS/PAYMENTS
                                                                 OTHER ANNUAL     SECURITIES UNDERLYING     ALL OTHER
NAME AND PRINCIPAL POSITION      YEAR      SALARY      BONUS     COMPENSATION        OPTIONS/SARS(#)      COMPENSATION
-----------------------------  ---------  ---------  ---------  ---------------  -----------------------  -------------
<S>                            <C>        <C>        <C>        <C>              <C>                      <C>
James C. Saxton .............       1998  $ 379,827  $      --     $      --            $      --           $  28,613(3)
  Chairman, President and           1997    341,800         --            --                   --               2,204(1)
  Chief Executive Officer
 
Douglas W. Hensley ..........       1998     88,779     31,250            --               25,000(5)            5,484(1)
  Executive Vice President of       1997     80,417     33,500            --               25,000               2,204(1)
  Corporate Development and
  Services
 
Jeffrey A. Pori .............       1998     55,538         --            --               25,000(5)           54,342(4)
  Vice President of Marketing       1997     39,012         --            --               25,000             128,005(2)
  and Commercial Development
 
Timothy J. Adams ............       1998     82,000     70,000            --                5,000               5,484(1)
  Vice President and General        1997     80,000     40,000            --               25,000               2,204(1)
  Counsel
</TABLE>
 
--------------------------
 
(1) Medical insurance premiums paid.
 
(2) Commissions paid.
 
                                       39
<PAGE>
(3) Medical and life insurance premiums paid.
 
(4) Commissions and medical insurance premiums paid.
 
(5) Repriced options originally granted in 1997 and repriced in 1998.
 
OPTION GRANTS IN LAST FISCAL YEAR
 
    The following table sets forth certain information concerning grants of
stock options or stock appreciation rights ("SARs") made to the Named Executive
Officers during the fiscal year ended December 31, 1998. During 1998, a total of
401,450 stock options were granted, of which 5,000 were granted to the Named
Executive Officers.
 
<TABLE>
<CAPTION>
                                                            INDIVIDUAL GRANTS                       POTENTIAL REALIZABLE
                                        ----------------------------------------------------------    VALUE AT ASSUMED
                                          NUMBER OF    PERCENT OF TOTAL                             ANNUAL RATES OF STOCK
                                         SECURITIES      OPTIONS/SARS                                PRICE APPRECIATION
                                         UNDERLYING       GRANTED TO       EXERCISE                    FOR OPTION TERM
                                        OPTIONS/SARS     EMPLOYEES IN        PRICE     EXPIRATION   ---------------------
NAME                                     GRANTED(#)       FISCAL YEAR       ($/SH)        DATE        5%($)      10%($)
--------------------------------------  -------------  -----------------  -----------  -----------  ---------  ----------
<S>                                     <C>            <C>                <C>          <C>          <C>        <C>
James C. Saxton.......................           --               --%      $      --           --   $      --  $       --
Douglas W. Hensley....................       25,000(1)           4.8           6.875      1/01/08      99,498     256,737
Jeffrey A. Pori.......................       25,000(1)           4.8           6.875      1/01/08      99,498     256,737
Timothy J. Adams......................        5,000              1.0           5.125      9/10/08      74,171     191,386
</TABLE>
 
------------------------
 
(1) Options originally granted to Messrs. Hensley and Pori in June 1997 and
    repriced in January 1998 from $8.25 per share to $6.875 per share.
 
AGGREGATE OPTION EXERCISES IN FISCAL 1998 AND FISCAL YEAR-END OPTION VALUES
 
    The following table sets forth certain information concerning unexercised
stock options held by the Named Executive Officers as of December 31, 1998:
 
<TABLE>
<CAPTION>
                                                                          NUMBER OF SHARES           VALUE OF UNEXERCISED
                                                                       UNDERLYING UNEXERCISED      IN-THE-MONEY OPTIONS AT
                                                                     OPTIONS AT FISCAL YEAR-END       FISCAL YEAR-END(1)
                                     SHARES ACQUIRED      VALUE      --------------------------  ----------------------------
NAME                                   ON EXERCISE      REALIZED     EXERCISABLE  UNEXERCISABLE  EXERCISABLE   UNEXERCISABLE
-----------------------------------  ---------------  -------------  -----------  -------------  -----------  ---------------
<S>                                  <C>              <C>            <C>          <C>            <C>          <C>
James C. Saxton....................            --              --            --            --     $      --      $      --
Douglas W. Hensley.................            --              --        61,447        25,000        24,591             --
Jeffrey A. Pori....................            --              --         4,090        26,022         1,636            409
Timothy J. Adams...................            --              --         5,000        25,000            --          6,875
</TABLE>
 
------------------------
 
(1) Amounts calculated by subtracting the exercise price of the options from the
    value of the underlying Common Stock on December 31, 1998, which was the
    closing market price on December 31, 1998 of $6.50 per share.
 
                                       40
<PAGE>
    The following table sets forth certain information concerning stock options
which had been previously awarded to the Named Executive Officers and which were
repriced during fiscal 1998:
 
TEN YEAR OPTION/SAR REPRICINGS
 
<TABLE>
<CAPTION>
                                        SECURITIES                                                        LENGTH OF
                                        UNDERLYING                                                     ORIGINAL OPTION
                                         NUMBER OF    MARKET PRICE OF  EXERCISE PRICE                  TERM REMAINING
                                       OPTIONS/SARS    STOCK AT TIME     AT TIME OF                      AT DATE OF
                                        REPRICED OR   OF REPRICING OR   REPRICING OR    NEW EXERCISE    REPRICING OR
NAME                      DATE          AMENDED(#)     AMENDMENT($)     AMENDMENT($)     PRICE($)(1)      AMENDMENT
------------------  -----------------  -------------  ---------------  ---------------  -------------  ---------------
<S>                 <C>                <C>            <C>              <C>              <C>            <C>
Douglas W.
  Hensley.........    January 2, 1998       25,000       $   6.875        $    8.25       $   6.875         49 months
Jeffery A. Pori...    January 2, 1998       25,000           6.875             8.25           6.875         49 months
</TABLE>
 
------------------------
 
(1) Closing price at January 2, 1998; the repricing date.
 
EMPLOYMENT AGREEMENT
 
    The Company has entered into a three-year employment agreement with James C.
Saxton, the Company's President and Chief Executive Officer, which terminates on
March 10, 2000, subject to automatic one-year renewals unless either the Company
or Mr. Saxton gives 60 days prior notice to the other of its desire not to
renew. Pursuant to the terms of such agreement, Mr. Saxton will be entitled to
receive a base salary of $360,000 per year, increasing each year by 3% or such
other amount as is determined by the Board of Directors in its discretion, and
will receive supplemental life insurance and long-term disability insurance at
the Company's expense. Mr. Saxton will also be eligible to receive an annual
bonus at the discretion of the Board of Directors. The agreement requires Mr.
Saxton to devote his full-time attention and energies to the Company's business
and contains restrictive covenants pursuant to which Mr. Saxton has agreed not
to compete with the Company, within 90 miles of any location in which the
Company or any affiliate is doing business, for a period of one year following
termination of his employment if such termination is the result of the Company's
termination of Mr. Saxton "for cause" (as such term is defined in the employment
agreement), Mr. Saxton's election not to renew the agreement at the end of any
term thereof or if Mr. Saxton terminates the agreement for other than "good
reason" (as such term is defined in the employment agreement). The agreement
further provides that if Mr. Saxton is terminated other than "for cause," Mr.
Saxton will be entitled to receive any unpaid compensation accrued through the
last day of his employment together with certain severance payments. There were
no other employment agreements with Directors or Named Executive Officers of the
Company at December 31, 1998.
 
INDIVIDUAL STOCK OPTION AGREEMENTS
 
    In December 1994, the Company granted options to purchase an aggregate of
127,907 shares of Common Stock to various officers and a consultant under
separate letter agreements, including options to purchase 61,447 shares to
Douglas W. Hensley and options to purchase 5,112 shares to Jeffrey A. Pori.
Options to purchase 23,497 shares lapsed upon termination of certain employees'
employment without vesting. In 1998, options to purchase 5,112 shares lapsed
upon a certain employee's termination of employment with the Company.
 
    The options granted to Mr. Hensley vested as to 20% of the shares on
December 29, 1995 and as to an additional 30% of the shares on December 29,
1996. The remaining shares underlying Mr. Hensley's options vested on December
29, 1997. As of December 29, 1998, 80% of the remaining options held by others
pursuant to such individual stock option grants had vested and the remaining 20%
will vest on December 29, 1999. All such options are exercisable from the date
of vesting through December 28, 2004,
 
                                       41
<PAGE>
at an exercise price of $6.10 per share, the fair market value of the underlying
shares on the date of grant, as determined by the Board of Directors in good
faith. The Company intends to register and qualify the additional 250,000 shares
underlying the options for resale under federal and state securities laws during
the second quarter of 1999.
 
STOCK OPTION PLANS
 
MANAGEMENT STOCK OPTION INCENTIVE PLAN
 
    On June 30, 1997, the Company adopted a Management Stock Option Incentive
Plan (the "Option Plan") which provides for the grant of options to purchase
Common Stock, up to a maximum of 500,000 shares. On December 7, 1998, the
Company's Board of Directors approved an increase from 500,000 to 750,000 in
number of shares subject to stock options under the Option Plan. The increase is
subject to majority ratification or approval, in accordance with Section 14 of
the Securities Exchange Act of 1934, by the stockholders not later than the next
annual meeting of stockholders. Any such additional options granted under the
Plan will be subject to such stockholder approval. All officers, employees
(including employees who are Directors), consultants, advisers, independent
contractors and agents are eligible to receive options under the Option Plan,
except that only employees will be eligible to receive incentive stock options.
No person eligible to receive options under the Option Plan may receive options
for the purchase of more than an aggregate of 25,000 shares in any year. As of
December 31, 1998, there were 502,150 options outstanding under the Option Plan.
Stock options granted on June 30, 1997 were issued at an exercise price equal to
the initial public offering price of $8.25 per share. Stock options granted
after June 30, 1997 were granted at the closing stock price on the grant date as
reported on the Nasdaq Stock Market.
 
    As of January 2, 1998 the Compensation Committee determined that it would be
in the best interests of the Company to offer all option holders the opportunity
to elect to reduce the exercise price of existing options from $8.25 per share
to $6.875 per share (the closing price of the Company's stock as reported on the
Nasdaq Stock Market on January 2, 1998), subject to extension of the five year
vesting schedule to commence January 2, 1998. Holders of options for 148,300
shares elected to have their stock options repriced. These options are
exercisable for a period of ten years and six months from the date of grant, and
vest ratably over a five year period commencing on the date of grant. In the
event that the employment of any optionee terminates during the exercise period,
the options lapse 30 days following such termination of employment.
 
    The Option Plan is administered by the Board of Directors or, in its
discretion, by a committee of the Board of Directors appointed for that purpose
(the "Committee"), which, subject to the terms of the Option Plan, will have the
authority in its sole discretion to determine (i) the individuals to whom
options shall be granted, (ii) the time or times at which options may be
exercised, (iii) the number of shares subject to each option, the option price
and the duration of each option granted and (iv) all of the other terms and
conditions of options granted under the Option Plan, including the period during
which options may be exercised following the optionee's termination of
employment or other relationship with the Company. The exercise price of
incentive stock options granted under the Option Plan must be at least equal to
the fair market value of the shares on the date of grant (110% of fair market
value in the case of optionees who own more than 10% of the combined voting
power of the Company and its subsidiaries) and may not have a term in excess of
10 years from the date of grant (five years in the case of optionees who own
more than 10% of the combined voting power of the Company and its subsidiaries).
These limits do not apply to non-qualified options. Options granted under the
Option Plan will not be transferable other than by will or the laws of descent
and distribution.
 
    Upon the occurrence of certain extraordinary events, appropriate adjustments
will be made by the Board of Directors to preserve, but not to increase, the
benefits to option holders, including adjustments to the aggregate number and
kind of shares subject to outstanding options and the per share exercise price.
 
                                       42
<PAGE>
    The Option Plan is of indefinite duration, however, no grant of incentive
stock options will be permitted to be made under the Option Plan more than 10
years after its date of adoption. The Board of Directors will have authority to
terminate or to amend the Option Plan without the approval of the Company's
stockholders unless stockholder approval is required by law or by stock exchange
or Nasdaq requirements applicable to the Company. The Board of Directors or the
Committee may amend the terms of any option granted under the Option Plan. No
amendment of any option or amendment or termination of the Option Plan that
impairs the rights of any holder of outstanding options may be made without the
consent of such holder.
 
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
 
    The Company has also adopted a Non-Employee Director Stock Option Plan (the
"Director Plan"). The Director Plan provides for the grant of non-qualified
options to purchase Common Stock to the members of the Company's Board of
Directors who are not employees. The maximum number of shares of Common Stock
which are available for issuance under the Director Plan is 50,000. The Director
Plan is administered by the Board of Directors.
 
    Under the Director Plan, each person who becomes a non-employee director is
automatically granted, as of the date of his election or appointment to the
Board of Directors, an initial option to purchase 500 shares of Common Stock. On
the first trading day of each April commencing with April 1998, each non-
employee director then serving on the Board of Directors and who has served for
at least three months is granted an option to purchase an additional 500 shares
of Common Stock. Options granted under the Director Plan have an exercise price
equal to the fair market value of the shares on the date of grant and are
generally exercisable one year from the date of grant. Options granted under the
Director Plan have a term of 10 years from the date of grant and are not
transferable other than by will or the laws of descent and distribution.
 
    Upon the occurrence of certain extraordinary events, appropriate adjustments
will be made by the Board of Directors to preserve, but not to increase, the
benefits to option holders, including adjustments to the aggregate number and
kind of shares subject to outstanding options and the per share exercise price.
In addition, options will become immediately exercisable upon a change of
control (as defined in the Director Plan).
 
    The Director Plan is of indefinite duration. The Board of Directors will
have authority to terminate or to amend the Director Plan without the approval
of the Company's stockholders unless stockholder approval is required by law or
by stock exchange or Nasdaq requirements applicable to the Company. No such
amendment may impair the rights of any holder of outstanding options without the
consent of such holder.
 
PROFIT SHARING PLAN AND EMPLOYEE STOCK OWNERSHIP PLAN
 
    On December 31, 1994, JSI established the Jim Saxton, Inc. Profit Sharing
Plan (the "Profit Sharing Plan") for its eligible employees. On December 29,
1995, the Company adopted the Saxton Incorporated Employee Stock Ownership Plan
(the "ESOP") and Trust (the "ESOP Trust"). In connection with the merger of the
Company and JSI on December 31, 1995, the Profit Sharing Plan was merged into
the ESOP and the assets of the trust established under the Profit Sharing Plan
were transferred to the ESOP Trust.
 
    An "employee stock ownership plan" (as defined in Section 407(d)(6) of
Employee Retirement Income Security Act of 1974 ("ERISA") and Section 4975(e)(7)
of the Internal Revenue Code) is designed to invest primarily in "qualifying
employer securities" of the Company. The account balances of participants in the
Profit Sharing Plan transferred to the ESOP Trust were invested by the ESOP
Trust in the Company's Common Stock. Thereafter, the Company may make periodic
contributions to the ESOP Trust out of its net profits in amounts determined by
the Board of Directors, which contributions may be made in cash or in shares of
the Company's Common Stock. Amounts contributed in cash will be used to
 
                                       43
<PAGE>
purchase shares of the Company's Common Stock. As of December 31, 1998, the ESOP
Trust held 44,142 shares of the Company's Common Stock.
 
    Participants in the Profit Sharing Plan on December 31, 1995 were
immediately eligible to participate in the ESOP. All other employees will become
eligible to participate in the ESOP on the first day of the ESOP plan year
coinciding with or next following the date the employee completes one year of
service with the Company, although eligibility to participate in the salary
deferral feature described below may commence at an earlier date. Contributions
by the Company to the ESOP for the benefit of a participating employee will vest
over a seven-year period of participation in the ESOP and will be held in trust
until distributed pursuant to the terms of the ESOP.
 
    The ESOP also includes a salary deferral feature (the "401(k) Feature")
which, if activated by the Company, will permit employees of the Company
participating in the ESOP to defer a portion of their compensation in accordance
with the provisions of Section 401(k) of the Internal Revenue Code. Matching
contributions by the Company may be made in amounts and at times determined by
the Company. Matching contributions by the Company, if any, under the 401(k)
Feature for the benefit of a participating employee will vest over a seven-year
period of participation in the ESOP and will be held in trust, together with the
participants' deferrals, until distributed pursuant to the terms of the 401(k)
Feature. The 401(k) Feature will be available to ESOP participants only for
those plan years which the Board of Directors of the Company determines that the
401(k) Feature shall apply.
 
LIMITATION OF LIABILITY AND INDEMNIFICATION
 
    The Company's Articles of Incorporation provide that, pursuant to Nevada
law, each Director shall not be liable for monetary damages for breach of the
Directors' fiduciary duty as a Director of the Company and its stockholders. In
addition, the Company's Bylaws provide that the Company will indemnify its
Directors and officers and may indemnify its employees and other agents to the
fullest extent permitted by law. The Company also contemplates entering into
indemnification agreements with its officers and Directors.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
    The following table sets forth certain information as of March 12, 1999 with
respect to the beneficial ownership of the Company's outstanding Common Stock by
(i) each person or group who was on such date the beneficial owner of more than
five percent of the outstanding Common Stock, (ii) each Director of the
 
                                       44
<PAGE>
Company, (iii) each Named Executive Officer and (iv) all Directors and executive
officers of the Company as a group.
 
<TABLE>
<CAPTION>
                                                                      SHARES
                                                                   BENEFICIALLY       PERCENTAGE OF SHARES
NAME AND ADDRESS(1)                                                OWNED(2)(3)         BENEFICIALLY OWNED
------------------------------------------------------------  ----------------------  ---------------------
<S>                                                           <C>                     <C>
James C. and Dorothy J. Saxton (4)..........................          3,737,898                  47.4%
Michele Saxton-Pori.........................................            531,369                   6.7%
Lee-Ann Saxton (5)..........................................            530,964                   6.7%
James C. Saxton II..........................................            530,000                   6.7%
Douglas W. Hensley (5)(6)...................................             69,197                   0.9%
Marc S. Hechter (6).........................................             23,450                     *
Jeffrey A. Pori (6).........................................             10,361                     *
Timothy J. Adams (5)........................................              5,000                     *
Paul Eisenberg..............................................                 --                    --
Bernard J. Mikell, Jr.......................................              1,000                     *
Robert L. Seale.............................................                 --                    --
All Directors and executive officers as a group (10
  persons)(7)...............................................          4,379,275                  55.5%
</TABLE>
 
------------------------
 
*   Less than 1%.
 
(1) The address of each beneficial owner of more than five percent of the
    outstanding Common Stock is 5440 West Sahara Avenue, Third Floor, Las Vegas,
    Nevada 89146.
 
(2) Unless otherwise noted, sole voting and dispositive power are possessed with
    respect to all shares of Common Stock shown.
 
(3) Includes vested shares allocated to the account of the following individuals
    and for all Directors and executive officers as a group under the Company's
    ESOP: James C. Saxton-- 5,798 shares; Michele Saxton-Pori-- 1,369 shares;
    Lee-Ann Saxton-- 964 shares; Douglas W. Hensley-- 2,500 shares, Jeffrey A.
    Pori-- 1,271 shares; and all Directors and executive officers as a group--
    11,902 shares. ESOP participants have sole discretion as to voting of such
    allocated shares.
 
(4) Includes 1,876,848 shares beneficially owned by James C. Saxton and
    1,770,000 shares beneficially owned by Mr. Saxton's wife, Dorothy J. Saxton,
    and 91,050 shares as joint tenants. Mr. and Mrs. Saxton may each be deemed
    to beneficially own the shares owned by the other.
 
(5) Does not include 21,228 shares owned by the Company's ESOP Trust which are
    not currently allocated to the account of any ESOP participants. The voting
    of such unallocated shares may be directed by Lee-Ann Saxton, Douglas W.
    Hensley and Timothy J. Adams as members of the ESOP Administrative
    Committee. Ms. Saxton and Messrs. Hensley and Adams each disclaim beneficial
    ownership of all such shares.
 
(6) Represents shares which may be acquired upon exercise of options exercisable
    within 60 days.
 
(7) Includes 1,770,000 shares owned by Dorothy J. Saxton and 91,050 shares owned
    by Dorothy J. Saxton and James C. Saxton as joint tenants, as to which James
    C. Saxton may be deemed to beneficially own, and an aggregate of 103,987
    shares which may be acquired by Messrs. Hensley, Hechter and Pori upon the
    exercise of options exercisable within 60 days. Excludes shares owned by
    Lee-Ann Saxton and James C. Saxton II, who are not executive officers or
    Directors of the Company.
 
                                       45
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    Pursuant to an agreement dated January 10, 1994, the Company agreed to
construct and sell an approximately 4,420 square-foot Turtle Stop convenience
store ("Turtle Stop") to L.'M.E.D.D., Inc., a privately-held corporation of
which Michele Saxton-Pori is a 25% stockholder ("L'MEDD"), for approximately
$1.3 million, subject to the Company's arranging permanent financing on behalf
of L'MEDD. Under the terms of the agreement, either the Company or L'MEDD had
the right to terminate the agreement if permanent financing was not obtained.
Financing was not obtained, the sale was not consummated and, on June 18, 1997,
the Company terminated the agreement. Pursuant to a lease dated December 1,
1994, the Company leased the property to Operations Management Group ("O"), a
corporation owned by the stockholders of L'MEDD (including Ms. Saxton-Pori), on
a triple-net basis. Under the terms of the lease, OMG was required to pay basic
monthly rent of $13,244 during the initial lease year, adjusted annually to
reflect increases in the cost of living. Management believes that the terms of
the lease with OMG are comparable to the terms which would have been negotiated
with an unaffiliated third-party. At December 31, 1998, OMG was indebted to the
Company in the aggregate amount of approximately $405,000, which represented
delinquent rent and advances by the Company to OMG for operating capital. The
Company assisted in the operation of Turtle Stop by maintaining the store books
and records and providing a Company employee to train on-site personnel for no
compensation. In March 1998, the Company evicted OMG from the premises after
exhaustive efforts to collect the delinquent rent and advances. The Company
wrote-off $405,000 during the second quarter of 1998 for such delinquent rent
and advances. The property is currently vacant and the collection of the
receivable is not probable. The Company plans to sell the property. Management
believes that neither the property nor its operations are material to the
Company as a whole.
 
    During the year ended December 31, 1997 and 1998, the Company's working
capital needs were augmented through a number of loans from affiliated parties,
all of which were approved by a majority of the disinterested members of the
Company's Board of Directors. The transactions were as follows:
 
    On July 1, 1997, the Company entered into an unsecured note payable with
James Lanzilotti, a relative of the Company's President and principal
stockholder, in the amount of $466,231, bearing interest at 12% payable monthly
and a maturity date of July 1, 1998, which was extended to July 1, 1999.
 
    On August 1, 1997, the Company entered into an unsecured note payable with
Paul Eisenberg, a Director of the Company, in the amount of $1,000,000 bearing
interest at 12% payable monthly and a maturity date of August 1, 1998, which was
extended to August 1, 1999. This note is guaranteed by Mr. and Mrs. James C.
Saxton, two of the principal stockholders of the Company.
 
    On August 27, 1997, the Company entered into an unsecured note payable with
James C. Saxton, the Company's President and principal stockholder, in the
amount of $721,000, bearing interest at 18% payable monthly and a maturity date
of November 27, 1998, which was extended to August 1, 1999.
 
    On September 30, 1997, the Company entered into a transaction with James C.
Saxton, the Company's President and principal stockholder, in which the Company
sold to Mr. Saxton its interest in a joint venture for $755,000. The book value
of the Company's interest was $500,000 and the net gain of $255,000 is included
in "Other income" on the consolidated statements of income. The sales price
consisted of an offset to advances due to Mr. Saxton of $500,000 and a note
receivable of $255,000. The note receivable bore interest at 10.25% and matured
on September 30, 1998, at which time the receivable was used to apply to other
related party notes payable to Mr. Saxton. The receivable is considered paid in
full and related party notes payables to Mr. Saxton was reduced by a total of
$255,000. The $255,000 was applied to the following two related party notes:
 
    On October 6, 1997, the Company entered into an unsecured note payable with
James C. Saxton, the Company's President and principal stockholder, in the
amount of $420,000, bearing interest at 18%,
 
                                       46
<PAGE>
payable monthly and a maturity date of November 6, 1998. The note was reduced by
$166,000 from the transaction as described above and the maturity date was
extended to August 1, 1999.
 
    On October 8, 1997, the Company entered into an unsecured note payable with
James C. Saxton, the Company's President and principal stockholder, in the
amount of $400,000, which was paid in full in September 1998 from an offsetting
transaction as described above.
 
    During the fourth quarter of 1998, the Company's President and principal
stockholder, James C. Saxton, pledged 3,111,560 shares of Common Stock, or
approximately 40.6% of its outstanding shares, as collateral for two personal
loans to Mr. Saxton. Mr. Saxton reloaned the proceeds from such loans to the
Company for use in connection with the acquisition of Diamond Key. The two notes
payable to Mr. Saxton aggregating $7.6 million, bear interest at 12% per annum
and mature on August 1, 1999. The Company intends to refinance the loans from
Mr. Saxton prior to their maturities. The Company understands that Mr. Saxton
intends to repay, in full, the loans from the two lenders upon repayment of the
loans he has made to the Company.
 
    In the future, transactions with affiliates of the Company are anticipated
to be minimal due in part to the availability of borrowings under the Company's
$10.0 million revolving line of credit obtained in February 1998 from a
financial institution. The Company will continue to require approval by a
majority of the Board of Directors, including a majority of the disinterested
members of the Board of Directors and will be made on terms no less favorable to
the Company than could be obtained from unaffiliated third parties.
 
                                       47
<PAGE>
                                    PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
 
(A)  CERTAIN DOCUMENTS FILED AS PART OF FORM 10-K.
 
<TABLE>
<CAPTION>
                                                                                                             PAGE
                                                                                                          -----------
<S>                                                                                                       <C>
Independent Auditors' Report............................................................................         F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998............................................         F-3
Consolidated Statements of Income for the years ended December 31, 1996, 1997 and 1998..................         F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1997 and 1998....         F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1997 and 1998..............         F-6
Notes to Consolidated Financial Statements..............................................................         F-8
Former Independent Auditors' Report.....................................................................        F-32
</TABLE>
 
(B) REPORTS ON FORM 8-K. The following reports on Form 8-K were filed during or
    dated for the last quarter of fiscal year ended December 31, 1998:
 
    Form 8-K dated and filed on September 23, 1998 reporting twelve month
    earnings since the Company became public on June 24, 1997 (Item 5).
 
    Form 8-K dated October 8, 1998 and filed on October 28, 1998 reporting a
    definitive agreement to acquire Diamond Key Homes, Inc. (Item 5).
 
    Form 8-K dated and filed on November 20, 1998 reporting the change of
    control of registrant by the pledge of common stock by the Company's
    President and his wife. The closing of the acquisition of Diamond Key Homes,
    Inc. was also reported in this Form 8-K (Items 1 and 5).
 
    Form 8-K/A dated November 20, 1998, filed on January 27, 1999 reporting
    consolidated pro forma financial statements including Diamond Key Homes,
    Inc. (Items 2, 5 and 7).
 
    Form 8-K dated December 9, 1998 and filed on December 16, 1998 reporting a
    change in certifying accountants and an increase in stock options under the
    Company's Management Stock Option Incentive Plan (Items 4 and 5).
 
(C)  EXHIBITS.
 
<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER       REF.                                                DESCRIPTION
-----------     ---     --------------------------------------------------------------------------------------------------
<S>          <C>        <C>
       2.1         (1)  Plan of Merger between Jim Saxton, Inc. and the Company, dated December 26, 1995, as filed with
                          Nevada Secretary of State on December 29, 1995
 
       2.2         (1)  Reorganization documents
 
       3.1         (1)  Articles of Incorporation of the Company
 
       3.2         (1)  Articles of Merger merging Jim Saxton, Inc. into the Company, as filed with Nevada Secretary of
                          State on December 29, 1995
 
       3.3         (1)  Bylaws of the Company, as amended
 
       4.1         (1)  Specimen Common Stock Certificate
 
       4.2         (1)  Form of Representatives' Warrants
 
       4.3         (1)  Form of Saxton Warrants
</TABLE>
 
                                       48
<PAGE>
<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER       REF.                                                DESCRIPTION
-----------     ---     --------------------------------------------------------------------------------------------------
<S>          <C>        <C>
      10.1         (1)  Saxton Incorporated Employee Stock Ownership Plan and Trust adopted December 29, 1995
 
    10.1.1         (1)  Amendment to Saxton Incorporated Employee Stock Ownership Plan and Trust, adopted December 10,
                          1996
 
      10.2         (1)  Management Stock Option Incentive Plan
 
      10.3         (1)  Non-Employee Stock Option Plan
 
      10.4         (1)  1994 Stock Option Agreement between the Company and Douglas W. Hensley
 
      10.5         (1)  Employment Agreement between the Company and James C. Saxton, dated March 10, 1997
 
      10.6         (1)  Form of Indemnification Agreement between the Company and each Director and officer of the Company
 
      10.7         (1)  Tax Indemnification Agreement between the Company and each of James C. Saxton, Dorothy J. Saxton,
                          Michele Saxton-Pori, Lee-Ann Saxton and James C. Saxton II
 
      10.8         (1)  Indemnification Agreement regarding liability on Company loans between the Company and James C.
                          Saxton and Dorothy J. Saxton
 
      10.9         (1)  Revolving line of Credit Facility between the Company and Key Bank
 
     10.10         (2)  Line of credit agreement between the Company and Key Bank dated January 9, 1998
 
     10.11         (3)  Agreement and Plan of Merger dated as of March 20, 1998 by and among Saxton Incorporated, MIKA
                          Max, Inc., Brian K. Brady and Maxim Homes, Inc.
 
     10.12         (3)  Employment Agreement dated as of March 20, 1998 between Maxim Homes, Inc. and Brian K. Brady
 
     10.13         (4)  Stock and Membership Interest Purchase Agreement dated as of October 7, 1998 by and among Saxton
                          Incorporated, Diamond Key Homes, Inc., Diamond Key Construction LLC, Larison P. Clark and Lisa
                          B. Clark
 
     10.14         (5)  Amendment to Purchase Agreement dated as of October 7, 1998
 
     10.15         (6)  Letter to SEC from KPMG LLP dated December 16, 1998
 
     10.16              Promissory Note dated October 14, 1998 between the Company and James C. Saxton
 
     10.17              Promissory Note dated November 5, 1998 between the Company and James C. Saxton
 
     10.18              Employment Agreement dated as of November 13, 1998 between Diamond Key Homes, Inc. and Larison P.
                          Clark
 
      21.1              List of subsidiaries of the Company
 
      23.1              Former Independent Auditors' Consent for Form S-8
 
      23.2              Independent Auditors' Consent for Form S-8
 
        27              Financial Data Schedule
 
        99         (2)  Independent Auditors' Report--KPMG LLP dated March 24, 1998
</TABLE>
 
------------------------
 
(1) Filed as part of the Company's Registration Statement on Form S-1 (file No.
    333-23927) originally filed on June 24, 1997 and incorporated herein by
    reference.
 
                                       49
<PAGE>
(2) Filed as part of Form 10-K for the fiscal year ended December 31, 1997 and
    incorporated herein by reference.
 
(3) Filed as part of Form 8-K dated March 20, 1998, filed on April 6, 1998 and
    incorporated herein by reference.
 
(4) Filed as part of Form 8-K dated October 8, 1998, filed on October 28, 1998
    and incorporated herein by reference.
 
(5) Filed as part of Form 8-K dated and filed on November 20, 1998 and
    incorporated herein by reference.
 
(6) Filed as part of Form 8-K dated December 9, 1998, filed on December 16, 1998
    and incorporated herein by reference.
 
(D) FINANCIAL STATEMENT SCHEDULES REQUIRED BY REGULATION S-X.
 
    No financial statement schedules are included because of the absence of the
    conditions under which they are required or because the information is
    included in the financial statements or the notes hereto.
 
                                       50
<PAGE>
                                   SIGNATURES
 
    Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be on its behalf by the undersigned, there unto duly authorized as of March 30,
1999.
 
<TABLE>
<S>                             <C>  <C>
                                              SAXTON INCORPORATED
                                                 (REGISTRANT)
 
                                By:             /s/ JAMES C. SAXTON
                                     ------------------------------------------
                                                  James C. Saxton
                                        CHAIRMAN OF THE BOARD OF DIRECTORS,
                                       PRESIDENT, CHIEF EXECUTIVE OFFICER AND
                                                      DIRECTOR
</TABLE>
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and the dates indicated.
 
<TABLE>
<CAPTION>
          NAME                          TITLE                      DATE
-------------------------  -------------------------------  -------------------
 
<C>                        <S>                              <C>
                           Chairman of the Board of
   /s/ JAMES C. SAXTON       Directors, President, Chief
-------------------------    Executive Officer and            March 30, 1999
     James C. Saxton         Director (Principal Executive
                             Officer)
 
 /s/ DOUGLAS W. HENSLEY    Executive Vice President,
-------------------------    Development Corporate            March 30, 1999
   Douglas W. Hensley        Services and Director
 
                           Executive Vice President of
    /s/ KIRK SCHERER         Finance, Chief Financial
-------------------------    Officer (Principal Financial     March 30, 1999
      Kirk Scherer           Officer)
 
   /s/ MARC S. HECHTER
-------------------------  Senior Vice President of           March 30, 1999
     Marc S. Hechter         Business Affairs and Director
 
  /s/ TIMOTHY J. ADAMS
-------------------------  General Counsel and Director       March 30, 1999
    Timothy J. Adams
 
 /s/ MICHELE SAXTON-PORI
-------------------------  Executive Vice President and       March 30, 1999
   Michele Saxton-Pori       Director
</TABLE>
 
                                       51
<PAGE>
<TABLE>
<CAPTION>
          NAME                          TITLE                      DATE
-------------------------  -------------------------------  -------------------
 
<C>                        <S>                              <C>
 /s/ MELODY J. SULLIVAN    Vice President, Chief
-------------------------    Accounting Officer (Principal    March 30, 1999
   Melody J. Sullivan        Accounting Officer)
 
   /s/ PAUL EISENBERG
-------------------------  Director                           March 30, 1999
     Paul Eisenberg
 
 /s/ BERNARD J. MIKELL,
           JR.
-------------------------  Director                           March 30, 1999
 Bernard J. Mikell, Jr.
 
   /s/ ROBERT L. SEALE
-------------------------  Director                           March 30, 1999
     Robert L. Seale
</TABLE>
 
                                       52
<PAGE>
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>                                                                                                          <C>
Independent Auditors' Report...............................................................................         F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998...............................................         F-3
Consolidated Statements of Income for the years ended December 31, 1996, 1997 and 1998.....................         F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1997 and 1998.......         F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1997 and 1998.................         F-6
Notes to Consolidated Financial Statements.................................................................         F-8
Former Independent Auditors' Reports.......................................................................        F-32
</TABLE>
 
                                      F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
 
The Board of Directors and Stockholders of
Saxton Incorporated
Las Vegas, Nevada
 
    We have audited the accompanying consolidated balance sheet of Saxton
Incorporated and subsidiaries (the "Company") as of December 31, 1998, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit. The
consolidated balance sheet of the Company as of December 31, 1997 and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the two years then ended were audited by other auditors whose
report, dated March 24, 1998, expressed an unqualified opinion on those
statements.
 
    We conducted our audit in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
 
    In our opinion, such 1998 consolidated financial statements present fairly,
in all material respects, the financial position of the Company as of December
31, 1998, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
 
Deloitte & Touche LLP
 
Las Vegas, Nevada
March 12, 1999
 
                                      F-2
<PAGE>
                              SAXTON INCORPORATED
 
                                AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                                                 DECEMBER 31,
                                                                                             ---------------------
                                                                                               1997        1998
                                                                                             ---------  ----------
<S>                                                                                          <C>        <C>
                                          ASSETS
Real estate properties:
  Operating properties, net of accumulated depreciation....................................  $  25,933  $   23,117
  Properties under development.............................................................     21,598      79,418
  Land held for future development or sale.................................................      3,767       1,349
                                                                                             ---------  ----------
    Total real estate properties...........................................................     51,298     103,884
Cash and cash equivalents..................................................................      1,110       1,331
Due from Tax Credit Partnerships...........................................................     17,397      31,997
Construction contracts receivable, net of allowance for doubtful accounts of $398 and $403
  at December 31, 1997 and 1998, respectively..............................................      3,043       8,773
Costs and estimated earnings in excess of billings on uncompleted contracts................      4,115       2,618
Notes receivable...........................................................................      2,884       1,000
Investments in joint ventures..............................................................      3,602       3,577
Due from related parties...................................................................        386         154
Prepaid expenses and other assets..........................................................      6,285      17,661
                                                                                             ---------  ----------
    Total assets...........................................................................  $  90,120  $  170,995
                                                                                             ---------  ----------
                                                                                             ---------  ----------
 
                           LIABILITIES AND STOCKHOLDERS' EQUITY
 
Accounts payable and accrued expenses......................................................  $  11,376  $   24,892
Tenant deposits and other liabilities......................................................      2,860       6,295
Billings in excess of costs and estimated earnings on uncompleted contracts................      1,791         181
Notes payable..............................................................................     40,610      88,306
Notes payable to related parties...........................................................      2,695      12,016
Long-term capital lease obligations........................................................      1,144       1,118
                                                                                             ---------  ----------
    Total liabilities......................................................................     60,476     132,808
                                                                                             ---------  ----------
Commitments and contingencies (notes 12 and 21)
 
Stockholders' equity:
  Common stock, $.001 par value. Authorized 50,000,000 shares, issued and outstanding
    7,619,142 shares in 1997 and 7,732,922 shares in 1998                                            8           8
  Preferred stock, $.001 par value. Authorized 5,000,000 shares; no shares issued and
    outstanding                                                                                     --          --
  Additional paid-in capital...............................................................     20,670      21,482
  Retained earnings........................................................................      8,966      16,697
                                                                                             ---------  ----------
    Total stockholders' equity.............................................................     29,644      38,187
                                                                                             ---------  ----------
    Total liabilities and stockholders' equity.............................................  $  90,120  $  170,995
                                                                                             ---------  ----------
                                                                                             ---------  ----------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-3
<PAGE>
                              SAXTON INCORPORATED
 
                                AND SUBSIDIARIES
 
                       CONSOLIDATED STATEMENTS OF INCOME
 
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                                   YEARS ENDED DECEMBER 31,
                                                                             -------------------------------------
                                                                               1996         1997          1998
                                                                             ---------  ------------  ------------
<S>                                                                          <C>        <C>           <C>
Revenue:
  Construction revenue, including Tax Credit
    Partnership construction revenue of $36,011, $21,526 and $34,345 for
    the years ended 1996, 1997 and 1998, respectively......................  $  41,875  $     31,707  $     51,524
    Sales of homes.........................................................     12,963        11,058        27,634
    Sales of commercial properties.........................................      4,772        11,540         7,823
    Rental revenue.........................................................      3,922         3,583         3,515
    Other revenue..........................................................        536         1,508         1,676
                                                                             ---------  ------------  ------------
      Total revenue........................................................     64,068        59,396        92,172
                                                                             ---------  ------------  ------------
Cost of revenue:
  Cost of construction, including Tax Credit
    Partnership cost of construction of $27,623, $17,315 and $25,782 for
    the years ended 1996, 1997 and 1998, respectively......................     33,078        26,981        40,863
  Cost of homes sold.......................................................     10,967        10,139        23,754
  Cost of commercial properties sold.......................................      3,444         7,127         7,710
  Rental operating cost....................................................        784           724           815
                                                                             ---------  ------------  ------------
    Total cost of revenue..................................................     48,273        44,971        73,142
                                                                             ---------  ------------  ------------
  Gross profit.............................................................     15,795        14,425        19,030
                                                                             ---------  ------------  ------------
  General and administrative expenses......................................      3,425         2,746         5,042
  Depreciation and amortization............................................      1,079         1,393         1,687
                                                                             ---------  ------------  ------------
      Operating income.....................................................     11,291        10,286        12,301
                                                                             ---------  ------------  ------------
Other income (expense):
  Interest expense, net of interest income of $72, $985 and $1,105 for the
    years ended December 31, 1996, 1997 and 1998 respectively                   (2,748)       (2,101)       (1,232)
  Joint venture earnings (loss)............................................        (43)           16           (25)
                                                                             ---------  ------------  ------------
      Total other expense..................................................     (2,791)       (2,085)       (1,257)
                                                                             ---------  ------------  ------------
      Income before provision for income taxes.............................      8,500         8,201        11,044
Provision for income taxes.................................................      2,517         2,350         3,313
                                                                             ---------  ------------  ------------
      Net income...........................................................  $   5,983  $      5,851  $      7,731
                                                                             ---------  ------------  ------------
                                                                             ---------  ------------  ------------
Earnings Per Common Share:
Basic
Net income............................................................................  $       0.92  $       1.01
                                                                                        ------------  ------------
                                                                                        ------------  ------------
Weighted-average number of common shares outstanding..................................     6,341,879     7,656,189
                                                                                        ------------  ------------
                                                                                        ------------  ------------
Diluted
Net income............................................................................  $       0.92  $       1.01
                                                                                        ------------  ------------
                                                                                        ------------  ------------
Weighted-average number of common shares outstanding assuming dilution................     6,363,219     7,674,119
                                                                                        ------------  ------------
                                                                                        ------------  ------------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-4
<PAGE>
                              SAXTON INCORPORATED
                                AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
                  YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
 
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                            ADDITIONAL               PARTNERS'
                                                 SHARES                       PAID-IN    RETAINED     CAPITAL
                                               OUTSTANDING   COMMON STOCK     CAPITAL    EARNINGS    (DEFICIT)     TOTAL
                                              -------------  -------------  -----------  ---------  -----------  ---------
<S>                                           <C>            <C>            <C>          <C>        <C>          <C>
Balance at December 31, 1995................        4,933      $       5     $   2,419   $     479   $     790   $   3,693
Contributions...............................           --             --            --          --         256         256
Distributions...............................           --             --        (1,577)         --      (2,064)     (3,641)
Stock issued to Employee Stock Ownership
  Plan......................................           17             --           172        (172)         --          --
Net income..................................           --             --            --       4,793       1,190       5,983
                                                    -----            ---    -----------  ---------  -----------  ---------
Balance at December 31, 1996................        4,950              5         1,014       5,100         172       6,291
Stock issued to Employee Stock Ownership
  Plan......................................           10             --             7          (7)         --          --
Contributions...............................           --             --            --          --         819         819
Distributions...............................           --             --            --          --      (2,321)     (2,321)
Purchase of partnership interests...........           --             --            --          --        (648)       (648)
Issuance of common stock in connection with
  initial public offering...................        2,275              3        17,320          --          --      17,323
Costs charged against the proceeds of the
  initial public offering...................           --             --        (2,321)         --          --      (2,321)
Issuance of 400,000 common stock warrants...           --             --         1,000          --          --       1,000
Issuance of common stock for retirement of
  debt......................................          384             --         3,650          --          --       3,650
Net income..................................           --             --            --       3,873       1,978       5,851
                                                    -----            ---    -----------  ---------  -----------  ---------
Balance at December 31, 1997................        7,619              8        20,670       8,966          --      29,644
Stock issued in connection with acquisition
  of Maxim Homes, Inc.......................           42             --           338          --          --         338
Stock issued in connection with acquisition
  of Diamond Key Homes, Inc.................           72             --           474          --          --         474
Net income..................................           --             --            --       7,731          --       7,731
                                                    -----            ---    -----------  ---------  -----------  ---------
Balance at December 31, 1998................        7,733      $       8     $  21,482   $  16,697   $      --   $  38,187
                                                    -----            ---    -----------  ---------  -----------  ---------
                                                    -----            ---    -----------  ---------  -----------  ---------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-5
<PAGE>
                              SAXTON INCORPORATED
                                AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
 
<TABLE>
<CAPTION>
                                                                                           YEARS ENDED DECEMBER 31,
                                                                                       ---------------------------------
                                                                                         1996        1997        1998
                                                                                       ---------  ----------  ----------
<S>                                                                                    <C>        <C>         <C>
Cash flows from operating activities:
  Net income.........................................................................  $   5,983  $    5,851  $    7,731
  Adjustments to reconcile net income to net cash used in operating activities:
    Depreciation and amortization....................................................      1,079       1,393       1,687
    Gain on sales of commercial properties...........................................     (1,327)     (4,413)       (475)
    Joint venture (earnings) losses..................................................         43         (16)         25
    Changes in operating assets and liabilities:
      Increase in due from Tax Credit Partnerships...................................     (9,562)     (1,182)    (14,600)
      Increase in construction contracts receivable..................................       (390)     (2,070)     (5,723)
      Decrease (increase) in costs and estimated earnings in excess of billings on
        uncompleted contracts........................................................     (1,170)     (1,597)      1,497
      Increase in properties under development.......................................     (2,390)    (11,094)    (46,338)
      Decrease (increase) in prepaid expenses and other assets.......................     (2,012)     (3,413)      2,301
      Increase in accounts payable and accrued expenses..............................      5,243         831      13,516
      Increase (decrease) in billing in excess of costs and estimated earnings on
        uncompleted contracts........................................................        317       1,373      (1,610)
      Increase in tenant deposits and other liabilities..............................        478       1,867       6,115
                                                                                       ---------  ----------  ----------
      Net cash used in operating activities..........................................     (3,708)    (12,470)    (35,874)
                                                                                       ---------  ----------  ----------
Cash flows from investing activities:
  Expenditures for property acquisitions and improvements............................     (7,232)     (7,002)    (14,168)
  Proceeds from sales of commercial properties.......................................      4,772       9,360       4,983
  Decrease (increase) in due from related parties....................................      1,234        (503)        (46)
  Decrease (increase) in notes receivable............................................      2,044        (565)      1,880
  Capital contributions to joint ventures............................................         --      (2,254)         --
  Cash paid to acquire net assets of Maxim Homes, Inc. and Diamond Key Homes, Inc....         --          --     (11,669)
                                                                                       ---------  ----------  ----------
      Net cash provided by (used in) investing activities............................        818        (964)    (19,020)
                                                                                       ---------  ----------  ----------
Cash flows from financing activities:
  Proceeds from issuance of notes payable............................................     13,059      43,148      99,933
  Principal payments on notes payable and capital lease obligations..................     (8,194)    (40,760)    (52,394)
  Net increase in notes payable to related parties...................................        931         249       7,576
  Payments to purchase partnership interests.........................................         --      (2,804)         --
  Proceeds from issuance of (payments on) subordinated dividend notes................      1,577      (2,700)         --
  Capital contributions from partners................................................        256         819          --
  Net proceeds from the issuance of common stock.....................................         --      17,323          --
  Distributions paid to partners.....................................................     (3,641)     (2,321)         --
                                                                                       ---------  ----------  ----------
      Net cash provided by financing activities......................................      3,988      12,954      55,115
                                                                                       ---------  ----------  ----------
      Net increase (decrease) in cash and cash equivalents...........................      1,098        (480)        221
Cash and cash equivalents:
  Beginning of year..................................................................        492       1,590       1,110
                                                                                       ---------  ----------  ----------
  End of year........................................................................  $   1,590  $    1,110  $    1,331
                                                                                       ---------  ----------  ----------
                                                                                       ---------  ----------  ----------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-6
<PAGE>
                              SAXTON INCORPORATED
                                AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (in thousands) (Continued)
 
<TABLE>
<CAPTION>
                                                                                          YEARS ENDED DECEMBER 31,
                                                                                       -------------------------------
                                                                                         1996       1997       1998
                                                                                       ---------  ---------  ---------
<S>                                                                                    <C>        <C>        <C>
Supplemental disclosure of cash flow information:
  Cash paid during the year for interest, net of amounts capitalized.................  $   2,799  $   3,192  $   4,024
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
  Cash paid during the year for income taxes.........................................  $     171  $   1,395  $   4,947
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
 
Non-cash financing and investing activities:
  Properties sold in exchange for notes receivable...................................  $      --  $   2,180  $      --
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
  Notes payable issued to acquire real estate properties.............................  $   1,968  $      --  $      --
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
  Capital lease obligations recorded in connection with equipment
    recorded.........................................................................  $     400  $     179  $     120
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
  Deferred offering costs charged against gross proceeds of initial public
    offering.........................................................................  $      --  $   2,321  $      --
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
  Common stock issued to retire subordinated dividend notes..........................  $      --  $   3,650  $      --
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
  Warrants for common stock issued to reduce subordinated dividend note
    obligations......................................................................  $      --  $   1,000  $      --
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
  Amounts due from related parties offset against subordinated dividend notes in
    satisfaction of the respective obligations.......................................  $      --  $     727  $      --
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
  Common stock issued to acquire net assets of Maxim Homes, Inc......................  $      --  $      --  $     338
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
  Recognition of revenue for the prior sale of a commercial property which was
    subject to certain conditions....................................................  $      --  $      --  $   2,834
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
  Amounts due from related parties applied to notes payable to related parties.......  $      --  $      --  $     255
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
  Common stock issued to acquire net assets of Diamond Key Homes, Inc................  $      --  $      --  $     474
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
  Cash and Common Stock accrued to be paid in November 1999 in connection with the
    acquisition of Diamond Key Homes, Inc............................................  $      --  $      --  $   2,000
                                                                                       ---------  ---------  ---------
                                                                                       ---------  ---------  ---------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-7
<PAGE>
                              SAXTON INCORPORATED
                                AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1996, 1997 AND 1998
 
(1) ORGANIZATION
 
    The accompanying consolidated financial statements present the financial
position and results of operations and cash flow of the company, including the
accounts of Saxton Incorporated, formerly Jim Saxton, Inc. ("JSI"), seven
general partnerships, three limited partnerships and nine wholly-owned
corporations, Big Tyme Food Marts, Inc. ("Big Tyme"), Nevada Housing
Opportunities Manager, LLC, RealNet Commercial Brokerage Inc., Chancellor
Capital, Tonopah Manager, Inc., Levitz Plaza Manager, Inc., Maxim Homes, Inc.
("Maxim"), HomeBanc Mortgage Corporation, Diamond Key Homes Inc., Diamond Key
Construction, LLC ("Diamond Key") and all the partnerships included in the
combination (predecessor partnerships) which are, or were before the initial
public offering (a defined below) under the common management of Saxton or
executive officers of Saxton Incorporated. Such consolidated group is
collectively referred to as "Saxton Incorporated and Subsidiaries" ("Saxton" or
the "Company"). After the Company's initial public offering in June 1997, the
Company owned 100% of the economic interests in the partnerships. Therefore, the
partnerships were dissolved by operation of law and all assets, subject to all
liabilities, of such partnerships were transferred to the Company. All
significant intercompany balances and transactions have been eliminated in
consolidation.
 
    Prior to the Company's initial public offering, stockholders' equity of the
Company consisted of the net assets of the predecessor partnerships and Saxton's
stockholders' equity. In December 1995, JSI was acquired by Saxton, a newly
formed holding company. The acquisition was accounted for as the combination of
entities under common control using the as-if pooling of interests method. Each
outstanding share of JSI common stock was exchanged for 1,916 shares of $.001
par value of the Company's common stock ("Common Stock").
 
    The names of the predecessor partnerships, which are included in the
combined financial statements, are as follows:
 
<TABLE>
<S>                           <C>
Saxton Properties             Novex, LP
                              Levitz Plaza,
LRC, LP                       LP
Sahara West                   SNIC II
Mendenhall & Saxton Partners  LB&S Partners
R & D Partners                TVS
</TABLE>
 
    Because the unaffiliated partners of the partnerships included in the
combined financial statements were issued cash for their ownership interests in
such partnerships as a result of the business combination, no minority interest
is included in the combined financial statements.
 
INITIAL PUBLIC OFFERING
 
    On June 24, 1997, the Company completed its initial public offering (the
"Offering") of 2,275,000 shares of Common Stock at $8.25 per share. The net
proceeds of approximately $17.3 million were used as follows: (i) $8.1 million
to repay indebtedness, of which $3.4 million represented indebtedness to the
Company's principal stockholders and $1.7 million represented indebtedness to
other related parties, (ii) $5.6 million to acquire land for future development,
(iii) $2.8 million to acquire the interests of various third-party partners in
certain properties and (iv) approximately $800,000 for development activities
and
 
                                      F-8
<PAGE>
general corporate purposes. Deferred offering costs in connection with the
Offering were charged to Stockholders' Equity.
 
    Concurrently with the closing of the Offering, certain stockholders of the
Company (the "Contributing Stockholders") contributed their partnership
interests in certain properties to the Company. In addition, certain obligations
to the Contributing Stockholders represented by subordinated dividend notes (the
"Notes") were satisfied as follows: (i) approximately $700,000 of outstanding
amounts due to the Company by the principal stockholders were offset against the
Notes, (ii) $3.7 million was repaid through the issuance by the Company of
384,256 shares of Common Stock and (iii) $1.0 million was repaid through the
issuance by the Company of warrants for 400,000 shares of Common Stock which
lapsed unexercised.
 
    Concurrent with the sale of the Offering shares, the Company consummated a 1
for 0.51312 reverse stock split and effected a plan of reorganization. All share
and per share data included in the accompanying consolidated financial
statements give effect to the reverse stock split.
 
    The Company is engaged in the acquisition, design, development,
construction, ownership and operation of real property located in the fast
growing markets of Las Vegas, Reno, Salt Lake City, Tucson and Phoenix. The
properties consist of industrial buildings, retail centers, apartments,
single-family homes and land in various phases of development. The Company also
has non-controlling interests in joint ventures that are engaged in the
acquisition, development, ownership and operation of real property.
 
    Revenues generated from Nevada, Arizona and Utah as a percentage of total
revenues were 82.4%, 8.2% and 9.4% for 1998, respectively. All revenues for 1997
and 1996 were generated from the Company's Nevada operations.
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
 
    The accompanying consolidated financial statements of the Company have been
prepared in conformity with generally accepted accounting principles. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
 
REAL ESTATE PROPERTIES
 
    Real estate operating properties are stated at cost less accumulated
depreciation. Costs incurred for acquisition and betterment of the property are
capitalized. Repair and maintenance costs are expensed as incurred. The Company
adopted the provisions of Statement of Financial Accounting Standards ("SFAS")
No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF, ("SFAS 121") on January 1, 1996. SFAS 121 requires
that long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Adoption of SFAS 121 did not have a
material impact on the Company's financial position, results of operations, or
liquidity.
 
    The Company capitalizes interest costs and real estate taxes in connection
with properties that are under development. Capitalization of interest costs and
real estate taxes is discontinued when a project is substantially complete and
ready for its intended use. The Company incurred interest costs of approximately
$4,091,000, $4,245,000 and $7,196,000 for the years ended December 31, 1996,
1997 and 1998, respectively, of which the Company capitalized approximately
$1,271,000, $1,159,000 and $4,859,000 for the years ended December 31, 1996,
1997 and 1998, respectively.
 
                                      F-9
<PAGE>
DEPRECIATION AND AMORTIZATION
 
    For financial reporting purposes, the Company depreciates its buildings,
tenant improvements and furniture and equipment over their estimated useful
lives (buildings 31.5 to 40 years, tenant improvements over the term of the
related lease, and furniture and equipment 5 to 7 years) using the straight-line
method. Leasing costs are capitalized and amortized on a straight-line basis
over the term of the lease. Loan fees are deferred and amortized on a
straight-line basis (which approximates the effective interest method) over the
term of the loan. Capitalized leasing costs and loan fees are included in
prepaid expenses and other assets in the accompanying Consolidated Balance
Sheets.
 
RENTAL REVENUE RECOGNITION
 
    Rental revenue is recognized on a straight-line basis over the terms of the
respective leases.
 
CONSTRUCTION REVENUE AND COST RECOGNITION
 
    Revenue on fixed-price construction contracts is recognized on the
percentage-of-completion method of accounting based on the proportion of actual
contract costs incurred to total estimated contract costs. Revisions to contract
revenues and cost estimates are reflected in the accounting period in which they
become known. Provisions for estimated losses on uncompleted contracts are made
in the accounting period in which the events that give rise to such losses are
determined. Changes in job performance, job conditions and estimated
profitability, including those arising from contract penalty provisions and
final contract settlements, may result in revisions to costs and revenue and are
recognized in the period in which such revisions are determined.
 
SALE OF PROPERTIES
 
    Profit is generally recognized on sales of properties at the time escrow is
closed provided that (i) there has been a minimum down payment, ranging from a
minimum of 1% for home sales and 10% to 25% on commercial properties sold, (ii)
the buyer has met adequate continuing investment criteria and (iii) the Company,
as the seller, has no continuing involvement in the property. The Company's home
sales are generally subject to a one-year warranty. Where the Company has an
obligation to complete certain future development, or has other continuing
obligations, profit is deferred in the ratio of the cost of development to be
completed to the total cost of the property being sold under
percentage-of-completion accounting.
 
USE OF ESTIMATES
 
    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ materially from those estimates.
 
    Applying the percentage-of-completion method of recognizing revenue requires
the Company to estimate the outcome of its long-term contracts. The Company
forecasts such outcomes to the best of its knowledge and belief of current and
expected conditions and its expected course of action. Differences between the
Company's estimates and actual results often occur resulting in changes to
reported revenue and earnings. Such changes could have a material effect on
future financial statements.
 
CASH EQUIVALENTS
 
    For purposes of the Statements of Cash Flows, the Company considers all
highly liquid debt instruments with original maturities of three months or less
to be cash equivalents.
 
                                      F-10
<PAGE>
INVESTMENTS IN JOINT VENTURES
 
    The equity method of accounting is used for investments in entities in which
the Company has the ability to exercise significant influence over operating and
financial policies. Under the equity method of accounting, the Company
recognizes its share of the net earnings or losses of these entities as earned
or incurred, increases the carrying value of its investment by the amount of
contributions made and reduces the carrying value of its investment by the
amount of all distributions received.
 
INCOME TAXES
 
    The Company accounts for its income taxes in accordance with SFAS No. 109,
ACCOUNTING FOR INCOME TAXES, ("SFAS 109") which requires recognition of deferred
tax assets and liabilities for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
 
PER SHARE DATA
 
    Prior to the Offering, per share data was not relevant and therefore is not
presented because the Company's financial statement presentation was of the
combined operations of various partnerships and corporations. In connection with
Offering, the Company now owns 100% of the economic interest of these
partnerships.
 
    SFAS No. 128, EARNINGS PER SHARE, ("SFAS 128") was issued by the Financial
Accounting Standards Board (the "FASB") in February 1997, effective for
financial statements issued after December 15, 1997. SFAS 128 provides
simplified standards for the computation and presentation of earnings per share
("EPS"), making EPS comparable to international standards. SFAS 128 requires
dual presentation of "Basic" and "Diluted" EPS, by entities with complex capital
structures, replacing "Primary" and "Fully-diluted" EPS under Accounting
Principles Board ("APB") Opinion No. 15.
 
    Basic EPS excludes dilution from Common Stock equivalents and is computed by
dividing net income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects the
impact of potentially dilutive securities outstanding during the period, similar
to fully-diluted EPS, net of shares assumed to be repurchased using the treasury
stock method.
 
                                      F-11
<PAGE>
    The following table reconciles the net income applicable to common
stockholders, Basic and Diluted shares and EPS for 1997 and 1998:
 
<TABLE>
<CAPTION>
                                                YEAR ENDED DECEMBER 31, 1997
                                          -----------------------------------------
                                                                         PER-SHARE
                                               INCOME         SHARES      AMOUNT
                                          -----------------  ---------  -----------
                                           (IN THOUSANDS)
<S>                                       <C>                <C>        <C>
BASIC EPS
Net income applicable to common
  stockholders..........................      $   5,851      6,341,879   $    0.92
                                                                             -----
                                                                             -----
Effect of dilutive securities:
  Stock options.........................             --         21,340
                                                 ------      ---------
DILUTED EPS
Net income applicable to common
  stockholders and assumed
  conversions...........................      $   5,851      6,363,219   $    0.92
                                                 ------      ---------       -----
                                                 ------      ---------       -----
</TABLE>
 
<TABLE>
<CAPTION>
                                                YEAR ENDED DECEMBER 31, 1997
                                          -----------------------------------------
                                                                         PER-SHARE
                                               INCOME         SHARES      AMOUNT
                                          -----------------  ---------  -----------
                                           (IN THOUSANDS)
<S>                                       <C>                <C>        <C>
BASIC EPS
Net income applicable to common
  stockholders..........................      $   7,731      7,656,189   $    1.01
                                                                             -----
                                                                             -----
Effect of dilutive securities:
  Stock options.........................             --         17,930
                                                 ------      ---------
DILUTED EPS
Net income applicable to common
  stockholders and assumed
  conversions...........................      $   7,731      7,674,119   $    1.01
                                                 ------      ---------       -----
                                                 ------      ---------       -----
</TABLE>
 
    The Company had options outstanding to purchase Common Stock that were
excluded from the computation of diluted EPS since their exercise price was
greater than the average market price. The antidilutive options outstanding for
December 31, 1997 and 1998 were 76,100 and 115,650, respectively.
 
STOCK OPTIONS
 
    Prior to January 1, 1996, the Company accounted for its stock options in
accordance with the provisions of APB Opinion No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES, and related interpretations. As such, compensation expense
would be recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. On January 1, 1996, the Company
adopted SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, ("SFAS 123")
which permits entities to recognize as expense over the vesting period the fair
value of all stock-based awards on the date of grant. Alternatively, SFAS 123
also allows entities to continue to apply the provisions of APB Opinion No. 25
and provide pro forma net income and pro forma earnings per share disclosures
for employee stock option grants made in 1995 and future years as if the
fair-value-based method defined in SFAS 123 had been applied. The Company has
elected to continue to apply the provisions of APB Opinion No. 25 and provide
the disclosure provisions of SFAS 123. See Note 16. The effects of applying SFAS
123, for either recognizing or disclosing compensation cost under such
pronouncement, may not be representative of the effects on reported net income
for future years.
 
                                      F-12
<PAGE>
RECENT ACCOUNTING PRONOUNCEMENTS
 
    The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") SFAS No. 130, REPORTING COMPREHENSIVE
INCOME, ("SFAS 130") in June 1997 which is effective for fiscal years beginning
after December 15, 1997. SFAS 130 requires companies to classify items of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of the statement of financial position. The
adoption of SFAS 130, in 1998, did not affect the consolidated financial
statements of the Company.
 
    In 1998, the Company adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE RELATED INFORMATION ("SFAS 131"). SFAS 131 supersedes SFAS No. 14,
FINANCIAL REPORTING FOR SEGMENTS OF A BUSINESS ENTERPRISE replacing the
"industry segment" approach with the "management" approach. The management
approach designates the internal organization that is used by management for
making operating decisions and assessing performance as the source of the
Company's reportable segments, SFAS 131 also requires disclosures about products
and services, geographic areas and major customers. The adoption of SFAS 131, in
1998, did not affect the consolidated financial statements of the Company.
 
    In February 1998, the FASB issued SFAS No. 132, EMPLOYERS' DISCLOSURE ABOUT
PENSIONS AND OTHER POST-RETIREMENT BENEFITS--AN AMENDMENT OF SFAS NOS. 87, 88
AND 106 ("SFAS 132"). SFAS 132 standardized the disclosure requirements for
pensions and other post-retirement plans, requires additional information on
changes in the benefit obligations and fair value of plan assets and eliminates
certain disclosures previously required under SFAS Nos. 87, 88 and 106. SFAS 132
is effective for fiscal years beginning after December 31, 1997. The adoption of
SFAS 132, in 1998, did not affect the consolidated financial statements of the
Company.
 
    In June 1998, the FASB issued, SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES ("SFAS 133"). SFAS 133 establishes accounting
and reporting standards for derivative instruments and hedging activities. SFAS
133 requires recognition of all derivative instruments in the statement of
financial position as either assets or liabilities and the measurement of
derivative instruments at fair value. SFAS 133 is effective for fiscal years
beginning after June 15, 1999. The adoption of SFAS 133 is not expected to
affect the consolidated financial statements of the Company.
 
    In October 1998, the FASB issued SFAS No. 134, ACCOUNTING FOR
MORTGAGE-BACKED SECURITIES RETAINED AFTER THE SECURITIZATION OF MORTGAGE LOANS
HELD FOR SALE BY A MORTGAGE BANKING ENTERPRISE, AND AMENDMENT OF SFAS NO. 65
("SFAS 134"). SFAS 134 requires mortgage banking enterprises to classify loans
held for sale that they have securitized, based on their intent to sell or hold
those investments. SFAS 134 is effective for the first fiscal quarter beginning
after December 15, 1998. The adoption of SFAS 134 is not expected to affect the
consolidated financial statements of the Company.
 
RECLASSIFICATIONS
 
    Certain amounts in prior periods have been reclassified to conform to the
current period's presentation.
 
(3) ACQUISITIONS
 
    On March 20, 1998, the Company acquired all of the capital stock of Maxim, a
Utah homebuilder. The acquisition was accounted for using the purchase method of
accounting. Maxim operates principally as a single-family residential
homebuilder, specializing in building homes generally ranging in price from
$145,000 to $185,000. The consideration paid at closing for this acquisition
consisted of: (i) $224,000 in cash; (ii) approximately $338,000 in the Company's
Common Stock (42,280 shares at valued $8.00 per share); and (iii) $569,000 in
cash to retire a portion of Maxim's debt. In addition, the Company may make five
annual installments ("earn-out payments") on March 31 of each year beginning in
1999, subject to certain levels of required income. These earn-out payment are
based on a specified percentage of
 
                                      F-13
<PAGE>
estimated after-tax net income of the Salt Lake City real estate operations of
the Company and are to be made 50% in the Company's Common Stock and 50% in
cash.
 
    On November 13, 1998, the Company acquired the outstanding capital stock and
ownership interests of Diamond Key and certain related entities. The purchase
was accounted for using the purchase method of accounting and the price was
approximately $10,876,000 paid in cash at closing, approximately $250,000
expected to be paid in 1999, with an additional amount of $2.0 million to be
paid 50% in cash and 50% in the Company's Common Stock one year from the date of
closing.
 
    On December 22, 1998, the Company acquired the outstanding capital stock of
HomeBanc Mortgage Corporation ("HomeBanc"). The purchase was accounted for using
the purchase method of accounting and the price was $474,000 paid in the form of
71,500 shares of Saxton Common Stock at closing.
 
    Goodwill related to the acquisitions of Maxim, Diamond Key and HomeBanc is
amortized over 15 years. The operations of these three acquisitions were
included in the Company's Consolidated Statements of Income since their
acquisition dates.
 
    The following represents summary unaudited pro forma information as if the
Diamond Key acquisition ("Acquisition") had occurred as of January 1, 1998. The
summary unaudited pro forma information below combines the actual results of the
Company and the results of Diamond Key before the Acquisition and reflects
increased amortization of goodwill, increased interest expense and certain
income tax adjustments related to the Acquisition that would have been incurred
had the Acquisition occurred on such date. The unaudited summary pro forma
information is not necessarily indicative of the results of operations of the
Company had the Acquisition occurred on such date, nor is it necessarily
indicative of future results. Unaudited pro forma information is as follows (in
thousands):
 
<TABLE>
<CAPTION>
                                                                       YEAR ENDED DECEMBER
                                                                               31,
                                                                       --------------------
                                                                         1997       1998
                                                                       ---------  ---------
<S>                                                                    <C>        <C>
Pro forma combined net income........................................  $   5,477  $  10,171
Basic earnings per common share......................................  $    0.86  $    1.33
</TABLE>
 
(4) REAL ESTATE OPERATING PROPERTIES
 
    Real estate operating properties are summarized as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                       ACCUMULATED
                                                                       DEPRECIATION
                                                                           AND
                                                              COST     AMORTIZATION     NET
                                                            ---------  ------------  ---------
<S>                                                         <C>        <C>           <C>
December 31, 1997:
  Buildings...............................................  $  21,257   $   (2,630)  $  18,627
  Tenant improvements.....................................        886         (154)        732
  Land....................................................      6,574           --       6,574
                                                            ---------  ------------  ---------
                                                            $  28,717   $   (2,784)  $  25,933
                                                            ---------  ------------  ---------
                                                            ---------  ------------  ---------
December 31, 1998:
  Buildings...............................................  $  19,530   $   (3,108)  $  16,422
  Tenant improvements.....................................        761         (188)        573
  Land....................................................      6,122           --       6,122
                                                            ---------  ------------  ---------
                                                            $  26,413   $   (3,296)  $  23,117
                                                            ---------  ------------  ---------
                                                            ---------  ------------  ---------
</TABLE>
 
    Depreciation expense for the years ended December 31, 1996, 1997 and 1998
was approximately $858,000, $635,000 and $730,000, respectively, for the above
assets. For further information on real estate properties, see Note 18.
 
                                      F-14
<PAGE>
(5) DUE FROM RELATED PARTIES AND DUE FROM TAX CREDIT PARTNERSHIPS
 
    Amounts due from related parties consist of receivables primarily from
stockholders of the Company. The receivables are unsecured, bear no interest and
are payable on demand.
 
    Amounts due from Tax Credit Partnerships relate to developer fees and
accrued interest receivable thereon, land acquisition and construction costs
receivable pertaining to low-income housing tax credit projects of the Company
at various stages of completion. All of the Tax Credit Projects were located in
the Las Vegas, Nevada area at December 31, 1998 and 1997 except one project that
was under development in Reno, Nevada at December 31, 1998.
 
    Tax Credit Partnerships are limited partnerships formed for the purpose of
constructing, owning and operating eligible low-income housing projects (as
defined under Section 42(d) of the Code). The Company generally retains
approximately a 1% or less general partnership interest and sells the remaining
99% to a large institutional investor, which in turn, publicly syndicates the
interest to third-party purchasers. These third-party purchasers acquire the
limited partnership interests to receive tax credits. Amount due from Tax Credit
Partnerships will be collected from loan proceeds, contributions from partners
and cash flow from operations and consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                          --------------------
                                                                            1997       1998
                                                                          ---------  ---------
<S>                                                                       <C>        <C>
Developer fees receivable (1)...........................................  $   9,939  $   9,939
Land acquisition and construction costs receivable......................      6,593     21,293
Accrued interest receivable.............................................        865        765
                                                                          ---------  ---------
                                                                          $  17,397  $  31,997
                                                                          ---------  ---------
                                                                          ---------  ---------
</TABLE>
 
------------------------
 
(1) Developer fees receivable are supported by notes receivable.
 
(6) NOTES RECEIVABLE
 
    Notes receivable consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                                 DECEMBER 31,
                                                                             --------------------
                                                                               1997       1998
                                                                             ---------  ---------
<S>                                                                          <C>        <C>
Promissory notes from nonaffiliated entities, bearing interest ranging
  between 8.5% and 11.0%, secured by deeds of trust, due December 1998.....  $     106  $      --
Promissory note from a nonaffiliated entity, bearing an interest rate of
  10.5%, due in December 1998, secured by deed of trust....................      2,180         --
Promissory notes from nonaffiliated entities, bearing interest ranging
  between 0% and 14%, with generally no scheduled maturity dates, $19 of
  which are secured by deeds of trust......................................        598      1,000
                                                                             ---------  ---------
                                                                             $   2,884  $   1,000
                                                                             ---------  ---------
                                                                             ---------  ---------
</TABLE>
 
(7) CONSTRUCTION CONTRACTS
 
    Construction contracts receivable includes amounts retained pending contract
completion, aggregating approximately $173,000 and $155,000 at December 31, 1997
and 1998, respectively. Based on anticipated completion dates, the 1998
retentions are expected to be collected in 1999.
 
    Accounts payable and accrued expenses include amounts retained pending
subcontract completion aggregating approximately $1,224,000 and $3,060,000 at
December 31, 1997 and 1998, respectively.
 
                                      F-15
<PAGE>
    Costs and estimated earnings in excess of billings, net on uncompleted
contracts are summarized as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                                       -----------------------
                                                                          1997        1998
                                                                       ----------  -----------
<S>                                                                    <C>         <C>
Costs incurred to date...............................................  $   61,309  $    98,470
Estimated earnings to date...........................................      17,273       30,694
                                                                       ----------  -----------
                                                                           78,582      129,164
Less billings to date................................................     (76,258)    (126,727)
                                                                       ----------  -----------
Costs and estimated earnings in excess of billings, net..............  $    2,324  $     2,437
                                                                       ----------  -----------
                                                                       ----------  -----------
</TABLE>
 
    Costs and estimated earnings in excess of billings, net, are shown on the
accompanying Consolidated Balance Sheets as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                                DECEMBER 31,
                                                                            --------------------
                                                                              1997       1998
                                                                            ---------  ---------
<S>                                                                         <C>        <C>
Costs and estimated earnings in excess of billings on uncompleted
  contracts...............................................................  $   4,115  $   2,618
Billings in excess of costs and estimated earnings on uncompleted
  contracts...............................................................     (1,791)      (181)
                                                                            ---------  ---------
Costs and estimated earnings in excess of billings, net...................  $   2,324  $   2,437
                                                                            ---------  ---------
                                                                            ---------  ---------
</TABLE>
 
    The asset "Costs and estimated earnings in excess of billings on uncompleted
contracts" represents construction revenue recognized in excess of amounts
billed on the respective construction contracts. The liability "Billings in
excess of costs and estimated earnings on uncompleted contracts" represents
amounts billed in excess of revenue recognized on the respective construction
contracts.
 
                                      F-16
<PAGE>
(8) INVESTMENTS IN JOINT VENTURES
 
    The Company participates in several real estate development joint ventures.
The joint ventures have projects at various stages of completion and
development. The Company provides development and construction services to these
joint ventures. The Company's interests in these joint ventures at December 31,
1998, range from up to 1% to 50%. Summary financial information for the joint
ventures is as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                          --------------------
FINANCIAL POSITION                                                          1997       1998
------------------------------------------------------------------------  ---------  ---------
<S>                                                                       <C>        <C>
Real estate properties..................................................  $  78,734  $  93,937
Other assets............................................................      1,472      3,817
                                                                          ---------  ---------
    Total assets........................................................     80,206     97,754
Notes payable...........................................................     54,137     64,613
Other liabilities.......................................................     19,880     24,717
                                                                          ---------  ---------
    Net assets..........................................................  $   6,189  $   8,424
                                                                          ---------  ---------
                                                                          ---------  ---------
Company's share of net assets...........................................  $   3,602  $   3,577
                                                                          ---------  ---------
                                                                          ---------  ---------
</TABLE>
 
<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                                                -------------------------------
RESULTS OF OPERATIONS                                             1996       1997       1998
--------------------------------------------------------------  ---------  ---------  ---------
<S>                                                             <C>        <C>        <C>
Rental revenues for joint ventures............................  $   2,197  $   6,079  $   8,730
Interest expense..............................................     (1,551)    (3,749)    (4,231)
Other expense.................................................     (1,933)    (5,028)    (7,154)
                                                                ---------  ---------  ---------
  Net loss....................................................  $  (1,287) $  (2,698) $  (2,655)
                                                                ---------  ---------  ---------
                                                                ---------  ---------  ---------
Company's share of net earnings (loss)........................  $     (43) $      16  $     (25)
                                                                ---------  ---------  ---------
                                                                ---------  ---------  ---------
</TABLE>
 
(9) PREPAID EXPENSES AND OTHER ASSETS
 
    Prepaid expenses and other assets consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                               DECEMBER 31,
                                                                           --------------------
                                                                             1997       1998
                                                                           ---------  ---------
<S>                                                                        <C>        <C>
Rental and other accounts receivable.....................................  $     640  $     575
Goodwill.................................................................         --      7,877
Development costs........................................................        787      2,598
Deferred tax assets, net.................................................         95         74
Furniture and equipment, net.............................................      1,098      1,379
Option and escrow deposits and impounds..................................      1,215      3,087
Inventories..............................................................      1,164        101
Other assets, primarily prepaid expenses and loan fees...................      1,286      1,970
                                                                           ---------  ---------
                                                                           $   6,285  $  17,661
                                                                           ---------  ---------
                                                                           ---------  ---------
</TABLE>
 
                                      F-17
<PAGE>
(10) NOTES PAYABLE
 
    Notes payable, of which approximately $10,606,000 are guaranteed by the two
principal stockholders of the Company, consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,
                                                                                    --------------------
                                                                                      1997       1998
                                                                                    ---------  ---------
<S>                                                                                 <C>        <C>
Notes payable to various financial institutions, maturing at dates ranging between
  April 1999 and November 2027. The notes bear interest monthly at various rates
  ranging between 7.9% and 15.0%. Monthly principal and interest payments
  approximate $532. The notes are collateralized by first trust deeds on real
  property........................................................................  $  31,743  $  72,328(1)
Notes payable to various individuals, maturing at dates ranging between June 1999
  and November 1999. The notes bear interest at various rates ranging between
  15.0% and 24.0%. Monthly interest payments approximate $244. The notes are
  collateralized by first trust deeds on real property............................      8,720     15,875
Other.............................................................................        147        103
                                                                                    ---------  ---------
                                                                                    $  40,610  $  88,306
                                                                                    ---------  ---------
                                                                                    ---------  ---------
</TABLE>
 
------------------------
 
(1) Includes notes payable of $45,538,000 maturing at dates ranging between
    April and December 1999. The notes bear interest monthly at various rates
    ranging between 8.7% and 10.0%. Monthly principal and interest payments
    approximate $343,000.
 
    Approximate principal maturities of notes payable outstanding as of December
31, 1998 are as follows (in thousands):
 
<TABLE>
<S>                                              <C>
Year ending December 31,
  1999.........................................       $  61,516
  2000.........................................           5,787
  2001.........................................           1,483
  2002.........................................           1,659
  2003.........................................              --
  Thereafter...................................          17,861
                                                        -------
                                                      $  88,306
                                                        -------
                                                        -------
</TABLE>
 
    Through March 12, 1999, $3,530,000 of notes payable have been refinanced
with maturity dates of April 1999 to February 2000 from January 1999 and
February 1999. For the remaining notes payable with maturity dates in 1999,
management is negotiating refinancing alternatives with the applicable lenders.
 
    On July 30, 1997, the Company entered into a $5,000,000 revolving line of
credit agreement (the "Agreement") with a financial institution. Loans under the
Agreement bear monthly interest at 1.5% above the prime rate as defined (9.25%
at December 31, 1998), and require the Company to pay a loan fee of 0.25% for
each disbursement. Loans under the agreement are available only for the
acquisition of land and are secured by first trust deeds on certain real
property. As of December 31, 1998, the Company had outstanding indebtedness of
$975,000 maturing on June 8, 1999 and $882,000 maturing on August 1, 1999 for a
total indebtedness of $1,857,000. The Company has available borrowings of
$3,143,000 under the agreement. Under the terms of the agreement, the Company is
required to meet certain financial covenants.
 
                                      F-18
<PAGE>
    On February 9, 1998, the Company signed a definitive loan agreement for a
$10,000,000 revolving line of credit with a financial institution. The line of
credit provides for borrowings of up to $1,000,000 for general working capital
requirements, $4,000,000 for acquisition and development, including strategic
acquisitions and $5,000,000 for land acquisitions. Borrowing under the line of
credit is secured by the pledge of certain Company receivables and any land
acquired with borrowings under the line of credit and bears interest at one
percent over the lender's prime rate in effect from time to time. The agreement
is also subject to certain financial covenants and matures May 1, 1999. As of
December 31, 1998, the Company had outstanding indebtedness of $5,000,000 and
available borrowings of $5,000,000 under this agreement.
 
    During 1997 and 1998, the Company entered into various notes payable
representing borrowings from an unaffiliated individual. These notes bear
interest and mature on the following dates: $8,590,000 at 20% maturing on
September 23, 1999; $1,000,000 at 20% maturing on November 20, 1999; $500,000 at
24% maturing on July 9, 1999; $5,300,000 at 15% maturing on August 1, 1999; and
$985,347 at 20% maturing on June 26, 1999.
 
(11) NOTES PAYABLE TO RELATED PARTIES AND OTHER RELATED PARTY TRANSACTIONS
 
    Notes payable to related parties are unsecured notes payable to certain
stockholders, officers and Directors of the Company for development purposes.
Interest only payments are due monthly at rates ranging from 12% to 18%, with
all amounts due at various dates in 1999.
 
    On September 30, 1997, the Company entered into a transaction with the
Company's President and principal stockholder, James C. Saxton, in which the
Company sold its interest in a joint venture for $755,000. The book value of the
Company's interest was $500,000 and the net gain of $255,000 is included in
"Other income" on the consolidated statements of income. The sales price
consisted of an offset to advances due to the Company's President and principal
stockholder of $500,000 and a note receivable of $255,000. The note receivable
bore interest at 10.25% and matured on September 30, 1998, at which time the
receivable was used to apply to other related party notes payable to Mr. Saxton.
The receivable is considered paid in full and related party notes payable to Mr.
Saxton was reduced by $255,000.
 
    During the fourth quarter of 1998, the Company's President and principal
stockholder, James C. Saxton, pledged 3,111,560 shares of common stock, or
approximately 40.6% of its outstanding shares, as collateral for two personal
loans to Mr. Saxton. Mr. Saxton reloaned the proceeds from such loans to the
Company for use in connection with the acquisition of Diamond Key. The two notes
payable to Mr. Saxton aggregating $7,575,000 bear interest at 12% per annum and
mature on August 1, 1999. The Company intends to refinance the loans from Mr.
Saxton prior to their maturities. The Company understands that Mr. Saxton
intends to repay, in full, the loans from the two lenders upon repayment of the
loans he has made to the Company.
 
(12) LEASE OBLIGATIONS
 
    The Company is obligated under various capital leases for equipment and
vehicles that expire at various dates over the next five years. These equipment
and vehicle leases require minimum monthly payments aggregating approximately
$34,000 per month with interest rates ranging from 7.9% to 16.5%.
 
    In addition, the Company is party to a sale and leaseback agreement for a
convenience store that the Company constructed and the related land. The lease
does not contain a bargain purchase option nor does the lease transfer ownership
of the property upon expiration of the lease. The lease is for a 20-year period,
which expires in 2015, but the Company has four 5-year options to extend. The
land portion of the leaseback has been classified as an operating lease and the
building portion of the leaseback has been classified as a capital lease in
accordance with SFAS No. 13, ACCOUNTING FOR LEASES. The book value of the land
of approximately $709,000 was removed from the accounts and the related gain on
the sale of approximately $103,000 was deferred. The deferred gain is being
recognized over the lease term. The lease obligation requires monthly minimum
lease payments of approximately $16,000 with fixed annual step
 
                                      F-19
<PAGE>
increases plus contingent rent based on 4% of annual sales in excess of
$1,200,000 excluding gasoline sales and gaming revenue.
 
    At the end of 1996, the Company sold a property to a third-party which the
Company leased back under a master lease agreement requiring monthly payments of
approximately $20,700 until the property reached a certain level of occupancy.
The Company had accounted for this transaction using the deposit method. During
1998, the master lease agreement was terminated and the Company removed the
deposit liability of approximately $2,675,000 and recognized the sale of the
property of approximately $2,832,000.
 
    Future minimum lease payments under lease obligations, excluding contingent
rents are as follows at December 31, 1998 (in thousands):
 
<TABLE>
<CAPTION>
                                                                                                CAPITAL    OPERATING
                                                                                      TOTAL     PORTION     PORTION
                                                                                    ---------  ---------  -----------
<S>                                                                                 <C>        <C>        <C>
Year ending December 31:
  1999............................................................................  $     408  $     313   $      95
  2000............................................................................        384        288          96
  2001............................................................................        274        176          98
  2002............................................................................        222        122         100
  2003............................................................................        203        101         102
  Thereafter......................................................................      2,482      1,221       1,261
                                                                                    ---------  ---------  -----------
    Total minimum payments........................................................  $   3,973      2,221   $   1,752
                                                                                    ---------             -----------
                                                                                    ---------             -----------
Amount representing interest (at rates ranging from 7.9% to 16.5%)................                (1,103)
                                                                                               ---------
Long-term capital lease obligations...............................................             $   1,118
                                                                                               ---------
                                                                                               ---------
</TABLE>
 
    Assets leased under capital leases consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                                       DECEMBER 31,
                                                                   --------------------
                                                                     1997       1998
                                                                   ---------  ---------
<S>                                                                <C>        <C>
Operating properties.............................................  $     589  $     589
Equipment........................................................        655        671
                                                                   ---------  ---------
                                                                       1,244      1,260
Less accumulated amortization....................................       (253)      (361)
                                                                   ---------  ---------
                                                                   $     991  $     899
                                                                   ---------  ---------
                                                                   ---------  ---------
</TABLE>
 
    Amortization of assets held under capital leases is included with
depreciation expense.
 
(13) SUBORDINATED DIVIDEND NOTES
 
    In August 1996, the Board declared and, in September 1996, paid a dividend
of approximately $0.165 per share for 9,580,020 outstanding shares of Common
Stock at the date of declaration. These dividends were issued in order to
distribute retained earnings through December 31, 1994 and the period from
January 1, 1995 through September 30, 1995, respectively. These earnings had
been taxed at the stockholders level due to the corporation's election to be
taxed as an S corporation. These actions were taken in anticipation of and as a
result of Saxton revoking its S corporation election on September 30, 1995. The
September 1996 dividends were paid in cash and then loaned back to the Company
as subordinated dividend notes. The 1994 dividends were paid through the
issuance of subordinated dividend notes to the stockholders. These notes had
10-year terms and, were subordinate to all existing and future corporate debt
and to the consolidated entity debt, and were retired in 1997 in conjunction
with the reorganization.
 
                                      F-20
<PAGE>
(14) RENTAL INCOME
 
    Operating properties are leased to tenants under various arrangements
classified as operating leases. The leases provide for rent and reimbursement of
various common area maintenance charges paid by the Company. Minimum future
rentals (excluding percentage rents and renewal options) on non-cancelable
leases are as follows (in thousands):
 
<TABLE>
<S>                                              <C>
Year ending December 31,
1999...........................................       $   2,475
2000...........................................           2,228
2001...........................................           2,029
2002...........................................           1,333
2003...........................................             901
Thereafter.....................................           6,219
                                                        -------
                                                      $  15,185
                                                        -------
                                                        -------
</TABLE>
 
    Approximately 22%, 23% and 33% for the years ended 1996, 1997 and 1998,
respectively, of each year's rental revenue reflected in the accompanying
consolidated financial statements is derived from one tenant.
 
(15) EMPLOYEE STOCK OWNERSHIP PLAN
 
    On December 31, 1994, the Company established a profit sharing plan (the
"Profit Sharing Plan") for its eligible employees. On December 29, 1995, the
Company adopted an employee stock ownership plan (the "ESOP") and trust (the
"ESOP Trust"). In connection with the merger of Saxton and JSI on December 31,
1995, the Profit Sharing Plan was merged into the ESOP and the assets of the
trust established under the Profit Sharing Plan have been transferred to the
ESOP Trust.
 
    An "employee stock ownership plan" (as defined in Section 407(d)(6) of the
Employee Retirement Security Act of 1974 ("ERISA") and Section 4975(e)(7) of the
Code) is designed to invest primarily in "qualifying employer securities." The
account balances of participants in the Profit Sharing Plan transferred to the
ESOP Trust have been invested by the ESOP Trust in the Company's Common Stock.
Thereafter, the Company may make periodic contributions to the ESOP Trust out of
its net profits in amounts determined by the Board of Directors, which
contributions may be made in cash or in shares of the Company's Common Stock.
Amounts contributed in cash will be used to purchase shares of the Company's
Common Stock.
 
    Participants in the Profit Sharing Plan on December 31, 1995 were
immediately eligible to participate in the ESOP. All other employees become
eligible to participate in the ESOP on the date coinciding with or next
following the date the employee completes one year of service with the Company.
Contributions by the Company to the ESOP for the benefit of a participating
employee vest over a seven-year period of participation in the ESOP and are held
in trust until distributed pursuant to the terms of the ESOP. The Company has
made no contributions to the Plan for the years ended 1996, 1997 and 1998.
 
(16) STOCK OPTIONS
 
    In December 1994, the Company granted options to purchase an aggregate of
127,907 shares of Common Stock to various officers and other key employees under
separate letter agreements. In 1995, options to purchase 23,497 shares lapsed
without vesting upon certain employees' termination of employment with the
Company. In 1998, options to purchase 5,112 shares lapsed upon a certain
employee's termination of employment with the Company. Options granted to one
officer of the Company vested 20% on December 29, 1995, 30% on December 29, 1996
and 50% on December 29, 1997. The remaining
 
                                      F-21
<PAGE>
options vest 20% per year on December 29th for five years beginning December 29,
1995. All options are exercisable from the date of vesting through December 28,
2004 at an exercise price of $6.10 per share. No options have been granted after
December 1994.
 
    On June 30, 1997, the Company adopted a Management Stock Option Incentive
Plan (the "Option Plan") which provides for the grant of options to employees to
purchase Common Stock up to a maximum of 500,000 shares. Stock options which
terminate without having been exercised, shares forfeited or shares surrendered
will again be available for distribution in connection with future awards under
the Option Plan. On December 7, 1998 the Company's Board of Directors approved
an increase from 500,000 to 750,000 in the number of shares subject to stock
options under the Option Plan. The increase is subject to majority ratification
or approval, in accordance with Section 14 of the Securities Exchange Act of
1934, by the stockholders not later than the next annual meeting of
stockholders. Any such additional options granted under the Plan will be subject
to such stockholder approval. As of December 31, 1998, the Company has
outstanding 502,150 stock options to certain officers and employees of the
Company pursuant to the Option Plan. These options will vest in equal annual
installments over five years commencing one year from the award date and will
expire between June 30, 2007 and December 30, 2008. Stock options granted on
June 30, 1997 were issued at an exercise price equal to the initial public
offering price of $8.25 per share. Stock options granted after June 30, 1997
were granted at the closing stock price on the grant date as reported on the
Nasdaq Stock Market. On January 2, 1998, the Company gave employee the
opportunity to reprice their stock options. The repricing involved changing
their stock price from $8.25 per share to $6.875 per share (the closing stock
price on January 2, 1998) and changing their grant date from June 30, 1997 to
January 2, 1998. Employees holding 148,300 of stock options elected to reprice
on January 2, 1998. As of December 31, 1998, stock options had been granted with
exercise prices ranging from $5.125 per share to $8.375 per share.
 
    SFAS 123 establishes financial accounting and reporting standards for
stock-based employee compensation plans and for transactions in which an entity
issues its equity instruments to acquire goods or services from non-employees.
Those transactions must be accounted for based on the fair value of the
consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable.
 
    Stock options granted under the Company's Option Plan are qualified stock
options that: (1) are generally granted at prices which are equal to the market
value of the stock on the date of grant; (2) are subject to a grantee's
continued employment with the Company and vest over a five year period; and (3)
expire ten years (plus six months for some options granted during 1997)
subsequent to the award.
 
                                      F-22
<PAGE>
    A summary of the status of the Company's stock options granted under the
Option Plan as of December 31, 1997 and 1998 and the activity is presented
below:
 
<TABLE>
<CAPTION>
                                                                                    WEIGHTED-
                                                                                     AVERAGE
                                                                       SHARES    EXERCISE PRICE
                                                                     ----------  ---------------
<S>                                                                  <C>         <C>
Outstanding at January 1, 1997.....................................          --     $      --
Granted............................................................     278,500          8.25
Exercised..........................................................          --            --
(Forfeited)........................................................     (52,400)         8.25
                                                                     ----------
Outstanding at end of year.........................................     226,100          8.25
                                                                     ----------
                                                                     ----------
Options exercisable at end of year.................................          --            --
                                                                     ----------
                                                                     ----------
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                    WEIGHTED-
                                                                                     AVERAGE
                                                                       SHARES    EXERCISE PRICE
                                                                     ----------  ---------------
<S>                                                                  <C>         <C>
Outstanding at January 1, 1998.....................................     226,100     $    8.25
Granted............................................................     401,450          6.78
Exercised..........................................................          --            --
(Forfeited)........................................................    (125,400)         7.73
                                                                     ----------
Outstanding at end of year.........................................     502,150          6.84
                                                                     ----------
                                                                     ----------
Options exercisable at end of year.................................      10,680          8.05
                                                                     ----------
                                                                     ----------
</TABLE>
 
    The fair value of each option granted during 1998, is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weighted-average assumption: (1) dividend yield of zero; (2) expected volatility
of 48.8%; (3) risk-free interest rate of 6.5% for 1998; and (4) expected life of
5 years. The weighted-average fair value of options granted during 1998 was
$3.41 and $4.32 for 1997.
 
    No compensation cost is recorded in the accompanying Consolidated Statements
of Income for 1998. Had compensation cost for the Company's 1998 grants for
stock options been determined consistent with SFAS 123, the Company's pro forma
net income and pro forma net income per common share for fiscal 1997 and 1998
would approximate the pro forma amounts below (in thousands, except per share
amounts):
 
<TABLE>
<CAPTION>
                                                         DECEMBER 31, 1997         DECEMBER 31, 1998
                                                      ------------------------  ------------------------
                                                      AS REQUIRED   PRO FORMA   AS REPORTED   PRO FORMA
                                                      -----------  -----------  -----------  -----------
<S>                                                   <C>          <C>          <C>          <C>
Net income applicable to Common Stock...............   $   5,851    $   5,714    $   7,731    $   7,541
Net income per common share:
  Basic EPS.........................................   $    0.92    $    0.90    $    1.01    $    0.98
  Diluted EPS.......................................   $    0.92    $    0.90    $    1.01    $    0.98
</TABLE>
 
    Pro forma information for fiscal 1996 is not presented since the Company was
not a public Company until its initial public offering on June 24, 1997.
 
                                      F-23
<PAGE>
(17) INCOME TAXES
 
    Income tax expense in the accompanying consolidated statements of income
includes the following amounts for the years ended December 31, 1996, 1997 and
1998 (in thousands):
 
<TABLE>
<CAPTION>
                                                                               1996       1997       1998
                                                                             ---------  ---------  ---------
<S>                                                                          <C>        <C>        <C>
Federal:
  Current..................................................................  $   2,573  $   1,498  $   3,364
  Deferred.................................................................        (56)       852       (113)
State:
  Current..................................................................         --         --         55
  Deferred.................................................................         --         --          7
                                                                             ---------  ---------  ---------
    Total..................................................................  $   2,517  $   2,350  $   3,313
                                                                             ---------  ---------  ---------
                                                                             ---------  ---------  ---------
</TABLE>
 
    The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate to income before taxes. The sources and
tax effects of the differences at December 31, 1996, 1997 and 1998 are as
follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                               1996       1997       1998
                                                                             ---------  ---------  ---------
<S>                                                                          <C>        <C>        <C>
Computed "expected" federal income tax expense.............................  $   2,890  $   2,788  $   3,765
Earnings of combined entities not subject to taxation......................       (352)      (496)        --
Other......................................................................        (21)        58       (452)
                                                                             ---------  ---------  ---------
                                                                             $   2,517  $   2,350  $   3,313
                                                                             ---------  ---------  ---------
                                                                             ---------  ---------  ---------
</TABLE>
 
    The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31, 1997 and 1998
are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                                           1997       1998
                                                                                         ---------  ---------
<S>                                                                                      <C>        <C>
Deferred tax assets:
  Investment in related party..........................................................  $      78  $      --
  Other................................................................................         17         74
                                                                                         ---------  ---------
    Total deferred tax assets..........................................................         95         74
                                                                                         ---------  ---------
Deferred tax liabilities:
  Depreciation/amortization............................................................        (74)      (247)
  Capitalization of expenses...........................................................       (411)      (419)
  Deferred revenue.....................................................................       (308)        --
                                                                                         ---------  ---------
    Total deferred tax liabilities.....................................................       (793)      (666)
                                                                                         ---------  ---------
Net deferred tax liabilities...........................................................  $    (698) $    (592)
                                                                                         ---------  ---------
                                                                                         ---------  ---------
</TABLE>
 
    The deferred tax liability is included in accounts payable and accrued
expenses and the deferred tax asset is included in prepaid expenses and other
assets in the accompanying Consolidated Balance Sheets for 1997 and 1998.
 
                                      F-24
<PAGE>
(18) REAL ESTATE PROPERTIES
 
    Schedule of real estate properties as of December 31, 1998 (in thousands,
except dates and life):
<TABLE>
<CAPTION>
                                                                                  COST CAPITALIZED        COST CAPITALIZED AT
                                                                                 SUBSEQUENT TO ACQ.          (GROSS AMOUNT)
                                                                                                            CLOSE OF PERIOD
                                                           INITIAL COST       ------------------------  ------------------------
                                           ENCUM-     ----------------------   IMPROVE-     CARRYING                   BLDG &
DESCRIPTION                     TYPE       BRANCES      LAND     BLDG & IMPR     MENTS        COSTS       LAND(a)      IMPR(a)
----------------------------  ---------  -----------  ---------  -----------  -----------  -----------  -----------  -----------
<S>                           <C>        <C>          <C>        <C>          <C>          <C>          <C>          <C>
OPERATING PROPERTIES:
  Nellis Express Village....  Retail      $     896   $     151   $      --    $     964    $     104    $     151    $   1,068
  Levitz I..................  Retail          7,355       1,694          --        5,172          661        1,941        5,833
  Furniture Expo............  Retail          2,719         714          --        1,757          237          795        1,994
  Big Tyme..................  Retail             --         104          --          530           59          104          589
  Lev. Pad B (Woody's)......  Retail            464         209          --          283           48          235          331
  Turtle Stop...............  Retail            876         148          --          760           84          148          844
  Sahara /Decatur Ret.......  Retail            485         205          --          392           56          205          448
  Nellis & Stewart..........  Retail            440         269          --          436           65          269          501
  Las Vegas Sun.............  Office          1,040         192          --          810           93          192          903
  SI/Americana..............  Office          1,483         609          --        1,409          188          609        1,597
  GSA.......................  Office          1,032         447          --        1,176          151          447        1,327
  Sahara Vista Bldg. A......  Office          4,224         842          --        3,515          405          842        3,920
  Arcata Park...............  Indus.            865         140          --          843           95          184          938
                                         -----------  ---------         ---   -----------  -----------  -----------  -----------
  Sub-total.................                 21,879       5,724          --       18,047        2,246        6,122       20,293
                                         -----------  ---------         ---   -----------  -----------  -----------  -----------
PROPERTIES UNDER
  DEVELOPMENT:
  Sahara Vista Bldg. B......  Office          3,263         837          --        4,785          522          839        5,307
  Regency, Lot B & C........  Retail            987         752          --        1,473          221          901        1,694
  Rancho/Vegas..............  Retail            374          83          --          832           85           85          917
  Sunrise Ridge.............  Resid.          1,115         770          --          766           75           45          841
  Silver Springs............  Resid.          6,984       1,488          --       12,782        1,287        1,077       14,069
  Northpark III.............  Indus.          1,200         493          --        1,615          196          493        1,811
  Taylor Ranch..............  Resid.          5,300       3,503          --        1,900          502        3,503        2,402
  Madre Mesa................  Resid.          1,161       2,263          --          660          254        2,074          914
  Sutter Creek..............  Resid.          4,635         988          --        5,797          630          988        6,427
  Kendall Creek.............  Resid.          1,245         810          --        1,458          211          810        1,669
  Seven Hills/LM............  Office            504         840          --           16           79          840           95
  Flamingo-Lindell..........  Office            975       1,550          --          335          175        1,550          510
  Smoke Ranch...............  Office          1,500       2,651          --           32          249        2,651          281
  Wood Ranch................  Resid.          1,577         487          --        1,110          148          487        1,258
  Riverwalk.................  Resid.          2,001         284          --        1,312          148          284        1,460
  Sunrise Pointe............  Resid.             --         388          --           18           38          388           56
  Pueblo Seco...............  Resid.             --         908          --          166          100          908          266
  Apache Junction I.........  Resid.          1,479         620          --          789          131          620          920
  Apache Junction II........  Resid.            634         420          --          349           71          420          420
  Apache Junction III.......  Resid.             --          --          --            4           --           --            4
  Bolero Court..............  Resid.          1,315       1,077          --        1,217          213        1,077        1,430
  Copper Creek..............  Resid.          1,217       1,275          --          183          135        1,275          318
  Castle Rock...............  Resid.          1,226       1,472          --          915          222        1,472        1,137
  Desert Vista I............  Resid.            532         331          --          465           74          331          539
  Desert Vista II...........  Resid.            241       1,351          --           31          128        1,351          159
  El Mirage.................  Resid.             --          --          --           40           --           --           40
  Neely Ranch...............  Resid.            324         141          --          247           36          141          283
  Rancho Cimarron...........  Resid.            104          31          --          104           12           31          116
  Rancho Cimarron II........  Resid.             --          --          --            3           --           --            3
  Rancho Vistoso............  Resid.            146         189          --           --           13          189           13
  Rita Ranch I..............  Resid.          1,341       1,017          --          897          178        1,017        1,075
  Rita Ranch II.............  Resid.             --         622          --           --            2          622            2
  Sonoran Vista I...........  Resid.            467         366          --          209           53          366          262
  Sonoran Vista II..........  Resid.          1,098       1,416          --          336          163        1,416          499
  Stonehenge................  Resid.            398         280          --          138           39          280          177
  Suncliff I................  Resid.            668         273          --          681           89          273          770
  Suncliff III..............  Resid.             --         163          --           11           16          163           27
  Suncliff IV...............  Resid.             --         496          --          163           61          496          224
  Suncliff V................  Resid.             --         696          --           --           47          696           47
  Sunrise Canyon 1..........  Resid.             --         471          --          170           60          471          230
  Sunrise Canyon 2..........  Resid.             --          --          --          106           10           --          116
                                         -----------  ---------         ---   -----------  -----------  -----------  -----------
  Sub-total.................                 44,011      31,802          --       42,115        6,673       30,630       48,788
                                         -----------  ---------         ---   -----------  -----------  -----------  -----------
LAND HELD FOR DEVELOPMENT
  AND SALE:
  East II Retail............  Land              300         518          --          113           --          631           --
  Flamingo Point, Lot 6.....  Land              131         679          --           39           --          718           --
                                         -----------  ---------         ---   -----------  -----------  -----------  -----------
  Sub-total.................                    431       1,197          --          152           --        1,349           --
                                         -----------  ---------         ---   -----------  -----------  -----------  -----------
  Total.....................              $  66,321   $  38,723   $      --    $  60,314    $   8,919    $  38,101    $  69,081
                                         -----------  ---------         ---   -----------  -----------  -----------  -----------
                                         -----------  ---------         ---   -----------  -----------  -----------  -----------
 
<CAPTION>
 
                                                     NET BOOK      DATE OF                  LIFE ON WHICH
DESCRIPTION                     TOTAL    ACCM DEPR     VALUE       CONSTR        DATE      DEP IS COMPUTED
----------------------------  ---------  ---------  -----------  -----------     -----     ---------------
<S>                           <C>        <C>        <C>          <C>          <C>          <C>
OPERATING PROPERTIES:
  Nellis Express Village....  $   1,219  $     321   $     898         1987         1986             40
  Levitz I..................      7,774      1,114       6,660         1991         1990             40
  Furniture Expo............      2,789        378       2,411         1992         1990             32
  Big Tyme..................        693         56         637         1995         1995             20
  Lev. Pad B (Woody's)......        566         59         507         1993         1990             34
  Turtle Stop...............        992        109         883         1994         1987             40
  Sahara /Decatur Ret.......        653         29         624         1996         1995             32
  Nellis & Stewart..........        770         22         748         1996         1995             40
  Las Vegas Sun.............      1,095        346         749         1987         1987             32
  SI/Americana..............      2,206        300       1,906         1991         1991             32
  GSA.......................      1,774        121       1,653         1994         1989             40
  Sahara Vista Bldg. A......      4,762        239       4,523         1996         1989             40
  Arcata Park...............      1,122        204         918         1989         1987             40
                              ---------  ---------  -----------
  Sub-total.................     26,415      3,298      23,117
                              ---------  ---------  -----------
PROPERTIES UNDER
  DEVELOPMENT:
  Sahara Vista Bldg. B......      6,146         --       6,146           --         1997             --
  Regency, Lot B & C........      2,595         --       2,595           --         1991             --
  Rancho/Vegas..............      1,002         --       1,002           --         1990             --
  Sunrise Ridge.............        886         --         886           --         1997             --
  Silver Springs............     15,146         --      15,146           --         1996             --
  Northpark III.............      2,304         --       2,304           --         1997             --
  Taylor Ranch..............      5,905         --       5,905           --         1997             --
  Madre Mesa................      2,988         --       2,988           --         1997             --
  Sutter Creek..............      7,415         --       7,415           --         1997             --
  Kendall Creek.............      2,479         --       2,479           --         1998             --
  Seven Hills/LM............        935         --         935           --         1998             --
  Flamingo-Lindell..........      2,060         --       2,060           --         1998             --
  Smoke Ranch...............      2,932         --       2,932           --         1998             --
  Wood Ranch................      1,745         --       1,745           --         1998             --
  Riverwalk.................      1,744         --       1,744           --         1998             --
  Sunrise Pointe............        444         --         444           --         1998             --
  Pueblo Seco...............      1,174         --       1,174           --         1998             --
  Apache Junction I.........      1,540         --       1,540           --         1998             --
  Apache Junction II........        840         --         840           --         1998             --
  Apache Junction III.......          4         --           4           --         1998             --
  Bolero Court..............      2,507         --       2,507           --         1998             --
  Copper Creek..............      1,593         --       1,593           --         1998             --
  Castle Rock...............      2,609         --       2,609           --         1998             --
  Desert Vista I............        870         --         870           --         1998             --
  Desert Vista II...........      1,510         --       1,510           --         1998             --
  El Mirage.................         40         --          40           --         1998             --
  Neely Ranch...............        424         --         424           --         1998             --
  Rancho Cimarron...........        147         --         147           --         1998             --
  Rancho Cimarron II........          3         --           3           --         1998             --
  Rancho Vistoso............        202         --         202           --         1998             --
  Rita Ranch I..............      2,092         --       2,092           --         1998             --
  Rita Ranch II.............        624         --         624           --         1998             --
  Sonoran Vista I...........        628         --         628           --         1998             --
  Sonoran Vista II..........      1,915         --       1,915           --         1998             --
  Stonehenge................        457         --         457           --         1998             --
  Suncliff I................      1,043         --       1,043           --         1998             --
  Suncliff III..............        190         --         190           --         1998             --
  Suncliff IV...............        720         --         720           --         1998             --
  Suncliff V................        743         --         743           --         1998             --
  Sunrise Canyon 1..........        701         --         701           --         1998             --
  Sunrise Canyon 2..........        116         --         116           --         1998
                              ---------  ---------  -----------
  Sub-total.................     79,418         --      79,418
                              ---------  ---------  -----------
LAND HELD FOR DEVELOPMENT
  AND SALE:
  East II Retail............        631         --         631           --         1996             --
  Flamingo Point, Lot 6.....        718         --         718           --         1990             --
                              ---------  ---------  -----------
  Sub-total.................      1,349         --       1,349
                              ---------  ---------  -----------
  Total.....................  $ 107,182  $   3,298   $ 103,884
                              ---------  ---------  -----------
                              ---------  ---------  -----------
</TABLE>
 
----------------------------------
 
(a) The basis of the land and building was increased to reflect transactions
    related to the acquisition of certain partnership interest in connection
    with the Company's initial public offering.
 
                                      F-25
<PAGE>
    The following table reconciles the historical cost of properties from
January 1, 1996 through December 31, 1998 (in thousands):
 
<TABLE>
<CAPTION>
                                                                       DECEMBER 31,
                                                            ----------------------------------
                                                               1996        1997        1998
                                                            ----------  ----------  ----------
<S>                                                         <C>         <C>         <C>
Balance at beginning of year..............................  $   33,961  $   41,305  $   54,082
Additions during year:
  Acquisitions, improvements, etc.........................      20,617      28,558      83,979
Deductions during year:
  Cost of real estate sold................................     (13,273)    (15,781)    (30,879)
                                                            ----------  ----------  ----------
Balance at close of year..................................  $   41,305  $   54,082  $  107,182
                                                            ----------  ----------  ----------
                                                            ----------  ----------  ----------
</TABLE>
 
    The following table reconciles the accumulated depreciation on properties
from January 1, 1996 through December 31, 1998 (in thousands):
 
<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                                   -------------------------------
                                                                     1996       1997       1998
                                                                   ---------  ---------  ---------
<S>                                                                <C>        <C>        <C>
Balance at beginning of year.....................................  $   1,995  $   2,497  $   2,784
Additions during year:
  Depreciation for the year......................................        858        635        730
Deductions during year:
  Cost of real estate sold.......................................       (356)      (348)      (216)
                                                                   ---------  ---------  ---------
Balance at close of year.........................................  $   2,497  $   2,784  $   3,298
                                                                   ---------  ---------  ---------
                                                                   ---------  ---------  ---------
</TABLE>
 
                                      F-26
<PAGE>
(19) RESIDENTIAL DEVELOPMENT
 
    The Company's single-family residential development activities during the
year ended December 31, 1998 and units planned for sale in future periods as of
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
                                                                        NUMBER OF
                                                                        HOMES AT     NUMBER OF HOMES  NUMBER OF HOMES
PROJECT NAME                             HOME TYPE       LOCATION      COMPLETION        SOLD(1)      SOLD IN 1998(2)
--------------------------------------  ------------  --------------  -------------  ---------------  ---------------
<S>                                     <C>           <C>             <C>            <C>              <C>
NEVADA
Under Development:
                                        Cluster
  Crescendo at Silver Springs.........  homes         Las Vegas               285              --               --
  Sutter Creek........................  Detached      Las Vegas               150               1                1
                                        Cluster
  Sterling at Silver Springs..........  homes         Las Vegas               240              --               --
  Kendall Creek.......................  Townhomes     Sparks                  102              --               --
                                                                            -----             ---              ---
    Total under development.........................................          777               1                1
Planned (5):
                                        Cluster
  Silver Springs Phase A..............  homes         Las Vegas               236              --               --
  Townhomes at Taylor Ranch...........  Townhomes     Las Vegas               102              --               --
                                        Cluster
  Taylor Ranch........................  homes         Las Vegas               253              --               --
  Madre Mesa North....................  Townhomes     Las Vegas               160              --               --
                                        Cluster
  Madre Mesa South....................  homes         Las Vegas               178              --               --
  Sharlands Townhomes.................  Townhomes     Reno                    246              --               --
                                                                            -----             ---              ---
    Total planned...................................................        1,175              --               --
                                                                            -----             ---              ---
    Total Nevada....................................................        1,952               1                1
                                                                            -----             ---              ---
UTAH
Under Development:
  Wood Ranch..........................  Detached      South Jordan             70              57               41
  Riverwalk...........................  Detached      American Fork            13              --               --
                                                      West Valley
  Sunrise Pointe I....................  Detached      City                     77              --               --
                                                                            -----             ---              ---
    Total under development.........................................          160              57               41
Planned (5)
  Murfield............................  Detached      Syracuse                142              --               --
  The Falls at Overlake...............  Detached      Tooele                   49              --               --
  The Landings at Eagle Mountain......  Detached      Eagle Mountain           78              --               --
  West Haven Townhomes................  Townhomes     Roy                     186              --               --
                                                                            -----             ---              ---
  Total planned                                                               455              --               --
                                                                            -----             ---              ---
Total Utah..........................................................          615              57               41
                                                                            -----             ---              ---
ARIZONA
Under Development:
  Amberlea (6)........................  Detached      Phoenix                 129             128               --
  Rancho Cimarron 1...................  Detached      Gilbert                  63              62               --
  Rancho Vistoso......................  Detached      Oro Valley               17              16                3
                                                      Apache
  Sunrise Canyon 1....................  Detached      Junction                250             120               16
                                                      Apache
  Sunrise Canyon 2....................  Detached      Junction                150              32                9
  Bolero Court........................  Detached      Phoenix                 130              43               11
  Copper Creek........................  Detached      Oro Valley               61              14                2
  Castle Rock.........................  Detached      Phoenix                 166              34               --
  Desert Vista 1......................  Detached      Oro Valley               40              32               --
  Rita Ranch 1........................  Detached      Tucson                   72              16                2
  Stonehenge..........................  Detached      Gilbert                  58              54                3
  Suncliff 1..........................  Detached      Peoria                  246             202                6
  Sonoran Vista 1.....................  Detached      Gilbert                 150             145                8
  Sonoran Vista 2.....................  Detached      Gilbert                  24               2               --
                                                                            -----             ---              ---
    Total under development.........................................        1,556             900               60
Planned (5):
  Desert Vista 2......................  Detached      Oro Valley               33              --               --
  Suncliff 3..........................  Detached      Peoria                   28              --               --
  Suncliff 4..........................  Detached      Peoria                  135              --               --
  El Mirage...........................  Detached      El Mirage               653              --               --
  Rita Ranch 2........................  Detached      Tucson                   63              --               --
                                                      Apache
  Sunrise Canyon 3....................  Detached      Junction                 81              --               --
  Pueblo Seco.........................  Townhomes     Mesa                    166              --               --
  Tangerine Hills.....................  Detached      Tucson                  450              --               --
                                                                            -----             ---              ---
    Total planned...................................................        1,609              --               --
                                                                            -----             ---              ---
    Total Arizona...................................................        3,165             900               60
                                                                            -----             ---              ---
Grand Total.........................................................        5,732             958              102
                                                                            -----             ---              ---
                                                                            -----             ---              ---
 
<CAPTION>
                                                          ESTIMATED
                                                           AVERAGE
                                        NUMBER OF HOMES   PRICE PER
PROJECT NAME                             IN BACKLOG(3)     HOME(4)
--------------------------------------  ---------------  -----------
<S>                                     <C>              <C>
NEVADA
Under Development:
 
  Crescendo at Silver Springs.........            22      $ 111,795
  Sutter Creek........................            37        112,070
 
  Sterling at Silver Springs..........            11        104,782
  Kendall Creek.......................            --        107,157
                                                 ---
    Total under development...........            70
Planned (5):
 
  Silver Springs Phase A..............            --        105,000
  Townhomes at Taylor Ranch...........            --         96,350
 
  Taylor Ranch........................            --        102,377
  Madre Mesa North....................            --         96,500
 
  Madre Mesa South....................            --        106,000
  Sharlands Townhomes.................            --         96,000
                                                 ---
    Total planned.....................            --
                                                 ---
    Total Nevada......................            70
                                                 ---
UTAH
Under Development:
  Wood Ranch..........................             5      $ 212,359
  Riverwalk...........................             2        170,000
 
  Sunrise Pointe I....................            --        138,000
                                                 ---
    Total under development...........             7
Planned (5)
  Murfield............................            --        132,000
  The Falls at Overlake...............            --        125,000
  The Landings at Eagle Mountain......            --        120,000
  West Haven Townhomes................            --         95,800
                                                 ---
  Total planned
                                                 ---
Total Utah............................             7
                                                 ---
ARIZONA
Under Development:
  Amberlea (6)........................             1      $ 104,505
  Rancho Cimarron 1...................             1        180,594
  Rancho Vistoso......................            --        206,419
 
  Sunrise Canyon 1....................            29         94,984
 
  Sunrise Canyon 2....................             9        103,434
  Bolero Court........................            25         98,062
  Copper Creek........................             2        112,445
  Castle Rock.........................             1        147,037
  Desert Vista 1......................             1        200,744
  Rita Ranch 1........................             6        103,101
  Stonehenge..........................             4        184,642
  Suncliff 1..........................             5         91,023
  Sonoran Vista 1.....................             3        109,276
  Sonoran Vista 2.....................            --        221,689
                                                 ---
    Total under development...........            87
Planned (5):
  Desert Vista 2......................            --        150,000
  Suncliff 3..........................            --         95,000
  Suncliff 4..........................            --         95,000
  El Mirage...........................            --         80,000
  Rita Ranch 2........................            --            N/A
 
  Sunrise Canyon 3....................            --         95,000
  Pueblo Seco.........................            --         96,500
  Tangerine Hills.....................            --            N/A
                                                 ---
    Total planned.....................            --
                                                 ---
    Total Arizona.....................            87
                                                 ---
Grand Total...........................           164
                                                 ---
                                                 ---
</TABLE>
 
                                      F-27
<PAGE>
(19) RESIDENTIAL DEVELOPMENT (CONTINUED)
------------------------
(1) "Number of Homes Sold" represents home sales which have closed in current or
    prior periods for properties under development.
 
(2) "Number of Homes Sold in 1998" represents home sales since March 1998; the
    acquisition date for Utah or since November 1998; the acquisition date for
    Arizona.
 
(3) "Number of Homes in Backlog" represents homes that have sales contracts but
    not yet closed.
 
(4) "Estimated Average Price" represents the average sales price per home of
    actual homes sold or the proposed offering price of homes to be built in
    future phases or in development.
 
(5) The Company owns or otherwise controls the land for each planned home
    development. In most cases, the planned home development requires additional
    entitlements, permits or other actions prior to construction, and there can
    be no assurance that all regulatory approvals can be obtained.
 
(6) The Company has no future interests in these communities, except speculative
    homes and pre-sold homes in construction as of December 31, 1998.
 
(20) FAIR VALUE OF FINANCIAL INSTRUMENTS
 
    The carrying amounts of cash and cash equivalents, construction contracts
receivable, costs and estimated earnings in excess of billings on uncompleted
contracts, accounts payable and accrued expenses, tenant deposits and other
liabilities and billings in excess of costs and estimated earnings on
uncompleted contracts approximate fair value because of the short maturity of
these instruments.
 
DUE FROM RELATED PARTIES AND DUE FROM TAX CREDIT PARTNERSHIPS
 
    Management has determined that it is not practicable to estimate the fair
value of due from related parties and due from tax credit partnerships because
of the difficulty in evaluating the timing and variability of payments.
 
NOTES RECEIVABLE, NOTES PAYABLE AND NOTES PAYABLE TO RELATED PARTIES
 
    The fair value of the Company's notes receivable, notes payable and notes
payable to related parties approximates their respective carrying values.
 
(21) COMMITMENTS AND CONTINGENCIES
 
    The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.
 
    The Company and its two principal stockholders are guarantors on
construction loans relating to the TCPs described in Note 5. Total construction
loans payable for these TCPs were approximately $37,076,000 at December 31,
1998.
 
(22) INFORMATION CONCERNING SEGMENTS
 
    In 1998, the Company adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE RELATED INFORMATION ("SFAS 131"). SFAS 131 supersedes SFAS No. 14,
FINANCIAL REPORTING FOR SEGMENTS OF A BUSINESS ENTERPRISE replacing the
"industry segment" approach with the "management" approach. The management
approach designates the internal organization that is used by management for
making operating decisions and assessing performance as the source of the
Company's reportable segments, SFAS
 
                                      F-28
<PAGE>
(22) INFORMATION CONCERNING SEGMENTS (CONTINUED)
131 also requires disclosures about products and services, geographic areas and
major customers. The adoption of SFAS 131 did not affect the consolidated
financial results of the Company.
 
    The Company has determined that its reportable segments are those that are
based on the Company's method of internal reporting, which disaggregates its
business by certain lines of business components. As of December 31, 1998, the
Company has four reportable operating segments: Homebuilding, Design-Build
Services, Sales of Commercial Property and Property Operations and Management.
Retail operations and corporate activities are included in the "Other" column.
The financial results of the Company's operating segments are presented on an
accrual basis. There are no significant differences among the accounting
policies of the segments as compared to the Company's consolidated financial
statements. The Company evaluates the performance of its segments an allocates
resources to them based on revenues and gross profit. There are no material
intersegment revenues. The tables below present information about the Company's
operating segments as of or for the years ended December 31, 1996, 1997 and
1998, respectively (in thousands):
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31, 1996
                                  -------------------------------------------------------------------------------
                                                                SALES OF       PROPERTY
                                  DESIGN-BUILD                 COMMERCIAL   OPERATIONS AND
                                    SERVICES    HOMEBUILDING    PROPERTY      MANAGEMENT      OTHER      TOTAL
                                  ------------  -------------  -----------  --------------  ---------  ----------
<S>                               <C>           <C>            <C>          <C>             <C>        <C>
Revenue.........................   $   41,875     $  12,963     $   4,772     $    3,922    $     536  $   64,068
Costs...........................       33,078        10,967         3,444            784           --      48,273
                                  ------------  -------------  -----------       -------    ---------  ----------
  Gross profit..................   $    8,797     $   1,996     $   1,328     $    3,138    $     536  $   15,795
                                  ------------  -------------  -----------       -------    ---------  ----------
                                  ------------  -------------  -----------       -------    ---------  ----------
Depreciation and amortization
  expense.......................   $       --     $      --     $      --     $      662    $     417  $    1,079
Interest expense................   $       --     $      --     $      --     $   (2,153)   $    (667) $   (2,820)
Interest income.................   $       --     $      --     $      --     $       47    $      25  $       72
Total assets....................   $   19,643     $   5,615     $      --     $   35,766    $   6,933  $   67,957
</TABLE>
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31, 1997
                                  -------------------------------------------------------------------------------
                                                                SALES OF       PROPERTY
                                  DESIGN-BUILD                 COMMERCIAL   OPERATIONS AND
                                    SERVICES    HOMEBUILDING    PROPERTY      MANAGEMENT      OTHER      TOTAL
                                  ------------  -------------  -----------  --------------  ---------  ----------
<S>                               <C>           <C>            <C>          <C>             <C>        <C>
Revenue.........................   $   31,707     $  11,058     $  11,540     $    3,583    $   1,508  $   59,396
Costs...........................       26,981        10,139         7,127            724           --      44,971
                                  ------------  -------------  -----------       -------    ---------  ----------
  Gross profit..................   $    4,726     $     919     $   4,413     $    2,859    $   1,508  $   14,425
                                  ------------  -------------  -----------       -------    ---------  ----------
                                  ------------  -------------  -----------       -------    ---------  ----------
Depreciation and amortization
  expense.......................   $       --     $      --     $      --     $      692    $     701  $    1,393
Interest expense................   $       --     $      --     $      --     $   (2,033)   $  (1,053) $   (3,086)
Interest income.................   $       --     $      --     $      --     $      971    $      14  $      985
Total assets....................   $   25,658     $  14,842     $      --     $   42,962    $   6,658  $   90,120
</TABLE>
 
                                      F-29
<PAGE>
(22) INFORMATION CONCERNING SEGMENTS (CONTINUED)
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31, 1998
                                  -------------------------------------------------------------------------------
                                                                SALES OF       PROPERTY
                                  DESIGN-BUILD                 COMMERCIAL   OPERATIONS AND
                                    SERVICES    HOMEBUILDING    PROPERTY      MANAGEMENT      OTHER      TOTAL
                                  ------------  -------------  -----------  --------------  ---------  ----------
<S>                               <C>           <C>            <C>          <C>             <C>        <C>
Revenue.........................   $   51,524     $  27,634     $   7,823     $    3,515    $   1,676  $   92,172
Costs...........................       40,863        23,754         7,710            815           --      73,142
                                  ------------  -------------  -----------       -------    ---------  ----------
  Gross profit..................   $   10,661     $   3,880     $     113     $    2,700    $   1,676  $   19,030
                                  ------------  -------------  -----------       -------    ---------  ----------
                                  ------------  -------------  -----------       -------    ---------  ----------
Depreciation and amortization
  expense.......................   $       --     $      62     $      --     $      722    $     903  $    1,687
Interest expense................   $       --     $      (1)    $      --     $   (2,187)   $    (149) $   (2,337)
Interest income.................   $       --     $      --     $      --     $      383    $     722  $    1,105
Total assets....................   $   45,642     $  71,845     $      --     $   48,377    $   5,131  $  170,995
</TABLE>
 
(23) QUARTERLY FINANCIAL DATA (UNAUDITED)
 
    The following tables reflect the Company's unaudited quarterly results of
operations (in thousands, except per share amounts):
 
<TABLE>
<CAPTION>
                                                                  FOR THE THREE MONTHS ENDED
                                             --------------------------------------------------------------------
                                             MARCH 31, 1997  JUNE 30, 1997  SEPTEMBER 30, 1997  DECEMBER 31, 1997
                                             --------------  -------------  ------------------  -----------------
<S>                                          <C>             <C>            <C>                 <C>
Total revenue..............................   $     16,540    $    16,189      $     12,130        $    14,537
Total cost of revenue......................         12,541         12,028             9,677             10,725
                                             --------------  -------------       ----------     -----------------
  Gross profit.............................          3,999          4,161             2,453              3,812
                                             --------------  -------------       ----------     -----------------
General and administrative expenses........            544            549               783                870
Depreciation and amortization..............            286            337               360                410
                                             --------------  -------------       ----------     -----------------
  Operating income.........................          3,169          3,275             1,310              2,532
                                             --------------  -------------       ----------     -----------------
Total other income.........................           (828)          (622)              (18)              (617)
                                             --------------  -------------       ----------     -----------------
  Income before provision for income
    taxes..................................          2,341          2,653             1,292              1,915
  Provision for income taxes...............            497            944               431                478
                                             --------------  -------------       ----------     -----------------
    Net income.............................   $      1,844    $     1,709      $        861        $     1,437
                                             --------------  -------------       ----------     -----------------
                                             --------------  -------------       ----------     -----------------
EARNINGS PER COMMON SHARE:
Basic
Net income.................................            N/A    $      0.33      $       0.11        $      0.19
                                             --------------  -------------       ----------     -----------------
                                             --------------  -------------       ----------     -----------------
Weighted-average number of common shares
  outstanding..............................            N/A      5,137,170         7,619,142          7,619,142
                                             --------------  -------------       ----------     -----------------
                                             --------------  -------------       ----------     -----------------
Diluted
Net income.................................            N/A    $      0.33      $       0.11        $      0.19
                                             --------------  -------------       ----------     -----------------
                                             --------------  -------------       ----------     -----------------
Weighted-average number of common share
  outstanding assuming dilution............            N/A      5,137,170         7,640,247          7,642,148
                                             --------------  -------------       ----------     -----------------
                                             --------------  -------------       ----------     -----------------
</TABLE>
 
                                      F-30
<PAGE>
(23) QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)
 
<TABLE>
<CAPTION>
                                                                  FOR THE THREE MONTHS ENDED
                                             --------------------------------------------------------------------
                                             MARCH 31, 1998  JUNE 30, 1998  SEPTEMBER 30, 1998  DECEMBER 31, 1998
                                             --------------  -------------  ------------------  -----------------
<S>                                          <C>             <C>            <C>                 <C>
Total revenue..............................   $     12,709    $    21,868      $     18,998        $    38,597
Total cost of revenue......................          9,602         16,624            14,937             31,979
                                             --------------  -------------       ----------     -----------------
  Gross profit.............................          3,107          5,244             4,061              6,618
                                             --------------  -------------       ----------     -----------------
General and administrative expenses........            752          1,684             1,164              1,442
Depreciation and amortization..............            391            375               431                490
                                             --------------  -------------       ----------     -----------------
  Operating income.........................          1,964          3,185             2,466              4,686
                                             --------------  -------------       ----------     -----------------
Total other income.........................           (369)          (460)             (534)               106
                                             --------------  -------------       ----------     -----------------
  Income before provision for income
    taxes..................................          1,595          2,725             1,932              4,792
  Provision for income taxes...............            444            895               561              1,413
                                             --------------  -------------       ----------     -----------------
    Net income.............................   $      1,151    $     1,830      $      1,371        $     3,379
                                             --------------  -------------       ----------     -----------------
                                             --------------  -------------       ----------     -----------------
EARNINGS PER COMMON SHARE:
Basic
Net income.................................   $       0.15    $      0.24      $       0.18        $      0.44
                                             --------------  -------------       ----------     -----------------
                                             --------------  -------------       ----------     -----------------
Weighted-average number of common shares
  outstanding..............................      7,624,310      7,661,422         7,661,422          7,676,965
                                             --------------  -------------       ----------     -----------------
                                             --------------  -------------       ----------     -----------------
Diluted
Net income.................................   $       0.15    $      0.24      $       0.18        $      0.44
                                             --------------  -------------       ----------     -----------------
                                             --------------  -------------       ----------     -----------------
Weighted-average number of common share
  outstanding assuming dilution............      7,679,049      7,671,509         7,661,781          7,688,556
                                             --------------  -------------       ----------     -----------------
                                             --------------  -------------       ----------     -----------------
</TABLE>
 
                                      F-31
<PAGE>
                          INDEPENDENT AUDITORS' REPORT
 
To the Board of Directors and Stockholders
Saxton Incorporated:
 
    We have audited the accompanying consolidated balance sheet of Saxton
Incorported and subsidiaries (the "Company") as of December 31, 1997 and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the years in the two-year period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
 
    We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Saxton
Incorporated and subsidiaries as of December 31, 1997, and the results of their
operations and their cash flows for each of the years in the two-year period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
 
KPMG LLP
Las Vegas, Nevada
March 24, 1998
 
                                      F-32