Fairfield Communities, Inc.

                 10% Senior Subordinated Secured Notes

                            Ombudsman Report




                         For the Period Ending

                           December 31, 1995





                              Prepared by

                      Houlihan Lokey Howard & Zukin

        ----------------------------------------------------------


                            Date Prepared:
                           February 8, 1996 <PAGE>
 





Introduction
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In  connection   with  Houlihan  Lokey  Howard   &  Zukin's  role
("Houlihan Lokey") as the official ombudsman ("Ombudsman") to the
Fairfield Communities, Inc. ("Fairfield" or the "Company") Senior
Subordinated Secured Noteholders  ("Noteholders"), the  following
is the quarterly report regarding the Noteholders' collateral for
the quarter ending December 31,  1995. 

The Noteholders' collateral (the "Collateral") consists of all of
Fairfield's  interest  in   its  (i)   Fairfield  Pointe   Alexis
development (excluding certain lots  pledged as Collateral to the
First National Bank of Boston) located in Tarpon Springs, Florida
("Pointe Alexis");  (ii) Harbour  Ridge joint venture  in Stuart,
Florida ("Harbour  Ridge"); and (iii) Sugar  Island joint venture
in St. Croix, U.S. Virgin  Islands ("Sugar Island").  Noteholders
previously  had Collateral  interests in  the Bald  Mountain Golf
Course at the Fairfield Mountain Development ("Bald Mountain Golf
Course") until  it was sold on  February 9, 1993 and  the Harbour
Golf Course  at the  Fairfield Harbour  development in  New Bern,
North  Carolina  ("Harbour Golf  Course")  until it  was  sold on
October 8, 1993.

In  addition, Fairfield  has  reserved, but  not issued,  588,235
shares of  its common  stock (approximately  five percent  of the
outstanding Fairfield  common stock on a  fully-diluted basis) on
behalf of the Noteholders to be issued, in whole or  part, and to
the extent  that the Collateral sale proceeds are insufficient to
fully  repay the  principal and  accrued interest  on the  Senior
Subordinated Secured Notes  ("Notes").  As  of January 31,  1996,
the trading price of Fairfield's common stock was $7.00.

Pursuant  to Fairfield's  plan  of  reorganization,  efforts  are
underway to liquidate all  of the Fairfield controlled Collateral
(Pointe   Alexis)  and   to   continue  receipt   of  cash   flow
distributions from Collateral consisting of Fairfield general and
limited partnership  interests (Sugar Island and  Harbour Ridge).
Fairfield  also must  maintain the  Collateral it  controls until
March, 1997.

Collateral proceeds during  the quarter ended December 31,   1995
totaled approximately $221,450  (excluding approximately  $10,786
funded to the Noteholders' Operating Account which is used to pay
administrative  expenses at Pointe  Alexis).  The  balance in the
Noteholders' Interest Payment Account was $646,984 as of December
31,  1995.
  
Since  the  effective  date of  Fairfield's  Chapter  11 plan  of
reorganization, Noteholders have received  distributions totaling
$13,494,217 of  which $5,484,939 was interest  and $8,009,279 was
principal.  The remaining  principal  balance  outstanding as  of
December  31, 1995 was $14,805,665 which amount is secured by all
of  the Collateral outlined  in this  report (including  the cash
balance mentioned above).  

This report will serve  to more fully describe the  Collateral as
well as  to update the Noteholders  with the respect  to both the
condition  and  expected  cash  flow  of  all  of  the  remaining
Collateral. <PAGE>
 



Pointe Alexis
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Fairfield   Pointe   Alexis   is   divided   into   two  separate
developments,  Pointe  Alexis  South   and  Pointe  Alexis  North
(Harbour Watch), both located in Tarpon Springs, Florida.

Pointe Alexis South  is a Fairfield community master  planned for
271 units.  As of December 31,  1995,  172 lots had been sold, 42
were vacant  lots with roads  and improvements installed,  and 57
were  raw land with no improvements.  The aggregate release price
(the amount which must  be paid to Noteholders upon sale  of each
unit) for all the  remaining lots is $1,140,375 although  some of
the  interior lots may never yield any appreciable value and even
many of  the water-front lots may  eventually need to  be sold at
prices  well  below  the  current  release  prices.    Originally
developed  as  a retirement  community,  Pointe  Alexis has  both
single- and  multi-family product.   As  a result of  Fairfield's
Chapter 11  filing and limited  sales at Pointe  Alexis, however,
the Company limited construction activity to projects in progress
and began marketing tracts  of land in bulk to  other developers.
This strategy will continue going forward.  Lot prices range from
$12,000 to $20,000 but may be discounted  if large tracts of land
are sold in bulk. 

The  community surrounding  the  development  consists mostly  of
lower income housing and  access from the Tampa airport  is poor;
however, some  of the lots  (especially the water-front  lots) do
have appeal.    In addition,  Pointe  Alexis is  one of  the  few
remaining  sites in  Florida where  gulf-front properties  can be
purchased  at  relatively  inexpensive  prices,  and  the  Tarpon
Springs area does have  a strong retirement community.   A market
does  exist  for  Pointe  Alexis lots,  albeit  at  significantly
discounted  prices from historical levels.   At the current sales
and  release prices,  the  remaining land  inventory will  likely
liquidate over three or  four years as undeveloped lots  are sold
in  small  to  medium   sized  tracts  to  developers.     As  an
alternative,  the entire project could  be sold in  a single bulk
sale,  or sold  through an  auction, although  these alternatives
would likely  require an  aggregate sales  price  well below  the
aforementioned release price.  

During the quarter  ended December  31,  1995,  at Pointe  Alexis
South, Fairfield recorded 3 lot sales and 5 lot closings compared
to  0  lot sales  and  2 lot  closings during  the  quarter ended
December 31,  1994.  Total revenues at Pointe Alexis South during
the  third  quarter  ended  December 31,  1995  totaled  $100,000
compared to $40,000 during the fourth quarter ended December  31,
1994.  

Harbour Watch shares  the same  location and  access problems  as
Pointe Alexis  South, but has superior  marketing characteristics
and  Collateral value.  Harbour  Watch is a  gated community with
card-controlled access.   From inception, it has been operated as
a lot sale development with no home building operations conducted
by  Fairfield (in contrast to  Pointe Alexis South).   Lot prices
generally  range from  $50,000 for interior  lots to  $170,000 or
more for water-front lots with docks.  The master plan calls  for
sales of 180  lots.  As of December 31,   1995, 117 lots had been  

sold and closed, and  63 were developed with roads  and available
for sale.   Of the 63 remaining lots, the  First National Bank of
Boston has  a first lien on 14 lots.  The aggregate release price
on  the  lots  pledged  as  Collateral  to  the  Noteholders   is
$1,784,718, although  an additional  reduction in  release prices
will likely be required to generate sales. 


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If sales activity continues to be slow, and no buyer materializes
for  a bulk  purchase,  remaining lots  may  be sold  through  an
auction format  which could  prompt further decreases  in release
prices.  

During  the quarter ended December  31,  1995,  at Harbour Watch,
Fairfield recorded 0  lot sales and 0 lot closings, compared to 1
lot sale and 1 lot closing  during the quarter ended December 31,
1994.  Total revenues  at Harbour Watch during the  quarter ended
December  31, 1995 were  $100,000 compared to  $40,000 during the
quarter ended December 31,  1994.

Many  of the  homes which  have been  built are  quite  large and
expensive, particularly some of the water-front  homes.  There is
an  ongoing sales effort  in place  with a  sales trailer  at the
entrance  to the community.   During the  quarter ending December
31,     1995,  construction  of  several   new  homes  continued,
maintaining   the  community's   positive  ambiance   of  ongoing
activity.   Since completing  the development of  the water-front
property,  3 water-front lots have been sold.   As of the date of
this  report, there were 9 water-front lots available for sale at
Harbour Watch with an aggregate release price of $656,028.

Pointe Alexis  South and  Harbour Watch collectively  had monthly
cash  operating  expenses of  approximately  $203,970 during  the
quarter ended December  31,  1995,  which, together with  closing
costs  and commissions, may be funded out of excess sale proceeds
(the sale price that is in excess of the release price). 

As  the Ombudsman,  Houlihan Lokey  will continue to  monitor the
spread  between  the sales  prices  and  release prices  and  its
relationship with operating  expenses and closing  cost.  At  its
discretion, Houlihan Lokey can instruct Fairfield to increase (up
to  the levels  in  the March  31,  1989 Indenture)  or  decrease
release  prices as appropriate.  Based on  the slow sales pace at
Pointe Alexis, a  reduction in  the sales and  release prices  at
both Pointe Alexis South  and Harbour Watch is likely  during the
next quarter.  



Harbour Ridge
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Harbour Ridge is a for-sale luxury recreational community located
on a beautiful  stretch of land  fronting on the St.  Lucie River
approximately  one  hour from  the  West  Palm Beach  Airport  in
Stuart, Florida.  The Collateral interest entitles Noteholders to
35.5 percent of the net partnership  cash flow.  The community is
a  high-end luxury community  with a strong  seasonal element, as
opposed  to   year-round  residence,  with  prices  ranging  from
approximately $175,000  to  approximately $1  million.    Primary
emphasis is on a  golf and clubhouse lifestyle, with  a secondary
emphasis on boating.   There are also boat slips for sale ranging
in price from $15,000 to $40,000.

The managing general partner  of Harbour Ridge is  Harbour Ridge,
Inc., the  principals  of  which  have years  of  experience  and
success  in  the business  which  are  clearly  expressed in  the
competent and professional  look and  feel of the  project.   The
homes  are attractively  designed  and appear  well  built.   The
clubhouse also is attractively designed and is  surrounded by two
golf courses, one designed by Joe Lee and the other by Pete Dye.

During the quarter ending  December 31,  1995,  1 unit was  sold,
leaving  approximately 10 more units to be  sold.  A total of 685
units have been sold since the inception of the project.

The Noteholders received a distribution of approximately $175,000
from  Harbour Ridge during the quarter ending December 31,  1995.
Current  projections  indicate  that  an additional  $.5  to  $.8
million  of cash  flow should be  generated for  the Noteholders,
depending upon,  among other things,  final sales proceeds  and a
variety of  potential costs associated with  transferring project
control to the Harbour Ridge home owners  association.<PAGE>



Sugar Island
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The  Sugar Island  Partnership  (the  "Partnership")  was  formed
during 1984 to purchase approximately 4,091 acres of land located
on the island  of St. Croix,  Territory of the Virgin  Islands of
the  United States.  The managing general partner is Delray Land,
Inc.  ("Delray").    The Partnership  paid  $10  million for  the
property.   At  the  time  of  the  purchase,  the  property  was
undeveloped except  for the 166-acre Fountain  Valley Golf Course
(renamed  Carambola Golf  Club) designed  by Robert  Trent Jones.
Fairfield's interest in the Partnership entitles it to 30% of the
total net cash flow distributed.

To date,  the Partnership has sold  883 acres of the  property in
two separate transactions.  During 1986, the Partnership sold 855
acres of the inland  property to Danested Associates ("Danested")
for an aggregate purchase  price of $10.7 million.   Danested has
developed condominiums  and  vacant lots  designated for  single-
family  homes on the property.  Also during 1986, the Partnership
sold  28.5 acres of water-front  land to the  Davis Beach Company
for  approximately $2.5 million for use in the development of the
157-unit Carambola Beach Resort (not included in the Collateral).
Danested  had entered  into an  option to  purchase approximately
1,069  additional acres of land for $12.0 million, but the option
expired unexercised on  March 31, 1991.  The land  that was under
option to Danested is located in the central  part of the island.
It is  mostly flat and easily developed but for the most part has
no direct ocean views.   Danested also had an  option to purchase
the  Carambola Golf Club (the "Golf Club") for $7.5 million which
expired unexercised on March 31, 1993.

The remaining parcel of 2,139 acres is arguably some  of the most
beautiful  land on  St. Croix.   The  terrain is  mountainous and
covered  with  dense foliage.   Most  of  the property  has ocean
views.  The  coastal portions are set in a  series of coves ideal
for development  but currently  there are no  significant natural
beaches  and  very limited  road  access.    Development  of  the
property will be difficult and  expensive, limiting the number of
potential buyers.    The Partnership  has  indicated that  it  is
considering  selling small  sections of  land or  even individual
lots,  if  possible.    The  cost  of  holding  the  property  is
relatively low.  The Partnership leases the land to local farmers
which results in a 95% property tax exemption.  

The  Carambola  Beach  Resort   (the  "Resort")  is  a  five-star
development  and was completely  rebuilt following hurricane Hugo
in 1990.  As a result  of decreasing tourism and occupancy rates,
however,  the senior Resort  lenders decided to  foreclose on the
hotel property  and shut down hotel operations  during June 1991.
The Resort  remained closed until an  investment group, operating
through  a  Radisson  Hotel  International  franchise  agreement,
purchased  the property on June 8, 1993.  Subsequently, the hotel
changed franchises  and it now  operates under  a Westin  Resorts
name.  During 1994, the resort was reported to  have occupancy of
approximately 30%,  although occupancy had increased  to over 50%
by  the end  of  the  year.   Although  occupancy rates  are  not
available for 1995,  the continued  slow pace of  tourism in  St.
Croix would  suggest that they have not  materially improved over  
1994.

On September  15,  1995, St.  Croix was  devastated by  hurricane
Marilyn,  causing over  $50  million  of  damage to  the  Island.
Although the Resort sustained the loss of its entire beach system
and  damage to certain main structures, it managed to resume full
operations  by  early December.    The Golf  Club  also sustained
damage  with several  trees uprooted,  sand traps  washed-out and
minor structural  damage  incurred to  the  club house,  but  was
closed for only about 30 days during repairs. <PAGE>
 



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Fortunately,  Delray  reserved  sufficient  funds  to  cover  the
insurance deductible.   Going  forward,  it is  unclear how  much
insurance rates will increase or if any carriers will even insure
the Golf Club.

Prior  to  the hurricane,  increased play  at  the Golf  Club had
netted annualized  cash flow to the  Partnership of approximately
$200,000. As  a result of  the shutdown, it is  unlikely that the
Golf  Club will generate any  cash flow during  1995, pending the
outcome  of  ongoing  negotiation   with  the  insurance  carrier
regarding business interruption coverage. 

From a Collateral value perspective, Sugar Island should generate
cash flow for  the Noteholders,  although the  magnitude and  the
time  frame over  which  the  cash  flow  will  be  realized  are
difficult to determine.  The Golf  Club could be sold (or  leased
on  a long-term basis) within the next  one or two years, but the
undeveloped land acreage could take several years to sell.<PAGE>



Bald Mountain Golf Course
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The Bald Mountain Golf Course is one of  two golf courses located
at  the Fairfield  Mountains  development  in Rutherford  County,
North  Carolina.  The 18-hole,  par 72, 6,689  yard Bald Mountain
Golf  Course was  designed  by  William  B.  Lewis  and  sits  on
approximately 115  acres, with  Bermuda grass tees  and fairways,
bent grass  greens, 28 sand traps and 10 water hazards.  The Bald
Mountain  Golf  Course is  located  behind a  gated  entrance and
attracts  almost exclusively  Fairfield  residents and  timeshare
owners.

On February 9,  1993, Fairfield  completed the sale  of the  Bald
Mountain Golf  Course  to  the  Fairfield  Mountains  Development
Property  Owners Association  (the "Mountain  POA") for  net cash
proceeds of $1,787,519.74.

In  addition to  the sale  proceeds, the  Mountains  POA withdrew
various claims alleging its rights to golf course ownership.<PAGE>



Harbour Golf Course
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The Harbour Golf Course is one of two golf courses located at the
Fairfield Harbour development in  New Bern, North Carolina.   The
18-hole, par 72,  6,600-yard Harbour Golf Course  was designed by
Dominic Palumbo and  is located on  approximately 188 acres  with
narrow sloping fairways, a site-wide canal system, 77  sand traps
and  3 lakes.   The course does  not allow access  to the general
public.

On October 8, 1993,  Fairfield completed the sale of  the Harbour
Golf Course to the Fairfield Harbour Property Owners' Association
for  net  cash  proceeds  of  $1,947,948.26.    Subsequently,  an
additional $22,800 was received in connection with the release of
certain contingent closing costs. <PAGE>