EXHIBIT 13.1

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
         MATTERS

The Company's common stock currently is listed on the New York Stock Exchange
under the symbol LNR. The following table sets forth the range of the high and
low closing prices reported on the New York Stock Exchange composite tape for
each period indicated.

                                HIGH                LOW
                          -------------------------------------
                                          1999
                          -------------------------------------
           First Quarter       $22 1/2            $16 7/8
          Second Quarter       $20 5/8            $18 1/16
           Third Quarter       $23 15/16          $18 9/16
          Fourth Quarter       $20 3/8            $17 5/8

                                          1998
                          -------------------------------------
           First Quarter       $26 11/16          $21 1/4
          Second Quarter       $29 7/8            $24 1/4
           Third Quarter       $26 1/8            $15 1/2
          Fourth Quarter       $19 1/2            $12 1/2

At January 28, 2000, there were approximately 4,100 stockholders of record of
the Company's common stock. During each of the four quarters in 1999 and 1998,
the Company declared and paid cash dividends of $.0125 per common share and
$.01125 per Class B common share.

ITEM 6.  SELECTED FINANCIAL DATA

The following table contains selected consolidated financial information about
the Company. The selected financial data should be read in conjunction with the
consolidated financial statements, the notes thereto, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Annual Report.

<TABLE>
<CAPTION>
                                                                   Years Ended November 30,
                                           --------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)          1999             1998           1997            1996          1995
                                           --------------    -----------     ----------     -----------    ----------
<S>                                     <C>                     <C>             <C>             <C>           <C>
RESULTS OF OPERATIONS (1)
      Revenues
         Real estate properties         $        194,527        148,205         76,371          63,565        67,214
         Real estate securities                  107,315         58,273         39,540          25,194        15,358
         Real estate loans                        46,158         44,279         51,572          74,677        50,243
                                           --------------    -----------     ----------      ----------    ----------
             Total revenues             $        348,000        250,757        167,483         163,436       132,815
                                           ==============    ===========     ==========      ==========    ==========

      EBITDA (2)                        $        235,635        179,286        126,282         114,013        91,662
      Interest expense                            83,909         53,850         26,584          20,513        14,692
      Net earnings                                95,560         73,323         44,218          47,255        40,508

      Per share amounts
        Net earnings -  basic           $           2.68           2.04           1.22           -             -
        Net earnings  - diluted                     2.63           2.02           1.22           -             -
        Cash dividends                              0.05           0.05         0.0125  (3)      -             -
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                                         November 30,
                                         ----------------------------------------------------------------------------
                                            1999             1998             1997             1996          1995
                                         ------------     ------------     ------------     -----------    ----------
                                                            (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                   <C>                   <C>              <C>               <C>           <C>
FINANCIAL POSITION (1)
      Total assets                    $    2,283,001        1,743,805        1,023,337         752,968       652,400
      Assets by business segment
         Real estate properties            1,264,191          985,678          424,610         304,279       280,862
         Real estate securities              628,750          443,564          319,517         263,842       163,292
         Real estate loans                   272,648          206,449          178,395         153,426       161,652

      Total debt                           1,403,401        1,017,199          391,171         354,406       252,256
      Parent Company investment               -                -                -              367,048       370,903
      Stockholders' equity                   710,332          618,979          569,088          -              -
      Stockholders' equity per share           20.18            17.39            15.75          -              -

      Shares outstanding
         Common stock                         25,142           24,852           25,144          -              -
         Class B common stock                 10,058           10,748           10,984          -              -
                                         ------------     ------------     ------------     -----------    ----------
             Total                            35,200           35,600           36,128          -              -
                                         ============     ============     ============     ===========    ==========
</TABLE>
------------
(1)  LNR Property Corporation was formed in June 1997 and spun-off from Lennar
     Corporation on October 31, 1997. The above information has been prepared
     and presented to reflect the Company as a separate consolidated group for
     the periods presented. Results of operations for periods prior to October
     31, 1997 and historical cost bases of assets and liabilities have been
     extracted from Lennar Corporation's financial statements.

(2)  EBITDA is defined as earnings before interest, taxes, depreciation,
     amortization and cash interest received on CMBS in excess of interest
     income recognized.

(3)  1997 dividends reflect only the dividend declared and paid in the fourth
     quarter.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS CONTAINS INFORMATION WHICH CONSTITUTES FORWARD LOOKING STATEMENTS.
FORWARD LOOKING STATEMENTS INHERENTLY INVOLVE RISKS AND UNCERTAINTIES. THE
FACTORS, AMONG OTHERS, THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE ANTICIPATED BY THE FORWARD LOOKING STATEMENTS IN THIS MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INCLUDE
(I) CHANGES IN INTEREST RATES, (II) CHANGES IN DEMAND FOR COMMERCIAL REAL ESTATE
NATIONALLY, IN AREAS IN WHICH THE COMPANY OWNS PROPERTIES, OR IN AREAS IN WHICH
PROPERTIES SECURING MORTGAGES DIRECTLY OR INDIRECTLY OWNED BY THE COMPANY ARE
LOCATED, (III) INTERNATIONAL, NATIONAL OR REGIONAL BUSINESS CONDITIONS WHICH
AFFECT THE ABILITY OF MORTGAGE OBLIGORS TO PAY PRINCIPAL OR INTEREST WHEN IT IS
DUE, AND (IV) THE CYCLICAL NATURE OF THE COMMERCIAL REAL ESTATE BUSINESS.

<PAGE>

OVERVIEW

LNR Property Corporation (the "Company") is engaged primarily in (i) acquiring,
developing, managing and repositioning commercial and multi-family residential
real estate properties, (ii) acquiring (often in partnership with financial
institutions or real estate funds) and managing portfolios of mortgage loans and
other real estate related assets, (iii) investing in unrated and non-investment
grade rated commercial mortgage-backed securities ("CMBS") as to which the
Company has the right to be special servicer, and (iv) making high yielding real
estate related loans and equity investments. For the following discussion, these
businesses are grouped as follows: (a) real estate properties, (b) real estate
securities and (c) real estate loans.

Prior to October 31, 1997, Lennar Corporation (the "Parent Company" or "Lennar")
transferred its real estate investment and management business to the Company.
On October 31, 1997, Lennar effected a spin-off of the Company (the "Spin-off")
to Lennar's stockholders by distributing to Lennar's stockholders one share of
the Company's stock for each share of Lennar stock they held.

The combined results of operations for the periods prior to November 1, 1997,
were extracted from the financial statements of Lennar using the historical
results of operations and historical cost basis of the assets and liabilities of
Lennar's real estate investment and management businesses. Additionally, the
results of operations include revenues and expenses that were not historically
recorded as part of those businesses, but were primarily associated with them.
Management believes the assumptions underlying the Company's results of
operations are reasonable. However, those results may not reflect the results of
operations the Company would have realized if it had operated as a separate
stand-alone group during the periods presented, rather than as part of the
larger Lennar enterprise.

During 1998, the Company entered the business of owning, developing and
syndicating multi-family and senior housing residential rental communities,
which qualify for Low-Income Housing Tax Credits, by acquiring from Pacific
Harbor Capital, Inc., a wholly-owned subsidiary of PacifiCorp, controlling
interests in a group of entities, as well as certain direct partnership
interests, known as the Affordable Housing Group ("AHG"). As of November 30,
1999, AHG had ownership interests in approximately 8,300 multi-family and senior
housing rental communities (60 properties), many of which qualify for Low-Income
Housing Tax Credits under Federal tax laws. These tax credits can be used to
increase the Company's after-tax income or may be sold to others.

<PAGE>

The following is a summary of the Company's results of operations for the years
ended November 30, 1999, 1998 and 1997 after allocating among the core business
segments certain non-corporate general and administrative expenses. The
Company's business segment reporting has been modified effective with the
adoption of Statement of Financial Accounting Standards ("SFAS") No. 131,
"Disclosures about Segments of an Enterprise and Related Information" on
November 30, 1999. Prior year numbers have been restated to conform to the
modified business segment reporting.

(IN THOUSANDS)                   1999           1998           1997
                              ---------      ---------      ---------
Revenues
   Real estate properties     $ 194,527        148,205         76,371
   Real estate securities       107,315         58,273         39,540
   Real estate loans             46,158         44,279         51,572
                              ---------      ---------      ---------
Total revenues                  348,000        250,757        167,483
                              ---------      ---------      ---------

Operating expenses
   Real estate properties       100,772         66,049         45,024
   Real estate securities         8,183          3,476          1,619
   Real estate loans              7,638          8,139          3,671
   Corporate and other           16,598         11,697         18,097
                              ---------      ---------      ---------
Total operating expenses        133,191         89,361         68,411
                              ---------      ---------      ---------

Operating earnings
   Real estate properties        93,755         82,156         31,347
   Real estate securities        99,132         54,797         37,921
   Real estate loans             38,520         36,140         47,901
   Corporate and other          (16,598)       (11,697)       (18,097)
                              ---------      ---------      ---------
Total operating earnings        214,809        161,396         99,072
                              ---------      ---------      ---------

Interest expense                 83,909         53,850         26,584
Income tax expense               35,340         34,223         28,270
                              ---------      ---------      ---------
Net earnings                  $  95,560         73,323         44,218
                              =========      =========      =========

<PAGE>

RESULTS OF OPERATIONS

YEAR ENDED NOVEMBER 30, 1999 COMPARED TO YEAR ENDED NOVEMBER 30, 1998

Net earnings for the year ended November 30, 1999 were $95.6 million, or $2.68
per share ($2.63 per share diluted), a 30% increase over prior year net earnings
of $73.3 million, or $2.04 per share ($2.02 per share diluted). The increase in
earnings was primarily due to (i) higher gains on sales of real estate
properties, (ii) an increase in interest income and servicing fees derived from
the Company's growing CMBS portfolio, which continues to perform above original
expectations, (iii) increased net operating income from a larger portfolio of
stabilized properties and (iv) a lower effective tax rate due to the AHG
acquisition. These increases were partially offset by (i) lower earnings from
Lennar Land Partners ("LLP") due to fewer land sales in the fourth quarter of
1999, (ii) an increase in depreciation expense due to the growth of the
Company's real estate portfolio and (iii) an increase in interest expense due to
increased borrowing levels to finance purchases of real estate, CMBS and loans.

Operating earnings were generated from the Company's three main business lines
in the following proportions: 40% from real estate properties, 43% from real
estate securities and 17% from real estate loans. This compares with 47%, 32%
and 21%, respectively, for the prior year. The shift in these percentages from
1998 to 1999 is primarily the result of higher earnings from the Company's
growing CMBS portfolio.

YEAR ENDED NOVEMBER 30, 1998 COMPARED TO YEAR ENDED NOVEMBER 30, 1997

Net earnings for the year ended November 30, 1998 were $73.3 million, or $2.04
per share ($2.02 per share diluted), a 66% increase over prior year net earnings
of $44.2 million, or $1.22 per share ($1.22 per share diluted). The increase in
earnings was primarily due to (i) an increase in the equity in earnings from LLP
which contributed $44.6 million to operating earnings in 1998, (ii) an increase
in interest income and servicing fees derived from the Company's growing CMBS
portfolio, (iii) higher gains on sales of real estate properties and (iv) a
lower effective tax rate due to the AHG acquisition. These increases were
partially offset by (i) lower earnings from older partnership investments which
were winding down and (ii) an increase in interest expense due to increased
borrowing levels to finance purchases of real estate, CMBS and the AHG
acquisition.

Operating earnings were generated from the Company's three main business lines
in the following proportions: 47% from real estate properties, 32% from real
estate securities and 21% from real estate loans. This compares with 27%, 32%
and 41%, respectively, for the prior year. The shift in these percentages from
1997 to 1998 is primarily the result of higher gains on property sales,
including the Company's share of joint venture gains and lower earnings from
older partnership investments in non-performing real estate loans.

<PAGE>

REAL ESTATE PROPERTIES

<TABLE>
<CAPTION>
(IN THOUSANDS)                                 1999            1998            1997
                                            ----------     ----------      ----------
<S>                                         <C>            <C>             <C>
Rental income                               $   95,391         73,200          56,334
Gains on sales of real estate                   67,187         26,818          18,076
Equity in earnings of partnerships              31,281         47,822           1,558
Management fees                                    668            365             403
                                            ----------     ----------      ----------
   Total revenues                              194,527        148,205          76,371
                                            ----------     ----------      ----------

Cost of rental operations                       53,881         45,285          35,767
Other operating expenses                        16,685          8,106           2,955
Minority interests                               2,813           (356)            242
Depreciation                                    27,393         13,014           6,060
                                            ----------     ----------      ----------
   Total operating expenses                    100,772         66,049          45,024
                                            ----------     ----------      ----------
   Operating earnings                       $   93,755         82,156          31,347
                                            ==========     ==========      ==========

Balance sheet data:

Operating properties and equipment, net     $  982,230        712,419         228,598
Land held for investment                       126,047        140,048          83,297
Investments in and advances to
   partnerships                                155,914        133,211         112,715
                                            ----------     ----------      ----------
   Total segment assets                     $1,264,191        985,678         424,610
                                            ==========     ==========      ==========
</TABLE>

Real estate properties include apartments, office buildings, shopping centers,
hotels, industrial facilities and land that the Company acquires and develops,
redevelops or repositions. It also includes the Company's 50% interest in LLP, a
partnership engaged in the acquisition, development and sale of land. Total
revenues from real estate properties include rental income from operating
properties, gains on sales of those properties, equity in earnings of
partnerships that own and operate real estate properties and fees earned from
managing those partnerships. Operating expenses include the direct costs of
operating the real estate properties, the related depreciation and the overhead
associated with managing the properties and partnerships.

YEAR ENDED NOVEMBER 30, 1999 COMPARED TO YEAR ENDED NOVEMBER 30, 1998

Overall, operating earnings from real estate properties increased to $93.8
million for the year ended November 30, 1999 from $82.2 million in 1998.
Earnings were higher primarily due to higher gains on sales of real estate and
increased net operating income from stabilized properties, offset to some degree
by greater depreciation expense and other operating expenses. Continued strength
in the real estate economy in 1999 contributed to strong demand for, and high
prices achieved from, the sale of the Company's real estate properties.

Total rental income increased to $95.4 million for the year ended November 30,
1999 from $73.2 million in 1998. In 1999 and 1998, respectively, rental income
consisted of $42.7 million and $29.2 million from commercial properties (office,
retail and industrial), $14.1 million and $19.9 million from market-rate
multi-family residential properties, $20.7 million and $10.6 million from
low-income multi-family residential communities, and $17.9 million and $13.5
million from hotels and other properties. The increases were primarily due to
continued acquisitions of real estate properties and the inclusion of the AHG
properties for a full year in 1999. Overall average occupancy and rental rates
were similar in the two years for stabilized operating properties. Cost of
rental operations increased to $53.9 million for the year ended November 30,
1999 from $45.3 million in 1998 due to the inclusion of the AHG properties for a
full year in 1999 and acquisitions of other new properties.

<PAGE>

Net rental income increased by $13.6 million, or 49%, for the year ended
November 30, 1999 over the prior year. Of this increase, 68% was due to net
rental income increases from stabilized market-rate properties and the rest of
the increase was due to the affordable housing business.

The net book value of operating properties and equipment at November 30, 1999
and the net operating income for the year then ended with regard to various
types of property owned by the Company, were as follows:

<TABLE>
<CAPTION>
                                                                                      Net
                                                                                   Operating     NOI as a %
                                                    Net Book        Occupancy       Income      of Net Book
(IN THOUSANDS, EXCEPT PERCENTAGES)                    Value           Rate         (NOI) (1)        Value
                                                  -------------- --------------- -------------- --------------
<S>                                                   <C>             <C>             <C>            <C>
Stabilized operating properties
         Commercial                                   $ 245,138       92%             $ 34,110       14%
         Multi-family                                     2,703       99%                  387       14%
         Hotel and other                                 33,347       64%                3,579       11%
                                                  --------------                 -------------- --------------
                                                        281,188                         38,076       14%

Under development or repositioning
         Commercial                                     186,582                          3,913
         Multi-family                                   195,613                            647
         Hotel                                           47,785                              -
                                                  --------------                 --------------
                                                        429,980                          4,560
                                                  --------------                 --------------
Total market-rate operating properties                  711,168                         42,636

AHG multi-family properties
         Stabilized (2)                                 158,075       96%               10,024        6%
         Development                                    102,300                              -
                                                  --------------                 --------------
Total AHG multi-family properties                       260,375                         10,024

Furniture, fixtures and equipment                        10,687                              -
                                                  --------------                 --------------
Total operating properties and equipment, net         $ 982,230                       $ 52,660
                                                  ==============                 ==============
</TABLE>
-------------------
(1)  Annualized NOI for purposes of this schedule is rental income less cost of
     rental operations before commissions, repairs and maintenance and
     non-operating expenses.

(2)  NOI and NOI as a percentage of net book value excludes the annualized
     effect of tax credits and other related tax deductions; if included, NOI
     and NOI as a percentage of net book value would have been $23,625 and 15%,
     respectively, on a pre-tax basis.

As of November 30, 1999, approximately 40% of the Company's market-rate
operating properties, based on net book value, had reached stabilized occupancy
levels and were yielding in total 14% on net book cost. The decrease in NOI as a
percentage of net book value from 18% in 1998 to 14% in 1999 is primarily due to
the sale of four older, more mature stabilized multi-family properties in 1999,
which are discussed below, and the acquisition of several commercial properties
in 1999 where the Company believes it can further improve operating income. The
anticipated improvements in the earnings of the unstabilized market-rate
operating properties are not expected to be recognized until future periods.

Pre-tax operating margins for the AHG communities, which qualify for Low-Income
Housing Tax Credits, are generally lower than for market-rate rentals. However,
the Company receives its desired yield from these investments after adding in
the impact of lower income taxes as a result of the tax credits and other
related tax deductions.

During the year, the Company completed several real estate sales resulting in
gains of $67.2 million, compared with $26.8 million during 1998. The most
significant sale involved a $61 million cash sale of four stabilized
multi-family communities in Florida, consisting of 1,520 apartments.


<PAGE>

Although the Company sold real estate with carrying values of $182.5 million
during 1999 ($72.2 million of which relates to the syndication of certain AHG
communities), the total book value of operating properties and equipment and
land held for investment increased by $255.8 million during the year, primarily
as a result of approximately $483.4 million in acquisitions and property
development expenditures. A majority of those acquisitions were for operating
properties which were being developed or where the Company believed it could
improve net operating earnings and/or ultimate sales value, although there can
be no assurance that it will be successful.

Equity in earnings of partnerships decreased to $31.3 million for the year ended
November 30, 1999 from $47.8 million in 1998. The decrease was primarily due to
lower equity in earnings of real estate property partnerships, primarily LLP, as
a result of decreased sales of the partnerships' underlying real estate. The
Company's equity in LLP earnings was $31.6 million for the year ended 1999,
compared with $44.6 million in 1998.

Other operating expenses, which represent an allocation of salary, professional
and other administrative expenses, increased to $16.7 million for the year ended
November 30, 1999, compared to $8.1 million in 1998. These increases were due to
additional personnel and administrative costs necessary to support the growth in
the Company's real estate property portfolio.

Depreciation expense increased to $27.4 million for the year ended November 30,
1999 from $13.0 million in 1998. This increase was due to growth in the
operating property portfolio, with approximately 35% of the increase resulting
from the affordable housing business.

YEAR ENDED NOVEMBER 30, 1998 COMPARED TO YEAR ENDED NOVEMBER 30, 1997

Overall, operating earnings from real estate properties increased to $82.2
million for the year ended November 30, 1998 from $31.3 million in 1997.
Earnings were higher primarily due to gains on sales of real estate properties,
higher equity in earnings of real estate partnerships and increases in net
rental income. The strong real estate economy and liquid capital markets,
particularly during the first three quarters of 1998, contributed to the strong
demand for, and high prices achieved from, the Company's real estate properties.

Total rental income increased to $73.2 million for the year ended November 30,
1998 from $56.3 million in 1997. In 1998 and 1997, respectively, rental income
consisted of $29.2 million and $27.0 million from commercial properties (office,
retail and industrial), $19.9 million and $19.5 million from market-rate
multi-family residential properties, $10.6 million and zero from low-income
multi-family residential communities, and $13.5 million and $9.8 million from
hotels and other properties. The increases were primarily due to acquisitions of
new properties in the latter part of 1997 and during 1998 and the AHG
acquisition. Overall average occupancy and rental rates were similar in the two
years for stabilized operating properties. Cost of rental operations increased
to $45.3 million for the year ended November 30, 1998 from $35.8 million in 1997
due to the AHG acquisition and acquisitions of other new properties. Net rental
income increased by 36% over the prior year as the net rental income increases
from newly acquired, developed or repositioned properties more than offset the
net rental income from the properties sold.

Results for the year ended November 30, 1998 include $4.9 million of net rental
income from operations on the AHG properties that closed during the year.
Pre-tax operating margins for properties, such as the AHG properties, that
qualify for Low-Income Housing Tax Credits are generally lower than for
market-rate rentals. However, the Company receives its desired yield from these
investments after adding in the impact of lower income taxes as a result of the
tax credits and other related tax deductions.


<PAGE>

The net book value of operating properties and equipment at November 30, 1998
and the net operating income for the year then ended with regard to various
types of property owned by the Company, were as follows:

<TABLE>
<CAPTION>
                                                                                      Net
                                                                                   Operating     NOI as a %
                                                    Net Book        Occupancy       Income      of Net Book
(IN THOUSANDS, EXCEPT PERCENTAGES)                    Value           Rate         (NOI) (1)        Value
                                                  -------------- --------------- -------------- --------------
<S>                                                   <C>             <C>             <C>            <C>
Stabilized operating properties
         Commercial                                   $ 128,361       99%             $ 19,317       15%
         Multi-family                                    28,164       92%                7,586       27%
         Hotel and other                                 32,815       71%                6,249       19%
                                                  --------------                 -------------- --------------
                                                        189,340                         33,152       18%
Under development or repositioning
         Commercial                                     144,653                          2,688
         Multi-family                                   111,811                          5,509
         Hotel                                           31,872                              -
                                                  --------------                 --------------
                                                        288,336                          8,197
                                                  --------------                 --------------
Total market-rate operating properties                  477,676                         41,349

AHG multi-family properties
         Stabilized (2)                                 174,120       96%                8,220        5%
         Development                                     55,009                              -
                                                  --------------                 --------------
Total AHG multi-family properties                       229,129                          8,220

Furniture, fixtures and equipment                         5,614                              -
                                                  --------------                 --------------
Total operating properties and equipment, net         $ 712,419                       $ 49,569
                                                  ==============                 ==============
</TABLE>
---------------------
(1)  Annualized NOI for purposes of this schedule is rental income less cost of
     rental operations before commissions, repairs and maintenance and
     non-operating expenses.

(2)  NOI and NOI as a percentage of net book value excludes the annualized
     effect of tax credits and other related tax deductions; if included, NOI
     and NOI as a percentage of net book value would have been $20,591 and 12%,
     respectively, on a pre-tax basis.

As of November 30, 1998, approximately 40% of the Company's market-rate
operating properties, based on net book value, had reached stabilized occupancy
levels and were yielding in total 18% on net book cost.

Although the Company sold real estate with carrying values of $48.4 million
during fiscal 1998, the total book value of operating properties and equipment
and land held for investment increased by $540.6 million over the prior year,
primarily as a result of the AHG acquisition and other asset additions. The AHG
acquisition and subsequent capital spending increased operating properties by
approximately $229.3 million. A majority of the other asset purchases were
operating properties which are being developed or where the Company believes it
can improve net operating earnings and cash flows as well as ultimate sales
value, although there can be no assurance that it will be successful.

Equity in earnings of partnerships increased to $47.8 million for the year ended
November 30, 1998 from $1.6 million in 1997. This increase was almost entirely
attributable to the results of LLP, which contributed $44.6 million to equity in
earnings in 1998.

Other operating expenses increased to $8.1 million for 1998 from $3.0 million
for 1997 primarily due to the increase in personnel and administrative costs
associated with increasing the real estate portfolio, which grew 132% during
1998.


<PAGE>

Depreciation expense increased to $13.0 million for the year ended November 30,
1998 from $6.1 million in 1997. This increase is directly attributable to the
increase in the Company's operating property portfolio, 47% of which is related
to the acquisition of the affordable housing business.

REAL ESTATE SECURITIES

<TABLE>
<CAPTION>
(IN THOUSANDS)                                    1999         1998          1997
                                                --------     --------      --------
<S>                                             <C>            <C>           <C>
Interest income                                 $ 87,590       56,160        29,919
Equity in earnings (losses) of partnerships        4,077       (5,450)           --
Gains on sales of investment securities            6,056        1,386         5,359
Management and servicing fees                      9,592        6,177         4,262
                                                --------     --------      --------
   Total revenues                                107,315       58,273        39,540
                                                --------     --------      --------
Operating expenses                                 7,502        3,476         1,619
Minority interest                                    681           --            --
                                                --------     --------      --------
   Total operating expenses                        8,183        3,476         1,619
                                                --------     --------      --------
   Operating earnings                           $ 99,132       54,797        37,921
                                                ========     ========      ========
Balance sheet data:

Investment securities                           $510,920      434,157       304,660
Investments in and advances to partnerships       90,148           --            --
Other investments                                 27,682        9,407        14,857
                                                --------     --------      --------
   Total segment assets                         $628,750      443,564       319,517
                                                ========     ========      ========
</TABLE>

Real estate securities include unrated and non-investment grade rated
subordinated CMBS which are collateralized by pools of mortgage loans on
commercial and multi-family residential real estate properties. It also includes
the Company's investment in a partnership that invests in CMBS, as well as
several small investments in entities in related businesses. Total revenues from
real estate securities include interest income, equity in the earnings of the
partnership that owns real estate securities, gains on sales of those
securities, servicing fees from acting as special servicer for CMBS transactions
and fees earned from managing the partnership. Operating expenses include the
overhead associated with managing the investments and partnership and costs of
the special servicing responsibilities.

YEAR ENDED NOVEMBER 30, 1999 COMPARED TO YEAR ENDED NOVEMBER 30, 1998

Overall operating earnings from real estate securities increased to $99.1
million for the year ended November 30, 1999 from $54.8 million in 1998.
Earnings were higher primarily due to the growth of the Company's CMBS portfolio
to a book value of $510.9 million (face amount of $1.2 billion) at November 30,
1999 from a book value of $434.2 million (face amount of $1.0 billion) at
November 30, 1998 and greater recognition of earnings due to actual CMBS
performance exceeding original expectations.

<PAGE>

In recording CMBS interest income, the Company records interest received plus
the amortization of the difference between the carrying value and the face
amount of the securities to achieve a level yield. To date, this has resulted in
less recognition of interest income than interest received. The excess interest
received is applied to reduce the Company's investment. The Company's initial
and ongoing estimates of its returns on CMBS investments are based on a number
of assumptions that are subject to certain business and economic conditions, the
most significant of which is the timing and magnitude of credit losses on the
underlying mortgages.

Actual loss experience to date, particularly for older transactions (3 to 6
years in age) is significantly lower than originally underwritten by the
Company. Therefore, changes to original estimated yields have resulted, and the
Company believes should continue to result, in improved earnings from these
transactions. The Company believes these improvements resulted from (i) its
having conservatively underwritten these transactions, (ii) its loan workout and
real estate expertise and (iii) a strong real estate economy. However, the
positive experience on these older transactions will not necessarily translate
into yield improvements on newer investments.

During the year ended November 30, 1999, the Company acquired $421.0 million
face amount of CMBS for $192.8 million, increasing the book value of its
portfolio to $510.9 million from $434.2 million at November 30, 1998. The
following is a summary of the CMBS portfolio held by the Company at November 30,
1999:

<TABLE>
<CAPTION>
                                            Weighted                                 Weighted     Weighted
                                             Average                       % of       Average      Average
                                 Face       Interest                       Face        Cash          Book
                                Amount        Rate        Book Value      Amount     Yield (1)    Yield (2)
                            -------------- ------------ --------------- ----------- ------------ ----------
                                                   (IN THOUSANDS, EXCEPT PERCENTAGES)
<S>                          <C>               <C>         <C>             <C>         <C>          <C>
BB rated or above              $240,053        7.22%       $185,071        77.1%        9.5%        12.4%
B rated                         268,321        6.62%        159,520        59.5%       11.1%        12.4%
Unrated                         712,298        7.32%        167,828        23.6%       29.9%        23.7%
Unrealized losses on
  securities and other                -                      (1,499)
                            --------------              ---------------
Total CMBS
  portfolio (3)              $1,220,672        7.20%       $510,920        41.9%       16.7%        16.1%
                            ==============              ===============
</TABLE>
--------------------
(1)  Cash yield is determined by annualizing the actual cash received during the
     month of November 1999, and dividing the result by the book value at
     November 30, 1999.

(2)  Book yield is determined by annualizing the interest income for the month
     of November 1999, and dividing the result by the book value at November 30,
     1999.

(3)  This table excludes CMBS owned through non-consolidated partnerships.

Equity in earnings of partnerships primarily represents the Company's
participation in a venture, Madison Square Company LLC ("Madison"), which was
formed in April 1999. The Company's investment in Madison continued to increase
as the venture grew its CMBS portfolio throughout 1999. Since formation, the
venture has acquired approximately $1.7 billion of assets. The Company's
investment in the venture as of the end of the year was approximately $90
million out of a total commitment by the Company of $125 million. In addition to
its investment in the venture the Company also maintains a significant ongoing
role in the venture, for which it earns fees, both as the special servicer for
the purchased CMBS transactions and as the provider of management services for
the venture. Madison contributed approximately $6.6 million of equity in
earnings of partnerships to the real estate securities line of business for the
year ended November 30, 1999.

<PAGE>

The $6.1 million of gains on sales of investment securities in 1999 represents
the sale of 200,000 shares of common stock in Bank United Corporation ("BNKU").
Early in 1999, the Company received approximately 617,000 shares of BNKU stock
in the form of a distribution from one of its partnerships. At November 30,
1999, the Company had a remaining investment of approximately 417,000 shares of
BNKU stock which had a market value in excess of book cost on that date of
approximately $13.2 million.

Management and servicing fees increased to $9.6 million from $6.2 million in
1998. These fees increased because of an increased number of CMBS mortgage pools
(55 at November 30, 1999 versus 44 at November 30, 1998) for which the Company
acts as special servicer.

Operating expenses increased to $7.5 million in 1999 from $3.5 million for the
year ended November 30, 1998 primarily due to increases in personnel and
out-of-pocket expenses directly related to the growth of the CMBS business.

YEAR ENDED NOVEMBER 30, 1998 COMPARED TO YEAR ENDED NOVEMBER 30, 1997

Overall operating earnings from real estate securities increased to $54.8
million for the year ended November 30, 1998 from $37.9 million in 1997.
Earnings were higher primarily due to the growth of the Company's CMBS portfolio
and greater recognition of earnings due to actual CMBS performance exceeding
original expectations.

During the twelve months ended November 30, 1998, the Company purchased $308.0
million face amount of securities for approximately $159.8 million, increasing
the book value of its portfolio to $434.2 million from $304.7 million at
November 30, 1997. The following is a summary of the CMBS portfolio held by the
Company at November 30, 1998:

<TABLE>
<CAPTION>
                                            Weighted                                 Weighted     Weighted
                                             Average                       % of       Average      Average
                                 Face       Interest                       Face        Cash          Book
                                Amount        Rate        Book Value      Amount     Yield (1)    Yield (2)
                            -------------- ------------ --------------- ----------- ------------ ----------
                                                   (IN THOUSANDS, EXCEPT PERCENTAGES)
<S>                          <C>               <C>         <C>             <C>         <C>          <C>
BB rated or above              $ 120,275       8.40%       $ 103,134       85.7%        9.9%        13.7%
B rated                          219,927       7.26%         156,191       71.0%       10.2%        13.0%
Unrated                          644,115       6.86%         158,606       24.6%       29.0%        23.2%
Unrealized gains on
securities and other                   -                      16,226
                             -------------              ---------------
Total CMBS
portfolio                      $ 984,317       7.11%       $ 434,157       44.1%       17.3%        17.0%
                             =============              ===============
</TABLE>
-----------------
(1) Cash yield is determined by annualizing the actual cash received during the
    month ended November 30, 1998, and dividing the result by the book value at
    November 30, 1998.
(2) Book yield is determined by annualizing the interest income for the month of
    November 30, 1998, and dividing the result by the book value at November 30,
    1998.

Equity in losses of partnerships of $5.5 million represents an adjustment in
basis of one of the Company's non-CMBS investments.

Gains on sales of investment securities decreased from the prior year. In 1997
the Company recognized $5.4 million in gains from sales of CMBS primarily as a
result of a Re-REMIC securitization transaction. The Re-REMIC transaction was
the securitization of the cash flows from pre-existing CMBS bonds. The Company
had no comparable transaction in 1998.

<PAGE>

Management and servicing fees increased to $6.2 million from $4.3 million in
1997. These fees increased because of an increased number of CMBS mortgage pools
(44 at November 30, 1998 versus 36 at November 30, 1997) for which the Company
acts as special servicer.

Operating expenses increased to $3.5 million in 1998 from $1.6 million for the
year ended November 30, 1997 primarily due to increases in personnel and
out-of-pocket expenses related to the growth of the CMBS business.

REAL ESTATE LOANS

<TABLE>
<CAPTION>
(IN THOUSANDS)                                    1999         1998         1997
                                                --------     --------     --------
<S>                                             <C>            <C>          <C>
Interest income                                 $ 18,874       20,690       11,527
Equity in earnings of partnerships                21,700       19,976       28,591
Management fees                                    5,080        2,718        8,720
Other income                                         504          895        2,734
                                                --------     --------     --------
   Total revenues                                 46,158       44,279       51,572
                                                --------     --------     --------
Operating expenses                                 5,492        5,961        3,671
Minority interest                                  2,146        2,178           --
                                                --------     --------     --------
   Total operating expenses                        7,638        8,139        3,671
                                                --------     --------     --------
   Operating earnings                           $ 38,520       36,140       47,901
                                                ========     ========     ========
Balance sheet data:

Mortgage loans, net                             $152,827       97,855       86,849
Investments in and advances to partnerships       69,830       61,279       46,644
Other investments                                 49,991       47,315       44,902
                                                --------     --------     --------
   Total segment assets                         $272,648      206,449      178,395
                                                ========     ========     ========
</TABLE>

Real estate loans include the Company's domestic and foreign discount loan
portfolio investments, owned primarily through partnerships, and related loan
workout operations, as well as its direct lending activities in unique
high yielding situations. Total revenues include interest income, equity in
earnings of partnerships and management fees earned from those partnerships.
Operating expenses include the overhead associated with servicing the loans and
managing the partnerships.

YEAR ENDED NOVEMBER 30, 1999 COMPARED TO YEAR ENDED NOVEMBER 30, 1998

Operating earnings from real estate loans increased to $38.5 million for the
year ended November 30, 1999 from $36.1 million in 1998.

Interest income declined to $18.9 million for the year ended November 30, 1999
from $20.7 million in 1998. The decrease was primarily due to the inclusion in
1998 of approximately $3.0 million of interest income on a $105 million
participation in a $255 million first mortgage loan collateralized by a hotel
portfolio that the Company had acquired late in the third quarter and
subsequently sold at par in the fourth quarter of 1998. Additionally, during the
fourth quarter, the Company began investing in structured junior loan
participations in high-quality short- to medium-term variable rate first
mortgage real estate loans. As of November 30, 1999, the Company had four of
these investments funded with a net book value of $75.2 million. These
investments contributed just under $1.0 million to earnings in the fourth
quarter of 1999 and are expected to have a more significant impact on earnings
in 2000.

<PAGE>

For the year ended November 30, 1999 equity in earnings of partnerships
increased to $21.7 million from $20.0 million in 1998. Most of the increase is
related to domestic discount loan portfolio resolutions. The Company anticipates
that the earnings from the domestic discount loan portfolios will be much less
significant in future periods as the majority of the assets remaining in the
partnerships were resolved in 1999.

As of the end of the year, the Company had invested in 15 portfolios of
non-performing real estate loans in Japan through partnerships with a total net
investment of approximately $49.6 million at November 30, 1999. As a result of
its loan workout activities, the Company has received cash equity distributions
from its Japan investments of approximately $29.6 million during 1999, bringing
the inception-to-date distributions (including return of capital) to
approximately $32.7 million. The majority of the funds were utilized to invest
in additional Japan portfolios.

At this point, there can be no assurance that the Company's investments in
non-performing real estate loans in Japan will achieve the same level of results
as the distressed U.S. portfolio business has.

Management fees increased to $5.1 million for the year ended November 30, 1999
from $2.7 million in 1998, due to increased disposition fees on the domestic
loan portfolio resolutions.

Operating expenses decreased to $5.5 million for the year ended November 30,
1999 from $6.0 million in 1998, primarily due to the decrease in expenses
associated with managing the diminishing domestic discount loan portfolios,
offset somewhat by the increased general and administrative expenses to support
the Japan operations.

YEAR ENDED NOVEMBER 30, 1998 COMPARED TO YEAR ENDED NOVEMBER 30, 1997

Operating earnings from real estate loans decreased to $36.1 million for the
year ended November 30, 1998 from $47.9 million in 1997.

Interest income grew to $20.7 million for the year ended November 30, 1998 from
$11.5 million in 1997. The increase was primarily due to new investments in
mortgage loans as the average balance of mortgage loans outstanding increased
over 1997. Interest income for 1998 included approximately $3.0 million in
interest income and fees on the $105 million participation in a $255 million
first mortgage loan collateralized by a hotel portfolio that was purchased in
the third quarter and sold at par during the fourth quarter.

For the year ended November 30, 1998, equity in earnings of partnerships
decreased to $20.0 million from $28.6 million in 1997. Overall, the Company's
earnings from the domestic discount loan portfolios declined as the assets in
the partnerships have been resolved and sold or paid down.

During 1998, the Company entered into several partnerships to acquire portfolios
of non-performing commercial mortgage loans in Japan, where it has opened an
office to oversee its loan workout and real estate asset management operations.
As of November 30, 1998, the total investment in these partnerships was $28.1
million.

Management fees decreased to $2.7 million in 1998 from $8.7 million in 1997 due
to a reduction in assets and earnings from distressed U.S. portfolio
partnerships. These fees are typically based on the amount of assets managed,
the performance of assets or partnerships, or both and may continue to decline
as the distressed U.S. portfolios mature.

<PAGE>

CORPORATE, OTHER, INTEREST AND INCOME TAX EXPENSES

YEAR ENDED NOVEMBER 30, 1999 COMPARED TO YEAR ENDED NOVEMBER 30, 1998

Corporate and other operating expenses increased to $16.6 million in 1999 from
$11.7 million in 1998 primarily due to overall Company growth.

Interest expense increased to $83.9 million in 1999 from $53.9 million in 1998.
This increase was primarily attributable to the Company's increased borrowing
levels. The Company's mortgage notes and other debts payable increased to $1,403
million at November 30, 1999 from $1,017 million at November 30, 1998, as the
Company increased its investments in all three of its core business lines. The
increase in interest expense was also due to an increase in interest rates on
new debt, and to some extent, an increase in the indices on variable rate debt
due to rising interest rates. See further detail below under "Financial
Condition, Liquidity and Capital Resources."

Income tax expense increased to $35.3 million in 1999 from $34.2 million in 1998
due to an increase in operating earnings. However, the effective tax rate
decreased to 27.0% in 1999 from 31.8% in 1998 as a direct result of tax credits
and other related tax deductions from the affordable housing business acquired
during 1998.

YEAR ENDED NOVEMBER 30, 1998 COMPARED TO YEAR ENDED NOVEMBER 30, 1997

Corporate and other operating expenses decreased to $11.7 million in 1998 from
$18.1 million in 1997 primarily due to Spin-off expenses of approximately $6.2
million incurred during 1997.

Interest expense increased to $53.9 million in 1998 from $26.6 million in 1997.
This increase was primarily attributable to increased borrowing levels. The
Company's debt increased to $1,017 million from $391 million in 1997 as it
increased investments in all three of its core business lines.

Income tax expense increased to $34.2 million in 1998 from $28.3 million in 1997
due to an increase in operating earnings. However, the effective tax rate
decreased to 31.8% in 1998 from 39.0% in 1997 as a direct result of tax credits
and other related tax deductions from the affordable housing business acquired
during 1998.

<PAGE>

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Operating activities provided $14.6 million of cash in 1999 compared with $31.9
million in 1998. The decrease in cash flow from operating activities during 1999
is primarily due to an increase in restricted cash of $63.7 million, resulting
from funds held in trust for asset purchases and development, and a decrease in
cash flow from net earnings of $16.6 million, after adjusting for the effects of
non-cash items, whose contribution to cash flow is reflected in cash from
investing activities below. These decreases in cash flow from operating
activities were offset to some extent by $26.9 million of cash flow provided
from a decrease in mortgage loans held for sale, primarily as a result of higher
principal payments received in 1999, and an increase in accounts payable and
accrued liabilities of $34.1 million.

The Company used $368.5 million in investing activities in 1999 compared with
$460.8 million in 1998. Although the Company increased its investment in
operating properties and equipment by $136.9 million, in partnerships by $76.3
million, and in loans held for investment by $70.7 million, these increases were
offset primarily by (1) $134.9 million more in cash provided by sales of
operating properties, land and AHG interests, (2) a $69.6 million decline in
purchases of land, (3) $41.4 million more in proceeds from principal collections
on and sales of investment securities, (4) a $32.3 million decline in new
purchases of CMBS without seller financing and (5) $80.5 million of cash used in
the prior year for the acquisition of AHG.

Financing activities provided $334.1 million of cash in 1999 compared with
$423.3 million in 1998. The overall decrease in cash flow provided by financing
activities was primarily due to pay-downs under repurchase agreements and
revolving credit lines and mortgage notes and other debts payable of $261.6
million, offset by $159.7 million of new borrowing activity under the Company's
mortgage notes and other debts payable.

The Company has various secured revolving lines of credit with an aggregate
commitment of $345.0 million of which $252.9 million was outstanding at November
30, 1999. The lines are collateralized by CMBS and mortgage loans. The lines
mature through September 2003. The Company also has a $200 million unsecured
revolving credit agreement which, if the one-year extension option is exercised,
expires on December 31, 2001. At November 30, 1999, approximately $2.0 million
was outstanding under this line.

The Company has entered into two reverse repurchase obligation facilities
("repos") through which it finances selected CMBS. The first facility had $106.5
million outstanding at November 30, 1999 and is required to be reduced to $79.9
million at December 2001, $53.3 million at December 2002, $26.6 million at June
2003 and paid in full in December 2003. The second facility had a total
commitment of $50.0 million, of which $16.8 million was outstanding at November
30, 1999. This facility matures in June 2000 but at that time gets converted to
a revolving line of credit available to finance mortgage loans, with a maturity
date of September 2003.

Additionally, the Company has received seller financing in the form of term
repos for five specific CMBS transactions. These agreements had an outstanding
balance of $89.0 million at November 30, 1999 and expire through February 2002.

Each of these repo agreements contain provisions which may require the Company
to repay amounts or post additional collateral prior to the scheduled maturity
dates if the market value of the bonds which collateralize them significantly
decline.

Approximately 61% of the Company's existing indebtedness bears interest at
variable rates. However, most of the Company's investments generate interest or
rental income at essentially fixed rates. Therefore, a material increase in
interest rates could increase the Company's interest expense without a
corresponding increase in income.

<PAGE>

During the first quarter of 1999, the Company issued $100 million of long-term
unsecured senior subordinated notes, bringing the Company's total unsecured
senior subordinated notes to $300 million, or 21% of the Company's total
outstanding debt balance. The $100 million notes bear interest at a fixed rate
of 10.5% and have a 10-year term. The Company used the proceeds from the
issuance to pay down short-term floating rate debt and for general corporate
purposes.

The Company has scheduled maturities on existing debt of $247.3 million in 2000,
assuming extensions which are exercisable solely at the Company's option.
Subsequent to year end, the Company obtained commitments to extend the
maturities of $37.9 million of this debt through September 2003. The Company's
ability to make scheduled debt payments of principal or interest on, or to
refinance, this indebtedness depends on its future performance, which, to a
certain extent, is subject to general economic, financial, competitive and other
factors beyond the Company's control. The Company believes its availability
under existing credit facilities, operating cash flow, unencumbered assets, and
its ability to obtain new borrowings and/or raise new capital, should provide
the funds necessary to enable it to meet its working capital requirements, debt
service and maturities, and short- and long-term needs based upon currently
anticipated levels of growth.

In December 1999, the Company's Board of Directors authorized the repurchase of
up to an additional 3,500,000 shares of its common stock. These shares were in
addition to the 1998 authorization to repurchase 2,000,000 shares. For the years
ended November 30, 1999 and 1998, the Company purchased and retired 500,000 and
550,900 shares, respectively, under these programs. During the quarter ended
February 29, 2000, the Company purchased and retired an additional 1,893,200
shares, bringing the inception-to-date total under the Company's buy-back
program to 2,944,100 shares.

<PAGE>

YEAR 2000

The Company has successfully transitioned into the Year 2000 ("Y2K"). It did not
encounter significant problems due to the fact that many computer programs had
been written with date fields using two digits, instead of four and then might
have treated the year "00" as being earlier than the year "99."

NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards regarding derivative instruments
and hedging activities. SFAS No. 133 requires that all derivative instruments be
recorded as either an asset or liability on the balance sheet at their fair
value, and that changes in the fair value be recognized currently in earnings
unless specified criteria are met. This statement was effective for fiscal
quarters of fiscal years beginning after June 15, 1999. SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133" extended the effective date to all
fiscal quarters of fiscal years beginning after June 15, 2000. Management is
still in the process of assessing the impact of implementing SFAS No. 133 on the
Company's results of operations and financial position.

<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of LNR Property Corporation:

We have audited the accompanying consolidated balance sheets of LNR Property
Corporation and subsidiaries (the "Company") as of November 30, 1999 and 1998
and the related consolidated statements of earnings, comprehensive earnings,
cash flows and Parent Company investment and stockholders' equity for each of
the three years in the period ended November 30, 1999. 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 audits 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 LNR Property
Corporation and subsidiaries at November 30, 1999 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended November 30, 1999, in conformity with generally accepted accounting
principles.

As discussed in Note 1 to the consolidated financial statements, effective
December 1, 1996, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF.

DELOITTE & TOUCHE LLP
Certified Public Accountants

Miami, Florida
January 20, 2000

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                                As of November 30,
                                                                                            -------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                                                       1999           1998
                                                                                            ----------     ----------
                                     ASSETS
<S>                                                                                         <C>             <C>
Cash and cash equivalents                                                                   $    8,587         28,417
Restricted cash                                                                                 95,682         56,264
Investment securities                                                                          510,920        434,157
Mortgage loans, net                                                                            152,827         97,855
Operating properties and equipment, net                                                        982,230        712,419
Land held for investment                                                                       126,047        140,048
Investments in and advances to partnerships                                                    315,892        194,490
Deferred income taxes                                                                            7,936         12,401
Other assets                                                                                    82,880         67,754
                                                                                            ----------     ----------
          Total assets                                                                      $2,283,001      1,743,805
                                                                                            ==========     ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities
      Accounts payable                                                                      $   39,780         16,173
      Accrued expenses and other liabilities                                                    91,562         56,894
      Mortgage notes and other debts payable                                                 1,403,401      1,017,199
                                                                                            ----------     ----------
          Total liabilities                                                                  1,534,743      1,090,266
                                                                                            ----------     ----------
Minority interests                                                                              37,926         34,560
                                                                                            ----------     ----------
Commitments and contingent liabilities (Note 14)

Stockholders' equity
      Common stock, $.10 par value, 150,000 shares authorized, 25,142 and 24,852 shares
      issued and outstanding in 1999 and 1998, respectively                                      2,514          2,485
      Class B common stock, $.10 par value, 40,000 shares authorized, 10,058 and 10,748
      shares issued and outstanding in 1999 and 1998, respectively                               1,006          1,075
      Additional paid-in capital                                                               529,042        536,259
      Retained earnings                                                                        163,974         71,452
      Accumulated other comprehensive earnings                                                  13,796          7,708
                                                                                            ----------     ----------
          Total stockholders' equity                                                           710,332        618,979
                                                                                            ----------     ----------
          Total liabilities and stockholders' equity                                        $2,283,001      1,743,805
                                                                                            ==========     ==========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
                                                                           Years Ended November 30,
                                                                      ----------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                                1999         1998         1997
                                                                      --------     --------     --------
<S>                                                                   <C>            <C>          <C>
Revenues
      Rental income                                                   $ 95,391       73,200       56,334
      Equity in earnings of partnerships                                57,058       62,348       30,149
      Interest income                                                  106,464       76,850       41,446
      Gains on sales of:
         Real estate                                                    67,187       26,818       18,076
         Investment securities                                           6,056        1,386        5,359
      Management and servicing fees                                     15,340        9,260       13,385
      Other, net                                                           504          895        2,734
                                                                      --------     --------     --------
          Total revenues                                               348,000      250,757      167,483
                                                                      --------     --------     --------

Costs and expenses
      Cost of rental operations                                         53,881       45,285       35,767
      General and administrative                                        46,277       29,240       26,342
      Depreciation                                                      27,393       13,014        6,060
      Minority interests                                                 5,640        1,822          242
                                                                      --------     --------     --------
          Total costs and expenses                                     133,191       89,361       68,411
                                                                      --------     --------     --------
Operating earnings                                                     214,809      161,396       99,072
Interest expense                                                        83,909       53,850       26,584
                                                                      --------     --------     --------
Earnings before income taxes                                           130,900      107,546       72,488
Income taxes                                                            35,340       34,223       28,270
                                                                      --------     --------     --------
Net earnings                                                          $ 95,560       73,323       44,218
                                                                      ========     ========     ========
Net earnings per share:
   Basic                                                              $   2.68         2.04         1.22
                                                                      ========     ========     ========
   Diluted                                                            $   2.63         2.02         1.22
                                                                      ========     ========     ========

Weighted average common and common equivalent shares outstanding:
    Basic                                                               35,626       36,006       36,128
                                                                      ========     ========     ========
    Diluted                                                             36,279       36,343       36,298
                                                                      ========     ========     ========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
<TABLE>
<CAPTION>
                                                                                   Years Ended November 30,
                                                                           ----------------------------------------
(IN THOUSANDS)                                                                1999           1998           1997
                                                                           ---------      ---------      ---------
<S>                                                                        <C>               <C>            <C>
Net earnings                                                               $  95,560         73,323         44,218
Other comprehensive earnings, net of tax:
Unrealized gain (loss) on available-for-sale securities, net and other        10,551        (12,877)        12,657
Less:  reclassification adjustment for (gains) losses  included in
    net earnings                                                              (4,463)            28             --
                                                                           ---------      ---------      ---------
Other comprehensive earnings                                                   6,088        (12,849)        12,657
                                                                           ---------      ---------      ---------
Comprehensive earnings                                                     $ 101,648         60,474         56,875
                                                                           =========      =========      =========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF PARENT COMPANY INVESTMENT
                            AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                                         Years Ended November 30,
                                                                                ---------------------------------------
                                                                                  1999           1998            1997
                                                                                ---------      ---------      ---------
(IN THOUSANDS)
<S>                                                                             <C>              <C>           <C>
PARENT COMPANY INVESTMENT
Beginning balance                                                               $      --             --        367,048
Net earnings through October 31, 1997                                                  --             --         43,848
Advances from Parent Company                                                           --             --        145,617
Change in unrealized gain on available-for-sale securities, net                        --             --         10,874
Spin-off of LNR from Lennar Corporation                                                --             --       (567,387)
                                                                                ---------      ---------      ---------
       Balance at November 30                                                          --             --             --
                                                                                ---------      ---------      ---------
COMMON STOCK
Beginning balance                                                                   2,485          2,515             --
Spin-off of LNR from Lennar Corporation                                                --             --          3,613
Purchase and retirement of treasury stock                                             (50)           (55)            --
Stock option exercises                                                                  9              2             --
Stock issued by employee stock ownership plan                                           1             --             --
Conversion of common stock (to) from Class B common stock                              69             23         (1,098)
                                                                                ---------      ---------      ---------
        Balance at November 30                                                      2,514          2,485          2,515
                                                                                ---------      ---------      ---------
CLASS B COMMON STOCK
Beginning balance                                                                   1,075          1,098             --
Conversion of common stock to (from) Class B common stock                             (69)           (23)         1,098
                                                                                ---------      ---------      ---------
        Balance at November 30                                                      1,006          1,075          1,098
                                                                                ---------      ---------      ---------
ADDITIONAL PAID-IN CAPITAL
Beginning balance                                                                 536,259        544,548             --
Spin-off of LNR from Lennar Corporation                                                --             --        545,000
Purchase and retirement of treasury stock                                          (7,515)        (8,299)            --
Stock option exercises                                                                135             10             --
Stock issued by employee stock ownership plan                                         163             --             --
Cash dividends - common stock                                                          --             --           (452)
                                                                                ---------      ---------      ---------
        Balance at November 30                                                    529,042        536,259        544,548
                                                                                ---------      ---------      ---------
RETAINED EARNINGS
Beginning balance                                                                  71,452            370             --
Net earnings  (for 1997 - November 1 through November 30)                          95,560         73,323            370
Purchase and retirement of treasury stock                                          (1,310)          (495)            --
Cash dividends - common stock                                                      (1,268)        (1,260)            --
Cash dividends - Class B common stock                                                (460)          (486)            --
                                                                                ---------      ---------      ---------
       Balance at November 30                                                     163,974         71,452            370
                                                                                ---------      ---------      ---------
ACCUMULATED OTHER COMPREHENSIVE EARNINGS
Beginning balance                                                                   7,708         20,557             --
Spin-off of LNR from Lennar Corporation                                                --             --         18,774
Change in accumulated other comprehensive earnings, net
   (for 1997 - November 1 through November 30)                                      6,088        (12,849)         1,783
                                                                                ---------      ---------      ---------
        Balance at November 30                                                     13,796          7,708         20,557
                                                                                ---------      ---------      ---------
        Total Parent Company investment and stockholders' equity                $ 710,332        618,979        569,088
                                                                                =========      =========      =========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                                  Years Ended November 30,
                                                                                          ---------------------------------------
(IN THOUSANDS)                                                                               1999           1998           1997
                                                                                          ---------      ---------      ---------
<S>                                                                                       <C>               <C>            <C>
Cash flows from operating activities:
      Net earnings                                                                        $  95,560         73,323         44,218
      Adjustments to reconcile net earnings to net cash provided by (used in)
       operating activities:
          Depreciation                                                                       27,393         13,014          6,060
          Minority interests                                                                  5,640          1,822            242
          Amortization of discount on mortgage loans, CMBS and other                        (24,232)        (6,932)           (91)
          Gains on sales of real estate                                                     (67,187)       (26,818)       (18,076)
          Equity in earnings of partnerships                                                (57,058)       (62,348)       (30,149)
          Gains on sales of investment securities                                            (6,056)        (1,386)        (5,359)
          Changes in assets and liabilities:
              (Increase) decrease in restricted cash                                        (39,647)        24,076        (10,182)
              Increase in other assets and deferred taxes                                    (1,292)        (3,311)       (39,897)
              (Increase) decrease in mortgage loans held for sale                            15,950        (10,967)       (14,910)
              Increase in accounts payable and accrued liabilities                           65,486         31,392         11,882
                                                                                          ---------      ---------      ---------
                     Net cash provided by (used in) operating activities                     14,557         31,865        (56,262)
                                                                                          ---------      ---------      ---------
Cash flows from investing activities:
      Operating properties and equipment
         Additions                                                                         (453,279)      (316,425)       (79,830)
         Sales                                                                              123,081         45,153         71,664
      Land held for investment
         Additions                                                                          (30,124)       (99,695)       (21,435)
         Sales                                                                               50,579         31,825         10,733
      Investments in and advances to partnerships                                          (125,594)       (49,256)        (5,342)
      Proceeds from the sale of partnership interest                                          8,023             --             --
      Distributions from partnerships                                                        95,593         93,583         79,693
      Purchases of other investments                                                             --             --        (21,857)
      Purchase of mortgage loans held for investment                                        (76,740)        (6,076)          (349)
      Proceeds from mortgage loans held for investment                                        7,774          6,336          1,116
      Purchase of investment securities                                                     (73,762)      (106,041)       (96,386)
      Proceeds from principal collections on and sales of investment securities              49,832          8,387        110,714
      Interest received on CMBS in excess of income recognized                               17,834         11,906         21,241
      Acquisition of AHG, net of cash acquired                                                   --        (80,538)            --
      Syndication of AHG properties                                                          38,260             --             --
                                                                                          ---------      ---------      ---------
                   Net cash provided by (used in) investing activities                     (368,523)      (460,841)        69,962
                                                                                          ---------      ---------      ---------
Cash flows from financing activities:
      Proceeds from stock option exercises                                                      145             --             --
      Purchase and retirement of treasury stock                                              (8,875)        (8,849)            --
      Payment of dividends                                                                   (1,728)        (1,746)          (452)
      Net (repayments) borrowings under repurchase agreements and revolving credit lines    (50,559)       130,838            240
      Mortgage notes and other debts payable
        Proceeds from borrowings                                                            482,613        322,902         35,377
        Principal payments                                                                  (87,460)        (7,285)       (17,101)
      Repayment of unsecured note payable to Lennar Corporation                                  --        (12,526)            --
                                                                                          ---------      ---------      ---------
                    Net cash provided by financing activities                               334,136        423,334         18,064
                                                                                          ---------      ---------      ---------
      Net increase (decrease) in cash and cash equivalents                                  (19,830)        (5,642)        31,764
      Cash and cash equivalents at beginning of year                                         28,417         34,059          2,295
                                                                                          ---------      ---------      ---------
      Cash and cash equivalents at end of year                                            $   8,587         28,417         34,059
                                                                                          =========      =========      =========
                                                                                                         CONTINUED
</TABLE>

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
                                                                                              Years Ended November 30,
                                                                                      ---------------------------------------
                                                                                        1999           1998           1997
                                                                                      ---------      ---------      ---------
                                                                                                  (IN THOUSANDS)
<S>                                                                                   <C>               <C>            <C>
Supplemental disclosures of cash flow information:
    Cash paid for interest, net of amounts capitalized                                $  83,494         48,611         25,341
    Cash paid for taxes                                                               $  21,286         29,349          3,660

Supplemental disclosures of non-cash investing and financing activities:
    Purchases of investment securities financed by seller                             $ 119,136         53,412         50,280
    Purchase of a mortgage loan financed by revolving credit line                     $      --             --         33,092
    Investment in partnership                                                         $  20,788             --             --

Spin-off of LNR from Lennar Corporation:
    Increase in Lennar Corporation's investment due to transfer of assets
    and liabilities from Lennar Corporation, prior to Spin-off                        $      --             --        156,491

Supplemental disclosure of non-cash transfers:
    Transfer of land held for investment to operating properties                      $  24,564         15,484             --
    Transfer of operating properties to land held for investment                      $  20,871             --             --
    Transfer of operating properties to investment in partnership                     $  17,962             --             --
    Transfer of Lennar Corporation's investment to additional paid-in capital         $      --             --        545,000

Purchase of interests in the Affordable Housing Group:
    Restricted cash and other assets                                                  $      --         26,246             --
    Operating properties                                                                     --        187,626             --
    Investments in and advances to partnerships                                              --         10,749             --
    Accounts payable, accrued expenses and other liabilities                                 --         (5,465)            --
    Mortgage notes and other debts payable                                                   --       (138,618)            --
                                                                                      ---------      ---------      ---------
    Cash paid                                                                         $      --         80,538             --
                                                                                      =========      =========      =========
Syndication of AHG properties:
    Proceeds from sale of partnership interests                                       $  38,260             --             --
    Basis in partnership interests                                                      (30,033)            --             --
                                                                                      ---------      ---------      ---------
    Net gain reflected in gains on sales of real estate                               $   8,227             --             --
                                                                                      =========      =========      =========
</TABLE>

See accompanying notes to consolidated financial statements

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

1.   SUMMARY OF ORGANIZATION, BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

     LNR Property Corporation ("LNR") and subsidiaries (collectively the
"Company"), a Delaware corporation, was formed in June 1997. The Company
operates a real estate investment and management business which engages
principally in (i) acquiring, developing, managing and repositioning commercial
and multi-family residential real estate properties, (ii) acquiring (often in
partnership with financial institutions and real estate funds) and managing
portfolios of mortgage loans and other real estate related assets, (iii)
investing in unrated and non-investment grade rated commercial mortgage-backed
securities ("CMBS") as to which the Company has the right to be the special
servicer (i.e., to oversee workouts of underperforming and non-performing loans)
and (iv) making high yielding real estate related loans and equity investments.

SPIN-OFF TRANSACTION

     Prior to October 31, 1997, Lennar Corporation (the "Parent Company" or
"Lennar") transferred its real estate investment and management business to the
Company. On October 31, 1997, Lennar effected a spin-off of the Company to
Lennar's stockholders (the "Spin-off") by distributing to Lennar's stockholders
one share of LNR stock for each share of Lennar stock they held.

BASIS OF PRESENTATION AND CONSOLIDATION

     The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. The assets, liabilities and
results of operations of entities (both corporations and partnerships) in which
the Company has a controlling interest have been consolidated. The ownership
interests of noncontrolling owners in such entities are reflected as minority
interests. The Company's investments in partnerships (and similar entities) in
which less than a controlling interest is held are accounted for by the equity
method (when significant influence can be exerted by the Company), or the cost
method. All significant intercompany transactions and balances have been
eliminated.

     For the period prior to the Spin-off, the operating results of the Company
are presented as if the Company had been a separate combined group. Expenses
which related both to the businesses operated by the Company and the businesses
retained by Lennar have been allocated on a basis which the Company believes is
reasonable. However, the expenses allocated to the Company are not necessarily
the same as those the Company would have incurred if it had operated
independently, and in general, the results of operations, financial position and
cash flows reflected in the consolidated financial statements of the Company are
not necessarily the same as those which would have been realized if the Company
had been operated independently of Lennar during the periods to which those
financial statements relate.

     The Company began accumulating retained earnings immediately following the
Spin-off on October 31, 1997.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

NET EARNINGS PER SHARE

     The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share" beginning in the first quarter
of 1998. The statement requires that earnings per share be calculated and
presented on a basic and diluted basis. Net earnings per share for 1997 have
been restated to conform with SFAS No. 128.

     Basic net earnings per share is computed by dividing the Company's net
earnings by the weighted average number of shares outstanding during the period.
Diluted net earnings per share is computed by dividing the Company's net
earnings by the weighted average number of shares outstanding and the dilutive
impact of common stock equivalents, primarily stock options, during the period.
The dilutive impact of common stock equivalents is determined by applying the
treasury stock method.

COMPREHENSIVE EARNINGS

     The Company adopted the provisions of SFAS No. 130, "Reporting
Comprehensive Income" beginning in the first quarter of 1999. This statement
establishes standards for reporting and display of comprehensive earnings in a
full set of general-purpose financial statements. This statement requires that
an entity classify all components of other comprehensive earnings by their
nature in a financial statement that is displayed with the same prominence as
other financial statements. Other comprehensive earnings for the Company
primarily includes unrealized gains and losses on marketable securities
classified as available-for-sale and the change in cumulative translation
adjustment resulting from the changes in exchange rates and the effect of those
changes upon translation of the Company's foreign investments reported in
stockholders' equity. Comprehensive earnings are presented separately in the
Company's consolidated statements of comprehensive earnings, net of taxes. The
change in accumulated other comprehensive earnings is reflected in the
consolidated statements of Parent Company investment and stockholders' equity.

BUSINESS SEGMENTS

     The Company adopted the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" on November 30, 1999. This
statement establishes standards for reporting information about a company's
operating segments and related disclosures about its products, services,
geographic areas of operations and major customers. Adoption of this statement
did not impact the Company's results of operations or financial position. See
Note 15 which provides further information.

CASH AND CASH EQUIVALENTS

     The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Due to the
short maturity period of cash equivalents, the carrying amount of these
instruments approximates fair value.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

INVESTMENT SECURITIES

     Investment securities, which consist principally of CMBS, are accounted for
in accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." This standard requires that debt and equity securities that
have determinable fair values are classified as available-for-sale unless they
are classified as held-to-maturity or trading. Securities classified as
held-to-maturity are carried at amortized cost because they are purchased with
the intent and ability to hold to maturity. At November 30, 1999 and 1998, no
securities were held for trading purposes.

     Securities classified as available-for-sale are recorded at fair value in
the consolidated balance sheet, with unrealized holding gains or losses, net of
tax effects, reported in stockholders' equity as a component of accumulated
other comprehensive earnings. Realized gains and losses, as well as unrealized
losses that are other than temporary, are recognized in earnings. The cost of
securities sold is based on the specific identification method.

MORTGAGE LOANS, NET

     Mortgage loans held for sale are recorded at the lower of cost or market,
estimated on a discounted cash flow basis using market interest rates. Purchase
discounts recorded on these loans are presented as a reduction of the carrying
amount of the loans and are not amortized. Mortgage loans held for investment
are carried net of unamortized discounts. These discounts are amortized
utilizing a methodology that results in a level yield.

     The Company provides an allowance for credit losses for loans considered to
be impaired based upon the Company's historical loss experience, the fair value
of collateral and other factors.

OPERATING PROPERTIES AND EQUIPMENT, NET AND LAND HELD FOR INVESTMENT

     Operating properties and equipment and land held for investment are
recorded at cost. Depreciation for operating properties and equipment is
calculated to amortize the cost of depreciable assets over their estimated
useful lives using the straight-line method. The range of estimated useful lives
for operating properties is 15 to 30 years and for equipment is 2 to 5 years.

     The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" in
the first quarter of 1997. SFAS No. 121 requires companies to evaluate
long-lived assets for impairment based on the undiscounted future cash flows of
the asset. If a long-lived asset is identified as impaired, the value of the
asset must be reduced to its fair value. The Company's operating properties and
land holdings would be considered long-lived assets under this pronouncement.
Adopting this statement did not have any material effect on the Company's
financial position, results of operations or cash flows.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

DERIVATIVE FINANCIAL INSTRUMENTS

     From time to time, the Company enters into interest rate swap agreements to
manage its costs and hedge against risks associated with changing interest rates
on specific debt instruments and recognizes interest differentials as
adjustments to interest expense as the differentials occur. Additionally, the
Company periodically utilizes treasury securities as a hedge to offset the
impact of interest rate movements on the market value of a portion of its
available-for-sale CMBS portfolio. Derivative financial instruments are not
leveraged or held for trading purposes.

FOREIGN CURRENCY

     The Company's foreign equity investments with a functional currency other
than U.S. dollars are translated into U.S. dollars at exchange rates in effect
at the end of each reporting period. Foreign entity revenue and expenses are
translated into U.S. dollars at the average rates that prevailed during the
period. The resulting net translation gains and losses are reported as foreign
currency translation adjustments in stockholders' equity as a component of
accumulated other comprehensive earnings.

REVENUE RECOGNITION

     Interest income is comprised of interest received plus amortization of the
discount between the carrying value of each investment security or mortgage loan
held for investment and its unpaid principal balance using a methodology which
results in a level yield.

     Revenues from sales of real estate (including the sales of land held for
investment and operating properties) are recognized when a significant down
payment is received, the earnings process is complete and the collection of any
remaining receivables is reasonably assured.

     Management fees are recognized in income when they are earned and
realization is reasonably assured.

     The Company applies the provisions of SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
in accounting for sales of investment securities and other financial assets.
This statement requires that transfers of financial and servicing assets be
recognized as sales when control has been surrendered.

INCOME TAXES

     Income taxes are accounted for in accordance with SFAS No. 109, "Accounting
for Income Taxes." Under SFAS No. 109, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities, and are measured by using enacted tax rates expected to
apply to taxable income in the years in which those differences are expected to
reverse.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

STOCK OPTION PLAN

     At November 30, 1999 and 1998, the Company had one stock option plan, which
is described in Note 12. The Company grants stock options to certain employees
for fixed numbers of shares with exercise prices not less than the fair value of
the shares at the dates of grant. The Company accounts for the stock option
grants in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." The Company applies the disclosure
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation."

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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

NEW ACCOUNTING PRONOUNCEMENTS

         In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
statement establishes accounting and reporting standards regarding derivative
instruments and hedging activities. SFAS No. 133 requires that all derivative
instruments be recorded as either an asset or liability on the balance sheet at
their fair value, and that changes in the fair value be recognized currently in
earnings unless specified criteria are met. This statement was effective for
fiscal quarters of fiscal years beginning after June 15, 1999. SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133" extended the effective date to all
fiscal quarters of fiscal years beginning after June 15, 2000. Management is
still in the process of assessing the impact of implementing SFAS No. 133 on the
Company's results of operations and financial position.

RECLASSIFICATIONS

     Certain reclassifications have been made to the prior year consolidated
financial statements to conform to the current year presentation.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

2.   ACQUISITION

     On February 18, 1998, the Company entered into an agreement to purchase
from Pacific Harbor Capital, Inc., a wholly-owned subsidiary of PacifiCorp,
controlling interests in a group of entities as well as certain direct
partnership interests, known as the Affordable Housing Group ("AHG"), which own
multi-family and senior housing rental communities, many of which qualify for
Low-Income Housing Tax Credits under Section 42 of the Internal Revenue Code.

     On May 1, 1998, the Company completed the purchase of certain interests
representing 36 of the properties. In June and September 1998, the Company
completed the purchase of the remaining interests representing four and two
properties, respectively. The aggregate amount of consideration was $81 million,
plus the assumption of approximately $45 million of future equity commitments,
and was financed primarily utilizing the Company's unsecured revolving credit
facility. The acquisition has been accounted for under the purchase method of
accounting and the cost of the acquisition has been allocated on the basis of
the estimated fair value of the assets acquired and liabilities assumed. There
was no goodwill associated with the transaction. For the year ended November 30,
1998, the consolidated results of operations include the operations associated
with the Company's interests in the 42 properties since their respective
acquisition dates. Revenues and net earnings on an unaudited pro forma basis
would have increased by $7.5 million and $2.6 million, respectively, during 1998
had the acquisition occurred on December 1, 1997. The pro forma earnings per
share would have been $2.11 per share ($2.09 per share diluted) in 1998.

3.   RESTRICTED CASH

<TABLE>
<CAPTION>
                                                                          November 30,
                                                                      -------------------
          (IN THOUSANDS)                                                1999        1998
                                                                      -------     -------
          <S>                                                         <C>          <C>
          Short-term investment securities                            $49,991      47,315
          Funds held in trust for asset purchases and development      45,271       7,582
          Tenant security deposits                                        420       1,367
                                                                      -------     -------
                                                                      $95,682      56,264
                                                                      =======     =======
</TABLE>

     The majority of the short-term investment securities at November 30, 1999
and 1998 are collateral for a letter of credit, which provides credit
enhancement to $277.3 million of tax-exempt bonds. The bonds are secured by five
high-rise Class A apartment buildings in New York City. The Company receives
interest on the short-term investment as well as 600 basis points per year for
providing the credit enhancement.

     Funds held in trust for asset purchases and development primarily represent
monies resulting from exchange transactions under Section 1031 of the Internal
Revenue Code and funding from municipal bonds used to finance the development of
affordable housing communities.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

4.   INVESTMENT SECURITIES

     Investment securities consist of investments in rated and unrated portions
of various issues of CMBS. The Company classifies its CMBS as available-for-sale
or held-to-maturity. Most rated CMBS are classified as available-for-sale. Most
unrated CMBS are classified as held-to-maturity, as the Company has the ability
and intent to hold these securities until maturity. In general, principal
payments on each class of security are made in the order of the stated
maturities of each class so that no payment of principal will be made on any
class until all classes having an earlier maturity date have been paid in full.
Each security is, in effect, subordinate to other securities of classes with
earlier maturities. The principal repayments on a particular class are dependent
upon collections on the underlying mortgages, affected by prepayments and
extensions, and as a result, the actual maturity of any class of securities may
differ from its stated maturity. The Company has already begun to receive
principal payments from some of its securities and has stated maturities on the
others through 2040. The Company's investment securities have weighted average
coupon rates ranging from 5.00% to 11.38%.

     These investments represent securities which are collateralized by pools of
mortgage loans on commercial real estate assets located across the country.
Concentrations of credit risk with respect to these securities are limited due
to the diversity of the underlying loans across geographical areas and diversity
among property types. In addition, the Company only invests in these securities
when it performs significant due diligence analysis on the real estate
supporting the underlying loans and when it has the right to select itself as
special servicer for the entire securitization. As special servicer, the Company
impacts the performance of the securitization by using its loan workout and
asset management expertise to resolve non-performing loans.

     The Company's investment securities consisted of the following:

                                              November 30,
                                         ---------------------
                  (IN THOUSANDS)           1999         1998
                                         --------     --------
                  Available-for-sale     $343,092      300,171
                  Held-to-maturity        167,828      133,986
                                         --------     --------
                                         $510,920      434,157
                                         ========     ========

     The Company periodically sells treasury securities short to hedge a portion
of its available-for-sale CMBS portfolio. At November 30, 1999, the Company was
obligated to deliver $62.5 million of securities it had sold short. This offsets
the impact of interest rate movements on the market value of a portion of the
Company's available-for-sale CMBS portfolio.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

5.   MORTGAGE LOANS, NET

                                      November 30,
                                ------------------------
      (IN THOUSANDS)               1999           1998
                                ---------      ---------
      Mortgage loans            $ 160,225        107,254
      Allowance for losses         (2,038)        (2,948)
      Unamortized discounts        (5,360)        (6,451)
                                ---------      ---------
                                $ 152,827         97,855
                                =========      =========

     At November 30, 1999 and 1998, the balance of mortgage loans classified as
held for sale were $60.2 million and $75.7 million, respectively, and classified
as held for investment were $92.6 million and $22.2 million, respectively.

6.   OPERATING PROPERTIES AND EQUIPMENT, NET

<TABLE>
<CAPTION>
                                                     November 30,
                                            ----------------------------
      (IN THOUSANDS)                            1999             1998
                                            -----------      -----------
      <S>                                   <C>                  <C>
      Rental apartments                     $   471,220          391,742
      Office buildings                          329,780          198,885
      Retail centers                             69,400           47,279
      Hotels                                     85,894           67,833
      Industrial buildings                       44,026           24,535
      Other                                      13,362           16,474
                                            -----------      -----------
         Total land and buildings             1,013,682          746,748
      Furniture, fixtures and equipment          17,812           10,358
                                            -----------      -----------
                                              1,031,494          757,106
      Accumulated depreciation                  (49,264)         (44,687)
                                            -----------      -----------
                                            $   982,230          712,419
                                            ===========      ===========
</TABLE>

     The Company leases as lessor its retail, office and other facilities under
non-cancelable operating leases with terms in excess of twelve months. The
future minimum rental revenues under these leases subsequent to November 30,
1999 are as follows (in thousands): 2000 - $49,619; 2001 - $44,423; 2002 -
$40,472; 2003 - $34,610; 2004 - $29,992 and thereafter - $198,738.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

7.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

     Summarized financial information on a combined 100% basis related to the
Company's significant partnerships accounted for by the equity method at
November 30, 1999 and 1998 follows:

                                                      November 30,
                                                -------------------------
(IN THOUSANDS)                                     1999           1998
                                                ----------     ----------
ASSETS
     Cash                                       $  200,970         92,070
     Portfolio investments                       2,547,235        781,680
     Other assets                                   93,124         45,703
                                                ----------     ----------
                                                $2,841,329        919,453
                                                ==========     ==========
LIABILITIES AND EQUITY
     Accounts payable and other liabilities     $   66,458         89,339
     Notes and mortgages payable                 1,668,886        204,854
     Equity of:
         The Company                               328,768        199,328
         Others                                    777,217        425,932
                                                ----------     ----------
                                                $2,841,329        919,453
                                                ==========     ==========

     The equity of the Company in the partnerships' financial statements shown
above exceeds the Company's recorded investment in and advances to the
partnerships by $12.9 million and $4.8 million at November 30, 1999 and 1998,
respectively, primarily due to unrealized earnings and purchase discounts in
1999 and purchase discounts in 1998. Portfolio investments consist primarily of
CMBS, commercial and multi-family residential real estate, mortgage loans
collateralized by commercial and multi-family residential real estate and other
investments.

                                        Years Ended November 30,
                                    ----------------------------------
(IN THOUSANDS)                        1999         1998         1997
                                    --------     --------     --------
Revenues                            $545,219      410,938      213,238
Costs and expenses                   313,818      246,285      125,693
                                    --------     --------     --------
Earnings of partnerships            $231,401      164,653       87,545
                                    ========     ========     ========
The Company's share of earnings     $ 57,058       62,348       30,149
                                    ========     ========     ========

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

     In connection with the Spin-off, Lennar transferred parcels of land to the
Company and the Company transferred these parcels to a general partnership in
exchange for a 50% partnership interest in this partnership. In 1999, certain
assets and liabilities of this land partnership were contributed at net book
value to a second general partnership and Lennar and the Company each received
50% general partnership interests in the second partnership. The two
partnerships are collectively referred to as Lennar Land Partners. At November
30, 1999 and 1998, the Company's investment in Lennar Land Partners was $114.9
million and $99.7 million, respectively. Lennar Land Partners is engaged in the
acquisition, development and sale of land. LNR and Lennar have equal say on all
major decisions with respect to Lennar Land Partners. LNR's by-laws require that
a committee of LNR directors who have no relationship with Lennar approve all
significant decisions with respect to Lennar Land Partners. Lennar manages the
day-to-day activities of Lennar Land Partners under a management agreement. A
portion of the outstanding debt of Lennar Land Partners and the debt of one
second tier partnership within Lennar Land Partners, amounting to $49.8 million
at November 30, 1999, is guaranteed by the Company and Lennar.

     At November 30, 1999 and 1998, the Company's equity interests in all other
significant partnerships ranged from 10% to 50%. These partnerships are involved
in the acquisition and management of portfolios of real estate loans, properties
and CMBS. The Company shares in the profits and losses of these partnerships
and, in many instances, receives fees for the management, servicing and
disposition of the assets.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

8.   MORTGAGE NOTES AND OTHER DEBTS PAYABLE

<TABLE>
<CAPTION>
                                                                                           November 30,
                                                                                  --------------------------------
(IN THOUSANDS)                                                                        1999               1998
                                                                                  ------------       -------------
<S>                                                                               <C>                      <C>
SECURED DEBT WITHOUT RECOURSE TO THE COMPANY
  Mortgage notes on operating properties and land with fixed interest rates
      from 5.0% to 11.3% at November 30, 1999, due through January 2046           $    124,400             131,387
  Mortgage notes on operating properties and land with floating interest
       rates (4.5% to 10.4% at November 30, 1999), due through November 2033           313,018             109,259
  Mortgage warehouse facility with a floating interest rate of 7.2%
      at November 30, 1999, secured by mortgage loans, due June 2000                    96,455              78,950
  Repurchase agreements with floating interest rates (7.7% to 8.0% at
      November 30, 1999), secured by CMBS, due through February 2002                    72,956                  --
  Term loans with floating interest rates (6.7% to 7.3% at November 30,
      1999), secured by CMBS, due through October 2002                                  39,232               4,016
SECURED DEBT WITH RECOURSE TO THE COMPANY
  Mortgage notes on operating properties and land with fixed interest rates
      from 7.4% to 8.1% at November 30, 1999, due through March 2004                    18,469              26,574
  Mortgage notes on operating properties and land with floating interest
      rates (7.6% to 9.1% at November 30, 1999), due through February 2004             143,288              74,172
  Mortgage warehouse facility with a floating interest rate of 7.2% at
      November 30, 1999, secured by mortgage loans, due September 2003                  56,430                  --
  Repurchase agreements with floating interest rates (7.5% to 8.1% at
      November 30, 1999), secured by CMBS, due through December 2003                   139,274             215,676
  Revolving credit lines with floating interest rates (7.5% to 8.0% at
      November 30, 1999), secured by CMBS and mortgage loans, due through
      November 2001                                                                    100,000              83,000
UNSECURED DEBT WITH RECOURSE TO THE COMPANY
  Revolving credit line with a floating interest rate of 7.7% at November
       30, 1999, due December 2000                                                       2,000              95,000
  Senior subordinated debt with a fixed interest rate of 9.4%, due March
      2008                                                                             199,255             199,165
  Senior subordinated debt with a fixed interest rate of 10.5%, due January
      2009                                                                              98,624                  --
                                                                                  ------------       -------------
                                                                                  $  1,403,401           1,017,199
                                                                                  ============       =============
</TABLE>

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

     Information concerning the Company's more significant debt instruments is
as follows:

REPURCHASE AGREEMENTS ("REPOS") AND  TERM LOANS

       The Company, through certain subsidiaries, has entered into two reverse
repurchase obligation facilities through which it finances selected CMBS. The
first facility had $106.5 million outstanding at November 30, 1999 and is
required to be reduced to $79.9 million at December 2001, $53.3 million at
December 2002, $26.6 million at June 2003 and paid in full in December 2003. The
second facility had a total commitment of $50.0 million, of which $16.8 million
was outstanding at November 30, 1999 and matures in June 2000. Interest on these
two facilities is variable, corresponds to the rating assigned to the CMBS and
is based on a range of LIBOR plus 75 - LIBOR plus 150.

      The Company, through certain subsidiaries, received seller financing in
the form of term repurchase agreements for five specific CMBS transactions.
These agreements had an outstanding balance of $89.0 million at November 30,
1999 and expire through February 2002. The interest on these term repurchase
agreements is variable and ranges from LIBOR plus 90 - LIBOR plus 165. The
Company has guaranteed the obligations of its subsidiaries under three of these
agreements and all of the agreements are collateralized by CMBS.

      The Company, through certain subsidiaries, also received seller financing
in the form of term loans for three specific CMBS transactions. These agreements
had an outstanding balance of $39.2 million at November 30, 1999 and expire
through October 2002. Interest on these term loans is variable and ranges from
LIBOR plus 25 - LIBOR plus 87.5.

      The Company expects to refinance or extend these facilities on
substantially the same terms as the existing agreements. If the Company is not
able to fully replace these repos and/or term loans, it can repay them using
availability under other existing facilities, cash flow generated from
operations or asset sales.

SECURED BANK LINES

       The Company, through certain subsidiaries, has four secured revolving
credit lines, including a mortgage warehouse facility, with an aggregate
commitment of $345.0 million of which $252.9 million was outstanding at November
30, 1999. Interest is variable and is based on a range of LIBOR plus 75 - LIBOR
plus 150. The lines are collateralized by CMBS and mortgage loans. The lines
mature through September 2003 and are expected to be refinanced or extended on
substantially the same terms as the existing lines. The agreements contain
certain financial tests and restrictive covenants, none of which are currently
expected to restrict the Company's activities. The Company has guaranteed the
obligations of its subsidiaries under certain of these agreements, representing
$249.0 million of the $345.0 million commitment.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

UNSECURED REVOLVING CREDIT NOTES PAYABLE

     The Company and certain of its subsidiaries have a $200 million unsecured
revolving credit agreement which, if the one-year extension option is exercised,
expires on December 31, 2001. At November 30, 1999, $2.0 million was
outstanding. Interest is calculated using a range of LIBOR plus 110 - LIBOR plus
175, which varies based on the Company's leverage and debt ratings. Interest is
currently at LIBOR plus 125. The agreement contains certain financial tests and
restrictive covenants, none of which are currently expected to restrict the
Company's activities.

UNSECURED SENIOR SUBORDINATED NOTES

     On March 19, 1998, the Company issued $200 million principal amount of
unsecured senior subordinated notes due March 15, 2008. The notes were issued at
a discount and had an effective interest rate of 9.445%. At November 30, 1999,
the discount on the notes was $745,000. The stated interest rate is fixed at
9.375% and is payable semi-annually. The subordinated notes contain certain
financial tests and restrictive covenants, none of which are currently expected
to restrict the Company's activities.

     On January 20, 1999, the Company issued an additional $100 million
principal amount of unsecured senior subordinated notes due January 15, 2009.
The notes were issued at a discount and had an effective interest rate of
10.75%. At November 30, 1999, the discount on the notes was $1,376,000. The
stated interest rate is fixed at 10.5% and is payable semi-annually. The
subordinated notes also contain substantially the same financial tests and
restrictive covenants as the $200 million of unsecured senior subordinated
notes.

     At November 30, 1999, the Company had eight interest rate swap agreements
outstanding with a total notional amount of $111.1 million, which will mature
through 2013. These agreements fixed the variable rates to a weighted average
rate of approximately 6.4%. The effect of the interest rate swap agreements on
interest incurred during 1999 and on the average cost of borrowings was
approximately a decrease of $1.0 million and 0.08% for the year ended November
30, 1999.

     The aggregate principal maturities of mortgage notes and other debts
payable subsequent to November 30, 1999, assuming extensions which are
exercisable solely at the Company's option, are as follows (in thousands): 2000
- $247,296; 2001 - $151,986; 2002 - $283,023; 2003 - $164,011; 2004 - $95,162
and thereafter - $461,923. All of the notes secured by land contain collateral
release provisions.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

9.  MINORITY INTERESTS

      Minority interests relate to the third party ownership interests in
entities (both corporations and partnerships) in which the Company has a
controlling interest. For financial reporting purposes the entities' assets,
liabilities and earnings are consolidated with those of the Company, and the
third parties' interests in the entities are included in the Company's
consolidated financial statements as minority interests. The primary component
of minority interests at November 30, 1999 and 1998, representing $21.2 million
and $20.0 million, respectively, relates to the Company's interest in a
partnership which provides credit enhancement to $49.4 million in 1999 and $46.8
million in 1998 of a $277.3 million issue of tax-exempt bonds collateralized by
commercial real estate. See Note 3.

10.  INCOME TAXES

     The provisions for income taxes consisted of the following for the years
ended November 30, 1999, 1998 and 1997:


                                   Years Ended November 30,
                             ------------------------------------
(IN THOUSANDS)                 1999          1998          1997
                             --------      --------      --------
CURRENT
   Federal                   $ 40,632        22,205        43,802
   Federal Low-Income
     Housing Tax Credits      (14,097)       (8,058)           --
   State                        4,887         2,497         6,467
                             --------      --------      --------
                               31,422        16,644        50,269
                             --------      --------      --------
DEFERRED
   Federal                      2,109        15,774       (18,432)
   State                        1,809         1,805        (3,567)
                             --------      --------      --------
                                3,918        17,579       (21,999)
                             --------      --------      --------
          Total expense      $ 35,340        34,223        28,270
                             ========      ========      ========

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of the assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The tax effects
of significant temporary differences of the Company's deferred tax assets and
liabilities at November 30, 1999 and 1998 are as follows:

                                             November 30,
                                          -------------------
(IN THOUSANDS)                              1999        1998
                                          -------     -------
DEFERRED TAX ASSETS
    Reserves and accruals                 $23,414      15,401
    Investment securities income           41,378      25,524
    Investments in partnerships             8,105       9,423
    Acquisition adjustments                 5,112       5,112
    Tax credit carryforwards                1,607         709
    Depreciation                            3,331          --
    Other                                      --         325
                                          -------     -------
      Total deferred tax assets            82,947      56,494
                                          -------     -------
DEFERRED TAX LIABILITIES
    Capitalized expenses                    1,404       1,403
    Deferred income                        52,096      18,723
    Acquisition adjustments                16,574      16,575
    Unrealized gain on
      available-for-sale securities         4,890       6,638
    Depreciation                               --         754
    Other                                      47          --
                                          -------     -------
      Total deferred tax liabilities       75,011      44,093
                                          -------     -------
               Net deferred tax asset     $ 7,936      12,401
                                          =======     =======

     Based on management's assessment, it is more likely than not that the
deferred tax assets will be realized through future taxable income.

     A reconciliation of the statutory rate to the effective tax rate for the
years ended November 30, 1999, 1998 and 1997 follows:

                                                   % of Pre-tax Income
                                              ------------------------------
                                                1999        1998        1997
                                              ------      ------      ------
Federal statutory rate                          35.0        35.0        35.0
Low-Income Housing Tax
    Credits                                    (11.3)       (8.2)         --
State income taxes, net of
    federal income tax benefit                   3.3         4.0         4.0
Permanent differences and other, net              --         1.0          --
                                              ------      ------      ------
         Effective rate                         27.0        31.8        39.0
                                              ======      ======      ======

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

     The Company was included in the consolidated federal income tax returns of
Lennar through the date of the Spin-off. The Company's provision for federal and
state income taxes in the accompanying consolidated statement of earnings for
the periods prior to the Spin-off have been calculated based on the Company's
income and temporary differences as if it filed a separate return. For the post
Spin-off period, the provision for income taxes has been based on the
stand-alone operations of the Company.

11.  FINANCIAL INSTRUMENTS

     The following table presents the carrying amounts and estimated fair values
of financial instruments held by the Company at November 30, 1999 and 1998,
using available market information and appropriate valuation methodologies.
Considerable judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies might have a material effect on the estimated fair
value amounts. The table excludes cash and cash equivalents, restricted cash and
accounts payable, which had fair values approximating their carrying values.

<TABLE>
<CAPTION>
                                                                           November 30,
                                                     ------------------------------------------------------
                                                              1999                            1998
                                                     -----------------------        -----------------------
                                                     Carrying         Fair          Carrying         Fair
(IN THOUSANDS)                                        Amount          Value          Amount          Value
                                                     --------        -------        --------        -------
ASSETS
<S>                                                <C>               <C>             <C>           <C>
     Mortgage loans                                $  152,827        166,567         97,855        111,231
     Investment securities available-for-sale         343,092        343,092        300,171        300,171
     Investment securities held-to-maturity           167,828        229,423        133,986        184,840

LIABILITIES
     Mortgage notes and other debts payable        $1,403,401      1,377,016      1,017,199      1,007,069

</TABLE>

     The following methods and assumptions were used by the Company in
estimating fair values:

     Mortgage loans: The fair values are based on discounting future cash flows
using the current interest rates at which similar loans would be made or are
estimated by the Company on the basis of financial or other information.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

     Investment securities available-for-sale and held-to-maturity: The fair
values are based on quoted market prices, if available. The fair values for
instruments which do not have quoted market prices are estimated by the Company
based on the acquisition price paid. The Company believes, however, that for
instruments which do not have quoted market prices, higher fair values would be
derived, for both 1999 and 1998, if the valuation was based on discounted
expected future cash flows. The gross unrealized gains and losses for
available-for-sale securities were (in thousands): $18,641 and $19,347 for 1999
and $29,402 and $12,381 for 1998, respectively. These unrealized gains and
losses are included in the carrying amounts above. The gross unrealized gains
and losses for held-to-maturity securities were (in thousands): $61,595 and $0
for 1999 and $50,854 and $0 for 1998, respectively.

     Mortgage notes and other debts payable: The fair value of fixed rate
borrowings is based on discounting future cash flows using the Company's
incremental borrowing rate. Variable rate borrowings are tied to market indices
and thereby, approximate fair value.

12.  CAPITAL STOCK

PREFERRED STOCK

     The Company has 500,000 shares of authorized preferred stock, $10 par
value. At November 30, 1999 and 1998, no shares of preferred stock were issued
or outstanding. The preferred stock may be issued in series with any rights,
powers and preferences which may be authorized by the Company's Board of
Directors.

COMMON STOCK

     The Company has two classes of common stock. The common stockholders have
one vote for each share owned in matters requiring stockholder approval and
during the years ended 1999 and 1998 received quarterly dividends of $.0125 per
share. Class B common stockholders have ten votes for each share owned and
during the years ended 1999 and 1998 received quarterly dividends of $.01125 per
share. Class B common stock can be converted into common stock at any time.
Common stock cannot be converted into Class B common stock. As of November 30,
1999, Mr. Leonard Miller, a member of the Board of Directors, owned or
controlled 9.9 million shares of Class B common stock, which represented
approximately 79% of the voting power.

   During 1998, the Company's Board of Directors approved a stock repurchase
plan authorizing the Company to buy back up to 2,000,000 shares of its common
stock. On December 7, 1999, the Company's Board of Directors authorized the
Company to buy back up to an additional 3,500,000 shares. During the years ended
November 30, 1999 and 1998, the Company purchased and retired 500,000 shares and
550,900 shares, respectively, under this program. During the quarter ended
February 29, 2000, the Company purchased and retired an additional 1,893,200
shares, bringing the inception-to-date total under the Company's buy-back
program to 2,944,100 shares.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

STOCK OPTION PLAN

     In connection with the Spin-off, the Company adopted the 1997 Stock Option
Plan (the "1997 Plan"). The 1997 Plan provides for the granting of options to
certain officers, employees and directors of the Company to purchase shares at
prices not less than market value on the date of the grant. Options granted
under the 1997 Plan will expire not more than 10 years after the date of grant,
except that options granted to a key employee who is a 10% stockholder will
expire not more than five years after the date of grant. The exercise price of
each stock option granted under the 1997 Plan will be 100% of the fair market
value of the common stock on the date the stock option is granted, except in the
case of a key employee who is a 10% stockholder, in which case the option price
may not be less than 110% of the fair market value of the common stock on the
date the stock option is granted, and except as to stock options granted to
replace Lennar stock options held by Lennar employees who became employees of
the Company as a result of the Spin-off.

     In December 1998, the Company provided employees with the opportunity to
surrender some or all of their stock options in exchange for 70% of the number
of options surrendered. Of the approximately 1,556,000 employee options
outstanding in December 1998, 481,000 options which were exercisable at $24.73
per share were surrendered, in exchange for 336,700 shares at $17.31 per share.

     A summary of the Company's stock option activity under the 1997 Plan for
the years ended November 30, 1999, 1998 and 1997 is as follows:

<TABLE>
<CAPTION>
                                              1999                        1998                       1997
                                    ------------------------   ------------------------   -----------------------
                                                   Weighted                   Weighted                  Weighted
                                                   Average                    Average                   Average
                                      Stock        Exercise      Stock        Exercise      Stock       Exercise
                                     Options         Price      Options        Price       Options        Price
                                    ------------------------   ------------------------   -----------------------

<S>                                 <C>            <C>         <C>            <C>         <C>           <C>
Outstanding, beginning of year      1,555,661      $   20.19   1,478,647      $   20.06          --     $      --
   Assumed at Spin-off                     --      $      --          --      $      --     409,647     $    7.64
   Granted                            464,240      $   18.09      86,000      $   22.35   1,069,000     $   24.82
   Forfeited                         (487,300)     $   24.63      (8,000)     $   26.04          --     $      --
   Exercised                          (11,798)     $   12.29        (986)     $   11.97          --     $      --
                                    ---------                  ---------                  ---------
Outstanding, end of year            1,520,803      $   18.19   1,555,661      $   20.19   1,478,647     $   20.06
Exercisable, end of year              348,619      $   15.74     217,129      $   15.77      61,203     $    6.59
Weighted average fair value of
 options granted during the
 year under SFAS No. 123            $    8.79                 $     7.93                  $   14.78

</TABLE>

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

     The following table summarizes information about fixed stock options
outstanding at November 30, 1999:

<TABLE>
<CAPTION>
                                   Options Outstanding                       Options Exercisable
                    ------------------------------------------------- ----------------------------------
                                         Weighted
                         Number          Average        Weighted           Number         Weighted
   Range of          Outstanding at     Remaining        Average       Outstanding at      Average
   Exercise            November 30,    Contractual      Exercise        November 30,      Exercise
    Prices                1999             Life           Price             1999            Price
--------------------------------------------------------------------- ----------------------------------
   <S>                   <C>               <C>           <C>              <C>               <C>
    $3.98-$9.92          303,023           2.67           $5.45           134,740            $5.16
   $11.97-$13.73          58,435           4.52          $12.67            14,517           $12.65
   $15.31-$20.28         505,345           7.53          $17.80            46,762           $16.99
   $22.59-$29.13         654,000           7.11          $24.87           152,600           $25.00

</TABLE>

     The Company has elected to account for its employee stock options under
Accounting Principles Board ("APB") Opinion No. 25 and related Interpretations.
No compensation expense is recorded under APB 25 because the exercise price of
the Company's employee common stock options equaled the market price for the
underlying common stock on the grant date.

       Under the terms of the Lennar 1991 Stock Option Plan (the "Lennar Option
Plan"), participants in the Lennar Option Plan who exercise their options after
the Spin-off (and who did not amend the terms of their options prior to the
Spin-off to provide otherwise) will receive upon exercise of Lennar stock
options both shares of Lennar common stock and LNR common stock. In connection
with the Spin-off, the Company agreed to deliver shares of its common stock to
participants in the Lennar Option Plan who exercise options and are entitled to
LNR common stock. There were Lennar stock options outstanding at the time of the
Spin-off which could entitle the holders to purchase up to 615,600 shares of LNR
common stock. Of these options, 79,475 and 22,000 had been exercised during the
years ended November 30, 1999 and 1998, respectively. The Company does not
receive any portion of the exercise price of the Lennar stock options.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

     SFAS No. 123 requires "as adjusted" information regarding net earnings and
net earnings per share to be disclosed for new options granted after fiscal year
1996. The Company determined this information using the fair value method of
that statement. The fair value of these options was determined at the date of
grant using the Black-Scholes option-pricing model. The significant weighted
average assumptions used for the years ended November 30, 1999, 1998 and 1997
were as follows:

                                          Years Ended November 30,
                                      ---------------------------------
                                       1999         1998         1997
                                      -------      -------      -------
Dividend yield                         0.20%        0.20%        0.20%
Volatility rate                        0.50         0.45         0.45
Risk-free interest rate                5.69%        5.50%        5.50%
Expected option life (years)           2-7          2-7          2-7

     The estimated fair value of the options is recognized in expense over the
options' vesting period for "as adjusted" disclosures. The net earnings per
share "as adjusted" for the effects of SFAS No. 123 is not indicative of the
effects on reported net earnings/loss for future years. For purposes of these
calculations, the Company has excluded shares subject to options which are held
by participants in the Lennar Option Plan, who are not employees and do not
otherwise receive compensation from the Company. The Company's reported "as
adjusted" information for the years ended November 30, 1999, 1998 and 1997 is as
follows:

<TABLE>
<CAPTION>
                                                            Years Ended November 30,
                                                    --------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)               1999          1998          1997
                                                    ----------     ---------     ---------
<S>                                                 <C>               <C>           <C>
Net earnings                                        $   95,560        73,323        44,218
Net earnings "As adjusted"                          $   94,407        71,782        43,042

Net earnings per share as reported - basic          $     2.68          2.04          1.22
Net earnings per share "As adjusted"- basic         $     2.65          1.99          1.19

Net earnings per share as reported - diluted        $     2.63          2.02          1.22
Net earnings per share  "As adjusted" - diluted     $     2.60          1.98          1.19

</TABLE>

     In management's opinion, existing stock option valuation models do not
provide a reliable single measure of the fair value of employee stock options
that have vesting provisions and are not transferable. In addition,
option-pricing models require the input of highly subjective assumptions,
including expected stock price volatility.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

SAVINGS PLAN

      The LNR Property Corporation Savings Plan (the "Savings Plan") allows
employees to participate and make contributions to the Savings Plan which are
invested on their behalf and the Company may also make contributions for the
benefit of employees. The Company records as compensation expense its
contributions to the Savings Plan. Amounts contributed by the Company to the
Savings Plan during 1999, 1998 and 1997 were immaterial.

 RESTRICTIONS ON PAYMENTS OF DIVIDENDS

     Other than as necessary to maintain the financial ratios and net worth
requirements under certain revolving credit agreements, there are no
restrictions on the payment of dividends on common stock by the Company. The
cash dividends paid with regard to a share of Class B common stock in a calendar
year may not be more than 90% of the cash dividends paid with regard to a share
of common stock in that calendar year. One of the Company's major subsidiaries
is also restricted on the payment of dividends to its parent company, LNR
Property Corporation, under certain revolving credit and loan agreements.

13.  RELATED PARTY TRANSACTIONS

     A member of the LNR Board of Directors has voting control of both LNR and
Lennar.

     The Company leases office space to Lennar and its subsidiaries, and during
the years ended November 30, 1999 and 1998 recorded $1.2 million and $1.0
million, respectively, in rental revenue. Prior to the Spin-off, for the period
December 1, 1996 through October 31, 1997, the Company provided a portion of
Lennar's facilities on a rent-free basis.

     Lennar provided data processing services to the Company under an agreement
to perform such services. The agreement expired in late 1999 and was not
renewed. Costs for these services aggregated $196,000 and $204,000 for the years
ended November 30, 1999 and 1998, respectively, and $16,000 for the one month
ended November 30, 1997.

     During the period December 1, 1996 through October 31, 1997, Lennar
provided various general and administrative services to the Company including:
data processing, treasury, legal, human resources, payroll, accounting, risk
management and others. Costs for these services were designed to approximate the
actual costs incurred by Lennar to render these services. Management believes
the methods used to determine these costs were reasonable, however, such costs
may not have been the same as those which would have been incurred if the
Company had operated as an independent entity during that period. Charges for
these costs are included in general and administrative expenses and amounted to
$3.3 million for the period December 1, 1996 through October 31, 1997.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

14.  COMMITMENTS AND CONTINGENT LIABILITIES

     The Company is a party to various claims, legal actions and complaints
arising in the ordinary course of business. In the opinion of management, the
disposition of these matters will not have a material adverse effect on the
financial condition, results of operations or cash flows of the Company.

     The Company is subject to the usual obligations associated with entering
into contracts for the purchase, development and sale of real estate as well as
the management of partnerships and special servicing of CMBS in the routine
conduct of its business.

     The Company is committed, under various letters of credit or other
agreements, to provide certain guarantees. Outstanding letters of credit and
guarantees under these arrangements totaled approximately $78.1 million and
$61.3 million at November 30, 1999 and 1998, respectively. Additionally, the
Company has guaranteed a portion of the outstanding debt of Lennar Land Partners
and the debt of one second tier partnership within Lennar Land Partners,
amounting to $49.8 million at November 30, 1999. See Note 7.

     The Company leases certain premises and equipment under various
non-cancelable operating leases with terms expiring through 2003, exclusive of
renewal option periods. The annual aggregate minimum rental commitments under
these leases are summarized as follows (in thousands): 2000 - $704; 2001 - $458;
2002 - $364; and 2003 - $135.

15.  SEGMENT REPORTING

     During 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." SFAS No.
131 establishes standards for the way that public business enterprises report
information about operating segments and related disclosures about products and
services, geographical areas and major customers. Management assesses Company
performance and allocates capital principally on the basis of three lines of
business: (1) real estate properties, (2) real estate securities and (3) real
estate loans.

     Real estate properties include apartments, office buildings, shopping
centers, hotels, industrial facilities and land that the Company acquires,
develops, redevelops or repositions. The Company's primary source of earnings
from real estate properties is its rental revenue and gains on sales of those
properties that have reached optimal value. Additionally, the Company recognizes
equity in earnings of partnerships that own, manage and sell real estate
properties and in some cases, earns fees from managing those partnerships.
Operating expenses include the direct costs of operating the real estate
properties, the related depreciation and the overhead associated with managing
the properties and partnerships.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

     Real estate securities include unrated and non-investment grade rated
subordinated CMBS which are collateralized by pools of mortgage loans on
commercial and multi-family residential real estate properties. The Company
performs "special servicing" for the loans underlying such investments. Special
servicing is the business of managing and working out the problem assets in a
pool of commercial mortgage loans or other assets. The Company's primary source
of earnings from real estate securities is the interest income earned on its
investments in these CMBS. Additionally, the Company recognizes equity in
earnings of partnerships that own CMBS. The Company also earns special servicing
fees with respect to the mortgage loans underlying the Company's CMBS, as well
as the CMBS owned by the partnerships and earns management fees for managing the
partnerships. Operating expenses include the overhead associated with managing
the investments and partnerships and costs of the servicing responsibilities.

     Real estate loans include domestic and foreign discount loan portfolio
investments, owned primarily through partnerships, and related loan workout
operations, as well as direct lending activities in unique high yielding
situations. The Company's primary source of earnings from real estate loans
include interest income on loan investments, equity in earnings of partnerships
and management fees earned from those partnerships. Operating expenses include
the overhead associated with servicing the loans and managing the partnerships.

     Revenues, expenses and assets are accounted for in accordance with the
accounting policies set forth in Note 1. Revenues and non-overhead expenses for
each business line are those that relate directly to those operations. Overhead
expenses, such as administrative expenses, are allocated directly to each
business line based on management's best estimates of the resources utilized in
the management and operations of each business line. Total assets are those
assets directly used in the Company's operations in each line of business.
Corporate assets consist principally of cash and cash equivalents and other
assets. There are no significant transfers between business lines.

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

     The following tables detail the Company's financial performance by these
three lines of business for the years ended November 30, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
                                            For the Year Ended November 30, 1999
                          -----------------------------------------------------------------------
                          Real Estate    Real Estate    Real Estate    Corporate
(IN THOUSANDS)            Properties     Securities        Loans       and Other          Total
<S>                       <C>               <C>            <C>            <C>           <C>
Rental income             $   95,391             --             --             --          95,391
Equity in earnings of
   partnerships               31,281          4,077         21,700             --          57,058
Interest income                   --         87,590         18,874             --         106,464
Gains on sales                67,187          6,056             --             --          73,243
Management and
   servicing fees                668          9,592          5,080             --          15,340
Other, net                        --             --            504             --             504
                          ----------     ----------     ----------     ----------      ----------
   Total revenues            194,527        107,315         46,158             --         348,000
Cost of rental
   operations                 53,881             --             --             --          53,881
Other operating
   expenses                   16,685          7,502          5,492         16,598          46,277
Depreciation                  27,393             --             --             --          27,393
Minority interests             2,813            681          2,146             --           5,640
                          ----------     ----------     ----------     ----------      ----------
   Total costs and
     expenses                100,772          8,183          7,638         16,598         133,191
                          ----------     ----------     ----------     ----------      ----------
Operating earnings/(loss) $   93,755         99,132         38,520        (16,598)        214,809
                          ==========     ==========     ==========     ==========      ==========
Total assets              $1,264,191        628,750        272,648        117,412       2,283,001
                          ==========     ==========     ==========     ==========      ==========
</TABLE>

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                For the Year Ended November 30, 1998
                                 ---------------------------------------------------------------------
                                 Real Estate    Real Estate    Real Estate    Corporate
(IN THOUSANDS)                    Properties    Securities        Loans       and Other         Total
<S>                               <C>              <C>            <C>           <C>          <C>
Rental income                     $  73,200             --             --            --         73,200
Equity in earnings
   (losses) of partnerships          47,822         (5,450)        19,976            --         62,348
Interest income                          --         56,160         20,690            --         76,850
Gains on sales                       26,818          1,386             --            --         28,204
Management and servicing fees           365          6,177          2,718            --          9,260
Other, net                               --             --            895            --            895
                                  ---------      ---------      ---------     ---------      ---------
    Total revenues                  148,205         58,273         44,279            --        250,757
Cost of rental operations            45,285             --             --            --         45,285
Other operating expenses              8,106          3,476          5,961        11,697         29,240
Depreciation                         13,014             --             --            --         13,014
Minority interests                     (356)            --          2,178            --          1,822
                                  ---------      ---------      ---------     ---------      ---------
     Total costs and
      expenses                       66,049          3,476          8,139        11,697         89,361
                                  ---------      ---------      ---------     ---------      ---------
Operating earnings/(loss)         $  82,156         54,797         36,140       (11,697)       161,396
                                  =========      =========      =========     =========      =========
Total assets                      $ 985,678        443,564        206,449       108,114      1,743,805
                                  =========      =========      =========     =========      =========
</TABLE>

<TABLE>
<CAPTION>
                                             For the Year Ended November 30, 1997
                             -------------------------------------------------------------------
                             Real Estate    Real Estate  Real Estate    Corporate
(IN THOUSANDS)               Properties     Securities      Loans       and Other        Total
<S>                           <C>                                                         <C>
Rental income                 $  56,334            --            --            --         56,334
Equity in earnings of
   partnerships                   1,558            --        28,591            --         30,149
Interest income                      --        29,919        11,527            --         41,446
Gains on sales                   18,076         5,359            --            --         23,435
Management and servicing
   fees                             403         4,262         8,720            --         13,385
Other, net                           --            --         2,734            --          2,734
                              ---------     ---------     ---------     ---------      ---------
    Total revenues               76,371        39,540        51,572            --        167,483
Cost of rental operations        35,767            --            --            --         35,767
Other operating expenses          2,955         1,619         3,671        18,097         26,342
Depreciation                      6,060            --            --            --          6,060
Minority interests                  242            --            --            --            242
                              ---------     ---------     ---------     ---------      ---------
     Total costs and
      expenses                   45,024         1,619         3,671        18,097         68,411
                              ---------     ---------     ---------     ---------      ---------
Operating earnings/(loss)     $  31,347        37,921        47,901       (18,097)        99,072
                              =========     =========     =========     =========      =========
Total assets                  $ 424,610       319,517       178,395       100,815      1,023,337
                              =========     =========     =========     =========      =========
</TABLE>

<PAGE>

                    LNR PROPERTY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        NOVEMBER 30, 1999, 1998 AND 1997

     All of the Company's operations and long-lived assets are geographically
located within the United States, with the exception of its equity investments
in portfolios of Japanese non-performing real estate loans, amounting to $49.6
million, $28.1 million and zero at November 30, 1999, 1998 and 1997,
respectively.

16.  QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>

(IN THOUSANDS, EXCEPT PER SHARE DATA)                    First       Second     Third      Fourth
                                                        --------     ------     ------     ------
<S>                                                     <C>          <C>        <C>        <C>
1999

    Revenues                                            $ 76,192     97,887     85,121     88,800

    Operating earnings                                  $ 46,667     65,911     50,201     52,030

    Earnings before income taxes                        $ 27,192     45,529     29,364     28,815

    Net earnings                                        $ 20,403     32,687     21,436     21,034

    Net earnings per share - basic                      $   0.57       0.92       0.60       0.59

    Net earnings per share - diluted                    $   0.57       0.90       0.59       0.58

1998

    Revenues                                            $ 51,838     54,901     69,163     74,855

    Operating earnings                                  $ 34,304     35,784     43,818     47,490

    Earnings before income taxes                        $ 27,246     25,859     26,541     27,900

    Net earnings                                        $ 16,620     16,954     19,098     20,651

    Net earnings per share - basic                      $   0.46       0.47       0.53       0.58

    Net earnings per share - diluted                    $   0.46       0.46       0.52       0.57

</TABLE>

     Quarterly and year to date computations of per share amounts are made
independently. Therefore, the sum of per share amounts for the quarters may not
agree with per share amounts for the year.