===============================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

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

                                    FORM 10-Q

(Mark One)

  [X] QUARTERLY ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
                                       OR
 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                     EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

          FOR THE TRANSITION PERIOD FROM              TO

                          COMMISSION FILE NO 001-12211

                        ECHELON INTERNATIONAL CORPORATION
           -------------------------------------------------------
            (Exact name of Registrant as specified in its charter)

                FLORIDA                                     59-2554218
        ------------------------                     ----------------------
        (State of incorporation)                        (I.R.S. Employer
                                                     Identification Number)
    450 CARILLON PARKWAY, SUITE 200
     ST. PETERSBURG, FLORIDA 33716                   TELEPHONE (727) 803-8200
---------------------------------------          -------------------------------
(Address of principal executive offices)         (Registrant's telephone number)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]

         Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.

         Common stock, par value $.01 per share, 6,715,125 shares, as of August
11, 1999

================================================================================


<PAGE>


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>


                                                                                           PAGE
<S>                                                                                        <C>
PART I.
     Item 1.  Financial Statements............................................................2
     Item 2.  Management's Discussion and Analysis of Financial Condition
                and Results of Operations....................................................16
     Item 3.  Quantitative and Qualitative Disclosures About Market Risk.....................26

PART II.
     Item 4.  Submission of Matters to a Vote of Security Holders............................27
     Item 5.  Other Information..............................................................27
     Item 6.  Exhibits and Reports on Form 8-K...............................................27

Signatures...................................................................................29

</TABLE>


<PAGE>

                                     PART I.
                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                        ECHELON INTERNATIONAL CORPORATION
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                    JUNE 30,   DECEMBER 31,
                                                                                      1999         1998
                                                                                  -----------  ------------
                                                                                  (UNAUDITED)

                                                                                       (IN MILLIONS, EXCEPT
                                                                                          SHARE AMOUNTS)
<S>                                                                                <C>           <C>
                         ASSETS
REAL ESTATE, LEASES, LOANS & OTHER INVESTMENTS:
     Real estate, net (Note 2) .................................................      $  253.4     $  198.8
     Aircraft under operating lease (net of accumulated depreciation of
          $9.7 and $9.5 million, respectively) .................................           2.8          3.0
     Leases and loans receivable, net (Note 3) .................................         178.1        190.4
     Investments in and advances to unconsolidated partnerships (Note 6) .......          20.7         21.8
                                                                                      --------     --------
                                                                                         455.0        414.0
                                                                                      --------     --------
ASSETS HELD FOR SALE ...........................................................           2.2          2.3
                                                                                      --------     --------

CURRENT ASSETS:
     Cash and equivalents (includes restricted deposits of $1.3 million for both
          1999 and 1998, respectively) .........................................          22.7         21.6
     Accounts receivable, net ..................................................           2.4          1.4
     Current portion of leases and loans receivable (Note 3) ...................          45.9         50.3
     Inventories, at cost ......................................................           1.0          1.0
     Other .....................................................................            .8           .8
                                                                                       --------    --------
          Total current assets .................................................          72.8         75.1
                                                                                       --------    --------
OTHER NON-CURRENT ASSETS .......................................................           4.6          2.8
                                                                                       --------    --------

          Total assets .........................................................      $  534.6     $  494.2
                                                                                      ========     ========
                LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable and other liabilities ....................................      $   16.5     $   11.8
     Fundings for limited partnership investments (Note 6) .....................           2.7          2.9
     Current portion of deferred income taxes ..................................          10.3         10.1
     Current portion of long-term debt (Note 4) ................................          25.1         15.7
                                                                                       --------    --------

          Total current liabilities ............................................          54.6         40.5

LONG-TERM DEBT (Note 4) ........................................................         134.3        106.0
DEFERRED INCOME TAXES ..........................................................         125.2        131.4
OTHER LIABILITIES ..............................................................            .2           .5

COMMITMENTS AND CONTINGENCIES (Note 9)
                                                                                       --------    --------
          Total liabilities ....................................................         314.3        278.4
                                                                                       --------    --------

STOCKHOLDERS' EQUITY (Note 5)
     Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued         --           --
     Common stock, $.01 par value, 25,000,000 shares authorized, 6,940,960
           issued and 6,714,675 outstanding in 1999 and 6,901,718 issued
           and 6,685,780 outstanding in 1998 ...................................            .1           .1
     Additional paid in capital ................................................         283.2        282.2
     Retained deficit ..........................................................         (57.2)       (61.0)
     Treasury stock, at cost (220,464 shares in 1999 and 215,938 shares in 1998)          (4.6)        (4.5)
     Unearned compensation .....................................................          (1.2)        (1.0)
                                                                                      --------     --------

          Total stockholders' equity ...........................................         220.3        215.8
                                                                                      --------     --------

          Total liabilities and stockholders' equity ...........................      $  534.6     $  494.2
                                                                                      ========     ========

</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.
                                       2

<PAGE>


                        ECHELON INTERNATIONAL CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>


                                                                                   THREE MONTHS              SIX MONTHS
                                                                                  ENDED JUNE 30,            ENDED JUNE 30,
                                                                                  --------------            --------------

                                                                                1999         1998        1999         1998
                                                                                ----         ----        ----         ----
                                                                                                (UNAUDITED)
                                                                                  (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S>                                                                          <C>          <C>          <C>          <C>
SALES AND REVENUES:
Real estate operations:
    Rental and other operations revenues ...............................     $    8.0     $    5.3     $   15.3     $    9.9
    Sales of development properties and development rights .............          2.4           .4          2.4          3.1
Investments in Financial Assets:
    Earned income on finance and operating leases ......................          1.7          1.3          3.5          2.2
    Interest income ....................................................           .9          1.1          1.8          2.2
    Equity in earnings of unconsolidated partnerships ..................          --            .4          --           2.5
    Equity in losses of limited partnership investments ................          (.6)         (.1)        (1.1)         (.6)
Investment income and net realized gain on sale of investments .........           .4           .7           .7          3.0
                                                                             --------     --------     --------     --------

                                                                                 12.8          9.1         22.6         22.3
                                                                             --------     --------     --------     --------

OPERATING EXPENSES:
Rental and other operations ............................................          4.4          3.3          8.1          6.1
Cost of development properties and development rights sold .............           .5          --            .5          1.6
Depreciation ...........................................................          1.7          1.4          3.3          2.7
Provision for (recovery of) lease, real estate and loan losses .........          --          (1.6)         --          (1.6)
Interest expense on long-term debt, net of amounts capitalized .........          1.9          1.2          3.2          2.6
General and administrative expenses ....................................          2.0          1.7          4.3          4.3
                                                                             --------     --------     --------     --------

                                                                                 10.5          6.0         19.4         15.7
                                                                             --------     --------     --------     --------

INCOME BEFORE INCOME TAXES .............................................          2.3          3.1          3.2          6.6

INCOME TAX EXPENSE (BENEFIT) ...........................................           .6           .2          (.6)          .3
                                                                             --------     --------     --------     --------

NET INCOME .............................................................     $    1.7     $    2.9     $    3.8     $    6.3
                                                                             ========     ========     ========     ========
Basic earnings per common share:
    Net income per common share ........................................     $    .25     $    .43     $    .56     $    .93
                                                                             ========     ========     ========     ========
Diluted earnings per common share:
    Net income per common share ........................................     $    .25     $    .41     $    .56     $    .91
                                                                             ========     ========     ========     ========
 Basic weighted average shares of common stock outstanding .............          6.7          6.8          6.7          6.8
                                                                             ========     ========     ========     ========
Diluted weighted average shares of common stock outstanding ............          6.7          6.9          6.7          6.9
                                                                             ========     ========     ========     ========
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements

                                       3
<PAGE>


                        ECHELON INTERNATIONAL CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                                     SIX MONTHS
                                                                                                    ENDED JUNE 30,
                                                                                                   -----------------
                                                                                                   1999        1998
                                                                                                   ----        ----
                                                                                                    (IN MILLIONS)
                                                                                                     (UNAUDITED)
<S>                                                                                              <C>         <C>
OPERATING ACTIVITIES:
     Net income ...........................................................................      $   3.8     $   6.3
     Adjustment to reconcile net income to cash provided by (used in) operating activities:
         Depreciation and amortization of financing costs .................................          3.3         2.8
         Deferred income taxes ............................................................         (6.0)       (4.6)
         Amortization related to finance leases ...........................................         (1.7)        (.9)
         Provision for (recovery of) lease, loan and real estate losses ...................           --        (1.6)
         Stock-based compensation expense .................................................           .5          .7
         Gain on sale of assets ...........................................................         (1.9)       (3.0)
         Equity in loss (income) of unconsolidated partnerships, net ......................          1.1        (1.9)
         Changes in working capital:
              Accounts payable and other liabilities ......................................          3.5         1.9
              Other working capital changes ...............................................          (.9)         .6
         Other ............................................................................         (1.0)        (.6)
                                                                                                 -------     -------
                                                                                                      .7         (.3)
                                                                                                 -------     -------

INVESTING ACTIVITIES:
     Purchases of marketable securities ...................................................           --        (7.7)
     Proceeds from sales of marketable securities .........................................           --        26.7
     Proceeds from sales and collections of leases and loans receivable ...................         19.9        15.8
     Real estate property additions and other capital expenditures ........................        (58.6)      (40.6)
     Net proceeds from sales of real estate properties and development rights .............          2.4         2.9
     Contributions to unconsolidated partnerships .........................................          (.2)       (5.7)
     Distributions from unconsolidated partnerships .......................................           --         5.6
                                                                                                 -------     -------
                                                                                                   (36.5)       (3.0)
                                                                                                 -------     -------

FINANCING ACTIVITIES:
     Issuance of long-term debt ...........................................................         57.1         9.0
     Repayment of long-term debt ..........................................................        (20.2)       (2.5)
     Issuance of common stock .............................................................           .1          .2
     Purchase of treasury stock ...........................................................          (.1)        (.1)
                                                                                                 -------     -------
                                                                                                    36.9         6.6
                                                                                                 -------     -------
Net increase in cash and equivalents ......................................................          1.1         3.3

BEGINNING CASH AND EQUIVALENTS ............................................................         21.6         7.8
                                                                                                 -------     -------

ENDING CASH AND EQUIVALENTS (INCLUDING RESTRICTED CASH OF
     $1.3 MILLION IN 1999) ................................................................      $  22.7     $  11.1
                                                                                                 =======     =======

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid during the period for:
         Interest, net of amounts capitalized .............................................      $   3.0     $   2.2
                                                                                                 =======     =======
         Income taxes, net of refunds .....................................................      $   4.4     $   4.6
                                                                                                 =======     =======
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING &
     FINANCING ACTIVITIES:
         Issuance of common stock related to LTIP .........................................      $    .6     $    .4
                                                                                                 =======     =======
         Change in unrealized gain (loss) on available-for-sale securities, net
              of tax of $.6 million in 1998 ...............................................      $    --     $  (1.0)
                                                                                                 =======     =======
         Delayed equity amortization on leveraged leases ..................................      $    .8     $    .8
                                                                                                 =======     =======
         Tax benefit of stock transactions with employees .................................      $    .2     $    --
                                                                                                 =======     =======
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       4

<PAGE>

                        ECHELON INTERNATIONAL CORPORATION

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


<TABLE>
<CAPTION>

                                                                                 SIX MONTHS ENDED
                                                                                      JUNE 30,
                                                                                 ----------------
                                                                                 1999       1998
                                                                                 ----       ----
                                                                                   (IN MILLIONS)
                                                                                    (UNAUDITED)

<S>                                                                              <C>       <C>
Net income ................................................................      $  3.8    $  6.3
Other comprehensive income, net of tax:
    Change in unrealized holding gain on available-for-sale securities
        during period .....................................................         --         .1

    Less:  reclassification adjustment for net gains included in net income         --       (1.1)
                                                                                 ------    ------

              Other comprehensive income ..................................         --       (1.0)
                                                                                 ------    ------

Total comprehensive income ................................................      $  3.8    $  5.3
                                                                                 ======    ======
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       5

<PAGE>

                        ECHELON INTERNATIONAL CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

(1)  INTERIM FINANCIAL STATEMENTS

     In the opinion of management, the accompanying consolidated financial
statements include all adjustments deemed necessary to summarize fairly and
reflect the financial position and results of operations of Echelon
International Corporation (the "Company") for the interim periods presented.
Results of the second quarter of 1999 are not necessarily indicative of results
for the full year. These consolidated financial statements should be read in
conjunction with the financial statements and notes thereto in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.

     Certain amounts previously reported in the Form 10-Q for the second quarter
of 1998 have been reclassified to conform to the 1999 presentation.


(2)  REAL ESTATE

     The depreciable lives and carrying values of real estate, a significant
portion of which is pledged to secure borrowings, are as follows:

<TABLE>
<CAPTION>

                                                            DEPRECIABLE      JUNE 30,        DECEMBER 31,
                                                           LIVES (YEARS)       1999              1998
                                                           -------------     --------        -------------
                                                                            (UNAUDITED)
                                                                           (IN MILLIONS)
<S>                                                        <C>              <C>                <C>

Land and land improvements held for development or sale                      $   26.0           $   26.9
                                                                             --------           --------

Real estate under development:
    Commercial Development
        Land and land improvements ....................                           1.0                1.0
        Construction in progress ......................                           8.3               10.5
                                                                             --------           --------
                                                                                  9.3               11.5
                                                                             --------           --------
    Multi-Family Development
        Land and land improvements ....................                          30.4               15.3
        Construction in progress ......................                          38.9               24.8
                                                                             --------           --------
                                                                                 69.3               40.1
                                                                             --------           --------
Income producing:
    Commercial
        Land and land improvements ....................                          16.3               15.3
        Buildings and improvements ....................        5-40             108.9              102.0
        Equipment and other ...........................        3-10               2.2                1.5
                                                                             --------           --------
                                                                                127.4              118.8
                                                                             --------           --------
    Multi-Family
        Land and land improvements ....................                           3.9                1.9
        Buildings and improvements ....................         35               37.6               18.0
        Equipment and other ...........................        3-10               1.5                0.7
                                                                             --------           --------
                                                                                 43.0               20.6
                                                                             --------           --------
    Corporate
        Equipment and other ...........................        3-10               2.3                2.3
                                                                             --------           --------

                                                                                277.3              220.2
Less: accumulated depreciation ........................                          23.9               21.4
                                                                             --------           --------
                                                                             $  253.4           $  198.8
                                                                             ========           ========
</TABLE>

                                       6

<PAGE>


     Capitalized interest during the development of specific projects was $2.0
million and $.6 million during the six months ended June 30, 1999 and 1998,
respectively.

(3)  LOANS RECEIVABLE

     At June 30, 1999 and December 31, 1998, loans receivable were as follows:

                                                        JUNE 30,    DECEMBER 31,
                                                          1999          1998
                                                        --------    ------------
                                                       (UNAUDITED)
                                                              (IN MILLIONS)
     Commercial finance loans receivable......          $   33.1    $      39.0
                                                        ========    ===========

     The Company's commercial finance loans receivable are secured by first
mortgage liens on the related commercial real estate or by security interests in
aircraft, aircraft engines or spare parts. These loans are further secured,
where applicable, by an assignment to the Company of the borrowers' lease
agreements, and, in some cases, third party guaranties. During the six months
ended June 30, 1999, the Company received scheduled repayments of $.1 million on
these loans and complete repayment on a $5.8 million real estate loan
receivable.


(4)  LONG-TERM DEBT

     Long-term debt outstanding at June 30, 1999 and December 31, 1998 is as
follows:
<TABLE>
<CAPTION>

                                                      INTEREST    JUNE 30,   DECEMBER 31,
                                                        RATE        1999        1998
                                                      --------  -----------  -------------
                                                                (UNAUDITED)
                                                                      (IN MILLIONS)

<S>                                                   <C>        <C>         <C>
Salomon Brothers Realty Corp. ...............         6.45%(a)   $   22.7    $   12.8
Northwestern Mutual Life Insurance Company...         6.98%          54.8        55.4
SouthTrust Bank .............................         --              --         14.9
AmSouth Bank ................................         6.53%(b)       34.8         8.9
Fleet Capital Corporation ...................         5.99%          12.4        12.9
Teacher's Insurance and Annuity Association
    of America ..............................         7.15%          19.3          --
Delayed equity obligation on finance lease...        10.00%          15.4        16.8
                                                                 --------    --------

                                                                    159.4       121.7
Less: current portion of long-term debt .....                        25.1        15.7
                                                                 --------    --------

                                                                 $  134.3    $  106.0
                                                                 ========    ========
</TABLE>

(a) Interest rate at June 30, 1999
(b) Weighted-average interest rate at June 30, 1999.

SALOMON BROTHERS REALTY CORP.

     In March 1999, the Company borrowed $10.0 million of the available credit
on the $30.0 million Salomon Brothers Realty Corp. loan. The additional $10.0
million is being repaid over the remaining term of the original loan's 25 year
amortization period. The entire loan matures in May 2000 with the ability to
extend through May 2002.

                                       7
<PAGE>

SOUTHTRUST BANK

     In April 1999, the Company closed on a $19.3 million loan with Teacher's
Insurance and Annuity Association of America ("TIAA") for the permanent
financing of ECHELON AT BAY ISLE KEY. This loan is part of the TIAA $55.5
million Credit Facility discussed below. The Company paid off the $16.5 million
construction loan, which included a $.5 million draw in April 1999, from
SouthTrust Bank with the TIAA funding.

AMSOUTH BANK

     In April 1998, the Company closed on an $18.6 million construction loan
with AmSouth Bank. The loan is being used to fund the development of ECHELON AT
THE RESERVE, a 314-unit multi-family residential community in CARILLON PARK,
located in the Gateway area of St. Petersburg, Florida. The interest rate is
LIBOR plus 1.50% per annum. As of June 30, 1999, Echelon has drawn $15.3 million
on this loan. The initial term of the loan is three years, with an option to
extend for an additional two years from construction completion. TIAA has
committed to provide the permanent financing for this development, under the
TIAA $55.5 million Credit Facility discussed below.

     In May 1998, the Company executed a commitment letter with AmSouth Bank for
a $50.0 million Advised Guidance Line of Credit ("AmSouth Line"). The proceeds
from the AmSouth Line are being used to provide the construction financing for
multi-family residential and commercial projects, as approved by AmSouth Bank.
Each project financed under the AmSouth Line will be a separate loan. The
interest rate for each loan will be the lesser of the prime rate of interest or
the LIBOR rate plus a defined number of basis points per annum. The term for
each multi-family residential loan is 36 months and for each commercial loan is
30 months. The repayment terms of the loans are interest only, with the entire
principal and any accrued interest due at maturity.

     To date, the Company has closed on five loans under the AmSouth Line. The
construction projects, the loan amounts and the construction draws as of June
30, 1999 are as follows:

<TABLE>
<CAPTION>

                                                                                                   CONSTRUCTION
                                                                      CONSTRUCTION LOAN             DRAWS AS OF
                              CONSTRUCTION PROJECT                         AMOUNT                  JUNE 30, 1999
                              --------------------                    -----------------            --------------
                                                                                    (IN MILLIONS)
<S>                                                                          <C>                       <C>
               CASTILLE AT CARILLON.............................             $10.9                     $8.0
               ECHELON AT WOODLAND PARK.........................             $11.3                     $3.9
               ECHELON AT NORTHLAKE.............................             $17.2                     $6.8
               ECHELON AT MISSION RANCH.........................             $14.1                     $ .8
               ECHELON AT MEMORIAL CREEK........................             $14.6                       --
</TABLE>


     Since the total loans approved under the AmSouth Line exceed $50.0
million, AmSouth Bank has participated portions of several loans to other
financial institutions.



                                       8
<PAGE>

OTHER FINANCING COMMITMENTS

     In May 1998, Echelon executed a commitment letter with TIAA for a $55.5
million Credit Facility ("Credit Facility") at an interest rate of 7.15% per
annum. The proceeds of the Credit Facility are to be used for the permanent
financing of specific projects. The Credit Facility will be secured by the
projects and funding will occur for each project based on specific conditions.
Each disbursement will constitute a separate loan, which will mature 10 years
from the date of the first loan disbursement. The first loan disbursement
requires interest-only payments for the first 12 months and monthly principal
and interest payments thereafter based on a 30-year amortization schedule. The
remaining loans require monthly principal and interest payments based on a
30-year amortization schedule. The Credit Facility defines the loan disbursement
expiration dates for each loan, with the ability for the Company to extend any
of the expiration dates for 90 days. Under the terms of the commitment, TIAA
required the Company to remit a refundable application fee. The Company
negotiated to provide stand-by letters of credit in lieu of the application fee,
which will be reduced on a pro-rata basis as the loans are funded. As of June
30, 1999, Echelon had certificates of deposit totaling $.8 million securing the
stand-by letters of credit.

     As previously discussed, in April 1999 the Company closed on a $19.3
million loan under the Credit Facility for the permanent financing of ECHELON AT
BAY ISLE KEY. The loan requires interest only payments for the first 12 months
of the term and monthly principal and interest payments thereafter based on a
30-year amortization schedule. Final maturity of the loan is no later than April
2009.

     In January 1999, the Company executed a commitment letter with NationsBank
for a $100.0 million Advised Guidance Line of Credit ("NationsBank Line"). The
NationsBank Line will provide construction financing for multi-family
residential and commercial projects, as approved by NationsBank. Each project
financed under the NationsBank Line will be a separate loan and the interest
rate for each loan will be negotiated with NationsBank based upon market
conditions at the time of funding. The term for each multi-family residential
loan is 36 months and for each commercial loan 30 months. The loans are interest
only, with the entire principal and any accrued interest due at maturity.

     In February 1999, the Company executed a $19.8 million commitment letter
with NationsBank under the NationsBank Line for the construction of ECHELON AT
LAKESIDE, a 184-unit multi-family residential community to be developed in
Plano, Texas. The interest rate is LIBOR plus 1.85% and the term is 36 months
from the date of the loan closing.

     In February 1999, the Company also executed a commitment letter with
Wachovia Bank, N.A. for a $21.5 million construction loan for ECHELON AT CHENEY
PLACE, a 303-unit multi-family residential community to be developed in downtown
Orlando, Florida. The interest rate on the loan is LIBOR plus 1.60% and the term
of the loan is 36 months from the date of the loan closing. See further
discussion of the development of ECHELON AT CHENEY PLACE included in Note 12,
"Subsequent Events".

     In June 1999, the Company executed a commitment letter with First Union
National Bank of Florida for a $26.1 million construction loan for ECHELON AT
THE BALLPARK, a 384-unit multi-family residential community to be developed in
downtown Memphis, Tennessee. The interest rate on the loan is LIBOR plus 1.65%
and the term of the loan is 36 months from the date of the loan closing.

FINANCIAL COVENANTS

     The Company's significant financial covenants include minimum net worth and
liquidity requirements. At June 30, 1999, Echelon was in compliance with all
financial convenants contained in its debt agreements.

                                       9
<PAGE>

(5)  STOCKHOLDERS' EQUITY

     During the six months ended June 30, 1999, the Company issued 30,976 shares
of restricted Common Stock under the Echelon International Corporation Long-Term
Incentive Plan ("LTIP") in accordance with executive employment agreements.
During the first half of 1999, the Company recorded $.6 million of unearned
compensation for the issuance of the 30,976 shares of restricted Common Stock
and recognized $.4 million of compensation related to the vesting period for all
restricted Common Stock. The remaining unearned compensation will be amortized
as compensation expense over the vesting period of the restricted Common Stock.

     During the six months ended June 30, 1998, the Company issued 90,181 shares
of restricted Common Stock under the LTIP in accordance with executive
employment agreements. During the first half of 1998, the Company recorded $1.6
million of unearned compensation and subsequently recognized $.7 of compensation
expense in conjunction with the issuance of the restricted Common Stock.

     In February 1998, the Company issued 129,250 stock options under the LTIP
and the Echelon International Corporation 1996 Stock Option Plan ("Stock Option
Plan"). The stock options were granted at market value on the date of grant. The
stock options granted under the LTIP are performance based options which cliff
vest at the end of nine years with a provision for early vesting if certain
performance goals are achieved. The stock options granted under the Stock Option
Plan vest over five years.

     The Company issued 672 shares and 1,274 shares of Common Stock under the
Echelon International Corporation Non-Employee Directors' Plan during the six
months ended June 30, 1999 and 1998, respectively.

     At the Company's Annual Meeting on May 18, 1999, the Company's stockholders
approved the Echelon International Corporation 1999 Non-Employee Directors' Plan
("1999 Non-Employee Directors' Plan"). Under the 1999 Non-Employee Directors'
Plan, non-employee directors receive an annual retainer of $10,000 paid
quarterly in arrears in the form of Echelon Common Stock and an automatic grant
of options to purchase 5,000 shares of Echelon Common Stock upon each annual
meeting of the Company's stockholders for which they are a Director. During the
three months ended June 30, 1999, the Company issued 573 shares of Common Stock
and 20,000 stock options under the 1999 Non-Employee Directors' Plan.

     The Company also issued 7,021 shares and 6,262 shares of Common Stock in
conjunction with the Echelon International Corporation Employee Stock Purchase
Plan during the six month periods ended June 30, 1999 and 1998, respectively.

     During the first half of 1999 and 1998, the Company repurchased 4,526
shares and 4,419 shares, respectively, of Common Stock, resulting in additional
Treasury Stock, at cost, of $.1 million in each of the periods. During the six
months ended June 30, 1999, 5821 shares of restricted Common Stock were
forfeited by an employee.

                                       10
<PAGE>

     The net income and common shares used to compute basic and diluted earnings
per share is presented in the following table:

<TABLE>
<CAPTION>

                                                                THREE MONTHS         SIX MONTHS
                                                               ENDED JUNE 30,      ENDED JUNE 30,
                                                              ---------------      --------------
                                                              1999       1998      1999      1998
                                                              ----       ----      ----      ----
                                                                (Unaudited)            (Unaudited)
                                                            (In millions, except per share amounts)
<S>                                                         <C>        <C>        <C>        <C>

BASIC
Weighted average number of shares:
    Average common shares outstanding ................          6.7        6.8        6.7        6.8
                                                            =======    =======    =======    =======

Net income used to compute basic earnings per share:
    Net income .......................................      $   1.7    $   2.9    $   3.8    $   6.3
                                                            =======    =======    =======    =======

Basic earnings per common share ......................      $   .25    $   .43    $   .56    $   .93
                                                           ========    =======    =======    =======

DILUTED
Weighted average number of shares:
    Average common shares outstanding ................          6.7        6.8        6.7        6.8
    Dilutive effect for stock options and
       contingently issuable common shares ...........       --             .1     --             .1
                                                            -------    -------    -------    -------

    Weighted average shares ..........................          6.7        6.9        6.7        6.9
                                                            =======    =======    =======    =======

Net income used to compute diluted earnings per share:
    Net income .......................................      $   1.7    $   2.9    $   3.8    $   6.3
                                                            =======    =======    =======    =======

Diluted earnings per common share ....................      $   .25    $   .41    $   .56    $   .91
                                                            =======    =======    =======    =======
</TABLE>


(6)  INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED PARTNERSHIPS

     As of July 31, 1998, a joint venture in which the Company had a 50%
interest was dissolved and the Company received net assets totaling $19.1
million. Presented below is summarized financial information for this joint
venture for the six months ended June 30, 1998. Amounts reflect 100% of the
joint venture's results of operations through June 30, 1998.

                                                                SIX MONTHS ENDED
                                                                  JUNE 30, 1998
                                                                ----------------
                                                                   (UNAUDITED)

                                                                  (IN MILLIONS)

      REVENUES AND EXPENSES

      Revenues..........................................                $5.1

      Expenses..........................................                  .1
                                                                        ----

      Combined net earnings of joint venture............                $5.0
                                                                        ====

      Company's equity in net earnings of joint venture.                $2.5
                                                                        ====

     The joint venture's revenues for the six months ended June 30, 1998
included a $3.2 million gain on the sale of two aircraft engines.

                                       11

<PAGE>

     The Company also has investments in affordable housing limited
partnerships, which range between a total gross ownership percentage of 7.1% to
11.6% as of both June 30, 1999 and 1998, respectively. The Company accounts for
these investments under the equity method of accounting. Echelon recorded
pre-tax losses of $1.1 million and $.6 million on these investments for the six
month periods ended June 30, 1999 and 1998, respectively.

     During 1996 and 1997, Echelon signed commitments to provide total capital
contributions of $25.8 million to affordable housing limited partnerships.
Echelon has funded $23.1 million of these commitments as of June 30, 1999. The
total initial investment commitments of $25.8 million are included as
investments in unconsolidated partnerships in the Company's consolidated balance
sheets as of both June 30, 1999 and December 31, 1998, respectively. The
remaining commitments to be funded by December 31, 1999 total $2.7 million as of
June 30, 1999.


(7)  RELATED PARTY TRANSACTIONS

     In April 1998, the Board of Directors approved an interest-free loan
program to assist the Company's Executive Officers in meeting tax liabilities
associated with the lapse of restrictions on Echelon's restricted Common Stock.
During the six months ended June 30, 1999, the Company funded $.7 million to
four Executive Officers in conjunction with this loan program. These
transactions resulted in $.1 million of compensation expense to the Company.


(8)  EFFECTIVE INCOME TAX RATE

     The Company's effective income tax rate differs from the statutory income
tax rate primarily due to tax credits related to the Company's investment in
affordable housing limited partnerships, amortization of investment tax credits
related to the Company's leveraged lease portfolio, and differences in rates
between previously deferred taxes and current taxes.


(9)  COMMITMENTS AND CONTINGENCIES

     The Company is subject to regulation with respect to the environmental
effects of its operations. Based on information currently available to the
Company, Echelon estimates that its share of liability for cleaning up these
sites ranges from $.1 million to $1.0 million, and has reserved $.3 million for
potential costs. Management currently believes that the ultimate outcome of
these matters will not have a material adverse effect upon the Company's results
of operations, financial condition or liquidity.

     The Company is currently involved in the construction of several commercial
projects and multi-family residential communities and at June 30, 1999 had
remaining commitments of $35.3 million with construction contractors.

     As of June 30, 1999, Echelon had four contracts, subject to the Company's
final due diligence, to acquire land or execute a joint venture agreement, for
the development of more than 850 multi-family residential units. No assurance
can be given that Echelon will acquire this land or develop these multi-family
residential communities.

     Through two previous partnerships, the Company remains contingently liable
for first mortgage bonds issued to residents of the life care communities owned
by such partnerships. The contingent liability reduces over time as those who
were residents at the time of the sale of Echelon's partnership interests
discontinue their residency. If the current owners fail to perform their
obligations and if the partnership assets, consisting primarily of land and
buildings, were worthless, the Company could be liable for an


                                       12

<PAGE>

additional $24.0 million as of December 31, 1998. The Company considers the
incurrence of this liability to be remote based on asset values and the
indemnification agreement from the current owners to Echelon.

(10) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which established accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The Company will be
required to adopt this standard as of January 1, 2001 and based on current
circumstances does not believe the application of the new rules will have a
material impact on the Company's results of operations or its financial
condition.

(11) OPERATING SEGMENTS

     As of December 31, 1998, the Company adopted SFAS No. 131, "Disclosures
About Segments of an Enterprise and Related Information," which established
standards for additional disclosure about operating segments for interim and
annual financial statements. This standard requires financial and descriptive
information be disclosed for segments whose operating results are reviewed by
the chief operating officer for decisions on resource allocation. It also
established standards for related disclosures about products and services,
geographic areas, and major customers.

     The Company has three principal operating segments. These segments are 1)
Commercial Real Estate, 2) Multi-Family Residential Real Estate and 3)
Investments in Financial Assets. Commercial Real Estate includes the operation
and development of office and industrial properties, land sales, marina
operations and real estate brokerage services. Multi-family Residential Real
Estate includes the development, ownership and operation of multi-family
residential communities. Investments in Financial Assets include leveraged
leases, direct finance leases, an operating lease, investments in afforadable
housing limited partnerships and commercial finance loans. The Financial Assets
segment is primarily invested in the airline industry.

     Segment information for the three and six month periods ended June 30, 1999
and 1998 is summarized below. Revenues received from Florida Progress
Corporation and subsidiaries accounted for 16% and 13% of the Company's revenues
for the three and six month periods ended June 30, 1999. Revenues received from
Florida Progress Corporation and subsidiaries for both the three and six months
ended June 30, 1998 accounted for 5% of the Company's revenues, respectively.


<TABLE>
<CAPTION>
                                                 THREE MONTHS           SIX MONTHS
                                                ENDED JUNE 30,        ENDED JUNE 30,
                                                --------------        --------------
                                                1999       1998       1999       1998
                                                ----       ----       ----       ----
                                                            (UNAUDITED)
                                                           (IN MILLIONS)
<S>                                           <C>        <C>        <C>        <C>
Sales and revenues: (1)
    Commercial real estate .............      $   9.2    $   5.6    $  15.7    $  12.9
    Multi-family residential real estate          1.2         .1        2.0         .1
    Investments in financial assets ....          2.0        2.7        4.2        6.3
                                              -------    -------    -------    -------

                                                 12.4        8.4       21.9       19.3
       Non-segment .....................           .4         .7         .7        3.0
                                              -------    -------    -------    -------

                                              $  12.8    $   9.1    $  22.6    $  22.3
                                              =======    =======    =======    =======
</TABLE>

                                       13

<PAGE>

<TABLE>
<CAPTION>

                                                  THREE MONTHS           SIX MONTHS
                                                 ENDED JUNE 30,         ENDED JUNE 30,
                                                 --------------        ---------------
                                                 1999      1998        1999       1998
                                                             (UNAUDITED)

                                                            (IN MILLIONS)
<S>                                           <C>        <C>         <C>         <C>

Operating expenses: (2)
    Commercial real estate .............      $   6.0    $   4.6     $  11.0     $  10.6
    Multi-family residential real estate          1.5         .2         2.5          .2
    Investments in financial assets ....           .9        (.5)        1.6          .5
                                              -------    -------     -------     -------
                                                  8.4        4.3        15.1        11.3
       Non-segment .....................          2.1        1.7         4.3         4.4
                                              -------    -------     -------     -------
                                              $  10.5    $   6.0     $  19.4     $  15.7
                                              =======    =======     =======     =======

Interest expense, net: (2)
    Commercial real estate .............      $    .7    $    .6     $   1.2     $   1.3
    Multi-family residential real estate           .4         --          .6          --
    Investments in financial assets ....           .8         .6         1.4         1.3
                                              -------    -------     -------     -------
                                                  1.9        1.2         3.2         2.6
       Non-segment .....................           --         --          --          --
                                              -------    -------     -------     -------

                                              $   1.9    $   1.2     $   3.2     $   2.6
                                              =======    =======     =======     =======

Depreciation expense: (2)
    Commercial real estate .............      $   1.1    $   1.0     $   2.3     $   1.9
    Multi-family residential real estate           .3         --          .5          --
    Investments in financial assets ....           .1         .3          .2          .6
                                              -------    -------     -------     -------

                                                  1.5        1.3         3.0         2.5
       Non-segment .....................           .2         .1          .3          .2
                                              -------    -------     -------     -------

                                              $   1.7    $   1.4     $   3.3     $   2.7
                                              =======    =======     =======     =======



Income tax expense (benefit) ...........      $    .6    $    .2     $   (.6)    $    .3
                                              =======    =======     =======     =======

Consolidated net income ................      $   1.7    $   2.9     $   3.8     $   6.3
                                              =======    =======     =======     =======

Capital expenditures:
    Commercial real estate .............      $   4.7    $  12.4     $   6.6     $  19.8
    Multi-family residential real estate         28.3       13.7        52.0        19.8
                                              -------    -------     -------     -------

                                                 33.0       26.1        58.6        39.6
       Non-segment .....................       --             .5      --             1.0
                                              -------    -------     -------     -------

                                              $  33.0    $  26.6     $  58.6     $  40.6
                                              =======    =======     =======     =======
</TABLE>
                                       14


<PAGE>





                                                  AS OF JUNE 30,
                                                 ----------------
                                                 1999        1998
                                                 ----        ----
                                                   (UNAUDITED)

                                                  (IN MILLIONS)

Assets: (3)
    Commercial real estate .............      $  141.6      $148.1
    Multi-family residential real estate         120.7        32.0
    Investments in financial assets ....         248.2       289.5
                                              --------      ------

                                                 510.5       469.6
       Non-segment .....................          24.1        24.6
                                              --------      ------

                                              $  534.6      $494.2
                                              --------      ------
------------------
(1)  Non-segment sales and revenues to reconcile to total revenue are comprised
     of investment income and net realized gain on sale of investments.
(2)  Non-segment operating expenses to reconcile to total operating expenses
     are comprised of corporate general and administrative expenses and
     corporate depreciation.
(3)  Non-segment assets to reconcile to total assets are comprised of all cash
     and cash equivalents and corporate equipment, furniture and fixtures.

(12) SUBSEQUENT EVENTS

     In July 1999, Fannie Mae's American Communities Fund agreed to invest with
     Echelon in the development of ECHELON AT CHENEY PLACE, a 303-unit
     multi-family residential community to be developed in downtown Orlando,
     Florida. The Company will account for its investment in the development of
     ECHELON AT CHENEY PLACE under the equity method. Concurrent with the
     execution of the agreement with Fannie Mae's American Communities Fund, the
     Company and Fannie Mae's American Communities Fund executed an agreement
     with Wachovia Bank, N.A. for a $21.5 million construction loan to fund the
     development of ECHELON AT CHENEY PLACE. The construction of ECHELON AT
     CHENEY PLACE began in late July 1999.

                                       15

<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

     Echelon is a real estate company which develops, owns, and manages
commercial and multi-family residential real estate (the "Real Estate
Business"). The Real Estate Business includes two segments: 1) Commercial Real
Estate and 2) Multi-Family Residential Real Estate. The Company also owns and
manages a portfolio of financial assets consisting primarily of leased aircraft
and other assets and collateralized financings of commercial real estate and
aircraft (the "Leasing and Lending Business"). The Leasing and Lending Business
comprises the majority of the Company's third segment, Investments in Financial
Assets. Echelon is continuing to withdraw from the aircraft and real estate
lending business to focus on its core real estate operations.

     Prior to December 18, 1996 ("Distribution Date"), the Company operated as a
wholly owned subsidiary of Florida Progress Corporation ("Florida Progress").
Effective on the Distribution Date, Florida Progress distributed the Company's
stock to Florida Progress shareholders (one share of the Company for each
fifteen shares of Florida Progress) as a tax-free dividend (the "Distribution").
The Distribution established the Company as a publicly held corporation,
separate from Florida Progress.

     The Company's operations for the six months ended June 30, 1999 include the
following transactions related to the Company's ongoing multi-family residential
and commercial development activities:

     MULTI-FAMILY RESIDENTIAL DEVELOPMENT

     Construction of ECHELON AT BAY ISLE KEY, a 369-unit multi-family
residential community located in the Gateway area of St. Petersburg, Florida,
was 98% leased as of June 30, 1999. ECHELON AT BAY ISLE KEY was named the "1998
Apartment Community of the Year" by the Bay Area Apartment Association, which
covers the Tampa, St. Petersburg and Clearwater area.

     Construction of the clubhouse and 14 of 22 total buildings for ECHELON AT
THE RESERVE was completed during the first half of 1999. ECHELON AT THE RESERVE
is a 314-unit multi-family residential community located in CARILLON PARK.
Leasing is in process and to date, over 200 units have been leased, representing
over 66% of the total units. Construction is scheduled for completion in the
last quarter of 1999.

     Construction of the clubhouse for ECHELON AT WOODLAND PARK was completed
during June 1999. ECHELON AT WOODLAND PARK is a 232-unit multi-family
residential community located in Tulsa, Oklahoma. Leasing has just begun with 25
leases signed and construction is scheduled for completion in the first quarter
of 2000.

     Construction of the clubhouse for ECHELON AT NORTHLAKE is scheduled to be
completed during August 1999. ECHELON AT NORTHLAKE is a 256-unit multi-family
residential community located in Atlanta, Georgia. Construction is scheduled for
completion in the first quarter of 2000.

     Construction is continuing for ECHELON AT MISSION RANCH, a 295-unit
multi-family residential community located in Mesquite, Texas (near Dallas) and
ECHELON AT MEMORIAL CREEK, a 292-unit multi-family residential community located
in Tulsa, Oklahoma. Both clubhouses are scheduled to open in October 1999.


                                       16
<PAGE>

     In addition to the multi-family residential communities above, there are an
additional seven multi-family residential communities currently under
development and/or construction:


     -    ECHELON AT CHENEY PLACE - a 303-unit multi-family residential
          community located in downtown Orlando, Florida,
     -    ECHELON AT THE BALLPARK - a 384-unit multi-family residential
          community located in downtown Memphis, Tennessee,
     -    ECHELON AT BRIARGATE - a 395-unit multi-family residential community
          located in Colorado Springs, Colorado,
     -    ECHELON AT TWENTY MILE VILLAGE - a 325-unit multi-family residential
          community located in Parker, Colorado (near Denver),
     -    ECHELON AT WATTERS CREEK - a 200-unit multi-family residential
          community located in Allen, Texas (near Dallas),
     -    ECHELON AT KELLER TOWN CENTER - a 276-unit multi-family residential
          community located in Keller, Texas (near Dallas) and
     -    ECHELON AT MID-TOWN - a 297-unit multi-family residential community
          located in downtown Memphis, Tennessee.

     COMMERCIAL DEVELOPMENT

     Construction was completed in late June 1999 on CASTILLE AT CARILLON, two
class A buildings totaling 103,900 square feet located in CARILLON PARK. As of
mid-August 1999, CASTILLE AT CARILLON is 72% leased with Echelon occupying
approximately 20,000 square feet as its corporate headquarters and leasing
approximately 55,000 square feet to third parties. Echelon has also executed
letters of intent for approximately 24,000 additional square feet.

     In June 1999, the Company recorded revenue of $2.4 million for the sale of
development rights in CARILLON PARK to an existing land owner. Echelon intends
to develop a portion of the unsold CARILLON PARK land for its own account and
market the remaining land to third parties.

RESULTS OF OPERATIONS

THREE AND SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE THREE AND SIX MONTHS
ENDED JUNE 30, 1998

     Net income for the three months ended June 30, 1999 was $1.7 million or
$.25 basic and diluted earnings per share compared to net income of $2.9 million
or $.43 basic and $.41 diluted earnings per share, respectively, for the three
months ended June 30, 1998. Net income for the six months ended June 30, 1999
was $3.8 million or $.56 basic and diluted earnings per share. This compares to
net income of $6.3 million or $.93 basic and $.91 diluted earnings per share,
respectively, for the six months ended June 30, 1998.

                                       17
<PAGE>

SALES AND REVENUES

     COMMERCIAL REAL ESTATE

     Commercial real estate sales and revenues for the three and six months
ended June 30, 1999 increased $3.6 million and $2.8 million compared to the same
periods in 1998 primarily due to:

o    A $2.0 million increase in revenues from the the sales of development
     properties and development rights during the three months ended June 30,
     1999 resulting from $2.4 million in revenues from the sale of development
     rights in CARILLON PARK during the second quarter of 1999 compared to $.4
     million in revenues from the sale of development rights in CARILLON PARK in
     the same period of 1998.

     A $.7 million decrease in revenues from the sales of development properties
     and development rights for the six months ended June 30, 1999 as the 1998
     first quarter revenues include revenues of $2.7 million from the sale of
     land in CARILLON PARK.

o    A $1.5 million and $2.9 million increase in rental revenues for the three
     and six month periods ended June 30, 1999, respectively, compared to the
     same periods in 1998 resulting from an overall increase in occupancy and
     rental rates for the Company's commercial properties, the 100% occupancy of
     the commercial properties completed during the second quarter of 1998,
     BAYBORO STATION and CENTRAL STATION, the completion of THE NEW MCNULTY in
     December 1998 and the construction completion of CASTILLE AT CARILLON in
     late June 1999.

o    A $.1 million and $.6 million increase in revenues from real estate
     brokerage services and other commercial real estate operations for the
     three and six month periods ended June 30, 1999 compared to the same
     periods in 1998.

     MULTI-FAMILY RESIDENTIAL REAL ESTATE

o    Multi-family residential real estate revenues of $1.2 million and $2.0
     million for the three and six months ended June 30, 1999 resulted from the
     leasing of ECHELON AT BAY ISLE KEY, which opened in late April 1998, and
     the initial leasing of ECHELON AT THE RESERVE, which completed the
     construction of the clubhouse and 14 of 22 total buildings during the first
     half of 1999.

     INVESTMENTS IN FINANCIAL ASSETS

     Investments in financial assets sales and revenues for the three and six
month periods ended June 30, 1999 decreased $.7 million and $2.1 million,
respectively, compared to the same periods in 1998 primarily due to:

     o    A decrease in equity in earnings of unconsolidated partnerships of $.4
          million and $2.5 million for the three and six months ended June 30,
          1999, respectively, compared to 1998 due to the July 31, 1998
          dissolution of the joint venture partnership in which Echelon had a
          50% interest.

     o    A decrease of $.2 million and $.4 million in interest income for the
          three and six months ended June 30, 1999 compared to the same periods
          in 1998 as a result of the sales and payoffs of loans receivable as
          the Company continues to execute its strategy to liquidate
          non-strategic assets and redirect the capital to real estate
          development and acquisition.

                                       18
<PAGE>

     o    Earned income on finance and operating leases increased $.4 million
          and $1.3 million for the three and six months ended June 30, 1999
          compared to the same periods in 1998 primarily as a result of a $.4
          million and $.8 million increase in lease revenues for the three and
          six months ended June 30, 1999, respectively, recorded from the direct
          finance lease of an aircraft leased to Continental Airlines that the
          Company received from the July 31, 1998 dissolution of the joint
          venture, in which Echelon was a 50% partner. For the three and six
          month periods ended June 30, 1998, the income from the joint venture
          was reported in the "Equity in earnings of unconsolidated
          partnerships" income statement line item. The Company also recorded an
          additional $.3 million of revenues in the first half of 1999 related
          to the restructure in the fourth quarter of 1998 of a direct finance
          lease for an aircraft leased to Southwest Airlines and a $.2 million
          increase in revenues from the Company's leveraged lease portfolio for
          the six months ended June 30, 1999.

     o    Equity in losses of limited partnership investments increased $.5
          million for both the three and six month periods ended June 30, 1999
          compared to the same periods in 1998. Equity in losses of limited
          partnership investments reduced revenues for the three and six months
          ended June 30, 1999 by $.6 million and $1.1 million, respectively, as
          compared to the same periods of 1998. The equity in losses of limited
          partnership investments resulted from the Company recording its share
          of pre-tax losses from affordable housing limited partnerships in each
          of the periods. The Company recorded $1.7 million and $1.3 million in
          related income tax credits for the six months ended June 30, 1999 and
          1998, respectively, as a reduction of income tax expense.

          As part of Echelon's strategy to focus on real estate development,
          Echelon has investments in affordable housing limited partnerships
          entitled to the benefits of housing tax credits. The Company's overall
          return on these investments includes recording pre-tax losses on this
          type of investment. The tax benefits resulting from such losses and
          the realization of the housing tax credits are the primary sources of
          value from this type of investment.

     NON-SEGMENT

o    The Company's non-segment sales and revenues are comprised of investment
     income and net realized gain on sale of investments, which decreased $.3
     million and $2.3 million for the three and six months ended June 30, 1999
     compared to the same periods of 1998 as a result of the Company's
     conversion of the marketable securities portfolio to cash and short-term
     cash investments during the fourth quarter of 1998.


                                       19
<PAGE>



OPERATING EXPENSES

     COMMERCIAL REAL ESTATE

     Commercial real estate operating expenses for the three and six months
ended June 30, 1999 increased $1.4 million and $.4 million compared to the same
periods in 1998 primarily due to:

     o    An increase in rental and other operations expenses in the three and
          six month periods ended June 30, 1999 of $1.7 million and $1.2 million
          over the same periods of 1998 primarily due to the completion and 100%
          occupancy of BAYBORO STATION and CENTRAL STATION in the second quarter
          of 1998, the completion of THE NEW MCNULTY in December 1998, the
          construction completion of CASTILLE AT CARILLON in late June 1999 and
          increased occupancy in the Company's other commercial properties in
          1999 as compared to 1998, as previously discussed.

     o    An increase in depreciation expense of $.1 million and $.4 million for
          the three and six months ended June 30, 1999, respectively, as
          compared to the same periods in 1998 primarily as a result of the
          completion of the construction and tenant improvements of two
          commercial properties, BAYBORO STATION and CENTRAL STATION, in the
          second quarter of 1998 and the completion of THE NEW MCNULTY in
          December 1998.

          These increases were offset by:

     o    A decrease in the cost of development properties and development
          rights sold of $.5 million and $1.1 million for the three and six
          months ended June 30, 1999 compared to the same periods in 1998 due to
          a decrease in sales of CARILLON PARK land and development rights, as
          discussed previously.

     MULTI-FAMILY RESIDENTIAL REAL ESTATE

o    Multi-family residential real estate operating expenses of $1.5 million and
     $2.5 million for the three and six months ended June 30, 1999,
     respectively, resulted from the opening of the first multi-family
     residential community, ECHELON AT BAY ISLE KEY, in late April 1998, and the
     completion of the clubhouse and 14 of a total 22 buildings, of ECHELON AT
     THE RESERVE during the first half of 1999, as discussed above. The $2.5
     million of operating expenses incurred during the first half of 1999 is
     comprised of $.5 million of depreciation expense, $.6 million of interest
     expense and $1.4 million of real estate operating expenses.

                                       20
<PAGE>

         INVESTMENTS IN FINANCIAL ASSETS

         Expenses related to investments in financial assets for the three and
six months ended June 30, 1999 increased $1.4 million and $1.1 million,
respectively, compared to the same periods in 1998 primarily due to:

     o    A reversal of a $1.6 million allowance for loan losses in the first
          half of 1998 as a result of the complete repayment of a loan, for
          which the Company had previously recorded an allowance for loan
          losses.

     o    A decrease in depreciation expense of $.2 million and $.4 million
          during the three and six months ended June 30, 1999, respectively,
          compared to the same periods of 1998 as a result of increasing the
          estimated depreciable life of a leased aircraft due to the extension
          of an operating lease from an original maturity of December 31, 1998
          to October 31, 2000.

     o    An increase in interest expense, net of amounts capitalized, of $.2
          million and $.1 million for the three and six months ended June 30,
          1999, compared to the same periods of 1998 as a result of an overall
          increase in debt due to a loan executed in November 1998, which is
          secured by a direct finance lease.

     NON-SEGMENT

o    Non-segment operating expenses to reconcile to total operating expenses are
     comprised primarily of corporate general and administrative expenses and
     corporate depreciation.

     The non-segment operating expenses increased $.4 million and decreased $.1
million for the three and six months ended June 30, 1999, respectively, as
compared to the same periods in 1998.

     The increase in non-segment operating expenses for the second quarter of
1999 compared to the second quarter of 1998 is due to the second quarter 1999
operating expenses including 3 months of the annual accrual for management
incentive and long-term incentive compensation as compared to the second quarter
of 1998, which included no management incentive and long-term incentive
compensation accrual. In 1998, the full year accrual for management incentive
and long-term incentive compensation was recorded in the first quarter of the
year as a result of the Company achieving the 1998 annual goals in the first
quarter.

     The decrease in non-segment operating expenses for the first half of 1999
is primarily as a result of capitalizing development overhead costs related to
the Company's increased level of construction and development of multi-family
residential and commercial projects. During the formation of the Company's
development pipeline, certain costs were appropriately expensed rather than
capitalized. As specific development projects are approved and construction
begins, costs related to these projects have been, and will continue to be,
capitalized.

                                       21

<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

     SOURCES OF LIQUIDITY AND CAPITAL RESOURCES

     The Company's liquidity and capital resources have been, and are expected
to continue to be, impacted by the Company's strategic plan referenced herein.
The Company's sources of liquidity and capital resources have been primarily
from the maturity and collection of Echelon's lease and loan portfolio, proceeds
from the sale of certain non-strategic assets and, with respect to the Echelon's
real estate development, from project-based and other financings. The planned
development of multi-family residential and commercial real estate will require
additional access to external financing. The timing and amount of external
financing requirements will, in part, be dependent upon the timing of
collections from real estate loans and asset sales.

     Echelon expects to obtain sufficient capital from its operations, asset
sales, loan collections, project-based and other financings, and the capital
markets to execute its strategic plan. However, no assurance can be given that
such capital will be available at the time or in amounts necessary to execute
the Company's strategic plan.

     At the Distribution Date, Echelon and Florida Progress entered into a
distribution agreement, which requires Echelon to maintain a liquidity level of
at least $17.0 million throughout 1999.

     CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES

     Cash flow provided by operating activities was $.7 million for the six
months ended June 30, 1999. The primary source of cash was the result of an
increase in accounts payable and other liabilities of $3.5 million. The primary
use of cash largely related to previously deferred tax liabilities becoming due
and payable as a result of collections of lease payments. Deferred income taxes
from leveraged leasing activities, which are reflected in cash flows from
operating activities, are offset by related collections from lessees, which are
included in cash flows from investing activities. Net cash flow from future
operations is generally expected to be reinvested in the Real Estate Business.

     CASH FLOW PROVIDED BY (USED IN) INVESTING ACTIVITIES

     Echelon's net cash flow used in investing activities for the first half of
1999 was $36.5 million. The cash flow reflected the $19.9 million in proceeds
received from the collection of leases and loans, including the $5.8 million
payoff of the real estate loan receivable from Vine Street Partnership. In June
1999, the Company also received $2.4 million for the sale of development rights
in CARILLON PARK. Upon the maturity and collection of Echelon's loan portfolio,
Echelon expects investing activities to continue to be a net use of funds as
Echelon continues to build the Real Estate Business.



                                       22
<PAGE>


     Real estate property additions and other capital expenditures were $58.6
million for the six months ended June 30, 1999. The Company's $52.0 million of
multi-family capital expenditures for the six months ended June 30, 1999 were
for the ongoing construction of multi-family residential communities and land
purchases for the development of additional multi-family residential projects.
The Company's commercial capital expenditures were $6.6 million for the six
months ended June 30, 1999 and were primarily for the completion of the
construction and ongoing tenant improvements of CASTILLE AT CARILLON and tenant
improvements for other commercial properties.

     For the remainder of 1999, capital expenditures for tenant improvements,
land development, commercial office development and multi-family residential
development are projected to be approximately $30.0 million to $80.0 million.
These expenditures are expected to be funded through project-based and other
financings and from existing cash.

     During the six months ended June 30, 1999, contributions to unconsolidated
partnerships were $.2 million. The remaining contributions to be funded by
December 31, 1999 total $2.7 million as of June 30, 1999.

     CASH FLOW FROM FINANCING ACTIVITIES

     During the six months ended June 30, 1999, the Company's primary source of
cash flow from financing activities was $57.1 million in proceeds from debt
financings, including TIAA's $19.3 million permanent financing for ECHELON AT
BAY ISLE KEY. The proceeds were used to fund the construction of the Company's
multi-family residential communities and commercial projects. The Company also
made scheduled loan repayments on the Company's outstanding debt of $20.2
million during the first half of 1999, which included the $16.5 million payoff
of the construction loan with SouthTrust Bank for ECHELON AT BAY ISLE KEY.

     The Company is currently involved in the construction of several commercial
projects and multi-family residential communities and at June 30, 1999, had
remaining commitments of $35.3 million with construction contractors.

     As of June 30, 1999, Echelon had four contracts, subject to the Company's
final due diligence, to acquire land or execute a joint venture agreement, for
the development of more than 850 multi-family-residential units. No assurance
can be given that Echelon will acquire this land or develop the multi-family
residential communities.

     During the six months ended June 30, 1999, the Company issued 7,021 shares
of Common Stock under the 1996 Echelon Employee Stock Purchase Plan, resulting
in additional paid in capital of $.1 million. The Company also purchased 4,526
shares of Common Stock, resulting in additional Treasury Stock of $.1 million.

     OFF-BALANCE SHEET RISK

     Through two previous partnerships, Echelon remains contingently liable for
first mortgage bonds issued to residents of the life care communities owned by
such partnerships. The contingent liability reduces over time as those who were
residents at the time of the sale of Echelon's partnership interests discontinue
their residency. If the current owners were to fail to perform their obligations
and if the partnership assets, consisting primarily of land and buildings, were
worthless, Echelon could be liable for an additional $24.0 million as of
December 31, 1998. Echelon considers the incurrence of this liability to be
remote based on asset values and the indemnification agreement from the current
owners to Echelon.

                                       23


<PAGE>


     IMPACT OF INFLATION

     Inflation and changing prices have not had a material impact on the
Company's revenues, operating income or net income during any of the Company's
three most recent fiscal years. Due to the current economic climate, the Company
does not expect that inflation will have a materially adverse effect on its
business or financial condition. To the extent inflationary trends affect
short-term interest rates, a portion of the Company's debt service costs may be
impacted as well as the lease rates the Company charges on both commercial and
multi-family residential real properties.

YEAR 2000 COMPUTER ISSUE

     Many computer systems currently in use were designed and developed using
two digits, rather than four, to identify the year. As a result, such computer
systems will recognize the year 2000 as "00". This could cause many computer
applications to fail completely or to create erroneous results unless corrective
measures are taken.

     Echelon has several projects underway to address the Year 2000 issue. These
include: 1) identifying and mitigating Year 2000 problems in Echelon's systems,
including equipment used in the Company's properties, such as elevators and
phone systems that may have date sensitive information within them, 2) working
with the Company's financial institutions, lenders and vendors to assure that
the appropriate steps are being taken to mitigate the Year 2000 issue in each
entity's software systems, and 3) ensuring that each entity that electronically
receives or sends information to Echelon is aware of the steps that the Company
is taking and is taking appropriate steps of its own to address the Year 2000
issue.

     During 1998 and 1997 the Company incurred total costs of $.3 million for
the acquisition and implementation of a property management and general ledger
software that is Year 2000 compliant. These costs were recorded in accordance
with Echelon's accounting policies. The Company has incurred costs of less than
$.1 million during the first half of 1999 and estimates an additional $.2
million to be incurred for Year 2000-related projects during the remainder of
the year ending December 31, 1999.

     Echelon is currently Year 2000 compliant with some systems and expects to
be complaint with all other systems no later than the third quarter of 1999.
Costs related to the maintenance and/or modifications of Echelon's software
systems have been and will continue to be expensed as incurred. Echelon does not
anticipate the costs related to Year 2000 to have a material impact on its
results of operations. While the Company currently expects that the Year 2000
issues will not pose significant operational problems, delays in the
modification of software systems or failure to fully identify all Year 2000
dependencies in the Company's systems could result in material adverse
consequences, including disruption of operations, loss of information, and
unanticipated increases in costs. The Company's contingency plan for addressing
the Year 2000 issue includes the utilization of manual operation systems.

RECENTLY ISSUED ACCOUNTING STANDARDS

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which established accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. The Company will be required to
adopt this standard as of January 1, 2001 and based on current circumstances,
does not believe the application of the new rules will have a material impact on
the Company's results of operations or its financial condition.



                                       24
<PAGE>

STRATEGIC PLAN

     A complete discussion of Echelon's Strategic Plan is included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.

     As previously disclosed, the Company's success to date is not a forecast of
1999 results. Specifically, financial results from 1998 and 1997 are not
indicators of projected 1999 net income. Redirecting capital into the Company's
real estate pipeline will lower net income for 1999, as is typical of the early
stages of real estate development.

            CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     Certain statements contained herein regarding other than historical facts
are forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1955 and are intended to be covered by the Safe Habor
created thereby. Such statements, including those concerning Echelon's expected
sources and uses of funds and capital expenditures and its business strategy
including its plans to gradually withdraw from the aircraft and real estate
lending business and focus on its core real estate operations, involve risks and
uncertainties.

     Echelon wishes to caution readers that in addition to the important factors
described elsewhere in this Form 10-Q, where the Company expresses an
expectation or belief as to future events, such expectation or belief is
expressed in good faith and it is believed to have a reasonable basis. However,
such forward-looking statements are subject to risk, uncertainties and other
factors, which could cause actual results to differ materially from future
results express or implied by such forward-looking statements. Important factors
that could cause actual strategies and the timing and expected results thereof
to differ materially from such forward-looking statements ("cautionary
statements"), include, but are not limited to those factors identified under
"CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS" in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998. Given these
uncertainties, readers are cautioned not to place undue reliance on such
forward-looking statements.


                                       25
<PAGE>


                                     PART II
                                OTHER INFORMATION

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company is exposed to interest rate changes primarily as a result
of its long-term debt used to fund capital expenditures for the expansion of the
Company's real estate portfolio. The Company also has real estate loans
receivable that bear interest at a floating rate based on the prime rate plus a
defined number of basis points. The Company's interest rate risk management
objective is to limit the impact of interest rate changes on earnings and cash
flow. The Company's construction financing is at variable rates of interest and
all permanent and corporate financings are at fixed rates of interest. To date,
the Company has not entered into any derivative or interest rate hedge
transactions.

         The Company's interest rate risk is monitored using a variety of
techniques. The table below presents the principal amounts, weighted average
interest rates, fair value and other terms required by year of expected maturity
to evaluate the expected cash flows and sensitivity to interest rate changes.


<TABLE>
<CAPTION>

                                                  AS OF JUNE 30, 1999
                                                  -------------------

                                        REMAINDER
                                           OF                                                                        FAIR
                                          1999      2000      2001      2002      2003      THEREAFTER     TOTAL     VALUE
                                          ----      ----      ----      ----      ----      ----------     -----     -----
<S>                                       <C>       <C>       <C>       <C>       <C>         <C>        <C>         <C>
Fixed rate debt                           $  1.6    $  6.8    $  3.3    $ 4.4     $  4.9      $ 80.9     $101.9      $101.9
                                           =====     =====     =====     ====      =====       =====      =====      ======
Weighted average interest rate
  at June 30, 1999               7.35%
                                 ====

Variable rate LIBOR debt                  $ 14.8    $  5.8    $  2.1    $  --     $  --       $ 34.8     $  57.5     $ 57.5
                                           =====     =====     =====     ====      ====        =====      ======     ======

Weighted average interest rate
  at June 30, 1999               6.50%
                                 ====

Variable rate prime loans
   receivable                             $ 28.5    $  --     $  4.5    $  --     $  --       $   --     $  33.0     $ 33.0
                                           =====     ====      =====     ====      ====        =====      ======     ======

Weighted average interest rate
  at June 30, 1999               9.39%
                                 ====

</TABLE>

         As the table incorporates only those exposures that exist as of June
30, 1999, it does not consider those exposures or positions, which could arise
after that date. In addition, the Company's variable interest construction
financing is included in the "thereafter" column based on the fact that the
Company has secured permanent financing commitment for some of these debt
instruments as of June 30, 1999. Moreover, because firm commitments are not
presented in the table above, the information presented therein has limited
predictive value. As a result, the Company's ultimate realized gain or loss with
respect to interest rate fluctuations will depend on the exposures that arise
during the period, the Company's hedging strategies at that time, and interest
rates.


                                       26

<PAGE>


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         The Annual Meeting of Stockholders of Echelon International Corporation
was held on May 18, 1999. There were 6,681,254 shares of Common Stock entitled
to vote. The following matters were voted upon at the meeting:

         1) Election of Directors

            Class III - Terms expiring 2002

                                               VOTES FOR           VOTES AGAINST
                                               ---------           -------------
              Darryl A. LeClair...........     4,777,158              69,348
              W. Michael Doramus..........     4,777,568              68,938

         2) Ratification of appointment of KPMG LLP as the Company's independent
            certified public accountants for fiscal year 1999:


              Votes for.......................................     4,808,002
              Votes against...................................        14,136
              Abstentions.....................................        24,368

         3) Proposal to approve the Echelon International Corporation 1999
            Non-Employee Directors' Stock Plan

              Votes for.......................................     4,545,917
              Votes against...................................       202,650
              Abstentions.....................................        97,939

     See the Echelon International 1999 Non-Employee Directors' Stock Plan filed
herein as Exhibit 22.

ITEM 5.  OTHER INFORMATION.

         Echelon International Corporation issued a news release dated August
11, 1999, announcing 1999 second quarter financial results. A copy of the news
release is being filed as Exhibit 99.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

        (a)   Exhibits:

     EXHIBIT NO.                            DESCRIPTION
     -----------                            -----------

         22                Echelon International Corporation 1999 Non-Employee
                           Directors' Stock Plan
         27                Financial Data Schedule of Echelon International
                           Corporation
         99                Echelon International Corporation New Release dated
                           August 11, 1999  regarding  1999 second quarter
                           financial results.


                                       27
<PAGE>

         (b)   Reports on Form 8-K:

               On July 1, 1999, Echelon International Corporation filed the
               following report on Form 8-K:

               Form 8-K dated June 30, 1999, reporting under Item 5 "Other
               Events", included information provided in an information packet
               mailed to the investment community on or about June 30, 1999.


                                       28
<PAGE>

                                   SIGNATURES

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


                                       ECHELON INTERNATIONAL CORPORATION
                                       Registrant


     NAME AND SIGNATURE             TITLE                               DATE
     ------------------             -----                               ----

/s/ LARRY J. NEWSOME
-----------------------------
    Larry J. Newsome           Principal Financial Officer,      August 12, 1999
Principal Financial Officer    Senior Vice President and
                               Chief Financial Officer


/s/ JAMES R. HOBBS, JR.
-----------------------------
   James R. Hobbs, Jr.         Principal Accounting Officer,     August 12, 1999
Principal Accounting Officer   Vice President and Controller



                                       29

<PAGE>
                                 EXHIBIT INDEX

EXHIBIT NO.                 DESCRIPTION
-----------                 -----------
   22            Echelon International Corporation 1999 Non-Employee Directors'
                 Stock Plan
   27            Financial Data Schedule of Echelon International Corporation
   99            Echelon International Corporation New Release dated August 11,
                 1999 regarding 1999 second quarter financial results.