UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                  For the quarterly period ended March 31, 1999

                         Commission file number: 1-8967

                      ATLANTIC GULF COMMUNITIES CORPORATION
             (Exact name of registrant as specified in its charter)

                DELAWARE                            59-0720444
       (State or jurisdiction of        (I.R.S. Employer Identification No.)
       incorporation or organization)


          2601 SOUTH BAYSHORE DRIVE                 33133-5461
               MIAMI, FLORIDA                       (Zip Code)
   (Address of principal executive offices)

                                 (305) 859-4000
              (Registrant's telephone number, including area code)

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

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.

                             [X]  Yes   [ ]  No


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


There were 12,639,733  shares of the Registrant's  common stock,  $.10 par value
per share, outstanding as of May 13, 1999.

<PAGE>

                  SPECIAL NOTE ABOUT FORWARD LOOKING STATEMENTS

EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED IN THIS QUARTERLY REPORT ON FORM
10-Q FOR THE FISCAL  QUARTER  ENDED MARCH 31, 1999,  CERTAIN  MATTERS  DISCUSSED
HEREIN  INCLUDING  CERTAIN  FORWARD  LOOKING  STATEMENTS  BASED ON  MANAGEMENT'S
EXPECTATIONS  REGARDING,  AND  EVALUATIONS  OF CURRENT  INFORMATION  ABOUT,  THE
COMPANY'S  BUSINESS  THAT INVOLVE  RISKS AND  UNCERTAINTIES,  AND ARE SUBJECT TO
FACTORS THAT COULD CAUSE ACTUAL  FUTURE  RESULTS TO DIFFER,  BOTH  ADVERSELY AND
MATERIALLY, FROM CURRENTLY ANTICIPATED RESULTS,  INCLUDING,  WITHOUT LIMITATION,
THE EFFECT OF ECONOMIC AND MARKET  CONDITIONS;  THE CYCLICAL  NATURE OF THE REAL
ESTATE  MARKET IN  PRIMARY  MARKETS IN  FLORIDA,  OTHER  PRIMARY  MARKETS IN THE
SOUTHEASTERN UNITED STATES AND LUXURY/RESORT  MARKETS; THE INDUSTRY AND INDUSTRY
SEGMENT CONDITIONS AND DIRECTIONS;  INTEREST RATES; THE AVAILABILITY AND COST OF
FINANCING  REAL  ESTATE  ACQUISITIONS  AND  DEVELOPMENTS;   THE  SALEABILITY  OF
PREDECESSOR  ASSETS;  CONSTRUCTION  COSTS;  WEATHER;  THE  AVAILABILITY  OF HIGH
QUALITY REAL ESTATE PARCELS IN PRIMARY MARKETS IN FLORIDA, OTHER PRIMARY MARKETS
IN THE SOUTHEASTERN  UNITED STATES AND LUXURY/RESORT  MARKETS;  THE AVAILABILITY
AND COST OF MATERIALS AND LABOR;  CONSUMER PREFERENCES AND TASTES;  GOVERNMENTAL
REGULATION;  COMPETITIVE PRESSURES;  THE COMPANY'S OWN DEBT AND EQUITY STRUCTURE
AND RELATED FINANCING  CONTINGENCIES AND RESTRICTIONS;  MANAGEMENT  LIMITATIONS;
THE COMPANY'S ABILITY TO CLOSE FINANCINGS OF NEW REAL ESTATE AT PARTICULAR TIMES
RELATIVE TO THE COMPANY'S CASH FLOW NEEDS AT SUCH TIMES;  THE COMPANY'S  ABILITY
TO  REFINANCE  EXISTING   INDEBTEDNESS;   LEGISLATION;   RESOLUTION  OF  PENDING
LITIGATION  IN WHICH THE COMPANY IS A DEFENDANT;  THE SUCCESS OR LACK THEREOF OF
THE COMPANY'S CURRENT DEVELOPMENT  PROJECTS;  AND THE SUCCESS OR LACK THEREOF OF
THE COMPANY'S STRATEGIC ALTERNATIVE INITIATIVE.

<PAGE>


<TABLE>
<CAPTION>

                                           TABLE OF CONTENTS

PART I.  FINANCIAL INFORMATION
<S>                                                                                                  <C>
         Item 1.  Financial Statements

                  Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998 ..........  2

                  Consolidated Statements of Operations for the Three Months Ended March 31,
                  1999 and 1998 ...................................................................  3

                  Consolidated Statements of Cash Flows for the Three Months Ended March 31,
                  1999 and 1998 ...................................................................  4

                  Notes to Consolidated Financial Statements ......................................  5

         Item 2.  Management's Discussion and Analysis of Financial Condition and Results
                  of Operations ...................................................................  8

PART II. OTHER INFORMATION

         Item 1.  Legal Proceedings ............................................................... 17

         Item 2.  Changes in Securities ........................................................... 17

         Item 3.  Defaults Upon Senior Securities ................................................. 18

         Item 4.  Submission of Matters to a Vote of Security Holders ............................. 18

         Item 5.  Other Information ............................................................... 18

         Item 6.  Exhibits and Reports on Form 8-K ................................................ 19

SIGNATURES ........................................................................................ 20
</TABLE>

<PAGE>

UNLESS THE CONTEXT CLEARLY  INDICATES  OTHERWISE,  ALL REFERENCES  HEREIN TO (1)
"ATLANTIC  GULF" REFER SOLELY TO ATLANTIC GULF  COMMUNITIES  CORPORATION AND (2)
THE "COMPANY"  INCLUDE  ATLANTIC  GULF AND ITS DIRECT AND INDIRECT  WHOLLY OWNED
SUBSIDIARIES.


PART I.      FINANCIAL INFORMATION





             [THE REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY.]




                                        1

<PAGE>

ITEM 1.      FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
             ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
                           Consolidated Balance Sheets
                      March 31, 1999 and December 31, 1998
               (in thousands, except share amounts and par value)


                                                                                     March 31,    December 31,
                                                                                   -----------    -----------
                                                                                       1999           1998
         ASSETS                                                                    (unaudited)
<S>                                                                                <C>            <C>        
Cash and cash equivalents                                                          $     7,743    $     9,413
Restricted cash and cash equivalents                                                     1,078          1,041
Contract receivables, net                                                                3,651          4,109
Mortgages, notes and other receivables, net                                             27,387         29,273
Land and residential inventory                                                         170,365        166,870
Property, plant and equipment, net                                                       3,895          3,950
Other assets, net                                                                       19,406         15,150
                                                                                   -----------    -----------
Total assets                                                                       $   233,525    $   229,806
                                                                                   ===========    ===========
         LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Accounts payable and accrued liabilities                                           $    15,400    $    17,533
Other liabilities                                                                       15,922          8,207
Notes and mortgages payable                                                            155,220        151,805
                                                                                   -----------    -----------
Total liabilities                                                                      186,542        177,545
                                                                                   -----------    -----------

Redeemable Preferred Stock
     Series A, 20%, $.01 par value, 2,500,000 shares authorized;
     2,500,000 shares issued and outstanding,  having a liquidation
     preference of $34,342 and $32,706, as of March 31, 1999
     and December 31, 1998, respectively                                                32,251         30,403

     Series B, 20%, $.01 par value; 2,000,000 shares authorized;
     2,000,000 shares issued and outstanding, having a liquidation
     preference of $27,194 and $25,899 as of March 31, 1999
     and December 31, 1998, respectively                                                25,844         24,417
                                                                                   -----------    -----------
                                                                                        58,095         54,820
                                                                                   -----------    -----------
Commitments and Contingencies

Common stockholders' (deficit) equity
     Common stock, $.10 par value, 70,000,000 shares authorized;
        12,753,354 and 11,933,359 shares issued as of
        March 31, 1999 and December 31, 1998, respectively                               1,275          1,193
     Contributed capital                                                               113,087        117,994
     Accumulated deficit                                                              (119,107)      (115,379)
     Accumulated other comprehensive loss                                               (6,351)        (6,351)
     Treasury stock, 158,536 shares, at cost                                               (16)           (16)
                                                                                   -----------    -----------

Total common stockholders' (deficit) equity                                            (11,112)        (2,559)
                                                                                   -----------    -----------
Total liabilities and common stockholders' (deficit) equity                        $   233,525    $   229,806
                                                                                   ===========    ===========
</TABLE>


See accompanying notes to consolidated financial statements.

                                       2

<PAGE>

             ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
                      Consolidated Statements of Operations
                   Three Months Ended March 31, 1999 and 1998
                      (in thousands, except per share data)
                                   (unaudited)

                                                         Three Months Ended
                                                              March 31,
                                                        --------------------
Revenues:                                                 1999        1998
                                                        --------    --------
  Real estate sales:
       Homesite                                         $  7,642    $  3,431
       Commercial                                          5,318       5,541
       Vertical Residential Units                              -           -
                                                        --------    --------
    Total real estate sales                               12,960       8,972
   Other operating revenue                                 2,259       1,025
   Interest income                                           881       1,367
                                                        --------    --------
       Total revenues                                     16,100      11,364
                                                        --------    --------
Costs and expenses:
    Cost of real estate sales:
       Homesite                                            6,887       3,007
       Commercial                                          3,903       5,482
       Vertical Residential Units                              -           -
                                                        --------    --------
     Total cost of real estate sales                      10,790       8,489
   Selling expense                                         1,833       1,252
   Operating expense                                         377         302
   Real estate costs                                       1,737       1,799
   General and administrative expense                      3,653       2,009
   Cost of borrowing, net of amounts capitalized           1,787       1,382
   Other expense                                             190         405
                                                        --------    --------
       Total costs and expenses                           20,367      15,638
                                                        --------    --------
Operating loss                                            (4,267)     (4,274)
                                                        --------    --------
Other income (expense):
   Reorganization items                                      539         514
   Miscellaneous                                              -        (189)
                                                        --------    --------
Total other income (expense)                                 539         325
                                                        --------    --------

Net loss                                                  (3,728)     (3,949)
                                                        --------    --------
Less:
   Accrued preferred stock dividends                       2,931       2,329
   Accretion of preferred stock to redemption amount         344         318
   Modification of preferred stock security interest       2,380           -
                                                        --------    --------
                                                           5,655       2,647
                                                        --------    --------
Net loss applicable to common stock                     $ (9,383)   $ (6,596)
                                                        ========    ========

Basic and diluted net loss per common share             $  ( .77)    $ ( .57)
                                                        ========    ========
Weighted average common shares outstanding                12,163      11,529
                                                        ========    ========


See accompanying notes to consolidated financial statements.

                                       3

<PAGE>

<TABLE>
<CAPTION>
             ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                   Three Months Ended March 31, 1999 and 1998
                            (in thousands of dollars)
                                   (unaudited)
                                                                                 Three Months Ended
                                                                                      March 31,
                                                                                --------------------
                                                                                  1999        1998
                                                                                --------    --------
Cash flows from operating activities:
<S>                                                                             <C>         <C>      
  Net loss                                                                      $ (3,728)   $ (3,949)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
     Depreciation and amortization                                                   796       1,032
     Other (income) expense                                                           30         (75)
     Reorganization items                                                              -          51
     Other net changes in assets and liabilities:
       Restricted cash                                                               (37)        334
       Receivables                                                                 2,314       1,164
       Land and residential inventory                                             (3,495)      1,368
       Other assets                                                               (4,256)       (321)
       Accounts payable and accrued liabilities                                   (2,133)     (5,361)
       Other liabilities                                                             252        (393)
                                                                                --------    --------
             Net cash used in operating activities                               (10,257)     (6,150)
                                                                                --------    --------

Cash flow from investing activities:
  Additions to property, plant and equipment, net                                   (117)       (307)
                                                                                --------    --------
             Net cash used in investing activities                                  (117)       (307)
                                                                                --------    --------
Cash flows from financing activities:
  Borrowings under credit agreements                                              81,838       6,080
  Repayments under credit agreements                                             (73,434)     (6,276)
  Proceeds from issuance of common stock                                             300           -
  Proceeds from issuance of preferred stock                                            -       1,735
                                                                                --------    --------
             Net cash provided by financing activities                             8,704       1,539
                                                                                --------    --------

Decrease in cash and cash equivalents                                             (1,670)     (4,918)
Cash and cash equivalents at beginning of period                                   9,413       9,188
                                                                                --------    --------
Cash and cash equivalents at end of period                                      $  7,743    $  4,270
                                                                                ========    ========

Supplemental cash flow information:
  Interest payments, net of amounts capitalized                                 $  1,328    $  5,302
                                                                                ========    ========
  Reorganization item payments                                                  $      -    $     51
                                                                                ========    ========
</TABLE>


See accompanying notes to consolidated financial statements.

                                       4

<PAGE>

             ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                 March 31, 1999
                                   (unaudited)

(1)      The March 31, 1999  financial  statements  are unaudited and subject to
         year-end  adjustments.  In management's  opinion, the interim financial
         statements  reflect all adjustments,  principally  consisting of normal
         recurring accruals,  necessary for a fair presentation of the financial
         position and results of operations. Results for interim periods are not
         necessarily  indicative  of results  for the full year.  For a complete
         description  of  the  Company's  accounting  policies,  see  "Notes  to
         Consolidated  Financial  Statements"  included in the Company's  Annual
         Report on Form 10-K for the year ended December 31, 1998, as amended by
         that certain Amendment to Form 10-K on Form 10-K/A-1, as filed with the
         Securities and Exchange Commission (the "SEC") on April 30, 1999 ("1998
         Form  10-K").  Certain  prior year amounts  have been  reclassified  to
         conform with the 1999 presentation.

(2)      Net income (loss) per share of common stock,  $.10 par value per share,
         of the Company ("Common  Stock"),  is computed by (a) deducting accrued
         preferred  stock  dividends  and the  accretion of  preferred  stock to
         redemption amount from net income (loss) to determine net income (loss)
         applicable  to common  stock and (b) then  dividing  net income  (loss)
         applicable to common stock by the weighted  average number of shares of
         Common  Stock  outstanding  during  the  periods.  The  effect  of  any
         outstanding  warrants  and options to purchase  common stock on the per
         share computation was anti-dilutive during the periods.

(3)      The Company  capitalizes  interest  primarily on land  inventory  being
         developed  for sale which is  subsequently  charged to income  when the
         related  asset  is  sold.   Capitalized  interest  was  $4,154,000  and
         $3,014,000  for the  three  months  ended  March  31,  1999  and  1998,
         respectively.

(4)      Earned  revenue is based on the percentage of costs incurred to date to
         total estimated  costs to be incurred.  This percentage is then applied
         to the expected  revenue  associated  with units that have been sold to
         date. Revenue from the sale of land is recognized when all the criteria
         for sales  pursuant to SFAS 66,  ACCOUNTING  FOR SALES OF REAL  ESTATE,
         have been met.

(5)      Pursuant to the Company's 1996 Non-Employee  Directors' Stock Plan, the
         Company issued to its  Non-Employee  Directors  30,000 shares of Common
         Stock at a price of $0.75 per share for the first quarter of 1999.

(6)      The  Company  and  AP-AGC,  LLC,  an  affiliate  of Apollo  Real Estate
         Advisors,  L.P.  ("Apollo"),  are  parties to that  certain  Investment
         Agreement, as amended (the "Investment  Agreement"),  pursuant to which
         Apollo  agreed to  purchase,  subject  to certain  conditions,  (a) 2.5
         million  shares  of 20%  Cumulative  Redeemable  Convertible  Preferred
         Stock,  Series A (the "Series A Preferred Stock"),  and (b) warrants to
         purchase  up  to 5  million  shares  of  Common  Stock  (the  "Investor
         Warrants"), for an aggregate purchase price of $25 million (the "Apollo
         Transaction").  As of December 31, 1998,  Apollo had  purchased (A) 2.5
         million shares of Series A Preferred Stock for $24.7 million ($9.88 per
         share) and (B) Investor  Warrants to acquire up to 5 million  shares of
         Common Stock for $0.3 million ($.06 per Investor Warrant share).

                                       5

<PAGE>

             ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                 March 31, 1999
                                   (unaudited)

(7)      Redeemable preferred stock (which includes the Series A Preferred Stock
         and the 20% Cumulative Redeemable Convertible Preferred Stock, Series B
         (the "Series B Preferred  Stock"))  consisted of the following at March
         31, 1999 and December 31, 1998 (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                  March 31,   December 31,
                                                                    1999         1998
                                                                    ----         ----
         SERIES A PREFERRED STOCK
         <S>                                                      <C>         <C>
         Gross proceeds                                           $ 25,000    $ 25,000
         Accrued dividends                                           9,342       7,706
                                                                  --------    --------
         Liquidation Preference amount                              34,342      32,706
         Less issue costs                                           (3,104)     (3,104)
         Less warrants purchased                                      (300)       (300)
         Plus accretion of preferred stock to redemption amount      1,313       1,101
                                                                  --------    --------
                                                                    32,251      30,403
                                                                  --------    --------

         SERIES B PREFERRED STOCK
         Private Placement  6/24/97
          Gross proceeds                                            10,000      10,000
          Accrued dividends                                          4,126       3,453
                                                                  --------    --------
          Liquidation Preference amount                             14,126      13,453
          Less issue costs                                            (950)       (950)
          Less warrants purchased                                     (120)       (120)
          Plus accretion of preferred stock to redemption amount       434         369
                                                                  --------    --------
                                                                    13,490      12,752
                                                                  --------    --------
         Rights Offering 11/19/97
          Gross proceeds                                            10,000      10,000
          Accrued dividends                                          3,068       2,446
                                                                  --------    --------
          Liquidation Preference amount                             13,068      12,446
          Less issue costs                                            (950)       (950)
          Less warrants purchased                                     (120)       (120)
          Plus accretion of preferred stock to redemption amount       356         289
                                                                  --------    --------
                                                                    12,354      11,665
                                                                  --------    --------
         Total Series B                                             25,844      24,417
                                                                  --------    --------

         Total redeemable preferred stock                         $ 58,095    $ 54,820
                                                                  ========    ========
</TABLE>


(8)      During  the first  three  months of 1999 and 1998,  comprehensive  loss
         consisted only of the net losses for those periods.

                                       6

<PAGE>

             ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                 March 31, 1999
                                   (unaudited)

(9)      Segment Reporting


         Three Months Ended March 31, 1999

<TABLE>
<CAPTION>
                                          Primary        Luxury
                                           Market         Resort      Predecessor
                                         Operations     Operations       Assets        Other          Total
                                        --------------------------------------------------------------------

<S>                                            <C>            <C>            <C>           <C>        <C>   
Total Revenues                          $      9,324  $       1,749  $       1,887   $     3,140  $   16,100
                                        ============  =============  =============   =======================

Gross Profit                            $      1,641  $         308  $         221   $         -  $    2,170
                                        ============  =============  =============   ===========
Unallocated revenues and (expenses)                                                                   (5,898)
                                                                                                  ----------

Net Loss                                                                                          $   (3,728)
                                                                                                  ==========
</TABLE>



         Three Months Ended March 31, 1998


<TABLE>
<CAPTION>
                                          Primary        Luxury
                                           Market         Resort      Predecessor
                                         Operations     Operations       Assets        Other          Total
                                        --------------------------------------------------------------------

<S>                                            <C>            <C>            <C>           <C>        <C>   
Total Revenues                          $      2,535  $           -  $       6,437   $     2,392  $   11,364
                                        ============  =============  =============   =======================

Gross Profit                            $        388  $           -  $          95   $         -  $      483
                                        ============  =============  =============   ===========
Unallocated revenues and (expenses)                                                                   (4,432)
                                                                                                  ----------

Net Loss                                                                                          $   (3,949)
                                                                                                  ==========
</TABLE>

                                                      7

<PAGE>


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

CURRENT BUSINESS

         The Company is a Florida-based, planned community development and asset
management company. The Company's CORE BUSINESS consists of:

         -        PRIMARY  MARKET  OPERATIONS,  consisting  of the  acquisition,
                  development  and  sale  of  real  estate  projects   ("PRIMARY
                  PROJECTS") containing  residential homesite components such as
                  single-family  lots,  multi-family  lots/units and residential
                  tract sales ("HOMESITES")  and/or  non-residential  components
                  such  as  commercial,  industrial,  office  and  institutional
                  ("COMMERCIAL  DEVELOPMENT")  in primary markets in Florida and
                  other  selected  primary  markets in the  southeastern  United
                  States ("PRIMARY MARKETS").

         -        LUXURY/RESORT  OPERATIONS,   consisting  of  the  acquisition,
                  development and sale of real estate  projects  ("LUXURY/RESORT
                  PROJECTS") in which the Company  engages in one or more of the
                  following activities:  Homesite  development,  construction of
                  VERTICAL  RESIDENTIAL  UNITS  (i.e.,  single  family  housing,
                  condominiums  and  timeshare  units),   and  construction  and
                  operation   of  equity   golf   clubs   and  other   amenities
                  ("AMENITIES").  The Company's existing  Luxury/Resort Projects
                  are  located  in  selected  markets in  Florida  and  Colorado
                  ("LUXURY/RESORT MARKETS").

                  The Company's (1) Primary  Markets and  Luxury/Resort  Markets
                  are referred to as its "CORE MARKETS" and (2) Primary Projects
                  and  Luxury/Resort  Projects  are  referred  to as  its  "CORE
                  PROJECTS."

         -        OTHER OPERATIONS, consisting principally of:

                  --       ENVIRONMENTAL  SERVICES,  consisting of the provision
                           of  environmental  services  to  third  parties  on a
                           contract basis; and

                  --       RECEIVABLES  PORTFOLIO   MANAGEMENT,   consisting  of
                           portfolio  management  of  MORTGAGE  RECEIVABLES  (as
                           defined below) and CONTRACT  RECEIVABLES  (as defined
                           below)  resulting  principally from the sale or other
                           disposition of PREDECESSOR ASSETS (as defined below).

         As of March 31, 1999, the Company (1) owned outright,  or had ownership
interests in, 11 Core  Projects,  consisting of seven Primary  Projects and four
Luxury/Resort  Projects and (2) had five  additional  planned  Primary  Projects
under control.  The 11 existing Core Projects and five planned Primary  Projects
are referred to as the Company's "CORE DEVELOPMENT PORTFOLIO."

         The Company  also is engaged in the orderly  disposition  of  scattered
PREDECESSOR  HOMESITES  (as defined  below) and  PREDECESSOR  TRACTS (as defined
below)  located in  secondary  markets in Florida and  Tennessee  (collectively,
"PREDECESSOR  ASSETS").  As  discussed  below,  the  continuing  disposition  of
Predecessor  Assets is a run-off  business  and not part of the  Company's  Core
Business.

                                       8

<PAGE>

CORE BUSINESS

         GENERAL.  The  Company's  Core  Business  consists  of three  principal
business  lines,  (1)  development  of  Primary  Projects,  (2)  development  of
Luxury/Resort   Projects  and  (3)  Other  Operations,   principally   including
Environmental Services and Receivables Portfolio Management.

         PRIMARY PROJECTS.  As of March 31, 1999, the Company was engaged in the
acquisition,  development  and  sale  of  Primary  Projects  in  Florida,  North
Carolina,  Georgia and Texas.  See PART I, ITEM 1.  BUSINESS - CORE  BUSINESS --
PRIMARY PROJECTS of the 1998 Amended Form 10-K for more  information  concerning
these Projects, including the scope and location of each Project.

                  REMAINING UNSOLD  LOTS/UNITS/ACRES IN THE PRIMARY PROJECTS, BY
PROJECT.   The  following  table  summarizes  the  number  of  remaining  unsold
lots/units/acres at the Company's Primary Projects,  by Project, as of March 31,
1999:

<TABLE>
<CAPTION>
                                      -----------------------------------------------------------------------------------
                                                   REMAINING UNSOLD LOTS/UNITS/ACRES AS OF MARCH 31, 1999(1)
                                      -----------------------------------------------------------------------------------
                                                  SINGLE FAMILY                MULTI-FAMILY              COMMERCIAL
                                      -----------------------------------------------------------------------------------
                                               TOTAL       TOTAL           TOTAL       TOTAL           TOTAL    TOTAL
                                               LOTS       ENTITLED(2)      UNITS      ENTITLED(2)      ACRES   ENTITLED(2)
                                      -----------------------------------------------------------------------------------
<S>                                          <C>            <C>           <C>             <C>           <C>           <C>
OWNED PROPERTIES
Lakeside Estates ..................             488           488             -             -             -             -
Saxon Woods .......................             375           375             -             -             -             -
West Meadows ......................             739           739             -             -             -             -
The Trails of West Frisco .........           1,451         1,451             -             -             -             -
                                      -----------------------------------------------------------------------------------
SUBTOTAL OWNED PROPERTIES                     3,053         3,053             -             -             -             -
                                      -----------------------------------------------------------------------------------

JOINT VENTURE PROPERTIES
Sunset Lakes ......................           1,226         1,226             -             -             -             -
Falcon Trace ......................             631           631             -             -             -             -
Cary Glen .........................             852           852           257           257             -             -
                                      -----------------------------------------------------------------------------------
SUBTOTAL JOINT VENTURE PROPERTIES             2,709         2,709           257           257             -             -
                                      -----------------------------------------------------------------------------------

CONTROLLED PROPERTIES (3)
Anneewakee Falls (4) ..............           1,200             -             -             -             -             -
Grand Oaks ........................           1,282             -             -             -             -             -
Rayland ...........................           3,766             -           534             -            75             -
Orlando Naval Training Center .....             911             -         2,129             -           131             -
Harbor Bay ........................           1,371             -           410             -            44             -
                                      -----------------------------------------------------------------------------------
SUBTOTAL CONTROLLED PROPERTIES ....           8,530             -         3,073             -           250             -
                                      -----------------------------------------------------------------------------------
TOTAL ALL PROPERTIES ..............          14,292         5,762         3,330           257           250             -
                                      -----------------------------------------------------------------------------------
</TABLE>

(1)      Varying from  project to project,  unsold  units are  developed,  under
         development  or to be developed in the future.  The change in remaining
         unsold  lots/units/acres  from  December  31, 1998 is a result of sales
         activity and any modifications  made to the scope of the Project during
         the intervening period.
(2)      "Entitled" means having the necessary  discretionary  local, state, and
         federal government approvals and permits to proceed with development.

                                       9

<PAGE>

(3)      The Company does not currently own these Projects, but has entered into
         contractual  relationships  (i.e.,  purchase  agreements with customary
         conditions  precedent,  option agreements,  joint venture arrangements,
         other  similar  arrangements,  etc.) to acquire  them.  There can be no
         assurance the Company will actually acquire these properties.
(4)      This  Project is located in  Georgia,  southwest  of Atlanta in Douglas
         County.  The Company controls this Project through a purchase  contract
         executed on February 19, 1999.

         LUXURY/RESORT PROJECTS. The Company also is engaged in the acquisition,
development and sale of master planned  Luxury/Resort  Projects in Luxury/Resort
Markets in Florida and Colorado. See PART I, ITEM 1. BUSINESS - CORE BUSINESS --
LUXURY/RESORT  PROJECTS  of the 1998  Amended  Form  10-K  for more  information
concerning these Projects, including the scope and location of each Project.

                  REMAINING  UNSOLD   LOTS/UNITS/ACRES   IN  THE   LUXURY/RESORT
PROJECTS,  BY PROJECT.  The following  table  summarizes the number of remaining
unsold  lots/units/acres at the Company's Luxury/Resort Projects, by Project, as
of March 31, 1999:

<TABLE>
<CAPTION>
                                 ----------------------------------------------------------------------------------------------
                                                     REMAINING UNSOLD LOTS/UNITS/ACRES AT MARCH 31, 1999(1)
                                 ----------------------------------------------------------------------------------------------
                                                                   VERTICAL RESIDENTIAL UNITS
                                        HOMESITES   ---------------------------------------------------------     COMMERCIAL
                                      SINGLE FAMILY     SINGLE FAMILY      MULTI-FAMILY     TIMESHARE CABINS      DEVELOPMENT
                                 ----------------------------------------------------------------------------------------------
                                     TOTAL     TOTAL    TOTAL    TOTAL    TOTAL    TOTAL     TOTAL     TOTAL     TOTAL  TOTAL
                                      LOTS    ENTITLED  UNITS   ENTITLED  UNITS   ENTITLED   UNITS   ENTITLED    ACRES ENTITLED
                                 ----------------------------------------------------------------------------------------------
<S>                                    <C>       <C>      <C>       <C>  <C>       <C>         <C>        <C>      <C>       <C>
     OWNED PROPERTIES
     West Bay Club .............       396       396      81        81     597       597        -          -       12        12
     Spring Valley Ranch .......       372         -       -         -      50         -       75          -        -         -
     Riverwalk Tower ...........         -         -       -         -     375       375        -          -        -         -
                                 ----------------------------------------------------------------------------------------------
     SUBTOTAL OWNED PROPERTIES .       768       396      81        81   1,022       972       75          -       12        12
                                 ----------------------------------------------------------------------------------------------

     JOINT VENTURE PROPERTIES
     Jupiter Ocean Grande ......         -         -       -         -     154       154        -          -        -         -
                                 ----------------------------------------------------------------------------------------------
     TOTAL ALL PROPERTIES ......       768       396      81        81   1,176     1,126       75          -       12        12
                                 ----------------------------------------------------------------------------------------------
</TABLE>

(1)      Varying from  Project to Project,  unsold  units are  developed,  under
         development  or to be developed in the future.  The change in remaining
         unsold  lots/units/acres  from  December  31, 1998 is a result of sales
         activity and any modifications  made to the scope of the Project during
         the intervening period.


         OTHER OPERATIONS

                  ENVIRONMENTAL  SERVICES.  EQ Lab, a wholly owned subsidiary of
the Company, is a full service ecological consulting firm and laboratory. EQ Lab
recorded approximately $360,000 and $448,000 of total revenues in 1999 and 1998,
respectively.  Revenues from unaffiliated parties totaled approximately $232,000
and $378,000 in 1999 and 1998, respectively.

                  RECEIVABLES  PORTFOLIO  MANAGEMENT.  The  Company is  actively
engaged  in the  management  and  collection  of a  portfolio  of  (1)  contract
receivables  originated by the Predecessor  Company's homesite installment sales
program (the  "CONTRACT  RECEIVABLES")  and (2) mortgage  receivables  generated
primarily  from

                                       10

<PAGE>

the Company's sales of Predecessor  Tracts (the "MORTGAGE  RECEIVABLES,"  which,
together  with the Contract  Receivables,  are  collectively  referred to as the
"RECEIVABLES  PORTFOLIO").  As of March 31,  1999,  the  portfolio  of  Contract
Receivables had a net book value of $3.7 million,  and the portfolio of Mortgage
Receivables had a net book value of $27.4 million.

PREDECESSOR ASSETS

         The  following  table  summarizes  the Company's  Predecessor  Homesite
Inventory by secondary market area as of March 31, 1999:

<TABLE>
<CAPTION>
                                             PREDECESSOR HOMESITE INVENTORY


                                                            Other                                              Total
                                         Standard         Developed         Buildable           Other       Predecessor
           Market Area                   Buildable          Lots            Reserved         Restricted      Homesites
           ------------------------------------------------------------------------------------------------------------

<S>                                         <C>                  <C>              <C>               <C>           <C>  
           North Port                       3,594                9                47                131           3,781
           Port Charlotte                     753               71             1,614                362           2,800
           Port St. Lucie                     203               27               318                 63             611
           Port Malabar                       159                4             1,765              1,541           3,469
           Port Labelle                        67                -                23              1,724           1,814
           Sabal Trace                          -                -                 -                  -               -
           Silver Springs Shores            2,393               85               226                280           2,984
           Cumberland Cove                    221                -                 -                  8             229
           Other                               47                -                30                  6              83
                                     ----------------------------------------------------------------------------------
           Total                            7,437              196             4,023              4,115          15,771
                                     ==================================================================================
</TABLE>


         The following  table  summarizes the Company's  Predecessor  Commercial
Development Inventory by secondary market area as of March 31, 1999:

                 PREDECESSOR COMMERCIAL DEVELOPMENT INVENTORY


                                                        Total
             Market Area                                Acres
             -----------------------------------------------------

             North Port                                  572
             Port Charlotte                            1,419
             Port St. Lucie                              322
             Port Malabar                                911
             Port Labelle                                804
             Silver Springs Shores                        36
             Cumberland Cove                             685
             Other                                        39
                                                   ---------------
             Total                                     4,788
                                                   ===============

                                       11

<PAGE>


         The decrease in inventory  from December 31, 1998 is primarily a result
of sales activity during the intervening period in accordance with the Company's
plan of  disposal  of  Predecessor  Assets.  See  PART I,  ITEM  1.  BUSINESS  -
PREDECESSOR ASSETS of the 1998 Amended Form 10-K for information  concerning the
Predecessor Homesite and Predecessor Commercial Development Inventory.

RESULTS OF OPERATIONS
<TABLE>
<CAPTION>

                       COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998

         The  Company's   results  of  operations  for  its  Core  Business  and
Predecessor  Assets  for the three  months  ended  March  31,  1999 and 1998 are
summarized below:

                                COMBINING RESULTS OF REAL ESTATE OPERATIONS
                                     Three Months Ended March 31, 1999
                                              (in thousands)



                                                     Primary           Luxury/
                                                     Market             Resort        Predecessor
                                                     Operations       Operations      Assets        Total
                                                     -----------------------------------------------------
<S>                                                       <C>            <C>              <C>        <C>  
Revenues:
   Real estate sales
      Homesite ...................................      $ 4,824        $ 1,749          $ 1,069    $ 7,642
      Commercial .................................        4,500              -              818      5,318
      Vertical Residential Units .................            -              -                -          -
                                                     -----------------------------------------------------
   Total real estate sales .......................        9,324          1,749            1,887     12,960
Costs and expenses:
   Cost of real estate sales
      Homesite ...................................        4,444          1,441            1,002      6,887
      Commercial .................................        3,239              -              664      3,903
      Vertical Residential Units .................            -              -                -          -
                                                     -----------------------------------------------------
Total cost of real estate sales ..................        7,683          1,441            1,666     10,790
                                                     -----------------------------------------------------

Gross margin real estate sales ...................      $ 1,641        $   308          $   221    $ 2,170
                                                     =====================================================

Results of Joint Venture Operations(1) ...........      $  (75)        $ (115)          $     -    $  (190)
                                                     =====================================================
</TABLE>

(1)      Included in "other operating revenue" in the Consolidated Statements of
         Operations.

                                                    12

<PAGE>

                              COMBINING RESULTS OF REAL ESTATE OPERATIONS
                                   Three Months Ended March 31, 1998
                                            (in thousands)


<TABLE>
<CAPTION>
                                                  Primary            Luxury
                                                  Market             Resort       Predecessor
                                                  Operations       Operations     Assets         Total
                                                  ----------------------------------------------------
<S>                                                    <C>                <C>            <C>     <C>  
Revenues:
   Real estate sales
      Homesite ............................         $  2,535         $     -         $   896   $ 3,431
      Commercial ..........................                -               -           5,541     5,541
      Vertical Residential Units ..........                -               -               -         -
                                                  ----------------------------------------------------
   Total real estate sales ................            2,535               -           6,437     8,972
Costs and expenses:
   Cost of real estate sales
      Homesite ............................            2,147               -             860     3,007
      Commercial ..........................                -               -           5,482     5,482
      Vertical Residential Units ..........                -               -               -         -
                                                  ----------------------------------------------------
Total cost of real estate sales ...........            2,147               -           6,342     8,489
                                                  ----------------------------------------------------

Gross margin real estate sales ............          $   388          $    -          $   95   $   483
                                                  ====================================================

Results of Joint Venture Operations(1) ....          $  (174)         $ (115)         $    -   $  (289)
                                                  ====================================================
</TABLE>

(1)      Included in "other operating revenue" in the Consolidated Statements of
         Operations.


         OVERVIEW. The Company reported a net loss applicable to Common Stock of
$9.4 million in the first quarter of 1999 compared to a net loss of $6.6 million
applicable to Common Stock in the first quarter of 1998. The increase in the net
loss of $2.8 million was primarily due to (1) a $1.6 million increase in general
and administrative  expenses, (2) an increase in preferred stock charges of $3.0
million,  (3) an increase in selling  expenses of $581,000 and (4) a decrease in
interest income of $486,000,  partially offset by (5) a $1.7 million increase in
gross  margin on real  estate  sales and (6) a $1.2  million  increase  in other
operating revenue.

         PRIMARY MARKET OPERATIONS.

                  HOMESITES.  Net  margins  from  Homesite  sales  in the  first
quarter of 1999 were  comparable  to the first  quarter of 1998.  Revenues  from
Homesite  sales  increased $2.3 million in the first quarter of 1999 compared to
the first  quarter of 1998  primarily  due to sales at The Trails of West Frisco
Project.  There were no sales at The Trails of West Frisco  Project in the first
three months of 1998. The Homesite sales gross margin percentage was 7.9% in the
first quarter of 1999 compared to 15.3% in the first quarter of 1998.  The lower
gross  margin  percentage  on  Homesite  sales in the first  quarter of 1999 was
primarily due to a decline in the gross margin

                                       13

<PAGE>

associated with the Lakeside  Estates Project of 11.8% on comparable  prior year
sales due to an increase in the estimated cost to complete the project.

         As of March 31, 1999, the Company had under contract  approximately 648
Homesites  for  $19.8  million  with 11  homebuilders  in the  Lakeside  Estates
Project,  the Saxon Woods  Project,  the West Meadows  Project and The Trails of
West Frisco  Project.  As of March 31,  1998,  the  Company  had under  contract
approximately  889  Homesites  for $25.7  million  with 13  homebuilders  in the
Lakeside Estates Project,  the Saxon Woods Project, the West Meadows Project and
The Trails of West Frisco Project.

                  COMMERCIAL  DEVELOPMENT.  Commercial Development revenues were
$4.5 million in the first quarter of 1999 with no comparable  sales in the first
quarter of 1998.  In January  1999,  the Company  sold and closed a $4.5 million
tract sale in the West Meadows Project.

                  JOINT VENTURES. Results of Joint Ventures increased by $99,000
in the first  quarter of 1999  compared to the first  quarter of 1998.  This was
primarily due to a gain on the sale of the Country Lakes JV Venture interest. As
of March 31,  1999 and  1998,  the  Company's  JV  Projects  had 1,322 and 4,445
Homesites under contract, respectively, totaling approximately $63.7 million and
$80.0  million,  respectively,  in future gross  revenue,  a portion of which is
allocable to the Company as a joint venturer.

         LUXURY/RESORT OPERATIONS.

                  HOMESITES.  During the first quarter of 1999, initial Homesite
sales occurred in the West Bay Club Project. Because the project was still under
initial  development  at the time,  there were no comparable  sales in the first
quarter of 1998.

         As of March 31, 1999, the Company had under contract  approximately  13
Homesites  for $3.1 million with 7  homebuilders  in the West Bay Club  Project.
There were no pending sales contracts at the project as of March 31, 1998.

                  JOINT VENTURES. Results of Joint Ventures in the first quarter
of 1999 were  comparable to the first quarter of 1998.  The joint venture losses
relate to the Jupiter Ocean Grande Project.

         PREDECESSOR ASSETS.

                  PREDECESSOR  HOMESITES.  Revenues  from  Predecessor  Homesite
sales  increased  $174,000  in the first  quarter of 1999  compared to the first
quarter of 1998  primarily  due to the sale of 75  Predecessor  Homesites in the
Sable Trace Project. There were no sales at this project in the first quarter of
1998. A comparable number of other Predecessor  Homesites were sold in the first
quarter of 1999 compared to the first quarter of 1998. The Predecessor  Homesite
sales gross margin  percentage  of 6.3% in the first quarter of 1999 compared to
4.0% in the first quarter of 1998 is consistent  with the Company's  accelerated
plan of disposal of its Predecessor Assets.

         As of March 31, 1999, the Company had under contract  approximately 111
Predecessor Homesites for $958,000,  including nine commercial lots allocated to
Predecessor  Homesites for $449,000. As of March 31, 1998, the Company had under
contract approximately 215 Predecessor Homesites for $633,000.

                                       14

<PAGE>

                  PREDECESSOR  TRACTS.  Revenues  from  Predecessor  Tract sales
decreased  $4.7  million  in the first  quarter  of 1999  compared  to the first
quarter of 1998 primarily due to fewer sales from a declining inventory balance.
As of March 31, 1999,  there were pending  Predecessor  Tract sales contracts or
letters of intent totaling  approximately  $901,000. As of March 31, 1998, there
were pending  Predecessor  Tract sales  contracts or letters of intent  totaling
approximately $14.4 million.

         The 18.8% gross margin  percentage for  Predecessor  Tract sales in the
first  quarter of 1999 is due to  significantly  fewer sales on more  profitable
terms. The first quarter 1998 gross margin  percentage of 1.1% is generally more
consistent with the accelerated plan of disposal of Predecessor Assets.

         OTHER RESULTS OF OPERATIONS.

                  OTHER OPERATING REVENUE.  Other operating revenue increased by
$1.2 million in the first quarter of 1999 compared to the first quarter of 1998.
This  increase was due to the  collection  of our  remaining  management  fee in
connection with the sale of the Country Lakes joint venture.

                  INTEREST INCOME.  Interest income decreased by $486,000 in the
first  quarter of 1999  compared  to the first  quarter of 1998.  This  decrease
corresponds to a reduction in the outstanding amount of Contract Receivables and
Mortgage Receivables due to principal collections on these portfolios during the
intervening period.

                  SELLING EXPENSES.  Selling expenses  increased $581,000 in the
first  quarter of 1999  compared to the first  quarter of 1998 due to  increased
real estate sales in the first  quarter of 1999 compared to the first quarter of
1998.  The ratio of selling  expense as a  percentage  of real estate  sales was
comparable in the first quarters of 1999 and 1998.

                  GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative
expense  increased  $1.6  million in the first  quarter of 1999  compared to the
first quarter of 1998 primarily due to (1) expenses of the Special  Committee of
the Board of Directors  associated  with the  Company's  strategic  alternatives
initiative,  including the retention of BT Alex.  Brown,  (2) certain  severance
expenses  and (3) employee  bonuses,  including  the stock  component of bonuses
issued to certain executives effective March 15, 1999.

                  COSTS  OF  BORROWING  NET OF  CAPITALIZED  INTEREST.  Costs of
borrowing  net of  capitalized  interest,  increased  by  $405,000  in the first
quarter of 1999  compared to the first quarter of 1998.  While notes,  mortgages
and capital leases  increased in the first quarter of 1999 compared to the first
quarter of 1998, the increase in indebtedness  primarily  related to projects on
which the interest is  capitalized.  Thus,  the increase in expense is primarily
due to an increase in the interest  rate on the  non-capitalized  portion of the
corporate debt outstanding. The increase in rate is due primarily to (1) the New
Senior Loan  Facilities,  which are interest  bearing,  which  refinanced  $39.5
million of Cash Flow Notes which were non-interest bearing,  combined with (2) a
higher  overall  interest  rate and (3) the  amortization  of loan fees over the
short  duration  of New  Senior  Loan  Facilities.  See  LIQUIDITY  AND  CAPITAL
RESOURCES below.

                  PREFERRED STOCK CHARGES. During the first quarter of 1999, the
Company  recorded a $2.9  million  accrual  for  dividends  associated  with its
Preferred Stock. The dividends were accumulated but unpaid as of March 31, 1999.
The dividend rate is 20% of the  liquidation  preference  value of the Preferred
Stock. The liquidation preference value of the Preferred Stock is $10 per share,
plus  accumulated  and unpaid  dividends.  In  addition,  the  Company  accreted
$344,000 of the value of its  Preferred  Stock to the  redemption  amount in the
first  quarter of 1999.  In  connection  with the closing of the New Senior Loan
Facilities in February 1999, the Company issued notes totaling $1.85 million and
500,000  shares of common  stock at a price of $1.061 per share to  AP-AGC,  LLC
("Apollo") in exchange for Apollo's (a) consent to the Company entering into the
New Senior Loan Facilities and agreement to subordinate its collateral  interest
in certain

                                       15

<PAGE>

of the  Company's  assets,  (b)  agreement to certain  amendments to the Secured
Agreement  and  Investment  Agreement  and (c)  agreement  to enter into the new
Intercreditor   Agreement  with  the  lenders  party  to  the  New  Senior  Loan
Facilities.  The  total  value  of the  consideration  paid to  Apollo  was $2.4
million.  The total of approximately $5.7 million of preferred stock charges was
charged to contributed  capital in the accompanying  March 31, 1999 consolidated
balance sheet.

LIQUIDITY AND CAPITAL RESOURCES

         GENERAL.  As of  March  31,  1999,  the  Company's  (1)  cash  and cash
equivalents totaled  approximately $7.7 million and (2) restricted cash and cash
equivalents  totaled $1.1 million,  consisting  primarily of (a) escrows for the
sale or  development of real estate  properties,  (b) funds held in trust to pay
certain  bankruptcy  claims and (c) various other escrow  accounts.  Of the $1.7
million decrease in cash and cash equivalents  during the first quarter of 1999,
(i) $10.3 million was used in operating activities and (ii) $117,000 was used in
investing  activities,  partially  offset  by (iii)  $8.7  million  provided  by
financing activities.

         Cash  used in  operating  activities  included  approximately  (1) $4.4
million for interest payments,  (2) $3.0 million for property tax payments,  (3)
$11.4 million for construction and development expenditures and (4) $4.9 million
of  fees  associated  with  the  Company's  refinancing  efforts.  Cash  used in
operating  activities  was offset in part by net cash generated from real estate
sales and other operations.

         Cash used in  investing  activities  consisted of $117,000 of property,
plant and equipment additions.

         Cash provided by financing activities consisted primarily of borrowings
of $8.4  million  under  various  project  financings  and the New  Senior  Loan
Facilities,  which were funded on February 2, 1999.  The remaining  $300,000 was
provided by stock  purchases in connection with certain  executive  compensation
bonuses.

         NEW SENIOR LOAN FACILITIES. Dated as of December 31, 1998, effective on
February 2, 1999,  Atlantic Gulf closed on its $39.5 million New Revolving  Loan
Facility and its $26.5  million New Term Loan Facility  (collectively,  the "NEW
SENIOR LOAN  FACILITIES").  The New  Revolving  Loan Facility had a $4.0 million
mandatory  reduction which was met by the refinancing of the West Frisco Project
under the Anglo American Facility discussed below.

         Amounts  outstanding  (1) under the New  Revolving  Loan  Facility bear
interest  at a fixed rate equal to 11% per annum and (2) under the New Term Loan
Facility bear  interest at a fixed rate equal to 15% per annum.  As of March 31,
1999, the Company had outstanding (a) $28.0 million under its New Revolving Loan
Facility and (b) $26.5 million under its New Term Loan Facility.

         ANGLO AMERICAN  FACILITY.  On March 31, 1999,  West Frisco  Development
Corporation  ("WFDC"),  an indirect  wholly-owned  subsidiary of Atlantic  Gulf,
borrowed  $7.0  million  from Anglo  American  Financial  (the  "ANGLO  AMERICAN
FACILITY").  The Anglo  American  Facility (1) is a full recourse  obligation of
WFDC,  secured by a deed of trust on the West  Frisco  Project,  (2)  matures on
December  31,  1999,  (3) bears  interest at the rate of 1.75% per month and (4)
requires payments of interest only (monthly in arrears) until maturity. Atlantic
Gulf has guaranteed the Anglo American Facility. Atlantic Gulf used $4.0 million
of the  proceeds  of the Anglo  American  Facility  to fund the  March 31,  1999
commitment reduction under the New Revolving Loan Facility.

                                       16

<PAGE>

         OTHER  MATERIAL  OBLIGATIONS  COMING DUE IN 1999.  During 1999, (1) the
commitment under the New Revolving Loan Facility will decline by $1.0 million on
May 31, 1999 and (2) the Anglo  American  Facility  will mature on December  31,
1999. If the outstanding principal balance under the New Revolving Loan Facility
exceeds the outstanding commitment following the commitment reduction on May 31,
1999, the Company will  immediately be obligated to pay the  outstanding  amount
down to the amount of the reduced commitment.

          In addition to the  aforementioned  reduction in the commitment  under
the New  Revolving  Loan  Facility  and the  maturation  of the  Anglo  American
Facility,  Atlantic Gulf's other material  obligations for the remainder of 1999
consist  primarily  of  approximately  $93 million of planned  expenditures  for
development,  construction and other capital improvements, a substantial portion
of which will be funded through  individual  project  development loans or joint
venture  arrangements,  many of which are  already in place.  If the  Company is
unable  to  obtain  the  capital   resources  to  fund  these   obligations  and
expenditures,  the  implementation  of  the  Company's  business  plan  will  be
adversely  affected,  slowing  the  Company's  anticipated  revenue  growth  and
increasing  the time  necessary to achieve  profitability.  However,  management
believes  that the Company,  through a combination  of sources,  will be able to
obtain the funds  necessary to continue to implement  its business  plan and, at
the same time, satisfy its debt obligations as they become due.


PART II.     OTHER INFORMATION

ITEM 1.      LEGAL PROCEEDINGS

         There were no new developments since April 30, 1999 with respect to the
legal proceedings referenced in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998, as amended by that certain  Amendment to Form 10-K
on Form 10-K/A-1,  as filed with the Securities and Exchange Commission on April
30, 1999 (the "1998 Amended Form 10-K").

         In addition to the legal  proceedings  specifically  referenced  in the
1998  Amended  Form 10-K,  the Company is, from time to time,  involved in other
litigation matters primarily arising in the normal course of its business. It is
the opinion of management that the resolution of these other litigation  matters
will not have a material  adverse affect on the Company's  business or financial
position.

ITEM 2.      CHANGES IN SECURITIES

         ISSUANCE OF 500,000  SHARES OF COMMON  STOCK TO APOLLO.  In  connection
with the closing of the New Senior Loan Facilities in February 1999, the Company
issued,  among  other  things,  500,000  shares of Common  Stock to  Apollo,  in
exchange for Apollo's  (a) consent to the Company  entering  into the New Senior
Loan Facilities and agreement to subordinate its collateral  interest in certain
of the  Company's  assets,  (b)  agreement to certain  amendments to the Secured
Agreement  and  Investment  Agreement  and (c)  agreement  to enter into the new
Intercreditor   Agreement  with  the  lenders  party  to  the  New  Senior  Loan
Facilities.  See  PART II,  ITEM 7.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF
FINANCIAL  CONDITION AND RESULTS OF OPERATIONS - LIQUIDITY AND CAPITAL RESOURCES
of the 1998 Amended Form 10-K for more  information  concerning  the issuance of
these shares.

                                       17

<PAGE>

         FUNDING OF A PORTION OF CERTAIN OF THE 1998  SENIOR  EXECUTIVE  BONUSES
WITH SHARES OF COMMON STOCK.  Effective as of March 15,1999,  the Company issued
(a) 213,333  shares of Common Stock to Mr.  Rutherford,  the President and Chief
Executive  Officer of Atlantic  Gulf,  in payment of 50% (valued at $200,000) of
Mr. Rutherford's 1998 Annual Bonus (in the aggregate amount of $400,000) and (b)
106,666 shares of Common Stock to Mr. Laguardia, an Executive Vice President and
Chief Operating Officer of Atlantic Gulf, in payment of 50% (valued at $100,000)
of Mr. Laguardia's 1998 Annual Bonus (in the aggregate amount of $200,000).  See
PART III, ITEM 11. EXECUTIVE COMPENSATION - EMPLOYMENT CONTRACTS AND TERMINATION
OF EMPLOYMENT AND  CHANGE-IN-CONTROL  ARRANGEMENTS of the 1998 Amended Form 10-K
for more information concerning the issuance of these shares.

ITEM 3.      DEFAULTS UPON SENIOR SECURITIES

         None.

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

         None.

ITEM 5.      OTHER INFORMATION

         WARRANT  RESET.  As  part of the  Preferred  Stock  sales  transactions
consummated  in 1997 and early 1998,  the Company issued (a) warrants to Apollo,
the holder of all of the shares of Series A  Preferred  Stock,  to acquire up to
5,000,000  shares of Common  Stock and (b)  warrants  to the  purchasers  of the
Series B  Preferred  Stock to acquire  up to  4,000,000  shares of Common  Stock
(collectively, the "Warrants"). The Warrants have an exercise price of $5.75 per
share  (the  "Exercise  Price").  The  Exercise  Price is  subject to a downward
adjustment,  calculated as of March 31, 1999,  based on a formula related to the
shortfall  between  actual  operating  cash flow during the  prescribed  testing
period from certain business lines and targeted operating cash flow (i.e., $62.4
million)  from such business  lines during the  prescribed  testing  period (the
"Warrant  Reset").  Management is in the process of finalizing the Warrant Reset
calculation.  At this time, based on the information  currently available to it,
management  believes  that the  likely  range  of the  Warrant  Reset  will be a
downward  adjustment  of $0.95 to $1.25 in the per share  Exercise  Price of the
Warrants. The calculation of the Warrant Reset downward adjustment is subject to
further review before being  finalized.  The Company will announce the amount of
the definitive Warrant Reset downward adjustment as soon as it's available under
cover of a Current  Report on Form 8-K,  which it will file with the  Securities
and Exchange Commission.

         STRATEGIC  TRANSACTION.  On March 26, 1999, the Company  announced that
(1) its Board of Directors had formed a Special  Committee to explore  strategic
alternatives  to  maximize  stockholder  value and (2) it has  retained BT Alex.
Brown,  a leading  investment  banking firm, to assist the Special  Committee in
reviewing strategic transactions.

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<PAGE>

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits required by Item 601 of Regulation S-K

         (27)     Financial Data Schedule.

(b)  Reports on Form 8-K

         1.       Form 8-K, filed with the Securities and Exchange Commission on
                  March 31,  1999,  announcing  that the  Company  had  formed a
                  Special  Committee  of  the  Board  of  Directors  to  explore
                  strategic  alternatives  to  maximize  stockholder  value  and
                  retained  BT Alex.  Brown to assist the Special  Committee  in
                  reviewing such possible alternatives.

                                       19

<PAGE>

                                   SIGNATURES


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                      ATLANTIC GULF COMMUNITIES CORPORATION

                                      /s/  THOMAS W. JEFFREY
                                      ------------------------------------------
                                      Thomas W. Jeffrey
                                      Executive Vice President and
                                      Chief Financial Officer
                                      Dated:  May 13, 1999


                                      /s/  PAULA J. COOK
                                      ------------------------------------------
                                      Paula J. Cook
                                      Vice President and Controller
                                      Dated: May 13, 1999

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