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 June 30, 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 12,675,733  shares of the Registrant's  common stock,  $.10 par value
per share, outstanding as of August 5, 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 JUNE 30,  1999,  CERTAIN  MATTERS  DISCUSSED
HEREIN,  INCLUDING PART II., ITEM 2.,  "MANAGEMENT'S  DISCUSSION AND ANALYSIS OF
FINANCIAL  CONDITION  AND  RESULTS  OF  OPERATIONS,"   CONTAIN  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 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;  THE
COMPANY'S RECENT OPERATING LOSSES;  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  RESULTS OF THE  COMPANY'S  CURRENT  DEVELOPMENT  PROJECTS;  THE
RESULTS OF THE COMPANY'S  STRATEGIC  ALTERNATIVE  INITIATIVE;  AND THE COMPANY'S
ABILITY  TO  REALIZE  THE  FINANCIAL  AND OTHER  BENEFITS  ANTICIPATED  FROM ITS
CORPORATE RESTRUCTURING PROGRAM.

<PAGE>

<TABLE>
<CAPTION>

                                          TABLE OF CONTENTS

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

                  Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998............2

                  Consolidated Statements of Operations for the Three and Six
                  Months Ended June 30, 1999 and 1998..............................................3

                  Consolidated Statements of Cash Flows for the Six Months Ended June 30,
                  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..............................................................25

         Item 2.   Changes in Securities..........................................................25

         Item 3.   Defaults Upon Senior Securities................................................25

         Item 4.   Submission of Matters to a Vote of Security Holders............................25

         Item 5.   Other Information..............................................................26

         Item 6.   Exhibits and Reports on Form 8-K...............................................26

SIGNATURES........................................................................................27
</TABLE>

<PAGE>


UNLESS THE CONTEXT CLEARLY  INDICATES  OTHERWISE,  ALL REFERENCES  HEREIN TO (1)
"ATLANTIC GULF" REFER SOLELY TO ATLANTIC GULF COMMUNITIES  CORPORATION,  (2) THE
"COMPANY"  INCLUDE  ATLANTIC  GULF AND ITS  DIRECT  AND  INDIRECT  WHOLLY  OWNED
SUBSIDIARIES  AND  (3)  THE  "PREDECESSOR   COMPANY"  REFER  SOLELY  TO  GENERAL
DEVELOPMENT  CORPORATION (ATLANTIC GULF'S CORPORATE  PREDECESSOR) AND ITS DIRECT
AND INDIRECT 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
                                      June 30, 1999 and December 31, 1998
                              (in thousands, except share amounts and par value)



                                                                                    June 30,      December 31,
                                                                                      1999            1998
                                                                                   -----------    ------------
         Assets                                                                    (unaudited)
         ------
<S>                                                                                        <C>          <C>
Cash and cash equivalents                                                          $     2,609    $     9,413
Restricted cash and cash equivalents                                                       696          1,041
Contract receivables, net                                                                3,240          4,109
Mortgages, notes and other receivables, net                                             22,430         29,273
Land and residential inventory                                                         166,927        166,870
Property, plant and equipment, net                                                      10,466          3,950
Other assets, net                                                                       19,473         15,150
                                                                                   -----------    -----------
Total assets                                                                       $   225,841    $   229,806
                                                                                   ===========    ===========
         Liabilities and Stockholders' (Deficit) Equity
         ----------------------------------------------
Accounts payable and accrued liabilities                                           $    16,271    $    17,533
Other liabilities                                                                       14,968          8,207
Notes and mortgages payable                                                            157,838        151,805
                                                                                   -----------    -----------
Total liabilities                                                                      189,077        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 $36,059 and $32,706, as of June 30, 1999
         and December 31, 1998, respectively                                            34,181         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 $28,553 and $25,899 as of June 30, 1999
         and December 31, 1998, respectively                                            27,336         24,417
                                                                                   -----------    -----------
                                                                                        61,517         54,820
                                                                                   -----------    -----------
Commitments and Contingencies

Common stockholders' deficit
         Common stock, $.10 par value, 70,000,000 shares authorized;
              12,796,595 and 11,933,359 shares issued and outstanding as
              of June 30, 1999 and December 31, 1998, respectively                       1,280          1,193
         Contributed capital                                                           109,699        117,994
         Accumulated deficit                                                          (129,365)      (115,379)
         Accumulated other comprehensive loss                                           (6,351)        (6,351)
         Treasury stock, 158,536 shares, at cost                                           (16)           (16)
                                                                                   -----------    -----------

Total common stockholders' deficit                                                     (24,753)        (2,559)
                                                                                   -----------    -----------
Total liabilities and stockholders' (deficit) equity                               $   225,841    $   229,806
                                                                                   ===========    ===========

See accompanying notes to consolidated financial statements.
</TABLE>

                                                       2

<PAGE>


<TABLE>
<CAPTION>
                                ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
                                        Consolidated Statements of Operations
                                  Three and Six Months Ended June 30, 1999 and 1998
                                        (in thousands, except per share data)
                                                     (unaudited)


                                                               Three Months Ended               Six Months Ended
                                                                    June 30,                        June 30,
                                                            -------------------------       -------------------------
                                                               1999          1998              1999           1998
                                                            -----------   -----------       -----------   -----------
<S>                                                         <C>           <C>               <C>           <C>
Revenues:
    Real estate sales:
         Homesite                                           $     9,993   $     3,647       $    17,635   $     7,078
         Commercial                                                 911        40,256             6,229        45,797
         Vertical Residential Units                                   -             -                 -             -
                                                            -----------   -----------       -----------   -----------
      Total real estate sales                                    10,904        43,903            23,864        52,875
    Other operating revenue                                       1,081         2,071             3,340         3,096
    Interest income                                                 164         1,152             1,045         2,519
                                                            -----------   -----------       -----------   -----------
         Total revenues                                          12,149        47,126            28,249        58,490
                                                            -----------   -----------       -----------   -----------
Costs and expenses:
    Cost of real estate sales:
         Homesite                                                 8,360         3,157            15,247         6,164
         Commercial                                                 621        33,349             4,524        38,831
         Vertical Residential Units                                   -             -                 -             -
                                                            -----------   -----------       -----------   -----------
      Total cost of real estate sales                             8,981        36,506            19,771        44,995
    Inventory Valuation Reserve                                   3,424             -             3,424             -
    Selling expense                                               1,702         1,968             3,535         3,220
    Operating expense                                             1,463           464             1,840           766
    Real estate costs                                             2,430         2,277             4,167         4,076
    General and administrative expense                            3,372         2,371             7,025         4,380
    Cost of borrowing, net of amounts capitalized                   964         1,649             2,751         3,031
    Other expense                                                   217            66               407           471
                                                            -----------   -----------       -----------   -----------
         Total costs and expenses                                22,553        45,301            42,920        60,939
                                                            -----------   -----------       -----------   -----------
Operating (loss) income                                         (10,404)        1,825           (14,671)       (2,449)
                                                            -----------   -----------       -----------   -----------
Other income (expense):
    Reorganization items                                            146           268               685           782
    Miscellaneous                                                     -           (27)                -          (216)
                                                            -----------   -----------       -----------   -----------
Total other income (expense)                                        146           241               685           566
                                                            -----------   -----------       -----------   -----------

Net (loss) income                                               (10,258)        2,066           (13,986)       (1,883)
                                                            -----------   -----------       -----------   -----------
Less:
    Accrued preferred stock dividends                             3,076         2,531             6,007         4,860
    Accretion of preferred stock to redemption amount               347           336               691           654
    Modification of preferred stock security interest                 -             -             2,380             -
                                                            -----------   -----------       -----------   -----------
                                                                  3,423         2,687             9,078         5,514
                                                            -----------   -----------       -----------   -----------
Net loss applicable to common stock                         $   (13,681)  $      (801)      $   (23,064)  $    (7,397)
                                                            ===========   ===========       ===========   ===========

Basic and diluted net loss per common share                 $     (1.08)  $     (0.07)      $     (1.86)  $     (0.64)
                                                            ===========   ===========       ===========   ===========
Weighted average common shares outstanding                       12,638        11,531            12,402        11,530
                                                            ===========   ===========       ===========   ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                                          3
<PAGE>


<TABLE>
<CAPTION>
                          ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
                                   Consolidated Statements of Cash Flows
                                  Six Months Ended June 30, 1999 and 1998
                                         (in thousands of dollars)
                                                (unaudited)

                                                                                   Six Months Ended
                                                                                       June 30,
                                                                            ------------------------------
                                                                               1999               1998
                                                                            -----------       ------------
<S>                                                                           <C>              <C>
Cash flows from operating activities:
   Net loss                                                                 $   (13,986)       $    (1,883)
   Adjustments to reconcile net loss to net cash (used in) provided by
      operating activities:
         Depreciation and amortization                                            2,083              2,083
         Other (income) expense                                                      (6)              (310)
         Reorganization items                                                         -                 45
         Land Acquisitions                                                            -            (22,125)
         Other net changes in assets and liabilities:
            Restricted cash                                                         345                813
            Receivables                                                           7,603              1,775
            Land and residential inventory                                       (6,119)            25,888
            Other assets                                                         (4,323)               946
            Accounts payable and accrued liabilities                               (917)            (1,302)
            Other liabilities                                                      (702)             1,972
                                                                            -----------       ------------
                  Net cash (used in) provided by operating activities           (16,022)             7,902
                                                                            -----------       ------------

Cash flow from investing activities:
   Additions to property, plant and equipment, net                                 (784)            (1,335)
                                                                            -----------       ------------
                  Net cash used in investing activities                            (784)            (1,335)
                                                                            -----------       ------------

Cash flows from financing activities:
   Borrowings under credit agreements                                            93,784             20,636
   Repayments under credit agreements                                           (83,782)           (35,145)
   Proceeds from issuance of preferred stock                                          -              1,735
                                                                            -----------       ------------
                  Net cash provided by (used in) financing activities            10,002            (12,774)
                                                                            -----------       ------------

Decrease in cash and cash equivalents                                            (6,804)            (6,207)

Cash and cash equivalents at beginning of period                                  9,413              9,188
                                                                            -----------       ------------
Cash and cash equivalents at end of period                                  $     2,609       $      2,981
                                                                            ===========       ============

Supplemental cash flow information:
   Interest payments, net of amounts capitalized                            $     3,086       $      1,340
                                                                            ===========       ============
   Reorganization item payments                                             $         -       $         45
                                                                            ===========       ============

</TABLE>
See accompanying notes to consolidated financial statements.

                                                     4

<PAGE>


             ATLANTIC GULF COMMUNITIES CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                  June 30, 1999
                                   (unaudited)


(1)      The June 30, 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,  accretion of preferred stock to redemption
         amount and other  preferred  stock  charges  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  $6,043,000  and
         $10,197,000  for  the  three  and  six  months  ended  June  30,  1999,
         respectively, and $2,382,000 and $5,396,000 for the three and six month
         periods ended June 30, 1998, respectively.

(4)      Earned revenue from the sale of Vertical  Residential Units 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 and
         13,212  shares  of  Common  Stock at a price of $1.70 per share for the
         second 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 June  30,  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
                                  June 30, 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 June
         30,  1999,  December  31,  1998  and June 30,  1998  (in  thousands  of
         dollars):

<TABLE>
<CAPTION>
                                                                June 30,         December 31,         June 30,
                                                                  1999              1998                1998
                                                               -----------       -----------        -----------
Series A Preferred Stock:
-------------------------
<S>                                                            <C>               <C>                <C>
Gross proceeds                                                 $    25,000       $    25,000        $    25,000
Accrued dividends                                                   11,059             7,706              4,666
                                                               -----------       -----------        -----------
Liquidation Preference amount                                       36,059            32,706             29,666
Less issue costs                                                    (3,104)           (3,104)            (3,100)
Less warrants purchased                                               (300)             (300)              (300)
Plus accretion of preferred stock to redemption amount               1,526             1,101                683
                                                               -----------       -----------        -----------
                                                                    34,181            30,403             26,949
                                                               -----------       -----------        -----------

Series B Preferred Stock:
-------------------------
Private Placement June 24, 1997:
  Gross proceeds                                                    10,000            10,000             10,000
  Accrued dividends                                                  4,832             3,453              2,202
                                                               -----------       -----------        -----------
  Liquidation Preference amount                                     14,832            13,453             12,202
  Less issue costs                                                    (950)             (950)              (950)
  Less warrants purchased                                             (120)             (120)              (120)
  Plus accretion of preferred stock to redemption amount               500               369                239
                                                               -----------       -----------        -----------
                                                                    14,262            12,752             11,371
                                                               -----------       -----------        -----------
Rights Offering November 19, 1997:
  Gross proceeds                                                    10,000            10,000             10,000
  Accrued dividends                                                  3,721             2,446              1,289
                                                               -----------       -----------        -----------
  Liquidation Preference amount                                     13,721            12,446             11,289
  Less issue costs                                                    (950)             (950)              (950)
  Less warrants purchased                                             (120)             (120)              (120)
  Plus accretion of preferred stock to redemption amount               423               289                158
                                                               -----------       -----------        -----------
                                                                    13,074            11,665             10,377
                                                               -----------       -----------        -----------
Total Series B                                                      27,336            24,417             21,748
                                                               -----------       -----------        -----------

Total redeemable preferred stock                               $    61,517       $    54,820        $    48,697
                                                               ===========       ===========        ===========
</TABLE>

(8)      During  the first  six  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
                                  June 30, 1999
                                   (unaudited)


(9)      Segment Reporting

<TABLE>
<CAPTION>
         Six Months Ended June 30, 1999:
         -------------------------------


                                                Primary        Luxury/
                                                 Market         Resort      Predecessor
                                               Operations     Operations       Assets        Other          Total
                                               ---------------------------------------------------------------------
<S>                                            <C>           <C>            <C>           <C>            <C>
Total Revenues                                 $    14,986   $      4,862   $      4,016  $      4,385   $    28,249
                                               ===========   ============   ============  ============   ===========

Gross Profit                                   $     2,339   $        998   $        756  $          -   $     4,093
                                               ===========   ============   ============  ============
Unallocated revenues (expenses), net                                                                         (18,079)
                                                                                                         -----------

Net Loss                                                                                                 $   (13,986)
                                                                                                         ===========


         Six Months Ended June 30, 1998:
         -------------------------------


                                                Primary        Luxury/
                                                 Market         Resort      Predecessor
                                               Operations     Operations       Assets        Other          Total
                                               ---------------------------------------------------------------------
<S>                                            <C>           <C>            <C>            <C>           <C>
Total Revenues                                 $    36,816   $          -   $     16,059   $     5,615   $    58,490
                                               ===========   ============   ============   ===========   ===========

Gross Profit                                   $     7,298   $          -   $        582   $         -   $     7,880
                                               ===========   ============   ============   ===========
Unallocated revenues (expenses), net                                                                          (9,763)
                                                                                                         -----------

Net Loss                                                                                                 $    (1,883)
                                                                                                         ===========
</TABLE>

                                                          7
<PAGE>


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

         [THE  DISCUSSION  OF  THE  COMPANY'S  BUSINESS  IN THE  SECTIONS  BELOW
ENTITLED "CURRENT BUSINESS," "CORE BUSINESS" AND "PREDECESSOR  ASSETS" SHOULD BE
READ IN CONJUNCTION WITH THE DISCUSSION OF THE COMPANY'S CORPORATE RESTRUCTURING
AND STRATEGIC  ALTERNATIVES  INITIATIVE IN THE SECTION  BELOW  ENTITLED  "RECENT
DEVELOPMENTS."]

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 June 30,  1999,  the Company (1) owned all of the equity,  or had
equity ownership  interests in joint ventures which owned all of the equity,  in
11 Core Projects,  consisting of seven Primary  Projects and four  Luxury/Resort
Projects and (2) had four additional planned Primary Projects under control. The
11 existing Core Projects and four 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

                                        8
<PAGE>


(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.

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 June 30, 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.

                                        9
<PAGE>


                  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 June 30,
1999:


<TABLE>
<CAPTION>
                                           ----------------------------------------------------------------------------------------
                                                            REMAINING UNSOLD LOTS/UNITS/ACRES AS OF JUNE 30, 1999(1)
                                           ----------------------------------------------------------------------------------------
                                                    SINGLE FAMILY                  MULTI-FAMILY                  COMMERCIAL
                                           ----------------------------------------------------------------------------------------
                                                 TOTAL          TOTAL           TOTAL         TOTAL           TOTAL       TOTAL
                                                  LOTS        ENTITLED(2)       UNITS      ENTITLED(2)        ACRES     ENTITLED(2)
                                           ----------------------------------------------------------------------------------------
OWNED PROPERTIES
----------------
<S>                                                  <C>           <C>              <C>          <C>             <C>           <C>
Lakeside Estates .....................               474           474              -             -              -             -
Saxon Woods ..........................               363           363              -             -              -             -
West Meadows .........................               710           710              -             -              -             -
The Trails of West Frisco ............             1,387         1,387              -             -              -             -
                                           ----------------------------------------------------------------------------------------
SUBTOTAL OWNED PROPERTIES.............             2,934         2,934              -             -              -             -
                                           ----------------------------------------------------------------------------------------

JOINT VENTURE PROPERTIES
------------------------
Sunset Lakes .........................             1,159         1,159              -             -              -             -
Falcon Trace .........................               556           556              -             -              -             -
Cary Glen ............................               852           852            257           257              -             -
                                           ----------------------------------------------------------------------------------------
SUBTOTAL JOINT VENTURE PROPERTIES.....             2,567         2,567            257           257              -             -
                                           ----------------------------------------------------------------------------------------

CONTROLLED PROPERTIES (3)
-------------------------
Anneewakee Falls (4)..................             1,226             -              -             -              -             -
Rayland...............................             3,766             -            534             -             75             -
Orlando Naval Training Center.........               911             -          2,129             -            131             -
Harbor Bay............................             1,371             -            410             -             44             -
                                           ----------------------------------------------------------------------------------------
SUBTOTAL CONTROLLED PROPERTIES........             7,274             -          3,073             -            250             -
                                           ----------------------------------------------------------------------------------------
TOTAL ALL PROPERTIES..................            12,775         5,501          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 of
         the Project.
(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.

                                       10
<PAGE>


         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 June 30, 1999:


<TABLE>
<CAPTION>
                                  -----------------------------------------------------------------------------------------------
                                                       REMAINING UNSOLD LOTS/UNITS/ACRES AT JUNE 30, 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
                                  -----------------------------------------------------------------------------------------------
OWNED PROPERTIES
----------------
<S>                                     <C>      <C>       <C>       <C>    <C>       <C>       <C>         <C>    <C>       <C>
West Bay Club..................         316      316       81        81     597       597        -          -      13        13
Chenoa (2).....................         372        -        -         -      50         -       75          -       -         -
Riverwalk Tower................           -        -        -         -     375       375        -          -       -         -
                                  -----------------------------------------------------------------------------------------------
SUBTOTAL OWNED PROPERTIES......         688      316       81        81   1,022       972       75          -      13        13
                                  -----------------------------------------------------------------------------------------------

JOINT VENTURE PROPERTIES
------------------------
Jupiter Ocean Grande...........           -        -        -         -     154       154        -          -       -         -
                                  -----------------------------------------------------------------------------------------------
TOTAL ALL PROPERTIES...........         688      316       81        81   1,176     1,126       75          -      13        13
                                  ===============================================================================================
</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)      Formerly known as Aspen Springs Ranch.


         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 (1) approximately $429,000 and $419,000 of total revenues in the second
quarter  of 1999 and 1998,  respectively,  and (2)  approximately  $790,000  and
$868,000  of  total  revenues  in  the  first  six  months  of  1999  and  1998,
respectively.  EQ Lab  recorded  (1)  approximately  $227,000  and  $240,000  of
revenues from unaffiliated third parties in the second quarter of 1999 and 1998,
respectively,  and (2)  approximately  $459,000  and  $619,000 of revenues  from
unaffiliated   third  parties  in  the  first  six  months  of  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  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 June 30, 1999, the portfolio
of Contract  Receivables had a net book value of $3.2 million, and the portfolio
of Mortgage Receivables had a net book value of $22.4

                                       11
<PAGE>


million.  As of December 31, 1998, the portfolio of Contract  Receivables  had a
net book value of $4.1 million,  and the portfolio of Mortgage Receivables had a
net book value of $29.3 million.

PREDECESSOR ASSETS

         The  following  table  summarizes  the Company's  Predecessor  Homesite
Inventory by secondary market area as of June 30, 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                    3,557           9           66          129        3,761
Port Charlotte                  715          71        1,623          362        2,771
Port St. Lucie                  207          27          307           61          602
Port Malabar                    110           4        1,765        1,543        3,422
Port Labelle                     67           -           23        1,733        1,823
Sabal Trace                       -           -            -            -            -
Silver Springs Shores         2,369          79          229          279        2,956
Cumberland Cove                 180           -            -            8          188
Other                            44           -           30            6           80
                           -----------------------------------------------------------
Total                         7,249         190        4,043        4,121       15,603
                           ===========================================================
</TABLE>

         The following  table  summarizes the Company's  Predecessor  Commercial
Development Inventory by secondary market area as of June 30, 1999:

                     PREDECESSOR COMMERCIAL DEVELOPMENT INVENTORY

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

               North Port                                            549
               Port Charlotte                                      1,405
               Port St. Lucie                                        318
               Port Malabar                                          889
               Port Labelle                                          804
               Silver Springs Shores                                  36
               Cumberland Cove                                       685
               Other                                                  39
                                                              ----------
               Total                                               4,725
                                                              ==========

                                       12
<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

            COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998

         The  Company's   results  of  operations  for  its  Core  Business  and
Predecessor   Assets  for  the  six  months   ended  June  30,  1999  and  1998,
respectively, are summarized below:

<TABLE>
<CAPTION>
                             Combining Results of Real Estate Operations
                             -------------------------------------------

                                   Six Months Ended June 30, 1999
                                           (in thousands)

                                                 Primary         Luxury/
                                                 Market          Resort       Predecessor
                                                 Operations     Operations    Assets         Total
                                                 ---------------------------------------------------
<S>                                              <C>            <C>            <C>         <C>
Revenues:
   Real estate sales
      Homesite..............................     $  10,486      $   4,862      $    2,287  $  17,635
      Commercial............................         4,500              -           1,729      6,229
      Vertical Residential Units............             -              -               -          -
                                                 ---------------------------------------------------
   Total real estate sales..................        14,986          4,862           4,016     23,864

Costs and expenses:
   Cost of real estate sales
      Homesite..............................         9,406          3,864           1,977     15,247
      Commercial............................         3,241              -           1,283      4,524
      Vertical Residential Units............             -              -               -          -
                                                 ---------------------------------------------------
Total cost of real estate sales.............        12,647          3,864           3,260     19,771
                                                 ---------------------------------------------------

Gross margin real estate sales .............     $   2,339      $     998      $      756  $   4,093
                                                 ===================================================

Results of Joint Venture Operations(1)......     $     (34)     $    (373)     $        -  $    (407)
                                                 ===================================================
</TABLE>

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

                                       13

<PAGE>

                                    Combining Results of Real Estate Operations
                                    -------------------------------------------
                                          Six Months Ended June 30, 1998
                                                  (in thousands)

<TABLE>
<CAPTION>

                                                   Primary          Luxury/
                                                   Market           Resort       Predecessor
                                                   Operations       Operations   Assets          Total
                                                   -----------------------------------------------------
<S>                                                  <C>        <C>                <C>           <C>
Revenues:
   Real estate sales
      Homesite..............................          $   5,036     $        -    $  2,042     $   7,078
      Commercial............................             31,780              -      14,017        45,797
      Vertical Residential Units............                  -              -           -             -
                                                   -----------------------------------------------------
   Total real estate sales..................             36,816              -      16,059        52,875

Costs and expenses:
   Cost of real estate sales
      Homesite..............................              4,314              -       1,850         6,164
      Commercial............................             25,204              -      13,627        38,831
      Vertical Residential Units............                  -              -           -             -
                                                   -----------------------------------------------------
Total cost of real estate sales.............             29,518              -      15,477        44,995
                                                   -----------------------------------------------------

Gross margin real estate sales .............          $   7,298     $        -    $    582     $   7,880
                                                   =====================================================

Results of Joint Venture Operations(1)......          $   1,187     $     (246)   $      -     $     941
                                                   =====================================================
</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
$23.1  million  in the first six months of 1999  compared  to a net loss of $7.4
million applicable to Common Stock in the first six months of 1998. The increase
in the net  loss  of  $15.7  million  was due  primarily  to (1) a $3.8  million
decrease in gross margin on real estate  sales,  (2) a $2.6 million  increase in
general and  administrative  expenses,  (3) a $3.6 million increase in preferred
stock  charges,  (4) inventory  valuation  reserves of $3.4 million,  (5) a $1.5
million decrease in interest income, partially offset by (6) a $280,000 decrease
in cost of borrowing net.

         PRIMARY MARKET OPERATIONS.

                  HOMESITES. Revenues from Homesite sales increased $5.5 million
in the first six  months of 1999  compared  to the first six  months of 1998 due
primarily to sales at The Trails of West Frisco Project.  There were no sales at
The Trails of West Frisco  Project in the first six months of 1998. The Homesite
sales gross margin percentage was 10.3% in the first six months of 1999 compared
to 14.3% in the first six months of 1998.  The lower Homesite sales gross margin
percentage  in the first six months of 1999  compared to the first six months of
1998 was due  primarily  to a decline in the gross  margin  associated  with the
Lakeside

                                       14

<PAGE>

Estates  Project  due to an  increase in the  estimated  cost to  complete  that
Project in1998 resulting in break-even margins for the remainder of the Lakeside
Estates Project.

         As of June 30, 1999, the Company had under contract  approximately  770
Homesites for $24.4 million with 11 homebuilders in the LakesideEstates Project,
the Saxon Woods Project,  the West Meadows Project and The Trails of West Frisco
Project.  As of December 31, 1998, the Company had under contract  approximately
650  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.  And, as of June 30, 1998,  the Company had under contract
approximately  938  Homesites  for $24.2  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.  Revenues from Commercial Development
were $4.5 million in the first six months of 1999,  compared to $31.8 million in
the first quarter of 1998. In January  1999,  the Company  closed on the sale of
the West Meadows  Project for $4.5 million.  In April 1998, the Company sold and
closed Dave's Creek for $24.8 million.  In June 1998, the Company sold a portion
of the Riverwalk Towers Project for $7.0 million.

                  JOINT  VENTURES.  Results of Joint Ventures  decreased by $1.2
million  in the first six  months of 1999  compared  to the first six  months of
1998. This was primarily associated with the Sunset Lakes Project.  During 1998,
the Sunset Lakes Project commenced  operations resulting in initial sales to all
the builders.  The comparable  period in 1999  represents  results of operations
from more normalized sales volumes.  As of June 30, 1999,  December 31, 1998 and
June 30, 1998, the Company's  Sunset Lakes and Falcon Trace JV Projects had 595,
787 and 975 Homesites under contract, respectively, totaling approximately $28.1
million, $37.3 million and $45.4 million, respectively, in future gross revenue,
a portion of which is allocable to the Company as a joint venturer.

         LUXURY/RESORT OPERATIONS.

                  HOMESITES.  Homesite  sales began at the West Bay Club Project
during the first six months of 1999. Because the West Bay Club Project was still
under  development as of June 30, 1998, there were no sales at the West Bay Club
Project in the first six months of 1998.

         As of June 30,  1999 and  December  31,  1998,  the  Company  had under
contract  approximately  182 and 12 Homesites for $9.8 million and $2.4 million,
respectively,  with 7 homebuilders  in the West Bay Club Project.  There were no
pending sales contracts at the West Bay Club Project as of June 30, 1998.

                  JOINT  VENTURES.  Results of Joint  Ventures  in the first six
months of 1999 decreased  $127,000  compared to the first six months of 1998 due
to increased marketing related expenses associated with the Jupiter Ocean Grande
Project start-up.

         PREDECESSOR ASSETS.

                  PREDECESSOR  HOMESITES.  Revenues  from  Predecessor  Homesite
sales  increased  $245,000 in the first six months of 1999 compared to the first
six months of 1998 due primarily to the sale of 75 Predecessor  Homesites in the
Sable Trace  Project.  There were only nominal sales for the Sable Trace Project
in the  first six  months of 1998 due to  project  start-up.  Other  Predecessor
Homesites sales declined in the first

                                       15

<PAGE>

six months of 1999 compared to the number of  Predecessor  Homesites sold in the
first six  months of 1998  consistent  with  continued  portfolio  run-off.  The
Predecessor  Homesite  sales gross margin  percentage was 13.6% in the first six
months of 1999 compared to 9.4% in the first six months of 1998. This percentage
is consistent with the Company's plan of disposal of its Predecessor Assets.

         As of June 30, 1999, the Company had under contract  approximately  137
Predecessor  Homesites  for $614,000.  As of December 31, 1998,  the Company had
under contract 2 commercial lots allocated to Predecessor Homesites for $99,000.
And,  as of June 30,  1998,  the  Company had under  contract  approximately  81
Predecessor Homesites for $507,000.

                  PREDECESSOR  TRACTS.  Revenues  from  Predecessor  Tract sales
decreased  $12.3  million in the first six months of 1999  compared to the first
six  months of 1998 due  primarily  to fewer  sales from a  declining  inventory
balance.  As of June 30,  1999,  there  were  pending  Predecessor  Tract  sales
contracts  or letters  of intent  totaling  approximately  $1.8  million.  As of
December  31,  1998,  there were pending  Predecessor  Tract sales  contracts or
letters of intent  totaling  approximately  $980,000.  And, as of June 30, 1998,
there  were  pending  Predecessor  Tract  sales  contracts  or letters of intent
totaling approximately $15.5 million.

         The 25.8%  Predecessor Tract sales gross margin percentage in the first
six months of 1999 is due to significantly fewer sales on more profitable terms.
The 2.8% Predecessor Tract sales gross margin percentage in the first six months
of 1998 is generally  more  consistent  with the Company's  plan of disposal for
Predecessor Assets.

         OTHER RESULTS OF OPERATIONS.

                  INVENTORY  VALUATION  RESERVES.  Inventory  valuation  reserve
charges  of $3.4  million  were  recognized  in the  second  quarter of 1999 and
represent a reduction in the carrying  value of the  Company's  inventory  based
upon a review of the fair values.  The charges  solely related to the Grand Oaks
Project which was a Controlled  Property  secured by a purchase  agreement.  The
Company was unable to close under the purchase  agreement  because the mezzanine
lender failed to fund the loan in accordance  with the terms of its  committment
letter.  The Company is currently  discussing with outside counsel its potential
remedies,  if any,  against the mezzanine  lender.  As such,  all  unrecoverable
capitalized costs were expensed upon the expiration of the purchase agreement.

                  OTHER OPERATING REVENUE.  Other operating revenue increased by
$244,000  in the first six  months of 1999  compared  to the first six months of
1998.  The increase was due to the  collection of the remaining  management  fee
owing to the  Company in  connection  with the sale of the  Country  Lakes Joint
Venture.

                  INTEREST INCOME.  Interest income decreased by $1.5 million in
the  first six  months of 1999  compared  to the first six  months of 1998.  The
decrease was due to discounts offered to borrowers to induce prepayment of their
mortgages for liquidity  purposes,  as well as normal  Contract  Receivables and
Mortgage Receivables portfolio run-off.

                  GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative
expense  increased  $3.7 million in the first six months of 1999 compared to the
first six months of 1998 due primarily to (1) expenses of the Special  Committee
of the Board of Directors associated with the Company's strategic alternatives

                                       16

<PAGE>


initiative,  including the retention of BT Alex.  Brown,  (2) certain  corporate
restructuring expenses,  including severance costs, lease restructuring expenses
and other similar costs and expenses, (3) employee bonuses,  including the stock
component of bonuses issued to certain  executives  effective March 15, 1999 and
(4) an impairment on the  non-recourse  loan  receivable  due from the Company's
Chairman and Chief Executive Officer secured solely by Common Stock.

                  PREFERRED STOCK CHARGES.  During the first six months of 1999,
the Company  recorded a $6.0 million  accrual for dividends  associated with its
Preferred  Stock.  The dividends were  accumulated,  but unpaid,  as of June 30,
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.  The liquidation preference of
the  Preferred  Stock was $64.6  million,  $58.6 million and $53.2 million as of
June 30, 1999, December 31, 1998, and June 30, 1998,  respectively.  The Company
accreted  $691,000 of the value of its Preferred Stock to the redemption  amount
in the first six months 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 $1.06 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
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 $9.1 million of preferred stock charges was
charged to contributed  capital in the accompanying  June 30, 1999  consolidated
balance sheet.

                                       17
<PAGE>

           COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998

         The  Company's   results  of  operations  for  its  Core  Business  and
Predecessor  Assets  for the  three  months  ended  June  30,  1999 and 1998 are
summarized below:
<TABLE>
<CAPTION>

                                 Combining Results of Real Estate Operations
                                 -------------------------------------------
                                       Three Months Ended June 30, 1999
                                                (in thousands)


                                                 Primary            Luxury/
                                                 Market             Resort           Predecessor
                                                 Operations         Operations       Assets          Total
                                                 -----------------------------------------------------------
<S>                                                  <C>             <C>               <C>          <C>
Revenues:
   Real estate sales
      Homesite..............................        $   5,662        $   3,113         $    1,218   $  9,993
      Commercial............................                -                -                911        911
      Vertical Residential Units............                -                -                  -          -
                                                 -----------------------------------------------------------
   Total real estate sales..................            5,662            3,113              2,129     10,904

Costs and expenses:
   Cost of real estate sales
      Homesite..............................            4,962            2,423                975      8,360
      Commercial............................                2                -                619        621
      Vertical Residential Units............                -                -                  -          -
                                                 -----------------------------------------------------------
Total cost of real estate sales.............            4,964            2,423              1,594      8,981
                                                 -----------------------------------------------------------

Gross margin real estate sales .............        $     698        $     690         $      535   $  1,923
                                                 ===========================================================

Results of Joint Venture Operations(1)......        $      41        $    (258)        $        -   $   (217)
                                                 ===========================================================
</TABLE>

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


                                       18

<PAGE>
<TABLE>
<CAPTION>

                                    Combining Results of Real Estate Operations
                                    -------------------------------------------

                                         Three Months Ended June 30, 1998
                                                  (in thousands)

                                                 Primary            Luxury/
                                                 Market             Resort      Predecessor
                                                 Operations       Operations    Assets            Total
                                                 ---------------------------------------------------------
<S>                                                   <C>           <C>          <C>           <C>
Revenues:
   Real estate sales
      Homesite..............................          $   2,501     $        -   $   1,147     $     3,648
      Commercial............................             31,780              -       8,475          40,255
      Vertical Residential Units............                  -              -           -               -
                                                 ---------------------------------------------------------
   Total real estate sales..................             34,281              -       9,622          43,903

Costs and expenses:
   Cost of real estate sales
      Homesite..............................              2,168              -         991           3,159
      Commercial............................             25,204              -       8,145          33,349
      Vertical Residential Units............                  -              -           -               -
                                                 ---------------------------------------------------------
Total cost of real estate sales.............             27,372              -       9,136          36,508
                                                 ---------------------------------------------------------

Gross margin real estate sales .............         $    6,909     $        -   $     486     $     7,395
                                                 =========================================================

Results of Joint Venture Operations(1)......         $    1,361     $     (131)  $       -     $     1,230
                                                 =========================================================
</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
$13.7  million in the second  quarter of 1999 compared to a net loss of $801,000
applicable  to Common Stock in the second  quarter of 1998.  The increase in the
net loss of $12.9  million was due  primarily to (1) a $5.5 million  decrease in
gross margin on real estate  sales,  (2) a $1.0 million  increase in general and
administrative expenses, (3) inventory valuation reserves of $3.4 million, (4) a
$556,000 increase in preferred stock charges, and (5) a $1.0 million decrease in
interest income.

         PRIMARY MARKET OPERATIONS.

                  HOMESITES. Revenues from Homesite sales increased $3.2 million
in the  second  quarter  of 1999  compared  to the  second  quarter  of 1998 due
primarily to sales at The Trails of West Frisco Project.  There were no sales at
The Trails of West Frisco  Project in the second  quarter of 1998.  The Homesite
sales gross margin  percentage  was 12.4% in the second quarter of 1999 compared
to 13.3% in the second  quarter of 1998.  The lower  Homesite sales gross margin
percentage  in the second  quarter of 1999 was due primarily to a decline in the
gross margin  associated with the Lakeside Estates Project due to an increase in
the estimated cost to complete that Project.

                                       19
<PAGE>

                  COMMERCIAL  DEVELOPMENT.  In April 1998,  the Company sold and
closed Dave's Creek for $24.8 million.  In June 1998, the Company sold a portion
of the Riverwalk Towers Project for $7.0 million. There were no comparable sales
in the second quarter of 1999.

                  JOINT  VENTURES.  Results of Joint Ventures  decreased by $1.3
million in the second  quarter of 1999  compared to the second  quarter of 1998.
This decrease was primarily  associated  with the Sunset Lakes  Project.  During
1998, the Sunset Lakes Project commenced  operations  resulting in initial sales
to all the  builders.  The  comparable  period  in 1999  represents  results  of
operations for more normalized sales volumes.

         LUXURY/RESORT OPERATIONS.

                  HOMESITES.  Homesite  sales began at the West Bay Club Project
in 1999.  Because the West Bay Club Project was still under initial  development
at the time,  there  were no sales at the West Bay Club  Project  in the  second
quarter of 1998.

                  JOINT  VENTURES.  Results  of  Joint  Ventures  in the  second
quarter of 1999 decreased $127,000 compared to the second quarter of 1998 due to
marketing  related  expenses  associated  with the Jupiter Ocean Grande  Project
start-up.

         PREDECESSOR ASSETS.

                  PREDECESSOR  HOMESITES.  Predecessor  Homesites  sales  in the
second  quarter of 1999 were  comparable to sales in the second quarter of 1998.
The Predecessor  Homesite sales gross margin  percentage was 20.0% in the second
quarter of 1999 compared  to13.6% in the second quarter of 1998. This percentage
is higher than that expected to be realized on an ongoing basis according to the
Company's plan of disposal of its Predecessor Assets.

                  PREDECESSOR  TRACTS.  Revenues  from  Predecessor  Tract sales
decreased  $7.6  million in the second  quarter of 1999  compared  to the second
quarter of 1998 due primarily to fewer sales from a declining inventory balance.

         The 32.0% Predecessor Tract sales gross margin percentage in the second
quarter of 1999 is due to  significantly  fewer sales on more profitable  terms.
The 3.8% Predecessor  Tract sales gross margin  percentage in the second quarter
of 1998 is generally  more  consistent  with the  Company's  plan of disposal of
Predecessor Assets.

         OTHER RESULTS OF OPERATIONS.

                  INVENTORY  VALUATION  RESERVES.  Inventory  valuation  reserve
charges  attributable  to the Grand Oaks Project of $3.4 million were recognized
in the second quarter of 1999 and represent a reduction in the carrying value of
the Company's inventory based upon a review of the fair values.

                  OTHER OPERATING REVENUE.  Other operating revenue decreased by
$1.0  million in the second  quarter of 1999  compared to the second  quarter of
1998. This decrease was due to a realized gain


                                       20
<PAGE>

on the assignment of a real estate  purchase  agreement in the second quarter of
1998 for a residential  project located in the Orlando,  Florida area. There was
no comparable sale in 1999.

                  INTEREST INCOME.  Interest income decreased by $1.0 million in
the second quarter of 1999 compared to the second quarter of 1998. This decrease
was due to discounts  offered to borrowers to induce  prepayment of the mortgage
for liquidity  purposes,  as well as normal  Contract  Receivables  and Mortgage
Receivables portfolio run-off.

                  GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative
expense  increased  $1.0 million in the second  quarter of 1999  compared to the
second  quarter  of  1998  due  primarily  to  further  corporate  restructuring
expenses,  including  severance costs,  lease  restructuring  expenses and other
similar costs and expenses and an impairment on the non-recourse loan receivable
due from Mr. Rutherford which is secured solely by Common Stock.

                  COSTS  OF  BORROWING  NET OF  CAPITALIZED  INTEREST.  Costs of
borrowing  net of  capitalized  interest  decreased  by  $685,000  in the second
quarter  of 1999  compared  to the  second  quarter  of 1998.  The  decrease  is
primarily  due  to  a  higher  capitalization  of  interest  to  projects  under
development. See LIQUIDITY AND CAPITAL RESOURCES below.

                  PREFERRED  STOCK  CHARGES.  During the second quarter of 1999,
the Company  recorded a $3.1 million  accrual for dividends  associated with its
Preferred  Stock. The dividends were accumulated but unpaid as of June 30, 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.  The  liquidation  preference  of the
Preferred   Stock  was  $64.6   million,   $58.6  million  and  $53.2   million,
respectively,  as of June 30, 1999,  December  31, 1998 and June 30,  1998.  The
Company accreted  $347,000 of the value of its Preferred Stock to the redemption
amount in the second quarter of 1999.

LIQUIDITY AND CAPITAL RESOURCES

         GENERAL.  As of  June  30,  1999,  the  Company's  (1)  cash  and  cash
equivalents totaled  approximately $2.6 million and (2) restricted cash and cash
equivalents totaled $696,000,  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 $6.8 million
decrease in cash and cash  equivalents  during the first six months of 1999, (i)
$16.0  million was used in operating  activities  and (ii)  $784,000 was used in
investing  activities,  partially  offset by (iii)  $10.0  million  provided  by
financing activities.

         Cash  used in  operating  activities  included  approximately  (1) $3.1
million for interest payments,  (2) $2.9 million for property tax payments,  (3)
$13.3 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 $784,000 of property,
plant and equipment additions.

         Cash provided by financing activities consisted primarily of borrowings
of $93.8  million  under  various  project  financings  and the New Senior  Loan
Facilities, which were funded on February 2, 1999.


                                       21
<PAGE>

         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 commitment  decreased
by $4.0  million on March 31,  1999 and an  additional  $1.0  million on May 31,
1999.

         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 June 30,
1999, the Company had outstanding (a) $27.0 million under its New Revolving Loan
Facility and (b) $26.5 million under its New Term Loan Facility.

         See COVENANT  DEFAULTS below for discussion of the covenant defaults in
existence  as of June 30,  1999,  under the New Senior Loan  Facilities  and the
Company's ongoing  discussions with the New Revolving Loan Facility lenders (the
"Revolving  Loan  Lenders") and New Term Loan lenders (the "Term Loan  Lenders")
(collectively,   the   "Lenders")  to  obtain   waivers  of  such  defaults  or,
alternatively, to amend the covenants in question to remedy such defaults.

         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.

         OTHER MATERIAL  OBLIGATIONS  COMING DUE IN 1999.  Atlantic Gulf's other
material   obligations   for  the   remainder  of  1999  consist   primarily  of
approximately $40 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.

RECENT DEVELOPMENTS

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

         The Company has explored, and is continuing to explore, with interested
third parties various strategic  alternative  transactions,  including,  but not
limited to, (1) a sale of all or substantially all of the Company's stock and/or
assets, (2) a merger,  consolidation or other business combination,  (3) a joint
venture or strategic  alliance,  (4) a corporate  recapitalization  and/or (5) a
management agreement/arrangement.  Certain third parties are currently doing due
diligence on the Company.

         While the Company is actively and  diligently  pursuing  all  strategic
alternative  transaction  opportunities,  there can be no assurance  that such a
transaction will be consummated.

                                       22

<PAGE>

         CORPORATE  RESTRUCTURING PROGRAM. On July 2, 1999, the Company publicly
announced its corporate restructuring program.

         As of June 30, 1999, the Company  eliminated 24 jobs, or  approximately
18% of its workforce,  as part of a restructuring program aimed at returning the
Company to  profitability  and  realigning its overhead costs with its operating
revenues.  Since January 1, 1999, the number of full-time  Company employees has
decreased from 166 to 146, or approximately 12% of its workforce.

         On or before June 30,  1999,  the  Company  eliminated  certain  senior
management  positions and  consolidated the  responsibilities  of the eliminated
positions with ongoing positions.  Specifically,  the Company (1) eliminated the
Executive Vice President and Chief  Financial  Officer  position,  the Executive
Vice  President  and Chief  Operating  Officer  position and the Vice  President
-Business  Development position and (2) reassigned the duties formerly performed
by these  officers to the Sr. Vice  President - Finance,  the Vice President and
Treasurer  and the Sr.  Vice  President  and  General  Counsel.  The  Company is
continuing to review its overall  staffing needs (both at the  management  level
and  below)  with  a  view  to  further  reducing  its  headcount,   eliminating
redundancies,  consolidating  positions,  further  streamlining  management  and
realizing further cost savings, when and where possible.

         The Company is  reducing,  where  possible,  other  direct and indirect
overhead costs. For example, the Company has consolidated all of its headquarter
operations on one floor at its corporate  headquarters  in Miami,  Florida.  The
Company is seeking a subtenant for its other floor.

         To date,  the corporate  restructuring  program has cost  approximately
$1.1 million in severance and other  one-time  corporate  restructuring  related
costs. The Company recorded  approximately  $340,000 of these costs in the first
quarter of 1999 and the  remainder  in the second  quarter of 1999.  The Company
expects  to incur  additional  corporate  restructuring  costs in the third and,
possibly,  fourth  quarters of 1999,  which the Company will record in the third
and  fourth  quarters,  when  and as the  amount  of such  additional  corporate
restructuring costs becomes known. The corporate restructuring (through June 30,
1999) is  expected  to  generate  annual  costs  savings of  approximately  $2.9
million, exclusive of severance and other one-time restructuring related costs.

         While the Company anticipates that its corporate  restructuring program
will  significantly  reduce its operating costs,  there can be no assurance that
such program, by itself, will return the Company to profitability.

         BUSINESS  STRATEGY.  At the same  time  that it  continues  to  explore
strategic  alternatives and implement its corporate  restructuring  program, the
Company is pursuing a two-pronged  business strategy of (1) carrying on its Core
Business  (i.e.,  planning,  development,  marketing  and sales of Homesites and
Vertical  Residential Units in its existing Core Development  Portfolio) and (2)
actively seeking  opportunities  to sell, in bulk,  selected Core Projects other
than its West Bay Club and Chenoa Projects, both of which are still in the early
development  stage.  Predecessor Assets will continue to be sold in the ordinary
course of business.  The Company  believes that sales of some of its more mature
Core  Projects  will  produce  the  highest net returns for the Company and will
significantly  reduce  corporate  overhead.  The Company intends to use the cash
proceeds  from any such sales (after  payment of  transaction  costs and Project
indebtedness)  to fund operations and pay down its  non-Project  corporate level
indebtedness.


                                       23
<PAGE>

         Senior  management  and the  Board  of  Directors  (the  "Board")  will
evaluate  any offers  the  Company  receives  for its Core  Projects  based on a
variety of  factors,  including,  but not  limited  to, the  following:  (1) the
aggregate price and other terms offered by the purchaser,  (2) the timing of the
closing of the sale, (3) contingencies to closing, (4) the impact of the sale on
the remaining operations of the Company, (5) the impact of the sale on the value
of the  Company's  remaining  assets to a  prospective  purchaser  of the entire
Company  and (6) such  other  factors  as senior  management  and the Board deem
relevant at the time of receipt of an offer,  including  the specific  course of
action, they believe, will maximize stockholder value.

         While the  Company  intends  to  diligently  pursue  all  Project  sale
opportunities, there can be no assurance that any such sales will be consummated
or, if consummated,  that the Company will realize the anticipated (1) amount of
sales proceeds therefrom and/or (2) overhead cost savings therefrom.

         COVENANT  DEFAULTS.  As of  June  30,  1999,  the  Company  was  not in
compliance  with  (a)  the  Minimum  Consolidated  Net  Worth  covenant  and the
Deviation  from Business Plan covenant in the New Revolving  Loan  Agreement and
(2) the Minimum  Consolidated  Net Worth  covenant  and the Maximum  Permissible
Amount  definition in the New Term Loan  Agreement.  The Company is currently in
negotiations   with  the  Lenders  to  obtain   waivers  of  such  defaults  or,
alternatively,  to amend the covenants in question to eliminate  such  defaults.
While the Company  believes that it will obtain such  waivers/amendments,  there
can be no  assurance  that the  Company  and the  Lenders  will be able to reach
agreement  on the  terms  of such  waivers/amendments.  If the  Company  and the
Lenders are unable to reach  agreement on the terms of such  amendments/waivers,
the Company  will be in default  under its New Senior Loan  Facilities,  and the
Lenders will be entitled to exercise the remedies  afforded them thereunder.  If
the   Company   and  the  Lenders   reach   agreement   on  the  terms  of  such
waivers/amendments,  the Company  will timely file a Current  Report on Form 8-K
describing the terms thereof and attaching,  as exhibits thereto,  copies of the
final waivers/amendments.

         CHANGES ON THE BOARD OF  DIRECTORS.  Effective  as of Friday,  July 16,
1999, the Board accepted Mr.  Charles  MacDonald's  resignation as a Director of
Atlantic  Gulf and  appointed  Mr. Dan Gropper to fill the vacancy on the Board.
Mr. Gropper is a Portfolio Manager with Stonington Management Corp. ("SMC"). SMC
is  controlled  by Mr.  Paul  Singer.  Mr.  Singer is also a partner  of Elliott
Associates,  L.P.  ("Elliott"),  and controls the investment manager of Westgate
International, L.P. ("Westgate").  Elliott and Westgate are acting as a group in
connection with their investment in the Company.


                                       24

<PAGE>


PART II.          OTHER INFORMATION

ITEM 1.           LEGAL PROCEEDINGS

         There were no new  developments  since March 31, 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  500,000  shares  of  Common  Stock  to  Apollo.  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.

         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

         See PART I, ITEM 2.  MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION  AND RESULTS OF  OPERATIONS - LIQUIDITY  AND CAPITAL  RESOURCES -- NEW
SENIOR LOAN  FACILITIES  and - RECENT  DEVELOPMENTS  above for a  discussion  of
pending defaults under the Company's New Senior Loan Facilities.

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

         None.

                                       25
<PAGE>
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 had an exercise price of $5.75 per
share (the  "Exercise  Price").  The  Exercise  Price was  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").  On June  17,  1999,  the  Company  issued  a  press  release
announcing  that the Exercise Price of the Warrants had been reduced,  effective
as of March 31, 1999, to $4.78 per share of Common Stock pursuant to the Warrant
Reset provisions in the applicable Warrant agreements.

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits required by Item 601 of Regulation S-K (consecutive numbering,
         see the 1998 Amended Form 10-K)

         (10.24)  Employment  Agreement,  dated May 15, 1999,  between  Atlantic
                  Gulf and William G. Peacher.

         (27)     Financial Data Schedule.

(b)      Current Reports on Form 8-K

         1.       Current  Report on Form 8-K,  filed  with the  Securities  and
                  Exchange Commission on June 17, 1999, announcing the reduction
                  in the Exercise  Price of the Warrants  from $5.75 per warrant
                  share to $4.78 per warrant  share,  effective  as of March 31,
                  1999,  pursuant to the Warrant Reset Exercise Price provisions
                  contained in the applicable Warrant agreements.

         2.       Current  Report on Form 8-K,  filed  with the  Securities  and
                  Exchange Commission on July 2, 1999,  announcing the Company's
                  corporate restructuring program.


                                       26

<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/ JOHN H. FISCHER
                                           -------------------------------------
                                           John H. Fischer
                                           Vice President and Treasurer
                                           Dated: August 16, 1999


                                           /s/  MATT ALLEN
                                           -------------------------------------
                                           Matt Allen
                                           Vice President - Finance
                                           Dated: August 16, 1999


                                       27