ARVIDA JMB PARTNERS L P - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the Fiscal Year
Ended December 31, 2002 Commission file no. 0-16976

ARVIDA/JMB PARTNERS, L.P.
(Exact name of registrant as specified in its charter)

Delaware 36-3507015
(State of organization) (IRS Employer Identification No.)

900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code 312/915-1987

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on
Title of each Class which registered
- ------------------- ------------------------

None None

Securities registered pursuant to Section 12(g) of the Act:

LIMITED PARTNERSHIP INTERESTS
AND ASSIGNEE INTERESTS THEREIN
(Title of Class)

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 (the "Act") during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [ X ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [ X ]

State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such
common equity, as of the last business day of the registrant's most
recently completed second fiscal quarter. Not applicable.

Documents Incorporated by Reference

Certain portions of the Prospectus of the registrant dated September 16,
1987, and filed with the Commission pursuant to Rules 424(b) and 424(c)
under the Securities Act of 1933 are incorporated by reference in Part III
of this Annual Report on Form 10-K.

TABLE OF CONTENTS

Page
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PART I

Item 1. Business . . . . . . . . . . . . . . . . . . 1

Item 2. Properties . . . . . . . . . . . . . . . . . 7

Item 3. Legal Proceedings. . . . . . . . . . . . . . 9

Item 4. Submission of Matters to a
Vote of Security Holders . . . . . . . . . . 11

PART II

Item 5. Market for the Partnership's Limited
Partnership Interests and
Related Security Holder Matters. . . . . . . 12

Item 6. Selected Financial Data. . . . . . . . . . . 13

Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . 16

Item 7A. Quantitative and Qualitative
Disclosures About Market Risk. . . . . . . . 25

Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . 26

Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . 57

PART III

Item 10. Director and Executive Officers of
the Registrant . . . . . . . . . . . . . . . 57

Item 11. Executive Compensation . . . . . . . . . . . 59

Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Security
Holder Matters . . . . . . . . . . . . . . . 59

Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . 61

Item 14. Controls and Procedures. . . . . . . . . . . 62

PART IV

Item 15. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K . . . . . 63

SIGNATURES and CERTIFICATIONS . . . . . . . . . . . . . . 66

i

PART I

ITEM 1. BUSINESS

All references to "Notes" are to Notes to Consolidated Financial
Statements contained in this report.

The registrant, Arvida/JMB Partners, L.P. (the "Partnership"), is a
limited partnership formed in 1987 and currently governed under the Revised
Uniform Limited Partnership Act of the State of Delaware. The Partnership
was formed to own and develop substantially all of the assets of Arvida
Corporation (the "Seller"), a subsidiary of The Walt Disney Company, which
were acquired by the Partnership from the Seller on September 10, 1987. On
September 16, 1987, the Partnership commenced an offering to the public of
up to $400,000,000 in Limited Partnership Interests and assignee interests
therein ("Interests") pursuant to a Registration Statement on Form S-1
under the Securities Act of 1933 (No. 33-14091). A total of 400,000
Interests were sold to the public (at an offering price of $1,000 per
Interest before discounts) and the holders of 400,000 Interests were
admitted to the Partnership in October 1987. The offering terminated
October 31, 1987. In addition, a holder (an affiliate of the dealer-
manager of the public offering) of 4,000 Interests was admitted to the
Partnership in October 1987. Subsequent to admittance to the Partnership,
no holder of Interests (a "Holder" or "Holder of Interests") has made any
additional capital contribution. The Holders of Interests of the
Partnership generally share in their portion of the benefits of ownership
of the Partnership's real property investments and other assets according
to the number of Interests held.

Pursuant to the Partnership's Amended and Restated Agreement of
Limited Partnership (the "Partnership Agreement"), the General Partner was
to elect to pursue one of the following courses of action on or before
October 31, 1997: (i) to cause the Interests to be listed on a national
exchange or to be reported by the National Association of Securities
Dealers Automated Quotation System; (ii) to purchase, or cause JMB Realty
Corporation or its affiliates to purchase, all of the Interests at their
then appraised fair market value (as determined by an independent
nationally recognized investment banking firm or real estate advisory
company); or (iii) to commence a liquidation phase in which all of the
Partnership's remaining assets were to be sold or disposed of by the end of
the fifteenth year from the termination of the offering. On October 23,
1997, the Board of Directors of the General Partner met and approved a
resolution selecting the option to commence an orderly liquidation of the
Partnership's remaining assets that was to be completed by October 2002.

Since October 1997, the Partnership (including various of its joint
ventures and subsidiaries) has sold a substantial amount of assets in an
effort to liquidate the Partnership. For example, during the last three
months of 1997, the Partnership sold Parkway Center, a mixed-use center
containing approximately 258,000 square feet of office and retail space and
a Radisson Suite Hotel; the Cabana Club located in the Sawgrass Community;
and two retail shopping centers located in the Weston Community. In 1998,
the Partnership sold its cable operation in the Weston Community and the
remaining memberships in the Sawgrass Country Club. In 1999, the
Partnership completed the sale of the River Hills Country Club as well as
its residential resale brokerage operations in Weston, Sawgrass and Boca
Raton, Florida. During 2000 and 2001, the Partnership completed a bulk
sale of its remaining lot inventory (approximately 103 developed and
undeveloped lots and the sales center) at its Waters Edge Community, closed

on the sale of the remaining lots at its Cullasaja Community and the
remaining equity memberships in the Cullasaja Club and sold the Weston
Athletic Club. In October 2002, the Partnership sold the Weston Hills
Country Club, a golf and country club operation located in Weston, Florida.

In November and December 2002, the Partnership completed the sale of (i) an
approximate 4.6 acre parcel in Weston (the "Waterways II Parcel") on which
the Partnership was constructing a shopping center to contain approximately
31,300 square feet of rentable space, and (ii) an approximate 46 acre
parcel (the "Ocala Parcel") near Ocala, Florida, respectively. In February
2003, the Partnership closed on the sale of The Shoppes of Town Center in
Weston, a mixed-use retail/office plaza consisting of approximately 158,000
net leaseable square feet. In addition, since the beginning of 1998
through February 28, 2003, the Partnership has closed on the sale of
approximately 6,180 housing units, more than 360 homesites and in excess of
135 acres of developed and undeveloped land tracts, as well as interests in
a number of office buildings. These sales have resulted from the close out
of the River Hills Community, Arvida's Grand Bay condominium project on
Longboat Key, Florida, the Cullasaja and Water's Edge Communities as well
as the near sell-out of all housing units and homesites at the
Partnership's largest Community, Weston, in Broward County, Florida. For
more information concerning the Partnership's sale of assets during the
past three years, reference is made to Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations in this report.

In October 2002, the Partnership commenced a solicitation for consents
to an amendment (the "Amendment") to the Partnership Agreement providing
for an extension of the term of the Partnership's liquidation period to not
later than October 31, 2005. In addition, under the terms of the
Amendment, Arvida/JMB Managers, Inc., the General Partner of the
Partnership, is authorized, in its sole discretion, to complete the
liquidation of the Partnership by forming a liquidating trust (the
"Liquidating Trust") and contributing any remaining Partnership assets to
the Liquidating Trust subject to all outstanding obligations and
liabilities of the Partnership. In November 2002, a majority of the
Holders of Interests gave their consent to the Amendment, which became
effective October 29, 2002, and, accordingly, the term of the Partnership's
liquidation period has been extended. For further information concerning
the consent solicitation and the votes granting consent, withholding
consent and abstaining with respect to the Amendment, reference is made to
Item 4. Submission of Matters to a Vote of Security Holders in this
report.

At March 1, 2003, the Partnership had 97 townhomes, each of which is
under a contract for sale, that remain to be built or for which the sale
remains to be closed, in the Partnership's Weston Community. The
Partnership expects to complete construction and close on the sale of these
townhomes, which are the last units to be built by the Partnership in
Weston, by the end of the second quarter of 2003. The Partnership's other
remaining assets include various small land parcels to be sold in their
respective current stages of development, an additional housing unit,
tangible personal property, including vehicles and furniture, fixtures and
equipment used in the Partnership's operations, receivables and certain
contract rights.

Outstanding contracts ("backlog"), at March 1, 2003 were for 97
townhomes with an aggregate sale price of approximately $17,735,000. These
contracts are all expected to be closed by the end of the second quarter of
2003. This compares with a backlog for housing units at March 1, 2002 of
592 housing units with an aggregate sale price of approximately
$164,066,000.

As noted above, under the terms of the Amendment, the General Partner
is authorized in its sole discretion, to complete the termination of the
Partnership by forming a Liquidating Trust. The trustee or trustees of the
Liquidating Trust are expected to be an officer or officers of the General
Partner. The remaining Partnership assets would be contributed to the
Liquidating Trust subject to all outstanding obligations and liabilities of
the Partnership. The General Partner, Associate Limited Partners and
Holders of Interests would receive beneficial interests in the Liquidating
Trust in proportion to their respective interests in the Partnership.
Subsequently, after liquidating any remaining non-cash assets and providing
for the payment or satisfaction of all such obligations and liabilities,
the trustee(s) of the Liquidating Trust would distribute any remaining
proceeds to the General Partner, Associate Limited Partners and Holders of
Interests in proportion to their respective interests in the Liquidating
Trust. The Partnership believes that the use of the Liquidating Trust
would permit the realization of administrative cost-savings while allowing
for the management and satisfaction of residual obligations and liabilities
arising out of the Partnership's operations.

Pending the completion of the liquidation, winding up and termination
of the Partnership (or if applicable, the Liquidating Trust), it is
anticipated that the Partnership (or the Liquidating Trust, as the case may
be) will retain a substantial amount of funds in reserve to provide for the
payment of, the defense against, or other satisfaction or resolution of
obligations, liabilities (including contingent liabilities) and current and
possible future claims, including those for indemnities and other matters
under various agreements made in connection with the sales of the Weston
Hills Country Club, The Shoppes of Town Center and other assets, possible
construction repairs, homeowner warranty claims, completion of work for
certain homeowner associations and master associations and pending and
possible future litigation and environmental matters. The amount of funds
to be retained in reserve for these purposes has not yet been determined.
The Partnership currently expects that those available funds in excess of
the amount determined to be held in reserve would be distributed during
2003 and 2004 to the partners and Holders of Interests. That portion, if
any, of the funds held in reserve that are not ultimately used to pay,
defend or otherwise resolve or satisfy obligations, liabilities or claims
would subsequently be distributed to the partners and Holders of Interests
as a final liquidating distribution at a later date.

The Partnership is not able to determine the amount of time and money
that it will take to effect its (or, if applicable, the Liquidating
Trust's) liquidation, winding up and termination. Various factors may
affect the timing of completing the liquidation, winding up and termination
of the Partnership (and, if applicable, the Liquidating Trust) and the
amount of a final liquidating distribution of funds, if any, out of those
retained in reserve. These factors include the amount of time it takes to
complete construction of the last townhomes in Weston, to sell or otherwise
dispose of the Partnership's other remaining assets and the time and
expense to resolve all obligations, liabilities and claims, including
contingent liabilities and claims that are not yet asserted but may be made
in the future. Among the important factors involved in liquidating the
Partnership's assets are the retention of an adequate workforce and
maintaining existing relationships with vendors and tradesmen through
completion of construction of the remaining townhomes in Weston. In
addition, as noted above, additional or unanticipated remedial construction
or development costs, delays in resolving pending or threatened litigation
or potential claims, currently unasserted claims that arise in the future
and other factors could extend the time required, and significantly
increase the cost, to complete the liquidation, winding up and termination.

The assets of the Partnership have consisted principally of interests
in land in the process of being developed into master-planned residential
communities (the "Communities") and, to a lesser extent, commercial
properties; accounts receivable; construction, brokerage and other support
businesses; real estate assets held for investment and certain club and
recreational facilities. The Partnership has been principally engaged in
the development of comprehensively planned resort and primary home
Communities containing a diversified product mix designed for the middle
and upper income segments of the various markets in which the Partnership
operates. In addition, the Partnership, directly or through certain
subsidiaries, has provided development and management services to the
homeowners associations within the Communities.

Within the Communities, the Partnership has constructed, or caused to
be constructed, a variety of products, including single-family homes, town-
houses and condominiums to be developed for sale, as well as related
commercial and recreational facilities. The Communities were located
primarily throughout the state of Florida, with Communities also located
near Atlanta, Georgia and Highlands, North Carolina. Additional
undeveloped properties owned by the Partnership in or near its Communities
have been developed as retail and/or office properties. The Partnership has
also owned or managed certain club and recreational facilities within
certain of its Communities. Certain assets located in Florida were
acquired by the Partnership by purchasing a 99.9% interest in a joint
venture partnership in which the General Partner acquired the remaining
joint venture partnership interest. In addition, other assets were owned
by various partnerships, the interests of which have been held by certain
indirect subsidiaries of the Partnership and by the Partnership. The
Partnership has also sold individual residential lots and parcels of
partially developed and undeveloped land. The third-party builders and
developers to whom the Partnership has sold homesites and land parcels were
generally smaller local builders who required project specific financing
for their developments and whose operations were more susceptible to
fluctuations in the availability and terms of financing.

Pursuant to a management agreement with the Partnership, through
December 31, 1997, Arvida Company ("Arvida"), an affiliate of the General
Partner, provided development and management supervisory and advisory
services and the personnel therefor to the Partnership for all of its
projects and operations, subject, in each case, to the overall control of
the General Partner on behalf of the Partnership. In November 1997, The
St. Joe Company, an unaffiliated third party, completed its acquisition of
a majority interest in St. Joe/Arvida Company, L.P. ("St. Joe/Arvida"),
which acquired the major assets of Arvida. In connection with this
transaction, Arvida entered into a sub-management agreement with St.
Joe/Arvida, effective January 1, 1998, whereby St. Joe/Arvida provides (and
is reimbursed for) a substantial portion of the development and management
supervisory and advisory services (and personnel with respect thereto) to
the Partnership that Arvida would have otherwise provided pursuant to its
management agreement with the Partnership. Effective January 1, 1998, St.
Joe/Arvida employed most of the same personnel previously employed by
Arvida, and the services provided to the Partnership pursuant to the sub-
management agreement generally have been provided by the same personnel.
Affiliates of JMB Realty Corporation own a minority interest in St.
Joe/Arvida. The transaction did not involve the sale of any assets of the
Partnership, nor the sale of the General Partner's interest in the
Partnership.

The business of the Partnership is cyclical in nature and certain
aspects of the development of Community projects are to some degree
seasonal. Such seasonality has not had a material impact on its business.
A presentation of information about industry segments, geographic regions
or raw materials is not applicable and would not be material to an
understanding of the Partnership's business taken as a whole.

The Partnership generally has followed the practice with respect to
its Communities of (i) developing an overall master plan for the Community,
(ii) creating a unifying architectural theme that is consistent with the
Community's master plan, (iii) offering a variety of recreational
facilities, (iv) imposing architectural standards and other property
restrictions on residents and third-party developers, in order to enhance
the long-term value of the Community, (v) establishing property owners'
associations to maintain compliance with architectural, landscaping and
other requirements and to provide for ownership and maintenance of certain
facilities, and/or (vi) operating and controlling access to golf, tennis
and other recreational facilities.

The Partnership's development approach, individually or by joint
venture, has been intended to enhance the value of real estate in
successive phases. The first step in the development of a property has
been to design a Community master plan that addresses the appropriate land
uses and product mix, including residential, recreational and, where
appropriate, commercial and industrial uses. The Partnership then sought
to obtain the necessary regulatory and environmental approvals for the
development of the Community in accordance with the master plan. This
approval process has been a major factor in determining the viability and
prospects for profitability of the Partnership's development projects.

In addition, prior to or contemporaneously with zoning approval, the
Partnership, if subject to the applicable filing requirements, has been
required to obtain "Development of Regional Impact" ("DRI") approval from
the applicable local governmental agency after review and recommendations
from the appropriate regional planning agency, with oversight by the
Florida State Department of Community Affairs. Receipt of DRI approval was
a prerequisite to obtaining zoning, platting, building permits or other
approvals required to begin development or construction. Obtaining such
approvals can involve substantial periods of time and expense and may
result in the loss of desired densities, and approvals may need to be
resubmitted if there is any subsequent deviation in current approved plans.

The process may also require committing land for public use and payment of
substantial impact fees. In addition, state laws generally have provided
further that a parcel of land cannot be subdivided into distinct segments
without having a plat filed and finalized with the local or municipal
authority, which, in general, has required the approval of various local
agencies, such as environmental and public works departments. In addition,
the Partnership has been required to secure the actual permits for
development from applicable Federal (e.g., the Army Corps of Engineers
and/or the Environmental Protection Agency with respect to coastal and
wetlands developments, including dredging of waterways) and state or local
agencies, including construction, dredging, grading, tree removal and water
management and drainage district permits. The Partnership has been
subject, in the process of obtaining such permits or approvals for platting
or construction activities, to delays or additional expenses; however, such
permits and approvals were customarily obtained in conjunction with the
development process. Failure to obtain or maintain necessary approvals, or
rejection of submitted plans, would result in an inability to develop the
Community as originally planned and would cause the Partnership to
reformulate development plans for resubmission, which might result in a
failure to increase, or a loss of, market value of the property or delays
in developing the property. The foregoing discussion and the discussion
which follows also have been generally applicable to the Partnership's
commercial and industrial developments.

Upon receipt of all approvals and permits required to be obtained by
the Partnership for a specific Community, other than actual approvals or
permits for final platting and/or construction activities, the Partnership
has applied for the permits and other approvals necessary to undertake the
construction of infrastructure, including roads, water and sewer lines and
amenities such as lakes, clubhouses, golf courses, tennis courts and
swimming pools. These expenditures for infrastructure and amenities have
been generally significant and were usually required early in the
development of a Community project, although the Partnership has attempted,
to the extent feasible, to develop Communities in a phased manner. See
Note 10 for further discussion regarding Tax Increment Financing Entities
and their involvement with infrastructure improvements.

Certain of the Florida Communities have applied for and have been
designated as Planned Unit Development ("PUD") by the local zoning
authority (usually the governing body of the municipality or the county in
which the Community is located). Designation as a PUD generally
establishes permitted densities (i.e., the number of residential units
which may be constructed) with respect to the land covered thereby and,
upon receipt, enables the developer to proceed in an orderly, planned
fashion. Generally, such PUD approvals permit flexibility between single-
unit and multi-unit products since the developer can plan Communities in
either fashion as long as permitted densities are not exceeded. As a
consequence, developments with PUD status are able to meet changing demand
patterns in housing through such flexibility. It should be noted that some
of the Communities, while not having received PUD approval, have obtained
the necessary zoning approvals to create a planned community development
with many of the benefits of PUD approval such as density shifting.

In developing the infrastructure and amenities of its Communities and
building its own housing products, the Partnership has functioned as a
general contractor although it has also from time to time hired firms for
general contracting work. The Partnership generally has followed the
practice of hiring subcontractors, architects, engineers and other
professionals on a project-by-project basis rather than maintaining in-
house capabilities, principally to be able to select the subcontractors and
consultants it believed were most suitable for a particular development
project and to control fixed overhead costs. The Partnership has not been
faced with any significant material or labor shortages and does not expect
any such shortages in connection with its construction of the remaining
townhomes in the Weston Community.

The Partnership's strategy has included the ownership and development
of certain commercial and industrial property not located in a Partnership
Community. In addition, certain of the Partnership's Communities contained
acreage zoned for commercial use, although, except for the Weston
Community, such acreage was generally not substantial. On both of such
types of properties, the Partnership, individually or with a joint venture
partner, has built shopping centers, office buildings and other commercial
buildings or sold land to be so developed.

Certain of the Communities and operations have been owned by the
Partnership jointly with third parties. Such investments by the
Partnership were generally in partnerships or ventures which owned and
operated a particular property in which the Partnership or an affiliate
(either alone or with an affiliate of the General Partner) had an interest.

Certain assets in which interests have been acquired by the
Partnership are described in more detail under Item 2. Properties below to
which reference is hereby made for a description of such assets.

The Partnership's real properties are subject to competition from
similar types of properties in the vicinities in which they are located,
including properties owned, advised or managed by affiliates of the General
Partner. The Partnership's principal markets have been in Florida,
particularly in or near Jacksonville, Tampa, Longboat Key, Boca Raton and
Broward County, Florida and, to a lesser extent, in or near Atlanta,
Georgia and the Highlands, North Carolina. In general, the Partnership has
competed with other real estate projects primarily on the basis of the
location and quality of its real estate developments and, in the case of
its Community developments, the type and quality of its amenities. The
Partnership has no real estate assets located outside of the United States.

In the opinion of the General Partner of the Partnership, all of the
investment properties held at December 31, 2002 are adequately insured.

The Partnership currently owns no patents, trademarks, licenses or
franchises other than those trademarks and tradenames in respect of the
names of certain of its Communities. The Arvida name and the service marks
with respect to the Arvida name were owned by Arvida, subject to the
Partnership's non-exclusive right to use the Arvida name and service marks
under a license agreement with Arvida (and subject to the non-exclusive
rights of certain third parties to the use of the name). As previously
discussed, St. Joe/Arvida acquired the major assets of Arvida, including
the Arvida name and service marks with respect to the Arvida name. In
connection with the acquisition of Arvida's assets, St. Joe/Arvida was
assigned Arvida's rights and obligations under the license agreement with
the Partnership.

At March 1, 2003, the Partnership had approximately 80 employees as
compared to 580 employees at March 1, 2002. The reduction in employees is
consistent with the orderly liquidation of the Partnership's remaining
assets which is currently in process.

The terms of transactions between the Partnership and the General
Partner and its affiliates are set forth in Items 11 and 13 filed with this
annual report to which reference is hereby made for a description of such
terms and transactions.

ITEM 2. PROPERTIES

At March 1, 2003, the Partnership had 97 townhomes, each of which is
under a contract for sale, that remain to be built or for which the sale
remains to be closed, in the Weston Community. The Partnership's other
remaining real properties include various small land parcels to be sold in
their respective current stages of development and one additional housing
unit.

The principal assets developed or managed by the Partnership during
the past several years are described below. The acreage amounts set forth
herein are approximations of the gross acreage of the Communities or other
properties referred to or described and are not indicative of the net
developable acreage that was previously owned by the Partnership or its
joint ventures. The Partnership's Shoppes of Town Center in the Weston
Community, a mixed use office/retail plaza consisting of approximately
158,000 net leasable square feet, which was sold to an unaffiliated third
party on February 7, 2003, was subject to a mortgage to secure the
repayment of the Partnership's indebtedness as discussed in detail in
Note 7.

(a) Palm Beach County, Florida

The Partnership owned property in Broken Sound, a 970-acre Community
located in Boca Raton. The Community offered a wide range of residential
products built by the Partnership or third-party builders, all of which
were sold and closed as of December 31, 1995.

(b) Broward County, Florida

Weston, a 7,500-acre Community, is in its final-stage of development.
The Community offers a complete range of housing products built by the
Partnership or third-party builders, as well as tennis, swim and fitness
facilities and two-18 hole golf courses. In addition, the Partnership
owned and developed commercial land located in the Weston Community.
Reference is made to Note 10 for a discussion of the Partnership's use of
certain tax-exempt financing in connection with the development of the
Weston Community.

(c) Sarasota / Tampa, Florida

The Partnership owned property known as Arvida's Grand Bay on Longboat
Key, which is a barrier island on Florida's west coast, approximately four
miles from downtown Sarasota and seven miles from Sarasota/Bradenton
airport. The property consists of six condominium buildings, all of which
were sold and closed by January 2000. The Partnership also owned property
in a Community in the Tampa area known as River Hills Country Club. All of
the units were sold and closed as of December 31, 2001.

(d) Jacksonville, Florida

The Partnership owned property in two Communities in Ponte Vedra
Beach, Florida, twenty-five miles from downtown Jacksonville, known as
Sawgrass Country Club and The Players Club at Sawgrass. All units in these
Communities were sold and closed as of December 31, 1996. The Partnership
also owned property in a 730-acre Community known as the Jacksonville Golf
& Country Club. All of the units were sold and closed as of December 1998.

(e) Atlanta, Georgia

The Partnership owned property in the Atlanta, Georgia area known as
Water's Edge. Reference is made to Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations for a discussion
of the Partnership's sale of the remaining lot inventory in Water's Edge
during 2000. The Partnership also owned property in the Atlanta area known
as Dockside. All of the units in the Dockside Community were sold and
closed as of December 31, 1996.

(f) Highlands, North Carolina

The Partnership owned a 600-acre Community near Highlands, North
Carolina known as The Cullasaja Club. The Partnership sold and closed on
all of the remaining lots at The Cullasaja Club, as well as its remaining
equity memberships in the Cullasaja Club during 2000. Reference is made to
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations for a discussion regarding the sale of the remaining
lots and equity memberships at Cullasaja Club.

(g) Other

Through a joint venture, the Partnership also owns a 2.5 acre
commercial parcel in Ocala Florida, which is not located in its residential
Communities. A visitor information center is located on the property which
is leased to an unaffiliated third party.

ITEM 3. LEGAL PROCEEDINGS

The Partnership has been named a defendant in a purported class action
entitled Lakes of the Meadow Village Homes, Condominium Nos. One, Two,
Three, Four, Five, Six, Seven, Eight and Nine Maintenance Associates, Inc.,
v. Arvida/JMB Partners, L.P. and Walt Disney World Company, Case No. 95-
23003-CA-08, filed in the Circuit Court of the Eleventh Judicial Circuit in
and for Dade County, Florida. The original complaint was filed on or about
November 27, 1995 and an amended complaint, which purports to be a class
action, was filed on or about February 28, 1997. In the case, plaintiffs
seek unspecified damages, attorneys' fees and costs, recission of specified
releases, and all other relief that plaintiffs may be entitled to at equity
or at law on behalf of the 460 building units they allegedly represent for,
among other things, alleged damages discovered in the course of making
Hurricane Andrew repairs. Plaintiffs have alleged that Walt Disney World
Company is responsible for liabilities that may arise in connection with
approximately 80% of the buildings at the Lakes of the Meadow Village Homes
and that the Partnership is potentially liable for the approximately 20%
remaining amount of the buildings. In the three count amended complaint,
plaintiffs allege breach of building codes and breach of implied
warranties. In addition, plaintiffs seek recission and cancellation of
various general releases obtained by the Partnership allegedly in the
course of the turnover of the Community to the residents. Plaintiffs have
indicated that they may seek to hold the Partnership responsible for the
entire amount of alleged damages owing as a result of the alleged
deficiencies existing throughout the entire development. The Partnership
has tendered this matter to The Walt Disney Company ("Disney") pursuant to
the Partnership's indemnification rights and has filed a third-party
complaint against it pursuant to the Partnership's rights of contractual
indemnity. The Partnership has also answered the amended complaint and has
filed a cross-claim against Disney's affiliate, Walt Disney World Company,
for common law indemnity and contribution. Discovery in this litigation is
proceeding with a discovery cut-off of August 15, 2003, and a trial date to
be set thereafter.

In a matter related to the Lakes of the Meadow development, the Miami-
Dade County Building Department ("Building Department") retained the
services of an engineering firm, All State Engineering, to inspect the
condominiums that are the subject of the lawsuit. On February 27, 2002,
the Building Department apparently advised condominium owners throughout
the development that it found serious life-safety building code violations
in the original construction of the structures and issued notices of
violation under the South Florida Building Code. The condominium owners
were further advised that the notices of violation would require
affirmative action on their part to respond to the notices through
administrative proceedings and/or by addressing the alleged deficiencies.

On August 8, 2002, the Partnership attended a mediation of this
matter. During the course of the mediation, plaintiffs demanded
$298,000,000 on behalf of the Association Nos. 1-7 and 9, such sums
allegedly representing the cost to address all construction defects
currently alleged to exist by plaintiffs, associated damages and such other
relief as the plaintiffs believe they are entitled, including punitive
damages. As to the claim for punitive damages, the Court subsequently
denied plaintiffs leave to amend the complaint to add a punitive damage
claim. With this demand, plaintiffs have sought to impose liability on the
Partnership for all of the units in Association Nos. 1-7 and 9. The
Partnership believes that its liability, if any, extends to the portion of
the units that the Partnership built and sold, which the Partnership
estimates to be approximately ten percent of the units in Association
Nos. 1-7 and 9. In this mediation session, a mediation conducted on
November 15-16, 2002, and in various other communications, the parties have
exchanged technical information regarding the issues raised by the notices
of violation, plaintiffs' demands, and possible ways in which to address
those issues. Further sessions and discussions are expected.

The Partnership is currently being defended by counsel paid for by
United States Fire Insurance Company ("U.S. Fire"), one of the
Partnership's insurance carriers. During 2001, the Partnership settled the
claims brought in connection with Lakes of the Meadows Village Homes
Condominium No. 8 Maintenance Association, Inc. ("Association No. 8") for a
payment of $155,000 funded by U.S. Fire. Representatives of the
Partnership have discussed with representatives of Association No. 8 issues
raised by the Building Department's notices of violations for that
Association's condominium units. Association No. 8 submitted construction
plans to address the issues raised by the Building Department notices of
violations and comments received by the plan reviewers for that
Associations' units. On February 7, 2003, Association No. 8 received
permits approving its plans and is in the process of putting the plans out
for actual bids. Based on currently known information, the Partnership
estimates that it may cost approximately $1,715,000 to fund the cost of
addressing the construction issues in accordance with the approved plans.
Association No. 8 has asked the Partnership to pay for the costs to address
these construction issues. As a result of these discussions, the
Partnership has asked U.S. Fire to pay the expense of addressing these
construction issues for Association No. 8. In the event that U.S. Fire
does not fund these costs, the Partnership expects to fund these costs
under the circumstances and seek reimbursement from U.S. Fire or the
Partnership's excess insurance carrier, The Home Insurance Company (the
"Home").

On the basis of the discussions to date, the Partnership believes that
the cost of addressing the issues raised by, and to receive a release from,
Association Nos. 1-7 and 9 can currently be estimated at $5.6 million. As
with the cost to address the issues raised by Association No. 8, the
Partnership has asked U.S. Fire to pay the expense of addressing the issues
of these plaintiffs and resolving this matter. In the event that neither
U.S. Fire nor Home funds these costs, the Partnership may fund these costs
under the circumstances and seek reimbursement from U.S. Fire and/or Home.

On August 9, 2002, the Partnership received a reservation of rights
letter from U.S. Fire, by which it purports to limit its exposure with
regard to the Lakes of the Meadow matter and to reserve its rights to deny
coverage and/or defense under the policy and/or applicable law and with
respect to defense costs incurred or to be incurred in the future, to be
reimbursed and/or obtain an allocation of attorney's fees and expenses if
it is determined there is no coverage.

As a result of this reservation of rights letter and the demands being
made by the plaintiffs in the mediation sessions, on November 20, 2002, the
Partnership filed a four count complaint, Arvida/JMB Managers, Inc. on
behalf of Arvida/JMB Partners, L.P. v. United States Fire Insurance Company
in the Circuit Court of Cook County, Illinois, Chancery Division,
02CH21001, for declaratory relief and damages ("Illinois action"). In the
complaint, the Partnership seeks, among other things, a declaration that
U.S. Fire is obligated to indemnify the Partnership for the Lakes of the
Meadow litigation; actual damages, including full indemnification for the
Lakes of the Meadow litigation; such other direct and consequential damages
as are proven at trial; prejudgment interest as permitted by law; and any
other legal and equitable relief that the Court deems just and proper under
the circumstances. On November 20, 2002, the same day, U.S. Fire filed a
single count complaint, United States Fire Insurance Company v. Arvida/JMB
Partners, L.P. in the United States District Court for the Southern
District of Florida, Miami Division, Case No.: 02-23366-Civ-Moore
(hereafter, "Florida federal case"), seeking a declaratory judgment against
the Partnership that U.S. Fire owes the Partnership no duties of
indemnification or defense with respect to the Lakes of the Meadows
litigation. The Partnership has filed a motion to dismiss the Florida
federal case because the Partnership does not believe that the court has
diversity jurisdiction to adjudicate this matter. The parties are engaged
in discovery with respect to the jurisdictional issue. The Florida federal
case is currently set for trial commencing December 15, 2003. The
Partnership believes that this suit is without merit and intends to
vigorously defend itself.

In a December 20, 2002 letter, Home and its agent, Risk Enterprise
Management Limited ("REM"), advised the Partnership of Home's position that
the Home policy provides coverage for the Lakes of the Meadow litigation
only in the event that the U.S. Fire policy provides coverage and that U.S.
Fire pays the limits under its policy. Given Home's position, the
Partnership amended its Illinois action to add Home and REM as defendants
in order to obtain, among other things, a declaration that Home is
obligated to defend and indemnify the Partnership for the Lakes of the
Meadow litigation; actual damages; such other direct and consequential
damages as proven at trial; prejudgment interest; and any other legal and
equitable relief that the court deems just and proper under the
circumstances.

On February 10, 2003, U.S. Fire filed in the United States District
Court for the Northern District of Illinois, Eastern Division, a notice of
removal of civil action to remove the Illinois action to federal court.
The pending federal matter is filed as Arvida/JMB Managers, Inc. v. U.S.
Fire Insurance Company, Home Insurance Company, and Risk Enterprise
Management Inc., Case No. 03 C 0988 (hereafter, "Illinois federal case").
The Partnership has filed a motion to remand the Illinois federal case to
the Illinois state court because the Partnership does not believe that the
federal court has diversity jurisdiction to adjudicate the matter.

In a separate proceeding on March 5, 2003, a superior court judge for
the state of New Hampshire entered an order placing Home under an order of
rehabilitation in order to preserve and protect the interests and assets of
Home and to stay all actions and proceedings against it for a period of
ninety days, except as may be modified by further order of the court. The
Partnership is evaluating the effect, if any, that this order may have on
the Illinois federal case and the coverage provided by Home.

The Partnership strongly disagrees with the positions taken by U.S.
Fire and Home and believes that it is covered under the terms of the
relevant policies. However, the Partnership can give no assurances as to
the ultimate portion of the expenses, fees, and damages, if any, which will
be covered by its insurance.

Other than as described above, the Partnership is not subject to any
material pending legal proceedings, other than ordinary routine litigation
incidental to the business of the Partnership.

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

On October 29, 2002, the Partnership commenced a solicitation for
consents to an Amendment to the Partnership Agreement that would extend the
term of the Partnership's liquidation period from October 31, 2002, to not
later than October 31, 2005. In addition, under the terms of the Amendment,
the General Partner is authorized, in its sole discretion, to complete the
liquidation of the Partnership by forming a liquidating trust and
contributing any remaining Partnership assets to the liquidating trust
subject to all outstanding obligations and liabilities of the Partnership.
At the expiration of the consent solicitation on November 29, 2002, Holders
of Interests who were entitled to consent to the Amendment had submitted
properly executed consent forms representing 236,537.229 Interests out of
the 404,000 outstanding Interests. The votes for the 236,537.229 Interests
were cast as follows: Holders owning 211,268.899 Interests (52.29% of the
404,000 outstanding Interests) gave consent to the Amendment, Holders
owning 21,004.33 Interests (5.20% of the 404,000 outstanding Interests)
withheld consent for the Amendment and Holders owning 4,264 Interests
(1.06% of the 404,000 outstanding Interests) abstained. Since Holders
owning a majority of the outstanding Interests consented to the Amendment,
the Amendment was approved. The effective date for the Amendment is
October 29, 2002.

There were no other matters submitted to a vote of security holders
during 2002.

PART II

ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS
AND RELATED SECURITY HOLDER MATTERS

As of January 1, 2003, there were 16,253 record Holders of the 404,000
Interests outstanding in the Partnership. There is no public market for
Interests, and it is not anticipated that a public market for Interests
will develop. Consequently, a Holder may not be able to readily sell his
Interests and may not be able to obtain a price that reflects the full
value of the underlying assets. Upon request, the General Partner may
provide information relating to a prospective transfer of Interests to an
investor desiring to transfer his Interests. The price to be paid for the
Interests, as well as any other economic aspects of the transaction, will
be subject to negotiation by the investor. However, there are restrictions
governing the transferability of these Interests set forth in the
Partnership Agreement and the Assignment Agreement. In addition, no
transfer will be effective until the first day of the next succeeding
calendar quarter after the requisite transfer form satisfactory to the
General Partner has been received by the General Partner. The transferee
consequently will not be entitled to receive any cash distributions or any
allocable share of profits or losses for tax purposes until such next
succeeding calendar quarter. Profits or losses of the Partnership for a
calendar year in which a transfer occurs will, to the extent permitted by
law, be allocated between the transferor and the transferee based upon the
number of quarterly periods for which each was recognized as the Holder of
the Interests, without regard to the results of the Partnership's
operations during particular quarterly periods and without regard to
whether cash distributions were made to the transferor or transferee. Cash
distributions to a Holder of Interests will be distributed to the person
recognized as the Holder of the Interests as of the last day of the
quarterly period preceding the quarter in which such distribution is made.

Reference is made to Item 1. Business for a discussion of the election
made on October 23, 1997 by the General Partner with respect to commencing
an orderly liquidation of all of the Partnership's assets that is currently
in process. Reference is also made to Item 4. Submission of Matters to a
Vote of Security Holders for a discussion of the extension of the term of
the Partnership's liquidation period to not later than October 31, 2005.

Reference is made to Item 6. Selected Financial Data for a discussion
of cash distributions made to the Holders of Interests. For a description
of the provisions of the Partnership Agreement relating to cash
distributions, see Note 12.

Reference is made to Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations for a discussion of
unsolicited tender offers for Interests made by third parties unaffiliated
with the Partnership or the General Partner.

ITEM 6. SELECTED FINANCIAL DATA

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

DECEMBER 31, 2002, 2001, 2000, 1999 AND 1998

(NOT COVERED BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT'S REPORT)

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

LIQUIDITY AND CAPITAL RESOURCES

This report, including this Management's Discussion and Analysis of
Financial Condition and Results of Operations, contains forward-looking
statements. Words like "believes," "expects," "anticipates," "likely" and
similar expressions used in this report are intended to identify forward-
looking statements. These forward-looking statements give the
Partnership's current estimates or expectations of future events,
circumstances or results, including statements concerning possible future
distributions and the amount of time and money that may be involved in
completing the liquidation, winding up and termination of the Partnership
(or, if applicable, a Liquidating Trust as a successor to the Partnership).

Any forward-looking statements made in this report are based upon the
Partnership's understanding of facts and circumstances as they exist on the
date of this report, and therefore such statements speak only as of that
date. In addition, the forward-looking statements contained in this report
are subject to risks, uncertainties and other factors that may cause the
actual events or circumstances, or the results or performances of the
Partnership, to be materially different from those estimated or expected,
expressly or implicitly, in the forward-looking statements. In particular,
but without limitation, statements concerning possible future distributions
to the Holders of Interest or the timing or costs associated with
completion of a liquidation, winding up and termination may be adversely
affected by unanticipated liabilities or increases in required reserves to
meet possible claims or contingencies, additional or unanticipated remedial
construction or development costs, delays in resolving pending or
threatened litigation or potential claims, currently unasserted claims that
arise in the future and other factors affecting the timing or amount of
expenses incurred in completing a liquidation, winding up and termination.

Pursuant to Section 5.5J of the Partnership Agreement, on October 23,
1997, the Board of Directors of the General Partner met and approved a
resolution selecting the option set forth in Section 5.5J(i)(c) of the
Partnership Agreement for the Partnership to commence an orderly
liquidation of its remaining assets that was to be completed by October
2002. In October 2002 the Partnership commenced a solicitation for
consents to an amendment (the "Amendment") to the Partnership's Amended and
Restated Agreement of Limited Partnership providing for an extension of the
term of the Partnership's liquidation period to not later than October 31,
2005. In addition, under the terms of the Amendment, the General Partner
is authorized, in its sole discretion, to complete the liquidation of the
Partnership by forming a liquidating trust (the "Liquidating Trust") and
contributing any remaining Partnership assets to the Liquidating Trust
subject to all outstanding obligations and liabilities of the Partnership.
In November 2002 a majority of the Holders of Interests gave their consent
to the Amendment, which became effective October 29, 2002, and,
accordingly, the term of the Partnership's liquidation period has been
extended. For further information concerning the consent solicitation and
the votes granting consent, withholding consent and abstaining with respect
to the Amendment, reference is made to Item 4. Submission of Matters to a
Vote of Security Holders in this report.

At March 1, 2003, the Partnership had 97 townhomes, each of which is
under a contract for sale, that remain to be built or for which the sale
remains to be closed, in the Partnership's Weston Community. The
Partnership expects to complete construction and close on the sale of these
townhomes, which are the last units to be built by the Partnership in
Weston, by the end of the second quarter of 2003. The Partnership's other
remaining assets included various small land parcels to be sold in their
respective current stages, an additional housing unit, tangible personal
property including vehicles and furniture, fixtures and equipment used in
the Partnership's operations, receivables and certain contract rights.

As noted above, under the terms of the Amendment, the General Partner
is authorized in its sole discretion, to complete the termination of the
Partnership by forming a Liquidating Trust. The trustee or trustees are
expected to be an officer or officers of the General Partner. The
remaining Partnership assets would be contributed to the Liquidating Trust
subject to all outstanding obligations and liabilities of the Partnership.
The General Partner, Associate Limited Partners and Holders of Interests
would receive beneficial interests in the Liquidating Trust in proportion
to their respective interests in the Partnership. Subsequently, after
liquidating any remaining non-cash assets and providing for the payment or
satisfaction of all such obligations and liabilities, the trustee(s) of the
Liquidating Trust would distribute any remaining proceeds to the General
Partner, Associate Limited Partners and Holders of Interests in proportion
to their respective interests in the Liquidating Trust. The Partnership
believes that the use of the Liquidating Trust would permit the realization
of administrative cost-savings while allowing for the management and
satisfaction of residual obligations and liabilities arising out of the
Partnership's operations.

Pending the completion of the liquidation, winding up and termination
of the Partnership (or if applicable, the Liquidating Trust), it is
anticipated that the Partnership (or the Liquidating Trust, as the case may
be) will retain a substantial amount of funds in reserve to provide for the
payment of, the defense against, or other satisfaction or resolution of
obligations, liabilities (including contingent liabilities) and current and
possible future claims, including those for indemnities and other matters
under various agreements made in connection with the sales of the Weston
Hills Country Club, The Shoppes of Town Center and other assets, possible
construction repairs, homeowner warranty claims, completion of work for
certain homeowner associations and master associations and pending and
possible future litigation and environmental matters. The amount of funds
to be retained in reserve for these purposes has not yet been determined.
The Partnership currently expects that those available funds in excess of
the amount determined to be held in reserve would be distributed during
2003 and 2004 to the partners and Holders of Interests. That portion, if
any, of the funds held in reserve that are not ultimately used to pay,
defend or otherwise resolve or satisfy obligations, liabilities or claims
would subsequently be distributed to the partners and Holders of Interests
as a final liquidating distribution at a later date.

The Partnership is not able to determine the amount of time and money
that it will take to effect its (or, if applicable, the Liquidating
Trust's) liquidation, winding up and termination. Various factors may
affect the timing of completing the liquidation, winding up and termination
of the Partnership (and, if applicable, the Liquidating Trust) and the
amount of a final liquidating distribution of funds, if any, out of those
retained in reserve. These factors include the amount of time it takes to
complete construction of the last townhomes in Weston, to sell or otherwise
dispose of the Partnership's other remaining assets and the time and
expense to resolve all obligations, liabilities and claims, including
contingent liabilities and claims that are not yet asserted but may be made
in the future. Among the important factors involved in liquidating the
Partnership's assets are the retention of an adequate workforce and
maintaining existing relationships with vendors and tradesmen through
completion of construction of the remaining townhomes in Weston. In
addition, as noted above, additional or unanticipated remedial construction
or development costs, delays in resolving pending or threatened litigation
or potential claims, currently unasserted claims that arise in the future
and other factors could extend the time required, and significantly
increase the cost, to complete the liquidation, winding up and termination.

At December 31, 2002 and 2001, the Partnership had unrestricted cash
and cash equivalents of approximately $88,969,000 and $124,357,000,
respectively. At February 28, 2003, the Partnership had unrestricted cash
and cash equivalents of approximately $82,724,000 after taking into account
the distribution made in February 2003. Cash and cash equivalents were
available for working capital requirements and reserves and distributions
to partners and Holders of Interests. The source of both short-term and
long-term future liquidity is expected to be derived primarily from cash on

hand and, to a lesser extent, from the sale of remaining townhomes in
Weston.

The Partnership was able to generate significant cash flow before debt
service during each of the preceding five years ending in the period ended
December 31, 2002. The Partnership utilized this cash flow to pay off its
term loan and finance its operations, make distributions to its partners
and Holders of Interests, and establish certain cash reserves. During
February 2003, the Partnership made a distribution for 2002 of $20,200,000
to its Holders of Interest ($50 per Interest) and $2,244,444 to its General
Partner and Associate Limited Partners, collectively. During 2002, the
Partnership made aggregate distributions of approximately $151,500,000 to
its Holders of Interests (approximately $375 per Interest) and
approximately $16,833,000 to the General Partner and Associate Limited
Partners, collectively. During 2001, the Partnership made aggregate
distributions of approximately $80,800,000 to its Holders of Interests
(approximately $200 per Interest) and approximately $8,978,000 to its
General Partner and Associate Limited Partners, collectively. During 2000,
the Partnership made aggregate distributions of approximately $58,461,000
to its Holders of Interests (approximately $145 per Interest) and
approximately $21,669,000 to its General Partners and Associate Limited
Partners, collectively. During 1999, the Partnership made aggregate
distributions of approximately $70,700,000 to its Holders of Interests
(approximately $175 per Interest) and approximately $3,928,000 to its
General Partner and Associate Limited Partners, collectively. During 1998,
the Partnership made aggregate distributions of approximately $50,500,000
to its Holders of Interest (approximately $125 per Interest) and
approximately $2,806,000 to its General Partner and Associate Limited
Partners, collectively.

In accordance with the Partnership Agreement, until the Holders of
Interests received aggregate distributions equal to their Capital
Investments (i.e., $1,000 per Interest), the General Partner and Associate
Limited Partners deferred a portion of their distributions of net cash flow
from the Partnership totaling approximately $12,541,000 through
December 31, 1999. In addition, in connection with the settlement of
certain litigation, the General Partner and the Associate Limited Partners
deferred approximately $1,259,000 of their share of an August 1997
distribution which was otherwise distributable to them, and such deferred
distribution amount was used by the Partnership to pay a portion of the
legal fees and expenses in such litigation. The General Partner and
Associate Limited Partners were entitled to receive such deferred amounts
after the Holders of Interests received a specified amount of distributions
from the Partnership after July 1, 1996, the remaining amount of which was
received by the Holders of Interest as part of their distribution in
February 2000. With the distribution made in February 2000, Holders of
Interests had received aggregate distributions in excess of their Capital
Investments. The distribution made in February 2000 to the General Partner
and Associate Limited Partners included the $1,259,000 amount of their
August 1997 distribution that was previously deferred as well as
approximately $6,306,000 of the approximately $12,541,500 of net cash flow
distributions to the General Partner and Associate Limited Partners
previously deferred pursuant to the terms of the Partnership Agreement. In
April and May 2000, distributions of approximately $23,100 were paid or
deemed paid to the General Partner and Associate Limited Partners,
including approximately $18,900 of net cash flow distributions that had
previously been deferred pursuant to the terms of the Partnership
Agreement. An August 2000 distribution of approximately $8,030,000 made to
the General Partner and Associate Limited Partners included the remaining
amount of net cash flow distributions that had previously been deferred of
approximately $6,216,000.

Included in Accrued expenses and other liabilities on the accompanying
consolidated balance sheet at December 31, 2002, is an accrual of
approximately $7.3 million for 2002 relating to certain contingent
liabilities.

On July 31, 1997, the Partnership obtained a new credit facility from
certain banks with Barnett Bank, N.A. being the primary agent on the
facility. The credit facility which matured on July 31, 2001, consisted of
a $75 million term loan, a $20 million revolving line of credit and a $5
million letter of credit facility. The term loan, which was paid off in
December 2000, and the letter of credit facility were not renewed at the
maturity date. The $20 million revolving line of credit was extended for a
fee of $50,000 through September 30, 2002 with First Union National Bank as
the only lender. There were no borrowings on the revolving line of credit,
which expired on September 30, 2002.

The Partnership originally had interest rate swap agreements with
respect to $50 million of the term loan. The interest rate swap agreements
fixed the interest rates under the term loan and were amortized in
conjunction with the scheduled loan repayments. These agreements expired
on July 31, 2001. The Partnership has approximately $3.2 million of
letters of credit outstanding at December 31, 2002, all of which are cash
collateralized. The combined effective interest rate for the Partnership's
credit facilities for the years ended December 31, 2001 and 2000 including
the amortization of loan origination fees and the effect of the interest
rate swap agreements was approximately 9.5% per annum and 9.8% per annum,
respectively.

In May 2000, the Partnership closed on a $20 million loan with First
Union National Bank for the development and construction of The Shoppes of
Town Center (the "Shoppes") in Weston, a mixed use retail/office plaza
consisting of approximately 158,000 net leasable square feet. The loan was
made to an indirect, majority-owned subsidiary of the Partnership, and the
Partnership guaranteed the obligations of the borrower, subject to a
reduction in the guarantee upon the satisfaction of certain conditions. At
December 31, 2002, the balance outstanding on the loan was approximately
$13,800,800. This amount is included in Liabilities related to assets held
for sale on the accompanying consolidated balance sheets. Interest on the
loan (as modified effective May 31, 2001 and further modified effective
December 31, 2001) was based on the relevant LIBOR rate plus 1.8% per
annum. Monthly payments of interest only were required during the first
twenty-five months of the loan. On July 1, 2002, the maturity date for the
loan was extended for eleven months and monthly payments of principal and
interest were due based upon a 25 year loan amortization schedule and an
assumed interest rate based on the ten-year treasury bond rate plus 2.5%
per annum. The loan could be prepaid in whole or in part at anytime,
provided that the borrower pay any costs or expenses of the lender incurred
as a result of a prepayment on a date other than the last day of a LIBOR
interest period. Construction of The Shoppes commenced in March 2000 and
was completed by December 31, 2002. The outstanding principal balance and
accrued and unpaid interest of approximately $13,848,000 was paid in
February 2003 out of the proceeds from the sale of The Shoppes discussed
below.

On February 7, 2003, the Partnership through certain consolidated
entities (collectively, the "Seller"), closed on the sale of the Shoppes to
unaffiliated third parties (collectively, the "Buyer"). The gross sale
price for the Shoppes was $34,330,000. Net cash proceeds received from the
sale, after prorations, credits, closing costs, amounts escrowed and the
settlement of the Seller's outstanding loan balance totaled approximately
$18,198,000. Under the Sale and Purchase Agreement (the "Agreement"), the
Seller made certain representations, warranties and indemnities for the
benefit of the Buyer that extend beyond the closing of the sale. In
addition, pursuant to the terms of the Agreement, the Seller entered into
an agreement to indemnify the Buyer's lender from certain possible claims
related to the Shoppes. In accordance with such indemnification, the
Seller deposited $100,000 and the Buyer deposited $50,000 in escrow to
secure the obligation to indemnify the Buyer's lender for such claims.
Pursuant to the Agreement, the Seller also deposited $50,000 in escrow as
security for completion of remediation work for compliance with the
Americans with Disabilities Act. The net book value and net cash proceeds

received from the sale represented approximately 22% and 13%, respectively,
of the Partnership's total consolidated assets for financial reporting
purposes at December 31, 2002. The sale resulted in a gain of
approximately $1,990,000 for financial reporting purposes and a gain of
approximately $2,460,000 for Federal income tax purposes.

On December 27, 2002, the Partnership, through certain consolidated
entities, closed on the sale of the Ocala Parcel to an unaffiliated third
party. The gross sale price of the Ocala Parcel was $1,400,000. Net cash
proceeds received from the sale, after prorations and closing costs totaled
approximately $1,266,000. The sale resulted in a loss of approximately
$380,000 for financial reporting purposes and a loss of approximately
$2,610,000 for Federal income tax purposes.

On December 4, 2002, the Partnership, through certain consolidated
entities, closed on the sale of the Waterways II Parcel to an unaffiliated
third party. The Partnership was constructing a shopping center on the
Waterways II Parcel which was not completed on the date of the sale. Under
the terms of the agreement, the seller assigned to the buyer the seller's
rights and obligations under the construction contract and the plans and
specifications for construction, as well as an agreement for parking. The
gross sale price of the Waterways II Parcel was $5,151,000. Net cash
proceeds received from the sale, after prorations and closing costs totaled
approximately $4,588,000. The sale resulted in a gain of approximately
$1,170,000 for financial reporting and Federal income tax purposes.

On October 1, 2002, the Partnership, through certain consolidated
entities, closed on the sale of Weston Hills Country Club (the "Country
Club") to an unaffiliated third party. Under the sale and purchase
agreement, the seller made certain representations, warranties and
indemnities for the benefit of the purchaser that will survive for one year
from the date of the closing. In accordance with the sale and purchase
agreement, $1,000,000 of the sale price has been placed in escrow to pay
possible claims or demands of the purchaser arising from the sale during
the one-year period, and is therefore reflected as restricted cash on the
accompanying consolidated balance sheet at December 31, 2002. The gross
cash sale price for the Country Club was $23,500,000 plus approximately
$224,000 for existing consumable and saleable inventory. Net cash proceeds
received from the sale, after prorations, closing costs and payment of
funds into escrow, totaled approximately $19,348,000. The sale resulted in
a gain of approximately $6,980,000 for financial reporting purposes and a
loss of approximately $6,106,000 for Federal income tax purposes.

In September 2001, the Partnership recorded an asset impairment of
$2.5 million to the carrying value of the Weston Athletic Club (the "Weston
Club"). The loss was recorded based upon the difference between the
carrying value of the Weston Club and its fair value less costs to sell as
determined by an agreement to purchase signed by the Partnership and an
unaffiliated third party purchaser during September 2001. During October
2001, the Partnership closed on the sale of the Weston Club to an
unaffiliated third party for a total sale price of $4.25 million. The sale
resulted in a loss of approximately $30,000 for financial reporting
purposes and a loss of approximately $3,710,000 for Federal income tax
purposes.

On March 6, 2000, the Partnership entered into a contract with an
unaffiliated third party builder for the bulk sale of the remaining lot
inventory, consisting of approximately 103 developed and undeveloped lots,
and the sales center at its Water's Edge Community for a sale price of
approximately $3.2 million. The contract provided for the lots to be
purchased in three phases. The closing of the first phase of 29 lots was
completed in March 2000 for approximately $0.7 million. The closing of the
second phase of 51 lots and the sales center was completed in September
2000 for approximately $1.6 million. The closing of the third phase of 23
lots was completed in December 2000 for approximately $0.9 million. These

sales are reflected in Homesite revenues and cost of revenues on the
accompanying consolidated statement of operations for the year ended
December 31, 2000. The Partnership recorded a $1.0 million write-down of
its related inventory as of December 31, 1999 to reduce the carrying value
of Water's Edge to its estimated fair value less selling costs at that
date. Accordingly, these transactions resulted in no gain or loss for
financial reporting purposes in 2000 and an approximate $3.2 million loss
for Federal income tax purposes in 2000.

In March 2000, the Partnership closed on the sale of the remaining
lots at its Cullasaja Club Community, as well as its remaining equity
memberships in the Cullasaja Club, to the Cullasaja Club, Inc. and
Cullasaja Realty Development, Inc., for a total sale price of approximately
$3.0 million. In addition, indebtedness owed to unaffiliated third party
lenders, as well as related accrued interest, was extinguished in
conjunction with this sale, as the payment of principal and interest was
contingent upon net cash flows generated from the Cullasaja Community.
Such cash flows were not achieved, and as a result, the Partnership
recorded an extraordinary gain related to the extinguishment of debt and
accrued interest of approximately $6.2 million, as reflected on the
accompanying consolidated statement of operations for the year ended
December 31, 2000. The sale of the lot inventory and equity memberships
resulted in a gain of approximately $488,000 for financial reporting
purposes and a loss of approximately $1,565,000 for Federal income tax
purposes.

Except for the bulk sale of the remaining lot inventory at the Water's
Edge Community, which is reflected in Homesite revenues and cost of
revenues, and the sale of the Shoppes, which occurred in February 2003, all
of the above mentioned sales are reflected in Land and property revenues
and cost of revenues on the accompanying consolidated statements of
operations for the years ended December 31, 2000 and 2001, and in Gain on
sale of assets held for sale on the accompanying consolidated statement of
operations for the year ended December 31, 2002.

In February 2002, unsolicited tender offers for Interests were made by
(1) First Commercial Guaranty ("FCG") to purchase up to 14,682
(approximately 3.67%) of the Interests for $150 per Interest, and (2) CMG
Partners, LLC ("CMG") to purchase up to 4.9% of the Interests for $200 per
Interest. The General Partner, on behalf of the Partnership, determined
that each of the FCG offer and the CMG offer was inadequate and not in the
best interests of the Holders of Interests. Accordingly, the General
Partner recommended that Holders of Interest reject each such offer and not
tender their Interests pursuant to either offer. The FCG offer and the CMG
offer were scheduled to expire in March and May 2002, respectively.

CMG subsequently modified and extended its offer to purchase Interests
for $190 per Interest. In October 2002, the General Partner, on behalf of
the Partnership, determined that the modified CMG offer was inadequate and
not in the best interests of the Holders of Interests. Accordingly, the
General Partner recommended that Holders of Interests reject such offer and
not tender their Interests to CMG pursuant to its modified offer.

In January 2003, CMG made yet another offer to purchase up to 4.9% of
the outstanding Interests for $100 per Interest (which took into account
the Partnership's distribution of $100 per Interest to Holders of Interests
in October 2002). In addition, in February 2003, FCG made an offer to
purchase up to approximately 4.1% of the outstanding Interests for $120 per
Interest. The General Partner, on behalf of the Partnership, determined
that each of these offers was inadequate and not in the best interests of
the Holders of Interests. Accordingly, the General Partner recommended
that Holders of Interests reject each such offer and not tender their
Interests pursuant to either offer. These offers are scheduled to expire
in April and March 2003, respectively, subject to earlier termination.

RESULTS OF OPERATIONS

The results of operations for the years ended December 31, 2002, 2001
and 2000 are primarily attributable to the development and sale or
operation of the Partnership's assets. See Note 1 for a discussion
regarding the recognition of profit from sales of real estate.

For the year ended December 31, 2002, the Partnership (including its
consolidated ventures and its unconsolidated ventures accounted for under
the equity method) closed on the sale of 812 housing units, two commercial
office building units, a land parcel in Ocala (the Ocala Parcel), a
commercial parcel in Weston, and the Weston Hills Country Club. This
compares with closings in 2001 of 1,356 housing units, seven homesites,
five commercial office building units, two one-story commercial office
buildings, a commercial and residential parcel in the Weston Community, a
land parcel in Dade County, and the Weston Athletic Club. Closings in 2000
were for 1,555 housing units, 97 homesites, five commercial office
buildings in Weston Town Center, several one-story commercial office
buildings in Weston, approximately five acres of developed land tracts in
Weston, the remaining lots and equity memberships at the Cullasaja Club
Community, a commercial office building in Boca Raton, Florida, the sales
office and a commercial parcel in its River Hills Community, and the bulk
sale of 103 developed and undeveloped lots and the sales center at its
Water's Edge Community. Outstanding contracts ("backlog"), as of March 1,
2003 were for 97 housing units. This compares with a backlog of housing
units as of March 1, 2002 of 592 units. The backlog of housing units as of
March 1, 2001 was for 1,040 units.

The Partnership's Communities, other than Weston, have completed
construction. The Partnership's Weston Community located in Broward
County, Florida, is in its final stage, with the construction and/or
closing on the sale of 97 townhomes remaining as of March 1, 2003. As
discussed above, in 2000, the remaining lots and equity club memberships at
the Cullasaja Club were sold and the Partnership closed the sale of the
remaining lots and the sales center at the Water's Edge Community. The
Partnership's condominium project on Longboat Key, Florida, known as
Arvida's Grand Bay was completed in 1999, and all units were sold and
closed by January 2000. All of the units in The River Hills Community were
sold and closed by July 2001. All of the units in the Jacksonville Golf &
Country Club Community in Jacksonville, Florida were closed as of December
31, 1998. All of the remaining units in the Partnership's Sawgrass Country
Club, The Players Club at Sawgrass and Dockside Communities in
Jacksonville, Florida and Atlanta, Georgia were sold and closed as of
December 31, 1996. In addition, the Broken Sound Community, located in
Boca Raton, Florida, had its final closings in 1995, and during 2000, the
Partnership assigned all of its remaining equity interests in the Broken
Sound Club back to the club and terminated its interest in this project in
connection with the settlement of certain litigation. Revenues for 2002
were impacted as a result of the lower levels of inventories available for
sale as the Partnership's remaining Weston Community completes its final
phase.

Revenues from housing and homesite activities generally are recognized
upon the closing of homes built by the Partnership and developed lots,
respectively, within the Partnership's Communities. Historically, a
substantial portion of the Partnership's housing revenues during the first
six months of a given year are generated from the closing of units
contracted in the prior year. Land and property revenues are generated
from the closing of developed and undeveloped residential and/or commercial
land tracts, the sale of operating properties, as well as gross revenues
earned from the sale of equity memberships in the clubs within the
Partnership's Communities.

Cost of revenues pertaining to the Partnership's housing sales reflect
the cost of the acquired assets as well as development and construction
expenditures, certain capitalized overhead costs, capitalized interest,
real estate taxes and marketing, as well as disposition costs. The costs
related to the Partnership's homesite sales reflect the cost of the
acquired assets, related development expenditures, certain capitalized
overhead costs, capitalized interest and real estate taxes, as well as
disposition costs. Land and property costs reflect the cost of the
acquired assets, certain development and construction costs and related
disposition costs, as well as the cost associated with the sale of equity
memberships.

Housing revenues and gross operating profit margins from housing
operations decreased for 2002 as compared to 2001 due to a decrease in the
number of units closed in the Partnership's Weston Community and an
aggregate accrual of approximately $7.3 million relating to certain
contingent liabilities, which is included in cost of revenues for 2002.
Housing revenues and gross operating profit margin increased for 2001 as
compared to 2000 due primarily to a change in the mix of units closed and
an increase in the average prices from approximately $224,000 per unit
closed in 2000 to approximately $307,000 per unit closed in 2001. Revenues
generated from the closings of units in Weston account for approximately
100%, 99% and 96% of the housing revenues recognized for the years ended
December 31, 2002, 2001 and 2000, respectively.

Sales of all the Partnership's remaining lot inventory had closed in
2001 resulting in no homesite revenues generated during 2002, and the
decrease in homesite revenues in 2001 as compared to 2000. The
Partnership's plan for the Weston Community included an increase in its
home building operations, which resulted in a reduced number of lots
available for sale to third-party builders. In March 2000, the Partnership
entered into a contract with an unaffiliated third party builder for the
bulk sale of the remaining lot inventory, consisting of approximately 103
developed and undeveloped lots, and the sales center at its Water's Edge
Community, for a sale price of approximately $3.2 million. The contract
provided for the lots to be sold in three phases. The closing of the first
phase of 29 lots was completed in March 2000 for approximately $0.7
million. The closing of the second phase of 51 lots and the sales center
was completed in September 2000 for approximately $1.6 million. The
closing of the final phase of 23 lots was completed in December 2000 for
approximately $0.9 million.

Effective January 1, 2002, the Partnership adopted SFAS No. 144
Accounting for the Impairment or Disposal of Long-Lived Assets.
Accordingly, operations and gain on sales of The Shoppes of Town Center,
the Weston Hills Country Club, the Ocala Parcel, the Waterways II Parcel,
and certain commercial office building units in Weston which meet the
criteria for Assets held for sale have been accounted for as Income from
operations of assets held for sale and Gain on sale of assets held for
sale. The results of operations for those assets have been excluded from
continuing operations in the consolidated statements of operations for all
periods presented. Land and property revenues for 2001 were generated
primarily from the sale of five commercial office building units, two one-
story commercial office buildings, a commercial and residential parcel in
the Weston Community, a land parcel in Dade County, the sale of the Weston
Athletic Club and the recognition of profits from land sales closed in
prior years which had been deferred until the accounting criteria for
profit recognition had been met. Land and property revenues for 2000 were
generated primarily from the sale of five commercial office buildings in
Weston Town Center, several one-story commercial office buildings in
Weston, approximately five acres of developed land tracts in Weston, the
remaining lots and equity memberships at the Cullasaja Club Community, a
commercial office building in Boca Raton, Florida, and the sales office and
a commercial parcel in the Partnership's River Hills Community.

Operating properties represents activity from the Partnership's club
operations, commercial properties and certain other operating assets.
Operating property revenues and related cost of revenues for 2002, 2001 and
2000 were generated primarily from the Weston Athletic Club, which was sold
prior to the adoption of SFAS No. 144, the effects of which are discussed
in the previous paragraph.

Net income from assets held for sale increased for 2002 as compared to
2001 and 2000 primarily due to revenues from The Shoppes of Town Center,
which began generating rental income during May of 2001.

Brokerage and other operations represents activity from the sale of
unaffiliated third-party builders' homes within the Partnership's
communities, fees earned from the Partnership's mortgage brokerage
operations within the Weston Community, proceeds from the Partnership's
property management activities, and fees earned from various management
agreements with joint ventures. Revenues from brokerage and other
operations decreased in 2002 as compared to 2001 and in 2001 as compared to
2000 due primarily to a decrease in brokerage commissions earned in Weston
resulting from a reduced number of units closed by third party builders
within the Community, a decrease in fees earned from the Partnership's
mortgage brokerage operations due to a decrease in the number of housing
units closed and a decrease in revenues from the Partnership's property
management activities.

Selling, general and administrative expenses include all marketing
costs, with the exception of those costs capitalized in conjunction with
the construction of housing units, as well as project and general
administrative costs. These expenses are net of the marketing fees
received from third party builders. Selling, general and administrative
expenses decreased for 2002 as compared with 2001 and 2000 due primarily to
decreased marketing, project administration and support service costs
resulting from the close out of several of the Partnership's Communities
and the final stage of development of its Weston Community. Reimbursements
to St. Joe/Arvida for employee costs for the year ended December 31, 2002
as compared to 2001 and 2000 have decreased due to the orderly liquidation
of the Partnership's remaining assets which is currently in process. A
greater decline over the periods presented would have resulted had it not
been critical to the Partnership's operations to retain employees of the
Partnership and St. Joe/Arvida through incentive compensation and retention
awards as the Partnership completes the liquidation of its assets.

In September 2001, the Partnership recorded an asset impairment of
$2.5 million to the carrying value of the Weston Athletic Club. The loss
was recorded based upon the difference between the carrying value of the
Weston Athletic Club and its fair value less costs to sell as determined by
an agreement to purchase signed by the Partnership and an unaffiliated
third party purchaser during September 2001. During October 2001, the
Partnership closed on the sale of the Weston Athletic Club for a total sale
price of $4.25 million. The sale resulted in a loss of approximately
$30,000 for financial reporting purposes and a loss of approximately
$3,710,000 for Federal income tax purposes.

As the Partnership undertook development of the final phases of its
remaining Communities, a larger portion of real estate taxes and interest
expense incurred have become eligible for capitalization, and there has
been a reduction of the overall amount of real estate taxes assessed and
interest expense incurred. These are the causes for the decrease in
interest and real estate taxes, net of amounts capitalized, on the
accompanying consolidated statements of operations for 2002 as compared to
2001 and for 2001 as compared to 2000.

INFLATION

The relatively low rates of inflation in recent years generally have
not had a material effect on the Community development business and
inflation in future periods is not likely to adversely affect the
Partnership's operations since Weston, the Partnership's last remaining
community, is in its final stage of development.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of the Partnership's financial condition
and results of operations are based upon the Partnership's consolidated
financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The
preparation of these financial statements requires management to make
estimates and judgements that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosures of contingent
assets and liabilities. These estimates are based on historical experience
and on various other assumptions that management believes are reasonable
under the circumstances; additionally management evaluates these results on
an on-going basis. Management's estimates form the basis for making
judgements about the carrying values of assets and liabilities that are not
readily apparent from other sources. Different estimates could be made
under different assumptions or conditions, and in any event, actual results
may differ from the estimates.

The Partnership relies on certain estimates to determine the
construction and land costs and resulting gross margins. The Partnership's
land and construction costs are comprised of direct and allocated costs,
including estimated costs for future warranties. Land, land development
and other common costs are assigned to individual components based on
specific identification or other allocation methods. Land and land
development costs generally include interest incurred until development is
substantially completed.

The Partnership also reviews its land and other inventories and
property, plant and equipment for impairment of value. This includes
considering certain indications of impairment such as significant changes
in asset usage, significant deterioration in the surrounding economy or
environmental problems. If such indications are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying value, the Partnership will adjust the carrying
value down to its estimated fair value. Fair value is based on
management's estimate of the property's fair value based on discounted
projected cash flows.

There are various judgments and uncertainties affecting the
application of these and other accounting policies, and materially
different amounts may be reported under different circumstances or if
different assumptions were used.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Partnership does not believe that it has a material exposure to
market rate risk. The Partnership had entered into a construction and
short-term mortgage loan in the principal amount of up to $20,000,000
(approximately $13,800,000 outstanding at December 31, 2002) with a
variable rate of interest to finance construction of The Shoppes of Town
Center in Weston in 2000. The loan was paid off in full on February 7,
2003 in conjunction with the sale of the Shoppes to an unaffiliated third
party.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

INDEX

Report of Independent Certified Public Accountants

Consolidated Balance Sheets, December 31, 2002 and 2001

Consolidated Statements of Operations for the years ended
December 31, 2002, 2001 and 2000

Consolidated Statements of Changes in Partners' Capital Accounts
for the years ended December 31, 2002, 2001 and 2000

Consolidated Statements of Cash Flows for the years ended
December 31, 2002, 2001 and 2000

Notes to Consolidated Financial Statements

SCHEDULES NOT FILED:

All schedules have been omitted as the required information is
inapplicable or immaterial, or the information is presented in the
consolidated financial statements or related notes.

REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Partners
ARVIDA/JMB PARTNERS, L.P.

We have audited the accompanying consolidated balance sheets of
Arvida/JMB Partners, L.P. and Consolidated Ventures (the "Partnership"), as
of December 31, 2002 and 2001, and the related consolidated statements of
operations, changes in partners' capital accounts, and cash flows for each
of the three years in the period ended December 31, 2002. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Arvida/JMB Partners, L.P. and Consolidated Ventures at
December 31, 2002 and 2001, and the consolidated results of their
operations and their cash flows for each of the three years in the period
ended December 31, 2002, in conformity with accounting principles generally
accepted in the United States.

Ernst & Young LLP
Miami, Florida
February 21, 2003, except for note 8
as to which is March 1, 2003, and
note 9 as to which is March 5, 2003

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2002 AND 2001

ASSETS
------

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)

AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

ARVIDA/JMB PARTNERS, L.P.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000