ARVIDA JMB PARTNERS L P - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 10-Q

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the quarter ended June 30, 2003 Commission file #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 Avenue., Chicago, IL 60611
(Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code 312/440-4800

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 "Exchange Act") during the preceding 12 months (or for such a
shorter period that 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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

Item 1. Financial Statements. . . . . . . . . . . . . . . . . 3

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations. . . . . . . . . . . . . . . . . . . . . . 21

Item 4. Controls and Procedures . . . . . . . . . . . . . . . 26

PART II OTHER INFORMATION

Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . 27

Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . 31

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

CONSOLIDATED BALANCE SHEETS

ASSETS
------

JUNE 30, DECEMBER 31,
2003 2002
(Unaudited) (See Note)
------------ -----------

Cash and cash equivalents. . . . . . . . . $ 89,289,380 88,968,513
Restricted cash. . . . . . . . . . . . . . 2,183,076 4,051,697
Trade and other accounts receivable
(net of allowance for doubtful
accounts of $223,000 at June 30,
2003 and December 31, 2002). . . . . . . 206,478 623,175
Real estate inventories. . . . . . . . . . -- 8,102,696
Property and equipment, net. . . . . . . . 791,356 1,207,014
Investments in and advances to
joint ventures, net. . . . . . . . . . . 266,184 264,464
Amounts due from affiliates, net . . . . . 267,612 308,132
Prepaid expenses and other assets. . . . . 244,862 1,632,203
Assets held for sale . . . . . . . . . . . -- 32,916,891
------------ ------------

Total assets . . . . . . . . . . $ 93,248,948 138,074,785
============ ============

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

CONSOLIDATED BALANCE SHEETS (CONTINUED)

LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS
------------------------------------------

JUNE 30, DECEMBER 31,
2003 2002
(Unaudited) (See Note)
------------ -----------
Liabilities:
Accounts payable . . . . . . . . . . . . $ 1,675,032 3,802,881
Deposits . . . . . . . . . . . . . . . . 40,525 2,512,554
Accrued expenses and other
liabilities. . . . . . . . . . . . . . 17,671,405 21,382,068
Liabilities related to assets held
for sale . . . . . . . . . . . . . . . -- 14,316,676
------------ ------------

Commitments and contingencies

Total liabilities. . . . . . . . 19,386,962 42,014,179
------------ ------------

Partners' capital accounts:
General Partner and
Associate Limited Partners:
Capital contributions. . . . . . . . . 20,000 20,000
Cumulative net income. . . . . . . . . 103,584,816 103,582,358
Cumulative cash distributions. . . . . (94,999,882) (92,755,438)
------------ ------------
8,604,934 10,846,920
------------ ------------
Limited Partners:
Capital contributions,
net of offering costs. . . . . . . . 364,841,815 364,841,815
Cumulative net income. . . . . . . . . 380,166,274 379,922,908
Cumulative cash distributions. . . . . (679,751,037) (659,551,037)
------------ ------------
65,257,052 85,213,686
------------ ------------
Total partners' capital
accounts . . . . . . . . . . . 73,861,986 96,060,606
------------ ------------

Total liabilities and
partners' capital. . . . . . . $ 93,248,948 138,074,785
============ ============

NOTE: The consolidated balance sheet at December 31, 2002 has been derived
from the audited consolidated financial statements at that date but does
not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial
statements.

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

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

CONSOLIDATED STATEMENTS OF OPERATIONS

THREE AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)

2003 2002
------------ ------------
Net (loss) income from continuing
operations . . . . . . . . . . . . . . . $ (1,649,764) 37,386,003
Charges (credits) to net income
from continuing operations not
requiring (providing) cash:
Depreciation and amortization. . . . . . 415,658 355,484
Equity in losses (earnings) of
unconsolidated ventures. . . . . . . . 2,706 (247,638)
Changes in:
Restricted cash. . . . . . . . . . . . . 1,868,621 7,522,066
Trade and other accounts receivable. . . 416,697 512,315
Real estate inventories:
Additions to real estate
inventories. . . . . . . . . . . . . (12,869,211) (71,396,313)
Cost of sales. . . . . . . . . . . . . 21,056,583 116,410,940
Capitalized interest . . . . . . . . . (84,676) (308,300)
Capitalized real estate taxes. . . . . -- (992,238)
Amounts due from affiliates, net . . . . 40,520 (65,313)
Prepaid expenses and other assets. . . . 1,387,341 4,056,089
Accounts payable, accrued expenses
and other liabilities. . . . . . . . . (5,880,326) (6,175,334)
Deposits and unearned income . . . . . . (2,472,029) (8,897,205)
------------ ------------
Net cash provided by
operating activities of
continuing operations. . . . . 2,232,120 78,160,556
------------ ------------
Investing activities:
Additions to property and equipment. . . -- (62,887)
Joint venture distributions. . . . . . . 37,386 337,640
------------ ------------
Net cash provided by
investing activities of
continuing operations. . . . . 37,386 274,753
------------ ------------
Financing activities:
Distributions to General Partner and
Associate Limited Partners . . . . . . (2,244,444) (12,344,445)
Distributions to Limited Partners. . . . (20,200,000) (111,100,000)
------------ ------------
Net cash used in
financing activities of
continuing operations. . . . . (22,444,444) (123,444,445)
------------ ------------
Net cash provided by (used in)
discontinued operations. . . . . . . . . 20,495,805 (928,222)
------------ ------------
Increase (decrease) in Cash and
cash equivalents . . . . . . . . . . . . 320,867 (45,937,358)
Cash and cash equivalents,
beginning of period. . . . . . . . . . . 88,968,513 123,181,440
------------ ------------
Cash and cash equivalents,
end of period. . . . . . . . . . . . . . $ 89,289,380 77,244,082
============ ============

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2003
(UNAUDITED)

Readers of this quarterly report should refer to the Partnership's
audited financial statements for the fiscal year ended December 31, 2002,
which are included in the Partnership's 2002 Annual Report on Form 10-K
(File No. 0-16976) filed on March 24, 2003, as certain footnote disclosures
which would substantially duplicate those contained in such audited
financial statements, and which are required by accounting principles
generally accepted in the United States for complete financial statements,
have been omitted from this report. Capitalized terms used but not defined
in this quarterly report have the same meanings as in the Partnership's
2002 Annual Report.

GENERAL

In the opinion of the General Partner, all adjustments (consisting
solely of normal recurring adjustments) necessary for a fair presentation
have been made to the accompanying consolidated financial statements as of
June 30, 2003 and December 31, 2002 and for the three and six months ended
June 30, 2003 and 2002. The results of operations for the three and six
month period ended June 30, 2003 are not necessarily indicative of the
results to be expected for the fiscal year ending December 31, 2003.

In April 2003, the FASB issued Statement No. 149 (SFAS 149),
"Amendment of Statement 133 on Derivative Instruments and Hedging
Activities." This statement amends SFAS 133 to provide clarification on
the financial accounting and reporting of derivative instruments and
hedging activities and requires contracts with similar characteristics to
be accounted for on a comparable basis. The Partnership does not expect
the adoption of SFAS 149, which will be effective for contracts entered
into or modified after June 30, 2003, to have a material effect on its
financial condition or results of operations.

In January 2003, FASB issued Interpretation No. 46 "Consolidation of
Variable Interest Entities" ("FIN 46"). The provisions of FIN 46 are
effective immediately for variable interest entities formed or acquired
after January 31, 2003 and in the interim period beginning after June 15,
2003 for variable interest entities in which the Partnership holds such an
interest before February 1, 2003. The Partnership does not have any
interests that would change its current reporting entity or require
additional disclosure outlined in FIN No. 46.

In November 2002, FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," ("FIN 45") which expands on the
guidance for the accounting and disclosure of guarantees. Each guarantee
meeting the characteristics described in FIN 45 is to be recognized and
initially measured at fair value. In addition, guarantors are required to
make significant new disclosures, even if the likelihood of the guarantor
making payments under the guarantee is remote, which represents another
change from general previous practice. The disclosure requirements are
effective for financial statements ending after December 15, 2002, while
the initial recognition and initial measurement provisions are applicable
on a prospective basis to guarantees issued or modified after December 31,
2002. The impact of FIN 45 is described below.

Warranty Reserves

In the normal course of business, the Partnership will incur warranty
related costs associated with homes which have previously closed. Warranty
reserves are established by charging cost of sales and recognizing a
liability for the estimated warranty costs for each home that is closed.
The Partnership monitors this reserve on a quarterly basis by evaluating
the historical warranty experience and the reserve is adjusted as
appropriate for current quantitative and qualitative factors. Actual
future warranty costs could differ from the currently estimated amounts.

For the six months ended June 30, 2003 and 2002, changes in the
warranty accrual consisted of the following:

2003 2002
----------- ----------
Accrued warranty costs,
January 1. . . . . . . . . . . . . $ 2,162,000 3,042,000
Estimated liability recorded . . . . 1,928,000 1,768,000
Payments made. . . . . . . . . . . . (1,724,000) (2,129,000)
----------- ----------
Accrued warranty costs,
June 30. . . . . . . . . . . . . . $ 2,366,000 2,681,000
=========== ==========

Accrued warranty costs are included in Accrued expenses and other
liabilities on the accompanying balance sheets.

Obligations Under Sale Agreements

In connection with the sale of The Shoppes of Town Center (the
"Shoppes") in Weston on February 7, 2003, certain consolidated entities of
the Partnership undertook certain indemnity obligations to the purchaser or
its lender. In general, these obligations relate to indemnification
against loss, costs or expenses arising out of a breach of representation
or warranty, possible claims of tenants, certain rent obligations,
restrictions on the leasing or use of the property, litigation relating to
the property, claims occurring or accruing prior to the closing and certain
other usual and customary matters. Some of these indemnity obligations
will terminate as to claims made after the first anniversary date of the
sale while other of these indemnity obligations have no specified
termination. Due to the different circumstances that could cause the
indemnity obligations to arise, the Partnership is not able to estimate the
maximum potential amount of these indemnity obligations, although the
Partnership currently does not believe that individually or collectively
these indemnity obligations will have a material adverse effect on its
financial condition or results of operations. The Partnership has recorded
a liability of approximately $161,000 for these indemnity obligations at
June 30, 2003. This liability is included in Accrued expenses and other
liabilities on the accompanying balance sheet at June 30, 2003.

In connection with the sale of the Weston Hills Country Club (the
"Country Club") on October 1, 2002, certain consolidated entities of the
Partnership (i) made certain representations, warranties and covenants for
the benefit of the purchaser concerning the sellers and the Country Club
and its business and operations and (ii) agreed to indemnify the purchaser
against third party claims or causes of actions in connection with the
sellers' ownership or operation of the Country Club and occurring or
accruing prior to the closing as well as against certain other usual and
customary matters. In general, the representations, warranties and
covenants will survive for one year from the date of closing while the
indemnity obligations have no express termination. The maximum potential
amount of these obligations is generally $1,000,000. 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 after the sale and is reflected as
restricted cash on the accompanying consolidated balance sheets at June 30,
2003 and at December 31, 2002. No liability has been recorded for these
obligations.

Indemnification of Certain Persons

Indemnification Obligations

Under certain circumstances, the Partnership indemnifies the General
Partner and certain other persons performing services on behalf of the
Partnership for liability they may incur arising out of the indemnified
persons' activities conducted on behalf of the Partnership. There is no
limitation on the maximum potential payments under these indemnification
obligations, and, due to the number and variety of events and circumstances
under which these indemnification obligations could arise, the Partnership
is not able to estimate such maximum potential payments. However,
historically the Partnership has not made payments in material amounts
under such indemnification obligations, and no amount has been accrued in
the accompanying financial statements for these indemnification obligations
of the Partnership.

Discontinued Operations

Effective January 1, 2002, the Partnership adopted SFAS 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS 144
requires that long-lived assets that are to be disposed of by sale be
measured at the lower of book value or fair value less cost to sell.
Additionally, SFAS 144 expands the scope of discontinued operations to
include all components of an entity with operations that (1) can be
distinguished from the rest of the entity and (2) will be eliminated from
the ongoing operations of the entity in a disposal transaction.
Accordingly, operations of the Shoppes, the Country Club, the AOK Group,
which owned an approximate 46 acre parcel (the "Ocala Parcel") near Ocala,
Florida, Waterways II, an approximate 4.6 acre parcel in Weston (the
"Waterways II Parcel") on which a shopping center containing approximately
31,300 square feet of rentable space was being constructed, one commercial
office parcel and certain commercial office units in Weston, which met the
criteria for assets held for sale, have been accounted for as net income
from operations of assets held for sale, and the results of operations for
those assets have been excluded from continuing operations in the
consolidated statements of operations for all periods presented. As of
June 30, 2003, all assets classified as assets held for sale have been
sold.

Condensed financial information relating to Assets held for sale is as
follows:

June 30, December 31,
2003 2002
----------- ------------
Assets held for sale:
Property and equipment, net . . $ -- 30,892,643
Real estate inventories
and other assets . . . . . . . -- 2,024,248
----------- -----------
Total assets . . . . . . . . -- 32,916,891
----------- -----------
Liabilities related to assets
held for sale:
Notes and mortgages payable . . -- 13,800,753
Other liabilities . . . . . . . -- 515,923
----------- -----------
Total liabilities. . . . . . -- 14,316,676
----------- -----------
Net Assets held for sale. . . . . $ -- 18,600,215
=========== ===========

Capitalized Interest and Real Estate Taxes

Interest, including the amortization of loan fees, of $84,676 and
$308,300 was incurred for the six months ended June 30, 2003 and 2002,
respectively, all of which was capitalized. Interest payments, including
amounts capitalized, of $47,011 and $310,280 were made during the six
months ended June 30, 2003 and 2002, respectively. Interest, including the
amortization of loan fees, of $0 and $128,177 was incurred for the three
months ended June 30, 2003 and 2002, respectively, all of which was
capitalized. Interest payments, including amounts capitalized of $0 and
$130,633 were made during the three months ended June 30, 2003 and 2002.
The decrease in interest incurred and paid during the three and six month
periods ending June 30, 2003 as compared to the same periods in 2002 is
primarily due to the repayment in February 2003 of the remaining amount
outstanding on the mortgage loan secured by the Shoppes, which is included
in Liabilities related to assets held for sale on the accompanying
consolidated balance sheet at December 31, 2002.

A net real estate tax credit of $215,262 and an expense of $1,034,848
were incurred for the six months ended June 30, 2003 and 2002,
respectively, of which $0 and $992,238 were capitalized, respectively.
Real estate tax payments of $56,074 and $116,540 were made during the six
months ended June 30, 2003 and 2002, respectively. In addition, real
estate tax reimbursements totaling $279,397 and $134,028 were received from
the Partnership's escrow agent during the six months ended June 30, 2003
and 2002, respectively. A net real estate tax credit of $236,300 and an
expense of $523,982 were incurred for the three months ended June 30, 2003
and 2002. During the three months ended March 31, 2003, $20,792 was
capitalized and subsequently adjusted due to a tax credit received in the
second quarter of 2003. During the three months ended June 30, 2002,
$492,237 was capitalized. Real estate tax payments of $35,519 and $88,249
were made during the three months ended June 30, 2003 and 2002,
respectively. In addition, real estate tax reimbursements totaling $6,501
and $35,719 were received from the Partnership's escrow agent during the
three months ended June 30, 2003 and 2002, respectively. The decrease in
real estate taxes incurred during the three and six month periods ending
June 30, 2003 as compared to the same periods in 2002 is due to the
continued sale of the remaining Partnership assets. The preceding analysis
of real estate taxes does not include real estate taxes incurred or paid
with respect to the Partnership's club facilities and other operating
properties as these taxes are included in Net income from assets held for
sale as described in Discontinued Operations.

Property and Equipment and Other Assets

Depreciation expense of $415,658 and $355,484 was recorded for the six
months ended June 30, 2003 and 2002, respectively. Amortization of loan
fees, which is included in interest expense, of $0 and $41,667 was recorded
for the six months ended June 30, 2003 and 2002, respectively.
Depreciation expense of $130,057 and $158,871 was recorded for the three
months ended June 30, 2003 and 2002, respectively. Amortization of loan
fees, which is included in interest expense, of $0 and $12,500 was recorded
for the three months ended June 30, 2003 and 2002, respectively.

Partnership Distributions

During February 2003, the Partnership made a distribution of
$20,200,000 to its Holders of Interest ($50.00 per Interest) and $2,244,444
for 2002 to the General Partner and Associate Limited Partners,
collectively.

During October 2002, the Partnership made a distribution of
$40,400,000 to its Holders of Interests ($100.00 per Interest) and
$4,488,889 to the General Partner and Associate Limited Partners,
collectively.

During April 2002, the Partnership made a distribution of $30,300,000
to its Holders of Interests ($75.00 per Interest) and $3,366,667 to the
General Partner and Associate Limited Partners, collectively.

During January 2002, the Partnership made a distribution for 2001 of
$80,800,000 to its Holders of Interests ($200.00 per Interest) and
$8,977,778 to the General Partner and Associate Limited Partners,
collectively.

Reclassifications

Certain reclassifications have been made to the 2002 financial
statements to conform to the 2003 presentation.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the amounts reported or
disclosed in the financial statements and accompanying notes. Actual
results could differ from those estimates.

RESTRICTED CASH

Restricted cash are amounts restricted under various escrow agreements
as well as cash which collateralizes letters of credit. The reduction in
restricted cash is due to a release of collateral securing certain of these
letters of credit.

NOTES AND MORTGAGES PAYABLE

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 consisted of a $75 million term loan, a $20
million revolving line of credit and a $5 million letter of credit
facility, all of which matured on July 31, 2001. The term loan, which was
paid off in December 2000, and the letter of credit facility were not
renewed. 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.

In May 2000, the Partnership closed on a $20 million loan with First
Union National Bank for the development and construction of the Shoppes, 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 sheet at December 31, 2002. Interest on the loan
(asmodified 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 paid 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 were paid in
February 2003 out of the proceeds from the sale of the Shoppes.

TRANSACTIONS WITH AFFILIATES

The Partnership, subject to certain limitations, may engage affiliates
of the General Partner for insurance brokerage and certain other
administrative services to be performed in connection with the
administration of the Partnership and its assets. The total of such costs
for the six months ended June 30, 2003 was approximately $86,600 all of
which was paid as of August 1, 2003. The total of such costs for the six
months ended June 30, 2002 was approximately $20,300. In addition, the
General Partner and its affiliates are entitled to reimbursements for
salaries and salary-related costs relating to the administration of the
Partnership and the operation of the Partnership's properties. Such costs
were approximately $244,100 and $216,600 for the six months ended June 30,
2003 and 2002, respectively, all of which were paid as of August 1, 2003.

The Partnership receives reimbursements from or reimburses other
affiliates of the General Partner engaged in real estate activities for
certain general and administrative costs including, and without limitation,
salaries and salary-related costs relating to work performed by employees
of the Partnership and certain out-of-pocket expenditures incurred on
behalf of such affiliates. For the six month period ended June 30, 2003,
the amount of such costs incurred by the Partnership on behalf of these
affiliates totaled approximately $43,300. At June 30, 2003, approximately
$900 was owed to the Partnership, all of which was received as of August 1,
2003. For the six month period ended June 30, 2002, the Partnership was
entitled to reimbursements of approximately $13,600.

For the six month periods ended June 30, 2003 and 2002, the
Partnership reimbursed St. Joe/Arvida Company, L.P. ("St. Joe/Arvida") or
its affiliates approximately $5,186,000 and $2,784,000, respectively, for
the services provided to the Partnership by St. Joe/Arvida pursuant to a
sub-management agreement for development and management supervisory and
advisory services (and personnel with respect thereto). On January 1, 2003
certain employees of the Partnership became employees of St. Joe/Arvida.
Therefore, a significant portion of the expense related to this
reimbursement to St. Joe/Arvida was a direct operating expense of the
Partnership for the six months ended June 30, 2002. At June 30, 2003, the
Partnership owed St. Joe/Arvida approximately $19,500 for services provided
pursuant to this agreement, all of which was paid as of August 1, 2003.
The Partnership also receives reimbursement from St. Joe/Arvida and its
affiliates for certain general and administrative costs including, and
without limitation, salaries and salary-related costs relating to work
performed by employees of the Partnership on behalf of St. Joe/Arvida and
its affiliates. For the six month periods ended June 30, 2003 and 2002,
the Partnership was entitled to reimbursement of such costs totaling
approximately $2,583,000 and $3,066,400, respectively, from St. Joe/Arvida
and its affiliates. Of this amount, approximately $278,400 was owed to the
Partnership at June 30, 2003, all of which was received as of August 1,
2003.

The Partnership received reimbursement from St. Joe/Arvida and its
affiliates for the use of certain equipment and property owned by the
Partnership. The net reimbursement received by the Partnership for the six
month periods ended June 30, 2003 and 2002 was approximately $27,000 and
$0, respectively.

In July 2003, affiliates of JMB Realty Corporation sold their interest
in St. Joe/Arvida to an affiliate of The St. Joe Company. Such sale did
not involve the sale of any assets of the Partnership, the sale of the
General Partner's interest in the Partnership, nor the sub-management
agreement for the services provided to the Partnership by St. Joe/Arvida.

The Partnership pays for certain general and administrative costs on
behalf of its clubs, homeowner associations and maintenance associations
(including salaries and salary-related costs and legal fees). The
Partnership receives reimbursements from these entities for such costs.
For the six month periods ended June 30, 2003 and 2002, the Partnership was
entitled to receive approximately $0 and $47,500, respectively, from these
entities, all of which was received.

The Partnership, pursuant to certain agreements, provides management
and other personnel and services to certain of its homeowners associations.

Pursuant to these agreements, the Partnership is entitled to receive
management fees for the services provided to these entities. Due to the
timing of the cash flows generated from these entities' operations, such
fees are typically paid in arrears. For the six months ended June 30, 2003
and 2002, the Partnership was entitled to receive approximately $65,700 and
$263,000, respectively, all of which was received as of August 1, 2003.

In February 2003, the General Partner and Associate Limited Partners,
collectively, received cash distributions in the aggregate amount of
$2,244,444. In January 2002, the General Partner and Associate Limited
Partners, collectively, received cash distributions from the Partnership in
the aggregate amount of $8,977,778. In April 2002, the General Partner and
Associate Limited Partners, collectively, received cash distributions in
the aggregate amount of $3,366,667. In October 2002, the General Partner
and Associate Limited Partners, collectively, received cash distributions
in the aggregate amount of $4,488,889.

All amounts receivable from or payable to the General Partner or its
affiliates do not bear interest and are expected to be paid in future
periods.

COMMITMENTS AND CONTINGENCIES

As security for performance of certain development obligations, the
Partnership is contingently liable under performance bonds for
approximately $8,373,000 at June 30, 2003. In addition, certain joint
ventures in which the Partnership holds an interest are also contingently
liable under performance bonds for approximately $306,100 at June 30, 2003.

On August 29, 2002, the Partnership entered into an agreement with St.
Joe/Arvida for the prospective assignment to and assumption by St.
Joe/Arvida of the Partnership's rights and obligations under the lease for
its offices (approximately 19,100 rentable square feet of space) in Boca
Raton, Florida. The Partnership currently expects that the assignment and
assumption will be modified to be made effective January 1, 2004.

Rental expense of $546,500 and $902,100 was incurred for the six month
periods ended June 30, 2003 and 2002, respectively.

The Partnership was named a defendant in a number of homeowner
lawsuits, certain of which purported to be class actions, that allegedly in
part arose out of or related to Hurricane Andrew, which on August 24, 1992
resulted in damage to a former community development known as Country Walk.

Other than for the Juarez and Lakes of the Meadow lawsuits discussed
below, these lawsuits have been settled, and United States Fire Insurance
Company (whether acting on its own behalf or for its affiliates, "U.S.
Fire"), one of the Partnership's insurance carriers that has paid for
settlements of these lawsuits, has in some, but not all, instances,
provided the Partnership with written reservation of rights letters. The
aggregate amount of the settlements funded by this carrier is approximately
$10.1 million. U.S. Fire has stated that it has funded these settlements
pursuant to various non-waiver agreements. U.S Fire's position was that
these non-waiver agreements permitted the carrier to fund the settlements
without preventing it from raising insurance coverage issues or waiving
such coverage issues. On May 23, 1995, U.S. Fire rescinded the various
non-waiver agreements currently in effect regarding certain of these
lawsuits, allegedly without waiving any future coverage defenses,
conditions, limitations, or rights. For this and other reasons, the extent
to which U.S. Fire may recover any of its settlement payments or associated
fees and costs from the Partnership is uncertain. The Partnership believes
that a material loss for the Partnership as a result of U.S. Fire's
reservations of rights and its funding of the settlement payments is

remote, although there is no assurance that the Partnership will not
ultimately pay or reimburse the insurance carrier for some portion of the
settlement payments or associated fees or costs. The accompanying
consolidated financial statements do not reflect any accrual related to
this matter.

The Partnership is a defendant in an insurance subrogation matter. On
or about May 10, 1996, a subrogation claim entitled Juarez v. Arvida
Corporation et al., Case No. 96-09372 CA13 was filed in the Circuit Court
of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida.
Plaintiffs filed this suit for the use and benefit of American Reliance
Insurance Company ("American Reliance"). In this suit, plaintiffs seek to
recover damages, pre-and post-judgment interest, costs and any other relief
the court may deem just and proper in connection with $3,200,000 American
Reliance allegedly paid on specified claims at Country Walk in the wake of
Hurricane Andrew. The Walt Disney Company ("Disney") is also a defendant
in this suit. The Partnership is advised that the amount of this claim
that allegedly relates to units it sold is approximately $350,000. The
Partnership is being defended by U.S. Fire. The Partnership believes that
a material loss for the Partnership as a result of this lawsuit is remote.
The accompanying consolidated financial statements do not reflect any
accruals related to this matter.

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 Associations,
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 Miami-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 amended
complaint, plaintiffs have sought 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 November 21, 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 on May 29, 2002, 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
U.S. Fire. During 2001, the Partnership settled the claims brought in
connection with Lakes of the Meadow Village Homes Condominium No. Eight
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
for most of its condominium units and is in the process of engaging a
general contractor for the work. 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.

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 U.S. Fire
does not pay these costs, the Partnership expects to fund these costs under
the circumstances and seek reimbursement from U.S. Fire.

The Partnership has applied the accounting rules concerning loss
contingencies in regard to the treatment of this matter for financial
reporting purposes.

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 including amounts expended and to be expended in
connection with the complete resolution of the construction issues for
Association No. 8 (hereinafter, the "Lakes of the Meadow Matter"); actual
damages, including full indemnification for the Lakes of the Meadow Matter;
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 Meadow Matter. The Partnership filed a motion to discuss the
Florida federal case because it did not believe the court had diversity
jurisdiction to adjudicate this matter. On June 17, 2003, U.S. Fire filed
a notice of voluntary dismissal and the Florida federal case was dismissed
without prejudice on the same day.

In a December 20, 2002 letter, the Partnership's excess insurance
carrier, The Home Insurance Company (the "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
Matter 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 Matter; 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 was 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 filed a motion to remand the Illinois federal case to the
Illinois state court because the Partnership did not believe that the
federal court had diversity jurisdiction to adjudicate the matter. On
May 8, 2003, the federal court remanded the case back to Illinois state
court.

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. On
June 13, 2003, after a determination was reached that further attempts to
rehabilitate Home would be futile and that Home was insolvent, the court
overseeing the rehabilitation issued an order to liquidate Home. The order
provides, among other things, for the appointment of a liquidator, the
cancellation of all in-force contracts of insurance, the securing of all of
Home's assets, the abatement of all actions and all proceedings against
Home, whether pending in the State of New Hampshire or elsewhere, and an
injunction against the commencement or continuance of actions against Home.

The Partnership is evaluating the effect, if any, that this order may have
on the continued prosecution of the Illinois action as well as the
existence of coverage provided by Home, generally. Given the pending
liquidation, the Partnership believes that it is doubtful that any
substantial recoveries from Home will be obtained.

The Partnership strongly disagrees with the positions taken by U.S.
Fire and Home regarding coverage under the relevant insurance policies and
believes that it is covered under the terms of those policies. However,
for reasons cited above, and others, 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.

The Partnership has been named a defendant in a lawsuit entitled, The
Ridges Maintenance Association, Inc. v. Arvida/JMB Partners, Arvida/JMB
Managers, Inc., Arvida Management Limited Partnership, and CCL Consultants,
Inc., Case No. 0310189, filed on or about June 6, 2003 in the Circuit Court
of the 17th Judicial Circuit in and for Broward County, Florida. Plaintiff
is alleged to be a homeowners' association representing the owners of
approximately 1,500 homes and extensive common areas in the Ridges
subdivision in Weston. In this six count complaint for breach of implied
warranty of merchantability, breach of implied warranty of fitness, breach
of express warranty, fraudulent misrepresentation and concealment,
negligent design, construction and/or maintenance and breach of fiduciary
duty, plaintiff seeks an unspecified dollar amount of compensatory damages,
interest, court costs and such other relief as the court may deem just and
proper. Plaintiff alleges that it evaluated the condition of the common
areas after the turnover of the community in January 2000 and discovered
numerous construction, design and maintenance defects and deficiencies
including, but not limited to, improper planting of inferior quality/grade
of landscaping contrary to prevailing government codes, shallow planting of
landscaping, landscape planting in inappropriate areas, and the planting of
landscaping that would uproot sidewalks. Plaintiff also alleges that prior
to the turnover of the community, the Arvida defendants engaged in a series
of actions that amounted to a breach of their fiduciary duties to plaintiff
by, among other things, improperly failing to pay for all of the common
expenses actually incurred prior to turnover in excess of the assessment
for common expenses and any other funds including working capital,
executing pre-turnover amendments to the declarations of the association
for the Arvida defendants' sole benefit and to the financial detriment of
the plaintiff, engaging in acts which constituted a conflict of interest,
and allegedly improperly transferring funds by and between plaintiff and a
non-party, The Town Foundation, Inc., which was also allegedly under the
control of one or more of the Arvida defendants, all in breach of
defendants' alleged fiduciary duties. The Arvida defendants believe that
they have meritorious defenses. This case has been tendered to Zurich
American Insurance Company ("Zurich"), for defense and indemnity. Zurich
is providing a defense of this matter under a reservation of rights. The
Partnership is unable to determine the ultimate portion of the expenses,
fees, and damages, if any, which will be covered by its insurance.

The Partnership has been named a defendant in a case entitled The
Falls Maintenance Association, Inc. v. Arvida/JMB Partners, Arvida/JMB
Managers, Inc., CCL Consultants, Inc. and Stiles Corporation f/k/a Stiles
Landscape Service Co., Case No. 0302577, filed on or about February 10,
2003, in the 17th Judicial Circuit in and for Broward County, Florida.
Plaintiff is alleged to be the homeowners' association responsible for the
maintenance, repair, and replacement of the common areas within the Falls
subdivision in Weston. Plaintiff complains that on turnover of the Falls
subdivision, it discovered numerous construction, design and maintenance
defects and deficiencies including, but not limited to, the quality/grade
of the landscaping, landscaping planted too shallow, landscaping planted
too deep, landscaping planted in narrow swale areas, landscaping planted in
shallow soil areas, poor fertility of road rock under locations where
landscaping is planted and poor maintenance. Plaintiff has filed a six
count complaint with five counts against the Partnership for breach of
implied warranty of merchantability, breach of implied warranty of fitness,
breach of express warranty, fraudulent misrepresentation/concealment, and
negligent design, construction and/or maintenance. Plaintiff seeks an
unspecified amount of compensatory damages, interest, costs, and such other
and further relief as is just and equitable. Defendants believe that they

have meritorious defenses. This case has been tendered to Zurich for
defense and indemnity. Zurich is providing a defense of this matter under
a reservation of rights. The Partnership is unable to determine the
ultimate portion of the expenses, fees, and damages, if any, which will be
covered by its insurance.

The Partnership has been sued, but not served, in an action entitled
Rothal v. Arvida/JMB Partners Ltd. et al, Case No. 03010709, filed in the
Circuit Court of the 17th Judicial Circuit in and for Broward County,
Florida. In this suit that was filed on or about June 20, 2003, plaintiff
purport to bring a class action allegedly arising out of construction
defects occurring during the development of Camellia Island in Weston.
Plaintiff has filed a fourteen count complaint seeking unspecified general
damages, special damages, statutory damages, prejudgment and post-judgment
interest, costs, attorneys' fees, and such other relief as the court may
deem just and proper. Plaintiff complains, among other things, that the
homes were not built of high quality and adequate construction, that the
homes were not built in conformity with the South Florida Building Code and
plans on file with Broward County, Florida, that the roofs were not
properly attached or were inadequate, that the truss systems and
installation were improper, and that the homes suffer from improper shutter
storm protection systems. The Partnership believes that it has meritorious
defenses. The Partnership is in the process of tendering this matter to
the appropriate insurance carriers.

In 1994, the Partnership was advised by Merrill Lynch that various
investors sought to compel Merrill Lynch to arbitrate claims brought by
certain investors in the Partnership representing approximately 5% of the
total of approximately 404,000 Interests outstanding. Merrill Lynch asked
the Partnership and its General Partner to confirm an obligation of the
Partnership and its General Partner to indemnify Merrill Lynch in these
claims against all loss, liability, claim, damage and expense, including
without limitation attorneys' fees and expenses, under the terms of a
certain Agency Agreement dated September 15, 1987 ("Agency Agreement") with
the Partnership relating to the sale of Interests through Merrill Lynch on
behalf of the Partnership. These claimants sought to arbitrate claims
involving unspecified damages against Merrill Lynch based on Merrill
Lynch's alleged violation of applicable state and/or federal securities
laws and alleged violations of the rules of the National Association of
Securities Dealers, Inc., together with pendent state law claims. The
Partnership believes that Merrill Lynch has resolved some of these claims
through litigation and otherwise, and that Merrill Lynch may be defending
other claims. The Agency Agreement generally provides that the Partnership
and its General Partner shall indemnify Merrill Lynch against losses
occasioned by any actual or alleged misstatements or omissions of material
facts in the Partnership's offering materials used in connection with the
sale of Interests and suffered by Merrill Lynch in performing its duties
under the Agency Agreement, under certain specified conditions. The Agency
Agreement also generally provides, under certain conditions, that Merrill
Lynch shall indemnify the Partnership and its General Partner for losses
suffered by the Partnership and occasioned by certain specified conduct by
Merrill Lynch in the course of Merrill Lynch's solicitation of
subscriptions for, and sale of, Interests. The Partnership is unable to
determine at this time the ultimate investment of investors who have filed
arbitration claims as to which Merrill Lynch might seek indemnification in
the future. At this time, and based upon the information presently
available about the arbitration statements of claims filed by some of these
investors, the Partnership and its General Partner believe that they have
meritorious defenses to the demands for indemnification made by Merrill
Lynch. Although there can be no assurance regarding the outcome of the
demands for indemnification, the Partnership believes that a material loss
for the Partnership as a result of the demands for indemnification by
Merrill Lynch is remote. The accompanying consolidated financial
statements do not reflect any accruals related to this matter.

The Partnership is also a defendant in several other actions brought
against it arising in the normal course of business. It is the belief of
the General Partner, based on knowledge of facts and advice of counsel,
that the claims made against the Partnership in such actions will not
result in any material adverse effect on the Partnership's consolidated
financial position or results of operations.

PART I. FINANCIAL INFORMATION

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

Reference is made to the notes to the accompanying consolidated
financial statements ("Notes") contained in this report for additional
information concerning the Partnership and its operations.

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 (discussed below) 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 the date of this report. 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 Interests 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,
(including, without limitation, contingencies relating to potential
homeowner warranty claims) additional or unanticipated remedial
construction or development costs, delays in resolving pending or
threatened litigation or potential claims, delays in satisfying conditions
or obligations under permits obtained by the Partnership, including those
for mitigation for the Weston Increment III area, 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 the Holders of a majority of the outstanding 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.

At August 1, 2003, the Partnership has completed construction and
closed on the sale of all remaining housing units to be built by the
Partnership. The Partnership's remaining assets include tangible personal
property including vehicles and furniture, fixtures and equipment used in
the Partnership's operations, receivables, and certain contract rights.

On May 23, 2003, the Partnership, through certain consolidated
entities, closed on the sale of the Town Center Parcel to an unaffiliated
third party. The gross sale price of the Town Center Parcel was
$1,200,000. Net cash proceeds received from the sale after prorations and
closing costs totaled approximately $982,000. The sale resulted in a gain
of approximately $354,000 for financial reporting purposes and Federal
income tax purposes.

On May 23, 2003, the Partnership, through certain consolidated
entities, closed on the sale of two commercial office building units in
Weston. The gross sales price of the units was $348,000. Net cash
proceeds received from the sale after proration and closing costs totaled
approximately $312,000. The sale resulted in a loss of approximately
$177,000 for financial reporting purposes and Federal income tax purposes.

On February 7, 2003, the Partnership through certain consolidated
entities (collectively, the "Seller"), closed on the sale 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, 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 undertook certain indemnity obligations for the benefit of the Buyer
or its lender. In general, these obligations relate to indemnification
against loss, costs or expenses arising out of a breach of representation
or warranty, possible claims of tenants, certain rent obligations,
restrictions on the leasing or use of the property, litigation relating to
the property, claims occurring or accruing prior to the closing and certain
other usual and customary matters. Some of these indemnity obligations
will terminate as to claims made after the first anniversary date of the
sale while other of these indemnity obligations have no specified
termination. The Seller deposited $100,000 and the Buyer deposited $50,000
in escrow to secure the obligation to indemnify the Buyer's lender. The
Seller also deposited $50,000 in escrow as security for completion of
remediation work for compliance with the Americans with Disabilities Act.
The Partnership has recorded a liability of approximately $161,000 for
these indemnity obligations at June 30, 2003. 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 $1,365,000 for financial reporting purposes and a gain of
approximately $1,835,000 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 (i) made certain representations, warranties and
covenants for the benefit of the purchaser concerning the sellers and the
Country Club and its business and operations and (ii) agreed to indemnify
the purchaser against third party claims or causes of actions in connection
with the sellers' ownership or operation of the Country Club and occurring
or accruing prior to the closing as well as against certain other usual and
customary matters. In general, the representations, warranties and
covenants will survive for one year from the date of closing while the
indemnity obligations have no express termination. The maximum potential
amount of these obligations is generally $1,000,000. 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 sheets at June 30,
2003 and at December 31, 2002. No liability has been recorded for these
obligations. 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.

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 Country
Club and the Shoppes, possible development or construction repairs or
remedial work, homeowner warranty claims, completion of work or possible
remediation 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 currently seeking to sell its remaining assets by
no later than the end of 2004. However, 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 sell or otherwise dispose of
the Partnership's 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. In
addition, as noted above, additional or unanticipated remedial construction
or development costs, delays in resolving pending or threatened litigation
or potential claims, delays in satisfying conditions or obligations under
permits obtained by the Partnership, including those for mitigation for the
Weston Increment III area, 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 June 30, 2003 and December 31, 2002, the Partnership had
unrestricted Cash and cash equivalents of approximately $89,289,000 and
$88,969,000, respectively. At July 31, 2003, the Partnership had
unrestricted Cash and cash equivalents of approximately $88,537,000. Cash
and cash equivalents are available for working capital requirements,
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.

During February 2003, the Partnership made a distribution for 2002
totaling approximately $22,444,000, of which $20,200,000 was distributed to
the Holders of Interests ($50 per Interest), and approximately $2,244,000
was distributed to the General Partner and Associate Limited Partners,
collectively. During October 2002, the Partnership made a distribution of
$40,400,000 to its Holders of Interests ($100.00 per Interest) and
$4,488,889 to the General Partner and Associate Limited Partners,
collectively. During April 2002, the Partnership made a distribution of
$30,300,000 to its Holders of Interests ($75.00 per Interest) and
$3,366,667 to the General Partner and Associate Limited Partners,
collectively. During January 2002, the Partnership made a distribution for
2001 of $80,800,000 to its Holders of Interests ($200.00 per Interest) and
$8,977,778 to the General Partner and Associate Limited Partners,
collectively.

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 consisted of a $75 million term loan, a $20
million revolving line of credit and a $5 million letter of credit
facility, all of which matured on July 31, 2001. The term loan, which was
paid off in December 2000, and the letter of credit facility were not
renewed. 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.

In May 2000, the Partnership closed on a $20 million mortgage loan
with First Union National Bank for the development and construction of the
Shoppes. 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
sheet at December 31, 2002. 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 paid 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 were paid in February 2003 out of the proceeds
from the sale of the Shoppes.

In January 2003, CMG Partners, LLC ("CMG") made an offer to purchase
up to 4.9% of the outstanding Interests for $100 per Interest. In
addition, in February 2003, First Commercial Guaranty ("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 were scheduled to
expire in April and March 2003, respectively, subject to earlier
termination.

In April 2003, CMG made another offer to purchase up to 4.9% of the
outstanding Interests for $75 per Interest (which took into account the
Partnership's distribution of $50 per Interest to Holders of Interests at
the end of February 2003). The General Partner, on behalf of the
Partnership, determined that this offer was inadequate and not in the best
interests of Holders of Interests. Accordingly, the General Partner
recommended that Holders of Interests reject this offer and not tender
their Interests to CMG. This offer was scheduled to expire at the end of
July 2003, subject to earlier termination.

RESULTS OF OPERATIONS

The results of operations for the six months ended June 30, 2003 and
2002, are primarily attributable to the development and sale of the
Partnership's remaining assets.

The decrease in balance sheets components such as trade and other
receivables, inventories, prepaid expenses and other assets, and deposits
at June 30, 2003 as compared to December 31, 2002 is attributable to the
ongoing orderly liquidation of the Partnership's assets as previously
discussed. The decrease in assets held for sale and related liabilities is
primarily attributable to the sale of the Shoppes and payment of the
mortgage loan secured by the property out of the sale proceeds in February
2003. The decrease in Accrued expenses and other liabilities is primarily
due to the payment of approximately $3,200,000 of accrued bonus and
incentive compensation for the period ended June 30, 2003.

For the three months ended June 30, 2003, the Partnership (including
its consolidated and unconsolidated ventures) closed on the sale of the
remaining 64 housing units, the remaining two commercial office building
units, and a land parcel in Weston (the Town Center parcel). This compares
to closings in the second quarter of 2002 of 269 housing units and one
commercial office building unit. As of June 30, 2003, there were no
outstanding contracts ("backlog"). As of June 30, 2002, there were only
146 housing units not under contract.

Housing revenues and gross operating profit margins from housing
operations decreased for the three and six month periods ended June 30,
2003 as compared to the same periods in 2002, due to the significant
decrease in the number of units closed, a change in the estimate resulting
in an increase in the warranty reserve, and a change in the mix of product
sold. The average per unit sales price was approximately $183,000 for the
six months ended June 30, 2003 as compared to approximately $306,000 for
the same period in 2002. Revenues generated from the closing of units in
Weston account for 100% of the housing revenues recognized for the six
months ended June 30, 2003 and 2002.

At August 1, 2003, the Partnership has completed construction and
closed on the sale of all remaining housing units to be built by the
Partnership. The Partnership's remaining assets include tangible personal
property including vehicles and furniture, fixtures and equipment used in
the Partnership's operations, receivables and certain contract rights.

The decrease in revenues from Brokerage and other operations for the
three and six months ended June 30, 2003 as compared to the same periods in
2002 is due primarily to a decrease in fees earned from the Partnership's
mortgage brokerage operations due to a decrease in the number of housing
units closed.

Selling, general and administrative expenses decreased for the three
and six months ended June 30, 2003 as compared to the same periods in 2002
due primarily to decreased marketing, support service costs, and project
administrative costs resulting from the final stage of development of the
Partnership's Weston Community.

Interest income decreased during the six months ended June 30, 2003 as
compared to the same period in 2002 due primarily to the decline in
interest rates on invested funds.

Net income from assets held for sale decreased during the three and
six months ended June 30, 2003 as compared to the same periods in 2002 due
primarily to the sale of the Shoppes during February 2003 and the sale of
the Country Club in October 2002. For the six months ended June 30, 2003
and 2002, net income from assets held for sale was $353,491 and $2,222,454,
respectively. For the three months ended June 30, 2003 and 2002, net
income from assets held for sale was $36,400 and $1,256,211, respectively.

Gain on sale of assets held for sale during the six months ended
June 30, 2003 is due to gain from the sale of the Town Center parcel and
the Shoppes partially offset by a loss on the sale of two commercial office
building units in Weston. The loss on sale of assets held for sale during
the six months ended June 30, 2002 was due to the sale of three commercial
office building units in Weston. For the three months ended June 30, 2003,
gain on sale of assets held for sale was due to the sale of the Town Center
parcel partially offset by a loss on the sale of two commercial office
building units in Weston. For the three months ended June 30, 2002, loss
on sale of assets held for sale was due to the sale of a commercial office
building unit in Weston.

ITEM 4. CONTROLS AND PROCEDURES

Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-15 of
the Securities Exchange Act of 1934 (the "Exchange Act") promulgated
thereunder, the principal executive officer and the principal financial
officer of the Partnership have evaluated the effectiveness of the
Partnership's disclosure controls and procedures as of the end of the
period covered by this report. Based on such evaluation, the principal
executive officer and the principal financial officer have concluded that
the Partnership's disclosure controls and procedures were effective as of
the end of the period covered by this report to ensure that information
required to be disclosed in this report was recorded, processed, summarized
and reported within the time period specified in the applicable rules and
form of the Securities and Exchange Commission for this report.

PART II - OTHER INFORMATION

ITEM 1. 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 amended complaint,
plaintiffs have sought 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 November 21,
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 on May 29, 2002, 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 Meadow Village Homes
Condominium No. Eight 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 for most of its condominium units and is in the
process of engaging a general contractor for the work. 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.

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 U.S. Fire
does not pay these costs, the Partnership expects to fund these costs under
the circumstances and seek reimbursement from U.S. Fire.

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 including amounts expended and to be expended in
connection with the complete resolution of the construction issues for
Association No. 8 (hereinafter, the "Lakes of the Meadow Matter"); actual
damages, including full indemnification for the Lakes of the Meadow Matter;
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 Meadow Matter. The Partnership filed a motion to dismiss the
Florida federal case because it did not believe the court had diversity
jurisdiction to adjudicate this matter. On June 17, 2003, U.S. Fire filed
a notice of voluntary dismissal and the Florida federal case was dismissed
without prejudice on the same day.

In a December 20, 2002 letter, the Partnership's excess insurance
carrier, The Home Insurance Company (the "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
Matter 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 Matter; 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 was 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 filed a motion to remand the Illinois federal case to the
Illinois state court because the Partnership did not believe that the
federal court had diversity jurisdiction to adjudicate the matter. On
May 8, 2003, the federal court remanded the case back to Illinois state
court.

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. On
June 13, 2003, after a determination was reached that further attempts to
rehabilitate Home would be futile and that Home was insolvent, the court
overseeing the rehabilitation issued an order to liquidate Home. The order
provides, among other things, for the appointment of a liquidator, the
cancellation of all in-force contracts of insurance, the securing of all of
Home's assets, the abatement of all actions and all proceedings against
Home, whether pending in the state of New Hampshire or elsewhere, and an
injunction against the commencement or continuance of actions against Home.

The Partnership is evaluating the effect, if any, that this order may have
on the continued prosecution of the Illinois action as well as the
existence of coverage provided by Home, generally. Given the pending
liquidation, the Partnership believes that it is doubtful that any
substantial recoveries from Home will be obtained.

The Partnership strongly disagrees with the positions taken by U.S.
Fire and Home regarding coverage under the relevant insurance and believes
that it is covered under the terms of those policies. However, for the
reasons cited above, and others, 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.

The Partnership has been named a defendant in a lawsuit entitled, The
Ridges Maintenance Association, Inc. v. Arvida/JMB Partners, Arvida/JMB
Managers, Inc., Arvida Management Limited Partnership, and CCL Consultants,
Inc., Case No. 0310189, filed on or about June 6, 2003 in the Circuit Court
of the 17th Judicial Circuit in and for Broward County, Florida. Plaintiff
is alleged to be a homeowners' association representing the owners of
approximately 1,500 homes and extensive common areas in the Ridges
subdivision in Weston. In this six count complaint for breach of implied
warranty of merchantability, breach of implied warranty of fitness, breach
of express warranty, fraudulent misrepresentation and concealment,
negligent design, construction and/or maintenance and breach of fiduciary
duty, plaintiff seeks an unspecified dollar amount of compensatory damages,
interest, court costs and such other relief as the court may deem just and

proper. Plaintiff alleges that it evaluated the condition of the common
areas after the turnover of the community in January 2000 and discovered
numerous construction, design and maintenance defects and deficiencies
including, but not limited to, improper planting of inferior quality/grade
of landscaping contrary to prevailing government codes, shallow planting of
landscaping, landscape planting in inappropriate areas, and the planting of
landscaping that would uproot sidewalks. Plaintiff also alleges that prior
to the turnover of the community, the Arvida defendants engaged in a series
of actions that amounted to a breach of their fiduciary duties to plaintiff
by, among other things, improperly failing to pay for all of the common
expenses actually incurred prior to turnover in excess of the assessment
for common expenses and any other funds including working capital,
executing pre-turnover amendments to the declarations of the association
for the Arvida defendants' sole benefit and to the financial detriment of
the plaintiff, engaging in acts which constituted a conflict of interest,
and allegedly improperly transferring funds by and between plaintiff and a
non-party, The Town Foundation, Inc., which was also allegedly under the
control of one or more of the Arvida defendants, all in breach of
defendants' alleged fiduciary duties. The Arvida defendants believe that
they have meritorious defenses. This case has been tendered to Zurich
American Insurance Company ("Zurich"), for defense and indemnity. Zurich
is providing a defense of this matter under a reservation of rights. The
Partnership is unable to determine the ultimate portion of the expenses,
fees, and damages, if any, which will be covered by its insurance.

The Partnership has been named a defendant in a case entitled The
Falls Maintenance Association, Inc. v. Arvida/JMB Partners, Arvida/JMB
Managers, Inc., CCL Consultants, Inc. and Stiles Corporation f/k/a Stiles
Landscape Service Co., Case No. 0302577, filed on or about February 10,
2003, in the 17th Judicial Circuit in and for Broward County, Florida.
Plaintiff is alleged to be the homeowners' association responsible for the
maintenance, repair, and replacement of the common areas within the Falls
subdivision in Weston. Plaintiff complains that on turnover of the Falls
subdivision, it discovered numerous construction, design and maintenance
defects and deficiencies including, but not limited to, the quality/grade
of the landscaping, landscaping planted too shallow, landscaping planted
too deep, landscaping planted in narrow swale areas, landscaping planted in
shallow soil areas, poor fertility of road rock under locations where
landscaping is planted and poor maintenance. Plaintiff has filed a six
count complaint with five counts against the Partnership for breach of
implied warranty of merchantability, breach of implied warranty of fitness,
breach of express warranty, fraudulent misrepresentation/concealment, and
negligent design, construction and/or maintenance. Plaintiff seeks an
unspecified amount of compensatory damages, interest, costs, and such other
and further relief as is just and equitable. Defendants believe that they
have meritorious defenses. This case has been tendered to Zurich for
defense and indemnity. Zurich is providing a defense of this matter under
a reservation of rights. The Partnership is unable to determine the
ultimate portion of the expenses, fees, and damages, if any, which will be
covered by its insurance.

The Partnership has been sued, but not served, in an action entitled
Rothal v. Arvida/JMB Partners Ltd. et al, Case No. 03010709, filed in the
Circuit Court of the 17th Circuit in and for Broward County, Florida. In
this suit that was filed on or about June 20, 2003, plaintiff purport to
bring a class action allegedly arising out of construction defects
occurring during the development of Camellia Island in Weston. Plaintiff
has filed a fourteen count complaint seeking unspecified general damages,
special damages, statutory damages, prejudgment and post-judgment interest,
costs, attorneys' fees, and such other relief as the court may deem just
and proper. Plaintiff complains, among other things, that the homes were
not built of high quality and adequate construction, that the homes were
not built in conformity with the South Florida Building Code and plans on
file with Broward County, Florida, that the roofs were not properly
attached or were inadequate, that the truss systems and installation were
improper, and that the homes suffer from improper shutter storm protection
systems. The Partnership believes that it has meritorious defenses. The
Partnership is in the process of tendering this matter to the appropriate
insurance carriers.

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 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

3.1. Amended and Restated Agreement of Limited Partnership.*

3.2. Acknowledgment and Amendment of Partnership Agreement.*

3.3. Assignment Agreement by and among the General Partner, the
Initial Limited Partner and the Partnership.*

31. Certifications pursuant to Rule 13a-14(a)/15d-14(a) of the
Securities and Exchange Commission are filed herewith.

32. Certifications pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are
filed herewith.

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

* Previously filed with the Securities and Exchange
Commission as Exhibits 3.1, 3.2 and 3.3, respectively, to the
Partnership's Form 10-Q/A Report (File No. 0-16976) filed on
June 6, 2002 and incorporated herein by reference.

(b) No reports on Form 8-K have been filed during the
quarter for which this report is filed.

SIGNATURES

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

ARVIDA/JMB PARTNERS, L.P.

BY: Arvida/JMB Managers, Inc.
(The General Partner)

By: GAILEN J. HULL
Gailen J. Hull, Vice President
Date: August 25, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on behalf of Arvida/JMB Partners, L.P. by the
following person in the capacities and on the date indicated.

By: GAILEN J. HULL
Gailen J. Hull, Chief Financial Officer
and Principal Accounting Officer
Date: August 25, 2003

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