ARVIDA JMB PARTNERS L P - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the Fiscal Year
Ended December 31, 2004 Commission file no. 0-16976

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

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

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

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

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

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

None None

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

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

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

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

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

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

Documents Incorporated by Reference

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

TABLE OF CONTENTS

Page
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PART I

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

Item 2. Properties . . . . . . . . . . . . . . . . . 4

Item 3. Legal Proceedings. . . . . . . . . . . . . . 5

Item 4. Submission of Matters to a
Vote of Security Holders . . . . . . . . . . 9

PART II

Item 5. Market for the Registrant's Common Equity,
Related Security Holder Matters and
Issuer Purchases of Equity Securities. . . . 10

Item 6. Selected Financial Data. . . . . . . . . . . 11

Item 7. Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . 13

Item 7A. Quantitative and Qualitative
Disclosures About Market Risk. . . . . . . . 19

Item 8. Financial Statements and
Supplementary Data . . . . . . . . . . . . . 20

Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . 47

Item 9A. Controls and Procedures. . . . . . . . . . . 47

PART III

Item 10. Director and Executive Officers of
the Registrant . . . . . . . . . . . . . . . 47

Item 11. Executive Compensation . . . . . . . . . . . 49

Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Security
Holder Matters . . . . . . . . . . . . . . . 49

Item 13. Certain Relationships and
Related Transactions . . . . . . . . . . . . 51

Item 14. Principal Accountant Fees and Services . . . 53

PART IV

Item 15. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K . . . . . 54

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 56

i

PART I

ITEM 1. BUSINESS

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

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

Pursuant to Section 5.5J of the Partnership's Amended and Restated
Agreement of Limited Partnership (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 Agreement
providing for an extension of the term of the Partnership's liquidation
period to not later than October 31, 2005. In addition, under the terms of
the Amendment, Arvida/JMB Managers, Inc., the General Partner of the
Partnership, is authorized, in its sole discretion, to complete the
liquidation of the Partnership by forming a liquidating trust (the
"Liquidating Trust") and contributing any remaining Partnership assets to
the Liquidating Trust subject to all outstanding obligations and
liabilities of the Partnership. In November 2002, 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.

As noted above, 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 trustee or trustees of the
Liquidating Trust could be an officer or officers of the General Partner or
an affiliate of the General Partner. The remaining Partnership assets
would be contributed to the Liquidating Trust subject to all outstanding
obligations and liabilities of the Partnership. The General Partner,
Associate Limited Partners and Holders of Interests would receive
beneficial interests in the Liquidating Trust in proportion to their
respective interests in the Partnership. Subsequently, after liquidating
any remaining non-cash assets and providing for the payment or satisfaction
of all such obligations and liabilities, the trustee(s) of the Liquidating
Trust would distribute any remaining proceeds to the General Partner,
Associate Limited Partners and Holders of Interests in proportion to their
respective interests in the Liquidating Trust.

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 possible construction repairs,
homeowner warranty claims, completion of work for certain homeowner
associations and master associations and pending and possible future
litigation and environmental matters. The amount of funds to be retained
in reserve for these purposes has not yet been determined. The Partnership
currently expects that any available funds in excess of the amount
determined to be held in reserve would be distributed during 2005 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.

Prior to the Partnership's orderly liquidation, the assets of the
Partnership consisted principally of interests in land developed into
master-planned residential communities (the "Communities"), and, to a
lesser extent, commercial properties; accounts receivable; construction,
brokerage and other support businesses; real estate assets held for
investment and certain club and recreational facilities. The Partnership
was principally engaged in the development of comprehensively planned
resort and primary home Communities containing a diversified product mix
designed for the middle and upper income segments of the various markets in
which the Partnership operated. The Communities were located primarily
throughout the State of Florida, with Communities also located near
Atlanta, Georgia and Highlands, North Carolina. In addition, the
Partnership, directly or through certain subsidiaries, provided development
and management services to the homeowners associations within the
Communities.

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, in addition to its cash and cash
equivalents, tangible personal property including vehicles and furniture,
fixtures and equipment used in the Partnership's warranty operations, a
receivable, and certain contract rights, including an interest in a joint
venture that owns a 2.5 acre commercial parcel in Ocala, Florida. The
Partnership expects to sell all of its remaining tangible saleable assets
prior to October 31, 2005. However, there can be no assurance that the
sale of all assets will take place, if at all, prior to the formation of
the Liquidating Trust.

During 2004, the Partnership had no closings as all housing units were
closed as of June 30, 2003. During 2003 the Partnership closed on the sale
of 128 townhomes in the Partnership's Weston Community, which were the last
remaining housing units to be built by the Partnership. Also during 2003,
the Partnership sold The Shoppes of Town Center (the "Shoppes"), a mixed-
use retail/office plaza consisting of approximately 158,000 net leasable
square feet in Weston, a land parcel adjacent to the Shoppes, two
commercial office building units in Weston, a small land parcel in Boca
Raton, Florida and two small land parcels located in the City of Weston,
Florida, each containing a billboard monument sign. The Partnership has
minor holdings in miscellaneous parcels of land that are primarily remnants
with little or no market value.

In 1996 the Partnership obtained, or caused to be obtained, certain
permits from the United States Army Corps of Engineers (the "Corps"), the
Florida Department of Environmental Protection ("FDEP") and the Broward
County Department of Natural Resource Protection ("BCDNRP") in connection
with the Partnership's development of approximately 1,166 acres in
Increment III of the Weston Community, certain portions of which were
environmentally sensitive and had been subject to protection as wetlands.
The Partnership was named as a co-permittee along with the Indian Trace
Development District (the predecessor to the City of Weston) on the permits

issued by the Corps and BCDNRP, with the Indian Trace Development District
named as sole permittee on the permit issued by FDEP. In order to obtain
these permits, the Partnership developed a plan for mitigation of
approximately 1,553 other acres of wetlands. The mitigation plan requires
improvement of the function and value of the wetlands, including
development of refuge habitat areas, and ongoing maintenance and monitoring
of the same. In general, the permits require, among other things, the
achievement in each of three consecutive years of specific amounts of
wetlands functional value credits in the five parcels included in the
mitigation area. Under an agreement entered into with the City of Weston
(as the successor to the Indian Trace Development District, the original
party to the agreement), in general, the Partnership contributed the land
for the mitigation area and has been providing the technical expertise
necessary to obtain the permits and implement their conditions to achieve
the specified wetlands functional value credits for the mitigation area.
Among other things, the City of Weston has agreed to assume perpetual
maintenance of the mitigation area when success has been achieved.

During at least the 18 consecutive months ending in the Fall 2003, the
most recent period for which information has been compiled, each of the
five parcels in the mitigation area has achieved wetlands functional value
credits equal to or in excess of the required amount for such parcel.
(During the 12 months (the "Spring 2002 Period") preceding this 18-month
period, the five parcels collectively, and most, but not all, of the five
parcels individually, achieved wetlands functional value credits equal to
or in excess of the required amounts.) The Partnership currently expects
that the mitigation area (including each of its parcels) will achieve the
requisite wetland functional value credits for the three consecutive years
ending in the Spring 2005. In addition, the Partnership is seeking a
determination by both the Corps and BCDNRP that any technical shortfall in
functional value credits that occurred in the Spring of 2002 does not
impair a determination by each agency that the mitigation is in substantial
compliance with permit conditions and as such satisfies the requirements of
the same so that for the three-year period ending in the Spring of 2004,
the permit requirements for the achievement of wetland functional value
credits have been successfully completed. In either event, the Partnership
expects to seek a termination of its involvement under the permits and the
mitigation area through an acknowledgment of the Partnership's release by
the Corps and BCDNRP under their respective permits and an acknowledgment
by the City of Weston of its responsibility for perpetual maintenance of
the mitigation area. The Partnership does not expect that the cost to
achieve the remaining wetlands functional value credits and satisfy other
requirements under the Corps and BCDNRP permits will be a material expense
to the Partnership. However, there is no assurance in regard to the timing
of the Partnership's release under the Corps and BCDNRP permits, including
whether the mitigation area will achieve the requisite wetlands functional
value credits for the three-year period ending in the Spring 2005 (or
whether the Partnership will be able to obtain a waiver for the Spring 2002
Period and have the three-year period ending Spring 2004 satisfy the permit
requirements). In addition, there is no assurance in regard to the timing
or possible expense that may be involved in obtaining an acknowledgment by
the City of Weston of its obligation for the perpetual maintenance of the
mitigation area.

Pursuant to a management agreement with the Partnership, through
December 31, 1997, Arvida Company ("Arvida"), an affiliate of the General
Partner, provided development and management supervisory and advisory
services and the personnel therefor to the Partnership for all of its
projects and operations, subject, in each case, to the overall control of
the General Partner on behalf of the Partnership. Arvida entered into a
sub-management agreement with St. Joe/Arvida Company, LP (now known as St.
Joe Towns & Resorts, LP - "Towns & Resorts LP"), effective January 1, 1998,
whereby Towns & Resorts LP provides (and is reimbursed for) a substantial
portion of the development and management supervisory and advisory services

(and personnel with respect thereto) to the Partnership that Arvida would
have otherwise provided pursuant to its management agreement with the
Partnership. Effective January 1, 1998, Towns & Resorts LP employed most
of the same personnel previously employed by Arvida, and the services
provided to the Partnership pursuant to the sub-management agreement
generally have been provided by the same personnel. Affiliates of JMB
Realty Corporation owned a minority interest in Towns & Resorts LP until
July 2003, when they sold their minority interest to an affiliate of the
St. Joe Company. The St. Joe Company beneficially owns 26.3% of the
outstanding Interests. 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 a change in the submanagement agreement for the services
provided to the Partnership by Towns & Resorts LP.

At March 1, 2005, the Partnership had 5 employees as compared to 7
employees at March 1, 2004. The reduction in employees is consistent with
the orderly liquidation of the Partnership's remaining assets currently in
process. Although the number of employees has been decreasing, the
Partnership has found it necessary to enter into retention agreements with
remaining employees and consulting arrangements with former employees that
have offset, in part, the savings the Partnership has realized from the
reduction in force.

The Partnership currently owns no patents, trademarks, licenses or
franchises other than those trademarks and tradenames in respect of the
names of certain of its Communities. The Arvida name and the service marks
with respect to the Arvida name were owned by Arvida, subject to the
Partnership's non-exclusive right to use the Arvida name and service marks
under a license agreement with Arvida (and subject to the non-exclusive
rights of certain third parties to the use of the name). Towns & Resorts
LP owns the Arvida name and service marks with respect to the Arvida name.
The Partnership has a license agreement with Towns & Resorts LP to use the
Arvida name.

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

ITEM 2. PROPERTIES

The Partnership has completed construction and closed on the sale of
all remaining housing units to be built by the Partnership and has sold or
otherwise disposed of virtually all of its other real estate assets.
Through a joint venture, the Partnership owns a 2.5 acre commercial parcel
in Ocala Florida. A visitor information center is located on the property,
which is leased to an unaffiliated third party. The Partnership is
currently in discussions to sell its ownership interest in this joint
venture to its joint venture partner. However, no definitive agreement has
been reached and there can be no assurance this sale will take place.

ITEM 3. LEGAL PROCEEDINGS

The Partnership was 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 ("Lakes of the Meadow" litigation).
In the lawsuit, plaintiffs sought unspecified damages, attorneys' fees and
costs, recission of specified releases, and all other relief that
plaintiffs might be entitled to at equity or at law on behalf of the 460
building units they allegedly represented for, among other things, alleged
damages discovered in the course of making Hurricane Andrew repairs.
Plaintiffs alleged that Walt Disney World Company was responsible for
liabilities that might arise in connection with approximately 80% of the
buildings at the Lakes of the Meadow Village Homes and that the Partnership
was potentially liable for the approximately 20% remaining amount of the
buildings. In the three count amended complaint, plaintiffs alleged breach
of building codes and breach of implied warranties. The Partnership
tendered this matter to The Walt Disney Company (n/k/a Disney Enterprises,
Inc., "Disney") pursuant to the Partnership's indemnification rights and
filed a third-party complaint against it pursuant to the Partnership's
rights of contractual indemnity. The Partnership also answered the amended
complaint and filed a cross-claim against Disney's affiliate, Walt Disney
World Company, for common law indemnity and contribution. The Partnership
completed settlements in this case with the condominium associations and
their members during the second quarter of 2004.

The Partnership continues to pursue claims for indemnity or
contribution against Disney or its affiliates in connection with the Lakes
of the Meadows Condominium units that were constructed in whole or in part
prior to September 10, 1987 (the date that the Partnership acquired the
assets of Arvida Corporation from Disney) but were sold by the Partnership
on or after that date. The Partnership's claims for indemnity and
contribution have been severed for separate proceedings and trial from the
remaining case-in-chief in the Lakes of the Meadow litigation. No
discovery cutoff or trial date has been set for these claims.

The Partnership sought payment or reimbursement of the foregoing
settlement amounts from U.S. Fire and an excess insurance carrier, The Home
Insurance Company, that is in liquidation proceedings in a four count
complaint filed in Illinois, Arvida/JMB Managers, Inc. on behalf of
Arvida/JMB Partners, L.P. v. United States Fire Insurance Company, et al in
the Circuit Court of Cook County, Illinois, Chancery Division, 02 CH 21001
("Illinois insurance action"). On December 10, 2004, the Partnership and
one of its insurance carriers, U.S. Fire, entered into an agreement (the
"Settlement Agreement") to settle their respective claims against each
other relating to insurance coverage under a policy of insurance for the
period from June 1, 1992 to June 1, 1993 (the "Policy"). The dispute
between the Partnership and U.S. Fire concerned whether the Policy covered
third-party claims asserted against the Partnership in the Lakes of the
Meadow Village matter discussed above and claims asserted against the
Partnership in an insurance subrogation lawsuit involving certain homes in
the Country Walk Community (the "Juarez action") discussed hereinafter.
The Partnership settled the claims asserted against it in the Lakes of the
Meadow matter earlier this year, while the claims asserted in the Juarez
action continue in litigation.

Pursuant to the terms of the Settlement Agreement in December 2004,
U.S. Fire paid the Partnership the settlement amount and the Partnership
dismissed with prejudice U.S. Fire from the Partnership's Illinois
insurance action seeking, among other things, to hold U.S. Fire liable
under the Policy for claims the Partnership paid relating to the Lakes of
the Meadow Village Homes. U.S. Fire has represented to the Partnership
that upon its payment of the settlement amount, U.S. Fire had exhausted the
products/completed operations aggregate limit of coverage under the Policy.

In addition, the Partnership and U.S. Fire released each other for all
past, present and future claims, whether currently known or unknown, that

arise out of or relate in any way to (i) Hurricane Andrew, which struck
Miami-Dade County, Florida on August 24, 1992, and the Policy, and (ii)
insurance coverage under the products/completed operations coverage of the
Policy. U.S. Fire also released any claim for subrogation that it might
have for amounts it has paid or will pay under the Policy and the
Settlement Agreement. The Settlement Agreement supercedes prior discussions
and understandings, both written and oral, between the parties in regard to
their respective claims arising out of or relating to Hurricane Andrew
under the Policy and the discharge and release of the products/completed
operations aggregate limit of the Policy, including without limitation, all
positions taken by U.S. Fire in respect of its reservations of rights in
regard to such claims and all positions taken by the Partnership in regard
to such claims. As a result, the settlement clarifies that the Partnership
has no obligation to reimburse U.S. Fire for any amount that U.S. Fire
previously paid for settlements of various lawsuits arising out of or
relating to Hurricane Andrew. As part of the settlement, the Illinois
action against U.S. Fire was dismissed on December 29, 2004. The U.S. Fire
settlement amount is recorded as a reimbursement of cost of revenues in the
accompanying consolidated statement of operations resulting in an overall
negative cost of revenues because the original Lakes of the Meadows
Settlement was recorded as a charge to cost of revenues.

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 (n/k/a Disney Enterprises, Inc.,
"Disney") is also a defendant in this suit. The Partnership filed a motion
to dismiss this action that has been pending since 1996. The Partnership
is advised that the amount of this claim (including prejudgment interest)
that allegedly relates to units it sold is a range of approximately
$360,000 to $800,000. As a result of, among other things, the settlement
agreement with U.S. Fire discussed in Item 3, the Partnership has assumed
the cost of defense and any obligations created by judgment or otherwise
arising in connection with this matter. 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, the General Partner and certain related parties as
well as other unrelated parties have been named defendants in an action
entitled Rothal v. Arvida/JMB Partners Ltd. et al., Case No. 03-10709 CACE
12, filed in the Circuit Court of the 17th Judicial Circuit in and for
Broward County, Florida. In this suit that was originally filed on or
about June 20, 2003, plaintiffs purport to bring a class action allegedly
arising out of construction defects occurring during the development of
Camellia Island in Weston, which has approximately 150 homes. On
September 20, 2004, plaintiffs filed a twelve count amended 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. Plaintiffs complain,
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 thereof were improper, and that the homes
suffer from improper shutter storm protection systems. The amended
complaint was dismissed pursuant to the Partnership's motion to dismiss and
the plaintiffs were given the right to file a further amended complaint.
The Partnership will file an appropriate response to the further amended
complaint, when filed. The Arvida defendants believe that they have
meritorious defenses and intend to vigorously defend themselves. Due to,

among other things, the early stage of the litigation, the Partnership is
not able to determine what, if any, loss exposure that it may have for this
matter, and the accompanying consolidated financial statements do not
reflect any accruals related to this matter. This case has been tendered
to one of the Partnership's insurance carriers, Zurich American Insurance
Company (together with its affiliates collectively, "Zurich"), for defense
and indemnity. Zurich is providing a defense of this matter under a
purported reservation of rights. The Partnership has also engaged other
counsel in connection with this lawsuit. 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 following three lawsuits in large part allegedly arise out of
landscaping issues at certain subdivisions in the Weston Community. These
lawsuits are collectively referred to as the "landscape cases."

A case, The Ridges Maintenance Association, Inc. v. Arvida/JMB
Partners, et al., Case No. 03-10189 (05) (the "Ridges Case"), was filed on
or about June 6, 2003 in the Circuit Court of the 17th Judicial Circuit in
and for Broward County, Florida. The defendants in this action include
Arvida/JMB Partners, Arvida/JMB Managers, Inc., Arvida Management Limited
Partnership, CCL Consultants, Inc. ("CCL"), Bamboo Hammock Nursery, Inc.
("Bamboo Hammock"), and Lagasse Pool Construction, Co. ("Lagasse").
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 the six-count amended complaint that was
filed on September 20, 2004, plaintiff seeks unspecified compensatory
damages, prejudgment interest, court costs and such other and further
relief as the court might deem just and proper. In Count I, plaintiff
seeks damages from the Arvida defendants for alleged negligent design,
construction and/or maintenance of the landscaping and common elements that
allegedly resulted in defects of the landscaping, sidewalks, irrigation
systems, and community pool. With respect to the landscaping claims, the
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 controlling government codes, shallow planting of
landscaping, landscape planting in inappropriate areas, and the planting of
landscaping that would uproot sidewalks. In Count II, plaintiff seeks
damages from CCL, the alleged civil engineer for the community, in
connection with the alleged negligent design, construction or maintenance
of the common areas and elements. In Count III, plaintiff seeks damages
from Bamboo Hammock, the alleged landscape engineer, architect, supplier,
installer and/or designer, in connection with alleged defects in the
landscaping resulting in damage to, among other things, the landscaping and
sidewalks. In Count IV, plaintiff seeks damages from Lagasse for alleged
defects in the community pool. In Count V, plaintiff seeks damages from
Arvida/JMB Partners, a general partnership in which the Partnership owns a
99.9% interest, and Arvida/JMB Managers, Inc., the General Partner of the
Partnership, seeking to hold these entities vicariously responsible for the
acts of CCL, Bamboo Hammock, and/or Lagasse. In Count VI, plaintiff seeks
damages from the Arvida/JMB Partners and Arvida/JMB Managers, Inc. for
various breaches of fiduciary duty. In this count, plaintiff alleges that
prior to the turnover of the community, these defendants engaged in acts
that amounted to a breach of fiduciary duty to plaintiff in that they,
among other things, (i) allegedly improperly executed an amendment to the
declarations of covenant for their sole benefit and to the financial
detriment of the plaintiff; (ii) allegedly engaged in acts that constituted
a conflict of interest; (iii) allegedly failed to maintain appropriate
care, custody and control over the financial affairs of the homeowners'
association by failing to pay for common expenses; (iv) allegedly
improperly transferred funds by and between plaintiff and a non-party, The
Town Foundation, Inc., which transfers allegedly amounted to a violation of
these defendants' obligations to fund operating deficits and a breach of
fiduciary duty; and (v) allegedly transferred funds by and between various

entities under their common control in violation of Florida statute and
their fiduciary duty to plaintiff. The Arvida defendants' motion to
dismiss or in the alternative for a more definite statement was denied with
the exception of defendants' motion to dismiss Count V which is still
pending without ruling. The Arvida defendants filed their answers to all
relevant counts except Count V on March 9, 2005. The Arvida defendants
believe that they have meritorious defenses and intend to vigorously defend
themselves.

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 (the
"Falls Maintenance Case"), was 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, which contains approximately 600 homes. 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
Arvida/JMB Partners and Arvida/JMB Managers, Inc. 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. Arvida/JMB Partners and
Arvida/JMB Managers, Inc. have filed an answer to the complaint denying
substantive liability and raising various defenses. The Arvida defendants
believe that they have meritorious defenses and intend to vigorously defend
themselves.

On October 22, 2003, a case entitled Weston Lakes Maintenance
Association v. Arvida/JMB Partners and Arvida/JMB Managers, Inc., Case No.
0318490, was filed in the Circuit Court of the Seventeenth Judicial Circuit
in and for Broward County, Florida Civil Division. In the four-count
complaint, which was served on the Partnership in February 2004, plaintiff,
Weston Lakes Maintenance Association, alleges that defendants negligently
selected and installed inferior landscaping materials in the common areas
and elements of the Weston Lakes subdivision, which contains approximately
570 homes. Plaintiff alleges that defendants' actions have caused higher
than expected maintenance fees and that the landscaping is causing injury
and damage to sidewalks and roadways that must be repaired or replaced.
Plaintiff alleges that an unspecified large sum of money will be required
to replace the alleged substandard landscaping and that significant expense
for remedial maintenance, repair and replacement of elements throughout the
community will be incurred. The four-count complaint is for negligent
construction and design of landscaping allegedly based on a violation of a
Broward County ordinance regarding plant materials, common law negligence,
breach of implied warranty of fitness, and breach of implied warranty of
merchantability. Plaintiff seeks a judgment in an unspecified amount and
type of damages, attorney's fees and such other relief as the court may
deem proper. Defendants have briefed and argued a motion to dismiss. The
court has not issued its decision on the motion. Defendants believe they
have meritorious defenses and intend to vigorously defend themselves.

Due to, among other things, the early stages of litigation, the
Partnership is not able to determine what, if any, loss exposure that it
may have for the landscape cases, and the accompanying consolidated
financial statements do not reflect any accruals related to the landscape
cases. Each of the landscape cases has been tendered to Zurich for defense
and indemnity. Zurich is providing a defense of each of the landscape
cases. The Partnership has also engaged other counsel in connection with
the landscape cases. Zurich has issued letters purporting to reserve its
rights in the Ridges and Falls Maintenance Cases. The Partnership is
unable to determine the ultimate portion of the expenses, fees and damages
allegedly relating to the landscape cases, if any, which will be covered by
its insurance.

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

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

There were no matters submitted to a vote of security holders during
the fourth quarter of 2004.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SECURITY
HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

As of January 1, 2005, there were 16,442 record holders of the 404,000
Interests outstanding in the Partnership. There is no public market for
Interests, and it is not anticipated that a public market for Interests
will develop. Consequently, a Holder may not be able to readily sell his
Interests and may not be able to obtain a price that reflects the full
value of the underlying assets. Upon request, the General Partner may
provide information relating to a prospective transfer of Interests to an
investor desiring to transfer his Interests. The price to be paid for the
Interests, as well as any other economic aspects of the transaction, will
be subject to negotiation by the investor. However, there are restrictions
governing the transferability of these Interests set forth in the
Partnership Agreement and the Assignment Agreement. In addition, no
transfer will be effective until the first day of the next succeeding
calendar quarter after the requisite transfer form satisfactory to the
General Partner has been received by the General Partner. The transferee
consequently will not be entitled to receive any cash distributions or any
allocable share of profits or losses for tax purposes until such next
succeeding calendar quarter. Profits or losses of the Partnership for a
calendar year in which a transfer occurs will, to the extent permitted by
law, be allocated between the transferor and the transferee based upon the
number of quarterly periods for which each was recognized as the Holder of
the Interests, without regard to the results of the Partnership's
operations during particular quarterly periods and without regard to
whether cash distributions were made to the transferor or transferee. Cash
distributions to a Holder of Interests will be distributed to the person
recognized as the Holder of the Interests as of the last day of the
quarterly period preceding the quarter in which such distribution is made.

Reference is made to Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations for a discussion of the
Partnership's retention of cash reserves to pay or resolve obligations and
liabilities of, and claims asserted against, the Partnership and possible
future cash distribution(s).

ITEM 6. SELECTED FINANCIAL DATA

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

DECEMBER 31, 2004, 2003, 2002, 2001 AND 2000

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

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

LIQUIDITY AND CAPITAL RESOURCES

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

Any forward-looking statements made in this report are based upon the
Partnership's understanding of facts and circumstances as they exist on the
date of this report, and therefore such statements speak only as of that
date. In addition, the forward-looking statements contained in this report
are subject to risks, uncertainties and other factors that may cause the
actual events or circumstances, or the results or performances of the
Partnership, to be materially different from those estimated or expected,
expressly or implicitly, in the forward-looking statements. In particular,
but without limitation, the accuracy of statements concerning possible
future distributions to the Holders of Interests or the timing, proceeds or
costs associated with completion of a liquidation, winding up and
termination may be adversely affected by, among other things, various
factors discussed below.

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 November 2002 the Holders of a majority of the outstanding
Interests gave their consent to an amendment (the "Amendment") to the
Partnership Agreement providing for an extension of the term of the
Partnership's liquidation period to not later than October 31, 2005.
Accordingly, the term of the Partnership's liquidation period has been
extended.

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 remaining Partnership
assets would be contributed to the Liquidating Trust subject to all
outstanding obligations and liabilities of the Partnership. Subsequently,
after liquidating any remaining non-cash assets and providing for the
payment or satisfaction of all such obligations and liabilities, the
trustee(s) of the Liquidating Trust would distribute any remaining proceeds
to the General Partner, Associate Limited Partners and Holders of Interests
in proportion to their respective interests in the Liquidating Trust. The
General Partner currently anticipates that a Liquidating Trust will be
formed by October 31, 2005.

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 possible construction repairs,
homeowner warranty claims, completion of work for certain homeowner
associations and master associations and pending and possible future
litigation and environmental matters. The amount of funds to be retained

in reserve for these purposes has not yet been determined. However, the
Partnership intends to take a cautious approach in determining the amount
of funds to be retained in reserve since it is not possible to estimate
with preciseness the amount of time or money that it will take to effect
the Partnership's (or, if applicable, the Liquidating Trust's) liquidation,
winding up and termination. The Partnership expects that any trustee
appointed to manage the Liquidating Trust would take a similarly cautious
approach. The Partnership currently expects that any available funds in
excess of the amount determined to be held in reserve would be distributed
during 2005 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.

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
time and expense to resolve all obligations, liabilities and claims,
including contingent liabilities and claims that are not yet asserted but
may be made in the future. Among other things, contingencies (including,
without limitation, contingencies relating to potential homeowner warranty
or other homeowner or homeowners' association claims), delays in resolving
pending or threatened litigation or other asserted claims, delays in
satisfying conditions or obligations under permits obtained by the
Partnership, including those for mitigation for the Weston Increment III
area, a delay in obtaining an acknowledgement from the City of Weston of
its responsibility for maintenance of the Weston Increment III mitigation
area, currently unasserted claims that arise in the future and other
factors could require increases in reserves and a reduction in future
distributions to Holders of Interests and could extend the time, and
significantly increase the cost, to complete the liquidation, winding up
and termination.

At December 31, 2004, 2003 and 2002, the Partnership had unrestricted
cash and cash equivalents of approximately $37,591,000, $65,450,000 and
$88,969,000, respectively. The Partnership also had approximately
$19,968,000 in marketable securities at December 31, 2004. At February 28,
2005, the Partnership had unrestricted cash and cash equivalents of
approximately $4,328,000. The decrease in cash and cash equivalents from
December 31, 2004 to February 28, 2005 is primarily due to the acquisition
of additional marketable securities and a distribution made in January for
approximately $11,222,000. The Partnership had approximately $41,737,000
in marketable securities at February 28, 2005. The source of both short-
term and long-term future liquidity is expected to be derived from cash on
hand and marketable securities since the Partnership has no continuing
business operations.

At December 31, 2004, the Partnership was contingently liable under
certain performance bonds for approximately $2,949,000. At February 28,
2005, prior to the date of this report, approximately $550,000 of such
performance bonds were released and returned to the Partnership. The
Partnership has substantially completed the work for which the remaining
performance bonds have been posted and expects these bonds to be released
and returned.

As of January 1, 2004, the Partnership assigned its rights and
obligations in the Boca Raton, Florida office lease to Towns & Resorts LP.
The total contractual obligations without the office space is $29,024, all
of which is due within the next 12 months. Reference is made to note 7 of
the financial statements for further discussion of the relationship between
the Partnership and Towns & Resorts LP.

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, in addition to its cash and cash
equivalents, marketable securities, tangible personal property including
vehicles and furniture, fixtures and equipment used in the Partnership's
warranty operations, a receivable, and certain contract rights, including
an interest in a joint venture that owns a 2.5 acre parcel in Ocala,
Florida. The Partnership expects to sell all of its remaining tangible
saleable assets prior to October 31, 2005, however, there can be no
assurance these assets will be sold.

During January 2005, the Partnership made a distribution of
$10,099,875 to its Holders of Interests ($25 per Interest) and $1,122,208
to its General Partner and Associate Limited Partners, collectively.
During December 2003, the Partnership made a distribution of $20,200,000 to
its Holder of Interest ($50 per Interest) and $2,244,444 to its General
Partner and Associate Limited Partners, collectively. During February
2003, the Partnership made a distribution for 2002 of $20,200,000 to its
Holders of Interest ($50 per Interest) and $2,244,444 to its General
Partner and Associate Limited Partners, collectively. During 2002, the
Partnership made aggregate distributions of approximately $151,500,000 to
its Holders of Interests (approximately $375 per Interest) and
approximately $16,833,000 to the General Partner and Associate Limited
Partners, collectively.

At December 31, 2003, the Partnership recorded an asset impairment of
$523,721 to the carrying value of the furniture and equipment remaining at
its corporate office in Boca Raton, Florida. This loss was determined
based upon an analysis by an unaffiliated appraiser and recorded based upon
the difference between the carrying value of the assets as compared to
their appraised fair value. During the third quarter of 2004, the
Partnership sold the remaining furniture and equipment from the Boca Raton
office to The St. Joe Company, an affiliated company, for $117,743. The
sales price was based upon the appraised fair value of the furniture and
equipment determined by the unaffiliated appraiser.

On December 8, 2003, the Partnership, through certain consolidated
entities, closed on the sale of two small land parcels each containing a
billboard monument sign located in the City of Weston to an unaffiliated
third party. The gross sales price of the land parcel was $1,750,000. Net
cash proceeds received from the sale after proration, closing costs and
other expenses totaled approximately $1,306,000. The sale resulted in a
gain of $1,306,000 for financial reporting purposes and federal income tax
purposes.

On September 12, 2003, the Partnership, through certain consolidated
entities, closed on the sale of a land parcel in Boca Raton to an
unaffiliated third party. The gross sales price of the land parcel was
$231,118. There were no related costs associated with the sale of this
parcel resulting in net cash proceeds from the sale of $231,118, and a gain
of $231,118 for financial reporting purposes and for Federal income tax
purposes.

On May 23, 2003, the Partnership, through certain consolidated
entities, closed on the sale of a land parcel adjacent to the Shoppes
("Town Center Parcel") and on the sale of two commercial office building
units in Weston. 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. The gross sales price of the two commercial office
building 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, closed on the sale of The Shoppes of Town Center (the "Shoppes").

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 outstanding loan balance totaled
approximately $18,198,000. The outstanding principal and interest on the
mortgage loan secured by the property was approximately $13,848,000.
Proceeds of the mortgage loan had been used to pay construction and
development costs for the Shoppes. The net book value and net cash
proceeds received from the sale represented approximately 22% and 13%,
respectively, of the Partnership's total consolidated assets for financial
reporting purposes at December 31, 2002. The sale resulted in a gain of
approximately $1,990,000 for financial reporting purposes and a gain of
approximately $2,460,000 for Federal income tax purposes.

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

On October 1, 2002, the Partnership, through certain consolidated
entities, closed on the sale of Weston Hills Country Club (the "Country
Club") to an unaffiliated third party. Under the sale and purchase
agreement, the seller made certain representations, warranties and
indemnities for the benefit of the purchaser that survived for one year
from the date of the closing. In accordance with the sale and purchase
agreement, $1,000,000 of the sale price had been placed in escrow to pay
possible claims or demands of the purchaser arising from the sale during
the one-year period. The Partnership received the $1,000,000 in escrowed
funds during December 2003. 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.

RESULTS OF OPERATIONS

The results of operations for the years ended December 31, 2004, 2003
and 2002 are primarily attributable to the development and sale or
operation of the Partnership's assets during its continuing orderly
liquidation. See Note 1 for a discussion regarding the recognition of
profit from sales of real estate.

For the year ended December 31, 2004, the Partnership (including its
consolidated ventures and its unconsolidated ventures accounted for under
the equity method) had no closings as all housing units were closed as of
June 30, 2003. This compares to closings in 2003 of 128 housing units, the
sale of the Shoppes (the Town Center Parcel) a land parcel in Boca Raton,
two commercial office building units in Weston, and two small land parcels
in Weston each containing a billboard monument, and closings in 2002
consisted of 812 housing units, two commercial office building units, a
land parcel in Ocala (the Ocala Parcel), a commercial parcel in Weston, and
the Country Club.

The Partnership has completed construction and closed on the sale of
all its remaining housing units. The Partnership closed on the sale of its
final 128 townhomes, which were in the Partnership's Weston Community
located in Broward County, Florida during 2003. Revenues for 2003 and 2002
were impacted as a result of the lower levels of inventories available for
sale as the Partnership's remaining Weston Community completed its final
phase.

Revenues from housing and homesite activities generally were
recognized upon the closing of homes built by the Partnership and developed
lots, respectively, within the Partnership's Communities. Historically, a
substantial portion of the Partnership's housing revenues during the first
six months of a given year were generated from the closing of units
contracted in the prior year. Land and property revenues and Gain on sale
of assets held for sale were generated from the closing of developed and
undeveloped residential and/or commercial land tracts and the sale of
operating properties within the Partnership's Communities.

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

There was no housing revenue during 2004. The gross operating profit
margin for 2004 is due in part to the settlement of the claim relating to
insurance coverage in a lawsuit involving the Lakes of the Meadows. This
is partially offset by increased costs due to changes in the Partnership's
estimated warranty cost. Housing revenues and gross operating profit
margin decreased for 2003 as compared to 2002 due to the significant
decrease in the number of units closed in the Partnership's Weston
Community, a change in the estimate for future warranty costs, additional
costing of construction overheads incurred which exceeded previously used
estimates and a change in the mix of product sold. Revenues generated from
the closings of units in Weston account for all of the housing revenues
recognized for the years ended December 31, 2003 and 2002, respectively.

Brokerage and other operations primarily represents activity from the
sale of unaffiliated third-party builders' homes within the Partnership's
communities, fees earned from the Partnership's mortgage brokerage
operations within the Weston Community, proceeds from the Partnership's
property management activities, and fees earned from various management
agreements with joint ventures. Revenues from brokerage and other
operations decreased in 2004 as compared to 2003 due to no brokerage
commissions being earned from the Partnership's mortgage brokerage
operations in 2004 as there were no unit closings in 2004. The brokerage
and other operations revenue for 2004 is due primarily to the receipt of a
payment for the release of a deed restriction. Revenues from brokerage and
other operations decreased in 2003 as compared to 2002 due primarily to a
decrease in brokerage commissions earned in Weston resulting from a reduced
number of units closed by third party builders within the Community and 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 include all marketing
costs, with the exception of those costs capitalized in conjunction with
the construction of housing units, as well as project and general
administrative costs. These expenses are net of the marketing fees
received from third party builders. Selling, general and administrative
expenses decreased for 2004 as compared with 2003 and 2002 due primarily to
decreased marketing, project administration and support service costs
resulting from the end of the Partnership's continuing business operations.

Interest income decreased for 2004 as compared to 2003 and 2002 due
primarily to a decrease in cash available for investment.

Effective January 1, 2002, the Partnership adopted SFAS No. 144
Accounting for the Impairment or Disposal of Long-Lived Assets.
Accordingly, operations and gain on sales of the Shoppes, the Country Club,
the Ocala Parcel, the Waterways II Parcel, certain commercial office
building units in Weston and certain land parcels which meet the criteria
for Assets held for sale have been accounted for as Net income from
operations of assets held for sale and Gain on sale of assets held for
sale. The results of operations for those assets have been excluded from
continuing operations in the consolidated statements of operations for all
periods presented.

Gain on sale of assets held for sale during 2003 included the gains
recognized from the sales of the Town Center Parcel, the Shoppes, two small
land parcels in Weston, each containing a billboard monument, and a land
parcel in Boca Raton, partially offset by a loss on the sale of two
commercial office building units in Weston. Gain on sale of assets held
for sale during 2002 included the Country Club in Weston and the Waterways
II Parcel, partially offset by a loss on the sale of the Ocala Parcel.

Net Income from operations of assets held for sale decreased in 2003
as compared to 2002 primarily due to the sale of the Shoppes during
February 2003 and the sale of the Country Club in October 2002.

INFLATION

The relatively low rates of inflation in recent years generally have
not had a material effect on the Community development business and
inflation in future periods is not likely to adversely affect the
Partnership since its assets consist primarily of cash and cash equivalents
and marketable securities.

CRITICAL ACCOUNTING POLICIES

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

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

The Partnership also reviews its tangible assets for impairment of
value.

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Partnership's only market rate exposure is interest rate risk
related to our marketable securities.

The Partnership is adverse to principal loss and to ensure the safety
of principal, has invested only in U.S. Government obligations.

The Partnership intends to hold these obligations to maturity, and
therefore, classifies those investments as Held-to-maturity securities.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

INDEX

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets, December 31, 2004 and 2003

Consolidated Statements of Operations for the years ended
December 31, 2004, 2003 and 2002

Consolidated Statements of Changes in Partners' Capital Accounts
for the years ended December 31, 2004, 2003 and 2002

Consolidated Statements of Cash Flows for the years ended
December 31, 2004, 2003 and 2002

Notes to Consolidated Financial Statements

SCHEDULES NOT FILED:

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

REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Partners
ARVIDA/JMB PARTNERS, L.P.

We have audited the accompanying consolidated balance sheets of
Arvida/JMB Partners, L.P. and Consolidated Ventures (the "Partnership"), as
of December 31, 2004 and 2003, and the related consolidated statements of
operations, changes in partners' capital accounts, and cash flows for each
of the three years in the period ended December 31, 2004. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
We were not engaged to perform an audit of the Company's internal control
over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion.

An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Arvida/JMB Partners, L.P. and Consolidated Ventures at
December 31, 2004 and 2003, and the consolidated results of their
operations and their cash flows for each of the three years in the period
ended December 31, 2004, in conformity with U.S. generally accepted
accounting principles.

/s/ Ernst & Young LLP
Certified Public Accountants

Miami, Florida
February 18, 2005, except for note 8, paragraph 11
as to which the date is March 9, 2005

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

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2004 AND 2003

ASSETS
------

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

AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

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

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) OPERATIONS AND BASIS OF ACCOUNTING

Operations

The assets of Arvida/JMB Partners, L.P. (the "Partnership") have
consisted principally of interests in land developed into master-planned
residential communities (the "Communities") and, to a lesser extent,
commercial properties; accounts receivable; construction, brokerage and
other support businesses; real estate assets held for investment and
certain club and recreational facilities. The Partnership's Communities
have contained a diversified product mix with both resort and primary homes
designed for the middle and upper income segments of the various markets in
which the Partnership operated.

Within the Communities, the Partnership has constructed, or caused to
be constructed, a variety of products, including single-family homes, town-
houses and condominiums to be developed for sale, as well as related
commercial and recreational facilities. The Communities were located
primarily throughout the State of Florida, with Communities also located
near Atlanta, Georgia; and Highlands, North Carolina. Additional
properties owned by the Partnership in or near its Communities have been
developed as retail and/or office properties. The Partnership has also
owned or managed certain club and recreational facilities within certain of
its Communities. In addition, the Partnership has sold individual
residential lots and parcels of partially developed and undeveloped land.

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.

Principles of Consolidation

The consolidated financial statements include the accounts of the
Partnership and its consolidated ventures. All material intercompany
balances and transactions have been eliminated in consolidation. The
equity method of accounting has been applied in the accompanying
consolidated financial statements with respect to those investments where
the Partnership's ownership interest is 50% or less.

Recognition of Profit from Sales of Real Estate

For sales of real estate, profit is recognized in full when the
collectability of the sales price is reasonably assured and the earnings
process is virtually complete. When the sale does not meet the require-
ments for recognition of income, profit is deferred until such requirements
are met. In certain circumstances, contracts for sales of real estate
contain provisions that allow the Partnership to repurchase the real estate
in the event certain conditions are not met. Profits generated from sales
subject to these provisions are generally deferred until the Partnership no
longer has any repurchase rights. For sales of residential units, profit
is recognized at the time of closing or if certain criteria are met, on the
percentage-of-completion method.

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.

Cost of Real Estate Revenues

Costs pertaining to the Partnership's housing and land and property
revenues reflect the cost of the acquired assets as well as net development
costs, construction costs, capitalized interest, capitalized real estate
taxes and capitalized overhead. Certain marketing costs relating to
housing projects, including exhibits and displays, and certain planning and
other pre-development activities, excluding normal period expenses, are
capitalized and charged to housing cost of revenues as related units are
closed. Provisions for value impairment are recorded whenever the
estimated future undiscounted cash flows from operations and projected net
sales proceeds are less than the net carrying value plus estimated costs to
complete development. A warranty reserve is provided as residential units
are closed. This reserve is reduced by the cost of subsequent work
performed and monitored on a quarterly basis, at a minimum, to ensure the
adequacy of recorded reserves.

Capitalized Interest and Real Estate Taxes

Interest and real estate taxes are capitalized to qualifying assets,
principally real estate inventories. Such capitalized interest and real
estate taxes are charged to cost of revenues as sales of real estate
inventories are recognized. Interest, including the amortization of loan
fees, of $0, $84,676 and $582,281 was incurred for the years ended
December 31, 2004, 2003 and 2002, respectively, all of which was
capitalized. The decrease in interest incurred for the years ended
December 31, 2004 and December 31, 2003 as compared to 2002 is due
primarily to the payment in February 2003 of the outstanding principal loan
balance for The Shoppes of Town Center (the "Shoppes") of approximately
$13,801,000 out of the proceeds from the sale of the Shoppes. Interest
payments, including amounts capitalized, of $0, $47,101 and $630,775 were
made for the years ended December 31, 2004, 2003 and 2002, respectively.

Real estate taxes of $102,960, a net real estate tax credit of
$134,170 and an expense of $1,604,389 were incurred for the years ended
December 31, 2004, 2003 and 2002, respectively, of which $0, $0 and
$1,498,463 were capitalized. The net tax credit for the year ended
December 31, 2003, resulted from the refund in March 2003, of a tax
overpayment paid by the Partnership in 2002. The decrease in real estate
taxes incurred since 2002 is due to the orderly liquidation of the
remaining assets of the Partnership. Real estate tax payments of $53,653,
$155,299 and $1,623,615, were made for the years ended December 31, 2004,
2003 and 2002, respectively. In addition, real estate tax reimbursements
totaling $12, $289,469 and $20,214 were received from the Partnership's
escrow agent during 2004, 2003 and 2002, respectively. 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 Cost of revenues for
operating properties, or in Net income from operations of assets held for
sale.

Property and Equipment and Other Assets

Property and equipment are carried at cost less accumulated
depreciation and are depreciated on the straight-line method over the
estimated useful lives of the assets, which range from two to five years.
Expenditures for maintenance and repairs are charged to expense as
incurred. Costs of major renewals and improvements which extend useful
lives are capitalized.

Other assets are amortized on the straight-line method, which
approximates the effective interest method, over the useful lives of the
assets, which range from one to five years. There was no amortization of
other assets, excluding loan origination fees, recorded for the years ended
December 31, 2004, 2003 and 2002. Amortization of loan origination fees,
which is included in interest expense, of approximately $0, $0 and $50,000
was recorded for the years ended December 31, 2004, 2003 and 2002,
respectively.

Discontinued Operations

Effective January 1, 2002, the Partnership adopted SFAS No. 144
Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS
No. 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 No. 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 of Town Center (the "Shoppes"), the
Weston Hills Country Club (the "Country Club"), the AOK Group, which owned
an approximate 46 acre parcel (the "Ocala Parcel") near Ocala, Florida,
Waterways II, which owned 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, commercial
office units in Weston, and certain land parcels, 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.

Investments in and Advances to Joint Ventures, Net

In general, the equity method of accounting has been applied in the
accompanying consolidated financial statements with respect to those joint
venture investments where the Partnership's ownership interest is 50% or
less.

Investments in the remaining joint ventures are carried at the
Partnership's proportionate share of the ventures' assets, net of their
related liabilities and adjusted for any basis differences. Basis
differences result from the purchase of interests at values which differ
from the recorded cost of the Partnership's proportionate share of the
joint ventures' net assets.

Partnership Records

The Partnership's records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes. The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments where applicable to reflect
the Partnership's accounts in accordance with GAAP and to consolidate the
accounts of the ventures as described above. Such GAAP and consolidation
adjustments are not reflected on the records of the Partnership. The net
effect of these items is summarized as follows:

2004 2003
------------------------- ------------------------
TAX BASIS TAX BASIS
GAAP BASIS (UNAUDITED) GAAP BASIS (UNAUDITED)
------------ ----------- ----------- -----------

Total assets. . . $58,591,103 58,591,103 67,744,573 68,268,294

Partners' capital
accounts:
General Partner
and Associate
Limited
Partners. . . $ 6,371,103 5,573,221 6,344,100 5,471,173
Holders of
Interests . . $46,804,332 82,050,816 44,131,061 88,381,341

Net income (loss):
General Partner
and Associate
Limited
Partners. . . $ 27,003 102,047 (13,931) (68,208)
Holders of
Interests . . $ 2,673,271 (6,330,524) (682,625) (3,342,197)

Net income (loss)
per Interest. . $ 6.62 (15.67) (1.69) (8.28)

Reference is made to note 11 for further discussion of the allocation
of profits and losses to the General Partner, Associate Limited Partners
and Holders of Interests.

Reclassifications

Certain reclassifications have been made to the 2003 and 2002
financial statements to conform to the 2004 presentation.

Income Taxes

No provision for state or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership. However, in certain instances, the Partnership has been
required under applicable state law to remit directly to the state tax
authorities amounts representing withholding on applicable taxable income
allocated to the General Partner, Associate Limited Partners and Holders of
Interests. Such payments on behalf of the General Partner, Associate
Limited Partners and Holders of Interests are deemed distributions to them.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (FASB)
issued a revised Statement of Financial Accounting Standards No. 123
(FAS 123), "Share-Based Payment" a revision of FAS 123. FAS 123 requires
compensation costs related to share-based payments to be recognized in the
income statement over the vesting period. The amount of the compensation
cost will be measured based on the grant-date fair value of the instrument
issued. FAS 123R is effective as of the beginning of the first annual
reporting period that begins after June 15, 2005, for all awards granted or
modified after that date and for those awards granted prior to that date
that have not vested. FAS 123 will have no earnings impact on the
Partnership.

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, at a minimum,
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 years ended December 31, 2004 and 2003, changes in the
warranty accrual consisted of the following:

2004 2003
----------- -----------
Accrued warranty costs,
beginning of year . . . . . . . $ 1,569,000 $ 2,162,000
Estimated liability recorded. . . 235,000 2,283,000
Payments made . . . . . . . . . . (996,000) (2,876,000)
----------- -----------
Accrued warranty costs,
end of year . . . . . . . . . . $ 808,000 $ 1,569,000
=========== ===========

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

Obligations Under Sale Agreements

In connection with the sale of 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 terminate as to claims made
after the first anniversary date of the sale while other of these indemnity
obligations have no specified termination. In accordance with such
indemnification, the seller deposited $100,000 and the buyer deposited
$50,000 in escrow to secure the obligation to indemnify the buyer's lender
for such claims. The Partnership received $50,000 of the $100,000 noted
above during 2003 and received the remaining $50,000 in October 2004. The
seller also deposited $50,000 in escrow as security for completion of
remediation work for compliance with the Americans with Disabilities Act.
The remediation work has been completed and in February 2005, the
Partnership received $50,000 which was the final refund of monies escrowed
by the seller. There are no other remaining indemnity obligations as of
December 31, 2004.

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 survived for one year from the date of closing while the
indemnity obligations have no express termination. The maximum potential
amount of these obligations was in general $1,000,000. In accordance with
the sale and purchase agreement, $1,000,000 of the sale price was placed in
escrow to pay possible claims or demands of the purchaser arising from the
sale during the one-year period after the sale. The Partnership received
the $1,000,000 in escrowed funds during December 2003.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities includes estimated project
completion costs on real estate inventory sold in prior years, warranty
reserves, and reserves for contingencies as discussed in Note 8.

Indemnification of Certain Persons

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 recorded in
the accompanying consolidated financial statements for these
indemnification obligations of the Partnership.

(2) INVESTMENT PROPERTIES

The Partnership has completed construction and closed on the sale of
all remaining housing units. The Partnership closed on the sale of its
final 128 townhomes in Weston during 2003.

On December 8, 2003, the Partnership, through certain consolidated
entities, closed on the sale of two small land parcels each containing a
billboard monument sign located in the City of Weston to an unaffiliated
third party. The gross sales price of the land parcels was $1,750,000.
Net cash proceeds received from the sale after proration, closing costs and
other expenses totaled approximately $1,306,000. The sale resulted in a
gain of $1,306,000 for financial reporting purposes and Federal income tax
purposes.

On September 12, 2003, the Partnership, through certain consolidated
entities, closed on the sale of a land parcel in Boca Raton to an
unaffiliated third party. The gross sales price of the land parcel was
$231,118. There were no related costs associated with the sale of this
parcel resulting in net cash proceeds from the sale of $231,118, and a gain
of $231,118 for financial reporting purposes and Federal income tax
purposes.

On May 23, 2003, the Partnership, through certain consolidated
entities, closed on the sale of a land parcel adjacent to the Shoppes
("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 approximately $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, closed on the sale of the Shoppes to unaffiliated third parties.
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. The net book value and net cash
proceeds received from the sale represented approximately 22% and 13%,
respectively, of the Partnership's total consolidated assets for financial
reporting purposes at December 31, 2002. The sale resulted in a gain of
approximately $1,990,000 for financial reporting purposes and a gain of
approximately $2,460,000 for Federal income tax purposes.

On December 27, 2002, the Partnership, through certain consolidated
entities, closed on the sale of the Ocala Parcel to an unaffiliated third
party for a gross sale price of $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
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 both financial reporting and Federal income tax purposes.

On October 1, 2002, the Partnership, through certain consolidated
entities closed on the sale of the Country Club to an unaffiliated third
party. 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.

(3) CASH, CASH EQUIVALENTS AND RESTRICTED CASH

Cash and cash equivalents may consist of U.S. Government obligations
with original maturities of three months or less, money market demand
accounts and repurchase agreements, the cost of which approximates market
value. Included in Restricted cash are amounts restricted under various
escrow agreements as well as cash which collateralizes letters of credit as
discussed in note 8. Credit risk associated with cash, cash equivalents
and restricted cash is considered low due to the high quality of the
financial institutions in which these assets are held.

(4) MARKETABLE SECURITIES

The Partnership entered into investments during 2004 which generally
mature between three months and eighteen months from the date of purchase.
The investments consist of U.S. Government obligations. The Partnership
intends to hold these obligations to maturity, and therefore, classifies
these investments as Held-to-maturity securities in accordance with FAS
115, Accounting for Certain Investments in Debt and Equity Securities.

Investments in marketable securities held to maturity consist of the
following:

December 31, 2004
--------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
----------- ---------- ---------- ----------

U.S. Government
obligations. . $19,968,034 -- 29,302 19,938,732
=========== ========== ========== ==========

(5) PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2004 and 2003 are summarized as
follows:
2004 2003
---------- ----------

Equipment and furniture . . . . . . . $ 100,253 $3,797,368
---------- ----------
Total. . . . . . . . . . . . . . 100,253 3,797,368
Accumulated depreciation . . . . (88,725) (3,652,452)
---------- ----------

Property and equipment, net. . . $ 11,528 $ 144,916
========== ==========

Depreciation expense of approximately $16,000, $538,000 and $1,429,000
was incurred for the years ended December 31, 2004, 2003 and 2002,
respectively.

Reference is made to notes 1 and 12 for a further discussion regarding
the impairment of long-lived assets.

(6) INVESTMENTS IN AND ADVANCES TO JOINT VENTURES, NET

The Partnership has or had investments in real estate joint ventures
with ownership interests of 50%. The Partnership's joint venture interests
accounted for under the equity method in the accompanying consolidated
financial statements are as follows:

LOCATION OF
NAME OF VENTURE % OF OWNERSHIP PROPERTY
- --------------- -------------- ------------

A&D Title, L.P. 50 Florida
Arvida Pompano Associates
Joint Venture 50 Florida
Ocala 202 Joint Venture 50 Florida

The following is combined unaudited summary financial information of
joint ventures accounted for under the equity method.

BALANCE SHEETS
--------------

DECEMBER 31, DECEMBER 31,
2004 2003
------------ ------------
Assets:
Real estate inventories . . . . . . $ 104,450 $ 104,450
Other assets. . . . . . . . . . . . 64,978 144,393
----------- -----------
Total assets. . . . . . . . $ 169,428 $ 248,843
=========== ===========

Liabilities . . . . . . . . . . . . . $ 147,426 $ 139,831

Equity. . . . . . . . . . . . . . . . 22,002 109,012
----------- -----------
Total liabilities and
equity. . . . . . . . . . $ 169,428 $ 248,843
=========== ===========

COMBINED RESULTS OF OPERATIONS
------------------------------

Years Ended December 31,
------------------------------------------
2004 2003 2002
---------- ---------- ----------

Statement of Operations:
Total revenue . . . . . $ 16,417 $ 232,927 $1,731,139
Total expense . . . . . 44,864 155,465 1,165,106
---------- ---------- ----------
Net (loss) income . . $ (28,447) $ 77,462 $ 566,033
========== ========== ==========

There are certain risks associated with the Partnership's investments
made through joint ventures including the possibility that the
Partnership's joint venture partners in an investment might become unable
or unwilling to fulfill their financial or other obligations, or that such
joint venture partners may have economic or business interests or goals
that are inconsistent with those of the Partnership. In addition, under
certain circumstances, either pursuant to the joint venture agreements or
due to the Partnership's obligations as a general partner, the Partnership
may be required to make additional cash advances or contributions to
certain of the ventures.

(7) TRANSACTIONS WITH AFFILIATES

Fees, commissions and other expenses paid or payable by the
Partnership to affiliates of the General Partner for the years ended
December 31, 2004, 2003 and 2002 are as follows:

2004 2003 2002
-------- -------- ----------
Insurance commissions . . . . . . . $ 12,135 $104,542 $ 312,711
Reimbursement (at cost) for
accounting services. . . . . . . . 93,847 55,908 111,967
Reimbursement (at cost) for
treasury, legal and
corporate services . . . . . . . . 458,019 287,491 684,233
-------- -------- ----------
$564,001 $447,941 $1,108,911
======== ======== ==========

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,
salary 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 year ended December 31, 2004 no such costs
were incurred by the Partnership on behalf of these affiliates. For the
years ended December 31, 2003 and 2002, the Partnership was entitled to
receive reimbursements of approximately $46,900 and $188,400, respectively.

Pursuant to a sub-management agreement between Arvida Company
("Arvida") and St. Joe/Arvida Company, L.P. (now known as St. Joe Towns &
Resorts, LP - "Towns & Resorts LP"), effective January 1, 1998, Towns &
Resorts LP provides (and is reimbursed for) a substantial portion of the
development and management supervisory and advisory services (and personnel
with respect thereto) to the Partnership that Arvida would otherwise have
provided pursuant to its management agreement with the Partnership. Towns
& Resorts LP is reimbursed for such services and personnel on the same
basis as Arvida under the management agreement, and such reimbursements are
made directly by the Partnership. The Partnership also receives
reimbursement from Towns & Resorts LP for certain general and
administrative costs including, and without limitation, salary and salary-
related costs relating to work performed by employees of the Partnership on
behalf of Towns & Resorts LP. Charges and related reimbursements between
the Partnership and Towns & Resorts LP are determined on a consistent basis
using various methodologies depending upon the nature of the services
provided. Such charges, whether incurred directly by the Partnership or
Towns & Resorts LP, may include salaries and salary related costs, as well
as burdens for administrative and office overheads. Methodologies used to
apportion costs between entities include, but are not limited to, charges
based upon percentages of (i) time spent on each entity relative to total
hours worked; (ii) cash expenditures by entity relative to total
expenditures; and (iii) real estate sales and closings by entity relative
to total sales and closings. Affiliates of JMB Realty Corporation owned a
minority interest in Towns & Resorts LP until July 2003, when they sold
their minority interest to an affiliate of The St. Joe Company. The St.
Joe Company beneficially owns 26.3% of the outstanding Interests.
Affiliates of The St. Joe Company currently own all of the interests in
Towns & Resorts LP.

For the years ended December 31, 2004, 2003 and 2002, the Partnership
reimbursed Towns & Resorts LP or its affiliates approximately $2,487,000,
$7,073,000 and $3,399,000, respectively, for the services provided to the
Partnership by Towns & Resorts LP personnel pursuant to the sub-management
agreement discussed above. Such reimbursements included amounts owing in
connection with the Partnership's achievement of certain profit and cash
flow levels prior to 2003. On January 1, 2003, certain employees of the
Partnership became employees of Towns & Resorts LP. Therefore, a
significant portion of the expense related to this reimbursement to Towns &
Resorts LP in 2003 was a direct operating expense of the Partnership in
prior years. For the years ended December 31, 2004, 2003 and 2002, the
Partnership received approximately $73,600, $5,154,000 and $6,045,800,
respectively, from Towns & Resorts LP or its affiliates. In addition, the
Partnership owed Towns & Resorts LP approximately $5,400 at December 31,
2004 all of which was paid as of March 1, 2005.

The Partnership received reimbursement from Towns & Resorts LP and its
affiliates for the use of certain equipment and property owned or leased by
the Partnership. In addition, in July 2003, the Partnership assigned its
rights as licensee in certain software licenses to The St. Joe Company in
consideration of a payment for the assignment. The Partnership remains
contingently liable to the software licensor for performance of the
obligations under the software licenses and retains certain rights to use
the software licenses. The net reimbursement and payment received for
these items by the Partnership for years ended December 31, 2004 and 2003
was approximately $0 and $194,000, respectively.

The Partnership, pursuant to certain agreements, had provided
management and other personnel and services to certain of its homeowners
associations. Pursuant to these agreements, the Partnership was 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 years ended
December 31, 2004, 2003 and 2002, the Partnership was entitled to receive
approximately $0, $65,700 and $465,000, respectively. At December 31,
2004, no amount was owed to the Partnership as all such agreements had been
terminated.

During the third quarter of 2004, the Partnership sold the remaining
furniture and equipment from its Boca Raton office to The St. Joe Company
for $117,743. The sale price was based upon the appraised fair value of
the furniture and equipment determined by an unaffiliated appraiser.

In May 2004, Arvida/JMB Partners, which is a consolidated subsidiary
of the Partnership, made a $450,000 minority interest distribution to
Arvida/JMB Managers, Inc. ("Managers"), which is also the General Partner
of the Partnership, for previously deferred amounts distributable with
respect to Managers's .1% general partner interest in Arvida/JMB Partners.

In February 2003, the General Partner and Associate Limited Partners,
collectively, received cash distributions in the aggregate amount of
$2,244,444. In December 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 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.

Amounts receivable from or payable to the General Partner, Towns &
Resorts LP or their respective affiliates do not bear interest and are
expected to be paid in future periods.

(8) COMMITMENTS AND CONTINGENCIES

As security for performance of certain development obligations, the
Partnership is contingently liable under standby letters of credit and
bonds for approximately $0 and $2,949,000, respectively, at December 31,
2004 and $0 and $8,018,000 at December 31, 2003.

On August 29, 2002, the Partnership entered into an agreement with
Towns & Resorts LP for the prospective assignment to and assumption by
Towns & Resorts LP 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 assignment and assumption was made effective
January 1, 2004.

Rental expense of $168,975, $996,878 and $1,637,360 was incurred for
the years ended December 31, 2004, 2003 and 2002, respectively.

The Partnership was 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 ("Lakes of the Meadow" litigation).
In the lawsuit, plaintiffs sought unspecified damages, attorneys' fees and
costs, recission of specified releases, and all other relief that
plaintiffs might be entitled to at equity or at law on behalf of the 460
building units they allegedly represented for, among other things, alleged
damages discovered in the course of making Hurricane Andrew repairs.
Plaintiffs alleged that Walt Disney World Company was responsible for
liabilities that might arise in connection with approximately 80% of the
buildings at the Lakes of the Meadow Village Homes and that the Partnership
was potentially liable for the approximately 20% remaining amount of the
buildings. In the three count amended complaint, plaintiffs alleged breach
of building codes and breach of implied warranties. The Partnership
tendered this matter to The Walt Disney Company (n/k/a Disney Enterprises,
Inc., "Disney") pursuant to the Partnership's indemnification rights and
filed a third-party complaint against it pursuant to the Partnership's
rights of contractual indemnity. The Partnership also answered the amended
complaint and filed a cross-claim against Disney's affiliate, Walt Disney
World Company, for common law indemnity and contribution. The Partnership
completed settlements in this case with the condominium associations and
their members during the second quarter of 2004.

The Partnership continues to pursue claims for indemnity or
contribution against Disney or its affiliates in connection with the Lakes
of the Meadow condominium units that were constructed in whole or in part
prior to September 10, 1987 (the date that the Partnership acquired the
assets of Arvida Corporation from Disney) but were sold by the Partnership
on or after that date. The Partnership's claims for indemnity and
contribution have been severed for separate proceedings and trial from the
remaining case-in-chief in the Lakes of the Meadow litigation. No
discovery cutoff or trial date has been set for these claims.

The Partnership also sought payment or reimbursement of the foregoing
settlement amounts from U.S. Fire and an excess insurance carrier, The Home
Insurance Company, that is in liquidation proceedings. On December 10,
2004, the Partnership and one of its insurance carriers, U.S. Fire, entered
into an agreement (the "Settlement Agreement") to settle their respective
claims against each other relating to insurance coverage under a policy of
insurance for the period from June 1, 1992 to June 1, 1993 (the "Policy").
The dispute between the Partnership and U.S. Fire concerned whether the
Policy covered third-party claims asserted against the Partnership in the
Lakes of the Meadow Village matter and claims asserted against the
Partnership in an insurance subrogation lawsuit involving certain homes in
the Country Walk Community (the "Juarez action"). The Partnership settled

the claims asserted against it in the Lakes of the Meadow matter earlier
this year for approximately $6.9 million (all of which was accrued and
included in Accrued expenses and other liabilities on the accompanying
consolidated balance sheets at December 31, 2003) while the claims asserted
in the Juarez action continue in litigation.

Pursuant to the terms of the Settlement Agreement in December 2004,
U.S. Fire paid the Partnership the settlement amount and the Partnership
dismissed with prejudice U.S. Fire from the Partnership's Illinois
insurance action seeking, among other things, to hold U.S. Fire liable
under the Policy for claims the Partnership paid relating to the Lakes of
the Meadow Village Homes. U.S. Fire has represented to the Partnership
that upon its payment of the settlement amount, U.S. Fire had exhausted the
products/completed operations aggregate limit of coverage under the Policy.

In addition, the Partnership and U.S. Fire released each other for all
past, present and future claims, whether currently known or unknown, that
arise out of or relate in any way to (i) Hurricane Andrew, which struck
Miami-Dade County, Florida on August 24, 1992, and the Policy, and (ii)
insurance coverage under the products/completed operations coverage of the
Policy. U.S. Fire also released any claim for subrogation that it might
have for amounts it has paid or will pay under the Policy and the
Settlement Agreement. The Settlement Agreement supercedes prior discussions
and understandings, both written and oral, between the parties in regard to
their respective claims arising out of or relating to Hurricane Andrew
under the Policy and the discharge and release of the products/completed
operations aggregate limit of the Policy, including without limitation, all
positions taken by U.S. Fire in respect of its reservations of rights in
regard to such claims and all positions taken by the Partnership in regard
to such claims. As a result, the settlement clarifies that the Partnership
has no obligation to reimburse U.S. Fire for any amount that U.S. Fire
previously paid for settlements of various lawsuits arising out of or
relating to Hurricane Andrew. The U.S. Fire settlement amount is recorded
as a reimbursement of cost of revenues in the accompanying consolidated
statement of operations resulting in an overall negative cost of revenues
because the original Lakes of the Meadows Settlement was recorded as a
charge to cost of revenues.

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 (n/k/a Disney Enterprises, Inc.,
"Disney") is also a defendant in this suit. The Partnership filed a motion
to dismiss this action that has been pending since 1996. The Partnership
is advised that the amount of this claim (including prejudgment interest)
that allegedly relates to units it sold is a range of approximately
$360,000 to $800,000. As a result of, among other things, the settlement
agreement with U.S. Fire discussed in Item 3, the Partnership has assumed
the cost of defense and any obligations created by judgment or otherwise
arising in connection with this matter. 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, the General Partner and certain related parties as
well as other unrelated parties have been named defendants in an action
entitled Rothal v. Arvida/JMB Partners Ltd. et al., Case No. 03-10709 CACE
12, filed in the Circuit Court of the 17th Judicial Circuit in and for
Broward County, Florida. In this suit that was originally filed on or
about June 20, 2003, plaintiffs purport to bring a class action allegedly
arising out of construction defects occurring during the development of
Camellia Island in Weston, which has approximately 150 homes. On
September 20, 2004, plaintiffs filed a twelve count amended 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. Plaintiffs complain,
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 thereof were improper, and that the homes
suffer from improper shutter storm protection systems. The amended
complaint was dismissed pursuant to the Partnership's motion to dismiss and
the plaintiffs were given the right to file a further amended complaint.
The Partnership will file an appropriate response to the further amended
complaint, when filed. The Arvida defendants believe that they have
meritorious defenses and intend to vigorously defend themselves. Due to,
among other things, the early stage of the litigation, the Partnership is
not able to determine what, if any, loss exposure that it may have for this
matter, and the accompanying consolidated financial statements do not
reflect any accruals related to this matter. This case has been tendered
to one of the Partnership's insurance carriers, Zurich American Insurance
Company (together with its affiliates collectively, "Zurich"), for defense
and indemnity. Zurich is providing a defense of this matter under a
purported reservation of rights. The Partnership has also engaged other
counsel in connection with this lawsuit. 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 following three lawsuits in large part allegedly arise out of
landscaping issues at certain subdivisions in the Weston Community. These
lawsuits are collectively referred to as the "landscape cases."

A case, The Ridges Maintenance Association, Inc. v. Arvida/JMB
Partners, et al., Case No. 03-10189 (05) (the "Ridges Case"), was filed on
or about June 6, 2003 in the Circuit Court of the 17th Judicial Circuit in
and for Broward County, Florida. The defendants in this action include
Arvida/JMB Partners, Arvida/JMB Managers, Inc., Arvida Management Limited
Partnership, CCL Consultants, Inc. ("CCL"), Bamboo Hammock Nursery, Inc.
("Bamboo Hammock"), and Lagasse Pool Construction, Co. ("Lagasse").
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 the six-count amended complaint that was
filed on September 20, 2004, plaintiff seeks unspecified compensatory
damages, prejudgment interest, court costs and such other and further
relief as the court might deem just and proper. In Count I, plaintiff
seeks damages from the Arvida defendants for alleged negligent design,
construction and/or maintenance of the landscaping and common elements that
allegedly resulted in defects of the landscaping, sidewalks, irrigation
systems, and community pool. With respect to the landscaping claims, the
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 controlling government codes, shallow planting of
landscaping, landscape planting in inappropriate areas, and the planting of
landscaping that would uproot sidewalks. In Count II, plaintiff seeks
damages from CCL, the alleged civil engineer for the community, in
connection with the alleged negligent design, construction or maintenance
of the common areas and elements. In Count III, plaintiff seeks damages
from Bamboo Hammock, the alleged landscape engineer, architect, supplier,
installer and/or designer, in connection with alleged defects in the
landscaping resulting in damage to, among other things, the landscaping and
sidewalks. In Count IV, plaintiff seeks damages from Lagasse for alleged
defects in the community pool. In Count V, plaintiff seeks damages from
Arvida/JMB Partners, a general partnership in which the Partnership owns a
99.9% interest, and Arvida/JMB Managers, Inc., the General Partner of the
Partnership, seeking to hold these entities vicariously responsible for the

acts of CCL, Bamboo Hammock, and/or Lagasse. In Count VI, plaintiff seeks
damages from the Arvida/JMB Partners and Arvida/JMB Managers, Inc. for
various breaches of fiduciary duty. In this count, plaintiff alleges that
prior to the turnover of the community, these defendants engaged in acts
that amounted to a breach of fiduciary duty to plaintiff in that they,
among other things, (i) allegedly improperly executed an amendment to the
declarations of covenant for their sole benefit and to the financial
detriment of the plaintiff; (ii) allegedly engaged in acts that constituted
a conflict of interest; (iii) allegedly failed to maintain appropriate
care, custody and control over the financial affairs of the homeowners'
association by failing to pay for common expenses; (iv) allegedly
improperly transferred funds by and between plaintiff and a non-party, The
Town Foundation, Inc., which transfers allegedly amounted to a violation of
these defendants' obligations to fund operating deficits and a breach of
fiduciary duty; and (v) allegedly transferred funds by and between various
entities under their common control in violation of Florida statute and
their fiduciary duty to plaintiff. The Arvida defendants' motion to
dismiss or in the alternative for a more definite statement was denied with
the exception of defendants' motion to dismiss Count V which is still
pending without ruling. The Arvida defendants filed their answers to all
relevant counts except Count V on March 9, 2005. The Arvida defendants
believe that they have meritorious defenses and intend to vigorously defend
themselves.

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 (the
"Falls Maintenance Case"), was 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, which contains approximately 600 homes. 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
Arvida/JMB Partners and Arvida/JMB Managers, Inc. 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. Arvida/JMB Partners and
Arvida/JMB Managers, Inc. have filed an answer to the complaint denying
substantive liability and raising various defenses. The Arvida defendants
believe that they have meritorious defenses and intend to vigorously defend
themselves.

On October 22, 2003, a case entitled Weston Lakes Maintenance
Association v. Arvida/JMB Partners and Arvida/JMB Managers, Inc., Case No.
0318490, was filed in the Circuit Court of the Seventeenth Judicial Circuit
in and for Broward County, Florida Civil Division. In the four-count
complaint, which was served on the Partnership in February 2004, plaintiff,
Weston Lakes Maintenance Association, alleges that defendants negligently
selected and installed inferior landscaping materials in the common areas
and elements of the Weston Lakes subdivision, which contains approximately
570 homes. Plaintiff alleges that defendants' actions have caused higher
than expected maintenance fees and that the landscaping is causing injury
and damage to sidewalks and roadways that must be repaired or replaced.
Plaintiff alleges that an unspecified large sum of money will be required
to replace the alleged substandard landscaping and that significant expense
for remedial maintenance, repair and replacement of elements throughout the
community will be incurred. The four-count complaint is for negligent
construction and design of landscaping allegedly based on a violation of a
Broward County ordinance regarding plant materials, common law negligence,

breach of implied warranty of fitness, and breach of implied warranty of
merchantability. Plaintiff seeks a judgment in an unspecified amount and
type of damages, attorney's fees and such other relief as the court may
deem proper. Defendants have briefed and argued a motion to dismiss. The
court has not issued its decision on the motion. Defendants believe they
have meritorious defenses and intend to vigorously defend themselves.

Due to, among other things, the early stages of litigation, the
Partnership is not able to determine what, if any, loss exposure that it
may have for the landscape cases, and the accompanying consolidated
financial statements do not reflect any accruals related to the landscape
cases. Each of the landscape cases has been tendered to Zurich for defense
and indemnity. Zurich is providing a defense of each of the landscape
cases. The Partnership has also engaged other counsel in connection with
the landscape cases. Zurich has issued letters purporting to reserve its
rights in the Ridges and Falls Maintenance Cases. The Partnership is
unable to determine the ultimate portion of the expenses, fees and damages
allegedly relating to the landscape cases, if any, which will be covered by
its insurance.

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

(9) TAX INCREMENT FINANCING ENTITIES

In connection with the development of the Partnership's Weston
Community, bond financing was utilized to construct certain on-site and
off-site infrastructure improvements, including major roadways, lakes,
other waterways and pump stations, which the Partnership would otherwise be
obligated to finance and construct as a condition to obtain certain
approvals for the project. This bond financing was obtained by the Indian
Trace Community Development District ("District"), a local government
district that operated in accordance with Chapter 190 of the Florida
Statutes and the predecessor to the City of Weston. Under this program,
the Partnership is not obligated directly to repay the bonds. Rather, the
bonds are expected to be fully serviced by special assessment taxes levied
on the property, which effectively collateralizes the obligation to pay
such assessments until land parcels are sold. At such point, the liability
for the assessments related to parcels sold is borne by the purchasers
through a tax assessment on their property. These special assessment taxes
are designed to cover debt service on the bonds, including principal and
interest payments, as well as the operating and maintenance budgets of the
District. The use of this type of bond financing is a common practice for
major land developers in South Florida.

During March and December 1995, the District issued approximately $99
million and $13.3 million of bonds, respectively, at fixed rates ranging
from 4.0% to 8.25% per annum with maturities commencing in May 1995 through
May 2011. In July 1997, the District issued another approximate $41.6
million of fixed rate bonds. These bonds bear interest ranging from 4.0%
to 5.0% (payable in May and November each year until maturity or prior
redemption), with maturities commencing in May 1999 through May 2027. At
December 31, 2004, the amount of bonds issued and outstanding totaled
approximately $94 million. For the years ended December 31, 2004, 2003 and
2002, the Partnership paid special assessments related to the bonds of
approximately $0, $25,000 and $1.2 million, respectively.

(10) FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107 requires the disclosure of the fair values of all
financial assets and liabilities for which it is practicable to estimate
such values. Value is defined in SFAS No. 107 as the amount at which the
instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. The fair value of the
Partnership's Held-to-Maturity Marketable Securities is approximately
$19,939,000 at December 31, 2004. Reference is made to note 4 for further
discussion of marketable securities. The Partnership believes the carrying
amounts of its Cash and cash equivalents, Restricted cash, Trade and other
accounts receivable, Investments in and advances to joint ventures, Amounts
due from affiliates, Prepaid expenses and other assets, approximate their
fair values at December 31, 2004 and 2003.

(11) PARTNERSHIP AGREEMENT

Pursuant to the terms of the Partnership Agreement (and subject to
Section 4.2F which allocates Profits, as defined, to the General Partner
and Associate Limited Partners), profits or losses of the Partnership will
be allocated as follows: (i) profits will be allocated such that the
General Partner and the Associate Limited Partners will be allocated
profits equal to the amount of cash flow distributed to them for such
fiscal period and the amount of cash flow anticipated to be distributed to
them in future periods, with the remainder of the profits allocated to the
Holders of Interests, except that in all events, the General Partner shall
be allocated at least 1% of profits and (ii) losses will be allocated 1% to
the General Partner, 1% to the Associate Limited Partners and 98% to the
Holders of Interests.

In the event profits to be allocated in any given year do not equal or
exceed cash distributed to the General Partner and the Associate Limited
Partners for such year, the allocation of profits will be as follows: The
General Partner and the Associate Limited Partners will be allocated
profits equal to the amount of cash flow distributed to them for such year.

The Holders of Interests will be allocated losses such that the sum of
amounts allocated to the General Partner, Associate Limited Partners and
Holders of Interests equals the profits for the given year.

In general, the distribution of Cash Flow (as defined) is allocated
90% to the Holders of Interests and 10% to the General Partner and the
Associate Limited Partners (collectively).

(12) IMPAIRMENT OF LONG-LIVED ASSETS

At December 31, 2003, the Partnership recorded an asset impairment of
$523,721 to the carrying value of the furniture and equipment remaining at
the corporate office in Boca Raton, Florida. This loss was determined
based upon an analysis by an unaffiliated appraiser and recorded based upon
the difference between the carrying value of the assets as compared to
their appraised fair value.

(13) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Three Months Ended
-----------------------------------------------------
March 31, June 30, September 30, December 31,
2003 2003 2003 2003
----------- ---------- ------------- ------------

Total revenues. . .$11,895,796 11,960,343 151,404 158,527
Gross operating
profit (loss) . .$ 1,015,613 893,132 (811,643) 410,861
Net income
(loss). . . . . .$ 823,329 (577,503) (1,458,212) 515,830
Net income (loss)
per Limited
Partnership
Interest. . . . .$ 2.02 (1.42) (3.54) 1.25

Three Months Ended
-----------------------------------------------------
March 31, June 30, September 30, December 31,
2004 2004 2004 2004
----------- ---------- ------------- ------------

Total revenues. . .$ 130,784 14,298 12,193 29,875
Gross operating
profit (loss) . .$ 106,798 (1,270) (224,674) 4,803,477
Net (loss)
income. . . . . .$ (627,057) (482,846) (673,723) 4,483,900
Net (loss) income
per Limited
Partnership
Interest. . . . .$ (1.52) (1.17) (1.63) 10.94

Total revenues and gross operating profit (loss) for the three months
ended September 30, 2003 differ from the amounts reflected in the
September 30, 2003 Form 10-Q due to the reclassification of Land and
property revenues in the third quarter filing which are more appropriately
classified as a component of Gain on sale of assets held for sale.

Total gross operating profit and net income for the fourth quarter
2004 as compared to the previous quarterly periods for 2004 was affected by
the settlement of approximately $4,900,000 with U.S. Fire which was
recorded as a reduction of housing cost of revenues in the accompanying
consolidated statement of operations.

Total revenues for the third and fourth quarter 2003 as compared to
the previous quarterly periods for 2003 were affected by closings on the
sale of all 128 of the Partnership's remaining townhomes during the first
two quarters of 2003. The fluctuations in Gross operating profit (loss)
and Net income (loss) for 2003 are attributable to the following: A gain
on the sale of the Shoppes in the first quarter, a loss on the sale of two
commercial office building units in Weston during the second quarter, a
change in the estimate for future warranty costs resulting in an increase
in the estimated warranty reserve and additional costing of construction
overheads incurred which exceeded previously used estimates during the
third quarter, and the recognition of a gain relating to two small land
parcels each containing a billboard monument sign during the fourth
quarter.

(14) SUBSEQUENT EVENTS

During January 2005, the Partnership made a distribution of
$10,099,875 to its Holders of Interest ($25.00 per Interest) and $1,122,208
to the General Partner and Associate Limited Partners, collectively.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. 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 III

ITEM 10. DIRECTOR AND EXECUTIVE OFFICERS OF THE REGISTRANT

The General Partner of the Partnership is Arvida/JMB Managers, Inc., a
Delaware corporation, all of the outstanding shares of stock of which are
owned by JMB Investment Holdings-I, Inc., a Delaware corporation.
Substantially all of the outstanding shares of stock of JMB Investment
Holdings-I, Inc. are owned indirectly by JMB Realty Corporation, a Delaware
corporation ("JMB") that is in the business of real estate investment.
Substantially all of the outstanding shares of stock of JMB are owned by
certain of its past and present officers and directors, members of their
families and their affiliates. The General Partner has responsibility for
all aspects of the Partnership's operations. The Associate Limited
Partners of the Partnership are Arvida/JMB Associates, an Illinois general
partnership, of which JMB and certain of its current and former officers
and directors and their affiliates are, indirectly, partners, and
Arvida/JMB Limited Partnership, an Illinois limited partnership, of which
Arvida/JMB Associates is the general partner. An affiliate of Merrill
Lynch, Pierce, Fenner & Smith Incorporated is the limited partner of
Arvida/JMB Limited Partnership. Certain relationships of the Partnership
to the General Partner and its affiliates are described under the captions
"Determinations by the General Partner," "Relationships of Affiliates to
Partnership," "Remuneration of JMB, Arvida and Affiliates" and "Fiduciary
Responsibility of the General Partner" in the section "Conflicts of
Interest" at pages 21 and 23-24 of the Prospectus of the Partnership, dated
September 16, 1987.

The Partnership is subject to certain conflicts of interest arising
out of its relationships with the General Partner, Towns & Resorts LP and
their affiliates. Various services have been and, to some extent, will
continue to be provided to the Partnership by the General Partner, Towns &
Resorts LP and their affiliates, including development and management
supervisory and advisory services, insurance brokerage and administrative
services such as legal, accounting and treasury services. In addition, the
timing and amount of cash distributions and cash reserves and allocations
of profits and losses for tax purposes, as well as the amount of expenses
charged to the Partnership for services, are or may be affected by
determinations made by the General Partner. Because the General Partner
and/or its affiliates have interests in the cash distributions and the
profits or losses for tax purposes of the Partnership or in the amount of
payments or reimbursements made for services rendered to the Partnership,
the General Partner has a conflict of interest in making the determinations
affecting these matters.

The director and executive officers of the General Partner of the
Partnership are as follows:

SERVED IN
NAME OFFICE OFFICE SINCE
---- ------ ------------

H. Rigel Barber Vice President 04/08/87
Gailen J. Hull Vice President 04/09/87
Gary Nickele President 08/13/02
and Director 08/08/00

There is no family relationship among any of the foregoing director or
officers. Mr. Nickele has been elected to serve a one-year term as
director until the annual meeting of the General Partner to be held on
August 9, 2005. All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the General Partner to be held on August 9, 2005.
There are no arrangements or understandings between or among any of said
director or officers and any other person pursuant to which the director or
any officer was selected as such.

The foregoing director and officers are also officers and/or directors
of JMB. Most of the foregoing director and officers are also officers
and/or directors of various affiliated companies of JMB.

The business experience during the past five years of such director and
officers of the General Partner of the Partnership includes the following:

H. Rigel Barber (age 56) is Chief Executive Officer and Executive Vice
President of JMB and an officer of various JMB affiliates. Mr. Barber has
been associated with JMB since March, 1982. He received a J.D. degree from
the Northwestern Law School and is a member of the Bar of the State of
Illinois.

Gailen J. Hull (age 56), in addition to being a Vice President of
Arvida/JMB Managers, Inc., has acted as the Chief Financial Officer of the
Partnership since August 2002. He is also a Senior Vice President and,
since August 2002, Chief Financial Officer of JMB and an officer of various
JMB affiliates. Mr. Hull has been associated with JMB since March, 1982.
He holds a Masters degree in Business Administration from Northern Illinois
University and is a Certified Public Accountant.

Gary Nickele (age 52) is Executive Vice President and General Counsel
of JMB and an officer and/or director of various JMB affiliates. Prior to
becoming President of Arvida/JMB Managers, Inc., in August 2002, Mr.
Nickele had been a Vice President of that corporation since April 1987. He
has been associated with JMB since February, 1984. He holds a J.D. degree
from the University of Michigan Law School and is a member of the Bar of
the State of Illinois.

Gary Nickele is President and Manager of KLC Land Company, LLC, which
was formerly known as Amfac Hawaii, LLC ("KLC"). On February 27, 2002, KLC
and certain of its subsidiaries and affiliates filed voluntary petitions
under Chapter 11 of the United States Bankruptcy Code. KLC, together with
its subsidiaries, principally owns and develops real estate in the State of
Hawaii, and it and certain subsidiaries filed the Chapter 11 proceedings in
part to enable them to achieve an orderly reorganization of their debt to
serviceable levels. In July and October 2002, the United States Bankruptcy
Court for the Northern District of Illinois entered orders confirming a
plan of reorganization for KLC and the other debtors in the Chapter 11
proceedings, and the plan became effective and was consummated in November
2002.

The Partnership is a limited partnership organized under the laws of
the State of Delaware, and the rights of its partners and Holders of
Interests are governed by its Partnership Agreement, the Assignment
Agreement and the Delaware Revised Uniform Limited Partnership Act, as
amended. Moreover, the Interests are not publicly traded. In view of
these facts, as well as the limited business activity of the Partnership,
the General Partner has determined that it is not necessary for the
Partnership to have either an "audit committee financial expert" or a "code
of ethics" as those terms are defined in the rules and regulations of the
Securities and Exchange Commission.

ITEM 11. EXECUTIVE COMPENSATION

The officers and the director of the General Partner receive no direct
remuneration in such capacities from the Partnership. The General Partner
and the Associate Limited Partners are entitled to receive a share of cash
distributions, when and as cash distributions are made to the Holders of
Interests, and a share of profits or losses. Reference is made to notes 1
and 12 for a description of such distributions and allocations. The
General Partner and the Associate Limited Partners, collectively, received
cash distributions in 2004 totaling $0. Pursuant to the Partnership
Agreement, the General Partner and Associate Limited Partners were
allocated net income for Federal income tax purposes for 2004 of
approximately $102,000. Reference is made to note 11 for further
discussion of this allocation.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED SECURITY HOLDER MATTERS

(a) The following have reported beneficial ownership of more than 5%
of the outstanding Interests of the Partnership.

NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------------- ----------------- --------

Limited Partnership The St. Joe Company 106,200.4399 26.3%
Interests and Interests
Assignee Interests (1)
therein

Limited Partnership Alfred I. duPont 106,200.4399 26.3%
Interests and Testamentary Trust Interests
Assignee Interests (2)
therein

Limited Partnership The Nemours 106,200.4399 26.3%
Interests and Foundation Interests
Assignee Interests (2)
therein

Limited Partnership Winfred L. Thornton 106,200.4399 26.3%
Interests and Interests
Assignee Interests (2)
therein

Limited Partnership William T. 106,200.4399 26.3%
Interests and Thompson III Interests
Assignee Interests (2)
therein

NAME AND ADDRESS AMOUNT AND NATURE
OF BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------------- ----------------- --------

Limited Partnership Hugh M. Durden 106,200.4399 26.3%
Interests and Interests
Assignee Interests (2)
therein

Limited Partnership John F. Porter III 106,200.4399 26.3%
Interests and Interests
Assignee Interests (2)
therein

Limited Partnership Herbert H. Peyton 106,200.4399 26.3%
Interests and Interests
Assignee Interests (2)
therein

(1) Reflects beneficial ownership of Interests held directly by The St.
Joe Company, for which it has been reported that it has shared voting
and dispositive power. The address for The St. Joe Company is 1650
Prudential Drive, Suite 400, Jacksonville, Florida 32207. Wholly
owned subsidiaries of The St. Joe Company are the partners, and
collectively own all of the partnership interests, in Towns & Resorts
LP.

(2) Reflects indirect beneficial ownership of Interests held directly by
The St. Joe Company. Messrs. Thornton, Thompson, Durden, Porter and
Peyton are trustees and directors of the Alfred I. duPont
Testamentary Trust (the "Trust") and The Nemours Foundation (the
"Foundation"), respectively. As a result of the Trust's and the
Foundation's respective direct and beneficial ownerships of
outstanding shares of common stock of The St. Joe Company, the Trust,
Foundation and Messrs. Thornton, Thompson, Durden, Porter and Peyton
are or may be deemed to be indirect beneficial owners of 106,200.4399
Interests owned directly by The St. Joe Company, for which they each
have or may be deemed to have shared voting and dispositive power.
See note (1) above. The address for each of the Trust, Foundation
and Messrs. Thornton, Thompson, Durden, Porter and Peyton is 4600
Touchton Road, East Building 200, Suite 500, Jacksonville, Florida
32246.

(b) The General Partner and its executive officers and director
beneficially own the following Interests of the Partnership:

NAME OF AMOUNT AND NATURE
BENEFICIAL OF BENEFICIAL PERCENT
TITLE OF CLASS OWNER OWNERSHIP OF CLASS
- -------------- ---------- ----------------- --------

Limited Partnership General Partner None --
Interests and and its executive
Assignee Interests officers and
therein director as
a group
- ---------------
No executive officer or director of the General Partner of the
Partnership possesses a right to acquire beneficial ownership of Interests
of the Partnership.

(c) There exists no arrangement, known to the Partnership, the
operation of which may at a subsequent date result in a change in control
of the Partnership.

(d) The Partnership has no compensation plans or individual
compensation arrangements under which equity securities of the Partnership
are authorized for issuance to any person.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to the Partnership Agreement, the Partnership is permitted to
engage in various transactions involving the General Partner, St.
Joe/Arvida and their respective affiliates. Such transactions involve
conflicts of interest for the General Partner or its affiliates. Certain
relationships of the General Partner (and its director and executive
officers) and its affiliates to the Partnership are set forth above in
Item 10.

The Partnership and its affiliate, Arvida Company ("Arvida"), entered
into an information systems sharing agreement that sets forth (i) the
Partnership's and Arvida's mutual ownership rights with respect to certain
proprietary computer software jointly developed by the Partnership and
Arvida, and (ii) the arrangement for the sharing by Arvida of certain
computer hardware and software owned, leased or licensed by the Partnership
and its affiliates and various related information systems services
(collectively, the "Information Resources"), provided that Arvida pays its
allocable share of the costs of using such Information Resources.

In November 1997, St. Joe/Arvida Company, L.P. (now known as St. Joe
Towns & Resorts, LP - "Towns & Resorts LP") acquired the major assets of
Arvida, including the Arvida name and service marks with respect to the
Arvida name. Pursuant to a license agreement with Arvida, the Partnership
has a non-exclusive right to use the Arvida name and service marks with
respect to the Arvida name. In connection with the acquisition of Arvida's
assets, Towns & Resorts LP was assigned Arvida's rights and obligations
under the license agreement with the Partnership. In addition, Towns &
Resorts LP was assigned Arvida's rights and obligations under the
information systems sharing agreement discussed above.

Towns & Resorts LP also entered into a sub-management agreement with
Arvida, effective January 1, 1998, whereby Towns & Resorts LP provides a
substantial portion of the development and management supervisory and
advisory services (and the personnel therefor) to the Partnership that
Arvida would otherwise provide pursuant to its management agreement with
the Partnership. Towns & Resorts LP is reimbursed for such services and
personnel on the same basis as Arvida under its management agreement, and
such reimbursements are made directly to Towns & Resorts LP by the
Partnership. The Partnership also receives reimbursement from Towns &
Resorts LP for certain general and administrative costs including, and
without limitation, salary and salary-related costs relating to work
performed by employees of the Partnership on behalf of Towns & Resorts LP.
Charges and related reimbursements between the Partnership and Towns &
Resorts LP are determined on a consistent basis using various methodologies
depending upon the nature of the services provided. Such charges, whether
incurred directly by the Partnership or Towns & Resorts LP, may include
salaries and salary-related costs, as well as burdens for administrative
and office overheads. Methodologies used to apportion costs between
entities include, but are not limited to, charges based upon percentages of
(i) time spent on each entity relative to total hours worked; (ii) cash
expenditures by entity relative to total expenditures; and (iii) real
estate sales and closings by entity relative to total sales and closings.
The total reimbursements made to Towns & Resorts LP during the year ended
December 31, 2004, was approximately $2,487,000. Such reimbursement
included amounts owing in connection with the Partnership's achievement of
certain profit and cash flow levels prior to 2004. On January 1, 2003,
certain employees of the Partnership became employees of Towns & Resorts
LP. Therefore, a significant portion of the expense related to this
reimbursement to Towns & Resorts LP in 2003 was a direct operating expense
of the Partnership in prior years. For the year ended December 31, 2004,
the Partnership received approximately $73,600 from Towns & Resorts LP or
its affiliates.

In August 2002, the Partnership entered into an agreement for the
prospective assignment to and assumption by Towns & Resorts LP 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 assignment and assumption was effective January 1, 2004.
From and after the effective date, Towns & Resorts LP will charge to the
Partnership an allocable portion of the monthly base rent (which ranges
from approximately $27,000 to $29,000 through January 31, 2005), operating
expenses and tenant improvement costs, if any, incurred by Towns & Resorts
LP pursuant to the lease. The allocation method for such costs is
discussed in the preceding paragraph and is similar to the allocation
method previously used by the Partnership to charge to Towns & Resorts LP a
portion of the lease costs.

The Partnership received reimbursement from Towns & Resorts LP and its
affiliates for the use of certain equipment and property owned or leased by
the Partnership. In addition, in July 2003, the Partnership assigned its
rights as licensee in certain software licenses to The St. Joe Company in
consideration of a payment for the assignment. The Partnership remains
contingently liable to the software licensor for performance of the
obligations under the software licenses and retains certain rights to use
the software licenses. The net reimbursement and payment received for
these items by the Partnership for the year ended December 31, 2004 was
approximately $0 and $194,000 for the year ended December 31, 2003.

JMB Insurance Agency, Inc., an affiliate of the General Partner,
earned and received insurance brokerage commissions in 2004 of
approximately $12,100 in connection with providing insurance coverage for
certain of the properties of the Partnership, all of which was paid as of
December 31, 2004. Such commissions are at rates set by insurance
companies for the classes of coverage provided.

The General Partner of the Partnership or its affiliates are entitled
to reimbursement for their direct expenses or out-of-pocket expenses
relating to the administration of the Partnership and the acquisition,
development, ownership, supervision, and operation of the Partnership
assets. In 2004, the General Partner and its affiliates were entitled to
reimbursements for legal, accounting and treasury services. Such costs for
2004 were approximately $551,900, all of which were paid as of December 31,
2004.

Amounts payable to or by the General Partner, Towns & Resorts LP or
their affiliates do not bear interest and are expected to be paid in future
periods.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Ernst & Young LLP audited the accompanying consolidated financial
statements for the years ended December 31, 2004 and 2003. The fees billed
by Ernst & Young LLP for all professional services for each of those years
were as follows:

(1) AUDIT FEES

The aggregate fees billed for each of the years ended December 31,
2004 and 2003 for professional services rendered by Ernst & Young LLP for
the audit of the Partnership's annual financial statements and review of
financial statements included in the Partnership's Form 10-Q filings were
approximately $168,900 and $76,000, respectively.

(2) AUDIT-RELATED FEES

None

(3) TAX FEES

The aggregate fees billed for each of the years ended December 31,
2004 and 2003, for professional services rendered by Ernst & Young LLP for
tax planning, tax compliance and tax return preparation were approximately
$10,700 and $20,000, respectively.

(4) ALL OTHER FEES

None

The Partnership has not adopted any pre-approval policies and
procedures for its audit, audit-related and permitted non-audit services.
All such services are approved by the sole director of the General Partner
before the services are rendered.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

1. Financial Statements. (See Index to Financial
Statements filed with this annual report on Form 10-K).

2. Exhibits.

3.1 Amended and Restated Agreement of Limited
Partnership.*

3.2 Acknowledgment and Amendment of Partnership
Agreement.*

3.3 Amendment to the Amended and Restated
Agreement of Limited Partnership, effective
October 29, 2002, is incorporated herein by
reference to Exhibit 3.3 to the Partnership's
Report for the year ended December 31, 2002 on
Form 10-K (File No. 0-16976) dated March 24,
2003.

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

10.1 Agreement between the Partnership and The Walt
Disney Company dated January 29, 1987 is
incorporated herein by reference to Exhibit
10.1 to the Partnership's Report for the year
ended December 31, 2002 on Form 10-K (File No.
0-16976) dated March 24, 2003.

10.2 Letter Agreement, dated as of September 10,
1987, between the Partnership and The Walt
Disney Company, is incorporated herein by
reference to Exhibit 10.2 to the Partnership's
Report for the year ended December 31, 2002 on
Form 10-K (File No. 0-16976) dated March 24,
2003.

10.3 Management, Advisory and Supervisory
Agreement, including the License Agreement for
the use of the Arvida name as exhibit A
thereto, is incorporated herein by reference
to Exhibit 10.3 to the Partnership's Report
for the year ended December 31, 2002 on Form
10-K (File No. 0-16976) dated March 24, 2003.

10.4 Fourth Amended and Restated Agreement of
Partnership of Arvida/JMB Partners, together
with Amendment No. 1 thereto, is incorporated
herein by reference to Exhibit 10.4 to the
Partnership's Report for the year ended
December 31, 2002 on Form 10-K (File No.
0-16976) dated March 24, 2003.

10.5 Information Systems Sharing Agreement dated
November 6, 1997 between Arvida/JMB Partners,
L.P. and Arvida Company is hereby incorporated
herein by reference to Exhibit 10.15 to the
Partnership's Report for the year ended
December 31, 1997 on Form 10-K (File No.
0-16976) dated March 25, 1998.

10.6 Sale and Purchase Agreement dated as of
September 6, 2002, by and between Weston Town
Center, LLC and Belmont Investment Corp., as
amended by the First, Second and Third
Amendments to Sale and Purchase Agreement,
dated January 17, 2003, February 7, 2003 and
February 7, 2003, respectively, for the sale
of the Weston Town Center, also known as The
Shoppes of Town Center located in Weston,
Florida is hereby incorporated by reference to
Exhibit 10.1 to the Partnership's Report on
Form 8-K (File No. 0-16976) filed on
February 24, 2003.

21 Subsidiaries of the Registrant is filed
herewith.

31.1 Certification of Principal Executive Officer
Pursuant to Rule 13a-14(a)/Rule 15d-14(a) of
the Securities Exchange Act of 1934, as
amended, is filed herewith.

31.2 Certification of Principal Financial Officer
Pursuant to Rule 13a-14(a)/Rule 15d-14(a) of
the Securities Exchange Act of 1934, as
amended, is filed herewith.

32. Certifications of Chief Executive Officer and
Chief Financial Officer Pursuant to 18 U.S.C.
Section 1850, 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) Reports on Form 8-K:

On December 10, 2004, a current report on Form 8-K was
filed with the Commission reporting under Item 5 (Other
Events) as the Partnership entered into a Material Definitive
Agreement.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership 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)

GAILEN J. HULL
By: Gailen J. Hull
Vice President
Date: March 25, 2005

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

GAILEN J. HULL
By: Gailen J. Hull, Vice President
Principal Accounting Officer
and Principal Financial Officer
Date: March 25, 2005

GARY NICKELE
By: Gary Nickele, President and Sole Director
Principal Executive Officer
Date: March 25, 2005

ARVIDA/JMB PARTNERS, L.P.

EXHIBIT INDEX

DOCUMENT SEQUENTIALLY
EXHIBIT INCORPORATED NUMBERED
NO. EXHIBIT BY REFERENCE PAGE
- ------- ------- ------------ ------------

3.1. Amended and Restated Agreement
of Limited Partnership. Yes

3.2 Acknowledgment and Amendment of
Partnership Agreement. Yes

3.3 Amendment to the Amended and
Restated Agreement of Limited
Partnership, effective October 29,
2002. Yes

3.4. Assignment Agreement by and
among the General Partner, the
Initial Limited Partner and the
Partnership. Yes

10.1 Agreement between the Partnership
and The Walt Disney Company dated
January 29, 1987 Yes

10.2 Letter Agreement, dated as of
September 10, 1987, between the
Partnership and The Walt Disney
Company Yes

10.3 Management, Advisory and Supervisory
Agreement, including the License
Agreement for the use of the Arvida
name as exhibit A thereto Yes

10.4 Fourth Amended and Restated Agreement
of Partnership of Arvida/JMB Partners,
together with Amendment No. 1 thereto Yes

10.5 Information Systems Sharing Agreement
dated November 6, 1997 between
Arvida/JMB Partners, L.P. and Arvida
Company Yes

10.6 Sale and Purchase Agreement dated as
of September 6, 2002, by and between
Weston Town Center, LLC and Belmont
Investment Corp., as amended by the
First, Second and Third Amendments to
Sale and Purchase Agreement, dated
January 17, 2003, February 7, 2003
and February 7, 2003, respectively,
for the sale of the Weston Town
Center, also known as The Shoppes of
Town Center located in Weston, Florida Yes

21 Subsidiaries of the Registrant. No

DOCUMENT SEQUENTIALLY
EXHIBIT INCORPORATED NUMBERED
NO. EXHIBIT BY REFERENCE PAGE
- ------- ------- ------------ ------------

31.1 Certification of Principal
Executive Officer pursuant to
Rule 13a-14(a)/Rule 15d-14(a)
of the Securities Exchange Act,
as amended. No

31.2 Certification of Principal
Financial Officer pursuant to
Rule 13a-14(a)/Rule 15d-14(a)
of the Securities Exchange Act,
as amended. No

32. Certifications of Chief Executive
Officer and Chief Financial
Officer Pursuant to 18 U.S.C.
Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley
Act of 2002. No