Legend Properties Inc – ‘10-K’ for 12/31/98

As of:  Thursday, 4/15/99   ·   For:  12/31/98   ·   Accession #:  950133-99-1343   ·   File #:  1-09885

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Annual Report   —   Form 10-K
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Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         54    312K 
 2: EX-21.1     Subsidiaries of the Registrant                         2±     6K 
 3: EX-27.1     Financial Data Schedule                                1      9K 

10-K   —   Annual Report
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 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 Form 10-K

[X]             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF                
 THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 1998

OR

[ ]            TRANSISTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF           
 THE SECURITIES EXCHANGE ACT OF 1934
For the transition
period from ___ to ___. 

 Commission File Number 1-9885

 Legend Properties, Inc.
(Exact name of Registrant as specified in its charter)

                                                                [Download Table]

                                                                                  
                        Delaware                                   36-3465359     
(State or other jurisdiction of                                  (IRS Employer    
incorporation or organization)                                Identification No.) 

13662 Office Place, Suite 201, Woodbridge, Virginia                  22192        
 (Address of principal executive offices)                          (Zip Code)     

Registrant's telephone number, including area code               (703) 680-2226   

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

Shares of Common Stock                                                None        
Securities registered pursuant to Section 12(g) of the Act:                       

None
(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 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 10K. [ ]                                                                   

Shares of common stock outstanding as of March 19, 1999: 6,290,874. The         
Registrants shares are not listed on an exchange or included in the NASDAQ      
quotation system. There is no established public trading market for the shares  
and the volume of trades in the secondary market does not permit the            
determination of the aggregate market value of the Registrants shares of common 
stock held by non-affiliates.                                                   

 DOCUMENTS INCORPORATED BY REFERENCE

See Exhibit index located on page 28  

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 TABLE OF CONTENTS

PART 1

                                                                [Download Table]
                                                                         
ITEM 1.  DESCRIPTION OF BUSINESS                                        1

ITEM 2.  PROPERTIES                                                     6

ITEM 3.  LEGAL PROCEEDINGS                                              6

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIY HOLDERS           7

                                       PART II                           

ITEM 5.  MARKET FOR THE REGISTRANT'S SHARES AND RELATED                  
         SHAREHOLDERS MATTERS                                           8

ITEM 6.  SELECTED FINANCIAL DATA                                        9

ITEM 7.  MANAGEMENT'S DICSUSSION AND ANALYSIS OF FINANCIAL               
         CONDITION AND RESULTS OF OPERATIONS                           10

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    21

ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA      21

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTS ON ACCOUNTING        
         AND FINANCIAL DISCLOSURE                                      21

                                  PART III                               

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT            22

ITEM 11. EXECUTIVE COMPENSATION                                        23

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND             
         MANAGEMENT                                                    25

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                26

                                      PART IV                            

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS             
         ON FORM 8-K                                                 II-1

                                 SIGNATURES                              

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PART I

ITEM 1.DESCRIPTION OF BUSINESS                                                  

BUSINESS OPERATIONS                                                             

The Registrant, Legend Properties, Inc., formerly known as Banyan Mortgage      
Investment Fund (the Company or Legend), is the surviving corporation from the  
December 31, 1996 merger (the Merger) of Banyan Mortgage Investment Fund        
(Banyan) and RGI U.S. Holdings, Inc. (RGI/US). The Company is organized as a    
corporation under the laws of the State of Delaware, pursuant to a Restated     
Certificate of Incorporation filed December 31, 1996. As of December 31, 1998,  
Holdings owns approximately 80% of the outstanding common shares of the Company.

The Company was originally established to invest primarily in (i) short-term    
loans, junior mortgage loans, wraparound mortgage loans and first mortgage loans
on income-producing properties and (ii) construction loans, pre-development     
loans and land loans. In response to defaults on loans made by the Company to   
its borrowers, in February 1990, the Company suspended making new loans, except 
for advances of additional funds under circumstances which it deemed necessary  
to preserve the value of existing collateral, including instances where the     
Company foreclosed upon or taken title, directly or indirectly to the           
collateral. At the time of the Merger, the Company controlled the ownership of a
2,227-acre parcel located in Charles County, Maryland (Chapman's Landing), a    
2,685-acre development located in Prince William County, Virginia (Southbridge) 
and a 565-acre parcel located in Monterey County, California (Laguna Seca       
Ranch). The Laguna Seca Ranch and Chapman's Landing projects were sold in       
December 1997 and October 1998, respectively.                                   

RGI/US was a Washington corporation and until the Merger, was a wholly-owned    
subsidiary of RGI Holdings, Inc. (Holdings) which is an indirect majority-owned 
subsidiary of Aker RGI ASA, a Norwegian investment company with interests in    
cement and building materials, oil and gas technology, seafoods and other       
industries. At the time of the Merger, RGI/US, through various subsidiaries,    
owned, developed and operated the following real estate: (i) Grand Harbor, a    
772-acre residential golf community located in Vero Beach, Florida; (ii) Oak    
Harbor, a 116-acre retirement community also located in Vero Beach, Florida;    
(iii) the Royal Palm Convalescent Center, a skilled nursing care facility       
licensed for 72 beds located in Vero Beach, Florida and (iv) a 164,724 square   
foot shopping center located in Lynnwood, Washington (the Lynnwood Center). The 
Lynnwood Center was sold in November 1997.                                      

The Company's strategy is to realize and enhance the market potential of its    
remaining core assets. The Company currently controls approximately 2,800 acres 
of land in a master planned community (Southbridge), a residential golf         
community (Grand Harbor), a retirement community (Oak Harbor), and a commercial 
business park (Ashburn).                                                        

Legend is a diversified real estate operating company engaged in three primary  
business activities: real estate development and sales, club operations and     
patient services. The Company operates other ancillary operations that provide  
support services to its primary business activities but these ancillary         
operations are not material enough to be considered a primary business activity.

Real Estate Development and Sales                       

The Real Estate Development and Sales activity is responsible for land planning,
entitlements, land development, construction and the sale of land parcels and   
finished homes.                                                                 

Southbridge includes a mix of commercial and residential land uses including    
single-family, townhouse and apartment/condominium units and office, retail and 
industrial/flex space. The Company is attempting to enhance the value of this   
project through land use, entitlement and zoning modifications and selective    
development. Such activities take into account local zoning, political and      
market conditions. The Company anticipates primarily developing commercial sites
and residential housing lots for sale to third parties but also pursues         
opportunities to sell undeveloped parcels or enter into joint ventures, or whole
or partial bulk sales.                                                          

Grand Harbor and Oak Harbor include primarily finished lots upon which the      
Company, through a general contractor, builds a variety of housing types and    
styles including villas, cottages, duplex and condominiums for sale to third    
parties. The Company also pursues outright lot sales.                           

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During February 1998, the Company entered into an agreement to acquire Ashburn, 
a 116 acre commercial tract in Loudoun County, Virginia. On March 6, 1998 the   
first parcel of 88 acres was acquired. The tract is planned for office and      
flex/tech development and contains substantial improvements including existing  
sewer, water and roadways.                                                      

Club Operations                                         

The Club Operations activity is responsible for the management and operations of
the club facilities.                                                            

Grand Harbor operates the Grand Harbor Golf and Beach Club which includes a     
clubhouse and two 18-hole golf courses, swimming and tennis facilities and an   
ocean front beach club.                                                         

Oak Harbor operates the Oak Harbor Club which includes a clubhouse and a 9-hole 
golf course.                                                                    

Patient Services                                        

The Patient Services activity is responsible for the management and operations  
of the assisted living and skilled care facilities.                             

Oak Harbor operates Somerset House (assisted living facility) and Royal Palm    
Convalescent Center (skilled care facility).                                    

Following is a narrative describing Legend's core assets. The project business  
plans explained below are subject to numerous risks and uncertainties which are 
more fully described in Item 7 "Management's Discussion and Analysis of         
Financial Condition and Results of Operations - Factors Affecting Legend's      
Business Plan." If the Company is unable to secure the necessary financing or   
capital to meet its future needs, the project business plans will likely be     
materially revised, which may have a material adverse effect on the Company's   
financial condition and results of operations. (See Item 7 "Management's        
Discussion and Analysis of Financial Condition and Results of Operations -      
Liquidity and Capital Resources.")                                              

DESCRIPTION OF PROJECTS                                                         

Grand Harbor. Grand Harbor is a 772-acre gated residential golf community,      
located along the Indian River in Vero Beach, Florida, with two 18-hole         
championship golf courses and waterfront access with a marina containing 144    
slips available for lease. The residences at Grand Harbor are clustered in      
individual communities affording a view of the surrounding golf courses and     
scenic waterways. Development of Grand Harbor began in 1987 and continued until 
1990 when the Resolution Trust Corporation acquired the property and most       
development and construction activities were terminated. In 1991, affiliates of 
RGI/US acquired the project, completed the development of the marina and        
constructed the clubhouse facilities and continued the residential development. 
At December 31, 1998 the Company owned approximately 325 acres.                 

Grand Harbor offers two 18-hole championship golf courses: a Harbor Course      
designed by Pete Dye and a River Course designed by Joe Lee. The 28,000 square  
foot clubhouse, which serves both courses, also serves as a social center for   
Grand Harbor residents. Grand Harbor maintains 24-hour access control, together 
with a variety of amenities, including an on-site swimming facility and eight   
clay tennis courts and an off-site oceanfront beach club. Grand Harbor and Oak  
Harbor collectively received zoning entitlements for the development of a       
maximum of 2,688 residential units. The Company's business plan, however,       
contemplates the development of 990 residential units at Grand Harbor and 352   
residential units at Oak Harbor (see below). The Company believes this plan best
maximizes the value of these parcels based on existing and anticipated market   
conditions, even though these parcels are zoned for greater density. If market  
conditions change, the Company can increase, to a certain extent, the proportion
of multi-family homes to be developed under existing zoning.                    

Grand Harbor currently offers single-family detached homes, duplexes and        
low-rise condominiums with sales prices ranging from approximately $200,000 to  
$1,100,000 with sizes ranging from 1,600 square feet in the condominiums to over
5,000 square feet in the single-family detached homes. In addition, there are   
golf course and riverfront lots available at sales prices ranging from $165,000 
to over $500,000. Through December 31, 1998, 686 residences had been sold and an
additional 39 contracted for sale for delivery in early or mid 1999. Based on   
the current development plan, approximately 265 additional residences are       
planned for Grand Harbor. Grand Harbor has                                      

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received governmental approvals for approximately 725,000 square feet of        
commercial space on 60 acres. In early 1998, a 20-acre parcel was sold for a    
luxury apartment project.                                                       

Grand Harbor currently derives revenue from the construction and sale of        
single-family detached homes, duplexes, condominiums and individual lots; rental
commissions from residential units and rental income from marina docks; and the 
operation of harbor and club facilities. In conjunction with offering           
residential units for sale, Grand Harbor offers four (4) types of equity        
memberships in the Grand Harbor Golf and Beach Club: (i) full memberships for   
$40,000; (ii) golf and tennis memberships for $20,000; (iii) tennis memberships 
for $10,000; and (iv) social memberships for $7,500. Upon the completion of sale
of the equity memberships, Grand Harbor will turn over management and control of
the Grand Harbor Golf and Beach Club to its members.                            

There are several residential communities located within Vero Beach that compete
with Grand Harbor in terms of location, quality, and/or price, including but not
limited to Windsor, Orchid Island Golf & Beach Club, and Indian River Club.     
While these communities offer many of the same amenities as Grand Harbor such as
an oceanfront beach club and a gated community, many do not offer boating       
access, a completed golf clubhouse, or have a limited product choice.           

Oak Harbor. Oak Harbor is a 116-acre luxury country club retirement community,  
located along the Indian River in Vero Beach, Florida. On-site amenities include
the 36,000 square foot clubhouse, a 24,900 square foot assisted living facility 
with 24 private suites and a nine-hole golf course designed by Joe Lee. The     
clubhouse contains a community hall, arts and crafts room, hobby shop, game     
room, library and fitness center. Oak Harbor provides the opportunity to own a  
home within a community that offers on-site health care and a Club that offers a
wide range of daily services designed to make life easier for residents. Oak    
Harbor Club members receive daily meals, transportation, housekeeping, social   
activities and access to optional health care. A discussion of Oak Harbor's     
zoning entitlements is included under "Grand Harbor". At December 31, 1998 the  
Company owned approximately 110 acres.                                          

Oak Harbor offers condominiums and single-family homes ranging in price from    
$250,000 to $635,000 and ranging in size from 1,178 to 2,850 square feet. All   
residences have emergency call systems and trained health professionals are     
available 24 hours a day to handle emergencies. Three levels of health care,    
including skilled, assisted living and home health care, are options available  
to Oak Harbor residents at an additional cost above the monthly Club dues       
described below.                                                                

-      Oak Harbor Club                                                          

          Membership in the Oak Harbor Club requires an initial $25,000 club
         deposit. Upon the re-sale of an Oak Harbor residence, the $25,000
           club deposit is refundable subject to the new owner becoming a Club
          member and paying the deposit. In addition, there is an initiation
   fee equal to ten percent (10%) of the purchase price of the
          residence. This fee may be deferred until the residence is resold,
            but will then equal 10% of the greater of the initial purchase price
           or the sale price of the residence. (Currently, this initiation fee
           is waived for the first 100 Club members.) The Oak Harbor Club is a
        non-equity club and Oak Harbor will not turn over management and
       control to its members. Monthly dues, ranging from $1,725 for a
         single person to $2,225 for a couple, include among other things,
         one meal per day, local transportation around Oak Harbor and Vero
            Beach, weekly housekeeping and linen service, Club activities, green
       fees on Oak Harbor's private nine-hole golf course, and 24-hour
emergency response service.                             

-      Royal Palm Convalescent Center                                           

     The off-site Royal Palm Convalescent Center is a skilled care
            nursing facility licensed for 72 beds, which is currently configured
      for 50 beds in private and semi-private rooms. Royal Palm is a
    private facility, which does not accept Medicaid or Medicare
           patients and has received a Superior Rating the past 15 consecutive
      years from the Florida Department of Health and Rehabilitative
Services.                                               

        Monthly rates range from approximately $4,080 for a semi-private
        room to $6,300 for a private suite.  As of December 31, 1998, 41
beds were occupied (82%).                               

-      Somerset House Assisted Living Facility                                  

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         The on-site Somerset House Assisted Living Facility is one of the
           finest of its kind in the United States. Initially constructed with
         24 private suites with patios situated in private courtyards, the
           facility is designed as a "mini-clubhouse" versus the institutional
       style facilities prevalent in many communities. The facility is
     designed to be expanded to up to 64 suites. The main building
            includes the common living, dining and kitchen facilities as well as
          the examination, consultation and Home Health Care offices. The 24
     private suites are located in a separate wing behind the main
           building. Each suite is 406 square feet and contains living, dining
      and kitchen facilities. A centrally located Nurse's Station is
        staffed 24 hours a day by nursing staff to provide assistance as
needed.                                                 

      Monthly rates range from $2,400 for Oak Harbor Club members to
    $3,600 for non-members. As of December 31, 1998 there were 5
suites occupied.                                        

Oak Harbor's current development plan is for a total of 352 residences          
consisting of villas, cottages and condominium units. As of December 31, 1998,  
65 residences have been sold and an additional 14 residences were under contract
for sale for delivery in early or mid 1999. Residential sales are subject to a  
non-refundable deposit of 20% of the sales price but are typically subject to   
cancellation by the purchaser under specified circumstances, such as the        
purchaser becoming incapable of independent living, or death. Although Oak      
Harbor is a retirement community, all residents must be capable of independent  
living at the time they join the Oak Harbor Club.                               

There are two competing lifecare communities located within a 35-mile radius of 
Oak Harbor. Indian River Estates, located in Vero Beach, and Sandhill Cove,     
located 32 miles south in Stuart, Florida. Both target a lower demographic      
prospect than Oak Harbor, have smaller average units than those offered by Oak  
Harbor, and do not offer home ownership to their residents.                     

Southbridge. Southbridge is a 2,685 acre mixed use master planned community     
located along the Potomac River in Prince William County, Virginia,             
approximately 24 miles south of Washington, D.C. Southbridge is located within  
close proximity to the major employment centers of Washington, D.C. and is      
comprehensively planned for approximately 5,000 single-family detached homes,   
townhomes, garden apartments and condominiums as well as 4 million square feet  
of commercial space including office, flex-tech and retail. The project is      
anticipated to be built in phases over the next 15 - 20 years and will offer    
residents an assortment of amenities including a public 18 hole championship    
golf course, three clubhouse facilities with pools and tennis courts and a town 
center overlooking the Potomac River. The mixture of commercial, recreational   
and educational facilities will allow residents to work and educate their       
children without leaving the community. At December 31, 1998 the Company owned  
approximately 2,350 acres.                                                      

Southbridge is divided into seven phases; only the first of which has had sales 
to date. Phase I is zoned for 2,376 residential units and 280,000 square feet of
commercial space. Although approved for 2,376 residential units, the Company's  
current development plan anticipates development of 1,822 units, which the      
Company believes maximizes the underlying value of the property based on        
existing and anticipated market conditions. The Company can modify its          
development plans within the limitations of the existing zoning in response to  
changes in market conditions.                                                   

Southbridge offers builders different residential lot products as follows:      

                                                                [Download Table]

STYLE                                  LOT SIZE       
-----                                  --------       
                                                      
Garden Apartments                           N/A       
Condominiums                                N/A       
Townhomes                                   N/A       
Cottage                                6,000 SF    (1)
Village                                8,000 SF    (1)
Country                               10,000 SF    (1)
Estate                                20,000 SF       

(1) currently all available developed lots are under contract to builders       

As of December 31, 1998, 657 residential lots have been sold to third-party     
homebuilders that have in turn constructed and sold 169 single-family homes and 
487 townhomes. In addition, the Company has under contract 142 single-family    
lots developed and ready for delivery to builders. In total, the Company has    
contracts with 4 builders for over 300 lots with a total contract value of      
approximately $13,500,000. Anticipated quarterly deliveries                     

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range from 22 to 30 lots. The Company continues to negotiate with other builders
for additional residential lots sales contracts. Future engineering and         
development of residential lots will be timed to satisfy contractual            
requirements and anticipated market demands.                                    

In November 1998, the Company formed Potomac Heritage Homes to construct and    
sell single family homes at various price points within Southbridge. Potomac    
Heritage's function is to compliment residential lot sale efforts. Potomac      
Heritage is currently in the initial stages of operations, and has recently     
begun sales and construction activities.                                        

The housing industry in the Greater Washington D.C. region is highly            
competitive. In the Company's local Washington D.C. market, there are numerous  
land developers, homebuilders and private interests with which the company      
competes to attract homebuilders and qualified buyers. The Company competes     
primarily on the basis of price, location, product and the level of amenities   
provided within the community.                                                  

Ashburn Corporate Center. Ashburn is a 116-acre commercial business park        
development project located in Loudoun County, Virginia planned for office and  
flex/tech uses. The project is improved with sewer, water and roadways in place.
On March 6, 1998 the Company closed on the initial acquisition of 88 acres.     
Acquisition of the remaining 28 acres has not yet occurred. Subsequent to the   
second quarter of 1998, the Company began marketing its interest in the project.
In Management's view, strong development and leasing activity in Northern       
Virginia has created an opportunity to achieve an acceptable return from the    
outright sale of the project rather than proceeding with development as         
originally planned.                                                             

OPERATING SEGMENTS                                                              

See the Notes to Consolidated Financial Statements.                             

OTHER INFORMATION                                                               

Development and construction activities performed in the State of Florida are   
not seasonal, however development and construction activities performed in the  
State of Virginia is affected by inclement weather, with the majority of the    
development and construction work occurring between the months of March and     
November. As it relates to sales activities, the majority of revenues recorded  
related to sales in the State of Florida occur between the months of October and
May, while revenues related to sales occurring in the State of Virginia are     
recorded more evenly throughout the year.                                       

As of December 31, 1998, the Company had 417 employees including 3 executive    
officers.                                                                       

The Company reviews and monitors compliance with federal, state and local       
provisions which have been enacted or adopted regulating the discharge of       
material into the environment, or otherwise relating to the protection of the   
environment. For the year ended December 31, 1998, the Company did not incur a  
material amount for capital expenditures for environmental matters nor does it  
anticipate making any material expenditures for environmental matters for the   
year ending December 31, 1999.                                                  

Certain statements in this Annual Report that are not historical fact constitute
"forward-looking statements" within the meaning of the Private Securities       
Litigation Reform Act of 1995. Discussions containing forward-looking statements
may be found in this section and in the sections headed "Legal Proceedings,"    
"Market for the Registrant's Shares and Related Shareholder Matters" and        
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations." Without limiting the foregoing, words such as "anticipates,"       
"expects," "intends," "plans" and similar expressions are intended to identify  
forward-looking statements. These statements are subject to a number of risks   
and uncertainties (See Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Factors Affecting Legends Business Plan.")
Actual results could differ materially from those projected in the              
forward-looking statements. The Company undertakes no obligation to update these
forward-looking statements to reflect future events or circumstances.           

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ITEM 2.  PROPERTIES                                                             

As of December 31, 1998, the Company owned interests in five properties. Below  
is a brief description of property interests owned by the Company               

                                                        [Enlarge/Download Table]

             Name, Location and             Approx.          Date                                                                
              Type of Property               Size          Acquired                      Description                             
-------------------------------------  --------------  ---------------------  ------------------------------------               

                                                                                                                                 
Grand Harbor                               325 acres        6/91(1)           a 100% interest in a corporation                   
Vero Beach, FL                                                                which owns the subject property                    
Residential Development                                                                                                          

Oak Harbor                                 106 acres        6/91(1)           a 100% interest in a corporation                   
Vero Beach, FL                                                                which owns the subject property                    
Residential Development                                                                                                          

Royal Palm                                  72-Bed          6/94(1)           a 100% interest in a corporation                   
Convalescent Center                                                           which owns the subject property                    
Vero Beach, FL                                                                                                                   
Skilled Nursing Care facility                                                                                                    

Southbridge                               2,350 acres        5/91             a 100% interest in general partnerships            
Prince William County, VA                                                     which own the subject property                     
Land Development                                                                                                                 

Ashburn Corporate Center                   88 acres          3/98             an 82% interest in a limited liability company that
Loudoun County, VA                                                            owns the property                                  
Land Parcel                                                                                                                      

(1) The acquisition date represents the date the property was acquired by RGI/US
or affiliates. RGI/US merged with and into the Company effective December 31,   
1996.                                                                           

ITEM 3.  LEGAL PROCEEDINGS                                                      

Ashburn Corporate Center                                                        

During August 1998, Legend filed a lawsuit and a memorandum of Lis Pendens in   
the Circuit Court of Loudoun County against Atlantic Research Corporation (ARC) 
which was subsequently amended during November 1998. On March 6, 1998 Legend was
assigned the rights under an existing contract to purchase approximately 28     
acres located in Loudoun County Virginia (the second Ashburn parcel) which      
included a $100,000 contract deposit. Although the contract contained a         
projected closing date, there was no provision stating that time was of the     
essence. Subsequent to the assignment of the contract, ARC attempted to insert  
new terms and conditions into the contract including a provision that time is of
the essence and a demand for additional consideration. During November 1998,    
Legend tendered performance under the contract by delivering all necessary      
papers and approximately $3.6 million to an escrow agent. Under the amended     
complaint, Legend is seeking specific performance under the real estate sales   
contract and any other relief the court may offer.                              

ARC has answered that the original contract had a clear and unambiguous         
settlement date of June 23, 1998, that Legend has breached the contract and ARC 
has no obligation to sell Legend the property, and that ARC is entitled to the  
$100,000 deposit as partial damages. ARC has also filed a counterclaim          
contending that ARC has been damaged under the contract breached by Legend and  
the memorandum of Lis Pendens. ARC claims that ARC has been forced to maintain a
valuable piece of property and forego opportunities to sell the property for a  
greater sum. ARC has requested the Court to deny Legend's claim, declare that   
Legend has no further rights to the property, order Legend to forfeit the       
$100,000 deposit, and award ARC $800,000 plus interest and costs as damages.    

Laguna Seca Ranch                                                               

On December 14, 1998, a Legend subsidiary, BMIF Monterey County Corp., filed a  
complaint against New Cities Development Group, Bates Properties, Inc., New     
Cities Development Company, Deregt Development, Inc., Rancho                    

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Monterey, L.L.C. (collectively New Cities), Old Republic Title Company and David
Bohen (collectively Old Republic) in the United States District Court, Northern 
District of California, San Jose Division.                                      

During 1997, Legend sold a property known as the Laguna Seca Ranch Development  
(the property) to New Cities with Legend retaining a house with certain         
surrounding property known as Lot 40 together with certain access easements to  
the nearest public right-of-way. New Cities agreed, as part of the sale, to     
establish a separate legal parcel for Lot 40 subsequent to the sale. As part of 
the sale, Legend agreed to cooperate and share equally in certain costs with New
Cities in negotiating an agreement concerning water service to the property with
California-American Water Company (Cal-Am). Pursuant to this, Legend agreed to  
post $200,000 in an interest bearing escrow held by Old Republic to pay any     
necessary amounts due from Legend in consummating an agreement with Cal-Am. An  
agreement was reached with Cal-Am on March 20, 1998 to provide the water needs, 
and Legend agreed with New Cities to contribute $60,000 out of the escrow to    
defray certain costs. On August 28, 1998 Cal-Am withdrew from its commitment.   
Subsequently, Old Republic released the $200,000 escrow with interest to New    
Cities.                                                                         

Legend is claiming that New Cities breached certain implied covenants in        
refusing to negotiate and consummate the agreement with Cal-Am, that New Cities 
failed to establish Lot 40 as a separate parcel, and that Old Republic wrongly  
released the funds in escrow to New Cities. Legend asked to recover $140,000    
plus interest on the escrow, that New Cities convey Lot 40, that New Cities pay 
approximately $75,000 of costs incurred by Legend for negotiating the agreement 
with Cal-Am, and other damages. New Cities has not responded to the complaint,  
whereas Old Republic has denied any wrong doing in releasing the escrow, and has
asserted other separate defenses.                                               

The Company is not aware of any other material pending legal proceedings as of  
March 19, 1999.                                                                 

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

There were no matters submitted to a vote of stockholders during the fourth     
quarter of the year ended December 31, 1998.                                    

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 PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S SHARES AND RELATED SHAREHOLDER MATTERS     

There is no established public trading market for the Company's shares of common
stock. The Company has not declared cash dividends on its common stock since the
year ended December 31, 1989, nor does the Company anticipate the declaration of
any such dividends in the near future. See Item 7, "Management's Discussion and 
Analysis of Financial Condition and Results of Operations" for further details. 

At March 19, 1999, there were 8,693 record holders of the Company's shares of   
common stock. Holdings owns approximately 80% of the outstanding shares of the  
Company.                                                                        

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ITEM 6.  SELECTED FINANCIAL DATA                                                

For financial reporting purposes, the December 31, 1996 Merger of Banyan and    
RGI/US was treated as a recapitalization of RGI/US, with RGI/US as the acquiror 
of Banyan. Accordingly, the historical consolidated financial statements of     
Legend and the selected financial data presented below for 1994 - 1996 are those
of RGI/US.                                                                      

                                                        [Enlarge/Download Table]

                                              For the Year Ended December 31                         
                       ------------------------------------------------------------------------------
                                1998                        1997                      1996(1)        
                       -----------------------     -----------------------      ---------------------
                                                                                                     
Cash and Cash                                                                                        
Equivalents                   $  4,446,864                 $ 12,732,681                 $  1,529,898 
                              ============                 ============                 ============ 

Investment in Real                                                                                   
Estate (1)                    $ 82,873,914                 $103,857,159                 $128,834,222 
                              ============                 ============                 ============ 

Properties Owned at                                                                                  
December 31 (1)                          5                            5                            7 
                              ============                 ============                 ============ 

Total Assets                  $147,558,291                 $162,870,552                 $184,110,129 
                              ============                 ============                 ============ 

Notes Payable to                                                                                     
Banks and Others              $ 40,722,737                 $ 60,411,332                 $ 86,700,617 
                              ============                 ============                 ============ 

Payables to Related                                                                                  
Parties                       $ 84,744,478                 $ 72,893,927                 $ 47,609,097 
                              ============                 ============                 ============ 

Total Revenues                $ 75,733,456                 $ 55,627,898                 $ 36,623,291 
                              ============                 ============                 ============ 

Loss Before                                                                                          
Extraordinary Item            $(12,136,973)                $(14,505,906)                $ (2,153,583)
                              ============                 ============                 ============ 

Net Income (Loss)             $(12,136,973)                $(14,505,906)                $ (2,153,583)
                              ============                 ============                 ============ 

Income (Loss) Per                                                                                    
Share of Common                                                                                      
Stock Before                                                                                         
Extraordinary Item-                                                                                  
basic and diluted (2)         $      (1.93)                $      (2.31)                $       (.49)
                              ============                 ============                 ============ 

Net Income (Loss) Per                                                                                
Share of Common                                                                                      
Stock -basic and                                                                                     
diluted (2)                   $      (1.93)                $      (2.31)                $       (.49)
                              ============                 ============                 ============ 

                                                                [Download Table]

                                 For the Year Ended December 31        
                       ------------------------------------------------
                                 1995                       1994       
                       ---------------------      ---------------------

                                                                       
Cash and Cash                                                          
Equivalents              $          578,906         $          430,819 
                         ==================         ================== 

Investment in Real                                                     
Estate (1)               $       21,984,169         $       14,153,666 
                         ==================         ================== 

Properties Owned at                                                    
December 31 (1)                           4                          4 
                         ==================         ================== 

Total Assets             $       40,555,418         $       36,061,717 
                         ==================         ================== 

Notes Payable to                                                       
Banks and Others         $       23,288,065         $       21,435,774 
                         ==================         ================== 

Payables to Related                                                    
Parties                  $       25,728,682         $       17,521,229 
                         ==================         ================== 

Total Revenues           $        2,088,247         $        2,410,407 
                         ==================         ================== 

Loss Before                                                            
Extraordinary Item       $      (4,069,032)         $      (1,504,261) 
                         ==================         ================== 

Net Income (Loss)        $      (4,069,032)         $          971,097 
                         ==================         ================== 

Income (Loss) Per                                                      
Share of Common                                                        
Stock Before                                                           
Extraordinary Item-                                                    
basic and diluted (2)    $            (.93)         $            (.34) 
                         ==================         ================== 

Net Income (Loss) Per                                                  
Share of Common                                                        
Stock -basic and                                                       
diluted (2)              $            (.93)         $              .22 
                         ==================         ================== 

(1)         "Investments in Real Estate" and "Properties Owned at December 31"  
           include investments in Grand Harbor and Oak Harbor through December
            31, 1995. Effective January 1, 1996, Grand Harbor Associates, Inc.(a
           wholly-owned subsidiary of Legend), a 45% owner of the Grand Harbor
          and Oak Harbor projects (The Projects), acquired an additional 45%
            interest in The Projects. Additionally, effective December 31, 1996,
           RGI/US merged with Banyan. Both of these business combinations were
          accounted for under the purchase method of accounting, wherein the
           purchase price was allocated to the assets acquired and liabilities
            assumed based upon their relative fair values. The accounts of these
           acquired companies have been included in the consolidated financial
statements of Legend from the acquisition dates.        

(2)         For the year ended December 31, 1998 there were 6,290,874 shares    
       outstanding. For the years ended December 31, 1997 and 1996 the
       weighted average number of shares outstanding was 6,286,322 and
         4,392,163, respectively, due to the recapitalization of RGI/US on
            December 31, 1996 and the sale of 34,130 shares in 1996. At December
           31, 1995 and 1994 the weighted average number of shares outstanding
was 4,386,983.                                          

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

OVERVIEW                                                                        

Legend Properties, Inc., formerly known as Banyan Mortgage Investment Fund (the 
Company or Legend), is the surviving corporation from the December 31, 1996     
merger (the Merger) of Banyan Mortgage Investment Fund (Banyan) with RGI U.S.   
Holdings, Inc. (RGI/US). For financial reporting purposes, the Merger was       
treated as a recapitalization of RGI/US, with RGI/US as the acquirer of Banyan. 
As of December 31, 1996, the historical consolidated financial statements of    
RGI/US became those of Legend Properties, Inc.                                  

During 1997 and 1998, Legend focused its management efforts and financial       
resources on its core assets on the East Coast. Non-core assets, including a    
565-acre land parcel (Laguna Seca Ranch) located in California and a 164,724    
square foot retail shopping center located in the state of Washington (Lynnwood 
Center), were sold during 1997 for approximately $33 million. During October    
1998, Legend sold the Chapman's Landing project to the State of Maryland and an 
environmental group for a total sales price of $28.5 million. As several of the 
Company's projects are in the initial stages of development, where major        
investments in infrastructure improvements are required to realize the market   
potential, significant financial resources were committed to infrastructure and 
amenity improvements.                                                           

Legend is currently focused on continuing the development of infrastructure,    
amenities and residential units at Grand Harbor and Oak Harbor consistent with  
approved zoning and development plans. At Southbridge, Legend intends to develop
and sell land parcels. Legend is currently marketing its interest in Ashburn.   
The Company's ability to fully implement its business plan is dependent on,     
among other things, securing long-term and short-term financing related to the  
developments on acceptable terms. There can be no assurances that the Company   
will be able to obtain the necessary financing on acceptable terms, if at all.  
See "Factors Affecting Legend's Business Plan" below.                           

LIQUIDITY AND CAPITAL RESOURCES                                                 

Historically, the Company has utilized internally generated funds, third party  
borrowing and loans from Holdings and affiliated entities to fund its           
construction and development activities, and ongoing operating expenses.        

During 1999, the Company contemplates continued expenditures for development and
construction activities at Grand Harbor, Oak Harbor and Southbridge. For Grand  
Harbor and Oak Harbor, the Company anticipates utilizing existing construction  
lines for the majority of the construction financing and securing additional    
construction lines from existing external lenders for the remainder. At         
Southbridge, the Company must arrange for development financing.                

During 1998, the Company sold Chapman's Landing for $28.5 million and realized  
net proceeds, after closing costs, of approximately $28.4 million. Net proceeds 
were used for the repayment of existing external debt and to fund construction  
and development activities. In addition, the Company borrowed $6,000,000 from   
Holdings to fund construction and development activities.                       

As of December 31, 1998 the Company's debt obligation totaled $125,467,215 of   
which $25,777,613 matures during 1999. Loans from Holdings totaling $84,744,478 
make up a substantial portion of the debt.                                      

As noted above, the Company has substantial debt repayments in 1999 and early   
2000 under existing financings and requires additional financing to advance its 
business plan. As of December 31, 1998 the Company had $4,446,864 of cash and   
cash equivalents, which will not be sufficient to fund these obligations. The   
Company anticipates meeting its existing debt obligations during 1999 from the  
release of restricted cash pledged as collateral on certain debt, net proceeds  
from the sale of Ashburn, the renewal and extension of existing construction    
lines, and internally generated funds from real estate sales and operations. If 
sufficient funds are not available from the above, the Company anticipates      
refinancing certain land acquisition financing and delaying certain quarterly   
interest payments as allowed under the debt agreements. The Company also has    
available, if needed, a $5 million credit facility from Holdings.               

For future construction and development activities, the Company anticipates     
utilizing existing or additional construction lines as noted above.             

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During 1998, approximately $16 million of the Chapman's Landing proceeds were   
utilized for the repayment of existing external debt pursuant to a loan         
restructuring with Holdings, and Holdings indirect parent, Aker RGI ASA (Aker). 
The previous debt agreements had required Legend to pay Holdings 50% of the net 
cash flow (as defined), upon the sale of Chapman's Landing. In exchange for     
releasing Legend from this commitment, Legend agreed to utilize these proceeds  
to retire certain external debt obligations that had been guaranteed by Aker.   
The Aker debt guarantees that were retired totaled approximately $42.9 million. 

This restructuring has also provided for an extension of the debt due to        
Holdings to April 2003, and it adjusted interest rates to between LIBOR plus    
2.5% to Prime plus 2%. Moreover, certain interest and principal repayment       
provisions were modified, and selected loans were consolidated. Lastly, Holdings
has made available a line of credit of $5 million to fund development,          
construction and operations.                                                    

There can be no assurance that the Company will be able to refinance the        
existing debt obligations or obtain the necessary construction and development  
financing to implement its plan or that, if available, the terms and conditions 
will be acceptable to the Company. If the Company is unable to secure the       
necessary additional financing or capital when needed, the plans for its        
projects will likely be materially revised, which would have a material adverse 
effect on the Company's financial condition and results of operations. See      
"Factors Affecting Legend's Business Plan".                                     

For each of Legend's projects, cash flow generated from operations can differ   
substantially from earnings, depending on the status of the development cycle.  
At Southbridge, which is in the initial stages of development, significant cash 
outlays are required for, among other things, land acquisitions, processing     
zoning and other regulatory approvals, construction of amenities, sales         
facilities, major roads, utilities, general landscaping and debt service. Since 
a major part of these initial expenditures are capitalized, income reported for 
financial statement purposes during the initial years may significantly exceed  
operating cash flow. At Grand Harbor and Oak Harbor, which have completed the   
initial stages of development, operating cash flow can exceed earnings reported 
for financial statement purposes, since expenses include charges for substantial
amounts previously capitalized.                                                 

1998 compared to 1997                                                           

Legend's cash and cash equivalents balance at December 31, 1998, and December   
31, 1997, was $4,446,864 and $12,732,681, respectively. The decrease is         
attributable to cash used in investing and financing activities of $4,578,762   
and $13,998,293, respectively, which is partially offset by cash provided by    
operating activities of $10,291,238.                                            

Cash Flows from Operating Activities: For the year ended December 31, 1998,     
operating activities provided cash of $10,291,238.                              

Cash provided by operations in 1998 was primarily due to the following:         

-           A net $13,067,070 reduction in inventory and assets held for sale   
        resulting from the sale of Chapman's Landing which was partially
            offset by the acquisition of Ashburn for approximately $7.9 million.
        Moreover, development at Southbridge continued, so that finished
            lots will be available to satisfy existing contracts during 1999 and
         beyond, which also worked to counterbalance the inventory decline
      related to the Chapman's Landing sale. Total land acquisition,
          development and construction activities were $36,561,117. This was
         offset by an aggregate inventory reduction of $49,628,187, due to
          the Chapman's Landing sale and unit or lot sales of 64, 22, and 63
  at Grand Harbor, Oak Harbor and Southbridge, respectively.

-           Related party interest expense of $5,853,716 that was accrued but   
            not paid during 1998. This accrued interest was capitalized into the
         loan balance on December 31, 1998 in accordance with the terms of
the related loan agreements.                            

-           Depreciation and amortization of $2,977,467 that resulted primarily 
         from fixed asset depreciation for Grand Harbor and Oak Harbor and
loan cost amortization.                                 

-           An increase in accounts payable and other notes and liabilities of  
         $4,662,756 offset by an increase in accounts and notes receivable
         and other assets of $4,132,798 during 1998. Fluctuations in these
          accounts are generally due to the timing of the payment of certain
       liabilities, including trade payables, advances from customers,
  prepaid expenses, and the collection of accounts and notes
receivable. These fluctuations can vary                 

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           significantly from period to period depending on the timing of sale
        closing, and development and construction activities. Due to the
          nature of Legend's business, significant fluctuations in operating
assets and liabilities are not considered unusual.      

Partially offset by the following:                                              

-           A net loss of $12,136,973 that was caused principally by            
      substantial interest expense, corporate overhead and operating
           losses at Oak Harbor, Ashburn and Southbridge. These were partially
         counterbalanced by operating profits at Grand Harbor and the gain
         from the sale of Chapman's Landing. Sales at Oak Harbor were less
         than expected and lower than 1997. Ashburn incurred certain costs
            associated with holding and marketing the property during the period
    it has been held for sale without any compensating revenues.
   Southbridge experienced delays in developing lots due to an
       extremely wet winter and spring in the Washington, DC area, and
         closed fewer lots than expected. Grand Harbor's operating profits
            resulted primarily from the sale of a 20-acre parcel of raw land and
better than expected residential unit sales.            

Cash Flows from Investing Activities: Legend used $4,578,762 in investing       
activities during 1998. The majority of this was the result of $3,787,322       
increase in restricted cash and investments, that arose chiefly from the growth 
of customer sales deposit cash at Grand Harbor as the backlog has expanded from 
12 to 39 units between December 31, 1997 and 1998. The remainder of the increase
relates to $791,440 in purchases of property and equipment during 1998.         

Cash Flows from Financing Activities: For the year ended December 31, 1998,     
Legend utilized net cash in financing activities in the amount of $13,998,293   
primarily for the repayment of $41,258,127 of external debt, partially offset by
proceeds from borrowings of $21,569,532 from external parties and $6,000,000    
from related parties.                                                           

The Company borrowed $21,569,532 from external parties that was mainly used at  
Grand Harbor ($11,698,130) and Oak Harbor ($3,931,402) to fund construction and 
development costs. Additional funds were borrowed at Ashburn Corporate Center   
($5,940,000) to finance the acquisition of the first parcel as was previously   
described. Debt repayments to external parties totaled $41,258,127 (Corporate   
$996,220, Grand Harbor $23,642,961 and Oak Harbor $16,618,946). These funds were
generated from the sale of Chapman's Landing (described earlier), sale of       
residential units and club memberships, and existing cash sources. Moreover, the
Company borrowed $6,000,000 from Holdings, which was used to pay off existing   
external debt and fund construction and development activities, and ongoing     
operations.                                                                     

1997 compared to 1996                                                           

Legend's cash and cash equivalents balance at December 31, 1997, and December   
31, 1996, was $12,732,681 and $1,529,898, respectively. The increase in 1997 is 
attributable to cash provided by investing activities of $20,777,889, which is  
partially offset by cash utilized in operating and financing activities of      
$3,937,187 and $5,637,919, respectively.                                        

Cash Flows from Operating Activities: For the year ended December 31, 1997,     
Legend utilized cash in operating activities of $3,937,187.                     

        -           Net losses of $14,505,906 due primarily to operating
                       losses at the Grand Harbor, Oak Harbor, Southbridge and
                    Chapman's Landing developments, as well as corporate
                       overhead expenses. These losses are partially offset by
                       an operating profit at the Lynnwood Center, gain on the
                   sale of the Lynnwood Center of $195,076 and a gross
                margin on the sale of the Laguna Seca project of
                     $4,013,444. Sales at Grand Harbor and Oak Harbor were
                        less than anticipated, due primarily to a lower level of
              demand for new homes at these and similar-type
                 developments in the Vero Beach area in 1997, when
                        compared to 1996. Due to delays caused during the Merger
                  proceedings and the related litigation, Legend was
              unable to start developments activities at the
                        Southbridge and Chapman's Landing properties as early as
                        originally anticipated, resulting in the closing on only
                        12 residential and one commercial lot at the Southbridge
                project during 1997. Corporate overhead expenses
                     included costs associated with the merger and related
                     lawsuit, as well as costs related to the formation of
                  and transition to corporate offices in Seattle and
suburban Washington D.C.        

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          -           An increase in accounts and notes receivable and other
                     assets of $541,903 and a decrease in accounts payable
                and other liabilities of $5,504,042 during 1997.
                       Fluctuations in these accounts are generally due to the
                       timing of the payment of certain liabilities, including
                trade payables, advances from customers, prepaid
                  expenses, and the collection of accounts and notes
                     receivable. These fluctuations can vary significantly
                     from period to period depending on the timing of sale
                     closing, and development and construction activities.
                   Due to the nature of Legend's business, significant
                        fluctuations in operating assets and liabilities are not
considered unusual.             

Partially offset by the following:                                              

            -           Sales of 44 and 30 units at Grand Harbor and Oak Harbor,
                       respectively, and 12 residential and one commercial lot
                     sale at Southbridge. These sales reduced inventory in
                      the amount of $22,575,105 in 1997, which was offset by
                  construction and development costs incurred at the
                      development properties of $21,668,428. At Grand Harbor
                    and Oak Harbor the construction of residential units
                continued, including the completion of a 24-unit
                   condominium building and starting construction of a
                       second identical condominium building at Oak Harbor and
                      the introduction of several new product types at Grand
                       Harbor. Development activities continued at Southbridge
              in order to develop finished lots for expected
                       deliveries in 1998 and beyond under existing contracts.

      -           The decrease in assets held for sale of $8,301,604
      related to the Laguna Seca Ranch sale.

        -           Related party interest expense of $4,721,217 was not
                  paid during 1997 pursuant to the terms of the loan
agreements.                     

       -           Depreciation and amortization expense of $3,205,495
                     related primarily to fixed assets at Grand Harbor and
                      Oak Harbor and amortization of deferred loan costs. As
                      of June 31, 1996, management decided to dispose of the
                        Lynnwood Center and discontinued recording depreciation.

Cash Flows from Investing Activities: For the year ended December 31, 1997,     
Legend generated cash flow from investing activities of $20,777,889 primarily   
from sales proceeds of the Lynnwood Center of $19,436,029 (net of selling       
expenses) and the release of $7,260,767 from restricted cash and investments.   
These sources were partially offset by additions to property and equipment of   
$6,297,341, primarily at Oak harbor for the construction of the Assisted Care   
Facility (ACF) and the nine-hole golf course. At December 31, 1996, Legend had, 
among other things, restricted cash deposited with a lender for the construction
of the ACF. As construction occurred on the AFC during 1997, the lender released
certain of these restricted amounts to Oak Harbor to fund the construction.     
Also, customer deposits previously received for the rental and sale of real     
estate were released to Grand Harbor and Oak Harbor. Additionally, Legend's     
indirect majority shareholder agreed to guarantee the repayment of a loan to a  
third party lender, which resulted in the release of restricted cash held by the
lender of approximately $4.3 million during the third quarter of 1997.          

Cash Flows from Financing Activities: For the year ended December 31, 1997,     
Legend utilized net cash in financing activities in the amount of $5,637,919    
primarily for the repayment of $45,942,347 of indebtedness from external        
parties, partially offset by proceeds from borrowings of $19,653,062 from       
external parties and $20,702,720 from related parties. The $20,702,720 from     
related parties was used to fund development, construction and operating costs  
associated with the properties, as well as costs associated with the Merger,    
relocation and litigation.                                                      

The Company borrowed an additional $19,653,062 from external parties, which was 
used primarily to fund certain construction and development costs, and to       
"refinance" existing construction and development revolving loans. Repayments on
external debt totaled $45,942,347. Funding for the repayment of the indebtedness
on the Lynnwood Center was made from the net sale proceeds of the Lynnwood      
Center. The other repayments were made primarily from funds generated through   
the preceding borrowings and through sales of residential units and club        
memberships.                                                                    

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RESULTS OF OPERATIONS                                                           

Due to the accounting treatment utilized for the Merger and the Company's       
purchase of additional ownership interests in certain properties the Company    
does not believe that its consolidated statement of operations for the years    
ended December 31, 1998 and 1997 are comparable to 1996. To allow for a         
comparison of results, the Company has utilized unaudited proforma results for  
1996 (Pro Forma 1996). The Pro Forma 1996 results have been prepared as if the  
Merger had occurred on January 1, 1996.                                         

                                                        [Enlarge/Download Table]

                                                                                 Years Ended December 31             
                                                                                 -----------------------             
                                                                     Actual            Actual           Pro Forma    
                                                                      1998              1997                1996     
                                                                  ------------      ------------        ------------ 
Revenues:                                                                                                            
                                                                                                                     
      Real estate sales                                           $ 65,218,900        43,595,507          25,445,563 
      Club operations                                                5,953,105         5,344,575           4,256,917 
      Patient service                                                2,600,866         2,718,014           2,617,615 
      Rent                                                                   -         2,186,157           2,713,740 
      Other                                                          1,960,585         1,783,645           1,822,350 
                                                                  ------------      ------------        ------------ 

                              Total revenues                        75,733,456        55,627,898          36,856,185 
                                                                  ------------      ------------        ------------ 

Operating costs and expenses:                                                                                        
      Real estate sales                                             49,628,187        31,343,932          18,172,004 
      Club operations                                                7,291,432         6,364,169           4,827,002 
      Patient service direct costs                                   1,919,183         1,521,292           1,378,808 
      Rental operations                                                      -           359,325             788,081 
      Other                                                          1,417,681           612,207             594,413 
      Provision for loss on assets held for sale                             -                 -           1,000,000 
      Selling, general and administrative                           15,414,245        18,265,252          13,412,275 
      Depreciation and amortization                                  2,092,509         1,780,904           1,249,179 
                                                                  ------------      ------------        ------------ 

                              Total operating costs and expenses    77,763,237        60,247,081          41,421,762 
                                                                  ------------      ------------        ------------ 

Operating loss                                                      (2,029,781)       (4,619,183)         (4,565,577)
                                                                  ------------      ------------        ------------ 

Other income (expense):                                                                                              
      Interest income                                                  944,800         1,386,920             756,782 
      Interest income, related party                                         -            73,339             146,277 
      Interest expense                                              (5,596,055)       (7,503,319)         (8,293,772)
      Interest expense, related party                               (5,853,716)       (4,823,954)         (2,906,595)
      Other, net                                                       397,779           727,575           1,175,696 
                                                                  ------------      ------------        ------------ 

                  Net other expense                                (10,107,192)      (10,139,439)         (9,121,612)
                                                                  ------------      ------------        ------------ 

Loss before equity in income of investee and minority interest     (12,136,973)      (14,758,622)        (13,687,189)

Equity in income of investee                                                 -                 -             947,419 

Minority interest in losses of consolidated subsidiaries                     -           252,716             257,572 
                                                                  ------------      ------------        ------------ 

Net loss                                                          $(12,136,973)      (14,505,906)        (12,482,198)
                                                                  ============      ============        ============ 

1998 compared to 1997                                                           

Result of operations for the year ended December 31,1998 include the            
consolidated revenues and expenses of Grand Harbor, Oak Harbor, Southbridge,    
Ashburn and Chapman's Landing whereas 1997 results consist of the consolidated  
revenues and expenses for Grand Harbor, Oak Harbor, Southbridge, Chapman's      
Landing, Laguna Seca Ranch and the                                              

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Lynnwood Center. The 1998 changes were the acquisition of Ashburn in March 1998 
and the sale of Chapman's Landing in October 1998, while 1997 changes were the  
sales of the Laguna Seca Ranch and the Lynnwood Center in November and December 
1997, respectively. Accordingly, the 1998 and 1997 results of operations are not
comparable.                                                                     

Total revenues rose $20,105,558 between 1997 and 1998. This is mainly because of
increases in real estate revenues, and to a lesser extent improvements in club  
operating revenues. These are discussed in further detail below.                

Real estate sales revenues grew $21,623,393 between 1997 and 1998 primarily as a
result of increases in revenues from the bulk sale of properties. During 1997,  
Laguna Seca was sold for approximately $12.8 million whereas Chapman's Landing  
was sold in 1998 for $28.5 million. Moreover, a 20-acre land parcel was sold    
during 1998 at Grand Harbor for $1.9 million yielding a net increase of $17.6   
million in bulk sales revenue. The remainder of the change relates to a net     
increase in unit and lot sales at Grand Harbor ($5,609,412 increase), Oak Harbor
($3,081,529 decrease) and Southbridge ($1,380,989 increase).                    

Grand Harbor's real estate sales rose to 64 units in 1998 from 44 units in 1997 
resulting from improved marketing strategies and the overall health of the US   
economy. The average sales price was approximately $407,000 in 1997 compared    
with nearly $365,000 for 1998. At Oak Harbor, 22 units were sold during 1998 as 
opposed to 30 units during 1997 for an approximate average sales price of       
$390,000 for both 1998 and 1997. Oak Harbor completed its first 24-unit         
condominium during March 1997, and at that time had a majority of those units   
under contract. These units closed soon thereafter, which substantially         
increased sales for 1997 over 1998. Sales prices range from $165,000 to         
$1,100,000 at Grand Harbor, and $250,000 to $635,000 at Oak Harbor. Accordingly 
average unit sales prices may fluctuate dramatically from period to period      
depending upon factors such as the unit type and location of the product sold.  

At Southbridge, lot sales increased from 12 in 1997 to 63 in 1998. This occurred
despite poor weather (in particular excessive rain) in the Washington, DC area  
during the winter and spring of 1998, which stalled lot development activity.   
The rise from 1997 to 1998 occurred primarily because sales for 1997 were       
restrained due to delays in development activity. This was caused by the        
previously discussed Merger and attendant litigation. The average Southbridge   
lot revenue for 1998 was $40,500, which is comparable to the 1997 average of    
$42,500.                                                                        

The Company's backlog at December 31, 1998 was as follows:                      

                                                                [Download Table]

                                                        CONTRACT     
                                   UNITS                  VALUE      
                                   -----                  -----      
                                                                     
Grand Harbor                            39         $       19,088,936
Oak Harbor                              13                  5,577,100
Southbridge                            341                 14,589,500
                              ------------         ------------------
                                       393         $       39,255,536
                              ============         ==================

Club memberships increased between 1997 and 1998 as a result of the continued   
progress in the sales and development activities at both Grand Harbor and Oak   
Harbor, and was the chief component in the rise in club operations revenue. The 
rental revenue for 1997 relates to the Lynnwood Center, which was sold during   
1997. Accordingly, there is no such comparable revenue item for 1998.           

Total operating costs and expenses rose $17,516,156. This is mainly due to      
increased real estate sales expenses and club operating costs, net of a decrease
in selling, general and administrative expenses.                                

A $15.0 million rise in the costs associated with the bulk sale of property     
($23.8 million in 1998 for Chapman's Landing and the 20-acre Grand Harbor land  
parcel versus $8.8 million during 1997 for Laguna Seca) was primarily           
responsible for the $18,284,255 increase in real estate sales expenses between  
1997 and 1998. The balance of the increase relates mainly to the growth in the  
overall number of units sold and changes in unit type, which were described     
previously. The gross margin as a percentage of real estate sales revenues was  
24% for 1998 (26% excluding Chapman's Landing and the sale of a 20-acre land    
parcel at Grand Harbor) as compared to 28% for 1997 (27% excluding Laguna Seca).
The gross margins excluding bulk land sales are comparable for 1998 and 1997.   
Even so, gross margins realized on the sale of residential units at Grand Harbor
and Oak Harbor can fluctuate significantly from period to period depending upon 
the type and location of the product sold.                                      

Club operation expenses increased in 1998 over 1997 mainly in response to the   
growth in club operation revenues. Selling, general and administrative costs for
1997 included expenses for relocating the corporate offices and certain         

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costs for litigation associated with the merger and expenses for settling       
lawsuits raised in connection with the merger. Accordingly, the 1997 costs      
include certain "onetime" costs that were not repeated in 1998. Moreover, these 
costs fell between 1997 and 1998 as real estate taxes and homeowner association 
subsidies declined with the general sales progress of the projects. This was    
coupled with reductions in professional fees from better management of those    
relationships and other similar factors. The total effect was a $2,851,007      
reduction in selling, general and administrative costs between 1997 and 1998.   

Net other expense decreased $32,247 between 1997 and 1998 primarily due to a    
decline in interest expense, offset by a drop in interest income. The interest  
expense decline resulted from a net reduction in external debt. Reductions in   
cash and cash equivalents available for short-term investment account for most  
of the decline in interest income between 1997 and 1998.                        

These changes yielded a decrease in the net loss of $2,368,933 (a net loss for  
1998 of $12,136,973 or $1.93 per share, as compared to $14,505,906 or $2.31 per 
share for 1997).                                                                

1997 compared to Proforma 1996                                                  

Results of operations for the year ended December 31,1997 include the           
consolidated revenues and expenses of Grand Harbor, Oak Harbor, Southbridge,    
Chapman's Landing, Laguna Seca Ranch and the Lynnwood Center whereas 1996       
results consist of the consolidated revenues and expenses for Grand Harbor, Oak 
Harbor and the Lynnwood Center. As a result, the Company believes that its      
consolidated statement of operations for 1997 is not comparable to the          
consolidated statement of operations for 1996. To allow for comparability of    
period to period variances, the 1997 results are compared to unaudited Pro Forma
1996 results of operations for 1996.                                            

Total revenues for the year ended December 31, 1997 and for Pro Forma 1996 were 
$55,627,898 and $36,856,185, respectively. Real estate sales increased by       
$18,149,944 between 1997 and Pro Forma 1996. In the year ended December 31,     
1997, real estate sales at Grand Harbor, Oak Harbor, Southbridge and Laguna Seca
Ranch were $17,840,512, $11,810,224, $1,162,500 and $12,782,271, respectively,  
compared to sales of $19,500,609 and $5,944,954 at Grand Harbor and Oak Harbor, 
respectively, in the comparable period of Pro Forma 1996. A total of 44 Grand   
Harbor residential units were sold during 1997 at an average sale price of      
approximately $365,000 as compared to 55 units sold during the comparable period
of Pro Forma 1996 at an average sale price of approximately $315,000. A total of
30 Oak Harbor residential units were sold during 1997, at an average sale price 
of approximately $392,000. The fourth quarter of 1996 was the first quarter of  
sales of residential units at Oak Harbor, and as such only 13 units were sold,  
at an average sale price of approximately $457,000. Since sales prices vary     
substantially at Grand Harbor and Oak Harbor, the average sales price of        
residential units may fluctuate significantly from period to period depending   
upon the type of product sold.                                                  

Delays in finalizing the Merger and subsequent litigation, blocked the start of 
development activities at Southbridge, and accordingly, only 12 residential lots
were sold at Southbridge during 1997, at an average sale price of approximately 
$42,000. In addition, one commercial lot of approximately 1.5 acres was sold for
$652,500. No lots were sold during 1996 at Southbridge.                         

Real estate sales for 1997 included the sale of the entire Laguna Seca Ranch.   
The sale closed in late December 1997 and generated net sales proceeds of       
$12,782,271.                                                                    

Furthermore, the Lynnwood Center was sold in mid November 1997 for net sales    
proceeds, after selling expenses, of $19,436,029. The net gain of $195,076      
generated from the sale is included in other revenues. Rent revenues decreased  
$527,583 between 1996 and 1997 mainly because the Lynnwood Center was sold in   
the middle of November 1997. Moreover, Pro Forma 1996 included the results of   
the 120 S. Spalding property, which was sold in April 1996.                     

Contributing to the growth in total revenues was an increase in club operations 
revenues generated by the Grand Harbor and Oak Harbor clubs. Grand Harbor club  
operation revenues increased $557,006 with the growth in overall memberships.   
The Oak Harbor Club did not commence operations until March 1, 1997, and        
generated club operation revenues of $530,652 for 1997.                         

An increase in real estate sales, club operations, and selling, general and     
administrative expenses spurred the growth in operating costs and expenses. The 
rise in the net real estate sales revenues from unit and lot sales between Pro  
Forma 1996 and 1997 also increased related costs. Moreover, the sale of Laguna  
Seca Ranch increased real estate                                                

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sales expenses in 1997. The growth in the Grand Harbor club operations revenue  
and the opening of the Oak Harbor club also increased costs between Pro Forma   
1996 and 1997. The growth in selling general, and administrative costs will be  
examined in a discussion that follows later.                                    

Gross margin as a percentage of real estate sales was 28% (27% excluding the    
sale of the Laguna Seca Ranch project) for 1997, compared to 29% for the        
comparable period in Pro Forma 1996. Gross margins realized on the sale of      
residential units at Grand Harbor and Oak Harbor may fluctuate significantly    
from period to period depending upon the type of product sold.                  

Selling, general and administrative expenses increased $4,852,977 to $18,265,252
in 1997, from $13,412,275 in Pro Forma 1996. This increase is primarily due to  
increases in expenses at the corporate office and Oak Harbor, and to a lesser   
extent increases at Grand Harbor and Southbridge resulting from growing sales   
and development activity. The relocation of the corporate offices, legal costs  
related to the litigation associated with the Merger and the subsequent         
settlement costs all contributed to a rise in corporate office costs. Increases 
at Oak Harbor reflected a full year of operations in 1997 versus a partial year 
for Pro Forma 1996.                                                             

The Oak Harbor Clubhouse was placed in service during 1997. Consequently,       
depreciation and amortization expense increased from $1,249,179 in Pro Forma    
1996 to $1,780,904 in 1997. Partially offsetting this was management's decision 
as of June 30, 1996 to dispose of the Lynnwood Center and discontinued recording
depreciation on the related assets.                                             

During 1997, the Company borrowed additional funds from related parties to      
finance construction and development activities. The net effect was to increase 
interest expense in 1997 over Pro Forma 1996. A portion of the external debt was
refinanced with related party debt, while repayments of external debt as a      
result of the sale of units continued during 1997. These last two factors caused
a shift from external to related party interest expense between Pro Forma 1996  
and 1997.                                                                       

The combination of the above changes resulted in a net loss of $14,505,906      
($2.31 per share) in 1997, as compared to a net loss of 12,482,198 ($2.85 per   
share) in Pro Forma 1996.                                                       

YEAR 2000 UPDATE                                                                

The Company is proceeding with its program to address the issue of computer     
programs and embedded computer chips that are unable to distinguish between the 
year 1900 and 2000. The problems arise from computer software and hardware that 
fails to distinguish dates in the "2000's" from dates in the "1900's", because  
historically computers and software have used only two digits to identify the   
year in a date. The Company has identified all of the assets that may be        
affected by this problem, and has substantially completed the assessment of     
these assets, which include computers and related software, building mechanical 
systems, and certain equipment. Most of the major or significant computer       
systems, mechanical systems, and equipment have been assessed through inquiries 
with the related vendor or testing of the systems. The assessment of the        
remaining major systems should be completed during the second quarter of 1999.  
The majority of the systems which have been assessed have been found to be      
compliant. The Company is currently working to replace the few non-compliant    
systems found by its assessment, and is actively seeking quotes for purchasing  
new systems or performing similar activities. The estimated cost of             
modifications to become "Year 2000" compliant is not expected to exceed         
$150,000, and should be completed during the third quarter of 1999.             

The nature of the Company's business minimizes its exposure to the "Year 2000"  
problem. Nevertheless, it is possible during the final assessment and the       
implementation phase that other significant risks could be identified.          
Contingency plans are beginning to be developed to address various possible     
business interruptions, which include the failure of accounting and related     
information systems including point of sales systems, building mechanical       
systems, and equipment. To date, the Company has identified and is replacing all
systems that could present a material risk of not being "Year 2000" ready.      
However, it is possible that unforeseen business interruptions could have a     
material adverse effect on financial conditions and results of operations.      
Moreover, if any third parties that provide important goods or services to the  
Company fail to appropriately address their "Year 2000" issues, there could be a
material adverse effect on the Company's financial conditions and results of    
operations.                                                                     

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FACTORS AFFECTING LEGEND'S BUSINESS PLAN                                        

     In addition to the other information contained in this Annual
Report, the following factors should be considered carefully:                   

Interest Rates                                                                  

        Legend's business and financial condition may be affected during
inflationary periods as a result of the higher costs and interest rates that    
accompany these cycles. High inflation and interest rates push financing and    
construction costs upward, which may adversely impact the Company's operations. 
Moreover, housing demand typically declines during such periods because         
financing is difficult, and at times impossible, for potential buyers to obtain 
on acceptable terms, thereby depressing demand for the Company's products.      

Substantial Debt Obligations                                                    

           As of December 31, 1998 Legend's outstanding notes payable to banks
and others aggregated $40,722,737, of which $25,777,613 matures in 1999,        
$2,635,459 in 2000, $3,235,659 in 2001, $2,448,308 in 2002, $3,706,560 in 2003  
and $2,919,138 thereafter. Additionally, as of December 31, 1998 payables to    
related parties totaled $84,744,478, which matures in 2003. As of December 31,  
1998 the Company had $4,446,864 of cash and cash equivalents, which will not be 
sufficient to fund these obligations. There can be no assurance that the Company
will be able to refinance the existing indebtedness or obtain the necessary     
construction and development financing to implement its business plan or that,  
if available, the terms and conditions will be acceptable to the Company. If the
Company is unable to secure the necessary additional financing or capital when  
needed, the business plans for its projects will probably require substantive   
revision, which would have a material adverse effect on the Company's financial 
condition and results of operations.                                            

        Legend's ability to service its debts and other obligations when
they become due will also depend on various factors affecting its properties,   
such as operating expenses and construction schedules, which, in turn, may be   
adversely affected by general and local economic conditions. Certain            
expenditures, such as loan payments and real estate taxes are typically fixed   
obligations and are not necessarily decreased by adverse events affecting       
revenues generated by the properties. Therefore, expenditures for developing    
properties may exceed the income derived from the sale of lots or homes and     
Legend would have to obtain funds from other sources to operate and maintain a  
property in order to protect its investment.                                    

Need for Additional Capital                                                     

           Funds from operations and proceeds from the sale of assets will not
be sufficient to allow Legend to complete its business plans for its remaining  
properties. There can be no assurance that additional capital will be available 
to Legend or that, if available, the terms and conditions will be acceptable to 
Legend or will not be dilutive to Legend's stockholders. A failure to secure    
additional capital when needed would have a material adverse effect on Legend's 
results of operation and financial condition.                                   

Real Estate Investment Risks                                                    

           Real property investments are subject to certain risks that are not
always susceptible to prediction or control. The cash flow generated by, and    
capital appreciation realized from, real property investments may be adversely  
affected by the national and regional economic climate (which, in turn, may be  
adversely impacted by plant closings, industry slow downs, income tax rates,    
interest rates, demographic changes and other factors), local real estate       
conditions (such as oversupply of, or reduced demand for rental space or housing
in the area), the attractiveness of the properties, zoning and other regulatory 
restrictions, competition from other land developers or developments, increased 
operating costs (including maintenance costs, insurance premiums and real estate
taxes), perceptions by tenants or potential buyers of the safety, convenience   
and attractiveness of the property and the willingness of the owner of the      
property to provide capable management and adequate maintenance. In light of the
foregoing factors, there can be no assurance that Legend's properties will be   
salable at a price or prices sufficient to recover costs.                       

      The cash flow generated by, or capital appreciation from, real
property investments may also be adversely impacted by changes in governmental  
regulations, zoning or tax laws, potential environmental or other legal         
liabilities and                                                                 

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changes in interest rates. Real estate investments, particularly development    
properties, are also relatively illiquid and, therefore, Legend's ability to    
vary its portfolio promptly in response to changes in economic or other         
conditions will in all likelihood be limited. In the event Legend is forced to  
sell a property, Legend may sustain a loss due to the inherent lack of liquidity
in such an investment.                                                          

Development and Construction Activities                                         

       Development and construction activities are subject to numerous
risks including delays in construction, certain of which (for example, acts of  
God, labor strikes or shortages of supplies) may not be controllable, and       
quality of construction, which depends upon a number of factors including the   
professional capabilities of the contractor(s), site constraints, adherence to  
plans and specifications, adequacy of supervision, and the financial ability of 
the developer to bear any unanticipated additional costs of construction.       
Similarly, development and construction activities generally require various    
governmental and other approvals and permits, the issuance or granting of these 
is not certain. There can be no assurance Legend will be able to secure all     
entitlements and permits necessary to complete the development and construction 
of each of its properties. Further, these activities require the expenditure of 
funds on, and the devotion of management's time to, projects which may not be   
completed or which, if completed, may not be completed on time or on budget.    
Likewise, financing may not be available on favorable terms, if at all, for     
development and construction projects and delays in completing development and  
construction could result in increases in debt service costs.                   

        Legend currently provides, and will continue to provide, certain
warranties with respect to the quality of the construction of the homes built at
Grand Harbor and Oak Harbor. In addition, Florida law requires homebuilders to  
provide for certain additional warranties that cannot be disclaimed, regardless 
of whether there are actual deficiencies in the quality of materials used or the
construction of the homes built at Grand Harbor and Oak Harbor. The cost of     
settling, or the failure to settle, any presently unasserted claims in the      
future may have a material adverse effect on Legend's future results of         
operations and financial condition.                                             

Lack of Geographic Diversification                                              

           The Southbridge and Ashburn Corporate Center properties are located
in close proximity to Washington, D.C. Similarly, Grand Harbor and Oak Harbor   
are both located in close proximity to Vero Beach, Florida. Economic weakness or
recession in either of these two areas, or the occurrence of other adverse      
circumstances could have a material adverse effect on Legend's results of       
operation and financial condition.                                              

Government Regulation                                                           

        Land Use and Zoning. Federal, state and local regulations may be
promulgated which restrict or curtail certain uses of land or existing          
structures or require renovation or alteration of these structures. Any         
restrictions on the anticipated development of the Company's properties could   
affect the market for and price of the lots or homes and prevent or delay sales.
Furthermore, obtaining any additional permits or other consents of local        
governments for development of properties may require public hearings and       
meetings with public officials and community groups. There can be no assurance  
that some or all of the entitlements relating to the Company's properties will  
not be revoked or modified in the future. From time to time, governmental       
entities have imposed limitations on the development of certain areas. In       
addition, it may be difficult or impossible to modify existing zoning to respond
to changing market conditions in order to increase the realizable value of the  
property. Any revocation or modification, or refusal to modify existing         
entitlements, could have a material adverse effect on the Company's results of  
operations and financial condition.                                             

           Environmental Matters. Under various federal, state and local laws,
ordinances and regulations, an owner, operator, manager or developer of real    
estate may be liable for the cost of removing or remediating certain hazardous  
or toxic substances (including asbestos containing materials) on, under or in   
real estate owned, operated, managed or developed. These enactments often impose
liability without regard to whether the owner, operator, manager or developer   
knew of, or was responsible for, the presence of the hazardous or toxic         
substances. The cost of any required remediation and the accompanying liability 
is generally not limited under these enactments and could exceed the value of   
the property or the aggregate assets of the owner, operator, manager or         
developer. The presence of hazardous or toxic substances, or the failure to     
properly remediate these substances, may adversely affect an owner's ability to 
sell or rent the property, or to borrow money using the property as collateral. 
In addition, liability may be imposed for releasing asbestos containing         
materials into the air. In connection with owning and operating its             

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properties, Legend may be potentially liable for these costs. Legend does not   
maintain insurance for any of these potential environmental liabilities and does
not anticipate securing any such insurance in the foreseeable future.           

 Americans With Disabilities Act. Under the Americans with
Disabilities Act of 1990 (the "ADA"), all public accommodations must comply with
certain federal requirements related to access and use by disabled persons.     
These requirements became effective in 1992. The ADA has separate compliance    
requirements for "public accommodations" and "commercial facilities" but        
generally requires making buildings accessible to people with disabilities.     
Noncompliance with these requirements could result in the imposition of fines by
the federal government or an award of damages to private litigants. Management  
believes that Legend is substantially in compliance with federal requirements   
related to access and use by disabled persons.                                  

     Healthcare Regulations. Healthcare operations in the State of
Florida are subject to varying degrees of regulation and licensing by health or 
social service agencies and other regulatory authorities. Changes in the laws or
new interpretations of existing laws can have a significant effect on methods   
and costs of doing business. Currently, no federal rules explicitly define or   
regulate assisted living. In addition, the Royal Palm Convalescent Center does  
not accept Medicare or Medicaid reimbursement. However, federal, state or local 
laws or regulatory procedures which might adversely affect assisted living      
businesses could be expanded or imposed and changes to licensing and            
certification standards could have a material adverse effect on Legend's results
of operations and financial condition.                                          

Book Value Not Reflective of Current Realizable Value                           

          Legend currently evaluates the carrying value of its real property
and other assets on an ongoing basis relying on a number of factors, including  
operating results, business plans, budgets and economic projections. In         
addition, Legend considers non-financial data such as continuity of personnel,  
changes in the operating environment, competitive information, market trends and
client and business relationships. The future value of these assets is subject  
to numerous contingencies, including the completion of construction and         
development. A change in any or all of these factors could result in an         
impairment in value of Legend's assets and the realizable value could differ    
significantly from the current carrying value of these assets.                  

Bankruptcy Risks                                                                

      If Legend defaulted on its indebtedness, it may be required to
restructure its financial affairs under the Federal Bankruptcy Code or seek some
other type of relief. A restructuring or other reorganization under the         
Bankruptcy Code or otherwise may result in the Stockholders losing their entire 
interest in the Company.                                                        

Issuance of Preferred Stock or Common Stock                                     

        Legend's board of directors has the authority to issue preferred
stock in one or more series or classes with such designations, preferences and  
rights and such qualifications, limitations or restrictions as determined by the
board. The issuance of preferred stock or common stock could have a dilutive or 
other material adverse effect on the holders of Legend's shares of common stock.

Shares Available for Future Sale                                                

            As of December 31, 1998, Holdings owns approximately 80% of Legend's
outstanding shares of common stock. These shares are subject to resale          
restrictions but a portion may, in certain circumstances, be registered for     
sale. Sales of a substantial number of these shares of common stock in the      
public market or the perception that sales occur could adversely affect the     
market price of the common stock and Legend's ability to raise capital in the   
future.                                                                         

Dividend Policy                                                                 

          The Company has not paid cash dividends since the first quarter of
1990 and does not contemplate paying cash dividends until it generates          
sustainable cash flow in excess of its capital needs. There can be no assurance 
that Legend will ever generate sufficient cash flow to pay dividends to its     
stockholders. Moreover, certain of Legend's loan agreements prohibit the payment
of dividends. If Legend issues preferred stock with a dividend, the             
stockholders' right to receive dividends, if any, will be subordinated to that  
of the holders of preferred stock.                                              

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ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS           

The Company is exposed to market risks associated with interest rate changes on 
the debt used to fund its construction, development, and operating activities.  
The Company's interest rate risk management objective is to limit the impact of 
interest rate changes on earnings and cash flow and to lower overall borrowing  
costs. The Company uses a mixture of fixed rate debt, interest rate swap        
agreements, and offsetting financial instruments such as annuity contracts and  
certificates of deposits to mitigate this risk. The Company does not enter into 
other derivative financial instruments for speculative purposes.                

The Company's interest rate risk is monitored by management. The table below    
presents the principal amounts, weighted-average interest rates and fair values 
required to evaluate the expected cash flows of the Company under debt and      
related agreements and its sensitivity to interest rate changes at December 31, 
1998.                                                                           

                                                        [Enlarge/Download Table]

                                                                   There-         Fair 
      (000,000 omitted)     1999    2000   2001    2002    2003    after   Total  Value
                            ----    ----   ----    ----    ----     -----  -----  -----

                                                                                       
Fixed rate debt                9.3    0.4     0.4     0.4     0.4     2.9   13,8   13.8
Average interest rate        11.1%   6.3%    6.3%    6.3%    6.3%    6,3%   7.1%       

Variable rate LIBOR debt      15.0    0.1     0.1     0.0    67.9     0.0   83.1   83.1
Average interest rate         9.5%   9.7%    9.7%    9.7%    9.7%    0.0%   9.7%       

Variable rate prime debt       0.1    0.1     0.2     0.2    20.1     0.0   20.7   20.7
Average interest rate         8.7%   8.7%    8.7%    8.7%   8..7%    0.0%   8.7%       

Variable rate bank cost of                                                             
funds debt                     1.3    2.0     2.6     1.9     0.0     0.0    7.8    7.8
Average interest rate         7.6%   7.6%    7.6%    7.6%    0.0%    0.0%   7.6%       

The table only incorporates those exposures that exist as of December 31, 1998, 
and it does not consider those exposures or positions, which could arise after  
that date. As a result, the Company's gain or loss with respect to interest rate
fluctuations will depend on the exposures that arise after December 31, 1998,   
the Company's hedging strategy during that period and interest rates.           

ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA               

See Index to Consolidated Financial Statements on Page F-1 of this Report for   
financial statements and financial statement schedules, where applicable.       

See Item 6, "Selected Financial Data," for the supplemental financial           
information specified by Item 302 of Regulation S-K.                            

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

Not Applicable                                                                  

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PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                    

           The directors and the executive officers of the Company as of March
19, 1999 are:                                                                   

                                                        [Enlarge/Download Table]
                                                                                      
Walter E. Auch, Sr.    Director                                                       
Helge Lund             Director                                                       
Jan Petter Storetvedt  Director, Chairman of the Board                                
Robert M. Ungerleider  Director                                                       
Fred E. Welker, III    Director                                                       
Peter J. Henn          President and Chief Executive Officer                          
Robert B. Cavoto       Vice President, Chief Financial Officer and Assistant Secretary

Walter E. Auch, Sr., age 77, was the Chairman and Chief Executive Officer of the
Chicago Board of Options Exchange from 1979 to 1986. Prior to that time, he was 
Executive Vice President, Director and a member of the executive committee of   
Paine Webber. Mr. Auch is a Director of Pimco L.P., Brinson Partners Funds,     
Advisors Series Trust, Smith Barney Concert Series Funds, Smith Barney Trak     
Fund, Nicholas Applegate Funds, Fort Dearborn Fund, Semele Group, Inc. and BSRT 
Management Corp. and a Trustee of Banyan Strategic Realty Trust, Hillsdale      
College and the Arizona Heart Institute. Mr. Auch has been a director of the    
Company since 1988.                                                             

Helge Lund, age 36, is presently Executive Vice President of Aker RGI ASA,      
responsible for Investments. He has been employed by Aker RGI ASA since January 
1999. Mr. Lund is a graduate of the Norwegian School of Economics and Business  
Administration and has an MBA from INSEAD in France. He serves as a director for
Constructor Dexion Group PLC, Atlas Stord AS and Polynor Partners AS. Mr. Lund  
has been a director of the Company since March 1999.                            

Jan Petter Storetvedt, age 43, is presently Senior Vice President, Investments  
Real Estate of Aker RGI ASA. Since March 1997, he has served as chairman of the 
board of Avantor ASA. From December 1991 to March 1997, he served as President, 
Chief Executive Officer and Director of Avantor ASA, a Norwegian publicly traded
real estate company. Mr. Storetvedt has been Chairman of the Board of the       
Company since June 1997.                                                        

Robert M. Ungerleider, age 57, is presently the President of Pilot Books, a book
publisher located in Greenport, New York, and practices law with and is of      
counsel to the firm of Felcher, Fox & Litner P.C., in New York, New York. He has
founded, developed and sold a number of start-up ventures including Verifone    
Finance, an equipment leasing business, SmartPage, a paging service company and 
Financial Risk Underwriting Agency, Inc., an insurance agency specializing in   
financial guarantee transactions. Prior to these endeavors, Mr. Ungerleider     
practiced real estate and corporate law for ten years. Mr. Ungerleider received 
his B.A. Degree from Colgate University and his Law Degree from Columbia        
University Law School. Mr. Ungerleider has been a director of the Company since 
1988.                                                                           

Fred E. Welker, III, age 51, has been the President of Realty Financial         
Advisors, Inc., a real estate investment banking firm, since January 1993. From 
1982 to 1992, Mr. Welker was the Executive Vice President for the Southeast     
Regional Office of Sonnenblick-Goldman Company, a real estate investment banking
firm. From 1981 to 1982, Mr. Welker was Vice President-Joint Ventures for       
American Savings & Loan Association, and from 1976 to 1981 he was a commercial  
loan officer with First Federal of Broward (merged with Glendale Federal). Mr.  
Welker has been a director of the Company since January 1997.                   

Peter J. Henn, age 38, has been President of the Company since March 1999. Prior
to his appointment, Mr. Henn was Vice President, General Counsel and Secretary  
of the Company since November 1997. Since March 1994, Mr. Henn has represented  
certain of the Company's Florida subsidiaries and provided real estate closing  
and escrow services to the company as President of Harbor Title & Escrow        
Company. Mr. Henn received his B.A. and M.A. in Economics from Florida Atlantic 
University and his J.D. from the University of Miami School of Law.             

Robert B. Cavoto, age 38, has been Vice President, Chief Financial Officer and  
Assistant Secretary of the Company since November 1997. During 1997, prior to   
this appointment, Mr. Cavoto was a financial consultant to LPI Development,     
Inc., a subsidiary of the Company. From 1991 to 1997, he was an Asset Manager   
with Banyan Management Corp., and was responsible for entitlement, development, 
financing and disposition activities for a portfolio of mixed-use and           
residential land developments. From 1988 to 1991, Mr. Cavoto was Vice President 
of                                                                              

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finance for a real estate company. Prior to that he was a manager in KPMG       
LLP's real estate practice. Mr. Cavoto received his B.S in accounting from      
Northern Illinois University and is a Certified Public Accountant.              

Edward F. Podboy resigned as President of the Company in March 1999. Mr. Jon    
Alvar Oyasaeter resigned as a Director of the Company in March 1999.            

ITEM 11. EXECUTIVE COMPENSATION                                                 

A. DIRECTOR COMPENSATION                                                        

The Directors are paid an annual fee of $15,000, payable quarterly, plus $875   
for each board or audit committee meeting attended in person and $250 an hour   
for any of these meetings attended via telephonic conference call. In addition, 
each Director is reimbursed for out-of-pocket expenses incurred in attending    
meetings of the Board.                                                          

B. EXECUTIVE COMPENSATION                                                       

Salary Compensation Table. The following information is furnished with respect  
to current and former Executive Officers whose compensation for the year ended  
December 31, 1998 exceeded $100,000:                                            

                                                        [Enlarge/Download Table]


                                                                                         Annual Compensation               
                                                                  ---------------------------------------------------------

                                                                                                               All Other   
                 Name and Principal Position           Year           Salary              Bonus              Compensation  
---------------------------------------------------  -----------  ---------------    ----------------     -----------------

                                                                                                                           
Peter J. Henn                                          1998            n/a                 n/a                    n/a      
Chief Executive Officer (1)                            1997            n/a                 n/a                    n/a      
                                                       1996            n/a                 n/a                    n/a      

Edward F. Podboy, Jr.                                  1998          $245,000           $390,932                     n/a   
Former Chief Executive Officer (2)                     1997          $133,802            $44,985                 $31,000   
                                                       1996               n/a                n/a                     n/a   

Robert B. Cavoto,                                      1998          $105,000            $30,000                 $11,078   
Vice President, Chief Financial Officer and            1997               n/a                n/a                     n/a   
Assistant Secretary                                    1996               n/a                n/a                     n/a   

(1)   Mr. Henn has served as President and Chief Executive Officer of the       
    Company since March 1999. During 1998 and 1997, Mr. Henn was compensated
under a Legal Services Agreement.                                   

(2)   Mr. Podboy served as President and Chief Executive Officer of the Company 
 from August 1997 to March 1999. From April to August 1997, Mr. Podboy
     served as President of LPI Development, Inc. a subsidiary of the Company.
All Other Compensation for 1997 is a reimbursement for relocation   
expenses. Pursuant to his Employment Agreement, the Company remains 
     obligated to pay Mr. Podboy his base salary, as defined in the employment
agreement, through its expiration date of July 31, 2001 and to be   
determined additional incentive compensation.                       

The Company has entered into a Legal Service Agreement with the law firm of     
Peter J. Henn, P.A. which provides, among other things, that the Company will   
pay $210,000 for legal services provided to the Company for the fiscal year     
ending December 31, 1999 and that Harbor Title & Escrow will continue to provide
title insurance, as required, at the minimum title insurance rates allowed under
Florida law.                                                                    

C. EXECUTIVE AND DIRECTORS' STOCK OPTION PLAN                                   

On June 25, 1993, the Company's stockholders approved and adopted the 1993      
Executive and Directors' Stock Option Plan (the "Plan"). The Plan grants the    
Board of Directors the authority to issue up to 40,000 shares (adjusted for the 
stock split) of the Company's common stock for stock option awards. The Plan    
consists of an Executive Option Grant Program and a Director Option Grant       
Program. Under the Director Option Grant Program, each                          

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Director holding office on the tenth business day after adjournment of the      
annual meeting automatically receives an option to acquire 1,000 shares. Options
granted vest 50% upon the first anniversary of the date of the grant and 50%    
upon the second anniversary of the date of the grant and expire ten years from  
the date of the grant. The exercise price for the options granted in July 1997, 
January 1997 (1996 Annual Meeting), 1995, 1994 and 1993 is $4.50, $7.75, $15.64,
$17.19 and $15.64 per share, respectively.                                      

The Board administers the Executive Option Grant Program and has the authority  
to determine, among other things, the individuals to be granted executive       
options, the exercise price at which shares may be acquired, the number of      
shares subject to each option and the exercise period of each option. The Board 
is also authorized to construe and interpret the Executive Option Grant Program 
and to prescribe additional terms and conditions of exercise in option          
agreements and provide the form of option agreement to be utilized with the     
Executive Option Grant Program. No Director is eligible to receive options under
the Executive Option Grant Program.                                             

Options granted under the Plan are not transferable except by will or by the    
laws of descent and distribution, and are exercisable during an optionee's      
lifetime only by the optionee or the appointed guardian or legal representative 
of the optionee. Upon the: (a) death or permanent and total disability of an    
optionee; or (b) retirement in accord with the Company's retirement practices,  
then any unexercised options to acquire shares will be exercisable at any time  
within one year in the case of (a) and ninety days in the case of (b) (but in no
case beyond the expiration date specified in the Option Agreement). If, while   
unexercised options remain outstanding under the Plan, the Company ceases to be 
a publicly traded company, or if the Company merges with another entity or a    
similar event occurs, all options outstanding under the Plan shall immediately  
become exercisable at that time.                                                

The Plan requires the optionee to pay, at the time of exercise, for all shares  
acquired on exercise in cash, shares or, in the case of the Executive Option    
Grant Program, other forms of consideration acceptable to the Board.            

If the Company declares a stock dividend, splits its stock, combines or         
exchanges its shares, or engages in any other transactions which results in a   
change in capital structure such as a merger, consolidation, dissolution,       
liquidation or similar transaction, the Board may adjust or substitute, as the  
case may be, the number of shares available for options under the Plan, the     
number of shares covered by outstanding options, the exercise price per share of
outstanding options, any target price levels for vesting of the options and any 
other characteristics of the options as the Board deems necessary to equitably  
reflect the effects of those changes on the option holders.                     

Pursuant to the Plan, the Board granted an aggregate 14,440 options thru        
December 31, 1996. Pursuant to the Company's Merger on December 31, 1996 which  
resulted in a change in control (as defined in the Merger agreement),           
substantially all stock options issued to the executive officers and various    
employees of Banyan Management Corp. under the Executive Option Grant Program   
became fully vested and exercisable until December 31, 1997. None of these      
options were exercised and have been cancelled.                                 

The exercise prices as well as the number of shares issuable on any options     
granted prior to the Merger have been adjusted to give effect to the Company's  
25 to 1 reverse stock-split as approved by its stockholders.                    

Options granted after December 31, 1996 (other than which have been described   
above) under the Executive Option Grant Program will be exercisable and vested  
in installments as follows: (1) 33.3% of the number of shares commencing on the 
first anniversary of the date of grant; (ii) an additional 33.3% of the shares  
commencing on the second anniversary of the date of the grant; and (iii) an     
additional 33.4% of shares commencing on the third anniversary of the date of   
grant. Options for all shares as granted under the Director Option Grant Program
will be exercisable and vest as follows: (i) 50.0% of the number of shares      
commencing on the first anniversary of the date of grant; and (ii) an additional
50.0% of the number of shares commencing on the second anniversary of the date  
of grant. The Board is granted discretion to determine the term of each Option  
granted under the Executive Option Grant Program, but in no event will the term 
exceed ten years and one day from the date of grant.                            

There were no stock options granted to or exercised by any present or former    
executive officer during the year ended December 31, 1998.                      

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ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT        

The following entity is known by the Company (based on filings on Schedule 13d) 
to be the beneficial owner of more than five percent (5%) of the outstanding    
shares of common stock of the Company as of March 31, 1999.                     

                                                        [Enlarge/Download Table]

                                        Name and Address of                     Amount of              Percent    
         Title of Class                  Beneficial Owner                 Beneficial Ownership       of Interest  
------------------------------  --------------------------------------  -------------------------  ---------------

                                                                                                                  
Shares of Common                  RGI Holdings, Inc. and affiliates              5,057,646                80%     
Stock, $0.01 par value             2025 First Avenue, Suite 830                                                   
                                     Seattle, Washington 98121                                                    

The following table sets forth the ownership interest and shares owned directly 
or indirectly by the directors and principal officers of the Company as of March
31, 1998:                                                                       

                                                        [Enlarge/Download Table]

                                      Name and Address of                   Amount of                  Percent         
          Title of Class               Beneficial Owner             Beneficial Ownership (1)         of Interest       
-----------------------------  -----------------------------------  -------------------------  ------------------------

                                                                                                                       
Shares of Common                     Robert M. Ungerleider                1,560 Shares              Less than 1%       
Stock, $0.01 par value                                                                                                 

Shares of Common                  All Directors and Officers              1,560 Shares              Less than 1%       
Stock, $0.01 par value                  of the Company,                                                                
                                    as a group (7 persons)                                                             


(1) excludes 8,340 options granted to acquire shares at prices ranging from     
$7.74 to $28.125 per share which have vested.                                   

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ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                        

The following is a summary of certain relationships and other significant       
transactions with related parties during 1998 and outstanding intercompany      
balances as of December 31, 1998 and 1997:                                      

Consulting and Other Fees                                                       

The Company paid the law firm of Peter J. Henn, P.A. $232,022 during the fiscal 
year ending December 31, 1998 for legal services provided to the Company by     
Peter J. Henn, the Company's President and Chief Executive Officer. Mr. Henn    
received no other compensation from the Company for serving as an officer of the
Company. Harbor Title & Escrow Company provides all title insurance that the    
Company is obligated to deliver to purchasers of homes at its Florida           
properties. Mr. Henn is the sole owner and President of Harbor Title & Escrow   
Company and received $109,428 in title insurance premiums from the Company      
during the fiscal year ending December 31, 1998. Harbor Title & Escrow Company  
charges the Company the minimum title insurance rates allowed under Florida law 
as determined by the Florida Department of Insurance.                           

The Company has entered into a Legal Service Agreement with the law firm of     
Peter J. Henn, P.A. which provides, among other things, that the Company will   
pay $210,000 for legal services provided to the Company for the fiscal year     
ending December 31, 1999 and that Harbor Title & Escrow will continue to provide
title insurance, as required, at the minimum title insurance rates allowed under
Florida law.                                                                    

Payables                                                                        

                                                        [Enlarge/Download Table]

Payables to related parties consist of the following at December 31:                 1998      1997       
                                                                                     ----      ----       

                                                                                                          
              Mortgage note payable to Holdings with interest payable quarterly                           
              at LIBOR plus 2.5%. Principal payments equal to 20% of Southbridge                          
              and 50% of other collateral sales revenues is payable quarterly                             
              with the balance due April 1, 2003. The debt is secured by certain                          
              real estate inventory and property.                                 $30,649,872   30,649,872

              Mortgage note payable to Holdings with interest at Prime plus 2%                            
              and partially secured by certain real estate inventory. Interest                            
              and principal are payable quarterly after certain other debt                                
              payments provided that a $4.5 million cash reserve remains.                                 
              Quarterly principal payments are equal to 80% of the defined net                            
              cash flow for Southbridge, Grand Harbor, and Oak Harbor with the                            
              balance due April 1, 2003. Unpaid interest will be capitalized                              
              into the principal balance annually.                                 35,024,632   20,960,448

              Unsecured note payable to RGI, Inc. with interest at Prime plus 2%                          
              Principal and interest is payable on the same terms, but after                              
              payments on the Mortgage note payable discussed immediately above                           
              with the remainder due April 1, 2003. Unpaid interest will be                               
              capitalized into the principal balance annually.                     16,821,696   14,412,667

              Unsecured note payable to Holdings, interest at Prime plus 2%.                              
              Principal and interest due June 1, 1999.                              2,248,278        -    

              Accrued interest                                                         -         6,868,311

              Other                                                                    -             2,629
                                                                                  -----------   ----------

                                                                                  $84,744,478   72,893,927
                                                                                  ===========   ==========

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Holdings has provided to the Company a $5 million credit facility to provide    
sufficient working capital to fund ongoing development, construction and        
operating activities. The credit facility provides for interest at Prime plus   
2%, matures on April 1, 2003 and is secured by certain real estate inventory and
property.                                                                       

Indemnity                                                                       

Aker RGI ASA, the indirect parent of Holdings, has provided an indemnity, to a  
maximum of $15,000,000, to the bonding company for development bonds at         
Southbridge, of which an aggregate total of approximately $9.8 and $5.6 million 
were outstanding at December 31, 1998 and March 19, 1999, respectively.         

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 PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K       

(a)         Exhibits:                                   

Exhibit No.                                                                     

                                                        [Enlarge/Download Table]


                                                                                                                 
3.1   --  Amended and Restated Certificate of Incorporation of Registrant.(1)                                    

3.2   --  Bylaws of Registrant, as amended and restated as of July 1, 1996.(2)                                   

10.1  --  Edward F. Podboy's Employment Contract dated _______, 1998 (3)                                         

10.2  --  Credit Agreements, Notes and Warrants between Registrant and Morgens Waterfall, Vintiadis & Co. Inc.(4)

10.3  --  Loan Modification Agreement, dated as of May 20, 1996, by and between Registrant and RGI Holdings, Inc.
          (SoGen Loan)(5)                                                                                        

10.4  --  Loan Modification Agreement, dated as of May 21, 1996, by and between Registrant and RGI Holdings, Inc.
          (Morgens Loan)(5)                                                                                      

10.5  --  Registration Rights Agreement, dated as of May 21, 1996, by and between Registrant and RGI Holdings,   
          Inc.(5)                                                                                                

10.6  --  Second Stipulation and Agreement of Settlement, signed September 17, 1997, In Re: Banyan Mortgage      
          Investment Fund Shareholders Litigation. (6)                                                           

21.1  --  Subsidiaries of the Registrant                                                                         

27.1  --  Financial Data Schedule                                                                                

99.1  --  Form of Director Stock Option Agreements dated July 1, 1993, July 24, 1994 and July 7, 1995.(7)        

99.2  --  Form of Executive Stock Option Agreements dated July 1, 1993, January 12, 1994 and February 8, 1995.(7)

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

(1)       Incorporated by reference to the Registrant's Report on Form 10-K for 
the year ended December 31, 1996.                           

(2)       Incorporated by reference to the Registrant's Report on Form 10-Q for 
the quarter ended June 30, 1996.                            

(3)       Incorporated by reference to the Registrant's Report on Form 10-K for 
the year ended December 31, 1997.                           

(4)       Incorporated by reference to Exhibits 10(a) through 10(n) to the      
          Registrant's Report on Form 10-K for the year ended December 31, 1994.

(5)       Incorporated by reference to the Registrant's Report on Form 8-K dated
May 20, 1996.                                               

(6)       Incorporated by reference to the Registrant's Report on Form 10-Q for 
the quarter ended September 30, 1997.                       

(7)       Incorporated by reference to the Registrant's Report on Form 10-K for 
the year ended December 31, 1995.                           

(b)       Reports on Form 8-K:                              

       No reports were filed on Form 8-K during the quarter ended December
31, 1998.                                                                       

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SIGNATURES

         PURSUANT to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.                        

                 LEGEND PROPERTIES, INC.

                    By:      /s/ Peter J. Henn
                                           -------------------------------
                                         Peter J. Henn, President,
    April 15, 1999                       Chief Executive Officer

            PURSUANT to the requirements of the Securities Exchange Act of 1934,
this Annual Report has been signed below by the following persons on behalf of  
the Registrant and in the capacities and on the dates indicated.                

                                                                [Download Table]
                                                                          
By:/s/ Peter J. Henn                                 Date:  April 15, 1999
       -------------                                                      
            Peter J. Henn, President,                                     
            Chief Executive Officer                                       

By:/s/Robert B. Cavoto                               Date:  April 15, 1999
       ---------------                                                    
            Robert B. Cavoto,                                             
            Chief Financial Officer, Vice President                       
            and Assistant Secretary                                       

By:/s/Walter E. Auch, Sr.                            Date:  April 15, 1999
      -------------------                                                 
            Walter E. Auch, Sr., Director                                 

By:/s/Helge Lund                                     Date:  April 15, 1999
      ----------                                                          
            Helge Lund, Director                                          

By:/s/Jan Petter Storetvedt                          Date:  April 15, 1999
      ---------------------                                               
            Jan Petter Storetvedt, Director                               

By:/s/Robert M. Ungerleider                          Date:  April 15, 1999
      ---------------------                                               
            Robert M. Ungerleider, Director                               

By:/s/Fred E. Welker, III                            Date:  April 15, 1999
      -------------------                                                 
            Fred E. Welker, III, Director                                 

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES  
(A SUBSIDIARY OF RGI HOLDINGS, INC.)  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS  

                                                        [Enlarge/Download Table]

                                                                                           PAGES
                                                                                           -----
                                                                                                
Report of Independent Auditor .....................................................        F-2  

Consolidated Balance Sheets at December 31, 1998 and 1997.........................         F-3  

Consolidated Statements of Operations For the Years Ended December 31, 1998,                    
   1997, and 1996.................................................................         F-4  

Consolidated Statements of Stockholders' Equity (Deficit) For the Years Ended                   
   December 31, 1998, 1997 and 1996...............................................         F-5  

Consolidated Statements of Cash Flows For the Years Ended December 31, 1998,                    
   1997, and 1996.................................................................   F-6 - F-7  

Notes to Consolidated Financial Statements........................................  F-8 - F-23  

   All schedules are omitted since the required information is not present or is
not present in amounts sufficient to required submission of the schedule or     
because the information required is included in the consolidated financial      
statements and notes thereto.                                                   

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INDEPENDENT AUDITORS' REPORT  

The Board of Directors and Stockholders                                         
Legend Properties, Inc.:                                                        

We have audited the accompanying consolidated balance sheets of Legend          
Properties, Inc. (a subsidiary of RGI Holdings, Inc.) and subsidiaries as of    
December 31, 1998 and 1997, and the related consolidated statements of          
operations, stockholders' equity (deficit) and cash flows for each of the years 
in the three-year period ended December 31, 1998. These consolidated financial  
statements are the responsibility of the management of Legend Properties, Inc.  
Our responsibility is to express an opinion on these consolidated financial     
statements based on our audits.                                                 

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

In our opinion, the consolidated financial statements referred to above present 
fairly, in all material respects, the financial position of Legend Properties,  
Inc. and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three-year period  
ended December 31, 1998, in conformity with generally accepted accounting       
principles.                                                                     

        KPMG LLP

Washington, D.C.                                                                
February 5, 1999                                                                

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES  
(A SUBSIDIARY OF RGI HOLDINGS, INC.)  
CONSOLIDATED BALANCE SHEETS   

                                                        [Enlarge/Download Table]

                                                                                                           December 31,             
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 1998                      1997     
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
                                     Assets                                                                                         
                                     ------                                                                                         

Real estate inventory                                                                      $  82,873,914                103,857,159 
Assets held for sale                                                                           7,916,175                          - 
Cash and cash equivalents                                                                      4,446,864                 12,732,681 
Restricted cash and investments                                                               19,017,860                 15,230,538 
Accounts and notes receivable                                                                  1,491,267                  1,012,877 
Property and equipment, net                                                                   24,645,281                 25,759,305 
Intangibles, net of accumulated amortization of                                                                                     
   $1,052,895 in 1998 and $1,137,935 in 1997                                                   1,646,542                  1,828,470 
Other assets, net of accumulated amortization of                                                                                    
   $3,646,481 in 1998 and $2,291,080 in 1997                                                   5,520,388                  2,449,522 
                                                                                           -------------              ------------- 
                                                                                           $ 147,558,291                162,870,552 
                                                                                           -------------              ------------- 

                      Liabilities and Stockholders' Equity                                                                          
                      ------------------------------------                                                                          

Notes payable to banks and others                                                          $  40,722,737                 60,411,332 
Payables to related parties                                                                   84,744,478                 72,893,927 
Accounts payable                                                                               3,033,693                  3,406,650 
Other notes and liabilities                                                                   14,443,250                  9,407,537 
                                                                                           -------------              ------------- 
                                                                                             142,944,158                146,119,446 
                                                                                           -------------              ------------- 
Stockholders' equity :                                                                                                              
   Common stock, $.01 par value.  Authorized                                                                                        
      10,000,000 shares; 6,311,678 shares issued and                                                                                
      6,290,874 shares outstanding at                                                                                               
      December 31, 1998 and 1997                                                                  63,117                     63,117 
   Additional paid-in capital                                                                 44,171,103                 44,171,103 
   Accumulated deficit                                                                       (39,498,771)               (27,361,798)
   Treasury stock, 20,804 shares at December 31, 1998 and 1997                                  (121,316)                  (121,316)
                                                                                           -------------              ------------- 
Total stockholders' equity                                                                     4,614,133                 16,751,106 
Commitments and contingencies                                                                                                       
----------------------------------------------------------------------------------------------------------------------------------- 
                                                                                           $ 147,558,291                162,870,552 
----------------------------------------------------------------------------------------------------------------------------------- 

See accompanying notes to the Consolidated Financial Statements                 

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES  
(A SUBSIDIARY OF RGI HOLDINGS, INC.)  
CONSOLIDATED STATEMENTS OF OPERATIONS   

                                                        [Enlarge/Download Table]

                                                                                         YEARS ENDED DECEMBER 31,                   
----------------------------------------------------------------------------------------------------------------------------------- 
                                                                            1998                     1997                   1996    
----------------------------------------------------------------------------------------------------------------------------------- 
                                                                                                                                    
Revenues:                                                                                                                           
   Real estate sales                                                   $ 65,218,900              43,595,507              25,445,563 
   Club operations                                                        5,953,105               5,344,575               4,256,917 
   Patient service                                                        2,600,866               2,718,014               2,617,615 
   Rent                                                                           -               2,186,157               2,480,846 
   Other                                                                  1,960,585               1,783,645               1,822,350 
                                                                       ------------------------------------------------------------ 
                     Total revenues                                      75,733,456              55,627,898              36,623,291 
                                                                       ------------------------------------------------------------ 

Operating costs and expenses:                                                                                                       
   Real estate sales                                                     49,628,187              31,343,932              18,172,004 
   Club operations                                                        7,291,432               6,364,169               4,827,002 
   Patient service direct costs                                           1,919,183               1,521,292               1,378,808 
   Rental operations                                                              -                 359,325                 396,696 
   Other                                                                  1,417,681                 612,207                 594,413 
   Provision for loss on assets held for sale                                     -                       -               1,000,000 
   Selling, general and administrative                                   15,414,245              18,265,252               7,073,640 
   Depreciation and amortization                                          2,092,509               1,780,904               1,227,565 
                                                                       ------------------------------------------------------------ 
    Total operating costs and expenses                                   77,763,237              60,247,081              34,670,128 
                                                                       ------------------------------------------------------------ 
Operating income (loss)                                                  (2,029,781)             (4,619,183)              1,953,163 
                                                                       ------------------------------------------------------------ 

Other income (expenses):                                                                                                            
   Interest income                                                          944,800               1,386,920                 599,758 
   Interest income, related party                                                 -                  73,339                 146,277 
   Interest expense, including loan cost                                                                                            
      amortization                                                       (5,596,055)             (7,503,319)             (4,791,157)
   Interest expense, related party                                       (5,853,716)             (4,823,954)               (810,230)
   Other, net                                                               397,779                 727,575                 491,034 
                                                                       ------------------------------------------------------------ 
                 Net other expense                                      (10,107,192)            (10,139,439)             (4,364,318)
                                                                       ------------------------------------------------------------ 
Loss before minority interests                                          (12,136,973)            (14,758,622)             (2,411,155)
                                                                       ------------------------------------------------------------ 
Minority interests in loss of                                                                                                       
   consolidated subsidiaries                                                      -                 252,716                 257,572 
                                                                       ------------------------------------------------------------ 

Net loss                                                               $(12,136,973)            (14,505,906)             (2,153,583)
                                                                       ------------------------------------------------------------ 
Net loss per share - basic and diluted                                 $      (1.93)                  (2.31)                  (0.49)
                                                                       ------------------------------------------------------------ 
Weighted average number of common shares outstanding                      6,290,874               6,286,322               4,392,163 
----------------------------------------------------------------------------------------------------------------------------------- 

See accompanying notes to the Consolidated Financial Statements                 

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

                                                        [Enlarge/Download Table]

                                                  COMMON STOCK                        
                                                  ------------             ADDITIONAL 
                                           SHARES             PAR VALUE     PAID-IN   
                                           ------             ---------     CAPITAL   
                                                                            -------   
                                                                                      
Balances at December 31, 1995            4,386,986            $ 43,870   $    (36,120)

    Merger of Grand Harbor Corporation                                                
       and Grand Harbor Associates, Inc.   -                   -               (1,000)
    Stockholder contribution               -                   -           21,663,015 
    Business combination with Banyan                                                  
       Mortgage Investment Fund          1,890,562              18,906     22,167,813 
    Net loss                               -                   -              -       

                                         ---------            --------   -------------
Balances at December 31, 1996            6,277,548              62,776     43,793,708 

    Purchase of fractional shares          -                  -               (22,267)
    Repurchase of shares                   -                  -               -       
    Sale of stock                           34,130                 341        399,662 
    Net loss                               -                  -               -       
                                         ---------            --------   -------------
Balances at December 31, 1997            6,311,678              63,117     44,171,103 

    Net loss                               -                  -               -       
                                         ---------            --------   -------------
Balance at December 31, 1998             6,311,678            $ 63,117   $ 44,171,103 
                                         =========            ========   =============

                                                        [Enlarge/Download Table]


                                                                            TOTAL      
                                         ACCUMULATED         TREASURY   STOCKHOLDERS'  
                                           DEFICIT            STOCK    EQUITY (DEFICIT)
                                           -------            -----    ----------------
                                                                                       
Balances at December 31, 1995            $(10,703,309)  $      -        $ (10,695,559) 

    Merger of Grand Harbor Corporation                                                 
       and Grand Harbor Associates, Inc.        1,000          -                -      
    Stockholder contribution                   -               -           21,663,015  
    Business combination with Banyan                                                   
       Mortgage Investment Fund                -             (11,316)      22,175,403  
    Net loss                               (2,153,583)         -           (2,153,583) 

                                         -------------  -------------    ------------- 
Balances at December 31, 1996             (12,855,892)       (11,316)      30,989,276  

    Purchase of fractional shares              -               -              (22,267) 
    Repurchase of shares                       -            (110,000)        (110,000) 
    Sale of stock                              -               -              400,003  
    Net loss                              (14,505,906)         -          (14,505,906) 
                                         -------------  -------------    ------------- 
Balances at December 31, 1997             (27,361,798)      (121,316)      16,751,106  

    Net loss                              (12,136,973)         -          (12,136,973) 
                                         -------------  -------------    ------------- 
Balance at December 31, 1998             $(39,498,771)  $   (121,316)    $  4,614,133  
                                         =============  =============    ============= 

See accompanying notes to Consolidated Financial Statements.                    

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
  (A SUBSIDIARY OF RGI HOLDINGS, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                                                                      Years Ended December 31,   
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                       1998               1997   
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                 
Cash flows from operating activities:                                                                                            
    Net loss                                                                                      $(12,136,973)      (14,505,906)
    Adjustments to reconcile net loss to net cash provided by (used in)                                                          
       operating activities:                                                                                                     
                         Depreciation and amortization                                               2,977,467         3,205,495 
                         Gain on sale of assets held for sale                                               -           (195,076)
                         Related party interest expense not paid                                     5,853,716         4,721,217 
                         Related party interest income not collected                                        -            (72,537)
                         Provisions for loss on assets held for sale                                        -                -   
                         Minority interests in loss                                                         -           (252,716)
                         Change in certain assets and liabilities, net of                                                        
                            effect of acquisitions:                                                                              
                                         Decrease (increase) in real estate inventory               20,983,245           906,677 
                                         Decrease (increase) in assets held for sale                (7,916,175)        8,301,604 
                                         (Increase) in accounts and notes receivable and other                                   
                                          assets                                                    (4,132,798)         (541,903)
                                         Increase (decrease) in accounts payable and other notes                                 
                                          and liabilities                                            4,662,756        (5,504,042)
                                                                                                  ------------      ------------ 

                                Net cash provided by (used in) operating activities                 10,291,238        (3,937,187)
                                                                                                  ------------      ------------ 

Cash flows from investing activities:                                                                                            
         Decrease (increase) in restricted cash and investments                                     (3,787,322)        7,260,767 
         Purchase of property and equipment                                                           (791,440)       (6,297,341)
         Loans to related parties                                                                          -             (20,000)
         Collection of loans to related parties                                                            -             398,434 
         Investments and acquisitions, net of cash acquired                                                -               -     
         Proceeds from assets held for sale                                                                -          19,436,029 
                                                                                                  ------------      ------------ 

                                Net cash provided by (used in) investing activities                 (4,578,762)       20,777,889 

Cash flows from financing activities:                                                                                            
         Proceeds from notes payable to bank and others                                             21,569,532        19,653,062 
         Repayment of notes payable to bank and others                                             (41,258,127)      (45,942,347)
         Proceeds from loans from related parties                                                    6,000,000        20,702,720 
         Repayment of loans from related parties                                                        (3,165)         (139,107)
         Payment of loan fees                                                                         (306,533)         (179,983)
         Repurchase of common and fractional shares                                                         -           (132,267)
         Sale of common shares                                                                              -            400,003 
                                                                                                  ------------      ------------ 

                                Net cash provided by (used in) financing activities                (13,998,293)       (5,637,919)
                                                                                                  ------------      ------------ 

Net increase (decrease) in cash and cash equivalents                                                (8,285,817)       11,202,783 

Cash and cash equivalents at beginning of year                                                      12,732,681         1,529,898 
                                                                                                  ------------      ------------ 
Cash and cash equivalents at end of year                                                          $  4,446,864        12,732,681 
                                                                                                  ============      ============ 

                                                                                                                  (Continued)    

                                                        [Enlarge/Download Table]

                                                                                                     Years Ended December 31,
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                               1996          
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                             
Cash flows from operating activities:                                                                                        
    Net loss                                                                                               (2,153,583)       
    Adjustments to reconcile net loss to net cash provided by (used in)                                                      
       operating activities:                                                                                                 
                         Depreciation and amortization                                                      1,968,984        
                         Gain on sale of assets held for sale                                                      -         
                         Related party interest expense not paid                                              469,377        
                         Related party interest income not collected                                         (146,277)       
                         Provisions for loss on assets held for sale                                        1,000,000        
                         Minority interests in loss                                                          (257,572)       
                         Change in certain assets and liabilities, net of                                                    
                            effect of acquisitions:                                                                          
                                         Decrease (increase) in real estate inventory                      (4,925,186)       
                                         Decrease (increase) in assets held for sale                              -          
                                         (Increase) in accounts and notes receivable and other                               
                                          assets                                                             (821,210)       
                                         Increase (decrease) in accounts payable and other notes                             
                                          and liabilities                                                   2,499,825        
                                                                                                         ------------        

                                Net cash provided by (used in) operating activities                        (2,365,642)       
                                                                                                         ------------        

Cash flows from investing activities:                                                                                        
         Decrease (increase) in restricted cash and investments                                            (8,746,205)       
         Purchase of property and equipment                                                               (15,219,862)       
         Loans to related parties                                                                          (2,120,100)       
         Collection of loans to related parties                                                             1,288,265        
         Investments and acquisitions, net of cash acquired                                                  (609,984)       
         Proceeds from assets held for sale                                                                       -          
                                                                                                         ------------        

                                Net cash provided by (used in) investing activities                       (25,407,886)       

Cash flows from financing activities:                                                                                        
         Proceeds from notes payable to bank and others                                                    50,493,708        
         Repayment of notes payable to bank and others                                                    (32,310,431)       
         Proceeds from loans from related parties                                                          11,887,333        
         Repayment of loans from related parties                                                                   -         
         Payment of loan fees                                                                              (1,346,090)       
         Repurchase of common and fractional shares                                                                -         
         Sale of common shares                                                                                     -         
                                                                                                         ------------        

                                Net cash provided by (used in) financing activities                        28,724,520        
                                                                                                         ------------        

Net increase (decrease) in cash and cash equivalents                                                          950,992        

Cash and cash equivalents at beginning of year                                                                578,906        
                                                                                                         ------------        
Cash and cash equivalents at end of year                                                                    1,529,898        
                                                                                                         ============        

                                                                                                         (Continued)         

See accompanying notes to the Consolidated Financial Statements                 

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

                                                        [Enlarge/Download Table]

                                                                                                YEARS ENDED DECEMBER 31,        
--------------------------------------------------------------------------------------------------------------------------------
                                                                                       1998              1997            1996   
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                
Supplement Disclosure of Cash Flow Information -                                                                                
    Cash paid during the year for interest, net of amount capitalized of                                                        
       $1,137,447 in 1998, $903,978 in 1997, and $1,964,000 in 1996                 $4,699,226        5,811,516        3,506,755
                                                                                    ==========        =========       ==========
Supplemental Schedule of Noncash Investing and Financing Transactions:                                                          
    Contribution to equity of notes and interest payable from stockholder,                                                      
       net of receivable                                                            $    -              -             21,663,015
    Increase in restricted cash and investments and decrease in receivables                                                     
       from related parties                                                              -              -              4,012,667
    Decrease in receivables from related parties and payables to related                                                        
       parties                                                                           -              -              1,100,000
    Purchase of minority interest in exchange for cancellation of a note                                                        
       receivable and accrued interest                                                   -            1,681,584               --
    Net assets of Banyan Mortgage Investment Fund, net of cash acquired                                                         
       through the issuance of common stock                                         $    -              -             21,698,244
                                                                                    ==========        =========       ==========

See accompanying notes to Consolidated Financial Statements.                    

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)

Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996

(1)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                               

DESCRIPTION OF BUSINESS                                           

Legend Properties, Inc. (Legend) formerly known as Banyan Mortgage
      Investment Fund (Banyan), is the surviving corporation from the December
     31, 1996 merger (the Merger) with RGI U.S. Holdings, Inc. (RGI/US) (see
       Note 2). Prior to the Merger, RGI/US was a wholly-owned subsidiary of RGI
Holdings, Inc. (Holdings). As of December 31, 1998, Holdings owns 
  approximately 80 percent of the outstanding common shares of Legend.

For financial reporting purposes, the Merger was treated as a     
      recapitalization of RGI/US, with RGI/US as the acquirer of Banyan. As of
    December 31, 1996, the historical consolidated financial statements of
Legend are those of RGI/US.                                       

     As of December 31, 1998, Legend owns, operates and develops real estate
through its wholly owned subsidiaries as follows:                 

              -      Grand Harbor Associates, Inc. (GHA) was formed as a holding
                  company in 1991 and owns a 100 percent interest in Grand
                 Harbor Property Holdings, Inc. (GHPH) and a 100 percent
                 interest in Oak Harbor Property Holdings, Inc., Quality
             Life Services, Inc. and Quality Life Services, Ltd.
                  (collectively, OHPH). GHA's original 45 percent interest
                was increased by acquiring an additional 45 percent on
                  January 2, 1996 and the remaining 10 percent interest on
July 2, 1997.                         

           GHPH includes nine corporations and seven limited
                    partnerships and was formed in 1991 to acquire and develop
                   772 acres of real estate in Indian River County, Florida.
                     Grand Harbor (the development) is planned for approximately
                     1,000 mid to high-end residential products. The development
                   has numerous amenities and facilities, including golf and
                    beach clubs, two 18-hole championship golf courses, tennis
courts and a marina.                  

                    OHPH includes eight corporations and a limited partnership
                    and was formed in 1993 to develop a senior citizen country
                   club community with an on-site assisted living center and
             health clinic. In 1994, an off-site skilled nursing
facility was acquired.                

        -      VMIF/Anden Southbridge Venture and VMIF/Anden Wayside
                Venture (for financial reporting purposes, acquired on
                  December 31, 1996 as part of the merger with Banyan (see
          note 2)) were formed in 1991 to hold and develop
               Southbridge, a 2,685 acre master planned community in
                   Prince William County, Virginia planned for approximately
             5,000 residential units, 4.2 million square feet of
                  non-residential uses (including office, R&D, commercial,
                 industrial, and other similar uses) and an 18 hole golf
course.                               

           -      Ashburn Corporate Center, LC (ACCLC) was formed in March
                  1998 to hold and develop the Ashburn Corporate Center, a
                  116-acre commercial business park development project in
                   Loudoun County, Virginia planned for office and flex/tech
                  uses. ACCLC is owned 82% by the Company, which serves as
the Manager of the LLC.               

  During 1998 and 1997, Legend disposed of the following operating and
development properties:                                           

       -      VMIF Charles County Venture (for financial reporting
                purposes, acquired on December 31, 1996 as part of the
                     merger with Banyan (see note 2)) was formed in 1991 to hold
                    and develop Chapman's Landing, a 2,227 acre master planned
                  community in Charles County, Maryland. Chapman's Landing
         was sold during October 1998 for $28.5 million.

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES  
(A SUBSIDIARY OF RGI HOLDING, INC.)   

Notes to Consolidated Financial Statements  
(1) CONTINUED                                                                   

           -      BMIF Monterey County Corp., a wholly owned subsidiary of
                     Legend Properties, Inc., (for financial reporting purposes,
                  acquired on December 31, 1996 as part of the merger with
               Banyan (see note 2)) was formed to hold and develop a
                   565-acre land parcel in Monterey County, California known
                     as the Laguna Seca Ranch (Laguna). During 1997, the Company
sold Laguna for $12.8 million.        

           -      American Property Investments, Inc. (API) was formed for
                the purpose of acquiring, renovating and operating the
                    Lynnwood Shopping Center in Lynnwood, Washington (acquired
                in November 1987). In November 1997, API sold Lynnwood
Center for $20.1 million.             

BASIS OF PRESENTATION                                             

   The consolidated financial statements include the accounts of Legend,
certain of its wholly and majority owned subsidiaries as of the   
     acquisition dates noted above. The accounts of Resource Group, Inc. and
      K.W. Properties, Inc., both wholly-owned subsidiaries of RGI/US prior to
April 1996, have been excluded from these consolidated financial  
       statements because these independent entities were not part of the merger
      with Banyan. These two subsidiaries were spun-off by means of a dividend
 to Holdings from Legend in April 1996. All significant intercompany
accounts and transactions have been eliminated in consolidation.  

USE OF ESTIMATES                                                  

  The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates and
       assumptions that affect the reported amounts of assets and liabilities at
       the date of the financial statements and the reported amounts of revenues
   and expenses during the reporting period. Actual results could differ
from those estimates.                                             

The Company computes cost of sales and relieves property under    
      development (a component of real estate inventory) based on the ratio of
   current year and estimated future costs to current year and estimated
future sales. Actual results could differ from these estimates.   

REAL ESTATE INVENTORY                                             

       Real estate inventory is recorded at the lower of cost or fair value less
    cost to sell. Inventoried costs consist of land (including any related
  legal, engineering and other acquisition costs) common improvements,
  amenities, construction in progress and completed residential units.
       Interest, real estate taxes and other carrying costs are capitalized only
       for discrete parcels or units undergoing active development. The costs of
     common improvements are allocated to discrete parcels or units based on
relative sales values or specific identification.                 

       The Company reviews its real estate inventory for impairment where events
  or changes in circumstances indicate that the carrying amount of the
    assets may not be recoverable. Recoverability of assets to be held and
     used is measured by comparing the carrying amount of an asset to future
      or anticipated net cash flows generated by the asset. If such assets are
  deemed to be impaired, the impairment is recognized by measuring the
      difference between the carrying amount of the assets and its fair value.

ASSETS HELD FOR SALE                                              

      Assets held for sale are reported at the lower of the carrying amount or
fair value less costs to sell.                                    

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)

Notes to Consolidated Financial Statements

CASH AND CASH EQUIVALENTS                                         

       Cash and cash equivalents consist of cash, demand deposits with banks and
      highly liquid investments with maturity dates of three months or less at
the date of acquisition.                                          

RESTRICTED CASH AND INVESTMENTS                                   

    Restricted cash includes customer deposits and various escrow accounts
    with local governments and others related to the completion of certain
     development of $7,007,417 and $4,224,312, and cash held in bank as loan
    collateral of $7,341,731 and $6,059,984 at December 31, 1998 and 1997,
respectively.                                                     

     Restricted investments include an irrevocable trust consisting of three
   annuities totaling $4,668,712 and $4,946,242 at December 31, 1998 and
      1997, respectively, which is solely to provide security for payment on a
     note payable. The annuity contracts will fully satisfy the note through
annual principal and interest payments.                           

PROPERTY AND EQUIPMENT                                            

  Property and equipment are stated at cost. Significant additions and
     improvements are capitalized while repairs and maintenance are expensed
      as incurred. Interest charges related to assets developed or constructed
   for use in operations are capitalized during the construction period.
       Depreciation and amortization are provided using the straight-line method
over the following estimated useful lives:                        

                                                                [Download Table]
                                                             
Buildings and improvements                      31 - 39 years
Furniture and fixtures                            3 - 7 years
Land Improvements                                    15 years
Marina                                               15 years

INTANGIBLES                                                       

    Intangibles include goodwill, a non-compete agreement and organization
     costs. Goodwill, which represents the excess of the purchase price over
     fair value of net assets acquired, is amortized using the straight-line
      method over fifteen years. The recoverability of goodwill is assessed by
   comparing estimated undiscounted future operating cash flows over the
remaining amortization period to the current net asset balance.If 
impairment is idenfified, any loss is measured based on projected 
     discounted future operating cash flows using a discount rate reflecting
    Legend's average cost of funds. The non-compete agreement is amortized
     using the straight-line method over a period of fifteen years, the term
of the agreement.                                                 

OTHER ASSETS                                                      

    Included among other assets are deferred loan costs that are amortized
using the straight-line method over the term of the related debt. 

DEPOSITS                                                          

       Included in other liabilities are customer deposits on real estate sales,
      rental and club memberships of $7,765,583 and $4,304,494 at December 31,
    1998 and 1997, respectively. The real estate sales and rental deposits
are held in restricted bank accounts, which were $5,470,785 and   
$2,463,885 at December 31, 1998 and 1997. Among these are certain 
       associate member deposits that will be refunded at the end of the related
term or upon cancellation by the member.                          

REVENUE RECOGNITION                                               

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)

Notes to Consolidated Financial Statements

       Revenues on retail sales of real estate are recorded upon the closing and
       transfer of title to the buyer, whereas rental revenue is recognized over
       the respective tenant lease terms (1 to 30 years) using the straight-line
    method. Sales of equity memberships in the Grand Harbor Golf and Beach
       Club (Club) are treated as real estate sales. Club assets at Grand Harbor
  are treated as an amenity and are charged to the cost of real estate
  sales as full equity memberships are sold. Membership dues for Grand
    Harbor are billed on an annual basis and recognized as revenue ratably
over the year.                                                    

INCOME TAXES                                                      

   The Company utilizes the asset and liability method of accounting for
       income taxes. Under the asset and liability method, deferred income taxes
 are recognized for the tax consequences of temporary differences by
applying enacted statutory rates applicable to future years to    
      differences between the financial statement carrying amounts and the tax
 basis of existing assets and liabilities. Changes in tax rates that
     effect deferred tax assets and liabilities are taken into income during
     the period that includes the enactment date. Deferred income tax assets
      are reduced by a valuation allowance when, in the opinion of management,
     it is likely that some portion or all of the deferred income tax assets
will not be realized.                                             

ADVERTISING COSTS                                                 

    Costs of advertising, promotion and marketing are generally charged to
operations as incurred. These expenses were $2,431,072 in 1998,   
$2,395,134 in 1997, and $900,753 in 1996.                         

SEGMENT INFORMATION                                               

Effective December 31, 1998, the Company adopted SFAS No. 131,    
     Disclosures About Segments of Enterprise and Related Information, which
      establishes standards for reporting information about operating segments
and related disclosures about products and services. See note 14. 

RECLASSIFICATIONS                                                 

   Certain amounts in prior years consolidated financial statements have
been reclassified to conform to the 1998 presentation.            

(2)    ACQUISITIONS                                                             

 Certain business combinations consummated during 1997 and 1996 were
accounted for under the purchase method of accounting, wherein the
 purchase price was allocated to the assets acquired and liabilities
      assumed based upon their relative fair values. Results of operations for
       these acquired companies have been included in the consolidated financial
statements from the acquisition dates.                            

BANYAN MORTGAGE INVESTMENT FUND                                   

   On April 12, 1996, an Agreement and Plan of Merger was executed among
RGI/US, Holdings and Banyan.                                      

  Effective December 31, 1996, RGI/US was merged with and into Banyan.
Banyan's certificate of incorporation was amended to convert each 
     twenty-five shares of Banyan's issued and outstanding common stock into
      one issued and outstanding share (Reverse Split). Additionally, the name
     of Banyan was changed to Legend Properties, Inc. After giving effect to
     the Reserve Split, all outstanding shares of RGI/US were converted into
     4,386,986 shares of Banyan's common stock. For accounting purposes, the
    merger was treated as a recapitalization of RGI/US, with RGI/US as the
acquirer of Banyan for $22,175,403.                               

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)

Notes to Consolidated Financial Statements

     GRAND HARBOR PROPERTY HOLDINGS, INC., AND OAK HARBOR PROPERTY HOLDINGS,
INC.                                                              

     On January 2, 1996, GHA, a 45 percent general partner in GHPH and OHPH,
     purchased Southmortgage Finance Co., a holding company for certain bank
    debt (the proceeds of which were loaned to GHPH), and an additional 45
 percent interest in GHPH, OHPH and Harbor Title and Escrow Co. Ltd.
      (collectively, the Acquired Companies). Harbor Title and Escrow Co. Ltd.
provides title and escrow service for GHPH and OHPH. The Acquired 
      Companies were purchased from Andlinger Properties Capital L.P. for cash
consideration of $52,237 and a promissory note of $996,220.       

 In July 1997, GHA acquired the remaining 10 percent of the Acquired
Companies. The Acquired Companies were purchased from Grand Harbor
      Development Company (GHDC), a corporation majority owned by Don Proctor,
      in exchange for the cancellation of a note receivable of $1,462,770 plus
    accrued interest of $218,814, payable to GHA from GHDC. Don Proctor is
    the majority shareholder of Proctor Construction Company, which has an
    exclusive contract to provide development and construction services at
    Grand Harbor and Oak Harbor. Mr. Proctor was an officer of GHPH, until
his resignation in June 1997.                                     

       The unaudited pro forma consolidated statements of operations that follow
 give effect to the transactions described above as if they had been
consummated on January 1, 1997 or 1996. The unaudited pro forma   
 consolidated statements of operations are presented for information
purposes only and do not purport to represent what would have been
    Legend's actual results of operations for the years ended December 31,
      1997 and 1996 had the acquisitions, in fact, occurred on January 1, 1997
or 1996, or Legend's results of operations for any future period. 

                                                                [Download Table]

                    Year ended December 31, 1997                    
               Assuming Acquisition on January 1, 1997              
                             (Unaudited)                            

                                                                    
  Total revenues                              $       55,627,898    
  Total costs and expenses                            60,247,081    
--------------------------------------------------------------------

  Operating loss                                      (4,619,183)   

  Net other expense                                  (10,139,439)   
--------------------------------------------------------------------

  Net loss                                    $      (14,758,622)   
====================================================================

  Net loss per share                          $            (2.35)   
====================================================================

                                                                [Download Table]

                    Year ended December 31, 1996                    
               Assuming Acquisition on January 1, 1996              
                             (Unaudited)                            

                                                                    
  Total revenues                              $       36,856,185    
  Total costs and expenses                            41,421,762    
--------------------------------------------------------------------

  Operating loss                                      (4,565,577)   

  Net other expense                                   (8,174,193)   
--------------------------------------------------------------------

  Net loss                                    $      (12,739,770)   
====================================================================

  Net loss per share                          $            (2.03)   
====================================================================

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)

Notes to Consolidated Financial Statements

(3)    REAL ESTATE INVENTORY AND ASSET HELD FOR SALE                            

    Real estate inventory consisted of the following at December 31, 1998:

                                                        [Enlarge/Download Table]

                                                         Initial cost to Legend             Cost Adjustments     
                                                         ----------------------             ----------------     
        Name, approximate size           Encum-                     Building and                    Building and 
           type and location             brances        Land        improvements         Land       improvements 
           -----------------             -------        ----        ------------         ----       ------------ 

                                                                                                                 
Grand Harbor, 325-acre residential      Note 5                                                                   
development in Vero Beach, FL           (H-N)         $9,780,340        -                 -           19,368,981 

Oak Harbor, 106-acre residential        Note 5                                                                   
development in Vero Beach, FL           (C-G)          3,848,067        -                 -           13,554,582 

Southbridge, 2,350-acre mixed use land  Note 5(A)                                                                
development in Prince William County,   Note 6                                                                   
VA                                      (1&2)         20,785,086       7,146,670          -            8,509,388 
                                                   --------------------------------------------------------------

                                                     $34,413,493       7,146,670           $0         41,432,951 
                                                   ==============================================================

                                                        [Enlarge/Download Table]

                                                                      Valuation                                              
                                                                   adjustment and                                            
                                                    Building         accumulated                                             
                                                       and        depreciation and                    Date of        Date    
          Description                  Land       improvements      amortization     Total (a)     Construction    Acquired  
-----------------------------------------------------------------------------------------------------------------------------

                                                                                                                             
Grand Harbor, 325-acre                                                                                                       
residential development in Vero                                                                                              
Beach, FL                           $9,780,340       19,368,981        (119,200)      29,030,121        (b)          03/91   

Oak Harbor, 106-acre                                                                                                         
residential development in Vero                                                                                              
Beach, FL                            3,848,067       13,554,582         -             17,402,649        (b)          05/91   

Southbridge, 2350-acre mixed                                                                                                 
uses land development in Prince                                                                                              
William County, VA                  20,785,086       15,656,058         -             36,441,144        (b)          12/96   
                                 ----------------------------------------------------------------                            

                                   $34,413,493       48,579,621        (119,200)      82,873,914                             
                                 ================================================================                            

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)

Notes to Consolidated Financial Statements

a)     Reconciliation of real estate inventory for the years ended
December 31:                                        

                                                        [Enlarge/Download Table]

                                                               1998              1997               1996   
-----------------------------------------------------------------------------------------------------------

                                                                                                           
Balance at beginning of year                      $     103,857,159       128,834,222        18,588,184    
-----------------------------------------------------------------------------------------------------------

Reallocation of purchase price Banyan                        -                415,869             -        
Net dispositions through sale                           (47,425,324)      (47,784,281)      (16,680,199)   
Acquisitions                                                 -              1,260,019       106,480,671    
Net additions                                            26,442,079        21,250,530        22,005,547    
Depreciation                                                 -                 -               (195,030)   
Reclassification to property and equipment                   -                 -               (364,951)   
Valuation adjustment                                         -               (119,200)       (1,000,000)   
-----------------------------------------------------------------------------------------------------------

Balance at end of year                            $      82,873,914       103,857,159       128,834,222    
===========================================================================================================

  b)     Properties are currently at various stages of development and
              entitlement. The build-out of the projects is expected to continue
             for periods ranging from 5-20 years under the current development
plans.                                              

     At December 31, 1998, Asset held for sale represents the carrying value
   of the Ashburn Corporate Center, which the Company expects to sell in
       1999. This property is encumbered by a Note payable to others--see Note 6
(O).                                                              

(4)    PROPERTY AND EQUIPMENT                                                   

       Property and equipment are stated at cost and consist of the following at
December 31:                                                      

                                                        [Enlarge/Download Table]

                                                                1998               1997      
---------------------------------------------------------------------------------------------

                                                                                             
Marina                                                    $      2,683,471         2,683,471 
Buildings and improvements                                      14,602,202        14,633,725 
Furniture, fixtures and equipment                                7,225,351         6,589,497 
Depreciable land improvements                                    2,014,677         2,022,186 
---------------------------------------------------------------------------------------------

                                                                26,525,701        25,928,879 

Less accumulated depreciation and amortization                   6,623,845         4,912,995 
---------------------------------------------------------------------------------------------

                                                                19,901,856        21,015,884 

Land (including golf course land)                                4,743,425         4,743,421 
---------------------------------------------------------------------------------------------

                                                          $     24,645,281        25,759,305 
=============================================================================================

(5)    NOTES PAYABLE TO BANKS AND OTHERS                                        

     Notes payable to banks and others consists of the following at December
31:                                                               

                                                        [Enlarge/Download Table]

(Reference to note 3)                                                       1998            1997     
=====================================================================================================

                                                                                                     
(A)      Note payable to others, interest only payable monthly at                                    
                 12 percent, principal due April 20, 1999, secured                                   
                 by certain real estate inventory.                        $2,950,000       2,950,000 

(B)      Note payable to others, interest only payable monthly at                                    
                 the prime rate plus .5 percent (8.25 percent at                                     
                 December 31, 1998), principal repaid during July                                    
                 1998.                                                     -                 996,220 

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)

Notes to Consolidated Financial Statements

                                                        [Enlarge/Download Table]

(Reference to note 3)                                                       1998             1997    
=====================================================================================================
                                                                                                     
(C)      Note payable to others, interest at 6.34 percent, due                                       
                 in annual installments of $600,000, including                                       
                 interest through July 1, 2009. Secured by annuity                                   
                 contracts.                                                4,650,912       4,937,852 

(D)      Notes payable to banks, interest payable monthly at the                                     
                 banks' cost of funds rate (not to exceed the                                        
                 LIBOR rate plus .50 percent) plus 2.25 percent                                      
                 (7.60 percent at December 31, 1998); principal                                      
                 payments of $504,794, $802,185, $997,841 and                                        
                 $743,489 due in 1999, 2000, 2001 and 2002,                                          
                 respectively. Secured by second mortgages on                                        
                 certain real estate inventory and property.               3,048,309       7,474,410 

(E)      Note payable to bank, interest payable monthly at the                                       
                 bank's cost of funds rate (note to exceed the                                       
                 LIBOR rate plus 5 percent) plus 2.5 percent (7.85                                   
                 percent at December 31, 1998); principal was repaid                                 
                 during November 1998.                                        -            7,433,500 

(F)      Notes payable to banks, interest payable monthly at                                         
                 LIBOR plus 2.0 percent and prime rate plus 1.0                                      
                 percent (8.66 percent to 8.75 percent at December                                   
                 31, 1998); principal payments of $7,632,421,                                        
                 $147,361, $160,143, $177,519 and $3,316,371 due                                     
                 in 1999, 2000, 2001, 2002 and 2003, respectively.                                   
                 Secured by first mortgages on certain real estate                                   
                 inventory, certain property and equipment and                                       
                 certificates of deposit with balances totaling                                      
                 $6.3 million at December 31,                                                        
                 1998.                                                    11,433,815      12,179,562 

(G)      Construction revolving line of credit, interest payable                                     
                 monthly at the prime rate plus 1 percent (8.75                                      
                 percent at December 31, 1998), due June 1999.                                       
                 Secured by first mortgages on certain real estate                                   
                 inventory, certain property and equipment, and a                                    
                 certificate of deposit with a balance of $6.3                                       
                 million at December 31, 1998.  Total advances are                                   
                 not to exceed $16,000,000.                                1,287,663       1,073,852 

(H)      Notes payable to bank, interest payable monthly at the                                      
                 bank's cost of funds rate (not to exceed the                                        
                 LIBOR rate plus .50 percent) plus 2.25 percent                                      
                 (7.60 percent at December 31, 1998); principal                                      
                 payments of $785,216, $1,247,814, $1,552,159 and                                    
                 $1,156,512 due in 1999, 2000, 2001 and 2002,                                        
                 respectively. Secured by first and second mortgages                                 
                 on certain real estate inventory.                         4,741,701      11,308,865 

(I)      Construction notes payable to bank, interest payable                                        
                 monthly at the bank's cost of funds rate (not to                                    
                 exceed the LIBOR rate plus .5 percent) plus 2.5                                     
                 percent; principal repaid during November, 1998.             -            2,000,000 

(J)      Notes payable to bank, interest payable monthly at the                                      
                 prime rate plus .5 percent (8.5 percent at December                                 
                 31, 1998); principal repaid during 1998.                     -            2,121,650 

(K)      Notes payable to banks, interest payable monthly at the                                     
                 prime rate (7.75 percent at December 31, 1998);                                     
                 principal is due during 1999. Secured by a first                                    
                 mortgage on certain real estate inventory.                1,732,588       3,982,736 

(L)      Construction revolving lines of credit payable to banks,                                    
                 due on demand, but reviewed annually for renewal,                                   
                 interest payable monthly at the prime rate (7.75                                    
                 percent at December 31, 1998). Secured by a first                                   
                 mortgage on certain property.  Total advances are                                   
                 not to exceed $12,000,000.                                4,743,556       3,061,795 

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)

Notes to Consolidated Financial Statements

                                                        [Enlarge/Download Table]
                                                                                         
(M)  Revolving line of credit payable to bank with interest                              
             payable at the prime rate plus .75 percent,                                 
             principal repaid during 1998.                             -          171,901

(N)  Notes payable to others, interest at 7.50 percent to 9.0                            
             percent; principal and interest due during 1999.                            
             secured by a first mortgage on certain real estate                          
             inventory.                                                91,000     490,200

(O)  Note payable to others, interest due monthly at 18%,                                
             principal due September 6, 1999. Secured by a first                         
             mortgage on assets held for sale.                      5,940,000    -       

(P)  Other                                                            103,193     228,789
                                                                  -----------  ----------
                                                                  $40,722,737  60,411,332
                                                                  ===========  ==========

      In conjunction with the acquisition of Royal Palm Convalescent Center by
       OHPH in June 1994, an irrevocable trust consisting of three annuities was
     established for the sole purpose of providing security for payments due
  on the note payable to Henry L. Block. The annuity contracts totaled
    $4,512,127 and $4,780,365 at December 31, 1998 and 1997, respectively,
       plus accrued interest receivable of $156,585 and $165,877, and will fully
satisfy the note through annual principal and interest payments of
$600,000 through July 1, 2009.                                    

    Scheduled principal maturities of notes payable to banks and others at
December 31, 1998 are as follows:                                 

                                                                [Download Table]
                                                          
1999                                         $ 25,777,613 
2000                                            2,635,459 
2001                                            3,235,659 
2002                                            2,448,308 
2003                                            3,706,560 
Thereafter                                      2,919,138 
----------------------------------------------------------

                                             $ 40,722,737 
==========================================================

     As noted above, the Company has substantial debt repayments in 1999 and
       early 2000 under existing financings and requires additional financing to
advance its business plan. As of December 31, 1998 the Company had
      $4,446,864 of cash and cash equivalents, which will not be sufficient to
  fund these obligations. The Company anticipates meeting its existing
      debt obligations during 1999 from the release of restricted cash pledged
   as collateral on certain debt, net proceeds from the sale of Ashburn,
      the renewal and extension of existing construction lines, and internally
  generated funds from real estate sales and operations. If sufficient
funds are not available from the above, the Company anticipates   
 refinancing certain land acquisition financing and delaying certain
   quarterly interest payments as allowed under the debt agreements. The
      Company also has available, if needed, a $5 million credit facility from
Holdings.                                                         

      There can be no assurance that the Company will be able to refinance the
existing debt obligations or obtain the necessary construction and
    development financing to implement its plan or that, if available, the
    terms and conditions will be acceptable to the Company. If the Company
    is unable to secure the necessary additional financing or capital when
   needed, the plans for its projects will likely be materially revised,
   which would have a material adverse effect on the Company's financial
condition and results of operations.                              

(6)    RELATED PARTY TRANSACTIONS                                               

       The following is a summary of other significant transactions and accounts
    with related parties during 1998, 1997 and 1996 and as of December 31,
1998 and 1997:                                                    

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)

Notes to Consolidated Financial Statements

(6)    CONTINUED                                                                

RECEIVABLES                                                       

     During 1996 and 1997, Legend held a note receivable that was due from a
       related party, which was cancelled in conjunction with the acquisition of
   the acquired companies that is discussed in a Note 2. Interest income
      from this note was $73,337 and $146,277 for 1997 and 1996, respectively.

PAYABLES                                                          

  Payables to related parties consist of the following at December 31:

                                                        [Enlarge/Download Table]

                                                                                  1998              1997     
                                                                                  ----              ----     
                                                                                                             
(Reference to note 3)                                                                                        
(1)  Mortgage note payable to Holdings with interest payable                                                 
             quarterly at LIBOR plus 2.5%. Principal payments                                                
             equal to 20% of Southbridge and 50% of other                                                    
             collateral sales revenues is payable quarterly                                                  
             with the balance due April 1, 2003. The debt is                                                 
             secured by certain real estate                                                                  
             inventory and property.                                     $      30,649,872        30,649,872 

(2)  Mortgage note payable to Holdings with interest at Prime                                                
             plus 2% and secured by certain real estate                                                      
             inventory. Interest and principal are payable                                                   
             quarterly after certain other debt payments                                                     
             provided that a $4.5 million cash reserve                                                       
             remains. Quarterly principal payments are equal                                                 
             to 80% of the defined net cash flow for                                                         
             Southbridge, Grand Harbor, and Oak Harbor with                                                  
             the balance due April 1, 2003. Unpaid interest                                                  
             will be capitalized into the principal balance                                                  
             annually.                                                          35,024,632        20,960,448 

(3)  Unsecured note payable to RGI, Inc. with interest at                                                    
             Prime plus 2%. Principal and interest is payable                                                
             on the same terms, but after payments on the                                                    
             Mortgage note payable discussed immediately above                                               
             with the remainder due April 1, 2003. Unpaid                                                    
             interest will be capitalized into the principal                                                 
             balance annually.                                                  16,821,696        14,412,667 

(4)  Unsecured note payable to Holdings, interest at Prime plus                                              
             2%.  Principal and interest due June 1, 1999.                       2,248,278            -      

(5)  Accrued interest                                                              -               6,868,311 

(6)  Other                                                                         -                   2,629 
                                                                          -----------------      ------------

                                                                         $      84,744,478        72,893,927 
=============================================================================================================

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)

Notes to Consolidated Financial Statements

(6)    CONTINUED                                                                

  Holdings has provided to the Company a $5 million credit facility to
provide sufficient working capital to fund ongoing development,   
     construction and operating activities. The credit facility provides for
   interest at Prime plus 2%, matures on April 1, 2003 and is secured by
certain real estate inventory and property.                       

 The entire $84,744,478 related party payable (principal and accrued
interest) is due on April 1, 2003.                                

       During 1998, Legend sold Chapman's Landing for $28.5 million and realized
  net proceeds (after closing costs) of $28.4 million. Of these funds,
approximately $16 million were applied towards paying off existing
external debt pursuant to a loan restructuring with Holdings, and 
Holdings indirect parent, Aker RGI ASA (Aker). The previous debt  
     agreements had required Legend to pay Holdings 50% of the net cash flow
  (as defined in the documents) upon the sale of Chapman's Landing. In
  exchange for releasing Legend from this commitment, Legend agreed to
     utilize these proceeds to retire certain external debt obligations that
     had been guaranteed by Aker. The Aker debt guarantees that were retired
totaled approximately $42.9 million.                              

      This restructuring has also provided for an extension of the debt due to
   Holdings to April 2003, and it adjusted the interest rates to between
LIBOR plus 2.5% to Prime plus 2%. Moreover, certain interest and  
   principal repayment provisions were modified, and selected loans were
 consolidated. Lastly, Holdings made available the $5 million credit
facility to fund development, construction and operations.        

INDEMNITY                                                         

       Aker RGI ASA, the indirect parent of Holdings, has provided an indemnity,
       to a maximum of $15,000,000, to the bonding company for development bonds
   at Southbridge, of which an aggregate total of approximately $9.8 and
    $5.6 million were outstanding at December 31, 1998 and March 19, 1999,
respectively.                                                     

CONSULTING AND OTHER FEES                                         

     Proctor Construction Company (Proctor) has provided all development and
construction services at Grand Harbor and Oak Harbor since Legend 
     acquired the projects. Donald C. Proctor is the majority shareholder of
   Proctor, and an affiliate of Mr. Proctor owned 10 percent of GHPH and
       OHPH (the corporations that own Grand Harbor and Oak Harbor, see note 2).
       This exclusive contract is effective through December 31, 1999, with fees
equal to the cost of the work, a 7 percent overhead charge and a 5
      percent profit fee, half of which is payable to GHPH and OHPH. There can
    be no assurance that Legend has purchased these services at prevailing
market rates.                                                     

      Legend paid $100,000 in 1996 to K.L. Associates for consulting services.
K.L. Associates is an entity owned by a former officer of Legend. 

(7)    INCOME TAXES                                                             

       There was no current income tax benefit or expense in 1998, 1997 or 1996,
  and the deferred tax expense or benefit was offset by changes in the
valuation allowance for deferred tax assets.                      

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)

Notes to Consolidated Financial Statements

(7)    CONTINUED                                                                

    The approximate tax effects of temporary differences and carryforwards
that give rise to significant portions of deferred tax assets and 
liabilities as of December 31 are as follows:                     

                                                        [Enlarge/Download Table]

                                                                    1998               1997 
--------------------------------------------------------------------------------------------
                                                                                            
Deferred tax assets:                                                                        
   Real estate inventory and assets held for sale         $     20,488,000       26,975,000 
   Deferred income                                                 270,000          424,000 
   Net operating loss carryforwards                             20,324,000        9,185,000 
   Organization and loan fees                                      849,000          896,000 
   Other                                                           176,000          232,000 

--------------------------------------------------------------------------------------------
Total gross deferred tax assets                                 42,107,000       37,712,000 

Less valuation allowance                                        40,950,000       37,239,000 
--------------------------------------------------------------------------------------------
Net deferred tax assets                                          1,157,000          473,000 
--------------------------------------------------------------------------------------------
Deferred tax liabilities:                                                                   
   Property and equipment                                          516,000          376,000 
   Other                                                           641,000           97,000 
============================================================================================
Total gross deferred tax liabilities                             1,157,000          473,000 
--------------------------------------------------------------------------------------------
Net deferred tax liability                                $              -                - 
============================================================================================

    The valuation allowance increased by $3,711,000 and $7,907,000 in 1998
     and 1997, respectively. Management believes that it is more likely than
       not that the remaining deferred tax asset balance is not realizable based
on estimates of future taxable income and after consideration of  
available tax planning strategies.                                

     As of December 31, 1998, Legend has net operating loss carryforwards of
    approximately $53,500,000 which substantially expire in 2011, 2012 and
  2018. This excludes net operating losses of Banyan which, because of
  certain tax regulations, are not realizable because of the change in
     ownership. Additionally, certain deductible temporary differences which
existed at the time of the merger may be limited under current tax
      regulations should they be realized during the five years ended December
31, 2001.                                                         

(8)    FAIR VALUE OF FINANCIAL INSTRUMENTS                                      

Legend's financial instruments include cash, restricted cash,     
     receivables, accounts payable, and short-term and long-term borrowings.
In general, Legend believes that the fair value of these financial
instruments approximates their carrying amounts based upon their  
     short-term nature or upon current market indicators, such as prevailing
interest rates available to the Company for similar instruments.  

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)

Notes to Consolidated Financial Statements

(8)    CONTINUED                                                                

 Legend's financial instruments also include restricted investments,
 consisting of an irrevocable trust fund containing three annuities,
     established to provide the annual payments required on the note payable
  to Henry L. Block (see Note 5(c)). The annual distributions from the
     annuities fully satisfy the interest and principal payments of the note
      payable. Moreover, these annuities cannot be surrendered and, therefore,
 have no cash value. Because the restricted investments and the note
      payable are inextricably linked, the fair value of each is considered to
be the carrying amounts reported in the balance sheet.            

(9)    CONCENTRATION OF ASSETS                                                  

The majority of Legend's assets are real estate holdings which are
    subject to possible fluctuating economic conditions. Such fluctuations
     can have a significant impact on the market values, which in turn could
limit the potential recovery of the properties' carrying values.  

(10)   STOCKHOLDERS' EQUITY                                                     

CHANGES IN AUTHORIZED SHARES                                      

In July of 1997, the Company amended Article Four of the Company's
       Amended and Restated Certificate of Incorporation to reduce the number of
authorized shares of capital stock to 15,000,000 shares, of which 
5,000,000 shares shall be preferred stock, $0.01 par value, and   
10,000,000 shares shall be common stock, $0.01 par value.         

(11)   STOCK OPTION PLAN                                                        

      The Company has granted stock options under the Executive and Directors'
   Stock Option Plan (the Plan) which was approved on June 25, 1993. The
    Plan grants the Board of Directors the authority to issue up to 40,000
    shares of the Company's common stock for stock option awards. The Plan
       consists of an Executive Option Grant Program and a Director Option Grant
   Program. Options issued under the Executive Option Grant Program vest
      over a three-year period. Options issued under the Director Option Grant
      Program vest over a two-year period. All options granted lapse ten years
from the date of grant.                                           

The following is a summary of stock option activity:              

                                                        [Enlarge/Download Table]

                                              Option price           Number of shares  
---------------------------------------------------------------------------------------
                                                                                       
Balance at December 31, 1995                $15.64 to $28.13              20,440       

Granted                                          $11.69                    4,840       
---------------------------------------------------------------------------------------

Balance at December 31, 1996                $11.69 to $28.13              25,280       

Granted                                      $4.50 to $7.75                9,300       

Forfeited                                    $4.50 to $28.13             (20,500)      
---------------------------------------------------------------------------------------

Balance at December 31, 1997                 $4.50 to $17.19              14,080       

Granted                                             -                        -         
---------------------------------------------------------------------------------------

Balance at December 31, 1998                 $4.50 to $17.19              14,080       
=======================================================================================

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)

Notes to Consolidated Financial Statements

(11)   CONTINUED                                                                

     At December 31, 1998, the number of options exercisable was 14,080. The
 Company has adopted the disclosure-only provisions of SFAS No. 123,
       Accounting for Stock-Based Compensation. Accordingly, the Company applies
       Accounting Principles Board Opinion No. 25 in accounting for the Plan and
therefore no compensation cost has been recognized for the Plan.  

       An insignificant amount of compensation cost would have been recorded had
     compensation cost for the Company's stock options been determined based
   upon the fair value at the grant date consistent with the methodology
prescribed under SFAS No. 123.                                    

(12)   EMPLOYEE BENEFIT PLAN                                                    

     The Company sponsors a defined contribution plan that provide employees
     of the Company an opportunity to accumulate funds for their retirement.
      Employees are eligible to join the plan if they are at least 21 years of
    age, have completed one year of service with the Company, and worked a
minimum of 1,000 hours. The Company matches the contributions of  
      participating employees on the basis of the percentages specified in the
 plan. Company matching contributions to the plan were approximately
 $47,000, $83,000 and $25,000 in 1998, 1997, and 1996, respectively.

(13)   CONTINGENCIES                                                            

LEGAL PROCEEDINGS                                                 

Ashburn Corporate Center                                          

During August 1998, Legend filed a lawsuit and a memorandum of Lis
      Pendens in the Circuit Court of Loudoun County against Atlantic Research
      Corporastion (ARC), which was subsequently amended during November 1998.
On March 6, 1998 Legend was assigned the rights under an existing 
    contract to purchase approximately 28 acres located in Loudoun County,
      Virginia (the second Ashburn parcel), which included a $100,000 contract
      deposit. Although the contract contained a projected closing date, there
      was no provision stating that time was of the essence. Both parties were
sophisticated in real estate transactions and were represented by 
     counsel. Subsequent to the assignment of the contract, ARC attempted to
      insert new terms and conditions into the contract, including a provision
    that time is of the essence and a demand for additional consideration.
     During November 1998, Legend tendered performance under the contract by
  delivering all necessary papers and approximately $3.6 million to an
   escrow agent. Under the amended complaint, Legend is seeking specific
       performance under the real estate sales contract and any other relief the
court may offer.                                                  

     ARC has answered that the original contract has a clear and unambiguous
     settlement date of June 23, 1998, that Legend has breached the contract
    and ARC has no obligation to sell Legend the property, and that ARC is
       entitled to the $100,000 deposit as partial damages. ARC has also filed a
  counterclaim contending that ARC has been damaged under the contract
       breached by Legend and the memorandum of Lis Pendens. ARC claims that ARC
 has been forced to maintain a valuable piece of property and forego
     opportunities to sell the property for a greater sum. ARC has requested
  the Court to deny Legend's claim, declare that Legend has no further
       rights to the property, order Legend to forfeit the $100,000 deposit, and
award ARC $800,000 plus interest and costs as damages.            

Laguna Seca Ranch                                                 

    On December 14, 1998, a Legend subsidiary, BMIF Monterey County Corp.,
       filed a complaint against New Cities Development Group, Bates Properties,
    Inc., New Cities Development Company, Deregt Development, Inc., Rancho
    Monterey, L.L.C. (collectively New Cities), Old Republic Title Company
and                                                               

F-21

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)

Notes to Consolidated Financial Statements

   David Bohen (collectively Old Republic) in the United States District
Court, Northern District of California, San Jose Division.        

      During 1997, Legend sold the Laguna Seca Ranch to New Cities with Legend
 retaining a house with certain surrounding property known as Lot 40
   together with certain access easements to the nearest public right of
  way. New Cities agreed, as part of the sale, to establish a separate
  legal parcel for Lot 40 subsequent to the sale. As part of the sale,
    Legend agreed to cooperate and share equally in certain costs with New
Cities in negotiating an agreement concerning water service to the
   property with California-American Water Company (Cal-Am). Pursuant to
     this, Legend agreed to post $200,000 in an interest bearing escrow held
by Old Republic to pay any necessary amounts due from Legend in   
 consumating an agreement with Cal-Am. An agreement was reached with
    Cal-Am on March 20, 1998 to provide the water needs, and Legend agreed
       with New Cities to contribute $60,000 out of the escrow to defray certain
costs. On August 28, 1998 Cal-Am withdrew from its commitment.    
      Subsequently, Old Republic released the $200,000 escrow with interest to
New Cities.                                                       

      Legend is claiming that New Cities breached certain implied covenants in
      refusing to negotiate and consummate the agreement with Cal-Am, that New
  Cities failed to establish Lot 40 as a separate parcel, and that Old
       Republic wrongly released the funds in escrow to New Cities. Legend asked
     to recover $140,000 plus interest on the escrow, that New Cities convey
    Lot 40, that New Cities pay approximately $75,000 of costs incurred by
      Legend for negotiating the agreement with Cal-Am, and other damages. New
 Cities has not responded to the complaint, whereas Old Republic has
    denied any wrong doing in releasing the escrow, and has asserted other
separate defenses.                                                

General Legal Matters                                             

       The Company is subject to various lawsuits arising in the ordinary course
     of business. The Company is of the opinion that the outcome of any such
 lawsuits will not have a material adverse effect on its operations.

(14)   OPERATING SEGMENTS                                         

 Legend's reportable operating segments are distinct operations that
service differing markets. The real estate segment consists of the
  development, construction and sales activities for all of the Legend
  properties. The club operations consist of the clubhouse and related
       activities for Grand Harbor and Oak Harbor. Patient services includes the
       Royal Palm Convalescent Center which offers skilled nursing care, and the
Somerset House Assisted Living Facility.                          

       The accounting policies for the reportable segments are the same as those
   described in Note 1. Internal interest is charged at rates similar to
      those charged on the payables to related parties. Summarized information
     concerning the reportable segments is presented in the following table.

F-22

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LEGEND PROPERTIES, INC. AND SUBSIDIARIES
(A SUBSIDIARY OF RGI HOLDINGS, INC.)

Notes to Consolidated Financial Statements

                                                        [Enlarge/Download Table]

                                                                                    Other,                   
                                    Real            Club          Patient          Corporate                 
                                   Estate         Operations      Services    and Eliminations (1)    Total  
                                   ------         ----------      --------    --------------------    -----  
($000 omitted)                                                                                               

1998                                                                                                         
                                                                                                             
Revenues                       $     65,219          5,953          2,601           1,960            75,733  
Operating costs and expenses        (61,202)        (9,485)        (3,455)        ( 3,621)          (77,763) 
Other income/expenses                (8,790)        (1,151)          (301)            135           (10,107) 
                              -------------------------------------------------------------------------------
Net income (loss) before                                                                                     
    minority interest          $     (4,773)        (4,683)        (1,155)         (1,526)          (12,137) 
                              ===============================================================================

Total assets                        113,101         13,684         15,523           5,250           147,558  
Capital expenditures           $        338            160           (135)            429               792  
                              ===============================================================================

1997                                                                                                         
Revenues                       $     43,596          5,345          2,718           3,969            55,628  
Operating costs and expenses        (44,916)        (8,499)        (2,736)         (4,096)          (60,247) 
Other income / expenses             (10,452)          (711)          (127)          1,150           (10,140) 
                              -------------------------------------------------------------------------------
Net income (loss) before                                                                                     
   minority interest           $    (11,772)        (3,865)          (145)          1,023           (14,759) 
                              ===============================================================================

Total assets                        120,192         14,487         15,622          12,570           162,871  
Capital expenditures           $      1,042            958          3,840             457             6,297  
                              ===============================================================================

1996                                                                                                         
Revenues                       $     25,446          4,257          2,618           4,302            36,623  
Operating costs and expenses        (25,900)        (6,035)        (2,491)           (244)          (34,670) 
Other income / expenses              (4,705)           (49)          (320)            710            (4,364) 
                              -------------------------------------------------------------------------------
Net income (loss) before                                                                                     
    minority interest          $     (5,159)        (1,827)          (193)          4,768            (2,411) 
                              ===============================================================================

Total assets                        153,026         13,671         14,366           3,047           184,110  
Capital expenditures           $        988         13,013          1,219               -            15,220  
                              ===============================================================================

     (1)    Other includes other segments which were not reportable in 1998.
           These other segments were not reported in earlier periods since
         they were disposed of prior to 1998 and it was impractical to
report separately.                                  

F-23

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K’ Filing		Date		First		Last			Other Filings
		7/1/09		46		47
		4/1/03		28		49
		12/31/01		50
		7/31/01		25
		12/31/99		7		49			10-K,  NT 10-K
		9/6/99		47
		6/1/99		28		48
		4/20/99		45
Filed on:		4/15/99		31
		3/31/99		27					10-Q,  NT 10-K
		3/19/99		1		49
		2/5/99		33
For Period End:		12/31/98		1		52			NT 10-K
		12/14/98		8		52
		8/28/98		9		53
		6/23/98		8		52
		3/31/98		27					10-K,  10-Q
		3/20/98		9		53
		3/6/98		4		52
		12/31/97		11		51			10-K,  ARS
		9/30/97		30					10-Q
		9/17/97		30
		7/2/97		39
		3/1/97		18
		1/1/97		43
		12/31/96		3		51			10-K,  10-K/A,  8-K,  8-K/A,  NT 10-K
		7/1/96		30
		6/30/96		19		30			10-Q
		5/21/96		30
		5/20/96		30					10-Q,  8-K
		4/12/96		42
		1/2/96		39		43
		1/1/96		11		43
		12/31/95		11		51			10-K405,  8-K,  NT 10-K
		7/7/95		30
		2/8/95		30
		12/31/94		11		30			PRE 14A
		7/24/94		30
		1/12/94		30
		7/1/93		30
		6/25/93		25		51
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