AMENDMENT NO. 2 TO FORM S-1

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434 under the Securities Act, check the following box. o


(1)	Estimated solely for the purpose of determining the amount of the registration fee in accordance with Rule 457 of the Securities Act of 1933. Pursuant to Rule 457(o), certain information has been omitted from the table.

(2)	Includes shares subject to underwriters’ over-allotment option.


(3)	$36,000 was paid on September 6, 2001 in connection with the initial filing of the registration statement.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

This is our initial public offering of shares of our common stock. No public market currently exists for our common stock. The initial public offering price of the common stock is expected to be between $17.00 and $19.00 per share.

We have applied to list our common stock on the New York Stock Exchange under the symbol “WCI”.

Before buying any shares, you should read the discussion of material risks of investing in our common stock in “Risk factors” beginning on page 7.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters may also purchase up to 1,035,000 shares of common stock from us at the public offering price, less underwriting discounts and commissions, within 30 days from the date of this prospectus. The underwriters may exercise this option only to cover over-allotments, if any.

The underwriters are offering the common stock as set forth under “Underwriting.” Delivery of the shares of common stock will be made on or about , 2002.

You should only rely on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of common stock.

Through and including , 2002 (the 25th day after commencement of this offering), federal securities law may require all dealers selling shares of our common stock, whether or not participating in this offering, to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before buying shares in this offering. You should read the entire prospectus carefully. Unless the context otherwise requires, all references to “WCI,” “WCI Communities,” the “Company,” “we,” “us” or “our” include WCI Communities, Inc. and its subsidiaries and predecessors as a combined entity. All references to “Watermark” or “Watermark Communities” mean Watermark Communities Inc., together with each of five related entities that were acquired by Watermark Communities in November 1998. In August 2001, Watermark was merged into WCI, with WCI as the surviving corporation.

Our master-planned communities are in Florida, a highly sought-after retirement and leisure-oriented home destination, and one of the nation’s fastest growing economies. We typically begin a master-planned community by purchasing undeveloped or partially developed real estate. We design and develop community infrastructure and amenity improvements and build a full range of homes for sale to primary, second and retirement home buyers.

Our revenues, earnings before interest and taxes (EBIT), net income and EBIT margin were $1,110.3 million, $224.9 million, $102.2 million and 20.3%, respectively, for the year ended December 31, 2001 as compared to $882.2 million, $177.8 million, $81.9 million and 20.2%, respectively, for the year ended December 31, 2000. Over the five year period ended December 31, 2001, our revenues and EBIT increased at compounded annual growth rates of 38.3% and 40.3%, respectively.

As of December 31, 2001, we had homebuilding contract backlog of $738.2 million, a 40.3% increase from $526.1 million as of December 31, 2000.

Our business lines include homebuilding, amenities operations, real estate services and parcel and lot sales, each of which contributes to our profitability.


†	Homebuilding. We believe the breadth of our homebuilding activities and the scope of our target market distinguishes us from our competitors. Our proprietary marketing system reaches prospective purchasers locally, regionally, nationally and internationally.



	†	Single- and multi-family homes: We design, sell and build single- and multi-family homes serving primary, second and retirement home buyers. These homes range from approximately 1,100 square feet to 8,000 square feet and are priced from $100,000 to $3.9 million, with an average sales price for the year ended December 31, 2001 of $328,000. We build most of these homes within our master-planned communities, where we create attractive amenities through affiliations with hotel operators and golf course designers such as The Ritz-Carlton, Raymond Floyd and Greg Norman. We believe that this approach increases the value of our homes and communities and helps us attract affluent purchasers.


	†	Mid-rise and high-rise tower residences: Unlike our traditional homebuilding competitors, we also design, sell and build luxury towers. Residences in these towers, which primarily target affluent, leisure-oriented home purchasers, range from approximately 900 square feet to 13,500 square feet and are priced from $100,000 to over $10 million, with an average sales


		price for the year ended December 31, 2001 of $1,139,000. Our sales contracts for these towers require substantial non-refundable cash deposits, generally ranging from 20% to 30% of the purchase price, and we typically do not start construction of the towers until there are sufficient pre-sales to cover the majority of the costs to construct the towers.


†	Amenities Operations. Our amenities, including golf, marina and recreational facilities, serve as the recreational and social hubs of each of our communities and enhance the marketability and sales value of the residences that surround each amenity. We design and construct the amenities in our communities. We profit from the sale of country club memberships and marina slips and by retaining ownership of some income producing properties.

†	Real Estate Services. We provide real estate services, such as real estate brokerage, title insurance, mortgage banking and property management to enhance our position as an integrated provider of residential products and services. We are the exclusive real estate brokerage franchisee of Prudential Real Estate Affiliates, Inc. in six regions in Florida.

†	Parcel and Lot Sales. We strategically sell parcels and lots within our communities to developers for the construction of commercial, industrial and rental properties that we do not ordinarily develop. We also sell selected lots directly to buyers for the design and construction of large custom homes.

Among the fifteen largest public homebuilding companies as measured by market capitalization, we currently generate the highest margins, with a 20.3% EBIT margin for the year ended December 31, 2001, as compared with an industry average EBIT margin of 12.1% for the last four fiscal quarters reported by these companies. We seek to maintain our high margins by focusing on the following key elements of our business strategy:


†	Continue to implement a vertically integrated business model. By serving as the master developer of our communities, and by retaining control of operations like amenities and real estate services, we believe we can ensure a high level of quality and generate greater returns than our competitors. We acquire and develop the land in our communities, construct the residences, design, build and operate the amenities in many of our communities and otherwise control all aspects of the planning, design, development, construction and operation of our communities.

†	Capitalize on favorable demographic trends and the overall strength of the Florida economy. We expect to benefit from favorable demographic and economic trends, such as the aging “baby boom” generation and the growing generational wealth transfer, resulting in a rapid expansion of our high income target customer base.

†	Continue to opportunistically acquire and profitably develop an attractive Florida land inventory. We believe that our expertise in development and our in-depth market knowledge enables us to successfully identify attractive land acquisition opportunities, efficiently manage the land’s development, and maximize the land’s value. As of December 31, 2001, we controlled over 15,500 acres of land in highly sought-after Florida coastal markets.


†	Expand strategic partnerships and further develop product branding. We will continue to selectively enter into business relationships with highly regarded partners, as we have done in the past with The Ritz-Carlton, Hyatt, Raymond Floyd and Greg Norman. We believe that partnering with premium brands such as these adds incremental value to our affiliated residences and amenities. In addition, we seek to grow the name brand recognition of WCI Communities products and services.


†	Export our successful business model to other markets. We expect to selectively take advantage of attractive opportunities to grow outside of Florida. We believe that we can benefit from our expertise in developing master-planned resort oriented communities and luxury residential towers by expanding to resort and urban locations.

We believe long-term demographic trends will drive and support our continued growth. These trends include:


†	the aging of the U.S. “baby boom” generation is expected to result in a significant increase in the number of U.S. people who are 45 to 65 years old, which is our most important target market;

†	the total number of affluent households is expected to rise at a compound annual growth rate of approximately 12% from now to 2005, representing a significant expansion in the number of our core target customers; and

†	Florida’s population, employment and income growth are expected to remain strong and exceed national averages through 2010.

Our principal executive office is located at 24301 Walden Center Drive, Bonita Springs, Florida 34134. Our telephone number is (941) 947-2600. WCI was incorporated in Delaware on October 26, 1987.

The number of shares of common stock to be outstanding after this offering is based on the number of shares of common stock outstanding as of the date of this prospectus and does not include:


†	3,286,886 shares issuable upon the exercise of outstanding options as of February 12, 2002, at a weighted average exercise price of $9.12 per share;

†	1,256,398 additional shares authorized and reserved for issuance upon the exercise of options that may be issued in the future pursuant to stock option plans, see “Management”; and

†	1,035,000 shares that may be purchased by the underwriters to cover over-allotments, if any.

Unless otherwise stated in this prospectus, this prospectus assumes a 1.43408 for 1 stock split based upon the mid-point of the range set forth on the cover of this prospectus.

The following summary of our consolidated financial data should be read in conjunction with, and is qualified in its entirety by reference to, “Selected historical consolidated financial data,” “Management’s discussion and analysis of financial condition and results of operations” and our audited historical financial statements, including introductory paragraphs and related notes to those financial statements, appearing elsewhere in this prospectus.

You should carefully consider each of the risks described below and all of the other information in this prospectus before deciding to invest in our common stock. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In such an event, the trading price of our common stock could decline and you may lose all or part of your investment.

If we are not able to raise sufficient capital to enhance and maintain the operations of our properties and to expand and develop our real estate holdings, our results of operations and revenues could decline.

We operate in a capital intensive industry and require significant capital expenditures to maintain our competitive position. Failure to secure additional financing, if and when needed, may limit our ability to grow our business which could reduce our results of operations and revenues. We expect to make significant capital expenditures in the future to enhance and maintain the operations of our properties and to expand and develop our real estate holdings. In the event that our plans or assumptions change or prove to be inaccurate or if cash flow proves to be insufficient due to unanticipated expenses or otherwise, we may seek to minimize cash expenditures and/or obtain additional financing in order to support our plan of operations. Additional funding, whether obtained through public or private debt or equity financing, or from strategic alliances, may not be available when needed or may not be available on terms acceptable to us, if at all.

If we are not able to develop and market our communities successfully, our earnings could be diminished.

Before a community generates any revenues, material expenditures are required to acquire land, to obtain development approvals and to construct significant portions of project infrastructure, amenities, model homes and sales facilities. It generally takes several years for a community development to achieve cumulative positive cash flow. Our inability to develop and market our communities successfully and to generate positive cash flows from these operations in a timely manner would have a material adverse effect on our ability to service our debt and to meet our working capital requirements.

Problems in the construction of our communities could result in substantial increases in costs and could disrupt our business which would reduce our profitability.

We must contend with the risks associated with construction activities, including the inability to obtain insurance or obtaining insurance at significantly increased rates, cost overruns, shortages of lumber or other materials, shortages of labor, labor disputes, unforeseen environmental or engineering problems, work stoppages and natural disasters, any of which could delay construction and result in a substantial increase in costs which would reduce our profitability. Where we act as the general contractor, we are responsible for the performance of the entire contract, including work assigned to unaffiliated subcontractors. Claims may be asserted against us for construction defects, personal injury or property damage caused by the subcontractors, and these claims may give rise to liability. Where we hire general contractors, if there are unforeseen events like the bankruptcy of, or an uninsured or under-insured loss claimed against, our general contractors, we may become responsible for the losses or other obligations of the general contractors, which may materially and adversely affect our results of operations. Should losses in excess of insured limits occur, the losses could adversely affect our results of operations.

Because many of our customers finance their home purchases, increased interest rates could lead to fewer home sales which would reduce our revenues.

Many purchasers of our homes obtain mortgage loans to finance a substantial portion of the purchase price of their homes. In general, housing demand is adversely affected by increases in interest rates, housing costs and unemployment and by decreases in the availability of mortgage financing. In addition, there have been discussions of possible changes in the federal income tax laws which would remove or limit the deduction for home mortgage interest. If effective mortgage interest rates increase and the ability or willingness of prospective buyers to finance home purchases is adversely affected, our operating results and capital resources may also be negatively affected which may impair our ability to meet our working capital requirements.

Because our business depends on the acquisition of new land, the unavailability of land could reduce our revenues or negatively affect our results of operations.

Our operations and revenues are highly dependent on our ability to expand our portfolio of land parcels. We may compete for available land with entities that possess significantly greater financial, marketing and other resources. Competition generally may reduce the amount of land available as well as increase the bargaining power of property owners seeking to sell. An inability to effectively carry out any of our sales activities and development resulting from the unavailability of land may reduce our revenues or negatively affect our results of operations.

A deterioration of regional or national economic conditions could reduce our real estate sales and revenues.

Our real estate sales and revenues could decline due to a deterioration of regional or national economies. Our sales and revenues would be disproportionately affected by worsening economic conditions in the Midwestern and Northeastern United States because we generate a disproportionate amount of our sales from customers in those regions. In addition, a significant percentage of our residential units are second home purchases which are particularly sensitive to the state of the economy.

Because of our geographic concentration in Florida, an economic downturn in Florida could reduce our revenues or our ability to grow our business.

We currently develop and sell our properties only in Florida. Consequently, any economic downturn in Florida could reduce our revenues or our ability to grow our business. In addition, the appeal of becoming an owner of one of our residential units may decrease if potential purchasers do not continue to view the locations of our communities as attractive primary, second home or retirement destinations.

Increased insurance risk, perceived risk of travel and adverse changes in economic conditions as a result of recent events could negatively affect our business.

Due in large part to the terrorist activities of September 11, 2001 and other recent events, we believe that insurance companies are re-examining many aspects of their business, and may take actions including increasing premiums, requiring higher self-insured retentions and deductibles, requiring additional collateral on surety bonds, reducing limits, restricting coverages, imposing exclusions, such as sabotage and terrorism, and refusing to underwrite certain risks and classes of business. Any increased premiums, mandated exclusions, or change in limits, coverages, terms and conditions may adversely affect our ability to obtain appropriate insurance coverages at reasonable costs, which could have a material adverse effect on our business. Furthermore, as many of our buyers are second-home purchasers, the perceived risk of travel due to terrorist acts could deter these buyers from purchasing our homes as vacation residences which could negatively affect our results of operations. In addition, the September 11, 2001 terrorist acts and subsequent military response have resulted in generalized economic uncertainty which could hurt our operating results.

Poor relations with the residents of our communities could negatively impact sales, which could cause our revenues or results of operations to decline.

As a community developer, we may be expected by community residents from time to time to resolve any real or perceived issues or disputes that may arise in connection with the operation or development of our communities. Any efforts made by us in resolving these issues or disputes could be deemed unsatisfactory by the affected residents and any subsequent action by these residents could negatively impact sales, which could cause our revenues or results of operations to decline. In addition, we could be required to make material expenditures related to the settlement of these issues or disputes or modify our community development plans.

We may not be successful in our efforts to identify, complete or integrate acquisitions which could adversely affect our results of operations and prospects.

A principal component of our strategy is to continue to grow profitably in a controlled manner in both existing and new markets by acquiring and developing land or by acquiring other property developers or homebuilders. However, we may not be successful in implementing our acquisition strategy and growth may not continue at historical levels or at all. The failure to identify, acquire and integrate other businesses or real estate development opportunities effectively could adversely affect our business, assets, financial condition, results of operations and prospects.

We experience variability in our results of operations in each quarter and accordingly, quarter-to-quarter comparisons should not be relied upon as an indicator of our future performance.

We have historically experienced, and in the future expect to continue to experience, variability in our revenue, profit and cash flow. Our historical financial performance is not necessarily a meaningful indicator of future results and we expect financial results to vary from project to project and from quarter to quarter. In particular, our revenue recognition policy for tower residences can cause significant fluctuation in our total revenue from quarter to quarter. We believe that quarter-to-quarter comparisons of our results should not be relied upon as an indicator of future performance. As a result of such fluctuations, our stock price may experience significant volatility. See “Management’s discussion and analysis of financial condition and results of operations—Liquidity and Capital Resources” and “—Seasonality”.

We commence construction of a portion of our single- and multi-family homes prior to obtaining non-cancellable sales contracts for those residences. As of December 31, 2001, we had 492 unsold homes in inventory, 94 of which had been completed. Two homes have been unsold for more than twelve months following their completion. Depending on the level of demand for these residences, some or all of these residences may not be sold at the prices or in the quantities originally expected. As a result, our operating income could be adversely affected.

If we do not receive cash corresponding to previously recognized revenues, our future cash flows could be lower than expected.

In accordance with generally accepted accounting principles, we recognize revenues and profits from sales of tower residences during the course of construction. Revenue is recorded when construction is beyond a preliminary stage, the buyer is committed to the extent of being unable to require a refund of a significant deposit except for nondelivery of the residence, a substantial percentage of residences are under firm contract, collection of the sales price is assured and costs can be reasonably estimated. Due to various contingencies, like delayed construction and buyer defaults or cost overruns, we may receive less cash than the amount of revenue already recognized or the cash may be received at a later date than we expected which could affect our profitability and ability to pay our debts. As of December 31, 2001, we had 739 tower residences under construction, of which 482 tower residences met the criteria for partial revenue recognition.


†	acquiring the necessary construction materials and labor in sufficient amounts and on acceptable terms;

†	adapting our construction methods to different geographies and climates; and

†	reaching acceptable sales levels at such communities.

In addition, we may have difficulty attracting potential customers from areas and to a market in which we have not had significant experience.

Our revenues and profitability may be adversely affected by natural disasters.

The Florida climate presents risks of natural disasters. To the extent that hurricanes, severe storms, floods or other natural disasters or similar events occur, our business may be adversely affected. To the extent our insurance is not adequate to cover business interruption or losses resulting from natural disasters, our revenues and profitability may be adversely affected.

Laws and regulations related to property development may subject us to additional costs and delays which could reduce our revenues, profits or prospects.

We are subject to a variety of statutes, ordinances, rules and regulations governing certain developmental matters, and building and site design which may impose additional costs and delays on us which could reduce our revenues, profits or prospects. In particular, we may be required to obtain the approval of numerous governmental authorities regulating matters like permitted land uses, levels of density and the installation of utility services like gas, electric, water and waste disposal. In addition, fees, some of which may be substantial, may be imposed on us to defray the cost of providing certain governmental services and improvements. We also may be subject to additional costs or delays or may be precluded from building a project entirely because of “no growth” or “slow growth” initiatives, building permit allocation ordinances, building moratoriums, restrictions on the availability of utility services or similar governmental regulations that could be imposed in the future. These ordinances, moratoriums and restrictions, if imposed, could cause our costs to increase and delay our planned or existing projects, which would in turn reduce our revenues, profits or ability to grow our business.

In addition, some of our land and some of the land that we may acquire has not yet received planning approvals or entitlements necessary for planned development or future development. Failure to obtain entitlement of this land on a timely basis may adversely affect our future results and prospects. This land may not become entitled on a timely basis.

Compliance with applicable environmental laws may substantially increase our costs of doing business which could reduce our profits.

We are subject to various laws and regulations relating to the operation of our properties, which are administered by numerous federal, state and local governmental agencies. See “Business — Regulatory and Environmental Matters.” Our growth and development opportunities in Florida may be limited and more costly as a result of legislative, regulatory or municipal requirements. The inability to grow our business or pay these costs could reduce our profits. In addition, our operating costs may also be affected by our compliance with, or our being subject to, environmental laws, ordinances and regulations relating to hazardous or toxic substances of, under, or in such property. These costs could be significant and could result in decreased profits or the inability to develop our land as originally intended. See “Business — Regulatory and Environmental Matters.”

Our substantial indebtedness and high leverage could adversely affect our financial health.

We are, and may continue to be, significantly leveraged. As of December 31, 2001, our total debt was $682.6 million. In addition, in connection with the development of certain of our communities we pay a portion of the revenues, fees, and assessments levied by community development or improvement districts on the property benefited by the improvements within our communities. In addition, we guarantee district shortfalls under some of our bond debt service agreements when the revenues, fees, and assessments which are designed to cover principal and interest and other operating costs of the bonds are not paid. See “Business — Community Development Districts.”

Our high degree of leverage could have important consequences to you, including the following:


†	our ability to obtain additional financing for working capital, capital expenditures, acquisitions or general corporate or other purposes may be impaired in the future;

†	a substantial portion of our cash flow from operations must be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available to us for other purposes;

†	certain of our borrowings are and will continue to be at variable rates of interest (including borrowings under our senior secured credit facility and project loans), which will expose us to the risk of increased interest rates;

†	we may be substantially more leveraged than certain of our competitors, which may place us at a competitive disadvantage; and

†	our substantial leverage may limit our flexibility to adjust to changing economic or market conditions, reduce our ability to withstand competitive pressures and make us more vulnerable to a downturn in general economic conditions.

In addition, our various debt instruments contain financial and other restrictive covenants that will limit our ability to, among other things, borrow additional funds.

Five stockholders and their affiliates will control approximately 65.8% of our common stock after this offering and, as a result, will be able to exercise control over all matters requiring stockholder approval.

On completion of this offering, five stockholders and their affiliates will beneficially own, in the aggregate, approximately 65.8% of our outstanding common stock. As a result, these stockholders will be able to exercise control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, which may have the effect of delaying or preventing a third party from acquiring control over us. These transactions may include those that other stockholders deem to be in their best interests and in which those other stockholders might otherwise receive a premium for their shares over their current prices. For additional information regarding our stock ownership see “Principal stockholders.”

Our stock price may be particularly volatile because of the industry we are in.

The stock market in general has recently experienced extreme price and volume fluctuations. In addition, the market prices of securities of home building companies have been volatile, and have experienced fluctuations that have often been unrelated to or disproportionate to the operating performance of such companies. These broad market fluctuations could adversely affect the price of our common stock.

Provisions in our charter documents and Delaware law may make it difficult for a third party to acquire our company and could depress the price of our common stock.

Upon the closing of the offering, Delaware corporate law and our restated certificate of incorporation and bylaws will contain provisions that could delay, defer or prevent a change in control of WCI or our management. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors and take other corporate actions. As a result, these provisions could limit the price that investors are willing to pay in the future for shares of our common stock. These provisions include:


†	creating a classified board of directors;

†	authorizing the board of directors to issue preferred stock;

†	prohibiting cumulative voting in the election of directors;

†	limiting the persons who may call special meetings of stockholders;

†	prohibiting stockholder action by written consent; and

†	establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.

We are also subject to certain provisions of Delaware law which could delay, deter or prevent us from entering into an acquisition, including Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in a business combination with an interested stockholder unless specific conditions are met. See “Description of capital stock — Preferred Stock and Series Common Stock” and “— Anti-Takeover Measures.”

You will experience immediate and substantial dilution by investing in our common stock.

The initial public offering price will be substantially higher than the net tangible book value of each outstanding share of common stock immediately after the offering. Purchasers of common stock in this offering will suffer immediate and substantial dilution. Any common stock you purchase in this offering will have a post-offering net tangible book value per share of $6.69 less than the initial public offering price, assuming an initial public offering price of $18.00 per share, which is the mid-point of the range shown on the cover page of this prospectus. If additional shares are sold by the underwriters following exercise of their over-allotment option, or if outstanding options to purchase shares of common stock are exercised, you will incur further dilution.

The market price of our common stock could be affected by the substantial number of shares that are eligible for future sale.

Sales of a substantial number of shares of our common stock into the public market after this offering, or the perception that these sales could occur, could cause our stock price to decline. After this offering, we will have 100,000,000 shares of authorized common stock, and 43,281,715 shares of common stock outstanding, or 44,316,715 shares outstanding if the underwriters fully exercise their over-allotment option. In addition, as of December 31, 2001, 2,456,553 shares of our common stock are issuable upon the exercise of outstanding stock options, of which 1,274,775 options are currently exerciseable under our stock option plans.

Our officers, directors, option holders and substantially all of our stockholders have agreed that, subject to limited exceptions, they will not sell their shares for a period of 180 days. Thus, upon the expiration of the 180-day lock-up period, 37,858,814 shares of our common stock held by those stockholders will be available for immediate resale, subject to the restrictions imposed by the securities laws.

Although it has advised us that it has no intent or understanding to do so, UBS Warburg LLC, in its sole discretion, may permit early release of the shares of our common stock subject to restrictions prior to the expiration of the 180-day lock up period. UBS Warburg LLC has advised us that, prior to granting an early release of our common stock, it would consider factors including need, market conditions, the performance of our common stock price, trading liquidity, prior trading habits of the selling stockholder and other relevant considerations. UBS Warburg LLC has advised us that it will not consider its own holdings as a factor in its decision to grant an early release from the provisions of such lock-up agreements.

We have entered into a registration rights agreement with some of our stockholders. Under circumstances described in that agreement, these stockholders can demand that we register the 28,462,056 shares of our common stock held by them for sale to the public market. In addition, we may be required to include those shares if we register additional shares for sale to the public market.

There is no existing market for our common stock so the share price for our common stock may fluctuate significantly.

Prior to the offering, there has been no public market for our common stock. We cannot assure you that an active trading market will develop upon completion of the offering or, if it does develop, that it will be sustained. The initial public offering price of our common stock was determined by negotiation among us and the representatives of the underwriters and may not be representative of the price that will prevail in the open market after the offering. See “Underwriting” for a discussion of the factors that were considered in determining the initial public offering price.

The market price of our common stock after this offering may be significantly affected by factors such as quarterly variations in our results of operations, changes in government regulations, the announcement of new contracts by us or our competitors, general market conditions specific to the homebuilding industry, changes in general economic conditions, volatility in the financial markets, differences between our actual financial and operating results and those expected by investors and analysts and changes in analysts’ recommendations or projections. These fluctuations may adversely affect the market price of our common stock.

We have broad discretion to use the offering proceeds and our investment of those proceeds may not yield a favorable return.

A portion of the net proceeds of this offering is not allocated for specific uses. Our management has broad discretion to spend the unallocated portion of the proceeds from this offering in ways with which you may not agree. The failure of our management to apply these funds effectively could result in unfavorable returns. This could harm our business and could cause the price of our common stock to decline.

This prospectus includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to our future prospects, developments and business strategies. The statements contained in this prospectus that are not statements of historical fact may include forward-looking statements that involve a number of risks and uncertainties. We have used the words “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “intend,” “hope” and similar expressions in this prospectus to identify forward-looking statements. These forward-looking statements are made based on our current expectations and beliefs concerning future events affecting us and are subject to risks, uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. The following factors are among those that could cause our actual results to differ materially from the forward-looking statements:


†	our ability to raise capital and grow our operations on a profitable basis;

†	our ability to compete in the Florida real estate market;

†	our ability to obtain necessary permits and approvals for the development of our land;

†	our ability to pay principal and interest on our substantial debt;

†	our ability to borrow in the future;

†	adverse legislation or regulation;

†	availability of labor or materials or significant increases in their costs;

†	increases in interest rates;

†	the level of consumer confidence;

†	the availability and cost of land in desirable areas and the ability to expand successfully into those areas;

†	natural disasters;

†	unanticipated litigation or legal proceedings;

†	conditions in the capital, credit and homebuilding markets;

†	our ability to sustain or increase historical revenues and profit margins;

†	risks associated with increased insurance costs or unavailability of adequate coverage, perceived risk of travel and changes in economic conditions due to recent events; and

†	continuation of current trends and general economic conditions.

All forward-looking statements attributable to us or any persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.

Our risks are more specifically described in “Risk factors.” If one or more of these risks or uncertainties materializes, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected.

We expect to receive net proceeds of approximately $114.3 million from the sale of the 6,900,000 shares of common stock, or approximately $131.6 million if the underwriters exercise their over-allotment option in full, based upon the initial public offering price of $18.00 per share and after deducting the estimated underwriting discounts and commissions and offering expenses payable by us.


•	to repay an outstanding construction loan of $20,488,000 that had an interest rate of 4.75% as of December 31, 2001 and matures in December 2002;

•	to repay an outstanding construction loan of $30,407,000 that had an interest rate of 5.00% as of December 31, 2001 and matures in March 2003;

•	to repay the expected outstanding balance of the revolving portion of our senior secured credit facility, if any; and

•	for general corporate purposes, including land acquisitions.

We have never paid dividends on our common stock and we do not currently anticipate paying dividends on our common stock.

The terms of our indebtedness impose limitations on our ability to pay dividends or make other distributions on our capital stock. We may enter into additional agreements related to our indebtedness from time to time which may contain similar limitations.

Future dividends on our common stock, if any, will be at the discretion of our board of directors and will depend on, among other things, our results of operations, cash requirements and surplus, financial condition, contractual restrictions and other factors that our board of directors may deem relevant.


†	on an actual basis, and

†	on an adjusted basis, giving effect to our sale of the common stock in this offering at an assumed public offering price of $18.00 per share, the mid-point of the range presented on the cover page of this prospectus, and the application of the net proceeds as described under “Use of proceeds.”

This information should be read together with our consolidated financial statements and related notes thereto included elsewhere in this prospectus.


†	3,286,886 shares issuable upon the exercise of outstanding options as of February 12, 2002, at a weighted average exercise price of $9.12 per share.

†	1,256,398 additional shares authorized and reserved for issuance upon the exercise of options that may be issued in the future pursuant to stock option plans, see “Management,” and

†	1,035,000 shares that may be purchased by the underwriters to cover over-allotments, if any.

Immediately prior to the consummation of this offering, we will file an amendment to our restated certificate of incorporation that increases our authorized shares of common stock to 100,000,000 and authorizes 100,000,000 shares of series common stock and 100,000,000 shares of preferred stock.

Dilution is the amount by which the offering price paid by the purchasers of the common stock offered hereby will exceed the net tangible book value per share of common stock after the offering. Net tangible book value per share is determined at any date by subtracting our total liabilities from the total book value of our tangible assets and dividing the difference by the number of shares of common stock deemed to be outstanding at that date.

Our net tangible book value as of December 31, 2001 was $390.5 million or $10.35 per share, giving pro forma effect to the issuance of shares in connection with the exercise of options exercisable within 60 days of the date hereof. After giving effect to the receipt of approximately $114.3 million of estimated net proceeds from the sale of 6,900,000 shares of common stock in the offering, our pro forma net tangible book value at December 31, 2001 would have been approximately $504.8 million or $11.31 per share. Pro forma net tangible book value per share represents the amount of total tangible assets less total liabilities, divided by the pro forma number of shares of common stock outstanding at December 31, 2001. This represents an immediate increase in pro forma net tangible book value of $.96 per share to existing stockholders and an immediate dilution of $6.69 per share to new investors purchasing shares of common stock in the offering. The following table illustrates the substantial and immediate per share dilution to new investors (assuming an offering price at the mid-point of the proposed range):

The following table summarizes, on a pro forma basis as of December 31, 2001, the differences between existing stockholders (assuming the exercise of options exercisable within 60 days of the date hereof) and the new investors with respect to the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid by existing stockholders and by new investors purchasing common stock in this offering, after adjustment for our sale of 6,900,000 shares of common stock at the initial public offering price of $18.00 per share, the mid-point of the anticipated range, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The above tables assume no exercise of 1,926,281 outstanding options that are not exercisable within 60 days of the date hereof. To the extent that any of these shares are issued, there will be further dilution to new investors. See “Description of capital stock.”

The original predecessor to WCI Communities was established in 1946 as Coral Ridge Properties, Inc., which undertook as its first project the development of the Galt Ocean Mile, a 2,500-acre oceanfront community located in Fort Lauderdale. Today, the area is comprised of approximately 8,000 homes and approximately 7,000 apartments and condominiums. In the early 1960s, Coral Ridge began acquiring large sections of land in rural Broward County, which by 1963 had become the city of Coral Springs, now Florida’s eleventh largest city with a population of approximately 116,000. In 1966, Coral Ridge was sold to the Westinghouse Electric Corporation. Under Westinghouse Electric’s ownership, our predecessor began its west coast Florida operations in the early 1970s with the purchase of approximately 2,500 acres in North Naples, known today as the community of Pelican Bay. Westinghouse continued its west coast expansion by acquiring additional large tracts of land for the development of its Gateway, Pelican Landing and Pelican Marsh communities. In 1989, marking its entry into homebuilding, our predecessor began building the first of its highly-amenitized luxury high-rise residences. In 1995, we began building homes in some of our communities.

In 1985, members of our senior management, Messrs. Hoffman and Ackerman, began building a real estate business which, in 1994, began operating as Florida Design Communities. Florida Design Communities was a fully integrated developer of leisure-oriented master-planned communities that built most of the homes in its communities. During its history, Florida Design Communities’ growth was characterized by the acquisition of underperforming assets which it developed into a number of successful master-planned communities. From 1987 to November 1998, Florida Design Communities constructed approximately 4,500 homes and, from 1985 to November 1998, developed five communities located throughout central and southern Florida. Florida Design Communities offered single- and multi-family homes marketed primarily to retirement and second home buyers. Florida Design Communities owned and operated several of the amenities at its communities and operated other companies that supported its core business, including residential brokerage entities, a mortgage company, a title insurance agency and a property management company.

In July 1995, certain stockholders of Florida Design Communities led a group of equity investors in acquiring Westinghouse Electric’s real estate business unit in a transaction valued at approximately $600.0 million. This business unit was merged with and into WCI Communities Limited Partnership and was restructured as a limited partnership. From July 1995 until the November 1998 merger of WCI Communities Limited Partnership and Florida Design Communities, Mr. Hoffman served as Chief Executive Officer of WCI Communities Limited Partnership and Mr. Ackerman served as Chairman of the board of directors and Executive Vice President of WCI Communities Limited Partnership, and both have continued to serve in such capacities for WCI Communities since the merger and reorganization. In April 1998, we purchased from CBS Corporation (the successor to Westinghouse Electric Corporation) its remaining investment in WCI Communities Limited Partnership.

In November 1998, Watermark Communities completed a reorganization of WCI Communities Limited Partnership pursuant to which each of WCI Communities Limited Partnership and Florida Design Communities became wholly-owned subsidiaries of Watermark Communities, a new holding company, and each of the limited partners of WCI Communities Limited Partnership and stockholders of Florida Design Communities became stockholders in Watermark Communities. In June 1999, WCI Communities Limited Partnership merged with and into Florida Design Communities, and simultaneously with the merger, Florida Design Communities, the surviving corporation in the merger, changed its name to WCI Communities, Inc. As a result of the merger, WCI Communities became the sole wholly-owned subsidiary of Watermark Communities.

On August 31, 2001, Watermark was merged into WCI, with WCI as the surviving corporation. The directors and officers of WCI, which were identical to the directors and officers of Watermark, remained the same following the merger.

The following tables sets forth our selected historical consolidated financial data for each of the five years in the period ended December 31, 2001. Balance sheet data as of December 31, 2001 and 2000 and statements of operations data for the years ended December 31, 2001, 2000 and 1999 have been derived from our audited consolidated financial statements which are included elsewhere in this prospectus. The following information should be read in conjunction with “Management’s discussion and analysis of financial condition and results of operations” and our audited historical consolidated financial statements, including the introductory paragraphs and related notes thereto, appearing elsewhere in this prospectus.

The following discussion of our financial condition and results of operations should be read in conjunction with our audited historical financial statements and the related notes and the other financial information appearing elsewhere in this prospectus.

We are engaged in the development of master-planned communities, the construction and sale of residences, lots and parcels, and the construction, operation and sale of amenities and real estate services. Our business operations include: homebuilding (single- and multi-family homes as well as luxury tower residences), amenities operations (the operation of golf, marina and resort amenity services and the sale of equity and non-equity memberships), real estate services (real estate brokerage, title insurance, mortgage banking, property management and other development services) and parcel and lot sales.

Until 1989, we focused on developing master-planned communities from large tracts of land. This developed land was sold to third party developers who marketed residential products to homebuyers. We entered the homebuilding business in 1989 and began selling and building our first luxury, high-rise residences. In November 1998, we enhanced our homebuilding operations by acquiring Florida Design Communities, a fully integrated developer of master-planned communities that had been building most of the homes in its communities since 1987. We further diversified our business operations by entering into the single- and multi-family homebuilding business. We now sell selected parcels to third party developers primarily for commercial development, rental apartments and retail and other uses which do not directly compete with our existing homebuilding products.

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an on-going basis. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

Percentage-of-Completion. Revenue for tower residences under construction is recognized on the percentage-of-completion method and recorded when (1) construction is beyond a preliminary stage, (2) the buyer is committed to the extent of being unable to require a refund except for nondelivery of the residence, (3) a substantial percentage of residences are under firm contracts, (4) collection of the sales price is assured and (5) costs can be reasonably estimated. Revenue recognized is calculated based upon the percentage of total costs incurred in relation to estimated total costs. We must apply the percentage-of-completion method since the duration of tower construction exceeds twelve months and reasonably dependable estimates of the revenues and costs can be made. If our estimates of tower

revenues and development costs are significantly different from our actual revenues and costs then our revenues and costs of sales may be over or understated.

Real estate inventories and cost of sales. Real estate inventories including land, common development costs and estimates for costs to complete are allocated to each parcel or lot based on the relative sales value of each parcel or lot as compared to the sales value of the total project, while site specific development costs are allocated directly to the benefited land. Estimates for costs to complete for sold homes are recorded at the time of closing. If our estimates of sales values or costs to complete are significantly different from actual results, our real estate inventories, revenues and costs of sales may be over or understated.

Community development district obligations. In connection with certain development activities, bond financing is utilized in many of our communities to construct on-site and off-site infrastructure improvements. Although we are not obligated directly to repay some of the bonds, we guarantee district shortfalls under certain bond debt service agreements. We annually estimate the amount of bond obligations that we may be required to fund in the future. If our estimates of the amount of bond obligations that we may be required to fund are significantly different from actual amounts funded our real estate inventories and costs of sales may be over or understated.

Impairment of long-lived assets and long-lived assets to be disposed of. Real estate inventories, including capitalized interest and real estate taxes, are carried at the lower of cost or fair value determined by evaluation of individual projects. Property and equipment are recorded at cost less accumulated depreciation and depreciated on the straight-line method over their estimated useful lives. Whenever events or circumstances indicate that the carrying value of our long-lived assets may not be recoverable, we compare the carrying amount of the asset to the undiscounted expected future cash flows. If this comparison indicates that the asset is impaired, the amount of the impairment is calculated using discounted expected future cash flows. If our estimate of the future cash flows is significantly different from actual cash flows, we may prematurely impair the value of the asset, we may underestimate the value of the calculated impairment or we may fail to record an impairment.

In June 2001, the Financial Accounting Standards Board (FASB) approved SFAS 141, Business Combinations and SFAS 142, Goodwill and Other Intangible Assets. SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Implementation of SFAS 141 did not have an effect on the financial statements of the Company. SFAS 142 provides guidance on accounting for intangible assets and eliminates the amortization of goodwill and certain identifiable intangible assets. Under the provisions of SFAS 142, intangible assets, including goodwill, that are not subject to amortization will be tested for impairment annually. SFAS 142 will be effective for our fiscal year 2002 and is immediately effective for goodwill and intangible assets acquired after June 30, 2001. Application of the provision prohibiting the amortization of goodwill is expected to result in an increase in income before income taxes of approximately $3.2 million in the year ended December 31, 2002. We will complete the required tests for impairment of goodwill during 2002. We do not currently believe our goodwill is impaired.

In October 2001, the FASB approved SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets which supercedes SFAS 121 and APB 30. SFAS 144 retains the requirements of SFAS 121 for recognition and measurement of an impairment loss on long-lived assets, and establishes a single accounting model for all long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. SFAS 144 will be effective for our fiscal year 2002. We expect the adoption of SFAS 144 will not have a significant adverse effect on our financial position or results of operations.

Throughout 2001, we continued to strengthen our balance sheet and improve the efficiency of our operations. Total revenues for the year ended December 31, 2001, increased 25.9% to $1,110.3 million, from $882.2 million for 2000, primarily due to an increase in homebuilding revenues. Total contribution margin for 2001 increased 25.2% to $344.6 million from $275.2 million for 2000, primarily due to an increase in homebuilding contribution margin. Income before income taxes and extraordinary items increased 28.3% to $172.4 million in 2001, from $134.4 million for 2000. Income tax expense increased 29.9% to $68.2 million in 2001, from $52.5 million for 2000. The effective income tax rate was 39.6% and 39.0% for 2001 and 2000, respectively. For the year ended 2001, we recognized a $2.0 million (net of tax) extraordinary item related to the write-off of unamortized debt issue costs associated with the early repayment of debt in conjunction with the offering of $250 million and $100 million in senior subordinated notes. Net income increased 24.8% to $102.2 million in 2001, from $81.9 million for 2000. Our 2001 operating results contributed to a 31.3% increase in shareholders’ equity to $419.0 million at December 31, 2001. The increase in shareholders’ equity contributed to a reduction in the debt-to-total capitalization ratio to 62.0% at December 31, 2001 compared to 63.4% at December 31, 2000.

The increase in single- and multi-family homebuilding revenues is primarily attributable to a 118 unit or 7.3% increase in the number of homes closed and a 20.3% increase in the average price of homes closed to $284,000 in 2001 from $236,000 in 2000. The increase in the number of homes closed was a direct result of the larger backlog at January 1, 2001 as compared to January 1, 2000 and increased home sales in newly introduced subdivisions in our Heron Bay community and in our newly introduced master-planned communities of Tarpon Bay and Sun City Center Fort Myers. The increase in the average selling price was primarily attributable to increasing prices in our existing communities that were possible due to strong market demand, an increase in the number of higher priced units sold and an increase in the dollar amount of options and lot premiums that our home buyers selected. During 2001, our homebuyers purchased options and lot premiums valued at approximately 14.8% of the base selling price of homes sold compared to 11.8% in 2000.

The value of net new contracts for single- and multi-family homes increased 10.1% to $522.6 million for 2001 compared to $474.7 million for 2000. The increase in the value of net new contracts was primarily the result of a 21.0% increase in the average price of homes contracted to $328,000 for 2001 from $271,000 in 2000. The increase in the average price was the result of both price increases and sales mix factors such as location, size and product demand. The decline in the number of net new contracts to 1,595 in 2001 from 1,754 in 2000 was primarily the result of the final close out of our Jensen Beach, St. James and Parkland Isle communities and reduced sales traffic and contract activity due to travel disruption after September 11. Backlog at December 31, 2001 was $265.4 million or 12.7% higher than the $235.4 million at December 31, 2000. The increase in backlog was primarily the result of a 37.7% increase in the average sales price of homes under contract to $431,000 in 2001 compared to $313,000 in 2000.

Mid-rise and high-rise homebuilding revenues increased 77.1% to $413.5 million in 2001 compared to $233.5 million in 2000.

The increase in mid-rise and high-rise homebuilding revenues was attributable primarily to an increase in the number of towers that qualified for revenue recognition and an increase in the value of sold units in those towers. We delivered tower units or met the requirements for percentage-of-completion revenue recognition in 17 towers in 2001 compared to 14 towers in 2000.

The value of net new contracts for mid-rise and high-rise homebuilding increased 48.2% to $595.6 million for 2001 compared to $402.0 million for 2000. This increase in net new contracts was primarily the result of an increase in the number of towers that converted from reservation to contract during the period. Ten towers converted from reservation to contract in 2001 compared to 6 towers in 2000. Backlog at December 31, 2001 was $472.8 million or 62.6% higher than the $290.7 million at December 31, 2000. The increase in backlog was due primarily to the increased number of net new contracts and the 16.7% increase in the average price of total tower units under contract to $1.4 million in 2001 compared to $1.2 million in 2000. The increase in the average price of units under contract was primarily attributable to our focus on more expensive, luxury residential towers.

Parcel and lot. Total parcel and lot revenues decreased 63.4% to $47.9 million for 2001 compared to $130.9 million for 2000. Sales of lots decreased 62.9% to $18.9 million for 2001 compared to $50.9 million for 2000. The decrease in the lot sales was primarily due to the sell out of lots in subdivisions located in Bay Colony, Pelican Landing and Heron Bay communities which was offset by the introduction of a new lot sales program in Tiburon.

Sales of residential and commercial parcels decreased 63.8% to $29.0 million for 2001 compared to $80.0 million in 2000. Sales of residential parcels continued to decrease due to management’s decision to hold most developed and undeveloped land inventory for homebuilding purposes and the sell-out of the few residential parcels that were not designated for homebuilding, while commercial parcel sales decreased primarily as a result of fewer available parcels for sale.

Amenity membership and operations. Total amenity membership and operating revenues increased 6.1% to $75.3 million for 2001 compared to $71.0 million for 2000. Equity membership and marina slip sales increased 28.7% to $33.6 million for 2001 compared to $26.1 million for 2000 while membership dues and amenity services revenue decreased 6.9% to $41.8 million for 2001 compared to $44.9 million for 2000. The increase in membership sales revenue was primarily attributed to the introduction of a marina slip sales program in the Gulf Harbour community offset by a decrease in the Bay Colony Golf Club and Pelican Marsh Club which was the result of sell-out of memberships. The decrease in operating revenues was attributable primarily to turnover of the Bay Colony Golf Club to its members and the sale of the Burnt Store Marina and restaurant operations in December 2000, respectively.

Real estate services and other. Total real estate services and other revenues increased 23.5% to $81.0 million for 2001 compared to $65.6 million in 2000. Other revenues included $6.9 million and $5.8 million in gains recognized from the sale of property and equipment and equity in earnings from investments in joint ventures recorded in 2001 and 2000, respectively. The increase in real estate services and other revenues was primarily attributed to a $13.0 million increase in real estate brokerage revenues and a $2.3 million increase in the mortgage banking operations offset by a $1.0 million decrease in title and other revenues. The increase in real estate brokerage revenues was primarily attributed to establishing two new offices and increasing the overall sales force. The increase in mortgage banking revenues was primarily the result of increased home purchases and mortgage refinancings during 2001.

Homebuilding. Homebuilding cost of sales increased 40.2% to $624.6 million for 2001 compared to $445.4 million for 2000. Single- and multi-family homebuilding cost of sales increased 24.5% to $389.2 million for 2001 compared to $312.5 million for 2000. Mid- and high-rise cost of sales increased 77.1% to $235.3 million for 2001 compared to $132.9 million for 2000. Cost of sales as a percentage of revenue was 68.9% for 2001 compared to 72.5% for 2000. The 3.6% decrease in homebuilding cost of sales percentage was primarily due to the increase in the average sales price of single- and multi-family homes which resulted in higher contribution margins, and our ongoing efforts to reduce construction and land development costs and improve operating efficiencies.

Overall, homebuilding contribution margin as a percentage of revenue increased to 31.1% for 2001 compared to 27.5% for 2000. Contribution margin percentage from single- and multi-family homebuilding increased to 21.0% in 2001 from 18.0% in 2000 due primarily to a higher average sales price and reduced costs of construction and land development as a percentage of related revenue. Contribution margin percentage from mid-rise and high-rise homebuilding remained unchanged at 43.1% for 2001 and 2000.

Parcel and lot. Total costs of sales decreased to $30.2 million for 2001 compared to $59.4 million for 2000 due primarily to a decrease in total revenue for 2001. The cost of parcel and lot sales increased to 63.0% of related revenue for 2001 compared to 45.4% for 2000. The increase in cost of sales percentage and the associated decrease in contribution margin percentage was due primarily to the change in mix of parcel and lot sales closed in the respective periods.

Amenity membership and operations. The amenity cost of membership and marina slip sales decreased to $50.5 million for 2001 compared to $55.8 million for 2000 due primarily to the turnover of Bay Colony Golf Club to its members and the sale of the Burnt Store marina and restaurant operations in December 2000, respectively. The associated contribution margin increased to 32.9% for 2001 compared to 21.4% for 2000, primarily due to the introduction of a high margin marina slip sales program in the Gulf Harbour community offset by the sell-out of high margin equity memberships in the Bay Colony Golf Club.

Real estate services and other. The real estate services and other costs increased 30.2% to $60.4 million for 2001 compared to $46.4 million for 2000 due primarily to the costs associated with the increased volume of real estate brokerage transactions and mortgage banking operations. The associated contribution margin decreased to 25.4% for 2001 compared to 29.3% for 2000, primarily due to an increase in the proportion of lower margin real estate brokerage operations compared to the combined real estate services and other operations for 2001 compared to 2000.

Selling, general and administrative expenses, including real estate taxes. Selling, general and administrative expenses, including real estate taxes, increased to $110.5 million for 2001 compared to $89.8 million for 2000. This increase was primarily due to increased wages, benefits costs and administrative expenses associated with the increase in personnel to support our growth and increased sales and marketing expenditures related to newly introduced communities, subdivisions and towers under development. Selling, general and administrative expenses, including real estate taxes, as a percentage of revenues decreased slightly to 10.0% for 2001 compared to 10.2% for 2000.

Interest expense. Interest expense, net of capitalization, increased 21.0% to $52.5 million for 2001 compared to $43.4 million for 2000. Interest incurred increased 1.9% to $63.3 million for 2001 compared to $62.1 million for 2000. The increase in interest incurred was primarily the result of an increase in average debt outstanding offset by a decrease in our effective borrowing rate. As a percentage of total revenue, interest incurred declined to 5.7% for 2001 compared to 7.0% for 2000. Amortization of previously capitalized interest increased by $4.2 million to 1.7% of total revenue for 2001 compared to 1.6% of total revenue for 2000 due to the change in the mix of real estate sold between the two periods. Interest capitalized decreased 11.7% to $33.2 million for 2001 compared to $37.6 million in 2000 due primarily to a change in the mix of properties undergoing active development.

Total revenues for the year ended December 31, 2000, increased 29.5% to $882.2 million, from $681.4 million for 1999, primarily due to an increase in homebuilding revenues. Total contribution margin for 2000 increased 39.3% to $275.2 million from $197.5 million for 1999 primarily due to an increase in homebuilding contribution margin. Income before income taxes and extraordinary items increased 76.8% to $134.4 million from $76.0 million in 1999. During 1999, we recognized a tax benefit primarily due to the reversal of a previously established valuation reserve of $35.2 million. This reserve was established for built-in tax losses and net operating loss carryforwards originally purchased from Westinghouse Electric in 1995. The basis for the release of the deferred tax allowance results from improved profitability during 1999 and increasing taxable income, resulting in cumulative taxable income over the prior two years and the current year and projected future taxable income. In March 1999, $1.7 million of prepayment penalties were paid and included as an extraordinary item associated with the early retirement of the Marbella construction loan. Net income increased 2.5% to $81.9 million in 2000 from $79.9 million for 1999.

Homebuilding. Total homebuilding revenues increased 43.4% to $614.7 million for 2000 compared with $428.8 million for 1999. Single- and multi-family homebuilding revenues increased 41.3% to $381.2 million in 2000 compared with $269.7 million for 1999. The increase in single- and multi-family homebuilding revenue is primarily attributable to a 282 unit or 21.2% increase in the number of homes closed and the continuation of the trend towards delivering a greater proportion of larger, higher priced homes as seen in the 28.4% increase in the average sales price between the periods.

The increase in the number of homes closed was due primarily to increased home sales in newly introduced subdivisions in our Heron Bay, West Jensen, Parkland Isles, Gulf Harbour and Waterlefe communities and in our existing master-planned communities of Pelican Sound and Tiburón.

The value of net new contracts for single- and multi-family homes increased by $190.9 million or 67.3% from 1999 to 2000. Backlog at December 31, 2000 was $235.4 million or 65.9% higher than at December 31, 1999. These increases were due primarily to strong sales at existing master-planned communities including Pelican Sound, Heron Bay and Parkland Isles, and initial sales at our Waterlefe community where we are the only homebuilder.

Mid-rise and high-rise homebuilding revenues increased 46.8% to $233.5 million in 2000 compared to $159.1 million in 1999.

The increase in mid-rise and high-rise homebuilding revenue was attributable to an increase in the number of towers in which we recognized revenue and an increase in the average price of these tower residences. We delivered tower units or met the requirements for percentage-of-completion revenue recognition in 14 towers in 2000 and 11 towers in 1999. We began construction of five new residential towers — Trieste, Montego, Seasons, Pointe and Siena — which met the requirement for recognizing percentage-of-completion revenue in 2000 and contributed $87.1 million in additional revenue.

The value of net new contracts for mid-rise and high-rise homebuilding increased by $189.4 million or 89.1% from 1999 to 2000. Backlog at December 31, 2000 was $290.7 million or 137.9% higher than at December 31, 1999. Both increases were primarily due to the 88.4% increase in the average price of tower units sold from $690,000 in 1999 to $1.3 million in 2000. We began taking contracts for three towers — Montenero, Caribe and Harbor Towers II — during 1999 and began taking contracts for five towers — Trieste, Montego, Seasons, Pointe and Siena — during 2000. The 249 residential units in towers introduced in 1999 had a projected sellout value of $183.3 million compared to the projected sellout value of $514.0 million for the 303 units in towers introduced in 2000.

Parcel and lot. Total parcel and lot sales revenues decreased 0.6% to $130.9 million for 2000 compared to $131.7 million for 1999. Sales of lots for 2000 increased 48.8% to $50.9 million compared to $34.2 million for 1999; residential parcel sales for 2000 increased 88.0% to $28.2

million compared to $15.0 million for 1999 while sales of commercial parcels decreased by 37.2% to $51.8 million compared to $82.5 million for 1999. The increase in lot sales is attributable to the implementation of our program for sale of waterfront, custom home lots in our Harbour Isles community, while residential parcel sales increased as a result of the sale of land in The Colony at Pelican Landing community. Sales of commercial parcels decreased due to the sell-out of Pelican Marsh in 1999 and as a result of the reduction in sales of the MacArthur parcels which is attributable to the sell-down of this inventory of parcels.

Amenity membership and operations. Total amenity membership and operating revenues for 2000 decreased 6.9% to $71.0 million compared to $76.3 million for 1999. Equity membership revenue decreased 10.0% to $26.1 million for 2000 compared to $29.0 million for 1999 while membership dues and amenity services revenue decreased 5.1% to $44.9 million from $47.3 million. The decrease in membership revenue is attributable primarily to decreased sales at our Pelican Marsh and Gulf Harbour clubs, which were converted to equity clubs in 1999, while the decrease in operating revenues is the result of the turnover of the Deering Bay and Pelican’s Nest clubs to their members.

Real estate services and other. Total real estate services and other revenues increased 47.1% to $65.6 million for 2000 compared to revenues of $44.6 million in 1999. This increase in revenues is primarily attributable to a $26.4 million increase in real estate brokerage revenue, an increase in mortgage banking revenue of $1.9 million and a $4.5 million increase in other income from the sale of Burnt Store Marina, which was offset by the reduction of the brokerage commission received in 1999 of $13.2 million from the sale of the MacArthur properties.

Homebuilding. Homebuilding cost of sales increased 37.1% to $445.4 million for 2000 compared to $324.8 million for 1999. Cost of sales as a percentage of revenue was 72.5% in 2000 compared to 75.7% in 1999. This decrease in cost of sales percentage was primarily due to improved homebuilding margins relating to the increase in the average sales price of single- and multi-family as well as tower residence units.

Overall, homebuilding contribution margin as a percentage of revenue increased 3.2% to 27.5% in 2000 from 24.3% in 1999. Contribution margin percentage from single- and multi-family homebuilding increased to 18.0% in 2000 from 17.6% in 1999, due to a higher average sales price and, consequently, improved contribution margins particularly at our Pelican Sound, Harbour Isles and Tiburón communities. For our mid-rise and high-rise homebuilding products, contribution margin percentage increased to 43.1% in 2000 compared to 35.6% for 1999, as a result of a higher average selling price.

Parcel and lot. Total costs of sales decreased to $59.4 million for 2000 compared to $75.9 million for 1999 due to a decrease in total revenue for 2000. The cost of parcel and lot sales decreased to 45.4% of related revenue for 2000 compared to 57.6% for 1999. The decrease in cost of sales percentage and the associated increase in contribution margin percentage are due primarily to the change in mix of land sales. Contribution margin percentage from sales of our lots and residential parcels increased as a larger portion of these sales occurred in our high-end communities of Harbour Isles and The Colony at Pelican Landing. Contribution margin for commercial parcels improved primarily due to increased margins on the sale of the MacArthur parcels in 2000. In 1999, commercial parcel contribution margins were lower because a greater proportion of the cost of the MacArthur land portfolio purchased in March 1999 was allocated to immediately saleable parcels which closed during that year.

Amenity membership and operations. The 12.3% decrease in the cost of amenity sales to $55.8 million for 2000 compared to $63.6 million for 1999 was primarily due to a decrease in membership

sales and operating revenues. The associated contribution margin increased to 21.4% for 2000 from 16.6% in 1999, primarily due to an increase in membership sales at our Bay Colony and Deering Bay clubs, which generate a higher margin than amenity service revenue and an increase in membership dues revenue of $4.9 million.

Real estate services and other. The 135.5% increase in real estate services and other costs to $46.4 million for 2000 compared to $19.7 million for 1999 was due to the costs associated with the increased volume of real estate brokerage transactions. Cost as a percentage of related revenues increased to 70.7% in 2000 compared to 44.2% in 1999 due primarily to the net brokerage revenue earned from the sale of the MacArthur properties in 1999 and increased overhead costs incurred in 2000 to operate our new or expanded realty brokerage, title insurance and mortgage banking offices.

Selling, general and administrative expenses, including real estate taxes. Selling, general and administrative expenses, including real estate taxes, increased to $89.8 million for 2000 compared to $72.1 million for 1999. This increase was primarily due to increased professional fees for legal and accounting services, increased sales and marketing expenditures relating to newly introduced communities under development and an increase in management incentive compensation. Selling, general and administrative expenses, including real estate taxes, decreased to 10.2% for 2000 compared to 10.6% for 1999.

Interest expense. Interest expense, net of capitalization, increased 1.9% to $43.4 million in 2000 from $42.6 million in 1999. Interest incurred increased 2.6% over the same period due to a marginal increase in our level of debt as well as a small increase in our effective borrowing rate. As a percentage of total revenue, interest incurred declined to 7.0% for 2000 compared to 8.9% for 1999. Amortization of previously capitalized interest decreased to 1.6% of total revenue for 2000 compared to 2.3% of total revenue for 1999 due to the change in the mix of real estate sold between the two years. Interest capitalized decreased 1.6% to $37.6 million for 2000 compared to $38.2 million in 1999 due to a change in the mix of properties undergoing active development.

We assess our liquidity in terms of our ability to generate cash to fund our operating and investing activities. We finance our land acquisitions, land improvements, homebuilding, development and construction activities from internally generated funds, credit agreements with financial institutions and other debt. As of December 31, 2001, we had cash and cash equivalents of $58.0 million.

Net cash used in operations was $128.1 million for the year ended December 31, 2001 as compared to cash provided by operations of $28.8 million for the comparable period in the prior year. Cash flow from operations before net inventory additions, contracts receivable and mortgages held for resale improved to $203.3 million for the year ended December 31, 2001 compared to $187.4 million for the comparable period in 2000. Net inventory additions increased to $125.4 million for the year ended December 31, 2001 compared to $48.5 million in 2000. The increase in net inventory additions is primarily related to increased single- and multi-family home inventories that are under contract for delivery during the next six to nine months and, to a lesser degree, tower inventories that have not yet qualified for revenue recognition and land acquisitions. Likewise, the increase in contracts receivable of $171.0 million for 2001 compared to $110.1 million during 2000 reflects the substantial increase in the value of tower units under contract that are now being constructed and that have met the requirements for percentage of completion revenue recognition. Land acquisitions for the year ended December 31, 2001 and 2000 totaled approximately $80.7 million and $74.3 million, respectively. We expect that real estate inventories will continue to increase as we are currently negotiating and searching for additional opportunities to obtain control of land for future communities.

Investing activities for the year ended December 31, 2001 included $24.3 million of net additions to property and equipment compared to $2.0 million in the same period in the prior year. For the year ended December 31, 2001, cash was provided from net mortgage notes receivable collections of $8.4 million compared to $1.8 million in the same period in 2000. We anticipate cash flows used in investing activities will increase with the development of current and future amenity operations.

Financing activities provided cash of $146.3 million for the year ended December 31, 2001 compared to cash uses of $6.3 million in the same period in 2000. The net cash inflow was primarily the result of the issuance of $350 million in senior subordinated notes due February 15, 2011, proceeds from construction and other loans of $90.4 million, net of repayments totaling $287.3 million for mortgages and notes payable, revolving line of credit, subordinated notes and finance subsidiary debt.

The senior secured credit facility includes a $250 million amortizing term loan and $200 million revolving loan. The facility allows us to borrow and repay up to the maximum amount under the $200 million revolving loan subject to maintaining an adequate collateral borrowing base. The term loan requires semi-annual principal payments of $5.0 million commencing January 2002. As of December 31, 2001, we had $193.7 million available for borrowing under the senior secured credit facility and $6.3 million committed pursuant to letters of credit.

Our wholly owned finance subsidiary, Financial Resources Group, Inc. has an $18.0 million bank warehouse facility, which is payable on demand and is secured primarily by mortgage loans held for sale. The warehouse facility is not guaranteed by us. As of December 31, 2001, $18.0 million was available for borrowing under the warehouse facility.

To finance the construction of certain on-site and off-site infrastructure improvements at many of our projects, we have used community development district and improvement district bond financing. User fees and special assessments payable upon sale of the property benefited by the underlying improvements are designed to fund bond debt service, including principal and interest payments, as well as program operating and maintenance cost. Although we are not obligated directly to repay all of the outstanding bonds, we do pay a portion of the fees and assessments securing the bonds and have guaranteed debt service shortfalls of certain district bond programs. The amount of bond obligations issued with respect to our communities total $204.2 million at December 31, 2001. We have accrued $36.3 million as of December 31, 2001, as our estimate of the amount of bond obligations that we may be required to fund. We may, subject to limitations in the senior secured credit facility, use district financing to a greater extent in the future.

We released 10 towers for reservation and commenced construction on 10 towers during 2001. We intend to use construction loans and customer deposits to construct high-rise towers. After the construction loans are repaid from the proceeds of closings with buyers, remaining proceeds will be available for general use. As of December 31, 2001, we had construction loans in place for 8 towers with $51.6 million outstanding and $275.2 million of remaining undrawn commitments. We expect to begin construction on 5 towers and are scheduled to close 6 towers in 2002 which will generate significant cash flow after repayment of the related construction loans.

During the course of future operations, we plan to acquire developed and undeveloped land, which will be used in the homebuilding, tower and amenities lines of business. As of December 31, 2001, we had contracts or options aggregating $106.5 million, including deposits of $2.6 million, to acquire approximately 1,900 acres of land that are expected to yield approximately 3,900 residential units. Payments of approximately $72.0 million are expected to be made during 2002 with the balance paid in future years. We will incur land development costs for improving overall community infrastructure such as water, sewer, streets and landscaping and for developing the amenity packages such as golf

courses, marinas and club facilities. A significant portion of these costs are incurred in the initial phases of a project. We recently commenced development of two new projects, Sun City Center Ft. Myers and Tarpon Bay and expect to commence development of two other communities this year, Evergrene and Tuscany Reserve, where we anticipate closings to start in 2003.

Our real estate development is dependent upon the availability of funds to finance current and future development. We plan to continue to grow and expect to fund this growth through the generation of cash flow from operations, from the availability of funds under our credit facilities, from new construction loans and from future debt and equity offerings. We believe we have adequate resources and sufficient credit facilities to satisfy our current and reasonably anticipated future requirements to acquire capital assets and land, to develop land improvements and construction activities and to meet any other needs of our business, both on a short- and long-term basis. If we do not have sufficient capital resources to fund our development and expansion, projects may be delayed, resulting in possible adverse effects on our results of operations. No assurance can be given as to the terms, availability or cost of any future financing we may need. If we are at any time unable to service our debt, refinancing or obtaining additional financing may be required and may not be available or available on terms acceptable to us. Furthermore, as a result of the events of September 11, 2001, considerable economic and political uncertainties could have adverse effects on consumer buying behavior, construction costs, availability of labor and materials and other factors affecting us and the homebuilding industry generally.

We selectively enter into business relationships through the form of partnerships and joint ventures with unrelated third parties. These partnerships and joint ventures are utilized to acquire, develop, market and operate homebuilding, amenities and real estate services projects. We do not consolidate partnerships and joint ventures where unanimous consent by both partners is required for making major decisions, and where we do not have control, directly or indirectly, over major decisions. In connection with the operation of these partnerships and joint ventures, the partners may agree to make additional cash contributions. We believe that future contributions, if required, will not have a significant impact to our liquidity or financial position. If we fail to make required contributions, we may lose some or all of our interest in such partnerships or joint ventures. At December 31, 2001, none of these partnerships or joint ventures had outstanding debt. However, the partners may agree to incur debt to fund partnership and joint venture operations in the future.

We have historically experienced, and in the future expect to continue to experience variability in our results on a quarterly basis. A substantial percentage of our homes are targeted towards retirement and second home buyers who frequently prefer to take ownership of their homes during the fall. Therefore, although new home contracts are obtained throughout the year, a significant portion of our single- and multi-family home closings occur during the fourth calendar quarter. Our revenue therefore may fluctuate significantly on a quarterly basis and we must maintain sufficient liquidity to meet short-term operating requirements. The following chart describes quarterly fluctuations of our revenue, contribution margin, net income and single-and multi-family homebuilding closings for the years 2001 and 2000:

Our costs of operations may be impacted by inflation as the strength of the current economic environment places upward pressure on the cost of labor and materials. In addition, certain raw materials used by us in our homebuilding operations are susceptible to commodity price increases. Unless these cost increases are passed on to customers through increased home and service prices, our operating margins may be reduced. In addition, in times of inflation, the reduced availability of attractive mortgage financing for purchasers of our homes may have an adverse effect on sales. If interest rates increase, construction and financing costs, as well as the cost of borrowings, also would increase, which can result in lower operating margins. Increases in interest rates also may affect adversely the volume of mortgage loan originations.

The volatility of interest rates could have an adverse effect on our future operations and liquidity. Among other things, these conditions may affect adversely the demand for housing and the availability of mortgage financing and may reduce the credit facilities offered to us by banks, investment bankers and mortgage bankers.

We are subject to interest rate risk on the variable rate portion of our debt. We hedge a portion of our exposure to changes in interest rates by entering into interest rate swap agreements to lock in a fixed interest rate.

The following table sets forth, as of December 31, 2001, our debt obligations, principal cash flows by scheduled maturity, weighted average interest rates and estimated fair market value. In addition, the table sets forth the notional amounts and weighted average interest rates of our interest rate swaps.

We are a fully integrated homebuilding and real estate services company with over 50 years of experience in the design, construction and operation of leisure-oriented, amenity-rich master-planned communities. We offer a full complement of products and services to enhance our customers’ lifestyles and increase our recurring revenues. Like traditional homebuilding companies, we design, sell and build single- and multi-family homes serving move-up, pre-retirement and retirement home buyers. Unlike our traditional homebuilding competitors, we also design, sell and build luxury residential towers targeting affluent, leisure-oriented home purchasers. We have developed master-planned communities where today there are over 150,000 residents who enjoy lifestyle amenities like award-winning golf courses, country clubs, deep-water marinas, tennis and recreational facilities, luxury hotels, upscale shopping and a variety of restaurants. Our master-planned communities offer a wide range of residential products from moderately priced homes to higher priced semi-custom, single- and multi-family homes and luxury residential towers.

Our master-planned communities are in Florida, a highly sought-after retirement and leisure-oriented home destination, and one of the nation’s fastest growing economies. Our communities are located in prime locations on Florida’s gulf coast near Marco Island, Naples, Ft. Myers, Sarasota and Tampa, and on the east coast near Ft. Lauderdale, Miami, Palm Coast and Palm Beach. We believe we are well-positioned to take advantage of favorable demographic trends, including the aging of the “baby boom” generation, as well as the overall strength of the Florida economy and real estate market. Furthermore, the United States Census Bureau predicts that Florida will experience one of the largest total increases in population in the United States over the next ten years.

As of December 31, 2001, we had 34 master-planned communities under development. We expect these master-planned communities to contain 612 holes of golf, over 1,000 marina slips and various country clubs, tennis and recreational facilities and other amenities. In total, we control over 15,500 acres of land, where we plan to develop up to 28,200 future residences.

Our revenues, EBIT, net income and EBIT margin were $1,110.3 million, $224.9 million, $102.2 million and 20.3%, respectively, for the year ended December 31, 2001 as compared to $882.2 million, $177.8 million, $81.9 million and 20.2%, respectively, for the year ended December 31, 2000. Over the five year period ended December 31, 2001, our revenues and EBIT increased at compounded annual growth rates of 38.3% and 40.3%, respectively.

As of December 31, 2001, we had homebuilding contract backlog of $738.2 million, a 40.3% increase from $526.1 million as of December 31, 2000.

Our business lines include homebuilding, amenities operations, real estate services and parcel and lot sales, each of which contributes to our profitability.

We typically begin a master-planned community by purchasing undeveloped or partially developed real estate. We then construct infrastructure improvements and build amenities in accordance with our development permits. Following completion of these improvements and the building of the amenities, we build a full range of homes for sale to primary, second and retirement home buyers. In certain situations, we elect to sell parcels and lots to third party builders or end users.

As part of our marketing strategy, we target primary, second and retirement homebuyers for most of our communities. To reach these customers we use national and international marketing campaigns

and local, point of purchase advertising and sales programs. Our national marketing efforts employ a proprietary database marketing system that maintains contact with the thousands of new prospects generated annually by our focused national advertising. This program has been enhanced by the integration of ongoing e-commerce initiatives that have increased the flow of qualified customers to our communities. We manage our marketing efforts through our in-house creative and production teams. We believe that these efforts contribute to a higher-than-average conversion rate of prospective customers to homebuyers.

We profit from the efficiencies created by our integrated delivery of all aspects of community development, including community design, land development, homebuilding, parcel and lot sales, amenities operations and real estate services businesses. See “— Our Homebuilding Activities,” “— Amenities Development and Operation,” “— Parcel and Lot Sales” and “— Other Real Estate Services Businesses” for an explanation of these operations and services. We believe that this integrated approach reduces risk as it provides us with greater control over our costs and provides us with recurring amenities and services revenues.

We seek to maintain our high margins by focusing on the following key elements of our business strategy:


†	Continue to implement a vertically integrated business model. By serving as the master developer of our communities, and by retaining control of operations like amenities and real estate services, we believe we can ensure a high level of quality and generate greater returns than our competitors. We acquire and develop the land in our communities, construct the residences, design, build and operate the amenities in many of our communities and otherwise control all aspects of the planning, design, development, construction and operation of our communities. Unlike most homebuilders, we design and operate our amenities on a profitable basis, which provides us with recurring revenue streams, which may continue after all of the homes in the community have been sold. In addition, we expect to expand our real estate brokerage, title insurance, mortgage banking and property management operations to enhance our position as an integrated single-source provider of residential products and services.

†	Capitalize on favorable demographic trends and the overall strength of the Florida economy. We expect to benefit from favorable demographic and economic trends resulting in a rapid expansion of our affluent target customer base. Those trends include:


	†	the aging of the “baby boom” generation and the growing generational wealth transfer, which we believe has, and will continue to, significantly increase demand for high quality master-planned pre-retirement communities;

	†	the increasing affluence of pre-retirement and retirement-aged purchasers of our products and services;

	†	the continued high population growth in Florida resulting in part from increasing numbers of people choosing Florida for retirement or second home purchases; and

	†	the strength of the Florida economy, which is expanding at a higher and more consistent rate than the nation as a whole.


†	Continue to opportunistically acquire and profitably develop an attractive Florida land inventory. We believe that our expertise in development and our in-depth market knowledge enables us to successfully identify attractive land acquisition opportunities, efficiently manage the land’s development, and maximize the land’s value. Through this process, we believe we create significant value, and provide the foundation for future margin strength. We typically target land purchases that are located in existing resort, urban or highly sought after markets for affluent home buyers. As of December 31, 2001, we controlled over 15,500 acres of land in highly sought-after Florida coastal markets.


†	Expand strategic partnerships and further develop product branding. We will continue to selectively enter into business relationships with highly regarded partners, as we have done in the past with The Ritz-Carlton and Hyatt hotels and professional golfers such as Raymond Floyd and Greg Norman. We believe that partnering with premium brands such as these adds value to our affiliated residences and amenities. We expect to generate incremental profits from these relationships from marketing fees, construction fees, development fees and golf course management fees. In addition, we seek to grow the name brand recognition of WCI Communities products and services.


†	Export our successful business model to other markets. We expect to selectively take advantage of attractive opportunities to grow outside of Florida and believe that several of our businesses would be well suited to be exported to new markets. We believe that we can benefit from our expertise in developing master-planned resort oriented communities and luxury residential towers by expanding to resort and urban locations. Our relationships with national brands such as The Ritz-Carlton should help facilitate our expansion into markets outside of Florida.

We believe the breadth of our homebuilding activities and the scope of our target market distinguish us from our competitors and position us to take advantage of favorable regional and national demographic and income trends. Like traditional homebuilding companies, we design, sell and build single- and multi-family homes serving primary, second and retirement home buyers. Homes range from approximately 1,100 square feet to 8,000 square feet and are priced from $100,000 to $3.9 million, with an average sales price for the year ended December 31, 2001 of $328,000. We build most of these homes within our master-planned communities, where we create attractive amenities through affiliations with hotel operators and golf course designers like The Ritz-Carlton, Raymond Floyd and Greg Norman. We believe that this approach increases the value of our homes and communities and helps us attract affluent purchasers.

Unlike our traditional homebuilding competitors, we also design, sell and build luxury residential towers targeted to affluent, leisure-oriented home purchasers. Residences in our towers range from approximately 900 square feet to 13,500 square feet and are priced from $100,000 to over $10 million, with an average sales price for the year ended December 31, 2001 of $1,139,000. Since 1988, we have built or have under construction 2,139 tower residences, of which 1,882 residences have been sold. Our towers have ranged in size from six to 22 stories and have included 26 to 133 residences. Our sales contracts for these towers require substantial non-refundable cash deposits, generally ranging from 20% to 30% of the purchase price, and we typically do not start construction of towers until there are sufficient pre-sales to cover the majority of the costs to construct the towers.

For the year ended December 31, 2001, homebuilding revenues were $906.1 million, which accounted for 81.6% of total revenues.

Design. We employ an award-winning in-house design group comprised of experienced architects and computer-assisted design technicians. Our product design experience along with our land planning expertise has enhanced our ability to charge view premiums for homes located on waterfront, conservation and golf course sites within our communities. Our design expertise has also provided us with the flexibility to respond to changing consumer demands as determined through our customer surveys and focus groups. The information gathered through these surveys and focus groups will continue to serve as the model for the development of our new products.

Sales. We maintain large sales centers with community scale models and lifestyle and home demonstration displays. The sales centers are staffed with licensed professionals who are employees of WCI. We also maintain professionally decorated model homes, which demonstrate the benefits and features of our products and the community lifestyles.

Sales associates initiate the contracting process with home buyers and collect deposits from customers. Customers are then directed to our affiliated mortgage banking company to complete financing arrangements, if required. Largely due to the affluence of many of our luxury and second home purchasers, we believe that we complete more cash transactions with customers than is typical in the industry.

We maintain and carefully manage an inventory both of homes that are available immediately or within a few months and of homes built to order. For homes that are built to order or selected from inventory at an early stage of construction, we offer customers a wide selection of standard options and upgrades to finish their homes. We also allow customization of the structural design in many of our product lines through our in-house design group. In addition, we offer design studios staffed with professional designers where the many options and upgrades available to purchasers of our products are displayed and demonstrated prior to incorporation into a home. Finally, home closings are typically conducted through our title agency companies.

Construction. We typically act as the general contractor in the construction of single- and multi-family residences. Our employees provide purchasing and quality assurance for, and construction management of, the homes we build, while the material and labor components of our houses are provided by subcontractors. Our construction techniques are consistent with local market practices and generally consist of concrete block exterior walls covered with a painted stucco finish and engineered truss roofs covered with shingles or tile. We comply in all material respects with local and state building codes, including Florida’s stringent hurricane and energy efficiency regulations. Depending upon the size and complexity of a home’s design, our construction time ranges from about 90 to 300 calendar days for our single-family homes and up to 250 calendar days for our multi-family homes.

Accounting. We recognize revenue under the completed contract method. The related profit is recognized when collectibility of the sales price is reasonably assured and the earnings process is virtually complete. The earnings process is normally considered complete when title has passed to the buyer, we are not obligated to perform significant additional activities after sale and delivery and there are no contingencies allowing the customer to require a refund. When a sale does not meet the requirements for income recognition, profit is deferred until the requirements are met and the related sold inventory is classified as completed inventory.

General. We expect our tower development business to continue to be a significant component of our future growth. For over 50 years, we have entitled and developed premium tower sites for residential development. Before 1987, we elected to sell entitled, and in many cases developed, sites to third party developers who constructed tower residences on the sites acquired from us. In 1987, we, in a joint

venture, constructed a high-rise tower adjacent to the beach in our Bay Colony community. Known as the Contessa, the high-rise was completed and sold out in 1990. The Carlysle, our second high-rise, also located adjacent to the beach in Bay Colony, was completed and sold out in 1992. Through December 31, 2001, we have successfully designed, marketed, completed construction and delivered 21 towers totaling 1,387 residences, which have generated revenues of approximately $1.04 billion and have sold at an average price of $750,000 per residence. In addition, we had twelve residential towers containing 739 residences under construction, and 13 residential units not yet delivered in three recently completed towers at December 31, 2001.

Design. We commence the design and planning of towers by conducting extensive research relating to the market, customer base, product requirements, pricing and absorption. Our research effort is directed by dedicated project managers specializing in the development of towers. Based on the results of this research, we organize an experienced team of architects, engineers and specialty consultants under the leadership of the project manager to create the design of the mid-rise or high-rise tower. We also contract for the services of an experienced third party general contractor during the early stages of design to assist in design, engineering and the estimation of construction costs.

Sales. Once schematic design and design development for a mid-rise or high-rise tower has been completed and its construction costs have been estimated, marketing of the residences commences. Brochures, scaled architectural models, walk-in kitchen and bathroom models and other marketing materials are used to assist community representatives in explaining and demonstrating the residences to be built. Often, computer videos are developed which integrate three dimensional computer assisted design drawings of the interior and exterior elevations of the towers with video of the site and its surroundings, which may include beaches, golf courses and bodies of water. These videos provide a “virtual tour” that is extremely useful for pre-selling our residences.

Unless we elect to register a tower with the U.S. Department of Housing and Urban Development, Federal and Florida law generally require that condominiums be completed and closed to a consumer within 24 months following a consumer’s execution of a purchase contract. In these cases, because construction of towers typically takes 15 to 22 months, it is necessary to engage in extensive pre-selling activities prior to commencement of construction. Pre-selling ensures that the completion of the construction of a tower coincides with the substantial sell out of the tower and the compliance with statutory requirements relating to the timing of condominium delivery to the consumer. To facilitate our pre-sales process, we engage in a “reservation” selling process by which buyers select specific residences, sign a reservation agreement and pay a refundable deposit. Once a sufficient number of residences are “reserved” indicating substantial consumer acceptance, reservations are converted to contracts and the customer’s deposit becomes nonrefundable after a 15-day rescission period under Florida law.

Generally, construction is not commenced until a majority of units are under firm contracts. For towers that take more than 18 months to build, we will generally collect from each purchaser a deposit equaling 30% of a residence purchase price to cover a portion of estimated construction costs. For towers that take less than 18 months to build, generally a 20% deposit is collected. Our experience has been that over 98% of the contracts for which nonrefundable deposits have been collected by us close upon the completion of the tower. Once construction is completed, closings of sold residences usually occur within one month, at which time we are paid the balance of the purchase price for the residences sold.

Construction. We hire experienced and bonded third party general contractors specializing in the construction of towers to construct these buildings. Typically, we negotiate a guaranteed maximum price with these contractors for the construction and delivery of completed towers. By hiring experienced general contractors to construct our towers, we mitigate many of the risks associated with

the construction of these structures. As the developer of the towers that we build, we manage the entire process from planning and closing of completed residences to turnover of the condominium association to residents.

Financing. We generally obtain separate construction financing for our tower projects. A lender typically provides a construction loan when the value of sales contracts on a project is sufficient to cover a substantial portion of the cost of the project’s construction. Buyers typically provide deposits equal to 20% to 30% of the purchase price of their residence. Under Florida law, a portion of the deposit representing 10% of the purchase price must be deposited into an escrow account, unless we have provided a letter of credit or a surety bond. Any amount of the down payment in excess of this 10% may be used to fund construction. We then generally seek a construction loan commitment to cover remaining construction costs, based on the number of residences sold at the time of the commitment. To the extent that we sell additional residences during the course of construction, subsequent deposits may also be utilized to fund construction, resulting in a lower amount outstanding under the construction loan than originally committed. We have developed a financing concept with banks to bundle multiple high-rise projects in a single construction loan facility.

Accounting. Revenue for tower residences is recognized on the percentage-of-completion accounting method. Revenue is recorded when construction is beyond a preliminary stage, the buyer is committed to the extent of being unable to require a refund of a significant deposit except for nondelivery of the residence, a majority of residences have been contracted and costs can be reasonably estimated. Any amounts due from sales recognized are recorded as contracts receivable. After the initial closing of the residences, revenue and related costs for the remaining residences are recorded at closing.

A portion of each sales commission is paid after the tower is under construction at the time a customer enters into a sales contract, with the balance paid at closing. Sales commissions are expensed as a component of the cost of mid-rise and high-rise revenue. Marketing expenditures related to tower developments are expensed as incurred.

General. The provision of amenities, like championship golf courses with clubhouses, fitness, tennis and recreational facilities, guest lodging, marinas and a variety of restaurants, is central to our mission to deliver high quality residential lifestyles. To ensure that the amenities in our communities are designed, constructed and operated at a level of quality consistent with the residences that we build, we have established an amenities development and operations group. Although many of the amenities facilities that we currently own or manage were constructed by various unaffiliated community developers from which we purchased ownership, we have developed the amenities of several communities, including those at Walden Lake Polo and Country Club, Gulf Harbour Yacht and Country Club, The Estates at Bay Colony Golf Club, Pelican Marsh Golf and Country Club, Gateway Golf and Country Club, Tiburón Naples Golf Club, Pelican Sound Golf and River Club, The Colony Golf and Bay Club, Waterlefe Golf and River Club, Tarpon Cove Yacht and Racquet Club, Jupiter Yacht Club, the Raptor Bay Golf Club and Pelican Nest Golf Club at Pelican Landing and have worked with noted amenities designers, particularly golf course architects, to enhance the marketability of our amenities and, thereby, our communities.

Ownership. Amenities at our communities are owned by either community residents or non-residents in equity membership programs, or by unaffiliated third parties, or retained by us. In newly developed or acquired communities, ownership of the amenities is structured to cater to the preferences and expectations of community residents.

Due to the high costs of entry at equity clubs, we have found that in communities offering homes at lower price points, residents often prefer non-equity membership programs, which require lower

initiation fees, but higher annual dues. Since residents’ preferences change over time, we may choose to sell the ownership and operation of the amenities to a resident group on an equity basis.

An alternative to non-equity programs, bundled home and amenities membership structures allow home buyers in moderately priced communities to receive club memberships bundled with their home purchase. In these cases, the amenities are owned and operated by the community homeowners association.

In communities offering higher-priced homes, all or a select group of residents own the golf and other amenities assets on a full equity basis. The conveyance of amenities assets to residents is accomplished through an equity subscription and sales process at an established price. These equity ownership offerings are usually completed in two to six years, depending upon the pace of residential build-out in the community.

Operation. In communities with bundled or equity ownerships, we typically enter into an operating agreement with the association or club entity which holds title to the facilities. The operating agreements generally provide that we will continue to control, manage and operate the amenities’ facilities until substantially all of the homes in the community, in the case of bundled ownership, or all of the resident equity ownership interests, in the case of equity ownership, have been sold. During this period, we generally receive the net profits, and incur any losses, of the amenities business.

Accounting. Revenues from amenities operations include membership dues and charges for services provided. Dues from members are recorded as deferred revenues when collected and are recognized as revenues over the membership term. Revenues for services are recorded when the service is provided. Costs of amenities operations are recorded as incurred.

Revenues from sales of equity memberships are recorded when the collectibility of the sales price is reasonably certain, costs can be reasonably estimated and the earnings process is complete. Revenues for the sale of non-equity membership initiation fees are included in revenue over the estimated period of member benefits. The amount of non-equity membership initiation fees collected in excess of the cumulative amount recorded as revenue is reflected as deferred revenue.

Prudential Florida WCI Realty. On June 10, 1999, Watermark Realty, Inc., a wholly owned subsidiary of WCI, entered into a six-year franchise agreement with Prudential Real Estates Affiliates, Inc. This agreement, as subsequently amended, allows us to provide exclusive residential brokerage services as Prudential Florida WCI Realty in six geographic areas across eight counties in Florida. The exclusive franchise areas are in Broward, Charlotte, Hillsborough, Manatee, Lee, Collier, Dade and Palm Beach Counties. To maintain this exclusive arrangement we must substantially grow our market share in each of these exclusive areas during the six-year franchise period. As consideration under the agreement, we pay Prudential a royalty based on gross commission revenue on a monthly basis. At December 31, 2001, we had 23 offices, 105 employees and over 1,000 sales agents.

WCI Realty, Inc. WCI Realty, Inc. provides new home and certain resale brokerage services. At December 31, 2001, WCI Realty, Inc. had 24 offices and 133 employees.

First Fidelity Title, Inc. First Fidelity Title, Inc. provides title insurance and closing services to our customers. First Fidelity underwrites its policies on behalf of large national title insurers and derives its revenues from three sources: fees paid to it for title insurance provided to our customers, third party residential closings and commercial closings. First Fidelity has a significant third party customer base. At December 31, 2001, First Fidelity had 7 offices and 58 employees.

Financial Resources Group, Inc. Financial Resources Group, Inc. provides residential mortgage banking services to our buyers, as well as third party homebuyers. Financial Resources Group originates home mortgages which are subsequently sold to mortgage investors. The sale of these mortgages are at prices established in commitments obtained from mortgage investors prior to the time the mortgages are originated. At December 31, 2001, Financial Resources Group had 57 employees in 6 offices located in Naples, Coral Springs, Coral Gables, Palm Beach Gardens, Bonita Springs and Sun City Center. In October of 2001, Financial Resources Group began funding loans through an $18 million warehouse line from Comerica.

WCI Communities Management, Inc. We provide management services to our master-planned community developments and oversee the business affairs of over 71 condominium and homeowners’ associations and 14 community master associations encompassing over 12,000 residences throughout Florida. The management companies derive their revenue from two primary sources: monthly flat fees received for managing homeowner, master and condominium associations and a management fee equal to 4% of the expenses paid to third party services providers at the Kings Point community in Sun City Center. The services provided by the management companies include security, common area maintenance and insurance policy administration. The companies operate nine regional and community offices located in Collier, Lee, Broward, Palm Beach, Dade and Hillsborough counties, with headquarters located in Bonita Springs, Florida. At December 31, 2001, our property management operations had 226 employees.

We provide various services for the property owner during both the design and construction phases of a project. We manage, coordinate and supervise each step in the development process. During the design phase we consult on all project aspects from obtaining zoning approvals, to selection of the design team, to managing the design process. We then develop project budgets and schedules and assist in selecting the general contractor. During construction, we act as the owner’s representative to oversee the general contractor.

To date we have provided this service for The Ritz-Carlton Hotels unit of the Host Marriott Corporation and Hyatt Hotels Corporation. It is our intent to expand this business to serve other customers that have a need for high-quality project management, but do not wish to create their own in-house support organization. As we acquire additional properties, we anticipate creating new opportunities for this division to support construction of hotels and other resort-related projects included at new locations.

We leverage our expertise and experience in master-planning by strategically selling lots and parcels at premium prices within our communities for construction of products we do not wish to build. This enables us to create a more well-rounded community by selling parcels and lots to developers who will construct commercial, industrial and rental properties, which we ordinarily do not develop. We sometimes sell selected lots directly to buyers for the design and construction of large custom homes.

Targeting move-up, retirement and affluent second home buyers, we have been developing and executing award-winning, multi-media marketing plans for our homes and communities for more than 50 years. We employ an experienced staff of copywriters, creative art directors and graphic designers who are responsible for the design and development of most of our marketing materials and advertising messages, including newspaper and magazine print, direct mail and billboards.

We believe our proprietary marketing systems and the depth of experience of our marketing group create an increased number of selling opportunities for us and has generally enhanced our marketing presence and brand recognition. Our marketing program reaches prospective purchasers, locally, regionally, nationally and internationally through advertisements placed in demographic specific periodicals and other media. Our Internet website displays a comprehensive review of each of our communities including locations, promotions, amenities, calendars of activities, lifestyle testimonials, product floorplans, elevations and views of most of the homes we build. The advertisements and website include response mechanisms, like a coupon, automatic e-mail or toll-free number, by which a prospective purchaser may request additional information about our housing products. When a prospective purchaser responds to one of our advertisements or at our website, purchaser-specific information is entered into our database creating a personalized customer record, which is used to record every interaction we have with this purchaser.

As a prospective purchaser’s interest in our products and communities evolves, we individualize our marketing program by tailoring direct mail, regular e-mail and telephone follow-up that will apprise the prospective purchaser of relevant activities, developments and products being offered. Through the process, we are able to collect a wide range of demographic and psychographic data about prospective purchasers, including home product preferences, hobby and recreational interests and the motivation for, and urgency of, the decision to purchase a home, which provides us with valuable information that we utilize to improve our target marketing success rate. Our targeted marketing allows us to develop a relationship with prospective purchasers, tending to predispose them toward visits to our communities during their home shopping or vacation trips to Florida. Some prospective purchasers may receive over 15 direct mail or telephone contacts a year from us. As of December 31, 2001, our database contained records of approximately 176,000 prospective purchasers qualified by age and income that had expressed an interest in purchasing a home in Florida.

We believe that our relationship and database marketing results in the efficient use of expenditures. The relative success and productivity of each of our marketing programs is measured to determine which programs yield the most qualified leads, prospects and customers per dollar spent. The results of these measurements are the primary determining factors for where future marketing expenditures will be directed. In addition, our database is a source of ongoing customer research, which influences our homebuilding design and the type and price range of the amenities to be integrated within our master-planned communities.

We have communities under development in eleven Florida counties including Collier County and Lee County on the west coast between Marco Island and Ft. Myers; Hillsborough County near Tampa; Sarasota County and Manatee County on the west coast near Sarasota; Dade County, Broward County, Palm Beach County, Martin County and St. Lucie County on the east coast encompassing much of Miami, Ft. Lauderdale, Boca Raton and West Palm Beach; and Flagler County on the east coast between St. Augustine and Daytona Beach. The following map of Florida highlights the eleven counties where we own or have the right to purchase property.

The following table sets forth information about our communities, including remaining acres, remaining entitled units and remaining number of tower sites.


(4)	Palm Beach Region includes Flagler, Palm Beach, Martin and St. Lucie Counties.

(5)	Entitlement is the approval to develop the property for the specific planned use under state and local planning laws. The number of entitled residences shown in the table above represents the maximum number of units expected to be allowed under such approvals. We usually build fewer than the maximum number of entitled units. Units are comprised of single- and multi-family homes as well as mid-rise and high-rise residences.

Unless otherwise specified, the following descriptions of our communities set forth information as of December 31, 2001. Estimated selling prices of our homes set forth below are subject to change.

Pelican Bay. Pelican Bay exemplifies our vision, talent and experience as a developer of master-planned communities. It was awarded the Urban Land Institute’s Award of Distinction in 1995. Located on approximately 1,856 acres fronting the Gulf of Mexico, Pelican Bay was designed and permitted to preserve a 570-acre mangrove estuary between the community and the beachfront in the early 1970s. Miles of boardwalks were constructed over the mangroves to access the beach by using a construction technique in which no machinery disturbed the mangrove floor. The community homeowner’s association provides tram service over the boardwalks and has educated buyers and residents about the ecological value of the estuary.

The master plan for Pelican Bay encompasses over 6,000 residences priced from $132,000 to $4.3 million in a mix of single- and multi-family homes and tower residences. Our final tower, the Montenero, was completed and closings began in August, 2001, and offered 133 two- and three-bedroom and penthouse residences ranging from 2,675 to 6,940 square feet priced from $500,000 to $4.0 million. Amenities include a 27-hole private golf club, a 100,000 square foot, 1,500-seat cultural and arts center, 33 acres of parks, a small hotel and two luxury resorts, The Ritz-Carlton Naples and the Registry Resort Hotel.

Pelican Bay has approximately 800,000 square feet of office and commercial space located at the north and south ends of the community. The south commercial area is anchored by a 240,000 square foot specialty shopping center, which includes Saks Fifth Avenue, Jacobsons, 50 retail boutiques and three restaurants. The south commercial area also includes a Barnes & Noble bookstore, banks and several multi-story office buildings. The north commercial area includes a 140,000 square foot neighborhood

center with a grocery, small retail shops and restaurants, a 65,000 square foot office building and the Pelican Bay Financial Center that we built in 1995.

We have also created a master community association for Pelican Bay, to which all homeowners belong and which manages the boardwalks and associated tram service, beachside restaurants and pavilions, neighborhood parks and tennis facilities. The community also contains public facilities, including a fire station, police station, library and church.

Bay Colony. Approximately 245 acres, Bay Colony, a luxury gated residential enclave, anchors Pelican Bay’s northwest corner. The residential mix includes single- and multi-family estates, villas and tower residences priced from $711,000 to $10.0 million, most of which we designed and built. We are currently constructing our final tower in Bay Colony, Trieste, which is scheduled for occupancy in 2002. This tower offers 106 three- and four-bedroom and penthouse residences ranging from 3,415 to 7,500 square feet priced from $1.2 million to $7.1 million. Bay Colony includes a private beach club with formal and casual dining, a swimming pool and a tennis club. Bay Colony residents also belong to the Pelican Bay community association and have the opportunity to join the Bay Colony Golf Club and the Pelican Isle Yacht Club.

Pelican Marsh. Pelican Marsh, excluding The Estates at Bay Colony Golf Club, is located on 1,326 acres immediately northeast of Pelican Bay and includes a residential mix of coach homes, carriage homes, mid-rise residences, detached villas and custom single- and multi-family homes ranging in price from $120,000 to $2.2 million. Amenities include an 18-hole championship golf course designed by Robert von Hagge, which was the home to the 2000 and 2001 Naples Senior Professional Golf Association tournament, with an accompanying 35,384 square foot clubhouse and pro shop, a community center offering fitness classes and lifestyle seminars, a sports complex offering basketball and tennis, a playground and beach access via a water shuttle. Pelican Marsh is home to Cocohatchee Strand, a nature preserve for which we have received several awards for environmental preservation.

The Estates at Bay Colony Golf Club. Approximately 284 acres, The Estates at Bay Colony Golf Club is a private community located within Pelican Marsh with custom estate homes priced from $2.3 million to over $10 million. The Estates at Bay Colony Golf Club features a limited-membership golf club with an 18-hole championship golf course designed by Robert von Hagge, which was home to the 1997, 1998 and 1999 Naples Senior Professional Golf Association tournament. The golf club features a 21,400 square foot clubhouse with formal and casual dining and a fully-equipped pro shop. Residents are also members of the Bay Colony Community Association and have the opportunity to join the Pelican Isle Yacht Club. The club was turned over to the members in January 2001.

Tiburón Naples. Tiburón Naples, located on approximately 943 acres adjacent to Pelican Marsh, is being constructed by us to offer estate homes, mid-rise residences, coach homes and villas ranging in price from $425,000 to over $3.8 million. When complete, this community will feature a 36-hole championship resort golf course designed by Greg Norman. The golf course and clubhouse are owned by a joint venture with Host Marriott Corporation and operated by us for a fee. An accompanying 295-room luxury golf resort, which opened in late 2001, is operated by The Ritz-Carlton Hotel Company, L.L.C. The golf course opened in November 1998 with 27 holes of golf, with an additional nine holes scheduled to open in the fourth quarter of 2002. This course was the home of the Franklin Templeton Shootout golf tournament in 2001 and will also be for 2002. The Tiburón Naples golf club features a 46,000 square foot clubhouse with formal and casual dining and a fully equipped pro shop and fitness area.

The Seasons at Naples Cay. We purchased approximately seven acres of land located in Naples Cay, a gated residential community on the northwestern edge of Naples. We are currently building The Seasons, a 43-unit luxury residential tower on the site. Within walking distance of the beach, The Seasons offers both beachfront and bay views. The tower residences are priced from $1.5 million to

$10.9 million. We expect this tower to have its own amenity package that will include a swimming pool, tennis courts and indoor recreation facilities.

Tarpon Cove. Tarpon Cove, an approximately 97-acre award-winning gated community built exclusively by us, offered condominiums, coach homes and duplexes priced from $125,000 to $310,000. Residents of Tarpon Cove are members of the Tarpon Cove Yacht & Racquet Club. Amenities include a swimming pool, a tennis center with lighted courts and pro shop, beach access via a private water shuttle, a fitness center and casual dining.

Cove Towers at Tarpon Cove. Cove Towers, an 18-acre community, offers a total of five towers consisting of 50 to 58 residences each. Aruba, completed in 1999, offered residences ranging from 1,621 square feet to 3,216 square feet, priced from $271,000 to $754,000. Bequia, completed in 2000, offered similar residences priced from the low $300,000’s to the mid $800,000’s. The third tower, Caribe, completed in March 2001, features 56 two- and three-bedroom and penthouse residences ranging from 1,854 to 4,270 square feet priced from $340,000 to over $1.1 million. Montego, scheduled for completion in May 2002 features 58 three- and four-bedroom residences and penthouses ranging from 2,380 to 4,811 square feet priced from $473,000 to $1.9 million. The remaining tower, Nevis, is under construction and features residences ranging from 2,555 to 5,185 square feet priced from $670,000 to $1.7 million. Planned amenities include a pool, fitness center, spa facility and two poolside guest suites at the Calypso Club. Residents will have access to and membership opportunities at the Tarpon Cove Yacht and Racquet Club.

Cape Marco. In 2000, we purchased two luxury beachfront high-rise sites totaling approximately 22 acres in Cape Marco on Marco Island. We have finalized the design of our first tower, Belize, which offers 148 residences ranging from 2,680 to 13,500 square feet and priced from $900,000 to over $9.3 million. This tower is now under construction.

Tarpon Bay. Tarpon Bay is an approximately 91-acre gated community. We are building approximately 350 residences, including duplex, coach and condominiums priced from $143,000 to $309,000. Residents of Tarpon Bay may purchase membership privileges in the Tarpon Cove Yacht & Racquet Club. Planned amenities include a clubhouse, fitness center, canoe rental, tennis and a non-swimming beach.

Tuscany Reserve. Tuscany Reserve is planned as an approximately 463 acre luxury community where we plan to build multi-family villa and estate homes priced from $1.2 million to $2.7 million. Planned amenities include a championship golf course, a club house, sports club, spa, pool and tennis.

Marco Shores. We currently have under contract the remaining 237 acres in the existing community of Marco Shores, which is located on southwest Florida’s intracoastal waterway adjacent to Marco Island. We plan to build five high-rise towers, approximately 160 single- and multi-family units, redesign the existing 18-hole championship golf course and build a new clubhouse.

Pelican Landing. Pelican Landing, located on approximately 1,838 acres, offers garden condominiums, coach homes, villas, single- and multi-family and estate homes priced from $91,000 to $1.7 million. Amenities include 36 holes of championship golf spread over two courses designed by Tom Fazio with accompanying clubhouses, a tennis center with six lighted courts and clubhouse, a boardwalk, a canoe park, boat slips, formal and casual dining and a private 34-acre beach park accessed by a private water shuttle. In addition, the community features a 450-room luxury Hyatt resort, and will offer 339 up-scale timeshare residences and amenities including 27 holes of golf designed by Raymond Floyd and a comprehensive recreational complex.

The Colony at Pelican Landing. The Colony at Pelican Landing is comprised of approximately 799 acres located within Pelican Landing. The community offers a mix of residential homes including custom estate homesites, villas and luxury towers that presently offers residences priced from $320,000 to $4.1 million. Our first tower in The Colony, Sorrento, was completed in June 2001 and offers 72 two- and three-bedroom residences ranging from 1,930 to 2,932 square feet priced from $325,000 to $960,000. Our second tower, Palermo, is scheduled for completion in December 2002 and offers 71 three- and four-bedroom residences and penthouses ranging from 2,910 to 5,945 square feet priced from $685,000 to $2.7 million. Our third tower, La Scala is under construction and features residences ranging from approximately 3,510 to 7,160 square feet priced from approximately $1.0 million to $4.2 million. Our fourth tower, Treviso, will be released for pre-sale in March 2002. Residents of Sorrento have, and residents of Palermo, La Scala and Treviso will have, access to the recreational facilities of the Pelican Landing Community Association and membership opportunities at The Colony Golf and Bay Club. Amenities at The Colony include a 20,868 square foot Bay Club restaurant, an 18-hole championship golf course designed by Jerry Pate, a 43,088 square foot country club with dining, which is under construction, tennis and fitness facilities and a spa.

Pelican Sound. Pelican Sound, located on approximately 549 acres, offers 1,299 single- and multi-family residences priced from $118,000 to $515,000. Amenities include 27 holes of championship golf, with an adjoining 18,000 square foot clubhouse, casual dining facility, six lighted tennis courts, a swimming pool and a river club featuring a health and fitness center, boat ramps, restaurant and a private riverboat to transport residents to beach and river destinations.

Gulf Harbour. Gulf Harbour is an approximately 548-acre gated retirement and second home community located on southwest Florida’s intracoastal waterway in Ft. Myers. Gulf Harbour includes single-family, estate, penthouse, carriage and villa homes ranging in price from $100,000 to $2.5 million. Although selected land parcels within Gulf Harbour have been sold to third party homebuilders, we maintain a significant homebuilding presence in the community and are building and selling homes ranging in price from $193,000 to $2.5 million. Gulf Harbour features an 18-hole championship golf course with a 38,000 square foot clubhouse and pro shop, a 192-protected slip floating deep-water marina capable of accommodating vessels up to 90 feet, an eight-court tennis complex, an 8,000 square foot spa and fitness center and retail tennis shop, a heated community swimming pool and over 7,000 feet of intracoastal waterway frontage. Other on-site amenities include a restaurant and a private island with a beach, both of which are made available to residents through membership packages.

Sun City Center Ft. Myers. Sun City Center Ft. Myers will be one of the largest age-restricted community of its kind in Southwest Florida. In accordance with Federal law, substantially all of the purchasers in the community must be over 55 years of age, and no one under the age of 18 is permitted to permanently reside there. Modeled after our Sun City Center in Tampa, the community encompasses approximately 1,375 acres in Ft. Myers, of which 92 acres are still under option, and offers a variety of home styles ranging in price from $140,000 to $386,000. Planned amenities include a 27-hole golf course with a 15,000 square foot clubhouse and a comprehensive 40,000 square foot town center recreational complex including indoor and outdoor swimming, tennis, fitness center, library, restaurant and multi-purpose rooms.

Gateway. Gateway, located on approximately 2,458 acres, offers single-family homesites, custom homes and attached and detached villas ranging in price from $100,000 to $495,000. Several single- and multi-family home neighborhoods are being developed by independent developers. We are the exclusive builder in three neighborhoods with price ranges from $150,000 to $367,000. Amenities include an 18-hole championship golf course designed by Tom Fazio offering full equity memberships as well as daily fee play, a 16,000 square foot clubhouse with a 230-seat dining room, pro shop,

fitness center, tennis center with eight lighted courts and a pro shop, a 35-acre polo and equestrian center offering boarding stables and a lighted polo and dressage arena. The club was turned over to the members in January 2002. A 15-acre park provides residents with a place to swim, fish, picnic and play sports, and 15 miles of riding and fitness trails wind through the community. Commercial properties include a 15-acre office park for general business and professional use and sites offering up to ten acres zoned for other commercial uses.

Wildcat Run. Wildcat Run is an approximately 584-acre gated community featuring single- and multi-family homes and custom homes priced from $155,000 to $765,000. Amenities include an 18-hole championship golf course designed by Arnold Palmer with an accompanying 26,000 square foot clubhouse and pro shop, a tennis center with five courts, a pro shop and a swimming pool.

Burnt Store Marina. Burnt Store Marina is an approximately 777-acre master-planned retirement and second home community designed to attract middle- and upper middle-income buyers. We offer homes ranging in price from $170,000 to $800,000. We have built two towers, each offering 60 residences ranging from 890 square feet to 2,436 square feet and priced from $100,000 to over $400,000. A third tower, Vista Del Sol, is currently under construction. An additional four towers are planned. Burnt Store Marina features a deep-water marina, providing direct access to the Gulf of Mexico and containing 425 wet slips with capacity for vessels of up to 70 feet and 188 dry slips. The marina also features a heated pool, yacht care services and shower and laundry facilities. A yacht club located just east of the marina offers regattas, club races, special events and cruises. The athletic club and fitness facility includes a heated pool, lighted tennis courts and an aerobics studio. Burnt Store Marina also contains a 27-hole executive golf course and a pro shop. A restaurant overlooking the marina contains a banquet room for meetings of up to 300 people. The marina operations and the restaurant were sold in December 2000.

Heron Bay. Situated on approximately 1,490 acres, Heron Bay is a gated golf community located in the cities of Coral Springs and Parkland. Heron Bay features eleven neighborhoods offering single- and multi-family and estate residences priced from $125,000 to $1.2 million, several of which are being developed by independent builders. We are the exclusive builder in nine neighborhoods offering single- and multi-family homes ranging from $180,000 to over $1 million. Amenities at Heron Bay include a daily fee championship golf course and an 18,500 square foot clubhouse owned and operated by the Tournament Player’s Club. In addition, the community includes a 10,000 square foot Heron Bay Commons clubhouse which features a fitness center, indoor racquetball courts and meeting facilities. The clubhouse is part of a complex, which includes tennis courts, basketball and volleyball courts and a children’s playground. Heron Bay is also home to the new 224-room Radisson Plaza Hotel, which includes a restaurant, outdoor dining terrace, health club, outdoor swimming pool and retail shops. With the acquisition of the Beaty property beginning in 2001, the Heron Bay community will grow by approximately 280 acres. The property is presently located within unincorporated Broward County. Prior to development, we will seek an annexation agreement with the City of Parkland and will address zoning to permit a mix of high-end townhouse and single-family homes. An additional recreation complex that is expected to be more fitness oriented with exercise equipment and weight center, aerobics room, treatment rooms, a lap pool and outdoor game courts is being planned for Heron Bay.

Parkland. We own approximately 2,255 acres in the city of Parkland, which is located just south of Boca Raton. Parkland Isles, our first community in Parkland, a 294-acre community within Parkland, was developed and built exclusively by us. Divided into four distinct neighborhoods separated by waterways, Parkland Isles offered homesites with more than 15 floorplans and dozens of elevations ranging in price from $144,000 to $475,000. Amenities available to Parkland Isles residents include

The Club, a complex that includes a swimming pool, whirlpool spa, children’s play area, tennis and basketball courts, a putting practice green and a three-building clubhouse featuring a teen center, fitness club and a business center with catering kitchen. Our remaining land holdings within the city of Parkland are planned for development as a high-end golf course community. Parkland Golf & Country Club, our next community in Parkland, will be a private community with planned features that may include an 18-hole golf course with a private 20,000 square foot golf club and a separate 40,000 square foot country club. Other amenities may include a fitness room, pool and spa, tennis courts, with a stadium court and a large dining area. We will offer a variety of product from multi-family to one-acre lots with upper-end custom homes with prices ranging from $300,000 to over $2.0 million.

Coral Springs. Planned and developed in the early 1960s by us, Coral Springs has evolved into the eleventh largest city in Florida with approximately 116,000 residents. The city offers a planned mix of rental and condominium apartments, townhomes, courtyard and estate homes. In 2000, we substantially completed the sale of our remaining residential properties in Coral Springs. We offered a variety of home designs in several neighborhoods throughout Coral Springs. Coral Springs is conveniently located near major attractions like a regional shopping mall, a performing arts center and an aquatic complex and fitness center. Coral Springs features some of the highest rated schools in the state, which makes the area especially attractive to families.

Waterlefe. Waterlefe is an approximately 602-acre community bordering the Manatee River, which is minutes away from the cities of Sarasota and Bradenton. Waterlefe currently features single-family homes, villas and condominiums priced from $190,000 to $633,000. Existing and planned amenities include an 18-hole golf course and fitness center, a 6,162 square foot clubhouse with dining facilities and a 73-slip marina and 12,102 square foot River Club.

Sun City Center. Sun City Center, a master-planned age-restricted retirement community, is situated on approximately 4,875 acres located on the west coast of Florida between the cities of Tampa and Sarasota. Housing is tailored for middle-income retirees with housing prices ranging from $100,000 to $428,000. In accordance with Federal law, substantially all of the purchasers must be over 55 years of age, and no one under the age of 18 is permitted to permanently reside in a residence. Amenities include 144 holes of golf over seven courses, 17 tennis courts, five heated swimming pools, two of which are Olympic-sized, three health and fitness clubs, lawn bowling greens, shuffleboard courts, volleyball courts, two restaurants and more than 150,000 square feet of indoor recreational facilities. The 13,000 square foot golf and racquet club features four dining rooms with a combined seating capacity of 200. We also own a corporate office building that houses the Sun City Center local staff and a 100-room Sun City Center hotel. We recently completed a 27,000 square foot recreation facility expansion and have plans for an additional 18 holes of golf.

Walden Lake. Walden Lake is an approximately 2,088-acre gated community located approximately 30 miles east of Tampa. Walden Lake’s primary target customers are middle- and upper-income families who live and work in the surrounding cities of Tampa, Plant City, Lakeland and, to a lesser extent, Orlando. Walden Lake also actively sells its homes to retirees. Housing prices range from $125,000 to $1.3 million. Amenities include two 18-hole championship golf courses, a 26,000 square foot clubhouse, a swimming pool, six lighted tennis courts, a fitness center, a 62-acre lake for boating and freshwater fishing, six miles of biking and fitness trails, equestrian facilities and a polo field, on-site elementary school and two daycare facilities.

The Tower Residences at The Ritz-Carlton, Sarasota. In July 2000, we purchased a two-acre parcel of land adjacent to the new Ritz-Carlton in downtown Sarasota. We are currently constructing an 80-unit luxury residential tower. We have entered into an agreement with The Ritz-Carlton Hotel Company, L.L.C. to act as the exclusive manager for this tower. Residences range from 2,799 to 5,275 square feet and are priced from $850,000 to over $4.5 million.

Venetian Golf & River Club. We have a contract to purchase approximately 1,087 acres adjacent to the Myakka River in Venice, and expect to close on this property during the second quarter of 2002 and begin development immediately thereafter. We plan to offer a total of approximately 1,600 residences in a gated community with a product mix featuring carriage homes, patio homes, executive and estate homes priced from $150,000 to $416,000. Planned amenities may include a river club with a dining facility, an 18-hole golf course with clubhouse, a fitness center, outdoor pool and walking trails.

Keys Gate. Approximately 1,150 acres, Keys Gate is a community located south of Miami. The community features single- and multi-family homes ranging in price from $72,000 to $360,000. Keys Gate is targeted at middle-income customers who primarily live and work in the Miami area. Amenities include eight lighted tennis courts, a health and fitness center, an entertainment amphitheater, racquetball courts, an 11,600 square foot recreation center featuring hobby and game rooms and a library and an 18-hole golf course with an adjoining full-service 24,000 square foot clubhouse featuring restaurants, a banquet hall and a pro shop. In June 1998, we sold the majority of our holdings within the community to another developer. We currently own approximately 130 lots within the community and an 11-acre commercial parcel.

Deering Bay. Deering Bay, an approximately 222-acre gated community overlooking Biscayne Bay, offers tower residences, villas and homesites. We are developing three towers for this community, each offering 43 to 48 residences, priced from $395,000 to over $2.5 million. We have completed two of the towers, Verona and Siena, and the third tower, Milano, is currently under construction. Residences range from 2,815 to 6,000 square feet and are priced from $775,000 to over $2.5 million. Amenities include an 18-hole championship golf course designed by Arnold Palmer, a 30,000 square foot clubhouse with three restaurants, two marinas with 93 slips able to accommodate yachts of up to 110 feet, seven lighted tennis courts, a fully-equipped health club and a swimming pool. A third marina with an additional 27 slips was completed in the third quarter of 2001.

Williams Island. In January 2001, we acquired a 4-acre high-rise site within the gated community of Williams Island, located in Aventura, Florida just north of Miami. The tower, Bella Mare, will offer 215 residences ranging from 1,500 to 6,880 square feet and priced from $500,000 to $3.6 million.

Harbour Isles. Located on approximately 112 acres, Harbour Isles is a 105-lot waterfront community in North Palm Beach featuring custom homes ranging in price from $1.9 million to $3.0 million, plus homesites, ranging from $1 million to $1.3 million. We offer six home designs that allow the purchaser to customize, within established design guidelines, floorplans and elevations to a homeowner’s specific needs.

Jupiter Yacht Club. Jupiter Yacht Club is an approximately 40-acre waterfront community located in Jupiter, Florida along the intracoastal waterway. We plan to develop five mid-size towers, that will offer residences ranging from 1,800 to 4,120 square feet and priced from $400,000 to $1.4 million. The first of the five towers, The Pointe will be completed in the first half of 2002. The second tower, Mariner, is currently under construction. Just a short distance from the Atlantic Ocean, the community

features an 89-slip deep-water marina, which accommodates yachts up to 65 feet in length, and includes commercially-zoned land capable of accommodating 66,000 square feet of retail and office space, as well as a 100-room hotel.

One Watermark Place. We purchased approximately three acres of land located in West Palm Beach in April 2001. The tower is currently under construction and is located directly on the intracoastal waterway providing views of the Atlantic Ocean. Tower residences range from 4,035 to 9,061 square feet and are priced from $1.3 million to $8.5 million. Planned amenities include a swimming pool, marina and indoor recreation facility. Construction of the tower began in July 2001.

Evergrene. Evergrene is planned as an approximately 364-acre community nestled within a vast array of wooded uplands and vegetation in Palm Beach Gardens, Florida. We plan to build approximately 1,000 single- and multi-family residences ranging from 1,144 to 3,671 square feet and priced from $148,000 to $600,000. Proposed amenities are expected to include a 38-acre lake, with a 14,000 square foot clubhouse, pools, playground, and three miles of walking trail through preserved areas. We began development in January 2002.

Palm Beach Resort Community. Palm Beach Resort is planned as an approximately 1,183-acre resort and residential community located near Jupiter, Florida. We expect to build approximately 800 single- and multi-family homes ranging from 1,632 to over 5,000 square feet with estimated sales prices of $587,000 to over $2.4 million. A 36-hole golf course, a clubhouse, and a corporate center are planned within the community. On the north portion of this parcel we plan to develop a 300-room resort hotel, 90 timeshare residences and golf condominiums. We expect to begin developing the project during the fourth quarter of 2002.

Old Palm Golf Club. Old Palm Golf Club is planned as an approximately 652-acre community development in Palm Beach Gardens, Florida. We expect to offer 309 single-family estate homes, villas and golf cottages priced from $1.2 million to over $4.0 million. Planned amenities include a 18-hole golf course, a state-of-the-art three-hole practice facility and an approximately 34,000 square foot clubhouse. We expect to commence development of this community in the second quarter of 2002.

Jupiter Waterfront. Jupiter Waterfront is an eight-acre parcel located on the intracoastal waterway near Jupiter, Florida. The current development plan provides 8 single-family estate homes with approximately 6,000 square feet of living area priced over $3.9 million each. Development of this neighborhood is expected to start during the first quarter of 2003.

Juno Beach Waterfront. Juno Beach Waterfront is an approximately 64-acre parcel planned for a marina and residential community. This community is expected to include approximately 250 mid-rise tower residences with approximately 2,600 square feet of living space priced at $350,000 to $700,000. The community is also planned to include a hotel, conference center, boat slips and a ship store. We expect to commence development of this community during the fourth quarter of 2003.

St. James Country Club. We purchased a single-family neighborhood of 50 homesites within St. James Country Club, a 449-acre golf course community located in central St. Lucie County. Home designs offer from 1,475 to over 2,277 square feet with prices ranging from $122,000 to $239,000. Amenities within St. James include an 18-hole daily fee golf course and a planned seven-acre recreational complex that will include a 2,500 square foot clubhouse, two lighted tennis courts and a community pool. We plan to sell all of our remaining homesites within the St. James Country Club to another builder.

Hammock Dunes. We currently have under contract approximately 39 oceanfront acres within the Hammock Dunes development in Palm Coast, Florida, located between St. Augustine and Daytona Beach. We plan to build eight luxury high-rise towers containing approximately 300 residences. Our first tower, Portofino, is currently under construction and features residences ranging from 2,090 to 4,780 square feet and priced from $555,000 to $1.7 million.

Pelican Isle Yacht Club Limited Partnership. We have invested in two partnerships with investments in Pelican Isle, a community being developed in North Naples, Florida, which includes 137 residences and the Pelican Isle Yacht Club. Pelican Isle is being developed by the Eco Group, a Tampa-based developer of residential communities. We have a 49% interest in a partnership that owns and operates the Pelican Isle Yacht Club. The second partnership that developed and sold luxury high-rise residences sold out all of these units and was dissolved. Residents of Bay Colony, Pelican Landing, Pelican Marsh and Wildcat Run are all eligible for membership in the Pelican Isle Yacht Club.

Walden Woods Business Center Ltd. We are 50% partners with TECO Properties Corporation in Walden Woods Business Center Ltd., a limited partnership, which was formed to develop a 550-acre mixed-use industrial park in Plant City, Florida. We also provide marketing, accounting and other services to the partnership.

Tiburón Golf Ventures Limited Partnership. Tiburón Golf Ventures Limited Partnership was formed with an affiliate of Host Marriott Corporation in 1998 to complete construction of, and then operate a 36-hole, Greg Norman-designed golf course in its Tiburón Naples community. The primary market for this high-end daily fee course is the guests of the adjacent The Ritz-Carlton Golf Lodge, guests of the existing The Ritz-Carlton Beach Hotel and the future residents of the surrounding Tiburón Naples community. In addition, the partnership has sold 181 of 350 non-equity golf memberships, which are currently being sold for $130,000 each. The first 27 holes of the course opened for play in November 1998 and the clubhouse opened in December 2000. The partnership acquired adjacent land in 2000 to construct an additional nine holes of golf expected to be completed in 2002 and for future residential property development. We hold a 51% interest in the venture and collect management fees for operating the golf course. To date, all acquisition and development costs have been funded by the partners in proportion to their partnership interests.

Norman Estates at Tiburón Limited Partnership. Norman Estates at Tiburón Limited Partnership was formed in 1998 for the purpose of constructing and developing a Norman Estates community which consists of 27 villas priced from $1.2 million to $1.4 million. As of December 31, 2001, we had closed on 13 residences at an average sales price of $1.4 million and there were 14 residences in backlog for $19.1 million. We hold a 49.5% limited partnership interest in the venture as well as have 50% ownership in the general partner which holds 1% of the venture. We also collect developer and construction fees for operating the project. The venture had a $2.5 million credit facility with a bank (none of which was outstanding as of December 31, 2001) to fund development and construction costs, which is non-recourse to the partners.

Pelican Landing Golf Resort Ventures Limited Partnership. Pelican Landing Golf Resort Ventures Limited Partnership was formed with Hyatt Equities, LLC in 1998 to develop and operate a 27-hole golf course adjacent to the resort hotel being constructed by Hyatt in Pelican Landing. The 18-hole course and clubhouse began operations in 2001 and the additional 9 holes are scheduled for construction in 2002. To date, all acquisition and development costs have been funded by the partners in proportion to their partnership interests. We retain a 51% interest in the venture and will also earn development fees for directing course construction as well as management fees for operating the

facility. Although subject to change, it is anticipated that Hyatt will retain operation of the food and beverage portion of the venture.

Pelican Landing Timeshare Ventures Limited Partnership. We own a 51% limited partnership interest in Pelican Landing Timeshare Ventures Limited Partnership, which was formed with HTS-Coconut Point, Inc., an affiliate of the Hyatt Hotels Corporation during 1998 to develop up to 339 upscale timeshare residences on 32 acres within the resort golf course being constructed by Pelican Landing Golf Resort Ventures Limited Partnership. In addition, we will earn development fees for managing the construction of the project. HTS-Coconut Point is the general partner and will also earn fees for sales, marketing, purchasing and property management. This project is currently in the planning stages.

Bighorn. We have a Class B limited partnership interest in Bighorn Development, L.P., which owns two-thirds of Bighorn Development L.L.C., the owner and developer of Bighorn, an exclusive community located in the heart of Palm Desert, California. Bighorn features an 18-hole championship golf course and a 40,000 square foot clubhouse. Bighorn Development L.L.C. acquired the operating assets of Bighorn Development L.P. and developed a neighboring property with an 18-hole golf course.

We own and use a 26,670 square foot office building in Sun City Center, Florida which is subject to a lien under our senior secured credit facility. We lease 97,180 square feet of office space in Bonita Springs, which serves as our corporate headquarters, and approximately 241,000 square feet of office space in other locations throughout Florida, which serve our divisional homebuilding operations and as branch office space for our related real estate services businesses.

At December 31, 2001, we had approximately 2,800 employees. We have no unionized employees and believe that our relationship with our employees is good.

In connection with the development of certain of our communities, community development or improvement districts may utilize bond financing to fund construction or acquisition of certain on-site and off-site infrastructure improvements, near or at these communities. The obligation to pay principal and interest on the bonds issued by the districts is assigned to each parcel within the district. If the owner of the parcel does not pay this obligation, a lien will be placed on the property to secure the unpaid obligation. The bonds, including interest and redemption premiums, if any, and the associated lien on the property are typically payable, secured and satisfied by revenues, fees, or assessments levied on the property benefited. The amount of bond obligations issued by districts with respect to our communities totaled $204.2 million at December 31, 2001.

The districts raise the money to make the principal and interest payments on the bonds by imposing assessments and user fees on the properties benefited by the improvements from the bond offerings. We pay a portion of the revenues, fees, and assessments levied by the districts on the properties we own in our communities that are benefited by the improvements. In addition, we guarantee district shortfalls under some of the bond debt service agreements that we are a party to when the revenues, fees, and assessments which are designed to cover principal and interest and other operating costs of the bonds, are not paid. We can make no assurances that debt service shortfalls guaranteed by us will not occur.

We record a liability for the estimated assessments and user fees levied by the districts on the properties that we own that are fixed and determinable. We reduce this liability by the corresponding assessment assumed by property purchasers at the time of closing and transfer of the property and by

cash held by the districts available to offset the particular bond obligation. We have accrued $36.3 million as of December 31, 2001 as the estimated amount of the assessments and user fees that we may be required to pay. The amount we may have to pay in may be more or less than the amount we have accrued.

We have historically experienced, and in the future expect to continue to experience, variability in revenue, profit and cash flow. Factors expected to contribute to this variability include:


•	the timing of the introduction and start of construction of new towers;
•	the timing of tower residence sales;
•	the timing of closings of homes, lots and parcels;
•	our ability to continue to acquire land and options on that land on acceptable terms;
•	the timing of receipt of regulatory approvals for development and construction;
•	the condition of the real estate market and general economic conditions in Florida;
•	the prevailing interest rates and the availability of financing, both for us and for the purchasers of our homes; and
•	the cost and availability of materials and labor.

Our historical financial performance is not necessarily a meaningful indicator of future results and, in particular, we expect financial results to vary from project to project and from quarter to quarter. Our revenue may therefore fluctuate significantly on a quarterly basis, and we believe that quarter-to-quarter comparisons of our results should not be relied upon as an indication of future performance.

The homebuilding industry and real estate development is highly competitive. In each of our business components, we compete against numerous developers and others in the real estate business in and near the areas where our communities are located. Some of our principal competitors include Toll Brothers, Inc., Lennar Corporation, Pulte Corporation, Centex Corporation and Bonita Bay Properties. We, therefore, may be competing for investment opportunities, financing, available land, raw materials and skilled labor with entities that possess greater financial, marketing and other resources. Competition generally may increase the bargaining power of property owners seeking to sell, and industry competition may be increased by future consolidation in the real estate development industry.

We are subject to various laws and regulations relating to the operation of our properties, which are administered by numerous Federal, state and local governmental agencies. In particular, development of property in Florida is subject to comprehensive Federal and Florida environmental legislation, including wildlife, endangered species and wetlands regulation, as well as other state administrative regulations. This regulatory framework, in general, encompasses areas like water quantity and quality, air quality, traffic considerations, availability of municipal services, use of natural resources, impact of growth, energy conservation and utility services, conformity with local and regional plans, and public building approvals, together with a number of other safety and health regulations. Additionally, each municipality has its own planning and zoning requirements. Permits and approvals mandated by regulation for development of any magnitude are often numerous, significantly time-consuming and onerous to obtain, and not guaranteed. The permit processes are administered by numerous Federal, state, regional and local boards and agencies with independent jurisdictions. Permits, when received, are subject to appeal or collateral attack and are of limited duration. Such permits, once expired, may or may not be renewed

and development for which the permit is required may not be completed if such renewal is not granted. These requirements have a direct bearing on our ability to further develop communities in Florida. Although we believe that our operations are in full compliance in all material respects with applicable Federal, state and local requirements, our growth and development opportunities in Florida may be limited and more costly as a result of legislative, regulatory or municipal requirements.

Our operating costs may also be affected by the obligation to pay for the cost of complying with existing environmental laws, ordinances and regulations, which require a current or previous owner or operator of real property to bear the costs of removal or remediation of hazardous or toxic substances on, under or in property. These laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of hazardous or toxic substances. In addition, the presence of hazardous or toxic substances, or the failure to remediate property properly, may adversely affect the owner’s ability to borrow by using the real property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of any substance at the disposal or treatment facility, whether or not the facility is or ever was owned or operated by the person. Environmental laws and common law principles could be used to impose liability for releases of hazardous materials, including asbestos-containing materials, into the environment, and third parties may seek recovery from owners as operators of real properties for personal injury associated with exposure to released materials containing asbestos or other hazardous materials.

Environmental site assessments conducted at our properties have not revealed any environmental liability or compliance concerns that we believe would have a material adverse effect on our business, assets, results of operations or liquidity, nor are we aware of any material environmental liability or concerns. Although we conduct environmental site assessments with respect to our own properties, there can be no assurance that the environmental assessments that we have undertaken have revealed all potential environmental liabilities, or that an environmental condition does not otherwise exist as to any one or more of our properties that could have a material adverse effect on our business, results of operations and financial condition.

From time to time, we have been involved in various litigation matters involving ordinary and routine claims incidental to our business. In addition, in May 2000, Richard Ahlborg, Carol Ahlborg, and other individuals who purchased lots in Pelican Landing filed a lawsuit against us in the United States District Court for the Middle District of Florida, Ft. Myers Division. The lawsuit seeks class action status and was instituted against us and a subsidiary, WCI Realty, Inc. It arose out of a preferred builder program under which plaintiffs purchased vacant lots and then contracted with a builder of their choice to construct a residence on their lots. In consideration of the extensive costs incurred by us and WCI Realty associated with the marketing, sales and advertising of the community for the benefit of the builders who participated in the program, these builders were required to pay a marketing fee to WCI Realty based on a percentage of the construction cost of the home. The plaintiffs asserted that we had an obligation to disclose to them that the preferred builder would pay a marketing fee to us. The plaintiffs have demanded unspecified money damages and have alleged, among other things, violation of the federal Racketeering, Influenced and Corrupt Organizations Act and the Real Estate Settlement Procedures Act. Since the Court has not yet ruled on whether to certify this lawsuit as a class, this litigation is still in its early stages. Accordingly, we are not able to estimate the range of possible loss. Therefore, we are not yet able to determine whether the resolution of this matter will have a material adverse effect on our financial condition or results of operations. We have objected to the certification of this lawsuit as a class action. We believe we have meritorious defenses and intend to vigorously defend this action.

The information contained in this section is based on numerous assumptions, including assumptions regarding the continued population growth rate in Florida and the continued economic health of Florida. These assumptions are subject to many factors, which are subject to change and are outside of our control. Results may differ substantially from those anticipated, and in the event results differ materially from those anticipated, our business and results of operations could be materially and adversely affected. Sources of this information are detailed below.

We believe that long-term demographic trends will drive and support our continued growth. These trends include the aging of the “baby boom” generation, the increase in the number of affluent households, and the strength of Florida’s population, employment and income growth.

Our strategy of developing and managing highly-amenitized master-planned communities caters directly to a large proportion of the approximately 2.2 million people expected to migrate to Florida over the next ten years.¹ We expect this group to include many members of the “baby boom” generation (those born between 1946 and 1964), the first of whom turned 55 years old in 2001. Approximately 41 million Americans are expected to reach the age of 50 in the United States from 2000 to 2010.² By the year 2010, the population of the state of Florida is projected to include approximately 7.2 million people over the age of 50, representing approximately 40% of the state’s population.³ We view the large numbers of the “baby boom” generation entering retirement age as an expansion of our target market. We actively market to these potential customers whom we believe will continue to seek our highly-amenitized master-planned communities as ideal locations for a primary, second or retirement home.


SOURCE:	Department of Health and Human Services, National Center for Health Statistics, 1996

Percentage of Florida and United States
Population Over 50 (Estimated/Projected)


SOURCES:	United States Census Bureau (for United States numbers), 2000; University of Florida, Bureau of Economic and Business Research (Florida Statistical Abstract 2000)

Our primary target market is older Americans. Older Americans tend to have a significantly higher homeownership rate than younger Americans, which benefits our business. For 2000, approximately 80% of individuals heading households who are aged 55 or older owned homes, while approximately 60% of individuals heading households who are under age 55 owned homes, according to the Joint Center for Housing Studies of Harvard University 2001.

A large portion of our target market is comprised of individuals with high household income or net worth who desire a home with highly-amenitized, upscale lifestyle offerings. This market encompasses retirees, secondary home purchasers and primary move-up buyers. Affluent households (defined as households earning more than $100,000 per year or having net worth over $500,000) grew to more than 19 million in 2000 from approximately 11 million in 1995, representing a compound annual growth rate of approximately 12%. The total number of affluent households is expected to rise to more than 33 million by the year 2005, representing a compound annual growth rate of approximately 12% from now to 2005. Additionally, the number of households with $5 million or more in net worth is expected to increase by approximately one million households during this period, representing a compound annual growth rate of more than 20% from between 2000 and 2005.

The coming transfer of wealth to the “baby boom” generation from the generations preceding it is also a key driver for growth in our markets. The annual amount of money to be passed on to the “baby boom” generation is expected to peak at approximately $340 billion around the year 2015, underscoring the “wealth effect” that the country is projected to experience during this period.

Florida is the nation’s fourth most populated state and is one of the most popular destinations for retirees, leisure, homebuyers, businesses and working-age people. With its natural amenities, tropical climate, approximately 1,200 mile coastline, variety of year-round recreational activities, range of housing styles and prices, transportation network, diverse and expanding economy with a variety of major employment centers and no state income tax, Florida offers a high quality of life and a low cost of living. Demand for housing in Florida is strong, reflecting the state’s population growth, strong job growth, favorable overall economic environment and strong demographics.

As the following chart illustrates, Florida has been outpacing the average population growth rate of the rest of the country. This disparity in growth rates is expected to continue with Florida’s population expected to increase 13.4% between 2000 and 2010, according to University of Florida’s Bureau of Economic and Business Research 2001, compared to the United States Census Bureau’s 2000 projection of 6.6% for the United States as a whole.


SOURCE:	United States Census Bureau (for United States numbers), 2000; University of Florida, Bureau of Economic and Business Research (2000 Florida Statistical Abstract)

Florida’s economic health and growth rate are important to our success. According to the Bureau of Economic Analysis of the US Department of Commerce, from 1989 to 1999, Florida’s gross state product grew at a compound annual rate of approximately 6.1%, while the national gross domestic product grew at a compound annual rate of 5.6% over the same period.¹

The following chart illustrates the job growth by number of new jobs in the ten states with the highest job growth for the period from January 1991 to December 2001E.

In the year 2001, 114,300 new jobs were added in Florida, the most of any state in the nation.²

Florida’s housing market, measured by permits, has historically been less volatile than other states with comparably sized housing markets.

The directors and executive officers of WCI Communities and their respective ages and positions are as follows:

Alfred Hoffman, Jr. is the Chief Executive Officer and a Director of WCI. From July 24, 1995 until the date of the merger of WCI Communities Limited Partnership and Florida Design Communities, Mr. Hoffman served as Chief Executive Officer of WCI Communities Limited Partnership, and from July 1998 until the date of the merger, he also served as a Director of WCI Communities Limited Partnership. From 1985 until the date of the merger, Mr. Hoffman also served as Chief Executive Officer and Chairman of the Board of Directors of Florida Design Communities. He also served as President of Florida Design Communities from 1985 to 1989 and 1993 to 1994. Mr. Hoffman is Chief Executive Officer and Chairman of the Board of Directors of First Fidelity Title, Inc., Financial Resources Group, Inc., Florida Lifestyle Management Company, Courtyards at Sun City Center, Inc. and Sun City Center Office Plaza, Inc. He also is Chief Executive Officer and a Director of Sun City Center Land Company and is a Director of Aston Care Systems, Inc. Prior to establishing Florida Design Communities, Mr. Hoffman founded Tekton Corporation, a homebuilder which he sold to Union Camp Corporation in 1970, and from 1970 to 1975, he served as head of Union Camp Corporation’s real estate homebuilding subsidiary. From 1975 to 1985, Mr. Hoffman was a private developer in the Tampa Bay area.

Don E. Ackerman is the Chairman of the Board of Directors and Executive Vice President of WCI. From July 24, 1995 until the date of the merger, Mr. Ackerman served as Chairman of the Board of Directors and Executive Vice President of WCI Communities Limited Partnership. From 1985 until the date of the merger, Mr. Ackerman also served as a Director of Florida Design Communities. He is also a Director of First Fidelity Title, Inc., Financial Resources Group, Inc., Florida Lifestyle Management Company, Courtyards at Sun City Center, Inc., Sun City Center Office Plaza, Inc., Sun City Center

Land Company and Aston Care Systems, Inc. From 1967 until 1991, Mr. Ackerman was a partner at J.H. Whitney & Co., a venture capital firm. Mr. Ackerman is President of Chandelle Ventures, Inc., his private investment company, and serves as Chairman of the Board of Walden University, Inc. Mr. Ackerman is a Director of Schlumberger Limited.

Jerry L. Starkey is the President and Chief Operating Officer and a Director of WCI. From 1998 until the date of the merger, Mr. Starkey was the President and Chief Operating Officer of WCI Communities Limited Partnership. From 1994 until the date of the merger, he also served as President and Secretary of Florida Design Communities. Since joining Florida Design Communities in 1988, Mr. Starkey has also held the office of Chief Operating Officer. Mr. Starkey is President of First Fidelity Title, Inc., Financial Resources Group, Inc., Courtyards at Sun City Center, Inc., Sun City Center Land Company and Sun City Center Office Plaza, Inc. Prior to joining the predecessor to Florida Design Communities, Mr. Starkey was Executive Vice President of George Thomas Homes, a production homebuilder with operations in Texas and Florida. Mr. Starkey is a member of the State Bar of Texas. In addition, Mr. Starkey was President and Secretary of Aston Care Systems, Inc. from 1996 to 1998.

James P. Dietz is a Senior Vice President and Chief Financial Officer of WCI. From October 1996 until the date of the merger, Mr. Dietz was the Chief Financial Officer and Treasurer of Florida Design Communities. Since joining Florida Design Communities in 1995, Mr. Dietz has also held the position of Corporate Controller. In addition, from 1996 until 1998, Mr. Dietz served as Chief Financial Officer of Aston Care Systems, Inc. Prior to joining Florida Design Communities, Mr. Dietz was Manager of Business Development at GTE Leasing Corporation, an affiliate of GTE. From 1986 until 1993, Mr. Dietz held various professional positions, including audit manager, at Arthur Andersen & Co.

Steven C. Adelman is the Senior Vice President and Treasurer of WCI. From 1996 until the date of the merger, Mr. Adelman served as Senior Vice President and Treasurer of WCI Communities Limited Partnership. Prior to joining WCI Communities Limited Partnership, Mr. Adelman was Vice President of Finance and Accounting at Inco Homes Corporation. From 1981 until 1993, Mr. Adelman held various management positions, including partner, at Kenneth Leventhal and Company, a public accounting firm specializing in the real estate industry.

R. Michael Curtin is the Senior Vice President, Marketing and Sales of WCI. From 1997 until the date of the merger, Mr. Curtin was the Senior Vice President, Marketing and Sales of Florida Design Communities. Since joining Florida Design Communities in 1995, Mr. Curtin has also held the office of Vice President, Marketing. Prior to joining Florida Design Communities, Mr. Curtin was employed by The Hunt Group as the Marketing and Sales Director for Rosedale Golf and Country Club.

Milton G. Flinn is the Senior Vice President, Real Estate Services Division of WCI. From 1993 until the date of the merger, Mr. Flinn was Chief Administrative Officer of Florida Design Communities. Since joining Florida Design Communities in 1983, Mr. Flinn has also held the office of Vice President of Human Resources. Prior to joining Florida Design Communities, Mr. Flinn was Personnel Administrator of Tropicana Products.

David L. Fry is the Senior Vice President, Amenities Division of WCI. From 1995 until the date of the merger, Mr. Fry was Vice President, Amenities of WCI Communities Limited Partnership. From 1989 until 1995, Mr. Fry was Golf Operations Director of the South Seas Resort Company. Prior to joining the South Seas Resort Company, Mr. Fry was Assistant Superintendent of the Bonita Bay Club, Bonita Springs Florida.

Michael R. Greenberg has been Senior Vice President, Homebuilding Division of WCI since the fall of 1999. Since joining WCI in 1998, Mr. Greenberg has also held the office of Division President of the Naples/ Bonita Springs Homebuilding Division. Prior to joining WCI, Mr. Greenberg was Executive

Vice President for Avatar Properties in Coral Gables, Florida. From 1991 to 1997, Mr. Greenberg held various positions with Toll Brothers, Inc., including Vice President.

Vivien N. Hastings is the Senior Vice President and General Counsel of WCI. From 1995 until the date of the merger, Ms. Hastings was Senior Vice President and General Counsel of WCI Communities Limited Partnership. Prior to serving as General Counsel, Ms. Hastings held various positions in WCI Communities Limited Partnership’s legal department. Prior to joining WCI Communities Limited Partnership, from 1982 to 1989, Ms. Hastings was Vice President and Co-General Counsel of Merrill Lynch Hubbard, Inc., a real estate division of Merrill Lynch & Co. From 1977 until 1982 Ms. Hastings was an associate with the Chicago law firm of Winston & Strawn.

S. Charles Mattoff is the Senior Vice President, Human Resources of WCI. From 1995 until the date of the merger, Mr. Mattoff held the positions of Vice President and Senior Vice President in charge of human resources for WCI Communities Limited Partnership. Prior to joining WCI, Mr. Mattoff was Vice President of Human Resources for the Aerospace Division of Vickers, Inc. from 1974 to 1994.

George R. Page is the Senior Vice President, Tower Division of WCI. From 1996 until the date of the merger, Mr. Page was General Manager of Bay Colony and Pelican Bay. Since joining WCI Communities Limited Partnership in 1990, Mr. Page also held the positions of Project Manager and Vice President of Development for Bay Colony. Prior to joining WCI Communities Limited Partnership, Mr. Page was Vice President of Development and Treasurer of Relleum, Inc. in Naples, Florida. From 1968 until 1987, Mr. Page held various management positions in marketing and sales with DVI Marketing Services, Inc., EWA Corporation, Scott USA and The Lange Company.

F. Philip Handy has been a Director of WCI since February 1999. Mr. Handy is the Chief Executive Officer of Strategic Industries and the Chairman and President of Winter Park Capital Company, a private investment firm that he founded. From June 1997 until December 1998, Mr. Handy was managing partner of Equity Group Investments, a private investment firm. From 1980 to 1997, Mr. Handy was Chairman and President of Winter Park Capital. Mr. Handy also serves on the board of Anixter International, iDine Rewards and Network, Inc. He also serves as the Chairman of the Florida Board of Education.

Lawrence L. Landry has been a Director of WCI since May 1999. From July 24, 1995 until August 1998, Mr. Landry served as a Director of WCI Communities Limited Partnership. From January 1996 until March 1999, Mr. Landry served as a Director of Florida Design Communities. Mr. Landry is the President and Chief Executive Officer of Westport Advisors, Ltd., which is the general partner of Westport Senior Living Investment Fund L.P. From February 1989 until June 1998, Mr. Landry was the chief finance and investment officer of the John D. and Catherine T. MacArthur Foundation. The MacArthur Foundation has been a stockholder of WCI since 1995. Mr. Landry is a member of the Board of Trustees of Clark University and also serves on the Board of Directors of Greystone Communities, Inc.

Thomas F. McWilliams has been a Director of WCI since March 1999. Mr. McWilliams has been employed by Citicorp Venture Capital, Ltd. since 1983 and has been a member of its investment committee since 1984. Mr. McWilliams serves on the boards of Chase Industries, MMI Products, Polar Corporation, Ergo Science Corporation, Pursell Industries, Strategic Industries and Royster-Clark Group Inc.

Joshua J. Mintz has been a Director of WCI since October 2000. Mr. Mintz is the Vice President and General Counsel of the John D. and Catherine T. MacArthur Foundation. Prior to joining the foundation in 1994, Mr. Mintz was with the law firm Sidley & Austin for thirteen years, specializing in commercial litigation and business reorganization, the last five of which he was a partner.

Jay Sugarman has been a Director of WCI since 1995. Mr. Sugarman is Chairman of the Board and Chief Executive Officer of iStar Financial, Inc., a publicly traded finance company focused on the real estate industry. From 1996 to 1997, he was Senior Managing Director of Starwood Capital Group, LLC and from 1993 to 1996, was President of Starwood Mezzanine Investors, L.P.

Stewart Turley has been a Director of WCI since February 1999. Mr. Turley was Chairman of the Board and Chief Executive Officer of Eckerd Corporation and also held the positions of manager of Eckerd’s non-drug operations, Vice President, Senior Vice President, President and Chief Executive Officer before retiring in 1997. Mr. Turley also serves on the boards of Sprint Corporation, and MarineMax, Inc.

Our restated certificate of incorporation requires our board of directors to consist of at least three members. Currently, our board has nine members. When we complete this offering, our restated certificate of incorporation will provide that our board will be classified into three classes, each class serving for a three-year term, with one class being elected each year by WCI’s stockholders. For more information on our board, see the section captioned “Description of capital stock — Anti-Takeover Measures — Election and removal of directors.” Currently, the directors of the key subsidiary of WCI Communities, Bay Colony-Gateway, are the same as that of WCI Communities.

We have an Investors Agreement that will terminate when we complete this offering. The Investors Agreement contains certain supermajority voting provisions with respect to WCI and its subsidiaries, regarding the sale of assets and property in excess of $25.0 million, the issuance of stock or incurrence of indebtedness in excess of $25.0 million and the termination of employment or amendment to the respective employment and consulting agreements of Al Hoffman, Jr. and Don E. Ackerman.

There are two committees of the board of directors: the Audit Committee and the Compensation Committee. The board of directors may also establish from time to time any other committees that it deems necessary or advisable.

The Audit Committee is responsible for making recommendations to the board of directors regarding the selection of independent accountants to audit our annual financial statements, conferring with the independent accountants and reviewing the scope and the fees of the annual audit, reviewing our audited financial statements, accounting and financial procedures, monitoring our ethics and conflict of interest procedures and approving the nature and scope of nonaudit services performed by the independent accountants. The Audit Committee consists of Mr. Handy, Mr. Landry and Mr. Turley.

The Compensation Committee is responsible for reviewing and making recommendations to the board of directors on all matters concerning compensation of management. The Compensation Committee is comprised of Mr. Turley, Mr. Sugarman, Mr. McWilliams, Mr. Handy and Mr. Landry with Mr. Turley serving as the chairman.

Each director who is not our employee will receive a fee of $5,000 for each full-day board meeting attended, $2,500 for each half-day board meeting attended and $500 for each telephone meeting attended. In addition, committee chairmen receive an annual fee of $3,000 and committee members receive an annual fee of $2,000. Directors who are also our employees will receive no remuneration

for serving as directors. Directors’ fees may be applied toward the exercise of vested stock options under the Non-Employee Directors’ Stock Incentive Plan.

WCI has a 1998 WCI Communities, Inc. Non-Employee Directors’ Stock Incentive Plan (formerly the 1998 Watermark Communities, Inc. Non-Employee Directors Stock Incentive Plan), pursuant to which non-qualified stock options to purchase up to 215,112 shares of the common stock of WCI Communities may be granted to non-employee directors of WCI Communities or any of its subsidiaries. The Compensation Committee administers the plan, and will from time to time grant options under the plan in a form and having terms, conditions and limitations as the committee may determine in accordance with the plan. The terms, conditions and limitations must be set forth in a stock option agreement. No option may be granted under the plan after December 4, 2008, but the terms of options granted on or before that date may extend beyond December 4, 2008. Participants may defer all or a portion of their directors’ meeting fees to apply to the exercise price of vested shares under the plan. In the event of any change in the outstanding common stock of WCI by reason of stock split, spin-off, stock dividend, reorganization, merger, consolidation or similar event, the number of shares subject to the plan and available for or covered by options and related option prices will be adjusted. Except as otherwise provided in a stock option agreement, in the event of a change of control, as defined in the plan, the committee m






Delaware	1531	59-2857021




(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)





	Proposed Maximum
Title of each Class of	Aggregate Offering	Amount of
Securities to be Registered	Price(1)(2)	Registration Fee(3)


Common stock, $.01 par value	$144,000,000	$36,000


	Per Share	Total


Initial public offering price	$	$

Underwriting discounts and commissions	$	$

Proceeds, before expenses, to WCI Communities, Inc.	$	$


Prospectus summary
Risk factors
Special note regarding forward-looking statements
Use of proceeds
Dividend policy
Capitalization
Dilution
The Company
Selected historical consolidated financial data
Management’s discussion and analysis of financial condition and results of operations
Business
Demographic trends
Management
Related party transactions
Principal stockholders
Description of capital stock
Shares eligible for future sale
U.S. tax consequences to non-U.S. holders
Underwriting
Legal matters
Experts
Where you can find more information
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
EX-1.1: UNDERWRITING AGREEMENT
EX-4.1: FORM OF SPECIMEN CERT. FOR COMMON STOCK
EX-4.2: FORM OF REGISTRATION RIGHTS AGREEMENT
EX-10.7: 1ST AMEN. TO STOCK PURCHASE & OPTION PLAN
EX-10.8: MANAGEMENT INCENTIVE COMPENSATION PLAN
EX-21.1: SUBSIDIARIES OF WCI COMMUNITIES, INC.
EX-23.2: CONSENT OF PRICEWATERHOUSECOOPERS LLP.


Common stock we are offering		6,900,000 shares

Common stock to be outstanding after the offering		43,281,715 shares

Proposed New York Stock Exchange symbol		WCI

Use of proceeds after expenses		We estimate that the net proceeds to WCI from the offering will be approximately $114.3 million. We expect to use these proceeds: (1) to repay approximately $50.9 million of outstanding construction loans, (2) to repay the outstanding balance of the revolving portion of our senior secured credit facility, if any, and (3) for general corporate purposes, including land acquisitions.






John B. Tehan, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017 Telephone: (212) 455-2000		Daniel J. Zubkoff, Esq. Cahill Gordon & Reindel 80 Pine Street New York, NY 10022 Telephone: (212) 701-3000



				Years ended December 31,

Statement of operations data				2001			2000			1999



				(dollars in thousands, except per share
				data)




Revenues:




	Homebuilding			$	906,057		$	614,665		$	428,837




	Parcel and lot				47,868			130,918			131,673




	Amenity membership and operations				75,340			70,974			76,307




	Real estate services and other				81,018			65,595			44,599

			Total revenues		1,110,283			882,152			681,416

Total cost of sales					765,648			606,934			483,928

Contribution margin⁽¹⁾					344,635			275,218			197,488




Selling, general, administrative and other, including real estate taxes					110,479			89,798			72,061




Depreciation and amortization					9,208			7,654			6,781

					224,948			177,766			118,646




Interest expense					52,532			43,363			42,621

Income before income taxes and extraordinary items					172,416			134,403			76,025




Income tax (expense) benefit					(68,223	)		(52,462	)		5,562

Income before extraordinary items					104,193			81,941			81,587




Extraordinary item, net of tax⁽²⁾					(1,958	)		—			(1,694	)

Net income				$	102,235		$	81,941		$	79,893

Earnings (loss) per share:




	Basic:




		Income before extraordinary items		$	2.86		$	2.25		$	2.24




		Extraordinary item, net of tax		$	(.05	)	$	—		$	(.05	)




		Net income		$	2.81		$	2.25		$	2.19




	Diluted:




		Income before extraordinary items		$	2.80		$	2.25		$	2.24




		Extraordinary item, net of tax		$	(.05	)	$	—		$	(.05	)




		Net income		$	2.75		$	2.25		$	2.19




	Weighted average number of shares:




		Basic			36,381,715			36,379,927			36,479,555




		Diluted			37,268,832			36,379,927			36,479,555




Operating data

Total homebuilding net new contracts				$	1,118,219		$	876,704		$	496,337




Single- and multi-family net new contracts					1,595			1,754			1,346




Mid-rise and high-rise net new contracts					523			307			308




Single- and multi-family home closings					1,732			1,614			1,332




Mid-rise and high-rise closings⁽³⁾					317			209			345




Total homebuilding backlog at period end⁽⁴⁾				$	738,245		$	526,083		$	264,044




Average contract selling price:




	Single- and multi-family homes			$	328		$	271		$	211




	Mid-rise and high-rise units			$	1,139		$	1,309		$	690



		As of December 31,

Balance sheet data		2001		2000


		(in thousands)




Real estate inventories		$	774,443	$	649,007




	Total assets		1,571,192		1,213,096




Debt⁽⁵⁾			682,611		553,256




Shareholders’ equity			419,045		319,222


(1)	Contribution margin represents our total line of business gross margin less overhead expenses directly related to each line of business. All sales, marketing and indirect corporate overhead expenses are included in the caption “Selling, general, administrative and other, including real estate taxes”.

(2)	Extraordinary items are the unamortized balance of debt issuance costs associated with the early retirement of a high-rise construction loan in 1999 and the unamortized balance of debt issuance costs associated with the early repayment of debt in conjunction with the $350.0 million offering of our outstanding 10 5/8% senior subordinated notes due 2011 in February and June 2001.

(3)	The timing of mid-rise and high-rise closings corresponds with the realization of net cash proceeds due under contracts for these residences. Revenues from these contracts are recognized under the percentage-of-completion method and, as a result, precede the timing of closings.

(4)	Homebuilding backlog at period end represents the sum of the value of (a) contracts for the sale of single- and multi-family homes not yet closed and (b) contracts for the sale of mid-rise and high-rise tower residences not yet closed less amounts previously recognized as revenue under the percentage-of-completion method of accounting.

(5)	Debt excludes accounts payable and accrued expenses, customer deposits and other liabilities (other than land repurchase liabilities), deferred income tax liabilities and community development district obligations.


			Actual			As adjusted


			(dollars in thousands)




Cash and cash equivalents			$	57,993		$	121,354

Debt obligations (including current portion):




	Revolving credit facility⁽¹⁾		$	—		$	—




	Term loan facility			250,000			250,000




	Project debt			77,675			26,780




	Senior subordinated notes due 2011			354,936			354,936

		Total debt obligations		682,611			631,716

Stockholders’ equity:




	Common stock, $.01 par value, 50,000,000 shares authorized, 36,513,898 issued and 43,413,898 shares issued as adjusted, respectively			365			434




	Additional paid-in capital			139,193			253,380




	Retained earnings			282,739			282,739




	Treasury stock, at cost, 132,183 shares			(795	)		(795	)




	Accumulated other comprehensive loss			(2,457	)		(2,457	)

		Total stockholders’ equity		419,045			533,301

Total capitalization			$	1,101,656		$	1,165,017


(1)	As of February 12, 2002, our outstanding balance under our revolving credit facility was approximately $15.5 million.






Initial public offering price per share				$	18.00




	Pro forma net tangible book value per share before the offering	$	10.35




	Increase per share attributable to new investors	$	.96

Pro forma net tangible book value per share after the offering				$	11.31

Dilution per share to new investors				$	6.69



		Total shares					Total consideration
												Average price
		Number		%			Amount		%			per share


Existing stockholders			37,742,319		84.5	%	$	147,319,000		54.3	%	$	3.90




New investors			6,900,000		15.5	%		124,200,000		45.7	%	$	18.00

	Total		44,642,319		100.0	%		271,519,000		100.0	%


(1)	Financial data as of and for the year ended December 31, 1998 consist of the accounts of WCI Communities, inclusive of Florida Design Communities, Inc. since December 1, 1998 (the date following the acquisition) and WCI Communities Limited Partnership for the complete year and reflects the reorganization of WCI Communities which occurred on November 30, 1998.

(2)	Contribution margin represents our total line of business gross margin less overhead expenses directly related to each line of business. All sales, marketing and indirect corporate overhead expenses are included in the caption “Selling, general, administrative and other, including real estate taxes.”

(3)	Extraordinary items are (a) the unamortized balance of debt issuance costs associated with the acquisition of WCI Communities Limited Partnership in July 1995 that was written off in 1997 when this debt was refinanced, (b) the unamortized balance of debt issuance cost associated with the early repayment of a high-rise construction loan in 1999 and (c) the unamortized balance of debt issuance costs associated with the early repayment of debt in conjunction with the $350.0 million offering of our outstanding 10 5/8% senior subordinated notes due 2011 in February and June 2001.

(4)	For 1997, weighted average shares basic and diluted were derived by assuming that 25,096,400 shares issued for partners’ interest in WCI LP were outstanding for twelve months. For 1998, weighted average shares basic and diluted were derived using the following assumptions: that 25,096,400 shares issued for the partners’ interest in WCI LP were considered outstanding for twelve months; that 10,939,374 shares issued for the acquisition of FDC were considered outstanding from date of issuance, November 30, 1998; and that 470,665 shares issued to employees were considered outstanding from the date of grant, December 4, 1998.

(5)	Prior to November 30, 1998, WCI Communities Limited Partnership reported its taxable income to its partners. As a result, prior to November 30, except for earnings recorded by Bay Colony-Gateway, a C corporation, WCI Communities Limited Partnership’s consolidated taxable earnings were taxed directly to WCI Communities Limited Partnership’s then-existing partners. Net income (loss) pro forma for C corporation status assumes that WCI Communities filed a consolidated return as a C corporation and was taxed as a C corporation at the statutory tax rates that would have applied for all periods.

(6)	Debt excludes accounts payable and accrued expenses, customer deposits and other liabilities (other than land repurchase liabilities), deferred income tax liabilities and community development district obligations.



	Year ended						Year ended
	December 31, 2001						December 31, 2000

					Average						Average
Single- and multi-family homebuilding	Number		Value*		price*		Number		Value*		price*


Number of communities with active homebuilding at period end		14		—		—		15		—		—




Net new contracts		1,595	$	522,612	$	328		1,754	$	474,713	$	271




Closed sales		1,732		492,576		284		1,614		381,208		236




Ending backlog		616		265,401		431		753		235,365		313


UBS Warburg	Credit Suisse First Boston


*	Dollar amounts in thousands.


*	Dollar amounts in thousands.



	Year ended December 31, 2000						Year ended December 31, 1999

					Average						Average
Single- and multi-family homebuilding	Number		Value*		price*		Number		Value*		price*


Number of communities with active homebuilding at period end		15		—		—		17		—		—




Net new contracts		1,754	$	474,713	$	271		1,346	$	283,775	$	211




Closed sales		1,614		381,208		236		1,332		269,720		202




Ending backlog		753		235,365		313		613		141,860		231



	2001

	1st		Percentage			2nd		Percentage			3rd		Percentage			4th		Percentage
	Quarter		of Total			Quarter		of Total			Quarter		of Total			Quarter		of Total			Total



	(in thousands)




Revenue	$	196,959		17.7	%	$	234,820		21.2	%	$	271,767		24.5	%	$	406,737		36.6	%	$	1,110,283




Contribution margin		58,691		17.0			71,722		20.8			86,835		25.2			127,387		37.0			344,635




Net income		9,064		8.9			18,626		18.2			26,386		25.8			48,159		47.1			102,235




Single- and multi-family homebuilding closings		238		13.7			369		21.3			387		22.4			738		42.6			1,732


																					FMV at
		2002			2003			2004			2005		2006		Thereafter			Total			12/31/01



		(in thousands)




Debt:




	Fixed rate	$	—		$	—		$	—		$	—	$	—		$350,000			$350,000		$	361,375




	Average interest rate		—			—			—			—		—		10.63	%		10.63	%




	Variable rate	$	30,860		$	41,558		$	255,257				$	—		—			$327,675		$	327,675




	Average interest rate		4.63	%		4.71	%		4.81	%		—		—		—			4.68	%




Interest rate swaps:




	Variable to fixed	$	160,000		$	40,000		$	50,000			—	$	—		—			$250,000		$	(4,001	)




	Average pay rate		5.62	%		5.70	%		5.68	%		—		—		—			5.65	%




	Average receive rate		*			*			*			*		*		*			*


							Approximate		Number of
			Approximate		Approximate		remaining		remaining
	Number of		total		remaining		entitled		tower
Region	communities		acres		acres		units⁽⁵⁾		sites


Southwest Florida⁽¹⁾		20		14,500		6,400		10,200		31




Southeast Florida⁽²⁾		6		19,900		2,800		5,900		2




Central Florida⁽³⁾		5		8,650		3,500		6,900		1




Palm Beach Florida⁽⁴⁾		11		14,950		2,800		5,200		14

Total		42		58,000		15,500		28,200		48


⁴	Actual birth rates in years 1945, 1950, 1955 and 1960, as reported by the National Center for Health Statistics, 1996, were used as the basis for determining the number of Americans turning 50 for the years 1995, 2000, 2005 and 2010, respectively. The chart does not reflect deaths or migration in or out of the United States.


SOURCE:	Cornell University Department of Consumer Economics and Housing, 1994


SOURCE:	The Public Policy Institute of New York State, Inc., 2001


¹	Bureau of Economic Analysis, US Department of Commerce, 2000


²	Bureau of Labor Statistics, United States Department of Labor, 2002


Name	Age		Position


Alfred Hoffman, Jr.		67	Chief Executive Officer and Director




Don E. Ackerman		68	Chairman of the Board of Directors and Executive Vice President




Jerry L. Starkey		42	President, Chief Operating Officer and Director




James P. Dietz		37	Senior Vice President and Chief Financial Officer




Steven C. Adelman		49	Senior Vice President and Treasurer




R. Michael Curtin		54	Senior Vice President, Marketing




Milton G. Flinn		46	Senior Vice President, Real Estate Services Division




David L. Fry		42	Senior Vice President, Amenities Division




Michael R. Greenberg		47	Senior Vice President, Homebuilding Division




Vivien N. Hastings		50	Senior Vice President and General Counsel




S. Charles Mattoff		58	Senior Vice President, Human Resources




George R. Page		58	Senior Vice President, Tower Division




F. Philip Handy		57	Director




Lawrence L. Landry		58	Director




Thomas F. McWilliams		58	Director




Joshua J. Mintz		46	Director




Jay Sugarman		39	Director




Stewart Turley		67	Director