OPERATIONS OVERVIEW

We are primarily engaged in real estate land sales and development, reinvestment of land sales proceeds into income properties, and golf course operations. We own approximately 11,200 acres in Florida, of which approximately 10,200 are located within and form a substantial portion of the western boundary of The City of Daytona Beach. Our lands are well-located in the central Florida Interstate 4 corridor, providing an excellent opportunity for reasonably stable land sales in future years.

With our substantial land holdings in Daytona Beach, we have parcels available for the entire spectrum of real estate uses. Along with land sales, we selectively develop parcels primarily for commercial uses. Although pricing levels and changes by us and our immediate competitors can affect sales, we generally enjoy a competitive edge due to low costs associated with long-time land ownership and a significant ownership position in the immediate market. As a general policy we do not discount sales prices to accelerate land sales.

Until the dramatic downturn in the national and local economies in 2008, sales activity on company-owned lands had been strong over the last several years. Development activities on and around company-owned lands continued relatively strong throughout 2008 with the commencement and completion of projects planned or in process before the downturn. During 2008, the we sold approximately 24 acres of land consisting of 22 upland acres and 2 wetland acres in two sales transactions. Sales and development activities over the last several years included the sale of 120 acres of land to Florida Hospital for the construction of a new hospital, which is anticipated to open mid-year 2009; the expansion of the Daytona Beach Auto Mall; the opening of a second office building in the Cornerstone Office Park; continued development within the 250-acre Gateway Commerce Park (where a 32,000 square-foot industrial building was completed in early 2009) and the 60-acre Interstate Commerce Park, both adjacent to Interstate 95, and the sale of approximately 100 acres of land west of Interstate 95 on which a private high school was constructed and opened in August 2008. In early 2009 the City of Daytona Beach police headquarters, located adjacent to Gateway Commerce Park, was completed and occupied. In the first half of 2008, development also commenced on a 288-unit apartment complex, a medical office building, and a townhouse residential community on the east side of Interstate 95. On the west side of the interstate, development has commenced on a fire station, a hotel, an elementary school, and a 59,000 square-foot furniture retail store in the Interstate Commerce Park.

These commercial and residential development activities tend to create additional buyer interest and sales opportunities, although, the weak economic conditions have led us to enter 2009 with a generally small backlog of contracts.

In 2000, we initiated a strategy of investing in income properties utilizing the proceeds of agricultural land sales qualifying for income tax deferral through like-kind exchange treatment for tax purposes. By the end of 2008, we had invested approximately $120 million in twenty-six income properties through this process. This investment includes the April 2008 purchase of a Harris Teeter supermarket in Charlotte, North Carolina, for approximately $9.7 million.

With this investment base in income properties, lease revenue of approximately $9.3 million is projected to be generated annually. This income, along with income from additional net-lease income property investments, will decrease earnings volatility in future years and add to overall financial performance. This has enabled us to enter into the business of building, leasing, and holding in our portfolio select income properties that are strategically located on our lands.

We currently have two self-developed projects in process. The first project is a two-building 31,000 square-foot flex office space complex located within Gateway Commerce Park. Construction of these buildings was completed in the third quarter of 2008. Leases are currently in negotiation on this project. Also under development is a 12 acre, 4-lot commercial complex, located at the corner of LPGA and Williamson Boulevards in Daytona

Beach, Florida. Site work, building plans, and permitting are complete for this project. The parcel will include a 23,000 square-foot "Class A" office building. Construction of the building began in July 2008 with the execution of a lease with Merrill Lynch for a significant portion of the building. A lease is currently in negotiation for substantial additional space in the building.

Golf operations consist of the operation of two golf courses, a clubhouse facility, and food and beverage activities within the LPGA International mixed-use residential community on the west side of Interstate 95, south and east of LPGA Boulevard. The Champions course was designed by Rees Jones and the Legends course was designed by Arthur Hills.

Prior to 2007, golf operations revenues had grown despite an overall decline in golf course revenues in Florida. The Florida golf industry has been hurt by over building of golf courses and hurricane activity in past years. During 2007, we made changes in management within the golf operation looking for improved operating results for the future. The overall weak national and local economies led to continued losses in 2008. We believe that improvement in golf course operations will be a function of stronger economic conditions, increased tourist demand, a reduction in new golf course construction which has been experienced in the last several years, and most importantly, increased residential growth in LPGA International and adjoining land to the west and northwest. LPGA International and nearby projects currently under development are planned to contain about 6,000 additional dwelling units. Our efforts to improve revenues and profitability have focused on providing quality products and services while maintaining consistent and stringent cost control for both golf course and food service activities.

Our agricultural operations consist of growing, managing, and selling timber and hay on approximately 10,700 acres of land on the west side of Daytona Beach, Florida. We are currently in the process of converting a significant portion of its timberlands to hay production.

SUMMARY OF 2008 OPERATING RESULTS

For the year ended December 31, 2008, profits of $4,834,900 were earned, equivalent to $0.84 per share. These profits represented a 64% decrease from calendar year 2007 profits totaling $13,532,838, equivalent to $2.37 per share. The downturn was primarily attributed to lower profits from commercial land sales and increased losses from golf operations. Earnings from income properties partially offset these declines with a 6% increase in earnings resulting from the Harris Teeter property acquired in April 2008. General and administrative expenses declined in 2008 compared to 2007 primarily as a result of the net change in stock option expenses resulting from a decrease in the price of our stock in 2008 and an increase in stock price during 2007.

We also use Earnings before Depreciation, Amortization, and Deferred Taxes (EBDDT) as a performance measure. Our strategy of investing in income properties through the deferred tax like-kind exchange process produces significant amounts of depreciation and deferred taxes.

The following is the calculation of EBDDT for the 2008 and 2007 fiscal years:

                                                                   Year Ended
                                                         December 31,       December 31,
                                                             2008               2007
Net Income                                              $    4,834,900      $  13,532,838
Add Back:
Depreciation and Amortization                                2,655,088          2,466,981
Deferred Taxes                                                 434,037          3,390,812

Earnings before Depreciation, Amortization, and
Deferred Taxes                                          $    7,924,025      $  19,390,631

EBDDT is calculated by adding depreciation, amortization, and change in deferred income tax to net income, as they represent non-cash charges. EBDDT is not a measure of operating results or cash flows from operating activities as defined by U.S. generally accepted accounting principles. Further, EBDDT is not necessarily indicative of cash availability to fund cash needs and should not be considered as an alternative to cash flow as a measure of liquidity. We believe, however, that EBDDT provides relevant information about operations and is useful, along with net income, for an understanding of our operating results.

EBDDT totaled $7,924,025 for the year ended December 31, 2008. This EBDDT represented a 59% decrease from EBDDT of $19,390,631 posted for the 2007 fiscal year. The downturn was the result of the lower net income coupled with a reduction in the add-back for deferred taxes on the reduced real estate sales volume and the associated deferred tax gains. EBDDT for 2008 included a reduction for deferred income taxes of $780,125 associated with increased pension liabilities charged to shareholders' equity.

RESULTS OF OPERATIONS

2008 Compared to 2007

REAL ESTATE OPERATIONS

REAL ESTATE SALES

During calendar year 2008, 24 acres of land were sold, all of which were for commercial uses. These sales consisted of 22 acres of uplands and 2 acres of wetlands and generated total revenues and profits from real estate sales of $4,565,599 and $2,972,030, respectively. The average sales price per acre of upland acres sold was $191,390 for the year. Revenues and profits from real estate sales were down significantly when compared to the revenues totaling $25,947,800 and profits of $19,013,088 generated during 2007 on the sale of 486 acres of land, of which 263 acres were upland acres. Sales during 2007 included the charitable contribution of 25 acres of land at a value of $1,500,000 and $1,900,000 of impact fee credits. The average sales price of commercial acreage was $229,675 per upland acre during 2007 with the price of residential acres sold averaging $47,087 per upland acre. Costs and expenses from real estate sales declined substantially in 2008 compared to 2007 on the significant volume decrease. Costs and expenses in 2007 also included higher costs associated with both the charitable contribution and impact fee credits.

INCOME PROPERTIES

Income properties produced a profit of $7,337,494 on revenues totaling $9,235,775 for the twelve months of 2008. These profits and revenues represented increases of 5% and 6%, respectively, when compared to the prior year. The increases were primarily generated on the April 2008 addition of the Harris Teeter supermarket located in Charlotte, North Carolina. During 2007 profits totaled $6,956,345 on revenues of $8,725,096.

GOLF OPERATIONS

Golf operations posted a loss of $1,843,094 during 2008, a 5% increase over the loss totaling $1,749,191 recorded in 2007. The increased loss was realized on a 9% decrease in revenues. Both golf and food and beverage activities contributed to the revenue decline as golf activities revenues fell 4% while revenues from food and beverage activities decreased 17%. The number of golf rounds played during 2008 was down 12% when compared to the prior year, with the average greens fee per round played increasing 6%. Revenues totaled $4,671,618 in 2008 and $5,160,070 in 2007. Partially offsetting the lower revenue was a 6% drop in costs and expenses, with costs and expenses totaling $6,514,712 in 2008 and $6,909,261 in the prior year. In addition to the reduced cost of sales associated with the lower volume, the decline in golf costs and expenses was also attributed to lower payroll costs, particularly related to golf activities.

GENERAL, CORPORATE, AND OTHER

Profits on sales of undeveloped real estate interests during 2008 totaled $1,369,696 on the release of mineral surface entry rights on 1,344 acres of land. In 2007, the release of mineral surface entry rights on 4,049 acres generated profits of $2,579,827.

During 2008, interest and other income totaled $712,496 and represented a 7% gain over the interest and other income of $663,231 recorded in calendar year 2007. Higher interest earned on increased balances from mortgage notes receivable, from year-end 2007 land sales, and $100,000 of income from the capture of a deposit on a canceled land sales transaction accounted for this gain. Partially offsetting these items was lower interest earned on investment securities.

General and administrative expenses decreased 54% for calendar year 2008 to $2,812,803. The significant variance was primarily the result of a $3,308,442 net change in stock option expenses resulting from a decrease in the price of our stock in 2008 and an increase in stock price during 2007. Somewhat offsetting the decrease in general and administrative expenses were higher legal and other costs related to shareholder relations. These costs approximated $273,000 during 2008. General and administrative expenses totaled $6,170,242 during 2007.

SUMMARY OF 2007 OPERATING RESULTS

For the year ended December 31, 2007, profits of $13,532,838 were earned, equivalent to $2.37 per share. These profits represented a 4% decrease from calendar year 2006 profits totaling $14,028,322, equivalent to $2.47 per share. The downturn was primarily attributed to lower profits from commercial land sales and increased losses from golf operations. Earnings from income properties partially offset these declines with a 3% increase in earnings resulting from two properties acquired mid-year 2006 being in place for the entire year. General and administrative expenses declined in 2007 compared to 2006 due to lower stock option expense accruals. Included in 2006's results was income, net of tax, from discontinued operations of $240,476, equivalent to $.04 per share, representing the operation and sale of an auto dealership facility site in Daytona Beach, that was being held as an income property. Also included in net income for 2006 was a charge of $216,093, net of tax, equivalent to $.04 per share, for the cumulative effect of a change in accounting principles due to the adoption of SFAS No. 123 (revised 2004) "Share Based Payment" ("SFAS 123R") accounting for stock options.

We also use Earnings before Depreciation, Amortization, and Deferred Taxes (EBDDT) as a performance measure. The Company's strategy of investing in income properties through the deferred tax like-kind exchange process produces significant amounts of depreciation and deferred taxes.

The following is the calculation of EBDDT for the 2006 and 2007 fiscal years:

                                                                    Year Ended
                                                         December 31,       December 31,
                                                             2007               2006
Net Income                                               $  13,532,838      $  14,028,322
Add Back:
Depreciation and Amortization                                2,466,981          2,265,848
Deferred Taxes                                               3,390,812          5,332,513

Earnings before Depreciation, Amortization, and
Deferred Taxes                                           $  19,390,631      $  21,626,683

EBDDT is calculated by adding depreciation, amortization, and change in deferred income tax to net income, as they represent non-cash charges. EBDDT is not a measure of operating results or cash flows from operating activities as defined by U.S. generally accepted accounting principles. Further, EBDDT is not

necessarily indicative of cash availability to fund cash needs and should not be considered as an alternative to cash flow as a measure of liquidity. The Company believes, however, that EBDDT provides relevant information about operations and is useful, along with net income, for an understanding of the Company's operating results.

EBDDT totaled $19,390,631 for the year ended December 31, 2007. This EBDDT represented a decrease of 10% from the EBDDT of $21,626,683 for the 2006 fiscal year. The downturn is not only the result of lower net income, but also a reduction in the add-back for deferred taxes. The add-back for deferred taxes declined as some gains from real estate transactions were not deferred for tax purposes, as they did not meet the criteria established by the tax code, or we were unable to identify properties which met our reinvestment criteria.

RESULTS OF OPERATIONS

2007 Compared to 2006

REAL ESTATE OPERATIONS

REAL ESTATE SALES

The sale of 486 acres of land, consisting of 263 upland acres and 223 wetland acres, during calendar year 2007, including the charitable contribution of 25 acres of land valued at $1,500,000, produced revenues and profits of $25,947,800 and $19,013,088, respectively. Also included in sales was the sale of $1,900,000 of impact fee credits. These revenues and profits represented downturns of 10% and 13%, respectively, when compared to 2006 twelve-month results. The average sales price of commercial acreage was $229,675 per upland acre during the year with the price for residential acres sold averaging $47,087 per upland acre. Costs and expenses rose substantially during the period due to the higher cost basis associated with both the charitable contribution and impact fees. The sale of 213 acres of property during 2006 produced profits totaling $21,811,380 on revenues of $28,941,749. Profits from real estate sales during 2006 also included the recognition of profits, totaling $4,780,000, which had previously been deferred in 2005 due to post-closing obligations. Average sales prices per upland acre were $139,389 and $100,000 for commercial and residential acreages, respectively.

INCOME PROPERTIES

The addition of two properties in mid-year 2006 accounted for the revenue and profits gains from income properties of 7% and 3%, respectively, in 2007 compared to the prior year results. Profits from income properties amounted to $6,956,345 for the full year of 2007 on revenues totaling $8,725,096. During 2006's twelve-month period, profits of $6,723,017 were realized on revenues totaling $8,183,729. Income properties costs and expenses rose 21% during 2007, to $1,768,751, due to the increased depreciation and operating costs associated with the properties acquired.

GOLF OPERATIONS

Golf operations posted a loss of $1,749,191 during the 2007 year. This loss represented an increase of 18% when compared to losses of $1,477,892 recorded for the prior year. Revenues realized were down 1% to $5,160,070 for the period from $5,210,725 in 2006. The revenue decrease was attributed to both golf and food and beverage activities with each declining 1%. The number of golf rounds played during 2007 was in line with the prior year, while the average rate per round played fell 3%. Golf operations costs and expenses rose 3% for the twelve-month period to $6,909,261. The higher expenses were principally associated with increased golf course maintenance expense and food and beverage payroll costs. Golf costs and expenses totaled $6,688,617 for the year ended December 31, 2006.

GENERAL, CORPORATE, AND OTHER

During 2007, profit on sales of other real estate interests totaled $2,579,827 on the release of mineral surface and subsurface entry rights on 4,049 acres. The release of surface and subsurface entry rights on 610 acres during 2006 produced profits of $679,315.

Interest and other income rose 16%, to $663,231 in the twelve months of 2007, when compared to interest and other income of $573,735 recorded during 2006. Higher interest on investment securities and mortgage notes receivable, on higher outstanding balances, was offset by lower interest earned on funds held by an intermediary for reinvestment through the like-kind exchange process.

General and administrative expenses totaling $6,170,242 for 2007 represented a 10% decrease from the costs amounting to $6,819,371 in the prior year. Lower stock option expenses, due to our lower stock price, accounted for this decline. Offsetting the decrease in stock option expense were higher legal fees, primarily associated with Securities and Exchange Commission compliance, and pension and other post-retirement benefit costs.

The effective income tax rate approximated 36% in 2007 and 35% in calendar year 2006. Both rates were somewhat lower than our typical effective income tax rate approximating 38%. The lower tax rates are associated with the utilization and/or the release of valuation allowances associated with charitable contributions. Charitable contributions of land to qualified organizations were made in 2006 and 2007. As we have reasonable assurance that we will generate taxable income to utilize a portion of these income tax deductions over the five-year carryforward period, the contributions result in positive adjustments to the income tax provision for both periods. A valuation allowance has been established for the portion of the deductions we project we will not be able to utilize.

LIQUIDITY AND CAPITAL RESOURCES

Cash, restricted cash, and investment securities totaled $6,112,420 at December 31, 2008, a decrease of $15,332,050 from the $21,444,470 balance held at year-end 2007. These funds were primarily used for development and construction activities, the continued conversion of our timber lands to hay, and the payment of dividends and income taxes, in addition to the approximate $9,700,000 purchase of the Harris Teeter income property in Charlotte, North Carolina. Construction and development activities, which approximated $7,100,000 during the year, included the construction of two roads on our core lands adjacent to LPGA Boulevard, completion of the 31,000 square-foot flex office space complex in Gateway Commerce Center, and the commencement of construction on the 23,000 square-foot "Class A" office building. These office buildings are intended to be held in our income property portfolio. Costs for the clearing and planting of lands for hay totaled approximately $3,300,000, with dividends of $2,290,835 paid, equivalent to $.40 per share, and income taxes totaling $3,353,343 paid.

Besides cash and maturing investment securities, funds during the year were provided by operating activities and existing financing sources. At December 31, 2008 our $20.0 million unsecured revolving line of credit had an outstanding balance of $2,017,895.

Capital expenditures for 2009 are projected to approximate $9.5 million, net of reimbursements from development partners. These expenditures include the completion of road construction and the "Class A" office building, tenant improvements, and the continuation of the conversion of timber lands to hay. Also included in capital requirements during 2009 is the acquisition of property through Internal Revenue Code Section 1033 involuntary conversion under threat of condemnation tax deferral provisions. We plan to reinvest $8.5 million by year-end 2009 through this process.

At the end of 2008, the Company focused its efforts on obtaining federal stimulus dollars to extend Dunn Avenue, a major east west thoroughfare bridging Interstate 95, and provide improved access to Company lands. Subsequent to year end, the Company reached a conceptual agreement with the City of Daytona Beach and the County of Volusia on a cost sharing agreement that will allow the use of federal funds to build this road project. This cost sharing agreement will reduce capital expenditures that the Company, as well as the City of Daytona Beach and the County of Volusia, might have otherwise been required to make to construct Dunn Ave.

Capital to fund the planned expenditures in 2009 is expected to be provided from cash and investment securities (as they mature), operating activities, and financing sources that are currently in place, including the $20 million revolving line of credit.

We also believe that we have the ability to borrow on a non-recourse basis against our existing income properties, which are all free of debt as of the date of this filing. As additional funds become available through qualified sales, we expect to invest in additional real estate opportunities.

During the fourth quarter of 2008, our Board of Directors authorized a program to repurchase shares of our common stock having an aggregate value of up to $8,000,000. The authorization permits us to effect the repurchases from time to time through a variety of methods including open market repurchases and privately negotiated transactions. The repurchase plan will be funded through reduced dividend payments in the future, and we have no plans to increase debt to fund the repurchase plan. Through March 10, 2009, 4,660 shares had been repurchased at a total cost of $104,648.

Our Board of Directors and management continually review the allocation of any excess capital with the goal of providing the highest return for all shareholders over the long term. The reviews consider various alternatives, including increasing or decreasing regular dividends, declaring special dividends, repurchasing stock, and retaining funds for reinvestment, including road development and hay conversion of timber lands. The Board of Directors has reaffirmed its support for the continuation of the 1031 tax- deferred exchange strategy for investment of agricultural land sales proceeds, self-development of income properties, and development of infrastructure on company-owned lands.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

We have various contractual obligations which are recorded as liabilities in our consolidated financial statements. Other items, such as certain development obligations, are not recognized as liabilities in our consolidated financial statements, but are required to be disclosed.

The following table summarizes our significant contractual obligations and commercial commitments on an undiscounted basis at December 31, 2008, and the future periods in which such obligations are expected to be settled in cash. In addition, the table reflects the timing of principal and interest payments on outstanding borrowings.

                             PAYMENT DUE BY PERIOD


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