10-K 1 l92973ae10-k.txt GRANITE DEVELOPMENT PARTNERS, L.P. FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 ----------------------- FORM 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 X For the fiscal year ended December 31, 2001 - ----------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- -------------- Commission file number 0330-080104 ----------- GRANITE DEVELOPMENT PARTNERS, L.P. ---------------------------------- (Exact name of registrant as specified in its charter) Delaware 34-1754061 ------------------------------------- --------------------------------- (State or other jurisdiction of incorporation (IRS Employer Identification No.) or organization) 1050 Terminal Tower 50 Public Square Cleveland, Ohio 44113 -------------------------------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code 216-621-6060 ----------------------------- Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --------- --------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any Agreement to this form 10-K. ( ) DOCUMENTS INCORPORATED BY REFERENCE None TABLE OF CONTENTS PART I. PAGE ------- ---- Item 1. Business 3 2. Properties 4 3. Legal Proceedings 4 4. Submission of Matters to a Vote of Security Holders 4 PART II. -------- Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 4 6. Selected Financial Data 5 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 7A. Quantitative and Qualitative Disclosure About Market Risk 16 8. Financial Statements and Supplementary Data 17 9. Changes in and Disagreements with Accountants on Accounting And Financial Disclosure 46 PART III. --------- Item 10. Directors and Executive Officers of the General Partner of the Registrant 46 11. Executive Compensation 46 12. Security Ownership of Certain Beneficial Owners and Management 46 13. Certain Relationships and Related Transactions 46 PART IV. -------- Item 14. Exhibits, Financial Statement Schedules and Reports on form 8-K 47-48

2 PART I Item 1. Business ORGANIZATION Granite Development Partners, L.P. ("Partnership"), a Delaware limited partnership, was formed on November 15, 1993 for the purpose of investing in, acquiring, owning, developing, selling and otherwise disposing of undeveloped and developed land acquired by the Partnership ("Partnership Properties"). The Partnership also may act as a joint venture partner with respect to the acquisition, ownership, development, sale or disposition of certain properties (also the "Partnership Properties"). The Partnership will terminate on December 31, 2013 or upon disposition of assets or certain other events. Effective December 16, 1998, the Partnership changed its fiscal year end from January 31 to December 31. The Partnership expects sales of all its properties to be complete by the year 2005, at which time the Partnership is expected to dissolve and terminate. The Partnership is the owner of Granite Silver Development Partners, L.P. the managing partner in Silver Canyon Partnership. Silver Canyon Partnership ("SC Partnership"), a Nevada limited partnership, is owned 33 1/3 % by Granite Silver Development Partners, L.P., 33 1/3% by Silver Canyon Corporation ("SCC"), and 33 1/3% by American Nevada Seven Hills Limited Partnership ("ANC"), a Nevada limited partnership and subsidiary of American Nevada Corporation, a Nevada corporation. SC Partnership is the owner and developer of Seven Hills, an approximately 1,300 acre master planned community located outside Las Vegas, Nevada. INVESTMENT OBJECTIVES AND POLICIES The principal investment objectives of the Partnership are the preservation of capital and appreciation of such capital through sales of land at increased values. There is no assurance that these investment objectives will be achieved. The Partnership has invested in undeveloped land or in partnerships or joint ventures that hold interests in such land on an all-cash basis and intends to realize the appreciation of such land upon resale. The Partnership Properties, the majority of which will be developed as residential tracts, have been acquired and developed with the proceeds from the sale of the senior notes and the warrants exercisable into partnership units and the proceeds from the sale of Partnership Properties allocated to such future acquisition and development. The Partnership Properties are in various stages of development ranging from fully developed and ready for sale to third parties, to projects with sales not expected to be completed for another three years. Seven Hills is not expected to fully mature for another two years. The Partnership expects sales of all Partnership Properties to be completed by the year 2005, at which time the Partnership will dissolve and terminate. The Partnership will develop each of its properties at a rate which will approximate the absorption rate in the relevant real estate market. Once development is completed, the properties will be marketed and sold. Upon completion of the sale of all of the Partnership Properties, remaining proceeds will be used to repay the senior note holders and the Partnership will be dissolved and terminated. 3 FORMATION OF THE PARTNERSHIP All of the Partnership Properties have been acquired and are in various stages of development. These properties are owned, developed and sold by the Partnership or a joint venture in which the Partnership, or a wholly-owned subsidiary of the Partnership, is a joint venture partner. The formation of the Partnership was designed to facilitate development of Partnership Properties under the control of a single entity, the Partnership, with greater access to the public and private capital markets and to enhance the potential for future growth. COMPETITION Competition in this segment is dominated by price, location and availability of properties. Item 2. Properties The following properties remain in the Partnership property portfolio as of December 31, 2001:

Item 3. Legal Proceedings Other than routine litigation and administrative proceedings arising in the ordinary course of business, the Partnership is not presently involved in any litigation nor, to its knowledge, is any litigation threatened against the Partnership or its properties, which is reasonably likely to have a material adverse effect on the liquidity or results of operations of the Partnership. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the year ended December 31, 2001. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The securities offered of Granite Development Partners, L.P., were 36,000 warrants, each of which entitled the holder thereof to purchase one unit of limited partnership interest of the Partnership, at an exercise price of $111.11 per partnership unit and up to 36,000 partnership units issuable upon exercise of the warrants. The warrants were exercisable at any time prior to December 3, 1996. On December 3, 1996, all 36,000 warrants were exercised. The securities are not traded on a public market. 4 Item 6. Selected Financial Data

* Fiscal 2001 results are for the year ended December 31, 2001 ** Fiscal 2000 results are for the year ended December 31, 2000 *** Fiscal 1999 results are for the year ended December 31, 1999 **** Fiscal 1998 results are for the eleven months ended December 31, 1998 ***** Fiscal 1997 results are for the year ended January 31, 1998 5 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of Granite Development Partners, L.P. ("Partnership"), should be read in conjunction with the audited financial statements and notes thereto as of and for the year ended December 31, 2001 contained in this Annual Report on Form 10-K. RESULTS OF OPERATIONS Overview The Partnership's results of operations for the years ended December 31, 2001, 2000 and 1999 include the financial results, accounted for on the equity basis, of Eaton Estate Partnership ("Eaton") and Silver Canyon Partnership ("SC Partnership"), the Partnership's two joint ventures. The Partnership has four remaining wholly owned projects in inventory at December 31, 2001. Eaton recorded its final sales during 2001. Eaton will be dissolved in 2002 and all remaining cash will be distributed to the partners pursuant to the terms of the partnership agreement. The Partnership is the owner of Granite Silver Development Partners, L.P., the managing partner in SC Partnership. The only project owned by SC Partnership is Seven Hills, which is discussed in more detail below. For the fiscal years ended December 31, 2001 and December 31, 2000, the Partnership reported net income of $2,886,995 and a net loss of $1,933,299, respectively. The increase in net income is primarily the result of net income from joint ventures of $6,145,060 for the year ended December 31, 2001 versus a net loss from joint ventures of $908,158 for the year ended December 31, 2000. This increase was partially offset by a decrease in Partnership gross margins from $3,364,688 for the year ended December 31, 2000 to $714,869 for the year ended December 31, 2001. For the fiscal years ended December 31, 2000 and December 31, 1999, the Partnership reported net losses of $1,933,299 and $17,731,283 respectively. The decrease in net loss is primarily the result of the following: a loss from joint ventures of $9,670,001 for the year ended December 31, 1999 versus $908,158 for the year ended December 31, 2000; the forgiveness of $3,800,771 of previously recognized interest income from SC Partnership during 1999; the forgiveness of $1,455,981 of previously recognized commission income from SC Partnership during 1999; and the forgiveness of $220,000 of administrative fee income from SC Partnership during 1999. The forgiveness of previously recognized interest and fees is the result of an agreement ("Agreement") between American Nevada Seven Hills Limited Partnership ("ANC") and the Partnership, the partners in SC Partnership, which modified certain terms of the Silver Canyon Partnership Agreement. This Agreement is described further in subsequent paragraphs. Silver Canyon Partnership - Agreement (1999) As discussed above, the primary reason for the net loss reported by the Partnership in 1999, was due to the loss from joint ventures of $9,670,001 of which $9,899,688 related to SC Partnership. The SC Partnership loss recorded by the Partnership related primarily to excess project costs for the Seven Hills project identified in 1999. As a result of such excess costs, ANC, the partner in SC Partnership responsible for the on-site improvements in the Seven Hills project, and the Partnership entered into the Agreement which modified certain terms of the Silver Canyon Partnership Agreement. The intent of the Agreement was to result in a more equitable sharing of excess costs by ANC and the Partnership to minimize the impact of the 6 identified costs in excess of budget to complete the Seven Hills project and to preserve cash flow available to meet the Partnership's obligations. The Agreement's impact on the Silver Canyon Partnership Agreement included the following provisions: 1. ANC assigned all of its future and past commissions, fees, and distributions relating to loans, capital calls and interest thereon to the SC Partnership. Amounts previously paid were deemed return of capital. 2. ANC funded one-half of the settlement amounts for the two lawsuits settled in 1999 and 2000. 3. The Partnership funded the remaining settlement liability for the lawsuits but received a priority distribution to cover such capital contribution. 4. After the priority distribution in #3, ANC and the Partnership received distributions pari passu until ANC recovered its entire cash investment except for $750,000, which occurred in the first quarter of 2001. 5. Thereafter, the Partnership will receive all distributions until it has recovered its entire capital account. To the extent the Partnership does not recover its entire capital account, ANC will negotiate in good faith as to whether ANC should fund one-half of any additional lawsuits funded by the Partnership. 6. After the Partnership has recovered its entire capital account, ANC and the Partnership will share all remaining distributions pari passu. The following table summarizes the favorable impact of the Agreement to SC Partnership as of December 31, 1999: Land inventory adjustment $ 5,054,279 Fees and commissions adjustment 6,110,701 ----------- Total adjustments $11,164,980 ===========

The following table summarizes the impact of the Agreement to the SC Partnership Agreement as it relates directly to the Partnership as of December 31, 1999: Land inventory adjustment at ownership $ 4,263,313 Fees and commissions adjustment at ownership 1,675,982 ------------ Subtotal $ 5,939,295 Forgiveness of capitalized income recognized (3,800,771) Forgiveness of commission income (1,455,981) Forgiveness of administration fee income ( 220,000) ------------ Subtotal $(5,476,752) ------------ Total $ 462,543 ============

The general partner of the Partnership is FC-Granite, Inc., an Ohio corporation ("FC-Granite"). FC-Granite is a wholly-owned subsidiary of Sunrise Land Company ("Sunrise"). As a result of the Partnership excess costs and their impact on the Partnership, FC-Granite and Sunrise forgave certain unpaid expenses as of June 30, 1999 and will not charge 7 the Partnership in the future. The following table summarizes the forgiven expenses which were recorded as a reduction to expense in the statement of operations: Administrative fees to FC-Granite $ 77,123 Real estate commissions to FC-Granite 59,295 Development fees to Sunrise 67,765 Interest to Sunrise 84,476 ---------- $ 288,659 ==========

Seven Hills - Gross Margins Through September 30, 2000 The loss from joint ventures for the nine months ended September 30, 2000 resulted primarily from SC Partnership recording zero gross margins on its Seven Hills project in Henderson, Nevada. The zero gross margins were the result of an extensive review of project costs performed in 1999, which revealed an increase in the scope of landscape and greenbelt improvements for the balance of the project as well as increases in parcel development costs in excess of budget. As a result, estimated costs to complete the project were revised. During the third quarter of 2000, the Partnership identified potential improvements in the estimated cost to complete the Seven Hills project. However, the management of the Partnership believed that it was premature to recognize gross margins for the project as of the third quarter of 2000 primarily because of the speculative nature of future land sales. A significant portion of the remaining land sales in Seven Hills consisted of estate lots, which are higher priced lots sold to high net worth individuals as opposed to lower priced lots sold in bulk to production home builders. Uncertainties in current and future economic conditions and the large number of estate lots yet to be sold made it very difficult to estimate accurate future sales prices and gross margins. As a result, no gross margins were recorded on sales in the first three quarters of 2000. The zero margins reported by the Partnership specifically related to speculation in high-end estate lot pricing and contingent project costs. A lowest-probable pricing scenario through the third quarter of 2000, showed that remaining sales would be sufficient only to recover remaining development costs, resulting in zero gross margins. A lowest-probable pricing scenario was used because of unknown future economic conditions, and how they could affect the pricing of remaining lots. The 2000 business plan was also adjusted to include certain contingent costs not included in the plan. Seven Hills - Gross Margins Fourth Quarter 2000 and 2001 The 2001 Seven Hills business plan was approved by the partners on January 25, 2001. That plan showed remaining sales to be sufficient to recover estimated costs to complete, resulting in an overall gross margin. However, the 2001 business plan continued to be based on speculation of sales prices, particularly for high priced estate lots. In addition, the 2001 business plan did not include estimates for certain contingent project costs. As a result, Partnership management adjusted the 2001 business plan to remove some of the speculation of higher priced estate lot pricing. The plan was also adjusted by management to include certain of the contingent project cost items that were reasonable to estimate and are reasonably probable to incur. The 2002 Seven Hills business plan was approved by the partners on February 7, 2002. That plan continues to show remaining sales to be sufficient to recover estimated costs to complete resulting in an overall gross margin and was adjusted by management to include certain of the contingent project cost items that are reasonable to estimate and are reasonably probable to incur. 8 During the fourth quarter of 2000 through to December 31, 2001, a significant amount of speculation was eliminated relating to the pricing of estate lots. Strong sales of high-end estate lots at prices higher than those used in the preliminary business plan reduced the need to use a lowest-probable pricing scenario for estate lots. As a result, revised estimates were incorporated by management for pricing and potential future cost. This resulted in the Partnership reporting gross margin beginning with sales in the fourth quarter of 2000. During the year ended December 31, 2001, $9,688,825 of gross margin was reported. SC Partnership and the Partnership management will continue to monitor all trends, results and uncertainties very closely. Gross margin reported will continue to be adjusted based on continued review of the business plan, and the effect that trends, actual results, and potential uncertainties have on the business plan. Comparisons - Results of Operations Sales of developed property totaled $1,629,800 for the year ended December 31, 2001, $7,617,600 for the year ended December 31, 2000 and $4,709,680 for the year ended December 31, 1999. The following significant sales occurred in fiscal 2001: 1) 10 lots in the Solon Estates (Thornbury) development for $1,335,800; 2) 5 lots in the Fairfax Meadows development for $224,000 and 1 lot in River Oaks for $ 70,000. The following significant sales occurred in fiscal 2000: 1) 41 lots in the Solon Estates (Thornbury) development for $4,671,100; 2) 45 lots in the Fairfax Meadows development for $1,973,000 and 4.8 acres in Day Drive for $690,000. The following significant sales occurred in fiscal 1999: 1) 54 lots in the Ledges development for $3,235,680; 2) 20 lots in the Fairfax Meadows development for $1,026,000; 3) 7 single family sublots in Cambridge Park for $368,000; and 4) a 0.77 acre parcel of Drake Estates in Strongsville for $80,000. Note that the Ledges, Cambridge Park and Drake Estates were completed and sold out in 1999. River Oaks was completed and sold out during 2001. As of March 4, 2002, one lot in the Solon Estates (Thornbury) subdivision in Solon, Ohio has sold for $140,000, one lot in the Fairfax Meadows subdivision in Medina, Ohio has sold for $44,000 and one lot in the Music Street subdivision in Newbury Township has sold for $60,000. Also at this date, four lots in the Solon Estates (Thornbury) subdivision in Solon, Ohio were under contract for $523,450. These contracts are not guaranteed to close. Interest income totaled $126,993 for the year ended December 31, 2001 versus $86,631 for the year ended December 31, 2000. Interest income is comprised of interest earned on notes receivable from the sales of developed property and from the investment of proceeds from sales in short-term commercial paper. The increase in interest income in fiscal 2001 is primarily due to the increase in interest earned on notes receivable. Interest income totaled $86,631 for the year ended December 31, 2000 versus $954,398 for the year ended December 31, 1999. The decrease in interest income in fiscal 2000 is mainly due to the decrease in the recognition of deferred interest income. During the year ended December 31, 1999, $772,027 was recognized related to SC Partnership sales, as previously discussed. No deferred interest income was recognized during fiscal year 2000. Commission income of $189,448 was recorded for the year ended December 31, 1999. Commission income earned during 1999 and in prior years from the SC Partnership, in the amount of $1,455,981, was forgiven in 1999 in connection with the Agreement and reapplied as repayment of partner loans and capital. There was no commission income recorded for the years ended December 31, 2001 and 2000. 9 Other income totaled $14,743 for the year ended December 31, 2001 versus $2,205 for the year ended December 31, 2000. The increase in other income in fiscal 2001 is primarily due to forfeited deposits. Other income totaled $2,205 for the year ended December 31, 2000 versus $110,187 for the year ended December 31, 1999. Other income for the year ended December 31, 1999 is mainly comprised of deferred administrative fees and management fees related to the SC Partnership. Administrative fee income earned during fiscal 1999 and in prior years in the amount of $220,000 was reapplied as repayment of partners loans and capital. The decrease in other income in fiscal 2000 is mainly due to the decrease in the recognition of deferred administrative and management fees related to the SC Partnership. Interest, commission, and administrative fee income in the amounts of $3,800,771, $1,455,981, and $220,000, respectively, recorded through the statement of operations in fiscal year 1999 and prior years, was forgiven during the year ended December 31, 1999. The total amount of $5,476,752 was recorded as a loss from joint venture agreement in the statement of operations. Interest expense totaled $3,788,423 for the year ended December 31, 2001 versus $4,090,708 for the year ended December 31, 2000. Interest expense is mainly comprised of interest accrued for Senior Notes, operating loans and mortgage notes payable. There was no interest expense incurred for operating loans during the year ended December 31, 2001 versus $354,359 for the year ended December 31, 2000. Interest expense totaled $4,090,708 for the year ended December 31, 2000 versus $4,470,896 for the year ended December 31, 1999. Interest expense for operating loans was $354,359 for the year ended December 31, 2000 versus $503,287 for the year ended December 31, 1999. Partner fees totaled $143,154 for the year ended December 31, 1999. Partner fees are comprised of administrative fees, development fees and commissions. There were no partner fees recorded for the years ended December 31, 2001 and 2000. As a result of the SC Partnership excess costs and their impact on the Partnership, FC-Granite modified the administrative fee arrangement. The administrative fee was not earned or accrued beyond June 30, 1999 and the unpaid accrued amount of $77,123 as of June 30, 1999 was deemed paid by the reapplication of a portion of the previously paid special units interest. Originally, FC-Granite was to be paid a monthly administrative fee as compensation for its services in administrating the business of the Partnership equal to one-sixth of 1% of the book value of the partnership properties, as defined. Total administrative fees accrued for the six months ended June 30, 1999 were $79,126. Administrative fees payable as of December 31, 1998 were $196,494. The Partnership paid administrative fees of $198,497 during the year ended December 31, 1999. As a result of the SC Partnership excess costs and their impact on the Partnership, Sunrise modified the development fee arrangement. The development fee was not earned or accrued beyond June 30, 1999 and the unpaid accrued amount of $67,765 as of June 30, 1999 was deemed paid by the reapplication of a portion of the paid special units interest. Originally, Sunrise was to be paid a semi-annual development fee equal to 4% of gross revenues as compensation for its services in managing the development of the Partnership's properties. Total development fees accrued for the six months ended June 30, 1999 were $34,148. Development 10 fees payable as of December 31, 1998 were $569,473. The Partnership paid development fees of $535,856 during the year ended December 31, 1999. As a result of the SC Partnership excess costs and their impact on the Partnership, FC-Granite modified the real estate commissions arrangement. The real estate commissions were not earned or accrued beyond June 30, 1999 and the unpaid accrued amount of $59,295 as of June 30, 1999 was deemed paid by the reapplication of a portion of the paid special units interest. Total real estate commissions accrued for the six months ended June 30, 1999 were $29,880. Commissions payable as of December 31, 1998 were $498,289. The Partnership paid commissions of $468,874 for the first six months of 1999 prior to the modification of the real estate commission arrangement. Operating and other expenses totaled $236,331 for the year ended December 31, 2001 versus $287,032 for the year ended December 31, 2000. Operating and other expenses are mainly comprised of legal fees, title fees and escrow fees. Title and escrow fees decreased from $63,431 for the year ended December 31, 2000 to $12,541 for the year ended December 31, 2001. Operating and other expenses totaled $287,032 for the year ended December 31, 2000 versus $344,635 for the year ended December 31, 1999. During the year ended December 31, 1999, legal settlement costs of $100,000 were recorded for the claims related to the 194th Street property in Miami Beach, Florida. During the year ended December 31, 2000 an additional $12,500 in costs were incurred. Title and escrow fees increased from $43,259 for the year ended December 31, 1999 to $63,431 for the year ended December 31, 2000. Income from joint ventures was $6,145,060 for the year ended December 31, 2001 versus loss from joint ventures of $908,158 for the year ended December 31, 2000 and $9,670,001 for the year ended December 31, 1999. Income from joint ventures consists of income from SC Partnership and Eaton, both being recorded by the Partnership under the equity method. The increase in joint venture income in fiscal 2001 as compared to 2000 and 1999, is mostly due to revised estimates for pricing and potential future costs relating to the Seven Hills project as previously discussed, resulting in increased gross margins recognized by SC Partnership. Eaton had no lots remaining and reported final sales of $200,000 for the year ended December 31, 2001, no sales for the year ended December 31, 2000 and $1,560,000 for the year ended December 31, 1999. The SC Partnership reported sales from the Seven Hills development in Henderson, Nevada of $25,651,450 for the year ended December 31, 2001, versus sales of $34,038,534 for the year ended December 31, 2000 and sales of $29,431,179 for the year ended December 31, 1999. As of March 4, 2002, at the Seven Hills development in Henderson, Nevada, three lots have sold for $875,000. Also at this date, six lots for $1,449,500 were under contract. These lots are not guaranteed to close. FINANCIAL CONDITION AND LIQUIDITY Outlook In November 2001, Forest City Enterprises, Inc., the corporate parent of Sunrise, purchased 27.6% or $9,379,000 of the Partnership's total outstanding senior notes payable ("Senior Notes") from an independent third party. Also, in February 2002, Forest City Enterprises, Inc. purchased an additional $453,000 of the Partnership's total outstanding Senior 11 Notes from an independent third party. Collectively, these two purchases are referred to "Internally Owned Senior Notes". Management believes that the Partnership has the wherewithal to service and retire all of the Senior Notes owned by third parties ("Externally Owned Senior Notes") and mortgage debt. Management also believes that a substantial portion of the Internally Owned Senior Notes will also be serviced and retired. The primary sources of cash that will be used to pay the Senior Notes interest and principal will be from land sales at Seven Hills, Solon Estates (Thornbury) and Fairfax Meadows projects. These projects represent substantially the remainder of the Partnership assets as of December 31, 2001. There is no certainty that the results of any of these business plans will be achieved. (See Information Related to Forward Looking Statements.) The following inventory remained at Seven Hills as of December 31, 2001: - 12.1 commercial acres - 84 residential "estate" or custom lots The Partnership has not sold commercial property at Seven Hills to date. Commercial property in the area has sold in the $100,000 to $150,000 per acre range. The historical average sales price for estate lots through December 31, 2000 was approximately $259,000. In January 2001, Seven Hills released for sale the most desirable lots. As a result, the average sales price for all estate lots through December 31, 2001, increased to $289,000 based upon actual closings. The updated average sales price through December 31, 2001 for the most desirable estate lot parcels is $574,000. Based on this recent sales activity, management believes a reasonable average sales price for future estate lots is $366,000. There is no assurance that these average prices can be maintained. Management estimates that approximately $15,513,500 in costs remains to be spent to complete the Seven Hills project. The remaining inventory at Solon Estates (Thornbury) is 103 lots. The average price of lots sold through December 31, 2001 in this project was $118,000. There are also 21 cluster units available. Through December 31, 2001, 17 cluster units have sold for an average price of $92,000. Approximately $3,838,000 in costs remain to be incurred to complete the Thornbury project. The remaining inventory at Fairfax Meadows is 23 lots. The average price of lots sold through December 31, 2001 in this project is $42,000. Project construction is substantially complete. The Partnership maintains updated business plans for all of its properties. The Seven Hills business plan has been adjusted to reduce sales to a lowest probable pricing scenario, and to include potential costs that have not been included in the business plan ("Management Adjustments"). Currently available cash, along with projected available cash flow, based on these business plans, taking into consideration the Management Adjustments of the Seven Hills plan, appears sufficient to repay the Externally Owned Senior Notes, including interest. There would not be sufficient cash flow to fully retire the Internally Owned Senior Notes, retire the partner's special units of $9,000,000, provide any return on the special units or make any payments to the Partnership's limited partners. Based on current estimates, the shortfall to the Internally Owned Senior Notes would be approximately $3,500,000 considering Management Adjustments of the Seven Hills plan, and approximately $650,000 if the Management Adjustments are not realized. 12 Cash Flows The net cash used in operating activities was $5,227,232 for the year ended December 31, 2001 versus $980,994 for the year ended December 31, 2000. The increase in net cash used in operating activities is primarily the result of an increase in net operating loss (defined as net income (loss), income forgiveness, amortization and income (loss) from joint ventures) of $3,223,648 for the year ended December 31, 2001 versus $1,019,324 for the year ended December 31, 2000 and an increase in land and land improvements of $1,712,319 for the year ended December 31, 2001 versus a decrease of $1,061,919 for the year ended December 31, 2000. These increases in net cash used in operating activities were partially offset by a decrease in accrued interest of $26,165 for the year ended December 31, 2001 versus a decrease of $654,243 for the year ended December 31, 2000 and an increase in mortgage notes receivables of $178,278 for the year ended December 31, 2001 versus an increase of $377,695 for the year ended December 31, 2000. The net cash used in operating activities was $980,994 for the year ended December 31, 2000 versus $1,991,837 for the year ended December 31, 1999. The decrease in net cash used in operating activities is primarily the result of a decrease in net operating loss of $1,019,324 for the year ended December 31, 2000 versus $2,584,530 for the year ended December 31, 1999, and an increase in interest receivable of $29,984 for the year ended December 31, 2000 versus a decrease in interest receivable of $1,812,791 for the year ended December 31, 1999. These decreases in net cash used in operating activities were partially offset by an increase in mortgage notes receivable of $377,695 for the year ended December 31, 2000 versus a decrease of $1,987,574 for the year ended December 31, 1999. Net cash provided by investing activities was $6,234,947 for the year ended December 31, 2001 versus $6,398,941 for the year ended December 31, 2000. The decrease in funds provided was the result of a decrease in distributions from affiliates from $1,518,132 for the year ended December 31, 2000 to $650,830 for the year ended December 31, 2001. Partially offsetting the decrease was an increase in investments in and advances to affiliates of $5,584,117 for the year ended December 31, 2001 versus an increase in investment in and advances to affiliate of $4,880,809 for the year ended December 31, 2000. Net cash provided by investing activities was $6,398,941 for the year ended December 31, 2000 versus net cash used in investing activities of $888,430 for the year ended December 31, 1999. The increase in funds provided was mainly the result of a decrease in investments in and advances to joint ventures from $4,880,809 for the year ended December 31, 2000 versus an increase in investment in and advances to joint ventures of $1,424,144 for the year ended December 31, 1999. The decrease in investments in and advances to joint ventures for the year ended December 31, 2000 consisted primarily of loan repayments and excess cash distributions from SC Partnership sales of $5,658,370 partially offset by capital call payments to the SC Partnership of $580,000. Net cash used in financing activities was $1,294,717 and $7,629,009 for the years ended December 31, 2001 and 2000, respectively. Net cash provided by financing activities was $4,668,805 for the year ended December 31, 1999. During the year ended December 31, 2001, the Partnership redeemed $2,000,000 in Senior Notes and borrowed mortgage notes of $940,638 for expenditures at the Solon Estates (Thornbury) development of which $200,004 was repaid. During the year ended December 31, 2000, the Partnership repaid Sunrise $3,549,400 of funds loaned for expenditures at the Seven Hills project as of December 31, 1999 and subsequently borrowed additional funds totaling $1,949,400 which were repaid during the year ended December 31, 2000. During the same period, the Partnership repaid Eaton $3,514,286 of funds 13 loaned for additional development expenditures as of December 31, 1999. The Partnership also repaid mortgage notes payable of $528,961 relating to expenditures at the Solon Estates (Thornbury) development as of December 31, 1999 and subsequently borrowed additional funds totaling $1,993,081 which were repaid during the year ended December 31, 2000. During January 2002, the Partnership redeemed $5,000,000 in Senior Notes. Litigation Other than routine litigation and administrative proceedings arising in the ordinary course of business, the Partnership is not presently involved in any litigation nor, to its knowledge, is any litigation threatened against the Partnership or its properties, which is reasonably likely to have a material adverse effect on the liquidity or results of operations of the Partnership. CRITICAL ACCOUNTING POLICIES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to makes estimates and assumptions in certain circumstances that affect amounts reported in the accompanying financial statements and related notes. In preparing these financial statements, management has utilized information available including its past history, industry standards, and the current economic environment among other factors, in forming its estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. It is possible that the ultimate outcome as anticipated by management in formulating its estimates inherent in these financial statements may not materialize. However, application of the accounting policies below involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. In addition, other companies may utilize different estimates, which may impact comparability of the Partnership's results of operations to those of companies in similar businesses. Land and Land Improvements Land and land improvements are recorded at cost. On a periodic basis, management reviews land and land improvements for impairment when there is an event or change in circumstances that indicates an impairment in value. The Partnership records impairment losses and reduces the carrying amounts of land held for sale when the carrying amounts exceed the estimated selling proceeds less the costs to sell. The Partnership is required to make subjective assessments as to whether there are impairments in the value of its properties. These assessments have a direct impact on the Partnership's net income, because recording an impairment charge results in an immediate negative adjustment to net income. Land Sales The Partnership follows the provisions of Statement of Financial Accounting Standards ("SFAS") No. 66, Accounting for Sales of Real Estate, for reporting sales of land and land improvements on the full accrual method, as appropriate. For each land sale, the Partnership determines the amount of land and land improvement costs to be reported in cost of sales using the relative sales value method for the common site costs and the specific identification method for all other costs. The Partnership makes estimates in utilizing the relative sales value method relating to the budgeted improvement costs. These estimates have a direct impact on the Partnership's net income, because a higher or lower cost of sales allocation has a corresponding impact on the net income. 14 For the Seven Hills project, the SC Partnership determines the amount of land and land improvement costs to be reported in cost of sales based upon the overall budgeted project gross margin. The budgeted project gross margin is assessed quarterly and revised to reflect historical results and changes in estimates. These revisions are considered a change in estimate and are accounted for prospectively against future sales. Management makes estimates regarding projected future land sales and improvement costs in determining the overall project gross margin. Considerations made in developing estimates of budgeted land sales include the economic conditions, competition, market supply and historical sales figures. Considerations made in developing estimates of budgeted improvement costs include market demand, cost trends and site conditions. These estimates have a direct impact on the Partnership's net income, because a higher or lower cost of sales allocation has a corresponding impact on the proportionate share of income or loss recorded by the Partnership relating to its interest in SC Partnership. NEW ACCOUNTING STANDARDS In June 2001, the FASB issued SFAS No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets. The provisions of SFAS 141 require the use of purchase accounting for all business combinations and the separate allocation of purchase price to intangible assets if specific criteria are met. The provisions of SFAS 142 state that goodwill and intangible assets with indefinite useful lives should not be amortized but rather tested at least annually for impairment. Intangible assets that have finite useful lives should continue to be amortized over their estimated useful lives. SFAS 142 also provides specific guidance for testing goodwill and intangible assets for impairment. The provisions of SFAS No. 141 apply to all business combinations initiated after June 30, 2001. The Partnership will adopt SFAS 142 effective January 1, 2002. The Partnership does not anticipate that these standards will have a material impact on the Partnership's financial position, results of operations, or cash flows. In October 2001, the FASB Issued SFAS No. 144, Accounting for the Impairment of Disposal of Long-Lived Assets, which addresses the financial accounting and reporting for the impairment or disposal of long-lived assets. This standard harmonizes the accounting for impaired assets and resolves some of the implementation issues as originally described in SFAS 121. It retains the fundamental provisions of SFAS 121 for (a) recognition and measurement of the impairment of long-lived assets to be held and used and (b) measurement of long-lived assets to be disposed of by sale. It also retains the basic provisions for presenting discontinued operations in the statement of operations but broadens the scope to include a component of an entity rather than a segment of a business. The Partnership will adopt this standard effective January 1, 2002. The Partnership does not believe this pronouncement will have a material impact on the Partnership's financial position, results of operations or cash flows. INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS This Annual Report, together with other statements and information publicly disseminated by the Partnership, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements reflect management's current views with respect to financial results related to future events and are based on assumptions and expectations which may not be realized and are inherently subject to risks and uncertainties, many of which 15 cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial or otherwise, may differ from the results discussed in the forward-looking statements. Risks and other factors that might cause differences, some of which could be material, include, but are not limited to, the effect of economic and market conditions on a nation-wide basis as well as regionally in areas where the Partnership has a geographic concentration of land; failure to consummate financing arrangements; development risks, including lack of satisfactory financing, construction and cost overruns; the level and volatility of interest rates; the rate of revenue increases versus expenses increases; as well as other risks listed from time to time in the Partnership's reports filed with the Securities and Exchange Commission. The Partnership has no obligation to revise or update any forward-looking statements as a result of future events or new information. Readers are cautioned not to place undue reliance on such forward-looking statements. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Management has and will continue to manage interest rate risk by maintaining a conservative ratio of fixed rate, long-term debt to total debt to ensure that variable rate exposure is maintained at an acceptable level. The Partnership had $740,634 in variable rate debt outstanding at December 31, 2001 and no variable rate debt outstanding at December 31, 2000. The tables below provide information about the Partnership's financial instruments that are sensitive to changes in interest rates. For debt obligations, the tables present principal cash flows and related weighted average interest rates by expected maturity dates.

16 Item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Granite Development Partners, L.P. In our opinion, the financial statements listed in the index appearing under Item 14(a) (1) on page 47 present fairly, in all material respects, the financial position of Granite Development Partners, L.P. (A Delaware Limited Partnership) ("Partnership") at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 14(a)(3) on page 47 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related financial statements. These financial statements and financial statement schedule are the responsibility of the Partnership's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /S/ PricewaterhouseCoopers LLP ------------------------------ PricewaterhouseCoopers LLP Cleveland, Ohio March 4, 2002 17 GRANITE DEVELOPMENT PARTNERS, L.P. (A Delaware Limited Partnership) BALANCE SHEETS

See notes to financial statements. 18 GRANITE DEVELOPMENT PARTNERS, L.P. (A Delaware Limited Partnership) BALANCE SHEETS (continued)

See notes to financial statements. 19 GRANITE DEVELOPMENT PARTNERS, L.P. (A Delaware Limited Partnership) STATEMENTS OF OPERATIONS

See notes to financial statements. 20 GRANITE DEVELOPMENT PARTNERS, L.P. (A Delaware Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' DEFICIT

See notes to financial statements. 21 GRANITE DEVELOPMENT PARTNERS, L.P. (A Delaware Limited Partnership) STATEMENTS OF CASH FLOWS

See notes to financial statements. 22 GRANITE DEVELOPMENT PARTNERS, L.P. (A Delaware Limited Partnership) STATEMENTS OF CASH FLOWS (continued)

See notes to financial statements. 23 GRANITE DEVELOPMENT PARTNERS, L.P. (A Delaware Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS NOTE A - NATURE OF BUSINESS AND FINANCIAL STATEMENT PRESENTATION Organization Granite Development Partners, L.P., a Delaware Limited Partnership (the "Partnership"), was formed on November 15, 1993 to acquire, develop, market and sell partnership properties, located principally in Ohio and Nevada, including acting as a joint venture partner with respect to certain properties. The Partnership is the owner of Granite Silver Development Partners, L.P., the managing partner in Silver Canyon Partnership ("SC Partnership"). The Partnership will terminate on December 31, 2013 or earlier upon disposition of assets. The sole general partner of the Partnership is FC-Granite, Inc., an Ohio corporation ("FC-Granite"). FC-Granite made an initial capital contribution to the Partnership of $300. FC-Granite is a wholly-owned subsidiary of Sunrise Land Company ("Sunrise"). Sunrise made an initial capital contribution of $100 and acted as the original limited partner until the outstanding warrants to acquire limited partnership interests were exercised on December 3, 1996. When the first warrant was exercised, Sunrise withdrew as the original limited partner. As a result, FC-Granite owned a 25% general partner interest and the limited partners owned a 75% interest in the Partnership. On December 3, 1996, FC-Granite exercised 9,000 warrants to purchase limited partnership units, representing a 25% ownership of the limited partnership units. On December 29, 2000, FC-Granite purchased 11,250 additional limited partnership units representing a 31.25% ownership of the limited partnership units. As of December 31, 2001, FC-Granite owns 56.25% of the limited partnership units. Combined with its general partnership units, FC-Granite owns 67.19% of the Partnership. At Partnership formation, FC-Granite contributed properties with assigned values of $7,234,482 and $2,765,518 of cash related to properties originally intended to be contributed by FC-Granite but were sold prior to the formation of the Partnership in exchange for $10,000,000 in special units valued at $1,111.11 per special unit. The historical cost basis of the contributed properties was $4,097,400. Until the senior notes payable are paid in full, $9,000,000 of the special units bear interest at 10.83% and will be paid pari-passu with interest on the senior notes payable and have accordingly been treated as partners' special units and the remaining $1,000,000 was reflected as a capital contribution. The difference of $3,137,082 between the partners' special units of $10,000,000 and the historical cost basis of the contributed properties of $4,097,400 and contributed cash of $2,765,518 was reflected as a reduction of partners' equity for FC-Granite. The properties are presented at their historical cost basis because of the affiliated ownership and common management of Sunrise, FC-Granite, and the Partnership. Pursuant to the terms of the Partnership Agreement, all income is allocated to FC-Granite, the general partner, until all prior year losses allocated to FC-Granite are recovered. As of December 31, 2001, $845,511 in losses allocated to FC-Granite have not been recovered. Once FC-Granite recoups the full allocation of losses from prior years as noted above, income and losses of the Partnership will be allocated in accordance with the Partnership agreement. 24 GRANITE DEVELOPMENT PARTNERS, L.P. (A Delaware Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE A - NATURE OF BUSINESS AND FINANCIAL STATEMENT PRESENTATION (continued) Once the senior notes payable and partner's special units have been paid in full and the capital accounts of the general and limited partners have been repaid, FC-Granite will receive distributions of 25% of available cash, as defined. No amounts are currently due under the terms of this participation. Silver Canyon Partnership - Agreement During the second quarter of 1999, American Nevada Seven Hills Limited Partnership ("ANC"), the partner in SC Partnership responsible for the onsite improvements in the Seven Hills project, identified costs in excess of budget to complete the project. Certain of these costs became known to ANC operating personnel during the fourth quarter of 1998. Further information became known during the second quarter of 1999. To minimize the impact of these excess costs, ANC and the Partnership entered into an agreement ("Agreement") which modified certain terms of the Silver Canyon Partnership Agreement. The changes resulting from the Agreement are reflected in these financial statements. The Agreement's impact on the Silver Canyon Partnership Agreement included the following provisions: 1. ANC assigned all of its future and past commissions, fees, and distributions relating to loans, capital calls and interest thereon to the SC Partnership. Amounts previously paid were deemed a return of capital. 2. ANC funded one-half of the settlement amounts for the two lawsuits settled in 1999 and 2000. 3. The Partnership funded the remaining settlement liability for the lawsuits but received a priority distribution to cover such capital contribution. 4. After the priority distribution in #3, ANC and the Partnership received distributions pari passu until ANC recovered its entire cash investment except for $750,000, which occurred in the first quarter of 2001. 5. Thereafter, the Partnership will receive all distributions until it has recovered its entire capital account. To the extent the Partnership does not recover its entire capital account, ANC will negotiate in good faith as to whether ANC should fund one-half of any additional lawsuits funded by the Partnership. 6. After the Partnership has recovered its entire capital account, ANC and the Partnership will share all remaining distributions pari passu. 25 GRANITE DEVELOPMENT PARTNERS, L.P. (A Delaware Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE A - NATURE OF BUSINESS AND FINANCIAL STATEMENT PRESENTATION (continued) The following table summarizes the favorable impact of the Agreement to SC Partnership as of December 31, 1999: Land inventory adjustment $ 5,054,279 Fees and commissions adjustment 6,110,701 ----------------- Total adjustments $ 11,164,980 =================

The following table summarizes the impact of the Agreement to the Silver Canyon Partnership Agreement as it relates directly to the Partnership as of December 31, 1999: Land inventory adjustment at ownership $ 4,263,313 Fee and commissions adjustment at ownership 1,675,982 ------------------- Subtotal $ 5,939,295 Forgiveness of capitalized income recognized (3,800,771) Forgiveness of commission income (1,455,981) Forgiveness of administration fee income (220,000) ------------------- Subtotal $ (5,476,752) ------------------- Total $ 462,543 ===================

Also, as a result of the SC Partnership excess costs and their impact on the Partnership, FC-Granite and Sunrise forgave certain unpaid expenses as of June 30, 1999 and will not charge the Partnership in the future. The following table summarizes the forgiven expenses: Administrative fees to FC-Granite $ 77,123 Real estate commissions to FC-Granite 59,295 Development fees to Sunrise 67,765 Interest to Sunrise 84,476 ------------------ $ 288,659 ==================

The forgiven expense was recorded as a reduction to expense in the statement of operations. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the period. Management is required to make significant estimates in connection with its development of budgeted sales and cost estimates in determining the allocation of land and land improvements to cost of sales in connection with the recording of land sales. Actual results could differ from those estimates. 26 GRANITE DEVELOPMENT PARTNERS, L.P. (A Delaware Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Land and Land Improvements Land and land improvements are recorded at cost. Management reviews its land and land improvements for impairment when there is an event or change in circumstances that indicates an impairment in value. The Partnership records impairment losses and reduces the carrying amounts of land held for sale when the carrying amounts exceed the estimated selling proceeds less the costs to sell. Land Sales The Partnership follows the provisions of Statement of Financial Accounting Standards ("SFAS") No. 66, Accounting for Sales of Real Estate, for reporting sales of land and land improvements on the full accrual method, as appropriate. For land sales, the Partnership determines the amount of land and land improvement costs to be reported in cost of sales using the relative sales value method for the common site costs and the specific identification method for all other costs. Investments In Joint Ventures The Partnership has two joint venture investments, which are accounted for under the equity method, as the Partnership has the ability to exercise significant influence over but does not have financial or operating control. These investments were recorded initially at cost and subsequently adjusted for net equity in income (loss), other capital transactions, and cash contributions and distributions. Mortgage Procurement Costs Mortgage procurement costs are amortized over the life of the debt to which the costs relate. Fair Value of Financial Instruments The Partnership's financial instruments consists principally of cash, mortgage notes receivable, interest receivable, accounts payable and accrued expenses in which the fair value of these financial instruments approximates the carrying value. The Partnership determined the estimated fair value of its debt by discounting future cash payments at interest rates that the Partnership believes approximates the current market. Business Segment Information The sole business of the Partnership is to acquire, develop, market and sell Partnership properties. The Partnership evaluates operating results and allocates resources on a property-by-property basis. The Partnership does not distinguish or group its operations on a geographic basis. Accordingly, the Partnership believes it has a single reportable segment for financial reporting purposes. Further, all operations are within the United States. Therefore, no additional disclosure relating to the presentation of business segment information is considered necessary. Income Taxes No provision or benefit for income taxes is included in the financial statements. Income taxes, if any, are the responsibility of the individual partners. 27 GRANITE DEVELOPMENT PARTNERS, L.P. (A Delaware Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) New Accounting Standards In June 2001, the FASB issued SFAS No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets. The provisions of SFAS 141 require the use of purchase accounting for all business combinations and the separate allocation of purchase price to intangible assets if specific criteria are met. The provisions of SFAS 142 state that goodwill and intangible assets with indefinite useful lives should not be amortized but rather tested at least annually for impairment. Intangible assets that have finite useful lives should continue to be amortized over their estimated useful lives. SFAS 142 also provides specific guidance for testing goodwill and intangible assets for impairment. The provisions of SFAS No. 141 apply to all business combinations initiated after June 30, 2001. The Partnership will adopt SFAS 142 effective January 1, 2002. The Partnership does not anticipate that these standards will have a material impact on the Partnership's financial position, results of operations, or cash flows. In October 2001, the FASB Issued SFAS No. 144, Accounting for the Impairment of Disposal of Long-Lived Assets, which addresses the financial accounting and reporting for the impairment or disposal of long-lived assets. This standard harmonizes the accounting for impaired assets and resolves some of the implementation issues as originally described in SFAS 121. It retains the fundamental provisions of SFAS 121 for (a) recognition and measurement of the impairment of long-lived assets to be held and used and (b) measurement of long-lived assets to be disposed of by sale. It also retains the basic provisions for presenting discontinued operations in the statement of operations but broadens the scope to include a component of an entity rather than a segment of a business. The Partnership will adopt this standard effective January 1, 2002. The Partnership does not believe this pronouncement will have a material impact on the Partnership's financial position, results of operations or cash flows. NOTE C - SENIOR NOTES PAYABLE The Partnership has unsecured senior notes payable ("Senior Notes") in the aggregate principal amount of $34,000,000 and $36,000,000 at December 31, 2001 and December 31, 2000, respectively. The Senior Notes bear interest at a fixed annual rate of 10.83%, payable semi-annually, and include a negative pledge covenant relating to the assets and operations of the Partnership, allowing only a collateralized working capital line not to exceed $5,000,000 and subordinated indebtedness of $5,000,000. Until such time as the principal of the Senior Notes and interest thereon is repaid in full, 100% of the cash flow of the Partnership, as defined, shall be applied to repay the Senior Notes. The Senior Notes will mature on November 15, 2003, but are subject to earlier redemption. On June 29, 2001, the Partnership repaid $2,000,000 in Senior Notes plus accrued interest to that date. On January 15, 2002, the Partnership repaid an additional $5,000,000 in Senior Notes plus accrued interest to that date. 28 GRANITE DEVELOPMENT PARTNERS, L.P. (A Delaware Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE C - SENIOR NOTES PAYABLE (continued) Additionally, the Partnership may defer two interest payments if minimum working capital, as defined, falls below $5,000,000. During the period interest payments are deferred, interest shall accrue at 12.83% and shall remain at that level until all deferred interest and interest thereon has been paid. The Partnership has not deferred interest payments on the Senior Notes payable. In November 2001, Forest City Enterprises Inc., the corporate parent of Sunrise, purchased 27.6% or $9,379,000, of the Partnership's total outstanding Senior Notes from an independent third party. In February 2002, Forest City Enterprises Inc. purchased an additional $453,000 of the Partnership's total outstanding Senior Notes from an independent third party. NOTE D - MORTGAGE NOTES PAYABLE In August 2000, the Partnership obtained a construction loan agreement for the Solon Estates (Thornbury) development. The loan amount is not to exceed $3,500,000 and has a maturity date of August 1, 2004. The principal outstanding bears interest at the prime rate (4.75% at December 31, 2001). There was an outstanding balance of $740,634 under this loan agreement at December 31, 2001. NOTE E - PARTNER'S SPECIAL UNITS Per the original Partnership Agreement, until the Senior Notes are paid in full, the $9,000,000 of partner's special units bear interest at 10.83% and the interest will be paid pari passu with the interest on the Senior Notes. As a result of the SC Partnership excess costs and their impact on the Partnership as discussed in Note A, FC-Granite, the holder of the special units, modified the interest arrangement during 1999. As a result, $2,841,317 in interest has not been accrued from February 1, 1999 through December 31, 2001. NOTE F - TRANSACTIONS WITH AFFILIATES FC-Granite and Sunrise are reimbursed for all direct costs of operations of the Partnership's affairs and development activities. Originally, FC-Granite was to be paid a monthly administrative fee as compensation for its services in administrating the business of the Partnership. As a result of the SC Partnership excess costs and their impact on the Partnership, FC-Granite modified the administrative fee arrangement to eliminate administrative fees beyond June 30, 1999. Therefore, no administrative fees were accrued for the years ended December 31, 2001 and 2000. Total administrative fees accrued for the six months ended June 30, 1999 were $79,126. Originally, Sunrise was to be paid a semi-annual development fee equal to 4% of gross revenues as compensation for its services in managing the development of the Partnership's properties. As a result of the SC Partnership excess costs and their impact on the Partnership, Sunrise modified the development fee arrangement to eliminate development fees beyond June 30, 1999. Therefore, no development fees were earned or accrued for the years ended December 31, 2001 and 2000. Total development fees accrued for the six months ended June 30, 1999 were $34,148. 29 GRANITE DEVELOPMENT PARTNERS, L.P. (A Delaware Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE F - TRANSACTIONS WITH AFFILIATES (continued) Originally, Sunrise was to be paid a semi-annual development fee equal to 4% of gross revenues as compensation for its services in managing the development of the Partnership's properties. As a result of the SC Partnership excess costs and their impact on the Partnership, Sunrise modified the development fee arrangement to eliminate development fees beyond June 30, 1999. Therefore, no development fees were earned or accrued for the years ended December 31, 2001 and 2000. Total development fees accrued for the six months ended June 30, 1999 were $34,148. Originally, FC-Granite was to be paid a monthly real estate commission equal to 3.5% of gross sales as compensation for its conducting marketing and sales duties and authorization of sales contracts. As a result of the SC Partnership excess costs and their impact on the Partnership, FC-Granite modified the real estate commissions arrangement to eliminate real estate commissions beyond June 30, 1999. Therefore, no real estate commissions were earned or accrued for the years ended December 31, 2001 and 2000. Total real estate commissions accrued for the six months ended June 30, 1999 were $29,880. Based on the terms of the Agreement, the Partnership's commission equal to 1.67% of SC Partnership's gross sales representing compensation for the Partnership's services in conducting marketing and sales duties and authorization of sales contracts was reapplied as payments on the amounts the Partnership loaned SC Partnership (See Note A). There were no commissions earned or accrued for the years ended December 31, 2001 and 2000. The Partnership earned commissions of $189,448 during the year ended December 31, 1999. The total amount of commissions earned from inception through December 31, 1999 totaling $1,455,981 was reversed through the statement of operations as a loss from joint venture agreement and applied to reduce advances to joint ventures. Based on the terms of the Agreement, the Partnership's monthly administrative fee in the amount of $5,000 per month was waived. There were no administrative fees earned or accrued for the years ended December 31, 2001 and 2000. At December 31, 1999, accrued administrative fees totaling $220,000 were reversed through the statement of operations as part of loss from joint venture agreement. During the year ended December 31, 2000, the Partnership repaid Sunrise $3,549,400 of funds loaned for expenditures at the Seven Hills project as of December 31, 1999 and subsequently borrowed additional funds totaling $1,949,400 which were repaid during the year ended December 31, 2000. During the same period, the Partnership repaid Eaton Estate Partnership ("Eaton") $3,514,286 of funds loaned for additional development expenditures as of December 31, 1999. Silver Canyon Partnership The Partnership has a 33 1/3 % interest in SC Partnership. The Partnership's investment in SC Partnership at December 31, 2001 and December 31, 2000 was $(1,486,866) and $(7,645,818), respectively. 30 GRANITE DEVELOPMENT PARTNERS, L.P. (A Delaware Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE G - INVESTMENTS IN AND ADVANCES TO JOINT VENTURES The Partnership has advances outstanding to SC Partnership of $15,971,337 and $21,555,454 at December 31, 2001 and 2000, respectively. The decrease in advances outstanding is the result of loan repayments of $5,584,117 funded by proceeds from SC Partnership land sales. For the year ended December 31, 2001, SC Partnership generated income of $8,244,138, of which $6,158,952 was recorded by the Partnership pursuant to the terms of the Agreement. For the year ended December 31, 2000, SC Partnership generated a loss of $1,044,857, 100% of which was recorded by the Partnership pursuant to the terms of the Agreement. For the year ended December 31, 1999, SC Partnership generated a loss of $27,201,519 and other capital transactions of $10,551,111 of which $9,899,688 was recorded by the Partnership. Summarized below is the condensed financial information of SC Partnership. The results for the year ended December 31, 1999 were affected by three events. - During the second quarter of 1999, ANC, the partner in charge of on-site improvements of the Seven Hills project, identified cost overruns that required adjustment of the remaining inventory to its realizable value. - The Partnership settled certain lawsuits. - To minimize the impact of these cost overruns, the Agreement forfeited certain previously earned commissions, fees and interest on advances. The effect of the Agreement is documented separately below as other capital transactions.

31 GRANITE DEVELOPMENT PARTNERS, L.P. (A Delaware Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE G - INVESTMENTS IN AND ADVANCES TO JOINT VENTURES (continued) The Partnership recorded its proportionate share of the net change in the SC Partnership capital after giving effect to the special allocations agreed to in the Agreement for the year ended December 31, 1999 (See Note A). The 1999 operating loss prior to the Agreement in the amount of $(17,457,081) results from an adjustment of the land inventory to its estimated realizable value. The adjustment in the amount of $17,758,816 was recorded in the second quarter 1999. As a result of the Agreement, $5,054,279 of the land inventory adjustment recorded in 1999 resulted from the partners of SC Partnership agreeing to reverse interest that the partners had earned and the SC Partnership had capitalized to inventory. Also as a result of the Agreement, certain fees and commissions previously earned by the partners of SC Partnership and expensed by the SC Partnership were reapplied from partnership expenses to repay certain partner loans and capital. These previously paid items were as follows:

As a result of the 1999 identified excess costs, which reflected an overall estimated project gross margin of zero, SC Partnership recorded zero gross margins on all sales from the second quarter of 1999 through the third quarter of 2000. During the fourth quarter of 2000 revised estimates of sales and costs to complete resulted in an overall gross margin for the project. As a result, a gross margin was reported relating to sales activity for that period. Sales and costs to complete have been further revised during fiscal year 2001 based upon current activity, maintaining an overall gross margin for the project. Based on these current revised estimates, a gross margin of $9,688,825 was reported by SC Partnership for the year ended December 31, 2001. Eaton Estate Partnership The Partnership has a 30% interest in Eaton. The Partnership's investment in Eaton at December 31, 2001 and 2000 was $102,480 and $767,202, respectively. For the years ended December 31, 2001 and 2000, Eaton generated losses of $46,307 and income of $455,663, respectively, of which losses of $13,892 and income of $136,699, respectively, have been recorded by the Partnership under the equity method. Eaton distributed $650,830 and $1,518,132 to the Partnership in fiscal years 2001 and 2000, respectively. 32 GRANITE DEVELOPMENT PARTNERS, L.P. (A Delaware Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE G - INVESTMENTS IN AND ADVANCES TO JOINT VENTURES (continued) Combined Joint Venture Financial Information Summarized below is the combined condensed financial information for the Partnership's joint venture investments in SC Partnership and Eaton:

NOTE H - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following table sets forth the quarterly results of operations for the years ended December 31, 2001 and 2000:

33 Item 8. Financial Statements and Supplementary Data (continued) REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Silver Canyon Partnership In our opinion, the financial statements listed in the index appearing under Item 14(a)(2) on page 47 present fairly, in all material respects, the financial position of Silver Canyon Partnership (A Nevada General Partnership) ("Partnership") at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 14(a)(3) on page 47 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related financial statements. These financial statements and financial statement schedule are the responsibility of the Partnership's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /S/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Cleveland, Ohio March 4, 2002 34 SILVER CANYON PARTNERSHIP (A Nevada General Partnership) BALANCE SHEETS

See notes to financial statements. 35 SILVER CANYON PARTNERSHIP (A Nevada General Partnership) BALANCE SHEETS (continued)

See notes to financial statements. 36 SILVER CANYON PARTNERSHIP (A Nevada General Partnership) STATEMENTS OF OPERATIONS

See notes to financial statements. 37 SILVER CANYON PARTNERSHIP (A Nevada General Partnership) STATEMENTS OF CHANGES IN PARTNERS' DEFICIT

See notes to financial statements. 38 SILVER CANYON PARTNERSHIP (A Nevada General Partnership) STATEMENTS OF CASH FLOWS

See notes to financial statements. 39 SILVER CANYON PARTNERSHIP (A Nevada General Partnership) STATEMENTS OF CASH FLOWS (continued)

See notes to financial statements. 40 SILVER CANYON PARTNERSHIP (A Nevada General Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE A - NATURE OF BUSINESS AND FINANCIAL STATEMENT PRESENTATION Organization Silver Canyon Partnership ("Partnership"), was formed on January 7, 1994 to acquire, own, plan, develop, operate, improve, lease, manage, sell, finance and refinance and otherwise deal with the Partnership property located in Henderson, Nevada. The Partnership will terminate on December 31, 2013 or earlier upon disposition of assets. The original partners were Silver Canyon Corporation, a Nevada Corporation ("SCC") and Granite Silver Development Partners, L.P., a Delaware Limited Partnership ("Granite") owned by Granite Development Partners, L.P. SCC made an initial capital contribution of land with an assigned value agreed upon by the partners of $4,500,000. As of January 31, 1995, Granite made a total initial cash capital contribution of $2,250,000. The cash from Granite's contribution was distributed to SCC. Through January 30, 1996, Granite owned a 55% interest and SCC owned a 45% interest in the Partnership. On January 30, 1996, Granite sold to American Nevada Seven Hills Limited Partnership ("ANC") a 21 2/3% partnership interest in the Partnership. SCC sold to ANC a 11 2/3% partnership interest in the Partnership. Upon the execution of the Amended and Restated Partnership Agreement, ANC had acquired interests in the Partnership representing in the aggregate a 33 1/3% interest. Partnership Amendment During the second quarter of 1999, ANC, the partner responsible for the onsite improvements in the Seven Hills project, identified costs in excess of budget to complete the project. Certain of these costs became known to operating personnel during the fourth quarter of 1998. Further information became known during the second quarter of 1999. To minimize the impact of these excess costs, an agreement ("Agreement") between ANC and Granite was entered into which modified certain terms of the Silver Canyon Partnership Agreement. The changes resulting from the Agreement are reflected in these statements. The Agreement's impact on the Silver Canyon Partnership Agreement includes the following provisions: 1. ANC assigned all of its future and past commissions, fees, and distributions relating to loans, capital calls and interest thereon to Granite. Amounts previously paid were deemed a return of capital. 2. ANC funded one-half of the settlement amounts for the two lawsuits settled in 1999 and 2000. 3. Granite funded the remaining settlement liability for the lawsuits but received a priority distribution to cover such capital contribution. 4. After the priority distribution in #3, ANC and Granite received distributions pari passu until ANC recovered its entire cash investment except for $750,000, which occurred in the first quarter of 2001. 41 SILVER CANYON PARTNERSHIP (A Nevada General Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE A - NATURE OF BUSINESS AND FINANCIAL STATEMENT PRESENTATION (continued) 5. Thereafter, Granite will receive all distributions until it has recovered its entire capital account. 6. After Granite has recovered its entire capital account, ANC and Granite will share all remaining distributions pari passu. The following table summarizes the impact of the Agreement to Silver Canyon Partnership as of December 31, 1999: Land inventory adjustment $ 5,054,279 Fees and commissions adjustment 6,110,701 ------------ Total adjustments $ 11,164,980 ============

The Partnership reduced its remaining land inventory by the amount of $21,006,068 during the second quarter of 1999 as a result of the excess costs, which reflected an estimated gross margin of zero. The Partnership continued to record zero gross margins on all sales closed since the second quarter of 1999. Profits, losses and distributions are allocated to the partners as provided in the Amended and Restated Partnership Agreement. As a result of the 1999 identified excess costs, which reflected an overall estimated project gross margin of zero, the Partnership recorded zero gross margins on all sales from the second quarter of 1999 through the third quarter of 2000. During the fourth quarter of 2000, revised estimates of sales and costs to complete resulted in an overall gross margin for the project. As a result, a gross margin was reported relating to sales activity for that period. Sales and costs to complete have been further revised during fiscal year 2001 based upon current activity, maintaining an overall gross margin for the project. Based on these current revised estimates, a gross margin of $9,688,825 was reported for the year ended December 31, 2001. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the period. Management is required to make significant estimates in connection with its development of budgeted sales and cost estimates in determining the allocation of land and land improvements to cost of sales in connection with the recording of land sales. Actual results could differ from those estimates. 42 SILVER CANYON PARTNERSHIP (A Nevada General Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Land and Land Improvements Land and land improvements are recorded at cost. Management reviews its land and land improvements for impairment when there is an event or change in circumstances that indicates an impairment in value. The Partnership records impairment losses and reduces the carrying amounts of land held for sale when the carrying amounts exceed the estimated selling proceeds less the costs to sell. Land Sales The Partnership follows the provisions of Statement of Financial Accounting Standards ("SFAS") No. 66, Accounting for Sales of Real Estate, for reporting sales of and land improvements on the full accrual method, as appropriate. For land sales, the Partnership determines the amount of land and land improvement costs to be reported in cost of sales based upon the overall project gross margin. Costs to Complete Total estimated project costs are reported in cost of sales based upon the overall project gross margin, which is reviewed quarterly. As a result, estimated project costs not yet incurred are included in costs of sales in certain circumstance due to timing. Such costs have been reclassified from land improvements to costs to complete in the balance sheet. As these costs are incurred they will be recorded as a reduction to costs to complete. Capitalized Interest and Real Estate Taxes Interest expense and real estate tax expense allocated to land held for development is capitalized. For the years ended December 31, 2001, 2000 and 1999, total interest charges were $2,538, $114,185 and $3,355,873, respectively, all of which were capitalized. For the years ended December 31, 2001, 2000 and 1999, total real estate taxes were $508,549, $400,869, and $500,912, respectively, all of which were capitalized. Restricted Cash Pursuant to the loan agreement with Ohio Savings Bank, a restricted cash account was established to hold scheduled loan paydowns in excess of expenditures. Mortgage Procurement Costs Mortgage procurement costs are amortized over the life of the debt to which the costs relate. Fixed Assets Fixed assets are recorded at cost. Depreciation is provided on a straight-line basis over the estimated useful lives of owned assets. Fair Value of Financial Instruments The Partnership's financial instruments consists principally of cash, restricted cash, mortgage notes receivable, accounts receivable, accounts receivable affiliate, funds in escrow, accounts payable, accrued expenses and deposits in which the fair value of these financial instruments approximate the carrying value. 43 SILVER CANYON PARTNERSHIP (A Nevada General Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Income Taxes No provision or benefit for income taxes is included in the financial statements. Income taxes, if any, are the responsibility of the individual partners. New Accounting Standards In June 2001, the FASB issued SFAS No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets. The provisions of SFAS 141 require the use of purchase accounting for all business combinations and the separate allocation of purchase price to intangible assets if specific criteria are met. The provisions of SFAS 142 state that goodwill and intangible assets with indefinite useful lives should not be amortized but rather tested at least annually for impairment. Intangible assets that have finite useful lives should continue to be amortized over their estimated useful lives. SFAS 142 also provides specific guidance for testing goodwill and intangible assets for impairment. The provisions of SFAS No. 141 apply to all business combinations initiated after June 30, 2001. The Partnership will adopt SFAS 142 effective January 1, 2002. The Partnership does not anticipate that these standards will have a material impact on the Partnership's financial position, results of operations, or cash flows. In October 2001, the FASB Issued SFAS No. 144, Accounting for the Impairment of Disposal of Long-Lived Assets, which addresses the financial accounting and reporting for the impairment or disposal of long-lived assets. This standard harmonizes the accounting for impaired assets and resolves some of the implementation issues as originally described in SFAS 121. It retains the fundamental provisions of SFAS 121 for (a) recognition and measurement of the impairment of long-lived assets to be held and used and (b) measurement of long-lived assets to be disposed of by sale. It also retains the basic provisions for presenting discontinued operations in the statement of operations but broadens the scope to include a component of an entity rather than a segment of a business. The Partnership will adopt this standard effective January 1, 2002. The Partnership does not believe this pronouncement will have a material impact on the Partnership's financial position, results of operations or cash flows. NOTE C - LOAN PAYABLE In January 1999, the Partnership obtained financing from Ohio Savings Bank to fund development expenditures for the Seven Hills project. Ohio Savings Bank has agreed, in accordance with the loan agreement, to make loans to the Partnership in an aggregate amount not to exceed $12,000,000. The loan bears interest at prime (4.75% at December 31, 2001) plus 1%. The loan had a scheduled maturity of January 28, 2002. In the second quarter of fiscal year 2000, the loan agreement was amended to reduce the maximum outstanding balance to $10,000,000. In the third quarter of fiscal year 2000, a restricted cash account was established to hold scheduled loan paydowns in excess of expenditures. 44 SILVER CANYON PARTNERSHIP (A Nevada General Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) NOTE C - LOAN PAYABLE (continued) Pursuant to an amended loan agreement signed by Ohio Savings Bank and the Partnership in January 2001, excess cash of $3,289,868 was returned to the Partnership. The amended loan agreement also reduced Ohio Savings' Bank funding of development costs from 100% to 50% and reduced the maximum outstanding balance to $3,000,000. There was no outstanding balance under this loan agreement at December 31, 2001. In February 2002, the third amendment to the development loan agreement extended the due date of any borrowed funds to December 31, 2002. It allows for borrowings of 100% of development costs up to a total of $3,000,000. Remaining estate lots and commercial property secure the loan. Ninety percent of gross proceeds from sales will be used to repay the loan. NOTE D - TRANSACTIONS WITH AFFILIATES Granite, SCC, and ANC are reimbursed for all direct costs of operations of the Partnership's affairs and development activities. Based on the Agreement, the monthly administrative fees in the amount of $5,000 per month payable to Granite were waived. No fees were earned or accrued for the years ended December 31, 2001 and 2000. At December 31, 1999 accrued administrative fees totaling $220,000 were reversed and presented as other capital transactions on the statement of operations. Based on the Agreement, the monthly golf course operation fees in the amount of $5,000 per month payable to SCC were waived. No fees were earned or accrued for the years ended December 31, 2001 and 2000. At December 31, 1999 accrued operation fees totaling $180,000 were reversed and presented as other capital transactions on the statement of operations. Based on the Agreement, the development fees payable to ANC were waived. No fees were earned or accrued for the years ended December 31, 2001 and 2000. At December 31, 1999, accrued development fees totaling $613,869 were reversed and presented as other capital transactions on the statements of operations. Granite had advances outstanding of $15,971,338 and $21,555,454 at December 31, 2001 and 2000, respectively, to the Partnership. Based on the Agreement, the above advances to the Partnership do not bear interest. All previously accrued and unpaid interest was waived. On November 22, 1999, the Partnership issued a capital call to its three partners in the amount of $1,066,667 each. One of the partners, SCC, failed to pay its capital call of $1,066,667 and was therefore in default. Pursuant to the terms of the Amended and Restated Partnership Agreement, each of the other two partners, Granite and ANC elected to make "Shortfall Loans", each in the amount of $533,334 to the Partnership. Such loans bear interest at the rate of 25% per annum and are payable from all distributions, fees or compensation which may otherwise be due to the defaulting partner. According to the terms of the Agreement, Granite has agreed to fund ANC's portion of future capital calls without charging interest. In addition, Granite will continue to make "Shortfall Loans" to SCC as necessary. 45 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None PART III Item 10. Directors and Executive Officers of the General Partner of the Registrant The following table sets forth the names of the officers and directors of the General Partner:

Robert F. Monchein, age 57, is the President of the General Partner and Sunrise. Mr. Monchein joined Forest City in 1979 and assumed the office of President of Sunrise in 1983. Samuel H. Miller, age 80, is the Vice President of the General Partner and Sunrise. Mr. Miller is also a director of the General Partner and Sunrise. Mr. Miller joined Forest City in 1945 and is currently Co-Chairman of the Board of Directors and Treasurer of Forest City. Thomas G. Smith, age 61, is the Secretary of the General Partner. Mr. Smith joined Forest City in 1985 and is Executive Vice President, Chief Financial Officer, and Secretary. Albert B. Ratner, age 74, is a Director of the General Partner and Sunrise. Mr. Ratner joined Forest City in 1951 and is currently Co-Chairman of the Board of Directors of Forest City. Charles A. Ratner, age 60, is a Director of the General Partner. Mr. Ratner joined Forest City in 1966 and is serving as its President and Chief Executive Officer. Mr. Ratner is also a director of American Greetings Corporation. Item 11. Executive Compensation The officers and directors of the General Partner are neither employed by nor compensated by the Partnership. All compensation paid to affiliates of the General Partner are defined in a management agreement between the Partnership and Sunrise Land Company, an affiliate of the General Partner. Item 12. Security Ownership of Certain Beneficial Owners and Management None Item 13. Certain Relationship and Related Transactions There are certain family relationships among the executive officers of Forest City, Sunrise and the General Partner. Charles A. Ratner is the brother of James A. Ratner and Ronald A. Ratner, and the cousin of Albert B. Ratner. 46 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) (1) The following financial statements of Granite Development Partners, L.P. and the report of the independent accountants are included in Part II, Item 8: Report of Independent Accountants Financial Statements: - Balance Sheets as of December 31, 2001 and 2000 - Statements of Operations for the years ended December 31, 2001, 2000 and 1999 - Statements of Changes in Partners' Deficit for the years ended December 31, 2001, 2000 and 1999 - Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 - Notes to the Financial Statements (a) (2) The following financial statements of Silver Canyon Partnership and the report of the independent accountants are included: Report of Independent Accountants Financial Statements: - Balance Sheets as of December 31, 2001 and 2000 - Statements of Operations for the years ended December 31, 2001, 2000 and 1999 - Statements of Changes in Partners' Deficit for the years ended December 31, 2001, 2000 and 1999 - Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999 - Notes to the Financial Statements (a) (3) The following financial statement schedule is included in Part IV, Item 14(d): Schedule III - Real Estate and Accumulated Depreciation Schedules other than those listed above are omitted for the reason that they are not required or are not applicable, or the required information is shown in the financial statements or notes thereto. (a) (4) Exhibits: No. 3.1 Summary of the Partnership Agreement of Limited Partnership adopted November 15, 1993 was filed with the Registration Statement on Form S-11 filed with the Commission on November 4, 1994 and is hereby incorporated by reference. No. 4.1 The Prospectus for the S-11 offering of 36,000 warrants and partnership units and the Prospectus for the S-4 Offer to Exchange 47 Senior Notes was filed with the Commission on November 4, 1994 and is hereby incorporated by reference. No. 5.1 The Prospectus for the Post-Effective Agreement No. 1 to the Registration Statement on Form S-11 was filed with the Commission on September 6, 1996 and is hereby incorporated by reference. (b) Reports on Form 8-K None 48 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GRANITE DEVELOPMENT PARTNERS, L.P. ---------------------------------- (Registrant) DATE: March 29, 2002 /s/ Robert F. Monchein --------------- -------------------------------------------- Robert F. Monchein President FC-Granite, Inc., the general partner of Granite Development Partners, L.P. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Principal Executive Officer President, FC-Granite, Inc. Date: March 29, 2002 /s/ Robert F. Monchein the general partner of Granite -------------- ---------------------- Development Partners, L.P. Robert F. Monchein Principal Financial and Controller, FC-Granite, Inc., Date: March 29, 2002 Accounting Officer the general partner of Granite -------------- /s/ Mark A. Ternes Development Partners, L.P. ------------------ Mark A. Ternes /s/ Samuel H. Miller Vice President, Director Date: March 29, 2002 -------------------- -------------- Samuel H. Miller /s/ Thomas G. Smith Secretary Date: March 29, 2002 ------------------- -------------- Thomas G. Smith /s/ Albert B. Ratner Director Date: March 29, 2002 -------------------- -------------- Albert B. Ratner /s/ Charles A. Ratner Director Date: March 29, 2002 ---------------------- -------------- Charles A. Ratner

49 Granite Development Partners, L.P. Schedule I I I - Real Estate Owned

(A) Land held by the unconsolidated joint ventures, included in Note G to the financial statements, also encumbered by the senior notes payable totals $3,427,371. (B) Reconciliations of total real estate carrying value are as follows:

Silver Canyon Partnership Schedule I I I - Real Estate Owned

(A) Reconciliations of total real estate carrying value are as follows:

GRANITE DEVELOPMENT PARTNERS LP 10-K