10-K405/A

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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K/A
AMENDMENT NO. 2

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

(Mark One)

/x/	Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2000.
/ /	Transitional report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Commission File Number: 0-23503

EXCEL LEGACY CORPORATION
(Exact name of registrant as specified in its charter)

Delaware	33-0781747
(State of other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

17140 Bernardo Center Drive, Suite 300, San Diego, CA 92128
(Address of principal executive offices, Zip Code)

Registrant's telephone number, including area code: (858)-675-9400

Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.01 par value per share
9.0% convertible Redeemable Subordinated Secured debentures due 2004
10.0% Senior Redeemable Secured Notes due 2004
(Title of Class)

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 the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /x/

    The aggregate market value of the Registrant's shares of common stock held by non-affiliates was $116,960,753 as of March 14, 2001 based on the $2.15 closing price on such date.

    The number of outstanding shares of the Registrant's common stock as of March 14, 2001 was 61,540,849.

    The following items of Excel Legacy Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, as amended, are hereby amended. Each such item is set forth in its entirety, as amended.

PART I

ITEM 2. PROPERTIES

    The Company's largest investment is its 91.3% interest in the PEI common stock. At December 31, 2000, PEI owned 30 commercial real estate properties and held one property with a 19-year ground lease, in addition to land in Tucson, AZ, Temecula, CA and San Diego/Pacific Beach, CA held for future development. These properties encompass approximately 4.4 million square feet of GLA and were 95% leased. The five largest properties include 1.5 million square feet of GLA that generate annual minimum rent of $24.6 million, based on leases existing as of December 31, 2000.

    In addition to the commercial properties PEI owned at December 31, 2000 are four self storage facilities. One of these facilities, San Diego, CA, is located on the same site as PEI's commercial property. The commercial property located in Azusa, CA was sold during the year, but PEI retained the self storage facility. PEI's other two self storage facilities are stand-alone properties. At year end, these facilities had 0.7 million square feet of GLA and were 96% occupied.

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    PEI also has a 50% interest in three joint ventures which own retail properties in Fresno, CA, Westminster, CO and Bend, OR. Below is a summary of the PEI properties, excluding the joint venture investments:

	Leases in Effect as of December 31, 2000
Commercial Properties	Number Of Tenants	Gross Leasable Area (sq ft)	Percent Leased		Annual Minimum Rent(1)
		(000's)			($000's)
Westbury, NY	8	398.6	100	%	$	7,765.0
Pentagon City, VA	9	336.8	100	%		6,928.6
Wayne, NJ(2)	5	343.9	93	%		4,368.7
Philadelphia, PA	22	308.7	98	%		3,085.6
Sacramento/Bradshaw, CA	1	156.6	100	%		2,415.7
Roseville, CA	19	188.5	100	%		2,415.3
Signal Hill, CA	13	154.8	97	%		2,335.7
Seekonk, MA	12	213.9	98	%		1,954.2
Glen Burnie, MD	10	154.6	87	%		1,699.8
San Diego, CA(3)	3	443.2	100	%		1,661.7
San Diego/Rancho San Diego, CA	19	98.4	97	%		1,198.9
Scottsdale, AZ	22	68.0	79	%		1,072.3
San Diego/Carmel Mountain, CA	7	35.0	100	%		941.7
Inglewood, CA	1	119.9	100	%		926.6
Moorestown, NJ(4)	3	177.1	37	%		738.0
Northridge, CA	2	22.0	100	%		734.0
New Britain, CT	1	112.4	100	%		671.1
Middletown, OH	1	126.4	100	%		650.0
San Juan Capistrano, CA	6	56.4	100	%		610.8
Terre Haute, IN	1	104.3	100	%		557.8
Smithtown, NY	1	55.6	100	%		500.7
Hampton, VA	2	45.6	100	%		452.4
San Diego/Rancho Bernardo, CA	1	82.5	100	%		450.0
Redwood City, CA	2	49.4	100	%		418.8
Tucson, AZ	11	40.1	100	%		408.1
Denver/Aurora, CO	1	7.3	100	%		164.3
San Diego/Southeast, CA	2	8.9	100	%		150.4
Chula Vista/Rancho del Rey, CA	1	6.7	100	%		75.0
Temecula, CA(5)	—	—	—			—
Total Commercial Properties	186	3,915.6	95	%	$	45,351.2

(1)

Annual Base Rent does not include percentage rents, expense reimbursements, revenue from month to month leases, or rents expiring in 2001.

(2)

Includes 23,000 sq. ft. of vacant storage space.

(3)

Self storage is also located at these properties.

(4)

Consists of leased land.

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(5)

Future shopping center development consisting of 47.5 acres purchased in July 1999.

Self Storage Properties	Gross Leaseable Area (sq ft)	Percent Leased
	(000's)
San Diego/Murphy Canyon, CA	250.8	99	%
San Diego, CA(1)	89.6	99	%
Azusa, CA	84.3	99	%
Solana Beach, CA(2)	238.0	91	%
San Diego/Pacific Beach, CA(3)	—	—
Total Self Storage Properties	662.7	96	%

(1)

GLA of facility is also included in GLA for the commercial property listed above.

(2)

Expansion of this facility was completed during the year and includes 100,000 square feet of indoor RV and boat storage.

(3)

Currently under development.

    The annual gross potential rent for the four operating self storage facilities is $7.2 million. Gross potential rent equals the GLA times the average rent per square foot.

    In addition, the Company's business consisted of the following portfolio of real properties, notes receivable, and investments in real estate related ventures:

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ownership interests in a number of real estate related ventures, including:



•

a 65% ownership interest in a joint venture that is developing a retail project in Newport, Kentucky scheduled for completion in 2001,



•

a 65% ownership interest in a joint venture which owns and operates a hotel, dinner theater and retail shop located near the Grand Canyon in northern Arizona,



•

a 100% ownership interest in Millennia which owns stock in two publicly traded companies, Mace Security International, Inc. and U.S. Plastics Lumber Corp. Another party can earn up to a 50% ownership interest in Millennia if certain returns as defined in the operating agreement exceed 35% per year,



•

a 100% ownership in TenantFirst Real Estate Services, Inc., a fully-integrated real estate development company providing development, leasing, property management and construction management services,



•

a 55% ownership interest in a development company which owns Newport Centre, a retail and office facility located in Winnipeg, Canada,



•

a 50% ownership in EL Holdings, Inc. and EL Media Holdings Company which were formed to invest in media towers and similar businesses, and



•

a 23.7% ownership interest in a development company which owns land in Indianapolis, Indiana.

•

five notes receivable relating to real estate projects in Arizona, California, and Utah with an aggregate outstanding balance of approximately $40.5 million as of December 31, 2000. The largest note relates to a project in Scottsdale, Arizona,



•

two properties located in Arizona including restaurant space and vacant land in Scottsdale,

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•

two properties located in California including a development project in Palm Springs, and land held for sale/development in Yosemite, and



•

a hospitality property under development in Bermuda scheduled for opening in 2001.

    The following table describes Legacy's portfolio of real estate properties as of December 31, 2000. Amounts shown for annual rents are based on executed leases at December 31, 2000. Legacy makes no allowances for contractually based delays to the commencement of rental payments. Due to the nature of real estate investments, Legacy's actual rental income may differ from amounts shown in the table below.

		Tenants	GLA (sq ft)	Annual Rent
			(in thousands)	(in thousands)
Arizona
	Scottsdale Land	(1)	(1)		(1)
	Brio Land	Roaring Fork Restaurant	3.7	$	104.3
	Grand Hotel	(2)	(2)		(2)
California
	Desert Fashion Plaza(4)	Saks Fifth Avenue/various	96.1		461.5
	Yosemite	(3)	(3)		(3)
Indiana
	Indianapolis	(4)	(4)		(4)
Kentucky
	Newport on the Levee	(5)	(5)		(5)
Bermuda
	Daniel's Head Bermuda	(6)	(6)		(6)
Winnipeg, Canada
	Newport Centre(7)	Bank of Montreal/various	156.1		1,594.0
Total			255.9	$	2,159.8

(1)

Property consists of vacant land in Scottsdale and is held for sale.

(2)

The Company holds a 65% ownership interest in Grand Tusayan LLC which owns and operates a 120-room hotel and restaurant.

(3)

Properties consist of vacant land currently held for development or sale.

(4)

Property consists of land held for development. The Company holds a 23.7% ownership interest.

(5)

In addition to land leased to an aquarium which provided $1.1 million in revenue related to that lease, in 2001, property consists of land under development and scheduled for completion in 2001. The Company holds a 65% ownership interest.

(6)

Property under development.

(7)

Property is owned by a Nova Scotia company of which the Company holds a 55% ownership interest.

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Debt Secured by Properties

    The following table summarizes outstanding PEI debt secured by properties as of December 31, 2000:

Lender	Property	Interest Rate		Maturity Date	Balance		Balance due at Maturity
					($000's)		($000's)
GMAC Commercial Mortgage(1)(5)	Westbury, NY; Signal Hill, CA; Philadelphia, PA; Wayne, NJ; and Roseville, CA	7.88%	(2)	6/28/04	$	121,375	$	121,375
Kieg Financial Corporation	Scottsdale, AZ	8.13%		2/1/06		1,983		1,087
American General Realty Advisors	Terre Haute, IN	8.75%		6/1/03		3,529		3,323
Fifth third Real Estate Capital	Middletown, OH	7.63%		2/1/14		3,596		—
GMAC Commercial Mortgage(3)	San Diego/Murphy Canyon, CA	9.00%		7/1/04		8,765		8,437
Rose Canyon Business Park(4)(5)	San Diego/Rancho Bernardo, CA	4.43%		12/8/04		11,500		11,500

(1)

No prepayment on loan is allowed prior to July 2002.

(2)

Interest based on LIBOR plus 98 basis points. Monthly payments are interest only.

(3)

No prepayment on loan is allowed prior to July 2001.

(4)

Capital lease arrangement whereby lease may be paid in full upon six month notice.

(5)

Monthly payments are interest only.

    The following table summarizes outstanding debt secured by the Company's properties as of December 31, 2000:

Lender	Property	Interest Rate		Maturity Date	Balance		Balance due at Maturity
					($000's)		($000's)
A.L. Rist and Margaret R. Rist	Anaheim, CA	6.00%		9/28/02	$	6,312	6,312
San Diego National Bank	Coto de Caza, CA	9.50%	(1)	11/21/01		708	690
Firstar Bank	Newport, KY	10.00%	(2)	3/31/01		2,106	2,106
Bank of Butterfield & Sons Limited	Daniel's Head, Bermuda	10.07%	(3)	7/1/10		5,000	5,000

(1)

Interest based on Prime.



(2)

Interest based on Prime plus 0.5%.



(3)

Interest based on the Bermuda dollar Base Rate plus 3.0%.

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

    The following selected data should be read in conjunction with the Company's financial statements and accompanying notes located elsewhere in this Form 10-K and "Item 7 – Management's Discussion and Analysis of Financial Condition and Results of Operations."

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		Year Ended December 31,						Five Months Ended December 31,			Period from Inception (November 17, 1997) to July 31,
Selected Statement of Operations Data		2000			1999			1998			1998
(in thousands except per share data)
Total revenue		$	18,497		$	25,917		$	15,010		$	8,145
Total operating expenses			(24,385	)		(25,436	)		(13,754	)		(5,267	)
Gain (loss) from real estate sales and write-off of real estate related costs			8,715			(1,765	)		—			—
Net income (loss) before income taxes			2,827			(1,284	)		1,256			2,878
(Provision) benefit of income taxes			(1,611	)		507			(535	)		(1,143	)
Net income (loss)		$	1,216		$	(777	)	$	721		$	1,735
Net income (loss) per share:
	Basic	$	0.03		$	(0.02	)	$	0.02		$	0.11
	Diluted	$	0.02		$	(0.02	)	$	0.01		$	0.07
Weighted average number of shares:
	Basic		41,847			33,985			33,458			15,842
	Diluted		61,553			33,985			54,768			25,984
Other Data
Earnings before depreciation, amortization and deferred taxes ("EBDADT")		$	13,173		$	3,674		$	2,712		$	2,994
Earnings before interest, income taxes, depreciation and amortization ("EBITDA")		$	15,249		$	9,933		$	5,819		$	5,453
Cash flows from
	Operating activities	$	(296	)	$	79		$	(4,045	)	$	3,385
	Investing activities		(5,101	)		(13,658	)		(8,681	)		(116,751	)
	Financing activities		5,099			13,959			2,622			124,857

	As of December 31,						As of July 31,
Selected Balance Sheet Data	2000		1999		1998		1998
(in thousands)
Net real estate	$	96,133	$	102,191	$	190,878	$	175,756
Total assets		324,584		328,153		261,296		246,916
Mortgages and notes payable		112,389		137,806		90,986		72,714
Stockholders' equity		194,598		180,039		166,640		165,919

Summary Selected Financial Data of PEI – As previously discussed, the Company acquired approximately 91.3% of the PEI common stock in November 1999. The Company does not, however, consolidate the accounts of PEI in its financial statements. The following selected historical financial

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data of PEI should be read in conjunction with the PEI Form 10-K separately filed with the Securities and Exchange Commission.

		Year Ended December 31										Four Months Ended December 31					Year Ended August 31
		2000		1999			1998		1997			1997		1996			1997			1996
Selected Income Statement Data
Rental revenues		$	70,771	$	66,667		$	62,485	$	56,067		$	18,170	$	18,941		$	56,838		$	56,221
Operating income			41,847		35,143			31,393		23,289			9,045		8,178			22,422			5,829
Income from continuing operations			34,292		32,671			29,429		29,003			17,508		7,590			19,085			8,340
Discontinued operations			—		—			—		(1,625	)		—		(3,235	)		(4,860	)		(8,250	)
Net income			34,292		32,671			29,429		27,378			17,508		4,355			14,225			90
Net income (loss) per share from continuing operations – basic			.07		(.05	)		.97		1.23			.74		.33			.82			.36
Cash dividends per share
	Preferred share		1.40		1.40			.35		—			—		—			—			—
	Common share		—		—			1.05		1.25			.35		.30			1.20			—

	As of December 31								As of August 31
	2000		1999		1998		1997		1997		1996
Selected Balance Sheet Data
Real estate assets, net	$	545,800	$	550,869	$	418,507	$	353,056	$	337,139	$	337,098
Total assets		662,405		562,558		457,352		408,478		403,757		540,325
Stockholders' equity		463,109		461,260		344,811		406,624		396,476		532,899

    Net income applicable to common stockholders from November 12, 1999 (the date of the Company's acquisition of the PEI common stock) to December 31, 1999 was $4.7 million of which the Company's equity interest was $163,000 after the accrual of preferred dividends.

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

Nature of Business

    The Company acquires, sells, develops, manages, invests, finances and operates real property and related businesses. The following discussion should be read in conjunction with the financial statements and the notes thereto.

Results of Operations (Comparison of the year ended December 31, 2000 to the year ended December 31, 1999)

Operating income totaled $7.8 million in the year ended December 31, 2000 compared to $11.4 million in the year ended December 31, 1999, a decrease of $3.6 million. In 1999, Millennia, a subsidiary of the Company, owned car wash properties that generated $4.3 million of operating income, which were sold in March 1999. Also, there was $0.5 million of non-recurring income in 1999 related to some land sales. This decrease was offset by the Grand Hotel, not opened until 1998, which generated

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$1.1 million of additional operating income in 2000 when compared to 1999 and the Company's project in Daniel's Head, Bermuda, which contributed $0.2 million.

Partnership income and other revenues were approximately $2.6 million in the year ended December 31, 2000 compared to $1.0 million in the year ended December 31, 1999. In 2000, the Company recognized $1.0 million from a joint venture that owns land in Orlando, Florida. The gain was primarily related to 235 acres of land sold in September 2000. The Company also recognized $0.8 million in income from its equity investment in PEI. Additionally, the Company recognized $0.3 million related to a forfeited deposit on a property sale and $0.5 million from its investments in joint ventures. In 1999 the income primarily related to the Company's investments in joint ventures.

Interest income was $4.2 million in the year ended December 31, 2000 compared to $3.9 million in the year ended December 31, 1999, which was primarily related to higher average note receivable balances in 2000. In 2000 the average notes receivable balance was $35.0 million compared to an average balance of $24.6 million in 1999.

Rental income was $3.8 million during the year ended December 31, 2000 compared to $9.5 million in the year ended December 31, 1999, a decrease of $5.7 million. The sale of twelve properties accounted for a decrease of $7.2 million and a property held for sale in Palm Springs, CA had a decrease in revenues of $0.5 million. Offsetting this decrease was the Company's project in Newport, KY which accounted for $1.1 million in 2000 related to a land lease that did not generate any revenues in 1999 and an office building located in San Diego that the Company master leases from PEI which generated $0.8 million in revenues in 2000 and did not generate revenues in 1999.

Interest expense was $10.9 million in the year ended December 31, 2000 compared to $8.0 million in the year ended December 31, 1999, an increase of $2.9 million. Debt of approximately $60.6 million assumed in conjunction with the acquisition of PEI in November 1999 increased interest expense by $4.8 in the year ended December 31, 2000. An increase of $2.1 million relates to additional amounts borrowed by an average of $21.0 million on the Company's credit facilities and short-term notes, primarily to fund its development projects. A decrease of $3.3 million relates to a reductions on mortgage debt related to properties that were sold in 1999 and 2000.

Other operating expenses were $6.3 million in the year ended December 31, 2000 compared to $6.3 million in the year ended December 31, 1999. In 1999, Millennia contributed $1.8 million of expenses. The offsetting net increase of $1.8 million primarily related to the Grand Hotel and operational costs of the Company's project in Bermuda.

Property operating expenses were $2.8 million in the year ended December 31, 2000 compared to $1.8 million in the year ended December 31, 1999, an increase of $1.0 million. The increase relates primarily to an office building located in San Diego that the Company master leases from PEI, which generated expenses of $1.1 million.

General and administrative expenses were $2.8 million in the year ended December 31, 2000 compared to $6.1 million in the year ended December 31, 1999. The primary reason for the decrease was a result of expenses incurred by Millennia in 1999. The remaining decrease relates to reimbursements received from PEI which were greater than the increase in general and administrative expenses resulting from the acquisition of PEI's common stock in 1999.

Depreciation and amortization expense totaled $1.6 million in the year ended December 31, 2000 compared to $3.2 million in the year ended December 31, 1999. The decrease of $1.6 million primarily relates to properties sold.

The net gain from real estate sales and write-off of real estate related costs was $8.7 million in the year ended December 31, 2000 compared to a net loss of $1.8 million in the year ended December 31, 1999. This gain in 2000 related to the Galleria in Scottsdale, AZ, two properties sold to PEI and land

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sold. An additional building was sold to PEI in 2000 for which there was no gain recorded as the Company is leasing back the building. In 1999, the Company recognized a gain of $5.1 million from real estate sales, which was offset by a write-off of $6.9 million of costs related to development projects in Scottsdale, Arizona and Indianapolis, Indiana.

Provision for income taxes was $1.6 million in the year ended December 31, 2000 compared to a benefit of $0.5 million in the year ended December 31, 1999 related to income before taxes of $2.9 million and a loss of $1.3 million, respectively.

    The Company calculates Earnings Before Depreciation, Amortization and Deferred Taxes ("EBDADT") as net income, plus depreciation and amortization on real estate and real estate related assets, and deferred income taxes. EBDADT does not represent cash flows from operations as defined by accounting principles generally accepted in the United States of America, and may not be comparable to other similarly titled measures of other companies. The Company believes, however, that to facilitate a clear understanding of its operating results, EBDADT should be examined in conjunction with its net income as reductions for certain items are not meaningful in evaluating income-producing real estate. The following information is included to show the items included in the Company's EBDADT for the periods ended December 31, 2000 and 1999:

		Year Ended December 31,
		2000			1999
Net income		$	1,216		$	(777	)
Depreciation and amortization (financial statements)			1,562			3,220
Proportionate share of depreciation and amortization from equity investments:
	PEI		8,726			992
	Other		696			121
Less depreciation of non-real estate assets			(211	)		(83	)
Deferred tax expense			1,184			201
EBDADT		$	13,173		$	3,674

Results of Operations (comparison of the year ended December 31, 1999 to the twelve months ended December 31, 1998)

    Effective December 11, 1998, the Board of Directors of the Company adopted a fiscal year-end of December 31, beginning with a short fiscal year ending on December 31, 1998. The Company's previous fiscal year-end was July 31. As such, the financial statements present the periods from inception (November 17, 1997) to July 31, 1998, the five months ended December 31, 1998, and the year ended December 31, 1999. For comparison purposes, the discussion below compares the year ended December 31, 1999 to the twelve months ended December 31, 1998. There were no significant operations from inception to December 31, 1997. The following discussion should be read in conjunction with the financial statements and the notes thereto.

Operating income totaled $11.4 million in the year ended December 31, 1999 compared to $9.4 million in the twelve months ended December 31, 1998. Of the increase of $2.0 million, there was an increase of $4.2 million related to operations from the Grand Hotel which was not opened until the second half of 1998. This increase was offset by a decrease of $3.5 million related to operations from Millennia. Millennia only had three months of operational results in 1999 as effective April 1, 1999, the operations were assigned to a third party in connection with the sale of Millennia assets. Of the remaining $1.3 million increase, $0.5 million was related to income from a ground lease and parking lot related to a venture in Newport, Kentucky which did not have any income in 1998, $0.5 million related

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to reversing accrued estimated costs related to a land sale and $0.3 million related to increased revenues from TenantFirst Real Estate Services and other various income sources.

Partnership income and other revenues totaled $1.0 million for the year ended December 31, 1999 and $0.3 million in the twelve months ended December 31, 1998. This income is primarily related to the Company's interest in a Nova Scotia limited liability company which owns an office building in Canada.

Interest income was $3.9 million in the year ended December 31, 1999 compared to $3.7 million in the twelve months ended December 31, 1998. The increase of $0.2 million is primarily related to notes receivable which were not outstanding in 1998 until the spin-off on March 31, 1998.

Rental income was $9.5 million during the year ended December 31, 1999 compared to $9.9 million in the twelve months ended December 31, 1998. A property in Westminster, CO leased to AMC was contributed to a partnership for a 50% interest effective July 1, 1999. Earnings from this property since this contribution are now recorded as partnership income. This accounted for a decrease of $0.7 million in rental revenue. This decrease was offset by increases of $0.3 million in the Company's remaining properties. Although the Company sold nine income producing properties in the second half of 1999, the decrease in revenues related to these sales was offset by 1998 operations which only had rental revenue after March 31, 1998, the date certain assets were spun-off from Excel Realty Trust, Inc. ("Excel").

Interest expense was $8.0 million in the year ended December 31, 1999 and primarily related to the $137.8 million of mortgages and notes payable outstanding at December 31, 1999 and $41.2 million of mortgage debt that was repaid in 1999 related to the sale of properties. In 1998, interest expense was $4.2 million. The increase in interest expense in 1999 compared to 1998 primarily relates to an increase in the average balance outstanding during the period which was influenced in part by additional debt related to the acquisition of PEI, and 1998 debt which was only outstanding from April 1, 1998.

Depreciation and amortization expense totaled $3.2 million in the year ended December 31, 1999 compared to $3.0 million in the twelve months ended December 31, 1998. The increase of $0.2 million primarily relates to depreciation of the Company's assets which the Company did not own until April 1, 1998. This was offset in part by the assets sold in 1999.

Property operating expenses were $1.8 million in the year ended December 31, 1999 compared to $2.6 million in the twelve months ended December 31, 1998. The decrease of $0.8 million relates to certain expenses that were capitalized in 1999 on properties in Scottsdale, Arizona and Palm Springs, California that the Company intends to demolish and redevelop. In 1998, while these were operating properties, these costs were expensed. These decreases were offset in part by expenses in 1998 on properties owned by the Company after March 31, 1998.

Other operating expenses were $6.3 million in the year ended December 31, 1999 compared to $5.8 million in the twelve months ended December 31, 1998. In 1999, expenses of $4.5 million related to the Grand Hotel compared to $1.0 million in 1998 as the property was under development until the second half of the year. Millennia had expenses of $1.8 million in the year ended December 31, 1999 compared to $4.8 million in the twelve months ended December 31, 1998.

General and administrative expenses were $6.1 million in the year ended December 31, 1999 compared to $3.5 million in the twelve months ended December 31, 1998. The increase relates to an increase in personnel in 1999 when compared to 1998, $0.5 million of bonuses paid upon consummation of the PEI acquisition, and due to the Company not having any significant expenses until April 1, 1998.

    In 1999, the Company sold ten properties for a net gain from real estate sales of $5.1 million. Also in 1999, the Company recorded a $6.0 million impairment charge for an investment (impairment in

12

investment) in a minority interest in a partnership which owns a development project in Indianapolis, Indiana which has been delayed due to a lack of funding. Finally, the Company wrote-off $0.9 million in costs related to a redevelopment project in Scottsdale, Arizona.

Provision for income taxes was a $0.5 million benefit in the year ended December 31, 1999 generated by the net loss before income taxes of $1.3 million. In the twelve months ended December 31, 1998, a $1.7 million expense was recorded due to the net income before income taxes of $4.1 million.

    The following information is included to show the items included in the Company's EBDADT for the year ended December 31, 1999 and the twelve months ended December 31, 1998:

		Year Ended December 31,
		1999			1998
Net income		$	(777	)	$	2,456
Depreciation and amortization (financial statements)			3,220			2,975
Proportionate share of depreciation and amortization from equity investments:
	PEI		992			—
	Other		121			—
Less depreciation of non-real estate assets			(83	)		(50	)
Deferred tax expense			201			325
EBDADT		$	3,674		$	5,706

Liquidity and Capital Resources

    Cash flows from asset sales and borrowings from debt were the primary source of capital to fund the Company's development and ongoing operations in the year ended December 31, 2000. In addition, PEI reimburses the Company for certain general and administrative expenses.

    In November 1999, the Company completed an exchange offer for the common stock of PEI. In the exchange offer, the Company acquired approximately 91.3% of the PEI common stock. PEI stockholders who tendered their shares of the PEI common stock in the exchange offer received from the Company a total of $8.50 consisting of $4.25 in cash, $2.75 in principal amount of the Company's 9.0% Convertible Redeemable Subordinated Secured Debentures ("Debentures") due 2004 and $1.50 in principal amount of the Company's 10.0% Senior Redeemable Secured Notes ("Senior Notes") due 2004 for each share of PEI common stock. After expenses, the Company paid approximately $61.0 million in cash and issued approximately $33.2 million in principal amount of the Debentures and approximately $18.1 million in principal amount of the Senior Notes to acquire the PEI common stock in the exchange offer. Of the cash, $27.4 million was borrowed from The Sol and Helen Price Trust. In 2000, the Company converted $18.1 million of this note payable into 5.1 million shares of common stock.

    In accordance with the stockholders agreement entered into in connection with the exchange offer, until a certain amount of PEI preferred stock is repurchased or tendered for, $7.5 million of cash flow, as defined, is required to be reinvested in PEI before dividends can be paid to Legacy's common shareholders. As such, cash available to service the Company's debt incurred to complete the PEI exchange offer is subject to this restriction. The Company does, however, directly benefit from savings in general and administrative expenses from managing the combined companies, and would receive its portion of PEI common stock dividends for cash flows in excess of the $7.5 million. In 2000, PEI cash flows were influenced by four properties sold where replacement properties were not immediately

13

identified and acquired. As such, cash flows, as defined by the stockholders' agreement, did not exceed $7.5 million.

    The Company anticipates that cash flow will be generated from existing properties and from opportunistic trading of assets. The ability to continue to fund its development projects is dependent on the Company's selling of assets, the procurement of equity or joint venture capital, or the ability to raise additional debt. The Company currently has a $40.0 million revolving line of credit due in 2002 with PEI of which $25.4 million was outstanding at December 31, 2000 and a $15.0 million revolving credit facility with Fleet National Bank due in June 2001, of which $11.4 million was outstanding at December 31, 2000. In 2001 the Company has $15.0 million of principal debt due and expects to repay the short-term debt from asset sales or debt refinancing.

    The Company has two significant projects currently under development, it's hospitality located in Daniel's Head, Bermuda and its retail project in Newport, Kentucky. The project in Bermuda is scheduled to open in 2001. The estimated remaining capital requirement on the project is less than $1.5 million. The Company anticipates meeting this capital requirement through borrowings from its $15.0 million facility which had $11.4 million outstanding at December 31, 2000. The Company's project in Kentucky has approximately $14.6 million remaining in required capital before a construction loan, for which the Company has a commitment from a Bank, funds the remaining construction costs. The Company anticipates meeting this capital requirement through the remaining available capital on its credit facility with Price Enterprises, Inc. The Company may have to stop construction should the Bank decide not to fund the construction loan. The Company has other projects in various stages of pre-development. The total costs of these projects is not known, as their nature, size and certainty are either not yet known or still need to be approved by the Company or various regulatory bodies. The Company spends approximately $0.3 million per month to fund these costs. The Company anticipates continuing to meet these costs both in the short and long terms, from available amounts on its credit facilities and from asset sales. Should the Company not have available funds for these costs, it may postpone further expenditures until funds are available. The Company intends to fund eventual construction costs on these projects through debt, other investors, and through future asset sales. Should the Company not secure the capital when needed for these projects, the Company may sell or delay the projects.

    In addition to using proceeds from asset sales to repay debt and fund development projects, the Company has on file a $300.0 million shelf registration statement for the purpose of issuing debt securities, preferred stock, depositary shares, common stock, warrants or rights. Currently, there remains $286.5 million of securities available for issuance under this shelf.

    The Company expects to meet its long-term liquidity requirements, such as property acquisitions and development, mortgage debt maturities, and other investment opportunities, through the most advantageous sources of capital available to the Company at the time, which may include operating cash flows from existing properties and the completion of current development projects, the sale of common stock, preferred stock or debt securities through public offerings or private placements, entering into joint venture arrangements with financial partners, the incurrence of indebtedness through secured or unsecured borrowings and the reinvestment of proceeds from the disposition of assets.

    In October 1999, the Company completed the sale of Millennia's assets to American Wash Services, Inc. ("AWS"), in exchange for 3,500,000 shares of common stock of the parent of AWS, Mace Security International, Inc. ("Mace"), a warrant to acquire an additional 62,500 shares of Mace common stock at an exercise price of $4.00 per share, and the assumption by AWS of certain liabilities of Millennia. In conjunction with this transaction, Millennia had assigned the operations of its assets to AWS effective April 1, 1999, and thus did not receive cash flow from operations after April 1, 1999. In addition, Millennia acquired 250,000 common shares of Mace through a private placement at $2.00 per share and 250,000 common shares of US Plastic Lumber Corporation ("USPL") at $4.00 per share.

14

The Mace and USPL common shares are subject to certain restrictions and not currently available for sale.

    In 1999, the City of Newport issued two series of public improvement bonds related to the Newport development project. The Series 2000a tax exempt bonds total $44.2 million and are broken down as follows: (a) $18.7 million maturing 2027 with interest at 8.375%; (b) $20.5 million maturing 2018 with interest at 8.5%; and (c) $5.0 million maturing 2027 with interest at 8.375%. The Series 2000b bonds are taxable and have a par amount of $11.6 million with interest at 11% due 2009. The bonds are guaranteed by Newport, the Company, and the third party developers of the project. As of December 31, 2000 Newport had drawn on $32.9 million of the bonds for construction incurred prior to that date.

    The Company also has a 50% interest in a limited liability company that owns land in Orlando, Florida. The land has a remaining land basis at December 31, 2000 of $18.5 million and has mortgage debt of $8.9 million secured by the land and guaranteed by the Company. The Company had $47.9 million of additional guaranteed debt related to several development projects at December 31, 2000.

    In December 2000, the Company converted 21,281,000 shares of Series B Preferred Stock (the "Preferred B Shares") to 21,281,000 shares of common stock. The Preferred B Shares were convertible into common stock of the Company on a one-for-one basis.

    In September 2000, the Company entered into agreements with certain officers to assume $5.1 million in personal debt obligations of the officers in exchange for their rights in 2.05 million shares of Company common stock. The effective price of the transaction was $2.50 per share, tied to the market price on the day of the transaction. The officer debts were entered into in connection with their original share purchase. By assuming these third-party debts, the Company also obtained a first lien on all remaining shares currently held by the officers, which will serve as security for the officers' notes to the Company. The Company paid $4.3 million of this debt in October 2000, upon which the Company recorded 1.71 million shares as repurchased. The Company also purchased shares from unaffiliated sellers at $2.50 per share and higher pursuant to a previously announced share repurchase program.

Certain Cautionary Statements

    Certain statements in this Form 10-K contain 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, that are not historical facts, but rather reflect current expectations concerning future results and events. The words "believes," "expects," "intends," "plans," "anticipates," "likely," "will" and similar expressions identify such forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors, some of which are beyond the Company's control that could cause actual results to differ materially from those forecast or anticipated in such forward-looking statements. These factors include, but are not limited to, the Company's development activities, leverage including short term obligations, reliance on major tenants, competition, dependence on regional economic conditions, fluctuations in operating results, integration of acquired businesses, costs of regulatory compliance, dependence on senior management, and possible stock price volatility. Such risks, uncertainties and other factors include, but are not limited to, the following risks:

The Company's limited operating history makes it difficult to evaluate its business – The Company was incorporated in November 1997 and became an independent business in March 1998 after Excel completed a spin-off of its business. Accordingly, the Company has a limited operating history on which to base an evaluation of its business and prospects. You must consider the Company's prospects in light

15

of the risks and uncertainties encountered by companies in the early stages of development, particularly companies in the real estate industry.

The Company's (including PEI's) tenants may face financial difficulties and be unable to pay rent which may, in turn, cause financial difficulties – The Company's financial position may be materially harmed if any of its or PEI's major tenants, including The Sports Authority, or any other significant tenant experiences financial difficulties, such as a bankruptcy, insolvency or general downturn in the business of the tenant. In addition, any failure or delay by any of the Company or PEI's tenants to make rent payments could impair its financial condition and materially harm the Company's business. Although failure on the part of a tenant to materially comply with the terms of a lease, including failure to pay rent, would give the Company the right to terminate the lease, repossess the property and enforce the payment obligations under the lease, the Company would then be required to find another tenant to lease the property. The Company may not be able to enforce the payment obligations against the defaulting tenant, find another tenant or, if another tenant were found, that the Company would be able to enter into a new lease on favorable terms.

The Company may face significant competition from developers, owners and operators of real estate properties which may inhibit the success of its business – The Company competes in the acquisition of real estate properties with over 200 publicly-traded REITs as well as other public and private real estate investment entities, including financial institutions such as mortgage banks and pension funds, and other institutional investors, as well as individuals. Competition from these entities may impair the Company's financial condition and materially harm its business by reducing the number of suitable investment opportunities offered to the Company and increasing the bargaining power of prospective sellers of property, which often increases the price necessary to purchase a property. Many of the Company's competitors in the real estate sector are significantly larger than the Company and may have greater financial resources and more experienced managers than the Company.

    In addition, a large portion of the Company's and PEI's developed properties are located in areas where competitors maintain similar properties. The Company will need to compete for tenants based on rental rates, attractiveness and location of properties, as well as quality of maintenance and management services.

16

    Competition from these and other properties may impair the Company's financial condition and materially harm its business by:

•

interfering with the Company's ability to attract and retain tenants,



•

increasing vacancies, which lowers market rental rates and limits the Company's ability to negotiate favorable rental rates, and



•

impairing the Company's ability to minimize operating expenses.

The Company's financial performance depends on regional economic conditions since many of its properties and investments are located in Arizona and California – Of the Company's properties and real estate related investments, five are located in two states: three in Arizona and two in California. Additionally, 16 of PEI properties are located in California and two in Arizona. Concentrating a significant number of properties and real estate related investments in these states may expose the Company to greater economic risks than if the properties and real estate related investments were located in several geographic regions. The Company's revenue from, and the value of, the properties and investments located in these states may be affected by a number of factors, including local real estate conditions, such as an oversupply of or reduced demand for real estate properties, and the local economic climate. High unemployment, business downsizing, industry slowdowns, changing demographics, and other factors may adversely impact any of these local economic climates. A general downturn in the economy or real estate conditions in Arizona or California could impair the Company's financial condition and materially harm its business. Further, due to the relatively high cost of real estate in the southwestern United States, the real estate market in that region may be more sensitive to fluctuations in interest rates and general economic conditions than other regions of the United States. The Company does not have any limitations or targets for the concentration of the geographic location of its properties and, accordingly, the risks associated with this geographic concentration will increase if the Company continues to acquire properties in Arizona and California.

The Company's substantial leverage may be difficult to service and could adversely affect its business – As of December 31, 2000, the Company had outstanding borrowings of approximately $36.8 million under its credit facilities, with total borrowing capacity of $55.0 million, and additional mortgage and note debt of approximately $75.6 million. This debt of $112.4 million represented approximately 35% of the Company's total assets at December 31, 2000. The Company is and will continue to be exposed to the risks normally associated with debt financing which may materially harm its business, including the following:

•

the Company's cash flow may be insufficient to meet required payments of principal and interest and payments of principal and interest on borrowings may leave the Company with insufficient cash resources to pay operating expenses.



•

the Company may not be able to refinance debt at maturity, and



•

if refinanced, the terms of refinancing may not be as favorable as the original terms of the debt.

The Company has incurred additional debt to facilitate the exchange offer collateralized by the PEI common stock and a default on that debt could result in the Company's loss of PEI – To facilitate the exchange offer, the Sol and Helen Price Trust made a five-year loan to the Company in the principal amount of $27.4 million. The Company used the proceeds of the loan to satisfy a portion of its monetary obligations under the exchange offer. In 2000, the Company converted $18.1 million of this note payable into 5.1 million shares of common stock. The Company's Senior Notes and Convertible Debentures are secured by certain of the Company's shares of PEI common stock. To the extent the Company is unable to meet its obligations under the terms of the Senior Notes and Convertible Debentures, the debt holders will have the right to take ownership of this PEI common stock.

17

The Company may not realize the expected benefits from the exchange offer making its future financial performance uncertain – The Company entered into the exchange offer with the expectation that the transaction would result in a number of benefits, including cost savings, operating efficiencies, revenue enhancements, tax advantages and other synergies. If these benefits and synergies are not realized, the Company's financial performance and the performance of PEI could be adversely impacted.

The Company faces risks associated with its equity investments in and with third parties because of its lack of control over the underlying real estate assets – As part of the Company's growth strategy, it may invest in shares of REITs or other entities that invest in real estate assets. In these cases, the Company will be relying on the assets, investments and management of the REIT or other entity in which it is investing. These entities and their properties will be exposed to the risks normally associated with the ownership and operation of real estate.

    The Company also may invest in or with other parties through partnerships and joint ventures. In these cases the Company will not be the only entity making decisions relating to the property, partnership, joint venture or other entity. Risks associated with investments in partnerships, joint ventures or other entities include:

•

the possibility that the Company's partners might experience serious financial difficulties or fail to fund their share of required investment contributions,



•

the partners might have economic or other business interests or goals which are inconsistent with the Company's business interests or goals, and



•

the partners may take action contrary to the Company's instructions or requests and adverse to its policies and objectives.

    Any substantial loss or action of this nature could potentially harm the Company's business. In addition, the Company may in some circumstances be liable for the actions of its third-party partners or co-venturers.

Rising interest rates may adversely affect the Company's cash flow – As of December 31, 2000, the Company owed approximately $112.4 million under its credit facility, mortgage debt, and other notes of which $43.6 million bore interest at variable rates. Variable rate debt creates higher debt payments if market interest rates increase. The Company may incur additional debt in the future that also bears interest at variable rates. Higher debt payments as a result of an increase in interest rates could adversely affect the Company's cash flow, cause it to default under some debt obligations or agreements, and materially harm its business.

Because the Company does not have a policy placing a limit on the amount of debt that it may incur, the Company's future borrowings could be significant and may adversely affect its cash flow and results of operations – The Company does not have a policy limiting the amount of debt that it may incur. Accordingly, the Company's management and board of directors have discretion to increase the amount of the Company's outstanding debt at any time. The Company could incur higher levels of debt, resulting in an increase in its total debt payments, which could adversely affect its cash flow and materially harm its business. In addition, if the Company increases the amount of its debt it may increase the risk of the Company's default on all of its debt, including the Company's Debentures and Senior Notes.

The Company could incur significant costs and expenses related to environmental problems – Various federal, state and local laws and regulations require property owners or operators to pay for the costs of removal or remediation of hazardous or toxic substances located on a property. Although the Company is not aware of any necessary environmental remediation or other environmental liability on its portfolio of properties, these laws often impose liability without regard to whether the owner or operator of the property was responsible for or even knew of the presence of the hazardous substances.

18

The presence of or failure to properly remediate hazardous or toxic substances may impair the Company's ability to rent, sell or borrow against a property. These laws and regulations also impose liability on persons who arrange for the disposal or treatment of hazardous or toxic substances at another location for the costs of removal or remediation of these hazardous substances at the disposal or treatment facility. Further, these laws often impose liability regardless of whether the entity arranging for the disposal ever owned or operated the disposal facility. Other environmental laws and regulations impose liability on owners or operators of property for injuries relating to the release of asbestos-containing materials into the air. As an owner and operator of property and as a potential arranger for hazardous substance disposal, the Company may be liable under the laws and regulations for removal or remediation costs, governmental penalties, property damage, personal injuries and related expenses. Payment of these costs and expenses could impair the Company's financial condition and materially harm its business.

The Company could face significant costs of compliance if it is considered an investment company under the Investment Company Act – The Company is not currently registered as an investment company under the Investment Company Act of 1940, because its management believes that the Company either is not within the definition of investment company under the Investment Company Act or, alternatively, excluded from regulation under the Investment Company Act by an exemption. If the Company is deemed to be an investment company under the Investment Company Act and fails to qualify for an exemption, it would be unable to conduct its business as currently conducted, which could materially harm its business. In the future, the Company intends to conduct its operations in order to avoid registration under the Investment Company Act. Therefore, the assets that the Company may acquire or sell may be limited by the regulations of the Investment Company Act.

The costs of compliance with the Americans With Disabilities Act could adversely affect the Company's business – Under the Americans with Disabilities Act of 1990, all public accommodations and commercial facilities must meet federal requirements relating to access and use by disabled persons. Compliance with the Americans with Disabilities Act requirements could involve removal of structural barriers from disabled persons' entrances on the Company's (and PEI's) properties. Other federal, state and local laws may require modifications to or restrict further renovations of the Company's properties to provide for these accesses. Although the Company believes that its properties are substantially in compliance with present requirements, noncompliance with the Americans with Disabilities Act or related laws or regulations could result in the United States government imposing fines or private litigants being awarded damages against the Company. If the Company incurs these costs and expenses, its financial condition could be impaired.

Certain anti-takeover provisions could prevent an acquisition of the Company's business at a premium price – Some of the provisions of the Company's certificate of incorporation and bylaws could discourage, delay or prevent an acquisition of its business at a premium price and could make removal of its management more difficult. These provisions could reduce the opportunities for the Company's stockholders to participate in tender offers, including tender offers that are priced above the then current market price of its common stock. The Company's certificate of incorporation permits its board of directors to issue shares of preferred stock in one or more series without stockholder approval. The preferred stock may be issued quickly with terms that delay or prevent a change in control of the Company's business. In addition, Section 203 of the Delaware General Corporation Law imposes restrictions on mergers and other business combinations between the Company and any holder of 15% or more of its common stock.

Protections for PEI's preferred stockholders limit PEI's common stockholders' ability to control PEI and receive dividends – The Company has agreed to protections for the holders of the PEI preferred stock which limit the control over PEI by its common stockholders and the dividends payable to PEI's

19

common stockholders. The holders of the PEI preferred stock are entitled to elect a majority of PEI's board of directors and to have one designee on the Company's board of directors, until:

•

less than 2,000,000 shares of the PEI preferred stock remain outstanding,



•

the Company makes an offer to purchase any and all outstanding shares of the PEI preferred stock at a cash price of $16.00 per share, and purchase all shares duly tendered and not withdrawn,



•

the directors of PEI (1) issue any equity securities without unanimous approval of PEI's board or (2) fail to pay dividends on the PEI common stock in an amount equal to 100% of PEI's taxable income or the amount necessary to maintain PEI's status as a REIT, or in an amount equal to the excess, if any, of PEI's funds from operations, less preferred stock dividends, over $7.5 million, or



•

the Board of Directors of PEI, by unanimous vote, terminates the right of the holders of the PEI preferred stock to elect a majority of the Directors.

    The third point above is intended to protect the interests of the holders of the PEI preferred stock by creating an annual reserve of $7.5 million at the PEI level which will not be distributed to the Company or any other holder of PEI common stock. This reserve will limit the Company's ability and the ability of all other PEI common stockholders to receive cash distributions from PEI for so long as the PEI preferred stock is outstanding. The Company has agreed with PEI that the $7.5 million reserve may be used for the improvement and/or acquisition of properties, the repurchase of the PEI preferred stock or the reduction of PEI's debt.

Directors and executive officers own a large percentage of the Company's voting stock and could exert significant influence over matters requiring stockholder approval – As of December 31, 2000, the Company's executive officers and directors and their affiliates beneficially owned approximately 12% of its outstanding common stock. As a result, these stockholders will continue to significantly influence the Company's management and affairs and all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger, consolidation or sale of substantially all of its assets. In addition, this significant ownership could discourage acquisition of the common stock by some potential investors and could have an anti-takeover effect.

The Board of Directors may make changes to the Company's policies without stockholder approval – The investment, financing, borrowing and distribution policies of the Company and its policies with respect to all other activities, growth, debt, capitalization, and operations, are determined by the Company's Board of Directors. Although it has no present intention to do so, the Board of Directors may amend or revise these policies at any time and from time to time at its discretion without a vote of the stockholders of the Company. A change in these policies could adversely affect the Company's financial condition and results of operations.

The loss of key personnel could harm the Company's business – Given the early stage of development of the Company's business, it depends to a large extent on the performance of its senior management team and other key employees for strategic business direction and real estate experience. If the Company lost the service of any members of its senior management or other key employees, it could materially harm its business. The Company has not obtained key-man life insurance for any of its senior management or other key employees.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    Financial statements required by this item appear with Index to Financial Statements and Schedules, starting on page F-1 of this report.

20

PART IV

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

(a)

Financial Statements and Financial Statement Schedules:

			Page
(1)	Report of Independent Accountants		F-1
(2)	Financial Statements
	(i)	Consolidated Balance Sheets December 31, 2000 and 1999	F-2
	(ii)	Consolidated Statements of Income (Loss) Years Ended December 31, 2000, December 31, 1999, Five Months Ended December 31, 1998 and the Period from Inception (November 17, 1997) to July 31, 1998	F-3
	(iii)	Consolidated Statements of Changes In Stockholders' Equity Years Ended December 31, 2000, December 31, 1999, Five Months Ended December 31, 1998 and the Period from Inception (November 17, 1997) to July 31, 1998	F-4
	(iv)	Consolidated Statements of Cash Flows Years Ended December 31, 2000, December 31, 1999, Five Months Ended December 31, 1998 and the Period from Inception (November 17, 1997) to July 31, 1998	F-5
	(v)	Notes to Consolidated Financial Statements	F-6
(3)	Financial Statement Schedules
	(i)	Schedule II; Valuation and Qualifying Accounts Years Ended December 31, 2000, December 31, 1999, Five Months Ended December 31, 1998 and the Period from Inception (November 17, 1997) to July 31, 1998	F-23
	(ii)	Schedule III; Real Estate and Accumulated Depreciation; December 31, 2000	F-24

The separate financial statements of the Company's unconsolidated, significant subsidiary, PEI, are incorporated by reference to PEI's annual report filed on Form 10-K for the year ended December 31, 2000 (File No. 0-20449).

(b)

Reports on Form 8-K filed during the quarter ended December 31, 2000:

The Company filed no reports on Form 8-K during the quarter ended December 31, 2000.

(c)

Exhibit Index

23.1*	Consent of PricewaterhouseCoopers LLP.
23.2*	Consent of Ernst & Young LLP.
23.3**	Consent of PricewaterhouseCoopers LLP.
23.4**	Consent of Ernst & Young LLP.

*

Filed herewith.

**

Previously filed.

21

SIGNATURES

    Pursuant to the requirements of the 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.

	EXCEL LEGACY CORPORATION
DATE: May 22, 2001	By:	/s/ GARY B. SABIN GARY B. SABIN President and Chief Executive Officer (Principal Executive Officer)
DATE: May 22, 2001	By:	/s/ JAMES Y. NAKAGAWA JAMES Y. NAKAGAWA Chief Financial Officer (Principal Financial and Accounting Officer)

22

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
  of Excel Legacy Corporation

    In our opinion, the consolidated financial statements as listed in item 14(a) of this Form 10-K present fairly, in all material respects, the financial position of Excel Legacy Corporation and its subsidiaries at December 31, 2000 and 1999 and the results of their operations and their cash flows for the years ended December 31, 2000, December 31, 1999, the five months ended December 31, 1998 and the period from inception (November 17, 1997) to July 31, 1998, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in item 14(a) of this Form 10-K present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedules are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedules 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
San Diego, California
February 22, 2001

F–1

EXCEL LEGACY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

			December 31,
			2000			1999
ASSETS
Real estate:
	Land		$	16,877		$	27,099
	Buildings			26,878			47,664
	Construction in progress			51,835			27,380
	Leasehold interest			2,351			2,351
	Accumulated depreciation			(1,808	)		(2,303	)
		Net real estate		96,133			102,191
Cash				1,469			1,767
Accounts receivable, less allowance for bad debts of $32 and $55 in 2000 and 1999, respectively				812			739
Notes receivable				40,470			28,380
Investment in securities				135,846			136,570
Investment in partnerships				14,855			18,341
Interest receivable				12,875			8,929
Pre-development costs				9,780			16,783
Other assets				7,807			7,938
Deferred tax asset				4,537			6,515
			$	324,584		$	328,153
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
	Notes payable		$	49,061		$	70,661
	Convertible debentures			33,240			33,243
	Senior notes			18,067			18,067
	Mortgages payable			12,021			15,835
	Accounts payable and accrued liabilities			15,130			9,188
	Other liabilities			1,364			151
Total liabilities				128,883			147,145
Commitments and contingencies
Minority interests				1,103			969
Stockholders' equity:
	Series B Preferred stock, $.01 par value, 50,000,000 shares authorized, 0 and 21,281,000 shares issued and outstanding in 2000 and 1999, respectively			—			213
	Common stock, $.01 par value, 150,000,000 shares authorized, 61,540,849 and 36,835,921 shares issued and outstanding in 2000 and 1999, respectively			615			368
	Additional paid-in capital			201,471			187,699
	Accumulated other comprehensive (loss) income, net of tax			(695	)		922
	Retained earnings			2,895			1,679
	Notes receivable from affiliates for common shares			(9,688	)		(10,842	)
		Total stockholders' equity		194,598			180,039
			$	324,584		$	328,153

The accompanying notes are an integral part of the financial statements.

F–2

EXCEL LEGACY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(in thousands, except per share amounts)

			Year Ended December 31,						Five Months Ended December 31,			Period from Inception (November 17, 1997) to July 31,
			2000			1999			1998			1998
Revenues
	Operating income		$	7,842		$	11,426		$	7,670		$	1,732
	Partnership and other income			2,564			1,006			252			—
	Interest income			4,246			3,937			1,573			1,996
	Rental income			3,845			9,548			5,515			4,417
		Total revenue		18,497			25,917			15,010			8,145
Operating expenses:
	Interest			10,860			7,997			2,645			1,518
	Other operating expenses			6,322			6,305			4,904			879
	Property operating expenses			2,856			1,816			1,646			915
	General and administrative			2,785			6,098			2,641			898
	Depreciation and amortization			1,562			3,220			1,918			1,057
		Total operating expenses		24,385			25,436			13,754			5,267
Net operating (loss) income				(5,888	)		481			1,256			2,878
Net gain from real estate sales and write-off of real estate related costs				8,715			(1,765	)		—			—
Income (loss) before income taxes				2,827			(1,284	)		1,256			2,878
(Provision) benefit for income taxes				(1,611	)		507			(535	)		(1,143	)
		Net income (loss)	$	1,216		$	(777	)	$	721		$	1,735
Basic net income (loss) per common share			$	0.03		$	(0.02	)	$	0.02		$	0.11
Diluted net income (loss) per common share			$	0.02		$	(0.02	)	$	0.01		$	0.07

The accomanying notes are an integral part of the financial statements

F–3

EXCEL LEGACY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except number of shares)

		Preferred Stock					Common Stock
												Additional Paid-in Capital			Accumulated Comprehensive Income (Loss)			Total Retained Earnings			Notes Receivable			Total Stockholders' Equity
		Number		Amount			Number		Amount
Balance at inception		—		$	—		—		$	—		$	—		$	—		$	—		$	—		$	—
Issuance of preferred stock		21,281,000			213		—			—			106,192			—			—			—			106,405
Issuance of common stock		—			—		33,457,804			335			70,831			—			—			—			71,166
Issuance of notes receivable from officers for common shares		—			—		—			—			—			—			—			(10,872	)		(10,872	)
Issuance costs		—			—		—			—			(2,515	)		—			—			—			(2,515	)
Net income		—			—		—			—			—			—			1,735			—			1,735
Balance at July 31, 1998		21,281,000			213		33,457,804			335			174,508			—			1,735			(10,872	)		165,919
Net income		—			—		—			—			—			—			721			—			721
Balance at December 31, 1998		21,281,000			213		33,457,804			335			174,508			—			2,456			(10,872	)		166,640
Issuance of common stock		—			—		3,378,117			33			13,479			—			—			—			13,512
Issuance costs		—			—		—			—			(288	)		—			—			—			(288	)
Repayment of loans		—			—		—			—			—			—			—			30			30
Comprehensive income:
	Net loss	—			—		—			—			—			—			(777	)		—			(777	)
	Unrealized gain on marketable securities, net of tax	—			—		—			—			—			922			—			—			922
Total comprehensive income																									145
Balance at December 31, 1999		21,281,000			213		36,835,921			368			187,699			922			1,679			(10,842	)		180,039
Conversion of notes payable to common stock		—			—		5,100,544			51			17,952			—			—			—			18,003
Conversion of preferred stock to common stock		(21,281,000	)		(213	)	21,281,000			213			—			—			—			—			—
Issuance of common shares		—			—		35,333			—			102			—			—			—			102
Repurchase common shares							(1,711,949	)		(17	)		(4,282	)											(4,299	)
Repayment of notes to affiliates		—			—		—			—			—			—			—			1,154			1,154
Comprehensive income:
	Net income	—			—		—			—			—			—			1,216			—			1,216
	Unrealized loss on marketable securities, net of tax	—			—		—			—			—			(1,617	)		—			—			(1,617	)
Total comprehensive loss																									(401	)
Balance at December 31, 2000		—		$	—		61,540,849		$	615		$	201,471		$	(695	)	$	2,895		$	(9,688	)	$	194,598

The accompanying notes are an integral part of the financial statements

F–4

EXCEL LEGACY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

			Year Ended December 31,									Period from Inception (November 17, 1997) to July 31, 1998
									Five Months Ended December 31, 1998
			2000			1999
Cash flows from operating activities:
	Net income (loss)		$	1,216		$	(777	)	$	721		$	1,735
	Adjustments to reconcile net income to net cash provided by operations:
		(Gain) loss from real estate sales net of write-off of real estate related costs		(8,715	)		1,765			—			—
		Depreciation and amortization		1,562			3,220			1,918			1,057
		Earnings from equity investments		(893	)		(163	)		—			—
		Minority interest in income of partnerships		134			123			(7	)		—
	Change in accounts receivable and other assets			(1,909	)		(10,212	)		(2,195	)		(6,334	)
	Change in accounts payable and other liabilities			8,309			6,123			(4,482	)		6,927
Net cash (used in) provided by operating activities				(296	)		79			(4,045	)		3,385
Cash flows from investing activities:
	Proceeds from real estate sales			39,977			63,031			—			—
	Real estate acquired and construction costs paid			(32,860	)		(21,287	)		(1,489	)		(98,951	)
	Pre-development costs paid			(3,614	)		(5,755	)		(6,907	)		(6,662	)
	Investment in partnerships			3,486			(10,828	)		(285	)		(11,138	)
	Acquisition of Price Enterprises, Inc			—			(33,643	)		—			—
	Notes receivable issued			(12,090	)		(5,176	)		—			—
Net cash used in investing activities				(5,101	)		(13,658	)		(8,681	)		(116,751	)
Cash flows from financing activities:
	Proceeds from issuance of preferred stock			—			—			—			106,405
	Proceeds from issuance of common stock			—			13,512			—			11,104
	Issuance costs paid			—			(288	)		—			(2,515	)
	Shares repurchased			(4,197	)		—			—			—
	Principal payments of notes and mortgages			(49,100	)		(38,129	)		(1,378	)		(72,504	)
	Borrowings from issuance of notes payable			58,396			38,864			4,000			82,367
Net cash provided by financing activities				5,099			13,959			2,622			124,857
Net (decrease) increase in cash				(298	)		380			(10,104	)		11,491
Cash at the beginning of the period				1,767			1,387			11,491			—
Cash at the end of the period			$	1,469		$	1,767		$	1,387		$	11,491

The accompanying notes are an integral part of the financial statement.

F–5

EXCEL LEGACY CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Summary of Significant Accounting Policies:

Organization

    Excel Legacy Corporation (the "Company"), a Delaware corporation was formed on November 17, 1997. The Company was originally a wholly owned subsidiary of Excel Realty Trust, Inc. ("Excel"), a Maryland corporation now known as New Plan Excel Realty Trust, Inc. On March 31, 1998, Excel effected a spin-off of the Company through a special dividend to the holders of common stock of Excel of all of the outstanding common stock of the Company held by Excel (the "Spin-off").

    In connection with the Spin-off, certain real properties, notes receivable and related assets and liabilities were transferred to the Company from Excel (Note 3). Upon completion of the Spin-off, the Company ceased to be a wholly owned subsidiary of Excel and began operating as an independent public real estate operating company.

Change in Fiscal Year

    In 1998 the Company's Board of Directors adopted a fiscal year-end of December 31, beginning with a five month transition period ending on December 31, 1998. The Company's previous fiscal year-end was July 31.

Principles of Consolidation

    The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and all affiliates in which the Company has an ownership interest greater than 50%. The Company uses the equity method of accounting to account for its investments in which its ownership interest is 50% or less, but in which it has significant influence. The Company accounts for its interest in Price Enterprises, Inc. ("PEI") (Note 2) under the equity method of accounting however, because the holders of PEI preferred stock, which does not include the Company, have the right to elect a majority of the PEI board of directors.

Real Estate

    Certain real estate assets were transferred to the Company from Excel and recorded at Excel's cost basis. Other real estate assets acquired subsequent to the Spin-off were recorded at the Company's cost. Depreciation is computed using the straight-line method over estimated useful lives of 40 years for buildings. The Company expenses as incurred ordinary repairs and maintenance costs, which include building painting, parking lot repairs, etc. The Company capitalizes major replacements and betterments, which include HVAC equipment, roofs, etc., and depreciates them over their estimated useful lives.

    The Company assesses its properties individually for impairment whenever events or changes in circumstances indicate that the carrying amount of the property may not be recoverable. Recoverability of property to be held and used is measured by comparing the carrying amount of the property to future undiscounted net cash flows expected to be generated by the property. If the sum of the expected undiscounted future cash flows is less than the carrying amount of the property, the property is considered to be impaired. If the property is impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property exceeds the fair value of the property. At December 31, 2000, the Company had $16.1 million of real estate assets under contract to sell in 2001. This sale may not be completed due to uncertainties associated with contract negotiations and buyer

F–6

due diligence contingencies. There were no other significant assets for sale at December 31, 2000. The Company continues to use its other real estate assets in its operations until it is under contract to sell.

Pre-development Costs

    Pre-development costs that are directly related to specific construction projects are capitalized as incurred. The Company expenses these costs to the extent they are unrecoverable or it is determined that the related project will not be pursued.

Management Contracts

    Management contracts are recorded at cost and amortized over a period of seven years. At December 31, 2000, the Company had $1.3 million capitalized related to management contracts acquired when the Company bought TenantFirst, a California corporation, related to the management of eight properties. The properties are not owned by PEI.

Income Taxes

    The Company provides for income taxes under the liability method. A current tax asset or liability is recognized for the estimated taxes refundable or payable for the current year. A deferred tax asset or liability is recognized for the estimated future tax effects attributable to carry forwards and to temporary differences between the tax and financial reporting basis of assets and liabilities. The measurement of current and deferred tax assets and liabilities is based on enacted tax laws and rates. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.

Deferred Leasing and Loan Acquisition Costs

    Costs incurred in obtaining tenant leases and long-term financing are amortized to other property expense and interest expense, respectively, on the straight-line and effective interest method over the terms of the related leases or debt agreements.

Revenue Recognition

    Rental revenues include: (1) minimum annual rentals, adjusted for the straight-line method for recognition of fixed future increases; (2) additional rentals, including recovery of property operating expenses, and certain other expenses which the Company accrues for in the period in which the related expense occurs; and (3) percentage rents which the Company accrues for on the basis of actual sales reported by tenants.

    Gain or loss on sale of real estate is recognized when the sales contract is executed, title has passed, payment is received, and the Company no longer has continuing involvement in the asset.

    The Company adopted the SEC's Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial Statements effective the fourth quarter of 2000. The adoption of SAB 101 did not have a material effect on the Company's consolidated financial position or results of operations.

Comprehensive Income

    In 1999, the Company adopted Statement of Financial Accounting Standard ("SFAS") No. 130 "Reporting Comprehensive Income." This statement requires that all components of comprehensive income be reported in the financial statements in the period in which they are recognized. The

F–7

components of comprehensive income for the Company include net income and unrealized gains on investments.

Use of Estimates

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

Reclassifications

    Certain reclassifications have been made to the consolidated financial statements at December 31, 1999 and for the periods ended December 31, 1998 and July 31, 1998, to conform with the current period's presentation.

New Pronouncement

    In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities – Deferral of the Effective Date of FASB Statement No. 133, an Amendment of FASB Statement No. 133 and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities – an Amendment of FASB Statement No. 133. SFAS No. 133 standardizes the accounting for derivative instruments by requiring that all derivatives be recognized as assets and liabilities and measured at fair value. The Company will be required to adopt this standard during the year ending December 31, 2001. The Company has determined that the adoption of SFAS No. 133 will not have a material impact on the Company's financial statements.

2.  Price Enterprises, Inc.:

    In November 1999, the Company completed an exchange offer of $8.50 per share for any and all common shares of PEI which is operated as a real estate investment trust. The exchange offer consisted of per share consideration for PEI common stock of $4.25 in cash, $2.75 in principal amount of newly issued 9% Convertible Redeemable Subordinated Secured Debentures of the Company due in 2004 (convertible at any time into the Company's common stock at $5.50 per share) and $1.50 in newly issued 10% Senior Redeemable Secured Notes of the Company due in 2004. Approximately, 12.1 million shares of PEI common stock were tendered representing approximately 91% of the

F–8

outstanding common stock. Below is summarized financial information as of December 31, 2000 and the year then ended for PEI (in thousands):

Balance Sheet	December 31, 2000
Real estate, net of accumulated depreciation	$	545,800
Other assets		116,605
Total assets	$	662,405
Notes and mortgages payable	$	195,009
Accounts payable and other liabilities		4,287
		199,296
83/4% Series A Preferred stock		353,404
Other stockholders' equity		109,705
Total liabilities and stockholders' equity	$	662,405

Income statement:	Year Ended December 31, 2000
Total revenue, including interest income and gain on sale of real estate	$	73,983
Operating expenses		(16,281	)
General and administrative		(3,085	)
Interest expense		(10,931	)
Depreciation and amortization		(9,558	)
Gain on sales of real estate		164
Net income		34,292
Preferred dividends		(33,360	)
Net income available for common shares	$	932

    The following unaudited pro forma information for the twelve months ended December 31, 1999 and 1998, has been presented as if Excel Legacy Corporation acquired approximately 91% of the common shares of PEI on January 1, 1999 and 1998 respectively. The unaudited pro forma information makes certain assumptions regarding capital sources and interest rates and the pro forma information is

F–9

not necessarily indicative of what the actual results of operations of the Company would have been had the acquisition actually occurred on January 1, 1999 and 1998, respectively, (in thousands):

		Year Ended December 31,
		1999			1999			1998			1998
		(actual)			(pro forma)			(actual)			(pro forma)
Total revenue		$	25,917		$	27,767		$	23,155		$	24,326
Operating expenses, excluding interest			(17,439	)		(17,439	)		(14,858	)		(14,858	)
Interest expense			(7,997	)		(14,710	)		(4,163	)		(10,876	)
Net gain on real estate sales			(1,765	)		(1,765	)		—			—
Income taxes			507			1,678			(1,678	)		—
Net (loss) income		$	(777	)	$	(4,469	)	$	2,456		$	(1,408	)
Net income per share
	Basic	$	(0.02	)	$	(0.13	)	$	0.10		$	(0.06	)
	Diluted	$	(0.02	)	$	(0.13	)	$	0.06		$	(0.06	)

3.  Spin-off:

    On March 31, 1998, Excel transferred certain real estate assets to the Company in exchange for 23.4 million common shares of the Company, assumption of mortgage debt by the Company, and issuance of a note payable to Excel from the Company which was subsequently repaid. The Spin-off took place through a dividend distribution to Excel's common stockholders of all the Company's common stock held by Excel. The fair value of the distribution was approximately $56.0 million or $2.39 per share.

4.  Millennia:

    The Company has an investment in a joint venture known as Millennia Car Wash, LLC ("Millennia") which owned interests in 19 car wash properties in Arizona and Texas. In October 1999, Millennia exchanged its assets in exchange for approximately 3.5 million shares of common stock and 62,500 common stock purchase warrants of Mace Security International ("MACE"). In connection with the agreement, Millennia had assigned the operations of its car wash properties to MACE effective April 1, 1999. As such, the Company has not reported operations of Millennia since that date. Millennia, however, had retained ownership of the car wash properties until October 1999. As part of the agreement, the Company acquired 250,000 common shares of MACE through a private placement at $2 per share and 250,000 common shares of US Plastic Lumber Corporation ("USPL") at $4 per share. The Company's common shares in MACE and USPL are subject to certain sale restrictions. One of the Company's senior officers is a director on the MACE board of directors.

    In conjunction with the sale of assets for MACE common shares, the Company recognized a $2.1 million gain on the exchange based upon the market value of the common shares on the date of the exchange, discounted for sale restrictions. In accordance with accounting principles generally accepted in the United States of America, the Company accounts for Millennia's investment in MACE under the equity method of accounting and owned approximately 15% of MACE at December 31,

F–10

2000. The Company classifies its investment in USPL as available-for-sale and recognizes changes in the fair value of its investment in USPL in other comprehensive income.

	December 31,
Investment in USPL (in thousands):	2000			1999
Cost	$	1,000		$	1,000
Unrealized (loss) gain		(695	)		922
Fair value	$	305		$	1,922

5.  Real Estate:

    The Company sold the following properties in 2000:

Location	Sold Date	Sales Price (000's)		Mortgage Transferred (000's)
Middletown, OH(1)	2/00	$	6,709	$	3,726
Terre Haute, IN(1)	2/00		5,762		3,598
San Diego/Rancho Bernardo, CA(1)(2)	2/00		12,381		7,381
San Diego/4-S Ranch, CA	5/00		6,130		—
Scottsdale Galleria, AZ	7/00		28,750		—
Scottsdale City Center, AZ(1)	10/00		9,663		2,006
Telluride, CO	12/00		2,550		—

(1)

Property sold to PEI



(2)

Property master leased back to the Company

    The sales of the above properties resulted in a net gain of $9.2 million of which properties sold to PEI accounted for $1.9 million. The gain was partially offset by certain real estate held for sale, which were written down by $0.5 million to their estimated sales price.

    In September 2000, the Company acquired approximately 4.5 acres of land in Anaheim, CA for $7.8 million. The Company paid cash of $1.5 million and assumed $6.3 million of debt.

    In 1999, in addition to the Millennia transaction (Note 4), the Company sold a property located in Highlands Ranch, Colorado for approximately $25.4 million, eight properties in various locations leased to Wal-Mart for approximately $34.9 million, and a land parcel in Rancho Bernardo, California for approximately $2.9 million. The combined book value of these assets was $66.3 million. Mortgage debt of $41.2 million was retired in conjunction with the sales. The sales resulted in a net book gain of $3.1 million. The Company also contributed a property located in Westminster, Colorado to a partnership for a 50% interest. The property had book value of approximately $24.9 million and mortgage debt of $18.5 million and is part of a development project.

    In 1999, the Company incurred a charge of $6.0 million related to an impairment in a minority investment in a development project in Indianapolis, Indiana which has been delayed due to a lack of funding. Additionally, the Company wrote-off $0.9 million in non-recurring costs related to a development project in Scottsdale, Arizona.

F–11

    In the five months ended December 31, 1998, Millennia acquired nine car wash properties for approximately $15.2 million. The acquisition was made through the assumption of various notes payable.

6.  Notes Receivable:

    The Company had $40.5 million in notes receivable outstanding at December 31, 2000 related to various development projects. The notes bear interest at 10% to 12% per annum and are secured by the related projects. The notes mature on various dates between 2001 and the earlier of the sale of the related projects, or 2003 to 2004.

7.  Notes and Mortgages Payable:

Notes payable

    The Company had the following notes payable outstanding at December 31, 2000 and December 31, 1999 (amounts in thousands):

	December 31,
	2000		1999
Revolving $15.0 million credit facility bearing interest at Libor plus 3.75% (10.3% at December 31, 2000) due June 30, 2001. The facility is secured by some of the Company's PEI common shares.	$	11,481	$	—
Revolving $40.0 million unsecured line of credit facility with PEI bearing interest at Libor plus 3.75% (10.3% at December 31, 2000) to 12.50% due December 2002.		25,377		—
Note payable to The Sol and Helen Price Trust bearing interest at Libor plus 1.50% (8.1% at December 31, 2000) due November 2004. The note is secured by some of the Company's PEI common shares (Note 9).		9,347		27,347
Note payable to an individual bearing interest at Prime plus 2% repaid in October 2000.		—		5,000
Note payable outstanding on a $4.7 million facility related to Newport on the Levee, LLC, bearing interest at Prime plus 0.5% (10% at December 31, 2000), due March 2001.		2,106		—
Revolving $35.0 million secured credit facility bearing interest at Libor plus 3.75% repaid in July 2000.		—		32,103
Other		750		6,211
Total	$	49,061	$	70,661

    The Company has a 65% interest in Newport on the Levee, LLC ("Newport") that is developing an entertainment retail project in Newport, KY. In addition to the $2.1 million note in the above table, the City of Newport has issued two series of public improvement bonds. The Series 2000a tax exempt bonds total $44.2 million and are broken down as follows: (a) $18.7 million maturing 2027 with interest at 8.375%; (b) $20.5 million maturing 2018 with interest at 8.5%; and (c) $5.0 million maturing 2027 with interest at 8.375%. The Series 2000b bonds are taxable and have a par amount of $11.6 million with interest at 11% due 2009. The bonds are guaranteed by Newport, the Company, and the third

F–12

party developers of the project. Newport has drawn on $32.9 million of the bonds at December 31, 2000 for construction incurred to date.

    The Company has a 50% interest in a limited liability company that owns land in Orlando, Florida. The land has a total book basis of $18.5 million at December 31, 2000 and mortgage debt of $8.9 million which is guaranteed by the Company.

    The Company also has guaranteed a $15.0 million note payable related to a development project in Scottsdale, AZ and the Company has a note receivable with a participating interest.

Convertible Debentures

    In conjunction with the PEI exchange offer, the Company issued $33.2 million in convertible debentures ("Debentures"). The Debentures bear an interest rate of 9% per annum and are secured by a first priority security interest in common shares of PEI. The holders of the Debentures are entitled at any time before the day prior to the final maturity date, subject to prior redemption, to convert any Debentures into the Company's common stock at the conversion price of $5.50 per share. The Debentures mature in November 2004.

F–13

Senior Notes

    In conjunction with the PEI exchange offer, the Company issued $18.1 million in senior notes ("Senior Notes"). The Senior Notes bear an interest rate of 10% per annum and, along with the Debentures, are secured by a first priority security interest in common shares of PEI. The Senior Notes rank equal to future senior indebtedness of the Company and are senior to the Debentures. The Senior Notes mature in November 2004.

Mortgages Payable

    The Company had $12.0 million in mortgages payable outstanding at December 31, 2000 secured by real estate. The mortgage debt has an average maturity of 4.0 years expiring at various dates to 2009. The monthly payment of principal and interest approximates $80,000 bearing an average interest rate of 7.9% at December 31, 2000.

Maturities

    The principal payments required to be made on mortgages and notes payable over the next five years are as follows (in thousands):

Year Ended December 31,
2001	$	14,995
2002		31,739
2003		—
2004		60,655
2005		—
Thereafter		5,000
	$	112,389

8.  Income Taxes:

    At December 31, 2000, the Company had a net deferred tax asset of $4.5 million. The deferred tax asset primarily relates to certain assets written-off for book purposes, but not yet deducted for tax purposes. The remaining portion of the deferred asset relates to timing differences in recognizing revenue and expenses for tax purposes through operations of the Company. No valuation allowance has

F–14

been provided against the deferred tax asset as the Company believes future taxable income is more likely than not. The provision for income taxes consisted of the following (in thousands):

		Federal			State
Year ended December 31, 2000:
	Current payable	$	126		$	262
	Deferred tax benefit		676			547
	Provision for income taxes	$	802		$	809
Year ended December 31, 1999:
	Current (benefit) payable	$	(743	)	$	25
	Deferred tax expense (benefit)		221			(10	)
	(Benefit) provision for income taxes	$	(522	)	$	15
Five months ended December 31, 1998:
	Current payable	$	312		$	107
	Deferred tax expense		82			34
	Provision for income taxes	$	394		$	141
Period from inceptions to July 31, 1998:
	Current payable	$	727		$	207
	Deferred tax expense		163			46
	Provision for income taxes	$	890		$	253

    The significant components of activities that gave rise to deferred tax assets and liabilities included on the balance sheet were as follows (in thousands):

	December 31,
	2000			1999
Impairment of real estate investments	$	2,579		$	2,395
Assets acquired from the Spin-off (Note 2)		702			4,487
NOL carryforwards		2,442			—
Other		219			—
Deferred gain on equity investments		(1,405	)		(367	)
Net deferred tax assets	$	4,537		$	6,515

    A reconciliation of the Company's effective tax rate to the statutory U.S. federal tax rate for the years ended December 31, 2000, December 31, 1999, the five months ended December 31, 1998 and the period from inception to December 31, 1998 is as follows:

	2000		1999		1998		1997
Statutory rate	34	%	34	%	34	%	34	%
State and local	22	%	6	%	8	%	6	%
Effective rate	56	%	40	%	42	%	40	%

F–15

9.  Capital Stock:

Common Shares

    In March 2000, $18.0 million of notes payable to The Sol and Helen Price Trust were converted into 5.1 million shares of the Company's common stock. In October 2000 the Company repurchased 1.7 million shares of common stock from affiliates for approximately $2.50 per share (Note 14).

    In December 2000, the Company converted 21,281,000 shares of Series B Preferred Stock to 21,281,000 shares of common stock on a one-for-one basis.

Private Placement

    In October 1999, the Company sold 3,378,117 shares of common stock to a group of investors. Proceeds of approximately $13.5 million were used for general corporate purposes, to fund certain development costs and to repay outstanding amounts on the Company's credit facility.

Options

    The Company adopted the 1998 Stock Option Plan (the "Option Plan") for directors, executive officers and other key employees of the Company. The aggregate number of shares issuable upon exercise of options under the Option Plan may not exceed 5,250,380 shares and are exercisable for 10 years from the date of grant. The exercise price of stock options may not be less than 100% of the fair market value of the stock on the date of grant. At December 31, 2000, the exercise price of the options outstanding ranged from $2.92 to $10.00 per share. Options granted in the period from inception to July 31, 1998 were granted at an exercise price of $5.00 and $10.00 per share. All subsequent options have been granted at an exercise price equal to the fair market value of the stock on the date of grant. Stock option and warrant activity are summarized as follows:

    The following table summarizes the activity for both plans:

		Options/ Warrants		Weighted Average Exercise Price Per Share
Outstanding at inception (November 17, 1997)		—		$	—
	Granted	3,850,000			7.50
Outstanding at July 31, 1998		3,850,000			7.50
	Granted	40,000			2.92
Outstanding at December 31, 1998		3,890,000			7.45
	Granted	1,363,000			5.06
	Cancelled	(950,000	)		7.50
Outstanding at December 31, 1999		4,303,000			6.68
	Granted	374,000			3.26
	Cancelled	(58,500	)		3.20
Outstanding at December 31, 2000		4,618,500		$	6.43

    The options vest over five years and expire at various dates through June 2010. All of the options were issued to directors, officers or affiliates of the Company. At December 31, 2000, options of 631,880 were available for granting under the Option Plan. In January 2001, 4,049,000 options with an average price of $6.82 were cancelled at the option of the respective holders.

    SFAS No. 123, Accounting for Stock-Based Compensation, requires either the recording or disclosure of compensation cost for stock-based employee compensation plans at fair value. The Company has adopted the disclosure-only provisions of SFAS No. 123. Accordingly, no compensation

F–16

costs have been recognized by the Company. Had compensation cost for the Company's stock option plan been recognized based on the fair value at the grant date for awards consistent with the provisions of SFAS No. 123, the Company's net income in the year ended December 31, 2000 would have been decreased by $558,000 from $1,216,000 ($0.03 per share – basic, and $0.02 per share – diluted) to a net income of $658,000 ($0.02 per share – basic, and $0.01 per share – diluted). The Company's net loss in the year ended December 31, 1999 would have been increased by $3,225,000 from $777,000 ($0.02 per share – basic, and $0.01 per share – diluted) to a net loss of $4,002,000 ($0.12 per share – basic, and $0.07 per share – diluted). For the five months ended December 31, 1998, the net income would have been decreased by $50,000 from $721,000 ($0.02 per share – basic, and $0.01 per share – diluted) to $671,000 ($0.02 per share – basic, and $0.01 per share – diluted). For the period from inception (November 17, 1997) to July 31, 1998, net income reduced by $5,705,000 from $1,735,000 ($0.11 per share – basic, and $0.07 per share diluted) to a net loss of $3,970,000 ($0.25 per share – basic, and $0.15 per share – diluted).

    The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for the year ended December 31, 2000 and 1999, the five months ended December 31, 1998, and the period from inception to July 31, 1998, respectively: expected volatility of 35.69%, 37.02%, 37.02%, and 36.56%; risk-free interest rate of 6.69%, 5.76%, 5.76% and 5.56%; expected life of 6 years (for all periods); and dividend yield of 0.00% (for all periods).

10.  Earnings Per Share (EPS):

    A reconciliation of the numerator and denominator of basic and diluted EPS is provided as follows (in thousands, except per share amounts):

		Year Ended December 31,
									Period from Inception (November 17, 1997) to July 31, 1998
							Five Months Ended December 31, 1998
Basic EPS
		2000		1999
Numerator:
	Net income (loss)	$	1,216	$	(777	)	$	721	$	1,735
Denominator:
	Weighted average common shares outstanding		41,847		33,985			33,458		15,842
Earnings Per Share		$	0.03	$	(0.02	)	$	0.02	$	0.11

F–17

			Year Ended December 31,
										Period from Inception (November 17, 1997) to July 31, 1998
								Five Months Ended December 31, 1998
Diluted EPS
			2000		1999
Numerator:
	Net income (loss)		$	1,216	$	(777	)	$	721	$	1,735
Denominator:
	Weighted average common shares outstanding			41,847		33,985			33,458		15,842
	Effect of diluted securities:
		Preferred B shares		19,706		21,281			21,281		10,142
		Common stock options		—		4			29		—
	Deduct diluted securities for net loss			—		(21,285	)		—		—
				61,553		33,985			54,768		25,984
Earnings Per Share			$	0.02	$	(0.02	)	$	0.01	$	0.07

11.  Financial Instruments and Credit Risk:

    Financial instruments which potentially subject the Company to concentrations of risk consist principally of cash, accounts receivable and notes receivable. From time to time, the Company's cash balances with any one institution may exceed Federal Deposit Insurance limits. The following fair value disclosure was determined by the Company, using available market information and discounted cash flow analyses as of December 31, 2000 and 1999. However, considerable judgment is necessary to interpret market data and to develop the related estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts that the Company could realize upon disposition. The use of different estimation methodologies may have a material effect on the estimated fair value amounts. The Company believes that the carrying values reflected in the Consolidated Balance Sheets at December 31, 2000 and 1999 approximates the fair values for cash, accounts receivable and payable, notes receivable, mortgage debt and notes payable, and that the market value of its real estate held for sale exceeds the carrying value. The Company's investment in MACE common shares has a book value of $22.4 million and a fair value, based upon the closing stock price at December 31, 2000 of $0.906, of $3.4 million.

12.  Statement of Cash Flows – Supplemental Disclosure:

		Year Ended December 31,
								Period from Inception (November 17, 1997) to July 31, 1998
						Five Months Ended December 31, 1998
		2000		1999
Supplemental disclosure:
	Cash paid for interest	$	7.7 million	$	5.6 million	$	2.2 million	$	1.6 million
	Net cash paid for income taxes		0.2 million		0.3 million		1.5 million		—

In 2000:

•

The Company converted $18.0 million of notes payable into 5.1 million common shares.



•

The Company transferred $16.7 million in mortgage debt to PEI in conjunction with asset sales to PEI.

F–18

•

Newport assumed $2.1 million in debt in conjunction with real estate construction and acquisitions.



•

Notes receivable from certain officers were decreased and payables increased by a net $1.1 million for salary and bonuses not paid in cash. This amount was included as a general and administrative expense in 1999.

In 1999:

•

The Company's subsidiary, Millennia, exchanged $37.4 million of assets and $15.1 million of debt in exchange for securities (see Note 4).



•

The Company assumed $78.9 million of debt related to the tender offer of PEI common shares (see Note 2).



•

The Company assumed $6.4 million in mortgage debt related to the construction of an office building.



•

The Company contributed $24.9 million in real estate with mortgage debt of $18.5 million to a partnership for development.

In the five months ended December 31, 1998:

•

Millennia assumed $15.2 million of debt in conjunction with the acquisition of nine car wash properties.

In the period from inception to July 31, 1998

•

The Spin-off occurred (Note 3) and common shares were issued to certain officers of the Company in exchange for cash and $10.9 million in notes receivable.



•

The Company issued 850,000 shares of common stock in connection with the acquisition of a real estate management company. The market value of the shares was approximately $3.4 million.



•

The Company borrowed $35.5 million in mortgages payable in connection with the construction of the AMC theaters.

13.  Segment Reporting:

    The Company's primary business segments consist of the Commercial Property Unit, the Development Unit, and the Investment Unit. The Commercial Property Unit manages Company held operating properties and includes its investment in PEI. The Development Unit develops real estate projects and the Business Unit pursues and invests in public and private real estate-related companies and/or their securities. Certain revenues and expenses such as general and administrative not

F–19

specifically incurred by specific segments, and corporate income taxes have been grouped with "General and Administrative" for presentation purposes.

		Commercial Property Unit			Development Unit			Investment Unit			General and Administrative			Total
Year ended December 31, 2000:
Total revenues		$	2,725		$	6,153		$	7,637		$	1,982		$	18,497
Interest			220			5			1			10,634			10,860
Depreciation and amortization			149			423			779			211			1,562
General and administrative			—			—			—			2,785			2,785
Operating expenses			1,500			927			6,751			—			9,178
Total operating expenses			1,869			1,355			7,531			13,630			24,385
Net operating income (loss)			856			4,798			106			(11,648	)		(5,888	)
	Real estate sales		1,872			6,843			—			—			8,715
	Provision for income taxes		—			—			(141	)		(1,470	)		(1,611	)
Net income		$	2,728		$	11,641		$	(35	)	$	(13,118	)	$	1,216
Additions (reductions) to real estate			(29,788	)		16,934			6,300			—			(6,554	)
Investment in securities and partnerships			113,151			—			37,550			—			150,701
Deferred tax asset			3515			—			1019			—			4,537
Total assets		$	114,973		$	126,973		$	59,076		$	23,562		$	324,584
Year ended December 31, 1999:
Total revenues		$	8,441		$	4,903		$	10,358		$	2,215		$	25,917
Interest			3,681			—			419			3,897			7,997
Depreciation and amortization			1,309			571			1,255			85			3,220
General and administrative			—			—			2,016			4,082			6,098
Operating expenses			465			1,162			6,494			—			8,121
Total operating expenses			5,455			1,733			10,184			8,064			25,436
Net operating income			2,986			3,170			174			(5,849	)		481
	Real estate sales		3,497			(7,324	)		2,062			—			(1,765	)
	Provision for income taxes		—			—			—			507			507
Net income		$	6,483		$	(4,154	)	$	2,236		$	(5,342	)	$	(777	)
Additions (reductions) to real estate			(73,837	)		17,595			(32,649	)		—			(88,891	)
Investment in securities and partnerships			120,070			—			34,841			—			154,911
Deferred tax asset			(104	)		5,600			1,019			—			6,515
Total assets		$	151,109		$	86,304		$	48,303		$	42,437		$	328,153
Five months ended December 31, 1998:
Total revenues		$	4,749		$	1,891		$	7,690		$	680		$	15,010
Interest			2,215			—			348			82			2,645
Depreciation and amortization			782			238			852			46			1,918
General and administrative			—			—			1,705			936			2,641
Operating expenses			365			1,133			5,052			—			6,550
Total operating expenses			3,362			1,371			7,957			1064			13,754
Net operating income			1,387			520			(267	)		(384	)		1,256
	Provision for income taxes		—			—			—			(535	)		(535	)
Net income		$	1,387		$	520		$	(267	)	$	(919	)	$	721
Additions to real estate			—			379			16,365			—			16,744
Investment in securities and partnerships			—			—			11,423			—			11,423
Deferred tax asset			603			5,600			—			—			6,203
Total assets		$	99,170		$	68,497		$	55,902		$	37,727		$	261,296

F–20

Period from inception (November 17, 1997) to July 31, 1998:
Total revenues		$	3,835	$	1,652	$	2,063	$	595		$	8,145
Interest			1,444		—		—		74			1,518
Depreciation and amortization			656		174		122		105			1,057
General and administrative			—		—		354		544			898
Operating expenses			165		753		876		—			1,794
Total operating expenses			2,265		927		1,352		723			5,267
Net operating income			1,570		725		711		(128	)		2,878
	Provision for income taxes		—		—		—		(1143	)		(1,143	)
Net income		$	1,570	$	725	$	711	$	(1271	)	$	1,735
Additions to real estate			105,287		28,521		42,886		—			176,694
Investment in securities and partnerships			—		—		11,138		—			11,138
Deferred tax asset			720		5,600		—		—			6,320
Total assets		$	100,529	$	69,377	$	38,240	$	38,770		$	246,916

14.  Related Party Transactions:

    In connection with the sale of common stock to certain affiliates in 1998, the Company issued notes receivable of which $9.7 million was outstanding at December 31, 2000. The notes bear interest at a fixed rate of 7%, and are due in March 2003. The total interest receivable at December 31, 2000 from these notes totaled $1.8 million. The notes have been offset against stockholders' equity on the Company's accompanying Consolidated Balance Sheets.

    In September 2000, the Company entered into agreements with certain officers to assume $5.1 million in personal debt obligations of the officers in exchange for their rights in 2.05 million shares of Company common stock. The effective price of the transaction was $2.50 per share, tied to the market price on the day of the transaction. The officer debts were entered into in connection with their original share purchase. By assuming these third-party debts, the Company also obtained a first lien on all remaining shares currently held by the officers, which will serve as security for the officers' notes to the Company. The Company paid $4.3 million of the above personal debt in October 2000, upon which the Company recorded 1.71 million shares as repurchased.

    In 2000, four properties and a joint venture interest were sold to PEI. The Company leases back one of the properties for a quarterly amount of $0.1 million. Also, at December 31, 2000, the Company had $25.4 million payable to PEI on a $40.0 million note. Finally, the Company offsets the general and administrative costs with reimbursements received monthly from PEI. In the nine months ended December 31, 2000, approximately $3.0 million was received as reimbursements.

15.  Retirement Plan:

    The Company has a 401(k) Retirement Plan (the "401(k) Plan") covering most of the officers and employees of the Company. The 401(k) Plan permits participants to contribute, until termination of employment with the Company, up to a maximum of 15% of their compensation to the 401(k) Plan. In addition, contributions of participants are matched by the Company in an amount equal to 50% of the participants contribution in Company stock (up to a maximum of 3% of such person's compensation).

F–21

The following table shows the costs incurred in connection with the 401(k) Plan for each of the periods shown:

	Year Ended December 31,
							Period from Inception (November 17, 1997) to July 31, 1998
					Five Months Ended December 31, 1998
	2000		1999
401 (k) Plan Costs incurred	$	142,000	$	87,000	$	15,000	$	—

16.  Selected Quarterly Financial Data (unaudited):

    Summarized quarterly financial data is as follows (in thousands except per share amounts):

		Total Revenues		Net Income (Loss)			Net Income (Loss) Per Share – Basic			Net Income (Loss) Per Share – Diluted
Year ended December 31, 2000
	Quarter ended March 31,	$	3,693	$	(373	)	$	(0.01	)	$	(0.01	)
	Quarter ended June 30,		5,235		(244	)	$	(0.01	)	$	(0.01	)
	Quarter ended September 30,		5,896		3,150		$	0.08		$	0.05
	Quarter ended December 31,		3,673		(1,317	)	$	(0.02	)	$	(0.02	)
Year ended December 31, 1999
	Quarter ended March 31,	$	9,217	$	174		$	0.01		$	0.00
	Quarter ended June 30,		6,216		512		$	0.02		$	0.01
	Quarter ended September 30,		5,426		335		$	0.01		$	0.01
	Quarter ended December 31,		5,058		(1,798	)	$	(0.05	)	$	(0.05	)

F–22

EXCEL LEGACY CORPORATION AND SUBSIDIARIES

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

(in thousands)

Description	Balance at Beginning of Period		Additions Charged to Expense		Deductions Written Off			Balance at End of Period
Allowance for bad debts:
Year ended December 31, 2000	$	55	$	20	$	(43	)	$	32
Year ended December 31, 1999	$	34	$	97	$	(76	)	$	55
Five months ended December 31, 1998	$	14	$	20	$	—		$	34
Period from inception (November 17, 1997) to July 31, 1998	$	—	$	16	$	2		$	14
Investment in Partnerships(1):
Year ended December 31, 2000	$	6,012	$	—	$	—		$	6,012
Year ended December 31, 1999	$	—	$	6,012	$	—		$	6,012
Five months ended December 31, 1998	$	—	$	—	$	—		$	—
Period from inception (November 17, 1997) to July 31, 1998	$	—	$	—	$	—		$	—

(1)

Relates to the Company's investment in Entercitement, LLC.

F–23

EXCEL LEGACY CORPORATION AND SUBSIDIARIES

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2000

(in thousands)

								Net Cost Capitalized (Sold) Subsequent to Acquisition
													Gross amount at which carried at close of period
				Initial Cost																				Life on Which Depreciation in Latest Income Statements is Computed
Description	Encumbrances			Land		Building and Improvements		Land			Building and Improvements		Land		Building and Improvements		Total(a)		Accumulated Depreciation		Date of Construction		Date Acquired
Scottsdale Towers Land Scottsdale, AZ	$	—		$	3,971	$	—	$	(428	)	$	—	$	3,543	$	—	$	3,543	$	—	—		1998	—
Brio Restaurant Scottsdale, AZ		—			563		1,046		—			—		563		1,046		1,609		73	1975		1998	40 years
Grand Hotel Tusayan, AZ			(1)		—		11,898		—			139		—		12,037		12,037		1,092	1998		1998	40 years
Pointe Anaheim Anaheim, CA		6,312			7,871		—		—			923		7,871		923		8,794		—		(2)	1998, 2000	—
Residential Property Coto de Caza, CA		708			316		586		—			—		316		586		902		2	2000		2000	40 years
Desert Fashion Plaza Palm Springs, CA		—			3,816		9,772		—			2,514		3,816		12,286		16,102		641	1967		1998	40 years
Land Yosemite, CA		—			600		—		168			—		768		—		768		—	—		1998	—
Danile's Head Bermuda		5,000			—		—		—			14,190		—		14,190		14,190		—		(2)	1998	—
Newport on the Levee Newport, KY(2)(3)		2,106			—		16,225		—			21,420		—		37,645		37,645		—	—		1998	—
	$	14,126		$	17,137	$	39,527	$	(260	)	$	39,186	$	16,877	$	78,713	$	95,590	$	1,808

(1)

This property is on a land lease with a cost of $2,351 which is not included above.

(2)

Property is currently under construction.

(3)

The city of Newport, KY issued two series of public improvement bonds related to construction of this project. $32.9 million of the bonds are outstanding at December 31, 2000. See note 7 for additional information.

F–24

EXCEL LEGACY CORPORATION AND SUBSIDIARIES

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2000

(in thousands)

(a)

Reconciliation of total real estate carrying value is as follows:

	Year Ended December 31,			Year Ended December 31,			Five Months Ended December 31,		Period from Inception (November 17, 1997) to July 31,
	2000			1999			1998		1998
Balance at beginning of period:	$	102,143		$	191,033		$	174,344	$	—
Acquisitions:		8,773			2,956			15,200		173,209
Improvements and other additions:		40,843			25,409			1,489		1,135
Cost of property sold/contributed to partnerships:		(56,169	)		(117,255	)		—		—
Balance at the end of the period:	$	95,590		$	102,143		$	191,033	$	174,344
Total cost for federal income tax purposes at the end of each period:	$	95,590		$	114,274		$	207,421	$	190,732
(b)  Reconciliation of accumulated depreciation is as follows:
Balance at beginning of period:	$	2,303		$	2,506		$	939	$	—
Depreciation expense:		1,562			2,382			1,567		939
Property sold/contributed to partnerships:		(2,057	)		(2,585	)		—		—
Balance at the end of the period:	$	1,808		$	2,303		$	2,506	$	939

F–25

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PART I

ITEM 2. PROPERTIES
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

PART IV

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

SIGNATURES
REPORT OF INDEPENDENT ACCOUNTANTS
EXCEL LEGACY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts)
EXCEL LEGACY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (LOSS) (in thousands, except per share amounts)
EXCEL LEGACY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (in thousands, except number of shares)
EXCEL LEGACY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
EXCEL LEGACY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

EX-23.1

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EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

    We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-79673), S-8 (No. 333-68597), and S-11A (No. 333-55715) of Excel Legacy Corporation of our report dated February 22, 2001 relating to the consolidated financial statements and financial statement schedules, which appears in this Form 10-K/A.

PricewaterhouseCoopers LLP

May 23, 2001

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EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

EX-23.2

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EXHIBIT 23.2

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

    We consent to the incorporation by reference in the Registration Statement (Form S-11 No. 333-55715) and related Prospectus of Excel Legacy Corporation for the registration of certain securities; the Registration Statement (Form S-3 No. 333-79673) and related Prospectus of Excel Legacy Corporation for the registration of certain securities; and the Registration Statement (Form S-8 No. 333-68597) pertaining to the 1998 Stock Option Plan of Excel Legacy Corporation of our report dated January 19, 2001 (except for Note 13, as to which the date is January 26, 2001), with respect to the consolidated financial statements and schedules of Price Enterprises, Inc. incorporated by reference in this Amendment No. 2 to the Annual Report (Form 10-K/A) for the year ended December 31, 2000.

	/s/ ERNST & YOUNG LLP
San Diego, California May 22, 2001

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EXHIBIT 23.2

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS