<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1998
Commission File Number 33-06419-A
CONDEV LAND GROWTH FUND '86, LTD.
---------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-2766359
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(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
2479 Aloma Avenue
Winter Park, Florida 32792
(Address of principal executive offices)
Registrant's telephone number, including area code: (407) 679-1748
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 report), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO .
------ -----
<PAGE>
CONDEV LAND GROWTH FUND '86, LTD.
INDEX
PART I. FINANCIAL INFORMATION:
Statement of Assets, Liabilities and
Partner's Capital - September 30, 1998
and December 31, 1997 1
Statement of Income & Expense -
Three Months Ended September 30, 1998
and September 30, 1997 2
Statement of Income & Expense -
Nine Months Ended September 30, 1998
and September 30, 1997 3
Statement of Cash Flows -
Nine months ended September 30, 1998
and September 30, 1997 4
Notes to Financial Statements 5 - 7
Management's Discussion and Analysis
of Financial Condition and Results of Operations 7 - 9
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings 10
Item 6 Exhibits and Reports on Form 8-K 10
Signatures 11
Distribution Report to Limited Partners, September 4, 1998 12
Third Quarter 1998 report to Limited Partners 13
<PAGE>
PART I. FINANCIAL INFORMATION
CONDEV LAND GROWTH FUND '86, LTD.
STATEMENT OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS
-------------------
September 30, 1998 December 31, 1997
------------------ -----------------
(Unaudited) *
<S> <C> <C>
Cash & Cash Equivalents $ 59,728 $ 19,062
Accounts Receivable 1,222 1,682
Land, at Cost (Note 2) 312,820 1,450,453
Investment in Joint
Venture (Note 3) 1,530,290 1,533,035
Organization Costs, Net 20,794 20,794
---------- ----------
Total Assets $1,924,854 $3,025,026
========== ==========
</TABLE>
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Deposits on land $ - $ 2,100
Accounts Payable - 1,242
---------- ----------
Total Liabilities - 3,342
---------- ----------
Partners' Capital -
General Partner 6,712 3,505
Limited Partners 1,918,142 3,018,179
---------- ----------
Total Partners' Capital $1,924,854 $3,021,684
---------- ----------
Total Liabilities and
Partners' Capital $1,924,854 $3,025,026
========== ==========
</TABLE>
* Condensed from audited financial statements
The accompanying notes are an integral part of these financial statements
1
<PAGE>
CONDEV LAND GROWTH FUND '86, LTD.
STATEMENT OF INCOME AND EXPENSE
THREE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(UNAUDITED)
September 30, 1998 September 30, 1997
------------------ ------------------
INCOME
- ------
Interest and Other Income $ 775 $ 919
Net Gain on sale of Land 33,171 -
---------- ---------
Total Income $ 33,946 $ 919
---------- ---------
OPERATING EXPENSES
- ------------------
Equity in loss of joint venture ( 443) 275
Management Fees 2,124 2,124
Taxes 2,534 0
Other Expense 851 20
Office Expense 1,959 1,056
---------- ----------
Total Operating Expense $ 7,025 $ 3,475
---------- ----------
Net Income/(Loss) $ 26,921 ($ 2,556)
========== ==========
The accompanying notes are an integral part of these financial statements
2
<PAGE>
CONDEV LAND GROWTH FUND '86, LTD.
STATEMENT OF INCOME AND EXPENSE
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(UNAUDITED)
September 30, 1998 September 30, 1997
------------------ ------------------
INCOME
- ------
Interest and Other Income $ 4,132 $ 3,227
Gain on Sale of Land 347,668 0
---------- ---------
Total Income $ 351,800 $ 3,227
---------- ---------
OPERATING EXPENSES
- ------------------
Professional Services 9,200 9,699
Equity in loss of joint venture 386 1,456
Management Fees 6,372 6,972
Taxes 8,718 0
Other Expense 2,146 1,191
Office Expense 4,308 4,544
---------- ----------
Total Operating Expense $ 31,130 $ 23,862
---------- ----------
Net Income/(Loss) $ 320,670 ($ 20,635)
========== ==========
The accompanying notes are an integral part of these financial statements
3
<PAGE>
CONDEV LAND GROWTH FUND '86, LTD.
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Sept. 30, 1998 Sept. 30, 1997
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net Income (Loss) $ 320,670 ($ 20,635)
Adjustments to reconcile net loss
to net cash used for operating
activities:
Net Gain on sale of Real Estate ( 347,668) -
Equity in loss of Joint
Venture, net 386 1,456
Cash used for changes:
Deposits on land ( 2,100) -
Accounts payable ( 1,242) -
Accounts Receivable 460 ( 1,682)
------------ -----------
Net cash used in operating
activities: ( 29,494) ( 20,861)
------------ -----------
Cash flows from investing activities:
Land development costs 5,830 ( 33,072)
Investment in Joint Venture ( 2,359) ( 29,443)
Proceeds from land sale 1,484,189 0
------------ -----------
Net cash from investing activities: 1,487,660 ( 62,515)
------------ -----------
Cash flows from financing activities:
Distributions to partners ( 1,417,500) ( 0)
------------ -----------
Net cash used in financing activities: ( 1,417,500) ( 0)
------------ -----------
Net increase (decrease) in cash 40,666 ( 83,376)
Cash and cash equivalents at beginning
of year 19,062 144,871
------------ -----------
Cash and cash equivalents at end of
period $ 59,728 $ 61,495
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
CONDEV LAND GROWTH FUND '86, LTD.
NOTES TO FINANCIAL STATEMENTS
Note 1 BASIS OF PRESENTATION
---------------------
The accompanying financial statements, in the opinion of Condev
Associates, the general partner of Condev Land Growth Fund '86,
Ltd., reflect all adjustments (which include only normal
recurring adjustments) necessary to a fair statement of the
financial position, the results of operations and the changes in
cash position for the periods presented. For a full description
of accounting policies, see notes to financial statements in the
1997 annual report on Form 10-K.
Note 2 INVESTMENT IN LAND:
-------------------
At September 30, 1998, land and related assets consisted of the
following:
Sewer capacity for land in
southeast Orange County, Florida $ 6,078(a)
6.00 acre parcel (zoned commercial) in
Brevard County, Florida 306,742(b)
1.00 acre parcel (zoned commercial) in
Orange County, Florida 0(c)
----------
$ 312,820
==========
(a) This represents the cost of prepaid sewer capacity for a
site sold to Amoco Oil Company during the second quarter, less
that portion sold to another user (see note (c) below). The
remaining 3.799 ERU's are being sold back to Orange County for
the original cost of $1,600 per ERU.
(b) On June 15, 1998, the Partnership sold one acre of this
parcel to a nationally recognized fast food restaurant
franchisee. The contract on the remaining six acres at this
location was allowed to expire when the contract holder was
unable to attract an anchor tenant for its project. This property
was immediately placed under another contract with a different
developer. Terms of the contract, signed October 10, 1998,
include an inspection period of up to 180 days, with appropriate
performance standards, and a closing following issuance of
required development permits.
(c) During the third quarter of 1997, the Partnership entered
into two contracts for sale of the remaining 5.39 acres at this
location. Closing on approximately 4.4 acres was concluded on
April 30, 1998. Sale of the remaining 1-acre parcel was concluded
on August 26, 1998 with an effective date of July 31, 1998. The
buyer was Pebbles Restaurants Properties, Ltd., who intends to
construct and operate a 5 & Diner Restaurant on the site. In
addition the Partnership sold part of the sewer capacity which
was reserved for the Curry Ford/Chickasaw Trail site but not
purchased by Amoco Oil Company in a previous transaction.
5
<PAGE>
Note 3 INVESTMENT IN JOINT VENTURE:
----------------------------
The Partnership owns a 59% interest in West 50 Joint Venture (A
Florida Joint Venture) whose purpose is to acquire and hold a
133-acre parcel of land in Lake County, Florida for investment
purposes. The remaining 41% interest is owned by Condev West 50,
Ltd., an affiliate of the general partner. The operations of
West 50 Joint Venture consist primarily of bringing sewer and
water utilities to the site and preliminary engineering and
development activities with the intent of bringing the property
closer to a marketable state. The Partnership's investment is
carried at its equity in the net underlying assets. A summary of
the assets, liabilities, and venturers' capital of West 50 Joint
Venture as of September 30, 1998 is as follows:
Assets
------
Cash $ 5,038
Investment in land 2,684,538
-----------
$ 2,689,576
===========
Liabilities and Venturers' Capital
----------------------------------
Liabilities
-----------
Mortgage note payable $ 95,865
Other liabilities -
----------
Total liabilities 95,865
----------
Venturers' Capital
------------------
Venturers' capital 2,594,366
Current profit (loss) ( 655)
----------
Total Venturers' capital 2,593,711
----------
Total liabilities and venturers' capital $2,689,576
==========
Note 4 DISTRIBUTIONS TO PARTNERS:
--------------------------
Pursuant to the partnership agreement, cash flow generated each
year by the Partnership is to be distributed 99% to the limited
partners and 1% to the general partner. There were no cash flow
distributions during the first nine months of 1998.
6
<PAGE>
Pursuant to the partnership agreement, proceeds realized from the
sale of properties, after the establishment of reserves for
future operating costs, are to be distributed at least annually.
During the third quarter of 1998, a total of $315,000 was
distributed to limited partners. For the first nine months of
1998 a total of $1,417,500 was distributed to limited partners.
Note 5 RELATED PARTY TRANSACTIONS:
---------------------------
The Partnership Agreement provides for the reimbursement to the
general partner of administrative expenses incurred in the direct
operation of the partnership. For the nine months ended
September 30, 1998, $3,106 was reimbursed to the general partner
for direct expenses incurred.
When properties are sold, under certain circumstances an
affiliate of the general partner may be paid real estate
commissions in amounts customarily charged by others rendering
similar services with such commissions plus commissions paid to
nonaffiliates not to exceed 10% of the gross sales price. No
real estate commissions have been paid to the general partner or
any affiliate of the general partner during the first nine months
of 1998.
The general partner is obligated to loan up to $100,000 to the
Partnership during its term to meet working capital requirements.
The General Partner has previously advanced $156,048.27 of
working capital to the Partnership, which advance was repaid in
December, 1993. Since the General Partner has met its obligation
to advance funds, it is not required to make further advances.
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
During the quarter ended September 30, 1998, the Partnership
continued to manage the portfolio properties with the objective
of selling the properties at fair market prices. One sale was
concluded during the third quarter, and one additional contract
for sale is pending.
Sale of Properties
------------------
The delayed closing of the remaining one-acre parcel at the
Woodbury Road location occurred on August 26, 1998, with an
effective date of July 31, 1998. The buyer was Pebbles
Restaurants Properties, Ltd., who intends to construct and
operate a 5 & Diner Restaurant on the site. The sales price was
$350,000. In addition, the Partnership sold part of the sewer
capacity which was reserved for the Curry Ford/Chickasaw Trail
site but not purchased by Amoco Oil Company in a previous
transaction. Total gross proceeds of the transaction were
$370,800. After expenses of the sale, which included $35,000 in
real estate brokerage commissions paid to non-affiliated brokers,
7
<PAGE>
net proceeds were $342,970. A total of $315,000 was distributed
to Limited Partners on September 4, 1998. In accordance with the
terms of the Partnership Agreement, the balance was added to
Partnership reserves.
This sale represents the final sale of the Woodbury Road parcel.
Offer to Purchase Units. In September, LP Investors, LLC, an
-----------------------
investment company based in Atlanta, Georgia, exercised their
rights as a limited partner and requested a list of all
beneficial owners and the number of units owned by each. As
required by the Partnership Agreement, this information was
provided. LP Investors paid a fee of $100 to the Partnership in
reimbursement of the Partnership's costs associated with
providing the list. LP Investors subsequently wrote to each
beneficial owner offering to purchase their units for $103.75 per
unit, less the $25 transfer fee charged by the Partnership. As of
September 30, 1998, there have been no transfers as a result of
this offer. Neither the Partnership, the General Partner, nor any
of its officers, employees or affiliates is in any way connected
with this offer.
Results of Operations
---------------------
Total revenues for the nine months ended September 30, 1998 were
$351,800, compared with total revenues of $3,227 for the nine
months ended September 30, 1997. The 1998 figures include a net
gain on the sale of Land in the amount of $347,668. Operating
expenses (excluding equity in the losses of the Partnership's
joint venture) for the nine months ended September 30, 1998 were
$31,130, an increase from $23,862 for the nine months ended
September 30, 1997. The primary reason for the increase was real
estate taxes in the amount of $8,718 in the 1998 period which
were charged upon the sale of property rather than at he end of
the year when they are normally paid. In both periods, operating
expenses represent the normal costs of operating the Partnership
and managing the Partnership properties.
West 50 Joint Venture, in which the Partnership holds a 59%
interest, had a loss of $655 for the nine months ended September
30, 1998 compared with a loss of $2,468 for the nine months ended
September 30, 1997. As discussed under Liquidity and Capital
---------------------
Resources and West 50 Joint Venture below, the joint venture has
--------- ---------------------
borrowed money under a secured line of credit with a commercial
bank to pay for engineering, planning and construction expenses
related to the extension of water and sewer facilities to the
property. Therefore, future results will be impacted by interest
charges incurred on outstanding debt. These additional expenses
are expected to be offset by higher sales prices for the Joint
Venture's land.
8
<PAGE>
Liquidity and Capital Resources at September 30, 1998
-----------------------------------------------------
Total assets decreased from $3,025,026 at December 31, 1997 to
$1,924,854 at September 30, 1998. This reflects the sale of four
properties during the period less distributions to limited
partners and the net results of operations for the nine month
period. Assets can be expected to decline in the future as
properties are sold and distributions are made to limited
partners. The Partnership currently holds one contract for sale
of portfolio properties, which is expected to close during the
first half of 1999.
Liquidity has been restored to a level which the general partner
believes to be adequate by adding to reserves from property
sales. Cash and equivalents increased from $19,062 at 1997 year-
end to $59,728 at September 30, 1998. As provided in the
Partnership Agreement, the general partner may add to reserves
from the net proceeds of closings as they occur.
West 50 Joint Venture
---------------------
The area of Lake County, Florida in which the West 50 Joint
Venture's 132.7-acre parcel is located has experienced heightened
activity in recent months, with significant new residential
development beginning in the immediate area. The City of Clermont
has committed to extend sewer and water facilities to one such
development which is directly across from the property on the
south side of State Road 50. In order to insure that the Joint
Venture's property has adequate sewer and water capacity for
future development of its property, the Joint Venture entered
into an agreement with the City of Clermont to upgrade the
facilities installed. The Joint Venture has paid $38,623 to the
City of Clermont as its share of the upgrades, which have been
completed. In addition, the Partnership has engaged an engineer
to design a master site plan for the site to permit future
division of the property into more useable parcels for potential
users. This plan is currently under review by Lake County. The
Joint Venture has arranged a $500,000 secured line of credit with
a commercial bank to pay for the Joint Venture's cost of these
improvements. Borrowings under the line of credit will be repaid
from future land sales.
9
<PAGE>
PART II
Item 1. LEGAL PROCEEDINGS
-----------------
As of September 30, 1998, there were no legal proceedings in
process, nor to the knowledge of the general partner, threatened
against the Partnership
Item 6. EXHIBITS AND REPORTS ON FORM 8-K:
---------------------------------
(A) Exhibits:
Distribution Report to Limited Partners, September 4, 1998
Third Quarter 1998 Report to Limited Partners
(B) Reports on Form 8-K:
There were no reports of Form 8-K for the period ended September
30, 1998
10
<PAGE>
CONDEV LAND FUND II, LTD.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned.
CONDEV LAND GROWTH FUND `86, LTD.
BY: Condev Associates, General Partner
October 22, 1998 /s/ Robert N. Gardner
- ------------------- ----------------------------------
DATE Robert N. Gardner, Partner
October 22, 1998 /s/ Joseph J. Gardner
- ------------------- ----------------------------------
DATE Joseph J. Gardner, Partner
11
<PAGE>
September 4, 1998
Condev Land Growth Fund '86, Ltd.
Distribution Report
Dear Limited Partner:
Enclosed is a distribution check representing your pro rata share of the
net proceeds relating to a recent sale of property by the Partnership. If your
-------
investment is held by a custodian, enclosed is a copy of the distribution check
- -------------------------------------------------------------------------------
which was sent to the custodian.
- --------------------------------
The delayed closing of the remaining one-acre parcel at the Woodbury Road
location occurred on August 26, 1998, with an effective date of July 31, 1998.
The buyer was Pebbles Restaurants Properties, Ltd., who intends to construct and
operate a 5 & Diner Restaurant on the site. The sales price was $350,000. In
addition, the Partnership sold part of the sewer capacity which was reserved for
the Curry Ford/Chickasaw Trail site but not purchased by Amoco in a previous
transaction. Total gross proceeds of the transaction were $370,800. After
expenses of the sale, which included $35,000 in real estate brokerage
commissions paid to non-affiliated brokers, net proceeds were $342,970. A total
of $315,000 is being distributed to Limited Partners at this time. In accordance
with the terms of the Partnership Agreement, the balance is being added to
Partnership reserves.
This sale represents the final sale of the Woodbury Road parcel.
The Partnership has two remaining parcels of land in its portfolio. The
status of these assets will be reviewed in the quarterly report due out in the
middle of October.
Sincerely yours,
CONDEV ASSOCIATES
General Partner
12
<PAGE>
October 15, 1998
Condev Land Growth Fund '86, Ltd.
Third Quarter 1998
Dear Limited Partner:
The financial statement, on the reverse side hereof, shows a net profit for the
nine months ended September 30, 1998 of $320,670. This includes a net gain on
the sale of real estate in the amount of $347,668. Detailed information on the
sale, which was concluded during the quarter, was included in the September 4,
1998 Distribution Report. Distributions to limited partners totaled $315,000 or
$42 per unit during the quarter. For the year to date, the Partnership has had
four sales and has distributed a total of $1,417,500. As of September 30, 1998,
the net asset value per unit of limited partner interest was $255.75. As of
September 30, 1998, the Partnership owned or had an interest in two remaining
properties:
NASA Causeway, Titusville. As previously reported, the sale of approximately
- -------------------------
one acre of this site was concluded on June 15, 1998. The contract on the
remaining six acres at this location was allowed to expire when the contract
holder was unable to attract an anchor tenant for its project. This property was
immediately placed under another contract with a different developer. Terms of
the contract, signed on October 10, 1998, include an inspection period of up to
180 days, with appropriate performance standards, and a closing following
issuance of required development permits.
West Hwy 50, Lake County. During the quarter, work on extending utilities to
- ------------------------
this site by the City of Clermont continued, with completion expected later this
month. This has generated considerable purchaser interest in the site. We are
revising our development plan in accordance with recommendations from Lake
County so that we can grade the site and sell smaller parcels to the growing
number of potential users for land in this location.
Many of the Limited Partners have called with questions regarding the recent
tender offer for their units made by LP Investors, LLC. Please be advised that
neither Condev nor any of its officers, employees or affiliates is in any way
connected with this offer. The decision on whether or not to sell is entirely up
to each limited partner. We will be pleased to answer any questions you may have
regarding this offer or any other matters relating to the Partnership.
Sincerely yours,
CONDEV ASSOCIATES
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CURRENCY> NO
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997
<EXCHANGE-RATE> 1 1
<CASH> 59,728 661,495
<SECURITIES> 0 0
<RECEIVABLES> 1,222 1,682
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 312,820 1,434,308
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1,924,854 3,067,820
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 1,924,824 3,067,820
<TOTAL-LIABILITY-AND-EQUITY> 1,924,824 3,067,820
<SALES> 0 0
<TOTAL-REVENUES> 351,800 3,227
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 31,130 23,862
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 320,670 (20,635)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 320,670 (20,635)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 320,670 (20,635)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
