<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 June 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
------- ----------
(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 - June 30, 1998
and December 31, 1997 1
Statement of Income & Expense -
Three Months Ended June 30, 1998
and June 30, 1997 2
Statement of Income & Expense -
Six Months Ended June 30, 1998
and June 30, 1997 3
Statement of Cash Flows -
Six months ended June 30, 1998
and June 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, June 22, 1998 12
Second 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
JUNE 30, 1998 AND DECEMBER 31, 1997
ASSETS
--------------
June 30, 1998 December 31, 1997
------------- -----------------
(Unaudited) *
Cash & Cash Equivalents $ 66,185 $ 19,062
Accounts Receivable 1,222 1,682
Land, at Cost (Note 2) 596,517 1,450,453
Investment in Joint
Venture (Note 3) 1,529,847 1,533,035
Organization Costs, Net 20,794 20,794
---------- ----------
Total Assets $2,214,565 $3,025,026
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Deposits on land $ - $ 2,100
Accounts Payable 1,632 1,242
---------- ----------
Total Liabilities 1,632 3,342
---------- ----------
Partners' Capital -
General Partner 6,442 3,505
Limited Partners 2,206,491 3,018,179
---------- ----------
Total Partners' Capital $2,212,933 $3,021,684
---------- ----------
Total Liabilities and
Partners' Capital $2,214,565 $3,025,026
========== ==========
* Condensed from audited financial statements
The accompanying notes are an integral part of these financial statements
1
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CONDEV LAND GROWTH FUND '86, LTD.
STATEMENT OF INCOME AND EXPENSE
THREE MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(UNAUDITED)
June 30, 1998 June 30, 1997
------------- -------------
INCOME
- ------
Interest and Other Income $ 3,314 $ 1,413
Net Gain on sale of Land 314,497 -
-------- -------
Total Income $317,811 $ 1,413
-------- -------
OPERATING EXPENSES
- ------------------
Professional Services 0 145
Equity in loss of joint venture (646) (380)
Management Fees 2,124 4,848
Taxes 6,185 0
Other Expense 16 1,080
Office Expense 1,870 1,048
-------- -------
Total Operating Expense $ 9,549 $ 6,741
-------- -------
Net Income/(Loss) $308,262 $(5,328)
The accompanying notes are an integral part of these financial statements
2
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CONDEV LAND GROWTH FUND '86, LTD.
STATEMENT OF INCOME AND EXPENSE
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
(UNAUDITED)
June 30, 1998 June 30, 1997
------------- -------------
INCOME
- ------
Interest and Other Income $ 3,357 $ 2,308
Gain on Sale of Land 314,497 0
-------- --------
Total Income $317,854 $ 2,308
-------- --------
OPERATING EXPENSES
- ------------------
Professional Services 9,200 9,699
Equity in loss of joint venture 829 1,181
Management Fees 4,248 4,848
Taxes 6,184 0
Other Expense 1,295 1,171
Office Expense 2,349 3,488
-------- --------
Total Operating Expense $ 24,105 $ 20,387
-------- --------
Net Income/(Loss) $293,749 $(18,079)
======== ========
The accompanying notes are an integral part of these financial statements
3
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CONDEV LAND GROWTH FUND '86, LTD.
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
June 30, 1998 June 30, 1997
-------------- --------------
Cash flows from operating activities:
Net Income (Loss) $ 293,749 $(20,635)
Adjustments to reconcile net loss
to net cash used for operating
activities:
Net Gain on sale of Real Estate (314,497) -
Equity in loss of Joint Venture,
net 829 1,456
Cash used for changes:
Deposits on land (2,100) -
Accounts payable 390 -
Accounts Receivable 460 (1,682)
----------- --------
Net cash used in operating activities: (21,169) (20,861)
----------- --------
Cash flows from investing activities:
Land development costs 4,982 (33,072)
Investment in Joint Venture (2,359) (29,443)
Proceeds from land sale 1,168,169 0
----------- --------
Net cash from investing activities: 1,170,792 (62,515)
----------- --------
Cash flows from financing activities:
Distributions to partners (1,102,500) (0)
Net cash used in financing activities: (1,102,500) (0)
Net increase (decrease) in cash 47,123 (83,376)
Cash and cash equivalents at beginning
of year 19,062 144,871
----------- --------
Cash and cash equivalents at end of
period $ 66,185 $ 61,495
=========== ========
The accompanying notes are an integral part of these financial statements
4
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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 June 30, 1998, land and related assets consisted of the
following:
Sewer capacity for land in southeast
Orange County, Florida $ 22,718(a)
6.00 acre parcel (zoned commercial) in
Brevard County, Florida 300,912(b)
1.00 acre parcel (zoned commercial) in
Orange County, Florida $272,580(c)
--------
$596,210
========
(a) On June 27, 1997, the Partnership executed an Option contract
providing for Amoco Oil Company to acquire this parcel. The sale
was concluded on May 4, 1998. The gross sales price was $475,000.
After expenses, the Partnership netted $411,133 on the
transaction. The Partnership paid $247,250 for this parcel in
July, 1987. The remaining value represents prepaid sewer capacity
for the site. This capacity may either be returned to Orange
County at the Partnership's original cost or sold to another
party. We have a commitment to sell this capacity to the buyer of
part of the Woodbury Road parcel. See note (c) below.
(b) In October, 1997 the Partnership entered into an Agreement
with a nationally recognized fast food restaurant franchisee for
the sale of approximately 1 acre of this parcel. The transaction
was closed on June 15, 1998. The sale price was $310,000, and net
proceeds to the Partnership were $272,197. The remaining 6 acres
at this location remain under contract with a shopping center
developer who intends to build a retail center on the site. The
inspection period provided by the contract expires in August,
with closing to follow in not more than 120 days.
(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 for $550,000. After closing
5
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costs, the net proceeds to the Partnership were $486,830. The
remaining 1-acre parcel remains under contract and is expected to
close on or before July 31, 1998. The buyer has made a non-
refundable $25,000 deposit on the contract.
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 professional services
and real estate taxes. 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 June 30, 1998 is as follows:
Assets
------
Cash $ 2,408
Investment in land 2,671,800
----------
$2,674,208
==========
Liabilities and Venturers' Capital
----------------------------------
Liabilities
-----------
Mortgage note payable $ 80,247
Other liabilities 1,000
----------
Total liabilities 81,247
Venturers' capital
------------------
Venturers' capital 2,594,366
Current profit (loss) (1,405)
----------
Total Venturers' capital 2,592,961
Total liabilities and venturers' capital $2,674,208
==========
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 six months of 1998.
6
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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 first six months of 1998 there were no distributions
to limited partners as there were no sales of land.
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 six months ended June 30,
1998, $5,262 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 six 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 June 30, 1998, the Partnership continued
to manage the portfolio properties with the objective of selling
the properties at fair market prices. Three sales were concluded
during the second quarter, and two additional contracts for sale
are pending.
Sale of Properties
------------------
Three sales of property were concluded during the second
quarter of 1998. These sales are summarized as follows:
Curry Ford Road/Chickasaw Trail. On May 4, 1998, this property
was sold to Amoco Oil Company for $475,000. After expenses, which
included $47,500 in real estate commissions paid to non-
affiliated real settee brokers, net proceeds were $411,133.
Woodbury Road/East Colonial Drive. On April 30, 1998,
approximately 4.4 acres of the remaining 5.4 acres at this
location were sold to ESA 1546, Inc., an affiliate of Extended
Stay America. The selling price was $550,000. The closing
proceeds were placed in escrow pending resolution of cross-
7
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access and utility easements relating to development of the
parcel. These matters were finalized on June 12, 1998, and the
selling proceeds were released to the Partnership. After expenses
of the sale, which included $55,000 in real estate commissions
paid to non-affiliated real estate brokers, net proceeds were
$486,830.
NASA Causeway, Titusville. On June 15, 1998, the Partnership
concluded the sale of approximately 1 acre of this 7-acre site to
Orlando Restaurants Real Estate Joint Venture for $310,000. After
expenses of $37,803, which included $31,000 paid to non-
affiliated real estate brokers, the Partnership realized $272,197
from the sale.
The net proceeds realized by the Partnership from these three
sales were $1,170,160, which includes $1,991 in interest earned
on the escrow deposit relating to the Woodbury Road transaction.
A total of $1,102,500 was distributed to limited partners on June
22, 1998. In accordance with the terms of the Partnership
Agreement, the balance was added to Partnership reserves to
provide for anticipated future costs of the Partnership.
Results of Operations
---------------------
Total revenues for the six months ended June 30, 1998 were
$317,854, compared with total revenues of $2,308 for the six
months ended June 30, 1997. As detailed under Sale of Properties
------------------
above, the 1998 figures include a net gain on the sale of Land in
the amount of $314,497. Operating expenses (excluding equity in
the losses of the Partnership's joint venture) for the six months
ended June 30, 1998 were $23,276, an increase from $19,206 for
the six months ended June 30, 1997. The reason for the increase
was real estate taxes in the amount of $6,184 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 $1,404 for the six months ended June 30,
1998 compared with a loss of $2,002 for the six months ended June
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
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Liquidity and Capital Resources at June 30, 1998
------------------------------------------------
Total assets decreased from $3,025,026 at December 31, 1997 to
$2,214,565 at June 30, 1998. This reflects the sale of three
properties during the period less distributions to limited
partners and the net results of operations for the six 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 two contracts for sale
of portfolio properties, which are expected to close during the
second half of 1998.
Liquidity was 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 $66,185 at June 30, 1998. As provided in the Partnership
Agreement, the general partner may add to reserves from the net
proceeds of closings anticipated during the second half of 1998.
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 will have adequate sewer and water capacity
for future development of its property, the Joint Venture has
entered into an agreement with the City of Clermont to upgrade
the facilities being installed. The Joint Venture has paid
$38,623 to the City of Clermont as its share of the requested
upgrades. In addition, the Partnership has engaged an engineer to
design the extension of sewer and water utilities on to the site.
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
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PART II
Item 1. LEGAL PROCEEDINGS
-----------------
As of June 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, June 22, 1998
Second Quarter 1998 Report to Limited Partners
(B) Reports on Form 8-K:
There were no reports of Form 8-K for the period ended June 30,
1998
10
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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
July 23, 1998 /s/ Robert N. Gardner
- ---------------------- ----------------------------------
DATE Robert N. Gardner, Partner
July 23, 1998 /s/ Joseph J. Gardner
- ---------------------- ----------------------------------
DATE Joseph J. Gardner, Partner
11
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June 22, 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 three recent sales 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.
- --------------------------------------
As reported in the April 14, 1998 First Quarter Report, four property sales
were scheduled to close in May. As summarized below, three of these sales have
been concluded; the fourth has been rescheduled to July 31, 1998.
Curry Ford Road/Chickasaw Trail. On May 4, 1998, this property was sold to
-------------------------------
Amoco Oil Company for $475,000. After expenses, which included $47,500 in real
estate commissions paid to non-affiliated real estate brokers, net proceeds were
$411,133. The Partnership paid $247,250 for this parcel in July, 1987.
Woodbury Road/East Colonial Drive. On April 30, 1998, approximately 4.4
---------------------------------
acres of the remaining 5.4 acres were sold to ESA 1546, Inc., an affiliate of
Extended Stay America. ESA is a nationwide developer and operator of extended
stay motels. The selling price was $550,000, or approximately $2.87 per square
foot. The closing proceeds were placed in escrow pending resolution of cross-
access and utility easements relating to development of the parcel. These
matters were finalized on June 12, 1998. After expenses of the sale, which
included $55,000 in real estate commissions paid to non-affiliated real estate
brokers, net proceeds were $486,830. The remaining 1-acre parcel remains under
contract. Closing has been extended to not later than July 31, 11998 to allow
the buyer sufficient time to obtain the necessary development permits. The buyer
has made a non-refundable $25,000 deposit on the contract.
NASA Causeway, Titusville. On June 15, 1998, the Partnership concluded the
-------------------------
sale of approximately 1 acre of this 7-acre site to Orlando Restaurants Real
Estate Joint Venture for $310,000 or approximately $7.38 per square foot. The
buyer intends to develop a Burger King restaurant on the site.. After expenses
of $37,803, which included $31,000 paid to non-affiliated real estate brokers,
the Partnership realized $272,197 from the sale. The Partnership paid $400,000
for the entire 7-acre parcel in June, 1988. The remaining 6 acres are still
under contract with a nationwide developer of retail shopping centers, who
continues to evaluate the site and attract tenants. It is felt that the new
Burger King will increase the likelihood of successfully concluding this sale,
which is scheduled to close in December 1998.
The net proceeds realized by the Partnership from these three sales were
$1,170,160. A total of $1,102,500 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 to provide for anticipated future
costs of the Partnership. This entire distribution is being treated as a return
of capital as required by the Partnership Agreement. However, this distribution
includes the return of allocated real estate taxes and organization costs paid
by the Partnership in prior years and deducted as expenses for income tax
purposes. Therefore, your K-1 (Form 1065) for 1998 will include a capital gain
of approximately $42.25 per unit relating to these three sales.
Sincerely yours,
Condev Associates
General Partner
12
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July 14, 1998
Condev Land Growth Fund '86, Ltd.
Second Quarter 1998
Dear Limited Partner:
The financial statement, on the reverse side hereof, shows a net profit for the
six months ended June 30, 1998 of $293,749. This includes a net gain on the sale
of real estate in the amount of $314,497. Detailed information on the three
sales which were concluded during the quarter were included in the June 22, 1998
Distribution Report. Distributions to limited partners totaled $1,102,500 or
$147 per unit during the quarter. As of June 30, 1998, the net asset value per
unit of limited partner interest was $294.20. The following is a summary of the
activity relating to the Partnership's properties:
Curry Ford Road/Chickasaw Trail. The sale of this parcel to Amoco Oil Company
- -------------------------------
was concluded on May 4, 1998. The gross sales price was $475,000. After
expenses, the Partnership netted $411,133 on the transaction. The Partnership
paid $247,250 for this parcel in July, 1987.
Woodbury Road/East Colonial Drive. The sale of part of this property to an
- ---------------------------------
affiliate of Extended Stay America was concluded on April 30, 1998 for $550,000.
After closing costs, the net proceeds to the Partnership were $486,830. The
remaining 1-acre parcel remains under contract and is expected to close later
this month.
NASA Causeway, Titusville. The sale of approximately 1 acre of this site was
- -------------------------
concluded on June 15, 1998 with Orlando Restaurants Real Estate Joint Venture.
The sale price was $310,000, and net proceeds to the Partnership were $272,197.
The remaining 6 acres at this location remain under contract with a shopping
center developer who intends to build a retail center on the site. The
inspection period provided by the contract expires in August, with closing to
followed in not more than 120 days.
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.
Sincerely yours,
CONDEV ASSOCIATES
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 66,185 70,229
<SECURITIES> 0 0
<RECEIVABLES> 1,222 1,682
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 596,517 1,432,162
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 2,214,565 3,049,741
<CURRENT-LIABILITIES> 1,632 0
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 2,212,933 3,049,741
<TOTAL-LIABILITY-AND-EQUITY> 2,214,565 3,049,741
<SALES> 0 0
<TOTAL-REVENUES> 317,854 2,308
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 24,105 20,387
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 293,749 (18,079)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 293,749 (18,079)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 293,749 (18,079)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
