<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 March 31, 1999
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 ______.
------
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CONDEV LAND GROWTH FUND '86, LTD.
INDEX
PART I. FINANCIAL INFORMATION:
Statement of Assets, Liabilities and
Partner's Capital - March 31, 1999
and December 31, 1998 1
Statement of Income & Expense -
Three Months Ended March 31, 1999
and March 31, 1998 2
Statement of Cash Flows -
Three months ended March 31, 1999
and March 31, 1998 3
Notes to Financial Statements 4 - 6
Management's Discussion and Analysis
of Financial Condition and Results of Operations 6 - 8
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings 8
Item 6 Exhibits and Reports on Form 8-K 8
Signatures 9
First Quarter 1999 report to Limited Partners 10
<PAGE>
PART I. FINANCIAL INFORMATION
CONDEV LAND GROWTH FUND '86, LTD.
STATEMENT OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL
MARCH 31, 1999 AND DECEMBER 31, 1998
ASSETS
------
March 31, 1999 December 31, 1998
-------------- -----------------
(Unaudited) *
Cash & Cash Equivalents $ 26,513 $ 39,457
Accounts Receivable 7,300 7,300
Land, at Cost (Note 2) 310,615 308,857
Investment in Joint
Venture (Note 3) 1,530,707 1,532,361
Organization Costs, Net 13,439 13,439
---------- ----------
Total Assets $1,888,574 $1,901,414
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Accounts Payable $ - $ -
---------- ----------
Total Liabilities $ - $ -
---------- ----------
Partners' Capital -
General Partner 2,899 3,027
Limited Partners 1,885,675 1,898,387
---------- ----------
Total Partners' Capital $1,888,574 $1,901,414
---------- ----------
Total Liabilities and
Partners' Capital $1,888,574 $1,901,414
========== ==========
* 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 MARCH 31, 1999 AND MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
INCOME
- ------
Interest and Other Income $ 366 $ 43
---------- ---------
Total Income $ 366 $ 43
---------- ---------
OPERATING EXPENSES
- -------------------
Professional Services 9,000 9,200
Equity in loss of joint venture 1,655 1,475
Management Fees 2,124 2,124
Other Expense - 1,279
Office Expense 428 478
---------- ----------
Total Operating Expense $ 13,207 $ 14,556
---------- ----------
Net Income/(Loss) $ (12,841) $ (14,512)
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
2
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CONDEV LAND GROWTH FUND '86, LTD.
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net Income (Loss) $ (12,841) $ (14,513)
Adjustments to reconcile net loss
to net cash used for operating activities:
Equity in loss of Joint Venture, net 1,655 1,475
Gain on land sale - -
Cash used for changes:
Deposits on land - 5,000
Accounts payable (-) (1,242)
Accounts Receivable (-) (-)
------------ -------------
Net cash used in operating activities: (11,186) (9,280)
------------ -------------
Cash flows from investing activities:
Land development costs (1,758) 1,015
Investment in Joint Venture - 1,467
Proceeds from land sale - -
------------ -------------
Net cash from investing activities: (2,482) 2,482
------------ -------------
Cash flows from financing activities:
Distributions to partners (-) (-)
Net cash used in financing activities: (-) (-)
------------ -------------
Net increase (decrease) in cash (12,944) (6,798)
Cash and cash equivalents at beginning of year 39,457 19,062
------------ -------------
Cash and cash equivalents at end of period $ 26,513 $ 12,264
============ =============
</TABLE>
The accompanying notes are an integral part of these financial statements
3
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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
1998 annual report on Form 10-K.
Note 2 INVESTMENT IN LAND:
-------------------
At March 31, 1999, land consisted of the following:
6.00 acre parcel (zoned commercial) in
Brevard County, Florida $310,615
On October 10, 1998, the Partnership contracted with a developer
of retail centers for the sale of this parcel. The contract calls
for a 180-day inspection period, with appropriate performance
standards, and a closing following issuance of required
development permits. The inspection period has been extended to
May 10, 1999.
In November, 1998, the general partner received notification from
St. Johns River Water Management District that this property
contains some jurisdictional wetlands, and that the area in
question had been disturbed when the property was cleared of
underbrush as part of the normal maintenance routine. The general
partner engaged an environmental consultant to assist in
resolving the matter. The area in question was flagged and
surveyed, and it was determined that approximately 1.3 acres of
the site are in fact jurisdictional wetlands. The General Partner
is in the process of working with the Water Management District
to mitigate the wetlands so the entire site will be useable by
the prospective buyer. The ultimate cost of such mitigation and
fines, if any, is unknown at this time, but it is not expected to
be material in relation to the total value of the parcel.
4
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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 March 31, 1999 is as follows:
Assets
------
Cash $ 4,005
Investment in land 2,726,278
----------
$2,730,283
==========
Liabilities and Venturers' Capital
------------------------------------
Liabilities
-----------
Mortgage note payable $ 135,865
Other liabilities -
----------
Total liabilities $ 135,865
Venturers' capital
------------------
Venturers' capital $ 2,597,223
Current profit (loss) (2,805)
-----------
Total Venturers' capital 2,594,418
Total liabilities and venturers' capital $ 2,730,283
===========
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 three months of 1999.
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 three months of 1999
5
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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 three months ended March
31, 1999, $334 as 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 three
months of 1999.
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 March 31, 1999, the Partnership
continued to manage the portfolio properties with the objective
of selling the properties at fair market prices. As of March
31, 1999, the Partnership had one contract for sale of one of its
two remaining properties.
Year 2000
---------
The Partnership is heavily dependent upon a computer system to
accurately maintain limited partner records, including name and
address information, number of units owned, and distribution
historical records. The Partnership is utilizing a system which
was specially designed for the Partnership in 1990, and it is
possible that the system will be affected by the date change
which will occur at the end of 1999. The Partnership has engaged
a computer consultant to evaluate the potential problems, and
make system changes if necessary so the operation of the
Partnership will not be affected by the date change. Work on
modifying the computer system has begun and is expected to be
completed by June, 1999. It is anticipated that the cost of
evaluating the current system and bringing it up to date to be
year 2000 compliant will be less than $1,000. The Partnership's
computer records are backed up on a weekly basis, so all of the
stored information is available from a secondary source.
6
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Even if the system were to be completely shut down by the date
change at the end of 1999, the data necessary to continue
operation of the Partnership is available and could readily be
adapted to a new system which is year 2000 compliant, so no
significant interruption in the operations of the Partnership is
anticipated.
Results of Operations
---------------------
Total revenues for the three months ended March 31, 1999 were
$366, compared with total revenues of $ 43 for the three months
ended March 31, 1999. Income is generated from short-term cash
investments, and income can be expected to fluctuate, depending
on the level of cash reserves in the Partnership and prevailing
interest rates. Operating expenses (excluding equity in the
losses of the Partnership's joint venture) for the three months
ended March 31, 1999 were $13,207, a slight decrease from $14,456
for the three months ended March 31, 1998. 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 $2,805 for the three months ended March
31, 1999 compared with a loss of $2,500 for the three months
ended March 31, 1998. However, 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.
Liquidity and Capital Resources at March 31, 1999
-------------------------------------------------
Total assets decreased slightly from $1,901,414 at December 31,
1998 to $1,888,574 at March 31, 1999. This reflects the net
results of operations for the 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 property which is expected to
close during the third quarter of 1999.
Liquidity remained at a relatively low level. Cash and
equivalents decreased from $39,457 at 1998 year-end to $26,513
at March 31, 1999. As provided in the Partnership Agreement, the
general partner intends to add to reserves from the net proceeds
of closings anticipated during the third quarter of 1999.
7
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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 extended sewer facilities to one such development which is
directly across from the property on the south side of State Road
50. Water service has been extended to the Joint Venture's
property. In order to insure that the Joint Venture's property
will have adequate sewer capacity for future development of its
property, the Joint Venture has paid $38,623 to the City of
Clermont to upgrade the facilities which have been installed. The
Partnership has engaged an engineer to design and permit the
extension of sewer utilities under SR 50 to the site and to
design and permit the construction of access points and related
highway improvements from SR 50 to the site. The general partner
is in the process of bidding the related construction contracts.
In addition, the Joint Venture has entered into a contract with
an excavation and grading company to remove up to 366,000 yards
of fill from the site and to grade a majority of 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 which exceed fill sales. Borrowings under the line
of credit will be repaid from future land sales.
PART II
Item 1. LEGAL PROCEEDINGS
-----------------
As of March 31, 1999, 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
First Quarter 1999 Report to Limited Partners
(B) Reports on Form 8-K
There were no reports of Form 8-K for the period ended March 31,
1999
8
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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
April 19, 1999 /s/ Robert N. Gardner
- ---------------------- ----------------------------------
DATE Robert N. Gardner, Partner
April 19, 1999 /s/ Joseph J. Gardner
- ---------------------- ----------------------------------
DATE Joseph J. Gardner, Partner
9
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April 13, 1999
Condev Land Growth Fund '86, Ltd.
First Quarter 1999
Dear Limited Partner:
The financial statements of the Partnership for the first quarter of 1999 are on
the reverse side hereof. There were no sales of property and no distributions to
limited partners during the quarter. As of March 31, 1999, the net asset value
(book value) per unit of limited partner interest was $251.42. As of March 31,
1999, the Partnership owned or had an interest in two remaining properties:
NASA Causeway, Titusville. The remaining six acres of this property are under
- -------------------------
contract for sale to a developer who is completing his evaluation of the site
and working with prospective tenants for a planned retail development. The buyer
is required to make an additional non-refundable deposit on or before May 10,
1999 if he elects to proceed with the purchase. Closing is scheduled for
September 6, 1999.
West Hwy 50, Lake County. The City of Clermont has completed the extension of
- ------------------------
water to this site and sewer to a point on the south side of State Road 50
directly across from the site. In December, we received preliminary site plan
approval from Lake County, and the general partner is in the process of bringing
sewer service under SR 50 to the property and constructing the access points on
SR 50 to insure that access to the property will be preserved. In addition, the
Partnership has entered into a contract for grading part of the site and selling
the excess fill produced as we balance the site for future development. Proceeds
from the sale of excess fill will be used to pay for expenses incurred in
engineering and making improvements to the site.
Please feel free to contact the Investor Relations office if you have any
questions or would like additional information concerning your investment.
Sincerely yours,
CONDEV ASSOCIATES
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 26,513 19,062
<SECURITIES> 0 0
<RECEIVABLES> 7,300 1,682
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 310,615 1,450,453
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1,888,574 3,025,026
<CURRENT-LIABILITIES> 0 3,342
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 1,888,574 3,021,684
<TOTAL-LIABILITY-AND-EQUITY> 1,888,574 3,025,026
<SALES> 0 0
<TOTAL-REVENUES> 366 43
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 13,207 14,556
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (12,841) (14,512)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (12,841) (14,512)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (12,841) (14,512)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
