<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, 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
(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, 1999
and December 31, 1998 1
Statement of Income & Expense -
Three Months Ended June 30, 1999
and June 30, 1998 2
Statement of Income & Expense -
Six Months Ended June 30, 1999
and June 30, 1998 3
Statement of Cash Flows -
Six months ended June 30, 1999
and June 30, 1998 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 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
Second Quarter 1999 report to Limited Partners 11
<PAGE>
PART I. FINANCIAL INFORMATION
CONDEV LAND GROWTH FUND '86, LTD.
STATEMENT OF ASSETS, LIABILITIES AND PARTNERS' CAPITAL
JUNE 30, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
------
June 30, 1999 December 31, 1998
------------- -----------------
(Unaudited) *
<S> <C> <C>
Cash & Cash Equivalents $ 28,278 $ 39,457
Accounts Receivable 1,222 7,300
Land, at Cost (Note 2) 311,105 308,857
Investment in Joint
Venture (Note 3) 1,528,486 1,532,361
Organization Costs, Net 13,439 13,439
---------- ----------
Total Assets $1,882,530 $1,901,414
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Accounts Payable $ - $ -
---------- ----------
Total Liabilities $ - $ -
---------- ----------
Partners' Capital -
General Partner 2,838 3,027
Limited Partners 1,879,692 1,898,387
---------- ----------
Total Partners' Capital $1,882,530 $1,901,414
---------- ----------
Total Liabilities and
Partners' Capital $1,882,530 $1,901,414
========== ==========
</TABLE>
* 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, 1999 AND JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
INCOME
- ------
Gain on Sale of Land $ - $314,496
Interest and Other Income 232 3,314
--------- --------
Total Income $ 232 $317,810
--------- --------
OPERATING EXPENSES
- ------------------
Professional Services - -
Equity in loss of joint venture 2,220 (646)
Management Fees 2,124 2,124
Other Expense - 6,200
Office Expense 1,932 1,870
--------- --------
Total Operating Expense $ 6,276 $ 9,548
--------- --------
Net Income/(Loss) $ (6,044) $308,262
========= ========
</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 INCOME AND EXPENSE
SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
INCOME
- ------
Gain on Sale of Land $ - $314,496
Interest and Other Income 599 3,357
--------- --------
Total Income $ 599 $317,853
--------- --------
OPERATING EXPENSES
- ------------------
Professional Services 9,000 9,200
Equity in loss of joint venture 3,875 829
Management Fees 4,248 4,248
Other Expense - 7,479
Office Expense 2,361 2,348
-------- --------
Total Operating Expense $ 19,484 $ 24,104
-------- --------
Net Income/(Loss) $(18,885) $293,749
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE>
CONDEV LAND GROWTH FUND '86, LTD.
STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net Income (Loss) $(18,885) $ 293,749
Adjustments to reconcile net loss
to net cash used for operating activities:
Equity in loss of Joint Venture, net 3,875 829
Gain on land sale - (314,497)
Cash used for changes:
Deposits on land - (2,100)
Accounts payable (-) 390
Accounts Receivable 6,078 460
-------- -----------
Net cash used in operating activities: (8,932) (314,918)
-------- -----------
Cash flows from investing activities:
Land development costs (2,247) 4,982
Investment in Joint Venture - (2,359)
Proceeds from land sale - 1,168,169
-------- -----------
Net cash from investing activities: (2,247) 1,170,792
-------- -----------
Cash flows from financing activities:
Distributions to partners (-) (1,102,500)
-------- -----------
Net cash used in financing activities: (-) (1,102,500)
-------- -----------
Net increase (decrease) in cash (11,179) 47,123
Cash and cash equivalents at beginning of year 39,457 19,062
-------- -----------
Cash and cash equivalents at end of period $ 28,278 $ 66,185
======== ===========
</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 1998 annual report on Form
10-K.
Note 2 INVESTMENT IN LAND:
------------------
At June 30, 1999, land consisted of the following:
6.00 acre parcel (zoned commercial) in
Brevard County, Florida $311,105
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 was extended to May 10,
1999, and was further extended to July 15, 1999. This was done to allow the
contract buyer additional time to conclude arrangements with a tenant for the
property.
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.
5
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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 June 30, 1999 is as follows:
<TABLE>
<CAPTION>
Assets
------
<S> <C>
Cash $ 6,778
Investment in land 2,748,742
----------
$2,755,520
==========
Liabilities and Venturers' Capital
----------------------------------
Liabilities
-----------
Mortgage note payable $ 163,865
Other liabilities 1,000
----------
Total liabilities $ 164,865
Venturers' capital
------------------
Venturers' capital $ 2,597,223
Current profit (loss) (6,568)
-----------
Total Venturers' capital 2,590,655
Total liabilities and venturers' capital $ 2,755,520
===========
</TABLE>
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 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 six months of 1999
6
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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 six months ended June 30, 1999, $730 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 six 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 June 30, 1999, the Partnership continued to manage the
portfolio properties with the objective of selling the properties at fair market
prices. As of June 30, 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 was completed in June, 1999. The cost of
evaluating the current system and bringing it up to date to be year 2000
compliant was 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. Even if the system were to be completely shut down by the
7
<PAGE>
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 six months ended June 30, 1999 were $366, compared with
total revenues of $317,853 for the six months ended June 30, 1998. 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. In the 1998 period, total revenues included a gain on
sale of land in the amount of $314,396 and interest and other income of $3,357.
There were no sales of land in the 1999 period. Operating expenses (excluding
equity in the losses of the Partnership's joint venture) for the six months
ended June 30, 1999 were $15,609, a decrease from $23,275 for the six months
ended June 30, 1998. In both periods, operating expenses represent the normal
costs of operating the Partnership and managing the Partnership properties.
However, in the 1998 period, real estate taxes paid on the properties which were
sold amounting to $7,479. Real estate taxes on the Partnership's properties are
normally paid in November each year. The total real estate tax amount will
decrease as properties are sold.
West 50 Joint Venture, in which the Partnership holds a 59% interest, had a loss
of $6,568 for the six months ended June 30, 1999 compared with a loss of $1,405
for the six months ended June 30, 1998. The larger loss in 1999 resulted from
the refund of billboard rental income because of a decision to terminate
existing billboard leases. 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. Since these expenses are incurred to develop land for sale,
interest charges incurred on outstanding debt will be capitalized. These
additional expenses are expected to be offset by higher sales prices for the
Joint Venture's land.
Liquidity and Capital Resources at June 30, 1999
- ------------------------------------------------
Total assets decreased slightly from $1,901,414 at December 31, 1998 to
$1,882,530 at June 30, 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 fourth quarter of 1999 or the first quarter of 2000.
8
<PAGE>
Liquidity remained at a relatively low level. Cash and equivalents decreased
from $39,457 at 1998 year-end to $28,278 at June 30, 1999. As provided in the
Partnership Agreement, the general partner intends to add to reserves from the
net proceeds of future land sales.
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 and
obtaining the necessary development permits. In addition, the Joint Venture has
entered into a contract with an excavation and grading company to remove up to
366,000 yards of excess 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 June 30, 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
Second Quarter 1999 Report to Limited Partners
(B) Reports on Form 8-K
There were no reports of Form 8-K for the period ended
June 30, 1999
9
<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
July 26, 1999 /s/ Robert N. Gardner
- ------------------- ---------------------------------
DATE Robert N. Gardner, Partner
July 26, 1999 /s/ Joseph J. Gardner
- ------------------- ---------------------------------
DATE Joseph J. Gardner, Partner
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CURRENCY> 0
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998
<EXCHANGE-RATE> 1.00 1.00
<CASH> 28,278 66,185
<SECURITIES> 0 0
<RECEIVABLES> 1,222 1,222
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 311,105 596,517
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1,882,530 2,214,565
<CURRENT-LIABILITIES> 0 1,632
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 1,882,530 2,212,933
<TOTAL-LIABILITY-AND-EQUITY> 1,882,530 2,214,565
<SALES> 0 0
<TOTAL-REVENUES> 599 317,854
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 19,484 24,105
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (18,885) 293,749
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (18,885) 293,749
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (18,885) 293,749
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
July 26, 1999
Condev Land Growth Fund '86, Ltd.
Second Quarter 1999
Dear Limited Partner:
The financial statements of the Partnership for the second 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 June 30, 1999, the net asset value
(book value) per unit of limited partner interest was $250.63.
The General Partner is making every reasonable effort to conclude the sale of
the remaining partnership properties as soon as possible.
In the case of the Titusville property, we have granted contract extensions to
----------
allow the contract holder time to finalize arrangements with his prospective
tenant in the belief that having a user for the property will help assure that
the property is sold. This strategy appears to be a correct one. As of the date
of this report, the purchaser of the property has secured a commitment from his
tenant, and has made a non-refundable deposit on the property. Engineering of
the site has begun, and application for the required development permits is
underway.
With respect to the West Hwy 50, Lake County property, our strategy has been to
------------------------
complete certain improvements to the property, such as the extension of sewer
and water service to the site, and construction of both on site and off site
access improvements. Access improvements include not only the roadway access to
the property, but also modifications to the turn lanes and medians along SR 50.
We are working with the Florida Department of Transportation and Lake County in
these endeavors. Because of the property's rolling terrain, we have made the
decision to do some preliminary grading of the site to bring the ultimate
development of the property closer to the market. We believe that these
improvements will better position the property for sale by reducing the time and
effort a potential buyer would have to undertake for development of the
property. We believe the added expense will ultimately be recovered through a
higher price for the land.
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
