<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, 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 - September 30, 1999
and December 31, 1998 1
Statement of Income & Expense -
Three Months Ended September 30, 1999
and September 30, 1998 2
Statement of Income & Expense -
Nine Months Ended September 30, 1999
and September 30, 1998 3
Statement of Cash Flows -
Nine months ended September 30, 1999
and September 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 10
Item 6 Exhibits and Reports on Form 8-K 10
Signatures 10
Third 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
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
ASSETS
------
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ ---------------------
(Unaudited) *
<S> <C> <C>
Cash & Cash Equivalents $ 23,099 $ 39,457
Accounts Receivable 1,222 7,300
Land, at Cost (Note 2) 313,390 308,857
Investment in Joint
Venture (Note 3) 1,528,486 1,532,361
Organization Costs, Net 13,439 13,439
---------- ----------
Total Assets $1,879,636 $1,901,414
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Accounts Payable $ - $ -
---------- ----------
Total Liabilities $ - $ -
---------- ----------
Partners' Capital -
General Partner 2,809 3,027
Limited Partners 1,876,827 1,898,387
---------- ----------
Total Partners' Capital $1,879,636 $1,901,414
---------- ----------
Total Liabilities and
Partners' Capital $1,879,626 $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 SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
INCOME
- ------
Gain on Sale of Land $ - $ 33,171
Interest and Other Income 239 775
---------- ---------
Total Income $ 239 $ 33,946
---------- ---------
OPERATING EXPENSES
- ------------------
Professional Services - -
Equity in loss of joint venture - ( 443)
Management Fees 2,124 2,124
Other Expense - 3,385
Office Expense 1,008 1,959
---------- ---------
Total Operating Expense $ 3,132 $ 7,025
---------- ---------
Net Income/(Loss) ($ 2,893) $ 26,921
========== =========
</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
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
INCOME
- ------
Gain on Sale of Land $ - $347,668
Interest and Other Income 837 4,132
--------- --------
Total Income $ 837 $351,800
--------- --------
OPERATING EXPENSES
- ------------------
Professional Services 9,000 9,200
Equity in loss of joint venture 3,875 386
Management Fees 6,372 6,372
Other Expense - 10,864
Office Expense 3,368 4,308
--------- --------
Total Operating Expense $ 22,615 $ 31,130
--------- --------
Net Income/(Loss) ($ 21,778) $320,670
========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE>
CONDEV LAND GROWTH FUND '86, LTD.
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net Income (Loss) ($ 27,778) $ 320,670
Adjustments to reconcile net loss
to net cash used for operating activities:
Equity in loss of Joint Venture, net 3,875 386
Gain on land sale - ( 347,668)
Cash used for changes:
Deposits on land - ( 2,100)
Due from related entity - 460
Accounts Receivable 6,078 ( 1,242)
----------- -----------
Net cash used in operating activities: ( 11,825) ( 29,494)
----------- -----------
Cash flows from investing activities:
Land development costs ( 4,533) 5,830
Investment in Joint Venture - ( 2,359)
Proceeds from land sale - 1,484,189
----------- -----------
Net cash from investing activities: ( 4,533) 1,487,660
----------- -----------
Cash flows from financing activities:
Distributions to partners ( -) ( 1,417,500)
----------- -----------
Net cash used in financing activities: ( -) ( 1,417,500)
----------- -----------
Net increase (decrease) in cash ( 16,358) 40,666
Cash and cash equivalents at beginning of year 39,457 19,062
----------- -----------
Cash and cash equivalents at end of period $ 23,099 $ 59,728
=========== ===========
</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 September 30, 1999, land consisted of the following:
6.00 acre parcel (zoned commercial) in
Brevard County, Florida $313,390
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. The buyer has made a
$30,000 non-refundable deposit on the contract, and is proceeding
with applications for development permits. The contract provides
that the closing may be extended by the buyer for up to six
months upon payment of an agreed monthly extension fee. If all
extensions are requested, closing would be February 1, 2000.
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 1.23 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 September 30, 1999 is as follows :
<TABLE>
Assets
------
<S> <C>
Cash $ 456
Investment in land 2,765,064
---------
$2,765,520
==========
Liabilities and Venturers' Capital
----------------------------------
Liabilities
-----------
Mortgage note payable $ 173,865
Other liabilities 1,000
----------
Total liabilities $ 174,865
Venturers' capital
------------------
Venturers' capital $ 2,597,223
Current profit (loss) ( 6,568)
-----------
Total Venturers' capital 2,590,655
Total liabilities and venturers' capital $ 2,765,520
===========
</TABLE>
On September 17, 1999, West 50 Joint Venture entered into a
contract for the sale of this entire property. Terms of the
contract include an inspection period until November 18, 1999 and
closing on or before December 5, 1999. The prospective buyer is
currently conducting its due diligence investigation of the
property. Because of the short inspection period and closing
under this contract, the Partnership has suspended the
improvements to the property which include the extension of sewer
and water service to the site, and construction of both on site
and off site access improvements. Permits for these improvements
will be assigned to the buyer at closing, or construction will be
reactivated if closing does not occur.
6
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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 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 nine months of 1999 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 nine months ended September
30, 1999, $7,297 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
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 September 30, 1999, the Partnership
continued to manage the portfolio properties with the objective
of selling the properties at fair market prices. As of September
30, 1999, the Partnership had contracts for sale of both 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
7
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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 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 nine months ended September 30, 1999 were
$837, compared with total revenues of $351,800 for the nine
months ended September 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 $347,668 and
interest and other income of $4,132. 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 nine months
ended September 30, 1999 were $18,740, a decrease from $30,744
for the nine months ended September 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 amounted to $8,718. 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 nine months ended
September 30, 1999 compared with a loss of $2,805 for the nine
months ended September 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
8
<PAGE>
expenses are expected to be offset by higher sales prices for the
Joint Venture's land.
Liquidity and Capital Resources at September 30, 1999
-----------------------------------------------------
Total assets decreased slightly from $1,901,414 at December 31,
1998 to $1,879,636 at September 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
contracts for sale of all remaining portfolio properties which
are expected to close during the fourth quarter of 1999 and the
first quarter of 2000.
Liquidity remained at a relatively low level. Cash and
equivalents decreased from $39,457 at 1998 year-end to $23,099 at
September 30, 1999. As provided in the Partnership Agreement, the
general partner intends to add to reserves from the net proceeds
of future land sales if necessary.
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.
All necessary development permits have been obtained. 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. 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, 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
Third Quarter 1999 Report to Limited Partners
(B) Reports on Form 8-K
There were no reports of Form 8-K for the period ended September
30, 1999
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 26, 1999 /s/ Robert N. Gardner
- --------------------- ----------------------------------
DATE Robert N. Gardner, Partner
October 26, 1999 /s/ Joseph J. Gardner
- --------------------- ----------------------------------
DATE Joseph J. Gardner, Partner
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CURRENCY> 1.00
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> SEP-30-1999 SEP-30-1998
<EXCHANGE-RATE> 1.00 1.00
<CASH> 23,099 59,728
<SECURITIES> 0 0
<RECEIVABLES> 1,222 1,222
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 313,390 312,820
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1,879,636 1,924,854
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 1,879,636 1,924,854
<TOTAL-LIABILITY-AND-EQUITY> 1,879,636 1,942,854
<SALES> 0 0
<TOTAL-REVENUES> 837 351,800
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 22,615 31,130
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (21,778) 320,670
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (21,778) 320,670
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (21,778) 320,670
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
October 22, 1999
Condev Land Growth Fund '86, Ltd.
Third Quarter 1999
Dear Limited Partner:
The financial statements of the Partnership for the third 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 September 30, 1999, the net asset
value (book value) per unit of limited partner interest was $250.24. As of this
date, the Partnership owned or had an interest in two properties:
NASA Causeway, Titusville. This property continues to be under contract with an
- -------------------------
investor who is developing the site for retail users. The buyer has made a
$30,000 non-refundable deposit on the contract, and is proceeding with
applications for development permits. The contract provides that the closing may
be extended by the buyer for up to six months upon payment of an agreed monthly
extension fee. If all extensions are requested, closing would be February 1,
2000.
West Hwy 50, Lake County. On September 17, 1999, West 50 Joint Venture, which is
- ------------------------
59% owned by Condev Land Growth Fund `86, Ltd. and 41% by Condev West 50, Ltd.,
entered into a contract for the sale of this entire property. Terms of the
contract include an inspection period until November 18, and closing on or
before December 5, 1999. The prospective buyer is currently conducting its due
diligence investigation of the property. Because of the short inspection period
and closing under this contract, the Partnership has suspended the improvements
to the property which include the extension of sewer and water service to the
site, and construction of both on site and off site access improvements. Permits
for these improvements will be assigned to the buyer at closing, or construction
will be reactivated if closing does not occur.
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
