<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
<PAGE>
 
                       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
<PAGE>
 
                       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
<PAGE>
 
                       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
<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 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
<PAGE>
 
               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
<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 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
<PAGE>
 
               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
<PAGE>
 
               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
<PAGE>
 
                    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
<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 23, 1998                  /s/ Robert N. Gardner
----------------------         ----------------------------------
      DATE                     Robert N. Gardner, Partner


July 23, 1998                  /s/ Joseph J. Gardner
----------------------         ----------------------------------
      DATE                     Joseph J. Gardner, Partner

                                       11
<PAGE>
 
                                                                   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
<PAGE>
 
                                                                   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