<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 Nine Months Ended September 30, 1996
                       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.)

                               2487 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:                           PAGE NUMBER

        ITEM 1. Financial Statements

                Statement of Assets,
                Liabilities and Partner's
                Capital - September 30, 1996
                and December 31, 1995                           3
 
                Statement of Income & Expense
                Three Months Ended September 30, 1996
                and September 30, 1995                          4

                Statement of Income & Expense
                Nine Months Ended September 30, 1996
                and September 30, 1995                          5

                Statement of Cash Receipts and
                Disbursements - Nine Months
                Ended September 30, 1996                        6

                Notes to Financial Statements                   7 - 10

        ITEM 2. Management's Discussion and
                Analysis of Financial Condition
                and Results of Operations                       10 - 11

PART II. OTHER INFORMATION:

        ITEM 6. Exhibits and Reports on Form 8-K                11
<PAGE>
 
                         PART I.  FINANCIAL INFORMATION



Item 1.   Financial Statements:
          ---------------------

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 1995 annual report on Form
10-K.

                       CONDEV LAND GROWTH FUND '86, LTD.
             STATEMENT OF ASSETS, LIABILITIES AND PARTNER'S CAPITAL
                    SEPTEMBER 30, 1996 AND DECEMBER 31, 1995

                                     ASSETS
                                     ------
<TABLE>
<CAPTION>
 
                           September 30, 1996  December 31, 1995
                           ------------------  -----------------
                                                   (AUDITED)
<S>                        <C>                 <C>
 
Cash & Cash Equivalents            $  465,748         $  196,814
Escrow Deposit                         34,135                  0
Land, at Cost (Note 2)              1,367,101          1,482,249
Investments in Joint
Ventures (Note 3)                   1,516,378          l,915,871
Organization Costs, Net                24,169             24,169
                                   ----------         ----------
             Total Assets          $3,407,531         $3,619,103
                                   ==========         ==========
</TABLE>


                       LIABILITIES AND PARTNER'S CAPITAL
                       ---------------------------------
<TABLE> 
<CAPTION> 

<S>                                <C>                <C> 
Partner's Capital -
     General Partner                    7,800              4,516
     Limited Partners               3,399,731          3,614,587
                                   ----------         ----------
        Total Partner's Capital    $3,407,531         $3,619,103
                                   ----------         ----------

Total Liabilities and
              Partner's Capital    $3,407,531         $3,619,103
                                   ==========         ==========
</TABLE> 

                                       3
<PAGE>
 
                       CONDEV LAND GROWTH FUND '86, LTD.
                        STATEMENT OF INCOME AND EXPENSE
          THREE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
                                  (UNAUDITED)
<TABLE>
<CAPTION>

                                      September 30, 1996      September 30, 1995
                                      ------------------      ------------------
INCOME
------                                               
<S>                                   <C>                     <C> 
Interest and Other Income                       $  2,943                $  8,434
 
Gain on land sale                                194,365                 405,580
 
Equity in Income of Joint Venture                    420                       0
                                                --------                --------
 
Total Income                                    $197,728                $414,014
 
 
OPERATING EXPENSES
------------------                                 
 
Professional Services                                  26                    955
 
Other                                            (  1,641)                     0
 
Taxes and permits                                   1,266                      0
 
Office Expense                                      2,097                  3,699
                                                 --------               --------
 
Total Operating Expense                          $  1,748               $  4,654
                                                 --------               --------
 
Net Income/(Loss)                                $195,980               $409,360
                                                 ========               ========
 
</TABLE>

                                       4
<PAGE>
 
                       CONDEV LAND GROWTH FUND '86, LTD.
                        STATEMENT OF INCOME AND EXPENSE
          NINE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                        September 30, 1996    September 30, 1995
                                        ------------------    ------------------
INCOME
------                                            
<S>                                     <C>                   <C>
Interest and Other Income                          $  7,281           $   34,289
 
Gain on land sale                                   194,365            1,100,940
 
Equity in Income of Joint Venture                   148,209                    0
                                                   --------           ----------
 
Total Income                                       $349,855           $1,135,229
 
 
OPERATING EXPENSES
------------------                                 
 
Professional Services                                11,492                9,968
 
Other                                                   344                  242
 
Taxes and permits                                     1,266                  198
 
Office Expense                                        8,366                9,083
                                                   --------           ----------
 
Total Operating Expense                            $ 21,428           $   19,491
                                                   --------           ----------
 
Net Income/(Loss)                                  $328,427           $1,115,738
                                                   ========           ==========
 
</TABLE>

                                       5
<PAGE>
 
                       CONDEV LAND GROWTH FUND '86, LTD.
                            STATEMENT OF CASH FLOWS
                      NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
 
<S>                                                          <C>  
Cash flows from operating activities:
           Net Income                                        $  328,427
           Adjustments to reconcile net loss
             to net cash used for operating
             activities:
                Equity in Income of Joint
                 Venture, net                                 ( 148,209)
                Gain on land sale                             ( 194,365)
                Equity in loss of Joint Venture                     118
                Cash used for changes:
                   Escrow                                     (  34,135)
                   Deposits on land                                   0
                                                             ----------

                   Net cash used in operating
                   activities                                 (  48,164)
                                                             ----------
 
Cash flows from financing activities:
           Land development costs                             (   2,591)
           Distribution from Joint Venture, net                 551,402
           Proceeds from land sale                              308,287
                                                             ----------
 
                   Net cash from financing
                   activities                                   857,098
                                                             ----------
 
Cash flows from investing activities:
           Distributions to partners                          ( 540,000)
                                                             ---------- 
                   Net cash used in investing
                   activities                                 ( 540,000)
                                                             ----------
 
                   Net increase in cash                         268,934
                                                             ----------
 
Cash and cash equivalents at beginning of year                  196,814
 
Cash and cash equivalents at end of period                   $  465,748
                                                             ==========
</TABLE>

                                       6
<PAGE>
 
                       CONDEV LAND GROWTH FUND '86, LTD.
                         NOTES TO FINANCIAL STATEMENTS

Note 1   BUSINESS:
         ---------

         Condev Land Growth Fund '86, Ltd. is a Florida Limited Partnership
         formed on April 17, 1986 under the Florida Uniform Partnership Act. The
         Partnership was formed for the purpose of acquiring and holding for
         investment predevelopment land in Central Florida. The Partnership
         registered with the Securities and Exchange Commission a total of 7,500
         units of limited partnership interests ("Units"). The Partnership had
         collected $7,500,000 in Partnership Capital as of December 31, 1987,
         the expiration of the offering period.

         As provided under the terms of the Partnership agreement the
         Partnership was to be in existence until December 31, 1993. In
         accordance with the Florida Limited Partnership Law and the Partnership
         Agreement, after December 31, 1993 the Partnership has been in
         liquidation with no change in the status of the limited partners or
         general partner.

         The Partnership has fully invested all available funds in properties
         located in the Central Florida area. Refer to Note 2 INVESTMENT IN LAND
         and Note 3 INVESTMENT IN JOINT VENTURES for details.


Note 2   INVESTMENT IN LAND:
         -------------------

         At September 30, 1996, land consisted of the following:

               2.83 acre parcel  (zoned commercial) in
               southeast Orange County, Florida                  $  322,791
               7.00 acre parcel (zoned commercial) in
               Brevard County, Florida                              420,503(a)
               5.39 acre parcel (zoned commercial) in
               Orange County, Florida                               623,807(b)
                                                                -----------   
                                                                $ 1,367,101
                                                                ===========

         (a) On January 12, 1996, the Partnership entered into a Contract for
         Sale of this parcel with a developer who intended to develop a retail
         center on the site. In April, the prospective purchaser made a non-
         refundable deposit under the terms of the contract. After two
         extensions, the buyer decided to terminate the contract and forfeit
         their $20,000 deposit. This amount was distributed to limited partners
         on October 11, 1996.

         (b) On July 25, 1995, the Partnership entered into a contract with a
         convenience store operator for the sale of approximately 1.2 acres of
         this site. The contract was amended a number of times after its
         original signing, finally providing for the sale of approximately 1
         acre. On July 26, 1996, the Partnership closed on this contract.

         The purchase price for the 45,000 square foot site was $360,000, or
         $8.00 per square foot. The Partnership paid $719,535 or $2.50 per
         square foot for the entire parcel in July, 1987. In addition the
         Partnership incurred capitalized costs of $19,420 on this parcel. As
         part of the agreement, the buyer agreed to construct a master drainage

                                       7
<PAGE>
 
         and retention system for the entire site, as well as access roads both
         on Colonial Drive and Woodbury Road to service the entire site. An
         escrow account in the amount of $34,135 was established for this
         permitting and construction, and represents the contribution of the
         Partnership towards those costs which exclusively benefit the remaining
         land owned by the Partnership. After expenses and the above mentioned
         escrow deposit for future development, the Partnership realized net
         cash proceeds of $284,243.84. A total of $280,000.00 was distributed to
         limited partners on October 11, 1996. The $4,243.84 balance was added
         to partnership reserves. The Partnership retains approximately 5.39
         acres at this location.

         For full details of investment in land, including a description of each
         parcel, please refer to the notes in Form 10-K filed as of December 31,
         1995.


Note 3   INVESTMENT IN JOINT VENTURES:
         -----------------------------

         The Partnership is a party to two joint ventures which have investments
         in land. The Partnership investment as of September 30, 1996 in the
         joint ventures for the period then ended are summarized as follows:
         
                                          Investment
 
         West 50 Joint Venture          $ l,516,378(a)
         Condev/McCulloch Road
               Joint Venture                      0(b)
                                        -----------   
                                        $ 1,516,378
                                        ===========

         The operations of West 50 Joint Venture consists primarily of
         professional services and real estate taxes. Condev/McCulloch Road
         Joint Venture was closed out upon the sale of its only parcel of land
         as described in Note 3(b) below.

         (a) 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 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, 1996 is as follows:

                                     Assets
                                     ------

         Cash                                                        $     1,146
         Accounts Receivable                                                   0
         Investment in land                                            2,568,250
                                                                     -----------
                                                                     $ 2,569,396
                                                                     ===========

                                       8
<PAGE>
 
                       Liabilities and Venturers' Capital
                       ----------------------------------

         Liabilities                                                           0
         Venturers' capital                                            2,569,396
                                                                     -----------
                                                                     $ 2,569,396
                                                                     ===========

         (b) The Partnership owned a 50.1% interest in Condev/McCulloch Road
         Joint Venture (A Florida Joint Venture) whose purpose was to acquire
         and hold a 19 acre parcel of land in Seminole County, Florida for
         investment purposes. The remaining 49.9% interest was owned by Condev
         Land Fund II, Ltd., an affiliate of the general partner. In April 1996,
         the Joint Venture's land was sold as described below, and the Joint
         Venture was terminated.

         During the first quarter of 1995, the Partnership entered into a
         Contract for Sale and Purchase relating to this property with Royal
         Apartments USA based in Champaign, Illinois. On April 22, 1996,
         Condev/McCulloch Road Joint Venture concluded the sale. The Purchase
         Price for this parcel was $1,190,000, which includes an amount of
         $35,000 paid by the purchaser as additional consideration to extend the
         closing date from December 22, 1995 to April 22, 1996. After expenses
         of the sale, the net proceeds realized by the Joint Venture were
         $1,104,330.01. The Joint Venture paid $737,355 for this parcel on
         February 6, 1989. In addition, the Joint Venture had $62,769 in
         additional capitalized costs relating to the property. Therefore, the
         Joint Venture had a net gain on the sale of this parcel of $304,206.01.

         Net proceeds from this sale were distributed to limited partners in
         May, 1996. Final distributions to Condev Land Growth Fund '86, Ltd. and
         Condev Land Fund II, Ltd. were made during the third quarter and the
         Joint Venture was terminated.


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 1996.

         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 a total of $540,000 was distributed to limited partners
         representing net proceeds of the sale described in Note 3(b) above. In
         addition, distributions totalling $300,000.00 relating to the deposit
         described in Note 2(a) and the sale described in Note 2(b) were made on
         October 11, 1996.

                                       9
<PAGE>
 
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, 1996, $5,805
         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 1996.

         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.


Note 6   OTHER INFORMATION:
         ------------------

         None

Item 2   Management's  discussion and analysis of financial condition and
         ----------------------------------------------------------------
         results of operations
         ---------------------

         Interest and other income for the nine months ended September 30, 1996
         was $7,281. This compares to interest and other income of $34,289 for
         the first nine months of 1995. The 1995 period includes $25,280 in
         interest on a purchase money mortgage which was outstanding at the
         time. This mortgage was repaid during the second quarter of 1995. Total
         income for the nine months ended September 30, 1996 was $328,427,
         including $148,209 equity in the income of Condev/McCulloch Road Joint
         Venture as a result of the sale of its parcel in Seminole County,
         Florida (see Note 3, Investment in Joint Ventures), and $194,365 gain
         on the sale of property (see Note 2(b) Investment in Land). Total
         income for the comparable 1995 period was $1,135,229 which included a
         gain on the sale of two parcels of land totalling $1,100,940. Operating
         expenses for the nine months ended September 30, 1996 were $ 21,428
         compared to $ 19,491 for the nine months ended September 30, 1995. The
         primary reason for this increase was slightly higher expenses for
         professional services, which increased from $ 9,968 in 1995 to $11,492
         in 1996. This occurred because of additional efforts to plan use of the
         land owned by the Partnership for future sale and to insure that
         existing development rights are vested to the fullest extent possible.
         Office expenses decreased from $9,083 in 1995 to 8,366 for the first
         nine months of 1996. Net income for the nine months ended September 30,
         1996 was $328,427, compared to a net income of $1,115,738 for the nine
         months ended September 30, 1995.

                                       10
<PAGE>
 
         Total assets of the partnership declined from $3,619,103 at December
         31, 1995 to $3,407,531 at September 30, 1996, a decrease of $211,572.
         This reflects the sale of land by the partnership during the period,
         partially offset by the gain on a sale made during the third quarter
         but not distributed to limited partners until the fourth quarter. Total
         assets can be expected to decrease as land is sold and the net proceeds
         are distributed to limited partners. Liquidity was at a high level of
         $$465,748 at September 30, 1996, compared to $196,814 at 1995 year end.
         However, distributions of $300,000 were made to limited partners on
         October 11, 1996, reducing liquidity to a more normal level.



                                    PART II


Item 6.  EXHIBITS AND REPORTS ON FORM 8-K.
         ---------------------------------

         (A)  Exhibits / Index.

              None

         (B)  Reports on Form 8-K.

              There were no reports on form 8-K for the nine months
              ended September 30, 1996.

                                       11
<PAGE>
 
                       CONDEV LAND GROWTH FUND '86, 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 25, 1996                   /s/ Robert N. Gardner
-------------------------          --------------------------------------------
DATE                               Robert N. Gardner, Partner


October 25, 1996                   /s/ Joseph J. Gardner
-----------------------            --------------------------------------------
DATE                               Joseph J. Gardner, Partner

                                       12