United States Securities and Exchange Commission
                             Washington, D.C. 20549
                     
                                   FORM 10-Q
                               
(Mark One)
    X     Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
          Exchange Act of 1934

               For the Quarterly Period Ended September 30, 1996
                               
                                       or

          Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

                For the Transition period from ______  to ______
                               
                               
                        Commission File Number: 33-17660
                               
                               
            PRINCIPAL GROWTH MORTGAGE INVESTORS FUND, L.P., SERIES 1
              Exact Name of Registrant as Specified in its Charter
      
      
           Delaware                                 13-3466206
State or Other Jurisdiction of
Incorporation or Organization           I.R.S. Employer Identification No.


3 World Financial Center, 29th Floor,
New York, NY    Attn.: Andre Anderson                10285
Address of Principal Executive Offices              Zip Code

                                 (212) 526-3237
               Registrant's Telephone Number, Including Area Code
                               
                               

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 reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes    X    No ____
                               
                               

Balance Sheets                             At September 30,   At December 31,
                                                      1996              1995
Assets
Cash and cash equivalents                         $135,716          $165,643
        Total Assets                              $135,716          $165,643
Liabilities and Partners' Capital
Liabilities:
  Accounts payable and accrued expenses            $30,124           $32,468
  Due to affiliates                                 65,440            51,236
        Total Liabilities                           95,564            83,704
Partners' Capital (Deficit):
  General Partner                                 (156,955)         (156,537)
  Limited Partners (Depository units:
 6,500,000 authorized; 1,657,500 issued)           197,107           238,476
        Total Partners' Capital                     40,152            81,939
        Total Liabilities and Partners' Capital  $ 135,716          $165,643

                                                                  


Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1996
                                            Limited        General
                                           Partners        Partner       Total
Balance at December 31, 1995               $238,476      $(156,537)     $81,939
Net loss                                    (41,369)          (418)     (41,787)
Balance at September 30, 1996              $197,107      $(156,955)     $40,152


Statements of Operations
                                   Three months ended      Nine months ended
                                      September 30,          September 30,
                                    1996         1995       1996         1995
Income
Interest income                $    1,863   $   2,924   $   5,825   $   8,001
        Total Income                1,863       2,924       5,825       8,001
Expenses
General and administrative         13,410      12,150      36,362      37,992
Investment management fee           3,750       3,750      11,250      11,250
        Total Expenses             17,160      15,900      47,612      49,242
        Net Loss               $  (15,297)  $ (12,976)  $ (41,787)  $ (41,241)
Net Loss Allocated:
To the General Partner         $     (153)  $    (129)  $   (418)   $    (412)
To the Limited Partners           (15,144)    (12,847)   (41,369)     (40,829)
                               $  (15,297)  $ (12,976)  $(41,787)   $ (41,241)
Per limited partnership unit
(1,657,500 outstanding)        $     (.01)  $    (.01)  $   (.03)   $    (.03)





Statements of Cash Flows
For the nine months ended September 30,                  1996         1995
Cash Flows From Operating Activities:
Net loss                                             $(41,787)     $(41,241)
Adjustments to reconcile net loss to net cash
used for operating activities:
   Increase (decrease) in cash arising from changes in
   operating assets and liabilities:
        Accounts payable and accrued expenses          (2,344)        1,932
        Due to affiliates                              14,204        11,150
Net cash used for operating activities                (29,927)      (28,159)
Net decrease in cash and cash equivalents             (29,927)      (28,159)
Cash and cash equivalents, beginning of period        165,643       215,521
Cash and cash equivalents, end of period             $135,716      $187,362




Notes to the Financial Statements

The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1995 audited financial statements within Form 10-K.

The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of September 30, 1996 and the results of operations and cash flows
for the nine months ended September 30, 1996 and 1995 and the statement of
partner's capital (deficit) for the nine months ended September 30, 1996.
Results of operations for the periods are not necessarily indicative of the
results to be expected for the full year.

No significant events have occurred subsequent to fiscal year 1995, and no
material contingencies exist which would require disclosure in this interim
report per Regulation S-X, Rule 10- 01, Paragraph (a)(5).

Part I, Item 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations

Liquidity and Capital Resources

The Partnership's zero coupon second mortgage loan (the "Loan") funded to
Colonial Gold Limited Partnership, in the original principal amount of
$14,314,950, was secured by a second mortgage on One Financial Plaza (the
"Property"), a 26-story office building and parking garage located in Hartford,
Connecticut. The Loan was subordinate to a non-recourse first mortgage held by
Principal Mutual Life Insurance Company (the "First Mortgagee") in the original
amount of $87,750,000. Several events occurred which negatively impacted the
operations of the Property and resulted in defaults by the Borrower under the
terms of its first mortgage loan and the Partnership's second mortgage loan. On
December 2, 1993, the Property was transferred to the First Mortgagee pursuant
to a foreclosure.  Reference is made to the Partnership's 1995 Annual Report on
Form 10-K for a comprehensive discussion of the events leading up to the
foreclosure.

In the absence of any viable alternatives, the General Partner negotiated an
agreement (the "Agreement") with the First Mortgagee, the Borrower and the
third mortgagee to obtain compensation for permitting the First Mortgagee to
achieve an orderly foreclosure of the Property.  The agreement called for the
First Mortgagee to pay the Partnership $350,000 following the transfer of title
to the First Mortgagee, which took place on December 2, 1993.  Pursuant to the
terms of the Agreement, the Partnership received $100,000 on March 7, 1994, and
$250,000 on December 7, 1994.  The General Partner is currently winding up the
affairs of the Partnership and will utilize these funds, as well as any funds
remaining in its cash reserve, to satisfy the Partnership's outstanding
liabilities and will thereafter liquidate the Partnership.

As of September 30, 1996, the Partnership's cash balance totaled $135,716,
compared with $165,643 at December 31, 1995. The decrease is due to the payment
of Partnership administrative expenses.

Results of Operations
The Partnership reported net losses of $15,297 and $41,787 for the three and
nine months ended September 30, 1996, respectively, compared with net losses of
$12,976 and $41,241 for the corresponding periods in 1995.  The slightly higher
net losses in the 1996 periods are primarily due to a decrease in interest
income.  General and administrative expenses totaled $13,410 and $36,362 for
the three and nine months ended September 30, 1996, respectively, compared with
$12,150 and $37,992 for the corresponding periods in 1995.  The slight decrease
in the nine-month period is due to lower audit fees.


Part II   Other Information

Items 1-5 Not applicable.

Item 6    Exhibits and reports on Form 8-K.

          (a)  Exhibits -

               (27) Financial Data Schedule

            (b)  Reports on Form 8-K - No reports on Form 8-K
            were filed during the quarter ended September 30, 1996.
            
            
            
            
                                   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, thereunto duly authorized.



                       PRINCIPAL GROWTH MORTGAGE INVESTORS FUND, L.P., SERIES 1
                         
                          BY:   PRINCIPAL GROWTH REALTY FUNDING, INC.
                                 General Partner
                               
                               
                               
Date: November 13, 1996   BY:  /s/ Kenneth L. Zakin
                                 Director and President
Date: November 13, 1996   BY:  /s/ Daniel M. Palmier
                                 Vice President and
                                 Chief Financial Officer