UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-K

(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
                          -----------------
                                      OR
[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from               to 
                               -------------    -------------            

Commission file number 0-14353
                       -------

                      BALCOR REALTY INVESTORS 85-SERIES I
                       A REAL ESTATE LIMITED PARTNERSHIP
             -----------------------------------------------------
            (Exact name of registrant as specified in its charter)

           Illinois                                      36-3244978
-------------------------------                      ------------------- 
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                       Identification No.)

2355 Waukegan Rd.
Bannockburn, IL                                             60015
----------------------------------------             -------------------       
(Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code (847) 267-1600
                                                   ---------------
Securities registered pursuant to Section 12(b) of the Act:  None
                                                             ----
Securities registered pursuant to Section 12(g) of the Act:

                         Limited Partnership Interests
                         -----------------------------
                               (Title of class)

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 [   ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
<PAGE>
                                    PART I

Item 1. Business
----------------

Balcor Realty Investors 85-Series I A Real Estate Limited Partnership (the
"Registrant") is a limited partnership formed in 1983 under the laws of the
State of Illinois. The Registrant raised $82,697,000 from sales of Limited
Partnership Interests. The Registrant's operations consist exclusively of
investment in and operation of income-producing real property, and all
financial information included in this report relates to this industry segment.

The Registrant utilized the net offering proceeds to acquire ten real property
investments and minority joint venture interests in three additional
properties. The Registrant has disposed of three of these properties in prior
years and disposed of one of the properties in which it held a minority joint
venture interest during 1995 and one during February 1996. The seven properties
and two minority joint venture interests held at December 31, 1995 are
described under Item 2. Properties. The Partnership Agreement generally
provides that the proceeds of any sale or refinancing of the Registrant's
properties will not be reinvested in new acquisitions.

Overall, the investment real estate market saw gradual improvement over the
last year. This improvement has taken place in an environment of generally low
interest rates and little or no new supply, parameters which may not exist in
the next few years. Demand for real estate space, while projected to improve in
line with the overall economy, is also vulnerable to external forces. The major
challenges facing the real estate industry today include increased
international competition, corporate restructurings, new computer and
communications technologies, an aging  population and potential revisions of
the tax code. In addition, the increased flow of capital to real estate through
new vehicles such as commercial mortgage-backed securities and REITs could spur
new construction at unsupportable levels, as well as impact existing property
values.

Operationally, existing apartment properties continued to register occupancy
percentages in the 90s, with average rents rising at an annual rate of between
3 and 4 percent.  Apartments are still considered one of the top real estate
asset classes in terms of performance. However, some markets are experiencing
new construction of rental units which, if unrestrained, could impact the
performance of existing properties. Most of the new construction is aimed at
the two segments of the rental market which are growing the fastest: low-income
households and upper-income households who prefer to rent rather than own. Of
all the major asset classes, apartments typically display the least volatility
in terms of property values.

The General Partner had previously advised the Limited Partners that its
strategy was to sell the Registrant's remaining assets over the next three to
four years.  The General Partner also stated that the timing of the liquidation
could be lengthened or shortened due to changes in market conditions, economic
factors, interest rates and unforeseen events.  Since November 1995, the
General Partner believes that the market for multifamily housing properties has
become increasingly favorable to sellers of these properties.  This belief is
based on the results of the sales and marketing activities of the Registrant as
described below and based upon the similar results of such activities by
various other partnerships affiliated with the Registrant.  These favorable
market conditions are in part attributable to the increasing strength of the
<PAGE>
capital markets and the re-entry of REITs into the acquisition market.  Since
November 1995, the Registrant has sold one of its properties in which it held a
minority joint venture interest.  Of its remaining properties, the General
Partner (i) has entered into a contract to sell one of the properties; (ii) is
actively marketing one of the properties in which it holds a minority joint
venture interest for sale; and (iii) if the market remains favorable, intends
to begin actively marketing more of the remaining properties for sale.  If the
current market conditions for sales remain favorable and the General Partner
can obtain appropriate sales prices, the Registrant's liquidation strategy may
be accelerated.

The Registrant received notice of an unsolicited offer for the purchase of
limited partnership interests ("tender offer") in November 1995.  The tender
offer was made by Walton Street Capital Acquisition Co. L.L.C. ("Walton
Street"). Walton Street stated that their primary motive in making the offer
was to make a profit from the purchase of the interests. Walton Street acquired
3.82% of the total interests outstanding in the Registrant and assigned the
interests to its affiliate, WIG 85. The Registrant incurred administrative
costs in responding to the tender offer. 

The Registrant received notice of an unsolicited offer for the purchase of
limited partnership interests ("tender offer") on March 11, 1996. The tender
offer was made by Metropolitan Acquisition VII, L.L.C. ("Metropolitan").
Metropolitan is an affiliate of Insignia Financial Group, Inc., which provides
property management services to all of the Registrant's properties.
Metropolitan stated that their primary motive in making the offer is to make a
profit from the purchase of the interests. Metropolitan is seeking to acquire
up to 30% of the total interests outstanding in the Registrant. The Registrant
will incur administrative costs in responding to the tender offer and may incur
additional costs if additional tender offers are made in the future. The
General Partner cannot predict with any certainty what the impact of this
tender offer or any future tender offers will have on the operations or
management of the Registrant.

During 1995, the Registrant completed the refinancing of the mortgage loan
secured by the Boulder Springs Apartments. See Note 4 of Notes to Financial
Statements for additional information.

The Registrant, by virtue of its ownership of real estate, is subject to
federal and state laws and regulations covering various environmental issues.
Management of the Registrant utilizes the services of environmental consultants
to assess a wide range of environmental contamination as appropriate. The
General Partner is not aware of any potential liability due to environmental
issues or conditions that would be material to the Registrant.
 
The officers and employees of Balcor Partners-XVI, the General Partner of the
Registrant, and its affiliates perform services for the Registrant. The
Registrant currently has no employees engaged in its operations.

Other Information
-----------------

In 1984, Seabrook Apartments, Orange County, Florida, was acquired by a limited
partnership (the "Joint Venture") in which the Registrant and two affiliates of
the Registrant (the "Affiliates") held effective ownership interests of
approximately 15.43% and 84.57%, respectively. The Registrant contributed
$492,480 and the Affiliates contributed $2,700,000 from their respective
<PAGE>
offering proceeds towards the purchase of the property. The property was
acquired subject to first mortgage financing of $5,950,000.

On February 20, 1996, the Joint Venture sold the property to an unaffiliated
party, United Dominion Realty Trust, Inc., a Virginia corporation, for a sale
price of $5,915,000. From the proceeds of the sale, the Joint Venture paid the
outstanding balance of the first mortgage loan collateralized by the property
of $5,081,898, a brokerage commission of $147,875 to an unaffiliated party,
closing and other sale costs of $42,642 and will receive the remaining proceeds
of approximately $640,000. Pursuant to the terms of the sale, $250,000 of the
proceeds will be held by the Joint Venture until August 1996. The Registrant's
share of the total proceeds will be approximately $100,000. The General Partner
was reimbursed by the Registrant for its actual expenses incurred in connection
with the sale.

In 1985, the Registrant acquired the Willow Bend Apartments, St. Louis,
Missouri, utilizing approximately $3,924,720 in offering proceeds.  The
property was acquired subject to first mortgage financing of approximately
$7,000,000.

On February 22, 1996, the Registrant contracted to sell the property for a sale
price of $9,985,000 to unaffiliated parties, Mary Camenzind Boland Revocable
Trust and John Hazzard Camenzind Trust (together, the "Purchaser").  The
Purchaser has deposited $200,000 into an escrow account as earnest money.  The
remaining $9,785,000 of the sale price will be paid in cash by the Purchaser at
closing, scheduled to be held on March 29, 1996.  From the proceeds of the
sale, the Registrant will pay to an unaffiliated party a brokerage commission
of $199,700 and to the holder of the first mortgage loan the outstanding
balance of the loan, expected to be approximately $5,794,000 at closing.  The
General Partner will be reimbursed by the Registrant for actual expenses
incurred in connection with the sale.

The closing is subject to the satisfaction of numerous terms and conditions.
There can be no assurance that all of the terms and conditions will be complied
with and, therefore, it is possible the sale of the property may not occur.

Item 2. Properties
------------------

As of December 31, 1995, the Registrant owned the seven properties described
below:

Location                     Description of Property
--------                     -----------------------

Chesterfield County,         Boulder Springs Apartments: a 284-unit 
  Virginia                   complex located on approximately 32 acres.

Arlington, Texas             Forest Ridge Apartments (Phase I): a 332-unit
                             complex located on approximately 14 acres.

East Baton Rouge Parish,     Forestwood Apartments: a 272-unit complex
  Louisiana                  located on approximately 11 acres.

Oklahoma City, Oklahoma      Heather Ridge Apartments: a 356-unit complex
                             located on approximately 16 acres.
<PAGE>
Colorado Springs, Colorado   Templeton Park Apartments: a 496-unit complex
                             located on approximately 21 acres.

Altamonte Springs, Florida   Timberlake Apartments (Phase I): a 480-unit
                             complex located on approximately 43 acres.

Town & Country, Missouri     Willow Bend Apartments: a 208-unit complex
                             located on approximately 21 acres.

Each of the above properties is held subject to various forms of financing.

The Registrant also held minority joint venture interests in North Hill
Apartments, DeKalb County, Georgia; and Seabrook Apartments, Orange County,
Florida. Seabrook Apartments was sold in February 1996. See Note 6 of Notes to
Financial Statements for additional information.

In the opinion of the General Partner, the Registrant has provided for adequate
insurance coverage for its real estate investment properties.

See Notes to Financial Statements for other information regarding real property
investments.

Item 3.  Legal Proceedings
--------------------------

Proposed class action
---------------------

On February 29, 1996, a proposed class action complaint was filed, Raymond
Masri vs. Lehman Brothers, Inc., et al., Case No. 96/103727 (Supreme Court of
the State of New York, County of New York). The Registrant, additional limited
partnerships which were sponsored by The Balcor Company, three limited
partnerships sponsored by the predecessor of Lehman Brothers, Inc. (together
with the Registrant and the affiliated partnerships, the "Defendant
Partnerships"), Lehman Brothers, Inc. and Smith Barney Holdings, Inc. are
defendants. The complaint alleges, among other things, common law fraud and
deceit, negligent misrepresentation and breach of fiduciary duty relating to
the disclosure of information in the offering of limited partnership interests
in the Defendant Partnerships. The complaint seeks judgment for compensatory
damages equal to the amount invested in the Defendant Partnerships by the
proposed class plus interest accrued thereon; general damages for injuries
arising from the defendants' actions; recovery from the defendants of all
profits received by them as a result of their actions relating to the Defendant
Partnerships; exemplary damages; attorneys' fees and other costs.

The defendants intend to vigorously contest this action. No class has been
certified as of this date. Management of each of the defendants believes they
have meritorious defenses to contest the claims. It is not determinable at this
time whether or not an unfavorable decision in this action would have a
material adverse impact on the Registrant.

Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------

No matters were submitted to a vote of the Limited Partners of the Registrant
during 1995.
<PAGE>
                                    PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder
-------------------------------------------------------------------------
Matters
-------

There has not been an established public market for Limited Partnership
Interests and it is not anticipated that one will develop; therefore, the
market value of the Limited Partnership Interests cannot reasonably be
determined. For information regarding distributions see Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations.

As of December 31, 1995, the number of record holders of Limited Partnership
Interests of the Registrant was 7,701.

Item 6. Selected Financial Data
-------------------------------

                                     Year ended December 31,                   
                   ----------------------------------------------------------
                       1995       1994        1993       1992        1991      
                   ---------- ----------- ----------- ----------- -----------
 

Total income       $16,503,016 $14,888,075 $15,484,410 $17,331,431 $16,137,937
Income (loss) 
  before gains 
  on sales of
  assets and
  extraordinary 
  items              2,142,234     529,539    (465,069) (1,653,732) (2,904,684)
Net income (loss)    2,142,234     663,204   7,210,490  (1,653,732) (2,904,684)
Net income (loss)
 per Limited 
 Partnership
 Interest                25.65        7.94       86.32      (19.80)    (34.77)
Total assets        54,596,297  59,911,923  58,158,518  75,012,096  76,644,481
Mortgage notes
  payable           56,466,198  57,381,930  55,919,126  79,230,302  79,520,953
Distributions per
  Limited Partner-
  ship Interest (A)      77.50        5.00        None        None        None

(A) These amounts include a distribution of original capital of $29 per Limited
Partnership Interest for 1995.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
-----------------------------------------------------------------------
Results of Operations
---------------------

Operations
----------

Summary of Operations
---------------------

The Pinebrook Apartments, which was owned by a joint venture consisting of
Balcor Realty Investors 85 - Series I A Real Estate Limited Partnership (the
"Partnership") and an affiliate, was sold in 1995. The Partnership recognized
its share of the gain on sale which is the primary reason the Partnership
generated higher net income in 1995 as compared to 1994. In addition, during
1995 certain of the Partnership's properties had improved operations. As a
result of the foreclosure of Suncrest Village Apartments and sale of Sahara
Palms Apartments in 1993, the Partnership recognized gains which resulted in
significantly higher net income in 1993 as compared to 1994. Further discussion
of the Partnership's operations is summarized below.

1995 Compared to 1994
---------------------

Increased rental rates during 1995 at most of the Partnership's properties
resulted in increased rental and service income.

Interest income on short-term investments increased in 1995 as compared to 1994
due to an increase in interest rates earned on short-term investments.

Pinebrook Apartments, in which the Partnership held a minority joint venture
interest, was sold during February 1995. As a result of the gain recognized in
connection with the sale, the Partnership recognized income from participation
in joint ventures with affiliates during 1995 as compared to a loss in 1994.

The Partnership incurred legal, consulting, printing and postage costs in
connection with a tender offer during the fourth quarter of 1995. As a result,
administrative expenses increased during 1995 as compared to 1994.

North Hill Apartments is owned by a joint venture consisting of the Partnership
and an affiliate. In connection with the December 1994 North Hill Apartments
refinancing, the joint venture received a refund relating to prior year
payments made to Mutual Benefit Life Insurance Company representing its 1%
guaranty fee on the original North Hills Apartments mortgage loan. As a result,
the joint venture recognized a $534,659 extraordinary gain on forgiveness of
debt in 1994, of which $133,665 represents the Partnership's share.

1994 Compared to 1993
---------------------
As a result of the Suncrest Village Apartments foreclosure in May 1993 and the
Sahara Palms Apartments sale in July 1993, rental and service income, interest
expense, depreciation expense, property operating expense, real estate taxes
and property management fees decreased during 1994 as compared to 1993.
<PAGE>
Increased rental and/or occupancy rates during 1994 at all of the Partnership's
seven remaining properties partially offset the decrease in rental and service
income due to the 1993 property dispositions.

The increase in cash flow from the Partnership's properties, the proceeds from
the July 1993 sale of Sahara Palms Apartments, and the net proceeds received in
connection with the refinancing of the mortgage loan on Heather Ridge
Apartments in July 1994 caused the Partnership's cash balances to increase.
This, together with higher interest rates, resulted in an increase in interest
income on short-term investments during 1994 as compared to 1993.

Participation in loss of joint ventures with affiliates increased in 1994 as
compared to 1993 due to increased interest expense on the Pinebrook Apartments
mortgage loan.

In addition to the decrease resulting from the 1993 property dispositions,
interest expense decreased during 1994 as compared to 1993 due to the
refinancing of the Timberlake - Phase I Apartments mortgage loan in October
1993, as well as the contractual decrease in the interest rate on the Templeton
Park Apartments mortgage loan, effective December 1993. The decrease in
interest expense was partially offset by increased interest expense for the
Forest Ridge - Phase I and Heather Ridge loans due to higher principal balances
resulting from the refinancings during 1994. In conjunction with the 1994
Forest Ridge - Phase I and Heather Ridge refinancings, the remaining deferred
expenses were written-off and this combined with the amortization of expenses
related to the 1993 Forestwood and Timberlake - Phase I mortgage refinancings
caused amortization of deferred expenses to increase during 1994 as compared to
1993.

Property operating expense decreased during 1994 as compared to 1993 due to the
1993 property dispositions and maintenance and repairs expense incurred in 1993
at the Forestwood Apartments for which the Partnership received an insurance
reimbursement in 1994. However, increases in carpet replacement at Forest Ridge
- Phase I, Forestwood, Timberlake - Phase I and Willowbend apartment complexes
as well as higher insurance expense at all of the Partnership's properties
partially offset the decrease for 1994 as compared to 1993.

As a result of the sale of Sahara Palms Apartments in July 1993 and the
relinquishment of title through foreclosure of Suncrest Village Apartments in
May 1993, the Partnership recognized a gain on sale of property of $4,194,237
in 1993 and extraordinary gain on foreclosure of property of $3,118,578 in
1993, respectively.

In October 1993, the Partnership completed the refinancing of the Timberlake -
Phase I first mortgage loan, and obtained a new first mortgage loan from an
unaffiliated lender. The Partnership received a $362,744 discount from the
previous lender for prepayment of the mortgage note and consequently recognized
an extraordinary gain on debt forgiveness in 1993.

Liquidity and Capital Resources
-------------------------------

The cash position of the Partnership significantly decreased as of December 31,
1995 when compared to December 31, 1994, primarily due to special distributions
paid to the Limited Partners in 1995. The Partnership's cash flow provided by
operating activities was generated primarily from the Partnership's properties,
and was partially offset by the payment of administrative expenses. The
<PAGE>
Partnership's net cash provided by investing activities consisted of a net
distribution from joint ventures with affiliates, comprised primarily of the
net proceeds received from the sale of the Pinebrook Apartments in which the
Partnership held a minority joint venture interest. Financing activities
consisted of distributions to Limited Partners, net proceeds from the
refinancing of the underlying mortgage loan on the Boulder Apartments, payment
of deferred expenses and funding of improvement escrows in connection with the
refinancing and principal payments on mortgage notes payable.

The Partnership classifies the cash flow performance of its properties as
either positive, a marginal deficit or a significant deficit, each after
consideration of debt service payments unless otherwise indicated. A deficit is
considered to be significant if it exceeds $250,000 annually or 20% of the
property's rental and service income. The Partnership defines cash flow
generated from its properties as an amount equal to the property's revenue
receipts less property related expenditures, which include debt service
payments. During 1995 and 1994, all seven of the Partnership's properties
generated positive cash flow. Of the remaining two properties in which the
Partnership holds minority joint venture interests, North Hill Apartments
generated positive cash flow while Seabrook Apartments generated a marginal
cash flow deficit during 1995 and 1994. Pinebrook Apartments, in which the
Partnership held a minority joint venture interest, was sold in February 1995
and generated a marginal cash flow deficit in both 1995 and 1994. As of
December 31, 1995, the occupancy rates of the Partnership's properties ranged
from 92% to 99%. 

While the cash flow of certain of the Partnership's properties has improved,
the General Partner continues to pursue a number of actions aimed at improving
the cash flow of the Partnership's properties including improving operating
performance and seeking rent increases where market conditions allow. 

The General Partner had previously advised the Limited Partners that its
strategy was to sell the Partnership's remaining assets over the next three to
four years.  The General Partner also stated that the timing of the liquidation
could be lengthened or shortened due to changes in market conditions, economic
factors, interest rates and unforeseen events.  Since November 1995, the
General Partner believes that the market for multifamily housing properties has
become increasingly favorable to sellers of these properties.  This belief is
based on the results of the sales and marketing activities of the Partnership
as described below and based upon the similar results of such activities by
various other partnerships affiliated with the Partnership.  These favorable
market conditions are in part attributable to the increasing strength of the
capital markets and the re-entry of REITs into the acquisition market.  Since
November 1995, the Partnership has sold one of its properties in which it held
a minority joint venture interest.  Of its remaining properties, the General
Partner (i) has entered into a contract to sell one of the properties; (ii) is
actively marketing one of the properties in which it holds a minority joint
venture interest for sale; and (iii) if the market remains favorable, intends
to begin actively marketing more of the remaining properties for sale.  If the
current market conditions for sales remain favorable and the General Partner
can obtain appropriate sales prices, the Partnership's liquidation strategy may
be accelerated.
<PAGE>
Each of the Partnership's properties is owned through the use of third-party
mortgage loan financing and, therefore, the Partnership is subject to the
financial obligations required by such loans. See Note 4 of Notes to Financial
Statements for information concerning outstanding balances, maturity dates,
interest rates, and other items related to each of these mortgage loans. No
mortgage loan financing matures during 1996. During 1997, approximately
$5,714,000 of mortgage loan financing collateralized by the Willow Bend
Apartments matures. The Partnership has a contract to sell the Willow Bend
Apartments with a scheduled closing date of March 29, 1996.

In May 1995, the Boulder Springs mortgage loan was refinanced. Proceeds from
the new loan of $8,140,000 were used to repay the existing loan of $7,786,649.
See Note 4 of Notes to the Financial Statements for additional information.

The Pinebrook Apartments was owned by a joint venture consisting of the
Partnership and an affiliate ("Joint Venture") . In February 1995, the Joint
Venture sold the property in an all cash sale for $6,140,000. From the
proceeds, $5,058,226 was paid to the third party mortgage holders in
satisfaction of the first, second and fourth mortgage loans. Additionally,
$716,729 was paid in satisfaction of the third mortgage note payable to
Pinebrook Limited Partnership, a separate joint venture consisting of the
Partnership and the affiliate. Total proceeds received from this transaction
were $871,599, of which $422,115 was the Partnership's share. See Note 4 of
Notes to the Financial Statements for additional information.

The Seabrook Apartments was owned by a joint venture ("Joint Venture")
consisting of the Partnership and two affiliates. In February 1996, the Joint
Venture sold the Seabrook Apartments in an all cash sale for $5,915,000. From
the proceeds, the Joint Venture paid the outstanding balance of the first
mortgage loan collateralized by the property of $5,081,898. Total proceeds
received from the sale were approximately $640,000, of which the Partnership's
share was approximately $100,000. See Note 12 of Notes to Financial Statements
and Item 1. Business for additional information.

In January 1996, the Partnership made a distribution of $620,228 ($7.50 per
Interest) to the holders of Limited Partnership Interests representing the
quarterly distribution for the fourth quarter of 1995. The Partnership
commenced distributions in the fourth quarter of 1994 and made four
distributions totaling $77.50 per Interest during 1995 and one distribution of
$5.00 during 1994. Distributions were comprised of $48.50 and $5.00 of Net Cash
Receipts during 1995 and 1994, respectively, and $29 of Net Cash Proceeds
during 1995. Including the January 1996 distribution, Limited Partners have
received cumulative cash distributions of $90.00 per $1,000 Interest as well as
certain tax benefits. Of this amount, $61.00 has been from Net Cash Receipts
and $29.00 has been from Net Cash Proceeds. The General Partner expects to
continue quarterly distributions to Limited Partners. However, the level of
future distributions, if available, will depend on cash flow from the
Partnership's remaining properties and proceeds from future property sales, as
to both of which there can be no assurances. In light of results to date and
current market conditions, the General Partner does not anticipate that
investors will recover all of their original investment.

In 1995, the Financial Accounting Standards Board issued Statement No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of". This statement has been adopted by the Partnership as of
January 1, 1995, and did not have a material impact on the financial position
or results of operations of the Partnership.
<PAGE>
Inflation has several types of potentially conflicting impacts on real estate
investments. Short-term inflation can increase real estate operating costs
which may or may not be recovered through increased rents and/or sales prices,
depending on general or local economic conditions. In the long-term, inflation
can be expected to increase operating costs and replacement costs and may lead
to increased rental revenues and real estate values.

Item 8. Financial Statements and Supplementary Data
---------------------------------------------------

See Index to Financial Statements and Financial Statement Schedule in this
Form 10-K.

The supplemental financial information specified by Item 302 of Regulation S-K
is not applicable.

The net effect of the differences between the financial statements and the tax
returns is summarized as follows:


                        December 31, 1995          December 31, 1994    
                    -------------------------    -------------------------
                      Financial        Tax        Financial        Tax 
                      Statements     Returns     Statements      Returns 
                    -------------   ---------    -----------  ------------
Total assets          $54,596,297 $42,014,617    $59,911,923   $48,360,939
Partners' capital
  (deficit) accounts:
    General Partner      (694,758) (1,502,386)      (716,180)   (1,589,662)
    Limited Partners   (2,459,643)(16,080,496)     1,828,563   (11,454,275)
Net income (loss):
  General Partner          21,422      87,276          6,632       (32,039)
  Limited Partners      2,120,812   1,782,797        656,572    (1,293,926)
Per Limited Part-
  nership Interest          25.65       21.56           7.94        (15.65)


Item 9. Changes in and Disagreements with Accountants on Accounting and
-----------------------------------------------------------------------
Financial Disclosure
--------------------

There have been no changes in or disagreements with accountants on any matter
of accounting principles, practices or financial statement disclosure.
<PAGE>
                                   PART III

Item 10. Directors and Executive Officers of the Registrant
-----------------------------------------------------------

(a) Neither the Registrant nor Balcor Partners-XVI, its General Partner, has
either a Board of Directors or a Board of Advisors.

(b, c & e) The names, ages and business experiences of the executive officers
and significant employees of the General Partner of the Registrant are as
follows:


            TITLE                            OFFICERS
            -----                            --------

Chairman, President and Chief           Thomas E. Meador
   Executive Officer
Senior Vice President                   Alexander J. Darragh
Senior Vice President                   Josette V. Goldberg
Senior Vice President                   Alan G. Lieberman
Senior Vice President, Chief            Brian D. Parker
   Financial Officer, Treasurer
   and Assistant Secretary                           
Senior Vice President                   John K. Powell, Jr.

Thomas E. Meador (July 1947) joined Balcor in July 1979. He is Chairman,
President and Chief Executive Officer and has responsibility for all ongoing
day-to-day activities at Balcor. He is a Director of The Balcor Company. He is
also Senior Vice President of American Express Company and is responsible for
its real estate operations worldwide. Prior to joining Balcor, Mr. Meador was
employed at the Harris Trust and Savings Bank in the commercial real estate
division where he was involved in various lending activities. Mr. Meador
received his M.B.A. degree from the Indiana University Graduate School of
Business.

Alexander J. Darragh (February 1955) joined Balcor in September 1988 and is
responsible for due diligence analysis and real estate advisory services for
Balcor and American Express Company. He also has supervisory responsibility for
Balcor's environmental matters.  Mr. Darragh received masters' degrees in Urban
Geography from Queen's University and in Urban Planning from Northwestern
University.

Josette V. Goldberg (April 1957) joined Balcor in January 1985 and has primary
responsibility for all human resources matters. In addition, she has
supervisory responsibility for Balcor's MIS functions. Ms. Goldberg has been
designated as a Senior Human Resources Professional (SHRP).

Alan G. Lieberman (June 1959) joined Balcor in May 1983 and is responsible for
Balcor's property sales and capital markets functions. Mr. Lieberman is a
Certified Public Accountant.

Brian D. Parker (June 1951) joined Balcor in March 1986 and, as Chief Financial
Officer and Chief Accounting Officer, is responsible for Balcor's financial,
legal and treasury functions. He is a Director of The Balcor Company.  Mr.
Parker is a Certified Public Accountant and holds an M.S. degree in Accountancy
from DePaul University.
<PAGE>
John K. Powell Jr. (June 1950) joined Balcor in September 1985 and is
responsible for portfolio and asset management matters relating to Balcor's
partnerships. Mr. Powell also has supervisory responsibility for Balcor's risk
management and investor services functions.  He received a Master of Planning
degree from the University of Virginia.  Mr. Powell has been designated a
Certified Real Estate Financier by the National Society for Real Estate Finance
and is a full member of the Urban Land Institute.

(d) There is no family relationship between any of the foregoing officers.

(f) None of the foregoing officers or employees are currently involved in any
material legal proceedings nor were any such proceedings terminated during the
fourth quarter of 1995.

Item 11. Executive Compensation
-------------------------------

The Registrant has not paid and does not propose to pay any remuneration to the
executive officers and directors of the General Partner. Certain of these
officers receive compensation from The Balcor Company (but not from the
Registrant) for services performed for various affiliated entities, which may
include services performed for the Registrant. However, the General Partner
believes that any such compensation attributable to services performed for the
Registrant is immaterial to the Registrant. See Note 8 of Notes to Financial
Statements for the information relating to transactions with affiliates.

Item 12. Security Ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------

(a) No person owns of record or is known by the Registrant to own beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant.

(b) Balcor Partners-XVI and its officers and partners own as a group the
following Limited Partnership Interests of the Registrant:

                                  Amount
                               Beneficially
         Title of Class            Owned       Percent of Class
         --------------        -------------   ----------------
         Limited Partnership
           Interests           880 Interests        1.06%

Relatives and affiliates of the officers and partners of the General Partner
own an additional fifteen Interests.

(c) The Registrant is not aware of any arrangements, the operation of which may
result in a change of control of the Registrant.

Item 13. Certain Relationships and Related Transactions
-------------------------------------------------------
<PAGE>
(a & b) See Note 8 of Notes to Financial Statements for additional information
relating to transactions with affiliates.

See Note 3 of Notes to Financial Statements for information relating to the
Partnership Agreement and the allocation of distributions and profits and
losses.

(c) No management person is indebted to the Registrant.

(d) The Registrant has no outstanding agreements with any promoters.
<PAGE>
                                    PART IV

Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
------------------------------------------------------------------------

(a)
(1 & 2) See Index to Financial Statements and Financial Statement Schedule in
this Form 10-K.

(3) Exhibits:

(3) The Amended and Restated Agreement and Certificate of Limited Partnership
is set forth as Exhibit 3 to Amendment No. 1 to the Registrant's Registration
Statement on Form S-11 dated November 29, 1984 (Registration No. 2-92777), and
said Agreement and Certificate is incorporated herein by reference.

(4) The Subscription Agreement as set forth as Exhibit 4.1 to Amendment No. 1
to Registrant's Registration Statement on Form S-11 dated November 29, 1984
(Registration No. 2-92777) and Form of Confirmation regarding Interests in the
Partnership as set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q
for the quarter ended June 30, 1992 (Commission File No. 0-14353) are
incorporated herein by reference.

(27) Financial Data Schedule of the Registrant for 1995 is attached hereto.

(b) Reports on Form 8-K: There were no reports filed on Form 8-K during the
quarter ended December 31, 1995.

(c) Exhibits: See Item 14(a)(3) above.

(d) Financial Statement Schedule: See Index to Financial Statements and
Financial Statement Schedule in this Form 10-K.
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                         BALCOR REALTY INVESTORS 85-SERIES I
                         A REAL ESTATE LIMITED PARTNERSHIP


                         By: /s/Brian D. Parker
                             --------------------------------
                             Brian D. Parker
                             Senior Vice President, and Chief
                             Financial Officer (Principal 
                             Accounting and Financial Officer)
                             of Balcor Partners-XVI,
                             the General Partner

Date: March 28, 1996
      --------------

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

       Signature                   Title                        Date    
----------------------   ------------------------------     ---------------

                         President and Chief Executive
                         Officer (Principal Executive
                         Officer) of Balcor Partners-
/s/Thomas E. Meador      XVI, the General Partner           March 28, 1996
--------------------                                        ---------------
  Thomas E. Meador

                         Senior Vice President, and
                         Chief Financial Officer 
                         (Principal Accounting
                         and Financial Officer) of
                         Balcor Partners-XVI, the
                         General Partner
 /s/Brian D. Parker                                         March 28, 1996
--------------------                                        ---------------
    Brian D. Parker
<PAGE>
        INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE


Report of Independent Accountants

Financial Statements:

Balance Sheets, December 31, 1995 and 1994

Statements of Partners' Capital, for the years ended December 31, 1995, 1994
and 1993

Statements of Income and Expenses, for the years ended December 31, 1995, 1994
and 1993

Statements of Cash Flows, for the years ended December 31, 1995, 1994 and 1993

Notes to Financial Statements

Financial Statement Schedule:

III - Real Estate and Accumulated Depreciation, as of December 31, 1995


Financial Statement Schedules, other than that listed, are omitted for the
reason that they are inapplicable or equivalent information has been included
elsewhere herein.
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS


To the Partners of
Balcor Realty Investors 85-Series I
A Real Estate Limited Partnership:

We have audited the financial statements and the financial statement schedule
of Balcor Realty Investors 85 - Series I A Real Estate Limited Partnership (An
Illinois Limited Partnership) as listed in the index of this Form 10-K. These
financial statements and financial statement schedule are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements and financial statement schedule based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Balcor Realty Investors
85-Series I A Real Estate Limited Partnership at December 31, 1995 and 1994,
and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.









                                   COOPERS & LYBRAND L.L.P.


Chicago, Illinois
March  23, 1996
<PAGE>
                      BALCOR REALTY INVESTORS 85-SERIES I
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                                BALANCE SHEETS
                          December 31, 1995 and 1994

                                    ASSETS

                                                  1995            1994
                                               -----------     -----------
Cash and cash equivalents                    $  2,369,231    $  6,475,393
Accounts and accrued interest receivable           19,630          28,827
Escrow deposits                                 1,652,919       1,140,420
Prepaid expenses                                  158,090
Deferred expenses, net of accumulated
  amortization of $302,544 in 1995 
  and $213,273 in 1994                          1,027,098         973,153
                                             -------------   -------------
                                                5,226,968       8,617,793
                                             -------------   -------------
Investment in real estate:
  Land                                         12,380,326      12,380,326
  Buildings and improvements                   65,940,832      65,940,832
                                             -------------   -------------
                                               78,321,158      78,321,158
  Less accumulated depreciation                28,951,829      27,027,028
                                             -------------   -------------
Investment in real estate, net of
  accumulated depreciation                     49,369,329      51,294,130
                                             -------------   -------------
                                             $ 54,596,297    $ 59,911,923
                                             =============   =============

                  LIABILITIES AND PARTNERS' (DEFICIT) CAPITAL

Accounts payable                             $    218,237    $    133,743
Due to affiliates                                  24,501          75,413
Accrued liabilities, principally 
  real estate taxes                               330,103         366,628
Security deposits                                 262,183         288,084
Losses in excess of investments in joint
   ventures with affiliates                       449,476         553,742
Mortgage notes payable                         56,466,198      57,381,930
                                             -------------   -------------
     Total liabilities                         57,750,698      58,799,540
                                             -------------   -------------
Limited Partners' (deficit) capital
  (82,697 Interests issued and outstanding)    (2,459,643)      1,828,563

General Partner's deficit                        (694,758)       (716,180)
                                             -------------   -------------
     Total partners' (deficit) capital         (3,154,401)      1,112,383
                                             -------------   -------------
                                             $ 54,596,297    $ 59,911,923
                                             =============   =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
                      BALCOR REALTY INVESTORS 85-SERIES I
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                  STATEMENTS OF PARTNERS' (DEFICIT) CAPITAL 
             for the years ended December 31, 1995, 1994 and 1993


                                   Partners' (Deficit) Capital Accounts
                                -------------- ------------- -------------
                                                  General       Limited
                                     Total        Partner       Partners
                                -------------- ------------- -------------

Balance at December 31, 1992    $  (6,347,826) $   (794,917) $ (5,552,909)

Net income for the year 
   ended December 31, 1993          7,210,490        72,105     7,138,385
                                -------------- ------------- -------------
Balance at December 31, 1993          862,664      (722,812)    1,585,476

Cash distributions (A)               (413,485)                   (413,485)

Net income for the year 
   ended December 31, 1994            663,204         6,632       656,572
                                -------------- ------------- -------------
Balance at December 31, 1994        1,112,383      (716,180)    1,828,563

Cash distributions (A)             (6,409,018)                 (6,409,018)

Net income for the year 
   ended December 31, 1995          2,142,234        21,422     2,120,812
                                -------------- ------------- -------------
Balance at December 31, 1995    $  (3,154,401) $   (694,758) $ (2,459,643)
                                ============== ============= =============


(A) Summary of cash distributions per Interest:

                                         1995          1994       1993
                                -------------- ------------- -------------
                 First Quarter  $        5.00          None         None 
                 Second Quarter          5.00          None         None 
                 Third Quarter          45.00          None         None 
                 Fourth Quarter         22.50  $       5.00         None 

The accompanying notes are an integral part of the financial statements.
<PAGE>
                      BALCOR REALTY INVESTORS 85-SERIES I
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                       STATEMENTS OF INCOME AND EXPENSES
             for the years ended December 31, 1995, 1994 and 1993

                                     1995          1994          1993
                                --------------  ------------  ------------
Income:
  Rental and service            $  15,525,153  $ 14,972,425  $ 15,565,175
  Interest on short-term 
    investments                       325,145       233,282       113,266
  Participation in income 
    (losses) of joint ventures
    with affiliates before
    extraordinary item                652,718      (317,632)     (194,031)
                                -------------- ------------- -------------
    Total income                   16,503,016    14,888,075    15,484,410
                                -------------- ------------- -------------
Expenses:
  Interest on mortgage 
    notes payable                   4,768,731     4,969,653     5,853,947
  Depreciation                      1,924,801     1,925,074     2,216,451
  Amortization of deferred 
    expenses                          156,022       154,912        96,490
  Property operating                5,179,036     4,985,291     5,371,265
  Real estate taxes                   923,313       991,624     1,051,338
  Property management fees            765,223       747,795       778,849
  Administrative                      643,656       584,187       581,139
                                -------------- ------------- -------------
    Total expenses                 14,360,782    14,358,536    15,949,479
                                -------------- ------------- -------------
Income (loss) before gain on 
  sale of property and 
  extraordinary items               2,142,234       529,539      (465,069)
Gain on sale of property                                        4,194,237
                                -------------- ------------- -------------
Income before
  extraordinary items               2,142,234       529,539     3,729,168
                                -------------- ------------- -------------
Extraordinary items:
  Gain on forgiveness of debt                                     362,744
  Gain on foreclosure of property                               3,118,578
  Participation in gain on
    forgiveness of debt from 
    joint venture with 
    an affiliate                                    133,665
                                               ------------- -------------
    Total extraordinary items                       133,665     3,481,322
                                -------------- ------------- -------------
Net income                      $   2,142,234  $    663,204  $  7,210,490
                                ============== ============= =============

The accompanying notes are an integral part of the financial statements.
<PAGE>
                      BALCOR REALTY INVESTORS 85-SERIES I
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                       STATEMENTS OF INCOME AND EXPENSES
             for the years ended December 31, 1995, 1994 and 1993
                                  (Continued)

                                     1995          1994          1993
                                -------------- ------------- -------------
Income before extraordinary items
  allocated to General Partner  $      21,422  $      5,295  $     37,292
                                ============== ============= =============
Income before extraordinary items
  allocated to Limited Partners $   2,120,812  $    524,244  $  3,691,876
                                ============== ============= =============
Income before extraordinary items
  per Limited Partnership 
  Interest (82,697 issued
  and outstanding)              $       25.65  $       6.34  $      44.64
                                ============== ============= =============
Extraordinary items allocated to
  General Partner                        NONE  $      1,337  $     34,813
                                ============== ============= =============
Extraordinary items allocated to
  Limited Partners                       NONE  $    132,328  $  3,446,509
                                ============== ============= =============
Extraordinary items per Limited
  Partnership Interest
  (82,697 issued and
  outstanding)                           NONE  $       1.60  $      41.68
                                ============== ============= =============
Net income allocated to 
  General Partner               $      21,422  $      6,632  $     72,105
                                ============== ============= =============
Net income allocated to 
  Limited Partners              $   2,120,812  $    656,572  $  7,138,385
                                ============== ============= =============
Net income per Limited 
  Partnership Interest (82,697
  issued and outstanding)       $       25.65  $       7.94  $      86.32
                                ============== ============= =============

The accompanying notes are an integral part of the financial statements.
<PAGE>
                      BALCOR REALTY INVESTORS 85-SERIES I
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                           STATEMENTS OF CASH FLOWS
             for the years ended December 31, 1995, 1994 and 1993

                                     1995          1994          1993
                                -------------- ------------- -------------
Operating activities:
  Net income                    $   2,142,234  $    663,204  $  7,210,490
  Adjustments to reconcile 
    net income to net cash 
    provided by operating
    activities:
      Gain on forgiveness 
        of debt                                                  (362,744)
      Gain on foreclosure
        of property                                            (3,118,578)
      Gain on sale of property                                 (4,194,237)
      Participation in (income)
        losses of joint
        ventures with 
        affiliates before
        extraordinary item           (652,718)      317,632       194,031
      Participation in gain on
        forgiveness of debt 
        from joint venture
        with an affiliate                          (133,665)
      Depreciation of 
        properties                  1,924,801     1,925,074     2,216,451
      Amortization of deferred 
        expenses                      156,022       154,912        96,490
      Net change in:
      Accounts and accrued 
        interest receivable             9,197       426,996      (203,405)
      Escrow deposits                (233,177)       29,178      (360,225)
      Prepaid expenses               (158,090)
      Accounts payable                 84,494        29,230      (244,111)
      Due to affiliates               (50,912)       (4,149)       (4,061)
      Accrued liabilities             (36,525)       (2,758)     (494,386)
      Security deposits               (25,901)      (11,015)      (78,091)
                                -------------- ------------- -------------
  Net cash provided by
    operating activities            3,159,425     3,394,639       657,624
                                -------------- ------------- -------------
Investing activities:
  Capital contributions 
    to joint ventures
    with affiliates                   (42,706)     (280,003)      (49,751)
  Distributions from joint 
    ventures with affiliates          591,158       125,610        91,904
  Improvements to properties                                     (118,767)
  Proceeds from sale of
    real estate                                                13,200,000
  Payment of selling costs                                        (99,559)
                                -------------- ------------- -------------
  Net cash provided by or used
    in investing activities           548,452      (154,393)   13,023,827
                                -------------- ------------- -------------

The accompanying notes are an integral part of the financial statements.
<PAGE>
                      BALCOR REALTY INVESTORS 85-SERIES I
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                           STATEMENTS OF CASH FLOWS
             for the years ended December 31, 1995, 1994 and 1993
                                  (Continued)

                                     1995          1994          1993
                                -------------- ------------- -------------
Financing activities:
  Distributions to
    Limited Partners               (6,409,018)     (413,485)
  Repayment of mortgage 
    note payable                   (7,786,649)  (10,563,000)  (29,604,431)
  Proceeds from issuance of 
    mortgage notes payable          8,140,000    12,890,000    17,600,000
  Principal payments on 
    mortgage notes payable         (1,269,083)     (864,196)     (465,471)
  Disbursements from 
    improvement escrows                89,678
  Payment of deferred expenses       (209,967)     (396,203)     (684,351)
  Funding of improvement 
    escrows                          (369,000)     (547,760)
                                -------------- ------------- -------------
  Net cash used in or provided
    by financing activities        (7,814,039)      105,356   (13,154,253)
                                -------------- ------------- -------------
Net change in cash and 
  cash equivalents                 (4,106,162)    3,345,602       527,198
Cash and cash equivalents at 
  beginning of period               6,475,393     3,129,791     2,602,593
                                -------------- ------------- -------------
Cash and cash equivalents
  at end of period              $   2,369,231  $  6,475,393  $  3,129,791
                                ============== ============= =============

The accompanying notes are an integral part of the financial statements.
<PAGE>
                      BALCOR REALTY INVESTORS 85-SERIES I
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                         NOTES TO FINANCIAL STATEMENTS


1.       Nature of the Partnership's Business:

Balcor Realty Investors 85-Series I A Real Estate Limited Partnership is
engaged principally in the operation of residential real estate located in
various markets within the United States.

2. Accounting Policies:

(a) The preparation of the financial statements in conformity with generally
accepted accounting principles requires the General Partner to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could vary from those estimates.

(b) Depreciation expense is computed using the straight-line method. Rates used
in the determination of depreciation are based upon the following estimated
useful lives:

                                                    Years
                                                    -----

               Buildings and improvements             30
               Furniture and fixtures                  5

Maintenance and repairs are charged to expense when incurred. Expenditures for
improvements are charged to the related asset account.

Interest incurred while properties were under construction was capitalized.

When properties are sold, the related costs and accumulated depreciation are
removed from the respective accounts. Any gain or loss on disposition is
recognized in accordance with generally accepted accounting principles. 

(c) Effective January 1, 1995 the Partnership adopted Statement of Financial
Accounting Standards, No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of". Under SFAS 121, the
Partnership records its investments in real estate at the lower of cost or fair
value, and periodically assesses, but not less than on an annual basis,
possible impairment to the value of its properties. The General Partner
estimates the fair value of its properties by dividing the property's expected
net operating income by a risk adjusted rate of return which considers economic
and demographic conditions in the market. In the event the General Partner
determines an impairment in value has occurred, and the carrying amount of the
real estate asset will not be recovered, a provision is recorded to reduce the
carrying basis of the property to its estimated fair value. The General Partner
considers  the method referred to above to result in a reasonable measurement
of a property's fair value, unless other factors affecting the property's value
indicate otherwise.
<PAGE>
(d) Investment in joint ventures with affiliates represents the Partnership's
25% and 15.4% interests in the North Hill Apartments and Seabrook Apartments,
respectively at December 31, 1995 and also included a 48.4% interest in
Pinebrook Apartments at December 31, 1994, all of which are recorded under the
equity method of accounting. Under this method, the Partnership records its
initial investment at cost and adjusts its investment account for additional
capital contributions, distributions and its share of joint venture income or
loss. Depreciation recognized in connection with the ownership of real estate
by the joint ventures has resulted in the Partnership's share of cumulative
losses exceeding the net amounts invested in the joint ventures. This has
resulted in the classification of the investment as "Losses in excess of
investments in joint ventures with affiliates" in the accompanying financial
statements.

(e) Deferred expenses consist of loan modification and financing fees which are
amortized over the terms of the respective agreements.

(f) The Financial Accounting Standard Board's Statement No. 107, "Disclosures
About Fair Value of Financial Instruments", requires disclosure of fair value
information about financial instruments for which it is practicable to estimate
that value. Since quoted market prices are not available for the Partnership's
financial instruments, fair values have been based on estimates using present
value techniques. These techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be substantiated
by comparison to independent markets and, in many cases, may not be realized in
immediate settlement of the instrument. Statement No. 107 does not apply to all
balance sheet items and excludes certain financial instruments and all
non-financial instruments such as real estate and investment in joint ventures
from its disclosure requirements.

(g) Revenue is recognized on an accrual basis in accordance with generally
accepted accounting principles.

(h) Cash and cash equivalents include all unrestricted highly liquid
investments with an original maturity of three months or less when purchased.

(i) The Partnership is not liable for Federal income taxes and each partner
recognizes his proportionate share of the Partnership income or loss in his tax
return; therefore no provision for income taxes is made in the financial
statements of the Partnership.

(j) A reclassification has been made to the previously reported 1994 and 1993
financial statements to conform with the classification used in 1995. This
reclassification has not changed the 1994 and 1993 results.

3. Partnership Agreement:

The Partnership was organized on August 1, 1983. The Partnership Agreement
provides for Balcor Partners-XVI to be the General Partner and for the
admission of Limited Partners through the sale of up to 100,000 Limited
Partnership Interests at $1,000 per Interest, 82,697 of which were sold through
April 30, 1985, the termination date of the offering.

The Partnership Agreement generally provides that the General Partner will be
allocated 1% of the profits and losses. One hundred percent of Net Cash
Receipts available for distribution shall be distributed to the holders of
<PAGE>
Interests in proportion to their participating percentages as of the record
date for such distributions. However, there shall be accrued for the benefit of
the General Partner as its distributive share from operations, an amount
equivalent to approximately 1% of the total Net Cash Receipts being
distributed, which will be paid only out of distributed Net Cash Proceeds in
excess of total Adjusted Original Capital plus a 6% Cumulative Distribution.
Under certain circumstances, the General Partner may participate in the Net
Cash Proceeds of the sale or refinancing of Partnership properties. The General
Partner's participation is limited to 15% of excess Net Cash Proceeds after the
return of Original Capital plus a Cumulative Distribution of 6% to the holders
of Interests, as defined in the Partnership Agreement.

4. Mortgage Notes Payable:

Mortgage notes payable at December 31, 1995 and 1994 consisted of the
following:

                   Carrying    Carrying Current Final
Property           Amount of   Amount of  Inter- Matur- Current  Estimated
Pledged as          Notes at   Notes at    est   ity    Monthly  Balloon
Collateral          12/31/95   12/31/94   Rate  Date    Payment  Payment
--------------     ---------- ---------- ------ ------  -------- ----------
Apartment Complexes:
Boulder Springs(A) $8,097,672 $7,813,574   7.590% 2002   $57,419 $7,485,000
Forest Ridge
 Phase I (B)        7,613,575  7,668,517   8.963% 2001    61,671  7,206,000
Forestwood          5,790,811  5,836,145   9.130% 2001    48,026  5,465,000
Heather Ridge (C)   5,174,909  5,212,157   8.950% 2001    41,653  4,872,000
Templeton Park (D) 12,512,165 13,385,348   6.381% 2016    97,701       None
Timberlake Phase I 11,467,036 11,579,411   7.750% 2003    83,820 10,210,000
Willow Bend         5,810,030  5,886,778   9.500% 1997    53,230  5,714,000
                   ---------- ---------- 

Total             $56,466,198$57,381,930    
                  =========== ==========

(A) In May 1995, this loan was refinanced. The interest rate decreased 
from 12.875% to 7.59%, the maturity date was extended from June 1995 to June
2002, and the monthly payment decreased from $90,457 to $57,419. A portion of
the proceeds from the new $8,140,000 first mortgage loan was used to repay the
existing first mortgage loan balance of $7,786,649.

(B) In July 1994, this loan was refinanced. The interest rate decreased from
9.025% to 8.963%, the maturity date was extended from November 1994 to August
2001 and the monthly payments increased from $50,698 to $61,671. A portion of
the proceeds from the new $7,690,000 first mortgage loan was used to repay the
existing first mortgage loan of $6,741,000.

(C) In July 1994, this loan was refinanced. The interest rate decreased from
9.025% to 8.95%, the maturity date was extended from November 1994 to August
2001 and the monthly payments increased from $28,745 to $41,653. A portion of
the proceeds from the new $5,200,000 first mortgage loan was used to repay the
existing first mortgage loan of $3,822,000.

(D) In accordance with the 1989 loan modification, the interest rate will be
adjusted on certain "adjustment dates". The next adjustment date is June 1,
<PAGE>
1998 with subsequent adjustments every five years thereafter. In addition, 50%
of property cash flow must be paid annually and will be applied against the
outstanding principal on the loan. Upon the sale or refinancing of the
property, the lender will participate in a percentage of the proceeds in excess
of the outstanding mortgage debt. 

During 1995, 1994 and 1993, the Partnership incurred interest expense on
mortgage notes payable to unaffiliated parties of $4,768,731, $4,969,653 and
$5,853,947 and paid interest expense of $4,768,731, $4,969,653 and $6,213,241,
respectively.

The Partnership's loans described above all require current monthly payments of
principal and interest.

Real estate with an aggregate carrying value of $49,369,329 at December 31,
1995 was pledged as collateral for repayment of mortgage loans.

Five-year scheduled maturities of the mortgage notes payable are approximately
as follows:

                         1996           $  830,000
                         1997            6,503,000
                         1998              887,000
                         1999              875,000
                         2000              982,000

5. Management Agreements:

As of December 31, 1995, all of the properties owned by the Partnership are
managed by a third-party management company. These management agreements
provide for annual fees of 5% of gross operating receipts.

6. Investment in Joint Ventures with Affiliates:

The Partnership owned a 48.4% joint venture interest in Pinebrook Apartments
which was sold in February 1995.  As of December 31, 1995, the Partnership owns
25% and 15.4% joint venture interests in North Hill Apartments and Seabrook
Apartments, respectively. The joint venturers are affiliates of the Partnership
with investment objectives similar to those of the Partnership. During 1995 and
1993, the Partnership received net capital distributions of $548,452 and
$42,153, respectively and during 1994, the Partnership made net capital
contributions of $154,393.

Seabrook Apartments was acquired by a joint venture ("Joint Venture")
consisting of the Partnership and two affiliates. In February 1996, the Joint
Venture sold the property for a sale price of $5,915,000. See Note 12. for
additional information. 

Pinebrook Apartments was acquired by a joint venture ("Joint Venture")
consisting of the Partnership and an affiliate. The Partnership and the
affiliate held participating percentages in the Joint Venture of 48.43% and
51.57%, respectively. In February 1995, the Joint Venture sold the property for
a sale price of $6,140,000. From the proceeds of the sale, the Joint 
<PAGE>
Venture paid $5,058,226 to the third party mortgage holders in full
satisfaction of the outstanding amount of the first, second and fourth mortgage
loans, as well as a brokerage commission and other closing costs. Additionally,
the Joint Venture paid approximately $716,729 to Pinebrook Limited Partnership
in full satisfaction of the outstanding amount of its loan. The Joint Venture
recognized a gain of $1,814,970 in 1995 of which $780,279 is the Partnership's
share. The Partnership's share of the gain is included in "Participation in
income of joint ventures with affiliates" and is partially offset by the
Partnership's share of operating losses through the sale date. The Joint
Venture received total proceeds of $871,599 from this transaction of which
$422,115 was the Partnership's share.

North Hill Apartments is owned by a joint venture ("Joint Venture") in which
the Partnership and an affiliate have participating percentages of 25% and 75%,
respectively. The $18,700,000 tax-exempt bond issue which funded the first
mortgage financing collateralized by the property was in technical default due
to the insolvency of the guarantor of the bonds. In April 1993, the Joint
Venture and the trustee for the bondholders entered into an agreement in which
the loan was modified and the trustee agreed to forebear from commencing
foreclosure proceedings while the Joint Venture sought alternate financing. In
December 1994, the bonds which funded the previous North Hill Apartments
mortgage loan were refinanced. The interest rate increased from 6.75% to 8.09%
and the maturity date was extended from December 1994 to December 2024. As a
condition of the new agreement, on January 1, 2005, at the discretion of both
the Joint Venture and the lender, the bonds will either be repaid or
remarketed. Under the terms of the new loan, monthly payments increased from
$105,188 to $124,920. The Joint Venture repaid the existing mortgage loan of
$18,700,000 with proceeds from the new mortgage loan of $16,795,600, which was
net of a discount of $84,400, proceeds of a $1,350,000 note to an unaffiliated
party, and Joint Venture cash reserves, which included amounts previously held
in escrow by the trustee which were refunded to the Joint Venture in
conjunction with the refinancing. See Note 10 of Notes to Financial Statements.

The $1,350,000 note to an unaffiliated party is non-interest bearing, is not
collateralized by the property, and will be repaid only to the extent net sales
proceeds exceed a certain predetermined level.

7. Tax Accounting:

The Partnership keeps its books in accordance with the Internal Revenue Code,
rules and regulations promulgated thereunder and existing interpretations
thereof. The accompanying financial statements, which are prepared in
accordance with generally accepted accounting principles, will differ from the
tax return due to the different treatment of various items as specified in the
Internal Revenue Code. The net effect of these accounting differences is that
the net income for 1995 in the financial statements is $272,161 more than the
tax income of the Partnership for the same period.
<PAGE>
8. Transactions with Affiliates:

Fees and expenses paid and payable by the Partnership to affiliates are:

                            Year Ended       Year Ended       Year Ended
                             12/31/95         12/31/94         12/31/93
                          --------------   --------------   --------------
                           Paid  Payable    Paid  Payable    Paid  Payable
                          ------ -------   ------ -------   ------ -------

Property management fees     None    None $738,965    None $790,418 $59,512
Reimbursement of
  expenses to General
  Partner at cost:
   Accounting             $43,360  $2,930   61,640  25,026   58,782   4,865
   Data processing         30,442   3,365   53,294  10,763   32,212   6,338
   Investor
     communications         6,695    None   20,271   8,230   18,986   1,571
   Legal                   21,029   2,121   12,118   4,920    9,444     782
   Other                    9,920     167   15,653   6,355   19,649   1,626
   Portfolio management   118,040  15,918   49,554  20,119   59,473   4,868

The Partnership participates in an insurance deductible program with other
affiliated partnerships in which the program pays claims up to the amount of
the deductible under the master insurance policies for its properties. The
program is administered by an affiliate of the General Partner who receives no
fee for administering the program, however, the General Partner is reimbursed
for expenses. The Partnership paid premiums to the deductible insurance program
of $105,794, $146,555 and $98,035 in 1995, 1994 and 1993, respectively.

Allegiance Realty Group, Inc., an affiliate of the General Partner, managed all
seven of the Partnership's properties until the affiliate was sold to a third
party in November 1994.

9. Property Sale:

During 1993, the Partnership sold the Sahara Palms Apartments for an all cash
sale price of $13,200,000. From the proceeds of the sale, the Partnership paid
$12,356,625 in full satisfaction of the property's mortgage loans. The basis of
the property was $8,906,204, net of accumulated depreciation of $4,134,055, and
the Partnership recognized a gain on the sale of the property of $4,194,237.
<PAGE>
10. Extraordinary Items:

(a) North Hill Apartments is owned by a joint venture consisting of the
Partnership and an affiliate. In connection with the December 1994 North Hill
Apartments refinancing, the joint venture received a refund of the escrow
account held by the trustee representing the amount which would have been paid
to Mutual Benefit Life Insurance Company as its 1% guaranty fee on the original
mortgage loan. As a result, the joint venture recognized a $534,659
extraordinary gain on forgiveness of debt in 1994, of which $133,665 represents
the Partnership's share.

(b) During 1993, title to the Suncrest Village Apartments was relinquished
through foreclosure. The Partnership wrote-off the mortgage loan balance of
$10,478,532, accrued real estate taxes of $140,710, security deposit of
$27,716, and the property basis of $7,528,380, net of accumulated depreciation
of $3,495,674. The Partnership recognized an extraordinary gain of $3,118,578
during 1993 for financial statement purposes.

(c) During 1993, the Partnership completed the refinancing of the $12,091,471
Timberlake - Phase I first mortgage loan and obtained a new first mortgage loan
from an unaffiliated lender in the amount of $11,700,000. The Partnership
received a $362,744 discount from the previous lender for prepayment of the
mortgage note which was recognized as an extraordinary gain on debt
forgiveness.

11. Fair Value of Financial Instruments:

The carrying amounts and fair values of the Partnership's financial instruments
at December 31, 1995 are as follows:

The carrying value of cash and cash equivalents, accounts and accrued interest
receivable and accounts payable approximates fair value.

Based on borrowing rates available to the Partnership at the end of 1995 for
mortgage loans with similar terms and maturities, the fair value of the
mortgage notes payable approximates the carrying value.

12. Subsequent Events: 

(a) In January 1996, the Partnership made a distribution of $620,228 ($7.50 per
Interest) to the holders of Limited Partnership Interests for the fourth
quarter of 1995.

(b) In February 1996, the Partnership and an affiliate of the Partnership
(together the "Joint Venture") sold the Seabrook Apartments for a sale price of
$5,915,000. The Partnership and the affiliate held effective ownership
interests of 15.43% and 84.57%, respectively from the proceeds of the sale, the
Joint Venture paid $5,081,898 in full satisfaction of the property's mortgage
loan. The basis of the property was $4,361,052, net of accumulated depreciation
of $2,625,226, and the Joint Venture recognized a gain on the sale of the
property of $1,363,431. The Partnership's share of the total proceeds was
approximately $100,000.

(c) On February 29, 1996, a proposed class action complaint was filed, Raymond
Masri vs. Lehman Brothers, Inc., et al., Case No. 96/103727 (Supreme Court of
the State of New York, County of New York). The Partnership, additional limited
partnerships which were sponsored by The Balcor Company, three limited
<PAGE>
partnerships sponsored by the predecessor of Lehman Brothers, Inc. (together
with the Partnership and the affiliated partnerships, the "Defendant
Partnerships"), Lehman Brothers, Inc. and Smith Barney Holdings, Inc. are
defendants. The complaint alleges, among other things, common law fraud and
deceit, negligent misrepresentation and breach of fiduciary duty relating to
the disclosure of information in the offering of limited partnership interests
in the Defendant Partnerships. The complaint seeks judgment for compensatory
damages equal to the amount invested in the Defendant Partnerships by the
proposed class plus interest accrued thereon; general damages for injuries
arising from the defendants' actions; recovery from the defendants of all
profits received by them as a result of their actions relating to the Defendant
Partnerships; exemplary damages; attorneys' fees and other costs.

The defendants intend to vigorously contest this action. No class has been
certified as of this date. Management of each of the defendants believes they
have meritorious defenses to contest the claims. It is not determinable at this
time whether or not an unfavorable decision in this action would have a
material adverse impact on the Registrant.
<PAGE>
                                  BALCOR REALTY INVESTORS 85-SERIES I
                                   A REAL ESTATE LIMITED PARTNERSHIP
                                   (An Illinois Limited Partnership)
                                        as of December 31, 1995

<TABLE>
                        SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

<CAPTION>
        Col. A                 Col. B          Col. C                        Col. D 
---------------------         --------  --------------------   ---------------------------------
                                            Initial Cost                Cost Adjustments
                                           to Partnership          Subsequent to Acquisition
                                        --------------------   ---------------------------------
                                                  Buildings               Carrying     Reduction
                               Encum-              and Im-     Improve-    Costs        of Basis
     Description              brances     Land    provements    ments       (a)           (b)
---------------------         -------   -------- ------------ ---------  ---------     ---------
<S>                             <C>  <C>          <C>          <C>      <C>         <C>
Boulder Springs Apts.,
  284 units in Chester-
  field County, VA              (e)  $   510,000  $ 9,075,000      None $   515,911  $  (160,228)
Forest Ridge Apts.-
  Phase I, 332 units
  in Arlington, TX              (e)    2,613,810    8,655,190  $ 49,065   1,340,138     (357,486)
Forestwood Apts., 272
  units in E. Baton
  Rouge Parish, LA              (e)    1,619,744    6,449,256   118,767   1,184,934     (426,027)
Heather Ridge Apts.,
  356 units in
  Oklahoma City, OK             (e)    1,346,000    9,632,000    48,217   1,732,505   (5,569,794) (g)
Templeton Park Apts.,
  496 units in
  Colorado Springs, CO          (e)    2,001,000   13,658,000      None   1,677,310     (344,256)
Timberlake Apts. I,
  480 units in Alta-
  monte Springs, FL             (e)    4,018,000   10,498,000      None   2,398,388   (1,693,410)
Willow Bend Apts.,
  208 units in Town
  & Country, MO                 (e)    1,500,000    5,925,000      None   1,003,705     (697,581)
                                      ----------   ----------  --------  ---------- ------------
    Total                            $13,608,554  $63,892,446  $216,049  $9,852,891 $ (9,248,782)
                                     ===========  ===========  ========  ========== ============
</TABLE>
See notes (a) through (g)
<PAGE>
                                  BALCOR REALTY INVESTORS 85-SERIES I
                                   A REAL ESTATE LIMITED PARTNERSHIP
                                   (An Illinois Limited Partnership)
                                        as of December 31, 1995

<TABLE>
                    SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Cont.)
<CAPTION>
       Col. A                          Col. E                 Col. F      Col. G   Col. H     Col. I
 ------------------       --------------------------------   --------    --------  ------ --------------
                               Gross Amounts at Which                                        Life Upon
                             Carried at Close of Period                                    Which Depre-
                          --------------------------------                                  ciation in
                                    Buildings               Accumulated    Date     Date   Latest Income
                                     and Im-       Total     Deprecia-   of Con-    Acq-     Statement
    Description             Land  provements       (c)(d)      tion(d)   struction uired    is Computed
-------------------       --------  ----------   ----------   ---------  --------- ------ --------------
<S>                    <C>         <C>         <C>          <C>             <C>    <C>           <C>
Boulder Springs Apts.,
  284 units in Chester-
  field County, VA     $   502,769 $ 9,437,914 $  9,940,683 $ 3,931,242     1986    5/84         (f)
Forest Ridge Apts.-
  Phase I, 332 units
  in Arlington, TX       2,544,132   9,756,585   12,300,717   4,234,125     1984   10/83         (f)
Forestwood Apts., 272
  units in E. Baton
  Rouge Parish, LA       1,546,252   7,400,422    8,946,674   3,114,198     1985    6/84         (f)
Heather Ridge Apts.,
  356 units in
  Oklahoma City, OK        711,948   6,476,980    7,188,928   3,514,556     1984   11/83         (f)
Templeton Park Apts.,
  496 units in
  Colorado Springs, CO   1,958,223  15,033,831   16,992,054   6,391,217     1984    1/84         (f)
Timberlake Apts. I,
  480 units in Alta-
  monte Springs, FL      3,742,819  11,478,159   15,220,978   5,199,243     1985    9/83         (f)
Willow Bend Apts.,
  208 units in Town
  & Country, MO          1,374,183   6,356,941    7,731,124   2,567,248     1986    1/85         (f)
                      ------------ ----------- ------------ -----------
    Total              $12,380,326 $65,940,832 $ 78,321,158 $28,951,829
                       =========== =========== ============ ===========
</TABLE>
See notes (a) through (g)
*
<PAGE>
                      BALCOR REALTY INVESTORS 85-SERIES I
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                             NOTES TO SCHEDULE III

(a) Consists of legal fees, appraisal fees, title costs, other related
professional fees and capitalized construction period interest.

(b) Guaranteed income earned on properties under the terms of certain
management and guarantee agreements was recorded by the Partnership as a
reduction of the basis of the property to which the guaranteed income related.

(c) The aggregate cost of land for Federal income tax purposes is $13,595,151
and the aggregate cost of buildings and improvements for Federal income tax
purposes is $63,571,184. The total of these is $77,166,335.

(d)                     Reconciliation of Real Estate
                        -----------------------------
                                       1995         1994         1993   
                                    ----------  -----------   ----------
Balance at beginning of year       $78,321,158  $78,321,158 $102,266,703
Additions during year:
  Improvements                            None         None      118,767
Deductions during year:
  Foreclosure of investment
    property                              None         None  (11,024,054)
  Cost of real estate sold                None         None  (13,040,258)
                                   ----------- ------------ ------------
    Balance at close of year       $78,321,158  $78,321,158 $ 78,321,158
                                  ============ ============ ============

                  Reconciliation of Accumulated Depreciation
                  ------------------------------------------
                                       1995         1994         1993   
                                    ----------  -----------   ----------
Balance at beginning of year       $27,027,028   25,101,954  $30,515,232
Depreciation expense for the  
  year                                1,924,801    1,925,074   2,216,451
Accumulated depreciation of
  foreclosed investment
  property                                None         None   (3,495,674)
Accumulated depreciation of
  real estate sold                        None         None   (4,134,055)
                                  ------------ ------------ ------------
Balance at close of year           $28,951,829  $27,027,028  $25,101,954
                                  ============ ============ ============

(e) See descriptions of the mortgage notes payable in Note 4 of Notes to
Financial Statements.

(f) Depreciation expense is computed based upon the estimated useful lives of
30 years for buildings and improvements and five years for furniture and
fixtures.

(g) This amount consists primarily of a reduction of basis due to a provision
for investment property write down during 1989.
<PAGE>