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, 1999
                          -----------------
                                      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 ]

                                    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 has retained cash reserves from the sale
of its real estate investments for contingencies which exist or may arise. The
Registrant's operations currently consist of interest income earned on
short-term investments and the payment of administrative expenses.

The Registrant utilized the net offering proceeds to acquire ten real property
investments and minority joint venture interests in three additional properties
and has since disposed of all of these investments. The Partnership Agreement
provides that the proceeds of any sale or refinancing of the Registrant's
properties will not be reinvested in new acquisitions.

The Partnership Agreement provides for the dissolution of the Registrant upon
the occurrence of certain events, including the disposition of all its
interests in real estate. The Registrant sold its final real estate investment
in September 1997. The Registrant has retained a portion of the cash from the
property sales to satisfy obligations of the Registrant as well as to establish
a reserve for contingencies. The timing of the termination of the Registrant
and final distribution of cash will depend upon the nature and extent of
liabilities and contingencies which exist or may arise. Such contingencies may
include legal and other fees and costs stemming from litigation involving the
Registrant including, but not limited to, the Bruss and Masri lawsuits
discussed in "Item 3. Legal Proceedings". Due to this litigation, the
Registrant will not be dissolved and reserves will be held by the Registrant
until the conclusion of such contingencies. There can be no assurances as to
the time frame for the conclusion of all contingencies.

The Registrant no longer has an ownership interest in any real estate
investment. The General Partner is not aware of any material potential
liability relating to environmental issues or conditions affecting real estate
formerly owned by 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.

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

As of December 31, 1999, the Registrant did not own any properties.

In the opinion of the General Partner, the Registrant has obtained adequate
insurance coverage for property liability and property damage matters.

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

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

Bruss et al. vs. Lehman Brothers, Inc., et al.
----------------------------------------------

On January 25, 1999, a proposed class action complaint was filed, Dorothy
Bruss, et al. vs. Lehman Brothers, Inc., et al. (Superior Court of New Jersey,
Law Division, Essex County, Docket No. L-000898-99). The Partnership, ten
additional limited partnerships which were sponsored by The Balcor Company
(together with the Partnership, the "Affiliated Partnerships"), The Balcor
Company, American Express Company, Lehman Brothers, Inc., Smith Barney, Inc.,
American Express Financial Corporation, and other affiliated entities and 9
individuals were named defendants in the action. Lead counsel representing the
plaintiffs in this case is the same counsel representing the plaintiffs in each
of the Lenore Klein case (now dismissed) and Raymond Masri case (see below).
The Bruss complaint raises largely the same issues as those raised in the
Lenore Klein and the Raymond Masri cases.

Upon the defendants' Motion to Dismiss, the Bruss complaint was dismissed
without prejudice on September 24, 1999. An amended complaint was filed on
November 30, 1999. The amended complaint differs from the original complaint in
that 8 of the 9 individual defendants and American Express Company were deleted
as defendants; the amended complaint also deletes 4 counts for breach of
fiduciary duty, breach of contract, conspiracy and violations of the New Jersey
RICO statute and similar statutes of other states. The amended complaint
alleges, common law fraud, equitable fraud, negligent misrepresentation and
violation of certain New Jersey and other similar state statutes relating to
the disclosure of information in the offering of limited partnership interests
in the Affiliated Partnerships, the marketing of interests in the Affiliated
Partnerships and the acquisition of real property for the Affiliated
Partnerships. The complaint seeks judgment for compensatory damages equal to
the amount invested in the Affiliated Partnerships by the proposed class plus
interest; general damages for injuries arising from the defendants' alleged
actions; equitable relief, including rescission on certain counts; punitive
damages; recovery from the Defendants of all profits received by them as a
result of their alleged actions relating to the Affiliated Partnerships; and
attorneys' fees and other costs.

The defendants filed a new Motion to Dismiss on January 31, 2000. The
defendants intend to vigorously contest this action. No class has been
certified as of this date. Management of each of the defendants believes that
it has meritorious defenses to contest the claims.

Raymond Masri vs. Lehman Brothers, Inc., et al.
-----------------------------------------------

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, twelve additional
limited partnerships which were sponsored by The Balcor Company, three limited
partnerships sponsored by the predecessor of Lehman Brothers, Inc., (together
with the Partnership, the "Defendant Partnerships"), Lehman Brothers, Inc. and
Smith Barney, 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' alleged actions;

recovery from the defendants of all profits received by them as a result of
their alleged 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.

No activity occurred on this matter during 1999. Plaintiffs' counsel also
represents the plaintiffs in the Dorothy Bruss matter, which is based on the
same set of facts.  Raymond Masri is named as an additional plaintiff in the
Dorothy Bruss matter.

Madison Partnership Liquidity Investors XX, et al. vs. The Balcor Company, et
-----------------------------------------------------------------------------
al.
---
Sandra Dee vs. The Balcor Company, et al.
-----------------------------------------

On May 7, 1999, a proposed class action complaint was filed and on May 13, 1999
was served on the defendants, Madison Partnership Liquidity Investors XX, et
al. vs. The Balcor Company, et al. (Circuit Court, Chancery Division, Cook
County, Illinois, Docket No. 99CH 08972). The General Partner of the
Partnership, the general partners of twenty-one additional limited partnerships
which were sponsored by The Balcor Company, The Balcor Company and one
individual are named as defendants in this action. The Partnership and the
twenty-one additional limited partnerships are referred to herein as the
"Affiliated Partnerships". Plaintiffs are entities that initiated tender offers
to purchase units and, in fact, purchased units in eleven of the Affiliated
Partnerships.

On June 1, 1999, a proposed class action complaint was filed and on August 16,
1999 was served on the defendants, Sandra Dee vs. The Balcor Company, et al.
(Circuit Court, Chancery Division, Cook County, Illinois, Docket No. 99CH
08123). This complaint is identical in all material respects to the Madison
Partnership Liquidity Investors XX, et al. vs. The Balcor Company et al.
complaint filed in May 1999. The defendants filed on September 15, 1999 a
motion to consolidate the Dee case with the Madison Partnership case. On
September 20, 1999, the motion was granted and this case was consolidated with
the Madison Partnership case.

The complaints allege breach of fiduciary duties and breach of contract under
the partnership agreements for each of the Affiliated Partnerships. The
complaints seek the winding up of the affairs of the Affiliated Partnerships,
the establishment of a liquidating trust for each of the Affiliated
Partnerships until a resolution of all contingencies occurs, the appointment of
an independent trustee for each such liquidating trust and the distribution of
a portion of the cash reserves to limited partners. The complaints also seek
compensatory damages, punitive and exemplary damages, and costs and expenses in
pursuing the litigation.

The defendants filed motions to dismiss the complaints on July 14, 1999 and on
September 15, 1999. On January 19, 2000 a hearing on the motions was held and
the class allegations in the complaints were struck regarding the Partnership
and ten of the Affiliated Partnerships in which plaintiffs do not own
interests. In all other respects, the motions to dismiss were denied. While the

court directed the plaintiffs to file an amended complaint by February 18,
2000, as of this date they have yet to do so.

The defendants intend to vigorously contest this action. No class has been
certified as of this date.

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 1999.

                                    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. For information
regarding distributions see "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and Capital Resources".

As of December 31, 1999, the number of record holders of Limited Partnership
Interests of the Registrant was 7,166.

Item 6. Selected Financial Data
-------------------------------
                                     Year ended December 31,
                 ----------------------------------------------------------
                    1999         1998        1997        1996        1995
                 ----------   ----------- ----------- ----------- -----------
Total income      $91,634      $104,700   $2,349,401  $12,182,124  $16,503,016
(Loss) income
  before gain
  on sales of
  properties and
  extraordinary
  items           (83,198)     (126,317)     712,051     1,491,061  2,142,234
Net (loss) income (83,198)     (126,317)  13,648,327    33,263,250  2,142,234
Net (loss) income
 per Limited
 Partnership
 Interest -
 Basic and Diluted  (1.01)        (1.53)      164.36        398.21      25.65
Total assets    1,821,446     1,860,973    2,530,776    26,713,606 54,596,297
Mortgage notes
  payable            None          None         None    11,495,334 56,466,198
Distributions per
  Limited Partner-
  ship Interest (A)  None          6.97       307.00        191.00      77.50

(A) These amounts include a distribution of original capital of $0.68, $299.00,
$160.00 and $29.00 per Limited Partnership Interest for the years 1998, 1997,
1996 and 1995, respectively.

Item 7. Management's Discussion and Analysis of Financial Condition and
-----------------------------------------------------------------------
Results of Operations
---------------------

Operations
----------

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

The operations of Balcor Realty Investors 85 - Series I A Real Estate Limited
Partnership (the "Partnership") in 1999 and 1998 consisted primarily of
administrative expenses which were partially offset by interest income earned
on short-term investments. Primarily as a result of lower administrative
expenses in 1999, the Partnership's net loss decreased during 1999 as compared
to 1998. The Partnership sold its remaining property in 1997 and recognized a
gain in connection with the sale. In addition, the Partnership held a minority
joint venture interest in one property which was sold in 1997 and recognized
its share of the gain in connection with this sale. As a result, the
Partnership recognized net income during 1997 as compared to a net loss during
1998. Further discussion of the Partnership's operations is summarized below.

1999 Compared to 1998
---------------------

As a result of lower interest rates in 1999 and higher average cash balances in
1998 prior to a distribution to Limited Partners in January 1998, interest
income on short-term investments decreased during 1999 as compared to 1998.

During 1998, the Partnership paid its share of property operating expenses
related to the North Hill Apartments, in which the Partnership held a minority
joint venture interest. This property was sold in 1997.

Primarily due to a decrease in accounting fees, administrative expenses
decreased during 1999 as compared to 1998.

1998 Compared to 1997
---------------------

During 1997, the Partnership sold the Templeton Park Apartments and recognized
a gain of $12,768,729 in connection with the sale of the property. As a result
of the sale of the property, rental and service income, interest expense on
mortgage note payable, depreciation, real estate taxes and property management
fees ceased in 1997.

Higher average cash balances were available for investment during 1997 due to
proceeds received in connection with the 1996 and 1997 property sales prior to
distribution to Limited Partners in January, April and October 1997. As a
result, interest income on short-term investments decreased during 1998 as
compared to 1997.

The Partnership recognized other income during 1997 primarily in connection
with partial refunds of prior years' insurance premiums relating to the
Partnership's properties.

The Partnership paid $1,025,000 to the holder of the first mortgage loan in
connection with the sale of the Templeton Park Apartments during 1997. This
amount was recorded as lender participation and represents additional interest
calculated as a percentage of the sale price in excess of an amount specified
in the loan agreement.

Property operating expenses decreased during 1998 as compared to 1997 due to
the sale of the Templeton Park Apartments.

The North Hill Apartments was owned by a joint venture consisting of the
Partnership and an affiliate. The property was sold in September 1997. During

1997, participation in income of joint venture with affiliate consisted
primarily of the Partnership's share of the gain recognized from the sale of
the property. As a result of the sale, participation in income of joint venture
with affiliate ceased.

In connection with the sale of the North Hill Apartments in 1997, the joint
venture wrote-off the remaining unamortized deferred financing fees of
$617,919, of which $154,480 was the Partnership's share. Also, in connection
with the sale of the property, the joint venture wrote-off the remaining
unamortized balance of a bond discount fee relating to the 1994 bond
refinancing of the property of $61,894, of which $15,473 was the Partnership's
share. These amounts were recognized as extraordinary items and classified as
debt extinguishment expense for financial statement purposes.

As a result of the 1997 sale of the North Hill Apartments, the joint venture
recognized an extraordinary gain on forgiveness of debt of $1,350,000, of which
$337,500 represents the Partnership's share.

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

The cash position of the Partnership decreased by approximately $42,000
as of December 31, 1999 as compared to December 31, 1998 due to cash used in
operating activities for the payment of administrative expenses, which was
partially offset by interest income earned on short-term investments.

The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all its
interests in real estate. The Partnership sold its final real estate investment
in September 1997. The Partnership has retained a portion of the cash from the
property sales to satisfy obligations of the Partnership as well as to
establish a reserve for contingencies. The timing of the termination of the
Partnership and final distribution of cash will depend upon the nature and
extent of liabilities and contingencies which exist or may arise. Such
contingencies may include legal and other fees and costs stemming from
litigation involving the Partnership including, but not limited to, the Bruss
and Masri lawsuits discussed in "Item 3. Legal Proceedings". Due to this
litigation, the Partnership will not be dissolved and reserves will be held by
the Partnership until the conclusion of such contingencies. There can be no
assurances as to the time frame for the conclusion of all contingencies.

The Partnership made distributions totaling $6.97 and $307.00 per Interest in
1998 and 1997, respectively. No distributions were made in 1999. See Statements
of Partners' Capital (Deficit) for additional information. Distributions were
comprised of $6.29 per Interest of Net Cash Receipts and $0.68 per Interest of
Net Cash Proceeds in 1998 and $8.00 per Interest of Net Cash Receipts and
$299.00 per Interest of Net Cash Proceeds in 1997.

Limited Partners have received cash distributions totaling $587.47 per $1,000
Interest as well as certain tax benefits. Of this amount, $98.79 represents Net
Cash Receipts and $488.68 represents Net Cash Proceeds. No additional
distributions are anticipated to be made prior to the termination of the
Partnership. However, after paying final partnership expenses, any remaining
cash reserves will be distributed. Limited Partners will not recover all of
their original investment.

The Partnership believes that its key vendors were Year 2000 compliant with
respect to the Partnership's operations as of December 31, 1999 and that there
was no material effect on the business, financial position or results of
operations of the Partnership related to Year 2000 issues.

Certain statements in this report constitute "forward looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. These
statements may include statements regarding income or losses as well as
assumptions relating to the foregoing.

The forward-looking statements made by the Partnership are subject to known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Partnership to differ from any
future results, performance or achievements expressed or implied by the
forward-looking statements.

Item 7a. Quantitative and Qualitative Disclosure About Market Risk
------------------------------------------------------------------

The supplemental financial information specified by Item 305 of Regulation S-K
is not applicable.

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, 1999               December 31, 1998
                    ---------------------------      --------------------------
                      Financial       Tax              Financial      Tax
                      Statements     Returns           Statements    Returns
                    -------------  ------------      ------------  ------------
Total assets           $1,821,446  $11,374,550        $1,860,973   $11,414,077
Partners' capital
  (deficit) accounts:
  General Partner        (306,029)    (305,461)         (306,029)     (305,461)
       Limited Partners 1,998,871   11,551,407         2,082,069    11,634,605
    Net (loss) income:
  General Partner            None         None              None           568
        Limited Partners  (83,198)    (83,198)          (126,317)     (140,559)
Per Limited Part-
  nership Interest          (1.01)(A)   (1.01)             (1.53)(A)     (1.70)

(A) Amount represents basic and diluted net loss per Limited Partnership
Interest.

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.

                                   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 Managing Director, Chief              Jayne A. Kosik
   Financial Officer, Treasurer
   and Assistant Secretary


Thomas E. Meador (age 52) 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 member of the board of directors 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.

Mr. Meador is on the Board of Directors of AMLI Commercial Properties Trust, a
private real estate investment trust that owns office and industrial buildings
in the Chicago, Illinois area. Mr. Meador was elected to the Board of AMLI
Commercial Properties Trust in August 1998.

Jayne A. Kosik (age 42) joined Balcor in August 1982 and, as Chief Financial
Officer, is responsible for Balcor's financial, human resources and treasury
functions. Ms. Kosik is also a member of the board of directors of The Balcor
Company. From June 1989 until October 1996, Ms. Kosik had supervisory
responsibility for accounting functions relating to Balcor's public and private
partnerships. She is also Treasurer and a Senior Managing Director of The
Balcor Company. Ms. Kosik is a Certified Public Accountant.

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

(e) 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 1999 except that Mr. Meador is named, in his capacity as an
officer of Balcor, as a defendant in the Madison/Dee lawsuit described in "Item
3. Legal Proceedings".

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. The executive 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 9 of Notes to Financial Statements for
the information relating to transactions with affiliates.

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

(a) The following entities are the sole Limited Partners which own beneficially
more than 5% of the outstanding Limited Partnership Interests of the
Registrant:
                    Name and            Amount and
                    Address of          Nature of      Percent
                    Beneficial          Beneficial     of
Title of Class      Owner               Ownership      Class
------------------------------------------------------------------------------
Limited             WIG 85-I            3,131.13       3.79%
Partnership         Partners            Limited
Interests           Chicago,            Partnership
                    Illinois            Interests

Limited             Metropolitan        2,654.15       3.21%
Partnership         Acquisition VII     Limited
Interests           Greenville,         Partnership
                    South Carolina      Interests

While WIG 85-I Partners and Metropolitan Acquisition VII individually own less
than 5% of the Interests, for purposes of this Item 12, WIG 85-I Partners is an
affiliate of Metropolitan Acquisition VII and, collectively, they own 7% of the
Interests.

(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
Interest                        5 Interests            Less than 1%

Relatives of the officers and affiliates of the partners of the General Partner
owned 325 additional Interests as of December 31, 1999.

In addition, Balcor LP Corp., an affiliate of the General Partner, holds title
to 50 Limited Partnership Interests in the Partnership due exclusively to
instances in which Limited Partners abandoned title to their Limited
Partnership Interests. Balcor LP Corp. is a nominee holder only of such
Interests and has disclaimed any economic or beneficial ownership in said
Interests. All distributions of cash payable with respect to such Interests
held by Balcor LP Corp. are returned to the Partnership for distribution to
other Limited Partners in accordance with the Partnership Agreement.

(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
-------------------------------------------------------

(a & b) See Note 4 of Notes to Financial Statements for information relating to
the Partnership Agreement and the allocation of distributions and profits and
losses.

See Note 9 of Notes to Financial Statements for additional information relating
to transactions with affiliates.

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

(d) The Registrant has no outstanding agreements with any promoters.

                                    PART IV

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

(a)
(1 & 2) See Index to Financial Statements 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 are incorporated herein by reference.

(27) Financial Data Schedule of the Registrant for 1999 is attached hereto.

(b) Reports on Form 8-K: No Reports on Form 8-K were filed during the quarter
ended December 31, 1999.

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

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/Jayne A. Kosik
                                   --------------------------------
                                      Jayne A. Kosik
                                      Senior Managing Director and Chief
                                      Financial Officer (Principal
                                      Accounting and Financial Officer)
                                      of Balcor Partners-XVI,
                                      the General Partner
Date:  March 28, 2000
       --------------

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-
                         XVI, the General Partner
/s/Thomas E. Meador                                      March 28, 2000
-------------------                                      --------------
   Thomas E. Meador

                         Senior Managing Director and
                         Chief Financial Officer
                         (Principal Accounting and
                         Financial Officer) of Balcor
                         Partners-XVI, the
                         General Partner
/s/Jayne A. Kosik                                        March 28, 2000
-----------------                                        --------------
   Jayne A. Kosik

                         INDEX TO FINANCIAL STATEMENTS


Report of Independent Accountants

Financial Statements:

Balance Sheets, December 31, 1999 and 1998

Statements of Partners' Capital (Deficit), for the years ended December 31,
1999, 1998 and 1997

Statements of Income and Expenses, for the years ended December 31, 1999, 1998
and 1997

Statements of Cash Flows, for the years ended December 31, 1999, 1998 and 1997

Notes to Financial Statements

Financial Statement Schedules are omitted for the reason that they are
inapplicable or equivalent information has been included elsewhere herein.

                       REPORT OF INDEPENDENT ACCOUNTANTS


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


In our opinion, the accompanying balance sheets and the related statements of
partners' capital (deficit), of income and expenses and of cash flows present
fairly, in all material respects, the financial position of Balcor Realty
Investors 85-Series I A Real Estate Limited Partnership (An Illinois Limited
Partnership, the "Partnership") at December 31, 1999 and 1998, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States. These financial statements are the
responsibility of the Partnership's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.

As described in Note 2 to the financial statements, the partnership agreement
provides for the dissolution of the Partnership upon the occurrence of certain
events, including the disposition of all its interests in real estate. The
Partnership no longer has an ownership interest in any real estate investment.
As described in Note 13, the Partnership has contingencies related to
litigation. Upon resolution of the litigation contingency matters, the
Partnership intends to cease operations and dissolve.


PricewaterhouseCoopers  LLP

Chicago, Illinois
March 28, 2000

                      BALCOR REALTY INVESTORS 85-SERIES I
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                                BALANCE SHEETS
                          December 31, 1999 and 1998


                                    ASSETS

                                                  1999           1998
                                              ------------   ------------
Cash and cash equivalents                     $ 1,812,965    $ 1,854,844
Accounts and accrued interest
  receivable                                        8,481          6,129
                                              ------------   ------------
                                              $ 1,821,446    $ 1,860,973
                                              ============   ============


                       LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                              $    95,788    $    62,447
Due to affiliates                                  32,816         22,486
                                              ------------   ------------
     Total liabilities                            128,604         84,933
                                              ------------   ------------
Commitments and contingencies

Limited Partners' capital (82,697
  Interests issued and outstanding)             1,998,871      2,082,069
General Partner's deficit                        (306,029)      (306,029)
                                              ------------   ------------
     Total partners' capital                    1,692,842      1,776,040
                                              ------------   ------------
                                              $ 1,821,446    $ 1,860,973
                                              ============   ============

The accompanying notes are an integral part of the financial statements.

                      BALCOR REALTY INVESTORS 85-SERIES I
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                   STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
             for the years ended December 31, 1999, 1998 and 1997


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

Balance at December 31, 1996    $ 14,313,721  $   (362,126) $  14,675,847

Cash distributions (A)           (25,387,979)                 (25,387,979)

Deemed distribution to
  Limited Partners (B)               (95,314)                     (95,314)

Net income for the year
   ended December 31, 1997        13,648,327        56,097     13,592,230
                                ------------- ------------- --------------
Balance at December 31, 1997       2,478,755      (306,029)     2,784,784

Cash distribution (A)               (576,398)                    (576,398)

Net loss for the year
   ended December 31, 1998          (126,317)                    (126,317)
                                ------------- ------------- --------------
Balance at December 31, 1998       1,776,040      (306,029)     2,082,069

Net loss for the year
   ended December 31, 1999           (83,198)                     (83,198)
                                ------------- ------------- --------------
Balance at December 31, 1999    $  1,692,842  $   (306,029) $   1,998,871
                                ============= ============= ==============

(A) Summary of cash distributions per Limited Partnership Interest:


                                    1999           1998          1997
                                ------------- ------------- --------------
                 First Quarter          None  $       6.97  $      163.00
                 Second Quarter         None          None         126.00
                 Third Quarter          None          None           None
                 Fourth Quarter         None          None          18.00

(B) This amount represents the Partnership's share of a state
withholding tax paid on behalf of the Limited Partners relating to the
gain on the sale of the North Hill Apartments, in which the Partnership
held a joint venture interest.

The accompanying notes are an integral part of the financial statements.

                      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, 1999, 1998 and 1997


                                    1999           1998          1997
Income:                         ------------- ------------- --------------
  Rental and service                                        $     435,999
  Interest on short-term
    investments                 $     91,634  $    104,700        274,269
  Other                                                            32,411
  Participation in income
    from joint venture
    with affiliate                                              1,606,722
                                ------------- ------------- --------------
    Total income                      91,634       104,700      2,349,401
                                ------------- ------------- --------------
Expenses:
  Interest on mortgage
    note payable                                                   99,717
  Lender participation                                          1,025,000
  Depreciation                                                     62,779
  Property operating                                 5,521        181,870
  Real estate taxes                                                12,325
  Property management fees                                         17,151
  Administrative                     174,832       225,496        238,508
                                ------------- ------------- --------------
    Total expenses                   174,832       231,017      1,637,350
                                ------------- ------------- --------------
(Loss) income before gain on
  sale of property and
  extraordinary items                (83,198)     (126,317)       712,051

Gain on sale of property                                       12,768,729
                                ------------- ------------- --------------
(Loss) income before
  extraordinary items                (83,198)     (126,317)    13,480,780
                                ------------- ------------- --------------
Extraordinary items:
  Participation in debt
    extinguishment expense
    from joint venture
    with an affiliate                                            (169,953)
  Participation in gain on
    forgiveness of debt from
    joint venture with
    an affiliate                                                  337,500
                                                            --------------
Total extraordinary items                                         167,547
                                ------------- ------------- --------------
Net (loss) income               $    (83,198) $   (126,317) $  13,648,327
                                ============= ============= ==============

The accompanying notes are an integral part of the financial statements.

                      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, 1999, 1998 and 1997
                                  (Continued)

                                    1999           1998          1997
                                ------------- ------------- --------------
(Loss) income before
  extraordinary items
   allocated to General Partner          None          None $      55,408
                                ============= ============= ==============
(Loss) income before
  extraordinary items
  allocated to Limited
  Partners                      $    (83,198) $   (126,317) $  13,425,372
                                ============= ============= ==============
(Loss) income before
  extraordinary items per
  Limited Partnership Interest
  (82,697 issued and
  outstanding) - Basic and
  Diluted                       $      (1.01) $      (1.53) $      162.34
                                ============= ============= ==============
Extraordinary items
  allocated to General
  Partner                                None          None $         689
                                ============= ============= ==============
Extraordinary items
  allocated to Limited
  Partners                               None          None $     166,858
                                ============= ============= ==============
Extraordinary items per
  Limited Partnership
  Interest (82,697
  issued and outstanding) -
  Basic and Diluted                      None          None $        2.02
                                ============= ============= ==============
Net (loss) income allocated to
  General Partner                        None          None $      56,097
                                ============= ============= ==============
Net (loss) income allocated
  to Limited Partners           $    (83,198) $   (126,317) $  13,592,230
                                ============= ============= ==============
Net (loss) income per Limited
  Partnership Interest
  (82,697 issued and
  outstanding) - Basic and
  Diluted                       $      (1.01) $      (1.53) $      164.36
                                ============= ============= ==============

The accompanying notes are an integral part of the financial statements.

                      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, 1999, 1998 and 1997


                                    1999           1998          1997
                                ------------- ------------- --------------
Operating activities:
  Net (loss) income             $    (83,198) $   (126,317) $  13,648,327
  Adjustments to reconcile
    net (loss) income to net
    cash used in operating
    activities:
      Gain on sale of
        property                                              (12,768,729)
      Participation in debt
        extinguishment expense
        from joint venture
        with an affiliate                                         169,953
      Participation in gain on
        forgiveness of debt
        from joint venture
        with an affiliate                                        (337,500)
      Participation in income
        from joint ventures
        with affiliates                                        (1,606,722)
      Depreciation of
        property                                                   62,779
      Net change in:
        Accounts and accrued
          interest receivable         (2,352)       16,183        146,104
        Prepaid expenses                                           29,911
        Accounts payable              33,341        45,192       (103,158)
        Due to affiliates             10,330       (12,280)       (95,565)
        Accrued liabilities                                       (91,810)
        Security deposits                                         (62,326)
                                ------------- ------------- --------------
  Net cash used in operating
    activities                       (41,879)      (77,222)    (1,008,736)
                                ------------- ------------- --------------
Investing activities:
  Distributions from joint
    venture with affiliate                                      1,179,284
  Proceeds from sale of
    real estate                                                23,300,000
  Payment of selling costs                                       (451,499)
                                                            --------------

The accompanying notes are an integral part of the financial statements.

                      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, 1999, 1998 and 1997
                                  (Continued)


                                    1999           1998          1997
                                ------------- ------------- --------------
  Net cash provided by
    investing activities                                       24,027,785
                                                            --------------
Financing activities:
  Distributions to
    Limited Partners                              (576,398)   (25,387,979)
  Repayment of mortgage
    note payable                                              (11,458,759)
  Principal payments on
    mortgage note payable                                         (36,575)
                                              ------------- --------------
  Cash used in financing
    activities                                    (576,398)   (36,883,313)
                                              ------------- --------------
Net change in cash and
  cash equivalents                   (41,879)     (653,620)   (13,864,264)
Cash and cash equivalents at
  beginning of period              1,854,844     2,508,464     16,372,728
                                ------------- ------------- --------------
Cash and cash equivalents
  at end of period              $  1,812,965  $  1,854,844  $   2,508,464
                                ============= ============= ==============

The accompanying notes are an integral part of the financial statements.

                      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 (the
"Partnership") has retained cash reserves from the sale of its real estate
investments for contingencies which exist or may arise. The Partnership's
operations currently consist of interest income earned on short-term
investments and the payment of administrative expenses.

2. Partnership Termination:

The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all its
interests in real estate. The Partnership sold its final real estate investment
in September 1997. The Partnership has retained a portion of the cash from the
property sales to satisfy obligations of the Partnership as well as to
establish a reserve for contingencies. The timing of the termination of the
Partnership and final distribution of cash will depend upon the nature and
extent of liabilities and contingencies which exist or may arise. Such
contingencies may include legal and other fees and costs stemming from
litigation involving the Partnership including, but not limited to, the Bruss
and Masri lawsuits discussed in Note 13 of Notes to the Financial Statements.
Due to this litigation, the Partnership will not be dissolved and reserves will
be held by the Partnership until the conclusion of such contingencies. There
can be no assurances as to the time frame for the conclusion of all
contingencies.

3. 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 was computed using the straight-line method. Rates
used in the determination of depreciation were based upon the following
estimated useful lives:
                                                  Years
                                                  -----
     Buildings and improvements                    30
     Furniture and fixtures                         5

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

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

(c) The Partnership recorded its investments in real estate at the lower of
cost or fair value, and periodically assessed, but not less than on an annual
basis, possible impairment to the value of its properties. The General Partner
estimated the fair value of its properties based on the current sales price
less estimated closing costs. The General Partner determined that no impairment
in value had occurred prior to the sales of the properties. The General Partner
considered 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
indicated otherwise.

(d) Deferred expenses consisted of loan modification and financing fees which
were amortized over the terms of the respective agreements. Upon sale, any
remaining balance was recognized as debt extinguishment expense and classified
as an extraordinary item.

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

(f) The Partnership calculates the fair value of its financial instruments
based on estimates using present value techniques. The Partnership includes
this additional information in the notes to the financial statements when the
fair value is different than the carrying value of those financial instruments.
When the fair value reasonably approximates the carrying value, no additional
disclosure is made.

(g) In order for the capital account balances to appropriately reflect the
partners' remaining economic interests in the Partnership, the income (loss)
allocations have been adjusted.

(h) Cash and cash equivalents include all unrestricted highly liquid
investments with an original maturity of three months or less. Cash is held or
invested in one financial institution.

(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) Statement of Financial Accounting Standards, No. 128, "Earnings per Share"
was adopted by the Partnership effective for the year ended December 31, 1997.
Since the Partnership has no dilutive securities, there is no difference
between basic and diluted net income (loss) per Limited Partnership Interest.

4. 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 and the Limited Partners will be
allocated 99% of the profits and losses. In order for the capital account
balances to appropriately reflect the partners' remaining economic interests in
the Partnership, the income (loss) allocations have been adjusted.

One hundred percent of Net Cash Receipts available for distribution was
distributed to the holders of Interests in proportion to their participating
percentages as of the record date for such distributions. Under certain
circumstances, the General Partner would have participated in the Net Cash
Proceeds of the sale or refinancing of Partnership properties. Since the
required subordination levels were not met, the General Partner has not
received any distributions of Net Cash Receipts or Net Cash Proceeds during the
lifetime of the Partnership.

5. Mortgage Note Payable:

During 1997, the Partnership incurred and paid interest expense on mortgage
note payable of $99,717.

6. Management Agreements:

The Partnership's properties were managed by a third party management company
prior to the sale of the properties. These management agreements provided for
annual fees of 5% of gross operating receipts.

7. Investment in Joint Venture with Affiliate:

The Partnership owned a 25% joint venture interest in the North Hill
Apartments, which was sold in 1997. During 1997 the Partnership received net
distributions of $1,274,598 related to the joint venture interest held by the
Partnership.

The North Hill Apartments was owned by a joint venture (the "Joint Venture")
consisting of the Partnership and an affiliate. The Partnership and the
affiliate held participating percentages in the Joint Venture of 25% and 75%,
respectively. During September 1997, the Joint Venture sold North Hill
Apartments for a sales price of $21,000,000. The purchaser of the property took
title subject to the existing mortgage loan in the amount of $16,470,524. From
the proceeds of the sale, the Joint Venture paid $164,705 in fees relating to
the assumption of the mortgage loan by the purchaser and $461,949 in selling
costs. In addition, a state withholding tax of $381,256 was paid relating to
the gain on sale of the property, of which $95,314 represents the Partnership's
share. This amount was recorded as a deemed distribution for financial
statement purposes. The Joint Venture recognized a gain of $6,569,949, of which
$1,642,487 represents the Partnership's share. See Note 11 of Notes to the
Financial Statements for additional information related to the Joint Venture.

8. 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, differed in prior
years from the tax returns due to the different treatment of various items as
specified in the Internal Revenue Code. The net loss for 1999 in the financial
statements is equal to the tax loss of the Partnership for the same period.

9. Transactions with Affiliates:

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

                              Year Ended      Year Ended      Year Ended
                               12/31/99        12/31/98        12/31/97
                            --------------  --------------  --------------
                            Paid   Payable  Paid  Payable   Paid  Payable
                            ------ -------  ----- --------  ----- --------
Reimbursement of
  expenses to General
  Partner at cost:
  Accounting                $7,726  $7,748 $9,286  $4,810   $19,403 $7,454
  Data processing            4,798   7,142  2,120     872     1,993  1,248
  Legal                      3,190   4,607  6,307   3,292    15,632  6,940
  Portfolio management      11,690  13,319 25,938  13,512    72,330 19,124
  Other                       None    None   None    None     7,691   None

Subject to the provisions of the partnership agreement, the Partnership has
agreed to advance the legal fees incurred by the General Partner in defending
the Madison Partnership lawsuit discussed in Note 13 of Notes to Financial
Statements.

10. Property Sale:

In February 1997, the Partnership sold the Templeton Park Apartments in an all
cash sale for $23,300,000. From the proceeds of the sale, the Partnership paid
$11,458,759 to the third party mortgage holder in full satisfaction of the
first mortgage loan, paid $451,499 in selling costs and $1,025,000 to the
mortgage holder as a participation fee. The lender participation fee represents
additional interest paid to the lender calculated as a percentage of the sales
price in excess of an amount specified in the loan agreement. The basis of the
property was $10,079,772, which is net of accumulated depreciation of
$6,912,282. For financial statement purposes, the Partnership recognized a gain
of $12,768,729 from the sale of this property.

11. Extraordinary Items:

(a) The North Hill Apartments was owned by a joint venture consisting of the
Partnership and an affiliate. In connection with the sale of the property in
September 1997, the joint venture wrote-off the remaining unamortized deferred
financing fees of $617,919, of which $154,480 was the Partnership's share.
Additionally, in connection with the 1994 bond refinancing of the property, the
joint venture paid a bond discount fee of $84,400 which was recorded as a
reduction of the underlying mortgage balance. In connection with the 1997 sale
of the property, the remaining unamortized balance of the discount fee of
$61,894 was written off, of which $15,473 was the Partnership's share. These
amounts were recognized as extraordinary items and classified as debt
extinguishment expense for financial statement purposes.

(b) In connection with the 1994 bond refinancing of the North Hill Apartments,
the joint venture was obligated under a $1,350,000 non-interest bearing note
from an unaffiliated party, which was to be repaid only to the extent that net
sales proceeds exceeded a certain predetermined level. The net proceeds
received from the sale of the property did not meet the required level.
Therefore, the note was not repaid and was forgiven. For financial statement
purposes, the joint venture recognized an extraordinary gain on forgiveness of
debt of $1,350,000, of which $337,500 was the Partnership's share.

12. Other Income:

The Partnership recognized other income of $32,411 during 1997 primarily in
connection with partial refunds of prior years' insurance premiums relating to
the Partnership's properties.

13. Contingencies:

(a) The Partnership is currently involved in two related lawsuits, Masri vs.
Lehman Brothers, Inc., et al. and Bruss, et al. vs. Lehman Brothers, Inc., et
al., whereby the Partnership and certain affiliates have been named as
defendants alleging substantially similar claims involving certain state
securities and common law violations with regard to the property acquisition
process of the Partnership, and to the adequacy and accuracy of disclosures of
information concerning, as well as marketing efforts related to, the offering
of the Limited Partnership Interests of the Partnership. The defendants
continue to vigorously contest these actions. A plaintiff class has not been
certified in either action. With respect to the Masri case, no determinations
upon any significant issues have been made. The Bruss complaint was filed on
January 25, 1999. On September 24, 1999, the court granted the defendants'
motion to dismiss the complaint for failure to state a cause of action. The
plaintiffs filed an amended complaint on November 30, 1999. The defendants have
filed a motion to dismiss the complaint for failure to state a cause of action.
The defendants continue to vigorously contest these actions. The Partnership
believes it has meritorious defenses to contest the claims. It is not
determinable at this time how the outcome of either action will impact the
remaining cash reserves of the Partnership.

(b) In May 1999, a lawsuit was filed, Madison Partnership Liquidity Investors
XX, et al. vs. The Balcor Company, et al. whereby the General Partner and
certain affiliates have been named as defendants. The plaintiffs are entities
that initiated tender offers to purchase and, in fact, purchased units in
eleven affiliated partnerships. The complaint alleges breach of fiduciary
duties and breach of contract under the partnership agreement and seeks the
winding up of the affairs of the Partnership, the establishment of a
liquidating trust, the appointment of an independent trustee for the trust and
the distribution of a portion of the cash reserves to limited partners. On June
1, 1999 a second lawsuit was filed and was served on August 16, 1999, Sandra
Dee vs. The Balcor Company, et al. The Dee complaint is virtually identical to
the Madison Partnership complaint and on September 20, 1999 was consolidated
into the Madison Partnership case. On January 19, 2000, a hearing was held on
the defendants' motion to dismiss the complaint; at the hearing the class
allegations were struck regarding eleven of the partnerships, including the
Partnership. The defendants intend to vigorously contest these actions. It is
not determinable at this time how the outcome of these actions will impact the
remaining cash reserves of the Partnership.