<PAGE>1





                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                   QUARTERLY REPORT UNDER SECTION 13 or 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended            March 31, 2005
                                          --------------

Commission file number                       1-11059
                                          --------------




              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.
              -----------------------------------------------------
             (Exact name of registrant as specified in its charter)


       California                                     13-3257662
-------------------------------          -------------------------------------
(State or other jurisdiction of          (I.R.S. Employer Identification No.)
incorporation or organization)

11200 Rockville Pike, Rockville, Maryland                20852
-----------------------------------------           ---------------
(Address of principal executive offices)              (Zip Code)

                                 (301) 255-4700
                                 --------------
              (Registrant's telephone number, including area code)



     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during the  preceding  12 months and (2) has been  subject to such  filing
requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

     As of March 31, 2005,  12,079,514  depositary units of limited  partnership
interest were outstanding.


<PAGE>2




              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

                               INDEX TO FORM 10-Q

                      FOR THE QUARTER ENDED MARCH 31, 2005
<TABLE>
CAPTION>
                                                                                                 Page
                                                                                                 ----
PART I.       Financial Information
<S>           <C>                                                                                <C>
Item 1.       Financial Statements

              Balance Sheets - March 31, 2005 (unaudited) and December 31, 2004                     3

              Statements of Income and Comprehensive Income - for the
                 three months ended March 31, 2005 and 2004 (unaudited)                             4

              Statement of Changes in Partners' Equity - for the three months ended
                 March 31, 2005 (unaudited)                                                         5

              Statements of Cash Flows - for the three months ended March 31, 2005
                 and 2004 (unaudited)                                                               6

              Notes to Financial Statements (unaudited)                                             7

Item 2.       Management's Discussion and Analysis of Financial Condition and Results of
                 Operations                                                                        12

Item 3.       Quantitative and Qualitative Disclosures about Market Risk                           16

Item 4.       Controls and Procedures                                                              16

PART II.      Other Information

Item 6.       Exhibits                                                                             17

Signature                                                                                          18

</TABLE>


<PAGE>3

PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS


         AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

                           BALANCE SHEETS

<TABLE>
<CAPTION>
                                                             March 31,        December 31,
                                                               2005              2004
                                                          --------------    ---------------
                                                            (Unaudited)
                        ASSETS
<S>                                                      <C>                <C>
Investment in FHA-Insured Certificates and GNMA
  Mortgage-Backed Securities, at fair value                $ 14,235,448      $ 14,299,980

Investment in debenture, at fair value                        1,741,873         1,741,873

Cash and cash equivalents                                       518,635           619,856

Receivables and other assets                                    146,124           140,559
                                                           ------------      ------------
      Total assets                                         $ 16,642,080      $ 16,802,268
                                                           ============      ============

           LIABILITIES AND PARTNERS' EQUITY

Distributions payable                                      $    251,395      $    377,092

Accounts payable and accrued expenses                           107,371            83,241
                                                           ------------      ------------
      Total liabilities                                         358,766           460,333
                                                           ------------      ------------
Partners' equity:
  Limited partners' equity, 15,000,000 Units authorized,
    12,079,514 Units issued and outstanding                  24,976,727        25,012,435
  General partner's deficit                                  (8,817,725)       (8,816,275)
  Accumulated other comprehensive income                        124,312           145,775
                                                           ------------      ------------
      Total partners' equity                                 16,283,314        16,341,935
                                                           ------------      ------------
      Total liabilities and partners' equity               $ 16,642,080      $ 16,802,268
                                                           ============      ============

</TABLE>

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


<PAGE>4


PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS



          AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

              STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

                              (Unaudited)
<TABLE>
<CAPTION>
                                                              For the three months ended
                                                                        March 31,
                                                                2005             2004
                                                              -------         ----------
<S>                                                           <C>             <C>
Income:
  Mortgage investment income                                 $ 320,181        $   804,511
  Interest and other income                                     27,408             64,782
                                                             ---------        -----------
                                                               347,589            869,293
                                                             ---------        -----------

Expenses:
  Asset management fee to related parties                       36,405            106,629
  General and administrative                                    96,947             88,288
                                                             ---------        -----------
                                                               133,352            194,917
                                                             ---------        -----------

Net earnings before gains on
  mortgage dispositions                                        214,237            674,376


Gains on mortgage dispositions                                       -            632,327
                                                             ---------        -----------

Net earnings                                                 $ 214,237        $ 1,306,703
                                                             =========        ===========
Other comprehensive loss - adjustment to
  unrealized gains on investments in insured mortgages         (21,463)           (40,628)
                                                             ---------        -----------

Comprehensive income                                         $ 192,774        $ 1,266,075
                                                             =========        ===========

Net earnings allocated to:
  Limited partners - 96.1%                                   $ 205,882        $ 1,255,742
  General Partner -   3.9%                                       8,355             50,961
                                                             ---------        -----------
                                                             $ 214,237        $ 1,306,703
                                                             =========        ===========

Net earnings per Unit of limited
  partnership interest - basic and diluted                      $ 0.02             $ 0.10
                                                             =========        ===========
</TABLE>

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



<PAGE>5


PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS


     AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

            STATEMENT OF CHANGES IN PARTNERS' EQUITY

            For the three months ended March 31, 2005

                         (Unaudited)
<TABLE>
<CAPTION>
                                                                                       Accumulated
                                                                                          Other
                                                      General          Limited        Comprehensive
                                                      Partner         Partners           Income              Total
                                                    -------------    ------------    -----------------   -------------
<S>                                                 <C>              <C>             <C>                 <C>
Balance, December 31, 2004                          $ (8,816,275)    $ 25,012,435         $ 145,775      $ 16,341,935

  Net earnings                                             8,355          205,882                 -           214,237

  Adjustment to unrealized gains on
     investments in insured mortgages                          -                -           (21,463)          (21,463)

  Distributions paid or accrued of $0.02 per Unit         (9,805)        (241,590)                -          (251,395)
                                                    ------------     ------------         ---------      ------------
Balance, March 31, 2005                             $ (8,817,725)    $ 24,976,727         $ 124,312      $ 16,283,314
                                                    ============     ============         =========      ============

Limited Partnership Units outstanding - basic and diluted,
  as of and for the three months ended March 31, 2005 and 2004         12,079,514
                                                                       ==========

</TABLE>

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




<PAGE>6

PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS


              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

                          STATEMENTS OF CASH FLOWS

                                 (Unaudited)
<TABLE>
<CAPTION>
                                                                                          For the three months ended
                                                                                                   March 31,
                                                                                            2005             2004
                                                                                         ---------        ----------
<S>                                                                                      <C>              <C>
Cash flows from operating activities:
   Net earnings                                                                          $ 214,237       $ 1,306,703
   Adjustments to reconcile net earnings to net cash provided by operating activities:
      Gains on mortgage dispositions                                                             -          (632,327)
      Changes in assets and liabilities:
         (Increase) decrease in receivables and other assets                                (5,565)          487,217
         Increase in accounts payable and accrued expenses                                  24,130             9,765
         Decrease in due to affiliate                                                            -          (151,408)
                                                                                         ---------       -----------

            Net cash provided by operating activities                                      232,802         1,019,950
                                                                                         ---------       -----------

Cash flows from investing activities:
   Proceeds from mortgage prepayments and sales                                                  -         9,534,643
   Receipt of mortgage principal from scheduled payments                                    43,069            78,153
   Proceeds from redemption of debentures                                                        -        11,146,330
   Debenture proceeds paid to affiliate                                                          -        (5,167,835)
                                                                                         ---------       -----------

            Net cash provided by investing activities                                       43,069        15,591,291
                                                                                         ---------       -----------

Cash flows used in financing activities:
   Distributions paid to partners                                                         (377,092)       (2,513,953)
                                                                                         ---------       -----------

Net (decrease) increase in cash and cash equivalents                                      (101,221)       14,097,288


Cash and cash equivalents, beginning of period                                             619,856        11,345,058
                                                                                         ---------       -----------

Cash and cash equivalents, end of period                                                 $ 518,635       $25,442,346
                                                                                         =========       ===========

Non-cash investing activity:
   Debentures received from HUD in exchange for assigned mortgages                       $       -       $ 1,741,873

</TABLE>


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



<PAGE>7


              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)

1.   ORGANIZATION

     American Insured Mortgage  Investors - Series 85, L.P. (the  "Partnership")
was  formed   pursuant  to  a  limited   partnership   agreement,   as  amended,
("Partnership Agreement") under the Uniform Limited Partnership Act of the state
of  California  on June 26,  1984.  During  the  period  from March 8, 1985 (the
initial closing date of the  Partnership's  public offering) through January 27,
1986 (the  termination date of the offering),  the Partnership,  pursuant to its
public offering of 12,079,389  Depository Units of limited partnership  interest
("Units")  raised a total of $241,587,780 in gross  proceeds.  In addition,  the
initial limited partner  contributed $2,500 to the capital of the Partnership in
exchange for 125 Units.

     CRIIMI, Inc., a wholly-owned  subsidiary of CRIIMI MAE Inc. ("CRIIMI MAE"),
acts as the General  Partner (the  "General  Partner") for the  Partnership  and
holds a partnership  interest of 3.9%. The General Partner  provides  management
and  administrative  services  on behalf  of the  Partnership.  AIM  Acquisition
Partners  L.P.  serves as the advisor (the  "Advisor") to the  Partnership.  The
general   partner  of  the  Advisor  is  AIM   Acquisition   Corporation   ("AIM
Acquisition")  and the  limited  partners  include,  but are not limited to, The
Goldman Sachs Group, L.P., Sun America  Investments,  Inc.  (successor to Broad,
Inc.) and CRI/AIM  Investment,  L.P.,  a  subsidiary  of CRIIMI MAE,  over which
CRIIMI  MAE  exercises  100%  voting  control.  AIM  Acquisition  is a  Delaware
corporation  that is primarily  owned by Sun America  Investments,  Inc. and The
Goldman Sachs Group, L.P.

     Pursuant  to the terms of certain  origination  and  acquisition  services,
management services and disposition  services agreements between the Advisor and
the Partnership  (collectively the "Advisory  Agreements"),  the Advisor renders
services to the Partnership, including but not limited to, the management of the
Partnership's  portfolio of mortgages and the  disposition of the  Partnership's
mortgages. Such services are subject to the review and ultimate authority of the
General Partner. However, the General Partner is required to receive the consent
of the Advisor prior to taking certain  significant  actions,  including but not
limited to the  disposition of mortgages,  any transaction or agreement with the
General  Partner  or its  affiliates,  or any  material  change  as to  policies
regarding  distributions  or  reserves  of  the  Partnership  (collectively  the
"Consent Rights"). The Advisor is permitted and has delegated the performance of
services to CRIIMI MAE Services Limited Partnership  ("CMSLP"),  a subsidiary of
CRIIMI  MAE,   pursuant  to  a  sub-management   agreement  (the   "Sub-Advisory
Agreement").  The general partner and limited partner of CMSLP are  wholly-owned
subsidiaries  of CRIIMI MAE. The  delegation  of such services by the Advisor to
CMSLP does not relieve the Advisor of its  obligation to perform such  services.
Furthermore the Advisor has retained its Consent Rights.

     Prior to December  1993,  the  Partnership  was engaged in the  business of
originating   and  acquiring   government   insured   mortgage  loans  ("Insured
Mortgages").  In accordance  with the terms of the  Partnership  Agreement,  the
Partnership is no longer  authorized to originate or acquire  Insured  Mortgages
and, consequently,  its primary objective is to manage its portfolio of mortgage
investments,  all of which are insured under Section 221(d)(4) or Section 231 of
the National  Housing Act of 1937, as amended (the "National  Housing Act"). The
Partnership Agreement states that the Partnership will terminate on December 31,
2009, unless terminated earlier under the provisions thereof. The Partnership is
required,  pursuant to the Partnership Agreement, to dispose of its assets prior
to this date.

     As the  Partnership  continues to liquidate  its mortgage  investments  and
Unitholders  receive  distributions  of return of  capital  and  taxable  gains,
Unitholders  should expect a reduction in earnings and  distributions due to the
decreasing  mortgage base.  Based upon the current level of interest rates,  the
trend in  mortgage  prepayments  and  other  dispositions  over the past year is
likely  to  continue.  Such  mortgage  prepayments  and other  dispositions,  if
continued at the trend over the past year,  will likely  result in a termination
and liquidation of the Partnership  significantly earlier than the December 2009
stated   termination   date.   Upon

<PAGE>8

              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)


the  termination  and  liquidation  of the  Partnership,  distributions  to
Unitholders  will  be made in  accordance  with  the  terms  of the  Partnership
Agreement.  A final  distribution  will be  based  on the  Unitholders'  and the
General Partner's pro-rata share of the Partnership's remaining net assets after
deducting  and setting  aside  amounts  required to satisfy  and  discharge  any
existing  Partnership  obligations  and expenses,  as stated in the  Partnership
Agreement.  Such distribution to Unitholders will be substantially less than the
amount  of  limited  partners'  equity  shown  on  the  Partnership's  financial
statements,  because that amount is calculated in accordance  with GAAP but does
not reflect the actual amount  distributable to limited  partners.  The terms of
the  Partnership  Agreement do not require the General  Partner to contribute an
amount equal to the General Partner's deficit to the Partnership as shown on the
Partnership's  financial  statements  prior to the time the Partnership  makes a
final distribution.  Therefore,  the amount of that deficit is excluded from the
amount distributable to limited partners.


2. BASIS OF PRESENTATION

     The Partnership's financial statements are prepared on the accrual basis of
accounting in accordance with accounting  principles  generally  accepted in the
United States  ("GAAP").  The preparation of financial  statements in conformity
with GAAP requires  management to make estimates and assumptions that affect the
reported  amounts  of  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 differ from those estimates.

     In the opinion of the General Partner, the accompanying unaudited financial
statements  contain all adjustments of a normal  recurring  nature  necessary to
present fairly the financial  position of the  Partnership as of March 31, 2005,
and the results of its  operations and its cash flows for the three months ended
March 31, 2005 and 2004.

     These unaudited  financial  statements  have been prepared  pursuant to the
rules  and  regulations  of the  Securities  and  Exchange  Commission.  Certain
information  and  note  disclosures   normally   included  in  annual  financial
statements  prepared in  accordance  with GAAP have been  condensed  or omitted.
While the General Partner  believes that the disclosures  presented are adequate
to make the  information not misleading,  these financial  statements  should be
read in conjunction with the financial statements and the notes to the financial
statements included in the Partnership's Annual Report on Form 10-K for the year
ended December 31, 2004.

3. FAIR VALUE OF FINANCIAL INSTRUMENTS

     The  following  estimated  fair  values  of  the  Partnership's   financial
instruments are presented in accordance with GAAP which define fair value as the
amount  at  which  a  financial  instrument  could  be  exchanged  in a  current
transaction between willing parties, other than in a forced or liquidation sale.
These estimated fair values,  however, do not represent the liquidation value or
the market value of the Partnership.
<TABLE>
<CAPTION>
                                              As of March 31, 2005             As of December 31, 2004
                                            Amortized           Fair          Amortized            Fair
                                               Cost            Value            Cost              Value
                                          --------------   -------------     ------------     -------------
<S>                                       <C>              <C>               <C>              <C>
Investment in FHA-Insured Certificates
   and GNMA Mortgage-Backed
   Security (1)                           $  14,111,137    $   14,235,448    $  14,154,205    $   14,299,980
                                          =============    ==============    =============    ==============

Cash and cash equivalents                 $     518,635    $      518,635    $     619,856    $      619,856
                                          =============    ==============    =============    ==============

Investment in Debentures                  $   1,741,873    $    1,741,873    $   1,741,873    $    1,741,873
                                          =============    ==============    =============    ==============

</TABLE>


<PAGE>9


              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)


(1) Carried at fair value on the Partnership's balance sheet.

     The following  methods and assumptions were used to estimate the fair value
of each class of financial instrument:

Investment in FHA-Insured  Certificates, GNMA Mortgage-Backed Securities and
----------------------------------------------------------------------------
Debenture
---------

     There is an active market for new issuances of FHA-Insured Certificates and
GNMA Mortgage-Backed  Securities.  However, the Partnership's  Insured Mortgages
are not comparable to such new issuances due to their age and characteristics of
their prepayment  penalties.  Accordingly,  the Partnership  internally develops
fair value estimates for these securities, as described below.

     The Partnership's  fair value estimates for its Insured Mortgages are based
on  available   market   information,   certain  third  party   information  and
management's  estimates.  The Partnership compares the interest rates on each of
its Insured Mortgages to the applicable U.S. Treasury rate for a security with a
comparable  maturity  plus a spread to  determine  an  approximate  market level
interest rate relative to each of its Insured Mortgages and considers prepayment
lockouts and penalties in determining  the fair value of its Insured  Mortgages.
In general,  the  Partnership's  Insured  Mortgages have  relatively high coupon
rates  compared  to current  U.S.  Treasury  rates and low,  if any,  prepayment
penalties.  Accordingly,  most of the Partnership's Insured Mortgages are valued
close to par. Insured  Mortgages that have some remaining  prepayment  penalties
are valued to include the  prepayment  penalty likely to be paid in the event of
prepayment.  These  assumptions  are similar to information  provided by a third
party and provide  prices that are consistent  with prices  received in sales of
certain of the Partnership's  Insured Mortgages.  The Partnership  believes that
its valuation methodology is reasonable for determining estimated fair values of
the  Partnership's  Insured  Mortgages  and, due to the nature of these  Insured
Mortgages,  another valuation  methodology would not result in values materially
different  from  the  values  utilized  by  the   Partnership   which  generally
approximate their par values.

     Since the Partnership's debenture may be redeemed by HUD, at any time, the
face value of the debenture is equivalent to the fair value of the debenture.

Cash and cash equivalents
-------------------------

     The carrying amount  approximates  fair value because of the short maturity
of these instruments.


4. INVESTMENT IN GNMA MORTGAGE-BACKED SECURITIES AND FHA-INSURED CERTIFICATES

     Listed   below  is  the   Partnership's   aggregate   investment   in  GNMA
Mortgage-Backed Securities and FHA-Insured Certificates:
<TABLE>
<CAPTION>
                                                                March 31,               December 31,
                                                                  2005                      2004
                                                               ------------             ------------
  <S>                                                          <C>                      <C>
  Number of:
    GNMA Mortgage-Backed Securities                                       1                        1
    FHA-Insured Certificates (1) (2) (3)                                  7                        7
  Amortized Cost                                                $14,111,137              $14,154,205
  Face Value                                                     14,215,881               14,260,814
  Fair Value                                                     14,235,448               14,299,980

</TABLE>


<PAGE>10


              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)


(1)   In April 2005, the mortgage on Bradley Road Nursing was prepaid. The
      Partnership received net proceeds of approximately $2.5 million and
      expects to recognize a gain of approximately $64,000 during the second
      quarter of 2005. The Partnership expects to distribute approximately
      $0.195 per Unit related to the prepayment of this mortgage and expects to
      include such amount in the second quarter distribution expected to be paid
      to Unitholders in August 2005.
(2)   In April 2005, the mortgage on Sangnok Villa was prepaid. The Partnership
      received net proceeds of approximately $876,000 and expects to recognize a
      gain of approximately $4,700 during the second quarter of 2005. The
      Partnership expects to distribute approximately $0.07 per Unit related to
      the prepayment of this mortgage and expects to include such amount in the
      second quarter distribution expected to be paid to Unitholders in August
      2005.
(3)   In May 2005, the FHA-Insured Certificate backed by the mortgage on
      Eaglewood Villa Apartments was sold, in the ordinary course of business,
      with the consent of the Advisor.  The Partnership received net proceeds of
      approximately $2.6 million and expects to recognize a gain of
      approximately $92,000 during the second quarter of 2005. The Partnership
      expects to distribute approximately $0.21 per Unit related to the sale of
      this FHA-Insured Certificate and expects to include such amount in the
      second quarter distribution expected to be paid to Unitholders in
      August 2005.

     As of  May  3,  2005,  all  of  the  GNMA  Mortgage-Backed  Securities  and
FHA-Insured  Certificates  are current  with respect to the payment of principal
and interest.


5. INVESTMENT IN DEBENTURE

     Listed below is the Partnership's investment in a debenture issued by HUD:
<TABLE>
<CAPTION>
                                                                 March 31,              December 31,
                                                                   2005                     2004
                                                               ------------             ------------
  <S>                                                          <C>                      <C>
  Amortized Cost                                                 $1,741,873               $1,741,873
  Face Value                                                      1,741,873                1,741,873
  Fair Value                                                      1,741,873                1,741,873

</TABLE>


     Interest on this 5.75% debenture is payable  semi-annually on January 1 and
July 1. The maturity date of this debenture is June 10, 2013,  however it may be
redeemed by HUD at any time.

6. DISTRIBUTIONS TO UNITHOLDERS

     The  distributions  paid or accrued to  Unitholders on a per Unit basis for
the three months ended March 31, 2005 and 2004 are as follows:

                                      2005           2004
                                      -----          ----

Quarter ended March 31                $0.02          $2.01
                                      -----          -----
                                      $0.02          $2.01
                                      =====          =====

     The basis for paying  distributions  to  Unitholders  is net proceeds  from
mortgage  dispositions,  if any, and cash flow from  operations,  which includes
regular  interest  income and  principal  from Insured  Mortgages.  Although the
Partnership's  Insured Mortgages pay a fixed monthly mortgage payment,  the cash
distributions  paid to the Unitholders  will vary during each quarter due to (1)
the  fluctuating  yields in the  short-term  money  market in which the  monthly
mortgage  payment  receipts  are  temporarily  invested  prior to the payment of
quarterly  distributions,  (2) the  reduction in the asset base  resulting  from
monthly mortgage payments received or mortgage  dispositions,  (3) variations in
the cash flow  attributable to the delinquency or default of Insured  Mortgages,
the  timing of  receipt of  debentures,  the  interest  rate on  debentures  and
debenture redemptions,  and (4) changes in the Partnership's operating expenses.
As  the  Partnership   continues  to  liquidate  its  mortgage  investments  and
Unitholders  receive  distributions  of return of  capital  and  taxable  gains,
Unitholders  should expect a reduction in earnings and  distributions due to the
decreasing

<PAGE>11


              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)


mortgage base. Based upon the current level of interest rates, the trend in
mortgage  prepayments  and  other  dispositions  over the past year is likely to
continue. Such mortgage prepayments and other dispositions,  if continued at the
trend over the past year, will likely result in a termination and liquidation of
the Partnership  significantly earlier than the December 2009 stated termination
date. Upon the termination and liquidation of the Partnership,  distributions to
Unitholders  will  be made in  accordance  with  the  terms  of the  Partnership
Agreement.  A final  distribution  will be  based  on the  Unitholders'  and the
General Partner's pro-rata share of the Partnership's remaining net assets after
deducting  and setting  aside  amounts  required to satisfy  and  discharge  any
existing  Partnership  obligations  and expenses,  as stated in the  Partnership
Agreement.  Such distribution to Unitholders will be substantially less than the
amount  of  limited  partners'  equity  shown  on  the  Partnership's  financial
statements,  because that amount is calculated in accordance  with GAAP but does
not reflect the actual amount  distributable to limited  partners.  The terms of
the  Partnership  Agreement do not require the General  Partner to contribute an
amount equal to the General Partner's deficit to the Partnership as shown on the
Partnership's  financial  statements  prior to the time the Partnership  makes a
final distribution.  Therefore,  the amount of that deficit is excluded from the
amount distributable to limited partners.

     Commencing  in the first  quarter of 2005,  the  General  Partner  declares
distributions  of regular cash flow and  mortgage  proceeds,  if any,  once each
quarter.  The  General  Partner  made  the  decision  to  declare  distributions
quarterly  instead  of  monthly  to  reduce  expenses  associated  with  monthly
declarations. The distributions are to be declared in March, June, September and
December and are to be paid approximately 30 days after the end of each calendar
quarter.


7. TRANSACTIONS WITH RELATED PARTIES

     The  General  Partner and certain  affiliated  entities  earned or received
compensation or payments for services from the Partnership as follows:

                 COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
                 -----------------------------------------------
<TABLE>
<CAPTION>
                                                                                              For the
                                                                                         three months ended
                                                                                             March 31,
       Name of Recipient                 Capacity in Which Served/Item                    2005        2004
       -----------------                 -----------------------------                    -----       ----
      <S>                                <C>                                              <C>         <C>
CRIIMI, Inc. (1)                     General Partner/Distribution                         $ 9,805   $ 985,340

AIM Acquisition Partners, L.P. (2)   Advisor/Asset Management Fee                          36,405     106,629

CRIIMI MAE Management, Inc.(3)       Affiliate of General Partner/Expense Reimbursement    14,827      16,519

</TABLE>

(1)  The General Partner, pursuant to the Partnership Agreement, is entitled to
     receive 3.9% of the Partnership's income, loss, capital and distributions,
     including, without limitation, the Partnership's adjusted cash from
     operations and proceeds of mortgage prepayments, sales or insurance (as
     defined in the Partnership Agreement).

(2)  The Advisor is entitled to an asset management fee equal to 0.95% of total
     invested assets (as defined in the Partnership Agreement). CMSLP is
     entitled to a fee of 0.28% of total invested assets from the Advisor's
     asset management fee. Of the amounts paid to the Advisor, CMSLP earned a
     fee equal to $10,728 and $31,424 for the three months ended March 31, 2005
     and 2004, respectively. The general partner and limited partner of CMSLP
     are wholly owned subsidiaries of CRIIMI MAE.

(3)  CRIIMI MAE Management, Inc., an affiliate of the General Partner, is
     reimbursed for personnel and administrative services on an actual cost
     basis.

<PAGE>12


PART I.  FINANCIAL INFORMATION
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS. When used in this Quarterly Report on Form 10-Q, the
words "believe," "anticipate," "expect," "contemplate," "may," "will," and
similar expressions are intended to identify forward-looking statements.
Statements looking forward in time are included in this Quarterly Report on Form
10-Q pursuant to the "safe harbor" provision of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially.
Accordingly, the following information contains or may contain forward-looking
statements: (1) information included in this Quarterly Report on Form 10-Q,
including, without limitation, statements made under Item 2, Management's
Discussion and Analysis of Financial Condition and Results of Operations, (2)
information included or incorporated by reference in prior and future filings by
the Partnership (defined below) with the Securities and Exchange Commission
("SEC") including, without limitation, statements with respect to growth,
projected revenues, earnings, returns, distributions and yields on its portfolio
of mortgage assets, the impact of interest rates, costs and business strategies
and plans and (3) information contained in written material, releases and oral
statements issued by or on behalf of, the Partnership, including, without
limitation, statements with respect to disposition of investments, projected
revenues, earnings, returns and yields on its portfolio of mortgage assets, the
impact of interest rates, costs and business strategies and plans. Factors which
may cause actual results to differ materially from those contained in the
forward-looking statements identified above include, but are not limited to (i)
regulatory matters, (ii) interest rates, (iii) prepayment of mortgages, (iv)
defaulted mortgages, (v) errors in servicing defaulted mortgages and (vi) sales
of mortgage investments at other than fair market value. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only of the date hereof. The Partnership undertakes no obligation to publicly
revise these forward-looking statements to reflect events or circumstances
occurring after the date hereof or to reflect the occurrence of unanticipated
events.

General
-------

      The Partnership's business consists of holding government insured mortgage
investments ("Insured Mortgages") primarily on multifamily housing properties,
and distributing the payments of principal and interest on such mortgage
investments, including debentures issued by the United States Department of
Housing and Urban Development ("HUD") in exchange for such mortgages, to the
holders of its depository units of limited partnership interests
("Unitholders"). CRIIMI, Inc., a wholly-owned subsidiary of CRIIMI MAE Inc.
("CRIIMI MAE"), acts as the General Partner (the "General Partner") for the
Partnership and holds a partnership interest of 3.9%. The Partnership's primary
source of revenue and cash is mortgage interest income from its Insured
Mortgages.

     The General  Partner is required to receive the consent of AIM  Acquisition
Partners L.P., the advisor (the "Advisor") to the  Partnership,  prior to taking
certain  significant  actions,  including but not limited to the  disposition of
mortgages,  any  transaction  or  agreement  with  the  General  Partner  or its
affiliates,  or any material change as to policies  regarding  distributions  or
reserves of the Partnership (collectively the "Consent Rights").

     As the  Partnership  continues to liquidate  its mortgage  investments  and
Unitholders  receive  distributions  of return of  capital  and  taxable  gains,
Unitholders  should expect a reduction in earnings and  distributions due to the
decreasing  mortgage base.  Based upon the current level of interest rates,  the
trend in  mortgage  prepayments  and  other  dispositions  over the past year is
likely  to  continue.  Such  mortgage  prepayments  and other  dispositions,  if
continued at the trend over the past year,  will likely  result in a termination
and liquidation of the Partnership  significantly earlier than the December 2009
stated termination date.

Mortgage Investments
--------------------

     As of March 31, 2005, the Partnership had investments in 8 Insured
Mortgages and one debenture with

<PAGE>13

PART I.  FINANCIAL INFORMATION
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS (continued)


an aggregate  amortized cost of approximately  $15.9 million,  an aggregate
face  value of  approximately  $16.0  million  and an  aggregate  fair  value of
approximately $16.0 million, as compared to March 31, 2004, when the Partnership
had  investments  in 12 Insured  Mortgages and one  debenture  with an aggregate
amortized  cost of  approximately  $36.5  million,  an  aggregate  face value of
approximately  $36.6 million and an aggregate fair value of approximately  $36.8
million.

     In April 2005,  the  mortgages on Bradley  Road  Nursing and Sangnok  Villa
prepaid.  The Partnership  received aggregate net proceeds of approximately $3.3
million and  expects to  recognize  gains of  approximately  $68,000  during the
second  quarter of 2005.  The  Partnership  expects to distribute  approximately
$0.265 per Unit  related to the  prepayment  of these  mortgages  and expects to
include such amount in the second  quarter  distribution  expected to be paid to
Unitholders in August 2005.

     In  May  2005,  the  FHA-Insured  Certificate  backed  by the  mortgage  on
Eaglewood Villa  Apartments was sold, in the ordinary  course of business,  with
the  consent  of  the  Advisor.   The  Partnership   received  net  proceeds  of
approximately  $2.6  million  and expects to  recognize a gain of  approximately
$92,000 during the second quarter of 2005. The Partnership expects to distribute
approximately $0.21 per Unit related to the sale of this FHA-Insured Certificate
and expects to include such amount in the second quarter  distribution  expected
to be paid to Unitholders in August 2005.

     After the  prepayment  of the two insured  mortgages  in April 2005 and the
sale of the  one  FHA-Insured  Certificate  in May  2005,  the  Partnership  had
investments  in 5 Insured  Mortgages  and one debenture  with an aggregate  face
value  of  approximately  $10.1  million.  As of May 3,  2005,  all of the  GNMA
Mortgage-Backed Securities and FHA-Insured Certificates are current with respect
to the payment of principal and interest.

Results of Operations
---------------------

     Net earnings  decreased by approximately  $1.1 million for the three months
ended March 31, 2005, as compared to the corresponding period in 2004, primarily
due to a decrease  in  mortgage  investment  income  and a decrease  in gains on
mortgage dispositions.

     Mortgage  investment  income  decreased by  approximately  $484,000 for the
three months ended March 31, 2005,  as compared to the  corresponding  period in
2004,  primarily  due to a reduction in the  mortgage  base.  The mortgage  base
decreased as a result of 4 mortgage  dispositions  with an  aggregate  principal
balance of approximately $20.4 million, representing an approximate 59% decrease
in the aggregate  principal balance of the total mortgage  portfolio since March
2004.

     Interest and other income decreased by approximately  $37,000 for the three
months ended March 31, 2005,  as compared to the  corresponding  period in 2004,
primarily  due to  variations  in the  amounts  and the timing of the  temporary
investment of mortgage disposition proceeds prior to distribution.

     Asset  management  fees  decreased by  approximately  $70,000 for the three
months ended March 31, 2005,  as compared to the  corresponding  period in 2004,
primarily due to the reduction in the mortgage base, as previously discussed.

     General and administrative  expenses increased by approximately  $9,000 for
the three months ended March 31, 2005, as compared to the  corresponding  period
in 2004,  primarily  related to the  Partnership's  listing fees on the American
Stock Exchange.

     Gains on mortgage dispositions  decreased by approximately $632,000 for the
three months ended


<PAGE>14

PART I.  FINANCIAL INFORMATION
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS (continued)


March 31, 2005, as compared to the corresponding period in 2004. During the
three  months  ended March 31,  2005,  the  Partnership  recognized  no gains or
losses. During the first three months 2004, the Partnership recognized a gain of
approximately  $246,000  from  the  assignment  of one  mortgage  and  gains  of
approximately $386,000 from the sale of two mortgages.

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

     The  Partnership's  operating  cash  receipts,  derived  from  payments  of
principal and interest on Insured  Mortgages,  interest on  debentures  and cash
receipts from interest on short-term  investments,  were  sufficient  during the
three months ended March 31, 2005 to meet operating requirements.  The basis for
paying distributions to Unitholders is net proceeds from mortgage  dispositions,
if any, and cash flow from  operations,  which includes  regular interest income
and  principal  from  Insured  Mortgages.  Although  the  Partnership's  Insured
Mortgages pay a fixed monthly mortgage payment,  the cash  distributions paid to
the Unitholders will vary during each quarter due to (1) the fluctuating  yields
in the short-term  money market in which the monthly  mortgage  payment receipts
are temporarily  invested prior to the payment of quarterly  distributions,  (2)
the  reduction  in the asset  base  resulting  from  monthly  mortgage  payments
received or mortgage dispositions,  (3) variations in the cash flow attributable
to the  delinquency  or default of Insured  Mortgages,  the timing of receipt of
debentures,  the interest rate on debentures and debenture redemptions,  and (4)
changes in the Partnership's operating expenses. As the Partnership continues to
liquidate its mortgage  investments and  Unitholders  receive  distributions  of
return of capital and taxable  gains,  Unitholders  should expect a reduction in
earnings and distributions  due to the decreasing  mortgage base. Based upon the
current level of interest  rates,  the trend in mortgage  prepayments  and other
dispositions over the past year is likely to continue. Such mortgage prepayments
and other  dispositions,  if  continued  at the trend over the past  year,  will
likely result in a termination and liquidation of the Partnership  significantly
earlier than the December 2009 stated termination date. Upon the termination and
liquidation of the  Partnership,  distributions  to Unitholders  will be made in
accordance with the terms of the  Partnership  Agreement.  A final  distribution
will be based on the  Unitholders' and the General  Partner's  pro-rata share of
the Partnership's remaining net assets after deducting and setting aside amounts
required to satisfy and  discharge  any  existing  Partnership  obligations  and
expenses,  as  stated  in  the  Partnership  Agreement.   Such  distribution  to
Unitholders  will be  substantially  less than the amount of  limited  partners'
equity shown on the Partnership's  financial statements,  because that amount is
calculated  in  accordance  with GAAP but does not  reflect  the  actual  amount
distributable to limited partners. The terms of the Partnership Agreement do not
require  the  General  Partner  to  contribute  an amount  equal to the  General
Partner's  deficit to the  Partnership as shown on the  Partnership's  financial
statements  prior  to the  time  the  Partnership  makes a  final  distribution.
Therefore,  the amount of that deficit is excluded from the amount distributable
to limited partners.

     Net cash  provided  by  operating  activities  decreased  by  approximately
$787,000  for the  three  months  ended  March  31,  2005,  as  compared  to the
corresponding period in 2004, primarily due to a decrease in mortgage investment
income and a decrease in cash received from interest on debentures.

     Net cash provided by investing  activities decreased by approximately $15.5
million  for  the  three  months  ended  March  31,  2005,  as  compared  to the
corresponding period in 2004, primarily due a decrease in proceeds received from
mortgage  prepayments,  mortgage sales and  redemption of debentures,  partially
offset by debenture proceeds due to affiliate.

     Net cash used in  financing  activities  decreased  by  approximately  $2.1
million  for  the  three  months  ended  March  31,  2005,  as  compared  to the
corresponding  period in 2004, due to a decrease in the amount of  distributions
paid to partners in the first three  months of 2005  compared to the same period
in 2004.

<PAGE>15

PART I.  FINANCIAL INFORMATION
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS (continued)


Critical Accounting Policies
----------------------------

     The  preparation of financial  statements in conformity  with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities,  the disclosure of contingent  assets and liabilities at
the date of the financial  statements,  and the reported amounts of revenues and
expenses during the reporting periods. The Partnership continually evaluates the
estimates used to prepare the financial statements,  and updates those estimates
as  necessary.  In  general,  management's  estimates  are  based on  historical
experience,  on information  from third parties,  and other various  assumptions
that are believed to be  reasonable  under the facts and  circumstances.  Actual
results could differ materially from those estimates.

     Management considers an accounting estimate to be critical if:

o    it requires assumptions to be made that were uncertain at the time the
     estimate was made; and
o    changes in the estimate or different estimates that could have been
     selected and could have a material impact on the Partnership's results
     of operations or financial condition.

     The Partnership's  critical accounting  estimates include the determination
of the fair values for Insured Mortgages:

     Fair Value of Insured Mortgages - The Partnership's fair value estimates
     for its Insured Mortgages are based on available market information,
     certain third party information and management's estimates. The Partnership
     compares the interest rates on each of its Insured Mortgages to the
     applicable U.S. Treasury rate for a security with a comparable maturity
     plus a spread to determine an approximate market level interest rate
     relative to each of its Insured Mortgages and considers prepayment lockouts
     and penalties in determining the fair value of its Insured Mortgages. In
     general, the Partnership's Insured Mortgages have relatively high coupon
     rates compared to current U.S. Treasury rates and low, if any, prepayment
     penalties. Accordingly, most of the Partnership's Insured Mortgages are
     valued close to par. Insured Mortgages that have some remaining prepayment
     penalties are valued to include the prepayment penalty likely to be paid in
     the event of prepayment. These assumptions are similar to information
     provided by a third party and provide prices that are consistent with
     prices received in sales of certain of the Partnership's Insured Mortgages.
     The Partnership believes that its valuation methodology is reasonable for
     determining estimated fair values of the Partnership's Insured Mortgages
     and, due to the nature of these Insured Mortgages, another valuation
     methodology would not result in values materially different from the values
     utilized by the Partnership which generally approximate their par values.

     The Partnership assesses each Insured Mortgage for other-than-temporary
     impairment when the fair value of an Insured Mortgage declines below
     amortized cost. Any such decline is considered other-than-temporary unless
     the Partnership has the ability and intent to hold the Insured Mortgage for
     a reasonable period of time sufficient for a forecasted recovery of fair
     value up to (or beyond) the cost of the investment, and evidence indicating
     that the cost of the Insured Mortgage is recoverable within a reasonable
     period of time outweighs evidence to the contrary. If an
     other-than-temporary impairment is determined to exist, such impairment is
     measured by comparing the estimated fair value of the related Insured
     Mortgage to its current amortized cost basis, with the difference
     recognized as a loss in the income statement. The Partnership did not
     recognize an impairment loss on its Insured Mortgages during the years
     ended December 31, 2004, 2003 and 2002.


<PAGE>16

PART I.  FINANCIAL INFORMATION
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


     Management has determined  that there has not been a material  change as of
March 31, 2005 in market risk from the  information  provided as of December 31,
2004 in the Partnership's Annual Report on Form 10-K as of December 31, 2004.


ITEM 4.  CONTROLS AND PROCEDURES

     The General  Partner  carried out an evaluation,  under the supervision and
with the  participation  of the  General  Partner's  management,  including  the
General  Partner's  Chairman of the Board and Chief Executive  Officer (CEO) and
its Chief  Financial  Officer  (CFO),  of the  effectiveness  of its  disclosure
controls  and  procedures  as defined  in Rule  13a-15(e)  under the  Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Based on that evaluation,
the General  Partner's CEO and CFO concluded  that its  disclosure  controls and
procedures  were  effective as of the end of the period  covered by this report.
There  have  been no  significant  changes  in the  General  Partner's  internal
controls over financial  reporting  that occurred  during the most recent fiscal
quarter  that have  materially  affected,  or are likely to  materially  affect,
internal controls over financial reporting.

     There have been no changes in the General Partner's  internal controls over
financial  reporting  in the  fiscal  quarter  ended  March  31,  2005 that have
materially  affected,  or is reasonably  likely to materially  affect,  internal
controls over financial reporting.


<PAGE>17

PART II.  OTHER INFORMATION
ITEM 6.   EXHIBITS

              Exhibits
              --------

              Exhibit No.                        Purpose
              -----------                        -------

                  31.1                 Certification pursuant to the Exchange
                                       Act Rule 13a-14(a) from Barry S.
                                       Blattman, Chairman of the Board and Chief
                                       Executive Officer of the General Partner
                                       (Filed herewith).

                  31.2                 Certification pursuant to the Exchange
                                       Act Rule 13a-14(a) from Cynthia O.
                                       Azzara, Executive Vice President, Chief
                                       Financial Officer and Treasurer of the
                                       General Partner (Filed herewith).

                  32.1                 Certification pursuant to 18 U.S.C.
                                       Section 1350 from Barry S. Blattman,
                                       Chairman of the Board and Chief Executive
                                       Officer of the General Partner
                                       (Furnished herewith).

                  32.2                 Certification pursuant to 18 U.S.C.
                                       Section 1350 from Cynthia O. Azzara,
                                       Executive Vice President, Chief Financial
                                       Officer and Treasurer of the General
                                       Partner (Furnished herewith).


<PAGE>18
                                    SIGNATURE

     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended,  the  Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.

                           AMERICAN INSURED MORTGAGE
                           INVESTORS L.P. - SERIES 85
                           (Registrant)

                           By:     CRIIMI, Inc.
                                   General Partner


                           /s/Cynthia O. Azzara
May 6, 2005                ---------------------------------------
-----------                Cynthia O. Azzara
DATE                       Executive Vice President,
                           Chief Financial Officer and
                           Treasurer (Principal Accounting Officer)