<PAGE>1
                                    FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


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

For the quarter ended                  June 30, 1999
                                       --------------

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

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


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



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



                                  (301) 816-2300
        ----------------------------------------------------------------
                (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
                                        ----      ----
         As of June 30, 1999, 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 June 30, 1999

                                                                 Page
                                                                 ----

PART I.           Financial Information

Item 1.           Financial Statements

                  Balance Sheets - June 30, 1999 (unaudited)
                    and December 31, 1998.......................   3

                  Statements of Income and Comprehensive Income -
                    for the three and six months ended June 30,
                    1999 and 1998 (unaudited) ..................   4

                  Statement of Changes in Partners' Equity -
                    for the six months ended June 30, 1999
                    (unaudited).................................   5

                  Statements of Cash Flows - for the six
                    months ended June 30, 1999 and
                    1998 (unaudited)............................   6

                  Notes to Financial Statements (unaudited).....   7

Item 2.           Management's Discussion and Analysis of
                    Financial Condition and Results
                    of Operations...............................  14

Item 2A.          Qualitative and Quantitative Disclosures about
                    Market Risk.................................  19

PART II.          Other Information

Item 6.           Exhibits and Reports on Form 8-K..............  20

Signature         ..............................................  21



<PAGE>3

PART I.           FINANCIAL INFORMATION
ITEM 1.           FINANCIAL STATEMENTS

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



                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                           June 30,              December 31,
                                                                            1999                    1998
                                                                        ---------------        --------------
                                                                          (unaudited)

                                                         ASSETS
<S>                                                                     <C>                    <C>
Investment in FHA-Insured
  Certificates and GNMA Mortgage-
  Backed Securities, at fair value:
    Acquired insured mortgages                                           $ 102,165,617          $ 110,253,225
    Originated insured mortgages                                            16,318,808             16,738,030
                                                                         --------------         -------------
                                                                           118,484,425            126,991,255
                                                                         --------------         -------------
Investment in FHA-Insured Loans, at
  amortized cost, net of unamortized
  discount and premium:
    Acquired insured mortgages                                              11,551,772             11,617,321
    Originated insured mortgages                                            12,760,088             12,818,519
                                                                         --------------         --------------
                                                                            24,311,860             24,435,840

Cash and cash equivalents                                                    7,234,174             15,793,919

Investment in FHA debentures                                                        --              2,296,098

Receivables and other assets                                                 1,137,651              1,453,292
                                                                         --------------         --------------
     Total assets                                                        $ 151,168,110          $ 170,970,404
                                                                         ==============         ==============

                                            LIABILITIES AND PARTNERS' EQUITY

Distributions payable                                                    $   8,170,327          $  15,963,562

Accounts payable and accrued expenses                                          176,095                184,236

Due to affiliate                                                                    --              1,279,178
                                                                         --------------         --------------
     Total liabilities                                                        8,346,422            17,426,976
                                                                         ---------------        --------------
Partners' equity:
  Limited partners' equity, 15,000,000 units authorized,
    12,079,514 units issued and outstanding                                  144,762,510          151,721,136
  General partner's deficit                                                   (3,956,493)          (3,674,093)
  Accumulated other comprehensive income                                       2,015,671            5,496,385
                                                                         ---------------        --------------
     Total partners' equity                                                  142,821,688          153,543,428
                                                                         ---------------        --------------
     Total liabilities and partners' equity                              $   151,168,110        $ 170,970,404
                                                                         ===============        ==============
</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             For the six months ended
                                                                June 30,                              June 30,
                                                      ---------------------------           -------------------------
                                                          1999          1998                   1999          1998
                                                      ------------  -------------           -----------   ------------
<S>                                                   <C>           <C>                     <C>           <C>
Income:
  Mortgage investment income                           $ 3,084,695   $ 3,533,125             $ 6,202,234   $ 7,239,023
  Interest and other income                                 37,689       218,085                  86,083       371,291
                                                       ------------  ------------           -------------  ------------
                                                         3,122,384     3,751,210               6,288,317     7,610,314

Expenses:
  Asset management fee to
    related parties                                        353,668       405,959                 715,575       824,061
  General and administrative                               127,101       147,924                 266,327       292,377
                                                       ------------  ------------           -------------  ------------
                                                           480,769       553,883                 981,902     1,116,438
                                                       ------------  ------------           -------------  ------------

Net earnings before gains on
  mortgage dispositions                                  2,641,615     3,197,327               5,306,415     6,493,876

Net gains on mortgage dispositions                          650,781      857,977                 650,781       961,789
                                                       ------------  ------------           -------------  ------------

Net earnings                                           $ 3,292,396   $ 4,055,304             $ 5,957,196   $ 7,455,665
                                                       ============  ============           ============   ============
Other comprehensive income                              (2,356,502)   (1,858,183)             (3,480,714)   (1,231,508)
                                                       ------------  ------------           -------------  ------------
Comprehensive income                                   $   935,894   $ 2,197,121            $ 2,476,482    $ 6,224,157
                                                       ------------  ------------           -------------  ------------

Net earnings allocated to:
  Limited partners - 96.1%                             $ 3,163,993   $ 3,897,147            $ 5,724,865    $ 7,164,894
  General partner - 3.9%                                   128,403       158,157                232,331        290,771
                                                       ------------  ------------          -------------   ------------
                                                       $ 3,292,396   $ 4,055,304            $ 5,957,196    $ 7,455,665
                                                       ============  ============          =============   ============

Net earnings per Unit of limited
  Partnership interest - Basic                         $      0.26   $      0.32            $      0.47    $      0.59
                                                       ============  ============          =============   ============



</TABLE>



<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 six months ended June 30, 1999

                                  (Unaudited)
<TABLE>
<CAPTION>

                                                                                     Accumulated
                                                                                         Other
                                              General              Limited           Comprehensive
                                              Partner              Partner               Income             Total
                                          ________________      _______________      _______________    ______________
<S>                                       <C>                   <C>                  <C>                <C>

Balance, December 31, 1998                 $   (3,674,093)       $  151,721,136       $   5,496,385      $ 153,543,428

  Net Earnings                                    232,331             5,724,865                  --          5,957,196

  Adjustment to unrealized
    losses on investments in
    in insured mortgages                               --                    --          (3,480,714)        (3,480,714)

  Distributions paid or accrued
    of $1.05 per Unit, including
    return of capital of $0.58                   (514,731)          (12,683,491)                 --        (13,198,222)
                                          -----------------     ----------------     ----------------   ----------------
Balance, June 30, 1999                     $   (3,956,493)       $  144,762,510       $   2,015,671        142,821,688
                                          =================     ================     ================   ================
Limited Partnership Units outstanding -                              12,079,514
  basic, as of June 30, 1999                                    ================



</TABLE>



<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 six months ended June 30,
                                                                               1999                   1998
                                                                          -----------------     ----------------
<S>                                                                       <C>                   <C>
Cash flows from operating activities:
  Net earnings                                                             $    5,957,196         $   7,455,665
  Adjustments to reconcile net earnings
    to net cash provided by operating
    activities:
    Net gain on mortgage dispositions                                            (650,781)             (961,789)
    Changes in assets and liabilities:
      Decrease in accounts payable and
        accrued expenses and due to affiliate                                    (139,270)             (120,237)
      Decrease in receivables and other assets                                    315,641               280,061
                                                                          ----------------       ----------------
        Net cash provided by operating activities                               5,482,786             6,653,700
                                                                          ----------------       ----------------
Cash flows from investing activities:
  Receipt of mortgage principal from
    scheduled payments                                                            671,065               680,474
  Proceeds from mortgage dispositions                                           5,129,812            13,504,073
  Proceeds from redemption of debenture                                         2,296,098                    --
  Debenture proceeds due to affiliate                                          (1,148,049)                   --
                                                                          ----------------       ----------------
        Net cash provided by investing activities                               6,948,926            14,184,547
                                                                          ----------------       ----------------
Cash flows from financing activities:
  Distributions paid to partners                                              (20,991,457)          (28,910,387)
                                                                          ----------------       ----------------
        Net cash used in financing activities                                 (20,991,457)          (28,910,387)
                                                                          ----------------       ----------------
Net decrease in cash and cash equivalents                                      (8,559,745)           (8,072,140)

Cash and cash equivalents, beginning of period                                 15,793,919            14,718,103
                                                                          ----------------       ----------------
Cash and cash equivalents, end of period                                   $    7,234,174         $   6,645,963
                                                                          ================       ================
Non cash investing activity:
9.5% debenture received from HUD in exchange
   for the mortgage on Porter Village I Apartments                         $           --         $   2,296,098
Portion of debenture due to affiliate, AIM 84                                          --            (1,148,049)

</TABLE>




                                  The accompanying notes are an integral part
                                        of these financial statements

<PAGE>7

              AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)


1.       ORGANIZATION

         American Insured Mortgage Investors - Series 85, L.P. (the Partnership)
was formed under the Uniform Limited Partnership Act of the state of California
on June 26, 1984.  The Partnership will terminate on December 31, 2009, unless
previously terminated under the provisions of the Partnership Agreement.

         Effective September 6, 1991, CRIIMI, Inc. (the General Partner)
succeeded the former general partners to become the sole general partner of the
Partnership.  CRIIMI, Inc. is a wholly owned subsidiary of CRIIMI MAE Inc.
(CRIIMI MAE).

         AIM Acquisition Partners, L.P., (the Advisor) serves as 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, AIM Acquisition, The Goldman Sachs Group, L.P., Broad, Inc. and
CRIIMI MAE.  Pursuant to the terms of certain amendments to the Partnership
Agreement, the General Partner is required to receive the consent of the Advisor
prior to taking certain significant actions which affect the management and
policies of the Partnership.

         The Partnership's investment in mortgages consists of participation
certificates evidencing a 100% undivided beneficial interest in government
insured multifamily mortgages issued or sold pursuant to Federal Housing
Administration (FHA) programs (FHA-Insured Certificates), mortgage-backed
securities guaranteed by the Government National Mortgage Association (GNMA)
(GNMA Mortgage-Backed Securities) and FHA-insured mortgage loans (FHA-Insured
Loans and together with FHA-Insured Certificates and GNMA Mortgage-Backed
Securities referred to herein as Insured Mortgages).  The mortgages underlying
the FHA-Insured Certificates, GNMA Mortgage-Backed Securities and FHA-Insured
Loans are non-recourse first liens on multifamily residential developments or
retirement homes.

         On October 5, 1998, CRIIMI MAE, the parent of the General Partner, and
CRIIMI MAE Management, Inc., an affiliate of CRIIMI MAE and provider of
personnel and administrative services to the Partnership, filed a voluntary
petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code.  As a
debtor-in-possession, CRIIMI MAE will not be permitted to provide any available
capital to the General Partner without approval from the bankruptcy court.  This
restriction or potential loss of the availability of a potential capital
resource could adversely affect the General Partner and the Partnership;
however, CRIIMI MAE has not historically represented a significant source of
capital for the General Partner or the Partnership.  Such bankruptcy filings
could also result in the potential need to replace CRIIMI MAE Management, Inc.
as a provider of personnel and administrative services to the Partnership.

         CRIIMI MAE and CRIIMI MAE Management, Inc. are working diligently
toward the preparation of a plan of reorganization.  The Bankruptcy Court has
granted the motion to extend CRIIMI MAE's and CRIIMI MAE Management, Inc.'s
exclusive right to file a plan of reorganization through September 10, 1999 and
to solicit acceptances thereof through November 10, 1999.  CRIIMI MAE and CRIIMI
MAE Management, Inc. expect to file a plan of reorganization during 1999, which
would contemplate CRIIMI MAE's and CRIIMI MAE Management, Inc.'s emergence from
bankruptcy later in 1999.  There can be no assurance at this time, however, that
a plan of reorganization will be proposed by CRIIMI MAE and CRIIMI MAE
Management, Inc. during such time or that such plan will be confirmed and
consummated.

<PAGE>8

              AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)

2.       BASIS OF PRESENTATION

         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
June 30, 1999 and December 31, 1998 and the results of its operations for the
three and six months ended June 30, 1999 and 1998 and its cash flows for the six
months ended June 30, 1999 and 1998.

         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 financial statements
prepared in accordance with generally accepted accounting principles 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
filed on Form 10-K for the year ended December 31, 1998.

Comprehensive Income
--------------------
         Comprehensive income is the change in Partners' equity during a period
from transactions from nonowner sources.  This includes net income as currently
reported by the Partnership adjusted for unrealized gains and losses related to
the Partnership's mortgages accounted for as "available for sale."  Unrealized
gains and losses are reported in the equity section of the Balance Sheet as
"Accumulated Other Comprehensive Income."

<PAGE>9

              AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)

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

         Fully Insured Mortgage Investments
         ----------------------------------
                  Listed below is the Partnership's aggregate investment in
Fully Insured Mortgages:


<TABLE>
<CAPTION>
                                                               June 30,               December 31,
                                                                 1999                     1998
                                                          -----------------        -----------------
<S>                                                       <C>                       <C>
Fully Insured Acquired:
  Number of
    GNMA Mortgage-Backed Securities                                       8                        8
    FHA-Insured Certificates (1) (2) (3)                                 42                       46
  Amortized Cost                                               $ 99,631,509             $104,595,386
  Face Value                                                    102,976,965              108,690,257
  Fair Value                                                    102,165,617              110,253,225

Fully Insured Originated:
  Number of
    GNMA Mortgage-Backed Securities                                       1                        1
    FHA-Insured Certificates                                              1                        1
  Amortized Cost                                               $ 16,837,249             $ 16,899,484
  Face Value                                                     16,480,632               16,542,867
  Fair Value                                                     16,318,808               16,738,030

</TABLE>

         (1)    In April 1999, the mortgage on Nassau Apartments was prepaid.
                The Partnership received net proceeds of approximately $866,000
                and recognized a loss of approximately $3,500 for the six months
                ended June 30, 1999.  A distribution of approximately $0.07 per
                Unit related to the prepayment of this mortgage was declared in
                May 1999 and was paid to Unitholders in August 1999.

         (2)    In April 1999, the mortgages on Walnut Apartments and Kings
                Villa/Discovery Commons were prepaid.  The Partnership received
                net proceeds, from the two mortgages, of approximately $3.7
                million resulting in an aggregate gain of approximately $593,000
                for the six months ended June 30, 1999.  A distribution of
                approximately $0.30 per Unit related to the prepayment of these
                mortgages was declared in May 1999 and was paid to Unitholders
                in August 1999.

         (3)    In May 1999, the mortgage on Quail Creek Apartments was prepaid.
                The Partnership received net proceeds of approximately $553,000
                and recognized a gain of approximately $62,000 for the six
                months ended June 30, 1999.  A distribution of approximately
                $0.04 per Unit related to the prepayment of this mortgage was
                declared in June 1999 and was paid to Unitholders in August
                1999.


                As of August 4, 1999, all of the fully insured FHA-Insured
         Certificates and GNMA Mortgage-Backed Securities are current with
         respect to the payment of principal and interest, except for the
         mortgages on Lincoln Green, which has been delinquent since May 1999,
         as discussed below, and Franklin Plaza and Bradley Road Nursing which
         are delinquent with respect to the payment of principal and interest
         due to the Partnership in July 1999.  The Partnership expects to
         receive the payments on Franklin Plaza and Bradley Road Nursing.  In
         July 1999, the General Partner instructed the servicer of the mortgage
         on Lincoln Green to file an Election to Assign the mortgage with HUD.
         The face value of this mortgage was approximately $3.1 million at April
         30, 1999.  The Partnership expects to receive 99% of this amount plus
         accrued interest.



<PAGE>11

              AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)


4.       INVESTMENT IN FHA-INSURED LOANS

         Fully Insured FHA-Insured Loans
         -------------------------------
                Listed below is the Partnership's aggregate investment in
FHA-Insured Loans:

<TABLE>
<CAPTION>
                                                               June 30,              December 31,
                                                                 1999                     1998
                                                          -----------------        -----------------
<S>                                                       <C>                       <C>
  Fully Insured Acquired:
    Number of Loans                                                      10                       10
    Amortized Cost                                            $  11,551,772             $ 11,617,321
    Face Value                                                   13,952,930               14,068,282
    Fair Value                                                   13,780,334               14,087,092

  Fully Insured Originated:
    Number of Loans                                                       3                        3
    Amortized Cost                                            $  12,760,088             $ 12,818,519
    Face Value                                                   12,435,513               12,488,890
    Fair Value                                                   12,351,230               12,747,524

</TABLE>


                  As of August 4, 1999, all of the Partnership's FHA-Insured
         Loans, recorded at amortized cost, were current with respect to the
         payment of principal and interest, except for the mortgage on Longleaf
         Lodge which is delinquent with respect to the payment of principal and
         interest due to the Partnership in July 1999.

                  In addition to base interest payments under Originated Insured
         Mortgages, the Partnership is entitled to additional interest based on
         a percentage of the net cash flow from the underlying development
         (referred to as Participations).  During the three and six months ended
         June 30, 1999, the Partnership received additional interest of $45,164
         and $45,164, respectively, from the Participations.  During the three
         and six months ended June 30, 1998, the Partnership received additional
         interest of $0 and $34,553, respectively, from the Participations.
         These amounts, if any, are included in mortgage investment income on
         the accompanying Statements of Income and Comprehensive Income.



<PAGE>12

              AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)

5.       DISTRIBUTIONS TO UNITHOLDERS

         The distributions paid or accrued to Unitholders on a per Unit basis
for the six months ended June 30, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                1999              1998
                                              -------           -------
<S>                                           <C>               <C>
Quarter ended March 31,                       $0.40(1)(2)       $1.07(4)
Quarter ended June 30,                        $0.65(3)          $0.58(5)
                                              -------           -------
                                              $1.05             $1.65
                                              =======           =======
</TABLE>

(1)      This amount includes approximately $0.06 per Unit representing net
         proceeds from the prepayment of the mortgage on Gamel & Gamel
         Apartments (Brown Gable Apartments).
(2)      This amount includes approximately $0.10 per Unit representing net
         proceeds received from the redemption of the FHA debenture.  During the
         first quarter of 1998, the assignment proceeds of the mortgage on
         Portervillage I Apartments were received in the form of a 9.5%
         debenture.  The debenture, with a face value of $2,296,098, was issued
         to the Partnership, with interest payable semi-annually on January 1
         and July 1.  In January 1999, net proceeds of approximately $2.3
         million were received upon redemption of these debentures.  Since the
         mortgage on Portervillage I Apartments was owned 50% by the Partnership
         and 50% by an affiliate of the Partnership, American Insured Mortgage
         Investors (AIM 84), approximately $1.1 million of the debenture
         proceeds was paid to AIM 84.
(3)      This amount includes approximately $0.41 per Unit representing net
         proceeds from the prepayment of the mortgages on Nassau Apartments,
         Walnut Apartments, Kings Villa/Discovery Commons, and Quail Creek
         Apartments.
(4)      This amount includes approximately $0.77 per Unit representing net
         proceeds from the prepayment of the mortgage on Spanish Trace
         Apartments.
(5)      This amount includes approximately $0.31 per Unit representing net
         proceeds from the prepayment of the mortgages on Isle of Pines Village
         Apartments, Emerald Green Apartments, and Stoney Brook Apartments.


         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
Insured Mortgages yield a fixed monthly mortgage payment once purchased, the
cash distributions paid to the Unitholders will vary during each quarter due to
(1) the fluctuating yields in the short-term money market where the monthly
mortgage payment receipts are temporarily invested prior to the payment of
quarterly distributions, (2) the reduction in the asset base and monthly
mortgage payments resulting from monthly mortgage payments received or mortgage
dispositions, (3) variations in the cash flow attributable to the delinquency or
default of Insured Mortgages and professional fees and foreclosure costs
incurred in connection with those Insured Mortgages and (4) variations in the
Partnership's operating expenses.  As the Partnership continues to liquidate its
mortgage investments and investors receive distributions of return of capital
and taxable gains, investors should expect a reduction in earnings and
distributions due to the decreasing mortgage base.




<PAGE>13

              AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)

6.       TRANSACTIONS WITH RELATED PARTIES

         The General Partner and certain affiliated entities, during the three
and six months ended June 30, 1999 and 1998, earned or received compensation or
payments for services from the Partnership as follows:

<TABLE>
<CAPTION>

                                   COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
                                   -----------------------------------------------

                                                            For the three months        For the six months
                          Capacity in Which                   ended June 30,               ended June 30,
Name of Recipient            Served/Item                    1999        1998              1999        1998
-----------------       ---------------------            ----------   ----------      -----------   ---------
<S>                     <C>                              <C>          <C>             <C>           <C>
CRIIMI, Inc.            General Partner/Distribution       $318,643     $284,327        $514,731     $808,862

AIM Acquisition         Advisor/Asset Management Fee        353,668      405,959         715,575      824,061
  Partners, L.P.(1)

CRIIMI MAE              Affiliate of General Partner/        15,046       16,361          22,488       32,544
Management, Inc.          Expense Reimbursement


</TABLE>


(1)      The Advisor, pursuant to the Partnership Agreement, effective June 26,
         1984, is entitled to an Asset Management Fee equal to 0.95% of Total
         Invested Assets (as defined in the Partnership Agreement).  CRIIMI MAE
         Services Limited Partnership (CMSLP), the sub-advisor to the
         Partnership 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 $104,247 and $210,921 for the
         three and six months ended June 30, 1999, respectively, and $119,657
         and $242,893 for the three and six months ended June 30, 1998,
         respectively.  The limited partner of CMSLP is a wholly-owned
         subsidiary of CRIIMI MAE Inc., which filed for protection under Chapter
         11 of the U.S. Bankruptcy Code.



<PAGE>14

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

Introduction
------------
         The Partnership's Management's Discussion and Analysis of Financial
Condition and Results of Operations contains statements that may be considered
forward looking.  These statements contain a number of risks and uncertainties
as discussed herein and in the Partnership's other reports filed with the
Securities and Exchange Commission that could cause actual results to differ
materially.  See Item 1, "Forward-Looking Statements" in the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1998, for a more
detailed discussion of such risks and uncertainties.

         On October 5, 1998, CRIIMI MAE Inc., the parent of the General Partner,
and CRIIMI MAE Management, Inc., an affiliate of CRIIMI MAE Inc. and provider of
personnel and administrative services to the Partnership, filed voluntary
petitions for reorganization under Chapter 11 of the Bankruptcy Code.  Such
bankruptcy filings could result in certain adverse effects to the Partnership
including without limitation, the potential loss of CRIIMI MAE Inc. as a
potential source of capital, as discussed under Liquidity and Capital Resources,
and the potential need to replace CRIIMI MAE Management, Inc. as a provider of
personnel and administrative services to the Partnership.

         CRIIMI MAE and CRIIMI MAE Management, Inc. are working diligently
toward the preparation of a plan of reorganization.  The Bankruptcy Court has
granted the motion to extend CRIIMI MAE's and CRIIMI MAE Management, Inc.'s
exclusive right to file a plan of reorganization through September 10, 1999 and
to solicit acceptances thereof through November 10, 1999.  CRIIMI MAE and CRIIMI
MAE Management, Inc. expect to file a plan of reorganization during 1999, which
would contemplate CRIIMI MAE's and CRIIMI MAE Management, Inc.'s emergence from
bankruptcy later in 1999.  There can be no assurance at this time, however, that
a plan of reorganization will be proposed by CRIIMI MAE and CRIIMI MAE
Management, Inc. during such time or that such plan will be confirmed and
consummated.

Year 2000
---------
         The Year 2000 issue is a computer programming issue that may affect
many electronic processing systems.  Until relatively recently, in order to
minimize the length of data fields, most date-sensitive programs eliminated the
first two digits of the year.  This issue could affect information technology
("IT") systems and date sensitive embedded technology that controls certain
systems (such as telecommunications systems, security systems, etc.) leaving
them unable to properly recognize or distinguish dates in the twentieth and
twenty-first centuries.  This treatment could result in significant
miscalculations when processing critical date-sensitive information relating to
dates after December 31, 1999.


<PAGE>15

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

         The General Partner has substantially completed the Year 2000 testing
and remediation of its IT systems, which include software systems to administer
and manage mortgage assets and for internal accounting purposes.  A majority of
the IT systems used by the Partnership is licensed from third parties.  These
third parties have either provided upgrades to existing systems or have
indicated that their systems are Year 2000 compliant.  The General Partner has
applied upgrades and has substantially completed compliance testing and
remediation as of August 11, 1999.  There can be no assurance, however, that all
of the Partnership's IT systems will be Year 2000 compliant by December 31,
1999.

         The Year 2000 issue may also affect the General Partner's
date-sensitive embedded technology, which controls systems such as the
telecommunications systems, security systems, etc.  The General Partner does not
believe that it has significant exposure, or that the cost to modify or replace
such technology to make it Year 2000 compliant will be material.  The failure of
any such systems to be Year 2000 compliant could be material to the Partnership.

         The  potential  impact of the Year 2000 issue depends not only on the
corrective  measures the General  Partner has undertaken and will undertake, but
also on the  ways in which  the  Year  2000  issue is addressed  by  third
parties  with  whom  the  Partnership   directly interfaces or whose financial
condition or operations are important to the  Partnership.  The Partnership has
initiated  communications  with third  parties with which it directly interfaces
to evaluate the risk of their failure to be Year 2000 compliant and the extent
to which the Partnership  may  be  vulnerable  to  such  failure.  There  can be
no assurance  that the systems of these third  parties  will be Year 2000
compliant by December 31, 1999.  The failure of these third parties to be Year
2000 compliant could have a material  adverse  effect on the operations of the
Partnership.

         The  Partnership  believes  that its greatest risk with respect to the
Year 2000 issue  relates to failures by third parties to be Year 2000 compliant.
In addition to risks posed by third parties with which the  Partnership
interfaces directly, risks  are  created  by third  parties  providing  services
to large segments of  society.  The  failure of third  parties to be Year 2000
compliant could,  among other  things,  cause  disruptions  in the capital and
real estate markets  and  borrower  defaults  on  real  estate  loans  and
mortgage-backed securities as well as the pools of mortgage loans underlying
such securities.

         The Partnership  believes that its greatest  internal  exposure to the
Year 2000  issue  involves  the loan  servicing operations of an  affiliate  of
the Partnership.  CRIIMI MAE Services Limited Partnership (CMSLP) currently
services approximately 26% of the total mortgage  investments in the AIM Funds.
CMSLP has applied a vendor upgrade and has completed  compliance  testing on the
upgrade.  The General Partner believes that the results of such testing indicate
that this risk has been substantially mitigated.

         Currently the Partnership estimates the cost of system upgrades related
to Year 2000 issues to be immaterial.

         The General Partner has substantially completed its organizational
compliance  testing and remediation,  and it has also drafted  contingency plans
for the risks of the failure of the Partnership or third parties to be Year 2000
compliant.  The General  Partner intends to complete  contingency  plans for the
Year  2000  issue in late  1999.  Due to the  inability  to  predict  all of the
potential  problems  that may arise  from the Year 2000  issue,  there can be no
assurance that all contingencies will be adequately addressed by such plans.


<PAGE>16

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

General
-------
         As of June 30, 1999, the Partnership had invested in 65 Insured
Mortgages with an aggregate amortized cost of  approximately  $141 million,  an
aggregate face  value  of  approximately  $146  million  and an  aggregate  fair
value of approximately $145 million, as discussed below.

         As of August 4, 1999, all of the fully insured FHA-Insured
Certificates, GNMA Mortgage-Backed Securities and FHA-Insured Loans are current
with respect to the payment of principal and interest except for the mortgages
on Lincoln Green, which has been delinquent since May 1999, as discussed below,
and Longleaf Lodge, Franklin Plaza and Bradley Road Nursing, which are
delinquent with respect to the payment of principal and interest due to the
Partnership in July 1999. The Partnership expects to receive payment on the
latter three mortgages.  In July 1999, the General Partner instructed the
servicer of the mortgage on Lincoln Green to file an Election to Assign the
mortgage with HUD.  The face value of this mortgage was approximately $3.1
million at April 30, 1999.  The Partnership expects to receive 99% of this
amount plus accrued interest.

Results of Operations
---------------------
         Net earnings for the three and six months ended June 30, 1999 decreased
as compared to the corresponding periods in 1998, primarily due to a decrease in
mortgage investment income as a result of the disposition of fourteen mortgages
since April 1998.  Also contributing to the decrease was a decrease in net gains
from mortgage dispositions as discussed below.

         Interest and other income decreased for the three and six months ended
June 30, 1999, as compared to the corresponding periods in 1998, primarily due
to the timing of temporary investment of mortgage disposition proceeds prior to
distribution.

         Asset management fees decreased for the three and six months ended June
30, 1999, as compared to the corresponding periods in 1998, primarily from the
reduction in the mortgage asset base.

         General and administrative expenses decreased for the three and six
months ended June 30, 1999, as compared to the corresponding periods in 1998,
primarily due to a reduction in mortgage base.



<PAGE>17

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

         Net gains on mortgage dispositions decreased for the three and six
months ended June 30, 1999, as compared to the corresponding periods in 1998.
During the first six months of 1999, the Partnership recognized net gains of
approximately $651,000 from the prepayment of the mortgages on Nassau
Apartments, Walnut Apartments, Kings Villa/Discovery Commons and Quail Creek
Apartments.  During the first six months of 1998, the Partnership recognized
gains of approximately $200,000 from the assignment of the mortgage on
Portervillage I Apartments in March 1998 and approximately $858,000 from the
prepayment of the mortgages on Stoney Brook Apartments, Emerald Green Apartments
and Isle of Pines Village Apartments in April 1998.  In addition, the
Partnership recognized a loss of approximately $96,000 from the prepayment of
the mortgage on Spanish Trace Apartments in February 1998.

         During the first quarter of 1998, the assignment proceeds of the
mortgage on Portervillage I Apartments were received in the form of a 9.5%
debenture.  The debenture, with a face value of $2,296,098, was issued to the
Partnership, with interest payable semi-annually on January 1 and July 1.  In
January 1999, net proceeds of approximately $2.3 million were received upon
redemption of these debentures.  Since the mortgage on Portervillage I
Apartments was owned 50% by the Partnership and 50% by an affiliate of the
Partnership, American Insured Mortgage Investors (AIM 84), approximately $1.1
million of the debenture proceeds was paid to AIM 84.

Liquidity and Capital Resources
-------------------------------
         The Partnership's operating cash receipts, derived from payments of
principal and interest on Insured Mortgages, plus cash receipts from interest on
short-term investments, were sufficient during the first six months of 1999 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
Insured Mortgages yield a fixed monthly mortgage payment once purchased, the
cash distributions paid to the Unitholders will vary during each quarter due to
(1) the fluctuating yields in the short-term money market where the monthly
mortgage payments received are temporarily invested prior to the payment of
quarterly distributions, (2) the reduction in the asset base and monthly
mortgage payments due to monthly mortgage payments received or mortgage
dispositions, (3) variations in the cash flow attributable to the delinquency or
default of Insured Mortgages and professional fees and foreclosure costs
incurred in connection with those Insured Mortgages and (4) variations in the
Partnership's operating expenses. As the Partnership continues to liquidate its
mortgage investments and investors receive distributions of return of capital
and taxable gains, investors should expect a reduction in earnings and
distributions due to the decreasing mortgage base.



<PAGE>18

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

         Net cash provided by operating activities decreased for the six months
ended June 30, 1999, as compared to the corresponding period in 1998, primarily
due to the decrease in earnings before mortgage dispositions as it relates to
the reduction in mortgage base.

         Net cash provided by investing activities decreased for the six months
ended June 30, 1999, as compared to the corresponding period in 1998.  This
decrease is primarily due to a decrease in proceeds received from the
disposition of mortgages and a decrease in debenture proceeds due to affiliate,
as discussed previously.  This decrease was offset by an increase in proceeds
from redemption of debenture, as discussed previously.

         Net cash used in financing activities decreased for the six months
ended June 30, 1999, as compared to the corresponding period in 1998, due to a
decrease in the amount of distributions paid to partners in the first six months
of 1999 versus the same period in 1998.

         On October 5, 1998, CRIIMI MAE, the parent of the General Partner, and
CRIIMI MAE Management, Inc., and affiliate of CRIIMI MAE and provider of
personnel and administrative services to the Partnership, filed a voluntary
petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code.  As a
debtor-in possession, CRIIMI MAE will not be permitted to provide any available
capital to the General Partner without approval from the bankruptcy court.  This
restriction or potential loss of the availability of a potential capital
resource could adversely affect the General Partner and the Partnership;
however, CRIIMI MAE has not historically represented a significant source of
capital for the General Partner or the Partnership.  Such bankruptcy filing
could also result in the potential need to replace CRIIMI MAE Management, Inc.
as a provider of personnel and administrative services to the Partnership.

         CRIIMI MAE and CRIIMI MAE Management, Inc. are working diligently
toward the preparation of a plan of reorganization.  The Bankruptcy Court has
granted the motion to extend CRIIMI MAE's and CRIIMI MAE Management, Inc.'s
exclusive right to file a plan of reorganization through September 10, 1999 and
to solicit acceptances thereof through November 10, 1999.  CRIIMI MAE and CRIIMI
MAE Management, Inc. expect to file a plan of reorganization during 1999, which
would contemplate CRIIMI MAE's and CRIIMI MAE Management, Inc.'s emergence from
bankruptcy later in 1999.  There can be no assurance at this time, however, that
a plan of reorganization will be proposed by CRIIMI MAE and CRIIMI MAE
Management, Inc. during such time or that such plan will be confirmed and
consummated.


<PAGE>19

ITEM 2A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

         The Partnership's principal market risk is exposure to changes in
interest rates in the US Treasury market, which coupled with the related spread
to treasury investors required for the Partnership's Insured Mortgages, will
cause fluctuations in the market value of Partnership's assets.

         Management has determined that there has not been a material change as
of June 30, 1999, in market risk from December 31, 1998 as reported in the
Partnership's Annual Report on Form 10-K as of December 31, 1998.



<PAGE>20

PART II. OTHER INFORMATION
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended June 30, 1999.

The exhibits filed as part of this report are listed below:

                  Exhibit No.                     Description
                  -----------               -----------------------
                     27                     Financial Data Schedule



<PAGE>21

                                                      SIGNATURE
                                                     ------------

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

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

                                            By:  CRIIMI, Inc.
                                                 General Partner


/s/ August 12, 1999                         /s/
-------------------                         -------------------------
DATE                                        Cynthia O. Azzara
                                            Principal Financial and
                                              Accounting Officer