<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                                  March 31, 2002
                                                       ---------------

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 Identification No.)
 incorporation or organization)

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 March 31, 2002,  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, 2002
<TABLE>
<CAPTION>
                                                                                                  Page
                                                                                                  ----
<S>                                                                                                <C>
PART I.       Financial Information

Item 1.       Financial Statements

              Balance Sheets - March 31, 2002 (unaudited) and December 31, 2001                     3

              Statements of Income and Comprehensive Income - for the three
                 months ended March 31, 2002 and 2001 (unaudited)                                   4

              Statement of Changes in Partners' Equity - for the three months ended
                 March 31, 2002 (unaudited)                                                         5

              Statements of Cash Flows - for the three months ended March 31, 2002
                 and 2001 (unaudited)                                                               6

              Notes to Financial Statements (unaudited)                                             7

Item 2.       Management's Discussion and Analysis of Financial Condition and Results of
                 Operations                                                                        13

Item 3.       Qualitative and Quantitative Disclosures about Market Risk                           17

PART II.      Other Information

Item 6.       Exhibits and Reports on Form 8-K                                                     18

Signature                                                                                          19
</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,
                                                               2002              2001
                                                           ------------      ------------
                                                           (Unaudited)
                                     ASSETS

<S>                                                        <C>               <C>
Investment in FHA-Insured Certificates and GNMA
  Mortgage-Backed Securities, at fair value
    Acquired insured mortgages                             $ 41,844,999      $ 45,845,197
    Originated insured mortgages                             15,594,550        15,734,485
                                                           ------------      ------------
                                                             57,439,549        61,579,682


Investment in FHA-Insured Loans, at amortized cost,
  net of unamortized discount and premium:
    Acquired insured mortgages                                8,881,718         8,914,573
    Originated insured mortgages                              9,396,153        12,430,002
                                                           ------------      ------------
                                                             18,277,871        21,344,575

Cash and cash equivalents                                    16,392,855         4,366,085

Receivables and other assets                                  4,358,126         8,394,392

Investment in FHA debenture                                           -         2,385,233
                                                           ------------      ------------
      Total assets                                         $ 96,468,401      $ 98,069,967
                                                           ============      ============

                        LIABILITIES AND PARTNERS' EQUITY

Distributions payable                                      $ 16,654,897      $  1,885,460

Accounts payable and accrued expenses                           137,709           121,659

Due to affiliate                                                      -         1,235,104
                                                           ------------      ------------
      Total liabilities                                      16,792,606         3,242,223
                                                           ------------      ------------
Partners' equity:
  Limited partners' equity, 15,000,000 Units authorized,
    12,079,514 Units issued and outstanding                  86,301,852        99,801,805
  General partners' deficit                                  (6,328,986)       (5,781,121)
  Accumulated other comprehensive (loss) income                (297,071)          807,060
                                                           ------------      ------------
      Total partners' equity                                 79,675,795        94,827,744
                                                           ------------      ------------
      Total liabilities and partners' equity               $ 96,468,401      $ 98,069,967
                                                           ============      ============
</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,
                                                                       2002             2001
                                                                   ------------     ------------
<S>                                                                <C>              <C>
Income:
  Mortgage investment income                                       $  1,620,471     $  2,147,699
  Interest and other income                                             106,204          147,362
                                                                   ------------     ------------
                                                                      1,726,675        2,295,061
                                                                   ------------     ------------

Expenses:
  Asset management fee to related parties                               189,781          260,415
  General and administrative                                             98,974          101,101
                                                                   ------------     ------------
                                                                        288,755          361,516
                                                                   ------------     ------------
Net earnings before gains on
  mortgage dispositions                                               1,437,920        1,933,545

Gains on mortgage dispositions                                        1,169,159          262,286
                                                                   ------------     ------------

Net earnings                                                       $  2,607,079     $  2,195,831
                                                                   ============     ============
Other comprehensive (loss) income - adjustment to
  unrealized (losses) gains on investments in insured mortgages      (1,104,131)         575,549
                                                                   ------------     ------------

Comprehensive income                                               $  1,502,948     $  2,771,380
                                                                   ============     ============

Net earnings allocated to:
  Limited partners - 96.1%                                         $  2,505,403     $  2,110,194
  General Partner -   3.9%                                              101,676           85,637
                                                                   ------------     ------------
                                                                   $  2,607,079     $  2,195,831
                                                                   ============     ============

Net earnings per Unit of limited
  partnership interest - basic                                     $       0.21     $       0.17
                                                                   ============     ============
</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, 2002

                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                       Accumulated
                                                                                          Other
                                                        General         Limited       Comprehensive
                                                        Partner         Partner       Income (Loss)      Total
                                                      ------------    ------------    ------------    ------------
<S>                                                   <C>             <C>             <C>             <C>
Balance, December 31, 2001                            $ (5,781,121)   $ 99,801,805    $    807,060    $ 94,827,744

  Net Earnings                                             101,676       2,505,403               -       2,607,079

  Adjustment to unrealized gains (losses) on
     investments in insured mortgages                            -               -      (1,104,131)     (1,104,131)

  Distributions paid or accrued of $1.325 per Unit,
     including return of capital of $1.115 per Unit       (649,541)    (16,005,356)              -     (16,654,897)
                                                      ------------    ------------    ------------    ------------

Balance, March 31, 2002                               $ (6,328,986)   $ 86,301,852    $   (297,071)   $ 79,675,795
                                                      ============    ============    ============    ============

Limited Partnership Units outstanding - basic, as
  of March 31, 2002                                                     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,
                                                                                               2002              2001
                                                                                           ------------      ------------
<S>                                                                                        <C>               <C>
Cash flows from operating activities:
   Net earnings                                                                            $  2,607,079      $  2,195,831
   Adjustments to reconcile net earnings to net cash provided by operating activities:
      Net gain on mortgage dispositions                                                      (1,169,159)         (262,286)
      Changes in assets and liabilities:
         Decrease (increase) in receivables and other assets                                    708,321           (53,781)
         Increase (decrease) in accounts payable and accrued expenses                            16,050            (9,541)
         Decrease in due to affiliate                                                           (42,487)          (28,247)
                                                                                           ------------      ------------

            Net cash provided by operating activities                                         2,119,804         1,841,976
                                                                                           ------------      ------------

Cash flows from investing activities:
   Proceeds from disposition of mortgages                                                     3,682,282         9,479,999
   Proceeds received from Midland                                                             6,759,242                 -
   Proceeds from redemption of debenture                                                      2,385,233                 -
   Debenture proceeds paid to affiliate                                                      (1,192,617)                -
   Receipt of mortgage principal from scheduled payments                                        158,286           285,379
                                                                                           ------------      ------------

            Net cash provided by investing activities                                        11,792,426         9,765,378
                                                                                           ------------      ------------

Cash flows used in financing activities:
   Distributions paid to partners                                                            (1,885,460)       (6,284,867)
                                                                                           ------------      ------------


Net increase in cash and cash equivalents                                                    12,026,770         5,322,487

Cash and cash equivalents, beginning of period                                                4,366,085         5,631,117
                                                                                           ------------      ------------

Cash and cash equivalents, end of period                                                   $ 16,392,855      $ 10,953,604
                                                                                           ============      ============

Non-cash investing activity:
   Portion of HUD debentures due from Midland in exchange
      for the mortgages on Country Club Terrace Apartments,
      Nevada Hills Apartments and Dunhaven Apartments                                      $  3,431,297                 -
</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 under the Uniform Limited  Partnership Act of the state of California
on June 26, 1984. The Partnership  Agreement  ("Partnership  Agreement")  states
that the  Partnership  will  terminate on December 31, 2009,  unless  terminated
earlier under the provisions of the Partnership Agreement.

     CRIIMI, Inc. (the "General  Partner"),  a wholly owned subsidiary of CRIIMI
MAE Inc. ("CRIIMI MAE"),  holds a partnership  interest of 3.9%. AIM Acquisition
Partners L.P. (the "Advisor") serves as the advisor to the Partnership  pursuant
to an advisory  agreement  between the Advisor and 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., Sun America  Investments,  Inc.  (successor to Broad,
Inc.) and CRI/AIM Investment,  L.P., an affiliate of CRIIMI MAE. AIM Acquisition
is a Delaware  corporation  that is primarily owned by Sun America  Investments,
Inc. and The Goldman Sachs Group, L.P.

     Under  the  Advisory  Agreement,   the  Advisor  renders  services  to  the
Partnership, including but not limited to, the management and disposition of the
Partnership's  portfolio of  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.  The Advisor is permitted to delegate the  performance  of services
pursuant  to  a  sub-advisory  agreement  (the  "Sub-Advisory  Agreement").  The
delegation of such  services  does not relieve the Advisor of its  obligation to
perform such services.  CRIIMI MAE Services Limited  Partnership  ("CMSLP"),  an
affiliate of CRIIMI MAE,  manages the  Partnership's  portfolio  pursuant to the
Sub-Advisory  Agreement.  The  general  partner  of CMSLP  is  CMSLP  Management
Company, Inc., a wholly owned subsidiary of CRIIMI MAE.

     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.


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 March 31, 2002
and December 31, 2001 and the results of its  operations  and its cash flows for
the three months ended March 31, 2002 and 2001.

<PAGE>8

     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 generally accepted accounting  principles
("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, 2001.


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>
                                                                 March 31,               December 31,
                                                                   2002                     2001
                                                                -----------              -----------
<S>                                                             <C>                      <C>
Fully Insured Acquired Mortgages:
  Number of:
    GNMA Mortgage-Backed Securities                                       2                        2
    FHA-Insured Certificates (1) through (4)                             23                       26
  Amortized Cost                                                $41,642,529              $44,640,062
  Face Value                                                     42,701,741               46,215,896
  Fair Value                                                     41,844,999               45,845,197

Fully Insured Originated Mortgages:
  Number of:
    GNMA Mortgage-Backed Securities                                       1                        1
    FHA-Insured Certificates                                              1                        1
  Amortized Cost                                                $16,094,091              $16,132,560
  Face Value                                                     16,094,090               16,132,560
  Fair Value                                                     15,594,550               15,734,485
</TABLE>

(1)  In April 2002,  the mortgage on Garden Court  Apartments  was prepaid.  The
     Partnership received net proceeds of approximately $1.2 million and expects
     to  recognize  a  gain  of   approximately   $9,000.   A  distribution   of
     approximately $0.09 per Unit related to the prepayment of this mortgage was
     declared in April and is expected to be paid to Unitholders in August 2002.

     In addition to footnote (1) above, footnotes (2) through (4) referred to in
the table above  correspond to the numbers of the items listed in the table that
follows.

     The list below summarizes debentures issued by the United States Department
of Housing and Urban Development  ("HUD") in January 2002 for mortgages assigned
to  HUD  under  Section  221 of the  National  Housing  Act  (the  "Section  221
program").  Interest is payable on the debentures semi-annually on January 1 and
July 1. The  debentures  were  issued to  Firstar  Trust  Company,  the  initial
mortgagee,  and  transferred to Midland Loan  Services,  Inc.  ("Midland"),  the
servicer.  The Partnership  anticipates the debentures will be redeemed prior to
the  maturity  date.  The net  proceed  amounts  listed  below are  included  in
receivables and other assets in the Partnership's  balance sheet as of March 31,
2002.

<PAGE>9
<TABLE>
<CAPTION>

(Dollars in thousands, except per unit amounts)

                                         Debenture                             Date of                   Debenture
                                         Interest       Net     Application    Response        Gain       Maturity
     Complex Name                          Rate      Proceeds      Date        from HUD        2002         Date
     ------------                          ----      --------      ----        --------        ----         ----
<C>                                       <C>         <C>            <C>       <C>            <C>         <C>
(2)  Country Club Terrace Apts.           7.500%      $ 1,425    Sep 2000      Jan 2002       $ 178       Sep 2010
(3)  Nevada Hills Apartments              7.500%        1,134    Dec 2000      Jan 2002         154       Dec 2010
(4)  Dunhaven Apartments                  7.125%          872    Jan 2001      Jan 2002         165       Feb 2011
                                                      -------
     Total included in receivables
     and other assets as of March 31, 2002            $ 3,431
                                                      =======
</TABLE>

     As of May 1, 2002, 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 mortgage on The Executive House,  which is
delinquent with respect to the April 2002 payment of principal and interest. The
Partnership  no longer  receives  monthly  principal and interest from mortgages
that are in the HUD  assignment  process  under the  Section  221  program.  The
servicer  of the  mortgage on Fairlawn  II filed an  application  for  insurance
benefits  under section 221 in September  2000.  The face value of this mortgage
was approximately $755,000 as of the insurance application date. The Partnership
has not received approval for the assignment of this mortgage as of May 1, 2002.

     Under  the  Section  221  program,  a  mortgagee  has the right to assign a
mortgage  ("put")  to FHA at the  expiration  of 20 years from the date of final
endorsement  if the  mortgage  is not in  default at such  time.  Any  mortgagee
electing to assign an Insured  Mortgage to FHA receives,  in exchange  therefor,
HUD debentures having a total face value equal to the then outstanding principal
balance of the Insured Mortgage plus accrued interest to the date of assignment.
These HUD debentures  generally  mature 10 years from the date of assignment and
bear interest at a rate announced  semi-annually  by HUD in the Federal Register
("going Federal rate") at such date. This assignment  procedure is applicable to
an  Insured  Mortgage,  which  had a firm  or  conditional  FHA  commitment  for
insurance on or before  November  30, 1983.  Once the servicer of a mortgage has
filed an application  for insurance  benefits under Section 221, the Partnership
will no longer  receive the monthly  principal  and  interest on the  applicable
mortgage. The Partnership expects to receive HUD debentures, as discussed above,
plus accrued  interest at the going Federal rate, from date of assignment of the
mortgage  to the  date  of  issuance  of the  debenture.  The  Partnership  will
recognize a gain on these  assignments  upon receipt of HUD debentures or a loss
when it becomes probable that a loss will be incurred.

<PAGE>10

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>
                                                               March 31,               December 31,
                                                                 2002                     2001
                                                              -----------              -----------
<S>                                                           <C>                      <C>
Fully Insured Acquired Loans:
  Number of Loans                                                       7                        7
  Amortized Cost                                              $ 8,881,718              $ 8,914,573
  Face Value                                                   10,578,264               10,632,937
  Fair Value                                                   10,462,428               10,451,178

Fully Insured Originated Loans:
  Number of Loans (1)                                                   2                        3
  Amortized Cost                                              $ 9,396,153              $12,430,002
  Face Value                                                    9,136,039               12,132,653
  Fair Value                                                    8,976,421               12,122,221
</TABLE>

(1)  In  January  2002,  the  mortgage  on  Longleaf  Lodge  was  prepaid.   The
     Partnership  received  net  proceeds  of  approximately  $3.7  million  and
     recognized  a gain of  approximately  $672,000  for the three  months ended
     March 31, 2002. A distribution of  approximately  $0.29 per Unit related to
     the  prepayment  of this  mortgage  was  declared  in  January  and paid to
     Unitholders in May 2002.

     As of May 1, 2002, all of the Partnership's  FHA-Insured Loans were current
with respect to the payment of principal and  interest,  except for the mortgage
on  Westbrook  Apartments,  which is  delinquent  with respect to the April 2002
payment of principal and interest.

     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 months ended March 31, 2002 and 2001, the Partnership  received
additional  interest of $3,228 and $0,  respectively,  from the  Participations.
These  amounts,  if any,  are  included  in  mortgage  investment  income on the
accompanying Statements of Income and Comprehensive Income.


5.   INVESTMENT IN DEBENTURE AND DUE TO AFFILIATE

     In December  2000, HUD issued  assignment  proceeds in the form of a 7.125%
FHA debenture for the mortgage on Fox Run Apartments. The debenture, with a face
value as of December 31, 2001,  of  $2,385,233,  was issued to the  Partnership,
with interest payable semi-annually on January 1 and July 1. The mortgage on Fox
Run  Apartments  was  beneficially  owned 50% by the  Partnership  and 50% by an
affiliate,  American Insured Mortgage Investors ("AIM 84"). In January 2002, net
proceeds of  approximately  $2.4 million were received  upon  redemption of this
debenture.  Since the  Partnership  was the record owner and AIM 84 was the 50 %
beneficial  owner of the  mortgage  on Fox Run  Apartments,  approximately  $1.2
million  of the  debenture  proceeds  was  paid to AIM  84.  A  distribution  of
approximately  $0.09 per Unit related to the  redemption  of this  debenture was
declared in January 2002 and paid in May 2002.

<PAGE>11

6.   DISTRIBUTIONS TO UNITHOLDERS

     The  distributions  paid or accrued to  Unitholders on a per Unit basis for
the three months ended March 31, 2002 and 2001 are as follows:

                                            2002          2001
                                           ------        ------
     Quarter ended March 31,               $1.325(1)     $0.680(2)
                                           ------        ------
                                           $1.325        $0.680
                                           ======        ======

     The following disposition proceeds are included in the distributions listed
above:
<TABLE>
<CAPTION>
                                                                   Date                       Net
                                                                 Proceeds       Type of     Proceeds
     Complex Name(s)                                             Received     Disposition   Per Unit
     ---------------                                             --------     -----------   --------
<C>                                                              <C>          <C>            <C>
(1) Quarter ended March 31, 2002:
     The Gate House Apartments                                   Dec 2001     Prepayment     $0.220
     Longleaf Lodge                                              Jan 2002     Prepayment      0.290
     Fox Run Apartments                                          Jan 2002     Assignment      0.090
     Interest on debentures related to mortgages on Summit
        Square Manor, Park Place, Park Hill Apts, Fairfax
        House, Woodland Villas, Country Club Terrace Apts,       Jan - Feb
        Dunhaven Apts and Nevada Hills Apts                        2002       Assignment      0.060
     Summit Square Manor                                         Jan 2002     Assignment      0.150
     Park Place                                                  Jan 2002     Assignment      0.060
     Park Hill Apartments                                        Jan 2002     Assignment      0.140
     Fairfax House                                               Jan 2002     Assignment      0.170
     Woodland Villas                                             Jan 2002     Assignment      0.025
(2) Quarter ended March 31, 2001:
     The Meadows of Livonia                                      Jan 2001     Prepayment     $0.530
</TABLE>

     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 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  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  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.

<PAGE>12

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:

<TABLE>
<CAPTION>
                 COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
                 -----------------------------------------------
                                                                                        For the
                                                                                   three months ended
                                                                                       March 31,
Name of Recipient                    Capacity in Which Served/Item                 2002         2001
-----------------                    -----------------------------                 ----         ----
<S>                                  <C>                                         <C>          <C>
CRIIMI, Inc. (1)                     General Partner/Distribution                $ 649,541    $ 333,350

AIM Acquisition Partners,L.P.(2)     Advisor/Asset Management Fee                  189,781      260,415

                                     Affiliate of General Partner/Expense
CRIIMI MAE Management, Inc.            Reimbursement                                15,342       11,969
</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, pursuant to the Partnership Agreement, is entitled to an Asset
     Management Fee equal to 0.95% of Total  Invested  Assets (as defined in the
     Partnership  Agreement).  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 $55,945 and $76,759 for the three  months ended March 31, 2002
     and 2001,  respectively.  The general  partner and limited partner of CMSLP
     are wholly owned subsidiaries of CRIIMI MAE.

<PAGE>13

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  "believes,"   "anticipates,"   "expects,"   "contemplates,"  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 or  incorporated  by  reference  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  with the  Securities and Exchange
Commission  including,  without  limitation,  statements with respect to growth,
projected  revenues,  earnings,  returns 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 growth,  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 and litigation
matters,  (ii) interest rates,  (iii) trends in the economy,  (iv) prepayment of
mortgages and (v) defaulted mortgages.  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
-------

     As of March 31, 2002, the Partnership had invested in 36 Insured  Mortgages
with an aggregate  amortized cost of approximately  $76.0 million,  an aggregate
face  value of  approximately  $78.5  million  and an  aggregate  fair  value of
approximately $76.9 million, as discussed below.

     In April 2002,  the mortgage on Garden Court  Apartments  was prepaid.  The
Partnership  received net proceeds of approximately  $1.2 million and expects to
recognize a gain of approximately  $9,000. A distribution of approximately $0.09
per Unit related to the prepayment of this mortgage was declared in April and is
expected to be paid to Unitholders in August 2002.

     As of May 1, 2002, 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 Westbrook  Apartments and The
Executive House,  which are delinquent with respect to the April 2002 payment of
principal and interest. The Partnership no longer receives monthly principal and
interest from mortgages that are in the HUD assignment process under the Section
221 program.  The  servicer of the mortgage on Fairlawn II filed an  application
for insurance  benefits  under section 221 in September  2000. The face value of
this mortgage was approximately  $755,000 as of the insurance  application date.
The Partnership has not received approval for the assignment of this mortgage as
of May 1, 2002.

     Under the Section 221 program,  a mortgagee has the right to put a mortgage
to FHA at the  expiration of 20 years from the date of final  endorsement if the
mortgage  is not in default at such time.  Any  mortgagee  electing to assign an
Insured Mortgage to FHA receives, in exchange therefor,  HUD debentures having a
total face value equal to the then outstanding  principal balance of the Insured
Mortgage plus accrued  interest to the date of assignment.  These HUD debentures
generally  mature 10 years from the date of assignment  and bear interest at the
going Federal rate at such date. This  assignment  procedure is applicable to an
Insured  Mortgage,  which had a firm or conditional FHA commitment for insurance
on or before  November  30,  1983.  Once the servicer of a mortgage has filed an
application for insurance benefits under the Section 221 program, the

<PAGE>14

Partnership  will no longer  receive the monthly  principal  and interest on the
applicable  mortgage.  The  Partnership  expects to receive HUD  debentures,  as
discussed  above,  plus accrued interest at the going Federal rate, from date of
assignment  of the  mortgage  to the  date of  issuance  of the  debenture.  The
Partnership  will  recognize  a gain on these  assignments  upon  receipt of HUD
debentures or a loss when it becomes probable that a loss will be incurred.

     The list below summarizes  debentures  issued in January 2002 for mortgages
assigned  to HUD under the  Section  221  program.  Interest  is  payable on the
debentures  semi-annually on January 1 and July 1. The debentures were issued to
Firstar Trust Company,  the initial  mortgagee,  and transferred to Midland Loan
Services,  Inc.  ("Midland"),  the servicer.  The  Partnership  anticipates  the
debentures  will be redeemed prior to the maturity date. The net proceed amounts
listed below are included in receivables  and other assets in the  Partnership's
balance sheet as of March 31, 2002.

<TABLE>
<CAPTION>
(Dollars in thousands, except per unit amounts)

                                        Debenture                             Date of                  Debenture
                                        Interest       Net     Application    Response       Gain      Maturity
      Complex Name                        Rate      Proceeds      Date        from HUD       2002        Date
      ------------                        ----      --------      ----        --------       ----        ----
<C>                                      <C>         <C>        <C>           <C>           <C>        <C>
(2)  Country Club Terrace Apts.          7.500%      $ 1,425    Sep 2000      Jan 2002      $ 178      Sep 2010
(3)  Nevada Hills Apartments             7.500%        1,134    Dec 2000      Jan 2002        154      Dec 2010
(4)  Dunhaven Apartments                 7.125%          872    Jan 2001      Jan 2002        165      Feb 2011
                                                     -------
     Total included in receivables
     and other assets as of March 31, 2002           $ 3,431
                                                     =======
</TABLE>

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

     Net earnings increased by approximately $411,000 for the three months ended
March 31, 2002, as compared to the corresponding  period in 2001,  primarily due
to an increase in gains on mortgage dispositions, partially offset by a decrease
in mortgage investment income, as discussed below.

     Mortgage  investment  income  decreased by  approximately  $527,000 for the
three months ended March 31, 2002,  as compared to the  corresponding  period in
2001,  primarily  due to a reduction in the  mortgage  base.  The mortgage  base
decreased  as a  result  of  fifteen  mortgage  dispositions  with an  aggregate
principal balance of approximately $26 million,  representing an approximate 24%
decrease in the  aggregate  principal  balance of the total  mortgage  portfolio
since March 2001 as compared to March 2002.

     Interest and other income decreased by approximately  $41,000 for the three
months ended March 31, 2002,  as compared to the  corresponding  period in 2001,
primarily  due to the timing of  temporary  investment  of mortgage  disposition
proceeds prior to distribution.

     Asset  management  fees  decreased by  approximately  $71,000 for the three
months ended March 31, 2002,  as compared to the  corresponding  period in 2001,
primarily due to the reduction in the mortgage asset base.

     General and  administrative  expenses  decreased  slightly by approximately
$2,000  for  the  three  months  ended  March  31,  2002,  as  compared  to  the
corresponding period in 2001.

     Gains on mortgage dispositions  increased by approximately $907,000 for the
three months ended March 31, 2002,  as compared to the  corresponding  period in
2001.  During the first three months of 2002, the Partnership  recognized a gain
of approximately  $672,000 from the prepayment of the mortgage on Longleaf Lodge
and gains of  approximately  $497,000  from the  assignment  of the mortgages on
Country  Club  Terrace   Apartments,   Dunhaven   Apartments  and  Nevada  Hills

<PAGE>15

Apartments.  During the first three months of 2001, the  Partnership  recognized
gains of  approximately  $262,000  from the  prepayment  of the mortgages on The
Meadows of Livonia and Gold Key Village Apartments.

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 three months of 2002 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  received from
Insured  Mortgages.  Although the 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 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 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.

     Net cash  provided  by  operating  activities  increased  by  approximately
$278,000  for the  three  months  ended  March  31,  2002,  as  compared  to the
corresponding  period in 2001,  primarily due to a decrease in  receivables  and
other  assets,  partially  offset by lower mortgage  investment  income due to a
reduction in the mortgage base. The decrease in receivables  and other assets is
primarily due to the receipt of principal and interest previously accrued on the
mortgages  awaiting  assignment  from HUD  under the  Section  221  program,  as
previously discussed.

     Net cash provided by investing  activities  increased by approximately $2.0
million  for  the  three  months  ended  March  31,  2002,  as  compared  to the
corresponding  period  in 2001.  This  increase  is  primarily  due to  proceeds
received  from  Midland,  as discussed  below,  and proceeds  received  from the
redemption of a debenture,  as discussed  below.  These increases were partially
offset by a decrease in proceeds  received from the  prepayment of mortgages and
debenture proceeds paid to an affiliate, as discussed below.

     During 2001, HUD issued  assignment  proceeds in the form of FHA debentures
in  exchange  for  mortgages  put to HUD  under the  Section  221  program.  The
debentures were issued to Firstar Trust Company, the initial mortgagee, and were
subsequently  transferred  to Midland for each of the mortgages on Summit Square
Manor, Park Place,  Park Hill Apartments,  Fairfax House and Woodland Villas. In
January 2002, the Partnership  received  aggregate net proceeds of approximately
$6.8 million from Midland for the  redemption  of the FHA  debentures  that were
previously  issued by HUD.  A  distribution  of  approximately  $0.545  per Unit
related to the redemption of these debentures was declared in Februuary and paid
in May 2002.

     In December  2000, HUD issued  assignment  proceeds in the form of a 7.125%
FHA debenture for the mortgage on Fox Run Apartments. The debenture, with a face
value of  approximately  $2.4 million as of December 31, 2001, was issued to the
Partnership,  with interest  payable  semi-annually on January 1 and July 1. The
mortgage on Fox Run  Apartments was owned 50% by the  Partnership  and 50% by an
affiliate of the Partnership, American Insured Mortgage Investors ("AIM 84"). In
January  2002,  net proceeds of  approximately  $2.4 million were  received upon
redemption  of this  debenture.  Since the  mortgage on Fox Run  Apartments  was
beneficially owned 50% by the Partnership and 50% by AIM 84,  approximately $1.2
million  of the  debenture  proceeds  was  paid to AIM  84.  A  distribution  of
approximately  $0.09 per Unit related to the  redemption  of this  debenture was
declared in January 2002 and paid in May 2002.

<PAGE>16

     Net cash used in  financing  activities  decreased  by  approximately  $4.4
million  for  the  three  months  ended  March  31,  2002,  as  compared  to the
corresponding  period in 2001, due to a decrease in the amount of  distributions
paid to partners in the first three  months of 2002  compared to the same period
in 2001.


<PAGE>17

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

     The Partnership's  principal market risk is exposure to changes in interest
rates in the U.S. Treasury  securities  market.  The Partnership will experience
fluctuations  in the  market  value of its  assets  related  to  changes  in the
interest rates of U.S. Treasury bonds as well as increases in the spread between
U.S. Treasury bonds and the  Partnership's  Insured  Mortgages.  As of March 31,
2002,  the average U.S.  Treasury rate used to price the  Partnership's  Insured
Mortgages  had  increased by  approximately  35 to 54 basis  points  compared to
December 31, 2001.

     Management has determined  that there has not been a material  change as of
March 31,  2002,  in market  risk from  December  31,  2001 as  reported  in the
Partnership's Annual Report on Form 10-K as of December 31, 2001.


<PAGE>18

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

     None.



<PAGE>19

PART II.   OTHER INFORMATION

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


May 10, 2002                                       /s/ Cynthia O. Azzara
------------                                       ---------------------------
DATE                                               Cynthia O. Azzara
                                                   Senior Vice President,
                                                   Chief Financial Officer and
                                                   Treasurer