<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, 2001
                                                     --------------

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, 2001,  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, 2001

<TABLE>
<CAPTION>
                                                                                                  Page
                                                                                                  ----
<S>           <C>                                                                                  <C>
PART I.       Financial Information

Item 1.       Financial Statements

              Balance Sheets - March 31, 2001  (unaudited) and December 31, 2000                    3

              Statements of Income and Comprehensive Income - for the three
                 months ended March 31, 2001  and 2000  (unaudited)                                 4

              Statement of Changes in Partners' Equity - for the three months ended
                 March 31, 2001  (unaudited)                                                        5

              Statements of Cash Flows - for the three months ended March 31, 2001
                 and 2000  (unaudited)                                                              6

              Notes to Financial Statements (unaudited)                                             7

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

Item 2A.      Qualitative and Quantitative Disclosures about Market Risk                           16

PART II.      Other Information

Item 5.       Other Information                                                                    17

Item 6.       Exhibits and Reports on Form 8-K                                                     17

Signature                                                                                          18
</TABLE>

<PAGE>3

PART I.   FINANCIAL INFORMATION
ITEM 1.   FINANCIAL STATEMENTS

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

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                            March 31,        December 31,
                                                              2001              2000
                                                          -------------     -------------
                                                          (Unaudited)
                        ASSETS

<S>                                                       <C>               <C>
Investment in FHA-Insured Certificates and GNMA
  Mortgage-Backed Securities, at fair value
    Acquired insured mortgages                            $  61,841,908     $  70,770,317
    Originated insured mortgages                             15,995,735        15,927,124
                                                          -------------     -------------
                                                             77,837,643        86,697,441


Investment in FHA-Insured Loans, at amortized cost,
  net of unamortized discount and premium:
    Acquired insured mortgages                               10,007,914        10,041,697
    Originated insured mortgages                             12,536,075        12,570,037
                                                          -------------     -------------
                                                             22,543,989        22,611,734

Cash and cash equivalents                                    10,953,604         5,631,117

Receivables and other assets                                  1,373,495         1,319,714

Investment in FHA debenture                                   2,361,381         2,361,381
                                                          -------------     -------------
      Total assets                                        $ 115,070,112     $ 118,621,387
                                                          =============     =============

           LIABILITIES AND PARTNERS' EQUITY

Distributions payable                                     $   8,547,419     $   6,284,867

Accounts payable and accrued expenses                           103,323           112,864

Due to affiliate                                              1,213,860         1,242,107
                                                          -------------     -------------
      Total liabilities                                       9,864,602         7,639,838
                                                          -------------     -------------
Partners' equity:
  Limited partners' equity, 15,000,000 Units authorized,
    12,079,514 Units issued and outstanding                 108,150,856       114,254,731
  General partners' deficit                                  (5,442,295)       (5,194,582)
  Accumulated other comprehensive income                      2,496,949         1,921,400
                                                          -------------     -------------
      Total Partners' equity                                105,205,510       110,981,549
                                                          -------------     -------------
      Total liabilities and partners' equity              $ 115,070,112     $ 118,621,387
                                                          =============     =============
</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)



                                                     For the three months ended
                                                              March 31,
                                                    ----------------------------
                                                        2001            2000
                                                    -----------      -----------

Income:
  Mortgage investment income                        $ 2,147,699      $ 2,520,344
  Interest and other income                             147,362          155,694
                                                    -----------      -----------
                                                      2,295,061        2,676,038
                                                    -----------      -----------

Expenses:
  Asset management fee to related parties               260,415          293,517
  General and administrative                            101,101          106,053
                                                    -----------      -----------
                                                        361,516          399,570
                                                    -----------      -----------
Net earnings before gains on
  mortgage dispositions                               1,933,545        2,276,468

Gains on mortgage dispositions                          262,286           44,023
                                                    -----------      -----------

Net earnings                                        $ 2,195,831      $ 2,320,491
                                                    ===========      ===========

Other comprehensive income                              575,549           47,673
                                                    -----------      -----------
Comprehensive income                                $ 2,771,380      $ 2,368,164
                                                    -----------      -----------

Net earnings allocated to:
  Limited partners - 96.1%                          $ 2,110,194      $ 2,229,992
  General Partner -   3.9%                               85,637           90,499
                                                    -----------      -----------
                                                    $ 2,195,831      $ 2,320,491
                                                    ===========      ===========

Net earnings per Unit of limited
  partnership interest - basic                      $      0.17      $      0.18
                                                    ===========      ===========


                   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, 2001

                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                        Accumulated
                                                                                          Other
                                                        General          Limited       Comprehensive
                                                        Partner          Partner          Income          Total
                                                     --------------   -------------    -------------   -------------
<S>                                                  <C>              <C>              <C>             <C>
Balance, December 31, 2000                           $  (5,194,582)   $ 114,254,731    $   1,921,400   $ 110,981,549

  Net Earnings                                              85,637        2,110,194             --         2,195,831

  Adjustment to unrealized gains on
     investments in insured mortgages                         --               --            575,549         575,549

  Distributions paid or accrued of $0.68 per Unit,
     including return of capital of $0.51 per Unit        (333,350)      (8,214,069)            --        (8,547,419)
                                                     -------------    -------------    -------------   -------------

Balance, March 31, 2001                              $  (5,442,295)   $ 108,150,856    $   2,496,949   $ 105,205,510
                                                     =============    =============    =============   =============

Limited Partnership Units outstanding - basic, as
  of March 31, 2001                                                      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,
                                                                                             2001             2000
                                                                                         ------------     ------------
<S>                                                                                      <C>              <C>
Cash flows from operating activities:
   Net earnings                                                                          $  2,195,831     $  2,320,491
   Adjustments to reconcile net earnings to net cash provided by operating activities:
      Net gain on mortgage dispositions                                                      (262,286)         (44,023)

      Changes in assets and liabilities:
         (Increase) decrease in receivables and other assets                                  (53,781)         161,134
         Decrease in accounts payable and accrued expenses                                     (9,541)          (2,657)
         Decrease in due to affiliate                                                         (28,247)            --
                                                                                         ------------     ------------
            Net cash provided by operating activities                                       1,841,976        2,434,945
                                                                                         ------------     ------------

Cash flows from investing activities:
   Proceeds from disposition of mortgages                                                   9,479,999        1,659,597
   Receipt of mortgage principal from scheduled payments                                      285,379          301,431
                                                                                         ------------     ------------

            Net cash provided by investing activities                                       9,765,378        1,961,028
                                                                                         ------------     ------------

Cash flows used in financing activities:
   Distributions paid to partners                                                          (6,284,867)     (22,876,915)
                                                                                         ------------     ------------


Net increase (decrease) in cash and cash equivalents                                        5,322,487      (18,480,942)

Cash and cash equivalents, beginning of period                                              5,631,117       23,723,644
                                                                                         ------------     ------------

Cash and cash equivalents, end of period                                                 $ 10,953,604     $  5,242,702
                                                                                         ============     ============
</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 previously
terminated under the provisions of the Partnership Agreement.

     CRIIMI,  Inc. (the "General Partner") holds a partnership  interest of 3.9%
and 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., 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 will render services to the
Partnership, including but not limited to, the management of the Partnership's
portfolio of mortgages and the disposition of the Partnership's mortgages. Such
services will be 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 will 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 CRIIMI MAE Services, Inc., an affiliate 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.

         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 voluntary
petitions for relief under chapter 11 of title 11 of the United States Code (the
"Bankruptcy Code"). On November 22, 2000, the United States Bankruptcy Court for
the District of Maryland, in Greenbelt, Maryland (the "Bankruptcy Court")
confirmed CRIIMI MAE's and CRIIMI MAE Management, Inc.'s Third Amended Joint
Plan of Reorganization (as amended and supplemented by praecipes filed with the
Bankruptcy Court on July 13, 14 and 21, and November 22, 2000). On April 17,
2001, CRIIMI MAE and CRIIMI MAE Management, Inc. announced the completion of
their confirmed joint plan of reorganization and emerged from bankruptcy. This
marks the conclusion of CRIIMI MAE's and CRIIMI MAE Management, Inc.'s financial
reorganization.


<PAGE>8


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, 2001
and December 31, 2000 and the results of its operations for the three months
ended March 31, 2001 and 2000 and its cash flows for the three months ended
March 31, 2001 and 2000.

     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
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, 2000.

     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.


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,
                                                                   2001                     2000
                                                               ------------             ------------
<S>                                                            <C>                      <C>
Fully Insured Acquired Mortgages:
  Number of
    GNMA Mortgage-Backed Securities                                       4                        4
    FHA-Insured Certificates (1) (2)                                     33                       35
  Amortized Cost                                               $ 59,040,672             $ 68,440,285
  Face Value                                                     61,944,086               71,404,632
  Fair Value                                                     61,841,908               70,770,317

Fully Insured Originated Mortgages:
  Number of
    GNMA Mortgage-Backed Securities                                       1                        1
    FHA-Insured Certificates                                              1                        1
  Amortized Cost                                               $ 16,276,170             $ 16,311,904
  Face Value                                                     16,243,803               16,279,536
  Fair Value                                                     15,995,735               15,927,124
</TABLE>

<PAGE>9

     Listed below is a summary of prepayments  on fully Insured  Mortgages as of
May 1, 2001:
<TABLE>
<CAPTION>
                                                     Date                                              Distribution
                                        Net        Proceeds                  Dist./    Declaration       Payment
       Complex name                   Proceeds     Received       Gain        Unit        Date             Date
       ------------                   --------     --------     ---------    ------     ---------       ---------
<S>                                  <C>           <C>          <C>          <C>        <C>             <C>
(1) The Meadows of Livonia           $6,653,000    Jan. 2001    $ 253,434    $ 0.53     Jan. 2001       May  2001
(2) Gold Key Village Apartments       2,827,000    Mar. 2001        8,852      0.22     Apr. 2001       Aug. 2001
</TABLE>

     As of May 1, 2001, all of the fully insured FHA-Insured Certificates and
GNMA Mortgage-Backed Securities are current with respect to the payment of
principal and interest. In addition, the Partnership no longer receives monthly
principal and interest from the mortgages that are in the HUD assignment process
under Section 221, as discussed below.

      As of May 1, 2001, the Partnership has received notification from the
respective servicers that HUD applications for insurance benefits have been
filed for the following mortgages:

                                                        Outstanding
                                                         Principal    Assignment
  Property Name                     Application Date      Balance        Date
  -------------                     ----------------    ----------       ----
  Park Place Apartments                June 2000        $  754,000        N/A
  Summit Square Manor                  June 2000         1,903,000        N/A
  Park Hill Apartments                 Sept. 2000        1,737,000        N/A
  Fairfax House                        Sept. 2000        2,128,000        N/A
  Country Club Terrace Apts.           Sept. 2000        1,439,000        N/A
  Fairlawn II                          Sept. 2000          755,000        N/A
  Nevada Hills Apts.                   Dec. 2000         1,146,000        N/A
  Dunhaven Apartments, Section I       Jan. 2001           884,000        N/A

      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 FHA-insured mortgage to FHA will receive, in exchange
therefor, HUD debentures having a total face value equal to the then outstanding
principal balance of the FHA-insured mortgage plus accrued interest to the date
of assignment. These HUD debentures will mature 10 years from the date of
assignment and will 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. In
general, the Partnership plans to hold the debentures until called or date of
maturity, whichever comes first. At that time debenture proceeds will be
distributed to Unitholders.
<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,
                                                                   2001                     2000
                                                                -----------              -----------
<S>                                                             <C>                      <C>
  Fully Insured Acquired Loans:
    Number of Loans                                                       8                        8
    Amortized Cost                                              $10,007,914              $10,041,697
    Face Value                                                   11,983,328               12,040,599
    Fair Value                                                   12,021,885               12,023,455

  Fully Insured Originated Loans:
    Number of Loans                                                       3                        3
    Amortized Cost                                              $12,536,075              $12,570,037
    Face Value                                                   12,230,207               12,261,397
    Fair Value                                                   12,316,262               12,192,633
</TABLE>

     As of May 1, 2001, all of the Partnership's FHA-Insured Loans, recorded at
amortized cost, were current with respect to the 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, 2001 and 2000, the Partnership received
additional interest of $0 and $21,566, 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%
debenture for the mortgage on Fox Run Apartments. The debenture, with a face
value of $2,385,233 and a fair value of $2,361,381, 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").
Upon disposition of the debenture 50% of the proceeds will be payable to AIM 84.
The Partnership expects to receive net proceeds of approximately $1.2 million.
The net proceeds due AIM 84 are included on the balance sheet in due to
affiliate. In general, the Partnership will hold the debenture until its
maturity date of June 1, 2010 or when called, whichever comes first. A
distribution will be declared at that time. The servicer of this mortgage filed
an application for insurance benefits under the Section 221 program of the
National Housing Act of 1937 in May 2000.

<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, 2001 and 2000 are as follows:

                                             2001          2000
                                             ----          ----

      Quarter ended March 31,               $0.68(1)      $0.47(2)(3)
                                            -----         -----
                                            $0.68         $0.47
                                            =====         =====

     The following disposition proceeds are included in the distributions listed
above:

                                          Date                            Net
                                        Proceeds           Type of      Proceeds
       Complex Name(s)                  Received         Disposition    Per Unit
       ---------------                  --------         -----------    --------
(1) The Meadows of Livonia             January 2001      Prepayment      $ 0.53
(2) Northwood Apartments               December 1999     Prepayment        0.13
(3) Turtle Creek Apartments            January 2000      Prepayment        0.13


     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>12


7.   TRANSACTIONS WITH RELATED PARTIES

     The General Partner and certain affiliated entities, during the three
months ended March 31, 2001 and 2000, earned or received compensation or
payments for services from the Partnership as follows:

                 COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
<TABLE>
<CAPTION>
                                                                                              For the
                                                                                        three months ended
                                                                                             March 31,
                                                                                     ------------------------
       Name of Recipient               Capacity in Which Served/Item                    2001          2000
       -----------------               -----------------------------                 ----------    ----------
<S>                                    <C>                                           <C>           <C>
CRIIMI, Inc.(1)                        General Partner/Distribution                  $  333,350    $  230,404

AIM Acquisition Partners, L.P.(2)      Advisor/Asset Management Fee                     260,415       293,517

CRIIMI MAE Management, Inc.            Affiliate of General Partner/
                                         Expense Reimbursement                           11,969        12,966

American Insured Mortgage              Affiliate of Partnership/
  Investors (3)                          Share of FHA Debenture                       1,213,860             -
</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 (both
     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 $76,759 and $86,438 for the three months ended March 31, 2001
     and 2000, respectively. The limited partner of CMSLP is a wholly owned
     subsidiary of CRIIMI MAE Inc.

(3)  In December 2000, HUD issued assignment proceeds in the form of a 7.125%
     debenture for the mortgage on Fox Run Apartments. The debenture, with a
     face value of $2,385,233 and a fair value of $2,361,381, 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"). Upon disposition of the debenture 50% of the proceeds will be
     payable to AIM 84.

<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
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, 2001, the Partnership had invested in 50 Insured Mortgages
with an aggregate amortized cost of approximately $98 million, an aggregate face
value of approximately $102 million and an aggregate fair value of approximately
$102 million, as discussed below.

     As of May 1, 2001, all of the fully insured FHA-Insured Certificates and
GNMA Mortgage-Backed Securities are current with respect to the payment of
principal and interest. In addition, the Partnership no longer receives monthly
principal and interest from the mortgages that are in the HUD assignment process
under Section 221, as discussed below.

      As of May 1, 2001, the Partnership has received notification from the
respective servicers that HUD applications for insurance benefits have been
filed for the following mortgages:

                                                        Outstanding
                                                         Principal    Assignment
  Property Name                     Application Date      Balance        Date
  -------------                     ----------------    ----------       ----
  Park Place Apartments                June 2000        $  754,000        N/A
  Summit Square Manor                  June 2000         1,903,000        N/A
  Park Hill Apartments                 Sept. 2000        1,737,000        N/A
  Fairfax House                        Sept. 2000        2,128,000        N/A
  Country Club Terrace Apts.           Sept. 2000        1,439,000        N/A
  Fairlawn II                          Sept. 2000          755,000        N/A
  Nevada Hills Apts.                   Dec. 2000         1,146,000        N/A
  Dunhaven Apartments, Section I       Jan. 2001           884,000        N/A

<PAGE>14

     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  FHA-insured  mortgage to FHA will  receive,  in exchange
therefor, HUD debentures having a total face value equal to the then outstanding
principal balance of the FHA-insured  mortgage plus accrued interest to the date
of  assignment.  These HUD  debentures  will  mature  10 years  from the date of
assignment  and will 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.  In
general,  the Partnership  plans to hold the debentures  until called or date of
maturity,  whichever  comes  first.  At that  time  debenture  proceeds  will be
distributed to Unitholders.

     In December  2000, HUD issued  assignment  proceeds in the form of a 7.125%
debenture for the mortgage on Fox Run  Apartments.  The  debenture,  with a face
value  of  $2,385,233  and a  fair  value  of  $2,361,381,  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").
Upon disposition of the debenture 50% of the proceeds will be payable to AIM 84.
The Partnership  expects to receive net proceeds of approximately  $1.2 million.
The  net  proceeds  due  AIM 84 are  included  on the  balance  sheet  in due to
affiliate.  In  general,  the  Partnership  will  hold the  debenture  until its
maturity  date  of  June  1,  2010 or when  called,  whichever  comes  first.  A
distribution  will be declared at that time. The servicer of this mortgage filed
an  application  for  insurance  benefits  under the  Section 221 program of the
National Housing Act of 1937 in May 2000.

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

     Net earnings decreased for the three months ended March 31, 2001, as
compared to the corresponding period in 2000, primarily due to a decrease in
mortgage investment income. This decrease in earnings was partially offset by an
increase in gains on mortgage dispositions.

     Mortgage investment income decreased for the three months ended March 31,
2001, as compared to the corresponding period in 2000, primarily due to a
reduction in the mortgage base. The mortgage base decreased as a result of five
mortgage dispositions with an aggregate principal balance of approximately $14
million, representing an approximate 11% decrease in the aggregate principal
balance of the total mortgage portfolio since March 2000.

     Interest and other income decreased for the three months ended March 31,
2001, as compared to the corresponding period in 2000, primarily due to the
timing of temporary investment of mortgage disposition proceeds prior to
distribution.

     Asset management fees decreased for the three months ended March 31, 2001,
as compared to the corresponding period in 2000, primarily due to the reduction
in the mortgage asset base.

     General and administrative expenses decreased for the three months ended
March 31, 2001, as compared to the corresponding period in 2000, primarily due
to a decrease in mortgage service fees as a result of the decreased mortgage
base.

<PAGE>15

     Gains on mortgage dispositions increased for the three months ended March
31, 2001, as compared to the corresponding period in 2000. 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. During the first three months of 2000, the Partnership
recognized a gain of approximately $44,000 from the prepayment of the mortgage
on Turtle Creek 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 2001 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.

     Net cash provided by operating activities decreased for the three months
ended March 31, 2001, as compared to the corresponding period in 2000, primarily
due to the reduction in the mortgage base and due to an increase in the change
in receivables and other assets. The increase in receivables and other assets is
primarily due to the accrual of principal and interest on the mortgages awaiting
assignment from HUD under the section 221 program, as previously discussed.

     Net cash provided by investing activities increased for the three months
ended March 31, 2001, as compared to the corresponding period in 2000. This
increase is primarily due to an increase in proceeds received from the
disposition of mortgages.

     Net cash used in financing activities decreased for the three months ended
March 31, 2001, as compared to the corresponding period in 2000, due to a
decrease in the amount of distributions paid to partners in the first three
months of 2001 versus the same period in 2000.

<PAGE>16

PART I.   FINANCIAL INFORMATION
ITEM 2A.  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 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
March 31, 2001, in market risk from December 31, 2000 as reported in the
Partnership's Annual Report on Form 10-K as of December 31, 2000.


<PAGE>17

PART II. OTHER INFORMATION
ITEM 5.       OTHER INFORMATION

      The following table sets forth information concerning a change in the
board of directors of CRIIMI MAE, the sole shareholder of the General Partner,
effective April 17, 2001. Under the terms of CRIIMI MAE's reorganization plan,
the Board of Directors has expanded from six to nine directors.

The five new Directors are:

o    John R. Cooper, senior vice president, finance, of PG&E National Energy
     Group, Inc., Bethesda, MD and senior vice president, finance and chief
     financial officer of PG&E National Energy Group Company, a subsidiary of
     PG&E Energy Group, Inc.
o    Alan M. Jacobs, president, AMJ Advisors LLC, Woodmere, NY, that provides
     expertise in business turnarounds, corporate restructuring and
     reorganization corporate finance and dispute resolution; AMJ was a
     financial advisor for CRIIMI MAE's Official Committee of Equity
     Shareholders.
o    Donald J. MacKinnon, chief executive officer and president, REALM, New
     York, NY, a business-to-business e-commerce hub that combines the resources
     of several real estate software companies: ARGUS Financial Software, B.J.
     Murray, CTI Limited, DYNA and NewStar solutions.
o    Donald C. Wood, president and chief operating officer, Federal Realty
     Investment Trust, Rockville, MD, an owner, manager and developer of high
     quality retail and mixed-use properties.
o    Michael F. Wurst, principal, Meridian Realty Advisors, Inc., Dallas, TX, a
     Dallas-based real estate investment firm focusing on out-of-favor or
     liquidity-challenged sectors and assets.

Directors to remain on the Board are:

o    William B. Dockser, chairman, CRIIMI MAE Inc., Rockville, MD.
o    H. William Willoughby, president, CRIIMI MAE Inc., Rockville, MD.
o    Robert J. Merrick, chief credit officer and director, MCG Capital
     Corporation, Richmond, VA.
o    Robert E. Woods, managing director and head of loan syndication for the
     Americas, Societe Generale, New York, NY.

     Garrett G. Carlson,  Sr. and G. Richard  Dunnells  resigned as directors in
conjunction with the effective date of the reorganization plan.


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 March 31, 2001.


<PAGE>18

PART II.   OTHER INFORMATION

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


May 15, 2001                                         /s/ Cynthia O. Azzara
------------                                         ---------------------
DATE                                                 Cynthia O. Azzara
                                                     Senior Vice President,
                                                     Chief Financial Officer and
                                                     Treasurer