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 31,2000
                                               -------------

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, 2000,  12,079,514  depositary units of limited  partnership
interest were outstanding.
<PAGE>





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

                               INDEX TO FORM 10-Q

                      FOR THE QUARTER ENDED MARCH 31, 2000

<TABLE>
<CAPTION>
                                                                                                   Page
                                                                                                   ----
<S>           <C>                                                                                  <C>

PART I.       Financial Information

Item 1.       Financial Statements

              Balance Sheets - March 31, 2000 (unaudited) and December 31, 1999                     4

              Statements of Income and Comprehensive Income - for the three
                 months ended March 31, 2000 and 1999 (unaudited)                                   5

              Statement of Changes in Partners' Equity - for the three months ended
                 March 31, 2000 (unaudited)                                                         6

              Statements of Cash Flows - for the three months ended March 31, 2000
                 and 1999 (unaudited)                                                               7

              Notes to Financial Statements (unaudited)                                             8

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

Item 2A.      Qualitative and Quantitative Disclosures about Market Risk                           15

PART II.      Other Information

Item 6.       Exhibits and Reports on Form 8-K                                                     16

Signature                                                                                          17
</TABLE>
<PAGE>

PART I.           FINANCIAL INFORMATION
ITEM 1.           FINANCIAL STATEMENTS

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

                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                           March 31,        December 31,
                                                             2000               1999
                                                        --------------     -------------
<S>                                                     <C>                <C>
                                                          (Unaudited)
                        ASSETS

Investment in FHA-Insured Certificates and GNMA
  Mortgage-Backed Securities, at fair value
    Acquired insured mortgages                           $  77,243,978     $  79,052,484
    Originated insured mortgages                            15,708,416        15,703,179
                                                         -------------     -------------
                                                            92,952,394        94,755,663


Investment in FHA-Insured Loans, at amortized cost,
  net of unamortized discount and premium:
    Acquired insured mortgages                              11,132,739        11,167,461
    Originated insured mortgages                            12,667,924        12,699,265
                                                         -------------     -------------
                                                            23,800,663        23,866,726

Cash and cash equivalents                                    5,242,702        23,723,644

Receivables and other assets                                   962,338         1,123,472
                                                         -------------     -------------
      Total assets                                       $ 122,958,097     $ 143,469,505
                                                         =============     =============

           LIABILITIES AND PARTNERS' EQUITY

Distributions payable                                    $   5,907,775     $  22,876,915

Accounts payable and accrued expenses                          144,816           147,473
                                                         -------------     -------------
      Total liabilities                                      6,052,591        23,024,388
                                                         -------------     -------------
Partners' equity:
  Limited partners' equity, 15,000,000 Units authorized,
    12,079,514 Units issued and outstanding                121,734,858       125,182,237
  General partners' deficit                                 (4,891,019)       (4,751,114)
  Accumulated other comprehensive income                        61,667            13,994
                                                         -------------     -------------
      Total Partners' equity                               116,905,506       120,445,117
                                                         -------------     -------------
      Total liabilities and partners' equity             $ 122,958,097     $ 143,469,505
                                                         =============     =============
</TABLE>


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

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,
                                                     -------------------------------
                                                         2000               1999
                                                     -------------------------------
<S>                                                  <C>               <C>
Income:
  Mortgage investment income                         $ 2,520,344         $ 3,117,539
  Interest and other income                              155,694              48,394
                                                     -----------         -----------
                                                       2,676,038           3,165,933
                                                     -----------         -----------

Expenses:
  Asset management fee to related parties                293,517             361,907
  General and administrative                             106,053             139,226
                                                     -----------         -----------
                                                         399,570             501,133
                                                     -----------         -----------
Net earnings before gains on
  mortgage dispositions                                2,276,468           2,664,800

Net gains on mortgage dispositions                        44,023                   -
                                                     -----------         -----------

Net earnings                                         $ 2,320,491         $ 2,664,800
                                                     ===========         ===========

Other comprehensive income (loss)                         47,673          (1,124,212)
                                                     -----------         -----------
Comprehensive income                                 $ 2,368,164         $ 1,540,588
                                                     -----------         -----------

Net earnings allocated to:
  Limited partners - 96.1%                           $ 2,229,992         $ 2,560,873
  General Partner -   3.9%                                90,499             103,927
                                                     -----------         -----------
                                                     $ 2,320,491         $ 2,664,800
                                                     ===========         ===========

Net earnings per Unit of limited
  partnership interest - basic                       $      0.18         $      0.21
                                                     ===========         ===========

</TABLE>

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

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, 2000

                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                        Accumulated
                                                                                          Other
                                                      General          Limited         Comprehensive
                                                      Partner          Partner            Income            Total
                                                   -------------     -------------     -------------     -------------
<S>                                                <C>               <C>               <C>               <C>

Balance, December 31, 1999                         $  (4,751,114)    $ 125,182,237     $      13,994     $ 120,445,117

  Net Earnings                                            90,499         2,229,992                 -         2,320,491

  Adjustment to unrealized gains on
     investments in insured mortgages                          -                 -            47,673            47,673

  Distributions paid or accrued of $0.47 per Unit,
     including return of capital of $0.29 per Unit      (230,404)       (5,677,371)                -        (5,907,775)
                                                   -------------     -------------     -------------     -------------

Balance, March 31, 2000                            $  (4,891,019)    $ 121,734,858     $      61,667     $ 116,905,506
                                                   =============     =============     =============     =============

Limited Partnership Units outstanding - basic, as
  of March 31, 2000                                                     12,079,514
                                                                        ==========

</TABLE>

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


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,
                                                                                             2000             1999
                                                                                         -----------      -----------
<S>                                                                                      <C>              <C>
Cash flows from operating activities:
   Net earnings                                                                          $ 2,320,491      $ 2,664,800
   Adjustments to reconcile net earnings to net cash provided by operating activities:
      Net gain on mortgage dispositions                                                      (44,023)               -
      Changes in assets and liabilities:
         Decrease in receivables and other assets                                            161,134          221,984
         (Decrease) increase in accounts payable and accrued expenses                         (2,657)         298,233
                                                                                         -----------      -----------

            Net cash provided by operating activities                                      2,434,945        3,185,017
                                                                                         -----------      -----------

Cash flows from investing activities:
   Receipt of mortgage principal from scheduled payments                                     301,431          342,360
   Proceeds from mortgage dispositions                                                     1,659,597                -
   Proceeds from redemption of debenture                                                           -        2,296,098
   Debenture proceeds due to affiliate                                                             -       (1,148,049)
                                                                                         -----------      -----------

            Net cash provided by investing activities                                      1,961,028        1,490,409
                                                                                         -----------      -----------

Cash flows from financing activities:
Distributions paid to partners                                                           (22,876,915)     (15,963,562)
                                                                                         -----------      -----------

            Net cash used in financing activities                                        (22,876,915)     (15,963,562)
                                                                                         -----------      -----------

Net decrease in cash and cash equivalents                                                (18,480,942)     (11,288,136)

Cash and cash equivalents, beginning of period                                            23,723,644       15,793,919
                                                                                         -----------      -----------

Cash and cash equivalents, end of period                                                 $ 5,242,702      $ 4,505,783
                                                                                         ===========      ===========

</TABLE>

                   The accompanying notes are an integral part
                          of these financial statements.
<PAGE>
              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").  Such  bankruptcy  filings could result in certain  adverse
effects to the Partnership.  For example, as a debtor-in-possession,  CRIIMI MAE
will not be permitted to provide any available capital to the General Partner or
to the general partner of CMSLP, the Partnership's sub-advisor, without approval
from the bankruptcy court. Even though this restriction or potential loss of the
availability of a potential  capital resource could adversely affect the General
Partner  and the  Partnership,  CRIIMI MAE has not  historically  represented  a
significant  source of capital for the General Partner or the Partnership.  Such
bankruptcy filings could also result in the potential need to replace CRIIMI MAE
Management,  Inc. as a provider of personnel and administrative  services to the
Partnership.


     On April 25, 2000,  CRIIMI MAE and CRIIMI MAE Management,  Inc. filed their
Third  Amended  Joint Plan of  Reorganization  (the "Plan") and proposed  Second
Amended Disclosure Statement (the "Disclosure Statement") with the United States
Bankruptcy  Court for the  District of Maryland,  in  Greenbelt,  Maryland  (the
"Bankruptcy  Court").  The Plan and  Disclosure  Statement  were  filed with the
support of the Official  Committee of Equity Security  Holders in the CRIIMI MAE
Chapter 11 case, which is a co-proponent of the Plan.  Subject to the completion
of mutually  satisfactory  unsecured debt  documentation,  the Plan also has the
support of the Official  Committee of Unsecured  Creditors of CRIIMI MAE,  which
was previously  pursuing its own plan of reorganization.  CRIIMI MAE, CRIIMI MAE
Management,  Inc., the Official  Committee of Equity Security  Holders,  and the
Official Committee of Unsecured  Creditors are now all proceeding jointly toward
confirmation of the Plan. On April 25, 2000, the Bankruptcy Court held a hearing
on  approval  of the  Disclosure  Statement  filed by CRIIMI  MAE and CRIIMI MAE
Management, Inc. At the conclusion of the hearing, the Bankruptcy Court directed
CRIIMI MAE and Citicorp  Real  Estate,Inc./Salomon  Smith Barney Inc.,  the only
creditor whose  objection to the Disclosure  Statement was before the Bankruptcy
Court,  to  submit  additional  legal  briefs  by May 9,  2000.  There can be no
assurance at this time that CRIIMI MAE's Plan will be confirmed and consummated.


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, 2000
and  December  31, 1999 and the results of its  operations  for the three months
ended  March 31,  2000 and 1999 and its cash  flows for the three  months  ended
March 31, 2000 and 1999.

     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, 1999.

     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,
                                                                   2000                    1999
                                                               ------------             ------------
<S>                                                            <C>                      <C>
Fully Insured Acquired Mortgages:
  Number of
    GNMA Mortgage-Backed Securities                                       5                        5
    FHA-Insured Certificates (1) (2)                                     38                       39
  Amortized Cost                                                $76,151,262              $77,969,011
  Face Value                                                     79,360,445               81,218,457
  Fair Value                                                     77,243,978               79,052,484

Fully Insured Originated Mortgages:
  Number of
    GNMA Mortgage-Backed Securities                                       1                        1
    FHA-Insured Certificates                                              1                        1
  Amortized Cost                                                $16,739,466              $16,772,658
  Face Value                                                     16,382,866               16,416,058
  Fair Value                                                     15,708,416               15,703,179

</TABLE>

     Listed below is a summary of prepayments  on fully Insured  Mortgages as of
May 1, 2000:
<TABLE>
<CAPTION>
                                                      Date                                           Distribution
                                        Net         Proceeds       Gain/     Dist./    Declaration     Payment
       Complex name                   Proceeds      Received      (Loss)      Unit        Date          Date
       ------------                   --------      --------      ------      ----        ----          ----
   <S>                                <C>           <C>           <C>         <C>       <C>            <C>
   (1) Turtle Creek Apartments        $1,660,000    Jan. 2000     $44,023     $ 0.13    Jan. 2000      May 2000

   (2) Woodland Hills Apartments         693,000    April 2000       *
</TABLE>


     *    In April 2000, the mortgage on Woodland Hills  Apartments was prepaid.
          The Partnership  received net proceeds of  approximately  $693,000 and
          expects to recognize a gain of approximately  $94,000. The Partnership
          expects to declare  approximately  $0.06 per Unit in May 2000, related
          to the prepayment of this mortgage.


     As of May 1, 2000, 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 Gold Key Village Apartments
and Town Park  Apartments,  which are delinquent with respect to the March April
2000  payments of principal  and interest.  The  respective  servicers of these
mortgages have filed  Notices of Default with HUD.

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,
                                                                   2000                     1999
                                                                -----------              -----------
<S>                                                             <C>                      <C>
  Fully Insured Acquired Loans:
    Number of Loans                                                       9                        9
    Amortized Cost                                              $11,132,739              $11,167,461
    Face Value                                                   13,393,483               13,453,341
    Fair Value                                                   13,114,130               13,203,586

  Fully Insured Originated Loans:
    Number of Loans                                                       3                        3
    Amortized Cost                                              $12,667,924              $12,699,265
    Face Value                                                   12,351,169               12,379,870
    Fair Value                                                   12,003,761               12,017,626

</TABLE>
     As of May 1, 2000, 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, 2000 and 1999, the Partnership  received
additional  interest of $21,566 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.   DISTRIBUTIONS TO UNITHOLDERS

     The  distributions  paid or accrued to  Unitholders on a per Unit basis for
the three months ended March 31, 2000 and 1999 are as follows:

                                                       2000          1999
                                                       ----          ----

                Quarter ended March 31,               $0.47(1)(2)   $0.40(3)(4)
                                                      -----         -----
                                                      $0.47         $0.40
                                                      =====         =====

     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
                  ---------------                          --------        -----------    --------
      <S>                                                <C>                <C>              <C>
      (1) Northwood Apartments                           December 1999      Prepayment       $0.13

      (2) Turtle Creek Apartments                        January 2000       Prepayment        0.13

      (3) Gamel & Gamel Apartments                       December 1998      Prepayment        0.06

      (4) Debenture from Portervillage I Apartments*     January 1999       Assignment        0.10
</TABLE>

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


     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.

6.   TRANSACTIONS WITH RELATED PARTIES

     The  General  Partner  and certain  affiliated  entities,  during the three
months  ended  March 31,  2000 and  1999,  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                           2000        1999
      -----------------                -----------------------------                         --------    --------
<S>                                    <C>                                                   <C>         <C>
CRIIMI, Inc (1).                       General Partner/Distribution                          $230,404    $196,088

AIM Acquisition Partners, L.P.(2)      Advisor/Asset Management Fee                           293,517     361,907

CRIIMI MAE Management, Inc.            Affiliate of General Partner/Expense Reimbursement      12,966       7,443
</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 $86,438 and $106,674 for the three months ended March 31, 2000
     and 1999,  respectively.  The  limited  partner of CMSLP is a wholly  owned
     subsidiary of CRIIMI MAE Inc.,  which filed for protection under chapter 11
     of the Bankruptcy Code.
<PAGE>

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.

Year 2000
---------

     During the transition from 1999 to 2000, the Partnership did not experience
any significant problems or errors in its information  technology ("IT") systems
or date-sensitive  embedded  technology that controls certain systems.  Based on
operations   since  January  1,  2000,  the  Partnership  does  not  expect  any
significant  impact to its  business,  operations,  or financial  condition as a
result of the Year 2000 issue.  However,  it is possible that the full impact of
the date change has not been fully  recognized.  The Partnership is not aware of
any  significant  Year 2000  problems  affecting  third  parties  with which the
Partnership interfaces directly or indirectly.

General
-------

     As of March 31, 2000, the Partnership had invested in 57 Insured  Mortgages
with an aggregate  amortized cost of  approximately  $117 million,  an aggregate
face  value  of  approximately  $121  million  and an  aggregate  fair  value of
approximately $118 million, as discussed below.

     In April 2000, the mortgage on Woodland Hills  Apartments was prepaid.  The
Partnership  received  net  proceeds of  approximately  $693,000  and expects to
recognize a gain of approximately  $94,000.  The Partnership  expects to declare
approximately  $0.06 per Unit in May 2000,  related  to the  prepayment  of this
mortgage.

     As of May 1, 2000, 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 Gold Key Village Apartments
and Town Park  Apartments,  which are  delinquent  with respect to the March and
April 2000 payments of principal and interest. The respective servicers of these
mortgages have filed Notices of Default with HUD.

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

     Net  earnings  decreased  for the three  months  ended March 31,  2000,  as
compared to the  corresponding  period in 1999,  primarily  due to a decrease in
mortgage investment income. This decrease in earnings was partially offset by an
increase  in  interest   and  other   income  and  a  decrease  in  general  and
administrative expenses.

     Mortgage  investment  income decreased for the three months ended March 31,
2000,  as  compared  to the  corresponding  period in 1999,  primarily  due to a
reduction in the mortgage  base.  The mortgage base  decreased as a result of 12
mortgage  dispositions with an aggregate  principal balance of approximately $28
million,  representing  an approximate  19% decrease in the aggregate  principal
balance of the total mortgage portfolio since March 1999.

     Interest  and other income  increased  for the three months ended March 31,
2000,  as compared to the  corresponding  period in 1999,  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, 2000,
as compared to the corresponding  period in 1999, primarily due to the reduction
in the mortgage asset base.

     General and  administrative  expenses  decreased for the three months ended
March 31, 2000, as compared to the corresponding  period in 1999,  primarily due
to a decrease in temporary  employment  costs and a decrease in mortgage service
fees.

     Net gains on mortgage  dispositions  increased  for the three  months ended
March 31,  2000,  as compared to the  corresponding  period in 1999.  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.  During
the first three months of 1999, no gains or losses were recognized.

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

     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").  Such  bankruptcy  filings could result in certain  adverse
effects to the Partnership.  For example, as a debtor-in-possession,  CRIIMI MAE
will not be permitted to provide any available capital to the General Partner or
to the general partner of CMSLP, the Partnership's sub-advisor, without approval
from the bankruptcy court. Even though this restriction or potential loss of the
availability of a potential  capital resource could adversely affect the General
Partner  and the  Partnership,  CRIIMI MAE has not  historically  represented  a
significant  source of capital for the General Partner or the Partnership.  Such
bankruptcy filings could also result in the potential need to replace CRIIMI MAE
Management,  Inc. as a provider of personnel and administrative  services to the
Partnership.

     On April 25, 2000,  CRIIMI MAE and CRIIMI MAE Management,  Inc. filed their
Third  Amended  Joint Plan of  Reorganization  (the "Plan") and proposed  Second
Amended Disclosure Statement (the "Disclosure Statement") with the United States
Bankruptcy  Court for the  District of Maryland,  in  Greenbelt,  Maryland  (the
"Bankruptcy  Court").  The Plan and  Disclosure  Statement  were  filed with the
support of the Official  Committee of Equity Security  Holders in the CRIIMI MAE
Chapter 11 case, which is a co-proponent of the Plan.  Subject to the completion
of mutually  satisfactory  unsecured debt  documentation,  the Plan also has the
support of the Official  Committee of Unsecured  Creditors of CRIIMI MAE,  which
was previously  pursuing its own plan of reorganization.  CRIIMI MAE, CRIIMI MAE
Management,  Inc., the Official  Committee of Equity Security  Holders,  and the
Official Committee of Unsecured  Creditors are now all proceeding jointly toward
confirmation of the Plan. On April 25, 2000, the Bankruptcy Court held a hearing
on  approval  of the  Disclosure  Statement  filed by CRIIMI  MAE and CRIIMI MAE
Management, Inc. At the conclusion of the hearing, the Bankruptcy Court directed
CRIIMI MAE and Citicorp  Real  Estate,Inc./Salomon  Smith Barney Inc.,  the only
creditor whose  objection to the Disclosure  Statement was before the Bankruptcy
Court,  to  submit  additional  legal  briefs  by May 9,  2000.  There can be no
assurance at this time that CRIIMI MAE's Plan will be confirmed and consummated.

     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 2000 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, 2000, as compared to the corresponding period in 1999, primarily
due to the reduction in the mortgage base and due to a decrease in the change in
accounts  payable  and  accrued  expenses.  The change in  accounts  payable and
accrued  expenses  is due to the timing of payment  of asset  management  fee to
related parties.

     Net cash  provided by investing  activities  increased for the three months
ended March 31,  2000,  as compared to the  corresponding  period in 1999.  This
increase  is  primarily  due  to an  increase  in  proceeds  received  from  the
disposition of mortgages and is partially  offset by a decrease in net debenture
proceeds.

     Net cash used in financing  activities increased for the three months ended
March 31,  2000,  as compared  to the  corresponding  period in 1999,  due to an
increase  in the amount of  distributions  paid to  partners  in the first three
months of 2000 versus the same period in 1999.

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

<PAGE>

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,  2000,  in market  risk from  December  31,  1999 as  reported  in the
Partnership's Annual Report on Form 10-K as of December 31, 1999.
<PAGE>

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

     No  reports  on Form  8-K  were  filed  with the  Securities  and  Exchange
Commission during the quarter ended March 31, 2000.

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

                  Exhibit No.               Description
                  -----------               -----------

                      27                    Financial Data Schedule
<PAGE>

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 11, 2000                                         /s/ Cynthia O. Azzara
------------                                         ---------------------
DATE                                                 Cynthia O. Azzara
                                                     Senior Vice President,
                                                     Chief Financial Officer and
                                                     Treasurer