FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
     SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended         SEPTEMBER 30, 1997

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
     SECURITIES EXCHANGE ACT OF 1934

For the transition period from_____________________to_________________________


                         Commission file number 2-93874


                                   KFP 85-LTD.
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             (Exact name of registrant as specified in its charter)


         FLORIDA                                     59-2433930
-----------------------                 ---------------------------------------
(State of organization)                 (I.R.S. employer identification no.)


          ONE SOUTHEAST THIRD AVENUE, 11TH FLOOR, MIAMI, FLORIDA 33131
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          (Address of principal executive offices, including zip code)


Registrant' telephone number, including area code          (305) 371-3592


                                 Not applicable
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              (Former name, former address and former fiscal year,
                          if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days.

                                 Yes [ ] No [X]


                                       1
<PAGE>


<TABLE>
<CAPTION>

                                      INDEX


PART I - FINANCIAL INFORMATION                                                                             PAGE NO.
                                                                                                           --------   
<S>                                                                                                             <C>
           Item 1 - Financial statements (unaudited):
               Balance Sheets
                  September 30, 1997 and December 31, 1996.......................................................3

               Statements of Operations
                  For the three and nine months ended September 30, 1997 and 1996................................4

               Statement of Partners' Equity
                  For the nine months ended September  30, 1997..................................................5

               Statements of Cash Flows
                  For the nine months ended September 30, 1997 and 1996..........................................6

               Notes to Financial Statements.....................................................................8

           Item 2 - Management's Discussion and Analysis of Financial
               Condition and Results of Operations..............................................................10


PART II - OTHER INFORMATION
 
               Items 1 through 6 ...............................................................................12

               Signatures.......................................................................................13



</TABLE>









                                       2
<PAGE>


<TABLE>
<CAPTION>

                                   KFP 85-LTD.
                                 BALANCE SHEETS
                    SEPTEMBER 30, 1997 AND DECEMBER 31, 1996

                                                      SEPTEMBER 30,
                                                           1997             DECEMBER 31,
                                                       (UNAUDITED)              1996
                                                      -------------          ------------
<S>                                                   <C>                    <C>         
ASSETS
Cash and interest-bearing deposits                    $     223,625          $    145,585
Escrow deposits                                             161,710                74,532
Accounts receivable (net of allowance
   for doubtful accounts of $12,918 in
   1997 and 1996)                                            29,442                39,700
Mortgage notes receivable (net of
   allowance for doubtful accounts
   of $43,673 in 1997 and 1996)                             365,046               324,645
Rental properties, at lower of cost or
   market, less accumulated depreciation                  3,509,865             4,528,412
Land and land development, at cost
   less accumulated depreciation                            552,839               552,839
Prepaid expenses                                             19,150                 7,670
Other assets                                                120,856               127,259
                                                      -------------          ------------
            Total assets                              $   4,982,533          $  5,800,642
                                                      =============          ============

LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
   Accounts payable                                   $       3,085          $     25,503
   Accrued liabilities                                      174,750               133,543
   Tenant security deposits and other
      liabilities                                            48,345                59,902
   Notes and mortgages payable                            4,474,589             5,283,168
                                                      -------------          ------------
               Total liabilities                          4,700,769             5,502,116
                                                      -------------          ------------

CONTINGENCIES (Note 5)

PARTNERS' EQUITY:
   General partners                                        (119,616)             (119,281)
   Limited partners, 8,000 limited
      partnership units authorized;
      7,940 units issued and outstanding                    401,380               417,807
                                                      -------------          ------------
               Total partners' equity                       281,764               298,526
                                                      -------------          ------------
               Total liabilities and
                  partners' equity                    $   4,982,533          $  5,800,642
                                                      =============          ============

</TABLE>
              The accompanying notes to financial statements are an
                     integral part of these balance sheets.

                                       3
<PAGE>


<TABLE>
<CAPTION>

                                   KFP 85-LTD.
                            STATEMENTS OF OPERATIONS
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
                                   (UNAUDITED)

                                                          THREE MONTHS                              NINE MONTHS
                                                   ------------------------------           ----------------------------
                                                      1997                1996                 1997              1996
                                                   ----------          ----------           ----------        ----------
<S>                                                <C>                 <C>                  <C>               <C>       
REVENUES:
   Rental income                                   $  202,608          $  291,713           $  618,652        $  847,545
   Real estate sales                                  155,000                   -            1,047,250                 -
   Interest income                                      8,867               8,597               23,285            25,074
   Other income                                           307               3,170               37,369            14,387
                                                   ----------          ----------           ----------        ----------

         Total revenues                               366,782             303,480            1,726,556           887,006
                                                   ----------          ----------           ----------        ----------

EXPENSES:
   Interest and financing costs                       117,058             135,678              358,786           460,993
   Property expenses                                   56,628             124,065              211,965           342,702
   Cost of real estate sold                           142,629                   -              955,510                 -
   Selling, administration
      and other                                        24,417              24,460               75,235           115,151
   Depreciation and
      amortization                                     42,816              63,707              141,822           191,120
                                                   ----------          ----------           ----------        ----------

      Total expenses                               $  383,548          $  347,910           $1,743,318        $1,109,966
                                                   ----------          ----------           ----------        ----------

      Net loss                                     $ (16,766)          $ (44,430)           $ (16,762)        $ (222,960)
                                                   ==========          ==========           ==========        ========== 

PER UNIT AMOUNTS TO 
LIMITED PARTNERS:
   Net loss after allocations
      to General Partners of
      $(335), $(889), $(335)
      and $(4,459), respectively                   $    (2.07)         $    (5.48)          $    (2.07)       $   (27.52)
                                                   ==========          ==========           ==========        ========== 

   Weighted average units
     outstanding                                        7,940               7,940           $    7,940             7,940
                                                  ===========         ===========           ==========        ========== 

</TABLE>


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

                                       4
<PAGE>



                                   KFP 85-LTD.
                          STATEMENT OF PARTNERS' EQUITY
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
                                   (UNAUDITED)


                                 GENERAL           LIMITED
PARTNERS' EQUITY (DEFICIT)       PARTNERS          PARTNERS          TOTAL
--------------------------      -----------       ----------      --------


December 31, 1996               $ (119,281)        $ 417,807      $ 298,526


Net loss                              (335)          (16,427)       (16,762)
                                ----------         ---------      ---------


September 30, 1997              $ (119,616)        $ 401,380      $ 281,764
                                ==========         =========      =========

























              The accompanying notes to financial statements are an
                        integral part of this statement.

                                       5
<PAGE>


<TABLE>
<CAPTION>

                                   KFP 85-LTD.
                            STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
                                   (UNAUDITED)


                                                                  1997                  1996
                                                              -----------             --------- 
<S>                                                           <C>                     <C>       
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net loss                                                $   (16,762)            $(222,960)
      Adjustments to reconcile net loss
       to net cash provided by (used in)
      operating activities-
         Depreciation and amortization                            141,822               191,120
         Gain on sale of real estate                              (91,740)                    -
         Changes in assets and liabilities:
            Increase in escrow deposits                           (87,178)             (103,963)
            Decrease in accounts receivable                        10,258                     -
            (Increase) decrease in prepaid expenses               (11,480)               19,509
            Decrease in other assets                                5,954                22,245
            Decrease in accounts payable                          (22,418)              (26,831)
            Increase in accrued liabilities                        41,207               128,883
            Decrease in tenant security deposits
               and other liabilities                              (11,557)                    -
                                                              -----------             --------- 
                  Net cash provided by (used in)
                     operating activities                         (41,894)                8,003
                                                              -----------             --------- 

CASH FLOWS FROM INVESTING ACTIVITIES:
      Payments received on mortgage notes                          83,599                12,126
      Proceeds from sale of real estate, net of
         closings costs                                            92,414                     -
                                                              -----------             --------- 
                  Net cash provided by investing activities       176,013                12,126
                                                              -----------             --------- 

CASH FLOWS FROM FINANCING ACTIVITIES:
      Repayment of notes and mortgages payable                    (56,079)              (45,404)
                                                              -----------             --------- 

NET INCREASE (DECREASE) IN CASH AND
      INTEREST-BEARING DEPOSITS                                    78,040               (25,275)

CASH AND INTEREST-BEARING DEPOSITS,
      BEGINNING OF THE PERIOD                                     145,585                68,412
                                                              -----------             --------- 

CASH AND INTEREST-BEARING DEPOSITS,
      END OF THE PERIOD                                       $   223,625             $  43,137
                                                              ===========             ========= 


                                   (Continued)

                                       6
<PAGE>



                                   KFP 85-LTD.
                            STATEMENTS OF CASH FLOWS
             FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
                                   (UNAUDITED)
                                   (Continued)
 
                                                                  1997                  1996
                                                              -----------             --------- 
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:

   Cash paid for interest                                     $   356,681             $ 460,993
                                                              ===========             ========= 

SUPPLEMENTAL SCHEDULE OF
NON-CASH INVESTING ACTIVITIES:

      Mortgage notes receivable accepted
         on sale of real estate                               $   124,000             $       -
                                                              ===========             ========= 

SUPPLEMENTAL SCHEDULE OF
NON-CASH FINANCING ACTIVITIES:

      Purchase money mortgage loan payable
         satisfied at closing                                 $   752,500             $       -
                                                              ===========             ========= 


</TABLE>

















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

                                       7
<PAGE>



                                   KFP 85-LTD.
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1997
                                   (UNAUDITED)

(1) BASIS OF PRESENTATION:

The balance sheet as of December 31, 1996, which has been derived from audited
statements, and the unaudited interim financial statements included herein, 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 omitted pursuant to those rules and regulations,
although the Partnership believes that the disclosures made are adequate to make
the information presented not misleading. It is suggested that these financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Partnership's annual report on Form 10-K as of December
31, 1996.

In the opinion of the Partnership, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position of the Partnership
as of September 30, 1997 and December 31, 1996, the results of operations for
the three- and nine-month periods ended September 30, 1997 and 1996, partners'
equity for the nine-month period ended September 30, 1997, and cash flows for
the nine-month periods ended September 30, 1997 and 1996.

(2) RELATED PARTY TRANSACTIONS:

Property management fees paid to Keyes Asset Management, Inc., for management of
various rental properties, totaled $9,240 and $14,539 for the three months ended
September 30, 1997 and 1996, respectively, $27,240 and $43,463 for the nine
months ended September 30, 1997 and 1996, respectively, and are included in
property expenses in the accompanying statements of operations.

Commissions paid to Keyes Asset Management, Inc. for leasing vacant space at
various rental properties totaled $12,891 and $11,900 for the three months ended
September 30, 1997 and 1996, respectively, and $20,560 and $45,682 for the nine
months ended September 30, 1997 and 1996, respectively. These amounts are
included in other assets in the accompanying balance sheet and the amount of
leasing commissions paid are amortized over the respective life of each lease.

On January 31, 1997, the Partnership paid a selling commission of $26,767 to
Keyes Asset Management, Inc. in conjunction with the sale of Charlotte Commerce
Center, one of the commercial properties in the Partnership's investment
portfolio. On July 11, 1997, the Partnership paid selling commissions of $9,300
to Keyes Asset Management, Inc. in conjunction with the sale of four condominium
units at LeJeune Industrial Park. These amounts are included in the cost of real
estate sold in the accompanying statements of operations.

                                       8
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(3) NOTES AND MORTGAGES PAYABLE:
<TABLE>

Notes and mortgages payable were as follows:
                                                                               SEPTEMBER 30,                DECEMBER 31,
                                                                                    1997                        1996
                                                                               -------------                ------------
<S>                                                                            <C>                            <C>      
Mortgage loan secured by Northpark Commerce Center, bearing interest
at 10.375%, payable in monthly installments of $44,525 representing
principal and interest, due May 1, 2017.
                                                                                 $4,474,589                   $4,524,933

Purchase money mortgage loan secured by Charlotte Commerce Center,
bearing interest at 9%, payable in monthly installments of $5,644
representing interest only, due March 31, 1997
                                                                                          -                      752,500

Obligation under capital lease due in monthly installments of $538
representing principal and interest at 18%, through February 1996
                                                                                          -                        5,735
                                                                                -----------                  -----------
                                                                                $ 4,474,589                  $ 5,283,168
                                                                                ===========                  ===========
</TABLE>

(4) DISPOSITIONS:

On January 31, 1997, the Partnership sold Charlotte Commerce Center located in
Altamonte Springs, Seminole County, Florida for a total of $892,250. The book
value of the center was $747,608 which was net of a 1989 reduction of $35,959 in
the Center's carrying value. Expenses related to the sale of the Center totaled
$65,273 which included a real estate sales commission of $53,535, one-half of
which was paid to Keyes Asset Management, Inc. The Partnership's net gain on
this disposition was $79,369. At closing, the Partnership received cash of
$21,358 which was net of selling expenses, 1995 and 1996 real estate taxes,
tenant security deposits, the outstanding purchase money mortgage balance and
accrued interest.

On July 11, 1997, the Partnership sold four condominium warehouse units located
at LeJeune Industrial Park, Opa-locka, Miami-Dade County, Florida for a total of
$155,000. The book value of these units was $129,567. Expenses related to the
sale of the units totaled $13,062 which included real estate sales commissions
of $9,300 which were paid to Keyes Asset Management, Inc. The Partnership's net
gain on these sales was $12,371. At closing, the Partnership accepted four
mortgage notes totaling $124,000 from the purchasers and received cash of
$15,937 which was net of selling expenses, July 1997 pro-rated rental income,
1997 pro-rated real estate taxes and tenant security deposits.

 (5) LIQUIDITY:

The Partnership has sustained significant losses in each of the last three
fiscal years. Operations of the Partnership consumed cash of $41,894 during the
nine months ended September 30, 1997. However, as of September 30, 1997, cash on
hand and escrow deposits are sufficient to pay the Partnership's current
accounts payable and accrued liabilities.

                                       9
<PAGE>



                                   KFP 85-LTD.

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

MATERIAL CHANGES IN FINANCIAL CONDITION

During the nine months ended September 30, 1997, the Partnership's cash and
interest-bearing deposits increased by $78,040 compared to an decrease of
$25,275 during the same period of 1996.

Cash used in operations was $13,402 and $41,894 during the three and nine months
ended September 30, 1997, respectively. This compares to cash used in operations
of $23,773 during the three-month period ended September 30, 1996 and cash
provided by operations of $8,003 for the nine-month period ended September 30,
1996. However, cash used in operations was net of increases in escrow deposits
of $37,852 and $87,178 in the three- and nine-month periods ended September 30,
1997. These escrow deposits may be utilized by the Partnership for future
payments of real estate taxes and property insurance.

There were no cash distributions to partners during either of the nine-month
periods ended September 30, 1997 or 1996.

During the first quarter of 1997, the Partnership sold Charlotte Commerce
Center, one of the commercial rental properties in its investment portfolio. The
net book value of the Center was $747,608 which was net of accumulated
depreciation of $328,306. During the third quarter of 1997, the Partnership sold
its four remaining condominium warehouse units located at LeJeune Industrial
Park. The net book value of the units was $129,567 which was net of accumulated
depreciation of $50,598. Upon the sale of the properties, these amounts were
removed from the Partnership's records resulting in a decrease in the carrying
value of rental properties from December 31, 1996 levels.

At the closing of the sale of the four condominium warehouse units in July 1997,
the Partnership accepted four mortgage notes from the purchasers. These notes,
which earn interest at an annual rate of 8%, totaled $124,000 and provide for
monthly payments of $1,342 for five years, including principal and interest, and
balloon payments which are due in July 2002.

During the three and nine months ended September 30, 1997, the Partnership
collected $77,014 and $83,599, respectively, on its mortgage notes receivable
compared to $4,109 and $12,126 collected during the three and nine months ended
September 30, 1996. The substantial increase in collections during the third
quarter of 1997 was attributable to the payoff of two mortgage notes receivable
totaling approximately $75,000.

The Partnership made principal payments of $17,216 on its notes and mortgages
payable during the quarter ended September 30, 1997 compared to $16,778 in the
second quarter of 1997 and $15,527 in the third quarter of 1996. For the
remainder of 1997, it is 

                                       10
<PAGE>



anticipated that principal payments on notes and mortgages will approximate
$17,700 which will be paid out of the general funds of the Partnership.

The Partnership does not intend to acquire any additional properties for its
investment portfolio. However, certain improvements may be necessary at some of
the properties in order to retain or attract tenants to space that is vacant.

Other than those items discussed above, the Partnership does not anticipate any
material changes to its financial condition during the last quarter of 1997.



MATERIAL CHANGES IN RESULTS OF OPERATIONS

Rental and other income, when combined, decreased in the nine months and third
quarter of 1997 when compared to the same periods of the previous year. These
declines are primarily attributable to the disposal of several rental properties
from the Partnership's investment portfolio: Keyes Executive Center, which
occurred during the last quarter of 1996; Charlotte Commerce Center, which
occurred during the first quarter of 1997; and the remaining four condominium
warehouse units located at LeJeune Industrial Park which closed in the third
quarter of 1997.

During the nine months ended September 30, 1997, the Partnership recognized a
gain of $91,740 from the sale of several rental properties. Of that amount,
$12,371 was recognized in the third quarter of 1997 from the sale of units at
LeJeune Industrial Park. There were no comparable sales in the three and nine
months ended September 30, 1996. For the remainder of 1997, the Partnership does
not anticipate selling any additional rental properties.

Interest income remained at approximately the same levels during the three and
nine months ended September 30, 1997 when compared to the same periods for 1996.

Partnership expenses, excluding cost of real estate sold, decreased in the third
quarter of 1997 from 1996 levels primarily due to the disposal of Keyes
Executive Center during the last quarter of 1996 and Charlotte Commerce Center
during the first quarter of 1997.

The Partnership anticipates that rental income and expenses will continue to be
lower during the fourth quarter of 1997 due to the reduction in the number of
rental properties remaining in its investment portfolio.

During the fourth quarter of 1997, other than discussed above, the Partnership
does not anticipate that revenues or expenses will vary materially from the
first three quarters of 1997.


                                       11
<PAGE>



                                   KFP 85-LTD.

                                     PART II

                                OTHER INFORMATION


ITEM 1.   LEGAL PROCEEDINGS.


           None


ITEM 2.   CHANGES IN SECURITIES.


           None


ITEM 3.   DEFAULTS UPON SENIOR SECURITIES.


           None


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.


           None


ITEM 5.   OTHER INFORMATION.


           None


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K.


           (a)  27 Financial Data Schedule


           (b)  None




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                                   KFP 85-LTD.

                                   SIGNATURES

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.

                                      KFP 85-Ltd.
                                      (Registrant)


                                      By:       KPA, Inc.
                                         -------------------------------------
                                                Managing General Partner


Date:   JANUARY 14, 1998              By:       /s/ TIMOTHY D. PAPPAS
                                         -------------------------------------
                                                Timothy D. Pappas,
                                                Vice President, Treasurer and
                                                Principal Accounting Officer














                                       13
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                                  EXHIBIT INDEX


EXHIBIT
NUMBER                   DESCRIPTION
-------                  ------------


27                       Financial Data Schedule