<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                     September 30, 2004
                                          ------------------

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 [ ]

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

     As  of  September  30,  2004,   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 SEPTEMBER 30, 2004

                                                                          Page
                                                                          ----
PART I.     Financial Information

Item 1.     Financial Statements

            Balance Sheets-September 30, 2004 (unaudited) and
               December 31, 2003                                            3

            Statements of Income and Comprehensive Income - for
               the three and nine months ended September 30, 2004
               and 2003 (unaudited)                                         4

            Statement of Changes in Partners' Equity - for the
               nine months ended September 30, 2004 (unaudited)             5

            Statements of Cash Flows - for the nine months ended
               September 30, 2004 and 2003 (unaudited)                      6

            Notes to Financial Statements (unaudited)                       7

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

Item 3.     Qualitative and Quantitative Disclosures about Market Risk     16

Item 4.     Controls and Procedures                                        17

PART II.    Other Information

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

Signature                                                                  19


<PAGE>3


PART I.           FINANCIAL INFORMATION
ITEM 1.           FINANCIAL STATEMENTS


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

                    BALANCE SHEETS

<TABLE>
<CAPTION>
                                                           September 30,      December 31,
                                                               2004               2003
                                                           ------------      ------------
                                                           (Unaudited)
                        ASSETS
<S>                                                     <C>                <C>
Investment in FHA-Insured Certificates and GNMA
  Mortgage-Backed Securities, at fair value                $ 14,344,015      $ 35,147,430

Investment in FHA-Insured Loans, at amortized cost,
  net of unamortized discount and premium                             -        10,628,077

Investment in debentures, at fair value                       1,741,873        10,335,670

Cash and cash equivalents                                    11,496,726        11,345,058

Receivables and other assets                                    146,122         1,592,192
                                                           ------------      ------------
      Total assets                                         $ 27,728,736      $ 69,048,427
                                                           ============      ============

           LIABILITIES AND PARTNERS' EQUITY

Distributions payable                                      $ 11,187,063       $ 2,513,947

Accounts payable and accrued expenses                            80,249            73,460

Due to affiliate                                                      -         5,319,243
                                                           ------------      ------------
      Total liabilities                                      11,267,312         7,906,650
                                                           ------------      ------------

Partners' equity:
  Limited partners' equity, 15,000,000 Units authorized,
    12,079,514 Units issued and outstanding                  25,125,410        67,926,439
  General partner's deficit                                  (8,811,691)       (7,074,710)
  Accumulated other comprehensive income                        147,705           290,048
                                                           ------------      ------------
      Total partners' equity                                 16,461,424        61,141,777
                                                           ------------      ------------
      Total liabilities and partners' equity               $ 27,728,736      $ 69,048,427
                                                           ============      ============
</TABLE>

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


<PAGE>4



PART I.           FINANCIAL INFORMATION
ITEM 1.           FINANCIAL STATEMENTS


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

             STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

                        (Unaudited)
<TABLE>
<CAPTION>
                                                             For the three months ended        For the nine months ended
                                                                      September 30,                    September 30,
                                                                 2004             2003            2004            2003
                                                               ---------      -----------      -----------     -----------
<S>                                                            <C>            <C>              <C>             <C>
Income:
  Insured mortgage investment income                           $ 353,160      $ 1,161,982      $ 1,768,017     $ 3,745,842
  Interest and other income                                       63,274           77,349          182,777         141,231
                                                               ---------      -----------      -----------     -----------
                                                                 416,434        1,239,331        1,950,794       3,887,073
                                                               ---------      -----------      -----------     -----------
Expenses:
  Asset management fee to related parties                         45,038          148,703          232,480         469,277
  General and administrative                                      75,984          106,163          232,135         329,205
                                                               ---------      -----------      -----------     -----------
                                                                 121,022          254,866          464,615         798,482
                                                               ---------      -----------      -----------     -----------
Net earnings before gains on insured
  mortgage dispositions                                          295,412          984,465        1,486,179       3,088,591

Net gains on insured mortgage dispositions                       571,671          627,469        2,055,067       1,373,339
                                                               ---------      -----------      -----------     -----------
Net earnings                                                   $ 867,083      $ 1,611,934      $ 3,541,246     $ 4,461,930
                                                               =========      ===========      ===========     ===========

Other comprehensive (loss) income - adjustment to
  unrealized (loss) gain on investments in insured mortgages    (530,096)         244,552         (142,343)       (223,853)
                                                               ---------      -----------      -----------     -----------
Comprehensive income                                           $ 336,987      $ 1,856,486      $ 3,398,903     $ 4,238,077
                                                               =========      ===========      ===========     ===========
Net earnings allocated to:
  Limited partners - 96.1%                                     $ 833,267      $ 1,549,069      $ 3,403,137     $ 4,287,915
  General Partner -   3.9%                                        33,816           62,865          138,109         174,015
                                                               ---------      -----------      -----------     -----------
                                                               $ 867,083      $ 1,611,934      $ 3,541,246     $ 4,461,930
                                                               =========      ===========      ===========     ===========
Net earnings per Unit of limited
  partnership interest - basic                                 $    0.07      $      0.13      $      0.28     $      0.35
                                                               =========      ===========      ===========     ===========
</TABLE>
        The accompanying notes are an integral part
              of these financial statements.



<PAGE>5


PART I.           FINANCIAL INFORMATION
ITEM 1.           FINANCIAL STATEMENTS



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

                    STATEMENT OF CHANGES IN PARTNERS' EQUITY

                  For the nine months ended September 30, 2004

                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                          Accumulated
                                                                                             Other
                                                       General            Limited        Comprehensive
                                                       Partner            Partners           Income         Total
                                                     ------------       ------------        ---------     ------------
<S>                                                  <C>                <C>                <C>            <C>
Balance, December 31, 2003                           $ (7,074,710)      $ 67,926,439        $ 290,048     $ 61,141,777

  Net earnings                                            138,109          3,403,137                -        3,541,246

  Adjustment to unrealized gains on
     investments in insured mortgages                           -                  -         (142,343)        (142,343)

  Distributions paid or accrued of $3.825 per Unit,
    including return of capital of $3.545 per Unit     (1,875,090)       (46,204,166)               -      (48,079,256)
                                                     ------------       ------------        ---------     ------------

Balance, September 30, 2004                          $ (8,811,691)      $ 25,125,410        $ 147,705     $ 16,461,424
                                                     ============       ============        =========     ============

Limited Partnership Units outstanding - basic, as of
   and for the three and nine months ended September 30, 2004             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 nine months ended
                                                                                                  September 30,
                                                                                             2004             2003
                                                                                         -----------       -----------
<S>                                                                                      <C>               <C>
Cash flows from operating activities:
   Net earnings                                                                          $ 3,541,246       $ 4,461,930
   Adjustments to reconcile net earnings to net cash provided by operating activities:
      Net gains on mortgage dispositions                                                  (2,055,067)       (1,373,339)
      Changes in assets and liabilities:
         Decrease  in receivables and other assets                                           635,410            37,306
         Increase in accounts payable and accrued expenses                                     6,789            11,864
         (Decrease) increase in due to affiliate                                            (151,408)           91,704
                                                                                         -----------       -----------

            Net cash provided by operating activities                                      1,976,970         3,229,465
                                                                                         -----------       -----------

Cash flows from investing activities:
   Proceeds from redemption of debentures                                                 11,146,330         2,674,487
   Debenture proceeds paid to affiliate                                                   (5,167,835)        1,528,983
   Receipt of mortgage principal from scheduled payments                                     188,577           744,159
   Proceeds from mortgage prepayments and sales                                           31,413,766                 -
   Proceeds from mortgage assignments                                                              -           465,339
                                                                                         -----------       -----------

            Net cash provided by investing activities                                     37,580,838         5,412,968
                                                                                         -----------       -----------

Cash flows used in financing activities:
  Distributions paid to partners                                                         (39,406,140)      (17,283,389)
                                                                                         -----------       -----------

Net increase (decrease) in cash and cash equivalents                                         151,668        (8,640,956)

Cash and cash equivalents, beginning of period                                            11,345,058        10,448,516
                                                                                         -----------       -----------

Cash and cash equivalents, end of period                                                 $11,496,726       $ 1,807,560
                                                                                         ===========       ===========

Portion of debenture due from a third party in exchange for an assigned mortgage         $         -       $   810,660
Debentures received from HUD in exchange for assigned mortgages                            1,741,873        10,335,670
Portion of debentures due to affiliate                                                             -        (5,167,835)


</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   pursuant  to  a  limited   partnership   agreement,   as  amended,
("Partnership Agreement") under the Uniform Limited Partnership Act of the state
of  California  on June 26,  1984.  During  the  period  from March 8, 1985 (the
initial closing date of the  Partnership's  public offering) through January 27,
1986 (the  termination date of the offering),  the Partnership,  pursuant to its
public offering of 12,079,389  Depository Units of limited partnership  interest
("Units")  raised a total of $241,587,780 in gross  proceeds.  In addition,  the
initial limited partner  contributed $2,500 to the capital of the Partnership in
exchange for 125 units of limited partnership interest.

     CRIIMI, Inc., a wholly-owned  subsidiary of CRIIMI MAE Inc. ("CRIIMI MAE"),
acts as the General  Partner (the  "General  Partner") for the  Partnership  and
holds a partnership  interest of 3.9%. The General Partner  provides  management
and  administrative  services  on behalf  of the  Partnership.  AIM  Acquisition
Partners  L.P.  serves as the advisor (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, The
Goldman Sachs Group, L.P., Sun America  Investments,  Inc.  (successor to Broad,
Inc.) and CRI/AIM  Investment,  L.P.,  a  subsidiary  of CRIIMI MAE,  over which
CRIIMI  MAE  exercises  100%  voting  control.  AIM  Acquisition  is a  Delaware
corporation  that is primarily  owned by Sun America  Investments,  Inc. and The
Goldman Sachs Group, L.P.

     Pursuant  to the terms of certain  origination  and  acquisition  services,
management services and disposition  services agreements between the Advisor and
the Partnership  (collectively the "Advisory  Agreements"),  the Advisor renders
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 are subject to the review and ultimate authority of the
General Partner. However, the General Partner is required to receive the consent
of the Advisor prior to taking certain  significant  actions,  including but not
limited to the  disposition of mortgages,  any transaction or agreement with the
General  Partner  or its  affiliates,  or any  material  change  as to  policies
regarding  distributions  or  reserves  of  the  Partnership  (collectively  the
"Consent Rights"). The Advisor is permitted and has delegated the performance of
services to CRIIMI MAE Services Limited Partnership  ("CMSLP"),  a subsidiary of
CRIIMI  MAE,   pursuant  to  a  sub-management   agreement  (the   "Sub-Advisory
Agreement").  The general partner and limited partner of CMSLP are  wholly-owned
subsidiaries  of CRIIMI MAE. The  delegation  of such services by the Advisor to
CMSLP does not relieve the Advisor of its  obligation to perform such  services.
Furthermore the Advisor has retained its Consent Rights.

     Prior to December  1993,  the  Partnership  was engaged in the  business of
originating   and  acquiring   government   insured   mortgage  loans  ("Insured
Mortgages").  The Partnership's  Investment in Insured Mortgages is comprised 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")  and
mortgage-backed  securities  guaranteed  by  the  Government  National  Mortgage
Association ("GNMA") ("GNMA Mortgage-Backed Securities"). In accordance with the
terms of the Partnership  Agreement,  the Partnership is no longer authorized to
originate or acquire Insured Mortgages and, consequently,  its primary objective
is to manage its  portfolio  of mortgage  investments,  all of which are insured
under Section  221(d)(4) or Section 231 of the National  Housing Act of 1937, as
amended (the "National Housing Act"). The Partnership  Agreement states that the
Partnership will terminate on December 31, 2009, unless terminated earlier under
the provisions thereof. The Partnership is required, pursuant to the Partnership
Agreement, to dispose of its assets prior to this date.

     As the  Partnership  continues to liquidate  its mortgage  investments  and
Unitholders  receive  distributions


<PAGE>8

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

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)


of return  of  capital  and  taxable  gains,  Unitholders  should  expect a
reduction in earnings and  distributions  due to the  decreasing  mortgage base.
Based  upon  the  current  level  of  interest  rates,  the  trend  in  mortgage
prepayments over the past year is likely to continue. Such mortgage prepayments,
if  continued  at the  trend  over  the  past  year,  will  likely  result  in a
termination and liquidation of the  Partnership  significantly  earlier than the
December 2009 stated  termination  date. Upon the termination and liquidation of
the Partnership distributions to Unitholders will be made in accordance with the
terms of the Partnership  Agreement. A final distribution to Unitholders will be
based on the  Partnership's  remaining  net assets after  deducting  and setting
aside  amounts  required  to satisfy  and  discharge  any  existing  Partnership
obligations  and  expenses,   and  such  distribution  to  Unitholders  will  be
substantially less than the amount referenced in limited partners' equity in the
Partnership's financial statements.


2. BASIS OF PRESENTATION

     The Partnership's financial statements are prepared on the accrual basis of
accounting in accordance with accounting  principles  generally  accepted in the
United States  ("GAAP").  The preparation of financial  statements in conformity
with GAAP requires  management to make estimates and assumptions that affect the
reported  amounts  of  assets  and  liabilities  at the  date  of the  financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

     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 September 30,
2004,  and the results of its  operations  for the three and nine  months  ended
September  30,  2004  and  2003 and its cash  flows  for the nine  months  ended
September 30, 2004 and 2003.

     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 GAAP have been  condensed  or omitted.
While the General Partner  believes that the disclosures  presented are adequate
to make the  information not misleading,  these financial  statements  should be
read in conjunction with the financial statements and the notes to the financial
statements included in the Partnership's Annual Report on Form 10-K for the year
ended December 31, 2003.


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

     Listed   below  is  the   Partnership's   aggregate   investment   in  GNMA
Mortgage-Backed Securities and FHA-Insured Certificates:

<TABLE>
<CAPTION>
                                                               September 30,            December 31,
                                                                   2004                     2003
                                                               ------------             ------------
<S>                                                            <C>                      <C>
  Number of:
    GNMA Mortgage-Backed Securities (4)                                   1                        2
    FHA-Insured Certificates (1) (2) (3)                                  7                       10
  Amortized Cost                                                $14,196,310              $34,857,381
  Face Value                                                     14,304,777               34,926,078
  Fair Value                                                     14,344,015               35,147,430
</TABLE>

(1)   In May 2004, the mortgage on Waterford Green Apartments was prepaid. The
      Partnership received net proceeds of approximately $6.6 million and
      recognized a gain of approximately $19,000 and $923,000 for the three and
      nine months

<PAGE>9

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

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)


      ended September 30, 2004. A distribution of approximately $0.455 per Unit
      related to the prepayment of this mortgage was declared in May and a
      distribution of approximately $0.07 per Unit for additional proceeds
      received related to the Partnership's participation interest in this
      mortgage was declared in June. Both distributions were paid to Unitholders
      in August 2004.
(2)   In May 2004, the mortgage on Northwood Place was prepaid. The Partnership
      received net proceeds of approximately $4.3 million and recognized a loss
      of approximately $51,000 for the nine months ended September 30, 2004. A
      distribution of approximately $0.345 per Unit related to the prepayment of
      this mortgage was declared in June and paid to Unitholders in August 2004.
(3)   In June 2004, the mortgage on Stafford Towers was prepaid. The Partnership
      received net proceeds of approximately $303,000 and recognized a loss of
      approximately $21,000 for the nine months ended September 30, 2004. A
      distribution of approximately $0.02 per Unit related to the prepayment of
      this mortgage was declared in July and paid to Unitholders in November
      2004.
(4)   In July 2004, the GNMA security secured by the mortgage on Oak Forest
      Apartments II was sold, with the consent of the Advisor. The Partnership
      received net proceeds of approximately $10.6 million and recognized a gain
      of approximately $553,000 for the three and nine months ended September
      30, 2004. A distribution of approximately $0.84 per Unit related to the
      sale of this GNMA security was declared in July and paid to Unitholders in
      November 2004.

     As of  November 1, 2004,  all of the GNMA  Mortgage-Backed  Securities  and
FHA-Insured  Certificates  are current  with respect to the payment of principal
and interest.


4. INVESTMENT IN FHA-INSURED LOANS

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

<TABLE>
<CAPTION>
                                                               September 30,            December 31,
                                                                   2004                      2003
                                                               ------------            --------------
    <S>                                                        <C>                     <C>
    Number of Loans (1) (2)                                               -                        3
    Amortized Cost                                             $          -             $ 10,628,077
    Face Value                                                            -               10,652,222
    Fair Value                                                            -               11,278,741

</TABLE>

(1)    In January 2004, HUD transferred assignment proceeds to the Partnership
       in the form of a 5.75% debenture, with a face value of approximately $3.5
       million, in exchange for the mortgage on Kaynorth Apartments. Since the
       mortgage on Kaynorth Apartments was beneficially owned 50% by the
       Partnership and 50% by American Insured Mortgage Investors ("AIM 84"),
       approximately $1.7 million of the debenture face value was due to AIM 84.
       See further discussion in Note 5.
(2)    In February 2004, the mortgages on Cobblestone Apartments and The
       Plantation were sold, with the consent of the Advisor. The Partnership
       received aggregate net proceeds of approximately $9.6 million and
       recognized aggregate gains of approximately $386,000 for the nine months
       ended September 30, 2004. The aggregate distribution of approximately
       $0.76 per Unit related to the sale of these two mortgages was declared in
       February 2004 and paid to Unitholders in May 2004.


5.     INVESTMENTS IN DEBENTURES, DUE TO AFFILIATE AND OTHER

     The Partnership, as the mortgagee, had the right to assign mortgages to the
United  States  Department  of Housing and Urban  Development  ("HUD") under the
Section  221(g)(4)  program  of the  National  Housing  Act  (the  "Section  221
Program.")  at the  expiration  of 20 years  from the date of final  endorsement
("Anniversary  Date").  The  Partnership,  as the mortgagee,  could exercise its
option to put a mortgage  to HUD during the one year  period  subsequent  to the
Anniversary  Date.  This  assignment  procedure  was  applicable  to an  Insured
Mortgage which had a firm or conditional  commitment for HUD insurance  benefits
on or before  November  30,  1983.  A  mortgagee  electing  to assign an Insured
Mortgage to HUD received,  in exchange therefore,  a debenture.  As of September
30, 2004,  the  Partnership no longer holds  mortgage  investments  eligible for
assignment  to HUD under the Section 221 program.  The following is a discussion
of  debentures  received in  exchange  for  mortgages

<PAGE>10

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

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)


assigned to HUD under the Section 221 Program:

Debenture and due to affiliate
------------------------------

     Listed  below  are  debentures   redeemed  by  HUD  in  January  2004.  The
Partnership  received aggregate proceeds of approximately  $10.6 million,  which
included the face value of the debentures, plus accrued interest. The debentures
paid interest  semi-annually on January 1 and July 1. Since the mortgages listed
were  beneficially  owned 50% by the Partnership and 50% by AIM 84, an affiliate
of the Partnership,  approximately $5.3 million of the proceeds were transferred
to AIM 84. A distribution of the remaining $5.3 million or  approximately  $0.42
per Unit was declared in January 2004 and paid to Unitholders in May 2004.

<TABLE>
<CAPTION>
     (Dollars in thousands, except per unit amounts)
                                                                  Face Value   Face Value     Date
                                Redemption   Interest    Face       Due to     Due to the   Debenture
    Debenture for mortgage on:      Date       Rate      Value    Affiliate    Partnership  Received
    -------------------------   ----------   --------   -------   ----------   -----------  --------
    <S>                         <C>          <C>        <C>       <C>          <C>          <C>
    Baypoint Shoreline
      Apartments                01/01/2004    6.375%    $ 1,813       $  906       $  906     Feb-03

    College Green Apartments    01/01/2004    5.750%      2,571        1,286        1,286     Jul-03

    Brougham Estates II         01/01/2004    5.750%      4,774        2,387        2,387     Aug-03

    Town Park Apartments        01/01/2004    5.750%      1,178          589          589     Aug-03
                                                        -------       ------       ------
    Total debentures                                    $10,336       $5,168       $5,168
                                                        =======       ======       ======

</TABLE>

     In  January  2004,  HUD  issued a 5.75%  debenture  to the  Partnership  in
exchange  for the  mortgage  on  Kaynorth  Apartments.  The  face  value  of the
debenture  was  approximately  $3.5 million and pays interest  semi-annually  on
January  1 and  July 1.  The  Partnership  recognized  a gain  of  approximately
$246,000 in the first quarter of 2004 related to this assignment.  This mortgage
was  beneficially  owned 50% by the  Partnership  and 50% by AIM 84. In February
2004,  the  Partnership,  with the  consent  of the  Advisor,  sold AIM 84's 50%
interest in this debenture and subsequently transferred the cash proceeds, which
included  the  face  value  of  the  debenture,   plus  accrued   interest,   of
approximately  $1.8  million  to AIM 84. The fair  value of this  debenture,  of
approximately  $1.7  million,  was included in  Investment  in Debentures on the
Partnership's balance sheet as of September 30, 2004.

Other
-----

     In January 2004, HUD also redeemed a 6.375% debenture held by a third party
beneficiary.  The  debenture  was issued by HUD in May 2003, in exchange for the
assignment  of the mortgage on The Executive  House.  The  Partnership  received
proceeds of approximately  $836,000 which included the Partnership's  portion of
the face value of the  debenture,  plus  accrued  interest.  A  distribution  of
approximately  $0.065  per  Unit  was  declared  in  February  2004  and paid to
Unitholders in May 2004. The debenture was held by an unrelated  third party and
the face amount of approximately  $811,000,  plus accrued  interest,  due to the
Partnership  was included in Receivables  and Other Assets on the  Partnership's
balance sheet as of December 31, 2003.



<PAGE>11

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

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)


6. DISTRIBUTIONS TO UNITHOLDERS

     The  distributions  paid or accrued to  Unitholders on a per Unit basis for
the nine months ended September 30, 2004 and 2003 are as follows:

<TABLE>
<CAPTION>
                                       2004           2003
                                       ----          ----
<S>                                   <C>            <C>
Quarter ended March 31                $2.010 (1)     $0.310 (4)
Quarter ended June 30                  0.925 (2)      0.255 (5)
Quarter ended September 30             0.890 (3)      0.130 (6)
                                      ------         ------
                                      $3.825         $0.695
                                      ======         ======
</TABLE>

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

<TABLE>
<CAPTION>
                                                                           Date                       Net
                                                                         Proceeds       Type of     Proceeds
      Name of property to which mortgage was held                        Received     Disposition   Per Unit
      -------------------------------------------                        --------     -----------   --------
      <S>                                                                <C>          <C>           <C>
      (1) Quarter ended March 31, 2004:
           Pleasant View Nursing Home                                    Dec 2003     Prepayment      $0.570
           Stone Hedge Village Apartments                                Dec 2003     Prepayment       0.135
           Baypoint Shoreline Apts., College Green Apts., Brougham
             Estates II and Town Park Apts. (redemption of debentures)   Jan 2004     Assignments      0.420
           The Executive House (redemption of debenture)                 Jan 2004     Assignment       0.065
           Cobblestone Apts. and The Plantation                          Feb 2004        Sale          0.760
      (2) Quarter ended June 30, 2004:
           Northwood Place                                               May 2004     Prepayment       0.345
           Waterford Green Apartments                                    May 2004     Prepayment       0.455
           Waterford Green Apartments - participation interest           May 2004     Prepayment       0.070
      (3) Quarter ended September 30, 2004:
           Oak Forest Apartments II                                     July 2004        Sale           0.84
           Stafford Towers                                              June 2004     Prepayment        0.02
      (4) Quarter ended March 31, 2003:
           Walnut Hills                                                  Dec 2002     Prepayment       0.040
           Westbrook Apartments                                          Jan 2003     Assignment       0.120
           Fairlawn II (redemption of 7.5% debenture)                    Jan 2003     Assignment       0.060
      (5) Quarter ended June 30, 2003:
           Stonebridge Apartments                                        Mar 2003     Prepayment       0.075
           Magnolia Place Apartments                                     May 2003     Prepayment       0.020
           Willow Dayton                                                 May 2003     Prepayment       0.070
      (6) Quarter ended September 30, 2003:
            Ashley Oaks Apartments                                      June 2003     Prepayment       0.040
</TABLE>

     The basis for paying  distributions  to  Unitholders  is net proceeds  from
mortgage and/or debenture  dispositions,  if any, and cash flow from operations,
which includes regular interest income and principal from Insured  Mortgages and
interest on  debentures.  Although  the Insured  Mortgages  pay a fixed  monthly
mortgage payment and the debentures have a fixed  semi-annual  interest payment,
the cash distributions paid to the Unitholders will vary during each quarter due
to (1) the fluctuating  yields in the short-term  money market where the monthly
mortgage payments and debenture  interest 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  and  debenture   dispositions,   (3)   variations  in  the  cash  flow
attributable to the delinquency or default of Insured Mortgages and professional
fees and foreclosure  costs incurred in connection with those Insured  Mortgages
and (4) variations in the Partnership's  operating expenses.  As the Partnership
continues  to  liquidate  its  mortgage   investments  and  Unitholders

<PAGE>12

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

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)


receive  distributions of return of capital and taxable gains,  Unitholders
should expect a reduction in earnings and  distributions  due to the  decreasing
mortgage  base.  Based upon the current  level of interest  rates,  the trend in
mortgage  prepayments  over the past year is likely to continue.  Such  mortgage
prepayments, if continued at the trend over the past year, will likely result in
a termination and liquidation of the Partnership  significantly earlier than the
December 2009 stated  termination  date. Upon the termination and liquidation of
the  Partnership,  distributions  to Unitholders will be made in accordance with
the terms of the Partnership Agreement. A final distribution to Unitholders will
be based on the  Partnership's  remaining net assets after deducting and setting
aside  amounts  required  to satisfy  and  discharge  any  existing  Partnership
obligations  and  expenses,   and  such  distribution  to  Unitholders  will  be
substantially less than the amount referenced in limited partners' equity in the
Partnership's financial statements.


7. TRANSACTIONS WITH RELATED PARTIES

     The  General  Partner and certain  affiliated  entities  earned or received
compensation or payments for services from the Partnership as follows:

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

<TABLE>
<CAPTION>
                                                                                       For the                  For the
                                                                                 three months ended        nine months ended
                                                                                    September 30,            September 30,
       Name of Recipient                 Capacity in Which Served/Item            2004        2003         2004        2003
       -----------------                 -----------------------------            -----       -----        -----       ----
<S>                                   <C>                                           <C>          <C>         <C>         <C>
CRIIMI, Inc. (1)                      General Partner/Distribution             $ 436,295    $ 63,729   $1,875,090   $ 340,703

AIM Acquisition Partners, L.P.(2)     Advisor/Asset Management Fee                45,038     148,703      232,480     469,277

                                      Affiliate of General Partner/Expense
CRIIMI MAE Management, Inc.(3)        Reimbursement                               15,950      14,831       45,058      45,801
</TABLE>

(1)  The General Partner, pursuant to the Partnership Agreement, is entitled to
     receive 3.9% of the Partnership's income, loss, capital and distributions,
     including, without limitation, the Partnership's adjusted cash from
     operations and proceeds of mortgage prepayments, sales or insurance (as
     defined in the Partnership Agreement).

(2)  The Advisor is entitled to an asset management fee equal to 0.95% of total
     invested assets (as defined in the Partnership Agreement). CMSLP 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 $13,272 and $68,511 for the three and nine months ended
     September 30, 2004, respectively and $43,823 and $138,300 for the three and
     nine months ended September 30, 2003, respectively. The general partner and
     limited partner of CMSLP are wholly owned subsidiaries of CRIIMI MAE.

(3)  CRIIMI MAE Management, Inc., an affiliate of the General Partner, is
     reimbursed for personnel and administrative services on an actual cost
     basis.


<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 "believe," "anticipate," "expect," "contemplate," "may," "will," 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 in this Quarterly Report on Form 10-Q,
including, without limitation, statements made under Item 2, Management's
Discussion and Analysis of Financial Condition and Results of Operations, (2)
information included or incorporated by reference in prior and future filings by
the Partnership (defined below) with the Securities and Exchange Commission
("SEC") 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, (v) defaulted mortgages, (vi) errors in servicing defaulted mortgages
and (vii) sales of mortgage investments below fair market value. 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
-------

     The Partnership's  business consists of holding government insured mortgage
investments  ("Insured  Mortgages") primarily on multifamily housing properties,
and  distributing  the  payments of  principal  and  interest  on such  mortgage
investments,  including  debentures  issued by the United  States  Department of
Housing and Urban  Development  ("HUD") in exchange for such  mortgages,  to the
holders   of   its   depository   units   of   limited   partnership   interests
("Unitholders").  CRIIMI,  Inc., a  wholly-owned  subsidiary  of CRIIMI MAE Inc.
("CRIIMI  MAE"),  acts as the General  Partner (the  "General  Partner") for the
Partnership and holds a partnership interest of 3.9%. The Partnership's  primary
source  of  revenue  and cash is  mortgage  interest  income  from  its  Insured
Mortgages.

     The General  Partner is required to receive the consent of AIM  Acquisition
Partners L.P., the advisor (the "Advisor") to the  Partnership,  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 (collectively the "Consent Rights").

     As the  Partnership  continues to liquidate  its mortgage  investments  and
Unitholders  receive  distributions  of return of  capital  and  taxable  gains,
Unitholders  should expect a reduction in earnings and  distributions due to the
decreasing  mortgage base.  Based upon the current level of interest rates,  the
trend in mortgage  prepayments  over the past year is likely to  continue.  Such
mortgage prepayments,  if continued at the trend over the past year, will likely
result in a termination and liquidation of the Partnership significantly earlier
than the December 2009 stated termination date.


<PAGE>14


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


Mortgage Investments
--------------------

     As of  September  30,  2004,  the  Partnership  had  invested  in 8 Insured
Mortgages and one debenture with an aggregate  amortized  cost of  approximately
$15.9  million,  an aggregate face value of  approximately  $16.0 million and an
aggregate fair value of approximately $16.1 million, as compared to December 31,
2003,  when the  Partnership  had  invested  in 15  Insured  Mortgages  and five
debentures with an aggregate  amortized cost of approximately  $51.5 million, an
aggregate face value of approximately  $51.6 million and an aggregate fair value
of approximately $52.4 million.

     During the first quarter of 2004,  two Insured  Mortgages  were sold,  five
debentures were redeemed and one debenture was issued as assignment proceeds for
one mortgage. The net aggregate amortized cost and aggregate face value of these
assets was approximately $14.9 million as of December 31, 2003.

     During the second quarter of 2004, three Insured Mortgages  prepaid.  These
mortgages  had an  aggregate  amortized  cost  and an  aggregate  face  value of
approximately $10.4 million as of December 31, 2003.

     During the third quarter of 2004, the GNMA security secured by the mortgage
on Oak Forest Apartments II was sold, with the consent of the Advisor. This GNMA
security had an amortized cost and face value of approximately  $10.1 million as
of December 31, 2003.  The  Partnership  received net proceeds of  approximately
$10.6 million and recognized a gain of approximately  $553,000 for the three and
nine months ended September 30, 2004. A distribution of approximately  $0.84 per
Unit related to the sale of this GNMA  security was declared in July and paid to
Unitholders in November 2004.

     As of November 1, 2004,  all of the Insured  Mortgages  were  current  with
respect to the payment of principal and interest.

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

     Net earnings decreased by approximately $745,000 and $921,000 for the three
and nine months  ended  September  30,  2004,  respectively,  as compared to the
corresponding  periods in 2003.  For the three  month  period,  the  decrease is
primarily  due to a  decrease  in  mortgage  investment  income and net gains on
mortgage dispositions  partially offset by a decrease in expenses.  For the nine
month period, the decrease is primarily due to a decrease in mortgage investment
income partially offset by an increase in net gains on mortgage dispositions and
a decrease in expenses.

     Mortgage  investment  income decreased by  approximately  $809,000 and $2.0
million for the three and nine months ended September 30, 2004, respectively, as
compared to the corresponding  periods in 2003,  primarily due to a reduction in
the  mortgage  base.  The  mortgage  base  decreased  as a result of 11 mortgage
dispositions with an aggregate principal balance of approximately $41.4 million,
representing an approximate 74% decrease in the aggregate  principal  balance of
the total mortgage portfolio since September 30, 2003.

     Interest and other income decreased by approximately  $14,000 for the three
months ended September 30, 2004 and increased by  approximately  $42,000 for the
nine months ended September 30, 2004, as compared to the  corresponding  periods
in 2003. These  fluctuations were primarily due to variations in the amounts and
the timing of the temporary investment of mortgage disposition proceeds prior to
distribution.

     Asset management fees decreased by approximately  $104,000 and $237,000 for
the three and nine months ended September 30, 2004, respectively, as compared to
the  corresponding  periods  in  2003,  primarily  due to the  reduction  in the
mortgage base, as previously discussed.

<PAGE>15


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


     General and administrative  expenses decreased by approximately $30,000 and
$97,000 for the three and nine months ended September 30, 2004, respectively, as
compared to the corresponding periods in 2003, primarily due to the reduction in
the mortgage base.

     Net gains on mortgage  dispositions  decreased by approximately $56,000 for
the three  months  ended  September  30,  2004 and  increased  by  approximately
$682,000 for the nine months ended September 30, 2004, respectively, as compared
to the corresponding periods in 2003. During the six months ended June 30, 2004,
the Partnership  recognized a gain of approximately $246,000 from the assignment
of one mortgage,  gains of approximately $386,000 from the sale of two mortgages
and net gains of approximately  $851,000 from the prepayment of three mortgages.
During the three months ended September 30, 2004, the  Partnership  recognized a
gain of approximately $553,000 from the sale of one mortgage and additional gain
of  approximately  $19,000 from a mortgage  that prepaid in the second  quarter.
During  the  first six  months  of 2003,  the  Partnership  recognized  gains of
approximately  $289,000  from the  prepayment  of four  mortgages  and  gains of
approximately $457,000 from the assignment of three mortgages.  During the three
months  ended   September  30,  2003,  the  Partnership   recognized   gains  of
approximately $627,000 from the assignment of three mortgages.

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

     The  Partnership's  operating  cash  receipts,  derived  from  payments  of
principal and interest on Insured  Mortgages,  interest on  debentures  and cash
receipts from interest on short-term  investments,  were  sufficient  during the
nine months ended September 30, 2004 to meet operating  requirements.  The basis
for paying  distributions  to Unitholders  is net proceeds from mortgage  and/or
debenture  dispositions,  if any, and cash flow from operations,  which includes
regular  interest  income and principal  from Insured  Mortgages and interest on
debentures.  Although the Insured Mortgages pay a fixed monthly mortgage payment
and  the  debentures  have  a  fixed  semi-annual  interest  payment,  the  cash
distributions  paid to the Unitholders  will vary during each quarter due to (1)
the fluctuating yields in the short-term money market where the monthly mortgage
payments and debenture interest 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
and debenture dispositions,  (3) variations in the cash flow attributable to the
delinquency  or  default  of  Insured   Mortgages  and  professional   fees  and
foreclosure  costs incurred in connection  with those Insured  Mortgages and (4)
variations in the Partnership's operating expenses. As the Partnership continues
to liquidate its mortgage  investments and Unitholders receive  distributions of
return of capital and taxable  gains,  Unitholders  should expect a reduction in
earnings and distributions  due to the decreasing  mortgage base. Based upon the
current level of interest rates, the trend in mortgage prepayments over the past
year is likely to continue. Such mortgage prepayments, if continued at the trend
over the past year,  will likely result in a termination  and liquidation of the
Partnership  significantly  earlier  than the December  2009 stated  termination
date. Upon the termination and liquidation of the Partnership  distributions  to
Unitholders  will  be made in  accordance  with  the  terms  of the  Partnership
Agreement.   A  final   distribution  to  Unitholders   will  be  based  on  the
Partnership's  remaining  net assets after  deducting  and setting aside amounts
required to satisfy and  discharge  any  existing  Partnership  obligations  and
expenses,  and such distribution to Unitholders will be substantially  less than
the amount referenced in limited partners' equity in the Partnership's financial
statements.

     Net cash provided by operating  activities  decreased by approximately $1.3
million  for the nine  months  ended  September  30,  2004,  as  compared to the
corresponding period in 2003, primarily due to a decrease in mortgage investment
income,  partially  offset by decreases in asset  management fee and general and
administrative expenses.

<PAGE>16


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


     Net cash provided by investing  activities increased by approximately $32.2
million  for the nine  months  ended  September  30,  2004,  as  compared to the
corresponding  period in 2003,  primarily due to increases in proceeds  received
from mortgage  prepayments  and sales and net debenture  redemptions,  partially
offset by a decrease in proceeds received from mortgage assignments and mortgage
principal from scheduled payments.

     Net cash used in  financing  activities  increased by  approximately  $22.1
million  for the nine  months  ended  September  30,  2004,  as  compared to the
corresponding  period in 2003, due to an increase in the amount of distributions
paid to partners in the first nine months of 2004 compared to the same period in
2003.

Critical Accounting Policies
----------------------------

     The  preparation of financial  statements in conformity  with GAAP requires
the General Partner to make estimates and  assumptions  that affect the reported
amounts of assets and  liabilities,  the  disclosure  of  contingent  assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting periods. The Partnership  continually
evaluates the estimates  used to prepare the financial  statements,  and updates
those estimates as necessary.  In general,  the General Partner's  estimates are
based on historical  experience,  on information  from third parties,  and other
various  assumptions  that are  believed  to be  reasonable  under the facts and
circumstances. Actual results could differ materially from those estimates.

     The General Partner considers an accounting estimate to be critical if:

o        it requires assumptions to be made that were uncertain at the time the
         estimate was made; and
o        changes in the estimate or different estimates that could have been
         selected and could have a material impact on the Partnership's results
         of operations or financial condition.

     The  Partnership's  primary  critical  accounting  estimate  relates to the
determination of fair values for Insured  Mortgages.  The Partnership  estimates
the fair value of its  Insured  Mortgages  internally.  The  Partnership  uses a
discounted cash flow  methodology to estimate the fair value.  This requires the
Partnership  to make certain  estimates  regarding  discount  rates and expected
prepayments.  The  estimated  cash flows were  discounted  using a discount rate
that, in the Partnership's  view, was commensurate with the market's  perception
of risk and value.  The  Partnership  used a variety of sources to determine its
discount rate including:  (i)  institutionally-available  research reports, (ii)
communications  with  dealers and active  insured  mortgage  security  investors
regarding the valuation of comparable  securities and (iii) recent transactions.
Increases in the discount rate used by the Partnership would generally result in
a  corresponding  decrease  in  the  fair  value  of the  Partnership's  insured
mortgages.  Decreases  in  the  discount  rate  used  by the  Partnership  would
generally  result  in  a  corresponding  increase  in  the  fair  value  of  the
Partnership's insured mortgages.  The Partnership also makes certain assumptions
regarding the prepayment speeds of its Insured Mortgages. In a low interest rate
environment,  mortgages are more likely to prepay even if the mortgage  contains
prepayment  penalties.  In general,  if the  Partnership  increases  its assumed
prepayment speed, the fair value of the Insured Mortgages will decrease.  If the
Partnership  decreases  its  assumed  prepayment  speed,  the fair  value of the
Insured Mortgages will increase.


ITEM 3.      QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

     The  General  Partner  has  determined  that  there has not been a material
change as of September 30, 2004, in market risk from the information provided as
of  December  31,  2003 in the  Partnership's  Annual  Report on Form 10-K as of
December 31, 2003.

<PAGE>17



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


ITEM 4.     CONTROLS AND PROCEDURES

     The General  Partner  carried out an evaluation,  under the supervision and
with the  participation  of the  General  Partner's  management,  including  the
General  Partner's  Chairman of the Board and Chief Executive  Officer (CEO) and
the Chief  Financial  Officer  (CFO),  of the  effectiveness  of its  disclosure
controls  and  procedures  as defined  in Rule  13a-15(e)  under the  Securities
Exchange  Act of  1934,  as  amended.  Based  on that  evaluation,  the  General
Partner's CEO and CFO concluded that its disclosure controls and procedures were
effective as of the end of the period covered by this report. There have been no
significant  changes in the General  Partner's  internal controls over financial
reporting  that  occurred  during  the most  recent  fiscal  quarter  that  have
materially affected, or are likely to materially affect,  internal controls over
financial reporting.


<PAGE>18


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

(a)      Exhibits

         Exhibit No.                      Purpose
         ----------                       -------

            31.1                 Certification pursuant to the Exchange Act Rule
                                 13a-14(a) from Barry S. Blattman, Chairman of
                                 the Board and Chief Executive Officer of the
                                 General Partner (Filed herewith).

            31.2                 Certification pursuant to the Exchange Act Rule
                                 13a-14(a) from Cynthia O. Azzara, Executive
                                 Vice President, Chief Financial Officer and
                                 Treasurer of the General Partner (Filed
                                 herewith).

            32.1                 Certification pursuant to Section 906 of the
                                 Sarbanes-Oxley Act of 2002 from Barry S.
                                 Blattman, Chairman of the Board and Chief
                                 Executive Officer of the General Partner
                                 (Furnished herewith).

            32.2                 Certification pursuant to Section 906 of the
                                 Sarbanes-Oxley Act of 2002 from Cynthia O.
                                 Azzara, Executive Vice President, Chief
                                 Financial Officer and Treasurer of the General
                                 Partner (Furnished herewith).


(b) Reports on Form 8-K

            Date
            ----

            July 26, 2004        To report a press release issued on July 21,
                                 2004 announcing the July 2004 distribution to
                                 the Partnership's Unitholders.

            August 12, 2004      To report a press release issued on August 11,
                                 2004 announcing the Partnership's second
                                 quarter financial results.

            August 26, 2004      To report a press release issued on August 20,
                                 2004 announcing the August 2004 distribution to
                                 the Partnership's Unitholders.

            September 24, 2004   To report a press release issued on
                                 September 21, 2004 announcing the September
                                 2004 distribution to the Partnership's
                                 Unitholders.


<PAGE>19



                                    SIGNATURE

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

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

                                     By:      CRIIMI, Inc.
                                              General Partner


November 9, 2004                     /s/Cynthia O. Azzara
----------------                     ---------------------------------------
DATE                                 Cynthia O. Azzara
                                     Executive Vice President,
                                     Chief Financial Officer and
                                     Treasurer (Principal Accounting Officer)