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, 2000
                              -------------------------------------------------

                                       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.
-------------------------------------------------------------------------------
             (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
-------------------------------------------------------------------------------
          (Address of principal executive offices, including zip code)

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

                                 Not applicable
-------------------------------------------------------------------------------
              (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 [X]   No [ ]

<PAGE>

                                   KFP 85-LTD.

                                      INDEX

<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION                                                               Page No.
                                                                                             --------
<S>                                                                                               <C>
         Item 1 - Financial statements (unaudited):
             Statements of Net Assets
                September 30, 2000 and December 31, 1999..........................................3

             Statements of Operations
                For the three and nine months ended September 30, 2000 and 1999...................4

             Statement of Changes in Partners' Equity in Net Assets
                For the nine months ended September 30, 2000......................................5

             Statements of Cash Flows
                For the nine months ended September 30, 2000 and 1999.............................6

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

         Item 2 - Management's Discussion and Analysis of Financial
             Condition and Results of Operations.................................................11


PART II - OTHER INFORMATION

             Items 1 through 6 ..................................................................14

             Signatures..........................................................................15
</TABLE>

                                       2
<PAGE>

                                   KFP 85-LTD.
                           (IN PROCESS OF LIQUIDATION)
                            STATEMENTS OF NET ASSETS
                    SEPTEMBER 30, 2000 AND DECEMBER 31, 1999


<TABLE>
<CAPTION>
                                                SEPTEMBER 30,
                                                    2000         DECEMBER 31,
ASSETS at estimated realizable value             (UNAUDITED)         1999
------------------------------------             -----------      ----------
<S>                                               <C>             <C>
Cash and interest-bearing deposits                $  369,701      $1,026,412
Accounts receivable, net                                  --          14,787
Mortgage notes receivable, net                       114,190         269,500
Rental properties                                         --          35,000
Land and land development, net                       425,000         468,000
Other assets                                           2,060           1,095
                                                  ----------      ----------

            Total assets                          $  910,951      $1,814,794
                                                  ==========      ==========

LIABILITIES AND PARTNERS' EQUITY IN NET ASSETS
----------------------------------------------
LIABILITIES at estimated settlement amounts:
    Accounts payable                              $   16,339      $      302
    Accrued liabilities                               86,598          97,784
                                                  ----------      ----------
            Total liabilities                        102,937          98,086
                                                  ----------      ----------

CONTINGENCIES (Note 4)

PARTNERS' EQUITY IN NET ASSETS:
    General partners                                      --              --
    Limited partners; 8,000 limited
        partnership units authorized;
        7,940 units issued and outstanding           808,014       1,716,708
                                                  ----------      ----------
            Total partners' equity in net assets     808,014       1,716,708
                                                  ----------      ----------
            Total liabilities and
                partners' equity in net assets    $  910,951      $1,814,794
                                                  ==========      ==========
</TABLE>

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

                                       3
<PAGE>

                                   KFP 85-LTD.
                           (IN PROCESS OF LIQUIDATION)
                            STATEMENTS OF OPERATIONS
         FOR THE Three AND NINE moNTHS ENDED SEPTEMBER 30, 2000 AND 1999
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                            THREE MONTHS         NINE MONTHS
                                            ------------         -----------
                                          2000        1999      2000       1999
                                          ----        ----      ----        ----
<S>                                    <C>         <C>        <C>         <C>
REVENUES:
   Rental income                       $      --   $ 206,013  $      --   $ 630,583
   Real estate sales,
      net of closing costs                    --          --     31,843          --
   Interest income                         1,320       6,077     13,114      19,105
   Other income                              103       1,217        103       4,015
                                       ---------   ---------  ---------   ---------

     Total revenues                        1,423     213,307     45,060     653,703
                                       ---------   ---------  ---------   ---------

EXPENSES:
   Interest and financing costs               --     112,922         --     340,386
   Property expenses                      19,811      58,240     33,410     182,347
   Cost of real estate sold                   --          --     35,000          --
   Selling, administration
     and other                            27,990      24,549     79,786      88,355
   Depreciation and
     amortization                             --      14,352         --     100,464
   Provision for losses on
     rental properties and land
     and land development costs               --          --     43,000       5,705
                                       ---------   ---------  ---------   ---------

      Total expenses                      47,801     210,063    191,196     717,257
                                       ---------   ---------  ---------   ---------

      Net income (loss)                $ (46,378)  $   3,244  $(146,136)  $ (63,554)
                                       =========   =========  =========   =========

PER UNIT AMOUNTS TO
LIMITED PARTNERS:
      Net income (loss) after
        allocations to General
        Partners of $0,
        $65, $0 and $(1,271),
        respectively                   $   (5.84)  $    0.40  $  (18.41)  $   (7.84)
                                       =========   =========  =========   =========

      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.
                           (IN PROCESS OF LIQUIDATION)
             STATEMENT OF CHANGES IN PARTNERS' EQUITY IN NET ASSETS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                   GENERAL            LIMITED
Partners' Equity in Net Assets    PARTNERS           PARTNERS           TOTAL
------------------------------    --------           --------           -----
<S>                              <C>               <C>               <C>
December 31, 1999                $      --         $ 1,716,708       $ 1,716,708

Net loss                                --            (146,136)         (146,136)

Cash distributions to
    Limited Partners                    --            (762,558)         (762,558)
                                 ---------         -----------       -----------

September 30, 2000               $      --         $   808,014       $   808,014
                                 =========         ===========       ===========
</TABLE>

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

                                       5
<PAGE>

                                   KFP 85-LTD.
                           (IN PROCESS OF LIQUIDATION)
                            STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                               2000             1999
                                                               ----             ----
<S>                                                          <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                $(146,136)      $ (63,554)
     Adjustments to reconcile net loss
     to net cash used in operating activities-
        Depreciation and amortization                               --         100,464
        Discounts on mortgage notes receivable
           allowed upon payoff                                  21,387              --
        Provision for losses on rental properties
           and land and land development costs                  43,000           5,705
        Provision for doubtful accounts                          8,827           7,547
        Loss on sale of real estate                              3,157              --
        Changes in assets and liabilities:
           Increase in escrow deposits                              --         (87,042)
           (Increase) decrease  in accounts receivable           5,960         (18,688)
           Increase in other assets                               (965)        (39,739)
           Increase in accounts payable                         16,037           3,642
           Increase (decrease) in accrued liabilities          (11,186)         65,069
            Increase in tenant security deposits                    --             732
                                                             ---------       ---------

                  Net cash used in operating activities        (59,919)        (25,864)
                                                             ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Payments received on mortgage notes                       133,923          10,806
     Proceeds from sale of real estate,
        net of closing costs                                    31,843              --
     Capital expenditures                                           --         (70,140)
                                                             ---------       ---------
                 Net cash provided by (used in)
                    investing activities                       165,766         (59,334)
                                                             ---------       ---------
</TABLE>

                                   (Continued)

                                       6
<PAGE>

                                   KFP 85-LTD.
                           (IN PROCESS OF LIQUIDATION)
                            STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
                                   (UNAUDITED)
                                   (Continued)

<TABLE>
<CAPTION>
                                                                2000               1999
                                                                ----               ----
<S>                                                            <C>                <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
     Distributions to Limited Partners                         (762,558)               --
     Repayment of mortgage payable                                   --           (61,898)
                                                            -----------       -----------

                 Net cash used in financing activities         (762,558)          (61,898)
                                                            -----------       -----------

NET DECREASE IN CASH AND
     INTEREST-BEARING DEPOSITS                                 (656,711)         (147,096)

CASH AND INTEREST-BEARING DEPOSITS,
     BEGINNING OF THE PERIOD                                  1,026,412           167,076
                                                            -----------       -----------

CASH AND INTEREST-BEARING DEPOSITS,
     END OF THE PERIOD                                      $   369,701       $    19,980
                                                            ===========       ===========


SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:

   Cash paid for interest                                   $        --       $   338,826
                                                            ===========       ===========

SUPPLEMENTAL DISCLOSURE OF
NONCASH INVESTING AND
FINANCING ACTIVITIES:

     Rental property acquired through foreclosure
        of mortgage note receivable                         $        --       $    36,343
                                                            ===========       ===========
</TABLE>

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

                                       7
<PAGE>

                                   KFP 85-LTD.
                           (IN PROCESS OF LIQUIDATION)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2000
                                   (UNAUDITED)

(1) BASIS OF PRESENTATION:

The statement of net assets as of December 31, 1999, 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, 1999.

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 net assets of the Partnership as of
September 30, 2000 and December 31, 1999, the results of operations for the
three-month and nine-month periods ended September 30, 2000 and 1999, changes in
partners' equity in net assets for the nine-month period ended September 30,
2000, and cash flows for the nine-month periods ended September 30, 2000 and
1999.

Effective December 31, 1999, the Managing General Partner formulated a plan of
liquidation whereby the remaining rental properties, land and mortgage notes
receivable will be disposed of by sale. Upon completion of the sale of the
remaining assets and settlement of all liabilities, the Partnership will
distribute the remaining cash to the partners based upon terms contained in the
Partnership Agreement. The Managing General Partner anticipates that the
Partnership's liquidation will be completed by December 31, 2000. However, there
is no guarantee that the Partnership will be able to sell all of its assets in
2000.

Based upon the adoption of a plan of liquidation, the Partnership changed its
basis of accounting for periods subsequent to December 31, 1999 from the
going-concern basis to the liquidation basis. Accordingly, the accompanying
financial statements have been prepared on the liquidation basis and the
carrying value of the assets are presented at estimated realizable values and
all liabilities presented at estimated settlement amounts. It is not presently
determinable whether the amounts realizable from the disposition of the assets
or the amounts that creditors agree to accept in settlement of the obligations
due them will differ materially from the estimated amounts shown in the
accompanying financial statements. The accompanying financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

                                       8
<PAGE>

(2) RELATED PARTY TRANSACTIONS:

On March 30, 2000, the Partnership paid a selling commission of $2,259 to Keyes
Asset Management, Inc. ("KAMI"), a company affiliated with the Managing General
Partner, in conjunction with the sale of a warehouse condominium unit at LeJeune
Industrial Park ("LeJeune").

Property management fees paid to KAMI for management of various rental
properties totaled $7,500 for the three months ended September 30, 1999, $22,500
for the nine months ended September 30, 1999, and are included in property
expenses in the accompanying statements of operations.

During the three and nine months ended September 30, 1999, $18,886 and $59,470,
respectively, was paid to KAMI in connection with the securing of tenants for
certain leases. The unamortized portion of leasing commissions to KAMI was
included in other assets in the balance sheets and was amortized on a
straight-line basis over the lives of the respective leases. On December 1,
1999, the remaining portion of unamortized deferred leasing commissions was
written off and included as part of the cost of real estate sold.

(3) CASH DISTRIBUTIONS TO LIMITED PARTNERS:

In February 2000, the Managing General Partner elected to make cash
distributions to all Limited Partners based on the number of Limited Partnership
units held by each Limited Partner. The total cash distributed to Limited
Partners was $762,558, the equivalent of $96 for each outstanding Limited
Partnership unit.

(4) CONTINGENCIES:

(a) ESTIMATED REALIZABLE VALUE -

As disclosed in Note 1, the Managing General Partner has formulated a plan of
liquidation for the Partnership. Accordingly, the Partnership changed its basis
of accounting from the going-concern basis to the liquidation basis effective
December 31, 1999. The liquidation basis of accounting requires that the
carrying value of remaining assets be presented at estimated realizable values.
The Partnership has presented its assets at estimated realizable value in the
accompanying statements of net assets. However, it is not presently determinable
whether the estimated amounts to be realized from future sales of the remaining
assets will differ materially from the amounts shown in the accompanying
financial statements. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

                                       9
<PAGE>

(b) CONTINGENCIES -

Prior to 2000, the Partnership began actively marketing for sale Commercial
Boulevard Center, the one property remaining in its investment portfolio as of
September 30, 2000. The Partnership intends to continue looking for qualified
purchasers during the remainder of 2000 but there is no guarantee that the
Partnership will be able to find a buyer by the end of 2000. There is also no
guarantee that the estimated realizable value will be achieved when the property
is ultimately sold.

Prior to the end of 2000, the Partnership anticipates that it will reaquire two
warehouse condominium units located at LeJeune through foreclosure of mortgage
notes receivable that the Partnership holds. The unpaid principal balance of the
mortgage notes is $63,147 and the Partnership anticipates that it will be able
to sell those units for an amount at least equal to the unpaid mortgage balance.
However, there is no guarantee that the Partnership will be able to sell the
units for that amount. At the present time, it is not known exactly when the
units will be reaquired or how long the units will have to be held before they
are sold.

                                       10
<PAGE>

                                   KFP 85-LTD.

Item 2.

Management's Discussion and Analysis of Financial Condition and Results
of Operations

General

Effective December 31, 1999, the Managing General Partner formulated a plan of
liquidation for the Partnership whereby the remaining rental properties, land
and mortgage notes receivable will be disposed of by sale. Accordingly, the
Partnership changed its basis of accounting for periods subsequent to December
31, 1999 from the going-concern basis to the liquidation basis. The carrying
value of the remaining assets are presented at estimated realizable values and
all liabilities are presented at estimated settlement amounts. The Partnership
ceased operations on December 31, 1999 and moved into a liquidation phase. For
periods subsequent to December 31, 1999, the Partnership's focus will be to sell
its assets and it will not receive any operating revenues. Therefore, the
Partnership's current activities are not comparable to 1999 or to any other
prior periods.

Material Changes in Financial Condition

During the nine months ended September 30, 2000, the Partnership's cash and
interest-bearing deposits decreased by $656,711 compared to a decrease of
$147,096 during the nine months ended September 30, 1999. The decrease in cash
and interest-bearing deposits in 2000 was primarily attributable to cash
distributions in February 2000 of $762,558 to Limited Partners. The remaining
decrease in cash and interest-bearing deposits in 2000 was attributable to
payments of accrued liabilities and expense incurred during liquidation. These
items were partially offset by principal collections of $133,923 on mortgage
notes receivable, $5,960 of collections on accounts receivable and $13,114 of
interest income received. In addition, the Partnership received cash of $31,843
from the sale of a warehouse condominium unit more fully described below.

On March 30, 2000, the Partnership closed on the sale of a warehouse condominium
unit located at LeJeune Industrial Park ("LeJeune"). The selling price of the
unit was $35,000 but the Partnership incurred expenses of $3,157 related to the
sale, resulting in a net sale of $31,843. The Partnership had previously
reaquired this unit on April 9, 1999 through the foreclosure of a mortgage note
receivable held by the Partnership. At the time of foreclosure, the outstanding
principal balance of the mortgage note was $36,344 and the Partnership incurred
costs of $4,361 related to the foreclosure, a total of $40,705. During 1999, the
Partnership reduced the carrying value of the LeJeune unit to an estimated
realizable value of $35,000.

                                       11
<PAGE>

Principal payments on the Northpark Commerce Center ("Northpark") mortgage
payable totaled $61,898 during the nine months of 1999. Northpark was sold on
December 1, 1999 and the mortgage balance remaining at that date was paid from
the sales proceeds. Therefore, there were no principal payments during the nine
months of 2000.

Prior to 2000, the Partnership began actively marketing for sale Commercial
Boulevard Center ("Commerical"), the one property remaining in its investment
portfolio as of September 30, 2000. During the second quarter of 2000, the
Partnership reevaluated the estimated realizable value of Commercial and reduced
its carrying value by $43,000 to $425,000. This reduction in estimated value was
based upon an informal survey of market conditions, property values and other
factors in the commercial areas adjoining the property. The Partnership will
continue to look for qualified purchasers during the last three months of 2000.
However, there is no guarantee that the Partnership will be able to find a buyer
for Commercial before the end of 2000 and there is no guarantee that the revised
estimated realizable value will be achieved when the property is ultimately
sold.

Prior to the end of 2000, the Partnership anticipates that it will reaquire two
warehouse condominium units located at LeJeune through foreclosures of mortgage
notes receivable held by the Partnership. The unpaid principal balance of the
mortgage notes is $63,147 and the Partnership anticipates that it will be able
to sell those units for an amount at least equal to the unpaid mortgage balance.
However, there is no guarantee that the Partnership will be able to sell those
units for that amount. Presently, it is not known exactly when the units will be
reaquired or how long the units will have to be held before they are sold.

The Partnership is also seeking qualified purchasers for the mortgage notes
receivable held by the Partnership. Alternatively, the Partnership is offering
discounts to the mortgagors for early payoffs of the mortgage notes. The
mortgage notes, which earn interest at rates ranging from 8% to 10% annually,
were originally accepted in previous years by the Partnership when it sold
warehouse condominium units at LeJeune. The Partnership anticipates that it will
be able to collect or sell these mortgage notes at the September 30, 2000
carrying value of $51,043, an amount net of the mortgage balance that is
anticipated to be foreclosed. However, there is no guarantee that the
Partnership will be able to collect or sell the remaining mortgage notes prior
to the end of 2000.

The Partnership is in the process of liquidation and anticipates that all
remaining assets will be sold or collected at their estimated realizable values
and all liabilities will be paid at their estimated settlement amounts. The cash
remaining will be distributed to Partners in accordance with provisions
contained in the Partnership Agreement.

Material Changes in Results of Operations

Effective December 31, 1999, the Managing General Partner formulated a plan of
liquidation. The Partnership ceased operations on December 31, 1999 and moved
into a liquidation phase. For periods subsequent to December 31, 1999, the
Partnership's focus will be to sell its assets and it will not receive any
future operating revenues. Therefore, the Partnership's current activities are
not comparable to 1999 or any other prior periods.

                                       12
<PAGE>

Forward Looking Statements

Certain items discussed in this report may constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended and, as such, may
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Partnership to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such forward-looking
statements speak only as of the date of this quarterly report. The Partnership
expressly disclaims any obligation or undertaking to publicly release updates or
revisions to any forward-looking statements contained herein, to reflect any
change in the Partnership's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.

                                       13
<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

                                       14
<PAGE>

                                   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:  November 13, 2000                 By:      /s/ Timothy D. Pappas
      -------------------                         -----------------------
                                                  Timothy D. Pappas,
                                                  Vice President, Treasurer and
                                                  Principal Accounting Officer

                                       15
<PAGE>

                                 EXHIBIT INDEX

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

  27                 Financial Data Schedule