BALCOR REALTY INVESTORS 85 SERIES I (Form: 10-Q, Received: 11/12/1999 09:56:51)

Illinois 36-3244978 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2355 Waukegan Road Bannockburn, Illinois 60015 ----------------------------------------- ------------------- (Address of principal executive offices) (Zip Code)

BALCOR REALTY INVESTORS 85 - SERIES I A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership) BALANCE SHEETS September 30, 1999 and December 31, 1998 (Unaudited) ASSETS 1999 1998 ------------ ------------ Cash and cash equivalents $ 1,810,546 $ 1,854,844 Accrued interest receivable 8,422 6,129 ------------ ------------ $ 1,818,968 $ 1,860,973 ============ ============

Accounts payable $ 80,370 $ 62,447 Due to affiliates 26,044 22,486 ------------ ------------ Total liabilities 106,414 84,933 ------------ ------------ Commitments and contingencies Limited Partners' capital (82,697 Interests issued and outstanding) 2,018,583 2,082,069 General Partner's deficit (306,029) (306,029) ------------ ------------ Total partners' capital 1,712,554 1,776,040 ------------ ------------ $ 1,818,968 $ 1,860,973 ============ ============

1999 1998 ------------ ------------ Income: Interest on short-term investments $ 68,583 $ 79,486 ------------ ------------ Total income 68,583 79,486 ------------ ------------ Expenses: Property operating 6,519 Administrative 132,069 174,817 ------------ ------------ Total expenses 132,069 181,336 ------------ ------------ Net loss $ (63,486) $ (101,850) ============ ============ Net loss allocated to General Partner None None ============ ============ Net loss allocated to Limited Partners $ (63,486) $ (101,850) ============ ============ Net loss per Limited Partnership Interest (82,697 issued and outstanding) - Basic and Diluted $ (0.77) $ (1.23) ============ ============ Distribution to Limited Partners None $ 576,398 ============ ============ Distribution per Limited Partnership Interest (82,697 issued and outstanding) None $ 6.97 ============ ============

1999 1998 ------------ ------------ Income: Interest on short-term investments $ 23,661 $ 26,963 ------------ ------------ Total income 23,661 26,963 ------------ ------------ Expenses: Administrative 40,031 41,856 ------------ ------------ Total expenses 40,031 41,856 ------------ ------------ Net loss $ (16,370) $ (14,893) ============ ============ Net loss allocated to General Partner None None ============ ============ Net loss allocated to Limited Partners $ (16,370) $ (14,893) ============ ============ Net loss per Limited Partnership Interest (82,697 issued and outstanding) - Basic and Diluted $ (0.20) $ (0.18) ============ ============

1999 1998 ------------ ------------ Operating activities: Net loss $ (63,486) $ (101,850) Adjustments to reconcile net loss to net cash used in operating activities: Net change in: Accounts and accrued interest receivable (2,293) 14,570 Accounts payable 17,923 18,487 Due to affiliates 3,558 12,183 ------------ ------------ Net cash used in operating activities (44,298) (56,610) ------------ ------------ Financing activity: Distribution to Limited Partners (576,398) ------------ Cash used in financing activity (576,398) ------------ Net change in cash and cash equivalents (44,298) (633,008) Cash and cash equivalents at beginning of year 1,854,844 2,508,464 ------------ ------------ Cash and cash equivalents at end of period $ 1,810,546 $ 1,875,456 ============ ============

Paid ----------------------- Nine Months Quarter Payable ------------- --------- --------- Reimbursement of expenses to the General Partner, at cost $ 22,311 $ 2,333 $ 26,044

With regard to the Dorothy Bruss litigation, the defendants filed two motions on May 12, 1999. The first motion was a Motion to Change Venue from Essex County, New Jersey to Union County, New Jersey, where the predecessor complaint, the Lenore Klein case, had been filed. The second motion was a Motion to Dismiss the complaint for failure to state a cause of action. On July 16, 1999, the Motion to Change Venue was denied. On September 24, 1999, the court granted the defendants' Motion to Dismiss the complaint. The court has given the plaintiffs until November 30, 1999 to file an amended complaint.

On May 7, 1999, a proposed class action complaint was filed, and on May 13, 1999 was served on the defendants, Madison Partnership Liquidity Investors XX, et al. vs. The Balcor Company, et al. (Circuit Court, Chancery Division, Cook County, Illinois, Docket No. 99CH 06972). The general partner of the Partnership, the general partners of twenty-one additional limited partnerships which were sponsored by The Balcor Company, The Balcor Company and one individual are named as defendants in this action. The Partnership and the twenty-one other limited partnerships are referred to herein as the "Affiliated Partnerships". Plaintiffs are entities that initiated tender offers to purchase units and, in fact, purchased units in eleven of the Affiliated Partnerships. The complaint alleges breach of fiduciary duties and breach of contract under the partnership agreements for each of the Affiliated Partnerships. The complaint seeks the winding up of the affairs of the Affiliated Partnerships, the establishment of a liquidating trust for each of the Affiliated Partnerships until a resolution of all contingencies occurs, the appointment of an independent trustee for each such liquidating trust and the distribution of a portion of the cash reserves to limited partners. The complaint also seeks compensatory damages, punitive and exemplary damages, and costs and expenses in pursuing the litigation. On July 14, 1999, the defendants filed a Motion to Dismiss the complaint. A hearing date on the motion has not yet been set. On September 20, 1999 the Sandra Dee case described below was consolidated with this case. Future reports to investors will report only the consolidated case.

The defendants intend to vigorously contest this action. No class has been certified as of this date. The Partnership believes that it has meritorious defenses to contest the claims. It is not determinable at this time how the outcome of this action will impact the remaining cash reserves of the Partnership.

Sandra Dee vs. The Balcor Company, et al.
On June 1, 1999, a proposed class action complaint was filed, and on August 16, 1999 was served on the defendants, Sandra Dee vs. The Balcor Company, et al. (Circuit Court, Chancery Division, Cook County, Illinois, Docket No. 99CH 08123). The general partner of the Partnership, the general partners of twenty-one additional limited partnerships which were sponsored by The Balcor Company, The Balcor Company and one individual are named as defendants in this action. The Partnership and the twenty-one other limited partnerships are referred to herein as the "Affiliated Partnerships". This complaint is identical in all material respects to the Madison Partnership Liquidity Investors XX, et al. vs. The Balcor Company et al. complaint filed in May 1999. The complaint alleges breach of fiduciary duties and breach of contract under the partnership agreements for each of the Affiliated Partnerships. The complaint seeks the winding up of the affairs of the Affiliated Partnerships, the establishment of a liquidating trust for each of the Affiliated Partnerships until a resolution of all contingencies occurs, the appointment of an independent trustee for each such liquidating trust and the distribution of a portion of the cash reserves to limited partners. The complaint also seeks compensatory damages, punitive and exemplary damages, and costs and expenses in pursuing the litigation. The defendants filed on September 15, 1999 a motion to consolidate this case with the Madison Partnership case. On September 20, 1999, the motion was granted and this case was consolidated with the Madison Partnership case. Future reports to investors will report only the consolidated case. On September 15, 1999, the defendants also filed a Motion to Dismiss the complaint.

The defendants intend to vigorously contest this action. No class has been certified as of this date. The defendants believe that they have meritorious defenses to contest the claims. It is not determinable at this time how the outcome of this action will impact the remaining cash reserves of the Partnership.

By: /s/Thomas E. Meador -------------------------------- Thomas E. Meador President and Chief Executive Officer (Principal Executive Officer) of Balcor Partners-XVI, the General Partner By: /s/Jayne A, Kosik -------------------------------- Jayne A. Kosik Senior Managing Director and Chief Financial Officer (Principal Accounting and Financial Officer) of Balcor Partners-XVI, the General Partner Date: November 10, 1999 -----------------


PERIOD TYPE	9 MOS
FISCAL YEAR END	DEC 31 1999
PERIOD END	SEP 30 1999
CASH	1811
SECURITIES	8
RECEIVABLES	0
ALLOWANCES	0
INVENTORY	0
CURRENT ASSETS	1819
PP&E	0
DEPRECIATION	0
TOTAL ASSETS	1819
CURRENT LIABILITIES	106
BONDS	0
PREFERRED MANDATORY	0
PREFERRED	0
COMMON	0
OTHER SE	1713
TOTAL LIABILITY AND EQUITY	1819
SALES	0
TOTAL REVENUES	69
CGS	0
TOTAL COSTS	132
OTHER EXPENSES	0
LOSS PROVISION	0
INTEREST EXPENSE	0
INCOME PRETAX	(63)
INCOME TAX	0
INCOME CONTINUING	0
DISCONTINUED	0
EXTRAORDINARY	0
CHANGES	0
NET INCOME	(63)
EPS BASIC	(.77)
EPS DILUTED	(.77)