SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - -----
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1997
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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 0-14352
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BALCOR CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois 36-3344227
- - ------------------------------- -------------------
(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)
Registrant's telephone number, including area code (847) 267-1600
--------------
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 (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 90 days.
Yes X No
----- -----
<PAGE>
BALCOR CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
BALANCE SHEETS
June 30, 1997 and December 31, 1996
(UNAUDITED)
ASSETS
1997 1996
--------------- --------------
Cash and cash equivalents $ 1,877,932 $ 2,509,984
Escrow deposits 416,773
Prepaid expenses 54,726
Accounts and accrued interest receivable 25,898 102,578
Deferred expenses, net of accumulated
amortization of $56,916 in 1996 261,816
--------------- --------------
1,903,830 3,345,877
--------------- --------------
Investment in real estate:
Land 3,440,509
Buildings and improvements 29,537,388
--------------
32,977,897
Less accumulated depreciation 13,544,703
--------------
Investment in real estate, net of
accumulated depreciation 19,433,194
--------------- --------------
$ 1,903,830 $ 22,779,071
=============== ==============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 26,878 $ 291,536
Due to affiliates 75,850 97,071
Accrued real estate taxes 294,801
Security deposits 90,753
Mortgage notes payable 16,803,395
--------------- --------------
Total liabilities 102,728 17,577,556
Commitments and contingencies
Limited Partners' capital (57,074
Interests issued and outstanding) 1,871,033 5,355,042
General Partner's deficit (69,931) (153,527)
--------------- --------------
Total Partners' capital 1,801,102 5,201,515
--------------- --------------
$ 1,903,830 $ 22,779,071
=============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1997 and 1996
(UNAUDITED)
1997 1996
--------------- --------------
Income:
Rental and service $ 603,951 $ 4,806,153
Interest on short-term investments 213,603 70,562
Other income 558,712
--------------- --------------
Total income 1,376,266 4,876,715
--------------- --------------
Expenses:
Interest on mortgage notes payable 176,932 1,271,074
Depreciation 105,764 874,787
Amortization of deferred expenses 6,324 46,766
Property operating 400,835 1,884,801
Real estate taxes 48,500 405,335
Property management fees 31,378 236,525
Administrative 141,208 220,646
--------------- --------------
Total expenses 910,941 4,939,934
--------------- --------------
Income (loss) before gain on sale of
properties and extraordinary item 465,325 (63,219)
Gain on sales of properties 13,452,026
--------------- --------------
Income (loss) before extraordinary item 13,917,351 (63,219)
Extraordinary item:
Debt extinguishment expense (255,492)
--------------- --------------
Net income (loss) $ 13,661,859 $ (63,219)
=============== ==============
Income (loss) before extraordinary item
allocated to General Partner $ 85,222 $ (632)
=============== ==============
Income (loss) before extraordinary item
allocated to Limited Partners $ 13,832,129 $ (62,587)
=============== ==============
Income (loss) before extraordinary item per
Limited Partnership Interest (57,074
issued and outstanding) $ 242.36 $ (1.10)
=============== ==============
Extraordinary item allocated to General
Partner $ (1,626) None
=============== ==============
Extraordinary item allocated to Limited
Partners $ (253,866) None
=============== ==============
<PAGE>
BALCOR CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the six months ended June 30, 1997 and 1996
(UNAUDITED)
(Continued)
1997 1996
--------------- --------------
Extraordinary item per Limited Partnership
Interest (57,074 issued and outstanding) $ (4.45) None
=============== ==============
Net income (loss) allocated to General
Partner $ 83,596 $ (632)
=============== ==============
Net income (loss) allocated to Limited
Partners $ 13,578,263 $ (62,587)
=============== ==============
Net income (loss) per Limited Partnership
Interest (57,074 issued and outstanding) $ 237.91 $ (1.10)
=============== ==============
Distributions to Limited Partners $ 17,062,272 $ 4,269,706
=============== ==============
Distributions per Limited Partners Interest
(57,074 issued and outstanding) $ 298.95 $ 74.81
=============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES
for the quarters ended June 30, 1997 and 1996
(UNAUDITED)
1997 1996
--------------- --------------
Income:
Rental and service $ 2,432,500
Interest on short-term investments $ 63,248 24,035
--------------- --------------
Total income 63,248 2,456,535
--------------- --------------
Expenses:
Interest on mortgage notes payable 634,808
Depreciation 437,393
Amortization of deferred expenses 23,383
Property operating 82,785 954,993
Real estate taxes 172,854
Property management fees 116,498
Administrative 63,713 134,459
--------------- --------------
Total expenses 146,498 2,474,388
--------------- --------------
Net loss $ (83,250) $ (17,853)
=============== ==============
Net loss allocated to General Partner $ (3,896) $ (179)
=============== ==============
Net loss allocated to Limited Partners $ (79,354) $ (17,674)
=============== ==============
Net loss per Limited Partnerships Interest
(57,074 issued and outstanding) $ (1.39) $ (0.31)
=============== ==============
Distributions to Limited Partners $ 16,821,420 $ 1,569,535
=============== ==============
Distributions per Limited Partners Interest
(57,074 issued and outstanding) $ 294.73 $ 27.50
=============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1997 and 1996
(UNAUDITED)
1997 1996
--------------- --------------
Operating activities:
Net income (loss) $ 13,661,859 $ (63,219)
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Extraordinary item:
Debt extinguishment expense 255,492
Gain on sales of properties (13,452,026)
Depreciation of properties 105,764 874,787
Amortization of deferred expenses 6,324 46,766
Net change in:
Escrow deposits 288,785 81,782
Accounts receivable 76,680 (58,693)
Prepaid expenses 54,726 (196,270)
Accounts payable (264,658) 23,858
Due to affiliates (21,221) 21,500
Accrued liabilities (294,801) 113,913
Security deposits (90,753) 4,216
--------------- --------------
Net cash provided by operating activities 326,171 848,640
--------------- --------------
Investing activities:
Proceeds from sales of properties 16,970,380
Payment of selling costs (980,544)
---------------
Net cash provided by investing activities 15,989,836
---------------
Financing activities:
Distribution to Limited Partners (17,062,272) (4,269,706)
Principal payments on mortgage notes (13,775) (155,309)
Release of improvement escrows 127,988
--------------- --------------
Net cash used in financing activities (16,948,059) (4,425,015)
--------------- --------------
Net change in cash and cash equivalents (632,052) (3,576,375)
Cash and cash equivalents at beginning
of period 2,509,984 5,475,539
--------------- --------------
Cash and cash equivalents at end of period $ 1,877,932 $ 1,899,164
=============== ==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying statements for the six months
and quarter ended June 30, 1997, and all such adjustments are of a normal and
recurring nature.
(b) For financial statement purposes, in previous years partners were allocated
income and loss in accordance with the profit and loss percentages in the
Partnership Agreement. In order for the capital accounts of the General Partner
and Limited Partners to appropriately reflect their respective remaining
economic interests as provided for in the Partnership Agreement, the General
Partner was allocated adjusted income during 1997 for financial statement
purposes.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. During 1996, the Partnership sold two properties. During 1997, the
Partnership sold its remaining properties, the American Way Mall, Providence
Square Apartments, and Storage USA of Norcross Self-Storage Facility. The
timing of the termination of the Partnership and final distribution of cash
will depend upon the nature and extent of liabilities and contingencies which
exist or may arise. The Partnership has retained a portion of the cash from the
property sales to satisfy obligations of the Partnership as well as establish a
reserve for contingencies. Such contingencies may include legal and other fees
stemming from litigation involving the Partnership including, but not limited
to, the lawsuit discussed below in Note 7 of Notes to Financial Statements. In
the absence of any such contingency, the reserves will be paid within twelve
months of the last property sale. In the event a contingency arises, reserves
may be held by the Partnership for a longer period of time.
3. Interest Expense:
During the six months ended June 30, 1997 and 1996, the Partnership incurred
and paid interest expense on mortgage notes payable of $176,932 and $1,271,074,
respectively.
4. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1997 are:
<PAGE>
Paid
----------------------
Six Months Quarter Payable
------------ --------- ----------
Reimbursement of expenses to
the General Partner, at cost $ 50,243 $ 32,486 $ 75,850
5. Property Sales:
(a) In January 1997, the Partnership sold the American Way Mall in an all cash
sale for $5,500,000. From the proceeds of the sale, the Partnership paid
$204,082 in selling costs. The basis of the property was $3,718,717, which is
net of accumulated depreciation of $4,361,314. For financial statement
purposes, the Partnership recognized a gain of $1,577,201 from the sale of this
property.
(b) In February 1997, the Partnership sold the Providence Square Apartments for
a sales price of $25,510,000 less a credit of $500,000 related to the personal
property for a net sales price of $25,010,000. The purchaser of the property
took title subject to the existing first mortgage loan in the amount of
$16,789,620, which represents a noncash transaction to the Partnership.
Accordingly, the noncash aspect of this transaction is not presented in the
Partnership's Statements of Cash Flows. From the proceeds of the sale, the
Partnership paid $167,896 in fees relating to the assumption of the mortgage
loan by the purchaser and $583,763 in other selling costs. The basis of the
property was $13,623,514, which is net of accumulated depreciation of
$8,450,525. For financial statement purposes, the Partnership recognized a gain
of $10,634,827 from the sale of this property.
(c) In February 1997, the Partnership sold the Storage USA of Norcross
Self-Storage Facility in an all cash sale for $3,250,000. From the proceeds of
the sale, the Partnership paid $24,803 in selling costs. Neither the General
Partner, any affiliate or any third party received a brokerage commission in
connection with the sale of the property. The basis of the property was
$1,985,199, which is net of accumulated depreciation of $838,628. For financial
statement purposes, the Partnership recognized a gain of $1,239,998 from the
sale of this property.
6. Extraordinary Item:
In February 1997, the Partnership sold the Providence Square Apartments. In
connection with the sale, the Partnership wrote off the remaining unamortized
deferred financing fees in the amount of $255,492. This amount was recognized
as an extraordinary item and classified as debt extinguishment expense.
7. Contingency:
The Partnership is currently involved in a lawsuit whereby the Partnership and
certain affiliates have been named as defendants alleging certain federal
securities law violations with regard to the adequacy and accuracy of
disclosures of information concerning, as well as the marketing efforts related
to the offering of the Limited Partnership Interests of the Partnership. The
defendants continue to vigorously contest this action. A plaintiff class has
<PAGE>
not yet been certified, and no determination of the merits have been made. It
is not determinable at this time whether or not an unfavorable decision in this
action would have a material adverse impact on the financial position,
operations and liquidity of the Partnership. The Partnership believes that it
has meritorious defenses to contest the claims.
<PAGE>
BALCOR CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Current Income Fund-85 A Real Estate Limited Partnership (the
"Partnership") is a limited partnership formed in 1985 to invest in and operate
income-producing real property. The Partnership raised $57,074,000 through the
sale of Limited Partnership Interests and utilized these proceeds to acquire
five real property investments. The Partnership sold two properties during 1996
and the remaining three properties were sold in 1997.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1996 for a more complete understanding of
the Partnership's financial position.
Operations
- - ----------
Summary of Operations
- - ---------------------
The Partnership sold its remaining three properties during the first quarter of
1997 and recognized significant gains in connection with these sales. In
addition, during the second quarter of 1997, the Partnership paid property
operating expenses related to properties sold in 1996 and 1997. These events
resulted in the Partnership generating net income during the six months ended
June 30, 1997 as compared to a net loss during the same period in 1996 and an
increase in the net loss during the quarter ended June 30, 1997 as compared to
the same period in 1996. Further discussion of the Partnership's operations are
summarized below.
1997 Compared to 1996
- - ---------------------
Discussions of fluctuations between 1997 and 1996 refer to the six months and
quarters ended June 30, 1997 and 1996.
During 1997, the Partnership sold the American Way Mall, Providence Square
Apartments and Storage USA of Norcross Self-Storage Facility and recognized
gains in connection with these sales of $13,452,026. During the second half of
1996, the Partnership sold the El Dorado Hills Apartments and the Willow Lawn
Self-Storage Facility. These sales resulted in decreases in rental and service
income, interest expense on mortgage notes payable, depreciation, amortization,
property operating expense, real estate taxes and property management fees
during 1997 as compared to 1996.
Due to higher cash balances as a result of proceeds received in connection with
the 1997 property sales prior to their distribution to Limited Partners in
April 1997, interest income on short-term investments increased during 1997 as
compared to 1996.
<PAGE>
The Partnership recognized $421,774 of other income in connection with the sale
of the American Way Mall during 1997. The agreement of sale provided that, if
the purchaser transferred any portion of the property to a specified third
party prior to February 25, 1997, the Partnership would be entitled to a
portion of the net proceeds from such a transfer. In addition, the Partnership
received a real estate tax refund of $136,938 for American Way Mall's 1995 real
estate taxes.
During the second quarter of 1997, the Partnership paid property operating
expenses related to properties sold in 1996 and 1997.
Administrative expenses decreased in 1997 as compared to 1996 primarily due to
lower portfolio management fees as a result of the property sales in 1996 and
1997.
In connection with the sale of Providence Square Apartments, the Partnership
wrote off the remaining unamortized deferred expenses in the amount of
$255,492. This amount was recognized as an extraordinary item and is classified
as debt extinguishment expense in 1997.
Liquidity and Capital Resources
- - -------------------------------
The cash position of the Partnership decreased by approximately $632,000 as of
June 30, 1997 when compared to December 31, 1996 primarily due to the April
1997 distribution of sale proceeds to Limited Partners which was offset by the
net proceeds received from the three property sales during 1997. The
Partnership generated cash totaling approximately $326,000 from its operating
activities which consisted primarily of cash flow generated from property
operations, interest income on short-term investments and other income, which
was partially offset by the payment of administrative expenses and operating
expenses on sold properties. The Partnership received cash of approximately
$15,990,000 from investing activities consisting of net proceeds received from
the sales of the American Way Mall, Providence Square Apartments and Storage
USA of Norcross Self-Storage Facility. The Partnership used cash of
approximately $16,948,000 to fund its financing activities which consisted
primarily of the payment of distributions to the Limited Partners.
In January 1997, the Partnership sold the American Way Mall in an all cash sale
for $5,500,000. From the proceeds of the sale, the Partnership paid $204,082 in
selling costs. The remainder of the available proceeds was distributed to the
Limited Partners in April 1997. In addition, the Partnership received $421,774
pursuant to the sale agreement which provided that if the purchaser transferred
any portion of the property to a specified third party prior to February 25,
1997, the Partnership was entitled to a portion of the net proceeds from the
transfer. See Note 5 of Notes to Financial Statements for additional
information.
In February 1997, the Partnership sold the Providence Square Apartments for a
sales price of $25,510,000 less a credit of $500,000 related to the personal
property for a net sales price of $25,010,000. The purchaser of the property
took title subject to the existing first mortgage loan in the amount of
$16,789,620. From the proceeds of the sale, the Partnership paid $167,896 in
fees relating to the assumption of the mortgage loan by the purchaser and
<PAGE>
$583,763 in other selling costs. Pursuant to the terms of the sale, $250,000 of
the proceeds was retained by the Partnership and was unavailable for
distribution until May 1997 at which time the funds were released in full. The
remainder of the available proceeds was distributed to the Limited Partners in
April 1997. See Note 5 of Notes to Financial Statements for additional
information.
In February 1997, the Partnership sold the Storage USA of Norcross Self-Storage
Facility in an all cash sale for $3,250,000. From the proceeds of the sale, the
Partnership paid $24,803 in selling costs. Neither the General Partner, any
affiliate or any third party received a brokerage commission in connection with
the sale of the property. The remainder of the available proceeds was
distributed to the Limited Partners in April 1997. See Note 5 of Notes to
Financial Statements for additional information.
To date, Limited Partners have received distributions of Net Cash Receipts of
$173.34 and Net Cash Proceeds of $677.54, totaling $850.88 per $1,000 Interest.
Since all of the Partnership's properties have been sold, no additional
quarterly distributions are expected. Limited Partners will not recover all of
their original investment.
The Partnership sold two properties in 1996. The Partnership sold its three
remaining properties during 1997, as described above. The timing of the
termination of the Partnership and final distribution of cash will depend upon
the nature and extent of liabilities and contingencies which exist or may
arise. The Partnership has retained a portion of the cash from property sales
to satisfy obligations of the Partnership as well as establish a reserve for
contingencies. Such contingencies may include legal and other fees stemming
from litigation involving the Partnership including, but not limited to, the
lawsuit discussed in Note 7 of Notes to Financial Statements. In the absence of
any such contingency, the reserves will be paid within twelve months of the
last property sale. In the event a contingency arises, reserves may be held by
the Partnership for a longer period of time.
<PAGE>
BALCOR CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(a) Exhibits:
(4) Amended and Restated Form of Subscription Agreement set forth as
Exhibit 4.1 to Amendment No. 5 to the Registrant's Registration Statement on
Form S-11 dated August 16, 1985 (Registration No. 2-95910), and Form of
Confirmation regarding Interests in the Partnership set forth as Exhibit 4.2 to
the Partnership's Report on Form 10-Q for the quarter ended September 30, 1992
are incorporated herein by reference.
(10)(a)(i) Agreement of Sale and attachment thereto relating to the sale of the
El Dorado Hills Apartments previously filed as Exhibit 2(a) to the
Partnership's Current Report on Form 8-K dated June 7, 1996 is incorporated
herein by reference.
(ii) First Amendment to Agreement of Sale relating to the sale of El Dorado
Hills Apartments previously filed as Exhibit (10)(a)(ii) to the Partnership's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, is
incorporated herein by reference.
(iii) Second Amendment to Agreement of Sale and Escrow Agreement relating to
the sale of El Dorado Hills Apartments previously filed as Exhibit (10)(a)(iii)
to the Partnership's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996, is incorporated herein by reference.
(b)(i) Agreement of Sale and attachment thereto relating to the sale of the
American Way Mall previously filed as Exhibit 2(b) to the Partnership's Current
Report on Form 8-K dated June 7, 1996, is incorporated herein by reference.
(ii) First Amendment to Agreement of Sale relating to the sale of the American
Way Mall previously filed as Exhibit (10)(b)(ii) to the Partnership's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996, is incorporated herein
by reference.
(iii) Second Amendment to Agreement of Sale relating to the sale of the
American Way Mall previously filed as Exhibit (99)(b) to the Partnership's
Current Report on Form 8-K dated September 26, 1996, is incorporated herein by
reference.
(iv) Third Amendment to Agreement of Sale relating to the sale of American Way
Mall, previously filed as Exhibit (10)(b)(iv) to the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1996, is incorporated
herein by reference.
<PAGE>
(v) Fourth Amendment to Agreement of Sale relating to the sale of American Way
Mall, previously filed as Exhibit (10)(b)(v) to the Partnership's Annual Report
on Form 10-K for the year ended December 31, 1996, is incorporated herein by
reference.
(c)(i) Agreement of Sale and attachment thereto relating to the sale of
Providence Square Apartments previously filed as Exhibit (2)(a) to the
Partnership's Current Report on Form 8-K dated September 26, 1996 is
incorporated herein by reference.
(ii) Agreement relating to the sale of Providence Square Apartments, previously
filed as Exhibit (2)(b) to the Partnership's Current Report on Form 8-K dated
September 26, 1996 is incorporated herein by reference.
(iii) Amendment No. 1 to Agreement of Sale relating to the sale of Providence
Square Apartments, previously filed as Exhibit (2)(c) to the Partnership's
Current Report on Form 8-K dated September 26, 1996 is incorporated herein by
reference.
(iv) Letter Agreement relating to the sale of Providence Square Apartments,
previously filed as Exhibit (2)(d) to the Partnership's Current Report on Form
8-K dated September 26, 1996 is incorporated herein by reference.
(v) Amendment No. 2 to Agreement of Sale relating to the sale of Providence
Square Apartments, previously filed as Exhibit (10)(c)(v) to the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1996, is
incorporated herein by reference.
(vi) Letter dated December 17, 1996 relating to the sale of Providence Square
Apartments, previously filed as Exhibit (10)(c)(vi) to the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1996, is incorporated
herein by reference.
(vii) Amendment No. 3 to Agreement of Sale relating to the sale of Providence
Square Apartments, previously filed as Exhibit (10)(c)(vii) to the
Partnership's Annual Report on Form 10-K for the year ended December 31, 1996,
is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the six month period ending
June 30, 1997 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended June 30, 1997.
<PAGE>
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.
BALCOR CURRENT INCOME FUND-85
A REAL ESTATE LIMITED PARTNERSHIP
By: /s/Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Current Income Partners-85, the General
Partner
By: /s/Jayne A. Kosik
------------------------------
Jayne A. Kosik
Managing Director and Chief Financial
Officer (Principal Accounting Officer) of
Balcor Current Income Partners-85, the
General Partner
Date: August 13, 1997
--------------------
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1878
<SECURITIES> 0
<RECEIVABLES> 26
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1904
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1904
<CURRENT-LIABILITIES> 103
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1801
<TOTAL-LIABILITY-AND-EQUITY> 1904
<SALES> 0
<TOTAL-REVENUES> 14828
<CGS> 0
<TOTAL-COSTS> 481
<OTHER-EXPENSES> 253
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 177
<INCOME-PRETAX> 13917
<INCOME-TAX> 0
<INCOME-CONTINUING> 13917
<DISCONTINUED> 0
<EXTRAORDINARY> (255)
<CHANGES> 0
<NET-INCOME> 13662
<EPS-PRIMARY> 237.91
<EPS-DILUTED> 237.91
</TABLE>
