Item 1. Business
Integrated Resources High Equity Partners, Series 85, a California Limited Partnership (the "Partnership"), was formed as of August 19, 1983. The Partnership is engaged in the business of operating and holding for investment previously acquired income-producing properties, consisting of office buildings, shopping centers and other commercial and industrial properties. Resources High Equity, Inc., a Delaware corporation and a wholly-owned subsidiary of Presidio Capital Corp., a British Virgin Islands corporation ("Presidio"), is the Partnership's managing general partner (the "Managing General Partner"). Until November 3, 1994, Resources High Equity, Inc. was a wholly-owned subsidiary of Integrated Resources, Inc. ("Integrated"). On November 3, 1994 Integrated consummated its plan of reorganization under Chapter 11 of the United States Bankruptcy Code at which time, pursuant to such plan of reorganization, the newly-formed Presidio purchased substantially all of Integrated's assets. Presidio AGP Corp., which is a wholly-owned subsidiary of Presidio, became the associate general partner (the "Associate General Partner") on February 28, 1995 replacing Z Square G Partners II which withdrew as of that date. The Managing General Partner and the Associate General Partner are referred to collectively hereinafter as the "General Partners." Affiliates of the General Partners are also engaged in businesses related to the acquisition and operation of real estate.
The Partnership offered 400,000 units of limited partnership interest (the "Units") pursuant to the Prospectus of the Partnership dated February 4, 1985, as supplemented by Supplements dated January 27, 1986 and April 11, 1986 (collectively, the "Prospectus"), filed pursuant to Rules 424(b) and 424(c) under the Securities Act of 1933, as amended. The Prospectus was filed as part of the Partnership's Registration Statement on Form S-11, Commission File No. 2- 92319 (the "Registration Statement"), pursuant to which the Units were registered and offered. The offering was terminated on May 30, 1986. Upon final admission of limited partners, the Partnership had accepted subscriptions for 400,010 Units (including the initial limited partner) for an aggregate of $100,002,500 in gross proceeds, resulting in net proceeds from the offering of $98,502,500 (gross proceeds of $100,002,500 less organization and offering costs of $1,500,000). All underwriting and sales commissions were paid by Integrated or its affiliates and not by the Partnership.
As of March 15, 1997, the Partnership had invested all of its net proceeds in real estate. Revenues from the following properties represented 15% or more of the Partnership's gross revenues during each of the last three fiscal years: in 1996, Southport and 568 Broadway represented 30.2% and 25.0% of gross revenues, respectively; in 1995, revenue from Southport, 568 Broadway and Loch Raven represented 30.8%, 23.8% and 16.7% of gross revenues, respectively; in 1994, revenue from Southport, 568 Broadway and Loch Raven represented 32.7%, 18.3% and 15.6% of gross revenues, respectively.
The Partnership owned the following properties as of March 15, 1997:
(1) Westbrook Mall Shopping Center
On July 10, 1985, the Partnership purchased the fee simple interest in the Westbrook Mall Shopping Center ("Westbrook"), a partially enclosed shopping center located next to a regional mall in Brooklyn Center, Minnesota, near Minneapolis. It comprises three buildings on approximately 9.87 acres, with a total of 79,242 square feet of gross leasable area and parking for approximately 460 cars. It was built in three phases from 1966 to 1977.
Westbrook is located directly across the street from the 1,000,000 square foot Brookdale Regional Shopping Center. Westbrook is in direct competition with two nearby shopping centers: Brookdale Square, which is located one-quarter mile east of Westbrook, has 140,000 square feet of gross leasable area; and Northbrook Center, which is located one and one-quarter miles east of Westbrook, contains 18 stores and has 76,000 square feet of gross leasable area. In addition, there are two relatively new shopping centers in the vicinity: one, anchored by a 105,000 square foot Target Discount Store, has an additional 39,000 square feet of retail space; the other, anchored by a 68,000 square foot Designer Depot, has an additional 32,000 square feet of retail space. Overall the Brookdale market comprises approximately 1.6 million square feet of retail space, of which approximately 165,000 square feet was vacant as of January 1, 1997.
Westbrook was 77% leased as of January 1, 1997, compared to 83% as of January 1, 1996. Occupancy, however, was only 21% as of January 1, 1997. In August 1993, Best Buy closed its 22,695 square foot store at Westbrook. Best Buy has continued to meet its financial obligations however, its lease expires on January 31, 1997. Kids R' Us closed its 18,500 square foot store in October 1994. However, it remains obligated under its lease until it expires in January 2014. Edison Brothers, which has operated a Repp Big & Tall store on a month-to-month lease has given notice that it will vacate at the end of January 1997 and terminate its lease. Additionally, Codeco, a local, 3,000 square foot tenant, vacated and has been in default since the fall of 1996, and its lease expires on January 31, 1997. At that time, the center will be 38% leased, and 14% occupied.
The Partnership's efforts to lease space in the center have been unsuccessful due primarily to the functional obsolescence of the structure, and secondarily to the weak retail climate in the immediate market. Therefore, in addition to continuing to search for tenants for the existing vacancies, the Partnership is pursuing various alternatives.
(2) Southport Shopping Center
On April 15, 1986, the Partnership purchased the fee simple interest in Southport Shopping Center ("Southport"), a regional shopping center located on the 17th Street Causeway in Fort Lauderdale, Florida near the intercoastal waterway and beach area. The center's three buildings, comprising a total of 143,089 square feet, are situated on a 9.45 acre site. Southport was built in phases from 1968 to 1977 and expanded again and renovated in 1985. The site provides parking for 563 cars. Southport was 95% occupied as of January 1, 1997 as compared to 96% on January 1, 1996. There are no leases that represent at least 10% of the square footage of the center scheduled to expire in 1997. The vacancy represents one theater space located at the rear of the center. During 1996, new and renewal leases were completed on 21,660 square feet representing 15 percent of the center's leasable space. During 1996, the roof tiles were painted and the roof on the East quadrant of the main center building will be replaced in 1997.
Southport is highly visible from S.E. 17th Street, the major east/west artery in the commercially-oriented area. Developments in the area are diversified and include hotels, restaurants, retail centers, office buildings and the 750,000 square foot Broward County Convention Center, which opened in 1991, is within walking distance. In 1996, the new 75,000 square foot, three story mixed-use NorthPort Marketplace opened on county owned land adjacent to
the Convention Center. With rental rates of $40-$50 per square feet, the development has attracted national restaurant/entertainment chains and is not considered competition for Southport's tenants. The center continues to maintain a solid tenant base and anchor tenants, Publix, Eckerd and McCrory's, combined square footage represents 39% of the center's leasable area.
(3) Loch Raven Plaza
On June 26, 1986, the Partnership purchased the fee simple interest in Loch Raven Plaza ("Loch Raven"), a retail/office complex located in Towson, Maryland. It contains approximately 25,000 square feet of office and storage space and 125,000 square feet of retail space, with parking for approximately 655 vehicles.
The property was 91% occupied as of January 1, 1997, compared to 88% at January 1, 1996. There are no leases which represent at least 10% of the square footage of the center scheduled to expire during 1997.
A complete renovation of the exterior of the center and the parking lot is planned for 1997. The entire project is budgeted for $1.1 million and is expected to be completed in the Fall of 1997. The renovation is deemed necessary in order to retain tenants as neighboring centers have recently undertaken renovation and re-tenanting programs.
(4) Century Park I
On November 7, 1986, a joint venture (the "Century Park Joint Venture") comprised of the Partnership and High Equity Partners L.P. - Series 86 ("HEP-86"), an affiliated public limited partnership, purchased the fee simple interest in Century Park I ("Century Park I"), an office complex. The Partnership and HEP-86 each have a 50% interest in the Century Park Joint Venture.
Century Park I, situated on approximately 8.6 acres, is located in the center of San Diego County in Kearny Mesa, California, directly adjacent to Highway 163 at the northeast corner of Balboa Avenue and Kearny Villa Road. Century Park I is part of an office park consisting of six office buildings and two parking garages, in which Century Park Joint Venture owns three buildings, comprising 200,002 net rentable square feet and one garage with approximately 810 parking spaces. One of the three buildings was completed in the latter half of 1985, and the other two buildings were completed in February 1986. The property was 74% leased as of January 1, 1997 compared to 74% at January 1, 1996. However, the leasing of 14,705 rentable square feet to HealthSouth / IMC Healthcare Centers in January 1997 increased the occupancy rate to 81%. There are no leases scheduled to expire in 1997. Capital expenditures budgeted for 1997 include replacing the roof and the installation of an HVAC monitoring system in Building I.
Century Park I competes with other office parks and office buildings in the Kearny Mesa submarket where the year-end 1996 vacancy rate was 15%. Net absorption in the area was 209,397 square feet during 1996. The primary competition continues to be Metropolitan Office Park with 100,000 square feet of available space.
(5) 568 Broadway
On December 2, 1986, a joint venture (the "Broadway Joint Venture") comprised of the Partnership and HEP-86 acquired a fee simple interest in 568-578 Broadway ("568 Broadway"), a commercial building in New York City, New York. Until February 1, 1990, the Partnership and HEP-86 each had a 50% interest in the Broadway Joint Venture. On February 1, 1990, the Broadway Joint Venture admitted a third joint venture partner, High Equity Partners L.P. - Series 88 ("HEP-88"), an affiliated public limited partnership sponsored by Integrated. HEP-88 contributed $10,000,000 for a 22.15% interest in the joint venture. The Partnership and HEP-86 each retain a 38.925% interest in the joint venture.
568 Broadway is located in the SoHo district of Manhattan on the northeast corner of Broadway and Prince Street. 568 Broadway is a 12-story plus basement and sub-basement building constructed in 1898. It is situated on a site of approximately 23,600 square feet, has a rentable square footage of approximately 299,000 square feet and a floor size of approximately 26,000 square feet. Formerly catering primarily to industrial light manufacturing, the building has been converted to an office building and is currently being leased to art galleries, photography studios, retail and office tenants. The last manufacturing tenant vacated in January 1993. The building was 100% leased as of January 1, 1997 compared to 95% as of January 1, 1996. There are no leases which represent at least 10% of the square footage of the property scheduled to expire during 1997.
568 Broadway competes with several other buildings in the SoHo area.
(6) Seattle Tower
On December 16, 1986, a joint venture (the "Seattle Landmark Joint Venture") comprised of the Partnership and HEP-86 acquired a fee simple interest in Seattle Tower, a commercial office building located in downtown Seattle ("Seattle Tower"). The Partnership and HEP-86 each have a 50% interest in the Seattle Landmark Joint Venture.
Seattle Tower is located at Third Avenue and University Street on the eastern shore of Puget Sound in the financial and retail core of the Seattle central business district. Seattle Tower, built in 1928, is a 27-story commercial building containing approximately 141,000 rentable square feet, including almost 10,000 square feet of retail space and approximately 2,211 square feet of storage space. The building also contains a 55-car garage. Seattle Tower is connected to the Unigard Financial Center and the Olympic Four Seasons Hotel by a skybridge system. Seattle Tower, formerly Northern Life Tower, represented the first appearance in Seattle of a major building in the Art Deco style. It was accepted into the National Register of Historic Places in 1975. Seattle Tower's occupancy at January 1, 1997 was 96% compared to 92% at January 1, 1996. There are no leases which represent at least 10% of the square footage of the property scheduled to expire during 1997.
Roof replacement and exterior building facade projects have been budgeted in the aggregate amount of approximately $630,000. The projects are expected to be completed during the third quarter of 1997.
The Partnership believes that Seattle Tower's primary direct competition comes from three office buildings of similar size or age in the immediate vicinity of Seattle Tower, which buildings have current occupancy rates which are comparable to Seattle Tower's.
Write-downs for Impairment
See Note 4 to the financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of write-downs for impairment.
Competition
The real estate business is highly competitive and, as discussed more particularly above, the properties acquired by the Partnership may have active competition from similar properties in the vicinity. In addition, various limited partnerships have been formed by the Managing General Partner and/or its affiliates that engage in businesses that may be competitive with the Partnership. The Partnership will also experience competition for potential buyers at such time as it seeks to sell any of its properties.
Employees
Services are performed for the Partnership at the properties by on-site personnel. Salaries for such on-site personnel are paid by the Partnership or by unaffiliated management companies that service the Partnership's properties from monies received by them from the Partnership. Services are also performed by the Managing General Partner and by Resources Supervisory Management Corp. ("Resources Supervisory"), each of which is an affiliate of the Partnership. Resources Supervisory currently provides supervisory management and leasing services for all of the Partnership's properties and subcontracts certain management and leasing functions to unaffiliated third parties.
The Partnership does not have any employees. Wexford Management LLC ("Wexford") performs accounting, secretarial, transfer and administrative services for the Partnership. See Item 10, "Directors and Executive Officers of the Registrant", Item 11, "Executive Compensation", and Item 13, "Certain Relationships and Related Transactions".
Item 2.

Item 2. Properties
A description of the Partnership's properties is contained in Item 1 above (see Schedule III to the financial statements for additional information with respect to the properties).
Item 3.

Item 3. Legal Proceedings
The Broadway Joint Venture is currently involved in litigation with a number of present or former tenants who are in default on their lease obligations. Several of these tenants have asserted claims or counterclaims seeking monetary damages. The plaintiffs' allegations include, but are not limited to, claims for breach of contract, failure to provide certain services, overcharging of expenses and loss of profits and income. These suits seek total damages in excess of $20 million plus additional damages of an indeterminate amount. The Broadway Joint Venture's action for rent against Solo Press was
tried in 1992 and resulted in a judgment in favor of the Broadway Joint Venture for rent owed. The Partnership believes this will result in dismissal of the action brought by Solo Press against the Broadway Joint Venture. Since the facts of the other actions which involve material claims or counterclaims are substantially similar, the Partnership believes that the Broadway Joint Venture will prevail in those actions as well.
A former retail tenant of 568 Broadway (Galix Shops, Inc.) and a related corporation that is a retail tenant of a building adjacent to 568 Broadway filed a lawsuit in the Supreme Court of The State of New York, County of New York, against the Broadway Joint Venture which owns 568 Broadway. The action was filed on April 13, 1994. The plaintiffs alleged that by erecting a sidewalk shed in 1991, 568 Broadway deprived plaintiffs of light, air and visibility to their customers. The sidewalk shed was erected, as required by local law, in connection with the inspection and restoration of the 568 Broadway building facade, which is also required by local law. Plaintiffs further alleged that the erection of the sidewalk shed for a continuous period of over two years is unreasonable and unjustified and that such conduct by defendants has deprived plaintiffs of the use and enjoyment of their property. The suit seeks a judgment requiring removal of the sidewalk shed, compensatory damages of $20 million, and punitive damages of $10 million. The Partnership believes that this suit is meritless and intends to vigorously defend it.
On or about May 11, 1993 HEP-86 was advised of the existence of an action (the "B&S Litigation") in which a complaint (the "HEP Complaint") was filed in the Superior Court for the State of California for the County of Los Angeles (the "Court") on behalf of a purported class consisting of all of the purchasers of limited partnership interests in HEP-86. On April 7, 1994 the plaintiffs were granted leave to file an amended complaint (the "Amended Complaint").
On November 30, 1995, after the Court preliminarily approved a settlement of the B&S Litigation but ultimately declined to grant final approval and after the Court granted motions to intervene by the original plaintiffs, the original and intervening plaintiffs filed a Consolidated Class and Derivative Action Complaint ( the "Consolidated Complaint") against the Administrative and Investment General Partners of HEP-86, the managing general partner of the Partnership, the managing general partner of HEP-88 and the indirect corporate parent of the General Partners. The Consolidated Complaint alleges various state law class and derivative claims, including claims for breach of fiduciary duties; breach of contract; unfair and fraudulent business practices under California Bus. & Prof. Code Sec. 17200; negligence; dissolution, accounting and receivership; fraud; and negligent misrepresentation. The Consolidated Complaint alleges, among other things, that the general partners caused a waste of HEP Partnership assets by collecting management fees in lieu of pursuing a strategy to maximize the value of the investments owned by the limited partners; that the general partners breached their duty of loyalty and due care to the limited partners by expropriating management fees from the partnerships without trying to run the HEP Partnerships for the purposes for which they are intended; that the general partners are acting improperly to enrich themselves in their position of control over the HEP Partnerships and that their actions prevent non-affiliated entities from making and completing tender offers to purchase HEP Partnership Units; that by refusing to seek the sale of the HEP Partnerships' properties, the general partners have diminished the value of the limited partners' equity in the HEP Partnerships; that the general partners have taken a heavily overvalued partnership asset management fee; and that limited partnership units were sold and marketed through the use of false and misleading statements.
In January, 1996, the parties to the B&S Litigation agreed upon a revised settlement (the "Revised Settlement"). The core feature of the Revised Settlement was the surrender by the general partners of certain fees that they are entitled to receive, the reorganization of the Partnership, HEP-86 and HEP-88 (collectively, the "HEP Partnerships") into a publicly traded real estate investment trust ("REIT"), and the issuance of stock in the REIT to the limited partners (in exchange for their limited partnership interests) and General Partners (in exchange for their existing interest in the HEP Partnerships and the fees being given up). The General Partners believe that the principal benefits of the Revised Settlement were (1) substantially increased distributions to limited partners, (2) market liquidity through a NASDAQ listed security, and (3) the opportunity for growth and diversification that was not permitted under the Partnership structure. There were also believed to be other significant tax benefits, corporate governance advantages and other benefits of the Revised Settlement.
On July 18, 1996, the Court preliminarily approved the Revised Settlement and made a preliminary finding that the Revised Settlement was fair, adequate and reasonable to the class. In August 1996, the Court approved the form and method of notice regarding the Revised Settlement which was sent to limited partners.
Only approximately 2.5% of the limited partners of the HEP Partnerships elected to "opt out" of the Revised Settlement. Despite this, following the submission of additional materials, the Court entered an order on January 14, 1997 rejecting the Revised Settlement and concluding that there had not been an adequate showing that the settlement was fair and reasonable. Thereafter, the plaintiffs filed a motion seeking to have the Court reconsider its order. Subsequently, the defendants withdrew the revised settlement and at a hearing on February 24, 1997, the Court denied the plaintiffs' motion. Also at the February 24, 1997 hearing, the Court recused itself from considering a motion to intervene and to file a new complaint in intervention by one of the objectors to the Revised Settlement, granted the request of one plaintiffs' law firm to withdraw as class counsel and scheduled future hearings on various matters.
The Limited Partnership Agreement provides for indemnification of the General Partners and their affiliates in certain circumstances. The Partnership has agreed to reimburse the General Partners for their actual costs incurred in defending this litigation and the costs of preparing settlement materials. Through December 31, 1996, the General Partners had billed the Partnership a total of $824,510 for these costs which was paid in February 1997.
The Partnerships and the General Partners believe that each of the claims asserted in the Consolidated Complaint are meritless and intend to continue to vigorously defend the B&S Litigation. It is impossible at this time to predict what the defense of the B&S Litigation will cost, the Partnership's financial exposure as a result of the indemnification agreement discussed above, and whether the costs of defending could adversely affect the Managing General Partner's ability to perform its obligations to the Partnership.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report through the solicitation of proxies or otherwise.
PART II
Item 5.

Item 5. Market for Registrant's Securities and Related Security Holder Matters
Units of the Partnership are not publicly traded. There are certain restrictions set forth in the Partnership's amended limited partnership agreement (the "Limited Partnership Agreement") which may limit the ability of a limited partner to transfer Units. Such restrictions could impair the ability of a limited partner to liquidate its investment in the event of an emergency or for any other reason.
In 1987, the Internal Revenue Service adopted certain rules concerning publicly traded partnerships. The effect of being classified as a publicly traded partnership would be that income produced by the Partnership would be classified as portfolio income rather than passive income. In order to avoid this effect, the Limited Partnership Agreement contains limitations on the ability of a limited partner to transfer Units in circumstances in which such transfers could result in the Partnership being classified as a publicly traded partnership. However, due to the low volume of transfers of Units, it is not anticipated that this will occur.
As of March 15, 1997, there were 10,648 holders of Units of the Partnership, owning an aggregate of 400,010 Units (including Units held by the initial limited partner).
Distributions per Unit of the Partnership for periods during 1995 and 1996 were as follows:
The source of distributions in 1995 and 1996 was cash flow from operations. All distributions are in excess of accumulated undistributed net income and, therefore, represent a return of capital to investors on a generally accepted accounting principles basis. In 1995, capital expenditures were funded from cash flow and working capital reserves and in 1996, capital expenditures were funded from cash flow. There are no material legal restrictions set forth in the Limited Partnership Agreement upon the Partnership's present or future ability to make distributions.
See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", for a discussion of factors which may affect the Partnership's ability to pay distributions.
Item 6.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
The Partnership's real estate properties are office buildings and shopping centers, all of which were acquired for cash. The public offering of the Units commenced on February 4, 1985 and was terminated on May 30, 1986. Upon termination, the Partnership had accepted subscriptions for 400,010 Units for aggregate net proceeds of $98,502,500 (gross proceeds of $100,002,500 less organization and offering expenses aggregating $1,500,000).
The Partnership uses working capital reserves remaining from the net proceeds of its public offering and any undistributed cash from operations as its primary source of liquidity. For the year ended December 31, 1996, all capital expenditures and distributions were funded from cash flow. As of December 31, 1996, the Partnership had total working capital reserves of approximately $3,512,000. The Partnership intends to distribute less than all of its future cash flow from operations in order to maintain adequate reserves for capital improvements and capitalized lease procurement costs. In March 1997, the Managing General Partner notified the limited partners of its intention to increase the annual distribution from $2.40 per unit to $3.00 per unit as a result of improved operating results. If real estate market conditions deteriorate in any areas where the Partnership's properties are located, there is substantial risk that future cash flow distributions may be reduced. Working capital reserves are temporarily invested in short-term instruments and, together with operating cash flow, are expected to be sufficient to fund anticipated capital improvements to the Partnership's properties.
During the year ended December 31, 1996, cash and cash equivalents increased $2,419,574 as a result of cash provided by operations in excess of capital expenditures and distributions to partners. The Partnership's primary source of funds is cash flow from the operation of its properties, principally rents received from tenants, which amounted to $4,075,413 for the year ended December 31, 1996. The Partnership used $645,287 for capital expenditures related to capital and tenant improvements to the properties and $1,010,552 for distributions to partners for the year ended December 31, 1996.
The following table sets forth, for each of the last three fiscal years, the amount of the Partnership's expenditures at each of its properties for capital improvements and capitalized tenant procurement costs:
(a) Property sold in August 1994
The Partnership has budgeted approximately $3 million in expenditures for capital improvements and capitalized tenant procurement costs in 1997 which is expected to be funded from cash flow from operations. However, such expenditures will depend upon the level of leasing activity and other factors which cannot be predicted with certainty.
The Partnership expects to continue to utilize a portion of its cash flow from operations to pay for various capital and tenant improvements to the properties and leasing commissions (the amount of which cannot be predicted with certainty). Capital and tenant improvements may in the future exceed the Partnership's current working capital reserves. In that event, the Partnership would utilize the remaining working capital reserves, eliminate or reduce distributions, or sell one or more properties. Except as discussed above, management is not aware of any other trends, events, commitments or uncertainties that will have a significant impact on liquidity.
Real Estate Market
The real estate market continues to suffer from the effects of the substantial decline in the market value of existing properties which occurred in the early 1990's. Market values have been slow to recover, and while the pace of new construction has slowed, high vacancy rates continue to exist in many areas. Technological changes are also occurring which may reduce the office space needs of many users. These factors may continue to reduce rental rates. As a result, the Partnership's potential for realizing the full value of its investment in its properties is at continued risk.
Impairment of Assets
The Partnership evaluates the recoverability of the net carrying value of its real estate and related assets at least annually, and more often if circumstances dictate.
The Partnership adopted Statement of Financial Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed Of" (SFAS #121) in 1995. Under SFAS #121, the Partnership estimates the future cash flows expected to result from the use of each property and its eventual disposition, generally over a five-year holding period. In performing this review, management takes into account, among other things, the existing occupancy, the expected leasing prospects of the property and the economic situation in the region where the property is located.
If the sum of the expected future cash flows, undiscounted, is less than the carrying amount of the property, the Partnership recognizes an impairment loss, and reduces the carrying amount of the asset to its estimated fair value. Fair value is the amount at which the asset could be bought or sold in a current transaction between willing parties, that is, other than in a forced or liquidation sale. Management estimates fair value using discounted cash flows or market comparables, as most appropriate for each property. Independent certified appraisers are utilized to assist management, when warranted.
Prior to the adoption of SFAS #121, real estate investments were carried at the lower of depreciated cost or net realizable value. Net realizable value was calculated by management using undiscounted future cash flows, in some cases with the assistance of independent certified appraisers.
Impairment write-downs recorded by the Partnership do not affect the tax basis of the assets and are not included in the determination of taxable income or loss.
Because the cash flows used to evaluate the recoverability of the assets and their fair values are based upon projections of future economic events such as property occupancy rates, rental rates, operating cost inflation
and market capitalization rates which are inherently subjective, the amounts ultimately realized at disposition may differ materially from the net carrying values at the balance sheet dates. The cash flows and market comparables used in this process are based on good faith estimates and assumptions developed by management. Unanticipated events and circumstances may occur and some assumptions may not materialize; therefore, actual results may vary from the estimates and the variances may be material. The Partnership may provide additional write-downs, which could be material in subsequent years if real estate markets or local economic conditions change.
The following table represents the write-downs for impairment recorded on the Partnership's properties for the years set forth below:
(a) Property sold in August 1994
The details of each write-down are as follows:
Seattle Tower
Seattle Tower's occupancy declined from 90% when originally purchased to 80% as of December 31, 1991. While occupancy recovered somewhat to 83% at December 31, 1992, the average base rent per square foot declined 8% from $14.00 per square foot at the date of acquisition to an average rate of approximately $12.87 per square foot at December 31, 1992. Management concluded that the property's estimated net realizable value was below its net carrying value. The net realizable value was based on the property's estimated undiscounted future cash flows over a 5- year period, reflecting expected cash flow from lower rental rates, and an assumed sale at the end of the holding period using a 10% capitalization rate. Management, therefore, recorded a write-down for impairment of $5,000,000 in 1992 of which the Partnership's share was $2,500,000.
The Partnership was not able to achieve leasing expectations at Seattle Tower and occupancy remained at approximately 80%. In addition, market rents remained lower than projected. As a result, actual income levels at Seattle Tower have not met and are not expected to meet income levels projected during management's impairment review in 1994. In addition, projected capital expenditures exceed amounts previously anticipated for such expenditures. Because the estimate of undiscounted cash flows prepared in 1995 yielded a
result lower than the asset's net carrying value, management determined that an impairment existed. Management estimated the property's fair value in order to determine the write-down for impairment. Because the estimate of fair value using expected cash flows discounted at 13% over 15 years and an assumed sale at the end of the holding period using a 10% capitalization rate yielded a result which in management's opinion, was lower than the property's value in the marketplace, the property was valued using sales of comparable buildings which indicated a fair value of $25 per square foot. This fair value estimate resulted in a $7,100,000 write-down for impairment in 1995 of which the Partnership's share was $3,550,000.
The economic outlook for Seattle has improved considerably since the last write- down at March 31, 1995. Occupancy has increased from approximately 81% at the time of the write-down to approximately 96% at December 31, 1996, a 15% increase.
Century Park I
The former sole tenant at Century Park I, General Dynamics Corp. vacated 52,740 square feet of space as of June 30, 1993 and the balance of its space as of December 31, 1993 totaling 119,394 square feet pursuant to the terms of its leases. On July 1, 1993 a 51,242 square foot lease was signed with San Diego Gas and Electric for a 13-year, 10 month term with a cancellation option exercisable between the fifth and sixth years. Due to the soft market in the greater San Diego area, management concluded that the property's estimated net realizable value was below its net carrying value. The net realizable value was based on the property's estimated undiscounted future cash flows over a 5-year period and an assumed sale at the end of the holding period using a 10% capitalization rate. Management, therefore, recorded a write-down for impairment of $9,100,000 in 1992 of which the Partnership's share was $4,550,000. Subsequently, management engaged the services of a certified independent appraiser to perform a written appraisal of the market value of the property. Based on the results of the appraisal, management recorded an additional $11,800,000 write-down for impairment in 1993 of which the Partnership's share was $5,900,000.
Since the date of the above mentioned appraisal, market conditions surrounding Century Park I deteriorated causing higher vacancy and lower rental rates. Leasing expectations were not achieved and capital expenditures exceeded projections due to converting the building from a single user to multi-tenancy capabilities. In early 1995, occupancy was only 25%. Because the estimate of undiscounted cash flows prepared in 1995 yielded a result lower than the asset's net carrying value, management determined that an impairment existed. Management estimated the property's fair value using expected cash flows discounted at 13% over 15 years and an assumed sale at the end of the holding period using a 10% capitalization rate, in order to determine the write-down for impairment. The fair value estimate resulted in a $2,500,000 write-down for impairment in 1995 of which the Partnership's share was $1,250,000.
The economic outlook for Century Park has improved markedly since the last write- down at March 31, 1995. The occupancy at the property has increased from approximately 25% at the time of the write-down to approximately 74% at December 31, 1996, and 81% at January 31, 1997, a 56% increase.
568 Broadway
The recession which occurred prior to 1992 had a particularly devastating effect on the photography studios which depend heavily on advertising budgets and art galleries as a source of business, resulting in many tenant failures. Due to the poor market conditions in the Soho area of New York City where 568 Broadway is located and the accompanying high vacancies and low absorption rates which resulted in declining rental rates, management concluded that the property's estimated net realizable value was below its net carrying value. The net realizable value was based on sales of comparable buildings which indicated a value of approximately $65 per square foot. Management, therefore, recorded a write-down for impairment of $19,400,000 in 1992 of which the Partnership's share was $7,551,450. Subsequently, management engaged the services of a certified independent appraiser to perform a written appraisal of the market value of the property. Based on the results of the appraisal, management recorded an additional $1,800,000 write-down for impairment in 1993 of which the Partnership's share was $700,650.
Since the date of the above mentioned independent appraisal, significantly greater capital improvement expenditures than were previously anticipated have been required in order to render 568 Broadway more competitive in the New York market. Because the estimate of undiscounted cash flows prepared in 1995 yielded a result lower than the asset's net carrying value, management determined that an impairment existed. Management estimated the property's fair value in order to determine the write-down for impairment. Because the estimate of fair value using expected cash flows discounted at 13% over 15 years and an assumed sale at the end of the holding period using a 10% capitalization rate yielded a result which, in management's opinion, was lower than the property's value in the marketplace, the property was valued using sales of comparable buildings which indicated a fair value of $45 per square foot. This fair value estimate resulted in a $6,600,000 write-down for impairment in 1995 of which the Partnership's share was $2,569,050.
The economic outlook for 568 Broadway has improved markedly since the last write- down at March 31, 1995. Occupancy has increased from approximately 76% at the time of the write-down to approximately 100% at December 31, 1996, a 24% increase.
Westbrook
Occupancy at Westbrook was 28% in early 1995. Two significant tenants are not operating while continuing to make rental payments under the terms of their leases. However, their absence has adversely impacted both the lease-up of the remaining space and rental rates, and will require additional tenant procurement costs. At a result, income levels have not been met and are not expected to meet income levels projected at the date of management's impairment review in 1994. As a result, expected cash flow is lower than previously projected. Because the estimate of undiscounted cash flows prepared in 1995 yielded a result lower than the asset's net carrying value, management determined that an impairment existed. Management estimated the property's fair value in order to determine the write-down for impairment. Because the estimate of fair value using expected cash flows discounted at 13% over 15 years and an assumed sale at the end of the holding period using a 10% capitalization rate yielded a result which, in management's opinion, was lower than the property's value in the marketplace, the property was valued using sales of comparable buildings which indicated a fair value of $25 per square foot. This fair value estimate resulted in a $3,400,000 write-down for impairment in 1995.
Loch Raven
Rental income at Loch Raven has not met and is not expected to meet previously projected levels due to lower rental market rates since management's impairment review in 1994. Expenses have also decreased slightly but this decrease has been offset by significant capital expenditures which were not previously anticipated. Because the estimate of undiscounted cash flows prepared in 1995 yielded a result lower than the asset's net carrying value, management determined that an impairment existed. Management estimated the property's fair value using expected cash flows discounted at 13% over 15 years and an assumed sale at the end of the holding period using a 10% capitalization rate, in order to determine the write-down for impairment. This fair value estimate resulted in $4,800,000 write-down for impairment in 1995.
Southport
Despite an occupancy rate in excess of 90% in 1995, actual income levels at Southport have not met and are not expected to meet previously projected income levels due to lower rental market rates. Expenses are slightly higher than anticipated and tenant procurement cost estimates are greater than amounts projected at the date of management's impairment review in 1994. Because the estimate of undiscounted cash flows prepared in 1995 yielded a result lower than the asset's net carrying value, management determined that an impairment existed. Management estimated the property's fair value in order to determine the write-down for impairment. Because the estimate of fair value using expected cash flows discounted at 13% over 15 years and an assumed sale at the end of the holding period using a 10% capitalization rate yielded a result which, in management's opinion, was lower than the property's value in the marketplace, the property was valued using sales of comparable buildings which indicated a fair value of $105 per square foot. This fair value estimate resulted in a $4,900,000 write-down for impairment in 1995.
Southern National
Southern National Corp. acquired First Savings Bank (the original master lessee) in January 1994. Southern National had given notice that it was not interested in remaining as a tenant after expiration of its lease but was interested in acquiring the building. Management believed that substantial renovations to the building would be required to adapt it to multi-tenant use. Because the building might require substantial renovations and market rental rates at that time were substantially below those which were payable under the expiring lease, management determined that a write-down for impairment on the building of $3,450,000 was required in 1993 based on an assumed sale using a 10% capitalization rate. The building was sold to Southern National for $5,500,000 on August 8, 1994. Based on the sales price, an additional write-down of $181,000 was recorded in 1994.
Results Of Operations
1996 vs. 1995
The Partnership experienced net income for the year ended December 31, 1996 compared to a net loss for the prior year due primarily to the significant write-downs for impairment recorded during 1995 as previously discussed.
Rental revenue increased for the year ended December 31, 1996 as compared to the prior year. Revenues at 568 Broadway, Seattle Tower and Century Park I increased during 1996 due to higher occupancy rates and increased at Southport due to higher rental rates in 1996 as compared to the prior year. These increases, however, were partially offset by a decrease in revenue at Westbrook as certain tenants vacated during 1996.
Costs and expenses decreased during 1996 as compared to 1995 due primarily to the significant write-downs for impairment recorded in 1995. Operating expenses decreased slightly during 1996 due to decreases in real estate taxes and bad debt expenses at certain properties partially offset by an increase in repairs and maintenance and utility costs. Real estate taxes decreased significantly at 568 Broadway due to the receipt of refunds related to the 1992-1995 tax years of which the partnership's share was $353,500. Bad debt expenses decreased at Southport, Westbrook, and Loch Raven due to fewer tenant write-offs and/or bankruptcies in 1996 compared to 1995. Repairs and maintenance at Century Park I and utility expenses at 568 Broadway increased due to increased occupancy during the year ended December 31, 1996 as compared to the prior year. Depreciation expense for 1996 increased due to the significant capital improvement and tenant procurement costs incurred and capitalized during the year ended December 31, 1995. The partnership management fee remained relatively consistent in 1996 as compared to the prior year. Administrative expenses increased due to the Partnership's reimbursement of the General Partner's litigation and settlement costs as previously discussed. The property management fee increase was the direct result of higher revenues at the aforementioned properties.
Interest income increased due to higher cash balances in 1996 partially offset by slightly lower interest rates in 1996 as compared to the prior year. For the year ended December 31, 1996, other income, which consists of investor ownership transfer fees, increased compared to 1995 due to a greater number of transfers during 1996.
1995 vs. 1994
The Partnership experienced a net loss for the year ended December 31, 1995 compared to net income for the prior year due primarily to the significant write-downs for impairment recorded during 1995 as previously discussed.
Rental revenue decreased slightly for the year ended December 31, 1995 as compared to the prior year. The most significant decrease in revenues during 1995 occurred due to the sale of Southern National. Since the Partnership sold its interest in Southern National on August 8, 1994, no rental revenue was billed or received from Southern National in 1995 compared to $460,000 in revenues during 1994. Revenues at 568 Broadway and Century Park I increased during 1995 due to higher occupancy rates. These increases, however, were offset by a decrease in revenue at Southport as rental rates declined as compared to 1994.
Costs and expenses increased during 1995 as compared to 1994 due primarily to the write-down for impairment recorded in 1995. Operating expenses decreased slightly during 1995 due to decreases in real estate taxes and repairs and maintenance at certain properties partially offset by an increase in utility costs. Real estate taxes decreased at 568 Broadway and Century Park I as a result of reductions in the assessed value of the properties for the 1995 tax period and years prior. Repairs and maintenance decreased at
Southport and Seattle Tower as certain projects were completed. The cost of utilities in 1995 increased at 568 Broadway due to the increased occupancy there. Depreciation expense for 1995 decreased due to lower asset carrying values as a result of the write-down recorded during the first quarter of 1995. The Partnership management fee decreased slightly during 1995 due to the sale of Southern National in August 1994.
Interest income increased slightly due to higher interest rates in 1995 compared to the prior year. For the year ended December 31, 1995, other income, which consists of investor ownership transfer fees, increased compared to 1994 due to a greater number of transfers during 1995.
Inflation is not expected to have a material impact on the Partnership's operations or financial position.
Legal Proceedings
The Partnership is a party to certain litigation. See Note 8 to the Partnership's financial statements for a description thereof.
Item 8.

Item 8. Financial Statements and Supplementary Data
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85, A CALIFORNIA LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
I N D E X
Independent Auditors' report
Financial statements, years ended December 31, 1996, 1995 and 1994
Balance Sheets
Statements of Operations
Statements of Partners' Equity
Statements of Cash Flows
Notes to Financial Statements
INDEPENDENT AUDITORS' REPORT
To the Partners of Integrated Resources High Equity Partners, Series 85
We have audited the accompanying balance sheets of Integrated Resources High Equity Partners, Series 85 (a California limited partnership) as of December 31, 1996 and 1995, and the related statements of operations, partners' equity and cash flows for each of the three years in the period ended December 31, 1996. Our audit also included the financial statement schedule listed in the Index at Item 14(a)2. These financial statements and the financial statement schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Integrated Resources High Equity Partners, Series 85 at December 31, 1996 and 1995, and the results of its operations and its cash flows for the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As discussed in Note 2, in 1995 the Partnership changed its method of recording write-downs for impairment of its investments in real estate to conform with Statement of Financial Accounting Standards No. 121.
DELOITTE & TOUCHE LLP March 14, 1997 New York, NY
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Integrated Resources High Equity Partners, Series 85, A California Limited Partnership (the "Partnership"), is a limited partnership, organized under the Uniform Limited Partnership Laws of California on August 19, 1983 for the purpose of investing in, holding and operating income-producing real estate. The Partnership will terminate on December 31, 2008 or sooner, in accordance with terms of the Agreement of Limited Partnership.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial statements
The financial statements are prepared on the accrual basis of accounting. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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.
Reclassifications
Certain reclassifications have been made to the financial statements for the prior years in order to conform to the current year's classifications.
Cash and cash equivalents
For purposes of the statements of cash flows, the Partnership considers all short-term investments which have original maturities of three months or less from the date of issuance to be cash equivalents.
Organization costs
Organization costs were charged against partners' equity upon the closing of the public offering in accordance with prevalent industry practice.
Leases
The Partnership accounts for its leases under the operating method. Under this method, revenue is recognized as rentals become due, except for stepped leases where the revenue from the lease is averaged over the life of the lease.
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Depreciation
Depreciation is computed using the straight-line method over the useful life of the property, which is estimated to be 40 years. The cost of properties represents the initial cost of the properties to the Partnership plus acquisition and closing costs less write-downs, if any.
Investments in joint ventures
For properties purchased in joint venture ownership with affiliated partnerships, the financial statements present the assets, liabilities, and expenses of the joint venture on a pro rata basis in accordance with the Partnership's percentage of ownership.
Impairment of Assets
The Partnership evaluates the recoverability of the net carrying value of its real estate and related assets at least annually, and more often if circumstances dictate.
The Partnership adopted Statement of Financial Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed Of" (SFAS #121) in 1995. Under SFAS #121, the Partnership estimates the future cash flows expected to result from the use of each property and its eventual disposition, generally over a five-year holding period. In performing this review, management takes into account, among other things, the existing occupancy, the expected leasing prospects of the property and the economic situation in the region where the property is located.
If the sum of the expected future cash flows, undiscounted, is less than the carrying amount of the property, the Partnership recognizes an impairment loss, and reduces the carrying amount of the asset to its estimated fair value. Fair value is the amount at which the asset could be bought or sold in a current transaction between willing parties, that is, other than in a forced or liquidation sale. Management estimates fair value using discounted cash flows or market comparables, as most appropriate for each property. Independent certified appraisers are utilized to assist management, when warranted.
Prior to the adoption of SFAS #121, real estate investments were carried at the lower of depreciated cost or net realizable value. Net realizable value was calculated by management using undiscounted future cash flows, in some cases with the assistance of independent certified appraisers.
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment of Assets (continued)
Impairment write-downs recorded by the Partnership do not affect the tax basis of the assets and are not included in the determination of taxable income or loss.
Because the cash flows used to evaluate the recoverability of the assets and their fair values are based upon projections of future economic events such as property occupancy rates, rental rates, operating cost inflation and market capitalization rates which are inherently subjective, the amounts ultimately realized at disposition may differ materially from the net carrying values at the balance sheet dates. The cash flows and market comparables used in this process are based on good faith estimates and assumptions developed by management. Unanticipated events and circumstances may occur and some assumptions may not materialize; therefore, actual results may vary from the estimates and the variances may be material. The Partnership may provide additional write-downs, which could be material in subsequent years if real estate markets or local economic conditions change.
Income taxes
No provision has been made for federal, state and local income taxes since they are the personal responsibility of the partners.
Net income (loss) and distributions per unit of limited partnership interest
Net income (loss) and distributions per unit of limited partnership interest is calculated based upon the number of units outstanding (400,010), for each of the years ended December 31, 1996, 1995 and 1994.
3. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
The Managing General Partner of the Partnership, Resources High Equity Inc., is a wholly-owned subsidiary of Presidio Capital Corp. ("Presidio"). Presidio AGP Corp., which is a wholly-owned subsidiary of Presidio, is the Associate General Partner (together with the Managing General Partner the "General Partners"). Affiliates of the General Partners are also engaged in businesses related to the acquisition and operation of real estate. Presidio is also the parent of other corporations that are or may in the future be engaged in business that may be in competition with the Partnership. Accordingly, conflicts of interest may arise between the Partnership and such other businesses. Wexford Management LLC
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
NOTES TO FINANCIAL STATEMENTS
3. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
("Wexford") has been engaged to perform administrative services to Presidio and its direct and indirect subsidiaries as well as the Partnership. Wexford is engaged to perform similar services for other similar entities that may be in competition with the Partnership.
The Partnership has a property management services agreement with Resources Supervisory Management Corp. ("Resources Supervisory"), an affiliate of the Managing General Partner, to perform certain functions relating to the management of the properties of the Partnership. A portion of the property management fees were paid to unaffiliated management companies which are engaged for the purpose of performing the management functions for certain properties. For the years ended December 31, 1996, 1995, and 1994, Resources Supervisory was entitled to receive an aggregate of $327,759, $303,936, and $277,844 of which $191,956, $161,137, and $153,732 was paid to unaffiliated management companies, respectively.
For the administration of the Partnership the Managing General Partner is entitled to receive reimbursement of expenses of a maximum of $150,000 per year for each of the years ended December 31, 1996, 1995 and 1994.
For managing the affairs of the Partnership, the Managing General Partner is entitled to receive a Partnership management fee equal to 1.05% of the amount of original gross proceeds paid or allocable to the acquisition of property by the Partnership. For the years ended December 31, 1996, 1995, and 1994 the Managing General Partner earned $908,172, $908,172 and $984,589, respectively.
The General Partners are allocated 5% of the net income or (losses) of the Partnership which amounted to $106,736, $(931,247), and $72,144 in 1996, 1995 and 1994, respectively. The General Partners are also entitled to receive 5% of distributions which amounted to $50,528, $50,528, and $302,955 in 1996, 1995 and 1994, respectively. During the third quarter 1994 the Partnership paid the balance of deferred fees payable to the Managing General Partner and its affiliates of $1,416,042 from the proceeds of the Southern National sale (Note 4).
During the liquidation stage of the Partnership, the Managing General Partner or an affiliate may be entitled to receive certain fees which are subordinated to the limited partners receiving their original invested capital and certain specified minimum returns on their investments.
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
NOTES TO FINANCIAL STATEMENTS
3. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
During July 1996 through February 1997, Millennium Funding II Corp., a wholly owned indirect subsidiary of Presidio, contracted to purchase 18,114 units of the Partnership from various limited partners, which represents less than 5% of the outstanding limited partnership units of the Partnership. 1996 distributions in the amount of $947 were received by Millenium Funding II Corp. related to these units.
4. REAL ESTATE
Management recorded write-downs for impairment, totaling $14,601,450, $10,050,650, $181,000 and $20,469,050 in 1992, 1993, 1994 and 1995, respectively. No write-downs were required for the year ended December 31, 1996. The details of write-downs recorded are as follows:
The former sole tenant at Century Park, General Dynamics Corp. vacated 52,740 square feet of space as of June 30, 1993 and the balance of its space as of December 31, 1993 totaling 119,394 square feet pursuant to the terms of its leases. On July 1, 1993 a 51,242 square foot lease was signed with San Diego Gas and Electric for a thirteen-year, ten month term with a cancellation option exercisable between the fifth and sixth years. Due to the soft market in the greater San Diego area, management concluded that the property's estimated net realizable value was below its net carrying value. The net realizable value was based on the property's estimated undiscounted future cash flows over a 5 year period and an assumed sale at the end of the holding period using a 10% capitalization rate. Management, therefore, recorded a write-down for impairment of $9,100,000 in 1992 of which the Partnership's share was $4,550,000. Subsequently, management engaged the services of a certified independent appraiser to perform a written appraisal of the market value of the property. Based on the results of the appraisal, management recorded an additional $11,800,000 write-down for impairment in 1993 of which the Partnership's share was $5,900,000.
Since the date of the above mentioned appraisal, market conditions surrounding Century Park deteriorated causing higher vacancy and lower rental rates. Leasing expectations were not achieved and capital expenditures exceeded projections due to converting the building from a single user to multi-tenancy capabilities. In early 1995, occupancy was only 25%. Because the estimate of undiscounted cash flows prepared in 1995 yielded a result lower that the asset's net carrying value, management determined that an impairment existed. Management estimated the property's fair value using expected cash flows discounted at 13% over 15 years and an assumed sale at the end of the holding period using a 10% capitalization rate in order to determine the write-down for impairment. This fair value estimate resulted in a $2,500,000 write-down for impairment in 1995 of which the Partnership's share was $1,250,000.
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
NOTES TO FINANCIAL STATEMENTS
4. REAL ESTATE (CONTINUED)
Seattle Tower's occupancy declined from 90% when originally purchased to 80% as of December 31, 1991. While occupancy recovered somewhat to 83% at December 31, 1992, the average base rent per square foot declined 8% from $14.00 per square foot at the date of acquisition to an average rate of approximately $12.87 per square foot at December 31, 1992. Management concluded that the property's estimated net realizable value was below its net carrying value. The net realizable value was based on the property's estimated undiscounted future cash flows over a 5 year period, reflecting expected cash flow from lower rental rates, and an assumed sale at the end of the holding period using a 10% capitalization rate. Management, therefore, recorded a write-down for impairment of $5,000,000 in 1992 of which the Partnership's share was $2,500,000.
The Partnership was not able to achieve leasing expectations at Seattle Tower and occupancy remained at approximately 80%. In addition, market rents were lower than projected. As a result, actual income levels at Seattle Tower did not meet and were not expected to meet income levels projected during management's impairment review in 1994. In addition, projected capital expenditures exceeded amounts previously anticipated for such expenditures. Because the estimate of undiscounted cash flows prepared in 1995 yielded a result lower than the asset's net carrying value, management determined that an impairment existed. Management estimated the property's fair value in order to determine the write-down for impairment. Because the estimate of fair value using expected cash flows discounted at 13% over 15 years and an assumed sale at the end of the holding period using a 10% capitalization rate yielded a result which, in management's opinion, was lower than the property's value in the marketplace, the property was valued using sales of comparable buildings which indicated a fair value of $25 per square foot. This fair value estimate resulted in a $7,100,000 write-down for impairment in 1995 of which the Partnership's share was $3,550,000.
The recession which occurred prior to 1992 had a particularly devastating effect on the photography studios which depend heavily on advertising budgets and art galleries as a source of business, resulting in many tenant failures. Due to the poor market conditions in the SoHo area of New York City where 568 Broadway is located and the accompanying high vacancies and low absorption rates which resulted in declining rental rates, management concluded that the property's estimated net realizable value was below its net carrying value. The net realizable value was based on sales of comparable buildings which indicated a value of approximately $65 per square foot. Management, therefore, recorded a write-down for impairment of $19,400,000 in 1992 of which the Partnership's share was $7,551,450. Subsequently, management engaged the services of a certified independent appraiser to perform a written appraisal
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
NOTES TO FINANCIAL STATEMENTS
4. REAL ESTATE (CONTINUED)
of the market value of the property. Based on the results of the appraisal, management recorded an additional $1,800,000 write-down for impairment in 1993 of which the Partnership's share was $700,650.
Since the date of the above mentioned appraisal, significantly greater capital improvement expenditures than were previously anticipated were required in order to render 568 Broadway more competitive in the New York market. In addition, occupancy levels remained low. Because the estimate of undiscounted cash flows prepared in 1995 yielded a result lower than the net carrying value, management determined that an impairment existed. Management estimated the property's fair value in order to determine the write-down for impairment. Because the estimate of fair value using expected cash flows discounted at 13% over 15 years and an assumed sale at the end of the holding period using a 10% capitalization rate yielded a result which, in management's opinion, was lower than the property's value in the marketplace, the property was valued using sales of comparable buildings which indicated a fair value of $45 per square foot. This fair value estimate resulted in a $6,600,000 write-down for impairment in 1995 of which the Partnership's share was $2,569,050.
Occupancy at Westbrook was 28% in early 1995. Two significant tenants were not operating while continuing to make rental payments under the terms of their leases. However, their absence adversely impacted both the lease-up of the remaining space and rental rates, and required additional tenant procurement costs. As a result, income levels did not meet and were not expected to meet income levels projected at the date of management's impairment review in 1994. As a result, expected cash flow is lower than previously projected. Because the estimate of undiscounted cash flows prepared in 1995 yielded a result lower than the asset's net carrying value, management determined that an impairment existed. Management estimated the property's fair value in order to determine the write-down for impairment. Because the estimate of fair value using expected cash flows discounted at 13% over 15 years and an assumed sale at the end of the holding period using a 10% capitalization rate yielded a result which, in management's opinion, was lower than the property's value in the marketplace, the property was valued using sales of comparable buildings which indicated a fair value of $20 per square foot. This fair value estimate resulted in a $3,400,000 write-down for impairment in 1995.
Rental income at Loch Raven did not meet and was not expected to meet previously projected levels due to lower rental market rates since management's impairment review in 1994. Expenses also decreased slightly but this decrease was offset by significant capital expenditures which were not previously
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
NOTES TO FINANCIAL STATEMENTS
4. REAL ESTATE (CONTINUED)
anticipated. Because the estimate of undiscounted cash flows prepared in 1995 yielded a result lower than the asset's net carrying value, management determined that an impairment existed. Management estimated the property's fair value, using expected cash flows discounted at 13% over 15 years and an assumed sale at the end of the holding period using a 10% capitalization rate, in order to determine the write-down for impairment. This fair value estimate resulted in a $4,800,000 write-down for impairment in 1995.
Despite an occupancy rate in excess of 90% in 1995, actual income levels at Southport did not meet and were not expected to meet previously projected income levels due to lower rental market rates. Expenses were slightly higher than anticipated and tenant procurement cost estimates were greater than amounts projected at the date of management's impairment review in 1994. Because the estimate of undiscounted cash flows prepared in 1995 yielded a result lower than the asset's net carrying value, management determined that an impairment existed. Management estimated the property's fair value in order to determine the write-down for impairment. Because the estimate of fair value using expected cash flows discounted at 13% over 15 years and an assumed sale at the end of the holding period using a 10% capitalization rate yielded a result which, in management's opinion, was lower than the property's value in the marketplace, the property was valued using sales of comparable buildings which indicated a fair value of $105 per square foot. This fair value estimated resulted in a $4,900,000 write-down for impairment in 1995.
Southern National Corp. acquired First Savings Bank (the original master lessee) in January 1994. Southern National had given notice that it was not interested in remaining as a tenant after expiration of its lease but was interested in acquiring the building. Management believed that substantial renovations to the building would be required to adapt it to multi-tenant use. Because the building might require substantial renovations and market rental rates at that time were substantially below those which were payable under the expiring lease, management determined that a write-down for impairment on the building of $3,450,000 was required in 1993 based on an assumed sale using a 10% capitalization rate. The building was sold to Southern National for $5,500,000 on August 8, 1994. Based on the sales price, an additional write-down of $181,000 was recorded in 1994.
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
NOTES TO FINANCIAL STATEMENTS
4. REAL ESTATE (CONTINUED)
The following table is a summary of the Partnership's real estate as of:
The following is a summary of the Partnership's share of anticipated future receipts under noncancellable leases:
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
NOTES TO FINANCIAL STATEMENTS
5. DISTRIBUTIONS PAYABLE
Such distributions were paid in the subsequent quarters.
6. DUE TO AFFILIATES
Such amounts were paid in the subsequent quarters.
7. PARTNERS' EQUITY
Units of limited partnership interest are at a stated value of $250. At December 31, 1996, 1995 and 1994 a total of 400,010 units of limited partnership interest, including the initial limited partner, had been issued for aggregate capital contributions of $100,002,500. In addition, the General Partners contributed a total of $1,000 to the Partnership.
8. COMMITMENTS AND CONTINGENCIES
a) 568 Broadway Joint Venture is currently involved in litigation with a number of present or former tenants who are in default on their lease obligations. Several of these tenants have asserted claims or counter claims seeking monetary damages. The plaintiffs' allegations include but are not limited to claims for breach of contract, failure to provide certain
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
NOTES TO FINANCIAL STATEMENTS
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
services, overcharging of expenses and loss of profits and income. These suits seek total damages in excess of $20 million plus additional damages of an indeterminate amount. The Broadway Joint Venture's action for rent against Solo Press was tried in 1992 and resulted in a judgement in favor of the Broadway Joint Venture for rent owed. The Partnership believes this will result in dismissal of the action brought by Solo Press against the Broadway Joint Venture. Since the facts of the other actions which involve material claims or counterclaims are substantially similar, the Partnership believes that the Broadway Joint Venture will prevail in those actions as well.
b) A former retail tenant of 568 Broadway (Galix Shops, Inc.) and a related corporation which is a retail tenant of a building adjacent to 568 Broadway filed a lawsuit in the Supreme Court of The State of New York, County of New York, against the Broadway Joint Venture which owns 568 Broadway. The action was filed on April 13, 1994. The Plaintiffs allege that by erecting a sidewalk shed in 1991, 568 Broadway deprived plaintiffs of light, air and visibility to their customers. The sidewalk shed was erected, as required by local law, in connection with the inspection and restoration of the 568 Broadway building facade, which is also required by local law. Plaintiffs further allege that the erection of the sidewalk shed for a continuous period of over two years is unreasonable and unjustified and that such conduct by defendants has deprived plaintiffs of the use and enjoyment of their property. The suit seeks a judgement requiring removal of the sidewalk shed, compensatory damages $20 million, and punitive damages of $10 million. The Partnership believes that this suit is without merit and intends to vigorously defend it.
c) On or about May 11, 1993 High Equity Partners L.P. - Series 86 ("HEP-86"), an affiliated partnership, was advised of the existence of an action (the "B&S Litigation') in which a complaint (the "HEP Complaint") was filed in the Superior Court for the State of California for the County of Los Angeles (the "Court") on behalf of a purported class consisting of all of the purchasers of limited partnership interests in HEP-86. On April 7, 1994 the plaintiffs were granted leave to file an amended complaint (the "Amended Complaint").
On November 30, 1995, after the Court preliminarily approved a settlement of the B&S Litigation but ultimately declined to grant final approval and after the Court granted motions to intervene by the original plaintiffs, the original and intervening plaintiffs filed a Consolidated Class and Derivative Action Complaint ( the "Consolidated Complaint")
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
NOTES TO FINANCIAL STATEMENTS
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
against the Administrative and Investment General Partners of HEP-86, the managing general partner of the Partnership, the managing general partner of HEP-88 and the indirect corporate parent of the General Partners. The Consolidated Complaint alleges various state law class and derivative claims, including claims for breach of fiduciary duties; breach of contract; unfair and fraudulent business practices under California Bus. & Prof. Code Sec. 17200; negligence; dissolution, accounting and receivership; fraud; and negligent misrepresentation. The Consolidated Complaint alleges, among other things, that the general partners caused a waste of HEP Partnership assets by collecting management fees in lieu of pursuing a strategy to maximize the value of the investments owned by the limited partners; that the general partners breached their duty of loyalty and due care to the limited partners by expropriating management fees from the partnerships without trying to run the HEP Partnerships for the purposes for which they are intended; that the general partners are acting improperly to enrich themselves in their position of control over the HEP Partnerships and that their actions prevent non-affiliated entities from making and completing tender offers to purchase HEP Partnership Units; that by refusing to seek the sale of the HEP Partnerships' properties, the general partners have diminished the value of the limited partners' equity in the HEP Partnerships; that the general partners have taken a heavily overvalued partnership asset management fee; and that limited partnership units were sold and marketed through the use of false and misleading statements.
In January, 1996, the parties to the B&S Litigation agreed upon a revised settlement (the "Revised Settlement"). The core feature of the Revised Settlement was the surrender by the general partners of certain fees that they are entitled to receive, the reorganization of the Partnership, HEP-86 and HEP- 88 (collectively, the "HEP Partnerships") into a publicly traded real estate investment trust ("REIT"), and the issuance of stock in the REIT to the limited partners (in exchange for their limited partnership interests) and General Partners (in exchange for their existing interest in the HEP Partnerships and the fees being given up). The General Partners believe that the principal benefits of the Revised Settlement were (1) substantially increased distributions to limited partners, (2) market liquidity through a NASDAQ listed security, and (3) the opportunity for growth and diversification that was not permitted under the Partnership structure. There were also believed to be other significant tax benefits, corporate governance advantages and other benefits of the Revised Settlement.
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
NOTES TO FINANCIAL STATEMENTS
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
On July 18, 1996, the Court preliminarily approved the Revised Settlement and made a preliminary finding that the Revised Settlement was fair, adequate and reasonable to the class. In August 1996, the Court approved the form and method of notice regarding the Revised Settlement which was sent to limited partners.
Only approximately 2.5% of the limited partners of the HEP Partnerships elected to "opt out" of the Revised Settlement. Despite this, following the submission of additional materials, the Court entered an order on January 14, 1997 rejecting the Revised Settlement and concluding that there had not been an adequate showing that the settlement was fair and reasonable. Thereafter, the plaintiffs filed a motion seeking to have the Court reconsider its order. Subsequently, the defendants withdrew the revised settlement and at a hearing on February 24, 1997, the Court denied the plaintiffs' motion. Also at the February 24, 1997 hearing, the Court recused itself from considering a motion to intervene and to file a new complaint in intervention by one of the objectors to the Revised Settlement, granted the request of one plaintiffs' law firm to withdraw as class counsel and scheduled future hearings on various matters.
The Limited Partnership Agreement provides for indemnification of the General Partners and their affiliates in certain circumstances. The Partnership has agreed to reimburse the General Partners for their actual costs incurred in defending this litigation and the costs of preparing settlement materials. Through December 31, 1996, the General Partners had billed the Partnership a total of $824,510 for these costs which was paid in February 1997.
The Partnerships and the General Partners believe that each of the claims asserted in the Consolidated Complaint are meritless and intend to continue to vigorously defend the B&S Litigation. It is impossible at this time to predict what the defense of the B&S Litigation will cost, the Partnership's financial exposure as a result of the indemnification agreement discussed above, and whether the costs of defending could adversely affect the Managing General Partner's ability to perform its obligations to the Partnership.
9. RECONCILIATION OF NET INCOME (LOSS) AND NET ASSETS PER FINANCIAL STATEMENTS TO TAX REPORTING
The Partnership files its tax returns on an accrual basis and has computed depreciation for tax purposes using the accelerated cost recovery systems, which is not in accordance with generally accepted accounting principles. The following is a reconciliation of the net income (loss) per the financial statements to the net taxable income (loss).
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
NOTES TO FINANCIAL STATEMENTS
9. RECONCILIATION OF NET INCOME (LOSS) AND NET ASSETS PER FINANCIAL STATEMENTS TO TAX REPORTING (CONTINUED)
The differences between the Partnership's assets and liabilities for tax purposes and financial reporting purposes are as follows:
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None. PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant
The Partnership has no officers or directors. The Managing General Partner manages and controls substantially all of the Partnership's affairs and has general responsibility and ultimate authority in all matters affecting its business. The Managing General Partner is also the investment general partner of HEP-86 and the managing general partner of HEP-88, both limited partnerships with investment objectives similar to those of the Partnership. The Associate General Partner is also a general partner in other partnerships affiliated with Presidio and whose investment objectives are similar to those of the Partnership. The Associate General Partner, in its capacity as such, does not devote any material amount of its business time and attention to the Partnership's affairs.
Based on a review of Forms 3 and 4 and amendments thereto furnished to the Partnership pursuant to Rule 16a-3(e) during its most recent fiscal year and Form 5 and amendments thereto furnished to the Partnership with respect to its most recent fiscal year, and written representations pursuant to Item 405(b)(2)(i) of Regulation S-K, none of the General Partners, directors or officers of the Managing General Partner or beneficial owners of more than 10% of the Units failed to file on a timely basis reports required by Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") during the most recent fiscal or prior fiscal years. No written representations were received from the partners of the Associate General Partner.
As of March 15, 1997, the names and ages of, and the positions held by, the officers and directors of the Managing General Partner are as follows:
All of the current executive officers and directors were elected following the consummation of Integrated's plan of reorganization under which the Managing General Partner became indirectly wholly-owned by Presidio. Biographies for the executive officers and directors follow:
Joseph M. Jacobs has been a director and the President of Presidio since its formation in August 1994 and a director, Chief Executive Officer, President and Treasurer of Resurgence Properties Inc., a company engaged in diversified real estate activities ("Resurgence"), since its
formation in March 1994. Since January 1, 1996, Mr. Jacobs has been a member and the President of Wexford. From May 1994 to December 1995, Mr. Jacobs was the President of Wexford Management Corp. From 1982 through May 1994, Mr. Jacobs was employed by, and since 1988 was the President of, Bear Stearns Real Estate Group, Inc., a firm engaged in all aspects of real estate, where he was responsible for the management of all activities, including maintaining worldwide relationships with institutional and individual real estate investors, lenders, owners and developers.
Jay L. Maymudes has been the Chief Financial Officer, a Vice President and Treasurer of Presidio since its formation in August 1994 and the Chief Financial Officer and a Vice President of Resurgence since July 1994, Secretary of Resurgence since January 1995 and Assistant Secretary from July 1994 to January 1995. Since January 1, 1996, Mr. Maymudes has been the Chief Financial Officer and a Senior Vice President of Wexford and was the Chief Financial Officer and a Vice President of Wexford Management Corp. from July 1994 to December 1995. From December 1988 through June 1994, Mr. Maymudes was the Secretary and Treasurer, and since February 1990 was a Senior Vice President of Dusco, Inc., a real estate investment advisor.
Robert Holtz has been a Vice President and Secretary of Presidio since its formation in August 1994 and a Vice President and Assistant Secretary of Resurgence since its formation in March 1994. Since January 1, 1996, Mr. Holtz has been a Senior Vice President and member of Wexford and was a Vice President of Wexford Management Corp. from May 1994 to December 1995. From 1989 through May 1994, Mr. Holtz was employed by, and since 1993 was a Vice President of, Bear Stearns Real Estate Group, Inc., where he was responsible for analysis, acquisitions and management of the assets owned by Bear Stearns Real Estate and its clients.
Arthur H. Amron has been a Vice President of certain subsidiaries of Presidio since November 1994. Since January 1996, Mr. Amron has been the general counsel and a Senior Vice President of Wexford. Also, from November 1994 to December 1995, Mr. Amron was the general counsel and, from March 1995 to December 1995, a Vice President, of Wexford Management Corp. From 1992 through November 1994 Mr. Amron was an attorney with the law firm of Schulte, Roth and Zabel.
Frederick Simon was a Senior Vice President of Wexford Management Corp. from November 1995 to December 1995. Since January 1996, Mr. Simon has been a Senior Vice President of Wexford. He is also a Vice President of Resurgence. Prior to joining Wexford, Mr. Simon was Executive Vice President and a Partner of Greycoat Real Estate Corporation, the U.S. arm of Greycoat PLC, a London stock exchange real estate investment and development company.
All of the directors will hold office, subject to the bylaws of the Managing General Partner, until the next annual meeting of stockholders of the Managing General Partner and until their successors are elected and qualified.
There are no family relationships between any executive officer and any other executive officer or director of the Managing General Partner.
As of March 15, 1997, the names and ages of, as well as the position held by, the officers and directors of the Associate General Partner are as follows:
See the biographies of the above named officers and directors in the preceding section except as noted below.
Mark Plaumann has been a Senior Vice President of Wexford since January 1996. Mr. Plaumann was a Vice President of Wexford Management Corp. from February 1995 to December 1995. Mr. Plaumann is also a director of Wahlco Environmental Systems, Inc. (a NYSE registrant engaged in the sale of air pollution control and specially engineered products and is majority-owned by investment funds managed by Wexford) since June 1996 and a director of Technology Service Group, Inc (a NASDAQ registrant engaged in the sale of smart pay phones and is majority-owned by investment funds managed by Wexford) since March 1997. Mr. Plaumann was employed by Alvarez & Marsal, Inc., a workout firm as Managing Director from February 1990 to January 1995. Mr. Plaumann was employed by American Healthcare Management, Inc. a hospital management company from February 1985 to January 1990 and by Ernst & Young from January 1973 to February 1985.
Affiliates of the General Partners are also engaged in business related to the acquisition and operation of real estate.
Many of the officers, directors and partners of the Managing General Partner and the Associate General Partner are also officers and/or directors of the general partners of other public partnerships controlled by Presidio and various subsidiaries of Presidio.
Item 11.

Item 11. Executive Compensation
The Partnership is not required to and did not pay remuneration to the officers and directors of the Managing General Partner or the partners of the Associate General Partner. Certain officers and directors of the Managing General Partner receive compensation from the Managing General Partner and/or its affiliates (but not from the Partnership) for services performed for various affiliated entities, which may include services performed for the Partnership; however, the Managing General Partner believes that any compensation attributable to services performed for the Partnership is immaterial. See also "Item 13. Certain Relationships and Related Transactions."
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 15, 1997, no person was known by the Partnership to be the beneficial owner of more than 5% of the Units.
No directors, officers or partners of the Managing General Partner presently own any Units. An affiliate of the Managing General Partner contracted to purchase 18,114 Units from various limited partners. These purchases represent less than 5% of the outstanding Units.
As of March 1, 1997, there were 8,797,255 shares of outstanding common stock of Presidio (the "Class A Shares"). As of that date, neither the individual directors nor the officers and directors of the Managing General Partner as a group were known by the Partnership to own more than 1% of the Class A Shares.
The following table sets forth certain information known to Presidio with respect to beneficial ownership of the Class A Shares as of March 1, 1997 (based on 8,797,255 Class A Shares outstanding on such date) by: (i) each person who beneficially owns 5% or more of the Class A Shares, (ii) the executive officers of Presidio, (iii) each of Presidio's directors, and (iv) all directors and executive officers as a group:
The address of Thomas F. Steyer and the other individuals mentioned in footnote 1 above (other than Fleur A. Fairman) is c/o Farallon Capital Partners, L.P., One Maritime Plaza, San Francisco, California 94111 and the address of Fleur A. Fairman is c/o Farallon Capital Management, Inc., 800 Third Avenue, 40th Floor, New York, New York 10022. The address of Angelo, Gordon & Co., L.P. and its affiliates is 245 Park Avenue, 26th Floor, New York, New York 10167. The address for Intermarket Corp. is 667 Madison Avenue, New York, New York 10021. The address for M. H. Davidson & Co. is 885 Third Avenue, New York, New York 10022.
Item 13.

Item 13. Certain Relationships and Related Transactions
The General Partners and certain affiliated entities have, during the year ended December 31, 1996, earned or received compensation or payments for services or reimbursements from the Partnership or Presidio subsidiaries as follows:
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) Financial Statements: see Index to Financial Statements in Item 8.
(a) (2) Financial Statement Schedule:
III. Real Estate and Accumulated Depreciation
(a) (3) Exhibits:
3,4. (a) Amended and Restated Partnership Agreement ("Partnership Agreement") of the Partnership, incorporated by reference to Exhibit A to the Prospectus of the Partnership dated February 4, 1985, included in the Partnership's Registration Statement on Form S-11 (Reg. No. 2-92319).
(b) Amendment dated April 1, 1985 to the Partnership's Partnership Agreement, incorporated by reference to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1985.
(c) Restatement of Amendment dated December 1, 1986 to the Partnership's Partnership Agreement, incorporated by reference to the Partnership's Current Report on Form 8-K dated December 8, 1986.
(d) Amendment dated as of April 1, 1988 to the Partnership's Partnership Agreement, incorporated by reference to the Partnership's Annual Report on Form 10- K for the year ended December 31, 1988.
10. (a) Agent's Agreement between the Partnership and Resources Property Man agement Corp., incorporated by reference to Exhibit 10(b) to the Partnership's Regi stration Statement on Form S-11 (Reg. No. 2-92319).
(b) Acquisition and Disposition Services Agreement among the Partnership and Realty Resources Inc., and Resources Acquisitions, Inc., incorporated by reference to Exhibit 10(c) to the Partnership's Registration Statement on Form S-11 (Reg. No. 2- 92319).
(c) Agreement among Resources High Equity, Inc., Integrated Resources, Inc. and Z Square G Partners II, incorporated by reference to Exhibit 10(d) to the Partnership's Registration Statement on Form S-11 (Reg. No. 2-92319).
(d) Lease Agreement dated June 12, 1985, between the Partnership and First Federal Savings and Loan Association of South Carolina for the First Federal Office Building, incorporated by reference to Exhibit 10(g) to the Partnership's Post-Effective Amendment No. 1 to Registration Statement on Form S-11 (Reg. No. 2-92319).
(e) Joint Venture Agreement dated November 2, 1986 between the Partnership and High Equity Partners, L.P. - Series 86, A California Limited Partnership, with respect to Century Park I, incorporated by reference to Exhibit 10(b) to the Partnership's Current Report on Form 8-K dated November 7, 1986.
(f) Joint Venture Agreement dated October 27, 1986 between the Partnership and High Equity Partners, L.P. - Series 86, with respect to 568 Broadway, incorporated by reference to Exhibit 10(b) to the Partnership's Current Report on Form 8-K dated November 19, 1986.
(g) Joint Venture Agreement dated November 24, 1986 between the Partnership and High Equity Partners, L.P. - Series 86, with respect to Seattle Tower, incorporated by reference to Exhibit 10(b) to the Partnership's Current Report on Form 8-K dated December 8, 1986.
(h) Amended and Restated Joint Venture Agreement dated February 1, 1990 among the Partnership, High Equity Partners, L.P. - Series 86 and High Equity Partners, L.P. - Series 88, with respect to 568 Broadway, incorporated by reference to Exhibit 10(a) to the Partnership's Current Report on Form 8-K dated February 1, 1990.
(i) First Amendment to Amended and Restated Joint Venture Agreement of 568 Broadway Joint Venture, dated as of February 1, 1990, among the Partnership, High Equity Partners, L.P. - Series 86 and High Equity Partners, L.P. - Series 88, incorporated by reference to Exhibit 10(p) to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1990.
(j) Agreement, dated as of March 23, 1990, among the Partnership, Resources High Equity Inc. and Resources Property Management Corp., with respect to the payment of deferred fees, incorporated by reference to Exhibit 10(q) to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1990.
(k) Amending Agreement, dated as of December 31, 1991, to Agreement dated as of March 23, 1990, among the Partnership, Resources High Equity Inc. and Resources Property Management Corp., with respect to the payment of deferred fees, incorporated by reference to Exhibit 10(r) to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1991.
(l) Form of Termination of Supervisory Management Agreement (separate agreement entered into with respect to each individual property) and Form of Supervisory Management Agreement between the Partnership and Resources Supervisory (separate agreement entered into with respect to each property), incorporated by reference to Exhibit 10(s) to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1991.
(m) Amending Agreement, dated as of December 30, 1992, to Agreement dated as of March 23, 1990, among the Partnership, Resources High Equity, Inc. and Resources Property Management Corp., with respect to the payment of deferred fees, incorporated by reference to Exhibit 10(m) to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1992.
(n) Amending Agreement, dated as of December 29, 1993, to Agreement dated as of March 23, 1990, among the Partnership, Resources High Equity, Inc. and Resources Property Management Corp., incorporated by reference with respect to the payment of deferred fees.
(b) Reports on Form 8-K:
The Partnership filed the following reports on Form 8-K during the last quarter of the fiscal year:
None.
Financial Statement Schedule Filed Pursuant to Item 14(a)(2)
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85, A CALIFORNIA LIMITED PARTNERSHIP
ADDITIONAL INFORMATION
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
INDEX
Additional financial information furnished pursuant to the requirements of Form 10-K:
Schedules - December 31, 1996, 1995 and 1994 and years then ended, as required:
Schedule III - Real estate and accumulated depreciation
- Notes to Schedule III - Real estate and accumulated depreciation
All other schedules have been omitted because they are inapplicable, not required, or the information is included in the financial statements or notes thereto.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85, A CALIFORNIA LIMITED PARTNERSHIP
By: RESOURCES HIGH EQUITY, INC. Managing General Partner
Dated: March 31, 1997 By: /s/ Joseph M. Jacobs -------------------- Joseph M. Jacobs President (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, This report has been signed below by the following persons on behalf of the registrant and in their capacities on the dates indicated.
Dated: March 31, 1997 By: /s/ Joseph M. Jacobs -------------------- Joseph M. Jacobs President and Director (Principal Executive Officer)
Dated: March 31, 1997 By: /s/ Jay L. Maymudes ------------------- Jay L. Maymudes Vice President, Secretary, Treasurer and Director (Principal Financial and Accounting Officer)
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85 A California Limited Partnership
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1996
(A) RECONCILIATION OF REAL ESTATE OWNED:
(B) RECONCILIATION OF ACCUMULATED DEPRECIATION: