Oh really? (<-That's an honest "Oh really" not a sarcastic one.)
I didn't see it in theatres, but we had a VHS player and it seems that it was one of the only movies that there was to watch... so we rented it when it first came out on tape.
It came out late '85 or early '86, I think. Part 2 wasn't out until 1989. Are you sure that the sequel was "underway" that early?