SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549


                                  FORM 10-K


                Annual Report Pursuant to Section 13 or 15(d)
                   of the Securities Exchange Act of 1934


For the period from January 1, 1998
to November 30, 1998                       Commission file number 0-16253



                      JMB MORTGAGE PARTNERS, LTD. - III
           (Exact name of registrant as specified in its charter)


         Illinois                                   36-3346551
(State of organization)                   (IRS Employer Identification No.)


  900 N. Michigan Ave., Chicago, IL                   60611
(Address of principal executive office)             (Zip Code)


Registrant's telephone number, including area code 312/915-1987


Securities registered pursuant to Section 12(b) of the Act:

                                                   Name of each exchange on
   Title of each class                               which registered      
   -------------------                             ------------------------
           None                                              None          


Securities registered pursuant to Section 12(g) of the Act:

                        LIMITED PARTNERSHIP INTERESTS
                              (Title of class)


Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  Yes [ X ]  No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment of this Form 10-K [ X ]

State the aggregate market value of the voting stock held by nonaffiliates
of the registrant.  Not applicable.

Documents incorporated by reference:  None



<PAGE>


                              TABLE OF CONTENTS



                                                             Page
                                                             ----
PART I

Item 1.      Business. . . . . . . . . . . . . . . . . . . . .  1

Item 2.      Properties. . . . . . . . . . . . . . . . . . . .  4

Item 3.      Legal Proceedings . . . . . . . . . . . . . . . .  5

Item 4.      Submission of Matters to a 
             Vote of Security Holders. . . . . . . . . . . . .  5


PART II

Item 5.      Market for the Partnership's 
             Limited Partnership Interests and 
             Related Security Holder Matters . . . . . . . . .  5

Item 6.      Selected Financial Data . . . . . . . . . . . . .  6

Item 7.      Management's Discussion and 
             Analysis of Financial Condition and 
             Results of Operations . . . . . . . . . . . . . .  8

Item 7A.     Quantitative and Qualitative
             Disclosure About Market Risk. . . . . . . . . . . 10

Item 8.      Financial Statements and 
             Supplementary Data. . . . . . . . . . . . . . . . 11

Item 9.      Changes in and Disagreements 
             with Accountants on Accounting 
             and Financial Disclosure. . . . . . . . . . . . . 31


PART III

Item 10.     Directors and Executive Officers 
             of the Partnership. . . . . . . . . . . . . . . . 31

Item 11.     Executive Compensation. . . . . . . . . . . . . . 34

Item 12.     Security Ownership of Certain 
             Beneficial Owners and Management. . . . . . . . . 34

Item 13.     Certain Relationships and 
             Related Transactions. . . . . . . . . . . . . . . 36


PART IV

Item 14.     Exhibits, Financial Statement Schedules,
             and Reports on Form 8-K . . . . . . . . . . . . . 36


SIGNATURES   . . . . . . . . . . . . . . . . . . . . . . . . . 39








                                      i


<PAGE>


                                   PART I


ITEM 1.  BUSINESS

     Unless otherwise indicated, all references herein to "Notes" are to
Notes to Consolidated Financial Statements contained in this annual report.

Capitalized terms used herein, but not defined, have the same meanings as
used in the Notes.

     The registrant, JMB Mortgage Partners, Ltd. - III (the "Partnership"),
was a limited partnership formed in 1985 and governed by the Revised
Uniform Limited Partnership Act of the State of Illinois to make first
mortgage loans and senior land purchase-leasebacks/leasehold mortgage loans
and, to a lesser extent, wrap-around and junior mortgage loans and land
purchase-leaseback arrangements on a subordinated basis.  On July 24, 1985,
the Partnership commenced an offering of $50,000,000 (subject to increase
by up to $50,000,000) in Limited Partnership interests ("Interests")
pursuant to a Registration Statement on Form S-11 under the Securities Act
of 1933 (Registration No. 0- 016253).  A total of 65,232.69 Interests were
sold to the public at $1,000 per Interest (fractional interests are due to
a Distribution Reinvestment Program).  The offering closed on August 31,
1986.  No holder of Interests (hereinafter, a "Limited Partner") has made
any additional capital contribution after such date.  The Limited Partners
of the Partnership shared in their portion of the benefits of ownership of
the Partnership's mortgage investments according to the number of Interests
held.

     The Partnership was engaged solely in the business of investing in
real estate, such as residential garden apartment complexes and smaller
commercial properties through participating first mortgage loans and
certain other mortgage investments.  All of the Partnership's investments
in real estate have been liquidated.  The Partnership's mortgage
investments were located throughout the nation and it had no mortgage
investments located outside of the United States.  A presentation of
information about industry segments, geographic regions, raw materials or
seasonality was not applicable and would not have been material to an
understanding of the Partnership's business taken as a whole.  Upon the
disposition of a particular mortgage investment or property through sale,
repayment or maturity of such investment, the net proceeds, if any, were
held for working capital, distributed or reinvested in existing mortgage
investments or properties rather than invested in acquiring additional
mortgage investments.  The Partnership made a final liquidating cash
distribution to its holders of Interests and wound up its affairs and
dissolved effective November 30, 1998.  Reference is also made to Item 7.



<PAGE>


<TABLE>

     The Partnership made mortgage investments in the properties listed below.

<CAPTION>

NAME, TYPE OF PROPERTY                            DATE OF              SALE OR
      AND LOCATION              SIZE            INVESTMENT         REPAYMENT DATE      TYPE OF OWNERSHIP
----------------------       ----------       ---------------     -----------------    ---------------------
<S>                         <C>              <C>                 <C>                   <C>

1. Spring Hill 
   Fashion Corner
   shopping center
   West Dundee, 
   Illinois. . . . . . .      125,198 
                               sq.ft.         February, 1986          11-13-96         Fee ownership of land and
                                                                                       improvements (through joint
                                                                                       venture partnership) (c)
2. Shoppes at Rivergate
   shopping center
   Goodlettsville 
   (Nashville),
   Tennessee . . . . . .       169,000
                               sq. ft.        September, 1987          7-16-97         Participating first mortgage
                                                                                       loan (d)
3. Calibre Pointe 
   Apartments
   Atlanta, Georgia. . .         214
                                units         September, 1987          5-30-96         Fee ownership of land and
                                                                                       improvements (through joint
                                                                                       venture partnership) (a)
4. North Rivers Market
   shopping center
   North Charleston,
   South Carolina. . . .      204,779 
                               sq. ft.        December, 1987          12-30-97         Fee ownership of land and,
                                                                                       improvements (through joint
                                                                                       venture partnership) (b)
5. Riverpoint Center 
   shopping center
   Chicago, Illinois . .      196,080 
                               sq. ft.         August, 1987           12-24-96         Participating first mortgage
                                                                                       loan (d)


<PAGE>


NAME, TYPE OF PROPERTY                            DATE OF             SALE OR 
      AND LOCATION              SIZE            INVESTMENT         REPAYMENT DATE      TYPE OF OWNERSHIP
----------------------       ----------       ---------------     -----------------    ---------------------

6. Franklin Farm 
   Village
   Center shopping 
   center
   Fairfax County, 
   Virginia. . . . . . .      104,000 
                               sq. ft.        December, 1991          10-30-96         Participating first mortgage 
                                                                                       loan (d)

<FN>
------------
   (a)  Reference is made to the Notes filed with this annual report for a description of the events resulting in the
Partnership, through a joint venture, obtaining legal title to this property in December 1991 and for a description
of the subsequent sale of this property in May 1996.

   (b)  Reference is made to the Notes filed with this annual report for a description of the events resulting in the
Partnership accounting for this investment as a joint venture investment in real estate effective September 1, 1992. 
Also, reference is made to the Notes for a description of the sale of this property in December 1997.

   (c)  Reference is made to the Notes filed with this annual report for a description of the events resulting in the
Partnership, through a joint venture, accounting for this investment as in-substance foreclosed at January 1, 1995
and subsequently taking title to the property in May 1995.  Also, reference is made to the Notes for a description of
the sale of this property in November 1996.

   (d)  Reference is made to the Notes filed with this annual report for a description of the events resulting in the
repayment of this mortgage loan.


</TABLE>


<PAGE>


     The Partnership's agreements for these mortgage investments were made
during the years 1991, 1989, 1988, 1987 and 1986.  The Partnership's
participating first mortgage loan on the Spring Hill Fashion Corner
shopping center in West Dundee, Illinois, including a description of the
events resulting in the Partnership, through a joint venture, obtaining
legal title to the property in May 1995 and subsequent sale in November
1996 are described in the Notes, which descriptions are hereby incorporated
herein by reference.  The Partnership's participating first mortgage loan
on the Shoppes at Rivergate shopping center in Goodlettsville (Nashville),
Tennessee and subsequent payoff in July 1997 are described in the Notes,
which descriptions are hereby incorporated by reference.  The Partnership's
participating first mortgage loan on the Calibre Pointe Apartments in
Atlanta, Georgia, including a description of the events resulting in the
Partnership, through a joint venture, obtaining legal title to the property
in December 1991 and subsequent sale in May 1996 are described in the
Notes, which descriptions are hereby incorporated herein by reference.  The
Partnership's participating first mortgage loan on the North Rivers Market
shopping center in North Charleston, South Carolina, including the
subsequent acquisition, through a joint venture, of the underlying
collateral in May 1993 and subsequent sale in December 1997 are described
in the Notes, which descriptions are hereby incorporated herein by
reference.  The Partnership's participating first mortgage loan secured by
the Riverpoint Center shopping center, located in Chicago, Illinois and
subsequent payoff in December 1996 are described in the Notes, which
descriptions are hereby incorporated herein by reference.  The
Partnership's fundings of a participating first mortgage loan secured by
Franklin Farm Village Center, located in Fairfax County, Virginia and
subsequent payoff in October 1996 are described in the Notes, which
descriptions are hereby incorporated herein by reference.

     The properties including those which secured the Partnership's
mortgage investments were subject to competition from similar types of
properties (including, in certain areas, properties owned by affiliates of
the General Partners) in the respective vicinities in which they were
located.  Such competition was generally for the retention of existing
tenants and for securing new tenants in markets where significant vacancies
were present.

     The terms of transactions between the Partnership, the General
Partners of the Partnership and their affiliates are set forth in Items 10
and 11 below to which reference is hereby made for a description of such
terms and transactions.


ITEM 2.  PROPERTIES

     The Partnership made real estate/mortgage investments in the
properties referred to under Item 1.  Reference is made to Item 1 and the
Notes for a description of such investments.





<PAGE>


ITEM 3.  LEGAL PROCEEDINGS

     The Partnership is not subject to any pending material legal
proceedings.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     There were no matters submitted to a vote of security holders during
fiscal years 1997 and 1998.


                                   PART II

ITEM 5.  MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS 
         AND RELATED SECURITY HOLDER MATTERS

     Immediately prior to the dissolution of the Partnership, there were
11,442 record holders of Interests of the Partnership.  There had been no
public market for Interests and it had not been anticipated that a public
market for Interests would develop.  Upon request, the Corporate General
Partner provided information relating to a prospective transfer of
Interests to an investor desiring to transfer his Interests.  The price
paid for the Interests as well as any other economic aspects of the
transaction was subject to negotiation by the investor.

     Reference is made to Item 6 for a discussion of cash distributions
made to the Limited Partners.

    Reference is made to Item 7 for a discussion of unsolicited tender 
offers received from unaffiliated third parties.



<PAGE>


<TABLE>
ITEM 6.  SELECTED FINANCIAL DATA

                                         JMB MORTGAGE PARTNERS, LTD. - III
                                              (A LIMITED PARTNERSHIP)
                                             AND CONSOLIDATED VENTURES

                                       ELEVEN MONTHS ENDED NOVEMBER 30, 1998
                               (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
                              AND YEARS ENDED DECEMBER 31, 1997, 1996, 1995 and 1994

                                   (NOT COVERED BY INDEPENDENT AUDITORS' REPORT)
<CAPTION>
                                  1998           1997            1996           1995           1994    
                              -----------     ----------      ----------     ----------     ---------- 
<S>                          <C>             <C>             <C>            <C>            <C>         
Total income . . . . . . . .  $   130,926      3,142,374       5,985,441      7,138,723      7,191,836 
                              ===========     ==========      ==========     ==========     ========== 
Earnings (loss) before 
 gains on sales of 
 investment properties . . .  $  (250,523)     1,732,377       2,413,755      2,409,947      4,182,722 

Gain on sale of interest
 in unconsolidated
 venture and on sales
 of investment properties,
 net of venture partner's
 share . . . . . . . . . . .        --         3,085,285       1,621,343          --             --    
                              -----------     ----------      ----------     ----------     ---------- 
Net earnings (loss). . . . .  $  (250,523)     4,817,662       4,035,098      2,409,947      4,182,722 
                              ===========     ==========      ==========     ==========     ========== 
Net earnings (loss)
 per Interest (b):
  Earnings (loss) before 
   gains on sale of in-
   vestment properties . . .  $     (3.23)         18.19           30.32          28.61          58.52 
  Gain on sale of interest
   in unconsolidated 
   venture and on sales 
   of investment proper-
   ties, net of venture 
   partner's share . . . . .        --             41.51           24.60          --             --    
                              -----------     ----------      ----------     ----------     ---------- 
Net earnings (loss). . . . .  $     (3.23)         59.70           54.92          28.61          58.52 
                              ===========     ==========      ==========     ==========     ========== 
Total assets . . . . . . . .  $   518,640     17,448,226      49,757,706     62,807,092     68,386,716 
                              ===========     ==========      ==========     ==========     ========== 
Cash distributions 
 per Interest (c). . . . . .  $    172.00         572.29          190.78          75.00          50.27 
                              ===========     ==========      ==========     ==========     ========== 


<PAGE>


<FN>
---------------

   (a)   The above selected financial data should be read in conjunction with the consolidated financial
statements and the related notes appearing elsewhere in this annual report. 

   (b)   The net earnings (loss) per Interest is based upon the number of Interests outstanding at the end of
each period (65,237.69) and the specified profit and loss allocations (as discussed in the Notes) between the
Limited and General Partners.

   (c)   Cash distributions from the Partnership were generally not equal to Partnership income (loss) for
financial reporting or Federal income tax purposes.  Each partner's taxable income (loss) from the Partnership in
each year was equal to his allocable share of the taxable income (loss) of the Partnership, without regard to the
cash generated or distributed by the Partnership.  Accordingly, cash distributions to the Limited Partners since
the inception of the Partnership have not resulted in taxable income to such Limited Partners and have therefore
represented a return of capital. 


</TABLE>


<PAGE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
         AND RESULTS OF OPERATIONS

LIQUIDITY AND CAPITAL RESOURCES

     As a result of the public offering of Interests as described in
Item 1, the Partnership had approximately $57,800,000 (after deducting
selling expenses and other offering costs) with which to make mortgage
investments and to satisfy working capital requirements.  A portion of such
proceeds was utilized to make the mortgage loans described in Item 1 above.

     During 1996 and early 1997, some of the holders of Interests in the
Partnership received from unaffiliated third parties unsolicited tender
offers to purchase up to 4.9% of the Interests in the Partnership at prices
ranging between $440 and $500 per Interest.  The Partnership recommended
against acceptance of these offers on the basis that, among other things,
the offer prices were inadequate.  The board of directors of JMB Realty
Corporation ("JMB"), the corporate general partner of the Partnership, had
established a special committee (the "Special Committee") consisting of
certain directors of JMB to deal with all matters relating to tender offers
for Interests in the Partnership, including any and all responses to such
tender offers.  The Special Committee had retained independent counsel to
advise it in connection with any potential tender offers for Interests and
had retained Lehman Brothers Inc. as financial advisor to assist the
Special Committee in evaluating and responding to any additional potential
tender offers for Interests.

     During the second half of 1997, another unaffiliated third party made
an unsolicited tender offer to some of the holders of Interests.  This
offer sought to purchase up to 4.9% of the Interests in the Partnership for
$200 per Interest.  The offer has expired.  The Special Committee
recommended against acceptance of this offer on the basis that, among other
things, the offer price was inadequate.  As of the date of this report, the
Partnership was aware that 4.18% of the outstanding Interests were
purchased by all such unaffiliated third parties either pursuant to such
tender offers or through negotiated purchases.

     All of the Partnership's real estate investments were liquidated in
1996 and 1997.

     In February 1998, distributions of approximately $11,221,000 ($172 per
Interest) were made to the Limited Partners, which included $142 per
Interest from the distributions received in 1998 from North Rivers Market
Associates relating to the December 1997 sale of the North Rivers Market
shopping center and $30 per Interest from Partnership operational cash flow
and reserves, including those from offering proceeds.  The Partnership also
paid a distribution of $217,459 in February 1998 and $13,917 in November
1998 to the General Partners, which represented their share of Partnership
operational cash flow and reserves, including those from offering proceeds.

In connection with the sale of the North Rivers Market shopping center, the
Partnership's last remaining real estate investment, as is customary in
such transactions, the North Rivers Market Associates venture agreed to
certain representations and warranties, with a stipulated survival period
which expired, with no liability to the venture, as scheduled in late
September 1998.  The General Partners did not receive their share of any
distribution of proceeds from the sale, as the subordination requirements
of the Partnership Agreement for the retention of sales proceeds by the
General Partners were not met.



<PAGE>


     The Partnership made a final liquidating cash distribution of $518,640
($7.95 per Interest) to its holders of Interests and wound up its affairs
and dissolved effective November 30, 1998.  However, the Partnership's goal
of capital appreciation was not achieved.  Aggregate sale and repayment
proceeds received by holders of Interests over the entire term of the
Partnership were less than their original investment.

RESULTS OF OPERATIONS

     Reference is made to the Notes for a description of the real estate
investments made by the Partnership.

     The decrease in cash and cash equivalents at November 1998 as compared
to December 31, 1997 is due primarily to distributions of approximately
$11,221,000 ($172 per Interest) made to the Limited Partners in February
1998, which included $142 per Interest from the distributions received from
North Rivers Market Associates relating to the December 1997 sale of the
North Rivers Market shopping center and $30 per Interest from Partnership
operational cash flow and reserves, including those from offering proceeds.

The Partnership also paid a distribution of $217,459 in February 1998 and
$13,917 in November 1998 to the General Partners, which represented their
share of Partnership operational cash flow and reserves, including those
from offering proceeds.  The General Partners did not receive their share
of any distribution of proceeds from sales due to subordination
requirements of the Partnership Agreement.  An additional decrease in cash
and cash equivalents and the decrease in venture partner's equity in
venture at November 30, 1998 as compared to December 31, 1997 is
attributable primarily to distributions of approximately $5,113,000 made to
the venture partner (Mortgage Partners-IV) of the North Rivers Market
Associates venture in 1998.

     The decrease in interest, rents and other receivables at November 30,
1998 as compared to December 31, 1997 is due primarily to the collection in
1998 of lump-sum 1997 expense recoveries from certain tenants at the North
Rivers Market shopping center.

     The decrease in accounts payable at November 30, 1998 as compared to
December 31, 1997 is due primarily to the payment in 1998 of certain
accrued 1997 operating, general and administrative and selling expenses. 
An additional decrease in accounts payable at November 30, 1998, and other
income of $13,597 for the eleven months ended November 30, 1998, is due to
the write-off of certain unincurred estimated selling costs in connection
with the December 1997 sale of the North Rivers Market shopping center.

     The decrease in rental income, property operating expenses and venture
partner's share of venture's operations for the eleven months ended
November 30, 1998 as compared to the year ended December 31, 1997 is due
primarily to the December 1997 sale of the North Rivers Market shopping
center.  The decrease in rental income and property operating expenses for
the year ended December 31, 1997 as compared to the year ended December 31,
1996 is due primarily to the May 1996 sale of the Calibre Pointe
Apartments.

     The decrease in interest income and mortgage investment servicing fees
for the eleven months ended November 30, 1998 as compared to the year ended
December 31, 1997 and the year ended December 31, 1997 as compared to the
year ended December 31, 1996 is due primarily to the repayment of the
mortgage loan secured by the Shoppes at Rivergate shopping center in July
1997, the repayment of the mortgage loans secured by the Franklin Farm
Village Center and the Riverpoint Center in 1996 and the 1996 sale of the
Spring Hill Fashion Center.  An additional decrease in interest income for
the eleven months ended November 30, 1998 is due to the interest earned in
1997 on the temporary investment of the proceeds from the repayment of the
mortgage loans secured by the Franklin Farm Village Center and the
Riverpoint Center and the sale of the Spring Hill Fashion Corner during the
fourth quarter of 1996 and the repayment of the Shoppes at Rivergate
shopping center in July 1997.



<PAGE>


     The decrease in depreciation expense for the year ended December 31,
1997 as compared to the year ended December 31, 1996 is due primarily to
the North Rivers Market Shopping Center being classified as held for sale
or disposition as of December 31, 1996.  This property was sold in December
1997.

     The decrease in amortization of deferred costs for the year ended
December 31, 1997 as compared to the year ended December 31, 1996 is due to
the amortization of all remaining costs in connection with the 1996
repayment of the mortgage loans secured by the Franklin Farm Village Center
and Riverpoint Center.

     The provision for loan losses for the year ended December 31, 1996 are
the result of loan loss provisions recorded for the mortgage notes secured
by the Riverpoint Center and the Shoppes at Rivergate shopping center.

     The decrease in Partnership's share of operations of unconsolidated
venture for the year ended December 31, 1997 as compared to the year ended
December 31, 1996 is due primarily to the November 1996 sale of the
JMB/Spring Hill investment property, the Spring Hill Fashion Corner.

     The decrease in venture partner's share of ventures' operations for
the year ended December 31, 1997 as compared to December 31, 1996 is due
primarily to the May 1996 sale of the Calibre Pointe Apartments.

     The gain on sale of interest in unconsolidated venture for the year
ended December 31, 1996 is due to the sale of the Partnership's interest in
the Spring Hill Fashion Corner.

     The gains on sales of investment properties, net of venture partner's
share, of $3,085,285 and $1,620,384 for the years ended December 31, 1997
and 1996, respectively, are due to the December 1997 sale of the North
Rivers Market shopping center and the May 1996 sale of the Calibre Pointe
Apartments.

INFLATION

     Due to the decrease in the level of inflation in recent years,
inflation generally has not had a material effect on the operations of the
Partnership.  Inflation in future periods is not applicable since the
Partnership wound up its affairs and dissolved effective November 30, 1998.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     The Partnership wound up its affairs and dissolved in 1998.  As a
result, there is no meaningful disclosure for this item.


YEAR 2000

     The Partnership wound up its affairs and dissolved in 1998.




<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                      JMB MORTGAGE PARTNERS, LTD. - III
                           (A LIMITED PARTNERSHIP)
                          AND CONSOLIDATED VENTURES

                                    INDEX


Independent Auditors' Report


Consolidated Balance Sheets, November 30, 1998 (Immediately prior 
  to final liquidating distribution) and December 31, 1997


Consolidated Statements of Operations, eleven months ended 
  November 30, 1998 (Immediately prior to final liquidating
  distribution) and years ended December 31, 1997 and 1996


Consolidated Statements of Partners' Capital Accounts (Deficits), 
  eleven months ended November 30, 1998 (Immediately prior 
  to final liquidating distribution) and years ended
  December 31, 1997 and 1996


Consolidated Statements of Cash Flows, eleven months ended 
  November 30, 1998 (Immediately prior to final liquidating
  distribution) and years ended December 31, 1997 and 1996


Notes to Consolidated Financial Statements


SCHEDULES NOT FILED:

     All schedules have been omitted as the required information is
inapplicable or the information is presented in the financial statements or
related notes.




<PAGE>













                        INDEPENDENT AUDITORS' REPORT



The Partners
JMB MORTGAGE PARTNERS, LTD. - III:

     We have audited the consolidated financial statements of JMB Mortgage
Partners, Ltd. - III (a limited partnership) and consolidated ventures as
listed in the accompanying index.  These consolidated financial statements
are the responsibility of the General Partners of the Partnership.  Our
responsibility is to express an opinion on  these consolidated 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 the General Partners of the
Partnership, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis for
our opinion.

     In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
JMB Mortgage Partners, Ltd. - III and consolidated ventures as of
November 30, 1998 (immediately prior to final liquidating distribution) and
December 31, 1997, and the results of their operations and their cash flows
for the eleven months ended November 30, 1998 (immediately prior to final
liquidating distribution) and for the years ended December 31, 1997 and
1996, in conformity with generally accepted accounting principles.

     As discussed in the Notes to the consolidated financial statements, in
1996 the Partnership changed its method of accounting for long-lived assets
and long-lived assets to be disposed of to conform with Statement of
Financial Accounting Standards No. 121.












                                          KPMG LLP


Chicago, Illinois
February 8, 1999




<PAGE>


<TABLE>
                                         JMB MORTGAGE PARTNERS, LTD. - III
                                              (A LIMITED PARTNERSHIP)
                                             AND CONSOLIDATED VENTURES

                                            CONSOLIDATED BALANCE SHEETS

                      NOVEMBER 30, 1998 (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
                                               AND DECEMBER 31, 1997

                                                      ASSETS
                                                      ------
<CAPTION>
                                                                                  1998               1997    
                                                                              ------------       ----------- 
<S>                                                                          <C>                <C>          
Current assets:
  Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . .       $   518,640        17,310,928 
  Interest, rents and other receivables. . . . . . . . . . . . . . . . .             --              137,298 
                                                                               -----------       ----------- 
          Total current assets . . . . . . . . . . . . . . . . . . . . .           518,640        17,448,226 
                                                                               -----------       ----------- 

                                                                               $   518,640        17,448,226 
                                                                               ===========       =========== 



<PAGE>


                                         JMB MORTGAGE PARTNERS, LTD. - III
                                              (A LIMITED PARTNERSHIP)
                                             AND CONSOLIDATED VENTURES

                                      CONSOLIDATED BALANCE SHEETS - CONTINUED

                               LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)

                                                                                   1998              1997    
                                                                               -----------       ----------- 
Current liabilities:
  Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . .       $     --              107,806 
                                                                               -----------       ----------- 
          Total current liabilities. . . . . . . . . . . . . . . . . . .             --              107,806 

Commitments and contingencies 

          Total liabilities. . . . . . . . . . . . . . . . . . . . . . .             --              107,806 
                                                                               -----------       ----------- 

Venture partner's equity in venture. . . . . . . . . . . . . . . . . . .             --            5,118,998 

Partners' capital accounts (deficits):
 General partners:
   Capital contributions . . . . . . . . . . . . . . . . . . . . . . . .             1,000             1,000 
   Cumulative net earnings . . . . . . . . . . . . . . . . . . . . . . .         4,283,667         4,323,591 
   Cumulative cash distributions . . . . . . . . . . . . . . . . . . . .        (4,284,667)       (4,053,291)
                                                                               -----------       ----------- 
                                                                                     --              271,300 
                                                                               -----------       ----------- 
 Limited partners (65,237.69 interests):
   Capital contributions, net offering costs . . . . . . . . . . . . . .        57,758,561        57,758,561 
   Cumulative net earnings . . . . . . . . . . . . . . . . . . . . . . .        39,298,219        39,508,818 
   Cumulative cash distributions . . . . . . . . . . . . . . . . . . . .       (96,538,140)      (85,317,257)
                                                                               -----------       ----------- 
                                                                                   518,640        11,950,122 
                                                                               -----------       ----------- 
          Total partners' capital accounts (deficits). . . . . . . . . .           518,640        12,221,422 
                                                                               -----------      ------------ 
                                                                               $   518,640        17,448,226 
                                                                               ===========      ============ 







<FN>
                           See accompanying notes to consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
                                         JMB MORTGAGE PARTNERS, LTD. - III
                                              (A LIMITED PARTNERSHIP)
                                             AND CONSOLIDATED VENTURES

                                       CONSOLIDATED STATEMENTS OF OPERATIONS

                                       ELEVEN MONTHS ENDED NOVEMBER 30, 1998
                               (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
                                    AND YEARS ENDED DECEMBER 31, 1997 AND 1996
<CAPTION>
                                                                1998             1997              1996     
                                                            ------------     ------------      ------------ 
<S>                                                        <C>              <C>               <C>           
Income:
  Interest income. . . . . . . . . . . . . . . . . . .       $   117,329        1,347,858         3,257,225 
  Rental income. . . . . . . . . . . . . . . . . . . .             --           1,794,516         2,728,216 
  Other income . . . . . . . . . . . . . . . . . . . .            13,597            --                --    
                                                             -----------      -----------       ----------- 
                                                                 130,926        3,142,374         5,985,441 
                                                             -----------      -----------       ----------- 
Expenses:
  Depreciation . . . . . . . . . . . . . . . . . . . .             --               --              219,128 
  Property operating expenses. . . . . . . . . . . . .            45,129          616,299         1,031,323 
  Mortgage investment servicing fees . . . . . . . . .             --              16,192            71,022 
  Professional services. . . . . . . . . . . . . . . .            81,802           79,901           122,569 
  Amortization of deferred costs . . . . . . . . . . .             --               6,691           175,023 
  General and administrative . . . . . . . . . . . . .           260,170          285,045           270,694 
  Provision for loan losses. . . . . . . . . . . . . .             --               --            1,077,478 
                                                             -----------      -----------       ----------- 
                                                                 387,101        1,004,128         2,967,237 
                                                             -----------      -----------       ----------- 
                                                                (256,175)       2,138,246         3,018,204 

Partnership's share of operations of 
  unconsolidated venture . . . . . . . . . . . . . . .             --               --              (48,441)
Venture partner's share of ventures' 
  operations . . . . . . . . . . . . . . . . . . . . .             5,652         (405,869)         (556,008)
                                                             -----------      -----------       ----------- 

          Earnings (loss) before gains on sales
            of investment properties . . . . . . . . .          (250,523)       1,732,377         2,413,755 

Gain on sale of interest in unconsolidated 
  venture. . . . . . . . . . . . . . . . . . . . . . .             --               --                  959 
Gains on sales of investment properties,
  net of venture partner's share of $1,554,939 in
  1997 and $980,379 in 1996. . . . . . . . . . . . . .             --           3,085,285         1,620,384 
                                                             -----------      -----------       ----------- 
          Net earnings (loss). . . . . . . . . . . . .       $  (250,523)       4,817,662         4,035,098 
                                                             ===========      ===========       =========== 


<PAGE>


                                         JMB MORTGAGE PARTNERS, LTD. - III
                                              (A LIMITED PARTNERSHIP)
                                             AND CONSOLIDATED VENTURES

                                 CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED



                                                                1998             1997              1996     
                                                            ------------     ------------      ------------ 

          Net earnings (loss) per limited
           partnership interest:
            Earnings (loss) before gains on sales
              of investment properties . . . . . . . .       $     (3.23)           18.19             30.32 
            Gain on sale of interest in
              unconsolidated venture . . . . . . . . .             --               --                  .01 
            Net gains on sales of investment 
              properties . . . . . . . . . . . . . . .             --               41.51             24.59 
                                                             -----------      -----------       ----------- 

                                                             $     (3.23)           59.70             54.92 
                                                             ===========      ===========       =========== 

























<FN>
                           See accompanying notes to consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
                                         JMB MORTGAGE PARTNERS, LTD. - III
                                              (A LIMITED PARTNERSHIP)
                                             AND CONSOLIDATED VENTURES

                         CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS)

                                       ELEVEN MONTHS ENDED NOVEMBER 30, 1998
                               (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
                                    AND YEARS ENDED DECEMBER 31, 1997 AND 1996

<CAPTION>
                                                                      GENERAL PARTNERS                    
                                               ---------------------------------------------------------- 
                                                    NET             NET            CASH     
                                              CONTRIBUTIONS      EARNINGS     DISTRIBUTIONS        TOTAL  
                                              -------------   -------------   -------------     --------- 
<S>                                          <C>             <C>             <C>               <C>        
Balance at December 31, 1995 . . . . . . . .         $1,000       2,948,423      (3,071,447)     (122,024)

Net earnings (loss). . . . . . . . . . . . .            --          452,436           --          452,436 
Cash distributions ($190.78 per
 limited partnership interest) . . . . . . .            --            --           (436,223)     (436,223)
                                                     ------     -----------      ----------     --------- 

Balance at December 31, 1996 . . . . . . . .          1,000       3,400,859      (3,507,670)     (105,811)

Net earnings (loss). . . . . . . . . . . . .            --          922,732           --          922,732 
Cash distributions ($572.29 per
 limited partnership interest) . . . . . . .            --            --           (545,621)     (545,621)
                                                     ------     -----------      ----------     --------- 

Balance at December 31, 1997 . . . . . . . .          1,000       4,323,591      (4,053,291)      271,300 

Net earnings (loss). . . . . . . . . . . . .            --          (39,924)           --         (39,924)
Cash distributions ($172.00 per
 limited partnership interest) . . . . . . .            --             --          (231,376)     (231,376)
                                                     ------     -----------      ----------     --------- 

Balance at November 30, 1998 . . . . . . . .         $1,000       4,283,667      (4,284,667)        --    
                                                     ======     ===========      ==========     ========= 






<PAGE>


                                         JMB MORTGAGE PARTNERS, LTD. - III
                                              (A LIMITED PARTNERSHIP)
                                             AND CONSOLIDATED VENTURES

                   CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL ACCOUNTS (DEFICITS) - CONCLUDED




                                                                 LIMITED PARTNERS (65,237.69)             
                                               ---------------------------------------------------------- 
                                                    NET              NET           CASH     
                                               CONTRIBUTIONS      EARNINGS    DISTRIBUTIONS       TOTAL   
                                               -------------   -------------  -------------    ---------- 

Balance at December 31, 1995 . . . . . . . .     $57,758,561     32,031,226     (35,536,555)   54,253,232 

Net earnings (loss). . . . . . . . . . . .            --          3,582,662           --        3,582,662 
Cash distributions ($190.78 per
 limited partnership interest) . . . . . . .          --              --        (12,445,756)  (12,445,756)
                                                 -----------     ----------     -----------   ----------- 

Balance at December 31, 1996 . . . . . . . .      57,758,561     35,613,888     (47,982,311)   45,390,138 

Net earnings (loss). . . . . . . . . . . . .          --          3,894,930           --        3,894,930 
Cash distributions ($572.29 per
 limited partnership interest) . . . . . . .          --              --        (37,334,946)  (37,334,946)
                                                 -----------     ----------     -----------   ----------- 

Balance at December 31, 1997 . . . . . . . .      57,758,561     39,508,818     (85,317,257)   11,950,122 

Net earnings (loss). . . . . . . . . . . . .           --          (210,599)          --         (210,599)
Cash distributions ($172.00 per
 limited partnership interest) . . . . . . .           --             --        (11,220,883)  (11,220,883)
                                                 -----------     ----------     -----------   ----------- 

Balance at November 30, 1998 . . . . . . . .     $57,758,561     39,298,219     (96,538,140)      518,640 
                                                 ===========     ==========     ===========   =========== 










<FN>
                           See accompanying notes to consolidated financial statements.
</TABLE>


<PAGE>


<TABLE>
                                         JMB MORTGAGE PARTNERS, LTD. - III
                                               (LIMITED PARTNERSHIP)
                                             AND CONSOLIDATED VENTURES

                                       CONSOLIDATED STATEMENTS OF CASH FLOWS

                                       ELEVEN MONTHS ENDED NOVEMBER 30, 1998
                               (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
                                    AND YEARS ENDED DECEMBER 31, 1997 AND 1996

<CAPTION>
                                                                 1998            1997               1996    
                                                             -----------      -----------       ----------- 
<S>                                                         <C>              <C>               <C>          
Cash flows from operating activities:
 Net earnings (loss) . . . . . . . . . . . . . . . . .       $  (250,523)       4,817,662         4,035,098 
 Items not requiring cash or cash equivalents:
   Total gain on sale of investment property . . . . .             --          (4,640,224)       (2,600,763)
   Gain on sale of interest in unconsolidated
    ventures . . . . . . . . . . . . . . . . . . . . .             --               --                 (959)
   Depreciation. . . . . . . . . . . . . . . . . . . .             --               --              219,128 
   Amortization of deferred costs. . . . . . . . . . .             --               6,691           175,023 
   Provision for loan losses . . . . . . . . . . . . .             --               --            1,077,478 
   Partnership's share of operations of 
    unconsolidated venture, net of distributions . . .             --               --               48,441 
   Venture partners' share of ventures'
    operations and gain on sale of investment
    property . . . . . . . . . . . . . . . . . . . . .            (5,652)       1,960,808         1,537,546 
Changes in:
  Interest, rents and other receivables. . . . . . . .           137,298           91,807           102,422 
  Prepaid expenses . . . . . . . . . . . . . . . . . .             --              16,290             --    
  Deferred interest receivable . . . . . . . . . . . .             --               --              528,982 
  Accounts payable . . . . . . . . . . . . . . . . . .          (107,806)          16,621            26,642 
  Amounts due from affiliates. . . . . . . . . . . . .             --               --              251,872 
  Accrued real estate taxes. . . . . . . . . . . . . .             --            (148,139)            --    
  Other current liabilities. . . . . . . . . . . . . .             --            (143,426)          (61,883)
  Tenant security deposits . . . . . . . . . . . . . .             --             (14,000)          (20,662)
                                                             -----------      -----------       ----------- 
          Net cash provided by (used in) 
            operating activities . . . . . . . . . . .          (226,683)       1,964,090         5,318,365 
                                                             -----------      -----------       ----------- 
Cash flows from investing activities:
  Cash proceeds from sale of investment
   property, net of selling expenses . . . . . . . . .             --          14,221,783        14,175,511 
  Additions to investment properties . . . . . . . . .             --            (223,009)         (125,007)


<PAGE>


                                         JMB MORTGAGE PARTNERS, LTD. - III
                                               (LIMITED PARTNERSHIP)
                                             AND CONSOLIDATED VENTURES

                                 CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED



                                                                 1998            1997               1996    
                                                             -----------      -----------       ----------- 

  Partnership's distribution from
   unconsolidated venture. . . . . . . . . . . . . . .             --               --            3,112,330 
  Payment of deferred costs. . . . . . . . . . . . . .             --             (41,878)            --    
  Collection of principal on mortgage notes
   receivable. . . . . . . . . . . . . . . . . . . . .             --          11,600,000        17,111,652 
                                                             -----------      -----------       ----------- 
          Net cash provided by (used in) 
            investing activities . . . . . . . . . . .             --          25,556,896        34,274,486 
                                                             -----------      -----------       ----------- 
Cash flows from financing activities:
  Distributions to venture partner . . . . . . . . . .        (5,113,346)        (918,439)       (5,660,400)
  Distributions to limited partners. . . . . . . . . .       (11,220,883)     (37,334,946)      (12,445,756)
  Distributions to general partners. . . . . . . . . .          (231,376)        (545,621)         (436,223)
                                                             -----------      -----------       ----------- 
          Net cash provided by (used in) 
            financing activities . . . . . . . . . . .       (16,565,605)     (38,799,006)      (18,542,379)
                                                             -----------      -----------       ----------- 
          Net increase (decrease) in cash and 
            cash equivalents . . . . . . . . . . . . .       (16,792,288)     (11,278,020)       21,050,472 

          Cash and cash equivalents,
            beginning of period. . . . . . . . . . . .        17,310,928       28,588,948         7,538,476 
                                                             -----------      -----------       ----------- 
          Cash and cash equivalents,
            end of period. . . . . . . . . . . . . . .       $   518,640       17,310,928        28,588,948 
                                                             ===========      ===========       =========== 
Supplemental disclosure of cash flow information:
  Cash paid for mortgage and other interest. . . . . .       $     --               --                --    
                                                             ===========      ===========       =========== 
  Non-cash investing and financing activities. . . . .       $     --               --                --    
                                                             ===========      ===========       =========== 






<FN>
                           See accompanying notes to consolidated financial statements.
</TABLE>


<PAGE>


                      JMB MORTGAGE PARTNERS, LTD. - III
                           (A LIMITED PARTNERSHIP)
                          AND CONSOLIDATED VENTURES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                    ELEVEN MONTHS ENDED NOVEMBER 30, 1998
            (IMMEDIATELY PRIOR TO FINAL LIQUIDATING DISTRIBUTION)
                 AND YEARS ENDED DECEMBER 31, 1997 AND 1996


OPERATIONS AND BASIS OF ACCOUNTING

     GENERAL

     The Partnership held an investment portfolio of first mortgage loans
and (through joint ventures) equity investments in commercial and
residential real estate.  Business activities consisted of the collections
of interest and principal on such loans and, with respect to its former
equity investments, rentals to commercial and retail tenants, residential
tenants and the ultimate sale of such real estate.

     For financial reporting purposes, effective January 1, 1995, the
mortgage loan secured by the Spring Hill Fashion Corner was determined to
have been in-substance foreclosed and was reclassified as an investment in
a joint venture in real estate on the equity method at its estimated fair
value.  In early May 1995, the lenders (including the Partnership) obtained
legal title to the property.  Accordingly, the accompanying financial
statements do not include the accounts of the JMB/Spring Hill Associates
("Spring Hill") venture.  The venture sold the property in November 1996.

     The accompanying consolidated financial statements include the
accounts of the Partnership and its majority-owned consolidated ventures,
Calibre Pointe Associates (property sold May 1996) and North Rivers Market
Associates (property sold December 1997).  The effect of all the
transactions between the Partnership and its consolidated ventures has been
eliminated in its consolidated financial statements.

     The Partnership records were maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting purposes.  The
accompanying consolidated financial statements have been prepared from such
records after making appropriate adjustments to present the Partnership's
accounts in accordance with generally accepted accounting principles
("GAAP") and to consolidate the accounts of the ventures as described
above.  Such GAAP and consolidation adjustments were not recorded on the
records of the Partnership.  The net effect of these items for the eleven
months ended November 30, 1998 (immediately prior to the final liquidating
distribution) and the year ended December 31, 1997 is summarized as
follows:






<PAGE>


<TABLE>


<CAPTION>
                                                        1998                               1997             
                                                      ------------------------------------------------------------- 
                                                              TAX BASIS                           TAX BASIS 
                                           GAAP BASIS        (UNAUDITED)       GAAP BASIS        (UNAUDITED)
                                          ------------       -----------     ------------       ----------- 
<S>                                      <C>                 <C>             <C>                <C>         
Total assets . . . . . . . . . . . .         $ 518,640           518,640       17,448,226        19,623,574 
Partners' capital accounts
 (deficits):
  General partners . . . . . . . . .             --                --             271,300           271,301 
  Limited partners . . . . . . . . .           518,640           518,640       11,950,122        19,304,539 

Net earnings (loss):
  General partners . . . . . . . . .           (39,924)          (39,925)         922,732           816,922 
  Limited partners . . . . . . . . .          (210,599)         (228,423)       3,894,930        (1,400,894)

Net earnings (loss) per
  Limited partnership
   interest. . . . . . . . . . . . .             (3.23)            (3.50)           59.70            (21.47)
                                             =========          ========       ==========        ========== 


</TABLE>


<PAGE>


     The net earnings (loss) per limited partnership interest ("Interest")
was based upon the number of Interests outstanding at the end of each
period (65,237.69).  Also, because net earnings (loss) was computed
immediately prior to dissolution, holders of Interests may have an
additional capital gain or loss on dissolution depending on the holders'
basis for Federal income tax purposes.

     The preparation of financial statements in accordance with GAAP
required the Partnership to make estimates and assumptions that affected
the reported or disclosed amount of 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 have differed from those
estimates.

     Statement of Financial Accounting Standards No. 95 requires the
Partnership to present a statement which classifies receipts and payments
according to whether they stem from operating, investing or financing
activities.  The required information has been segregated and accumulated
according to the classifications specified in the pronouncement. 
Partnership distributions from its unconsolidated venture were considered
cash flow from operating activities only to the extent of the Partnership's
cumulative share of net earnings.  In addition, the Partnership recorded
amounts held in U.S. Government obligations at cost which approximated
market.  For the purposes of these statements, the Partnership's policy was
to consider all such amounts held with original maturities of three months
or less ($17,094,000 at December 31, 1997) as cash equivalents, which
included investments in an institutional mutual fund which held U.S.
Government obligations, with any remaining amounts (generally with original
maturities of one year or less) reflected as short-term investments being
held to maturity.

     Deferred costs in connection with mortgage investments were amortized
over the terms of the agreements relating to such mortgage investments
using the straight-line method.  Unamortized deferred costs were expensed
upon early payment of a mortgage loan.

     The Partnership had been recognizing interest income only as collected
on the mortgage loans secured by the Shoppes at Rivergate and Riverpoint
Center shopping centers.

     Statement of Financial Accounting Standards No. 114, "Accounting by
Creditors for Impairment of a Loan" provides that the impairment of a
collateralized loan that is considered impaired (as defined) may be
recognized by creating a valuation allowance to the recorded balance of the
loan to yield a net carrying amount of the loan which is equal to the fair
value of the loan collateral.  The Partnership elected to recognize
subsequent changes in the fair value of the collateral as adjustments to
this valuation allowance.

     The Partnership, through joint ventures with its affiliated lenders,
as described below, had taken title to the underlying collateral for Spring
Hill Fashion Corner, North Rivers Market and Calibre Point Apartments. 
Depreciation was provided until the property was sold or reclassified as
held for sale over the estimated useful lives of the various components as
follows:

                                                           Years  
                                                           -----  
     Building and improvements - straight-line               30   
     Personal property - straight-line                      5-7   
                                                            ===   

     Maintenance and repair expenses were charged to operations as
incurred.  Significant betterments and improvements were capitalized and
depreciated over their estimated useful lives.



<PAGE>


     The Partnership adopted Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of" ("SFAS 121") as required in the first
quarter of 1996.  SFAS 121 required that the Partnership and its
consolidated ventures record an impairment loss on its properties to be
held for investment whenever their carrying value could not be fully
recovered through estimated undiscounted future cash flows from their
operations and sale.  The amount of the impairment loss to be recognized
would have been the difference between the property's carrying value and
the property's estimated fair value.  The Partnership's policy was to
consider a property to be held for sale or disposition when the Partnership
had committed to a plan to sell such property and active marketing activity
had commenced or was expected to commence in the near term.  In accordance
with SFAS 121, any properties identified as "held for sale or disposition"
were no longer depreciated.  Adjustments for impairment loss for such
properties (subsequent to the date of adoption of SFAS 121) were made in
each period as necessary to report these properties at the lower of
carrying value or fair value less costs to sell.  The adoption of SFAS 121
did not have any significant effect on the Partnership's financial
position, results of operations or liquidity.

     The results of operations for consolidated properties classified as
held for sale or disposition or sold or disposed of during the past three
years were ($14,418), $1,211,187 and $1,025,163, respectively, for the
eleven months ended November 30, 1998 (immediately prior to final
liquidating distribution) and the years ended December 31, 1997 and 1996. 
In addition, the accompanying consolidated financial statements include
($48,441) of the Partnership's share of property operations of ($150,275)
of its unconsolidated property held for sale or disposition for the year
ended December 31, 1996.  Such unconsolidated property was sold as of
December 31, 1996.

     During the second quarter of 1997, Statements of Financial Accounting
Standards No. 128 ("Earnings per Share") and No. 129 ("Disclosure of
Information about Capital Structure") were issued.  As the Partnership's
capital structure only had general and limited partnership interests, the
Partnership did not experience any significant impact on its consolidated
financial statements upon adoption of these standards when required at the
end of 1997.

     No provision for state or Federal income taxes has been made as the
liability for such taxes is that of the partners rather than the
Partnership.  However, in certain instances, the Partnership has been
required under applicable law to remit directly to the taxing authorities
amounts representing withholding from distributions paid to partners.

     INVESTMENTS

     CALIBRE POINTE APARTMENTS

     In September 1987, the Partnership participated in funding a
$13,250,000 participating first mortgage loan, secured by a 214-unit luxury
apartment complex known as Calibre Pointe Apartments, located in Atlanta,
Georgia.  The Partnership funded $8,249,980 (a 62.264% participation) of
this loan and $5,000,020 was funded by JMB Mortgage Partners, Ltd. - IV
("Mortgage Partners - IV"), a partnership affiliated with the General
Partners (jointly the "Lenders").



<PAGE>


     Due to competitive market conditions, the borrower did not make all of
its required 1991 monthly interest payments under the terms of the mortgage
note, and the Lenders obtained legal title to the property on December 3,
1991.  The Lenders contributed the property to a newly formed joint venture
between themselves (Calibre Pointe Associates) to own and operate the
complex.  The terms of the venture agreement provided, in general, that the
benefits of ownership, including tax effects, net cash receipts and sale
proceeds were to be allocated or distributed between the Partnership and
Mortgage Partners-IV in proportion to their respective capital
contributions to the venture (62.264% by the Partnership).  The Partnership
recorded its net carrying value (including liabilities of the property
assumed at acquisition) in the property contributed to the venture in an
amount not in excess of its then estimated fair value.

     As the venture had committed to a plan to sell the property, the
property was classified as held for sale or disposition as of January 1,
1996 and, therefore, was not subject to continued depreciation.

     Calibre Pointe Associates sold the property in May 1996 for
$14,450,000 (before selling costs and prorations) which was paid in cash at
closing.  Calibre Pointe Associates recognized a gain of $2,600,763 for
financial reporting purposes and a gain of approximately $2,126,000 for
Federal income tax purposes in 1996.  The Partnership recognized a gain of
$1,620,384 for financial reporting purposes and a gain of approximately
$1,324,000 for Federal income tax purposes in 1996.

     NORTH RIVERS MARKET SHOPPING CENTER

     In December 1987, the Partnership participated in the initial funding
of a nonrecourse participating first mortgage loan in the maximum principal
amount of $19,250,000, secured by a first mortgage on a shopping center
known as North Rivers Market in North Charleston, South Carolina.  The
other lender was Mortgage Partners-IV, (jointly the "Lenders").  The
Lenders' initial funding was $17,350,000, of which the Partnership's share
was $11,536,622 (66.4935% of the loan).  Up to an additional $1,900,000 was
to have been funded by the Lenders, if certain rental and occupancy levels
were achieved.

     Due to the significant vacancy level at the property, the borrower
made only a portion of the required interest payments for the years 1991
and 1992.

     On May 17, 1993, the borrower, pursuant to a deed in lieu of
foreclosure, transferred legal title of the property to North Rivers Market
Associates ("NRMA") to own and operate the complex.  NRMA was a joint
venture in which the Partnership and Mortgage Partners-IV each owned shares
in proportion to their original share of the former first mortgage loan. 
The terms of the venture agreement provided in general that the benefits of
ownership, including tax effects, net cash receipts, sale proceeds, and
future contribution obligations were to be allocated or distributed between
the Partnership and the venture partner in proportion to their respective
capital accounts.  The venture recorded its net carrying value (including
liabilities of the property assumed at acquisition) of the property
contributed to the venture in an amount not in excess of its then estimated
fair value.

     An affiliate of the General Partners of the Partnership assumed
management of the property under an agreement which provided for a fee
computed as 6% of the gross income of the property.  Such property
management fees for the years ended December 31, 1997 and 1996 aggregated
$109,828 and $96,783, respectively.

     As NRMA had committed to a plan to sell the property, the property was
classified as held for sale or disposition as of December 31, 1996 and
therefore, was not subject to continued depreciation.



<PAGE>


     On December 30, 1997, NRMA sold the land and related improvements of
the property.  The sale price of the property was $14,708,742, which was
received in cash at closing by NRMA (net of selling costs and prorations). 
The sale resulted in a gain of approximately $4,640,000 to NRMA for
financial reporting purposes (of which the Partnership's share was
$3,085,285), due in part to a value impairment provision of $2,300,000
recorded by NRMA in 1995.  In addition, NRMA recognized a gain on sale of
approximately $2,245,000 for Federal income tax reporting purposes in 1997
(of which the Partnership's share was $1,493,034).

     In connection with the sale of this property, as is customary in such
transactions, NRMA agreed to certain representations and warranties, with a
stipulated survival period which expired, with no liability to NRMA, as
scheduled in late September 1998.  The remaining funds of the North Rivers
Market Associates venture were distributed to the venture partners in late
November 1998.

     SPRING HILL FASHION CORNER

     In February 1986, the Partnership committed to participate in the
funding of a participating first mortgage loan in the maximum amount of
$11,000,000, secured by the Spring Hill Fashion Corner shopping center
located in West Dundee, Illinois.  The total amount funded under this loan
was $10,030,000 (of which the Partnership's share was $3,264,765 (32.55%)).

The other two participating lenders were JMB Mortgage Partners, Ltd. and
JMB Mortgage Partners, Ltd.-II, both of which were affiliates of the
General Partners of the Partnership.

     The borrower defaulted in its scheduled basis interest payments due
under this loan during the fourth quarter of 1994.  Consequently, an
affiliate of the lenders took control of the property's funds in January,
1995 and was managing the property under an agreement which provided for a
maximum fee equal to 6% of the property's gross receipts (such fee
including compensation for leasing activity).  In early May 1995, the
lenders obtained legal title to the property pursuant to a deed in lieu of
foreclosure.  Effective as of the management takeover date (January 1,
1995), the Partnership considered the mortgage loan to be in-substance
foreclosed and accounted for its investment as an investment in a joint
venture on the equity method.  For financial reporting purposes, the
Partnership did not recognize any gain or loss from this transaction as a
result of the Partnership's previously recorded provisions for loan loss
aggregating $534,000.  The operations of this property provided a return
which was significantly less than the scheduled interest payments due under
the original mortgage loan.

     The terms of JMB/Spring Hill's partnership agreement provided
generally that contributions, distributions, cash flow, sale or refinancing
proceeds and profits and losses were to be distributed or allocated to the
partners in their respective ownership percentages (32.55% to the
Partnership).

     As JMB/Spring Hill had committed to a plan to sell the property, the
property was classified as held for sale as of July 1, 1996 and, therefore,
was not subject to continued depreciation.

     In October 1996, JMB/Spring Hill finalized a contract for the sale of
this property.  On November 13, 1996, JMB/Spring Hill sold the Spring Hill
Fashion Corner to an unaffiliated third party for $9,200,000, all of which
was received (less closing costs and prorations) in cash at closing.  As a
result of the sale, JMB/Spring Hill recognized a loss for Federal income
tax reporting purposes of approximately $1,030,000.  As the sale per the
contract was estimated to result in a loss of approximately $775,000 for
financial reporting purposes, JMB/Spring Hill recognized a $775,000
provision for value impairment at September 30, 1996, of which $252,263 was
allocated to the Partnership.  When the sale of the property was completed
in November 1996, JMB/Spring Hill, after the effect of the September 1996
provision for value impairment, recognized a gain of approximately $3,000
for financial reporting purposes, of which approximately $960 was allocated
to the Partnership.


<PAGE>


     SHOPPES AT RIVERGATE

     The Partnership funded a $12,000,000 nonrecourse participating first
mortgage loan secured by a portion of a shopping center in Goodlettsville,
Tennessee.  The loan bore basic interest at the rate of 9.5% per annum and
provided for monthly payments of interest only.  The Partnership had been
recognizing interest income only as collected.  In addition, due to the
uncertainty of the realization of the simple and accrued interest
recognized through December 31, 1996 (approximately $567,000) and the
principal balance of the loan ($12,000,000), the Partnership, as a matter
of prudent accounting practice and for financial reporting purposes
recorded a provision for loan loss as of December 31, 1996 in the amount of
$967,269.

     In March 1997, the Partnership issued a payoff letter to the borrower
of the loan secured by this property regarding an early repayment of the
mortgage loan at an amount less than what was otherwise due under the terms
of the original mortgage loan.  Pursuant to such agreement, in July 1997,
the Partnership received $11,600,000, representing payment in full on the
mortgage loan.  The payment of the mortgage loan resulted in no gain or
loss for financial reporting purposes in 1997 (as a result of loan loss
provisions totaling approximately $2,227,000 previously recorded by the
Partnership), and resulted in a loss of approximately $3,582,000 for
Federal income tax purposes in 1997.

     RIVERPOINT CENTER

     In August 1989, the Partnership participated in the funding of a ten-
year nonrecourse participating first mortgage loan.  The Partnership
committed to fund a maximum of $13,050,000 or approximately 44.6% of this
loan.  The remaining portion of the loan was funded by Mortgage Partners-IV
and IDS Life Account RE, the latter an entity advised by an affiliate of
the General Partners (jointly the "Lenders").  The loan was secured by a
first mortgage on a shopping center known as Riverpoint Center, located in
Chicago, Illinois.  The Lenders cumulatively funded $28,039,630
($12,509,989 by the Partnership).  The loan bore basic interest at the rate
of 9.25% per annum for 1994 and 1995 which increased to a rate of 9.50% per
annum in mid 1996.  The loan also provided for simple accrued interest
(payable at maturity) and a participation by the lenders in excess property
cash flows (as defined).

     The borrower had notified the Lenders that it was experiencing
financial difficulties and approached the Lenders regarding a loan
modification.  During the third quarter of 1996, the Lenders and borrower
finalized a loan modification.  In conjunction with the modification
agreement, the Lenders agreed to accept at certain dates through June 30,
1997 repayment of the loan at specified amounts.  As repayment of the loan
per such agreement yielded the Lenders an amount less than the carrying
amount of the loan, the Partnership recognized, as of July 1, 1996, an
additional provision for loan loss of $110,209.  On December 24, 1996, the
borrower, in accordance with the agreement, repaid the Lenders $27,400,000
(of which the Partnership's share was $12,244,616) in full satisfaction of
the mortgage loan.

     For financial reporting purposes, the Partnership did not recognize
any gain or loss from this transaction as a result of the Partnership's
recorded provisions for loan loss in 1991, 1995 and 1996.  For Federal
income tax reporting purposes, the Partnership recognized a loss of
approximately $1,907,000 in 1996 as a result of this transaction.



<PAGE>


     FRANKLIN FARM VILLAGE CENTER

     In December 1991, the Partnership participated in the funding of a
nonrecourse participating first mortgage loan secured by the Franklin Farm
Village Center shopping center located in Fairfax County, Virginia.  The
Partnership committed to fund a maximum of $5,600,000, or approximately
33.7% of the loan.  The other lender was Mortgage Partners-IV, (jointly the
"Lenders").  The loan bore basic interest (payable monthly) at the rate of
8.5% per annum during 1994, 1995 and 1996 and also provided for simple
accrued interest (payable at maturity) and for a participation by the
Lenders in excess property cash flows (as defined).  The Lenders had
cumulatively funded $14,809,000, of which the Partnership's share was
approximately $4,996,000.

     In June 1994, the Lenders received a partial return in the amount of
$322,907 of the original principal funding (of which the Partnership's
share was $108,933) related to an "earn down" provision in the original
purchase agreement between the borrower and the seller.  The borrower
remitted the earn down proceeds back to the Lenders as required by the
terms of the loan agreement.

     During July 1996, the Lenders executed an agreement with the borrower
regarding an early repayment of the mortgage loan.  Such agreement allowed
the borrower to repay the loan at a predetermined amount prior to
November 8, 1996.  Pursuant to such agreement, the Lenders received
$16,275,000 on October 30, 1996 as payment in full of all principal and
interest due on the mortgage loan.  The Partnership has received and
recognized as income basic and simple accrued interest of approximately
$451,000 that was previously not recorded.  Although such repayment did not
result in a gain or loss for financial reporting purposes, the Partnership
reported a loss on repayment of approximately  $69,000 for Federal income
tax reporting purposes in 1996.

PARTNERSHIP AGREEMENT

     Net profits of the Partnership from operations were generally
allocated to the General Partners in an amount equal to the greater of 1%
of net profits or the amount of net cash flow actually distributed to the
General Partners (as described below), with the remaining net profits
allocated to the Limited Partners.  Any net losses from Partnership
operations were generally allocated 90% to the Limited Partners and 10% to
the General Partners.  Net profits from the repayment or other disposition
of mortgage investments generally were to be allocated first to the General
Partners in an amount equal to the greater of 1% of such net profits or the
cash distributions to the General Partners from the proceeds of such
repayment or other disposition (as described below).  The remaining net
profits from the repayment or other disposition of mortgage investments
were to be allocated to the Limited Partners.  Net losses from the
repayment or other disposition of mortgage investments were to be allocated
97% to the Limited Partners and 3% to the General Partners. 
Notwithstanding such profit and loss allocation provisions, the Partnership
Agreement further provided that if at any time profits (including items
thereof) were realized by the Partnership, any current or anticipated event
that would cause the deficit balance in absolute amount in the capital
accounts of the General Partners to be greater than their share of the
Partnership's indebtedness (as defined) after such event, then the General
Partners were to be allocated profits to the extent necessary to cause the
deficit balance in the capital accounts of the General Partners to be no
less than their respective shares of the Partnership's indebtedness after
such event.  In general, the effect of this provision was to defer the
recognition of gain to the Limited Partners; such provision was applied to
the gain allocated to the General Partners for financial reporting and
Federal income tax purposes in 1997.  Such special allocations did not have
an effect on total assets, total partners' capital or net earnings.



<PAGE>


     The General Partners were not required to make any capital
contributions except under certain limited circumstances upon dissolution
and termination of the Partnership.  Distributions of "net cash flow" of
the Partnership were made 90% to the Limited Partners and 10% to the
General Partners, with one-half of such net cash flow distributable to the
General Partners in the first twelve fiscal quarters following the close of
the offering subordinated to the receipt by the Limited Partners of  a
stipulated return on their "current capital accounts".  Distributions of
"repayment proceeds" were to be made 100% to the Limited Partners until the
Limited Partners had received repayment proceeds equal to their contributed
capital plus a stipulated return thereon.  Since the Limited Partners did
not receive sale and repayment proceeds equal to their original contributed
capital from the investments of the Partnership, the General Partners did
not receive any distributions from the sales and repayments of the
Partnership investments or any portion of the subordinated operating
distributions described above.  Of the cumulative distributions of
$96,538,140 paid to the Limited Partners through November 30, 1998
(immediately prior to final liquidating distribution), $1,780,738
represented a 7% return to certain Limited Partners through February 4,
1986 (the date of the first admittance of the Limited Partners) and a 6.25%
return to certain Limited Partners from February 5, 1986 through August 31,
1986 (the date of the final admittance of the Limited Partners), during
which periods the Limited Partners' subscription proceeds were held in
escrow.


MANAGEMENT AGREEMENTS

     In December 1994, one of the affiliated property managers sold
substantially all its assets and assigned its interest in its management
contracts to an unaffiliated third party.  In addition, certain management
personnel of the property manager became management personnel of the
purchaser and its affiliates.  The successor to the affiliated property
manager's assets was acting as the property manager of the Calibre Pointe
Apartments (prior to its sale in May 1996) for a fee computed as a
percentage of gross income of the property.  An affiliate of the General
Partners acted as the property manager of North Rivers Market shopping
center prior to its sale in December 1997 for a fee computed as a
percentage of gross income of the property.


TRANSACTIONS WITH AFFILIATES

     The Partnership, pursuant to the Partnership Agreement, was permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary-
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments.  Fees, commissions and other
expenses incurred and paid by the Partnership to the General Partners and
their affiliates for the eleven months ended November 30, 1998 (immediately
prior to final liquidating distribution) and for the years ended December
31, 1997 and 1996 were as follows:



<PAGE>


                                                                UNPAID AT  
                                                               NOVEMBER 30,
                              1998        1997        1996        1998     
                            --------    --------    --------   ------------
Property management 
  and leasing fees . . .     $  --       109,828      96,783        --     
Reimbursement (at cost) 
  for accounting
  services . . . . . . .      18,705       9,662       5,256        --     
Reimbursement (at cost)
  for portfolio
  management services. .       7,110      25,006      17,587        --     
Reimbursement (at cost)
  for legal services . .       5,823       6,419       3,385        --     
Reimbursement (at cost)
  for administrative
  charges and other
  out-of-pocket
  expenses . . . . . . .       5,084       5,600        --          --     
Partnership winding
  up fee . . . . . . . .       5,438        --          --          --     
                            --------    --------    --------      ------   
                            $ 42,160     156,515     123,011        --     
                            ========    ========    ========      ======   

     The Corporate General Partner was entitled to receive mortgage
investment servicing fees from the Partnership at an annual rate of 1/4 of
1% of the maximum amount advanced by the Partnership and outstanding from
time to time with respect to mortgage investments.  The cumulative amount
of such fees aggregated $878,510, all of which was paid.

     The General Partners had deferred payment of certain of their
distributions of net cash flow from the Partnership pursuant to the
subordination requirements of the Partnership Agreement as described above.

Such subordination requirements were not met over the operating period of
the Partnership and such deferred amounts were not paid to the General
Partners.

SELECTED FINANCIAL INFORMATION (UNAUDITED)

     Pursuant to the requirements of the Securities and Exchange
Commission, the following is a summary of historical financial information
for the Shoppes at Rivergate shopping center which secured a participating
first mortgage loan of the Partnership.  Such information was for the
twelve months ended November 30, 1996 and for the period December 1, 1996
to the repayment date of the loan (July 16, 1997) and was not related to
the then current market value.

                                              1997              1996    
                                          -----------       ----------- 
Current assets . . . . . . . . . . .      $     --              173,618 
Current liabilities. . . . . . . . .            --           (2,913,941)
                                          -----------       ----------- 
Working capital. . . . . . . . . . .            --           (2,740,323)
                                          -----------       ----------- 
Investment property, 
  net of depreciation. . . . . . . .            --            5,221,986 
Other assets . . . . . . . . . . . .            --            1,825,379 
Long-term debt . . . . . . . . . . .            --          (14,168,000)
                                          -----------       ----------- 
Owners' equity . . . . . . . . . . .      $     --           (9,860,958)
                                          ===========       =========== 
Total income . . . . . . . . . . . .      $   984,000         2,140,168 
                                          ===========       =========== 
Expenses related to 
  operating income . . . . . . . . .      $   818,000         2,054,205 
                                          ===========       =========== 
Net income (loss). . . . . . . . .        $   166,000            85,963 
                                          ===========       =========== 


<PAGE>


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE

     There were no changes in, or disagreements with, accountants during
the eleven months ended November 30, 1998 (immediately prior to final
liquidating distribution) and the fiscal year 1997.

                                  PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP

     The Corporate General Partner of the Partnership was JMB Realty
Corporation ("JMB"), a Delaware corporation, substantially all of the
outstanding stock of which is owned, directly or indirectly, by certain of
its officers, directors, members of their families and their affiliates. 
JMB, as the Corporate General Partner, had responsibility for all aspects
of the Partnership's operations, subject to the requirement that all
mortgage investments and all voluntary dispositions thereof (whether by
sale or exchange) were required to be approved by the Associate General
Partner of the Partnership, AGPP Associates, L.P., an Illinois limited
partnership with JMB as its sole general partner.  The limited partners of
the Associate General Partner are generally officers, directors and
affiliates of JMB or its affiliates.

    The Partnership was subject to certain conflicts of interest arising
out of its relationships with the General Partners and their affiliates as
well as the fact that the General Partners and their affiliates are engaged
in a range of real estate activities.  Certain services were provided to
the Partnership or its investment properties by affiliates of the General
Partners, including property management services and insurance brokerage
services.  In general, such services were provided on terms no less
favorable to the Partnership than could have been obtained from independent
third parties and were otherwise subject to conditions and restrictions
contained in the Partnership Agreement.  The Partnership Agreement
permitted the General Partners and their affiliates to provide services to,
and otherwise deal and do business with, persons who may have been engaged
in transactions with the Partnership, and permitted the Partnership to
borrow from, purchase goods and services from, and otherwise to do business
with, persons doing business with the General Partners or their affiliates.

The General Partners and their affiliates may have been in competition with
the Partnership under certain circumstances, including, in certain
geographical markets, for tenants and/or for the sale of properties. 
Because the timing and amount of cash distributions and profits and losses
of the Partnership may have been affected by various determinations by the
General Partners under the Partnership Agreement, including whether and
when to sell a property, the establishment and maintenance of reasonable
reserves and the determination of the source of such reserves (i.e.,
offering proceeds, cash generated from operations or sale or repayment
proceeds), the timing of expenditures and the allocation of certain tax
items under the Partnership Agreement, the General Partners may have had a
conflict of interest with respect to such determinations.

     The names, positions held and length of service therein of each
director, and the executive and certain other officers of the Corporate
General Partner are as follows:



<PAGE>


                                                               SERVED IN  
NAME                       OFFICE                             OFFICE SINCE
----                       ------                             ------------

Judd D. Malkin             Chairman                             5/03/71
                           Director                             5/03/71
                           Chief Financial Officer              2/22/96
Neil G. Bluhm              President                            5/03/71
                           Director                             5/03/71
Burton E. Glazov           Director                             7/01/71
Stuart C. Nathan           Executive Vice President             5/08/79
                           Director                             3/14/73
A. Lee Sacks               Director                             5/09/88
John G. Schreiber          Director                             3/14/73
H. Rigel Barber            Executive Vice President             1/02/87
                           Chief Executive Officer              8/01/93
Glenn E. Emig              Executive Vice President             1/01/93
                           Chief Operating Officer              1/01/95
Gary Nickele               Executive Vice President             1/01/92
                           General Counsel                      2/27/84
Gailen J. Hull             Senior Vice President                6/01/88
Howard Kogen               Senior Vice President                1/02/86
                           Treasurer                            1/01/91

     There is no family relationship among any the foregoing directors or
officers.  The foregoing directors have been elected to serve a one-year
term until the annual meeting of the Corporate General Partner to be held
on June 2, 1999.  All of the foregoing officers have been elected to serve
one-year terms until the first meeting of the Board of Directors held after
the annual meeting of the Corporate General Partner to be held on June 2,
1999.  There are no arrangements or understandings between or among any of
said directors or officers and any other person pursuant to which any
director or officer was elected as such.

     JMB is the corporate general partner of Carlyle Real Estate Limited
Partnership-XI ("Carlyle-XI"), Carlyle Real Estate Limited Partnership-XIII
("Carlyle-XIII"), Carlyle Real Estate Limited Partnership-XIV ("Carlyle-
XIV"), Carlyle Real Estate Limited Partnership-XV ("Carlyle-XV"), and
Carlyle Income Plus, L.P.-II ("Carlyle Income Plus-II"), and the managing
general partner of JMB Income Properties, Ltd.-V ("JMB Income-V"), JMB
Income Properties, Ltd. - VII ("JMB Income-VII"), JMB Income Properties,
Ltd.-X, ("JMB Income-X"), and JMB Income Properties, Ltd.-XI ("JMB Income-
XI").  JMB is also the sole general partner of the associate general
partner of most of the foregoing partnerships.  Most of the foregoing
directors and officers are also officers and/or directors of various
affiliated companies of JMB including Arvida/JMB Managers, Inc. (the
general partner of Arvida/JMB Partners, L.P. ("Arvida")).  Most of such
directors and officers are also partners, directly or indirectly, of
certain partnerships which are or were associate general partners in the
following real estate limited partnerships, among others:  the Partnership,
Carlyle-XI, Carlyle-XIII, Carlyle-XIV, Carlyle-XV, JMB Income-VII, JMB
Income-X, JMB Income-XI, and Carlyle Income Plus-II.



<PAGE>


     The business experience during the past five years of each such
director and officer of the Corporate General Partner of the Partnership in
addition to that described above is as follows:

     Judd D. Malkin (age 61) is an individual general partner of JMB
Income-V.  Mr. Malkin has been associated with JMB since October, 1969. 
Mr. Malkin is also a director of Urban Shopping Centers, Inc., an affiliate
of JMB that is a real estate investment trust in the business of owning,
managing and developing shopping centers.  He is a Certified Public
Accountant.

     Neil G. Bluhm (age 61) is an individual general partner of JMB
Income-V.  Mr. Bluhm has been associated with JMB since August, 1970.  Mr.
Bluhm is also a principal of Walton Street Capital, L.L.C., which sponsors
real estate investment funds, and a director of Urban Shopping Centers,
Inc.  He is a member of the Bar of the State of Illinois and a Certified
Public Accountant.

     Burton E. Glazov (age 60) has been associated with JMB since June,
1971 and served as an Executive Vice President of JMB until December 1990. 
Mr. Glazov is currently retired.  He is a member of the Bar of the State of
Illinois.

     Stuart C. Nathan (age 57) has been associated with JMB since July,
1972.  He is a member of the Bar of the State of Illinois. 

     A. Lee Sacks (age 65) has been associated with JMB since December,
1972.  He is also President and a director of JMB Insurance Agency, Inc.  

     John G. Schreiber (age 52) has been associated with JMB since
December, 1970 and served as an Executive Vice President of JMB until
December 1990.  Mr. Schreiber is President of Schreiber Investments, Inc.,
which is engaged in the real estate investing business.  He is also a
senior advisor and partner of Blackstone Real Estate Advisors, L.P., an
affiliate of the Blackstone Group, L.P.  He is also a director of Urban
Shopping Centers, Inc., a trustee of Amli Residential Property Trust and a
director for a number of investment companies advised or managed by T. Rowe
Price Associates, Inc. and its affiliates.  He holds a Masters degree in
Business Administration from Harvard University Graduate School of
Business.

     H. Rigel Barber (age 50) has been associated with JMB since March,
1982.  He holds a J.D. degree from the Northwestern Law School and is a
member of the Bar of the State of Illinois.

     Glenn E. Emig (age 51) has been associated with JMB since December,
1979.  Prior to becoming Executive Vice President of JMB in 1993, Mr. Emig
was Executive Vice President and Treasurer of JMB Institutional Realty
Corporation.  He holds a Masters Degree in Business Administration from the
Harvard University Graduate School of Business and is a Certified Public
Accountant. 

     Gary Nickele (age 46) has been associated with JMB since February,
1984.  He holds a J.D. degree from the University of Michigan Law School
and is a member of the Bar of the State of Illinois.

     Gailen J. Hull (age 50) has been associated with JMB since March,
1982.  He holds a Masters degree in Business Administration from Northern
Illinois University and is a Certified Public Accountant.

     Howard Kogen (age 63) has been associated with JMB since March, 1973. 
He is a Certified Public Accountant.





<PAGE>


ITEM 11. EXECUTIVE COMPENSATION

     The General Partners were entitled to receive a share of cash
distributions, when and as cash distributions were made to the Limited
Partners, and a share of profits or losses.  Reference is also made to the
Notes for a description of such distributions and allocations.  In 1998,
1997 and 1996, cash distributions of $231,376, $545,621 and $436,223,
respectively, were paid to the General Partners.  The General Partners were
allocated taxable loss of $39,925 in 1998.

     The General Partners had deferred payment of certain of their
distributions of net cash flow from the Partnership pursuant to the
subordination requirements of the Partnership Agreement as described above.

Such subordination requirements were not met over the operating period of
the Partnership and such deferred amounts were not paid to the General
Partners.

     The Corporate General Partner was entitled to receive mortgage
investment servicing fees from the Partnership at an annual rate of 1/4 of
1% of the maximum amount advanced by the Partnership and outstanding from
time to time with respect to mortgage investments. The servicing fee was
payable from the date the Partnership first advanced funds with respect to
a mortgage investment.  The cumulative amount of such fees aggregated
$878,510, all of which was paid.

     JMB Realty Corporation or its affiliates was entitled to receive
application and commitment fees in connection with the receipt of loan
applications and the issuance of commitments to make mortgage loans or to
enter into land purchase-leasebacks.  Such application and commitment fees
were not to exceed 3% of the gross proceeds of the offering.  To the extent
they were paid by actual or prospective borrowers or sellers of land, the
fees otherwise payable by the Partnership were reduced.  JMB received
$1,367,152 of such fees from the borrowers and the Partnership paid
$589,828 of such fees to the Corporate General Partner.

     The Partnership, pursuant to the Partnership Agreement was permitted
to engage in various transactions involving the Corporate General Partner
and its affiliates including the reimbursement for salaries and salary
related expenses of its employees, certain of its officers, and other
direct expenses relating to the administration of the Partnership and the
operation of the Partnership's investments.  The relationship of the
Corporate General Partner (and its directors and officers) to its
affiliates is set forth in Item 10 above.

     The Corporate General Partner and its affiliates were entitled to
reimbursement (at cost) in 1998 for accounting services, portfolio
management services, legal services and for administrative charges and
other out-of-pocket expenses of $18,705, $7,110, $5,823 and $5,084,
respectively, all of which was paid at November 30, 1998.

     The Corporate General Partner also was entitled to and received a fee
of $5,438 in 1998, pursuant to a winding up agreement between the
Partnership and the Corporate General Partner, in consideration of the
Corporate General Partner's assumption of the obligation of potential
Partnership liabilities (as defined).


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     (a)  No person or group was known by the Partnership to own
beneficially more than 5% of the outstanding Interests of the Partnership
immediately prior to the liquidation of the Partnership.




<PAGE>


<TABLE>
<CAPTION>

     (b)   The Corporate General Partner, its officers and directors and the Associate General Partner of the
Partnership owned the following Interests of the Partnership immediately prior to its liquidation:

                               NAME OF                          AMOUNT AND NATURE
                               BENEFICIAL                       OF BENEFICIAL               PERCENT
TITLE OF CLASS                 OWNER                            OWNERSHIP                   OF CLASS 
--------------                 ----------                       -----------------           --------
<S>                            <C>                              <C>                         <C>
Limited Partnership            JMB Realty Corporation           10 Interests                Less than 1%
Interests                                                       directly

Limited Partnership            Burton E. Glazov                 2 Interests                 Less than 1%
Interests                                                       directly (1)                

Limited Partnership            Corporate General                14.34189 Interests          Less than 1%
Interests                      Partner, its                     (1)(2)                      
                               officers and 
                               directors, and the
                               Associate General
                               Partner as a group

<FN>

     (1)   Included 2 Interests owned directly for which Mr. Glazov had sole voting and investment power.

     (2)   Included 2.34189 Interests owned by an officer for which such officer had sole investment and voting
power.

     No officer or director of the Corporate General Partner of the Partnership possessed the right to acquire
beneficial ownership of Interests of the Partnership.

     Reference is made to Item 10 for a description of the ownership of the Corporate General Partner.

     (c)   There existed no arrangement, known to the Partnership, the operation of which would have resulted in a
change in control of the Partnership.


</TABLE>


<PAGE>


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     There were no significant transactions or business relationships with
the Corporate General Partner, its affiliates or their management other
than those described in Items 10 and 11 above.



                                   PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a)  The following documents are filed as part of this report:

      (1)  Financial Statements (See Index to Financial Statements filed
with this report.)

      (2)  Exhibits

           3-A.    The Prospectus of the Partnership dated July 24, 1985,
as supplemented January 27, 1986, April 29, 1986, June 11, 1986, August 14,
1986, September 27, 1986 as filed with the Commission pursuant to Rules
424(b) and 424(c), is hereby incorporated herein by reference to the
Partnership's Registration Statement on Form S-11 (File No. 2-95948) dated
July 24, 1985.

           3-B.    Amended and Restated Agreement of Limited Partnership
set forth as Exhibit A to the Prospectus, which is hereby incorporated
herein by reference to the Partnership's Registration Statement on Form S-
11 (File No. 2-95948) dated July 24, 1985. 

           3-C.    Acknowledgement of rights and duties of the General
Partners of the Partnership between AGPP Associates, L.P. (a successor
Associated General Partner of the Partnership) and JMB Realty Corporation
as of December 31, 1995 is hereby incorporated herein by reference to the
Partnership's Report for June 30, 1996 on Form 10-Q (File No. 0-16253)
dated August 9, 1996.

           10-A.   Loan documents related to the Partnership's
participation in the funding of a non-recourse first mortgage loan on
Calibre Pointe Apartments located in Atlanta, Georgia is hereby
incorporated herein by reference to the Partnership's Report on Form 8-K
(File No. 2- 95948) dated March, 25, 1987.

           10-B.   Loan documents related to the Partnership's
participation in the funding of a first mortgage loan secured by a first
mortgage loan on North Rivers Market Shopping Center located in North
Charleston, South Carolina, is hereby incorporated herein by reference to
the Partnership's Report on Form 8-K (File No. 2-95948) dated September 15,
1987.

           10-C.   Loan documents related to the Partnership's
participation in the funding of a first mortgage loan secured by a first
mortgage loan on Riverpoint Center Shopping Center located in Chicago,
Illinois, is hereby incorporated herein by reference to the Partnership's
Report on Form 8-K (File No. 0-16253) dated September 5, 1989.



<PAGE>


           10-D.   Loan document related to the Partnership's participation
in the funding of a first mortgage secured by a first mortgage on Shoppes
at Rivergate  Shopping Center located in Goodlettsville, Tennessee, dated
August 24, 1987 is hereby incorporated herein by reference to Exhibit 10-D
of the Partnership's Report for December 31, 1992 on Form 10-K (File No. 0-
16253) dated March 19, 1993.

           10-E.   Loan documents related to the Partnership's
participation in the funding of a participating first mortgage loan secured
by Franklin Farm Village Shopping Center located in Fairfax County,
Virginia, is hereby incorporated herein by reference to the Partnership's
Report on Form 8-K (File No. 0-16253) dated November 25, 1991.

           10-F.   First and Second Amendments to the Loan Documents dated
September 28, 1993 and November 23, 1994, respectively, between
Rosenfeld/Franklin Farm Village Center L.P. and Mortgage Partners, Ltd.-IV,
relating to additional loan amounts, are incorporated herein by reference
to the Partnership's Report for December 31, 1994 on Form 10-K (File No. 0-
16253) dated March 27, 1995.

           10-G.   Real Property Purchase Agreement between Calibre Pointe
Associates and Security Capital Atlantic Incorporated, dated April 29, 1996
are hereby incorporated by reference to the Partnership's Report on Form 8-
K (File No. 0-16253) dated May 30, 1996.

           10-H.   Loan documents related to the repayment of the mortgage
loan secured by Franklin Farm Village Center Shopping located in Fairfax
County, Virginia, are hereby incorporated by reference to the Partnership's
Report on Form 10-K (File No. 0-16253) dated March 21, 1997.

           10-I.   Loan documents related to the repayment of the mortgage
loan on Riverpoint Center Shopping Center located in Chicago, Illinois, are
hereby incorporated by reference to the Partnership's Report on Form 10-K
(File No. 0-16253) dated March 21, 1997.

           10-J.   Real Property Purchase Agreement between North Rivers
Market Associates and KRC Acquisition Corp., dated December 4, 1997.*

           10-K.   Assignment of Real Property Purchase Agreement from KRC
Acquisition Corp. to Kimco North Rivers 692, Inc., dated December 17,
1997.*

           10-L.   Letter Agreement between North Rivers Market Associates
and Kimco North Rivers 692, Inc., dated December 29, 1997.*

           10-M.   Agreement of Partnership of North Rivers Market
Associates between the Partnership and JMB Mortgage Partners, Ltd. - IV,
dated April 26, 1993 hereby incorporated herein by reference to the
Partnership's Report for June 30, 1997 on Form 10-Q (File No. 0-16253)
dated August 8, 1997.



<PAGE>


           10-N.   Loan document related to the repayment of the first
mortgage loan secured by the Shoppes at Rivergate Shopping Center located
in Goodlettsville, Tennessee, dated July 15, 1997 is hereby incorporated
herein by reference to the Partnership's Report for September 30, 1997 on
Form 10-Q (File No. 0-16253) dated November 12, 1997.

           21.     List of Subsidiaries

           24.     Powers of Attorney

           27.     Financial Data Schedule

      (b)  The following report on Form 8-K was filed since the beginning
of the last quarter of the period covered by this report.

                The Partnership's Report on Form 8-K (File No. 0-16253)
for November 19, 1998 describing the Partnership's final liquidating
distribution and dissolution and change in fiscal year was filed.  No
financial statements were required to be filed therewith.

----------------


     *   Hereby incorporated herein by reference to the Partnership's
Report on Form 8-K (File No. 0-16253) dated December 4, 1997.

     No annual report for the eleven months ended November 30, 1998
(immediately prior to final liquidating distribution) or proxy material has
been sent to the Partners of the Partnership.  An annual report will be
sent to the Partners subsequent to this filing.





<PAGE>


                                 SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Partnership has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                 JMB MORTGAGE PARTNERS, LTD. - III

                 By:      JMB Realty Corporation
                          Corporate General Partner


                          GAILEN J. HULL
                 By:      Gailen J. Hull
                          Senior Vice President
                 Date:    February 26, 1999

     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 the capacities and on the dates indicated.

                 By:      JMB Realty Corporation
                          Corporate General Partner


                          JUDD D. MALKIN*
                 By:      Judd D. Malkin, Chairman and 
                          Chief Financial Officer
                 Date:    February 26, 1999

                          NEIL G. BLUHM*
                 By:      Neil G. Bluhm, President and Director
                 Date:    February 26, 1999

                          H. RIGEL BARBER*
                 By:      H. Rigel Barber, Chief Executive Officer
                 Date:    February 26, 1999

                          GLENN E. EMIG*
                 By:      Glenn E. Emig, Chief Operating Officer
                 Date:    February 26, 1999


                          GAILEN J. HULL
                 By:      Gailen J. Hull, Senior Vice President
                          Principal Accounting Officer
                 Date:    February 26, 1999

                          A. LEE SACKS*
                 By:      A. Lee Sacks, Director
                 Date:    February 26, 1999

                          STUART C. NATHAN*
                 By:      Stuart C. Nathan, Executive Vice President
                           and Director
                 Date:    February 26, 1999

                 *By:     GAILEN J. HULL, Pursuant to a Power of Attorney


                          GAILEN J. HULL
                 By:      Gailen J. Hull, Attorney-in-Fact
                 Date:    February 26, 1999



<PAGE>


                      JMB MORTGAGE PARTNERS, LTD. - III

                                EXHIBIT INDEX



                                                     DOCUMENT  
                                                  INCORPORATED 
                                                  BY REFERENCE     PAGE
                                                  -------------    ----
3-A.       Copies of pages 8-16, 46-47 and                     
           A-7 to A-20 of the Prospectus of 
           the Partnership dated July 24, 
           1985, (as supplemented)                       Yes         --

3-B.       Amended and Restated Agreement of
           Limited Partnership                           Yes         --

3-C.       Real Property Purchase Agreement
           between Calibre Pointe Associates
           and Security Capital Atlantic
           Incorporated                                  Yes         --

10-A.      Calibre Pointe Apartments Loan 
           Documents                                     Yes         --

10-B.      North Rivers Market Shopping Center
           Loan Documents                                Yes         --

10-C.      Riverpoint Center Loan Documents              Yes         --

10-D.      Rivergate Shopping Center Loan
           Documents                                     Yes         --

10-E.      Franklin Farm Village Center Loan
           Documents                                     Yes         --

10-F.      First and Second Amendments to the
           Franklin Farm Village Center Loan
           Documents                                     Yes         --

10-G.      Calibre Point Apartments Sale
           Documents                                     Yes         --

10-H.      Franklin Farm Village Shopping
           Center Loan Documents                         Yes         --

10-I.      Riverpoint Center Shopping Center Loan
           Repayment Documents                           Yes         --

10-J.      North Rivers Market Purchase Agreement        Yes         --

10-K.      North Rivers Market Assignment of
           Purchase Agreement                            Yes         --

10-L.      North Rivers Market Letter Agreement          Yes         --

10-M.      North Rivers Market Partnership
           Agreement                                     Yes         --

10-N.      Shoppes at Rivergate Loan Repayment 
           Document                                      Yes         --

21.        List of Subsidiaries                          No    

24.        Powers of Attorney                            No    

27.        Financial Data Schedule                       No