<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                                 ------------
                                   FORM 10-Q

                  QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

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

For Quarter Ended September 30, 2001         Commission File Number 0-14052


                   NEW ENGLAND LIFE PENSION PROPERTIES III;
                       A REAL ESTATE LIMITED PARTNERSHIP
            (Exact name of registrant as specified in its charter)



      Massachusetts                                     04-2847256
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
incorporation or organization)

     World Trade Center East, 16th Floor
     Two Seaport Lane
     Boston, Massachusetts                                        02210
(Address of principal executive offices)                      (Zip Code)

              Registrant's telephone number, including area code:
                                (617) 261-9000



--------------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last report

     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 twelve (12) months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

                                Yes  X         No
<PAGE>

                   NEW ENGLAND LIFE PENSION PROPERTIES III;
                       A REAL ESTATE LIMITED PARTNERSHIP

                                   FORM 10-Q

                     FOR QUARTER ENDED SEPTEMBER 30, 2001

                                    PART I

                             FINANCIAL INFORMATION
                            ----------------------

                                       2
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

STATEMENTS OF NET ASSETS IN LIQUIDATION


                                     September 30, 2001   December 31, 2000
                                         (Unaudited)          (Audited)
                                     ------------------   -----------------


ASSETS

Other assets                            $            --   $      50,000
Cash and cash equivalents                       652,889         691,321
                                        ---------------   -------------
                                        $       652,889   $     741,321
                                        ===============   =============


LIABILITIES AND NET ASSETS IN LIQUIDATION


Accounts payable                        $         5,424   $      88,935
Accrued expenses for liquidation                159,513         193,000
                                        ---------------   -------------
Total liabilities                               164,937         281,935
                                        ---------------   -------------

Net Assets in liquidation:
   Limited partners ($88.60 per
   unit; 75,000 units authorized,
   68,414 units issued
   and outstanding)                             477,035         448,755
   General partners                              10,917          10,631
                                        ---------------   -------------
Total partners' capital                         487,952         459,386
                                        ---------------   -------------

                                        $       652,889   $     741,321
                                        ===============   =============


          (See accompanying notes to unaudited financial statements)

                                       3
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

STATEMENTS OF CHANGES OF NET ASSETS IN LIQUIDATION
(Unaudited)



                                       Three Months Ended   Nine Months Ended
                                       September 30, 2001   September 30, 2001
                                       ------------------   ------------------

Net assets in liquidation at
   beginning of period                     $   482,696          $   459,386
                                           -----------          -----------

Increase during period:
   Operating activities
       Interest income                           5,256               28,566
                                           -----------          -----------
Net change in net assets
in liquidation                                   5,256               28,566
                                           -----------          -----------

Net assets in liquidation at
end of period                              $   487,952          $   487,952
                                           ===========          ===========


          (See accompanying notes to unaudited financial statements)

                                       4
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

STATEMENTS OF OPERATIONS
(Unaudited)
                                        Three Months Ended   Nine Months Ended
                                        September 30, 2000   September 30, 2000
                                        ------------------   ------------------

INVESTMENT ACTIVITY

Property rentals                         $       239,089       $      689,160
Property operating expenses                      (81,976)            (130,604)
Depreciation and amortization                         --             (112,074)
                                         ---------------       --------------
    Total real estate activity                   157,113              446,482


Interest on cash equivalents                       5,267               13,801
                                         ---------------       --------------
    Total investment activity                    162,380              460,283
                                         ---------------       --------------

PORTFOLIO EXPENSES

General and administrative                        55,232              158,687
Management fee                                        --               26,655
                                         ---------------       --------------
                                                  55,232              185,342
                                         ---------------       --------------

Net Income                               $       107,148       $      274,941
                                         ===============       ==============

Net income per limited partnership
  unit                                   $          1.55       $         3.98
                                         ===============       ==============
Cash distributions per
  limited partnership unit               $          1.95       $         5.88
                                         ===============       ==============
Number of limited partnership
  units outstanding during the period             68,414               68,414
                                         ===============       ==============


          (See accompanying notes to unaudited financial statements)

                                       5
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

SUMMARIZED STATEMENT OF CASH FLOWS
(Unaudited)


                                            Nine Months Ended
                                            September 30, 2000
                                            ------------------


Net cash provided by operating activities        $ 471,675
                                                 ---------

Cash flows from financing activity:
   Investment in property                          (85,753)
                                                 ---------

         Net cash used in
         investing activities                      (85,753)
                                                 ---------

Cash flows from financing activity:
   Distributions to partners                      (406,337)
                                                 ---------

         Net decrease in
         cash and cash equivalents                 (20,415)

Cash and cash equivalents:
   Beginning of period                             324,989
                                                 ---------

   End of period                                 $ 304,574
                                                 =========

           (See accompanying notes to unaudited financial statements)

                                       6
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS (Unaudited)

     In the opinion of management, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the Partnership's
financial position as of September 30, 2001 and December 31, 2000 and the
changes of net assets in liquidation and the results of its operations for the
three and nine month periods ended September 30, 2001 and 2000, respectively,
and its cash flows for the nine months ended September 30, 2000.  These
adjustments are of a normal recurring nature.

     See notes to financial statements included in the Partnership's 2000 Annual
Report on Form 10-K for additional information relating to the Partnership's
financial statements.

NOTE 1 - ORGANIZATION AND BUSINESS
-----------------------------------

     New England Life Pension Properties III; A Real Estate Limited Partnership
(the "Partnership") is a Massachusetts limited partnership organized for the
purpose of investing primarily in newly constructed and existing income
producing real properties.  The Partnership primarily serves as an investment
for qualified pension and profit sharing plans and other entities intended to be
exempt from federal income tax.  The Partnership commenced operations in July
1985 and had disposed of all of its investments as of December 31, 2000. On
December 31, 2000, the Partnership adopted a plan of liquidation and intends to
dissolve in 2001.

     In connection with its adoption of a plan of liquidation on December 31,
2000, the Partnership also adopted the liquidation basis of accounting which,
among other things, requires that assets and liabilities be stated at their
estimated net realizable value and that estimated costs of liquidating the
Partnership be provided to the extent that they are reasonably determinable.

NOTE 2 - PROPERTY
-----------------

     Effective January 1, 1998, the management and control of the business and
affairs of the 270 Technology Park joint venture, including the sale of the
property, was vested solely in the Partnership through its 98% general partner
interest in the joint venture.  Accordingly, as of January 1, 1998, the
investment was accounted for as a wholly-owned property.  The remaining 2%
general partner interest was owned by NELPP III/MORF III Associates Limited
Partnership, an entity in which the Partnership owns a 50% interest.  The
carrying value of the joint venture investment on January 1, 1998 ($6,162,959)
was allocated to land, building and improvements, and other net operating
assets.

     The building was being depreciated over 30 years, beginning January 1,
1998.


                                       7
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

     On October 31, 2000, the Partnership sold its partnership interests and all
related property rights to its 50% partner in NELPP III/MORF III Associates
Limited Partnership for a gross sales prices of $6,732,467.  The Partnership
received net proceeds of $6,800,575, which included a reimbursement of
approximately $90,000 for leasing commissions previously paid by the
Partnership, which, per the purchase and sale agreement, were the responsibility
of the buyer.  The Partnership recognized a gain of $1,110,277 ($16.07 per
limited partnership unit).  On November 29, 2000, the Partnership made a capital
distribution of $6,499,330 ($95.00 per limited partnership unit) from the
proceeds of the sale.

NOTE 3 - ACCRUED EXPENSES FOR LIQUIDATION
-----------------------------------------

     Accrued expenses for liquidation as of September 30, 2001 include estimates
of costs to be incurred in carrying out the dissolution and liquidation of the
Partnership.  These costs include estimates of legal fees, accounting fees, tax
preparation and filing fees and other professional services.  During the three
and nine month periods ended September 30, 2001, the Partnership incurred $1,229
and $33,487, respectively, of such expenses.

     The actual costs could vary from the related provisions due to the
uncertainty related to the length of time required to complete the liquidation
and dissolution of the Partnership.  The accrued expenses do not take into
consideration the possible litigation arising from the customary representations
and warranties made as part of each sale.  Such costs are unknown and are not
estimable at this time.

                                       8
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------

Liquidity and Capital Resources
-------------------------------

     The Partnership completed its offering of units of limited partnership
interest in December 1985 and a total of 68,414 units were sold.  The
Partnership received proceeds of $61,950,285, net of selling commissions and
other offering costs, which were invested in real estate, used to pay related
acquisition costs, or retained as working capital reserves.  As of December 31,
2000, the Partnership had sold all of its real estate investments: six of which
were sold prior to 1994 and one of which was sold in each of 1998, 1999 and
2000.  As a result of the sales and similar transactions, capital of $62,352,590
($911.40 per limited partnership unit) has been returned to the limited partners
through September 30, 2001.

     At September 30, 2001, the Partnership had $652,889 in cash and cash
equivalents, which is being retained primarily as a reserve in connection with
the liquidation of the Partnership.  The Partnership intends to liquidate and
dissolve in 2001. Distributions of cash from operations for the first and second
quarters of 2000 were made at the annualized rate of 4.25% on the adjusted
capital contribution of $183.60 per limited partnership unit.  Due to the sale
of the last remaining asset in October 2000, distributions were suspended
effective the third quarter of 2000 to enable the Partnership to meet its fund
level obligations for the remainder of its lifecycle.

Results of Operations
---------------------

     Operating Factors

     On October 31, 2000 the Partnership sold its partnership interests and all
related property rights in the entity owning 270 Technology Park and recognized
a gain of $1,110,277.  At the time of the sale, the buildings were 83% leased.

     Investment Results

     There are no comparative real estate operating results for the three and
nine month periods ended September 30, 2001 and 2000, due to the sale of the
Partnership's last remaining property in October 2000, as discussed above.

     Portfolio Expenses

     General and administrative expenses primarily consist of state taxes, real
estate appraisal, legal, accounting, printing and servicing agent fees.  General
and administrative expenses for the three and nine month periods ended September
30, 2000 were $55,232 and $158,687, respectively.

                                       9
<PAGE>

NEW ENGLAND LIFE PENSION PROPERTIES III;
A REAL ESTATE LIMITED PARTNERSHIP

     The Partnership management fee is 9% of distributable cash flow from
operations after any increase or decrease in working capital reserves as
determined by the managing general partner.

     There was no management fee incurred during the first three quarters of
2001 due to the discontinuance of operating cash distributions as a result of
the sale of the Partnership's last remaining property in 2000 as discussed
above.

     Costs to dissolve and liquidate the Partnership include legal fees,
accounting fees, tax preparation fees, filing fees and other professional
services.  During the three and nine month periods ended September 30, 2001, the
Partnership incurred $1,229 and $33,487, respectively, of such expenses.



                                       10
<PAGE>

                   NEW ENGLAND LIFE PENSION PROPERTIES III;
                       A REAL ESTATE LIMITED PARTNERSHIP

                                   FORM 10-Q

                     FOR QUARTER ENDED SEPTEMBER 30, 2001

                                    PART II

                               OTHER INFORMATION
                               -----------------


     Item 6.  Reports on Form 8-K

                        Reports on Form 8-K: No reports on Form 8-K were filed
                        during the quarter ended September 30, 2001.

                                       11
<PAGE>

                                  SIGNATURES
                                  ----------


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                              NEW ENGLAND LIFE PENSION PROPERTIES III;
                              A REAL ESTATE LIMITED PARTNERSHIP
                              (Registrant)


November 9, 2001
                              /s/ Alison L. Husid
                              --------------------------------
                                Alison L. Husid
                                President, Chief Executive Officer and
                                Director of Managing General Partner,
                                Copley Properties Company III, Inc.



November 9, 2001
                              /s/ Jonathan Martin
                              --------------------------------
                                Jonathan Martin
                                Principal Financial and Accounting Officer of
                                Managing General Partner, Copley Properties
                                Company III, Inc.

                                       12