FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT
                          UNDER SECTION 13 OR 15(D) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                        QUARTERLY OR TRANSITIONAL REPORT


                    U.S. Securities and Exchange Commission
                            Washington, D.C.  20549


                                  FORM 10-QSB

(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934


                 For the quarterly period ended March 31, 1998


[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

               For the transition period from_________to_________

                         Commission file number 2-95502


               DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III
       (Exact name of small business issuer as specified in its charter)

       New York                                             13-3251176
(State or other jurisdiction of                           (IRS Employer
incorporation or organization)                          Identification No.)

                          One Insignia Financial Plaza
                        Greenville, South Carolina 29602
                    (Address of principal executive offices)

                                 (864) 239-1000
                          (Issuer's telephone number)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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

                           PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

a)
               DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III

                           CONSOLIDATED BALANCE SHEET
                                  (Unaudited)
                        (in thousands, except unit data)

                                 March 31, 1998


Assets
 Cash and cash equivalents                                        $ 3,716
 Receivables and deposits                                             605
 Other assets                                                         318
 Investment properties:
     Land                                              $ 9,103
     Buildings and related personal property            24,305
                                                        33,408
     Less accumulated depreciation                     (15,581)    17,827

                                                                  $22,466


Liabilities and Partners' Capital (Deficit)

Liabilities
 Accounts payable                                                 $   362
 Tenant security deposit liabilities                                   41
 Accrued property taxes                                               217
 Due to affiliate                                                     336
 Other liabilities                                                    482
 Mortgage notes payable                                            15,389

Partners' Capital (Deficit)
 General partner's                                     $  (117)
 Limited partners' (59,905 interests issued
     and outstanding)                                    5,756      5,639

                                                                  $22,466

          See Accompanying Notes to Consolidated Financial Statements


b)
               DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
                        (in thousands, except unit data)


                                                      Three Months Ended
                                                            March 31,
                                                       1998         1997
Revenues:
  Hotel operations                                  $  2,414     $  2,605
  Rental operations                                      417          458
  Other income                                            40           45
     Total revenues                                    2,871        3,108

Expenses:
  Hotel operations                                     1,559        1,673
  Rental operations                                       94           93
  General and administrative                              20           30
  Mortgage interest                                      417          377
  Property taxes                                          30           31
  Depreciation                                           299          304
     Total expenses                                    2,419        2,508

Net income                                          $    452     $    600

Net income allocated to general partner (1%)        $      5     $      6
Net income allocated to limited partners (99%)           447          594

                                                    $    452     $    600

Net income per limited partnership interest         $   7.46     $   9.91

Distribution per limited partnership interest       $  10.00     $     --


          See Accompanying Notes to Consolidated Financial Statements

c)
               DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III

        CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
                                  (Unaudited)
                        (in thousands, except unit data)

<TABLE>
<CAPTION>
                                          Limited
                                        Partnership    General      Limited
                                         Interest      Partner      Partners      Total
<S>                                     <C>        <C>          <C>           <C>
Original capital contributions           60,095     $       1    $    30,048   $    30,049

Partners' (deficit) capital at
  December 31, 1997                      59,905     $    (122)   $     5,908   $     5,786

Distribution to limited partners             --            --           (599)         (599)

Net income for the three months
  ended March 31, 1998                       --             5            447           452

Partners' (deficit) capital at
  March 31, 1998                         59,905     $    (117)   $     5,756   $     5,639
<FN>
               See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>

d)
               DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                  Three Months Ended
                                                                       March 31,
                                                                   1998        1997
<S>                                                             <C>         <C>
Cash flows from operating activities:
   Net income                                                    $    452    $    600
   Adjustments to reconcile net income to net
    cash provided by operating activities:
     Depreciation                                                     299         304
Amortization of loan costs and lease commissions                       22           8
     Change in accounts:
        Receivables and deposits                                     (233)       (313)
        Other assets                                                   15         (30)
        Accounts payable                                               10          52
        Tenant security deposit liabilities                            (2)         (2)
        Accrued property taxes                                         95          62
        Due to affiliate                                             (424)         --
        Other liabilities                                              71          (7)

          Net cash provided by operating activities                   305         674

Cash flows used in investing activities:
   Property improvements and replacements                             (28)        (65)

Cash flows from financing activities:
   Payments on mortgage notes payable                                 (71)        (64)
   Distribution paid to limited partners                             (599)       (599)

          Net cash used in financing activities                      (670)       (663)

Net decrease in cash and cash equivalents                            (393)        (54)

Cash and cash equivalents at beginning of period                    4,109       3,447

Cash and cash equivalents at end of period                       $  3,716    $  3,393

Supplemental disclosure of cash flow information:
  Cash paid for interest                                         $    375    $    372
<FN>
               See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>

e)               DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    (Unaudited)


NOTE A - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Drexel Burnham
Lambert Real Estate Associates III (the "Partnership") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B.  Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.  In the opinion of DBL Properties Corporation ("DBL" or
the "General Partner"), all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 1998, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1998.  For further information, refer to the consolidated
financial statements and footnotes thereto included in the Partnership's annual
report on Form 10-KSB for the fiscal year ended December 31, 1997.

NOTE B - BASIS OF ACCOUNTING

The consolidated financial statements include the accounts of the Partnership
and its 90% general partnership interest in DBL Airport Valley Limited
Partnership ("DBLAV"), which owns and operates two hotels in Tucson and Green
Valley, Arizona, and its 90% general partnership interest in Shallowford
Associates, Ltd. ("Shallowford"), which owns and operates a shopping center in
Roswell, Georgia. All material intercompany transactions and balances have been
eliminated in consolidation.  In addition, the consolidated financial statements
include the accounts and operations of its wholly-owned property, Perimeter
Square Shopping Center ("Perimeter Square"), which is a shopping center in
Tulsa, Oklahoma.

Certain reclassifications have been made to the 1997 information to conform to
the 1998 presentation.

NOTE C - TRANSACTIONS WITH AFFILIATED PARTNERS

The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
The Partnership Agreement provides for certain payments to affiliates for
services and as reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership.

On June 24, 1997, Insignia Financial Group, Inc., a Delaware corporation
("Insignia"), and IFGP Corporation, a wholly-owned subsidiary of Insignia and a
Delaware corporation ("IFGP") (collectively, the "Buyer"), entered into a Stock
Purchase Agreement (the "Agreement") with The Wynnewood Company, Inc., a New
York corporation ("Seller"), DBL, a New York corporation, and William Clements,
an individual and the owner of 100% of the capital stock of Seller.  The closing
of the transactions contemplated by the Agreement occurred on June 24, 1997 (the
"Closing"). At the Closing, pursuant to the terms and conditions of the
Agreement, the Buyer acquired all of the issued and outstanding stock of DBL.

Upon the Closing, the officers and directors of DBL resigned and Insignia caused
new officers and directors of this entity to be elected.

The following transactions with The Wynnewood Company and its affiliates during
the three month period ended March 31, 1997, and with affiliates of Insignia
during the three month period ended March 31, 1998, were incurred (in
thousands):

                                                             1998         1997

   Property management fees (including in operating
     expenses)                                               $127          $117
   Reimbursement for services of affiliates (included
     in general and administrative expenses)                   20             3

Prior to Insignia's affiliation on June 24, 1997, affiliates of Insignia
provided property management services for the commercial properties and
partnership administrative services for the Partnership.  At March 31, 1998, the
Partnership owed Insignia approximately $336,000 for payroll expenses paid by
Insignia on behalf of the hotel properties.

Included in other liabilities at March 31, 1998, is a $25,000 note payable to
the co-venturer in Shallowford.  The note does not have any stipulated terms for
repayment and it accrues interest at 3% above prime.  Interest expense on the
note amounted to approximately $1,000 for both the three month periods ended
March 31, 1998 and 1997. Total accrued interest payable of approximately $16,000
is included in other liabilities at March 31, 1998.

On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in
Insignia Properties Trust, with Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust.  The closing, which
is anticipated to happen in the third quarter of 1998, is subject to customary
conditions, including government approvals and the approval of Insignia's
shareholders.  If the closing occurs, AIMCO will then control the General
Partner of the Partnership.

NOTE D - DISTRIBUTIONS TO LIMITED PARTNERS

In February 1998, the Partnership declared and paid a cash distribution to the
limited partners of approximately $599,000 ($10.00 per limited partnership
unit).

In December 1996, the Partnership declared a cash distribution to the limited
partners of approximately $599,000 ($10.00 per limited partnership unit).  The
distribution was accrued at December 1996 and paid in March 1997.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The Partnership's investment properties consist of two shopping centers and two
hotels.  The following table sets forth the average occupancy of the properties
for the three month periods ended March 31, 1998 and 1997:

                                                    Average
                                                   Occupancy
Property                                       1998          1997

Perimeter Square                                91%           92%
   Tulsa, Oklahoma
Shallowford Corners                             90%           90%
   Roswell, Georgia
Green Valley Hotel                              81%           92%
   Green Valley, Arizona
Tucson Airport Hotel                            83%           92%
   Tucson, Arizona


Management attributes the decline in occupancy at Tuscon Airport Hotel to the
addition of three new competing hotels in the vicinity of the property.
Additionally, two more competing hotels are expected to open for business during
1998.  Management attributes the decline in occupancy at Green Valley Hotel to
the absence of a movie production for which the hotel was the primary facility
for the production employees in 1997.

The Partnership realized net income of approximately $452,000 and $600,000 for
the three month periods ended March 31, 1998 and 1997, respectively.  The
decrease in net income is attributable to decreased hotel and rental income
partially offset by a decrease in total expenses.  The decrease in hotel income
is primarily due to the declines in occupancy noted above.  Offsetting the
decline in occupancy was an increase in room rates at the Tucson Airport Hotel.
The decrease in rental income is the result of a decrease in tenant
reimbursements at Shallowford Corners.  Total expenses decreased slightly due
primarily to a decrease in hotel operations expense which coincides with the
decrease in occupancies discussed above.  Partially offsetting the decrease in
hotel operations expense was an increase in interest expense as a result of the
Partnership successfully negotiating a forbearance agreement with the holder of
the mortgage encumbering Shallowford Corners (see discussion below).  The
agreement required increasing the interest rate from 8.75% to 10%.

As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rates, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expense.  As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rates and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.

At March 31, 1998, the Partnership held cash and cash equivalents of
approximately $3,716,000 versus approximately $3,393,000 at March 31, 1997.  The
net decrease in cash and cash equivalents for the three month periods ended
March 31, 1998 and 1997 was approximately $393,000 and $54,000, respectively.
Net cash provided by operating activities decreased primarily due to the
decrease in net income, as discussed above, as well as the payments made to
affiliates. Net cash used in investing activities decreased due to a decrease 
in property improvement and replacement expenditures. Net cash used in financing
activities remained relatively consistent.

The main tenant in the Shallowford Corners Shopping Center, occupying 45,528 sq.
ft., approximately 39% of the leaseable space, was approached by a competing
center to vacate its space and occupy space in the competing center. The General
Partner has had a number of discussions with that tenant regarding expanding and
improving the space it occupies as well as adding additional parking space to
the center.  The tenant is presently studying its alternatives. In October 1997,
the General Partner executed a new letter of intent for the sale of the
property, however, a sales contract was not executed.  As a result, the General
Partner is continuing to market the property for sale.  The first mortgage of
$7,750,000 on the property matured on April 15, 1997.  On October 15, 1997, the
General Partner negotiated a forbearance agreement with the holder of the
mortgage through June 30, 1998.  Subsequent to March 31, 1998, an extension to
the forbearance agreement has been executed through December 31, 1998.  The 
forbearance agreement requires interest only payments based on a 10% per annum 
interest rate.  If the property is not sold or the mortgage is not refinanced, 
the property could be lost through foreclosure.

The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership.  The mortgage indebtedness
of approximately $15,343,000 matures at various times with balloon payments due
at maturity at which time the properties will either be refinanced or sold (see
discussion above regarding Shallowford Corners Shopping Center).  Future cash
distributions will depend on the levels of cash generated from operations,
property sales, and the availability of cash reserves. Distributions of
approximately $599,000 ($10 per limited partner unit) were paid to the limited
partners during the three months ended March 31, 1998 and 1997.

Year 2000

The Partnership is dependent upon the General Partner and Insignia for
management and administrative services.  Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue").  The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems.  The General Partner believes that with modifications to
existing software and conversions to new software, the Year 2000 Issue will not
pose significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the
Partnership.

Other

Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements.  Such forward-looking statements speak only as of the date
of this quarterly report.  The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.


                            PART II - OTHER INFORMATION



ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K


      a)    Exhibit 27, Financial Data Schedule, is filed as an exhibit to
            this report.

      b)    Reports on Form 8-K:  None filed during the quarter ended March 31,
            1998.


                                     SIGNATURE

  In accordance with the requirements of the Exchange Act, the registrant
  caused this report to be signed on its behalf by the undersigned, thereunto
  duly authorized.



                         DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III

                         By:         DBL Properties Corporation
                                     Its General Partner


                         By:         /s/William H. Jarrard, Jr.
                                     William H. Jarrard, Jr.
                                     President and Director


                         Date:       May 15, 1998