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, 1999


[ ]  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                      (I.R.S. Employer
incorporation or organization)                      Identification No.)

                        55 Beattie Place, P.O. Box 1089
                        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, 1999



Assets

  Cash and cash equivalents                                  $ 3,582

  Receivables and deposits                                       897

  Other assets                                                   146

  Investment properties:

     Land                                         $ 9,103

     Buildings and related personal property       24,687

                                                   33,790

     Less accumulated depreciation                (16,772)    17,018

                                                             $21,643
Liabilities and Partners' Capital (Deficit)

Liabilities:

  Accounts payable                                           $   258

  Tenant security deposit liabilities                             44

  Accrued property taxes                                         331

  Due to affiliate                                               352

  Other liabilities                                            1,289

  Mortgage notes payable                                      15,005


Partners' Capital (Deficit):

  General partner's                               $  (130)

  Limited partners' (59,905 units issued

    and outstanding)                                4,494      4,364


                                                             $21,643


          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,

                                                   1999         1998


Revenues:

  Hotel operations                               $ 2,296       $ 2,414

  Rental operations                                  496           417

  Other income                                        18            40

     Total revenues                                2,810         2,871

Expenses:

  Hotel operations                                 1,522         1,489

  Rental operations                                  103            94

  General and administrative                          90            20

  Mortgage interest                                  397           417

  Property taxes                                     135           100

  Depreciation                                       296           299

     Total expenses                                2,543         2,419


Net income                                       $   267       $   452

Net income allocated to general partner (1%)     $     3       $     5

Net income allocated to limited partners (99%)       264           447

                                                 $   267       $   452


Net income per limited partnership unit          $  4.41       $  7.46


Distribution per limited partnership unit        $    --       $ 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)






                                   Limited

                                 Partnership   General    Limited

                                    Units      Partner    Partners    Total


Original capital contributions     60,095    $       1    $  30,048 $  30,049


Partners' (deficit) capital at

  December 31, 1998                59,905    $    (133)   $   4,230 $   4,097

Net income for the three months

  ended March 31, 1999                 --            3          264       267


Partners' (deficit) capital at

  March 31, 1999                   59,905    $    (130)   $   4,494 $   4,364


          See Accompanying Notes to Consolidated Financial Statements


d)
               DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
                                 (in thousands)


                                                           Three Months Ended


                                                                March 31,

                                                             1999       1998

Cash flows from operating activities:

Net income                                                 $   267     $   452

Adjustments to reconcile net income to net

cash provided by operating activities:

Depreciation                                                   296         299

Amortization of loan costs, lease commissions and

   debt discount                                                29          22

Changes in accounts:

Receivables and deposits                                      (388)       (233)

Other assets                                                   145          15

Accounts payable                                               (56)         10

Tenant security deposit liabilities                             (3)         (2)

Accrued property taxes                                         122          95

Due to affiliate                                                86        (424)

Other liabilities                                              330          71


Net cash provided by operating activities                      828         305

Cash flows used in investing activities:

Property improvements and replacements                         (72)        (28)

Cash flows from financing activities:

Payments on mortgage notes payable                             (78)        (71)

Distribution paid to limited partners                           --        (599)

Net cash used in financing activities                          (78)       (670)

Net increase (decrease) in cash and cash equivalents           678        (393)

Cash and cash equivalents at beginning of period             2,904       4,109

Cash and cash equivalents at end of period                 $ 3,582     $ 3,716

Supplemental disclosure of cash flow information:

  Cash paid for interest                                   $   361     $   375


          See Accompanying Notes to Consolidated Financial Statements


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" or "Registrant") 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, 1999, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1999.  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, 1998.

Principles of Consolidation

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 1998 balances to conform to the
1999 presentation.

NOTE B - TRANSFER OF CONTROL

On October 1, 1998, Insignia Financial Group, Inc., the sole shareholder of IFGP
Corporation, merged into Apartment Investment and Management Company ("AIMCO"),
a publicly traded real estate investment trust, with AIMCO being the surviving
corporation (the "Insignia Merger").  As a result of the Insignia Merger, AIMCO
acquired control of IFGP Corporation and, as a result thereof, the General
Partner.  The General Partner does not believe that this transaction will have a
material effect on the affairs and operations of the Partnership.

NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES

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.

The following payments were made to the General Partner and affiliates during
the three months ended March 31, 1999 and 1998:

                                                           1999        1998
                                                            (in thousands)
Property management fees (included in operating
     expenses)                                             $ --      $ 127
   Reimbursement for services of affiliates (included
     in general and administrative expenses)                 25         20


For the three months ended March 31, 1998 affiliates of the General Partner were
entitled to receive varying percentages of gross receipts from the Partnership's
commercial and hotel properties for providing property management services.  The
Partnership paid to such affiliates approximately $127,000 for the three months
ended March 31, 1998. Effective October 1, 1998 (the effective date of the
Insignia Merger) these services for the commercial and hotel properties were
provided by an unrelated party.


An affiliate of the General Partner received reimbursement of accountable
administrative expenses amounting to approximately $25,000 and $20,000 for the
three months ended March 31, 1999 and 1998, respectively.

At March 31, 1999, the Partnership owed an affiliate of the General Partner
approximately $352,000 for payroll expenses paid by such affiliate on behalf of
the hotel properties.

Included in other liabilities at March 31, 1999, 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. Accrued interest on the
note amounted to approximately $1,000 in both 1999 and 1998.  Total accrued
interest payable of approximately $18,000 is included in other liabilities at
March 31, 1999.

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).

No distributions were paid during the three months ended March 31, 1999.

NOTE E - SEGMENT REPORTING

Description of the types of products and services from which each reportable
segment derives its revenues: The Partnership has two reportable segments: hotel
and commercial properties.  The Partnership's hotel property segment consists of
two hotels located in Arizona.  The commercial property segment consists of two
retail shopping centers in Georgia and Oklahoma.  These properties lease space
to tenants under various lease terms.

Measurement of segment profit or loss:  The Partnership evaluates performance
based on net income.  The accounting policies of the reportable segments are the
same as those of the Partnership as described in the Partnership's annual report
on Form 10-KSB for the year ended December 31, 1998.

Factors management used to identify the enterprise's reportable segments: The
Partnership's reportable segments are investment properties that offer different
products and services.  The reportable segments are managed separately because
they provide distinct services with different types of products and customers.

Segment information for the three months ended March 31, 1999 and 1998 is shown
in the tables below (in thousands).  The "Other" column includes Partnership
administration related items and income and expense not allocated to the
reportable segment.

1999
                                     Hotel   Commercial    Other   Totals
Rental income                       $    --  $   496    $    --   $   496
Hotel income                          2,296       --         --    2,296
Other income                             --        3         15       18
Interest expense (income)               160      246         (9)     397
Depreciation                            192      104         --      296
General and administrative expense       --       --         90       90
Segment profit (loss)                   319       14        (66)     267
Total assets                          9,264   10,607      1,772   21,643
Capital expenditures for investment
  properties                             72       --         --       72

1998
                                      Hotel   Commercial   Other   Totals
Rental income                       $    --  $   417    $    --   $   417
Hotel income                          2,414       --         --     2,414
Other income                             --        6         34        40
Interest expense (income)               160      266         (9)      417
Depreciation                            190      109         --       299
General and administrative expense       --       --         20        20
Segment profit (loss)                   504      (75)        23       452
Total assets                          9,205   10,750      2,511    22,466
Capital expenditures for investment
  properties                             28       --         --        28

NOTE F - LEGAL PROCEEDINGS

The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature arising in the ordinary course of business.

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

The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Partnership from time to time.
The discussion of the Partnership's business and results of operations,
including forward-looking statements pertaining to such matters, does not take
into account the effects of any changes to the Partnership's business and
results of operation.  Accordingly, actual results could differ materially from
those projected in the forward-looking statements as a result of a number of
factors, including those identified herein.

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, 1999 and 1998:

                                                    Average
                                                   Occupancy
Property                                      1999          1998

Perimeter Square                               91%           91%
   Tulsa, Oklahoma
Shallowford Corners                            92%           90%
   Roswell, Georgia
Green Valley Hotel                             76%           81%
   Green Valley, Arizona
Tucson Airport Hotel                           76%           83%
   Tucson, Arizona

The General Partner attributes the decline in occupancy at Tucson Airport Hotel
and Green Valley Hotel to the addition of new competing hotels in the vicinity
of the properties.

Results of Operation

The Partnership realized net income of approximately $267,000 compared to
approximately $452,000 for the three months ended March 31, 1999 and 1998,
respectively. The decrease in net income is due to a decrease in total revenues
and an increase in total expenses. The decrease in total revenues is due to a
decrease in hotel operations income and, to a lesser extent, other income
partially offset by an increase in rental operations income.  The decrease in
hotel operations income is primarily due to the decreases in occupancy discussed
above.  The increase in rental operations income is primarily due to the new
tenants during the latter part of 1998 signing leases at higher rental rates.
The increase in total expenses is primarily due to an increase in general and
administrative expenses and to a lesser extent an increase in hotel operations,
rental operations and property tax expenses.  The increase in hotel operations
expenses is primarily due to an increase in administrative salaries and credit
card commissions.  The increase in general and administrative expenses is
primarily due to the overaccrual of audit expense in 1997 that was adjusted
during the first quarter of 1998.  The increase in property tax expense is
primarily due to an increase in the assessed value of the Tucson Airport Hotel.

Included in general and administrative expenses at both March 31, 1999 and 1998
are management reimbursements to the General Partner allowed under the
Partnership Agreement.  In addition, costs associated with the quarterly and
annual communications with investors and regulatory agencies and the annual
audit required by the Partnership agreement are also included.

As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental or hospitality 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 or room rate reductions to offset softening market conditions, there
is no guarantee that the General Partner will be able to sustain such a plan.

Liquidity and Capital Resources

At March 31, 1999, the Partnership had cash and cash equivalents of
approximately $3,582,000 as compared to approximately $3,716,000 at March 31,
1998.  For the three months ended March 31, 1999 cash and cash equivalents
increased by approximately $678,000 from the Partnership's year ended December
31, 1998.  The increase in cash and cash equivalents is due to approximately
$828,000 of cash provided by operating activities and was partially offset by
approximately $72,000 of cash used in investing activities and approximately
$78,000 of cash used in financing activities.  Cash used in investing activities
consisted of property improvements and replacements. Cash used in financing
activities consisted of principal payments made on the mortgage encumbering the
Partnership's properties.  The Partnership invests its working capital reserves
in a money market account.

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 and to comply with Federal,
state, and local legal and regulatory requirements.  Capital improvements
planned for each of the Partnership's properties are detailed below.

Perimeter Square Shopping Center

During the three months ended March 31, 1999, the Partnership completed no
capital improvements at Perimeter Square Shopping Center.  Capital improvements
planned for 1999 consist of, but are not limited to, tenant improvements.  These
capital improvements are expected to cost approximately $21,000.

Shallowford Corners Shopping Center

During the three months ended March 31, 1999, the Partnership completed no
capital improvements at Shallowford Corners Shopping Center.  Capital
improvements planned for 1999 consist of, but are not limited to, tenant
improvements.  These capital improvements are expected to cost approximately
$34,000

Best Western Green Valley

During the three months ended March 31, 1999, the Partnership completed
approximately $3,000 of capital improvements at the Best Western Green Valley.
The General Partner has not yet determined the 1999 capital improvement program
for the property.

Clarion Hotel Tucson Airport

During the three months ended March 31, 1999, the Partnership completed
approximately $69,000 of capital improvements at the Clarion Hotel Tucson
Airport consisting of televisions, refrigerators, and signage.  The General
Partner has not yet determined the 1999 capital improvement program for the
property.

The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves.  To the extent that such budgeted
capital improvements are completed, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.

The Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership.  The remaining
mortgage indebtedness of approximately $15,005,000, net of discount, matures at
various times with balloon payments due at maturity at which time the properties
will either be refinanced and/or sold. If the properties cannot be refinanced or
sold for a sufficient amount, the Partnership will risk losing such properties
to foreclosure.

The first mortgage on Shallowford Corners Shopping Center of $7,750,000 matured
April 15, 1997.  On October 15, 1997, the General Partner negotiated a
forbearance agreement with the holder of the mortgage which has now been
extended through June 30, 1999.  The forbearance agreement requires interest
only payments based on a 10% per annum interest rate.  The General Partner is
currently negotiating options with the lender regarding the forbearance
agreement.  If an agreement with the lender cannot be reached, the property
could be lost through foreclosure.

A distribution of approximately $599,000 ($10.00 per limited partnership unit)
was made to the limited partners during the three months ended March 31, 1998.
No distribution was paid to the limited partners during the three months ended
March 31, 1999.  The Partnership's distribution policy will be reviewed on a
quarterly basis.  Future cash distributions will depend on the levels of net
cash generated from operations, the availability of cash reserves, and the
timing of debt maturities, refinancings and/or property sales.  There can be no
assurance, however, that the Partnership will generate sufficient funds from
operations, after planned capital improvement expenditures, to permit any
additional distributions to its limited partners in 1999 or subsequent periods.

Year 2000 Compliance

General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems

The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year.  The Partnership
is dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent").  Any of the computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000.  This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.

Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999.  The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made, or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.

The Managing Agent's plan to resolve Year 2000 issues involves four phases:
assessment, remediation, testing, and implementation.  To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems.  The status of each
is detailed below.

Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase

Computer Hardware:

During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the mainframe system used by the Managing Agent became fully
functional.  In addition to the mainframe, PC-based network servers, routers and
desktop PCs were analyzed for compliance.  The Managing Agent has begun to
replace each of the non-compliant network connections and desktop PCs and, as of
March 31, 1999, had completed approximately 75% of this effort.

The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date.  The remaining network connections and
desktop PCs are expected to be upgraded to Year 2000 compliant systems by July
31, 1999.

Computer Software:


The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs.  Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.

During 1998, the Managing Agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems.  The estimated additional costs to convert such systems at
all properties, is $200,000, and the implementation and the testing process is
expected to be completed by July 31, 1999.

The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded 80% of the server operating systems.  The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
July 31, 1999.

Operating Equipment:

The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance.  In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).

The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems.  While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally.  The Managing Agent intends to have a third-party conduct an
audit of these systems and report their findings by July 31, 1999.

Any of the above operating equipment that has been found to be non-compliant to
date has been replaced or repaired.  To date, these have consisted only of
security systems and phone systems.  As of March 31, 1999 the Managing Agent has
evaluated approximately 86% of the operating equipment for the Year 2000
compliance.

The total cost incurred for all properties managed by the Managing Agent as of
March 31, 1999 to replace or repair the operating equipment was approximately
$400,000.  The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $325,000, which is expected to be
completed by August 30, 1999.

The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within its enterprise.

Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000

The Managing Agent continues to conduct surveys of its banking and other vendor
relationships to assess risks regarding their Year 2000 readiness. The Managing
Agent has banking relationships with three major financial institutions, all of
which have indicated their compliance efforts will be complete before May 1999.
The Managing Agent has updated data transmission standards with two of the three
financial institutions.  The Managing Agent's contingency plan in this regard is
to move accounts from any institution that cannot be certified Year 2000
compliant by June 1, 1999.

The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent).  To date the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.

The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership.  However, the effect of non-compliance by external agents is not
readily determinable.

Costs to Address Year 2000

The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.8 million ($0.6 million expensed
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project.  Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized.  The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.

Risks Associated with the Year 2000

The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner.  As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program.  In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur.  The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.

In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership.  The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records.  The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.

Contingency Plans Associated with the Year 2000

The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others.  These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.


                          PART II - OTHER INFORMATION


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K


          a)   Exhibits:

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

          b)   Reports on Form 8-K:

               None filed during the three months ended March 31, 1999.


                                   SIGNATURES


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/ Patrick J. Foye
                                   Patrick J. Foye
                                   Executive Vice President


                              By:  /s/ Carla R. Stoner
                                   Carla R. Stoner
                                   Senior Vice President Finance and
                                   Administration


                              Date: May 17, 1999