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 June 30, 2000


[ ] 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  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___

<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

a)

                 DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III

                Consolidated Statement of Net Assets in Liquidation

                                   (Unaudited)

                                   (in thousands)

                                  June 30, 2000
<TABLE>
<CAPTION>

Assets
<S>                                                                         <C>
   Cash and cash equivalents                                                $  2,270

Liabilities:
   Accounts payable                                                               55
   Other liabilities                                                             199
   Estimated costs during the period of liquidation                               16
                                                                                 270

Net assets in liquidation                                                   $  2,000
</TABLE>

            See Accompanying Notes to Consolidated Financial Statements

<PAGE>

b)

                 DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III

           CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
                                   (Unaudited)

                         Six months Ended June 30, 2000

                                   (in thousands)


      Net assets in liquidation at beginning of period                  $ 5,240

      Changes in net assets in liquidation attributed to:

         Decrease in cash and cash equivalents                           (3,566)
         Decrease in receivables and deposits                               (23)
         Decrease in investment property                                 (7,650)
         Decrease in accounts payable                                        24
         Decrease in tenant security deposit                                 27
         Decrease in other liabilities                                      141
         Decrease in due to affiliate                                       173
         Decrease in mortgage note payable                                7,650
         Increase in estimated costs during the period
            of liquidation                                                  (16)

      Net assets in liquidation at end of period                        $ 2,000


            See Accompanying Notes to Consolidated Financial Statements

<PAGE>

c)


                 DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III

                      CONSOLIDATED STATEMENT OF OPERATIONS

                                   (Unaudited)

                          (in thousands, except unit data)


<TABLE>
<CAPTION>

                                                      Three Months Ended   Six Months Ended
                                                         June 30, 1999      June 30, 1999
Revenues:                                                 (Restated)          (Restated)

<S>                                                          <C>                 <C>
   Rental operations                                         $  444              $ 940
   Other income                                                  20                 38
      Total revenues                                            464                978

Expenses:
   Rental operations                                             99                202
   General and administrative                                    54                144
   Mortgage interest                                            235                472
   Property taxes                                                35                 67
   Depreciation                                                 104                208
      Total expenses                                            527              1,093

Loss from continuing operations                                 (63)              (115)
(Loss) income from discontinued operations                     (256)                63

Net loss                                                    $  (319)             $ (52)

Net loss allocated to general partner (1%)                   $   (3)              $ (1)
Net loss allocated to limited partners (99%)                   (316)               (51)

                                                            $  (319)             $ (52)
Per limited partnership unit:

   Loss from continuing operations                            (1.04)             (1.91)
   (Loss) income from discontinued operations                 (4.24)              1.04

Net loss                                                    $ (5.28)           $ (0.85)
</TABLE>

            See Accompanying Notes to Consolidated Financial Statements


<PAGE>


d)

                 DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III

                      consolidated STATEMENTS OF CASH FLOWS

                                   (Unaudited)

                         Six Months Ended June 30, 1999

                                   (in thousands)


Cash flows from operating activities:
   Net loss                                                           $  (52)
   Adjustments to reconcile net loss to net cash
     provided by operating activities:
      Depreciation                                                       590
      Amortization of loan costs, lease commissions and
         debt discount                                                    52
      Change in accounts:
          Receivables and deposits                                       (57)
          Other assets                                                   125
          Accounts payable                                              (123)
          Tenant security deposit liabilities                             (2)
          Accrued property taxes                                          88
          Due to affiliate                                               200
          Other liabilities                                              353

               Net cash provided by operating activities               1,174

Cash flows used in investing activities:

   Property improvements and replacements                                (75)

Cash flows used in financing activities:

   Payments on mortgage notes payable                                   (157)

Net increase in cash and cash equivalents                                942

Cash and cash equivalents at beginning of period                       2,904

Cash and cash equivalents at end of period                           $ 3,846

Supplemental disclosure of cash flow information:
   Cash paid for interest                                             $  757

            See Accompanying Notes to Consolidated Financial Statements


<PAGE>

e)

                 DREXEL BURNHAM LAMBERT REAL ESTATE ASSOCIATES III

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note A - Basis of Presentation

As of December 31, 1999,  Drexel Burnham Lambert Real Estate Associates III (the
"Partnership" or "Registrant")  adopted the liquidation  basis of accounting due
to the default of the first  mortgage  on  Shallowford  Corners on December  15,
1999, the Partnership's only property at that date. On March 7, 2000, the lender
foreclosed on the property and sold it to an unaffiliated party for $7,650,000.

As a result of the  decision  to  liquidate  the  Partnership,  the  Partnership
changed its basis of accounting  for its  consolidated  financial  statements at
December 31, 1999, to the liquidation basis of accounting.  Consequently, assets
have been valued at their  estimated net realizable  value and  liabilities  are
presented at their  estimated  settlement  amounts.  The valuation of assets and
liabilities  necessarily  requires many estimates and  assumptions and there are
substantial   uncertainties  in  carrying  out  the   liquidation.   The  actual
realization  of assets and  settlement of  liabilities  could be higher or lower
than  amounts  indicated  and is based  upon  the  estimates  of DBL  Properties
Corporation (the "General Partner") as of the date of the consolidated financial
statements.

The  statement  of net  assets  in  liquidation  as of June 30,  2000,  includes
approximately  $16,000 of accrued costs, net of income, that the General Partner
estimates  will be  incurred  during  the  period  of  liquidation  based on the
assumption  that the  liquidation  process  will be  completed  during the third
quarter  of 2000.  These  costs  principally  include  legal and  administrative
expenses.  Because the success in  realization  of assets and the  settlement of
liabilities is based on the General  Partner's best  estimates,  the liquidation
period may be shorter than projected or it may be extended  beyond the projected
period.

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 owned and  operated two hotels in Tucson and Green
Valley,  Arizona,  which were sold during 1999, and its 90% general  partnership
interest  in  Shallowford  Associates,  Ltd.  ("Shallowford"),  which  owned and
operated a shopping center in Roswell,  Georgia,  which was foreclosed on by the
lender on March 7, 2000.  All material  inter-entity  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, which was sold during 1999.

Note B - Transactions with Affiliated Parties

The Registrant 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  reimbursement of certain expenses incurred by affiliates on behalf
of the Partnership.

<PAGE>

The following  payments were made to the General  Partner and affiliates  during
the six months ended June 30, 2000 and 1999:

                                                         2000       1999
                                                          (in thousands)
         Reimbursement for services of affiliates
           (included in general and administrative
           expense in 1999)                               20         31

An  affiliate  of the General  Partner  received  reimbursement  of  accountable
administrative  expenses amounting to approximately  $20,000 and $31,000 for the
six months ended June 30, 2000 and 1999, respectively.

Included in other liabilities at June 30, 2000, is a $16,000 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.

AIMCO and its affiliates  currently own 7,501 limited  partnership  units in the
Partnership representing approximately 12.52% of the outstanding units. A number
of these  units were  acquired  pursuant  to tender  offers made by AIMCO or its
affiliates.  It is possible that AIMCO or its  affiliates  will make one or more
additional offers to acquire  additional  limited  partnership  interests in the
Partnership  for cash or in exchange for units in the operating  partnership  of
AIMCO. Under the Partnership  Agreement,  unitholders  holding a majority of the
Units are  entitled to take action  with  respect to a variety of matters.  When
voting on matters, AIMCO would in all likelihood vote the Units it acquired in a
manner  favorable  to the  interest  of the  General  Partner  because  of their
affiliation with the General Partner.

Note C - Distributions to Limited Partners

During  the  six  months  ended  June  30,  2000,  the  Partnership  distributed
approximately  $2,800,000  ($46.74 per limited  partnership unit) to the limited
partners consisting of approximately  $1,928,000 ($32.18 per limited partnership
unit) from the sale proceeds of Perimeter  Square,  the Green Valley Hotel,  and
the  Tucson  Airport  Hotel  and  approximately  $872,000  ($14.56  per  limited
partnership unit) of cash from operations.  There were no distributions declared
during the six months ended June 30, 1999.

Note D - Discontinued Operations

Best Western  Green Valley Hotel and Tucson  Airport  Hotel were the only hotels
owned by the  Partnership  and  represented  one  segment  of the  Partnership's
operations.  Due to the sale of  these  properties,  the  results  of the  hotel
segment have been included in (loss) income from  discontinued  operations.  The
revenues of these  properties were  approximately  $1,715,000 and $4,011,000 for
the three and six months ended June 30, 1999. Loss from discontinued  operations
was approximately  $256,000 for the three months ended June 30, 2000 compared to
income from discontinued  operations of approximately $63,000 for the six months
ended June 30, 1999.

<PAGE>

Note E - Segment Reporting

Description  of the types of products  and  services  from which the  reportable
segment derives its revenues:

The Partnership had two reportable  segments:  commercial and hotel  properties.
The Partnership's  commercial  property segment consisted of two retail shopping
centers,  one in Arizona and one in Georgia.  The Partnership  leased commercial
space to tenants  under  various  lease terms.  The shopping  center  located in
Arizona  was sold to an  unrelated  party  during 1999 and the  shopping  center
located in Georgia was foreclosed by the lender in March 2000. The Partnership's
hotel  property  segment  consisted  of two  hotels  in  Arizona.  The two hotel
properties held by the Partnership  were sold to unrelated  parties during 1999.
Therefore,  the hotel segment is reflected as discontinued operations (see "Note
D - "Discontinued  Operations" for further  discussion).  Effective December 31,
1999 the Partnership  adopted the liquidation basis of accounting (see "Note A -
Basis of Presentation").  As a result,  segment information is only provided for
the three and six month periods ended June 30, 1999.

Measurement of segment profit or loss:

The  Partnership  evaluates  performance  based on segment  profit (loss) before
depreciation. The accounting policies of the reportable segments are the same as
those described in the  Partnership's  Annual Report on Form 10-KSB for the year
ended December 31, 1999.

Factors management used to identify the enterprise's reportable segment:

The Partnership's  reportable  segments consisted of investment  properties that
offered  different  products and  services.  The  reportable  segments were each
managed  separately because they provided distinct services with different types
of products and customers.

Segment  information  for the three and six months ended June 30, 1999, 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.
<TABLE>
<CAPTION>

 Three Months Ended June 30, 1999        Hotel       Commercial     Other      Totals
                                 (discontinued)

<S>                                      <C>            <C>          <C>        <C>
Rental income                            $   --         $ 444        $  --      $ 444
Other income                                 --             1           19         20
Interest expense (income)                    --           244           (9)       235
Depreciation                                 --           104           --        104
General and administrative
  expense                                    --            --           54         54
Loss from discontinued
  operations                               (256)           --           --       (256)
Segment loss                               (256)          (37)         (26)      (319)



  Six Months Ended June 30, 1999         Hotel       Commercial     Other      Totals
                                 (discontinued)

Rental income                            $   --         $ 940         $ --      $ 940
Other income                                 --             4           34         38
Interest expense (income)                    --           490          (18)       472
Depreciation                                 --           208           --        208
General and administrative
  expense                                    --            --          144        144
Income from discontinued
  operations                                 63            --           --         63
Segment profit (loss)                        63           (23)         (92)       (52)
Total assets                              8,939        10,566        1,785     21,290
Capital expenditures for
  investment properties                      72             3           --         75
</TABLE>

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.

<PAGE>

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF 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.

As of  December  31,  1999 the  Partnership  adopted  the  liquidation  basis of
accounting due to the default of the mortgage at Shallowford Corners on December
15, 1999. On March 7, 2000 the lender  foreclosed on the property and sold it to
an  unrelated  party for  $7,650,000.  Consequently,  assets have been valued at
their  estimated net  realizable  value and  liabilities  are presented at their
estimated settlement amounts, including estimated costs associated with carrying
out the  liquidation.  The  valuation  of  assets  and  liabilities  necessarily
requires many estimates and assumptions and there are substantial  uncertainties
in carrying out the liquidation. The actual realization of assets and settlement
of liabilities  could be higher or lower than the amounts indicated and is based
upon the General Partner's estimates as of the date of the financial statements.

The  statement  of net  assets  in  liquidation  as of June 30,  2000,  includes
approximately  $16,000 of accrued costs, net of income, that the General Partner
estimates  will be  incurred  during  the  period  of  liquidation  based on the
assumption  that the  liquidation  process  will be  completed  during the third
quarter  of 2000.  These  costs  principally  include  legal and  administrative
expenses.  Because the success in  realization  of assets and the  settlement of
liabilities is based on the General  Partner's best  estimates,  the liquidation
period may be shorter than projected or it may be extended  beyond the projected
period.

During  the  six  months  ended  June  30,  2000,  the  Partnership  distributed
approximately  $2,800,000  ($46.74 per limited  partnership unit) to the limited
partners consisting of approximately  $1,928,000 ($32.18 per limited partnership
unit) from the sale proceeds of Perimeter  Square,  the Green Valley Hotel,  and
the  Tucson  Airport  Hotel  and  approximately  $872,000  ($14.56  per  limited
partnership unit) of cash from operations.  There were no distributions declared
during the six months ended June 30, 1999.

<PAGE>

                           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 quarter ended June 30, 2000.

<PAGE>

                                   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/Martha L. Long
                                        Martha L. Long
                                        Senior Vice President
                                        and Controller

                               Date: