<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
                               _________________

                                   FORM 10-K

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

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
                          COMMISSION FILE NO. 0-17809
         _____________________________________________________________


            COPLEY REALTY INCOME PARTNERS 3; A LIMITED PARTNERSHIP

            (Exact name of registrant as specified in its charter)


        Massachusetts                                         04-3005973
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                            Identification No.)

      225 Franklin Street, 25th Floor
      Boston, Massachusetts                                     02110
(Address of principal executive offices)                     (Zip Code)

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

          Securities registered pursuant to Section 12(b) of the Act:
                                     None

          Securities registered pursuant to Section 12(g) of the Act:
                     Units of Limited Partnership Interest

                               (Title of Class)

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                              Yes  X     No
                                  ---       ---

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]

     No voting stock is held by nonaffiliates of the Registrant.

                      DOCUMENTS INCORPORATED BY REFERENCE
                      -----------------------------------

                                     None

                                       1
<PAGE>

                                     PART I
                                     ------

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

       Copley Realty Income Partners 3; A Limited Partnership (the
"Partnership") was organized under the Uniform Limited Partnership Act of the
Commonwealth of Massachusetts on February 17, 1988, to invest primarily in newly
constructed and existing income-producing real properties.

       The Partnership was initially capitalized with contributions of $2,000 in
the aggregate from Third Income Corp. (the "Managing General Partner") and GCOP
Associates Limited Partnership (the "Associate General Partner") (collectively,
the "General Partners") and $10,000 from Copley Real Estate Advisors, Inc. (the
"Initial Limited Partner").  The Partnership filed a Registration Statement on
Form S-11 (the "Registration Statement") with the Securities and Exchange
Commission on February 23, 1988, with respect to a public offering of 40,000
units of limited partnership interest at a price of $1,000 per unit (the
"Units") with an option to sell up to an additional 60,000 Units (an aggregate
of $100,000,000).  The Registration Statement was declared effective on May 23,
1988.

       The first sale of Units occurred on October 13, 1988, at which time the
Initial Limited Partner withdrew its contribution from the Partnership.
Investors were admitted to the Partnership thereafter at monthly closings; the
offering terminated and the last group of initial investors was admitted to the
Partnership on June 6, 1989.  As of June 6, 1989, a total of 27,641 Units had
been sold, a total of 1,703 investors had been admitted as limited partners (the
"Limited Partners") and a total of $27,140,580 had been contributed to the
capital of the Partnership.  The remaining 72,359 Units were de-registered on
June 27, 1989.

       As of December 31, 1999, the Partnership had disposed of all of its real
estate investments.  The Partnership intends to liquidate and dissolve in 2000
after settling its remaining liabilities.  The Partnership sold one real estate
investment in 1997 and its remaining two real estate investments in 1999.  The
principal terms of the sale of the Partnership's investments are set forth in
the following table:


<TABLE>
<CAPTION>
    INVESTMENT          MONTH/YEAR OF SALE        NET SALE PROCEEDS        DISTRIBUTION/UNIT       DISTRIBUTION
                                                                                                    MONTH/YEAR
<S>                  <C>                       <C>                       <C>                    <C>
Investment Three                         7/97                $5,715,415                $200.00                7/97
Investment Four                          6/99                $8,381,091                 294.00                7/99
Investment Five                          8/99                $7,444,456                 264.00                9/99
</TABLE>


       The Partnership has no employees. Services are performed for the
Partnership by the Managing General Partner and affiliates of the Managing
General Partner.

       A.  Industrial Building in Brea, California ("Brea West")
           ----------------------------------------------------

       On April 28, 1989, the Partnership acquired a 60% interest in a joint
venture formed with an affiliate of The Muller Company.  The Partnership
committed to contribute $8,250,000 to the capital of the joint venture, all of
which was funded.  On December 20, 1990, the Partnership increased its
investment in the joint venture by committing to make a deficit loan to the
venture in the maximum amount of $900,000, of which $828,799 was funded.
Because the Partnership's joint venture partner was unable to fund its share of
deficits, the Partnership assumed 100% ownership of the joint venture's assets,
effective June 30, 1991.  The property consists primarily of approximately 7.51
acres of land in Brea, California and a 184,000 square foot industrial facility
located thereon.  As of December 31, 1998, the facility was 100% leased to one
tenant until May 2008.

                                       2
<PAGE>

       On June 25, 1999 the Partnership sold the Brea West property for a gross
sale price of $8,530,000.  The Partnership received net proceeds of $8,381,091
after closing costs, and recognized a gain of $1,374,240 ($49.22 per Limited
Partnership Unit) on the sale.  On July 29, 1999 the Partnership made a capital
distribution of $8,126,454 ($294.00 per Limited Partnership Unit) from the
proceeds of the sale.  At the time of sale, a disposition fee of $255,900 was
accrued but not paid to AEW Real Estate Advisors, Inc., the Partnership's asset
manager and advisor (the "advisor").  This fee was subsequently reversed in
conjunction with the sale of the Partnership's last remaining investment since
the limited partners did not receive a return of their capital contributions
from the sale of the Partnership's investments.

       B.  Industrial Building in Simi Valley, California ("Shasta Way")
           ------------------------------------------------------------

       On September 29, 1989, the Partnership acquired a 34.8% interest in a
joint venture formed with Copley Realty Income Partners 4; A Limited
Partnership, an affiliate of the Partnership (the "Affiliate") with a 25.2%
interest, and an affiliate of The Hewson Company (the "Developer").  As of
December 31, 1998, the Partnership had contributed $7,111,757 to the capital of
the joint venture out of a maximum commitment of $7,612,500.  Effective January
1, 1996, the joint venture was restructured, resulting in the withdrawal of the
Developer, and the increase of the ownership interests of the Partnership and
its Affiliate to 58% and 42%, respectively.  The joint venture agreement
entitled the Partnership and the Affiliate to receive a preferred return on
their respective invested capital at the rate of 10% per annum.  The joint
venture agreement also entitled the Partnership to receive 58% of remaining cash
flow and 58% of sale and refinancing proceeds following the return of the
Partnership's and the Affiliate's equity.

       The joint venture owned approximately 12.13 acres of land in Simi Valley,
California and in June 1991 completed construction thereon of a 235,080 square
foot industrial building.  As of December 31, 1998, the facility was 100% leased
to one tenant until December 2003.  The lease included a five-year renewal
option.

       On August 27, 1999, the joint venture sold its property to an
unaffiliated third party for gross proceeds of $13,057,000, of which the
Partnership's share was $7,573,060.  The Partnership received its 58% share of
the net proceeds, after closing costs, in the amount of $7,444,456, and
recognized a gain of $2,702,113 ($96.78 per Limited Partnership Unit) on the
sale.  On September 22, 1999 the Partnership made a capital distribution of
$7,297,224 ($264.00 per Limited Partnership Unit) from the proceeds of the sale.

Item 2.  Properties:
         -----------

       The Partnership disposed of all its real property investments.

Item 3.  Legal Proceedings.
         -----------------

       The Partnership is not a party to, nor are any of its properties subject
to, any material pending legal proceedings.

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

       No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Annual Report on Form 10-K.

                                       3
<PAGE>

                                    PART II
                                    -------


Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.
         ---------------------------------------------------------------------

       There is no active market for the Units.  Trading in the Units is
sporadic and occurs solely through private transactions.

       As of December 31, 1999, there were 1,689 holders of Units.

       The Partnership's Amended and Restated Agreement of Limited Partnership
dated October 13, 1988, as amended to date (the "Partnership Agreement"),
requires that any Distributable Cash (as defined therein) be distributed
quarterly to the Partners in specified proportions and priorities.  There are no
restrictions on the Partnership's present or future ability to make
distributions of Distributable Cash. For the year ended December 31, 1999, cash
distributions paid in 1999, or distributed after year end with respect to 1999,
to the Limited Partners as a group totaled $16,666,417, including $8,126,454
($294 per Limited Partnership Unit), and $7,297,224 ($264 per Limited
Partnership Unit), representing proceeds from the respestice sales of the
Partnership's last two remaining properties.  For the year ended December 31,
1998, cash distributions paid in 1998, or distributed after year end with
respect to 1998 to the Limited Partners as a group totaled $1,437,332.

       Total cash distributions exceeded net income in 1999 and, therefore,
resulted in a reduction of partners' capital.  Regular cash distributions from
operations also exceeded cash provided by operating activities in 1999.
Reference is made to the Partnership's Statement of Partners' Capital (Deficit)
and Statement of Cash Flows in Item 8 hereof.


                                       4
<PAGE>

Item 6.  Selected Financial Data.
         -----------------------
<TABLE>
<CAPTION>


                                                  For Year           For Year        For Year        For Year       For Year
                                                  Ended or           Ended or        Ended or        Ended or       Ended or
                                                  As of:             As of:          As of:          As of:         As of:
                                                  12/31/99(1)        12/31/98        12/31/97(2)     12/31/96       12/31/95
                                                  -----------        --------        --------        --------       --------
<S>                                               <C>             <C>           <C>             <C>           <C>
Revenues                                          $   934,090      $ 1,454,158    $ 1,673,318      $ 1,993,178    $ 1,749,606

Net Income (Loss)                                 $ 4,600,377      $   799,412    $ 2,303,492      $ 1,058,287    $ 1,025,324

Net Income (Loss) per Limited Partnership Unit    $    164.77      $     28.63    $     82.50      $     37.90    $     36.72

Total Assets                                      $ 1,559,851      $14,006,600    $14,687,268      $19,622,775    $20,250,786

Total Cash Distributions per Limited
Partnership Unit, including amounts distributed
after year end with respect to such year          $    602.95      $     53.00    $    262.39      $     60.00    $     57.50
                                                  -----------      -----------    -----------      -----------    -----------
</TABLE>
(1) Net Income in 1999 includes a combined gain from the sale of two properties
    of $3,809,751.  Cash Distributions include a combined return of capital of
    $558.00 per Limited Partnership Unit.

(2) Net Income in 1997 includes a gain from the sale of one property of
    $1,490,313.  Cash Distributions include a return of capital of $200.00 per
    Limited Partnership Unit.

                                       5
<PAGE>

Item 7.
-------

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 June 1989 and a total of 27,641 units were sold.  The Partnership
received proceeds of $24,458,317, net of selling commissions and other offering
costs, which have been used for investments in real estate, related acquisition
costs, or were retained as working capital reserves.

   On July 22, 1997, the Partnership sold the South Bay property to the sole
tenant, which had exercised the purchase option under its lease, for gross
consideration of $5,850,000.  The Partnership received net proceeds of
$5,715,415 after closing costs.  On July 24, 1997, the Partnership made a
capital distribution of $5,528,200 ($200 per Limited Partnership Unit) from the
proceeds of the sale.  This distribution reduced the adjusted capital
contribution to $800 per Unit.

   On June 25, 1999, the Partnership sold the Brea West property for a gross
sale price of $8,530,000 and received net proceeds of $8,381,091 after closing
costs. On July 29, 1999, the Partnership made a capital distribution of
$8,126,454 ($294.00 per Limited Partnership Unit) from the proceeds of the sale.
This distribution reduced the adjusted capital contribution to $506 per Unit.

   On August 27, 1999, the Shasta Way joint venture investment in which the
Partnership and an affiliate owned a 58% and 42% interest, respectively, sold
its property to an unaffiliated third party for gross proceeds of $13,057,000,
of which the Partnership's share was $7,573,060.  The Partnership received its
58% share of the net proceeds, after closing costs, in the amount of $7,444,456.
On September 22, 1999, the Partnership made a capital distribution of $7,297,224
($264.00 per Limited Partnership Unit) from the proceeds of the sale.  This
distribution reduced the adjusted capital contribution to $242 per Unit.

   At December 31, 1999, the Partnership had $1,559,851 in cash and cash
equivalents.  The balance is being retained primarily as a reserve in the event
of any claims for breach of representations or warranties in connection with the
sales of Brea West and Shasta Way; pending dissolution and liquidation of the
Partnership later in 2000, and for working capital.  The annualized distribution
rate relating to all four quarters of 1998 was 6.5% on the adjusted capital
contribution of $800. Cash distributions from operations related to the first
two quarters of 1999 were made at the annualized rate of 5.0% on the adjusted
capital contribution of $800 per unit.  Cash distributions related to the third
quarter of 1999 were made at an annualized rate of 6.0% on the weighted average
capital contribution of $569.65 per unit. The increase in the distribution rate
was due to higher than expected cash receipts from the Shasta Way joint venture
due to a later than anticipated sale date.

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

   Form of Real Estate Investments

   The Brea West investment was a wholly-owned property which was sold on June
25, 1999, as discussed above.  The South Bay investment was structured as a
joint venture with a real estate management/development firm.  Effective January
1, 1996, however, the venture was restructured and the venture partner's
ownership interest was assigned to the Partnership.  Accordingly, as of that
date, this investment was accounted for as a wholly-owned property.  The South
Bay investment was sold on July 22, 1997, as discussed above.  The Shasta Way
investment had been structured as a joint venture with a real estate
management/development firm and an affiliate of the Partnership.  As of January
1, 1996, the ownership was restructured, and the management/development firm's
interest was assigned to the Partnership and its affiliate in proportion to
their respective ownership interests.  The Partnership's ownership percentage
increased to 58%. The Shasta Way investment was sold on August 27, 1999, as
discussed above.

                                       6
<PAGE>

   Operating Factors

   On June 25, 1999, the Partnership sold the Brea West property for a gross
sale price of $8,530,000.  The Partnership received net proceeds of $8,381,091,
after closing costs, and recognized a gain of $1,374,240 ($49.22 per Limited
Partnership Unit) on the sale.  The Brea West property was 100% leased to a
single tenant through the date of sale.

   On July 22, 1997, the Partnership's sold South Bay property to the sole
tenant, which had exercised the purchase option under its lease, for gross
consideration of $5,850,000.  The Partnership  received net proceeds of
$5,715,415 after closing costs and recognized a gain of $1,490,313 ($53.38 per
Limited Partnership Unit).  The South Bay property was 100% leased to a single
tenant through the date of sale.

   On August 27, 1999, the Shasta Way joint venture, in which the Partnership
and an affiliate owned a 58% and 42% interest, respectively, sold its property
to an unaffiliated third party for gross proceeds of $13,057,000, of which the
Partnership's share was $7,573,060.  The Partnership received its 58% share of
the net proceeds, after closing costs, in the amount of $7,444,456, and
recognized a gain of $2,702,113 ($96.78 per Limited Partnership Unit) on the
sale.  The Shasta Way property was 100% leased through the date of sale.   An
extension was agreed upon which would have kept the tenant at Shasta Way through
December 31, 2003.

   Investment Results

   1999 Compared to 1998

   Aggregate operating results from real estate investments were $616,540 and
$923,198 in 1999 and 1998, respectively. The decline was due to the sales of the
Brea West property in June 1999 and Shasta Way property in August 1999,
resulting in decreased operating income.

   Interest on cash equivalents and short term investments increased by $42,000
or 38%, due to higher average invested balances from the sale proceeds of Brea
West and Shasta Way in 1999 prior to the distribution of such proceeds.

   Cash provided by operations decreased by approximately $703,000 between 1998
and 1999.  The difference is attributable to the sale of the last two remaining
assets during 1999.

   1998 Compared to 1997

   Aggregate operating results from real estate investments were $923,198 and
$965,851 in 1998 and 1997, respectively. The decline was due to the sale of the
South Bay property in July 1997, resulting in decreased operating income of
approximately $174,000.  This decline was partially offset by an increase in
operations at Brea West of $95,000 due to a base rental increase and a decrease
in accounting and legal expenses.  Furthermore, joint venture earnings at Shasta
Way increased by $36,000 due to an increase in revenue.

   Interest on cash equivalents and short-term investments decreased by $9,000
or 8%, due to lower average invested balances, as well as lower short-term
yields.

   Cash provided by operations decreased by approximately $212,000 between 1997
and 1998.  The difference is attributable to the decrease in operating results
discussed above, partially offset by the funding of $163,000 in commissions
related to the new lease at Brea West in 1997.

   Portfolio Expenses

   General and administrative expenses primarily consist of appraisal, printing,
accounting, legal and servicing agent fees. These expenses decreased
approximately $4,500, or 5% between 1998 and 1999, primarily due to a decrease
in appraisal fees as a result of the sales of the Partnership's remaining
investments in 1999.  General and administrative expenses decreased
approximately $12,000, or 12% between 1997 and 1998, primarily due to a decrease
in accounting fees as well as decreases in franchise taxes and investor
servicing fees.  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.

                                       7
<PAGE>

Inflation
---------

   By their nature, real estate investments tend not be adversely affected by
inflation.  Inflation may result in appreciation in the value of real estate
investments over time, if rental rates and replacement costs increase.  Declines
in real property values during the period of Partnership operations, due to
market and economic conditions, have overshadowed the positive effect inflation
may have had on the value of the Partnership's investments.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk:
          -----------------------------------------------------------

The Partnership was not party to derivative financial instruments or derivative
commodity instruments at or during the year ended December 31, 1999.  The
Partnership's only other financial instruments (as defined by Financial
Accounting Standards Board Statement No. 107) are its cash and cash equivalents
for which cost approximates market value.

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

   The independent auditor's reports and financial statements listed in the
accompanying index are filed as part of this report.  See Index to the Financial
Statements and Financial Statement Schedules on page 13.

Item 9.  Disagreements on Accounting and Financial Disclosure.
         ----------------------------------------------------

   The Partnership has had no disagreements with its accountants on any matters
of accounting principles or practices or financial statement disclosure.

                                       8
<PAGE>

                                   PART III
                                   --------

Item 10.  Directors and Executive Officers of the Registrant.
          ---------------------------------------------------

       (a) and (b) Identification of Directors and Executive Officers.

The following table sets forth the names of the directors and executive officers
of the Managing General Partner and the age and position held by each of them as
of December 31, 1999.
<TABLE>
<CAPTION>

Name                       Position(s) with the Managing General Partner               Age
----                       ---------------------------------------------               ---
<S>                        <C>                                                         <C>
Alison Husid Cutler        President, Chief Executive Officer and Director              37
Pamela J. Herbst           Vice President and Director                                  44
J. Grant Monahon           Vice President and Director                                  54
James J. Finnegan          Vice President                                               39
Karin J. Lagerlund         Treasurer and Principal Financial and Accounting Officer     35
</TABLE>

       (c)  Identification of Certain Significant Employees.
            -----------------------------------------------

            None.

       (d)  Family Relationships.
            --------------------

            None.

       (e)  Business Experience.
            -------------------

   The Managing General Partner was incorporated in Massachusetts on February
17, 1988. The background and experience of the executive officers and directors
of the Managing General Partner are as follows:

   Alison Husid Cutler is a Portfolio Manager in AEW Institutional Real Estate
Services, with responsibility for several real estate equity portfolios
representing approximately $800 million in client capital. She has over 12 years
of experience in real estate finance and investment management. Ms. Cutler
joined the predecessor of AEW Capital Management, L.P. ("AEW Capital
Management") in 1987 as Controller for a portfolio management team responsible
for the acquisition, management, restructuring and disposition of client assets
in New England and the western U.S. She later served as Asset Manager for a
portfolio of assets in Arizona and the West Coast. Prior to joining AEW,
Ms. Cutler worked for several years as a Senior Auditor with Peat Marwick, Main
& Co. She is a Certified Public Accountant and a graduate of the University of
Massachusetts (B.A.).

   Pamela J. Herbst directs AEW Capital Management, L.P.'s ("AEW Capital
Management) Institutional Real Estate Services, with oversight responsibility
for direct equity investing and the asset and portfolio management of existing
core and core-plus commingled funds and separate accounts. Ms. Herbst is a
member of AEW Capital Management's Investment Policy Group and Operating
Committee. She came to AEW Capital Management in December 1996 as a result of
the firm's merger with Copley Real Estate Advisors, Inc., where she held various
senior level positions in asset and portfolio management, acquisitions, and
corporate operations since 1982. Ms. Herbst is a graduate of the University of
Massachusetts (B.A.) and Boston University (M.B.A.).

   J. Grant Monahon is AEW Capital Management's Chief Operating Officer and a
member of the firm's Management Committee and Investment Policy Group. He has
over 25 years of experience in real estate law and investments. Prior to joining
the predecessor of AEW Capital Management in 1987, Mr. Monahon was a partner
with a major Boston law firm. As the head of that firm's real estate finance
department, he represented a wide variety of institutional clients, both
domestic and international, in complex equity and debt transactions. He is the
former Chairman of the General Counsel section of the National Association of
Real Estate Investment Managers. Mr. Monahon is a graduate of Dartmouth College
(B.A.) and Georgetown University Law Center (J.D.).

                                       9
<PAGE>

   James J. Finnegan is the General Counsel of AEW Capital Management. Mr.
Finnegan served as Vice President and Assistant General Counsel of Aldrich,
Eastman & Waltch, L.P., a predecessor to AEW Capital Management. Mr. Finnegan
has over ten years of experience in real estate law, including seven years of
experience in private practice with major New York City and Boston law firms.
Mr. Finnegan also serves as AEW's securities and regulatory compliance officer.
Mr. Finnegan is a graduate of the University of Vermont (B.A.) and Fordham
University School of Law (J.D.).

   Karin J. Lagerlund directs the Institutional Real Estate Services Portfolio
Accounting Group at AEW Capital Management, overseeing portfolio accounting,
performance measurement and client financial reporting for AEW's private equity
investment portfolios. Ms. Lagerlund is a Certified Public Accountant and has
over ten years experience in real estate consulting and accounting. Prior to
joining AEW Capital Management in 1994, she was an Audit Manager at EY/Kenneth
Leventhal LLP. Ms. Lagerlund is a graduate of Washington State University
(B.A.).

       (f)  Involvement in Certain Legal Proceedings.
            ----------------------------------------

            None.

Item 11.  Executive Compensation.
          ----------------------

   Under the Partnership Agreement, the General Partners and their affiliates
are entitled to receive various fees, commissions, cash distributions,
allocations of taxable income or loss and expense reimbursements from the
Partnership. See Notes 1 and 6 of Notes to Financial Statements.

   The following table sets forth the amounts of the fees and cash distributions
and reimbursements of out-of-pocket expenses which the Partnership paid to or
accrued for the account of the General Partners and their affiliates for the
year ended December 31, 1999. Cash distributions to General Partners include
amounts distributed after year-end with respect to 1999.

<TABLE>
<CAPTION>

                                                                         Amount of Compensation
Receiving Entity                  Type of Compensation                   and Reimbursement
----------------                  --------------------                   -----------------
<S>                               <C>                                    <C>
AEW Real Estate Advisors, Inc.    Management Fees and
                                  Reimbursement of Expenses                  $136,150

General Partners                  Share of Distributable Cash                  12,553

New England Securities            Servicing Fees and Reimbursement
 Corporation                      of Expenses                                   3,279
                                                                             --------
                                  TOTAL                                      $151,982
                                                                             ========
</TABLE>

   For the year ended December 31, 1999, the Partnership allocated $54,170 of
taxable income to the General Partners.

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

       (a)  Security Ownership of Certain Beneficial Owners.
            -----------------------------------------------

   As of December 31, 1999, Alexander Hamilton Life Insurance Company of
America, whose address is 2700 Sanders Road, Prospect Heights, IL., 60070, owned
5,000 Units, approximately 18% of the total number of Units outstanding. No
other person or group is known by the Partnership to be the beneficial owner of
more than 5% of the outstanding Units at December 31, 1999. Under the
Partnership Agreement, the voting rights of the Limited Partners are limited
and, in some circumstances, are subject to the prior receipt of certain opinions
of counsel or judicial decisions.

                                      10
<PAGE>

   Except as expressly provided in the Partnership Agreement, the right to
manage the business of the Partnership is vested exclusively in the Managing
General Partner.

       (b) Security Ownership of Management.
           --------------------------------

   The General Partners of the Partnership owned no Units at December 31, 1999.

       (c)  Changes in Control.
            ------------------

   There exists no arrangement known to the Partnership, the operation of which
may at a subsequent date result in a change in control of the Partnership.

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

   The Partnership has no relationships or transactions to report other than as
reported in Item 10, above.


                                    PART IV
                                    -------

Item 14.  Exhibits, Financial Statements, and Reports on Form 8-K.
          -------------------------------------------------------

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

       (1) Financial Statements--The Financial Statements listed on the
accompanying Index to Financial Statements and Schedule and Financial Statements
Index No. 2 are filed as part of this Annual Report.

       (2) Financial Statement Schedules--The Financial Statement Schedule
listed on the accompanying Index to Financial Statements and Schedule is filed
as part of this Annual Report.

       (3) Exhibits--The Exhibits listed in the accompanying Exhibit Index are
filed as a part of this Annual Report and incorporated in this Annual Report as
set forth in said Index.

       (b)  Reports on Form 8-K. During the last quarter of the year ended
December 31, 1999, the Partnership filed no Current Report on Form 8-K.

                                      11
<PAGE>

                       Copley Realty Income Partners 3;
                             A Limited Partnership


                             Financial Statements

                                   *********


                               December 31, 1999


                                      12



<PAGE>

                       COPLEY REALTY INCOME PARTNERS 3;
                             A LIMITED PARTNERSHIP

                         INDEX TO FINANCIAL STATEMENTS



     Report of Independent Accountants

     Financial Statements (in liquidation as of December 31, 1999):

          Balance Sheets - December 31, 1999 and 1998

          Statements of Operations - For the Years Ended December 31, 1999, 1998
          and 1997

          Statements of Partners' Capital (Deficit) - For the Years Ended
          December 31, 1999, 1998 and 1997

          Statements of Cash Flows - For the Years Ended December 31, 1999, 1998
          and 1997

          Notes to Financial Statements



          All schedules are omitted because they are not applicable.


                                      13
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS
                       ---------------------------------


To the Partners of Copley Realty Income Partners 3; A Limited Partnership:

In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of Copley
Realty Income Partners 3;, A Limited Partnership (the "Partnership") at December
31, 1999 and 1998, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States.  These financial
statements are the responsibility of Third Income Corp., the Managing General
Partner of the Partnership (the "Managing General Partner"); our responsibility
is to express an opinion on these financial statements based on our audits.  We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement.  An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by the Managing General Partner, and evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for the opinion expressed above.

As described in Note 1 to the financial statements, the Partnership adopted a
plan of liquidation on December 31, 1999 and as a result changed its basis of
accounting for periods subsequent to December 31, 1999 from the going concern
basis to the liquidation basis of accounting.



/s/ PricewaterhouseCoopers LLP
--------------------------
Boston, Massachusetts
March 21, 2000


                                      14
<PAGE>

COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP

BALANCE SHEETS
(in liquidation as of December 31, 1999)
<TABLE>
<CAPTION>

                                                    December 31,
                                              -------------------------
                                                 1999          1998
                                              -----------  ------------
<S>                                           <C>          <C>
ASSETS

Real estate investments:
 Joint ventures                               $        -   $ 4,819,346
 Property, net                                         -     7,023,843
                                              ----------   -----------
                                                            11,843,189

Cash and cash equivalents                     $1,559,851     2,163,411
                                              ----------   -----------
                                              $1,559,851   $14,006,600
                                              ==========   ===========

LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                              $   48,751   $    52,798
Accrued management fee                                 -        35,897
Deferred disposition fee                               -        29,250
Accrued expenses for liquidation                  64,000             -
                                              ----------   -----------
Total liabilities                                112,751       117,945
                                              ----------   -----------

Partners' capital (deficit):
 Limited partners ($242 and $800 per unit;
   respectively, 100,000 units authorized;
  27,641 units issued and outstanding)         1,465,444    13,936,821
 General partners                                (18,344)      (48,166)
                                              ----------   -----------
Total partners' capital                        1,447,100    13,888,655
                                              ----------   -----------

                                              $1,559,851   $14,006,600
                                              ==========   ===========

</TABLE>


               (See accompanying notes to financial statements)


                                      15
<PAGE>

COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP

STATEMENTS OF OPERATIONS
(in liquidation as of December 31, 1999)
<TABLE>
<CAPTION>

                                                 Year ended December 31,
                                         -------------------------------------
                                            1999         1998         1997
                                         -----------  -----------  -----------
<S>                                      <C>          <C>          <C>
INVESTMENT ACTIVITY

Property rentals                         $  479,466   $  988,047   $1,234,451
Property operating expenses                 (56,390)    (105,723)    (195,179)
Depreciation and amortization               (80,126)    (315,530)    (393,374)
                                         ----------   ----------   ----------
                                            342,950      566,794      645,898

Joint venture earnings                      273,590      356,404      319,953
                                         ----------   ----------   ----------

 Total real estate operations               616,540      923,198      965,851

 Gain on sale of property                 4,076,353            -    1,490,313

 Reversal of deferred disposition fee        29,250            -            -
                                         ----------   ----------   ----------

  Total real estate activity              4,722,143      923,198    2,456,164

Interest on cash equivalents
 and short-term investments                 151,784      109,707      118,914
                                         ----------   ----------   ----------

  Total investment activity               4,873,927    1,032,905    2,575,078
                                         ----------   ----------   ----------

PORTFOLIO EXPENSES

Management fee                              124,149      143,590      169,519
General and administrative                   85,401       89,903      102,067
Estimated liquidation period expenses        64,000            -            -
                                         ----------   ----------   ----------
                                            273,550      233,493      271,586
                                         ----------   ----------   ----------

NET INCOME                               $4,600,377   $  799,412   $2,303,492
                                         ==========   ==========   ==========

Net income per limited
  partnership unit                       $   164.77   $    28.63   $    82.50
                                         ==========   ==========   ==========

Cash distributions per limited
  partnership unit                       $   615.96   $    53.00   $   262.39
                                         ==========   ==========   ==========

Number of limited partnership
  units outstanding during the year          27,641       27,641       27,641
                                         ==========   ==========   ==========

</TABLE>
               (See accompanying notes to financial statements)


                                      16
<PAGE>

COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP

STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
(in liquidation as of December 31, 1999)


<TABLE>
<CAPTION>


                                                         Year ended December 31,
                                --------------------------------------------------------------------------
                                         1999                      1998                     1997
                                ------------------------  -----------------------  -----------------------
                                 General      Limited      General     Limited      General     Limited
                                Partners     Partners     Partners     Partners    Partners     Partners
                                ---------  -------------  ---------  ------------  ---------  ------------
<S>                             <C>        <C>            <C>        <C>           <C>        <C>

Balance at beginning of year    $(48,166)  $ 13,936,821   $(41,362)  $14,610,376   $(46,978)  $19,582,641

Cash distributions               (16,182)   (17,025,750)   (14,798)   (1,464,973)   (17,419)   (7,252,722)

Net income                        46,004      4,554,373      7,994       791,418     23,035     2,280,457
                                --------   ------------   --------   -----------   --------   -----------
Balance at end of year          $(18,344)  $  1,465,444   $(48,166)  $13,936,821   $(41,362)  $14,610,376
                                ========   ============   ========   ===========   ========   ===========

</TABLE>

               (See accompanying notes to financial statements)


                                      17
<PAGE>

<TABLE>
<CAPTION>
COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS
(in liquidation as of December 31, 1999)
                                                              Year ended December 31,
                                                  ----------------------------------------
                                                        1999          1998          1997
                                                        ----          ----          ----
<S>                                               <C>            <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                        $  4,600,377   $   799,412   $ 2,303,492
 Adjustments to reconcile net
   income to net cash provided
   by operating activities:
 Depreciation and amortization                          80,126       315,530       393,374
 Equity in joint venture earnings                     (273,590)     (356,404)     (319,953)
 Cash distributions from joint ventures                462,675       601,959       772,792
 Gain on sale of property                           (4,076,353)            -    (1,490,313)
Increase in property deferred lease commission        (115,349)       (6,911)            -
Decrease in investment income receivable                     -         2,628         4,492
 Increase (decrease) in operating
   liabilities                                          24,056          (309)        1,892
 Increase in other net assets                          (59,867)      (10,720)     (107,829)
                                                  ------------   -----------   -----------
       Net cash provided by operating activities       642,075     1,345,185     1,557,947
                                                  ------------   -----------   -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Net proceeds from sale of property                 15,825,547             -     5,686,165
 Deferred disposition fee                                    -             -        29,250
 Reversal of deferred disposition fee                  (29,250)            -             -
 Decrease in short-term
   investments, net                                          -       196,364       299,627
                                                  ------------   -----------   -----------
Net cash provided by investing activities           15,796,297       196,364     6,015,042

CASH FLOWS FROM FINANCING ACTIVITY:
 Distributions to partners                         (17,041,932)   (1,479,771)   (7,270,141)
                                                  ------------   -----------   -----------
       Net cash used in financing activity         (17,041,932)   (1,479,771)   (7,270,141)
                                                  ------------   -----------   -----------

Net increase (decrease) in cash and cash
 equivalents                                          (603,560)       61,778       302,848

Cash and cash equivalents
 Beginning of year                                   2,163,411     2,101,633     1,798,785
                                                  ------------   -----------   -----------

 End of year                                      $  1,559,851   $ 2,163,411   $ 2,101,633
                                                  ============   ===========   ===========

</TABLE>

                (See accompanying notes to financial statements)


                                      18
<PAGE>

COPLEY REALTY INCOME PARTNERS 3;
A LIMITED PARTNERSHIP

NOTES TO FINANCIAL STATEMENTS

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

General
-------

   Copley Realty Income Partners 3; A 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 commenced operations in October 1988, and acquired its real
estate investments prior to the end of 1989. The Partnership sold its last
remaining investment in August 1999. On December 31, 1999, the Partnership
adopted a plan of liquidation.

   The Managing General Partner of the Partnership is Third Income Corp., a
wholly-owned subsidiary of AEW Real Estate Advisors, Inc. ("AEW"), formerly
known as Copley Real Estate Advisors ("Copley"). The associate general partner
is GCOP Associates Limited Partnership, a Massachusetts limited partnership.
Subject to the Managing General Partner's overall authority, the business of the
Partnership is managed by AEW pursuant to an advisory contract.

   On December 10, 1996, Copley's parent, New England Investment Companies,
Limited Partnership ("NEIC"), a publicly traded master limited partnership,
acquired certain assets subject to then existing liabilities from Aldrich,
Eastman & Waltch, Inc. and its affiliates and principals (collectively, "the AEW
Operations"). Simultaneously, a new entity, AEW Capital Management L.P. was
formed, into which NEIC contributed its interests in Copley and its affiliates.
As a result, the AEW Operations were combined with Copley to form the business
operations of AEW Capital Management, L.P. At year end 1997, NEIC completed a
restructuring plan under which it contributed all of its operations to a newly
formed private partnership, NEIC Operating Partnership, L.P., in exchange for a
general partnership interest in the newly formed entity. Accordingly, at
December 31, 1997, AEW Capital Management, L.P. was wholly owned by NEIC
Operating Partnership, L.P. AEW is a subsidiary of AEW Capital Management, L.P.
Effective April 1, 1998, NEIC changed its name to Nvest, L.P. and NEIC Operating
Partnership, L.P. changed its name to Nvest Companies, L.P.

   Prior to August 30, 1996, New England Mutual Life Insurance Company ("The New
England") was NEIC's principal unit holder and owner of all the outstanding
stock of NEIC's general partner. On August 30, 1996, The New England merged with
and into Metropolitan Life Insurance Company ("Met Life"). Met Life is the
surviving entity and, therefore, through a wholly-owned subsidiary, became the
owner of the units of partnership interest previously owned by The New England
and of the stock of NEIC's general partner.

Management
----------

   AEW, as advisor, is entitled to receive stipulated fees from the Partnership
in consideration of services performed in connection with the management of the
Partnership and acquisition and disposition of Partnership investments in real
property. Partnership management fees are 9% of distributable cash flow from
operations, as defined, before deducting such fees. AEW is also reimbursed for
expenses incurred in connection with administering the Partnership ($12,000 in
1999, $12,000 in 1998, and $12,000 in 1997). Acquisition fees were based on 3%
of the gross proceeds from the offering and paid at the time commitments were
initially funded. Disposition fees are limited to the lesser of 3% of the
selling price of the property, or 50% of the standard real estate commission
customarily charged by an independent real estate broker. Payments of
disposition fees are subject to the prior receipt by the limited partners of
their capital contributions plus a stipulated return thereon. Based on the
Partnership's returns to date and the sale of the Partnership's sole remaining
real estate investment in August, 1999 (as discussed in Note 3), the Managing
General Partner determined that previously accrued deferred disposition fees of
$29,250 would not be paid and, accordingly, reversed such fees in 1999.


                                      19
<PAGE>

   New England Securities Corporation, an indirect subsidiary of Met Life, is
engaged by the Partnership to act as its unit holder servicing agent. Fees and
out-of-pocket expenses for such services totaled $3,279, $3,014 and $2,834 in
1999, 1998 and 1997, respectively. Fees to Back Bay Advisors, L.P., a wholly-
owned subsidiary of Nvest Companies, L.P., for short-term investment advisory
services totaled $0, $2,014 and $1,726 in 1999, 1998 and 1997, respectively.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------

Liquidation Basis of Accounting
-------------------------------

   In connection with its adoption of a plan of liquidation on December 31,
1999, 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.

Accounting Estimates
--------------------

   The preparation of financial statements in conformity with generally accepted
accounting principles requires the Managing General Partner to make estimates
affecting the reported amounts of assets and liabilities, and of revenues and
expenses. In the Partnership's business, certain estimates require an assessment
of factors not within management's control, such as the ability of tenants to
perform under long-term leases and the ability of the properties to sustain
their occupancies in changing markets. Actual results, therefore, could differ
from those estimates.

Real Estate Joint Ventures
--------------------------

   Investments in joint ventures, including loans made to joint ventures which
are in substance real estate investments, were stated at cost, plus (minus)
equity in undistributed joint venture income (losses). Allocations of joint
venture income (losses) were made to the Partnership's venture partners as long
as they had substantial economic equity in the project. Economic equity is
measured by the excess of the appraised value of the property over the
Partnership's total cash investment plus accrued preferential returns and
interest thereon. Currently, the Partnership recorded an amount equal to 100% of
the operating results of the property, after the elimination of all inter-entity
transactions, except for the venture which included an affiliate of the
Partnership, which had substantial economic equity in the project. Joint
ventures were consolidated with the accounts of the Partnership if, and when,
the venture partner no longer shared in the control of the business.

Property
--------

   Property included land and buildings and improvements, which were stated at
cost less accumulated depreciation, plus other operating assets and liabilities.
The Partnership's initial carrying value of a property previously owned by a
joint venture equaled the Partnership's carrying value of the predecessor
investment on the conversion date.

Capitalized Costs, Depreciation and Amortization
------------------------------------------------

   Maintenance and repair costs were expensed as incurred; significant
improvements and renewals were capitalized. Depreciation was computed using the
straight-line method based on the estimated useful lives of the buildings and
improvements.

   Acquisition fees have been capitalized as part of the cost of real estate
investments. Amounts not related to land were being amortized using the
straight-line method over the estimated useful lives of the underlying real
property.

Leases
------

   Leases were accounted for as operating leases. Leasing commissions were
amortized over the terms of the respective leases. Rental income was recognized
on a straight-line basis over the terms of the respective leases.


                                      20
<PAGE>

Realizability of Real Estate Investments
----------------------------------------

   The Partnership considers a real estate investment to be impaired when it
determines the carrying value of the investment is not recoverable through
expected undiscounted cash flows from the operations and disposition of the
property. The impairment loss is based on the excess of the investment's
carrying value over its estimated fair market value. For investments being held
for disposition, the impairment loss also includes estimated costs of sale.
Investments held for disposition are not depreciated during the holding period.
Investments are considered to be held for disposition at the time management
commits the Partnership to a plan to dispose of the investment.

Cash Equivalents and Short-Term Investments
-------------------------------------------

   Cash equivalents are stated at cost plus accrued interest. The Partnership
considers all highly liquid investments purchased with a maturity of ninety days
or less to be cash equivalents; otherwise, they are classified as short-term
investments.

Income Taxes
------------

   A partnership is not liable for income taxes and, therefore, no provision for
income taxes is made in the financial statements of the Partnership. A
proportionate share of the Partnership's income is reportable on each partner's
tax return.

Per Unit Computations
---------------------

   Per Unit computations are based on the number of units of limited partnership
interest outstanding during the year. The actual per unit amount will vary by
partner depending on the date of admission to, or withdrawal from, the
Partnership.

Segment Data
------------

   Effective January 1, 1998, the Partnership adopted Financial Accounting
Standards Board Statement No. 131, "Disclosures about Segments on an Enterprise
and Related Information" (FAS 131). Based on criteria established in FAS 131,
the Managing General Partner has determined that the Partnership operates in one
operating segment: investing in real estate properties which are domiciled in
the United States of America.

NOTE 3 - REAL ESTATE JOINT VENTURES
-----------------------------------

   The Partnership had invested in two real estate joint ventures organized as
general partnerships with a real estate management/development firm and, in one
case, with an affiliate of the Partnership. The ownership of both ventures was
restructured in 1996, as described below. The Partnership made capital
contributions to the ventures, which were subject to preferential cash
distributions at a specified rate and to priority distributions with respect to
sale or refinancing proceeds. The Partnership also made a mortgage loan to one
of the ventures. The joint venture agreements provided for the funding of cash
flow deficits by the venture partners in proportion to ownership interests, and
for the dilution of ownership share in the event a venture partner did not
contribute proportionately.

   The respective real estate management/development firms were responsible for
day-to-day development and operating activities, although overall authority and
responsibility for the business was shared by the venturers. The real estate
management/development firms, or their affiliates, also provided various
services to the joint ventures for a fee.


                                      21
<PAGE>

   The following is a summary of cash invested in joint ventures, net of returns
of capital and excluding investment acquisition fees:
<TABLE>
<CAPTION>

                                                             December 31,
                             Rate of       Ownership  ------------------------
Investment/Location     Return/Interest    Interest       1999         1998
---------------------  -----------------  ----------  ------------  ----------
<S>                    <C>                <C>         <C>           <C>
Shasta Way
 Simi Valley, CA           10.0%  (C)            58%         $   -  $6,726,051
</TABLE>
(C) Capital contribution

Shasta Way
----------

   On September 29, 1989, the Partnership entered into a joint venture with an
affiliate of the Partnership, and with an affiliate of The Hewson Company, to
construct and operate an industrial facility in Simi Valley, California. The
Partnership committed to make, and as of December 31, 1997 had completely
funded, capital contributions of up to $7,612,500. The venture owned land on
which it completed construction of an industrial building in 1991. Effective
January 1, 1996, the joint venture was restructured, and the Hewson Company's
interest was assigned to the Partnership and its affiliate in proportion to
their respective ownership interests. The Partnership's ownership percentage
increased from 34.8% to 58%; its affiliate's interest was increased to 42%.

   On August 27, 1999, the joint venture sold its property to an unaffiliated
third party for gross proceeds of $13,057,000, of which the Partnership's share
was $7,573,060. The Partnership received its 58% share of the net proceeds,
after closing costs, in the amount of $7,444,456, and recognized a gain of
$2,702,113 ($96.78 per limited partnership unit) on the sale. On September 22,
1999 the Partnership made a capital distribution of $7,297,224 ($264.00 per
limited partnership unit) from the proceeds of the sale.

South Bay Associates
--------------------

   Effective January 1, 1996, this joint venture was restructured and the joint
venture partner's ownership interest was assigned to the Partnership. The
investment was accounted for as a wholly-owned property through the date of sale
on July 27, 1997. (See Note 4).

Summarized Financial Information
--------------------------------

The following summarized financial information is presented in the aggregate for
the joint ventures:

                            Assets and Liabilities
                            ----------------------
<TABLE>
<CAPTION>
                                                 December 31,
                                            ----------------------
                                            1999              1998
                                            ----              ----
<S>                                     <C>            <C>
Assets
 Real property, at cost less
  accumulated depreciation
  of $1,084,004 at December 31, 1998     $        -       $7,146,195
 Other                                            -          153,318
                                         ----------       ----------
                                                           7,299,513

Liabilities                                       -           70,400
                                         ----------       ----------

   Net assets                            $        -       $7,229,113
                                         ==========       ==========

</TABLE>


                                      22
<PAGE>

                             Results of Operations
                             ---------------------
<TABLE>
<CAPTION>
                                         Year ended December 31,
                                      ----------------------------
                                      1999        1998        1997
                                      ----        ----        ----
<S>                               <C>         <C>         <C>
Revenue
 Rental income                    $  997,109  $1,258,609  $1,205,152
 Other                                 3,336       2,269       5,914
                                  ----------  ----------  ----------
                                   1,000,445   1,260,878   1,211,066
                                  ----------  ----------  ----------

Expenses
 Depreciation and amortization       308,955     460,785     460,785
 Operating expenses                  219,783     183,877     196,910
                                  ----------  ----------  ----------
                                     528,738     644,662     657,695
                                  ----------  ----------  ----------

Net income                        $  471,707  $  616,216  $  553,371
                                  ==========  ==========  ==========

</TABLE>
   Liabilities and expenses exclude amounts owed and attributable to the
Partnership and (with respect to our joint ventures) its affiliate on behalf of
their various financing arrangements with the joint ventures.

NOTE 4 - INVESTMENT IN PROPERTY
-------------------------------

The following is a summary of the Partnership's investment in property:
<TABLE>
<CAPTION>

                                            December 31,
                                         -----------------
                                         1999         1998
                                         ----        -----
<S>                                  <C>          <C>

   Land                              $         -  $ 2,991,854
   Buildings and improvements                  -    5,978,755
   Accumulated depreciation                    -   (2,239,389)
   Deferred costs, net                         -      352,489
   Other net assets (liabilities)              -      (59,866)
                                     -----------  -----------
    Net carrying value               $         -  $ 7,023,843
                                     ===========  ===========
</TABLE>
   The net carrying value at December 31, 1998 is comprised solely of the Brea
West property.

   Brea West
   ---------

   On April 28, 1989, the Partnership entered into a joint venture agreement to
construct and operate an industrial facility in Brea, California. The
Partnership contributed $9,078,799 to the capital of the venture. The venture
partner was unable to fund its proportionate share of the cost overruns and,
effective June 30, 1991, the venture partner's ownership share was reduced to
zero and the property became wholly-owned by the Partnership.

   The building was being depreciated over 30 years. Tenant improvements were
being depreciated over the original lease term.

   On June 25, 1999, the Partnership sold the Brea West property for a gross
sale price of $8,530,000. The Partnership received net proceeds of $8,381,091,
after closing costs, and recognized a gain of $1,374,240 ($49.22 per limited
partnership unit) on the sale. On July 29, 1999 the Partnership made a capital
distribution of $8,126,454 ($294.00 per limited partnership unit) from the
proceeds of the sale.

   South Bay Associates
   --------------------

   On May 18, 1989, the Partnership entered into a joint venture with an
affiliate of South Bay Construction and Development Co. Inc., to acquire and
operate a research and development facility in San Jose, California. The
Partnership invested $7,028,247 in the joint venture in the form of capital
contributions and a


                                      23
<PAGE>

mortgage loan. Effective January 1, 1996, the joint venture was restructured and
the joint venture partner's ownership interest was assigned to the Partnership.
The carrying value of the joint venture investment at conversion ($4,180,704)
was allocated to land, building and improvements, an investment valuation
allowance, and other net operating assets.

   On July 22, 1997, the South Bay property was sold to the sole tenant which
exercised the purchase option under its lease for gross consideration of
$5,850,000. The Partnership received net proceeds of $5,715,415, after closing
costs, and recognized a gain of $1,490,313 ($53.38 per limited partnership unit)
on the sale. A disposition fee of $29,250 was accrued but not paid to AEW.
On July 24, 1997, the Partnership made a capital distribution of $5,528,200
($200 per limited partnership unit) from the proceeds of the sale.

NOTE 5 - INCOME TAXES
---------------------

   The Partnership's income for federal income tax purposes differs from that
reported in the accompanying statement of operations as follows:
<TABLE>
<CAPTION>

                                                  Year ended December 31,
                                               -----------------------------
                                               1999          1998       1997
                                               ----          ----       ----
<S>                                       <C>           <C>         <C>

Net income per financial
 statements                                $4,600,377   $  799,412  $ 2,303,492

Timing differences:
  Joint venture earnings (losses)             (68,309)     173,100      (85,995)
  Rental revenue                                   59            -       79,451
  Expenses                                     67,243        6,814       11,090
  Depreciation                               (340,370)      85,597       79,040
  Loss on sale                               (308,464)           -   (2,008,862)
                                           ----------   ----------  -----------

Taxable income                             $3,950,536   $1,064,923  $   378,216
                                           ==========   ==========  ===========

</TABLE>

NOTE 6 - PARTNERS' CAPITAL
--------------------------

   Allocation of net income (losses) from operations and distributions of
distributable cash from operations, as defined, are in the ratio of 99% to the
limited partners and 1% to the general partners. Cash distributions are made
quarterly.

   Net sales proceeds and financing proceeds are be allocated first to limited
partners to the extent of their contributed capital plus a stipulated return
thereon, as defined, second to pay disposition fees, and then 85% to the limited
partners and 15% to the general partners. Income from sales is allocated in
proportion to the distribution of related proceeds, provided that the general
partners are allocated at least 1%. Income or losses from sales, if there are no
residual proceeds after the repayment of the related debt, will be allocated 99%
to the limited partners and 1% to the general partners.


                                      24
<PAGE>

                             FINANCIAL STATEMENTS
                                  INDEX NO. 2

                   AUDITOR'S REPORT AND FINANCIAL STATEMENTS

                           OF SHASTA WAY ASSOCIATES



Report of Independent Auditors from PricewaterhouseCoopers LLP

Balance Sheets - December 31, 1998 and 1997

Statements of Operations - For the Years ended December 31, 1998, 1997 and 1996

Statements of Partners' Capital - For the Years ended December 31, 1998, 1997
and 1996

Statements of Cash Flows - For the Years ended December31, 1998, 1997 and 1996

Notes to Financial Statements


                                      25
<PAGE>

               [PRICEWATERHOUSECOOPERS LETTERHEAD APPEARS HERE]

                       REPORT OF INDEPENDENT ACCOUNTANTS



To the Partners
Shasta Way Associates

We have audited the accompanying balance sheets of Shasta Way Associates (a
California general partnership) as of December 31, 1998 and 1997, and the
related statements of operations, partners' capital, and cash flows for each of
the three years in the period ended to December 31, 1998.  These financial
statements are the responsibility of the Partnership's management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.  We conducted our audit in accordance with generally accepted
auditing standards.  Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.  In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Shasta Way
Associates at December 31, 1998 and 1997, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 1998
in conformity with generally accepted accounting principles.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Boston, MA


                                      26
<PAGE>

SHASTA WAY ASSOCIATES
(A California General Partnership)
December 31, 1998
BALANCE SHEET
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                              December 31,
                                                                   1998                         1997
                                                              -------------------------------------------
<S>                                                          <C>                             <C>
ASSETS
     Cash                                                     $   150,180                     $     8,718
     Tenant Receivables                                                 -                         116,212
     Rental Property
                  Land                                          2,977,867                       2,977,867
                  Buildings                                     6,807,151                       6,803,913
                  Accumulated depreciation                     (2,575,455)                     (2,146,952)
                                                              -----------                     -----------
                                                                7,209,563                       7,634,828

     Other Assets - net of accumulated
       amortization of $216,646 and $181,717
       in 1998 and 1997, respectively.                              5,953                          40,883

                                                              $ 7,365,696                     $ 7,800,641
                                                              ===========                     ===========

LIABILITIES AND PARTNERS' CAPITAL
     Security deposits                                        $    62,400                     $    62,400
     Accounts payable and accrued expenses                          8,000                          18,652
     Due to partners
                  CRIP 3                                        2,104,381                       1,802,692
                  CRIP 4                                        1,523,709                       1,305,250
     Partners' capital                                          3,667,206                       4,611,647
                                                              -----------                     -----------
                                                              $ 7,365,696                     $ 7,800,641
                                                              ===========                     ===========
</TABLE>


                                      27
<PAGE>

SHASTA WAY ASSOCIATES
(A California General Partnership)
December 31, 1998
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                 Year ended December 31,
                                                        1998             1997              1996
                                                    -----------------------------------------------
<S>                                                <C>               <C>                <C>
REVENUE
       Rental income                                $1,092,432        $1,045,432         $1,045,432
       Tenant reimbursments                            166,176           159,720            162,773
       Interest and other income                         2,269             5,914              3,636
                                                    ----------        ----------         ----------
                                                     1,260,877         1,211,066          1,211,841
                                                    ----------        ----------         ----------
EXPENSES
       Rental operating expenses                       172,796           184,831            160,800
       General and administrative                       11,081            12,079             22,411
       Depreciation and amortization                   463,433           463,433            463,433
       Guaranteed payments
                       CRIP 3                          903,648           881,430            868,326
                       CRIP 4                          654,360           638,272            628,733
                                                    ----------        ----------         ----------
                                                     2,205,318         2,180,045          2,143,703

NET LOSS                                            $ (944,441)       $ (968,979)        $ (931,862)
                                                    ==========        ==========         ==========
</TABLE>


                                      28
<PAGE>

SHASTA WAY ASSOCIATES
(A California General Partnership)
December 31, 1998
STATEMENT OF PARTNERS' CAPITAL
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                          Hewson Shasta            Copley Realty            Copley Realty
                                            Way  L.P.            Income Partners 3        Income Partners 4        Total
                                     -------------------------------------------------------------------------------------
<S>                                      <C>                    <C>                      <C>                   <C>
Partners' capital - (deficit)
     December 31, 1995                    $ (604,984)              $4,128,133               $2,989,339          $6,512,488
Transfer of interest                         604,984                 (350,891)                (254,093)                  -
Net loss  - 1996                                   -                 (540,480)                (391,382)           (931,862)
                                     -------------------------------------------------------------------------------------
Partners' capital
     December 31, 1996                             -                3,236,762                2,343,864           5,580,626
Net loss - 1997                                    -                 (562,008)                (406,971)           (968,979)
                                     -------------------------------------------------------------------------------------
Partners' capital
     December 31, 1997                             -                2,674,755                1,936,893           4,611,647
Net loss  - 1998                                   -                 (547,776)                (396,665)           (944,441)
                                     -------------------------------------------------------------------------------------
Partners' capital
     December  31, 1998                            -               $2,126,978               $1,540,228          $3,667,206
                                     =====================================================================================
</TABLE>


                                      29
<PAGE>

SHASTA WAY ASSOCIATES
(A California General Partnership)
December 31, 1998
STATEMENT OF CASH FLOWS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                           Year ended December 31,
                                                                                      1998          1997         1996
                                                                                  ---------------------------------------
<S>                                                                               <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss                                                                       $(944,441)    $(968,979)    $(931,862)
           Adjustments to reconcile net loss to net cash
           provided by operating activities
                        Depreciation and amortization                                 463,433       463,433       463,433
                        Decrease in tenant receivable                                 116,212       154,082       151,238

                        (Decrease) / Increase in accounts payable and
                        accrued expenses                                              (10,652)        6,467         4,014

                        Increase in due to partners                                   520,148       187,302       376,259
                                                                                  ---------------------------------------
           Total adjustments                                                        1,089,141       811,284       994,944


           Net cash  (used in) provided by operating activities                       144,700      (157,695)       63,082
                                                                                  ---------------------------------------

CASH  FLOWS FROM INVESTING ACTIVITIES
     Additions to rental property                                                      (3,238)            -             -

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

Net (decrease) increase in cash                                                       141,462      (157,695)       63,082
Cash beginning of year                                                                  8,718       166,413       103,331
                                                                                  ---------------------------------------
Cash at year end                                                                      150,180         8,718       166,413
                                                                                  =======================================
</TABLE>


                                      30
<PAGE>

SHASTA WAY ASSOCIATES
(A California General Partnership)
NOTES TO THE FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1. ORGANIZATION AND OTHER MATTERS

Shasta Way Associates, formerly Hewson Shasta Way Associates (the Partnership),
was formed September 29, 1989 as a California general partnership for the
purpose of developing and operating a commercial industrial property in Simi
Valley, California.  The percentage ownership interests through December 31,
1995 were as follows:

  Hewson Shasta Way L.P., a California limited partnership (Hewson)  40.0%
  Copley Realty Income Partners 3 (CRIP 3)                           34.8%
  Copley Realty Income Partners 4 (CRIP 4)                           25.2%

CRIP 3 and CRIP 4 were committed to contribute an aggregate of approximately
$13,125,000 to the Partnership; subsequently, the Partnership Agreement provides
for pro rata contributions by all partners.  CRIP 3 and CRIP 4 contributed
$7,111,757 and $5,149,893, respectively, through December 31, 1998.

CRIP 3 and CRIP 4 are entitled to preferential cash payments to the extent of a
stipulated return on their invested capital (Note 4).  Prior to 1992, for
financial reporting purposes, income and losses were allocated to the partners
in accordance with their respective ownership interests, based on the long-term
substance of the business enterprise and the requirement for all partners for
fund capital, as described above.  For the years ended December 31, 1995, net
income (loss) was allocated entirely to CRIP 3 and CRIP 4.

On January 1, 1996, the partners executed an Amended and Restated Statement of
Partnership Agreement whereby Hewson transferred all of its right, title and
interest in and to the Partnership to CRIP 3 and CRIP 4.  The percentage
ownership interests are as follows:

  Copley Realty Income Partners 3 (CRIP 3)                           58.0%
  Copley Realty Income Partners 4 (CRIP 4)                           42.0%

Beginning January 1, 1996, income and losses are allocated to CRIP 3 and CRIP 4
in accordance with the ownership interests.


2.  SIGNIFICANT ACCOUNTING POLICES

RENTAL PROPERTY

Rental property includes land and buildings and improvements, which are stated
at cost less accumulated depreciation. The Partnership considers the property to
be impaired when it determines the carrying value of the investment is not
recoverable through expected undiscounted cash flows from operations and
disposition of the property. An impairment loss, if any, would be based on the
excess of the investment's carrying value over its estimated fair market value.
The Partnership does not consider the property impaired at December 31,1998 or
1997.

INCOME RECOGNITION

The Partnership's rental property is leased to a tenant used an operating lease.
The lease includes a provision whereby the tenant is not responsible for rental
payments for specified occupancy periods.  Rental income is recognized over the
lease term on a straight-line basis.  Included in tenant receivables are  $0,
and  $98,760 of deferred rent receivable for both December 31, 1998 and 1997,
respectively.


                                      31
<PAGE>

SHASTA WAY ASSOCIATES
(A California General Partnership)
NOTES TO THE FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


INCOME TAXES

Federal and state income taxes are not payable by the Partnership, since the
partners report their proportionate share of taxable income or loss on their
separate tax returns.

DEPRECIATION AND AMORTIZATION

Depreciation is provided on the straight-line method over the estimated lives of
the assets, which are 31.5 years for the building and the term of the tenant's
lease for tenant improvements.

Included in other assets are leasing commissions, which are amortized over the
related tenant's lease.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

2.  RENTAL PROPERTY

At December 31, 1989 the rental property under development consisted of
approximately 12 acres of land with two existing buildings.  During 1990, the
existing buildings were demolished and construction of a 235,080 square-foot
industrial building commenced.  Construction was completed in June 1991.

The Partnership's property is being leased to a tenant under an operating lease
which expires in December 1998.   However in  February 1999, the tenant
exercised an option to renew the lease until December 2003. The lease provides
for the tenant to reimburse the Partnership for operating expenses.

The aggregate minimum rents due to the ventures under a non-cancelable lease
are: 1999- $1,297,641; 2000 - $1,297,641; 2001 - $1,310,618; 2002 - $1,323,594;
2003 - $1,323,594.


3.  RELATED PARTY TRANSACTIONS

The Partnership agreement provides that CRIP 3 and CRIP 4 will be paid
guaranteed payments of 10% per annum on invested capital (as defined).  The
cumulative unpaid guaranteed payments are included in due to partners in the
accompanying balance sheets.

Included in rental operating expenses are $39,032, $40,339, and $40,783 of
management fees paid to Hewson Properties, Inc. in 1998, 1997, and 1996,
respectively.  These fees are paid at a rate of 3% of gross rental income
received.


                                      32
<PAGE>

                                 EXHIBIT INDEX
                                 -------------
<TABLE>
<CAPTION>

EXHIBIT NUMBER                                                      PAGE NUMBER
--------------                                                      -----------
<S>                                                                 <C>
10A.        Joint Venture Agreement of South Bay/CRIP 3                  *
            Associates Joint Venture dated as of March 27,
            1989 by and between Copley Realty Income Partners 3;
            A Limited Partnership and SBC and D Co., Inc.

10B.        General Partnership Agreement of Brea West                   *
            Associates dated as of April 28, 1989 between BW
            Partners and Copley Realty Income Partners 3; A
            Limited Partnership.

10C.        First Amendment to Brea West Associates General              *
            Partnership Agreement dated as of April 28, 1989
            by and between Copley Realty Income Partners 3;
            A Limited Partnership and BW Partners.

10D.        Pledge and Security Agreement for Brea West                  *
            Associates dated as of April 28, 1989 by and
            among BW Partners, Copley Realty Income Partners
            3; A Limited Partnership, and Tar Partners.

10E         General Partnership Agreement of Hewson Shasta Way           *
            Associates dated as of September 29, 1989 between
            Hewson/Shasta Way L.P., Copley Realty Income
            Partners 3; A Limited Partnership and Copley Realty
            Income Partners 4; A Limited Partnership.

10F.        Purchase Agreement and Escrow Instruction                    *
            and Railroad Spur Agreement dated as of
            May 17, 1991 by and between NI Industries, Inc.,
            a Delaware corporation, and Brea West Associates

10G.        Agreement for Dissolution, Distribution and                  *
            Winding-Up of Brea West Associates dated
            May 31, 1991 by and between BW Partners, a
            California general partnership, and the
            Registrant

10H.        Incentive Property Management Agreement                      *
            effective as of May 31, 1991 by and between
            TRI-Partners, a California general partnership,
            and the Registrant

10I.        Lease between South Bay/CRIP 3, a California                 *
            general partnership ("Landlord"), and Media Arts
            Group, Inc., a Delaware Corporation ("Tenant)" dated
            February 7, 1994.
</TABLE>


                                      33
<PAGE>

                                 EXHIBIT INDEX
                                 -------------
<TABLE>
<CAPTION>

EXHIBIT NUMBER                                                      PAGE NUMBER
--------------                                                      -----------
<S>                                                                 <C>
10J.        First Amendment to Lease by and between                      *
            South Bay/CRIP 3, a California general partnership
            ("Landlord"), and Media Arts Group, Inc., a Delaware
            Corporation ("Tenant)" dated April 15, 1994.

10K.        Second Amendment to Lease by and between                     *
            South Bay/CRIP 3, a California general partnership
            ("Landlord"), and Media Arts Group, Inc., a Delaware
            Corporation ("Tenant)" dated June 23, 1994.

10L.        Promissory Note dated May 1, 1994 by and between             *
            South Bay/CRIP III Associates Joint Venture,
            a California general partnership, as Holder,
            and CXR Telcom Corporation, a Delaware
            Corporation, as Maker.

10M.        Assignment and Assumption and Indemnity Agreement            *
            dated January 1, 1996, by and between Hewson/Shasta
            Way L.P., a California limited partnership
            ("Assignor"), Copley Realty Income Partners 3;
            a Limited Partnership, a Massachusetts limited
            partnership ("CRIP 3"), and Copley Realty Income
            Partners 4; a Limited Partnership, a Massachusetts
            limited partnership ("CRIP 4").

10N.        First Amendment to General Partnership Agreement             *
            dated January 1, 1996, as amended to date (the
            "Partnership Agreement") of Hewson Shasta Way
            Associates, a California general partnership, by and
            among Hewson/Shasta Way L.P., a California limited
            partnership, Copley Realty Income Partners 3; a
            Limited Partnership, a Massachusetts limited
            partnership ("CRIP 3"), and Copley Realty Income
            Partners 4; a Limited Partnership, a Massachusetts
            limited partnership ("CRIP 4").

27.         Financial Data Schedule

</TABLE>
____________________________________________
*  Previously filed and incorporated herein by reference


                                      34
<PAGE>

                                  SIGNATURES
                                  ----------


   Pursuant to the requirements of Section 13 or 15(d) 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.

                                          COPLEY REALTY INCOME PARTNERS 3;
                                          A LIMITED PARTNERSHIP



Date:  March 28, 2000                     By: /s/ Alison Husid Cutler
                                              -----------------------
                                              Alison Husid Cutler
                                              President of the
                                              Managing General Partner


   Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

         Signature                   Title                     Date
         ---------                   -----                     ----


                               President, Chief
 /s/  Alison Husid Cutler      Executive Officer and
-------------------------      Director of the Managing    March 28, 2000
   Alison Husid Cutler         General Partner


                               Vice President and
 /s/  Pamela J. Herbst         Director of the Managing    March 28, 2000
----------------------
   Pamela J. Herbst            General Partner

                               Vice President and
 /s/  J. Grant Monahon         Director of the Managing    March 28, 2000
----------------------
   J. Grant Monahon            General Partner


/s/  James J. Finnegan         Vice President of the       March 28, 2000
----------------------
   James J. Finnegan           Managing General Partner


                               Treasurer and Principal
/s/  Karin J. Lagerlund        Financial and Accounting
-----------------------
   Karin J. Lagerlund          Officer  of the Managing    March 28, 2000
                               General Partner


                                      35