SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-Q
(Mark One)

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

For the quarterly period ended March 31, 1999
                               --------------
                                      OR

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

For the transition period from              to             
                               ------------    ------------
Commission file number 0-14348
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                      BALCOR EQUITY PENSION INVESTORS-III
                      A REAL ESTATE LIMITED PARTNERSHIP         
            -------------------------------------------------------
            (Exact name of registrant as specified in its charter)

          Illinois                                      36-3354308    
-------------------------------                     -------------------
(State or other jurisdiction of                      (I.R.S. Employer  
incorporation or organization)                      Identification No.)

2355 Waukegan Road
Bannockburn, Illinois                                     60015    
----------------------------------------            ------------------- 
(Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code (847) 267-1600
                                                   --------------

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     
    -----     -----
<PAGE>
                     BALCOR EQUITY PENSION INVESTORS - III
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                                BALANCE SHEETS
                     March 31, 1999 and December 31, 1998
                                  (Unaudited)

                                    ASSETS

                                                1999             1998
                                           --------------   --------------
Cash and cash equivalents                  $   2,928,816    $   2,961,482
Accounts and accrued interest receivable          14,113            8,461
Prepaid expenses                                   1,896
Escrow deposits - restricted                     109,526          109,526
                                           --------------   --------------
                                           $   3,054,351    $   3,079,469
                                           ==============   ==============


                       LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                           $      37,692    $      47,555
Due to affiliates                                 56,111           53,814
                                           --------------   --------------
    Total liabilities                             93,803          101,369
                                           --------------   --------------

Commitments and contingencies

Limited Partners' capital (683,204
  Interests issued and outstanding)            3,557,854        3,575,406
General Partner's deficit                       (597,306)        (597,306)
                                           --------------   --------------
    Total partners' capital                    2,960,548        2,978,100
                                           --------------   --------------
                                           $   3,054,351    $   3,079,469
                                           ==============   ==============
                                                          
The accompanying notes are an integral part of the financial statements.
<PAGE>
                     BALCOR EQUITY PENSION INVESTORS - III
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                       STATEMENTS OF INCOME AND EXPENSES
                for the quarters ended March 31, 1999 and 1998
                                  (Unaudited)


                                                1999             1998
                                           --------------   --------------
Income:
  Interest on short-term investments       $      38,010    $      57,646
  Other income                                     3,437
                                           --------------   --------------
    Total income                                  41,447           57,646
                                           --------------   --------------
Expenses:
  Administrative                                  58,999          138,000
  Other expense                                                     3,600
                                           --------------   --------------
    Total expenses                                58,999          141,600
                                           --------------   --------------
Net loss                                   $     (17,552)   $     (83,954)
                                           ==============   ==============
Net loss allocated to General Partner              None     $      (2,976)
                                           ==============   ==============
Net loss allocated to Limited Partners     $     (17,552)   $     (80,978)
                                           ==============   ==============
Net loss per Limited Partnership Interest
  (683,204 issued and outstanding)
  - Basic and Diluted                      $       (0.03)   $       (0.12)
                                           ==============   ==============
Distribution to General Partner                    None     $      26,067
                                           ==============   ==============
Distribution to Limited Partners                   None     $   5,617,898
                                           ==============   ==============
Distribution per Limited Partnership 
  Interest:
    Taxable                                        None             None 
                                           ==============   ==============
    Tax-Exempt                                     None     $        8.86
                                           ==============   ==============

The accompanying notes are an integral part of the financial statements.
<PAGE>
                     BALCOR EQUITY PENSION INVESTORS - III
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                           STATEMENTS OF CASH FLOWS
                for the quarters ended March 31, 1999 and 1998
                                  (Unaudited)

                                                1999             1998
                                           --------------   --------------
Operating activities:
  Net loss                                 $     (17,552)   $     (83,954)
  Adjustments to reconcile net loss
    to net cash (used in) or provided 
    by operating activities:
      Net change in:
        Accounts and accrued interest
          receivable                              (5,652)         147,955
        Prepaid expenses                          (1,896)          (1,914)
        Accounts payable                          (9,863)           1,144
        Due to affiliates                          2,297           10,309
                                           --------------   --------------
  Net cash (used in) or provided by 
    operating activities                         (32,666)          73,540
                                           --------------   --------------
Financing activities:
  Distribution to Limited Partners                             (5,617,898)
  Distribution to General Partner                                 (26,067)
                                                            --------------
  Cash used in financing activities                            (5,643,965)
                                                            --------------
Net change in cash and cash equivalents          (32,666)      (5,570,425)
Cash and cash equivalents at beginning
  of period                                    2,961,482        8,638,754
                                           --------------   --------------
Cash and cash equivalents at end of period $   2,928,816    $   3,068,329
                                           ==============   ==============

The accompanying notes are an integral part of the financial statements.
<PAGE>
                      BALCOR EQUITY PENSION INVESTORS-III
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                         NOTES TO FINANCIAL STATEMENTS

1. Accounting Policy:

In the opinion of management, all adjustments necessary for a fair presentation
have been made to the accompanying statements for the quarter ended March 31,
1999, and all such adjustments are of a normal and recurring nature.

2. Partnership Termination:

The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. The Partnership sold its final real estate investment in October
1997. The Partnership has retained a portion of the cash from the property
sales to satisfy obligations of the Partnership as well as to establish a
reserve for contingencies. The timing of the termination of the Partnership and
final distribution of cash will depend upon the nature and extent of
liabilities and contingencies which exist or may arise. Such contingencies may
include legal and other fees and costs stemming from litigation involving the
Partnership. There can be no assurances as to the time frame for the conclusion
of contingencies which exist or may arise.

3. Transactions with Affiliates:

Fees and expenses paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1999 are:

                                               
                                       Paid       Payable
                                    ------------  ---------        

   Reimbursement of expenses to
     the General Partner, at cost    $ 10,315     $ 56,111 


4. Other Income:

During 1999, the Partnership received $3,437 representing a refund of real
estate taxes related to the Green Trails Apartments, which was sold in 1996.
This amount has been recognized as other income for financial statement
purposes.

5. Contingency:

The Partnership was involved in a lawsuit, Dee vs. Walton Street Capital
Acquisition II, LLC, whereby the Partnership, the General Partner and certain
third parties were named as defendants seeking damages relating to tender 
<PAGE>
offers to purchase interests in the Partnership and nine affiliated
partnerships initiated by the third party defendants in 1996. The action has
been dismissed with prejudice, which dismissal was affirmed by the Appellate
Court of Illinois. Plaintiffs filed a further appeal to the Illinois Supreme
Court. The Illinois Supreme Court has issued a ruling in which it has declined
to hear the appeal. As a result, the Appellate Court of Illinois dismissed the
case on April 22, 1999.
<PAGE>
                      BALCOR EQUITY PENSION INVESTORS-III
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                     MANAGEMENT'S DISCUSSION AND ANALYSIS

Balcor Equity Pension Investors-III A Real Estate Limited Partnership (the
"Partnership") is a limited partnership formed in 1985 to make first mortgage
loans and to invest in and operate income-producing real property. The
Partnership raised $170,801,000 through the sale of Limited Partnership
Interests. The Partnership funded four first mortgage loans, two of which were
jointly funded with affiliates, and acquired five real property investments and
a minority joint venture interest with an affiliate in another real property
investment.  As of March 31, 1999, the Partnership has no loans outstanding or
properties remaining in its portfolio.

Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1998 for a more complete understanding of
the Partnership's financial position.

Operations
----------
Summary of Operations
---------------------

The operations of the Partnership in 1999 and 1998 consisted primarily of
administrative expenses which were partially offset by interest income earned
on short-term investments. As a result of lower administrative expenses in
1999, the Partnership's net loss decreased during the quarter ended March 31,
1999 as compared to the same period in 1998. The decrease in the net loss was
partially offset by lower interest income earned on short-term investments.
Further discussion of the Partnership's operations is summarized below.

1999 Compared to 1998
---------------------

Discussions of fluctuations between 1999 and 1998 refer to the quarters ended
March 31, 1999 and 1998. 

As a result of higher average cash balances in 1998 due to the distribution to
Limited Partners in January 1998 and lower interest rates in 1999, interest
income on short-term investments decreased during 1999 as compared to 1998.

During the first quarter of 1999, the Partnership received $3,437 representing
a refund of real estate taxes related to the Green Trails Apartments, which was
sold in 1996. This amount has been recognized as other income for financial
statement purposes.

Primarily due to a decrease in accounting and investor processing fees,
administrative expenses decreased during 1999 as compared to 1998. 
<PAGE>
During March 1998, the Partnership recognized other expense of $3,600 related
to the settlement of a dispute with a vendor at the Erindale Centre Shopping
Center.
 
Liquidity and Capital Resources
-------------------------------

The cash position of the Partnership decreased by approximately $33,000 as of
March 31, 1999 as compared to December 31, 1998 due to cash used in operating
activities for the payment of administrative expenses, which was partially
offset by interest income earned on short-term investments. 

The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. The Partnership sold its final real estate investment in October
1997. The Partnership has retained a portion of the cash from the property
sales to satisfy obligations of the Partnership as well as to establish a
reserve for contingencies. The timing of the termination of the Partnership and
final distribution of cash will depend upon the nature and extent of
liabilities and contingencies which exist or may arise. Such contingencies may
include legal and other fees and costs stemming from litigation involving the
Partnership. There can be no assurances as to the time frame for the conclusion
of contingencies which exist or may arise. See "Item 1. Legal Proceedings" for
additional information.

The Partnership sold the Arborland Consumer Mall in October 1997. In connection
with the sale, $109,526 related to tenant reimbursements was placed in escrow
at closing and will be held in escrow until such time as the buyer receives
reimbursement from the tenants. The Partnership expects to receive the full
amount of the escrow. 
 
Limited Partners have received Net Cash Receipts distributions of $103.98 per
$250 Taxable Interest and $138.36 per $250 Tax-exempt Interest, and Net Cash
Proceeds of $159.97 per $250 Tax-exempt Interest. Distributions to Tax-exempt
Limited Partners total $298.33 per $250 Interest. No additional distributions
are anticipated to be made prior to the termination of the Partnership.
However, after paying final partnership expenses, any remaining cash reserves
will be distributed in accordance with the Partnership Agreement. Amounts
allocated to the Repurchase Fund will also be distributed at that time. Taxable
Limited Partners will not receive aggregate distributions from the Partnership
equal to their original investment. However, Taxable Limited Partners will
receive a distribution from amounts allocated to the Repurchase Fund. 

In 1997, the Partnership discontinued the repurchase of Interests from Limited
Partners. As of March 31, 1999, there were 19,585 Interests and cash of
$2,770,137 in the Repurchase Fund.

The Partnership sold all of its remaining real property investments and
distributed a majority of the proceeds from these sales to Limited Partners in
1996 and 1997. Since the Partnership no longer has any operating assets, the
number of computer systems and programs necessary to operate the Partnership
has been significantly reduced. The Partnership relies on third party vendors 
<PAGE>
to perform most of its functions and has implemented a plan to determine the
Year 2000 compliance status of these key vendors. The Partnership is within its
timeline for having these plans completed prior to the year 2000.

The Partnership's plan to determine the Year 2000 compliance status of its key
vendors involves the solicitation of information from these vendors through the
use of surveys, follow-up discussions and review of data where needed. The
Partnership has sent out surveys to these vendors and received back a majority
of these surveys. While the Partnership cannot guarantee Year 2000 compliance
by its key vendors, and in many cases will be relying on statements from these
vendors without independent verification, preliminary surveys indicate that the
key vendors performing services for the Partnership are aware of the issues and
are working on a solution to achieve compliance before the year 2000. The
Partnership is in the process of developing a contingency plan in the event any
of its key vendors are not Year 2000 compliant prior to the year 2000. As part
of its contingency plan, the Partnership will identify replacement vendors in
the event that current vendors are not substantially Year 2000 compliant by
June 30, 1999. The Partnership does not believe that failure by any of its key
vendors to be Year 2000 compliant by the year 2000 would have a material effect
on the business, financial position or results of operations of the
Partnership.
<PAGE>
                      BALCOR EQUITY PENSION INVESTORS-III
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                          PART II - OTHER INFORMATION

Item 1. Legal Proceedings
-------------------------

The Illinois Supreme Court has issued a ruling in which it has declined to hear
the appeal filed by the plaintiffs in the Dee vs. Walton Street Capital
Acquisition II, LLC case. As a result, the Appellate Court of Illinois
dismissed the case on April 22, 1999. This case will be deleted from all future
reports of the Partnership.

Item 6.  Exhibits and Reports on Form 8-K
-----------------------------------------

(a) Exhibits:

(4) Form of Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 3
to the Registrant's Registration Statement on Form S-11 dated September 25,
1985 (Registration Statement No. 2-97579) and Form of Confirmation regarding
Interests in the Registrant set forth as Exhibit 4.2 to the Registrant's Report
on Form 10-Q for the quarter ended June 30, 1992 (Commission File No. 0-14348)
are incorporated herein by reference.

(10) Material Contracts:

(a) Agreement of Sale and attachment thereto relating to the sale of Belmont
Apartments, Renton, Washington, previously filed as Exhibit (2) to the
Registrant's Current Report on Form 8-K dated May 16, 1997, is incorporated
herein by reference. 

(b)(i) Agreement of Sale and attachment thereto relating to the sale of the
Erindale Centre Shopping Center, Colorado Springs, Colorado, previously filed
as Exhibit (2)(i) to the Registrant's Current Report on Form 8-K dated June 2,
1997, is incorporated herein by reference.

(b)(ii) First Amendment to Agreement of Sale relating to the sale of the
Erindale Centre Shopping Center, Colorado Springs, Colorado, previously filed
as Exhibit (2)(ii) to the Registrant's Current Report on Form 8-K dated June 2,
1997, is incorporated herein by reference.

(b)(iii) Second Amendment to Agreement of Sale relating to the sale of the
Erindale Centre Shopping Center, Colorado Springs, Colorado, previously filed
as Exhibit (99)(a) to the Registrant's Current Report on Form 8-K dated June
17, 1997, is incorporated herein by reference.

(c)(i) Agreement of Sale and attachment thereto relating to the sale of
Arborland Consumer Mall, Ann Arbor, Michigan, previously filed as Exhibit
(2)(a) to the Registrant's Current Report on Form 8-K dated June 17, 1997, is
incorporated herein by reference.
<PAGE>
(c)(ii) First Amendment to Agreement of Sale and Escrow Agreement relating to
the sale of the Arborland Consumer Mall, Ann Arbor, Michigan, previously filed
as Exhibit (2)(b) to the Registrant's Current Report on Form 8-K dated June 17,
1997, is incorporated herein by reference.

(27) Financial Data Schedule of the Registrant for the quarter ending March 31,
1999 is attached hereto.
 
(b) Reports on Form 8-K: No Reports were filed on Form 8-K during the quarter
ended March 31, 1999.
<PAGE>
SIGNATURES

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


                        BALCOR EQUITY PENSION INVESTORS-III
                        A REAL ESTATE LIMITED PARTNERSHIP


                        By:  /s/Thomas E. Meador
                             ---------------------------------                
                             Thomas E. Meador
                             President and Chief Executive Officer (Principal 
                             Executive Officer) of Balcor Equity Partners - 
                             III, the General Partner



                        By:  /s/Jayne A. Kosik
                             -----------------------------------
                             Jayne A. Kosik
                             Senior Managing Director and Chief Financial 
                             Officer (Principal Accounting and Financial 
                             Officer) of Balcor Equity Partners - III, the 
                             General Partner



Date: May 6, 1999
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