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, 1998
                               --------------
                                      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, 1998 and December 31, 1997
                                  (Unaudited)

                                    ASSETS

                                               1998             1997
                                           --------------   --------------
Cash and cash equivalents                  $   3,068,329    $   8,638,754
Accounts and accrued interest receivable          24,441          172,396
Escrow deposits - restricted                     134,526          134,526
Prepaid expenses                                   1,914
                                           --------------   --------------
                                           $   3,229,210    $   8,945,676
                                           ==============   ==============

                       LIABILITIES AND PARTNERS' CAPITAL

Accounts payable                           $      45,856    $      44,712
Due to affiliates                                 54,458           44,149
                                           --------------   --------------
    Total liabilities                            100,314           88,861
                                           --------------   --------------

Commitments and contingencies

Limited Partners' capital (683,204
  Interests issued and outstanding)            3,724,674        9,423,550
General Partner's deficit                       (595,778)        (566,735)
                                           --------------   --------------
    Total partners' capital                    3,128,896        8,856,815
                                           --------------   --------------
                                           $   3,229,210    $   8,945,676
                                           ==============   ==============
                                                          
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 three months ended March 31, 1998 and 1997
                                  (Unaudited)

                                                1998             1997
                                           --------------   --------------
Income:
  Rental                                                    $   1,780,110
  Service                                                         607,000
  Interest on short-term investments       $      57,646          208,098
                                           --------------   --------------
    Total income                                  57,646        2,595,208
                                           --------------   --------------
Expenses:
  Depreciation                                                    447,188
  Amortization of deferred expenses                                46,514
  Property operating                                            1,028,265
  Real estate taxes                                               282,607
  Property management fees                                        106,088
  Administrative                                 138,000          221,901
  Other expense                                    3,600
                                           --------------   --------------
    Total expenses                               141,600        2,132,563
                                           --------------   --------------
(Loss) income before gain on sale 
  of property                                    (83,954)         462,645
Gain on sale of property                                          770,345
                                           --------------   --------------
Net (loss) income                          $     (83,954)   $   1,232,990
                                           ==============   ==============
Net (loss) income allocated to 
  General Partner                          $      (2,976)   $      98,401
                                           ==============   ==============
Net (loss) income allocated to 
  Limited Partners                         $     (80,978)   $   1,134,589
                                           ==============   ==============
Net (loss) income per Limited Partnership
  Interest (683,204 issued and outstanding)
  - Basic and Diluted                      $       (0.12)   $        1.66
                                           ==============   ==============
Distribution to General Partner            $      26,067    $     277,369
                                           ==============   ==============
Distribution to Limited Partners           $   5,617,898    $  26,451,647
                                           ==============   ==============
Distribution per Limited Partnership 
  Interest:
    Taxable                                        None     $        2.80
                                           ==============   ==============
    Tax-Exempt                             $        8.86    $       41.50
                                           ==============   ==============

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 three months ended March 31, 1998 and 1997
                                  (Unaudited)

                                                1998             1997
                                           --------------   --------------
Operating activities:
  Net (loss) income                        $     (83,954)   $   1,232,990
  Adjustments to reconcile net (loss)
    income to net cash provided by
    operating activities:
      Gain on sale of property                                   (770,345)
      Depreciation of properties                                  447,188
      Amortization of deferred expenses                            46,514
      Net change in:
        Accounts and accrued interest
          receivable                             147,955          114,138
        Prepaid expenses                          (1,914)         195,964
        Accounts payable                           1,144         (126,358)
        Due to affiliates                         10,309            1,224
        Accrued liabilities                                       230,825
        Security deposits                                         (26,394)
                                           --------------   --------------
  Net cash provided by operating
    activities                                    73,540        1,345,746
                                           --------------   --------------
Investing activities:
  Proceeds from sale of property                                5,768,000
  Payment of selling costs                                       (289,417)
  Distributions from joint ventures
    with affiliates                                               220,882
  Capital contribution to joint venture
    with affiliate                                                (39,705)
                                                            --------------
  Net cash provided by investing activities                     5,659,760
                                                            --------------
Financing activities:
  Distribution to Limited Partners            (5,617,898)     (26,451,647)
  Distribution to General Partner                (26,067)        (277,369)
                                           --------------   --------------
  Cash used in financing activities           (5,643,965)     (26,729,016)
                                           --------------   --------------

Net change in cash and cash equivalents       (5,570,425)     (19,723,510)
Cash and cash equivalents at beginning
  of period                                    8,638,754       35,523,271
                                           --------------   --------------
Cash and cash equivalents at end of period $   3,068,329    $  15,799,761
                                           ==============   ==============
                         
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 Policies:

(a) The loss allocation between the Limited Partners and the General Partner
has been adjusted for financial statement purposes in order that the capital
account balances more accurately reflect their remaining economic interests as
provided for in the Partnership Agreement.

(b) 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, 1998, 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.  During 1997, the Partnership sold its remaining five properties.
The Partnership has retained a portion of the cash from the property sales to
satisfy obligations of the Partnership as well as 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
including, but not limited to, the lawsuit discussed in Note 4 of Notes to
Financial Statements. In the absence of any such contingencies, the reserves
will be paid within twelve months of the last property being sold. In the event
a contingency continues to exist or arises, reserves may be held by the
Partnership for a longer period of time.

3. Transactions with Affiliates:

Fees and expenses paid and payable by the Partnership to affiliates during the
quarter ended March 31, 1998 are:
                                               
                                       Paid       Payable
                                    ------------  ---------        

   Reimbursement of expenses to
     the General Partner, at cost    $ 14,434     $ 54,458 

4. Contingency:

The Partnership is currently involved in a lawsuit whereby the Partnership, the
General Partner and certain third parties have been named as defendants seeking
damages relating to tender offers to purchase interests in the Partnership and
nine affiliated partnerships initiated by the third party defendants in 1996. 
<PAGE>
The defendants continue to vigorously contest this action. The action has been
dismissed with prejudice and plaintiffs have filed an appeal, which is pending.
It is not determinable at this time whether or not an unfavorable decision in
this action would have a material adverse impact on the Partnership's financial
position, results of operations or liquidity. The Partnership believes it has
meritorious defenses to contest the claims.

5. Subsequent Event:

In April 1998, the Partnership made a distribution of $13,756 ($0.28 per
Taxable Interest) to the holders of Taxable Limited Partnership Interests. This
amount represents a distribution of remaining available Net Cash Receipts
reserves.
<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, 1998, 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 1997 for a more complete understanding of
the Partnership's financial position.

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

Administrative expenses were higher than interest income earned on short-term
investments during the quarter ended March 31, 1998.  As a result, the
Partnership recognized a net loss for the quarter ended March 31, 1998.  During
1997, the Partnership recognized income from the operations of five properties
and recognized a gain on the sale of the Ammendale Technology Park - Phase II
office buildings.  These were the primary reasons the Partnership recognized
net income for the quarter ended March 31, 1997.  Further discussion of the
Partnership's operations are summarized below.

1998 Compared to 1997
---------------------

Discussions of fluctuations between 1998 and 1997 refer to the quarters ended
March 31, 1998 and 1997.

During 1997, the Partnership sold the Ammendale Technology Park - Phase II
office buildings, the Belmont Apartments, the Erindale Centre Shopping Center,
the Bingham Farms Office Plaza - Phase IV and the Arborland Consumer Mall.  As
a result, rental income, service income, depreciation, amortization of deferred
expenses, property operating expenses, real estate taxes, and property
management fees ceased during 1997.

Higher average cash balances were available for investment during 1997 due to
proceeds received in connection with the 1996 and February 1997 property sales
prior to distribution to Limited Partners in January 1997 and April 1997.  This
resulted in a decrease in interest income on short-term investments during 1998
as compared to 1997.
<PAGE>
During 1998, the Partnership paid other expense of $3,600 related to the
Erindale Centre Shopping Center, as discussed below.

During 1997, the Partnership incurred higher accounting, portfolio management
and legal fees which was the primary reason administrative expenses decreased
during 1998 as compared to 1997.

The Partnership sold the Ammendale Technology Park - Phase II office buildings
in February 1997, and recognized a gain of $770,345 in connection with the
property sale.  

Liquidity and Capital Resources
-------------------------------

The cash position of the Partnership decreased by approximately $5,570,000 as
of March 31, 1998 when compared to December 31, 1997 primarily due to the
distribution made to Tax-exempt Limited Partners in January 1998 consisting
primarily of proceeds received in connection with the October 1997 sale of the
Arborland Consumer Mall.  Operating activities generated cash of approximately
$74,000 and consisted of the collection of certain operating accounts
receivable and interest income earned on short-term investments, which were
partially offset by the payment of administrative expenses.  Financing
activities consisted of a distribution to the Partners of approximately
$5,644,000.  In April 1998, the Partnership made a distribution to Taxable
Limited Partners of approximately $14,000, as discussed below. 

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.  During 1997, the Partnership sold its remaining five properties.
The Partnership has retained a portion of the cash from the property sales to
satisfy obligations of the Partnership as well as 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
including, but not limited to, the lawsuit discussed in Note 4 of Notes to
Financial Statements. In the absence of any such contingencies, the reserves
will be paid within twelve months of the last property being sold. In the event
a contingency continues to exist or arises, reserves may be held by the
Partnership for a longer period of time. 
 
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 payment of these
reimbursements are received from the tenants in 1998. 
 
The Partnership sold the Erindale Centre Shopping Center in August 1997.  In
connection with the sale, $25,000 of the sale proceeds was placed in escrow at
closing until the settlement of a dispute with a vendor at the property was
reached.  In March 1998, the Partnership paid $3,600 to the vendor in
settlement of the dispute.  In April 1998, the $25,000 escrow was released to
the Partnership in full.  

In April 1998, the Partnership made a distribution of $13,756 ($0.28 per 
<PAGE>
Taxable Interest) to the holders of Taxable Limited Partnership Interests. This
amount represents a distribution of remaining available Net Cash Receipts
reserves.  In April 1998, the Partnership also paid $1,146 to the General
Partner as its distributive share of Net Cash Receipts distributed in April
1998 and made a contribution to the Repurchase Fund of $382.  

Including the April 1998 distribution, Limited Partners have received Net Cash
Receipts distributions of $103.98 per $250 Taxable Interest and $138.36 per
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
Interest.  In accordance with the Partnership Agreement, Net Cash Proceeds from
property sales have been allocated to the Tax-exempt Limited Partners. Taxable
and Tax-exempt Limited Partners received quarterly distributions from Net Cash
Receipts.  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.  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 February 1997, the Partnership discontinued the repurchase of Interests from
Limited Partners.  As of March 31, 1998, there were 19,585 Interests and cash
of $2,768,421 in the Repurchase Fund.
<PAGE>
                      BALCOR EQUITY PENSION INVESTORS-III
                       A REAL ESTATE LIMITED PARTNERSHIP
                       (An Illinois Limited Partnership)

                          PART II - OTHER INFORMATION

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 the Green
Trails Apartment, Lisle, Illinois previously filed as Exhibit (2) to the
Registrant's Current Report on Form 8-K dated June 28, 1996 is incorporated
herein by reference.

(b)  Agreement of Sale and attachment thereto relating to the sale of the 1275
K Street Office Building, Washington, D.C., previously filed as Exhibit (2) to
the Registrant's Current Report on Form 8-K dated November 29, 1996 is
incorporated herein by reference.

(c) (i) Agreement of Sale and attachment thereto relating to the sale of
Bingham Farms Office Plaza - Phase IV, Bingham Farms, Michigan, previously
filed as Exhibit (10)(d) to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997 is incorporated herein by reference. 

(c) (ii) First Letter Amendment to Agreement of Sale relating to the sale of
Bingham Farms Office Plaza - Phase IV, Bingham Farms, Michigan, previously
filed as Exhibit (99)(b)(i) to the Registrant's Current Report on Form 8-K
dated June 17, 1997, is incorporated herein by reference.

(c) (iii) Second Amendment to Agreement of Sale relating to the sale of Bingham
Farms Office Plaza - Phase IV, Bingham Farms, Michigan, previously filed as
Exhibit (99)(b)(ii) to the Registrant's Current Report on Form 8-K dated June
17, 1997, is incorporated herein by reference.

(d) 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. 

(e)(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.
<PAGE>
(e)(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.

(e)(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.

(f)(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.

(f)(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 three month period
ending March 31, 1998 is attached hereto.
 
(b) Reports on Form 8-K: A Current Report on Form 8-K dated January 15, 1998
was filed reporting the status of proposed class action litigation to which the
Registrant was a party.
<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 Officer) of Balcor
                              Equity Partners - III, the General Partner



Date: May 12, 1998
      -----------------
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