JMB MORTGAGE PARTNERS LTD III, 10-Q, 1995-08-14

JMB MORTGAGE PARTNERS LTD III
10-Q, 1995-08-14
REAL ESTATE

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Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549

Re: JMB Mortgage Partners, Ltd.-III
Commission File No. 0-16253
Form 10-Q

Gentlemen:

Transmitted, for the above-captioned registrant, is the
electronically filed executed copy of registrant's current
report on Form 10-Q for the quarter ended June 30, 1995.

Thank you.

Very truly yours,

JMB MORTGAGE PARTNERS, LTD.- III

By: JMB Realty Corporation
Corporate General Partner

By:
_______________________________
C. Scott Nelson, Vice President
Accounting Officer

CSN:gd

Enclosures

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the quarter Commission file number 0-16253
ended June 30, 1995

JMB MORTGAGE PARTNERS, LTD. - III
(Exact name of registrant as specified in its charter)

Illinois 36-3346551
(State of organization) (IRS Employer Identification No.)

900 N. Michigan Ave., Chicago, IL 60611
(Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code 312/915-1987

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
--- ---

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

Item 1. Financial Statements . . . . . . . . . . . . . .3

Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . 24

PART II OTHER INFORMATION

Item 5. Other Information. . . . . . . . . . . . . . . 30

Item 6. Exhibits and Reports on Form 8-K . . . . . . . 31

<TABLE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 31, 1994
(UNAUDITED)

ASSETS
<CAPTION>
June 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . . . . .$ 4,506,071 10,278,236
Short-term investments (note 1). . . . . . . . . . . . . . . . . . 4,125,501 393,123
Interest and other receivables . . . . . . . . . . . . . . . . . . 346,243 329,057
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . -- 28,769
------------ ------------
Total current assets. . . . . . . . . . . . . . . . . . . . . . 8,977,815 11,029,185

Investment property (note 2)
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,434,411 10,434,411
Building and improvements. . . . . . . . . . . . . . . . . . . . . 15,023,487 14,933,079
------------ ------------
25,457,898 25,367,490

Less accumulated depreciation. . . . . . . . . . . . . . . . . . . (2,006,186) (1,683,840)
------------ ------------
Total investment property, net of depreciation. . . . . . . . . 23,451,712 23,683,650

Mortgage notes receivable (net of allowance for loan loss of
$0 in 1995 and $99,000 in 1994 (note 5)). . . . . . . . . . . . . . 29,397,026 32,518,098
Deferred interest receivable (net of allowances for
loan loss of $1,691,218 in 1995 and $2,125,761 in 1994
(note 5)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,020,757 935,250
Investment in unconsolidated venture, at equity (note 5(a)). . . . . 3,106,337 --
Deferred expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 191,338 220,533
------------ ------------
66,144,985 63,386,716
============ ============
3

JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED BALANCE SHEETS - CONTINUED

LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)

June 30, December 31,
1995 1994
------------ ------------
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . .$ 65,533 59,349
Due to affiliates. . . . . . . . . . . . . . . . . . . . . . . . . 29,036 411,464
Accrued real estate taxes. . . . . . . . . . . . . . . . . . . . . 176,691 143,943
Other current liabilities. . . . . . . . . . . . . . . . . . . . . 121,070 139,349
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . 392,330 754,105
------------ ------------
Tenant security deposits . . . . . . . . . . . . . . . . . . . . . 22,097 37,638
------------ ------------
Commitments and contingencies (notes 2, 4 and 5)

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 414,427 791,743
------------ ------------

Venture partner's equity in ventures (note 2). . . . . . . . . . . . 8,672,848 10,437,237
Partners' capital accounts:
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings . . . . . . . . . . . . . . . . . . . . 2,622,235 2,404,776
Cumulative cash distributions . . . . . . . . . . . . . . . . . (2,745,259) (2,527,800)
------------ ------------
(122,024) (122,024)
------------ ------------

Limited partners (65,237.69 interests):
Capital contributions, net of offering costs. . . . . . . . . . 57,758,561 57,758,561
Cumulative net earnings . . . . . . . . . . . . . . . . . . . . 32,022,032 30,164,926
Cumulative cash distributions . . . . . . . . . . . . . . . . . (32,600,859) (30,643,727)
------------ ------------
57,179,734 57,279,760
------------ ------------

JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED BALANCE SHEETS - CONCLUDED

June 30, December 31,
1995 1994
------------ ------------

Total partners' capital accounts. . . . . . . . . . . . . . . . 57,057,710 57,157,736
------------ ------------

66,144,985 68,386,716
============ ============

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
5

<TABLE>
JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF OPERATIONS

THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994

(UNAUDITED)

Three Months Ended Six Months Ended
June 30 June 30
-------------------------- --------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income:
Interest income . . . . . . . . . . $ 848,547 937,579 1,700,199 1,677,760
Rental income . . . . . . . . . . . . 892,634 955,820 1,816,387 1,832,597
------------ ------------ ------------ ------------
1,741,181 1,893,399 3,516,586 3,510,357
------------ ------------ ------------ ------------
Expenses:
Depreciation. . . . . . . . . . . . . 161,173 162,692 322,346 319,812
Property operating expenses . . . . . 341,089 381,303 670,186 682,746
Mortgage investment servicing
fees . . . . . . . . . . . . . . . . 18,994 20,271 39,128 40,335
Professional services . . . . . . . . 24,920 26,371 56,329 51,372
Amortization of deferred
expenses . . . . . . . . . . . . . . 8,002 4,294 26,759 15,624
General and administrative. . . . . . 60,871 45,462 109,958 75,649
------------ ------------ ------------ ------------
615,049 640,393 1,224,706 1,185,538
------------ ------------ ------------ ------------

Operating earnings . . . . . . . . 1,126,132 1,253,006 2,291,880 2,324,819

JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF OPERATIONS - CONCLUDED

Venture partner's share of
ventures' operations
(note 2) . . . . . . . . . . . . . . (145,656) (157,879) (329,173) (314,513)
------------ ------------ ------------ ------------

Net earnings . . . . . . . . . . $ 1,030,776 1,095,127 2,074,565 2,010,306
============ ============ ============ ============
Net earnings per limited
partnership interest
(notes 1 and 3) . . . . . . . . $ 14.14 15.40 28.47 28.04
============ ============ ============ ============

Cash distributions per
limited partnership
interest (note 1) . . . . . . . $ 15.00 12.50 30.00 25.00
============ ============ ============ ============

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
7

<TABLE>
JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 1995 AND 1994

(UNAUDITED)
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . $ 2,074,565 2,010,306
Items not requiring cash or cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . . . . 322,346 319,812
Amortization of deferred expenses. . . . . . . . . . . . 26,759 15,624
Partnership's share of operations of
unconsolidated venture, net of distributions. . . . . . 18,342 --
Venture partners' share of ventures' operations. . . . . 329,173 314,513
Changes in:
Interest and other receivables . . . . . . . . . . . . . (17,186) 120,178
Prepaid expenses . . . . . . . . . . . . . . . . . . . . 28,769 10,128
Deferred interest receivable . . . . . . . . . . . . . . (85,507) (70,826)
Accounts payable . . . . . . . . . . . . . . . . . . . . 6,184 (9,737)
Due to affiliates. . . . . . . . . . . . . . . . . . . . (382,428) (2,940)
Accrued real estate taxes. . . . . . . . . . . . . . . . 32,748 149,639
Other current liabilities. . . . . . . . . . . . . . . . (18,279) (68,773)
Tenant security deposits . . . . . . . . . . . . . . . . (15,541) 6,744
------------ ------------

Net cash provided by operating activities . . . . . . 2,319,945 2,794,668
------------ ------------

Cash flows from investing activities:
Partnership's distributions to venture partners. . . . . (2,093,562) --

JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

1995 1994
------------ ------------
Net sales and maturities (purchases) of
short-term investments. . . . . . . . . . . . . . . . . (3,732,378) 4,571,812
Additions to investment property . . . . . . . . . . . . (90,408) (24,535)
Partnership's contribution to unconsolidated
venture . . . . . . . . . . . . . . . . . . . . . . . . (3,607) --
Refund of deferred costs . . . . . . . . . . . . . . . . 2,436 --
Collection of principal on mortgage notes
receivable (note 5(d)). . . . . . . . . . . . . . . . . -- 108,932
------------ ------------

Net cash provided by (used in) investing
activities . . . . . . . . . . . . . . . . . . . . . (5,917,519) 4,656,209
------------ ------------
Cash flows from financing activities:
Distributions to limited partners. . . . . . . . . . . . (1,957,132) (1,630,946)
Distributions to general partners. . . . . . . . . . . . (217,459) (181,215)
------------ ------------

Net cash used in financing activities . . . . . . . . (2,174,591) (1,812,161)
------------ ------------

Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . . . . (5,772,165) 5,638,716

Cash and cash equivalents, beginning of year. . . . . 10,278,236 793,190
------------ ------------
Cash and cash equivalents, end of period. . . . . . $ 4,506,071 6,431,906
============ ============
Supplemental disclosure for cash flow information:
Cash paid for mortgage and other interest. . . . . . . $ -- --
============ ============

JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONCLUDED

1995 1994
------------ ------------
Non-cash investing and financing activities:
Balance due on mortgage note receivable (net
of allowance for loan loss of $99,000)
(note 5(a)). . . . . . . . . . . . . . . . . . . . . $ 3,121,072 --

Partnership contribution to unconsolidated
venture. . . . . . . . . . . . . . . . . . . . . . . . 3,607 --
------------ ------------
Net carrying value of investment property
(reflected as investment in unconsolidated
venture (note 5(a)). . . . . . . . . . . . . . . . . $ 3,124,679 --
============ ============

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
10

JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 1995 AND 1994

(UNAUDITED)

Readers of this quarterly report should refer to the
Partnership's audited financial statements for the fiscal year
ended December 31, 1994, which are included in the Partnership's
1994 Annual Report, as certain footnote disclosures which would
substantially duplicate those contained in such audited
financial statements have been omitted from this report.

(1) BASIS OF ACCOUNTING

The accompanying consolidated financial statements include the
accounts of the Partnership and its ventures, Calibre Pointe
Associates and North Rivers Market Associates (note 2). The
effect of all the transactions between the Partnership and its
ventures has been eliminated in the consolidated financial
statements. The equity method of accounting has been applied in
the accompanying financial statements in 1995 with respect to
the Partnership's interest in Spring Hill Fashion Center (note
5(a)). Accordingly, the accompanying financial statements do
not include the accounts of Spring Hill Fashion Center.

The Partnership records are maintained on the accrual basis of
accounting as adjusted for Federal income tax reporting
purposes. The accompanying consolidated financial statements
have been prepared from such records after making appropriate
adjustments to present the Partnership's accounts in accordance
with generally accepted accounting principles (GAAP) and to
consolidate the accounts of the ventures as described above.
Such adjustments are not recorded on the records of the
Partnership.

JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
<TABLE>

The net effect of these items is summarized as follows for the six months ended June 30:

1995 1994
--------------------------- --------------------------
GAAP Basis Tax Basis GAAP Basis Tax Basis
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net earnings . . . . . . . . . . . . . $ 2,074,565 1,909,590 2,010,306 2,603,786
Net earnings per limited
partnership interest. . . . . . . . . $ 28.47 26.22 28.04 37.69
=========== =========== =========== ===========

JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The net earnings per limited partnership interest is based
upon the number of Interests outstanding at the end of the
period (65,237.69).

Certain reclassifications have been made to the 1994 financial
statements in order to confirm with the 1995 presentation.

Statement of Financial Accounting Standards No. 95 requires
the Partnership to present a statement which classifies receipts
and payments according to whether they stem from operating,
investing or financing activities. The required information has
been segregated and accumulated according to the classifications
specified in the pronouncement. Partnership distributions from
unconsolidated ventures are considered cash flow from operating
activities only to the extent of the Partnership's cumulative
share of net earnings. The Partnership records amounts held in
U.S. Government obligations at cost which approximates market.
For the purposes of these statements, the Partnership's policy
is to consider all such amounts held with original maturities of
three months or less ($3,702,764 at June 30, 1995 and
$10,077,022 at December 31, 1994) as cash equivalents with any
remaining amounts (generally with original maturities of one
year or less) reflected as short-term investments being held to
maturity.

No provision for state or Federal income taxes has been made
as the liability for such taxes is that of the partners rather
than the Partnership. However, in certain instances, the
Partnership has been required under applicable law to remit
directly to the taxing authorities amounts representing
withholding from distributions paid to partners.

Basic and simple interest income on mortgage notes receivable
is being recognized using the effective interest method which
results in a level effective yield on the outstanding principal
balance. The Partnership is recognizing interest income only as
collected on two of its mortgage loans (notes 5(b) and 5(d)).

Statement of Financial Accounting Standards No. 114,
"Accounting by Creditors for Impairment of a Loan" ("SFAS #114")
became effective in January, 1994. SFAS #114 provides that the
impairment of a collateralized loan that is considered impaired
(as defined) will be recognized by creating a valuation
allowance to the recorded balance of the loan to yield a net
carrying amount of the loan which is equal to the fair value of
the loan collateral. The Partnership has elected to recognize
subsequent changes in the fair value of the collateral as
adjustments to this valuation allowance.

JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(2) VENTURE AGREEMENTS

(a) Calibre Pointe Associates

Reference is made to Note 2(a) of Notes to Financial
Statements included in the Partnership's 1994 Annual Report for
a description of the former $13,250,000 loan funded 62.264% by
the Partnership and 37.736% by JMB Mortgage Partners, Ltd. - IV
("Mortgage Partners - IV"), a partnership affiliated with the
General Partners (jointly, the "Lenders") and secured by the
Calibre Pointe Apartments located in Atlanta, Georgia.

Due to competitive market conditions, the borrower did not
make all of its required 1991 monthly interest payments under
the terms of the mortgage note. Accordingly, the Lenders
provided the borrower with a notice of default. After lengthy
unsuccessful negotiations with the borrower regarding a possible
loan modification, the Lenders obtained legal title to the
property on December 3, 1991 and an affiliate of the General
Partners of the Partnership assumed management of the property
(until December, 1994 when the affiliate sold certain of its
assets and assigned its interest in its contract to an
unaffiliated third party) under an agreement which provided for
a fee computed as a percentage of gross income of the property.
The Lenders contributed the property to a newly formed joint
venture (Calibre Pointe Associates) to own and operate the
complex. The terms of the venture agreement provide, in
general, that the benefits of ownership, including tax effects,
net cash receipts, sale proceeds and future contribution
obligations are allocated or distributed, as the case may be,
between the Partnership and Mortgage Partners - IV in proportion
to their respective capital contributions to the venture
(62.264% by the Partnership). The Partnership recorded its net
carrying value (including liabilities of the property assumed at
acquisition) in the property contributed to the venture in an
amount not in excess of its estimated fair value.

The Partnership along with its joint venture partner, through
the Calibre Pointe Associates, had in 1994 entered into a non-
binding letter of intent to sell its entire interest in the
Calibre Pointe Apartments. The prospective purchaser and the
Partnership failed to negotiate and execute a sales agreement
and terminated further discussions. However, given the
favorable market conditions, the Partnership continues to
examine a potential sale of the property.

(b) North Rivers Market Associates

Reference is made to Notes 2(b) and 5(c) of Notes to Financial
Statements included in the Partnership's 1994 Annual Report for
a description of the former $17,350,000 loan funded 66.4935% by

JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

the Partnership and 33.5065% by Mortgage Partners - IV (jointly,
the "Lenders") and secured by the North Rivers Market investment
property. Due to the significant vacancy level at the property,
the borrower had made only a portion of the required interest
payments for the years 1991 and 1992. In addition, in July
1992, the Lenders became aware that the borrower had not paid
both the 1990 and 1991 real estate taxes when they were due, but
rather had made certain arrangements with the taxing authority
to make monthly installments into an escrow account held by the
taxing authority until such taxes were paid in full. However,
in July 1992, the county overruled the taxing authority and
accelerated all amounts owed by the borrower, which made the
property eligible for auction if the taxes were not paid in
full. As a result, in July 1992, the Lenders exercised their
rights under the mortgage document and paid the past due real
estate tax payments (including interest and penalties) of
approximately $390,000 of which $259,000 represented the
Partnership's share. Such amount was added to the mortgage
balance. Accordingly, the Lenders accelerated all amounts owed
by the borrower and commenced proceedings to realize upon their
security. For income tax reporting purposes, this investment
continued to be accounted for as a loan until May 17, 1993 (as
discussed below). Further, effective September 1, 1992, the
Partnership commenced accounting for the operations of the
property as if the Partnership, through a joint venture, owned
the property.

On May 17, 1993, the borrower, pursuant to a deed in lieu of
foreclosure, transferred legal title of the property to North
Rivers Market Associates ("NRMA") to own and operate the
complex. NRMA is a joint venture in which the Partnership and
Mortgage Partners- IV own 66.4935% and 33.5065% each
respectively. The terms of the venture agreement provide in
general that the benefits of ownership, including tax effects,
net cash receipts, sale proceeds, and future contribution
obligations are allocated or distributed, as the case may be,
between the Partnership and the venture partner in proportion to
their respective capital accounts. An affiliate assumed
management of the property under an agreement which provides for
a fee computed as 6% of gross income of the property.

(3) PARTNERSHIP AGREEMENT

Net profits of the Partnership from operations are generally
allocated to the General Partners in an amount equal to the
greater of 1% of net profits or the amount of net cash flow
actually distributed to the General Partners with the remaining
net profits allocated to the Limited Partners. Any net losses
from Partnership operations will be allocated 90% to the Limited
Partners and 10% to the General Partners. Net profits from the
repayment or other disposition of mortgage investments will
generally be allocated first to the General Partners in an

JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

amount equal to the greater of 1% of such net profits or the
cash distributions to the General Partners from the proceeds of
such repayment or other disposition (as described below). The
remaining net profits from any disposition of mortgage
investments will be allocated to the Limited Partners. Net
losses from the repayment or other disposition of mortgage
investments will be allocated 97% to the Limited Partners and 3%
to the General Partners.

The General Partners are not required to make any capital
contributions except under certain limited circumstances upon
dissolution and termination of the Partnership. Distributions
of "net cash flow" of the Partnership will be made 90% to the
Limited Partners and 10% to the General Partners, with one-half
of such net cash flow distributable to the General Partners in
the first twelve fiscal quarters following the close of the
offering, subordinated to the receipt by the Limited Partners of
a stipulated return on their "current capital accounts".
Distributions of "repayment proceeds" will be made 97% to the
Limited Partners until the Limited Partners have received
repayment proceeds equal to their contributed capital plus a
stipulated return thereon, with the remainder of such 97%
distribution, subject to the General Partners' receipt of any
deferred share of net cash flow, to be distributed 85% to the
Limited Partners and 15% to the General Partners, with one-
quarter of such repayment proceeds distributable to the General
Partners subordinated to the receipt by the Limited Partners of
a stipulated return on their current capital accounts. The
remaining 3% of all distributions of repayment proceeds will be
distributed to the General Partners, subject to certain
limitations. Of the cumulative distributions of $32,600,859
paid to the Limited Partners through June 30, 1995, $1,780,738
represents a 7% return to certain Limited Partners through
February 4, 1986 (the date of the first admittance of the
Limited Partners) and a 6.25% return to certain Limited Partners
from February 5, 1986 through August 31, 1986 (the date of the
final admittance of the Limited Partners) during which periods
the Limited Partners subscription proceeds were held in escrow.

(4) MANAGEMENT AGREEMENTS

Certain of the Partnership's properties are managed by
affiliates of the General Partners or their assignees for fees
computed as a percentage of gross income received by the
properties. In December 1994, one of the affiliated property
managers sold certain of its assets and assigned its interest in
its management contracts to an unaffiliated third party. In
addition, certain management personnel of the property manager
became management personnel of the purchaser and its affiliates.
The successor to the affiliated property manager's assets is
acting as the property manager of the Calibre Pointe Apartments
after the sale on the same terms that existed prior to the sale.

JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

An affiliate of the General Partners currently is acting as the
manager of North Rivers Market Shopping Center for a fee
computed as six percent of gross income of the property.

(5) MORTGAGE NOTES RECEIVABLE

The Partnership has participated in the funding of six
participating first mortgage loans, for five shopping center
properties (Spring Hill Fashion Center, Shoppes at Rivergate,
North Rivers Market, Riverpoint Center, and Franklin Farm
Village Center) and one apartment complex (Calibre Pointe
Apartments). The Partnership has taken title to the underlying
collateral for North Rivers Market and the Calibre Pointe
Apartments (Note 2). Additionally, on January 1, 1995 the
Partnership, Mortgage Partners, Ltd. ("Mortgage Partners"), and
Mortgage Partners, Ltd. - II ("Mortgage Partners - II"),
partnerships affiliated with the General Partner, and jointly
called the "lenders" in-substance foreclosed on the mortgage
loan secured by the Spring Hill Fashion Center. Subsequently,
in early May of 1995 the Lenders obtained legal title to the
property pursuant to a deed in lieu of foreclosure (Note 5(a)).
Generally, the remaining mortgage agreements provide for basic
interest payable monthly at certain specified interest rates
along with annual simple accrued interest (deferred until
maturity) at rates ranging from 2% to 3% per annum and for
additional interest in an amount equal to a percentage of the
gross receipts of the properties in excess of certain specified
levels and an amount equal to a percentage of the subsequent
increases in the value of the underlying properties in excess of
certain specified levels. Any payments of additional interest
made by the borrowers will be used to offset, on a dollar-for-
dollar basis, the borrowers' obligations to pay simple accrued
interest.

(a) Spring Hill Fashion Center, West Dundee, Illinois

Reference is made to Note 5(a) of Notes to Financial
Statements contained in the Partnership's 1994 Annual Report for
a description of the terms of the loan. Through October 1988,
the total amount funded under this loan was $10,030,000 (of
which the Partnership's share was $3,264,765 (32.55%)). The
other two participating lenders are JMB Mortgage Partners, Ltd.-
I and JMB Mortgage Partners, Ltd.-II (jointly the "Lenders"),
both of which are affiliates of the General Partners of the
Partnership. As additional security for the first mortgage
loan, the borrower delivered to the lenders, in January 1988,
two $250,000 irrevocable and unconditional letters of credit
(which were currently to expire December 31, 1994 and January
15, 1995, respectively), upon which the lenders could draw in
the event a default occurred under the loan. The aforementioned

JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

letters of credit had been subject to yearly renewal if certain
specified net operating income levels at the property were not
achieved by the borrower.

Due to the uncertainty of the realization of the simple
accrued interest recognized through November 30, 1991
(approximately $485,800) and the principal balance of the loan
($3,264,765), the Partnership, as a matter of prudent accounting
practice and to reflect the estimated fair value of the
collateral, for financial reporting purposes, suspended the
accrual of the simple accrued interest (which is payable at
maturity) effective December 1, 1991 and made provisions for
loan loss of $281,000 in 1992, $154,000 in 1993 and $99,000 in
1994, bringing the total provision for loan loss to $534,000,
which is reflected in the accompanying consolidated balance
sheet at December 31, 1994.

The borrower defaulted in its scheduled basis interest
payments due under this loan during the fourth quarter of 1994.
Consequently, the lenders (including the Partnership) drew on
the above-mentioned letters of credit totaling $500,000 in late
December, 1994. An affiliate of the lenders took control of the
property's funds in January 1995 and is currently managing the
property under an agreement which provides for a fee equal to 4%
of the property's gross receipts (such fee excluding
compensation for leasing activity). In early May 1995, the
lenders obtained legal title to the property pursuant to a deed
in lieu of foreclosure. Effective as of the management takeover
date (January 1, 1995), the Partnership considered the mortgage
loan to be in-substance foreclosed and has accounted for its
investment as an investment in an unconsolidated joint venture.
For financial reporting purposes, the Partnership will not
recognize any material gain or loss from this transaction as a
result of the Partnership's previously recorded provisions for
loan loss. For Federal income tax reporting purposes, the
Partnership expects to recognize a loss of approximately
$757,000 in 1995 as a result of this transaction. The
operations of this property are expected to provide a current
return which would be less than the scheduled interest payments
due under the original mortgage loan.

Occupancy at the shopping center remained at 94% at June 30,
1995, unchanged from March 31, 1995. However, a major tenant,
which occupies approximately 24% of the leasable space at the
property and who is currently operating under Chapter 11
bankruptcy protection has informed the Partnership that it does
not intend to exercise its renewal option when its current lease
expires in October 1995. Due to the competitive conditions in
this market, re-leasing time and expense could be substantial
when this tenant vacates, which will further reduce cash flow
from this investment to the Partnership in the short-term.

JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(b) Shoppes at Rivergate, Goodlettsville (Nashville),
Tennessee

The Partnership funded a $12,000,000 non-recourse
participating first mortgage loan secured by a portion of a
shopping center in Goodlettsville, Tennessee. The loan bears
basic interest at the rate of 9.0% per annum through September
1992 and 9.5% per annum through maturity in September 1997, and
provides for monthly payments of interest only. The Partnership
is also entitled to participation in annual gross receipts (as
defined) in excess of $1,337,000.

Due to the uncertainty of the realization of the simple
accrued interest recognized through December 31, 1993
(approximately $1,920,000) and the principal balance of the loan
($12,000,000), the Partnership, as a matter of prudent
accounting practice, made a provision for loan loss as of
December 31, 1993 in the amount of $1,260,152. No additional
provision for loan loss has been deemed necessary for 1994 or
1995. In addition, effective December 1, 1993, the Partnership
is recognizing interest income only as collected. As of the
date of this report, no amounts currently due from the borrower
of this loan are in arrears.

In May 1995, a tornado touched down in Goodlettsville,
Tennessee and severely damaged a significant percentage (17% or
29,000 square feet) of the Shoppes at Rivergate. The portion of
the shopping center undamaged by the tornado has continued to
operate. The damaged portion of the center will be repaired,
but none of the tenants affected by the tornado have been able
to reopen. It is expected that substantially all of the loss,
including any loss caused by business interruption, will be
covered by the borrower's insurance, and the borrower plans on
rebuilding the damaged portions of the center as soon as
possible. Therefore, as of the date of this report, the
borrower is current with all payments due to the Partnership.
Due to these facts, the Partnership has not provided for any
additional loan loss as a result of the tornado. As a result of
the damage, one of the tenants exercised a right to terminate
its lease. None of the other tenants affected by the tornado
have this right. However, there can be no assurances that the
damage caused by the tornado will not have an adverse impact on
the loan or the center as collateral for the loan.

In August, 1989, the Partnership participated in the funding
of a non-recourse participating first mortgage loan in the
maximum principal amount of $29,250,000. The Partnership had
committed to fund a maximum of $13,050,000 or approximately
44.6% of this loan. The remaining portion of the loan was

JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

funded by Mortgage Partners-IV, and IDS Life Account RE, the
latter an entity advised by an affiliate of the General Partners
(jointly the "Lenders"). The loan is secured by a first
mortgage on a shopping center known as Riverpoint Center,
located in Chicago, Illinois. The Lenders' initial funding was
$26,000,000 and additional fundings were made in 1990 and 1991.
The Lenders do not intend to fund any additional amounts beyond
the $28,039,630 ($12,509,989 by the Partnership) now funded.
The ten-year loan currently bears basic interest at the rate of
8.884% per annum for the first loan year, 8.75% per annum for
loan years two and three, increasing .50% per annum in the
fourth and .25% per annum in the seventh loan year to a maximum
rate of 9.50% per annum, payable monthly in advance.

Due to the uncertainty of the realization of the simple
accrued interest recognized through December 31, 1991 ($431,065)
and the principal balance of the loan ($12,509,989), the
Partnership had, as a matter of prudent accounting practice,
made a provision for loan loss on the deferred interest
receivable as of December 31, 1991 in the amount of $431,065.
In addition, effective January 1, 1992, the Partnership is
recognizing interest income only as collected.

(d) Franklin Farm Village Center, Fairfax County, Virginia

In December 1991, the Partnership participated in the funding
of a non-recourse participating first mortgage loan in the
maximum principal amount of $16,600,000. The Partnership has
committed to fund a maximum of $5,600,000 or approximately 33.7%
of the loan. The other lender is Mortgage Partners-IV, (jointly
the "Lenders"). The loan is secured by a first mortgage on a
shopping center known as Franklin Farm Village Center (the
"Center") located in Fairfax County, Virginia. The Lenders
funded $13,463,144 on December 19, 1991 of which the
Partnership's share was $4,541,769. Up to an additional
$3,136,856 (of which the Partnership's share is $1,058,215) may
be funded if the borrower elects to pursue certain
expansion/purchase options with respect to the land surrounding
the existing center and its parking lot. The borrower
subsequently exercised its option to acquire an outparcel which
is located immediately in front of the center subject to a long-
term ground lease with First Virginia Bank. The Lenders
provided the permanent financing of approximately $687,000 (of
which the Partnership's share was approximately $232,000) on
this acquisition, in November 1993, pursuant to the terms for
subsequent fundings in the loan documents. The loan bears basic
interest payable monthly at the rate of 8.5% per annum during
the first five loan years and 10% per annum thereafter to
maturity.

JMB MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

In November 1994, the Lenders finalized an agreement with the
borrower to fund the acquisition of an outparcel adjacent to the
center. The Lenders provided permanent financing of
approximately $659,000 (of which the Partnership's share was
approximately $222,000) including 90% of the closing costs,
toward the acquisition by the borrower of the outparcel land and
improvements. The loan bears basic interest payable monthly at
the rate of 9% per annum during the first four loan years of
this funding and 10% per annum thereafter through maturity in
November, 2001. This represented the second subsequent funding
on this mortgage loan, which leaves approximately $1,791,000 (of
which the Partnerships' share is approximately $604,000)
available to the borrower to fund future expansion or purchase
options. There can be no assurance, however, that terms and
conditions for additional subsequent fundings will be met and,
therefore, it is possible that additional subsequent fundings
will not be made or will be less than the maximum principal
amount.

In June, 1994, the Lenders received a partial return in the
amount of $322,907 of the original principal funding (of which
the Partnership's share was $108,933). These funds relate to an
"earn down" provision in the original purchase agreement between
the borrower and the seller. Due to a major tenant not
generating a certain level of sales in 1993, the seller was
required to return a portion of the sale price it had received
in 1991 at closing. The borrower subsequently remitted the
proceeds back to the Lenders as required by the terms of the
loan agreement. The Lenders will retain these proceeds due to
the possibility of the borrower requesting future additional
fundings per the original loan agreement as discussed above.

In late 1993, the Lenders were informed by the borrower that
an underground gasoline tank experienced a gasoline leak at the
property. The tenant, which has a ground lease with the
borrower, informed the borrower and the appropriate state
agencies that gasoline was discharged into the ground. The
tenant, which operates a gasoline station at the site, is
cooperating fully with all government agencies in order to
rectify this problem in a expeditious manner. In addition, the
Lenders were informed that no nearby underground water supplies
were affected nor does it appear likely that any will be
affected in the future. The tenant (an affiliate of a national
gasoline marketer) appears to have the financial resources to
fully pay for the clean up at the property. At this time, it is
undeterminable what the cost of the clean up will be. In
addition, at this time, the Lenders believe the value of the
borrower's property has not been materially affected.
Therefore, no provision for loan loss has been established at
this time. However, there can be no assurances that the
gasoline leak, as reported, will not have a material impact on
the value of the Lender's security in the future.

MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The Corporate General Partner received $130,164 from the
borrower as fees for JMB's services in processing, reviewing and
arranging the loan and is entitled to receive additional fees in
the event there are subsequent fundings to this loan. The
portions of such fees which are attributable to the
Partnership's participation in the loan constitute Mortgage
Investment Application Fees (see note 6).

(6) TRANSACTIONS WITH AFFILIATES

Fees, commissions and other expenses required to be paid by
the Partnership to the General Partners and their affiliates as
of June 30, 1995 and for the three months ended June 30, 1995
and 1994, are as follows:
Unpaid at
June 30,
1995 1994 1995
-------- -------- ---------
Mortgage investment
servicing fees. . . . . . $ 39,128 40,335 18,994
Property management
fees. . . . . . . . . . . 52,757 86,569 9,770
Reimbursement (at cost)
for out-of-pocket
expenses. . . . . . . . . 432 422 272
-------- -------- --------
$ 92,317 127,346 29,036
======== ======== ========

The Corporate General Partner and its affiliates are entitled
to reimbursement for salaries and direct expenses of certain
officers and employees of the Corporate General Partner and its
affiliates while directly engaged in the administration of the
Partnership and the operation of the Partnership's real property
investments. In 1994, and through the six months ended June 30,
1995 such reimbursable costs aggregated $77,513 and $37,258
respectively, all of which were paid at June 30, 1995.

Subsequent to June 30, 1995, the Managing General Partner of
the Partnership has determined to use an independent third-party
or parties to perform certain of these administrative services
beginning in late 1995. Use of a third-party, rather than
reimbursement to the Managing General Partner and its
affiliates, is not expected to have a material effect on the
operations of the Partnership.

The Corporate General Partner is entitled to receive mortgage
investment servicing fees from the Partnership at an annual rate
of 1/4 of 1% of the maximum amount advanced by the Partnership
and outstanding from time to time with respect to mortgage
investments. The cumulative amount of such fees at June 30,
1995 aggregated $754,248, of which $18,994 was unpaid at June
30, 1995.
22

MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The Corporate General Partners and its affiliates are entitled
to property management fees for the North Rivers Market Shopping
Center. In 1995, such fees aggregated $52,757, of which $9,770
was unpaid at June 30, 1995.

JMB is entitled to receive application and commitment fees in
connection with the receipt of loan applications and issuance of
commitments to make mortgage loans and to enter into land
purchase leasebacks. Such application and commitment fees shall
not exceed 3% of the gross proceeds of the offering. To the
extent they are paid by actual or prospective borrowers or
sellers of land, the fees otherwise payable by the Partnership
will be reduced. In January 1992, the Partnership paid $130,164
which represented the remaining application fees due to JMB as
a result of the funding of the Franklin Farm mortgage loan
(note 5(d)).

The General Partners have previously deferred payment of
certain of their distributions of net cash flow from the
Partnership. During February 1993, the Partnership paid
previously deferred distributions of approximately $317,000 to
the General Partners. The remaining cumulative amount of such
deferred distributions aggregated $679,727 at June 30, 1995, all
of which is being deferred in accordance with the subordination
requirements of the Partnership Agreement. The aggregate amount
deferred, including the above-noted subordinated distributions,
is approximately $10 per Interest. All amounts deferred or
currently payable do not bear interest.

(7) SELECTED FINANCIAL INFORMATION

Pursuant to the requirements of the Securities and Exchange
Commission, the following is a summary of historical income
statement information for Shoppes at Rivergate, Riverpoint
Center and Franklin Farm Village Center shopping centers for the
six months ended June 30, 1995 and 1994. Such properties secure
the participating first mortgage investments made by the
Partnership.
1995 1994
---------- ----------

Total revenues . . . . . . . . . . . $ 4,053,636 3,925,489
========== ==========
Net income (loss). . . . . . . . . . $ 164,544 (174,700)
========== ==========
(8) ADJUSTMENTS

In the opinion of the Corporate General Partner, all
adjustments (consisting solely of normal recurring adjustments)
necessary for a fair presentation have been made to the
accompanying figures as of June 30, 1995 and for the three and
six months ended June 30, 1995 and 1994.

PART I. FINANCIAL INFORMATION

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

At June 30, 1995, the Partnership had cash and cash
equivalents of approximately $4,506,071. Such funds and short-
term investments of approximately $4,126,000 will be utilized
for future distributions to partners, for working capital
reserves and for additional amounts expected to be funded under
the participating first mortgage loan secured by Franklin Farm
Village Center, located in Fairfax County, Virginia as described
in Note 5(d). In the second quarter of 1995, the Partnership's
consolidated ventures distributed approximately $5,838,000 to
the Partnership and Mortgage Partners-IV, the affiliated joint
venture partnership ($3,744,000 and $2,094,000 respectively).
These amounts represent the previously undistributed operating
cash flows from Calibre Pointe Associates and North Rivers
Market Associates. The Partnership and its consolidated
ventures have currently budgeted in 1995 approximately $229,000
for capital expenditures. The Partnership's share of such items
is currently budgeted to be approximately $148,000. The capital
expenditures for its unconsolidated venture (the Partnership's
mortgage investment in Spring Hill Fashion Center, deemed to be
in-substance foreclosed as of January 1, 1995 as discussed
below) is currently budgeted to be approximately $315,000 in
1995. The Partnerships share of such items is currently
budgeted to be approximately $102,000. Actual amounts expended
in 1995 may vary depending on a number of factors including
actual leasing activity, results of property operations,
liquidity considerations and other market conditions over the
course of the year. The sources of capital for such items and
for future short-term and long-term liquidity and distributions
to the Limited and General Partners are expected to be from the
collection of interest and repayment of principal of the
Partnership's participating first mortgage loan investments.
However, reference is made to Notes 5(a), 5(b) and 5(c)
concerning the suspension of certain interest accruals and the
provision for loan losses on the loans secured by Spring Hill
Fashion Center, Shoppes at Rivergate and Riverpoint Shopping
Center, located in West Dundee, Illinois, Goodlettsville,
Tennessee and Chicago, Illinois respectively and Note 5(a)
regarding the in-substance foreclosure on the loan secured by
Spring Hill Fashion Center in 1995.

Additional sources of both short-term and long-term liquidity
and distributions are expected to be from net cash generated by
the Partnership's investment properties, the Calibre Pointe
Apartments, the North Rivers Market Shopping Center and the
Spring Hill Fashion Center, and from the sale of such
investments. Reference is made to Notes 2 and 5(a) for a
description of the events resulting in the Partnership, through
a joint venture, obtaining legal title to these properties. The
operations of the properties are expected to provide a current
return which is significantly less than the interest payments
due under the original mortgage loans.

Based upon the determination of the Corporate General Partner,
the Partnership has, commencing with the fourth quarter of 1994,
increased the distribution to $15.00 per $1,000 Interest per
quarter from its previous level of $12.50 per $1,000 Interest.

An additional source of both future short-term and long-term
liquidity and distributions is expected to be from net cash
generated by the Spring Hill Fashion Center investment property
and from the sale of such investment. Reference is made to Note
5(a) regarding the suspension of certain interest accruals and
the provisions for loan loss on the loan secured by the Spring
Hill Fashion Center located in West Dundee, Illinois. Due to
the uncertainty of the realization of the simple accrued
interest recognized through November 30, 1991 (approximately
$485,800) and the principal balance of this loan ($3,264,765),
the Partnership, as a matter of prudent accounting practice and
to reflect the estimated fair value of the collateral, has, for
financial reporting purposes, suspended the accrual of the
simple accrued interest (which is payable at maturity) effective
December 1, 1991 and made provisions for loan loss of $281,000
in 1992, $154,000 in 1993 and $99,000 in 1994, bringing the
total provision for loan loss to $534,000, which is reflected in
the accompanying financial statements. Reference is also made
to Note 5(a) regarding the default by the borrower of the loan
secured by Spring Hill Fashion Center, the drawing by the
lenders (including the Partnership) of the two $250,000 letters
of credit that were additionally securing this loan, and the
January 1, 1995 assumption of property management at the Spring
Hill Fashion Center by an affiliate of the General Partners of
the lenders. Effective as of the management takeover date
(January 1, 1995), the Partnership has considered the mortgage
loan to be in-substance foreclosed and has accounted for its
investment as an investment in an unconsolidated joint venture.
In early May 1995, the lenders obtained legal title to the
property pursuant to a deed in lieu of foreclosure. For
financial reporting purposes, the Partnership will not recognize
any material gain or loss from this transaction as a result of
the Partnership's previously recorded provisions for loan loss
(see Note 5(a)). For federal income tax reporting purposes, the
Partnership expects to recognize a loss of approximately
$757,000 in 1995 as a result of this transaction. The
operations of this property are expected to provide a current
return which would be less than the scheduled interest payments
due under the original mortgage loan. Occupancy at the Spring
Hill Fashion Center was 94% at June 30, 1995, unchanged from
March 31, 1995. However, a major tenant, F&M Distributors
("F&M") which occupies 30,000 square feet (approximately 24%) of
the leasable space at the property and who is currently
operating under Chapter 11 bankruptcy protection, has informed
the lenders (including the Partnership) that it does not intend
to exercise its renewal options when its current lease expires
in October 1995. Due to the competitive conditions in this
market, releasing time and expense could be substantial when
this tenant vacates, which will further reduce cash flow from
this investment to the Partnership in the short term. The
Partnership is currently evaluating its long-term strategy with
respect to this real estate investment. The manager of the

property is marketing the vacant space, and it will most likely
be difficult to sell this property prior to the re-leasing of
the F&M space.

The Partnership along with its joint venture partner, through
Calibre Pointe Associates, had 1994 entered into a non-binding
letter of intent to sell its entire interest in the Calibre
Pointe Apartments. The prospective purchaser and the
Partnership failed to negotiate and execute a sales agreement
and terminated further discussions. However, given the
favorable market conditions, the Partnership continues to
examine a potential sale of the property.

In June, 1994 the Lenders (including the Partnership) received
a partial return in the amount of $322,907 of the original
principal funding (of which the Partnership's share was
$108,933) of the mortgage loan at Franklin Farm Village Center.
These funds relate to an "earn down" provision in the original
purchase agreement between the borrower and the seller. Due to
a major tenant not generating a certain level of sales in 1993,
the seller was required to return a portion of the sale price it
had received in 1991 at closing. The borrower subsequently
remitted the proceeds back to the Lenders as required by the
terms of the loan agreement. The Lenders will retain these
proceeds due to the possibility of the borrower requesting
future additional fundings per the original loan agreement as
discussed in Note 5(d). In November 1994, the Lenders finalized
an agreement with the borrower to fund the acquisition of an
outparcel and improvements adjacent to the center. The Lenders
provided permanent financing of approximately $659,000 (of which
the Partnership's share was approximately $222,000), including
90% of the closing costs, toward the acquisition by the borrower
of the outparcel land and improvements. The loan bears basic
interest payable monthly at the rate of 9% per annum for the
first four loan years of this funding and 10% per annum
thereafter through maturity in November, 2001. This represented
the second subsequent funding on this mortgage loan, which
leaves approximately $1,791,000 (of which the Partnership's

share is approximately $604,000) available to the Borrower to
fund future expansion or purchase options. One of the center's
tenants, a major oil company, continues to explore the extent of
the possible damage caused by a leak at one of its gasoline
pumps in late 1993. The borrower is monitoring the situation
closely and does not believe it will have a material impact on
the value of the center.

Occupancy of North Rivers Market Shopping Center in North
Charleston, South Carolina was 80% at June 30, 1995, unchanged
from March 31, 1995. Phar Mor, a major tenant at the center
filed for protection under Chapter 11 of the bankruptcy code.
The Phar Mor store at the center has continued to operate since
its bankruptcy filing and has been current on all rent payments
due subsequent to filing. The manager is aggressively
attempting to lease the vacant space in the center. However, the
competitiveness of the market given the Naval facility closings
in the nearby area is expected to make it difficult to lease
space in the center, thereby extending the period of time it
will take to complete the lease- up of the center and result in
a decrease in cash flow from operations over the near term.
Hechinger's, who vacated its store, which it owns, in 1989
continues to attempt to lease the remaining vacancy in its store
to other suitable retailers. However, in early 1995, a tenant
(Sportstown) that occupied part of the vacated Hechinger's space
filed for protection under Chapter 11 of the bankruptcy code.
This event is not expected to have a material impact on future
income generated from the property.

As a result of its filing for protection under Chapter 11 of
the bankruptcy code, the Herman's Sporting Goods store at
Riverpoint Center vacated its space in the third quarter of
1993. The borrower has re-leased the space to a restaurant
which opened in September 1993. In addition, Herman's Sporting
Goods closed its stores at North Rivers Market Shopping Center
and at the Shoppes at Rivergate during the second quarter of
1993. The borrower at the Shoppes at Rivergate has re-leased
this space to several smaller tenants in 1994, while the space
at the North Rivers Market Shopping Center remains vacant as of
the date of this report.

RESULTS OF OPERATIONS

The aggregate decrease in cash and cash equivalents and short-
term investments, and the related decrease in Venture partner's
equity in ventures at June 30, 1995 as compared to December 31,
1994 is primarily due to the payment of approximately $2,094,000
to the Venture partner for its share of previously undistributed
cash flows related to the Calibre Pointe Apartments and North
Rivers market Shopping Center as discussed above. Additionally
the increase in short-term investments and corresponding
decrease in cash and cash equivalents at June 30, 1995 as
compared to December 31, 1994 is due to an increase of the
Partnership's U.S. Government obligations classified as short-
term investments at June 30, 1995 rather than as cash
equivalents at December 31, 1994.

The decrease in prepaid expenses at June 30, 1995 as compared
to December 31, 1994 is primarily due to the timing of payment
of certain property operating expenses (including insurance
premiums) at certain of the Partnership's investment properties.

The decrease in mortgage notes receivable and increase in
investment in unconsolidated venture, at equity at June 30, 1995
as compared to December 31, 1994 and the increase in
Partnership's share of operations of unconsolidated venture for
the three and six months ended June 30, 1995 as compared to the
same periods in 1994 is a result of the foreclosure of the
mortgage loan secured by the Spring Hill Fashion Center as more
fully described in Note 5(a).

The increase in deferred interest receivable at June 30, 1995
as compared to December 31, 1994 is due to the continuing
deferral of additional interest earned under the terms of the
mortgage loan receivable secured by the Franklin Farms Village
Center (Note 5(d)).

The decrease in due to affiliates at June 30, 1995 as compared
to December 31, 1994 is a result of the distribution of the
$337,250 of proceeds from the drawn letters of credit secured by
the Spring Hill Fashion Center to the other two participating
lenders (Note 5(a)).

The increase in accrued real estate taxes at June 30, 1995 as
compared to December 31, 1994 is due primarily to the timing of
real estate tax payments at Calibre Pointe Apartments and North
Rivers Market Shopping Center.

The decrease in other liabilities at June 30, 1995 as compared
to December 31, 1994 is due to the timing of a payment made from
deposits held for real estate taxes for the Shoppes at
Rivergate.

Interest income decreased for the three months ended June 30,
1995 as compared to the same period in 1994 primarily due to a
lower average investment in U.S. Government obligations due to
the payment of previously undistributed cash flows to the
venture partner in the second quarter as discussed above and the
recording of the Spring Hill loan as in investment in
unconsolidated venture (Note 2(a)).

The decrease in rental income and Venture partner's share of
venture operations for the three months ended June 30, 1995 as
compared to the same period in 1994 is primarily due to tenant
billing adjustments related to tenant recoveries in 1995 at the
North Rivers Market Shopping Center and a decrease in occupancy
for both the Calibre Pointe Apartments and North Rivers Market
Shopping Center in 1995. This is partially offset by an
increase average rents at the Calibre Pointe Apartments,
resulting in an increase in Venture partner's share of venture
operations for the six months ended June 30, 1995 as compared to
the same period in 1994.

The decrease in property operating expenses for the three
months ended June 30, 1995 as compared to the same period in
1994 is primarily the result of higher bad debt expense recorded
in 1994 related to certain tenants at the North Rivers Shopping
Center.

<TABLE>
PART II. OTHER INFORMATION

ITEM 5. Other Information

The following is a listing of approximate occupancy levels by quarter for the Partnership's
investment properties.

<CAPTION>
1994 1995
------------------------- -------------------------
AT AT AT AT AT AT AT AT
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31
----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. Calibre Pointe Apartments
Atlanta, Georgia . . . . . . . . . . 96% 97% 99% 97% 98% 90%

2. North Rivers Market
Shopping Center
North Charleston,
South Carolina . . . . . . . . . . . 88% 88% 87% 88% 80% 80%

3. Spring Hill Fashion Center
Shopping Center
West Dundee, Illinois. . . . . . . . N/A N/A N/A N/A 94% 94%

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

<FN>

An "N/A" indicated that the property was not owned or reflected as owned by the Partnership at the
end of the quarter.

</TABLE>

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

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

10-A. Loan documents related to the Partnership's
participation in the funding of a non-recourse
first mortgage loan on Calibre Pointe Apartments
located in Atlanta, Georgia is hereby incorporated
herein by reference to the Partnership's Form 8-K
(File No. 2-95948) dated March 25, 1987.

10-B. Loan documents related to the Partnership's
participation in the funding of a first mortgage
loan secured by a first mortgage loan on North
Rivers Market Shopping Center located in North
Charleston, South Carolina, is hereby incorporated
herein by reference to the Partnership's Form 8-K
(File No. 2-95948) dated September 15, 1987.

10-C. Loan documents related to the Partnership's
participation in the funding of a first mortgage
loan secured by a first mortgage loan on Riverpoint
Center Shopping Center located in Chicago,
Illinois, is hereby incorporated herein by
reference to the Partnership's Form 8-K (File No.
0-16253) dated September 5, 1989.

10-D. Loan document related to the Partnership's
participation in the funding of a first mortgage
secured by a first mortgage on Shoppes at Rivergate
Shopping Center located in Goodlettsville,
Tennessee, dated August 24, 1987 is hereby
incorporated herein by reference to Exhibit 10-D of
the Partnership's Report for December 31, 1992 on
Form 10-K (File No. 0-16253) dated March 19, 1993.

10-E. Loan documents related to the Partnership's
participation in the funding of a participating
first mortgage loan secured by Franklin Farm
Village Center located in Fairfax County, Virginia,
are hereby incorporated by reference to the
Partnership's Report for December 31, 1994 on Form
10-K (File No. 0-16253) dated March 27, 1995.

10-F. First and Second Amendments to the Loan Documents
dated September 28, 1993 and November 23, 1994,
respectively, between Rosenfeld/Franklin Farm
Village Center L.P. and Mortgage Partners, Ltd.-IV,
relating to additional loan amounts, are hereby
incorporated by reference to the Partnership's
Report for December 31, 1994 on Form 10-K (File No.
0-16253) dated March 27, 1995.

27. Financial Data Schedule

(b) No reports on Form 8-K have been filed for the quarter
covered by this report.
31

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.

JMB MORTGAGE PARTNERS, LTD. - III

BY: JMB Realty Corporation
(Corporate General Partner)

By: Gailen J. Hull,
Senior Vice President
Date: August 9, 1995

Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
person in the capacity and on the date indicated.

Gailen J. Hull
Principal Accounting Officer
Date: August 9, 1995

<ARTICLE> 5

<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE REGISTRANT'S FORM 10-Q FOR THE SIX MONTHS
ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS INCLUDED IN SUCH REPORT.
</LEGEND>

<CIK> 0000763820
<NAME> MORTGAGE PARTNERS LTD. - III

<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995

<CASH> $ 4,506,071
<SECURITIES> 4,125,501
<RECEIVABLES> 346,243
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,977,815
<PP&E> 25,457,898
<DEPRECIATION> 2,006,186
<TOTAL-ASSETS> 66,144,985
<CURRENT-LIABILITIES> 392,330
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 57,057,710
<TOTAL-LIABILITY-AND-EQUITY> 66,144,985
<SALES> 1,816,387
<TOTAL-REVENUES> 3,516,586
<CGS> 0
<TOTAL-COSTS> 1,019,291
<OTHER-EXPENSES> 205,415
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,291,880
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,074,565
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,074,565
<EPS-PRIMARY> 28.47
<EPS-DILUTED> 28.47

</TABLE>