JMB MORTGAGE PARTNERS LTD III, 10-Q, 1995-11-13

JMB MORTGAGE PARTNERS LTD III
10-Q, 1995-11-13
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 September 30, 1995.

Thank you.

Very truly yours,

JMB MORTGAGE PARTNERS, LTD.- III

By: JMB Realty Corporation
Corporate General Partner

By:
_______________________________
Gailen J. Hull
Senior Vice President and
Principal Accounting Officer

GJH:et

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 September 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
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
(UNAUDITED)

ASSETS
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 1) . . . . . . . . . . . . .$ 8,550,107 10,278,236
Short-term investments (note 1). . . . . . . . . . . . . . . 139,526 393,123
Interest and other receivables . . . . . . . . . . . . . . . 176,607 329,057
Due from affiliates. . . . . . . . . . . . . . . . . . . . . 151,607 --
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . 41,789 28,769
------------ ------------
Total current assets. . . . . . . . . . . . . . . . . . . 9,059,636 11,029,185

Investment property (note 2)
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,561,468 10,434,411
Building and improvements. . . . . . . . . . . . . . . . . . 13,657,635 14,933,079
------------ ------------
23,219,103 25,367,490

Less accumulated depreciation. . . . . . . . . . . . . . . . (2,167,358) (1,683,840)
------------ ------------
Total investment property, net of depreciation. . . . . . 21,051,745 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)) . . . . . . . . . . . . . . . . . . . . . . . . . . 1,061,007 935,250
Investment in unconsolidated venture, at equity (note 5(a)). . 3,171,195 --
Deferred expenses. . . . . . . . . . . . . . . . . . . . . . . 183,376 220,533
------------ ------------
63,923,985 63,386,716
============ ============

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

CONSOLIDATED BALANCE SHEETS - CONTINUED

LIABILITIES AND PARTNERS' CAPITAL ACCOUNTS (DEFICITS)

September 30, December 31,
1995 1994
------------ ------------
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . .$ 81,924 59,349
Due to affiliates. . . . . . . . . . . . . . . . . . . . . . 45,184 411,464
Accrued real estate taxes. . . . . . . . . . . . . . . . . . 170,484 143,943
Other current liabilities. . . . . . . . . . . . . . . . . . 136,688 139,349
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . 434,280 754,105
------------ ------------
Tenant security deposits . . . . . . . . . . . . . . . . . . 23,357 37,638
------------ ------------
Commitments and contingencies (notes 2, 4 and 5)

Total liabilities . . . . . . . . . . . . . . . . . . . . 457,637 791,743
------------ ------------

Venture partner's equity in ventures (note 2). . . . . . . . . 8,040,420 10,437,237
Partners' capital accounts:
General partners:
Capital contributions . . . . . . . . . . . . . . . . . . 1,000 1,000
Cumulative net earnings . . . . . . . . . . . . . . . . . 2,730,964 2,404,776
Cumulative cash distributions . . . . . . . . . . . . . . (2,853,988) (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 . . . . . . . . . . . . . . . . . 31,368,816 30,164,926
Cumulative cash distributions . . . . . . . . . . . . . . (33,579,425) (30,643,727)
------------ ------------
55,547,952 57,279,760
------------ ------------

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

CONSOLIDATED BALANCE SHEETS - CONCLUDED

September 30, December 31,
1995 1994
------------ ------------

Total partners' capital accounts. . . . . . . . . . . . . 55,425,928 57,157,736
------------ ------------

63,923,985 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 NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994

(UNAUDITED)

Three Months Ended Nine Months Ended
September 30 September 30
-------------------------- --------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income:
Interest income. . . . . . . . . $ 834,164 894,511 2,534,363 2,572,271
Rental income. . . . . . . . . . . 924,587 854,557 2,740,974 2,687,154
------------ ------------ ------------ ------------
1,758,751 1,749,068 5,275,337 5,259,425
------------ ------------ ------------ ------------
Expenses:
Depreciation . . . . . . . . . . . 161,172 159,906 483,518 479,718
Property operating expenses. . . . 391,889 347,702 1,062,075 990,113
Mortgage investment servicing
fees. . . . . . . . . . . . . . . 18,524 20,441 57,652 60,776
Professional services. . . . . . . 7,259 276 63,588 51,648
Amortization of deferred
expenses. . . . . . . . . . . . . 7,961 7,811 34,720 23,435
General and administrative . . . . 113,718 42,435 223,676 158,419
Provision for value impairment . . 2,300,000 -- 2,300,000 --
------------ ------------ ------------ ------------
3,000,523 578,571 4,225,229 1,764,109
------------ ------------ ------------ ------------

Operating earnings (loss) . . . (1,241,772) 1,170,497 1,050,108 3,495,316

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). . . . . . . . . . . . . 632,427 (133,355) 303,254 (447,868)
------------ ------------ ------------ ------------

Net earnings (loss) . . . . . $ (544,487) 1,037,142 1,530,078 3,047,448
============ ============ ============ ============
Net earnings (loss) per
limited partnership interest
(notes 1 and 3). . . . . . . $ (10.02) 14.51 18.45 42.55
============ ============ ============ ============

Cash distributions per
limited partnership
interest (note 1). . . . . . $ 15.00 12.50 45.00 37.50
============ ============ ============ ============

<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

NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994

(UNAUDITED)
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . $ 1,530,078 3,047,448
Items not requiring cash or cash equivalents:
Depreciation . . . . . . . . . . . . . . . . . . . . 483,518 479,718
Amortization of deferred expenses. . . . . . . . . . 34,720 23,435
Provision for value impairment . . . . . . . . . . . 2,300,000 --
Partnership's share of operations of
unconsolidated venture, net of distributions. . . . (46,516)
Venture partners' share of ventures' operations. . . (303,254) 447,868
Changes in:
Interest and other receivables . . . . . . . . . . . 152,450 269,170
Due from affiliates. . . . . . . . . . . . . . . . . (151,607) --
Prepaid expenses . . . . . . . . . . . . . . . . . . (13,020) (37,395)
Deferred interest receivable . . . . . . . . . . . . (125,757) (106,098)
Accounts payable . . . . . . . . . . . . . . . . . . 22,575 (6,828)
Due to affiliates. . . . . . . . . . . . . . . . . . (366,280) 43,883
Accrued real estate taxes. . . . . . . . . . . . . . 26,541 158,043
Other current liabilities. . . . . . . . . . . . . . (2,661) (41,350)
Tenant security deposits . . . . . . . . . . . . . . (14,281) 7,475
------------ ------------

Net cash provided by operating activities . . . . 3,526,506 4,197,603
------------ ------------

Cash flows from investing activities:

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

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

1995 1994
------------ ------------
Partnership's distributions to venture partners. . . (2,093,561) --
Net sales and maturities (purchases) of
short-term investments. . . . . . . . . . . . . . . 253,597 (1,842,386)
Additions to investment property . . . . . . . . . . (151,614) (108,746)
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 used in investing
activities . . . . . . . . . . . . . . . . . . . (1,992,749) (1,842,200)
------------ ------------
Cash flows from financing activities:
Distributions to limited partners. . . . . . . . . . (2,935,698) (2,446,419)
Distributions to general partners. . . . . . . . . . (326,188) (271,823)
------------ ------------

Net cash used in financing activities . . . . . . (3,261,886) (2,718,242)
------------ ------------

Net decrease in cash and
cash equivalents . . . . . . . . . . . . . . . . (1,728,129) (362,839)

Cash and cash equivalents, beginning of year. . . 10,278,236 793,190
------------ ------------
Cash and cash equivalents, end of period. . . . $ 8,550,107 430,351
============ ============
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>

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 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 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.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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

1995 1994
--------------------------- --------------------------
GAAP Basis Tax Basis GAAP Basis Tax Basis
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net earnings . . . . . . . . . . . $ 1,530,078 3,206,404 3,047,448 3,905,679
Net earnings per limited
partnership interest. . . . . . . $ 18.45 44.15 42.55 56.54
=========== =========== =========== ===========

<FN>

</TABLE>

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 conform with the 1995 presentation.

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 ($7,475,135 at September 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)).

Provisions for value impairment are recorded with respect to
investment properties whenever the estimated future cash flows
from a property's operations and projected sale are less than
the property's net carrying value. Due to the uncertainty of
the Partnership's ability to recover the net carrying value of
the North Rivers Market investment property through future
operations or sale as the Partnership has shortened its intended
holding period for this investment to no later than 1999, the
Partnership, as a matter of prudent accounting practice and for
financial reporting purposes, has recorded a provision for value
impairment of $2,300,000 (of which $770,000 has been allocated
to the venture partner and is reflected in venture partner's
share of venture operations). Such provision, made as of
September 30, 1995 was recorded to reduce the net carrying value
of North Rivers Market to its then estimated recoverable value.

(2) VENTURE AGREEMENTS

(a) Calibre 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.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Due to competitive market conditions, the borrower defaulted
in 1991 on the mortgage note and the Lenders obtained legal
title to the property. The Lenders contributed the property to
a newly formed joint venture (Calibre 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 is currently examining 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
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,
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. The
Partnership as a matter of prudent accounting practice, has
recorded a provision for value impairment at September 30, 1995
in the amount of $2,300,000 (of which $770,000 has been
allocated to the venture partner). Reference is made to Note 1.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(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
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.

(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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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.
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, Shops 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 any 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.
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,

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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
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
on the equity method. For financial reporting purposes, the
Partnership did not recognize any gain or loss from this
transaction as a result of the Partnership's previously recorded
provisions for loan loss, as described above. 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.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Occupancy at the shopping center was at 92% at September 30,
1995, down from 94% at June 30, 1995. However, a major tenant,
which occupied 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 did
not intend to exercise its renewal option when its current lease
expired in October 1995, and has since vacated its space,
thereby reducing the occupancy at the property to 68%. The
Partnership is currently holding discussions with a potential
replacement tenant for this space. Due to the competitive
conditions in this market, re-leasing time and expense could be
substantial to replace this major tenant which will further
reduce cash flow from this investment to the Partnership in the
short-term. Further, this property will most likely be difficult
to sell prior to the re-leasing of this space.

(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
thru the date of this report. 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.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

center are estimated to be approximately $1,200,000 of which
approximately $250,000 has been spent as of September 30, 1995.
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. 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
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 Lenders do not intend to fund any
additional amounts beyond the 28,039,630 (12,509,989, by the
Partnership) now funded. The loan is secured by a first
mortgage on a shopping center known as Riverpoint Center,
located in Chicago, Illinois. 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.

The Silo Electronic store (12,100 sq.ft.) at Riverpoint Center
vacated its space in the third quarter 1995, and the borrower is
pursuing its legal remedies regarding such unpaid amounts. The
borrower has re-leased the space to a book store for three
months at a substantially lower rent. The borrowers have a
letter of intent from a prospective tenant to lease the space
for five years with rent commencing on July 1, 1996. As a
result of this vacancy, the borrower has notified the lender
that it is experiencing financial difficulties and has
approached the Lenders regarding a loan modification. The
Lenders are considering the borrower's request. As of the date
of this report, certain escrow payments and participation
interest are due to the Lender: however the borrower is current
in its monthly debt service payments.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(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 have
cumulatively funded approximately $14,809,000 as of September
30, 1995 of which the Partnership's share is approximately
$4,996,000. Up to an additional $1,791,000 (of which the
Partnership's share is $603,600) 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.
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
not determinable 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 leaks as reported, will not have a material impact on
the value of the Lenders' security in the future. As of the
date of this report, no amounts currently due from the borrower
of this loan are in arrears.

JMB 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 September 30, 1995 and for the nine months ended September
30, 1995 and 1994, are as follows:
Unpaid at
September
30,
1995 1994 1995
-------- -------- ---------
Mortgage investment
servicing fees. . . . . $ 57,652 60,776 37,518
Property management
fees. . . . . . . . . . 73,678 201,961 7,666
Reimbursement (at cost)
for out-of-pocket
expenses. . . . . . . . 1,255 1,142 --
-------- -------- --------
$ 132,585 263,879 45,184
======== ======== ========

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

MORTGAGE PARTNERS, LTD. - III
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED VENTURES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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 nine months ended
September 30, 1995 such reimbursable costs aggregated $77,513
and $132,350 respectively, all of which were paid at September
30, 1995.

The Corporate General Partner of the Partnership has
determined to use independent third parties to perform certain
administrative services beginning in the fourth quarter of 1995.
Use of such third parties 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 September
30, 1995 aggregated $772,772, of which $37,518 was unpaid at
September 30, 1995.

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 $73,678, of which $7,666
was unpaid at September 30, 1995.

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 September 30,
1995, all of which is being deferred in accordance with the
subordination requirements of the Partnership Agreement.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONCLUDED

(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 Shops at Rivergate, Riverpoint Center
and Franklin Farm Village Center shopping centers for the nine
months ended September 30, 1995 and 1994. Such properties
secure the participating first mortgage investments made by the
Partnership.
1995 1994
---------- ----------

Total revenues . . . . . . . . . $ 5,711,066 6,205,290
========== ==========
Net earnings . . . . . . . . . . $ 1,099 145,329
========== ==========
(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 September 30, 1995 and for the three
and nine months ended September 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 September 30, 1995, the Partnership had cash and cash
equivalents of approximately $8,550,000. Such funds and short-
term investments of approximately $140,000 will be utilized for
future distributions to partners, for working capital reserves
and for additional amounts that may 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, ($3,744,000 and
$2,094,000 respectively). These amounts represent previously
undistributed operating cash flows from Calibre Associates and
North Rivers Market Associates. The Partnership and its
consolidated ventures have currently budgeted in 1995
approximately $280,000 for capital expenditures. The
Partnership's share of such items is currently budgeted to be
approximately $181,000. The capital expenditures for its
unconsolidated venture (the Partnership's mortgage investment in
Spring Hill Fashion Center, as discussed below) is currently
budgeted to be approximately $330,000 in 1995. The Partnerships
share of such items is currently budgeted to be approximately
$107,000. 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 remaining 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 Shops at Rivergate and Riverpoint Shopping Center,
located in Goodlettsville, Tennessee and Chicago, Illinois,
respectively.

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.

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. In an effort to reduce partnership operating
expenses, the Partnership has elected to make a semi-annual
operating distribution each year beginning in November 1995.

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 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
at equity. 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 did not recognize
any subsequent 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 92% at September 30, 1995, down from 94%
at June 30, 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 operating under
Chapter 11 bankruptcy protection had informed the lenders
(including the Partnership) that it did not intend to exercise
its renewal options when its current lease expired in October
1995 and has since vacated its space thereby reducing the
occupancy to 68%. The Partnership is currently holding
discussions with a potential replacement tenant for this space.
Due to the competition condition in the market, re-leasing time
and expense could be substantial to replace this major tenant,
which will futher reduce cash flow from this investment to the
Partnership in the short term. Further, this property will most
likely be difficult to sell prior to the re-leasing of this
space.
25

In May 1995, a tornado touched down in Goodlettsville,
Tennessee and severely damaged a significant percentage (17% or
29,000 square feet) of the Shops 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. The borrower has started
rebuilding the damaged portions of the center with funds
provided by the insurance company. Total costs to repair the
center are estimated to be approximately $1,200,000 of which
approximately $260,000 has been spent as of September 30, 1995.
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.

The Partnership continues to examine a potential sale of the
Calibre Pointe Apartments, given the favorable conditions that
exist in the Atlanta market.

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. 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. As of the date of this report, no amounts currently due
from the borrower of this loan are in arrears.

Occupancy of North Rivers Market Shopping Center in North
Charleston, South Carolina was 80% at September 30, 1995,
unchanged from June 30, 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.
They have sublet their space to Sports Authority which is
expected to open in late November.

As a result of the vacancies at the property and the
competitiveness of the market described above, there is
uncertainty as to the Partnership's ability to recover the net
carrying value of the North Rivers market investment property,
over its revised expected holding period. As a result the
Partnership, as a matter of prudent acccounting practice,
recorded a provision for value impairment of $2,300,000 (of
which $770,000 has been allocated to the Partnership and was
reflected in the Partnership's share of operations of
unconsolidated ventures.) Such provision, made as of September
30, 1995 was recorded to reduce the net carrying value of North
Rivers Market to its estimated recoverable value. Reference is
made to Notes 1 and 2(b).

After reviewing the properties and competitive market places
in the portfolio, the General Partners of the Partnership expect
to be able to liquidate the remaining assets as quickly as
practible, therefore, the affairs of the Partnership are
expected to be wound up no later than 1999 barring unforseen
economic developments, including the inability to sell the
Franklin Farm Village Center note prior to its maturity in 2001.

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 September 30, 1995 as compared to December
31, 1994 is primarily due to the payment of approximately
$2,094,000 to Mortgage Partners-IV 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 decrease in short-term investments at
September 30, 1995 as compared to December 31, 1994 is due to a
decrease of the Partnership's U.S. Government obligations
classified as short-term investments at September 30, 1995
rather than as cash equivalents at December 31, 1994.

The decrease in interest and other receivables at September
30, 1995 as compared to December 31, 1994 is primarily due to
the timing of collection of rents at Calibre Pointe Apartments.

The increase in due from affiliates at September 30, 1995 as
compared to December 31, 1994 is due to the Partnership's
receivable of $151,607 from the other participating lender
(Mortgage Partners - IV) representing interest earned on the
loan secured by the Franklin Farm Village Center. This amount
was received in October 1995.

The increase in prepaid expenses at September 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 decreases in land and building and improvements at
September 30, 1995 as compared to December 31, 1994 and the
provision for value impairment recorded for the three and nine
months ended September 30, 1995 are the result of the provision
for value impairment of $2,300,000 recorded at the North Rivers
Market property at September 30, 1995. Reference is made to
Note 2(b).

The decrease in mortgage notes receivable and increase in
investment in unconsolidated venture, at equity at September 30,
1995 as compared to December 31, 1994 and the increase in
Partnership's share of operations of unconsolidated venture for
the three and nine months ended September 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 September 30,
1995 as compared to December 31, 1994 is due to the continuing
deferral of approximately $126,000 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 September 30, 1995 as
compared to December 31, 1994 is primarily 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 September 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.

Interest income decreased for the three and nine months ended
September 30, 1995 as compared to the same periods 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 1995 recording of the Spring Hill loan as in
investment in unconsolidated venture (Note 2(a)).

The increase in rental income for the three and nine months
ended September 30, 1995 as compared to the same periods in 1994
is primarily due to tenant billing adjustments made in the third
quarter of 1995 related to tenant recoveries at the North Rivers
Market Shopping Center and an increase in average rents at the
Calibre Pointe Apartments.

The increase in general and administrative expenses for the
three and nine months ended September 30, 1995 as compared to
the same periods in 1994 is primarily due to the increase in
reimbursable costs to affiliates of the General Partners in
1995, and the recognition of certain additional prior year
reimbursable costs to such affiliates. Reference is made to
Note 6.

The decrease in venture partner's share of ventures'
operations for the three and nine months ended September 30,
1995 as compared to the same periods in 1994 is primarily due to
the $770,000 portion of the North Rivers Market value impairment
allocated to the venture partner at September 30, 1995.
Reference is made to Note 2(b).

<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% 98%

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

3. Spring Hill Fashion Center
Shopping Center
West Dundee, Illinois. . . . . . . N/A N/A N/A N/A 94% 94% 92%

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

<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 Shops 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.

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: November 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: November 9, 1995

<ARTICLE> 5

<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE REGISTRANT'S FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995

<CASH> 8,550,107
<SECURITIES> 139,526
<RECEIVABLES> 370,003
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,059,636
<PP&E> 23,219,103
<DEPRECIATION> 2,167,358
<TOTAL-ASSETS> 63,923,985
<CURRENT-LIABILITIES> 434,280
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 55,425,928
<TOTAL-LIABILITY-AND-EQUITY> 63,923,985
<SALES> 2,740,974
<TOTAL-REVENUES> 5,275,337
<CGS> 0
<TOTAL-COSTS> 3,937,965
<OTHER-EXPENSES> 287,264
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,050,108
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,530,078
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,530,078
<EPS-PRIMARY> 18.45
<EPS-DILUTED> 18.45

</TABLE>