BRAUVIN INCOME PLUS L P III, 10-K, 1999-04-15

BRAUVIN INCOME PLUS L P III
10-K, 1999-04-15
REAL ESTATE OPERATORS (NO DEVELOPERS) & LESSORS

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<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the fiscal year ended December 31, 1998

or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

For the transition period from to

Commission File Number 0-19219

Brauvin Income Plus L.P. III

(Exact name of registrant as specified in its charter)

Delaware 36-3639043

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

30 North LaSalle Street, Chicago, Illinois 60602

(Address of principal executive offices) (Zip Code)

(312)759-7660
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on
which registered
None None

Securities registered pursuant to Section 12(g) of the Act:

Limited Partnership Interests

(Title of class)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No .

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

The aggregate sales price of the limited partnership interests of
the registrant (the "Units") to unaffiliated investors of the
registrant during the initial offering period was $21,307,600.
This does not reflect market value. This is the price at which the
Units were sold to the public during the initial offering period,
and there is no current market for the Units nor have any Units
been sold within the last 60 days prior to this filing except for
Units sold to or by the registrant pursuant to the registrant's
distribution reinvestment plan.

Portions of the Prospectus of the registrant dated October 30, 1989
(the "Prospectus"), as supplemented December 7, 1989, December 20,
1989, April 24, 1990, December 12, 1990, August 29, 1991 and
September 17, 1991 and filed pursuant to Rule 424(b) and Rule
424(c) under the Securities Act of 1933, as amended, are
incorporated by reference into Parts II, III and IV of this Annual
Report on Form 10-K.

<PAGE>
BRAUVIN INCOME PLUS L.P. III
1998 FORM 10-K ANNUAL REPORT

INDEX
PART I
Page
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . .7

Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . 15

Item 4. Submission of Matters to a Vote of Security Holders. . . . . 21

PART II
Item 5. Market for the Registrant's Units and Related
Security Holder Matters. . . . . . . . . . . . . . . . . . . 22

Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . 23

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . 25

Item 7A. Quantitative and Qualitative Disclosures About Market
Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Item 8. Consolidated Financial Statements and Supplementary
Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . . . . 36

PART III
Item 10. Directors and Executive Officers of the Partnership. . . . . 37

Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . 39

Item 12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . . . . 41

Item 13. Certain Relationships and Related Transactions . . . . . . . 42

PART IV
Item 14. Exhibits, Consolidated Financial Statements and
Schedule, and Reports on Form 8-K. . . . . . . . . . . . . . 43

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

<PAGE>
PART I

Item 1. Business.

Brauvin Income Plus L.P. III (the "Partnership") is a Delaware
limited partnership formed in July 1989 for the purpose of
acquiring debt-free ownership of existing, free-standing,
income-producing retail, office and industrial real estate
properties predominantly all of which would involve "triple-net"
leases. It was anticipated at the time the Partnership first
offered its Units (as defined below) that a majority of these
properties would be leased to operators of national franchise
automotive service businesses, retail stores and convenience
stores, fast food and sit-down restaurants, health and recreational
facilities, as well as banks and savings and loan branches. The
leases would provide for a base minimum annual rent and increases
in rent such as through participation in gross sales above a stated
level, fixed increases on specific dates or indexation of rent to
indices such as the Consumer Price Index. The Partnership sold
$982,070 of its limited partnership interests (the "Units")
commencing October 30, 1989 through December 31, 1989, pursuant to
a Registration Statement on Form S-11 under the Securities Act of
1933, as amended (the "Offering"). The Offering was conditioned
upon the sale of $1,200,000 in Units which was achieved on January
15, 1990. An additional $20,325,530 in Units were sold from the
period January 1, 1990 until the Offering closed on October 29,
1991, for a cumulative total of $21,307,600. The investors in the
Partnership (the "Limited Partners") share in the benefits of
ownership of the Partnership's real property investments
proportionally based on the number of Units owned by each Limited
Partner compared to the total number of Units sold. An additional
$1,459,119 has been raised through the Partnership's distribution
reinvestment plan (the "Plan") through December 31, 1998. These
Units were purchased from the Units reserved for the Plan after the
termination of the Offering. The Offering was anticipated to close
on October 29, 1990, but was extended through and closed on October
29, 1991 by the General Partners with the approval of the
appropriate regulatory authorities. As of December 31, 1998,
$462,972 of Units sold through the Offering have been repurchased
by the Partnership from investors liquidating their investment and
have been retired.

The principal investment objectives of the Partnership are: (i)
preservation and protection of capital; (ii) distribution of
current cash flow from the Partnership's cash flow attributable to
rental income; (iii) capital appreciation; (iv) the potential for
increased income and protection against inflation through
escalation in the base rent or participation and growth in the
sales of the lessees of the Partnership's properties; (v) the
deferral of the taxation of cash distributions for Taxable Class
Limited Partners; and (vi) the production of "passive" income to
offset "passive" losses from other investments.

Some tax shelter of cash distributions by the Partnership will
be available to Taxable Class Limited Partners through depreciation
of the underlying properties. Taxable Class Limited Partners will
benefit from the special allocation of all depreciation to the
Units which they acquired from the Partnership because their
reduced taxable income each year will result in a reduction in
taxes due, although no "spill-over" losses are expected. Taxable
income generated by property operations will likely be considered
passive income for federal income tax purposes because Section
469(c)(2) of the Internal Revenue Code states that a passive
activity includes "any rental activity" and, therefore, is
available to offset losses Taxable Class Limited Partners may have
realized in other passive investments.

During the early years of the Partnership the Limited Partners
received cash distributions in excess of their allocable share of
the Partnership's income, and substantially in excess of their tax
liability thereon, particularly for the Taxable Class Limited
Partners due to the special allocation of depreciation deductions,
although the Taxable Class Limited Partners will recognize more
income from the sale of Partnership properties.

Taxable income generated by property operations will likely be
considered passive income for federal income tax purposes and,
therefore, such income can be used to offset losses Taxable Class
Limited Partners will receive from other passive investments,
subject to certain limitations.

It was originally contemplated that the Partnership would dispose
of its properties approximately seven to ten years after their
acquisition with a view towards liquidation of the Partnership
within that period.
Pursuant to the terms of an agreement and plan of merger dated
as of June 14, 1996, as amended March 24,1997, June 30, 1997,
September 30, 1997, December 31, 1997, March 31, 1998 and June 30,
1998 (the "Merger Agreement"). The Partnership proposed to merge
with and into Brauvin Real Estate Funds, L.L.C., a Delaware limited
liability company affiliated with certain of the General Partners
(the "Purchaser") through a merger (the "Merger") of its Units.
Although the Merger will not be consummated, the following text
describes the transaction. Promptly upon consummation of the
Merger, the Partnership would have ceased to exist and the
Purchaser, as the surviving entity, would succeed to all of the
assets and liabilities of the Partnership. The Limited Partners
holding a majority of units voted in favor of the Merger on
November 8, 1996. A majority of the Limited Partners also voted in
favor of an amendment of the Agreement allowing the Partnership to
sell or lease property to affiliates (this amendment, together with
the Merger shall be referred herein as the "Transaction").
However, as described below, on August 12, 1998, the District Court
in the Christman Litigation (as defined below) granted plaintiffs'
motion for partial summary judgement, holding that the Partnership
Agreement did not allow the Limited Partners to vote in favor or
against the Transaction.

The redemption price to be paid to the Limited Partners in
connection with the Merger was based on the fair market value of
the properties of the Partnership (the "Assets"). Cushman &
Wakefield Valuation Advisory Services ("Cushman & Wakefield"), an
independent appraiser, the largest real estate valuation and
consulting organization in the United States, was engaged by the
Partnership to prepare an appraisal of the Assets, to satisfy the
Partnership's requirements under the Employee Retirement Income
Security Act of 1974, as amended. Cushman & Wakefield determined
the fair market value of the Assets to be $19,129,150, or $8.58 per
Unit, on April 1, 1996. Subsequently, the Partnership purchased a
34% interest in Brauvin Bay County Venture. Based on the terms of
the Merger Agreement, the fair market value of the Assets was to
be increased by the amount of the investment in Brauvin Bay County
Venture, and correspondingly, the Partnership's cash holdings were
to be reduced by the same amount and, therefore, the total
redemption amount would remain unchanged. The redemption price of
$8.85 per Unit also included all remaining cash of the Partnership,
less net earnings of the Partnership from and after August 1, 1996
through December 31, 1996, less the Partnership's actual costs
incurred and accrued through the effective time of the filing of
the certificate of merger, including reasonable reserves in
connection with: (i) the proxy solicitation; (ii) the Transaction
(as detailed in the Merger Agreement); and (iii) the winding up of
the Partnership, including preparation of the final audit, tax
return and K-1s (collectively, the "Transaction Costs") and less
all other Partnership obligations. Of the total redemption price
stated above, approximately $0.27 was distributed to Limited
Partners in the December 31, 1997 distribution.

The General Partners were not to receive any payment in exchange
for the redemption of their general partnership interests nor would
they have received any fees from the Partnership in connection with
the Transaction. The Managing General Partner and his son, James
L. Brault, an executive officer of the Corporate General Partner,
were to have a minority ownership interest in the Purchaser.

The Merger was not completed primarily due to certain litigation,
as described below, that was still pending at December 31, 1998.
The General Partners believe that these lawsuits are without merit
and, therefore, continue to vigorously defend against them.
Because of the August 12, 1998 rulings of the District Court in the
Christman Litigation, as described in Item 3, it is not possible
for the Merger to be consummated.

The terms of the transactions between the Partnership and
affiliates of the General Partners are set forth in Item 13 below.
Reference is hereby made for a description of such terms and
transactions.

The restated limited partnership agreement of the Partnership
(the "Agreement") provides that the Partnership shall terminate
December 31, 2035, unless sooner terminated.

The Partnership has no employees.

Market Conditions/Competition

Since the current leases at the Partnership's properties entitle
the Partnership to participate in gross receipts of lessees above
fixed minimum amounts, the success of the Partnership will depend
in part on the ability of those lessees to compete with similar
businesses in the vicinity.

Since the Merger will not be completed, the General Partners will
have to determine whether to continue the Partnership's operations
or attempt to sell some or all of the properties. The Partnership
has and continues to compete with many other entities engaged in
real estate activities. The General Partners will evaluate factors
such as the economy, the lease terms, the financial strength of the
existing tenants and the ability to locate potential purchasers.

Item 2. Properties.

All lease payments are current pursuant to the terms of each of
the leases. The Partnership is landlord only and does not
participate in the operations of any of the properties purchased by
the Partnership. All of the properties are occupied.
Additionally, all properties were paid for in cash, without any
financing. The General Partners believe that all properties are
adequately insured.

The following information is presented only for the properties
whose cost basis exceeds 10% of the gross proceeds of the Offering
or whose rental income exceeds 10% of the total rental income of
the Partnership.

On September 17, 1991, the Partnership purchased from an entity
unaffiliated with the Partnership the land and buildings underlying
two Sports Unlimited sporting goods stores (the "Stores") for
$4,350,000, plus closing costs. The Stores are located in Winter
Park, Florida, a suburb of Orlando, and Charlotte, North Carolina.
The Stores are leased to and operated by Sports and Recreation,
Inc. ("SRI") and SRI Holdings, Inc. (collectively, the "Tenant").
The leases are for 20 years maturing in September 2011, with two
ten-year renewal options. The Tenant is obligated to pay base
minimum rent each month in the amount of $41,688. The base rent
will increase in the third lease year effective January 1, 1994,
the seventh lease year and every three years thereafter in
accordance with increases in the Consumer Price Index, not to
exceed 4% per annum. Pursuant to the triple-net lease, the Tenant
is responsible for all obligations and expenses incident to the
operation and maintenance of the Stores including all taxes,
insurance premiums and structural repairs. The Tenant, based on
the February 3, 1991 consolidated financial statements, had
sufficient net worth and, accordingly, the General Partners
determined that lease insurance, although not available at the time
of acquisition, would not be required for these acquisitions. In
1996, SRI was merged into JumboSports Inc. On December 27, 1998,
JumboSports Inc. filed Voluntary Petitions for Relief under Chapter
11 of the United States Bankruptcy Code. However, the
Partnership's leases were not on the initial list of leases to be
rejected and the tenant remains current with all of its lease
obligations.

The following is a demographic summary of the five Ponderosa
restaurants, two Chi-Chi's restaurants, one International House of
Pancakes restaurant, one Applebee's restaurant, two Sports
Unlimited stores, one Chili's restaurant, three Steak n Shake
restaurants, the 34% interest in a Blockbuster Video store and the
6.4% interest in a CompUSA store purchased by the Partnership:

Ponderosas:

Kissimmee, Florida

Unit 1005 is located at 4042 West Vine Street. The structure,
built in 1980, is a one-story, 5,360 square foot building
constructed with wood trim over wood frame on an approximately
60,000 square foot site.

The tenant has given the Partnership notice of its intent to
purchase the property under the tenant's existing purchase options
contained within the lease. The purchase price of the property
will be based on the appraised value of the asset.

Waukegan, Illinois

Unit 164 is located at 2915 Belvidere Road. The structure, built
in 1970 and renovated in 1986, is a one-story, 4,700 square foot
building constructed with wood and painted concrete block with wood
trim over wood frame on an approximately 49,300 square foot site.
<PAGE>
Elmhurst, Illinois

Unit 173 is located at 856 North York Road. The structure, built
in 1969, is a one-story, 4,700 square foot building constructed
with painted stucco and wood trim over wood frame on an
approximately 41,000 square foot site.

In September 1997, this property sustained extensive fire damage.
The Partnership is currently litigating the insurance company and
the tenant on the disposition of the insurance proceeds. On
September 3, 1998, the partnership sold this property to an
unaffiliated third party for approximately $300,000, resulting in
a loss of approximately $289,500.

Dayton, Ohio

Unit 856 is located at 726 Miller Lane. The structure, built in
1985 and renovated in 1986, is a one-story, 6,060 square foot
building constructed with stucco over wood frame on an
approximately 116,800 square foot site.

In August 1995, Metromedia, the parent of Ponderosa, closed the
Dayton, Ohio restaurant and subsequently reopened it as a
Bennigan's restaurant in January 1996. Per the terms of the lease,
Metromedia continues to make all rent and certain occupancy
payments to the Partnership.

Kansas City, Missouri

Unit 1069 is located at 7210 Northeast 43rd Street. The
structure, built in 1987, is a one-story, 5,400 square foot
building constructed with stucco over wood frame on an
approximately 61,420 square foot site.

Chi-Chi's

Buffalo, New York

Unit 360 is located at the intersection of Nile Strip and
McKinley Parkway at the entrance to a regional mall. The
restaurant is situated on a 1.5 acre site and contains 7,270 square
feet with a seating capacity of 280 people. The property opened in
January 1990.
Hickory, North Carolina

Unit 401 is located at 2060 Highway 70 Southeast in Hickory,
adjacent to the Valley Hill Mall, a 625,000 square foot regional
shopping center. The property was built in 1990 and consists of a
5,678 square foot restaurant located on an approximately 50,000
square foot land parcel.

During 1995, Chi-Chi's, the sub-tenant under the Foodmaker master
lease, closed its Hickory, North Carolina restaurant because it was
not profitable. Under the terms of the lease, Foodmaker, the
master tenant and guarantor, continued to pay rent for this
property. In March 1996, a potential sub-tenant executed a second
sub-lease with Chi-Chi's for the property. This new sub-tenant
(Carolina Country BBQ of Hickory) occupied the facility in November
1996. Foodmaker continues to be the guarantor under terms of the
second sub-lease.

Foodmaker owns, operates and franchises Jack In The Box, a chain
of fast-food restaurants located principally in the western and
southwestern United States. Until January 27, 1994, Foodmaker also
owned Chi-Chi's, a chain of full-service, casual Mexican
restaurants located primarily in the Midwestern and Midatlantic
United States.

International House of Pancakes:

Denver, Colorado

The I-HOP property consists of a 4,500 square foot building on
approximately one acre of land. The property is positioned on an
outparcel of a 350,000 square foot shopping mall located on Highway
285, a major east/west traffic route in Denver. The restaurant
opened in March 1989.

<PAGE>
Applebee's:

St. Charles, Missouri

The Applebee's property consists of a 4,140 square foot building
on a 66,516 square foot parcel of land. The building is a
square-shaped, one-story, wood-framed and brick-faced structure
which was completed in December 1990. The dining area seated 159
patrons, but was expanded in 1992 to add another 38 seats at a cost
to the Partnership of $79,974, and has a U-shaped bar.

Sports Unlimited:

In 1996, the tenant was merged into JumboSports Inc. On December
27, 1998, JumboSports Inc. filed Voluntary Petitions for Relief
under Chapter 11 of the United States Bankruptcy Code. However,
the Partnership's leases were not on the initial list of leases to
be rejected and the tenant remains current with all of its lease
obligations.

Orlando, Florida

This property is located at 2075 Semoran Blvd. in Winter Park,
Florida, a suburb of Orlando, and consists of a 40,000 square foot
building on 3.8 acres of land. The building is single-story
concrete construction with a flat, built-up composition roof over
metal decking supported by steel bar joists. The building was
completed in 1988.

Charlotte, North Carolina

This property is located at 7300 E. Independence Blvd and
consists of a 30,000 square foot building on 2.5 acres of land.
The building is single-story concrete construction completed in
1987.

<PAGE>
Chili's:

Midland, Texas

The Partnership owns a 99.5% interest in a joint venture, with
an affiliated public real estate limited partnership, that acquired
the Chili's property. This property is located at 4610 N. Garfield
Street in Midland, Texas. The property consists of a 6,213 square
foot building situated on a 45,540 square foot site as an
out-parcel at a shopping center complex consisting of five
buildings. The property is single-story construction framed in a
combination of steel, wood and brick. The property was completed
in 1984.

Steak n Shake:

Collinsville, Illinois

The property is located approximately 10 miles east of St. Louis,
Missouri. The property contains 3,560 square feet on a 38,770
square foot parcel of land. The single-story property was
constructed in 1991.

Indianapolis, Indiana

This property is located at 1501 E. 86th Street on a corner lot
at the intersection of Westfield Boulevard and 86th Street. The
property contains 4,760 square feet on a 1.27 acre site. The
single-story property was constructed in 1974.

In March 1998, the Partnership sold approximately .332 acres of
land on which this property is situated to an unaffiliated third
party for approximately $150,000, resulting in a gain of
approximately $14,600.

Indianapolis, Indiana

This property is located at 8460 N. Michigan Road as an outparcel
of a K-Mart anchored shopping center. The property contains 3,860
square feet on a 0.918 acre site. The single-story property was
constructed in 1989.

<PAGE>
Blockbuster:

Callaway, Florida

The Partnership owns a 34.0% interest in a joint venture, with
affiliated public real estate limited partnerships, that acquired
the Blockbuster Video store. The property is located at 123 N.
Tydall Parkway on the major arterial in the Panama City, Florida
area. The property contains a 6,466 square foot building located
on a 40,075 square foot parcel of land. The property was
constructed in 1996.

CompUSA:

Duluth, Georgia

The Partnership owns a 6.4% interest in a joint venture, with
affiliated public real estate limited partnerships, that acquired
the CompUSA store. The CompUSA store is a 25,000 square foot
single story building located on a 105,919 square foot parcel in
Duluth, Georgia, a suburb of Atlanta, in the Gwinnett Place Mall
Shopping area. The single story building was completed in March
1993 utilizing a frame of steel and concrete block.

The following table summarizes the operations of the
Partnership's properties.
<PAGE>
<TABLE>
BRAUVIN INCOME PLUS L.P. III
SUMMARY OF OPERATING DATA
DECEMBER 31, 1998
<CAPTION>
1998
PERCENT OF 1998 PERCENT OF LEASE
PURCHASE ORIGINAL RENTAL RENTAL EXPIRATION RENEWAL
PROPERTIES PRICE UNITS SOLD INCOME INCOME DATES OPTIONS
<S> <C> <C> <C> <C> <C> <C>
5 PONDEROSA RESTAURANTS $ 5,266,155 24.7% $ 702,649 29.8% 2003 4 FIVE YEAR OPTIONS
2 CHI CHI'S RESTAURANTS 2,280,400 10.7% 307,659 13.0% 2011 4 FIVE YEAR OPTIONS
1 IHOP RESTAURANT 645,000 3.0% 102,852 4.3% 2009 2 FIVE YEAR OPTIONS
1 APPLEBEE'S RESTAURANT
& EXPANSION 1,229,974 5.8% 195,282 8.3% 2011 2 TEN YEAR OPTIONS
1 ORLANDO SPORTS UNLIMITED
STORE 1,900,000 8.9% 305,334 12.9% 2011 2 TEN YEAR OPTIONS
1 CHARLOTTE SPORTS
UNLIMITED STORE 2,450,000 11.5% 237,089 10.0% 2011 2 TEN YEAR OPTIONS
1 CHILI'S RESTAURAN 950,000 4.5% 128,776 5.5% 2004 2 FIVE YEAR OPTIONS
3 STEAK N' SHAKE
RESTAURANTS 2,525,000 11.9% 328,869 13.9% 2010 2 TEN YEAR OPTIONS
6.4% OF 1 COMPUSA 150,400 0.7% 16,755 0.7% 2008 4 FIVE YEAR OPTIONS
34.0% OF 1 BLOCKBUSTER 344,702 1.7% 37,145 1.6% 2006 3 FIVE YEAR OPTIONS
$17,741,631 83.4% $2,362,410 100.0%
<FN>
<F1>
NOTE - THE FORMAT OF THIS SCHEDULE DIFFERS FROM THE INCOME STATEMENT OF THE PARTNERSHIP. THIS SCHEDULE ALLOCATES THE
PARTNERSHIP'S SHARE OF PURCHASE PRICE AND RENTAL INCOME FROM EACH JOINT VENTURE. THE INCOME STATEMENT USES THE
EQUITY METHOD OF ACCOUNTING, THEREFORE, NO RENTAL INCOME IS RECORDED IN THE RENTAL INCOME ACCOUNTS FOR THE JOINT
VENTURES.
<PAGE>
Risk of Ownership

The possibility exists that the tenants of the Partnership's
properties may be unable to fulfill their obligations pursuant to
the terms of their leases, including making base rent or percentage
rent payments to the Partnership. Such a default by the tenants or
a premature termination of any one of the leases could have an
adverse effect on the financial position of the Partnership.
Furthermore, the Partnership may be unable to successfully locate
a substitute tenant due to the fact that these buildings, except
the Sports Unlimited, Blockbuster and CompUSA sites, have been
designed or built primarily to house particular restaurant
operations. Thus, the properties may not be readily marketable to
a new tenant without substantial capital improvements or
remodeling. Such improvements may require expenditure of
Partnership funds otherwise available for distribution.

Item 3. Legal Proceedings.

Two legal actions, as hereinafter described, were pending against
the General Partners of the Partnership and affiliates of such
General Partners, as well as against the Partnership on a nominal
basis in connection with the Merger, with regard to the Illinois
Christman lawsuit, as described below. On April 13, 1999, all the
parties to the litigation reached an agreement to settle the
litigation, subject to the approval by the United States District
Court for the Northern District of Illinois. Management believes
that the settlement will not have a material financial impact on
the Partnership. The terms of the settlement agreement, along with
a Notice to the Class, will be forwarded to the Limited Partners in
the second quarter of 1999. One additional legal action, which was
dismissed on January 28, 1998 had also been brought against the
General Partners of the Partnership and affiliates of such General
Partners, as well as the Partnership on a nominal basis in
connection with the Merger. With respect to these actions the
Partnership and the General Partners and their named affiliates
denied all allegations set forth in the complaints and vigorously
defended against such claims.

A. The Dismissed Florida Lawsuit

On September 17, 1996, a lawsuit was filed in the Circuit Court
of the Seventeenth Judicial Circuit in and for Broward County,
Florida, styled Rebecca Scialpi and Helen Friedlander v. Jerome J.
Brault, Brauvin Realty Advisors, Inc., Brauvin Realty Advisors II,
Inc., Brauvin Realty Advisors III, Inc., and Brauvin Realty
Advisors IV, Inc., James L. Brault, and Brauvin Real Estate Funds,
L.L.C. and Brauvin High Yield Fund L.P., Brauvin High Yield Fund
L.P. II, Brauvin Income Plus L.P. III, and Brauvin Corporate Lease
Program IV, L.P., Docket No. 96012807. The Partnership and the
other affiliated partnerships named in this lawsuit (the
"Affiliated Partnerships") that were proposed to be a party to a
merger or sale with the Purchaser, were each named as a "Nominal
Defendant" in this lawsuit. The named plaintiffs were not Limited
Partners in the Partnership. Rather, the named plaintiffs are
limited partners in Brauvin High Yield Fund L.P. II, one of the
Affiliated Partnerships. Jerome J. Brault, the Managing General
Partner of the Partnership, and Brauvin Realty Advisors III, Inc.,
the Corporate General Partner of the Partnership, as well as
certain corporate general partners of the Affiliated Partnerships,
were named as defendants in this lawsuit. James L. Brault, an
officer of the Corporate General Partner and the son of Jerome J.
Brault, was also named as a defendant. This lawsuit was dismissed
for want of prosecution on January 28, 1998.

B. The Illinois Christman Lawsuit

On September 18, 1996, a class action lawsuit was filed in the
United States District Court for the Northern District of Illinois,
styled M. Barbara Christman, Joseph Forte, Janet M. Toolson, John
Archbold, and Ben O. Carroll v. Brauvin Realty Advisors, Inc.,
Brauvin Realty Advisors II, Inc., Brauvin Realty Advisors III,
Inc., Brauvin Realty Advisors IV, Inc., Jerome J. Brault, Brauvin
Real Estate Funds, L.L.C. and Brauvin High Yield Fund L.P., Brauvin
High Yield Fund L.P. II, Brauvin Income Plus L.P. III, and Brauvin
Corporate Lease Program IV L.P., Docket No. 96C6025. The
Partnership and the Affiliated Partnerships are each named as a
"Nominal Defendant" in the lawsuit. Jerome J. Brault and the
Corporate General Partner of the Partnership, as well as the
corporate general partners of the Affiliated Partnerships, are
named as defendants.

The plaintiffs filed an amended complaint on October 8, 1996,
which alleges claims for breach of fiduciary duties, breaches of
the Agreement, and violation of the Illinois Deceptive Trade
Practices Act. The amended complaint seeks injunctive relief, as
well as compensatory and punitive damages, relating to the
Transaction.

On September 27, 1996, counsel for plaintiffs, The Mills Law
Firm, mailed a solicitation to all of the Limited Partners,
requesting that they revoke their previously-mailed proxies in
favor of the Merger. On October 11, 1996, the General Partners
filed a counterclaim against plaintiffs and their counsel, The
Mills Law Firm, alleging that plaintiffs and The Mills Law Firm
violated the federal securities laws and proxy rules by sending
their September 27, 1996 letter to the Limited Partners. The
plaintiffs and The Mills Law Firm have moved to dismiss this
counterclaim. The District Court has taken this motion under
advisement and has yet to issue a ruling.

On October 10 and 11, 1996, the District Court conducted an
evidentiary hearing on the motion of the General Partners to
invalidate revocations of proxies procured as a result of The Mills
Law Firm's September 27, 1996 letter. In that evidentiary hearing,
The Mills Law Firm admitted that it violated the proxy rules by
sending its September 27, 1996 letter to the Limited Partners
without filing such letter with the Commission (as defined below)
in violation of the Commission's requirements. At the conclusion
of the hearing on October 10 and 11, the District Court found that
the General Partners have a likelihood of succeeding on the merits
with respect to their claim that the September 27, 1996 letter sent
to the Limited Partners by plaintiffs and The Mills Law Firm is
false or misleading in several significant respects.

Notwithstanding this finding, the District Court did not
invalidate the revocations of proxies resulting from The Mills Law
Firm's September 27, 1996 letter because it did not believe it
possessed the authority to do so under present law. This ruling
was appealed to the Seventh Circuit Court of Appeals. The Seventh
Circuit Court of Appeals subsequently dismissed this appeal on the
grounds that the appeal was rendered moot by the Limited Partners'
approval November 8, 1996 of the Merger.

On October 16, 1996 and on November 6, 1996, the parties filed
cross-motions for partial summary judgement addressing the
allegation in plaintiffs' amended complaint that the Agreement does
not allow the Limited Partners to vote in favor of or against the
Transaction by proxy. On August 12, 1998, the District Court
granted plaintiff's motion for partial summary judgement, holding
that the Partnership Agreement did not allow the Limited Partners
to vote in favor or against the Transaction by proxy.

On April 2, 1997, the Court granted plaintiffs' leave to again
amend their complaint. In their second amended complaint,
plaintiffs have named the Partnership as a "Nominal Defendant."
Plaintiffs have also added a new claim, alleging that the General
Partners violated certain of the rules of the Securities and
Exchange Commission (the "Commission") by making false and
misleading statements in the Proxy. Plaintiffs also allege that
the General Partners breached their fiduciary duties, breached
various provisions of the Agreement, violated the Illinois
Deceptive Trade Practice Act, and violated section 17-305 of the
Delaware Revised Uniform Limited Partnership Act. The General
Partners deny those allegations and will continue to vigorously
defend against these claims.

On April 2, 1997, plaintiffs again requested that the District
Court enjoin the closing of the Transaction. After conducting a
lengthy hearing on May 1, 1997, the District Court denied
plaintiffs' motion to preliminarily enjoin the closing of the
Transaction with the Purchaser. Plaintiffs filed a notice of
appeal to the Seventh Circuit Court of Appeals from the District
Court's May 1, 1997 order denying plaintiffs' motion to
preliminarily enjoin the closing of the Transaction. This appeal
was dismissed by the Seventh Circuit Court of Appeals on January
23, 1998, based on the appellate court's finding that the District
Courts order of January 16, 1998 rendered the appeal moot.

On January 16, 1998, by agreement of the Partnership and the
General Partners and pursuant to a motion of the General Partners,
the District Court entered an order preventing the Partnership and
the General Partners from completing the Merger, or otherwise
disposing of all or substantially all of the Partnership's assets,
until further order of the Court.

On January 28, 1998, the District Court entered an Order of
Reference to Special Master, designating a Special Master and
vesting the Special Master with authority to resolve certain
aspects of the lawsuit subject to the District Court's review and
confirmation. The Special Master has been empowered to determine
how the assets of the Partnership should be sold or disposed of in
a manner which allows the Limited Partners to maximize their
financial return in the shortest practicable time frame. In
addition, early in the second quarter of 1998, the Special Master
retained a financial advisor (the "Financial Advisor"), at the
expense of the Partnership, to assist the Special Master. The
Financial Advisor was engaged to perform a valuation of the
Partnership. The cost to the Partnership for the services of the
Financial Advisor was $110,000.

On August 4, 1998, the Special Master filed a Report and
Recommendation with the District Court, expressing the Special
Master's recommendation that the Partnership's properties be
disposed of in an auction conducted by the Financial Advisor under
the direction of the Special Master. The District Court accepted
this Report and Recommendation. On November 4, 1998, the Special
Master filed an additional Report and Recommendation with the
District Court, requesting that the Court withdraw its Order of
Reference to Special Master on the grounds it would be impossible
to effect the sale of the Partnerships in a manner that maximizes
the financial return to Limited Partners in a short time frame,
unless certain litigation issues are resolved. The District Court
has accepted this Report and Recommendation.

On January 21, 1999, plaintiffs filed another amended complaint,
adding additional claims against the General Partners and seeking
class certification under Federal Rule 23 as to the newly added
claims, and as to all other claims in plaintiffs' complaint which
had not been previously certified. The District Court granted
plaintiffs' request for class certification as to all of the claims
not previously certified, and certified all of the claims of the
plaintiffs' complaint under Rule 23(b)(1), 23(b)(2)and 23(b)(3).

In addition, pursuant to the General Partners' motion, the
District Court dismissed as moot certain of plaintiffs' claims,
including plaintiffs' claim that the General Partners violated
certain of the rules of the Securities and Exchange Commission by
allegedly making false and misleading statements in the Proxy. The
District Court similarly dismissed as moot a counterclaim that had
been made against class plaintiffs and their counsel for violating
the federal securities laws.

On April 13, 1999, all of the parties reached a Settlement
Agreement encompassing all matters in the lawsuit. The Settlement
Agreement is subject to the approval by the District Court, and the
Limited Partners will be provided with a written notice concerning
its terms. The settlement will not have a material financial
impact on the Partnership.

C. The Scialpi Illinois Lawsuit

On June 20, 1997, another lawsuit was filed in the United States
District Court for the Northern District of Illinois, styled
Benjamin Siegel, Rebecca Scialpi, Helen Friedlander, and BHS &
Associates, Inc. v. Jerome J. Brault, Brauvin Realty Advisors,
Inc., Brauvin Realty Advisors II, Inc., Brauvin Realty Advisors
III, Inc., Brauvin Realty Advisors IV, Inc., James L. Brault,
Brauvin Real Estate Funds LLC, Brauvin High Yield Fund L.P.,
Brauvin High Yield Fund II L.P., Brauvin Income Plus L.P. III, and
Brauvin Corporate Lease Program IV, L.P. docket number 97 C 4450.
The Partnership and the Affiliated Partnerships are each named as
"Nominal Defendant" in the lawsuit. Jerome J. Brault and the
Corporate General Partner of the Partnership, as well as the
corporate general partners of the Affiliated Partnerships, have
been named as defendants in this lawsuit. James L. Brault, an
officer of the Corporate General Partner and the son of Jerome J.
Brault, is also named as a defendant.

Notably, the complaint was filed by two of the same parties,
Scialpi and Friedlander, who were plaintiffs in the Florida
lawsuit, which is described above. As also described above,
Scialpi and Friedlander are not limited partners in the
Partnership, but are limited partners in one of the Affiliated
Partnerships, Brauvin High Yield Fund L.P. II. On August 15, 1997,
the plaintiffs filed an amended complaint dropping Benjamin Siegel
as a plaintiff. The plaintiffs are also represented by the same
lawyers that represented them in the Florida lawsuit.

The complaint alleges a putative class action consisting of
claims that certain Commission rules were violated by making false
and misleading statements in the Proxy, the defendants breached
their fiduciary duties and breached the Agreement. The complaint
was consolidated with the Christman lawsuit, which is described
above, pursuant to General Rule 2.31 of the United States District
Court of the Northern District of Illinois. The General Partners
deny these allegations and intend to vigorously defend these
claims. There have been no material developments with respect to
this lawsuit since it was filed on June 20, 1997; however,
management believes that the terms of the April 13, 1999 settlement
agreement described above will encompass this lawsuit.

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

None.
<PAGE>
PART II

Item 5. Market for the Registrant's Units and Related Security
Holder Matters.

At December 31, 1998, there were approximately 1,646 Limited
Partners in the Partnership. There is no established public trading
market for Units and it is not anticipated that there will be a
public market for Units. Neither the General Partners nor the
Partnership are obligated, but reserve the right, to redeem or
repurchase Units. Units may also be purchased by the Plan in
certain instances. Any Units so purchased shall be retired.

Pursuant to the terms of the Agreement, there are restrictions
on the ability of the Limited Partners to transfer their Units. In
all cases, the General Partners must consent to the substitution of
a Limited Partner.

Cash distributions to Limited Partners for 1998, 1997 and 1996
were $1,991,668, $2,817,608 and $1,049,822, respectively. Prior to
the commencement of the Partnership's proxy solicitation in August
1996, distributions were paid four times per year, within 60 days
following the end of each calendar quarter or were paid monthly
within 15 days of the end of the month, depending upon the Limited
Partner's preference (see Item 7). All distributions represent
cash flow from operations, with the exception of approximately
$439,600 in 1998 which was a return of capital. Pursuant to the
terms of the Merger Agreement, net income after August 1, 1996 was
to accrue to the Purchaser. Since the net income of the
Partnership after August 1, 1996 was to accrue to the Purchaser, no
distributions of net income were paid to the Limited Partners for
the two months of August and September 1996 and the quarter ended
December 31, 1996. Included in the December 31, 1997 distribution
was any prior period earnings including amounts previously reserved
for anticipated closing cost (see Item 7).

<PAGE>
Item 6. Selected Financial Data.

BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
(not covered by Independent Auditors' Report)
Years Ended December 31,

1998 1997 1996
Selected Income Statement Data:
Rental Income $2,258,278 $2,307,918 $2,282,166
Interest Income 52,924 74,802 44,900
Loss on sales of properties (274,905) - --
Net Income 1,187,388 1,637,197 1,421,119
Net Income Per Unit (a) $ 0.52 $ 0.72 $ 0.62

Selected Balance Sheet Data:
Cash and Cash Equivalents $849,223 $ 463,110 $1,442,263

Land, Buildings and
Improvements 17,463,157 18,308,792 18,308,792

Investment in Brauvin
Gwinnett County Venture 147,518 149,824 151,818

Investment in Brauvin
Bay County Venture 355,532 356,478 367,323

Total Assets 16,065,321 16,771,450 18,137,625

Cash Distributions to
General Partners 17,951 -- 21,042
Cash Distributions to
Limited Partners (b) 1,991,668 2,817,608 1,049,822

Cash Distributions to
Limited Partners
Per Unit (a) $ 0.89 $ 1.26 $ 0.47

(a) Net income per Unit and cash distributions per Unit are based on
the average Units outstanding during the year since they were of
varying dollar amounts and percentages based upon the dates
Limited Partners were admitted to the Partnership and additional
Units were purchased through the Plan.

(b) This includes $21,471, $16,115, and $18,558 paid to various
states for income taxes on behalf of all Limited Partners for
the years 1998, 1997 and 1996, respectively. The 1998 amount
also includes a return of capital distribution of $439,619.

The above selected financial data should be read in conjunction
with the consolidated financial statements and the related notes
appearing elsewhere in this annual report.

BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
(not covered by Independent Auditors' Report)
Years Ended December 31, 1995 and 1994

1995 1994
Selected Income Statement Data:
Rental Income $2,249,447 $ 2,157,975
Interest Income 22,397 27,246
Net Income 1,756,847 1,668,247
Net Income Per Unit (a) $ 0.78 $ 0.76

Selected Balance Sheet Data:
Cash and Cash Equivalents $1,069,555 $ 925,719

Land, Buildings and Improvemen 18,308,792 18,308,792

Investment in Brauvin Gwinnett
County Venture 153,668 157,014

Total Assets 17,780,891 18,027,140

Cash Distributions to General
Partners 44,237 5,500

Cash Distributions to Limited
Partners (b) 2,060,581 2,007,702

Cash Distributions to Limited
Partners per Unit (a) $ 0.93 $ 0.91

(b) This includes $17,867, and $19,933 paid to various states for
income taxes on behalf of all Limited Partners for the years
1995 and 1994, respectively.

The above selected financial data should be read in conjunction
with the consolidated financial statements and the related notes
appearing elsewhere in this annual report.

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.

General

Certain statements in this Annual Report that are not historical
fact constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Discussions
containing forward-looking statements may be found in this section
and in the section entitled "Business." Without limiting the
foregoing, words such as "anticipates," "expects,""intends,""plans"
and similar expressions are intended to identify forward-looking
statements. Theses statements are subject to a number of risks and
uncertainties. Actual results could differ materially from those
projected in the forward-looking statements. The Partnership
undertakes no obligation to update these forward-looking statements
to reflect future events or circumstances.

Year 2000

The "Year 2000" problem concerns the inability of computer
technology systems to correctly identify and process date sensitive
information beyond December 31, 1999. Many computers
automatically add the "19" prefix to the last two digits the
computer reads for the year when date information is needed in
computer software programs. Thus when a date beginning on January
1, 2000 is entered into a computer, the computer may interpret this
date as the year "1900" rather than "2000".

The Partnership's computer information technology systems
consists of a network of personal computers linked to a server
built using hardware and software from mainstream suppliers. The
Partnership does not own any equipment that contains embedded
microprocessors, which may also pose a potential Year 2000 problem.
Additionally, the Partnership has no internally generated software
coding to correct as all of the Partnership's software is purchased
and licensed from external providers. These external providers
have assured management that their systems are, or will be, Year
2000 compliant.

The Partnership has two main software packages that contain date
sensitive information, (i) accounting and (ii) investor relations.
In 1997, the Partnership initiated and completed the conversion
from its existing accounting software to a new software program
that is Year 2000 compliant. In 1998, the investor relations
software was also updated to a new software program that is Year
2000 compliant. Management has determined that the Year 2000 issue
will not pose significant operational problems for its remaining
computer software systems. All costs associated with these
conversions are expensed as incurred, and are not material.
Management does not believe that any further expenditures will be
necessary for the Partnership to be Year 2000 compliant. However,
additional personal computers may be purchased from time to time to
replace existing machines.

Also in 1997, management of the Partnership initiated formal
communications with all of its significant third party vendors,
service providers and financial institutions to determine the
extent to which the Partnership is vulnerable to those third
parties failure to remedy their own Year 2000 issue. There can be
no guarantee that the systems of these third parties will be timely
converted and would not have an adverse effect on the Partnership.

The most reasonably likely worst case scenario for the
Partnership with respect to the Year 2000 issue would be the
inability of certain tenants to timely make their rental payments
beginning in January 2000. This could result in the Partnership
temporarily suffering a depletion of the Partnership's cash
reserves as expenses will need to be paid while the cash flows from
revenues are delayed. The Partnership has no formal Year 2000
contingency plan.

Liquidity and Capital Resources

The Partnership commenced an offering to the public on October
30, 1989 of 2,500,000 Units. The offering was anticipated to close
on October 29, 1990 but was extended by the General Partners with
the necessary regulatory approval to October 29, 1991. The
Offering was conditioned upon the sale of $1,200,000, which was
achieved on January 15, 1990. The Offering closed on October 29,
1991 with the Partnership raising a cumulative total of
$21,307,600. Until the proxy solicitation process began, the
Partnership continued to raise additional funds through the Plan.
The Plan raised $1,459,119 through December 31, 1998 from Limited
Partners investing their distributions of Operating Cash Flow in
additional Units. As of December 31, 1998, Units valued at
$462,972 have been repurchased by the Partnership from Limited
Partners liquidating their investment in the Partnership and have
been retired. Additionally, a return of capital distribution of
$439,619 was distributed by the Partnership to Limited Partners
during the year ended December 31, 1998.

The Partnership purchased the land, buildings and improvements
underlying five Ponderosa restaurants on January 19, 1990, February
16, 1990, March 19, 1990, April 24, 1990 and June 4, 1990,
respectively. In addition, the Partnership closed on the land,
buildings and improvements underlying two Chi-Chi's restaurants;
the first closed on March 12, 1991 and the second closed on March
27, 1991. The land, buildings and improvements underlying an IHOP
restaurant were purchased on April 26, 1991, an Applebee's
restaurant on June 5, 1991 (which was expanded in 1992), two Sports
Unlimited sporting goods stores on September 17, 1991, a Chili's
restaurant on February 7, 1992 and three Steak n Shake restaurants
on April 16, 1992.

On February 7, 1992, the Partnership purchased a 99.5% equity
interest in a joint venture with an affiliate, Brauvin Chili's
Limited Partnership, which owns one Chili's restaurant.

On November 9, 1993, the Partnership purchased a 6.4% interest
in a joint venture with affiliated public real estate limited
partnerships (the "Venture"). The Venture acquired the land and
building underlying a 25,000 square foot CompUSA computer
superstore from an unaffiliated seller.

On October 31, 1996, the Partnership purchased a 34% joint
venture equity interest in a joint venture with affiliated public
real estate limited partnerships, the Brauvin Bay County Venture.
The Bay County Venture purchased real property upon which is
operated a newly constructed Blockbuster video store. The property
contains a 6,466 square foot building located on a 40,075 square
foot parcel of land.

These operating properties are expected to generate cash flow for
the Partnership after deducting certain operating and general and
administrative expenses from their rental income. The Partnership
has no funds available to purchase additional property, excluding
those raised through the Plan.

Distributions of the Partnership's net earnings for the period
January 1, 1998 to March 31, 1998, April 1, 1998 to June 30, 1998,
July 1, 1998 to September 30, 1998 and October 1, 1998 to December
31, 1998 were made to Limited Partners on May 8, 1998, August 15,
1998, November 15, 1998 and February 15, 1999, respectively, in the
amounts of approximately $525,000, $361,400, $644,100 and $500,900.
In addition, distributions of approximately $21,500 were paid to
various states for income taxes on behalf of all Limited Partners
during 1998.

Below is a table summarizing the four year historical data for
distribution rates per unit:

Distribution
Date 1999 1998 (a) 1997 (b) 1996 1995

February 15 $.2246 $ -- $.2396 $.2313 $.2313

May 15 -- .2368 .2390 .2313 .2313

August 15 -- .1621 .2190 -- .2313

November 15 (c) -- .2888 .5665 -- .2313

(a) The 1998 distributions were made on May 8, 1998, August 15,
1998, November 15, 1998 and February 15, 1999.
(b) The 1997 distributions were made on March 31, 1997, July 15,
1997, October 22, 1997 and December 31, 1997.
(c) The November 15, 1998 distribution above does not include a
return of capital distribution of approximately $0.1971, per
Unit.

Per the terms of the Merger, the Partnership's net earnings from
April 1996 through July 1996 were to be distributed to the Limited
Partners in conjunction with the closing of the Merger. However,
because of the lengthy delay and the uncertainty of the ultimate
closing date, the General Partners decided to make a significant
distribution on December 31, 1997 of the Partnership's earnings.
Included in the December 31, 1997 distribution was any prior period
earnings including amounts previously reserved for anticipated
closing costs.

Based on the August 12, 1998 ruling of the District Court in the
Christman Litigation, the reserves will be re-established by the
Partnership as soon as a definitive sale process has been
determined and associated costs and reserves can be identified.

Future increases in the Partnership's distributions will largely
depend on increased sales at the Partnership's properties resulting
in additional percentage rent and, to a lesser extent, on rental
increases, which will occur due to increases in receipts from
certain leases based upon increases in the Consumer Price Index or
scheduled increases of base rent.

During the years ended December 31, 1998, 1997 and 1996, the
General Partners and their affiliates earned management fees of
$23,172, $23,647 and $22,990, respectively, and received $17,951,
$0 and $21,042 in Operating Cash Flow distributions for the years
ended December 31, 1998, 1997 and 1996, respectively. Included in
the $17,951 received in 1998 was approximately $15,100 the
Partnership paid the General Partners as an Operating Cash Flow
distribution for the year ended December 31, 1997.

Although the Merger will not be consummated, the following text
describes the Transaction. Pursuant to the terms of the Agreement,
the Limited Partners would have received approximately $8.85 per
Unit in cash; of this original amount, approximately $0.27 has
already been distributed to the Limited Partners. Promptly upon
consummation, the Partnership would have ceased to exist and the
Purchaser, as the surviving entity, would have succeeded to all of
the assets and liabilities of the Partnership.

The Partnership drafted a proxy statement, which required prior
review and comment by the Commission, to solicit proxies for use at
the Special Meeting originally to be held at the offices of the
Partnership on September 24, 1996. As a result of various legal
issues, as described in legal proceedings, the Special Meeting was
adjourned to November 8, 1996 at 10:00 a.m. The purpose of the
Special Meeting was to vote upon the Merger and certain other
matters as described in the Proxy.

By approving the Merger, the Limited Partners also would have
approved an amendment of the Agreement allowing the Partnership to
sell or lease property to affiliates (this amendment, together with
the Merger shall be referred to herein as the "Transaction"). The
Delaware Revised Uniform Limited Partnership Act (the "Act")
provides that a merger must also be approved by the general
partners of a partnership, unless the limited partnership agreement
provides otherwise. Because the Agreement did not address this
matter, at the Special Meeting, Limited Partners holding a majority
of the Units were also asked to approve the adoption of an
amendment to the Agreement to allow the majority vote of the
Limited Partners to determine the outcome of the Transaction with
the Purchaser without the vote of the General Partners. Neither
the Act nor the Agreement provides the Limited Partners not voting
in favor of the Transaction with dissenters' appraisal rights.

The redemption price to be paid to the Limited Partners in
connection with the Merger was based on the fair market value of
the properties of the Partnership (the "Assets"). Cushman &
Wakefield Valuation Advisory Services ("Cushman & Wakefield"), an
independent appraiser, the largest real estate valuation and
consulting organization in the United States, was engaged by the
Partnership to prepare an appraisal of the Assets, to satisfy the
Partnership's requirements under the Employee Retirement Income
Security Act of 1974, as amended. Cushman & Wakefield determined
the fair market value of the Assets to be $19,129,150, or $8.58 per
Unit, on April 1, 1996. Subsequently, the Partnership purchased a
34% interest in Brauvin Bay County Venture. Based on the terms of
the Merger Agreement, the fair market value of the Assets will be
increased by the amount of the investment in Brauvin Bay County
Venture, and correspondingly, the Partnership's cash holdings were
reduced by the same amount and therefore the total redemption
amount would remain unchanged. The redemption price of $8.85 per
Unit also included all remaining cash of the Partnership, less net
earnings of the Partnership from and after August 1, 1996 through
December 31, 1996, less the Partnership's actual costs incurred and
accrued through the effective time of the filing of the certificate
of merger, including reasonable reserves in connection with: (i)
the proxy solicitation; (ii) the Transaction (as detailed in the
Merger Agreement); and (iii) the winding up of the Partnership,
including preparation of the final audit, tax return and K-1s
(collectively, the "Transaction Costs") and less all other
Partnership obligations. Of the original cash redemption amount
approximately $0.27 was distributed to Limited Partners in the
December 31, 1997 distribution.

Cushman & Wakefield subsequently provided an opinion as to the
fairness of the Transaction to the Limited Partners from a
financial point of view. In its opinion, Cushman & Wakefield
advised that, the price per Unit reflected in the Transaction was
fair, from a financial point of view to the Limited Partners.
Cushman & Wakefield's determination that a price is "fair" does not
mean that the price was the highest price which might be obtained
in the marketplace, but rather that based on the appraised values
of the properties, the price reflected in the Transaction was
believed by Cushman & Wakefield to be reasonable.

Mr. Jerome J. Brault is the Managing General Partner and Brauvin
Realty Advisors III, Inc. is the Corporate General Partner. Mr.
Cezar M. Froelich resigned his position as an Individual General
Partner of the Partnership effective as of September 17, 1996. The
General Partners were not to receive any payment in exchange for
the redemption of their general partnership interests nor were they
to receive any fees from the Partnership in connection with the
Transaction. The remaining General Partners do not believe that
Mr. Froelich's lack of future involvement will have any adverse
effect on the Partnership.

The Managing General Partner and his son, James L. Brault, an
executive officer of the Corporate General Partner, were to have a
minority ownership interest in the Purchaser. Therefore, the
Messrs. Brault had an indirect economic interest in consummating
the Transaction that was in conflict with the economic interests of
the Limited Partners. Mr. Froelich has no affiliation with the
Purchaser.

Although the Special Meeting was held and an affirmative vote of
the majority of the Limited Partners was received, the District
Court in the Christman Litigation ruled on August 12, 1998 in favor
of the Plaintiff's motion for partial summary judgement, holding
the Partnership Agreement did not allow the Limited Partners to
vote in favor or against the Transaction by proxy.

As discussed in Item 3, all the parties to the litigation reached
an agreement to settle the litigation, subject to the approval by
the United States District Court for the Northern District of
Illinois.

The 1998 and 1997 distributions were based on the net earnings
of the Partnership for the years ended December 31, 1998 and 1997,
respectively. These distributions were lower than they otherwise
would be because the Partnership has incurred significant legal
costs to defend against the lawsuits. In addition, the remaining
term on the Partnership's properties' leases continue to shrink.
This fact is causing the Partnership to potentially face the risks
and costs of lease rollover. This heightened degree of risk may
also have an adverse effect on the ultimate value of the Assets.
Further, the Partnership's most significant tenant, Ponderosa, has
recently closed and vacated six of the Affiliated Partnerships'
properties. However, subsequent to their closings, two properties
have been reopened and subleased to two unrelated local concept
restaurant operators and two have been sold to unaffiliated third
parties. Fortunately, none of the Partnership's properties has
been closed, with the exception of the Elmhurst property (as
described below). However, this is the type of risk the
Partnership was seeking to avoid with the successful completion of
the Merger.

In September 1997, one of the Partnership's properties located
in Elmhurst, Illinois sustained extensive fire damage. The
Partnership is currently negotiating with the insurance company and
the tenant on the disposition of the insurance proceeds. On
September 3, 1998, the Partnership sold the Elmhurst property to an
unaffiliated third party for approximately $300,000, resulting in
a loss of approximately $289,500.

As detailed in Item 3, on January 16, 1998, by agreement of
the Partnership and the General Partners and pursuant to a motion
of the General Partners, the District Court entered an order
preventing the Partnership and the General Partners from completing
the Merger, or otherwise disposing of all or substantially all of
the Partnership's assets, until further order of the Court.

On January 28, 1998, the District Court entered an Order of
Reference to Special Master, designating a Special Master and
vesting the Special Master with authority to resolve certain
aspects of the lawsuit subject to the District Court's review and
confirmation. The Special Master has been empowered to determine
how the assets of the Partnership should be sold or disposed of in
a manner which allows the Limited Partners to maximize their
financial return in the shortest practicable time frame. In
addition, early in the second quarter of 1998, the Special Master
retained a financial advisor (the "Financial Advisor"), at the
expense of the Partnership, to assist the Special Master. The
Financial Advisor was engaged to perform a valuation of the
properties of the Partnership as well as a valuation of the
Partnership. The cost to the Partnership for the services of the
Financial Advisor was $110,000.

On August 4, 1998 Special Master filed a Report and
Recommendation with the District Court expressing the Special
Master's recommendation that the Partnership's properties be
disposed of in an auction conducted by the Financial Advisor under
the direction of the Special Master. The District Court accepted
this Report and Recommendation. On November 4, 1998, the Special
Master filed an additional Report and Recommendation with the
District Court, requesting that the Court withdraw its Order of
Reference to Special Master on the grounds it would be impossible
to effect the sale of the Partnership's properties in a manner that
maximizes the financial return to Limited Partners in a short time
frame, unless certain litigation issues are resolved. The District
Court has accepted this Report and Recommendation.

Results of Operations - Years ended December 31, 1998 and 1997

Results of operations for the Partnership for the year ended
December 31, 1998 reflected net income of $1,187,388 compared to
$1,637,197 for the year ended December 31, 1997, a decrease of
approximately $449,800. The major cause for the decline in net
income relates to the sale of the Elmhurst property in September,
1998. This property sale resulted in the Partnership recognizing
a loss of approximately $289,500.

Total income for the year ended December 31, 1998 was $2,311,750
as compared to $2,383,963 for the year ended December 31, 1997, a
decrease of approximately $72,200. The decrease in total income was
a result of decreased percentage rents earned at several of the
Partnership properties. Additionally, total income declined as a
result of decreased interest income which is a result of decreased
funds invested during 1998. Rental revenue also declined due to the
September 1998 sale, since only nine months of revenue was recorded
for the period ended in 1998 compared to twelve months for the
period ended in 1997.

Total expenses for the year ended December 31, 1998 was $891,449
as compared to $783,864 for the year ended December 31, 1997, an
increase of approximately $107,600. The increase in expenses was
primarily due to an increase in valuation fees, however, this
increase was partially offset by a decrease in transactions costs.

Results of Operations - Years ended December 31, 1997 and 1996

Results of operations for the Partnership for the year ended
December 31, 1997 reflected net income of $1,637,197 compared to
$1,421,119 for the year ended December 31, 1996, an increase of
approximately $216,100.

Total income for the year ended December 31, 1997 was $2,383,963
as compared to $2,327,929 for the year ended December 31, 1996, an
increase of approximately $56,000. The increase in total income
was due primarily to an increase in interest income as a result of
increased cash balances in 1997 due to the terms of the
Transaction.

Total expenses for the year ended December 31, 1997 was $783,864
as compared to $921,133 for the year ended December 31, 1996, a
decrease of approximately $137,300. The decrease in expenses was
primarily the result of a decrease in transaction costs and
valuation fees. Partially offsetting this decrease in expenses was
an increase in general and administrative expenses associated with
the Partnership's attempt to resolve some of the due diligence
issues and related items associated with the Merger, as discussed
above.

Results of Operations - Years ended December 31, 1996 and 1995

Results of operations for the Partnership for the year ended
December 31, 1996 reflected net income of $1,421,119 compared to
$1,756,847 for the year ended December 31, 1995, a decrease of
approximately $335,700. The decrease in net income was due
primarily to an increase in total expenses as a result of the
Partnership's Transaction and property valuations.

Total income for the year ended December 31, 1996 was $2,327,929
as compared to $2,275,223 for the year ended December 31, 1995, an
increase of approximately $52,700. The increase in total income is
mainly due to an increase in rental income as a result of an
increase in percentage rental income at several of the properties.
Total income was also effected due to an increase in interest
income as a result of the Partnership having more funds invested
during 1996.

Total expenses for the year ended December 31, 1996 were $921,133
as compared to $531,100 for the year ended December 31, 1995, an
increase of approximately $390,000. The increase in expense was
primarily the result of legal and other professional fees paid or
accrued related to the Transaction. Total expenses also increased
in 1996 compared to 1995 as a result of the Partnership hiring an
independent real estate company to conduct property valuations to
provide a valuation of the Units to satisfy the Partnership's
requirements under the Employee Retirement Income Security Act of
1974, as amended.

Impact of Inflation

The Partnership anticipates that the operations of the
Partnership will not be significantly impacted by inflation. To
offset any potential adverse effects of inflation, the Partnership
entered into "triple-net" leases with the tenant being responsible
for all operating expenses, insurance and real estate taxes. In
addition, several of the leases require escalations of rent based
upon increases in the Consumer Price Index, scheduled increases of
base rents, or tenant sales.

Item 7A. Quantitative and Qualitative Disclosures About Market
Risk.

The Partnership does not engage in any hedge transactions or
derivative financial instruments, or have any interest sensitive
obligations.

Item 8. Consolidated Financial Statements and Supplementary Data.

See Index to Consolidated Financial Statements and Schedule on
Page F-1 of this Annual Report on Form 10-K for consolidated
financial statements and financial statement schedule, where
applicable.

The supplemental financial information specified in Item 302
of Regulation S-K is not applicable.

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.

During the Partnership's two most recent fiscal years, there
have been no changes in, or disagreements with, the accountants.

<PAGE>

PART III

Item 10. Directors and Executive Officers of the Partnership.

The General Partners of the Partnership are:

Brauvin Realty Advisors III, Inc., an Illinois corporation
Mr. Jerome J. Brault, individually

Brauvin Realty Advisors III, Inc. (the "Corporate General
Partner") was formed under the laws of the State of Illinois in
1989, with its issued and outstanding shares being owned by Messrs.
Jerome J. Brault (beneficially)(50%) and Cezar M. Froelich (50%).

The principal officers and directors of the Corporate General
Partner are:

Mr. Jerome J. Brault . .Chairman of the Board of
Directors, President, Chief
Executive Officer and Director

Mr. James L. Brault . .Vice President and Secretary

Mr. Thomas E. Murphy . Treasurer and Chief Financial
Officer

The business experience during the past five years of the General
Partners and the principal officers and directors of the Corporate
General Partner are as follows:

MR. JEROME J. BRAULT (age 65) chairman of the board of directors,
president and chief executive officer of the Corporate General
Partner, as well as a principal shareholder of the Corporate
General Partner. He is a member and manager of Brauvin Real Estate
Funds, L.L.C. He is a member of Brauvin Capital Trust L.L.C.
Since 1979, he has been a shareholder, president and a director of
Brauvin/Chicago, Ltd. He is an officer, director and one of the
principal shareholders of various Brauvin entities which act as the
general partners of six other publicly registered real estate
programs. He is an officer, director and one of the principal
shareholders of Brauvin Associates, Inc., Brauvin Management
Company, Brauvin Advisory Services, Inc. and Brauvin Securities,
Inc., Illinois companies engaged in the real estate and securities
businesses. He is a director, president and chief executive
officer of Brauvin Net Lease V, Inc. He is the chief executive
officer of Brauvin Capital Trust, Inc. Mr. Brault received a B.S.
in Business from DePaul University, Chicago, Illinois in 1959.

MR. JAMES L. BRAULT (age 38) is a vice president and secretary
and is responsible for the overall operations of the Corporate
General Partner and other affiliates of the Corporate General
Partner. He is an officer of various Brauvin entities which act as
the general partners of six other publicly registered real estate
programs. Mr. Brault is executive vice president and assistant
secretary and is responsible for the overall operations of Brauvin
Management Company. He is also an executive vice president and
secretary of Brauvin Net Lease V, Inc. He is a manager of Brauvin
Real Estate Funds, L.L.C., Brauvin Capital Trust, L.L.C. and
BA/Brauvin L.L.C. He is the president of Brauvin Capital Trust,
Inc. Prior to joining the Brauvin organization in May 1989, he was
a Vice President of the Commercial Real Estate Division of the
First National Bank of Chicago ("First Chicago"), based in their
Washington, D.C. office. Mr. Brault joined First Chicago in 1983
and his responsibilities included the origination and management of
commercial real estate loans, as well as the direct management of
a loan portfolio in excess of $150 million. Mr. Brault received a
B.A. in Economics from Williams College, Williamstown,
Massachusetts in 1983 and an M.B.A. in Finance and Investments from
George Washington University, Washington, D.C. in 1987. Mr. Brault
is the son of Mr. Jerome J. Brault.

MR. THOMAS E. MURPHY (age 32) is the treasurer and chief
financial officer of the Corporate General Partner and other
affiliates of the Corporate General Partner. He is the chief
financial officer of various Brauvin entities which act as the
general partners of six other publicly registered real estate
programs. Mr. Murphy is also the chief financial officer of
Brauvin Associates, Inc., Brauvin Management Company, Brauvin
Financial, Inc., Brauvin Securities, Inc. and Brauvin Net Lease V,
Inc. He is the treasurer, chief financial officer and secretary of
Brauvin Capital Trust, Inc. He is responsible for the Partnership's
accounting and financial reporting to regulatory agencies. He
joined the Brauvin organization in July 1994. Prior to joining the
Brauvin organization he worked in the accounting department of
Zell/Merrill Lynch and First Capital Real Estate Funds where he was
responsible for the preparation of the accounting and financial
reporting for several real estate limited partnerships and
corporations. Mr. Murphy received a B.S. in Accounting from
Northern Illinois University in 1988. Mr. Murphy is a Certified
Public Accountant and is a member of the Illinois Certified Public
Accountants Society.

Item 11. Executive Compensation.

(a & b) The Partnership is required to pay certain fees,
make distributions and allocate a share of the profits and losses
of the Partnership to the Corporate General Partner or its
affiliates as described under the caption "Compensation Table" on
pages 10 to 12 of the Partnership's Prospectus and "Summary of
Limited Partnership Agreement - Allocations and Distribution to the
Limited Partners" on page 70 of the Partnership's Prospectus, as
supplemented, and the sections of the Agreement entitled
"Distributions of Operating Cash Flow," "Allocation of Profits,
Losses and Deductions," "Distribution of Net Sales or Refinancing
Proceeds" and "Compensation of General Partners and Their
Affiliates" located on pages A-8 to A-13 of the Agreement, attached
as Exhibit A to the Prospectus. The relationship of the Corporate
General Partner (and its directors and officers) to its affiliates
is set forth above in Item 10. Reference is also made to Note 2 of
the Notes to Consolidated Financial Statements filed with this
Annual Report on Form 10-K for a description of such distributions
and allocations.

The General Partners received Acquisition Fees for services
rendered in connection with the selection, purchase, construction
or development of any property by the Partnership whether
designated as real estate commissions, acquisition fees, finders'
fees, selection fees, development fees, non-recurring management
fees, consulting fees, payments for covenants not to compete,
guarantee fees, financing fees or any other similar fees or
commissions, however designated and however treated for tax or
accounting purposes. Such Acquisition Fees may not exceed such
compensation as is customarily charged in arm's-length transactions
by others rendering similar services as an ongoing public activity
in the same geographic locale and for comparable properties. In
addition, unaffiliated real estate brokers and other parties
engaged by the seller of a Partnership property received fees or
commissions for their services from the seller in connection with
the purchase of a property by the Partnership, in an amount of up
to 1/2% of the gross proceeds of the Offering. Such fee was not
paid with any of the gross proceeds of the Offering. In the event
real estate brokers or other parties receive such fees which would
be considered Acquisition Fees, the total Acquisition Fees paid to
all parties by all parties will not exceed 5-1/2% of the gross
proceeds of the Offering. The aggregate Acquisition Fees to be
paid to an affiliate of the General Partners shall not exceed 5% of
the gross proceeds of the Offering. No acquisition fees were paid
in 1998 or 1997. An acquisition fee of $21,278 was paid in 1996
related to the Bay County Venture purchase.

Up to a maximum of 1% of the gross proceeds of the Offering was
set aside for the Partnership's Distribution Reserve which, if not
utilized to pay the Limited One Year Guaranty Return of 9-1/4% per
annum on Adjusted Investment, could have been paid to an affiliate
of the General Partners at the sole discretion of the General
Partners on the earlier of: (i) October 29, 1991; or (ii) the
expenditure of 95% of the proceeds of the Offering available for
Investment in Properties (the "Distribution Reserve Termination").
No such amounts were paid to the General Partners since the
Distribution Reserve was fully used to fund distributions to the
Limited Partners.

An affiliate of the General Partners may provide leasing and
re-leasing services to the Partnership in connection with the
management of Partnership properties. The maximum property
management fee paid to an affiliate of the General Partners shall
be equal to 1% of the gross revenues of each Partnership property,
however, the receipt of such property management fees by the
affiliate of the General Partners is subordinate to receipt by the
Limited Partners of the 9-1/4% non-cumulative, non-compounded
annual return on Adjusted Investment (the "Current Preferred
Return"). During 1998, 1997 and 1996, the Partnership paid $23,568
$21,664 and $23,180, respectively, for property management fees.

(c, d, e & f) Not applicable.

(g) The Partnership has no employees and pays no
employee or director compensation.

(h & i) Not applicable.

(j) Compensation Committee Interlocks and Insider
Participation. Since the Partnership has no
employees, it did not have a compensation committee
and is not responsible for the payment of any
compensation.

(k) Not applicable.

(l) Not applicable.

The following is a summary of all fees, commissions and other
expenses paid or payable to the General Partners or its affiliates
for the years ended December 31, 1998, 1997 and 1996:

1998 1997 1996

Selling commissions $ -- $ -- $ 6,897
Management fees 23,172 23,647 22,990
Reimbursable operating expenses 119,249 126,736 98,457
Legal fees -- 197 4,244
Acquisitions fees -- -- 21,278
Transaction costs -- -- 8,844

As of December 31, 1998 and 1997, the Partnership has made all
payments to affiliates except for $1,587 and $1,983, respectively,
related to management fees.

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

(a) No person or group is known by the Partnership to own
beneficially more than 5% of the outstanding Units of the
Partnership.

(b) None of the officers and directors of the Corporate
General Partner purchased Units.

No officer or director of the Corporate General Partner
possesses a right to acquire beneficial ownership of
Units of the Partnership. The General Partners will
share in the profits, losses and distributions of the
Partnership as outlined in Item 11, "Executive
Compensation."

Item 13.Certain Relationships and Related Transactions.

(a & b) The Partnership is entitled to engage in various
transactions involving affiliates of the Corporate
General Partner, as described under the sections
"Compensation Table" and "Conflicts of Interest" on pages
11 to 14 and 14 to 16, respectively, of the Partnership's
Prospectus, as supplemented, and the section of the
Agreement entitled "Rights, Duties and Obligations of
General Partners" on pages A-15 to A-18. The
relationship of the Corporate General Partner to its
affiliates is set forth in Item 10. Cezar M. Froelich,
a former Individual General Partner and a shareholder of
the Corporate General Partner, is a principal of the law
firm of Shefsky & Froelich Ltd., which firm acted as
securities and real estate counsel to the Partnership,
the General Partners and certain of its affiliates.

(d) There have been no significant transactions with
promoters.

<PAGE>
PART IV

Item 14.Exhibits, Consolidated Financial Statement and Schedules,
and Reports on Form 8-K.

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

(1) (2) Consolidated Financial Statements and Schedule
indicated in Part II, Item 8 "Consolidated
Financial Statements and Supplementary Data." (See
Index to Consolidated Financial Statements and
Schedule on page F-1 of Form 10-K).

(3) Exhibits required by the Securities and Exchange
Commission Regulation S-K, Item 601:

(21) Subsidiaries of the Registrant.

(27) Financial Data Schedule.

The following exhibits are incorporated by reference from the
Registrant's Registration Statement (File No. 33-28577) on Form
S-11 filed under the Securities Act of 1933:

Exhibit No. Description
3.(a) Restated Limited Partnership Agreement.

3.(b) Articles of Incorporation of Brauvin Realty Advisors
III, Inc.

3.(c) By-Laws of Brauvin Realty Advisors III, Inc.

3.(d) Amendment to the Certificate of Limited Partnership
of the Partnership.

10.(a) Escrow Agreement.

(b) Form 8-K.
None.

The following exhibits are incorporated by reference to the
Registrant's fiscal year ended 1994 Form 10-K (File No. 0-19219):

Exhibit No. Description

(10)(b)(1) Management Agreement.

(19)(a) Amendment to Distribution Reinvestment Plan.

(28) Pages 11-16, 40, 41 and 70 of the Partnership's
Prospectus dated October 30, 1989, as
supplemented, pages A-8 to A-13 and A-15 to A-18
of the Agreement and portions of Supplements #4
and #5.

The following exhibit is incorporated by reference to the
Registrant's definitive proxy statement dated August 23, 1996 (File
No. 0-17557):

Exhibit No. Description

(10)(c) Merger Agreement.

The following exhibit is incorporated by reference to the
Registrant's fiscal year ended 1996 Form 10-K (File No. 0-19219):

Exhibit No. Description

(10)(d) First Amendment and Waiver to the Agreement and
Plan of Merger.
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto
duly authorized.

BRAUVIN INCOME PLUS L.P. III
BY: BRAUVIN Realty Advisors III, Inc.
Corporate General Partner

By: /s/ Jerome J. Brault
Jerome J. Brault
Chairman of the Board of
Directors, President and Chief
Executive Officer

By: /s/ Thomas E. Murphy
Thomas E. Murphy
Chief Financial Officer and
Treasurer

By: /s/ James L. Brault
James L. Brault
Vice President and Secretary

INDIVIDUAL GENERAL PARTNER

/s/ Jerome J. Brault
Jerome J. Brault

Dated: April 15, 1999

<PAGE>
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

Page

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . F-2

Consolidated Financial Statements:

Consolidated Balance Sheets, December 31, 1998 and 1997 . . . . . . F-3

Consolidated Statements of Operations, for the years
ended December 31, 1998, 1997 and 1996. . . . . . . . . . . . . . F-4

Consolidated Statements of Partners' Capital, for
the years ended December 31, 1998, 1997 and 1996. . . . . . . . . F-5

Consolidated Statements of Cash Flows, for the years
ended December 31, 1998, 1997 and 1996. . . . . . . . . . . . . . F-6

Notes to Consolidated Financial Statements. . . . . . . . . . . . . F-7

Schedule III--Real Estate and Accumulated Depreciation,
December 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . F-29

All other schedules provided for in Item 14(a)(2) of Form 10-K
are either not required, not applicable or immaterial.

<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Partners
Brauvin Income Plus L.P. III
Chicago, Illinois

We have audited the accompanying consolidated balance sheets of
Brauvin Income Plus L.P. III (a limited partnership) and subsidiary
as of December 31, 1998 and 1997, and the related consolidated
statements of operations, partners' capital, and cash flows for the
each of the three years in the period ended December 31, 1998. Our
audits also included the financial statement schedule listed in the
Index to Consolidated Financial Statements and Schedule on page F-
1. These consolidated financial statements and the financial
statement schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these
consolidated financial statements and the financial statement
schedule based on our audits.

We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Brauvin
Income Plus L.P. III and its subsidiary at December 31, 1998 and
1997, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set
forth therein.

/s/ Deloitte & Touche LLP

Chicago, Illinois
February 16, 1999
(April 14, 1999 as to Note 6)

BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)

CONSOLIDATED BALANCE SHEETS

December 31, December 31,
1998 1997
ASSETS
Investment in real estate, at cost:
Land $7,397,633 $ 7,845,528
Buildings and improvements 10,065,524 10,463,264
17,463,157 18,308,792
Less: Accumulated depreciation (2,888,332) (2,639,582)
Net investment in real estate 14,574,825 15,669,210

Investment in Joint Ventures (Note 5):
Brauvin Gwinnett County Venture 147,518 149,824
Brauvin Bay County Venture 355,532 356,478

Cash and cash equivalents 849,223 463,110
Rent receivable 7,992 8,174
Deferred rent receivable 59,407 53,830
Prepaid offering costs 70,824 70,824
Total Assets $16,065,321 $16,771,450

LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued expenses $ 245,228 $ 119,758
Rent received in advance 9,881 18,205
Tenant security deposits 51,626 52,203
Due to affiliate 1,587 1,983
Total Liabilities 308,322 192,149

Minority Interest in Brauvin
Chili's Limited Partnership (768) (697)

PARTNERS' CAPITAL:
General Partners 116,693 110,896
Limited Partners 15,641,074 16,469,102
Total Partners' Capital 15,757,767 16,579,998
Total Liabilities and Partners'
Capital $16,065,321 $16,771,450
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)

CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31,

1998 1997 1996
INCOME:
Rental $2,258,278 $2,307,918 $2,282,166
Interest 52,924 74,802 44,900
Other 548 1,243 863
Total income 2,311,750 2,383,963 2,327,929

EXPENSES:
General and
administrative 204,052 190,496 158,191
Management fees (Note 3) 23,172 23,647 22,990
Transaction costs (Note 6) 174,365 184,743 297,345
Valuation fees 110,000 -- 57,629
Depreciation 379,860 384,978 384,978
Total expenses 891,449 783,864 921,133
Income before loss on sales
of properties and minority
interest and equity interest
in joint ventures 1,420,301 1,600,099 1,406,796

Loss on sales of
properties, net (274,905) - -

Income before minority interest
and equity interest in
joint ventures 1,145,396 1,600,099 1,406,796

Minority interest share in
Brauvin Chili's Limited
Partnership's net income (504) (507) (530)

Equity interest in
net income from:
Brauvin Bay County Venture 29,314 24,175 1,343
Brauvin Gwinnett
County Venture 13,182 13,430 13,510
Net income $1,187,388 $1,637,197 $ 1,421,119
Net income allocated to
the General Partners $ 23,748 $ 32,744 $ 28,422
Net income allocated to
the Limited Partners $1,163,640 $1,604,453 $ 1,392,697
Net income per Unit
outstanding (a) $ 0.52 $ 0.72 $ 0.62

(a) Net income per Unit is based on the average Units outstanding
during the year since they were of varying dollar amounts and
percentages based upon the dates Limited Partners were
admitted to the Partnership and additional Units were
purchased through the distribution reinvestment plan (the
"Plan").

See accompanying notes to consolidated financial statements.

BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
For the years ended December 31, 1998, 1997 and 1996

General Limited
Partners Partners* Total

Balance, December 31, 1995 $70,772 $17,314,980 $17,385,752

Contributions, net -- 32,715 32,715
Selling commissions and other
offering costs -- (8,313) (8,313)
Net income 28,422 1,392,69 1,421,119

Cash distributions (21,042) (1,049,822) (1,070,864)

Balance, December 31, 1996 78,152 17,682,257 17,760,409

Net income 32,744 1,604,453 1,637,197
Cash distributions -- (2,817,608) (2,817,608)

Balance, December 31, 1997 110,896 16,469,102 16,579,998

Net income 23,748 1,163,640 1,187,388
Return of capital distribution -- (439,619) (439,619)
Cash distributions (17,951) (1,552,049) (1,570,000)

Balance, December 31, 1998 $ 116,693 $15,641,074 $15,757,767

* Total Units outstanding at December 31, 1998, 1997 and 1996 were
2,230,375, 2,230,375 and 2,230,375, respectively. Distributions to
Limited Partners per Unit were approximately $0.89, $1.26 and $0.47
for the years ended December 31, 1998, 1997 and 1996, respectively.
In addition, a return of capital distribution of approximately $0.20
per Unit was made during the year ended December 31, 1998.
Distributions to Limited Partners per Unit are based on the average
Units outstanding during the year since they were of varying dollar
amounts and percentages based upon the dates Limited Partners were
admitted to the Partnership and additional Units were purchased
through the Plan.
See accompanying notes to consolidated financial statements.
<PAGE>
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1998, 1997 and 1996

1998 1997 1996
Cash flows from operating activities:
Net income $1,187,388 $1,637,197 $1,421,119
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 379,860 384,978 384,978
Loss on sales of properties, net 274,905 - --
Minority interest's share of income from
Brauvin Chili's Limited Partnership 504 507 530
Equity interest in net income from:
Brauvin Bay County Venture (29,314) (24,175) (1,343)
Brauvin Gwinnett County Venture (13,182) (13,430) (13,510)
Changes in:
Rent receivable 182 (4,856) (3,318)
Deferred rent receivable (5,577) (8,629) (8,629)
Due from affiliates -- -- 7,301
Other assets -- 2,690 (631)
Accounts payable and accrued expenses 125,470 78,167 3,996
Rent received in advance (8,324) (44,031) (21,564)
Due to affiliates (396) 1,983 --
Tenant security deposits (577) (221,755) --
Net cash provided by operating
activities 1,910,939 1,788,646 1,768,929
Cash flows from investing activities:
Investment in Brauvin Bay County Venture -- -- (365,980)
Proceeds from sale of property 439,620 - --
Distributions from:
Brauvin Bay County Venture 30,260 35,020
Brauvin Gwinnett County Venture 15,488 15,424 15,360
Net cash provided by (used in)
investing activities 485,368 50,444 (350,620)
Cash flows from financing activities:
Sale of Units, net of liquidations and
selling commissions -- -- 25,848
Cash distributions to Limited Partners (1,991,668) (2,817,608) (1,049,822)
Cash distributions to General Partners (17,951) -- (21,042)
Cash distribution to minority interest
Brauvin Chili's Limited Partnership (575) (635) (585)

Net cash used in financing activities (2,010,194) (2,818,243) (1,045,601)
Net increase (decrease) in cash and
cash equivalents 386,113 (979,153) 372,708
Cash and cash equivalents at beginning
of year 463,110 1,442,263 1,069,555
Cash and cash equivalents at end of year$ 849,223 $ 463,110 $1,442,263

See accompanying notes to consolidated financial statements.

BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 1998, 1997 and 1996

(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION

BRAUVIN INCOME PLUS L.P. III (the "Partnership") is a Delaware
limited partnership organized for the purpose of acquiring
debt-free ownership of existing, free-standing, income-producing
retail, office or industrial real estate properties predominantly
subject to "triple-net" leases. The General Partners of the
Partnership are Brauvin Realty Advisors III, Inc. and Jerome J.
Brault. Brauvin Realty Advisors III, Inc. is owned by Messrs.
Brault (beneficially) (50%) and Cezar M. Froelich (50%). Mr.
Froelich resigned as a director of Brauvin Realty Advisors III,
Inc. in December 1994 and as an Individual General Partner
effective as of September 17, 1996. Brauvin Securities, Inc., an
affiliate of the General Partners, was the selling agent for the
Partnership. The Partnership is managed by an affiliate of the
General Partners.

The Partnership was formed on July 31, 1989 and filed a
Registration Statement on Form S-11 with the Securities and
Exchange Commission which was declared effective on October 30,
1989. The sale of the minimum of $1,200,000 of limited partnership
interests of the Partnership (the "Units") necessary for the
Partnership to commence operations was achieved on January 15,
1990. The Partnership's offering was originally expected to close
on October 29, 1990 but the Partnership, with the receipt of the
necessary regulatory approval, extended the offering until it
closed on October 29, 1991. Through December 31, 1998, 1997, and
1996, the Partnership has sold $22,766,719, $22,766,719 and
$22,766,719 of Units, respectively. These totals include
$1,459,119 of Units raised by Limited Partners who utilized their
distributions of Operating Cash Flow to purchase additional Units
through the distribution reinvestment plan (the "Plan"). Units
valued at $462,972 have been repurchased by the Partnership from
Limited Partners liquidating their investment in the Partnership
and have been retired as of December 31, 1998, 1997 and 1996. As
of December 31, 1998, the Plan participants have acquired Units
under the Plan which approximate 6% of the total Units outstanding.

The Partnership has acquired the land and buildings underlying
five Ponderosa restaurants (one of which was sold in 1998, see Note
7), two Chi-Chi's restaurants, one International House of Pancakes
restaurant, one Applebee's restaurant, two Sports Unlimited stores,
and three Steak n Shake restaurants. The Partnership also acquired
99.5%, 6.4% and 34.0% equity interests in three joint ventures with
entities affiliated with the Partnership. These ventures own the
land underlying a Chili's restaurant, a CompUSA store and a
Blockbuster Video store, respectively.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Management's Use of Estimates

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

Accounting Method

The accompanying financial statements have been prepared using
the accrual method of accounting.

<PAGE>

Rental Income

Rental income is recognized on a straight-line basis over the
life of the related leases. Differences between rental income
earned and amounts due per the respective lease agreements are
credited or charged as applicable to deferred rent receivable.

Federal Income Taxes

Under the provisions of the Internal Revenue Code, the
Partnership's income and losses are reportable by the partners on
their respective income tax returns. Accordingly, no provision is
made for Federal income taxes in the consolidated financial
statements. However, in certain instances, the Partnership has
been required under applicable state law to remit directly to the
tax authorities amounts representing withholding from distributions
paid to partners.

Consolidation of Joint Venture

The Partnership owns a 99.5% equity interest in one joint
venture, Brauvin Chili's Limited Partnership, which owns one
Chili's restaurant. The accompanying financial statements have
consolidated 100% of the assets, liabilities, operations and
partners' capital of Brauvin Chili's Limited Partnership. All
significant intercompany accounts have been eliminated.

Investment in Joint Venture

The Partnership owns a 6.4% and a 34.0% equity interest in two
joint ventures, Brauvin Gwinnett County Venture, which owns one
CompUSA store, and Brauvin Bay County Venture, which owns one
Blockbuster Video store, respectively. The accompanying financial
statements include the investments in Brauvin Gwinnett County
Venture and Brauvin Bay County Venture using the equity method of
accounting.

Investment in Real Estate

The Partnership's rental properties are stated at cost including
acquisition costs. Depreciation is recorded on a straight-line
basis over the estimated economic lives of the properties which
approximate 35 years.

The Partnership has performed an analysis of its long-lived
assets, and the Partnership's management determined that there were
no events or changes in circumstances that indicated that the
carrying amount of the assets may not be recoverable at December
31, 1998, 1997 and 1996. Accordingly, no impairment loss has been
recorded in the accompanying financial statements for the years
ended December 31, 1998, 1997 and 1996.

Offering Costs

Offering costs represent costs incurred in selling Units, such
as the printing of the Prospectus and marketing materials.
Offering costs have been recorded as a reduction of Limited
Partners' Capital. Prepaid offering costs represent amounts in
excess of the defined percentages of the gross proceeds. Prior to
the commencement of the Partnership's proxy solicitation (see Note
6), gross proceeds were expected to increase due to the purchase of
additional Units through the Plan and the prepaid offering costs
would be transferred to offering costs and treated as a reduction
in Partners' Capital.

Cash and Cash Equivalents

Cash equivalents include all highly liquid debt instruments with
an original maturity within three months of purchase.

Estimated Fair Value of Financial Instruments

Disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments." The estimated fair value amounts
have been determined by using available market information and
appropriate valuation methodologies. However, considerable
judgement is necessarily required in interpreting market data to
develop estimates of fair value.

The fair value estimates presented herein are based on
information available to management as of December 31, 1998 and
1997, but may not necessarily be indicative of the amounts that the
Partnership could realize in a current market exchange. The use of
different assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.

The carrying amounts of the following items are a reasonable
estimate of fair value: cash and cash equivalents; rent receivable;
accounts payable and accrued expenses; rent received in advance;
and due to affiliate.

<PAGE>
(2) PARTNERSHIP AGREEMENT

Distributions

All Operating Cash Flow, as defined in the Partnership Agreement
(the "Agreement") shall be distributed: (a) first, to the Limited
Partners until the Limited Partners receive an amount equal to a
9-1/4% non-cumulative, non-compounded, annual return on Adjusted
Investment, as such term is defined in the Agreement, commencing on
the last day of the calendar quarter in which the Unit was
purchased (the "Current Preferred Return"); and (b) thereafter, any
remaining amounts will be distributed 98% to the Limited Partners
(on a pro rata basis) and 2% to the General Partners.

The net proceeds of a sale or refinancing of a Partnership
property shall be distributed as follows:

* first, pro rata to the Limited Partners until each Limited
Partner has received an amount equal to a 10.5% cumulative,
non-compounded, annual return of Adjusted Investment (the
"Cumulative Preferred Return");

* second, to the Limited Partners until each Limited Partner has
been paid an amount equal to his Adjusted Investment, as defined
in the Agreement, apportioned pro rata among the Limited
Partners based on the amount of the Adjusted Investment; and

* thereafter, 95% to the Limited Partners (apportioned pro rata
based on Units) and 5% to the General Partners.

Profits and Losses

Net profits and losses from operations of the Partnership
[computed without regard to any allowance for depreciation or cost
recovery deductions under the Internal Revenue Code of 1986, as
amended (the "Code")] for each taxable year of the Partnership
shall be allocated to each Partner in the same ratio as the cash
distributions received by such Partner attributable to that period
bears to the total cash distributed by the Partnership. In the
event that there are no cash distributions, net profits and losses
from operations of the Partnership (computed without regard to any
allowance for depreciation or cost recovery deductions under the
Code) shall be allocated 99% to the Limited Partners and 1% to the
General Partners. Notwithstanding the foregoing, all depreciation
and cost recovery deductions allowed under the Code shall be
allocated 2% to the General Partners and 98% to the Taxable Class
Limited Partners, as defined in the Agreement.

The net profit of the Partnership from any sale or other
disposition of a Partnership property shall be allocated (with
ordinary income being allocated first) as follows: (a) first, an
amount equal to the aggregate deficit balances of the Partners'
Capital Accounts, as such term is defined in the Agreement, shall
be allocated to each Partner who or which has a deficit Capital
Account balance in the same ratio as the deficit balance of such
Partner's Capital Account bears to the aggregate of the deficit
balances of all Partners' Capital Accounts; (b) second, to the
Limited Partners until the Capital Account balances of the Limited
Partners are equal to any unpaid Cumulative Preferred Return, as of
such date; (c) third, to the Limited Partners until the Capital
Account balances of the Limited Partners are equal to the sum of
the amount of their Adjusted Investment plus any unpaid Cumulative
Preferred Return; (d) fourth, to the General Partners until their
Capital Account balances are equal to any previously subordinated
fees; and (e) thereafter, 95% to the Limited Partners and 5% to the
General Partners. The net loss of the Partnership from any sale or
other disposition of a Partnership property shall be allocated as
follows: (a) first, an amount equal to the aggregate positive
balances in the Partners' Capital Accounts, to each Partner in the
same ratio as the positive balance in such Partner's Capital
Account bears to the aggregate of all Partners' positive Capital
Accounts balances; and (b) thereafter, 95% to the Limited Partners
and 5% to the General Partners.

(3) TRANSACTIONS WITH RELATED PARTIES

The Partnership pays an affiliate of the General Partners an
annual property management fee equal to up to 1% of gross revenues
derived from Partnership properties managed by such affiliate. The
property management fee is subordinated to receipt by the Limited
Partners of distributions of Operating Cash Flow in an amount equal
to the Current Preferred Return.

An affiliate of one of the General Partners provided securities
and real estate counsel to the Partnership.

The Partnership pays affiliates of the General Partners selling
commissions of 7-1/2% of the capital contributions received for
Units sold by the affiliates.

The Partnership pays an affiliate of the General Partners an
acquisition fee in the amount of up to 5% of the gross proceeds of
the Partnership's offering for the services rendered in connection
with the process pertaining to the acquisition of a property.
Acquisition fees related to the properties not ultimately purchased
by the Partnership are expensed as incurred.

Fees, commissions and other expenses paid or payable to the
General Partners or its affiliates for the years ended December 31,
1998, 1997 and 1996 were as follows:
1998 1997 1996
Selling commissions $ -- $ -- $ 6,867
Management fees 23,172 23,647 22,990
Reimbursable operating expenses 119,249 126,736 98,457
Legal fees -- 197 4,244
Acquisition fees -- -- 21,278
Transaction costs -- -- 8,844

As of December 31, 1998 and 1997, the Partnership has made all
payments to affiliates except for $1,587 and $1,983, respectively,
related to management fees.

(4) LEASES

The Partnership's rental income is principally obtained from
tenants through rental payments provided under triple-net
noncancelable operating leases. The leases provide for a base
minimum annual rent and increases in rent such as through
participation in gross sales above a stated level. The following is
a schedule of noncancelable future minimum rental payments due to
the Partnership under operating leases of Partnership properties as
of December 31, 1998:

Year Ending December 31:
1999 $ 2,103,818
2000 2,106,318
2001 2,106,318
2002 2,106,318
2003 1,962,334
Thereafter 10,593,526
$20,978,632

Additional rent based on percentages of tenant sales increases
was $142,058, $155,658 and $158,196 in 1998, 1997 and 1996,
respectively.

Approximately 26% of the Partnership's rental income is from
properties operated as Ponderosa restaurants. Approximately 25% of
the Partnership's rental income is from properties operated as
Sports Unlimited retail stores. The Partnership is subject to some
risk of loss should adverse events affect these tenants and, in
turn, adversely affect the lessees' ability to pay rent to the
Partnership.

(5) INVESTMENT IN JOINT VENTURES

The Partnership owns equity interests in the Brauvin Gwinnett
County Venture and the Brauvin Bay County Venture and reports its
investments on the equity method. The following are condensed
financial statements for the Brauvin Gwinnett County Venture and
the Bay County Venture:

BRAUVIN GWINNETT COUNTY VENTURE

December 31, 1998 December 31, 1997

Land and buildings, net $2,239,254 $2,285,006
Other assets 85,048 75,185
$2,324,302 $2,360,191

Liabilities $ 25,029 $ 24,884
Partners' capital 2,299,273 2,335,307
$2,324,302 $2,360,191

Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1998 1997 1996

Rental and
other income $275,753 $274,277 $264,475

Expenses:
Depreciation 45,752 45,752 45,752
Management fees 2,640 2,830 2,520
Operating and
administrative 21,394 15,858 5,109
69,786 64,440 53,381

Net income $205,967 $209,837 $211,094

BRAUVIN BAY COUNTY VENTURE

December 31, December 31,
1998 1997

Land and buildings, net $1,033,942 $1,051,588
Other assets 17,330 11,989
$1,051,272 $1,063,577

Liabilities $ 4,296 $ 13,820
Partners' capital 1,046,976 1,049,757

$1,051,272 $1,063,577

Period from
October 31,1996
Year Ended Year Ended (inception) to
December 31, December 31, December 31,
1998 1997 1996
Rental and
other income $110,782 $109,985 $18,502

Expenses:
Depreciation 17,646 17,689 2,898
Management fees 1,079 1,178 191
Operating and
administrative 5,838 20,014 11,463
24,563 38,881 14,552

Net income $ 86,219 $ 71,104 $ 3,950

(6) MERGER AND LITIGATION

Merger

Pursuant to the terms of an agreement and plan of merger dated
as of June 14, 1996, as amended March 24,1997, June 30, 1997,
September 30, 1997, December 31, 1997, March 31, 1998 and June 30,
1998 (the "Merger Agreement"), the Partnership proposed to merge
with and into Brauvin Real Estate Funds, L.L.C., a Delaware limited
liability company affiliated with certain of the General Partners
(the "Purchaser") through a merger (the "Merger") of its Units.
Although the Merger will not be consummated, the following text
describes the transaction. Promptly upon consummation of the
Merger, the Partnership would have ceased to exist and the
Purchaser, as the surviving entity, would succeed to all of the
assets and liabilities of the Partnership. The Limited Partners
holding a majority of units voted in favor of the Merger on
November 8, 1996. A majority of the Limited Partners also voted in
favor of an amendment of the Agreement allowing the Partnership to
sell or lease property to affiliates (this amendment, together with
the Merger shall be referred herein as the "Transaction").
However, as described below, on August 12, 1998, the District Court
in the Christman Litigation (as defined below) granted plaintiffs'
motion for partial summary judgement, holding that the Partnership
Agreement did not allow the Limited Partners to vote in favor or
against the Transaction.

The Merger was not completed primarily due to certain
litigation, as described below, that was still pending at December
31, 1998. The General Partners believe that these lawsuits are
without merit and, therefore, continue to vigorously defend against
them. Because of the August 12, 1998 rulings of the District Court
in the Christman Litigation, as described below, it is not possible
for the Merger to be consummated.

In September 1997, one of the Partnership's properties located
in Elmhurst, Illinois sustained extensive fire damage. The
Partnership is currently negotiating with the insurance company and
the tenant on the disposition of the insurance proceeds.
Additionally, on September 3, 1998, the Partnership sold this
property to an unaffiliated third party for a sales price of
approximately $300,000, which resulted in a loss on the sale of
approximately $289,500.

Distributions of the Partnership's net earnings for the periods
January 1, 1997 to March 31, 1997, April 1, 1997 to June 30, 1997,
July 1, 1997 to September 30, 1997 and October 1, 1997 to December
31, 1997 were made to the Limited Partners on March 31, 1997, July
15, 1997, October 22, 1997 and December 31, 1997, respectively, in
the amounts of approximately $534,400, $533,000, $470,600 and
$1,263,500, respectively. In addition, distributions of
approximately $16,100 were paid to various states for income taxes
on behalf of all Limited Partners in 1997.

Distributions of the Partnership's net earnings for the periods
January 1, 1998 to March 31, 1998, April 1, 1998 to June 30, 1998,
July 1, 1998 to September 30, 1998 and October 1, 1998 to December
31, 1998 were made to Limited Partners on May 8, 1998, August 15,
1998 , November 15, 1998 and February 15, 1999, respectively, in
the amounts of approximately $525,800, $361,400, $644,100 and
$500,900. In addition, distributions of approximately $21,500 were
paid to various states for income taxes on behalf of all Limited
Partners in 1998.

Litigation

Two legal actions, as hereinafter described, were pending at
December 31, 1998 against the General Partners of the Partnership
and affiliates of such General Partners, as well as against the
Partnership on a nominal basis in connection with the Merger, with
regard to the Illinois Christman lawsuit, as described below. On
April 13, 1999, all the parties to the litigation reached an
agreement to settle the litigation, subject to the approval by the
United States District Court for the Northern District of Illinois.
Management believes that the settlement will not have a material
financial impact on the Partnership. The terms of the settlement
agreement, along with a Notice to the Class, will be forwarded to
the Limited Partners in the second quarter. One additional legal
action, which was dismissed on January 28, 1998 had also been
brought against the General Partners of the Partnership and
affiliates of such General Partners, as well as the Partnership on
a nominal basis in connection with the Merger. With respect to
these actions the Partnership and the General Partners and their
named affiliates denied all allegations set forth in the complaints
and are vigorously defended against such claims.

A. The Dismissed Florida Lawsuit

B. The Illinois Christman Lawsuit

On October 2, 1996, the District Court certified plaintiffs'
proposed class as all of the limited partners of the Partnership
and of the Affiliated Partnerships, and appointed plaintiffs'
counsel, The Mills Law Firm, as counsel for the class. On October
2, 1996, the District Court also conducted a hearing on plaintiffs'
motion to preliminarily enjoin the special meetings of the limited
partners and the Transaction. The District Court denied
plaintiffs' motion for a preliminary injunction at the conclusion
of the October 2, 1996 hearing.
On September 27, 1996, counsel for plaintiffs, The Mills Law
Firm, mailed a solicitation to all of the Limited Partners,
requesting that they revoke their previously-mailed proxies in
favor of the Merger. On October 11, 1996, the General Partners
filed a counterclaim against plaintiffs and their counsel, The
Mills Law Firm, alleging that plaintiffs and The Mills Law Firm
violated the federal securities laws and proxy rules by sending
their September 27, 1996 letter to the Limited Partners. The
plaintiffs and The Mills Law Firm have moved to dismiss this
counterclaim. The District Court has taken this motion under
advisement and has yet to issue a ruling.

On October 16, 1996 and on November 6, 1996, the parties filed
cross-motions for partial summary judgement addressing the
allegation in plaintiffs' amended complaint that the Agreement does
not allow the Limited Partners to vote in favor of or against the
Transaction by proxy. On August 12, 1998, the District Court
granted plaintiffs' motion for partial summary judgement, holding
that the Agreement did not allow the Limited Partners to vote in
favor or against the Transaction by proxy.

On April 2, 1997, the Court granted plaintiffs' leave to again
amend their complaint. In their second amended complaint,
plaintiffs named the Partnership as a "Nominal Defendant."
Plaintiffs also added a new claim, alleging that the General
Partners violated certain of the rules of the Securities and
Exchange Commission (the "Commission") by making false and
misleading statements in the Proxy. Plaintiffs also allege that
the General Partners breached their fiduciary duties, breached
various provisions of the Agreement, violated the Illinois
Deceptive Trade Practice Act, and violated section 17-305 of the
Delaware Revised Uniform Limited Partnership Act. The General
Partners deny those allegations and will continue to vigorously
defend against these claims.

On April 2, 1997, plaintiffs again requested that the District
Court enjoin the closing of the Transaction. After conducting a
lengthy hearing on May 1, 1997, the District Court denied
plaintiffs' motion to preliminarily enjoin the closing of the
Transaction with the Purchaser. Plaintiffs filed a notice of
appeal to the Seventh Circuit Court of Appeals from the District
Court's May 1, 1997 order denying plaintiffs' motion to
preliminarily enjoin the closing of the Transaction. This appeal
was dismissed by the Seventh Circuit Court of Appeals on January
23, 1998, based on the appellate court's finding that the District
Court's order of January 16, 1998 rendered the appeal moot.

On January 28, 1998, the District Court entered an Order of
Reference to Special Master, designating a Special Master and
vesting the Special Master with authority to resolve certain
aspects of the lawsuit subject to the District Court's review and
confirmation. The Special Master was empowered to determine how
the assets of the Partnership should be sold or disposed of in a
manner which allows the Limited Partners to maximize their
financial return in the shortest practicable time frame. In
addition, early in the second quarter of 1998, the Special Master
retained a financial advisor (the "Financial Advisor"), at the
expense of the Partnership, to assist the Special Master. The
Financial Advisor was engaged to perform a valuation of the
Partnership. The cost to the Partnership for the services of the
Financial Advisor is $110,000.

C. The Scialpi Illinois Lawsuit

On June 20, 1997, another lawsuit was filed in the United States
District Court for the Northern District of Illinois, styled
Benjamin Siegel, Rebecca Scialpi, Helen Friedlander, and BHS &
Associates, Inc. v. Jerome J. Brault, Brauvin Realty Advisors,
Inc., Brauvin Realty Advisors II, Inc., Brauvin Realty Advisors
III, Inc., Brauvin Realty Advisors IV, Inc., James L. Brault,
Brauvin Real Estate Funds LLC, Brauvin High Yield Fund L.P.,
Brauvin High Yield Fund II L.P., Brauvin Income Plus L.P. III, and
Brauvin Corporate Lease Program IV, L.P., Docket number 97 C 4450.
The Partnership and the Affiliated Partnerships are each named as
"Nominal Defendant" in the lawsuit. Jerome J. Brault and the
Corporate General Partner of the Partnership, as well as the
corporate general partners of the Affiliated Partnerships, have
been named as defendants in this lawsuit. James L. Brault, an
officer of the Corporate General Partner and the son of Jerome J.
Brault, is also named as a defendant.

On March 18, 1998, the Partnership sold approximately .332 acres
of land on which a Steak-n-Shake restaurant is situated to an
unaffiliated third party for approximately $150,000, resulting in
a gain of approximately $14,600.

On September 3, 1998, the Partnership sold the Elmhurst,
Illinois property to an unaffiliated third party for approximately
$300,000, resulting in a loss of approximately $289,500. The
Partnership continues to negotiate with the insurance company and
the tenant on the disposition of the insurance proceeds as a result
of the September, 1997, fire at this property.

<PAGE>

</TABLE>
<TABLE>
SCHEDULE III
BRAUVIN INCOME PLUS L.P. III
(a Delaware limited partnership)

REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
<CAPTION> Gross Amount at Which Carried
Initial Cost at Close of Period
Buildings, Buildings,
Personal Cost of Personal
Property and Subsequent Property and Accumulated Date
Description Encumbrances (c) Land Improvements Improvements Land Improvements Total Depreciation (b) Acquired
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ponderosas $0 $2,188,241 $2,655,069 $0 $2,188,241 $ 2,655,069 $ 4,843,310 $1,072,182 11/90-6/90
Chi Chi's Restaurant 0 865,252 1,530,299 0 865,252 1,530,299 2,395,551 422,363 3/91
IHOP 0 297,951 394,958 0 297,951 394,958 692,909 86,848 4/91
Applebee's & Expansion 0 442,625 786,889 83,631 442,625 870,520 1,313,145 245,629 6/91& 4/92
Sports Unlimited 0 2,194,992 2,395,773 0 2,194,992 2,395,773 4,590,765 632,621 9/91
Chili's Restaurant 0 247,257 788,593 0 247,257 788,593 1,035,850 154,759 2/92
Steak N'Shake 0 1,161,315 1,430,312 0 1,161,315 1,430,312 2,591,627 273,930 3/92

$0 $7,397,633 $9,981,893 $83,631 $7,397,633 $10,065,524 $17,463,157 $2,888,332
<FN>
<F1>
NOTES:
(a) The cost of this real estate is $17,463,157 for tax purposes (unaudited). The buildings are depreciated over approximately 35
years using the straight line method. The properties were constructed between 1969 and 1986.
(b) The following schedule summarizes the changes in the Partnership's real estate and accumulated depreciation balances:
</FN>
<CAPTION>

Real estate 1998 1997 1996
<S> <C> <C> <C>
Balance at beginning of year $18,308,792 $18,308,792 $18,308,792
Sale of land and buildings (845,635) -- --
Balance at end of year $17,463,157 $18,308,792 $18,308,792

Accumulated depreciation 1998 1997 1996
Balance at beginning of year $ 2,639,582 $ 2,254,604 $ 1,869,626
Sale of Ponderosa 9/3/98 (131,110) -- --
Provision for depreciation 379,860 384,978 384,978
Balance at end of year $ 2,888,332 $ 2,639,582 $ 2,254,604
<FN>
<F2>
(c) Encumbrances - Brauvin Income Plus L.P. III did not borrow cash in order to purchase its properties. 100% of the land and
buildings were paid for with funds contributed by the Interest Holders.
</FN>
</TABLE>

<PAGE>
EXHIBIT

BRAUVIN INCOME PLUS L.P. III
FORM 10-K ANNUAL REPORT
FOR THE PERIOD ENDED
DECEMBER 31, 1998

<PAGE>
EXHIBIT INDEX

BRAUVIN INCOME PLUS L.P. III

FORM 10-K

For the fiscal year ended December 31, 1998

Exhibit (21) Subsidiaries of the Registrant

Exhibit (27) Financial Data Schedule

<PAGE>
(Exhibit 21)

Name of Subsidiary State of Formation

Brauvin Chili's Limited Partnership Delaware

Brauvin Gwinnett County Venture Illinois

Brauvin Bay County Venture Illinois

<PAGE>

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 849,223
<SECURITIES> 503,050 <F1>
<RECEIVABLES> 67,399
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 17,463,157 <F2>
<DEPRECIATION> (2,888,332)
<TOTAL-ASSETS> 16,065,321
<CURRENT-LIABILITIES> 308,322
<BONDS> (768) <F3>
0
0
<COMMON> 15,757,767 <F4>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 16,065,321
<SALES> 0
<TOTAL-REVENUES> 2,311,750 <F5>
<CGS> 0
<TOTAL-COSTS> 891,449 <F6>
<OTHER-EXPENSES> (41,992) <F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (274,905)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,187,388
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

<FN>
<F1> "SECURITIES" REPRESENTS INVESTMENT IN JOINT VENTURES
<F2> "PP&E" REPRESENTS INVESTMENT IN REAL ESTATE [LAND AND
BUILDING]
<F3> "BONDS" REPRESENTS MINORITY INTEREST IN JOINT VENTURE
<F4> "COMMON" REPRESENTS TOTAL PARTNERS CAPITAL
<F5> "TOTAL REVENUES" REPRESENTS RENTAL, INTEREST, AND OTHER
INCOME
<F6> "TOTAL COSTS" REPRESENTS TOTAL EXPENSES
<F7> "OTHER EXPENSES" REPRESENTS MINORITY INTEREST AND JOINT
VENTURES' NET INCOME/LOSS
</FN>

</TABLE>