SECURITIES AND EXCHANGE COMMISSION
                           Washington, D. C. 20549

                                    FORM 10-Q

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


               For the Quarterly Period Ended: September 30, 1996

                         Commission File Number: 0-20707



                       COLONIAL REALTY LIMITED PARTNERSHIP
             (Exact name of registrant as specified in its charter)



                Alabama                               63-1098468
        (State of organization)                      (IRS Employer
                                                Identification Number)

        2101 Sixth Avenue North                          35203
               Suite 750                              (Zip Code)
          Birmingham, Alabama
(Address of principal executive offices)

                                (205) 250-8700
             (Registrant's telephone number, including area code)



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






<PAGE>




                       COLONIAL REALTY LIMITED PARTNERSHIP

                               INDEX TO FORM 10-Q




PART I:  FINANCIAL INFORMATION

      Item 1.  Financial Statements (Unaudited)

               Consolidated Condensed Balance Sheets as of
               September 30, 1996 and December 31, 1995 .............

               Consolidated  Condensed Statements of Income
               for the Three Months Ended  September  30, 1996
               and 1995 and for the Nine Months Ended
               September 30, 1996 and 1995 ..........................

               Consolidated Condensed Statements of Cash
               Flows for the Nine Months Ended
               September 30, 1996 and 1995 ..........................

               Notes to Consolidated Condensed Financial Statements .

               Report of Independent Accountants ....................

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

PART II:  OTHER INFORMATION


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

SIGNATURES ..........................................................

EXHIBIT .............................................................



<PAGE>

<TABLE>




                       COLONIAL REALTY LIMITED PARTNERSHIP
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                             --------------------
<CAPTION>


                               September 30, 1996
                                     (Unaudited)          December 31, 1995
                                    --------------          --------------
                     ASSETS
<S>                                  <C>                      <C>

Land, buildings, & equipment, net    $740,619,547             $624,514,188
Undeveloped land and construction
in progress ......................    101,320,198               32,640,381
Cash and equivalents .............      2,430,329                1,584,850
Restricted cash ..................      2,474,257                2,079,796
Accounts receivable, net .........      2,643,316                2,280,508
Prepaid expenses .................      5,162,386                3,561,611
Notes receivable .................        597,206                  580,169
Deferred debt and lease costs, net      5,658,132                3,841,814
Investments ......................      5,094,782                5,363,639
Other assets .....................      5,538,936                4,849,614
                                      -----------              -----------
                                     $871,539,089             $681,296,570
                                      ===========              ===========


       LIABILITIES AND PARTNERS' CAPITAL

Notes and mortgages payable ......   $431,542,723             $354,099,770
Accounts payable .................     11,405,661               11,423,830
Accrued expenses .................     10,952,720                1,933,068
Tenant deposits ..................      2,778,773                2,401,604
Unearned rent ....................        764,551                  843,642
                                      -----------              -----------

   Total liabilities .............    457,444,428              370,701,914
                                      -----------              -----------

Redeemable units, at redemption value 221,318,948              207,596,087
                                      -----------              -----------

Partners' capital, excluding
  redeemable units ...............    192,775,713              102,998,569
                                      -----------              -----------

                                     $871,539,089             $681,296,570
                                      ===========              ===========

<FN>

The accompanying notes are an integral part of these financial statements.

</FN>
</TABLE>
<PAGE>
<TABLE>



                       COLONIAL REALTY LIMITED PARTNERSHIP
                   CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                                   (Unaudited)
                              ---------------------
<CAPTION>


                                   Three Months Ended      Nine Months Ended
                                       September 30,          September 30,
                                ---------------------  ----------------------
                                   1996       1995        1996        1995
                                ---------- ----------  ----------  ----------
<S>                            <C>         <C>          <C>         <C>
 Revenue:
   Rent ...................... $33,697,454 $27,479,569  $93,090,765 $77,885,091
   Other .....................   1,133,632     946,214    3,171,780   2,830,777
                                ----------  ----------   ----------  ----------
Total revenue ................  34,831,086  28,425,783   96,262,545  80,715,868
                                ----------  ----------   ----------  ----------
 Property operating expenses:
   General operating expenses    2,557,913   2,322,099    7,099,856   6,187,815
   Salaries and benefits .....   2,321,790   1,931,743    6,449,417   5,440,861
   Repairs and maintenance ...   3,629,972   3,225,600    9,777,098   8,090,656
   Taxes, licenses,
   and insurance .............   2,840,136   2,530,882    8,374,087   7,103,734
 General and administrative ..   1,032,899   1,179,182    2,598,282   3,744,225
 Depreciation ................   5,789,206   4,598,941    5,791,565  13,318,259
 Amortization ................     251,019     583,398    1,241,498   1,684,542
                                ----------  ----------   ----------  ----------

   Total operating expenses ..  18,422,935  16,371,847   51,331,803  45,570,092
                                ----------  ----------   ----------  ----------

   Income from operations ....  16,408,151  12,053,936   44,930,742  35,145,776
                                ----------  ----------   ----------  ----------
 Other income (expense):
   Interest expense ..........  (6,383,196) (5,706,186) (16,614,047)(18,093,507)
   Income from investments ...     137,332     106,209      455,708     357,966
   Gains (losses) from sales
     of property .............         730        (496)      15,492     174,954
                                ----------  ----------   ----------  ----------

   Total other expense .......  (6,245,134) (5,600,473) (16,142,847)(17,560,587)
                                ----------  ----------   ----------  ----------

 Income before
   extraordinary item ........  10,163,017   6,453,463   28,787,895  17,585,189
 Extraordinary loss from early
   extinguishment of debt ....      (9,263)         -0-    (487,503)         -0-
                                ----------  ----------   ----------  ----------

   Net income ................ $10,153,754  $6,453,463  $28,300,392 $17,585,189
                                ==========  ==========   ==========  ==========

 Net income per unit .........       $0.39       $0.31        $1.11       $0.92
                                ==========  ==========   ==========  ==========

 Weighted average units
   outstanding ...............  26,080,222  21,106,108   25,575,676  19,193,907
                                ==========  ==========   ==========  ==========
<FN>

 The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>


                       COLONIAL REALTY LIMITED PARTNERSHIP
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                               -------------------
<CAPTION>

                                                       Nine Months Ended
                                                          September 30,
                                                 ------------------------------
                                                       1996            1995
                                                 ---------------  -------------
<S>                                             <C>              <C>

 Cash flows from operating activities:
   Net  income ..............................   $  28,300,392    $  17,585,189
   Adjustments to reconcile net income to
   net cash provided by operating activities:
     Depreciation and amortization ..........      17,033,063       15,002,801
     Provision for doubtful accounts ........          19,464          116,396
     Gains from sales of property ...........         (15,492)        (174,954)
     Income from investments ................        (455,708)        (779,159)
   Decrease (increase) in:
     Restricted cash ........................        (394,461)      (1,019,341)
     Accounts receivable ....................        (331,629)         500,116
     Notes receivable .......................         (17,037)         (18,656)
     Prepaid expenses .......................      (1,420,361)        (401,635)
     Other assets ...........................      (1,257,028)      (1,677,314)
   Increase (decrease) in:
     Accounts payable .......................          72,684        1,663,795
     Accrued expenses .......................       8,542,236        6,291,734
     Other liabilities ......................          84,306          414,210
                                                -------------    -------------
Net Cash Provided by Operating activities: ..      50,160,429       37,503,182
                                                -------------    -------------
Cash flows from investing activities:
     Property acquisition costs paid ........     (90,054,192)     (50,897,503)
     Development expenditures ...............     (68,015,254)     (14,058,919)
     Tenant improvements ....................        (556,569)        (838,085)
     Capital expenditures ...................      (4,489,591)      (1,564,133)
     Proceeds from sales of property ........           6,400          328,237
     Distributions from investments .........         738,359          739,292
     Capital contributions to investments ...         (13,794)        (146,600)
                                                -------------    -------------
Net cash used in investing activities .......    (162,384,641)     (66,437,711)
                                                -------------    -------------

Cash flows from financing activities:
     Principal reductions of debt ...........     (37,561,430)     (18,147,194)
     Proceeds from additional borrowings ....     130,040,450       61,520,000
     Change in revolving credit balances ....     (44,994,368)     (64,468,744)
     Capital contributions ..................     106,976,322       73,731,007
     Capital distributions ..................     (38,803,730)     (25,196,440)
     Payment of mortgage financing cost .....      (2,587,553)        (705,985)
                                                -------------    -------------
Net cash provided by financing activities ...     113,069,691       26,732,644
                                                -------------    -------------
 Increase (decrease) in cash and equivalents          845,479       (2,201,885)
 Cash and equivalents, beginning of period ..       1,584,850        2,797,767
                                                -------------    -------------
 Cash and equivalents, end of period ........   $   2,430,329    $     595,882
                                                =============    =============

<FN>


 The accompanying notes are an integral part of these financial statements.

</FN>
</TABLE>
<PAGE>





                       COLONIAL REALTY LIMITED PARTNERSHIP
                              NOTES TO CONSOLIDATED
                         CONDENSED FINANCIAL STATEMENTS
                               September 30, 1996
                                   (Unaudited)

Note 1 -- Basis of Presentation
        The accompanying  unaudited  consolidated condensed financial statements
have  been  prepared  by  management  in  accordance  with  generally   accepted
accounting  principles for interim  financial  reporting and in conjunction with
the rules and  regulations  of the Securities  and Exchange  Commission.  In the
opinion  of  management,   all  adjustments  considered  necessary  for  a  fair
presentation  have been included.  These financial  statements should be read in
conjunction  with the  information  included in the  Company's  General Form for
Registration of Securities as filed with the Securities and Exchange  Commission
on Form 10 on July 6, 1996.  The December 31, 1995 balance sheet data  presented
herein was derived from audited  financial  statements  but does not include all
disclosures required by generally accepted accounting principles.

Note 2 -- Acquisitions
        On September  13, 1996,  the Company  acquired a  multifamily  community
located in Macon,  Georgia at a purchase price of $9.45 million. The purchase of
this property was completed through an advance on the Company's line of credit.

        On October 2, 1996, the Company  acquired a 209,000 square foot shopping
center located in Orlando,  Florida,  for a purchase price of $18.1 million. The
purchase of the shopping center was financed through an advance on the Company's
line of credit.

        On October 18, 1996, the Company acquired a 158,000 square foot shopping
center located in St. Petersburg, Florida for a purchase price of $11.8 million,
which was funded through an advance on the Company's line of credit.

        On October 18, 1996, the Company acquired a 222,000 square foot shopping
center located in Orlando, Florida for a purchase price of $17.2 million. In the
acquisition of this property,  the Company assumed an existing mortgage of $10.4
million  that matures in October  2001 and bears an interest  rate of 8.8%.  The
remainder of the purchase price was financed through an advance on the Company's
line of credit.

Note 3 -- Distribution
        On October 24, 1996, a cash distribution was declared to partners of the
Company in the amount of $0.50 per partnership unit, totaling  $13,016,000.  The
distribution  was made to partners of record as of November 4, 1996 and was paid
on November 12, 1996.


<PAGE>








                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Partners
Colonial Realty Limited Partnership

        We have reviewed the accompanying consolidated balance sheet of Colonial
Realty Limited  Partnership  as of September 30, 1996, the related  consolidated
condensed  statements of income for the three-month and nine-month periods ended
September 30, 1996 and 1995, and the related  consolidated  condensed statements
of cash flows for the  nine-month  periods  ended  September  30, 1996 and 1995.
These financial statements are the responsibility of the Company's management.

        We conducted our review in accordance with standards  established by the
American  Institute  of  Certified  Public  Accountants.  A  review  of  interim
financial  information consists principally of applying analytical procedures to
financial  data and making  inquiries of persons  responsible  for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the  expression  of an opinion  regarding the  financial  statements  taken as a
whole. Accordingly, we do not express such an opinion.

        Based on our review, we are not aware of any material modifications that
should be made to the accompanying  condensed  consolidated financial statements
for them to be in conformity with generally accepted accounting principles.

        We have  previously  audited,  in  accordance  with  generally  accepted
auditing standards,  the consolidated balance sheet as of December 31, 1995, and
the related  consolidated  statements of operations,  shareholders'  equity, and
cash  flows for the year then ended (not  presented  herein);  and in our report
dated  January  25,  1996,  we  expressed  an   unqualified   opinion  on  those
consolidated financial statements.  In our opinion, the information set forth in
the accompanying  consolidated  condensed balance sheet as of December 31, 1995,
is fairly  stated in all  material  respects  in  relation  to the  consolidated
balance sheet from which it has been derived.




                                                        COOPERS & LYBRAND L.L.P.

Birmingham, Alabama
October  21, 1996


<PAGE>


                       COLONIAL REALTY LIMITED PARTNERSHIP


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


General
        The following discussion should be read in conjunction with management's
discussion and analysis of financial condition and results of operations and all
of  the  other   information   appearing  in  the  Company's  General  Form  for
Registration of Securities as filed with the Securities and Exchange  Commission
on Form 10 on July 6, 1996 and with the financial  statements  included  therein
and the notes thereto.


Results of Operations -- Three Months Ended  September 30, 1996 and 1995 Revenue
        -- Total revenue increased by $6,405,000, or 22.5%, for thethird quarter
of 1996 when compared to the third quarter of 1995. Of this increase, $5,390,000
represents  revenues generated by properties  acquired or developed  during 1995
and 1996.  The  $1,015,000  remainder of the increase in revenues when comparing
the third quarter of 1996 to the third quarter of 1995 represents an increase in
rents charged to tenants.

        Operating  Expenses -- Operating  expenses  increased by $2,051,000,  or
12.5%, for the third quarter of 1996 when compared to the third quarter of 1995.
Expenses  incurred  by  properties  acquired  during  1995  and  1996  increased
operating expenses by $2,464,000.  Operating expenses also decreased by $250,000
due to the resolution of prior reserves for certain state tax contingencies.

        Other Income  (Expense) -- Interest  expense  increased by $677,000,  or
11.9%, for the third quarter of 1996 when compared to the third quarter of 1995.
Interest expense increased  $1,591,000 due to the increase in indebtedness which
was  incurred  to  finance   acquisition  and  development   activity,   net  of
indebtedness which was repaid through a portion of the Company's equity offering
proceeds in January 1996. Interest expense also decreased by $914,000 due to the
capitalization of $1,171,000 in interest on construction expenditures during the
third quarter of 1996 compared to $257,000  capitalized during the third quarter
of 1995.


Results of Operations  -- Nine Months Ended  September 30, 1996 and 1995 Revenue
        -- Total revenue increased by $15,547,000, or 19.3%, for the
nine months ended  September  30, 1996,  when  compared to the nine months ended
September 30, 1995. Of this increase,  $13,204,000 represents revenues generated
by properties  acquired or developed in 1995 and 1996.  Revenues also  decreased
$508,000  during the first nine  months of 1996 when  compared to the first nine
months of 1995 due to one-time revenues received from lease cancellations during
the second quarter of 1995. The $2,851,000 remainder of the increase in revenues
when  comparing  the first nine  months of 1996 to the first nine months of 1995
represents an increase in rents charged to tenants.

        Operating  Expenses -- Operating  expenses  increased by $5,762,000,  or
12.6%,  for the nine months ended  September  30, 1996 when compared to the nine
months ended September 30, 1995. Expenses incurred by properties acquired during
1995 and 1996 increased  operating  expenses by $6,053,000.  Operating  expenses
also decreased by $1,325,000 due to the resolution of prior reserves for certain
state tax contingencies.  The $1,034,000  remainder of the increase in operating
expenses  when  comparing the first nine months of 1996 to the first nine months
of 1995 represents an increase in expenses incurred by existing properties.

        Other Income and Expenses -- Interest expense decreased  $1,479,000,  or
8.2%,  for the nine months ended  September 30, 1996,  when compared to the nine
months ended September 30, 1995.  Interest expense increased $639,000 due to the
increase  in  indebtedness  which  was  incurred  to  finance   acquisition  and
development activity,  net of indebtedness which was repaid through a portion of
the Company's  equity offering  proceeds in January 1996.  Interest expense also
decreased by $2,118,000 due to the  capitalization  of $2,589,000 in interest on
construction  expenditures  during the first  nine  months of 1996  compared  to
$471,000 capitalized during the first nine months of 1995.

<PAGE>

Liquidity and Capital Resources
        As of  September  30,  1996,  the  Company  had one bank  line of credit
providing for total  borrowings of $110 million.  The line, which is used by the
Company  primarily  to finance  property  acquisitions  and  development,  bears
interest at a rate ranging between LIBOR plus 125 to LIBOR plus 175 basis points
and expires in December 1998. The balance  outstanding on this line at September
30, 1996 was $33,888,000.

        Management intends to replace significant borrowings that may accumulate
under the bank line of credit with funds  generated  from the sale of additional
equity  securities  and/or permanent  financing,  as market  conditions  permit.
Management  believes  that  these  potential  sources  of funds,  along with the
possibility  of issuing  limited  partnership  units of Colonial  Realty Limited
Partnership in exchange for properties,  will provide the Company with the means
to finance  additional  acquisitions.  Management  anticipates that its net cash
provided by operations and its existing cash balances will provide the necessary
funds on a short- and long-term basis to cover its operating expenses,  interest
expense  on  outstanding  indebtedness,   recurring  capital  expenditures,  and
dividends to shareholders in accordance with Internal Revenue Code  requirements
applicable to real estate investment trusts.





<PAGE>


                       COLONIAL REALTY LIMITED PARTNERSHIP
                          PART II -- OTHER INFORMATION



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

        (a)  Exhibits

            15.  Letter re:  Unaudited Interim Financial Information


<PAGE>


                                   SIGNATURES


        Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant  has duly  caused  this  amendment  to be signed on its behalf by the
undersigned hereunto duly authorized.


                                           COLONIAL REALTY LIMITED PARTNERSHIP




Date:  November 14, 1996                   /s/ Douglas B. Nunnelley
                                           ----------------------------
                                           Douglas B. Nunnelley
                                           Senior Vice President
                                           and Chief Financial Officer



Date:  November 14, 1996                   /s/ Douglas B. Nunnelley
                                           ----------------------------
                                           Douglas B. Nunnelley
                                           Senior Vice President
                                           and Chief Financial Officer
                                           (Duly Authorized Officer
                                           and Principal Financial Officer)



Date:  November 14, 1996                   /s/ Kenneth E Howell
                                           ----------------------------
                                           Kenneth E. Howell
                                           Vice President, Controller,
                                           and Secretary
                                           (Principal Accounting Officer)


<PAGE>






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



                                        Re: Colonial Realty Limited Partnership
                                            (File No. 0-20707)
                                            Registration on Form S-3


We are aware that our report  dated  October  21,  1996 on our review of interim
financial  information of Colonial  Realty Limited  Partnership for the quarters
ended September 30, 1996 and 1995 and included in the Company's quarterly report
on Form 10-Q for the  quarters  then ended is  incorporated  by reference in the
registration statements on Forms S-3 related to the Shelf Registrations filed on
July 5, 1996 and October 18, 1996.  Pursuant to Rule 436(c) under the Securities
Act of 1933,  this report  should not be  considered a part of the  registration
statement prepared or certified by us within the meaning of Sections 7 and 11 of
that Act.





                                                        COOPERS & LYBRAND L.L.P.

Birmingham, Alabama
October 21, 1996