FORM 10-QSB - QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                        Quarterly or Transitional Report

                      U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934


                 For the quarterly period ended September 30, 2000


[ ] 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 0-10260

                             SHELTER PROPERTIES III

         (Exact name of small business issuer as specified in its charter)



         South Carolina                                          57-0718508
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                          55 Beattie Place, P.O. Box 1089
                        Greenville, South Carolina 29602

                      (Address of principal executive offices)

                                 (864) 239-1000

                           (Issuer's telephone number)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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____


                         PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

a)

                             SHELTER PROPERTIES III

                           CONSOLIDATED BALANCE SHEET

                                   (Unaudited)

                        (in thousands, except per unit data)

                               September 30, 2000

Assets

   Cash and cash equivalents                                           $    785
   Receivables and deposits                                                 184
   Restricted escrows                                                       730
   Other assets                                                             180
   Investment properties:
      Land                                                $   1,281
      Buildings and related personal property                26,811
                                                             28,092

      Less accumulated depreciation                         (16,878)     11,214
                                                                       $ 13,093

Liabilities and Partners' (Deficit) Capital
Liabilities

   Accounts payable                                                    $     59
   Tenant security deposit liabilities                                      120
   Accrued property taxes                                                   280
   Other liabilities                                                        506
   Mortgage notes payable                                                 7,738

Partners' (Deficit) Capital

   General partners                                       $    (89)
   Limited partners (55,000 units issued and
      outstanding)                                           4,479        4,390
                                                                       $ 13,093

            See Accompanying Notes to Consolidated Financial Statements


b)

                             SHELTER PROPERTIES III

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)

                          (in thousands, except unit data)


<TABLE>
<CAPTION>

                                     Three Months Ended            Nine Months Ended
                                       September 30,                 September 30,

                                    2000           1999           2000           1999
Revenues:
<S>                                <C>           <C>            <C>             <C>
   Rental income                   $1,306        $1,317         $3,982          $3,885
   Other income                       108            87            318             248
       Total revenues               1,414         1,404          4,300           4,133

Expenses:
   Operating                          638           634          1,843           1,833
   General and administrative         114            59            261             176
   Depreciation                       259           220            786             662
   Interest                           177           180            514             548
   Property taxes                     107            95            286             289
       Total expenses               1,295         1,188          3,690           3,508

   Net income                      $  119        $  216         $  610          $  625

Net income allocated

   to general partners (1%)        $    1        $    2         $    6          $    6
Net income allocated

   to limited partners (99%)          118           214            604             619
                                   $  119        $  216         $  610          $  625
Net income per limited
   partnership unit                $ 2.14        $ 3.89         $10.98          $11.25

Distributions per limited

   partnership unit                $   --        $ 3.60         $10.44          $ 3.60

            See Accompanying Notes to Consolidated Financial Statements
</TABLE>


c)

                             SHELTER PROPERTIES III

          CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
                                   (Unaudited)

                          (in thousands, except unit data)


<TABLE>
<CAPTION>

                                      Limited
                                     Partnership     General      Limited
                                        Units        Partners    Partners     Total

<S>                                    <C>             <C>        <C>        <C>
Original capital contributions         55,000          $ 2        $27,500    $27,502

Partners' (deficit) capital at
   December 31, 1999                   55,000         $ (89)      $ 4,449    $ 4,360

Distributions to partners                                (6)         (574)      (580)

Net income for the nine months
   ended September 30, 2000                --             6           604        610

Partners' (deficit) capital at
   September 30, 2000                  55,000         $ (89)      $ 4,479    $ 4,390

            See Accompanying Notes to Consolidated Financial Statements
</TABLE>


d)

                             SHELTER PROPERTIES III

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (Unaudited)

                                   (in thousands)

<TABLE>
<CAPTION>

                                                                 Nine Months Ended
                                                                   September 30,

                                                                  2000        1999
Cash flows from operating activities:

<S>                                                             <C>         <C>
   Net income                                                   $   610     $   625
   Adjustments to reconcile net income to net
     cash provided by operating activities:
        Depreciation                                                786         662
        Amortization of discounts and loan costs                     78          74
        Change in accounts:
            Receivables and deposits                                253          22
            Other assets                                            (29)        (50)
            Accounts payable                                        (55)         79
            Tenant security deposit liabilities                      14          (4)
            Accrued property taxes                                  123          25
            Other liabilities                                        50          12

               Net cash provided by operating activities          1,830       1,445

Cash flows from investing activities:

   Property improvements and replacements                          (755)       (554)
   Net (deposits to) withdrawals from restricted escrows           (160)        384

               Net cash used in investing activities               (915)       (170)

Cash flows from financing activities:

   Payments on mortgage notes payable                              (205)       (190)
   Partners' distributions                                         (580)       (200)

               Net cash used in financing activities               (785)       (390)

Net increase in cash and cash equivalents                           130         885

Cash and cash equivalents at beginning of period                    655         630

Cash and cash equivalents at end of period                      $   785     $ 1,515

Supplemental disclosure of cash flow information:

   Cash paid for interest                                       $   460     $   475

            See Accompanying Notes to Consolidated Financial Statements
</TABLE>


e)

                             SHELTER PROPERTIES III

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note A - Basis of Presentation

The  accompanying   unaudited   consolidated  financial  statements  of  Shelter
Properties  III (the  "Partnership"  or  "Registrant")  have  been  prepared  in
accordance with generally accepted  accounting  principles for interim financial
information  and  with  the  instructions  to Form  10-QSB  and  Item 310 (b) of
Regulation  S-B.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial  statements.  In the opinion of Shelter  Realty III  Corporation  (the
"Corporate  General Partner"),  all adjustments  (consisting of normal recurring
accruals)  considered  necessary  for a fair  presentation  have been  included.
Operating  results for the three and nine month periods ended September 30, 2000
are not necessarily  indicative of the results that may be expected for the year
ending  December 31, 2000. For further  information,  refer to the  consolidated
financial  statements and footnotes thereto included in the Partnership's Annual
Report on Form 10-KSB for the year ended December 31, 1999.

Principles of Consolidation

The financial  statements include all of the accounts of the Partnership and its
99.99% owned  partnership.  The Corporate  General  Partner of the  consolidated
partnership is Shelter Realty III  Corporation.  Shelter Realty III  Corporation
may be removed as the general  partner of the  consolidated  partnership  by the
Registrant;   therefore,   the   consolidated   partnership  is  controlled  and
consolidated by the Registrant.  All significant  interpartnership balances have
been eliminated.

Note B - Transfer of Control

Pursuant  to a series  of  transactions  which  closed  on  October  1, 1998 and
February 26, 1999,  Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment  Investment and Management Company  ("AIMCO"),  a publicly
traded real estate investment trust, with AIMCO being the surviving  corporation
(the "Insignia Merger").  As a result, AIMCO acquired 100% ownership interest in
the Corporate  General Partner.  The Corporate  General Partner does not believe
that this  transaction has had or will have a material effect on the affairs and
operations of the Partnership.

Note C - Reconciliation of Cash Flows

The  following  is  a  reconciliation   of  the  subtotal  on  the  accompanying
consolidated  statements of cash flows captioned "net cash provided by operating
activities"  to "net cash used in  operations",  as defined  in the  Partnership
Agreement.  However,  "net cash used in operations"  should not be considered an
alternative  to  net  income  as an  indicator  of the  Partnership's  operating
performance or to cash flows as a measure of liquidity.

<TABLE>
<CAPTION>

                                                        For the Nine Months Ended
                                                              September 30,
                                                           2000             1999
                                                              (in thousands)
<S>                                                     <C>              <C>
Net cash provided by operating activities               $ 1,830          $ 1,445
   Payments on mortgage notes payable                      (205)            (190)
   Property improvements and replacements                  (755)            (554)
   Change in restricted escrows, net                       (160)             384
   Changes in reserves for net operating
      liabilities                                          (356)             (84)
   Additional reserves                                     (132)          (1,001)

      Net cash provided by operations                   $   222          $    --
</TABLE>

The Corporate General Partner reserved  approximately $132,000 and $1,001,000 at
September  30, 2000 and 1999,  respectively,  to fund capital  improvements  and
repairs at the Partnership's four investment properties.

Note D - Transactions with Affiliated Parties

The  Partnership  has no employees  and is dependent  on the  Corporate  General
Partner  and  its  affiliates  for  the  management  and  administration  of all
partnership  activities.  The Partnership Agreement provides for (i) payments to
affiliates for services and (ii)  reimbursement of certain expenses  incurred by
affiliates  on behalf of the  Partnership.  The  following  amounts were paid or
accrued to the Corporate  General Partner and affiliates  during the nine months
ended September 30, 2000 and 1999.

                                                           2000      1999
                                                           (in thousands)

Property management fees (included in
  operating expenses)                                      $216      $211
Reimbursement for services of affiliates
  (included in operating and general and
   administrative expenses and investment properties)       145        92
Due to general partners                                     185       185
Due from general partners                                    11        11

During the nine months  ended  September  30, 2000 and 1999,  affiliates  of the
Corporate General Partner were entitled to receive 5% of gross receipts from all
of the Registrant's  properties for providing property management services.  The
Registrant paid to such affiliates  approximately  $216,000 and $211,000 for the
nine months ended September 30, 2000 and 1999, respectively.

An  affiliate  of  the  Corporate  General  Partner  received  reimbursement  of
accountable  administrative  expenses  amounting to  approximately  $145,000 and
$92,000 for the nine months ended September 30, 2000 and 1999, respectively.

During 1986 a liability  of  approximately  $185,000 was incurred to the general
partners for sales commissions  earned.  Pursuant to the Partnership  Agreement,
this  liability  cannot be paid until certain  levels of returns are received by
the limited  partners.  As of  September  30,  2000,  the level of return to the
limited partners has not been met.

On September  26, 1997,  an affiliate of the General  Partner  purchased  Lehman
Brothers Class "D" subordinated bonds of SASCO, 1992-M1. These bonds are secured
by 55 multi-family  apartment mortgage loan pairs held in Trust, including Essex
Park Apartments,  Colony House Apartments, and Willowick Apartments owned by the
Partnership.

In addition to its  indirect  ownership of the general  partner  interest in the
Partnership,  AIMCO and its affiliates  currently own 32,314 limited partnership
units in the Partnership  representing 58.75% of the outstanding units. A number
of these  units were  acquired  pursuant  to tender  offers made by AIMCO or its
affiliates.  It is possible that AIMCO or its  affiliates  will make one or more
additional offers to acquire  additional  limited  partnership  interests in the
Partnership  for cash or in exchange for units in the operating  partnership  of
AIMCO. Under the Partnership  Agreement,  unitholders  holding a majority of the
Units are  entitled to take action with  respect to a variety of matters,  which
would  include  without   limitation,   voting  on  certain  amendments  to  the
Partnership  Agreement and voting to remove the General Partner.  As a result of
its  ownership  of 58.75% of the  outstanding  units,  AIMCO is in a position to
influence all voting  decisions with respect to the  Registrant.  When voting on
matters,  AIMCO would in all  likelihood  vote the Units it acquired in a manner
favorable  to the interest of the  Corporate  General  Partner  because of their
affiliation with the Corporate General Partner.

Note E - Distributions

During  the  nine  months  ended  September  30,  2000,  cash  distributions  of
approximately  $580,000  ($574,000  of which was paid to the  limited  partners,
$10.44 per limited partnership unit) were paid from operations. Included in this
amount was  approximately  $15,000 which consisted of withholding  taxes paid to
the state of South Carolina on behalf of the limited  partners.  During the nine
months ended September 30, 1999, a cash  distribution of approximately  $200,000
($198,000 to the limited partners,  $3.60 per limited partnership unit) was paid
from operations.

Subsequent  to September 30, 2000, an operating  distribution  of  approximately
$222,000  was  declared  and paid  ($220,000  of which  was paid to the  limited
partners, $4.00 per limited partnership unit).

Note F - Segment Reporting

Description  of the types of products  and  services  from which the  reportable
segment derives its revenue:

The  Partnership  has  one  reportable  segment:   residential  properties.  The
Partnership's  residential property segment consists of four apartment complexes
located in Georgia,  South Carolina (2), and Tennessee.  The  Partnership  rents
apartment units to tenants for terms that are typically twelve months or less.

Measurement of segment profit or loss:

The  Partnership  evaluates  performance  based on segment  profit (loss) before
depreciation.  The accounting policies of the reportable segment are the same as
those described in the  Partnership's  Annual Report on Form 10-KSB for the year
ended December 31, 1999.

Factors management used to identify the enterprise's reportable segment:

The  Partnership's  reportable  segment  consists of investment  properties that
offer similar products and services.  Although each of the investment properties
is  managed  separately,  they have been  aggregated  into one  segment  as they
provide services with similar types of products and customers.

Segment  information  for the three and nine months ended September 30, 2000 and
1999 is shown in the tables  below.  The  "Other"  column  includes  partnership
administration  related  items and  income  and  expense  not  allocated  to the
reportable segment.

  Three Months Ended September 30, 2000    Residential      Other       Totals
                                                      (in thousands)
Rental income                                $ 1,306         $ --      $ 1,306
Other income                                     106             2         108
Interest expense                                 177            --         177
Depreciation                                     259            --         259
General and administrative expense                --           114         114
Segment profit (loss)                            231          (112)        119

  Nine Months Ended September 30, 2000     Residential      Other       Totals
                                                      (in thousands)
Rental income                                $ 3,982         $ --      $ 3,982
Other income                                     312             6         318
Interest expense                                 514            --         514
Depreciation                                     786            --         786
General and administrative expense                --           261         261
Segment profit (loss)                            865          (255)        610
Total assets                                  12,878           215      13,093
Capital expenditures for investment
  properties                                     755            --         755

  Three Months Ended September 30, 1999    Residential      Other       Totals
                                                      (in thousands)
Rental income                                $ 1,317         $ --      $ 1,317
Other income                                      85             2          87
Interest expense                                 180            --         180
Depreciation                                     220            --         220
General and administrative expense                --            59          59
Segment profit (loss)                            273           (57)        216

  Nine months Ended September 30, 1999     Residential      Other       Totals
                                                      (in thousands)
Rental income                                $ 3,885         $ --      $ 3,885
Other income                                     236            12         248
Interest expense                                 548            --         548
Depreciation                                     662            --         662
General and administrative expense                --           176         176
Segment profit (loss)                            789          (164)        625
Total assets                                  13,440           215      13,655
Capital expenditures for investment
  properties                                     554            --         554

Note G - Legal Proceedings

In March 1998, several putative unit holders of limited partnership units of the
Partnership  commenced an action  entitled  Rosalie  Nuanes,  et al. v. Insignia
Financial  Group,  Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs  named as defendants,  among others,
the Partnership,  its Corporate  General Partner and several of their affiliated
partnerships  and corporate  entities.  The action  purports to assert claims on
behalf of a class of limited  partners and derivatively on behalf of a number of
limited  partnerships  (including  the  Partnership)  which are named as nominal
defendants,  challenging the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited  partnership  units;  the  management  of  partnerships  by the Insignia
affiliates;  and the Insignia  Merger.  The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998,  the Corporate  General  Partner filed a motion  seeking  dismissal of the
action.  In lieu of  responding  to the  motion,  the  plaintiffs  have filed an
amended complaint.  The Corporate General Partner filed demurrers to the amended
complaint which were heard February 1999.

Pending the ruling on such  demurrers,  settlement  negotiations  commenced.  On
November 2, 1999,  the parties  executed and filed a Stipulation  of Settlement,
settling claims,  subject to final court approval,  on behalf of the Partnership
and all limited  partners  who owned  units as of November 3, 1999.  Preliminary
approval of the settlement  was obtained on November 3, 1999 from the Court,  at
which time the Court set a final approval  hearing for December 10, 1999.  Prior
to the December 10, 1999 hearing,  the Court received various  objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement.  On
December 14, 1999, the Corporate  General Partner and its affiliates  terminated
the  proposed  settlement.  In  February  2000,  counsel  for some of the  named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated  the  settlement.  On June  27,  2000,  the  Court  entered  an order
disqualifying them from the case. The Court is considering applications for lead
counsel and has  currently  scheduled a hearing on the matter for  November  20,
2000. The Corporate  General Partner does not anticipate  that costs  associated
with this case will be material to the Partnership's overall operations.

The  Partnership is unaware of any other pending or outstanding  litigation that
is not of a routine nature arising in the ordinary course of business.

Item 2.     Management's Discussion and Analysis or Plan of Operation

The  matters  discussed  in this Form  10-QSB  contain  certain  forward-looking
statements  and  involve  risks and  uncertainties  (including  changing  market
conditions,   competitive  and  regulatory   matters,   etc.)  detailed  in  the
disclosures  contained  in this  Form  10-QSB  and the  other  filings  with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussions of the  Registrant's  business and results of operations,  including
forward-looking  statements  pertaining  to such  matters,  does not  take  into
account the effects of any changes to the  Registrant's  business and results of
operation.  Accordingly,  actual  results  could  differ  materially  from those
projected in the forward-looking  statements as a result of a number of factors,
including those identified herein.

The Partnership's investment properties consist of four apartment complexes. The
following  table sets forth the average  occupancy of the properties for each of
the nine months ended September 30, 2000 and 1999:

                                                            Average
                                                           Occupancy

       Property                                        2000          1999

       Essex Park Apartments
          Columbia, South Carolina                     91%            92%

       Colony House Apartments
          Mufreesboro, Tennessee                       91%            92%

       North River Village Apartments
          Atlanta, Georgia                             95%            95%

       Willowick Apartments
          Greenville, South Carolina                   96%            94%

Results of Operations

The  Registrant's  net income for the three and nine months ended  September 30,
2000 was  approximately  $119,000  and  $610,000,  respectively,  as compared to
approximately  $216,000  and  $625,000  for the  three  and  nine  months  ended
September  30,  1999.  The  decrease in net income for both periods is due to an
increase in total expenses  partially  offset by an increase in total  revenues.
Total revenues increased due to an increase in rental income for the nine months
ended  September 30, 2000 and an increase in other income for the three and nine
months ended September 30, 2000.  Rental income  increased due to an increase in
the  average  rental  rates at all four of the  Registrant's  properties.  Other
income increased  primarily due to an increase in miscellaneous  income at North
Village Apartments, and to a lesser extent, an increase in interest income.

Total expenses  increased for the three and nine months ended September 30, 2000
due to an increase in  depreciation  and  general and  administrative  expenses,
which were  partially  offset by a decrease  in interest  expense.  Depreciation
expense increased due to increased property improvements and replacements at all
four of the  investment  properties  which are now being  depreciated.  Interest
expense decreased slightly for the three month period and more significantly for
the nine month period  primarily due to the  reduction of principal  balances on
the  properties'   mortgages.   Operating  and  property  tax  expense  remained
relatively constant for the three and nine months ended September 30, 2000.

General  and  administrative  expense  increased  for the three  and nine  month
periods ended September 30, 2000 as a result of an increase in costs  associated
with the annual audit and  management  reimbursements  to the Corporate  General
Partner  allowed  under the  Partnership  Agreement.  Included  in  general  and
administrative  expenses for the nine months ended  September  30, 2000 and 1999
were  costs  associated  with  the  quarterly  and  annual  communications  with
investors  and  regulatory  agencies and the annual  appraisals  required by the
Partnership Agreement.

As part of the ongoing  business plan of the Registrant,  the Corporate  General
Partner monitors the rental market environments of its investment  properties to
assess the feasibility of increasing rents,  maintaining or increasing occupancy
levels and protecting  the  Partnership  from increases in expenses.  As part of
this plan, the Corporate  General  Partner  attempts to protect the  Partnership
from the burden of  inflation-related  increases in expenses by increasing rents
and maintaining a high overall occupancy level.  However, due to changing market
conditions  which  can  result  in the  use of  rental  concessions  and  rental
reductions to offset softening market conditions, there is no guarantee that the
Corporate General Partner will be able to sustain such a plan.

Liquidity and Capital Resources

At  September  30,  2000,  the  Partnership  had cash and  cash  equivalents  of
approximately  $785,000  compared to  approximately  $1,515,000 at September 30,
1999. The increase in cash and cash  equivalents of  approximately  $130,000 for
the nine months ended September 30, 2000, from the  Partnership's  calendar year
end, is due to approximately $1,830,000 of cash provided by operating activities
which was partially offset by  approximately  $785,000 of cash used in financing
activities and approximately $915,000 of cash used in investing activities. Cash
used in investing activities consisted of property improvements and replacements
and, to a lesser  extent,  net  deposits to escrow  accounts  maintained  by the
mortgage  lender.  Cash  used  in  financing  activities  consisted  of  partner
distributions  and,  to a  lesser  extent,  payments  of  principal  made on the
mortgages  encumbering the Registrant's  properties.  The Registrant invests its
working capital reserves in money market accounts.

The sufficiency of existing  liquid assets to meet future  liquidity and capital
expenditure   requirements   is  directly   related  to  the  level  of  capital
expenditures  required at the investment  properties to adequately  maintain the
physical  assets and other  operating needs of the Registrant and to comply with
Federal, state, local, legal, and regulatory requirements.  Capital improvements
completed at each of the Registrant's properties are detailed below.

Essex Park Apartments

The Partnership  has budgeted  approximately  $223,000 for capital  improvements
during 2000 at Essex Park Apartments,  consisting primarily of appliances, floor
coverings,   plumbing  improvements,   and  other  building  improvements.   The
Partnership has completed  approximately  $139,000 in capital expenditures as of
September 30, 2000, consisting primarily of fencing improvements, floor covering
and appliance replacements and other building  improvements.  These improvements
were funded from operations.

Colony House Apartments

The Partnership  has budgeted  approximately  $117,000 for capital  improvements
during 2000 at Colony House Apartments consisting primarily of appliances, floor
coverings,  swimming pool improvements,  air conditioning improvements and other
building improvements.  The Partnership has completed  approximately $334,000 in
capital  expenditures  as of September 30, 2000,  consisting  primarily of floor
covering and appliance  replacements,  air conditioning  improvements,  swimming
pool improvements. These improvements were funded from operations.

North River Village Apartments

The Partnership  has budgeted  approximately  $214,000 for capital  improvements
during  2000  at  North  River  Village  Apartments,   consisting  primarily  of
appliances,  floor  coverings and plumbing  improvements.  The  Partnership  has
completed  approximately  $203,000 in capital  expenditures  as of September 30,
2000,  consisting  primarily of floor covering and HVAC  replacements,  plumbing
improvements,  parking lot improvements,  swimming pool improvements,  and other
building improvements. These improvements were funded from operations.

Willowick Apartments

The Partnership  has budgeted  approximately  $107,000 for capital  improvements
during 2000 at Willowick Apartments,  consisting primarily of appliances,  floor
coverings,  major  landscaping  and clubhouse  renovations.  The Partnership has
completed  approximately  $79,000 in capital  expenditures  as of September  30,
2000,   consisting   primarily  of  floor   covering,   lighting  and  appliance
replacements and other building  improvements.  These  improvements  were funded
from operations.

The additional  capital  expenditures will be incurred only if cash is available
from  operations  and  Partnership  reserves.  To the extent that such  budgeted
capital improvements are completed, the Registrant's distributable cash flow, if
any, may be adversely affected at least in the short term.

The  Registrant's  current assets are thought to be sufficient for any near term
needs  (exclusive  of capital  improvements)  of the  Registrant.  The  mortgage
indebtedness of  approximately  $7,738,000,  net of discount,  is amortized over
varying periods with balloon  payments due from November 15, 2002 to October 15,
2003. The Corporate  General Partner will attempt to refinance such indebtedness
and/or sell the  properties  prior to such  maturity  dates.  If the  properties
cannot be refinanced or sold for a sufficient  amount,  the Registrant will risk
losing such properties through foreclosure.

During  the  nine  months  ended  September  30,  2000,  cash  distributions  of
approximately  $580,000  ($574,000  of which was paid to the  limited  partners,
$10.44 per limited partnership unit) were paid from operations. Included in this
amount was  approximately  $15,000 which consisted of withholding  taxes paid to
the state of South Carolina on behalf of the limited  partners.  During the nine
months ended September 30, 1999, a cash  distribution of approximately  $200,000
($198,000 to the limited partners,  $3.60 per limited partnership unit) was paid
from operations.  Subsequent to September 30, 2000, an operating distribution of
approximately  $222,000 was declared and paid ($220,000 of which was paid to the
limited partners, $4.00 per limited partnership unit). Future cash distributions
will  depend  on  the  levels  of  net  cash  generated  from  operations,   the
availability of cash reserves, and the timing of debt maturities,  refinancings,
and/or property sales. The  Partnership's  distribution  policy is reviewed on a
quarterly basis. There can be no assurance,  however,  that the Partnership will
generate  sufficient  funds from operations,  after planned capital  improvement
expenditures,  to permit any additional distributions to its partners in 2000 or
subsequent periods.  In addition,  the Partnership may be restricted from making
distributions if the amount in the reserve account for each property  maintained
by the  mortgage  lender is less than $400 per  apartment  unit at Colony  House
Apartments,  Essex  Park  Apartments,  and  Willowick  Apartments  and  $200 per
apartment unit at North River Village  Apartments.  As of September 30, 2000 the
reserve account was fully funded with approximately $652,000 on deposit with the
mortgage lender.

                           PART II - OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

In March 1998, several putative unit holders of limited partnership units of the
Partnership  commenced an action  entitled  Rosalie  Nuanes,  et al. v. Insignia
Financial  Group,  Inc., et al. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs  named as defendants,  among others,
the Partnership,  its Corporate  General Partner and several of their affiliated
partnerships  and corporate  entities.  The action  purports to assert claims on
behalf of a class of limited  partners and derivatively on behalf of a number of
limited  partnerships  (including  the  Partnership)  which are named as nominal
defendants,  challenging the acquisition of interests in certain general partner
entities by Insignia Financial Group, Inc. and entities which were, at one time,
affiliates of Insignia; past tender offers by the Insignia affiliates to acquire
limited  partnership  units;  the  management  of  partnerships  by the Insignia
affiliates;  and the Insignia  Merger.  The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998,  the Corporate  General  Partner filed a motion  seeking  dismissal of the
action.  In lieu of  responding  to the  motion,  the  plaintiffs  have filed an
amended complaint.  The Corporate General Partner filed demurrers to the amended
complaint which were heard February 1999.

Pending the ruling on such  demurrers,  settlement  negotiations  commenced.  On
November 2, 1999,  the parties  executed and filed a Stipulation  of Settlement,
settling claims,  subject to final court approval,  on behalf of the Partnership
and all limited  partners  who owned  units as of November 3, 1999.  Preliminary
approval of the settlement  was obtained on November 3, 1999 from the Court,  at
which time the Court set a final approval  hearing for December 10, 1999.  Prior
to the December 10, 1999 hearing,  the Court received various  objections to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement.  On
December 14, 1999, the Corporate  General Partner and its affiliates  terminated
the  proposed  settlement.  In  February  2000,  counsel  for some of the  named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated  the  settlement.  On June  27,  2000,  the  Court  entered  an order
disqualifying them from the case. The Court is considering applications for lead
counsel and has  currently  scheduled a hearing on the matter for  November  20,
2000. The Corporate  General Partner does not anticipate  that costs  associated
with this case will be material to the Partnership's overall operations.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            a)    Exhibits:

                  Exhibit 27, Financial Data Schedule, is filed as an exhibit to
                  this report.

            b)    Reports on Form 8-K filed during the quarter  ended  September
                  30, 2000:

                  None.

                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                             SHELTER PROPERTIES III

                                 By:     Shelter Realty III Corporation
                                         Corporate General Partner

                                 By:     /s/Patrick J. Foye
                                         Patrick J. Foye
                                         Executive Vice President

                                 By:     /s/Martha L. Long
                                         Martha L. Long
                                         Senior Vice President and
                                         Controller

                                 Date:   November 8, 2000