UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

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


              For the quarterly period ended September 30, 2004


[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT


             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 (i) 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




                             SHELTER PROPERTIES III
                           CONSOLIDATED BALANCE SHEET
                                   (Unaudited)
                        (in thousands, except unit data)

                               September 30, 2004

<TABLE>
<CAPTION>


Assets
<S>                                                                          <C>
   Cash and cash equivalents                                                 $ 133
   Receivables and deposits                                                      135
   Restricted escrow                                                              84
   Other assets                                                                  543
   Assets held for sale (Note A)                                               2,515
   Investment properties:
      Land                                                     $ 762
      Buildings and related personal property                   16,143
                                                                16,905
      Less accumulated depreciation                            (11,738)        5,167
                                                                            $ 8,577

Liabilities and Partners' Deficit
Liabilities
   Accounts payable                                                          $ 124
   Tenant security deposit liabilities                                            59
   Accrued property taxes                                                        194
   Other liabilities                                                             300
   Due to affiliate (Note C)                                                     379
   Mortgage notes payable                                                      9,184
   Liabilities related to assets held for sale (Note A)                        3,301

Partners' Deficit
   General partners                                             $ (72)
   Limited partners (55,000 units issued and
      outstanding)                                              (4,892)       (4,964)
                                                                            $ 8,577

         See Accompanying Notes to Consolidated Financial Statements
</TABLE>


                             SHELTER PROPERTIES III
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                      (in thousands, except per unit data)

<TABLE>
<CAPTION>

                                        Three Months Ended            Nine Months Ended
                                          September 30,                 September 30,
                                       2004           2003           2004           2003
                                                   (Restated)                    (Restated)
Revenues:
<S>                                    <C>           <C>           <C>            <C>
  Rental income                        $ 667         $ 654         $ 1,979        $ 1,895
  Other income                             82            69            232            180
       Total revenues                     749           723          2,211          2,075

Expenses:
  Operating                               398           393          1,163          1,042
  General and administrative               46            50            179            212
  Depreciation                            150           145            459            444
  Interest                                172           175            517            520
  Property taxes                           70            57            200            168
       Total expenses                     836           820          2,518          2,386

Loss from continuing operations           (87)          (97)           (307)         (311)
Income from discontinued
  operations (Note A)                      10            39             185            52

Net loss                               $ (77)        $ (58)         $ (122)        $ (259)

Net loss allocated
  to general partners (1%)             $ (1)          $ (1)          $ (1)          $ (3)
Net loss allocated
  to limited partners (99%)               (76)          (57)          (121)          (256)

                                       $ (77)        $ (58)         $ (122)        $ (259)
Per limited partnership unit:
Loss from continuing operations       $ (1.56)      $ (1.74)       $ (5.53)       $ (5.59)
Income from discontinued
  operations                             0.18          0.71           3.33           0.94
                                      $ (1.38)      $ (1.03)       $ (2.20)       $ (4.65)

         See Accompanying Notes to Consolidated Financial Statements
</TABLE>


                            SHELTER PROPERTIES III
            CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
                                   (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 at
   December 31, 2003                   55,000         $ (71)      $(4,771)   $(4,842)

Net loss for the nine months
   ended September 30, 2004                --             (1)        (121)      (122)

Partners' deficit at
   September 30, 2004                  55,000         $ (72)      $(4,892)   $(4,964)

         See Accompanying Notes to Consolidated Financial Statements
</TABLE>

                             SHELTER PROPERTIES III
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                   Nine Months Ended
                                                                     September 30,
                                                                    2004        2003
Cash flows from operating activities:
<S>                                                                <C>         <C>
  Net loss                                                         $ (122)     $ (259)
  Adjustments to reconcile net loss to net cash provided
   by operating activities:
     Depreciation                                                     683          657
     Amortization of loan costs                                        14           14
     Casualty gain                                                    (86)          --
     Change in accounts:
      Receivables and deposits                                          8           37
      Other assets                                                    (97)        (224)
      Accounts payable                                                 34         (165)
      Tenant security deposit liabilities                               3            9
      Accrued property taxes                                          (60)         122
      Other liabilities                                                31          (18)
      Due to affiliate                                                 60           --
         Net cash provided by operating activities                    468          173

Cash flows from investing activities:
  Property improvements and replacements                             (488)        (404)
  Net insurance proceeds received                                      91           --
  Net withdrawals from restricted escrows                              95           --
         Net cash used in investing activities                       (302)        (404)

Cash flows from financing activities:
   Payments on mortgage notes payable                                (291)        (271)
   Advances received from affiliate                                   135           --
   Repayment of advances from affiliate                               (69)          --
         Net cash used in financing activities                       (225)        (271)

Net decrease in cash and cash equivalents                             (59)        (502)

Cash and cash equivalents at beginning of period                      192          666

Cash and cash equivalents at end of period                         $ 133        $ 164

Supplemental disclosure of cash flow information:
 Cash paid for interest                                            $ 662        $ 737

 Supplemental disclosure of non-cash flow information:
  Property improvements and replacements in accounts payable        $ 45        $ --


         See Accompanying Notes to Consolidated Financial Statements
</TABLE>


                             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.  The general  partner  responsible  for management of the
Partnership's  business  is Shelter  Realty III  Corporation,  a South  Carolina
corporation (the "Corporate General Partner").  The Corporate General Partner is
a  subsidiary  of Apartment  Investment  and  Management  Company  ("AIMCO"),  a
publicly  traded real estate  investment  trust. In the opinion of 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, 2004,  are not
necessarily  indicative  of the results that may be expected for the fiscal year
ending  December 31, 2004. 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 fiscal year ended December 31, 2003.

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the accompanying  consolidated statements of operations have been restated as of
January 1, 2003 to reflect the  operations of Colony House  Apartments as income
from  discontinued  operations  due to its sale to a third party  subsequent  to
September 30, 2004.

Note B - Reconciliation of Cash Flows

As required by the Partnership  Agreement,  the following is a reconciliation of
"Net cash provided by operating  activities"  in the  accompanying  consolidated
statements  of cash  flows to "Net  cash from  operations",  as  defined  in the
Partnership  Agreement.  However,  "Net  cash  from  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,
                                                              2004           2003
                                                                  (in thousands)
Net cash provided by operating activities                    $ 468           $ 173
<S>                                                           <C>             <C>
  Payments on mortgage notes payable                          (291)           (271)
  Property improvements and replacements                      (488)           (404)
  Change in restricted escrow                                   95              --
  Changes in reserves for net operating assets                  21             239
     Net cash used in operations                            $ (195)         $ (263)
</TABLE>

Distributions made from reserves no longer considered necessary by the Corporate
General  Partner are  considered to be additional  net cash from  operations for
allocation purposes.

Note C - Transactions with Affiliated Parties

The  Partnership  has no employees and depends 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.

During the nine months  ended  September  30, 2004 and 2003,  affiliates  of the
Corporate General Partner were entitled to receive 5% of gross receipts from all
of the Partnership's  properties for providing property management services. The
Partnership paid to such affiliates  approximately $159,000 and $149,000 for the
nine months ended September 30, 2004 and 2003,  respectively,  which is included
in operating expenses and income from discontinued operations.

An affiliate of the  Corporate  General  Partner  charged for  reimbursement  of
accountable  administrative  expenses  amounting to  approximately  $176,000 and
$119,000 for the nine months ended  September  30, 2004 and 2003,  respectively,
which  is  included  in  general  and  administrative  expenses  and  investment
properties.   Included  in  these  amounts  are  fees  related  to  construction
management services provided by an affiliate of the Corporate General Partner of
approximately  $43,000 and $3,000 for the nine months ended  September  30, 2004
and 2003, respectively.  The construction management service fees are calculated
based on a percentage of additions to the  investment  properties.  At September
30,  2004,  the   Partnership   owed   approximately   $58,000  for  accountable
administrative expenses which is included in due to affiliate.

During 1986, a liability of  approximately  $185,000 was incurred to the general
partners for sales  commissions  earned.  In  connection  with the sale of North
River  Village  Apartments  in 2002,  the  Corporate  General  Partner  earned a
commission  of  $68,000  for  its  assistance  in  the  sale.  Payment  of  such
commissions  is subordinate  to the limited  partners  receiving a cumulative 7%
return on their investment. As of September 30, 2004, the level of return to the
limited partners has not been met and the balance of  approximately  $253,000 is
included in due to affiliate.

Pursuant to the  Partnership  Agreement,  an affiliate of the Corporate  General
Partner advanced the Partnership  approximately  $135,000 during the nine months
ended  September 30, 2004 to assist with the payment of property  taxes at Essex
Park  Apartments.   During  the  nine  months  ended  September  30,  2004,  the
Partnership made a payment on this advance of approximately $69,000. Interest on
advances is charged at the prime rate plus 2%, or 6.75% at  September  30, 2004.
Interest  expense  for this loan was  approximately  $3,000 for the nine  months
ended  September  30, 2004.  At  September  30, 2004,  the  Partnership  owed an
affiliate of the Corporate General Partner approximately $68,000 in advances and
accrued interest, which is included in due to affiliate. Subsequent to September
30, 2004, an affiliate of the Corporate General Partner advanced the Partnership
approximately $34,000 to fund capital improvements at Willowick  Apartments.  No
such advances or payments  were made during the nine months ended  September 30,
2003.

The  Partnership  insures its properties up to certain  limits through  coverage
provided by AIMCO which is  generally  self-insured  for a portion of losses and
liabilities  related to workers  compensation,  property  casualty  and  vehicle
liability. The Partnership insures its properties above the AIMCO limits through
insurance  policies  obtained  by  AIMCO  from  insurers  unaffiliated  with the
Corporate  General Partner.  During the nine months ended September 30, 2004 and
2003, the Partnership  paid AIMCO and its affiliates  approximately  $66,000 and
$59,000,  respectively,  for insurance  coverage and fees associated with policy
claims administration.

Note D - Casualty

In May  2003,  one of the  Partnership's  investment  properties,  Colony  House
Apartments,  incurred damages as a result of a hail storm. During the year ended
December 31,  2003,  approximately  $151,000 of fixed  assets and  approximately
$86,000 of  accumulated  depreciation  were written off resulting in a net write
off of approximately  $65,000.  During 2003, the property received approximately
$244,000  in  proceeds  from the  insurance  company  to repair  the  damage and
recognized  a  casualty  gain  of  approximately  $179,000  as a  result  of the
difference between the proceeds received and the net book value of the buildings
which were  damaged.  During the nine  months  ended  September  30,  2004,  the
Partnership received additional proceeds of approximately  $91,000 and wrote off
approximately  $5,000 of additional  net assets which  resulted in an additional
gain  of  approximately   $86,000.  This  amount  is  included  in  income  from
discontinued operations.

Note E - Subsequent Event

Subsequent to September 30, 2004, the Partnership  sold Colony House  Apartments
to a third party, for net proceeds of approximately  $7,161,000 after payment of
closing costs. The Partnership used approximately $3,199,000 of the net proceeds
to repay the mortgage encumbering the property. The Partnership anticipates that
it will recognize a gain on the sale of approximately  $4,427,000.  In addition,
the Partnership recorded a loss on early extinguishment of debt of approximately
$89,000 as a result of unamortized  loan costs being written off. As a result of
this sale,  the  accompanying  consolidated  statement of  operations  have been
restated  as of  January  1, 2003 to  reflect  the  operations  of Colony  House
Apartments  as income  from  discontinued  operations.  Included  in income from
discontinued  operations are revenues generated by the property of approximately
$1,135,000 and $1,021,000 for the nine months ended September 30, 2004 and 2003,
respectively.

Note F - Contingencies

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. (the "Nuanes action") 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
purported  to  assert  claims  on  behalf  of a class of  limited  partners  and
derivatively  on behalf  of a number  of  limited  partnerships  (including  the
Partnership)  that are named as nominal  defendants,  challenging,  among  other
things,  the  acquisition  of interests  in certain  Corporate  General  Partner
entities by Insignia Financial Group, Inc.  ("Insignia") and entities that were,
at one  time,  affiliates  of  Insignia;  past  tender  offers  by the  Insignia
affiliates to acquire limited partnership units;  management of the partnerships
by the  Insignia  affiliates;  and the series of  transactions  which  closed on
October 1, 1998 and February 26, 1999 whereby  Insignia and Insignia  Properties
Trust,  respectively,  were merged into AIMCO.  The plaintiffs  sought  monetary
damages and equitable relief, including judicial dissolution of the Partnership.
In addition,  during the third quarter of 2001, a complaint  captioned Heller v.
Insignia  Financial  Group (the  "Heller  action")  was filed  against  the same
defendants  that are named in the  Nuanes  action.  On or about  August 6, 2001,
plaintiffs filed a first amended  complaint.  The Heller action was brought as a
purported derivative action, and asserted claims for, among other things, breach
of fiduciary  duty,  unfair  competition,  conversion,  unjust  enrichment,  and
judicial dissolution.

On January 8, 2003,  the parties filed a  Stipulation  of Settlement in proposed
settlement of the Nuanes action and the Heller action.

In general  terms,  the  proposed  settlement  provides  for  certification  for
settlement  purposes of a settlement class consisting of all limited partners in
this  Partnership and others (the  "Partnerships")  as of December 20, 2002, the
dismissal  with  prejudice  and  release  of claims  in the  Nuanes  and  Heller
litigation,  payment by AIMCO of $9.9  million  (which shall be  distributed  to
settlement  class  members  after  deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent  appraisals of the  Partnerships'  properties  by a court  appointed
appraiser. An affiliate of the Corporate General Partner has also agreed to make
at least one round of tender offers to purchase all of the partnership interests
in the Partnerships within one year of final approval,  if it is granted, and to
provide  partners with the independent  appraisals at the time of these tenders.
The proposed  settlement also provided for the limitation of the allowable costs
which  the  Corporate   General  Partner  or  its  affiliates  will  charge  the
Partnerships  in connection with this litigation and imposes limits on the class
counsel  fees and  costs in this  litigation.  On April  11,  2003,  notice  was
distributed  to  limited   partners   providing  the  details  of  the  proposed
settlement.

On June 13, 2003, the court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions.  On August 12, 2003, an objector
("Objector") filed an appeal (the "Appeal") seeking to vacate and/or reverse the
order approving the settlement and entering  judgment  thereto.  On November 24,
2003,  the Objector  filed an  application  requesting  the court order AIMCO to
withdraw settlement tender offers it had commenced,  refrain from making further
offers  pending  the appeal and auction  any units  tendered  to third  parties,
contending  that the offers did not  conform  with the terms of the  settlement.
Counsel  for the  Objector  (on behalf of another  investor)  had  alternatively
requested the court take certain action  purportedly to enforce the terms of the
settlement agreement. On December 18, 2003, the court heard oral argument on the
motions  and denied them both in their  entirety.  The  Objector  filed a second
appeal challenging the court's use of a referee and its order requiring Objector
to pay those fees.

On January 28, 2004,  the  Objector  filed his opening  brief in the Appeal.  On
April 23,  2004,  the  Corporate  General  Partner  and its  affiliates  filed a
response  brief in support  of the  settlement  and the  judgment  thereto.  The
plaintiffs  have also  filed a brief in support  of the  settlement.  On June 4,
2004,  Objector filed a reply to the briefs  submitted by the Corporate  General
Partner and  Plaintiffs.  In addition  both the  Objector and  plaintiffs  filed
briefs in  connection  with the second  appeal.  The Court of Appeals heard oral
argument  on both  appeals on  September  22,  2004 and took the  matters  under
submission.

The  Corporate  General  Partner  does  not  anticipate  that  any  costs to the
Partnership, whether legal or settlement costs, associated with these cases will
be material to the Partnership's overall operations.

On August 8, 2003 AIMCO Properties  L.P., an affiliate of the Corporate  General
Partner,  was served  with a  complaint  in the United  States  District  Court,
District of Columbia alleging that AIMCO Properties L.P.  willfully violated the
Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime
for all  hours  worked  in  excess  of forty  per  week.  On  March 5,  2004 the
plaintiffs filed an amended complaint also naming NHP Management Company,  which
is also an affiliate of the Corporate  General Partner.  The complaint is styled
as a Collective  Action under the FLSA and seeks to certify state  subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate  maintenance workers for
time  that they were  required  to be  "on-call".  Additionally,  the  complaint
alleges AIMCO  Properties  L.P.  failed to comply with the FLSA in  compensating
maintenance  workers  for time that they  worked in  responding  to a call while
"on-call".  The defendants have filed an answer to the amended complaint denying
the  substantive  allegations.  Some  discovery  has taken place and  settlement
negotiations  continue.  Although the outcome of any  litigation  is  uncertain,
AIMCO  Properties,  L.P. does not believe that the ultimate  outcome will have a
material  adverse  effect on its financial  condition or results of  operations.
Similarly,  the  Corporate  General  Partner  does not believe that the ultimate
outcome  will have a  material  adverse  effect on the  Partnership's  financial
condition or results of operations.

The  Partnership  is unaware  of any other  pending  or  outstanding  litigation
matters  involving  it or its  investment  properties  that are not of a routine
nature arising in the ordinary course of business.

As  previously  disclosed,  the  Central  Regional  Office of the United  States
Securities  and  Exchange   Commission   (the  "SEC")  is  conducting  a  formal
investigation relating to certain matters.  Although the staff of the SEC is not
limited  in the  areas  that it may  investigate,  AIMCO  believes  the areas of
investigation include AIMCO's miscalculated monthly net rental income figures in
third quarter 2003,  forecasted  guidance,  accounts payable,  rent concessions,
vendor  rebates,  capitalization  of payroll and certain  other  costs,  and tax
credit  transactions.  AIMCO is cooperating  fully. AIMCO is not able to predict
when the matter  will be  resolved.  AIMCO does not  believe  that the  ultimate
outcome  will  have a  material  adverse  effect on its  consolidated  financial
condition or results of operations.  Similarly,  the Corporate  General  Partner
does not believe that the ultimate  outcome will have a material  adverse effect
on the Partnership's consolidated financial condition or results of operations.

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

The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government  regulations.  Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including,  without limitation:  national and local
economic  conditions;  the terms of  governmental  regulations  that  affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates;  financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest;  real estate risks, including variations of real estate values and
the general  economic  climate in local markets and  competition  for tenants in
such markets;  litigation,  including  costs  associated  with  prosecuting  and
defending  claims  and  any  adverse   outcomes,   and  possible   environmental
liabilities.   Readers  should  carefully  review  the  Registrant's   financial
statements and the notes thereto,  as well as the risk factors  described in the
documents  the  Registrant  files  from  time to time  with the  Securities  and
Exchange Commission.

The  Partnership's  investment  properties  consist of two apartment  complexes,
excluding one property that sold subsequent to September 30, 2004. The following
table sets forth the average  occupancy of the  properties  for each of the nine
months ended September 30, 2004 and 2003:

                                                            Average
                                                           Occupancy
       Property                                        2004          2003

       Essex Park Apartments
          Columbia, South Carolina (1)                 88%            85%

       Willowick Apartments
          Greenville, South Carolina                   91%            90%

(1)   The  Corporate  General  Partner  attributes  the increase in occupancy at
      Essex  Park  Apartments  to  increased  retention  efforts  from  property
      management and a more stable customer base.

The  Partnership's  financial  results depend upon a number of factors including
the  ability to attract  and  maintain  tenants  at the  investment  properties,
interest  rates on mortgage  loans,  costs  incurred  to operate the  investment
properties,  general  economic  conditions  and weather.  As part of the ongoing
business plan of the  Partnership,  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,  the Corporate  General Partner may use
rental  concessions  and  rental  rate  reductions  to offset  softening  market
conditions,  accordingly,  there  is no  guarantee  that the  Corporate  General
Partner will be able to sustain such a plan.  Further,  a number of factors that
are outside the control of the  Partnership  such as the local economic  climate
and weather can  adversely  or  positively  affect the  Partnership's  financial
results.

Results of Operations

The  Partnership's  net loss for the three and nine months ended  September  30,
2004 was approximately $77,000 and $122,000, respectively,  compared to net loss
of approximately $58,000 and $259,000 for the corresponding periods in 2003. The
increase in net loss for the three  month  period is due to a decrease in income
from discontinued  operations and an increase in total expenses partially offset
by an increase in total  revenues.  The  decrease in net loss for the nine month
period is due to an  increase in total  revenues  and an increase in income from
discontinued operations partially offset by an increase in total expenses.

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the accompanying  consolidated statements of operations have been restated as of
January 1, 2003 to reflect the  operations of Colony House  Apartments as income
from  discontinued  operations  due to its sale to a third party  subsequent  to
September 30, 2004. The income from discontinued operations includes revenues of
approximately  $1,135,000 and $1,021,000 for the nine months ended September 30,
2004 and 2003, respectively.

In May  2003,  one of the  Partnership's  investment  properties,  Colony  House
Apartments,  incurred damages as a result of a hail storm. During the year ended
December 31,  2003,  approximately  $151,000 of fixed  assets and  approximately
$86,000 of  accumulated  depreciation  were written off resulting in a net write
off of approximately  $65,000.  During 2003, the property received approximately
$244,000  in  proceeds  from the  insurance  company  to repair  the  damage and
recognized  a  casualty  gain  of  approximately  $179,000  as a  result  of the
difference between the proceeds received and the net book value of the buildings
which were  damaged.  During the nine  months  ended  September  30,  2004,  the
Partnership received additional proceeds of approximately  $91,000 and wrote off
approximately  $5,000 of additional  net assets which  resulted in an additional
gain  of  approximately   $86,000.  This  amount  is  included  in  income  from
discontinued operations.

Excluding the income from discontinued  operations,  the Partnership's loss from
continuing  operations was approximately  $87,000 and $307,000 for the three and
nine  months  ended  September  30,  2004,  respectively,  compared to loss from
continuing   operations   of   approximately   $97,000  and   $311,000  for  the
corresponding  periods in 2003. The decrease in loss from continuing  operations
for both periods is due to an increase in total revenues  partially offset by an
increase in total  expenses.  Total revenues for the three and nine months ended
September 30, 2004 increased due to increases in rental and other income. Rental
income  increased  due to  increases  in the average  rental rates at Essex Park
Apartments  and in occupancy  at Essex Park  Apartments  partially  offset by an
increase in bad debt expense at Essex Park  Apartments.  Other income  increased
due to an  increase  in  lease  cancellation  fees at both of the  Partnership's
investment properties and an increase in late charges at Essex Park Apartments.

Total  expenses  for both  periods  increased  due to  increases  in  operating,
depreciation and property tax expenses partially offset by a decrease in general
and administrative expense. Operating expenses for both periods increased due to
increases in property expenses and management fees.  Property expenses increased
due to an increase in payroll and related benefits at both of the  Partnership's
investment  properties.  Management  fees increased due to an increase in rental
income primarily at Essex Park Apartments. Depreciation expense for both periods
increased  due to capital  improvements  and  replacements  placed into  service
during the past twelve months, primarily at Essex Park Apartments.  Property tax
expense increased due to an increase in the tax rate at Essex Park Apartments.

General and  administrative  expense  decreased  due to  decreases  in taxes and
licenses and in the expected cost of the annual  audit.  Included in general and
administrative expense for the nine months ended September 30, 2004 and 2003 are
management  reimbursements to the Corporate General Partner as allowed under the
Partnership  Agreement.  In addition,  costs  associated  with the quarterly and
annual  communications  with  investors and  regulatory  agencies and the annual
audit  required by the  Partnership  Agreement  are also included in general and
administrative expenses.

Liquidity and Capital Resources

At  September  30,  2004,  the  Partnership  had cash and  cash  equivalents  of
approximately $133,000 compared to approximately $164,000 at September 30, 2003.
Cash and cash equivalents decreased approximately $59,000 from December 31, 2003
due to  approximately  $302,000  and  $225,000  of cash  used in  investing  and
financing activities,  respectively,  partially offset by approximately $468,000
of cash  provided by operating  activities.  Cash used in  investing  activities
consisted of property  improvements  and  replacements  partially  offset by net
withdrawals from restricted escrows and insurance  proceeds received.  Cash used
in financing  activities  consisted  of payments of  principal on the  mortgages
encumbering  the  Partnership's  properties  and  repayment  of  advances  to an
affiliate  partially  offset  by  advances  received  from  an  affiliate.   The
Partnership invests its working capital reserves in interest bearing 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  properties  to  adequately  maintain the physical
assets and other  operating needs of the Partnership and to comply with Federal,
state,  and local  legal and  regulatory  requirements.  The  Corporate  General
Partner  monitors  developments in the area of legal and regulatory  compliance.
For example,  the  Sarbanes-Oxley  Act of 2002  mandates or suggests  additional
compliance  measures  with  regard to  governance,  disclosure,  audit and other
areas.  In light of these changes,  the  Partnership  expects that it will incur
higher expenses related to compliance.  Capital improvements planned for each of
the Partnership's properties are detailed below.

Essex Park Apartments

During the nine months ended  September  30,  2004,  the  Partnership  completed
approximately  $149,000  of  capital  improvements  at  Essex  Park  Apartments,
consisting  primarily  of  structural  upgrades,  exterior  painting  and  floor
covering  and  appliance  replacements.  These  improvements  were  funded  from
operating cash flow. The Partnership  evaluates the capital improvement needs of
the property  during the year and  currently  expects to complete an  additional
$28,000 in capital improvements during the remainder of 2004. Additional capital
improvements may be considered and will depend on the physical  condition of the
property as well as the anticipated cash flow generated by the property.

Colony House Apartments

During the nine months ended  September  30,  2004,  the  Partnership  completed
approximately  $288,000  of  capital  improvements  at Colony  House  Apartments
consisting  primarily of floor covering and appliance  replacements and building
repairs related to damage from a hail storm. These improvements were funded from
operating cash flow,  replacement reserves and insurance proceeds.  The property
was sold subsequent to September 30, 2004.

Willowick Apartments

During the nine months ended  September  30,  2004,  the  Partnership  completed
approximately   $96,000  of  capital   improvements  at  Willowick   Apartments,
consisting primarily of floor covering and appliance  replacements and furniture
and fixtures.  These  improvements  were funded from  operating  cash flow.  The
Partnership  evaluates the capital  improvement needs of the property during the
year and  currently  expects  to  complete  an  additional  $125,000  in capital
improvements during the remainder of 2004.  Additional capital  improvements may
be considered and will depend on the physical  condition of the property as well
as the anticipated cash flow generated by the property.

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 Partnership's  distributable cash flow, if any,
may be adversely affected at least in the short term.

The  Partnership's  assets are thought to be sufficient  for any near term needs
(exclusive  of  capital   improvements)   of  the   Partnership.   The  mortgage
indebtedness   encumbering  the   Partnership's   properties  of   approximately
$9,184,000 is amortized  over 240 months and is scheduled to be fully  amortized
in January 2021.

No  distributions  were made during the nine months ended September 30, 2004 and
2003.

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  cash
available  for  distribution  is  reviewed on a monthly  basis.  There can be no
assurance,  however,  that the Partnership  will generate  sufficient funds from
operations,  after  planned  capital  improvement  expenditures,  to permit  any
distributions  to its  partners  during  the  remainder  of 2004  or  subsequent
periods.

Other

In addition to its  indirect  ownership of the general  partner  interest in the
Partnership,  AIMCO and its affiliates  owned 36,382 limited  partnership  units
(the "Units") in the Partnership representing 66.15% of the outstanding Units at
September  30,  2004. 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 acquire  additional  Units in exchange for cash or a combination
of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO,
either through private  purchases or tender offers.  Pursuant to the Partnership
Agreement,  unitholders  holding a majority  of the Units are  entitled  to take
action with  respect to a variety of matters that  include,  but are not limited
to,  voting on certain  amendments  to the  Partnership  Agreement and voting to
remove the Corporate General Partner.  As a result of its ownership of 66.15% of
the outstanding Units, AIMCO and its affiliates are in a position to control all
such voting  decisions with respect to the  Partnership.  Although the Corporate
General  Partner  owes  fiduciary   duties  to  the  limited   partners  of  the
Partnership,  the Corporate  General Partner also owes fiduciary duties to AIMCO
as its sole  stockholder.  As a  result,  the  duties of the  Corporate  General
Partner,  as  corporate  general  partner,  to the  Partnership  and its limited
partners may come into conflict with the duties of the Corporate General Partner
to AIMCO as its sole stockholder.

Critical Accounting Policies and Estimates

The consolidated financial statements are prepared in accordance with accounting
principles   generally  accepted  in  the  United  States,   which  require  the
Partnership to make estimates and assumptions.  The Partnership believes that of
its significant  accounting policies,  the following may involve a higher degree
of judgment and complexity.

Impairment of Long-Lived Assets

Investment  properties  are  recorded at cost,  less  accumulated  depreciation,
unless  considered  impaired.  If  events  or  circumstances  indicate  that the
carrying  amount of a property may be  impaired,  the  Partnership  will make an
assessment of its  recoverability  by estimating  the  undiscounted  future cash
flows,  excluding  interest  charges,  of the property.  If the carrying  amount
exceeds the aggregate  future cash flows,  the  Partnership  would  recognize an
impairment  loss to the extent the carrying amount exceeds the fair value of the
property.

Real  property  investments  are  subject  to varying  degrees of risk.  Several
factors  may  adversely  affect  the  economic  performance  and  value  of  the
Partnership's investment properties.  These factors include, but are not limited
to,  changes  in the  national,  regional  and  local  economic  climate;  local
conditions,  such as an oversupply of multifamily  properties;  competition from
other available  multifamily property owners and changes in market rental rates.
Any adverse changes in these factors could cause impairment of the Partnership's
assets.

Revenue Recognition

The Partnership generally leases apartment units for twelve-month terms or less.
Rental income  attributable to leases is recognized monthly as it is earned. The
Partnership  evaluates all accounts receivable from residents and establishes an
allowance, after the application of security deposits, for accounts greater than
30 days past due on current tenants and all receivables due from former tenants.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy  competition from other similar  complexes in the area. Any
concessions  given at the inception of the lease are amortized  over the life of
the lease.

ITEM 3.     CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures.  The Partnership's management,  with the
participation of the principal executive officer and principal financial officer
of the Corporate  General Partner,  who are the equivalent of the  Partnership's
principal executive officer and principal financial officer,  respectively,  has
evaluated  the  effectiveness  of  the  Partnership's  disclosure  controls  and
procedures (as such term is defined in Rules  13a-15(e) and 15d-15(e)  under the
Securities  Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report.  Based on such  evaluation,  the principal
executive  officer and  principal  financial  officer of the  Corporate  General
Partner, who are the equivalent of the Partnership's principal executive officer
and principal  financial officer,  respectively,  have concluded that, as of the
end of such period,  the  Partnership's  disclosure  controls and procedures are
effective.

(b) Internal Control Over Financial  Reporting.  There have not been any changes
in the Partnership's  internal control over financial reporting (as such term is
defined in Rules  13a-15(f)  and  15d-15(f)  under the Exchange  Act) during the
fiscal quarter to which this report relates that have  materially  affected,  or
are reasonably likely to materially affect,  the Partnership's  internal control
over financial reporting.



<PAGE>



                           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. (the "Nuanes action") 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
purported  to  assert  claims  on  behalf  of a class of  limited  partners  and
derivatively  on behalf  of a number  of  limited  partnerships  (including  the
Partnership)  that are named as nominal  defendants,  challenging,  among  other
things,  the  acquisition  of interests  in certain  Corporate  General  Partner
entities by Insignia Financial Group, Inc.  ("Insignia") and entities that were,
at one  time,  affiliates  of  Insignia;  past  tender  offers  by the  Insignia
affiliates to acquire limited partnership units;  management of the partnerships
by the  Insignia  affiliates;  and the series of  transactions  which  closed on
October 1, 1998 and February 26, 1999 whereby  Insignia and Insignia  Properties
Trust,  respectively,  were merged into AIMCO.  The plaintiffs  sought  monetary
damages and equitable relief, including judicial dissolution of the Partnership.
In addition,  during the third quarter of 2001, a complaint  captioned Heller v.
Insignia  Financial  Group (the  "Heller  action")  was filed  against  the same
defendants  that are named in the  Nuanes  action.  On or about  August 6, 2001,
plaintiffs filed a first amended  complaint.  The Heller action was brought as a
purported derivative action, and asserted claims for, among other things, breach
of fiduciary  duty,  unfair  competition,  conversion,  unjust  enrichment,  and
judicial dissolution.

On January 8, 2003,  the parties filed a  Stipulation  of Settlement in proposed
settlement of the Nuanes action and the Heller action.

In general  terms,  the  proposed  settlement  provides  for  certification  for
settlement  purposes of a settlement class consisting of all limited partners in
this  Partnership and others (the  "Partnerships")  as of December 20, 2002, the
dismissal  with  prejudice  and  release  of claims  in the  Nuanes  and  Heller
litigation,  payment by AIMCO of $9.9  million  (which shall be  distributed  to
settlement  class  members  after  deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent  appraisals of the  Partnerships'  properties  by a court  appointed
appraiser. An affiliate of the Corporate General Partner has also agreed to make
at least one round of tender offers to purchase all of the partnership interests
in the Partnerships within one year of final approval,  if it is granted, and to
provide  partners with the independent  appraisals at the time of these tenders.
The proposed  settlement also provided for the limitation of the allowable costs
which  the  Corporate   General  Partner  or  its  affiliates  will  charge  the
Partnerships  in connection with this litigation and imposes limits on the class
counsel  fees and  costs in this  litigation.  On April  11,  2003,  notice  was
distributed  to  limited   partners   providing  the  details  of  the  proposed
settlement.

On June 13, 2003, the court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions.  On August 12, 2003, an objector
("Objector") filed an appeal (the "Appeal") seeking to vacate and/or reverse the
order approving the settlement and entering  judgment  thereto.  On November 24,
2003,  the Objector  filed an  application  requesting  the court order AIMCO to
withdraw settlement tender offers it had commenced,  refrain from making further
offers  pending  the appeal and auction  any units  tendered  to third  parties,
contending  that the offers did not  conform  with the terms of the  settlement.
Counsel  for the  Objector  (on behalf of another  investor)  had  alternatively
requested the court take certain action  purportedly to enforce the terms of the
settlement agreement. On December 18, 2003, the court heard oral argument on the
motions  and denied them both in their  entirety.  The  Objector  filed a second
appeal challenging the court's use of a referee and its order requiring Objector
to pay those fees.

On January 28, 2004,  the  Objector  filed his opening  brief in the Appeal.  On
April 23,  2004,  the  Corporate  General  Partner  and its  affiliates  filed a
response  brief in support  of the  settlement  and the  judgment  thereto.  The
plaintiffs  have also  filed a brief in support  of the  settlement.  On June 4,
2004,  Objector filed a reply to the briefs  submitted by the Corporate  General
Partner and  Plaintiffs.  In addition  both the  Objector and  plaintiffs  filed
briefs in  connection  with the second  appeal.  The Court of Appeals heard oral
argument  on both  appeals on  September  22,  2004 and took the  matters  under
submission.

The  Corporate  General  Partner  does  not  anticipate  that  any  costs to the
Partnership, whether legal or settlement costs, associated with these cases will
be material to the Partnership's overall operations.

On August 8, 2003 AIMCO Properties  L.P., an affiliate of the Corporate  General
Partner,  was served  with a  complaint  in the United  States  District  Court,
District of Columbia alleging that AIMCO Properties L.P.  willfully violated the
Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime
for all  hours  worked  in  excess  of forty  per  week.  On  March 5,  2004 the
plaintiffs filed an amended complaint also naming NHP Management Company,  which
is also an affiliate of the Corporate  General Partner.  The complaint is styled
as a Collective  Action under the FLSA and seeks to certify state  subclasses in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate  maintenance workers for
time  that they were  required  to be  "on-call".  Additionally,  the  complaint
alleges AIMCO  Properties  L.P.  failed to comply with the FLSA in  compensating
maintenance  workers  for time that they  worked in  responding  to a call while
"on-call".  The defendants have filed an answer to the amended complaint denying
the  substantive  allegations.  Some  discovery  has taken place and  settlement
negotiations  continue.  Although the outcome of any  litigation  is  uncertain,
AIMCO  Properties,  L.P. does not believe that the ultimate  outcome will have a
material  adverse  effect on its financial  condition or results of  operations.
Similarly,  the  Corporate  General  Partner  does not believe that the ultimate
outcome  will have a  material  adverse  effect on the  Partnership's  financial
condition or results of operations.

ITEM 6.     EXHIBITS


            See Exhibit Index attached.



<PAGE>


                                   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/Martha L. Long
                                          Martha L. Long
                                          Senior Vice President


                                    By:   /s/Stephen B. Waters
                                          Stephen B. Waters
                                          Vice President


                                    Date: November 12, 2004



<PAGE>


                             Shelter Properties III

                                  EXHIBIT INDEX

Exhibit

 3                See Exhibit 4(a)

 4     (a)        Amended and Restated  Certificate  and  Agreement of Limited
                  Partnership,  [included  as Exhibit A to the  Prospectus  of
                  Registrant  dated  September 2, 1981  contained in Amendment
                  No. 1 to  Registration  Statement No.  2-72567 of Registrant
                  filed September 2, 1981 (the  "Prospectus") and incorporated
                  herein by reference].

       (b)        Subscription   Agreements  and  Signature  Pages  [Filed  with
                  Amendment  No. 1 of  Registration  Statement  No.  2-72567  of
                  Registrant and incorporated herein by reference].

       (d)        Modification  Agreement  between  Citibank,  N.A. and Southern
                  Associates  Limited  Partnership  and a Title  to Real  Estate
                  between Southern  Associates  Limited  Partnership and Shelter
                  Properties  III to  acquire  Essex Park  Apartments.  Filed as
                  Exhibit  4(d)  to Form  10-K  of  Registrant  for  year  ended
                  December 31, 1987 and incorporated herein by reference.

10(i)             Contract related to acquisition of properties.

       (a)        Purchase  Agreement  dated July 1, 1981 and First  Addendum to
                  Purchase  Agreement  dated August 4, 1981 between Colony House
                  of  Murfreesboro  and U.S.  Shelter  Corporation  to  purchase
                  Colony House Apartments.**

       (b)        Purchase  Agreement  dated  July 31,  1981,  between  Southern
                  Associated Limited Partnership and U.S. Shelter Corporation
                  to purchase Essex Park Apartments.**

                  **Filed  as  Exhibits  12(a)  and  12(b),  respectively,  to
                  Amendment No. 1 of  Registration  Statement  No.  2-72567 of
                  Registrant filed September 2, 1981 and  incorporated  herein
                  by reference.

       (e)        Purchase   Agreement   dated  May  14,  1982  between  Lincoln
                  Willowick  Greenville  Associates and U.S. Shelter Corporation
                  to  purchase  Willowick  Apartments.  [Filed  with Form 8-K of
                  Registrant  dated  May 14,  1982 and  incorporated  herein  by
                  reference.]

10(ii)            Form of Management  Agreement  with U.S.  Shelter  Corporation
                  subsequently  assigned to Shelter  Management Group, L.P. (now
                  known as Insignia Management,  L.P.) [Filed with Amendment No.
                  1 to  Registration  Statement,  No.  2-72567 of Registrant and
                  incorporated herein by reference.]

10(iii)           Contracts related to refinancing the debt:

        (m)       Multifamily  Note dated  December  15,  2000  between  Shelter
                  Properties III and Reilly Mortgage Group,  Inc., a District of
                  Columbia corporation  securing Colony House Apartments,  Essex
                  Park Apartments,  and Willowick  Apartments  (filed as Exhibit
                  10(iii)(m)  on Form 8-K  February  1,  2001  and  incorporated
                  herein by reference).

<PAGE>




        (n)       Multifamily  Deed of Trust,  Assignment of Rents, and Security
                  Agreement dated December 15, 2000 between  Shelter  Properties
                  III and Reilly  Mortgage  Group,  Inc., a District of Columbia
                  corporation,  securing  Colony  House  Apartments,  Essex Park
                  Apartments,   and  Willowick   Apartments  (filed  as  Exhibit
                  10(iii)(n) on Form 8-K February 1, 2001).

31.1              Certification  of  equivalent  of  Chief  Executive  Officer
                  pursuant     to     Securities     Exchange     Act    Rules
                  13a-14(a)/15d-14(a),  as Adopted  Pursuant to Section 302 of
                  the Sarbanes-Oxley Act of 2002.

31.2              Certification  of  equivalent  of  Chief  Financial  Officer
                  pursuant     to     Securities     Exchange     Act    Rules
                  13a-14(a)/15d-14(a),  as Adopted  Pursuant to Section 302 of
                  the Sarbanes-Oxley Act of 2002.

32.1              Certification   Pursuant  to  18  U.S.C.  Section  1350,  as
                  Adopted  Pursuant to Section 906 of the  Sarbanes-Oxley  Act
                  of 2002.

99     (a)        Prospectus of Registrant  dated  September 2, 1981 [included
                  in Registration  Statement No.  2-72567,  of Registrant] and
                  incorporated herein by reference.


<PAGE>



Exhibit 31.1


                                  CERTIFICATION


I, Martha L. Long, certify that:


1.    I have reviewed this quarterly report on Form 10-QSB of Shelter Properties
      III;

2.    Based on my knowledge,  this report does not contain any untrue  statement
      of a material fact or omit to state a material fact  necessary to make the
      statements made, in light of the circumstances under which such statements
      were made,  not  misleading  with  respect  to the period  covered by this
      report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  report,  fairly  present  in all  material
      respects the financial condition,  results of operations and cash flows of
      the small  business  issuer as of, and for, the periods  presented in this
      report;

4.    The  small  business  issuer's  other  certifying  officer(s)  and  I  are
      responsible  for  establishing  and  maintaining  disclosure  controls and
      procedures (as defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) for
      the small business issuer and have:

      (a)   Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            small business issuer, including its consolidated  subsidiaries,  is
            made  known to us by  others  within  those  entities,  particularly
            during the period in which this report is being prepared;

      (b)   Evaluated  the   effectiveness   of  the  small  business   issuer's
            disclosure  controls and procedures and presented in this report our
            conclusions about the  effectiveness of the disclosure  controls and
            procedures, as of the end of the period covered by this report based
            on such evaluation; and

      (c)   Disclosed in this report any change in the small  business  issuer's
            internal  control over financial  reporting that occurred during the
            small  business  issuer's  most  recent  fiscal  quarter  (the small
            business  issuer's  fourth  fiscal  quarter in the case of an annual
            report) that has  materially  affected,  or is reasonably  likely to
            materially affect, the small business issuer's internal control over
            financial reporting; and

5.    The  small  business  issuer's  other  certifying  officer(s)  and I  have
      disclosed,  based on our most recent  evaluation of internal  control over
      financial reporting, to the small business issuer's auditors and the audit
      committee of the small  business  issuer's  board of directors (or persons
      performing the equivalent functions):

      (a)   All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely  affect the small business  issuer's
            ability  to  record,   process,   summarize  and  report   financial
            information; and

      (b)   Any fraud,  whether or not  material,  that  involves  management or
            other  employees who have a significant  role in the small  business
            issuer's internal control over financial reporting.


Date:  November 12, 2004

                                    /s/Martha L. Long
                                    Martha L. Long
                                    Senior Vice  President of Shelter Realty III
                                    Corporation,   equivalent   of   the   chief
                                    executive officer of the Partnership


<PAGE>



Exhibit 31.2


                                  CERTIFICATION


I, Stephen B. Waters, certify that:


1.    I have reviewed this quarterly report on Form 10-QSB of Shelter Properties
      III;

2.    Based on my knowledge,  this report does not contain any untrue  statement
      of a material fact or omit to state a material fact  necessary to make the
      statements made, in light of the circumstances under which such statements
      were made,  not  misleading  with  respect  to the period  covered by this
      report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  report,  fairly  present  in all  material
      respects the financial condition,  results of operations and cash flows of
      the small  business  issuer as of, and for, the periods  presented in this
      report;

4.    The  small  business  issuer's  other  certifying  officer(s)  and  I  are
      responsible  for  establishing  and  maintaining  disclosure  controls and
      procedures (as defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) for
      the small business issuer and have:

      (a)   Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            small business issuer, including its consolidated  subsidiaries,  is
            made  known to us by  others  within  those  entities,  particularly
            during the period in which this report is being prepared;

      (b)   Evaluated  the   effectiveness   of  the  small  business   issuer's
            disclosure  controls and procedures and presented in this report our
            conclusions about the  effectiveness of the disclosure  controls and
            procedures, as of the end of the period covered by this report based
            on such evaluation; and

      (c)   Disclosed in this report any change in the small  business  issuer's
            internal  control over financial  reporting that occurred during the
            small  business  issuer's  most  recent  fiscal  quarter  (the small
            business  issuer's  fourth  fiscal  quarter in the case of an annual
            report) that has  materially  affected,  or is reasonably  likely to
            materially affect, the small business issuer's internal control over
            financial reporting; and

5.    The  small  business  issuer's  other  certifying  officer(s)  and I  have
      disclosed,  based on our most recent  evaluation of internal  control over
      financial reporting, to the small business issuer's auditors and the audit
      committee of the small  business  issuer's  board of directors (or persons
      performing the equivalent functions):

      (a)   All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely  affect the small business  issuer's
            ability  to  record,   process,   summarize  and  report   financial
            information; and

      (b)   Any fraud,  whether or not  material,  that  involves  management or
            other  employees who have a significant  role in the small  business
            issuer's internal control over financial reporting.


Date:  November 12, 2004

                                    /s/Stephen B. Waters
                                    Stephen B. Waters
                                    Vice   President  of  Shelter  Realty  III
                                    Corporation,   equivalent   of  the  chief
                                    financial officer of the Partnership


<PAGE>


Exhibit 32.1


                          Certification of CEO and CFO
                       Pursuant to 18 U.S.C. Section 1350,
                             As Adopted Pursuant to
                Section 906 of the Sarbanes-Oxley Act of 2002



In connection with the Quarterly Report on Form 10-QSB of Shelter Properties III
Limited  Partnership  (the  "Partnership"),   for  the  quarterly  period  ended
September 30, 2004 as filed with the Securities  and Exchange  Commission on the
date hereof  (the  "Report"),  Martha L. Long,  as the  equivalent  of the chief
executive  officer of the Partnership,  and Stephen B. Waters, as the equivalent
of the chief  financial  officer  of the  Partnership,  each  hereby  certifies,
pursuant to 18 U.S.C.  Section 1350,  as adopted  pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:


      (1)   The Report fully complies with the  requirements of Section 13(a) or
            15(d) of the Securities Exchange Act of 1934; and

      (2)   The  information  contained in the Report  fairly  presents,  in all
            material respects, the financial condition and results of operations
            of the Partnership.


                                           /s/Martha L. Long
                                    Name:  Martha L. Long
                                    Date:  November 12, 2004


                                           /s/Stephen B. Waters
                                    Name:  Stephen B. Waters
                                    Date:  November 12, 2004


This  certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley  Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.