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, 2005


[ ]   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 ___

Indicate by check mark whether the  registrant  is a shell company (as defined
in Rule 12b-2 of the Exchange Act).  Yes ___  No _X_




<PAGE>



                         PART I - FINANCIAL INFORMATION



ITEM 1.     FINANCIAL STATEMENTS




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

                               September 30, 2005

<TABLE>
<CAPTION>


Assets
<S>                                                                          <C>
   Cash and cash equivalents                                                 $ 115
   Receivables and deposits                                                      117
   Restricted escrow                                                              85
   Other assets                                                                  474
   Investment properties:
      Land                                                     $ 762
      Buildings and related personal property                   16,434
                                                                17,196
      Less accumulated depreciation                            (12,311)        4,885
                                                                            $ 5,676

Liabilities and Partners' Deficit
Liabilities
   Accounts payable                                                           $ 9
   Tenant security deposit liabilities                                            79
   Accrued property taxes                                                        186
   Other liabilities                                                             312
   Due to affiliates (Note C)                                                    551
   Mortgage notes payable                                                      8,878

Partners' Deficit
   General partners                                             $ (78)
   Limited partners (55,000 units issued and
      outstanding)                                              (4,261)       (4,339)
                                                                            $ 5,676

</TABLE>

         See Accompanying Notes to Consolidated Financial Statements


<PAGE>



                             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,
                                       2005           2004           2005           2004

Revenues:
<S>                                    <C>           <C>           <C>            <C>
   Rental income                       $ 682         $ 667         $ 1,987        $ 1,979
   Other income                            74            82            212            232
   Casualty gain (Note D)                  21            --             21             --
       Total revenues                     777           749          2,220          2,211

Expenses:
  Operating                               485           398          1,392          1,163
  General and administrative               39            46            121            179
  Depreciation                            150           150            439            459
  Interest                                167           172            508            517
  Property taxes                           62            70            186            200
       Total expenses                     903           836          2,646          2,518

Loss from continuing operations          (126)          (87)          (426)           (307)
Gain on sale of discontinued
  operations (Note A)                      --            --            124             --
Income from discontinued
  operations (Note A)                      --            10             --             185

Net loss                              $ (126)        $ (77)         $ (302)        $ (122)

Net loss allocated
  to general partners (1%)             $ (1)          $ (1)          $ (3)          $ (1)
Net loss allocated
  to limited partners (99%)              (125)          (76)          (299)          (121)

                                      $ (126)        $ (77)         $ (302)        $ (122)
Per limited partnership unit:
Loss from continuing operations       $ (2.27)      $ (1.56)       $ (7.68)       $ (5.53)
Gain on sale of discontinued
  operations                               --            --           2.25             --
Income from discontinued
  operations                               --          0.18             --           3.33
                                      $ (2.27)      $ (1.38)       $ (5.43)       $ (2.20)

</TABLE>

         See Accompanying Notes to Consolidated Financial Statements


<PAGE>






                            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, 2004                   55,000         $ (75)      $(3,962)   $(4,037)

Net loss for the nine months
   ended September 30, 2005                --             (3)        (299)      (302)

Partners' deficit at
   September 30, 2005                  55,000         $ (78)      $(4,261)   $(4,339)

</TABLE>

         See Accompanying Notes to Consolidated Financial Statements


<PAGE>



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

                                                                   Nine Months Ended
                                                                     September 30,
                                                                     2005        2004
Cash flows from operating activities:
<S>                                                                <C>         <C>
  Net loss                                                         $ (302)     $ (122)
  Adjustments to reconcile net loss to net cash (used in)
   provided by operating activities:
     Depreciation                                                     439          683
     Amortization of loan costs                                        10           14
     Bad debt expense                                                  49           92
     Gain on sale of discontinued operations                         (124)          --
     Casualty gain                                                    (21)         (86)
     Change in accounts:
      Receivables and deposits                                        (25)         (84)
      Other assets                                                    (23)         (97)
      Accounts payable                                                (75)          34
      Tenant security deposit liabilities                              24            3
      Accrued property taxes                                           (7)         (60)
      Other liabilities                                                (5)          31
      Due to affiliates                                               (70)          60
         Net cash (used in) provided by operating activities         (130)         468

Cash flows from investing activities:
  Property improvements and replacements                             (242)        (488)
  Net insurance proceeds received                                      28           91
  Net (deposits to) withdrawals from restricted escrows                (1)          95
         Net cash used in investing activities                       (215)        (302)

Cash flows from financing activities:
   Payments on mortgage notes payable                                (232)        (291)
   Advances received from affiliates                                  269          135
   Repayment of advances from affiliates                              (52)         (69)
         Net cash used in financing activities                        (15)        (225)

Net decrease in cash and cash equivalents                            (360)         (59)

Cash and cash equivalents at beginning of period                      475          192

Cash and cash equivalents at end of period                         $ 115        $ 133

Supplemental disclosure of cash flow information:
 Cash paid for interest                                            $ 496        $ 662

 Supplemental disclosure of non-cash activity:
  Property improvements and replacements in accounts payable        $ 14        $ 45

</TABLE>

         See Accompanying Notes to Consolidated Financial Statements


<PAGE>



                             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, 2005,  are not
necessarily  indicative  of the results that may be expected for the fiscal year
ending  December 31, 2005. 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, 2004.

Certain  2004  balances  have  been   reclassified  to  conform  with  the  2005
presentation.

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the statements of operations  for the three and nine months ended  September 30,
2004  reflect  the  operations  of  Colony  House   Apartments  as  income  from
discontinued operations due to its sale in October 2004. Included in income from
discontinued  operations for the three and nine months ended  September 30, 2004
is approximately $355,000 and $1,048,000, respectively, of revenues generated by
the property.  The  additional  gain on sale  recognized  during the nine months
ended September 30, 2005 is due to a change in the estimated closing costs.

Note B - Reconciliation of Cash Flows

As required by the Partnership  Agreement,  the following is a reconciliation of
"Net cash  (used in)  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,
                                                              2005            2004
                                                                 (in thousands)
<S>                                                         <C>              <C>
Net cash (used in) provided by operating activities         $ (130)          $ 468
  Payments on mortgage notes payable                          (232)           (291)
  Property improvements and replacements                      (242)           (488)
  Change in restricted escrow                                   (1)             95
  Changes in reserves for net operating assets                 132              21
     Net cash used in operations                            $ (473)         $ (195)
</TABLE>

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) certain  payments to
affiliates for services and (ii)  reimbursement of certain expenses  incurred by
affiliates on behalf of the Partnership.

Affiliates of the Corporate  General  Partner  receive 5% of gross receipts from
the Partnership's  properties as compensation for providing property  management
services.  The Partnership  paid to such affiliates  approximately  $107,000 and
$159,000 during the nine months ended September 30, 2005 and 2004, respectively,
which is included in operating expenses and income from discontinued operations.

An  affiliate  of  the  Corporate   General   Partner  charged  the  Partnership
reimbursement of accountable  administrative expenses amounting to approximately
$79,000 and  $176,000  for the nine months  ended  September  30, 2005 and 2004,
respectively,  which is  included  in general and  administrative  expenses  and
investment  properties.   The  portion  of  these  reimbursements   included  in
investment  properties for the nine months ended September 30, 2005 and 2004 are
fees related to construction management services provided by an affiliate of the
Corporate General Partner of approximately $5,000 and $43,000, respectively. The
construction  management  service fees are  calculated  based on a percentage of
additions to the investment  properties.  At September 30, 2005, the Partnership
owed an affiliate of the  Corporate  General  Partner  approximately  $16,000 in
reimbursements of accountable  administrative expenses, which is included in due
to affiliates.

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  approximately  $68,000  for  its  assistance  in  the  sale.  In
connection  with the sale of Colony  House  Apartments  in 2004,  the  Corporate
General Partner earned a commission of  approximately  $61,000.  Payment of such
commissions  is subordinate  to the limited  partners  receiving a cumulative 7%
return on their investment.  This return has not yet been met and the balance of
approximately $314,000 is included in due to affiliates.

Pursuant to the  Partnership  Agreement,  an affiliate of the Corporate  General
Partner advanced the Partnership  approximately $269,000 and $135,000 during the
nine  months  ended  September  30, 2005 and 2004,  respectively,  to aid in the
payment of property taxes at Essex Park Apartments. During the nine months ended
September  30,  2005 and 2004,  the  Partnership  repaid  advances  and  accrued
interest  of  approximately  $60,000  and  $69,000,  respectively.  Interest  on
advances is charged at the prime rate plus 2% or 8.75% at  September  30,  2005.
Interest expense was approximately  $11,000 and $3,000 for the nine months ended
September  30,  2005  and  2004,  respectively.   At  September  30,  2005,  the
Partnership  owed an affiliate of the Corporate  General  Partner  approximately
$221,000  in  advances  and  accrued  interest  which  is  included  in  due  to
affiliates.

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,  general
liability 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,  2005 and 2004,  the  Partnership  was  charged  by AIMCO and its
affiliates  approximately  $46,000  and  $65,000,  respectively,  for  insurance
coverage and fees associated with policy claims administration.

Note D - Casualty Gain

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 insurance proceeds of approximately  $91,000 and wrote off
approximately  $5,000 of additional  assets which resulted in a casualty gain of
approximately $86,000. The casualty gain is included in income from discontinued
operations due to the sale of the property in October 2004.

In March  2005,  one of the  Partnership's  investment  properties,  Essex  Park
Apartments, incurred damages as a result of a fire. During the nine months ended
September 30, 2005, the Partnership received insurance proceeds of approximately
$28,000 and wrote off approximately $7,000 of undepreciated damaged assets which
resulted in a casualty gain of approximately $21,000.

Note E - Subsequent Event

Subsequent to September 30, 2005, the  Partnership  entered into a sale contract
with a third  party  to sell  Essex  Park  Apartments  for a  purchase  price of
approximately $8,980,000.  The anticipated closing date is January 31, 2006. For
the nine months ended  September  30, 2005 the  property  had total  revenues of
approximately  $1,516,000 and net loss of approximately  $179,000.  The net book
value of Essex Park  Apartments  assets at September 30, 2005 was  approximately
$3,367,000.

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 28, 2002, the trial court granted  defendants
motion to strike the complaint. Plaintiffs took an appeal from this order.

On January 8, 2003,  the parties filed a  Stipulation  of Settlement in proposed
settlement of the Nuanes  action and the Heller  action.  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 May 4, 2004, the Objector filed a
second appeal  challenging  the court's use of a referee and its order requiring
Objector to pay those fees.

On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated  the trial  court's  order and  remanded  to the trial court for further
findings  on the basis that the "state of the record is  insufficient  to permit
meaningful  appellate  review".  With regard to the second appeal,  the Court of
Appeals  reversed the order requiring the Objector to pay referee fees. On April
26, 2005,  the Court of Appeals  lifted the stay of a pending  appeal related to
the Heller action and the trial court's order striking the  complaint.  On April
28, 2005, the Objector  filed a Petition for Review with the California  Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings.  On June 10, 2005, the California  Supreme Court
denied  Objector's  Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21,  2005.  The parties  intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's  remand order.  With respect to the related Heller appeal,  on
July 28, 2005,  the Court of Appeals  reversed the trial court's order  striking
the first amended complaint.

On August 18, 2005,  Objector and his counsel filed a motion to  disqualify  the
trial court based on a peremptory challenge and filed a motion to disqualify for
cause on October 17, 2005. On or about October 13, 2005 Objector  filed a motion
to  intervene  and on or about  October  19,  2005  filed  both a motion to take
discovery  relating to the adequacy of plaintiffs as derivative  representatives
and a motion to dissolve the anti-suit injunction in connection with settlement.
On October 27, 2005, the Court denied Objector's peremptory challenge and struck
Objector's motion to disqualify for cause. No hearing has been set on Objector's
remaining motions. On November 3, 2005, Objector and his counsel filed a writ of
mandate to the Court of Appeals challenging the court's October 27, 2005 order.

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.

AIMCO  Properties  L.P.  and NHP  Management  Company,  both  affiliates  of the
Corporate  General  Partner,  are  defendants  in a lawsuit  alleging  that they
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.
The  complaint,  filed in the United States  District  Court for the District of
Columbia,  attempts  to bring 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.  and  NHP
Management Company failed to compensate  maintenance  workers for time that they
were  required  to be  "on-call".  Additionally,  the  complaint  alleges  AIMCO
Properties  L.P. and NHP  Management  Company  failed to comply with the FLSA in
compensating maintenance workers for time that they worked in excess of 40 hours
in a week. In June 2005 the Court conditionally  certified the collective action
on both the on-call and overtime issues,  which allows the plaintiffs to provide
notice of the  collective  action to all  non-exempt  maintenance  workers  from
August 7, 2000 through the present. Those employees will have the opportunity to
opt-in to the collective action,  and AIMCO Properties,  L.P. and NHP Management
Company will have the  opportunity to move to decertify the  collective  action.
Because the court denied  plaintiffs'  motion to certify  state  subclasses,  on
September  26,  2005,  the  plaintiffs  filed  a  class  action  with  the  same
allegations in the Superior Court of California (Contra Costa County).  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
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.

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.

Environmental

Various  Federal,  state and local laws subject  property owners or operators to
liability for management,  and the costs of removal or  remediation,  of certain
hazardous  substances  present on a property.  Such laws often impose  liability
without regard to whether the owner or operator knew of, or was responsible for,
the release or presence of the  hazardous  substances.  The  presence of, or the
failure to manage or remedy properly,  hazardous substances may adversely affect
occupancy at affected  apartment  communities and the ability to sell or finance
affected properties.  In addition to the costs associated with investigation and
remediation  actions  brought by government  agencies,  and  potential  fines or
penalties  imposed by such  agencies in  connection  therewith,  the presence of
hazardous  substances on a property could result in claims by private plaintiffs
for personal injury, disease, disability or other infirmities. Various laws also
impose  liability for the cost of removal,  remediation or disposal of hazardous
substances  through a  licensed  disposal  or  treatment  facility.  Anyone  who
arranges for the disposal or treatment of hazardous  substances  is  potentially
liable  under such laws.  These laws often impose  liability  whether or not the
person arranging for the disposal ever owned or operated the disposal  facility.
In connection  with the ownership,  operation and management of its  properties,
the Partnership  could  potentially be liable for  environmental  liabilities or
costs associated with its properties.

Mold

The Partnership is aware of lawsuits  against owners and managers of multifamily
properties asserting claims of personal injury and property damage caused by the
presence of mold, some of which have resulted in substantial  monetary judgments
or settlements. The Partnership has only limited insurance coverage for property
damage loss claims  arising from the  presence of mold and for  personal  injury
claims related to mold  exposure.  Affiliates of the Corporate  General  Partner
have  implemented a national  policy and procedures to prevent or eliminate mold
from its  properties  and the  Corporate  General  Partner  believes  that these
measures will  minimize the effects that mold could have on residents.  To date,
the Partnership  has not incurred any material costs or liabilities  relating to
claims of mold exposure or to abate mold  conditions.  Because the law regarding
mold is unsettled and subject to change the Corporate  General  Partner can make
no assurance that liabilities resulting from the presence of or exposure to mold
will  not have a  material  adverse  effect  on the  Partnership's  consolidated
financial condition or results of operations.

SEC Investigation

The  Central  Regional  Office of the  United  States  Securities  and  Exchange
Commission (the "SEC")  continues its 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  have included  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, tax credit transactions,  and
tender offers for limited  partnership  interests.  AIMCO is cooperating  fully.
AIMCO is not able to predict when the investigation 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.


<PAGE>




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. The
following  table sets forth the average  occupancy of the properties for each of
the nine months ended September 30, 2005 and 2004:
<TABLE>
<CAPTION>

                                                             Average
                                                            Occupancy
       Property                                        2005          2004

       Essex Park Apartments
<S>                                                    <C>            <C>
          Columbia, South Carolina                     87%            88%

       Willowick Apartments (1)
          Greenville, South Carolina                   87%            91%
</TABLE>

(1)         The Corporate  General Partner  attributes the decrease in occupancy
            at  Willowick   Apartments   to  increased   credit   standards  for
            prospective tenants.

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 which
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,
2005 was approximately $126,000 and $302,000, respectively, compared to net loss
of approximately $77,000 and $122,000 for the corresponding periods in 2004. The
increase in net loss for the three month period ended  September 30, 2005 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 increase in net
loss for the nine month period ended  September 30, 2005 is due to a decrease in
income from discontinued  operations and an increase in total expenses partially
offset by a gain on sale of discontinued operations recognized in 2005.

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the statements of operations  for the three and nine months ended  September 30,
2004  reflect  the  operations  of  Colony  House   Apartments  as  income  from
discontinued operations due to its sale in October 2004. Included in income from
discontinued  operations for the three and nine months ended  September 30, 2004
is approximately $355,000 and $1,048,000, respectively, of revenues generated by
the property.  The  additional  gain on sale  recognized  during the nine months
ended September 30, 2005 is due to a change in the estimated closing costs.

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.

In March  2005,  one of the  Partnership's  investment  properties,  Essex  Park
Apartments, incurred damages as a result of a fire. During the nine months ended
September 30, 2005, the Partnership received insurance proceeds of approximately
$28,000 and wrote off approximately $7,000 of undepreciated damaged assets which
resulted in a casualty gain of approximately $21,000.

Excluding  the  income  from  discontinued   operations  and  gain  on  sale  of
discontinued operations,  the Partnership had loss from continuing operations of
approximately  $126,000  and  $426,000  for the  three  and  nine  months  ended
September 30, 2005, respectively, compared to loss from continuing operations of
approximately  $87,000 and $307,000 for the  corresponding  periods in 2004. The
increase in loss from continuing operations for the three month period is due to
an increase in total expenses partially offset by an increase in total revenues.
The increase in loss from continuing operations for the nine month period is due
primarily to an increase in total  expenses.  Total  revenues  increased for the
three month period due to an increase in rental income and the  recognition of a
casualty  gain in 2005  partially  offset by a decrease in other  income.  Total
revenues for the nine month period remained relatively  constant.  Rental income
for the three month  period  increased  due to a decrease in bad debt expense at
both  investment  properties.  Other income  decreased  due to decreases in late
charges and lease cancellation fees, primarily at Essex Park Apartments.

Total expenses  increased for the three and nine months ended September 30, 2005
due to an increase in operating expense partially offset by decreases in general
and administrative,  property tax, and interest expenses.  Depreciation  expense
decreased or the nine months ended September 30, 2005 due to assets at Willowick
Apartments  becoming fully  depreciated.  Operating  expenses  increased for the
three and nine months ended September 30, 2005 due to an increase in payroll and
related  benefits,  applicant  screening  costs and  contract  services  at both
investment properties. Property tax expense decreased due to a partial refund of
the 2004 taxes at one of the  Partnership's  properties that resulted in a lower
accrual for the 2005 period. Interest expense decreased as a result of regularly
scheduled  principal  payments on the mortgages  encumbering  the  Partnership's
investment  properties,  partially  offset by an increase in interest expense on
advances from an affiliate of the Corporate General Partner.

General and administrative expenses for both periods decreased due to a decrease
in the  management  reimbursements  paid to the  Corporate  General  Partner  as
allowed  under  the  Partnership   Agreement.   Also  included  in  general  and
administrative  expenses  are costs  associated  with the  quarterly  and annual
communications with investors and regulatory agencies.

Liquidity and Capital Resources

At  September  30,  2005,  the  Partnership  had cash and  cash  equivalents  of
approximately $115,000 compared to approximately $133,000 at September 30, 2004.
Cash and cash  equivalents  decreased  approximately  $360,000 from December 31,
2004  due to  approximately  $130,000,  $215,000  and  $15,000  of cash  used in
operating,  investing activities and financing  activities,  respectively.  Cash
used in investing activities consisted of property improvements and replacements
partially  offset  by  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  from an affiliate of the
Corporate General Partners partially offset by advances from an affiliate of the
Corporate General Partner.  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,  2005,  the  Partnership  completed
approximately  $160,000  of  capital  improvements  at  Essex  Park  Apartments,
consisting  primarily of structural  improvements,  maintenance  equipment,  and
floor covering and appliance  replacements.  These improvements were funded from
operating cash flow and insurance proceeds.  The Partnership regularly evaluates
the capital  improvement  needs of the property.  While the  Partnership  has no
material commitments for property improvements and replacements, certain routine
capital expenditures are anticipated during 2005. Such capital expenditures will
depend on the physical condition of the property as well as the anticipated cash
flow generated by the property.

Willowick Apartments

During the nine months ended  September  30,  2005,  the  Partnership  completed
approximately $96,000 of capital improvements at Willowick Apartments consisting
primarily of major landscaping, electrical upgrades, and counter top, appliance,
air conditioning unit, and floor covering replacements.  These improvements were
funded from operating cash flow. The Partnership regularly evaluates the capital
improvement  needs  of the  property.  While  the  Partnership  has no  material
commitments for property improvements and replacements,  certain routine capital
expenditures are anticipated during 2005. Such capital  expenditures will depend
on the physical  condition of the property as well as the anticipated  cash flow
generated by the property.

Capital  expenditures will be incurred only if cash is available from operations
or from  Partnership  reserves.  To the extent  that  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  both of the  investment  properties of  approximately
$8,878,000 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, 2005 and
2004. 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 2005  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,  2005. 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  ake  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.
The Partnership will offer rental concessions during particularly slow months or
in response  to heavy  competition  from other  similar  complexes  in the area.
Rental income attributable to leases, net of any concessions, is recognized on a
straight-line  basis over the term of the lease.  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.

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 28, 2002, the trial court granted  defendants
motion to strike the complaint. Plaintiffs took an appeal from this order.

On January 8, 2003,  the parties filed a  Stipulation  of Settlement in proposed
settlement of the Nuanes  action and the Heller  action.  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 May 4, 2004, the Objector filed a
second appeal  challenging  the court's use of a referee and its order requiring
Objector to pay those fees.

On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.
With regard to the settlement and judgment entered thereto, the Court of Appeals
vacated  the trial  court's  order and  remanded  to the trial court for further
findings  on the basis that the "state of the record is  insufficient  to permit
meaningful  appellate  review".  With regard to the second appeal,  the Court of
Appeals  reversed the order requiring the Objector to pay referee fees. On April
26, 2005,  the Court of Appeals  lifted the stay of a pending  appeal related to
the Heller action and the trial court's order striking the  complaint.  On April
28, 2005, the Objector  filed a Petition for Review with the California  Supreme
Court in connection with the opinion vacating the order approving settlement and
remanding for further findings.  On June 10, 2005, the California  Supreme Court
denied  Objector's  Petition for Review and the Court of Appeals sent the matter
back to the trial court on June 21,  2005.  The parties  intend to ask the trial
court to make further findings in connection with settlement consistent with the
Court of Appeal's  remand order.  With respect to the related Heller appeal,  on
July 28, 2005,  the Court of Appeals  reversed the trial court's order  striking
the first amended complaint.

On August 18, 2005,  Objector and his counsel filed a motion to  disqualify  the
trial court based on a peremptory challenge and filed a motion to disqualify for
cause on October 17, 2005. On or about October 13, 2005 Objector  filed a motion
to  intervene  and on or about  October  19,  2005  filed  both a motion to take
discovery  relating to the adequacy of plaintiffs as derivative  representatives
and a motion to dissolve the anti-suit injunction in connection with settlement.
On October 27, 2005, the Court denied Objector's peremptory challenge and struck
Objector's motion to disqualify for cause. No hearing has been set on Objector's
remaining motions. On November 3, 2005, Objector and his counsel filed a writ of
mandate to the Court of Appeals challenging the court's October 27, 2005 order.

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.

AIMCO  Properties  L.P.  and NHP  Management  Company,  both  affiliates  of the
Corporate  General  Partner,  are  defendants  in a lawsuit  alleging  that they
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.
The  complaint,  filed in the United States  District  Court for the District of
Columbia,  attempts  to bring 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.  and  NHP
Management Company failed to compensate  maintenance  workers for time that they
were  required  to be  "on-call".  Additionally,  the  complaint  alleges  AIMCO
Properties  L.P. and NHP  Management  Company  failed to comply with the FLSA in
compensating maintenance workers for time that they worked in excess of 40 hours
in a week. In June 2005 the Court conditionally  certified the collective action
on both the on-call and overtime issues,  which allows the plaintiffs to provide
notice of the  collective  action to all  non-exempt  maintenance  workers  from
August 7, 2000 through the present. Those employees will have the opportunity to
opt-in to the collective action,  and AIMCO Properties,  L.P. and NHP Management
Company will have the  opportunity to move to decertify the  collective  action.
Because the court denied  plaintiffs'  motion to certify  state  subclasses,  on
September  26,  2005,  the  plaintiffs  filed  a  class  action  with  the  same
allegations in the Superior Court of California (Contra Costa County).  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
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 5.     OTHER INFORMATION

            None.

ITEM 6.     EXHIBITS

            See Exhibit Index.


<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 14, 2005



<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),  respectively,   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.

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

                  **Filed as Exhibit 12(b) 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(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).

        (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,  and  incorporated
                  herein by reference).


<PAGE>


                             SHELTER PROPERTIES III

                            EXHIBIT INDEX - CONTINUED

10(iv)            Contracts related to disposition of properties:

        (c)       Purchase and Sale  Contract  between  Registrant  and The Dama
                  Realty Investors, LLC, dated August 18, 2004 (filed as exhibit
                  10  (iv)(c)  on  Form  8-K  dated   November   3,  2004,   and
                  incorporated herein by reference).

        (d)       Assignment  and  Assumption  of  Real  Estate  Sale  Agreement
                  between  The  Dama  Realty  Investors,  LLC and  Colony  House
                  General  Partnership,  dated August 18, 2004 (filed as exhibit
                  10  (iv)(d)  on  Form  8-K  dated   November   3,  2004,   and
                  incorporated herein by reference).

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  of  the  equivalent  of the  Chief  Executive
                  Officer and Chief  Financial  Officer  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 14, 2005

                                    /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 14, 2005

                                    /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, 2005 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 14, 2005


                                           /s/Stephen B. Waters
                                    Name:  Stephen B. Waters
                                    Date:  November 14, 2005


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.