<PAGE>


================================================================================


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


                                    FORM 10-Q

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

                 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
                                                --------------

                         Commission file number 0-16343
                                                -------

                         SHELBOURNE PROPERTIES III, INC.
             (Exact name of registrant as specified in its charter)


           Delaware                                       04-3502381
           --------                                       ----------
  (State or other jurisdiction of                       (I.R.S. Employer
  incorporation or organization)                       Identification No.)


     P.O. Box 9507, 7 Bulfinch Place, Suite 500, Boston, Massachusetts 02114
    ------------------------------------------------------------------------
                    (Address of principal executive offices)

                                 (617) 570-4600
                                 --------------
              (Registrant's telephone number, including area code)


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


Indicated by check whether registrant is an accelerated filer (as identified in
Rule 12b-2 of the Exchange Act). Yes      No  X
                                     ---     ---


As of May 12, 2003, there were 788,772 shares of common stock outstanding.

================================================================================



<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003


                                      INDEX
<TABLE>
<CAPTION>


   Part I.    Financial Information                                                                Page
                                                                                                   ----
  <S>         <C>                                                                                  <C>
   Item 1.    Consolidated Financial Statements:

              Consolidated Statements of Net Assets (Liquidation Basis) for
              March 31, 2003 and December 31, 2002...............................................    3

              Consolidated Statement of Operations and Changes in Net Assets
              (Liquidation Basis) for the Three Months Ended March 31, 2003 and
              Consolidated Statement Operations (Going Concern) for the
              Three Months Ended March 31, 2002 (Restated).......................................    4

              Consolidated Statements of Cash Flows for the
              Three Months Ended March 31, 2003 (Liquidation Basis) and
              the Three Months Ended March 31, 2002 (Going Concern) (Restated)...................    5

              Notes to Consolidated Financial Statements.........................................    6

   Item 2.    Management's Discussion and Analysis of Financial
              Condition and Results of Operations................................................   16

   Item 3.    Quantitative and Qualitative Disclosure about Market Risk..........................   22

   Item 4.    Controls and Procedures............................................................   22


   Part II.   Other Information:

   Item 6.    Exhibits and Reports on Form 8-K...................................................   23

   Signatures ...................................................................................   24

</TABLE>




                                       2


<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003


            CONSOLIDATED STATEMENTS OF NET ASSETS (LIQUIDATION BASIS)
                   AS OF MARCH 31, 2003 AND DECEMBER 31, 2002

<TABLE>
<CAPTION>

                                                                                 March 31, 2003            December 31, 2002
                                                                             -----------------------     ----------------------
                                                                                  (Unaudited)
<S>                                                                          <C>                         <C>
ASSETS

Real estate held for sale                                                             $  16,388,074              $  31,146,000

Investments in joint ventures                                                            14,987,513                 37,202,673

Cash and cash equivalents, of which $1,001,370 is restricted
   cash at March 31, 2003                                                                 2,271,423                    260,370

Other assets                                                                                153,971                    273,333

Receivables, net                                                                            224,781                    123,997
                                                                             -----------------------     ----------------------

Total Assets                                                                             34,025,762                  69,006,3733
                                                                             -----------------------     ----------------------

LIABILITIES

Accounts payable and accrued expenses                                                       884,554                    640,412
Note payable                                                                             15,423,374                 19,718,457
Reserve for estimated costs during the period of liquidation                              1,111,169                  1,500,000
Deferral of gains on real estate assets and joint ventures                                9,058,716                 28,173,687

COMMITMENTS AND CONTIGENCIES (Notes 8, 10)

CLASS B Partnership Interests                                                                     -                          -

CLASS A 5% Preferred Partnership Interests, at liquidation value                                  -                    672,178
                                                                             -----------------------     ----------------------

Total Liabilities                                                                        26,477,813                 50,704,734
                                                                             -----------------------     ----------------------

NET ASSETS IN LIQUIDATION                                                             $   7,547,949              $  18,301,639
                                                                             =======================     ======================
</TABLE>





                See notes to consolidated financial statements.


                                       3
<PAGE>

                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003


         CONSOLIDATED STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
        FOR THE THREE MONTHS ENDED MARCH 31, 2003 (LIQUIDATION BASIS) AND
                      CONSOLIDATED STATEMENT OF OPERATIONS
         FOR THE THREE MONTHS ENDED MARCH 31, 2002 (GOING CONCERN BASIS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                           For the Three Months Ended
                                                                                   March 31,
                                                              -----------------------------------------------------
                                                                       2003                       2002
                                                              ------------------------ ----------------------------
                                                                                         (Restated - See note 2)
<S>                                                           <C>                      <C>
Rental Revenues                                                          $    798,551                $     835,649

Costs and Expenses

     Operating expenses                                                       439,978                      346,416
     Depreciation and amortization                                                  -                      172,774
     Asset management fee                                                      50,000                      105,863
     Transition management fees                                                     -                       41,650
     Purchase of advisory agreements                                                -                   15,262,114
     Administrative expenses                                                  252,671                      629,534
     Property management fee                                                   16,731                       24,292
                                                              ------------------------ ----------------------------
                                                                              759,380                   16,582,643
                                                              ------------------------ ----------------------------
Income (loss) before equity income from joint ventures, gain
    on sales of real estate and interest                                       39,171                 (15,746,994)

     Equity income from joint ventures                                     15,102,299                    1,096,278
     Gain on sales of real estate                                           4,618,972                            -
     Interest expense                                                        (157,785)                     (84,594)
     Interest income                                                           19,777                       11,675
                                                              ------------------------ ----------------------------

Net income (loss)                                                          19,622,434                  (14,723,635)
Preferred dividends                                                            (8,402)                      (4,201)
                                                              ------------------------ ----------------------------

Net  income (loss) available for common shares                             19,614,032                $ (14,727,836)
                                                                                       ============================

Net assets at January 1, 2003                                              18,301,639
Liquidating dividends - common                                            (30,367,722)
                                                              ------------------------
Net assets at March 31, 2003                                             $  7,547,949
                                                              ========================

Earnings (loss) per share - basic and diluted                            $      24.87                $      (15.01)
                                                              ======================== ============================

Weighted average common shares                                                788,772                      981,385
                                                              ======================== ============================
</TABLE>


                See notes to consolidated financial statements.


                                       4
<PAGE>

                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
          FOR THE THREE MONTHS ENDED MARCH 31, 2003 (LIQUIDATION BASIS)
                    AND MARCH 31, 2002 (GOING CONCERN BASIS)
                                   (UNAUDITED
<TABLE>
<CAPTION>

                                                                                 For the Three Months Ended
                                                                                          March 31,
                                                                      --------------------------------------------------
                                                                              2003                      2002
                                                                      ----------------------  --------------------------
                                                                                               (Restated - See Note 2)
<S>                                                                   <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net income (loss)                                                          $19,622,434              $  (14,723,635)
     Adjustments to reconcile net income to net cash
        provided by operating activities:
            Depreciation and amortization                                                 -                     172,774
            Straight-line adjustment for stepped lease rentals                            -                      10,938
            Change in bad debt reserve                                               17,099                      61,250
            Purchase of advisory agreement                                                -                  15,262,114
            Distributions in excess of earnings from joint ventures               8,395,184                  10,521,993
            Gain on sales of real estate                                         (4,618,972)                          -

     Change in assets and liabilities:
            Receivables                                                            (117,883)                    (36,191)
            Other assets                                                            119,362                     (96,630)
            Accounts payable and accrued expenses                                  (886,951)                   (144,514)
            Accrued interest                                                         70,084                      84,594
                                                                      ----------------------  --------------------------
     Net cash provided by operating activities                                   22,600,357                  11,112,693
                                                                      ----------------------  --------------------------

Cash FlowS from Investing Activities:
            Improvements to real estate                                             (18,074)                     (3,581)
            Investment in Accotel                                                  (720,791)                          -
            Proceeds from sales of real estate, net                              14,820,768                           -
                                                                      ----------------------  --------------------------
     Net cash provided by (used in) investing activities                         14,081,903                     (3,581)
                                                                      ----------------------  --------------------------

Cash FlowS from Financing Activities:
            Purchase of treasury stock                                                    -                (11,830,337)
            Proceeds from Fleet Loan                                             15,423,374                           -
            Paydown of Credit Facility from sales proceeds                       (6,524,820)                          -
            Payoff of Credit Facility                                           (13,193,637)                          -
            Dividends paid-preferred and common                                 (30,376,124)                          -
                                                                      ----------------------  --------------------------
     Net cash used in financing activities                                      (34,671,207)                (11,830,337)
                                                                      ----------------------  --------------------------

     Increase (decrease) in cash and cash equivalents                             2,011,053                    (721,225)
     Cash and cash equivalents, beginning of period                                 260,370                   2,839,489
                                                                      ----------------------  --------------------------

     Cash and cash equivalents, end of period                                   $ 2,271,423              $    2,118,264
                                                                      ======================  ==========================

     Supplemental disclosure of cash flow information-
     Cash paid for interest                                                     $    87,701              $            -
                                                                      ======================  ==========================

</TABLE>

                 See notes to consolidated financial statements


                                       5
<PAGE>



                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.     ORGANIZATION
       ------------

       Shelbourne Properties III, Inc., a Delaware corporation (the
       "Corporation"), was formed on April 17, 2001. The Corporation's
       wholly-owned operating partnership, Shelbourne Properties III L.P., a
       Delaware limited partnership (the "Operating Partnership," and
       together with the Corporation, the "Company"), holds directly and
       indirectly all of the Company's properties. Pursuant to a merger that
       was consummated on April 17, 2001, the Operating Partnership became
       the successor by merger to High Equity Partners L.P. - Series 88 (the
       "Predecessor Partnership").

       In August 2002, the Board of Directors adopted a Plan of Liquidation
       (the "Plan of Liquidation") and directed that the Plan of Liquidation
       be submitted to the Corporation's stockholders for approval. The
       stockholders of the Corporation approved the Plan of Liquidation at a
       Special Meeting of Stockholders held on October 29, 2002. The Plan of
       Liquidation contemplates the orderly sale of all of the Corporation's
       assets for cash or such other form of consideration as may be
       conveniently distributed to the Corporation's stockholders and the
       payment of (or provision for) the Corporation's liabilities and
       expenses, as well as the establishment of a reserve to fund the
       Corporation's contingent liabilities. The Plan of Liquidation gives
       the Corporation's Board of Directors the power to sell any and all of
       the assets of the Corporation without further approval by the
       stockholders.

       The Corporation currently expects that the liquidation will be
       substantially completed not later than October 29, 2004, although
       there can be no assurance in this regard. As a result, it is currently
       anticipated that not later than October 29, 2004, any then remaining
       assets and liabilities will be transferred to a liquidating trust.
       With the transfer to a liquidating trust, the liquidation will be
       completed for federal and state income tax purposes, although one or
       more distributions of the remaining cash and net proceeds from future
       asset sales may occur subsequent to the establishment of a liquidating
       trust.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
       ------------------------------------------

       BASIS OF PRESENTATION
       ---------------------

       As a result of the adoption of the Plan of Liquidation and its
       approval by the Corporation's stockholders, the Corporation adopted
       the liquidation basis of accounting for the period subsequent to
       October 29, 2002. Under the liquidation basis of accounting, assets
       are stated at their estimated net realizable value. Liabilities
       including the reserves for estimated costs during the period of
       liquidation are stated at their anticipated settlement amounts. The
       valuation of investments in joint ventures and real estate held for
       sale is based upon current contracts, estimates as determined by
       independent appraisals or other indications of sales values. The
       valuations for other assets and liabilities under the liquidation
       basis of accounting are based on management's estimates as of March
       31, 2003. The actual values realized for assets and settlement of
       liabilities may differ materially from the amounts estimated.

       The accompanying consolidated financial statements include the
       accounts of the Corporation and its wholly owned subsidiaries, the
       Operating Partnership and Shelbourne Properties III GP Inc., the
       general partner of the Operating Partnership and a wholly-owned
       subsidiary of the Corporation. Intercompany accounts and transactions
       have been eliminated in consolidation.

       The consolidated statements of operations and cash flows for the three
       months ended March 31, 2002 have been restated from the pro-rata
       method of accounting to reflect the equity method of accounting.




                                       6
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

2      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
       ------------------------------------------------------

       The following table summarizes the statement of operations line items
       impacted by the restatement:

                                               For the Three Months Ended
                                                       March 31,

                                           Previously
                                            Reported               Restated
                                              2002                   2002
                                        ------------------    ------------------
       Rental revenues                   $     1,958,960       $      835,649
       Costs and expenses                    (17,091,935)         (16,582,643)
       Equity income from joint ventures               -            1,096,278
       Interest expense                          (84,594)             (84,594)
       Interest income                            31,222               11,675
       Net gain on sales of real estate          462,712                    -
                                         ------------------    -----------------
       Net Loss                          $   (14,723,635)      $   14,723,635)
                                         ==================    =================


ADJUSTMENTS TO LIQUIDATION BASIS OF ACCOUNTING
----------------------------------------------

       On October 30, 2002, in accordance with the liquidation basis of
       accounting, assets were adjusted to estimated net realizable value and
       liabilities were adjusted to estimated settlement amounts, including
       estimated costs associated with carrying out the liquidation. Since
       the sale of Livonia Shopping Plaza (note 4), Melrose Crossing II (note
       4), Hilliard, Ohio (note 5) and 568 Broadway (note 5), the valuation
       of investments in joint ventures and real estate held for sale have
       been updated to reflect the remaining estimated costs of carrying out
       the liquidation as of March 31, 2003 without any additional adjustment
       required. The valuation of investments in joint ventures and real
       estate held for sale is based on current contracts, estimates as
       determined by independent appraisals or other indications of sales
       value, net of estimated selling costs and capital expenditures
       anticipated during the liquidation period. The valuations of other
       assets and liabilities are based on management's estimates as of March
       31, 2003. The actual values realized for assets and settlement of
       liabilities may differ materially from amounts estimated. Significant
       increases (decreases) in the carrying value of net assets are
       summarized as follows:

       Decrease to reflect estimated net realizable values of
         certain real estate properties                            $ (4,574,204)
       Recognition of deferred gain and incentive fees on real
         estate properties                                            4,574,204
       Decrease to reflect net realizable value of investments
         in joint ventures                                          (14,540,767)
       Recognition of deferred gain and incentive fees on
         investments in joint ventures                               14,540,767
                                                                   ------------
       Adjustment to reflect changes since December 31, 2002
         to net carrying value                                     $          -
                                                                   =============

       Adjusting assets to estimated net realizable value resulted in the
       write-up in the value of certain real estate properties. The
       anticipated gains, net of any incentive fees associated with the
       adjustment in value of these real estate properties, have been
       deferred until such time as a sale occurs. During the quarter ended
       March 31, 2003, the Corporation recognized actual gains of $4,618,972
       on the sale of real estate and $14,565,894 included in equity income
       from joint ventures attributable to real estate sales.


                                       7
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
     -----------------------------------------------------

     RESERVE FOR ESTIMATED COSTS DURING THE PERIOD OF LIQUIDATION
     ------------------------------------------------------------

     Under liquidation accounting, the Corporation is required to estimate and
     accrue the costs associated with executing the Plan of Liquidation. These
     amounts can vary significantly due to, among other things, the timing and
     realized proceeds from property sales, the costs of retaining agents and
     trustees to oversee the liquidation, the costs of insurance, the timing and
     amounts associated with discharging known and contingent liabilities and
     the costs associated with cessation of the Company's operations. These
     costs are estimates and are expected to be paid out over the liquidation
     period. Such costs do not include costs incurred in connection with
     ordinary operations.

     The reserve for additional costs associated with liquidation was reduced
     from $1,500,000 at December 31, 2002 to $1,111,169 at March 31, 2003 due to
     professional costs associated with obtaining the Fleet Loan of $372,165 and
     tax planning costs of $16,666 paid to an affiliate of Presidio Capital
     Investment Company, LLC in connection with the Accor transaction (see note
     10).

     USE OF ESTIMATES
     ----------------

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

     CASH EQUIVALENTS
     ----------------

     The Corporation considers all short-term investments that have original
     maturities of three months or less from the date of acquisition to be cash
     equivalents.

     ACCOUNTS RECEIVABLE
     -------------------

     Accounts receivable are stated net of an allowance for doubtful accounts of
     $36,269 and $19,170 as of March 31, 2003 and December 31, 2002,
     respectively.

     REVENUE RECOGNITION
     -------------------

     Prior to the adoption of the liquidation basis of accounting, base rents
     were recognized on a straight-line basis over the terms of the related
     leases. Subsequent to the adoption of the liquidation basis of accounting,
     the amount of the previously deferred straight-line rent was grouped with
     real estate for purposes of comparing such balances to their net realizable
     value and, if such amounts when aggregated with real estate exceeded the
     net realizable value, the amount of the excess was included in the
     write-off of other assets as part of the adjustment to the liquidation
     basis of accounting. At October 29, 2002, the date prior to the adoption of
     liquidation accounting, approximately $356,513 of deferred straight-line
     rent was included in other assets that was subsequently grouped with real
     estate with no write-off required.

     Percentage rents charged to retail tenants based on sales volume are
     recognized when earned. Pursuant to Staff Accounting Bulletin No 101,
     "Revenue Recognition in Financial Statements," and the Emerging Issues Task
     Force's Consensus on Issue 98-9, "Accounting for Contingent Rent in Interim
     Financial Periods," the Corporation defers recognition of contingent rental
     income (i.e., percentage/excess rent) in interim periods until the
     specified target (i.e., breakpoint) that triggers the contingent rental
     income is achieved. Recoveries from tenants for taxes, insurance and other
     operating expenses are recognized as revenue in the period the applicable
     costs are incurred.



                                       8
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
     -----------------------------------------------------

     INVESTMENTS IN JOINT VENTURES
     -----------------------------

     Certain properties are owned in joint ventures with Shelbourne Properties I
     L.P. and/or Shelbourne Properties II L.P. Accordingly, the Corporation's
     consolidated balance sheet at December 31, 2002 and the Corporation's
     consolidated statements of operations commencing January 1, 2002, as
     restated, reflect the equity method of accounting.

     REAL ESTATE
     -----------

     Subsequent to the adoption of the liquidation basis of accounting, real
     estate assets were adjusted to their net realizable value and classified as
     real estate held for sale. Additionally, the Corporation suspended
     recording any further depreciation expense.

     DEPRECIATION AND AMORTIZATION
     -----------------------------

     Upon the adoption of the liquidation basis of accounting, deferred loan
     fees of $614,178 were written off to reflect the balances at their net
     realizable value. Direct lease costs associated with the real estate were
     grouped with real estate for purposes of comparing carrying amounts to
     their net realizable value, and if such amounts, when aggregated with real
     estate exceeded the net realizable value, these costs were written off.

     Prior to the Corporation adopting the liquidation basis of accounting,
     depreciation was computed using the straight-line method over the useful
     life of the property, which was estimated to be 40 years. The cost of
     properties represented the initial cost of the properties to the Company
     plus acquisition and closing costs less impairment adjustments. Tenant
     improvements, leasing costs and deferred loan fees were amortized over the
     applicable lease term.

     FINANCIAL INSTRUMENTS
     ---------------------

     The carrying values reflected in the consolidated statements of net assets
     at March 31, 2003 and December 31, 2002 reasonably approximate the fair
     values for cash and cash equivalents, other assets, receivables, accounts
     payable, accrued expenses and note payable. Additionally, as the
     Corporation currently expects that the liquidation will be substantially
     completed not later than October 2004, the net realizable value of notes
     payable approximates the fair value. In making such assessment, the
     Corporation has utilized discounted cash flow analyses, estimates, and
     quoted market prices as deemed appropriate.

     INCOME TAXES
     ------------

     The Corporation is operating with the intention of qualifying as a real
     estate investment trust ("REIT") under Sections 856-860 of the Internal
     Revenue Code of 1986 as amended. Under those sections, a REIT which pays at
     least 90% of its ordinary taxable income as a dividend to its stockholders
     each year and which meets certain other conditions will not be taxed on
     that portion of its taxable income which is distributed to its
     stockholders.

     For federal income tax purposes, the cash dividends distributed to
     stockholders after October 29, 2002 have been and will be characterized as
     liquidating distributions.

     AMOUNTS PER SHARE
     -----------------

     Basic earnings (loss) per share is computed based on weighted average
     common shares outstanding during the period.



                                       9
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
     -----------------------------------------------------

     DIVIDENDS PER SHARE
     -------------------

     On January 13, 2003, the Board of Directors declared a dividend of $2.50
     per share. The dividend was paid on January 31, 2003 to stockholders of
     record at the close of business on January 23, 2003.

     On February 28, 2003, the Board of Directors declared a dividend of $36.00
     per share. The dividend was paid on March 18, 2003 to stockholders of
     record at the close of business on March 10, 2003. The dividend was funded
     from proceeds of the Fleet Loan (see note 7) and from proceeds generated by
     the sales of the New York, New York property and the Melrose Park, Illinois
     property, as well as cash reserves.

     RECENTLY ISSUED ACCOUNTING STANDARDS
     ------------------------------------

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
     No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical
     Corrections," which updates, clarifies and simplifies existing accounting
     pronouncements which are effective for fiscal years beginning after May 15,
     2002. This statement had no effect on the Corporation's consolidated
     financial statements.

     In November 2002, the FASB issued Interpretation No. 45, Guarantors'
     Accounting and Disclosure Requirements for Guarantees, Including Indirect
     Guarantees of Indebtedness of Others. The Interpretation elaborates on the
     disclosures to be made by a guarantor in its financial statements about its
     obligations under certain guarantees that it has issued. It also clarifies
     that a guarantor is required to recognize, at the inception of a guarantee,
     a liability for the fair value of the obligation undertaken in issuing the
     guarantee. This Interpretation does not prescribe a specific approach for
     subsequently measuring the guarantor's recognized liability over the term
     of the related guarantee. The disclosure provisions of this Interpretation
     are effective for the Corporation's December 31, 2002 financial statements.
     The initial recognition and initial measurement provisions of this
     Interpretation are applicable on a prospective basis to guarantees issued
     or modified after December 31, 2002. This Interpretation had no effect on
     the Corporation's consolidated financial statements.

     In January 2003, the FASB issued Interpretation No. 46, Consolidation of
     Variable Interest Entities. This Interpretation clarifies the application
     of existing accounting pronouncements to certain entities in which equity
     investors do not have the characteristics of a controlling financial
     interest or do not have sufficient equity at risk for the entity to finance
     its activities without additional subordinated financial support from other
     parties. The provisions of the Interpretation will be immediately effective
     for all variable interest in variable interest entities created after
     January 31, 2003, and the Corporation will need to apply its provisions to
     any existing variable interest in variable interest entities by no later
     than December 21, 2004. The Corporation does not expect that this will have
     an impact on the Corporation's consolidated financial statements.

3.   CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
     -----------------------------------------------------------

     During the three months ended March 31, 2003 and 2002, property management
     services (the "Property Management Services") and asset management
     services, investor relation services and accounting services (the "Asset
     Management Services") have been provided to the Company by affiliates of
     the Company.

     ASSET MANAGEMENT SERVICES
     -------------------------

     For the period from January 1, 2002 through February 14, 2002, Shelbourne
     Management LLC ("Shelbourne Management"), a wholly-owned subsidiary of
     Presidio Capital Investment Company, LLC ("PCIC"), provided Asset
     Management Services to the Company pursuant to the terms of an Advisory
     Agreement (the "Advisory Agreement") between the Corporation, the Operating
     Partnership and Shelbourne Management. Pursuant to the




                                       10
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

3.   CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
     ----------------------------------------------------------------------

     terms of the Advisory Agreement, the Corporation was obligated to pay for
     Asset Management Services an annual asset management fee, payable
     quarterly, equal to 1.25% of the gross asset value of the Corporation as of
     the last day of each year. In addition, the Corporation was obligated to
     (i) pay $200,000 for non-accountable expenses and (ii) reimburse Shelbourne
     Management for expenses incurred in connection with the performance of its
     services. Effective February 14, 2002, in connection with the Transaction
     (as described below), PCIC began providing such services for a reduced fee
     of $333,333 per annum. Both Shelbourne Management and PCIC were affiliates
     of the then management of the Corporation.

     Effective October 1, 2002, as contemplated by in the Plan of Liquidation,
     the agreement with PCIC was terminated and Kestrel Management, L.P.
     ("Kestrel") began providing the Asset Management Services for a fee of
     $200,000 per annum. Kestrel is an affiliate of the Corporation's current
     Chief Executive Officer.

     Asset Management Services were provided to the Corporation during the three
     months ended March 31, 2003 and 2002 as follows:

          o    Effective January 1, 2002 through February 13, 2002, pursuant to
               the terms of the Advisory Agreement, by Shelbourne Management.

          o    Effective February 14, 2002 through the end of the fiscal quarter
               and thereafter through September 30, 2002, by PCIC.

          o    Effective October 1, 2002 and thereafter including for the fiscal
               quarter ended March 31, 2003, as contemplated by the Plan of
               Liquidation, by Kestrel.

     PROPERTY MANAGEMENT SERVICES
     ----------------------------

     The Operating Partnership has contracted with affiliates to provide
     Property Management Services pursuant to agreements that provide for a fee
     of up to 6% of property revenue. Kestrel provided Property Management
     Services during the fiscal quarters ended March 31, 2003 and 2002.

     The following table summarizes the amounts paid to affiliates for Expense
     Reimbursements, Asset Management Fee, Transition Management Fee and
     Property Management Fees for the three-month periods ended March 31, 2003
     and 2002.

          THREE MONTHS ENDED MARCH 31, 2003

                                            Shelbourne
                                            Management       Kestrel
                                            ----------       -------
         Asset Management Fee               $        -     $   50,000
         Property Management Fees           $        -     $   52,626



                                       11
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


3.   CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
     ----------------------------------------------------------------------

         THREE MONTHS ENDED MARCH 31, 2002

                                            Shelbourne
                                            Management         Kestrel
                                            ----------         -------
         Expense Reimbursement (1)          $   25,000        $        -
         Asset Management Fee                  105,863                 -
         Transition Management Fee              41,650                 -
         Property Management Fees            $       -        $   57,639


         (1) The asset management fees were modified in connection with the
             Transaction to eliminate expense reimbursement.


     ALLOCATION OF DIVIDENDS BY THE CORPORATION
     ------------------------------------------

     Dividends payable to HX Investors, L.P. ("HX Investors"), an affiliate of
     the current Chief Executive Officer of the Corporation, for the three
     months ended March 31, 2003 and 2002 on account of shares of common stock
     owned by HX Investors were $12,646,634 and $0, respectively.

     In addition, in connection with the settlement of the lawsuit brought by HX
     Investors, Shelbourne Management agreed to pay to HX Investors 42% of the
     amounts paid to Shelbourne Management with respect to the Class A units.

     THE TRANSACTION
     ---------------

     On February 14, 2002, the Corporation, Shelbourne Properties I, Inc. and
     Shelbourne Properties II, Inc. (the "Companies") consummated a transaction
     (the "Transaction") whereby the Corporation purchased the 385,226 shares of
     the Corporation's common stock held by subsidiaries of PCIC and the
     Advisory Agreement was contributed to the Operating Partnership. Pursuant
     to the Transaction, the Corporation paid PCIC $11,830,337 in cash and the
     Operating Partnership issued preferred partnership interests with an
     aggregate liquidation preference of $672,178 and a note in the amount of
     $14,589,936. This note was satisfied in April 2002 from the proceeds of the
     Credit Facility (See note 6).

4.   REAL ESTATE
     -----------

     The following table is a summary of the Corporation's real estate as of:

                                    MARCH 31, 2003          DECEMBER 31, 2002
                                  LIQUIDATION BASIS         LIQUIDATION BASIS
                                     (UNAUDITED)
                                 --------------------      --------------------

      Real estate held for sale     $  16,388,074             $  31,146,000
                                 ====================      ====================


     On January 29, 2003, Livonia Shopping Plaza located in Livonia, Michigan
     was sold for a gross sales price of $12,969,000. The Corporation received
     proceeds of $12,737,322 after closing costs. The Corporation received net
     proceeds in the amount of approximately $7,865,000 after mortgage repayment
     and closing adjustments. The Corporation realized an accounting gain of
     $4,481,423.



                                       12
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


4.   REAL ESTATE (CONTINUED)
     ----------------------

     On February 28, 2003, the Corporation sold its property located in Melrose
     Park, Illinois for a gross purchase price of $2,164,800. The Corporation
     received proceeds of $2,083,446 after closing costs. After closing
     adjustments, net proceeds were approximately $1,970,000. The Corporation
     realized an accounting gain of $137,549.

5.   INVESTMENT IN JOINT VENTURES
     ----------------------------

     On October 30, 2002, the Corporation adopted the liquidation basis of
     accounting. Subsequent to the adoption of the liquidation basis of
     accounting, the investments in joint ventures were adjusted to their net
     realizable value based on current contracts, estimates as determined by
     independent appraisals or other indications of sales value.

     At January 1, 2003 the Corporation was invested in three joint ventures,
     (568 Broadway, Supervalu, and Tri-Columbus). As of March 31, 2003 the
     Corporation was invested in two operating joint ventures (SuperValu and
     Tri- Columbus). The joint ventures are accounted for utilizing the equity
     method of accounting.

     On January 14, 2002, one of the Corporation's joint ventures sold a
     supermarket in Edina, Minnesota for $3,500,000 that resulted in a gain on
     sale to the Corporation of $649,092. On January 30, 2002, the same joint
     venture sold a supermarket in Toledo, OH for $3,600,000 that resulted in a
     net loss to the Corporation of $186,380. These amounts are included in the
     Corporation's equity earnings from joint ventures.

     On January 31, 2003, the Hilliard, Ohio property, which was owned by
     Tri-Columbus Associates, in which the Corporation holds a 79.34% interest,
     was sold for a gross sales price of $4,600,000. After satisfying the debt
     encumbering the property, closing adjustments and other closing costs, net
     proceeds were approximately $2,063,000, $1,636,784 of which is attributable
     to the Corporation's interest. The joint venture recognized no gain or loss
     on the sale as the joint venture's property was previously written down to
     its net realizable value.

     On February 24, 2003, Indiana Market Ltd, A Limited Liability Co., in which
     the Corporation indirectly holds a 50% interest, entered into a contract to
     sell its property located in Indianapolis, Indiana for a gross sales price
     of $750,000. On April 28, 2003 an amendment to the original contract was
     signed, reducing the gross sales price to $700,000. The sale closed on May
     8, 2003.

     On February 28, 2003, 568 Broadway Joint Venture, a joint venture in which
     the Corporation indirectly holds a 22.15% interest, sold its property
     located at 568 Broadway, New York, New York for a gross sale price of
     $87,500,000. After assumption of the debt encumbering the property
     ($10,000,000), closing adjustments and other closing costs, net proceeds
     were approximately $73,000,000, approximately $16,169,500 of which was
     allocated to the Operating Partnership. The joint venture recognized an
     accounting gain of $67,746,480 of which $14,565,894 was attributable to the
     Corporation and is reported as equity income from joint ventures.

6.   CREDIT FACILITY
     ---------------

     On May 1, 2002, the Operating Partnership and certain of its subsidiaries,
     as well as the operating partnership of Shelbourne Properties I, Inc. and
     the operating partnership of Shelbourne Properties II, Inc., and certain of
     their subsidiaries entered into a $75,000,000 revolving credit facility
     with Bayerische Hypo-Und Vereinsbank AG, New York Branch, as agent for
     itself and other lenders (the "Credit Facility"). The Credit Facility was
     subsequently satisfied on February 20, 2003. (See note 7 below).

7.   FLEET LOAN

     On February 20, 2003, in a transaction designed to provide flexibility to
     the Corporation, Shelbourne Properties I, Inc. and Shelbourne Properties
     II, Inc., (collectively, the "Companies") and their respective operating
     partnerships (the "Shelbourne OPs")in implementing their respective plans
     of liquidation and enable them to distribute 100% of



                                       13
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


7.   FLEET LOAN (CONTINUED)
     ---------------------

     the net proceeds from the sale of the New York, New York property, direct
     and indirect subsidiaries (the "Borrowers") of each of the Companies
     entered into a Loan Agreement with Fleet National Bank, as agent for itself
     and other lenders ("Fleet") pursuant to which the Borrowers obtained a
     $55,000,000 loan (the "Loan"). The Companies believed that by entering into
     a single loan transaction instead of three separate loan transactions they
     were able to obtain a larger loan at a more favorable interest rate. The
     Loan bears interest at the election of the Borrowers at a rate of either
     LIBOR plus 2.75% (4.09% at March 31, 2003) or Fleet's prime rate (but not
     less than 5%) plus 100 basis points. At present the Borrowers have elected
     that the Loan bear interest at LIBOR plus 2.75%. The Loan matures on
     February 19, 2006, subject to two one year extensions. The Loan is
     prepayable in whole or in part at anytime without penalty or premium.

     At March 31, 2003, the Loan was secured by mortgages on the Company's Las
     Vegas, Nevada property and the properties held by Tri-Columbus Associates,
     as well as certain other real properties owned indirectly by Shelbourne
     Properties I, Inc. and Shelbourne Properties II, Inc. The Borrowers are
     jointly and severally liable for the repayment of the amounts due under the
     Loan and the Operating Partnership and the Corporation (as well as the
     other operating partnerships and Companies) have guaranteed the repayment
     of the Loan. A portion of the Loan proceeds, as well as the balance of a
     note in the amount of $10,000,000 secured by the 568 Broadway property,
     were used to satisfy the Credit Facility that had a balance due of
     $37,417,249 as of February 20, 2003.

     At March 31, 2003, the outstanding balance due on the Loan was $55,000,000,
     of which $15,423,374 was allocable to the Company and the interest rate, at
     March 31, 2003, on the Loan was 4.09%. The outstanding principal balance
     was subsequently reduced by $20,000,000 on April 29, 2003 in connection
     with the sale of property jointly owned by Shelbourne Properties I, Inc.
     and Shelbourne Properties II, Inc.

     Since the Borrowers are jointly and severally liable for the repayment of
     the entire principal, interest and other amounts due under the Loan, the
     Borrowers, the Companies and the operating partnerships have entered into
     Indemnity, Contribution and Subrogation Agreements, the purpose and intent
     of which was to place the operating partnerships in the same position (as
     among each other) as each would have been had the lender made three
     separate loans, one to each of the operating partnerships; each of which
     loans would have been in a smaller amount than the Loan, would have been
     the obligation/liability only of the operating partnership to which it was
     made and would have been secured only by certain of such operating
     partnership's assets.

8.   CLASS B PARTNERSHIP INTERESTS
     -----------------------------

     Under the Plan of Liquidation which has been approved by the Corporation's
     Board of Directors and stockholders, the Class B Unitholders are entitled
     to receive an incentive payment of 15% of (i) the cash and other proceeds
     generated from operating the assets and properties of the Company, plus the
     aggregate fair value of all consideration received from the disposal of the
     assets and properties of the Company less (ii) the sum of all direct costs
     incurred in connection with such disposal (the "Incentive Fee"), after the
     payment of a priority return of approximately $52.25 per share to
     stockholders of the Corporation plus interest thereon compounded quarterly
     at 6% (from August 19, 2002) per annum (the "Priority Return"). On August
     19, 2002, the Board of Directors of the Corporation authorized the issuance
     by the Operating Partnership of, and the Operating Partnership issued,
     Class B Units to HX Investors L.P. ("HX Investors") which Class B Units
     provide distribution rights to HX Investors consistent with the intent and
     financial terms of the Incentive Fee. The Class B Units entitle the holder
     thereof to receive distributions equal to 15% of gross proceeds after the
     Priority Return. After giving effect to dividends paid from August 19, 2002
     to May 12, 2003, the remaining unpaid per share Priority Return at May 12,
     2003 is $7.18.


                                       14
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


9.   CLASS A 5% PREFERRED PARTNERSHIP INTERESTS
     ------------------------------------------

     In connection with the Transaction, the Operating Partnership issued to
     Shelbourne Management 672.178 Class A 5% Preferred Partnership Units (the
     "Class A Units"). The Class A Units entitled the holder to a quarterly
     distribution equal to 1.25% of the aggregate liquidation preference of the
     Class A Units ($672,178). In addition, upon the liquidation of the
     Operating Partnership, each Class A Unit was entitled to a liquidation
     preference of $1,000 per unit. The Class A Units are not convertible into
     common units of the Operating Partnership or shares in the Corporation and
     the holders of the Class A Units do not have voting rights except in
     limited circumstances. Although the holders of the Class A Units do not
     have redemption rights, pursuant to the terms of the Purchase and
     Contribution Agreement entered into in connection with the Transaction,
     Shelbourne Management had the right to cause the Operating Partnership to
     reacquire the Class A Units upon the occurrence of certain events
     including, without limitation, if the aggregate assets of the Companies is
     below approximately $75 million or the outstanding debt under which the
     Companies are obligated is less than $55 million, for a purchase price
     equal to the liquidation preference plus an amount (the "Put Premium")
     which was equal to approximately $4,374,000 at December 31, 2002 and
     declined each February 13, May 13, August 13 and November 13 until it
     reached zero on May 13, 2007.

     The terms of the Class A Units were subsequently modified to eliminate the
     liquidation preference and limit the circumstances under which the holders
     of the Class A Units can cause the Operating Partnership to purchase the
     Class A Units at a premium. These circumstances include the occurrence of
     the following while any of the Class A Units are outstanding; (i) the
     filing of bankruptcy by a Shelbourne OP; (ii) the failure of a Shelbourne
     OP to be taxed as a partnership; (iii) the termination of the Advisory
     Agreement; (iv) the issuing of a guaranty by any of the Companies on the
     debt securing the Accor S.A. properties; or (v) the taking of any action
     with respect to the Accor S.A. properties (see below) without the consent
     of the Class A Unitholder.

     In connection with the settlement of the lawsuit brought by HX Investors,
     Shelbourne Management agreed to pay to HX Investors 42% of the amounts paid
     to Shelbourne Management with respect to the Class A units.

10.  ACCOR S.A. PROPERTIES TRANSACTION
     ---------------------------------

     On January 15, 2003, a joint venture owned by the Operating Partnership and
     the operating partnerships of Shelbourne Properties I, Inc. and Shelbourne
     Properties II, Inc. acquired from Realty Holdings of America, LLC, an
     unaffiliated third party, a 100% interest in an entity that owns 20 motel
     properties triple net leased to an affiliate of Accor S.A. The cash
     purchase price, which was provided from working capital, was approximately
     $2,668,272, of which $867,806, $1,079,675 and $720,791 was paid by
     Shelbourne Properties I, Inc., Shelbourne Properties II, Inc., and the
     Corporation respectively. The properties are also subject to existing
     mortgage indebtedness in the current principal amount of approximately
     $74,220,000.

     The Companies formed the joint venture and acquired the interest in the new
     properties in order to facilitate the disposition of the other properties
     of the Companies and the distribution to stockholders of the sales proceeds
     in accordance with the Plan of Liquidation. Prior to the acquisition of the
     Accor S.A. properties, the holder of the Class A Units had the right to
     cause the Operating Partnerships to purchase the Class A Units at a
     substantial premium to their liquidation value (at the time of the
     acquisition, a premium of approximately $4,374,000 in the case of the
     Operating Partnership and approximately $16,265,000 for all three operating
     partnerships) unless the operating partnerships maintained at least
     approximately $54,200,000 of aggregate indebtedness ($14,574,000 in the
     case of the Operating Partnership) guaranteed by the holder of the Class A
     Units and secured by assets having an aggregate market value of at least
     approximately $74,800,000 ($20,100,000 in the case of the Operating
     Partnership). These requirements significantly impaired the ability of the
     Corporation to sell its properties and make distributions in accordance
     with the Plan of Liquidation. In lieu of these requirements, the operating
     partnerships acquired the Accor S.A. properties for the benefit of the
     holder of the Class A Units. The holder of the Class A Units does, however,
     continue to have the right, under certain limited circumstances which the
     Companies do not anticipate will occur, to cause the operating partnerships
     to purchase the Class A Units at the premium as described above. The terms
     of the Class A Units were also modified to eliminate the $2,500,000
     aggregate liquidation



                                       15
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


10.  ACCOR S.A. PROPERTIES TRANSACTION (CONTINUED)
     --------------------------------------------

     preferences to which the holder of the Class A Units was previously
     entitled ($672,178 in the case of the Operating Partnership).

     The holder of the Class A Units has the right to require the operating
     partnerships to acquire other properties for its benefit at an aggregate
     cash cost to the operating partnerships of $2,500,000 (approximately
     $670,000 of which would be paid by the Operating Partnership). In that
     event the Accor S.A. properties would not be held for the benefit of the
     holder of the Class A Units and would be disposed of as part of the
     liquidation of the Companies.

11.  SUBSEQUENT EVENTS
     -----------------

     On April 16, 2003, Tri-Columbus Associates, a joint venture in which the
     Corporation indirectly owns a 79.34% interest, entered into a contract to
     sell its building in Grove City, Ohio for a gross sales price of
     $4,090,000. The closing of the sale, if at all, is tentatively expected to
     occur in early June 2003.

     On May 8, 2003, Indiana Market Ltd., a joint venture in which the
     Corporation holds a 50% interest, consummated the sale of its shopping
     center property located in Indianapolis, Indiana commonly referred to as
     Indiana Market Place for a purchase price of $700,000. After closing costs
     and adjustments, net proceeds were approximately $600,000, approximately
     $300,000 of which is allocable to the Corporation. The Corporation
     anticipates an accounting gain of approximately $30,000.

     As a result of the sale, the remaining properties owned by the Corporation
     are a shopping center located in Las Vegas, Nevada, and a 79.34% interest
     in two industrial buildings in the Columbus, Ohio area.




                                       16
<PAGE>



                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         CAUTIONARY STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM
         ACT OF 1995.

         Statements contained herein may constitute "forward-looking
         statements" within the meaning of Section 27A of the Securities Act of
         1933, as amended, and Section 21E of the Securities Exchange Act of
         1934, as amended. Any statements contained herein which are not
         statements of historical facts and that address activities, events or
         developments that Shelbourne Properties III, Inc. expects, believes or
         anticipates will or may occur in the future shall be deemed to be
         forward-looking statements. Forward-looking statements are inherently
         subject to risks and uncertainties, many of which cannot be predicted
         with accuracy and some of which might not even be anticipated. Future
         events, actual results and performance financial and otherwise, could
         differ materially from those set forth in or contemplated by the
         forward-looking statements herein. Factors that could cause actual
         results to differ materially from those in forward-looking statements
         include the terms of future property sales, investments and
         financings, general economic and business conditions and various other
         risk factors listed in the registration statement of Shelbourne
         Properties III, Inc. filed with the Securities and Exchange
         Commission.

         This item should be read in conjunction with the financial statements
         and other items contained elsewhere in the report.

         ORGANIZATION

         Shelbourne Properties III, Inc., a Delaware corporation (the
         "Corporation"), was formed on April 17, 2001. The Corporation's
         wholly-owned operating partnership, Shelbourne Properties III L.P., a
         Delaware limited partnership (the "Operating Partnership," and
         together with the Corporation, the "Company"), holds directly and
         indirectly all of the Company's properties. Pursuant to a merger that
         was consummated on April 17, 2001, the Operating Partnership became
         the successor by merger to High Equity Partners L.P. - Series 88 (the
         "Predecessor Partnership").

         In August 2002, the Board of Directors adopted a Plan of Liquidation
         (the "Plan of Liquidation") and directed that the Plan of Liquidation
         be submitted to the Corporation's stockholders for approval. The
         stockholders of the Corporation approved the Plan of Liquidation at a
         Special Meeting of Stockholders held on October 29, 2002. The Plan of
         Liquidation contemplates the orderly sale of all of the Corporation's
         assets for cash or such other form of consideration as may be
         conveniently distributed to the Corporation's stockholders and the
         payment of (or provision for) the Corporation's liabilities and
         expenses, as well as the establishment of a reserve to fund the
         Corporation's contingent liabilities. The Plan of Liquidation gives
         the Corporation's Board of Directors the power to sell any and all of
         the assets of the Corporation without further approval by the
         stockholders.

         Since the adoption of the Plan of Liquidation, the Company has sold
         its properties located in Livonia, Michigan and Melrose Park, Illinois
         and its joint venture properties located in Hilliard, Ohio, New York,
         New York. As a result, the remaining assets of the Company are a
         shopping center located in Las Vegas, Nevada, a 50% interest in a
         retail property in Indianapolis, Indiana, and a 79.34% interest in two
         industrial buildings in the Columbus, Ohio area. In addition, the
         Company holds a 27% interest in a joint venture that holds 20 motel
         properties for the benefit of the Class A Unitholder. See "The Accotel
         Transaction" below.

         The Corporation currently expects that the liquidation will be
         substantially completed not later than October 29, 2004, although
         there can be no assurance in this regard. As a result, it is currently
         anticipated that not later than October 29, 2004, any then remaining
         assets and liabilities will be transferred to a liquidating trust.
         With the transfer to a liquidating trust, the liquidation will be
         completed for federal and state income tax purposes, although one or
         more distributions of the remaining cash and net proceeds from future
         asset sales may occur subsequent to the establishment of a liquidating
         trust.



                                       17
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003


THE TRANSACTION
---------------

On February 14, 2002, the Corporation, Shelbourne Properties I, Inc. and
Shelbourne Properties II, Inc. (the "Companies") consummated a transaction (the
"Transaction") whereby the Corporation purchased the 385,226 shares of the
Corporation's common stock held by subsidiaries of Presidio Capital Investment
Company ("PCIC") and the Advisory Agreement was contributed to the Operating
Partnership. Pursuant to the Transaction, the Corporation paid PCIC $11,830,337
in cash and the Operating Partnership issued preferred partnership interests
with an aggregate liquidation preference of $672,178 and a note in the amount of
$14,589,936.

THE ACCOTEL TRANSACTION
-----------------------

In connection with the Transaction, the Operating Partnership issued the Class A
Units to Shelbourne Management. Pursuant to the terms of the Purchase and
Contribution Agreement in which the Class A Units were issued, the holder of the
Class A Units had the right to cause the Operating Partnership to purchase the
Class A Units at a substantial premium to their liquidation value ($4,374,000 at
the January 15, 2003) unless the Operating Partnership, together with the
operating partnerships of Shelbourne Properties I, Inc. and Shelbourne
Properties II, Inc. (collectively, the "Shelbourne OPs") maintained at least
approximately $54,200,000 of aggregate indebtedness ($14,574,000 in the case of
the Operating Partnership) guaranteed by the holder of the Class A Units and
secured by assets having an aggregate market value of at least approximately
$74,800,000 ($20,100,000 in the case of the Operating Partnership) (the "Debt
 and Asset Covenant"). These requirements significantly impaired the ability of
the Corporation to sell its properties and pay dividends in accordance with the
Plan of Liquidation.

Accordingly, in a transaction (the "Accotel Transaction") designed to facilitate
the liquidation of the Corporation and provide dividends to stockholders, on
January 15, 2003, a joint venture owned by the Shelbourne OPs acquired from
Realty Holdings of America, LLC, an unaffiliated third party, a 100% interest in
an entity that owns 20 motel properties triple net leased to an affiliate of
Accor S.A. The cash purchase price, which was provided from working capital, was
$2,668,272, of which $867,806, $1,079,675 and $720,791 was paid by Shelbourne
Properties I L.P., Shelbourne Properties II L.P. and the Operating Partnership,
respectively. The properties were also subject to existing mortgage indebtedness
in the principal amount of approximately $74,220,000.

The Accor S.A. properties were acquired for the benefit of the holder of the
Class A Units as they provide sufficient debt to be guaranteed by the holder of
the Class A Units. Except as indicated below, the Class A Unitholder will
ultimately be the sole owner of the joint venture. In connection with the
Accotel Transaction, the terms of the Class A Units were amended to (i)
eliminate the liquidation preferences (as the cost of the interest in the Accor
S.A. properties which was borne by the Shelbourne OPs satisfied the liquidation
preference) and (ii) eliminate the Debt and Asset Covenant. The holder of the
Class A Units does, however, continue to have the right, under certain limited
circumstances which the Companies do not anticipate will occur, to cause the
Shelbourne OPs to purchase their respective Class A Units at the premium
described above. These circumstances include the occurrence of the following
while any of the Class A Units are outstanding; (i) the filing of bankruptcy by
a Shelbourne OP; (ii) the failure of a Shelbourne OP to be taxed as a
partnership; (iii) the termination of the Advisory Agreement; (iv) the issuing
of a guaranty by any of the Companies on the debt securing the Accor S.A.
properties; or (v) the taking of any action with respect to the Accor S.A.
properties without the consent of the Class A Unitholder.

The holder of the Class A Units has the right, which right must be exercised by
no later than July 28, 2004, to require that the Shelbourne OPs acquire other
properties for the Class A Unitholder's benefit at an aggregate cash cost to the
Shelbourne OPs of not more than $2,500,000 (approximately $670,000 of which
would be paid by the Operating Partnership). In that event, the Accor S.A.
properties would not be held for the benefit of the holder of the Class A Units
and the Companies would seek to dispose of these properties as part of the
liquidation of the Companies. Accordingly, if the Class A Unitholder were to
exercise this option, there is a risk that the Companies interest in the Accor
S.A. properties could not be sold for their original purchase price.

The foregoing description of the transaction does not purport to be complete,
and is qualified in its entirety by reference to the Purchase Agreement (and all
exhibits thereto) dated as of January 15, 2003, the Modification Agreement,
dated as of January 15, 2003 and the Amended and Restated Partnership Unit
Designation, copies of



                                       18
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003


which are attached as exhibits to the Corporation's Current Report on Form 8-K
filed on January 16, 2003, which are incorporated herein by reference.

THE PLAN OF LIQUIDATION - PROPERTY SALES
----------------------------------------

On October 29, 2002, the Corporation's stockholders approved the Plan of
Liquidation. Accordingly the Corporation began selling its properties. Since the
adoption of the Plan of Liquidation, the Company has sold the following
properties.

Livonia Shopping Plaza. On January 29, 2003 Livonia Shopping Plaza was sold for
$12,969,000. The Corporation received proceeds of $12,737,322 after closing
costs. After satisfying the debt encumbering the property of $4,700,000, all
expenses, prorations, adjustments and settlement charges, the Company received
net proceeds in the amount of approximately $7,865,000. The Company realized an
accounting gain of $4,481,423.

TMR Warehouse, Hilliard, Ohio. On January 31, 2003, the Hilliard, Ohio,
property, which was owned by Tri-Columbus Associates, a joint venture in which
the Corporation held a 79.34% interest, was sold for a gross sales price of
$4,600,000. After satisfying the debt encumbering the property of $2,300,000 (of
which the Corporation was responsible for $1,824,820), closing adjustments and
other closing costs, net proceeds were $2,063,553, $1,637,223 of which is
attributable to the Corporation's interest. The joint venture recognized no gain
or loss on the sale as the joint venture's property was previously written down
to its net realizable value.

568 Broadway. On February 28, 2003, 568 Broadway Joint Venture, a joint venture
in which the Corporation indirectly held a 22.15% interest, sold its property
located at 568 Broadway, New York, New York for a gross sales price of
$87,500,000. After assumptions of the debt encumbering the property (see above),
closing adjustments and other closing costs, net proceeds were approximately
$73,000,000 of which approximately $16,169,500 was allocated to the Operating
Partnership. The joint venture recognized an accounting gain of $67,746,480 of
which $14,565,894 was attributable to the Corporation.

Melrose Crossing Shopping Center. Also on February 28, 2003, the Corporation
sold its property located in Melrose Park, Illinois for a gross purchase price
of $2,164,800. The Corporation received proceeds of $2,083,446 after closing
costs. After closing adjustments, net proceeds were approximately $1,970,000.
The Company realized an accounting gain of $137,549.

RECENT DEVELOPMENTS
-------------------

On April 16, 2003, Tri-Columbus Associates, a joint venture in which the
Corporation indirectly owns a 79.34% interest, entered into a contract to sell
its building in Grove City, Ohio for a gross sales price of $4,090,000. The
closing of the sale, if at all, is tentatively expected to occur in early June
2003.

On May 8, 2003, Indiana Market Ltd., a joint venture in which the Corporation
holds a 50% interest, consummated the sale of its shopping center property
located in Indianapolis, Indiana commonly referred to as Indiana Market Place
for a purchase price of $700,000. After closing costs and adjustments, net
proceeds were approximately $600,000, approximately $300,000 of which is
allocable to the Corporation. The Corporation anticipates an accounting gain of
approximately $30,000.

As a result of the sale, the remaining properties owned by the Corporation are a
shopping center located in Las Vegas, Nevada, and a 79.34% interest in two
industrial buildings in the Columbus, Ohio area.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

The Company uses its working capital reserves and any cash from operations as
its primary source of liquidity. In addition, on February 20, 2003, in a
transaction designed to provide flexibility to the Corporation, Shelbourne
Properties I, Inc. and Shelbourne Properties II, Inc. (collectively, the
"Companies") in implementing their respective plans of liquidation and enable
them to distribute 100% of the net proceeds from the sale of the New York, New
York property, direct and indirect subsidiaries (the "Borrowers") of each of the
Companies entered into a Loan Agreement with Fleet National Bank, as agent for
itself and other lenders ("Fleet") pursuant to which the Borrowers




                                       19
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003


obtained a $55,000,000 loan (the "Loan"). The Companies believed that by
entering into a single loan transaction instead of three separate loan
transactions they were able to obtain a larger loan at a more favorable interest
rate. The Loan bears interest at the election of the Borrowers at a rate of
either LIBOR plus 2.75% or Fleet's prime rate (but not less than 5%) plus 1%. At
present the Borrowers have elected that the Loan bear interest at LIBOR plus
2.75%. The Loan matures on February 19, 2006, subject to two one year
extensions. The Loan is prepayable in whole or in part at anytime without
penalty or premium.

At March 31, 2003, the outstanding balance due on the Loan was $55,000,000, of
which $15,423,374 was allocable to the Company and the interest rate on the Loan
was 4.09%. The outstanding principal balance was subsequently reduced by
$20,000,000 on April 29, 2003 in connection with the sale of property jointly
owned by Shelbourne Properties I, Inc. and Shelbourne Properties II, Inc.

The Loan is secured by mortgages on the Company's Las Vegas, Nevada property and
the properties held by Tri-Columbus Associates, as well as certain other real
properties owned indirectly by Shelbourne Properties I, Inc. and Shelbourne
Properties II, Inc. The Borrowers are jointly and severally liable for the
repayment of the amounts due under the Loan and the Operating Partnership and
the Corporation (as well as the other operating partnerships and Companies) have
guaranteed the repayment of the Loan. A portion of the Loan proceeds, as well as
the balance of a note in the amount of $10,000,000 secured by the 568 Broadway
property, were used to satisfy the Credit Facility that had a balance due of
$37,417,249 of which the Corporation was responsible for $13,193,637.

Since the Borrowers are jointly and severally liable for the repayment of the
entire principal, interest and other amounts due under the Loan, the Borrowers,
the Companies and the operating partnerships have entered into Indemnity,
Contribution and Subrogation Agreements, the purpose and intent of which was to
place the operating partnerships in the same position (as among each other) as
each would have been had the lender made three separate loans, one to each of
the operating partnerships; each of which loans would have been in a smaller
amount than the Loan, would have been the obligation/liability only of the
operating partnership to which it was made and would have been secured only by
certain of such operating partnership's assets.

The Company had $2,271,423 in cash and cash equivalents at March 31, 2003 of
which $1,001,370 was classified as restricted cash. Cash and cash equivalents
are temporarily invested in short-term instruments. The Company's level of
liquidity based upon cash and cash equivalents increased by $2,011,053 for the
three months ended March 31, 2003 as compared to December 31, 2002. As discussed
further below, the increase resulted from $22,600,357 of net cash provided by
operating activities and $14,081,903 of net cash provided by investing
activities which was offset by $34,671,207 of net cash used in financing
activities.

In addition to the cash and cash equivalents reported at March 31, 2003, the
Corporation's joint ventures held cash at March 31, 2003 of which the
Corporation's allocable share was $769,366.

Currently, the Corporation's primary sources of funds are rents collected from
tenants, distributions from its joint venture investments and proceeds from
property sales. Rents collected from tenants for the three months ended March
31, 2003 amounted to $758,885 as compared to $831,580 for the three months ended
March 31, 2002. The decrease is due to the sale of Livonia Shopping Plaza on
January 29, 2003.

Cash provided from investing activities were a result of the proceeds from the
sales of Livonia Shopping Plaza and Melrose Crossing II of $14,820,768 that were
offset by the investment in Accotel of $720,791 and improvements to real estate
of $18,074 at Sunrise Marketplace.

Cash used in financing activities consisted of the dividends paid to
stockholders of $30,367,722, preferred dividends in the amount of $8,402 and the
payoff of the Credit Facility which was funded by the proceeds generated by the
sales of Livonia Shopping Plaza and the Hilliard, Ohio property and Fleet Loan
proceeds of $15,423,374.


                                       20
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003


RESULTS OF OPERATIONS
---------------------

Three months ended March 31, 2003 vs. March 31, 2002
----------------------------------------------------

Net income

The Corporation's net income increased by $34,341,868 to a net income of
$19,614,032 for the three month's ended March 31, 2003 from a net loss of
$14,727,836 for the three months ended March 31, 2002. The increase was due to
an increase in gains on sale, increased equity income from joint ventures and a
decrease in costs and expenses partially offset by a decrease in rental revenue
and an increase in interest expense. The Corporation's income before interest
and other income and net gain on sale of real estate was $39,171 for the three
months ended March 31, 2003, as compared to a loss of $15,746,994 for the three
months ended March 31, 2002.

Gain on Sale

The gain on sale of $4,618,972 for the three months ended March 31, 2003 was due
to the sale of Livonia Shopping Plaza and Melrose Crossing II during the three
months ended March 31, 2003.

Rental Revenue

Rental revenues decreased $37,098 or approximately 4%, to $798,551 for the
three-months ended March 31, 2003 from $835,649 for the three months ended March
31, 2002 due to the sale of Livonia Shopping Plaza. The decrease in rental
revenues of $81,493 due to the sale of Livonia Shopping Plaza was substantially
offset by Sunrise Marketplace's rental revenues increasing by approximately
$45,000.

Costs and Expenses

Costs and expenses for the three months ended March 31, 2003 amounted to
$759,380, representing a decrease of $15,823,263 from the same period in 2002.
The decrease is due principally to expenses incurred in 2002 of $15,262,114
associated with the purchase of the Advisory Agreement that was consummated on
February 14, 2002. The remaining expenses from 2002 amounted to $1,320,529.
Therefore, without giving effect to the costs incurred in 2002 for the purchase
of the Advisory Agreements, expenses decreased by $561,149 for three months
ended March 31, 2003 compared with the same period in 2002. The decrease is
primarily due to reduced administrative expenses, the cessation of depreciation
and amortization and the reduction of the asset management fees to $200,000 per
year.

Operating expenses increased by $93,562 for the three months ended March 31 2003
as compared to the three months ended March 31, 2002. The increase was the
result of an obligation under the terms of the sale of Livonia Shopping Plaza to
pay the real estate taxes through November 30, 2003. This was partially offset
by billings to tenants to recover the additional expense. This additional income
and expense was recognized during the period ended March 31, 2003. The increase
in expense was partially offset by the reduction in insurance costs due to the
sales of Livonia and Melrose Crossing II.

Pursuant to the Plan of Liquidation which was adopted October 29, 2002,
depreciation and amortization expenses ceased as of that date. Therefore the
Corporation incurred no depreciation and amortization for the three months ended
March 31, 2003 as compared to $172,774 for the same period in 2002. Partnership
asset management fees decreased to $50,000 for the three months ended March 31,
2003 from $147,513 for the same period in 2002. In 2002, prior to the
Transaction, the fees were based on 1.25% of gross asset value of the
Corporation, which amounted to $105,863 during 2002, and after the Transaction,
there was a flat fee of $27,778 per month which amounted to $41,650 for the
balance of the first quarter of 2002. As a result the total asset management fee
and transition management fees paid for the three months ended March 31, 2002
were 147,513. Effective October 1, 2002, the asset management fee payable by the
Corporation was reduced to $50,000 per quarter.

Administrative costs decreased to $252,671 for the three months ended March 31,
2003 from $629,534 for the same period in 2002. This reduction is due to the
costs not incurred in 2003 that were incurred in 2002 in connection with



                                       21
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003


         the Transaction. Property Management fees decreased to $16,731 from
         $24,292 for the periods ending March 31, 2003 and 2002 respectively.
         The decrease is due to the sale of Livonia Shopping Plaza in January
         2003.

         Non-Operating Income and Expenses

         Income from investments in joint ventures increased by $14,006,021 to
         $15,102,299 for the three months ended March 31, 2003 as compared to
         $1,096,278 for the three months ended March 31, 2002. This is
         primarily due to 568 Broadway Joint Venture, in which the Corporation
         indirectly held a 22.15% interest, selling its property on February
         28, 2003. The joint venture recognized a gain on sale of $67,746,480
         of which $14,565,894 was allocated to the Corporation. Excluding the
         gain on sale, the Corporation experienced a decrease in equity income
         from 568 Broadway Joint Venture for the three months ended March 31,
         2003 as compared to the three months ended March 31, 2002 of $270,758
         due to the sale of the property on February 28, 2003.

         The Corporation's other two other investments in joint ventures,
         SuperValu and Tri-Columbus Associates, experienced a combined increase
         in equity income, excluding the sale of the Hilliard, Ohio property,
         of $173,598 for the three months ended March 31, 2003 as compared to
         the same period in 2002. This increase is primarily due to the
         cessation of depreciation and amortization expenses in accordance with
         liquidation accounting.

         During the first quarter of 2003, interest expense amounted to
         $157,785, which consisted of $87,701 paid in connection with the
         Credit Facility and $70,084 incurred in connection with the Loan, as
         compared to $84,594 for the first quarter 2002. The interest in 2002
         was incurred on the notes issued to Shelbourne Management in
         connection with the purchase of the Advisory Agreements on February
         14, 2002.

         Interest income increased to $19,777 during the three months ended
         March 31, 2003 from $11,675 during the three months ended March 31,
         2002 due to slightly higher cash balances invested.

         Inflation

         Inflation is not expected to have a material impact on the operations
         or financial position of Company.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The primary market risk we face is interest rate sensitivity. Our
         long-term debt bears interest at a floating rate, and therefore we are
         exposed to the risk of interest rate changes. At May 12, 2003,
         borrowings under our secured loan totaled $15,423,374 and initially
         bore an interest rate of LIBOR plus 2.75%. Based on the balance
         outstanding on our credit facility at May 12, 2003 and the interest
         rate at that date, a 10% increase in LIBOR would increase our interest
         expense in 2003 by approximately $20,667. Conversely, a 10% decrease
         in LIBOR would decrease our interest expense in 2003 by the same
         amount. The gain or loss we ultimately realize with respect to
         interest rate fluctuations will depend on the actual interest rates
         during that period. We do not believe that we have any risk related to
         derivative financial instruments.

ITEM 4.  CONTROLS AND PROCEDURES

         Our principal executive officer and principal financial officer have,
         within 90 days of the filing date of this quarterly report, evaluated
         the effectiveness of the Corporation's disclosure controls and
         procedures (as defined in Exchange Act Rules 13a - 14(c)) and have
         determined that such disclosure controls and procedures are adequate.
         There have been no significant changes in the Corporation's internal
         controls or in other factors that could significantly affect such
         internal controls since the date of evaluation. Accordingly, no
         corrective actions have been taken with regard to significant
         deficiencies or material weaknesses.


                                       22
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003


                           PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (A) EXHIBITS

         Exhibits required by Item 601 of Regulation S-K are filed herewith or
         incorporated herein by reference and are listed in the attached
         Exhibit Index.


         (B) REPORTS ON FORM 8-K

         The following reports on Form 8-K were filed on behalf of the
         Registrant during the quarter ended March 31, 2003:

         (i)   Acquisition of Accotel Properties.

               Item reported: 2

               Dated filed: January 16, 2003

         (ii)  Sale of Livonia Property.

               Item reported: 2

               Dated filed: January 30, 2003

         (iii) Sale of Hilliard, Ohio Property.

               Item reported: 2

               Dated filed: February 4, 2003

         (iv)  Fleet Loan.

               Item reported: 5

              Dated filed: February 24, 2003


         (v)   Sale of New York, New York and Melrose, Illinois Properties.
               Issuance of Dividend.

               Item reported: 5

               Dated filed: March 3, 2003



                                       23
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                            Shelbourne Properties III, Inc.
                                            (Registrant)


Dated:   May 14, 2003                       By: /S/ Michael L. Ashner
                                                ---------------------
                                                Michael L. Ashner
                                                Chief Executive Officer



















                                       24
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003


                                 CERTIFICATIONS

I, Michael L. Ashner, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Shelbourne
       Properties III, Inc.;

2.     Based on my knowledge, this quarterly 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 quarterly report;

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

4.     The registrant's other certifying officers and I are responsible for
       establishing and maintaining disclosure controls and procedures (as
       defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
       have:

       a)      designed such disclosure controls and procedures to ensure that
               material information relating to the registrant is made known to
               us, particularly during the period in which this quarterly report
               is being prepared:

       b)      evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this quarterly report (the "Evaluation Date"); and

       c)      presented in this quarterly report our conclusions about the
               effectiveness of the disclosure controls and procedures on our
               evaluation as of the Evaluation Date;

5.     The registrant's other certifying officers and I have disclosed, based on
       our most recent evaluation, to the registrant's auditors and the audit
       committee of registrant's board of directors (or persons performing the
       equivalent functions):

       a)      all significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's auditors any material
               weaknesses in internal controls; and

       b)      any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls; and

6.     The registrant's other certifying officers and I have indicated in this
       quarterly report whether there were significant changes in internal
       controls or in other factors that could significantly affect internal
       controls subsequent to the date of our most recent evaluation, including
       any corrective actions with regard to significant deficiencies and
       material weaknesses.


       Date:    May 14, 2003                        /s/ Michael L. Ashner
                                                    ----------------------------
                                                    Michael L. Ashner
                                                    Chief Executive Officer


                                       25
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003

                                 CERTIFICATIONS

I, Carolyn B. Tiffany, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Shelbourne
       Properties, III Inc;

2.     Based on my knowledge, this quarterly 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 quarterly report;

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

4.     The registrant's other certifying officers and I are responsible for
       establishing and maintaining disclosure controls and procedures (as
       defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
       have:

       a)      designed such disclosure controls and procedures to ensure that
               material information relating to the registrant is made known to
               us, particularly during the period in which this quarterly report
               is being prepared:

       b)      evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this quarterly report (the "Evaluation Date"); and

       c)      presented in this quarterly report our conclusions about the
               effectiveness of the disclosure controls and procedures on our
               evaluation as of the Evaluation Date;

5.     The registrant's other certifying officers and I have disclosed, based on
       our most recent evaluation, to the registrant's auditors and the audit
       committee of registrant's board of directors (or persons performing the
       equivalent functions):

       a)      all significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's auditors any material
               weaknesses in internal controls; and

       b)      any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls; and

6.     The registrant's other certifying officers and I have indicated in this
       quarterly report whether there were significant changes in internal
       controls or in other factors that could significantly affect internal
       controls subsequent to the date of our most recent evaluation, including
       any corrective actions with regard to significant deficiencies and
       material weaknesses.


       Date: May 14, 2003                           /s/ Carolyn B. Tiffany
                                                    ----------------------------
                                                    Carolyn B. Tiffany
                                                    Chief Financial Officer




                                       26
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003

EXHIBIT INDEX

<TABLE>
<CAPTION>

Exhibit
Number                              Description                                                           Page
------                              -----------                                                           ----
<S>      <C>                                                                                              <C>
2.1      Stock Purchase Agreement among HX Investors,
         Exeter Capital Corporation and the Company                                                       (4)
2.2      Amendment No. 1 to Stock Purchase Agreement                                                      (6)
2.3      Plan of Liquidation                                                                              (7)
3.1      Amended and Restated Certificate of Incorporation of the Company                                 (1)
3.2      Amended and Restated Bylaws of the Corporation                                                   (1)
4.1      Limited Partnership of the operating partnership                                                 (1)
4.2      Stockholder Rights Agreement                                                                     (1)
4.3      Amendment to Stockholder Rights Agreement                                                        (2)
4.4      Restated Partnership Unit Designation for 5% Class A Preferred                                   (9)
         Partnership Units (incorporated by reference to Exhibit E-1 of Exhibit 10.4)
4.5      Stockholder Agreement, among the Companies and                                                   (3)
         HX Investors, LP and Exeter Capital Corporation, dated as of April 30, 2002
4.6      Amendment No. 2 to Stockholder Rights Agreement                                                  (5)
4.7      Partnership Unit Designation of the Class B Partnership Units of the Operating Partnership       (8)
10.1     Settlement Agreement and Mutual Release between
         HX Investors, the Companies and Shelbourne Management                                            (4)
10.2     Amendment No. 1 to Settlement Agreement                                                          (6)
10.3     Purchase Agreement, dated as of January 15, 2003,                                                (9)
         between the Shelbourne JV LLC and Realty Holdings of America, LLC
10.4     Agreement, dated as of January 15, 2003, among .                                                 (9)
         Presidio Capital Investment Company, LLC (and certain of its subsidiaries),
         Shelbourne Management, NorthStar Capital Investment Corp., each of the
         Shelbourne REITs and its operating partnership and HX Investors, L.P
10.5     Loan Agreement, dated as of February 19, 2003, among Shelbourne Properties I L.P.,               (10)
         Shelbourne Properties II L.P., Shelbourne Properties III L.P., Shelbourne Richmond
         Company LLC, Shelbourne Matthews Company LLC, Shelbourne
         Las Vegas Company LLC, Century Park I Joint Venture, Seattle Landmark
         Joint Venture, Tri-Columbus Associates and Fleet National Bank and the other
         lending institutions which may become party thereto and Fleet National Bank, as agent
10.6     Form of Guaranty, dated as of February 19, 2003, from Shelbourne Properties III, Inc. and        (10)
         Shelbourne Properties III L.P.
10.7     Form of Indemnity, Contribution and Subrogation Agreement, dated as of February                  (10)
         19, 2003, among the REITs and the operating partnerships
10.8     Form of Deed of Trust, Assignment of Leases and Rents, Security Agreement                        (10)
         and Fixture Filing with respect to the Collateral Properties dated as of February 19, 2003
         in favor of Fleet National Bank
10.9     Cash Management Agreement, dated February 19, 2003, among Shelbourne Properties                  (10)
         I L.P., Shelbourne Properties II L.P., Shelbourne Properties III L.P., Fleet National Bank,
         as agent for itself and the Lenders, and various subsidiaries of the Shelbourne OP's listed
         on Exhibit A thereto
99.1      Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                         29
</TABLE>

------------------
(1)  incorporated by reference to the Registration Statement of the Company on
     Form S-4 filed on February 11, 2000, as amended
(2)  incorporated by reference to the Current Report of the Company on Form 8-K
     filed on February 14, 2002
(3)  incorporated by reference to the Current Report of the Company on Form 8-K
     filed on May 14, 2002.
(4)  incorporated by reference to the Current Report of the Company on Form 8-K
     filed on July 2, 2002.





                                       27
<PAGE>


                         SHELBOURNE PROPERTIES III, INC.
                            FORM 10Q- MARCH 31, 2003


(5)  incorporated by reference to the Current Report of the Company on Form 8-K
     filed on July 8, 2002
(6)  incorporated by reference to the Current Report of the Company on Form 8-K
     filed on August 5, 2002
(7)  incorporated by reference to Appendix A to the Company's Definitive Proxy
     Statement on Schedule 14A filed on September 27, 2002
(8)  incorporated by reference to the Quarterly Report on Form 10-Q of the
     Company filed on November 14, 2002.
(9)  incorporated by reference to the Current Report of the Company on Form 8-K
     filed on January 15, 2003.
(10) incorporated by reference to the Current Report of the Company on Form 8-K
     filed on February 24, 2003.

















                                       28