<PAGE>


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

                                   FORM 10-QSB

(Mark One)

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

                  For the quarterly period ended June 30, 1999

                                       OR

            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

            For the transition period from ___________ to ___________

                         Commission file number 2-81033

           Winthrop Residential Associates III, A Limited Partnership
       (Exact name of small business issuer as specified in its charter)

             Maryland                                    04-2782016
-------------------------------------       ------------------------------------
  (State or other jurisdiction of           (I.R.S. Employer Identification No.)
     incorporation or organization)

 Five Cambridge Center, Cambridge, MA                    02142-1493
---------------------------------------     ------------------------------------
(Address of principal executive office)                  (Zip Code)

Registrant's telephone number, including area code   (617) 234-3000
                                                  ---------------------


Indicate by check mark whether 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
                                      -----     -----


                                     1 of 13

<PAGE>


           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                            FORM 10-QSB JUNE 30, 1999

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.

Consolidated Balance Sheets (Unaudited)

<TABLE>
<CAPTION>
                                                                    June 30,               December 31,
(In Thousands, Except Unit Data)                                      1999                     1998
                                                              ---------------------    ---------------------

<S>                                                           <C>                      <C>
Assets

Cash and cash equivalents                                     $              1,752     $              1,723
Investment in Local Limited Partnership                                         15                       76
Other assets                                                                   155                       98
Real estate (net of accumulated depreciation
      of $2,973 in 1999 and $2,884 in 1998)                                  2,001                    2,090
                                                              ---------------------    ---------------------

      Total Assets                                            $              3,923     $              3,987
                                                              =====================    =====================

Liabilities and Partners' Capital

Liabilities:

Accounts payable and accrued expenses                          $                89     $                108
Distribution payable                                                            27                      277
Mortgage payable                                                             2,504                    2,533
Accrued interest - Subordinated Loan Payable                                    66                       60
Subordinated Loan Payable                                                      133                      133
                                                              ---------------------    ---------------------

      Total Liabilities                                                      2,819                    3,111
                                                              ---------------------    ---------------------

Partners' Capital:

Limited Partners -

   Units of Limited Partnership Interest,
   $1,000 stated value per unit; 25,005 units
   authorized, issued and outstanding                                        2,400                    2,189
General Partners' deficit                                                   (1,296)                  (1,313)
                                                              ---------------------    ---------------------

         Total Partners' Capital                                             1,104                      876
                                                              ---------------------    ---------------------

         Total Liabilities and Partners' Capital               $             3,923     $              3,987
                                                              =====================    =====================
</TABLE>



                 See notes to consolidated financial statements.

                                     2 of 13

<PAGE>


  WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                   FORM 10-QSB JUNE 30, 1999

Consolidated Statements of Operations (Unaudited)

(In Thousands, Except Unit Data)

<TABLE>
<CAPTION>
                                                         For the Three Months Ended               For the Six Months Ended
                                                         June 30,            June 30,             June 30,          June 30,
                                                          1999                 1998                1999               1998
                                                   -------------------  -------------------  -----------------  -----------------

<S>                                                <C>                  <C>                  <C>                 <C>
Income:

    Rental income                                  $              284   $              267   $            565    $           534
    Income from Local Limited Partnership
       cash distributions                                         304                  115                304                129
    Equity in (loss) income of Local
       Limited Partnership                                        (33)                   -                (32)                19
    Interest                                                       17                   17                 32                 28
    Other                                                          14                    6                 27                 14
                                                   -------------------  -------------------  -----------------  -----------------

      Total Income                                                586                  405                896                724
                                                   -------------------  -------------------  -----------------  -----------------

Expenses:

    Operating                                                     202                  188                385                382
    Interest                                                       50                   51                101                103
    Depreciation and amortization                                  46                   45                 91                 91
    General and administrative                                     22                   24                 37                 48
                                                   -------------------  -------------------  -----------------  -----------------

      Total Expenses                                              320                  308                614                624
                                                   -------------------  -------------------  -----------------  -----------------

Net income                                         $              266   $               97   $            282    $           100
                                                   ===================  ===================  =================  =================

Net income allocated to General Partners           $               20   $                7   $             21    $             7
                                                   ===================  ===================  =================  =================

Net income allocated to Limited Partners           $              246   $               90   $            261    $            93
                                                   ===================  ===================  =================  =================

Net income per Unit of Limited Partnership
   Interest                                        $             9.84   $             3.60   $          10.44    $          3.72
                                                   ===================  ===================  =================  =================

Distributions per Unit of Limited Partnership
   Interest                                        $             1.00   $             1.00   $           2.00    $          2.00
                                                   ===================  ===================  =================  =================
</TABLE>



                 See notes to consolidated financial statements.


                                     3 of 13

<PAGE>


           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP

                            FORM 10-QSB JUNE 30, 1999



Consolidated Statement of Changes in Partners' Capital (Unaudited)

<TABLE>
<CAPTION>
(In Thousands, Except Unit Data)                  Units of
                                                   Limited             General              Limited               Total
                                                 Partnership          Partners'            Partners'            Partners'
                                                  Interest             Deficit              Capital              Capital
                                              ------------------  -------------------  ------------------   -------------------

<S>                                           <C>                 <C>                  <C>                  <C>
Balance - January 1, 1999                                25,005   $           (1,313)  $           2,189    $              876

    Net income                                                                    21                 261                   282
    Distributions                                                                 (4)                (50)                  (54)
                                              ------------------  -------------------  ------------------   -------------------

Balance - June 30, 1999                                  25,005   $           (1,296)  $           2,400    $            1,104
                                              ==================  ===================  ==================   ===================
</TABLE>



                 See notes to consolidated financial statements.

                                     4 of 13

<PAGE>


           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                            FORM 10-QSB JUNE 30, 1999


Consolidated Statements of Cash Flows (Unaudited)

<TABLE>
<CAPTION>
                                                                                        For the Six Months Ended
                                                                                    June 30,                 June 30,
(In Thousands)                                                                        1999                     1998
                                                                              ---------------------    ---------------------

<S>                                                                           <C>                      <C>
Cash Flows from Operating Activities:

Net income                                                                    $                282     $                100
Adjustments to reconcile net income to net cash
  provided by operating activities:
      Depreciation                                                                              89                       89
      Amortization                                                                               2                        2
      Equity in loss (income) of Local Limited Partnership                                      32                      (19)

      Changes in assets and liabilities:
         Increase in other assets                                                              (57)                     (23)
         Decrease in accounts payable
            and accrued expenses                                                               (19)                       -
         Increase in accrued interest payable on subordinated loan                               6                        7
                                                                              ---------------------    ---------------------

      Net cash provided by operating activities                                                335                      156
                                                                              ---------------------    ---------------------

Cash Flows From Investing Activities:

      Distribution received from Local Limited Partnership                                      27                        -
                                                                              ---------------------    ---------------------

      Cash provided by investing activities                                                     27                        -
                                                                              ---------------------    ---------------------

Cash Flows From Financing Activities:

      Mortgage principal payments                                                              (29)                     (26)
      Distributions to partners                                                               (304)                     (54)
                                                                              ---------------------    ---------------------

      Cash used in financing activities                                                       (333)                     (80)
                                                                              ---------------------    ---------------------

Net increase in cash and cash equivalents                                                       29                       76

Cash and cash equivalents, beginning of period                                               1,723                    1,484
                                                                              ---------------------    ---------------------

Cash and cash equivalents, end of period                                      $              1,752     $              1,560
                                                                              =====================    =====================

Supplemental Disclosure of Cash Flow Information

      Interest paid in cash                                                   $                 95     $                 96
                                                                              =====================    =====================

Supplemental Disclosure of Non-Cash
      Investing Activities

      Accrued Distributions to Partners                                       $                 27     $                 27
                                                                              =====================    =====================
</TABLE>



                 See notes to consolidated financial statements.

                                     5 of 13
<PAGE>


           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                            FORM 10-QSB JUNE 30, 1999

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.           General

             The accompanying financial statements, footnotes and discussions
             should be read in conjunction with the financial statements,
             related footnotes and discussions contained in the Partnership's
             Annual Report on Form 10-KSB for the year ended December 31, 1998.

             The financial information contained herein is unaudited. In the
             opinion of management, all adjustments necessary for a fair
             presentation of such financial information have been included. All
             adjustments are of a normal recurring nature. Certain amounts have
             been reclassified to conform to the June 30, 1999 presentation. The
             balance sheet at December 31, 1998, was derived from audited
             financial statements at such date.

             The results of operations for the six months ended June 30, 1999
             and 1998, are not necessarily indicative of the results to be
             expected for the full year.

2.           Consolidation

             The accompanying financial statements have been prepared on a
             consolidated basis, including the accounts of Clear Creek Ltd.
             ("Clear Creek"). All significant intercompany transactions and
             balances have been eliminated.



                                     6 of 13
<PAGE>


           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                            FORM 10-QSB JUNE 30, 1999

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

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

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

           Liquidity and Capital Resources

           As of June 30, 1999, the Partnership retained an equity interest in
           six Local Limited Partnerships, each of which owns a single apartment
           complex. The Partnership also owns an 88.5% interest in Clear Creek
           Ltd. ("Clear Creek"), a partnership in which an affiliate of the
           Partnership's general partner is the sole general partner. The
           Partnership's primary sources of income are distributions from the
           Local Limited Partnerships and rental income from Clear Creek
           Apartments. The Partnership requires cash to pay the operating
           expenses of Clear Creek, for general and administrative expenses and
           to make capital contributions and/or loans to any of the Local
           Limited Partnerships which the Managing General Partner deems to be
           in the Partnership's best interest.

           To date, all cash requirements have been satisfied by interest income
           earned on short-term investments, rental income from Clear Creek and
           cash distributed to the Partnership by the Local Limited
           Partnerships. If the Partnership funds any operating deficits, it
           will use monies from its operating reserves. As of June 30, 1999, the
           Partnership had cash and cash equivalents of $1,752,000, as compared
           to $1,723,000 at December 31, 1998. The Managing General Partner's
           current policy is to maintain a reserve balance sufficient to provide
           the Partnership the flexibility to preserve its economic interest in
           the Local Limited Partnerships. Therefore, a lack of cash distributed
           by the Local Limited Partnerships to the Partnership in the future
           should not deplete the reserves, though it may restrict the
           Partnership from making distributions. The Partnership did not fund
           any operating deficits to Local Limited Partnerships in 1999 and
           1998.

           The level of liquidity based on cash and cash equivalents experienced
           a $29,000 increase at June 30, 1999, as compared to December 31,
           1998. The Partnership's $335,000 of net cash provided by operating
           activities and $27,000 distribution received from Local Limited
           Partnership (investing activities) was partially offset by $29,000 of
           mortgage principal payments and $304,000 of cash distributed to
           partners (financing activities). On June 16, 1998, Fayetteville
           Apartments Limited partnership ("Fayetteville") refinanced its
           mortgage. During September 1998, Fayetteville distributed $250,000 of
           refinancing proceeds to the Partnership. The Partnership distributed
           the proceeds of the $250,000 distribution received from Fayetteville
           during the first quarter of 1999. In addition, as of June 30, 1999,
           Partnership distributions (paid or accrued) aggregated $50,000 ($2.00
           per Unit) to its limited partners and $4,000 to the general partners.


                                     7 of 13
<PAGE>


           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                            FORM 10-QSB JUNE 30, 1999


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

           Liquidity and Capital Resources (Continued)

           The Partnership is not obligated to provide any additional funds to
           the Local Limited Partnerships to fund operating deficits. The
           Partnership determines on a case by case basis whether to fund any
           operating deficits. If a Local Limited Partnership sustains
           continuing operating deficits and has no other sources of funding, it
           is likely that it will eventually default on its mortgage obligations
           and risk a foreclosure on its property by the lender. If a
           foreclosure were to occur, the Local Limited Partnership would lose
           its investment in the property and would incur a tax liability due to
           the recapture of tax benefits taken in prior years. The Partnership,
           as an owner of the Local Limited Partnership, would share these
           consequences in proportion to its ownership interest in the Local
           Limited Partnership.

           The loan encumbering Dunhaven Apartments Phase II, ("Dunhaven") was
           in default and held by the U.S. Department of Housing and Urban
           Development. The Partnership was unable to reach an agreement with
           the general partner of the Local Limited Partnership which holds
           title to Dunhaven pursuant to which the Partnership, or an affiliate
           of the Partnership, would have been appointed as general partner of
           the Dunhaven Local Limited Partnership and the Partnership, or its
           affiliate, would satisfy the default on the loan. In June of 1999,
           the Department of Housing and Urban Development foreclosed on the
           mortgage for Dunhaven. For financial reporting purposes, the
           Partnership's investment in this Local Limited Partnership had
           previously been written down to zero. For tax reporting purposes, the
           Partnership will incur a tax liability due to the recapture of tax
           benefits taken in prior years in proportion to its ownership interest
           in the Local Limited Partnership.

           Clear Creek has two housing assistance contracts with the Department
           of Housing and Urban Development, which account for approximately 20%
           of the units in the apartment complex. One contract expired in July
           1999 and was not renewed. The other contract expires in September of
           1999 and is not expected to be renewed. Based upon current market
           conditions of apartment rentals, the non-renewal of these contracts
           is not expected to have a significant impact on rental operations.

           Year 2000

           The Year 2000 Issue is the result of computer programs being written
           using two digits rather than four to define the applicable year. The
           Registrant is dependent upon the General Partner and its affiliates
           and Coordinated Services for management and administrative services.
           Any computer programs or hardware that have date-sensitive software
           or embedded chips may recognize a date using "00" as the year 1900
           rather than the year 2000. This could result in a system failure or
           miscalculations causing disruptions of operations, including, among
           other things, a temporary inability to process transactions, send
           invoices, or engage in similar normal business activities.



                                     8 of 13
<PAGE>


           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                            FORM 10-QSB JUNE 30, 1999


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

           Year 2000 (Continued)

           During the first half of 1998, Coordinated Services, the General
           Partner and its affiliates completed their assessment of the various
           computer software and hardware used in connection with the management
           of the Registrant. This review indicated that significantly all of
           the computer programs used by the Managing General Partner and its
           affiliates are off-the-shelf "packaged" computer programs which are
           easily upgraded to be Year 2000 compliant. In addition, to the extent
           that custom programs are utilized by the Managing General Partner and
           its affiliates, such custom programs are Year 2000 compliant.

           Following the completion of its assessment of the computer software
           and hardware, Coordinated Services, the General Partner and its
           affiliates began upgrading those systems which required upgrading. To
           date, significantly all of these systems have been upgraded. The
           Registrant has to date not borne, nor is it expected that the
           Registrant will bear, any significant costs in connection with the
           upgrade of those systems requiring remediation.

           To date, neither Coordinated Services or the General Partner are
           aware of any external agent with a Year 2000 issue that would
           materially impact the Registrant's results of operations, liquidity
           or capital resources. However, the Managing General Partner has no
           means of ensuring that external agents will be Year 2000 compliant.
           The General Partner does not believe that the inability of external
           agents to complete their Year 2000 resolution process in a timely
           manner will have a material impact on the financial position or
           results of operations of the Registrant. However, the effect of
           non-compliance by external agents is not readily determinable.

           Results of Operations

           Net income increased by $182,000 for the six months ended June 30,
           1999, as compared to the six months ended June 30, 1998. The increase
           is due to an increase in income of $172,000 and a decrease in
           expenses of $10,000. The increase in income is primarily due to an
           increase of $175,000 of cash received from Local Limited
           Partnerships, an increase in rental income of $31,000, and an
           increase in other income of $13,000, which was partially offset by a
           decrease of $51,000 of equity in income of Local Limited Partnership.
           Rental income increased primarily due to higher occupancy in 1999 as
           compared to 1998. During the six months ended June 30, 1999, the
           Local Limited Partnerships owning Village Square Apartments and the
           Groves Apartments distributed $291,000 and $13,000, respectively.
           During the six months ended June 30, 1998, the Local Limited
           Partnerships owning Village Square Apartments and Dunhaven
           Apartments, Section II - Phase I distributed $115,000 and $14,000,
           respectively. The decrease in expenses is primarily due to a decrease
           in general and administrative expenses of $11,000, which is due to
           the timing of certain expenditures. All other items of income and
           expense remained relatively constant.


                                     9 of 13
<PAGE>


           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                            FORM 10-QSB JUNE 30, 1999


Part II - Other Information


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

             (a)  Exhibits

                  27.      Financial Data Schedule

                  99.      Supplementary Information Required Pursuant to
                           Section 9.4 of the Partnership Agreement.

             (b) Reports on Form 8-K:

                  No reports on Form 8-K were filed during the six months ended
                  June 30, 1999.



                                    10 of 13
<PAGE>


           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                            FORM 10-QSB JUNE 30, 1999


                                   SIGNATURES

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

                                  WINTHROP RESIDENTIAL ASSOCIATES III,
                                  A LIMITED PARTNERSHIP


                                  BY:  TWO WINTHROP PROPERTIES, INC.
                                       Managing General Partner



                                  BY:  /s/ Michael L. Ashner
                                       ------------------------------
                                       Michael L. Ashner
                                       Chief Executive Officer



                                  BY:  /s/ Thomas Staples
                                       ------------------------------
                                       Thomas Staples
                                       Chief Financial Officer

                                       Dated:     August 12, 1999



                                    11 of 13
<PAGE>


           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                            FORM 10-QSB JUNE 30, 1999


Exhibit Index


         Exhibit                                                       Page No.
         -------                                                       --------

27.      Financial Data Schedule                                           -

99.      Supplementary Information Required
         Pursuant to Section 9.4 of the
         Partnership Agreement.                                           13




                                    12 of 13