<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 March 31, 2000
                                                 --------------

                                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)

<TABLE>
<S>                                                <C>
                  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)
</TABLE>

        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_____


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                                     1 of 12
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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                           FORM 10-QSB MARCH 31, 2000

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.

Consolidated Balance Sheets (Unaudited)

<TABLE>
<CAPTION>
                                                               March 31,         December 31,
(In Thousands, Except Unit Data)                                 2000               1999
                                                             -------------    -----------------
<S>                                                          <C>              <C>

Assets

Cash and cash equivalents                                        $ 2,341            $ 2,683
Other assets                                                         107                 91
Real estate (net of accumulated depreciation
      of $3,120 in 2000 and $3,073 in 1999)                        2,008              2,055
                                                                 -------            -------

      Total Assets                                               $ 4,456            $ 4,829
                                                                 =======            =======

Liabilities and Partners' Capital

Liabilities:

Accounts payable and accrued expenses                            $    90            $    82
Distribution payable                                                  27                502
Mortgage payable                                                   2,460              2,475
Accrued interest - subordinated loan payable                          77                 73
Subordinated loan payable                                            133                133
                                                                 -------            -------

      Total Liabilities                                            2,787              3,265
                                                                 -------            -------

Partners' Capital:

Limited Partners -
   Units of Limited Partnership Interest,
   $1,000 stated value per unit; 25,005 units authorized,
   issued and outstanding                                          2,887              2,790
General Partners' deficit                                         (1,218)            (1,226)
                                                                 -------            -------

         Total Partners' Capital                                   1,669              1,564
                                                                 -------            -------

         Total Liabilities and Partners' Capital                 $ 4,456            $ 4,829
                                                                 =======            =======
</TABLE>


                 See notes to consolidated financial statements.

                                     2 of 12

<PAGE>


           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                           FORM 10-QSB MARCH 31, 2000



Consolidated Statements of Operations (Unaudited)

(In Thousands, Except Unit Data)

<TABLE>
<CAPTION>
                                                                     For the Three Months Ended
                                                                      March 31,       March 31,
                                                                       2000             1999
                                                                   --------------  --------------
<S>                                                                <C>             <C>
Income:

    Rental income                                                      $   289         $   281
    Income from Local Limited Partnership cash distributions                87               -
    Equity in income of Local Limited Partnerships                           -               1
    Interest                                                                28              15
    Other                                                                    9              13
                                                                       -------         -------

      Total Income                                                         413             310
                                                                       -------         -------

Expenses:

    Operating                                                              164             183
    Interest                                                                50              51
    Depreciation and amortization                                           47              45
    General and administrative                                              20              15
                                                                       -------         -------

      Total Expenses                                                       281             294
                                                                       -------         -------

Net income                                                             $   132         $    16
                                                                       =======         =======

Net income allocated to General Partners                               $    10         $     1
                                                                       =======         =======

Net income allocated to Limited Partners                               $   122         $    15
                                                                       =======         =======

Net Income per Unit of Limited Partnership Interest                    $  4.88         $   .60
                                                                       =======         =======

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



                 See notes to consolidated financial statements.

                                     3 of 12

<PAGE>


           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                           FORM 10-QSB MARCH 31, 2000



Consolidated Statement of Changes in Partners' Capital (Unaudited)

<TABLE>
<CAPTION>

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

<S>                                       <C>               <C>              <C>               <C>
Balance - January 1, 2000                       25,005      $      2,790     $     (1,226)     $       1,564

    Net income                                                       122               10                132
    Distributions                                                    (25)              (2)               (27)
                                          -------------     -------------    -------------     --------------

Balance - March 31, 2000                        25,005      $      2,887     $     (1,218)     $       1,669
                                          =============     =============    =============     ==============
</TABLE>


                See notes to consolidated financial statements.


                                    4 of 12

<PAGE>


           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                           FORM 10-QSB MARCH 31, 2000

Consolidated Statements of Cash Flows (Unaudited)

<TABLE>
<CAPTION>
                                                                                       For the Three Months Ended
                                                                                   March 31,                March 31,
(In Thousands)                                                                        2000                     1999
                                                                              ---------------------    ---------------------
<S>                                                                           <C>                      <C>
Cash Flows from Operating Activities:

Net income                                                                        $        132             $         16
Adjustments to reconcile net income to net cash
  provided by operating activities:
      Depreciation                                                                          47                       44
      Amortization                                                                           -                        1
      Equity in income of Local Limited Partnership                                          -                       (1)

      Changes in assets and liabilities:
         Increase in other assets                                                          (16)                     (12)
         Increase (decrease) in accounts payable
          and accrued expenses                                                               8                      (14)
         Increase in accrued interest payable on subordinated loan                           4                        3
                                                                                  -------------            -------------

      Net cash provided by operating activities                                            175                       37
                                                                                  -------------            -------------

Cash Flows From Financing Activities:

      Mortgage principal payments                                                          (15)                     (14)
      Distributions to partners                                                           (502)                    (277)
                                                                                  -------------            -------------

      Net cash used in financing activities                                               (517)                    (291)
                                                                                  -------------            -------------


Net decrease in cash and cash equivalents                                                 (342)                    (254)

Cash and cash equivalents, beginning of period                                           2,683                    1,723
                                                                                  -------------            -------------

Cash and cash equivalents, end of period                                          $      2,341             $      1,469
                                                                                  =============            =============

Supplemental Disclosure of Cash Flow Information

      Interest paid in cash                                                       $         46             $         48
                                                                                  =============            =============

Supplemental Disclosure of Non-Cash
      Investing Activities

      Accrued distributions to partners                                           $         27             $         27
                                                                                  =============            =============
</TABLE>

                 See notes to consolidated financial statements.

                                     5 of 12

<PAGE>

           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                           FORM 10-QSB MARCH 31, 2000

                   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, 1999.

             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 March 31, 2000 presentation.
             The balance sheet at December 31, 1999, was derived from audited
             financial statements at such date.

             The results of operations for the three months ended March 31, 2000
             and 1999, 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 12

<PAGE>



           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                           FORM 10-QSB MARCH 31, 2000


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 consolidated
           financial statements and other items contained elsewhere in the
           report.

           Liquidity and Capital Resources

           As of March 31, 2000, the Partnership retained an equity interest in
           five 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, 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 March 31, 2000,
           the Partnership had cash and cash equivalents of $2,341,000, as
           compared to $2,683,000 at December 31, 1999. 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 2000 and
           1999.

           The level of liquidity based on cash and cash equivalents experienced
           a $342,000 decrease at March 31, 2000 as compared to December 31,
           1999. The Partnership's $15,000 of mortgage principal payments and
           $502,000 of cash distributed to partners (financing activities) was
           partially offset by $175,000 of net cash provided by operating
           activities. Village Square Associates, a Local Limited Partnership
           ("Village Square"), refinanced its mortgage and distributed $942,000
           of the proceeds to the Partnership in September 1999. At December 31,
           1999, the Partnership recorded an accrued distribution of $475,000
           related to the refinancing proceeds which was distributed in the
           quarter ended March 31, 2000.


                                     7 of 12

<PAGE>


           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                           FORM 10-QSB MARCH 31, 2000

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

           Liquidity and Capital Resources (Continued)

           In addition, as of March 31, 2000, the Partnership accrued
           distributions aggregating $25,000 ($1.00 per Unit) to its limited
           partners and $2,000 to the general partners.

           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.

           In 1999, the Department of Housing and Urban Development foreclosed
           on the mortgage for Dunhaven Apartments Phase II, ("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 in 2000 due to the recapture of tax benefits taken in prior
           years in proportion to its ownership interest in the Local Limited
           Partnership.

           Clear Creek had two housing assistance contracts with the Department
           of Housing and Urban Development which accounted for approximately
           20% of the units in the apartment complex. These contracts expired in
           1999 and were not renewed. Management replaced the housing assistance
           contracts with subsidized payments from a local subsidy contract.

           Results of Operations

           Net income increased by $116,000 for the three months ended March 31,
           2000, as compared to the three months ended March 31, 1999. The
           increase is due to an increase in income of $103,000 and a decrease
           in expenses of $13,000. The increase in income is primarily due to an
           increase of cash received from Local Limited Partnerships of $87,000
           and an increase in interest income of $13,000. During the three
           months ended March 31, 2000, the Local Limited Partnerships owning
           Fayetteville Apartments and the Groves Apartments distributed $48,000
           and $39,000, respectively, to the Partnership. The decrease in
           expenses is primarily due to a decrease in operating expenses of
           $19,000 which was partially offset by an increase in general and
           administrative expenses of $5,000. All other items of income and
           expense remained relatively constant.



                                     8 of 12

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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                           FORM 10-QSB MARCH 31, 2000


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 period ended
                  March 31, 2000.






                                     9 of 12

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           WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                           FORM 10-QSB MARCH 31, 2000


                                   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: May 11, 2000




                                    10 of 12

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    WINTHROP RESIDENTIAL ASSOCIATES III, A LIMITED PARTNERSHIP
                    FORM 10-QSB MARCH 31, 2000



Exhibit Index


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

27.      Financial Data Schedule                                         -

99.      Supplementary Information Required Pursuant to
         Section 9.4 of the Partnership Agreement.                      12











                                    11 of 12