UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549



FORM 10-Q



(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, 2008



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 0-14187



CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3

(Exact name of registrant as specified in its charter)



|                                |                    
|------------------------------- | -------------------
|California                      | 94-2940208         
|(State or other jurisdiction of | (I.R.S. Employer   
|incorporation or organization)  | Identification No.)



55 Beattie Place, PO Box 1089

Greenville, South Carolina  29602

(Address of principal executive offices)



(864) 239-1000

(Registrants telephone number, including area code)



Indicate by check mark 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.

[X] Yes  [ ] No



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                                                                        |                              
|----------------------------------------------------------------------- | -----------------------------
|Large accelerated filer [ ]                                             | Accelerated filer [ ]        
|Non-accelerated filer [ ]
(Do not check if a smaller reporting company) | Smaller reporting company [X]



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

[ ] Yes  [X] No











PART I  FINANCIAL INFORMATION





Item 1.

Financial Statements







CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3

BALANCE SHEETS

(in thousands, except unit data)





|                                             |             |             
|-------------------------------------------- | ----------- | ------------
|                                             | June 30,    | December 31,
|                                             | 2008        | 2007        
|                                             | (Unaudited) | (Note)      
|                                             |             | (Restated)  
|Assets                                       |             |             
|Cash and cash equivalents                    | $    437    | $    224    
|Receivables and deposits                     | 711         | 655         
|Other assets                                 | 1,283       | 1,089       
|Investment properties:                       |             |             
|Land                                         | 8,177       | 8,177       
|Buildings and related personal property      | 72,918      | 68,653      
|                                             | 81,095      | 76,830      
|Less accumulated depreciation                | (37,098)    | (34,274)    
|                                             | 43,997      | 42,556      
|Assets held for sale (Note A)                | --          | 2,031       
|                                             | $46,428     | $46,555     
|                                             |             |             
|Liabilities and Partners' Deficit            |             |             
|Liabilities                                  |             |             
|Accounts payable                             | $ 1,218     | $  2,603    
|Tenant security deposit liabilities          | 424         | 412         
|Accrued property taxes                       | 307         | 193         
|Other liabilities                            | 543         | 555         
|Due to affiliates (Note B)                   | 10,347      | 11,018      
|Mortgage notes payable                       | 47,530      | 48,172      
|Liabilities related to assets held           |             |             
|for sale (Note A)                            | --          | 4,791       
|                                             | 60,369      | 67,744      
|                                             |             |             
|Partners' Deficit                            |             |             
|General partner                              | (982)       | (1,054)     
|Limited partners (383,001 units outstanding) | (12,959)    | (20,135)    
|                                             | (13,941)    | (21,189)    
|                                             | $46,428     | $46,555     



Note:

The balance sheet at December 31, 2007 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.



See Accompanying Notes to Financial Statements















CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3



CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per unit data)





|                               |                |                |          |           
|------------------------------ | -------------- | -------------- | -------- | ----------
|                               | Three Months   | Six Months    
|                               | Ended June 30, | Ended June 30,
|                               | 2008           | 2007           | 2008     | 2007      
|                               |                | (Restated)     |          | (Restated)
|Revenues:                      |                |                |          |           
|Rental income                  | $ 2,963        | $ 2,647        | $ 5,739  | $ 5,173   
|Other income                   | 363            | 386            | 771      | 694       
|Total revenues                 | 3,326          | 3,033          | 6,510    | 5,867     
|                               |                |                |          |           
|Expenses:                      |                |                |          |           
|Operating                      | 1,645          | 1,623          | 3,208    | 3,239     
|General and administrative     | 158            | 154            | 296      | 302       
|Depreciation                   | 1,581          | 964            | 2,888    | 1,902     
|Interest                       | 1,112          | 829            | 2,074    | 1,656     
|Property tax                   | 212            | 187            | 416      | 360       
|Total expenses                 | 4,708          | 3,757          | 8,882    | 7,459     
|                               |                |                |          |           
|Casualty gain (Note C)         | 52             | 19             | 85       | 19        
|Loss before discontinued       |                |                |          |           
|operations                     | (1,330)        | (705)          | (2,287)  | (1,573)   
|Loss from discontinued         |                |                |          |           
|operations (Notes A and E)     | (356)          | (20)           | (338)    | (65)      
|Gain on sale of discontinued   |                |                |          |           
|operations (Note E)            | 9,873          | --             | 9,873    | --        
|Net income (loss)              | $8,187         | $(725)         | $7,248   | $(1,638)  
|                               |                |                |          |           
|Net income (loss) allocated to |                |                |          |           
|general partner (1%)           | $    82        | $    (7)       | $    72  | $   (16)  
|Net income (loss) allocated to |                |                |          |           
|limited partners (99%)         | 8,105          | (718)          | 7,176    | (1,622)   
|                               | $8,187         | $(725)         | $7,248   | $(1,638)  
|Per limited partnership unit:  |                |                |          |           
|Loss from continuing           |                |                |          |           
|operations                     | $ (3.44)       | $ (1.82)       | $ (5.91) | $ (4.06)  
|Loss from discontinued         |                |                |          |           
|operations                     | (.92)          | (.05)          | (.87)    | (.17)     
|Gain on sale of discontinued   |                |                |          |           
|operations                     | 25.52          | --             | 25.52    | --        
|                               | $21.16         | $(1.87)        | $18.74   | $(4.23)   



See Accompanying Notes to Financial Statements















CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3



STATEMENT OF CHANGES IN PARTNERS' DEFICIT

(Unaudited)

(in thousands, except unit data)







|                               |             |          |           |          
|------------------------------ | ----------- | -------- | --------- | ---------
|                               | Limited     |          |           |          
|                               | Partnership | General  | Limited   |          
|                               | Units       | Partner  | Partners  | Total    
|                               |             |          |           |          
|Original capital contributions | 383,033     | $1       | $95,758   | $95,759  
|                               |             |          |           |          
|Partners' deficit at           |             |          |           |          
|December 31, 2007              | 383,001     | $(1,054) | $(20,135) | $(21,189)
|                               |             |          |           |          
|Net income for the six months  |             |          |           |          
|ended June 30, 2008            | --          | 72       | 7,176     | 7,248    
|                               |             |          |           |          
|Partners' deficit at           |             |          |           |          
|June 30, 2008                  | 383,001     | $(982)   | $(12,959) | $(13,941)



See Accompanying Notes to Financial Statements











CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3



STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)





|                                                           |                  |         
|---------------------------------------------------------- | ---------------- | --------
|                                                           | Six Months Ended
|                                                           | June 30,        
|                                                           | 2008             | 2007    
|Cash flows from operating activities:                      |                  |         
|Net income (loss)                                          | $ 7,248          | $(1,638)
|Adjustments to reconcile net income (loss) to net cash     |                  |         
|provided by operating activities:                          |                  |         
|Depreciation                                               | 2,974            | 2,207   
|Amortization of loan costs                                 | 54               | 53      
|Casualty gain                                              | (85)             | (19)    
|Gain on sale of discontinued operations                    | (9,873)          | --      
|Loss on extinguishment of debt                             | 383              | --      
|Change in accounts:                                        |                  |         
|Receivables and deposits                                   | (56)             | (98)    
|Other assets                                               | (244)            | (328)   
|Accounts payable                                           | (209)            | 18      
|Tenant security deposit liabilities                        | 12               | 57      
|Accrued property taxes                                     | 114              | 168     
|Other liabilities                                          | (32)             | 84      
|Due to affiliates                                          | 266              | 519     
|Net cash provided by operating activities                  | 552              | 1,023   
|                                                           |                  |         
|Cash flows from investing activities:                      |                  |         
|Property improvements and replacements                     | (5,682)          | (4,474) 
|Proceeds from the sale of discontinued operations          | 11,904           | --      
|Insurance proceeds received                                | 104              | 25      
|Net cash provided by (used in) investing activities        | 6,326            | (4,449) 
|                                                           |                  |         
|Cash flows from financing activities:                      |                  |         
|Payments on mortgage notes payable                         | (675)            | (689)   
|Repayment of mortgage note payable                         | (4,738)          | --      
|Prepayment penalty paid                                    | (315)            | --      
|Advances from affiliates                                   | 5,289            | 3,821   
|Repayment of advances from affiliates                      | (6,226)          | --      
|Net cash (used in) provided by financing activities        | (6,665)          | 3,132   
|                                                           |                  |         
|Net increase (decrease) in cash and cash equivalents       | 213              | (294)   
|                                                           |                  |         
|Cash and cash equivalents at beginning of period           | 224              | 500     
|                                                           |                  |         
|Cash and cash equivalents at end of period                 | $437             | $206    
|                                                           |                  |         
|Supplemental disclosure of cash flow information:          |                  |         
|Cash paid for interest, net of capitalized interest        | $1,771           | $1,516  
|                                                           |                  |         
|Supplemental disclosure of non-cash activity:              |                  |         
|Property improvements and replacements in accounts payable | $911             | $710    



Included in property improvements and replacements for the six months ended June 30, 2008 and 2007 are approximately $2,156,000 and $1,695,000 of property improvements and replacements, respectively, which were included in accounts payable at December 31, 2007 and 2006.



See Accompanying Notes to Financial Statements











CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3



NOTES TO FINANCIAL STATEMENTS

(Unaudited)



Note A  Basis of Presentation



The accompanying unaudited financial statements of Consolidated Capital Institutional Properties/3 (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of ConCap Equities, Inc. (the "General Partner"), which is wholly owned by Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2008 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2008. For further information, refer to the financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007.



Certain reclassifications have been made to the 2007 information to conform to the 2008 presentation.



In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the accompanying statements of operations for the three and six months ended June 30, 2007 have been restated to reflect the operations of Hidden Cove by the Lake Apartments and Park Capitol Apartments as discontinued operations as a result of the sales of the properties in August 2007 and June 2008, respectively. The operations for the three and six months ended June 30, 2008 of Park Capitol Apartments are included in loss from discontinued operations. Included in the loss from discontinued operations are revenues of approximately $268,000 and $530,000 for the three and six months ended June 30, 2007, respectively, for Hidden Cove by the Lake Apartments and revenues of approximately $273,000 and $604,000 and $309,000 and $612,000 for the three and six months ended June 30, 2008 and 2007, respectively, of Park Capitol Apartments.



As a result of the sale of Park Capitol Apartments in June 2008, the accompanying balance sheet as of December 31, 2007 has been restated to reflect the respective assets and liabilities of Park Capitol Apartments as held for sale.



Note B  Transactions with Affiliated Parties



The Partnership has no employees and depends on the General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for (i) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership.



Affiliates of the General Partner receive 5% of gross receipts from all of the Partnership's properties as compensation for providing property management services. The Partnership was charged by such affiliates approximately $343,000 and $339,000 for the six months ended June 30, 2008 and 2007, respectively, which is included in operating expense and loss from discontinued operations.



Affiliates of the General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $538,000 and $497,000 for the six months ended June 30, 2008 and 2007, respectively, which is included in general and administrative expenses, investment properties and gain on sale of discontinued operations. The portion of these reimbursements included in investment properties and gain on sale of discontinued operations for the six months ended June 30, 2008 and 2007 are redevelopment and construction management services provided by an affiliate of the General Partner of approximately $336,000 and $277,000, respectively.  At December 31, 2007, approximately $92,000 of these reimbursements are payable to affiliates of the General Partner and are included in due to affiliates.  No such reimbursements were owed at June 30, 2008.



During the six months ended June 30, 2008, AIMCO Properties, L.P., an affiliate of the General Partner advanced the Partnership approximately $1,293,000 to cover expenses related to operations at each of the Partnerships properties and approximately $3,996,000 to cover redevelopment costs at Cedar Rim Apartments. During the six months ended June 30, 2007, AIMCO Properties, L.P., advanced the Partnership approximately $1,341,000 to cover expenses related to operations at each of the Partnerships properties and approximately $2,480,000 to cover redevelopment costs at Sienna Bay Apartments and Cedar Rim Apartments and property improvements at Williamsburg Manor Apartments and Lamplighter Park Apartments.  Interest is charged at prime plus 2% (7.00% at June 30, 2008). Interest expense on outstanding advance balances was approximately $564,000 and $286,000 for the six months ended June 30, 2008 and 2007, respectively.  Total advances and accrued interest of approximately $10,347,000 and $10,926,000 remain unpaid and are owed to AIMCO Properties, L.P. at June 30, 2008 and December 31, 2007, respectively, and are included in due to affiliates. The Partnership may receive additional advances of funds from AIMCO Properties, L.P. although AIMCO Properties, L.P. is not obligated to provide such advances.  For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission.  Subsequent to June 30, 2008, AIMCO Properties, L.P., advanced the Partnership approximately $678,000 to cover redevelopment costs at Cedar Rim Apartments and operations at Sienna Bay Apartments and Tamarac Village Apartments.



The Partnership insures its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty, general liability and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the six months ended June 30, 2008, the Partnership was charged by AIMCO and its affiliates approximately $195,000 for hazard insurance coverage and fees associated with policy claims administration. Additional charges will be incurred by the Partnership during 2008 as other insurance policies renew later in the year.  The Partnership was charged by AIMCO and its affiliates approximately $359,000 for insurance coverage and fees associated with policy claims administration during the year ended December 31, 2007.



Note C  Casualty Events



During September 2007, one of the Partnerships investment properties, Williamsburg Manor Apartments, sustained fire damage.  During the year ended December 31, 2007, the Partnership received approximately $25,000 in insurance proceeds and recognized a casualty gain of approximately $8,000 as a result of the write off of undepreciated damaged assets of approximately $17,000.  During the six months ended June 30, 2008, the Partnership received approximately $38,000 in additional insurance proceeds and recognized an additional casualty gain of approximately $33,000 as a result of an additional write off of undepreciated damaged assets of approximately $5,000.  The Partnership does not expect to receive any further insurance proceeds related to this casualty.



During December 2007, one of the Partnerships investment properties, Lamplighter Park Apartments, sustained flood damage to several of its apartment units of approximately $102,000.  During the three and six months ended June 30, 2008, the Partnership received insurance proceeds of approximately $66,000 and wrote off undepreciated assets of approximately $14,000 resulting in a casualty gain of approximately $52,000. Additional insurance proceeds are expected to be received related to this casualty.



During December 2006, one of the Partnerships investment properties, Tamarac Village Apartments, incurred damage from a roof leak of approximately $35,000.  During the three and six months ended June 30, 2007, the Partnership received approximately $25,000 in insurance proceeds and recognized a casualty gain of approximately $19,000 as a result of the write off of undepreciated damaged assets of approximately $6,000.



Note D  Redevelopment



During 2005, the Partnership began a major redevelopment project at Sienna Bay Apartments in order to become more competitive with other properties in the area in an effort to increase occupancy at the property.  As of June 30, 2008 the redevelopment was complete.  The total cost of the redevelopment was approximately $6,777,000, of which approximately $2,000 was completed during the six months ended June 30, 2008.



During 2006, the Partnership began a major redevelopment project at Cedar Rim Apartments in order to become more competitive with other properties in the area in an effort to increase occupancy at the property.  Based upon current redevelopment plans, the General Partner anticipates the Cedar Rim Apartments redevelopment to be completed during the fourth quarter of 2008 at a total estimated cost of approximately $14,933,000, of which approximately $10,881,000 was completed during the years ended December 31, 2007 and 2006 and an additional $2,948,000 was completed during the six months ended June 30, 2008. The redevelopment consists of site, building exterior, common area and unit interior improvements.  The site improvements consist of landscape enhancements and replacements, lighting upgrades, replacing pool area with a renovated sundeck area, construction of a maintenance shop and storage building and the addition of covered parking spaces.  The building exterior improvements consist of roof replacements, gutter improvements, foundation work, replacement of all exterior siding and balcony and stairwell improvements.  The common area improvements consist of the reconstruction of mail box kiosks.  The unit interior improvements consist of kitchen and bath upgrades, replacement of appliances, and other interior renovations. Included in these construction costs are capitalized construction period interest of approximately $139,000 and $156,000, construction period property taxes of approximately $8,000 and $28,000, and other construction period operating costs of approximately $19,000 and $11,000 for the six months ended June 30, 2008 and 2007, respectively.   The Partnership currently expects to spend approximately $1,104,000 for property redevelopment during the remainder of 2008. The project is being funded by the Partnerships operating cash flow and advances from AIMCO Properties, L.P., although AIMCO Properties, L.P. is not obligated to fund such advances.



Note E  Sale of Investment Properties



On June 6, 2008, the Partnership sold Park Capitol Apartments to a third party for a gross sales price of $12,250,000. The net proceeds realized by the Partnership were approximately $11,904,000 after payment of closing costs. The Partnership used approximately $4,738,000 of the net proceeds to repay the mortgage encumbering the property. The Partnership realized a gain on sale of discontinued operations of approximately $9,873,000 during the six months ended June 30, 2008 as a result of the sale. In addition, the Partnership recorded a loss on extinguishment of debt of approximately $383,000 due to the write-off of unamortized loan costs and the payment of a prepayment penalty associated with the payment of the mortgage of approximately $315,000.  The loss on extinguishment of debt is included in loss from discontinued operations. In accordance with SFAS No. 144 the operations of Park Capitol Apartments, loss of approximately $338,000 and income of $65,000, including revenues of approximately $604,000 and $612,000 have been classified as loss from discontinued operations on the accompanying statements of operations for the six months ended June 30, 2008 and 2007, respectively.



Note F  Contingencies



In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its General Partner and several of their affiliated partnerships and corporate entities. The action purported to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) that are named as nominal defendants, challenging, among other things, the acquisition of interests in certain General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities that were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary damages and equitable relief, including judicial dissolution of the Partnership. In addition, during the third quarter of 2001, a complaint captioned Heller v. Insignia Financial Group (the "Heller action") was filed against the same defendants that are named in the Nuanes action. On or about August 6, 2001, plaintiffs filed a first amended complaint. The Heller action was brought as a purported derivative action, and asserted claims for, among other things, breach of fiduciary duty, unfair competition, conversion, unjust enrichment, and judicial dissolution. On January 28, 2002, the trial court granted defendants motion to strike the complaint.  Plaintiffs took an appeal from this order.



On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. On June 13, 2003, the court granted final approval of the settlement and entered judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an appeal (the Appeal) seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. On May 4, 2004, the Objector filed a second appeal challenging the courts use of a referee and its order requiring Objector to pay those fees.



On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.  With regard to the settlement and judgment entered thereto, the Court of Appeals vacated the trial courts order and remanded to the trial court for further findings on the basis that the state of the record is insufficient to permit meaningful appellate review.  The matter was transferred back to the trial court on June 21, 2005.  With regard to the second appeal, the Court of Appeals reversed the order requiring the Objector to pay referee fees. With respect to the related Heller appeal, on July 28, 2005, the Court of Appeals reversed the trial courts order striking the first amended complaint.



On August 18, 2005, Objector and his counsel filed a motion to disqualify the trial court based on a peremptory challenge and filed a motion to disqualify for cause on October 17, 2005, both of which were ultimately denied and/or struck by the trial court.  On or about October 13, 2005 Objector filed a motion to intervene and on or about October 19, 2005 filed both a motion to take discovery relating to the adequacy of plaintiffs as derivative representatives and a motion to dissolve the anti-suit injunction in connection with settlement.  On November 14, 2005, Plaintiffs filed a Motion For Further Findings pursuant to the remand ordered by the Court of Appeals. Defendants joined in that motion.  On February 3, 2006, the Court held a hearing on the various matters pending before it and ordered additional briefing from the parties and Objector. On June 30, 2006, the trial court entered an order confirming its approval of the class action settlement and entering judgment thereto after the Court of Appeals had remanded the matter for further findings.  The substantive terms of the settlement agreement remain unchanged.  The trial court also entered supplemental orders on July 1, 2006, denying Objectors Motion to File a Complaint in Intervention, Objectors Motion for Leave of Discovery and Objectors Motion to Dissolve the Anti-Suit Injunction.  Notice of Entry of Judgment was served on July 10, 2006.



On August 31, 2006, the Objector filed a Notice of Appeal to the Courts June 30, 2006 and July 1, 2006 orders. The matter was argued and submitted and the Court of Appeal issued an opinion on February 20, 2008 affirming the order approving the settlement and judgment entered thereto. On March 12, 2008, the Court of Appeal denied Appellants Petition for Re-Hearing. On May 21, 2008, the California Supreme Court denied Appellants Petition for Review.  Objector has until August 19, 2008 to file a petition for certiorari with the United States Supreme Court.



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



As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (overtime claims). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call" (on-call claims). In March 2007, the court in the District of Columbia decertified the collective action.  In July 2007, plaintiffs counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining on-call claims and the attorneys fees claimed by plaintiffs counsel. As a result, the lawsuits asserted in the 22 Federal courts will be dismissed. At this time, affiliates of the General Partner are attempting to obtain additional information to determine the most equitable allocation of settlement amounts and attorneys fees. The General Partner is uncertain as to the amount of loss, if any, allocable to the Partnership.  Therefore, the Partnership cannot estimate whether a loss will occur or a potential range of loss.



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



Environmental



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



Mold



The Partnership is aware of lawsuits against owners and managers of multifamily properties asserting claims of personal injury and property damage caused by the presence of mold, some of which have resulted in substantial monetary judgments or settlements.  The Partnership has only limited insurance coverage for property damage loss claims arising from the presence of mold and for personal injury claims related to mold exposure.  Affiliates of the General Partner have implemented policies, procedures, third-party audits and training and the General Partner believes that these measures will prevent or eliminate mold exposure and will minimize the effects that mold may have on residents.  To date, the Partnership has not incurred any material costs or liabilities relating to claims of mold exposure. During the year ended December 31, 2007, the Partnership incurred approximately $206,000 related to mold abatement conditions that occurred at Cedar Rim Apartments and an additional $88,000 during the six months ended June 30, 2008.  The mold abatement is a direct result of extremely wet and rainy weather conditions which occurred during the redevelopment work to several buildings which required exterior walls and windows to be removed prior to replacement.  The Partnership does not anticipate that it will incur any additional costs during the reminder of 2008 as a result of these mold conditions.  Because the law regarding mold is unsettled and subject to change the General Partner can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on the Partnerships financial condition or results of operations.



Item 2.

Management's Discussion and Analysis of Financial Condition and Results of  Operations



The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements in certain circumstances. Certain information included in this Report contains or may contain information that is forward-looking, including, without limitation, statements regarding the effect of redevelopments, the Partnerships future financial performance, including the Partnerships ability to maintain current or meet projected occupancy and rent levels, and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and, in addition, will be affected by a variety of risks and factors that are beyond the Partnerships control including, without limitation: natural disasters such as hurricanes; national and local economic conditions; the general level of interest rates; energy costs; the terms of governmental regulations that affect the Partnerships properties and interpretations of those regulations; the competitive environment in which the Partnership operates; financing risks, including the risk that the Partnerships cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for tenants in such markets; insurance risks; development risks; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the Partnership.   Readers should carefully review the Partnerships financial statements and the notes thereto, as well as the risk factors described in the documents the Partnership files from time to time with the Securities and Exchange Commission.



The Partnership's investment properties consist of five apartment complexes. The following table sets forth the average occupancy of the properties for each of the six month periods ended June 30, 2008 and 2007:



|                              |                   |     
|----------------------------- | ----------------- | ----
|                              | Average Occupancy
|Property                      | 2008              | 2007
|                              |                   |     
|Cedar Rim Apartments (1)      | 53%               | 67% 
|New Castle, Washington        |                   |     
|Lamplighter Park Apartments   | 99%               | 99% 
|Bellevue, Washington          |                   |     
|Sienna Bay Apartments (2)     | 91%               | 81% 
|St. Petersburg, Florida       |                   |     
|Tamarac Village Apartments    | 97%               | 97% 
|Denver, Colorado              |                   |     
|Williamsburg Manor Apartments | 95%               | 96% 
|Cary, North Carolina          |                   |     



(1)

The General Partner attributes the decrease in occupancy at Cedar Rim Apartments to ongoing redevelopment at the property.



(2)

The General Partner attributes the increase in occupancy at Sienna Bay Apartments to completion of the redevelopment of the property during the first quarter of 2008.



The Partnerships financial results depend upon a number of factors including the ability to attract and maintain tenants at the investment properties, interest rates on mortgage loans, costs incurred to operate the investment properties, general economic conditions and weather. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, the General Partner may use rental concessions and rental rate reductions to offset softening market conditions, accordingly, there is no guarantee that the General Partner will be able to sustain such a plan. Further, a number of factors that are outside the control of the Partnership such as the local economic climate and weather can adversely or positively affect the Partnerships financial results.



Results of Operations



The Partnerships net income was approximately $8,187,000 and $7,248,000 for the three and six months ended June 30, 2008, respectively, compared to net loss of approximately $725,000 and $1,638,000 for the three and six months ended June 30, 2007, respectively. The increase in net income for the three and six months ended June 30, 2008 is primarily due to the recognition of a gain on sale of discontinued operations, the recognition of casualty gains and an increase in total revenues partially offset by an increase in loss from discontinued operations and total expenses.



In accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the statements of operations for the three and six months ended June 30, 2007 have been restated to reflect the operations of Hidden Cove by the Lake Apartments and Park Capitol Apartments as discontinued operations as a result of the sales of the properties in August 2007 and June 2008, respectively. The operations for the three and six months ended June 30, 2008 of Park Capitol Apartments are included in loss from discontinued operations. Included in the loss from discontinued operations are revenues of approximately $268,000 and $530,000 for the three and six months ended June 30, 2007, respectively, for Hidden Cove by the Lake Apartments and revenues of approximately $273,000 and $604,000 and $309,000 and $612,000 for the three and six months ended June 30, 2008 and 2007, respectively, of Park Capitol Apartments.



On June 6, 2008, the Partnership sold Park Capitol Apartments to a third party for a gross sales price of $12,250,000. The net proceeds realized by the Partnership were approximately $11,904,000 after payment of closing costs. The Partnership used approximately $4,738,000 of the net proceeds to repay the mortgage encumbering the property. The Partnership realized a gain on sale of discontinued operations of approximately $9,873,000 during the six months ended June 30, 2008 as a result of the sale. In addition, the Partnership recorded a loss on extinguishment of debt of approximately $383,000 due to the write-off of unamortized loan costs and the payment of a prepayment penalty associated with the payment of the mortgage of approximately $315,000.  The loss on extinguishment of debt is included in loss from discontinued operations. In accordance with SFAS No. 144 the operations of Park Capitol Apartments, loss of approximately $338,000 and income of approximately $65,000, including revenues of approximately $604,000 and $612,000 have been classified as loss from discontinued operations for the six months ended June 30, 2008 and 2007, respectively.



The Partnership recognized a loss from continuing operations of approximately $1,330,000 and $2,287,000 for the three and six months ended June 30, 2008 compared to loss from continuing operations of approximately $705,000 and $1,573,000 for the three and six months ended June 30, 2007, respectively.  The increase in loss from continuing operations for both the three and six months ended June 30, 2008 is due  an increase in total expenses, partially offset by an increase in total revenues and an increase in the recognition of casualty gains.



Total revenues increased for the three months ended June 30, 2008 due to an increase in rental income partially offset by a decrease in other income.  Total revenues increased for the six months ended June 30, 2008 due to increases in both rental income and other income. Rental income increased for both periods due to an increase in the average rental rates at all of the investment properties and an increase in occupancy at Sienna Bay Apartments partially offset by a decrease in occupancy at Cedar Rim Apartments.  Other income increased for the six month period due to an increase in tenant utility reimbursements at Williamsburg Manor, Sienna Bay, and Lamplighter Park Apartments and lease cancellation fees at Sienna Bay Apartments.  Other income decreased for the three month period due to a decrease in tenant utility reimbursements at Tamarac Village Apartments.



During September 2007, one of the Partnerships investment properties, Williamsburg Manor Apartments, sustained fire damage.  During the year ended December 31, 2007, the Partnership received approximately $25,000 in insurance proceeds and recognized a casualty gain of approximately $8,000 as a result of the write off of undepreciated damaged assets of approximately $17,000.  During the six months ended June 30, 2008, the Partnership received approximately $38,000 in additional insurance proceeds and recognized an additional casualty gain of approximately $33,000 as a result of an additional write off of undepreciated damaged assets of approximately $5,000.  The Partnership does not expect to receive any further insurance proceeds related to this casualty.



During December 2007, one of the Partnerships investment properties, Lamplighter Park Apartments, sustained flood damage to several of its apartment units of approximately $102,000.  During the three and six months ended June 30, 2008, the Partnership received insurance proceeds of approximately $66,000 and wrote off undepreciated assets of approximately $14,000 resulting in a casualty gain of approximately $52,000. Additional insurance proceeds are expected to be received related to this casualty.



During December 2006, one of the Partnerships investment properties, Tamarac Village Apartments, incurred damage from a roof leak of approximately $35,000.  During the three and six months ended June 30, 2007, the Partnership received approximately $25,000 in insurance proceeds and recognized a casualty gain of approximately $19,000 as a result of the write off of undepreciated damaged assets of approximately $6,000.



Total expenses increased for both the three and six months ended June 30, 2008 due to increases in depreciation, interest and property tax expenses. General and administrative expense remained relatively constant for the comparable periods. Operating expense remained relatively constant for the comparable periods as increases in advertising, insurance and management fee expenses, were partially offset by a decrease in maintenance expense for the three and six months ended June 30, 2008.  In addition, for the three months ended June 30, 2008, property expense increased.  Advertising expense increased for both periods predominantly due to an increase in advertising and promotion costs at Sienna Bay Apartments and Cedar Rim Apartments.  Insurance expense increased for both periods due to increased premiums at Sienna Bay Apartments due to its completed redevelopment.  Maintenance expense decreased for both periods primarily due to decreases in contract services at Sienna Bay Apartments, Lamplighter Park Apartments and Tamarac Village Apartments, a decrease in expenses at Lamplighter Park Apartments associated with minor casualties which occurred in 2007, partially offset by an increase in costs associated with mold abatement at Cedar Rim Apartments. Property expenses increased for the three month period primarily due to an increase in leasing commissions, salary and related benefits and utility expenses at Williamsburg Manor, Tamarac Village, Lamplighter Park and Cedar Rim Apartments. Management fees increased at all properties, except Cedar Rim Apartments, due to an increase in revenues upon which the fee is based. Depreciation expense increased for both periods due to assets being placed into service at Sienna Bay, Tamarac Village and Cedar Rim Apartments. Interest expense increased due to an increase in advances from AIMCO Properties, L.P., an affiliate of the General Partner, and the addition of a second mortgage at Lamplighter Park Apartments during 2007, partially offset by principal payments on the mortgages encumbering the Partnerships investment properties, which lowered the carrying balance of the mortgages, and a decrease in capitalized interest at Cedar Rim Apartments related to the redevelopment project. Property tax expense increased for both periods primarily due to a decrease in capitalized taxes at Cedar Rim Apartments and a successful tax appeal at Tamarac Village Apartments during the prior year related to previous years taxes.



General and administrative costs remained relatively constant for the three and six months ended June 30, 2008. Included in general and administrative expenses for the three and six months ended June 30, 2008 and 2007 are management reimbursements to the General Partner as allowed under the Partnership Agreement.  Also included in general and administrative expenses for the three and six months ended June 30, 2008 and 2007 are costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement.



Liquidity and Capital Resources



At June 30, 2008, the Partnership had cash and cash equivalents of approximately $437,000 compared to approximately $206,000 at June 30, 2007. The increase in cash and cash equivalents of approximately $213,000 from December 31, 2007, is due to approximately $6,326,000 and $552,000 of cash provided by investing and operating activities, respectively, partially offset by approximately $6,665,000 of cash used in financing activities. Cash provided by investing activities consisted of proceeds from the sale of Park Capitol Apartments and insurance proceeds received partially offset by property improvements and replacements.  Cash used in financing activities consisted of repayments of advances from an affiliate of the General Partner, the repayment of the debt encumbering Park Capitol Apartments, monthly payments on mortgage notes and payment of a prepayment penalty related to Park Capitol Apartments partially offset by the receipt of advances from an affiliate of the General Partner.  The Partnership invests its working capital reserves in interest bearing accounts.



The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the properties to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, and local legal and regulatory requirements. The General Partner monitors developments in the area of legal and regulatory compliance.  Capital improvements planned for each of the Partnership's properties are detailed below.



Cedar Rim Apartments



During the six months ended June 30, 2008, the Partnership completed approximately $2,948,000 of capital improvements arising from the redevelopment of the property, which includes capitalization of construction period interest of approximately $139,000, construction period property taxes of approximately $8,000, and other construction period operating costs of approximately $19,000. The property is currently undergoing a redevelopment project in order to become more competitive with other properties in the area in an effort to increase net operating income at the property.  The redevelopment consists of site, building exterior, common area and unit interior improvements.  The site improvements consist of landscape enhancements and replacements, lighting upgrades, replacing pool area with a renovated sundeck area, construction of a maintenance shop and storage building and the addition of covered parking spaces.  The building exterior improvements consist of roof replacements, gutter improvements, foundation work, replacement of all exterior siding and balcony and stairwell improvements.  The common area improvements consist of the reconstruction of mail box kiosks.  The unit interior improvements consist of kitchen and bath upgrades, replacement of appliances, and other interior renovations. Based upon current redevelopment plans, the General Partner anticipates the redevelopment to be completed during the fourth quarter of 2008 at a total estimated cost of approximately $14,933,000, of which approximately $10,881,000 was completed during the years ended December 31, 2007 and 2006 in addition to the $2,948,000 completed during the six months ended June 30, 2008 as mentioned above. The project is being funded by the Partnerships operating cash flow and advances from AIMCO Properties, L.P., although AIMCO Properties, L.P. is not obligated to fund such advances. Additional capital improvements of approximately $302,000 were completed during the six months ended June 30, 2008 and consisted primarily of building improvements and furniture replacements. The Partnership regularly evaluates the capital improvement needs of the property. The Partnership currently expects to spend an additional $1,104,000 for property redevelopment during the remainder of 2008.  In addition, certain routine capital expenditures are anticipated during the remainder of 2008.  Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.



Lamplighter Park Apartments



During the six months ended June 30, 2008, the Partnership completed approximately $285,000 of capital improvements at the property consisting primarily of recreational facility upgrades, roof and building improvements and exterior painting and floor covering and appliance replacements.  These improvements were funded from operating cash flow, insurance proceeds and advances from AIMCO Properties, L.P., although AIMCO Properties, L.P. is not obligated to fund such advances.  The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during the remainder of 2008. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.



Park Capitol Apartments



During the six months ended June 30, 2008, the Partnership completed approximately $89,000 of capital improvements at the property consisting primarily of floor covering replacements, swimming pool resurfacing and structural improvements. These improvements were funded from operating cash flow. This property was sold during June 2008.



Tamarac Village Apartments



During the six months ended June 30, 2008, the Partnership completed approximately $422,000 of capital improvements at the property consisting primarily of floor covering, appliance and roof replacements, kitchen and bath resurfacing, structural improvements, recreational facility improvements and exterior painting. These improvements were funded from operating cash flow and advances from AIMCO Properties, L.P., although AIMCO Properties, L.P. is not obligated to fund such advances.  The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during the remainder of 2008. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.



Williamsburg Manor Apartments



During the six months ended June 30, 2008, the Partnership completed approximately $94,000 of capital improvements at the property consisting primarily of floor covering replacements, dumpster enclosures, furniture and fixtures, fire safety improvements and building improvements. These improvements were funded from operating cash flow, insurance proceeds, and advances from AIMCO Properties, L.P., although AIMCO Properties, L.P. is not obligated to fund such advances.  The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during the remainder of 2008. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.



Sienna Bay Apartments



During the six months ended June 30, 2008, the Partnership completed approximately $2,000 of capital improvements arising from the redevelopment of the property.  Additional capital improvements of approximately $295,000 were completed and consisted primarily of floor covering and furniture replacements, electrical and fire safety improvements. These improvements were funded from operating cash flow and advances from AIMCO Properties, L.P., although AIMCO Properties, L.P. is not obligated to fund such advances. During 2005, the Partnership began a major redevelopment project at Sienna Bay Apartments in order to become more competitive with other properties in the area in an effort to increase occupancy at the property.  As of June 30, 2008 the redevelopment was complete.  The total cost of the redevelopment was approximately $6,777,000, of which approximately $2,000 was completed during the six months ended June 30, 2008, as mentioned above. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during the remainder of 2008. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.



Capital expenditures will be incurred only if cash is available from operations, Partnership reserves or advances from AIMCO Properties, L.P., although AIMCO Properties, L.P. is not obligated to fund such advances. To the extent that capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term.



The Partnership's assets are thought to be generally sufficient for near-term needs (exclusive of capital improvements and redevelopment costs) of the Partnership. The mortgage indebtedness encumbering the Partnership's properties of approximately $47,530,000 has maturity dates ranging from September 2012 to August 2021. The mortgage indebtedness encumbering Tamarac Village and Cedar Rim Apartments of approximately $20,909,000 requires monthly payments until the loans mature between July 2021 and August 2021, respectively, at which time the loans are scheduled to be fully amortized. The mortgage indebtedness encumbering Lamplighter Park, Williamsburg Manor and Sienna Bay of approximately $26,621,000 requires monthly payments until the loans mature between September 2012 and July 2021 and have balloon payments totaling approximately $23,257,000 due at maturity. The General Partner will attempt to refinance such indebtedness and/or sell the properties prior to such maturity dates. If the investment properties cannot be refinanced or sold for a sufficient amount, the Partnership may risk losing such properties through foreclosure.



The Partnership made no distributions during the six months ended June 30, 2008 and 2007. Future cash distributions will depend on the levels of cash generated from operations, and the timing of debt maturities, property sales and/or refinancings. The Partnership's cash available for distribution is reviewed on a monthly basis. Given the current redevelopment project at Cedar Rim Apartments along with the amounts accrued and payable to affiliates of the General Partner at June 30, 2008, it is not expected that the Partnership will generate sufficient funds from operations, after planned capital expenditures, to permit any distributions to its partners for the foreseeable future.



Other



In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 239,212 limited partnership units (the "Units") in the Partnership representing 62.46% of the outstanding Units at March 31, 2008. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 62.46% of the outstanding Units, AIMCO and its affiliates are in a position to control all such voting decisions with respect to the Partnership. Although the General Partner owes fiduciary duties to the limited partners of the Partnership, the General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the General Partner, as general partner, to the Partnership and its limited partners may come into conflict with the duties of the General Partner to AIMCO as its sole stockholder.



Critical Accounting Policies and Estimates



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



Impairment of Long-Lived Assets



Investment properties are recorded at cost, less accumulated depreciation, unless the carrying amount of the asset is not recoverable.  If events or circumstances indicate that the carrying amount of a property may not be recoverable, the Partnership will make an assessment of its recoverability by comparing the carrying amount to the Partnerships estimate of the undiscounted future cash flows, excluding interest charges, of the property.   If the carrying amount exceeds the aggregate undiscounted future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property.



Real property investment is subject to varying degrees of risk.  Several factors may adversely affect the economic performance and value of the Partnerships investment properties.  These factors include, but are not limited to, general economic climate; competition from other apartment communities and other housing options; local conditions, such as loss of jobs or an increase in the supply of apartments that might adversely affect apartment occupancy or rental rates; changes in governmental regulations and the related cost of compliance; increases in operating costs (including real estate taxes) due to inflation and other factors, which may not be offset by increased rents; and changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing.  Any adverse changes in these factors could cause impairment of the Partnerships assets.



Capitalized Costs Related to Redevelopment and Construction Projects



The Partnership capitalizes costs incurred in connection with capital expenditure activities, including redevelopment and construction projects. Costs including interest, property taxes and operating costs associated with redevelopment and construction projects are capitalized during periods in which redevelopment and construction projects are in progress in accordance with SFAS No. 34, Capitalization of Interest Costs and SFAS No. 67, Accounting for Costs and the Initial Rental Operations of Real Estate Properties. Included in these capitalized costs are payroll costs associated with time spent by site employees in connection with the planning, execution and control of all capital expenditure activities at the property level.



Revenue Recognition



The Partnership generally leases apartment units for twelve-month terms or less.  The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area.  Rental income attributable to leases, net of any concessions, is recognized on a straight-line basis over the term of the lease.  The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants.



Item 4T.

Controls and Procedures



(a)

Disclosure Controls and Procedures.



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



(b)

Changes in Internal Control Over Financial Reporting.



There have been no significant changes in the Partnerships internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Partnerships internal control over financial reporting.





PART II - OTHER INFORMATION



Item 1.

Legal Proceedings



In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its General Partner and several of their affiliated partnerships and corporate entities. The action purported to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) that are named as nominal defendants, challenging, among other things, the acquisition of interests in certain General Partner entities by Insignia Financial Group, Inc. ("Insignia") and entities that were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs sought monetary damages and equitable relief, including judicial dissolution of the Partnership. In addition, during the third quarter of 2001, a complaint captioned Heller v. Insignia Financial Group (the "Heller action") was filed against the same defendants that are named in the Nuanes action. On or about August 6, 2001, plaintiffs filed a first amended complaint. The Heller action was brought as a purported derivative action, and asserted claims for, among other things, breach of fiduciary duty, unfair competition, conversion, unjust enrichment, and judicial dissolution. On January 28, 2002, the trial court granted defendants motion to strike the complaint.  Plaintiffs took an appeal from this order.



On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. On June 13, 2003, the court granted final approval of the settlement and entered judgment in both the Nuanes and Heller actions. On August 12, 2003, an objector ("Objector") filed an appeal (the Appeal) seeking to vacate and/or reverse the order approving the settlement and entering judgment thereto. On May 4, 2004, the Objector filed a second appeal challenging the courts use of a referee and its order requiring Objector to pay those fees.



On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.  With regard to the settlement and judgment entered thereto, the Court of Appeals vacated the trial courts order and remanded to the trial court for further findings on the basis that the state of the record is insufficient to permit meaningful appellate review.  The matter was transferred back to the trial court on June 21, 2005.  With regard to the second appeal, the Court of Appeals reversed the order requiring the Objector to pay referee fees. With respect to the related Heller appeal, on July 28, 2005, the Court of Appeals reversed the trial courts order striking the first amended complaint.



On August 18, 2005, Objector and his counsel filed a motion to disqualify the trial court based on a peremptory challenge and filed a motion to disqualify for cause on October 17, 2005, both of which were ultimately denied and/or struck by the trial court.  On or about October 13, 2005 Objector filed a motion to intervene and on or about October 19, 2005 filed both a motion to take discovery relating to the adequacy of plaintiffs as derivative representatives and a motion to dissolve the anti-suit injunction in connection with settlement.  On November 14, 2005, Plaintiffs filed a Motion For Further Findings pursuant to the remand ordered by the Court of Appeals. Defendants joined in that motion.  On February 3, 2006, the Court held a hearing on the various matters pending before it and ordered additional briefing from the parties and Objector. On June 30, 2006, the trial court entered an order confirming its approval of the class action settlement and entering judgment thereto after the Court of Appeals had remanded the matter for further findings.  The substantive terms of the settlement agreement remain unchanged.  The trial court also entered supplemental orders on July 1, 2006, denying Objectors Motion to File a Complaint in Intervention, Objectors Motion for Leave of Discovery and Objectors Motion to Dissolve the Anti-Suit Injunction.  Notice of Entry of Judgment was served on July 10, 2006.



On August 31, 2006, the Objector filed a Notice of Appeal to the Courts June 30, 2006 and July 1, 2006 orders. The matter was argued and submitted and the Court of Appeal issued an opinion on February 20, 2008 affirming the order approving the settlement and judgment entered thereto. On March 12, 2008, the Court of Appeal denied Appellants Petition for Re-Hearing.  On May 21, 2008, the California Supreme Court denied Appellants Petition for Review.  Objector has until August 19,2008 to file a petition for certiorari with the United States Supreme Court.



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



As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (FLSA) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (overtime claims). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call" (on-call claims). In March 2007, the court in the District of Columbia decertified the collective action.  In July 2007, plaintiffs counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining on-call claims and the attorneys fees claimed by plaintiffs counsel. As a result, the lawsuits asserted in the 22 Federal courts will be dismissed. At this time, affiliates of the General Partner are attempting to obtain additional information to determine the most equitable allocation of settlement amounts and attorneys fees. The General Partner is uncertain as to the amount of loss, if any, allocable to the Partnership. Therefore, the Partnership cannot estimate whether a loss will occur or a potential range of loss.



Item 6.

Exhibits



See Exhibit Index Attached.













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.







|                      |                                                
|--------------------- | -----------------------------------------------
|                      | CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3
|                      |                                                
|                      | By:   CONCAP EQUITIES, INC.                    
|                      | General Partner                                
|                      |                                                
|Date: August 14, 2008 | By:   /s/Martha L. Long                        
|                      | Martha L. Long                                 
|                      | Senior Vice President                          
|                      |                                                
|Date: August 14, 2008 | By:   /s/Stephen B. Waters                     
|                      | Stephen B. Waters                              
|                      | Vice President                                 
|                      |                                                
|                      |                                                













CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/3



EXHIBIT INDEX





Exhibit Number

Description of Exhibit





3.1

Certificate of Limited Partnership, as amended to date (Exhibit 3 to the Registrants Annual Report on Form 10-K for the year ended December 31, 2002, is incorporated herein by reference).



3.2

Third Amendment to Second Amended and Restated Limited Partnership Agreement of the Consolidated Capital Institutional Properties/3 dated October 13, 2006. (Incorporated by reference to the Quarterly Report on Form 10-QSB for the quarterly period ended September 30, 2006).



10.48

Multifamily Note dated June 27, 2001, by and between Consolidated Capital Institutional Properties/3, a California limited partnership, and GMAC Commercial Mortgage Corporation, related to Tamarac Village Apartments. (Incorporated by reference to the Quarterly Report on Form 10-QSB for the quarterly period ended June 30, 2001.)



10.50

Multifamily Note dated July 23, 2001, by and between Consolidated Capital Institutional Properties/3, a California limited partnership, and GMAC Commercial Mortgage Corporation, related to Cedar Rim Apartments. (Incorporated by reference to the Quarterly Report on Form 10-QSB for the quarterly period ended June 30, 2001.)



10.52

Deed of Trust, Assignment of Leases and Rents and Security Agreement dated August 31, 2005 between AIMCO Williamsburg Manor, LLC, a Delaware limited liability company and New York Life Insurance Company filed as Exhibit 10.52 to the Registrants Current Report on Form 8-K dated August 31, 2005 and filed on September 7, 2005, incorporated herein by reference.



10.53

Promissory Note dated August 31, 2005 between AIMCO Williamsburg Manor, LLC, a Delaware limited liability company and New York Life Insurance Company filed as Exhibit 10.53 to the Registrants Current Report on Form 8-K dated August 31, 2005 and filed on September 7, 2005, incorporated herein by reference.



10.54

Guaranty dated August 31, 2005 between AIMCO Properties, L.P., for the benefit of New York Life Insurance Company filed as Exhibit 10.54 to the Registrants Current Report on Form 8-K dated August 31, 2005 and filed on September 7, 2005, incorporated herein by reference.



10.55

Additional Mortgage Note dated August 31, 2005 between AIMCO Sandpiper, LLC, a Delaware limited liability company and New York Life Insurance Company (related to Sienna Bay Apartments) filed as Exhibit 10.55 to the Registrants Current Report on Form 8-K dated August 31, 2005 and filed on September 7, 2005, incorporated herein by reference.









Exhibit Number

Description of Exhibit





10.56

Modification, Reinstatement and Consolidation of Notes dated August 31, 2005 between AIMCO Sandpiper, LLC, a Delaware limited liability company and New York Life Insurance Company (related to Sienna Bay Apartments) filed as Exhibit 10.56 to the Registrants Current Report on Form 8-K dated August 31, 2005 and filed on September 7, 2005, incorporated herein by reference.



10.57

Mortgage, Assignment of Leases and Rents and Security Agreement dated August 31, 2005 between AIMCO Sandpiper, LLC, a Delaware limited liability company and New York Life Insurance Company (related to Sienna Bay Apartments) filed as Exhibit 10.57 to the Registrants Current Report on Form 8-K dated August 31, 2005 and filed on September 7, 2005, incorporated herein by reference.



10.58

Guaranty dated August 31, 2005 between AIMCO Properties, L.P. for the benefit of New York Life Insurance Company (related to Sienna Bay Apartments) filed as Exhibit 10.58 to the Registrants Current Report on Form 8-K dated August 31, 2005 and filed on September 7, 2005, incorporated herein by reference.



10.62

Purchase and Sale Contract between Consolidated Capital Institutional Properties/3, a California limited partnership, and 6900 South Shore, LLC, an Illinois limited liability company, dated July 23, 2007. (Related to Hidden Cove by the Lake Apartments) Incorporated by reference to the Registrant's Current Report on Form 8-K dated July 23, 2007.



10.63

Multifamily Note dated August 31, 2007 between Consolidated Capital Institutional Properties/3, a California limited partnership and Capmark Bank in reference to Lamplighter Park Apartments filed as Exhibit 10.63 to the Registrants Current Report on Form 8-K dated August 31, 2007 and filed on September 7, 2007, incorporated herein by reference.



10.64

Amended and Restated Multifamily Note dated August 31, 2007 between Consolidated Capital Institutional Properties/3, a California limited partnership and Capmark Bank in reference to Lamplighter Park Apartments filed as Exhibit 10.64 to the Registrants Current Report on Form 8-K dated August 31, 2007 and filed on September 7, 2007, incorporated herein by reference.



10.65

Purchase and Sale Contract between Consolidated Capital Institutional Properties/3, a California limited partnership, and the affiliated Selling Partnerships and Jackson Square Properties, LLC, a California limited liability company, dated March 10, 2008. (Related to Park Capitol Apartments) Incorporated by reference to the Registrant's Current Report on Form 8-K dated March 10, 2008.









Exhibit Number

Description of Exhibit





28.1

Fee Owner's General Partnership Agreement (Incorporated by reference to Registration Statement of Partnership (File No. 2-97664) filed July 23, 1985).



28.2

Fee Owner's Certificate of Partnership (Incorporated by reference to Registration Statement of Partnership (File No. 2-97664) filed July 23, 1985).



31.1

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



31.2

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



32.1

Certification of equivalent of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.