UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) ~~May~~October 627, 2009

DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.

(Exact name of Registrant as specified in its charter)

Delaware	0-15676	62-1242599
(State or other jurisdiction	(Commission	(I.R.S. Employer
of incorporation)	File Number)	Identification Number)

55 Beattie Place

Post Office Box 1089

Greenville, South Carolina 29602

(Address of principal executive offices)

(864) 239-1000

(Issuer's telephone number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1 5.0102 ~~Entry~~Departure ~~Into~~of aDirectors ~~Material~~or ~~Definitive~~Certain ~~Agreement~~Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

~~Davidson~~On ~~Diversified~~October ~~Real Estate III~~27, ~~L.P.~~2009, ~~a Delaware~~Apartment ~~limited~~Investment ~~partnership~~and Management ~~(the~~Company ~~“Registrant”~~("Aimco"), ~~owns~~announced athe ~~99.99%~~appointment ~~interest~~of ~~in Plainview~~Ernest ~~Apartments, L~~M.~~P.,~~ aFreedman ~~South~~as Executive ~~Carolina~~Vice ~~limited~~President ~~partnership~~and ~~(the “Partnership”~~Chief orFinancial ~~“Seller”)~~Officer. ~~The~~ ~~Partnership~~Mr. ~~owns~~Freedman ~~Plainview Apartments~~will ~~(“Plainview”), a 480-unit apartment complex located in Louisville,~~also ~~Kentucky. As~~serve ~~previously disclosed,~~as onExecutive ~~April~~Vice 6,President ~~2009 (the “Effective Date”), the Seller entered into a Purchase~~ and ~~Sale~~Chief ~~Contract~~Financial ~~(the~~Officer ~~“Purchase~~of ~~Agreement”) with a third party, NTS-Plainview Associates, a Kentucky limited partnership (~~the ~~“Purchaser”), to~~Managing ~~sell~~General ~~Plainview~~Partner. toMr. ~~the~~Freedman’s ~~Purchaser~~promotion ~~for~~is aeffective ~~total~~November ~~sales price of $21~~1,~~035,000~~ 2009.

OnAimco ~~May~~also 6,announced ~~2009~~that David Robertson, President, ~~the~~Chief ~~Seller~~Investment Officer and ~~Purchaser~~Chief Financial Officer of Aimco and ~~entered~~President ~~into~~and aChief ~~First~~Financial ~~Amendment~~Officer toof ~~Purchase~~the Managing General Partner is resigning from his position as Chief Financial Officer of Aimco and ~~Sale~~the ~~Contract~~Managing General ~~pursuant~~Partner toeffective ~~which~~November 1, 2009, and is resigning from his other ~~the~~positions ~~purchase~~effective ~~price~~December ~~was~~31, ~~reduced~~2009. In order to ~~$20~~provide for an orderly transition,~~535~~ Mr. Robertson will continue in an advisory capacity through early 2010,~~000~~ working on a variety of transactions.

Item 9.01 Financial Statements and Exhibits

(d) Exhibit

10 P First Amendment to Purchase and Sale Contract between Plainview Apartments, L.P., a South Carolina limited partnership, and NTS-Plainview Associates, a Kentucky limited partnership, dated May 6, 2009.*

*Schedules and supplemental materials to the exhibit have been omitted but will be provided to the Securities and Exchange Commission upon request.

SIGNATURE

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 hereunto duly authorized.

DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.

By: Davidson Diversified Properties, Inc.

Managing General Partner

By: /s/Stephen B. Waters

Stephen B. Waters

~~Vice~~Senior ~~President~~Director

Date: ~~May~~November 122, 2009

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