UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended September 30, 2013

o 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 0-11962

CAPITAL REALTY INVESTORS-III

LIMITED PARTNERSHIP

(Exact Name of Issuer as Specified in its Charter)



Maryland	52-1311532
(State of Incorporation)	(I.R.S. Employer Identification No.)

11200 Rockville Pike
Rockville, MD	20852
(Address of Principal Executive Offices)	(ZIP Code)

(301) 468-9200

(Issuer’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.

Yes þ No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of Accelerated filer and large accelerated filer@ in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company þ

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ¨ No þ

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

Yes ¨ No þ

The units of limited partner interest of the Registrant are not traded in any market. Therefore, the units of limited partner interest had neither a market selling price nor an average bid or asked price. As of November 14, 2013, the issuer had 59,882 outstanding units of limited partner interest.

Table of Contents

PART III

CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

INDEX TO FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2013



	Page


Part I FINANCIAL INFORMATION

Item 1. Financial Statements
Condensed Balance Sheets as of September 30, 2013 and December 31, 2012	1

Condensed Statements of Operations and Accumulated Losses for the three and nine months ended September 30, 2013 and 2012	2

Condensed Statements of Cash Flows for the nine months ended September 30, 2013 and 2012	3

Notes to Condensed Financial Statements	4

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	10

Item 3. Quantitative and Qualitative Disclosure about Market Risk	12

Item 4. Controls and Procedures	12

Part II OTHER INFORMATION

Item 1. Legal Proceedings	13

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	13

Item 3. Defaults Upon Senior Securities	13

Item 4. Mine Safety Disclosures	14

Item 5. Other Information	14

Item 6. Exhibits	15

Signatures	14

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CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

CONDENSED BALANCE SHEETS

(Unaudited)

ASSETS



	September 30,		December 31,
	2013		2012
Investments in and receivable from partnerships	$	2,719,001	$	2,582,473
Cash and cash equivalents	1,428,274		2,079,580
Acquisition fees, principally paid to related parties,
net of accumulated amortization of $0 and $20,922, respectively	—		608
Property purchase costs,
net of accumulated amortization of $0 and $27,630, respectively	—		1,734
Total assets	$	4,147,275	$	4,664,395

LIABILITIES AND PARTNERS' CAPITAL



Due on investments in partnerships	$	119,544		$	119,544
Accrued interest payable	33,976			33,976
Accounts payable and accrued expenses	31,190			36,063
Total liabilities	184,710			189,583

Commitments and contingencies	—			—

Partners' capital:
Capital paid-in:
General Partners	2,000			2,000
Limited Partners	60,001,500			60,001,500
	60,003,500			60,003,500
Less:
Accumulated distributions to partners	(31,184,819		)	(31,184,819		)
Offering costs	(6,156,933		)	(6,156,933		)
Accumulated losses	(18,699,183		)	(18,186,936		)
Total partners' capital	3,962,565			4,474,812
Total liabilities and partners' capital	$	4,147,275		$	4,664,395

The accompanying notes are an integral part

of these condensed financial statements.

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CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

CONDENSED STATEMENTS OF OPERATIONS AND ACCUMULATED LOSSES

(Unaudited)



	For the three months ended September 30,						For the nine months ended September 30,
	2013			2012			2013			2012
Share of income from partnerships	$	126,492		$	50,610		$	136,528		$	167,916
Other revenue and expenses
Revenue:
(Loss) gain on disposition of property, net of disposition fee	(146,070		)	849,033			(146,070		)	3,593,485
Interest and other	3,377			93,548			5,426			99,943
	(142,693		)	942,581			(140,644		)	3,693,428
Expenses:
General and administrative	46,371			93,259			208,771			243,022
Management fee	75,000			75,000			225,000			225,000
Professional fees	12,000			48,500			73,088			142,313
Amortization of deferred costs	424			424			1,272			1,272
Impairment loss	—			—			—			433,190
	133,795			217,183			508,131			1,044,797

Total other revenue and expenses	(276,488		)	725,398			(648,775		)	2,648,631

Net (loss) income	(149,996		)	776,008			(512,247		)	2,816,547

Accumulated losses, beginning of period	(18,549,187		)	(19,308,141		)	(18,186,936		)	(21,348,680		)
Accumulated losses, end of period	$	(18,699,183	)	$	(18,532,133	)	$	(18,699,183	)	$	(18,532,133	)

Net (loss) income allocated to General Partners (1.51%)	$	(2,265	)	$	11,718		$	(7,735	)	$	42,530

Net (loss) income allocated to Initial and
Special Limited Partners (1.49%)	$	(2,235	)	$	11,562		$	(7,632	)	$	41,967

Net (loss) income allocated to Additional Limited Partners (97%)	$	(145,496	)	$	752,728		$	(496,880	)	$	2,732,050

Net (loss) income per unit of Additional Limited Partner Interest based on 59,882 units outstanding	$	(2.43	)	$	12.57		$	(8.30	)	$	45.62

The accompanying notes are an integral part

of these condensed financial statements.

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CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)



	For the nine months ended September 30,
	2013			2012
Cash flows from operating activities:
Net (loss) income	(512,247		)	$	2,816,547
Adjustments to reconcile net (loss) income to net cash
used in operating activities:
Share of income from partnerships	(136,528		)	(167,916		)
Amortization of deferred costs	1,272			1,272
Loss (gain) on disposition of property	146,070			(3,593,485		)
Impairment loss	—			433,190
Changes in assets and liabilities:
(Decrease) increase in accounts payable and accrued expenses	(4,873		)	48,267
Net cash used in operating activities	(506,306		)	(462,125		)

Cash flows from investing activities:
Proceeds from disposition of investment in property	—			4,485,788
Disposition fee paid	(145,000		)	(946,000		)
Advance to Local Partnership	—			(20,000		)
Repayment of advances to Local Partnerships				10,000
Receipt of distribution from Local Partnership	—			11,211
Net cash (used in) provided by investing activities	(145,000		)	3,540,999

Net (decrease) increase in cash and cash equivalents	(651,306		)	3,078,874
Cash and cash equivalents, beginning of period	2,079,580			2,172,240
Cash and cash equivalents, end of period	$	1,428,274		$	5,251,114

The accompanying notes are an integral part

of these condensed financial statements.

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CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONDENSED FINANCIAL STATEMENTS

September 30, 2013 and 2012

(Unaudited)

1. ORGANIZATION

Capital Realty Investors-III Limited Partnership (the Partnership) was formed under the Maryland Revised Uniform Limited Partnership Act on June 27, 1983, and shall continue until December 31, 2037, unless sooner dissolved in accordance with the terms of the Partnership Agreement. The Partnership was formed to invest in real estate by acquiring and holding limited partner interests in limited partnerships (Local Partnerships) that own and operate federal or state government-assisted apartment properties, which provide housing principally to the elderly or to individuals and families of low or moderate income, or conventionally financed apartment properties, located throughout the United States. The Partnership originally made investments in thirty-seven Local Partnerships. As of September 30, 2013, the Partnership retained investment in one Local Partnership, owning no apartment complexes.

The General Partners of the Partnership are C.R.I., Inc. (CRI), which is the Managing General Partner, and current and former shareholders of CRI. The Initial Limited Partner was Rockville Pike Associates Limited Partnership-III, a limited partnership which includes certain current officers and former employees of CRI or its affiliates. The Special Limited Partner had been Two Broadway Associates II, a limited partnership comprised of an affiliate and employees of Merrill Lynch, Pierce, Fenner & Smith, Incorporated. Effective January 1, 2002, Two Broadway Associates II transferred its interest to MLH Merger Corporation and three individuals.

The Partnership sold 60,000 units at $1,000 per unit of additional limited partner interest through a public offering. The offering period was terminated in January 1984. As of September 30, 2013, 118 units of limited partner interest had been abandoned.


2.	BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP) and with the instructions to Form 10-Q. Certain information and accounting policies and footnote disclosures normally included in financial statements prepared in conformity with US GAAP have been condensed or omitted pursuant to such instructions. These condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Partnership's Annual Report on Form 10-K at December 31, 2012. The balance sheet amounts at December 31, 2012 are compiled from the Partnership's Annual Report on Form 10-K at December 31, 2012.

In the opinion of CRI, the Managing General Partner of the Partnership, the accompanying unaudited condensed financial statements reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position of the Partnership as of September 30, 2013, and the results of its operations and its cash flows for the three and nine month periods ended September 30, 2013 and 2012. The results of operations for the interim period ended September 30, 2013 are not necessarily indicative of the results to be expected for the full year.

Recent Accounting Pronouncement

In April 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-07 to improve consistency and comparability of financial reporting in the area of liquidation accounting. This ASU clarifies when an entity should apply the liquidation basis of accounting and provides principles for the recognition and measurement of assets and liabilities and requirements for financial statements prepared using the liquidation basis of accounting. The ASU is effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and is applied prospectively from the day liquidation becomes imminent. Early adoption is permitted. The Partnership has elected to adopt this ASU on July 1, 2013. The adoption of this ASU did not have a material affect on the Partnership.

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CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONDENSED FINANCIAL STATEMENTS- CONTINUED

September 30, 2013 and 2012

(Unaudited)


3.	PLAN OF LIQUIDATION

On November 21, 2005, the General Partners recommended that the limited partners approve a plan of liquidation and dissolution for the partnership, or the "Plan". The Plan was approved by the limited partners on January 20, 2006.

Currently, all properties in which the Partnership had invested through its investments in the Local Partnerships have been sold. There can be no assurance as to when the liquidation and dissolution of the Partnership will be completed, but it is anticipated that the process will be completed prior to December 31, 2013. Liquidation is imminent as of August 19, 2013, the date Meadow Lanes apartments was sold. However, in accordance with ASU No. 2013-07, the Partnership is a limited life entity whose liquidation follows a plan for liquidation that was specified in the Partnership’s governing documents at the Partnership’s inception. Therefore, the Partnership is not required to present the financial statements on the liquidation basis of accounting.

4. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

At September 30, 2013 and 2012, the Partnership had limited partnership equity interests in one and four Local Partnerships, owning zero and three apartment complexes, respectively.

Under the terms of the Partnership's investment in each Local Partnership, the Partnership was required to make capital contributions to the Local Partnerships. These contributions were payable in installments upon each Local Partnership achieving specified levels of construction and/or operations. At September 30, 2013 and 2012, all such capital contributions had been paid to the Local Partnerships.

a. Summarized financial information

Combined statements of operations for the Local Partnership in which the Partnership was invested as of September 30, 2013 and the four Local Partnerships in which the Partnership was invested as of September 30, 2012 follow. The combined statements are compiled from information supplied by the management agent of the Local Partnership properties and are unaudited. The information for each of the periods is presented separately for those Local Partnerships which have investment basis (equity method), and for those Local Partnerships which have cumulative losses in excess of the amount of the Partnership's investments in those local Partnerships (equity method suspended). Appended after the combined statements is information concerning the Partnership's share of income from partnerships related to cash distributions recorded as income, and related to the Partnership's share of income from Local Partnerships.

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CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONDENSED FINANCIAL STATEMENTS- CONTINUED

September 30, 2013 and 2012

(Unaudited)

COMBINED STATEMENTS OF OPERATIONS

(Unaudited)




	For the nine months ended September 30,
	2013									2012
	Equity Method				Suspended		Total			Equity Method			Suspended				Total
Number of Local Partnerships	1			(a)	—		1			2		(b)	2			(c)	4

Revenue:
Rental	$	507,408			$	—	$	507,408		$	1,014,163		$	615,020			$	1,629,183
Other	8,338				—		8,338			18,606			19,805				38,411
Gain on sale of property	2,900,927				—		2,900,927			—			—				—

Total revenue	3,416,673				—		3,416,673			1,032,769			634,825				1,667,594

Expenses:
Operating and other	328,022				—		328,022			647,581			326,612				974,193
Interest (income) expense	(57,251		)		—		(57,251		)	25,476			123,043				148,519
Depreciation and amortization	199,310				—		199,310			179,784			40,235				220,019

Total expenses	470,081				—		470,081			852,841			489,890				1,342,731

Net income	$	2,946,592			$	—	$	2,946,592		$	179,928		$	144,935			$	324,863

Cash distribution	$	—			$	—	—			$	11,211		$	—			$	11,211
Partnership’s share of Local Partnership net income	$	136,528			$	—	$	136,528		$	177,916		$	—			$	177,916
Advances to Local Partnerships	—				—		—			—			(10,000		)		(10,000		)
Share of income from partnerships	$	136,528			$	—	$	136,528		$	177,916		$	(10,000	)		$	167,916

__________________________________________

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CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONDENSED FINANCIAL STATEMENTS- CONTINUED

September 30, 2013 and 2012

(Unaudited)



	For the three months ended
	September 30,
	2013									2012
	Equity Method				Suspended		Total			Equity Method			Suspended			Total
Number of Local Partnerships	1			(a)	—		1			2		(b)	2		(c)	4

Revenue:
Rental	$	102,298			$	—	$	102,298		$	314,808		$	120,718		$	435,526
Other	781				—		781			6,388			718			7,106
Gain on sale of property	2,900,927				—		2,900,927			—			—			—

Total revenue	3,004,006				—		3,004,006			321,196			121,436			442,632

Expenses:
Operating and other	62,353				—		62,353			199,191			66,885			266,076
Interest (income) expense	(19,083		)		—		(19,083		)	8,492			22,345			30,837
Depreciation and amortization	66,436				—		66,436			59,928			582			60,510

Total expenses	109,706				—		109,706			267,611			89,812			357,423

Net income	$	2,894,300			$	—	$	2,894,300		$	53,585		$	31,624		$	85,209

Cash distribution	$	—			$	—	$	—		$	11,211		$	—		$	11,211
Partnership’s share of Local Partnership net income	$	126,492			$	—	$	126,492		$	50,610		$	—		$	50,610
Share of income from partnerships	$	126,492			$	—	$	126,492		$50,610			$	—		$	50,610

__________________________________________

(a) Meadow Lanes (operations through date of sale)

(b) Meadow Lanes; Villa Mirage I

Cash distributions received from Local Partnerships which have investment basis (equity method) are recorded as a reduction of investments in partnerships and as cash receipts on the respective balance sheets. Cash distributions received from Local Partnerships which have cumulative losses in excess of the amount of the Partnership's investments in those Local Partnerships (equity method suspended) are recorded as share of income from partnerships on the respective statements of operations and as cash receipts on the respective balance sheets. As of September 30, 2012, the Partnership's share of cumulative losses to date for two of four Local Partnerships exceeded amount of the Partnership's investments in and advances to those Local Partnerships by $8,930,372. As of September 30, 2013, the remaining Local Partnership did not have cumulative losses in excess of the Partnership's investment. As the Partnership has no further obligation to advance funds or provide financing to these Local Partnerships, the excess losses have not been reflected in the accompanying financial statements.

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CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONDENSED FINANCIAL STATEMENTS- CONTINUED

September 30, 2013 and 2012

(Unaudited)

b. Due on investments in partnerships and accrued interest payable

Due on investment in partnerships includes $119,544 due to a previous owner related to Meadow Lanes Apartments at both September 30, 2013 and December 31, 2012; accrued interest payable thereon was $33,976 at both September 30, 2013 and December 31, 2012. These amounts are scheduled to be paid upon the occurrence of certain specific events, as outlined in the note agreement. At September 30, 2013 and December 31, 2012, the Partnership is in dispute with the previous owner regarding amounts owed under the note agreement. Management cannot determine the outcome of the dispute at this time. Accordingly, the condensed financial statements do not reflect any adjustment due to the uncertainty.

c. Completed Sales

Villa Mirage I and Villa Mirage II

On November 15, 2011, the general partners of Villa Mirage I, a California limited partnership, and Villa Mirage II, a California limited partnership, entered into a contract with an unaffiliated third party to sell their properties for an aggregate sale price of $6,500,000. On September 27, 2012, the sale of the properties closed. The investment balance in the Local Partnerships at the time of sale was $214,467. Of the $1,388,500 of proceeds received as a result of the sale, a disposition fee was paid to the managing general partner in the amount of $325,000. The disposition fee was netted against the related gain on disposition of property.

A gain of $849,033 was recorded during the three months ended September 30, 2012 as a result of the sale of Villa Mirage I and Villa Mirage II.

Monterey/Hillcrest

On September 29, 2011, the general partners of Pebble Valley Housing Partners Limited Partnership, a Wisconsin limited partnership, entered into a contract with an unaffiliated third party to sell its property (Monterey/Hillcrest) and the transaction closed on January 31, 2012. The sales price was $18,920,000 and total proceeds amounted to $3,694,108. Proceeds received in February 2012 totaled $3,611,288. The investment balance in the Local Partnership was $0 at December 31, 2011. Net unamortized acquisition costs and property purchase costs of $3,656 were written off and netted against the gain on sale of property. A disposition fee of $946,000 was paid to the managing general partner. The disposition fee was netted against the related gain on disposition of property.

During the three months ended March 31, 2012, a gain of $2,744,452 was recorded as a result of the sale of Monterey/Hillcrest.

Meadow Lanes

On June 18, 2012, the Local Partnership entered into a purchase and sale agreement to sell Meadow Lanes Apartments for $2,900,000. The sale occurred on August 19, 2013. All sale proceeds were used to satisfy Local Partnership obligations and the remaining funds available will be distributed to partners in accordance with the Meadow Lanes–II Associates Limited Dividend Housing Association Limited Partnership Agreement. The Partnership's investment basis in this Local Partnership at December 31, 2012 was $2,582,473. The Partnership expects to receive $2,719,001 as a result of the sale. Net unamortized acquisition and property purchases costs of $1,070 were written off and a disposition fee of $145,000 was paid to the managing general partner. Both of these amounts are included in the loss on disposition of properties line item on the accompanying condensed statements of operations and accumulated losses.

During the three months ended September 30, 2013, a loss of $146,070 was recorded as a result of the sale of Meadow Lanes.

Subsequent to the the receipt of the distribution related to the sale, the Partnership will be liquidated.

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CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONDENSED FINANCIAL STATEMENTS- CONTINUED

September 30, 2013 and 2012

(Unaudited)

d. Advances to Local Partnerships

On February 8, 2012, the Partnership advanced $10,000 to Villa Mirage I and $10,000 to Villa Mirage II Limited Partnerships for the issuance of a prepayment letter, as required by CalHFA. For financial statement purposes the advance to Villa Mirage II was charged off by the Partnership as a result of losses at the Local Partnership level during prior years.

e. Investment Reconciliation

The following reconciliation of investments in partnership at September 30, 2013:



Investments in and receivable from partnership at December 31, 2012:	$	2,582,473

Share of income from partnership	136,528

Investments in and receivable from partnership at September 30, 2013:	$	2,719,001

5. RELATED PARTY TRANSACTIONS

In accordance with the terms of the Partnership Agreement, the Partnership is obligated to reimburse the Managing General Partner or its affiliates for certain direct expenses and payroll expenses in connection with managing the Partnership. Payroll expenses are reimbursed at a factor of 1.75 times base salary. For the three and nine month periods ended September 30, 2013, the Partnership paid $19,847 and $65,622, respectively, and $27,003 and $82,543 for the three and nine month periods ended September 30, 2012, respectively, to the Managing General Partner or its affiliates as direct reimbursement of expenses incurred on behalf of the Partnership. In addition, certain employees of the Managing General Partner provided legal and tax accounting services to the Partnership. These are reimbursed comparable to third party service charges. For the three and nine month periods ended September 30, 2013, the Partnership paid $20,153 and $96,922, respectively, and $52,856 and $123,797 for the three and nine month periods ended September 30, 2012, respectively, to the Managing General Partner or its affiliates for these services. Such reimbursed expenses are included in the accompanying condensed statements of operations and accumulated losses as general and administrative expenses.

In accordance with the terms of the Partnership Agreement, the Partnership is obligated to pay the Managing General Partner an annual incentive management fee (“Management Fee”) after all other expenses of the Partnership are paid. The Partnership paid the Managing General Partner Management Fees of $75,000 and $225,000, for the three and nine month periods ended September 30, 2013 and 2012, respectively.

In accordance with the terms of the Partnership agreement, the Managing General Partner and/or its affiliates may receive a fee of not more than 5% of the sale price of an investment in a Local Partnership or the property it owns, payable under certain conditions upon the sale of an investment in a Local Partnership or the property it owns. The payment of the fee is subject to certain

restrictions including the achievement of a certain level of sales proceeds and making certain distributions to limited partners. In accordance with the terms of the Partnership agreement, in February 2012, the Managing General Partner was paid a disposition fee of $946,000 related to sale of Monterey/Hillcrest, which was netted against the related gain on the disposition of the property.

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CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONDENSED FINANCIAL STATEMENTS- CONTINUED

September 30, 2013 and 2012

(Unaudited)

Additionally, also in accordance with the terms of the Partnership agreement, in August 2013, the Managing General Partner was paid a disposition fee of $145,000 related to the sale of Meadow Lanes, which was included with the loss on disposition of property line item on the accompanying condensed statements of operations and accumulated losses. The fee is based on 5% of the gross sales price of the property sold.

6. CASH DISTRIBUTIONS

There were no cash distributions for the three and nine month periods ended September 30, 2013.

For the nine month period ended September 30, 2012, the Partnership received a distribution totaling $4,485,788 related to the sale of the Monterey/Hillcrest and Villa Mirage I and II properties. This amount is included in gain on disposition of investment in partnerships on the condensed statements of operations and accumulated losses.

7. CASH CONCENTRATION RISK

Financial instruments that potentially subject the Partnership to concentrations of risk consist primarily of cash. The Partnership maintains one cash account at SunTrust Bank and three cash accounts at Eagle Bank. As of September 30, 2013, the uninsured portion of the cash balances was $1,063,708.

8. SIGNIFICANT SUBSIDIARIES

The following Local Partnership invested in by the Partnership represents more than 20% of the Partnership's total assets or equity as of September 30, 2013 and 2012 or net income (loss) for the three-month periods then ended. The following financial information represents the performance of this Local Partnership for the nine-month periods ended September 30, 2013 and 2012. The financial information consists of estimates based on the audited financial statements of the Local Partnerships at December 31, 2012 and these estimates are unaudited.



Meadow Lanes	2013	2012
Total Assets	$—	$3,685,416
Total Liabilities	—	325,896
Revenue	3,416,673	607,098
Net Income	2,946,591	61,340

9. SUBSEQUENT EVENTS

Events that occur after the balance sheet date but before the financial statements were available to be issued must be evaluated for recognition or disclosure. The effects of subsequent events that provide evidence about conditions that existed at the balance sheet date are recognized in the accompanying financial statements. Subsequent events which provide evidence about conditions that existed after the balance sheet date require disclosure in the accompanying notes.



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

The Management's Discussion and Analysis of Financial Condition and Results of Operations section is based on the financial statements, and contains information that may be considered forward looking, including statements regarding the effect of governmental regulations. Actual results may differ materially from those described in the forward looking statements and will be affected by a variety of factors including national and local economic conditions, the general level of interest rates, governmental regulations affecting the Partnership and interpretations of those regulations, the competitive environment in which the Partnership operates, and the availability of working capital.

Critical Accounting Policies

The Partnership has disclosed its selection and application of significant accounting policies in Note 1 of the notes to financial statements included in the Partnership's Annual Report on Form 10-K at December 31, 2012. The Partnership accounts for its investments in partnership (Local Partnership) by the equity method because the Partnership is a limited partner in the Local Partnership. As such, the Partnership has no control over the selection and application of accounting policies, or the use of estimates, by the Local Partnership. The Partnership reviews property assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. Recoverability is measured by a comparison of the carrying amount of an asset to the estimated future net cash flows expected to be generated by the asset. If an asset were determined to be impaired, its basis would be adjusted to fair value through the recognition of an impairment loss.

Generally accepted accounting principles (GAAP) in the United States provides guidance on when a company should include the assets, liabilities, and activities of a variable interest entity (VIE) in its financial statements and when it should disclose information

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about its relationship with a VIE. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity's activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity's activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that will receive a majority of the VIE's expected losses, receive a majority of a VIE's expected residual returns, or both.

The Partnership does not consolidate the Partnership's interest in this VIE under this guidance, as it is not considered to be the primary beneficiary. Accounting guidance requires continued reconsideration as to the consideration of the primary beneficiary. The Partnership currently records the amount of its investment in this partnership as an asset on its balance sheet, recognizes its share of partnership income or losses in the statements of operations, and discloses how it accounts for material types of these investments in its financial statements.

The Partnership's balance in investment in this Local Partnership represents its maximum exposure to loss. The Partnership's exposure to loss on this partnership is mitigated by the condition and financial performance of the underlying properties as well as the strength of the local general partners.

Financial Condition/Liquidity

The Partnership's liquidity, with unrestricted cash resources of $1,428,274 as of September 30, 2013, along with anticipated future cash distributions from Local Partnerships, is expected to be adequate to meet its current and anticipated operating cash needs. As of November 14, 2013, there were no material commitments for capital expenditures.

The Partnership closely monitors its cash flow and liquidity position in an effort to ensure that sufficient cash is available for operating requirements. For the three and nine month periods ended September 30, 2013, existing cash resources were adequate to support operating cash requirements. Cash and cash equivalents decreased $651,306 during the nine month period ended September 30, 2013, primarily due to normal operating expenses.

Results of Operations

The Partnership's had a net loss for the nine month period ended September 30, 2013 compared to net income for nine month period ended September 30, 2012, primarily due to the gain recorded on the disposition of Monterrey/Hillcrest in 2012.

For financial reporting purposes, the Partnership, as a limited partner in the Local Partnership, does not record losses from the Local Partnerships in excess of its investment to the extent that the Partnership has no further obligation to advance funds or provide financing to the Local Partnerships. As a result, the Partnership's share of income from partnerships for the three and nine month periods ended September 30, 2012 did not include income of $30,992 and $142,216, respectively, compared to excluded losses of $0 for both the three and nine month periods ended September 30, 2013.

On June 18, 2012, the Local Partnership entered into a purchase and sale agreement to sell Meadow Lanes Apartments for $2,900,000. The Partnership's investment basis in this Local Partnership at December 31, 2012 was $2,582,473. The Partnership expects to receive $2,719,001 as a result of the sale.

Certain taxing authorities may assert claims against the Partnership for failure to withhold and remit income tax on operating profit or where the sale(s) of property in which the Partnership was invested failed to produce sufficient cash proceeds with which to pay the tax and/or to pay statutory partnership filing fees. The Partnership is unable to quantify the amount of such potential claims at this time. The Partnership has consistently advised its Partners that they should consult with their tax advisors as to the necessity of filing non-resident returns in such states with respect to their proportional taxes due.

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No other significant changes in the Partnership's operations have taken place during the three and nine month periods ended September 30, 2013.

Plan of Liquidation and Dissolution

On November 21, 2005, the General Partners recommended that the limited partners approve a plan of liquidation and dissolution for the Partnership. The plan of liquidation and dissolution was approved by the limited partners on January 20, 2006. The one remaining Property in which the Partnership is invested through its investments in the Local Partnerships sold on August 19, 2013. The Villa Mirage I and Villa Mirage II property sales closed September 27, 2012. Subsequent to the receipt of the anticipated proceeds related to the sale of the Meadow Lanes property, the Local Partnership, in which the Partnership is invested, will be dissolved and terminated, at which time the General Partner will commence the dissolution and termination of the Partnership. There can be no assurance as to when the liquidation and dissolution of the Partnership will be completed but it is anticipated that the process will be completed prior to December 31, 2013.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

None.

Item 4. 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 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. A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met. 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.

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

Part II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

The Partnership is unaware of any pending or outstanding litigation involving it or the underlying investment property of the Local Partnerships in which the Partnership invests that are not of a routine nature arising in the ordinary course of business or that would have a material adverse effect on the business of the Partnership.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

Item 3. DEFAULTS UPON SENIOR SECURITIES

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None.

Item 4. MINE SAFETY DISCLOSURES

None.

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Item 5. OTHER INFORMATION

There has not been any information required to be disclosed in a report on Form 8-K during the quarter ended September 30, 2013, but not reported, whether or not otherwise required by this Form 10-Q at September 30, 2013.

There is no established market for the purchase and sale of units of limited partner interest (Units) in the Partnership, although various informal secondary market services may exist. Due to the limited markets, however, investors may be unable to sell or otherwise dispose of their Units.

Item 6. EXHIBITS


Exhibit No.	Description



31.1		Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

All other Items are not applicable.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	CAPITAL REALTY INVESTORS-III
		LIMITED PARTNERSHIP
	(Registrant)

November 14, 2013	by:		/s/ William B. Dockser
DATE			William B. Dockser,
			Director, Chairman of the Board
				and Treasurer
			Principal Executive Officer

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In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



November 14, 2013	by:	/s/ H. William Willoughby
DATE		H. William Willoughby
		Director, President, Secretary,
		Principal Financial Officer and
			Principal Accounting Officer

CAPITAL REALTY INVESTORS III LTD PARTNERSHIP 10-Q