Exhibit 9
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                          KRUPP REALTY FUND, LTD. - III


                                                     January 14, 1997

Dear Limited Partner:

         You may have recently received a communication from Krescent Partners
L.L.C. that announces, among other things, an increase in the offer price to
$370 per unit, the extension of its offer to January 31, 1997, and its agreement
to join forces with American Holdings I, L.P. (the "Bidders").

         THE KRUPP CORPORATION, A GENERAL PARTNER OF THE PARTNERSHIP (A "GENERAL
PARTNER") STILL BELIEVES THAT THE BIDDERS' OFFER IS INADEQUATE AND NOT IN THE
BEST INTERESTS OF THE UNIT HOLDERS. THE GENERAL PARTNER RECOMMENDS THAT THE
HOLDERS OF UNITS REJECT THIS OFFER AND NOT TENDER THEIR UNITS PURSUANT THERETO.

         The General Partner reached this conclusion after considering a number
of factors, including, but not limited to, the following:

o        THE PRICE PER UNIT OFFERED BY THE BIDDERS DOES NOT REFLECT THE VALUE 
         INHERENT IN THE UNITS. Although the Bidders' offer price has been
         increased to $370 per unit, such price remains well below the General
         Partner's estimate of net asset value. This no doubt reflects the fact
         that the Bidders' estimate of the liquidation value of the units is
         between $395 and $426 per unit. As more fully described in the
         Partnership's December 1996 correspondence, the General Partner has
         estimated the net asset value of each unit to be $661, which is between
         155% and 167% of the Bidders' estimate. If anything, the General
         Partner believes its estimate to be conservative. The Bidders' new
         price, combined with their lower estimates of value, can only be
         explained by their desire to make you believe that they are offering
         close to 100% of value. This, of course, is in conflict with their
         stated objective of making a profit.

o        THE BIDDERS SUGGEST THAT THE PARTNERSHIP'S EXISTING MORTGAGE 
         INDEBTEDNESS WILL HAVE AN ADVERSE EFFECT ON THE LIQUIDATION OF ITS
         PROPERTIES. The General Partner fully considered the terms of the
         mortgage indebtedness, including applicable prepayment penalties and
         the timing of lockout provisions, in estimating the net asset value to
         be $661 per unit.





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         The General Partner believes that the market value of the Partnership's
assets has recently begun to recover. As you may know, real estate values fell
precipitously during the late 1980's and early 1990's. The Partnership survived
this turbulent period by adopting various measures, including the suspension of
distributions in 1990, the sale of certain properties, and the refinancing of
the remaining properties at favorable rates. The Partnership's properties have
begun to generate greater revenues and reflect increased property values.
Encouraged by this improvement, the General Partner authorized the reinstatement
of distributions in 1994.

         The General Partner looks forward to continued success in recovering
the loss in value that occurred in the late 1980's and early 1990's. The General
Partner's strategy is to aggressively manage the Partnership's properties to
maximize their value and prepare the properties for sale when this goal is
reached.

         Please do not hesitate to call our Investor Communication
representatives at 1- 800-255-7877 for assistance in any Partnership matter.

                                         Sincerely yours,



                                         Laurence Gerber
                                         The Krupp Corporation, a General
                                         Partner







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