U.S. Securities and Exchange Commission
Washington, D. C.  20549

FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934
       For the quarterly period ended  June 30, 2004

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
       For the transition period from                   to________.

                         Commission file number              0-2864

DIVERSIFIED REALTY, INC.
(Exact name of small business issuer as specified in its charter)

                Montana                       81-0268110
(State or other jurisdiction of      (IRS Employer Identification No.)
incorporation or organization)
128 Second Street South, Great Falls, Montana   59405
(Address of principal executive offices)

(406) 727-2600
(Issuer's telephone number)

Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes   X     No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by
a court. Yes         No  ___
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:

                   Class          Outstanding at June 30,  2004
$.10 Par Value Common Stock             5,365,753 Shares

Transitional Small Business Disclosure Format (Check One): Yes ; No X .
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DIVERSIFIED REALTY, INC.

FORM 10-QSB INDEX

JUNE 30, 2004

 Page Number
PART I

  Condensed Financial Statements:

Balance Sheet
  June 30, 2004	                                               2

Statements of Income and Comprehensive Income -
  Three Months and Six Months
Ended June 30, 2004 and 2003  	                               3

Statements of Cash Flows -
  Three Months and Six Months
            Ended June 30, 2004 and 2003                       4

Notes to Financial Statements	                               5

  Management's Discussion and Analysis
  of the Statements of Income                                  6

  Controls and Procedures                                      7

PART II

  Other Information	                                    8-9

  Signatures                                                 10

  Exhibits                                                11-17










1
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DIVERSIFIED REALTY, INC.

BALANCE SHEET

AS OF JUNE 30, 2004

(Unaudited)
ASSETS

Current Assets

   Cash 	               $	2,249,191

   Marketable Securities		    3,168

   Due From Parent Company		  113,951

   Prepaid Income Taxes		            8,080

   Prepaid Expenses		            1,554

       Total Current Assets		2,375,944


Property, Plant and Equipment, Net	  105,449

Other Assets

   Restricted Cash		          483,531

       Total Assets	       $	2,964,924


LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

  Accounts Payable and
   Accrued Liabilities	       $	  18,606

  Current Deferred Income Taxes		   1,291

       Total Current Liabilities	  19,897

Long-Term Deferred Tax Liability	 169,900


Stockholders' Equity

  Common Stock, $.10 Par Value,
    11,000,000 shares authorized,
    5,365,753 shares issued
    & outstanding                         536,575

  Additional Paid-In-Capital		1,926,535

  Retained Earnings		          310,140

   Accumulated Other Comprehensive Income   1,877

     Total Stockholders' Equity		2,775,127

Total Liabilities and
 Stockholders' Equity	       $	2,964,924


See Notes to Financial Statements.

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		DIVERSIFIED REALTY, INC.

		   STATEMENTS OF INCOME
		            AND
		   COMPREHENSIVE INCOME

		   (Unaudited)


		  For The Three Months		  For The Six Months
		       Ended				 Ended
		      June 30,				June 30,
		  2004		  2003		  2004		  2003


Operating
 Revenues	$ 447,649 	$  22,433 	$ 468,545 	$  44,163



Operating
 Expenses	  32,060 	   21,571 	   54,055 	   39,881

Operating
 Income		 415,589 	      862 	  414,490 	    4,282

Income Tax
 (Expense)
   Benefit	(169,120)	    3,599 	 (166,572)	    1,724



Net Income 	$ 246,469 	$  4,461 	$ 247,918 	$   6,006


Other Comprehensive Income(Loss)
   Net of Income Taxes:

     Unrealized
      Holding Gains
      (Losses)	    (198)	     292 	     (72)	      328

        Comprehensive
         Income	$ 246,271 	$  4,753 	$ 247,846 	$   6,334

Basic Earnings
  Per Share	$   0.05 	$   0.001 	$    0.05	$   0.001

Weighted
 Average Shares	 5,366,252 	 5,367,701	 5,366,595	 5,367,730























		See Notes to Financial Statements

	3

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DIVERSIFIED REALTY, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)



		                         For The Six Months
		                                Ended
		                               June 30,
		                           2004		2003
CASH FLOWS FROM OPERATING ACTIVITIES

Net Cash from Operations		  7,542 	14,903

Income Taxes (Paid) in Cash		  (700)		   --

Net Cash Provided By
   Operating Activities	             $   6,842 	   $	14,903


CASH FLOWS FROM INVESTING ACTIVITIES
Cash Received on Sale of Property	483,531           --


CASH FLOWS FROM FINANCING ACTIVITIES

Cash Purchases of Common Stock		 (677)		 (42)


Net Cash Advances
   From (To) Parent Company		   --	        2,641


Net Cash Provided By
    Financing Activities		(677)		2,599

     NET INCREASE
      (DECREASE) IN CASH		489,696        17,502

     CASH - BEGINNING OF PERIOD	      2,243,026     2,237,202

     CASH - END OF PERIOD	    $ 2,732,722	  $ 2,254,704










See Notes to Financial Statements.

4
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DIVERSIFIED REALTY, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 2004

Note 1.  Basis of Presentation
In the opinion of management, all adjustments necessary (consisting
of only normal recurring accruals) have been made to the unaudited
financial statements to present fairly the financial position as of
June 30, 2004 and the results of the Company's operations for the
three months ended June 30, 2004 and 2003 and cash flows for the three
months ended June 30, 2004 and 2003.  The results of operations for
the three months ended June 30, 2004 and 2003 are not necessarily
indicative of the results to be expected for the full year.

Parent - M Corp, Great Falls, Montana owns approximately 95% of the
outstanding shares of the Company.

Note 2.  Significant Accounting Policies
For purposes of the statements of cash flows, cash equivalents include
time deposits, certificates of deposit and money market accounts, all
with original maturities of three months or less.

Comprehensive income includes net income, as well as other changes in
stockholder's equity that result from transactions and economic events
other than those with stockholders.  The Company's only significant
element of other comprehensive income is unrealized gains and losses
on available-for-sale securities.

Basic earnings per share (EPS) is calculated by dividing net income by
the weighted number of common shares outstanding for the period.

Note 3.  Contingencies
The Board of Directors has approved the Company's participation in an
attempt to purchase a savings and loan institution.  The Company will
participate in the purchase with its parent, M Corp. Should the
purchase take place, the liquidity of the Company will be
significantly affected.

The Board of Directors has approved a merger between a newly formed
company and Diversified Realty, Inc. in order to take the Company
private and such merger is pending.  Schedule 13e-3 and Schedule
13e-3/A have been filed electronically with the Securities Exchange
Commission, and can be viewed at www.sec.com.

Note 4.  Real Estate Sale
Diversified Realty, Inc. owned one property, not operated as a rental
unit, in Clearwater, Florida. On May 25, 2004 the Company sold this
property which was carried on the financial statements at a cost of
$122,000 with $61,015 in accumulated depreciation.  The Company
recorded a gain of $426,451 during the second quarter of 2004.  The
net proceeds from the sale, $483,531, are currently being held by
Asset Preservation Inc. pending a tax-deferred like-kind exchange
expected to occur in the third quarter of 2004.  The Company has
identified the new property in connection with this exchange located
at 2212 Broadwater Avenue in Billings, Montana and expects to
complete the exchange in the third quarter of  2004.

5
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DIVERSIFIED REALTY, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

        OF THE INCOME STATEMENT

June 30, 2004

A summary of the period-to-period changes in items included in the
statements of income is shown below.

                               COMPARISON OF

                           THREE MONTHS		SIX MONTHS
                              ENDED	          ENDED
                             JUNE 30,	 	 JUNE 30,
                        2004    AND  2003          2004 AND 2003

Revenues             $ 425,216    (1,895%)       $ 424,382 (961%)


Expenses                10,489    (48.6%)          14,173 (35.5%)


Net Income             266,507   (5,973%)        266,412 (4,436%)

Revenues increased $424,382 (961%) in the first six months of 2004
as comparedwith the first six months of 2003 due to the sale of
Clearwater, Florida property during May of 2004 resulting in a gain
of $426,451 during second quarter, a decrease in interest and
dividend revenues of $1,207 (13.2%), and a decrease in rental income
of $863 (2.5%).  Operating expenses increased $14,173 (35.5%) in the
first six months of 2004 ($10,489 in the second quarter of 2004) as
compared with the first six months of 2003 due primarily to an
increase in legal fees and travel expenses.  The provision for
income tax expense increased $143,796 (8,339%) in the first six
months of 2004 as compared with the first six months of 2003 due
primarily to the deferred tax calculated on the gain on sale of
property.









6
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DIVERSIFIED REALTY, INC.

CONTROLS AND PROCEDURES

JUNE 30, 2004

Evaluation of disclosure controls and procedures.  Based on an
evaluation carried out under the supervision and with the
participation of our management, including our Chief Executive
Officer and Chief Financial Officer during the 90-day period
prior to the filing of this report, our Chief Executive Officer
and Chief Financial Officer believe that our disclosure controls
and procedures, as defined in Securities Exchange Act Rules 13a-14
and 15d-14, are, to the best of their knowledge, effective.

Changes in internal controls, subsequent to the date of this
evaluation.  Our Chief Executive Officer and Chief Financial
Officer are not aware of any significant changes in our internal
controls over financial reporting, including any corrective actions
with regard to significant deficiencies and material weakness, or
in other factors that could significantly affect these controls to
ensure that information required to be disclosed by us, in reports
that we file or submit under the Securities Act, is recorded,
processed, summarized, and reported within the time period
specified in Securities and Exchange Commission rules or
regulations.






















7
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DIVERSIFIED REALTY, INC.

PART II

OTHER INFORMATION


JUNE 30, 2004



ITEM 1	LEGAL PROCEEDINGS

None

ITEM 2	CHANGES IN SECURITIES AND USE OF PROCEEDS

None

ITEM 3	DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5	OTHER INFORMATION

None
















8
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DIVERSIFIED REALTY, INC.

PART II

OTHER INFORMATION - CONTINUED


JUNE 30, 2004


ITEM 6	EXHIBITS AND REPORTS ON FORM 8-K

   (a)  Exhibits:

    Exhibit
    Number 	Description                               Page #

     3.1	Articles of Incorporation                     11
     3.2	By-Laws                                       11
     10		Material Contracts                            11
     31.1	Certification required under Section 302   12-13
     31.2	Certification required under Section 302   14-15
     32.1       Certification required under Section 906      16
     32.2       Certification required under Section 906      16


   (b)  Reports on Form 8-K

         No current reports on Form 8-K were filed during second
         fiscal quarter of 2004.














9
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SIGNATURES



In accordance with the requirements of 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.





DIVERSIFIED REALTY, INC.
Registrant



Date:    July 28, 2004		By:    s/R. Bruce Robson
                                         R. Bruce Robson,
					     President,
					Chairman of the Board




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 indicated on July 28, 2004.



Director			s/Tyler Arneson
                                  Tyler Arneson

Director                        s/S.M. McCann
			          S.M. McCann

Chief Financial Officer		s/D. Mellinger
	                          D. Mellinger

Chief Executive Officer		s/Paul J. McCann
                                  Paul J. McCann







10
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DIVERSIFIED REALTY, INC.

EXHIBIT 3.1

ARTICLES OF INCORPORATION


The Articles of Incorporation were signed on December 2, 1957.
There have been no amendments to the Articles of Incorporation
during the second fiscal quarter of 2004.



EXHIBIT 3.2

BY-LAWS


During the second quarter ending June 30, 2004, there were no
changes to the Diversified Realty, Inc. By-laws.



EXHIBIT 10

MATERIAL CONTRACTS

On May 25,2004, a contract was executed for the sale of
property located in Clearwater, Florida in the amount of $520,000.
This property was carried on the financial statements at a cost of
$122,000 with $61,015 in accumulated depreciation.  The Company
recorded a gain of $426,451 during the secondquarter of 2004.  The
net proceeds from the sale, $483,531 are held by Asset Preservation
Inc. pending a tax-deferred like-kind exchange expected to occur
during the third quarter of 2004.  The Company has identified the
new property in connection with this exchange located at 2212
Broadwater Avenue in Billings, Montana and expects to complete the
exchange in the third quarter of 2004.










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DIVERSIFIED REALTY, INC.

EXHIBIT 31.1

CERTIFICATION

I, Paul J. McCann, certify that:

1.  I have reviewed this quarterly report on Form 10-QSB of
    Diversified Realty, Inc.

2.  Based on my knowledge, this report does not contain any
    untrue statement of a material fact or omit to state a material fact
    necessary to make the statements made, in light of the circumstances
    under which such statements were made, not misleading with respect to
    the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial
    information included in the quarterly report, fairly present in
    all material respects the financial condition, results of operations
    and cash flows of Diversified Realty, Inc., as of, and for, the
    periods presented in this report.

4.  Diversified Realty, Inc.'s other certifying officers and I are
    responsible for establishing and maintaining disclosure controls and
    procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)
    and internal control over financial reporting (as defined in Exchange
    Act Rules 13a-15(f) and 15d-15(f) for Diversified Realty, Inc.
    and have:

    a. Designed such disclosure controls and procedures, or caused such
    disclosure controls and procedures to be designed under our
    supervision, to nsure that material information relating to
    Diversified Realty, Inc., including its consolidated subsidiaries,
    is made known to us by others within those entities, particularly
    during the period in which this report is being prepared;

    b.  Evaluated the effectiveness of Diversified Realty, Inc.'s
    disclosure controls and procedures and presented in this report our
    conclusions about the effectiveness of the disclosure controls and
    procedures, as of the end of the period covered by this report based
    on such evaluation; and:

    c. Disclosed in this report any change in Diversified Realty, Inc.'s
    internal control over financial reporting that occurred during
    Diversified Realty, Inc.'s second fiscal quarter that has materially
    affected, or is reasonably likely to materially affect Diversified
    Realty, Inc.'s internal control over financial reporting;
12
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 DIVERSIFIED REALTY, INC.

EXHIBIT 31.1 - CONTINUED

CERTIFICATION

 5.  Diversified Realty Inc.'s other certifying officers and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to Diversified Realty, Inc.'s auditors and the
audit committee of Diversified Realty, Inc.'s Board of Directors (or
persons performing the equivalent functions):

    a.  All significant deficiencies and material weaknesses in the
    design or operation of internal controls over financial reporting
    which are reasonably likely to adversely affect Diversified Realty,
    Inc.'s ability to record, process, summarize and report financial
    information; and

    b. any fraud, whether or not material, that involves management or
    other employees who have a significant role in Diversified Realty,
    Inc.'s internal control over financial reporting.



    Date: July 28, 2004            s/Paul J. McCann
                                   Paul J. McCann,
				Chief Executive Officer



















13
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DIVERSIFIED REALTY, INC.

EXHIBIT 31.2

CERTIFICATION

I, D. Mellinger, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of
     Diversified Realty, Inc.

2. Based on my knowledge, this report does not contain any
   untrue statement of a material fact or omit to state a
   material fact necessary to make the statements made, in light
   of the circumstances under which such statements were made,
   not misleading with respect to the period covered by this
   report;

3. Based on my knowledge, the financial statements, and other
   financial information included in the quarterly report, fairly
   present in all material respects the financial condition,
   results of operations and cash flows of Diversified Realty,
   Inc., as of, and for, the periods presented in this report.

4. Diversified Realty, Inc.'s other certifying officers and I are
   responsible for establishing and maintaining disclosure
   controls and procedures (as defined in Exchange Act Rules
   13a-15(e) and 15d-15(e) and internal control over financial
   reporting (as defined in Exchange Act Rules 13a-15(f) and
   15d-15(f) for Diversified Realty, Inc. and have:

   a.  Designed such disclosure controls and procedures, or caused
   such disclosure controls and procedures to be designed under our
   supervision, to ensure that material information relating to
   Diversified Realty, Inc., including its consolidated
   subsidiaries, is made known to us by others within those entities,
   particularly during the period in which this report is being
   prepared;

   b.  Evaluated the effectiveness of Diversified Realty, Inc.'s
   disclosure control and procedures and presented in this report our
   conclusions about the effectiveness of the disclosure controls and
   procedures, as of the end of the period covered by this report
   based on such evaluation; and:

   c. Disclosed in this report any change in Diversified Realty,
   Inc.'s internal control over financial reporting that occurred
   during Diversified Realty, Inc.'s second fiscal quarter that has
   materially affected, or is reasonably likely to materially affect
   Diversified Realty, Inc.'s internal control over financial
   reporting;

14
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DIVERSIFIED REALTY, INC.

EXHIBIT 31.2 - CONTINUED

CERTIFICATION

5.  Diversified Realty Inc.'s other certifying officers and I have
    disclosed, based on our most recent evaluation of internal control
    over financial reporting, to Diversified Realty, Inc.'s auditors
    and the audit committee of Diversified Realty, Inc.'s Board of
    Directors (or persons performing the equivalent functions):

    a.  All significant deficiencies and material weaknesses in the
    design or operation of internal controls over financial reporting
    which are reasonably likely to adversely affect Diversified Realty,
    Inc.'s ability to record, process, summarize and report financial
    information; and

    b.  any fraud, whether or not material, that involves management or
    other employees who have a significant role in Diversified Realty,
    Inc.'s internal control over financial reporting.



    Date: July 28, 2004         s/D. Mellinger
                                D. Mellinger,
                                Chief Financial Officer





















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DIVERSIFIED REALTY, INC.
EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED UPRSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Diversified Realty, Inc.
on Form 10-QSB for the period ending June 30, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"),
I, Paul J. McCann, Chief Executive Officer of Diversified Realty, Inc.,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my
knowledge and belief, that;

The report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of Diversified Realty, Inc.

Date:  July 28, 2004             	 s/Paul J. McCann
                                           Paul J. McCann,
                                           Chief Executive Officer


EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED UPRSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Diversified Realty, Inc.
on Form 10-QSB for the period ending June 30, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"),
I, D. Mellinger, Chief Financial Officer of Diversified Realty, Inc.,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my
knowledge and belief, that;

The report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of Diversified Realty, Inc.

Date:   July 28, 2004             s/D. Mellinger
				    D. Mellinger,
                                    Chief Financial Officer


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