February 28, 2000



United States
Securities and Exchange Commission
Washington, D.C.  20549


RE:   Davidson Diversified Real Estate I, L.P.
      Form 10-KSB
      File No. 0-13530


To Whom it May Concern:

The  accompanying  Form 10-KSB for the year ended  December 31, 1999 describes a
change in the method of  accounting to  capitalize  exterior  painting and major
landscaping,   which  would  have  been  expensed  under  the  old  policy.  The
Partnership believes that this accounting principle change is preferable because
it  provides a better  matching  of  expenses  with the  related  benefit of the
expenditures and it is consistent with industry practice and the policies of the
Managing General Partner.

Please do not hesitate to contact the undersigned with any questions or comments
that you might have.

Very truly yours,




Stephen Waters
Real Estate Controller


<PAGE>



                   FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT

                            UNDER SECTION 13 OR 15(d)

                                   Form 10-KSB

(Mark  One)
[X]  ANNUAL  REPORT  UNDER  SECTION  13 OR  15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934 [No Fee Required]

                        For the fiscal year ended December 31, 1999


[ ] TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
    OF 1934 [No Fee Required]

                    For the transition period from _________to _________

                         Commission file number 0-13530

                          DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.
                       (Name of small business issuer in its charter)

         Delaware                                           62-1181565
(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)

                    Issuer's telephone number (864) 239-1000

               Securities registered under Section 12(b) of the Exchange Act:

                                      None

               Securities registered under Section 12(g) of the Exchange Act:

                      Units of Limited Partnership Interest

                                (Title of class)

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___

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the best of the  registrant's  knowledge,  in  definitive  proxy or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

State issuer's revenues for its most recent fiscal year.  $3,218,000

State the aggregate  market value of the voting  partnership  interests  held by
non-affiliates  computed  by  reference  to the price at which  the  partnership
interests  were sold,  or the average bid and asked  prices of such  partnership
interests as of December 31, 1999. No market exists for the Limited  Partnership
interests of the Registrant,  and,  therefore,  no aggregate market value can be
determined.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None


<PAGE>
                                     PART I

Item 1.     Description of Business

Davidson  Diversified Real Estate I, L.P. (the "Registrant" or "Partnership") is
a Delaware limited  partnership  organized in January 1983. The general partners
of the  Partnership  are  Davidson  Diversified  Properties,  Inc.,  a Tennessee
corporation  ("Managing  General  Partner");  Diversified  Equities,  Limited, a
Tennessee limited partnership ("Associate General Partner"); and David W. Talley
("Individual  General  Partner")  (collectively,  the "General  Partners").  The
Managing  General  Partner  was  wholly  owned  by MAE GP  Corporation  ("MAE").
Effective  February 25, 1998, MAE GP was merged into Insignia  Properties  Trust
("IPT"), a subsidiary of Apartment  Investment and Management Company ("AIMCO").
Thus, the Managing  General Partner is now  wholly-owned by AIMCO (see "Transfer
of Control").  The  Partnership  Agreement  provides that the  Partnership is to
terminate on December 31, 2007, unless terminated prior to such date.

The offering of the Partnership's  limited partnership units ("Units") commenced
on November 16, 1983,  and  terminated  on September 14, 1984.  The  Partnership
received  gross  proceeds from the offering of  $15,008,000  and net proceeds of
$13,507,200.  Since its initial offering,  the Registrant has not received,  nor
are limited partners required to make additional capital contributions.

The Partnership's business is to own and operate existing real estate properties
for investment.  The Partnership  does not engage in any foreign  operations nor
derive any income from foreign sources.  All of the net proceeds of the offering
were  invested  in six  properties,  four  of  which  have  since  been  sold or
foreclosed  upon.  The  Partnership  continues  to own  and  operate  two of the
properties.  See "Item 2. Description of Properties"  below for a description of
the Partnership's remaining properties.

The  Partnership  receives  income from its properties  and is  responsible  for
operating  expenses,  capital  improvements  and  debt  service  payments  under
mortgage  obligations  secured by the properties.  The Partnership  financed its
properties  primarily  through  non-recourse  debt.  Therefore,  in the event of
default, the lender can generally only look to the subject property for recovery
of amounts due.

The Partnership  has no employees.  Management and  administrative  services are
provided by the  Managing  General  Partner and agents  retained by the Managing
General  Partner.  An affiliate of the Managing  General  Partner  provided such
management services for the years ended December 31, 1999 and 1998.

Both  the  income  and  expenses  of  operating  the  properties  owned  by  the
Partnership are subject to factors outside of the Partnership's control, such as
changes in the supply and demand of similar  properties  resulting  from various
market  conditions,  increases/decreases  in unemployment or population  shifts,
changes in the availability of permanent mortgage funds, changes in zoning laws,
or changes in patterns or needs of users. In addition,  there are risks inherent
in owning and  operating  residential  properties  because such  properties  are
susceptible  to the  impact of  economic  and other  conditions  outside  of the
control of the Partnership.

<PAGE>

There have been, and it is possible there may be other, Federal, state and local
legislation  and  regulations   enacted   relating  to  the  protection  of  the
environment.  The Partnership is unable to predict the extent,  if any, to which
such new  legislation  or  regulations  might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.

The Partnership  monitors its properties for evidence of pollutants,  toxins and
other dangerous substances, including the presence of asbestos. In certain cases
environmental  testing has been performed which resulted in no material  adverse
conditions or liabilities.  In no case has the Partnership  received notice that
it is a potentially  responsible party with respect to an environmental clean up
site.

The  real  estate  business  in which  the  Partnership  is  engaged  is  highly
competitive.  There are other  residential  properties within the market area of
the Partnership's properties.  The number and quality of competitive properties,
including  those which may be managed by an affiliate  of the  Managing  General
Partner in such market area,  could have a material  effect on the rental market
for apartments at the Partnership's properties and the rents that may be charged
for such  apartments.  While the Managing General Partner and its affiliates own
and/or control a significant number of apartment units in the United States such
units represent an insignificant  percentage of the total apartment units in the
United States and competition for the apartments is local. In addition,  various
limited  partnerships  have been formed by the Managing  General  Partner and/or
affiliates to engage in business which may be competitive with the Partnership.

A further description of the Partnership's business is included in "Management's
Discussion  and  Analysis or Plan of  Operations"  included in "Item 6." of this
Form 10-KSB.

Transfer of Control

Pursuant  to a series  of  transactions  which  closed  on  October  1, 1998 and
February 26, 1999,  Insignia  Financial Group, Inc. and IPT merged into AIMCO, a
publicly  traded real estate  investment  trust,  with AIMCO being the surviving
corporation (the "Insignia Merger").  As a result, AIMCO acquired 100% ownership
interest in the Managing General Partner.  The Managing General Partner does not
believe that this transaction has had or will continue to have a material effect
on the affairs and operations of the Partnership.

Item 2.     Description of Properties

The following table sets forth the Partnership's investments in properties:

                           Date of
Property                   Purchase          Type of Ownership           Use

Versailles on the Lake     04/05/84    Fee ownership subject to      Apartment
  Ft. Wayne, Indiana                   first and second mortgages.   156 units

Ashley Woods               07/31/84    Fee ownership subject to      Apartment
  Cincinnati, Ohio                     first mortgage. (1)           352 units

(1) Property is held by a Limited Liability Company of which the Registrant owns
100%.


<PAGE>

Schedule of Properties

Set forth below for each of the  Registrant's  properties is the gross  carrying
value,  accumulated  depreciation,  depreciable life, method of depreciation and
Federal tax basis.

                        Gross
                       Carrying   Accumulated    Useful               Federal
Property                Value    Depreciation     Life    Method     Tax Basis
                           (in thousands)                         (in thousands)

Versailles on the Lake $ 4,704      $ 2,735     5-25 yrs    S/L       $ 1,064
Ashley Woods             9,621        5,142     5-25 yrs    S/L         3,298
                       $14,325      $ 7,877                           $ 4,362

See  "Note A" of the  consolidated  financial  statements  included  in "Item 7.
Financial Statements" for a description of the Partnership's depreciation policy
and "Note J - Change in Accounting Principle".

Schedule of Property Indebtedness

The  following  table  sets  forth  certain  information  relating  to the loans
encumbering the Registrant's properties.
<TABLE>
<CAPTION>

                           Principal                                      Principal
                           Balance At    Stated                            Balance
                          December 31,  Interest   Period     Maturity     Due At
        Property              1999        Rate    Amortized     Date    Maturity (2)
                         (in thousands)                                 (in thousands)
Versailles on the Lake
<S>                        <C>          <C>      <C>         <C>          <C>
  1st mortgage              $ 2,360      7.60%    21.42 yrs   11/15/02     $ 2,071
  2nd mortgage                   88      7.60%       (1)      11/15/02          88

Ashley Woods                  7,833      7.29%     30 yrs     12/01/04       7,334
                            $10,281                                        $ 9,493
Less unamortized
  discounts                     (71)
  Total                     $10,210
</TABLE>

(1)   The loan requires interest only payments.

(2)   See "Item 7. Financial  Statements - Note C" for information  with respect
      to the Registrant's ability to prepay the loans and other specific details
      about the loans.
<PAGE>

The Partnership exercised an interest rate buy-down option for Versailles on the
Lake  reducing the stated rate from 8.76% to 7.60% during 1992.  The fee for the
interest rate reduction was  approximately  $205,000 and is being amortized as a
loan discount  using the effective  interest  method over the term of the loans.
The discount fee is reflected as a reduction of the mortgage  notes  payable and
increases the effective rate of the debt to 8.76%.

Rental Rates and Occupancy

Average annual rental rates and occupancy for 1999 and 1998 for each property:

                                         Average Annual             Average
                                          Rental Rates             Occupancy
                                           (per unit)
 Property                               1999        1998        1999       1998

 Versailles on the Lake                $6,131      $5,920        92%        86%
 Ashley Woods                           6,821       6,577        92%        89%

The  Managing  General  Partner  attributes  the increase in occupancy at Ashley
Woods to increased  marketing and  advertising  efforts  along with  concessions
currently being offered to attract new tenants.  In addition,  improvements were
made at the property which made it more attractive to new tenants.  The Managing
General  Partner  attributes the increase in occupancy at Versailles on the Lake
to increased marketing and advertising efforts to attract new tenants.

As noted under "Item 1.  Description of Business",  the real estate  industry is
highly competitive.  All of the properties are subject to competition from other
residential  apartment  complexes  in the area.  The  Managing  General  Partner
believes that all of the properties are adequately insured.  Each property is an
apartment  complex  which  leases  units  for  terms  of one  year or  less.  No
residential  tenant  leases  10% or  more  of the  available  space.  All of the
properties are in good physical  condition,  subject to normal  depreciation and
deterioration as is typical for assets of this type and age.

Real Estate Taxes and Rates

Real estate taxes and rates in 1999 for each property were:

                                                 1999            1999
                                                 Taxes           Rate
                                            (in thousands)

Versailles on the Lake                           $ 83*           8.97%
Ashley Woods                                      171            4.98%


*Amount per 1998 billings.  Taxes are paid a year in arrears.



<PAGE>


Capital Improvements

Versailles on the Lake

During  1999,  the  Partnership  completed  approximately  $175,000  of  capital
improvements  at the property,  consisting  primarily of lighting  improvements,
carpet and vinyl replacement, appliances, and other building improvements. These
improvements  were funded from the  Partnership's  reserves and  operating  cash
flow. The Partnership is currently  evaluating the capital  improvement needs of
the  property  for the  upcoming  year.  The  minimum  amount to be  budgeted is
expected  to be  $300  per  unit  or  $46,800.  Additional  improvements  may be
considered and will depend on the physical  condition of the property as well as
replacement reserves and anticipated cash flow generated by the property.

Ashley Woods

During  1999,  the  Partnership  completed  approximately  $312,000  of  capital
improvements  at the  property,  consisting  primarily of heating  improvements,
parking lot improvements, plumbing upgrades, structural improvements, and carpet
and vinyl  replacement.  These  improvements  were funded from the Partnership's
reserves.  The Partnership is currently evaluating the capital improvement needs
of the  property  for the upcoming  year.  The minimum  amount to be budgeted is
expected  to be  $300  per  unit or  $105,600.  Additional  improvements  may be
considered and will depend on the physical  condition of the property as well as
replacement reserves and anticipated cash flow generated by the property.

The  capital  improvements  planned  for  the  year  2000  at the  Partnership's
properties will be made only to the extent of cash available from operations and
Partnership  reserves. To the extent that such budgeted capital improvements are
completed,  the Registrant's  distributable  cash flow, if any, may be adversely
affected at least in the short term.

Item 3.     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. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs  named as defendants,  among others,
the  Partnership,  the Managing  General Partner and several of their affiliated
partnerships  and corporate  entities.  The action  purports to assert claims on
behalf of a class of limited  partners and derivatively on behalf of a number of
limited  partnerships  (including  the  Partnership)  which are named as nominal
defendants,  challenging  the  acquisition  by Insignia  Financial  Group,  Inc.
("Insignia")  and  entities  which  were,  at one time,  affiliates  of Insignia
("Insignia  Affiliates") of interests in certain general partner entities,  past
tender offers by Insignia  Affiliates to acquire limited  partnership units, the
management of partnerships  by Insignia  Affiliates and the Insignia Merger (see
"Item 7. Financial  Statements,  Note B - Transfer of Control").  The plaintiffs
seek monetary damages and equitable relief,  including  judicial  dissolution of
the  Partnership.  On June 25, 1998, the Managing General Partner filed a motion
seeking  dismissal  of the action.  In lieu of  responding  to the  motion,  the
plaintiffs have filed an amended  complaint.  The Managing General Partner filed
demurrers to the amended  complaint which were heard February 1999.  Pending the
ruling on such  demurrers,  settlement  negotiations  commenced.  On November 2,
1999,  the parties  executed and filed a  Stipulation  of  Settlement,  settling
claims,  subject to final court  approval,  on behalf of the Partnership and all
limited partners who own units as of November 3, 1999.  Preliminary  approval of
the  settlement  was obtained on November 3, 1999 from the Superior Court of the
State of  California,  County of San Mateo,  at which time the Court set a final
approval  hearing for December 10, 1999.  Prior to the December 10, 1999 hearing
the Court received various  objections to the settlement,  including a challenge
to the Court's preliminary  approval based upon the alleged lack of authority of
class  plaintiffs'  counsel to enter the  settlement.  On December 14, 1999, the
Managing General Partner and its affiliates  terminated the proposed settlement.
Certain  plaintiffs  have filed a motion to disqualify  some of the  plaintiffs'
counsel in the action.  The Managing  General  Partner does not anticipate  that
costs  associated with this case will be material to the  Partnership's  overall
operations.

The Partnership is unaware of any pending or outstanding  litigation that is not
of a routine nature arising in the ordinary course of business.

Item 4.     Submission of Matters to a Vote of Security Holders

During the quarter ended  December 31, 1999, no matters were submitted to a vote
of Unit holders through the solicitation of proxies or otherwise.


<PAGE>


                                     PART II

Item 5.     Market for the Partnership Equity and Related Partner Matters

The Partnership,  a publicly-held  limited partnership,  offered and sold 751.84
Limited  Partnership  Units  aggregating  $15,008,000.  As of December 31, 1999,
there were 689 holders of record owning an aggregate of 751.59 Units. Affiliates
of the Managing  General  Partner  owned 266.65 units or 35.478% at December 31,
1999.

The following table sets forth the distributions made by the Partnership for the
years ended December 31, 1999 and 1998.

                                                  Distributions
                                            Aggregate        Per Unit
                                          (in thousands)

          01/01/98 - 12/31/98                  $900         $1,197.46
          01/01/99 - 12/31/99                   314            417.78

Both  of  these   distributions   represented   a  portion  of  the   previously
undistributed  net  proceeds  from the  mortgage  refinancing  of  Ashley  Woods
Apartments during 1997 and were paid entirely to limited partners.

Future cash  distributions  will depend on the levels of net cash generated from
operations, the availability of cash reserves and the timing of debt maturities,
refinancings,  and/or property sales. The Partnership's  distribution  policy is
reviewed on a semi-annual  basis. There can be no assurance,  however,  that the
Partnership  will  generate  sufficient  funds from  operations  after  required
capital  expenditures  to  permit  distributions  to its  partners  in  2000  or
subsequent periods.

Several tender offers were made by various parties,  including affiliates of the
Managing General Partner,  during the years ended December 31, 1999 and 1998. As
a result of these tender offers,  AIMCO and its affiliates  currently own 266.65
units of limited  partnership units in the Partnership  representing  35.478% of
the outstanding units. It is possible that AIMCO or its affiliates will make one
or more additional offers to acquire additional limited partnership interests in
the Partnership  for cash or in exchange for units in the operating  partnership
of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the
Units are  entitled to take action  with  respect to a variety of matters.  When
voting on matters, AIMCO would in all likelihood vote the Units it acquired in a
manner  favorable  to the interest of the Managing  General  Partner  because of
their affiliation with the Managing General Partner.

Item 6.     Management's Discussion and Analysis or Plan of Operation

The  matters  discussed  in this Form  10-KSB  contain  certain  forward-looking
statements  and  involve  risks and  uncertainties  (including  changing  market
conditions,   competitive  and  regulatory   matters,   etc.)  detailed  in  the
disclosures  contained in this Form 10-KSB and other filings with the Securities
and Exchange Commission made by the Registrant from time to time. The discussion
of  the   Registrant's   business   and   results   of   operations,   including
forward-looking  statements  pertaining  to such  matters,  does not  take  into
account the effects of any changes to the  Registrant's  business and results of
operation.  Accordingly,  actual  results  could  differ  materially  from those
projected in the forward-looking  statements as a result of a number of factors,
including those identified herein.  This item should be read in conjunction with
the  consolidated  financial  statements and other items contained  elsewhere in
this report.

Results of Operations

The Partnership realized a net loss of approximately  $46,000 for the year ended
December 31, 1999 compared to a net loss of approximately  $184,000 for the year
ended  December 31, 1998.  The decrease in net loss for the year ended  December
31, 1999 is primarily due to an increase in total  revenues  which was partially
offset by an increase in total expenses.  Total revenues increased primarily due
to an increase  in rental  income and to a lesser  extent,  an increase in other
income. Rental income increased primarily due to increased occupancy as noted in
"Item 2. Description of Properties" and increased average annual rental rates at
both of the  Partnership's  properties,  which are partially offset by increased
concession costs at both of the Partnership's properties. Other income increased
due to increased  laundry  income at both of the  Partnership's  properties  and
increased tenant charges at Ashley Woods.  These increases were partially offset
by a decrease in interest  income due to a decrease in the average cash balances
held in interest-bearing accounts.

Total expenses increased due primarily to increased  depreciation expense and to
a lesser  extent,  increased  general  and  administrative  expenses.  Partially
offsetting these increases was a decrease in property tax expense.  Depreciation
expense  increased due to the timing of capital  improvements  completed  during
1998 and 1999 that are now being depreciated. General and administrative expense
increased  due to an increase in legal  expense due to the 1999  settlement of a
lawsuit as disclosed in the  Partnership's  Annual Report on Form 10-KSB for the
fiscal year ended  December 31, 1998.  This increase was  partially  offset by a
decrease  in  expense  reimbursements  paid  to the  Managing  General  Partner.
Included in general and  administrative  expenses at both  December 31, 1999 and
1998,  are  reimbursements  to the Managing  General  Partner  allowed under the
Partnership  Agreement associated with its management of the Partnership.  Costs
associated  with the  quarterly  and annual  communications  with  investors and
regulatory  agencies and the annual audit required by the Partnership  Agreement
are also included. Property tax expense decreased primarily due to a decrease in
expense at Ashley  Woods.  For the year ended  December 31,  1998,  property tax
expense  at Ashley  Woods  includes  additional  amounts  owed due to a tax rate
increase on tax bills received and paid in arrears. This additional  expenditure
was paid  during  the first  quarter  of 1998.  Property  tax for the year ended
December 31, 1999, does not include any such additional amount.

Effective  January 1, 1999, the Partnership  changed its method of accounting to
capitalize the cost of exterior  painting and major landscaping on a prospective
basis.  The  Partnership  believes  that  this  accounting  principle  change is
preferable  because it provides a better  matching of expenses  with the related
benefit of the expenditures and it is consistent with industry  practice and the
policies of the Managing General  Partner.  There was no effect from this change
during 1999 on the net loss. The cumulative effect, had this change been applied
to prior periods, is not material. The accounting principle change will not have
an effect on cash flow,  funds available for distribution or fees payable to the
Managing General Partner and affiliates.

As part of the ongoing  business plan of the  Partnership,  the Managing 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 Managing 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, due to
changing market  conditions,  which can result in the use of rental  concessions
and  rental  reductions  to  offset  softening  market  conditions,  there is no
guarantee that the Managing General Partner will be able to sustain such a plan.

Liquidity and Capital Resources

At  December  31,  1999,  the  Partnership  had  cash and  cash  equivalents  of
approximately  $681,000 compared to approximately $338,000 at December 31, 1998.
Cash  and  cash   equivalents   increased   approximately   $343,000   from  the
Partnership's  previous  year ended  December 31,  1998.  The increase is due to
approximately   $616,000  of  cash   provided  by   operating   activities   and
approximately  $219,000 of cash  provided  by  investing  activities,  which was
partially offset by approximately $492,000 of cash used in financing activities.
Cash  provided by investing  activities  consisted  of net receipts  from escrow
accounts  maintained  by the  mortgage  lender  which  was  partially  offset by
property  improvements  and  replacements.  Cash  used in  financing  activities
consisted  of partner  distributions  and,  to a lesser  extent,  of payments of
principal made on the mortgages  encumbering the  Registrant's  properties.  The
Registrant invests its working capital reserves in money market 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 Registrant and to comply with Federal,
state, and local legal and regulatory requirements. The Partnership is currently
evaluating  the capital  improvement  needs of its  properties  for the upcoming
year.  The  minimum  amount to be  budgeted  is  expected to be $300 per unit or
$152,400.  Additional  improvements  may be  considered  and will  depend on the
physical  condition  of the  properties  as well  as  replacement  reserves  and
anticipated cash flow generated by the properties. The capital expenditures will
be  incurred  only if cash is  available  from  operations  or from  Partnership
reserves.  To the extent that such budgeted capital  improvements are completed,
the Registrant's  distributable  cash flow, if any, may be adversely affected at
least in the short term.

The  Registrant's  current assets are thought to be sufficient for any near-term
needs  (exclusive  of capital  improvements)  of the  Registrant.  The  mortgage
indebtedness of approximately  $10,210,000,  net of discount,  is amortized over
periods ranging from 21 to 30 years with balloon  payments due in 2002 and 2004.
The Managing General Partner will attempt to refinance such indebtedness  and/or
sell the properties  prior to such maturity  date. If the  properties  cannot be
refinanced or sold for a sufficient amount, the Registrant will risk losing such
properties through foreclosure.

A distribution of $314,000  ($417.78 per limited  partnership  unit) was made to
the  limited   partners  during  the  year  ended  December  31,  1999.  A  cash
distribution of $900,000  ($1,197.46 per limited  partnership  unit) was made to
the limited  partners  during the year ended  December 31,  1998.  Both of these
distributions represented a portion of the previously undistributed net proceeds
from  the  mortgage  refinancing  of  Ashley  Woods  during  1997.  Future  cash
distributions  will depend on the levels of net cash generated from  operations,
the   availability  of  cash  reserves  and  the  timing  of  debt   maturities,
refinancings,  and/or property sales. The Partnership's  distribution  policy is
reviewed on a semi-annual  basis. There can be no assurance,  however,  that the
Partnership  will  generate  sufficient  funds from  operations  after  required
capital improvements to permit distributions to its partners in the year 2000 or
subsequent periods.

Tender Offers

Several tender offers were made by various parties,  including affiliates of the
Managing General Partner,  during the years ended December 31, 1999 and 1998. As
a result of these tender offers,  AIMCO and its affiliates  currently own 266.65
units of limited  partnership units in the Partnership  representing  35.478% of
the outstanding units. It is possible that AIMCO or its affiliates will make one
or more additional offers to acquire additional limited partnership interests in
the Partnership  for cash or in exchange for units in the operating  partnership
of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the
Units are  entitled to take action  with  respect to a variety of matters.  When
voting on matters, AIMCO would in all likelihood vote the Units it acquired in a
manner  favorable  to the interest of the Managing  General  Partner  because of
their affiliation with the Managing General Partner.

Year 2000 Compliance

General Description

The Year 2000 issue is the result of computer  programs  being written using two
digits rather than four digits to define the applicable year. The Partnership is
dependent  upon the Managing  General  Partner and its affiliates for management
and  administrative  services  ("Managing  Agent").  Any of the Managing Agent's
computer programs or hardware that had date-sensitive software or embedded chips
might have  recognized  a date using "00" as the year 1900  rather than the year
2000.  This could have resulted in a system failure or  miscalculations  causing
disruptions of operations,  including, among other things, a temporary inability
to process  transactions,  send invoices,  or engage in similar normal  business
activities.

Computer Hardware, Software and Operating Equipment

In 1999,  the Managing  Agent  completed  all phases of its Year 2000 program by
completing  the  replacement  and repair of any  hardware or software  system or
operating  equipment that was not yet Year 2000 compliant.  The Managing Agent's
hardware  and software  systems and its  operating  equipment  are now Year 2000
compliant.  No  material  failure or  erroneous  results  have  occurred  in the
Managing Agent's computer  applications  related to the failure to reference the
Year 2000 to date.

Third Parties

To  date,  the  Managing  Agent  is not  aware of any  significant  supplier  or
subcontractor  (external agent) or financial institution of the Partnership that
has a Year 2000 issue that  would  have a material  impact on the  Partnership's
results of operations,  liquidity or capital  resources.  However,  the Managing
Agent  has no means of  ensuring  or  determining  the Year 2000  compliance  of
external  agents.  At this time, the Managing Agent does not believe that a Year
2000 issue of any  non-compliant  external agent will have a material  impact on
the Partnership's financial position or results of operations.

Costs

The total cost of the Managing Agent's Year 2000 project was approximately  $3.2
million and was funded from operating cash flows.

Risks Associated with the Year 2000

The Managing  Agent  completed all necessary  phases of its Year 2000 program in
1999,  and did not  experience  system or  equipment  malfunctions  related to a
failure to reference the Year 2000. The Managing  Agent or  Partnership  has not
been  materially  adversely  affected by  disruptions  in the economy  generally
resulting from the Year 2000 issue.

At this  time,  the  Managing  Agent  does not  believe  that the  Partnership's
businesses,  results of  operations  or financial  condition  will be materially
adversely affected by the Year 2000 issue.

Contingency Plans Associated with the Year 2000

The  Managing  Agent has not had to implement  contingency  plans such as manual
workarounds or selecting new relationships for its banking or elevator operation
activities in order to avoid the Year 2000 issue.


<PAGE>


Item 7.     Financial Statements

DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

LIST OF FINANCIAL STATEMENTS

Report of Ernst & Young LLP, Independent Auditors

Consolidated Balance Sheet - December 31, 1999

Consolidated Statements of Operations - Years ended December 31, 1999 and 1998

Consolidated  Statement of Changes in Partners'  Deficit - Years ended  December
31, 1999 and 1998

Consolidated Statements of Cash Flows - Years ended December 31, 1999 and 1998

Notes to Consolidated Financial Statements


<PAGE>


                     Report of Ernst & Young LLP, Independent Auditors

The Partners

Davidson Diversified Real Estate I, L.P.


We  have  audited  the  accompanying  consolidated  balance  sheet  of  Davidson
Diversified  Real  Estate I, L.P.  as of  December  31,  1999,  and the  related
consolidated  statements of  operations,  changes in partners'  deficit and cash
flows for each of the two years in the period ended  December  31,  1999.  These
financial statements are the responsibility of the Partnership's management. Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made  by the  Partnership's  management,  as  well  as  evaluating  the  overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  consolidated   financial  position  of  Davidson
Diversified  Real Estate I, L.P.  at December  31,  1999,  and the  consolidated
results  of its  operations  and its cash flows for each of the two years in the
period  ended  December 31,  1999,  in  conformity  with  accounting  principles
generally accepted in the United States.

                                                            /s/ERNST & YOUNG LLP

Greenville, South Carolina
February 21, 2000


<PAGE>




                    DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

                           CONSOLIDATED BALANCE SHEET

                        (in thousands, except unit data)

                                December 31, 1999

Assets

   Cash and cash equivalents                                              $ 681
   Receivables and deposits                                                 202
   Restricted escrows                                                       203
   Other assets                                                             178
   Investment properties (Notes C & F):
      Land                                                $ 1,072
      Buildings and related personal property              13,253
                                                           14,325

      Less accumulated depreciation                        (7,877)        6,448
                                                                        $ 7,712

Liabilities and Partners' Deficit

Liabilities

   Accounts payable                                                        $ 60
   Tenant security deposit liabilities                                       68
   Accrued property taxes                                                   259
   Other liabilities                                                         92
   Due to affiliate (Note E)                                                321
   Mortgage notes payable (Note C)                                       10,210

Partners' Deficit

   General partners                                        $ (125)
   Limited partners (751.59 units issued and
      outstanding)                                         (3,173)       (3,298)
                                                                        $ 7,712

               See Accompanying Notes to Consolidated Financial Statements

<PAGE>


                    DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                        (in thousands, except unit data)



                                                       Years Ended December 31,
                                                          1999         1998
Revenues:
   Rental income                                        $ 2,947      $ 2,783
   Other income                                             271          252
        Total revenues                                    3,218        3,035

Expenses:
   Operating                                              1,375        1,365
   General and administrative                               155          140
   Depreciation                                             661          603
   Interest                                                 823          832
   Property taxes                                           250          279
      Total expenses                                      3,264        3,219

Net loss (Note D)                                         $ (46)      $ (184)

Net loss allocated to general partners (5%)                $ (2)        $ (9)
Net loss allocated to limited partners (95%)                (44)        (175)
                                                          $ (46)      $ (184)

Net loss per limited partnership unit                   $(58.54)    $(232.84)

Distributions per limited partnership unit              $417.78     $1,197.46


               See Accompanying Notes to Consolidated Financial Statements

<PAGE>


                          DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

                  CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT

                              (in thousands, except unit data)



                                     Limited
                                   Partnership    General    Limited
                                      Units       Partners   Partners     Total

Original capital contributions       751.84        $ 1       $15,008    $15,009

Partners' deficit at
  December 31, 1997                  751.59       $ (114)    $(1,740)   $(1,854)

Distribution to partners                 --           --        (900)      (900)

Net loss for the year ended
  December 31, 1998                      --           (9)       (175)      (184)

Partners' deficit at
  December 31, 1998                  751.59       $ (123)    $(2,815)   $(2,938)

Distribution to partners                 --           --        (314)      (314)

Net loss for the year ended
  December 31, 1999                      --           (2)        (44)       (46)

Partners' deficit at
  December 31, 1999                  751.59       $ (125)    $(3,173)   $(3,298)


               See Accompanying Notes to Consolidated Financial Statements

<PAGE>


                    DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (in thousands)

                                                       Years Ended December 31,
                                                           1999        1998

Cash flows from operating activities:
   Net loss                                               $ (46)      $ (184)
   Adjustments to reconcile net loss to net
    cash provided by operating activities:
      Depreciation                                           661          603
      Amortization of discounts and loan costs                60           54
      Loss on disposal of property                            --           49
      Change in accounts:
         Receivables and deposits                             (7)         (78)
         Other assets                                        (21)          19
         Accounts payable                                      6           22
         Tenant security deposit liabilities                  (5)         (16)
         Accrued property taxes                               (7)          16
         Other liabilities                                   (25)          16

             Net cash provided by operating activities       616          501

Cash flows from investing activities:

   Property improvements and replacements                   (487)        (948)
   Net receipts from (deposits to) restricted escrows        706         (117)

             Net cash provided by (used in) investing
               activities                                    219       (1,065)

Cash flows from financing activities:
   Payments on mortgage notes payable                       (178)        (158)
   Payment of loan costs                                      --          (16)
   Distributions to partners                                (314)        (900)

             Net cash used in financing activities          (492)      (1,074)

Net increase (decrease) in cash and cash equivalents         343       (1,638)

Cash and cash equivalents at beginning of the year           338        1,976
Cash and cash equivalents at end of the year               $ 681        $ 338

Supplemental disclosure of cash flow information:
   Cash paid for interest                                  $ 812        $ 777


               See Accompanying Notes to Consolidated Financial Statements

<PAGE>
                          DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

                   Notes to Consolidated Financial Statements

                                December 31, 1999

Note A - Organization and Significant Accounting Policies

Organization:  Davidson  Diversified  Real Estate I, L.P. (the  "Partnership" or
"Registrant"),is a Delaware limited  partnership  organized on January 14, 1983,
to acquire and operate  residential real estate  properties.  As of December 31,
1999, the Partnership operates two residential properties located in Cincinnati,
Ohio and Ft. Wayne,  Indiana.  The  Partnership's  managing  general  partner is
Davidson  Diversified  Properties,  Inc., (the "Managing General Partner").  The
Managing General Partner is a subsidiary of Apartment  Investment and Management
Company  ("AIMCO"),  (see "Note B - Transfer of  Control").  The  directors  and
officers of the Managing  General  Partner  also serve as executive  officers of
AIMCO. The Partnership  Agreement  provides that the Partnership is to terminate
on December 31, 2007 unless terminated prior to such date.

Principles of Consolidation:  The consolidated  financial statements include the
Partnership's  100% membership  interest in Ashley Woods L.L.C. As a result, the
Partnership  consolidates  its interest in Ashley Woods  whereby all accounts of
Ashley  Woods are  included  in the  consolidated  financial  statements  of the
Partnership with interentity accounts being eliminated.

Allocations to Partners: Net income (loss) of the Partnership and taxable income
(loss) are allocated 95% to the limited partners and 5% to the general partners.
Distributions  of  available  cash (cash flow) are  allocated  among the limited
partners and the general  partners in  accordance  with the agreement of limited
partnership.

Allocation of net income for tax purposes, arising from the occurrence of a sale
or refinancing shall be allocated as follows:

      First, an amount equal to the aggregate deficit in the capital accounts of
      the general and limited partners having deficits in their capital accounts
      shall be  allocated  to each such partner in the same ratio as the deficit
      such  partner's  capital  account  bears  to the  aggregate  of  all  such
      partner's deficits.

      Second, to the limited partners in an amount equal to the cash distributed
      to them from a sale or refinancing.

      Third,  the remainder,  if any, 5% to the general  partners and 95% to the
      limited partners.

Distributions  of cash from sales or  refinancings  shall be  distributed in the
following order of priority.

      First,  to the limited  partners,  an amount which when added to all prior
      distributions  of cash  from  sales  or  refinancings  shall  equal  their
      original invested  capital,  plus an amount which, when added to all prior
      distributions to the limited partners  (excluding  distributions which are
      deducted in the calculation of adjusted invested  capital),  will equal 8%
      per annum  cumulative  noncompounded on their adjusted  invested  capital,
      commencing  the last day of the  calendar  quarter in which  each  limited
      partner is admitted to the Partnership through the date of payment.

      Second,  to an affiliate of the general  partners,  an amount equal to its
      subordinated real estate  commission,  which fee is equal to the lesser of
      (i) 3% of the gross  sales  price of a property  or (ii)  one-half  of the
      competitive commission, as defined, but may only be paid after the limited
      partners have received  their priority  distributions  as discussed in the
      previous paragraph.

      Third, 85% of the remaining cash from sales or refinancings to the limited
      partners and 15% of the remaining cash from sales or  refinancings  to the
      general partners.

Depreciation:  Depreciation  is  provided by the  straight-line  method over the
estimated lives of the investment properties and related personal property.  For
Federal income tax purposes,  the  accelerated  cost recovery method is used (1)
for real property over 18 years for additions  after March 15, 1984,  and before
May 9, 1985, and 19 years for additions after May 8, 1985, and before January 1,
1987, and (2) for personal  property over 5 years for additions prior to January
1, 1987. As a result of the Tax Reform Act of 1986, for additions after December
31, 1986, the modified accelerated cost recovery method is used for depreciation
of (1) real  property  additions  over 27 1/2 years,  and (2) personal  property
additions over 5 years.

Effective  January 1, 1999, the Partnership  changed its method of accounting to
capitalize the costs of exterior painting and major landscaping (Note J).

Investment Properties:  Investment properties consist of two apartment complexes
and are  stated  at cost.  Acquisition  fees are  capitalized  as a cost of real
estate. In accordance with Statement of Financial  Accounting Standards ("SFAS")
No. 121,  "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets  to be  Disposed  Of",  the  Partnership  records  impairment  losses  on
long-lived assets used in operations when events and circumstances indicate that
the assets might be impaired  and the  undiscounted  cash flows  estimated to be
generated by those assets are less than the  carrying  amounts of those  assets.
For the years ended December 31, 1999 and 1998, no adjustments for impairment of
value were necessary.

Cash and Cash  Equivalents:  Includes cash on hand and in banks and money market
accounts.  At certain  times,  the amount of cash deposited at a bank may exceed
the limit on insured deposits.

Tenant  Security  Deposits:  The  Partnership  requires  security  deposits from
lessees  for the  duration  of the lease,  and such  deposits  are  included  in
receivables  and  deposits.  Deposits  are  refunded  when the  tenant  vacates,
provided the tenant has not damaged its space and is current on rental payments.

Use of Estimates:  The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

Advertising:  The  Partnership  expenses the costs of  advertising  as incurred.
Advertising expense,  included in operating expenses,  was approximately $55,000
and $45,000 for the years ended December 31, 1999 and 1998, respectively.

Restricted Escrows:

      Reserve  Account:  The  Partnership  has a  general  reserve  account  for
      Versailles  to  cover  necessary  repairs  and  replacements  of  existing
      improvements,  debt service,  out-of-pocket expenses incurred for ordinary
      and necessary administrative tasks, and payment of real property taxes and
      insurance   premiums.   At  December  31,  1999,   this  reserve   totaled
      approximately $65,000.

      Capital Reserve:  At the time of the refinancing of Ashley Woods' mortgage
      note payable  during  1997,  approximately  $626,000 of the proceeds  were
      designated  for  "capital   improvements   escrows"  for  certain  capital
      improvements.  The required  improvements  were completed and all of these
      funds were withdrawn during 1999.

      Replacement  Reserve:  At the time of the  refinancing  of  Ashley  Woods'
      mortgage  note during 1997, a  replacement  reserve was  established.  The
      Registrant is required to deposit  approximately  $8,000 per month in this
      reserve  account held by the mortgage  lender in order to complete  listed
      capital improvements and replacements.  At December 31, 1999, this reserve
      balance totaled approximately $138,000.

Loan Costs: At December 31, 1999, loan costs of approximately  $283,000,  net of
accumulated amortization of approximately $133,000, are included in other assets
and are being  amortized on a straight-line  basis as interest  expense over the
term of the respective loans.

Leases: The Partnership  generally leases apartment units for twelve-month terms
or less. The Partnership recognizes income as earned on its leases. In addition,
it is the  Partnership's  policy to offer rental  concessions  during periods of
declining  occupancy  or in response  to heavy  competition  from other  similar
complexes  in the  area.  Concessions  are  charged  against  rental  income  as
incurred.

Fair Value of Financial Instruments: SFAS No. 107, "Disclosures about Derivative
Financial  Instruments",   as  amended  by  SFAS  No.  119,  "Disclosures  about
Derivative  Financial  Instruments  and  Fair  Value of  Financial  Instruments"
requires  disclosure  of fair value  information  about  financial  instruments,
whether or not recognized in the balance  sheet,  for which it is practicable to
estimate  fair  value.  Fair value is defined in the SFAS as the amount at which
the  instruments  could be exchanged in a current  transaction  between  willing
parties,  other than in a forced or liquidation  sale. The Partnership  believes
that the  carrying  amount of its  financial  instruments  (except for long term
debt)  approximates  their fair value due to the short  term  maturity  of these
instruments.  The  fair  value  of  the  Partnership's  long  term  debt,  after
discounting the scheduled loan payments to maturity,  approximates  its carrying
balance.

Segment Reporting: SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related  Information"  established  standards  for the way that public  business
enterprises  report  information  about operating  segments in annual  financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports.  It also establishes  standards
for related disclosures about products and services, geographic areas, and major
customers. See "Note G" for required disclosure.

Note B - Transfer of Control

Pursuant  to a series  of  transactions  which  closed  on  October  1, 1998 and
February 26, 1999,  Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment  Investment and Management Company  ("AIMCO"),  a publicly
traded real estate investment trust, with AIMCO being the surviving  corporation
(the "Insignia Merger").  As a result, AIMCO acquired 100% ownership interest in
the Managing General Partner. The Managing General Partner does not believe that
this  transaction  has had or will  continue  to have a  material  effect on the
affairs and operations of the Partnership.

Note C - Mortgage Notes Payable

The principle terms of mortgage notes payable are as follows:
<TABLE>
<CAPTION>

                          Principal     Monthly                           Principal
                         Balance At     Payment     Stated                 Balance
                        December 31,   Including   Interest   Maturity      Due At
       Property             1999        Interest     Rate       Date       Maturity
                             (in thousands)                             (in thousands)

Versailles on the Lake
<S>                       <C>           <C>        <C>       <C>          <C>

  1st mortgage             $ 2,360       $  22      7.60%     11/15/02     $ 2,071
  2nd mortgage                  88       $   1(1)   7.60%     11/15/02          88

Ashley Woods                 7,833          55      7.29%     12/01/04       7,334
                            10,281       $  78                             $ 9,493
Less unamortized
  Discounts                   (71)

Totals                     $10,210
</TABLE>

(1)   Interest only payments

The  mortgage  notes  payable  are  non-recourse  and are secured by the related
property and  improvements of the Partnership and by pledge of revenues from the
apartment properties.  The notes require prepayment penalties if repaid prior to
maturity and prohibit resale of the properties subject to existing indebtedness.

The Partnership exercised an interest rate buy-down option for Versailles on the
Lake  reducing the stated rate from 8.76% to 7.60% during 1992.  The fee for the
interest rate reduction was  approximately  $205,000 and is being amortized as a
loan discount  using the effective  interest  method over the term of the loans.
The discount fee is reflected as a reduction of the mortgage  notes  payable and
increases the effective rate of the debt to 8.76%.

Scheduled  principal  payments  of the  mortgage  notes  payable  subsequent  to
December 31, 1999, are as follows (in thousands):

                               2000        $   176
                               2001            198
                               2002          2,354
                               2003            110
                               2004          7,443
                                           $10,281

Note D - Income Taxes

The Partnership  received a ruling from the Internal  Revenue Service that it is
to be classified as a partnership for Federal income tax purposes.  Accordingly,
no provision for income taxes is made in the consolidated  financial  statements
of the Partnership. Taxable income or loss of the Partnership is reported in the
income tax returns of its partners.

The following is a reconciliation  of reported net loss and Federal taxable loss
(in thousands, except per unit data):

                                     1999          1998
 Net loss as reported              $ (46)        $ (184)
Add (deduct):
  Depreciation differences            (7)            30
  Unearned income                     23            (31)
  Disposal of fixed assets            --             49
  Miscellaneous                       25             30
Federal taxable loss                $ (5)        $ (106)
Federal taxable loss per
  limited partnership unit        $ (6.48)     $(133.92)

The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net liabilities at December 31, 1999 (in thousands):

                                                         1999

Net liabilities as reported                            $(3,298)
Differences in basis of assets and liabilities:
Buildings and land                                         249
Accumulated depreciation                                (2,335)
Other                                                      533

Net liabilities - Federal tax basis                    $(4,851)

Note E - Transactions with Affiliated Parties

The  Partnership  has no employees  and is  dependent  on the  Managing  General
Partner  and  its  affiliates  for  the  management  and  administration  of all
Partnership  activities.  Affiliates  of the Managing  General  Partner  provide
property  management  services to the  Partnership.  The  Partnership  Agreement
provides for payments to affiliates for property  management services based on a
percentage  of revenue and for  reimbursement  of certain  expenses  incurred by
affiliates on behalf of the  Partnership.  The  following  payments were paid to
affiliates  of the  Managing  General  Partner  during  each of the years  ended
December 31, 1999 and 1998:

                                                   1999        1998
                                                    (in thousands)
Property management fees (included in
   operating expenses)                            $ 166        $ 152
Reimbursement for services of affiliates
   (included in investment properties,
   general and administrative expenses and
   operating expenses)                               85          117

During the years ended  December 31, 1999 and 1998,  affiliates  of the Managing
General  Partner were entitled to receive 5% of gross  receipts from both of the
Registrant's  properties  as  compensation  for  providing  property  management
services.  The Registrant  paid to such  affiliates  approximately  $166,000 and
$152,000 for the years ended December 31, 1999 and 1998, respectively.

An  affiliate  of  the  Managing  General  Partner  received   reimbursement  of
accountable  administrative  expenses  amounting  to  approximately  $85,000 and
$117,000  for the years ended  December 31, 1999 and 1998,  respectively.  These
amounts  include  approximately  $19,000 and $27,000 of  construction  oversight
reimbursements for the years ended December 31, 1999 and 1998, respectively.

The  Partnership  is liable to a company  affiliated  with the Managing  General
Partner through common  ownership for real estate  commissions in the amounts of
$125,000  for Revere  Village and $196,000 for Essex which were sold in previous
years.  The total  amount of $321,000 is  included on the  consolidated  balance
sheet as "Due to affiliate".  Payment of the commissions will not be made to the
affiliated company until each limited partner has received  distributions  equal
to their original invested capital, plus 8% per annum cumulative  non-compounded
on their adjusted  invested  capital  commencing on the last day of the calendar
quarter in which each limited  partner was admitted to the  Partnership  through
the date of payment.

Several tender offers were made by various parties,  including affiliates of the
Managing General Partner,  during the years ended December 31, 1999 and 1998. As
a result of these tender offers,  AIMCO and its affiliates  currently own 266.65
units of limited  partnership units in the Partnership  representing  35.478% of
the outstanding units. It is possible that AIMCO or its affiliates will make one
or more additional offers to acquire additional limited partnership interests in
the Partnership  for cash or in exchange for units in the operating  partnership
of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the
Units are  entitled to take action  with  respect to a variety of matters.  When
voting on matters, AIMCO would in all likelihood vote the Units it acquired in a
manner  favorable  to the interest of the Managing  General  Partner  because of
their affiliation with the Managing General Partner.

On September 26, 1997, an affiliate of the Managing  General  Partner  purchased
Lehman Brothers' Class "D" subordinated bonds of SASCO, 1992-M1. These bonds are
secured  by 55  multi-family  apartment  mortgage  loan  pairs  held  in  trust,
including Versailles on the Lake Apartments owned by the Partnership.

Note F - Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>

                                                 Initial Cost
                                                To Partnership
                                                (in thousands)

                                                        Buildings         Net Cost
                                                       and Related      Capitalized
                                                         Personal      Subsequent to
Description                Encumbrances      Land        Property       Acquisition
                          (in thousands)                               (in thousands)
<S>                          <C>           <C>          <C>               <C>
Versailles on the Lake        $ 2,448       $ 191        $ 3,847           $ 666
Ashley Woods                    7,833          881         5,815            2,925
                           -    -----      --- ---    -    -----       -    -----
Totals                        $10,281      $ 1,072       $ 9,662          $ 3,591
                               ======       ======        ======           ======
</TABLE>


<TABLE>
<CAPTION>

                        Gross Amount At Which
                               Carried
                         At December 31, 1999
                            (in thousands)
                              Buildings
                                 And                           Date of
                               Personal          Accumulated  Construc-   Date    Depreciable
     Description       Land    Property   Total  Depreciation   tion    Acquired  Life-Years
                                                (in thousands)
<S>                   <C>    <C>       <C>       <C>          <C>       <C>        <C>
Versailles on the      $ 191  $ 4,513   $ 4,704   $ 2,735      1970      04/84      5-25
Lake
Ashley Woods             881    8,740     9,621     5,142      1971      07/84      5-25

     Totals           $1,072  $13,253   $14,325   $ 7,877

</TABLE>

Reconciliation of "Real Estate and Accumulated Depreciation" (in thousands):

                                               Year Ended December 31,
                                                 1999          1998
Investment Properties
Balance at beginning of year                    $13,838       $13,002
    Property improvements                           487           948
    Property disposal                                --          (112)
Balance at end of year                          $14,325       $13,838

Accumulated Depreciation
Balance at beginning of year                    $ 7,216       $ 6,676
    Depreciation expense                            661           603
    Property disposal                                --           (63)
Balance at end of year                          $ 7,877       $ 7,216

The  aggregate  cost of the real  estate  for  Federal  income tax  purposes  at
December  31,  1999 and 1998,  is  approximately  $14,574,000  and  $14,088,000,
respectively. The accumulated depreciation taken for Federal income tax purposes
at December 31, 1999 and 1998,  is  approximately  $10,212,000  and  $9,543,000,
respectively.

<PAGE>

Note G - Segment Reporting

The  Partnership  has  one  reportable  segment:   residential  properties.  The
Partnership's  residential property segment consists of two apartment complexes,
one located in Cincinnati,  Ohio, and the other located in Fort Wayne,  Indiana.
The  Partnership  rents  apartment units to tenants for terms that are typically
twelve months or less.

The  Partnership  evaluates  performance  based on segment  profit (loss) before
depreciation.  The accounting policies of the reportable segment are the same as
those described in the summary of significant accounting policies.

The  Partnership's  reportable  segment  consists of investment  properties that
offer similar products and services.  Although each of the investment properties
is  managed  separately,  they have been  aggregated  into one  segment  as they
provide services with similar types of products and customers.

Segment information for the years 1999 and 1998 is shown in the tables below (in
thousands). The "Other" column includes Partnership administration related items
and income and expense not allocated to the reportable segment.
<TABLE>
<CAPTION>

1999                                        Residential        Other         Totals
<S>                                          <C>              <C>          <C>
Rental income                                 $ 2,947          $ --         $ 2,947
Other income                                      260              11           271
Interest expense                                  823              --           823
Depreciation                                      661              --           661
General and administrative expense                 --             155           155
Segment profit (loss)                              98            (144)          (46)
Total assets                                    7,488             224         7,712
Capital expenditures for investment
  properties                                      487              --           487
</TABLE>

<TABLE>
<CAPTION>

1998                                        Residential        Other        Totals
<S>                                          <C>              <C>          <C>
Rental income                                 $ 2,783          $ --         $ 2,783
Other income                                      214              38           252
Interest expense                                  832              --           832
Depreciation                                      603              --           603
General and administrative expense                 --             140           140
Segment loss                                      (82)           (102)         (184)
Total assets                                    7,970             290         8,260
Capital expenditures for investment
  properties                                      948              --           948
</TABLE>

<PAGE>
Note H - Distributions

A distribution of $314,000  ($417.78 per limited  partnership  unit) was made to
the limited  partners during the year ended December 31, 1999. A distribution of
$900,000  ($1,197.46  per  limited  partnership  unit)  was made to the  limited
partners  during the year ended December 31, 1998.  Both of these  distributions
represented  a portion of the  previously  undistributed  net proceeds  from the
mortgage refinancing of Ashley Woods Apartments during 1997.

Note I - 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. in the Superior Court of the State of California
for the County of San Mateo. The plaintiffs  named as defendants,  among others,
the  Partnership,  the Managing  General Partner and several of their affiliated
partnerships  and corporate  entities.  The action  purports to assert claims on
behalf of a class of limited  partners and derivatively on behalf of a number of
limited  partnerships  (including  the  Partnership)  which are named as nominal
defendants,  challenging  the  acquisition  by Insignia  Financial  Group,  Inc.
("Insignia")  and  entities  which  were,  at one time,  affiliates  of Insignia
("Insignia  Affiliates") of interests in certain general partner entities,  past
tender offers by Insignia  Affiliates to acquire limited  partnership units, the
management of partnerships  by Insignia  Affiliates and the Insignia Merger (see
"Note B - Transfer  of  Control").  The  plaintiffs  seek  monetary  damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998,  the Managing  General  Partner  filed a motion  seeking  dismissal of the
action.  In lieu of  responding  to the  motion,  the  plaintiffs  have filed an
amended  complaint.  The Managing General Partner filed demurrers to the amended
complaint which were heard February 1999.  Pending the ruling on such demurrers,
settlement negotiations commenced. On November 2, 1999, the parties executed and
filed a  Stipulation  of  Settlement,  settling  claims,  subject to final court
approval, on behalf of the Partnership and all limited partners who own units as
of November 3, 1999.  Preliminary  approval of the  settlement  was  obtained on
November 3, 1999 from the Superior Court of the State of  California,  County of
San Mateo, at which time the Court set a final approval hearing for December 10,
1999.  Prior to the  December  10,  1999  hearing  the  Court  received  various
objections to the settlement,  including a challenge to the Court's  preliminary
approval based upon the alleged lack of authority of class  plaintiffs'  counsel
to enter the settlement.  On December 14, 1999, the Managing General Partner and
its affiliates terminated the proposed settlement. Certain plaintiffs have filed
a motion to  disqualify  some of the  plaintiffs'  counsel  in the  action.  The
Managing  General  Partner does not anticipate  that costs  associated with this
case will be material to the Partnership's overall operations.

The  Partnership is unaware of any other pending or outstanding  litigation that
is not of a routine nature arising in the ordinary course of business.


<PAGE>


Note J - Change in Accounting Principle

Effective  January 1, 1999, the Partnership  changed its method of accounting to
capitalize the cost of exterior  painting and major landscaping on a prospective
basis.  The  Partnership  believes  that  this  accounting  principle  change is
preferable  because it provides a better  matching of expenses  with the related
benefit of the expenditures and it is consistent with industry  practice and the
policies of the Managing General  Partner.  There was no effect from this change
during 1999 on the net loss. The cumulative effect, had this change been applied
to prior periods, is not material. The accounting principle change will not have
an effect on cash flow,  funds available for distribution or fees payable to the
Managing General Partner and affiliates.


<PAGE>



Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure

          None.

<PAGE>
                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons, Compliance
        with Section 16(a) of the Exchange Act

Davidson Diversified Real Estate I, L.P. (the "Partnership" or "Registrant") has
no officers or directors.  Davidson Diversified Properties,  Inc. (the "Managing
General   Partner")  manages  and  controls  the  Partnership  and  has  general
responsibility and authority in all matters affecting its business.

The names of the  directors  and  executive  officers  of the  Managing  General
Partner,  their ages and the nature of all positions  presently held by them are
set forth below. There are no family relationships between or among any officers
and directors.

         Name                     Age     Position

         Patrick J. Foye           42     Executive Vice President and Director

         Martha L. Long            40     Senior Vice President and Controller

Patrick J. Foye has been  Executive  Vice President and Director of the Managing
General  Partner  since October 1, 1998.  Mr. Foye has served as Executive  Vice
President  of AIMCO  since May 1998.  Prior to  joining  AIMCO,  Mr.  Foye was a
partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to
1998 and was  Managing  Partner  of the  firm's  Brussels,  Budapest  and Moscow
offices from 1992  through  1994.  Mr. Foye is also Deputy  Chairman of the Long
Island  Power   Authority  and  serves  as  a  member  of  the  New  York  State
Privatization  Council.  He received a B.A. from Fordham College and a J.D. from
Fordham University Law School.

Martha L. Long has been Senior Vice  President  and  Controller  of the Managing
General  Partner and AIMCO since October 1998, as a result of the acquisition of
Insignia  Financial  Group,  Inc. From June 1994 until January 1997, she was the
Controller for Insignia, and was promoted to Senior Vice President - Finance and
Controller in January 1997,  retaining that title until October 1998.  From 1988
to June 1994,  Ms. Long was Senior Vice  President and  Controller for The First
Savings Bank, FSB in Greenville, South Carolina.

Based solely upon a review of Forms 3 and 4 and amendments  thereto furnished to
the Registrant  under Rule 16a-3(e) during the  Registrant's  most recent fiscal
year and Forms 5 and amendments thereto furnished to the Registrant with respect
to its most recent  fiscal year,  the  Registrant  is not aware of any director,
officer,  beneficial  owner of more than ten  percent  of the  units of  limited
partnership interest in the Registrant that failed to file on a timely basis, as
disclosed in the above Forms,  reports required by section 16(a) of the Exchange
Act during the most recent  fiscal year or prior fiscal years except as follows:
AIMCO Properties,  L.P. and its joint filers failed to timely file a Form 3 with
respect to its  acquisition  of Units and AIMCO and its joint  filers  failed to
timely file a Form 4 with respect to its acquisition of Units.

Item 10.    Executive Compensation

None of the directors and officers of the Managing  General Partner received any
remuneration from the Registrant.


<PAGE>


Item 11.    Security Ownership of Certain Beneficial Owners and Management

Except as noted below, no person or entity was known by the Registrant to be the
beneficial  owners  of more  than 5% of the  Limited  Partnership  Units  of the
Registrant as of December 31, 1999.

                   Entity                   Number of Units     Percentage

          AIMCO Properties, L.P.                 162.25           21.588%
            (an affiliate of AIMCO)
          Cooper River Properties, LLC            85.65           11.396%
            (an affiliate of AIMCO)
          Insignia Properties, LP                 18.50            2.461%
            (an affiliate of AIMCO)
          Davidson Diversified Properties, Inc.     .25             .033%
            (an affiliate of AIMCO)

Cooper  River  Properties,  L.L.C.,  Insignia  Properties,  L.P.,  and  Davidson
Diversified  Properties,  Inc. are indirectly  ultimately owned by AIMCO.  Their
business address is 55 Beattie Place, Greenville, SC 29602.

AIMCO  Properties,  L.P.  is  indirectly  ultimately  controlled  by AIMCO.  Its
business address is 2000 South Colorado Boulevard, Denver, CO 80222.

As of December 31, 1999, no director or officer of the Managing  General Partner
owns,  nor do the directors or officers as a group own any of the  Partnership's
Units. No such director or officer had any right to acquire beneficial ownership
of additional Units of the Partnership.

Item 12.    Certain Relationships and Related Transactions

The  Partnership  has no employees  and is  dependent  on the  Managing  General
Partner  and  its  affiliates  for  the  management  and  administration  of all
Partnership  activities.  Affiliates  of the Managing  General  Partner  provide
property  management  services to the  Partnership.  The  Partnership  Agreement
provides for payments to affiliates for property  management services based on a
percentage  of revenue and for  reimbursement  of certain  expenses  incurred by
affiliates on behalf of the  Partnership.  The  following  payments were paid to
affiliates  of the  Managing  General  Partner  during  each of the years  ended
December 31, 1999 and 1998:

                                                   1999        1998
                                                    (in thousands)

Property management fees                           $166        $152
Reimbursement for services of affiliates             85         117

During the years ended  December 31, 1999 and 1998,  affiliates  of the Managing
General  Partner were  entitled to receive 5% of gross  receipts from all of the
Registrant's  properties  as  compensation  for  providing  property  management
services.  The Registrant  paid to such  affiliates  approximately  $166,000 and
$152,000 for the years ended December 31, 1999 and 1998, respectively.

<PAGE>

An  affiliate  of  the  Managing  General  Partner  received   reimbursement  of
accountable  administrative  expenses  amounting  to  approximately  $85,000 and
$117,000 for years ended December 31, 1999 and 1998, respectively. These amounts
include   approximately   $19,000   and   $27,000  of   construction   oversight
reimbursements for the years ended December 31, 1999 and 1998, respectively.

The  Partnership  is liable to a company  affiliated  with the Managing  General
Partner through common  ownership for real estate  commissions in the amounts of
$125,000  for Revere  Village and $196,000 for Essex which were sold in previous
years.  The total  amount of $321,000 is  included on the  consolidated  balance
sheet as "Due to affiliate".  Payment of the commissions will not be made to the
affiliated  company  until each limited  partner has received a payment equal to
their original invested capital, plus 8% per annum cumulative  non-compounded on
their  adjusted  invested  capital  commencing  on the last day of the  calendar
quarter in which each limited  partner was admitted to the  Partnership  through
the date of payment.

Several tender offers were made by various parties,  including affiliates of the
Managing General Partner,  during the years ended December 31, 1999 and 1998. As
a result of these tender offers,  AIMCO and its affiliates  currently own 266.65
units of limited  partnership units in the Partnership  representing  35.478% of
the outstanding units. It is possible that AIMCO or its affiliates will make one
or more additional offers to acquire additional limited partnership interests in
the Partnership  for cash or in exchange for units in the operating  partnership
of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the
Units are  entitled to take action  with  respect to a variety of matters.  When
voting on matters, AIMCO would in all likelihood vote the Units it acquired in a
manner  favorable  to the interest of the Managing  General  Partner  because of
their affiliation with the Managing General Partner.

On September 26, 1997, an affiliate of the Managing  General  Partner  purchased
Lehman Brothers' Class "D" subordinated bonds of SASCO, 1992-M1. These bonds are
secured  by 55  multi-family  apartment  mortgage  loan  pairs  held  in  trust,
including Versailles on the Lake Apartments owned by the Partnership.

Item 13.    Exhibits and Reports on Form 8-K

      (a)   Exhibits:

            Exhibit 18, Independent Accountants'  Preferability Letter for
            Change in Accounting Principle, is filed as an exhibit to this
            report.

            Exhibit 27, Financial Data Schedule, is filed as an exhibit to
            this report.

      (b)   Reports on Form 8-K filed in the fourth quarter of calendar 1999:

            None.

<PAGE>
                                   SIGNATURES

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

                    DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.


                    By: Davidson Diversified Properties, Inc.,
                        Its Managing General Partner

                    By: /s/Patrick J. Foye
                        Patrick J. Foye
                        Executive Vice President

                    By: /s/Martha L. Long
                        Martha L. Long
                        Senior Vice President
                        and Controller

                    Date:

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

/s/Patrick J. Foye      Executive Vice President      Date:
Patrick J. Foye         and Director

/s/Martha L. Long       Senior Vice President         Date:
Martha L. Long          and Controller

<PAGE>

                     DAVIDSON DIVERSIFIED REAL ESTATE I, LP

                                  EXHIBIT INDEX

Exhibit                                   Description

   2              Agreement and Plan of Merger, dated as of October 1, 1998,
                  by and between AIMCO and IPT;  incorporated  by reference to
                  Exhibit 2.1 filed with  Registrant's  Current Report on Form
                  8-K dated October 1, 1998.

   3A             Partnership  Agreement  dated January 14, 1983 is incorporated
                  by reference to Exhibit A to the Prospectus of the Partnership
                  dated November 16, 1983 as filed with the Commission  pursuant
                  to Rule 424(b) under the Act.

   3B             Amendment  No.  1 dated  January  1,  1986 to the  Partnership
                  Agreement  is  incorporated  by reference to Exhibit 3B to the
                  Partnership's  Annual  Report on Form 10-K for the fiscal year
                  ended December 31, 1985.

   4              Certificate of Limited Partnership dated December 2, 1982 is
                  incorporated by reference to Exhibit 4 to the  Partnership's
                  Annual  Report  on Form  10-K  for  the  fiscal  year  ended
                  December 31, 1987.

   4A             Certificate of Amendment of Certificate of Limited Partnership
                  dated March 24, 1983 is  incorporated  by reference to Exhibit
                  4A to the  Partnership's  Annual  Report  on Form 10-K for the
                  fiscal year ended December 31, 1987.

   4B             Restated Certificate of Limited Partnership dated June 8, 1983
                  is   incorporated   by   reference   to   Exhibit  4B  to  the
                  Partnership's  Annual  Report on Form 10-K for the fiscal year
                  ended December 31, 1987.

   4C             Amended and Restated  Certificate of Limited Partnership dated
                  January 1, 1986 is  incorporated by reference to Exhibit 4C to
                  the  Partnership's  Annual  Report on Form 10-K for the fiscal
                  year ended December 31, 1987.

   10A            Agent's   Agreement   dated   November  1,  1983  between  the
                  Partnership and Harvey Freeman & Sons, Inc. is incorporated by
                  reference to Exhibit 10B to the Partnership's Annual Report on
                  Form 10-K for the fiscal year ended December 31, 1983.

   10B            Agreement  among Agents dated  November 1, 1983 by and among
                  Harvey Freeman & Sons, Inc.,  Harvey Freeman & Sons, Inc. of
                  Arkansas,  Harvey  Freeman & Sons,  Inc. of Florida,  Harvey
                  Freeman & Sons, Inc. of Georgia, Harvey Freeman & Sons, Inc.
                  of Indiana, Harvey Freeman & Sons, Inc. of Kentucky,  Harvey
                  Freeman & Sons, Inc. of Mississippi,  Harvey Freeman & Sons,
                  Inc. of North Carolina, Harvey Freeman & Sons, Inc. of Ohio,
                  and  Harvey  Freeman  & Sons,  Inc.  of South  Carolina,  is
                  incorporated   by   reference   to   Exhibit   10C   to  the
                  Partnership's Annual Report on Form 10-K for the fiscal year
                  ended December 31, 1983.

   10C            Acquisition and Disposition  Services  Agreement dated October
                  3, 1983 between the Partnership  and Criswell  Freeman Company
                  is   incorporated   by   reference   to  Exhibit  10D  to  the
                  Partnership's  Annual  Report on Form 10-K for the fiscal year
                  ended December 31, 1983.

   10D            Contract  for Sale of Real Estate for  Versailles  on the Lake
                  dated  March  16,  1984   between   Versailles   on  the  Lake
                  Associates,  an Illinois  limited  partnership  and  Tennessee
                  Trust  Company,  Trustee,  is  incorporated  by  reference  to
                  Exhibit 10(b) to the Partnership's  Current Report on Form 8-K
                  dated April 4, 1984.

   10E            Assignment  of Contract  for Sale dated April 2, 1984  between
                  Tennessee Trust Company, Trustee and the Partnership (relating
                  to  Versailles  on the Lake  Apartments)  is  incorporated  by
                  reference to Exhibit 10L to the Partnership's Annual Report on
                  Form 10-K for the fiscal year ended December 31, 1984.

   10F            Note dated  November  19,  1984  executed  by the  Partnership
                  payable to American  Fletcher  National Bank and Trust Company
                  relating to Versailles on the Lake  Apartments is incorporated
                  by reference to Exhibit 10W to the Partnership's Annual Report
                  on Form 10-K for the fiscal year ended December 31, 1985.

   10G            Real  Estate  Mortgage,   Assignment  of  Rents  and  Security
                  Agreement  dated November 19, 1984 executed by the Partnership
                  payable to American  Fletcher  National Bank and Trust Company
                  relating  to  Versailles  on  the  Lake  is   incorporated  by
                  reference to Exhibit 10EE to the  Partnership's  Annual Report
                  on Form 10-K for the fiscal year ended December 31, 1985.

   10H            Memorandum   of   Understanding   among  SEC  Realty  Corp.,
                  Tennessee Properties, L.P., Freeman Mortgage Corporation, J.
                  Richard  Freeman,  W.  Criswell  Freeman and  Jacques-Miller
                  Properties,  Inc. is  incorporated  by  reference to Exhibit
                  10BB to the Partnership's Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1988.

<PAGE>

   10I            Partnership  Administration and Consultation Agreement among
                  Freeman Properties,  Inc., Freeman  Diversified  Properties,
                  Inc.,   Residual   Equities   Limited   and   Jacques-Miller
                  Properties,  Inc. is  incorporated  by  reference to Exhibit
                  10CC to the Partnership's Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1988.

   10J            Partnership Agreement of Ashley Woods Associates dated May 16,
                  1990 owned 99.9% by the Partnership relating to refinancing of
                  Ashley  Woods  Apartments  is  incorporated  by  reference  to
                  Exhibit 10EE to the  Partnership's  Annual Report on Form 10-K
                  for the fiscal year ended December 31, 1991.

   10K            Multifamily Note with Addendum dated June 14, 1990 executed by
                  Ashley Woods Associates payable to PW Funding Inc. relating to
                  Ashley  Woods  Apartments  is  incorporated  by  reference  to
                  Exhibit 10FF to the  Partnership's  Annual Report on Form 10-K
                  for the fiscal year ended December 31, 1991.

   10L            Multifamily  Open-end  Mortgage with Rider dated June 14, 1990
                  executed  by Ashley  Woods  Associates  in favor of PW Funding
                  Inc.  relating to Ashley Woods  Apartments is  incorporated by
                  reference to Exhibit 10GG to the  Partnership's  Annual Report
                  on Form 10-K for the fiscal year ended December 31, 1991.

   10M            Termination   Agreement   dated   December  31,  1991  among
                  Jacques-Miller,  Inc.,  Jacques-Miller  Property Management,
                  Davidson  Diversified  Properties,  Inc., and Supar, Inc. is
                  incorporated   by   reference   to   Exhibit   10HH  to  the
                  Partnership's Annual Report on Form 10-K for the fiscal year
                  ended December 31, 1991.

   10N            Assignment   of  Limited   Partnership   Interest  of  Freeman
                  Equities,  Limited,  dated December 31, 1991 between  Davidson
                  Diversified Properties, Inc. and Insignia Jacques-Miller, L.P.
                  is   incorporated   by   reference  to  Exhibit  10II  to  the
                  Partnership's  Annual  Report on Form 10-K for the fiscal year
                  ended December 31,1991.

   10O            Assignment of General Partner  Interests of Freeman  Equities,
                  Limited,  dated December 31, 1991 between Davidson Diversified
                  Properties,  Inc. and MAE GP  Corporation is  incorporated  by
                  reference to Exhibit 10JJ to the  Partnership's  Annual Report
                  on Form 10-K for the fiscal year ended December 31, 1991.

   10P            Stock  certificate,  dated December 31, 1991 showing ownership
                  of 1,000 shares of Davidson  Diversified  Properties,  Inc. by
                  MAE GP  Corporation  is  incorporated  by reference to Exhibit
                  10KK to the  Partnership's  Annual Report on Form 10-K for the
                  fiscal year ended December 31, 1991.


<PAGE>


   10Q            Contracts related to refinancing of debt:

                  (a)   First Deed of Trust and Security Agreement dated October
                        28, 1992  between  Davidson  Diversified  Real Estate I,
                        Limited Partnership and First Commonwealth Realty Credit
                        Corporation, a Virginia Corporation, securing Versailles
                        on the Lake is  incorporated by reference to Exhibit 10Q
                        (a) to the  Partnership's  Annual  Report on Form 10-KSB
                        for the fiscal year ended December 31, 1992.

                  (b)   Second  Deed  of  Trust  and  Security  Agreement  dated
                        October  28,  1992  between  Davidson  Diversified  Real
                        Estate I,  Limited  Partnership  and First  Commonwealth
                        Realty  Credit  Corporation,   a  Virginia  Corporation,
                        securing  Versailles  on the  Lake  is  incorporated  by
                        reference to Exhibit 10Q (b) to the Partnership's Annual
                        Report on Form 10-KSB for the fiscal year ended December
                        31, 1992.

                  (c)   First  Assignment  of Leases and Rents dated October 28,
                        1992 between Davidson Diversified Real Estate I, Limited
                        Partnership   and  First   Commonwealth   Realty  Credit
                        Corporation, a Virginia Corporation, securing Versailles
                        on the Lake is  incorporated by reference to Exhibit 10Q
                        (c) to the  Partnership's  Annual  Report on Form 10-KSB
                        for the fiscal year ended December 31, 1992.

                  (d)   Second  Assignment of Leases and Rents dated October 28,
                        1992 between Davidson Diversified Real Estate, I Limited
                        Partnership   and  First   Commonwealth   Realty  Credit
                        Corporation, a Virginia Corporation, securing Versailles
                        on the Lake is  incorporated by reference to Exhibit 10Q
                        (d) to the  Partnership's  Annual  Report on Form 10-KSB
                        for the fiscal year ended December 31, 1992.

                  (e)   First Deed of Trust Note dated  October 28, 1992 between
                        Davidson  Diversified Real Estate I Limited  Partnership
                        and  First  Commonwealth   Realty  Credit   Corporation,
                        relating to  Versailles on the Lake is  incorporated  by
                        reference to Exhibit 10Q (e) to the Partnership's Annual
                        Report on Form 10-KSB for the fiscal year ended December
                        31, 1992.

                  (f)   Second Deed of Trust Note dated October 28, 1992 between
                        Davidson  Diversified Real Estate I, Limited Partnership
                        and  First   Commonwealth   Realty  Credit   Corporation
                        relating to  Versailles on the Lake is  incorporated  by
                        reference to Exhibit 10Q (f) to the Partnership's Annual
                        Report on Form 10-KSB for the fiscal year ended December
                        31,1992.

   10R            Promissory  Note dated  November  20,  1997,  by and between
                  Ashley Woods,  L.L.C.,  a South Carolina  limited  liability
                  company,  and Lehman  Brothers  Holdings,  Inc.,  a Delaware
                  corporation.

<PAGE>

   16             Letter from the Partnership's  former  independent  accountant
                  regarding  its  concurrence  with the  statements  made by the
                  Partnership is  incorporated by reference to the exhibit filed
                  with Form 8-K dated September 30, 1992.

   18             Independent Accountants'  Preferability Letter for Change in
                  Accounting  Principle,  is  attached  as an  exhibit to this
                  report.

   27             Financial Data  Schedule,  is attached as an exhibit to this
                  report.

<PAGE>
                                                                 Exhibit 18


February 7, 2000


Mr. Patrick J. Foye
Executive Vice President

Davidson Diversified Properties, Inc.
Managing General Partner of Davidson Diversified Real Estate I, L.P.
55 Beattie Place
P.O. Box 1089
Greenville, South Carolina 29602

Dear Mr. Foye:

Note J of Notes to the Consolidated Financial Statements of Davidson Diversified
Real Estate I, L.P.  included in its Form 10-KSB for the year ended December 31,
1999  describes  a change in the method of  accounting  to  capitalize  exterior
painting and major  landscaping,  which would have been  expensed  under the old
policy.  You have advised us that you believe that the change is to a preferable
method in your  circumstances  because it provides a better matching of expenses
with the related  benefit of the  expenditures  and is consistent  with policies
currently  being used by your  industry  and  conforms  to the  policies  of the
Managing General Partner.

There are no authoritative criteria for determining a preferable method based on
the particular circumstances; however, we conclude that the change in the method
of accounting  for exterior  painting and major  landscaping is to an acceptable
alternative  method which,  based on your business  judgment to make this change
for the reasons cited above, is preferable in your circumstances.

                                                               Very truly yours,
                                                            /s/Ernst & Young LLP