MULTIFAMILY NOTE

US $7,325,000.00                                  Louisville, Kentucky
                                                       City


                                                       as of August 6, 1997

     For Value Received, the undersigned promise to pay PATRICIAN FINANCIAL
COMPANY LIMITED PARTNERSHIP, a Massachusetts limited partnership or order, the
principal sum of Seven Million Three Hundred Twenty-five Thousand and No/100ths
Dollars, with interest on the unpaid principal balance from the date of this
Note, until paid, at the rate of 7.5 percent per annum.  The principal and
interest shall be payable at 4550 Montgomery Avenue, Suite 1150, Bethesda,
Maryland 20814, or such other place as the holder hereof may designate in
writing, in consecutive monthly installments of Fifty-One Thousand Two Hundred
Seventeen and 46/100ths Dollars (US $51,217.46) on the 1st day of each month
beginning October 1, 1997 (herein "amortization commencement date"), until the
entire indebtedness evidenced hereby is fully paid, except that any remaining
indebtedness, if not sooner paid, shall be due and payable on September 1, 2007.

     If any installment under this Note is not paid when due, the entire
principal amount outstanding hereunder and accrued interest thereon shall at
once become due and payable, at the option of the holder hereof.  The holder
hereof may exercise this option to accelerate during any default by the
undersigned regardless of any prior forbearance.  In the event of any default in
the payment of this Note, and if the same is referred to an attorney at law for
collection or  any action at law or in equity is brought with respect hereto,
the undersigned shall pay the holder hereof all expenses and costs, including,
but not limited to, attorney's fees.

     If any installment under this Note is not received by the holder hereof
within ten (10) calendar days after the installment is due, the undersigned
shall pay to the holder hereof a late charge of five (5) percent of such
installment, such late charge to be immediately due and payable without demand
by the holder hereof.  If any installment under this Note remains past due for
thirty (30) calendar days or more, the outstanding principal balance of this
Note shall bear interest during the period in which the undersigned is in
default at a rate of 11.5 percent per annum, or, if such increased rate of
interest may not be collected from the undersigned under applicable law, then at
the maximum increased rate of interest, if any, which may be collected from the
undersigned under applicable law.

     From time to time, without affecting the obligation of the undersigned or
the successors or assigns of the undersigned to pay the outstanding principal
balance of this Note and observe the covenants of the undersigned contained
herein, without affecting the guaranty of any person, corporation, partnership
or other entity for payment of the outstanding principal balance of this Note,
without giving notice to or obtaining the consent of the undersigned, the
successors or assigns of the undersigned or guarantors, and without liability on
the part of the holder hereof, the holder hereof may, at the option of the
holder hereof, extend the time for payment of said outstanding principal balance
or any part thereof, reduce the payments thereon, release anyone liable on any
of said outstanding principal balance, accept a renewal of this Note, modify the
terms and time of payment of said outstanding principal balance, join in any
extension or subordination agreement, release any security given herefor, take
or release other or additional security, and agree in writing with the
undersigned to modify the rate of interest or period of amortization of this
Note or change the amount of the monthly installments payable hereunder.

     Presentment, notice of dishonor, and protest are hereby waived by all
makers, sureties, guarantors and endorsers hereof.  This Note shall be the joint
and several obligation of all makers, sureties, guarantors and endorsers, and
shall be binding upon them and their successors and assigns.

     The indebtedness evidenced by this Note is secured by a Mortgage or Deed of
Trust dated as of even date herewith, and reference is made thereto for rights
as to acceleration of the indebtedness evidenced by this Note.  This Note shall
be governed by the law of the jurisdiction in which the Property subject to the
Mortgage or Deed of Trust is located.

The attached Addendum to Multifamily Note dated the date of this Note is
incorporated into and are deemed to amend and supplement this Note.


                         LA FONTENAY, L.L.C
                         a South Carolina limited liability company

                         BY:  DAVIDSON DIVERSIFIED REAL ESTATE II, L.P.
                              a Delaware limited partnership
                              Sole Member and Manager

                              BY:  DAVIDSON DIVERSIFIED PROPERTIES, INC.,
                                   a Tennessee corporation,
                                   General Partner

                                   BY:  /s/ Leigh A. Watters
                                        Leigh A. Watters
                                        Vice President


                                  ENDORSEMENT

                              TO MULTIFAMILY NOTE

                          dated as of August 6, 1997,

                                    given by

                              LA FONTENAY, L.L.C.

                                       TO

                PATRICIAN FINANCIAL COMPANY LIMITED PARTNERSHIP

               in the original principal amount of $7,325,000.00

     Pay to the order of BERKSHIRE MORTGAGE FINANCE LIMITED PARTNERSHIP, without
recourse.

                                        PATRICIAN FINANCIAL COMPANY
                                        LIMITED PARTNERSHIP,
                                        a Massachusetts limited partnership

                                        BY:  BRF CORPORATION, a Massachusetts
                                             corporation, General Partner


                                             BY:  /s/ Matthew Wherry
                                                  Matthew Wherry
Date:  as of August 6, 1997                       Authorized Signatory, 
                                                  Patrician Operations


     Pay to the order of ____________________________________________________,
without recourse.

                                        BERKSHIRE MORTGAGE FINANCE
                                        LIMITED PATRNERSHIP,
                                        a Massachusetts limited partnership

                                        BY:  BRF CORPORATION, a Massachusetts
                                             corporation, General Partner


                                             BY:  /s/ Matthew Wherry
                                                  Matthew Wherry
Date:  as of August 6, 1997                       Authorized Signatory, 
                                                  Patrician Operations


                          ADDENDUM TO MULTIFAMILY NOTE


     THIS ADDENDUM TO MULTIFAMILY NOTE (the "Addendum") is made as of this 6th
day of August, 1997 and is incorporated into and shall be deemed to amend and
supplement the Multifamily Note (the "Multifamily Note") made by the undersigned
(the "Borrower") to PATRICIAN FINANCIAL COMPANY LIMITED PARTNERSHIP and its
successors, assigns and transferees (the "Lender"), dated the same date as this
Addendum (the Multifamily Note as amended and supplemented by this Addendum, any
other addendum to the Multifamily Note, and any future amendments to the
Multifamily Note is referred to as the "Note").  The debt evidenced by the Note
is secured by a Multifamily Mortgage, Deed of Trust or Deed to Secure Debt of
the same date (the "Multifamily Instrument"), covering the property described in
the Multifamily Instrument and defined therein as the "Property," located at:

             500 La Fontenay Court, Louisville, Kentucky 40223-3005
                               (Property Address)

This Property is located entirely within the state of Kentucky [Insert name of
state in which the property is located] (the "Property Jurisdiction").  The
Multifamily Instrument is amended and supplemented by the Rider to Multifamily
Instrument (the "Rider") and any other rider to Multifamily Instrument given by
Borrower to Lender and dated the same date as the Multifamily Instrument.  (The
Multifamily Instrument as amended and supplemented by the Rider and any other
rider to the Multifamily Instrument and any future amendments to the Instrument
is referred to as the "Instrument".)

The term "Loan Documents" when used in this Addendum shall mean, collectively,
the following documents:  (i) the Instrument, (ii) the Note, and (iii) all other
documents or agreements, including any Collateral Agreements (as defined in the
Rider) or O&M Agreement (as defined in the Rider), arising under, related to, or
made in connection with, the loan evidenced by the Note, as such Loan Documents
may be amended.

The covenants and agreements of this Addendum, and the covenants and agreements
of any other addendum to the Multifamily Note, shall be incorporated into and
shall amend and supplement the covenants and agreements of the Multifamily Note
as if this Addendum and other addenda were a part of the Multifamily Note, and
all references to the Note in the Loan Documents shall mean the Note as so
amended and supplemented.  Any conflict between the provisions of the
Multifamily Note and this Addendum shall be resolved in favor of this Addendum.

     ADDITIONAL COVENANTS.  In addition to the covenants and agreements made in
the Multifamily Note Borrower and Lender further covenant and agree as follows:

A.   PREPAYMENTS

     1.  YIELD MAINTENANCE PERIOD

     During the first 9.5 [insert applicable number of years] years of the Note
term beginning with the date of the Note (the "Yield Maintenance Period") and
upon giving Lender 60 days prior written notice, Borrower may prepay the entire
unpaid principal balance of the Note on the last Business Day before a scheduled
monthly payment date by paying, in addition to the entire unpaid principal
balance, accrued interest and any other sums due Lender at the time of
prepayment, a prepayment premium equal to the greater of:

   (a) 1% of the entire unpaid principal balance of the Note, or

   (b) The product obtained by multiplying (1) the entire unpaid principal
       balance of the Note at the time of prepayment, times (2) the difference
       obtained by subtracting from the interest rate on the Note the yield
       rate (the "Yield Rate") on the 6.625% U. S. Treasury Security due May,
       2007 (the "Specified U.S. Treasury Security"), as the Yield Rate is
       reported in the Wall Street Journal on the fifth Business Day preceding
       (x) the date notice of prepayment is given to Lender where prepayment is
       voluntary, or (y) the date Lender accelerates the loan, times (3) the
       present value factor calculated using the following formula:

       1 -(1 + r)-n
             r
       [r = Yield Rate
        n = the number of years, and any fraction thereof, remaining between
       the prepayment date and the expiration of the Yield Maintenance Period]

    In the event that no Yield Rate is published for the Specified U.S.
Treasury Security, then the nearest equivalent U.S. Treasury Security shall be
selected at Lender's sole discretion.  If the publication of such Yield Rates in
the Wall Street Journal is discontinued, Lender shall determine such Yield Rates
from another source selected by Lender.

    Except as provided in paragraph A.3 of this Addendum, no partial
prepayments are permitted.

    2.  AFTER YIELD MAINTENANCE PERIOD

    After the expiration of the Yield Maintenance Period and upon giving Lender
60 days prior written notice, Borrower may prepay the entire unpaid principal
balance of the Note on the last Business Day before a scheduled monthly payment
date by paying, in addition to the entire unpaid principal balance, accrued
interest and any other sums due Lender at the time of prepayment, a prepayment
premium equal to 1% of the entire unpaid principal balance of the Note.  No
prepayment premium shall be due for any full prepayment made by Borrower in
accordance with the provisions of the preceding sentence within 90 days of the
maturity date of the Note.

    Except as provided in paragraph A.3 of this Addendum, no partial
prepayments are permitted.
 
    3.  PARTIAL PREPAYMENTS

    Borrower shall have no right to make a partial prepayment of the
outstanding indebtedness during the Note term.  However, in the event that
Lender shall require a partial prepayment of the outstanding indebtedness after
a default under the Note, the Instrument or any of the other Loan Documents, by
applying funds held by Lender pursuant to any Collateral Agreement (as defined
in Uniform Covenant 2B of the Instrument) against the indebtedness secured by
the Instrument, or, if Lender shall for any other reason accept a partial
prepayment by Borrower of the outstanding indebtedness, except as otherwise
provided in paragraph A.4 of this Addendum, a prepayment premium shall be due
and payable to Lender as follows:

    (a) After Yield Maintenance Period.  If Lender shall require or accept a
        partial prepayment after the expiration of the Yield Maintenance
        Period, the partial prepayment shall be made on the last Business Day
        before a scheduled monthly payment date and a prepayment premium equal
        to 1% of the partial principal prepayment amount shall be due and
        payable to Lender. No prepayment premium shall be due for any partial
        prepayment made by Borrower in accordance with the provisions of the
        preceding sentence within 90 days of the maturity date of the Note.

    (b) During Yield Maintenance Period.  If Lender shall require or accept a
        partial prepayment during the Yield Maintenance Period, the partial
        prepayment shall be made on the last Business Day before a scheduled
        monthly payment date and a prepayment premium shall be due and payable
        to Lender equal to the greater of:

       (i) 1% of the amount of principal being prepaid, or

       (ii)the product obtained by multiplying (A) the amount of the principal
           which is being prepaid, times (B) the difference obtained by
           subtracting from the interest rate on the Note the yield rate (the
           "Partial Prepayment Yield Rate") on the Specified U.S. Treasury
           Security, as the Partial Prepayment Yield Rate is reported in the
           Wall Street Journal on the fifth Business Day preceding (1) the day
           Lender accelerates the loan (in connection with any partial
           prepayment made in connection with an acceleration of the loan), or
           (2) the day Lender applies funds held under any Collateral Agreement
           (other than in connection with an acceleration of the loan), times
           (C) the present value factor calculated using the following formula:

           1 - (1 + y)-n
                       y
           [y = Partial Prepayment Yield Rate
            n = the number of years, and any fraction thereof, remaining
                between the prepayment date and the expiration of the Yield
                Maintenance Period]

     When the total amount to be applied toward the unpaid principal balance of
the loan and the prepayment premium is known, but the amounts to be allocated
toward the unpaid principal balance of the loan and the prepayment premium,
respectively, are unknown, the Lender shall determine the allocation between the
prepaid principal amount and the prepayment premium as follows:

         Given:  a  =  total amount to be applied
                 b  =  prepaid principal amount
                 c  =  prepayment premium
                 N  =  note rate
                 F  =  present value factor = 1 - (1 + y)-n
                                            y
                ["y" and "n" have the same meanings as set forth in subparagraph
                            (ii) above]

         Then:  a  =  b + c
                b  =        a          
                      F (N-y) + 1
                c  =  a - b

     Except as provided in the next sentence, any partial prepayment of the
outstanding indebtedness shall not extend the due date of any subsequent monthly
installments or change the amount of such installments, unless Lender shall
otherwise agree in writing.  Upon any partial prepayment, Lender shall have the
option, in its sole and absolute discretion, to recast the monthly installments
due under the Note so that the maturity date of the Note shall remain the same.

   4. PREMIUM DUE WHETHER VOLUNTARY OR INVOLUNTARY PREPAYMENT; INSURANCE AND
      CONDEMNATION PROCEEDS

   Borrower shall pay the prepayment premium due under this paragraph A whether
the prepayment is voluntary or involuntary (in connection with Lender's
acceleration of the unpaid principal balance of the Note) or the Instrument is
satisfied or released by foreclosure (whether by power of sale or judicial
proceeding), deed in lieu of foreclosure or by any other means.  Notwithstanding
any other provision herein to the contrary, Borrower shall not be required to
pay any prepayment premium in connection with any prepayment occurring as a
result of the application of insurance proceeds or condemnation awards under the
Instrument.

   5.  NOTICE; BUSINESS DAY

   Any notice to Lender provided for in this Addendum shall be given in the
manner provided in the Instrument.  The term "Business Day" means any day other
than a Saturday, a Sunday, or any other day on which Lender is not open for
business.

B.  BORROWER'S EXCULPATION

   Subject to the provisions of paragraph C and notwithstanding any other
provision in the Note or Instrument, the personal liability of Borrower, any
general partner of Borrower (if the Borrower is a partnership), and any "Key
Principal" (collectively, the individual(s) whose name(s) is (are) set forth at
the foot of this Addendum) to pay the principal of and interest on the debt
evidenced by the Note and any other agreement evidencing Borrower's obligations
under the Note and the Instrument shall be limited to (1) the real and personal
property described as the "Property" in the Instrument, (2) the personal
property described in or pledged under any Collateral Agreement (as defined in
Uniform Covenant 2B of the Instrument) executed in connection with the loan
evidenced by the Note, (3) the rents, profits, issues, products and income of
the Property received or collected by or on behalf of Borrower (the "Rents and
Profits") to the extent such receipts are necessary first, to pay the reasonable
expenses of operating, managing, maintaining and repairing the Property,
including but not limited to real estate taxes, utilities, assessments,
insurance premiums, repairs, replacements and ground rents, if any (the
"Operating Expenses") then due and payable as of the time of receipt of such
Rents and Profits, and then, to pay the principal and interest due under the
Note and any other sums due under the Instrument or any other Loan Document
(including but not limited to deposits or reserves due under any Collateral
Agreement), except to the extent that Borrower did not have the legal right,
because of a bankruptcy, receivership or similar judicial proceeding, to direct
the disbursement of such sums.

   Except as provided in Paragraph C, Lender shall not seek (a) any judgment
for a deficiency against Borrower, any general partner of Borrower (if Borrower
is a partnership) or any Key Principal, or Borrower's or any general partner's
or Key Principal's heirs, legal representatives, successors or assigns, in any
action to enforce any right or remedy under the Instrument, or (b) any judgment
on the Note except as may be necessary in any action brought under the
Instrument to enforce the lien against the Property or to exercise any remedies
under any Collateral Agreement.

C.  EXCEPTIONS TO NON-RECOURSE LIABILITY

   If, without obtaining the Lender's prior written consent, (i) a Transfer
shall occur which, pursuant to Uniform Covenant 19 of the Instrument, gives
Lender the right, at its option, to declare all sums secured by the Instrument
immediately due and payable, (ii) Borrower shall encumber the Property with the
lien of any subordinate instrument in connection with any financing by Borrower,
or, (iii) Borrower shall violate the single asset covenant of paragraph J of the
Rider, any of such events shall constitute a default by Borrower under the Note,
the Instrument and the other Loan Documents, and if such event shall continue
for 30 days, Paragraph B shall not apply from and after the date which is 30
days after such event and the Borrower, any general partner of Borrower (if
Borrower is a partnership) and Key Principal (each individually on a  joint or
several basis if more than one ) shall be personally liable on a joint and
several basis for full recourse liability under the Note and the other Loan
Documents.

   Notwithstanding paragraph B, Borrower, any general partner of Borrower (if
Borrower is a partnership) and Key Principal (each individually on a joint and
several basis if more than one) shall be personally liable on a joint and
several basis, in the amount of any loss, damage or cost (including but not
limited to attorneys fees) resulting from (A) fraud or intentional
misrepresentation by Borrower or Borrower's agents or employees or any Key
Principal or general partner of Borrower in connection with obtaining the loan
evidenced by the Note, or in complying with any of Borrower's obligations under
the Loan Documents, (B) insurance proceeds, condemnation awards, security
deposits from tenants or other sums or payments received by or on behalf of the
Borrower in its capacity as owner of the Property and not applied in accordance
with the provisions of the Instrument (except to the extent that Borrower did
not have the legal right because of a bankruptcy, receivership or similar
judicial proceeding, to direct disbursement of such sums or payments, (C) all
Rents and Profits, (except to the extent that Borrower did not have the legal
right, because of a bankruptcy, receivership or similar judicial proceeding, to
direct the disbursement of such sums), and not applied, first, to the payment of
the reasonable Operating Expenses as such Operating Expenses become due and
payable, and then, to the payment of principal and interest then due and payable
under the Note and any other sums due under the Instrument and all other Loan
Document (including but not limited to deposits or reserves payable under any
Collateral Agreement), (D) Borrower's failure to pay transfer fees and charges
due Lender under paragraph 19(c) of the Instrument, or (E) Borrower's failure
following a default under any of the Loan Documents to deliver to Lender on
demand all Rents and Profits, security deposits (except to the extent that
Borrower did not have the legal right because of a bankruptcy, receivership or
similar judicial proceeding to direct the disbursement of such sums), books and
records relating to the Property.

   No provision of paragraphs B or C shall (i) affect any guaranty or similar
agreement executed in connection with the debt evidenced by the Note, (ii)
release or reduce the debt evidenced by the Note, (iii) impair the right of
Lender to enforce the provisions of paragraph D of the Rider, (iv) impair the
lien of the Instrument, or (v) impair the right of Lender to enforce the
provisions of any Collateral Agreement.

D.  BUSINESS, COMMERCIAL OR INVESTMENT PURPOSE

   Borrower represents that the Loan evidenced by the Note is being made solely
for business, commercial or investment purposes.

E.  GOVERNING LAW

   1.  CHOICE OF LAW

   The validity of the Note, and the other Loan Documents, each of their terms
and provisions, and the rights and obligations of Borrower under the Note, and
the other Loan Documents shall be governed by, interpreted, construed, and
enforced pursuant to and in accordance with the laws of the Property
Jurisdiction.

   2.  CONSENT TO JURISDICTION

   Borrower irrevocably consents to the exclusive jurisdiction of any and all
state and federal courts with jurisdiction in the Property Jurisdiction over
Borrower and Borrower's assets.  Borrower agrees that such assets shall be used
to first satisfy all claims of creditors organized or domiciled in the United
States of America ("USA") and that no assets of the Borrower in the USA shall be
considered part of any foreign bankruptcy estate.

   Borrower agrees that any controversy arising under or in relation to the
Note, the Instrument or any of the other Loan Documents shall be litigated
exclusively in the Property Jurisdiction.  The state and federal courts and
authorities with jurisdiction in the Property Jurisdiction shall have exclusive
jurisdiction over all controversies which may arise under or in relation to the
Note, including without limitation those controversies relating to the
execution, interpretation, breach, enforcement, or compliance with the Note, the
Instrument, or any other issue arising under, related to, or in connection with
any of the Loan Documents.  Borrower irrevocably consents to service,
jurisdiction, and venue of such courts for any litigation arising from the Note,
the Instrument or any of the other Loan Documents, and waives any other venue to
which it might be entitled by virtue of domicile, habitual residence, or
otherwise.

F.  SUCCESSORS AND ASSIGNS

   The provisions of the Note, the Instrument, and all other Loan Documents
shall be binding on the successors and assigns, including, but not limited to,
any receiver, trustee, representative or other person appointed under foreign or
domestic bankruptcy, receivership, or similar proceedings of Borrower and any
person having an interest in Borrower.

G.  NO THIRD PARTY BENEFICIARY

   Borrower acknowledges and agrees that (i) any loss sharing arrangement or
arrangement for interim advancement of funds that originally is made by the
Lender named in the Note to Federal National Mortgage Association is made
pursuant to a contractual obligation of such Lender to Federal National Mortgage
Association that is independent of, and separate and distinct from, the
obligation of Borrower for the full and prompt payment of the indebtedness
evidenced by the Note, (ii) Borrower shall not be deemed to be a third party
beneficiary of such loss sharing arrangement or arrangement for interim
advancement of funds, and (iii) no such loss sharing or interim advancement
arrangement shall constitute any person or entity making such payment as a
guarantor or surety of the Borrower's obligations, notwithstanding the fact that
the obligations under any such loss sharing or interim advancement arrangement
may be calculated with reference to amounts payable under the Note or other Loan
Documents.

   BY SIGNING BELOW, Borrower accepts and agrees to the covenants and
agreements contained in this Addendum.


                    BORROWER:
                    LA FONTENAY, L.L.C.
                    a South Carolina limited liability company

                    BY:  DAVIDSON DIVERSIFIED REAL ESTATE II, L.P.
                         a Delaware limited partnership
                         Sole Member and Manager

                         BY:  DAVIDSON DIVERSIFIED PROPERTIES, INC.,
                              a Tennessee corporation,
                              General Partner

                              BY:  /s/ Leigh A. Watters
                                   Leigh A. Watters
                                   Vice President