FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                        Quarterly or Transitional Report

                      U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                   For the quarterly period ended March 31, 2000


[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934


                For the transition period from _________to _________

                         Commission file number 0-14483

                     Davidson Diversified Real Estate II, L.P.
         (Exact name of small business issuer as specified in its charter)



           Delaware                                             62-1207077
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)

                          55 Beattie Place, P.O. Box 1089
                        Greenville, South Carolina 29602

                      (Address of principal executive offices)

                                 (864) 239-1000

                           (Issuer's telephone number)

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___

                         PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

a)

                    Davidson Diversified Real Estate II, L.P.

                           CONSOLIDATED BALANCE SHEET

                                   (Unaudited)

                          (in thousands, except unit data)

                                 March 31, 2000
<TABLE>
<CAPTION>

Assets

<S>                                                          <C>              <C>
   Cash and cash equivalents                                                $  1,472
   Receivables and deposits, net of $196
       for doubtful accounts                                                     284
   Restricted escrows                                                            448
   Other assets                                                                  422
   Investment properties:
      Land                                                    $  2,603
      Buildings and related personal property                   37,848
                                                                40,451

      Less accumulated depreciation                            (21,900)       18,551
                                                                            $ 21,177

Liabilities and Partners' Deficit

Liabilities

   Accounts payable                                                         $    215
   Tenant security deposit liabilities                                           136
   Accrued property taxes                                                        587
   Other liabilities                                                             588
   Due to Managing General Partner                                               880
   Mortgage notes payable                                                     23,943

Partners' Deficit

   General partners                                            $ (538)
   Limited partners (1,224.25 units issued and
      outstanding)                                              (4,634)       (5,172)
                                                                            $ 21,177

            See Accompanying Notes to Consolidated Financial Statements
</TABLE>



<PAGE>


b)


                    Davidson Diversified Real Estate II, L.P.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)

                          (in thousands, except unit data)



                                                            Three Months Ended
                                                                March 31,
                                                             2000       1999

Revenues:                                                            (restated)
   Rental income                                          $  1,779   $  1,933
   Other income                                                112        136
      Total revenues                                         1,891      2,069

Expenses:
   Operating                                                 1,043        890
   General and administrative                                   62         88
   Depreciation                                                474        426
   Interest                                                    535        522
   Property taxes                                              137        156
      Total expenses                                         2,251      2,082

Loss from continuing operations                               (360)       (13)
Loss from discontinued operation                                --        (49)

   Net loss                                               $   (360)  $    (62)

Net loss allocated to general partners (2%)               $     (7)  $     (1)
Net loss allocated to limited partners (98%)                  (353)       (61)
                                                          $   (360)  $    (62)

Per limited partnership unit:

Loss from continuing operations                           $(288.34)  $ (10.62)
Loss from discontinued operation                                --     (39.21)
Net loss                                                  $(288.34)  $ (49.83)

            See Accompanying Notes to Consolidated Financial Statements


c)

                    Davidson Diversified Real Estate II, L.P.

               CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
                                   (Unaudited)
                        (in thousands, except unit data)

<TABLE>
<CAPTION>

                                      Limited
                                     Partnership     General      Limited
                                        Units        Partners    Partners     Total

<S>                                    <C>           <C>         <C>        <C>
Original capital contributions         1,224.25      $     1     $24,485    $24,486

Partners' deficit at

   December 31, 1999                   1,224.25      $  (531)    $(4,281)   $(4,812)

Net loss for the three months
   ended March 31, 2000                      --           (7)       (353)      (360)

Partners' deficit at
   March 31, 2000                      1,224.25      $  (538)    $(4,634)   $(5,172)
</TABLE>

            See Accompanying Notes to Consolidated Financial Statements

d)

                    Davidson Diversified Real Estate II, L.P.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (Unaudited)

                                 (in thousands)


<TABLE>
<CAPTION>

                                                                 Three Months Ended
                                                                       March 31,

                                                                  2000        1999

Cash flows from operating activities:

<S>                                                           <C>          <C>
   Net loss                                                   $  (360)     $   (62)
   Adjustments to reconcile net loss to net cash
     provided by operating activities:
        Depreciation                                              474          519
        Amortization of discounts, loan costs
            and leasing commissions                                55           59
        Loss on disposal of property                               19           --
        Change in accounts:
            Receivables and deposits                              296          141
            Other assets                                          (80)         (56)
            Accounts payable                                     (179)         (81)
            Tenant security deposit liabilities                   (31)          (2)
            Accrued property taxes                                (12)         (37)
            Other liabilities                                     (79)          87

               Net cash provided by operating activities          103          568

Cash flows used in investing activities:

   Property improvements and replacements                        (287)        (179)
   Net withdrawals from restricted escrows                         64           15

               Net cash used in investing activities             (223)        (164)

Cash flows used in financing activities:

   Advances from Managing General Partner                         378           --
   Payments on mortgage notes payable                            (184)        (195)
   Net cash provided by (used in) financing activities            194         (195)

Net increase in cash and cash equivalents                          74          209
Cash and cash equivalents at beginning of period                1,398          971

Cash and cash equivalents at end of period                    $ 1,472      $ 1,180

Supplemental disclosure of cash flow information:

   Cash paid for interest                                     $   460      $   498

   Supplemental disclosures of non-cash activity: At December 31, 1999, property
   improvements  and  replacements  and accounts  payable were both  adjusted by
   approximately $91,000 for non-cash activity.

            See Accompanying Notes to Consolidated Financial Statements
</TABLE>

e)

                    Davidson Diversified Real Estate II, L.P.

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note A - Basis of Presentation

The  accompanying   unaudited  consolidated  financial  statements  of  Davidson
Diversified Real Estate II, L.P. (the  "Partnership" or "Registrant")  have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-QSB and Item 310(b)
of Regulation S-B.  Accordingly,  they do not include all of the information and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements.  In the opinion of Davidson Diversified  Properties,  Inc.
(the  "Managing  General  Partner"),   all  adjustments  (consisting  of  normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included.  Operating results for the three month period ended March 31, 2000 are
not  necessarily  indicative  of the results  that may be expected  for the year
ending  December 31, 2000. For further  information,  refer to the  consolidated
financial  statements and footnotes thereto included in the Partnership's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1999.

Principles of Consolidation:

The  Registrant's   financial   statements  include  all  the  accounts  of  the
Partnership and its four 99.9% owned partnerships.  The Managing General Partner
of the  consolidated  partnerships  is  Davidson  Diversified  Properties,  Inc.
Davidson Diversified  Properties,  Inc. may be removed as the general partner of
the  consolidated  partnerships by the Registrant;  therefore,  the consolidated
partnerships are controlled and consolidated by the Registrant.  All significant
interpartnership balances have been eliminated.

Reclassifications:

Certain  reclassifications have been made to the 1999 balances to conform to the
2000 presentation.

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 have a  material  effect on the  affairs  and
operations of the Partnership.

Note C - 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.  The  Partnership  Agreement  provides  for (i) certain
payments to affiliates for services and (ii)  reimbursement  of certain expenses
incurred by affiliates on behalf of the Partnership.  The following amounts were
paid or accrued to the Managing  General  Partner and its affiliates  during the
three months ended March 31, 2000 and 1999:

                                                         2000       1999
                                                         ----       ----
                                                          (in thousands)

         Property management fees (included in
           operating expenses)                           $ 97       $104
         Reimbursement for services of affiliates
           (included in general and administrative
            expenses and investment properties)            48         61
         Due to affiliates (included in other
           liabilities)                                   226        203
         Due to Managing General Partner                  880        --

During  the three  months  ended  March 31,  2000 and  1999,  affiliates  of the
Managing  General Partner were entitled to receive 5% of gross receipts from all
of the Registrant's  residential  properties for providing  property  management
services.  The  Registrant  paid to such  affiliates  approximately  $97,000 and
$104,000 for the three months ended March 31, 2000 and 1999, respectively.

An  affiliate  of  the  Managing   General   Partner  was  entitled  to  receive
reimbursement of accountable  administrative expenses amounting to approximately
$48,000  and  $61,000  for the  three  months  ended  March  31,  2000 and 1999,
respectively.  A portion of both the  current  fees and the prior year fees were
not able to be paid due to the Partnership's cash flow. Accordingly, as of March
31, 2000, a liability of approximately $226,000 exists and is reflected in other
liabilities.

As of March 31, 2000 the  Managing  General  Partner has loaned the  Partnership
approximately  $880,000 to cover  operational  expenses required at Greensprings
Manor  Apartments.  This  loan was  made in  accordance  with  the  terms of the
Partnership Agreement. Interest is charged at the prime rate plus 1%.

AIMCO and its affiliates  currently own 467.25 limited  partnership units in the
Partnership  representing  38.166% of the  outstanding  units. A number of these
units were acquired  pursuant to tender offers made by AIMCO or its  affiliates.
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.

Note D - Discontinued Operations

Shoppes at River Rock was the only commercial  property owned by the Partnership
and represented one segment of the Partnership's operations.  Due to the sale of
the property on December 30, 1999,  the results of the  commercial  segment have
been shown as loss from discontinued operation as of March 31, 2000 and 1999 and
accordingly,  the  statements of  operations  have been restated to reflect this
presentation.  Revenues of this  property  were  approximately  $263,000 for the
three months  ended March 31, 1999 and loss from  operations  was  approximately
$49,000 for the same period.

Note E - Segment Reporting

Description  of the types of products  and  services  from which the  reportable
segment derives its revenues:

The  Partnership  had  two  reportable  segments:   residential  properties  and
commercial properties.  The Partnership's  residential property segment consists
of four apartment complexes located in Ohio, Kentucky,  Tennessee,  and Indiana.
The  Partnership  rents  apartment units to tenants for terms that are typically
twelve months or less. The commercial  property segment  consisted of a shopping
center located in Tennessee, which was sold on December 30, 1999. As a result of
the sale of the commercial property during 1999, the commercial segment is shown
as discontinued operation.

Measurement of segment profit and loss:

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.

Factors management used to identify the enterprise's reportable segment:

The  Partnership's  reportable  segment  consists of investment  properties that
offer different products and services.  The reportable segments are each managed
separately  because they  provide  distinct  services  with  different  types of
products and customers.

Segment  information for the three months ended March 31, 2000 and 1999 is shown
in the tables below.  The "Other"  column  includes  partnership  administration
related items and income and expense not allocated to the reportable segment (in
thousands).

                 2000                   Residential      Other       Totals

Rental income                             $ 1,779         $ --      $ 1,779
Other income                                  106             6         112
Interest expense                              530             5         535
Depreciation                                  474            --         474
General and administrative expense             --            62          62
Segment loss                                 (299)          (61)       (360)
Total assets                               20,247           930      21,177
Capital expenditures for investment
  properties                                  196            --         196

<TABLE>
<CAPTION>

                 1999                   Residential    Commercial     Other      Totals
                                                 (discontinued 1999)
<S>                                       <C>         <C>             <C>       <C>
Rental income                             $ 1,933     $    --         $ --      $ 1,933
Other income                                  132          --              4        136
Interest expense                              513          --              9        522
Depreciation                                  426          --             --        426
General and administrative expense             --          --             88         88
Loss from discontinued operations                         (49)            --        (49)
Segment profit (loss)                          80         (49)           (93)       (62)
Total assets                               21,076       3,470            590     25,136
Capital expenditures for investment
  properties                                  171           8             --        179

</TABLE>


<PAGE>


Note F - 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.


ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION

The  matters  discussed  in this Form  10-QSB  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-QSB 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.

The Partnership's investment properties consist of four apartment complexes. The
following table sets forth the average occupancy of the properties for the three
months ended March 31, 2000 and 1999:

                                                 Average Occupancy

                                                 2000        1999

         Big Walnut Apartments
            Columbus,  Ohio                       90%         91%

         LaFontenay I & II Apartments
            Louisville, Kentucky (1)              94%         91%

         The Trails Apartments
            Nashville, Tennessee                  96%         94%

         Greensprings Manor Apartments
            Indianapolis, Indiana (2)             61%         94%

(1)   The  Managing  General  Partner  attributes  the  increase in occupancy at
      LaFontenay I & II Apartments to management's intensified marketing efforts
      as well as capital improvements to enhance the exterior of the property.

(2)   The  Managing  General  Partner  attributes  the  decrease in occupancy at
      Greensprings  Manor  Apartments  to  construction  at  the  property.  The
      property is currently undergoing a major renovation project to enhance the
      appearance of the property to attract additional tenants.

Results of Operations

The  Registrant's  net loss for the  three  months  ended  March 31,  2000,  was
approximately  $360,000 compared to a net loss of approximately  $62,000 for the
three  months  ended  March  31,  1999.  The  increase  in net loss was due to a
decrease in total  revenues and an increase in total  expenses.  Total  revenues
decreased  due to a decrease in rental  income and other  income.  Rental income
decreased  primarily  due to the  decrease in occupancy  at  Greensprings  Manor
Apartments  as discussed  above.  This  decrease in rental  income was partially
offset by an increase in occupancy at two of Registrant's  investment properties
and an increase in average  annual  rental rates at all four of the  properties.
Other income  decreased  due to a decrease in late  charges  charged to tenants.
Total  expenses  increased  primarily  due  to  an  increase  in  operating  and
depreciation  expenses which was partially  offset by a decrease in property tax
and general and administrative expenses.  Operating expenses increased primarily
due to an increase  in  security  expenses  at  Greensprings  Manor  Apartments.
Depreciation  expense increased due to an increase in capital improvements which
occurred in 1999.  Property tax expense  decreased due to a tax refund which was
received from the taxing  authorities  for  LaFontenay I & II Apartments  during
2000. General and administrative  expense decreased as a result of a decrease in
general partner  reimbursement fees. Also included in general and administrative
expenses were costs associated with the quarterly and annual communications with
investors  and  regulatory  agencies  and  the  annual  audit  required  by  the
Partnership Agreement.

As part of the ongoing  business plan of the  Partnership,  the Managing General
Partner monitors the rental market  environment of the investment  properties to
assess the feasibility of increasing rents,  maintaining or increasing occupancy
levels and protecting the Partnership from increases in expense. 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  March  31,  2000,  the  Partnership   had  cash  and  cash   equivalents  of
approximately  $1,472,000 as compared to  approximately  $1,180,000 at March 31,
1999. Cash and cash equivalents  increased  approximately  $74,000 for the three
months ended March 31, 2000 from the  Partnership's  year end,  primarily due to
approximately   $103,000  of  cash   provided  by   operating   activities   and
approximately  $194,000  of cash  provided  by  financing  activities  which was
partially offset by approximately $223,000 of cash used in investing activities.
Cash  provided by financing  activities  consisted of advances from the Managing
General Partner, which was partially offset by payments of principal made on the
mortgages  encumbering  the  Partnership's  properties.  Cash used in  investing
activities consisted of property improvements and replacements, partially offset
by net withdrawals from escrow accounts  maintained by the mortgage lender.  The
Partnership 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 various  properties  to  adequately  maintain  the
physical  assets and other operating needs of the Partnership and to comply with
Federal,   state,   and  local  legal  and  regulatory   requirements.   Capital
improvements planned for each of the Registrant's properties are detailed below.

Big Walnut Apartments: The property has budgeted, but is not limited to, capital
improvements of approximately $662,000 during the current year which consists of
floor  covering and appliance  replacements,  roof  replacements,  swimming pool
improvements  and other property  enhancements.  The  Partnership  has completed
approximately  $79,000 in capital  expenditures  at Big Walnut  Apartments as of
March  31,  2000   consisting   primarily  of  parking  lot  and  swimming  pool
improvements,   electrical   upgrades,   and   appliance   and  floor   covering
replacements. These improvements were funded primarily from property operations.

LaFontenay I & II Apartments:  The property has budgeted, but is not limited to,
capital  improvements  of  approximately  $117,000 during the current year which
consists of floor  covering and  appliance  replacement,  air  conditioning  and
heating  replacements.  The Partnership has completed  approximately  $50,000 in
capital  expenditures  at  LaFontenay  I & II  Apartments  as of March 31, 2000,
consisting  primarily of plumbing  improvements  appliances  and floor  covering
replacements. These improvements were funded primarily from property operations.

The  Trails:  The  property  has  budgeted,  but  is  not  limited  to,  capital
improvements of approximately  $86,000 during the current year which consists of
floor covering and appliance  replacements,  and air conditioning  upgrades. The
Partnership has completed  approximately  $35,000 in capital expenditures at The
Trails  Apartments as of March 31, 2000,  consisting  primarily of swimming pool
improvements,  and floor covering  replacements.  These improvements were funded
primarily from property operations.

Greensprings  Manor:  The property has budgeted,  but is not limited to, capital
improvements of approximately $190,000 during the current year which consists of
floor covering and appliance replacements, cabinet replacements, and heating and
air  conditioning  improvements.  The  Partnership  has completed  approximately
$32,000 in capital expenditures at Greensprings Manor Apartments as of March 31,
2000, consisting primarily of floor covering replacements and appliances.  These
improvements  were funded  primarily from property  operations.  The property is
also undergoing a major renovation  project to improve the exterior and interior
appearance of the property.

The additional  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  $23,943,000,  net of discount,  is amortized over
periods  with  required  balloon  payments  ranging  from  November  15, 2002 to
December 1, 2009.  The Managing  General  Partner will attempt to refinance such
indebtedness  and/or sell the  properties  prior to such  maturity  date. If the
property  cannot be refinanced or sold for a sufficient  amount,  the Registrant
will risk losing such property through foreclosure.

No cash  distributions were made during the three months ended March 31, 2000 or
1999. The Registrant's  distribution  policy is reviewed on a semi-annual basis.
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,  refinancing  and/or  property  sales.  There  can be no  assurance,
however,  that the Registrant  will generate  sufficient  funds from  operations
after planned capital  expenditures to permit  distributions  to its partners in
2000 or subsequent periods. In addition,  the Partnership may be restricted from
making  distributions  if the amount in the reserve  accounts for Big Walnut and
Greensprings Manor Apartments is below $400 per unit or $333,000 in total. As of
March 31, 2000, the account balances were approximately  $172,000 for Big Walnut
Apartments and $235,000 for Greensprings Manor Apartments.


                           PART II - OTHER INFORMATION

ITEM 1.     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
"Part 1 - Financial Information, Item 1. 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.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            a)    Exhibits

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

            b)    Reports on Form 8-K:

                  A  Form  8-K  dated  December  30,  1999  was filed  with  the
                  Securities  and  Exchange  Commission  on January 6, 2000,  in
                  connection with the sale of The Shoppes at River Rock.


<PAGE>


                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                                    DAVIDSON DIVERSIFIED REAL ESTATE II, 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: May 10, 2000