UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(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, 2009

[ ] 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 0-13530

DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

(Exact name of registrant as specified 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)

(864) 239-1000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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. [X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]

Accelerated filer [ ]

Non-accelerated filer [ ]

(Do not check if a smaller reporting company)

Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Davidson Diversified Real Estate I, L.P.

STATEMENTS OF NET ASSETS IN LIQUIDATION

(in thousands)

	March 31,	December 31,
	2009	2008
	(Unaudited)	(Note)
Assets
Cash and cash equivalents	$ 286	$ 328
Receivables	95	54
	381	382
Liabilities
Other liabilities	--	8
Estimated costs to liquidate (Note B)	22	29
	22	37
Net assets in liquidation	$ 359	$ 345

Note: The statement of net assets in liquidation at December 31, 2008 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.

See Accompanying Notes to Financial Statements

DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION

(Unaudited)

(in thousands)

	For the Three Months
	Ended
	March 31, 2009

Net assets in liquidation at January 1, 2009	$ 345

Revenues	16
Increase in receivables	41
Decrease in other liabilities	8
Decrease in estimated costs to liquidate	9
Adjustment to estimated costs to liquidate	(2)
Costs paid during liquidation period	(58)
Net assets in liquidation at end of period	$ 359

See Accompanying Notes to Financial Statements

DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

STATEMENT OF DISCONTINUED OPERATIONS

(Unaudited)

(in thousands, except per unit data)

Three Months Ended

March 31, 2008




Income from continuing operations	$ --
Loss from discontinued operations (Note A)
Revenues:
Rental income	228
Other income	39
Total revenues	267

Expenses:
Operating	177
General and administrative	24
Depreciation	75
Interest	47
Property taxes	22
Total expenses	345

Net loss	$ (78)


Net loss allocated to general partners	$ (4)

Net loss allocated to limited partners	(74)

	$ (78)

Net loss per limited partnership unit	$ (98.52)

See Accompanying Notes to Financial Statements

Davidson Diversified Real Estate I, L.P.

STATEMENT OF CASH FLOWS

(Unaudited)

(in thousands)

Three Months Ended

March 31, 2008



Cash flows from operating activities:
Net loss	$ (78)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation	75
Amortization of loan costs	4
Change in accounts:
Receivables	1
Other assets	(17)
Accounts payable	1
Tenant security deposit liabilities	1
Due to affiliate	25
Accrued property taxes	22
Other liabilities	15
Net cash provided by operating activities	49

Cash flows used in investing activities:
Property improvements and replacements	(23)

Net increase in cash and cash equivalents	26

Cash and cash equivalents at beginning of period	88
Cash and cash equivalents at end of period	$ 114

Supplemental disclosure of cash flow information:
Cash paid for interest	$ 32

See Accompanying Notes to Financial Statements

Davidson Diversified Real Estate I, L.P.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Note A - Basis of Presentation

As of September 30, 2008, Davidson Diversified Real Estate I, L.P. (the “Partnership” or “Registrant”) adopted the liquidation basis of accounting due to the sale of its remaining investment property (as discussed in “Note D – Disposition of Investment Property”). The general partner of the Partnership is Davidson Diversified Properties, Inc. (“Managing General Partner”), a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust.

As a result of the decision to liquidate the Partnership, the Partnership changed its basis of accounting for its financial statements at September 30, 2008 to the liquidation basis of accounting. Consequently, assets have been valued at estimated net realizable value and liabilities are presented at their estimated settlement amounts, including estimated costs associated with carrying out the liquidation of the Partnership. The valuation of assets and liabilities necessarily requires many estimates and assumptions and there are substantial uncertainties in carrying out the liquidation. The actual realization of assets and settlement of liabilities could be higher or lower than amounts indicated and is based upon the Managing General Partner’s estimates as of the date of the financial statements.

The Managing General Partner estimates that the liquidation process will be completed by September 30, 2009. Because the success in realization of assets and the settlement of liabilities is based on the Managing General Partner’s best estimates, the liquidation period may be shorter than projected or it may be extended beyond the projected period.

The accompanying unaudited financial statements of the Partnership have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. 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 the Managing General Partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the accompanying statement of discontinued operations for the three months ended March 31, 2008 reflects the operations of Versailles on the Lake Apartments as loss from discontinued operations as a result of the property’s sale to a third party on August 27, 2008 (as discussed in “Note D”).

Note B – Adjustment to Liquidation Basis of Accounting

In accordance with the liquidation basis of accounting at September 30, 2008, assets were adjusted to their estimated net realizable value and liabilities were adjusted to their estimated settlement amount. The net adjustment required to convert to the liquidation basis of accounting was a decrease in net assets of approximately $45,000. The net adjustments are summarized as follows:

	Decrease in
	Net Assets
	(in thousands)

Adjustment of other assets and liabilities, net	$ (45)

Note C - Transactions with Affiliated Parties

The Partnership has no employees and depends on the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for payments to affiliates for services and reimbursement of certain expenses incurred by affiliates on behalf of the Partnership.

Affiliates of the Managing General Partner received 5% of gross receipts from the Partnership’s property as compensation for providing property management services. The Partnership paid to such affiliates approximately $14,000 for the three months ended March 31, 2008, which is included in operating expenses.

Affiliates of the Managing General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $10,000 for the three months ended March 31, 2008, which is included in general and administrative expenses.

The Partnership insured its property up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers’ compensation, property casualty, general liability and vehicle liability. The Partnership insured its property above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. The Partnership was charged by AIMCO and its affiliates approximately $30,000 for insurance coverage and fees associated with policy claims administration during the year ended December 31, 2008.

Note D - Disposition of Investment Property

On August 27, 2008, the Partnership sold its last remaining investment property, Versailles on the Lake Apartments, located in Fort Wayne, Indiana, to a third party for a net sales price of $4,455,000. After payment of closing costs, the net sales proceeds received by the Partnership were approximately $4,361,000. The Partnership used a portion of the proceeds to repay the mortgage encumbering the property of approximately $2,405,000. The sale resulted in a gain of approximately $3,007,000 during the nine months ended September 30, 2008. In addition, the Partnership recorded a loss on early extinguishment of debt during the nine months ended September 30, 2008 of approximately $36,000 as a result of the write off of unamortized loan costs.

Note E - Contingencies

As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the Managing General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company failed to compensate maintenance workers for time that they were required to be "on-call" (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter of 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts will be dismissed. During the fourth quarter of 2008, the settlement amounts for alleged unpaid overtime to employees were paid by those partnerships where the respective employees had worked. The Partnership was not required to pay any settlement amounts. At this time, the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel are not resolved. The Managing General Partner is uncertain as to the amount of any additional loss that may be allocable to the Partnership. Therefore, the Partnership cannot estimate whether any additional loss will occur or a potential range of loss.

The Partnership is unaware of any other pending or outstanding litigation matters involving it or its former investment property that are not of a routine nature arising in the ordinary course of business.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Report contains or may contain information that is forward-looking, including, without limitation, statements regarding the Partnership’s future financial performance and the effect of government regulations. Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors some of which are beyond the Partnership’s control including, without limitation: national and local economic conditions; the general level of interest rates; the terms of governmental regulations that affect the Partnership and interpretations of those regulations; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties previously owned by the Partnership. Readers should carefully review the Partnership’s financial statements and the notes thereto, as well as the other documents the Partnership files from time to time with the Securities and Exchange Commission.

Results of Operations

As of September 30, 2008, the Partnership adopted the liquidation basis of accounting, due to the sale of its remaining investment property, Versailles on the Lake Apartments, on August 27, 2008.

During the three months ended March 31, 2009, net assets in liquidation increased by approximately $14,000. The increase in net assets in liquidation is primarily due to revenues received as a result of collections of delinquent rents and utility reimbursements, partially offset by an increase in the estimated costs to liquidate.

The statement of net assets in liquidation as of March 31, 2009 includes approximately $22,000 of costs that the Managing General Partner estimates will be incurred during the period of liquidation, based on the assumption that the liquidation process will be completed by September 30, 2009. Because the settlement of liabilities is based on the Managing General Partner’s best estimates, the liquidation period may be shorter or extended beyond the projected period.

Liquidity and Capital Resources

The Partnership expects to liquidate by September 30, 2009 due to the sale of its remaining property and there are no other capital sources available to the Partnership.

There were no distributions to the partners during the three months ended March 31, 2009 and 2008. The Partnership's cash available for distribution is reviewed on a quarterly basis. Future cash distributions will depend on the amount of cash remaining after fully liquidating the Partnership.

Other

In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 339.45 limited partnership units (the "Units") in the Partnership representing 45.19% of the outstanding Units at March 31, 2009. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 45.19% of the outstanding Units, AIMCO and its affiliates are in a position to influence all such voting decisions with respect to the Partnership. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO as its sole stockholder.

Item 4T. Controls and Procedures.

(a) Disclosure Controls and Procedures.

The Partnership’s management, with the participation of the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective.

(b) Changes in Internal Control Over Financial Reporting.

There has been no change in the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

Item 6. Exhibits.

See Exhibit Index.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly 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.,
	Managing General Partner

Date: May 14, 2009	By: /s/Steven D. Cordes
	Steven D. Cordes
	Senior Vice President

Date: May 14, 2009	By: /s/Stephen B. Waters
	Stephen B. Waters
	Vice President

DAVIDSON DIVERSIFIED REAL ESTATE I, LP

EXHIBIT INDEX

Exhibit Description

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.

3C Amendment No. 2 dated December 28, 2007 to the Partnership Agreement is incorporated by reference to Exhibit 3C to the Partnership’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007.

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.

10AA Purchase and Sale Contract between Davidson Diversified Real Estate I, L.P., a Delaware limited partnership, and VL Apartments, LLC, an Indiana limited liability company, incorporated by reference to the Partnership's Current Report on Form 8-K dated June 26, 2008.

10AB First Amendment to and Reinstatement of Purchase and Sale Contract between Davidson Diversified Real Estate I, L.P., a Delaware limited partnership, and VL Apartments, LLC, an Indiana limited liability company, incorporated by reference to the Partnership’s Current Report on Form 8-K dated July 28, 2008.

10AC Second Amendment to Purchase and Sale Contract between Davidson Diversified Real Estate I, L.P., a Delaware limited partnership, and VL Apartments, LLC, an Indiana limited liability company, incorporated by reference to the Partnership’s quarterly report on Form 10-Q for the quarter ended June 30, 2008.

31.1 Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of equivalent of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

March 31, 2009

Net Assets

DAVIDSON DIVERSIFIED REAL ESTATE I LP 10-Q