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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                 ---------------

                                    FORM 10-K
                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

      (Mark one)

          X          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                     SECURITIES EXCHANGE ACT OF 1934
                     For the fiscal year ended December 31, 1997

                                       OR




                     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 1-22262

                             COMMERCIAL ASSETS, INC.
             (Exact Name of Registrant as Specified in Its Charter)

                Maryland                                   84-1240911
    (State or Other Jurisdiction of                     (I.R.S. Employer
     Incorporation or Organization)                   Identification No.)

     3410 Galena Street, Suite 210                           80231
            Denver, Colorado                               (Zip Code)
(Address of Principal Executive Offices)

         Registrant's telephone number, including area code:  (303) 614-9410

         Securities registered pursuant to Section 12(b) of the Act:

      Title of Each Class             Name of Each Exchange on Which Registered
         Common Stock,                      American Stock Exchange, Inc.
   par value $.01 per share

         Securities registered pursuant to Section 12(g) of the Act: None

         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. Yes X No __

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ X ]

         As of  February  27,  1998,  10,342,009  shares  of Common  Stock  were
outstanding,  and the  aggregate  market  value of the  shares  (based  upon the
closing price of the Common Stock on that date as reported on the American Stock
Exchange, Inc.) held by non-affiliates was approximately $48,000,000.

                       DOCUMENTS INCORPORATED BY REFERENCE
         Portions  of the  Proxy  Statement  for the  Registrant's  1998  Annual
Meeting of  Stockholders  are  incorporated  by reference  into Part III of this
Annual Report.

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<PAGE>






                             COMMERCIAL ASSETS, INC.

                                Table of Contents
                           Annual Report on Form 10-K
                   For the Fiscal Year Ended December 31, 1997


Item                                                                        Page
                                     PART I
1.    Business
           Manager..........................................................   2
           Taxation of the Company..........................................   2
           Competition......................................................   3
           Financial Information about Industry Segments....................   3
           Capital Resources................................................   3
           Dividend Reinvestment Plan.......................................   4
           Restrictions on and Redemptions of Common Stock..................   4
           Employees........................................................   4

2.    Properties............................................................   5

3.    Legal Proceedings.....................................................   5

4.    Submission of Matters to a Vote of Security Holders...................   5

                                     PART II

5.    Market For Registrant's Common Equity and Related
        Stockholder Matters.................................................   5

6.    Selected Financial Data...............................................   5

7.    Management's Discussion and Analysis of Financial
        Condition and Results of Operations.................................   6

8.    Financial Statements and Supplementary Data...........................   9

9.    Changes in and Disagreements with Accountants on
        Accounting and Financial Disclosure.................................   9

                                    PART III

10.   Directors and Executive Officers of the Registrant...................   9

11.   Executive Compensation...............................................   10

12.   Security Ownership of Certain Beneficial Owners and Management.......   10

13.   Certain Relationships and Related Transactions.......................   11

                                     PART IV

14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.....    11

     Signatures...........................................................    15




                                       (i)
<PAGE>

                                     PART I


Introduction

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,  the Company's  Annual Report to Stockholders and other
Company  filings  (collectively,  the "SEC Filings") under the Securities Act of
1933, as amended,  and the Securities  Exchange Act of 1934, as amended (as well
as information  communicated  orally or in writing between the dates of such SEC
Filings) contains or may contain information that is forward looking, including,
without  limitation,  statements  regarding  the  effect  of  acquisitions,  the
Company's future financial performance and the effect of government regulations.
Actual results may differ materially from those described in the forward looking
statements  and will be affected  by a variety of risks and  factors  including,
without limitation, national and local economic conditions, the general level of
interest rates,  terms of governmental  regulations  that affect the Company and
interpretations of those regulations,  the competitive  environment in which the
Company  operates,  financing risks,  including the risk that the Company's cash
flow from operations may be insufficient to meet required  payments of principal
and interest,  real estate risks, including variations of real estate values and
the general  economic  climate in local markets and  competition  for tenants in
such markets,  acquisition  and  development  risks,  including  failure of such
acquisitions   to  perform  in  accordance   with   projections,   and  possible
environmental liabilities. In addition, the Company's continued qualification as
a real estate  investment trust involves the application of highly technical and
complex provisions of the Internal Revenue Code. Readers should carefully review
the Company's  financial  statements and the notes thereto,  as well as the risk
factors described in the SEC Filings.

Item 1.  Business.

Commercial Assets, Inc., a Maryland corporation formed in August 1993, (together
with its consolidated  subsidiaries,  the "Company") is a real estate investment
trust ("REIT").  Initially,  it was a wholly-owned subsidiary of Asset Investors
Corporation ("Asset Investors").  Asset Investors contributed $75 million to the
initial capital of the Company and in October 1993, it distributed approximately
70% of the  Company's  outstanding  common stock  ("Common  Stock") as a taxable
dividend  to Asset  Investors'  stockholders.  Asset  Investors  currently  owns
approximately  27%  of  the  outstanding   Common  Stock  and  provides  certain
management  services to the Company.  The Common Stock is listed on the American
Stock Exchange, Inc. ("AMEX") under the symbol "CAX."

Historically,  the Company  owned  subordinate  classes of  Commercial  Mortgage
Backed  Securities  ("CMBS bonds").  CMBS bonds generally are backed by mortgage
loans on commercial  real estate.  The  principal  and interest  payments on the
underlying mortgage assets are allocated among the several classes or "tranches"
of a series of CMBS  bonds.  The  Company's  subordinate  tranches of CMBS bonds
included "first-loss" tranches, which bore the risk of default on the underlying
collateral and provided credit support for the more senior tranches.

In 1997,  the Company  announced  that it  intended to redeploy  its assets from
subordinate CMBS bonds in order to achieve greater risk adjusted rates of return
from other types of real estate-related  investments.  As a result thereof,  the
Company  restructured  its  subordinate  CMBS bonds in November 1997 by selling,
redeeming and  resecuritizing  various CMBS bonds.  The Company  received  $77.7
million  in cash and a small  residual  interest  in two CMBS  bonds  from  such
restructuring.  The Company has  temporarily  invested  its funds in  government
securities  and other cash  equivalents  until such time as it determines  which
type of assets to invest in.

                                     - 1 -
<PAGE>

The Company's goals are to: (i) generate income in order to pay dividends to its
stockholders  by managing its assets;  and (ii) preserve  stockholders'  equity.
Since the  Company's  funds  are  temporarily  invested  in  short-term,  liquid
investments,  the return from such investments is likely to be less than returns
in prior years. Once the Company  determines which assets to invest its funds in
on a long term  basis,  it  expects to  increase  its  returns.  There can be no
assurance, however, that the Company will achieve its objectives.

The Company's  principal executive offices are located at 3410 S. Galena Street,
Suite 210, Denver,  Colorado 80231 and its telephone number is (303) 614-9410.

Manager

The Company's  day-to-day  operations are performed by a manager (the "Manager")
pursuant to a  year-to-year  management  agreement  currently in effect  through
March 31, 1998 (the "Management  Agreement").  From inception  through September
1996, the Manager was related to MDC Holdings,  Inc. ("MDC"). In September 1996,
an investor group led by Terry  Considine,  Thomas L. Rhodes and Bruce D. Benson
acquired Financial Asset Management, LLC ("FAM"), the Manager at such time, from
MDC. In November  1997, the assets of FAM,  including the Management  Agreement,
were  acquired  by  Asset  Investors  who is now the  current  Manager.  Messrs.
Considine and Rhodes are the  Co-Chairmen of the Board of Directors and Co-Chief
Executive  Officers of both the Company and Asset  Investors and Mr. Benson is a
director of both companies.

The Management Agreement is approved by the Company's  independent directors and
may be  terminated  by either  party with or  without  cause at any time upon 60
days' written notice.  The Manager  provides all personnel and related  overhead
necessary  to conduct  the  regular  business  of the  Company.  Pursuant to the
Management Agreement, the Manager receives a "Base Fee," an "Incentive Fee," and
an "Acquisition Fee." The Base Fee is payable quarterly in an amount equal to 1%
per annum of the Company's  "average  invested  assets." At the present time, no
Base Fee is being paid to the Manager as effectively all of the Company's assets
are cash equivalents. Once the Company determines what assets it will invest its
cash  balances in, the Base Fee is expected to resume.  The Incentive Fee equals
20% of the  amount  by which  the  Company's  REIT  income  exceeds  the  amount
calculated by  multiplying  the  Company's  "average net worth" by the "Ten-Year
United  States  Treasury  rate"  plus 1%.  The  Company  does not  expect to pay
Incentive Fees until the Company's funds are reinvested. The Manager receives an
Acquisition  Fee  equal to 1/2 of 1% of the  cost of each  asset  acquired.  The
Company expects to pay Acquisition Fees in 1998.

The Company has agreed to indemnify the Manager and its affiliates  with respect
to all expenses, losses, damages, liabilities, demands, charges or claims of any
nature in respect of acts or  omissions of the Manager made in good faith and in
accordance with the standards set forth in the Management Agreement.

Taxation of the Company

The Company has elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), and the Company intends to continue to operate in
such a manner.  The Company's  current and  continuing  qualification  as a REIT
depends on its  ability to meet the  various  requirements  imposed by the Code,
through actual  operating  results,  distribution  levels and diversity of stock
ownership.

If the Company  qualifies  for  taxation  as a REIT,  it will  generally  not be
subject to Federal  corporate  income  tax on its net income  that is  currently
distributed to stockholders. This treatment substantially eliminates the "double
taxation" (at the corporate and stockholder  levels) that generally results from


                                     - 2 -
<PAGE>

investment  in a  corporation.  If the Company fails to qualify as a REIT in any
taxable  year,  its  taxable  income  will be subject  to Federal  income tax at
regular  corporate  rates  on  its  taxable  income  (including  any  applicable
alternative  minimum  tax).  Even if the Company  qualifies as a REIT, it may be
subject to certain state and local income taxes and to Federal income and excise
taxes on its undistributed income.

If in any  taxable  year the  Company  fails  to  qualify  as a REIT and  incurs
additional  tax  liability,  the Company might need to borrow funds or liquidate
certain investments in order to pay the applicable tax and the Company would not
be compelled to make  distributions  under the Code.  Unless  entitled to relief
under certain statutory provisions,  the Company would also be disqualified from
treatment as a REIT for the four taxable  years  following the year during which
qualification is lost.  Although the Company  currently  intends to operate in a
manner  designed  to qualify as a REIT,  it is possible  that  future  economic,
market,  legal,  tax or other  considerations  may cause the  Company to fail to
qualify  as a REIT or may  cause  the  Board of  Directors  to  revoke  the REIT
election.

The Company and its  stockholders  may be subject to state or local  taxation in
various  state  or  local  jurisdictions,  including  those  in which it or they
transact  business or reside.  The state and local tax  treatment of the Company
and its stockholders may not conform to the Federal income tax treatment.

Competition

The Company is likely to compete with  others,  including  other REITs,  for the
assets it ultimately determines to invest its funds in. Such entities are likely
to have  greater  financial  resources  than the Company  and may be  conducting
business  activities  through business forms, which may, among other things, not
be subject to the operating restrictions placed on REITs.  Competition with such
entities  may  increase  the price the Company  pays for the assets it elects to
invest in.

Financial Information about Industry Segments

The Company has operated in one industry  segment,  the  ownership of CMBS bonds
backed  by  mortgage  loans on  commercial  real  estate.  See the  consolidated
financial statements and notes thereto included in Item 8 of this Report on Form
10-K for financial information relating to the Company.

Capital Resources

The Company  received $77.7 million from the  restructuring  of its  subordinate
CMBS bonds in  November  1997.  The  Company  plans to use such funds to provide
working  capital to support  its  operations,  to make  investments  and for the
payment of dividends to its stockholders. The Company may finance its operations
by entering into credit  agreements or long-term  borrowing  arrangements and by
issuing additional Common Stock or Preferred Stock. In addition, the Company may
issue notes or other debt instruments.

Without  further  stockholder  action,  the Company is authorized to issue up to
75,000,000  shares of Common Stock, of which  10,342,009  shares were issued and
outstanding as of February 27, 1998. Future offerings of Common Stock may result
in the  reduction of the net  tangible  book value per  outstanding  share and a
reduction  in the market  price of the Common  Stock.  The  Company is unable to
estimate  the  amount,  timing or nature of such  future  offerings  as any such
offerings will depend on general market conditions or other factors.

In addition,  the Board of Directors is authorized to issue 25,000,000 shares of
Preferred  Stock,  par  value  $.01 per  share,  without  further  action by the
Company's  stockholders.  Depending on the terms set by the Board of  Directors,
the  authorization  and  issuance  of  Preferred  Stock could  adversely  affect


                                     - 3 -
<PAGE>

existing stockholders.  The effects could include, among other things,  dilution
of ownership interests,  restrictions on dividends and preferences to holders of
a new class of stock in distributions,  including  preferences upon liquidation.
At this time, the Company does not expect to issue Preferred Stock.

Dividend Reinvestment Plan

The Company has an Automatic Dividend  Reinvestment Plan administered by Norwest
Shareowner  Services.  The plan provides the Company's  stockholders a method of
investing  cash  dividends  paid by the Company in  additional  shares of Common
Stock  purchased  in the open  market.  The plan also  permits  participants  to
purchase Common Stock in the open market with voluntary cash payments.

Restrictions on and Redemptions of Common Stock

The Company must meet certain  ownership  tests with respect to the Common Stock
to qualify as a REIT.  In addition,  the  corporate  charter of the Company,  as
amended, (the "Charter") provides that Common Stock may not be owned by a person
if the  ownership of Common Stock by such person would result in the  imposition
of a tax on the Company or on any other holder  (nominee or otherwise) of Common
Stock.  Provisions  of the Code  would  impose  such a tax if Common  Stock were
owned,  directly or indirectly,  by the United States  government,  any state or
political  subdivision  thereof,  any  foreign  government,   any  international
organization,  any agency or  instrumentality  of any of the foregoing,  a rural
electric or  telephone  cooperative  described in Section  1381(a)(2)(C)  of the
Code, or any organization  exempt from tax under the Code that is not subject to
tax on its unrelated business taxable income.

The Charter  empowers the Board of  Directors,  at its option,  to redeem Common
Stock or to restrict transfers of Common Stock to bring or maintain ownership of
the Common Stock in conformity with the above-noted requirements. The redemption
price to be paid is the fair market value as reflected in the latest  quotations
on any  exchange on which the Common  Stock is listed or, if the Common Stock is
not listed on any exchange, on the over-the-counter  market or, if no quotations
are  available,  the net asset value of the Common  Stock as  determined  by the
Board of Directors.  The Charter also provides  that any  acquisition  of Common
Stock that would result in the  disqualification  of the Company as a REIT shall
be void to the fullest extent  permitted  under  applicable law and the intended
transferee of such shares shall be deemed never to have had an interest therein.
Furthermore,  if such  provision is determined  to be void or invalid,  then the
transferee  of such Common Stock shall be deemed,  at the option of the Company,
to have acted as agent on behalf of the Company in  acquiring  such Common Stock
and to hold such Common Stock on behalf of the Company.

The Charter provides that no person or group may beneficially own more than 9.8%
of the  outstanding  Common  Stock,  unless the Board of Directors  exempts such
ownership  from such limit after finding that the Company's  qualification  as a
REIT would not be jeopardized by such ownership.

Each stockholder is required, upon demand, to disclose to the Board of Directors
in writing such  information  with  respect to direct and indirect  ownership of
Common  Stock as the Board of Directors  deems  prudent in  protecting  the REIT
status of the Company.

Employees

Pursuant  to the  Management  Agreement,  the  Manager  provides  all  personnel
necessary  to conduct the regular  business of the  Company.  Consequently,  the
Company has no employees.  Certain employees of the Manager serve as officers of
the Company.

                                     - 4 -
<PAGE>

Item 2.  Properties.

The Company does not own or lease any real estate or physical property.

Item 3.  Legal Proceedings.

At February 28, 1998, there were no legal proceedings, pending or threatened, to
which the Company or any of its subsidiaries were a party.

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

No matters were  submitted to a vote of the  Company's  stockholders  during the
fourth quarter of 1997.


                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

The Common  Stock of the  Company is listed on the AMEX under the symbol  "CAX."
The high and low  closing  sales  prices  of the  Common  Stock as  reported  in
published  financial  sources and certain  dividend  information for the periods
indicated were as follows:
<TABLE>
<CAPTION>

                                                                    Regular          Special        Capital Gain
                                                                   Dividends        Dividends         Dividends
1997                              High              Low            Declared          Declared         Declared
                                  ----              ---            --------          --------         --------
<S>                             <C>             <C>                 <C>              <C>               <C>
   First Quarter                $   7           $    6-3/8          $  .17           $   --            $   --
   Second Quarter                 6-11/16           6-3/16             .17               --                --
   Third Quarter                   7-3/16            6-5/8             .17               --                --
   Fourth Quarter                 7-11/16           6-9/16             .17              .26               .17
1996
   First Quarter                $   6-1/8       $    5-3/4          $  .17           $   --            $   --
   Second Quarter                   6-1/4            5-3/4             .17               --                --
   Third Quarter                    6-1/2            5-7/8             .17              .04                --
   Fourth Quarter                   6-3/4           6-3/16             .17               --                --

</TABLE>

As of  February  27,  1998,  10,342,009  shares of Common  Stock were issued and
outstanding and were held by 1,650 stockholders of record. The Company estimates
there were an additional 8,000 beneficial  owners on that date whose shares were
held by banks, brokers or other nominees.

The Company,  as a REIT, is required to distribute annually to holders of Common
Stock at least 95% of its "real estate  investment trust taxable income," which,
as defined by the Code and Treasury regulations,  is generally equivalent to net
taxable ordinary income.  The future payment of dividends by the Company will be
at the discretion of the Board of Directors and will depend on numerous  factors
including the  Company's  financial  condition,  its capital  requirements,  and
annual distribution  requirements under the provisions of the Code applicable to
REITs and such other factors as the Board of Directors deems relevant.

Item 6.  Selected Financial Data.

The Company's  selected  financial data, set forth below,  has been derived from
and  should  be read in  conjunction  with the  Company's  audited  consolidated


                                     - 5 -
<PAGE>

financial statements and the notes thereto. The data as of December 31, 1997 and
1996 and for each of the three years in the period ended  December 31, 1997,  is
included elsewhere in this Report on Form 10-K.

(In thousands, except per share data)
<TABLE>
<CAPTION>

Operating Data:
                                                                                                      Period from
                                                                                                      October 12,
                                                                Year Ended December 31,                1993(1) to
                                             ----------------------------------------------------     December 31,
                                                1997         1996          1995         1994              1993
                                                ----         ----          ----         ----              ----

<S>                                            <C>          <C>          <C>           <C>             <C>
Revenues                                       $ 10,117      $10,157     $ 9,169       $ 7,064         $    994
Gain on restructuring of bonds                    5,786           --          --            --               --
Net income                                       13,706        6,959       6,376         4,927              679
Basic earnings per share                           1.32          .68         .63           .49              .07
Diluted earnings per share                         1.32          .68         .63           .49              .07
Regular dividends per share                         .68          .68         .68           .50              .07
Special dividends per share                         .26          .04          --           .03               --
Capital gain dividends per share                    .17           --          --            --               --
Weighted-average common shares outstanding       10,332       10,247      10,104        10,047           10,039
Weighted-average common shares and common
    share equivalents outstanding                10,371       10,254      10,108        10,048           10,039
---------------------
<FN>
1   Date operations commenced.
</FN>
</TABLE>


<TABLE>
<CAPTION>

Balance Sheet Data:                                                       December 31,
                                             -----------------------------------------------------------------------
                                                1997          1996         1995         1994            1993
                                                ----          ----         ----         ----            ----

<S>                                           <C>          <C>           <C>          <C>             <C>
Cash and cash equivalents                     $   74,153   $    8,277    $      598   $  12,367       $ 66,302
CMBS bonds                                         1,981       61,460        69,503      74,046          8,723
Total assets                                      78,148       72,406        71,590      87,604         75,216
Total stockholders' equity                        77,705       71,919        70,465      74,672         74,976

</TABLE>

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

                          RESULTS OF OPERATIONS FOR THE
                  YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

The following  discussion and analysis of consolidated results of operations and
financial  condition  should  be  read  in  conjunction  with  the  consolidated
financial statements of the Company included elsewhere herein.

Comparison of Year Ended December 31, 1997 to Year Ended December 31, 1996

CMBS Bonds

Income from CMBS bonds was  $9,172,000  during 1997  compared to  $9,838,000  in
1996.  Earnings from CMBS bonds  decreased by  $1,138,000  because there were no


                                     - 6 -
<PAGE>

earnings in November or December  1997  subsequent to the  restructuring  of the
CBMS bond portfolio.  This decrease was partially  offset by higher income prior
to the restructuring.  The income from the CMBS bonds prior to the restructuring
was higher due to August  1997  prepayments  on one bond and  earnings  on bonds
acquired in March 1997 offset by income from the early  redemption  of two bonds
in May 1996 and prepayments on another bond in 1996.

Interest Income

Interest  income in 1997 and 1996 was $945,000 and $319,000,  respectively.  The
increase in interest  income in 1997 as compared to 1996 is due to investing the
proceeds from the restructuring of the CMBS bonds into highly liquid, short-term
investments. The average interest rate earned on these funds was 5.44% and 5.14%
in 1997 and 1996, respectively.

Management Fees

Management fee expenses were $1,678,000 and $1,425,000,  respectively,  for 1997
and 1996. The increase in management fees during 1997 compared with 1996 was due
to an increase of $311,000 in Incentive Fees, offset by a decrease of $58,000 in
Base Fees and  Administrative  Fees. Prior to the restructuring of the CMBS bond
portfolio, the Manager received an Administrative Fee of up to $10,000 per annum
for each CMBS bond. The increase in Incentive Fees was due to higher REIT income
before  Incentive Fees partially  offset by an increase in the average  Ten-Year
U.S.  Treasury  Rate  between  1996 and 1997.  The  increase  in REIT income was
primarily a result of gains associated with the  restructuring of the CMBS bonds
and  nonrecurring  expenses  incurred in 1996 while the  increase in the average
Ten-Year U.S.  Treasury Rate had the effect of raising the threshold above which
Incentive  Fees are paid.  The  decrease in Base Fees was due to the decrease in
average  invested assets as a result of the  restructuring of the Company's CMBS
bonds.

General and Administrative

General and  administrative  expenses of the Company were $519,000 and $805,000,
respectively,  for 1997 and 1996. General and administrative  expenses decreased
in 1997 compared to 1996 primarily due to lower stockholder  relations expenses,
lower consulting and accounting expenses and the elimination of the expense from
dividend  equivalent  rights ("DERs")  pursuant to the May 1996 amendment to the
Company's stock option plan.

Comparison of Year Ended December 31, 1996 to Year Ended December 31, 1995

CMBS Bonds

Income from CMBS bonds was  $9,838,000  during 1996  compared to  $8,980,000  in
1995.  The  increase in earnings  from CMBS bonds was the result of a $1,518,000
increase in discount amortization  primarily due to: (i) the May 1996 redemption
of two CMBS bonds; and (ii) prepayments on two other CMBS bonds during 1996. The
proceeds  from the  redemption  were  invested in  short-term  cash  instruments
resulting in lower bond interest income subsequent to the redemption.

Interest Income

Interest  income in 1996 and 1995 was $319,000 and $189,000,  respectively.  The
increase in interest  income in 1996 as compared to 1995 is due to investing the
proceeds  from the May 1996  redemption  of two CMBS bonds into  highly  liquid,
short-term  investments.  The  average  interest  rate earned on these funds was
5.14% and 5.08% in 1996 and 1995, respectively.

                                     - 7 -
<PAGE>

Management Fees

Management fees expenses were $1,425,000 and $1,151,000,  respectively, for 1996
and 1995. The increase in management fees during 1996 compared with 1995 was due
to an increase of $378,000 in Incentive Fees,  offset by decreases of $97,000 in
Base Fees and $7,000 in Administrative  Fees. The increase in Incentive Fees was
due to a $1,830,000 increase in REIT income before Incentive Fees and a decrease
in the average  Ten-Year U.S.  Treasury Rate between 1995 and 1996. The decrease
in Base Fees was due  primarily to a reduction of invested  assets  because of a
$4,245,000  unrealized  holding loss on the CMBS bonds  recorded at December 31,
1995,  and because of the early  redemption  of the two CMBS bonds in the second
quarter of 1996.  The  decrease in  Administrative  Fees was also due to the May
1996 redemption of the two CMBS bonds.

General and Administrative

General and administrative expenses of the Company were $805,000 and $1,393,000,
respectively,  for 1996 and 1995. General and administrative  expenses decreased
in 1996 compared to 1995  primarily due to, among other things,  elimination  of
the expense from the accrual of DERs in May 1996 and lower costs for stockholder
relations.  In addition,  general and administrative expenses in 1995 included a
one-time  expense of $313,000  incurred  to have a third  party  assess the fair
value of the Company's net assets.

Elimination of DERs

In May 1996, the Company's  stockholders  approved an amendment to the Company's
stock option plan which permitted the Company to issue shares of Common Stock to
the holders of stock  options who  voluntarily  gave up their  rights to receive
DERs in the future.  The  issuance of Common  Stock in exchange for the right to
receive  DERs  resulted  in a one-time  charge to income of  $966,000  ($941,000
non-cash  charge for the issuance of 157,413 shares of Common Stock plus $25,000
of transaction costs) during 1996.

Interest Expense

During  1996  and  1995,  interest  expense,  including  non-usage  fees  on the
Company's secured loan agreement, was $2,000 and $249,000,  respectively. Due to
the  cash  available  from  the  early  redemptions,  there  were  only  limited
borrowings in 1996.

Dividend Distributions

During each of 1997, 1996 and 1995, the Company  declared  regular  dividends of
$.68 per share. In addition,  the Company declared special dividends of $.26 per
share  and $.04 per share in 1997 and 1996,  respectively,  and a capital  gains
dividend of $.17 per share in 1997.

                         LIQUIDITY AND CAPITAL RESOURCES

As of  December  31,  1997,  the  Company  has  cash  and  cash  equivalents  of
$74,153,000.  The  Company's  principal  demands for  liquidity  include  normal
operating  activities  and  dividends  paid to  stockholders.  In addition,  the
Company  intends to invest  such funds in a class of assets  that it has not yet
determined.

Net cash provided by operating  activities was $4,428,000 during 1997,  compared
to  $5,920,000  during 1996.  The decrease was  primarily a result of changes in
other assets.  Net cash provided by investing  activities was $72,892,000 during
1997  compared to  $9,857,000  in 1996.  Investing  activities  in 1997 included
$77,693,000 of net cash provided from the  restructuring  of its CMBS bonds. Net


                                     - 8 -
<PAGE>

cash used in financing  activities  increased to $11,444,000 in 1997 compared to
$8,098,000 in 1996 primarily due to increased dividends.

The  Company  had a Loan and  Security  Agreement,  collateralized  by four CMBS
bonds,  which was cancelled in November 1997 upon the sale and  resecuritization
of the CMBS bonds. No borrowings  were  outstanding on this line at December 31,
1996. In addition,  the Company has an unsecured  line of credit with a bank for
$1,000,000 that expires on July 31, 1998. Advances under this line bear interest
at prime.  No advances were  outstanding  on this line of credit at December 31,
1997 or 1996.

                              YEAR 2000 COMPLIANCE

The Company utilizes  numerous  accounting and reporting  software  packages and
computer hardware to conduct its business,  the majority of which already comply
with year 2000 requirements.  Management  believes that the cost of modification
or replacement of non-compliant  accounting and reporting  software and hardware
will  not  be  material  to the  Company's  financial  position  or  results  of
operations.

Item 8.  Financial Statements and Supplementary Data.

The  independent  auditor's  reports,   consolidated  financial  statements  and
schedules listed in the  accompanying  index are filed as part of this Report on
Form  10-K and  incorporated  herein  by  reference.  See  "Index  to  Financial
Statements" on page F-1.

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure.

None.


                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.

The information set forth under the caption "Board of Directors and Officers" in
the Proxy  Statement in  connection  with the Company's  1998 Annual  Meeting of
Stockholders  which is to be filed by the Company  after the date this Report on
Form 10-K is filed (the "Proxy Statement") is hereby incorporated by reference.

Executive Officers of the Registrant

The Executive Officers of the Company as of February 28, 1998 are:

         Name      Age            Position with the Company
--------------------------------------------------------------------------------
Terry Considine     50   Co-Chairman of the Board of Directors and Co-Chief
                           Executive Officer
Thomas L. Rhodes    58   Co-Chairman of the Board of Directors and Co-Chief
                           Executive Officer
David M. Becker     38   Chief Financial Officer

Terry  Considine  has been  Co-Chairman  of the Board of Directors  and Co-Chief
Executive Officer of the Company and Asset Investors since September 1996. He is
the sole owner of Considine Investment Co. and has also been the Chairman of the
Board of  Directors  and Chief  Executive  Officer of Apartment  Investment  and
Management Company  ("AIMCO"),  one of the largest apartment REITs in the United
States  since  July 1994.  Mr.  Considine  has been and  remains  involved  as a
principal in a variety of real estate  activities,  including  the  acquisition,
renovation,  development and disposition of properties.  Mr.  Considine has also


                                     - 9 -
<PAGE>

controlled entities engaged in other businesses such as television broadcasting,
gasoline distribution and environmental  laboratories.  Mr. Considine received a
B.A. from Harvard  College and a J.D. from Harvard Law School and is admitted as
a member of the Massachusetts Bar.

Mr. Considine has had substantial real estate experience. From 1975 through July
1994,  partnerships  or other  entities in which Mr.  Considine had  controlling
interests  invested in  approximately  35 multifamily  apartment  properties and
commercial  real estate  properties.  Six of these real estate  assets  (four of
which  were  multifamily  apartment  properties  and two of  which  were  office
properties)  did not  generate  sufficient  cash flow to service  their  related
indebtedness  and were foreclosed upon by their lenders,  causing pre-tax losses
of  approximately  $11.9 million to investors and losses of  approximately  $2.7
million to Mr. Considine.

Thomas L. Rhodes has been  Co-Chairman  of the Board of  Directors  and Co-Chief
Executive  Officer of the Company and Asset  Investors since September 1996. Mr.
Rhodes has also been a Director of AIMCO since July 1994.  Mr. Rhodes has served
as the President and a Director of National  Review  magazine  since 1992.  From
1976 to 1992, he held various positions at Goldman,  Sachs & Co. and was elected
a General Partner in 1986. He currently serves as a Director of Delphi Financial
Group, Inc. and its subsidiaries, Delphi International, Ltd., Oracle Reinsurance
and The Lynde and Harry Bradley Foundation. Mr. Rhodes is Chairman of the Empire
Foundation  for Policy  Research,  a Trustee of The  Heritage  Foundation  and a
Trustee of The Manhattan Institute.

David M. Becker has  functioned as Chief  Financial  Officer for the Company and
Asset  Investors  since  December  1997.  From  September 1995 until joining the
Company,  he was both the  Chief  Financial  Officer  of  Westfield  Development
Company,  Inc. and Vice  President-Finance  of the Frederick  Ross Co.,  related
companies  involved  in  commercial  real  estate  development,   brokerage  and
management.  Prior to September 1995, he held various  executive  positions with
CONCORD Services, Inc., a privately-held company involved in multiple businesses
including trading,  manufacturing and finance.  CONCORD Services,  Inc. declared
bankruptcy in February 1995. In addition, Mr. Becker was Chief Financial Officer
and  General  Counsel  of Ramtron  International  Corporation,  a  publicly-held
semiconductor  manufacturer,  from October 1989 to July 1994.  Mr.  Becker is an
attorney and certified public accountant. He received a B.A. from the University
of Northern Iowa and a J.D. from the University of Denver.

There  are no  family  relationships  between  any of  the  executive  officers,
directors or persons  nominated or chosen by the Company to become a director or
executive  officer and there are no arrangements or  understandings  pursuant to
which any of them were selected as directors or officers. None of the directors,
persons nominated to become directors or executive  officers of the Company have
been  involved  in any legal  proceedings  during  the past five  years that are
material to an evaluation of the ability or integrity of such persons.

Item 11.  Executive Compensation.

The information  required by this item is presented under the captions  "Summary
Compensation  Table",  "Options/SAR  Grants in Last Fiscal Year" and  "Aggregate
Option/SAR Exercises in Last Fiscal Year and Fiscal Year-end Options/SAR Values"
in the Proxy Statement and is incorporated herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

The information  required by this item is presented under the caption  "Security
Ownership of Certain  Beneficial  Owners and  Management" in the Proxy Statement
and is incorporated herein by reference.


                                     - 10 -
<PAGE>


Item 13.  Certain Relationships and Related Transactions.

The information  required by this item is presented  under the caption  "Certain
Relationships   and  Related   Transactions"  in  the  Proxy  Statement  and  is
incorporated herein by reference.

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)(1)   The financial statements listed in the Index to Financial Statements on
         Page F-1 of this report are filed as part of this report.

(a)(2)   All  schedules  are  omitted  because  they are not  applicable  or the
         required  information  is shown in the  financial  statements  or notes
         thereto.

(a)(3)   The Exhibit Index is included on page 12 of this report.

(b)      Reports on Form 8-K for the quarter ended December 31, 1997:

             Current Report on Form 8-K, dated November 3, 1997






                                     - 11 -
<PAGE>






                          INDEX TO FINANCIAL STATEMENTS


COMMERCIAL ASSETS, INC.                                                     Page

Financial Statements:

         Report of Independent Auditors..................................    F-2
         Consolidated Balance Sheets as of December 31, 1997
             and 1996...................................................     F-3
         Consolidated Statements of Income for the years ended
             December 31, 1997, 1996 and
             1995........................................................    F-4
         Consolidated Statements of Stockholders' Equity for
             the years ended December 31,
             1997, 1996 and 1995.........................................    F-5
         Consolidated Statements of Cash Flows for the years
             ended December 31, 1997, 1996
             and 1995....................................................    F-6
         Notes to Consolidated Financial Statements......................    F-7





                                     F - 1
<PAGE>




                         REPORT OF INDEPENDENT AUDITORS



Board of Directors and Stockholders
Commercial Assets, Inc.
Denver, Colorado


We have  audited the  accompanying  consolidated  balance  sheets of  Commercial
Assets,  Inc. as of December  31,  1997 and 1996,  and the related  consolidated
statements of income,  stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1997. These financial  statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  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
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 consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Commercial  Assets,  Inc. as of December 31, 1997 and 1996, and the consolidated
results of their  operations and their cash flows for each of the three years in
the period  ended  December  31,  1997 in  conformity  with  generally  accepted
accounting principles.



                                                               ERNST & YOUNG LLP
Denver, Colorado
February 6, 1998





                                     F - 2
<PAGE>





<TABLE>
<CAPTION>

                    COMMERCIAL ASSETS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                      (In thousands, except per share data)


                                                                                                December 31,
                                                                                           1997             1996
                                                                                           ----             ----
                                                       ASSETS

<S>                                                                                     <C>              <C>
   CASH AND CASH EQUIVALENTS                                                            $   74,153       $    8,277
   RESTRICTED CASH                                                                              --            1,982
   CMBS BONDS                                                                                1,981           61,460
   OTHER ASSETS, NET                                                                         2,014              687
                                                                                        ----------       ----------
                                                                                        $   78,148       $   72,406
                                                                                        ==========       ==========

                                        LIABILITIES AND STOCKHOLDERS' EQUITY

   ACCOUNTS PAYABLE AND ACCRUED LIABILITIES                                             $      368       $      189
   MANAGEMENT FEES PAYABLE                                                                      75              298
   NOTES PAYABLE TO BANKS                                                                       --               --
                                                                                        ----------       ----------
                                                                                               443              487
                                                                                        ----------       ----------

   STOCKHOLDERS' EQUITY:
   Preferred stock, par value $.01 per share, 25,000 shares authorized; no shares
     issued or outstanding                                                                      --               --
   Common stock, par value $.01 per share, 75,000 shares authorized; 10,342 and
     10,316 shares issued and outstanding, respectively                                        104              103
   Additional paid-in capital                                                               76,724           76,559
   Retained earnings (dividends in excess of accumulated earnings)                             877           (1,354)
   Net unrealized holding losses on CMBS bonds                                                  --           (3,389)
                                                                                        ----------       ----------
                                                                                            77,705           71,919
                                                                                        ----------       ----------
                                                                                        $   78,148       $   72,406
                                                                                        ==========       ==========
</TABLE>


                 See Notes to Consolidated Financial Statements.

                                      F - 3

<PAGE>

<TABLE>
<CAPTION>

                    COMMERCIAL ASSETS, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

                      (In thousands, except per share data)


                                                                             Year Ended December 31,

                                                                  1997                1996               1995
                                                                  ----                ----               ----
REVENUES
<S>                                                             <C>                 <C>                <C>
   CMBS bonds                                                   $   9,172           $   9,838          $   8,980
   Interest                                                           945                 319                189
                                                                ---------           ---------          ---------
                                                                   10,117              10,157              9,169
                                                                ---------           ---------          ---------

EXPENSES
   Management fees                                                  1,678               1,425              1,151
   General and administrative                                         519                 805              1,393
   Elimination of DERs                                                 --                 966                 --
   Interest                                                            --                   2                249
                                                                ---------           ---------          ---------
                                                                    2,197               3,198              2,793
                                                                ---------           ---------          ---------

INCOME BEFORE GAIN ON RESTRUCTURING OF BONDS                        7,920               6,959              6,376

Gain on restructuring of bonds                                      5,786                  --                 --
                                                                ---------           ---------          ---------

NET INCOME                                                      $  13,706           $   6,959          $   6,376
                                                                =========           =========          =========

BASIC EARNINGS PER SHARE                                        $    1.32           $     .68          $     .63
DILUTED EARNINGS PER SHARE                                      $    1.32           $     .68          $     .63

DIVIDENDS DECLARED PER SHARE
     Regular dividends                                          $     .68           $     .68          $     .68
     Special dividends                                                .26                 .04                --
     Capital gain dividends                                           .17                  --                --
                                                                ---------           ---------          --------
                                                                $    1.11           $     .72          $     .68
                                                                =========           =========          =========

Weighted-Average Common Shares Outstanding                         10,332              10,247             10,104

Weighted-Average Common Shares and Common Share
   Equivalents Outstanding                                         10,371              10,254             10,108


</TABLE>


                 See Notes to Consolidated Financial Statements.

                                      F - 4


<PAGE>

<TABLE>
<CAPTION>

                    COMMERCIAL ASSETS, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

              For the Years Ended December 31, 1997, 1996 and 1995

                                 (In thousands)
                                                                            Retained            Net
                                                                            Earnings         Unrealized
                                                                          (Dividends In       Holding
                                                               Additional   Excess of          Losses             Total
                                             Common Stock        Paid-In  Accumulated            on           Stockholders'
                                          Shares      Amount     Capital    Earnings)        CMBS Bonds          Equity
                                          ------      ------     -------    ---------        ----------          ------
<S>                                       <C>        <C>       <C>         <C>                <C>               <C>
BALANCES - DECEMBER 31, 1994               10,053     $  101    $  74,994   $   (423)          $    --           $  74,672
Issuance of common stock                       89          1          529         --                --                 530
Net income                                     --         --           --      6,376                --               6,376
Dividends                                      --         --           --     (6,868)               --              (6,868)
Unrealized depreciation of CMBS bonds          --         --           --         --            (4,245)             (4,245)
                                          -------     ------    ---------   --------           -------           ---------
BALANCES - DECEMBER 31, 1995               10,142        102       75,523       (915)           (4,245)             70,465
Issuance of common stock                      174          1        1,036         --                --               1,037
Net income                                     --         --           --      6,959                --               6,959
Dividends                                      --         --           --     (7,398)               --              (7,398)
Unrealized appreciation of CMBS bonds          --         --           --         --               856                 856
                                          -------     ------    ---------   --------           -------           ---------
BALANCES - DECEMBER 31, 1996               10,316        103       76,559     (1,354)           (3,389)             71,919
Issuance of common stock                       26          1          165         --                --                 166
Net income                                     --         --           --     13,706                --              13,706
Dividends                                      --         --           --    (11,475)               --             (11,475)
Reversal of unrealized holding losses
    upon restructuring of bonds                --         --           --         --             3,389               3,389
                                          -------     ------    ---------   --------           -------           ---------
BALANCES - DECEMBER 31, 1997               10,342     $  104    $  76,724   $    877           $    --           $  77,705
                                          =======     ======    =========   ========           =======           =========
</TABLE>


                 See Notes to Consolidated Financial Statements.

                                      F - 5


<PAGE>

<TABLE>
<CAPTION>

                    COMMERCIAL ASSETS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (In thousands)


                                                                         Year Ended December 31,
                                                                 1997           1996            1995
                                                                 ----           ----            ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                            <C>            <C>             <C>
   Net income                                                  $ 13,706       $  6,959        $  6,376
   Adjustments to reconcile net income to net cash flows
     from operating activities:
     Amortization of discount on CMBS bonds and other
       assets                                                    (2,381)        (2,155)           (638)
     Issuance of common stock for elimination of DERs                --            941              --
     Increase in accounts payable and accrued liabilities           216            157             329
     (Increase) decrease in other assets                         (1,327)            18              84
     Gain on restructuring of bonds                              (5,786)            --              --
                                                               --------       --------        --------
       Net cash provided by operating activities                  4,428          5,920           6,151
                                                               --------       --------        --------

CASH FLOWS FROM INVESTING ACTIVITIES
   Principal collections from CMBS bonds                             --          9,857             554
   Acquisitions of CMBS bonds                                    (4,801)            --              --
   Proceeds from restructuring of bonds                          77,693             --              --
                                                               --------       --------        --------
       Net cash provided by investing activities                 72,892          9,857             554
                                                               --------       --------        --------

CASH FLOWS FROM FINANCING ACTIVITIES
   Dividends paid                                               (11,475)        (7,398)         (8,879)
   Repayments of short-term notes payable                            --           (700)         (9,595)
   Proceeds from the issuance of common stock                        31             --              --
                                                               --------       --------        --------
       Net cash used in financing activities                    (11,444)        (8,098)        (18,474)
                                                               --------       --------        --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS             65,876          7,679         (11,769)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                    8,277            598          12,367
                                                               --------       --------        --------

CASH AND CASH EQUIVALENTS AT END OF YEAR                       $ 74,153       $  8,277        $    598
                                                               ========       ========        ========
</TABLE>


                 See Notes to Consolidated Financial Statements.

                                      F - 6



<PAGE>




                             COMMERCIAL ASSETS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



A.       Organization

Commercial  Assets,  Inc.  (the  "Company")  is  a  Maryland  corporation  which
commenced   operations  in  1993  when  Asset  Investors   Corporation   ("Asset
Investors") contributed $75,000,000 to the Company and distributed approximately
70% of the Company's Common Stock to Asset Investors'  stockholders.  The Common
Stock is listed on the American Stock Exchange under the symbol "CAX."

The Company's  day-to-day  operations are performed by a manager (the "Manager")
pursuant to a  year-to-year  management  agreement  currently in effect  through
March 1998 ("the Management Agreement").  Prior to October 1996, the Company was
managed by subsidiaries of MDC Holdings,  Inc.  ("MDC").  In September 1996, MDC
sold Financial  Asset  Management  LLC ("FAM"),  the Manager at such time, to an
investor group led by Terry Considine,  Thomas L. Rhodes and Bruce D. Benson. In
November  1997,  the assets of FAM,  including the  Management  Agreement,  were
acquired by Asset Investors,  who is now the current Manager.  Mr. Considine and
Mr.  Rhodes are  Co-Chairmen  of the Board of Directors  and Co-Chief  Executive
Officers of both the Company and Asset  Investors.  Mr.  Benson is a director of
both companies.  No change has been made to the Management  Agreement other than
an extension.

The  Management  Agreement  is subject  to the  approval  of a  majority  of the
Company's  independent  directors and can be terminated by either party, without
cause,  with 60 days'  notice.  Since  the  Company  has no  employees,  certain
employees of the Manager have been designated as officers of the Company.

Historically,  the Company  owned  subordinate  classes of  Commercial  Mortgage
Backed  Securities  ("CMBS  bonds").  The CMBS bonds were  issued in  commercial
mortgage loan securitizations involving multi-class issuances of debt securities
which were secured and funded as to the payment of  principal  and interest by a
specific  group of  mortgage  loans on  multi-family  or other  commercial  real
estate.  In 1997, the Company decided to restructure its asset base and cease to
invest in subordinate CMBS bonds. In November 1997, the Company restructured its
subordinate  CMBS bond  portfolio by selling,  redeeming or  resecuritizing  its
various  CMBS  bonds.  The  restructuring  resulted  in  the  Company  receiving
$77,693,000 cash and retaining an equity interest in an owner trust arising from
a  resecuritization  transaction  (see  Note C).  The  Company  has  temporarily
invested the proceeds from such restructuring in government securities and other
cash equivalents until the Company decides what class of assets it will reinvest
such funds in.

B.       Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated  financial  statements  include the accounts of the Company and
its  wholly-owned  subsidiaries.   All  significant  intercompany  balances  and
transactions have been eliminated in consolidation.

                                     F - 7
<PAGE>

CMBS Bonds

Earnings from CMBS bonds are comprised of coupon  interest and the  amortization
of the purchase discount. Amortization of the purchase discount is recognized by
the interest  method using a constant  effective  yield and assumes an estimated
rate of future  prepayments,  defaults  and credit  losses which is adjusted for
actual experience.  The allowance for credit losses is equal to the undiscounted
total of future  estimated  credit losses.  In the event the Company adjusts the
estimate of future credit losses,  such adjustments would be included in current
period earnings.

The Company classifies its CMBS bonds as  available-for-sale.  Accordingly,  the
CMBS bonds are  carried at fair value in the  financial  statements.  Unrealized
holding  gains and losses on  available-for-sale  securities  are excluded  from
earnings and reported as a net amount in stockholders' equity until realized. If
the fair value of a CMBS bond declines  below its  amortized  cost basis and the
decline is considered to be "other than temporary," the amount of the write-down
would be included in the  Company's  income  (i.e.,  accounted for as a realized
loss). The decline in fair value is considered to be other than temporary if the
cost basis exceeds the related projected cash flow from the CMBS bond discounted
at a risk-free rate of return.

Fair Value of Financial Instruments

The fair  value of the  Company's  CMBS bonds is  discussed  in Note C. The fair
value of all other financial  instruments of the Company  generally  approximate
their carrying basis or amortized cost.

Income Taxes

The  Company  intends to operate in a manner  that will permit it to qualify for
the income tax treatment accorded to a real estate investment trust ("REIT"). If
it so qualifies,  the Company's REIT income,  with certain  limited  exceptions,
will not be subject to federal or state income tax at the corporate level.
Accordingly, no provision for taxes has been made in the financial statements.

In order to maintain its status as a REIT, the Company is required,  among other
things,  to  distribute  annually to its  stockholders  at least 95% of its REIT
income and to meet certain asset, income and stock ownership tests.  Regular and
special dividends  declared in 1997, 1996 and 1995 represented  ordinary taxable
income to the  stockholders.  In addition,  the Company declared a capital gains
dividend of $.17 per share in 1997.

Earnings Per Share

Basic  earnings  per  share  for  1997,   1996  and  1995  are  based  upon  the
weighted-average  number of shares of Common Stock outstanding  during each such
year. Diluted earnings per share reflect the effect of any dilutive, unexercised
stock options in 1997, 1996 and 1995.

Statements of Cash Flows

For purposes of reporting cash flows,  cash  maintained in bank accounts,  money
market funds and overnight cash  investments  are considered to be cash and cash
equivalents.  The  Company  paid  interest  expense  in cash of $0,  $8,000  and
$290,000 for 1997, 1996 and 1995, respectively.

Non-cash  investing and  financing  activities  for 1997,  1996 and 1995 were as
follows (in thousands):




                                     F - 8
<PAGE>



<TABLE>
<CAPTION>


                                                                    1997             1996              1995
                                                                  --------         --------          ------
Principal   collections   on  CMBS   bonds   transferred   to
<S>                                                                <C>              <C>              <C>
    restricted cash                                                $ 6,227          $ 1,214          $    397
Unrealized holding gains and losses on CMBS bonds                    3,389              856            (4,245)
Distributions of Common Stock pursuant to DERs                          --               96               376
Distributions  of  Common  Stock  as  consideration  for  the
    elimination of DERs                                                 --              941                --
Distributions of Common Stock                                          135               --                --
</TABLE>

Use of Estimates

The  preparation  of the  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.

Accounting Standards Not Yet Adopted by the Company

The  Financial  Accounting  Standards  Board  ("FASB")  has issued  several  new
pronouncements that are not yet adopted by the Company.

In June  1997  the FASB  issued  Statement  of  Financial  Accounting  Standards
("SFAS") No. 130, "Reporting  Comprehensive  Income," to establish standards for
reporting  and display of  comprehensive  income (all changes in equity during a
period except those resulting from  investments by and  distributions to owners)
and its  components in financial  statements.  This new standard,  which will be
effective  for the  Company  for the  year  ending  December  31,  1998,  is not
currently anticipated to have a significant impact on the Company's consolidated
financial  statements based on the current financial structure and operations of
the Company.

In June 1997 the FASB  issued SFAS No. 131,  "Disclosures  about  Segments of an
Enterprise  and Related  Information,"  to  establish  standards  for  reporting
information about operating  segments in annual financial  statements,  selected
information   about  operating   segments  in  interim   financial  reports  and
disclosures  about products and services,  geographic areas and major customers.
This new  standard,  which will be effective for the Company for the year ending
December 31, 1998, will require the Company to report  financial  information on
the  basis  that is used  internally  for  evaluating  segment  performance  and
deciding how to allocate  resources to segments and is currently not anticipated
to  result  in  significantly  more  detailed  information  in the  notes to the
Company's  consolidated  financial  statements  than is  currently  required and
provided.

C.       CMBS Bonds

As of December 31, 1996, the outstanding balance of the Company's CMBS bonds was
$89,297,000  while  unamortized   purchase  discounts,   acquisition  costs  and
allowance  for credit  losses  totaled  $24,448,000.  Additionally,  the Company
recorded  unrealized  holding  losses  of  $3,389,000  on the  CMBS  bonds as of
December 31, 1996.

The estimated  fair value of the Company's CMBS bonds of $61,460,000 at December
31, 1996, was determined by discounting  the future cash flows before  estimates
of credit losses of the CMBS bonds at interest rates equal to a spread over U.S.
Treasury rates with comparable terms to maturity.  The discount rates range from
10% to 27%. The interest rate spread over the U.S.  Treasury rate was based upon
then current market information of CMBS bonds with similar characteristics.  The
fair  value of CMBS  bonds  fluctuated  over time due to,  among  other  things,


                                     F - 9
<PAGE>

changes in  prevailing  interest  rates,  liquidity  in the CMBS  bonds  market,
paydowns on the  mortgage  loans  collateralizing  the CMBS bonds and changes in
real estate values of the related commercial properties.

The Company  provided an allowance for credit losses of  $12,720,000 at December
31, 1996 on certain of its CMBS bonds. During 1997, 1996 and 1995, there were no
credit losses charged to operations or write-downs charged against the allowance
for credit losses.

Pursuant  to the  provisions  of  certain  of the  Company's  CMBS  bonds,  cash
collections which would otherwise be attributable to the Company's interests are
required to be set aside in reserve  accounts to support the eventual payment of
more senior  classes of CMBS bonds.  At December  31, 1996,  $1,982,000  was set
aside and is shown as restricted cash on the balance sheet.

In May 1996, two CMBS bonds with an outstanding  principal balance of $9,664,000
and net carrying value of $8,723,000 were redeemed earlier than anticipated. The
bonds  were  acquired  in  March  1994,  for  $9,088,000,  or  84.25%  of  their
outstanding principal balance.  Since the bonds were redeemed at par, $1,426,000
of discount amortization was included in earnings during 1996.

In March 1997, the Company  contributed its ownership interest in two CMBS bonds
(Lehman Capital Corporation Trust Certificate,  Series 1994-2 and Series 1994-3)
into a newly created trust (Blaylock  Mortgage Capital  Corporation  Multifamily
Trust). Interests in bond classes within the same CMBS issuance which were owned
by another  party were also  contributed  into the trust.  The trust then issued
seven classes of CMBS bonds  collateralized by the CMBS bond classes contributed
into  the  trust.  The  Company  received  an  interest  in five of the new bond
classes,  which  corresponded  to the Company's  ownership  interests in the two
bonds  contributed  to the  trust.  The  Company  also  acquired  the  remaining
$5,737,000  principal  balance of two of the new bond classes rated "BB" and "B"
at a cost of $4,801,000,  which resulted in the Company having 100% ownership in
the five new subordinate classes.

In August 1997, three mortgages  underlying one of the Company's CMBS bonds were
prepaid.  As a result of the  prepayment,  the  Company  recognized  $482,000 of
income  from a  prepayment  penalty  received  and  $2,305,000  of  income  from
accelerated discount amortization.  The $5,853,000 of principal collections from
the repaid mortgages was transferred to restricted cash pursuant to the terms of
the indenture.

In November 1997,  the Company  restructured  its portfolio of CMBS bonds.  Nine
bonds  were sold for  $28,472,000  in cash.  One bond  which had an  outstanding
principal  balance of  $10,000,000  and net carrying  value prior to  unrealized
holding  gains of  $9,244,000  was  redeemed  by the  bond  issuer  at par.  The
remaining  two CMBS  bonds  were  resecuritized  by  contributing  the bonds and
related  restricted  cash to an owner  trust in which the  Company  retained  an
equity interest. In a private placement,  the trust then sold for $39,952,000 in
cash, debt securities  representing  senior interests in the trust's assets. The
principal  balance of the equity interest retained by the Company is $5,000,000.
However,  since the  equity  interest  represents  the  first-loss  class of the
portfolio  and  provides  credit  support  for the senior debt  securities,  the
Company  established an allowance for credit losses of $3,000,000 and valued the
equity  interest at its estimated fair value of  $2,000,000.  As a result of the
sale and  resecuritization  transactions,  the Company  recognized  a $5,786,000
gain, net of related costs and  management  fees, in the fourth quarter of 1997.
In  addition,  since the one bond was  redeemed  at par,  $756,000  of  discount
amortization was included in earnings during the fourth quarter of 1997.

The following  unaudited  pro-forma  information has been prepared  assuming the
restructuring  of the CMBS  bonds had been  completed  at the  beginning  of the
periods  presented.  The  pro-forma  information  is presented  for  information
purposes only and is not  necessarily  indicative of what would have occurred if


                                     F - 10
<PAGE>

the  restructuring  had been  completed  as of those  dates.  In  addition,  the
pro-forma  information is not intended to be a projection of future results. The
unaudited, pro-forma results of operations for the years ended December 31, 1997
and 1996 are as follows (in thousands, except per share data):

                                                          1997           1996
                                                       ----------     ----------

Revenues                                               $    5,615     $    6,788
                                                       ==========     ==========

Net income before gain on restructuring of bonds       $    5,133     $    4,940
Gain on restructuring of bonds                              6,069          5,786
                                                       ----------     ----------
Net income                                             $   11,202     $   10,726
                                                       ==========     ==========

Net income per share                                   $     1.08     $     1.05
                                                       ==========     ==========

Prior to the restructuring,  certain of the Company's CMBS bonds were pledged as
collateral for the Company's short-term notes payable (see Note D).

D.       Short-Term Notes Payable

The  Company  had a Loan and  Security  Agreement,  collateralized  by four CMBS
bonds, that was cancelled in November 1997 upon the sale and resecuritization of
the bonds. No borrowings were outstanding on this line at December 31, 1996.

The Company has an  unsecured  line of credit  with a bank for  $1,000,000  that
expires on July 31, 1998.  Advances under this line bear interest at prime.  Two
of the Company's  independent directors are members of the Advisory Board of the
bank. No advances were  outstanding  on this line of credit at December 31, 1997
or 1996.

E.       Stock Option Plan

The Company  has a Stock  Option Plan for the  issuance of  non-qualified  stock
options  to its  directors  and  officers  which as of January 1, 1998 and 1997,
permitted the issuance of up to an aggregate of 1,025,000 and 948,000  shares of
Common Stock, respectively,  of which 717,000 and 648,000 related to outstanding
stock  options,  respectively.  The exercise  price for stock options may not be
less than 100% of the fair  market  value of the  shares of Common  Stock at the
date of the grant.  Each of the stock  options  granted to date has a  five-year
term.

Prior to May 30,  1996,  stock  options  granted  under  the Stock  Option  Plan
automatically  accrued  dividend  equivalent  rights  ("DERs") based on: (i) the
number  of  shares  underlying  the  unexercised  portion  of the  option;  (ii)
dividends  declared on the outstanding  shares of the Company between the option
grant  date and the option  exercise  date;  and (iii) the  market  price of the
shares on the dividend record date. DERs were paid in shares of Common Stock (or
in other  property that  constituted  the dividend) at the time of each dividend
distribution.  During 1996 and 1995, the Company  incurred $96,000 and $376,000,
respectively,  of general and administrative  expenses from DERs covering 16,000
and 64,000, respectively,  shares of Common Stock which were subject to issuance
pursuant to options granted under the plan.

On May 30, 1996, the Company's  stockholders  approved an amendment to the Stock
Option Plan which  provided for the issuance of Common Stock in exchange for the
elimination  of the accrual of DERs for options  granted  under the Stock Option
Plan.  As a result of the  amendment,  the  Company  incurred a $966,000  charge
during 1996.

                                     F - 11
<PAGE>

Presented below is a summary of the changes in stock options for the three years
ended December 31, 1997. As of December 31, 1997, the  outstanding  options have
exercise   prices   ranging   from   $5.62  to  $7.50   and  have  a   remaining
weighted-average life of 1.8 years.
                                             Weighted
                                              Average
                                           Exercise Price          Shares
                                           --------------          ------
Outstanding - December 31, 1994                $ 7.09              481,000
     Granted                                     6.15               93,000
                                               ------             --------
Outstanding - December 31, 1995                  6.94              574,000
     Granted                                     5.86               83,000
     Forfeited                                   6.68               (9,000)
                                               ------             --------
Outstanding - December 31, 1996                  6.80              648,000
     Granted                                     6.30               87,000
     Forfeited                                   7.30              (13,000)
     Exercised                                   6.12               (5,000)
                                               ------             --------
Outstanding - December 31, 1997                $ 6.74              717,000
                                               ======             ========

As of December 31, 1997, no options have expired.  Options  granted to date vest
over a two-year period. As of December 31, 1997, 1996 and 1995, 660,000, 454,000
and 485,000, respectively, of the outstanding options were exercisable.

The Company has elected to follow  Accounting  Principles  Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related  Interpretations
in accounting for its employee stock options  rather than the  alternative  fair
value  accounting  provided for under SFAS No. 123,  "Accounting for Stock-Based
Compensation."  Under  APB 25,  because  the  exercise  price  of the  Company's
employee stock options  equals the market price of the  underlying  stock on the
date of grant, no compensation expense is recognized.

Pro forma information regarding net income and earnings per share is required by
SFAS No. 123, and has been  determined  as if the Company had  accounted for its
employee stock options under the fair value method of that  Statement.  The fair
value  for  these   options  was  estimated  at  the  date  of  grant  using  an
option-pricing model.

Option  valuation  models  require  the input of highly  subjective  assumptions
including  the expected  stock price  volatility.  Because the  Company's  stock
options  have  characteristics  significantly  different  from  those of  traded
options,  and because changes in the subjective input assumptions can materially
affect the fair value estimate,  in management's opinion, the existing models do
not  necessarily  provide a  reliable  single  measure  of the fair value of its
employee stock options.

During 1997,  1996 and 1995,  the estimated  weighted-average,  grant-date  fair
value of  options  granted  was  $.42,  $.45  and  $.23,  respectively,  and the
estimated total fair value of options granted was $36,000,  $27,000 and $30,000,
respectively.  The pro forma net income of the Company reflecting the fair value
of options  granted  was  $13,670,000  ($1.32 per share),  $6,932,000  ($.68 per
share) and $6,346,000  ($.63 per share) for 1997,  1996 and 1995,  respectively.
The Company  assumed a life of five years and  risk-free  interest rate equal to
the  Five-Year  U.S.  Treasury  rate on the date the options  were  granted.  In
addition,  the expected stock price  volatility and dividends  growth rates were
estimated based upon historical averages over the three years ended December 31,
1997.

                                     F - 12
<PAGE>

F.       Other Matters

The Company operates under a Management Agreement with the Manager,  pursuant to
which  the  Manager  advises  the  Company  on its  business  and  oversees  its
day-to-day  operations,  subject to the  supervision  of the Company's  Board of
Directors.

During 1997,  1996 and 1995,  the  Company's  management  fees were  $1,701,000,
$1,425,000  and  $1,151,000,  respectively,  consisting  of:  (i)  Base  Fees of
$598,000,  $654,000 and  $751,000,  respectively;  (ii)  Administrative  Fees of
$56,000, $58,000 and $65,000, respectively;  (iii) Incentive Fees of $1,024,000,
$713,000 and $335,000,  respectively;  and (iv) Acquisition Fees of $23,000,  $0
and $0,  respectively.  Acquisition Fees were capitalized as part of the cost of
acquiring CMBS bonds. In addition,  the Company  incurred  $426,000 of Incentive
Fees during 1997 relating to the gain on the restructuring of the CMBS bonds.

The  Company's  Charter  authorizes  the Board of Directors to issue  25,000,000
shares,  par value $.01 per share, of Preferred Stock. The Board of Directors is
authorized  to fix the  terms of the  Preferred  Stock,  including  preferences,
powers and rights (including voting rights) senior to the Common Stock. To date,
the Company has not issued any shares of Preferred Stock.

G.       Selected Quarterly Financial Data (unaudited)

Presented  below  is  selected  quarterly  financial  data for the  years  ended
December 31, 1997 and 1996 (in thousands, except per share data).




                                     F - 13
<PAGE>


<TABLE>
<CAPTION>



                                                                        Three Months Ended,
                                                                        -------------------
                                                 December 31,      September 30,      June 30,         March 31,
1997
-------------------------------------------- ----------------- ------------------ --------------- ------------------
<S>                                                <C>               <C>                <C>               <C>
Revenues                                           $  2,246           $ 3,474            $ 2,242          $ 2,155
Gain on restructuring of bonds                        5,786                --                 --               --
Net income                                            7,677             2,484              1,810            1,735
Basic earnings per share                                .74               .24                .17              .17
Diluted earnings per share                              .74               .24                .17              .17
Regular dividends declared per share                    .17               .17                .17              .17
Special dividends declared per share                    .26                --                 --               --
Capital gains dividends declared per share              .17                --                 --               --

Stock prices 1
     High                                           7-11/16            7-3/16            6-11/16             7
     Low                                             6-9/16             6-5/8             6-3/16            6-3/8
Weighted-average common shares outstanding           10,342            10,342             10,326           10,316
Weighted-average common shares and common
     share equivalents outstanding                   10,408            10,381             10,348           10,351

1996
-------------------------------------------- ----------------- ------------------ --------------- ------------------
Revenues                                             $2,146            $2,167             $3,526           $2,318
Net income                                            1,595             1,765              1,992            1,607
Basic earnings per share                                .16               .17                .19              .16
Diluted earnings per share                              .15               .17                .19              .16
Regular dividends declared per share                    .17               .17                .17              .17
Special dividends declared per share                     --               .04                 --               --

Stock prices 1
     High                                             6-3/4             6-1/2              6-1/4            6-1/8
     Low                                             6-3/16             5-7/8              5-3/4            5-3/4
Weighted-average common shares outstanding           10,316            10,316             10,214           10,142
Weighted-average common shares and common
     share equivalents outstanding                   10,331            10,325             10,219           10,146

<FN>
---------------
1 Daily closing prices as reported on the AMEX Composite Tape.
</FN>
</TABLE>




                                     F - 14
<PAGE>






                                  EXHIBIT INDEX


          Exhibit No.       Description
          -----------       -----------


                 3.1         Amended and Restated Charter of Commercial  Assets,
                             Inc. (the  "Registrant"),  (incorporated  herein by
                             reference to Exhibit 3.1 to Amendment  No. 1 to the
                             Registrant's  Registration Statement on Form 10 (as
                             amended,   the  "Form   10")  of  the   Registrant,
                             Commission  File No.  1-22262,  filed on August 31,
                             1993).

                 3.2         By-laws of the Registrant,  (incorporated herein by
                             reference to Exhibit 3.2 to Amendment  No. 1 to the
                             Form  10 of the  Registrant,  Commission  File  No.
                             1-22262, filed on August 31, 1993).

                 3.3         Amendment to the By-laws of the Registrant dated as
                             of  January  14,  1997   (incorporated   herein  by
                             reference to Exhibit 3.3 to the Registrant's Annual
                             Report on Form 10-K for the year ended December 31,
                             1996,  Commission File No. 1-22262,  filed on March
                             24, 1997).

                 4.1         Form of  certificate  representing  common stock of
                             the Registrant (incorporated herein by reference to
                             Exhibit  4.2 to the Form 10-Q for the period  ended
                             March 31, 1994, of the Registrant,  Commission File
                             No. 1-22262, filed on May 16, 1994).

                 4.2         Automatic  Dividend  Reinvestment  Plan relating to
                             the common  stock of the  Registrant  (incorporated
                             herein by reference to Exhibit 4.2 to Amendment No.
                             1 to the Form 10 of the Registrant, Commission File
                             No. 1-22262, filed on August 31, 1993).

                 10.1        Contribution  Agreement,  dated  as of  August  20,
                             1993,  between the Registrant  and Asset  Investors
                             (incorporated  herein by  reference to Exhibit 10.1
                             to   Amendment   No.  1  to  the  Form  10  of  the
                             Registrant,  Commission File No. 1-22262,  filed on
                             August 31, 1993).

                 10.2        Registration  Rights Agreement,  dated as of August
                             20,  1993,   between  the   Registrant   and  Asset
                             Investors  (incorporated  herein  by  reference  to
                             Exhibit 10.2 to  Amendment  No. 2 to the Form 10 of
                             the Registrant,  Commission File No. 1-22262, filed
                             on September 15, 1993).

                 10.3*       Management Agreement,  dated as of January 1, 1995,
                             between  the   Registrant   and   Financial   Asset
                             Management  Corporation   (incorporated  herein  by
                             reference  to Exhibit  10.3(b) to the  Registrant's
                             Quarterly  Report on Form 10Q,  Commission filed on
                             May 12, 1995).

                 10.3(a)*    Amendment to the Management  Agreement  dated as of
                             January  1,  1996   between  the   Registrant   and
                             Financial     Asset     Management      Corporation
                             (incorporated   herein  by   reference  to  Exhibit
                             10.3(a)  to the  Registrant's  Quarterly  Report on
                             Form 10-Q for the  period  ended  March  31,  1996,
                             Commission  File  No.  1-22262,  filed  on May  15,
                             1996).

                                     - 12 -
<PAGE>

                 10.3(b)*    Assignment of the Management  Agreement dated as of
                             April 1, 1996 between  Financial  Asset  Management
                             Corporation  and  Financial  Asset  Management  LLC
                             (incorporated   herein  by   reference  to  Exhibit
                             10.3(b)  to the  Registrant's  Quarterly  Report on
                             Form 10-Q,  Commission File No.  1-22262,  filed on
                             May 15, 1996).

                 10.3(c)*    Amendment to the Management  Agreement  dated as of
                             January  1,  1997,   between  the   Registrant  and
                             Financial Asset Management LLC (incorporated herein
                             by reference to Exhibit 10.3(c) to the Registrant's
                             Annual  Report  on Form  10-K  for the  year  ended
                             December 31,  1996,  Commission  File No.  1-22262,
                             filed on March 24, 1997).

                 10.4*       Commercial  Assets,  Inc.  1993 Stock  Option  Plan
                             (incorporated  herein by  reference to Exhibit 10.4
                             to   Amendment   No.  2  to  the  Form  10  of  the
                             Registrant,  Commission File No. 1-22262,  filed on
                             September 15, 1993).

                 10.4(a)*    First  Amendment to  Commercial  Assets,  Inc. 1993
                             Stock Option Plan (incorporated herein by reference
                             to Exhibit  10.4(a) to the  Registrant's  Quarterly
                             Report on Form 10-Q for the  period  ended June 30,
                             1996, Commission File No. 1-22262,  filed on August
                             13, 1996).

                 10.4(b)*    Second  Amendment to Commercial  Assets,  Inc. 1993
                             Stock Option Plan (incorporated herein by reference
                             to Exhibit  10.4(b) to the  Registrant's  Quarterly
                             Report on Form 10-Q for the  period  ended June 30,
                             1997, Commission File No. 1-22262,  filed on August
                             7, 1997).

                 10.5*       Form  of   Non-Officer   Directors   Stock   Option
                             Agreement  (incorporated  herein  by  reference  to
                             Exhibit 99.2 to the Registration  Statement on Form
                             S-8,  Registration No. 33-7467B,  filed on February
                             1, 1994).

                 10.6*       Form   of   Officers    Stock   Option    Agreement
                             (incorporated  herein by  reference to Exhibit 99.3
                             to  the   Registration   Statement   on  Form  S-8,
                             Registration  No.  33-7467B,  filed on  February 1,
                             1994).

                 10.7*       Form  of  Indemnification   Agreement  between  the
                             Registrant  and  each  Director  of the  Registrant
                             (incorporated  herein by  reference to Exhibit 10.5
                             to   Amendment   No.  1  to  the  Form  10  of  the
                             Registrant,  Commission File No. 1-22262,  filed on
                             August 31, 1993).

                 10.8        Loan and Security  Agreement,  dated as of November
                             29, 1994,  between the Registrant  and  PaineWebber
                             Real Estate Securities,  Inc.  (incorporated herein
                             by reference  to Exhibit  10.8 to the  Registrant's
                             Annual  Report on Form  10-K,  Commission  File No.
                             1-22262, filed on March 29, 1995).

                 10.8(a)     Amendment to the Loan and Security Agreement, dated
                             as of August 28, 1995,  between the  Registrant and
                             PaineWebber    Real   Estate    Securities,    Inc.
                             (incorporated   herein  by   reference  to  exhibit
                             10.8(a) to the  Registrant's  Annual Report on Form
                             10-K,  commission File No. 1-22262,  filed on March
                             28, 1996).

                                     - 13 -
<PAGE>

                 10.8(b)     Amendment to the Loan and Security Agreement, dated
                             as of October 25, 1996,  between the Registrant and
                             PaineWebber    Real   Estate    Securities,    Inc.
                             (incorporated herein by reference to Exhibit 108(b)
                             to the Registrant's  Annual Report on Form 10-K for
                             the year ended December 31, 1996,  Commission  File
                             No. 1-22262, filed on March 24, 1997).

                 10.9        Trust  Agreement,  dated as of  November  3,  1997,
                             between CAX DTR Securitization Corp. and Wilmington
                             Trust Company  (incorporated herein by reference to
                             Exhibit 10.9 to the Registrant's  Current Report on
                             Form 8-K dated  November 3, 1997,  Commission  File
                             No. 1-22262, filed on November 14, 1997).

                 10.9(a)     Note  Purchase  Agreement,  dated as of November 3,
                             1997, among Structured  Mortgage Trust 1997-2,  CAX
                             DTR    Securitization    Corp.,   and   PaineWebber
                             Incorporated   Company   (incorporated   herein  by
                             reference  to Exhibit  10.9(a) to the  Registrant's
                             Current  Report on Form 8-K dated November 3, 1997,
                             Commission File No. 1-22262,  filed on November 14,
                             1997).

                 10.9(b)     Trust Indenture and Security Agreement, dated as of
                             November 3, 1997, between Structured Mortgage Trust
                             1997-2 and  LaSalle  National  Bank,  as  Indenture
                             Trustee Company  (incorporated  herein by reference
                             to  Exhibit  10.9(b)  to the  Registrant's  Current
                             Report  on  Form  8-K  dated   November   3,  1997,
                             Commission File No. 1-22262,  filed on November 14,
                             1997).

                 10.9(c)     Contribution  Agreement,  dated as of  November  3,
                             1997, between  Commercial Assets,  Inc. and CAX DTR
                             Securitization  Corp. Company  (incorporated herein
                             by reference to Exhibit 10.9(c) to the Registrant's
                             Current  Report on Form 8-K dated November 3, 1997,
                             Commission File No. 1-22262,  filed on November 14,
                             1997).

                 10.9(d)     Securitization  Cooperation Agreement,  dated as of
                             November  3,  1997,  among  CAX DTR  Securitization
                             Corp., Commercial Assets, Inc., Structured Mortgage
                             Trust 1997-2, and PaineWebber  Incorporated Company
                             (incorporated   herein  by   reference  to  Exhibit
                             10.9(d) to the Registrant's  Current Report on Form
                             8-K dated  November  3, 1997,  Commission  File No.
                             1-22262, filed on November 14, 1997).

                 10.9(e)     Side  Letter  Agreement,  dated as of  November  3,
                             1997,   between   Commercial   Assets,   Inc.   and
                             PaineWebber   Incorporated  Company   (incorporated
                             herein  by  reference  to  Exhibit  10.9(e)  to the
                             Registrant's  Current  Report  on  Form  8-K  dated
                             November  3,  1997,  Commission  File No.  1-22262,
                             filed on November 14, 1997).

                 23          Independent Auditors' Consent - Ernst & Young LLP.

                 27          Financial Data Schedule.

*  Management contract or compensatory plan or arrangement.




                                     - 14 -
<PAGE>




                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) 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.
                                               COMMERCIAL ASSETS, INC.
                                                   (Registrant)

Date: March 30, 1998                             By  /s/Terry Considine
                                                   --------------------
                                                     Terry Considine
                                                     Co-Chief Executive Officer

Date: March 30, 1998                             By  /s/Thomas L. Rhodes
                                                   ---------------------
                                                     Thomas L. Rhodes
                                                     Co-Chief Executive Officer

Date: March 30, 1998                             By  /s/David M. Becker
                                                   --------------------
                                                     David M. Becker
                                                     Chief Financial Officer

Date: March 30, 1998                             By  /s/Diane Schott Armstrong
                                                   -----------------------
                                                     Diane Schott Armstrong
                                                     Controller

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the dates indicated.

                 Name                       Capacity                   Date

/s/Terry Considine                          Director              March 30, 1998
-----------------------------------
Terry Considine

/s/Thomas L. Rhodes                         Director              March 30, 1998
-----------------------------------
Thomas L. Rhodes

                                            Director              March 30, 1998
-----------------------------------
Donald L. Kortz

/s/Raymond T. Baker                         Director              March 30, 1998
-----------------------------------
Raymond T. Baker

/s/Robert J. Malone                         Director              March 30, 1998
-----------------------------------
Robert J. Malone

/s/Bruce D. Benson                          Director              March 30, 1998
-----------------------------------
Bruce D. Benson

                                            Director              March 30, 1998
-----------------------------------
Thomas C. Fries


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