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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)
            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
   X        SECURITIES EXCHANGE ACT OF 1934
            For the fiscal year ended December 31, 1999

                                       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 1-2262

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

                Delaware                                 84-1501789
    (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.  [   ]

         As  of  March  17  2000,   10,368,029   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 $36,000,000.

                       Documents Incorporated by Reference
         Portions  of the  proxy  statement  for the  Registrant's  2000  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, 1999

Item                                                                        Page
                                     PART I
1.   Business................................................................  1
          Company Background.................................................  1
          Proposed Merger with Asset Investors...............................  2
          Industry Background................................................  2
          Financial Information about Industry Segments......................  3
          Growth and Operating Strategies....................................  3
          Manager............................................................  5
          Competition........................................................  6
          Taxation of the Company............................................  6
          Regulations........................................................  7
          Insurance..........................................................  8
          Capital Resources..................................................  8
          Restrictions on and Redemptions of Common Stock....................  8
          Employees..........................................................  9

2.   Properties..............................................................  9

3.   Legal Proceedings....................................................... 12

4.   Submission of Matters to a Vote of Security Holders..................... 13

                                     PART II

5.   Market for Registrant's Common Equity and Related Stockholder Matters... 13

6.   Selected Financial Data................................................. 14

7.   Management's Discussion and Analysis of Financial Condition and
       Results of Operations................................................. 15
          Results of Operations.............................................. 15
          Liquidity and Capital Resources.................................... 18
          Funds From Operations.............................................. 18
          Year 2000 Compliance............................................... 19

7a.  Quantitative and Qualitative Disclosures About Market Risk.............. 20

8.   Financial Statements and Supplementary Data............................. 21

9.   Changes in and Disagreements with Accountants on Accounting and
       Financial Disclosure.................................................. 21

                                    PART III

10.  Directors and Executive Officers of the Registrant...................... 21

11.  Executive Compensation.................................................. 24

12.  Security Ownership of Certain Beneficial Owners and Management.......... 26

13.  Certain Relationships and Related Transactions.......................... 26

                                     PART IV

14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K........ 28




                                       (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,  our Annual Report to Stockholders and our filings with
the Securities Exchange Commission 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,
constitute  "forward-looking  statements"  within  the  meaning  of the  Private
Securities   Litigation   Reform  Act  of  1995.  Such  statements  may  include
projections of our cash flow,  dividends and anticipated  returns on real estate
investments.  Such  forward-looking  statements involve known and unknown risks,
uncertainties  and other factors that may cause our actual results,  performance
or achievements to be materially different from any future results,  performance
or achievements  expressed or implied by the  forward-looking  statements.  Such
factors  include:  general  economic  and  business  conditions;  interest  rate
changes;  financing and refinancing  risks; risks inherent in owning real estate
or  debt  secured  by  real  estate;   future  development  rate  of  homesites;
competition;  the  availability  of real estate  assets at prices which meet our
investment  criteria;  our  ability to reduce  expense  levels,  implement  rent
increases, use leverage and other risks set forth in our SEC filings.

In this  report,  the  words  "the  Company,"  "we,"  "our"  and  "us"  refer to
Commercial Assets, Inc., a Delaware corporation, and our predecessor, Commercial
Assets, Inc., a Maryland corporation and, where appropriate, our subsidiaries.

Item 1.  Business.

Company Background

We have been a Delaware  corporation since June 10, 1999. Prior to this, we were
a Maryland  corporation  that was formed in August  1993.  We have elected to be
treated  for  United  States  federal  income  tax  purposes  as a  real  estate
investment  trust or  "REIT".  We are  engaged  in the  ownership,  acquisition,
development and expansion of manufactured home communities. Initially, we were a
wholly-owned   subsidiary  of  Asset  Investors  Corporation.   Asset  Investors
contributed  $75  million to our  initial  capital  and in October  1993,  Asset
Investors distributed 70% of our common stock to Asset Investors'  stockholders.
Asset Investors  currently owns 27% of our outstanding common stock and provides
management services to us. Our shares of common stock are listed on the American
Stock Exchange, Inc. ("AMEX") under the symbol "CAX."

Prior to 1998,  we owned  subordinate  classes  of  Commercial  Mortgage  Backed
Securities  ("CMBS bonds").  CMBS bonds generally are debt  instruments that 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.  Our  subordinate  tranches of
CMBS bonds included "first-loss" tranches, which bore the most risk in the event
of a default on the  underlying  mortgages and provided  credit  support for the
more senior  tranches.  In 1997,  we decided to  redeploy  our assets into other
types of real estate  investments  in order to reduce the risk of our portfolio.
We  resecuritized  our CMBS bonds in November 1997 from which we received  $77.7
million in cash and a small residual interest in two CMBS bonds.  During most of
1998,  we  invested  our funds in  short-term  government  securities  and other
short-term investments pending our decision as to the type of real estate assets
in which we would invest.

                                     - 1 -
<PAGE>

In the third  quarter of 1998, we decided to acquire  interests in  manufactured
home  communities.  As of December 31, 1999, we held interests as owner,  ground
lessor or mortgage lender (including participating mortgages) in 12 manufactured
home communities with a total of 1,840 developed  homesites (sites with homes in
place)  and  1,370  undeveloped  homesites.  We  expect  to  continue  acquiring
interests in manufactured home communities during 2000.

Our principal executive offices are located at 3410 S. Galena Street, Suite 210,
Denver, Colorado 80231 and our telephone number is (303) 614-9410.

Proposed Merger with Asset Investors

In August 1999,  we agreed to merge with Asset  Investors.  Asset  Investors has
agreed to issue  0.4075  shares of its common stock for each share of our common
stock.  Alternatively,  our stockholders may elect to receive $5.75 per share in
cash for up to 3,549,868 shares of our common stock with any remaining shares of
our common stock receiving 0.4075 shares of Asset Investors common stock.  Asset
Investors  and the officers  and  directors of Asset  Investors  and  Commercial
Assets  have agreed to elect to receive  Asset  Investors  common  stock for all
shares of our common stock that they own. The merger  requires the approval by a
majority  of  the  outstanding  shares  of  Asset  Investors  common  stock  and
two-thirds of the outstanding  shares of our common stock.  Asset Investors owns
27% of our  common  stock and has  agreed to vote  these  shares in favor of the
merger.  The stockholders  meetings for both companies to vote on the merger are
expected to occur during the second quarter of 2000.

Industry Background

A manufactured home community is a residential subdivision designed and improved
with sites for the placement of manufactured homes and related  improvements and
amenities.  Manufactured  homes  are  detached,  single-family  homes  which are
produced  off-site by manufacturers and installed on sites within the community.
Manufactured  homes are  available  in a variety  of  designs  and floor  plans,
offering many amenities and custom options.

Modern   manufactured  home  communities  are  similar  to  typical  residential
subdivisions containing centralized entrances,  paved streets, curbs and gutters
and  parkways.  The  communities  frequently  provide  a  clubhouse  for  social
activities and recreation and other  amenities,  which may include golf courses,
swimming  pools,  shuffleboard  courts and  laundry  facilities.  Utilities  are
provided by or arranged for by the owner of the community. Community lifestyles,
primarily  promoted  by  resident  managers,  include a wide  variety  of social
activities  that promote a sense of  neighborhood.  The  communities  provide an
attractive and affordable  housing  alternative for retirees,  empty nesters and
start-up or single-parent families.  Manufactured home communities are primarily
characterized  as "all  age"  communities  and  "adult"  communities.  In  adult
communities,  as least 80% of the tenants  must be at least 55 years old, and in
all age communities there is no age restriction on tenants.

The owner of a home in our communities leases from us the site on which the home
is located. Typically, the leases are on a month-to-month or year-to-year basis,
renewable upon the consent of both parties or, in some instances, as provided by
statute.  In some  circumstances,  we offer a  four-year  lease,  as required by
statute,  and a 99-year  lease to  tenants in order to enable the tenant to have
some of the  benefits  an  owner of real  property  enjoys,  including  creditor
protection  laws in some  states.  These leases can be  cancelled,  depending on
state law, for non-payment of rent, violation of community rules and regulations
or other  specified  defaults.  Generally,  rental rate increases are made on an
annual basis. The size of these rental rate increases  depends upon the policies
that are in  place at each  community.  Rental  increases  may be based on fixed
dollar  amounts,  percentage  amounts,  inflation  indexes,  or they may  depend
entirely on local market  conditions.  We own interests in the underlying  land,
utility connections,  streets,  lighting,  driveways,  common area amenities and


                                     - 2 -
<PAGE>

other capital  improvements  and are  responsible  for  enforcement of community
guidelines  and  maintenance.   Each  homeowner  within  the  manufactured  home
communities  is  responsible  for the  maintenance of his or her home and leased
site, including lawn care in some communities.

The ownership of manufactured home communities, once fully occupied, tends to be
a stable,  predictable asset class. The cost and effort involved in relocating a
home to another  manufactured home community  generally  encourages the owner of
the home to resell it within the community.

Financial Information about Industry Segments

We operate in one industry segment, the ownership and management of real estate.
See the  consolidated  financial  statements  including their notes in Item 8 of
this report on Form 10-K.

Growth and Operating Strategies

We measure our economic  profitability  based on Funds From Operations  ("FFO"),
less an  annual  capital  replacement  reserve  of at  least  $50 per  developed
homesite.  This reserve is  management's  estimate  based on its  experience  in
owning,  operating and managing  manufactured home communities.  We believe that
the  presentation  of FFO, when considered with the financial data determined in
accordance  with generally  accepted  accounting  principles,  provides a useful
measure of our performance. However, FFO does not represent cash flow and is not
necessarily  indicative of cash flow or liquidity available to us, nor should it
be  considered  as an  alternative  to net income as an  indicator  of operating
performance.  The Board of Governors of the National  Association of Real Estate
Investment  Trusts  (also  known as NAREIT)  defines  FFO as net income  (loss),
computed in accordance with generally accepted accounting principles,  excluding
gains and losses from debt restructuring and sales of property, plus real estate
related  depreciation  and  amortization  (excluding  amortization  of financing
costs),  and  after  adjustments  for  unconsolidated   partnerships  and  joint
ventures.  We calculate FFO  beginning  with the NAREIT  definition  and include
adjustments for:

o        property  acquisition  fees paid to Asset Investors which were expensed
         under generally accepted accounting  principles because Asset Investors
         is an affiliate; and
o        nonrecurring  costs  related to the  abandonment  of  potential  marina
         investments.

We believe that the  presentation  of FFO provides  investors with  measurements
which help facilitate an understanding of our ability to make required  dividend
payments,  capital  expenditures  and principal  payments on our debt. Since FFO
excludes  unusual and  nonrecurring  expenses as well as depreciation  and other
real estate related expenses,  FFO may be materially  different from net income.
Therefore,  FFO should not be considered as an  alternative to net income or net
cash flows from operating activities, as calculated in accordance with generally
accepted accounting principles, as an indication of our operating performance or
liquidity.

FFO is not  necessarily  indicative  of cash  available  to fund our cash needs,
including  our  ability  to  make  distributions.  We use FFO in  measuring  our
operating  performance  because  we  believe  that the  items  that  result in a
difference  between  FFO and net  income do not  impact  the  ongoing  operating
performance  of a real estate  company.  Also, we believe that other real estate
companies,  analysts and investors  utilize FFO in analyzing the results of real
estate companies.  Our basis of computing FFO is not necessarily comparable with
that of other REITs.

                                     - 3 -
<PAGE>

Our primary objective is to maximize  stockholder value by increasing the amount
and  predictability  of our FFO on a per share basis, less a reserve for capital
replacements. We seek to achieve this objective primarily by:

o        improving  net  operating   income  from  our  existing   portfolio  of
         manufactured home communities; and
o        acquiring additional  communities at values that are accretive on a per
         share basis.

Management  has  adopted  specific  policies  to  accomplish  our  objective  of
increasing the amount and predictability of our FFO on a per share basis, less a
reserve for capital replacements. These policies include:

o        selectively acquiring manufactured home communities that have potential
         long-term  appreciation  of value  through,  among other  things,  rent
         increases, expense efficiencies and in-part homesite development;
o        developing and maintaining  resident  satisfaction and a reputation for
         quality  communities  through  maintenance of the physical condition of
         our  communities  and providing  activities  that improve the community
         lifestyle;
o        improving  the  profitability  of our  communities  through  aggressive
         management of occupancy,  community  development  and  maintenance  and
         expense controls;
o        using debt leverage to increase our financial returns;
o        reducing  our  exposure  to interest  rate  fluctuations  by  utilizing
         long-term,  fixed-rate,  fully-amortizing  debt instead of higher cost,
         short term debt;
o        ensuring the continued  maintenance  of our  communities by providing a
         minimum $50 per homesite per year for capital replacements;
o        reducing our exposure to downturns in regional  real estate  markets by
         diversifying our portfolio of communities  since  substantially  all of
         our properties are in Florida and Arizona; and
o        recruiting and retaining capable community management personnel.

Future Acquisitions

In 1998, when we decided to enter the manufactured home community  business,  we
began to  implement  a business  plan which  called  for the  investment  of our
capital in the acquisition of manufactured home communities.  We have focused on
identifying  acquisition  opportunities that we believe provide returns that are
accretive  to  our  stockholders.  During  1998,  we  invested  $23  million  in
manufactured home communities (including participating mortgages and real estate
joint  ventures).  We invested an additional  $47 million in  manufactured  home
communities  during 1999.  We plan on continuing  to acquire  manufactured  home
communities during 2000.

Our acquisition of interests in manufactured  home communities takes many forms.
In many cases we acquire  fee title to the  community.  When a  community  has a
significant  number of  unleased  homesites,  we seek a stable  return  from the
community  during the  development  and  lease-up  phase  while also  seeking to
participate in future increased  earnings after development is completed and the
sites are leased. We seek to accomplish this goal by making loans to development
companies in return for  participating  mortgages that are  non-recourse  to the
borrowers and secured by the property.  In general, our participating  mortgages
earn  interest at fixed rates and, in  addition,  participate  in the profits or
revenues from the community.  This profit participation right generally entitles
us to 50% of the net  income and cash flow  generated  by the  community.  As an
alternative,  we sometimes enter into ground leases with  development  companies
having similar terms to our participating mortgages.

                                     - 4 -
<PAGE>

We believe that acquisition  opportunities for manufactured home communities are
attractive at this time because of:

o        the increasing  acceptability of and demand for manufactured  homes, as
         shown by the growth in the number of individuals living in manufactured
         homes; and
o        the continued  constraints  on  development  of new  manufactured  home
         communities.

We are actively  seeking to acquire  additional  communities  and are  currently
engaged in various stages of negotiations  relating to the possible  acquisition
of  a  number  of  communities.  The  acquisition  of  interests  in  additional
communities could also result in our becoming increasingly leveraged as we incur
debt in connection with these transactions.

From August  1998  through  December  1999,  we invested  $70 million to acquire
interests in 12 manufactured home communities (including participating mortgages
and real  estate  joint  ventures)  that are  located in  Arizona,  Florida  and
California.  These communities have a total of 1,840 developed  homesites (sites
with homes in place) and 1,370 undeveloped homesites.

When evaluating potential acquisitions, we consider such factors as:

o        the location and type of property;
o        the value of the homes located on the leased land;
o        the  improvements,  such as golf  courses  and  swimming  pools  at the
         property;
o        the current and projected  cash flow of the property and our ability to
         increase cash flow;
o        the potential for capital appreciation of the property;
o        the terms of tenant leases, including the potential for rent increases;
o        the tax and  regulatory  environment  of the  community  in  which  the
         property is located;
o        the potential for expansion of the physical  layout of the property and
         the number of sites;
o        the occupancy and demand by residents for  properties of a similar type
         in the vicinity;
o        the credit of the residents in a community;
o        the prospects for liquidity  through sale,  financing or refinancing of
         the property;
o        the competition from existing manufactured home communities;
o        the potential for the construction of new communities in the area; and
o        the replacement cost of the property.

Expansion of Existing Communities

We will seek to  increase  the number of  homesites  and the amount of  earnings
generated from our existing  portfolio of manufactured home communities  through
marketing campaigns aimed at increasing  occupancy.  We will also seek expansion
through future  acquisitions  and expanding the number of sites  available to be
leased to residents if justified  by local market  conditions  and  permitted by
zoning and other  applicable laws. As of December 31, 1999, we held interests in
six communities with 1,370 undeveloped homesites.

Manager

Our daily  operations  are  performed  by a  manager  pursuant  to a  management
agreement  currently in effect through December 31, 2000. The manager identifies
and performs due diligence on potential  manufactured home community investments
for us. Since November 1997,  Asset Investors has been our manager.  In addition
to being our manager and a principal  stockholder,  Asset  Investors  separately
owns, acquires,  develops and manages  manufactured home communities,  including
providing property management services on our communities.  Consequently, we and


                                     - 5 -
<PAGE>

Asset Investors are involved in the same industry.  The two companies  agreed we
shall invest at least $50 million in manufactured home communities  before Asset
Investors makes any additional  acquisitions of manufactured  home  communities.
Thereafter,  the two companies  will make a  determination  with respect to each
acquisition  on a  case-by-case  basis.  At December 31, 1999,  we have invested
approximately   $70  million  in  manufactured   home   communities   (including
participating  mortgages  and real estate joint  ventures).  Therefore,  the two
companies are determining acquisitions on a case-by-case basis.

The management  agreement was approved by our  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 our regular  business,  and in return,  the manager is paid
the following fees:

o        Acquisition Fees equal to 0.5% of the cost of each real  estate-related
         asset acquired by us;
o        Base  Fees  equal  to 1% per  year of the net  book  value  of our real
         estate-related assets;
o        Incentive  Fees  equal to 20% of the  amount by which our FFO,  less an
         annual  capital  replacement  reserve  of at  least  $50 per  developed
         homesite,  exceeds (a) our average net worth, multiplied by (b) 1% over
         the ten year United States Treasury rate.

During 1999, we paid $565,000 in Base Fees and $205,000 in  Acquisition  Fees to
Asset  Investors.  We paid $87,000 in Base Fees and $124,000 in Acquisition Fees
during 1998. We did not pay any Incentive  Fees in 1999 or 1998.  For 1999,  the
management  agreement  relating to the Incentive Fee was amended to provide that
such fee was based on our FFO, less an annual capital  replacement reserve of at
least $50 per  developed  homesite,  instead  of REIT  income as was the case in
1998.  The change was made  because we believe  this is a better  measure of our
economic profitability and would, therefore, be a more appropriate incentive for
Asset  Investors  even if  increased  management  fees  result.  The  management
agreement  has been  extended to December  31, 2000 with the same terms as those
used in 1999. The  management  agreement will terminate if our merger with Asset
Investors occurs.

We  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.

Competition

There are numerous housing  alternatives that compete with our manufactured home
communities in attracting  residents.  Our properties compete for residents with
other  manufactured  home communities,  multifamily  rental  apartments,  single
family homes and  condominiums.  The number of competitors in a particular  area
could have a material  effect on our ability to attract and  maintain  residents
and on the rents we are able to charge for homesites.  In acquiring  assets,  we
compete  with  other  REITs,  pension  funds,  insurance  companies,  and  other
investors,  many of  which  have  greater  financial  resources  than we do.  In
addition,  Asset  Investors  is also  involved in  acquiring  manufactured  home
communities.

Taxation of the Company

We have elected to be taxed as a REIT under the  Internal  Revenue Code of 1986,
as amended (the  "Code"),  and we intend to operate in a manner which will allow
us to avail ourselves of the beneficial tax provisions  applicable to REITs. Our
qualification  as a REIT  depends on our  ability to meet  various  requirements
imposed  by the  Code,  such as  specifications  relating  to  actual  operating
results, distribution levels and diversity of stock ownership.

                                     - 6 -
<PAGE>

If we  qualify  for  taxation  as a REIT,  we will  generally  not be subject to
Federal corporate income tax on our 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 investment in
a  corporation.  If we fail to qualify as a REIT in any taxable year, we will be
subject to Federal income tax at regular  corporate  rates on our taxable income
(including  any  applicable  alternative  minimum tax).  Even if we qualify as a
REIT, we may be subject to certain state and local income and other taxes and to
Federal income and excise taxes on our undistributed income.

If in any taxable year we fail to qualify as a REIT and as a result, incur a tax
liability,  we might need to borrow funds or liquidate  certain  investments  in
order to pay the applicable tax. In this situation, we would not be compelled to
make distributions as required for entities claiming REIT status under the Code.
Moreover,  unless  we  would be  entitled  to  relief  under  certain  statutory
provisions,  we  would be  disqualified  from  treatment  as a REIT for the four
taxable years following the year during which qualification is lost. Although we
currently  intend 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 us to fail to qualify as a REIT,  or may cause the Board of  Directors  to
revoke the REIT election.

We and our  stockholders  may be subject to state or local  taxation  in various
state  or local  jurisdictions,  including  those  in which we or they  transact
business or reside. The state and local tax treatment  conferred upon us and our
stockholders may not conform to the Federal income tax treatment.

Regulations

General

Manufactured home communities,  like other housing alternatives,  are subject to
various laws,  ordinances and  regulations,  including  regulations  relating to
recreational  facilities  such as swimming  pools,  clubhouses  and other common
areas.  We believe that we have obtained the necessary  permits and approvals to
operate each of our properties in conformity with these laws.

Americans with Disabilities Act

Our current  properties and any newly acquired  communities must comply with the
Americans with  Disabilities  Act (the "ADA").  The ADA generally  requires that
public  facilities  such as clubhouses,  swimming pools and recreation  areas be
made accessible to people with disabilities. As we previously mentioned, many of
our  communities  have  public  facilities.  In  order  to  comply  with the ADA
requirements,  we have made  improvements  at our communities in order to remove
barriers to access.  If we should ever fail to comply with ADA  regulations,  we
could be fined or we could be forced to pay  damages  to private  litigants.  We
have made those  changes  required by the ADA which we believe are  appropriate,
and we believe that our properties are in compliance  with the  requirements  of
the ADA. We believe  that any further  costs  related to ADA  compliance  can be
covered by cash flow from the individual properties without causing any material
adverse  effect.  If  ongoing  changes  involve  a greater  expenditure  than we
currently anticipate, or if the changes must be made on a more accelerated basis
than  we  anticipate,  our  ability  to make  expected  distributions  could  be
adversely affected.

Rent Control Legislation

State and local  laws,  principally  in  Florida,  might  limit our  ability  to
increase  rents on some of our  properties,  and  thereby,  limit our ability to
recover increases in operating  expenses and the costs of capital  improvements.
Enactment  of  rent  control  laws  has  been  considered  from  time to time in
jurisdictions in which we operate. We presently expect to maintain  manufactured
home  communities  and may purchase  additional  properties  in markets that are


                                     - 7 -
<PAGE>

either subject to rent control laws or in which such legislation may be enacted.

Insurance

We believe that our properties are covered by adequate fire,  flood and property
insurance  policies.  It is our  policy to  purchase  insurance  policies  which
contain commercially  reasonable deductibles and limits from reputable insurers.
We also believe that we have obtained adequate title insurance policies insuring
fee title to properties we have acquired.

Capital Resources

We have used our available cash balances, our FFO and our short-term investments
to provide working  capital to support our  operations,  to pay dividends and to
acquire assets.  Future  acquisitions  will be financed by the most  appropriate
sources  of  capital,  perhaps  including  our  available  cash  and  short-term
investment  balances;  undistributed FFO; long-term,  secured debt;  short-term,
secured debt; and the issuance of additional equity securities. This flexibility
allows us to offer more choices of "acquisition  currency" to potential  sellers
of manufactured home communities,  including the ability to defer some or all of
the tax  consequences  of a sale.  We believe  that this  flexibility  may offer
sellers an incentive to enter into transactions with us on favorable terms.

Without  further  stockholder  approval,  we  are  authorized  to  issue  up  to
75,000,000  shares of common stock. As of March 17, 2000,  10,368,029  shares of
common stock were  outstanding.  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. We are 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.  Depending  on the terms set by the
Board of  Directors,  the  authorization  and issuance of preferred  stock could
adversely  affect existing  stockholders.  The effects on existing  stockholders
could include, among other things, dilution of ownership interests, restrictions
on dividends to be issued on common  stock and  preferences  to holders of a new
class  of  stock in the  distribution  of  assets  upon  liquidation.  We do not
presently  intend to issue preferred stock during 1999. As of March 17, 2000, we
have not authorized or issued additional classes of stock.

Restrictions on and Redemptions of Common Stock

To  qualify  to be  taxed  as a REIT,  we must  comply  with  certain  ownership
limitations  with  respect to shares of our common  stock.  Our  Certificate  of
Incorporation provides that shares of common stock generally may not be owned by
a person if the  ownership  of shares by such  person  would  exceed 9.8% of our
outstanding  shares or would result in the  imposition of a tax on us. The Board
of  Directors  has waived  this  restriction  with  respect to Asset  Investors'
ownership of 27% of our common stock.

Our Certificate of Incorporation empowers the Board of Directors, at its option,
to redeem  shares of common  stock or to restrict  transfers of shares to comply
with the requirements  described above. The redemption price we would pay if the
Board of  Directors  exercises  this option to redeem  shares  would be the fair
market value of the common stock as  reflected in the latest  quotations  on the
American Stock Exchange.  Our Certificate of Incorporation also provides that if
anyone acquires shares of our common stock in a manner or in a volume that would
result in our  disqualification  as a REIT under the Code,  that  acquisition is
deemed void to the fullest extent  permitted under the law and the acquirer will
be  deemed  never to have  had an  interest  in the  shares.  Furthermore,  if a


                                     - 8 -
<PAGE>

transaction  is determined to be void or invalid,  the acquirer may be deemed to
have acted as agent on our behalf in acquiring  such shares and may be deemed to
hold such shares on our behalf.

Each stockholder is required, upon demand, to disclose to the Board of Directors
in writing any information with respect to the direct and indirect  ownership of
shares of our common stock as the Board of Directors  deems necessary or prudent
in order to protect our tax status.

Employees

Pursuant  to the  management  agreement,  the  manager  provides  all  personnel
necessary to conduct our regular business.  Consequently,  we have no employees.
Certain employees of Assets Investors, the manager, serve as our officers.

Item 2.  Properties.

The  manufactured  home  communities  in which we have  interests  are primarily
located in Arizona and Florida. We hold interests in these communities as owner,
ground  lessor or  mortgage  lender  (including  participating  mortgages).  The
following  table sets forth the states in which the communities in which we held
an interest on December 31, 1999 are located:

<TABLE>
<CAPTION>

                                                                         Number of Sites
                                                              --------------------------------------
                                         Number of
                                        Communities             Developed             Undeveloped
                                      -----------------       ---------------       ----------------
<S>           <C>                          <C>                     <C>                   <C>
              Arizona                         7                       982                   310
              Florida                         4                       854                 1,031
              California                      1                        --                    30
                                            ---                     -----                ------
                 Total                       12                     1,836                 1,371
                                            ===                     =====                ======


</TABLE>



                                     - 9 -
<PAGE>

The following  table sets forth  information  regarding each  manufactured  home
community in which we own an interest:

<TABLE>
<CAPTION>

                                                                         Average
                                                                         Monthly
                                              Developed                    Rent        Undeveloped        Year
   Community                Location          Homesites     Occupancy     per Site      Homesites      Developed
--------------------------------------------------------------------------------------------------------------------
Owned Communities
<S>                 <C>                        <C>            <C>          <C>             <C>            <C>
  Casa Encanta      Mesa, AZ                      106          97%          $345             -- (1)       1970
  Cypress Greens    Lakeland, FL                   88          98            188              19          1986
  Desert Harbor     Apache Junction, AZ           103         100            203             104          1997
  Fiesta Village    Mesa, AZ                      170          94            274             206 (1)      1962
  La Casa Blanca    Apache Junction, AZ           198         100            150              --          1993
  Lakeshore Villas  Tampa, FL                     290          96            323              --          1972
  Rancho Mirage     Apache Junction, AZ           312         100            174              --          1994
  Riverside         Ruskin, FL                    223          99            397             767          1984
  Royal Palm        Haines City, FL               233          98            216             217          1971
  Southern Palms    Mesa, AZ                       36         100            208             -- (1)       1961
                                            ----------------------------------------------------------
      Subtotal                                  1,759          98            252           1,313
                                            ----------------------------------------------------------

Participating Mortgage and Joint
    Venture Communities
  Savanna Club (2)  Port St. Lucie, FL             20         100            154              23          1999
  Sun Lake (2)      Grand Island, FL               --          --             --               5          1980
  Cannery Village   Newport Beach, CA              --          --             --              30 (3)      1999
  White Sands       Apache Junction, AZ            57          96            208              --          1984
                                            ----------------------------------------------------------
      Subtotal                                     77          97            194              58
                                            ----------------------------------------------------------
Total Communities                               1,836          98%          $250           1,371
                                            ==========================================================
<FN>

1        We intend to redevelop the Fiesta Village,  Casa Encanta,  and Southern
         Palms  communities  along with  adjoining  vacant  land.  The  combined
         redevelopment will result in the additional 206 spaces.
2        We hold notes  receivable  secured by  individual  homes and  homesites
         within this community.
3        This community is currently being redeveloped.
</FN>
</TABLE>


10% Owned  Properties.  At December 31,  1999,  we owned two  manufactured  home
communities  which each  exceeded 10% of our total assets.  The first  property,
known as  Riverside  Club,  is  located  in the  Tampa,  Florida  region and was
purchased in November 1998. The property has 223 developed  homesites  which are
99% occupied and 767  undeveloped  homesites.  The property  offers  residents a
range of amenities including:

o        a 9-hole golf course,
o        swimming pool,
o        tennis courts,
o        clubhouse, and
o        marina.

The  developed  homesites  are  leased to the owner of the home  located on each
homesite. The leases are annual leases and can be renewed by the tenant provided
that he or she complies with the rules and  regulations of the property and pays
the required rent. At December 31, 1999, the average monthly rent for a homesite
was $397.  We can increase  rent based on either (a) rents charged by comparable


                                     - 10 -
<PAGE>

properties in the surrounding area or (b) increases in our costs associated with
the property. The cost of the property has been allocated as follows:

o        $3,558,000 to land and
o        $7,866,000 to buildings and land improvements.

We depreciate  buildings and land  improvements over 25 years using the straight
line method.  For federal income tax purposes,  we depreciate  buildings over 40
years and land  improvements  over 15 years using the  straight  line method for
both  categories.  At December 31, 1999, our net book value in this property was
$11,080,000  which is  approximately  the same as our basis in the  property for
federal   income  taxes.   Annual  real  estate  taxes  for  this  property  are
approximately  $180,000 at a 2.5%  realty tax rate.  Estimated  realty  taxes on
future improvements are expected to have a similar tax rate.

Effective  November 1998, we leased this property to a third party for 50 years.
The lease provides for an initial annual rent payment of $890,000, increasing by
4% per annum.  As additional  homesites are developed,  the annual lease payment
increases  by an amount  equal to 10% of the costs  incurred in  developing  the
homesites. In addition, we received additional rent equal to 50% of the lessee's
net cash flow from the property  and 50% of any sales  proceeds in excess of our
historical cost of the property and subsequent  improvements.  Effective January
1, 2000, we terminated the lease in exchange for the cancellation of $186,000 of
loans to the lessee.

In September 1999, we borrowed  $5,500,000 in the form of a non-recourse,  fully
amortizing  mortgage  secured  by 221  developed  and 23  undeveloped  homesites
located at this  property.  This  indebtedness  has a 6.7%  interest rate and is
repayable in 240 equal monthly  installments  of principal and interest  through
October 2019. The principal amount of the mortgage  indebtedness payable in 2000
is  $137,000.  The mortgage  indebtedness  may not be prepaid for the first five
years. During years 6-10, the mortgage  indebtedness may be prepaid in full, but
we will be required to pay an amount sufficient to allow the lender to realize a
6.7% return for the remainder of the term of the mortgage  indebtedness based on
the difference  between 6.7% and the then interest rate on a U.S.  Treasury Note
or Bond for a similar period of time. The mortgage  indebtedness  may be prepaid
in full during  years 11-20  provided we pay a prepayment  penalty  based on the
outstanding principal of the mortgage indebtedness as follows:

                                                Prepayment
                                                 Penalty
                     Year(s)                    Percentage
                     -------                    ----------
                     11-12                         5%
                     13                            4%
                     14                            3%
                     15                            2%
                     16-20                         1%

See  financial  statements  included  elsewhere  in this report on Form 10-K for
additional information about our indebtedness.

We intend to further develop this property over the next five to ten years.  The
development is expected to include development of the undeveloped homesites plus
the completion of the golf course into an 18-hole course.  The estimated cost to
fully develop the property is $8 million.  We expect to finance the  development
with our  existing  cash  and  short-term  investments,  proceeds  from  secured
long-term  notes  payable  on our  various  properties  and cash  flow  from our
operations.

                                     - 11 -
<PAGE>

The other  property  which  exceeded  10% of our total assets is known as Rancho
Mirage  and is  located  in the  Phoenix,  Arizona  region.  This  property  was
purchased in May 1999 and has 312 developed homesites which are 100% occupied.
The property offers residents a range of amenities including:

o        a 6-hole pitch-and-putt golf course;
o        swimming pool;
o        tennis courts; and
o        clubhouse.

The  developed  homesites  are  leased to the owner of the home  located on each
homesite. The leases are annual leases and can be renewed by the tenant provided
that he or she complies with the rules and  regulations of the property and pays
the required rent. At December 31, 1999, the average monthly rent for a homesite
was  approximately  $174.  We can  increase  rent  based  on  rents  charged  by
comparable  properties in the surrounding  area.  Effective January 1, 2000, the
average  monthly rent was  increased to $295.  The cost of the property has been
allocated as follows:

o        $930,000 to land and
o        $10,987,000 to buildings and land improvements.

We depreciate  buildings and land  improvements over 25 years using the straight
line method.  For federal income tax purposes,  we depreciate  buildings over 40
years and land  improvements  over 15 years using the  straight  line method for
both  categories.  At December 31, 1999, our net book value in this property was
$11,627,000  which is  approximately  the same as our basis in the  property for
federal   income  taxes.   Annual  real  estate  taxes  for  this  property  are
approximately  $30,000 at a 0.6%  realty  tax rate.  Estimated  realty  taxes on
future improvements are expected to have a similar tax rate. We do not intend to
further develop this property in the future.

Other  Owned  Properties.  At  December  31,  1999,  we owned  eight  additional
manufactured  home  communities  containing  1,224  developed  homesites and 546
undeveloped  homesites.  These  properties  contain,  on average,  153 developed
homesites,  with the largest property containing 290 developed homesites.  These
properties  offer  residents a range of  amenities,  including  swimming  pools,
clubhouses and tennis courts.

At December  31,  1999,  four of these  properties  are  encumbered  by mortgage
indebtedness  totaling  $14,964,000.  These  properties  represent  43.4% of our
developed homesites. The four properties securing our mortgage indebtedness have
a combined net book value of  $24,246,000  and the  indebtedness  has a weighted
average interest rate of 7.5%. The principal amount of our mortgage indebtedness
payable in 2000 is $1,081,000.  See our financial  statements included elsewhere
in this report on Form 10-K at  December  31,  1999 for  additional  information
about our indebtedness.

Item 3.  Legal Proceedings.

In  September  1999,  four of our  stockholders,  individually  and as purported
representatives  of all of our  stockholders,  except  Asset  Investors  and its
affiliates, filed three purported class action lawsuits in the Court of Chancery
in the State of Delaware  against us and the  members of the board of  directors
and specified  officers of us and Asset  Investors.  These lawsuits alleged that
the defendants breached their fiduciary duties to our stockholders in connection
with our proposed merger with Asset Investors on the terms then proposed and our
recent   reincorporation  from  Maryland  to  Delaware.  In  October  1999,  the
plaintiffs filed an amended  complaint.  In November 1999, the Court of Chancery
approved consolidation of these lawsuits as a single lawsuit.

                                     - 12 -
<PAGE>

In March 2000, the parties entered into a settlement  agreement.  The settlement
agreement specified that we and Asset Investors would amend the merger agreement
in the following respects:

o        our  stockholders,  other than Asset  Investors  and the  officers  and
         directors  of Asset  Investors  and  Commercial  Assets,  may  elect to
         receive  $5.75  per  share in cash,  subject  to  proration,  for up to
         3,549,868  shares of our common  stock as  opposed  to .4075  shares of
         Asset Investors common stock; and
o        the  percentage  of votes of our common stock  necessary to approve the
         merger was increased from a simple majority to two-thirds.

The settlement agreement is subject to the approval of the Court of Chancery. If
approved by the Court of Chancery,  the  settlement  agreement  will release the
defendants from further liability relating to the merger.

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

No  matters  were  submitted  to a vote of our  stockholders  during  the fourth
quarter of 1999.

                                     PART II

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

Our common stock is listed on the AMEX under the symbol  "CAX." The high and low
closing  sales  prices of the shares of common  stock as reported  in  published
financial  sources and certain  dividend  information for the periods  indicated
were as follows:
                                                                      Regular
                                                                     Dividends
                                     High              Low            Declared
                                     ----              ---            --------
   1999
      First Quarter               $ 6-1/16          $  4-15/16         $  .13
      Second Quarter               5-13/16               4-7/8            .13
      Third Quarter                5-11/16             4-15/16            .13
      Fourth Quarter                 5-3/8               4-1/8            .13

   1998
      First Quarter               $   7             $   6-7/16         $   --
      Second Quarter                  7                  6-1/4            .13
      Third Quarter                  6-7/8              5-9/16            .13
      Fourth Quarter                 6-1/4               5-1/8            .13

As of March 17,  2000,  10,368,029  shares  of  common  stock  were  issued  and
outstanding  and were held by 1,210  stockholders  of record.  We estimate there
were an additional  10,000 beneficial owners on that date whose shares were held
by banks, brokers or other nominees.

We, as a REIT, are required to distribute  annually to stockholders at least 95%
of our  "REIT  taxable  income,"  which,  as  defined  by the Code and  Treasury
regulations,  is generally equivalent to net taxable ordinary income. We measure
our  economic   profitability  and  intend  to  pay  regular  dividends  to  our
stockholders  based on FFO,  less an annual  capital  replacement  reserve of at
least $50 per developed homesite, during the relevant period. The future payment
of dividends,  however,  will be at the discretion of the Board of Directors and
will depend on numerous  factors  including,  our financial  condition,  capital


                                     - 13 -
<PAGE>

requirements,  the annual distribution  requirements under the provisions of the
Code  applicable to REITs and such other factors as the Board of Directors deems
relevant.

On April 20, 1999,  28,500  shares of common stock were issued to  non-executive
directors  in  lieu  of  annual  director  fees as a  private  placement  of our
securities.  The $5-1/16 per share value was equal to the closing stock price on
April 20, 1999.

Item 6.  Selected Financial Data.

Our selected  financial data, set forth below,  has been derived from and should
be read in  conjunction  with  our  audited  consolidated  financial  statements
including  their notes.  Financial data as of December 31, 1999 and 1998 and for
each of the three  years in the period  ended  December  31,  1999,  is included
elsewhere in this report on Form 10-K.

Balance Sheet and Operating Data (in thousands, except per share data):

<TABLE>
<CAPTION>

                                                                              December 31,
                                                    ------------------------------------------------------------------
                                                      1999          1998           1997          1996          1995
                                                    ----------    ----------     ---------     ---------     ---------
<S>                                                 <C>           <C>            <C>           <C>           <C>
Real estate, before accumulated depreciation        $ 65,602      $ 12,678       $     --      $     --      $     --
Investments in participating mortgages and joint
   ventures                                            4,080        10,608             --            --            --
Cash equivalents and short-term investments           17,166        48,358         74,153         8,277           598
Investment in Asset Investors                          1,396            --             --            --            --
Investment in and note receivable from Westrec         3,563         4,011          1,710            --            --
CMBS bonds                                             1,753         1,739          1,981        61,460        69,503
Total assets                                          97,083        78,234         78,148        72,406        71,590
Secured long-term notes payable                       20,442            --             --            --            --
Minority interest in subsidiaries                        615            --             --            --            --
Total stockholders' equity                            74,081        77,254         77,705        71,919        70,465

                                                                        Year Ended December 31,
                                                    -----------------------------------------------------------------
                                                      1999         1998          1997          1996          1995
                                                    ---------    ----------    ----------    ----------    ----------
RENTAL PROPERTY OPERATIONS:
Rental and other property revenues                  $  2,538      $     --       $     --      $     --      $     --
Income from participating mortgages and leases         1,971           587             --            --            --
Property operating expenses                           (1,114)           --             --            --            --
Depreciation                                          (1,279)          (50)            --            --            --
                                                    ---------     ----------    ----------    ----------    ----------
Income from rental property operations                 2,116           537             --            --            --
                                                    ---------     ----------    ----------    ----------    ----------

Interest and other income                              1,913         3,874            945           319           189
CMBS bonds revenues                                      154           161          9,172         9,838         8,980
General and administrative expenses                     (519)         (420)          (519)       (1,771)       (1,393)
Management fees                                         (770)         (211)        (1,678)       (1,425)       (1,151)
Interest expense                                        (273)           --             --            (2)         (249)
Gain on sale of bonds                                     --            --          5,786            --            --
Net income                                             2,524         3,441         13,706         6,959         6,376

Per share amounts:
   Basic and diluted earnings                       $    .24      $    .33       $    1.32     $    .68      $    .63
   Regular dividends                                $    .52      $    .39       $     .68     $    .68      $    .68
   Special dividends                                $     --      $     --       $     .26     $    .04      $     --
   Capital gain dividends                           $     --      $     --       $     .17     $     --      $     --


                                     - 14 -
<PAGE>
                                                                        Year Ended December 31,
                                                    -----------------------------------------------------------------
                                                      1999         1998          1997          1996          1995
                                                    ---------    ----------    ----------    ----------    ----------

Weighted average common shares outstanding            10,342        10,357          10,332       10,247        10,104
Weighted average common shares and common share
   equivalents outstanding                            10,342        10,372          10,371       10,254        10,108
</TABLE>

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

                          RESULTS OF OPERATIONS FOR THE
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

The following  discussion and analysis of consolidated results of operations and
financial  condition  should  be  read  in  conjunction  with  our  consolidated
financial  statements  included elsewhere in this report. In 1997, we decided to
change our business from the ownership of high-risk  CMBS bonds to the ownership
of real estate.  In November 1997, we resecuritized  our portfolio of CMBS bonds
and had substantially ceased to be in this business. We temporarily invested the
proceeds  from  the  resecuritization  in  money  market  and  other  short-term
investments while we decided which real estate asset class we would redeploy our
capital into. This decision helped us to avoid the volatility  incurred by other
owners of CMBS bonds following the capital market crisis in the third quarter of
1998.  Since August 1998, we have been focused on the  investment of our capital
in the acquisition of manufactured home communities.  Through December 31, 1999,
we have invested  approximately  $70 million in  manufactured  home  communities
(including  participating mortgages and real estate joint ventures) but have not
yet redeployed  all of our capital into this asset class.  Since our capital has
not  yet  been  entirely   invested  into  this  new  business,   our  financial
performance,  and  consequently  our stock price,  has been  adversely  affected
during this  period.  We believe  that the  investment  of our  capital  will be
substantially completed during 2000, and we are hopeful that this will result in
improved performance.

Results of 1999 are not  comparable  to 1998  because our 1998  operations  were
primarily  the  result  of  investments  in  money  market  accounts  and  other
short-term  investments.  During 1999, we had more  investments in  manufactured
home  communities.  Results of 1998 are not  comparable to 1997 results  because
during 1997, we were in the business of investing in CMBS bonds.

Inflation

We do not believe that changes in inflation rates would have a material  adverse
effect on our business. In fact, we believe that inflation may positively impact
our business,  in light of the fact that manufactured home communities represent
a more  affordable  housing  choice  for many  people  than  other  alternatives
available,  increased  inflation  rates may allow us to demand  increased  rents
without losing tenants.

Comparison of Year Ended December 31, 1999 to Year Ended December 31, 1998

Rental Property Operations

Income from rental property  operations  totaled $2,116,000 for 1999 as compared
to $537,000 for 1998. Our first investment in manufactured  home communities was
in August  1998.  As of December 31, 1999,  we had  invested  approximately  $70
million in 12  communities  (including  participating  mortgages and real estate
joint ventures).

                                     - 15 -
<PAGE>

Interest and Other Income

Interest and other income was  $1,913,000 in 1999 and  $3,874,000  in 1998.  The
$1,961,000 decrease is due to a reduction in cash and short-term  investments as
a result of investments in  manufactured  home  communities  beginning in August
1998. The average  interest rate earned on our cash and  short-term  investments
was 5.1% in 1999 and 5.4% in 1998.

Interest Expense

Interest expense was $273,000 during 1999 due to long-term notes payable secured
by our  communities.  We had no interest  expense during 1998 as we did not have
any  debt on  manufactured  home  communities  until  May  1999.  We  anticipate
borrowing  additional  amounts in the  future in the form of  secured  long-term
notes payable.

General and Administrative Expenses

Our general and  administrative  expenses  were $519,000 in 1999 and $420,000 in
1998.  The $99,000  increase was  primarily  due to increased  costs  related to
shareholder  relations and due diligence  costs on potential  acquisitions  that
were not completed.

Related-Party Management Fees

Management  fees paid to Asset  Investors  were  $565,000 in 1999 and $87,000 in
1998.  The  $478,000  increase  in  management  fees  is  primarily  due  to our
investments in manufactured home communities since August 1998.  Management fees
are not paid on cash and short-term investments, which is what we primarily held
during 1998.

CMBS Bonds

Income from CMBS bonds during 1999 was $154,000 and is comparable to 1998.  This
income is from our retained residual interest in two CMBS bonds.

Related-Party Acquisition Fees

We expensed real estate  acquisition fees paid to Asset Investors of $205,000 in
1999 and  $124,000  in 1998.  The  change in fees is a result  of the  amount we
invested in manufactured home communities  during these years.  These fees would
be capitalized if they had been paid to an unrelated  third party.  Because they
are paid to Asset  Investors,  an  affiliate,  these  fees  are  expensed  under
generally accepted accounting principles.

Reincorporation Costs

In 1999, we  reincorporated  in Delaware from Maryland.  We incurred $120,000 of
nonrecurring costs in connection with the reincorporation.

Costs Related to Abandonment of Potential Marina Investments

During the third  quarter of 1998,  we decided  that we would no longer  seek to
acquire  interests  in marinas  and  recorded a  $500,000  nonrecurring  expense
related to the abandonment of potential marina investments.

                                     - 16 -
<PAGE>

Comparison of Year Ended December 31, 1998 to Year Ended December 31, 1997

Rental Property

During 1998,  income from rental properties  totaled $537,000,  arising from our
initial investments in manufactured home communities.

Interest and Other Income

Interest and other income  during 1998 was  $3,874,000  compared to $945,000 for
1997.  The $2,929,000  increase is due to our temporary  investment of the $77.7
million of cash proceeds received in November 1997 from the  resecuritization of
our  CMBS  bonds.   The  average  interest  rates  earned  on  these  short-term
investments was 5.4% during 1998 and 1997.

CMBS Bonds

Income from CMBS bonds was $161,000 during 1998 compared to $9,172,000 for 1997.
The 1998 amount represents the income from our retained residual interest in two
CMBS bonds.  All other  income from the CMBS bonds  ceased after the sale of the
CMBS bonds in November 1997.

General and Administrative Expenses

Our general  and  administrative  expenses  were  $420,000  in 1998  compared to
$519,000 in 1997.  General and  administrative  expenses decreased by $99,000 in
1998  compared to 1997  primarily  due to lower  accounting  and other  expenses
related to the ownership of CMBS bonds.

Management Fees

During 1998, we incurred  base fees of $87,000 on  investments  in  manufactured
home   communities,   the  retained   residual   interest  from  the  CMBS  bond
resecuritization  and the  investment  in Westrec  Marina  Management,  Inc.  We
incurred no incentive  fees or  administrative  fees in 1998.  During  1997,  we
incurred  management  fees of  $1,678,000,  consisting of base fees of $598,000,
incentive fees of $1,024,000 and administrative  fees of $56,000. We experienced
a large decrease in management fees during 1998 because we do not pay these fees
on cash and short-term investments.

Acquisition Fees

During  1998,  we  incurred  acquisition  fees of  $124,000  as a result  of our
investments  in  manufactured  home   communities.   During  1997,  we  incurred
acquisition  fees of $23,000 on acquisitions of CMBS bonds. The acquisition fees
incurred in 1997 were  capitalized  as part of the cost of acquiring CMBS bonds.
The 1998 acquisition fees were expensed because our manager was Asset Investors,
owner of 27% of our common  stock.  If these fees had been paid to an  unrelated
third party, then the fees would have been capitalized under generally  accepted
accounting principles.

Costs Related to Abandonment of Potential Marina Investments

During the third  quarter of 1998,  we decided  that we would no longer  seek to
acquire  interests  in  marinas,  and we expensed  $500,000 of costs  related to
previously considered marina investments.

                                     - 17 -
<PAGE>

Dividend Distributions

During 1999, 1998 and 1997, we declared regular dividends of $.52, $.39 and $.68
per share, respectively.  In addition, we declared special dividends of $.26 per
share and a capital gains dividend of $.17 per share in 1997.

                         LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1999,  we had cash and cash  equivalents  of  $4,664,000  and
short-term  investments of  $12,502,000.  Our principal  activities  that demand
liquidity  include our normal  operating  activities,  payments of principal and
interest on  outstanding  debt,  acquisitions  of or additional  investments  in
properties and payments of dividends to stockholders.

In 1999, the net cash provided by operating  activities was $2,671,000  compared
to $4,182,000 during 1998. The $1,511,000  decrease was primarily a result of an
increase  in other  assets.  The  primary  increases  in other  assets  were (i)
$750,000 in deferred  financing costs,  (ii) $360,000 in refundable  deposits on
potential  manufactured  home  community  acquisitions,  and (iii)  $360,000  in
deferred merger costs.

Net cash used in investing  activities  was  $7,209,000  during 1999 compared to
$71,001,000 in 1998. The net cash used in 1999 was primarily due to acquisitions
of manufactured home communities, net of sales of short-term investments used to
fund such  acquisitions.  The funds used in 1998 were primarily for the purchase
of short-term investments.

Net cash provided by financing  activities  was  $5,910,000  during 1999 and was
primarily  due to  approximately  $12,100,000  in net  proceeds  from  long-term
borrowings  less  (i)  dividends  paid of  $5,400,000  and (ii)  treasury  stock
purchases of $441,000.  Net cash used in  financing  activities  during 1998 was
$4,042,000 and was the payment of dividends.

We had long-term  debt of  $20,442,000  and no  short-term  debt at December 31,
1999. All of our debt was fixed rate and the weighted  average interest rate was
7.5% at December 31, 1999. Debt encumbered 55% of our real estate and 36% of our
total assets at December 31, 1999.  Our secured  long-term  notes  payable had a
weighted average maturity of 9.5 years at December 31, 1999.

We expect to meet our long-term  liquidity  requirements  in excess of 12 months
through  our  cash  balances,   short-term   investments,   long-term,   secured
borrowings, cash generated by operations and issuance of equity securities.

                              FUNDS FROM OPERATIONS

We measure  our  economic  profitability  based on FFO,  less an annual  capital
replacement reserve of at least $50 per developed homesite.  We believe that the
presentation  of FFO,  when  considered  with the financial  data  determined in
accordance  with generally  accepted  accounting  principles,  provides a useful
measure of our performance. However, FFO does not represent cash flow and is not
necessarily  indicative of cash flow or liquidity available to us, nor should it
be  considered  as an  alternative  to net income as an  indicator  of operating
performance.  The Board of Governors of NAREIT defines FFO as net income (loss),
computed in accordance with generally accepted accounting principles,  excluding
gains and losses from debt restructuring and sales of property, plus real estate
related  depreciation  and  amortization  (excluding  amortization  of financing
costs),  and  after  adjustments  for  unconsolidated   partnerships  and  joint
ventures.  We calculate FFO  beginning  with the NAREIT  definition  and include
adjustments for:

                                     - 18 -
<PAGE>

o        property  acquisition fees that were expensed under generally  accepted
         accounting principles because the fees were paid to Asset Investors, an
         affiliate; and
o        nonrecurring  costs  related to the  abandonment  of  potential  marina
         investments.

We believe that the  presentation  of FFO provides  investors with  measurements
which help facilitate an understanding of our ability to make required  dividend
payments,  capital  expenditures  and principal  payments on our debt. Since FFO
excludes  unusual and  nonrecurring  expenses as well as depreciation  and other
real estate related expenses,  FFO may be materially  different from net income.
Therefore,  FFO should not be considered as an  alternative to net income or net
cash flows from operating activities, as calculated in accordance with generally
accepted accounting principles, as an indication of our operating performance or
liquidity.

FFO is not  necessarily  indicative  of cash  available  to fund our cash needs,
including  our  ability  to  make  distributions.  We use FFO in  measuring  our
operating  performance  because  we  believe  that the  items  that  result in a
difference  between  FFO and net  income do not  impact  the  ongoing  operating
performance  of a real estate  company.  Also, we believe that other real estate
companies,  analysts and investors  utilize FFO in analyzing the results of real
estate companies.  Our basis of computing FFO is not necessarily comparable with
that of other REITs.

For 1999, 1998 and 1997, our FFO was as follows (in thousands):

<TABLE>
<CAPTION>

                                                                            1999            1998            1997
                                                                      -------------   -------------   -------------
<S>                                                                     <C>             <C>             <C>
  Net income                                                            $   2,524       $   3,441       $  13,706
  Real estate depreciation                                                  1,279              50              --
  Real estate acquisition fees                                                205             124              --
  Gain on sale of bonds                                                        --              --          (5,786)
  Costs related to abandonment of potential marina investments                 --             500              --
  Equity in Asset Investors' FFO adjustments                                   73              --              --
                                                                        ---------       ---------       ---------
  Funds From Operations (FFO)                                           $   4,081       $   4,115       $   7,920
                                                                        =========       =========       =========

  Weighted average common shares outstanding                               10,342          10,357          10,332
                                                                        =========       =========       =========
</TABLE>

For 1999, 1998 and 1997, our net cash flows were as follows (in thousands):
<TABLE>
<CAPTION>

                                                                            1999            1998            1997
                                                                      -------------   -------------   --------------
<S>                                                                     <C>               <C>           <C>
  Cash provided by operating activities                                 $   2,671         $ 4,182       $   4,428
  Cash provided by (used in) investing activities                          (7,209)        (71,001)         72,892
  Cash provided by (used in) financing activities                           5,910          (4,042)        (11,444)
</TABLE>


                              YEAR 2000 COMPLIANCE

Year 2000  issues  have arisen  because  many  existing  computer  programs  and
chip-based  embedded technology systems use only the last two digits to refer to
a year,  and  therefore do not  properly  recognize a year that begins with "20"
instead of the familiar "19." If not corrected, many computer applications could
fail or create erroneous results.  The following disclosure provides information
regarding the current status of our Year 2000 compliance program.

Our  hardware and  software  systems are  currently  Year 2000  compliant.  Upon
failure of any system,  data included in critical  software  (such as rent-rolls
and  certain  record-keeping   systems)  could  be  transferred  to  alternative
commercially  available  software at a  reasonable  cost and within a reasonable
time period. Consequently,  we would be able to continue our business operations


                                     - 19 -
<PAGE>

without any material interruption or material effect on our business, results of
operations  or  financial  condition.  We have not  experienced  any  Year  2000
problems through March 17, 2000.

Disruptions in the economy generally  resulting from Year 2000 issues could also
materially adversely affect us. Moreover,  because a large number of our tenants
may be dependent on social  security  payments to pay their rents,  a failure of
the  Social  Security  Administration  to cause  their  systems  to be Year 2000
compliant may result in a material adverse effect on our operations.  The Social
Security  Administration  has  announced  that they will have their systems Year
2000  compliant  before  January 1, 2000. We have received oral  representations
from our third party vendors  indicating that they are  substantially  Year 2000
compliant.  We have not  experienced  any Year 2000  problems  through March 17,
2000.

We believe that the cost of  modification  or  replacement of our less essential
accounting and reporting  software and hardware that is not currently  compliant
with Year 2000  requirements,  if any,  will not be  material  to our  financial
position or results of operations.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

Our principal exposure to market risk is through our short-term  investments and
our various debt  instruments and  borrowings.  The following is a list of these
short-term investments, debt instruments and borrowing arrangements.

We  invest  funds  primarily  in  government  securities  and  other  short-term
investments  with  interest  rates  of  approximately  0.25%  above  the  London
Interbank Offered Rate or "LIBOR". Accordingly,  changes in interest rates could
affect the returns from such investments.  If LIBOR decreased immediately by 1%,
our annual net income and cash flows would  decrease by  $125,000,  based on the
amount of  short-term  investments  at December 31,  1999.  Because we intend to
redeploy our short-term  investments by acquiring  manufactured home communities
during 2000,  however,  our primary  objective  with  respect to our  short-term
investments  is to  minimize  the  risk  that  the  principal  amount  of  these
investments  could decrease.  Therefore,  we have short-term  investments  whose
principal  amount is expected to be less  affected by changes in interest  rates
than other potential investments. The timing and amount of such investments will
depend on a number of  factors.  See "Item 2. - Business - Growth and  Operating
Strategies - Future Acquisitions."

We have $12.8  million of fixed  rate,  non-recourse,  secured  long-term  notes
payable  that mature in 2019.  We do not have  significant  exposure to changing
interest  rates on these  notes as the  rates  are fixed and the notes are fully
amortizing.

We have a $2.9 million fixed-rate,  non-recourse,  partially amortizing, secured
long-term note payable that matures in 2007. We do not have significant exposure
to changing interest rates on this note as the rate is fixed and the balance due
at maturity is $2.6 million.

We have a $4.7 million fixed rate, recourse, secured long-term note payable that
is repayable in three annual  installments.  The implied  interest  rate on this
note is 7.0%. We do not have significant  exposure to changing interest rates on
this note as the rate is fixed and the note is fully amortizing.  In the future,
we  intend  to  borrow  additional  non-recourse,  secured,  fixed  rate,  fully
amortizing debt in connection with the refinancing of the existing note payable.
While changes in interest  rates would affect the cost of funds  borrowed in the
future to refinance the existing  debt,  we believe that the effect,  if any, of
near-term  changes  in  interest  rates on our  financial  position,  results of
operations  or cash flows would not be material  as the  existing  debt is fixed
rate until June 2002.

                                     - 20 -
<PAGE>

We  intend  to  borrow  additional  non-recourse,  secured,  fixed  rate,  fully
amortizing  debt in connection with  acquisitions  of communities.  Accordingly,
changes in interest rates will affect the cost of future borrowings  incurred in
connection with future acquisitions.

Item 8.  Financial Statements and Supplementary Data.

The  report of  independent  auditors,  consolidated  financial  statements  and
schedules listed in the accompanying  index are filed as part of this report 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.

We have had no changes in nor any disagreements with our accountants relating to
accounting or financial disclosure.

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.

Information  with respect to our directors and executive  officers appears below
and was furnished in part by each such person.  Each of our  executive  officers
serves  for a term of one year and until his or her  successor  is  elected  and
qualified  or until his or her  earlier  resignation  or removal by the Board of
Directors.  There are no family  relationships  among any of our  directors  and
executive officers.

<TABLE>
<CAPTION>

          Name             Age       First Elected                  Position(s) Held with the Company
                           ---       -------------                  ---------------------------------
<S>                         <C>            <C>         <C>
Terry Considine             52   September 1996        Chairman of the Board of Directors (Class III) and Chief
                                                       Executive Officer
Thomas L. Rhodes            60   September 1996        Vice Chairman of the Board of Directors (Class I)

Bruce E. Moore              57   October 1998          Director (Class III), President and Chief Operating Officer

Raymond T. Baker            48   August 1993           Independent Director (Class I) and Member of the Audit and
                                                       Compensation Committees
Bruce D. Benson             61   September 1996        Director (Class II) and Member of the Compensation Committee

Thomas C. Fries             55   December 1996         Independent Director (Class I) and Member of the Audit and
                                                       Compensation Committees
Donald L. Kortz             59   August 1993           Independent Director (Class II) and Member of the Audit and
                                                       Compensation Committees
Robert J. Malone            55   August 1993           Independent Director (Class II) and Member of the Audit and
                                                       Compensation Committees
David M. Becker             40   December 1997         Chief Financial Officer, Secretary and Treasurer

</TABLE>

Terry  Considine  has been our  Chairman  of the  Board of  Directors  and Chief
Executive  Officer  since  April  1998.  From  September  1996 to April 1998 Mr.
Considine served as Co-Chairman of the Board of Directors and Co-Chief Executive
Officer.  He is the sole owner of Considine  Investment Co. Since July 1994, Mr.
Considine  has also  been the  Chairman  of the  Board of  Directors  and  Chief
Executive Officer of Apartment Investment and Management Company ("AIMCO").

Thomas L.  Rhodes has been our Vice  Chairman of the Board of  Directors  of the
Company and Asset Investors since April 1998. From September 1996 to April 1998,
Mr.  Rhodes  served  as  Co-Chairman  of the  Board of  Directors  and  Co-Chief


                                     - 21 -
<PAGE>

Executive Officer of the Company and Asset Investors. 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 Trustee of The Heritage Foundation.

Bruce E.  Moore was  appointed  our  President  and Chief  Operating  Officer in
October 1998 and has been a Director  since January 1999. Mr. Moore has been the
Chief  Operating  Officer,  President  and a Director of Asset  Investors  since
February 1998. Mr. Moore is the founder and was the Chief  Executive  Officer of
Brandywine Financial Services Corporation and its affiliates  ("Brandywine"),  a
private  real estate  firm  specializing  in various  aspects of the real estate
industry,  including  asset  management,   consulting,   development,   property
management,   brokerage  and  capital  formation.   He  is  a  certified  public
accountant, holds a Masters in Accounting and a Bachelor of Science in Economics
from the  Wharton  School of the  University  of  Pennsylvania.  Mr.  Moore is a
director and past president of the Media Youth Center, and a past advisory-board
member for the  Department of Recreation and  Intercollegiate  Athletics for the
University  of  Pennsylvania.  In  addition,  Moore is a member of the  National
Association of Real Estate Investment  Trusts and the  International  Council of
Shopping Centers.

David M. Becker has  functioned as our Chief  Financial  Officer,  Treasurer and
Secretary  since December 1997 and was appointed to such position in April 1998.
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 until
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.

Raymond T. Baker has served as a  Director  of the  Company,  as a member of its
compensation  committee and as Chairman of its audit committee since the Company
was organized in 1993. He served as a Director of Asset  Investors from December
1991 until August 1993.  He has been a partner of Gold Crown  Management  Co., a
Denver-based property management company,  since 1974. Mr. Baker was a member of
the Colorado Economic  Development  Commission  Advisory Board, was a member and
Chairman of the Colorado  Economic  Development  Commission,  is Chairman of the
Metropolitan  Football Stadium District,  is a member and Chairman of the Denver
Metropolitan Major League Baseball District and is a director of Alpine Bank. He
serves as Chairman  and member of the Denver  Zoological  Board and Chairman and
member of the Gold Crown Youth Foundation.

Bruce D. Benson has served as Director of the Company and Asset  Investors since
October  1996 and  previously  served  as a  Director  of Asset  Investors  from
February  1992 through  February  1994.  In February  1998,  Mr. Benson became a
member of the Company's  compensation  committee.  For the past 32 years, he has
been President and owner of Benson  Mineral Group,  Inc., a domestic oil and gas
production  company  located in Denver,  Colorado.  He is also  Chairman,  Chief
Executive Officer and President of United States  Exploration,  Inc., an oil and
gas  exploration  company  listed on the American Stock  Exchange.  He serves on
numerous Boards of Trustees and Boards of Directors,  including Chairman, Denver
Zoological Foundation;  Past Chairman and Past President, Boy Scouts of America,
Denver  Area  Council;  Trustee  and Past  President  of the Board of  Trustees,
Berkshire  School,  Sheffield,   Massachusetts;  Past  Trustee,  Smith  College,
Northampton,   Massachusetts;  Past  Chairman,  Colorado  Commission  on  Higher


                                     - 22 -
<PAGE>

Education;  and  past  member,  Board  of  Directors,   University  of  Colorado
Foundation; and Chairman of the Total Learning Environmental Capital Campaign of
the  University  of Colorado.  In 1994,  he was the  Republican  nominee for the
Governor of Colorado.

Thomas C.  Fries has  served as a Director  of the  Company  and a member of its
audit and compensation committees since December 1996. Since 1986, Mr. Fries has
been the President and Owner of CP Company, a regional distributor and lessor of
refrigeration  equipment  located in Denver,  Colorado.  From 1980 to 1995,  Mr.
Fries served as President and Owner of Cummins  Power,  Inc., the Rocky Mountain
area  distributor  for  Cummins  Engine  Company,  Inc.  He has  served as Board
Chairman of Colorado Outward Bound School and Junior Achievement.  He is a Board
member of Mountain States Employers  Council,  Colorado Outward Bound School and
the Denver Museum of Natural History,  and he is a member of the American Alpine
Club.

Donald L.  Kortz has  served as a Director  of the  Company  and a member of its
audit and compensation committees since its organization in 1993. He served as a
Director of Asset  Investors  from June 1988 until August 1993. Mr. Kortz served
as President and Chief  Executive  Officer of Fuller & Company,  a  Denver-based
commercial  real estate broker,  from April 1987 until October 1995, when he was
appointed  President and Chief Executive  Officer of Rose Community  Foundation.
Mr. Kortz returned to Fuller & Company as the Chairman of its Board of Directors
in January  1999.  Previously,  Mr.  Kortz  served as  Chairman  of the Board of
Trustees of the Rose Health Care  Systems,  the holding  company of Rose Medical
Center,  Denver,  Colorado  and  as a  member  of  the  Denver  Board  of  Water
Commissioners.  Mr.  Kortz  also is a member of the  Society  of  Fellows of the
University  of  Denver  and  is  a  member  of  local,  state  and  federal  bar
associations  and  realtors  associations  and is a member  of Key  Bank,  N.A.,
District of Colorado, Advisory Board.

Robert J.  Malone has served as a Director  of the  Company  and a member of the
audit and  compensation  committees  since the Company was organized in 1993. He
served as a Director of Asset  Investors  from  February 1992 until August 1993.
Mr. Malone is Chairman of US Bank  (formerly  Colorado  National  Bank,  Denver,
Colorado). From 1969 to 1993, Mr. Malone served in various capacities, including
chief  executive  and  senior  executive  capacities,  with  Central  Banks/Bank
Western,  Western  Capital  Investment  Corporation,  First  Interstate  Bank of
Denver,  First  Interstate  Bank of Idaho  and  Bank of  America,  Los  Angeles,
California.  He also  serves on the  boards  of  numerous  civic and  charitable
organizations  including  Chairman of the Board of Directors of Colorado's Ocean
Journey,  past Trustee and member of the  Executive  Committee of the Denver Art
Museum,  Director of Colorado  UpLIFT and Trustee and Chairman of the Nominating
Committee of the Denver Zoological Foundation.

Compliance With Section 16(a) of the Exchange Act

Our executive  officers and directors,  and persons who own more than 10% of the
Company's common stock,  are required under the Securities  Exchange Act of 1934
to file reports of  ownership  and changes in  ownership  of  securities  of the
Company with the  Securities  and  Exchange  Commission  and the American  Stock
Exchange,  Inc.  Copies of those  reports  also must be  furnished  to us. Based
solely upon a review of the copies of reports  furnished  to us, we believe that
for the year ended December 31, 1999, all filing requirements were timely met by
our executive officers, directors and beneficial owners of more than ten percent
of our stock.

Executive Compensation

In the year ended December 31, 1999, none of Messrs. Considine, Rhodes, Moore or
Becker received any  compensation  in his capacity as Chief  Executive  Officer,
Vice  Chairman,  President  and  Chief  Operating  Officer,  or Chief  Financial
Officer, Secretary and Treasurer.

                                     - 23 -
<PAGE>

Through the end of 1999, none of Messrs. Considine,  Rhodes, Moore or Becker had
at any time been granted options to acquire shares of our common stock.  Messrs.
Considine and Rhodes are each a stockholder of the Company and Asset  Investors.
Messrs.  Moore and Becker are each a stockholder of Asset  Investors but neither
is a stockholder of the Company.

Director Compensation

During 1999,  each of our  non-employee  directors  received 5,700 shares of our
common stock,  plus $300 for each meeting of the Board of Directors or committee
thereof  attended.  The closing stock price on the date these shares were issued
was $5-1/16.  In addition,  all directors are reimbursed for expenses related to
attending Board of Directors and committee meetings.

Under the existing 1998 Stock Incentive Plan, all of our non-employee  directors
received an automatic  grant of options to acquire 7,500 shares of the Company's
common stock with an exercise  price equal to the closing price of the Company's
common stock on the date of the 1999 annual stockholders  meeting.  Such options
were immediately exercisable and have a term of ten years.

Under  the  1998  Stock  Incentive  Plan,  all  of  our  non-employee  directors
automatically  receive  annual grants of  market-price  options to acquire 7,500
shares of the  Company's  common  stock on the date of each annual  stockholders
meeting.  These options will be  immediately  exercisable  upon grant and have a
term of ten years.

Compensation Committee Interlocks and Insider Participation

During 1999, Mr. Considine served as Chief Executive Officer and Chairman of the
Board of the Company and Asset  Investors and Mr. Rhodes served as Vice Chairman
of the Board of the Company and Asset  Investors.  Mr.  Considine is Chairman of
the Board and Chief  Executive  Officer of Apartment  Investment  and Management
Company ("AIMCO"), and Mr. Rhodes serves on the compensation committee of AIMCO.
Mr. Benson served as a director of the Company and Asset Investors  during 1999.
Mr. Moore served as  President,  Chief  Operating  Officer and a director of the
Company and Asset Investors during 1999.

Item 11.  Executive Compensation.

We do not  pay a  salary,  bonus  or any  other  compensation  to our  executive
officers  because  Asset  Investors,  as our  manager,  provides  all  personnel
necessary to conduct our regular business at Asset Investors'  expense.  We have
the same  executive  officers as Asset  Investors.  We pay various fees to Asset
Investors for the services  performed by Asset  Investors  under our  management
agreement.  All  salaries,  bonuses  and  other  compensation  received  by  our
executive  officers  is paid by Asset  Investors  and it has not  allocated  any
portion of the compensation paid by it to these executive officers  specifically
for their  services to us. The  following  is a  description  of our  management
agreement with Asset Investors.

The  Management   Agreement.   We  entered  into  a  management  agreement  (the
"Management  Agreement")  with  predecessors of Financial  Asset  Management LLC
("FAM")  on  August  20,  1993,  under  which FAM  performed  the  services  and
activities described below, among others,  relating to our assets and operations
through  November  1997.  In September  1996,  an investor  group led by Messrs.
Considine,  Rhodes and Benson  acquired FAM. In November 1997,  Asset  Investors
acquired the assets of FAM, including the Management  Agreement,  and became our
manager.  Mr.  Considine  is the  Chairman of the Board of  Directors  and Chief
Executive  Officer of both Asset  Investors  and the Company,  Mr. Rhodes is the
Vice Chairman of the Board of Directors of both Asset Investors and the Company,


                                     - 24 -
<PAGE>

and Mr.  Benson is a  director  for both  companies.  The  Management  Agreement
provided  for an initial  term of one year,  subject to  extension  by agreement
between us and Asset  Investors.  The  Management  Agreement  has been  extended
through December 31, 2000 provided,  however,  if the proposed merger between us
and Asset  Investors  occurs then the Management  Agreement  will  automatically
terminate.

Asset  Investors,  as our  manager,  advises us on our business and oversees our
day-to-day  operations,  subject to the  supervision  of our Board of Directors.
Asset   Investors  also  is  obligated  to  present  to  us  asset   acquisition
opportunities  consistent  with our policies and  objectives  and to furnish our
Board of Directors  with  information  concerning the  acquisition,  holding and
disposition of our assets.

The Management Agreement is approved annually by our Independent  Directors.  It
may be  terminated  by either  party with or  without  cause at any time upon 60
days' written notice. In addition, we have the right to terminate the Management
Agreement upon the occurrence of certain specified events including, among other
things,  a breach by Asset  Investors  of any  material  provision  which breach
remains uncured for 30 days or the bankruptcy of Asset Investors. The Management
Agreement  also  may be  terminated  at  any  time  by a  majority  vote  of our
Independent  Directors or holders of our common stock (excluding  shares held by
Asset Investors). Asset Investors is entitled to certain termination payments in
the  event of an  acquisition  of us which  results  in the  termination  of the
Management  Agreement.  These  payments  do not  apply  if we merge  with  Asset
Investors.

Asset  Investors  receives  various  fees for the  advisory  and other  services
performed in connection with the Management Agreement.  Asset Investors,  at its
expense,  provides all personnel and certain overhead items necessary to conduct
our regular business.

We have agreed to indemnify  Asset  Investors 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 Asset Investors made in good faith and
in accordance with the standards set forth in the Management Agreement.

Under the  Management  Agreement,  Asset  Investors  may  receive a base fee, an
acquisition  fee, an  incentive  fee, and an  administrative  fee. The base fee,
payable quarterly,  is 1% of our average real estate-related invested assets for
such year. We paid base fees totaling $565,000 in 1999 and $87,000 in 1998.

The acquisition fee equals 1% of the acquisition  cost of each real estate asset
which Asset  Investors  assists us in acquiring.  The purpose of the acquisition
fee is to reimburse  Asset  Investors for its employee  costs related to the due
diligence  procedures it performs in  connection  with our  acquisition  of real
estate assets.  We paid acquisition fees totaling  $205,000 in 1999 and $124,000
in 1998.

The incentive fee is based on our profitability.  Asset Investors is entitled to
the incentive fee only after our Funds from  Operations (or FFO), less a capital
replacement reserve of at least $50 per developed homesite,  exceeds a return on
our "Average Net Worth" equal to the "Ten-Year U.S.  Treasury Rate" plus 1%. For
1999, 20% of the amount by which our FFO, less a capital  replacement reserve of
$50 per developed  homesite,  exceeds the above described  return on our Average
Net Worth is paid to Asset  Investors as the incentive fee. The base fee and the
incentive  fee are subject to reduction  in the event that our  expenses  exceed
certain amounts. We paid no incentive fees in 1999.

Asset Investors also may perform certain bond  administration  and other related
services for us under the  Management  Agreement and receives an  administrative
fee for such services in relation to the complexity of the  transaction  and the
services required. We paid no administrative fees in 1999.

                                     - 25 -
<PAGE>

Item 12.  Security Ownership of Certain Beneficial Owners and Management

The table below sets forth,  as of March 17,  2000,  the number of shares of our
common  stock  beneficially  owned  by  (1)  each  person  known  by  us to be a
beneficial  owner of more than 5% of the our common  stock;  (2) all  directors,
individually,   and  each  executive   officer  that  holds  our  common  stock,
individually;  and (3) all of our directors  and executive  officers as a group,
which information was furnished in part by each such person.
<TABLE>
<CAPTION>

                                                                                Amount and
                                                                           Nature of Beneficial        Percent of
Name of Beneficial Owner (1)                                                   Ownership(2)             Class (3)
----------------------------                                                   ------------             ---------
<S>                                                                              <C>                      <C>
Asset Investors Operating Partnership, L.P.                                      2,761,126                26.6%
Terry Considine(4)                                                                 161,815                 1.6%
Thomas L. Rhodes(5)                                                                 72,148                   *
Bruce E. Moore                                                                           0                   *
Raymond T. Baker(6)                                                                100,418                 1.0%
Bruce D. Benson(7)                                                                 133,186                 1.3%
Thomas C. Fries(8)                                                                 103,716                 1.0%
Donald L. Kortz(6)                                                                  99,316                 1.0%
Robert J. Malone(6)                                                                 91,982                   *
All directors and executive officers as a group (9 persons)                        762,581                 7.2%
-----------------------
<FN>

*        Denotes  ownership  of less  than 1% of the  outstanding  shares of our
         common stock.

(1)      Unless  otherwise  indicated,  the address for each stockholder is 3410
         South Galena Street, Suite 210, Denver, Colorado 80231.
(2)      Includes,  where  applicable,  shares of our common stock owned by such
         person's minor children and spouse and by other related individuals and
         entities.  Unless otherwise indicated,  such person has sole voting and
         investment power as to the shares listed.
(3)      All shares of our common  stock which a person had the right to acquire
         within 60 days after March 17, 2000 were deemed to be  outstanding  for
         the purpose of  computing  the  "Percent of Class" owned by such person
         but were not deemed to be outstanding  for the purpose of computing the
         "Percent  of Class"  owned by any  other  person.  On March  17,  2000,
         10,368,029 shares of our common stock were outstanding.
(4)      Includes  107,571 shares of our common stock held by Titahotwo  Limited
         Partnership,  in which Mr.  Considine  serves as general  partner,  and
         28,244 options exercisable within 60 days which are held by Titahotwo.
(5)      Includes 10,950 options exercisable within 60 days.
(6)      Includes 37,500 options exercisable within 60 days.
(7)      Includes 68,306 options exercisable within 60 days.
(8)      Includes 47,500 options exercisable within 60 days.
</FN>
</TABLE>

Item 13.  Certain Relationships and Related Transactions.

Transactions involving Asset Investors. The Company was formed in August 1993 as
a wholly owned subsidiary of Asset  Investors.  In October 1993, Asset Investors
distributed  approximately 70% of our outstanding  shares of common stock to the
stockholders  of  Asset  Investors  (the  "Distribution").  At the  time  of the
Distribution,  our  shares  were  approved  for  listing on the  American  Stock
Exchange,  Inc. and, thereafter,  we commenced  operations.  As reflected in the
table under "Security  Ownership of Certain  Beneficial  Owners and Management,"
Asset Investors  currently owns approximately 27% of the Company's common stock.
Messrs. Considine,  Rhodes and Moore and our officers are directors and officers
of Asset Investors,  respectively.  In addition, Mr. Benson is a director of the
Company and Asset  Investors.  Our day-to-day  operations are performed by Asset
Investors. See "The Management Agreement" above.

                                     - 26 -
<PAGE>

In connection with our formation, Asset Investors and the Company entered into a
Contribution   Agreement  under  which,  among  other  things,  Asset  Investors
contributed  approximately  $75  million to our  capital.  Each party  agreed to
indemnify the other against certain liabilities and obligations.

We have determined that Asset Investors'  ownership of our common stock does not
jeopardize our  qualification  as a REIT, and have exempted Asset Investors from
any  restrictions  on  ownership of our common stock which may be adopted by us,
unless  there is a change in law or  regulation  that  causes  Asset  Investors'
ownership  of our common  stock to  jeopardize  our status as a REIT.  If such a
change in law or regulation  should occur,  we may adopt such  provisions as are
necessary to maintain our status as a REIT,  provided that such provisions,  and
the  enforcement of such  provisions,  shall be in such a manner as to cause the
least  interference with Asset Investors'  ownership of our securities and shall
provide for the payment to Asset  Investors  of an amount at least equal to: (1)
the  closing  price of our common  stock on the last  business  day prior to the
redemption  date on the  principal  national  securities  exchange  on which our
common  stock is  listed  or  admitted  to  trading;  or (2) if not so listed or
admitted to trading, the closing bid price on such last business day as reported
on the NASDAQ System, if quoted thereon;  or (3) if not otherwise  determinable,
the net asset value of our common stock redeemed, as determined in good faith by
our Board of Directors for any such  securities to be redeemed.  Notwithstanding
the  foregoing,  in no event may the  redemption  price of our  common  stock be
greater than the net asset value of our common stock redeemed,  as determined in
good faith by our Board of Directors.

Transactions  involving Asset Investors and Mr. Moore.  Property  management and
accounting  for  our  communities  is  performed  by  AIC  Community  Management
Partnership  ("AICCMP").  Asset  Investors  owns 50% of  AICCMP  and Mr.  Moore,
President,  Chief Operating Officer and a director of both the Company and Asset
Investors,  indirectly owned 17.5% of AICCMP.  During 1999, our communities paid
$172,000 in fees to AICCMP.  Effective January 1, 2000, Asset Investors acquired
the 50% of AICCMP that it did not already own for $380,000.

Brandywine  Homes Sales  Corporation  ("Homesales  Corp.")  provided real estate
brokerage  services  for both new home sales and  existing  home  resales in our
communities  and Asset Investors  communities.  Mr. Moore owned 50% of Homesales
Corp.  and  it  received  commissions  from  our  communities,  Asset  Investors
communities or the homeowner  depending on the  circumstances.  During 1999, our
communities  paid  $46,000 in  commissions,  Asset  Investors  communities  paid
$45,000 in commissions and homeowners  located in the communities  paid $293,000
in commissions to Homesales  Corp.  Effective  January 1, 1999,  Asset Investors
acquired  Homesales Corp.'s inventory of homes, its activities and personnel for
a total price of $657,000.

Brandywine  Commercial  Services,  Inc. ("Services Corp.") provided  maintenance
services to our  communities and Asset  Investors  communities  during 1999. Mr.
Moore owned 50% of Services  Corp.  Our  communities  paid  $658,000 in fees and
Asset Investors  communities paid $1,725,000 in fees during 1999 for maintenance
services  provided by Services Corp.  Effective January 1, 2000, Asset Investors
acquired the equipment and activities of Services Corp. for $30,000.

Transactions  involving Mr. Rhodes. During 1999, Commercial Assets paid finder's
fees of $225,000  to Thomas L. Rhodes II, the adult son of the Vice  Chairman of
Commercial  Assets and Asset Investors.  These fees were paid in connection with
our acquisition of manufactured home communities and represent 1% of the cost of
acquisition. Our management believes the finder's fees paid were consistent with
similar arrangements in the industry.

                                     - 27 -
<PAGE>

                                     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)   The  financial  statement  schedules  listed in the Index to  Financial
         Statements on Page F-1 of this report are filed as part of this report.
         All other  schedules  are omitted  since they are not  applicable,  not
         required,  or the  information  required  to be set  forth  therein  is
         included in the financial statements, or in notes thereto.

(a)(3)   The Exhibit Index is included on page 29 of this report.

(b)      Reports on Form 8-K for the quarter ended December 31, 1999:

         No current  reports on Form 8-K were  filed by the  Company  during the
         fourth quarter of 1999.


                                     - 28 -
<PAGE>


                          INDEX TO FINANCIAL STATEMENTS


COMMERCIAL ASSETS, INC.                                                     Page

Financial Statements:

    Report of Independent Auditors.........................................  F-2
    Consolidated Balance Sheets as of December 31, 1999 and 1998...........  F-3
    Consolidated Statements of Income for the years ended December 31,
        1999, 1998 and 1997................................................  F-4
    Consolidated Statements of Stockholders' Equity for the years ended
        December 31, 1999, 1998 and 1997...................................  F-5
    Consolidated Statements of Cash Flows for the years ended December
        31, 1999, 1998 and 1997............................................  F-6
    Notes to Consolidated Financial Statements.............................  F-7

Financial Statement Schedules:

    Schedule III - Real Estate and Accumulated Depreciation................ F-20
    Schedule IV - Mortgage Loans on Real Estate............................ F-22




                                     F - 1
<PAGE>



                         REPORT OF INDEPENDENT AUDITORS



Board of Directors and Stockholders
Commercial Assets, Inc.


We have  audited the  accompanying  consolidated  balance  sheets of  Commercial
Assets,  Inc. and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of income,  stockholders' equity and cash flows for each
of the three  years in the period  ended  December  31,  1999.  Our audits  also
included  the  consolidated   financial   statement   schedules  listed  in  the
accompanying   index.   These   financial   statements  and  schedules  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  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. and subsidiaries as of December 31, 1999 and 1998, and
the  consolidated  results of their  operations and their cash flows for each of
the three  years in the  period  ended  December  31,  1999 in  conformity  with
accounting  principles  generally  accepted in the United  States.  Also, in our
opinion, the related financial statement schedules,  when considered in relation
to the basic consolidated financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.



                                                            /s/ERNST & YOUNG LLP
Denver, Colorado
January 21, 2000, except for
  Note O, as to which the date
  is March 7, 2000





                                     F - 2
<PAGE>




                    COMMERCIAL ASSETS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

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

                                                                                                 December 31,
                                                                                                 ------------
                                                                                           1999               1998
                                                                                           ----               ----
ASSETS
<S>                                                                                      <C>                <C>
Real estate, net of accumulated depreciation of $1,329 and $50                           $   64,273         $   12,628
Investments in participating mortgages                                                        2,148              9,328
Investment in real estate joint ventures                                                      1,932              1,280
Short-term investments                                                                       12,502             45,066
Cash and cash equivalents                                                                     4,664              3,292
Investment in and note receivable from Westrec                                                3,563              4,011
Investment in Asset Investors                                                                 1,396                 --
CMBS bonds                                                                                    1,753              1,739
Other assets, net                                                                             4,852                890
                                                                                         ----------         ----------
      Total Assets                                                                       $   97,083         $   78,234
                                                                                         ==========         ==========

LIABILITIES
Secured long-term notes payable                                                          $   20,442         $       --
Accounts payable and accrued liabilities                                                      1,747                872
Related-party management fees payable                                                           198                108
                                                                                         ----------         ----------
                                                                                             22,387                980
                                                                                         ----------         ----------

COMMITMENTS AND CONTINGENCIES                                                                    --                 --

MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES                                                  615                 --

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; 10,393 and
   10,364 shares issued; and 10,320 and 10,364 shares outstanding, respectively                 104                104
Additional paid-in capital                                                                   77,018             76,874
Retained earnings (dividends in excess of accumulated earnings)                              (2,600)               276
Treasury stock, 73 and 0 shares at cost                                                        (441)                --
                                                                                         ----------         ----------
                                                                                             74,081             77,254
                                                                                         ----------         ----------
      Total Liabilities and Stockholders' Equity                                         $   97,083         $   78,234
                                                                                         ==========         ==========

</TABLE>


                 See Notes to Consolidated Financial Statements.

                                     F - 3
<PAGE>




                    COMMERCIAL ASSETS, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

                      (In thousands, except per share data)

<TABLE>
<CAPTION>

                                                                                         Year Ended December 31,
                                                                                         -----------------------
                                                                                  1999           1998            1997
                                                                                  ----           ----            ----
Rental property operations
<S>                                                                             <C>            <C>             <C>
Rental and other property revenues                                              $   2,538      $      --       $    --
Income from participating mortgages and leases                                      1,971            587            --
Property operating expenses                                                        (1,114)            --            --
Depreciation                                                                       (1,279)           (50)           --
                                                                                ---------      ---------      --------
Income from rental property operations                                              2,116            537            --
                                                                                ---------      ---------      --------

Interest and other income                                                           1,913          3,874           945
CMBS bonds revenue                                                                    154            161         9,172
Equity in earnings of Asset Investors                                                  23             --            --
General and administrative expenses                                                  (519)          (420)         (519)
Related-party management fees                                                        (565)           (87)       (1,678)
Interest expense                                                                     (273)            --            --
Related-party acquisition fees                                                       (205)          (124)           --
Reincorporation expenses                                                             (120)            --            --
Costs related to abandonment of potential marina investments                           --           (500)           --
Gain on sale of bonds                                                                  --             --         5,786
                                                                                ---------      ---------      --------

Net income                                                                      $   2,524      $   3,441      $ 13,706
                                                                                =========      =========      ========

Basic and diluted earnings per share                                            $     .24      $     .33      $   1.32
                                                                                =========      =========      ========

Weighted average common shares outstanding                                         10,342         10,357        10,332

Weighted average common shares and common share equivalents outstanding            10,342         10,372        10,371

Dividends paid per share:
   Regular dividends                                                            $     .52       $    .39      $    .68
   Special dividends                                                                   --             --           .26
   Capital gain dividends                                                              --             --           .17
                                                                                ---------      ---------      --------
                                                                                $     .52       $    .39      $   1.11
                                                                                =========      =========      =========

</TABLE>



                 See Notes to Consolidated Financial Statements.

                                     F - 4
<PAGE>




                    COMMERCIAL ASSETS, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

              For the Years Ended December 31, 1999, 1998 and 1997

                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                Retained
                                                                                Earnings
                                                                              (Dividends In             Accumulated
                                                  Common Stock     Additional   Excess of                  Other         Total
                                         -------------------------   Paid-In   Accumulated   Treasury  Comprehensive  Stockholders'
                                            Shares        Amount     Capital    Earnings)     Stock       Income        Equity
                                         ----------    ----------- -----------   --------      ------      ------        ------

<S>                                         <C>         <C>        <C>           <C>        <C>          <C>            <C>
BALANCES - DECEMBER 31, 1996                10,316      $  103     $  76,559     $ (1,354)  $    --      $(3,389)       $  71,919

Comprehensive Income
    Net income                                  --          --            --       13,706        --           --           13,706
    Reversal of unrealized holding
      losses upon restructuring of
      bonds                                     --          --            --           --        --        3,389            3,389
                                           -------      ------     ---------     --------   -------      -------        ---------
       Comprehensive Income                     --          --            --       13,706        --        3,389           17,095
                                           -------      ------     ---------     --------   -------      -------        ---------
Issuance of common stock                        26           1           165           --        --           --              166
Dividends                                       --          --            --      (11,475)       --           --          (11,475)
                                           -------      ------     ---------      -------   -------      -------        ---------
BALANCES - DECEMBER 31, 1997                10,342         104        76,724          877        --           --           77,705

Issuance of common stock                        22          --           150           --        --           --              150
Net income                                      --          --            --        3,441        --           --            3,441
Dividends                                       --          --            --       (4,042)       --           --           (4,042)
                                           -------      ------     ---------     --------   -------      -------        ---------
BALANCES - DECEMBER 31, 1998                10,364         104        76,874          276        --           --           77,254

Issuance of common stock                        29          --           144           --        --           --              144
Purchase of treasury stock                      --          --            --           --      (441)          --             (441)
Net income                                      --          --            --        2,524        --           --            2,524
Dividends                                       --          --            --       (5,400)       --           --           (5,400)
                                           -------      ------     ---------     --------   -------      -------        ---------
BALANCES - DECEMBER 31, 1999                10,393      $  104     $  77,018     $ (2,600)  $  (441)     $    --        $  74,081
                                           =======      ======     =========     ========   =======      =======        =========

</TABLE>


                 See Notes to Consolidated Financial Statements.

                                     F - 5
<PAGE>


                    COMMERCIAL ASSETS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                                               Year Ended December 31,
                                                                                               -----------------------
                                                                                         1999          1998           1997
                                                                                         ----          ----           ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                   <C>           <C>            <C>
Net income                                                                            $  2,524      $  3,441       $ 13,706
Adjustments to reconcile net income to net cash flows from operating activities:
   Depreciation and amortization                                                         1,289            50             --
   Amortization of premium on short-term investments                                        91           274             --
   Amortization of discount on secured long-term notes payable                             158            --             --
   Amortization of discounts on CMBS bonds                                                  --            --         (2,381)
   Accrued income on participating mortgages                                              (418)         (443)            --
   Accrued income on CMBS bonds                                                            (92)           --             --
   Equity in earnings of real estate joint ventures                                         (9)           --             --
   Equity in earnings of Asset Investors                                                   (23)           --             --
   Gain on sale of bonds                                                                    --            --         (5,786)
   Increase in accounts payable and accrued liabilities                                    286           537            216
   (Increase) decrease in other assets                                                  (1,135)          323         (1,327)
                                                                                      --------      --------       --------
     Net cash provided by operating activities                                           2,671         4,182          4,428
                                                                                      --------      --------       --------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of real estate                                                               (34,292)      (12,671)            --
Purchases of Asset Investors' common stock                                              (1,433)           --             --
Collections on short-term investments                                                   10,059        30,313             --
Notes receivable advances                                                               (1,339)         (477)            --
Proceeds from sale of short-term investments                                            22,411        16,085             --
Acquisitions of short-term investments                                                      --       (91,946)            --
Investments in participating mortgages, net                                             (1,380)       (8,959)            --
Investment in real estate joint ventures                                                  (648)       (1,280)            --
Capital replacements and improvements                                                   (1,178)           (7)            --
Investment in Westrec                                                                       --        (2,301)            --
Collections on note receivable from Westrec                                                448            --             --
Dividends from real estate joint ventures                                                    5            --             --
Dividends from Asset Investors                                                              60            --             --
Proceeds from sale of bonds                                                                 --            --         77,693
Acquisition of CMBS bonds                                                                   --            --         (4,801)
Collections on CMBS bonds                                                                   78           242             --
                                                                                      --------      --------       --------
     Net cash provided by (used in) investing activities                                (7,209)      (71,001)        72,892
                                                                                      --------      ---------      --------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured long-term notes payable                                           12,600            --             --
Dividends paid                                                                          (5,400)       (4,042)       (11,475)
Payment of loan costs                                                                     (541)           --             --
Purchase of treasury stock                                                                (441)           --             --
Principal paydowns on secured short-term financing                                        (214)           --             --
Principle paydowns on secured long-term notes payable                                      (94)           --             --
Proceeds from issuance of Common Stock                                                      --            --             31
                                                                                      --------      --------       --------
     Net cash provided by (used in) financing activities                                 5,910        (4,042)       (11,444)
                                                                                      --------      --------       --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     1,372       (70,861)        65,876
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                         3,292        74,153          8,277
                                                                                      --------      --------       --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                            $  4,664      $  3,292       $ 74,153
                                                                                      ========      ========       ========

</TABLE>


                 See Notes to Consolidated Financial Statements.

                                     F - 6
<PAGE>

                    COMMERCIAL ASSETS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



A.       Organization

Commercial  Assets,  Inc.  ("CAX"  and,  together  with  its  subsidiaries,  the
"Company") is a Delaware  corporation  that has interests in  manufactured  home
communities  and has  elected  to be taxed  as a real  estate  investment  trust
("REIT").  Prior to June 10,  1999,  the  Company  was a  Maryland  corporation.
Effective June 10, 1999, the Company's stockholders approved its reincorporation
in Delaware. The Company's common stock, par value $.01, (the "Common Stock") is
listed on the American Stock Exchange under the symbol "CAX."

Prior to 1998,  the Company owned  subordinate  classes of  Commercial  Mortgage
Backed  Securities ("CMBS bonds").  In November 1997, the Company  resecuritized
its  subordinate  CMBS bond  portfolio.  This resulted in the Company  receiving
$77,693,000  cash and  retaining a residual  interest in an owner trust  arising
from the resecuritization.  In the third quarter of 1998, the Company decided to
invest in manufactured home communities and as of December 31, 1999 has invested
approximately  $70  million  in  12  manufactured  home  communities  (including
investments  in  participating  mortgages and real estate joint  ventures)  with
1,840 developed homesites and 1,370 undeveloped homesites.

The  Company's  daily  operations  are  performed  by a manager  pursuant  to an
agreement   currently  in  effect   through   December  2000  ("the   Management
Agreement"). Since November 1997, Asset Investors Corporation (together with its
subsidiaries,  "Asset Investors") has been the manager. Asset Investors owns 27%
of the Company's  Common Stock.  No change was made to the Management  Agreement
during 1998. For 1999, the Incentive Fee was amended to provide that it is based
on Funds From Operations, less an annual capital replacement reserve of at least
$50 per developed  homesite,  instead of the Company's REIT income.  In general,
FFO is net income plus  depreciation,  amortization and real estate  acquisition
fees. The  Management  Agreement has been extended to December 31, 2000 with the
same terms as 1999  except  that the  Management  Agreement  will  automatically
terminate if the Company merges with Asset Investors.  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,  officers  of Asset  Investors  are also
officers of the Company.

B.       Proposed Merger with Asset Investors

The Company and Asset Investors have agreed to merge, subject to the approval by
both (a) a majority of Asset Investors' outstanding shares and (b) two-thirds of
the Company's  outstanding shares. Asset Investors owns approximately 27% of the
Company's outstanding shares and has agreed to vote these shares in favor of the
merger.  Asset  Investors  will issue 0.4075 shares of its common stock for each
outstanding  share of the Company's Common Stock.  Alternatively,  the Company's
stockholders  may elect to receive  $5.75 per share in cash for up to  3,549,868
shares of the Company's  Common Stock with any remaining shares receiving 0.4075
shares of Asset  Investors  common stock.  Asset  Investors and the officers and
directors  of Asset  Investors  and the Company  have agreed to elect to receive
shares of Asset  Investors  common stock for all shares of the Company's  Common
Stock that they own.  The  stockholder  meetings  are  expected  to occur in the
second quarter of 2000.

                                     F - 7
<PAGE>

C.       Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated  financial  statements  include the accounts of the Company and
its  majority-owned  subsidiaries.  All  significant  intercompany  balances and
transactions have been eliminated in consolidation.  The Company's investment in
Asset Investors is recorded under the equity method.

Real Estate and Depreciation

Rental  properties are recorded at cost less  accumulated  depreciation,  unless
considered  impaired.  If events or  circumstances  indicate  that the  carrying
amount of a property may be impaired, the Company will make an assessment of its
recoverability  by  estimating  the future  undiscounted  cash flows,  excluding
interest charges, of the property.  If the carrying amount exceeds the aggregate
future cash flows,  the Company would recognize an impairment loss to the extent
the carrying  amount exceeds the fair value of the property.  As of December 31,
1999,  management  believes  that no  impairment  losses exist based on periodic
reviews. No impairment losses were recognized in 1999 or 1998.

Depreciation is computed using the straight line method over an estimated useful
life of 25 years for land  improvements and buildings.  Significant  renovations
and  improvements,  which  improve or extend the useful  life of the asset,  are
capitalized and  depreciated  over the remaining  estimated  life.  Maintenance,
repairs and minor improvements are expensed as incurred.

Investments in Participating Mortgages

The Company has loans  secured by real estate which provide for an interest rate
return plus up to 50% of net  profits,  cash flows and sales  proceeds  from the
underlying real estate. The Company accounts for these investments as loans when
(a) the Company  does not have an interest  in the  borrower  and either (b) the
borrower has a substantial  equity  investment in the real estate  collateral or
(c) the  Company  has  recourse  to other  substantial  tangible  assets  of the
borrower.  As  such,  the  Company  records  interest  income  based on the rate
provided  for in the loan and records its share of any net profits or gains from
the sale of the underlying real estate when realized.  If the above requirements
are not met,  then the loan is  accounted  for as an equity  investment  in real
estate under the equity method of accounting.

Investments in Real Estate Joint Ventures

Investments  in real estate joint ventures in which the Company does not control
the joint  venture's  activities  are  accounted  for under the equity method of
accounting.

Investment in and Note Receivable from Westrec

The Company  classifies  its investment in and note  receivable  from Westrec as
available-for-sale  and carries  this at estimated  fair value in the  financial
statements.  The Company  believes that the contractual  amounts provided for in
the note  receivable  and the  agreement  under  which the  Company can sell its
shares of Westrec common stock approximates fair value at December 31, 1999.

Revenue Recognition

The Company derives its income from the rental of homesites.  The leases entered
into by residents  for the rental of the site are generally for terms not longer
than one year and the associated  rental revenues are recognized when earned and
due from residents.

                                     F - 8
<PAGE>

Interest on participating  mortgages is recorded based upon outstanding balances
and interest  rates per the terms of the  mortgages.  In  addition,  the Company
evaluates the  collectibility  of any unpaid  interest and provides  reserves as
necessary. As of December 31, 1999, there is no reserve for uncollected interest
on the participating mortgages.  Rent on ground leases is recognized when earned
and due from lessee.

Deferred Financing Costs

Fees and costs incurred in obtaining financing are capitalized.  These costs are
amortized  over  the  terms of the  related  loan and are  charged  to  interest
expense.

Capitalized Interest

Interest is capitalized on development  projects  during periods of construction
or development.  During 1999,  capitalized  interest was $417,000.  There was no
capitalized interest in 1998 or 1997.

CMBS Bonds

Earnings from CMBS bonds was comprised of coupon  interest and the  amortization
of the purchase  discount.  Amortization of the purchase discount was recognized
by the interest method using a constant effective yield and assumed an estimated
rate of future  prepayments,  defaults and credit  losses which was adjusted for
actual experience. The allowance for credit losses was equal to the undiscounted
total of future estimated  credit losses.  In the event the Company adjusted 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.  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  financial  instruments  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 REIT. If it so qualifies,  the Company's
net 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.

Ninety percent of dividends paid in 1999 represented  ordinary taxable income to
stockholders  and 10%  represented  a return of capital for income tax  purposes
(unaudited).  Regular and special  dividends  paid in 1998 and 1997  represented


                                     F - 9
<PAGE>

ordinary  taxable  income to the  stockholders  (unaudited).  In  addition,  the
Company paid a capital gains dividend of $.17 per share in 1997 (unaudited).

Earnings Per Share

Basic  earnings  per  share  for  1999,   1998  and  1997  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 dilutive,  unexercised
stock  options of 0,  15,000 and  39,000 in 1999,  1998 and 1997,  respectively.
Stock  options  of  62,000,   43,000  and  28,000  for  1999,   1998  and  1997,
respectively, have been excluded from diluted earnings per share as their effect
would be anti-dilutive.

Treasury Stock

Treasury stock is recorded at cost. In addition,  the Company  purchased 114,000
shares of Asset  Investors'  common stock during 1999.  Because Asset  Investors
owns 27% of the  Company's  Common  Stock,  the  Company  is  deemed  to have an
interest in 48,000  shares of the  Company's  Common Stock and has also recorded
this as treasury stock.

Statements of Cash Flows

For purposes of reporting cash flows,  cash  maintained in bank accounts,  money
market funds and  highly-liquid  investments  are considered to be cash and cash
equivalents. The Company paid $565,000 in interest during 1999. The Company paid
no interest in 1998 or 1997.

Non-cash operating,  investing and financing  activities for 1999, 1998 and 1997
were as follows (in thousands):

<TABLE>
<CAPTION>

                                                                            1999            1998            1997
                                                                          --------        --------       ---------
<S>                                                                       <C>              <C>            <C>
Accrued initial capital expenditures on real estate purchases             $   400          $   --         $    --
Issuance of Common Stock for services                                         144             150             135
Escrow of long-term debt proceeds                                             300              --              --
Acquisitions of real estate by:
    Issuance of note payable                                                4,519              --              --
    Assumption of debt and minority interest in subsidiaries                4,068              --              --
    Cancellation of participating mortgages                                 8,978              --              --
Principal collections on CMBS bonds transferred to restricted cash             --              --           6,227
Unrealized holding gains and losses on CMBS bonds                              --              --           3,389

</TABLE>

Use of Estimates

The  preparation  of the  financial  statements in  conformity  with  accounting
principles  generally accepted in the United States 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.

Reclassifications

Certain  reclassifications  have  been  made in the 1998  and 1997  consolidated
financial  statements  to conform to the  classifications  currently  used.  The
effect of such reclassifications on amounts previously reported is immaterial.

                                     F - 10
<PAGE>

D.       Short-term Investments

The Company has  short-term  investments  consisting  of  mortgage-backed  bonds
guaranteed  by Federal  Home Loan  Mortgage  Corporation  and  Federal  National
Mortgage  Association.  These investments are classified as  available-for-sale,
and the fair market value at December 31, 1999  approximates  the carrying value
of  $12,502,000.  During  1999 and 1998,  the Company  had no  unrealized  gains
(losses) on these  investments.  The Company had  $22,411,000 and $16,085,000 in
proceeds  from  the  sale  of  short-term  investments  during  1999  and  1998,
respectively,  and  realized  no gains  (losses)  from such  sales.  The Company
determined its basis in these sold investments using the specific identification
method. At December 31, 1999, these investments had the following maturities:

                        Amount              Maturity
                  -------------------    ---------------
                      $3,395,000              2000
                      $9,107,000              2003

E.       Investments in Manufactured Home Communities

During 1999,  the Company  acquired eight  manufactured  home  communities  with
approximately  1,450  developed  homesites and 500  undeveloped  homesites.  The
Company had  participating  mortgages on three of these communities in 1998. The
total investment was $52,257,000  consisting of $34,292,000 cash,  $8,587,000 of
assumed debt,  $8,978,000 by canceling  participating  mortgages and $400,000 of
estimated   initial  capital   expenditures.   During  1998,  the  Company  paid
$12,671,000 to acquire two manufactured home communities with  approximately 310
developed  homesites  and  790  undeveloped  homesites.  These  investments  are
recorded as real estate.

The Company made $8,959,000 of  participating  mortgages in 1998 involving three
manufactured  home  communities  and adjacent land involving  approximately  310
developed homesites and 210 undeveloped homesites.  These non-recourse mortgages
were  secured  by  the  three  manufactured  home  communities,  adjacent  land,
commercial real estate,  two additional  manufactured  home  communities and one
recreational  vehicle  park.  These  investments  are recorded as  participating
mortgages.  In 1999,  the Company  cancelled  these  participating  mortgages in
connection  with the purchase of these  manufactured  home  communities  and the
adjoining land.

The following  unaudited  pro-forma  information has been prepared  assuming the
acquisition  of the  manufactured  home  communities  had been  completed at the
beginning of the periods  presented.  The  unaudited  pro-forma  information  is
presented for informational  purposes only and is not necessarily  indicative of
what would have occurred if the  restructurings  and the  acquisitions  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 1999 and 1998 are as follows
(in thousands, except per share data):

                                                1999                 1998
                                              --------             --------
Revenues                                      $  6,927             $  5,775
                                              ========             ========

Net income                                    $  1,252             $    391
                                              ========             ========

Basic and diluted earnings per share          $    .12             $    .04
                                              ========             ========

The Company is actively seeking to acquire additional  communities and currently
is engaged in negotiations  relating to the possible  acquisition of a number of
communities.   At  any  time,  these  negotiations  are  at  various  stages  of


                                     F - 11
<PAGE>

completion,   which  may  include  outstanding   contracts  to  acquire  certain
manufactured  home  communities,  subject  to  satisfactory  completion  of  the
Company's due diligence review.

F.       Real Estate

Real estate at December 31, 1999 and 1998, is as follows (in thousands):
<TABLE>
<CAPTION>
                                                                                           1999              1998
                                                                                        ----------        ----------
<S>                                                                                     <C>               <C>
Land                                                                                    $   15,290        $    3,798
Land improvements and buildings                                                             50,312             8,880
                                                                                        ----------        ----------
                                                                                            65,602            12,678
Less accumulated depreciation                                                               (1,329)              (50)
                                                                                        ----------        ----------

Investment in real estate, net                                                          $   64,273        $   12,628
                                                                                        ==========        ==========
</TABLE>

Land  improvements and buildings  consist  primarily of  infrastructure,  roads,
landscaping, clubhouses, maintenance buildings and common amenities.

Two  manufactured  home communities have been leased to a third party. The first
lease involves a community acquired by the Company at a cost of $1.4 million and
is for a term of 50 years.  The Company  receives  initial annual lease payments
equal to 9% of its cost. The annual lease payments increase by 4% per annum over
the prior year's lease payments until the annual lease payment equals 13% of the
Company's cost. In addition,  the Company receives  additional rent equal to 50%
of the lessee's net cash flow from the  property.  In the event of a sale of the
property,  the Company  receives  all  proceeds  until it has realized its total
purchase price of the property plus a 13% per annum rate of return.  The Company
then  receives 50% of any sales  proceeds in excess of such amount.  The Company
terminated  the lease on January 1, 2000 by  canceling  $187,000 in loans to the
lessee.

The other leased  community  involves two phases and has been leased to the same
third party for 50 years.  Annual lease  payments on the first phase during 1999
was  $890,000 and  increases in later years by 4% per annum.  There are no lease
payments on the second phase until the sites are  developed,  at which time, the
annual  lease  payments on the second phase will be equal to 10% times the costs
incurred in developing this phase.  In addition,  the lessee pays to the Company
additional rent equal to 50% of the lessee's net cash flow from the property. In
the event of a sale, the Company receives 50% of any sales proceeds in excess of
the  Company's  cost.  The  Company  terminated  the lease on January 1, 2000 by
canceling $186,000 in loans to the lessee.

G.       Investments in Participating Mortgages

During 1998, the Company made investments in participating  mortgages secured by
three  manufactured home communities and adjoining land. The non-recourse  notes
accrued  interest  at 15% per annum and paid  interest  at 9% per annum  through
August 1999,  with the pay rate  increasing 1% each year thereafter to a maximum
of 12% per annum.  The loans were  scheduled  to mature in September  2007.  The
Company  also  received  additional  interest of 50% of the net profits and cash
flows from the  properties.  In August  1999,  the Company  purchased  the three
communities  and  adjoining  land by canceling the  participating  mortgages and
releasing additional collateral pledged on the mortgages.

                                     F - 12
<PAGE>

The following  table provides  unaudited  summary  financial  information of the
borrower  with  respect to these  participating  mortgages  for the period  from
August 1998 (date of  participating  mortgages) to December 31, 1998 and January
1999 to August 1999 (date the Company acquired the properties):
<TABLE>
<CAPTION>

                                                                           January 1999 to         August 1998 to
                                                                             August 1999            December 1998
                                                                         --------------------    --------------------
                                                                                       (in thousands)
                                                                                         (unaudited)
<S>                                                                            <C>                     <C>
Rental and other property revenues                                             $   828                 $   458
Property operating expenses                                                       (369)                   (234)
Depreciation expense                                                               (52)                    (31)
                                                                               -------                 -------
Income from rental property operations                                             407                     193
                                                                               -------                 -------

Net loss                                                                          (384)                   (108)
</TABLE>

The  Company  also  has  investments  in  participating   mortgages  secured  by
individual homes and homesites within two manufactured home  communities.  These
mortgages  accrue  interest at 10% and pay interest from the cash flows from the
homes and homesites.  The Company also receives additional interest equal to 50%
of the net profits and cash flows from the homes and homesites.

As of December 31, 1999, the Company had investments in participating  mortgages
of  $2,148,000.  During 1999 and 1998,  the  Company had income of $920,000  and
$451,000, respectively, from participating mortgages.

H.       Investments in Real Estate Joint Ventures

The  Company  has  a  $1,304,000  investment  in a  joint  venture  involving  a
manufactured  home  community.  The Company  receives a priority return from the
venture  until the Company has received an amount  equal to 9% times  $1,250,000
for 1999. The Company's  subsequent  annual priority return increases by 5% over
the prior year's amount.  The other venturer then receives a similar  percentage
return on its $300,000  investment in the venture.  In the event the property is
sold,  the Company  receives all proceeds  until it has received its  investment
plus 20% per annum.  The other  venturer then receives all proceeds until it has
received its investment  plus 20% per annum.  Any excess sales proceeds are then
shared  equally.  The  Company  did not record any income  from this real estate
joint venture in 1999 or 1998 as the property is under development.

In November 1999, the Company invested  $624,000 in a joint venture  involving a
manufactured home community.  The Company receives a priority annual return from
the venture equal to 9% times $690,000  through 2000.  After 2000, the Company's
priority return increases by 4% annually.  Thereafter,  the Company receives 20%
of any  profits  and cash flows of the  venture in excess of the above  priority
returns.  During 1999,  the Company  recorded  $10,000 in income from this joint
venture.

I.       Investment in Asset Investors

During 1999,  the Company  purchased  114,000 shares  (approximately  2%) of the
common stock of Asset  Investors.  The Company has recorded  its  investment  in
Asset  Investors  under the equity method  because Asset  Investors  manages the
Company and owns  approximately  27% of the Company's Common Stock. In 1999, the
Company recorded $23,000 in equity in earnings of Asset Investors.

                                     F - 13
<PAGE>

J.       CMBS Bonds

In November 1997, the Company  resecuritized its portfolio of retained interests
in prior  securitizations  that are in the form of CMBS  bonds.  Nine bonds were
sold, one bond was redeemed and the remaining two CMBS bonds were  resecuritized
by transferring the bonds and related restricted cash to an owner trust in which
the Company retained a residual interest. In a private placement, the trust then
sold debt securities  representing  senior interests in the trust's assets.  The
Company  recorded the  resecuritization  of its portfolio as a sale. The Company
received  $77,693,000  in cash proceeds and recorded a $5,786,000  gain from the
sale.  The Company  determined  its basis in the CMBS bonds  using the  specific
identification  method.  The  Company  paid  $426,000 in  incentive  fees to its
manager in connection  with the sale.  These  incentive fees were netted against
the gain.

The estimated  fair value of the residual  interest  retained by the Company was
$2,000,000.  During 1999 and 1998, the Company  received  $141,000 and $403,000,
respectively,  of which  $78,000 and $242,000,  respectively,  was recorded as a
reduction in the net book value of the retained residual interest.  The net book
value at December 31, 1999 was $1,753,000  which  approximates  fair value.  The
Company had no unrealized  gains (losses) on its CMBS bonds at December 31, 1999
and 1998.  The maturity  dates of the CMBS bonds range from 2001 to 2004 and the
Company had no sales of CMBS bonds during 1999 or 1998.

In 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.

K.       Investment in and Note Receivable from Westrec

Prior  to  deciding  to  acquire  manufactured  home  communities,  the  Company
evaluated  acquiring interests in marinas and, in connection with this, acquired
a 12% interest in Westrec Marina  Management Inc.  ("Westrec") for approximately
$2,500,000  and made a loan to an affiliate of Westrec.  In the third quarter of
1998, the Company decided to invest in manufactured home communities  instead of
marinas.  The Company has recorded its  investment in and note  receivable  from
Westrec at the sum of the amount for which the Company can re-sell its  interest
in Westrec plus the  outstanding  balance of the note  receivable.  In 1998, the
Company expensed $500,000 for due diligence,  legal, and other costs incurred in
connection with investigating investments in marinas.

L.       Secured Long-Term Notes Payable

The following table summarizes the Company's secured long-term notes payable (in
thousands):
<TABLE>
<CAPTION>

                                                                                               December 31,
                                                                                      -------------------------------
                                                                                          1999              1998
                                                                                      -------------      ------------
Fixed rate, ranging from 6.70% to 7.77%, fully-amortizing, non-recourse notes
<S>                                                                                       <C>             <C>
   maturing at various dates in 2019                                                      $ 12,815        $      --
7.67% fixed rate, partially-amortizing, non-recourse note maturing in 2007                   2,950               --
Recourse, fully-amortizing note discounted at 7.00%, maturing in 2002                        4,677               --
                                                                                          --------        ---------
                                                                                          $ 20,442        $      --
                                                                                          ========        =========
</TABLE>

Real estate assets which secure the long-term notes payable had a net book value
of $35,326,000 at December 31, 1999. The Company had $522,000 in escrow for real
estate taxes and property improvements at December 31, 1999.

                                     F - 14
<PAGE>

Scheduled  principal  payments after December 31, 1999 for the secured long-term
notes payable are (in thousands):

                          2000                        $   1,218
                          2001                            2,098
                          2002                            2,453
                          2003                              419
                          2004                              449
                          Thereafter                     13,805
                                                      ---------
                                                      $  20,442
                                                      =========

M.       Stock Option Plan

The Company has a Stock Incentive Plan for the issuance of  non-qualified  stock
options to its  directors and officers,  employees and  consultants  which as of
December  31,  1999,  permitted  the issuance of up to an aggregate of 3,000,000
shares of Common  Stock,  of which  331,000 and 454,000  related to  outstanding
stock options as of December 31, 1999 and 1998, 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.  The stock options have various
terms ranging up to 10 years.

Presented below is a summary of the changes in stock options for the three years
ended December 31, 1999. As of December 31, 1999, the  outstanding  options have
exercise   prices   ranging   from   $5.625  to  $6.625  and  have  a  remaining
weighted-average life of 3.0 years.
                                                                        Weighted
                                                                        Average
                                                 Exercise Price         Shares
                                                 --------------         ------
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
     Granted                                           6.62              38,000
     Forfeited                                         7.50            (290,000)
     Expired                                           7.25             (11,000)
                                                     ------          ----------
Outstanding - December 31, 1998                        6.23             454,000
     Granted                                           6.50              38,000
     Expired                                           6.32            (161,000)
                                                     ------          ----------
Outstanding - December 31, 1999                      $ 6.22             331,000
                                                     ======          ==========

Options  granted  to date vest  over  various  periods  up to two  years.  As of
December 31, 1999, 1998 and 1997, 331,000, 445,000 and 660,000, respectively, of
the outstanding options were exercisable and the weighted average exercise price
of exercisable options was $6.22, $6.22 and $6.78, respectively.

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


                                     F - 15
<PAGE>

value  for  these   options  was  estimated  at  the  date  of  grant  using  an
option-pricing model with the following weighted average assumptions:

<TABLE>
<CAPTION>

                                                             1999                   1998                  1997
                                                     -------------------    -------------------    ------------------
<S>                                                     <C>                    <C>                   <C>
Range of risk free interest rates                       5.3% to 6.5%           5.8% to 6.1%          5.7% to 6.8%
Expected dividend yield                                    9.8%                   8.3%                  10.0%
Volatility factor of the expected market price of
    the Company's common stock                             0.200                  0.200                  0.200
Weighted average expected life of options                10.0 years             10.0 years             5.0 years

</TABLE>

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 1999,  1998 and 1997,  the estimated  weighted-average,  grant-date  fair
value of options  granted  was $.26,  $.41 and $.47,  respectively.  The Company
assumed  lives of five to ten years and  risk-free  interest  rates equal to the
Five- or  Ten-Year  U.S.  Treasury  rate on the date the  options  were  granted
depending on option term. In addition,  the expected stock price  volatility and
dividend growth rates were estimated based upon historical averages over the two
years ended  December 31, 1999,  adjusted for changes  based upon the  Company's
investment in manufactured home community assets.

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the options'  vesting  period.  The  Company's  pro
forma information follows (in thousands except for per share data):

<TABLE>
<CAPTION>

                                                                       1999              1998             1997
                                                                   -----------       -----------      ------------
<S>                                                                  <C>               <C>              <C>
Pro forma net income                                                 $ 2,514           $3,426           $ 13,664
Pro forma basic earnings per share                                   $  0.24           $ 0.33           $   1.32
Pro forma diluted earnings per share                                 $  0.24           $ 0.33           $   1.31
</TABLE>

N.       Management Fees

The Company operates under a management agreement, pursuant to which the manager
advises the Company on its business and oversees its daily  operations,  subject
to the supervision of the Company's Board of Directors. Asset Investors has been
the manager since  November 1997.  The  Management  Agreement  provides that the
manager receives a "Base Fee," an "Acquisition  Fee" and an "Incentive Fee." The
Base  Fee is  payable  quarterly  in an  amount  equal  to 1% per  annum  of the
Company's average net book value of real estate-related  assets. The Acquisition
Fee equals 0.5% of the cost of each real estate-related asset acquired. For 1997
and 1998, the Incentive Fee equals 20% of the amount by which the Company's REIT
taxable  income  exceeds the amount  calculated  by  multiplying  the  Company's
"average  net worth" by the  "Ten-Year  United  States  Treasury  rate" plus 1%.
During 1999, the Incentive Fee was amended to provide that this fee was based on
the Company's Funds From Operations,  less an annual capital replacement reserve
of at least $50 per  developed  homesite,  instead of REIT  income.  In general,
Funds From Operations is equal to net income plus depreciation, amortization and
acquisition  fees. In 1997, the manager also received  "Administrative  Fees" on
each CMBS bond  outstanding.  Administrative  Fees were terminated in connection
with the November 1997 restructuring of the CMBS bond portfolio.  The Management
Agreement has been extended through December 31, 2000. The terms are the same as
provided for in 1999.

                                     F - 16
<PAGE>

Fees paid to the manager during 1999, 1998 and 1997 were (in thousands):
<TABLE>
<CAPTION>

                                          1999               1998               1997
                                     ---------------    ---------------     --------------
<S>                                      <C>                <C>                <C>
Base Fees                                $  565             $   87             $    598
Acquisition Fees                            205                124                   23
Incentive Fees                               --                 --                1,024
Administrative Fees                          --                 --                   56
                                         ------             ------             --------
                                         $  770             $  211             $  1,701
                                         ======             ======             ========
</TABLE>

Acquisition  Fees  incurred  in 1997  were  capitalized  as part of the  cost of
acquiring CMBS bonds. In addition,  the Company  incurred  $426,000 of Incentive
Fees in 1997  relating  to the  gain on the  restructuring  of the  CMBS  bonds.
Acquisition  Fees incurred in 1999 and 1998 were expensed because such fees were
paid to Asset Investors, owner of 27% of the Company's Common Stock.

O.       Commitments and Contingencies

In connection with the acquisition of a manufactured home community, the Company
entered into an earn-out agreement with respect to 154 unoccupied homesites. The
Company will pay $17,000 to the former owner for each newly  occupied  homesite.
During  1999 and 1998,  the  Company  paid  $17,000  and $0,  respectively,  for
homesites that became occupied.

The Company has agreed to acquire from time-to-time  homesites subject to ground
leases.  The purchase  price for each  homesite will be equal to the base annual
rent provided for in the ground lease divided by 9%. The Company is not required
to acquire  these  homesites  in groups of less than 10. The  maximum  number of
homesites  the  Company   might   purchase  is   approximately   500  for  total
consideration of approximately  $20 million.  The Company purchased no homesites
during 1999 or 1998.

The Company has agreed to invest up to an  additional  $680,000 in a real estate
joint  venture in four  equal,  annual  installments  of $170,000  beginning  in
November 2000.

In connection  with the  acquisition of a property,  the Company entered into an
earn-out  agreement  whereby it will pay the former owner an amount equal to the
increase  in the  property's  net  operating  income  divided  by 9.5% until the
Company pays a total of $2,160,000. No amount was paid during 1999.

In September  1999,  four of the  Company's  stockholders,  individually  and as
purported representatives of the Company's stockholders,  except Asset Investors
and its  affiliates,  filed three  purported  class action  lawsuits in Delaware
against the Company,  the members of the board of directors and certain officers
of Asset Investors and the Company.  These lawsuits  alleged that the defendants
breached their fiduciary duties to the Company's stockholders in connection with
the Company's  proposed  merger with Asset  Investors  and the Company's  recent
reincorporation in Delaware.  In November 1999, these lawsuits were consolidated
into a single  lawsuit.  On March 7, 2000, the parties entered into a settlement
agreement,  subject to the court's approval which,  amended the merger agreement
as follows:

o    the Company's stockholders, other than Asset Investors and the officers and
     directors of Asset Investors and the Company, may elect to receive $5.75 in
     cash per share for up to  3,549,868  shares of the  Company's  Common Stock
     with any  remaining  shares to  receive  0.4075  shares of Asset  Investors
     common stock; and
o    the percentage of votes of the Company's Common Stock needed to approve the
     merger was increased from a majority to two-thirds.

P.       Operating Segments

Investments in manufactured home communities constitute substantially all of the
Company's investments. Management assesses the performance of the Company as one
operating segment.

                                     F - 17
<PAGE>

Q.       Fair Value of Financial Instruments

The following  methods and  assumptions  were used to estimate the fair value of
each  type of  financial  instrument.  The  estimates  of fair  value  have been
determined  by the Company  using  available  market  information  and valuation
methodologies.

o    Cash and cash equivalents,  accounts payable and accrued  liabilities,  and
     secured short-term  financing - the carrying amounts approximate fair value
     because of the short maturity of these instruments.
o    Investment in Asset  Investors - the fair value was  determined  based upon
     the closing  price of Asset  Investors  common  stock on the New York Stock
     Exchange, Inc. as of the end of 1999.
o    Secured  long-term  notes payable - based upon  borrowing  rates  currently
     available to the Company, the carrying value of its secured long-term notes
     payable approximates their fair value.

The  carrying  values  and fair  values  of the  Company's  investment  in Asset
Investors at December 31, 1999 is as follows (in thousands):

                                                                 1999
                                                ------------------------------
                                                Carrying Value      Fair Value
                                                --------------      ----------
     Investment in Asset Investors              $ 1,396,000        $ 1,270,000
                                                ===========        ===========

R.       Other Matters

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.

S.       Selected Quarterly Financial Data (unaudited)

Presented  below  is  selected  quarterly  financial  data for the  years  ended
December 31, 1999 and 1998 (in thousands, except per share data).

<TABLE>
<CAPTION>

                                                                          Three Months Ended,
                                                    -----------------------------------------------------------------
 1999                                                 December 31,     September 30,      June 30,         March 31,
--------------------------------------------------- -------------- ----------------- --------------- ----------------

<S>                                                     <C>            <C>              <C>              <C>
Rental and other property revenues                      $ 1,156        $    945         $    437         $     --
Income from participating mortgages and leases              326             455              603              587
Property operating expenses                                (512)           (428)            (174)              --
Depreciation                                               (493)           (465)            (232)             (89)
                                                        -------        --------          -------         --------
Income from rental property operations                      477             507              634              498
                                                        -------        --------          -------         --------

Interest and other income                                   343             349              520              701
General and administrative expenses                        (115)           (131)            (140)            (133)
Related-party management fees                              (190)           (181)            (114)             (80)
Interest expense                                           (154)            (61)             (58)              --
Related-party acquisition fees                               (8)             (3)            (152)             (42)
Net income                                                  400             408              734              982

Basic and diluted earnings per share                        .04             .04              .07              .09

Weighted average common shares outstanding               10,320          10,325           10,362           10,364
Weighted average common shares and common share
   equivalents outstanding                               10,320          10,325           10,362           10,365

                                     F - 18
<PAGE>

                                                                          Three Months Ended,
                                                    -----------------------------------------------------------------
1998                                                 December 31,     September 30,      June 30,         March 31,
--------------------------------------------------- -------------- ----------------- --------------- ----------------
Income from participating mortgages and leases          $   436        $    151         $     --         $     --
Depreciation                                                (46)             (4)              --               --
                                                        -------        --------          -------         --------
Income from rental property operations                      390             147               --               --
                                                        -------        --------          -------         --------

Interest and other income                                   767           1,012            1,042            1,053
General and administrative expenses                        (117)           (129)             (88)             (86)
Related-party management fees                               (47)            (23)             (12)              (5)
Related-party acquisition fees                              (63)            (61)              --               --
Costs related to abandonment of potential marina
   investments                                               --            (500)              --               --
Net income                                                  967             486              986            1,002

Basic and diluted earnings per share                        .09             .05              .09              .10

Weighted average common shares outstanding               10,364          10,364           10,359           10,342
Weighted average common shares and common share
   equivalents outstanding                               10,366          10,373           10,387           10,378

</TABLE>

T.       Recent Accounting Developments

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards No. 133. Accounting for Derivative  Instruments
and Hedging Activities  ("Statement 133").  Statement 133 requires recording all
derivative  instruments  as  assets  or  liabilities,  measured  at fair  value.
Statement 133 is effective  beginning after 2000. The Company has elected not to
early adopt the  provisions  of  Statement  133 as of December 31, 1999 and when
Statement  133 is adopted,  the Company does not expect  Statement 133 to have a
significant impact on its financial position and results of operations.






                                     F - 19
<PAGE>







                                               COMMERCIAL ASSETS, INC.
                                                     SCHEDULE III
                                       REAL ESTATE AND ACCUMULATED DEPRECIATION
                                                  December 31, 1999
                                           (In Thousands Except Site Data)


<TABLE>
<CAPTION>

                                                                                                    December 31, 1999
                                                                                      ----------------------------------------------
                                                                             Cost                                    Total
                                                                           Capital-                                   Cost
                                                             Initial Cost    ized       Total Cost                   Net of
                                                          ---------------- Subsequ- ---------------------  Accumu-  Accumu-
                                                   Number       Buildings    uent         Buildings          lated    lated
                   Date                     Year     of           and         to             and            Depreci- Depreci- Encum-
 Property Name   Acquired  Location      Developed Sites Land Improvements Acquis.  Land Improvements Total  ation    ation  brances
 ---------------------------------------------------------------------------------------------------------------------------------
<S>                <C>    <C>              <C>    <C>   <C>    <C>        <C>      <C>    <C>        <C>    <C>     <C>       <C>
Casa Encanta       1999   Mesa, AZ         1970    106  $  315 $ 1,152   $    --  $  315  $ 1,152 $ 1,467   $  17  $  1,450  $    --
Cypress Greens     1998   Lakeland, FL     1986    107     240   1,129        28     240    1,157   1,397      60     1,337       --
Desert Harbor      1999   Apache Junction, 1997    207     621   6,169       700   1,058    6,432   7,490     124     7,366    4,677
                          AZ
Fiesta Development 1999   Mesa, AZ           --    206   4,804      --       136   4,804      136   4,940      --     4,940       --
Fiesta Village     1999   Mesa, AZ         1962    170     498   4,029        --     498    4,029   4,527      61     4,466    2,950
La Casa Blanca     1999   Apache Junction, 1993    198     594   6,698        91     594    6,789   7,383     133     7,250       --
                          AZ
La Casa Mini       1999   Apache Junction,   --     --     495     175        --     495      175     670       1       669       --
  Storage                 AZ
Lakeshore Utilities1999   Tampa, FL          --     --      50     100        --      50      100     150       3       147       --
Lakeshore Villas   1999   Tampa, FL        1972    290     870   6,990       293     870    7,283   8,153     219     7,934    5,041
Marina Dunes       1999   Marina, CA         --     --     306      --        13     306       13     319      --       319       --
Rancho Mirage      1999   Apache Junction, 1994    312     930  10,879       108     930   10,987  11,917     290    11,627       --
                          AZ
Riverside          1998   Ruskin, FL       1984    990   3,558   7,744       122   3,558    7,866  11,424     344    11,080    5,478
Royal Palm         1999   Haines City, FL  1971    450   1,383   3,027       131   1,383    3,158   4,541      61     4,480    2,296
Southern Palms     1999   Mesa, AZ         1961     36     189   1,035        --     189    1,035   1,224      16     1,208       --
                                                 -----------------------------------------------------------------------------------
              Total                              3,072 $14,853 $49,127   $ 1,622 $15,290  $50,312 $65,602  $1,329   $64,273  $20,442
                                                 ===================================================================================
</TABLE>




                                     F - 20
<PAGE>




                             COMMERCIAL ASSETS, INC.
                                  SCHEDULE III
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
              For the Years Ended December 31, 1999, 1998 and 1997
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                                     Year Ended December 31,
                                                                                     -----------------------
                                                                             1999              1998             1997
                                                                             ----              ----             ----
Real Estate
<S>                                                                       <C>               <C>              <C>
    Balance at beginning of year                                          $   12,678        $       --       $      --
    Additions during the year:
       Real estate acquisitions                                               51,309            12,671              --
       Additions                                                               1,615                 7              --
    Dispositions                                                                  --                --              --
                                                                          ----------        ----------       ---------
    Balance at end of year                                                $   65,602        $   12,678       $      --
                                                                          ==========        ==========       =========


Accumulated Depreciation
    Balance at beginning of year                                          $      (50)       $       --       $      --
    Additions during the year:
       Depreciation                                                           (1,279)              (50)             --
    Dispositions                                                                  --                --              --
                                                                          ----------        ----------       ---------
    Balance at end of year                                                $   (1,329)       $      (50)      $      --
                                                                          ==========        ==========       =========


</TABLE>



                                     F - 21
<PAGE>




                                               COMMERCIAL ASSETS, INC.
                                                     SCHEDULE IV
                                            MORTGAGE LOANS ON REAL ESTATE
                                                  December 31, 1999
                                                    (in thousands)


<TABLE>
<CAPTION>

                                                                                                           Principal
                                                                                                           Amount of
                                                                                                             Loans
                                                                                                          Subject to
                                      Final       Periodic                  Face          Carrying        Delinquent
                        Interest     Maturity     Payment     Prior      Amount of        Amount of      Principal or
    Description           Rate         Date        Terms      Liens      Mortgages        Mortgages        Interest
---------------------  ------------  ----------  ----------  ---------  --------------  ---------------  ---------------
<S>                        <C>          <C>           <C>     <C>         <C>             <C>                <C>
Savanna Club               10%          9/2018        (1)     $   --      $   1,896       $    1,913         $      --
Sun Lake                   10%          9/2018        (1)         --            222              235                --
                                                             ---------  --------------  ---------------  ---------------
                                                              $   --      $   2,118       $    2,148         $      --
<FN>
                                                             =========  ==============  ===============  ===============

(1)      Interest is paid from any cash flows from the property.

</FN>
</TABLE>



                                     F - 22
<PAGE>




                             COMMERCIAL ASSETS, INC.
                                   SCHEDULE IV
                          MORTGAGE LOANS ON REAL ESTATE
              For the Years Ended December 31, 1999, 1998 and 1997
                                 (in thousands)


<TABLE>
<CAPTION>


                                                                                      Year Ended December 31,
                                                                                      -----------------------
                                                                              1999             1998             1997
                                                                              ----             ----             ----

<S>                                                                        <C>              <C>              <C>
    Balance at beginning of period                                         $    9,328       $       --       $      --

    Additions during period:
       Investments in participating mortgages                                   1,866            8,913              --
       Accrued interest                                                           925              371              --
       Loan costs                                                                  --               70              --
    Deductions during period:
       Collections of principal                                                  (486)             (20)             --
       Collections of interest                                                   (503)              (2)             --
       Amortization of loan costs                                                  (4)              (4)             --
       Cancellation of debt in connection with purchase of property            (8,978)              --              --
                                                                           ----------       ----------       ---------

    Balance at close of period                                             $    2,148       $    9,328       $      --
                                                                           ==========       ==========       =========

</TABLE>




                                     F - 23
<PAGE>



                                  EXHIBIT INDEX


Exhibit No.                               Description


      2.1         Agreement  and Plan of  Merger,  dated as of March  12,  1999,
                  between  Commercial Assets,  Inc., a Maryland  corporation and
                  Commercial Assets, Inc., a Delaware corporation  (incorporated
                  herein by reference to Exhibit 2.1 to the Registrant's Current
                  Report on Form 8-K, dated June 10, 1999, Commission File No.
                  1-2262, filed on June 10, 1999).

      2.2         Agreement and Plan of Merger,  dated as of August 31, 1999, by
                  and between the  Registrant  and Asset  Investors  Corporation
                  (incorporated  herein  by  reference  to  Exhibit  2.1  to the
                  Registrant's  Current  Report on Form 8-K,  dated  August  31,
                  1999, Commission File No. 1-2262, filed on September 3, 1999).

      3.1         Amended  and  Restated   Certificate   of   Incorporation   of
                  Commercial  Assets,  Inc.  (the  "Registrant"),  (incorporated
                  herein by reference to Exhibit 3.1 to the Registrant's Current
                  Report on Form 8-K, dated June 10, 1999,  Commission  File No.
                  1-2262, filed on June 10, 1999).

      3.2         Amended  and  Restated  By-laws  of  Commercial  Assets,  Inc.
                  (incorporated  herein  by  reference  to  Exhibit  3.2  to the
                  Registrant's  Current Report on Form 8-K, dated June 10, 1999,
                  Commission File No. 1-2262, filed on June 10, 1999).

      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.  1-2262,  filed  on May 16,
                  1994).

      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. 1-2262,  filed on August
                  31, 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. 1-2262,
                  filed on May 15, 1996).

    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. 1-2262, 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. 1-2262, filed on March
                  24, 1997).

                                     - 29 -
<PAGE>

     10.4*        1998  Stock  Incentive  Plan of the  Registrant  (incorporated
                  herein  by  reference  to  Exhibit  10.4  to the  Registrant's
                  Quarterly  Report on Form 10-Q,  Commission  File No.  1-2262,
                  filed on July 31, 1998).

     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. 1-2262,  filed on August
                  31, 1993).

      10.8        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. 1-2262, filed on November 14, 1997).

    10.8(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. 1-2262, filed on November 14, 1997).

    10.8(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. 1-2262, filed on November 14, 1997).

    10.8(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.  1-2262,  filed on November 14,
                  1997).

    10.8(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. 1-2262,  filed on
                  November 14, 1997).

    10.8(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. 1-2262, filed on November 14, 1997).

      10.9        Asset  Purchase  Agreement  effective as of November 20, 1998,
                  between  The   Moorings  of  Manatee,   Inc.   and   Community
                  Acquisition  &  Development  Corp.   (incorporated  herein  by
                  reference to Exhibit 10.10 to the Registrant's  Current Report
                  on Form 8-K  dated  November  20,  1998,  Commission  File No.
                  1-2262, filed on December 4, 1998).

    10.9(a)       Assignment  of  Agreement  effective  as of November 20, 1998,
                  between  Community  Acquisition  & Development  Corp.  and CAX
                  Riverside, L.L.C. (incorporated herein by reference to Exhibit
                  10.10(a) to the Registrant's  Current Report on Form 8-K dated
                  November  20,  1998,  Commission  File  No.  1-2262,  filed on
                  December 4, 1998).

                                     - 30 -
<PAGE>

    10.9(b)       Agreement  for  Assignment  of Contracts  and Convenant not to
                  Compete  effective as of November 20, 1998,  between  Moorings
                  Development  and  Marketing  Corporation,  Riverside  Sod  and
                  Supply  Company,  Barry  Spencer and  Community  Acquisition &
                  Development Corp. (incorporated herein by reference to Exhibit
                  10.10(b) to the Registrant's  Current Report on Form 8-K dated
                  November  20,  1998,  Commission  File  No.  1-2262,  filed on
                  December 4, 1998).

    10.9(c)       Assignment  of  Agreement  effective  as of November 20, 1998,
                  between  Community  Acquisition  & Development  Corp.  and CAX
                  Riverside, L.L.C. (incorporated herein by reference to Exhibit
                  10.10(c) to the Registrant's  Current Report on Form 8-K dated
                  November  20,  1998,  Commission  File  No.  1-2262,  filed on
                  December 4, 1998).

    10.9(d)       Riverside  Master  Lease  Agreement,  dated as of November 20,
                  1998,  between CAX Riverside,  L.L.C.  as lessor and Riverside
                  Golf Course Community,  L.L.C. as lessee  (incorporated herein
                  by reference  to Exhibit  10.9(d) to the  Registrant's  Annual
                  Report on Form 10-K/A Amendment No. 1 dated December 31, 1999,
                  Commission File No. 1-2262, filed on March 8, 2000).

     10.10        Securities  Purchase  Agreement,  dated as of March 26,  1998,
                  between  Registrant  and  Westrec  Marina   Management,   Inc.
                  (incorporated  herein  by  reference  to  Exhibit  10.1 to the
                  Registrant's  Quarterly  Report on Form 10-Q  dated  March 31,
                  1998, Commission File No. 1-2262, filed on May 14, 1998).

    10.10(a)      Put and Call Agreement dated as of November 30, 1998,  between
                  the Registrant and Westrec Marina Management, Inc. and Michael
                  M. Sachs (incorporated herein by reference to Exhibit 10.10(a)
                  to the Registrant's  Annual Report on Form 10-K dated December
                  31,  1998,  Commission  File No.  1-2262,  filed on March  25,
                  1999).

    10.10(b)      Secured Promissory Note dated as of November 30, 1998, between
                  the  Registrant and Michael M. Sachs  (incorporated  herein by
                  reference  to  Exhibit  10.10(a)  to the  Registrant's  Annual
                  Report on Form 10-K dated December 31, 1998,  Commission  File
                  No. 1-2262, filed on March 25, 1999).

     10.11        Form of Amended and Restated  Promissory  Note entered into in
                  connection with investments in mortgages on three manufactured
                  home  communities and adjoining land  (incorporated  herein by
                  reference  to  Exhibit  10.10(a)  to the  Registrant's  Annual
                  Report on Form 10-K dated December 31, 1998,  Commission  File
                  No.
                  1-2262, filed on March 25, 1999).

    10.11(a)      Amended and Restated Combination Deed of Trust,  Assignment of
                  Rents,  Security  Agreement  and Fixture  Financing  Statement
                  entered into in connection  with  investments  in mortgages on
                  three   manufactured   home  communities  and  adjoining  land
                  (incorporated  herein by reference to Exhibit  10.10(a) to the
                  Registrant's  Annual  Report on Form 10-K dated  December  31,
                  1998, Commission File No. 1-2262, filed on March 25, 1999).

     10.12        Restated  Purchase  Agreement  dated  as of  April  20,  1998,
                  between Lake Shore Villas,  Inc., The Inn at Lakeshore Villas,
                  Ltd.,  and Lakeshore  Villa Health Care,  LTD. and Senior Care
                  Group,  Inc., Heights Healthcare  Company,  L.L.C.,  Community
                  Acquisition and Development Corporation, CAX Lakeshore, L.L.C.
                  and  Lakeshore  Utilities,   L.L.C.  (incorporated  herein  by
                  reference to Exhibit 10.12 to the Registrant's  Current Report
                  on Form 8-K dated March 31, 1999,  Commission File No. 1-2262,
                  filed on April 13, 1999).

                                     - 31 -
<PAGE>

    10.12(a)      Seventh Amendment to Purchase  Agreement dated as of March 30,
                  1999,   between  Heights  Healthcare   Company,   L.L.C.,  CAX
                  Lakeshore, L.L.C., Lakeshore Utilities, L.L.C. and Senior Care
                  Group, Inc. and Lake Shore Villas,  Inc., The Inn at Lakeshore
                  Villas,   LTD.  and   Lakeshore   Villa   Health  Care,   LTD.
                  (incorporated  herein by reference to Exhibit  10.12(a) to the
                  Registrant's  Current Report on Form 8-K dated March 31, 1999,
                  Commission File No. 1-2262, filed on April 13, 1999).

    10.12(b)      Agreement  to  Assign  dated as of  March  31,  1999,  between
                  Heights Healthcare Company,  L.L.C. and CAX Lakeshore,  L.L.C.
                  (incorporated  herein by reference to Exhibit  10.12(b) to the
                  Registrant's  Current Report on Form 8-K dated March 31, 1999,
                  Commission File No. 1-2262, filed on April 13, 1999).

     10.13        Agreement of Sale dated March 1, 1999,  between  Rancho Mirage
                  Mobile Home Park and Community Acquisition & Development Corp.
                  (incorporated  herein by  reference  to  Exhibit  10.13 to the
                  Registrant's  Current  Report on Form 8-K  dated May 7,  1999,
                  Commission File No. 1-2262, filed on May 18, 1999).

    10.13(a)      Assignment of Agreement dated May 6, 1999,  between  Community
                  Acquisition & Development Corp. and CAX Rancho Mirage,  L.L.C.
                  (incorporated  herein by reference to Exhibit 10.13 (a) to the
                  Registrant's  Current  Report on Form 8-K  dated May 7,  1999,
                  Commission File No. 1-2262, filed on May 18, 1999).

     10.14        Agreement  of Sale dated May 6,  1999,  between  Five  Whites,
                  L.L.C. and Community  Acquisition and Development  Corporation
                  (incorporated  herein by  reference  to  Exhibit  10.14 to the
                  Registrant's  Current  Report on Form 8-K dated June 30, 1999,
                  Commission File No. 1-2262, filed on July 14, 1999).

    10.14(a)      Agreement  of Sale dated May 6,  1999,  between  White  Gregg,
                  L.L.C. and Community  Acquisition and Development  Corporation
                  (incorporated  herein by  reference  to  Exhibit  10.14 to the
                  Registrant's  Current  Report on Form 8-K dated June 30, 1999,
                  Commission File No. 1-2262, filed on July 14, 1999).

    10.14(b)      Assignment  of Agreement of Sale dated June 28, 1999,  between
                  Community  Acquisition and Development  Corporation and CAX La
                  Casa  Blanca,  L.L.C.  (incorporated  herein by  reference  to
                  Exhibit 10.14 to the  Registrant's  Current Report on Form 8-K
                  dated June 30, 1999, Commission File No. 1-2262, filed on July
                  14, 1999).

    10.14(c)      Assignment  of Agreement of Sale dated June 28, 1999,  between
                  Community  Acquisition and Development  Corporation and CAX La
                  Casa Blanca East, L.L.C.  (incorporated herein by reference to
                  Exhibit 10.14 to the  Registrant's  Current Report on Form 8-K
                  dated June 30, 1999, Commission File No. 1-2262, filed on July
                  14, 1999).

    10.14(d)      Promissory Note dated June 30, 1999 between CAX La Casa Blanca
                  East, L.L.C. and White Gregg, L.L.C.  (incorporated  herein by
                  reference to Exhibit 10.14 to the Registrant's  Current Report
                  on Form 8-K dated June 30, 1999,  Commission  File No. 1-2262,
                  filed on July 14, 1999).

     10.15        Form of Amended and Restated  Promissory  Note entered into in
                  connection with investments in mortgages on three manufactured
                  home communities and adjoining land.  (incorporated  herein by
                  reference to Exhibit 10.11 to the  Registrant's  Annual Report
                  on Form 10-K dated December 31, 1998, Commission File No.
                  1-2262, filed on March 24, 1999).

                                     - 32 -
<PAGE>

    10.15(a)      Form of  Amended  and  Restated  Combination  Deed  of  Trust,
                  Assignment of Rents,  Security Agreement and Fixture Financing
                  Statement  entered  into in  connection  with  investments  in
                  mortgages on three manufactured home communities and adjoining
                  land. (incorporated herein by reference to Exhibit 10.11(a) to
                  the Registrant's Annual Report on Form 10-K dated December 31,
                  1998, Commission File No. 1-2262, filed on March 24, 1999).

    10.15(b)      Receipt, Release and Settlement Agreement,  dated as of August
                  13, 1999,  between the  Registrant,  Casa Encanta  Commercial,
                  L.L.C.,  Fiesta/Encanta  MHP,  L.L.C.,  Fiesta MHP  Investors,
                  L.L.C., Fiesta SPE, L.L.C., Southern Palms MHP, L.L.C., Norman
                  Andrus, and The Norman Andrus Irrevocable Trust  (incorporated
                  herein by  reference to Exhibit  10.11(b) to the  Registrant's
                  Current  Report on Form 8-K dated August 13, 1999,  Commission
                  File No. 1-2262, filed on August 30, 1999).

    10.15(c)      Form of  Assignment  and  Assumption  of  Membership  Interest
                  (incorporated  herein by reference to Exhibit  10.11(c) to the
                  Registrant's Current Report on Form 8-K dated August 13, 1999,
                  Commission File No.
                  1-2262, filed on August 30, 1999).

     10.16        Form of Promissory Note to General Electric Capital  Assurance
                  Company  entered into in connection  with the financing of two
                  manufactured home communities.

     21.1         List of Subsidiaries

     23.1         Consent of Independent Auditors - Ernst & Young LLP.

     27.1         Financial Data Schedule.

*  Management contract or compensatory plan or arrangement.




                                     - 33 -
<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 28, 2000                  By   /s/Terry Considine
                                        ----------------------------------------
                                           Terry Considine
                                           Chairman and Chief Executive Officer

Date: March 28, 2000                  By   /s/Thomas L. Rhodes
                                        ----------------------------------------
                                           Thomas L. Rhodes
                                           Vice Chairman

Date: March 28, 2000                  By   /s/Bruce E. Moore
                                        ----------------------------------------
                                           Bruce E. Moore
                                           President and Chief Operating Officer

Date: March 28, 2000                  By   /s/David M. Becker
                                        ----------------------------------------
                                           David M. Becker
                                           Chief Financial Officer

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 28, 2000
-------------------------------
Terry Considine

/s/Thomas L. Rhodes                      Director              March 28, 2000
-------------------------------
Thomas L. Rhodes

/s/Raymond T. Baker                      Director              March 27, 2000
-------------------------------
Raymond T. Baker

/s/Bruce D. Benson                       Director              March 25, 2000
-------------------------------
Bruce D. Benson

/s/Thomas C. Fries                       Director              March 24, 2000
-------------------------------
Thomas C. Fries

                                         Director
-------------------------------
Donald L. Kortz

/s/Robert J. Malone                      Director              March 28, 2000
-------------------------------
Robert J. Malone

/s/Bruce E. Moore                        Director              March 28, 2000
-------------------------------
Bruce E. Moore



                                     - 34 -