<PAGE>


================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-Q

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

           [ ]  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 1-14373

                         INSIGNIA FINANCIAL GROUP, INC.
             (Exact Name of Registrant as Specified in Its Charter)

            DELAWARE                                    56-2084290
    (State of Incorporation)               (I.R.S. Employer Identification No.)

200 PARK AVENUE, NEW YORK, NEW YORK                      10166
(Address of Principal Executive Offices)               (Zip Code)

                                                    (212) 984-8033
              (Registrant's Telephone Number, Including Area Code)

                                 ---------------

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No_____

At October 31, 2002 the Registrant had 23,237,690 shares of common stock
outstanding.

================================================================================
<PAGE>

                         INSIGNIA FINANCIAL GROUP, INC.

                                    FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2002

                                 ---------------

                                      INDEX
                                 ---------------


                                                                          Page
PART I -- FINANCIAL INFORMATION

   Item 1.  Financial Statements                                            2
        Consolidated Statements of Operations for the
          Three and Nine Months Ended September 30, 2002 and 2001 ....    2-3
        Consolidated Balance Sheets
           at September 30, 2002 and December 31, 2001................      4
        Consolidated Statements of Cash Flows
           for the Nine Months Ended September 30, 2002 and 2001......      5
        Notes to Consolidated Financial Statements....................      6
   Item 2.  Management's Discussion and Analysis of
              Financial Condition and Results of Operations...........     25
   Item 3.  Quantitative and Qualitative Disclosure of Market Risk....     41
   Item 4.  Controls and Procedures...................................     41
PART II -- OTHER INFORMATION
   Item 1.  Legal Proceedings.........................................     42
   Item 6.  Exhibits and Reports on Form 8-K..........................     42
SIGNATURES                                                                 43

<PAGE>

                         PART I -- FINANCIAL INFORMATION

ITEM 1 -- FINANCIAL STATEMENTS

                         INSIGNIA FINANCIAL GROUP, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED         NINE MONTHS ENDED
                                                                        SEPTEMBER 30              SEPTEMBER 30
                                                                   ----------------------    ----------------------
                                                                      2002        2001         2002         2001
                                                                   ---------    ---------    ---------    ---------
<S>                                                                <C>          <C>          <C>          <C>
REVENUES
   Real estate services                                            $ 187,802    $ 146,306    $ 514,070    $ 491,665
   Property operations                                                 2,380          720        6,930        3,189
                                                                   ---------    ---------    ---------    ---------
                                                                     190,182      147,026      521,000      494,854
                                                                   ---------    ---------    ---------    ---------
COSTS AND EXPENSES
   Real estate services                                              169,435      140,116      471,009      452,087
   Property operations                                                 1,881          186        5,046          899
   Administrative                                                      4,502        2,399       11,085        8,781
   Depreciation                                                        4,541        3,954       13,082       11,238
   Property depreciation                                                 445          316        1,503          810
   Amortization of intangibles                                         1,030        5,829        4,139       18,480
                                                                   ---------    ---------    ---------    ---------
                                                                     181,834      152,800      505,864      492,295
                                                                   ---------    ---------    ---------    ---------

    Operating income (loss)                                            8,348       (5,774)      15,136        2,559

OTHER INCOME AND EXPENSES:
   Interest income                                                       846          971        2,930        3,801
   Other income, net                                                   1,295           17        1,308          356
   Interest expense                                                   (2,406)      (3,091)      (6,755)      (9,714)
   Property interest expense                                            (670)        (305)      (1,621)      (1,477)
   Losses from internet investments                                       --       (1,779)          --       (8,870)
   Equity earnings in real estate                                         70          234        1,516        1,288
                                                                   ---------    ---------    ---------    ---------

Income (loss) from continuing operations before income taxes           7,483       (9,727)      12,514      (12,057)

Income tax (expense) benefit                                          (3,367)       4,331       (5,631)       5,130
                                                                   ---------    ---------    ---------    ---------

Income (loss) from continuing operations                               4,116       (5,396)       6,883       (6,927)

Discontinued operations, net of applicable taxes:
  Income (loss) from operations                                           --          926           --       (1,522)
  Adjustment to loss on disposal                                       4,653           --        4,918           --
                                                                   ---------    ---------    ---------    ---------

Income (loss) before cumulative effect of a change in accounting
  principle                                                            8,769       (4,470)      11,801       (8,449)

Cumulative effect of a change in accounting principle, net of
  applicable tax benefit                                                  --           --      (20,635)          --
                                                                   ---------    ---------    ---------    ---------

Net income (loss)                                                      8,769       (4,470)      (8,834)      (8,449)

Preferred stock dividends                                               (800)        (250)      (1,373)        (750)
                                                                   ---------    ---------    ---------    ---------


Net income (loss) available to common shareholders                 $   7,969    $  (4,720)   $ (10,207)   $  (9,199)
                                                                   =========    =========    =========    =========
</TABLE>


                                       2
<PAGE>

                         INSIGNIA FINANCIAL GROUP, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
                      (In thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED          NINE MONTHS ENDED
                                                                              SEPTEMBER 30               SEPTEMBER 30
                                                                        -----------------------    ------------------------
                                                                           2002         2001          2002          2001
                                                                        ----------   ----------    ----------    ----------
<S>                                                                    <C>           <C>           <C>           <C>
PER SHARE AMOUNTS: Earnings per common share -- basic:
     Income (loss) from continuing operations                           $     0.14   $    (0.25)   $     0.24    $    (0.35)
     Income (loss) from discontinued operations                               0.20         0.04          0.21         (0.07)
     Cumulative effect of a change in accounting principle                      --           --         (0.89)           --
                                                                        ----------   ----------    ----------    ----------
     Net income (loss)                                                  $     0.34   $    (0.21)   $    (0.44)   $    (0.42)
                                                                        ==========   ==========    ==========    ==========

  Earnings per common share -- diluted:
     Income (loss) from continuing operations                           $     0.14   $    (0.25)   $     0.23    $    (0.35)
     Income (loss) from discontinued operations                               0.20         0.04          0.21         (0.07)
     Cumulative effect of a change in accounting principle                      --           --         (0.86)           --
                                                                        ----------   ----------    ----------    ----------
     Net income (loss)                                                  $     0.34   $    (0.21)   $    (0.43)   $    (0.42)
                                                                        ==========   ==========    ==========    ==========

  Weighted average common shares outstanding and assumed conversions:
     -- Basic                                                               23,198       22,214        23,082        21,932
                                                                        ==========   ==========    ==========    ==========
     -- Assuming dilution                                                   23,593       22,214        23,869        21,932
                                                                        ==========   ==========    ==========    ==========

</TABLE>

--------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.


                                       3
<PAGE>

                         INSIGNIA FINANCIAL GROUP, INC.
                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                                  SEPTEMBER 30  DECEMBER 31
                                                                                      2002         2001
                                                                                  ------------  -----------
                                                                                   (Unaudited)     (Note)
<S>                                                                                <C>          <C>
ASSETS
  Cash and cash equivalents                                                         $  90,041    $ 131,860
   Receivables, net of allowance of $6,605 (2002) and $5,972 (2001)                   155,984      176,120
   Restricted cash                                                                     22,973       21,617
   Property and equipment, net                                                         57,424       62,198
   Real estate investments, net                                                       135,717       95,710
   Goodwill, less accumulated amortization of $57,992 (2001)                          281,277      288,353
   Acquired intangible assets, less accumulated amortization of
     $63,989 (2002) and $57,145 (2001)                                                 18,184       21,462
   Deferred taxes                                                                      42,202       43,132
   Other assets                                                                        28,704       20,069
   Assets of discontinued operation                                                        --       57,822
                                                                                    ---------    ---------
Total assets                                                                        $ 832,506    $ 918,343
                                                                                    =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Accounts payable                                                                  $  11,339    $  12,876
  Commissions payable                                                                  58,224       86,387
  Accrued incentives                                                                   35,554       63,911
  Accrued and sundry                                                                   90,236      100,863
  Deferred taxes                                                                        8,185       12,636
  Notes payable                                                                       149,502      169,972
  Real estate mortgages                                                                66,718       37,269
  Liabilities of discontinued operation                                                    --       34,572
                                                                                    ---------    ---------
Total liabilities                                                                     419,758      518,486

Stockholders' Equity:
   Common stock, par value $.01 per share -- authorized 80,000,000 shares,
     23,203,149 (2002) and 22,852,034 (2001) issued and outstanding shares, net
     of 1,502,600 (2002 and 2001) shares held in treasury                                 232          229
   Preferred stock, par value $.01 per share -- authorized 20,000,000 shares,
     Series A, 250,000 (2002), Series B, 125,000 (2002) and 250,000 (2001)
       issued and outstanding shares                                                        4            3
   Additional paid-in capital                                                         437,275      422,309
   Notes receivable for common stock                                                   (1,227)      (1,882)
   Accumulated deficit                                                                (21,778)     (11,912)
   Accumulated other comprehensive loss                                                (1,758)      (8,890)
                                                                                    ---------    ---------
Total stockholders' equity                                                            412,748      399,857
                                                                                    ---------    ---------
Total liabilities and stockholders' equity                                          $ 832,506    $ 918,343
                                                                                    =========    =========

</TABLE>

NOTE: The Balance Sheet at December 31, 2001 has been derived from the audited
      financial statements at that date but does not include all the information
      and footnotes required by accounting principles generally accepted in the
      United States (GAAP) for complete financial statements.
--------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.


                                       4
<PAGE>

                         INSIGNIA FINANCIAL GROUP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                             NINE MONTHS ENDED
                                                               SEPTEMBER 30
                                                         ----------------------
                                                            2002        2001
                                                         ---------    ---------
<S>                                                      <C>          <C>
OPERATING ACTIVITIES
Income (loss) from continuing operations                 $   6,883    $  (6,927)

Adjustments to reconcile income (loss) from continuing
  operations to net cash used in operating activities:
     Depreciation and amortization                          18,724       30,528
     Equity earnings in real estate ventures                (1,516)      (1,288)
     Gain on sale of real estate property                   (1,306)          --
     Losses from internet investments                           --        8,870
     Changes in operating assets and liabilities:
       Accounts receivable                                  22,329       47,081
       Other assets                                         (5,131)     (11,533)
       Accrued incentives                                  (29,069)     (53,894)
       Accounts payable and accrued expenses               (18,532)     (29,081)
       Commissions payable                                 (28,345)     (28,406)
                                                         ---------    ---------
Net cash used in operating activities                      (35,963)     (44,650)
                                                         ---------    ---------

INVESTING ACTIVITIES
     Payments made for acquisition of businesses            (9,923)     (10,003)
     Proceeds from sale of real estate                      35,287       40,240
     Proceeds from sale of discontinued operation           23,250           --
     Investment in internet-based businesses                    --       (3,795)
     Investment in real estate                             (46,384)      (7,157)
     Distributions from real estate investments             14,463        4,821
     Additions to property and equipment, net               (7,892)     (10,721)
     Increase in restricted cash                              (127)     (19,371)
                                                         ---------    ---------
Net cash provided by (used in) investing activities          8,674       (5,986)
                                                         ---------    ---------

FINANCING ACTIVITIES
     Proceeds from issuance of common stock                    685        1,243
     Proceeds from issuance of preferred stock, net         12,270           --
     Proceeds from exercise of stock options                   606        2,077
     Preferred stock dividends                              (1,032)      (1,000)
     Proceeds from notes payable                            15,000      143,999
     Payment on notes payable                              (36,722)    (134,337)
     Proceeds from real estate mortgages                    20,000          513
     Payments on real estate mortgages                     (28,438)     (33,086)
     Debt issuance costs                                    (1,086)      (2,130)
                                                         ---------    ---------
Net cash used in financing activities                      (18,717)     (22,721)
                                                         ---------    ---------

Net cash provided by (used in) discontinued operations       1,715       (1,070)
Effect of exchange rate changes on cash                      2,472          (14)
                                                         ---------    ---------

Net decrease in cash and cash equivalents                  (41,819)     (74,441)
Cash and cash equivalents at beginning of period           131,860      124,527
                                                         ---------    ---------
Cash and cash equivalents at end of period               $  90,041    $  50,086
                                                         =========    =========

Supplemental disclosure of cash flow information:
     Cash paid for interest                              $   6,489    $   7,343
     Cash paid for taxes                                     5,315        6,859
</TABLE>

-------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements.


                                       5
<PAGE>

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


1.  Business

     Insignia Financial Group, Inc. ("Insignia" or the "Company"), a Delaware
corporation headquartered in New York, New York, is a leading provider of
international real estate and real estate financial services, with operations in
the United States, the United Kingdom, France, continental Europe, Asia and
Latin America. Insignia's principal executive offices are located at 200 Park
Avenue, New York, New York 10166, and its telephone number is (212) 984-8033.

     Insignia's real estate service businesses specialize in commercial leasing,
sales brokerage, corporate real estate consulting, property management, property
development and re-development, apartment brokerage and leasing, condominium and
cooperative apartment management, real estate-oriented financial services,
equity co-investment and other services. Insignia's primary real estate service
businesses include the following: Insignia/ESG (U.S. commercial real estate
services), Insignia Richard Ellis (U.K. commercial real estate services),
Insignia Bourdais (French commercial real estate services; acquired in December
2001), Insignia Douglas Elliman (New York apartment brokerage and leasing) and
Insignia Residential Group (New York condominium, cooperative and rental
apartment management). Insignia's commercial real estate service operations in
continental Europe, Asia and Latin America include the following locations:
Madrid and Barcelona, Spain; Frankfurt, Germany; Milan and Bologna, Italy;
Brussels, Belgium; Amsterdam, The Netherlands; Tokyo, Japan; Hong Kong, Beijing
and Shanghai, China; Bangkok, Thailand; Mumbai, Hyderabad, Bangalore, Chennai
and Delhi, India; Manila, Philippines; and Mexico City, Mexico. The Company also
holds a 10% ownership interest in a commercial services business with operations
in Dublin, Ireland and Belfast, Northern Ireland.

     Insignia also provides real estate services -- through an affiliate program
launched in 2001 -- in secondary markets in the U.S. and around the globe where
the Company wants to meet the needs of its multi-market clients without owning
the operations. Under this program, regional service providers agree to serve as
Insignia's exclusive representative within a market and to adopt Insignia's
branding, marketing standards and governance protocols. Insignia has no economic
interest in the regional service providers, which pay Insignia a fee for joining
the affiliate program. Insignia has established U.S. affiliations with service
providers in Pittsburgh, Baltimore, Seattle and Indianapolis and foreign
affiliations in the U.K., France, Denmark, Sweden and South Africa. In France,
twenty affiliate offices were gained as part of the Groupe Bourdais acquisition.

     In addition to traditional real estate services, Insignia deploys its own
capital, together with the capital of third party investors, in principal real
estate investments, including co-investment in existing property assets, real
estate development and managed private investment funds. The Company's real
estate service operations and principal real estate investment activities are
more fully described below.

2.   Interim Financial Information

     The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and nine
months ended September 30, 2002 is not necessarily indicative of the results
that may be expected for the year ending December 31, 2002. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001.

3.  Reclassifications

     Certain amounts for the prior year have been reclassified to conform to the
2002 presentation. These reclassifications have no effect on net income.


                                       6
<PAGE>

4.  Significant Accounting Policies

Revenue Recognition

     The Company's real estate services revenues are generally recorded when the
related services are performed or at closing in the case of real estate sales.
Leasing commissions that are payable upon tenant occupancy, payment of rent or
other events beyond the Company's control are recognized upon the occurrence of
such events. As certain conditions to revenue recognition for leasing
commissions are outside of the Company's control and are not clearly defined,
judgment must be exercised in determining when such required events to
recognition have occurred. Revenues from tenant representation, agency leasing,
investment sales and residential brokerage, which collectively comprise a
substantial portion of Insignia's service revenues, are transactional in nature
and therefore subject to seasonality and changes in business and capital market
conditions. As a consequence, the timing of transactions and resulting revenue
recognition is difficult to predict.

     Insignia's revenue from property management services is generally based
upon percentages of the revenue generated by the properties that it manages. In
conjunction with the provision of management services, the Company customarily
employs personnel (either directly or on behalf of the property owner) to
provide services solely to the properties managed. In most instances, Insignia
is reimbursed by the owners of managed properties for direct payroll related
costs incurred in the employment of property personnel. The aggregate amount of
payroll costs reimbursed exceeds $75 million annually. Such payroll
reimbursements are generally characterized in the Company's consolidated
statements of operations as a reduction of actual expenses incurred. This
characterization is based on the following factors: (i) the property owner
generally has authority over hiring practices and the approval of payroll prior
to payment by the Company; (ii) Insignia is the primary obligor with respect to
the property personnel, but bears little or no credit risk under the terms of
the management contract; (iii) reimbursement to the Company is generally
completed simultaneously with payment of payroll or soon thereafter; and (iv)
the Company generally earns no margin in the arrangement, obtaining
reimbursement only for actual cost incurred.

Use of Estimates

     The preparation of financial statements in conformity with GAAP requires
that management make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Estimates and assumptions
are used in the evaluation and financial reporting for, among other things, bad
debts, self-insurance liabilities, intangibles and investment valuations,
deferred taxes and pension costs. Actual results could differ from those
estimates under different assumptions or conditions.

Real Estate Investments

     Insignia invests in real estate and real estate related assets. Generally,
the Company's investment strategy involves identifying investment opportunities
and investing as a minority owner in entities formed to acquire such assets. The
Company's minority-owned investments are generally accounted for under the
equity method of accounting due to the Company's influence over the operational
decisions made with respect to the real estate entities. The Company's portion
of earnings in these real estate entities is reported in equity earnings in real
estate in its consolidated statements of operations, including gains on sales of
property and net of impairments. Conversely, income from dispositions of
minority-owned development assets is reported in real estate services revenues
in the Company's consolidated statements of operations. The Company's policy
with respect to the timing of recognition of promoted profit participation
interests in its real estate investments is to record such amounts upon
collection.

     Each entity in which the Company holds a real estate investment is a
special purpose entity, the assets of which are subject to the obligations only
of that entity. Each entity's debt, except for limited and specific guarantees
aggregating $14.2 million (see discussion of Liquidity and Capital Resources in
Item 2 of this Form 10-Q), is either (i) non-recourse except to the real estate
assets of the subject entity (subject to carve-outs standard in such
non-recourse financing, including the misapplication of rents or environmental
liabilities), or (ii) an obligation solely of such limited liability entity and
thus is non-recourse to other assets of the Company.

     The Company provides real estate services to and receives real estate
service fees from the entities comprising its principal investment activities.
Such fees are generally derived from the following services: (i) property
management, (ii) asset management, (iii) development management, (iv) investment
management, (v) leasing, (vi)


                                       7
<PAGE>

acquisition, (vii) sales or (viii) financings. With respect to fees that are
currently recorded as expense by the entities, the Company includes the fees in
current income, while its share as owner of such fee is reflected in the income
or loss from the investment entity. If the fee is capitalized by the investment
entity, the Company records only the portion of the fee attributable to third
party ownership and defers the portion attributable to its ownership.

     The Company evaluates all real estate investments on a quarterly basis for
evidence of impairment. Impairment losses are recognized whenever events or
changes in circumstances indicate declines in value of such investments below
carrying value and the related undiscounted cash flows are not sufficient to
recover the asset's carrying amount. Generally, Insignia relies upon the
expertise of its own property professionals to assess real estate values;
however, in certain circumstances where Insignia considers its expertise limited
with respect to a particular investment, third party valuations may also be
obtained. Property valuations and estimates of related future cash flows are by
nature subjective and will vary from actual results.

     In October 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which provides accounting guidance
for financial accounting and reporting for the impairment or disposal of
long-lived assets. Insignia early adopted SFAS No. 144 as of January 1, 2001.
SFAS No. 144 requires, in most cases, that gains/losses from dispositions of
investment properties and all earnings from such properties be reported as
"discontinued operations." SFAS No. 144 is silent with respect to treatment of
gains or losses from sales of investment property held in a joint venture. The
Company has concluded that, as a matter of policy, all gains and losses realized
from sales of minority owned property in its real estate co-investment program
constitute earnings from a continuing line of business. Therefore, operating
activity related to that investment program will continue to be included in
income (loss) from continuing operations. However, SFAS No. 144 requires that
gains or losses from sales of consolidated properties, if material, be reported
as discontinued operations. As a result, the Company's earnings from
dispositions of consolidated properties would be excluded from reported income
from continuing operations and included in discontinued operations.

Principles of Consolidation

     Insignia's consolidated financial statements include the accounts of all
majority-owned subsidiaries and all entities over which the Company exercises
voting control. All significant intercompany balances and transactions have been
eliminated. Entities in which the Company owns less than a majority interest and
has substantial influence are recorded on the equity method of accounting (net
of payments to certain employees in respect of equity grants or rights to
proceeds).

     In one instance, a minority-owned partnership (with additional promotional
interests in profits depending on performance) is consolidated by virtue of
general partner control. Since the limited partners' investment has been fully
depreciated, the assets, liabilities and operations of the partnership are
consolidated as if Insignia completely owned the asset, even though Insignia
holds a minority economic interest.

Foreign Currency

     The financial statements of the Company's foreign subsidiaries are measured
using the local currency as the functional currency. The British pound and euro
represent the only foreign currencies of material operations, which collectively
generate from 15% to 25% of the Company's annual revenues. All currencies other
than the British pound, euro and dollar have comprised less than 1% of annual
revenues. Revenues and expenses of such subsidiaries have been translated into
U.S. dollars at the average exchange rates prevailing during the periods. Assets
and liabilities have been translated at the rates of exchange at the balance
sheet date. Translation gains and losses are deferred as a separate component of
stockholders' equity in other comprehensive income (loss), unless there is a
sale or complete liquidation of the underlying foreign investment. Gains and
losses from foreign currency transactions, such as those resulting from the
settlement of foreign receivables or payables, are included in the consolidated
statements of operations in determining net income. For the nine months ended
September 30, 2002, the Company's European operations have been translated into
U.S. dollars at average exchange rates of $1.49 to the pound and $0.93 to the
euro. For the nine months of 2001, European operations were translated to U.S.
dollars at average exchange rates of $1.44 and $0.89 to the pound and euro,
respectively. The assets and liabilities of the Company's European operations
have been translated at exchange rates of $1.56 to the pound and $0.98 to the
euro at September 30, 2002 and were translated at exchange rates of $1.47 to the
pound and $0.91 to the euro at September 30, 2001.


                                       8
<PAGE>

5.  Seasonality

     Seasonal factors affecting the Company are disclosed in Item 2 of this Form
10-Q, "Management's Discussion and Analysis of Financial Condition and Results
of Operations" under the caption "Nature of Operations."

6.  Discontinued Operations

     In late December 2001, Insignia entered into a contract to sell its Realty
One single-family home brokerage business and affiliated companies to Real
Living, Inc., effective as of December 31, 2001. Real Living, Inc. is a
privately held company formed by HER Realtors of Columbus, Ohio and Huff Realty
of Cincinnati, Ohio. The sale closed on January 31, 2002. Proceeds from the sale
potentially total $33.0 million, including approximately $29.0 million in cash
received at closing (before extinguishment of $5.5 million of Realty One debt)
and additional payments aggregating as much as $4.0 million. The additional
payments include the following: (i) a $1.0 million reimbursement, collected in
February 2002, for Realty One operating losses in January 2002; (ii) a potential
earn-out of as much as $2 million payable over the next two years (depending on
the performance of the Realty One business); and (iii) a $1 million operating
lease payable over four years for the use of proprietary software developed by
Insignia for an Internet-based residential brokerage model. Remaining amounts
due to Insignia under the terms of the sale totaling $2.8 million were included
in other assets in the Company's consolidated balance sheet at September 30,
2002. Insignia discontinued Realty One's operations for financial reporting
purposes and recognized a loss in connection with the sale of Realty One of
$17.6 million (net of applicable taxes of $4.0 million) for the year ended
December 31, 2001. During the three and nine months ended September 30, 2002,
the Company reported net income of $4.7 million and $4.9 million, respectively,
from discontinued operations. The third quarter income represents the
elimination of a valuation allowance on a $4.7 million tax benefit on the
capital portion of the loss on sale of Realty One. This capital loss was fully
reserved in 2001 because of uncertainty of its deductibility due to loss
disallowance rules in the Treasury Regulations and insufficient income of the
appropriate character. In the third quarter of 2002, it was determined that the
loss would be fully deductible for tax purposes, resulting in the realization of
a tax benefit for financial reporting purposes.

7.   Change in Accounting Principle

     In September 2002, the Company adopted the fair value expense recognition
provisions of SFAS No. 123, Accounting for Stock-Based Compensation, in
accounting for employee stock options. The accounting change results in the
expensing of the estimated fair value of employee stock options granted by the
Company, applied on a prospective basis for all stock options granted on or
after January 1, 2002. The Company previously followed Accounting Principles
Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees. Under
APB Opinion No. 25, no compensation expense is recognized when the exercise
price of an employee stock option equals or exceeds the market price at
issuance.

     The Company issued 290,000 employee options during the first nine months of
2002. The fair value of these options has been estimated as of the date of grant
using the Black-Scholes option pricing model with the following assumptions: (i)
estimated stock price volatility of 40%; (ii) risk free interest rate of 2.5%;
(iii) weighted average option life of 3.9 years; and (iv) a forfeiture rate of
3%. Under these assumptions, the aggregate value of the options totaled
$842,000, which is amortizable to expense over the vesting periods of five
years. For the nine months of 2002, stock compensation expense recognized
totaled $116,000.

     The Black-Scholes option valuation model was developed for use in
estimating the fair value of transferable options and warrants with no vesting
restrictions. This method requires the input of subjective assumptions including
the expected stock price volatility and weighted average expected life of the
options. The Company's employee stock options have characteristics significantly
different from those of transferable options and changes in the subjective input
assumptions can materially affect the value estimate. The Black-Scholes model is
not the only reliable measure that could be used to determine the fair value of
employee stock options. The Company believes that any and all valuations of
employee stock options will necessarily be estimates. The ultimate impact of the
accounting change on the Company's future earnings will depend on the number of
options issued in the future, as to which the Company has no specific plan, and
the estimated value of each option. Insignia does not expense the value of
outstanding options issued before January 1, 2002. Information about values of
those options and the estimated effect if expensed is disclosed in the notes to
the consolidated financial statements included in the Company's 2001 Form 10-K.



                                       9
<PAGE>

8.  Goodwill and Intangible Assets

     In June 2001, the FASB issued SFAS No. 141, Business Combinations, and No.
142, Goodwill and Other Intangible Assets. SFAS 141 replaces APB 16 and requires
the use of the purchase method for all business combinations initiated after
June 30, 2001. It also provides guidance on purchase accounting related to the
recognition of intangible assets. Under SFAS 142, goodwill and other intangible
assets deemed to have indefinite lives are no longer amortized but are subject
to impairment tests on an annual basis, at a minimum, or whenever events or
circumstances occur indicating goodwill might be impaired. Other acquired
intangible assets continue to be amortized over their estimated useful lives.

     The Company adopted SFAS No. 141 for all business combinations completed
after June 30, 2001 and fully implemented SFAS No. 141 and SFAS No. 142
effective January 1, 2002. The Company has identified its reporting units and
has determined the carrying value of each reporting unit by assigning assets and
liabilities, including the existing goodwill and intangible assets, to those
units as of January 1, 2002 for purposes of performing a required transitional
goodwill impairment assessment within six months of adoption.

     In the first quarter of 2002, the Company estimated goodwill impairment of
between $20.0 million and $50.0 million based on internal analyses of current
industry multiples and the carrying values of tangible and intangible assets of
its reporting units. Such internal analyses demonstrated that the value of the
Company's U.S. commercial operation significantly exceeded its carrying value
and that goodwill of the small Asian operation was impaired. These analyses also
indicated potential impairment in the Company's European operations and Insignia
Douglas Elliman. The Company engaged Standard & Poor's to value the European and
Insignia Douglas Elliman operations and those appraisals indicated no impairment
in the Company's European operations and partial impairment in Insignia Douglas
Elliman. The total impairment measured for Insignia Douglas Elliman and the
Asian operation aggregated $30.0 million before applicable taxes. As a result of
this evaluation, the Company reported a $20.6 million (net of tax benefit of
$9.4 million) goodwill impairment charge in earnings, as the cumulative effect
of a change in accounting principle effective January 1, 2002, for the nine
months ended September 30, 2002. The estimation of business values for measuring
goodwill impairment is highly subjective and selections of different projected
income levels and valuation multiples within observed ranges can yield different
results.



                                       10

<PAGE>

     Amortization of goodwill totaled approximately $4.4 million and $12.9
million, respectively, for the three and nine months ending September 30, 2001.
Elimination of this amortization would have improved income by approximately
$3.1 million and $9.0 million (net of applicable taxes), respectively, for those
periods of 2001. The following table provides pro forma information to reflect
the effect of adoption of SFAS No. 142 on earnings for the periods indicated.

<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED        NINE MONTHS ENDED
                                                                     SEPTEMBER 30              SEPTEMBER 30
                                                                ----------------------    ----------------------
                                                                   2002         2001         2002         2001
                                                                ---------    ---------    ---------    ---------
                                                                     (In thousands, except per share data)
<S>                                                            <C>          <C>          <C>          <C>
Reported income (loss) from continuing operations               $   4,116    $  (5,396)   $   6,883    $  (6,927)
Less: Preferred stock dividend                                       (800)        (250)      (1,373)        (750)
                                                                ---------    ---------    ---------    ---------
Income (loss) from continuing operations available to
   common shareholders                                              3,316       (5,646)       5,510       (7,677)
Add:
  Goodwill amortization, net of tax benefit of $1,333 and
  $3,946 for the three and nine months ending September 30,
  2001                                                                 --        3,063           --        8,964
                                                                ---------    ---------    ---------    ---------
Adjusted income from continuing operations available to
   common shareholders                                          $   3,316    $  (2,583)   $   5,510    $   1,287
                                                                =========    =========    =========    =========
Earnings per common share -- basic:

   Reported income (loss) from continuing operations            $    0.14    $   (0.25)   $    0.24    $   (0.35)
   Add:
     Goodwill amortization, net of tax benefit of $0.06 and
     $0.18 for the three and nine months ending September 30,
     2001                                                              --         0.14           --         0.41
                                                                ---------    ---------    ---------    ---------
   Adjusted income (loss) from continuing operations            $    0.14    $   (0.11)   $    0.24    $    0.06
                                                                =========    =========    =========    =========

Earnings per common share -- assuming dilution:

   Reported income (loss) from continuing operations            $    0.14    $   (0.25)   $    0.23    $   (0.35)
   Add:
     Goodwill amortization, net of tax benefit of $0.06 and
     $0.18 for the three and nine months ending September 30,
     2001                                                              --         0.14           --         0.41
                                                                ---------    ---------    ---------    ---------
   Adjusted income (loss) from continuing operations            $    0.14    $   (0.11)   $    0.23    $    0.06
                                                                =========    =========    =========    =========
</TABLE>

     Additional contingent purchase price of acquired businesses totaling $12.7
million was recorded as additional goodwill during the first nine months of
2002. Such additional purchase price included: (i) Insignia Bourdais earnout
payment of $6.0 million (paid by issuance of 131,480 shares of Insignia common
stock and cash of $4.7 million); (ii) a $4.0 million earnout with respect to the
prior Boston acquisition by Insignia/ESG; (iii) a $2.0 million earnout related
to Insignia Douglas Elliman; and (iv) a $728,000 earnout related to the
Company's operations in the Netherlands. The table below reconciles the change
in the carrying amount of goodwill, by operating segment, for the period from
December 31, 2001 to September 30, 2002.

<TABLE>
<CAPTION>
GOODWILL                                     COMMERCIAL     RESIDENTIAL        TOTAL
--------                                    ------------    ------------    ------------
                                                           (In thousands)
<S>                                        <C>             <C>             <C>
BALANCE AS OF DECEMBER 31, 2001             $    228,967    $     59,386    $    288,353

Additional purchase consideration                 10,728           2,000          12,728
Reclassifications from other intangibles             287              --             287
Goodwill related to sale of business unit             --            (447)           (447)
Cumulative goodwill impairment                    (3,201)        (26,822)        (30,023)
Foreign currency translation                      10,379              --          10,379
                                            ------------    ------------    ------------
BALANCE AS OF SEPTEMBER 30, 2002            $    247,160    $     34,117    $    281,277
                                            ============    ============    ============
</TABLE>


                                       11
<PAGE>

     The following tables present certain information on the Company's acquired
intangible assets as of September 30, 2002 and December 31, 2001, respectively.

<TABLE>
<CAPTION>
                                     WEIGHTED
                                     AVERAGE           GROSS
                                   AMORTIZATION       CARRYING     ACCUMULATED
ACQUIRED INTANGIBLE ASSETS           PERIOD            AMOUNT      AMORTIZATION    NET BALANCE
--------------------------         ------------     ------------   ------------   ------------
                                                                  (In thousands)
<S>                                <C>             <C>            <C>             <C>
AS OF SEPTEMBER 30, 2002

     Property management contracts   7 years        $     72,799   $     59,380   $     13,419
     Favorable premises leases       8 years               4,675          1,517          3,158
     Other                           3 years               4,699          3,091          1,608
                                                    ------------   ------------   ------------
     Total                                          $     82,173   $     63,989   $     18,184
                                                    ============   ============   ============

AS OF DECEMBER 31, 2001

     Property management contracts   7 years        $     70,926   $     54,049   $     16,877
     Favorable premises leases       8 years               4,453          1,099          3,354
     Other                           3 years               3,228          1,997          1,231
                                                    ------------   ------------   ------------
     Total                                          $     78,607   $     57,145   $     21,462
                                                    ============   ============   ============
</TABLE>

     All intangible assets are being amortized over their estimated useful lives
with no residual value. Intangibles included in "Other" consist of customer
backlog, non-compete agreements, franchise agreements and trade names. The
aggregate acquired intangible amortization expense for the nine months ended
September 30, 2002 and 2001 totaled $4.6 million and $5.6 million, respectively.
Intangible assets acquired in the Insignia Bourdais transaction contributed $1.1
million of amortization expense ($765,000 pertaining to customer backlog) during
the first three quarters of 2002. This increase was offset by declines in
amortization in 2002 attributed to property management contracts that fully
amortized in 2001. Amortization of favorable premises leases, totaling
approximately $492,000 and $319,000 for the nine month periods ending September
30, 2002 and 2001, respectively, is included in rental expense (included in real
estate services expenses) in the Company's consolidated statements of
operations.

     The estimated acquired intangible amortization expense, including amounts
reflected in rental expense, for the fiscal year ending December 31, 2002 and
for the subsequent four fiscal years through December 31, 2006 approximates $5.7
million, $2.8 million, $1.9 million, $1.3 million and $1.3 million,
respectively.

9.  Real Estate Investments

     The Company engages in real estate investment generally through: (i)
investment in operating properties through co-investments with various clients
or, in limited instances, by itself; (ii) investment in and development of
commercial real estate on its on behalf and through co-investments; and (iii)
minority ownership in and management of private investment funds, whose
investments primarily consist of securitized real estate debt. As of September
30, 2002, the Company's real estate investments totaled $135.7 million,
consisting of the following: (i) $27.8 million in minority-owned operating
properties; (ii) $82.8 million of carrying value of real estate attributed to
three consolidated properties; (iii) $10.6 million in minority owned development
properties; (iv) $1.7 million in a land parcel held for development; and (v)
$12.8 million in real estate debt investment funds. Insignia's equity investment
in the consolidated properties totaled $22.4 million at September 30, 2002.

     Insignia maintains an incentive compensation program pursuant to which
certain employees, including executive officers, participate in the profits
generated by its real estate investments, through grants of either equity
interests (at the time investments are made) or contractual rights to proceeds.
Such grants generally consist of an aggregate of 50% of the cash proceeds to
Insignia after Insignia has recovered its full investment plus a 10% per annum
return thereon. In addition, upon disposition, the Company generally makes
discretionary incentive payments of 5% to 10% to certain employees who directly
contributed to the success of an investment. With respect to the private
investment funds, employees are collectively entitled to share 55% to 60% of
proceeds received by Insignia in respect of its promoted profits participation
in those funds. Employees share only in promoted profits and are not entitled to
any portion of earnings on the Company's actual investment. Gains on sales of
real estate and equity earnings for the nine-month periods of 2002 and 2001 are
recorded net of employee entitlements of $5.0


                                       12
<PAGE>

million and $695,000, respectively, pursuant to these grants. The Company's
principal investment programs are more fully described below.

     The Compensation Committee of the Company's Board of Directors, with the
advice of third party professionals, has completed a review of policies relating
to management participation in the Company's real estate investment program in
the context of Insignia's entire incentive compensation program for senior
management. The Committee has determined that all future promote interests
granted to members of senior management shall have a co-investment requirement
(such that any such individual has money at risk) and a netting requirement
(such that losses on poor investments are netted with gains on successful
investments). These requirements will apply to investments made by the Company
on and after July 29, 2002. The mechanics by which this policy will be
implemented will be determined based on the collective efforts of members of the
Committee, its independent counsel and consultants and management. No grants to
such members of senior management with respect to investments made after July
29, 2002 shall be made until such mechanics are in place.

Property Investment

     The Company co-invests in the purchase of operating real estate assets
including office, retail, industrial, apartment and hotel properties. As of
September 30, 2002, Insignia held equity investments totaling $27.8 million in
33 minority owned property assets. These properties consist of over 8.4 million
square feet of commercial property, 1,487 multi-family apartment units and 829
hotel rooms. The gross aggregate asset carrying value of these properties
totaled approximately $1 billion at September 30, 2002. The Company's minority
ownership interests in co-investment property range from 1% to 30%. Gains
realized from sales of real estate by minority owned ventures totaled $2.0
million in the third quarter of 2002 and $3.7 million for the first nine months
of 2002, compared to $161,000 and $625,000 for the third quarter and nine months
of 2001. Such amounts are included under the caption "equity earnings in real
estate" in the Company's consolidated statements of operations.

     Insignia also consolidates two operating properties, a wholly-owned retail
property located in Norman, Oklahoma and a New York City apartment complex owned
by a limited partnership in which the Company owns a 1% controlling general
partner interest. With respect to the New York City apartment complex, Insignia
is entitled to approximately 45% of all distributions after limited partners
receive a return of all invested capital (aggregating approximately $6.0
million). These properties comprise approximately 155,000 square feet of
commercial space and 420 multi-family apartment units. At September 30, 2002,
the carrying amounts of these consolidated real estate assets totaled $45.8
million, and non-recourse real estate mortgage debt totaled $46.7 million. In
September 2002, a consolidated retail property was sold for a $1.3 million gain.
The gain is included under the caption "other income, net" in the Company's
consolidated statements of operations.

     The New York City apartment complex is owned by several multi-tiered
partnerships, in which Insignia has several different interests. Since 1999,
Insignia has held a 1% general partner interest in the limited partnership that
owns the property and a 1% general partner interest in the second tier limited
partnership that owns the 99% limited partner interest in the property-owning
partnership. In the first quarter of 2002, Insignia's intent with respect to its
ownership interests in the property changed from a passive role, in which its
primary objective was to retain the property management assignment for the
property, to an active role, in which it has commenced an effort to refinance
all of the debt encumbering the property. Although Insignia's economic interest
in the property is nominal (until the limited partners have received a return of
all invested capital), the Company commenced consolidating this property in its
financial statements as of January 1, 2002 because (i) the partnership agreement
for the property-owning partnership grants the general partner complete
authority over the management and affairs of the partnership, including any sale
or refinancing of its sole asset without limited partner approval, and (ii)
generally accepted accounting principles require consolidation on the basis of
voting control (regardless of the level of equity ownership). In July 2002,
Insignia invested $1.2 million in the second tier limited partnership as a new
limited partner pursuant to a $1.5 million equity financing. The remaining
$300,000 was invested by existing limited partners in June 2002.

Development

     In July 2002, a subsidiary of the Company acquired three contiguous parcels
of property and related leasehold rights in St. Thomas, United States Virgin
Islands, which comprise 32.3 acres of property, including 18 submerged acres
with full water rights. The initial purchase price was approximately $35.0
million, paid with $18.5 million in cash and a portion of a $20.0 million
borrowing by the subsidiary under a $40.0 million mortgage loan facility. At
September 30, 2002, approximately $3.5 million of the borrowing was held in cash
and escrowed reserves. The property is currently undergoing predevelopment
activities together with operating activities of an existing marina.


                                       13
<PAGE>

The property and its debt are consolidated in the Company's consolidated
financial statements. The loan facility is non-recourse to Insignia. Insignia's
investment in the property totaled $19.4 million at September 30, 2002.

     In addition, Insignia has minority ownership in four office projects whose
development is directed by the Company. Insignia also owns a parcel of land in
Denver, located adjacent to one of the office developments, that is held for
future development. This land parcel was subject to an impairment write-down in
the third quarter of 2002 as described in Note 10. Insignia's ownership in the
four office projects range from 25% to 33% and the operating status of each at
September 30, 2002 was as follows:

o    Dallas office project -- 96% leased

o    Portland flex project -- 60% leased

o    Denver office project -- 41% leased

o    Portland downtown office project -- 1% leased

     The Company's only obligations with respect to the office developments,
beyond its investment, are partial construction financing guarantees totaling
$8.9 million. The Company's investment in development assets totaled $31.7
million at September 30, 2002. Interest capitalized in connection with these
developments totaled $663,000 and $427,000, respectively, for the nine-month
periods of 2002 and 2001.

Private Investment Funds

     At September 30, 2002, Insignia had equity investments of $12.8 million in
two private investment funds, Insignia Opportunity Trust ("IOT") and Insignia
Opportunity Partners II ("IOP II") and had a commitment to invest an additional
$2.3 million in IOP II. The investment objectives of these funds are to invest
primarily in real estate debt securities with a focus on below investment grade
commercial mortgage-backed securities. The gross carrying value of assets owned
and managed by the two funds was approximately $140.0 million as of September
30, 2002.

     IOT has completed its deployment of committed capital and IOP II has called
$28.5 million of its $48.5 million of total capital commitments. Three executive
officers of the Company have committed $2.25 million to IOP II on the same basis
as all other investors. Insignia holds ownership interests of approximately 13%
in IOT and 10% in IOP II and is currently entitled to an additional profits
participation of 10% in IOT and 5% in IOP II. Insignia's additional profits
participation could increase to 30% in IOT and 50% in IOP II, depending on the
performance of the funds. Insignia's earnings from its investments in IOT and
IOP II was $2.4 million and $1.7 million (after employee incentive participation
of $1.1 million and $675,000) for the nine months of 2002 and 2001,
respectively, and are included in real estate services revenues in the
accompanying consolidated statements of operations.

10. Real Estate Impairment

     During the third quarter of 2002, the Company recorded impairment against
its real estate investments of $1.6 million on five property assets. Insignia
re-evaluates each real estate investment on a quarterly basis, taking into
account changes in market conditions and prospects. The impairment charge
includes $560,000 for the Denver land parcel held for future development
(disclosed in Note 9 above) based on a third party appraisal and $703,000 for a
15% owned office building, located in Boston, suffering from increased vacancies
and lowered rental rates.

11. Acquisitions

Groupe Bourdais

     In late December 2001, Insignia completed the acquisition of Groupe
Bourdais, one of France's premier commercial real estate services companies.
Groupe Bourdais now operates under the Insignia Bourdais name. The Insignia
Bourdais purchase price consists of total potential consideration of
approximately $49.0 million, including an initial payment of approximately $21.4
million in cash and stock (402,645 common shares) and additional payments
totaling up to approximately $28.0 million over the three years ending December
31, 2004, depending on the performance of the Insignia Bourdais operation. The
Company recorded contingent consideration of $6.0 million to goodwill in 2002 on
the basis of the performance of Insignia Bourdais for its fiscal year ended
March 31, 2002. The additional consideration was paid by issuance of 131,480
shares of Insignia common stock and cash of $4.7 million. The acquisition
consisted substantially of specifically identified intangible assets and
goodwill and has been allocated based upon estimates of value for such acquired
intangibles. Identified intangible assets, which included customer backlog,
property management contracts, a non-compete agreement, franchise agreements and
a


                                       14
<PAGE>

favorable premises lease, have been valued based on third party appraisals. The
results of Insignia Bourdais have been included in the Company's financial
statements since January 1, 2002.

Other Information

     The following table provides pro forma results of operations for the
periods indicated, assuming consummation of the Groupe Bourdais acquisition as
of January 1, 2001:

<TABLE>
<CAPTION>
                                   THREE MONTHS ENDED    NINE MONTHS ENDED
                                   SEPTEMBER 30 2001     SEPTEMBER 30 2001
                                   -----------------     ------------------
                                    (In thousands, except per share data)
<S>                               <C>                   <C>
Revenues                             $    154,887          $    521,938
                                     ============          ============

Loss from continuing operations            (4,254)               (4,833)
                                     ============          ============

Net loss                                   (3,328)               (6,355)
                                     ============          ============

Net loss per common share:
  -- Basic                           $      (0.16)         $      (0.32)
                                     ============          ============
  -- Assuming dilution               $      (0.16)         $      (0.32)
                                     ============          ============
</TABLE>

     Pro forma results of operations for Baker Commercial and Brooke
International -- India, each acquired in 2001, are not provided because the
impact of these acquisitions on the Company's results of operations was not
material.

12. Private Financing

     In June 2002, Insignia executed agreements for $50.0 million of new capital
through a private investment by funds affiliated with Blackacre Capital
Management, LLC ("Blackacre"). The investment consists of $12.5 million in newly
issued shares of Series B convertible preferred stock and a commitment to
provide $37.5 million of subordinated debt. The preferred stock carries an 8.5%
annual dividend, payable quarterly at Insignia's option in cash or in kind, and
is convertible into Insignia common stock at a price of $15.40 per share,
subject to adjustment. The preferred stock has a perpetual term, although
Insignia may call the preferred stock, at stated value, after June 7, 2005. In
February 2000, Blackacre purchased $25.0 million of convertible preferred stock,
which has now been exchanged for a Series A convertible preferred stock with an
8.5% annual dividend and a conversion price of $14.00 per share.

     The Blackacre credit facility, which is subordinate to Insignia's senior
credit facility, bears interest at an annual rate of 11.25% to 12.25%, payable
quarterly, depending on the amount borrowed. Insignia may borrow in as many as
three tranches over the 18-month period ending in December 2003. The
subordinated debt matures in June 2009. In July 2002, Insignia borrowed $15.0
million under the credit facility. The proceeds were used to finance the
purchase of the real estate development property described in Note 9.


                                       15
<PAGE>

13. Long Term Debt

                                      SEPTEMBER 30    DECEMBER 31
                                          2002           2001
                                     -------------   -------------
                                            (In thousands)
NOTES PAYABLE
  Senior revolving credit facility   $     117,000   $     149,000
  Subordinated credit facility              15,000              --
  Acquisition loan notes                    17,502          20,972
                                     -------------   -------------
                                           149,502         169,972
                                     -------------   -------------

REAL ESTATE MORTGAGES                       66,718          37,269

                                     -------------   -------------
  TOTAL                              $     216,220   $     207,241
                                     =============   =============

     The acquisition loan notes are payable to sellers of the acquired UK
businesses and are backed by restricted cash deposits in approximately the same
amount. The loan notes have a semiannual redemption feature at the discretion of
the note holder. The real estate mortgages are secured solely by the property
assets owned by the respective consolidated subsidiaries. Maturities range from
December 2002 to October 2023. At September 30, 2002, Insignia had over $78.0
million of availability on its credit facilities under its covenants. In October
2002, Insignia paid down $22.0 million on the senior revolving credit facility
from existing cash balances, lowering its outstanding balance to $95.0 million.


                                       16
<PAGE>

14. Earnings Per Share

     The following table sets forth the computation of the numerator and
denominator used to compute, basic and diluted earnings from continuing
operations per common share for the periods indicated. The potential dilutive
shares from the conversion of preferred stock and the exercise of options,
warrants and restricted stock is not assumed for the 2001 periods because the
inclusion of such shares would be antidilutive.

<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED          NINE MONTHS ENDED
                                                                      SEPTEMBER 30               SEPTEMBER 30
                                                               ------------------------    ------------------------
                                                                  2002          2001          2002          2001
                                                               ----------    ----------    ----------    ----------
                                                                                   (In thousands)
<S>                                                           <C>           <C>           <C>           <C>
NUMERATOR:
Numerator for basic earnings per share:
   Income (loss) from continuing operations                    $    4,116    $   (5,396)   $    6,883    $   (6,927)
     Preferred stock dividends                                       (800)         (250)       (1,373)         (750)
                                                               ----------    ----------    ----------    ----------
   Income (loss) from continuing operations available
     to common stockholders                                    $    3,316    $   (5,646)   $    5,510    $   (7,677)

Effect of dilutive securities:
   Preferred stock dividends                                           --            --            --            --
                                                               ----------    ----------    ----------    ----------
Numerator for diluted earnings per share -- income (loss)
  from continuing operations available to common
   stockholders after assumed conversions                      $    3,316    $   (5,646)   $    5,510    $   (7,677)
                                                               ==========    ==========    ==========    ==========

DENOMINATOR:
Denominator for basic earnings per share -- weighted average
    common shares                                                  23,198        22,214        23,082        21,932

Effect of dilutive securities:
   Stock options, warrants and unvested restricted stock              395            --           788            --
   Convertible preferred stock                                         --            --            --            --
                                                               ----------    ----------    ----------    ----------
Denominator for diluted earnings per share -- weighted
  average common shares and assumed conversions                    23,593        22,214        23,869        21,932
                                                               ==========    ==========    ==========    ==========
</TABLE>

15. Comprehensive Income (Loss)

     The following table presents a calculation of comprehensive income (loss)
for the periods indicated.

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED           NINE MONTHS ENDED
                                                          SEPTEMBER 30                SEPTEMBER 30
                                                    ------------------------    ------------------------
                                                       2002          2001          2002          2001
                                                    ----------    ----------    ----------    ----------
                                                                       (In thousands)
<S>                                                <C>           <C>           <C>           <C>
Net income (loss)                                   $    8,769    $   (4,470)   $   (8,834)   $   (8,449)
Other comprehensive income (loss), net of taxes:
    Foreign currency translation adjustment              1,294         2,991         7,261          (502)
    Reclassification adjustment for realized gain           --            --           (50)           --
    Unrealized gains on securities                          --           (56)           --             5
    Minimum pension liability                              (18)           --           (79)           --
                                                    ----------    ----------    ----------    ----------
Total other comprehensive income (loss)                  1,276         2,935         7,132          (497)
                                                    ----------    ----------    ----------    ----------
TOTAL COMPREHENSIVE INCOME (LOSS)                   $   10,045    $   (1,535)   $   (1,702)   $   (8,946)
                                                    ==========    ==========    ==========    ==========
</TABLE>


                                       17
<PAGE>

16. Industry Segment Data

     Insignia's operating activities encompass two reportable segments that
include (i) commercial real estate services including principal investment
activities, and (ii) residential real estate services. The Company's reportable
segments are business units that offer similar products and services and are
managed separately because of the distinction between such services. The
accounting policies of the reportable segments are the same as those used in the
preparation of the consolidated financial statements.

     The commercial segment provides services including tenant representation,
property and asset management, agency leasing and brokerage, investment sales,
development and re-development, consulting and other services. The commercial
segment also includes the Company's principal real estate investment activities
and fund management. Insignia's commercial segment is comprised of the
operations of Insignia/ESG in the U.S., Insignia Richard Ellis in the U.K.,
Insignia Bourdais in France (which commenced operations in January 2002) and
other businesses in continental Europe, Asia and Latin America. The residential
segment provides services including apartment brokerage and leasing, rental
brokerage, property management and mortgage brokerage services and consists of
the New York based operations of Insignia Douglas Elliman and Insignia
Residential Group. The Company's unallocated administrative expenses and
corporate assets, consisting primarily of cash and property and equipment, are
included in "Other" in the segment reporting. The Company's internet-based
initiatives launched in 1999 were terminated in 2001. The operating impact of
internet initiatives for the first nine months of 2001 was limited to $8.9
million of write-downs on equity internet investments made predominantly in 1999
and 2000.


                                       18
<PAGE>

     The following tables summarize financial information by industry segment
for the periods indicated. This financial information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in Item 2 of this Form 10-Q.

<TABLE>
<CAPTION>
                                                     COMMERCIAL     RESIDENTIAL        OTHER           TOTAL
                                                    ------------    ------------    ------------    ------------
                                                                         (In thousands)
THREE MONTHS ENDED -- SEPTEMBER 30, 2002
<S>                                                <C>             <C>             <C>             <C>
REVENUES:
   Real estate services                             $    151,669    $     36,133    $         --    $    187,802
   Property operations                                     2,380              --              --           2,380
                                                    ------------    ------------    ------------    ------------
      TOTAL REVENUES                                     154,049          36,133              --         190,182
                                                    ------------    ------------    ------------    ------------

OPERATING INCOME (LOSS)                                   10,354           2,518          (4,524)          8,348

OTHER INCOME AND EXPENSE:
   Interest income                                           450               6             390             846
   Other income                                            1,290              --               5           1,295
   Interest expense                                          (64)             (3)         (2,339)         (2,406)
   Property interest expense                                (670)             --              --            (670)
   Equity earnings (loss) in real estate ventures             70              --              --              70
                                                    ------------    ------------    ------------    ------------

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
   INCOME TAXES                                     $     11,364    $      2,521    $     (6,402)   $      7,483
                                                    ============    ============    ============    ============

NINE MONTHS ENDED -- SEPTEMBER 30, 2002

REVENUES:
   Real estate services                             $    408,928    $    105,142    $         --    $    514,070
   Property operations                                     6,930              --              --           6,930
                                                    ------------    ------------    ------------    ------------
      TOTAL REVENUES                                     415,858         105,142              --         521,000
                                                    ------------    ------------    ------------    ------------

OPERATING INCOME (LOSS)                                   18,546           7,742         (11,152)         15,136

OTHER INCOME AND EXPENSE:
   Interest income                                         1,635               9           1,286           2,930
   Other income                                            1,256              --              52           1,308
   Interest expense                                         (358)            (14)         (6,383)         (6,755)
   Property interest expense                              (1,621)             --              --          (1,621)
   Equity earnings in real estate ventures                 1,516              --              --           1,516
                                                    ------------    ------------    ------------    ------------

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
   INCOME TAXES                                     $     20,974    $      7,737    $    (16,197)   $     12,514
                                                    ============    ============    ============    ============

Total assets                                        $    703,680    $     63,164    $     65,662    $    832,506
Real estate investments                                  135,717              --              --         135,717
</TABLE>


                                       19
<PAGE>

<TABLE>
<CAPTION>
                                                                              INTERNET
                                                  COMMERCIAL   RESIDENTIAL   INITIATIVES      OTHER         TOTAL
                                                  ----------   -----------   -----------    ----------    ----------
                                                                               (In thousands)
THREE MONTHS ENDED -- SEPTEMBER 30, 2001
<S>                                              <C>           <C>           <C>           <C>           <C>
REVENUES:
   Real estate services                           $  114,978    $  431,328    $       --    $       --    $  146,306
   Property operations                                   720            --            --            --           720
                                                  ----------    ----------    ----------    ----------    ----------
   TOTAL REVENUES                                    115,698        31,328            --            --       147,026
                                                  ----------    ----------    ----------    ----------    ----------

OPERATING INCOME (LOSS)                               (3,700)          346            --        (2,420)       (5,774)

OTHER INCOME AND EXPENSE:
   Losses from internet investments                       --            --        (1,779)           --        (1,779)
   Interest and other income                             432             4            --           535           971
   Interest expense                                     (150)          (11)           --        (2,930)       (3,091)
   Property interest expense                            (305)           --            --            --          (305)
   Foreign currency transaction gains                     --            --            --            17            17
   Equity earnings in real estate ventures               234            --            --            --           234
                                                  ----------    ----------    ----------    ----------    ----------

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
   INCOME TAXES                                   $   (3,489)   $      339    $   (1,779)   $   (4,798)   $   (9,727)
                                                  ==========    ==========    ==========    ==========    ==========


NINE MONTHS ENDED -- SEPTEMBER 30, 2001

REVENUES:
   Real estate services                           $  399,415    $   92,250    $       --    $       --    $  491,665
   Property operations                                 3,189            --            --            --         3,189
                                                  ----------    ----------    ----------    ----------    ----------
   TOTAL REVENUES                                    402,604        92,250            --            --       494,854
                                                  ----------    ----------    ----------    ----------    ----------

OPERATING INCOME (LOSS)                               10,814           583            --        (8,838)        2,559

OTHER INCOME AND EXPENSE:
   Losses from internet investments                       --            --        (8,870)           --        (8,870)
   Interest and other income                           1,532             4            --         2,265         3,801
   Interest expense                                     (461)          (32)           --        (9,221)       (9,714)
   Property interest expense                          (1,477)           --            --            --        (1,477)
   Foreign currency transaction gains                     --            --            --           356           356
   Equity earnings in real estate ventures             1,288            --            --            --         1,288
                                                  ----------    ----------    ----------    ----------    ----------

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
   INCOME TAXES                                   $   11,696    $      555    $   (8,870)   $  (15,438)   $  (12,057)
                                                  ==========    ==========    ==========    ==========    ==========

Total assets                                      $  555,095    $  164,052    $    5,332    $   49,599    $  774,078

Real estate investments                               70,390            --            --            --        70,390
</TABLE>


                                       20
<PAGE>

     Certain geographic information is as follows:

                     THREE MONTHS ENDED        NINE MONTHS ENDED
                        SEPTEMBER 30              SEPTEMBER 30
                  -----------------------   -----------------------
TOTAL REVENUES       2002         2001         2002         2001
                  ----------   ----------   ----------   ----------
                                   (In thousands)
United States     $  141,800   $  119,438   $  397,007   $  410,404
United Kingdom        32,640       23,839       82,579       73,825
France                11,502           --       29,584           --
Other countries        4,240        3,749       11,830       10,625
                  ----------   ----------   ----------   ----------
                  $  190,182   $  147,026   $  521,000      494,854
                  ==========   ==========   ==========   ==========


                                                 SEPTEMBER 30
                                           -----------------------
LONG-LIVED ASSETS                             2002         2001
                                           ----------   ----------
                                                (In thousands)
United States                              $  347,465   $  360,529
United Kingdom                                114,158      109,261
France                                         24,409           --
Other countries                                 6,570        8,628
                                           ----------   ----------
                                           $  492,602   $  478,750
                                           ==========   ==========

     Long-lived assets are comprised of property and equipment, real estate
investments, goodwill and acquired intangibles. Long-lived assets in the United
States include $37.0 million pertaining to a development parcel in St. Thomas,
United States Virgin Islands.

17. Loans to Officers

     In March 2002, Insignia made a loan in the amount of $1.5 million to its
Chairman and Chief Executive Officer. The variable interest rate on the loan is
the same as the average cost of funds borrowed by Insignia, which was
approximately 5.2% at September 30, 2002. The loan is payable on or before March
5, 2005. The Company deducts quarterly interest payments due on the loan from
certain bonuses payable to the Chairman. To the extent such bonuses are not
paid, all accrued and unpaid interest is payable at maturity. The loan and any
accrued interest thereon would be forgiven in limited circumstances, such as a
significant transaction or change of control.

     In June 2001, Insignia made a loan in the amount of $1.5 million to its
President. The variable interest rate on the loan is the same as the average
cost of funds borrowed by Insignia, which was approximately 5.2% at September
30, 2002. The loan becomes due upon the earliest of (i) voluntary termination of
the President's employment with Insignia, (ii) the termination of the
President's employment with Insignia for cause or (iii) March 15, 2006. Insignia
will forgive $375,000 of the principal amount of the loan and accrued interest
thereon on March 15 of the year following each of 2002, 2003, 2004 and 2005 to
the extent that actual Net EBITDA equals or exceeds 75% of annual budgeted Net
EBITDA for any such year, as approved by the Board of Directors. In addition, if
aggregate actual Net EBITDA for fiscal 2002, 2003, 2004 and 2005 equals or
exceeds aggregate annual budgeted EBITDA for such years, any outstanding
principal amount of the loan and accrued interest thereon, will be forgiven as
of March 15, 2006.

     In May 2002, Insignia made a loan in the amount of $270,000 to an Executive
Vice President of the Company. The variable interest rate on the loan is the
same the average cost of funds borrowed by Insignia, which was approximately
5.2% at September 30, 2002. Interest on the loan is payable to Insignia in cash
on June 30 and December 31 of each year; provided, however, that until December
31, 2004 all interest accrued and payable may, at the discretion of the employee
(but subject to Insignia's right of offset as more fully described below), be
added to the outstanding principal balance of the loan instead of paid in cash.
The loan is repayable on the earlier of (i) June 30, 2005 or (ii) 30 days
following a termination of the employee's employment with Insignia for any
reason. Pursuant to its rights under the note, beginning on August 1, 2002,
Insignia began withholding 50% of any distribution payable to the employee, in
respect of the employee's equity interest in the Company's profits interest in
Insignia Opportunity Partners, the operating partnership subsidiary of Insignia
Opportunity Trust, to be applied as a payment of accrued interest and
outstanding principal. In October 2002, the Company withheld $6,995 from
distributions payable to the employee pursuant to its rights under the note.


                                       21
<PAGE>

     Pursuant to the Company's Supplemental Stock Purchase and Loan Program,
Insignia has loans outstanding to seven employees, including three executive
officers, of the Company. These loans were originally made in 1998 and 1999 for
the purchase of 158,663 newly issued shares of Insignia's common stock at an
average share price of approximately $12.18. The loans require principal and
interest payments, at a fixed rate of 7.5%, in 40 equal quarterly installments
ending December 31, 2009. The notes are secured by the common shares and are
non-recourse to the employee except to the extent of 25% of the outstanding
amount. At September 30, 2002, the loans outstanding totaled $1.2 million and
are presented as a reduction of stockholders' equity in the Company's
consolidated balance sheet.

18. Contingencies

Ordinary Course of Business Claims

     Insignia and certain subsidiaries are defendants in lawsuits arising in the
ordinary course of business. Management does not expect that the results of any
such lawsuits will have a significant adverse effect on the financial condition,
results of operations or cash flows of the Company. All contingencies including
unasserted claims or assessments, which are probable and the amount of loss can
be reasonably estimated, are accrued in accordance with SFAS No. 5, Accounting
for Contingencies.

Indemnification

     In 1998, the Company's former parent entered into a Merger Agreement with
Apartment Investment and Management Company ("AIMCO"), and one of AIMCO's
subsidiaries, pursuant to which the former parent was merged into AIMCO. Shortly
before the merger, the former parent distributed the stock of Insignia to its
shareholders in a spin-off transaction. As a requirement of the Merger
Agreement, Insignia entered into an Indemnification Agreement with AIMCO. In the
Indemnification Agreement, Insignia agreed generally to indemnify AIMCO against
all losses exceeding $9.1 million that result from: (i) breaches by the Company
or former parent of representations, warranties or covenants in the Merger
Agreement; (ii) actions taken by or on behalf of former parent prior to the
merger; and (iii) the spin-off.

     In December 2001, the Company entered into a stock purchase agreement with
Real Living, Inc., the purchaser, that provided for the sale of 100% of the
stock of Realty One and its affiliated companies. Such affiliated companies
included First Ohio Mortgage Corporation, Inc., First Ohio Escrow Corporation,
Inc. and Insignia Relocation Management, Inc. As a part of sale, the Company
agreed generally to indemnify the purchaser against all losses up to the
purchase price (subject to certain deductible amounts), resulting from the
following: (i) breaches by the Company of any representations, warranties or
covenants in the stock purchase agreement; (ii) pre-disposition obligations for
goods, services, taxes or indebtedness except for those assumed by Real Living,
Inc.; (iii) change of control payments made to employees of Realty One; and (iv)
any third party losses arising or related to the period prior to the
disposition. In addition, the Company provided an indemnification for losses
incurred by Wells Fargo Home Mortgage, Inc. ("Wells Fargo") and/or the purchaser
in respect of (i) mortgage loan files existing on the date of closing; (ii)
fraud in the conduct of its home mortgage business; and (iii) the failure to
follow standard industry practices in the home mortgage business. The aggregate
loss for which the Company is potentially liable to Wells Fargo is limited to
$10 million and the aggregate of any claims made by the purchaser and Wells
Fargo shall not exceed the purchase price.

     As of October 30, 2002, the Company was not aware of any matters that would
give rise to a material claim under any warranties and indemnities.


                                       22
<PAGE>

Environmental

     Under various federal and state environmental laws and regulations, a
current or previous owner or operator of real estate may be required to
investigate and remediate certain hazardous or toxic substances or
petroleum-product releases at the property, and may be held liable to a
governmental entity or to third parties for property damage and for
investigation and cleanup costs incurred by such parties in connection with
contamination. In addition, some environmental laws create a lien on the
contaminated site in favor of the government for damages and costs it incurs in
connection with the contamination. The owner or operator of a site may be liable
under common law to third parties for damages and injuries resulting from
environmental contamination emanating from or at the site, including the
presence of asbestos containing materials. Insurance for such matters may not be
available.

     The presence of contamination or the failure to remediate contamination may
adversely affect the owner's ability to sell or lease real estate or to borrow
using the real estate as collateral. There can be no assurance that Insignia, or
any assets owned or controlled by Insignia (as on-site property manager),
currently are in compliance with all of such laws and regulations or that
Insignia will not become subject to liabilities that arise in whole or in part
out of any such laws, rules or regulations. The liability may be imposed even if
the original actions were legal and Insignia did not know of, or was not
responsible for, the presence of such hazardous or toxic substances. Insignia
may also be solely responsible for the entire payment of any liability if it is
subject to joint and several liability with other responsible parties who are
unable to pay. Insignia may be subject to additional liability if it fails to
disclose environmental issues to a buyer or lessee of property. Management is
not currently aware of any environmental liabilities that are expected to have a
material adverse effect upon the operations or financial condition of the
Company.


                                       23
<PAGE>

19. Equity

     During the nine month period ended September 30, 2002, the Company had the
following changes in stockholders' equity:

     a)   Net loss of $8,834,000, including $20,635,000 (net of tax benefit)
          with respect to the cumulative effect of a change in accounting
          principle.

     b)   Issuance of 125,000 shares, or $12,500,000, of Series B convertible
          preferred stock (less $175,000 of issuance costs) that carries an 8.5%
          annual dividend and is convertible into Insignia common stock at a
          price of $15.40.

     c)   Exchange of 250,000 shares, or $25,000,000, of convertible preferred
          stock, originally issued in February 2000, for Series A convertible
          preferred stock that carries an 8.5% annual dividend and is
          convertible into Insignia common stock at a price of $14.00 per share.
          This exchange with the existing holder did not change total
          stockholders' equity.

     d)   Preferred stock dividends totaling $1,032,000 paid in cash.

     e)   Exercise of stock options to purchase 102,967 shares of Insignia
          common stock at exercise prices ranging from $4.08 to $11.59 per
          share.

     f)   Sale of 78,809 shares of Insignia common stock, at an average price of
          approximately $8.67, under the Company's Employee Stock Purchase
          Program.

     g)   Issuance of 131,480 shares (valued at $1.3 million) of Insignia common
          stock in connection with the Groupe Bourdais acquisition.

     h)   Issuance of 85,645 shares of Insignia common stock (at issue date
          market values averaging approximately $10.00 per share) for vested
          restricted stock awards. Accrued compensation expense relating to
          restricted stock totaled $463,000 for the nine-month period of 2002.

     i)   Payments of $113,000 on notes receivable for common stock. In
          addition, the retired Chairman of the Company's U.K. subsidiary,
          Insignia Richard Ellis and a Vice Chairman of Insignia/ESG, Inc.
          assigned to the Company, for retirement, 47,786 shares of Insignia
          common stock with an average market value of $11.35 per share. Such
          common shares were retired in satisfaction of common stock purchase
          notes receivable of $542,000.

     j)   Other comprehensive income of $7,132,000, net of applicable taxes, for
          the nine months ended September 30, 2002, arising substantially from
          the translation of European net assets at higher exchange rates.

     k)   Stock option expense of $116,000 representing the estimated value of
          employee stock options issued during 2002, which is added to
          additional paid-in capital and charged to net income.

     In July 2002, the Company authorized a stock repurchase program of up to
$5.0 million, subject to compliance with all covenants contained within the
Company's existing debt agreements. As of October 31, 2002, Insignia had not
initiated any stock repurchases under this authorization.


                                       24
<PAGE>

ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

     Insignia monitors and evaluates its financial performance using two primary
measures -- Net EBITDA and income from continuing operations. Net EBITDA is
defined as income from continuing operations before depreciation, amortization,
property dispositions and impairments, internet investment results and income
taxes. Net EBITDA deducts all interest expense and includes Funds From
Operations ("Real estate FFO") from real estate co-investments. Real estate FFO
is defined as income or loss from real estate operations before depreciation,
gains or losses on sales of property and provisions for impairment. Net EBITDA
and Real Estate FFO are supplemental measures that are not defined by GAAP and
Insignia's usage of these terms may differ from other companies' usage of the
same or similar terms.

     Insignia's 2002 third quarter was highlighted by very strong year-over-year
performance in Europe, especially the United Kingdom which benefited from a
strong investment market and robust demand for valuation services. Also,
strength in the Company's New York residential sales and brokerage unit,
Insignia Douglas Elliman, continued in the third quarter, although at a lessened
pace from the first two quarters of 2002, which were unusually robust. The
Company's U.S. commercial real estate services business, Insignia/ESG, continues
to face soft markets, but benefited from continued expense containment measures
and the stronger relative performance of its flagship New York operation.

     For the third quarter of 2002, Net EBITDA totaled $13.0 million, up
significantly from $3.5 million for the third quarter of 2001. Service revenues
for the third quarter of 2002 totaled $187.8 million, an increase from $146.3
million for the same period in 2001. The increase in revenues reflects year-over
year improvement in all virtually operating units and an $11.5 million
contribution from the Company's French business unit acquired in late December
2001. For the third quarter of 2002, the Company reported income from continuing
operations of $4.1 million ($0.14 per diluted share), an improvement from a loss
of $5.4 million ($0.25 per diluted share) in the third quarter of 2001. Net
income for the third quarter of 2002 totaled $8.8 million ($0.34 per diluted
share), compared to a net loss of $4.5 million ($0.21 per diluted share) for the
same period of 2001. Earnings for the 2002 third quarter were aided by a $4.7
million tax benefit in discontinued operations related to the January 2002 sale
of Realty One. The capital loss resulting from the Realty One sale had been
fully reserved due to uncertainty of the deductibility of the loss. In the third
quarter of 2002, it was determined that the loss would be fully deductible,
requiring the recognition of a tax benefit. Results for the third quarter of
2001 were adversely impacted by the effects of the September 11th terrorist
attacks on New York and Washington as well as $1.8 million of Internet losses.
Goodwill amortization was discontinued effective January 1, 2002 as required by
new accounting standards. The Company incurred $4.4 million of such amortization
expense in the third quarter of 2001.

     For the first nine months of 2002, Net EBITDA totaled $31.2 million, up 4%
from $30.1 million for the same period of 2001. Service revenues reached $514.1
million, up 5% from $491.7 million for the 2001 period. Income from continuing
operations for the nine months of 2002 was $6.9 million ($0.23 per diluted
share), an improvement from a loss of $6.9 million ($0.35 loss per diluted
share) for the nine months of 2001. The 2001 loss included $8.9 million of
internet investment losses and $12.9 million of goodwill amortization. Net
losses for the nine months of 2002 and 2001 included the cumulative effect of
the goodwill accounting change (2002) and the operations of the discontinued
Realty One business (2001). As a result, the Company reported net losses of $8.8
million ($0.43 per diluted share) in 2002 versus $8.4 million ($0.42 per diluted
share) in 2001.

     Earnings per share for the nine months of 2002 is affected by a 9% increase
in average diluted shares over 2001. Diluted shares increased by 1.9 million for
the nine months of 2002 as a result of (i) an 800,000 share dilutive effect of
options and warrants that were non-dilutive by virtue of reported losses in
2001, (ii) 500,000 shares issued to employees pursuant to stock option exercises
and stock plan purchases and (iii) 534,000 shares issued in connection with the
Insignia Bourdais acquisition.

     The 2002 results continued to reflect caution by US corporate clients
worldwide. They are particularly wary of making long-term commitments for office
space due to the uncertainty in the economy and financial markets. As a
consequence, the time needed to complete transactions has lengthened
significantly. Compared with the accelerated pace of activity in the late 1990s
and 2000, office leases and property investment sales -- including those in our
real estate investment portfolio -- are now taking much longer to consummate. A
slow office leasing environment affects Insignia/ESG, the domestic commercial
services business, more than Insignia's other businesses.


                                       25
<PAGE>

     The table below depicts the Company's operating results, in a format that
highlights the above measures, and reconciles them to GAAP net income, for the
three and nine months ended September 30, 2002 and 2001, respectively. Operating
results for each period present all results related to the sold Realty One
business in discontinued operations. This information has been derived from the
Company's consolidated statements of operations for the periods then ended.

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED         NINE MONTHS ENDED
                                                          SEPTEMBER 30              SEPTEMBER 30
                                                     ----------------------    ----------------------
                                                        2002         2001         2002         2001
                                                     ---------    ---------    ---------    ---------
                                                                      (In thousands)
<S>                                                  <C>          <C>         <C>           <C>
REAL ESTATE SERVICES REVENUES
     Commercial -- United States                     $ 103,287    $  87,390    $ 284,935    $ 314,965
     Commercial -- International                        48,382       27,588      123,993       84,450
     Residential                                        36,133       31,328      105,142       92,250
                                                     ---------    ---------    ---------    ---------
         Total real estate service revenues            187,802      146,306      514,070      491,665
                                                     ---------    ---------    ---------    ---------

COSTS AND EXPENSES
     Real estate services                              169,435      140,116      471,009      452,087
     Administrative                                      4,502        2,399       11,085        8,781
                                                     ---------    ---------    ---------    ---------
EBITDA -- REAL ESTATE SERVICES (1)                      13,865        3,791       31,976       30,797
     Real estate FFO (2)                                   683        1,807        3,095        4,830
     Interest and other income                             835          988        2,932        4,157
     Interest expense                                   (2,406)      (3,091)      (6,755)      (9,714)
                                                     ---------    ---------    ---------    ---------
NET EBITDA (1)                                          12,977        3,495       31,248       30,070
     Gains on sales of real estate                       3,263          161        5,006          625
     Real estate impairment                             (1,577)          --       (1,699)          --
     Depreciation -- property and equipment             (4,541)      (3,954)     (13,082)     (11,238)
     Amortization of intangibles                        (1,030)      (5,829)      (4,139)     (18,480)
     Real estate depreciation (3)                       (1,609)      (1,821)      (4,820)      (4,164)
                                                     ---------    ---------    ---------    ---------
INCOME (LOSS) FROM REAL ESTATE OPERATIONS                7,483       (7,948)      12,514       (3,187)

   Losses from internet investments                         --       (1,779)          --       (8,870)
                                                     ---------    ---------    ---------    ---------

INCOME (LOSS) FROM CONTINUING OPERATIONS
   BEFORE INCOME TAXES                                   7,483       (9,727)      12,514      (12,057)

   Income tax (expense) benefit                         (3,367)       4,331       (5,631)       5,130
                                                     ---------    ---------    ---------    ---------

INCOME (LOSS) FROM CONTINUING OPERATIONS                 4,116       (5,396)       6,883       (6,927)

Discontinued operations, net of taxes:
   Operating income (loss)                                  --          926           --       (1,522)
   Adjustment to loss on disposal                        4,653           --        4,918           --
                                                     ---------    ---------    ---------    ---------

INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF A
   CHANGE IN ACCOUNTING PRINCIPLE                        8,769       (4,470)      11,801       (8,449)

Cumulative effect of a change in accounting
   principle, net of $9.4 million tax benefit               --           --      (20,635)          --
                                                     ---------    ---------    ---------    ---------

NET INCOME (LOSS)                                        8,769       (4,470)      (8,834)      (8,449)

Preferred stock dividends                                 (800)        (250)      (1,373)        (750)
                                                     ---------    ---------    ---------    ---------

NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS   $   7,969    $  (4,720)   $ (10,207)   $  (9,199)
                                                     ---------    ---------    ---------    ---------
</TABLE>

(1) Neither EBITDA nor Net EBITDA, as disclosed above, should be construed to
represent cash provided by operations determined pursuant to GAAP. These
measures are not defined by GAAP and Insignia's usage of these terms may differ
from other companies' usage of the same or similar terms. As compared to net
income, the


                                       26
<PAGE>

EBITDA and Net EBITDA measures effectively eliminate the impact of non-cash
charges for depreciation, amortization of intangible assets and other charges.
Management believes that the presentation of these supplemental measures enhance
a reader's understanding of the Company's operating performance as they provide
a measure of generated cash.

(2) Real estate FFO is defined as income or loss from real estate operations
before depreciation, gains or losses on sales of property and provisions for
impairment. This measure is not defined by GAAP and Insignia's usage of this
term may differ from other companies' usage of the same or similar terms.
Management uses this supplemental measure in the evaluation of principal real
estate investment activities and believes that it provides a measure of
generated cash flows for the Company's real estate operations.

(3) Real estate depreciation represents the depreciation attributed to the three
consolidated real estate properties as well as the portion of depreciation
expense of equity real estate investees attributed to Insignia's ownership.


Commercial Real Estate Services

     Insignia's commercial real estate service operations include Insignia/ESG
in the United States, Insignia Richard Ellis in the United Kingdom, Insignia
Bourdais in France and other subsidiaries in Germany, Italy, Belgium, the
Netherlands, Spain, Asia and Latin America. Commercial real estate services
revenues of $151.7 million for the third quarter of 2002 reflect a 32%
improvement from $115.0 million for the same period of 2001. Commercial EBITDA
of $14.7 million in 2002 significantly exceeded the $4.1 million for the third
quarter of 2001. For the nine months of 2002, commercial revenues were up 2% to
$408.9 million. Insignia Bourdais contributed $29.6 million to revenues in 2002.
EBITDA of $32.0 million for the nine months of 2002 reflects a decline from 2001
EBITDA of $33.9 million.

     United States

     The Company's U.S. commercial services unit, Insignia/ESG, experienced weak
leasing markets nationwide. U.S. revenues and EBITDA totaled $103.3 million and
$7.5 million, respectively, for the third quarter of 2002. While revenues were
up 18% and EBITDA was up 156% over the third quarter of 2001 , performance was
low by historical third quarter standards. The performance of Insignia/ESG for
the third quarter of 2002 does reflect improvement from prior quarters in 2002,
although the general economic uncertainty and sluggish pace of leasing activity
continues to hamper performance. U.S. revenues totaled $284.9 million for the
nine months of 2002, down 10% from the same period of 2001, and EBITDA totaled
$17.6 million, down 35% from $27.2 million in 2001. Nearly half of the decline
was derived from the development business, which has not sold an asset in 2002.
Development income totaled $4.6 million for the nine months of 2001. The
remainder of the 2002 decline is attributed to lower leasing volume. The revenue
decline was partially mitigated by discipline in controlling non-essential
expenses, which decreased by over $8.0 million from 2001 levels. Conversely, the
U.S. EBITDA margin declined in 2002 due to uncontrollable expenditures,
including, predominantly, higher occupancy costs and bad debts. During the nine
months of 2002, occupancy costs increased by approximately $3.0 million over
2001 levels as a result of new leases or renewals at higher rent levels in
several US markets, most notably Boston and the Company's headquarters at 200
Park Avenue in New York City.

     Europe

     European operations continue to exhibit strength in difficult times, fueled
by investment activity and valuation services in the UK and positive
contributions from Insignia Bourdais in France (which was acquired at the end of
2001). European EBITDA totaled $8.2 million for the third quarter of 2002, up
from $2.4 million in the third quarter of 2001. European revenues were $46.4
million for the third quarter of 2002, up 75% from $26.5 million in 2001. The
2002 third quarter included Insignia Bourdais revenues of $11.5 million and
EBITDA of $2.3 million. Other European operations produced EBITDA loss of
$900,000 for the 2002 third quarter. For the nine months of 2002, European
EBITDA was $17.3 million, up from $9.5 million in the same period in 2001.
European revenues of $119.3 million for the nine months of 2002 reflect a 46%
increase over $81.9 million in 2001. The strength of European operations in the
nine months of 2002 is attributable to the Insignia Bourdais acquisition and
improved performance in the UK. Insignia Bourdais in France contributed revenues
of $29.6 million and EBITDA of $4.8 million during the nine months of 2002. The
European results reflect a substantial reduction in leasing activity in markets
other than Paris.


                                       27
<PAGE>

     Insignia's European operating results in 2002 have been translated into
U.S. dollars at average exchange rates of $1.49 to the pound and $0.93 to the
euro. In 2001, European operating results were translated into U.S. dollars at
average exchange rates of $1.44 to the pound and $0.89 to the euro. The change
in currency translation rates accounts for approximately $500,000 of the
improved European performance in 2002.

     Asia and Latin America

     The Company's operations in Asia and Latin America launched in 2001
continue to build their service platforms, although performance remains
constrained by very weak commercial real estate markets in Asia. Latin American
performance improved aided by the completion of one of the largest office leases
ever in Mexico in the third quarter of 2002. These operations incurred and
EBITDA loss of $1 million for the third quarter of 2002 on $2.0 million in
revenues. The EBITDA loss was $2.8 million for the first nine months of 2002 on
$4.7 million in revenues. The poor 2002 performance compares to EBITDA losses of
approximately $1.2 million and $2.8 million, respectively, for the quarter and
nine months of 2001. The losses are, for the most part, attributable to
Insignia's building of a competitive presence in Tokyo, Hong Kong and Shanghai.

Residential Real Estate Services

     The Company's residential real estate services consist of co-op and
apartment brokerage through Insignia Douglas Elliman and property management
services through Insignia Residential Group. These residential operations
continue to benefit from a strong New York co-op and condo sales market. In the
third quarter of 2002, residential service revenues totaled $36.1 million, an
increase of 15% over $31.3 million for the same quarter of 2001, and residential
EBITDA increased materially to $3.6 million, a 71% increase over $2.1 million
for the third quarter 2001. Insignia Douglas Elliman generated service revenues
and EBITDA of $29.5 million and $3.5 million, respectively, during the 2002
third quarter, representing increases of 18% and 77% over the 2001 period.
Insignia Douglas Elliman's gross transaction volume totalled $775 million for
the third quarter of 2002, reflecting an 18% increase from the same period in
2001, while the number of units sold increased 24% to 991. The average sales
price during the 2002 third quarter decreased by 5% from 2001 to approximately
$782,000, reflecting a higher proportion of sales activity at the lower end of
the pricing spectrum.

     For the first nine months of 2002, revenues from residential operations
climbed 14% to $105.1 million, while EBITDA improved 94%, or $5.3 million, to
$11.0 million. The New York residential sales market has demonstrated strength
on a number of levels since December 2001. This improvement reflects benefits
derived from pent-up demand from the late 2001 period when new contract signings
came to a virtual standstill as well as shifts in household investment towards
real estate. Demand is particularly robust for apartments selling for less than
$1.0 million and remains active for apartments up to $3.0 million; however,
there is notably less demand for apartments priced at higher levels as the more
affluent continue to defer purchase decisions. Insignia Douglas Elliman's
performance in 2002 has out-paced the performance of the New York City market as
a whole, indicating an ability to increase its market share. For the first nine
months of 2002, Insignia Douglas Elliman generated revenues and EBITDA of $85.2
million and $10.9 million, respectively, representing increases of 17% and 122%
over the 2001 period. Insignia Douglas Elliman's 2002 year-to-date gross
transaction volume totalled $2.2 billion, representing a 19% increase over 2001
while the number of units sold increased 27% to 2,843. The average sales price
for the nine months of 2002 decreased 6% from 2001 to approximately $778,000.

     Residential EBITDA for the nine months of 2002 was reduced by a second
quarter $1.0 million charge for the estimated unrecoverable costs of vacating
and subleasing excess office space previously used by Insignia Residential Group
as well as a $494,000 third quarter charge attributed to estimated litigation
settlements at Insignia Residential Group. The lease charge was determined based
on assumptions regarding the probable sublease of the excess space, including
passage of an estimated twelve months prior to receiving rents from a subtenant.
Aside from these charges, Insignia Residential Group has benefited from
operating efficiencies achieved from the termination of unprofitable management
assignments. As evidence, Insignia Residential Group generated EBITDA of $1.5
million before these charges during the nine months of 2002. This result would
have represented an increase of 88% over $775,000 for the nine months of 2001.


                                       28
<PAGE>

Administrative

     Corporate administrative expenses increased 88% to $4.5 million during the
third quarter of 2002 and 26% to $11.1 million for the nine months of 2002. The
majority of the increase stems from increased professional fees. The costs
primarily related to external advice to the compensation committee, which is
evaluating executive compensation programs, external advice to the newly formed
corporate governance committee and external counsel advice in meeting the
requirements of the Sarbanes-Oxley Act of 2002.

Other Items Included in the Determination of Net EBITDA

     Interest and other income declined 16% to $835,000 during the 2002 third
quarter and 29% to $2.9 million for the nine months of 2002, compared to the
same periods of 2001. Lower interest rates and average cash balances account for
the change.

     Corporate interest expense decreased 22% to $2.4 million for the third
quarter of 2002 and 30% to $6.8 million for the nine months of 2002. The Company
continues to benefit from lower interest rates on its LIBOR based borrowings and
reduced borrowing levels as a result of a $32 million pay-down of debt during
the first quarter of 2002. The average interest rate on the outstanding balance
on the senior revolving credit facility was approximately 4.5% for the first
nine months of 2002, compared to an average of over 7% for the same period of
2001.

     Real estate FFO from the Company's property investment portfolio declined
62% to $683,000 for the third quarter of 2002 and 36% to $3.1 million for the
nine months of 2002. The declines in 2002 are primarily attributable to lost
earnings from properties sold over the past year, including, most significantly,
the Fresh Meadows apartment complex in Queens, New York -- which contributed FFO
in 2001 of $418,000 for the third quarter and $792,000 for the nine months --
and losses from two development assets that are in the initial stages of their
operations and have not yet achieved profitability.

Other Items Included in the Determination of Income from Continuing Operations

     Gains realized from sales of real estate in 2002 totaled $3.3 million for
the third quarter and $5.0 million for the nine months. For the comparable
periods of 2001, gains realized from property sales totaled $161,000 during the
third quarter and $625,000 for the nine-month period. During the 2002 third
quarter, the Company produced gains of $2.0 million from the sale of three
co-invested property assets and a further $1.3 million from the sale of a
consolidated retail property. Gains for the nine months of 2002 included the
first quarter sale of a 10% owned office/retail property located in California.
These gains are recorded net of amounts payable to certain employees totaling
$5.0 million for the nine months of 2002 and $695,000 for the same period of
2001. Comparisons of this type of income do not reflect performance of the
investments for the comparative period, but rather the volume of asset sales in
the period and the cumulative value change of the investments sold.

     During the third quarter of 2002, the Company recorded impairment against
its real estate investments of $1.6 million on five property assets. Insignia
re-evaluates each real estate investment on a quarterly basis, taking into
account changes in market conditions and prospects. The impairment charge
includes $560,000 for a land parcel, located in Denver and held for future
development, based on a third party appraisal and $703,000 for a 15% owned
office building, located in Boston, suffering from increased vacancies and
lowered rental rates.

     Depreciation of property and equipment increased 15% to $4.5 million for
the third quarter of 2002, from $4.0 million for the comparable period of 2001.
For the nine months of 2002, depreciation increased 16% to $13.1 million (over
$11.2 million in 2001). The increases are the result of capital spending of over
$15 million over the past year primarily for leasehold improvements (in
connection with addition or relocation of offices) and software.

     Amortization of intangibles declined from 2001 by 82%, or $4.8 million, to
$1.0 million during the 2002 third quarter and 78%, or $14.3 million, to $4.1
million for the nine months of 2002. The adoption of new accounting standards
requiring elimination of amortization of goodwill, effective January 1, 2002,
was responsible for $4.4 million of the decrease in the third quarter and $12.9
million of the decrease for the nine months. The remainder of the decrease was
attributed to certain property management contracts that fully amortized in 2001
and early 2002. Amortization expense in 2002 pertains primarily to acquired
property management contracts, non-compete agreements and the customer backlog
of Insignia Bourdais.


                                       29
<PAGE>

     In 2001, the Company incurred pre-tax internet losses of $1.8 million
during the third quarter and $8.9 million for the nine-month period. The losses
represented impairment write-offs of certain third-party internet-based
investments made predominantly in 1999 and 2000. Insignia had no
Internet-related activity during the quarter or nine months of 2002. At
September 30, 2002, the Company's only remaining internet-related investment was
a $900,000 investment in an e-commerce venture fund.

     Income tax expense on continuing operations for the three and nine months
of 2002 totaled $3.4 million and $5.6 million, respectively, as determined based
on a consolidated effective tax rate estimated at 45%. Conversely, the same
periods of 2001 included income tax benefits of $4.3 million and $5.1 million,
respectively, due to losses for those periods.

Other Factors in the Determination of Net Income

     Net income in 2002 has been enhanced by income from discontinued operations
of $4.7 million for the third quarter and $4.9 million for the nine months. This
income included $265,000 recognized in the first quarter of 2002 pertaining to
post closing adjustments in conjunction with the Realty One sale and a $4.7
million tax benefit in the third quarter attributed to the elimination of a
valuation allowance on the capital portion of the loss, which had been fully
reserved in 2001 due to uncertainty of deductibility. Net income for 2001
included $926,000 of operating income for the third quarter and an operating
loss of $1.5 million for the nine months related to Realty One, which is
reported in discontinued operations. Conversely, net income for the first nine
months of 2002 was adversely affected by a goodwill impairment charge of $20.6
million (net of tax of $9.4 million) reported as the cumulative effect of a
change in accounting principle.

     With respect to the goodwill accounting change, the Company conducted
internal analyses in early 2002 that indicated the U.S. commercial operation was
not impaired and that goodwill of the Asia operation was in fact impaired. The
Company also determined that there was a possibility of impairment in the
European operations and in Insignia Douglas Elliman and engaged third-party
valuation consultants to appraise these businesses. Their evaluations indicated
no impairment in the European operations and Insignia Douglas Elliman's
impairment was calculated to be $26.8 million before taxes. The total impairment
charge of $30.0 million before taxes included approximately $3.2 million related
to goodwill of Insignia Brooke in Asia.

     The Insignia Douglas Elliman impairment was derived based on an estimated
enterprise value of 5.5 times an estimated normalized annual EBITDA of $8.0
million. Such an estimate is highly subjective, and a small difference in
estimated valuation multiple or normalized income can produce a large difference
in estimated value. The Company recognizes that at the time the valuation was
performed, as of January 1, 2002, the normalized EBITDA a willing buyer would
conclude was a particularly difficult estimate. Insignia Douglas Elliman
produced EBITDA of over $11.0 million in 2000, while only producing $4.7 million
in the unusual 2001 year. Subsequent to the January 1, 2002 valuation, Insignia
Douglas Elliman's operations in 2002 have performed at a much higher level than
the normalized estimate, with EBITDA for the nine months of 2002 totaling $10.9
million, due in part to pent-up demand carried over from 2001.


                                       30
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     Insignia's liquidity and capital resources consist of its cash and cash
equivalents, unused capacity under its $230.0 million revolving senior credit
facility and $37.5 million subordinated debt facility, and cash generated by
operations. Historically, capital expenditures and investments in minority
ownership interests in real estate related investments have been funded through
cash from operations, and the revolving senior credit facility has been used to
fund the cash portion of acquisitions of businesses and, in 2000, certain
e-commerce investments.

     Insignia's unrestricted cash at September 30, 2002 totaled $90.0 million,
representing a $41.9 million decline from $131.9 million at December 31, 2001.
The decline stems primarily from payment of 2001 incentive compensation of
approximately $50.0 million, and a $32.0 million pay-down on the senior
revolving credit facility, offset in part by $24.0 million in net proceeds from
the sale of Realty One, approximately $15.0 million in net proceeds from real
estate investment activities and $27.5 million in preferred stock and
subordinated debt issuance's. In October 2002, Insignia used $22.0 million of
its unrestricted cash to reduce the outstanding balance on its revolving credit
facility.

     The Company uses Net EBITDA reduced by applicable income taxes as a proxy
for its cash flow from operations because this computation derives a measure of
working capital resources produced by operations, which is generally available
for real estate investment or other purposes. The table below summarizes Net
EBITDA less applicable income taxes and deductions for capital expenditures for
the nine months ended September 30, 2002 and 2001, respectively.

                                           NINE MONTHS ENDED
                                              SEPTEMBER 30
                                        --------------------------
                                           2002            2001
                                        ----------      ----------
                                              (In thousands)
    NET EBITDA                          $   31,248      $   30,070

    Applicable income tax expense           (5,631)         (2,026)
                                        ----------      ----------
    AFTER TAX NET EBITDA                    25,617          28,044

    Capital expenditures, net               (7,892)        (10,721)
                                        ----------      ----------

     TOTAL CASH FLOWS                   $   17,725      $   17,323
                                        ==========      ==========

     While this working capital measure differs from cash flow from operations
under GAAP, the GAAP measure differences tend to be temporary in Insignia's
businesses and by its construction matches incentives earned in the prior year
with current year operations. For example, cash used in operations during the
nine months of 2002 totaling $36.0 million includes $50.0 million of incentive
payments for the preceding fiscal year as well as net commission payments of
$28.3 million to brokers attributed in part high payments in January 2002 from
collections in late 2001. For the nine months of 2001, cash used in operating
activities totaled $44.6 million, including approximately $75.0 million of
incentive compensation paid for the record 2000 year. Cash flow from operations
as defined by GAAP is generally negative during the first half of each year due
to the payment of prior year incentives and seasonal factors affecting
transactional revenues.

Existing Debt

     Insignia's total debt at September 30, 2002 and December 31, 2001 is
disclosed in Note 13 to the financial statements under the caption "Long Term
Debt." The Company's credit facilities include its $230.0 million senior
revolving credit facility and the $37.5 million subordinated credit facility
entered into in June 2002 with Blackacre Capital Management, LLC. At September
30, 2002, the amount outstanding on the senior revolving credit facility was
$117.0 million and the interest rate on amounts drawn was approximately 4.3%.
Insignia also had letters of credit of $11.0 million ($10.4 million pertaining
to real estate investment obligations) at September 30, 2002 that are considered
outstanding amounts under the terms of the revolving credit facility. The unused
commitment at September 30, 2002 was approximately $102 million. In October
2002, the Company paid down $22.0 million on this credit facility, lowering the
outstanding balance to $95.0 million. This represents the lowest outstanding
balance

                                       31
<PAGE>

under the revolving credit facility in over three years. The $230.0 million
revolving credit facility matures in May 2004.

     Borrowings under the senior revolving credit facility bear interest at
LIBOR plus a margin that varies according to the ratio of debt to consolidated
EBITDA. The margin above LIBOR was 2.50% at September 30, 2002. Insignia is
vulnerable to increases in interest rates as a result of either increases in
LIBOR or its margin above LIBOR. A 100 basis point increase in the effective
interest rate would increase interest expense by approximately $1.0 million on
an annual basis.

     The $37.5 million Blackacre credit facility is subordinate to Insignia's
senior credit facility and bears interest, payable quarterly, at an annual rate
of 11.25% to 12.25%, depending on the amount borrowed. At September 30, 2002,
the Company had borrowings of $15.0 million outstanding on the subordinated
credit facility at an interest rate of 11.25%. Insignia may borrow the $37.5
million at any time over the 18-month period ending December 2003. The
subordinated debt matures in June 2009. In conjunction with the subordinated
debt agreement, the Company negotiated an amendment to its $230 million senior
credit facility to permit borrowings on the Blackacre credit facility and to
allow for a broader range of principal investment activities.

     The Company's senior and subordinated credit agreements contain covenants
concerning the maintenance of a minimum consolidated net worth, maximum total
debt, maximum leverage ratios and certain other financial ratios. The most
restrictive of these covenants are the leverage ratios, which are based on the
ratios of total debt and senior debt to consolidated EBITDA. Under these
covenants, the maximum amount of total debt outstanding cannot exceed 3.5 times
EBITDA for the trailing four quarters and senior debt (all debt excluding the
subordinated credit facility) outstanding cannot exceed 3.0 times EBITDA for the
trailing four quarters. At September 30, 2002, Insignia had approximately $78.0
million of availability on its credit facilities under these covenants. The
Company currently maintains full compliance with all financial covenants.

     The U.K. acquisition loan notes, totaling $17.5 million at September 30,
2002, are guaranteed by a bank as required by the terms of the respective
purchase agreements. The bank holds restricted cash deposits sufficient to repay
the notes in full when due. The acquisition loan notes have a final maturity of
April 2010 and are redeemable semi-annually by the note holders. Real estate
mortgage debt, totaling $66.7 million at September 30, 2002, are secured solely
by three property assets owned by consolidated subsidiaries and are non-recourse
to Insignia. Maturities of these mortgages range from December 2002 to October
2023.

Real Estate Investments and Related Obligations

     Insignia invests in real estate assets and real estate related assets,
usually as a minority owner and asset manager or property manager, with third
party investors. These investments include operating real estate properties,
real estate under development and investment entities investing in below
investment grade or lower rated securitized real estate debt. Each of these
entities is debt financed. The real estate entities in which Insignia owns a
minority interest owned aggregate assets of over $1.2 billion and were obligated
on aggregate debt of over $700.0 million at September 30, 2002. Each entity is
liable only for its own debt, and such debt is substantially non-recourse other
than to the asset financed. At September 30, 2002 and December 31, 2001,
respectively, the consolidated carrying value of the Company's real estate
investments consisted of the following:

                                                       SEPTEMBER 30  DECEMBER 31
                                                           2002         2001
                                                       ------------  ----------
                                                            (In thousands)

Minority interests in operating properties               $ 27,791    $ 29,282
Consolidated majority owned properties                     45,621      41,788
Consolidated minority owned property                       37,193          --
Minority interests in development properties               10,577      10,761
Land held for future development                            1,725       2,308
Minority interests in real estate debt investment funds    12,810      11,571
                                                         --------    --------
   TOTAL INVESTMENTS                                     $135,717    $ 95,710
                                                         ========    ========

     The real estate carrying amounts of consolidated majority-owned properties
were financed by real estate mortgage debt totaling $28.3 million and $37.3
million at September 30, 2002 and December 31, 2001, respectively.


                                       32
<PAGE>

The minority owned property partnership, consolidated beginning in 2002 by
virtue of general partner control, is financed by mortgage debt of $38.4 million
at September 30, 2002. Insignia's equity at book value in all consolidated
properties totaled $22.4 million at September 30, 2002 and $5.5 million at
December 31, 2001. The Company has no further obligations to these properties or
their creditors.

     In March 2002, Insignia sold an office building in Tokyo, Japan purchased
in late 2001 and in September 2002 sold a shopping center in Florida. Each of
the assets was held by a consolidated subsidiary at December 31, 2001. The sale
of these properties reduced the Company's real estate investments and
corresponding real estate mortgage notes by $33.0 million and $29.2 million,
respectively.

     In July 2002, a subsidiary of the Company acquired three contiguous parcels
of property, including related leasehold rights and an existing marina, located
in St. Thomas, United States Virgin Islands. The initial purchase price of
approximately $35.0 million was paid with $18.5 million in cash and a portion of
a $20.0 million borrowing by the subsidiary under a $40.0 million non-recourse
mortgage loan facility. At September 30, 2002, approximately $3.5 million of the
borrowing was held in cash and escrowed reserves. The remaining availability
under the loan facility will be utilized in future development activities of the
property. The loan facility is secured solely by assets of the subsidiary.

     Apart from the potential loss of its equity investment, totaling $75.3
million at book value in all real estate entities at September 30, 2002,
Insignia's other material risk consists of specific obligations it has
undertaken or standard carve-outs in the mortgage lending industry from the
non-recourse provisions of mortgage loans. Each entity in which Insignia holds
an investment is a single purpose entity, the assets of which are subject to the
obligations only of that entity. Each entity's debt, except to the extent of the
letters of credit and other guarantees/commitments shown below, is either (i)
non-recourse except to the real estate assets of the subject entity (subject to
carve-outs standard in such non-recourse financing, including the misapplication
of rents or environmental liabilities), or (ii) an obligation solely of such
limited liability entity and thus is non-recourse to other assets of the
Company.

     Insignia, as a matter of policy, would consider advancing funds to such an
entity beyond its obligation as a new investment requiring normal returns.
Insignia's aggregate obligations to all such real estate entities at September
30, 2002 consisted of the following:

                                                             AMOUNT
                                                            -------
                                                          (In thousands)

Letters of credit partially backing construction loans      $ 8,900
Other letters of credit and guarantees of property debt       2,825
Future capital contributions for capital improvements           193
Future capital contributions for asset purchases              2,260
                                                            -------

   TOTAL OBLIGATIONS                                        $14,178
                                                            =======

     Outstanding letters of credit generally have one-year terms to maturity and
bear standard renewal provisions. Other real estate obligations do not bear
formal maturity dates and remain outstanding until certain conditions (such as
final sale of property and funding of capital commitments) have been satisfied.


                                       33
<PAGE>

     Contingent Purchase Consideration

     Insignia also has obligations for earnouts, or contingent purchase
consideration, with respect to certain past acquisitions. Two earnouts
aggregating a maximum amount of $7.4 million are believed extremely unlikely to
ever become payable. Other acquisition earnouts, excluding Insignia Bourdais,
are believed more likely than not of becoming payable, and the amounts payable
after September 30, 2002 would be as follows:

               YEAR             AMOUNT
               ----           ----------
                             (In thousands)

               2002           $    1,750
               2003                3,350
               2004                2,500
               2005                  500
                              ----------
               TOTAL          $    8,100
                              ==========

     The 2002 amount payable includes $1.5 million measured and accrued in the
Company's consolidated balance sheet at September 30, 2002. With respect to
Insignia Bourdais, $21.4 million was paid at closing in a combination of cash
and Insignia common stock. Based on the performance of Insignia Bourdais for its
fiscal year ending March 31, 2002, additional purchase price of approximately
$6.0 million was paid in June 2002 by issuance of 131,480 Insignia common shares
and $4.7 million in cash. Contingent consideration may be payable based on
operating results for calendar years 2002, 2003 and 2004 of up to $22.0 million.
Payment of all remaining earnout would require average annual EBITDA over the
three years of more than $10.0 million, while EBITDA equal to or less than the
results of the last twelve months ended March 31, 2002, of approximately $6.6
million, would not result in payment of any additional consideration. All
earnout calculations are based upon a multiple of total purchase consideration
to EBITDA of approximately 4.2. The Company is not able to predict the amount of
any future consideration payable under the remaining earnout provision. All
amounts that become payable are payable in euros and the operating results that
form the basis of calculation are measured in euros. As a result, the dollar
obligation, if any, will fluctuate with the euro.

Other Commitments

     Operating Leases

     The Company leases office space and equipment under non-cancelable
operating leases. Minimum annual rentals under operating leases for fiscal years
2002 -- 2006 and thereafter are as follows:

                                               AMOUNT
                                             ----------
                                           (In thousands)

               2002                          $   29,634
               2003                              32,539
               2004                              30,603
               2005                              27,477
               2006                              25,182
               Thereafter                       101,003
                                             ----------
               TOTAL MINIMUM PAYMENTS        $  246,438
                                             ==========

     Certain of the leases are subject to renewal options and annual escalation
based on the Consumer Price Index or annual increases in operating expenses. The
lease on the Company's UK headquarters in London expires in June 2003 and a
decision has been made to relocate to new space under a 9-year lease entered
into in October 2002. The Company will take occupancy of the new office space in
June 2003. The relocation will increase occupancy expense by approximately $2.0
million annually. Capital expenditures in connection with the relocation are
preliminarily estimated at $5.0 million.


                                       34
<PAGE>

     Preferred Stock

     Insignia has 375,000 shares, or $37.5 million, of convertible preferred
stock outstanding to investment funds affiliated with Blackacre. This
convertible preferred stock includes 250,000 shares, or $25.0 million, purchased
in February 2000 and 125,000 shares, or $12.5 million, purchased in June 2002.
The initial preferred, which originally carried a 4% annual dividend, was
exchanged in June 2002 for a new series of convertible preferred stock. The
convertible preferred stock carries an 8.5% annual dividend (totaling
approximately $3.2 million), payable quarterly at Insignia's option in cash or
in kind. During the nine months of 2002, the Company paid cash dividends of
approximately $1.0 million. The convertible preferred stock has a perpetual
term, although Insignia may call the preferred stock, at stated value, after
June 7, 2005.

     Stock Repurchases

     In July 2002, the Company authorized a stock repurchase program of up to
$5.0 million, subject to compliance with all covenants contained within the
Company's existing debt agreements. As of October 31, 2002, the Company had not
initiated any stock repurchases under this authorization. Due to the current
unstable economic environment, the Company chose instead to reduce outstanding
debt by $22.0 million in October 2002. This debt pay-down improves the Company's
cash flows and strengthens its balance sheet for future growth and expansion
once the U.S. economy recovers. The Company continues to evaluate the
alternative uses of its cash on an ongoing basis.

     Project Octane

     In September 2000, the Company joined Project Octane ("Octane"), an
industry consortium comprised of Insignia, CB Richard Ellis, Inc., Jones Lang
LaSalle Incorporated and Trammell Crow Company formed to develop on-line
transaction platforms for commercial real estate services. In May 2001, the
consortium members entered into a software development cooperation agreement
that included a commitment of each member to contribute up to approximately $4.4
million to Octane through December 31, 2004. Approximately $1.4 million of the
total commitment has been called and funded by each member. The Company does not
currently anticipate being called upon to fund its remaining commitment of $3.0
million. Under the terms of the cooperation agreement the Company would be
obligated to contribute additional proceeds only upon a request or capital call
of the Board of Managers for the consortium, which request requires the approval
of three of the four managers representing the four Octane members.

     Spain Expansion

     As part of the Company's efforts to expand its real estate services
capabilities on the European continent, Insignia significantly expanded its
resources in Spain. Key moves included opening an office in Barcelona during the
third quarter of 2002 and augmenting its existing Madrid office with a team of
consulting professionals formerly associated with Arthur Andersen Real Estate.
In October 2002, Insignia committed to invest approximately $2.5 million, over a
three-year period, in Spain to acquire a company formed by the ex-Arthur
Andersen consulting team, to recruit additional professional talent and to
provide working capital for the Madrid and Barcelona offices. In all, a total of
25 professionals have been added to Insignia's operations in Spain.

     Capital Expenditures

     Insignia's original capital expenditure estimate for 2002 totaled
approximately $15.0 million; however, approximately one-third of such
expenditures has been eliminated or deferred. Capital expenditures totaled $7.9
million for the nine months of 2002, despite approximately $2.0 million of
unexpected expenditures required as a result of Microsoft's change in corporate
licensing practices. The 2002 expenditures compare favorably to $10.7 million
for the nine months of 2001. The Company expects to fund future capital
expenditures from cash on hand and cash provided by operations.


                                       35
<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. SFAS No. 146 provides guidance for accounting
and financial reporting for costs associated with exit or disposal activities
and supersedes Emerging Issues Task Force (EITF) Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity. SFAS No. 146 requires the recognition of a liability for costs
associated with an exit or disposal activity when the liability is incurred and
establishes fair value as the initial measurement of a liability. Under EITF
Issue No. 94-3, a liability for an exit cost is recognized at the date of a
commitment to an exit plan. SFAS No. 146 is effective for exit or disposal
activities initiated after December 31, 2002. Adoption of SFAS No. 146 is not
expected to have any current effect of the Company's financial position or
results of operations.

     In April 2002, the FASB issued SFAS No. 145, which rescinds SFAS No. 4,
Reporting Gains and Losses from Extinguishment of Debt and SFAS No. 64,
Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements (which amended
SFAS No. 4), amends SFAS No. 13, Accounting for Leases and makes certain
technical corrections to other accounting standards. The rescission of SFAS No.
4 and SFAS Statement No. 64 affects income statement classification of gains and
losses from extinguishment of debt. SFAS No. 145 will be effective as of January
1, 2003. Upon adoption, prior period items that do not meet the extraordinary
item classification criteria in APB 30 must be reclassified. Adoption of SFAS
No. 145 is not expected to have any effect on the Company's financial position
or results of operations.

     In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 provides guidance for
accounting and financial reporting for the impairment or disposal of long-lived
assets. While SFAS No. 144 supersedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, it
retains the fundamental provisions of that Statement. It also supersedes the
accounting and reporting of APB Opinion No. 30, Reporting the Results of
Operations -- Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions
related to the disposal of a segment of a business. However, it retains the
requirement in Opinion 30 to report separately discontinued operations and
extends that reporting to a component of an entity either disposed of or
classified as held for sale. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001. Insignia early adopted SFAS No. 144 as of
January 1, 2001.

     SFAS No. 144 requires, in most cases, that gains/losses from dispositions
of investment properties and all earnings from such properties be reported as
"discontinued operations". SFAS No. 144 is silent with respect to treatment of
gains or losses from sales of investment property held in a joint venture. The
Company has concluded that, as a matter of policy, all gains or losses realized
from sales of minority owned property in its real estate co-investment program
constitute earnings from a continuing line of business. Therefore, operating
activity related to that investment program will continue to be classified as
income (loss) from continuing operations. However, SFAS No. 144 requires that
gains or losses from sales of consolidated properties, if material, be reported
as discontinued operations.

CRITICAL ACCOUNTING POLICIES

     Management's discussion and analysis of financial condition and results of
operations is based upon the Company's consolidated financial statements, which
have been prepared in accordance with GAAP. The preparation of these financial
statements requires management to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses. The Company
bases its estimates on historical experience and assumptions that are believed
to be reasonable under the circumstances, the results of which form the basis
for making judgments about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. Insignia believes the
following critical accounting policies affect its significant judgments and
estimates used in the preparation of its consolidated financial statements.

Revenue Recognition

     The Company's real estate services revenues are generally recorded when the
related services are performed or at closing in the case of real estate sales.
Leasing commissions that are payable upon tenant occupancy, payment of rent or
other events beyond the Company's control are recognized upon the occurrence of
such events. As certain conditions to revenue recognition for leasing
commissions are outside of the Company's control and are not clearly


                                       36
<PAGE>

defined, judgment must be exercised in determining when such required events to
recognition have occurred. Revenues from tenant representation, agency leasing,
investment sales and residential brokerage, which collectively comprise a
substantial portion of Insignia's service revenues, are transactional in nature
and therefore subject to seasonality and changes in business and capital market
conditions. As a consequence, the timing of transactions and resulting revenue
recognition is difficult to predict.

     Insignia's revenue from property management services is generally based
upon percentages of the revenue generated by the properties that it manages. In
conjunction with the provision of management services, the Company customarily
employs personnel (either directly or on behalf of the property owner) to
provide services solely to the properties managed. In most instances, Insignia
is reimbursed by the owners of managed properties for direct payroll related
costs incurred in the employment of property personnel. The aggregate amount of
payroll costs reimbursed exceeds $75 million annually. Such payroll
reimbursements are generally characterized in the Company's consolidated
statements of operations as a reduction of actual expenses incurred. This
characterization is based on the following factors: (i) the property owner
generally has authority over hiring practices and the approval of payroll prior
to payment by the Company; (ii) Insignia is the primary obligor with respect to
the property personnel, but bears little or no credit risk under the terms of
the management contract; (iii) reimbursement to the Company is generally
completed prior to or simultaneously with payment of payroll; and (iv) the
Company generally earns no margin in the arrangement, obtaining reimbursement
only for actual cost incurred.

Principles of Consolidation

     Insignia's consolidated financial statements include the accounts of all
majority owned subsidiaries and all entities over which the Company exercises
voting control over operating decisions. All significant intercompany balances
and transactions have been eliminated. Entities in which the Company owns less
than the majority interest and has substantial influence are recorded on the
equity method of accounting (net of payments to certain employees in respect of
equity grants or rights to proceeds).

     In one instance, a property partnership located in Manhattan, New York, in
which the Company owns a nominal minority interest (with additional promotional
interests in profits depending on performance) is consolidated by virtue of
control of the partnership. Since the limited partners' investment has been
fully depreciated, the assets, liabilities and operations of the partnership are
consolidated as if Insignia completely owned the asset, even though Insignia
holds a minority economic interest.

Business Combinations

     The Company accounts for its business combinations under the purchase
method of accounting. As such, the Company allocates the acquisition cost to the
identifiable assets acquired and liabilities assumed based on respective fair
values at date of acquisition. The excess of the cost of the acquired company
over the sum of the amounts assigned to identifiable assets acquired, less
liabilities assumed, is then allocated among identifiable intangible assets and
goodwill. The Company utilizes various methods customarily used in determining
the fair value of identifiable intangible assets. These methods include, but are
not limited to, obtaining independent appraisals, preparing discounted cash flow
analysis and comparable sales analysis. The Company engaged third-party
consultants to determine the fair value of intangible assets identified in the
Baker Commercial (October 2001) and Groupe Bourdais (December 2001)
acquisitions. Identified intangible assets included property management
contracts, customer backlog, non-compete agreements, franchise agreements and
trade names. Customer backlog, the most significant of the acquired intangible
assets, causes income to be lower in the initial period subsequent to
acquisition because of a very short amortization period of generally less than
one year.

     All contingent consideration determinable at the date of acquisition is
included in determining the cost of an acquired company. Consideration which is
due at the expiration of the contingency period or which is held in escrow
pending the outcome of the contingency is disclosed but not recorded as a
liability or as additional cost of the acquired company unless the outcome of
the contingency is determinable and probable.

Valuation of Investments

     The Company reviews all real estate and other investments on a quarterly
basis for evidence of impairment. Impairment losses are recognized whenever
events or changes in circumstances indicate declines in value of such
investments below carrying value and the related undiscounted cash flows are not
sufficient to recover the assets carrying amount. Generally, Insignia relies
upon the expertise of its own property professionals to assess real estate


                                       37
<PAGE>

values. When such internal assessment is not deemed sufficiently reliable or
Insignia considers its expertise limited with respect to a particular
investment, third party valuations are generally obtained in instances where
indicators of possible impairment exist. Property valuations and estimates of
related future cash flows are by nature subjective and will vary from actual
results.

Valuation of Intangibles

     The Company's intangible assets substantially consist of goodwill, property
management contracts, favorable premises leases, and other intangibles including
non-compete agreements, franchise agreements, customer backlog and trade names.
Through December 31, 2001, the Company used an undiscounted cash flow
methodology to determine whether underlying operating cash flows were sufficient
to recover the carrying amount of intangible assets. As of January 1, 2002,
goodwill is no longer amortized, but will be evaluated annually for impairment
based on a reporting unit fair value approach as required by SFAS No. 142. In
determining fair value of a reporting unit, the Company relies on third-party
appraisals as well as internal analyses based on the application of generally
accepted valuation approaches. Such valuation approaches include a market
approach, which includes both comparisons to other comparable publicly traded
businesses and recent transactions involving similar businesses, and an income
approach based on discounted cash flows. All such estimates are subjective and
selected from a range of observed valuation methods.

Valuation of Deferred Taxes

     The Company records deferred income tax assets and liabilities to reflect
the tax consequences on future years of temporary differences of revenue and
expense items for financial statement and income tax purposes. The Company
periodically evaluates the realization of its deferred income tax assets by
considering the existence of sufficient taxable income of the appropriate
character and provides a reserve for any amounts that are unlikely to be
realized. At September 30, 2002, the Company maintained reserves of
approximately $5.0 million pertaining to operating losses in certain foreign
jurisdictions that are deductible only to the extent of income. These amounts
would only become deductible if and when sufficient taxable income is generated
in the appropriate reporting jurisdiction. At September 30, 2002, the Company
also had approximately $16.0 million in net operating losses that are available
to be utilized in future periods to the extent of taxable income generated.

Stock Based Compensation

     In September 2002, the Company adopted the fair value expense recognition
provisions of SFAS No. 123, Accounting for Stock-Based Compensation, in
accounting for employee stock options. The accounting change results in the
expensing of the estimated fair value of employee stock options granted by the
Company, and has been applied on a prospective basis for all stock options
granted on or after January 1, 2002. The fair value of options is estimated as
of the date of grant using the Black-Scholes option valuation model and
amortized to expense over the respective option vesting periods, which generally
total five years. The Company previously followed Opinion No. 25, Accounting for
Stock Issued to Employees ("APB 25"). Under APB 25, no compensation expense is
recognized when the exercise price of an employee stock option equals or exceeds
the market price at issuance.

     The Black-Scholes option valuation model was developed for use in
estimating the fair value of transferable options and warrants with no vesting
restrictions. This method requires the input of subjective assumptions including
the expected stock price volatility and weighted average expected life of the
options. The Company's employee stock options have characteristics significantly
different from those of transferable options and changes in the subjective input
assumptions can materially affect the value estimate. The Black-Scholes model is
not the only reliable measure that could be used to determine the fair value of
employee stock options. The Company believes that any and all valuations of
employee stock options will necessarily be estimates. The ultimate impact of the
accounting change on the Company's future earnings will depend on the number of
options issued in the future, as to which the Company has no specific plan, and
the estimated value of each option. Insignia does not expense the value of
outstanding options issued before January 1, 2002. The Company issued 290,000
employee options during the first nine months of 2002 with an estimated
aggregate fair value of $842,000 under the Black-Scholes model. For the nine
months of 2002, stock compensation expense recognized totaled $116,000.


                                       38
<PAGE>

Bad Debts

     Insignia does not traditionally incur significant bad debts or encounter
significant credit issues. This is in part because portions of commissions are
generally paid at closing, which is also when revenue is recognized, unless
significant contingencies exist with respect to contract fulfillment. Also,
leasing commissions that are payable only upon the occurrence of certain events
such as tenant occupancy or payment of rent are generally recognized as revenues
simultaneous with the occurrence of those events. However, Insignia does carry
receivables that it must monitor for collectibility. The Company monitors its
receivables on a continual basis and maintains an allowance for bad debts
typically estimated in a range of 2% to 4% of total receivables. Credit losses
have historically been insignificant and within the Company's estimates;
however, estimating credit losses requires significant judgment, and conditions
may change or new information may become known after any periodic evaluation. As
a result, actual credit losses will differ from the Company's estimates.

Defined Benefit Plan

     The Company's U.K. business, Insignia Richard Ellis, maintains a defined
benefit plan for certain of its employees. This plan is not open to new
participants, as persons not already in this plan may only participate in the
Company's defined contribution plans. The Company obtains independent actuarial
valuations in measuring the annual funded status and net periodic pension cost
of the plan in accordance with GAAP. A critical assumption in periodic pension
expense is the expected asset return, which was projected at 7% as of December
31, 2000 and 6.5% as of December 31, 2001. As a result of adverse financial
market conditions the expected return exceeded the actual return on plan assets
for 2001. This downward trend has continued through the first nine months of
2002. In accordance with GAAP, such shortfalls are not recognized currently in
the Company's earnings for the periods. To the extent that actual returns over
extended periods are less than the expected return, net pension costs in future
periods would increase.

IMPACT OF INFLATION AND CHANGING PRICES

     Insignia's businesses bear exposure to inflationary changes in operating
expenditures and market risks from changing prices including fluctuations in
property rental rates, market interest rates, real estate property values and
foreign currency fluctuations affecting operating results in Europe, Asia and
Latin America. In recent years, inflation has not had a significant impact on
the Company's results of operations; however, current trends indicate increases
in certain expenditures, including office occupancy costs, employee-related
expenses and corporate insurance premiums.

     The Company's revenues from transactional services are impacted by
fluctuations in interest rates, lease rates and property values. Commercial
service revenues are derived from a broad range of services that are primarily
transaction driven and are therefore volatile in nature and highly competitive.
The revenues from property management are highly dependent upon market rents of
the properties managed, which are affected by rental rates and building
occupancy rates. Rental rate increases are dependent upon market conditions and
the competitive environments in the respective locations of the properties.
Employee compensation is the principal cost element of property management.
Changes in market interest rates and real property values impact the revenues of
the Company's New York-based co-op and condo brokerage and apartment leasing
business. The Company's earnings from real estate financial services and asset
dispositions are most affected by leasing rates and real estate property values.
In 2002, the Company's real estate investment portfolio continues to suffer from
deterioration of property values and rents due to high vacancy levels caused by
the US economic slowdown.

NATURE OF OPERATIONS

     The Company's revenues are substantially derived from tenant
representation, agency leasing, investment sales, consulting and residential
brokerage services. Revenues generated by these services are transactional in
nature and therefore affected by seasonality, availability of space, competition
in the market place and changes in business and capital market conditions. A
significant portion of the expenses associated with these transactional
activities is directly correlated to revenue. Also, certain conditions to
revenue recognition for leasing commissions are outside of the Company's
control. Consequently, future revenue production and earnings may be difficult
to predict and comparisons from period to period may be difficult to interpret.

     Consistent with the industry in general, the Company's revenues and
operating income have historically been lower during the first three calendar
quarters than in the fourth quarter. The reasons for the concentration of


                                       39
<PAGE>

earnings in the fourth quarter include a general, industry-wide focus on
completing transactions by calendar year end, as well as the constant nature of
the Company's non-variable expenses throughout the year versus the seasonality
of its revenues. This phenomenon has generally produced a historical pattern of
higher revenues and income in the last half of the year and a gradual slowdown
in transactional activity and corresponding operating results during the first
quarter. This tendency notwithstanding, it is completely possible that any
fourth quarter may not be the best performance quarter of a particular year.

     In recent years, the Company's operating results have been particularly
unpredictable and inconsistent with such historical quarter to quarter seasonal
patterns. As evidence, in 2001 the Company realized its best ever first quarter,
yet produced much lower second and third quarters than the preceding year due to
the effects of the global economic slowdown and the tragic events of September
11th. In 2002, quarterly operating results have been more consistent with normal
seasonal patterns, although overall performance has continued to suffer from
poor global economic conditions.

     The Company plans its capital and operating expenditures based on its
expectations of future revenues. If revenues are below expectations in any given
quarter, the Company may be unable to control expenditures to compensate for any
unexpected revenue shortfall. The Company's business and earnings could suffer
as a consequence.

FORWARD LOOKING STATEMENTS

     Certain items discussed in this Report constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 and, as such, involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. You can
identify such statements by the fact that they do not relate strictly to
historical or current facts. Statements that make reference to the expectations
or beliefs of the Company or any of its management are such forward-looking
statements. These statements use words such as "believe", "expect", "should" and
"anticipate". Such information includes, without limitation, statements
regarding the results of litigation, Insignia's future financial performance,
cash flows, expansion plans, estimated capital expenditures and statements
concerning the performance of the U.S. and international commercial and
residential brokerage markets. Actual results will be affected by a variety of
risks and factors, including, without limitation, international, national and
local economic conditions and real estate and financing risks, as well as those
set forth under the caption "Risk Factors" in Item 1 of Form 10-K for the year
ended December 31, 2001.

     All such forward-looking statements speak only as of the date of this
Report. The Company expressly disclaims any obligation or undertaking to release
publicly any updates of revisions to any forward-looking statements contained
herein to reflect any change in the Company's expectations with regard thereto
or any change in events, conditions or circumstances on which any such statement
is based.


                                       40
<PAGE>

ITEM 3 -- QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

     Real estate market trends are cyclical and correlated to economic
conditions and to public perception of the economic outlook. In addition,
capital availability tends to also be cyclical, leading to periods of excess
supply or shortages. When supply is constrained or the economic outlook is poor,
transaction volumes, particularly for leasing and investment sales, may decline.
When capital is constrained or there is excess supply, property investment
volume may decline.

     Periods of economic slowdown or recession, rising interest rates, inflation
or declining demand for real estate will adversely affect Insignia's business
and may cause, among other things: (i) declines in leasing activity; (ii)
declines in the availability of capital for investment in and mortgage financing
for commercial real estate; (iii) declines in consumer demand for New York
co-ops and condominiums; and (iv) declines in rental rates and property values,
with a commensurate decline in real estate service revenues. In 2001 and thus
far in 2002, the Company's commercial businesses have suffered from a global
economic slowdown which has caused a material decline in leasing activity from
the robust levels experienced in 2000.

     Insignia is exposed to a variety of market risks, including foreign
currency fluctuations and changes in interest rates. In addition to the United
States, the Company conducts business in foreign jurisdictions throughout
Europe, Asia and Latin America. However, currencies other than the British
pound, euro and dollar have comprised less than 1% of annual revenues. The
Company's European operations, which are conducted using the pound and euro
currencies, generally have produced 15% to 25% of the Company's total service
revenues. With the addition of Insignia Bourdais in France, revenue
contributions in euros have increased. During the nine months of 2002, $119.3
million, or 23%, of total services revenues were conducted in these currencies.
For the same period of 2001, $81.9 million, or 17%, of total services revenues
were conducted in these currencies.

     Because the pound and euro have declined over the last three years, the
Company's reported revenues and earnings from its foreign operations have been
adversely affected when translated to dollars. Beginning in mid-2002, these
currencies have experienced a partial recovery, which has begun to have a
favorable impact on the translated earnings from foreign operations. Changes in
the value of such currencies against the US Dollar will continually impact the
Company's reported results. As evidence, a 10% change in the pound and euro
could have an annual impact of approximately $15 million on revenues.

     The Company's residential brokerage and leasing business may be affected by
changes in the general level of market interest rates, consumer confidence,
spending habits and overall levels of indebtedness, economic activity and the
health of the New York-based financial services industry. Consumer purchases of
co-op and condo properties in New York are influenced to some degree by mortgage
interest rates, particularly at the lower end of the spectrum of sales prices.
Changes in interest rates also affect the interest earned on the Company's cash
and equivalents as well as interest paid on credit facility borrowings. Interest
rates are sensitive to many factors, including governmental monetary and tax
policies, domestic and international economic and political considerations and
other factors that are beyond the Company's control. A 100 basis point change in
interest rates on the Company's LIBOR based senior credit facility borrowings,
totaling $95 million at October 31, 2002, would affect interest expense by more
than $1 million on an annual basis. However, the Company's cash holdings bear
interest at rates that generally fluctuate directly with LIBOR, thereby
mitigating the impact of interest rate changes on credit facility borrowings.


ITEM 4 -- CONTROLS AND PROCEDURES

     Within the 90 days prior to the date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's CEO and CFO, of the effectiveness
of the design and operation of the Company's disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14. A newly formed Disclosure Committee
consisting of senior management of all major operations assisted the CEO and
CFO. Based upon that evaluation, the CEO and CFO concluded that the Company's
disclosure controls and procedures are effective. There were no significant
changes in the Company's internal controls or in other factors that could
significantly affect these controls subsequent to the date of their evaluation.


                                       41
<PAGE>

                          PART II -- OTHER INFORMATION

ITEM 1 -- LEGAL PROCEEDINGS

     See Note 18 -- "Contingencies" in Notes to Consolidated Financial
Statements, Part I, Item 1, of this Form 10-Q.


ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K

     a)   Exhibits

          10.2(a)  Employment Agreement, dated as of July 24, 2002, by and
                   between Insignia Douglas Elliman, LLC and Geoffrey P.
                   Wharton.

          10.2(b)  Stock Option Agreement, dated as of July 24, 2002, by and
                   between Insignia and Geoffrey P. Wharton.

          99.1     Certification Pursuant to Section 906 of the Sarbanes-Oxley
                   Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter
                   63 of Title 18, United States Code).

     b)   Reports on Form 8-K filed during the quarter ended September 30, 2002:

          None


                                       42
<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.


                                       INSIGNIA FINANCIAL GROUP, INC.



                                       By: /s/ Andrew L. Farkas
                                           -------------------------------------
                                           Andrew L. Farkas
                                           Chairman and Chief Executive Officer


                                        By: /s/ James A. Aston
                                           -------------------------------------
                                           James A. Aston
                                           Chief Financial Officer



DATE: November 8, 2002


















                                       43


<PAGE>

                                  CERTIFICATION
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
                          AND EXCHANGE ACT RULE 13a-14.

I, Andrew L. Farkas, certify that:

     1.   I have reviewed this quarterly report on Form 10-Q of Insignia
          Financial Group, Inc.;

     2.   Based on my knowledge, this quarterly report does not contain any
          untrue statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this quarterly report;

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this quarterly report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the registrant as of, and for, the periods presented in
          this quarterly report;

     4.   The registrant's other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
          and we have:

          a)   designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiaries, is made known to us by others within
               those entities, particularly during the period in which this
               quarterly report is being prepared;

          b)   evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this quarterly report (the "Evaluation Date"); and

          c)   presented in this quarterly report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent evaluation, to the registrant's auditors and the
          audit committee of the registrant's board of directors (or persons
          performing the equivalent function):

          a)   all significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's auditors any material
               weaknesses in internal controls; and

          b)   any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls; and

     6.   The registrant's other certifying officers and I have indicated in
          this quarterly report whether or not there were significant changes in
          internal controls or in other factors that could significantly affect
          internal controls subsequent to the date of our most recent
          evaluation, including any corrective actions with regard to
          significant deficiencies and material weaknesses.


Dated:  November 8, 2002               /s/ Andrew L. Farkas
                                       -------------------------------
                                       Andrew L. Farkas
                                       Chief Executive Officer

<PAGE>

                                  CERTIFICATION
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
                          AND EXCHANGE ACT RULE 13a-14.


I, James A. Aston, certify that:

     1.   I have reviewed this quarterly report on Form 10-Q of Insignia
          Financial Group, Inc.;

     2.   Based on my knowledge, this quarterly report does not contain any
          untrue statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this quarterly report;

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this quarterly report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the registrant as of, and for, the periods presented in
          this quarterly report;

     4.   The registrant's other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
          and we have:

          a)   designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiaries, is made known to us by others within
               those entities, particularly during the period in which this
               quarterly report is being prepared;

          b)   evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this quarterly report (the "Evaluation Date"); and

          c)   presented in this quarterly report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent evaluation, to the registrant's auditors and the
          audit committee of the registrant's board of directors (or persons
          performing the equivalent function):

          a)   all significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's auditors any material
               weaknesses in internal controls; and

          b)   any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls; and

     6.   The registrant's other certifying officers and I have indicated in
          this quarterly report whether or not there were significant changes in
          internal controls or in other factors that could significantly affect
          internal controls subsequent to the date of our most recent
          evaluation, including any corrective actions with regard to
          significant deficiencies and material weaknesses.


Dated: November 8, 2002                /s/ James A. Aston
                                       -------------------------------
                                       James A. Aston
                                       Chief Financial Officer