<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 MARCH 31, 2001

              [ ] 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 May 1, 2001, the Registrant had 21,875,929 shares of Common Stock
outstanding.

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

<PAGE>


                         INSIGNIA FINANCIAL GROUP, INC.

                                    FORM 10-Q

                      FOR THE QUARTER ENDED MARCH 31, 2001

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

                                      INDEX

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

<TABLE>
<CAPTION>


                                                                                                                Page
                                                                                                                ----
<S>                                                                                                           <C>
PART I -- FINANCIAL INFORMATION

      Item 1. Financial Statements

           Condensed Consolidated Statements of Operations for the
            Three Months Ended March 31, 2001 and 2000 ......................................................     2

           Condensed Consolidated Balance Sheets
             at March 31, 2001 and December 31, 2000 ........................................................     4

           Condensed Consolidated Statements of Cash Flows
             for the Three Months Ended March 31, 2001 and 2000 .............................................     5

           Notes to Condensed Consolidated Financial Statements..............................................     6

      Item 2.  Management's Discussion and Analysis of
                 Financial Condition and Results of Operations ..............................................    17

      Item 3.  Quantitative and Qualitative Disclosure of Market Risk......................................      24

PART II -- OTHER INFORMATION

      Item 1.  Legal Proceedings............................................................................     25

      Item 6.  Exhibits and Reports on Form 8-K.............................................................     25

SIGNATURES .................................................................................................     26
</TABLE>

<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements
-----------------------------

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


<TABLE>
<CAPTION>

                                                                                     THREE MONTHS ENDED
                                                                                          MARCH 31
                                                                                          --------
                                                                                   2001              2000
                                                                                   ----              ----
<S>                                                                             <C>                 <C>
REVENUES
   Real estate services                                                         $ 191,704           $169,372
   Property operations                                                              1,404                788
                                                                                ----------         ----------
                                                                                  193,108            170,160
                                                                                ----------         ----------
COSTS AND EXPENSES
   Real estate services                                                           175,691            157,149
   Property operations                                                              1,188                645
   Internet-based businesses                                                            -              6,000
   Administrative                                                                   3,400              2,811
   Depreciation                                                                     4,724              2,622
                                                                                ----------         ----------
   Amortization of intangibles                                                      6,772              6,422
                                                                                ----------         ----------
                                                                                  191,775            175,649

    Operating income (loss)                                                         1,333             (5,489)

OTHER INCOME AND EXPENSES:
   Provisions for loss on Internet investments                                     (4,502)                 -
   Interest and other income                                                        2,129              1,356
   Interest expense                                                                (3,167)            (2,719)
   Foreign currency gains                                                              57                601
   Equity earnings in real estate ventures                                            424              1,730
                                                                                ----------         ----------

Loss before income taxes and cumulative effect of a change in
  accounting principle                                                             (3,726)            (4,521)

   (Benefit) provision for income taxes                                            (1,192)               192
                                                                                ----------         ----------

Loss before cumulative effect of a change in accounting principle                  (2,534)            (4,713)

Cumulative effect of a change in accounting principle, net of                           -            (30,420)
  applicable taxes                                                              ----------         ----------

Net loss                                                                           (2,534)           (35,133)

Preferred stock dividends                                                            (250)              (140)
                                                                                ----------         ----------

Net loss available to common shareholders                                       $  (2,784)         $ (35,273)
                                                                                ==========         ==========
</TABLE>

                                       2
<PAGE>



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

<TABLE>
<CAPTION>

                                                                                     THREE MONTHS ENDED
                                                                                          MARCH 31
                                                                                          --------
                                                                                   2001              2000
                                                                                   ----              ----
<S>                                                                             <C>                <C>
PER SHARE AMOUNTS:
  Loss per common share - basic
     Loss before cumulative effect of a change in accounting principle           $ (0.13)          $ (0.23)
                                                                                ========          ========
     Cumulative effect of a change in accounting principle                       $     -           $ (1.46)
                                                                                ========          ========

     Net loss                                                                    $ (0.13)          $ (1.69)
                                                                                ========          ========

  Loss per common share - assuming dilution:
     Loss before cumulative effect of a change in accounting principle           $ (0.13)          $ (0.23)
                                                                                ========          ========
     Cumulative effect of a change in accounting principle                       $     -           $ (1.46)
                                                                                ========          ========
     Net loss                                                                    $ (0.13)          $ (1.69)
                                                                                ========          ========
  Weighted average common shares and assumed conversions:
     - Basic and assuming dilution                                                21,687            20,806
                                                                                ========          ========
</TABLE>


See Notes to Condensed Consolidated Financial Statements.


                                       3






<PAGE>


                         INSIGNIA FINANCIAL GROUP, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                                      MARCH 31,           DECEMBER 31,
                                                                                         2001                 2000
                                                                                         ----                 ----
                                                                                     (Unaudited)             (Note)
<S>                                                                                  <C>                  <C>
ASSETS
  Cash and cash equivalents                                                           $   43,553             $ 124,527
  Receivables                                                                            162,789               183,819
  Mortgage loans held for sale                                                            21,520                11,443
  Restricted cash                                                                         27,746                 6,555
  Property and equipment, net                                                             72,666                74,502
  Real estate interests                                                                   65,389               102,170
  Investments                                                                              5,978                10,458
  Property management contracts                                                           20,438                22,357
  Costs in excess of net assets of acquired businesses, net of amortization              316,599               324,631
  Other assets                                                                            51,285                49,880
                                                                                   ------------------    -----------------
Total assets                                                                           $ 787,963             $ 910,342
                                                                                   ==================    =================


LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Accounts payable                                                                     $  15,173             $  28,282
  Commissions payable                                                                     50,902                71,688
  Accrued incentives                                                                      24,124                89,963
  Accrued and sundry liabilities                                                          84,830                99,320
  Loss in excess of investment                                                             3,122                 3,222
  Deferred taxes                                                                          15,104                15,333
  Mortgage warehouse line of credit                                                       19,402                 9,502
  Notes payable                                                                          155,383               135,782
  Real estate mortgage notes payable                                                      15,739                48,369
                                                                                   ------------------    -----------------
                                                                                         383,779               501,461

Stockholders' Equity:
  Common Stock, par value $.01 per share - authorized 80,000,000 shares,
    21,779,689 (2001) and 21,573,928 (2000) issued and outstanding shares,
    net of 1,502,600 (2001 and 2000) shares held in treasury                                 218                   216
  Preferred Stock, par value $.01 per share - authorized 20,000,000 shares,
    250,000 (2001 and 2000) issued and outstanding shares                                      3                     3
  Additional paid-in capital                                                             415,195               413,831
  Notes receivable for common stock                                                       (2,019)               (2,051)
  Retained (deficit) earnings                                                               (188)                2,846
  Accumulated other comprehensive loss                                                    (9,025)               (5,964)
                                                                                   ------------------    -----------------
Total stockholders' equity                                                               404,184               408,881
                                                                                   ------------------    -----------------
Total liabilities and stockholders' equity                                              $787,963              $910,342
                                                                                   ==================    =================
</TABLE>

NOTE:  The Balance Sheet at December 31, 2000 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 for complete financial statements.

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

                                       4
<PAGE>


                         INSIGNIA FINANCIAL GROUP, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                          THREE MONTHS ENDED
                                                                                               MARCH 31,
                                                                                               ---------
                                                                                         2001               2000
                                                                                         ----               ----
<S>                                                                                <C>                 <C>
OPERATING ACTIVITIES
Net loss                                                                           $   (2,534)         $  (35,133)
Cumulative effect of a change in accounting principle                                       -              30,420
                                                                                  -----------------   ---------------
Loss before cumulative effect of a change in
  Accounting principle                                                                 (2,534)             (4,713)
Adjustments to reconcile net loss to net cash
  used in operating activities:
     Depreciation and amortization                                                     11,496               9,044
     Equity earnings in real estate ventures                                             (424)             (1,730)
     Foreign currency gains                                                               (57)               (601)
     Provisions for loss on Internet investments                                        4,502                   -
     Changes in operating assets and liabilities:
       Receivables                                                                     18,265              (1,275)
       Other assets                                                                    (2,814)              1,376
       Accounts payable and accrued expenses                                          (64,625)            (40,191)
       Commissions payable                                                            (20,786)             (5,652)
                                                                                  -----------------   ---------------
Net cash used in operating activities                                                 (56,977)            (43,742)
                                                                                  -----------------   ---------------

INVESTING ACTIVITIES
     Additions to property and equipment, net                                          (2,913)             (9,603)
     Investment in Internet-based businesses                                                -              (5,470)
     Payments made for acquisition of businesses                                       (2,307)             (1,298)
     Increase in mortgage loans held for sale                                         (10,077)             (4,508)
     Investment in real estate                                                         (4,574)             (4,323)
     Proceeds from sale of real estate properties                                      40,240                   -
     Distributions from real estate investments                                         1,317               6,537
     Net (increase) decrease  in restricted cash                                      (21,766)              2,620
                                                                                  -----------------   ---------------
Net cash used in investing activities                                                     (80)            (16,045)
                                                                                  -----------------   ---------------

FINANCING ACTIVITIES
     Proceeds from issuance of Common Stock                                               290                 204
     Proceeds from issuance of Preferred Stock                                              -              25,000
     Proceeds from Internet stock offerings                                                 -              37,215
     Dividend payments on Preferred Stock                                                (500)                  -
     Proceeds from exercise of stock options                                              910                 420
     Net advances on mortgage warehouse line of credit                                  9,900               4,968
     Payments on notes payable                                                           (387)             (4,499)
     Proceeds from notes payable                                                           41                 240
     Payments on real estate mortgage notes payable                                   (33,143)                  -
     Proceeds from real estate mortgage notes payable                                     513               5,872
                                                                                  -----------------   ---------------
Net cash (used in) provided by financing activities                                   (22,376)             69,420
                                                                                  -----------------   ---------------

  Effect of exchange rate changes in cash                                              (1,541)               (276)
  Net (decrease)  increase in cash and cash equivalents                               (80,974)              9,357
  Cash and cash equivalents at beginning of period                                    124,527              61,600
                                                                                  -----------------   ---------------
  Cash and cash equivalents at end of period                                        $  43,553           $  70,957
                                                                                  =================   ===============
</TABLE>

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

                                        5
<PAGE>



        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
        ----------------------------------------------------------------

1.  Business

Organization

    Insignia Financial Group, Inc. ("Insignia" or the "Company"), a Delaware
corporation headquartered in New York, New York, is an international real estate
services company with operations throughout the United States and United Kingdom
as well as in 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 real
estate services, apartment brokerage and leasing, single-family home brokerage,
mortgage origination, title services, escrow agency services, condominium and
cooperative apartment management, real estate oriented financial services,
equity co-investment and other services. The Company's principal real estate
service businesses are Insignia/ESG, Inc. (U.S. commercial real estate
services), Insignia Richard Ellis (U.K. commercial real estate services - based
in London), Douglas Elliman LLC (residential sales and rentals), Realty One,
Inc. (single-family home brokerage and mortgage origination) and Insignia
Residential Group, Inc. (condominium and cooperative apartment management).
Insignia also has real estate service operations in Frankfurt, Germany; Milan,
Italy; Brussels, Belgium; Dublin, Ireland; Belfast, Northern Ireland; Amsterdam,
the Netherlands; Shanghai and Beijing, China; Bangkok, Thailand; Tokyo, Japan;
Hong Kong; Mumbai, Delhi, Bangalore and Hyderabad, India; and Mexico City.
Insignia enjoys overall market dominance for commercial and residential real
estate services in New York through the leading market positions of
Insignia/ESG, Douglas Elliman and Insignia Residential Group.

     In addition to real estate services, Insignia invests in real estate
assets, through co-investment initiatives with institutional clients, principal
development activities and real estate funds. The Company's real estate service
operations and real estate investment activities are more fully described below.

Real Estate Services

Commercial Real Estate Services

     The Company's commercial real estate services are provided through
Insignia/ESG in the United States, Insignia Richard Ellis ("IRE") in the United
Kingdom and other Insignia subsidiaries in Europe, Asia and Latin America. The
Company's commercial services operations generated aggregate service revenues of
$145.7 million in the first quarter of 2001, representing 76% of the Company's
total service revenues for the period.

United States Operations

     All commercial real estate services in the U.S. are rendered under the
Insignia/ESG brand. Through Insignia/ESG, the Company is among the leading
providers of commercial real estate services in the U.S., with leadership
positions in the New York metropolitan marketplace and significant positions in
other major markets including Washington, D.C., Philadelphia, Boston, Chicago,
Atlanta, Phoenix, Los Angeles, San Francisco, Dallas and Miami. The Company
delivers its real estate services throughout the U.S. across geographic markets,
property types and disciplines and is active to varying degrees in 47 markets.

     The Company provides a broad spectrum of commercial real estate services
throughout the U.S. to corporations and other major space users, property owners
and investors. These services include tenant representation, property leasing
and management, property acquisition and disposition services, investment sales,
mortgage financing, equity co-investment, development, redevelopment and
consulting services. The Company serves tenants, owners and investors in office,
industrial, retail, hospitality and mixed-use properties, representing 224
million square feet of commercial real estate including 148 million square feet
of office space, 56 million square feet of industrial space, 15 million square
feet of retail space and 5 million square feet of mixed use space. U.S.
commercial real estate services operations comprise the Company's largest
business unit, accounting for approximately 63% and 57% of total service
revenues for the first quarter of 2001 and the 2000 year, respectively.

                                       6

<PAGE>


United Kingdom and European Operations

     The Company's European businesses consist of commercial real estate service
operations in the United Kingdom, Ireland, Germany, Italy, Belgium and the
Netherlands. The Company's expansion in Europe began in 1998 with the
acquisition of Richard Ellis Group Limited ("REGL") and was significantly
enhanced through the acquisition of St. Quintin Holdings Limited ("St. Quintin")
in 1999 and its successful integration with REGL into a single U.K. operation
with a leading market position in London. The Company's U.K. subsidiary is among
the three largest commercial real estate service providers in the United Kingdom
and the largest, based on 25% market share for leasing activity, in central
London. The Company provides extensive coverage of the entire United Kingdom
market through full-service offices in London, Glasgow, Birmingham, Leeds,
Manchester, Liverpool and Jersey. The Company also holds a minority equity
interest in an Irish real estate services company with offices in Ireland and
Northern Ireland through offices in Dublin and Belfast. The Company's U.K.
operation provides broad-ranging real estate services, including agency leasing,
tenant representation, property sales and financing, consulting, project
management, appraisal, zoning and other general services. The major income
components are agency leasing, tenant representation and property sales and
financing.

     The U.K. operations are viewed as the springboard for the Company's
continued global expansion of the commercial real estate services platform. The
U.K. operation has assisted in the establishment of service operations in
Frankfurt, Germany, Milan, Italy, Brussels, Belgium and Amsterdam, the
Netherlands since 1998. The other European operations outside the U.K. are
expected to provide increasingly meaningful contributions over time through the
maturation of operations and expansion of service capabilities throughout their
markets.

     The combined strength of the Company's subsidiaries in New York and London
gives Insignia a commanding position in two of the world's most important global
business centers. The U.S. and U.K. operations have benefited from transatlantic
cross-selling opportunities, which are expected to grow in impact over time, in
light of the global business environment and the prominence of New York and
London as world financial capitals.

Other International Operations

     Asia

     The Company launched operations in Asia during 2000 with the establishment
of an office in Tokyo, Japan in July 2000 and the acquisition of Brooke
International, a Hong Kong based commercial real estate services company, in
December 2000. The Tokyo operation serves the Company's clients throughout
Japan. Insignia augmented its Asian reach in April 2001 with the acquisition of
Brooke International's operations in India. Brooke International, founded in
1988, employs more than 120 real estate professionals and support personnel in
eight offices in Hong Kong, China, Thailand and India. The Brooke acquisition
provides the Company with an ideal platform from which to serve existing clients
in Asia, particularly in corporate real estate and investment services, and
should also create cross-selling opportunities with the U.S., U.K. and
continental European businesses. The Company anticipates further expansion in
Asia as additional attractive opportunities are identified.

     Latin America

     The Company extended its service capability into Latin America with the
March 2001 acquisition of Grupo Inmobiliario Inova S.A de C.V. ("Inova"). Inova,
headquartered in Mexico City and founded in 1992, is a commercial real estate
service company which provides acquisition advisory and due diligence services,
project coordination and supervision, real estate valuations, tenant
representation, asset management and strategic advisory services. Inova conducts
business throughout the major markets in Mexico and other leading business
centers of South America, including Buenos Aires, Rio de Janeiro and Sao Paulo.
The Company views Inova as the platform from which to build its presence
throughout Latin America. This business now operates under the Insignia/ESG
brand as Insignia/ESG de Mexico.

Residential Real Estate Services

     The Company's residential real estate services are performed in the U.S.
through the collective operations of Douglas Elliman, Realty One and Insignia
Residential Group. Through these businesses, the Company provides a diversified
array of residential real estate services throughout northern Ohio and the New
York metropolitan area including apartment brokerage and leasing, single-family
home brokerage, mortgage origination, title services,



                                       7

<PAGE>


escrow agency services and condominium and cooperative apartment management.
The Company's residential services operations generated aggregate service
revenues of $46 million in the first quarter of 2001, representing 24% of the
Company's total service revenues for the period.

Residential Sales and Rentals

     Through Douglas Elliman, the Company operates a residential cooperative,
condominium and rental apartment brokerage and leasing firm in New York City.
Douglas Elliman commands the number one market position for both residential
sales and rentals in New York City according to the annual ranking in the March
2001 issue of Crain's New York Business. In addition, Douglas Elliman operates
in upscale suburban markets through offices in Greenwich and Darien,
Connecticut, Bernardsville/Basking Ridge, New Jersey, and Long Island
(Manhasset, Locust Valley and Port Washington/Sands Point). Douglas Elliman has
more than 900 brokers, supported by 130 corporate employees in 15 offices in the
New York City area. Douglas Elliman's apartment brokerage and leasing business
closed transactions valued at over $581 million for the first quarter of 2001
and approximately $2.8 billion for the 2000 year.

Single Family Home Brokerage and Mortgage Origination

     Through Realty One, the Company operates a full-service single-family
residential brokerage, mortgage origination and title insurance business
headquartered in Cleveland and having offices throughout northern Ohio. Realty
One's current business operation is the result of nearly 60 separate mergers and
acquisitions and constitutes the largest residential real estate brokerage firm
in Ohio and the fourteenth largest (based on unit volume) in the United States
according to Real Trends "Big Brokers Report" published in May 2001. Realty One
employs approximately 1,500 sales associates and 600 corporate and support staff
located in 46 offices throughout northern Ohio and represents more than 100
residential builders. Realty One participated in residential sales transactions
valued at over $480 million for the first quarter of 2001 and nearly $3 billion
for the 2000 year.

Cooperative and Condominium Management

     Through Insignia Residential Group, the Company is the largest manager of
cooperatives, condominiums and rental apartments in the New York metropolitan
area, according to a survey in the February 2001 issue of The Cooperator.
Insignia Residential Group provides full service third-party fee management for
more than 300 properties, comprising approximately 72,000 residential apartment
units, and employ's over 300 people located in offices throughout the greater
New York metropolitan area. Among the notable properties currently managed by
Insignia Residential Group in New York City are the San Remo, Worldwide Plaza,
Fresh Meadows, Horizon House, West Village Houses and Metropolitan Life
Insurance Company's Peter Cooper Village/Stuyvesant Town Complex. Manhattan is
the largest market for Insignia Residential Group, although it does maintain a
presence in each of the other four boroughs of New York City as well as Long
Island, Westchester County and Northern New Jersey. In addition to property
management, Insignia Residential Group also offers mortgage brokerage services,
including resale and financing arrangements for cooperative and condominium
corporations through third-party financial institutions. Insignia Residential
Group's residential management and mortgage brokerage business generated total
service revenues of $26.5 million in 2000, representing approximately 3% of the
Company's service revenues for the year.

Real Estate Principal Investment Activities

Co-investment and Development

     Insignia pursues opportunities to invest in operating real estate assets.
The Company identifies investment opportunities for select clients and invests
alongside of those clients in the purchase of qualifying properties.
Co-investment partners include Walton Street Real Estate Fund III, Citibank, ING
Barings, Blackacre Capital Management, The Witkoff Group, Lennar, Lone Star
Opportunity Fund, Prudential, GE Investments and Whitehall Street Real Estate.
As of March 31, 2001, Insignia held ownership in 37 co-investment partnerships
totaling over 10.2 million square feet of commercial property and approximately
5,300 multi-family apartment and hotel units. The Company's ownership interests
in these partnerships range from 1% to 30%.

                                       8

<PAGE>


     The Company is also the sole owner of two real estate properties with an
aggregate carrying value of approximately $18 million. These properties, which
are consolidated in the Company's financial statements, include Brookhaven
Village, a 155,000 square foot retail facility located in Norman, Oklahoma, and
Dolphin Village, a 136,000 square foot retail facility located in St.
Petersburg, Florida. The Company holds interests ranging from 25% to 33% in two
office properties under development and two parcels of land held for development
and solely owns one parcel of land also held for development. Development
activities on these properties are being directed by Insignia and are not
expected to be complete until later in 2001 or thereafter.

Insignia Opportunity Trust

     Insignia Opportunity Trust ("IOT") is an Insignia sponsored private real
estate investment trust ("REIT") formed in 1999. IOT, through its subsidiary
operating partnership, Insignia Opportunity Partners ("IOP"), invests primarily
in secured real estate debt instruments and, to a lesser extent, in other real
estate debt and equity instruments, with a focus on below investment grade
commercial mortgage-backed securities. At formation, IOT received aggregate
capital commitments of $71 million (of which $9 million was committed by
Insignia and the remainder committed by third-party investors), which IOT in
turn committed to invest in IOP in exchange for an 88.75% general partner
interest in IOP. Insignia also committed to invest an additional $1 million
directly in IOP in exchange for (i) a 1.25% managing general partner equity
interest and (ii) a 10% non-subordinated promoted equity interest in IOP.
Approximately $67 million of the total capital commitments to IOT and IOP have
now been contributed (including approximately $9.3 million funded by Insignia)
and the remaining $5 million of capital commitments are expected to be funded
during the second or third quarter of 2001. Insignia maintains ownership
interests of approximately 12% in IOT and 11% in IOP.

Internet Initiatives

     At March 31, 2001, Insignia held remaining equity investments of
approximately $6 million in third-party Internet-related businesses, reflecting
further impairment write-offs of approximately $4.5 million during the 2001
quarter. The Company has now written off the majority of its Internet-based
investments made in 1999 and 2000. While these remaining businesses continue to
operate, their future performance is highly dependent upon the ability to raise
incremental capital to fund the on-going development of their business plans. If
these businesses are unsuccessful in raising the necessary capital, Insignia
could incur further losses from impairment write-offs. The Company continues to
monitor carefully the performance of its remaining Internet investments.
The Company terminated all internal Internet operating initiatives during 2000.

     The Company is not currently investing in new third-party Internet-oriented
companies and has no intention of making material investments in Internet
technology initiatives other than certain Internet-related platforms developed
or invested in by Project Octane, the industry consortium comprised of Insignia,
CB Richard Ellis, Jones Lang LaSalle and Trammel Crow.

2.   Acquisitions

     Insignia continues to pursue an acquisition strategy that focuses on
expansion both domestically and internationally. Insignia has acquired the
following real estate services businesses in 2001:

     Inova

    In March 2001, Insignia acquired Inova, a commercial real estate service
company headquartered in Mexico City. Inova provides acquisition advisory
services and due diligence, project coordination and supervision, real estate
valuations, tenant representation, asset management and strategic advisory
services. Inova offers Insignia an operating platform, with quality real estate
professionals, for the expansion of services in Latin America. The base purchase
price was approximately $500,000 and was paid in cash.

                                       9

<PAGE>


     Brooke International

     In April 2001, Insignia further expanded its Asian presence through the
acquisition of Brooke International's operation in India. The base purchase
price for the Indian operation was approximately $700,000, all of which was paid
in cash. The Indian purchase follows the December 2000 acquisition of Hong Kong
based Brooke International and its offices in China and Thailand. Brooke
International is a commercial real estate company specializing in corporate and
investment services.

3.   Change in Accounting Principle

     At December 31, 2000, the Company changed its method of accounting for
revenue recognition for leasing commissions in compliance with Staff Accounting
Bulletin 101 ("SAB 101"), Revenue Recognition in Financial Statements, effective
as of January 1, 2000. Historically, the Company generally recognized leasing
commissions upon execution of the underlying lease, unless significant
contingencies existed. Under the new accounting method, adopted retroactive to
January 1, 2000, the Company's leasing commissions that are payable upon certain
events such as tenant occupancy or payment of rent are recognized upon the
occurrence of such events. Operating results for the first quarters of 2001 and
2000 are presented herein in compliance with the requirements of this accounting
change. In addition, the cumulative effect of the accounting change on prior
years resulted in a reduction to income of $30.4 million (net of applicable
taxes of $23.3 million), which is included in net earnings for the first quarter
of 2000. The effect of the accounting change on the first quarter of 2000, which
has been restated for the change, was to increase the loss before the cumulative
effect of the accounting change by $401,000 ($0.02 per share), from the $4.3
million loss previously reported.

     For the three month period ended March 31, 2001, the Company recognized
revenue of $4.4 million that was included in the $30.4 million cumulative effect
adjustment at January 1, 2000. The effect of that revenue was to increase
earnings by approximately $1 million (net of applicable taxes) during the first
quarter of 2001. While this accounting change affects the timing of recognition
of leasing revenues (and corresponding commission expense), it does not impact
the Company's cash flow from operations.

4.   Credit Agreement

     On May 8, 2001, Insignia closed a new three-year $230 million revolving
credit facility, representing a $45 million increase over the prior $185 million
facility. The revolving credit facility was arranged by First Union Securities,
Lehman Brothers and Bank of America and involves a syndicate of ten national and
international financial institutions. This credit facility will be used for
working capital and acquisition needs. The Company has borrowings of $134
million on the facility and letters of credit of $12.6 million.

5.   Interim Financial Information

     The accompanying unaudited condensed 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 months
ended March 31, 2001 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2001. 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, 2000.

6.   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."

                                       10

<PAGE>


7.   Recent Accounting Pronouncements

     In September 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards 133 ("SFAS"), Accounting for
Derivative Instruments and Hedging Activities, as amended by SFAS 137. SFAS 133
requires companies to recognize all derivatives on the balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives are either offset against the change in
fair value of assets, liabilities or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value is
immediately recognized in earnings. SFAS 133 was effective as of January 1, 2001
for the Company and its implementation did not have any effect on the Company's
financial position or results of operations.

8.  Earnings Per Share

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

<TABLE>
<CAPTION>
                                                                                        THREE MONTHS ENDED
                                                                                             MARCH 31
                                                                                             --------
                                                                                        2001             2000
                                                                                        ----             ----
                                                                                          (In thousands)
<S>                                                                                  <C>              <C>
NUMERATOR:
Numerator for basic loss per share - loss available
  to common stockholders (before cumulative effect)                                  $   (2,784)      $   (4,853)
Effect of dilutive securities:
   Preferred stock dividends                                                                  -                -
                                                                                     ----------      -----------

Numerator for diluted loss per share - loss  available
  to common stockholders after assumed conversions (before cumulative effect)        $   (2,784)      $   (4,853)
                                                                                     ==========      ===========

DENOMINATOR:
Denominator for basic loss per share - weighted
  average common shares                                                                  21,687           20,806
Effect of dilutive securities:
   Stock options, warrants and unvested restricted stock                                      -                -
   Convertible preferred stock                                                                -                -
                                                                                     ----------      -----------

Denominator for diluted loss per share - weighted
  average common shares and assumed conversions                                          21,687           20,806
                                                                                     ==========      ===========
</TABLE>


                                       11
<PAGE>



9.  Comprehensive Income (Loss)

     Comprehensive loss for the three months ended March 31, 2001 totaled $5.6
million and was comprised of net loss of $2.5 million and other comprehensive
losses of $3.1 million. The following tables set forth the components of
accumulated other comprehensive income (loss) for the periods indicated:

<TABLE>
<CAPTION>


                                                             FOREIGN          UNREALIZED      ACCUMULATED OTHER
                                                            CURRENCY            GAINS            COMPREHENSIVE
          THREE MONTHS ENDED - MARCH 31, 2001              TRANSLATION       ON SECURITIES       INCOME (LOSS)
                                                          -------------------------------------------------------
                                                                               (In thousands)
<S>                                                       <C>                 <C>             <C>
 Balance - December 31, 2000                                 $    (6,007)     $          43       $    (5,964)
 Comprehensive (loss) income                                      (5,417)                18            (5,399)
 Income tax benefit (provision)                                    2,346                 (8)            2,338
                                                          -------------------------------------------------------
                                                                  (3,071)                10            (3,061)
                                                          -------------------------------------------------------
 Ending Balance - March 31, 2001                             $    (9,078)     $          53       $    (9,025)
                                                          =======================================================
</TABLE>



<TABLE>
<CAPTION>


                                                             FOREIGN          UNREALIZED      ACCUMULATED OTHER
                                                            CURRENCY         GAINS (LOSSES)      COMPREHENSIVE
          THREE MONTHS ENDED - MARCH 31, 2000              TRANSLATION       ON SECURITIES       INCOME (LOSS)
                                                          -------------------------------------------------------
                                                                               (In thousands)
<S>                                                       <C>                 <C>             <C>

 Balance - December 31, 1999                                 $    (1,333)       $     1,215     $        (118)
 Comprehensive loss                                               (1,556)              (747)           (2,303)
 Income tax benefit                                                  668                289               957
                                                          -------------------------------------------------------
                                                                    (888)              (458)           (1,346)
                                                          -------------------------------------------------------
 Ending Balance - March 31, 2000                             $    (2,221)     $         757      $     (1,464)
                                                          =======================================================
 </TABLE>

10. Industry Segment Data

     Insignia's operating activities encompass three reportable segments. These
segments include (i) commercial real estate services and principal investment
activities; (ii) residential real estate services; and (iii) Internet-based
e-commerce initiatives. 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 commercial segment provides services
including tenant representation, property and asset management, agency leasing
and brokerage, investment sales, development, consulting and other services and
is comprised of the operations of Insignia/ESG in the U.S., IRE in the U.K. and
other businesses in Europe, Asia and Latin America. The commercial segment's
principal real estate investment activities are substantially comprised of
investments in real estate assets, through co-investment ventures with
institutional clients; principal development activities and real estate oriented
funds. The residential segment provides services including apartment brokerage
and leasing, single-family home brokerage services, property management
services, mortgage origination and other services and is comprised of the
operations of Douglas Elliman, Realty One and Insignia Residential Group. The
Company's Internet-based initiatives segment in 2000 comprised equity
investments in third-party Internet-oriented businesses and the internally
developed Internet-related businesses of EdificeRex and PowerChooser. The
Company terminated all internally developed Internet initiatives and
substantially ceased equity financing activities with third-party Internet-based
businesses in 2000. 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. This 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.


                                       12

<PAGE>



The following tables summarize certain financial information by industry
segment:


<TABLE>
<CAPTION>
                                                                                  INTERNET
THREE MONTHS ENDED - MARCH 31, 2001                  COMMERCIAL  RESIDENTIAL    INITIATIVES        INTERNET        OTHER       TOTAL
                                                   ------------------------------------------------------------------------
                                                                               (In thousands)
<S>                                                   <C>
REVENUES:
   Real estate services                             $  145,667     $   46,037     $         -   $       -       $  191,704
   Property operations                                   1,404              -               -           -            1,404
                                                   ------------------------------------------------------------------------

                                                       147,071         46,037               -           -          193,108
                                                   ------------------------------------------------------------------------
COSTS AND EXPENSES:
   Real estate services                                128,895         46,796               -           -          175,691
   Property operations                                   1,188              -               -           -            1,188
   Administrative                                            -              -               -       3,400            3,400
   Depreciation                                          3,187          1,520               -          17            4,724
   Amortization of intangibles                           5,254          1,518               -           -            6,772
                                                   ------------------------------------------------------------------------
                                                       138,524         49,834               -       3,417          191,775
                                                   ------------------------------------------------------------------------

   Operating income (loss)                               8,547         (3,797)              -      (3,417)           1,333

OTHER INCOME AND EXPENSE:
   Provisions for loss on Internet investments               -              -          (4,502)          -           (4,502)
   Interest and other income                               784            278               -       1,067            2,129
   Interest expense                                       (161)          (305)              -      (2,701)          (3,167)
   Foreign currency gains                                    -              -               -          57               57
   Equity earnings in real estate ventures                 424              -               -           -              424
                                                   ------------------------------------------------------------------------

Income (loss) before income taxes                        9,594         (3,824)         (4,502)     (4,994)          (3,726)
   Provision (benefit) for income taxes                  4,509         (2,123)         (1,580)     (1,998)          (1,192)
                                                   ------------------------------------------------------------------------
Net income (loss)                                   $    5,085      $  (1,701)    $    (2,922)  $  (2,996)     $    (2,534)
                                                   =========================================================================
Total assets                                        $  558,347      $ 171,596     $     5,978   $  52,042      $   787,963
Real estate interests                                   65,389              -               -           -           65,389
</TABLE>



                                       13
<PAGE>

<TABLE>
<CAPTION>
                                                                               INTERNET
THREE MONTHS ENDED - MARCH 31, 2000              COMMERCIAL    RESIDENTIAL    INITIATIVES      OTHER          TOTAL
                                                ------------------------------------------------------------------------
                                                                             (In thousands)
<S>                                             <C>            <C>             <C>          <C>            <C>
REVENUES
   Real estate services                              $122,628      $ 46,744   $      -     $       -          $169,372
   Property operations                                    788             -          -             -               788
                                                   ------------------------------------------------------------------------
                                                      123,416        46,744           -                        170,160
                                                   ------------------------------------------------------------------------

 COSTS AND EXPENSES
   Real estate services                               110,846        46,303           -            -           157,149
   Property operations                                    645             -           -            -               645
   Internet-based businesses                                -             -       6,000            -             6,000
   Administrative                                           -             -           -        2,811             2,811
   Depreciation                                         1,816           660         132           14             2,622
   Amortization of intangibles                          4,912         1,510           -            -             6,422
                                                   ------------------------------------------------------------------------
                                                      118,219        48,473       6,132        2,825           175,649
                                                  -------------------------------------------------------------------------

   Operating income (loss)                              5,197        (1,729)     (6,132)      (2,825)           (5,489)

OTHER INCOME AND EXPENSE:
   Interest and other income                              367           161          13          815             1,356
   Interest expense                                      (225)         (181)          -       (2,313)           (2,719)
   Foreign currency gains                                  -              -           -          601               601
   Equity earnings in real estate ventures              1,730             -           -            -             1,730
                                                  -------------------------------------------------------------------------

Income (loss) before income taxes and
  cumulative effect of a change
  in accounting principle                               7,069        (1,749)     (6,119)      (3,722)           (4,521)

   Provision (benefit) for income taxes                 3,317          (926)       (685)      (1,514)              192
                                                  -------------------------------------------------------------------------

Income (loss) before cumulative effect of a
  change in accounting principle                        3,752          (823)     (5,434)      (2,208)           (4,713)
Cumulative effect of a change in accounting
  principle, net of applicable taxes                  (30,391)          (29)                       -           (30,420)
                                                  -------------------------------------------------------------------------

Net loss                                          $   (26,639)     $   (852)    $(5,434)    $ (2,208)        $ (35,133)
                                                  =========================================================================

Total assets                                      $   561,436      $158,454     $50,987     $ 41,893         $ 812,770
Real estate interests                                  74,737             -           -            -            74,737
</TABLE>

                                       14
<PAGE>


    Certain geographic information is as follows:

<TABLE>
<CAPTION>
                                                                              THREE MONTHS ENDED
                                                               MARCH 31, 2001                  MARCH 31, 2000
                                                           ---------------------------------------------------------
                                                                         LONG-LIVED                      LONG-LIVED
                                                            REVENUES        ASSETS        REVENUES         ASSETS
                                                           ---------------------------------------------------------
<S>                                                        <C>           <C>             <C>             <C>
                                                                                (In thousands)
United States                                              $ 167,980      $ 296,520       $ 142,073        $ 301,756
United Kingdom                                                22,360        107,682          27,552          101,312
Other countries                                                2,768          5,501             535              955
                                                           ---------------------------------------------------------
                                                           $ 193,108      $ 409,703       $ 170,160        $ 404,023
                                                           =========================================================
</TABLE>

     Long-lived assets are comprised of property and equipment, property
management contracts and costs in excess of net assets of acquired businesses.

11.  Material Contingencies

     Antitrust Litigation

     In 1994, Re/Max International and various franchisees filed suit in federal
court in Ohio against Realty One, alleging claims under the federal antitrust
laws and related state law claims. Re/Max International alleged in its complaint
that Realty One conspired with Smythe, Cramer Company to institute a series of
differential commission splits intended to harm Re/Max International and its
franchisees in the northeast Ohio residential real estate brokerage market.
Re/Max International claimed actual damages of $30 million. The federal
antitrust laws provide for trebling of actual damages.

     Insignia acquired Realty One in October 1997. In connection with the
acquisition, the sellers agreed to indemnify the Company for any loss arising
from the Re/Max International litigation up to the amount of the acquisition
price of approximately $40 million. The Re/Max International case was tried
before a jury in 2000, resulting in a mistrial. The parties subsequently settled
Re/Max International's claims in July 2000, whereby Realty One agreed to cease
to impose reduced commission splits on the Re/Max plaintiffs, subject to
reinstatement in accordance with the terms of the settlement. In September 2000,
the court entered a judgment against Realty One in the amount of approximately
$6.7 million, as agreed to by the parties; however, also included in its
judgment were several terms governing Realty One's conduct to which the parties
had not agreed. Realty One has appealed the court's judgment. The sellers have
funded the initial cash portion of the settlement, totaling approximately $3.6
million, on behalf of Realty One pursuant to their indemnification obligations
to Insignia and are obligated to fund the remainder in semi-annual installments
over five years. The payment of the first portion of the judgment was made
without prejudice to Realty One's rights of appeal.

     Litigation Claims

     Insignia and certain subsidiaries are defendants in other lawsuits arising
in the ordinary course of business. Management does not expect that the results
of any such lawsuits will have a material adverse effect on the financial
condition, results of operations or cash flows of the Company.

     Indemnification

     In 1998, Former Parent entered into a Merger Agreement with Apartment
Investment and Management Company ("AIMCO"), and one of AIMCO's subsidiaries,
pursuant to which Former Parent was merged into AIMCO. Shortly before the
merger, 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. The Company also agreed generally to indemnify AIMCO against all
losses, without regard to any dollar value limitation, that result from: (i)
amounts AIMCO paid to employees of Former Parent that were not retained as
employees of AIMCO; (ii) pre-merger obligations for goods, services, taxes or
indebtedness except for


                                       15



<PAGE>

those that AIMCO agreed to assume; and (iii) the businesses of Former Parent
that Insignia now owns and operates as a result of the Spin-Off.

     Since the merger transaction in October 1998, there have been no related
claims except for an examination of the federal income tax returns of Former
Parent being conducted by the Internal Revenue Service for the years ended
December 31, 1996, December 31, 1997 and the period ended October 1, 1998. AIMCO
has notified the Company that it is seeking indemnity from Insignia for any
liability as a result of this examination. Insignia agreed to indemnify AIMCO
for taxes, penalties, interest and professional fees for which it is liable as a
result of this audit and has reimbursed over $500,000 to AIMCO for professional
fees incurred in connection with the audit. No determinations have been made or
can be made at this time as to any potential tax liability that may arise as a
result of this examination.

12. Equity

    During the three month period ended March 31, 2001, the Company had the
following changes in stockholders' equity:

    a) Net Loss of $2,534,000 for the three months ended March 31, 2001.

    b) Payment of $500,000 in Preferred Stock dividends.

    c) Exercise of stock options to purchase 153,466 shares of Common Stock at
       exercise prices ranging from $4.40 to $10.09 per share.

    d) Sale of 34,190 shares of Common Stock, at an average price of
       approximately $8.50, under the Company's Employee Stock Purchase Program.

    e) Issuance of 18,105 shares of Common Stock for vested restricted stock
       awards.

    f) Accrued compensation of $166,000 relating to restricted stock awards.

    g) Payments of $32,000 on notes receivable for Common Stock.

    h) Other comprehensive losses of $3,061,000 for the three months ended
       March 31, 2001.

                                       16
<PAGE>


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

FINANCIAL CONDITION

     Insignia's total assets declined approximately $122.4 million, from $910.3
million at December 31, 2000 to $788 million at March 31, 2001. The decrease was
attributable to the following items: (i) a decline in cash arising primarily
from payment of approximately $75 million of annual bonuses for the 2000 year
and the payment of approximately $22 million for the final purchase price of the
UK businesses; and (ii) a $37 million decline in real estate interests resulting
from the sale of two real estate properties developed by the Company.

     Liabilities were lowered approximately $117.7 million to $383.8 million at
March 31, 2001. This decrease reflects the aforementioned payment of accrued
incentives for the 2000 year and the retirement of $33 million in real estate
mortgage notes payable from proceeds received upon the sale of development
properties. Stockholders' equity declined by approximately $4.7 million to
$404.2 million at March 31, 2001, primarily as a result of the $2.5 million net
loss for the period, in combination with $3 million of foreign currency
translation losses.

RESULTS OF OPERATIONS

     Insignia reported strong results from its core real estate service
operations during the first quarter of 2001, with service revenues of $191.7
million and Net EBITDA of $13 million, respectively. These operating results
represented increases of 13% and 38%, respectively, over the first quarter of
2000. The comparable operating results reported for the first quarter of 2000
were service revenues of $169.4 million and Net EBITDA of $9.4 million. The
first quarter of 2001 performance was fueled by growth in the U.S. commercial
service operations of Insignia/ESG. Financial results for the first quarter of
2001 and 2000 both reflect the adoption of the SAB 101 accounting change. The
effect of this change on the first quarter of 2000, which has been restated, was
to increase the loss before the cumulative effect of the accounting change by
$401,000 ($0.02 per share) to $4.7 million; up from the $4.3 million loss
previously reported. In addition, the cumulative effect of this accounting
change on prior years resulted in a further $30.4 million (net of applicable
taxes of $23.3 million) charge to the first quarter of 2000.

     Insignia reported a net loss of approximately $2.5 million for the first
quarter of 2001, representing improved results in comparison to the $4.7 million
net loss experienced in the first quarter of 2000. This 2001 net loss included
the adverse affects of $4.5 million in impairment write-offs of the Company's
investment in six Internet-based businesses and significantly higher
depreciation expense compared to 2000. Financial results for the first quarter
of 2001 were further characterized by the absence of any gains from property
sales in the co-investment real estate program. Net earnings for the first
quarter of 2000 were adversely affected by $4.3 million of operating expenses of
EdificeRex, the Company's internal web-based Internet business launched in early
2000, and $1.7 million of other internal Internet-based business activities.
These Internet-based expenses lowered earnings for the first quarter of 2000 by
$0.29 per share. Financial results for the first quarter of 2000 were enhanced
by a $1.9 million gain realized from the sale of a co-investment property and
foreign currency transaction gains of $601,000 on the Company's borrowings
denominated in European currencies.

     As a result of the foregoing, per share results for the first quarter of
2001 improved in comparison to the same period of 2000 to a $0.13 loss per
share. The comparable per share loss for the same period of 2000 was $0.23 per
share (before the $30.4 million cumulative effect). The $30.4 million cumulative
effect of the SAB 101 accounting change increased the net loss for the first
quarter of 2000 to $35.1 million, or $1.69 per share. It is important to note
that the adverse effect of SAB 101 adoption on the first quarter of 2000
constituted a change in the timing of recognition of leasing revenues and had no
impact on cash flow from operations.

     Weighted average common shares outstanding for the first quarter of 2001
increased 4% over the same period of 2000 to approximately 21.7 million shares,
due substantially to stock option exercises and purchases under the Company's
employee stock purchase program.

    The Company continues to believe that the 2001 year should be among the best
in its history. While the exceptional operating levels experienced in 2000 are
unlikely to be repeated in 2001, the Company's core real estate service
businesses continue to perform well and demand for U.S. and international
services, commercial in particular, remains strong.

                                       17
<PAGE>

     In addition to net income, Insignia uses EBITDA (defined as real estate
services revenues less direct expenses and administrative costs) and Net EBITDA
(defined as income before depreciation, amortization, income taxes and
non-recurring one-time charges) as indicators of the Company's financial
performance. As compared to net income, these measures effectively eliminate the
impact of non-cash charges for depreciation, amortization of intangibles and
other non-recurring charges. Neither EBITDA nor Net EBITDA, as disclosed above,
should be construed to represent cash provided by operations pursuant to
generally accepted accounting principles ("GAAP"), as neither is defined by
GAAP. Insignia's usage of these terms may differ from other companies' usage of
the same or similar terms. The Company's results of operations are more fully
discussed below.

     The following table sets forth financial data derived from the Company's
condensed consolidated statements of operations for the three months ended March
31, 2001 and 2000, respectively.

<TABLE>
<CAPTION>
                                                                                    THREE MONTHS ENDED
                                                                                         MARCH 31
                                                                                         --------
                                                                              2001                     2000
                                                                              ----                     ----
<S>                                                                         <C>                     <C>
                                                                                      (In thousands)
      REAL ESTATE REVENUES
           United States commercial                                          $ 120,539               $  94,541
           International commercial                                             25,128                  28,087
           Residential                                                          46,037                  46,744
                                                                         ------------------       ----------------
               Total real estate revenues                                      191,704                 169,372
                                                                         ------------------       ----------------
      COSTS AND EXPENSES
           Real estate services                                                175,691                 157,149
           Administrative                                                        3,400                   2,811
                                                                         ------------------       ----------------

      EBITDA - REAL ESTATE SERVICES (1)                                         12,613                   9,412

           Real estate FFO(2)                                                    1,320                     768
           Interest and other income(3)                                          2,129                   1,343
           Foreign currency gains                                                   57                     601
           Interest expense                                                     (3,167)                 (2,719)
                                                                         ------------------       ----------------

      NET EBITDA(1)                                                             12,952                   9,405

           Applicable income tax                                                  (388)                   (108)
                                                                         ------------------       ----------------

                                                                                12,564                   9,297

           Gains on sale of real estate                                              -                   1,922
           Tax on real estate                                                        -                    (769)
           Depreciation - FF&E                                                  (4,376)                 (2,370)
           Amortization of intangibles                                          (6,772)                 (6,422)
           Depreciation - real estate                                           (1,028)                   (937)
                                                                         ------------------       ----------------


      INCOME FROM REAL ESTATE OPERATIONS                                           388                     721

         Internet-based businesses                                                   -                  (5,987)
         Provision for loss of Internet Investments                             (4,502)                      -
         Internet depreciation                                                       -                    (132)
         Benefit for income taxes                                                1,580                     685
                                                                         ------------------       ----------------
                                                                                (2,922)                 (5,434)
                                                                         ------------------       ----------------


      NET LOSS (4)                                                         $    (2,534)             $   (4,713)
                                                                         ==================       ================
</TABLE>

(1) EBITDA and Net EBITDA, as disclosed above, should not be construed to
represent cash provided by operations determined pursuant to generally accepted
accounting principles ("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



                                       18




<PAGE>



compared to net income, the EBITDA and Net EBITDA measures effectively eliminate
the impact of non-cash charges for depreciation, amortization of intangible
assets and other non-recurring 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) Funds From Operations ("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) Interest and other income for the three months ended March 31, 2000
excludes $13,000 of interest income of EdificeRex, which is reflected in
Internet-based businesses.

(4) Represents loss before cumulative effect of the accounting change on prior
years.

Real Estate Services

Commercial Real Estate Operations

     Insignia's commercial real estate service operations include Insignia/ESG
in the United States, IRE in the United Kingdom, other businesses in Germany,
Italy, Belgium, the Netherlands, Asia and Latin America. For the first quarter
of 2001, these commercial businesses collectively produced service revenues of
$145.7 million and EBITDA of $16.8 million, reflecting increases of 19% for
revenues and 42% for EBITDA, as compared to the same period of 2000. It is
important to point out that comparative results for the first quarter of 2000
have been restated in compliance with the SAB101 accounting change, which
lowered commercial service revenues and EBITDA by $4.9 million and $696,000,
respectively, from results previously reported for this period. Commercial real
estate services produced approximately 76% of Insignia's total service revenues
and substantially all of the EBITDA for the first quarter of 2001.

     The revenue and EBITDA gains experienced in the commercial services sector
in the first quarter of 2001 were substantially achieved through growth in
Insignia/ESG's domestic operations, which continued to experience operating
success even in the face of an economic slowdown in the U.S. marketplace. For
the 2001 quarter, Insignia/ESG produced U.S. service revenues of $120.5 million
and EBITDA of $16.2 million, representing gains of 27% for revenues and 98% for
EBITDA over 2000. Such U.S. results for the 2001 quarter were buoyed by
continued strong showings by the Company's bellwether New York region, the West
Coast region and real estate principal development activities. These robust
results for Insignia/ESG in the first quarter of 2001 bear witness to the
strength and diversity of the Company's U.S. service platform and the
relationships with corporate and institutional clients.

     In Europe, financial results for the first quarter of 2001 reflected
anticipated year-over-year revenue and EBITDA declines from the exceptional pace
experienced in the first quarter of 2000. The European businesses collectively
produced service revenues of $24.7 million and EBITDA of $1.4 million for the
first quarter of 2001. In comparison, results for the same period of 2000
reflected service revenues of $28.1 million and EBITDA of $3.6 million. The
lower operating results for all of Europe in the first quarter of 2001 was
primarily attributable to a slowdown in transaction levels in IRE's U.K.
operation, which experienced a 19% decline in revenues to $22.4 million and a
$3.2 million drop in EBITDA to $1.2 million. Despite this expected decline from
first quarter of 2000, the U.K. markets remains active and prospects for the
2001 year remain favorable. Limited development and available supply in the U.K.
markets and low interest rates are expected to sustain growth in rental levels
and equity investment in 2001.

     The continental European businesses reflected strength in occupancy and
investment markets as the operations in Germany and the Netherlands collectively
produced service revenues of $1.8 million and EBITDA of approximately $500,000
for the first quarter of 2001. These results represent more than a $1 million
increase in EBITDA over the same period of 2000. The operations in Belgium and
Italy continued to produce modest operating losses for the first quarter of
2001; however, operating forecasts for the remainder of 2001 are favorable in
these markets.


                                       19
<PAGE>


     The Company's Asian operations (launched in December 2000) and Latin
American operations (initiated in March 2001) incurred modest EBITDA losses of
$658,000 and $157,000, respectively, for the first quarter of 2001. These losses
were in line with management's expectations for the initial start-up periods of
operation.

Residential Real Estate Operations

     The Company's residential real estate services operations, comprised of
Douglas Elliman, Realty One and Insignia Residential Group, collectively
generated service revenues of $46 million and an EBITDA loss of $759,000 for the
first quarter of 2001. Service revenues for the first quarter of 2001 were flat
and EBITDA was down approximately $1.2 million compared to the same period of
2000. The year-over-year EBITDA decline was principally due to an easing of
transaction levels in Douglas Elliman's residential brokerage business in New
York from the abnormally strong volume experienced in the first quarter of 2000.
Historically, the first quarter of each year is the lowest for operating
production from residential real estate services, due primarily to the adverse
seasonal factors affecting Realty One's single family home brokerage operation
in northern Ohio.

     Realty One produced service revenues of $16.6 million and a corresponding
$2.5 million EBITDA loss for the first quarter of 2001. This operating
performance compares similarly to service revenues of $16.7 million and an
EBITDA loss of $2.3 million for the same period of 2000. That said, recent
interest rate declines and a refocus in marketing towards first time homebuyers
has fueled growth in mortgage volume in Realty One's mortgage lending unit, as
closed mortgage loans grew 29% to $79 million for the 2001 quarter. Douglas
Elliman produced service revenues of $23 million for the first quarter of 2001,
representing a nominal 1% decline compared to the first quarter of 2000, and
EBITDA of $1.3 million, down 48% from the $2.6 million achieved in the 2000
quarter. As previously stated, these declines are attributed to lower
transaction volume of residential sales and rentals in the New York marketplace
compared to the exceptional level experienced in the first quarter of 2000.
Insignia Residential Group results for the first quarter of 2001 were
substantially in line with 2000 as revenues declined a modest 5% to $6.5 million
and EBITDA increased to $358,000. It is noteworthy to point out that Insignia
Residential Group was appointed property manager and leasing agent in April 2001
for the Metropolitan Life Insurance Company's Peter Cooper Village/Stuyvesant
Town Complex, an 11,000 unit apartment complex in Manhattan. This assignment
represents one of the largest in New York and increases the Company's
residential apartment management portfolio to approximately 72,000 units.

Real Estate Principal Investment Activities

     The Company's real estate investment operation produced equity earnings
from real estate ownership of $424,000 for the first quarter of 2001,
representing a decline from approximately $1.7 million for the same period of
2000. This decline is primarily attributable to the absence of property sales
from the Company's co-investment portfolio during the first quarter of 2001. In
comparison, the Company realized a pretax gain of approximately $1.9 million
during the first quarter of 2000 from the sale of a 105,000 square foot
co-investment property located in northern California.

     The Company also reported $1.4 million in revenues for the three-month
period of 2001 from the operations of the wholly owned Brookhaven Village and
Dolphin Village retail properties. This production represents a material
improvement over the $788,000 reported for the same period of 2000. Thee two
properties collectively contributed income of $140,000 (before depreciation) for
the first quarter of 2001.

     The Company produced FFO from real estate ownership of $1.3 million for the
first quarter of 2001, representing a significant increase of 72% from $768,000
produced in the comparable period of 2000. This year-over-year growth is
attributable to the continued expansion of the Company's real estate portfolio,
in combination with enhanced operating performance of properties and the above
mentioned absence of property sales during the 2001 quarter. FFO is defined as
income or loss from real estate operations before depreciation, gains or losses
on property sales and provisions for impairment. This measure is not defined by
GAAP and the Company's usage of this term may differ from other companies' usage
of the same or similar terms. The Company believes this supplemental disclosure
provides a measure of cash generated by property operations.

                                       20

<PAGE>


Internet Operations

     In the first quarter of 2001, the Company incurred $4.5 million in
impairment losses from the write-off of certain of its third-party Internet
investments. After these write-offs, the Company continues to hold remaining
equity investments of approximately $6 million in ten Internet-oriented
businesses. As previously stated, the Company is not currently making material
investments in new Internet initiatives and has terminated all internal
Internet-related operating activities. As such, the financial results for the
first quarter of 2001 do not include any Internet-based operating losses. During
the first quarter of 2000, the Company incurred $6 million of net operating
losses from internal Internet-based businesses. These losses substantially
represented expenses incurred in connection with the development of internal
Internet-oriented business applications and consisted primarily of personnel
costs and advertising and marketing campaigns.

Other Items Affecting Net Income

     Administrative expenses rose 21% to $3.4 million for the first quarter of
2001, advancing from $2.8 million for the same period of 2000. The
year-over-year quarterly increase is primarily due to professional fees incurred
in connection with the ongoing IRS audit and higher travel and entertainment
costs in 2001.

     Interest and other income increased 57% from approximately $1.4 million for
the first quarter of 2000 to $2.1 million for the same period of 2001. This
increase is the result of higher cash balances during most of the quarter,
pending the significant payout in March 2001 of bonuses earned during the 2000
year.

     Interest expense increased 16% from $2.7 million for the first quarter of
2000 to approximately $3.2 million for the first quarter of 2001. The increase
reflects higher average borrowings during the first quarter of 2001 attributable
in part to borrowings of $15 million in March 2000 under the revolving credit
facility.

     Depreciation from the core service businesses (excluding consolidated
property depreciation) increased 85% from $2.4 million for the first quarter of
2000 to $4.4 million for the same period of 2001. This increase reflects the
impact of the successful implementation of new information technology platforms
at Insignia/ESG and Realty One and leasehold improvements in connection with the
upgrade and relocation of offices in key U.S. markets. Amortization of
intangibles increased 5% to approximately $6.8 million for the first quarter of
2001 due primarily to payments for contingent earnouts achieved and acquisitions
substantially comprised of purchased intangibles.

     The income tax benefit totaling $1.2 million for the first quarter of 2001
was attributable to the estimated tax benefit on the aforementioned $4.5 million
of Internet impairment write-offs. Income taxes of $192,000 for the first
quarter of 2000 reflects the affects of approximately $4.3 million in
Internet-based expenses of EdificeRex, for which no tax benefit was currently
available.








                                       21
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

     Insignia's liquidity and capital resources consist of its unrestricted cash
on hand, available credit under its credit facilities and cash provided by
operations. The Company utilizes cash holdings and available credit for general
corporate purposes, expansion of the service platform through acquisitions and
office openings and to fund ongoing real estate investment activities.

     Unrestricted cash at March 31, 2001 totaled $43.5 million, representing a
sharp decline from $124.5 million at December 31, 2000. A substantial portion of
the available cash at December 31, 2000 was used to pay approximately $75
million in incentive compensation and $22 million for remaining purchase
consideration for the U.K. businesses. The Company's total debt at March 31,
2001 and December 31, 2000 was comprised of the following:

<TABLE>
<CAPTION>
                                                                               MARCH 31,         DECEMBER 31,
                                                                                 2001                2000
                                                                                 ----                ----
<S>                                                                       <C>               <C>
                                                                                       (In thousands)
              Credit facility borrowings                                        $121,037            $122,350
              Cash-secured acquisition indebtedness                               27,093               6,219
              Other debt of subsidiaries                                           7,253               7,213
                                                                          -----------------------------------------
                   Notes payable                                                 155,383             135,782

              Mortgage warehouse line of credit                                   19,402               9,502
              Real estate mortgage notes payable                                  15,739              48,369

                                                                          -----------------------------------------
                  TOTAL DEBT                                                    $190,524            $193,653
                                                                          =========================================
</TABLE>


     The real estate mortgages, mortgage warehouse line and cash-secured
acquisition indebtedness are all self-liquidating from the related assets and do
not affect Insignia's liquidity and capital resources. Other debt of $128
million, together with approximately $12.5 million in letters of credit
supporting real estate investments, represent the outstanding obligations under
facilities aggregating approximately $195 million at March 31, 2001.

     In May 2001, Insignia completed a renewal and expansion of its revolving
credit facility, resulting in a new three-year $230 million credit facility.
With the expanded facility, the Company has more than $100 million in unused
liquidity.

     Cash used in operating activities totaled approximately $57 million for the
first quarter of 2001, compared to $43.7 million for the same period of 2000.
Cash from operations is generally negative during the first quarter of each year
due to the payment of annual incentive compensation pertaining to the preceding
year and seasonal factors affecting transactional revenues (see also "Nature of
Operations"). The increase in cash usage from operations during the first
quarter of 2001 is principally due to higher incentive payments as compared to
the same period of 2000. Cash flows from investing and financing activities for
the first quarter of 2001 were characterized primarily by $40 million in
proceeds from the sale of two real estate development properties and the
corresponding payoff of $33 million of real estate debt financing their
development. Other prominent investing and financing activities during 2001 were
increases in mortgage loans and borrowings on the related warehouse line (of
Realty One's mortgage lending unit) and a $22 million increase in restricted
cash securing deferred loan notes issued to former shareholders of IRE in the
satisfaction of remaining purchase consideration for the U.K. businesses.

     For 2001, Insignia has budgeted approximately $20 million in capital
expenditures, all of which is to be funded from operations. The Company believes
that its cash on hand, available credit and anticipated cash flows from
operations are sufficient for its short term and long term operating and capital
requirements.


                                       22

<PAGE>


IMPACT OF INFLATION AND CHANGING PRICES

     Inflation has not had a significant impact on the results of operations of
Insignia in recent years and is not anticipated to have a significant negative
impact in the foreseeable future. Insignia's exposure to market risk from
changing prices consists primarily of fluctuations in rental rates of properties
managed, market interest rates on residential mortgages and debt obligations,
real estate property values and foreign currency fluctuations of its European
operations.

     The revenues associated with the commercial services business are impacted
by fluctuations in interest rates, lease rates, real property values and the
availability of space and competition in the market place. 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 of the property management operations with respect to rental
properties are highly dependent upon the aggregate 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 on residential mortgage loans and changes
in real property values in northern Ohio and New York City impact the revenues
of the Company's residential brokerage and mortgage origination businesses.
Increases in mortgage interest rates, which have typically resulted in a weak
environment for single-family home sales in the northern Ohio marketplace,
adversely affect the revenues and profits of Realty One's home brokerage and
mortgage origination business. Recent market trends have seen the decline of
interest rates, resulting in the stabilization Realty One's operations in the
first quarter of 2001 compared to the same period of 2000.

NATURE OF OPERATIONS

     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. Such
seasonal and other factors materially impact the Company's quarterly results,
particularly revenues, earnings and cash flows. The SAB 101 accounting change
may affect seasonality.

     Consistent with the industry in general, the commercial services segment
has historically experienced its lowest quarterly operating results in the first
quarter of each year as a result of the desire of clients to complete
transactions by calendar year-end. This phenomenon generally results in 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.

     The residential services segment is materially impacted by the seasonal
factors of Realty One's home brokerage and mortgage origination business. Due to
the geographic location of Realty One's operations in Ohio, weather conditions
have historically had an adverse effect on single family home sales resulting in
operating losses during the first quarter of each year. The volume of Realty
One's home brokerage and mortgage transactions typically peak during the spring
and summer months, coinciding with both favorable weather conditions and the
increased tendency for moving between school years, resulting in higher revenues
and earnings during the second and third quarters of each year.

     A significant portion of the expenses associated with transactional
activities in the commercial and residential segments is directly correlated to
revenue. As a consequence of the seasonality of revenues, the Company's income
is normally expected to be lowest in the first quarter and highest in the fourth
quarter of each year. Insignia continues to believes that its large, diversified
client base, geographical reach, overall size and number of annual transactions
help to minimize the impact of seasonality and other changes in business and
capital market conditions on annual revenues and earnings.

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




                                       23



<PAGE>


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
which 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. Such information
also includes statements regarding the Company's plans to substantially limit
its e-commerce business expenses. 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.

     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.

Item 3.  Quantitative and Qualitative Disclosure of Market Risk
---------------------------------------------------------------

     Insignia is exposed to a variety of market risks, including foreign
currency exchange rate fluctuations and changes in interest rates. The Company's
earnings and cash flows are subject to fluctuations due to changes in foreign
currency exchange rates from the Company's operations in foreign jurisdictions.
In addition to the United States, the Company conducts business in the following
foreign jurisdictions: the U.K., Germany, Italy, Belgium, Ireland, the
Netherlands, Hong Kong, China, Thailand, India and Mexico. The British Pound
(Sterling) represents the only foreign currency of a material business
operation, as more than 90% of Insignia's foreign operations are derived in the
U.K.

     The Company's financial results could be significantly affected by factors
such as fluctuations in foreign currency exchange rates and weak economic
conditions in these foreign markets. These foreign factors have not had a
material adverse effect on the Company; however, they could potentially have a
material adverse affect on the Company's future financial position and results
of operations. A 10% change in the British pound could have an estimated annual
impact of approximately $10 million on revenues and $1 million on net earnings.

     The Company's interest income and expense are most sensitive to the changes
in the general level of interest rates. In this regard, changes in interest
rates affect the interest earned on the Company's cash equivalents and
short-term investments as well as interest paid on its debt. 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 at current cash and debt levels would have an estimated annual
net impact of approximately $1 million on the Company's results of operations.
However, changes in interest rates can have a material adverse effect on Realty
One's home brokerage and mortgage origination business in northern Ohio.




                                       24
<PAGE>


                           PART II - OTHER INFORMATION
                           ---------------------------

Item 1.  Legal Proceedings
--------------------------

     See Note 11 - "Material Contingencies" in Notes to Condensed Consolidated
Financial Statements, Part I, Item 1, of this Form 10-Q.


Item 6.  Exhibits and Reports on Form 8-K
-----------------------------------------

     a)  Exhibits

         None

     i)  Reports on Form 8-K filed during the quarter ended March 31, 2001:

         None.




                                       25

<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