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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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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 001-12231

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CB RICHARD ELLIS SERVICES, INC.(Exact name of registrant as specified in its charter)

|Delaware                                                       |  | 52-1616016                                                                       
|-------------------------------------------------------------- |  | ---------------------------------------------------------------------------------
|(State or other jurisdiction
of incorporation or organization) |  | (I.R.S. Employer
Identification Number)                                          
|200 North Sepulveda Boulevard
El Segundo, California           |  | 90245-4380(Zip Code)                                                             
|(Address of principal executive offices)                       |  |                                                                                  
|(310) 563-8611                                                 |  | Not Applicable                                                                   
|(Registrant's telephone
number, including area code)           |  | (Former name, former address and formal
fiscal year if changed since last report)
|                                                               |  |                                                                                  

---

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 / /.

Number
of shares of common stock outstanding at April 30, 2001 was 20,641,688.

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CB RICHARD ELLIS SERVICES, INC.    FORM 10-Q    March 31, 2001    TABLE OF CONTENTS

|                             |  |                                                                                                      |  | Page
|---------------------------- |  | ---------------------------------------------------------------------------------------------------- |  | ----
|PART IFINANCIAL INFORMATION |  |                                                                                                     
|Item 1.                      |  | Financial Statements                                                                                 |  |     
|                             |  | Consolidated Balance Sheets at March 31, 2001 (Unaudited) and December 31, 2000                      |  | 3   
|                             |  | Consolidated Statements of Operations for the three months ended March 31, 2001 and 2000 (Unaudited) |  | 4   
|                             |  | Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and 2000 (Unaudited) |  | 5   
|                             |  | Notes to Consolidated Financial Statements (Unaudited)                                               |  | 6   
|Item 2.                      |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                |  | 11  
|Item 3.                      |  | Quantitative and Qualitative Disclosures About Market Risk                                           |  | 20  
|PART IIOTHER INFORMATION    |  |                                                                                                     
|Item 1.                      |  | Legal Proceedings                                                                                    |  | 21  
|Item 6.                      |  | Exhibits and Reports on Form 8-K                                                                     |  | 22  
|Signatures                   |  | 23                                                                                                  

2

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CB RICHARD ELLIS SERVICES, INC.    CONSOLIDATED BALANCE SHEETS    (Dollars in thousands, except share and per share data)

|                                                                                                                          |                                                                                                                                                    | March 31,
2001                             |         | December 31,
2000 |        
|------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------------- | -------
|
|ASSETS                                                                                                                    |                                                                                                                                                   
|Current Assets:                                                                                                           |                                                                                                                                                    |                                            |         |                   |        
|                                                                                                                          | Cash and cash equivalents                                                                                                                          |                                            | $       | 20,339            |        
|                                                                                                                          | Receivables, less allowance for doubtful accounts of $11,959 and $12,631 at March 31, 2001 and December 31, 2000                                   |                                            |         | 141,792           |        
|                                                                                                                          | Prepaid expenses                                                                                                                                   |                                            |         | 9,819             |        
|                                                                                                                          | Deferred taxes, net                                                                                                                                |                                            |         | 13,105            |        
|                                                                                                                          | Other current assets                                                                                                                               |                                            |         | 8,716             |        
|                                                                                                                          |                                                                                                                                                    |                                            |         |                   |        
|                                                                                                                          |                                                                                                                                                    | Total current assets                       |         |                   | 193,771
|Property and equipment, net                                                                                               |                                                                                                                                                    |                                            | 75,048  |                   |        
|Goodwill, net of accumulated amortization of $59,738 and $56,417 at March 31, 2001 and December 31, 2000                  |                                                                                                                                                    |                                            | 415,299 |                   |        
|Other intangible assets, net of accumulated amortization of $290,679 and $289,038 at March 31, 2001 and December 31, 2000 |                                                                                                                                                    |                                            | 44,169  |                   |        
|Cash surrender value of insurance policies, deferred compensation plan                                                    |                                                                                                                                                    |                                            | 61,267  |                   |        
|Investment in and advances to unconsolidated subsidiaries                                                                 |                                                                                                                                                    |                                            | 38,187  |                   |        
|Deferred taxes, net                                                                                                       |                                                                                                                                                    |                                            | 35,316  |                   |        
|Prepaid pension costs                                                                                                     |                                                                                                                                                    |                                            | 24,126  |                   |        
|Other assets                                                                                                              |                                                                                                                                                    |                                            | 44,113  |                   |        
|                                                                                                                          |                                                                                                                                                    |                                            |         |                   |        
|                                                                                                                          |                                                                                                                                                    | Total assets                               |         | $                 | 931,296
|                                                                                                                          |                                                                                                                                                    |                                            |         |                   |        
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                      |                                                                                                                                                   
|Current Liabilities:                                                                                                      |                                                                                                                                                    |                                            |         |                   |        
|                                                                                                                          | Accounts payable and accrued expenses                                                                                                              |                                            | $       | 77,803            |        
|                                                                                                                          | Compensation and employee benefits payable                                                                                                         |                                            |         | 63,790            |        
|                                                                                                                          | Reserve for bonus and profit sharing                                                                                                               |                                            |         | 20,807            |        
|                                                                                                                          | Income taxes payable                                                                                                                               |                                            |         | 14,696            |        
|                                                                                                                          | Short-term borrowings                                                                                                                              |                                            |         | 8,418             |        
|                                                                                                                          | Current maturities of long-term debt                                                                                                               |                                            |         | 1,161             |        
|                                                                                                                          |                                                                                                                                                    |                                            |         |                   |        
|                                                                                                                          |                                                                                                                                                    | Total current liabilities                  |         |                   | 186,675
|Long-term debt:                                                                                                           |                                                                                                                                                    |                                            |         |                   |        
|                                                                                                                          | Senior subordinated notes, less unamortized discount of $1,604 and $1,664 at March 31, 2001 and December 31, 2000                                  |                                            |         | 173,396           |        
|                                                                                                                          | Revolving credit facility                                                                                                                          |                                            |         | 218,000           |        
|                                                                                                                          | Other long-term debt                                                                                                                               |                                            |         | 18,257            |        
|                                                                                                                          |                                                                                                                                                    |                                            |         |                   |        
|                                                                                                                          |                                                                                                                                                    | Total long-term debt                       |         |                   | 409,653
|Deferred compensation liability                                                                                           |                                                                                                                                                    |                                            | 79,980  |                   |        
|Other liabilities                                                                                                         |                                                                                                                                                    |                                            | 27,729  |                   |        
|                                                                                                                          |                                                                                                                                                    |                                            |         |                   |        
|                                                                                                                          |                                                                                                                                                    | Total liabilities                          |         |                   | 704,037
|Minority interest                                                                                                         |                                                                                                                                                    |                                            | 2,967   |                   |        
|Commitments and contingencies                                                                                             |                                                                                                                                                    |                                            |         |                   |        
|Stockholders' Equity:                                                                                                     |                                                                                                                                                    |                                            |         |                   |        
|                                                                                                                          | Preferred stock, $0.01 par value; 8,000,000 shares authorized; no shares issued or outstanding                                                     |                                            |         |                  |        
|                                                                                                                          | Common stock, $0.01 par value; 100,000,000 shares authorized; 20,636,051 and 20,605,023 shares outstanding at March 31, 2001 and December 31, 2000 |                                            |         | 217               |        
|                                                                                                                          | Additional paid-in capital                                                                                                                         |                                            |         | 365,420           |        
|                                                                                                                          | Notes receivable from sale of stock                                                                                                                |                                            |         | (11,661           | )      
|                                                                                                                          | Accumulated deficit                                                                                                                                |                                            |         | (91,943           | )      
|                                                                                                                          | Accumulated other comprehensive loss                                                                                                               |                                            |         | (21,897           | )      
|                                                                                                                          | Treasury stock at cost, 1,072,155 shares at March 31, 2001 and December 31, 2000                                                                   |                                            |         | (15,844           | )      
|                                                                                                                          |                                                                                                                                                    |                                            |         |                   |        
|                                                                                                                          |                                                                                                                                                    | Total stockholders' equity                 |         |                   | 224,292
|                                                                                                                          |                                                                                                                                                    |                                            |         |                   |        
|                                                                                                                          |                                                                                                                                                    | Total liabilities and stockholders' equity |         | $                 | 931,296
|                                                                                                                          |                                                                                                                                                    |                                            |         |                   |        

The accompanying notes are an integral part of these consolidated financial statements.

3

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CB RICHARD ELLIS SERVICES, INC.    CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)    (Dollars in thousands, except share and per share data)

|                                                                          |                                         | Three Months Ended
March 31
|------------------------------------------------------------------------- | --------------------------------------- | ---------------------------
|
|Revenue:                                                                  |                                         |                            
|                                                                          | Leases                                  |                            
|                                                                          | Sales                                   |                            
|                                                                          | Property and facilities management fees |                            
|                                                                          | Consulting and referral fees            |                            
|                                                                          | Appraisal fees                          |                            
|                                                                          | Loan origination and servicing fees     |                            
|                                                                          | Investment management fees              |                            
|                                                                          | Other                                   |                            
|                                                                          |                                         |                            
|                                                                          |                                         | Total revenue              
|Costs and Expenses:                                                       |                                         |                            
|                                                                          | Commissions, fees and other incentives  |                            
|                                                                          | Operating, administrative and other     |                            
|                                                                          | Depreciation and amortization           |                            
|                                                                          |                                         |                            
|Operating income                                                          |                                         |                            
|Interest income                                                           |                                         |                            
|Interest expense                                                          |                                         |                            
|                                                                          |                                         |                            
|(Loss) income before (benefit) provision for income tax                   |                                         |                            
|(Benefit) provision for income tax                                        |                                         |                            
|                                                                          |                                         |                            
|Net (loss) income                                                         |                                         | $                          
|                                                                          |                                         |                            
|Basic (loss) earnings per share                                           |                                         | $                          
|                                                                          |                                         |                            
|Weighted average shares outstanding for basic (loss) earnings per share   |                                         |                            
|                                                                          |                                         |                            
|Diluted (loss) earnings per share                                         |                                         | $                          
|                                                                          |                                         |                            
|Weighted average shares outstanding for diluted (loss) earnings per share |                                         |                            
|                                                                          |                                         |                            

The
accompanying notes are an integral part of these consolidated financial statements.

4

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CB RICHARD ELLIS SERVICES, INC.    CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)    (Dollars in thousands)

|                                                     |                                                                                                       | Three Months Ended
March 31                                      |       
|---------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                |                                                                                                       |                                                                  |       
|                                                     | Net (loss) income                                                                                     |                                                                  | $     
|                                                     | Adjustments to reconcile net (loss) income to net cash used in operating activities:                  |                                                                  |       
|                                                     |                                                                                                       | Depreciation and amortization excluding deferred financing costs |       
|                                                     |                                                                                                       | Gain on sale of properties, businesses and servicing rights      |       
|                                                     |                                                                                                       | Deferred compensation deferrals                                  |       
|                                                     |                                                                                                       | Equity interest in earnings of unconsolidated subsidiaries       |       
|                                                     |                                                                                                       | Provision for doubtful accounts                                  |       
|                                                     | Decrease in receivables                                                                               |                                                                  |       
|                                                     | Increase in cash surrender value of insurance policies, deferred compensation plan                    |                                                                  |       
|                                                     | Decrease in compensation and employee benefits payable and reserve for bonus and profit sharing       |                                                                  |       
|                                                     | Decrease in accounts payable and accrued expenses                                                     |                                                                  |       
|                                                     | Decrease in income taxes payable                                                                      |                                                                  |       
|                                                     | (Decrease) increase in other liabilities                                                              |                                                                  |       
|                                                     | Other                                                                                                 |                                                                  |       
|                                                     |                                                                                                       |                                                                  |       
|                                                     |                                                                                                       | Net cash used in operating activities                            |       
|                                                     |                                                                                                       |                                                                  |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                |                                                                                                       |                                                                  |       
|                                                     | Purchases of property and equipment                                                                   |                                                                  |       
|                                                     | Proceeds from sale of properties, businesses and servicing rights                                     |                                                                  |       
|                                                     | Distributions from (contributions to) investments in and advances to unconsolidated subsidiaries, net |                                                                  |       
|                                                     | Other investing activities, net                                                                       |                                                                  |       
|                                                     |                                                                                                       |                                                                  |       
|                                                     |                                                                                                       | Net cash (used in) provided by investing activities              |       
|                                                     |                                                                                                       |                                                                  |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                |                                                                                                       |                                                                  |       
|                                                     | Proceeds from revolving credit facility                                                               |                                                                  |       
|                                                     | Repayment of revolving credit facility                                                                |                                                                  |       
|                                                     | Repayment of senior notes and other loans, net                                                        |                                                                  |       
|                                                     | Other financing activities, net                                                                       |                                                                  |       
|                                                     |                                                                                                       |                                                                  |       
|                                                     |                                                                                                       | Net cash provided by financing activities                        |       
|                                                     |                                                                                                       |                                                                  |       
|Net increase (decrease) in cash and cash equivalents |                                                                                                       |                                                                  | 141   
|Cash and cash equivalents, at beginning of period    |                                                                                                       |                                                                  | 20,854
|Effect of exchange rate changes on cash              |                                                                                                       |                                                                  | (656  
|                                                     |                                                                                                       |                                                                  |       
|Cash and cash equivalents, at end of period          |                                                                                                       | $                                                                | 20,339
|                                                     |                                                                                                       |                                                                  |       
|SUPPLEMENTAL DATA:                                   |                                                                                                       |                                                                  |       
|                                                     | Cash paid during the period for:                                                                      |                                                                  |       
|                                                     |                                                                                                       | Interest (none capitalized)                                      |       
|                                                     |                                                                                                       | Income taxes, net                                                |       

The
accompanying notes are an integral part of these consolidated financial statements.

5

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CB RICHARD ELLIS SERVICES, INC.    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    (Unaudited)

1.  Organization

CB Richard Ellis Services, Inc. (the Company), was founded in 1906. It is a holding company that conducts its worldwide operations through approximately 75
direct and indirect subsidiaries. Approximately 77% of the Company's revenues are from the United States (US) and 23% from the rest of the world. On February 24, 2001, the Company announced that it
had entered into an Agreement and Plan of Merger with CBRE Holding, Inc. and Blum CB Corporation, which was amended and restated as of April 24, 2001, whereby members of senior management, Ray Wirta,
CEO, and Brett White, Chairman, The Americas, together with director, Fred Malek and directors, Richard Blum, Bradford Freeman and Donald Koll and their respective affiliates will acquire all of the
Company's outstanding shares which they do not own at a price of $16.00 per share. The acquisition, which is expected to close in July of 2001, remains subject to certain conditions, including, among
others, the receipt of debt financing by CBRE Holding, Inc. and the Company, the approval of the merger by the holders of two-thirds of the outstanding shares of the Company not owned by the buying
group, the expiration or termination of waiting periods under applicable antitrust laws and a successful tender offer for at least 51% of the Company's outstanding 8 7/8% Senior
Subordinated Notes. The Company will pay a termination fee of $7.5 million and reimburse up to $3.0 million of the buying group's expenses if it wishes to accept a superior acquisition
proposal.

2.  Basis of Preparation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and include all
information and footnotes required for interim financial statement presentation. In the Company's opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. The preparation of financial statements in conformity with accounting principles generally accepted in the US requires management to make estimates and assumptions
that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses
during the reporting periods. Actual results could differ
materially from those estimates. All significant intercompany transactions and balances have been eliminated and certain reclassifications have been made to prior periods' consolidated financial
statements to conform to current period presentation. The results of operations for the three months ended March 31, 2001 are not necessarily indicative of the results of operations to be
expected for the year ending December 31, 2001.

The
consolidated financial statements and notes to the consolidated financial statements, along with management's discussion and analysis of financial condition, results of
operations, liquidity and capital resources should be read in conjunction with the Company's recent filing on Form 10-K, which contains the latest available audited consolidated financial
statements and notes thereto, as of and for the period ended December 31, 2000.

6

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3.  Investments in and Advances to Unconsolidated Subsidiaries

Condensed Statement of Operations (unaudited) for the unconsolidated subsidiaries accounted for using the equity method is as follows (in thousands):

Three Months Ended
March 31,2001

2000Revenues

$
69,649

$
48,496Income from operations


12,689


13,219Net income


7,846


8,957


4.  Debt

The Company has a revolving credit facility of $270.0 million, which is subject to a mandatory reduction of $70.0 million on December 31,
2001 and expires on May 20, 2003. The amount outstanding under this facility totaled $218.0 million at March 31, 2001. Interest rate alternatives include Bank of America's reference rate plus
1.00% and LIBOR plus 2.00%. The weighted average interest rate on amounts outstanding at March 31, 2001 and December 31, 2000 was 7.69% and 8.79%, respectively.

The
revolving credit facility contains numerous restrictive covenants that, among other things, limit the Company's ability to incur or repay other indebtedness, make advances or
loans to subsidiaries and other entities, make capital expenditures, incur liens, enter into mergers or effect other fundamental corporate transactions, sell its assets, or declare dividends. In
addition, the Company is required to meet certain ratios relating to its adjusted net worth, level of indebtedness, fixed charges and interest coverage.

The
Company has outstanding Senior Subordinated Notes (Subordinated Notes) due on June 1, 2006. The Subordinated Notes are redeemable in whole or in part after June 1, 2002 at
104.438% of par on that date and at declining prices thereafter. On or before June 1, 2001, up to 35.0% of the issued amount may be redeemed at 108.875% of par plus accrued interest solely with the
proceeds from an equity offering. The amount included in the accompanying Consolidated Balance Sheet less unamortized discount was $173.4 million at March 31, 2001.

The
Company has short-term borrowings of $8.4 million and $9.2 million with related weighted average interest rates of 7.0% and 7.3% as of March 31, 2001 and
December 31, 2000, respectively.

The
Company has a credit agreement with Residential Funding Corporation (RFC). The credit agreement provides for a revolving line of credit of up to $100.0 million, and bears interest
at 1.00% per annum over LIBOR. The agreement expires on August 31, 2001. During the quarter, the Company had a maximum of $91.6 million revolving line of credit principal outstanding. At
March 31, 2001, the Company had $0.6 million revolving line of credit principal outstanding.

5.  Commitments and Contingencies

Between November 12, and December 6, 2000, five putative class actions were filed in the Court of Chancery of the State of Delaware in and for New Castle
County by various of the Company's stockholders against the Company, its directors and the group which has proposed to take the Company private. A similar action was also filed on November 17, 2000 in
the Superior Court of the State of California in and for the County of Los Angeles. These actions all alleged that the offering price for the going private transaction was unfair and inadequate and
sought injunctive relief or rescission of the transaction and, in the alternative, money damages.

7

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The five Delaware actions have been consolidated. As of February 23, 2001, the parties to the Delaware litigation entered into a memorandum of understanding in which they agreed in
principle to a settlement. The memorandum provides, among other things:



There
are numerous conditions to the settlement proposed by the memorandum including the closing of the merger.

The
parties may not be able to complete a mutually acceptable stipulation of settlement, and, if so, the litigation will continue. In addition, no agreements have been reached with
respect to any settlement of the California action.

In
December 1996, GMH Associates, Inc. (GMH) filed a lawsuit against Prudential Realty Group (Prudential) and the Company in Superior Court of Pennsylvania, Franklin County, alleging
various contractual and tort claims against Prudential, the seller of a large office complex, and the Company, its agent in the sale, contending that Prudential breached its agreement to sell the
property to GMH, breached its duty to negotiate in good faith, conspired with the Company to conceal from GMH that Prudential was negotiating to sell the property to another purchaser and that
Prudential and the Company misrepresented that there were no other negotiations for the sale of the property. Following a non-jury trial, the court rendered a decision in favor of GMH and against
Prudential and the Company, awarding GMH $20.3 million in compensatory damages, against Prudential and the Company jointly and severally, and $10.0 million in punitive damages,
allocating the punitive damage award
$7.0 million as against Prudential and $3.0 million as against the Company. Following the denial of motions by Prudential and the Company for a new trial, a judgment was entered on December 3,
1998. Prudential and the Company filed an appeal of the judgment. On March 3, 2000, the appellate court in Pennsylvania reversed all of the trial courts' decisions finding that liability was not
supported on any theory claimed by GMH and directed that a judgment be entered in favor of the defendants including the Company. The plaintiff filed an appeal with the Pennsylvania Supreme Court which
was denied. The plaintiff has exhausted all appeal possibilities and judgment has been entered in favor of all defendants.

In
August 1993, a former commissioned sales person of the Company filed a lawsuit against the Company in the Superior Court of New Jersey, Bergen County, alleging gender
discrimination and wrongful termination by the Company. On November 20, 1996, a jury returned a verdict against the Company, awarding $1.5 million in general damages and $5.0 million in
punitive damages to the plaintiff. Subsequently, the trial court awarded the plaintiff $0.6 million in attorneys' fees and costs. Following denial by the trial court of the Company's motions
for a new trial, reversal of the verdict and reduction of damages, the Company filed an appeal of the verdict and requested a reduction of damages. On March 9, 1999 the appellate court ruled in the
Company's favor, reversed the trial court's decision and ordered a new trial. On February 16, 2000, the Supreme Court of New Jersey reversed the decision of the appellate court, concluded that the
general damage award in the trial court should be sustained and returned the case to the appellate court for a determination as to whether a new trial should be ordered on the issue of punitive
damages. In April 2000, the Company settled the compensatory damages claim, including interest, and all claims to date with respect to attorneys fees by paying to the plaintiff the sum of
$2.75 million leaving only the punitive damage claim for resolution.

8

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The plaintiff also agreed, with very limited exceptions, that no matter what the outcome of the punitive damage claim the Company would not be responsible for more than 50% of the plaintiff's future
attorney fees. In February 2001, the Company settled all remaining claims for the sum of $2.0 million and received a comprehensive release.

The
Company is a party to a number of pending or threatened lawsuits arising out of, or incident to, its ordinary course of business. Based on available cash and anticipated cash
flows, the Company believes that the ultimate outcome will not have an impact on the Company's ability to carry on its operations. Management believes that any liability that may result from
disposition of these lawsuits will not have a material effect on the Company's consolidated financial position or results of operations.

An
important part of the strategy for the Company's investment management business involves investing its own capital in certain real estate investments with its clients. As of
March 31, 2001, the Company had committed $40.6 million to fund future co-investments.

6.  Comprehensive Loss

Comprehensive loss consists of net income (loss) and other comprehensive loss. Accumulated other comprehensive loss consists of foreign currency translation
adjustments. For the three months ended March 31, 2001, total comprehensive loss was $12.5 million, which consists of foreign currency translation loss of $9.6 million. For the
three months ended March 31, 2000, total comprehensive loss was $3.2 million, which consists of foreign currency translation loss.

7.  Per Share Information

Basic (loss) earnings per share was computed by dividing net (loss) income by the weighted average number of common shares outstanding of 21,309,550 and
20,819,268 for the three months ended March 31, 2001 and 2000, respectively. As a result of operating losses incurred for the three months ended March 31, 2001, diluted weighted average
shares outstanding do not give effect to common stock equivalents, as to do so would be anti-dilutive. At March 31, 2000, the computation of diluted earnings per share further assumes the
dilutive effect of 31,916 common stock equivalents, which consisted principally of stock options.

8.  Industry Segments

The Company reports its operations through three business segments: Transaction Management, Financial Services and Management Services. The Company has a
number of lines of business which are aggregated, reported and managed through these three segments. The Transaction Management segment is the Company's largest generator of revenue and includes
Brokerage Services, Corporate Services and Investment Property activities. Brokerage Services includes activities that provide sales, leasing and consulting services in connection with commercial real
estate and is the Company's primary revenue source. Corporate Services focuses on building relationships with large corporate clients which generate recurring revenue. Investment Property activities
provide brokerage services for commercial real property marketed for sale to institutional and private investors. The Financial Services segment provides commercial mortgage, valuation, investment
management and consulting and research services. The current year results of Financial Services include a nonrecurring pre-tax gain of $5.6 million from the sale of mortgage fund management
contracts. The Management Services segment provides facility management services to corporate real estate users and property management and related services to owners. Prior year quarter includes a
$4.7 million nonrecurring pre-tax gain on the sale of certain

9

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non-strategic assets. The following unaudited table summarizes the revenue, cost and expenses, and operating (loss) income by operating segment for the three months ended March 31,
2001 and 2000:

Three Months Ended
March 312001

2000(Dollars in thousands)RevenueTransaction Management

$
179,981

$
178,459Financial Services


55,919


41,397Management Services


36,598


41,063$
272,498

$
260,919Operating (loss) incomeTransaction Management

$
(4,130
)
$
4,631Financial Services


6,849


805Management Services


(394
)

3,8032,325


9,239Interest income


800


489Interest expense


9,055


9,685(Loss) income before (benefit) provision for income tax

$
(5,930
)
$
43Geographic InformationRevenueAmericasUnited States

$
211,009

$
198,500Canada, South and Central America


11,504


9,199222,513


207,699Pacific


7,690


8,014Asia


9,015


9,733Europe, Middle East and Africa


33,280


35,473$
272,498

$
260,919


10

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CB RICHARD ELLIS SERVICES, INC.

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

Introduction

Management's discussion and analysis of financial condition, results of operations, liquidity and capital resources contained within this report on Form 10-Q
is more clearly understood when read in conjunction with the Notes to the Consolidated Financial Statements. The Notes to the Consolidated Financial Statements elaborate on certain terms that are used
throughout this discussion and provide information about the Company and the basis of presentation used in this report on Form 10-Q.

Results of Operations

The following unaudited table sets forth items derived from the Company's consolidated financial statements for the three months ended March 31, 2001
and 2000:

Three Months Ended
March 31,2001

2000(Dollars in thousands)Revenue

$
272,498

$
260,919EBITDA

$
14,021

$
19,808Net (income) loss

$
(2,846
)
$
20Cash flow used in operating activities

$
(104,263
)
$
(67,522
)Net income after tax before goodwill amortization

$
1,102

$
3,935Cash flow used in operating activities per share (diluted)

$
(4.89
)
$
(3.24
)Basic loss per share

$
(0.13
)
$
EBITDA per share (diluted)

$
0.66

$
0.95Diluted loss per share

$
(0.13
)
$
Debt/equity


1.87
x

2.04
xEBITDA/net interest expense


1.70
x

2.15
xEffective tax rate


52.0
%

54.0
%Operating expense as a percentage of revenue


49.2
%

48.7
%EBITDA as a percentage of revenue


5.1
%

7.6
%Net loss as a percentage of revenue


(1.0
)%

International revenue as a percentage of consolidated revenue


22.6
%

23.9
%


Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000

The Company reported consolidated net loss of $2.8 million, or $0.13 diluted loss per share for the three months ended March 31, 2001 on revenues
of $272.5 million compared to consolidated net income of $0.02 million on revenues of $260.9 million for the three months ended March 31, 2000. These results include a
nonrecurring pre-tax gain of $5.6 million on the sale of mortgage fund management contracts during the current quarter compared to a $4.7 million nonrecurring pre-tax gain on the sale of
certain non-strategic assets during the prior year quarter.

Revenues
on a consolidated basis increased by $11.6 million or 4.4% for the three months ended March 31, 2001, compared to the three months ended March 31, 2000.
This was driven by a 59.9% increase in loan origination and servicing fees due primarily to higher loan origination fees during the month of March. In addition, lease revenues increased by
$3.4 million, mainly as a result of the North American operations. Property and facilities management fees, as well as appraisal fees grew by approximately $2.6 million. These revenue
increases were slightly offset by a decrease of $3.3 million in

11

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other revenues. The decrease in other revenues is the result of the contribution of an engineering services group into a separately owned joint venture during April 2000, as well as the sale of
several non-strategic assets previously included in the Management Services segment. In addition, sales revenue decreased by $0.4 million due to lower revenue in the international operations,
offset by higher sales revenue in North America of $1.9 million.

Commissions,
fees and other incentives totaled $124.4 million on a consolidated basis, a 9.2% increase from the first quarter of 2000. The increase is primarily due to higher
overall commissions within the North American operations, primarily as a result of increased revenues. In the US, insurance and benefit costs for producers, which are a component of commission
expense, also increased during the current quarter. Producer compensation within the international operations are typically fixed in nature compared to the North American operations and did not
decrease as a result of lower revenues. These factors resulted in commissions as a percentage of revenues increasing from 43.7% to 45.7% in the current quarter.

Operating,
administrative and other on a consolidated basis was $134.1 million, an increase of $6.9 million or 5.5% as compared to the first quarter of 2000. This is
primarily due to higher personnel requirements and insurance and benefit costs within North America, as well as lower earnings from unconsolidated subsidiaries during the current quarter. The current
quarter also includes compensation
expense related to the Deferred Compensation Plan retention program, which became effective January 2001 and accordingly, had no impact on the results of prior year quarter.

Consolidated
interest expense was $9.1 million, a decrease of $0.6 million or 6.5% for the quarter. This decrease was primarily a result of lower average borrowing
levels during the current quarter due to the pay down of the revolving credit facility during December 2000. In addition, the revolving credit facility was renewed at a lower average borrowing rate
during the current quarter as compared to the prior year quarter.

The
income tax benefit on a consolidated basis was $3.1 million for the three months ended March 31, 2001, as compared to a provision for income tax of $0.02 million for
the three months ended March 31, 2000. The current quarter benefit was the result of the pre-tax loss. The effective tax rate was 52.0% for the three months ended March 31, 2001 as
compared to 54.0% for the three months ended March 31, 2000. The Company calculates its effective tax rate based on an estimate of its annual earnings for the entire year.

EBITDA
was $14.0 million for the three months ended March 31, 2001, as compared to $19.8 million for the three months ended March 31, 2000. EBITDA
represents earnings before net interest expense, income taxes, depreciation and amortization of intangible assets relating to acquisitions, merger-related and other nonrecurring charges. Management
believes that the presentation of EBITDA will enhance a reader's understanding of the Company's operating performance and ability to service debt as it provides a measure of cash generated (subject to
the payment of interest and income taxes) that can be used by the Company to service its debt and for other required or discretionary purposes. Additionally, many of the Company's debt covenants are
based upon EBITDA. Net cash that will be available to the Company for discretionary purposes represents remaining cash after debt service and other cash requirements, such as capital expenditures, are
deducted from EBITDA. EBITDA should not be considered as an alternative to (i) operating income determined in accordance with accounting principles generally accepted in the US or
(ii) operating cash flow determined in accordance with accounting principles generally accepted in the US. The Company's calculation of EBITDA may not be comparable to similarly titled measures
reported by other companies.

12

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Segment Operations

The Company provides integrated real estate services through three global business segments: Transaction Management, Financial Services and Management
Services. The factors for determining the reportable segments were based on the type of service and client and the way the chief operating decision-makers organize segments internally for making
operating decisions and assessing performance. Transaction Management consists of sales, leasing and consulting services in connection with commercial real estate, transaction management and advisory
services with large corporate clients and
investment property services (brokerage services for commercial real estate property marketed for sale to institutional and private investors). Financial Services consists of commercial loan
origination and servicing through the Company's wholly-owned subsidiary, L.J. Melody & Company (L.J. Melody), investment management services through the Company's wholly-owned subsidiary, CB
Richard Ellis Investors, L.L.C. (CBRE Investors) and valuation and appraisal services. The Company's results for the three month period ended March 31, 2001 for the Financial Services segment
includes a $5.6 million nonrecurring pre-tax gain from the sale of mortgage fund management contracts. Management Services provides facility, property and construction management services. For
the three-month period ended March 31, 2000, the Management Services segment results included a $4.7 million nonrecurring pre-tax gain from the sale of certain non-strategic assets. The
following unaudited table summarizes the

13

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Company's revenue, cost and expenses, and operating (loss) income by operating segment for the three months ended March 31, 2001 and 2000:

|                       |                         | Three Months Ended March 31            |              
|---------------------- | ----------------------- | -------------------------------------- | -------------
|
|
|Transaction Management |                         |                                        |              
|                       | Revenue:                |                                        |              
|                       |                         | Leases                                 |              
|                       |                         | Sales                                  |              
|                       |                         | Other consulting and referral fees(1)  |              
|                       |                         |                                        |              
|                       |                         |                                        | Total revenue
|                       | Costs and expenses:     |                                        |              
|                       |                         | Commissions, fees and other incentives |              
|                       |                         | Operating, administrative and other    |              
|                       |                         | Depreciation and amortization          |              
|                       |                         |                                        |              
|                       | Operating (loss) income |                                        | $            
|                       |                         |                                        |              
|                       | EBITDA                  |                                        | $            
|                       |                         |                                        |              
|Financial Services     |                         |                                        |              
|                       | Revenue:                |                                        |              
|                       |                         | Appraisal fees                         |              
|                       |                         | Loan origination and servicing fees    |              
|                       |                         | Investment management fees             |              
|                       |                         | Other(1)                               |              
|                       |                         |                                        |              
|                       |                         |                                        | Total revenue
|                       | Costs and expenses:     |                                        |              
|                       |                         | Commissions, fees and other incentives |              
|                       |                         | Operating, administrative and other    |              
|                       |                         | Depreciation and amortization          |              
|                       |                         |                                        |              
|                       | Operating income        |                                        | $            
|                       |                         |                                        |              
|                       | EBITDA                  |                                        | $            
|                       |                         |                                        |              
|Management Services    |                         |                                        |              
|                       | Revenue:                |                                        |              
|                       |                         | Property management fees               |              
|                       |                         | Facilities management fees             |              
|                       |                         | Other(1)                               |              
|                       |                         |                                        |              
|                       |                         |                                        | Total revenue
|                       | Costs and expenses:     |                                        |              
|                       |                         | Commissions, fees and other incentives |              
|                       |                         | Operating, administrative and other    |              
|                       |                         | Depreciation and amortization          |              
|                       |                         |                                        |              
|                       | Operating (loss) income |                                        | $            
|                       |                         |                                        |              
|                       | EBITDA                  |                                        | $            
|                       |                         |                                        |              
|Total operating income |                         | $                                      | 2,325        
|                       |                         |                                        |              
|Total EBITDA           |                         | $                                      | 14,021       
|                       |                         |                                        |              

---

14

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Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000

Transaction Management

Revenueincreased by $1.5 million or 0.9% for the three months ended March 31, 2001, compared to the
three months ended March 31, 2000. This increase was primarily due to higher lease revenues in North America as a result of a greater number of total transactions executed during the current
year, as well as a larger dollar average per transaction. This was offset by a 2.3% drop in sales revenue primarily due to lower revenues in France. In addition, Singapore had reduced sales revenue
due to a lower number of deals completed as a result of economic and political problems in neighboring countries. These decreases were slightly offset by a greater number of investment property sales
within North America.Commissions, fees and other incentivesincreased by $6.7 million or 7.1% for the three months ended March 31, 2001,
compared to the three months ended March 31, 2000, primarily due to the increased lease and sales revenues within the North American operations. The overall revenue growth also resulted in
higher variable commission expense within the North American operation compared to the prior year. Producers earn an increased percentage of commissions as certain revenue targets are met. Insurance
and benefits for producers, which are a component of commission expense, increased primarily in the US compared to prior year quarter. In addition, producer compensation within the international
operations are typically fixed in nature and do not decrease as a result of lower revenues. These factors contributed to an increase in commissions as a percentage of revenues from 53.2% to 56.5% for
the current quarter.Operating, administrative, and otherincreased by $2.4 million or 3.2% for the three months ended March 31, 2001,
compared to the three months ended March 31, 2000. This increase is mainly related to higher personnel requirements, increased insurance and benefit costs, and current quarter compensation
expense related to the DCP retention plan within North America.

Financial Services

Revenueincreased by $14.5 million or 35.1% for the three months ended March 31, 2001, compared
to the three months ended March 31, 2000. Loan origination and servicing fees increased by $5.6 million. Excluding any acquisitions, loan origination fees increased by
$5.1 million or 94.0% over the quarter ended March 31, 2000, while loan servicing fees increased slightly compared to prior year quarter. Appraisal fees increased by $2.4 million.
Investment management fees increased 18.6% as assets under management grew by $868.3 million as compared to prior year quarter. Other revenue increased by $5.3 million due to the gain on
the sale of mortgage fund management contracts during the current quarter.Commissions, fees and other incentivesincreased by $3.5 million or 29.0% for
the three months
ended March 31, 2001, compared to the three months ended March 31, 2000 attributable to higher loan and appraisal commissions as a result of the increased revenues. Operating, administrative, and
otherincreased by $4.7 million or 18.4% for the three months ended March 31, 2001, compared to the three
months ended March 31, 2000. This increase is primarily due to the start-up of the investment management operations in Asia during 2000, which as a result, had limited activity compared to the
current period. The mortgage banking line of business had higher personnel, bonus and long-term incentive costs attributable to the more favorable current year results. In addition, earnings from
unconsolidated subsidiaries decreased for the current year as compared to the same period last year.

Management Services

Revenuedecreased by $4.5 million or 10.9% for the three months ended March 31, 2001, compared to the
three months ended March 31, 2000. Other revenues decreased by $7.2 million due to the gain

15

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on the sale of certain non-strategic assets in prior year quarter. The decline in other revenues is also the result of the contribution of an engineering services group into a separately owned joint
venture during April 2000, as well as the sale of other non-strategic assets during the prior year. This operation generated $1.8 million of revenues during the first quarter of 2000. This was
offset by increased property and facility management fees primarily due to higher square footage managed in the US and India.

Liquidity and Capital Resources

The Company finances its operations and non-acquisition related capital expenditures primarily with internally generated funds and borrowings under a revolving
credit facility. The revolving credit facility contains numerous restrictive covenants that, among other things, limit the Company's ability to incur or repay other indebtedness, make advances or
loans to subsidiaries and other entities, make capital expenditures, incur liens, enter into mergers or effect other fundamental corporate transactions, sell its assets, or declare dividends. In
addition, the Company is required to meet certain financial ratios relating to its adjusted net worth, level of indebtedness, fixed charges and interest coverage. The revolving credit facility
currently totals $270.0 million, with the Company being required to make a mandatory $70.0 million reduction by December 31, 2001. The amount outstanding under this facility was
$218.0 million at March 31, 2001 and is included in the accompanying Consolidated Balance Sheets. This revolving credit facility matures May 20, 2003.

The
Company believes that it can satisfy its non-acquisition obligations as well as working capital requirements from internally generated cash flow, borrowings under the amended
revolving credit facility or any replacement credit facilities. Material future acquisitions, if any, that require cash will require new sources of capital such as an expansion of the revolving credit
facility and raising money by
issuing additional debt or equity. The Company anticipates that its existing sources of liquidity, including cash flow from operations, will be sufficient to meet its anticipated non-acquisition cash
requirements for the foreseeable future and in any event for at least the next twelve months.

During
February 2001, the Company entered into an Agreement and Plan of Merger with CBRE Holding, Inc. and Blum CB Corporation, which was amended and restated as of April 24,
2001, whereby members of senior management, Ray Wirta, CEO, and Brett White, Chairman, The Americas, together with director, Fred Malek and directors, Richard Blum, Bradford Freeman and Donald Koll
and their respective affiliates will acquire all of the Company's outstanding shares which they do not own at a price of $16.00 per share. The acquisition, which is expected to close in July of 2001,
remains subject to certain conditions, including, among others, the receipt of debt financing by CBRE Holding, Inc. and the Company, the approval of the merger by the holders of two-thirds of the
outstanding shares of the Company not owned by the buying group, the expiration or termination of waiting periods under applicable antitrust laws and a successful tender offer for at least 51% of the
Company's outstanding 8 7/8% Senior Subordinated Notes. The Company will pay a termination fee of $7.5 million and reimburse up to $3.0 million of the buying
group's expenses if it wishes to accept a superior acquisition proposal. No workforce reductions are contemplated in connection with the acquisition.

Net
cash used in operating activities for the first quarter of 2001 was $104.3 million, an increase of $36.7 million over prior year quarter mainly due to increased payments
for the 2000 bonus and profit sharing, made in the current quarter. This increase is due to the better financial results for 2000 as compared to 1999. Income tax payments also increased by
$9.2 million during the current year.

The
Company utilized $0.5 million for investing activities for the first quarter of 2001, compared to cash provided of $6.3 million in the first quarter of 2000. During
the current quarter, the Company received $6.1 million in proceeds primarily from the sale of mortgage fund management contracts. Prior year proceeds totaled $11.3 million due to the
sale of certain non-strategic assets in the management services segment, as well as the receipt of proceeds in 2000 from the 1999 sale of a risk management

16

---

operation. In addition, capital expenditures increased by $2.1 million over prior year quarter. The Company expects to have a total of $20-25 million in capital spending during 2001.

Net
cash provided by financing activities was $104.9 million for the three months ended March 31, 2001, compared to $58.8 million for the three months ended
March 31, 2000, and is mainly attributable to an increased balance in the revolving credit facility, used primarily to fund the payment of bonus and profit sharing.

Outlook

During the first quarter of 2001, the U.S. economy in general and certain local and regional U.S. economies in particular continued to experience economic
softness. Many businesses, including the Company's customers, have implemented staff reductions and delayed or curtailed their plans and commitments with respect to their commercial real estate needs.
Additionally, lease rates in various regions, particularly those with a concentration in the telecommunication and technology industries, began to decline.

As
the first quarter came to a close, the Company began to see a slowdown in leasing activity and a continued slowdown in sales activity both of which are reflective of the general
softness in the US economy. The Company also experienced lower than expected revenues in Europe and Asia. If these trends continue, they are likely to adversely affect the Company's financial results
including EBITDA, net income and cash flow, in the near term. The Company is evaluating a cost reduction plan for use in the event revenues continue to perform below expectations. The Company believes
that it could implement such a plan within a reasonable time frame and intends to be prepared to act rapidly in the event that revenues continue to decline.

Litigation

Between November 12, and December 6, 2000, five putative class actions were filed in the Court of Chancery of the State of Delaware in and for New Castle
County by various of the Company's stockholders against the Company, its directors and the group which has proposed to take the Company private. A similar action was also filed on November 17, 2000 in
the Superior Court of the State of California in and for the County of Los Angeles. These actions all alleged that the offering price for the going private transaction was unfair and inadequate and
sought injunctive relief or rescission of the transaction and, in the alternative, money damages.

The
five Delaware actions have been consolidated. As of February 23, 2001, the parties to the Delaware litigation entered into a memorandum of understanding in which they agreed in
principle to a settlement. The memorandum provides, among other things:



There
are numerous conditions to the settlement proposed by the memorandum including the closing of the merger.

17

---

The parties may not be able to complete a mutually acceptable stipulation of settlement, and, if so, the litigation will continue. In addition, no agreements have been reached with
respect to any settlement of the California action.

In
December 1996, GMH Associates, Inc. (GMH) filed a lawsuit against Prudential Realty Group (Prudential) and the Company in Superior Court of Pennsylvania, Franklin County, alleging
various contractual and tort claims against Prudential, the seller of a large office complex, and the Company, its agent in the sale, contending that Prudential breached its agreement to sell the
property to GMH, breached its duty to negotiate in good faith, conspired with the Company to conceal from GMH that Prudential was negotiating to sell the property to another purchaser and that
Prudential and the Company misrepresented that there were no other negotiations for the sale of the property. Following a non-jury trial, the court rendered a decision in favor of GMH and against
Prudential and the Company, awarding GMH $20.3 million in compensatory damages, against Prudential and the Company jointly and severally, and $10.0 million in punitive damages,
allocating the punitive damage award $7.0 million as against Prudential and $3.0 million as against the Company. Following the denial of motions by Prudential and the Company for a new trial, a
judgment was entered on December 3, 1998. Prudential and the Company filed an appeal of the judgment. On March 3, 2000, the appellate court in Pennsylvania reversed all of the trial courts' decisions
finding that liability was not supported on any theory claimed by GMH and directed that a judgment be entered in favor of the defendants including the Company. The plaintiff filed an appeal with the
Pennsylvania Supreme Court, which was denied. The plaintiff has exhausted all appeal possibilities and judgment has been entered in favor of all defendants.

In
August 1993, a former commissioned sales person of the Company filed a lawsuit against the Company in the Superior Court of New Jersey, Bergen County, alleging gender
discrimination and wrongful termination by the Company. On November 20, 1996, a jury returned a verdict against the Company, awarding $1.5 million in general damages and $5.0 million in
punitive damages to the plaintiff. Subsequently, the trial court awarded the plaintiff $0.6 million in attorneys' fees and costs. Following denial by the trial court of the Company's motions
for a new trial, reversal of the verdict and reduction of damages, the Company filed an appeal of the verdict and requested a reduction of damages. On March 9, 1999 the appellate court ruled in the
Company's favor, reversed the trial court's
decision and ordered a new trial. On February 16, 2000, the Supreme Court of New Jersey reversed the decision of the appellate court, concluded that the general damage award in the trial court should
be sustained and returned the case to the appellate court for a determination as to whether a new trial should be ordered on the issue of punitive damages. In April 2000, the Company settled the
compensatory damages claim, including interest, and all claims to date with respect to attorneys fees by paying to the plaintiff the sum of $2.75 million leaving only the punitive damage claim
for resolution. The plaintiff also agreed, with very limited exceptions, that no matter what the outcome of the punitive damage claim the Company would not be responsible for more than 50% of the
plaintiff's future attorney fees. In February 2001, the Company settled all remaining claims for the sum of $2.0 million and received a comprehensive release.

The
Company is a party to a number of pending or threatened lawsuits arising out of, or incident to, its ordinary course of business. Based on available cash and anticipated cash
flows, the Company believes that the ultimate outcome will not have an impact on the Company's ability to carry on its operations. Management believes that any liability that may result from
disposition of these lawsuits will not have a material effect on the Company's consolidated financial position or results of operations.

Euro Conversion Disclosure

A majority of the European Union member countries converted to a common currency, the "Euro," on January 1, 1999. The existing legacy currencies of the
participating countries will continue

18

---

to be accepted until January 1, 2002. The Company does not expect the introduction of the Euro to have a significant impact on its market or the manner in which it conducts business, and
believes the related impact on its financial results will not be material. Approximately 4.0% of its 2001 business was transacted in the participating member countries. The Company is currently using
both the Euro and legacy currencies to conduct business in these member countries.

Net Operating Losses

The Company had US federal income tax NOLs of approximately $16.3 million at both March 31, 2001 and December 31, 2000.

The
Company's ability to utilize NOLs has been limited by Section 382 of the Internal Revenue Code because in previous years it experienced an ownership change within the
meaning of Section 382. Since
the annual limitation is $26.0 million, the Company anticipates that the remaining $16.3 million of NOLs will be utilized in 2001.

New Accounting Pronouncements

In September 2000, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 140, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities.SFAS 140 revises the standards for accounting for
securitizations and other transfers of financial assets and collateral established by SFAS 125. In addition, this statement is effective for recognition and reclassification of collateral and for
disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. This statement is also effective for all transfers and servicing of financial assets
and extinguishments of liabilities occurring after March 31, 2001. The adoption of SFAS 140 is not expected to have any material impact on the Company's results of operations and financial
position.

In
June 1998, the FASB issued SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137, Accounting for Derivative Instruments and
Hedging ActivitiesDeferral of the Effective Date of FASB Statement No. 133, and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activitiesan Amendment of FASB
Statement No. 133, which are effective for
the Company beginning January 1, 2001. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally
document, designate and assess the effectiveness of transactions that receive hedge accounting. The adoption of these pronouncements did not have a material impact on the consolidated financial
statements at March 31, 2001.

Safe Harbor Statement Regarding Outlook and Other Forward-Looking Data

Portions of this Form 10-Q, including Management's Discussion and Analysis of Financial Condition and Results of Operations, contain forward-looking
statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the Company's actual results and performance in future periods to be materially different from any future results or performance suggested in forward-looking
statements in this Form 10-Q. Any forward-looking statements speak only as of the date of this report and the Company expressly disclaims any obligation to update or revise any forward-looking
statements found herein to reflect any changes in its expectations or results or any change in events. Factors that could cause results to differ materially include, but are not limited to: commercial
real estate vacancy levels; employment conditions and their effect on vacancy rates; property values; rental rates; any general economic recession domestically or internationally; and general
conditions of financial liquidity for real estate transactions.

19

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Report of Management

The Company's management is responsible for the integrity of the financial data reported by it and its subsidiaries. Fulfilling this responsibility requires
the preparation and presentation of consolidated financial statements in accordance with accounting principles generally accepted in the US. Management uses internal accounting controls,
corporate-wide policies and procedures and judgment so that these statements reflect fairly the consolidated financial position, results of operations and cash flows of the Company.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's exposure to market risk consists of foreign currency exchange rate fluctuations related to international operations and changes in interest rates
on debt obligations.

Approximately
23% of the Company's business is transacted in local currencies of foreign countries. The Company attempts to manage its exposure primarily by balancing monetary assets
and liabilities, and maintaining cash positions only at levels necessary for operating purposes. While its international results of operations as measured in dollars are subject to foreign exchange
rate fluctuations, the related risk is not considered material. The Company routinely monitors its transaction exposure to currency rate changes, and enters into currency forward and option contracts
to limit its exposure, as appropriate. Gains and losses on contracts are recognized in accordance with the provisions of SFAS No. 138,Accounting for Certain Derivative
Instruments and Certain Hedging Activitiesan Amendment of SFAS No. 133and SFAS No. 133,Accounting for Derivative Instruments and Hedging
Activities. At March 31, 2001, the Company had no outstanding contracts. The Company does not engage in any speculative activities.

The
Company manages its interest expense by using a combination of fixed and variable rate debt. The Company utilizes sensitivity analyses to assess the potential effect of its
variable rate debt. If interest rates were to increase by 80 basis points, approximately 10.0% of its weighted-average variable rate at March 31, 2001, the net impact would be an increase of
$0.4 million in pre-tax loss and cash used in operating activities for the quarter.

20

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PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Between November 12, and December 6, 2000, five putative class actions were filed in the Court of Chancery of the State of Delaware in and for New Castle
County by various of the Company's stockholders against the Company, its directors and the group which has proposed to take the Company private. A similar action was also filed on November 17, 2000 in
the Superior Court of the State of California in and for the County of Los Angeles. These actions all alleged that the offering price for the going private transaction was unfair and inadequate and
sought injunctive relief or rescission of the transaction and, in the alternative, money damages.

The
five Delaware actions have been consolidated. As of February 23, 2001, the parties to the Delaware litigation entered into a memorandum of understanding in which they agreed in
principle to a settlement. The memorandum provides, among other things:



There
are numerous conditions to the settlement proposed by the memorandum including the closing of the merger.

The
parties may not be able to complete a mutually acceptable stipulation of settlement, and, if so, the litigation will continue. In addition, no agreements have been reached with
respect to any settlement of the California action.

In
December 1996, GMH Associates, Inc. (GMH) filed a lawsuit against Prudential Realty Group (Prudential) and the Company in Superior Court of Pennsylvania, Franklin County, alleging
various contractual and tort claims against Prudential, the seller of a large office complex, and the Company, its agent in the sale, contending that Prudential breached its agreement to sell the
property to GMH, breached its duty to negotiate in good faith, conspired with the Company to conceal from GMH that Prudential was negotiating to sell the property to another purchaser and that
Prudential and the Company misrepresented that there were no other negotiations for the sale of the property. Following a non-jury trial, the court rendered a decision in favor of GMH and against
Prudential and the Company, awarding GMH $20.3 million in compensatory damages, against Prudential and the Company jointly and severally, and $10.0 million in punitive damages,
allocating the punitive damage award $7.0 million as against Prudential and $3.0 million as against the Company. Following the denial of motions by Prudential and the Company for a new trial, a
judgment was entered on December 3, 1998. Prudential and the Company filed an appeal of the judgment. On March 3, 2000, the appellate court in Pennsylvania reversed all of the trial courts' decisions
finding that liability was not supported on any theory claimed by GMH and directed that a judgment be entered in favor of the defendants including the Company. The plaintiff filed an appeal with the
Pennsylvania Supreme Court which was denied. The plaintiff has exhausted all appeal possibilities and judgment has been entered in favor of all defendants.

In
August 1993, a former commissioned sales person of the Company filed a lawsuit against the Company in the Superior Court of New Jersey, Bergen County, alleging gender
discrimination and wrongful termination by the Company. On November 20, 1996, a jury returned a verdict against the Company, awarding $1.5 million in general damages and $5.0 million in
punitive damages to the

21

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plaintiff. Subsequently, the trial court awarded the plaintiff $0.6 million in attorneys' fees and costs. Following denial by the trial court of the Company's motions for a new trial, reversal
of the verdict and reduction of damages, the Company filed an appeal of the verdict and requested a reduction of damages. On March 9, 1999 the appellate court ruled in the Company's favor, reversed
the trial court's decision and ordered a new trial. On February 16, 2000, the Supreme Court of New Jersey reversed the decision of the appellate court, concluded that the general damage award in the
trial court should be sustained and returned the case to the appellate court for a determination as to whether a new trial should be ordered on the issue of punitive damages. In April 2000, the
Company settled the compensatory damages claim, including interest, and all claims to date with respect to attorneys fees by paying to the plaintiff the sum of $2.75 million leaving only the
punitive damage claim for resolution. The plaintiff also agreed, with very limited exceptions, that no matter what the outcome of the punitive damage claim the Company would not be responsible for
more than 50% of the plaintiff's future attorney fees. In February 2001, the Company settled all remaining claims for the sum of $2.0 million and received a comprehensive release.

The
Company is a party to a number of pending or threatened lawsuits arising out of, or incident to, its ordinary course of business. Based on available cash and anticipated cash
flows, the Company believes that the ultimate outcome will not have an impact on the Company's ability to carry on its operations. Management believes that any liability that may result from
disposition of these lawsuits will not have a material effect on the Company's consolidated financial position or results of operations.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|                   |  | CB RICHARD ELLIS SERVICES, INC.                              
|------------------ |  | -------------------------------------------------------------
|Date: May 15, 2001 |  | /s/JAMES H. LEONETTIJames H. Leonetti Chief Financial Officer

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EXHIBIT INDEX

|Exhibit Number |  | Description of Exhibit                 
|-------------- |  | ---------------------------------------
|               |  | No exhibits are filed with this report.

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