SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             -----------------------

                                    FORM 10-Q

(Mark One)

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

                For the quarterly period ended September 30, 1999

                                       OR

       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934


                          Commission file number 1-2262


                             COMMERCIAL ASSETS, INC.
             (Exact name of registrant as specified in its charter)


                Delaware                                        84-1501789
     (State or other jurisdiction of                          (IRS Employer
     incorporation or organization)                        Identification No.)

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

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

                                 Not Applicable
              (Former Name, Former Address and Former 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 ___.

As of October 29, 1999, 10,368,029 shares of common stock were outstanding.



<PAGE>



                             COMMERCIAL ASSETS, INC.

                                    FORM 10-Q

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999

                                TABLE OF CONTENTS

                                                                            PAGE
PART I.  FINANCIAL INFORMATION:

         Item 1.  Condensed Consolidated Financial Statements:

               Balance Sheets as of September 30, 1999 (unaudited) and
                 December 31, 1998...........................................  1

               Statements of Income for the three and nine months ended
                 September 30, 1999 and 1998 (unaudited).....................  2

               Statements of Cash Flows for the nine months ended September
                 30, 1999 and 1998 (unaudited)...............................  3

               Notes to Financial Statements (unaudited).....................  4

         Item 2.  Management's Discussion and Analysis of
               Financial Condition and Results of Operations................. 11


PART II. OTHER INFORMATION:

         Item 6.  Exhibits and Reports on Form 8-K........................... 22


                                       (i)

<PAGE>

<TABLE>
<CAPTION>


                    COMMERCIAL ASSETS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (in thousands, except per share data)

                                                                                       September 30,    December 31,
                                                                                           1999               1998
                                                                                           ----               ----
                                                                                        (unaudited)
ASSETS
<S>                                                                                      <C>                <C>
Cash and cash equivalents                                                                $    5,076         $    3,292
Short-term investments                                                                       13,334             45,066
Real estate, net of accumulated depreciation of $836 and $50                                 63,253             12,628
Investments in participating mortgages                                                        1,951              9,328
Investment in real estate joint venture                                                       1,304              1,280
Investment in Asset Investors                                                                 1,417                 --
Investment in and note receivable from Westrec                                                3,788              4,011
CMBS bonds                                                                                    1,714              1,739
Other assets, net                                                                             4,116                890
                                                                                         ----------         ----------
      Total Assets                                                                       $   95,953         $   78,234
                                                                                         ==========         ==========

LIABILITIES
Secured long-term notes payable                                                          $   18,128         $       --
Secured short-term financing                                                                    212                 --
Accounts payable and accrued liabilities                                                      1,782                872
Management fees payable to related parties                                                      184                108
                                                                                         ----------         ----------
                                                                                             20,306                980
                                                                                         ----------         ----------

MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES                                                  615                 --

STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per share, 25,000 shares authorized; no shares
   issued or outstanding                                                                         --                 --
Common stock, par value $.01 per share, 75,000 shares authorized; 10,393 and
   10,364 shares issued; and 10,320 and 10,364 shares outstanding, respectively
                                                                                                104                104
Additional paid-in capital                                                                   77,018             76,874
Retained earnings (dividends in excess of accumulated earnings)                              (1,649)               276
Treasury stock, 73 and 0 shares at cost                                                        (441)                --
                                                                                         ----------         ----------
                                                                                             75,032             77,254
                                                                                         ----------         ----------
      Total Liabilities and Stockholders' Equity                                         $   95,953         $   78,234
                                                                                         ==========         ==========
</TABLE>


            See Notes to Condensed Consolidated Financial Statements.

                                      - 1 -

<PAGE>

<TABLE>
<CAPTION>

                    COMMERCIAL ASSETS, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                      (in thousands, except per share data)
                                   (unaudited)


                                                                    Three Months Ended              Nine Months Ended
                                                                       September 30,                   September 30,
                                                                       -------------                   -------------
                                                                   1999           1998             1999          1998
                                                                   ----           ----             ----          ----
Rental property operations
<S>                                                              <C>            <C>              <C>           <C>
Rental and other property revenues                               $   945        $     --         $ 1,382       $     --
Income from participating mortgages and leases                       455             151           1,645            151
Property operating expenses                                         (428)             --            (602)            --
                                                                 -------        --------         -------       --------
Income from rental property operations before depreciation
                                                                     972             151           2,425            151
Depreciation                                                        (465)             (4)           (786)            (4)
                                                                --------        --------        --------       --------
Income from rental property operations                               507             147           1,639            147
                                                                --------        --------        --------       --------

Interest and other income                                            349           1,012           1,570          3,107
Interest expense                                                     (61)             --            (119)            --
General and administrative expenses                                 (131)           (129)           (404)          (303)
Related-party management fees                                       (181)            (23)           (375)           (40)
Equity in earnings of Asset Investors                                 10              --              15             --
CMBS bonds revenue                                                    38              40             115            124
                                                                --------        --------        --------       --------

Income from operations                                               531           1,047           2,441          3,035
Related-party acquisition fees                                        (3)            (61)           (197)           (61)
Reincorporation expenses                                            (120)             --            (120)            --
Costs related to abandonment of potential marina investments
                                                                      --            (500)             --           (500)
                                                                --------        ---------       --------      ---------

Net income                                                      $    408        $    486        $  2,124      $   2,474
                                                                ========        ========        ========      =========

Basic and diluted earnings per share                            $   0.04        $   0.05        $   0.20      $   0.24
                                                                ========        ========        ========      =========

Weighted average common shares outstanding                        10,325          10,364          10,350         10,355

Weighted average common shares and common share equivalents
   outstanding                                                    10,325          10,373          10,350         10,378

Dividends paid per share                                        $   0.13        $   0.13        $   0.39       $   0.26
                                                                ========        ========        ========       ========

</TABLE>

            See Notes to Condensed Consolidated Financial Statements.

                                      - 2 -

<PAGE>

<TABLE>
<CAPTION>

                    COMMERCIAL ASSETS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)                                                 Nine Months Ended
                                                                                                 September 30,
                                                                                                 -------------
                                                                                             1999           1998
                                                                                             ----           ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                       <C>            <C>
Net income                                                                                $  2,124       $  2,474
Adjustments to reconcile net income to net cash flows from operating activities:
   Depreciation and amortization                                                               792              4
   Amortization of premium on short-term investments                                            85            135
   Amortization of discount on secured long-term notes payable                                  79             --
   Accrued income on participating mortgages                                                  (423)          (151)
   Accrued income on CMBS bonds                                                                (53)            --
   Equity in earnings of Asset Investors                                                       (15)            --
   Increase in accounts payable and accrued liabilities                                        133            174
   Increase in other assets                                                                    (51)          (157)
                                                                                          --------       --------
     Net cash provided by operating activities                                               2,671          2,479
                                                                                          --------       --------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of real estate                                                                   (33,486)        (1,368)
Purchases of Asset Investors' common stock                                                  (1,433)            --
Deposits on potential real estate acquisitions                                              (1,154)            --
Collections on short-term investments                                                        9,234          6,129
Notes receivable advances                                                                     (612)            --
Proceeds from sale of short-term investments                                                22,411          4,156
Acquisitions of short-term investments                                                          --        (70,151)
Investments in participating mortgages, net                                                 (1,178)        (7,999)
Investment in real estate joint venture                                                        (24)            --
Capital replacements                                                                          (297)            --
Investment in Westrec                                                                           --         (2,249)
Collections on note receivable from Westrec                                                    223             --
Dividends from Asset Investors                                                                  31             --
Collections on CMBS bonds                                                                       78            186
                                                                                          --------       --------
     Net cash used in investing activities                                                  (6,207)       (71,296)
                                                                                          --------       ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured long-term notes payable                                               10,300             --
Dividends paid                                                                              (4,049)        (2,695)
Payment of loan costs                                                                         (458)            --
Purchase of treasury stock                                                                    (441)            --
Principal paydowns on secured short-term financing                                              (3)            --
Principle paydowns on secured long-term notes payable                                          (29)            --
                                                                                          --------       --------
     Net cash provided by (used in) financing activities                                     5,320         (2,695)
                                                                                          --------       --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                         1,784        (71,512)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                             3,292         74,153
                                                                                          --------       --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                $  5,076       $  2,641
                                                                                          ========       ========

</TABLE>

            See Notes to Condensed Consolidated Financial Statements.

                                      - 3 -

<PAGE>


                             COMMERCIAL ASSETS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

A.           Organization

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

Prior to 1998,  the Company owned  subordinate  classes of  Commercial  Mortgage
Backed Securities ("CMBS bonds"). In November 1997, the Company restructured its
subordinate  CMBS bond portfolio by  resecuritizing  its various CMBS bonds. The
restructuring  resulted in the Company receiving  $77,693,000 cash and retaining
an equity interest in an owner trust arising from a resecuritization transaction
(see Note J). In the third  quarter of 1998,  the  Company  decided to invest in
manufactured  home  communities  and  as of  September  30,  1999  has  invested
approximately $65 million in 11 manufactured home communities and adjoining land
with 1,770 developed homesites and 1,370 undeveloped homesites.

The  Company's  daily  operations  are  performed  by a manager  pursuant  to an
agreement  currently  in effect  through  December  31,  1999  ("the  Management
Agreement"). Since November 1997, Asset Investors Corporation (together with its
subsidiaries,  "Asset Investors") has been the manager. Asset Investors owns 27%
of the  Company's  Common Stock.  For 1999,  the  Management  Agreement has been
amended to provide  that the  Incentive  Fee is based on Funds From  Operations,
less an  annual  capital  replacement  reserve  of at  least  $50 per  developed
homesite.  In  general,  Funds  From  Operations  is  equal to net  income  plus
depreciation, amortization and acquisition fees. No other change was made to the
Management Agreement other than its extension to December 31, 1999 (see Note M).
The  Management  Agreement  is subject  to the  approval  of a  majority  of the
Company's  independent  directors and can be terminated by either party, without
cause, with 60 days' notice. Since the Company has no employees, the officers of
Asset Investors are also officers of the Company.

B.           Merger with Asset Investors

The Company and Asset  Investors have agreed to merge,  subject to approval by a
majority of the outstanding  shares of both  companies.  Asset Investors will be
the surviving  company and will issue 0.4075 shares of its common stock for each
outstanding share of the Company's Common Stock.

C.           Presentation of Financial Statements

The  Condensed  Consolidated  Financial  Statements  of the  Company  have  been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange  Commission.  These financial statements reflect all
adjustments, consisting of only normal recurring accruals, which, in the opinion
of management,  are necessary to present fairly the financial position,  results
of operations  and cash flows of the Company as of September  30, 1999,  for the
three and nine month periods then ended,  and for all prior  periods  presented.
These  statements are condensed and do not include all the information  required
by generally accepted accounting  principles ("GAAP") in a full set of financial
statements.  These financial  statements  should be read in conjunction with the


                                     - 4 -
<PAGE>

Company's  Consolidated  Financial  Statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.

Certain  reclassifications  have  been made in the 1998  Condensed  Consolidated
Financial Statements to conform to the classifications used in the current year.
The  effect  of  such   reclassifications  on  amounts  previously  reported  is
immaterial.

D.           Summary of Significant Accounting Policies

Principles of Consolidation

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

Rental Properties and Depreciation

Rental   properties  are  recorded  at  cost  less   accumulated   depreciation.
Depreciation is computed using the straight line method over an estimated useful
life of 25 years for land  improvements and buildings.  Significant  renovations
and  improvements,  which  improve or extend the useful  life of the asset,  are
capitalized and depreciated over the remaining estimated life. In addition,  the
Company  capitalizes  direct and indirect costs (including  interest,  taxes and
other costs) in connection with the development of additional  homesites  within
its manufactured home communities.
Maintenance, repairs and minor improvements are expensed as incurred.

When conditions  exist which indicate that the carrying amount of a property may
be impaired,  the Company will evaluate the recoverability of its net investment
in the property by assessing current and future levels of income and cash flows.
As of  September  30,  1999,  there  has  been no  impairment  of the  Company's
investment in real estate.

Revenue Recognition

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

Interest on participating  mortgages is recorded based upon outstanding balances
and interest  rates per the terms of the  mortgages.  In  addition,  the Company
evaluates the  collectibility  of any unpaid  interest and provides  reserves as
necessary.  As of  September  30,  1999,  there is no  reserve  for  uncollected
interest on the  participating  mortgages.  Rent on ground  leases is recognized
when earned and due from the lessee.

Deferred Financing Costs

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

                                     - 5 -
<PAGE>

Capitalized Interest

Interest is capitalized on development  projects  during periods of construction
or development.

Income Taxes

CAX has elected to be taxed as a REIT as defined under the Internal Revenue Code
of 1986,  as amended  (the  "Code").  In order for CAX to qualify as a REIT,  at
least  95% of its  gross  income in any year  must be  derived  from  qualifying
sources.

As a REIT,  CAX  generally  will not be subject to federal  income  taxes at the
corporate level if it distributes at least 95% of its REIT taxable income to its
stockholders.  REITs are also  subject to a number of other  organizational  and
operational requirements. If CAX fails to qualify as a REIT in any taxable year,
its taxable  income will be subject to federal  income tax at regular  corporate
rates (including any applicable  alternative minimum tax). Even if CAX qualifies
as a REIT,  it may be  subject to certain  state and local  income  taxes and to
federal income and excise taxes on its undistributed income.

Earnings Per Share

Basic earnings per share for the three and nine months ended  September 30, 1999
and 1998 are based upon the  weighted-average  number of shares of Common  Stock
outstanding  during each such period.  Diluted  earnings  per share  reflect the
effect of any dilutive, unexercised stock options in each such period.

Treasury Stock

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

Statements of Cash Flows

For purposes of reporting cash flows,  cash  maintained in bank accounts,  money
market funds and  highly-liquid  investments  with an initial  maturity of three
months or less are considered to be cash and cash equivalents.  The Company made
interest  payments of $230,000 and $0 during the nine months ended September 30,
1999 and 1998, respectively.

Non-cash operating, investing and financing activities for the nine months ended
September 30, 1999 and 1998 were as follows (in thousands):

<TABLE>
<CAPTION>

                                                                                 1999                   1998
                                                                                 ----                   ----
<S>                                                                             <C>                   <C>
Accrued initial capital expenditures on real estate purchases                   $   400               $   --
Issuance of Common Stock for services                                               144                  150
Escrow of long-term debt proceeds                                                   300                   --
Acquisitions of real estate by:
    Issuance of note payable                                                      4,519                   --
    Assumption of debt and minority interest in subsidiaries                      4,243                   --
    Cancellation of participating mortgages                                       8,978                   --

</TABLE>

                                     - 6 -
<PAGE>

E.           Short-term Investments

During  1998,  the  Company  acquired  short-term   investments   consisting  of
mortgage-backed  bonds guaranteed by Federal Home Loan Mortgage  Corporation and
Federal  National  Mortgage  Association.  These  investments  are classified as
available-for-sale, and the fair market value at September 30, 1999 approximates
the carrying value of $13,334,000.

F.           Real Estate

Real estate at September 30, 1999 and December 31, 1998 was (in thousands):

<TABLE>
<CAPTION>

                                                                             September 30,          December 31,
                                                                                 1999                   1998
                                                                                 ----                   ----
<S>                                                                            <C>                   <C>
Land                                                                           $   14,358            $    3,798
Land improvements and buildings                                                    49,731                 8,880
                                                                               ----------            ----------
                                                                                   64,089                12,678
Less accumulated depreciation                                                        (836)                  (50)
                                                                               ----------            ----------
Real estate, net                                                               $   63,253            $   12,628
                                                                               ==========            ==========
</TABLE>

Land  improvements and buildings  consist  primarily of  infrastructure,  roads,
landscaping,   clubhouses,  maintenance  buildings  and  common  amenities.  Two
manufactured home communities have been leased to a third party. The first lease
involves a community  acquired  by the Company at a cost of $1.4  million and is
for a term of 50 years. The Company receives initial annual lease payments equal
to 9% of its cost. The annual lease  payments  increase by 4% per annum over the
prior year's lease  payments  until the annual lease  payment  equals 13% of the
Company's cost. In addition,  the Company receives  additional rent equal to 50%
of the lessee's net cash flow from the  property.  In the event of a sale of the
property,  the Company  receives  all  proceeds  until it has realized its total
purchase price of the property plus a 13% per annum rate of return.  The Company
then  receives 50% of any sales  proceeds in excess of such amount.  The Company
may  terminate  the lease  after  five  years by paying to the lessee 50% of the
amount by which the fair  market  value of the  property  exceeds the sum of the
Company's total purchase price plus any unpaid rents due from the lessee.

The other leased  community  involves two phases and has been leased to the same
third  party  for 50  years.  Phase  One  has  221  developed  homesites  and 23
undeveloped  homesites.  Phase Two involves 746 undeveloped  homesites.  Initial
annual lease  payments on Phase One are  $890,000,  increasing  by 4% per annum.
There are no lease payments on Phase Two until the sites are ready for homes, at
which time,  the annual  lease  payments on Phase Two will be equal to 10% times
the costs incurred in developing Phase Two. In addition,  the lessee pays to the
Company  additional  rent  equal to 50% of the  lessee's  net cash flow from the
property. In the event of a sale, the Company receives 50% of any sales proceeds
in excess of the Company's  cost. The Company may terminate the lease in 2004 by
paying to the  lessee 50% of the  amount by which the fair  market  value of the
property  exceeds the sum of the Company's  total purchase price plus any unpaid
rents due from the lessee.

G.           Investments in Participating Mortgages

In August 1998, the Company made investments in participating  mortgages secured
by three  manufactured  home  communities  and adjoining land. The notes accrued
interest at 15% per annum and paid interest at 9% per annum through August 1999,
with the pay rate  increasing  1% each year  thereafter  to a maximum of 12% per
annum.  The loans were  scheduled  to mature in 2007 and 2008.  The Company also


                                     - 7 -
<PAGE>

received additional interest equal to 50% of the net profits and cash flows from
the properties.  In August 1999, the Company purchased the three communities and
adjoining land by canceling the participating mortgages and releasing additional
collateral pledged on the mortgages.

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

As of September 30, 1999, the Company had investments in participating mortgages
of $1,951,000.  The Company had income from participating  mortgages of $193,000
and $868,000,  respectively,  for the three and nine months ended  September 30,
1999, and $140,000 during the three and nine months ended September 30, 1998.

H.           Investment in Real Estate Joint Venture

The Company has an interest in a joint venture  involving the  development of 30
homesites.  The Company  receives a priority  return from the venture  until the
Company  has  received  a per annum  amount  equal to 9% times  $1,250,000.  The
Company's  subsequent  annual  priority  return  increases  by 5% over the prior
year's amount.  The other venturer then receives a similar  percentage return on
$300,000.  In the event the property is sold, the Company  receives all proceeds
until it has received its investment plus 20% per annum. The other venturer then
receives all proceeds until it has received its  investment  plus 20% per annum.
Any excess sales  proceeds are then shared  equally.  The Company did not record
any income from this real estate joint venture  during the three and nine months
ended September 30, 1999.

I.           Investment in Asset Investors

During the nine months ended September 30, 1999, the Company  purchased  114,000
shares  (approximately  2%) of the common stock of Asset Investors.  The Company
has recorded its investment in Asset  Investors  under the equity method because
Asset Investors manages the Company and owns  approximately 27% of the Company's
Common Stock.

Summarized  financial  information  of  Asset  Investors  as  reported  by Asset
Investors is (in thousands):

<TABLE>
<CAPTION>

                                                                                  September 30,         December 31,
Balance Sheets                                                                        1999                  1998
                                                                                      ----                  ----

<S>                                                                                <C>                    <C>
Real estate                                                                        $  109,543             $   98,563
Investments in participating mortgages                                                 20,622                 27,604
Investment in Commercial Assets                                                        19,741                 20,706
Cash and cash equivalents                                                               1,604                  1,426
Other assets                                                                            8,068                  9,927
                                                                                   ----------             ----------
Total assets                                                                          159,578                158,226
Secured long-term notes payable                                                        54,456                 40,506
Secured short-term financing                                                            1,000                 10,500
Other liabilities                                                                       4,060                  2,935
Minority interest                                                                      15,386                 25,649
                                                                                   ----------             ----------
Stockholders' equity                                                               $   84,676             $   78,636
                                                                                   ==========             ==========
</TABLE>


                                     - 8 -
<PAGE>






<TABLE>
<CAPTION>

                                                                    Three Months Ended              Nine Months Ended
                                                                       September 30,                   September 30,
                                                                       -------------                   -------------
                                                                   1999           1998             1999          1998
                                                                   ----           ----             ----          ----
<S>                                                             <C>             <C>             <C>            <C>
Income from rental property operations before depreciation      $  3,169        $  2,869        $  9,386       $  6,668
Depreciation                                                        (983)           (874)         (2,827)        (1,762)
                                                                --------        --------        --------       --------
Income from rental property operations                             2,186           1,995           6,559          4,906
                                                                --------        --------        --------       --------

Property management income, net                                       54              39             158            122
Management fees from Commercial Assets                               134              65             418             75
Equity in earnings of Commercial Assets                              154             154             714            688
Amortization of management contracts                                (689)           (689)         (2,067)        (2,205)
General and administrative expenses                                 (389)           (373)         (1,098)        (1,031)
Interest and other income                                            124              75             227            677
Interest expense                                                    (955)           (914)         (2,853)        (1,390)
                                                                --------        --------        --------       --------

Income from operations                                               619             352           2,058          1,842
Nonrecurring revenues (expenses), net                                 80          (2,092)            105         (2,092)
Minority interest                                                   (106)            372            (341)            54
                                                                --------        --------        --------       --------
Net income (loss)                                               $    593        $ (1,368)       $  1,822       $   (196)
                                                                ========        ========        ========       ========

</TABLE>

J.           CMBS Bonds

In November  1997,  the Company  restructured  its  portfolio  of CMBS bonds and
retained  a  $5,000,000   equity  interest  in  the  owner  trust  used  in  the
restructuring.  Since the equity interest represents the first-loss class of the
portfolio  and  provides  credit  support  for the senior debt  securities,  the
Company  valued the equity  interest at its then  estimated fair market value of
$2,000,000.  During the nine  months  ended  September  30,  1999 and 1998,  the
Company  received  $141,000 and  $310,000,  respectively,  of which  $78,000 and
$186,000, respectively, was recorded as a reduction in the net book value of the
retained equity interest. The net book value at September 30, 1999 is $1,714,000
which the Company believes approximates fair market value.

K.           Investment in and Note Receivable from Westrec

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

                                     - 9 -
<PAGE>

L.           Secured Long-Term Notes Payable

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

<TABLE>
<CAPTION>

                                                                               September 30,        December 31,
                                                                                   1999                 1998
                                                                                   ----                 ----
Fixed rate, ranging from 6.70% to 7.10%, fully-amortizing,
<S>                                                                             <C>                  <C>
   nonrecourse notes maturing in 2019                                           $  10,571            $    --
7.67% fixed rate, non-amortizing, nonrecourse note maturing in
   2007                                                                             2,960                 --
Recourse, fully-amortizing note discounted at 7.00%, maturing in
   2002                                                                             4,597                 --
                                                                                ---------            -------
                                                                                $  18,128            $    --
                                                                                =========            =======

</TABLE>

Real estate assets which secure the long-term notes payable had a net book value
of  $38,241,000  at September  30, 1999.  The Company has $505,000 in escrow for
real estate taxes and property improvements at September 30, 1999.

M.           Management Fees

The Company operates under a management agreement, pursuant to which the manager
advises the Company on its business and oversees its daily  operations,  subject
to the supervision of the Company's Board of Directors. Asset Investors has been
the manager since  November  1997.  The  Management  Agreement has been extended
through  December 31, 1999 and provides that the manager  receives a "Base Fee,"
an "Acquisition  Fee" and an "Incentive Fee." The Base Fee is payable  quarterly
in an amount  equal to 1% per annum of the  Company's  average net book value of
real estate-related  assets. The Acquisition Fee equals 0.5% of the cost of each
real estate-related  asset acquired.  Acquisition Fees are expensed because such
fees are paid to Asset  Investors,  owner of 27% of the Company's  Common Stock.
These fees would be capitalized  if they were paid to an unrelated  third party.
For 1999,  the  Incentive  Fee equals  20% of the amount by which the  Company's
Funds From Operations,  less an annual capital  replacement  reserve of at least
$50 per developed  homesite,  exceeds the amount  calculated by multiplying  the
Company's  average net worth by a percentage equal to the Ten-Year United States
Treasury rate plus 1%. In general,  Funds From Operations is equal to net income
plus depreciation, amortization and acquisition fees. During 1998, the Incentive
Fee was  based on the  Company's  REIT  taxable  income  instead  of Funds  From
Operations. Management fees during the three and nine months ended September 30,
1999 and 1998 were (in thousands):

<TABLE>
<CAPTION>

                                                   Three Months Ended                     Nine Months Ended
                                                      September 30,                         September 30,
                                            ----------------------------------    -----------------------------------
                                                 1999               1998               1999                1998
                                            ---------------    ---------------    ---------------     ---------------
<S>                                            <C>                 <C>               <C>                  <C>
Base Fees                                      $    181            $   23            $    375             $   40
Acquisition Fees                                      3                61                 197                 61
Incentive Fees                                       --                --                  --                 --
                                               --------            ------            --------             ------
                                               $    184            $   84            $    572             $  101
                                               ========            ======            ========             ======

</TABLE>


                                     - 10 -
<PAGE>

N.           Commitments

In connection with the acquisition of a manufactured home community, the Company
entered into an earn-out agreement with respect to 154 unoccupied homesites. The
Company will pay $17,000 to the former owner for each newly  occupied  homesite.
The earn-out agreement terminates in 2048.

The Company has agreed to acquire  from time to time  ground  leases  related to
individual  homesites.  The  purchase  price for each lease will be equal to the
base  annual rent  provided  for in each such  ground  lease  divided by 9%. The
Company is not required to acquire such leases in groups of less than 10 leases.
The maximum number of leases the Company might purchase is approximately 500 for
total consideration of approximately $20 million.

O.           Operating Segments

The Company began investing in manufactured  home communities in August 1998 and
management assesses the performance of the Company as one operating segment.

P.           Common Stock and Dividends

During the three and nine months  ended  September  30,  1999,  the Company paid
$0.13 and $0.39 per share  dividends on Common  Stock  totaling  $1,350,000  and
$4,049,000,  respectively.  Dividends  paid during the same periods in 1998 were
$0.13 and $0.26 per share totaling $1,348,000 and $2,695,000, respectively.


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

Introduction

The Private  Securities  Litigation  Reform Act of 1995 provides a "safe harbor"
for  forward-looking  statements in certain  circumstances.  Certain information
included  in this  report and our other  filings  with the  Securities  Exchange
Commission  under the  Securities  Act of 1933, as amended,  and the  Securities
Exchange Act of 1934, as amended, as well as information  communicated orally or
in writing between the dates of these SEC filings,  constitute  "forward-looking
statements" within the meaning of the Private  Securities  Litigation Reform Act
of 1995.  Forward-looking  statements may include  projections of our cash flow,
dividends and anticipated  returns on real estate  investments.  Forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause our actual  results,  performance  or  achievements  to be  materially
different  from any future  results,  performance or  achievements  expressed or
implied  by the  forward-looking  statements.  These  factors  include:  general
economic  and  business  conditions;   interest  rate  changes;   financing  and
refinancing  risks; risks inherent in owning real estate or debt secured by real
estate; future development rate of homesites;  competition;  the availability of
real estate assets at prices which meet our investment criteria;  our ability to
reduce expense levels,  implement rent  increases,  use leverage and other risks
set forth in our SEC filings.

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


                                     - 11 -
<PAGE>

Business

Company Background

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

Prior to 1998,  we owned  subordinate  classes  of  Commercial  Mortgage  Backed
Securities or "CMBS bonds".  CMBS bonds generally are debt  instruments that are
backed by mortgage loans on commercial  real estate.  The principal and interest
payments  on the  underlying  mortgage  assets are  allocated  among the several
classes or "tranches"  of a series of CMBS bonds.  Our  subordinate  tranches of
CMBS bonds included "first-loss" tranches, which bore the most risk in the event
of a default on the  underlying  mortgages and provided  credit  support for the
more senior  tranches.  In 1997,  we decided to  redeploy  our assets into other
types of real estate  investments  in order to reduce the risk of our portfolio.
We  restructured  our CMBS bonds in  November  1997 by  selling,  redeeming  and
resecuritizing  our various CMBS bonds from which we received  $77.7  million in
cash and retained a small  residual  interest in two CMBS bonds.  During most of
1998, we invested our funds in short-term investments pending our decision as to
the type of real estate assets in which we would invest.

In the third  quarter of 1998, we decided to acquire  interests in  manufactured
home communities.  As of September 30, 1999, we held interests as owner,  ground
lessor or mortgage lender, including participating mortgages, in 11 manufactured
home communities with a total of 1,770 developed  homesites (sites with homes in
place)  and  1,370  undeveloped  homesites.  We  expect  to  continue  acquiring
interests in manufactured home communities.

Industry Background

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

Modern   manufactured  home  communities  are  similar  to  typical  residential
subdivisions containing centralized entrances,  paved streets, curbs and gutters
and  parkways.  The  communities  frequently  provide  a  clubhouse  for  social
activities and recreation and other  amenities,  which may include golf courses,
swimming  pools,  shuffleboard  courts and  laundry  facilities.  Utilities  are
provided by or arranged for by the owner of the community. Community lifestyles,
primarily  promoted  by  resident  managers,  include a wide  variety  of social
activities  that promote a sense of  neighborhood.  The  communities  provide an
attractive and affordable  housing  alternative for retirees,  empty nesters and
start-up or single-parent families.  Manufactured home communities are primarily
characterized   as  "all  age"  communities  and  "adult"   communities.   Adult


                                     - 12 -
<PAGE>

communities  typically require that at least 80% of the tenants must be at least
55 years old, and in all age communities there is no age restriction on tenants.

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

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

Recent Developments

Merger with Asset Investors

We have agreed to merge with Asset Investors. The merger agreement provides that
Asset  Investors  will  issue  0.4075  shares  of  its  common  stock  for  each
outstanding  share of our common  stock.  The merger is subject to approval by a
majority of the shares of both companies entitled to vote.

Growth and Operating Strategies

We measure our economic  profitability  based on Funds From Operations or "FFO",
less an  annual  capital  replacement  reserve  of at  least  $50 per  developed
homesite.  We believe that FFO,  less a capital  replacement  reserve,  provides
investors with an  understanding of our ability to incur and service debt and to
make capital expenditures. The Board of Governors of the National Association of
Real Estate Investment Trusts,  also known as NAREIT,  defines FFO as net income
or loss, computed in accordance with generally accepted  accounting  principles,
excluding gains and losses from debt  restructuring and sales of property,  plus
real estate related  depreciation and  amortization,  excluding  amortization of
financing costs, and after adjustments for unconsolidated partnerships and joint
ventures.  We calculate FFO in a manner consistent with NAREIT's definition.  In
our calculation we include adjustments for:

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


                                     - 13 -
<PAGE>

FFO should not be considered an alternative to net income or net cash flows from
operating  activities,  as  calculated  in accordance  with  generally  accepted
accounting  principles,  as an indication of our  performance or as a measure of
liquidity.  FFO is not  necessarily  indicative of cash available to fund future
cash needs.

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

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

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

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

Future Acquisitions

In 1998, when we decided to enter the manufactured home community  business,  we
began to  implement  a business  plan which  called  for the  investment  of our
capital in the acquisition of manufactured home communities.  We have focused on
identifying  acquisition  opportunities that we believe provide returns that are
accretive to our  stockholders.  We plan on continuing this business plan during
1999 and 2000,  and hope to have largely  invested  our capital in  manufactured
home communities during this time period.

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


                                     - 14 -
<PAGE>

us to 50% of the net  income and cash flow  generated  by the  community.  As an
alternative,  we sometimes enter into ground leases with  development  companies
having similar terms to our participating mortgages.

We believe that acquisition  opportunities for manufactured home communities are
attractive at this time because of the  increasing  acceptability  of and demand
for  manufactured  homes and the continued  constraints  on  development  of new
manufactured  home  communities.  We are actively seeking to acquire  additional
communities and are currently engaged in various stages of negotiations relating
to the possible  acquisition  of a number of  communities.  The  acquisition  of
interests  in  additional   communities   could  also  result  in  our  becoming
increasingly leveraged as we incur debt in connection with these transactions.

As of September 30, 1999, we have invested  approximately $65 million to acquire
interests  in 11  manufactured  home  communities  that are  located in Arizona,
Florida  and  California.  These  communities  have a total of  1,770  developed
homesites (sites with homes in place) and 1,370 undeveloped homesites.

When evaluating potential acquisitions, we consider such factors as:

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

Expansion of Existing Communities

We will seek to  increase  the number of  homesites  and the amount of  earnings
generated from our existing  portfolio of manufactured home communities  through
marketing campaigns aimed at increasing  occupancy.  We will also seek expansion
through future  acquisitions  and expanding the number of sites  available to be
leased to residents if justified  by local market  conditions  and  permitted by
zoning and other applicable laws.

Manager

Our daily  operations  are  performed  by a  manager  pursuant  to a  management
agreement  currently  in effect  through  December  31,  1999.  The manager also
identifies and performs due diligence on potential  manufactured  home community
investments  for us. Since November 1997,  Asset Investors has been our manager.
In addition to being our manager and a principal  stockholder,  Asset  Investors
separately owns,  acquires,  develops and manages manufactured home communities,
including   providing   property   management   services  on  our   communities.
Consequently,  we and Asset Investors are involved in the same industry. The two


                                     - 15 -
<PAGE>

companies have agreed that we shall invest at least $50 million in  manufactured
home  communities  before Asset Investors  makes any additional  acquisitions of
manufactured home communities.  Following our investment of $50 million, the two
companies  will   coordinate   their  efforts  to  acquire   manufactured   home
communities.  Asset Investors may acquire  communities if a material  portion of
the  purchase  price  is paid  for in  units  of  limited  partnership  in Asset
Investors  Operating  Partnership  referred to as "OP Units" or Asset Investors'
common  stock.  As of September 30, 1999,  we have  invested  approximately  $65
million in manufactured home communities and, therefore,  we and Asset Investors
are coordinating our acquisitions at this time.

The management  agreement was approved by our  independent  directors and may be
terminated  by  either  party  with or  without  cause at any time upon 60 days'
written  notice.  The  manager  provides  all  personnel  and  related  overhead
necessary to conduct our regular  business,  and in return,  the manager is paid
the following fees:

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

During the three and nine months ended  September 30, 1999 and 1998, we paid the
following fees to our manager (in thousands):

<TABLE>
<CAPTION>

                                                   Three Months Ended                     Nine Months Ended
                                                      September 30,                         September 30,
                                            ----------------------------------    -----------------------------------
                                                 1999               1998               1999                1998
                                            ---------------    ---------------    ---------------     ---------------
<S>                                            <C>                 <C>               <C>                  <C>
Base Fees                                      $    181            $   23            $    375             $   40
Acquisition Fees                                      3                61                 197                 61
Incentive Fees                                       --                --                  --                 --
                                               --------            ------            --------             ------
                                               $    184            $   84            $    572             $  101
                                               ========            ======            ========             ======


</TABLE>

Prior to 1999,  the Incentive  Fee was based on REIT income  instead of FFO. The
Incentive  Fee for 1999 is  based on FFO,  less an  annual  capital  replacement
reserve of at least $50 per  developed  homesite,  because we believe  this is a
better  measure  of  our  economic  profitability  and,  therefore,  is  a  more
appropriate  incentive for Asset  Investors  even if increased  management  fees
result.

We  indemnify  the  manager and its  affiliates  with  respect to all  expenses,
losses,  damages,  liabilities,  demands,  charges  or claims  of any  nature in
respect of acts or omissions of the manager made in good faith and in accordance
with the standards set forth in the management agreement.

Properties

The  manufactured  home  communities  in which we have  interests  are primarily
located in Arizona and Florida. We hold interests in these communities as owner,
ground lessor or mortgage lender, including participating mortgages.

                                     - 16 -
<PAGE>

The following  table sets forth the states in which the  communities in which we
held an interest on September 30, 1999 are located:


                                        Number of Homesites
                   Number of      --------------------------------
                  Communities     Developed        Undeveloped
                 ---------------  ------------- ------------------
Arizona               6                925               310
Florida               4                842             1,037
California            1                 --                30
                    ---              -----           -------
   Total             11              1,767             1,377
                    ===              =====           =======


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

<TABLE>
<CAPTION>



                                                                               Average
                                                                               Monthly
                                                   Developed                    Rent          Undeveloped
   Community               Location                Homesites     Occupancy    per Site         Homesites
--------------------------------------------------------------------------------------------------------------
Owned Communities
<S>                    <C>                            <C>           <C>         <C>               <C>
  Casa Encanta         Mesa, AZ                       106           96%         $345                -- (2)
  Cypress Greens (1)   Lakeland, FL                    86          100           190                21
  Desert Harbor        Apache Junction, AZ            103          100           202               104
  Fiesta Village       Mesa, AZ                       170           95           272               206 (2)
  La Casa Blanca       Apache Junction, AZ            198          100           151                --
  Lakeshore Villas     Tampa, FL                      290           96           323                --
  Rancho Mirage        Apache Junction, AZ            312          100           175                --
  Riverside (1)        Ruskin, FL                     221           99           403               769
  Royal Palm           Haines City, FL                233           98           216               217
  Southern Palms       Mesa, AZ                        36           97           208                -- (2)
                                                --------------------------------------------------------------
      Subtotal                                      1,755           98           253             1,317
                                                --------------------------------------------------------------
Participating Mortgage and Join
 Venture Communities
  Savanna Club (3)     Port St. Lucie, FL              12          100           163                25
  Sun Lake (3)         Grand Island, FL                --           --            --                 5
  Cannery Village      Newport Beach, CA               --           --            --                30
                                                --------------------------------------------------------------
      Subtotal                                         12          100           163                60
                                                ==============================================================
   Total Communities                                1,767           98%         $252             1,377
                                                ==============================================================

<FN>

1    We have leased this  community to a third party under a long-term  lease in
     which we receive a base rent plus 50% of any profits from the community.
2    We intend to redevelop the Fiesta Village, Casa Encanta, and Southern Palms
     communities  along with adjoining  vacant land. The combined  redevelopment
     will result in the additional 206 spaces.
3    We own individual homes and homesites within this community.

</FN>

</TABLE>

Taxation of the Company

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


                                     - 17 -
<PAGE>

to qualify  as a REIT  depends in part upon the  actions of third  parties  over
which  we  have no  control,  or  only  limited  influence.  For  instance,  our
qualification  depends upon the conduct of certain entities with which we have a
direct or indirect relationship,  in our capacity as a lender, lessor, or holder
of non-controlling equity interests.

If we  qualify  for  taxation  as a REIT,  we will  generally  not be subject to
Federal corporate income tax on our net income that is currently  distributed to
stockholders.  This treatment  substantially  eliminates  the "double  taxation"
which  would  otherwise  occur at the  corporate  and  stockholder  levels  that
generally  results from investment in a corporation.  If we fail to qualify as a
REIT in any taxable  year,  we will be subject to Federal  income tax at regular
corporate  rates on our taxable  income,  including any  applicable  alternative
minimum tax.  Even if we qualify as a REIT,  we may be subject to certain  state
and local  income and other taxes and to Federal  income and excise taxes on our
undistributed income.

                          RESULTS OF OPERATIONS FOR THE
             THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

Comparison  of Three and Nine Months Ended  September 30, 1999 to Three and Nine
Months Ended September 30, 1998

Rental Property Operations

Income from rental property  operations  totaled $507,000 and $1,639,000  during
the three and nine months  ended  September  30, 1999  compared to $147,000  and
$147,000  during the same periods in 1998. Our first  investment in manufactured
home  communities  was in August 1998. As of September 30, 1999, we had invested
approximately $65 million in 11 communities.

Interest and Other Income

Interest and other income  during the three and nine months ended  September 30,
1999 was $349,000 and  $1,570,000  compared to $1,012,000 and $3,107,000 for the
same periods in 1998,  respectively.  The decrease is due to a reduction in cash
and  short-term  investments  used  to fund  investments  in  manufactured  home
communities  beginning in August 1998. The average interest rate earned on these
funds was 5.0% and 5.4%  during the nine  months  ended  September  30, 1999 and
1998.

Interest Expense

Interest  expense was $61,000 and  $119,000  for the three and nine months ended
September 30, 1999 due to long-term notes payable secured by our communities. We
had no interest  expense  during the same periods in 1998 as we did not have any
debt on manufactured  home communities  until May 1999. We anticipate  borrowing
additional amounts in the future in the form of secured long-term notes payable.

General and Administrative Expenses

Our general and administrative expenses were $131,000 and $404,000 for the three
and nine months ended  September  30, 1999 compared to $129,000 and $303,000 for
the same periods in 1998.  These  expenses  increased  for the nine months ended
September 30, 1999 compared to the 1998 period  primarily due to increased costs
related  to  shareholder   relations  and  due  diligence   costs  on  potential
acquisitions that were not completed.

                                     - 18 -
<PAGE>

Management Fees

During the three and nine months ended  September 30, 1999, our management  fees
were  $181,000  and  $375,000  compared to $23,000  and $40,000  during the same
periods  in 1998.  The  increase  in  management  fees is  primarily  due to our
investments in manufactured home communities  during this period.  Such fees are
not paid on cash and  short-term  investments,  which is what we primarily  held
during the 1998 periods.

CMBS Bonds

Income from CMBS bonds during the three and nine months ended September 30, 1999
was $38,000 and $115,000  and is  comparable  to the same periods in 1998.  This
income is from our retained equity interest in two CMBS bonds.

Acquisition Fees

During  the  three  and nine  months  ended  September  30,  1999,  we  expensed
acquisition  fees paid to Asset  Investors  of $3,000 and  $197,000  compared to
$61,000 and  $61,000  during the same  periods in 1998.  The change in fees is a
result of the amount we invested in manufactured  home communities  during these
periods.  These fees would be  capitalized if they had been paid to an unrelated
third party. Because they are paid to Asset Investors, an affiliate,  these fees
are expensed under generally accepted accounting principles.

Reincorporation Costs

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

Costs Related to Abandonment of Potential Marina Investments

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

Dividend Distributions

During the three and nine months ended  September  30, 1999,  we paid  dividends
totaling  $1,350,000  or $0.13 per  share,  and  $4,049,000  or $0.39 per share,
compared to  $1,348,000 or $0.13 per share,  and  $2,695,000 or $0.26 per share,
for the same periods in 1998. We did not pay dividends  during the first quarter
of 1998.

                         LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 1999,  we had cash and cash  equivalents  of $5,076,000  and
short-term  investments of  $13,334,000.  Our principal  activities  that demand
liquidity  include our normal  operating  activities,  payments of principal and
interest on  outstanding  debt,  acquisitions  of or additional  investments  in
properties and payments of dividends to stockholders.

During the nine  months  ended  September  30,  1999,  the net cash  provided by
operating  activities  was  $2,671,000  compared to  $2,479,000  during the same
period in 1998. The increase  during the first nine months of 1999 was primarily
due to investments in manufactured home  communities.  Higher income from rental


                                     - 19 -
<PAGE>

property  operations  before  depreciation  was only  partially  offset by lower
interest and other income on funds used for such investments.

Net cash used in  investing  activities  was  $6,207,000  during the nine months
ended September 30, 1999 compared to uses of $71,296,000  during the same period
in 1998. The net cash used in the 1999 period was primarily due to  acquisitions
of  interests  in  manufactured  home  communities,  net of sales of  short-term
investments used to fund such  acquisitions,  whereas the funds used in the 1998
period were for the purchase of short-term investments.

Net cash provided by financing  activities was $5,320,000 during the nine months
ended  September 30, 1999 compared to uses of $2,695,000  during the same period
in  1998.  The net  cash  provided  in the  1999  period  was  primarily  due to
$10,300,000  in proceeds from  long-term  borrowings,  net of dividends  paid of
$4,049,000.  The net cash used in the 1998 period was due to dividends paid. The
increase in dividends between the periods occurred  primarily because we did not
pay a quarterly dividend during the first quarter of 1998.

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

                              FUNDS FROM OPERATIONS

We measure  our  economic  profitability  based on FFO,  less an annual  capital
replacement reserve of at least $50 per developed homesite. We believe that FFO,
less a reserve, provides investors with an understanding of our ability to incur
and service debt and make capital expenditures. The Board of Governors of NAREIT
defines  FFO as net  income  or loss,  computed  in  accordance  with  generally
accepted   accounting   principles,   excluding   gains  and  losses  from  debt
restructuring and sales of property,  plus real estate related  depreciation and
amortization,  excluding  amortization of financing costs, and after adjustments
for unconsolidated partnerships and joint ventures. We calculate FFO in a manner
consistent with NAREIT's  definition.  In our calculation we include adjustments
for:

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

FFO should not be considered an alternative to net income or net cash flows from
operating  activities,  as  calculated  in accordance  with  generally  accepted
accounting  principles,  as an indication of our  performance or as a measure of
liquidity.  FFO is not  necessarily  indicative of cash available to fund future
cash needs.





                                     - 20 -
<PAGE>




For the three and nine months ended September 30, 1999 and 1998, our FFO was (in
thousands):

<TABLE>
<CAPTION>

                                                   Three Months Ended                     Nine Months Ended
                                                      September 30,                         September 30,
                                            ----------------------------------    -----------------------------------
                                                 1999               1998               1999                1998
                                            ---------------    ---------------    ---------------     ---------------
<S>                                             <C>                <C>                <C>                 <C>
Net income                                      $   408            $   486            $ 2,124             $ 2,474
Real estate depreciation                            465                  4                786                   4
Acquisition fees                                      3                 61                197                  61
Realization of bond discounts                        --                 60                 78                 186
Costs related to abandonment of potential
   marina investments                                --                500                 --                 500
Equity in Asset Investors' adjustments
   for FFO                                           29                 --                 43                  --
                                                -------            -------            -------             -------
Funds From Operations (FFO)                     $   905            $ 1,111            $ 3,228             $ 3,225
                                                =======            =======            =======             =======

Weighted average common shares outstanding       10,325             10,364             10,350              10,355
                                                =======            =======            =======             =======

</TABLE>

For the nine months ended  September  30, 1999 and 1998,  net cash flows were as
follows (in thousands):

                                                        Nine Months Ended
                                                          September 30,
                                                --------------------------------
                                                  1999                1998
                                                ------------     ---------------
Cash provided by operating activities           $  2,671           $   2,479
Cash used in investing activities                 (6,207)            (71,296)
Cash provided by (used in)financing activities     5,320              (2,695)


                              YEAR 2000 COMPLIANCE

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

Our critical  hardware and software  systems are currently Year 2000  compliant.
Upon  failure  of any  system,  data  included  in  critical  software,  such as
rent-rolls  and  certain   record-keeping   systems,  could  be  transferred  to
alternative  commercially  available  software at a reasonable cost and within a
reasonable time period. Consequently,  we would be able to continue our business
operations without any material interruption or material effect on our business,
results of operations or financial  condition.  In addition,  we anticipate that
any  hardware  or  software  that we  acquire,  including  upgrades  to existing
systems, between now and December 31, 1999 will be Year 2000 compliant.

Disruptions in the economy generally  resulting from Year 2000 issues could also
materially adversely affect us. Moreover,  because a large number of our tenants
may be dependent on social  security  payments to pay their rents,  a failure of
the  Social  Security  Administration  to cause  their  systems  to be Year 2000
compliant may result in a material adverse effect on our operations.  The Social
Security  Administration  has  announced  that they will have their systems Year
2000 compliant before January 1, 2000.

                                     - 21 -
<PAGE>

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

Item 3.           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

We  invest  funds  primarily  in  government  securities  and  other  short-term
investments  with  interest  rates  of  approximately  0.25%  above  the  London
Interbank Offered Rate or "LIBOR". Accordingly,  changes in interest rates could
affect  the  returns  from  such  investments.  We  intend  to  invest  funds in
manufactured  home communities  during 1999,  however,  the timing and amount of
such investments  will depend on a number of factors.  See "Item 2. - Business -
Growth and Operating Strategies - Future Acquisitions."

We have $10.6  million of fixed  rate,  non-recourse,  secured  long-term  notes
payable  that mature in 2019.  We do not have  significant  exposure to changing
interest  rates on these  notes as the  rates  are fixed and the notes are fully
amortizing.

We have a $4.6 million fixed rate, recourse, secured long-term note payable that
is repayable in three annual  installments.  The implied  interest  rate on this
note is 7.0%. We do not have significant  exposure to changing interest rates on
this note as the rate is fixed and the note is fully amortizing.  In the future,
we  intend  to  borrow  additional  non-recourse,  secured,  fixed  rate,  fully
amortizing debt in connection with the refinancing of the existing note payable.
While changes in interest  rates would affect the cost of funds  borrowed in the
future to refinance the existing  debt,  we believe that the effect,  if any, of
near-term  changes  in  interest  rates on our  financial  position,  results of
operations  or cash flows would not be material  as the  existing  debt is fixed
rate until June 2002.

We  have a $3.0  million,  7.67%,  nonrecourse,  partially  amortizing,  secured
long-term note payable that matures in 2007. We do not have significant exposure
to changing interest rates on this note as the rate is fixed and the balance due
at maturity is only $2.6 million.

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

                                     PART II
                                OTHER INFORMATION

Item 6.           EXHIBITS AND REPORTS ON FORM 8-K.

         (a)   Exhibits:

Exhibit No.       Description

     2.1        Agreement  and  Plan of  Merger,  dated as of  March  12,  1999,
                between  Commercial  Assets,  Inc., a Maryland  corporation  and


                                     - 22 -
<PAGE>

                Commercial Assets,  Inc., a Delaware  corporation  (incorporated
                herein by reference to Exhibit 2.1 to the  Registrant's  Current
                Report on Form 8-K,  dated June 10,  1999,  Commission  File No.
                1-2262, filed on June 10, 1999).

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

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

      27        Financial Data Schedule

         (b)   Reports on Form 8-K:

               The  following  Current  Reports  on Form 8-K  were  filed by the
               Registrant  during the period covered by this Quarterly Report on
               Form 10-Q:

               Current  Report on Form 8-K dated August 13, 1999,  reporting our
               acquisition of manufactured home community assets which included:
               Statement of Excess of Revenues Over Specific  Operating Expenses
               of the Fiesta Village  Manufactured Home Communities for the year
               ended  December 31, 1998 (audited) and the period from January 1,
               1999 to June 30, 1999 (unaudited).

               Current  Report on Form 8-K dated August 31, 1999  reporting  the
               proposed merger with Asset Investors Corporation.

                                    SIGNATURE

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.

                                                    COMMERCIAL ASSETS, INC.
                                                    (Registrant)


Date:  November 10, 1999                             By  /s/ David M. Becker
                                                       -------------------------
                                                         David M. Becker
                                                         Chief Financial Officer




                                     - 23 -