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                       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 March 31, 1998


                                       OR

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


                         Commission file number 1-22262


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


                Maryland                                       84-1240911
    (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 April 24, 1998,  10,364,029  shares of Commercial  Assets,  Inc.  Common
Stock were outstanding.

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<PAGE>

                             COMMERCIAL ASSETS, INC.

                                    FORM 10-Q


                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998


                                TABLE OF CONTENTS

                                                                            PAGE
PART I.           FINANCIAL INFORMATION:


      Item 1.  Condensed Consolidated Financial Statements:

               Balance Sheets as of March 31, 1998 (Unaudited) and
                 December 31, 1997..........................................  1

               Statements of Income for the three months ended
                 March 31, 1998 and 1997 (Unaudited)........................  2

               Statements of Cash Flows for the three months ended
                 March 31, 1998 and 1997 (Unaudited)........................  3

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

      Item 2.  Management's Discussion and Analysis of
                 Financial Condition and Results of Operations..............  7


PART II.          OTHER INFORMATION:


       Item 2.  Changes in Securities and Use of Proceeds...................  11

       Item 6.  Exhibits and Reports on Form 8-K............................  11





                                       (i)


<PAGE>
<TABLE>
<CAPTION>

                    COMMERCIAL ASSETS, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                      (In thousands, except per share data)


                                                                                       March 31,       December 31,
                                                                                         1998              1997
                                                                                         ----              ----
                                                                                      (unaudited)
                                     ASSETS

<S>                                                                                     <C>              <C>       
   CASH AND CASH EQUIVALENTS                                                            $   73,873       $   74,153
   INVESTMENTS IN AND NOTES RECEIVABLE FROM WESTREC                                          4,250            1,710
   CMBS BONDS                                                                                1,921            1,981
   OTHER ASSETS, NET                                                                           212              304
                                                                                        ----------       ----------
                                                                                        $   80,256       $   78,148
                                                                                        ==========       ==========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

   ACCOUNTS PAYABLE AND ACCRUED LIABILITIES                                             $    1,549       $      368
   MANAGEMENT FEES PAYABLE                                                                      --               75
   NOTE PAYABLE TO BANK                                                                         --               --
                                                                                        ----------       ----------
                                                                                             1,549              443
                                                                                        ----------       ----------

   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; 10,342 and
     10,316 shares issued and outstanding, respectively                                        104              104
   Additional paid-in capital                                                               76,724           76,724
   Retained earnings                                                                         1,879              877
                                                                                        ----------       ----------
                                                                                            78,707           77,705
                                                                                        ----------       ----------
                                                                                        $   80,256       $   78,148
                                                                                        ==========       ==========
</TABLE>

            See Notes to Condensed Consolidted 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 March 31,
                                                                                  ----------------------------
                                                                                   1998                  1997
                                                                                   ----                  ----
REVENUES
<S>                                                                              <C>                   <C>      
   Interest                                                                      $   1,053             $     111
   CMBS bonds                                                                           40                 2,044
                                                                                 ---------             ---------
                                                                                     1,093                 2,155
                                                                                 ---------             ---------

EXPENSES
   General and administrative                                                           86                   123
   Management fees                                                                       5                   297
                                                                                 ---------             ---------
                                                                                        91                   420
                                                                                 ---------             ---------

NET INCOME                                                                       $   1,002             $   1,735
                                                                                 =========             =========

BASIC EARNINGS PER SHARE                                                         $     .10             $     .17
DILUTED EARNINGS PER SHARE                                                       $     .10             $     .17

DIVIDENDS DECLARED PER SHARE                                                     $      --             $     .17

Weighted-Average Common Shares Outstanding                                          10,342                10,316

Weighted-Average Common Shares and Common Share
   Equivalents Outstanding                                                          10,378                10,351


</TABLE>

            See Notes to Condensed Consolidted Financial Statements.

                                     - 2 -
<PAGE>

<TABLE>
<CAPTION>

                    COMMERCIAL ASSETS, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (In thousands)
                                   (unaudited)


                                                                                   Three Months Ended March 31,
                                                                                   ----------------------------
                                                                                       1998              1997
                                                                                       ----              ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                 <C>               <C>     
   Net income                                                                       $   1,002         $  1,735
   Adjustments to reconcile net income to net cash flows
     from operating activities:
     Amortization of discount on CMBS bonds and other assets                               60             (200)
     Increase in accounts payable and accrued liabilities                               1,106               42
     Decrease (increase) in other assets                                                   92              (11)
                                                                                    ---------         --------
       Net cash provided by operating activities                                        2,260            1,566
                                                                                    ---------         --------

CASH FLOWS FROM INVESTING ACTIVITIES
   Investments in Westrec                                                              (2,540)              --
   Acquisitions of CMBS bonds                                                              --           (4,801)
                                                                                    ---------         --------
       Net cash used in investing activities                                           (2,540)          (4,801)
                                                                                    ---------         --------

CASH FLOWS FROM FINANCING ACTIVITIES
   Dividends paid                                                                          --           (1,754)
                                                                                    ---------         --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                                                                                         (280)          (4,989)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                       74,153            8,277
                                                                                    ---------         --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                          $  73,873         $  3,288
                                                                                    =========         ========

</TABLE>

            See Notes to Condensed Consolidted Financial Statements.

                                     - 3 -
<PAGE>


                             COMMERCIAL ASSETS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)


A.           Organization

Commercial  Assets,  Inc. (the  "Company") is a Maryland  corporation  which has
elected to be taxed as a real  estate  investment  trust  ("REIT").  The Company
commenced   operations  in  1993  when  Asset  Investors   Corporation   ("Asset
Investors") contributed $75,000,000 to the Company and distributed approximately
70% of the Company's Common Stock to Asset Investors'  stockholders.  The Common
Stock is listed on the American Stock Exchange under the symbol "CAX."

The Company's  day-to-day  operations are performed by a manager (the "Manager")
pursuant to a  year-to-year  management  agreement  currently in effect  through
December 1998 ("the Management Agreement").  Prior to November 1997, the Company
was managed  Financial  Asset  Management LLC ("FAM").  An investor group led by
Terry  Considine,  Thomas  L.  Rhodes  and Bruce D.  Benson  has owned FAM since
September  1996. In November 1997,  the assets of FAM,  including the Management
Agreement,  were acquired by Asset Investors,  which is now the current Manager.
Mr. Considine is Chairman of the Board of Directors and Chief Executive  Officer
of both the Company and Asset  Investors.  Mr.  Rhodes is Vice  Chairman and Mr.
Benson  is a  director  of  both  companies.  No  change  has  been  made to the
Management Agreement other than an extension.

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,  certain
employees of the Manager have been designated as officers of the Company.

Historically,  the Company  owned  subordinate  classes of  Commercial  Mortgage
Backed  Securities  ("CMBS  bonds").  The CMBS bonds were  issued in  commercial
mortgage loan securitizations involving multi-class issuances of debt securities
which were secured and funded as to the payment of  principal  and interest by a
specific  group of  mortgage  loans on  multi-family  or other  commercial  real
estate.  In 1997, the Company decided to restructure its asset base and cease to
invest in subordinate CMBS bonds. In November 1997, the Company restructured its
subordinate  CMBS bond  portfolio by selling,  redeeming or  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 E).  The  Company  has  temporarily
invested the proceeds from such restructuring in government securities and other
cash equivalents until the funds can be reinvested.

The Company has been evaluating  investment  opportunities for the proceeds from
the  restructuring  of the CMBS bonds, and during the first quarter of 1998, the
Company  decided  to acquire  interests  in  marinas.  In  connection  with this
acquisition  strategy,  the Company  acquired a 12%  interest in Westrec  Marina
Management, Inc. ("Westrec") (see Note D).

B.           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 Condensed  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 and results of operations of the Company as of March 31, 1998,  for the
three months then ended, and for all prior periods  presented.  These statements


                                     - 4 -
<PAGE>

are  condensed  and do not include  all the  information  required by  generally
accepted accounting  principles ("GAAP") in a full set of financial  statements.
These  statements  should be read in  conjunction  with the Company's  Financial
Statements  and notes thereto  included in the  Company's  Annual Report on Form
10-K for the year ended December 31, 1997.

C.           Statements of 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 for purposes of reporting cash flows.

Non-cash investing and financing activities for the three months ended March 31,
1998 and 1997 were as follows (in thousands):

<TABLE>
<CAPTION>

                                                                                               1998            1997
                                                                                              ------          ------
<S>                                                                                           <C>            <C>    
Principal collections on CMBS bonds transferred to restricted cash                            $   --         $   112

Unrealized holding gains on CMBS bonds                                                            --           1,015

</TABLE>

D.            Investments in and Notes Receivable from Westrec

On  March  31,  1998,  the  Company  acquired  a 12%  interest  in  Westrec  for
approximately  $2,500,000 and warrants to increase its ownership to 35% over the
next three  years.  In  addition,  the  Company  has  options to  purchase  from
affiliates  of Westrec  two marinas and  general  partner  interests  in limited
partnerships  that own an additional 10 marinas.  Initially,  the  investment in
Westrec will be accounted for under the cost method.  The Company also had notes
and interest  receivable from affiliates of Westrec of $1,750,000 and $1,710,000
at March 31, 1998 and December 31, 1997, respectively.

In May 1998, the Company issued to an affiliate of Westrec  warrants to purchase
322,000 shares of Common Stock at $6.60 per share.

E.           CMBS Bonds

In March 1997, the Company  contributed its ownership interest in two CMBS bonds
into a newly created trust (Blaylock  Mortgage Capital  Corporation  Multifamily
Trust). Interests in bond classes within the same CMBS issuance which were owned
by another  party were also  contributed  into the trust.  The trust then issued
seven classes of CMBS bonds  collateralized by the CMBS bond classes contributed
into  the  trust.  The  Company  received  an  interest  in five of the new bond
classes,  which  corresponded  to the Company's  ownership  interests in the two
bonds  contributed  to the  trust.  The  Company  also  acquired  the  remaining
$5,737,000  principal  balance  of two of the  new  bond  classes  at a cost  of
$4,801,000,  which resulted in the Company having 100% ownership in the five new
subordinate classes.

In November 1997,  the Company  restructured  its portfolio of CMBS bonds.  Nine
bonds  were  sold,  one bond was  redeemed  by the bond  issuer at par,  and the
remaining  two CMBS  bonds  were  resecuritized  by  contributing  the bonds and
related  restricted  cash to an owner  trust in which the  Company  retained  an
equity  interest.  In a private  placement,  the trust then sold debt securities
representing  senior interests in the trust's assets.  The principal  balance of
the equity interest  retained by the Company is $5,000,000.  However,  since the
equity  interest  represents the first-loss  class of the portfolio and provides
credit  support  for the senior debt  securities,  the  Company  established  an
allowance for credit losses of $3,000,000 and valued the equity  interest at its
estimated fair value.  During the three months ended March 31, 1997, the Company


                                     - 5 -
<PAGE>

recognized  interest  income net of  amortization  of $40,000  from the retained
equity interest.

Prior to the restructuring,  certain of the Company's CMBS bonds were pledged as
collateral for the Company's short-term notes payable (see Note F).

F.           Short-Term Notes Payable

The  Company  had a Loan and  Security  Agreement,  collateralized  by four CMBS
bonds, that was cancelled in November 1997 upon the sale and resecuritization of
the bonds

The Company has an  unsecured  line of credit  with a bank for  $1,000,000  that
expires on July 31, 1998.  Advances under this line bear interest at prime.  One
of the Company's  independent directors is a member of the Advisory Board of the
bank. No advances were  outstanding  on this line of credit at March 31, 1998 or
December 31, 1997.

G.           Management Fees

The Company operates under a Management Agreement with the Manager,  pursuant to
which  the  Manager  advises  the  Company  on its  business  and  oversees  its
day-to-day  operations,  subject to the  supervision  of the Company's  Board of
Directors.  Pursuant to the Management  Agreement,  the Manager receives a "Base
Fee," an  "Incentive  Fee," and an  "Acquisition  Fee." The Base Fee is  payable
quarterly in an amount equal to 1% per annum of the Company's  "average invested
assets." The Incentive Fee equals 20% of the amount by which the Company's  REIT
(taxable)  income  exceeds the amount  calculated by  multiplying  the Company's
"average net worth" by the "Ten-Year  United States  Treasury rate" plus 1%. The
Manager receives an Acquisition Fee equal to 1/2 of 1% of the cost of each asset
acquired.  Prior to the  restructuring  of the CMBS bond portfolio,  the Manager
also received "Administrative Fees" on each CMBS bond outstanding.

During the three months ended March 31, 1998 the Company  incurred  Base Fees of
$5,000 on the  retained  equity  interest  from the CMBS bond  resecuritization.
During the three months ended March 31, 1997, the Company's management fees were
$320,000  consisting  of Base  Fees of  $166,000,  Incentive  Fees of  $118,000,
Administrative Fees of $13,000, and Acquisition Fees of $23,000. The acquisition
fees were capitalized as part of the cost of acquiring CMBS bonds.




                                     - 6 -
<PAGE>




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,  the Company's  Annual Report to Stockholders and other
Company  filings  (collectively,  the "SEC Filings") under the Securities Act of
1933, as amended,  and the Securities  Exchange Act of 1934, as amended (as well
as information  communicated  orally or in writing between the dates of such SEC
Filings) contains or may contain information that is forward looking, including,
without  limitation,  statements  regarding  the  effect  of  acquisitions,  the
Company's future financial performance and the effect of government regulations.
Actual results may differ materially from those described in the forward looking
statements  and will be affected  by a variety of risks and  factors  including,
without limitation, national and local economic conditions, the general level of
interest rates,  terms of governmental  regulations  that affect the Company and
interpretations of those regulations,  the competitive  environment in which the
Company  operates,  financing risks,  including the risk that the Company's cash
flow from operations may be insufficient to meet required  payments of principal
and interest,  risks inherent in owning marinas or debt secured by marinas,  the
availability of marinas at prices which meet the Company's  investment criteria,
acquisition and development  risks,  including  failure of such  acquisitions to
perform in accordance with projections,  and possible environmental liabilities.
In addition,  the Company's continued  qualification as a real estate investment
trust involves the application of highly technical and complex provisions of the
Internal Revenue Code.  Readers should carefully review the Company's  financial
statements and the notes thereto,  as well as the risk factors  described in the
SEC Filings.

Business.

Commercial Assets, Inc., a Maryland corporation formed in August 1993, (together
with its consolidated  subsidiaries,  the "Company") is a real estate investment
trust ("REIT").  Initially,  it was a wholly-owned subsidiary of Asset Investors
Corporation ("Asset Investors").  Asset Investors contributed $75 million to the
initial capital of the Company and in October 1993, it distributed approximately
70% of the  Company's  outstanding  common stock  ("Common  Stock") as a taxable
dividend  to Asset  Investors'  stockholders.  Asset  Investors  currently  owns
approximately  27%  of  the  outstanding   Common  Stock  and  provides  certain
management  services  to the  Company  pursuant  to the  terms  of a  management
agreement.  See  "Manager."  The Common  Stock is listed on the  American  Stock
Exchange, Inc. ("AMEX") under the symbol "CAX."

Prior to November  1997,  the Company  owned  subordinate  classes of Commercial
Mortgage Backed  Securities  ("CMBS bonds").  CMBS bonds generally 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. The Company's subordinate tranches of CMBS
bonds  included  "first-loss"  tranches,  which  bore the risk of default on the
underlying  collateral and provided credit support for the more senior tranches.
The Company restructured its subordinate CMBS bonds in November 1997 by selling,
redeeming and  resecuritizing  various CMBS bonds.  The Company  received  $77.7
million  in cash and a small  residual  interest  in two CMBS  bonds  from  such
restructuring.  The Company has  temporarily  invested  its funds in  government
securities  and  other  cash  equivalents  until  such  time as the funds can be
reinvested.

                                     - 7 -
<PAGE>

The Company has decided to acquire  interests in marinas.  The Company  believes
that the marina  industry has many of the  traditional  characteristics  of real
estate but is undercapitalized and has fragmented ownership.  This is similar to
the  status  of other  areas of the real  estate  industry  before  REITs  began
consolidating  these real estate  assets in an attempt to achieve the  operating
efficiencies and more effective access to capital that publicly traded REITs may
provide.

In the United States and its  territories,  there are over 10,000 marinas listed
in the  Marinas  Directory  maintained  by the  National  Marine  Manufacturer's
Association,  of which over 85% are privately  owned and managed.  These marinas
have approximately  1,100,000 slips consisting of 250,000 dry land storage units
and 850,000 wet slips/mooring  storage units.  There are over 1,500 marinas with
at least 200 slips.

As part of its strategy to acquire interests in marinas,  on March 31, 1998, the
Company acquired a 12% interest, consisting of 9.8% voting common stock and 2.2%
non-voting common stock, in Westrec Marina  Management,  Inc.  ("Westrec").  The
purchase price for such stock consisted of approximately $2,500,000 and warrants
to purchase 322,000 shares of the Company's Common Stock at a per share price of
$6.60.  Such warrants  have been  transferred  to Westrec's  owner and expire in
three  years.  In  addition,  the  Company  acquired  warrants  to  purchase  an
additional  23% of Westrec over the next three years,  in the form of non-voting
common stock.  Westrec also received  warrants to purchase a number of shares of
the  Company's  Common  Stock equal to (i) the total  dollar  amount paid by the
Company in  exercising  its  warrants to purchase  additional  shares of Westrec
non-voting  common  stock  divided  by (ii)  the  average  trading  price of the
Company's  Common  Stock for the  30-day  period  prior to the date on which the
Company  exercises its warrants to purchase the Westrec  stock.  These  warrants
have been  transferred to the owner of Westrec and expire three years after they
become  exercisable.  Westrec is the largest  marina  management  company in the
United  States.  The Company  also has  options to acquire  from  affiliates  of
Westrec two marinas and the general  partner  interests in limited  partnerships
that own an additional  10 marinas.  These 12 marinas have  approximately  7,000
boat slips,  believed  to be the largest  single  group owned  privately  in the
United States.

The Company  believes that even though the cash returns to be earned from equity
interests in marinas may be less than the returns  previously earned on the CMBS
bonds,  the change in assets will reduce the Company's  exposure to credit risks
and may result in  increased  opportunities  for capital  appreciation.  At this
time,  the Company has not acquired any marinas.  There can be no assurance that
the Company will ever acquire any marinas due to a number of factors  including,
but not limited to: differences  between the Company's valuation of a marina and
the  purchase  price  required  by the  marina  owner or the  price  that  other
purchasers may be willing to pay; the Company's determination that the return it
expects  from a marina is  inadequate  for the risk  associated  with owning and
operating the marina; other non-marina investment  opportunities that may become
available to the Company in the future.  In addition,  there can be no assurance
that the value of any marinas  purchased  by the Company  will  appreciate.  The
failure to achieve  expected  returns or a decrease in the value of such marinas
could have a material adverse effect on the Company.

Manager

The Company's  day-to-day  operations are performed by a manager (the "Manager")
pursuant to a  year-to-year  management  agreement  currently in effect  through
December 1998 ("the Management Agreement").  Prior to November 1997, the Company
was managed  Financial  Asset  Management LLC ("FAM").  An investor group led by
Terry  Considine,  Thomas  L.  Rhodes  and Bruce D.  Benson  has owned FAM since
September  1996. In November 1997,  the assets of FAM,  including the Management
Agreement,  were acquired by Asset Investors,  which is now the current Manager.
Mr. Considine is Chairman of the Board of Directors and Chief Executive  Officer


                                     - 8 -
<PAGE>

of both the Company and Asset  Investors.  Mr.  Rhodes is Vice  Chairman and Mr.
Benson is a director of both companies.

The Management Agreement is approved by the Company's  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  the  regular  business  of the  Company.  Pursuant to the
Management Agreement, the Manager receives a "Base Fee," an "Incentive Fee," and
an "Acquisition Fee." The Base Fee is payable quarterly in an amount equal to 1%
per annum of the  Company's  "average  invested  assets." At the present time, a
small Base Fee is being paid to the Manager as effectively  all of the Company's
assets are cash  equivalents.  Once the  Company  invests  its cash  balances in
marina  assets,  the Base Fee is expected to increase.  The Incentive Fee equals
20% of the  amount  by which  the  Company's  REIT  income  exceeds  the  amount
calculated by  multiplying  the  Company's  "average net worth" by the "Ten-Year
United  States  Treasury  rate"  plus 1%.  The  Company  does not  expect to pay
Incentive Fees until the Company's funds are reinvested. The Manager receives an
Acquisition  Fee  equal to 1/2 of 1% of the  cost of each  asset  acquired.  The
Company  expects to pay Base Fees and  Acquisition  Fees during 1998. It may pay
Incentive Fees based on the Company's results.

The Company has agreed to 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.

Taxation of the Company

The Company has elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), and the Company intends to continue to operate in
such a manner.  The Company's  current and  continuing  qualification  as a REIT
depends on its  ability to meet the  various  requirements  imposed by the Code,
through actual  operating  results,  distribution  levels and diversity of stock
ownership.

If the Company  qualifies  for  taxation  as a REIT,  it will  generally  not be
subject to federal  corporate  income  tax on its net income  that is  currently
distributed  to  stockholders.  If the Company fails to qualify as a REIT in any
taxable  year,  its  taxable  income  will be subject  to federal  income tax at
regular  corporate  rates  on  its  taxable  income  (including  any  applicable
alternative  minimum  tax).  Even if the Company  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.

                          RESULTS OF OPERATIONS FOR THE
                   THREE MONTHS ENDED MARCH 31, 1998 AND 1997

Interest Income

Interest  income  during the three  months  ended March 31, 1998 was  $1,053,000
compared  to  $111,000  for the same  period  in 1997.  The  increase  is due to
investing the proceeds from the  restructuring of the CMBS bonds into short-term
investments.  The average  interest rate earned on these funds was 5.4% and 5.2%
during the three months ended March 31, 1998 and 1997, respectively.

CMBS Bonds

Income from CMBS bonds was $40,000  during 1998  compared to $2,044,000 in 1997.
Earnings during 1998 represent the income from the retained equity interest from
the  resecuritization  of two CMBS bonds.  All other  income from the CMBS bonds


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<PAGE>

ceased subsequent to the restructuring of the CMBS bonds in November 1997.

General and Administrative

General and administrative expenses of the Company were $86,000 and $123,000 for
the three  months  ended  March 31,  1998 and 1997,  respectively.  General  and
administrative  expenses  decreased for such three-month period in 1998 compared
to 1997  primarily due to lower  accounting  and other  expenses  related to the
ownership of CMBS bonds.


Management Fees

During the three months ended March 31, 1998 the Company  incurred  Base Fees of
$5,000 on the  retained  equity  interest  from the CMBS bond  resecuritization.
During the three months ended March 31, 1997, the Company's management fees were
$320,000  consisting  of Base  Fees of  $166,000,  Incentive  Fees of  $118,000,
Administrative Fees of $13,000, and Acquisition Fees of $23,000. The acquisition
fees were  capitalized  as part of the cost of acquiring  CMBS bonds.  The large
decrease in  management  fees is because such fees are not paid when the Company
primarily owns cash and cash equivalents.

The  Company  does not  believe  that  changes in  inflation  rates would have a
material impact on the net income of the Company.

                         LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 1998, the Company has cash and cash  equivalents of $73,873,000.
The  Company's   principal   demands  for  liquidity  include  normal  operating
activities and dividends  paid to  stockholders.  In addition,  during the three
months ended March 31, 1998, the company invested $2,540,000 in Westrec, and the
Company  intends to invest a significant  portion,  if not all, of the remaining
proceeds from the  restructuring  of the CMBS bond portfolio in equity interests
in marinas.

In February 1998,  the Company  announced that it was changing the date on which
its  quarterly  dividends  are declared  from the last day of the quarter to the
first month of the  subsequent  quarter.  This change was made in order to allow
the  dividend  to be based on  actual  results  instead  of  estimated  results.
Accordingly,  no dividend  was declared in the first  quarter of 1998.  In April
1998,  the  Company  declared a $0.13 per common  share  dividend  for the first
quarter of 1998.  During  the first  quarter  of 1997,  a dividend  of $0.17 per
common share was declared and paid.

The  Company  had a Loan and  Security  Agreement,  collateralized  by four CMBS
bonds,  which was cancelled in November 1997 upon the sale and  resecuritization
of the CMBS bonds. In addition, the Company has an unsecured line of credit with
a bank for  $1,000,000  that expires on July 31, 1998.  Advances under this line
bear interest at prime.  No advances were  outstanding on this line of credit at
March 31, 1998 or December 31, 1997.

The Company  believes that even though the cash returns to be earned from equity
interests in marinas may be less than the returns  previously earned on the CMBS
bonds,  the change in assets will reduce the Company's  exposure to credit risks
and may result in increased  opportunities  for capital  appreciation.  However,
there can be no assurance that the value of the marinas will appreciate, and any
drop in the value of the  marinas  could have a material  adverse  effect on the
Company.

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<PAGE>

                              YEAR 2000 COMPLIANCE

The Company utilizes  numerous  accounting and reporting  software  packages and
computer hardware to conduct its business,  the majority of which already comply
with year 2000 requirements.  Management  believes that the cost of modification
or replacement of non-compliant  accounting and reporting  software and hardware
will  not  be  material  to the  Company's  financial  position  or  results  of
operations.



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<PAGE>


                                     PART II
                                OTHER INFORMATION


Item 2.           CHANGES IN SECURITIES AND USE OF PROCEEDS.

On March  31,  1998,  the  Company  issued to  Westrec  Marina  Management  Inc.
("Westrec") warrants (the ("Initial Warrants") to purchase a number of shares of
Common Stock equal to the dollar amount paid by the Company for 12% of Westrec's
then outstanding shares of common stock divided by $6.60 and additional warrants
to  purchase a number of shares of Common  Stock  equal to (i) the total  dollar
amount paid by the Company in  exercising  its  warrants to purchase  additional
shares of Westrec  non-voting  common stock divided by (ii) the average  trading
price of the  Company's  Common Stock for the 30 day period prior to the date on
which the Company  exercises its warrants to purchase the Westrec stock.  In May
1998, it was  determined  that the number of shares of Common Stock that Westrec
could purchase  pursuant to the Initial Warrants was 322,000.  This issuance was
made as a private placement of securities, not involving any public offering.


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

           (a)    Exhibits:

Exhibit No.       Description


     10.1         Securities  Purchase  Agreement,  dated as of March 26,  1998,
                  between the Registrant and Westrec Marina Management, Inc.


     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:

                  Form 8-K dated  January 31, 1998,  reporting  the formation of
                  CAII Holdings, Inc.




                                    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:  May 14, 1998
                                              By/s/ David M. Becker
                                              ------------------------------
                                              David M. Becker
                                              Chief Financial Officer



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