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, 2000

                                       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 May 5, 2000, 10,396,529 shares of common stock were outstanding.


<PAGE>



                             COMMERCIAL ASSETS, INC.

                                    FORM 10-Q

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000

                                TABLE OF CONTENTS

                                                                            PAGE
PART I.  FINANCIAL INFORMATION:

         Item 1.  Condensed Consolidated Financial Statements:

                  Balance Sheets as of March 31, 2000 (unaudited) and
                    December 31, 1999.......................................   1

                  Statements of Income for the three months
                  ended March 31, 2000 and 1999 (unaudited).................   2

                  Statements of Cash Flows for the three months ended
                    March 31, 2000 and 1999 (unaudited).....................   3

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

         Item 2.  Management's Discussion and Analysis of
                    Financial Condition and Results of Operations...........  12


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)

                                                                                         March 31,        December 31,
                                                                                           2000               1999
                                                                                           ----               ----
                                                                                        (unaudited)
ASSETS
<S>                                                                                      <C>                <C>
Real estate, net of accumulated depreciation of $1,821 and $1,329                        $   65,767         $   64,273
Investments in participating mortgages                                                        2,266              2,148
Investment in real estate joint venture                                                       1,951              1,932
Short-term investments                                                                       11,926             12,502
Cash and cash equivalents                                                                    12,905              4,664
Investment in and note receivable from Westrec                                                3,201              3,563
Investment in Asset Investors                                                                 1,383              1,396
Investment in home sales company                                                              1,376                 --
CMBS bonds                                                                                    1,746              1,753
Other assets, net                                                                             3,487              4,852
                                                                                         ----------         ----------
      Total Assets                                                                       $  106,008         $   97,083
                                                                                         ==========         ==========

LIABILITIES
Secured long-term notes payable                                                          $   30,551         $   20,442
Accounts payable and accrued liabilities                                                      1,550              1,747
Management fees payable to related parties                                                      211                198
                                                                                         ----------         ----------
                                                                                             32,312             22,387
                                                                                         ----------         ----------

COMMITMENTS AND CONTINGENCIES                                                                    --                 --

MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES                                                  615                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
   10,393 shares issued; and 10,320 and 10,320 shares outstanding, respectively                 104                104
Additional paid-in capital                                                                   77,018             77,018
Dividends in excess of accumulated earnings                                                  (3,600)            (2,600)
Treasury stock, 73 and 73 shares at cost                                                       (441)              (441)
                                                                                         ----------         ----------
                                                                                             73,081             74,081
                                                                                         ----------         ----------
      Total Liabilities and Stockholders' Equity                                         $  106,008         $   97,083
                                                                                         ==========         ==========
</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
                                                                                                    March 31,
                                                                                                    ---------
                                                                                               2000           1999
                                                                                               ----           ----
Rental property operations
<S>                                                                                          <C>            <C>
Rental and other property revenues                                                           $ 1,783        $     --
Income from participating mortgages and leases                                                    77             587
Property operating expenses                                                                     (661)             --
Depreciation                                                                                    (493)            (89)
                                                                                            --------        --------
Income from rental property operations                                                           706             498
                                                                                            --------        --------

Interest and other income                                                                        458             701
Interest expense                                                                                (364)             --
General and administrative expenses                                                             (121)           (133)
Related-party management fees                                                                   (193)            (80)
Equity in loss of home sales company                                                            (191)             --
Equity in earnings of Asset Investors                                                             11              --
CMBS bonds revenue                                                                                39              38
Related-party acquisition fees                                                                    --             (42)
                                                                                            --------        --------

Net income                                                                                  $     345       $    982
                                                                                            =========       ========

Basic and diluted earnings per share                                                        $    0.03       $   0.09
                                                                                            =========       ========

Weighted average common shares outstanding                                                     10,320         10,364

Weighted average common shares and common share equivalents outstanding                        10,320         10,365

Dividends paid per share                                                                    $    0.13       $   0.13
                                                                                            =========       ========
</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)                                               Three Months Ended
                                                                                                  March 31,
                                                                                                  ---------
                                                                                             2000           1999
                                                                                             ----           ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                       <C>            <C>
Net income                                                                                $    345       $    982
Adjustments to reconcile net income to net cash flows from operating activities:
   Depreciation and amortization                                                               504             89
   Amortization of premium on short-term investments                                            --             47
   Amortization of discount on secured long-term notes payable                                  79             --
   Accrued income on participating mortgages                                                   (15)           (61)
   Equity in earnings of Asset Investors                                                       (11)            --
   Equity in earnings of real estate joint ventures                                            (10)            --
   Equity in loss of home sales company                                                        191             --
   Increase (decrease) in accounts payable and accrued liabilities                            (198)            67
   Increase in other assets                                                                   (327)          (365)
                                                                                          --------       --------
     Net cash provided by operating activities                                                 558            759
                                                                                          --------       --------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of real estate                                                                        --         (8,323)
Collections on short-term investments                                                          576          4,774
Proceeds from sale of short-term investments                                                    --          2,414
Investments in participating mortgages, net                                                   (103)          (603)
Investments in real estate joint ventures                                                      (19)           (24)
Purchase of inventory contributed to home sales company                                       (864)            --
Capital replacements and improvements                                                         (858)           (44)
Collections on note receivable from Westrec                                                    362             --
Dividends from Asset Investors                                                                  29             --
Distributions from real estate joint ventures                                                    9             --
Collections on CMBS bonds                                                                        7             58
                                                                                          --------       --------
     Net cash used in investing activities                                                    (861)        (1,748)
                                                                                          --------       --------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured long-term notes payable                                               10,110             --
Dividends paid                                                                              (1,345)        (1,347)
Payment of loan costs                                                                         (141)            --
Principal paydowns on secured long-term notes payable                                          (80)            --
                                                                                          --------       --------
     Net cash provided by (used in) financing activities                                     8,544         (1,347)
                                                                                          --------       --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                         8,241         (2,336)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                             4,664          3,292
                                                                                          --------       --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                                $ 12,905       $    956
                                                                                          ========       ========
</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  resecuritized
its subordinate CMBS bond portfolio.  The sale resulted in the Company receiving
$77,693,000  cash and  retaining a residual  interest in an owner trust  arising
from the  resecuritization  transaction  (see Note K). In the third  quarter  of
1998, the Company decided to invest in manufactured  home  communities and as of
March 31, 2000 has invested  approximately  $70 million in 12 manufactured  home
communities   (including  real  estate  joint  ventures)  with  1,850  developed
homesites and 1,360 undeveloped homesites.

The  Company's  daily  operations  are  performed  by a manager  pursuant  to an
agreement  currently  in effect  through  December  31,  2000  ("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.  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.           Proposed Merger with Asset Investors

The Company and Asset Investors have agreed to merge, subject to the approval by
both (a) a majority of Asset Investors' outstanding shares and (b) two-thirds of
the Company's  outstanding shares. Asset Investors owns approximately 27% of the
Company's outstanding shares and has agreed to vote these shares in favor of the
merger.  Asset  Investors  will issue 0.4075 shares of its common stock for each
outstanding  share of the Company's Common Stock.  Alternatively,  the Company's
stockholders  may elect to receive  $5.75 per share in cash for up to  3,549,868
shares of the Company's  Common Stock with any remaining shares receiving 0.4075
shares of Asset  Investors  common stock.  Asset  Investors and the officers and
directors  of Asset  Investors  and the Company  have agreed to elect to receive
shares of Asset  Investors  common stock for all shares of the Company's  Common
Stock that they own.

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 March 31, 2000 for the three
month period 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  financial  statements  should be read in  conjunction  with the 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, 1999.

Certain  reclassifications  have  been made in the 1999  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,  unless
considered  impaired.  If events or  circumstances  indicate  that the  carrying
amount of a property may be impaired, the Company will make an assessment of its
recoverability  by  estimating  the future  undiscounted  cash flows,  excluding
interest charges, of the property.  If the carrying amount exceeds the aggregate
future cash flows,  the Company would recognize an impairment loss to the extent
the  carrying  amount  exceeds the fair value of the  property.  As of March 31,
2000,  management  believes  that no  impairment  losses exist based on periodic
reviews.  No impairment  losses were  recognized in the three months ended March
31, 2000 and 1999.

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.

Investments in Participating Mortgages

The Company has loans  secured by real estate which provide for an interest rate
return plus up to 50% of net  profits,  cash flows and sales  proceeds  from the
underlying real estate. The Company accounts for these investments as loans when
(a) the Company  does not have an interest  in the  borrower  and either (b) the
borrower has a substantial  equity  investment in the real estate  collateral or
(c) the  Company  has  recourse  to other  substantial  tangible  assets  of the
borrower.  As  such,  the  Company  records  interest  income  based on the rate
provided  for in the loan and records its share of any net profits or gains from
the sale of the underlying real estate when realized.  If the above requirements
are not met,  then the loan is  accounted  for as an equity  investment  in real
estate under the equity method of accounting.

                                     - 5 -
<PAGE>

Investment in Real Estate Joint Venture

An  investment  in a real estate  joint  venture in which the  Company  does not
control the joint venture's  activities is accounted for under the equity method
of accounting.

Investment in Home Sales Company

The Company owns 35% of the nonvoting  common stock of a corporation  that sells
manufactured  homes. This investment is accounted for under the equity method of
accounting.

Investment in and Note Receivable from Westrec

The Company  classifies  its investment in and note  receivable  from Westrec as
available-for-sale  and carries  this at estimated  fair value in the  financial
statements.  The Company  believes that the contractual  amounts provided for in
the note  receivable  and the  agreement  under  which the  Company can sell its
shares of Westrec common stock approximates fair value at March 31, 2000.

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 March 31, 2000, 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.

Capitalized Interest

Interest is capitalized on development  projects  during periods of construction
or development. Capitalized interest was $220,000 and $0 during the three months
ended March 31, 2000 and 1999, respectively.

Income Taxes

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

As a REIT, the Company  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 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 (including any applicable alternative minimum tax). Even


                                     - 6 -
<PAGE>

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.

Earnings Per Share

Basic  earnings per share for the three months ended March 31, 2000 and 1999 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
dilutive,  unexercised  stock options of 0 and 1,000 shares for the three months
ended March 31, 2000 and 1999, respectively.

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 $545,000  and $0 during the three  months  ended March 31,
2000 and 1999, respectively.

Non-cash  operating,  investing  and financing  activities  for the three months
ended March 31, 2000 and 1999 were as follows (in thousands):

<TABLE>
<CAPTION>

                                                                                 2000                   1999
                                                                             -------------          ------------
<S>                                                                            <C>                    <C>
Accrued initial capital expenditures on real estate purchases                  $     --               $    300
Acquisitions of real estate by:
    Cancellation of notes receivable                                              1,174                     --
    Assumption of accounts payable and accrued liabilities, net of
      other assets received                                                          63                     --
Purchase of inventory and other assets, net of accounts payable and
    accrued liabilities assumed, by cancellation of notes receivable                621                     --
Investment in home sales company by  contribution of inventory and
   other assets, net of accounts payable and accrued liabilities
   transferred                                                                    1,569                     --
</TABLE>

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 March 31, 2000 approximates the
carrying value of $11,926,000. During the three months ended March 31, 1999, the
Company had $2,414,000 in proceeds from the sale of short-term  investments  and
realized no gain (loss)  from such  sales.  The Company had no sales  during the
three months ended March 31, 2000. The Company  determined its basis in the sold


                                     - 7 -
<PAGE>

investments using the specific identification method.

F.           Real Estate

Real estate at March 31, 2000 and December 31, 1999 was (in thousands):
<TABLE>
<CAPTION>

                                                                                March 31,            December 31,
                                                                                  2000                   1999
                                                                                  ----                   ----
<S>                                                                            <C>                   <C>
Land                                                                           $   15,290            $   15,290
Land improvements and buildings                                                    52,298                50,312
                                                                               ----------            ----------
                                                                                   67,588                65,602
Less accumulated depreciation                                                      (1,821)               (1,329)
                                                                               ----------            ----------
Real estate, net                                                               $   65,767            $   64,273
                                                                               ==========            ==========

</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
terminated  the lease on January 1, 2000 by  canceling  $187,000 in loans to the
lessee.

The other leased  community  involves two phases and has been leased to the same
third party for 50 years.  Annual lease  payments on the first phase during 1999
are $890,000 and increases by 4% per annum.  There are no lease  payments on the
second  phase  until the sites are ready for homes,  at which  time,  the annual
lease payments on the second phase will be equal to 10% times the costs incurred
in developing this phase. 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 terminated the lease on January 1, 2000 by canceling
$186,000 in loans to the lessee.

G.           Investments in Participating Mortgages

During 1998, the Company made investments in participating  mortgages secured by
three  manufactured home communities and adjoining land. The non-recourse  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 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
non-recourse  mortgages  accrue  interest at 10% and pay interest  from the cash
flows  from the  homes and  homesites.  The  Company  also  receives  additional


                                     - 8 -
<PAGE>

interest  equal to 50% of the net  profits  and cash  flows  from the  homes and
homesites.

As of March 31, 2000, the Company had investments in participating  mortgages of
$2,266,000.  The Company had income from participating  mortgages of $54,000 and
$331,000, respectively, for the three months ended March 31, 2000 and 1999.

H.           Investments in Real Estate Joint Ventures

The  Company  has  a  $1,322,000  investment  in a  joint  venture  involving  a
manufactured  home  community.  The Company  receives a priority return from the
venture  until the  Company  has  received  an annual  amount  equal to 9% times
$1,250,000 for 1999. 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 months ended March 31, 2000 and 1999.

In November 1999, the Company invested  $624,000 in a joint venture  involving a
manufactured home community.  The Company receives a priority annual return from
the venture equal to 9% times $690,000  through 2000.  After 2000, the Company's
priority return increases by 4% annually.  Thereafter,  the Company receives 20%
of any  profits  and cash flows of the  venture in excess of the above  priority
returns.  During the three  months ended March 31,  2000,  the Company  recorded
$15,000 in income from this joint venture.

I.           Investment in Asset Investors

During 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. The Company
recorded  $11,000 and $0 in equity in earnings of Asset  Investors for the three
months ended March 31, 2000 and 1999, respectively.

J.           Investment in Home Sales Company

Effective  January 1, 2000, the Company acquired $621,000 of inventory and other
assets, net of accounts payable and accrued liabilities assumed, in exchange for
the  cancellation of notes  receivable.  The Company then contributed all of its
inventory and related home sales assets and  liabilities to a home sales company
in exchange for 35% of the  nonvoting  common  stock of the home sales  company.
Asset  Investors  owns the remaining 65% of the home sales  company's  nonvoting
common  stock and  certain  officers  of the  Company  own all of the home sales
company's  voting common stock. The nonvoting common stock represents 99% of all
outstanding shares of the home sales company's capital stock.

During the three months ended March 31, 2000, the Company invested $1,569,000 in
the home sales company and had equity in the losses of the home sales company of
$191,000.

                                     - 9 -
<PAGE>

K.           CMBS Bonds

In November  1997,  the Company sold its  portfolio of CMBS bonds and retained a
residual  interest  in the  owner  trust  used in the sale.  Since the  residual
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 value of $2,000,000.  The net book value at March 31,
2000 is  $1,746,000  which the Company  believes  approximates  fair value.  The
Company had no sales of CMBS bonds  during the three months ended March 31, 2000
and 1999.

L.           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") 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.

M.           Secured Long-Term Notes Payable

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

                                                                                 March 31,          December 31,
                                                                                   2000                 1999
                                                                                   ----                 ----
Fixed rate, ranging from 7.4% to 8.3%, fully amortizing, non-recourse
<S>                                                                             <C>                  <C>
   notes maturing at various dates in 2019 and 2020                             $  22,875            $   12,815
7.7% fixed rate, partially amortizing, non-recourse note maturing in 2007           2,947                 2,950
Recourse, fully amortizing note discounted at 7.00%, maturing in 2002               4,729                 4,677
                                                                                ---------            ----------
                                                                                $  30,551            $   20,442
                                                                                =========            ==========
</TABLE>

Real estate assets which secure the long-term notes payable had a net book value
of $62,788,000 at March 31, 2000.

N.           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, 2000,  except that it will terminate if the Company merges
with  Asset  Investors.  The  Management  Agreement  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.  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


                                     - 10 -
<PAGE>

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.
Management  fees during the three  months ended March 31, 2000 and 1999 were (in
thousands):
                                                  Three Months Ended
                                                      March 31,
                                        ---------------------------------------
                                              2000                  1999
                                        -----------------     -----------------
        Base Fees                          $    193               $   80
        Acquisition Fees                         --                   42
        Incentive Fees                           --                   --
                                           --------               ------
                                           $    193               $  122
                                           ========               ======

O.           Commitments and Contingencies

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.
During the three months ended March 31, 2000 and 1999,  the Company paid $86,000
and $0,  respectively,  for homesites that became  occupied.  At March 31, 2000,
there were 148 homesites subject to the earnout.

The Company has agreed to acquire from time-to-time  homesites subject to ground
leases.  The purchase  price for each  homesite will be equal to the base annual
rent provided for in the ground lease divided by 9%. The Company is not required
to acquire  these  homesites  in groups of less than 10. The  maximum  number of
homesites  the  Company   might   purchase  is   approximately   500  for  total
consideration of approximately  $20 million.  The Company purchased no homesites
during the three months ended March 31, 2000 or 1999.

The Company has agreed to invest up to an  additional  $680,000 in a real estate
joint  venture in four  equal,  annual  installments  of $170,000  beginning  in
November 2000.

In connection  with the  acquisition of a property in November 1999, the Company
entered  into an  earn-out  agreement  whereby it will pay the  former  owner an
amount equal to the increase in the property's  net operating  income divided by
9.5% until the Company pays a total of $2,160,000. No amount was paid during the
three months ended March 31, 2000.

In September  1999,  four of the  Company's  stockholders,  individually  and as
purported representatives of the Company's stockholders,  except Asset Investors
and its  affiliates,  filed three  purported  class action  lawsuits in Delaware
against the Company,  the members of the board of directors and certain officers
of Asset Investors and the Company.  These lawsuits  alleged that the defendants
breached their fiduciary duties to the Company's stockholders in connection with
the Company's  proposed  merger with Asset  Investors  and the Company's  recent
reincorporation in Delaware.  In November 1999, these lawsuits were consolidated
into a single  lawsuit.  In March 2000,  the parties  entered  into a settlement
agreement,  subject to the court's approval,  which amended the merger agreement
as follows:

o    the Company's stockholders, other than Asset Investors and the officers and
     directors of Asset Investors and the Company, may elect to receive $5.75 in
     cash per share for up to  3,549,868  shares of the  Company's  Common Stock
     with any  remaining  shares to  receive  0.4075  shares of Asset  Investors
     common stock; and


                                     - 11 -
<PAGE>

o    the percentage of votes of the Company's Common Stock needed to approve the
     merger was increased from a simple majority to two-thirds.

P.           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.

Q.           Common Stock and Dividends

During the three  months  ended March 31, 2000 and 1999,  the Company paid $0.13
and  $0.13  per  share  dividends  on  Common  Stock  totaling   $1,345,000  and
$1,347,000, 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.

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


                                     - 12 -
<PAGE>

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 March 31, 2000,  we held  interests  as owner,  ground
lessor or mortgage lender, including participating mortgages, in 12 manufactured
home communities with a total of 1,850 developed  homesites (sites with homes in
place) and 1,360 undeveloped homesites.

Proposed Merger with Asset Investors

In August 1999,  we agreed to merge with Asset  Investors.  Asset  Investors has
agreed to issue  0.4075  shares of its common stock for each share of our common
stock.  Alternatively,  our stockholders may elect to receive $5.75 per share in
cash for up to 3,549,868 shares of our common stock with any remaining shares of
our common stock receiving 0.4075 shares of Asset Investors common stock.  Asset
Investors  and the officers  and  directors of Asset  Investors  and  Commercial
Assets  have agreed to elect to receive  Asset  Investors  common  stock for all
shares of our common stock that they own. The merger  requires the approval by a
majority  of  the  outstanding  shares  of  Asset  Investors  common  stock  and
two-thirds of the outstanding  shares of our common stock.  Asset Investors owns
27% of our  common  stock and has  agreed to vote  these  shares in favor of the
merger.

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


                                     - 13 -
<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.

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.  This reserve is  management's  estimate  based on its  experience  in
owning,  operating and managing  manufactured home communities.  We believe that
the  presentation  of FFO when  considered with the financial data determined in
accordance  with generally  accepted  accounting  principles,  provides a useful
measure of our performance. However, FFO does not represent cash flow and is not
necessarily  indicative of cash flow or liquidity available to us, nor should it
be  considered  as an  alternative  to net income as an  indicator  of operating
performance.  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 beginning with the NAREIT  definition  and include  adjustments
for  property  acquisition  fees that were  expensed  under  generally  accepted
accounting  principles  because  the  fees  were  paid to  Asset  Investors,  an
affiliate.

We believe that the  presentation  of FFO provides  investors with  measurements
which help facilitate an understanding of our ability to make required  dividend
payments,  capital  expenditures  and principal  payments on our debt. Since FFO
excludes  depreciation  and  other  real  estate  related  expenses,  FFO may be
materially different from net income. Therefore, FFO should not be considered as
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 operating performance or liquidity.

FFO is not  necessarily  indicative  of cash  available  to fund our cash needs,
including  our  ability  to  make  distributions.  We use FFO in  measuring  our
operating  performance  because  we  believe  that the  items  that  result in a
difference  between  FFO and net  income do not  impact  the  ongoing  operating
performance  of a real estate  company.  Also, we believe that other real estate


                                     - 14 -
<PAGE>

companies,  analysts and investors  utilize FFO in analyzing the results of real
estate companies.  Our basis of computing FFO is not necessarily comparable with
that of other REITs.

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    selectively  acquiring  manufactured  home  communities that have potential
     long-term   appreciation  of  value  through,   among  other  things,  rent
     increases, expense efficiencies and in-park homesite development;
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;
o    improving  the   profitability  of  our  communities   through   aggressive
     management of occupancy,  community development and maintenance and expense
     controls;
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    ensuring  the  continued  maintenance  of our  communities  by  providing a
     minimum $50 per developed homesite per year for capital replacements;
o    seeking to reduce our exposure to downturns in regional real estate markets
     by diversifying our portfolio of communities since substantially all of our
     properties are in Florida and Arizona; 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.

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
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.

                                     - 15 -
<PAGE>

We believe that acquisition  opportunities for manufactured home communities are
attractive at this time because of:

o    the increasing acceptability of and demand for manufactured homes, as shown
     by the growth in the number of individuals  living in  manufactured  homes;
     and
o    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 March 31,  2000,  we have  invested  approximately  $70 million to acquire
interests  in 12  manufactured  home  communities  that are  located in Arizona,
Florida  and  California.  These  communities  have a total of  1,850  developed
homesites (sites with homes in place) and 1,360 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. As of March 31, 2000, we held interests in six
communities with 1,360 undeveloped homesites.

Manager

Our daily  operations  are  performed  by a  manager  pursuant  to a  management
agreement  currently  in effect  through  December  31,  2000.  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,


                                     - 16 -
<PAGE>

including   providing   property   management   services  on  our   communities.
Consequently,  we and Asset Investors are involved in the same industry. The two
companies have agreed that they will make a  determination  with respect to each
acquisition on a case-by-case basis.

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  Funds  From
     Operations,  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  months  ended March 31, 2000 and 1999,  we paid the  following
fees to Asset Investors (in thousands):

                                                   Three Months Ended
                                                      March 31,
                                          ----------------------------------
                                               2000               1999
                                          ---------------    ---------------
     Base Fees                               $    193            $   80
     Acquisition Fees                              --                42
     Incentive Fees                                --                --
                                             --------            ------
                                             $    193            $  122
                                             ========            ======

Prior to 1999,  the Incentive  Fee was based on REIT income  instead of FFO. The
Incentive  Fee for 1999 is  calculated  the same way as in 1998  except that our
FFO, less an annual  capital  replacement  reserve of at least $50 per developed
homesite,  replaces REIT income in the calculation  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.

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
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.

                                     - 17 -
<PAGE>

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 MONTHS ENDED MARCH 31, 2000 AND 1999

Comparison  of Three Months Ended March 31, 2000 to Three Months Ended March 31,
1999

Rental Property Operations

Income from rental property  operations totaled $706,000 during the three months
ended March 31, 2000  compared to $498,000  during the same period in 1999.  The
increase was due to our  acquisition of  manufactured  home  communities  during
1999.

Interest and Other Income

Interest  and other  income  during the three  months  ended  March 31, 2000 was
$458,000  compared to $701,000 for the same period in 1999.  The decrease is due
to a reduction in cash and short-term  investments  used to fund  investments in
manufactured home communities during 1999.

Interest Expense

Interest  expense was  $364,000 for the three months ended March 31, 2000 due to
long-term notes payable secured by our  communities.  We had no interest expense
during the same period in 1999 as we had no debt until May 1999.

General and Administrative Expenses

Our general and administrative expenses were $121,000 for the three months ended
March 31, 2000 and are comparable to the same period in 1999.

Related-Party Management Fees

During the three months ended March 31, 2000, our management  fees were $193,000
compared to $80,000  during the same period in 1999.  The increase in management
fees is due to our investments in  manufactured  home  communities  during 1999.
These  fees are not paid on cash and  short-term  investments,  which is what we
primarily held during the 1999 period.

Equity in Loss of Home Sales Company

During the three months  ended March 31, 2000,  our equity in the loss of a home
sales company was $191,000. We did not have an investment in this company during
1999.

                                     - 18 -
<PAGE>

CMBS Bonds

Income from CMBS bonds  during the three months ended March 31, 2000 was $39,000
and is comparable  to the same period in 1999.  This income is from our retained
residual interest in two CMBS bonds.

Related-Party Acquisition Fees

During the three months ended March 31, 1999, we expensed  acquisition fees paid
to Asset  Investors  of  $42,000.  We paid no  acquisition  fees during the same
period in 2000 because we acquired no manufactured  home communities  during the
2000  period.  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.

Dividend Distributions

During  the three  months  ended  March 31,  2000,  we paid  dividends  totaling
$1,345,000 or $0.13 per share  compared to $1,347,000 or $0.13 per share for the
same period in 1999.

                         LIQUIDITY AND CAPITAL RESOURCES

As of March  31,  2000,  we had cash and cash  equivalents  of  $12,905,000  and
short-term  investments of  $11,926,000.  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 three months ended March 31, 2000, the net cash provided by operating
activities was $558,000 compared to $759,000 during the same period in 1999. The
decrease  was  primarily  due to a decrease  in  accounts  payable  and  accrued
liabilities.

Net cash used in investing activities was $861,000 during the three months ended
March 31, 2000,  compared to uses of $1,748,000  during the same period in 1999.
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.  In the  2000  period,  capital
replacements and  improvements  and the purchase of manufactured  home inventory
were  partially  offset by collections  on short-term  investments  and the note
receivable from Westrec.

Net cash provided by financing activities was $8,544,000 during the three months
ended March 31, 2000  compared to uses of  $1,347,000  during the same period in
1999. The $9,891,000 increase in the 2000 period was primarily due to $9,969,000
in net proceeds from long-term borrowings.

We had long-term  debt of  $30,551,000  at March 31, 2000 and expect to meet our
long-term  liquidity  requirements  in excess of 12 months  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 the
presentation  of FFO when  considered  with the  financial  data  determined  in


                                     - 19 -
<PAGE>

accordance  with generally  accepted  accounting  principles,  provides a useful
measure of our performance. However, FFO does not represent cash flow and is not
necessarily  indicative of cash flow or liquidity available to us, nor should it
be  considered  as an  alternative  to net income as an  indicator  of operating
performance. 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 beginning with the NAREIT  definition  and include  adjustments
for  property  acquisition  fees that were  expensed  under  generally  accepted
accounting  principles  because  the  fees  were  paid to  Asset  Investors,  an
affiliate.

We believe that the  presentation  of FFO provides  investors with  measurements
which help facilitate an understanding of our ability to make required  dividend
payments,  capital  expenditures  and principal  payments on our debt. Since FFO
excludes  depreciation  and  other  real  estate  related  expenses,  FFO may be
materially different from net income. Therefore, FFO should not be considered as
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 operating performance or liquidity.

FFO is not  necessarily  indicative  of cash  available  to fund our cash needs,
including  our  ability  to  make  distributions.  We use FFO in  measuring  our
operating  performance  because  we  believe  that the  items  that  result in a
difference  between  FFO and net  income do not  impact  the  ongoing  operating
performance  of a real estate  company.  Also, we believe that other real estate
companies,  analysts and investors  utilize FFO in analyzing the results of real
estate companies.  Our basis of computing FFO is not necessarily comparable with
that of other REITs.

For the three months ended March 31, 2000 and 1999, our FFO was (in thousands):

<TABLE>
<CAPTION>

                                                                     Three Months Ended
                                                                          March 31,
                                                              ----------------------------------
                                                                   2000               1999
                                                              ---------------     --------------
<S>                                                               <C>                 <C>
Net income                                                        $   345             $   982
Real estate depreciation                                              493                  89
Real estate acquisition fees                                           --                  42
Equity in Asset Investors' adjustments for FFO                         27                  --
                                                                  -------             -------
Funds From Operations (FFO)                                       $   865             $ 1,113
                                                                  =======             =======

Weighted average common shares outstanding                         10,320              10,364
                                                                  =======             =======
</TABLE>

For the three  months  ended  March 31,  2000 and 1999,  net cash  flows were as
follows (in thousands):

<TABLE>
<CAPTION>

                                                                      Three Months Ended
                                                                          March 31,
                                                              -----------------------------------
                                                                   2000                1999
                                                              ---------------     ---------------
<S>                                                              <C>                <C>
Cash provided by operating activities                            $    558           $     759
Cash used in investing activities                                    (861)             (1,748)
Cash provided by (used in) financing activities                     8,544              (1,347)
</TABLE>


                                     - 20 -
<PAGE>

                              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  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.

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  announced  that their systems were Year 2000 compliant
before  January 1, 2000. We have received  oral  representations  from our third
party vendors indicating that they are substantially Year 2000 compliant.

We did not experience  any Year 2000 problems  during the first quarter of 2000.
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.  If LIBOR decreased immediately by 1%,
our annual net income and cash flows would  decrease by  $248,000,  based on the
amount  of cash and  short-term  investments  at March  31,  2000.  Our  primary
objective  with respect to our  short-term  investments  is to minimize the risk
that the principal amount of these  investments  could decrease.  Therefore,  we
have  short-term  investments  whose  principal  amount is  expected  to be less
affected by changes in interest rates than other potential investments.

We have $22.9  million of fixed  rate,  non-recourse,  secured  long-term  notes
payable  that mature in 2019 and 2020.  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 $4.7 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


                                     - 21 -
<PAGE>

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 $2.9 million, fixed rate, 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 $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 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.  (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).

    10.1      Promissory  Note dated  September 1, 1999  between CAX  Riverside,
              L.L.C. and Minnesota Life Insurance Company.

    10.2      Form of Promissory Note to Jackson National Life Insurance Company
              entered into in connection with the financing of two  manufactured
              home communities.

    10.2(a)   Form  of Loan  Agreement  with  Jackson  National  Life  Insurance
              Company  entered  into in  connection  with the  financing  of two
              manufactured home communities.

                                     - 22 -
<PAGE>

    10.2(b)   Form of Deed of Trust,  Security Agreement and Financing Statement
              with  Jackson  National  Life  Insurance  Company  entered into in
              connection   with  the   financing   of  two   manufactured   home
              communities.

    10.2(c)   Form of Assignment of Leases and Rents with Jackson  National Life
              Insurance Company entered into in connection with the financing of
              two manufactured home communities.

    10.3      Acquisition  Agreement  dated  effective  as of  January  1,  2000
              between CAX Riverside,  L.L.C., CADC Holdings,  L.L.C.,  Riverside
              Golf  Course  Investors,   Inc.  and  Community   Acquisition  and
              Development Corporation

    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:

               No  Current  Reports  on Form  8-K were  filed by the  Registrant
               during the period covered by this Quarterly Report on Form 10-Q.


                                    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 12, 2000                          By  /s/ David M. Becker
                                                --------------------------------
                                                  David M. Becker
                                                  Chief Financial Officer


                                     - 23 -