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 June 30, 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 July 24, 1998,  10,364,029 shares of Commercial Assets,  Inc. Common Stock
were outstanding.



<PAGE>



  
                             COMMERCIAL ASSETS, INC.

                                    FORM 10-Q

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998

                                TABLE OF CONTENTS

                                                                            PAGE
PART I. FINANCIAL INFORMATION:

        Item 1.  Condensed Consolidated Financial Statements:

                 Balance Sheets as of June 30, 1998 (Unaudited)
                   and December 31, 1997....................................   1

                 Statements of Income for the three and six months
                   ended June 30, 1998 and 1997 (Unaudited).................   2

                 Statements of Cash Flows for the six months ended
                   June 30, 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 4.  Submission of Matters to a Vote of Security Holders........  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)


                                                                                       June 30,        December 31,
                                                                                         1998              1997
                                                                                         ----              ----
                                                                                     (unaudited)
ASSETS

<S>                                                                                     <C>              <C>       
   CASH AND CASH EQUIVALENTS                                                            $   14,322       $   74,153
   SHORT TERM INVESTMENTS                                                                   57,978               --
   INVESTMENTS IN AND NOTES RECEIVABLE FROM WESTREC                                          4,290            1,710
   CMBS BONDS                                                                                1,855            1,981
   OTHER ASSETS, NET                                                                           583              304
                                                                                        ----------       ----------
                                                                                        $   79,028       $   78,148
                                                                                        ==========       ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

   ACCOUNTS PAYABLE AND ACCRUED LIABILITIES                                             $      532       $      368
   MANAGEMENT FEES PAYABLE                                                                      --               75
   NOTE PAYABLE TO BANK                                                                         --               --
                                                                                        ----------       ----------
                                                                                               532              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; 10,364 and
     10,316 shares issued and outstanding, respectively                                        104              104
   Additional paid-in capital                                                               76,874           76,724
   Retained earnings                                                                         1,518              877
                                                                                        ----------       ----------
                                                                                            78,496           77,705
                                                                                        ----------       ----------
                                                                                        $   79,028       $   78,148
                                                                                        ==========       ==========
</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             Six Months Ended
                                                                    June 30,                     June 30,
                                                           ------------------------      ------------------------
                                                              1998          1997            1998           1997
                                                           ---------      ---------      ---------       --------
REVENUES
<S>                                                        <C>            <C>            <C>             <C>    
   Interest                                                $   1,042      $      49      $   2,095       $   160
   CMBS bonds                                                     44          2,193             84         4,237
                                                           ---------      ---------      ---------       -------
                                                               1,086          2,242          2,179         4,397
                                                           ---------      ---------      ---------       -------

EXPENSES
   General and administrative                                     88            121            174           244
   Management fees                                                12            311             17           608
                                                           ---------      ---------      ---------       -------
                                                                 100            432            191           852
                                                           ---------      ---------      ---------       -------

NET INCOME                                                       986          1,810          1,988         3,545

Other comprehensive income-unrealized holding gains on
   CMBS bonds                                                     --            943             --         1,958
                                                           ---------      ---------      ---------       -------

COMPREHENSIVE INCOME                                       $     986      $   2,753      $   1,988       $ 5,503
                                                           =========      =========      =========       =======

BASIC EARNINGS PER SHARE                                   $    0.09      $    0.17      $    0.19       $  0.34
DILUTED EARNINGS PER SHARE                                 $    0.09      $    0.17      $    0.19       $  0.34

DIVIDENDS DECLARED PER SHARE                               $    0.13      $    0.17      $    0.13       $  0.34

Weighted-Average Common Shares Outstanding                    10,359         10,326         10,350        10,321

Weighted-Average Common Shares and Common Share
   Equivalents Outstanding                                    10,387         10,348         10,382        10,349

</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)


                                                                                         Six Months Ended
                                                                                              June 30,
                                                                                      -----------------------
                                                                                      1998              1997
                                                                                      ----              ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                 <C>               <C>     
   Net income                                                                       $   1,988         $  3,545
   Adjustments to reconcile net income to net cash flows
     from operating activities:
     Amortization of premium/discount on CMBS bonds and
       short-term investments                                                              11             (460)
     Increase in accounts payable and accrued liabilities                                  89               (1)
     Decrease (increase) in other assets                                                   48                3
                                                                                    ---------         --------
       Net cash provided by operating activities                                        2,136            3,087
                                                                                    ---------         --------

CASH FLOWS FROM INVESTING ACTIVITIES
   Investments in Westrec                                                              (2,580)              --
   Acquisitions of short term investments                                             (58,166)              --
   Collections on CMBS bonds                                                              126               --
   Acquisitions of CMBS bonds                                                              --           (4,801)
                                                                                    ---------         --------
       Net cash used in investing activities                                          (60,620)          (4,801)
                                                                                    ---------         --------


CASH FLOWS FROM FINANCING ACTIVITIES
   Dividends paid                                                                      (1,347)          (3,512)
   Issuance of Common Stock                                                                --               31
                                                                                    ---------         --------
       Net cash used in financing activities                                           (1,347)          (3,481)
                                                                                    ---------         --------
NET DECREASE IN CASH AND CASH EQUIVALENTS                                             (59,831)          (5,195)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                       74,153            8,277
                                                                                    ---------         --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                          $  14,322         $  3,082
                                                                                    =========         ========
</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. (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 by Financial Asset Management LLC ("FAM").  An investor group led by
Terry Considine,  Thomas L. Rhodes and Bruce D. Benson acquired FAM in 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 F).  The  Company  has  temporarily
invested the proceeds  from such  restructuring  in  government  securities  and
short-term investments 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  announced  that it was  considering  the  acquisition  of  interests in
marinas. In connection with this, the Company acquired a 12% interest in Westrec
Marina Management, Inc. ("Westrec") (see Note E).

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 June 30, 1998,  for the
three and six months  then ended,  and for all prior  periods  presented.  These


                                     - 4 -
<PAGE>

statements  are  condensed  and do not include all the  information  required by
generally  accepted  accounting  principles  ("GAAP") in a full set of financial
statements.  These  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 six months ended June 31,
1998 and 1997 were as follows (in thousands):

                                                           1998            1997
                                                           ----            ----
Principal collections on CMBS bonds transferred
  to restricted cash                                     $   --         $   227

Unrealized holding gains on CMBS bonds                       --           1,958

Issuance of Common Stock                                    150             135

D.            Short-term investments.

During the second quarter of 1998, the Company acquired  short-term  investments
consisting of  mortgage-backed  bonds  guaranteed by Federal  National  Mortgage
Association and Federal Home Loan Mortgage  Corporation.  These  investments are
classified  as  available-for-sale,  and the fair market  value at June 30, 1998
approximates the carrying value of $57,978,000.

E.            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 has notes
and interest  receivable from affiliates of Westrec of $1,790,000 and $1,710,000
at June 30, 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.

F.           CMBS Bonds

In November 1997,  the Company  restructured  its portfolio of CMBS bonds.  Nine
bonds were sold,  one bond was  redeemed 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 in order to
value the equity interest at its then estimated fair value of $2,000,000. During


                                     - 5 -
<PAGE>

the six months  ended June 30,  1998,  the  Company  received  $210,000 of which
$126,000  was  recorded  as a  reduction  in the net book value of 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 G).

G.           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 June 30, 1998 or
December 31, 1997.

H.           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 six months  ended June 30,  1998 the  Company  incurred  Base Fees of
$17,000 on the retained equity interest from the CMBS bond  resecuritization and
investment in Westrec.  During the six months ended June 30, 1997, the Company's
management  fees were $631,000  consisting  of Base Fees of $341,000,  Incentive
Fees of  $237,000,  Administrative  Fees of  $30,000,  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  projections of the Company's future
financial performance,  cash flow and dividends. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results,  performance or achievements of the Company to be materially
different  from any future  results,  performance or  achievements  expressed or
implied  by  the  forward-looking  statements.  Such  factors  include:  general
economic and business  conditions;  interest  rate  changes;  risks  inherent in
owning real estate or debt secured by real estate; competition; the availability
of real  estate at prices  which meet the  Company's  investment  criteria;  the
Company's   ability  to  acquire  any  real  estate;   potential   environmental
liabilities  or costs  associated  with the  ownership  of real  estate  and the
Company's  ability to maintain or reduce expense  levels;  and  compliance  with
provisions relating to the Company's continued  qualification as a REIT. 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  short-term  investments  until  such  time as the  funds can be
reinvested.

The Company is evaluating  acquiring interests in various classes of real estate
including,  but not limited to, marinas.  The Company  believes that even though
the cash  returns to be earned from equity  interests  in real estate or marinas
may be less than the returns  previously earned on the CMBS bonds, the change in


                                     - 7 -
<PAGE>

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 real estate or marinas.  There can be no  assurance  that the
Company  will ever acquire any real estate or marinas due to a number of factors
including,  but not limited to, differences  between the Company's  valuation of
the property and the purchase  price required by the property owner or the price
that other  purchasers may be willing to pay, the Company's  determination  that
the return it expects from a property is inadequate for the risk associated with
owning and operating the property,  or other investment  opportunities  that may
become  available  to the Company in the future.  In  addition,  there can be no
assurance that the value of any real estate or marinas  purchased by the Company
will  appreciate.  The failure to achieve  expected returns or a decrease in the
value of such real estate or marinas could have a material adverse effect on the
Company.

In connection  with its possible  acquisition of 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
$2,580,000 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.

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 by Financial Asset Management LLC ("FAM").  An investor group led by
Terry Considine,  Thomas L. Rhodes and Bruce D. Benson acquired FAM in 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.

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 or temporary  investments.  Once the Company invests
its cash balances in real estate  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


                                     - 8 -
<PAGE>

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
                     SIX MONTHS ENDED JUNE 30, 1998 AND 1997

Interest Income

Interest  income  during  the  three  and six  months  ended  June 30,  1998 was
$1,042,000  and  $2,095,000,  respectively,  compared to $49,000  and  $160,000,
respectively, for the same periods in 1997. The increase is due to investing the
proceeds from the  restructuring of the CMBS bonds into short-term  investments.
The average  interest  rates earned on these funds were 5.4% and 5.2% during the
six months ended June 30, 1998 and 1997, respectively.

CMBS Bonds

Income from CMBS bonds was $44,000 and $84,000  during second  quarter and first
half of 1998,  respectively,  compared to  $2,193,000  and  $4,237,000  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
ceased subsequent to the restructuring of the CMBS bonds in November 1997.

General and Administrative

General and administrative expenses of the Company were $88,000 and $174,000 for
the three and six months ended June 30, 1998, respectively, compared to $121,000
and  $244,000,   respectively,  for  the  same  periods  in  1997.  General  and
administrative  expenses  decreased  for such  periods in 1998  compared to 1997
primarily due to lower accounting and other expenses related to the ownership of
CMBS bonds.

                                     - 9 -
<PAGE>

Management Fees

During the three and six months ended June 30, 1998,  the Company  incurred Base
Fees of $12,000 and $17,000,  respectively, on the retained equity interest from
the CMBS bond resecuritization and investment in Westrec.  During the six months
ended June 30, 1997, the Company's  management fees were $631,000  consisting of
Base  Fees of  $341,000,  Incentive  Fees of  $237,000,  Administrative  Fees of
$30,000,  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 the  Company  does not incur such fees on cash  equivalents  and
temporary investments.

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 June 30, 1998, the Company has cash and cash  equivalents of  $14,322,000.
The  Company's   principal   demands  for  liquidity  include  normal  operating
activities  and  dividends  paid to  stockholders.  In addition,  during the six
months ended June 30, 1998,  the Company  invested  $2,580,000  in Westrec.  The
Company may invest a significant  portion, if not all, of the remaining proceeds
from the  restructuring of the CMBS bond portfolio in equity interests in either
real estate or marinas.

In February 1998,  the Company  announced that it was changing the date on which
its  quarterly  dividends are declared from the last month 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 each of the first two  quarters 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
June 30, 1998 or December 31, 1997.

The Company  believes that even though the cash returns to be earned from equity
interests  in real  estate or 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 real
estate or marinas will appreciate,  and any drop in the value of the real estate
or marinas could have a material adverse effect on the Company.

                              YEAR 2000 COMPLIANCE

Management  believes  that  the  cost  of  modification  or  replacement  of its
accounting  and reporting  software and hardware that is not compliant with year
2000  requirements will not be material to the Company's  financial  position or
results of operations.


                                     - 10 -
<PAGE>




                                     PART II
                                OTHER INFORMATION


Item 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Company's 1998 Annual Meeting of Stockholders  was held on June 30, 1998. At
the meeting,  Messrs.  Bruce D. Benson and Donald L. Kortz were elected as Class
II Directors to terms expiring in 2001. There were 9,554,447 and 9,554,557 votes
cast "for" the election of Messrs. Benson and Kortz,  respectively,  and 162,321
and 162,211,  respectively,  votes were withheld. In addition,  the stockholders
approved the Commercial  Assets,  Inc. 1998 Stock  Incentive  Plan. Of the votes
cast,  5,513,448  were cast "for"  approval of the plan and 1,029,931  were cast
"against" approval of the Plan with 88,010 abstentions.


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

           (a)  Exhibits:

Exhibit No.     Description

    3.1         Amended and Restated  Charter of  Commercial  Assets,  Inc. (the
                "Registrant"),  (incorporated herein by reference to Exhibit 3.1
                to Amendment No. 1 to the Registrant's Registration Statement on
                Form  10  (as  amended,   the  "Form  10")  of  the  Registrant,
                Commission File No. 1-22262, filed on August 31, 1993).

    3.2         By-laws of the Registrant, (incorporated  herein by reference to
                Exhibit 3.2 to Amendment No. 1 to the Form 10 of the Registrant,
                Commission File No. 1-22262, filed on August 31, 1993).

    3.3         Amendment to the By-laws of the  Registrant  dated as of January
                14, 1997 (incorporated herein by reference to Exhibit 3.3 to the
                Registrant's  Annual  Report  on Form  10-K for the  year  ended
                December 31, 1996,  Commission File No. 1-22262,  filed on March
                24, 1997).

   10.4*        1998 Stock Incentive Plan of the Registrant.

     27         Financial Data Schedule.


* Management contract or compensatory plan or arrangement.

           (b)    Reports on Form 8-K:

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


                                     - 11 -
<PAGE>



                                    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:  July 31, 1998                                 By  /s/ David M. Becker
                                                         ---------------------
                                                         David M. Becker
                                                         Chief Financial Officer



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