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

                                    FORM 10-Q

(Mark One)

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

                  For the quarterly period ended June 30, 1999

                                       OR

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


                          Commission file number 1-2262


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


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

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

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

                                 Not Applicable
              (Former Name, Former Address and Former Fiscal Year,
                         if Changed Since Last Report.)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No ___.

 As of July 31, 1999, 10,368,029 shares of common stock were outstanding.



<PAGE>




                             COMMERCIAL ASSETS, INC.

                                    FORM 10-Q

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999

                                TABLE OF CONTENTS

                                                                            PAGE
PART I.   FINANCIAL INFORMATION:

   Item 1.  Condensed Consolidated Financial Statements:

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

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

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

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

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


PART II.  OTHER INFORMATION:

   Item 4.  Submission of Matters to a Vote of Security Holders...............22

   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)

                                                                                          June 30,         December 31,
                                                                                            1999               1998
                                                                                            ----               ----
                                                                                         (unaudited)
ASSETS
<S>                                                                                      <C>                <C>
Cash and cash equivalents                                                                $    1,092         $    3,292
Short-term investments                                                                       15,078             45,066
Real estate, net of accumulated depreciation of $371 and $50                                 51,323             12,628
Investments in participating mortgages                                                       10,381              9,328
Investment in real estate joint venture                                                       1,304              1,280
Investment in Asset Investors                                                                 1,435                 --
Investment in and note receivable from Westrec                                                4,011              4,011
CMBS bonds                                                                                    1,676              1,739
Other assets, net                                                                             1,903                890
                                                                                         ----------         ----------
      Total Assets                                                                       $   88,203         $   78,234
                                                                                         ==========         ==========

LIABILITIES
Secured long-term notes payable                                                          $    9,619         $       --
Secured short-term financing                                                                    214                 --
Accounts payable and accrued liabilities                                                      1,475                872
Management fees payable to related parties                                                      123                108
                                                                                         ----------         ----------
                                                                                             11,431                980
                                                                                         ----------         ----------

MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES                                                  615                 --

STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per share, 25,000 shares authorized; no shares
   issued or outstanding                                                                         --                 --
Common stock, par value $.01 per share, 75,000 shares authorized; 10,393 and
   10,364 shares issued; and 10,345 and 10,364 shares outstanding, respectively                 104                104
Additional paid-in capital                                                                   77,018             76,874
Retained earnings (dividends in excess of accumulated earnings)                                (707)               276
Treasury stock, 48 and 0 shares at cost                                                        (258)                --
                                                                                         ----------         ----------
                                                                                             76,157             77,254
                                                                                         ----------         ----------
      Total Liabilities and Stockholders' Equity                                         $   88,203         $   78,234
                                                                                         ==========         ==========
</TABLE>

           See Notes to Condensed Consolidated Financial Statements.

                                     - 1 -
<PAGE>



<TABLE>
<CAPTION>

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


                                                                       Three Months                     Six Months
                                                                      Ended June 30,                  Ended June 30,
                                                                      --------------                  --------------
                                                                   1999           1998             1999          1998
                                                                   ----           ----             ----          ----
Rental property operations
<S>                                                              <C>            <C>              <C>           <C>
Rental and other property revenues                               $   437        $     --         $   437       $     --
Income from participating mortgages and leases                       603              --           1,190             --
Property operating expenses                                         (174)             --            (174)            --
                                                                 -------        --------        --------       --------
Income from rental property operations before depreciation           866              --           1,453             --
Depreciation                                                        (232)             --            (321)            --
                                                                --------        --------        --------       --------
Income from rental property operations                               634              --           1,132             --
                                                                --------        --------        --------       --------

Interest and other income                                            520           1,042           1,221          2,095
Interest expense                                                     (58)             --             (58)            --
General and administrative expenses                                 (140)            (88)           (273)          (174)
Management fees paid to manager                                     (114)            (12)           (194)           (17)
Equity in earnings of Asset Investors                                  5              --               5             --
CMBS bonds revenue                                                    39              44              77             84
                                                                --------        --------        --------       --------

Income from operations                                               886             986           1,910          1,988
Acquisition fees paid to manager                                    (152)             --            (194)            --
                                                                --------        --------        --------       --------

Net income                                                      $    734       $     986        $  1,716       $  1,988
                                                                ========       =========        ========       ========

Basic and diluted earnings per share                            $   0.07       $    0.09        $   0.16       $   0.19
                                                                ========       =========        ========       ========

Weighted average common shares outstanding                        10,362          10,359          10,363         10,350

Weighted average common shares and common share equivalents
   outstanding                                                    10,362          10,387          10,363         10,382

Dividends paid per share                                        $   0.13       $    0.13        $   0.26       $   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)
                                                                                             Six Months
                                                                                           Ended June 30,
                                                                                           --------------
                                                                                        1999              1998
                                                                                        ----              ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                  <C>               <C>
Net income                                                                           $  1,716          $  1,988
Adjustments to reconcile net income to net cash flows from operating activities:
   Depreciation                                                                           321                --
   Amortization of premium on short-term investments                                       65                11
   Accrued income on participating mortgages                                             (277)               --
   Accrued income on CMBS bonds                                                           (15)               --
   Equity in earnings of Asset Investors                                                   (5)               --
   Increase in accounts payable and accrued liabilities                                   228                89
   Decrease (increase) in other assets                                                   (142)               48
                                                                                     ---------         --------
     Net cash provided by operating activities                                          1,891             2,136
                                                                                     --------          --------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of real estate                                                              (33,486)               --
Purchases of Asset Investors' common stock                                             (1,433)               --
Collections on short-term investments                                                   8,011                --
Proceeds from sale of short-term investments                                           21,912                --
Acquisitions of short-term investments                                                     --           (58,166)
Investments in participating mortgages, net                                              (776)               --
Investment in real estate joint venture                                                   (24)               --
Capital replacements                                                                      (97)               --
Investment in Westrec                                                                      --            (2,580)
Dividends from Asset Investors                                                              3                --
Collections on CMBS bonds                                                                  78               126
                                                                                     --------          --------
     Net cash used in investing activities                                             (5,812)          (60,620)
                                                                                     ---------         --------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured long-term notes payable                                           4,800                --
Dividends paid                                                                         (2,699)           (1,347)
Payment of loan costs                                                                    (122)               --
Repurchase of Common Stock                                                               (258)               --
                                                                                     --------          --------
     Net cash provided by (used in) financing activities                                1,721            (1,347)
                                                                                     --------          --------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                              (2,200)          (59,831)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                        3,292            74,153
                                                                                     --------          --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                           $  1,092          $ 14,322
                                                                                     ========          ========
</TABLE>


           See Notes to Condensed Consolidated Financial Statements.

                                     - 3 -
<PAGE>




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

A.           Organization

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

Prior to 1998,  the Company owned  subordinate  classes of  Commercial  Mortgage
Backed Securities ("CMBS bonds"). In November 1997, the Company restructured its
subordinate  CMBS bond  portfolio by 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 I).  The  Company  has  temporarily
invested the proceeds from such  restructuring  until  invested in  manufactured
home communities.

In the third quarter of 1998, the Company decided to invest in manufactured home
communities  and as of June 30, 1999 has invested  approximately  $62 million in
interests in 11  manufactured  home  communities  and adjoining  land with 1,790
developed  homesites,  220 sites ready for homes and 1,240 sites  available  for
future development.

The  Company's  daily  operations  are  performed  by a manager  pursuant  to an
agreement  currently  in effect  through  December  31,  1999  ("the  Management
Agreement"). Since November 1997, Asset Investors Corporation (together with its
subsidiaries,  "Asset Investors") has been the manager. Asset Investors owns 27%
of the  Company's  Common Stock.  For 1999,  the  Management  Agreement has been
amended to provide  that the  Incentive  Fee is based on Funds From  Operations,
less an  annual  capital  replacement  reserve  of at  least  $50 per  developed
homesite.  In  general,  Funds  From  Operations  is  equal to net  income  plus
depreciation, amortization and acquisition fees. No other change was made to the
Management Agreement other than its extension to December 31, 1999 (see Note L).

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.           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 June 30, 1999,  for the three
and six month  periods then ended,  and for all prior periods  presented.  These
statements  are  condensed  and do not include all the  information  required by
generally  accepted  accounting  principles  ("GAAP") in a full set of financial
statements.  These financial  statements  should be read in conjunction with the
Company's  Consolidated  Financial  Statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.

                                     - 4 -
<PAGE>

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

C.           Summary of Significant Accounting Policies

Principles of Consolidation

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

Rental Properties and Depreciation

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

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

Revenue Recognition

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

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

Deferred Financing Costs

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

                                     - 5 -
<PAGE>

Income Taxes

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

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

Earnings Per Share

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

Treasury Stock

Asset  Investors  owns 27% of the  Company's  Common  Stock.  During  the second
quarter of 1999, the Company purchased 114,000 shares of Asset Investors' common
stock. Consequently,  the Company has an interest in 48,000 shares of its Common
Stock and has 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 $27,000  and $0 during the six months  ended June 30, 1999
and 1998, respectively.

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

<TABLE>
<CAPTION>

                                                                                 1999                   1998
                                                                             -------------            --------
<S>                                                                            <C>                    <C>
Accrued initial capital expenditures on real estate purchases                  $    300               $     --
Issuance of Common Stock for services                                               144                    150
Escrow of long-term debt proceeds                                                   300                     --
Real estate purchase price paid with note payable                                 4,519                     --
Real estate and other assets purchased by assuming debt and minority
   interests in subsidiaries                                                        920                     --

</TABLE>

D.           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 June 30, 1999 approximates the
carrying value of $15,078,000.

                                     - 6 -
<PAGE>

E.           Real Estate

Real estate at June 30, 1999 and December 31, 1998 was (in thousands):
<TABLE>
<CAPTION>

                                                                               June 30,             December 31,
                                                                                 1999                   1998
                                                                                 ----                   ----
<S>                                                                            <C>                   <C>
Land                                                                           $    8,552            $    3,798
Land improvements and buildings                                                    43,142                 8,880
                                                                               ----------            ----------
                                                                                   51,694                12,678
Less accumulated depreciation                                                        (371)                  (50)
                                                                               ----------            ----------
Real estate, net                                                               $   51,323            $   12,628
                                                                               ==========            ==========
</TABLE>

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

The other leased  community  involves two phases and has been leased to the same
third party for 50 years.  Phase One has 221  developed  homesites  and 23 sites
ready for homes. Phase Two involves 840 sites available for future  development.
Initial  annual lease  payments on Phase One are $890,000,  increasing by 4% per
annum.  There are no lease  payments  on Phase Two until the sites are ready for
homes,  at which time,  the annual lease  payments on Phase Two will be equal to
10% times the costs  incurred in developing  Phase Two. In addition,  the lessee
pays to the Company  additional  rent equal to 50% of the lessee's net cash flow
from the property. In the event of a sale, the Company receives 50% of any sales
proceeds in excess of the  Company's  cost.  The Company may terminate the lease
after  five  years by paying to the  lessee  50% of the amount by which the fair
market value of the property  exceeds the sum of the  Company's  total  purchase
price plus any unpaid rents due from the lessee.

F.           Investments in Participating Mortgages

As of June 30, 1999,  the Company has  investments  in  participating  mortgages
secured by three  manufactured  home  communities  and adjoining land. The notes
accrue interest at 15% per annum and pay 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  mature  in 2007 and  2008.  The  Company  also  receives
additional  interest  equal to 50% of the net  profits  and cash  flows from the
properties.  In addition,  as of June 30, 1999,  the Company has  investments in
participating  mortgages  secured by individual  homes and home sites within two
manufactured  home  communities.  These mortgages accrue interest at 10% and pay
interest  from the cash flows from the  homesites.  The  Company  also  receives
additional  interest  equal to 50% of the net  profits  and cash  flows from the
homesites.  As of June 30, 1999, the Company had  investments  in  participating
mortgages of $10,381,000 and income of $344,000 and $675,000, respectively, from
these mortgages for the three and six months ended June 30, 1999.

                                     - 7 -
<PAGE>

G.           Investment in Real Estate Joint Venture

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

H.           Investment in Asset Investors

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

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

<TABLE>
<CAPTION>

                                                      June 30,          December 31,
Balance Sheets                                          1999                1998
                                                  ----------------     ----------------
<S>                                                  <C>                  <C>
Real estate                                          $   96,818           $   98,563
Investments in participating mortgages                   30,843               27,604
Investment in Commercial Assets                          19,994               20,706
Cash and cash equivalents                                 2,501                1,426
Other assets                                              8,722                9,927
                                                     ----------           ----------
Total assets                                            158,878              158,226
Secured long-term notes payable                          48,568               40,506
Secured short-term financing                              6,200               10,500
Other liabilities                                         3,107                2,935
Minority interest                                        15,529               25,649
                                                     ----------           ----------
Stockholders' equity                                 $   85,474           $   78,636
                                                     ==========           ==========
</TABLE>





                                     - 8 -
<PAGE>




<TABLE>
<CAPTION>



                                                                       Three Months                     Six Months
                                                                      Ended June 30,                  Ended June 30,
                                                                      --------------                  --------------
                                                                   1999           1998             1999          1998
                                                                   ----           ----             ----          ----
<S>                                                             <C>             <C>               <C>          <C>
Income from rental property operations before depreciation      $  3,168        $  2,065          $6,217       $  3,799
Depreciation                                                        (924)           (495)         (1,844)          (888)
                                                                --------        --------        --------       --------
Income from rental property operations                             2,244           1,570           4,373          2,911
                                                                --------        --------        --------       --------

Property management income, net                                       50              33             104             83
Management fees from Commercial Assets                               195               7             284             10
Equity in earnings of Commercial Assets                              265             266             560            534
Amortization of management contracts                                (689)           (689)         (1,378)        (1,516)
General and administrative expenses                                 (371)           (336)           (709)          (658)
Interest and other income                                             50             219             103            602
Interest expense                                                    (957)           (268)         (1,898)          (476)
                                                                --------        --------        --------       --------

Income from operations                                               787             802           1,439          1,490
Income tax benefit                                                   100              --             100             --
Loss from early extinguishment of debt                               (75)             --             (75)            --
Minority interest                                                   (125)           (175)           (235)          (318)
                                                                --------        --------        --------       --------
Net income                                                      $    687        $    627        $  1,229       $  1,172
                                                                ========        ========        ========       ========
</TABLE>

I.           CMBS Bonds

In November  1997,  the Company  restructured  its  portfolio  of CMBS bonds and
retained  a  $5,000,000   equity  interest  in  the  owner  trust  used  in  the
restructuring.  Since the equity interest represents the first-loss class of the
portfolio  and  provides  credit  support  for the senior debt  securities,  the
Company  valued the equity  interest at its then  estimated fair market value of
$2,000,000.  During the six months  ended June 30,  1999 and 1998,  the  Company
received  $141,000 and  $210,000,  respectively,  of which $78,000 and $126,000,
respectively,  was recorded as a reduction in the net book value of the retained
equity  interest.  The net book value at June 30, 1999 is  $1,676,000  which the
Company believes approximates fair market value.

J.           Investment in and Note Receivable from Westrec

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

K.           Secured Long-Term Notes Payable

In May 1999, the Company borrowed $5,100,000 in the form of a 7.1%, non-recourse
note payable, maturing in May 2019. The note is secured by one manufactured home
community  which has a net carrying  value of $8,253,000  at June 30, 1999.  The
note requires $300,000 to be held in escrow until certain improvements have been


                                     - 9 -
<PAGE>

made to the property securing the note. This amount is included in other assets.

In June 1999,  the Company  acquired a  manufactured  home community for a total
amount of $7,245,000.  The terms of the purchase  provided that the Company paid
$2,000,000 up-front with the balance in three annual  installments.  The Company
discounted  the future  payments at a 7.0% per annum  interest  rate in order to
record the purchase price and related $4,519,000 secured long-term note payable.
The future payments are secured by the property.

Scheduled payments of principal on the notes payable subsequent to June 30, 1999
are as follows (in thousands):

        1999                                              $      59
        2000                                                    846
        2001                                                  1,868
        2002                                                  2,205
        2003                                                    154
        Thereafter                                            4,487
                                                          ---------
                                                          $   9,619

L.           Management Fees

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

<TABLE>
<CAPTION>

                                                   Three Months Ended                      Six Months Ended
                                                        June 30,                               June 30,
                                            ----------------------------------    -----------------------------------
                                                 1999               1998               1999                1998
                                            ---------------    ---------------    ---------------     ---------------
<S>                                            <C>                 <C>               <C>                  <C>
Base Fees                                      $    119            $   12            $    194             $   17
Acquisition Fees                                    152                --                 194                 --
Incentive Fees                                       (5)               --                  --                 --
                                               --------            ------            --------             ------
                                               $    266            $   12            $    388             $   17
                                               ========            ======            ========             ======
</TABLE>

                                     - 10 -
<PAGE>

M.           Commitments

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

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

N.           Operating Segments

The Company has recently begun  investing in manufactured  home  communities and
management assesses the performance of the Company as one operating segment.

O.           Common Stock and Dividends

During the three and six months ended June 30, 1999,  the Company paid $0.13 and
$0.26 per share  dividends on Common Stock totaling  $1,352,000 and  $2,699,000,
respectively.  Dividends  paid  during  the same  periods in 1998 were $0.13 and
$0.13 per share totaling $1,347,000 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,  our Quarterly  Report to Stockholders  and our 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 such SEC
filings,  constitute  "forward-looking  statements"  within  the  meaning of the
Private  Securities  Litigation  Reform Act of 1995. Such statements may include
projections of our cash flow,  dividends and anticipated  returns on real estate
investments.  Such  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.  Such
factors  include:  general  economic  and  business  conditions;  interest  rate
changes;  financing and refinancing  risks; risks inherent in owning real estate
or  debt  secured  by  real  estate;   future  development  rate  of  homesites;
competition;  the  availability  of real estate  assets at prices which meet our
investment  criteria;  our  ability to reduce  expense  levels,  implement  rent
increases, use leverage and other risks set forth in our SEC filings.

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

                                     - 11 -
<PAGE>

Business

Company Background

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

Prior to 1998,  we owned  subordinate  classes  of  Commercial  Mortgage  Backed
Securities  ("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 June 30, 1999, we held interests as owner, ground lessor
or mortgage lender (including  participating  mortgages) in 11 manufactured home
communities  with a total of 1,790  developed  homesites  (sites  with  homes in
place),  220  sites  ready  for  homes and  1,240  sites  available  for  future
development.  We expect to continue  acquiring  interests in  manufactured  home
communities during 1999.

Industry Background

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

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


                                     - 12 -
<PAGE>

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

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

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

Recent Developments

Manufactured Home Community Acquisitions

During  the  second  quarter  of  1999,  we  acquired  four   manufactured  home
communities for $25.4 million cash and $4.5 million of debt.  These  communities
have 835 developed homesites,  165 sites ready for homes and 175 sites available
for  future  development.  As  of  June  30,  1999,  we  have  interests  in  11
manufactured  home  communities with a total of 1,790 developed  homesites,  220
sites ready for homes, 1,240 sites available for future  development.  We expect
to acquire additional manufactured home communities during 1999.

Growth and Operating Strategies

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

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

                                     - 13 -
<PAGE>

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

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

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

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

Future Acquisitions

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

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.

                                     - 14 -
<PAGE>

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

As of June 30,  1999,  we have  invested  approximately  $62  million to acquire
interests  in 11  manufactured  home  communities  that are  located in Arizona,
Florida  and  California.  These  communities  have a total of  1,790  developed
homesites (sites with homes in place), 220 sites ready for homes and 1,240 sites
available for future development.

When evaluating potential acquisitions, we consider such factors as:

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

Expansion of Existing Communities

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

Manager

Our daily  operations  are  performed  by a  manager  pursuant  to a  management
agreement  currently  in effect  through  December  31,  1999.  The manager also
identifies and performs due diligence on potential  manufactured  home community
investments  for us. Since November 1997,  Asset Investors has been our manager.
In addition to being our manager and a principal  stockholder,  Asset  Investors
separately owns,  acquires,  develops and manages manufactured home communities,
including   providing   property   management   services  on  our   communities.
Consequently,  we and Asset Investors are involved in the same industry. The two
companies have agreed that we shall invest at least $50 million in  manufactured
home  communities  before Asset Investors  makes any additional  acquisitions of


                                     - 15 -
<PAGE>

manufactured home communities.  Following our investment of $50 million, the two
companies  will   coordinate   their  efforts  to  acquire   manufactured   home
communities.  Asset Investors may acquire  communities if a material  portion of
the  purchase  price  is paid  for in  units  of  limited  partnership  in Asset
Investors  Operating  Partnership ("OP Units") or Asset Investors' common stock.
As of June 30, 1999, we have invested  approximately $62 million in manufactured
home  communities  and,  therefore,  we and Asset Investors are coordinating our
acquisitions at this time.

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

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

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

<TABLE>
<CAPTION>

                                                   Three Months Ended                      Six Months Ended
                                                        June 30,                               June 30,
                                            ----------------------------------    -----------------------------------
                                                 1999               1998               1999                1998
                                            ---------------    ---------------    ---------------     ---------------
<S>                                            <C>                 <C>               <C>                  <C>
Base Fees                                      $    119            $   12            $    194             $   17
Acquisition Fees                                    152                --                 194                 --
Incentive Fees                                       (5)               --                  --                 --
                                               --------            ------            --------             ------
                                               $    266            $   12            $    388             $   17
                                               ========            ======            ========             ======
</TABLE>

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

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

Properties

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




                                     - 16 -
<PAGE>




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

<TABLE>
<CAPTION>

                                                                             Number of Sites
                                                     -----------------------------------------------------------------
                                                                                                      Available for
                               Number of                                      Ready for Homes            Future
                              Communities               Developed                                      Development
                           ------------------        -----------------        -----------------     ------------------
<S>                                <C>                       <C>                      <C>                 <C>
Arizona                            6                         953                      101                   206
Florida                            4                         834                      123                 1,001
California                         1                          --                       --                    30
                                 ---                       -----                    -----                ------
   Total                          11                       1,787                      224                 1,237
                                 ===                       =====                    =====                ======
</TABLE>


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


<TABLE>
<CAPTION>



                                                                         Average
                                                                         Monthly
                                               Developed                  Rent     Sites Ready    Sites Available
 Community            Location                 Homesites    Occupancy   per Site    for Homes     for Development
------------------------------------------------------------------------------------------------------------------
  Owned Communities
<S>                                                 <C>       <C>          <C>         <C>               <C>
Cypress Greens (1)  Lakeland, FL                       85       100%         $190         22               --
La Casa Blanca      Apache Junction, AZ               198       100           150         --               --
La Casa Blanca East Apache Junction, AZ               106       100           200        101               --
Lakeshore Villas    Tampa, FL                         290        96           323         --               --
Rancho Mirage       Apache Junction, AZ               312       100           175         --               --
Riverside (1)       Ruskin, FL                        221        99           401         23              837
Royal Palm          Haines City, FL                   231        98           216         55              164
                                              --------------------------------------------------------------------
    Subtotal                                        1,443        99           244        201            1,001
                                              --------------------------------------------------------------------
  Participating Mortgage and Joint
  Venture Communities
Fiesta Village      Mesa, AZ                          175        98           273         --              206 (2)
Casa Encanta        Mesa, AZ                          111        87           350         --               -- (2)
Southern Palms      Mesa, AZ                           51       100           203         --               -- (2)
Savanna Club        Port St. Lucie, FL                  7       100           165         19               --
Sun Lake            Grand Island, FL                   --        --            --          4               --
Cannery Village     Newport Beach, CA                  --        --            --         --               30
                                              --------------------------------------------------------------------
    Subtotal                                          344        95           283         23              236
                                              --------------------------------------------------------------------
Total Communities                                   1,787        98%         $252        224            1,237
                                              ====================================================================
<FN>

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

Taxation of the Company

We have elected to be taxed as a REIT under the  Internal  Revenue Code of 1986,
as amended (the  "Code"),  and we intend to operate in a manner which will allow


                                     - 17 -
<PAGE>

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  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.

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" (at
the corporate and stockholder  levels) that generally results from investment in
a  corporation.  If we fail to qualify as a REIT in any taxable year, we will be
subject to Federal income tax at regular  corporate  rates on our taxable income
(including  any  applicable  alternative  minimum tax).  Even if we qualify as a
REIT, we may be subject to certain state and local income and other taxes and to
Federal income and excise taxes on our undistributed income.


                          RESULTS OF OPERATIONS FOR THE
                THREE AND SIX MONTHS ENDED JUNE 30, 1999 AND 1998

Comparison of Three and Six Months Ended June 30, 1999 to Three and Six Months
Ended June 30, 1998

Rental Property Operations

Income from rental property  operations  totaled $634,000 and $1,132,000  during
the three and six months  ended  June 30,  1999.  There were no such  activities
during the same periods in 1998 as our first  investment  in  manufactured  home
communities  was  in  August  1998.  As  of  June  30,  1999,  we  had  invested
approximately $62 million in 11 communities.

Interest and Other Income

Interest  and other  income  during the three and six months ended June 30, 1999
was $520,000 and  $1,221,000  compared to $1,042,000 and $2,095,000 for the same
periods in 1998,  respectively.  The  decrease is due to a reduction in cash and
short-term investments used to fund investments in manufactured home communities
beginning in August 1998.  The average  interest  rate earned on these funds was
4.8% and 5.4% during the six months ended June 30, 1999 and 1998, respectively.

Interest Expense

Interest  expense was  $58,000 for both the three and six months  ended June 30,
1999 due to $5.1  million  of  long-term  notes  payable  secured  by one of our
communities.  We had no interest  expense  during the same periods in 1998 as we
did not have any debt on  manufactured  home  communities  until  May  1999.  We
anticipate  borrowing  additional  amounts  in the future in the form of secured
long-term notes payable.

General and Administrative Expenses

Our general and administrative expenses were $140,000 and $273,000 for the three
and six months ended June 30, 1999 compared to $88,000 and $174,000 for the same
periods in 1998,  respectively.  These  expenses  increased for the 1999 periods


                                     - 18 -
<PAGE>

compared  to 1998  primarily  due to  increased  costs  related  to  shareholder
relations  and due  diligence  costs on  potential  acquisitions  that  were not
completed.

Management Fees

During the three and six months ended June 30, 1999,  our  management  fees were
$114,000 and $194,000 compared to $12,000 and $17,000 during the same periods in
1998,  respectively.  The increase in  management  fees is primarily  due to our
acquisitions of manufactured  home  communities  during this period.  We did not
make any real estate-related  acquisitions during the 1998 periods and such fees
are not paid on cash and  short-term  investments,  which is what we held during
the 1998 periods.

CMBS Bonds

Income from CMBS bonds  during the three and six months  ended June 30, 1999 was
$39,000 and $77,000 and is comparable  to the same periods in 1998.  This income
is from our retained equity interest in two CMBS bonds.

Dividend Distributions

During the three and six months ended June 30, 1999, we paid dividends  totaling
$1,352,000  ($.13 per  share) and  $2,699,000  ($0.26  per  share)  compared  to
$1,347,000  ($0.13  per  share)  and  $1,347,000  ($0.13 per share) for the same
periods in 1998, respectively. We did not pay dividends during the first quarter
of 1998.

                         LIQUIDITY AND CAPITAL RESOURCES

As of June  30,  1999,  we had  cash  and cash  equivalents  of  $1,092,000  and
short-term  investments of  $15,078,000.  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 six months  ended June 30, 1999,  the net cash  provided by operating
activities was $1,891,000 compared to $2,136,000 during the same period in 1998.
The decrease  during the first six months of 1999 was primarily due to lower net
income as a result of management  fees paid on 1999 real estate  investments and
an increase in general and administrative expenses.

Net cash used in investing activities was $5,812,000 during the six months ended
June 30, 1999  compared to uses of  $60,620,000  during the same period in 1998.
The net cash  used in the 1999  period  was  primarily  due to  acquisitions  of
interests  in  manufactured  home  communities,   net  of  sales  of  short-term
investments used to fund such  acquisitions,  whereas the funds used in the 1998
period were for the purchase of short-term investments.

Net cash provided by financing  activities was $1,721,000  during the six months
ended June 30,  1999  compared to uses of  $1,347,000  during the same period in
1998.  The net cash  provided  in the 1999  period  was due to $4.8  million  in
proceeds from long-term  borrowings,  net of dividends paid of $2.7 million. The
net cash used in the 1998  period was due to  dividends  paid.  The  increase in
dividends  between  the  periods  occurred  primarily  because  we did not pay a
quarterly dividend during the first quarter of 1998.

                                     - 19 -
<PAGE>

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

                              FUNDS FROM OPERATIONS

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

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

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

<TABLE>
<CAPTION>

                                                   Three Months Ended                      Six Months Ended
                                                        June 30,                               June 30,
                                            ----------------------------------    -----------------------------------
                                                 1999               1998               1999                1998
                                            ---------------    ---------------    ---------------     ---------------
<S>                                             <C>                <C>                <C>                 <C>
Net income                                      $   734            $   986            $ 1,716             $ 1,988
Real estate depreciation                            232                 --                321                  --
Acquisition fees                                    152                 --                194                  --
Amortization of CMBS bonds                           20                 66                 78                 126
Equity in Asset Investors' adjustments for FFO       14                 --                 14                  --
                                                -------            -------            -------             -------
Funds From Operations (FFO)                     $ 1,152            $ 1,052            $ 2,323             $ 2,114
                                                =======            =======            =======             =======

Weighted average common shares outstanding       10,362             10,359             10,363              10,350
                                                =======            =======            =======             =======
</TABLE>

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

<TABLE>
<CAPTION>

                                                                                           Six Months Ended
                                                                                               June 30,
                                                                                  -----------------------------------
                                                                                       1999                1998
                                                                                  ---------------     ---------------
<S>                                                                                  <C>                <C>
Cash provided by operating activities                                                $  1,891           $   2,136
Cash used in investing activities                                                      (5,812)            (60,620)
Cash provided by (used in) financing activities                                         1,721              (1,347)
</TABLE>


                              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"


                                     - 20 -
<PAGE>

instead of the familiar "19." If not corrected, many computer applications could
fail or create erroneous results.  The following disclosure provides information
regarding the current status of our Year 2000 compliance program.

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

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

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 various debt  instruments
and borrowings.  The following is a list of these debt instruments and borrowing
arrangements.

We have a $5.1 million fixed rate, non-recourse,  secured long-term note payable
that  matures in 2019.  The interest  rate on this note is 7.1%.  We do not have
significant  exposure  to  changing  interest  rates on this note as the rate is
fixed and the note is fully amortizing.

We have a $4.5 million fixed rate, recourse, secured long-term note payable that
is repayable in three annual  installments.  The implied  interest  rate on this
note is 7.0%. We do not have significant  exposure to changing interest rates on
this note as the rate is fixed and the note is fully amortizing.  In the future,
we  intend  to  borrow  additional  non-recourse,  secured,  fixed  rate,  fully
amortizing debt in connection with the refinancing of the existing note payable.
While changes in interest  rates would affect the cost of funds  borrowed in the
future to refinance the existing  debt,  we believe that the effect,  if any, of
near-term  changes  in  interest  rates on our  financial  position,  results of
operations  or cash flows would not be material  as the  existing  debt is fixed
rate until June 2002.

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

                                     - 21 -
<PAGE>

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

Our  1999  Annual  Meeting  of  Stockholders  was held on June 9,  1999.  At the
meeting,  Messrs.  Terry  Considine and Bruce E. Moore were elected as Class III
Directors  to terms  expiring in 2002 and Mr.  Robert J. Malone was elected as a
Class II Director to a term expiring in 2001.  There were  9,953,140,  9,956,944
and  9,962,459  votes cast "for" the  election of Messrs.  Considine,  Moore and
Malone,  respectively,  and 239,269,  235,465 and 229,950  votes were  withheld,
respectively.  In addition,  the stockholders  approved our reincorporation from
Maryland to Delaware.  Of the votes cast,  8,387,771 were cast "for" approval of
the   reincorporation   and  132,757  were  cast   "against"   approval  of  the
reincorporation with 71,076 abstentions. In addition,  1,600,805 shares were not
voted in connection with the reincorporation. Under Maryland law, all votes cast
as abstentions and all unvoted shares  constituted  votes "against"  approval of
the reincorporation.

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.  (the  "Registrant"),   (incorporated   herein  by
                reference to Exhibit 3.1 to the  Registrant's  Current Report on
                Form 8-K, dated June 10, 1999, Commission File No. 1-2262, filed
                on June 10, 1999).

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

      27        Financial Data Schedule

         (b)    Reports on Form 8-K:

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

                Current  Report on Form 8-K dated April 21, 1999,  reporting our
                intent to acquire shares of Asset Investors Corporation.

                                     - 22 -
<PAGE>

                Current  Report on Form 8-K dated March 31, 1999  reporting  the
                acquisition  of   manufactured   home  community   assets  which
                included:   Statement  of  Excess  of  Revenues   Over  Specific
                Operating  Expenses of the Lakeshore  Villas  Manufactured  Home
                Community for the year ended  September  30, 1998  (audited) and
                the  period  from   October  1,  1998  to   December   31,  1998
                (unaudited).

                Current  Report  on Form 8-K dated  May 7,  1999  reporting  the
                acquisition  of   manufactured   home  community   assets  which
                included:   Statement  of  Excess  of  Revenues   Over  Specific
                Operating Expenses of the Rancho Mirage Mobile Home Park for the
                Year Ended  December  31,  1998  (audited)  and the period  from
                January 1, 1999 to March 31, 1999 (unaudited).

                Current  Report on Form 8-K dated June 10,  1999  reporting  our
                reincorporation in Delaware.

                Current  Report on Form 8-K dated June 30,  1999  reporting  the
                acquisition  of   manufactured   home  community   assets  which
                included:   Statement  of  Excess  of  Revenues   Over  Specific
                Operating  Expenses  of the La  Casa  Blanca  Manufactured  Home
                Communities  for the Year Ended  December 31, 1998 (audited) and
                the period from January 1, 1999 to March 31, 1999 (unaudited).

                                    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:  August 5, 1999                               By  /s/ David M. Becker
                                                      --------------------------
                                                        David M. Becker
                                                        Chief Financial Officer


                                     - 23 -