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                                                                    EXHIBIT 99.1




                                   225 BARONNE

                              STATEMENT OF REVENUES
                          AND DIRECT OPERATING EXPENSES
                          YEAR ENDED DECEMBER 31, 1997




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                          Independent Auditors' Report



To the Board of Trustees
Continental Mortgage and Equity Trust

We have audited the accompanying statement of revenues and direct operating
expenses of 225 Baronne for the year ended December 31, 1997. This statement of
revenues and direct operating expenses is the responsibility of the Property's
management. Our responsibility is to express an opinion on this statement of
revenues and direct operating expenses based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and direct operating expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of revenues and
direct operating expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall statement of revenues and direct operating expenses
presentation. We believe that our audit provides a reasonable basis for our
opinion.

The accompanying financial statement is prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission (for
inclusion in Form 8-K of Continental Mortgage and Equity Trust) and, as
described in Note 1, is not intended to be a complete presentation of the
results of operations.

In our opinion, the statement of revenues and direct operating expenses referred
to above presents fairly, in all material respects, the revenues and direct
operating expenses of 225 Baronne for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.




FARMER, FUQUA, HUNT & MUNSELLE, P.C.

Dallas, Texas
January 20, 1998 (except for Note 4, as to which
the date is March 5, 1998)



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                                   225 BARONNE
                              STATEMENT OF REVENUES
                          AND DIRECT OPERATING EXPENSES
                          Year Ended December 31, 1997


<TABLE>
<S>                                                                   <C>         
REVENUES
         Net rental revenues                                          $  1,654,559
         Other revenues                                                     26,794
                                                                      ------------

                  Total revenues                                         1,681,353


DIRECT OPERATING EXPENSES
         Utilities                                                         565,373
         Repairs and maintenance                                           392,455
         Salaries and benefits                                             284,269
         Property taxes                                                     98,240
         Insurance                                                          84,131
                                                                      ------------

                  Total direct operating expenses                        1,424,468
                                                                      ------------


REVENUES IN EXCESS OF DIRECT OPERATING EXPENSE                        $    256,885
                                                                      ============
</TABLE>






         The accompanying notes are an integral part of this statement.



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                                   225 BARONNE
                         NOTES TO STATEMENT OF REVENUES
                          AND DIRECT OPERATING EXPENSES
                                December 31, 1997


NOTE 1:           ORGANIZATION AND BASIS OF PRESENTATION

                  225 Baronne is a 420,902 square foot office building located
                  in New Orleans, Louisiana. During 1997, the property was owned
                  by 225 Baronne Street, Inc.

                  The accompanying financial statement does not include a
                  provision for depreciation and amortization, bad debt expense,
                  interest expense, or income taxes. Accordingly, this statement
                  is not intended to be a complete presentation of the results
                  of operations.

NOTE 2:           ACCOUNTING ESTIMATES

                  The preparation of financial statements in conformity with
                  generally accepted accounting principles requires management
                  to make estimates and assumptions that affect the reported
                  amounts of revenues and expenses during the reporting period.
                  Actual results could differ from those estimates.

NOTE 3:           OTHER REVENUES

                  Other revenues consist of the following:

<TABLE>
<S>                                                       <C>        
                       Tenant reimbursements              $    26,436
                       Miscellaneous                              358
                                                          -----------

                                                          $    26,794
                                                          ===========
</TABLE>

NOTE 4:           SUBSEQUENT EVENT

                  The property was sold to Continental Mortgage and Equity
                  Trust, a California business trust, on March 5, 1998.




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