<PAGE>

                         SECURITIES AND EXCHANGE COMMISSION

                               WASHINGTON, D.C. 20549

                                      FORM 10-Q


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


                 For the quarterly period ended September 30, 1995
                                                ------------------


                             Commission file number 0-17189
                                                    -------


                            KOLL REAL ESTATE GROUP, INC.
                            ----------------------------
               (Exact name of registrant as specified in its charter)


              DELAWARE                                            02-0426634
              --------                                            ----------
   (State or other jurisdiction of                            (I.R.S. Employer
    incorporation or organization.)                          Identification No.)


        4343 VON KARMAN AVENUE
       NEWPORT BEACH, CALIFORNIA                                     92660
       -------------------------                                     -----
(Address of principal executive offices)                          (Zip Code)

Registrant's telephone number, including area code: (714) 833-3030


     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
                                              -----        -----

The number of shares of Class A Common Stock outstanding at November 1, 1995
were 47,412,587.


<PAGE>

                          KOLL REAL ESTATE GROUP, INC.

                                    FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1995

                                      INDEX

<TABLE>
<CAPTION>
                                                                            Page No.
                                                                            --------
<S>                                                                         <C>
PART I  --  Financial Information:

            Item 1  --  Financial Statements


                        Introduction to the Financial Statements...........      3

                        Balance Sheets  --
                        December 31, 1994 and September 30, 1995...........      4

                        Statements of Operations  --
                        Three Months and Nine Months Ended September 30,
                        1994 and 1995......................................      5

                        Statements of Cash Flows  --
                        Nine Months Ended September 30, 1994 and 1995......      6

                        Notes to Financial Statements......................      7


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

PART II  --  Other Information:


            Item 1  --  Legal Proceedings..................................     15

            Item 6  --  Exhibits and Reports on Form 8-K...................     16

SIGNATURE..................................................................     16
</TABLE>

                                       2

<PAGE>

                           KOLL REAL ESTATE GROUP, INC.

                         PART I -- FINANCIAL INFORMATION


ITEM 1  --  FINANCIAL STATEMENTS

                INTRODUCTION TO THE FINANCIAL STATEMENTS

     The condensed financial statements included herein have been prepared by
Koll Real Estate Group, Inc. and its consolidated subsidiaries (the
"Company"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission.  Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations.  The Company believes that the
disclosures are adequate to make the information presented not misleading
when read in conjunction with the financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994,
and the current year's previously issued Quarterly Reports on Form 10-Q.

     The financial information presented herein reflects all adjustments,
consisting only of normal recurring adjustments, which are, in the opinion of
management, necessary for a fair presentation of the results for the interim
periods presented. The results for interim periods are not necessarily
indicative of the results to be expected for the full year.

                                       3


<PAGE>

                         KOLL REAL ESTATE GROUP, INC.

                                 BALANCE SHEETS

                                  (in millions)

<TABLE>
<CAPTION>
                                                  December 31,   September 30,
                                                      1994           1995
                                                  ------------   -------------
<S>                                               <C>            <C>
ASSETS

Cash and cash equivalents (including restricted
  cash of 7.5 and 2.7, respectively)                 $ 20.5           $  5.2
Real estate held for development or sale               42.7             38.5
Operating properties, net                              10.2              8.9
Land held for development                             325.8            332.7
Other assets                                           23.8             15.8
                                                     ------           ------
                                                     $423.0           $401.1
                                                     ------           ------
                                                     ------           ------

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
  Accounts payable and accrued
    liabilities                                      $ 31.8           $  8.8
  Senior debt                                           --              16.1
  Subordinated debentures                             152.9            167.8
  Other liabilities                                    92.8             79.7
                                                     ------           ------
  Total liabilities                                   277.5            272.4
                                                     ------           ------

Stockholders' equity:
  Series A Preferred Stock                               .4               .4
  Class A Common Stock                                  2.3              2.4
  Capital in excess of par value                      230.5            230.4
  Deferred proceeds from stock issuance                (1.6)            (1.5)
  Minimum pension liability                            (2.0)            (2.0)
  Accumulated deficit                                 (84.1)          (101.0)
                                                     ------           ------
  Total stockholders' equity                          145.5            128.7
                                                     ------           ------
                                                     $423.0           $401.1
                                                     ------           ------
                                                     ------           ------
</TABLE>


                 See the accompanying notes to financial statements.


                                       4


<PAGE>

                         KOLL REAL ESTATE GROUP, INC.

                            STATEMENTS OF OPERATIONS

                     (in millions, except per share amounts)

<TABLE>
<CAPTION>
                                           Three Months Ended                Nine Months Ended
                                              September 30,                     September 30,
                                           1994          1995                1994         1995
                                          ------        ------              ------       ------
<S>                                      <C>          <C>                  <C>          <C>
REVENUES:
    Asset Sales                           $  4.9        $  3.6              $  8.4       $ 12.9
    Operations                               3.5           3.2                 8.2          6.0
                                          ------        ------              ------       ------
                                             8.4           6.8                16.6         18.9
                                          ------        ------              ------       ------
COSTS OF:
    Asset Sales                              4.8           3.1                 8.3         10.9
    Operations                               3.1           2.8                 7.6          7.5
                                          ------        ------              ------       ------
                                             7.9           5.9                15.9         18.4
                                          ------        ------              ------       ------
Gross operating margin                        .5            .9                  .7           .5
General and administrative expenses          2.0           1.8                 6.5          5.9
Interest expense                             4.7           5.9                13.7         16.8
Other expense (income), net                   .5           8.9                 1.2          6.2
                                          ------        ------              ------       ------
Loss from continuing operations before
  income taxes                              (6.7)        (15.7)              (20.7)       (28.4)
Provision (benefit) for income taxes        (2.3)         (7.2)               (7.1)       (11.5)
                                          ------        ------              ------       ------
Loss from continuing operations             (4.4)         (8.5)              (13.6)       (16.9)
Gain on disposition of discontinued
  operation, net of income taxes             --            --                   .7          --
                                          ------        ------              ------       ------
Net loss                                  $ (4.4)        $(8.5)             $(12.9)      $(16.9)
                                          ------        ------              ------       ------
                                          ------        ------              ------       ------
Earnings (loss) per common share:
    Continuing operations                 $ (.10)        $(.18)             $ (.32)       $(.36)
    Discontinued operations                  --            --                  .02          --
                                          ------        ------              ------       ------
Net loss per common share                 $ (.10)        $(.18)             $ (.30)       $(.36)
                                          ------        ------              ------       ------
                                          ------        ------              ------       ------
</TABLE>


               See the accompanying notes to financial statements.


                                       5

<PAGE>

                         KOLL REAL ESTATE GROUP, INC.

                           STATEMENTS OF CASH FLOWS

                                 (in millions)

<TABLE>
<CAPTION>
                                                                      Nine Months Ended
                                                                         September 30,
                                                                      1994         1995
                                                                     ------       ------
<S>                                                                 <C>          <C>
Cash flows from operating activities:
  Net loss                                                           $(12.9)      $(16.9)
    Adjustments to reconcile to cash used by
      operating activities:
        Depreciation and amortization                                    .9           .9
        Non-cash interest expense                                      13.3         15.4
        Asset revaluations                                             --            7.5
        Gains on sales                                                  (.1)        (2.0)
        Gain on disposition of discontinued operation                   (.7)         --
        Proceeds from asset sales, net                                  7.9         12.2
        Investments in real estate held for development
          or sale                                                      (3.2)       (10.5)
        Investments in land held for development                       (7.5)        (6.9)
        Decrease in other assets                                        1.8          5.0
        Decrease in accounts payable, accrued and
          other liabilities                                            (7.1)       (36.1)
                                                                     ------       ------
            Cash used by operating activities                          (7.6)       (31.4)

Cash flows from investing activities:
    Sale of short-term investments, net                                18.7          --
    Proceeds from disposition of discontinued operation                 1.0          --
                                                                     ------       ------
            Cash provided by investing activities                      19.7          --
                                                                     ------       ------

Cash flows from financing activities:
    Borrowings of senior debt                                          --           20.3
    Repayments of senior debt                                          (7.0)        (4.2)
                                                                     ------       ------
            Cash provided (used) by financing activities               (7.0)        16.1
                                                                     ------       ------

Net increase (decrease) in cash and cash equivalents                    5.1        (15.3)
Cash and cash equivalents -- beginning of period                       21.8         20.5
                                                                     ------       ------
Cash and cash equivalents -- end of period                            $26.9       $  5.2
                                                                     ------       ------
                                                                     ------       ------
</TABLE>

            See the accompanying notes to financial statements.


                                       6

<PAGE>

                           KOLL REAL ESTATE GROUP, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 1  --  BASIS OF PRESENTATION

     The accompanying financial statements should be read in conjunction with
the Financial Statements and Notes thereto included in the Annual Report on
Form 10-K of Koll Real Estate Group, Inc. (the "Company") for the year ended
December 31, 1994, and the current year's previously issued Quarterly Reports
on Form 10-Q.

NOTE 2  --  LOSS PER COMMON SHARE

     The weighted average number of common shares outstanding for both the
three and nine month periods ended September 30, 1994 was 43.3 million
shares. The weighted average number of common shares outstanding for each of
the three and nine month periods ended September 30, 1995 was 47.3 million
and 47.0 million, respectively.  The Series A Preferred Stock is not included
in the loss-per-share calculations because the effect would be anti-dilutive.

NOTE 3  --  LAND HELD FOR DEVELOPMENT

     Land held for development consists of approximately 1,200 acres known as
Bolsa Chica located in Orange County, California, adjacent to the Pacific
Ocean, surrounded by the City of Huntington Beach and approximately 35 miles
south of downtown Los Angeles ("Bolsa Chica"). The Company is currently
seeking approvals from state and federal agencies for a Local Coastal Plan
("LCP") for wetlands restoration and residential development of up to 3,300
homes at Bolsa Chica, which was unanimously approved by the Orange County
Board of Supervisors in December 1994. The related Development Agreement was
unanimously approved  by the Orange County Board of Supervisors in April
1995.  The project still requires approvals of the California Coastal
Commission and the U.S. Army Corps of Engineers.  The Company, working with
various governmental, community and environmental groups, has developed a
quality master plan which reflects a 42% reduction in density (from 5,700 to
3,300 units) and a wetlands restoration plan to be funded by development of
up to 900 units in the lowlands.

     In July 1995, the Company was informed that the Ports of Long Beach and
Los Angeles and various federal and state agencies expected to enter into a
Memorandum of Agreement ("MOA") specifying the terms under which the various
agencies would grant mitigation credits, which are needed by the Ports to
expand their facilities, in exchange for Ports' funds to be used for
restoration, maintenance and monitoring of the wetlands in the Bolsa Chica
lowlands. Consistent with the objectives of the MOA, the Company

                                       7

<PAGE>

announced that it had entered into an agreement with the American Land
Conservancy, a nonprofit conservation organization, to sell approximately 930
acres of its 1,200-acre Bolsa Chica property, representing substantially all
of the Company's lowland ownership at the site.  Confidentiality arrangements
prevent the Company from releasing the price of the proposed sale. While the
agreement between the Company and the American Land Conservancy has expired,
discussions are continuing. However, there can be no assurance that a new
agreement will be entered into or that any transaction will be completed.
The ability of the Company to complete any such transaction would be subject
to substantial contingencies, including: (i) obtaining all final approvals
from various governmental agencies for development of up to 2,500 residential
units on the Company's approximately 200 acres (and approximately 21 acres
owned by third parties) on the Bolsa Chica mesa; (ii) Coastal Commission
approval of (a) the Ports' Master Plan amendments, including the amount of
mitigation credits to be granted in exchange for the Ports funding a $62
million wetlands restoration escrow account and (b) a wetlands restoration
plan for Bolsa Chica; and (iii) the American Land Conservancy securing
sufficient funds to complete the proposed transaction.

     Under the 3,300 unit LCP which was approved by the Orange County Board
of Supervisors, the Company is committed to restoring the wetlands at Bolsa
Chica provided that state and federal agencies approve development of up to
900 homes in the lowlands.  On November 3, 1995 the staff of the California
Coastal Commission released its report on the Bolsa Chica LCP.  The
Commission's staff report recommends various modifications to the County's
LCP, which are unacceptable to both the County of Orange and the Company.
Due to the volume of the 261 page staff report and the fact that it was
released only eight business days before the scheduled hearing, the County of
Orange, which is the Coastal Commission applicant for the LCP, has determined
that more time is required to adequately address and refute the various
erroneous statements and infeasible recommendations made in the staff report.
The County has therefore requested a continuance of the Coastal Commission's
hearing to the Commission's next Southern California meeting in January 1996.

     If the Coastal Commission approves the 3,300 unit LCP in January 1996,
the Company expects to commence infrastructure construction on the mesa in
1997. However, due to a number of factors beyond the Company's control,
including possible objections of various environmental and so-called public
interest groups that may be made in legislative, administrative or judicial
forums, the required approvals could be delayed substantially; and there can
be no assurance that the project will receive final approvals as currently
proposed.

     In this regard, on January 13, 1995, two lawsuits challenging the Orange
County Board of Supervisors approval of the Bolsa Chica project were filed in
Orange County Superior Court. Although the lawsuits differ in the particular
issues they raise, generally they each allege, among other things, violations
of the California Environmental Quality Act and violations of the California
Government Code planning and zoning laws.  The plaintiffs in

                                       8

<PAGE>

both actions are not seeking monetary damages, but are instead asking the
Court to set aside the approval of the Bolsa Chica project.  The plaintiffs
in both lawsuits also seek attorneys' fees in unspecified amounts if they
prevail.  The Company and the County of Orange believe these lawsuits are
without merit and are vigorously defending them.

     In the event that the County approved LCP is modified by the Coastal
Commission to materially reduce the number of residential units below 3,300,
a significant reduction in the book value of the Bolsa Chica project
currently reflected in the Company's financial statements would result.  Any
such potential impact on the statement of operations and stockholders' equity
would be partially offset by a decrease in deferred taxes. Realization of the
Company's investment in Bolsa Chica will also depend upon various economic
factors, including the demand for residential housing in the Southern
California market and the availability of credit to the Company and to the
housing industry. While the December 1994 bankruptcy filing by the County of
Orange is not indicative of the state of the overall Orange County economy,
it appears to have had an adverse effect on residential real estate and could
also impair the Company's ability to secure municipal bond financing for
infrastructure improvements necessary to develop Bolsa Chica.

NOTE 4  --  DEBT

SENIOR DEBT

     In February 1995, the Company borrowed $15.5 million under a letter of
credit and reimbursement agreement with Nomura Asset Capital Corporation
("Nomura") which was used along with $6.5 million of restricted cash to
settle litigation with Abex Inc. and Wheelabrator Technologies Inc.  As of
September 30, 1995, approximately $5 million was available under a
construction loan agreement with Nomura to fund infrastructure construction
at the Company's Rancho San Pasqual (formerly Eagle Crest) project.

     The Company also borrowed $4.8 million under a construction loan
agreement with Bank of Boston during the nine months ended September 30, 1995
and applied $4.2 million in proceeds from sales of residential homes at the
Company's Wentworth By The Sea project in New Hampshire to satisfy required
prepayments, resulting in an outstanding balance of $.6 million as of
September 30, 1995.  On November 2, 1995, the Company sold all of its
interest in the Wentworth residential land to its development manager for
$4.1 million in cash plus the buyer's prepayment of amounts outstanding under
the Bank of Boston credit agreement, which terminated this credit facility.

     Cash payments for interest on senior debt were approximately $.4 million
and $.9 million for the nine months ended September 30, 1994 and 1995,
respectively.

                                       9

<PAGE>

SUBORDINATED DEBT

     Subordinated debt was comprised of the following (in millions):

<TABLE>
<CAPTION>
                                   December 31,     September 30,
                                       1994              1995
                                   ------------     -------------
<S>                               <C>               <C>
Senior subordinated debentures        $123.0            $ 138.2
Subordinated debentures                 30.7               34.5
                                      ------            -------
    Total face amount                  153.7              172.7

Less unamortized discount               (6.2)              (5.7)
Plus accrued interest                    5.4                 .8
                                      ------            -------
                                      $152.9             $167.8
                                      ------            -------
                                      ------            -------
</TABLE>

NOTE 5  --  INCOME TAXES

     The Internal Revenue Service ("IRS") has completed its examinations of
the tax returns of the Company and its consolidated subsidiaries, including
formerly affiliated entities, for the years ended December 31, 1989, 1990 and
1991.  With respect to each examination, the IRS has proposed material audit
adjustments. The Company disagrees with the positions taken by the IRS and
has filed a protest with the IRS to vigorously contest the proposed
adjustments. After review of the IRS's proposed adjustments, the Company
estimates that, if upheld, the adjustments could result in Federal tax
liability, before interest, of approximately $17,000,000 (net of amounts
which may be payable by former affiliates pursuant to tax sharing agreements)
and a disallowance of up to $83,000,000 of recognized net operating loss
carryforwards.  The Company has not determined the extent of potential
accompanying state tax liability adjustments should the proposed IRS
adjustments be upheld. The Company's protest was filed on August 11, 1995 and
has not yet been considered by the IRS Appeals Division. Management currently
believes that the IRS's positions will not ultimately result in any material
adjustments to the Company's financial statements. Therefore, the Company has
not made any adjustments to its existing reserves for any prospective tax
liability or adverse tax consequence at this time.  The Company is prepared
to pursue all available administrative and judicial appeal procedures with
regard to this matter and the Company is advised that its dispute with the
IRS could take up to five years to resolve.

     Cash payments for federal, state and local income taxes were
approximately $.4 million and $.2 million for the nine months ended September
30, 1994 and 1995, respectively. Tax refunds received were $.8 million and
$.4 million for the nine months ended September 30, 1994 and 1995,
respectively.

                                       10

<PAGE>

NOTE 6  --  COMMITMENTS AND CONTINGENCIES

     As described in the Company's Form 10-K for the year ended December 31,
1994, the United States Environmental Protection Agency ("EPA") has
designated Universal Oil Products ("UOP"), among others, as a Potentially
Responsible Party ("PRP") with respect to an area of the Upper Peninsula of
Michigan (the "Torch Lake Site") under the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"). UOP is allegedly the successor in interest to one of the
companies that conducted mining operations in the Torch Lake area and an
affiliate of Allied Signal Inc., a predecessor of the Company. The Company
has not been named as a PRP at the site. However, Allied Signal has, through
UOP, asserted a contractual indemnification claim against the Company for all
claims that may be asserted against UOP by EPA or other parties with respect
to the site. EPA has proposed a clean-up plan which would involve covering
certain real property both contiguous and non-contiguous to Torch Lake with
soil and vegetation in order to address alleged risks posed by copper
tailings and slag at an estimated cost between $6 and $7.5 million. EPA
estimates that it has spent between $3 and $4 million to date in performing
studies of the site. Under CERCLA, EPA could assert claims against the Torch
Lake PRP's, including UOP, to recover the cost of these studies, the cost of
all remedial action required at the site, and natural resources damages. An
earlier settlement in principle with EPA staff pursuant to which UOP would
pay $1.7 million in exchange for a release similar to those normally granted
by EPA in such circumstances was rejected by certain other governmental
authorities in July 1993. Settlement negotiations between the Company, on
behalf of UOP, and EPA resumed shortly thereafter.  In June 1995, EPA
proposed a CERCLA settlement pursuant to which UOP would pay approximately
$2.9 million in exchange for a limited covenant by EPA not to sue UOP in the
future.  The Company, without admission of any obligation to UOP, has since
determined to vigorously defend UOP's position that the EPA's proposed
clean-up plan is unnecessary and inconsistent with the requirements of CERCLA
given that the EPA's own Site Assessment and Record of Decision found no
immediate threat to human health. In the Company's view the proposed
remediation costs would be in excess of any resulting benefits.

                                       11

<PAGE>

ITEM 2  --  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS


GENERAL

     The principal activity of the Company is to obtain zoning and other
entitlements for land it owns and to improve the land for residential
development. Once the land is entitled, the Company may sell unimproved land
to other developers or investors; sell improved land to homebuilders; or
participate in joint ventures with other developers, investors or
homebuilders to finance and construct infrastructure and homes. The Company's
principal activities also include single and multi-family residential
construction and providing residential, retail, office and industrial
development services to third parties, including feasibility studies,
entitlement coordination, project planning, construction management,
financing, marketing, acquisition, disposition and asset management services
on a national and international basis, through its offices throughout
California, and in Dallas, Denver, Mexico City, Phoenix and Seattle.  The
Company intends to consider additional real estate acquisition and joint
venture opportunities; however, over the next year the Company's principal
objective is to maintain adequate liquidity to fully support the Bolsa Chica
project development efforts.

     Real estate held for development or sale and land held for development
(real estate properties) are carried at the lower of cost or estimated net
realizable value based on undiscounted cash flows. The Company's real estate
properties are subject to a number of uncertainties which can affect the
future values of those assets. These uncertainties include delays in
obtaining zoning and regulatory approvals, withdrawals or appeals of
regulatory approvals and availability of adequate capital, financing and cash
flow.  See "Item 1 --Financial Statements: Note 3 -- Land Held for
Development" for a description of Bolsa Chica, the Company's principal
development project.  In addition, future values may be adversely affected by
heightened environmental scrutiny, limitations on the availability of water
in Southern California, increases in property taxes, increases in the costs
of labor and materials and other development risks, changes in general
economic conditions, including higher mortgage interest rates, and other real
estate risks such as the demand for housing generally and the supply of
competitive products.  While the December 1994 bankruptcy filing by the
County of Orange is not indicative of the state of the overall Orange County
economy, it appears to have had an adverse effect on residential real estate
and could also impair the Company's ability to secure municipal bond
financing for infrastructure improvements at Bolsa Chica.  Real estate
properties do not constitute liquid assets and, at any given time, it may be
difficult to sell a particular property for an appropriate price. The state
of California's economy has had a negative impact on the real estate market
generally, on the availability of potential purchasers for

                                       12

<PAGE>

such properties and upon the availability of sources of financing for
carrying and developing such properties.

LIQUIDITY AND CAPITAL RESOURCES

     The principal assets in the Company's portfolio are residential land
which must be held over an extended period of time in order to be developed
to a condition that, in management's opinion, will ultimately maximize the
return to the Company. Consequently, the Company requires significant capital
to finance its real estate development operations. On February 6, 1995 the
Company entered into an agreement with Abex Inc. and Wheelabrator
Technologies, Inc. which settled litigation (the "Abex litigation") regarding
certain tax sharing agreements.  Under the terms of the agreement, the
Company paid an aggregate of $22 million, $15.5 million of which was funded
by borrowings under a financing agreement with Nomura Asset Capital
Corporation ("Nomura") and the balance of $6.5 million was funded from
restricted cash.

     During the nine months ended September 30, 1995, the Company generated
an aggregate of approximately $12.2 million in cash from asset sales,
principally through the sale of wharfage rights in Coronado, California, the
sale of industrial property in Murrieta, California and sales of residential
homes at its Wentworth By The Sea project in New Hampshire ("Wentworth"),
before utilizing approximately $4.2 million of Wentworth proceeds to make
required prepayments of senior debt. At September 30, 1995 the Company's
unrestricted cash and cash equivalents aggregated $2.5 million and restricted
cash of $2.7 million was available to fund infrastructure improvements at the
Company's Rancho San Pasqual (formerly Eagle Crest) project. On November 2,
1995, the Company sold all of its residential property at Wentworth for
approximately $4.1 million in cash plus the buyer's prepayment of $.6 million
of bank debt and assumption of other related liabilities. The Company
continues to own the Wentworth marina, which is being actively marketed
for sale.

     Historically, sources of capital have included bank lines of credit,
specific property financings, asset sales and available internal funds. The
Company has reported losses since 1991, with the exception of 1993 results
which included gains on dispositions and extinguishment of debt, and expects
to report losses in the foreseeable future. While a significant portion of
such losses is attributable to non-cash interest expense on the Company's
subordinated debentures, the Company's capital expenditures for project
development are significant.  Given the limited availability of capital to
the Company until the Bolsa Chica project approvals are obtained, the Company
will continue to be dependent primarily on real estate asset sales, existing
financing arrangements (see Note 4) and cash and cash equivalents on-hand to
fund project development and general and administrative costs during 1995.

                                       13

<PAGE>

FINANCIAL CONDITION

SEPTEMBER 30, 1995 COMPARED WITH DECEMBER 31, 1994

     The $15.3 million decrease in cash and cash equivalents primarily
reflects the funding of project development costs during the nine months
ended September 30, 1995, as well as other activity presented in the
Statements of Cash Flows.  Restricted cash of $2.7 million at September 30,
1995 reflects funds deposited into an escrow account, as required under the
construction loan agreement with Nomura, to be used solely for funding
infrastructure costs at the Company's Rancho San Pasqual residential project
in San Diego County.

     The $8.0 million decrease in other assets primarily reflects the March
1995 collection of a note receivable from AV Partnership, equity in net
losses from AV Partnership during the pre-sales phase, the reclassification
of a note receivable to real estate held for development or sale upon
acquisition of title to industrial property in Ontario, California and the
refund of a deposit upon termination of a purchase contract for property
adjacent to the Bolsa Chica site.

     The $23.0 million decrease in accounts payable and accrued liabilities
primarily reflects the February 1995 payment of $22 million to settle the
Abex litigation.

     Senior debt of $16.1 million reflects the February 1995 borrowing of
$15.5 million under a letter of credit and reimbursement agreement with
Nomura to settle the Abex litigation discussed above and $.6 million of net
borrowings under a construction loan agreement with Bank of Boston for
development and construction of single-family homes at the Company's
Wentworth project.

RESULTS OF OPERATIONS

     The nature of the Company's business is such that individual
transactions often cause significant fluctuations in operating results from
year to year.

THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 1994

     The $1.3 million decrease in asset sales revenues from $4.9 million in
1994 to $3.6 million in 1995 and the related decrease in the costs of asset
sales from $4.8 million in 1994 to $3.1 million in 1995 principally reflects
reduced residential sales at Wentworth, partially offset by the September
1995 sale of a leasehold interest in Grand Caribe Island in Coronado,
California and residential sales at the Company's Oceanside Hills project.
The decrease in revenues from operations from $3.5 million in 1994 to $3.2
million in 1995 primarily reflects lower revenues from golf operations due to
the September 1994 sale of the Company's Wentworth golf course.

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<PAGE>

The change in other expense (income), net from $.5 million of expense in 1994
to $8.9 million of  expense in 1995 primarily reflects $7.5 million in asset
revaluation losses on the Company's Wentworth project and the golf course at
Rancho San Pasqual (formerly Eagle Crest) to reflect estimated net realizable
values.

NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 1994

     The $4.5 million increase in asset sales revenues from $8.4 million in
1994 to $12.9 million in 1995 and the increase in the related costs of asset
sales from $8.3 million in 1994 to $10.9 million in 1995 principally reflects
the March 1995 sale of industrial property in Murrieta, California and the
May 1995 sale of wharfage rights in Coronado, California. The decrease in
revenues from operations from $8.2 million in 1994 to $6.0 million in 1995
primarily reflects an absence of revenues from the Wentworth golf course
which was sold in September 1994 and lower revenues from the Company's
domestic development business.

     The increase in interest expense from $13.7 million in 1994 to $16.8
million in 1995 principally reflects higher outstanding balances of
subordinated debentures and senior debt during 1995.

     The change in other expense (income), net from $1.2 million of expense
in 1994 to $6.2 million of income for 1995 primarily reflects $7.5 million in
asset revaluation losses on the Company's Wentworth project and the golf
course at Rancho San Pasqual to reflect estimated net realizable values,
partially offset by non-recurring income from reductions in excess
environmental reserves due to favorable governmental agency rulings in 1995.

     The gain on disposition of discontinued operations, net of income taxes
for the 1994 period reflects the receipt of cash for the February 1994
termination of the contingent payment provision of a December 1993 agreement
with Libra Invest & Trade Ltd. ("Libra") whereby the Company exchanged its
Lake Superior Land Company subsidiary for approximately $42.4 million face
amount of the Company's senior subordinated debentures held by Libra and
other consideration.

PART II  --  OTHER INFORMATION

ITEM 1  --  LEGAL PROCEEDINGS

      "Item 3 -- Legal Proceedings" in the Company's Annual Report on Form
10-K for the Year Ended December 31, 1994 is incorporated herein by this
reference. See also Notes 5 and 6 of Notes to Financial Statements set forth
above in Part I -- Item 1.

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<PAGE>

ITEM 6  --  EXHIBITS AND REPORTS ON FORM 8-K

     (a)    Exhibits:

     4.1    Amendment to Construction Loan Agreement dated as of September 12,
            1995 between the Registrant, Signal Landmark and Nomura Asset
            Capital Corporation ("Nomura").

     4.2    Amendment to Letter of Credit and Reimbursement Agreement dated as
            of  September 12, 1995 between the Registrant and Nomura.

    27.1   Financial Data Schedule.

     (b)   Reports on Form 8-K:

           None.




                                     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.

                                       KOLL REAL ESTATE GROUP, INC.



Date       November 14, 1995                   /s/ RAYMOND J. PACINI
     -----------------------------     ----------------------------------------
                                                   RAYMOND J. PACINI
                                              Executive Vice President --
                                                Chief Financial Officer


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