Commercial Assets Inc., formed in August 1993, is a real estate investment trust or REIT. The Company is engaged in the ownership, acquisition, development and expansion of manufactured home communities. As of December 31, 1999, the Company held interests as owner, ground lessor or mortgage lender (including participating mortgages) in 12 manufactured home communities with a total of 1,840 developed homesites (sites with homes in place) and 1,370 undeveloped homesites. The Company expects to continue acquiring interests in manufactured home communities during 2000. The manufactured home communities in which the Company has interests are primarily located in Arizona and Florida. The Company holds interests in these communities as owner, ground lessor or mortgage lender (including participating mortgages). At December 31, 1999, the Company owned two manufactured home communities which each exceeded 10% of the Company's total assets. The first property, known as Riverside Club,is located in the Tampa, Florida region and was purchased in November 1998. The property has 223 developed homesites which are 99% occupied and 767 undeveloped homesites. The property offers residents a range of amenities including a 9-hole golf course, swimming pool, tennis courts, clubhouse, and marina. The developed homesites are leased to the owner of the home located on each homesite. The leases are annual leases and can be renewed by the tenant provided that he or she complies with the rules and regulations of the property and pays the required rent. At December 31, 1999, the average monthly rent for a homesite was $397. The Company can increase rent based on either rents charged by comparable properties in the surrounding area or increases in the Company's costs associated with the property. The cost of the property has been allocated as follows: $3.56 million to land and $7.87 million to buildings and land improvements. Effective November 1998,the Company leased this property to a third party for 50 years. The lease provides for an initial annual rent payment of $890,000, increasing by 4% per annum. As additional homesites are developed, the annual lease payment increases by an amount equal to 10% of the costs incurred in developing the homesites. In addition, the Company received additional rent equal to 50% of the lessee's net cash flow from the property and 50% of any sales proceeds in excess of the Company's historical cost of the property and subsequent improvements. Effective January 2000, the Company terminated the lease in exchange for the cancellation of $186,000 of loans to the lessee. The Company intends to further develop this property over the next five to ten years. The development is expected to include development of the undeveloped homesites plus the completion of the golf course into an 18-hole course. The estimated cost to fully develop the property is $8 million.The Company expects to finance the development with the Company's existing cash and short-term investments, proceeds from secured long-term notes payable on the Company's various properties and cash flow from the Company's operations. The other property which exceeded 10% of the Company's total assets is known as Rancho Mirage and is located in the Phoenix, Arizona region. This property was purchased in May 1999 and has 312 developed homesites which are 100% occupied. The property offers residents a range of amenities including: a 6-hole pitch-and-putt golf course; swimming pool; tennis courts; and clubhouse. The developed homesites are leased to the owner of the home located on each homesite. The leases are annual leases and can be renewed by the tenant provided that he or she complies with the rules and regulations of the property and pays the required rent. At December 31, 1999, the average monthly rent for a homesite was approximately $174.The Company can increase rent based on rents charged by comparable properties in the surrounding area. Effective January 2000, the average monthly rent was increased to $295. The cost of the property has

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