CB COMMERCIAL HOLDINGS INC, S-1, 1996-09-26

CB COMMERCIAL HOLDINGS INC
S-1, 1996-09-26
REAL ESTATE

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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CB COMMERCIAL HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 6531 52-1616016
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION
ORGANIZATION) CODE NUMBER)

533 SOUTH FREMONT AVENUE
LOS ANGELES, CALIFORNIA 90071-1798
(213) 613-3123
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

---------------

JAMES J. DIDION
CHIEF EXECUTIVE OFFICER
CB COMMERCIAL HOLDINGS, INC.
533 SOUTH FREMONT AVENUE
LOS ANGELES, CALIFORNIA 90071-1798
(213) 613-3123
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

COPIES TO:

RICHARD S. GREY, ESQ. GREGG A. NOEL, ESQ.
PETER V. LEPARULO, ESQ. RAND S. APRIL, ESQ.
PILLSBURY MADISON & SUTRO LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM
P.O. BOX 7880 300 GRAND AVENUE, SUITE 3400
SAN FRANCISCO, CALIFORNIA 94120 LOS ANGELES, CALIFORNIA 90071

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================
PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Common Stock, $.01 par value............................ $86,250,000 $29,741.38
===================================================================================================
</TABLE>

(1)Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.

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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED , 1996

PROSPECTUS

[LOGO OF CB COMMERCIAL]

CB COMMERCIAL REAL ESTATE SERVICES GROUP, INC.

COMMON STOCK

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All of the shares (the "Shares") of common stock, par value .01 per
share (the "Common Stock"), of CB Commercial Real Estate Services Group, Inc.
("the Company") offered hereby (the "Offering") are being sold by the Company.
Prior to the Offering, there has been no established public market for the
Common Stock. It is currently estimated that the initial public offering price
of the Common Stock offered hereby will be between $ and $ per share.
See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price of the Common Stock. Application
will be made to have the Common Stock approved for listing on the New York
Stock Exchange under the symbol "CBG."

SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share..................................... $ $ $
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Total(3)...................................... $ $ $
</TABLE>
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(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including certain liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted the several Underwriters an option, exercisable
within 30 days after the date of the Prospectus, to purchase up to an
additional shares of Common Stock to cover over-allotments, if any. If
all of such shares of Common Stock are purchased, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ , $
and $ , respectively. See "Underwriting."

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The Shares are offered by the several Underwriters, subject to prior sale
when, as and if issued to and accepted by them, subject to approval of certain
legal matters by counsel for the Underwriters and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the Shares
will be made in New York, New York on or about , 1996.

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MERRILL LYNCH & CO. MONTGOMERY SECURITIES

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The date of this Prospectus is , 1996.
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[MAP OF U.S. WITH LOCATION OF OFFICES AND BAR CHARTS]

Two bar graphs one of which depicts the Company's Earnings Before Interest,
Tax, Depreciation and Amortization ["EBITDA"] For Each of the four quarters
and the trailing four quarters in the Years 1992-1995 and the first two quarters
of 1996 and the other depicting the Company's revenue for each of the four
quarters and the trailing four quarters in the years 1992-1995 and for the
first two quarters of 1996.

Photographs of directors and officers along the left side of the fold out.
Graphic depiction of World Map showing location of Company's offices.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and related notes appearing
elsewhere in this Prospectus. Prospective investors should carefully consider
the matters set forth in "Risk Factors." Except as set forth in the
consolidated financial statements and notes thereto or otherwise as specified
herein, all information in this Prospectus assumes no exercise of the
Underwriters' over-allotment option. Effective upon consummation of the
Offering, the Company will change its name from CB Commercial Holdings, Inc. to
CB Commercial Real Estate Services Group, Inc. Unless the context requires
otherwise, the term the "Company" or "CB Commercial" means CB Commercial Real
Estate Services Group, Inc. and each of its consolidated subsidiaries.

COMPANY OVERVIEW

Founded in 1906, the Company is the largest vertically-integrated commercial
real estate services company in the United States with aggregate 1995 revenue
of $468.5 million and 231 business unit offices in 118 locations. In addition,
the Company has established exclusive alliances with international commercial
real estate services firms which have offices in an additional 119 locations in
31 countries. The Company provides a full range of services to commercial real
estate tenants, owners, and investors including: (i) brokerage (facilitating
sales and leases), investment properties (acquisitions and sales on behalf of
investors), corporate services, property management, and real estate market
research (collectively, "Property and User Services"), and (ii) mortgage
banking (loan origination and servicing), investment management and advisory
services, and valuation and appraisal services (collectively, "Investor
Services"). The Company believes that, on the basis of revenues, its brokerage
and independent commercial loan origination businesses are the largest such
businesses in the U.S., and that the Company is among the top ten providers of
property management and loan servicing in the United States. The Company's
diverse client base includes local, national and multinational corporations,
financial institutions, pension funds and other tax exempt entities, local,
state and national governmental entities, and individuals.

The Company's revenue increased 17.0% to $243.7 million for the six months
ended June 30, 1996 from $208.3 million for the six months ended June 30, 1995,
and EBITDA (earnings before interest, taxes, depreciation and amortization)
increased 70.2% to $17.7 million from $10.4 million over the same period. In
1995, the Company's revenue increased 9.2% to $468.5 million from $429.0
million in 1994 and EBITDA increased 23.1% to $41.5 million from $33.7 million
over the same period.

The Company believes that it enjoys a variety of competitive advantages in
the commercial real estate services industry, including the Company's--

. Significant deal flow and strong market presence in its core brokerage and
property management businesses, both of which are employed for the benefit
of all of the Company's business disciplines;

. 90-year tradition and history of providing high-quality services and client
coverage;

. Internationally recognized "brand" identity which the Company believes is
widely respected in the real estate services industry;

. Experienced and trained professionals in all business disciplines, including
the Company's more than 1,900 sales professionals in Property and User
Services who have an average tenure of more than nine years with the
Company;

.Multi-discipline capabilities and extensive multi-market network;

. State-of-the-art technology and professional education programs which enable
the Company to deliver superior services;

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. Experienced management team, the executive and key employees of which have
an average tenure of more than 18 years with the Company and currently
collectively own approximately % of the Company's Common Stock (including
exercisable stock options and shares held through the Company's Deferred
Compensation Plan); and

. Employees who, prior to the Offering, own more than 50% of the Common Stock
of the Company.

As part of its growth strategy, the Company is continually assessing
acquisition opportunities. Management believes that there are significant
opportunities in the fragmented and consolidating real estate services industry
to acquire additional companies to complement and expand the Company's existing
operations. Since the beginning of 1995, the Company has completed three
strategic acquisitions. In July 1996, the Company acquired L.J. Melody &
Company and L.J. Melody & Company of California (collectively "L.J. Melody"), a
nationally-known mortgage banking firm, for $15 million. The L.J. Melody
acquisition provides the Company with leadership for its own mortgage banking
business, access to loan sources not previously available to the Company and an
enhanced ability to access the Company's investment properties and brokerage
businesses as a source of mortgage originations. In June 1995, the Company
acquired Westmark Realty Advisors L.L.C. ("Westmark"), an investment management
and advisory business with approximately $3.0 billion of assets under
management, for $37.5 million, plus a supplemental purchase price component of
up to $18.0 million based upon Westmark's adjusted operating income. The
Westmark acquisition gives the Company the opportunity to enhance its
brokerage, property management, and loan origination businesses, and has moved
the Company into a significant position in a business area which the Company
believes has the potential for significant growth. In April 1995, the Company
acquired Langdon Rieder, a nationally-known tenant representation firm, for
$1.5 million, plus other consideration. The Langdon Rieder acquisition enhanced
the Company's ability to provide sophisticated services to tenants similar to
those services it had historically provided to landlords.

INDUSTRY TRENDS

Over the last ten years, the commercial real estate industry has experienced
various structural changes and more recently has been experiencing a broad
recovery from the real estate "depression" of the early 1990s. The Company
believes that these factors and the resulting trends, the most important of
which are summarized below, create an opportunity for the Company to leverage
its experience, multi-discipline integrated services, multi-market presence and
brand equity into a competitive advantage--

. CHANGING COMPOSITION AND NEEDS OF INVESTORS AND OWNERS. Investors in and
owners of commercial real estate assets have become increasingly
institutional with geographically diverse portfolios. This change in the
ownership characteristics and management requirements of institutional real
estate investors and owners has fueled the demand for, and growth of,
sophisticated multi-service, nationally-oriented real estate service
providers.

. CONTINUING OUTSOURCING TREND. As a result of corporate managements'
heightened awareness that corporate real estate assets are a major component
of corporate net worth combined with competitive pressures encouraging a
greater focus on core businesses, corporations have been downsizing and, as
a result, outsourcing their non-core activities to third-parties. As a
consequence, the demand for multi-disciplined, multi-market professional
real estate services firms that provide contractually-based, integrated
services capable of supplementing a corporate real estate department has
increased significantly.

. ONGOING INDUSTRY CONSOLIDATION. The Company believes that the combination of
institutional and corporate real estate service needs and demands, together
with the real estate "depression" of the early 1990s, has made it necessary
for real estate services firms to (i) provide comprehensive, high-quality
services, (ii) make significant investments in corporate infrastructure,
including information technology and professional education, and (iii) have
access to sufficient capital to support these service and investment

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needs. These factors have fueled the consolidating industry environment,
which the Company believes will motivate local and regional real estate
service providers to sell to, or form alliances with, major national and
international companies.

. EXPANDING CMBS MARKET. Wall Street firms and financial institutions have
recently been providing a significant amount of third-party commercial
mortgage financing and have been accessing the public debt markets by
issuing commercial mortgage-backed securities ("CMBS") in order to
securitize their portfolios and avoid holding loans for the long-term. As a
result, companies with access to real estate transaction deal flow and
national loan origination capabilities should be able to benefit from this
expansion of the CMBS market.

. RECOVERING MARKETS. Coincident with the long term structural shifts in the
commercial real estate industry, commercial real estate markets in the
United States have been recovering over the last several years,
experiencing increased activity in most product types and geographic market
areas. As a result, brokerage and property management fees, which are based
upon a percentage of transaction value and total rent collections,
respectively, have begun to increase.

BUSINESS OBJECTIVE AND GROWTH STRATEGIES

The Company's primary business objective is to continue to expand through
acquisitions and internal growth, while simultaneously delivering strong
consistent growth in its annual results of operations. The key growth
strategies by which the Company plans to accomplish this objective include--

. CAPITALIZING ON INDUSTRY STRUCTURAL CHANGES. As the ownership of commercial
real estate becomes increasingly institutional, large firms that can
efficiently service a nationwide real estate portfolio are gaining market
share over smaller local and regional operators. The Company's ability to
provide multi-discipline, integrated real estate services on a nationwide
basis with strong brand identity is an important competitive advantage.

. PURSUING STRATEGIC ACQUISITIONS AND PARTNERSHIPS. The Company intends to
continue to strengthen the range, quality and geographic coverage of its
services through strategic acquisitions and partnerships and the
development of additional service disciplines.

. BENEFITTING FROM RECOVERING COMMERCIAL REAL ESTATE MARKETS. Brokerage and
property management fees from contracts with existing clients have begun to
increase as a result of the recovery in U.S. commercial real estate markets
and the generally rising level of occupancy and rental levels and, as a
result, property values. Since brokerage fees are typically based upon a
percentage of transaction value, and property management fees are typically
based upon a percentage of total rent collections, recent occupancy and
rental rate increases at the property level have generated an increase in
brokerage and property management fees to the Company.

. CAPITALIZING ON THE CORPORATE OUTSOURCING TREND. By relying on a single
integrated provider for all their real estate-related needs, corporations
may be able to reduce their ongoing overhead expense while taking advantage
of the Company's real estate expertise. This outsourcing trend has
accelerated in recent years and the Company believes that it will continue
in the future. The Company is one of the major participants in this segment
of the commercial real estate services industry and believes that only a
small percentage of the market has been penetrated.

. GENERATING INTERNAL GROWTH BY INCREASING MARKET SHARE AND EMPLOYEE
PRODUCTIVITY. In order to increase market share in the markets it currently
serves, the Company is focusing on increasing the number of brokerage
professionals in its existing national network of offices. The Company's
current sales professionals only occupy approximately 73%, on average, of
its available office space for sales professionals. The Company believes
that revenue growth can be generated without a corresponding growth

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in management and infrastructure costs through hiring of additional
professionals. In order to improve each employee's productivity, the
Company makes substantial investments in information technology and
professional education.

. ENCOURAGING LOCAL MARKET INNOVATION. Although the Company encourages each
business discipline to innovate locally to meet its respective clients'
needs, it also requires its businesses to adhere to consistent quality
standards in order to strengthen client relationships and increase the
potential for multiple assignments with each client.

. CAPITALIZING ON CROSS BORDER ACTIVITY. Internationally, the Company has
established exclusive alliances in various markets throughout Europe with
DTZ Debenham Thorpe International, Inc. ("DTZ") and in Asia with C.Y. Leung
& Company Limited ("C.Y. Leung"), both leading firms in their respective
markets. In addition, Westmark is currently exploring the development of
new cross-border investment products in conjunction with DTZ and C.Y.
Leung.

THE COMPANY'S BUSINESSES

PROPERTY AND USER SERVICES

Property and User Services include a broad range of services, delivered
primarily to users and owners of commercial real estate, including brokerage
(facilitating sales and leases), investment properties (acquisitions and sales
on behalf of investors), corporate services, property management, and real
estate market research. These services are provided with respect to a wide
range of commercial real estate properties, including, but not limited to,
office space, industrial buildings, retail properties, multifamily residential
properties and unimproved land.

Brokerage. Brokerage, the Company's original and core business, advises
buyers, sellers, landlords and tenants in connection with the sale and leasing
of office space, industrial buildings, retail properties, multifamily
residential properties and unimproved land. Brokerage employs approximately
1,650 sales professionals nationally generating significant deal flow and
real-time market data. This market presence provides the Company with a
competitive advantage in developing business opportunities and client contacts
and in developing CB Commercial's brand identity for the Company's other
business disciplines. The Company believes its commercial brokerage business
is the market-leader in the United States based upon both 1995 revenue, which
totaled approximately $294.3 million, and the number of completed
transactions, which totaled approximately 19,800.

Investment Properties. The Company provides sophisticated strategic planning
for, and execution of, acquisitions and sales of income-producing commercial
properties for its clients through its investment properties sales
professionals. In 1995, approximately 1,000 sales transactions were completed
with some of the country's largest and most sophisticated investors,
including, as examples, Prudential Insurance Co., RREEF and Security Capital.
With aggregate estimated sales consideration of more than $4 billion in 1995,
the Company believes that it is the largest provider of investment properties
sales services in the United States.

Corporate Services. Corporate services, which operates through the
CBC/Madison Advisory Group, addresses the multiple-market domestic and
international real estate needs of corporate America by providing
comprehensive, quality services on a cost efficient basis through a single
point-of-contact at the Company. Corporate services coordinates the
utilization of all the Company's various disciplines to deliver an integrated
service to some of the largest and most sophisticated companies in the United
States, including, as examples, Eastman Kodak, Ford Motor Company, General
Motors, and Allstate Insurance Company. CBC/Madison Advisory Group directly
addresses client demand driven by corporate downsizing, outsourcing, and
alliance partnering, expanding a client's real estate department and
performing most of the functions involved in corporate real estate
administration. CBC/Madison Advisory Group has been one of the Company's
fastest growing services, with revenue having increased at a compound annual
rate of 50% from 1993 through 1995.

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Property Management. Property management provides operations, maintenance,
marketing and leasing services for income-producing properties owned primarily
by institutional investors. The Company provides asset management-oriented
services to its clients to implement their specific goals and objectives,
focusing on the enhancement of property values through maximization of cash
flow. Property Management was recently ranked the tenth largest in the United
States based on square footage under management by Commercial Property News'
1996 annual survey of property managers. As of June 30, 1996, the Company
managed 743 properties aggregating approximately 102 million square feet.

Real Estate Market Research. The Company provides its research and
forecasting services to internal clients as well as outside corporate and
institutional investor clients through CB Commercial/Torto Wheaton Research,
the widely-recognized research division of the Company based in Boston,
Massachusetts. The Company's research reports and forecasts are utilized by all
of the Company's businesses to assist clients with analysis and interpretation
of market data in order to provide them with a competitive edge in the rapidly
changing real estate marketplace. The Company's publications and products
provide real estate data for more than 50 of the largest Metropolitan
Statistical Areas ("MSAs") in the United States and are sold on a subscription
basis to many of the largest portfolio managers, insurance companies and
pension funds in the United States.

INVESTOR SERVICES

Investor Services includes mortgage banking (loan origination and servicing),
investment management and advisory services, and valuation and appraisal
services relating primarily to office space, industrial buildings, retail
properties, multifamily residential properties and unimproved land.

Mortgage Banking. The Company provides its mortgage origination and loan
servicing through L.J. Melody, a wholly-owned subsidiary of the Company
acquired in July 1996 and based in Houston, Texas. On a combined basis
including originations by L.J. Melody prior to its acquisition, the Company
originated $2.5 billion, $2.0 billion and $1.1 billion of loans in 1995, 1994
and 1993, respectively. As part of these origination activities, the Company
originates loans through special conduit arrangements with affiliates of
Merrill Lynch, Citicorp, and Lehman Brothers which permit it to service the
loans that it originates and is currently negotiating a similar arrangement
with an affiliate of NationsBank. In addition, the Company is a major loan
originator for insurance companies having originated, on a combined basis,
loans in the names of the insurance companies valued at $1.6 billion in 1995,
of which it serviced $891.3 million. As of December 31, 1995, 1994 and 1993,
the Company, on a combined basis, serviced loan portfolios of $7.3 billion,
$7.1 billion and $6.3 billion, respectively. Based upon available statistics,
the Company believes that, on a combined basis, it is the largest commercial
loan originator in general, as well as through conduits, in the United States.
As of December 31, 1995, the Company, on a combined basis, was the eighth
largest commercial loan servicer in the United States. The Company believes it
will have a significant competitive advantage in the commercial loan
origination business due to its anticipated integration with the deal flow
generated through the Company's brokerage and investment properties sales
activities. This integration will not only provide advantages to mortgage
banking, but will also facilitate sales transactions enhancing the Company's
capability to execute clients' sales assignments.

Investment Management and Advisory. The Company provides its investment
management and advisory services primarily to large institutions and pension
funds through Westmark which employs over 140 professionals and operates
nationally from its headquarters in Los Angeles, California. Westmark operates
as a separate and independent subsidiary, providing advisory services and
managing approximately $3.8 billion in tax-exempt capital invested in more than
220 office, industrial and retail properties located in more than 40 major U.S.
markets with an aggregate of more than 40 million square feet. The Company's
investment management and advisory activities include creating investment
products, raising investor capital, identifying and acquiring specific
properties and managing the operations and dispositions of the assets. As of
June 30, 1996, the Company

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represented more than 180 investors, in 12 commingled funds and a variety of
nondiscretionarily managed separate accounts.

Valuation and Appraisal Services. Valuation and appraisal services delivers
sophisticated commercial real estate valuations through a variety of products
including market value appraisals, portfolio valuations, discounted cash flow
analyses, litigation support, feasibility land use studies and fairness
opinions. The Company's appraisal staff has more than 80 professionals with
more than 50% of its professionals holding the MAI professional designation.
Valuation and appraisal services operates nationally through 21 regional
offices, and its clients are generally portfolio owners, both corporate and
institutional. Based upon revenue generated in 1995, the Company believes it is
among the leading commercial real estate appraisal firms in the United States.

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THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Compa- shares(1)
ny................................
Common Stock to be outstanding af- shares(1)(2)
ter the Offering..................
Use of proceeds.................... Of the $ estimated net proceeds from the
Offering, $ will be used to repay a
portion of the Company's senior secured
indebtedness and $ will be used to pay
accrued and unpaid interest on the
Company's senior subordinated indebtedness.
The remaining net proceeds will be used for
general corporate purposes, including to
fund acquisitions. See "Use of Proceeds."
Listing............................ Application will be made to have the Common
Stock approved for listing on the New York
Stock Exchange ("NYSE") under the symbol
"CBG."
</TABLE>
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(1) Does not include up to shares subject to an over-allotment option
granted to the Underwriters by the Company. See "Underwriting."
(2) Excludes (i) 976,607 shares issuable upon exercise of stock options under
the Company's stock option plans as of June 30, 1996, (ii) shares of Class
C-R and Class J common stock to be repurchased by the Company for an
aggregate of $8,000 in connection with the Offering and (iii) shares of
Preferred Stock convertible into Common Stock at the option of the holder
after the Offering. Includes shares of Common Stock issuable upon
conversion of the Company's Class C-1 common stock (assuming an initial
public offering price per share of $ ). See "Capitalization" "Description
of Capital Stock--"Preferred Stock and--The Recapitalization."

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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

The following table sets forth summary financial and other data for the
Company on a consolidated historical basis and a consolidated pro forma basis
for the periods and dates indicated. The summary historical balance sheet data
as of December 31, 1995 and 1994 and the statement of operations data for each
of the three years in the period ended December 31, 1995 are derived from the
financial statements of the Company that have been audited by Arthur Andersen
LLP, independent public accountants, included herein. The summary historical
balance sheet data as of December 31, 1993, 1992 and 1991 and the statement of
operations data for the years ended December 31, 1992 and 1991 are derived from
audited financial statements not included herein. The summary historical
financial data for each of the six-month periods ended June 30, 1996 and 1995
are derived from unaudited financial statements prepared on the same basis as
the audited financial statements and containing, in the opinion of management,
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial position at such dates and the operating
results and cash flows for such periods. Period to period comparability in 1995
and 1996 was affected by the Westmark acquisition completed in June 1995. A
significant portion of the Company's revenue is transactional in nature and
seasonal. Historically, this seasonality has caused the Company's revenue,
operating income, net income and EBITDA to be lower in the first two calendar
quarters and higher in the third and fourth calendar quarters of each year. The
results of operations for the six months ended June 30, 1996 are not
necessarily indicative of results to be expected for the entire year ending
December 31, 1996 or for any future period.

The summary unaudited pro forma statement of operations data, balance sheet
data and other data give effect to the acquisitions of Westmark, L.J. Melody as
well as the Offering and Recapitalization as if such transactions had occurred
as of January 1, 1995, with respect to operating and other data, and as if the
L.J. Melody acquisition, the Offering and the Recapitalization had occurred as
of June 30, 1996, with respect to the pro forma balance sheet data. The pro
forma financial data set forth below is not necessarily indicative of the
results that would have been achieved had such transactions been consummated as
of the dates indicated or that may be achieved in the future.

The information set forth below should be read in conjunction with "Unaudited
Pro Forma Financial Statements," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements for
each of the Company, L.J. Melody and Westmark and related notes thereto which
are included elsewhere in this Prospectus.

10
<PAGE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, (UNAUDITED) YEAR ENDED DECEMBER 31,
----------------------------------- --------------------------------------------------------------------
1996 1996 1995 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ----------- ---------- ---------- ---------- ---------- ----------
PRO FORMA PRO FORMA
---------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenue.......... $247,112 $ 243,695 $ 208,287 $489,684 $ 468,460 $ 428,988 $ 392,037 $ 360,223 $ 338,119
Costs and
expenses:
Commissions,
fees and other
incentives..... 124,044 121,269 109,765 245,564 239,018 225,085 206,070 187,582 175,142
Operating,
administrative
and other...... 106,263 104,718 88,118 200,341 187,968 170,234 160,073 152,402 159,791
Depreciation and
amortization(1). 5,412 4,894 3,682 14,502 11,631 8,091 49,606 45,855 51,946
Non-recurring
charges ....... -- -- -- -- -- -- -- 4,500 12,030
---------- ---------- ---------- -------- ---------- ---------- ---------- ---------- ----------
Operating income
(loss).......... 11,393(2) 12,814 6,722 29,277 29,843 25,578 (23,712) (30,116) (60,790)
Interest income.. 894 749 883 1,926 1,674 1,109 915 1,083 1,349
Interest expense. 9,979 11,547 10,379 22,512 23,267 17,362 14,240 15,516 24,805
---------- ---------- ---------- -------- ---------- ---------- ---------- ---------- ----------
Income (loss)
before provision
for income tax.. 2,308 2,016 (2,774) 8,691 8,250 9,325 (37,037) (44,549) (84,246)
Provision for
income tax...... 817 390 100 1,647 841 152 112 12 135
---------- ---------- ---------- -------- ---------- ---------- ---------- ---------- ----------
Net income
(loss).......... $ 1,491 $ 1,626 $ (2,874) $ 7,044 $ 7,409 $ 9,173 $ (37,149) $ (44,561) $ (84,381)
========== ========== ========== ======== ========== ========== ========== ========== ==========
Net income (loss)
per common and
common
equivalent share
outstanding..... $ $ 0.12 $ (0.25) $ $ 0.56 $ 0.71 $ (3.34) $ (4.02) $ (7.69)
Number of shares
used in
computing per
share
amounts (3)..... 13,449,967 11,412,655 13,168,975 12,933,552 11,133,078 11,073,811 10,976,522
OTHER DATA:
EBITDA (4)....... $ 16,805(2) $ 17,708 $ 10,404 $ 43,779 $ 41,474 $ 33,669 $ 25,894 $ 15,739 $ (8,844)
Net cash provided
by (used in)
operating
activities...... $ 596 $ (8,537) $ 30,632 $ 31,418 $ 19,609 $ 10,911 $ (25,307)
Investments under
management at
period end (5).. $3,787,057 $ 991,155 $3,901,727 $ 879,809 $ 760,554 $ 883,761 $ 776,010
Loans originated
(6)............. $ 626,288 $ 381,469 $ 989,872 $ 874,159 $ 613,071 $ 458,792 $ 135,022
Loans serviced
(6)............. $3,571,904 $3,776,986 $3,779,069 $3,578,962 $3,140,635 $3,787,941 $3,830,502
Total
consideration of
properties sold
................ $3,817,554 $3,052,212 $6,549,861 $6,521,451 $4,995,234 $4,478,472 $3,986,576
Number of sale
transactions.... 1,755 1,640 3,503 3,693 3,249 3,042 2,590
Number of lease
transactions.... 8,229 8,288 17,476 17,930 18,338 17,909 17,431
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total sale and
lease
transactions.... 9,984 9,928 20,979 21,623 21,587 20,951 20,021
========== ========== ========== ========== ========== ========== ==========
Square feet under
management (7).. 101,748 91,497 105,356 92,311 76,065 70,707 71,156
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, (UNAUDITED) AS OF DECEMBER 31,
------------------------------- ----------------------------------------------------
1996 1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- --------- --------
PRO FORMA
---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............ $ 18,826 $ 27,451 $ 11,971 $ 23,045 $ 28,770 $ 6,140 $ 6,822 $ 2,889
Total assets............ 207,125 189,763 177,426 190,954 150,100 128,914 173,274 212,249
Total long-term debt.... 172,076 239,259 257,190 250,142 233,571 239,853 239,473 240,401
Total liabilities....... 276,577 340,770 342,968 345,642 314,648 303,774 311,630 306,123
Total stockholders'
equity (deficit)....... (69,452) (151,007) (165,542) (154,688) (164,548) (174,860) (138,356) (93,874)
</TABLE>

(footnotes on following page)

11
<PAGE>

- -------
(1) 1993, 1992, and 1991 reflect the amortization of intangibles associated
with the acquisition in 1989 of CB Commercial Real Estate Group, Inc. of
$42.9 million, $40.7 million and $47.1 million, respectively.
(2) Pro forma operating income and EBITDA for the six months ended June 30,
1996 reflect a decrease from amounts for the actual six months ended June
30, 1996 because of the significant seasonality of the L.J. Melody mortgage
origination business. L.J. Melody's revenue, operating income and EBITDA
for the first six months of each calendar year have historically been lower
than for the last six months of the year. L.J. Melody's $1.2 million pro
forma loss for the period significantly affects pro forma operating income
and EBITDA. See "Unaudited Pro Forma Combined Financial Statements."
(3) Includes the dilutive effect of 976,607 shares issuable upon exercise of
stock options outstanding as of June 30, 1996 under the Company's stock
option plans. Pro forma data excludes shares of Class C-R and Class J
common stock to be repurchased by the Company in connection with the
Offering and shares of Preferred Stock convertible at the option of the
holder into Common Stock after the Offering. Pro forma data includes
shares of Common Stock issuable upon conversion of the Company's Class C-1
common stock (assuming an initial public offering price per share of
$ ). See "Description of Capital Stock--Preferred Stock" and "--The
Recapitalization."
(4) EBITDA represents earnings before interest, income taxes, depreciation and
amortization, thereby removing the effect of certain non-cash charges on
income, such as the amortization of intangible assets relating to
acquisitions. EBITDA is widely used in the industry as a measure of
operating performance and ability to service debt. However, EBITDA should
not be considered as an alternative either (i) to operating income
(determined in accordance with generally accepted accounting principles
("GAAP")), (ii) operating cash flow (determined in accordance with GAAP) or
(iii) liquidity.
(5) Investments under management represent the market value of the assets
managed as of the end of the period shown. The increase for the six months
ended June 30, 1996 and the year ended December 31, 1995 over the six
months ended June 30, 1995 and the year ended December 31, 1994,
respectively, primarily reflects the acquisition of Westmark on June 30,
1995.
(6) Loans originated represent the initial principal amount of loans originated
during the period and loans serviced represents the outstanding principal
balance of loans being serviced as of the end of the period shown. Loans
originated and loans serviced do not include any amounts relating to L.J.
Melody, which was acquired by the Company effective July 1, 1996.
(7) Square feet under management represents the total square footage of
properties for which the Company provided property management services as
of the end of the periods shown.

THE RECAPITALIZATION

In connection with the Offering, (i) the Company's Certificate of
Incorporation will be amended to, among other things, change the name of the
Company from CB Commercial Holdings, Inc. to CB Commercial Real Estate Services
Group, Inc., effect the conversion of the Class B-1 and Class B-2 common stock
of the Company into the Common Stock on a 1-for-1 basis, effect the conversion
of the Class C-1 common stock of the Company into a lesser number of shares of
Common Stock based upon the initial public offering price per share and provide
for the convertibility of the Company's Preferred Stock into Common Stock at
the holder's option, and (ii) the Company will repurchase all of the
outstanding shares of its Class C-R common stock and Class J common stock for
$.01 per share, in each case upon the consummation of the Offering, as part of
the proposed recapitalization of the Company's capital structure (the
"Recapitalization"). See "Description of Capital Stock--Preferred Stock" and
"--The Recapitalization."

12
<PAGE>

FORWARD LOOKING INFORMATION

When used in this Prospectus, the words "expects," "anticipates,"
"estimates," "believes" and words of similar import may constitute "forward-
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended. Such statements, which include statements contained in
"Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business" concerning
projections of revenue growth and statements of management's objectives, are
subject to risks and uncertainties, including those set forth under "Risk
Factors" and elsewhere in this Prospectus, that could cause actual results to
differ materially from those projected. These forward-looking statements speak
only as of the date of this Prospectus. The Company expressly disclaims any
obligation or undertaking to publicly release any updates or revisions to any
forward-looking statement contained herein to reflect any change in the
Company's expectation with regard thereto or any change in events, conditions
or circumstances on which any such statement is based.

13
<PAGE>

RISK FACTORS

Prospective investors should carefully consider the following risk factors
in addition to the other information presented in this Prospectus before
purchasing the shares of Common Stock offered hereby.

GENERAL ECONOMIC CONDITIONS

Periods of economic slowdown or recession, rising interest rates or
declining demand for real estate will adversely affect certain segments of the
Company's business. Such economic conditions could result in a general decline
in rents which in turn would adversely affect revenues from property
management fees and brokerage commissions derived from property sales and
leases. Such conditions could also lead to a decline in sale prices as well as
a decline in demand for funds invested in commercial real estate and related
assets. An economic downturn or increase in interest rates also may reduce the
amount of loan originations and related servicing by the Company's commercial
mortgage banking business. If the Company's brokerage and mortgage banking
businesses are adversely affected, it is also quite likely that other segments
of the Company's business will also be adversely affected, due to the
relationship among the Company's various business segments.

GEOGRAPHIC CONCENTRATION

For the year ended December 31, 1995, approximately $141.4 million or 37.0%
of total revenue of $382.4 million from sale and lease transactions was
generated from transactions originated in the state of California. Total
revenue from sale and lease transactions for 1995 was 81.6% of the Company's
total revenue for 1995. As a result of this geographic concentration, the
performance of the commercial real estate markets and the local economies in
various areas within California could affect the Company's results of
operations.

COMPETITION

The Company competes in a variety of service disciplines within the
commercial real estate industry, including (i) brokerage (facilitating sales
and leases on behalf of investors), investment properties (acquisitions and
sales), corporate services, property management, and real estate market
research and (ii) mortgage banking (loan origination and servicing),
investment management and advisory services, and valuation and appraisal
services. Each of these business areas is highly competitive on a national as
well as local level. The Company faces competition not only from other real
estate service providers, but also from institutional lenders, insurance
companies and investment advisory, mortgage banking, accounting and appraisal
firms. Some of the Company's principal competitors in certain of these
business areas are better established and have substantially more experience
than the Company. Moreover, although many of the Company's competitors are
local or regional firms that are substantially smaller than the Company on an
overall basis, they may be substantially larger on a local or regional basis.
Because of these factors, these companies may be better able than the Company
to obtain new customers, pursue new business opportunities or to survive
periods of industry consolidation. In addition, the Company has faced
increased competition in recent years in the property management and
investment advisory segment of its business which has resulted in decreased
property management fee rates and margins. In general, in each of the
Company's businesses there can be no assurance that the Company will be able
to continue to compete effectively or that it will be able to maintain current
commission or fee levels or margins or that it will not encounter increased
competition which could limit the Company's ability to maintain or increase
its market share.

Coldwell Banker, a former sister company of CB Commercial Real Estate Group,
Inc., recently acquired by HFS, Inc., has announced that it intends to expand
its franchise program from the residential real estate brokerage franchising
business into commercial brokerage franchising. The activities of Coldwell
Banker franchisees as direct competitors of the Company could cause name
confusion in the industry between the Company and Coldwell Banker franchisees,
which could result in a dilution of the value of the trade name "CB
Commercial." See "Business--Competition."

14
<PAGE>

RISKS INHERENT IN ACQUISITION GROWTH STRATEGY

A significant component of the Company's growth in 1995 and 1996 has been,
and part of its principal strategy for continued growth is, through
acquisitions. Recent acquisitions have included L.J. Melody (mortgage banking
services), Westmark (investment management and advisory services) and Langdon
Rieder Corporation (corporate advisory services). The Company expects to
accelerate its acquisition program. The Company's future growth through
acquisitions will be partially dependent upon the continued availability of
suitable acquisition candidates at favorable prices and upon favorable terms
and conditions; however, there can be no assurance that future acquisitions
can be consummated at favorable prices or upon favorable terms and conditions.
In addition, acquisitions entail risks that businesses acquired will not
perform in accordance with expectations and that business judgments with
respect to the value, strengths and weaknesses of businesses acquired or the
consequences of any such acquisition will prove incorrect. See "Business--
Acquisitions."

In addition, there can be no assurance that significant difficulties in
integrating operations acquired from other companies will not be encountered,
including difficulties arising from the diversion of management's attention
from other business concerns and the potential loss of key employees of either
the Company or the acquired operations. The Company encountered a number of
these difficulties when it acquired Westmark and, to a lesser extent, when it
acquired L.J. Melody. There can be no assurance that the Company's management
will be able to effectively manage the acquired businesses or that such
acquisitions will benefit the Company overall.

The Company will require additional financing to sustain its acquisition
program. The Company expects to finance future acquisitions and internal
growth through a combination of funds available under its senior secured
credit facilities (as in effect following the consummation of the Offering),
cash flow from operations, additional indebtedness incurred by the Company
(including, in the case of acquisitions, seller financing) and public or
private sales of the Company's capital stock. The covenants in the Company's
credit agreements as in effect following the consummation of the Offering will
restrict the Company's ability to raise additional capital in certain
respects. There can be no assurance that financing will be available to the
Company or, if available, that it will be sufficient to finance acquisitions
and internal growth. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and "The
Company's Credit Agreements."

SEASONALITY

A substantial component of the Company's revenues is transactional in nature
and as a result is subject to seasonality. Historically, the Company's
revenues, operating income, income, and EBITDA in the first two calendar
quarters are generally lower than in the third and fourth calendar quarters
due to seasonal fluctuations, which are consistent with the industry
generally. The Company's non-variable operating expenses, which are treated as
expenses when incurred during the year, are relatively constant in total
dollars on a quarterly basis. As a consequence of the seasonality of revenues
and the relatively constant level of quarterly expenses, a substantial
majority of the Company's operating income, income and EBITDA has historically
been realized in the third and fourth calendar quarters. The Company believes
that future operating results will continue to follow these historical
patterns, although revenues are also likely to be affected by both broad
economic fluctuations and supply and demand cyclicality relating to commercial
real estate. There can be no assurance that the Company will be profitable on
a quarterly or annual basis in the future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of Common Stock in the public market following
the Offering could have an adverse effect on the market price of the Common
Stock. Shares sold in the Offering will be eligible for sale in the public
market immediately following the Offering. Additionally, days after the
closing of the Offering, shares will become eligible for sale without
any volume restriction, and shares will become eligible

15
<PAGE>

for sale, subject to the volume limitations of Rule 144 of the Securities Act
of 1933, as amended (the "Securities Act"). Furthermore, holders of the
Company's 4,000,000 shares of outstanding Preferred Stock have the right to
convert such shares into Common Stock after the date of the Offering at a
conversion ratio ranging from .60 to .78 shares of Common Stock for each share
of Preferred Stock, depending on the market price of the Common Stock. The
holders of the Preferred Stock have agreed not to sell any shares of Common
Stock they acquire upon such conversion for 180 days from the date of this
Prospectus without the prior written consent of Merrill Lynch, Pierce, Fenner
& Smith Incorporated. The holders of the Preferred Stock have also agreed that
any purchaser of the Preferred Stock will be required to be bound by the same
restrictions. Thereafter, for an additional six months, such holders are
contractually bound to sell such shares only within the volume limitations of
Rule 144 for sales made at a price per share below the initial public offering
price unless such sales are pursuant to block trades which do not involve a
broker's transaction executed on any exchange or in the over-the-counter
market. See "Shares Eligible for Future Sale" and "Underwriting."

LACK OF PRIOR PUBLIC MARKET AND POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common Stock.
Although application has been made to list the Common Stock on the NYSE, there
can be no assurance that an active trading market will develop or be
sustained. The price of shares of Common Stock to be sold in the Offering will
be determined by negotiations among the Company and the Underwriters and may
bear no relationship to the price at which the Common Stock will trade after
completion of the Offering. See "Underwriting" for factors to be considered in
determining such offering price. The market price of the Common Stock could be
subject to significant fluctuations in response to quarter-to-quarter
variations in operating results of the Company or its competitors, conditions
in the commercial real estate industry, the commencement of, developments in
or outcome of litigation, changes in estimates of the Company's performance by
securities analysts, and other events or factors. In addition, the stock
market in recent years has experienced extreme price and volume fluctuations
that have often been unrelated or disproportionate to the operating
performance of companies. These fluctuations, as well as general economic and
market conditions, may adversely affect the market price of the Common Stock.
See "Underwriting."

RETAINED RISKS OF LOANS SOLD

In connection with the Company's origination and sale of certain loans in
its mortgage banking business, the Company must make certain representations
and warranties concerning loans originated by the Company and sold to
"conduit" purchasers or to the Federal Home Loan Mortgage Corporation
("Freddie Mac"). These representations and warranties cover such matters as
title to the mortgaged property, lien priority, environmental reviews and
certain other matters. The Company's representations and warranties rely in
part on similar representations and warranties made by the borrower or others.
The Company would have a claim against the borrower or another party in the
event of a breach of any of these representations or warranties; however, the
Company's ability to recover on any such claim would be dependent upon the
financial condition of the party against which such claim is asserted. There
can be no assurance that the Company will not experience a material loss as a
result of representations and warranties it makes.

POTENTIAL LACK OF SPACE TO LEASE

A significant portion of the Company's brokerage business involves
facilitating the lease of commercial property including retail, industrial,
and office space. Since the real estate depression of the early 1990s, the
development of new retail, industrial, and office space has been limited. As a
consequence in certain areas of the country there is beginning to be
inadequate office, industrial and retail space to meet demand and there is a
potential for a decline in the Company's overall number of lease transactions,
the effect of which may, over time, be partially offset by increasing land
sales (which will benefit the Company's brokerage). There can be no assurance
that any increase in the sale of undeveloped land will coincide with any
decline in the number of lease transactions.

16
<PAGE>

DILUTION

The initial public offering price is expected to be substantially higher
than the book value per share of Common Stock. As a result, purchasers of
shares of Common Stock in the Offering will incur immediate and substantial
dilution.

ENVIRONMENTAL CONCERNS

Numerous laws and regulations have been enacted which regulate exposure to
potentially hazardous materials often found in and around buildings. Some of
these laws and regulations directly and indirectly impact the commercial real
estate market by imposing additional costs and liability on owners, operators
and sellers as well as lenders. Such laws and regulations tend to discourage
sales and leasing activities and mortgage lending with respect to some
properties, and may therefore adversely affect the Company. In addition, the
failure of the Company to disclose environmental issues may subject the
Company to liability to a buyer or lessee of property or to a purchaser of a
mortgage loan.

FORWARD-LOOKING STATEMENTS

This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act. Discussions containing such forward-looking
statements may be found in the material set forth under "Prospectus Summary,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," as well as within this Prospectus generally. In
addition, when used in this Prospectus, the words "anticipates," "expects" and
words of similar import may constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act. Such statements are subject to a
number of risks and uncertainties. Actual results in the future could differ
materially from those described in the forward-looking statements as a result
of the risk factors set forth above and the matters set forth in the
Prospectus generally. The Company undertakes no obligation to publicly release
the result of any revisions to these forward-looking statements that may be
made to reflect any future events or circumstances.

17
<PAGE>

THE COMPANY

The Company's business was founded under the name Tucker, Lynch & Coldwell
by Colbert Coldwell in San Francisco in 1906 as a commercial real estate
brokerage firm. The firm was renamed Coldwell, Cornwall & Banker with the
arrival of Benjamin Arthur Banker in 1913, became Coldwell, Banker & Company
in 1940 and was acquired by Sears, Roebuck & Co. ("Sears") in 1981.

In March 1989 the Company was incorporated in Delaware for the purpose of
acquiring Coldwell Banker Commercial Group, Inc. from Sears by a group of six
officers of Coldwell Banker Commercial Group, Inc. led by Mr. James J. Didion,
the Company's Chairman and Chief Executive Officer, and an investor group
formed by Mr. Frederic V. Malek and The Carlyle Group, L.P., a Washington,
D.C.-based private merchant bank. The acquisition was completed in April 1989
and the name of Coldwell Banker Commercial Group, Inc. was changed to
CB Commercial Real Estate Group, Inc. in 1991. The Company is a holding
company that conducts its operations solely through CB Commercial Real Estate
Group, Inc. and its subsidiaries. In connection with the Offering the Company
will change its name to CB Commercial Real Estate Services Group, Inc.

The Company's executive offices are located at 533 South Fremont Avenue, Los
Angeles, California 90071-1798 and its telephone number is (213) 613-3123.

USE OF PROCEEDS

The net proceeds to the Company from the sale of shares of Common
Stock offered by the Company hereby are estimated to be approximately $
million ($ million if the Underwriters' over-allotment option is exercised
in full), assuming an initial public offering price of $ per share and
after deducting the estimated underwriting discount and offering expenses
payable by the Company.

The Company intends to use $ of the net proceeds ($ million if the
Underwriter's over-allotment option is exercised in full) to repay a portion
of the Company's senior secured indebtedness and $ to pay accrued and
unpaid interest on the Company's senior subordinated indebtedness. The
remaining $ of net proceeds ($ million if the Underwriters' over-
allotment option is exercised in full) will be used for general corporate
purposes, including to fund acquisitions. Pending such uses, the net proceeds
will be invested in short-term, investment grade, interest-bearing securities.

As of August 31, 1996, the balance of the Company's outstanding senior
secured indebtedness was approximately $150.0 million and bore interest at a
rate of approximately 7.0% per annum. The terms of the senior secured
indebtedness, as amended in connection with the Recapitalization and the
Offering, will provide for a final maturity date of December 31, 2001. As of
August 31, 1996, the balance of the Company's senior subordinated indebtedness
was approximately $70.6 million and bore interest at a rate of approximately
% per annum. The terms of the senior subordinated indebtedness, as amended
in connection with the Recapitalization and the Offering, will provide for a
final maturity date of July 23, 2002. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business--The
Company's Credit Agreements."

DIVIDEND POLICY

The Company has never declared or paid dividends on its capital stock and
does not anticipate paying any dividends on its Common Stock in the
foreseeable future. The Company's Series A-1, Series A-2 and Series A-3
Preferred Stock (the "Preferred Stock") carry a quarterly dividend of $0.25
per share. Until the Company has completed its accelerated acquisition
program, it does not intend to pay the dividend on the Preferred Stock. As a
consequence, such dividend will accumulate and bear interest. In addition to
the restrictions imposed by the terms of the Preferred Stock, the Company's
credit agreements, as amended, will restrict its ability to pay dividends with
respect to the Common Stock. See "Business--The Company's Credit Agreements"
and "Description of Capital Stock--Preferred Stock."

18
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of June
30, 1996 on a pro forma basis, giving effect to (i) the acquisition of L.J.
Melody and (ii) as further adjusted to give effect to the Offering at an
assumed initial public offering price of $ per share and the application
of the estimated net proceeds therefrom as set forth under "Use of Proceeds."
This table should be read in conjunction with "Unaudited Pro Forma Financial
Statements," "Management's Discussion and Analysis of Financial Condition and
Results of Operations, and the Company's consolidated financial statements,
including the related notes thereto, all appearing elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
PRO FORMA
AS OF JUNE 30, 1996 (1)
--------------------------
AS FURTHER
ACQUISITION ADJUSTED
------------ -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term obligations, less current portion....... $ $
Stockholders' equity:
Preferred Stock, $.01 par value;--8,000,000
shares authorized; 4,000,000 shares issued and
outstanding;--4,000,000 shares issued and
outstanding, as further adjusted(2)............
Common Stock, $.01 par value;--100,000,000
shares authorized, shares issued and
outstanding; shares issued and
outstanding, as further adjusted...............
Additional paid-in capital......................
Accumulated deficit.............................
----------- -----------
Total stockholders' equity (deficit).......... $ $
----------- -----------
Total capitalization.............................. $ $
=========== ===========
</TABLE>
- --------
(1) Assumes an increase in the Company's authorized Common Stock to
100,000,000 shares of Common Stock, the conversion of the Class B-1 and
Class B-2 common stock of the Company into Common Stock on a 1-for-1
basis, the conversion of the Class C-1 common stock of the Company into
shares of Common Stock assuming an initial public offering price per
share in the Offering of $ , and the repurchase by the Company for $0.01
per share of the 800,000 outstanding shares of the Company's Class C-R
common stock and two outstanding shares of the Company's Class J common
stock, which in each case will occur upon the consummation of the Offering
as part of the Recapitalization. See "Description of Capital Stock--The
Recapitalization."
(2) The Preferred Stock is convertible into Common Stock at the holder's
option after the consummation of the Offering at a ratio based upon the
per share market price of the Common Stock, ranging from .60 shares of
Common Stock per share of Preferred Stock at a market price of $30.00 or
more per share of Common Stock to .78 shares of Common Stock per share of
Preferred Stock at a market price of $10.00 to $21.99 per share of Common
Stock. No conversion of the Preferred Stock is permitted when the market
price of the Common Stock is below $10.00 per share. See "Description of
Capital Stock--Preferred Stock."

19
<PAGE>

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The following table sets forth selected financial and other data for the
Company on a consolidated historical basis and a consolidated pro forma basis
for the periods and dates indicated. The selected historical balance sheet
data as of December 31, 1995 and 1994 and the statement of operations data for
each of the three years in the period ended December 31, 1995 are derived from
the financial statements of the Company that have been audited by Arthur
Andersen LLP, independent public accountants, included herein. The selected
historical balance sheet data as of December 31, 1993, 1992 and 1991 and the
statement of operations data for the years ended December 31, 1992 and 1991
are derived from audited financial statements not included herein. The
selected historical financial data for each of the six-month periods ended
June 30, 1996 and 1995 are derived from unaudited financial statements
prepared on the same basis as the audited financial statements and containing,
in the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
position at such dates and the operating results and cash flows for such
periods. Period to period comparability in 1995 and 1996 was affected by the
Westmark acquisition completed in June 1995. A significant portion of the
Company's revenue is transactional in nature and seasonal. Historically, this
seasonality has caused the Company's revenue, operating income, net income and
EBITDA to be lower in the first two calendar quarters and higher in the third
and fourth calendar quarters of each year. The results of operations for the
six months ended June 30, 1996 are not necessarily indicative of results to be
expected for the entire year ending December 31, 1996 or for any future
period.

The selected unaudited pro forma statement of operations data, balance sheet
data and other data give effect to the acquisitions of Westmark, L.J. Melody
as well as the Offering and Recapitalization as if such transactions had
occurred as of January 1, 1995 with respect to operating and other data, and
as if the L.J. Melody acquisition, the Offering and the Recapitalization had
occurred as of June 30, 1996, with respect to the pro forma balance sheet
data. The pro forma financial data set forth below is not necessarily
indicative of the results that would have been achieved had such transactions
been consummated as of the dates indicated, or that may be achieved in the
future.

The information set forth below should be read in conjunction with
"Unaudited Pro Forma Financial Statements", "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements for each of the Company, L.J. Melody and Westmark and related notes
thereto which are included elsewhere in this Prospectus.

20
<PAGE>

(footnotes on following page)

21
<PAGE>

- --------
(1) 1993, 1992, and 1991 reflect the amortization of intangibles associated
with the acquisition in 1989 of CB Commercial Real Estate Group, Inc. of
$42.9 million, $40.7 million and $47.1 million, respectively.
(2) Pro forma operating income and EBITDA for the six months ended June 30,
1996 reflect a decrease from amounts for the actual six months ended June
30, 1996 because of the significant seasonality of the L.J. Melody
mortgage origination business. L.J. Melody's revenue, operating income and
EBITDA for the first six months of each calendar year have historically
been lower than for the last six months of the year. L.J. Melody's
$1.2 million pro forma loss for the period significantly affects pro forma
operating income and EBITDA. See "Unaudited Pro Forma Combined Financial
Statements."
(3) Includes the dilutive effect of 976,607 shares issuable upon exercise of
stock options outstanding as of June 30, 1996 under the Company's stock
option plans. Pro forma data excludes shares of Class C-R and Class J
common stock to be repurchased by the Company in connection with the
Offering and shares of Preferred Stock convertible at the option of the
holder into Common Stock after the Offering. Pro forma data includes
shares of Common Stock issuable upon conversion of the Company's Class C-1
common stock (assuming an initial public offering price per share of
$ ). See "Description of Capital Stock--Preferred Stock" and "--The
Recapitalization."
(4) EBITDA represents earnings before interest, income taxes, depreciation and
amortization, thereby removing the effect of certain non-cash charges on
income, such as the amortization of intangible assets relating to
acquisitions. EBITDA is widely used in the industry as a measure of
operating performance and ability to service debt. However, EBITDA should
not be considered as an alternative either (i) to operating income
(determined in accordance with generally accepted accounting principles
("GAAP")), (ii) operating cash flow (determined in accordance with GAAP)
or (iii) liquidity.
(5) Investments under management represent the market value of the assets
managed as of the end of the period shown. The increase for the six months
ended June 30, 1996 and the year ended December 31, 1995 over the six
months ended June 30, 1995 and the year ended December 31, 1994,
respectively, primarily reflects the acquisition of Westmark on June 30,
1995.
(6) Loans originated represent the initial principal amount of loans
originated during the period and loans serviced represents the outstanding
principal balance of loans being serviced as of the end of the period
shown. Loans originated and loans serviced do not include any amounts
relating to L.J. Melody, which was acquired by the Company effective July
1, 1996.
(7) Square feet under management represents the total square footage of
properties for which the Company provided property management services as
of the end of the periods shown.

22
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

INTRODUCTION

The integrated real estate services provided by the Company include (i)
Property and User Services, consisting of brokerage (facilitating sales and
leases), investment properties (acquisitions and sales on behalf of
investors), corporate services, property management, and real estate market
research, and (ii) Investor Services, consisting of mortgage banking (loan
origination and servicing) through L.J. Melody, investment management and
advisory services through Westmark, and valuation and appraisal services.

A significant portion of the Company's revenue is transactional in nature
and seasonal. Historically, this seasonality has caused the Company's revenue,
operating income, net income and EBITDA to be lower in the first two calendar
quarters and higher in the third and fourth calendar quarters of each year.
The results of operations for the six months ended June 30, 1996 are not
necessarily indicative of results to be expected for the entire year ending
December 31, 1996 or for any future period. See "Risk Factors--Seasonality."

Revenue from Property and User Services, which constitutes a substantial
majority of the Company's revenue, is largely transactional in nature and
subject to economic cycles. However, the Company's significant size,
geographic coverage, number of transactions, and large client base coupled
with its ability to develop its contractually-based businesses has made the
Company's annual revenue more stable. Due in large part to acquisitions,
revenue from Investor Services, a significant portion of which is non-
transactional in nature, has grown more rapidly than revenue from Property and
User Services. Approximately 54.0% of the costs and expenses associated with
Property and User Services are directly correlated to revenue while
approximately 25.0% of the costs and expenses of Investor Services are
directly correlated to revenue.

The Company has recently completed three strategic acquisitions and is
continually assessing acquisition opportunities as part of its growth strategy
(see "Business--Acquisitions"). Because of the substantial non-cash goodwill
and intangible amortization charges incurred by the Company in connection with
acquisitions subject to purchase accounting, management anticipates that
future acquisitions may result in a decrease in net income. Management's
strategy is to pursue acquisitions that are expected to be accretive to EBITDA
after all integration costs. EBITDA represents earnings before interest,
income taxes, depreciation and amortization, thereby removing the effect of
certain non-cash charges on income, such as the amortization of intangible
assets relating to acquisitions. EBITDA is widely used in the industry as a
measure of operating performance and ability to service debt. However, EBITDA
should not be considered as an alternative to (i) operating income (determined
in accordance with generally accepted accounting principles ("GAAP"), (ii)
operating cash flow (determined in accordance with GAAP) or (iii) liquidity.
Period to period comparability in 1995 and 1996 was affected by the
acquisition of Westmark in June 1995. See "Risk Factors--Risks Inherent in
Acquisition Growth Strategy."

Since 1992, the Company's results have benefitted from its ability to take
advantage of a significant and ongoing recovery in U.S. commercial real estate
markets and the generally rising level of occupancy and rental levels, and, as
a result, property values. The Company does not believe that its national
brokerage competitors have been able to take similar advantage of the
recovery. Since brokerage fees are typically based upon a percentage of
transaction value, and property management fees are typically based upon a
percentage of total rent collections, recent occupancy and rental rate
increases at the property level have generated an increase in brokerage and
property management fees to the Company. As a result of anticipated job and
population growth in many geographic markets in the United States, and the
historically low level of development of new commercial space, the Company
believes that upward pressure on occupancy, rental levels, and property values
is likely to continue for the balance of 1996 and through 1997. However, there
can be no assurance that actual results will reflect this current belief. See
"Risk Factors--Forward Looking Statements."

Upon consummation of the Offering, the Company's total outstanding
indebtedness will be reduced from $270.3 million to approximately $200.9
million. The reduction of the Company's total outstanding indebtedness, net of
the effect of the increase in the interest rate on the Senior Subordinated
Credit Agreement, will result in a

23
<PAGE>

savings in interest costs to the Company of approximately $3.6 million per
year. See "The Company's Credit Agreements--Senior Subordinated Debt
Amendments." The 2.5% quarterly dividend on the Company's Preferred Stock,
which will accrue from October 1, 1996, will result, if and when paid, in a
cost of $1.0 million per quarter. Until the Company has completed its
accelerated acquisition program, it does not intend to pay dividends on the
Preferred Stock. As a consequence, such dividend will accumulate and bear
interest. Effective upon the consummation of the Offering, the terms of the
Company's Preferred Stock will be amended to provide that it is convertible at
the option of the holders into shares of Common Stock. See "Description of
Capital Stock--Preferred Stock."

RESULTS OF OPERATIONS

The following unaudited table sets forth items derived from the Company's
consolidated statements of operations for each of the periods presented in
dollars and as a percentage of revenue.

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------------------- -----------------------------------------------
1996 1995 1995 1994 1993
-------------- --------------- -------------- -------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $243,695 100.0% $208,287 100.0% $468,460 100.0% $428,988 100.0% $392,037 100.0%
Costs and Expenses:
Commissions, fees and
other incentives...... 121,269 49.8 109,765 52.7 239,018 51.0 225,085 52.5 206,070 52.6
Operating,
administrative and
other................. 104,718 43.0 88,118 42.3 187,968 40.1 170,234 39.7 160,073 40.8
Depreciation and
amortization.......... 4,894 2.0 3,682 1.8 11,631 2.5 8,091 1.9 49,606 12.7
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Operating income (loss). 12,814 5.2 6,722 3.2 29,843 6.4 25,578 5.9 (23,712) (6.1)
Interest income......... 749 0.3 883 0.4 1,674 0.4 1,109 0.3 915 0.2
Interest expense........ 11,547 4.7 10,379 5.0 23,267 5.0 17,362 4.0 14,240 3.6
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Income (loss) before
provision for income
taxes.................. 2,016 0.8 (2,774) (1.4) 8,250 1.8 9,325 2.2 (37,037) (9.5)
Provision for income
taxes.................. 390 0.2 100 0.0 841 0.2 152 0.0 112 0.0
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Net income (loss)....... $ 1,626 0.6% $ (2,874) (1.4)% $ 7,409 1.6% $ 9,173 2.2% $(37,149) (9.5)%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
EBITDA.................. $ 17,708 7.2% $ 10,404 5.0% $ 41,474 8.9% $ 33,669 7.8% $ 25,894 6.6%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
</TABLE>

24
<PAGE>

The following unaudited tables summarize the revenue, cost and expenses, and
operating income by operating segment for the six months ended June 30, 1996
and 1995 and the years ended December 31, 1995, 1994 and 1993.

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------------------- ---------------------------------------------------
1996 1995 1995 1994 1993
-------------- --------------- --------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PROPERTY AND USER SERV-
ICES
Revenue:
Brokerage.............. $144,988 68.4% $136,722 71.3% $294,290 69.6% $284,775 71.1% $270,063 74.2%
Investment Properties.. 47,301 22.3 37,018 19.3 87,576 20.7 81,394 20.4 67,388 18.5
Corporate Services..... 9,404 4.4 8,955 4.7 21,723 5.1 15,631 3.9 9,640 2.6
Property Management(1)
...................... 9,665 4.6 8,571 4.5 18,332 4.4 17,692 4.4 16,432 4.5
Real Estate Market
Research.............. 680 0.3 373 0.2 912 0.2 758 0.2 649 0.2
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
212,038 100.0 191,639 100.0 422,833 100.0 400,250 100.0 364,172 100.0
Costs and expenses:
Commissions, fees and
other incentives...... 114,551 54.0 104,435 54.5 227,387 53.8 215,506 53.8 196,425 53.9
Operating,
administrative and
other................. 85,878 40.5 78,011 40.7 160,415 37.9 152,141 38.0 143,394 39.4
Depreciation and
amortization.......... 3,310 1.6 3,403 1.8 8,889 2.1 7,485 1.9 44,268 12.2
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Operating income
(loss)................ $ 8,299 3.9% $ 5,790 3.0% $ 26,142 6.2% $ 25,118 6.3% $(19,915) (5.5)%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
INVESTOR SERVICES
Mortgage Banking
Revenue................ $ 7,245 100.0% $ 4,176 100.0% $ 10,417 100.0% $ 9,488 100.0% $ 7,218 100.0%
Costs and expenses:
Commissions, fees and
other
incentives............ 2,839 39.2 1,688 40.4 4,209 40.4 3,914 41.3 2,805 38.9
Operating,
administrative and
other................. 3,272 45.2 3,180 76.2 6,338 60.8 5,538 58.4 4,521 62.6
Depreciation and
amortization.......... 83 1.1 88 2.1 268 2.6 195 2.1 1,372 19.0
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Operating income....... $ 1,051 14.5% $ (780) (18.7)% $ (398) (3.8)% $ (159) (1.8)% $ (1,480) (20.5)%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
Investment Management
and Advisory
Revenue................ $ 16,001 100.0% $ 4,494 100.0% $ 18,610 100.0% $ 5,902 100.0% $ 5,091 100.0%
Costs and expenses:
Operating,
administrative and
other................. 11,632 72.7 3,290 73.2 13,745 73.9 5,580 94.5 5,103 100.2
Depreciation and
amortization.......... 1,375 8.6 65 1.5 2,148 11.5 149 2.5 1,245 24.5
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Operating income (loss). $ 2,994 18.7% $ 1,139 25.3% $ 2,717 14.6% $ 173 3.0% $ (1,257) (24.7)%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
Valuation and Appraisal
Services
Revenue................ $ 8,411 100.0% $ 7,978 100.0% $ 16,600 100.0% $ 13,348 100.0% $ 15,556 100.0%
Costs and expenses:
Commissions, fees and
other incentives...... 3,879 46.1 3,642 45.7 7,422 44.7 5,665 42.4 6,840 44.0
Operating,
administrative and
other................. 3,936 46.8 3,637 45.6 7,470 45.0 6,975 52.3 7,055 45.4
Depreciation and
amortization.......... 126 1.5 126 1.6 326 2.0 262 2.0 2,721 17.5
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Operating income
(loss)................ $ 470 5.6% $ 573 7.1% $ 1,382 8.3% $ 446 3.3% $ (1,060) (6.9)%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
TOTAL INVESTOR SERVICES
Revenue................ $ 31,657 100.0% $ 16,648 100.0% $ 45,627 100.0% $ 28,738 100.0% $ 27,865 100.0%
Costs and expenses:
Commissions, fees and
other incentives...... 6,718 21.2 5,330 32.0 11,631 25.5 9,579 33.3 9,645 34.6
Operating,
administrative and
other................. 18,840 59.5 10,107 60.7 27,553 60.4 18,093 63.0 16,679 59.9
Depreciation and
amortization.......... 1,584 5.0 279 1.7 2,742 6.0 606 2.1 5,338 19.2
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Operating income
(loss)................ $ 4,515 14.3% $ 932 5.6% $ 3,701 8.1% $ 460 1.6% $ (3,797) (13.7)%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
- -------
(1) Does not include reimbursable costs associated with the wages of on-site
employees and the cost of field office rent, furniture, computers,
supplies and utilities. Revenues from leasing services provided to the
Company's property management clients are reflected in brokerage rather
than property management revenue.

25
<PAGE>

SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995

REVENUE on a consolidated basis for the six months ended June 30, 1996 was
$243.7 million, an increase of $35.4 million or 17.0% from $208.3 million for
the six months ended June 30, 1995. The overall increase in revenue, compared
to the same period in 1995, reflected a continued improvement in the
commercial real estate markets in most areas of the United States. This
improvement reflected increasing investor confidence, increasing prices and a
more liquid market than in prior periods resulting from declining vacancy
levels and the return of some bargaining power to landlords.
Property and User Services revenue was $212.0 million for the six months
ended June 30, 1996, an increase of $20.4 million or 10.6% from $191.6 million
for the six months ended June 30, 1995. Brokerage revenue accounted for $145.0
million, an increase of $8.3 million or 6.1% from $136.7 million, and
investment properties revenue accounted for $47.3 million, an increase of
$10.3 million or 27.8% from $37.0 million. These increases resulted in part
from an increase in the total number and size of brokerage and investment
properties sale transactions closed during the six months ended June 30, 1996
compared to transactions closed in the six months ended June 30, 1995.
Although the number of lease transactions declined from the six months ended
June 30, 1995 to the six months ended June 30, 1996, the average commission
amount for lease transactions increased from the six months ended June 30,
1995 to the six months ended June 30, 1996, resulting in an overall increase
in revenue from leasing. Property management revenue was $9.7 million, an
increase of $1.1 million or 12.8% from $8.6 million.
Investor Services revenue was $31.7 million for the six months ended June
30, 1996, an increase of $15.1 million or 90.2% from $16.6 million for the six
months ended June 30, 1995. This increase was primarily due to an increase in
investment management and advisory revenue to $16.0 million from $4.5 million,
resulting from the Westmark acquisition. Valuation and appraisal services
revenue accounted for $8.4 million, an increase of $0.4 million or 5.4% from
$8.0 million, and mortgage banking revenue was $7.2 million, an increase of
$3.0 million or 73.5% from $4.2 million, resulting from increased sales and
refinancing activity.

COMMISSIONS, FEES AND OTHER INCENTIVES on a consolidated basis for the six
months ended June 30, 1996 were $121.3 million, an increase of $11.5 million
or 10.5% from $109.8 million for the six months ended June 30, 1995. The
increase in these costs is directly correlated to the increase in revenue
since most of the Company's sales professionals are compensated based on
revenue. As a percentage of revenue, commissions, fees and other incentives
decreased from 52.8% to 49.8%. The decrease in commissions, fees and other
incentives as a percentage of revenue is primarily due to the acquisition of
Westmark, which significantly increased the revenue of investment management
and advisory which does not incur this type of revenue-based expense.
Excluding investment management and advisory, commissions, fees and other
incentives, on a consolidated basis, were relatively flat as a percentage of
revenue decreasing to 53.3% for the six months ended June 30, 1996 from 53.9%
for the six months ended June 30, 1995.
Property and User Services commissions, fees and other incentives were
$114.5 million for the six months ended June 30, 1996, an increase of $10.1
million or 9.7% from $104.4 million for the six months ended June 30, 1995 and
a decrease as a percentage of revenue from 54.5% to 54.0%.
Investor Services commissions, fees and other incentives were $6.7 million
for the six months ended June 30, 1996, an increase of $1.4 million or 26.0%
from $5.3 million for the six months ended June 30, 1995 and a decrease as a
percentage of revenue from 32.0% to 21.2%.

OPERATING, ADMINISTRATIVE AND OTHER on a consolidated basis for the six
months ended June 30, 1996 was $104.7 million, an increase of $16.6 million or
18.8% from $88.1 million for the six months ended June 30, 1995, remaining
relatively stable as a percentage of revenue for such periods at 43.0% and
42.3%, respectively.
Property and User Services operating, administrative and other was $85.9
million for the six months ended June 30, 1996, an increase of $7.9 million or
10.1% from $78 million for the six months ended June 30, 1995. This increase
was primarily associated with increased operating activities.
Investor Services operating, administrative and other was $18.8 million for
the period ended June 30, 1996, an increase of $8.7 million or 86.4% from
$10.1 million for the six months ended June 30, 1995, primarily resulting from
the Westmark acquisition.

26
<PAGE>

DEPRECIATION AND AMORTIZATION on a consolidated basis for the six months
ended June 30, 1996 was $4.9 million, an increase of $1.2 million or 32.9%
from $3.7 million for the six months ended June 30, 1995, resulting primarily
from the Westmark acquisition.
Property and User Services depreciation and amortization was $3.3 million
for the six months ended June 30, 1996, a decrease of $0.1 million or 2.7%
from $3.4 million for the six months ended June 30, 1995.
Investor Services depreciation and amortization was $1.6 million for the six
months ended June 30, 1996, an increase of $1.3 million or 467.7% from $0.3
million for the six months ended June 30, 1995.

OPERATING INCOME on a consolidated basis for the six months ended June 30,
1996 was $12.8 million, an increase of $6.1 million or 90.6% from $6.7 million
for the six months ended June 30, 1995.
Property and User Services operating income was $8.3 million for the six
months ended June 30, 1996, an increase of $2.5 million or 43.3% from $5.8
million for the six months ended June 30, 1995.
Investor Services operating income was $4.5 million for the six months ended
June 30, 1996, an increase of $3.6 million or 384.4% from $0.9 million for the
six months ended June 30, 1995.

INTEREST INCOME on a consolidated basis for the six months ended June 30,
1996 was $0.7 million, a decrease of $0.2 million or 15.2% from $0.9 million
for the six months ended June 30, 1995.

INTEREST EXPENSE on a consolidated basis for the six months ended June 30,
1996 was $11.5 million, an increase of $1.1 million or 11.3% from $10.4
million for the six months ended June 30, 1995, primarily resulting from
additional debt incurred with respect to the Westmark acquisition, offset in
part by reduced average bank borrowing levels on other Company indebtedness
and a decline in interest rates on bank debt.

NET INCOME on a consolidated basis for the six months ended June 30, 1996
was $1.6 million, an increase of $4.5 million from a net loss of $2.9 million
for the six months ended June 30, 1995.

EBITDA on a consolidated basis for the six months ended June 30, 1996 was
$17.7 million, an increase of $7.3 million or 70.2% from $10.4 million for the
six months ended June 30, 1995.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

REVENUE on a consolidated basis in 1995 was $468.5 million, an increase of
$39.5 million or 9.2% from $429.0 million in 1994. The overall increase in
revenue, compared to 1994, reflected a continued improvement in the commercial
real estate markets in most areas of the United States. This improvement
reflected increasing investor confidence, increasing prices and a more liquid
market than in prior years resulting from declining vacancy levels and the
return of some bargaining power to landlords.
Property and User Services revenue was $422.8 million in 1995, an increase
of $22.5 million or 5.6% from $400.3 million in 1994. Brokerage revenue
accounted for $294.3 million, an increase of $9.5 million or 3.3% from $284.8
million and investment properties revenue accounted for $87.6 million, an
increase of $6.2 million or 7.6% from $81.4 million. Corporate services
revenue accounted for $21.7 million, an increase of $6.1 million or 39% from
$15.6 million. Although the number of sale and lease transactions closed
decreased in 1995 from 1994, the average dollar amount of both sale and lease
transactions increased approximately 9.0%, resulting in a net increase in
brokerage and investment properties revenue.
Investor Services revenue was $45.6 million in 1995, an increase of $16.9
million or 58.8% from $28.7 million in 1994, largely due to an increase in
investment management and advisory revenue to $18.6 million from $5.9 million,
primarily resulting from the Westmark acquisition. Valuation and appraisal
services revenue accounted for $16.6 million, an increase of $3.3 million or
24.4% from $13.3 million and mortgage banking revenue accounted for $10.4
million, an increase of $0.9 million or 9.8% from $9.5 million.

COMMISSIONS, FEES AND OTHER INCENTIVES on a consolidated basis in 1995 were
$239.0 million, an increase of $13.9 million or 6.2% from $225.1 million in
1994. The increase in these costs is directly correlated to the increase in
revenue since most of the Company's sales professionals are compensated based
on revenue. As a percentage of revenue, commissions, fees and other incentives
decreased from 52.5% in 1994 to 51.0% in 1995.

27
<PAGE>

The decrease in commissions, fees and other incentives as a percentage of
revenue is primarily due to the significant revenue growth of investment
management and advisory, which does not incur this type of revenue-based
expense. Excluding investment management and advisory, commissions, fees and
other incentives on a consolidated basis remained constant as a percent of
revenues at 53.2% for 1995 and 1994.
Property and User Services commissions, fees and other incentives was
$227.4 million in 1995, an increase of $11.9 million or 5.5% from $215.5
million in 1994 and a decrease as a percentage of revenue from 53.9% to 53.8%.
Investor Services commissions, fees and other incentives was $11.6 million
in 1995, an increase of $2.0 million or 21.4% from $9.6 million in 1994 and a
decrease as a percentage of revenue from 33.4% to 25.6%.

OPERATING, ADMINISTRATIVE AND OTHER on a consolidated basis in 1995 was
$188.0 million, an increase of $17.8 million or 10.4% from $170.2 million in
1994, remaining relatively stable as a percentage of revenue for such periods
at 40.0% and 39.7%, respectively.
Property and User Services operating, administrative and other was $160.4
million in 1995, an increase of $8.3 million or 5.4% from $152.1 million in
1994. This increase was caused, in part, by additions to staff in anticipation
of further increases in operating activities and resulted in higher levels of
administrative, technical and other support expenditures and related personnel
costs, as well as higher business promotion and other expenses.
Investor Services operating, administrative and other was $27.6 million in
1995, an increase of $9.5 million or 52.3% from $18.1 million in 1994,
primarily resulting from the Westmark acquisition.

DEPRECIATION AND AMORTIZATION on a consolidated basis in 1995 was $11.6
million, an increase of $3.5 million or 43.8% from $8.1 million in 1994 as a
result of the Westmark acquisition and new capital leases for computer
equipment entered into in 1995.
Property and User Services depreciation and amortization was $8.9 million in
1995, an increase of $1.4 million or 18.8% from $7.5 million in 1994.
Investor Services depreciation and amortization was $2.7 million in 1995, an
increase of $2.1 million or 352.5% from $0.6 million in 1994.

OPERATING INCOME on a consolidated basis in 1995 was $29.8 million, an
increase of $4.2 million or 16.7% from $25.6 million in 1994.
Property and User Services operating income was $26.1 million in 1995, an
increase of $1 million or 4.1% from $25.1 million in 1994.
Investor Services operating income was $3.7 million in 1995, an increase of
$3.2 million or 704.6% from $0.5 million in 1994.

INTEREST INCOME on a consolidated basis in 1995 was $1.7 million, an
increase of $0.6 million or 50.1% from $1.1 million in 1994. This increase
primarily resulted from increased interest rates and improved cash management.

INTEREST EXPENSE on a consolidated basis in 1995 was $23.3 million, an
increase of $5.9 million or 34.0% from $17.4 million in 1994. This increase
resulted from a general increase in interest rates, the full year impact of
the higher interest rates on the senior secured and senior subordinated debt
of LIBOR plus 250 basis points and LIBOR plus 125 basis points, respectively,
which were effective June 30, 1994, and the addition of the debt incurred with
respect to the Westmark acquisition, offset in part by reduced average
borrowing levels on other Company indebtedness.

NET INCOME on a consolidated basis in 1995 was $7.4 million, a decrease of
$1.8 million or 19.2% from $9.2 million in 1994.

EBITDA on a consolidated basis in 1995 was $41.4 million, an increase of
$7.7 million or 23.2% from $33.7 million in 1994.

28
<PAGE>

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

REVENUE on a consolidated basis in 1994 was $429.0 million, an increase of
$37.0 million or 9.4% from $392.0 million in 1993.
Property and User Services revenue was $400.3 million in 1994, an increase
of $36.1 million or 9.9% from $364.2 million in 1993. Brokerage revenue
accounted for $284.8 million, an increase of $14.7 million or 5.5% from $270.1
million and investment properties revenue accounted for $81.4 million, an
increase of $14.0 million or 20.8% from $67.4 million. Corporate services
revenue accounted for $15.6 million, an increase of $6.0 million or 62.1% from
$9.6 million and property management revenue accounted for $17.7 million, an
increase of $1.3 million or 7.7% from $16.4 million. These increases resulted
in part from an increase in the total number and size of brokerage, investment
properties and corporate services sale transactions closed during 1994 and in
part from an increase in total size of brokerage lease transactions closed
during 1994. Although the number of lease transactions declined in 1994 from
1993, the average lease commission amount increased by approximately 9.7%,
resulting in an overall increase in revenue from leasing.
Investor Services revenue was $28.7 million in 1994, an increase of $0.9
million or 3.1% from $27.8 million in 1993. Investment Management and Advisory
revenue accounted for $5.9 million, an increase of $0.8 million or 15.9% from
$5.1 million. Valuation and Appraisal Services revenue accounted for $13.3
million, a decrease of $2.3 million or 14.2% from $15.6 million as a result of
a change in federal regulations, which modified appraisal standards and
requirements. Mortgage Banking revenue accounted for $9.5 million, an increase
of $2.3 million or 31.5% from $7.2 million, primarily resulting from improved
availability of credit to finance commercial real estate transactions.

COMMISSIONS, FEES AND OTHER INCENTIVES on a consolidated basis in 1994 were
$225.1 million, an increase of $19.0 million or 9.2% from $206.1 million in
1993. An increase in these costs is directly correlated to an increase in
revenue since most of the Company's sales professionals are compensated based
on revenue. As a percentage of revenue, commissions, fees and other expenses
remained relatively flat decreasing from 52.6% in 1993 to 52.5% in 1994.
Property and User Services commissions, fees and other incentives was $215.5
million in 1994, an increase of $19.1 million or 9.7% from $196.4 million in
1993 and a decrease as a percentage of revenue from 53.9% to 53.8%.
Investor Services commissions, fees and other incentives was $9.6 million
for both years, a decrease as a percentage of revenues from 34.6% to 33.3%.

OPERATING, ADMINISTRATIVE AND OTHER on a consolidated basis in 1994 was
$170.2 million, an increase of $10.2 million or 6.3% from $160.1 million in
1993, and remained relatively flat as a percentage of revenue for such periods
at 39.7% and 40.8%, respectively, due to the cost control measures implemented
in 1994. These increases were primarily the result of the Company's expansion
of loan closing and underwriting activities and continuing investments in
information technology and the additions of sales support personnel and LAN
(local area network) administrators and technicians to enhance the
productivity of sales personnel.
Property and User Services operating, administrative and other was $152.1
million in 1994, an increase of $8.7 million or 6.1% from $143.4 million in
1993.
Investor Services operating, administrative and other was $18.1 million in
1994, an increase of $1.4 million or 8.5% from $16.7 million in 1993.

DEPRECIATION AND AMORTIZATION on a consolidated basis in 1994 was $8.1
million, a decrease of $41.5 million or 83.7% from $49.6 million in 1993 as a
result of the write-off of intangibles in 1993 associated with the
Acquisition.
Property and User Services depreciation and amortization was $7.5 million in
1994, a decrease of $36.8 million or 83.1% from $44.3 million in 1993.
Investor Services depreciation and amortization was $0.6 million in 1994, a
decrease of $4.7 million or 88.7% from $5.3 million in 1993.

OPERATING INCOME on a consolidated basis in 1994 was $25.6 million, an
increase of $49.3 million from $(23.7) million in 1993.

29
<PAGE>

Property and User Services operating income was $25.1 million in 1994, an
increase of $45 million from $(19.9) million in 1993.
Investor Services operating income was $.5 million in 1994, an increase of
$4.3 million from $(3.8) million in 1993.

INTEREST INCOME on a consolidated basis in 1994 was $1.1 million, an
increase of $0.2 million or 21.2% from $0.9 million in 1993.

INTEREST EXPENSE on a consolidated basis in 1994 was $17.4 million, an
increase of $3.2 million or 21.9% from $14.2 million in 1993. This increase
resulted from a general increase in interest rates and the impact of the
higher interest rates on the senior secured indebtedness and senior
subordinated indebtedness, which were effective June 30, 1994.

NET INCOME on a consolidated basis in 1994 was $9.2 million, an increase of
$46.4 million from $(37.2) million in 1993.

EBITDA on a consolidated basis in 1994 was $33.7 million, an increase of
$7.8 million or 30% from $25.9 million in 1993.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically financed its operations and non-acquisition
related capital expenditures primarily with internally generated funds,
operating and, to a much lesser extent, capital leases, and borrowings under a
revolving credit facility. In order to finance the Acquisition and related
expenses, in April 1989 the Company incurred borrowings of $251.0 million,
which included $170.0 million under a senior secured credit agreement (the
"Senior Secured Credit Agreement") and $81.0 million under a senior
subordinated credit agreement (the "Senior Subordinated Credit Agreement"). As
of June 30, 1996, the Company had outstanding approximately $153.4 million,
including $4.2 million of deferred interest, under the Senior Secured Credit
Agreement, approximately $16.3 million under a revolving credit facility
("Revolving Credit Facility A"), no amounts outstanding under its second
revolving credit facility ("Revolving Credit Facility B" and together with
Revolving Credit Facility A, the "Revolving Credit Facilities") and
$69.9 million (including $7.9 million of deferred interest) under the Senior
Subordinated Credit Agreement. The outstanding amount under the Senior Secured
Credit Agreement reflects principal repayments of $35.5 million since June 30,
1994. In addition, as of June 30, 1996 the Company had outstanding other long-
term indebtedness, consisting primarily of acquisition debt, totaling
approximately $43.2 million. The Company expects that, consistent with the
seasonality of the Company's revenue, all outstanding borrowings under the
Revolving Credit Facility A will be repaid prior to November 30, 1996.

$ million of the net proceeds of the Offering will be used to repay a
portion of the Senior Secured Credit Agreement and $ will be used to pay
accrued and unpaid interest on the Senior Subordinated Credit Agreement. The
remaining $ of net proceeds will be used for general corporate purposes,
including to fund acquisitions.

In connection with the Offering and the repayment of a portion thereof, the
senior secured lenders have agreed to amend the terms of the Senior Secured
Credit Agreement. As amended, the Company will be required to make quarterly
principal payments of $2.625 million commencing March 31, 1997 with a final
payment of $9.5 million on December 31, 2001. The Revolving Credit Facilities
will permit maximum borrowings of $30.0 million through December 31, 1997 and
$20.0 million thereafter. Under the amended Senior Secured Credit Agreement,
the amounts borrowed under the Revolving Credit Facilities must be paid off in
full for at least 30 consecutive days in each year commencing with 1997. See
"The Company's Credit Agreements--Senior Secured Debt Repayment and
Amendments."

Also in connection with the Offering, the senior subordinated lenders have
agreed to amend the terms of the Senior Subordinated Credit Agreement. As
amended, interest will be payable on a current basis commencing January 1,
1997 and the entire amount outstanding under the Senior Subordinated Credit
Agreement will be due on July 23, 2002. Interest payments on the amounts
outstanding under Senior Subordinated Credit Agreement

30
<PAGE>

had been deferred since June 1994 until the payment in full of amounts
outstanding under the Senior Secured Credit Agreement. See "The Company's
Credit Agreements--Senior Subordinated Debt Amendments."

Upon consummation of the Offering and the Recapitalization, principal
payments on the Senior Secured Credit Agreement, Senior Subordinated Credit
Agreement and the Company's other indebtedness, including debt incurred to
finance the acquisitions of Westmark and L.J. Melody are as follows (in
thousands):

<TABLE>
<CAPTION>
PRO FORMA
---------
<S> <C>
1996........................................................... $ 25,498
1997........................................................... 20,973
1998........................................................... 17,027
1999........................................................... 10,846
2000........................................................... 23,780
2001........................................................... 29,711
2002........................................................... 69,915
Thereafter..................................................... 3,151
--------
$200,901
========
</TABLE>

The Company expects to have capital expenditures of approximately $4.0
million in 1997. In connection with the Westmark acquisition, the sellers may
be entitled to a supplemental purchase price based on the operating results of
Westmark payable over a period of six years and subject to a maximum aggregate
payment of $18.0 million. See "Note 1 of Notes to Consolidated Financial
Statements." The Company expects to use net cash provided by operating
activities for the next several years primarily to fund acquisitions,
including earnout payments and to make required principal payments under the
Company's outstanding indebtedness. The Company believes that it can satisfy
these obligations as well as working capital requirements from internally
generated cash flow, borrowings under the Revolving Credit Facilities and,
with respect to acquisitions, seller financing and third-party borrowing.

CASH FLOWS

Net cash provided by (used in) operating activities for the six months ended
June 30, 1996 was $0.6 million, an increase of $9.1 million from ($8.5)
million for the six months ended June 30, 1995. The increase resulted
primarily from an improvement in net income of $4.5 million. Additionally,
non-cash charges, consisting of depreciation, amortization and deferred
interest, included in net income for the six months ended June 30, 1996, were
$2.2 million higher than for the six months ended June 30, 1995. Net cash
provided by operating activities was also impacted by changes in components of
working capital which provided a net increase to net cash provided by
operating activities of $2.3 million.

Net cash used in investing activities was $0.1 million for the six months
ended June 30, 1996, compared to $21.4 million for the six months ended June
30, 1995 as a result of the Westmark acquisition in 1995.

Net cash provided by financing activities was $3.9 million for the six
months ended June 30, 1996, compared to $13.1 million for the six months ended
June 30, 1995. The decrease resulted from the $12.4 million repayment of
amounts outstanding under the Senior Secured Credit Agreement offset by net
proceeds from the Revolving Credit Facility A of $16.3 million during the six
months ended June 30, 1996 as compared to $13.0 million net proceeds from the
Revolving Credit Facility A, $9.7 million repayment of amounts outstanding
under the Senior Secured Credit Agreement and $10.0 million proceeds from
senior subordinated loans in connection with the Westmark acquisition during
the six months ended June 30, 1995.

Net cash provided by operating activities was $30.6 million in 1995 compared
to $31.4 million in 1994. The decrease primarily resulted from a reduction in
net income of $1.8 million in 1995 compared to 1994, offset in part by changes
in components of operating assets and liabilities. Net cash provided by
operating activities in 1994 was $31.4 million compared to $19.6 million in
1993. The increase primarily resulted from an increase in net income of $46.3
million, offset by changes in components of operating assets and liabilities.

31
<PAGE>

Net cash used in investing activities was $24.9 million in 1995 compared to
$3.9 million in 1994. The increase was caused by the acquisitions of Westmark
and Langdon Rieder in 1995 for $22.4 million (see "Business--Acquisitions"),
partially offset by a $2.1 million decrease in purchases of property and
equipment. Net cash used in investing activities was $3.9 million in 1994
compared to $5.6 million in 1993. The decrease was primarily caused by a
decrease in purchases of property and equipment and a reduction in other
investing activities.

Net cash used in financing activities was $11.5 million in 1995 compared to
$4.9 million in 1994. The increase in 1995 resulted from the $19.0 million
repayment of senior term loans and $2.2 million repayment of capital leases,
partially offset by proceeds from the senior subordinated loan of $10.0
million. Net cash used in financing activities was $4.9 million in 1994
compared to $14.7 million in 1993. The decrease in 1994 resulted from the
$14.0 million net repayment of senior revolving credit line in 1993, partially
offset by the $4.1 million repayment of senior term loans in 1994.

NET OPERATING LOSSES

The Company had net operating loss carryforwards ("NOLs") of approximately
$221.0 million as of December 31, 1995, corresponding to $77.6 million of the
Company's $87.5 million in net deferred tax assets, all of which have been
reserved through a valuation allowance. The valuation allowance is based on
management's conclusion regarding the realizability of this deferred tax asset
on a more likely than not basis, as defined in SFAS No. 109. In reaching this
conclusion, management considered the Company's past operating results, the
current year events and trends, including the impact, if any, of the
acquisitions that were concluded during the year and other factors.

Management continues to evaluate the appropriateness of all or part of this
valuation allowance on a periodic basis and if the Company concludes there is
a change with respect to realizability, any necessary adjustments are made at
that time. As of June 30, 1996, the Company has experienced continuing
profitability due to a variety of reasons, including the strength of the
commercial real estate markets. In addition, the Company has operated Westmark
for one full year since acquiring Westmark in June 1995, and as a result has
concluded that Westmark should make a positive contribution to the Company's
consolidated taxable income. Finally, the acquisition of L.J. Melody in July
1996 is also expected to make a positive contribution to the Company's
consolidated taxable income. As a result of these factors, management has
determined that it now has sufficient reliable information to conclude that
part of the Company's NOLs are realizable on a more likely than not basis. The
Company is currently in the process of determining the portion of the NOLs
that will be realizable. Therefore, the Company expects to record a deferred
tax asset in the third quarter ended September 30, 1996, part of which is
expected to be allocated to the purchase price of L.J. Melody. While a final
determination has not been made with respect to the amount of deferred tax
asset to be recorded, it is expected to be material to the Company's financial
statements.

In addition, the Company believes that when the Offering is completed, it
will be able to generate additional taxable income in the future resulting
from the paydown of part of its Senior Secured Credit Agreement using the
proceeds from the Offering. Accordingly, the Company expects to record an
additional deferred tax upon completion of the Offering which could be
material.

The ability of the Company to utilize NOLs may also be limited in the future
if an "ownership change" within the meaning of Section 382 of the Internal
Revenue Code of 1986, as amended, were deemed to occur. Such an ownership
change may be deemed to occur if the Company engages in certain transactions
involving the issuance of shares of Common Stock, including the issuance of
shares of Common Stock in connection with an acquisition or otherwise or by
reason of a sale of capital stock by an existing shareholder. If an ownership
change were to occur, Section 382 would impose an annual limit on the amount
of NOLs the Company could utilize. The Company believes that the Offering and
Recapitalization will not result in an ownership change. An ownership change
may not be within the control of the Company, however, and therefore there is
no assurance that an ownership change will not occur in the future. The
availability of NOLs is, in any event, subject to

32
<PAGE>

uncertainty since their validity is not reviewed by the Internal Revenue
Service until such time as they are utilized to offset income.

INFLATION

The Company's operations are directly affected by various national and
economic conditions, including interest rates, the available of credit to
finance commercial real estate transactions and the impact of tax laws. To
date, the Company does not believe that general inflation has had a material
impact upon its operations. Revenues, commissions and other variable costs
related to revenues are primarily affected by real estate market supply and
demand versus general inflation.

NEW ACCOUNTING PRONOUNCEMENTS

In 1993, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions and SFAS No. 112, Employers' Accounting for Postemployment Benefits.
These standards did not have a material impact on the Company's financial
statements.

Effective January 1, 1996, the Company adopted SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of, and SFAS No. 123, Accounting for Stock-Based Compensation. These standards
did not have a material impact on the Company's financial statements.

33
<PAGE>

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain unaudited consolidated statement of
operations data for each of the Company's last ten quarters and the percentage
of the Company's revenues represented by each line item reflected in each
consolidated income statement. In the opinion of management, this information
has been presented on the same basis as the audited financial statements
appearing elsewhere in this Prospectus, and includes all adjustments,
consisting only of normal recurring adjustments and accruals, that the Company
considers necessary for a fair presentation. The unaudited quarterly
information should be read in conjunction with the audited financial
statements of the Company and the notes thereto. The operating results for any
quarter are not necessarily indicative of the results for any future period.

QUARTERLY RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
1996 1995 1994
----------------- ------------------------------------ ------------------------------------
JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $130,954 $112,741 $143,570 $116,603 $108,361 $99,926 $128,905 $112,843 $103,730 $83,510
Costs and expenses:
Commissions, fees and
other incentives...... 66,262 55,007 71,449 57,804 57,370 52,395 67,919 59,645 54,367 43,154
Operating,
administrative and
other.................. 54,376 50,342 51,389 48,461 44,747 43,371 46,316 42,675 42,487 38,756
Depreciation and
amortization.......... 2,326 2,568 4,982 2,967 1,825 1,857 2,562 1,797 1,783 1,949
-------- -------- -------- -------- -------- ------- -------- -------- -------- -------
Operating income (loss). 7,990 4,824 15,750 7,371 4,419 2,303 12,108 8,726 5,093 (349)
Interest income......... 354 395 446 345 393 490 370 270 255 214
Interest expense........ 5,689 5,858 6,539 6,349 5,244 5,135 4,747 5,383 3,790 3,442
-------- -------- -------- -------- -------- ------- -------- -------- -------- -------
Income (loss) before
provision (benefit) for
income tax............. 2,655 (639) 9,657 1,367 (432) (2,342) 7,731 3,613 1,558 (3,577)
Provision (benefit) for
income tax............. 438 (48) 603 138 26 74 (73) 75 75 75
-------- -------- -------- -------- -------- ------- -------- -------- -------- -------
Net income (loss)....... $ 2,217 $ (591) $ 9,054 $ 1,229 $ (458) $(2,416) $ 7,804 $ 3,538 $ 1,483 $(3,652)
======== ======== ======== ======== ======== ======= ======== ======== ======== =======
EBITDA.................. $ 10,316 $ 7,392 $ 20,732 $ 10,338 $ 6,244 $ 4,160 $ 14,670 $ 10,523 $ 6,876 $ 1,600
======== ======== ======== ======== ======== ======= ======== ======== ======== =======
</TABLE>

<TABLE>
<CAPTION>
AS A PERCENTAGE OF REVENUES
---------------------------------------------------------------------------------------
1996 1995 1994
---------------- ---------------------------------- ---------------------------------
JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31 DEC. 31 SEPT. 30 JUNE 30 MARCH 31
------- -------- ------- -------- ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Commissions, fees and
other incentives...... 50.6 48.8 49.8 49.6 52.9 52.4 52.7 52.9 52.4 51.7
Operating,
administrative and
other................. 41.5 44.6 35.8 41.6 41.3 43.4 35.9 37.8 41.0 46.4
Depreciation and
amortization.......... 1.8 2.3 3.4 2.5 1.7 1.9 2.0 1.6 1.7 2.3
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Operating income (loss). 6.1 4.3 11.0 6.3 4.1 2.3 9.4 7.7 4.9 (0.4)
Interest income......... 0.3 0.3 0.3 0.3 0.3 0.5 0.3 0.3 0.3 0.2
Interest expense........ 4.4 5.2 4.6 5.4 4.8 5.1 3.7 4.8 3.7 4.1
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income (loss) before
provision (benefit) for
income tax............. 2.0 (0.6) 6.7 1.2 (0.4) (2.3) 6.0 3.2 1.5 (4.3)
Provision (benefit) for
income tax............. 0.3 (0.0) 0.4 0.1 0.0 0.1 (0.1) 0.1 0.1 0.1
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net income (loss)....... 1.7% (0.6)% 6.3% 1.1% (0.4)% (2.4)% 6.1% 3.1% 1.4% (4.4)%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
EBITDA.................. 7.9% 6.6% 14.4% 8.8% 5.8% 4.2% 11.4% 9.3% 6.6% 1.9%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>

34
<PAGE>

BUSINESS

COMPANY OVERVIEW

Founded in 1906, the Company is the largest vertically-integrated commercial
real estate services company in the United States with aggregate 1995 revenue
of $468.5 million, and 231 business unit offices in 118 locations. In
addition, the Company has established exclusive alliances with international
commercial real estate services firms which have offices in an additional 119
locations in 31 countries. The Company provides a full range of services to
commercial real estate tenants, owners, and investors including: (i) brokerage
(facilitating sales and leases), investment properties (acquisitions and sales
on behalf of investors), corporate services, property management, and real
estate market research (collectively, "Property and User Services"), and (ii)
mortgage banking (loan origination and servicing), investment management and
advisory services, and valuation and appraisal services (collectively,
"Investor Services"). Management believes that, on the basis of revenue, its
brokerage and independent commercial loan origination are the largest such
businesses in the United States, and that the Company is among the top ten
providers of property management and loan servicing in the United States.

The Company believes that one of its most important competitive advantages
as a diversified commercial real estate services provider is its ability to
capitalize on the significant deal flow and strong market presence of its core
brokerage and property management businesses. These businesses provide the
Company with real-time, in-depth local, national and, through its alliances,
international market information and entree to clients. This real time
information is employed for the benefit of all of the Company's business
disciplines and enables the Company to capitalize upon client demand for a
variety of integrated commercial real estate services. The Company's diverse
client base includes local, national and multinational corporations, financial
institutions, pension funds and other tax exempt entities, local, state and
national governmental entities, and individuals.

The Company believes that it enjoys a variety of competitive advantages in
the commercial real estate services industry, including the Company's--

. 90-year tradition and history of providing high-quality services and client
coverage;

. Internationally recognized "brand" identity which the Company believes is
widely respected in the real estate services industry;

. Experienced and trained professionals in all business disciplines,
including the Company's more than 1,900 sales professionals in Property and
User Services who have an average tenure of more than nine years with the
Company;

. Multi-discipline capabilities and extensive multi-market network;

. State-of-the-art technology and professional education programs which
enable the Company to deliver superior services;

. Employees who own more than 50% of the Common Stock of the Company (prior
to the Offering).

INDUSTRY TRENDS

Over the last ten years, the commercial real estate industry has experienced
various structural changes and more recently has been experiencing a broad
recovery from the real estate "depression" of the early 1990s. Management
believes these factors and the resulting trends, the most important of which
are discussed below, create an opportunity for the Company to leverage its
experience, multi-discipline integrated services, multi-market presence and
brand equity into a competitive advantage.

35
<PAGE>

.CHANGING COMPOSITION AND NEEDS OF INVESTORS IN AND OWNERS OF COMMERCIAL
REAL ESTATE ASSETS.

Investors in and owners of commercial real estate assets have become
increasingly institutional. Simultaneously, their investment and management
needs have become increasingly multi-market due to the fact that the
commercial real estate properties in their portfolios are typically located in
numerous geographic locations. This change in the ownership characteristics
and management requirements of institutional real estate investors and owners
has fueled the demand for and growth of sophisticated multi-service,
nationally-oriented real estate service providers.

.CONTINUING CORPORATE OUTSOURCING TREND.

Shareholder pressure for higher performance and return on equity within most
American corporations in the 1980's heightened corporate managements'
awareness that corporate real estate assets are a major component of corporate
net worth. Simultaneously, with competitive pressures encouraging greater
focus on core businesses, corporations have been downsizing and, as a result,
outsourcing their non-core activities to third-parties. As a consequence, the
demand for multi-discipline, multi-market professional real estate service
firms that provide contractually-based, integrated services capable of
supplementing a corporate real estate department has increased significantly.

.ONGOING INDUSTRY CONSOLIDATION.

The Company believes that the combination of institutional and corporate
real estate service needs and demands, together with the real estate
"depression" of the early 1990s, has made it necessary for real estate service
firms to (i) provide comprehensive, high-quality services, (ii) make
significant investments in corporate infrastructure, including information
technology and professional education, and (iii) have access to sufficient
capital to support these service and investment needs. These factors have
fueled the consolidating industry environment, which the Company believes will
motivate local and regional real estate service providers to sell to, or form
alliances with, major national and international companies.

.EXPANDING CMBS MARKET.

Historically, the majority of third-party financing for commercial real
estate assets was provided by banks and insurance companies who generally held
the loans they originated to the maturity date of the loans. More recently,
Wall Street firms and financial institutions have been providing a significant
amount of third-party mortgage financing, and have been accessing the public
debt markets by issuing commercial mortgage-backed securities ("CMBS") in
order to securitize their portfolios and avoid holding loans for the long-
term. The Company believes that its overall market presence, extensive
available market data and access to real estate transaction deal flow
positions its mortgage banking business to benefit substantially from the
expansion of the CMBS market. The Company's national geographic coverage and
loan origination capabilities create the opportunity to be a major supplier of
mortgages to the CMBS market. In addition, the Company expects to service a
majority of the loans that it originates, and the profit margin potential for
servicing an increasing volume of loans may be significant to the Company's
mortgage banking business. The acquisition and subsequent combination with
L.J. Melody in July 1996 was a strategic step in substantially expanding the
Company's capabilities in this area.

.RECOVERING COMMERCIAL REAL ESTATE MARKETS.

Coincident with the longer term structural shifts in the commercial real
estate industry, commercial real estate markets in the United States have been
recovering over the last several years, experiencing increased activity in
most product types and geographic market areas. National office and industrial
building occupancy levels have generally been rising, rental rates are
beginning to increase, and correspondingly, property values are increasing.
Activity in retail properties is also currently strong, being driven primarily
by discount retailers' expansion objectives. Finally, in response to a
combination of a lack of available product and strong demand, new construction
is currently underway in the multifamily property sector.

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Geographically, recoveries are underway in a number of major U.S. real
estate markets where the Company has operations, including California,
Arizona, Texas, and the Washington, D.C./Baltimore areas. Additionally, market
activity levels in Chicago, Philadelphia, Seattle, and Atlanta have increased
from the fairly stable, but relatively low, levels of the last few years to
strong growing levels. While there continue to be submarkets with negative job
growth and therefore lower real estate activity levels, most major U.S. real
estate markets are experiencing increasing levels of real estate activity.

BUSINESS OBJECTIVE AND GROWTH STRATEGIES

The Company's primary business objective is to continue to expand through
acquisitions and internal growth, while simultaneously delivering strong
consistent growth in its annual results of operations. The key business
strategies by which the Company plans to accomplish this objective include--

. LEVERAGING EXISTING BUSINESS DISCIPLINES, MARKET PRESENCE AND "BRAND"
EQUITY TO CAPITALIZE ON INDUSTRY STRUCTURAL CHANGES.

The Company believes that structural changes in the market for commercial
real estate have led to an increasing demand for real estate services
providers who can satisfy a wide range of customer needs on a vertically-
integrated basis. Furthermore, as the ownership of commercial real estate
becomes increasingly institutional, large firms who can efficiently service a
nationwide real estate portfolio are gaining market share over smaller local
and regional operators. The Company's ability to provide multi-discipline,
integrated real estate services on a nationwide basis with strong brand
identity is an important competitive advantage. The Company's strategy is to
leverage these advantages to grow its revenues and market share in the large
and fragmented real estate services industry.

. PURSUING STRATEGIC ACQUISITIONS AND PARTNERSHIPS TO STRENGTHEN EXISTING
BUSINESS AND EXPAND GEOGRAPHIC COVERAGE.

Although the Company is currently a leading provider of multi-discipline,
integrated commercial real estate services, the Company intends to continue to
strengthen the range, quality and geographic coverage of its services through
strategic acquisitions and partnerships. The Company has recently completed
three strategic acquisitions -- L.J. Melody (mortgage banking), Westmark
(investment management and advisory services), and Langdon Rieder (corporate
services). In addition, through its "CB Commercial/Partners" program, the
Company has begun establishing relationships with leading local brokerage
firms in order to expand the Company's geographic coverage in markets that are
not currently being served by the Company. Due to the fragmented nature of the
commercial real estate services industry, the Company believes that there will
be substantial opportunities to strengthen its capabilities through
acquisitions and strategic partnerships, and a tactical plan for growth
through acquisitions has been developed for implementation over the next
several years.

As the Company continues to strengthen its integrated services capability,
it intends to develop and/or acquire additional service disciplines to expand
its client relationships. Development and construction management, dedicated
facilities management, and real estate merchant banking are a few of the
services under consideration and study. The Company believes it can increase
its market share by increasing its services "menu" and the capabilities
offered to its clients.

.BENEFITTING FROM RECOVERING COMMERCIAL REAL ESTATE MARKETS.

In addition to growth through expansion opportunities, brokerage and
property management fees from contracts with existing clients have begun to
increase as a result of the recovery in U.S. commercial real estate markets
and the generally rising level of occupancy and rental levels and, as a
result, property values. Since brokerage fees are typically based upon a
percentage of transaction value, and property management fees are typically
based upon a percentage of total rent collections, recent occupancy and rental
rate increases at the property level have generated an increase in brokerage
and property management fees to the Company. As a result of anticipated job
and population growth in many geographic markets in the United States, and the
historically low level of development of new commercial space, the Company
believes that upward pressure on occupancy, rental levels, and property values
is likely to continue for the balance of 1996 and through 1997.

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.CAPITALIZING ON THE CORPORATE OUTSOURCING TREND.

Large corporations seeking to focus on core businesses and reduce operating
costs are looking to the multi-discipline, integrated national and
international real estate service provider as an outsource vendor. By relying
on a single integrated provider for all their real estate-related needs,
corporations are able to reduce their ongoing overhead expense while taking
advantage of the Company's real estate expertise. This outsourcing trend has
accelerated in recent years and the Company believes that it will continue in
the future. The Company is one of the major participants in this segment of
the real estate services industry and believes that only a small percentage of
the market has been penetrated. As a result, this trend provides the Company
with attractive revenue opportunities.

.GENERATING INTERNAL GROWTH BY INCREASING MARKET SHARE AND EMPLOYEE
PRODUCTIVITY.

Market Share. In order to increase its market share in the markets that the
Company currently serves, the Company is focusing on increasing the number of
brokerage professionals in its existing national network of offices. The
Company's current sales professionals only occupy approximately 73%, on
average, of its available office space for sales professionals, and the
Company believes that revenue growth can be generated without a corresponding
growth in management and infrastructure costs through the hiring of additional
professionals.

Employee Productivity. The Company also focuses on the enhancement of
revenues and profit margins through the delivery of services to its clients in
a more efficient manner. In order to improve each employee's productivity, the
Company invests a substantial amount on an annual basis in information
technology and for the professional education of both its management and
revenue-producing professionals through its training programs, provided by its
CB Commercial University. The success of this strategy is evidenced by the
annual improvement in revenues per employee in the Company's brokerage group.
Since 1993, the average revenue per sales professional has increased
approximately 23% from $176,000 to $216,000 in 1995, while spending on
information technology and professional development per employee increased
approximately 16% from $2,800 to $3,300 in 1995. Through previously made and
continuing investments in information technology and professional education,
the Company believes it is well-positioned for further employee productivity
gains.

.ENCOURAGING LOCAL MARKET INNOVATION WITHIN CB COMMERCIAL'S QUALITY
FRAMEWORK.

In order to deliver consistently superior, vertically-integrated services,
the Company requires each office to adhere to strict standards of quality
consistency. Although the Company encourages each business discipline to
innovate locally to meet its respective clients' needs, the Company believes
that this framework, or "envelope" of consistency, is responsive to client
demand, strengthening client relationships and increasing the potential for
multiple assignments with each client.

.CAPITALIZING ON CROSS BORDER ACTIVITY BY INCREASING INTERNATIONAL
PRESENCE.

Internationally, the Company has established exclusive alliances in various
markets throughout Europe with DTZ and in Asia with C.Y. Leung, both leading
firms in their respective markets. Historically, the Company's ability to
offer real estate acquisition and disposition services, including related
advisory services, internationally has enabled it to expand market share with
its domestic clients, especially corporations. In addition, Westmark is
currently exploring the development of new cross-border investment products in
conjunction with DTZ and C.Y. Leung.

ACQUISITIONS

The Company is continually assessing acquisition opportunities as part of
its growth strategy. Management believes that there are significant
opportunities in the fragmented and consolidating real estate services
industry to acquire additional companies to complement and expand the
Company's existing operations. Since the beginning of 1995, the Company has
completed three strategic acquisitions--

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L.J. MELODY. In July 1996, the Company acquired L.J. Melody for $15.0
million, including $6.0 million in seller financing. The combined pre-
acquisition loan originations of the Company and L.J. Melody for 1995 were
$2.5 billion, and the combined pre-acquisition loans serviced as of December
31, 1995 were $7.3 billion. The L.J. Melody acquisition provides the Company
with leadership for its own mortgage banking business, access to loan sources
not previously available to the Company and the enhanced ability to access its
investment properties and brokerage businesses as a source of mortgage
originations. The Company expects to complete the integration of its mortgage
banking business with that of L.J. Melody in the fourth quarter of 1996. The
combined businesses will be headquartered in Houston, Texas.

WESTMARK. In June 1995, the Company acquired Westmark, a Los Angeles,
California-based investment management and advisory business with
approximately $3.0 billion of assets under management. The purchase price for
Westmark was $37.5 million plus $2.9 million in net liabilities assumed and an
additional $1.0 million in costs related to the acquisition, with $20.0
million financed by the sellers, $10.0 million financed by a venture capital
affiliate of a national bank and $7.5 million paid in cash by the Company. The
sellers are also entitled to receive up to an additional $18.0 million of
purchase price over a six-year period based upon Westmark's adjusted operating
income. By early 1996, the Company had combined its $880.0 million investment
management and advisory business with that of Westmark to create a company
with over $3.8 billion in tax-exempt assets under management. The Westmark
acquisition gives the Company the opportunity (subject to various self-dealing
prohibitions for assets subject to the Employment Retirement Income Security
Act ("ERISA")) to enhance its brokerage, property management, and loan
origination businesses, and has moved the Company into a significant position
in a business area which the Company believes has the potential for
significant growth and high margins.

LANGDON RIEDER. In April 1995, the Company acquired Langdon Rieder, a
nationally-known tenant representation firm based in Los Angeles, California,
for $1.5 million in cash, plus other consideration. This acquisition enhanced
the Company's ability to provide sophisticated services to tenants similar to
those services it had historically provided to landlords. Langdon Rieder has
been combined with the Company's CBC/Madison Advisory Group, enhancing the
Company's corporate services capabilities.

The Company expects to accelerate its acquisitions program over the next
several years and will focus on acquisitions in its mortgage banking, property
management, and investment management and advisory businesses. The Company
will also consider opportunistic acquisitions for its brokerage and investment
properties businesses. Based upon its historical experience, the Company
believes that seller financing generally will provide 40% to 50% of the
purchase price for an acquisition, with the balance financed from third-party
borrowings and internally generated cash flow.

Because of the substantial non-cash goodwill and intangible amortization
charges incurred by the Company in connection with acquisitions subject to
purchase accounting and because of interest expense associated with
acquisition financing, management anticipates that future acquisitions may
adversely affect net income. In addition, during the first six months
following an acquisition, the Company believes there are generally significant
one-time costs relating to integrating information technology, accounting and
management services and rationalizing personnel levels. Management's strategy
is to pursue acquisitions that are expected to be accretive to EBITDA after
all integration costs.

THE COMPANY'S BUSINESSES

PROPERTY AND USER SERVICES

BROKERAGE

The Company has provided commercial real estate brokerage services since
1906 through the representation of buyers, sellers, landlords and tenants in
connection with the sale and lease of office space, industrial buildings,
retail properties, multifamily residential properties and unimproved land. The
Company believes that it is the largest provider of commercial real estate
brokerage services in the United States, based upon both 1995 total

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revenues, and the number of completed transactions, which totaled
approximately $294.3 million and approximately 19,800, respectively. In 1995,
brokerage facilitated over 2,500 sale transactions with an aggregate estimated
total consideration over $2.5 billion and approximately 17,500 lease
transactions involving aggregate rents, under the terms of leases facilitated,
of over $8.3 billion.

Brokerage services comprise the largest source of revenue for the Company
and provide a foundation for growing the Company's other disciplines which
make up its multi-discipline integrated commercial real estate services. The
Company believes that its position in the brokerage services industry provides
a competitive advantage for all of its lines of business by enabling them to
leverage off brokerage's (i) national network of relationships with owners and
users of commercial real estate, (ii) real-time knowledge of completed
transactions and real estate market trends, and (iii) brand recognition in the
brokerage area.

Operations. As of June 30, 1996 the Company employed approximately 1,650
brokerage professionals in 80 offices located in most of the largest MSAs in
the United States. The Company maintains a decentralized approach to brokerage
services, bringing significant local knowledge and expertise to each
assignment. Each local office draws upon the broad range of support services
provided by the Company's other business groups, including a national network
of market research, mortgage originations, client relationships and
transaction referrals which the Company believes provide it with significant
economies of scale over many local competitors.

Each brokerage services professional is carefully selected based upon
education, experience and knowledge of commercial real estate and receives on-
going training through centralized and local office education programs. The
Company believes that its market position provides a competitive advantage for
recruiting and retaining its employees. As of June 30, 1996, the average
tenure of sales professionals Property and User Services was over nine years.
Collectively, the Company's sales professionals only occupy approximately 73%,
on average, of the Company's available office space for sales professionals,
and substantive revenue growth can be generated without corresponding growth
in management and infrastructure costs through the hiring of additional
professionals.

In order to increase market share in its domestic brokerage business, the
Company recently announced a plan to establish "partnerships" with leading
local firms in order to institute geographic coverage in markets that
currently are not being served by the Company. To date, through the "CB
Commercial/Partners" program, the Company has identified approximately 80
markets on which it intends to focus during the next three years. To date, the
Company has established such a partnership-type arrangement in Pittsburgh,
Pennsylvania. Revenue anticipated from this program will be a combination of
fixed annual fees and a percentage of revenue in excess of a pre-agreed
threshold, comparable to a classic franchise program. This program requires
minimal capital outlay, and management believes it has an attractive profit
potential once the initial infrastructure is established.

Compensation. Under a typical brokerage services agreement, the Company is
entitled to receive sale or lease commissions. Sale commissions, which are
calculated as a percentage of sales price, are generally earned by the Company
at the close of escrow. Sale commissions range from approximately 0.5% to 5%
with the rate of commission declining as the price of the property increases.
Lease commissions, which are calculated as a percentage of the minimum rent
payable during the term of the lease, are generally earned by the Company at
the commencement of a lease and are not contingent upon the tenant fulfilling
the terms of the lease. In cases where a third-party brokerage firm is not
involved, lease commissions earned by the Company for a new lease typically
range between 2% and 6% of minimum rent payable under the lease depending upon
the value of the lease. For renewal of an existing lease, such fees are
generally 50% of a new lease commission. In sales and leases where a third-
party broker is involved, the Company must typically share 50% of the
commission it would have otherwise received with the third-party broker. The
Company's brokerage sales professionals typically receive 50% of the Company's
share of commissions before costs and expenses.

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INVESTMENT PROPERTIES

Since 1992, investment properties has provided sophisticated strategic
planning for, and execution of, acquisitions and sales of income-producing
properties for its clients. In 1995, the Company completed approximately 1,000
transactions which involved properties with an aggregate estimated value over
$4.0 billion, generating total revenues of $87.6 million, exceeding the
transaction volume of each of its major competitors, including investment
banking firms in the United States. Based upon these results, the Company
believes that it is the largest provider of commercial real estate investment
properties services in the United States. On behalf of property owners seeking
to dispose of investment properties, the Company strives to ensure that the
owner achieves the maximum value in the minimum amount of time by providing
services which include (i) accessing the Company's proprietary databases and
other information sources to provide real-time knowledge of available
properties, completed comparable transactions, real estate market trends, and
active investors in the market, and to assist with valuation and buyer
identification, and (ii) designing the appropriate marketing strategy that
allows the owner to target probable buyers or buyer categories. On behalf of
prospective investors, access to the same sources of information provides the
Company's clients with a competitive advantage by enabling the Company's
professionals (i) to identify the geographical areas and specific properties
which are most suitable for the investor and (ii) to advise investors in
negotiations and due diligence.

Operations. As of June 30, 1996, the Company employed approximately 280
investment properties professionals who exclusively handle acquisitions and
sales of investment properties and are located in 37 offices in most of the
largest MSAs in the United States. As of June 30, 1996, the average tenure of
brokerage and investment properties sales professionals with the Company was
over nine years.

A team of professionals with expertise within a given market and property
type is assembled for each investment properties assignment to best accomplish
the client's objectives. As necessary, the team may also include professionals
from the Company's other disciplines, such as financial consulting
professionals who provide sophisticated financial and analytical counseling to
clients involved in complex sale and lease transactions. This counseling is
accomplished by identifying cash flow, accounting and tax issues in order to
propose appropriate strategies for optimal financial results. These services
provide the client with in-depth analyses of transaction specific data as well
as real estate market data. Additionally, mortgage banking may be involved to
provide advice regarding available debt financing as well as the origination
of new debt.

Compensation. Under a typical investment properties agreement, the Company
is entitled to receive sale commissions, which are calculated as a percentage
of sales price and are generally earned by the Company at the close of escrow.
In cases where another real estate broker is not involved, sale commissions
earned by the Company typically range from 0.5% to 5% of the sales price, with
the rate of commissions generally declining as the sales price increases. In
cases where another firm is involved in the transaction, the Company must
typically share 50% of the commission it would have otherwise received with
the other firm. The Company's investment properties professionals typically
receive 50% of the Company's commission before costs and expenses.

CORPORATE SERVICES

Since 1992, the Company has provided corporate services through CBC/Madison
Advisory Group, assisting corporations in developing and executing multiple-
market real estate strategies. The Company's objective is to establish long-
term relationships with corporations that require continuity in the delivery
of high-quality, multi-market management services and strategic advisory
services including acquisition, disposition and consulting services. Global
competition, the focus on quality, "right-sizing" of corporate organizations
and changes in management philosophy have all contributed to an increased
interest in and reliance on outside third-party real estate service providers.
Specifically, through contractual relationships, the Company assists major,
multi-market companies in developing and executing real estate strategies as
well as addressing specific occupancy and facilities management objectives.
Corporate services coordinates the utilization of all the Company's various
disciplines to deliver an integrated service to its clients. Essentially,
Corporate Services expands a client's real

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estate department and performs most of the functions involved in a corporate
real estate department. The Company's clients include, as examples, the
following Fortune 500 companies -- Allstate Insurance Co. Inc., American
Express, Eastman Kodak Co. Inc., Ford Motor Company, General Motors Corp.,
Gillette Company Inc., Household International Inc., IBM, John Hancock Mutual
Life Insurance Co. Inc., McDonald's, Northwest Mutual, and Whirlpool Corp.

Operations. CBC/Madison Advisory Group is organized into three geographic
regions in the Eastern, Western and Central areas of the United States, with
each geographic region comprised of consulting, corporate services and team
management professionals who provide corporate service clients with a broad
array of financial, real estate, technological and general business skills. In
addition to CBC/Madison Advisory Group's objective of providing a full range
of corporate services in a contractual relationship, the group will respond to
client requests generated by other Company business groups for significant,
single-assignment acquisition, disposition and consulting assignments that may
lead to long-term relationships.

Compensation. A typical corporate services agreement gives the Company the
right to execute some or all of the client's future sales and leasing
transactions. The commission rate with respect to such transactions frequently
reflects a discount for the captive nature and large volume of the business.

Term. A typical corporate services agreement includes a stated term of at
least one year and normally contains provisions for extensions of the
agreement. Agreements typically include a provision for cancellation by either
party, upon notice, within a specified short time frame.

PROPERTY MANAGEMENT

The Company provides value-added property management services for income-
producing properties owned primarily by institutional investors and, as of
June 30, 1996, managed approximately 102 million square feet of commercial
space.

According to Commercial Property News' 1996 annual survey of property
managers, the Company's property management business was ranked the tenth
largest in the United States based on square footage under management.
Property management services include maintenance, marketing and leasing
services for investor-owned properties. Additionally, the Company provides
construction management services, which relate primarily to tenant
improvements. The Company works closely with its clients to implement their
specific goals and objectives, focusing on the enhancement of property values
through maximization of cash flow. The Company markets its services primarily
to long-term institutional owners of large commercial real estate assets. The
Company's property management clients include Allstate Insurance Co. Inc., AMB
Institutional Realty Advisors
Inc., Catellus Real Estate Group, Citicorp, The Equitable Life Assurance
Society of the United States, GE Capital Investment Advisors, Prudential
Insurance Company of America, Inc., Metropolitan Life Insurance Co., Westmark
Realty Advisors L.L.C. and The Yarmouth Group, Inc.

Operations. The Company employs approximately 120 property management
professionals in 30 offices. Most property management services are performed
by management teams located on-site or in the vicinity of the properties they
manage. This provides property owners and tenants with immediate and easily
accessible service enhancing client awareness of manager accountability. All
personnel are extensively trained and are encouraged to continue their
education through both Company-sponsored and outside training. The Company
provides each local office with centralized corporate resources including
investments in computer software and hardware as described below under the
caption "Information Technology." Property management personnel utilize state-
of-the-art computer systems for accounting, marketing, and maintenance
management. The Company believes that these investments in technology
represent a competitive advantage for (i) accumulating and synthesizing
property data from multiple locations into customized financial and operating
reports required by clients, and (ii) providing its services on a cost
effective basis relative to smaller competitors by spreading these fixed costs
over its large revenue base.

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Compensation. Under a typical property management agreement, the Company
will be entitled to receive management fees and lease commissions. The
management fee in most cases is based upon a formula which gives the Company a
specified percentage of the monthly gross rental income collected from tenants
occupying the property under management and, as a result, will increase and
decrease as building rents and occupancies increase and decrease. Many of
these property management agreements also include a stated minimum management
fee. The Company also may be entitled to reimbursement for costs incurred that
are directly attributable to management of the property. Reimbursable costs,
which are not included in the Company's revenue, include the wages of on-site
employees and the cost of field office rent, furniture, computers, supplies
and utilities. The Company pays its property management professionals a
combination of salary and incentive-based bonuses. Lease commissions, which
are paid in addition to the management fee, are similar to those described for
brokerage services. Revenue from leasing services provided to the Company's
property management clients are reflected in brokerage rather than property
management revenue since brokerage professionals are normally engaged to
accomplish the leasing.

Term. A typical property management agreement contains an evergreen
provision which provides that the agreement remains in effect for an
indefinite period, but enables the property owner to terminate the agreement
upon 30 days prior written notice, which the Company believes to be customary
in the commercial real estate industry. As of June 30, 1996, the average
duration of the Company's tenure as property manager for properties under
contract was approximately 4.5 years.

REAL ESTATE MARKET RESEARCH

Real estate market research services are provided by eight professionals in
Boston, Massachusetts employed by CB Commercial/Torto Wheaton Research. Real
estate market research services are provided to the Company's internal clients
as well as sold to third-party clients and include (i) data collection and
interpretation, (ii) econometric forecasting, and (iii) evaluating marketing
opportunities and portfolio risk for institutional clients within and across
U.S. commercial real estate markets. The Company's publications and products
provide real estate data for more than 50 of the largest MSA's in the United
States and are sold on a subscription basis to many of the largest portfolio
managers, insurance companies and pension funds in the United States.

INVESTOR SERVICES

MORTGAGE BANKING

The Company provides its mortgage origination and loan servicing through
L.J. Melody, which was acquired in July 1996 and is based in Houston, Texas.
The Company, on a combined basis, originated $2.5 billion, $2.0 billion and
$1.1 billion of loans in 1995, 1994 and 1993, respectively, on a combined
basis including originations by the Company prior to its acquisition of L.J.
Melody. As part of these origination activities, the Company has special
conduit arrangements with affiliates of Merrill Lynch & Co., Citicorp, and
Lehman Brothers which permit it to service the loans which it originates, and
is currently negotiating a similar arrangement with an affiliate of
NationsBank. Under these arrangements, the Company generally originates loans
in its name, makes certain representations and warranties based upon
representations made to it by the borrower or another party and immediately
sells them into a conduit program. The Company also originates loans into
other conduit programs where it does not have servicing rights. In addition,
the Company is a major loan originator for insurance companies having
originated on a combined basis, loans in the names of the insurance companies
valued at $1.6 billion in 1995. The Company has correspondency arrangements
with various life insurance companies which entitle it to service the loans it
originates. As of December 31, 1995, 1994 and 1993, the Company, on a combined
basis with L.J. Melody, serviced loan portfolios of $7.3 billion, $7.1 billion
and $6.3 billion, respectively. Based upon available statistics, the Company
believes that it is the largest independent commercial loan originator, in
general, as well as through conduits, in the United States. As of December 31,
1995, the Company was, on a combined basis, the eighth largest commercial loan
servicer in the United States. The Company's life insurance and pension plans
clients on whose behalf it both originates and services loans

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include AETNA, Allstate Life Insurance Co., CIGNA, Lincoln National Life,
Massachusetts Mutual Life, Phoenix Home Life, New York State Teachers'
Retirement System, State of Wisconsin Investment Board, and Teachers'
Retirement System of Texas. For 1995, CIGNA accounted for approximately 32.6%
of the Company's loan origination business on a combined basis.

Operations. The Company employs approximately 43 mortgage banking
professionals in 21 offices in the United States. The Company's mortgage
banking loan originations take place throughout the United states, with
support from L.J. Melody's headquarters in Houston, Texas. All of the
Company's loan servicing is handled by L.J. Melody in Houston, Texas. The
Company believes that the L.J. Melody acquisition will give it a significant
competitive advantage in the mortgage origination business due to the
anticipated integration with the deal flow generated through the Company's
brokerage and investment properties sales activities. This integration will
not only provide competitive advantages to mortgage banking, but will also
facilitate sales transactions, enhancing the Company's capability to execute
clients' sales assignments. In 1995, less than 10% of the Company's property
sales were financed by its commercial loan origination capabilities.

Compensation. The Company typically receives origination fees, ranging from
0.5% for large insurance company loans to 1.0% for most conduit loans. In
situations where the Company services the loans which it originates, it also
receives a servicing fee between .06% and .25%, calculated as a percentage of
the outstanding loan balance. These agreements generally contain an evergreen
provision with respect to servicing which provides that the agreement remains
in effect for an indefinite period, but enables the lender to terminate the
agreement upon 30 days prior written notice, which the Company believes to be
a customary industry termination provision. Approximately 55.5% of the
Company's 1995 loan origination revenue, on a combined basis, was from
agreements which entitle it to both originate and service loans. The Company
also originates loans on behalf of conduits and insurance companies for whom
it does not perform servicing. In 1995, approximately 44.5% of its revenues,
on a combined basis, were attributable to such originations. The Company's
client relationships have historically been long-term. The Company pays its
mortgage banking professionals a combination of salary, commissions and
incentive-based bonuses which average between 46% and 49% of the Company's
loan origination fees.

INVESTMENT MANAGEMENT AND ADVISORY

The Company provides its investment management and advisory services
primarily to tax-exempt corporate and public pension funds through Westmark.
Since 1971, the Company has provided its clients with investment management
and advisory services, including the creation of investment products, raising
of investor capital, identification and acquisition of specific properties and
management and disposition of the assets. Currently, the Company represents
more than 180 clients in twelve commingled funds and a variety of separate
accounts. Westmark separate account clients include the AFL-CIO Building
Investment Trust, Alaska Permanent Fund Corporation, AT&T Telephone Real
Estate Equity Trust, California Public Employees' Retirement System (CALPERS),
California State Teachers' Retirement System (CALSTRS), Delta Air Lines, Dow
Chemical Company, Eastman Kodak Retirement Income Plan, Employees' Retirement
Plan Trust, Honeywell, Inc., Hughes Aircraft Company Retirement Plan, Master
Trust Fund and Utah State Retirement Fund.

Operations. Westmark operates as a separate and independent subsidiary of
the Company, providing advisory services and managing approximately $3.8
billion in tax-exempt capital invested in more than 220 office, industrial and
retail properties located in 40 major U.S. markets with an aggregate of more
than 40 million square feet. Westmark's headquarters are located in Los
Angeles and it maintains regional offices in Boston, Atlanta, Dallas, New York
City, and Washington D.C. Westmark develops and markets a variety of
investment alternatives designed to meet its client's risk, reward, and
liquidity requirements. Westmark employs 140 professionals who perform the
following services for its investors -- market research and forecasting,
acquisition strategy and implementation, portfolio strategy and management,
specific asset management, and development and dispositions. Westmark uses a
state-of-the-art portfolio information system that integrates property and
fund-level accounting with specific asset management data.

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Westmark's investors invest through separate accounts, commingled funds, and
real estate operating companies, including limited partnerships. Certain funds
and separate accounts are subject to ERISA regulations and, with respect to
such funds and accounts, Westmark is limited in its ability to employ any
affiliated company, including the Company. Potential conflicts must be
resolved in accordance with ERISA rules to avoid ERISA violations, and
Westmark maintains both internal and external control mechanisms to manage
these issues. The Company's brokerage, property management, mortgage
origination and servicing, and investment properties services are Westmark's
largest service providers, and the interaction of the companies is believed to
be beneficial to the Westmark investors.

Compensation. Westmark's fees are typically higher for managing commingled
and other funds than they are for separate accounts, but all of the fees are
within the ranges indicated below. Westmark receives an annual asset
management fee which is typically 0.5% to 1.2% of the lower of the cost of the
assets managed or their fair market value. When debt is managed, the asset
management fee is at the lower end of the range. Westmark also receives an
acquisition fee when it acquires property or places debt on behalf of a client
that is typically 0.5% to 1.0% of funds invested or debt placed (the placement
fee for debt is at the low end of this range). In some, but not all cases,
Westmark receives an incentive fee when an asset or a fund is sold. Typically,
the incentive fee will only be payable after the client has achieved a real
(adjusted for inflation) rate of return of 8% to 12% and is a percentage of
value in excess of that return.

Term. The term of Westmark's advisory agreements vary by the form of
investment vehicle utilized. In the commingled funds, the term is generally 10
years with extension provisions based upon a vote of the investors. In the
Company's separate account relationships, the agreements are generally one to
three years in term, with "at will" termination provisions. In general, both
the capital managed by Westmark and its client relationships are long-term in
nature.

VALUATION AND APPRAISAL SERVICES

The Company's valuation and appraisal services business delivers
sophisticated commercial real estate valuations through a variety of products
including market value appraisals, portfolio valuations, discounted cash flow
analyses, litigation support, feasibility land use studies and fairness
opinions. The Company's appraisal staff has more than 80 professionals with
more than 50% of the staff holding the Member of Appraisal Institute ("MAI")
professional designation. The business is operated nationally through 21
regional offices and its clients are generally corporate and institutional
portfolio owners. The Company believes it is among the leading real estate
appraisal firms on the basis of revenues generated in 1995.

INTERNATIONAL ALLIANCES AND ACTIVITIES

In response to growing cross-border capital flows for investment in
commercial real estate, and the multinational strategies of the Company's U.S.
corporate clients, the Company has developed exclusive alliances with leading
firms in various countries in Europe, the Far East and Southeast Asia,
Australia and New Zealand. The relationships with DTZ, a consortium of 23 real
estate advisory firms operating in 15 countries in Europe, as well as
Australia and New Zealand, and C. Y. Leung & Company, a locally-owned firm
operating in China, Singapore, and Malaysia, have allowed the Company to
provide global corporate service capabilities and significantly strengthen its
client relationships in the United States. Representative international
clients include Blockbuster Videos Entertainment Corp., Coca-Cola Co. Inc.,
Tenneco, U. S. Robotics Corp. and Westinghouse Electric Corp. Revenues from
the Company's international activities currently represent a small portion of
total revenues. In addition to cross-border corporate space acquisition and
disposition activity, Westmark is exploring the development of new cross-
border investment products with DTZ and C.Y. Leung.

INFORMATION TECHNOLOGY

In order to enhance the quality of its real estate services and improve the
productivity of its employees, the Company has invested in state-of-the-art
computer and telecommunication systems to provide real-time real

45
<PAGE>

estate information and sophisticated presentation and analysis tools. The
Company's information technology group ("IT Group"), headquartered in
Torrance, California, employs 40 professionals that operate the Company's data
center, develop custom programs, implement special systems software, and
provide support for hardware and software utilized in the Company's national
network of offices.

The Company has adopted computer hardware and software standards to maintain
the consistency and quality of its real estate services. Each office is
connected directly to the Company's IBM mainframe computer for real-time
access to the Company's centralized databases and customized software
applications. The Company also utilizes PeopleSoft's client server financial
applications on a Sun/Oracle platform to support its accounting functions.
Each evening all data is backed up to tape and stored off-site. The Company's
disaster recovery services, including a "hot site," are provided by Comdisco
Disaster Recovery Services, Inc.

The Company believes that it maintains the nation's largest database of
commercial properties in the United States. The CB Commercial proprietary
property information database contains over 20 years of comprehensive data on
over 4.2 billion square feet of office space, nearly 11.0 billion square feet
of industrial space and over 2.2 billion square feet of retail space,
comprised of approximately 220,000, 400,000 and 28,000 buildings,
respectively. Nearly 150 information services coordinators, researchers, and
analysts located throughout the United States and over 2,000 of the Company's
real estate professionals support the centralized, real-time information
gathering activities. The Company also purchases commercial real estate data
from third parties.

LANs, connected to the Company's wide area network (WAN) through Frame
Relay, provide the Company's professionals with direct and simultaneous access
to current market information and industry-specific software applications that
synthesize complex and comprehensive information into charts, spreadsheets and
presentations. Products and systems available to the Company's professionals
include: (i) "virtual" property tours which incorporate demographics,
pictures, floor plans and sound providing current information on properties
located throughout the United States, (ii) standardized financial analyses and
presentation of multiple lease scenarios to compare total occupancy costs,
(iii) tracking of owned and leased property information, including
photographs, locator maps and site/floor plans, (iv) transaction management
for a corporate multi-market real estate portfolio to coordinate, facilitate,
and expedite acquisition, disposition and consulting requirements and, (v)
centralized property management data bases with an array of management,
valuation, accounting and reporting applications.

Mobile computing with remote, on-line access to the Company's databases and
software applications is available to the Company's professionals. By special
arrangement, some of the Company's clients have remote modem access to
selected client-customized software applications. The CB Commercial Web Site
has also given clients direct access through the CB Internet home page. These
systems allow clients to gain access to various levels of information,
maintain day-to-day contact with the Company's professionals, and track and
monitor property acquisition and disposition activities and property
portfolios.

EMPLOYEE EDUCATION

In 1991, the Company founded its training program, known as CB Commercial
University ("CBCU") to provide professional development and industry training
for its key professional employees. CBCU is distinguished in the industry for
its quality, intensity, scope and results. Through CBCU and its professional
education department, the Company currently offers 35 training programs and
courses. The courses offered at CBCU are typically one week in length and are
customized to meet both employees' and clients' needs and skill levels.
Courses focus on (i) employees' productivity and quality consistency; (ii)
management leadership and effectiveness in the context of the latest industry
knowledge and technology; and (iii) clients' needs in the Company's various
business lines and specialty practice areas. Although CBCU was originally
established to develop the skills of the Company's employees, in 1995 in
response to demand from its clients, in 1995 the Company added courses to the
CBCU curriculum which involve its clients. In 1995, more than 450 employees
and clients took courses at CBCU.

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<PAGE>

COMPETITION

The market for commercial real estate brokerage and other real estate
services provided by the Company is both highly fragmented and highly
competitive. Thousands of local commercial real estate brokerage firms and
hundreds of regional commercial real estate brokerage firms have offices in
the United States. The Company believes that no more than two other major
firms have the ability to compete nationally with the Company's brokerage
business, and that the Company's national brokerage network enables it to
compete effectively with these organizations. Most of the Company's
competitors are local or regional firms that are substantially smaller than
the Company on an overall basis, but in some cases, may be larger locally.

L.J. Melody competes with a large number of mortgage banking firms and
institutional lenders as well as regional and national investment banking
firms and insurance companies in providing its mortgage banking services.
Appraisal services are provided by other national, local and regional
appraisal firms and national and regional accounting firms. Consulting
services are provided by numerous commercial real estate firms (national,
regional and local), accounting firms, appraisal firms and others. Westmark
competes with investment advisory firms, insurance companies and other real
estate investment advisors.

The Company's property management business competes for the right to manage
properties controlled by third parties. The competitor may be the owner of the
property (who is trying to decide the efficiency of outsourcing) or another
property management company. Increasing competition in recent years has
resulted in having to provide additional services at lower rates through
eroding margins. In 1996, however, rates have stabilized and in some cases
increased.

In all of its business disciplines, the Company competes on the basis of the
skill and quality of its personnel, the variety of services offered, the
breadth of geographic coverage and the quality of its infrastructure,
including technology. See "Risk Factors--Competition."

EMPLOYEES

As of June 30, 1996, the Company had approximately 4,000 employees,
approximately 73% of whom work in the areas of brokerage and investment
properties. All of the Company's sales professionals are parties to contracts
with the Company which subject them to the Company's rules and policies during
their employment, and limit their post-employment activities in terms of
soliciting clients or employees of the Company. The Company believes that
relations with its employees are good.

FACILITIES

The Company owns its headquarters building in downtown Los Angeles,
California. In addition to the Company's headquarters, the Company owns and
occupies three smaller office buildings in Phoenix, Arizona, San Diego and
Carlsbad, California. These properties are mortgaged to secure loans to the
Company.

The Company also leases office space on terms that vary depending on the
size and location of the office. The leases expire at various dates through
2005. For those leases that are not renewable, the Company believes there is
adequate alternative office space available at acceptable rental rates to meet
its needs.

LEGAL PROCEEDINGS

As a result of the thousands of transactions in which the Company
participates and its employment of almost 4,000 people, it is a party to a
number of pending or threatened lawsuits, arising out of or incident to the
ordinary course of its business. At any given time, the Company typically is a
defendant in 150 to 175 legal proceedings and a plaintiff in 50 to 100 legal
proceedings. The Company believes that any liability that may result from
these proceedings will not have a material adverse effect on its consolidated
financial position or results of operation.

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<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
James J. Didion......... 56 Chairman of the Board and Chief Executive Officer
Gary J. Beban........... 50 President/Director
David A. Davidson....... 61 Senior Executive Vice President, Chief Financial Officer and
Treasurer
Thaddeus W. Jones....... 54 Senior Executive Vice President/Senior Executive Director--
CBC/Madison Advisory Group
George J. Kallis........ 53 Senior Executive Vice President--Brokerage Western U.S./ Director
Charles O. McBride, Jr.. 54 Senior Executive Vice President/Chief Operating Officer--
Property Management Services
Jeffrey S. Morgan....... 41 Senior Vice President/Director
Ronald J. Platisha...... 49 Executive Vice President and Principal Accounting Officer
Richard A. Pogue........ 53 Senior Executive Vice President--Brokerage/Director
Kenneth D. Sandstad..... 50 Senior Executive Vice President--Brokerage Eastern U.S.
Walter V. Stafford...... 56 Senior Executive Vice President and General Counsel
John L. Stanfill........ 54 President--CB Commercial Investment Properties
Richard C. Clotfelter... 58 President--Westmark Realty Advisors L.L.C./Director
Lawrence J. Melody...... 58 President--L.J. Melody & Company/Director
Stanton D. Anderson(2).. 55 Director
Richard C.
Blum(1)(2)(3).......... 60 Director
Frank C. Carlucci....... 65 Director
Daniel A. D'Aniello(2).. 50 Director
Hiroaki Hoshino......... 54 Director
Takayuki Kohri.......... 44 Director
Paul C. Leach(2)........ 51 Director
Frederic V. Malek(1)(3). 59 Director
Peter V. Ueber-
roth(1)(3)............. 58 Director
Gary L. Wilson(1)(3).... 56 Director
</TABLE>
- --------
(1) Member of Compensation Committee of the Board of Directors.
(2) Member of Audit Committee of the Board of Directors.
(3) Member of Acquisition/Investment Committee of the Board of Directors

James J. Didion. Mr. Didion has been Chairman and Chief Executive Officer of
CB Commercial since January 1987 and a Director since the Company's
incorporation. Previously, he served as President of CB Commercial Real Estate
Group, Inc., following a career of almost 24 years in sales and management
positions in the commercial brokerage operations of CB Commercial Real Estate
Group, Inc. Mr. Didion is a trustee and member of the Urban Land Institute. He
is also a member of the National Realty Committee and was Chairman of the
National Realty Committee from 1993 through June 1996. Mr. Didion holds an
A.B. degree from the University of California, Berkeley.

Gary J. Beban. Mr. Beban has been the President of the Company since May
1995 and a Director since 1989. He joined the Company's Los Angeles office in
1970 as an industrial and investment properties specialist and thereafter
served in several management positions in Chicago. He is a member of the
Industrial Development Research Council and the National Realty Committee. Mr.
Beban serves on the Board of Directors of The First American Financial
Corporation and its wholly-owned subsidiary, First American Title Insurance
Company. Mr. Beban holds a B.A. degree from the University of California, Los
Angeles.

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<PAGE>

David A. Davidson. Mr. Davidson has been Senior Executive Vice President,
Chief Financial Officer and Treasurer of the Company since November 1992. From
February 1991 to November 1992, he served as Executive Vice President and from
July 1990 to February 1991 was Senior Vice President. Mr. Davidson joined the
Company as Vice President, Treasurer and Assistant Secretary in June 1989.
During 1987 and 1988 he was Executive Vice President and Chief Operating
Officer of Nationwide Health Properties, a real estate investment trust.
Subsequently, he served as Executive Vice President of Corporation Operations
and Chief Financial Officer for Voluntary Hospitals of America, an alliance of
not-for-profit hospitals located in Dallas, Texas. From 1981 to 1987, Mr.
Davidson was Vice President, Treasurer of Beverly Enterprises, a provider of
health care services. Mr. Davidson holds a B.S. degree and a Masters of
Accountancy degree from Brigham Young University.

Thaddeus W. Jones. Mr. Jones has been Senior Executive Vice President of the
Company and Senior Executive Director of CBC/Madison Advisory Group since
1994, after having served as Executive Director--CBC/Madison Advisory Group
from 1992 to 1994. From 1986 to 1992 Mr. Jones was President of CB Commercial
Realty Advisors and from 1984 to 1986 he was a Senior Vice President, after
having served in various management positions in the Company's brokerage
business. Mr. Jones rejoined CB Commercial in 1982 after leaving in 1979.
Mr. Jones holds a B.S. degree from the University of California, Los Angeles.

George J. Kallis. Mr. Kallis has been the Company's Senior Executive Vice
President--Brokerage Western U.S. since 1992 and a Director of the Company
since 1995. Prior to that time, he served as Executive Vice President from
1991 to 1992 and as Senior Vice President and Regional Manager--Brokerage from
1988 to 1991. Mr. Kallis joined the Company in 1977. Mr. Kallis is a member of
the International Council of Shopping Centers and the Urban Land Institute and
is on the Board of Directors of the Los Angeles County Economic Development
Council. Mr. Kallis holds a B.S. degree in Business Administration from the
University of Maryland.

Charles O. McBride. Mr. McBride has been Senior Executive Vice President of
the Company and Chief Operating Officer--Property Management Services since
April 1991. He joined the Company in 1989 as Executive Vice President/Chief
Operating Officer--Property Management Services. Mr. McBride was a senior
officer with PM Realty Group, a national real estate management and services
company, from 1971 to 1989, serving as Executive Vice President from 1981 to
1989. Mr. McBride holds a B.A. degree from the University of Texas.

Jeffrey S. Morgan. Mr. Morgan has been a Senior Vice President of the
Company since 1991 and a Director of the Company since 1995. He joined the
Company in 1978 and is a specialist in industrial properties. He has been
named to the Company's Colbert Coldwell Circle (representing the top three
percent of the Company's sales force) for five of the last nine years. In 1994
he was awarded the William H. McCarthy Award, the highest honor awarded
producing professionals within the Company. Mr. Morgan holds a B.S. degree in
Marketing from California State University (Northridge).

Ronald J. Platisha. Mr. Platisha has been the Company's Executive Vice
President and Principal Accounting Officer since 1992. Mr. Platisha was
promoted to Senior Vice President in 1991, after serving as First Vice
President and Controller from 1982 to 1991. Mr. Platisha joined the Company in
1976. Mr. Platisha holds a B.S. degree from California State University
(Long Beach).

Richard A. Pogue. Mr. Pogue has been the Company's Senior Executive Vice
President--Brokerage since 1994 and a Director of the Company since 1995. From
1992 to 1994, he served as the Company's Senior Vice President--Investment
Properties. From 1984 to 1992, he was Division President of The Koll Company,
a real estate investment and development company. Mr. Pogue originally joined
the Company in 1971. Mr. Pogue is a member of the National Realty Committee
and Urban Land Institute. Mr. Pogue holds a B.A. degree from the University of
Oklahoma.

Kenneth D. Sandstad. Mr. Sandstad has been the Company's Senior Executive
Vice President--Brokerage Eastern U.S. since 1991. Prior to that time, he
served as Division Manager--Brokerage from 1990 to 1991,

49
<PAGE>

having been promoted from Regional Manager--Brokerage and Senior Vice
President, a position he had held since 1986. Mr. Sandstad joined the
Company's Minneapolis office in 1974 in the brokerage division. Mr. Sandstad
received a B.A. degree from St. Olaf College and a J.D. degree from the
University of Minnesota.

Walter V. Stafford. Mr. Stafford has served as Senior Executive Vice
President and General Counsel of the Company since 1995. Mr. Stafford was a
partner at the law firm Pillsbury Madison & Sutro LLP from 1988 to 1995 and
from 1973 to 1982. From 1982 to 1988 he was Senior Vice President and General
Counsel at Diasonics, Inc., a medical device manufacturer, and from 1982 to
1994 he was a director of that company. Mr. Stafford holds a B.A. from the
University of California (Berkeley) and an L.L.B. degree from Boalt Hall.

John L. Stanfill. Mr. Stanfill is President of CB Commercial Investment
Properties. Previously, he was Managing Director--Special Investments, a
position he was appointed to when he rejoined the Company in 1990 after
founding a real estate investment banking firm in 1979. From 1976 to 1979, Mr.
Stanfill served as Vice President of Investment Marketing of the Company. He
originally joined the Company in 1971. Mr. Stanfill holds a B.A. in English
Literature from the University of California, Los Angeles.

Richard C. Clotfelter. Mr. Clotfelter was elected Chairman and President,
Westmark Realty Advisors, an indirect wholly-owned subsidiary of the Company
in 1995, and has been a Director of the Company since 1993. Mr. Clotfelter
joined the Company in 1983 as President--Capital Markets, Asset Valuation and
Management Activities. From April 1977 through 1982, he was President of
Prescott, Inc., a real estate development and management company.
Mr. Clotfelter is on the Board of Directors of The Commerce Bancorporation.
Mr. Clotfelter is also a member of the Urban Land Institute, serving on its
Urban Development/Mixed Used Council.

Lawrence J. Melody. Mr. Melody has served as a Director since August 1996.
He is also Chairman of the Board and President of L.J. Melody & Company which
he founded in February 1978. He is a member of the International Council of
Shopping Centers, the Urban Land Institute (a member of the Multifamily
Council), the Pension Real Estate Association, the National Association of
Industrial and Office Parks, the National Multi Housing Council, as well as
other professional organizations. He is a member of Board of Trustees of the
Mortgage Bankers Association of America and past President and Director of the
Texas Mortgage Bankers Association, who awarded him their Distinguished
Service Award in 1995. Mr. Melody holds a B.A. degree from University of Notre
Dame.

Stanton D. Anderson. Mr. Anderson has been a Director of the Company since
1989. In 1995, he became counsel to the law firm of McDermott, Will & Emery.
Prior to 1995, Mr Anderson was a founding partner in the law firm of Anderson,
Hibey & Blair. He is also a founder of Global USA, Inc. an international
consulting company, where he serves as Chairman and President. He also served
as Deputy Director of the Republican Convention in 1980, 1984 and 1988. He
also served as counsel to the Reagan-Bush Campaign in 1980 and a Director of
the 1980 Presidential Transition. Mr. Anderson serves on the Board of
Directors of International Management & Development Group, Ltd. Mr. Anderson
holds a B.A. degree from Westmont College and a J.D. degree from Willamette
University School of Law.

Richard C. Blum. Mr. Blum has been a Director of the Company since 1993. He
is the Chairman and President of Richard C. Blum & Associates, L.P., a
merchant banking firm he founded in 1980. Mr. Blum is a member of the Board of
Directors of National Education Corporation; Sumitomo Bank of California;
Triad Systems Corporation; Northwest Airlines Corporation; and URS
Corporation. Mr. Blum also serves as Vice Chairman of URS Corporation.

Frank C. Carlucci. Mr. Carlucci has been a Director of the Company since
1989. In 1993, Mr. Carlucci became Chairman of The Carlyle Group, a merchant
banking firm where he had served as Vice Chairman since 1989. From 1987 to
1989, Mr. Carlucci served as the Secretary of Defense. From 1986 to 1987, Mr.
Carlucci was Assistant to the President for National Security Affairs. From
1983 to 1986, Mr. Carlucci served as Chairman and Chief Executive Officer of
Sears World Trade. Mr. Carlucci is on the Board of Directors of Ashland Oil,
Inc.; BDM International, Inc.; Bell Atlantic Corporation; General Dynamics
Corporation; Kaman Corporation; Neurogen Corporation; Northern Telecom, Ltd.;
The Quaker Oats Company; Sun Resorts, Ltd.,

50
<PAGE>

N.V.; Texas Biotechnology Corporation; Pharmacia & Upjohn, Inc.; and
Westinghouse Electric Corporation. Mr. Carlucci holds an A.B. degree from
Princeton University.

Daniel A. D'Aniello. Mr. D'Aniello has been a Director of the Company since
1989. He has served as Managing Director of The Carlyle Group, a merchant
banking firm since May 1987. From 1986 through April 1987, Mr. D'Aniello was
Vice President--Finance and Development of Marriott Inflite Services, Inc., a
subsidiary of Marriott Corp. Mr. D'Aniello is on the Board of Directors of GTS
Duratek, Inc. Mr. D'Aniello holds a B.S. degree from Syracuse University and
an M.B.A. from the Harvard University Graduate School of Business.

Hiroaki Hoshino. Mr. Hoshino has been a Director of the Company since 1984.
Previously, he served as Senior Vice President, Treasurer and Chief Financial
Officer of Kajima International, Inc. from April 1987 to March 1990 and as
Senior Vice President and Chief Financial Officer of that company from April
1990 to March 1991. From April 1991 to March 1993, he served as Executive Vice
President and Chief Financial Officer of Kajima International Inc. Since April
1991, he has served as the Chief Financial Officer and since April 1993 he has
been Executive Vice President and Chief Financial Officer of Kajima U.S.A.
Inc. Since September 1992, he has been Executive Vice President, Chief
Financial Officer and a director and since April 1996 he has been President,
Chief Executive Officer and Chief Financial Officer of Kajima Capital of
America, Inc. Mr. Hoshino holds a B.A. degree from Gakushuin University.

Takayuki Kohri. Mr. Kohri has been a Director of the Company since 1989.
Previously, he was Assistant Manager of Sumitomo Real Estate Sales in Japan
from 1984 to August 1988. From August 1988 to July 1993, he was an Executive
Vice President of Sumitomo Real Estate Sales L.A., Inc. Since July 1993, he
has been Deputy Manager of Sumitomo Real Estate Sales Japan, a real estate
sales and development firm. Mr. Kohri holds a B.A. degree in Economics from
Keio University.

Paul C. Leach. Mr. Leach has been a Director of the Company since August
1996. Since its founding in 1991, Mr. Leach has served as president of Paul
Leach & Company, a private investment banking firm in San Francisco which
specializes in international and domestic acquisitions and investments. He is
also Managing Director of The Lone Cypress Company, the owner of Pebble Beach
Company, and Managing Director of Rancho Cielo Company, a developer in Rancho
Santa Fe, California. From 1988 through 1991, Mr. Leach was a senior manager
and partner in the international merger and acquisition group at Deloitte &
Touche. Prior to 1988, he held several positions in San Francisco, including
serving as a partner with both Osterweis Capital Management and Centennial
Petroleum Company and manager of corporate development for Natomas Company.
From 1975 through 1977, Mr. Leach served as associate director of the Domestic
Council Staff at the White House during the Ford Administration. Mr. Leach
holds an A.B. degree from Dartmouth College and M.B.A. and J.D. degrees from
Stanford Graduate School of Business and Stanford Law School, respectively.

Frederic V. Malek. Mr. Malek has been a Director of the Company since 1989.
He currently serves as Chairman of Thayer Capital Partners, a merchant banking
firm he founded. He was President of Marriott Hotels from 1981 through 1988
and was Executive Vice President of Marriott Corp. from 1978 through 1988. He
was Senior Advisor to The Carlyle Group, a merchant banking firm, from
November 1988 through December 1991. From September 1989 through June 1990, he
was President of Northwest Airlines and from June 1990 until December 1991 he
served as Vice Chairman of Northwest Airlines. From December 1991 through
November 1992, Mr. Malek was Campaign Manager, Bush/Quayle '92. He also serves
on the Board of Directors of American Management Systems, Inc.; Automatic Data
Processing Corp.; Avis, Inc.; FPL Group Inc.; ICF Kaiser Inc.; Intrav, Inc.;
Manor Care, Inc.; National Education Corp.; Northwest Airlines Corporation;
and Paine Webber Funds. Mr. Malek holds a B.S. degree from the United States
Military Academy at West Point and an M.B.A. degree from the Harvard
University Graduate School of Business.

Peter V. Ueberroth. Mr. Ueberroth has been a Director of the Company since
1989. Since 1989, he has been an investor and Managing Director of Contrarian
Group, Inc., a business management company. From 1984 through 1989, he was the
Commissioner of Major League Baseball in the United States. Mr. Ueberroth is a
member of the Board of Directors of The Coca Cola Company; Ambassadors
International, Inc.; Doubletree Hotels Corp; and Transamerica Corporation.

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<PAGE>

Gary L. Wilson. Mr. Wilson has been a Director of the Company since 1989.
Since 1991, he has been a director and Co-Chairman of Northwest Airlines
Corporation. From 1985 until January 1990, Mr. Wilson was an Executive Vice
President and Chief Financial Officer and Director for The Walt Disney
Company. From 1974 until 1985, he was Executive Vice President and Chief
Financial Officer of Marriott Corporation. From January 1990 through December
1991, Mr. Wilson served as a Principal Advisor and remains a Director of The
Walt Disney Company. Mr. Wilson holds a B.A. degree from Duke University and
an M.B.A. from the Wharton Graduate School of Business and Commerce at the
University of Pennsylvania.

All directors are elected to hold office until the next annual meeting of
stockholders of the Company and until their successors have been elected.
Officers serve at the discretion of the Board of Directors. There are no
family relationships among any of the directors or executive officers of the
Company. See "Description of Capital Stock--The Recapitalization."

BOARD COMMITTEES; COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Effective upon the closing of the Offering, there will be three committees
of the Board of Directors: a Compensation Committee, an Audit Committee and an
Acquisition/Investment Committee. See "Description of Capital Stock--The
Recapitalization."

The Compensation Committee members are Messrs. Blum, Malek, Ueberroth and
Wilson, who are outside directors of the Company. This committee determines
the salary and incentive compensation, if any, of executive officers of the
Company whose annual base salary exceeds $300,000, may authorize employment
agreements with such officers, and in exceptional circumstances, may review
and approve compensation arrangements with other employees.

The members of the Audit Committee are Messrs. Anderson, Blum, D'Aniello and
Leach, who are outside directors of the Company. The purpose of the Audit
Committee is to recommend a firm of independent public accountants to be
appointed by the Board subject to stockholder ratification, review the
Company's annual consolidated financial statements and consult with the
representatives of the independent public accountant and the Chief Financial
Officer and Principal Accounting Officer with regard to the adequacy of
internal controls.

The Acquisition/Investment Committee members are Messrs. Blum, Malek,
Ueberroth and Wilson. The purpose of the Acquisition/Investment Committee is
to authorize the undertaking by the Company of definitive negotiations with
respect to any acquisition or investment that contemplates the issuance of any
class of the Company's stock or the aggregate cost of which is likely to
exceed $10 million.

DIRECTOR COMPENSATION

Each of the directors of the Company who is not also an executive officer is
entitled to receive a fee of $2,500 for attendance at each meeting of the
Board of Directors, $2,500 for attendance at each meeting of a board committee
which does not coincide with a Board of Directors meeting and an annual
retainer of $15,000. No director received compensation from the Company for
services as a director in excess of $27,500 in 1995. Non-employee directors
are reimbursed for their expenses for each meeting attended. In 1993, below
market options were granted to certain non-employee directors in partial
payment of directors' fees. See "Employee Benefit Plans."

52
<PAGE>

EXECUTIVE COMPENSATION

The following table summarizes all compensation paid to the Company's Chief
Executive Officer and to the Company's nine other most highly compensated
executive officers other than the Chief Executive Officer whose total annual
salary and bonus exceeded $100,000, for services rendered in all capacities to
the Company for each of the fiscal years in the three year period ended
December 31, 1995.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------------- ---------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL COMPEN- STOCK STOCK COMPEN-
POSITION YEAR SALARY(1) BONUS(2) SATION(3) AWARDS(4) OPTIONS SATION(5)
- ------------------ ---- -------- -------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
James J. Didion.........
Chairman of the Board 1995 $402,000 $279,160 $51,212 -- -- $1,520
and 1994 402,000 300,000 82,005 -- -- 1,105
Chief Executive Officer 1993 387,000 250,000 -- $90,000 -- 978
Gary J. Beban........... 1995 312,000 190,527 -- -- -- 1,520
President 1994 312,000 236,118 -- -- 10,000 273
1993 282,000 233,899 -- 60,000 -- --
Richard C. Clotfelter... 1995 262,000 174,475 -- -- -- --
President--Westmark 1994 237,000 123,192 3,506 32,500 20,000 --
Realty Advisors 1993(6) 194,334 106,671 -- 150,000 40,000 --
David A. Davidson.......
Senior Executive Vice
President, Chief 1995 237,000 109,919 19,295 -- -- 1,291
Financial Officer and 1994 222,000 112,660 16,032 -- 20,000 1,105
Treasurer 1993 197,000 72,730 -- 60,000 -- 978
Thaddeus W. Jones....... 1995 222,000 173,079 -- -- -- --
Senior Executive Vice 1994 222,000 177,259 -- -- 20,000 --
President 1993 222,000 140,514 -- -- -- --
Senior Executive
Director--
CBC/Madison Advisory
Group
George J. Kallis........
Senior Executive Vice 1995 212,000 153,538 8,770 -- -- --
President-- 1994 212,000 177,944 10,129 32,500 -- 747
Brokerage Western U.S. 1993 182,000 140,805 -- -- -- 876
Charles O. McBride...... 1995 206,479 134,345 5,722 -- -- 1,520
Senior Executive Vice 1994 201,000 137,735 4,760 -- -- 1,105
President/ 1993 195,750 76,366 -- -- -- 978
Chief Operating
Officer--
Property Management
Services
Richard A. Pogue........
Senior Executive Vice 1995 204,000 143,767 -- -- -- --
President-- 1994 189,708 158,780 4,431 97,500 40,000 --
Brokerage 1993 137,000 72,035 -- -- -- --
Kenneth D. Sandstad.....
Senior Executive Vice 1995 212,000 139,580 1,328 -- -- 1,520
President-- 1994 212,000 162,887 -- -- -- 1,105
Brokerage Eastern U.S. 1993 197,000 116,367 -- -- -- 978
John L. Stanfill........
President--CB 1995 209,600 142,581 -- -- -- --
Commercial 1994 202,000 146,485 -- 32,500 -- --
Investment Properties 1993 187,000 120,253 -- -- -- --
</TABLE>
- --------
(1) Includes base salary and automobile allowances.
(2) Bonus for each year is paid in the first quarter of the following year.
Pursuant to the Company's Deferred Compensation Plan, Mr. Didion elected
to defer his entire bonuses in 1993, 1994 and 1995, and

53
<PAGE>

Mr. Davidson and Mr. Kallis elected to defer all or a substantial portion
of their bonuses in 1994 and 1995. All such amounts were invested in shares
of the Company's Common Stock.
(3) Under the Company's Deferred Compensation Plan beginning in 1994, an
individual who defers an amount payable as bonus in the first 90 days of a
year for investment in shares of the Company's Common Stock is credited
with such shares based on the appraised value of such shares at the time
the election to defer is made. The amounts shown represent the difference
between the aggregate appraised value of such shares at the time the bonus
was paid and the aggregate appraised value of such shares at the time the
election to defer was made. The amounts shown relate to bonuses payable in
the first quarter of the following year. With respect to Mr. McBride, such
amounts reflect a transfer of amounts deferred for investment in an
interest index fund during the year to investment in the Company's Common
Stock in the first quarter of the following year based on the appraised
value of the investment at the time of the election to transfer such
deferred amounts.
(4) Represents the appraised value of restricted stock awards at the date of
grant. The aggregate number of shares and appraised value of restricted
stock (excluding stock no longer subject to any specified vesting period)
held by the individuals named above as of December 31, 1995 was as
follows: Mr. Didion--15,000 ($149,100); Mr. Beban--10,000 ($99,400); Mr.
Clotfelter--30,000 ($298,200); Mr. Davidson--10,000 ($99,400); Mr. Jones--
0; Mr. Kallis--5,000 ($49,700); and Mr. Stanfill--5,000 ($49,700); Mr.
McBride--0; Mr. Pogue--15,000 ($149,100); Mr. Sandstad--0. The holders of
shares of restricted stock are entitled to receive dividends on such
shares to the extent dividends are paid on the Common Stock. Does not
include income recognized for income tax purposes upon vesting of
restricted stock awards.
(5) Consists of each individual's allocable share of profit sharing
contributions in the form of shares of Common Stock made by the Company to
the Company's Capital Accumulation Plan, based on the appraised value of
the stock at the time of contribution.
(6) Mr. Clotfelter's employment by the Company commenced in February 1993.

AGGREGATED 1995 YEAR-END OPTION VALUES

The following table sets forth certain information as of December 31, 1995
with respect to the number and value of unexercised stock options held by
individuals named in the Summary Compensation Table above. In fiscal 1995,
none of the such individuals either were granted or exercised any options.

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK UNDERLYING
UNEXERCISED OPTIONS(1) AT
DECEMBER 31, 1995
-------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C>
James J. Didion.................................... 75,000 0
Gary J. Beban...................................... 62,500 7,500
Richard C. Clotfelter.............................. 31,667 28,333
David A. Davidson.................................. 45,000 15,000
Thaddeus W. Jones.................................. 25,000 15,000
George J. Kallis................................... 40,000 0
Charles O. McBride................................. 40,000 0
Richard A. Pogue................................... 10,000 30,000
Kenneth D. Sandstad................................ 40,000 0
John L. Stanfill................................... 20,000 0
</TABLE>
- --------
(1) All options have an exercise price of $10.00 per share.

54
<PAGE>

EMPLOYEE BENEFIT PLANS

Omnibus Stock and Incentive Plan. The Company's Omnibus Stock and Incentive
Plan (the "Omnibus Plan") is a restricted stock plan which provides for the
issuance of shares of the Company's Common Stock, subject to vesting
provisions. No shares remain available for issuance under the Omnibus Plan, but
additional shares will become available if forfeited by any of the current
holders.

1990 Stock Option Plan. One million shares have been reserved for issuance
under the Company's 1990 Stock Plan (the "Stock Option Plan"). These options
vest over one to four years. Options exercisable at $10.00 per share for
900,000 shares are outstanding as of August 31, 1996. If options are forfeited,
the underlying shares again become available for grant under the Stock Option
Plan.

Service Providers Plan. A total of 600,000 shares of Common Stock have been
reserved for issuance under the Company's 1991 Service Providers Stock Option
Plan. In 1993, 5,922 below market options were granted to certain directors in
partial payment of director fees. During 1995 options to purchase 4,106 shares
of Common Stock were exercised. As of June 30, 1996, options to purchase 36,607
shares of Common Stock are outstanding.

1996 Equity Incentive Plan. In January 1996, the Company adopted a restricted
stock purchase plan (the "Equity Incentive Plan") for the purpose of offering
selected executives an opportunity to acquire a proprietary interest, or to
increase such interest, in the success of the Company by purchasing shares of
the Common Stock. A total of 550,000 shares of Common Stock have been reserved
for issuance under the Equity Incentive Plan of which 510,906 shares have been
granted. The shares may be issued to senior executives for a purchase price
equal to the greater of $10.00 per share or fair market value. The purchase
price for shares under this plan must be paid either in cash or by delivery of
a full recourse promissory note. Any shares purchased vest at the rate of 5%
per quarter.

Bonuses. The Company has bonus programs covering certain employees, including
senior management. Awards are based on the position and performance of the
employee and the achievement of pre-established financial, operating and
strategic objectives. Although bonuses are generally paid in cash, the Company
retains the discretion to pay this bonus in shares of the Company's Common
Stock.

Capital Accumulation Plan. The Company's Capital Accumulation Plan (the "Cap
Plan") is a defined contribution profit sharing plan under Section 401(k) of
the Internal Revenue Code and is the Company's only such plan. Under the Cap
Plan, each participating employee may elect to defer a portion of his or her
earnings and the Company may make additional contributions from the Company's
current or accumulated net profits to the Cap Plan in such amounts as
determined by the Board of Directors. During each year that the Cap Plan has
been in existence except 1991, the Company has made an additional contribution
of stock having a fair market value equal to 2 1/2% of the Company's operating
income for the year for which such contribution was made. Each such
contribution has been allocated among the participating employees in proportion
to their respective contributions to the Cap Plan during the year for which
such contribution was made. At September 16, 1996, Cap Plan held 2,872,775
shares of the Company's Common Stock.

Deferred Compensation Plan. In 1993, the Company's Board of Directors
approved the adoption and implementation of a Deferred Compensation Plan (the
"DCP") effective January 1, 1994. Under the DCP, a select group of management
and highly-compensated employees are permitted to defer the payment of all or a
portion of their compensation (including any bonus). The DCP permits
participating employees to make an irrevocable election at the beginning of
each year to receive amounts deferred at a future date either in cash, which
accrues at a rate of interest determined in accordance with the DCP, or in
newly-issued shares of Common

55
<PAGE>

Stock of the Company. For the year ended December 31, 1995, approximately
$698,000 (including interest) and $1.1 million were deferred in cash and
stock, respectively. The accumulated deferrals as of June 30, 1996 are
approximately $1.3 million in cash (including interest) and $2.6 million in
stock for a total of $3.9 million.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

In connection with the Offering and Recapitalization, the Company's Third
Restated Certificate of Incorporation will be amended and restated as the
Fourth Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation"). See "Description of Capital Stock--The Recapitalization." The
Certificate of Incorporation will include provisions that limit the liability
of its directors for monetary damages for breach of their fiduciary duty as
directors, except for liability that cannot be limited under the Delaware
General Corporation Law ("Delaware Law"). The Delaware Law provides that
directors of a company will not be personally liable for monetary damages for
breach of their fiduciary duty as directors, except for liability (i) for any
breach of their duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) for unlawful payment of dividend or unlawful
stock repurchase or redemption, as provided Section 174 of the Delaware Law,
or (iv) for any transaction from which the director derived an improper
personal benefit.

The Company's Certificate of Incorporation also provides that the Company
shall indemnify its directors and officers to the fullest extent permitted by
the Delaware Law. The Company has entered into separate indemnification
agreements with its directors that could require the Company, among other
things, to indemnify them against certain liabilities that may arise by reason
of their status or service as directors and to advance their expenses incurred
as a result of any proceeding against them as to which they could be
indemnified. The Company believes that the limitation of liability provision
in its Certificate of Incorporation and the indemnification agreements will
facilitate the Company's ability to continue to attract and retain qualified
individuals to serve as directors and officers of the Company.

CERTAIN TRANSACTIONS

Mr. Clotfelter, a director of the Company and president of Westmark, owns
85% of the stock of Prescott, Inc. ("Prescott"), a property management company
based in Seattle, Washington. In 1994, the Company completed the acquisition
of certain assets of Prescott, which consisted of property management
agreements, for an aggregate purchase price of $175,000. In connection with
the acquisition of assets from Prescott, in 1994 Mr. Clotfelter incurred
indebtedness to the Company in an aggregate principal amount of $106,000. The
indebtedness bore interest at nine percent, which was determined under the
Company's policies for employee loans, and the largest amount outstanding at
any time (including principal and interest) was $109,000. The loan was repaid
in full as of March 20, 1996.

In February 1995 the Company retained the law firm of McDermott, Will &
Emery, to which Mr. Anderson, a director of the Company, is counsel, to
provide services to the Company consisting of legal counsel in connection with
the Company's activities with certain federal agencies.

On June 30, 1995, the Company, through a general partnership (the
"Acquisition Partnership") in which it directly or indirectly owns all of the
partnership interests, acquired Westmark. The purchase price was funded in
part by a $10 million senior subordinated loan (the "Senior Subordinated
Loan") from 399 Venture Partners, Inc., which owns 427,750 shares of the
Company's voting stock, to the Acquisition Partnership. See "Principal
Stockholders."

Pursuant to the terms of his employment arrangements, in each of 1991, 1992
and 1993 the Company paid Mr. Stanfill $50,000 as an interest free advance
against future bonuses. Mr. Stanfill's maximum obligation

56
<PAGE>

pursuant to such advances was $133,463.50 and his current obligation is
$33,363.50 which is scheduled to be repaid in February of 1997.

In connection with the Company's acquisition of L.J. Melody, the Company
entered into an Employment Agreement, dated as of July 1, 1996 ("Melody
Employment Agreement"), pursuant to which the Company agreed to employ Mr.
Melody as President and Chief Executive Officer of L.J. Melody through
June 30, 2001. Pursuant to the Melody Employment Agreement, Mr. Melody is
entitled to receive (a) a base salary of $26,000 per month and (b) certain
"incentive compensation," based on L.J. Melody's profits.

Under certain conditions, Mr. Melody is entitled to severance benefits from
L.J. Melody if the Melody Employment Agreement is terminated. Such benefits
include the acceleration and immediate payment of two years base salary and
incentive compensation. In addition, in connection with the acquisition, the
Company granted Mr. Melody an option to purchase 30,250 shares of the
Company's Class B-2 common stock. See "Management--Principal Stockholders."

For information concerning indemnification of directors and officers, see
"Management--Limitation of Liability and Indemnification Matters."

57
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's voting capital stock as of September 16, 1996,
assuming the completion of the Recapitalization and the conversion of the
Class C-1 common stock assuming an initial public offering price per share of
$ and as adjusted to reflect the sale by the Company of the
shares offered hereby (assuming no exercise of the Underwriters' over-
allotment option), by: (i) each person who is known by the Company to own
beneficially more than 5% of each class of the Company's voting stock, (ii)
each of the Company's directors, (iii) each of the Company's executive
officers named under "Management--Summary Compensation Table," and (iv) all
directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>
SHARES
SHARES BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
TITLE OF CLASS THE OFFERING THE OFFERING
-------------------------- -----------------------------------
NUMBER PERCENT PERCENT
------------ ----------------------
<S> <C> <C> <C> <C>
Kajima U.S.A., Inc.
Park Avenue Plaza
55 East 52nd Street
32nd Floor
New York, NY 10055..... Series A-1 Preferred Stock 1,000,000 100% 100%
Common 2,609(1) * *
Fukoku Mutual Life
Insurance Company
2-2, Uchisaiwaicho
2-chome Chiyoda-ku,
Tokyo 100 Japan........ Series A-2 Preferred Stock 1,000,000 50% 50%
S.R.E.S.-- Fifth Avenue,
Inc.
666 Fifth Avenue
New York, NY 10103..... Series A-2 Preferred Stock 1,000,000 50% 50%
Common 4,106(2) * *
Entities Associated with
BK Capital Partners (3)
909 Montgomery Street
Suite 400
San Francisco, CA
94133.................. Common 437,500 % %
Entities associated with
Mellon Family Invest-
ment
Company V (4)
Mill Street Extension
Laughlintown, PA 15655. Common 466,300 % %
399 Venture Partners,
Inc.
399 Park Avenue
New York, NY 10043..... Common 427,750 % %
Gary J. Beban (7)....... Common 191,459 % %
Richard C. Clotfelter
(5)(7)................. Common 108,835 % *
David A. Davidson
(5)(7)................. Common 88,055 % *
James J. Didion
(5)(6)(7).............. Common 403,067 % %
</TABLE>

58
<PAGE>

<TABLE>
<CAPTION>
SHARES
SHARES BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
THE OFFERING THE OFFERING
----------------------- ------------
TITLE OF CLASS NUMBER PERCENT PERCENT
-------------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Thaddeus Jones (7)......... Common 72,233 * *
George J. Kallis (5)(7).... Common 114,864 * *
Charles O. McBride (7)..... Common 56,631 * *
Lawrence J. Melody......... Common 1,513 * *
Richard A. Pogue (5)(7).... Common 61,468 * *
Kenneth D. Sandstad (7).... Common 117,256 *
John L. Stanfill (7)....... Common 94,822 *
Stanton D. Anderson (7).... Common 4,235 * *
Richard C. Blum (7)(8)..... Common 437,500 % %
Frank C. Carlucci (7)...... Common 2,287 * *
Daniel A. D'Aniello (7)(9). Common % %
Hiroaki Hoshino (10)....... Common -- % %
Takayuki Kohri (11)........ Common -- * *
Paul C. Leach.............. -- -- -- --
Frederic V. Malek (7)(12).. Common % %
Jeffrey S. Morgan.......... Common 9,837 * *
Peter V. Ueberroth......... Common 10,000 * *
Gary L. Wilson............. -- -- -- --
All directors and executive
officers
as a group (25 persons)
(13)...................... Common % %
</TABLE>
- --------
* Less than 1%.
(1) Represents options to purchase 2,609 shares of Common Stock exercisable
on or before November 15, 1996 issued to Kajima U.S.A., Inc. in respect
of services rendered as a director by Mr. Hoshino.
(2) Represents 4,106 shares of Common Stock issued upon exercise of options
issued to S.R.E.S.-Fifth Avenue, Inc. in respect of services rendered as
a director by Mr. Kohri.
(3) Includes 287,500 shares of Common Stock issued in the name of BK Capital
Partners II.
(4) Includes 225,000 shares of Common Stock issued in the name of Richard
King Mellon Foundation.
(5) Does not include shares of Common Stock issued in the name of the Company
in respect of Common Stock units credited to the following persons in the
following amounts under the Company's Deferred Compensation Plan but
which are not beneficially owned by such persons: Clotfelter--1,895;
Davidson-- 23,598; Didion--121,970; Kallis--10,991; McBride--6,087;
Pogue--3,592; and Sandstad 1,506.
(6) Includes 6,000 shares held by a trust for the benefit of three members of
Mr. Didion's immediate family.

59
<PAGE>

(7) Represents number of shares of Common Stock which the named individual
beneficially owns as well as those which the individual has options to
acquire that are exercisable on or before November 15, 1996, which
options have not been exercised. The respective numbers shown in the
table include the following number of option shares for the following
individuals: Anderson--4,235; Beban--62,500; Carlucci--2,287;
Clotfelter--45,000; D'Aniello--4,235 (options issued to Carlyle);
Davidson--45,000; Didion--75,000; Jones--25,000; Kallis--40,000; Malek--
5,934; McBride--40,000; Melody--1,513; Pogue--10,000; Sandstad--40,000;
and Stanfill--20,000. Such shares do not include options for 2,609 shares
of Common Stock issued to Kajima U.S.A., Inc. in respect of services
rendered as a director by Mr. Hoshino.
(8) Represents 437,500 shares owned by BK Capital Partners and BK Capital
Partners II, limited partnerships of which Richard C. Blum & Associates,
L.P. is the general partner. Mr. Blum holds the majority of the interests
in Richard C. Blum & Associates, L.P.
(9) Includes 4,235 shares of Common Stock subject to outstanding options
exercisable on or before November 15, 1996 issued in the name of the
Carlyle Group, L.P., which, by virtue of Mr. D'Aniello's interest in the
general partner of the Carlyle Group, L.P., and investment control over
such shares, may be deemed to be beneficially owned by Mr. D'Aniello.
Includes shares of Class C-1 common stock which will convert into
shares of Common Stock upon the consummation of the Offering (assuming an
initial public offering price of $ per share).
(10) Mr. Hoshino is a Director of Kajima U.S.A., Inc., which together with an
affiliate owns 2,000,000 shares of the Company's Preferred Stock,
1,000,000 of which are voting securities, and 2,609 shares of Common
Stock. Mr. Hoshino disclaims beneficial ownership of such shares.
(11) Mr. Kohri is Deputy Manager of Sumitomo Real Estate Sales Japan, an
affiliate of S.R.E.S.--Fifth Avenue, Inc., which owns 1,000,000 shares of
the Company's Preferred Stock and options to acquire 4,106 shares of the
Company's Common Stock. Mr. Kohri disclaims beneficial ownership of such
shares.
(12) Includes shares of C-1 common stock which will convert into shares of
Common Stock upon the consummation of the Offering (assuming an initial
public offering price of $ per share).
(13) Includes 420,704 shares of Common Stock subject to outstanding options
exercisable on or before November 15, 1996.

60
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The following summary is a description of certain provisions of the
Company's Certificate of Incorporation and Bylaws that will be in effect upon
the completion of the Recapitalization, which will occur concurrently with the
closing of the Offering. Such summary does not purport to be complete, and is
qualified in its entirety by all of the provisions of the Certificate of
Incorporation and Bylaws. Copies of the Certificate of Incorporation and
Bylaws are filed as exhibits to the Registration Statement of which this
Prospectus forms a part. Upon the closing of the Offering, the authorized
capital stock of the Company, after giving effect to the Recapitalization,
will consist of 100,000,000 shares of Common Stock, $.01 par value ("Common
Stock"), and 8,000,000 shares of preferred stock, $.01 par value ("Preferred
Stock").

COMMON STOCK

Assuming the completion of the Recapitalization and the conversion of the
Class C-1 common stock (assuming an initial public offering price per share of
$ ), as of September 16, 1996, there were shares of Common Stock
outstanding. The holders of Common Stock are entitled to one vote for each
share held of record on all matters submitted to a vote of the stockholders,
including the election of directors, and do not have cumulative voting rights.
Accordingly, the holders of shares of Common Stock and Preferred Stock with a
majority of the votes entitled to vote in any election of directors can elect
all of the directors standing for election, if they so choose. Subject to
preferences that may be applicable to any then outstanding Preferred Stock,
holders of Common Stock are entitled to receive ratably such dividends, if
any, as may be declared by the Board of Directors out of funds legally
available therefor. See "Dividend Policy." Upon a liquidation, dissolution or
winding up of the Company, the holders of Common Stock will be entitled to
share ratably in the net assets legally available for distribution to
stockholders after the payment of all debts and other liabilities of the
Company, subject to the prior rights of any Preferred Stock then outstanding.
Holders of Common Stock have no preemptive or conversion rights or other
subscription rights and there are no redemption or sinking funds provisions
applicable to the Common Stock. All outstanding shares of Common Stock are,
and the shares of Common Stock to be outstanding upon completion of the
Offering will be, fully paid and nonassessable.

PREFERRED STOCK

The Preferred Stock consists of a single class of 8,000,000 shares, of which
three series will be outstanding: (a) 1,000,000 shares of Series A-1 Preferred
Stock ("Series A-1 Preferred Stock"), (b) 2,000,000 shares of Series A-2
Preferred Stock ("Series A-2 Preferred Stock") and (c) 1,000,000 shares of
Series A-3 Preferred Stock ("Series A-3 Preferred Stock"). The authorized
shares of Preferred Stock not included in such series may be issued from time
to time in one or more series upon authorization by the Board of Directors. In
addition, upon conversion of any of the Series A-1 Preferred Stock, Series A-2
Preferred Stock or Series A-3 Preferred Stock (collectively, "Preferred
Stock"), the shares converted will be available for issuance in one or more
series from time to time. The Board of Directors may determine the designation
and number of shares of any such series of Preferred Stock and the
designation, preferences and relative participating, optional or other special
rights and the qualifications, limitations and restrictions thereon.

Effective upon the completion of the Recapitalization, holders of Preferred
Stock are entitled to dividends ("Preference Dividend") at the rate of $.25
per quarter on each share of Preferred Stock, payable out of funds legally
available therefor. The accrual of such dividend will be retroactive to
October 1, 1996.

In the event the Preference Dividend is not declared and paid within one
year after the last day of the quarter to which it relates, it will bear
compound annual interest at either (i) a fixed rate of 8% annually or (ii) an
annual rate equal to the six-month rate offered to The Sumitomo Bank, Limited
in the London interbank market in amounts comparable to the amount of any
unpaid dividend, as determined by each preferred stockholder. Pursuant to an
agreement between the Company and the existing preferred stockholders, the
holders of 3,000,000 shares of Preferred Stock have elected the 8% fixed rate
annually and the holder of the remaining 1,000,000 shares has elected the
variable rate option.

The Preference Dividend will not be paid and no interest will accrue or be
paid thereon if applicable law restricts or prohibits the declaration or
payment of the Preference Dividend. The Preference Dividend will also

61
<PAGE>

not be required to be declared or paid to the extent it would violate any
contractual restrictions in a credit agreement of the Company. The Company has
agreed that it will not enter into any contractual prohibition with respect to
the accumulation of dividends or the accrual and payment of interest on any
unpaid dividends with respect to the Preferred Stock.

In addition to the Preference Dividend and any interest payable thereon,
each share of Preferred Stock is entitled to receive dividends in the amount
of sixty percent (60%) of the amount received by each share of Common Stock.

Upon any liquidation, dissolution or winding up of the Company, holders of
Preferred Stock and Common Stock will be entitled to share in the remaining
assets of the Company after payment of liabilities and any accrued and unpaid
Preference Dividend, including any interest thereon, subject to prior
distribution rights of other preferred stock, if any, then outstanding, as
follows: (i) each holder of Preferred Stock and Common Stock will be entitled
to receive an amount, reduced by any prior payments to such holder pursuant to
such liquidation, dissolution or winding up of the Company, other than the
Preference Dividend and any interest therein, equal to $10.00 per share and
(ii) each holder of Preferred Stock will be entitled to share ratably in all
remaining assets of the Company to the extent of sixty percent (60%) of the
distribution, with respect to each share of Common Stock in excess of $10.00.

The holders of shares of Series A-1 Preferred Stock will have two (2) votes
per share of Stock on all matters submitted to a vote of the stockholders of
the Company and, except as provided by law, will vote together with the
holders of shares of Series A-2 Preferred Stock and the holders of Common
Stock as one class on all matters submitted to a vote of stockholders of the
Company. The holders of Series A-3 Preferred Stock will not be entitled to
vote on any matters, except as may be required by law.

The Preferred Stock is convertible into shares of Common Stock at the option
of the holder at a ratio ranging from .60 to .78 shares of Common Stock for
each share of Preferred Stock, depending on the Market Price (as defined
below) of the Common Stock at the time of conversion as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK FOR EACH
"MARKET PRICE" OF SHARE OF PREFERRED
COMMON STOCK STOCK
----------------- -----------------------
<S> <C>
Under $10.00 No conversion permitted
$10.00 - $21.99 0.78
22.00 - 22.99 0.76
23.00 - 23.99 0.74
24.00 - 24.99 0.72
25.00 - 25.99 0.70
26.00 - 26.99 0.68
27.00 - 27.99 0.66
28.00 - 28.99 0.64
29.00 - 29.99 0.62
$30.00 or more 0.60
</TABLE>

The term "Market Price" means (i) during the first 20 consecutive days in
which the Common Stock is traded after the closing of the Offering, the
initial public offering price and (ii) thereafter, the average closing price
for a share of Common Stock as reported by The Wall Street Journal (West Coast
Edition) for 20 consecutive trading days preceding the date as of which
conversion occurs.

Upon consummation of the Offering, 4,000,000 shares of undesignated
preferred stock will be authorized. The Board of Directors has the authority,
subject to certain rights of the Series A-1, Series A-2 and Series A-3
Preferred Stock and without further action by the stockholders, to issue
shares of preferred stock from time to time in one or more series and to fix
the number of shares, designations, preferences, powers, and relative,

62
<PAGE>

participating, optional or other special rights and qualifications or
restrictions thereof. The preferences, powers, rights and restrictions of
different series of preferred stock may differ with respect to dividend rates,
amounts payable on liquidation, voting rights, conversion rights, redemption
provisions, sinking fund provisions and purchase funds and other matters. The
issuance of additional preferred stock could decrease the amount of earnings
and assets available for distribution to holders of Common Stock or adversely
affect the rights and powers, including voting rights, of the holders of
Common Stock, and may have the effect of delaying, deferring or preventing a
change in control of the Company. The Company has no present plan to issue any
shares of preferred stock other than in connection with the Recapitalization.

REGISTRATION RIGHTS

Pursuant to a registration rights agreement between the Company and the
holders of the Preferred Stock (the "Registration Rights Agreement"), until
expiration of the Rule 144 Period (as defined below), if the Company proposes
to register any of its securities, it will use its best efforts to include in
such registration Common Stock acquired by the holders of Preferred Stock upon
conversion of the Preferred Stock. The registration rights granted to the
holders of Preferred Stock do not apply to the Offering, registrations at the
request of stockholders granted registration rights by the Company,
registrations relating solely to employee benefit plans, a corporate
reorganization, reclassification, merger, consolidation or acquisition or a
registration that does not permit secondary sales. The "Rule 144 Period" means
the period beginning at the date of this Prospectus and continuing until the
Common Stock acquired on conversion of the Preferred Stock is no longer
subject to the volume limitation provisions of Rule 144 of the Securities Act,
either pursuant to the provisions of the Registration Rights Agreement or
operation of law.

THE RECAPITALIZATION

In connection with the Offering, the Company has solicited stockholder
approval for the Recapitalization pursuant to which, among other things, the
Company's Certificate of Incorporation and Bylaws will be amended. Provided
the stockholders approve the Recapitalization, the Company's Certificate of
Incorporation will be amended and restated concurrently with the closing of
the Offering to effect the following changes, among others: (i) change the
name of the Company from CB Commercial Holdings, Inc. to CB Commercial Real
Estate Services Group, Inc., (ii) provide for (A) the automatic conversion,
concurrently with the consummation of the Offering, of the Class B-1 common
stock and Class B-2 common stock (which will be replaced on a one-for-one
basis with Common Stock), the Class C-1 common stock (which will be replaced
with Common Stock determined according to the formula set forth below) and
each existing series of preferred stock (which will be replaced on a one-for-
one basis with corresponding new series of preferred stock, respectively), and
(B) the Common Stock as the only class of common stock of the Company
following the closing of the Offering, (iii) provide for the elimination of
Class C-R common stock and Class J common stock (the outstanding shares of
which will be repurchased for $0.01 per share or an aggregate of $8,000), (iv)
provide for an increase in the total number of shares of capital stock which
the Company is authorized to issue from 27,200,002 to 108,000,000 and an
increase in the number of shares of common stock (which will be comprised of
the Common Stock) which the Company is authorized to issue from 19,200,002 to
100,000,000, (v) provide that the Common Stock and the Series A-1 and Series
A-2 Preferred Stock will vote together as a class for directors and on other
matters, except where a separate class vote is required by law and except with
respect to any changes in any of the rights, preferences or privileges of the
Preferred Stock (for which a majority of the holders of all series of
Preferred Stock voting as a single class is required), and (vi) eliminate
super majority and cumulative voting by stockholders. Each share of C-1 common
stock will be converted into a number of shares of Common Stock equal to (i)
the greater of the initial public offering price per share and $22.00, minus
$10.00 divided by (ii) the greater of the initial public offering price per
share and $22.00.

Also as part of the Recapitalization, concurrently with the closing of the
Offering, the Company's By-Laws will be amended to, among other things, (i)
eliminate the requirement of supermajority stockholder approval to amend or
repeal existing ByLaws, so that the ByLaws may be amended by a majority vote
of the directors or a

63
<PAGE>

majority vote of the stockholders entitled to vote and (ii) eliminate the
Operating Committee (the powers and authority of which were not clearly
delineated) and grant to the Executive Committee and other committees of the
Board of Directors the power to take such actions as may be authorized by
resolution of the Board of Directors, consistent with the limitations of the
Delaware Law, and (iii) modify certain requirements for the calling of
meetings of the Board of Directors.

DELAWARE ANTI-TAKEOVER LAW

Following the consummation of the Offering, the Company will be subject to
the "business combination" statute of the Delaware General Corporation Law
(Section 203). In general, such statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with any "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an "interested stockholder," unless (i) such
transaction is approved by the board of directors prior to the date the
interested stockholder obtains such status, (ii) upon consummation of such
transaction, the "interested stockholder" beneficially owned at least 85% of
the voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned by (a) persons who are directors and also
officers and (b) employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer, or (iii) the "business
combination" is approved by the board of directors and authorized at an annual
or special meeting of stockholders by the affirmative vote of at least 66 2/3%
of the outstanding voting stock which is not owned by the "interested
stockholder." A "business combination" includes mergers, asset sales and other
transactions resulting in financial benefit to the "interested stockholder."
An "interested stockholder" is a person who together with affiliates and
associates owns (or within three years, did own) beneficially 15% or more of a
corporation's voting stock. The statute could prohibit or delay mergers or
other takeover or change in control attempts with respect to the Company and,
accordingly, may discourage attempts to acquire the Company.

THE COMPANY'S CREDIT AGREEMENTS

Senior Secured Debt Repayment and Amendments

After the consummation of the Offering, approximately $ million of
indebtedness ("Term Debt"), including $18 million of indebtedness secured by
certain mortgages (the "Mortgage Debt"), will be outstanding under the
Company's Senior Secured Credit Agreement. The Senior Secured Credit Agreement
also provides for a $20 million revolving credit facility ("Revolving Credit
Facility A") and an additional $10 million revolving credit facility
("Revolving Credit Facility B"). No indebtedness is expected to be outstanding
under Revolving Credit Facility A or Revolving Credit Facility B immediately
after completion of the Offering. The Company has reached an agreement in
principle to amend and restate its Senior Secured Credit Agreement. It is
anticipated that, pursuant to such amendment the terms and conditions of the
Senior Secured Credit Agreement will be substantially as described below. All
indebtedness outstanding under the Senior Secured Credit Agreement will bear
interest at a rate equal to, at the Company's option, LIBOR plus 250 basis
points or the prime rate plus 150 basis points. Principal payments of $2.625
million each will be due quarterly, commencing March 31, 1997, with the unpaid
principal balance of $ due and payable in full on December 31, 2001. The
availability period of Revolving Credit Facility A ends December 31, 2001. The
availability period of Revolving Credit Facility B ends December 31, 1997.

Subject to certain exceptions and limitations, the Company will be obligated
to make prepayments in respect of indebtedness outstanding under the Senior
Secured Credit Agreement equal to (a) 100% of the net cash proceeds from any
sale or other disposition of assets resulting in aggregate consideration in
excess of $1 million in any twelve-month period, or (b) 25% of the net cash
proceeds from a sale of the Company's capital stock. In general, prepayments
are applied first to Term Debt (other than the Mortgage Debt) and then to
indebtedness outstanding under Revolving Credit Facility A and Revolving
Credit Facility B, pro rata according to the respective principal amounts then
outstanding thereunder, and then to the Mortgage Debt; provided, however,

64
<PAGE>

that a prepayment required to be made as a result of the sale of real property
which secures the Mortgage Debt is applied, first, to Mortgage Debt, next to
other Term Debt, and, finally, to indebtedness outstanding under Revolving
Credit Facility A and Revolving Credit Facility B, pro rata according to the
respective principal amounts then outstanding thereunder. All of the foregoing
prepayments in respect of Revolving Credit Facility A and Revolving Credit
Facility B permanently reduce the amount available under the respective
revolving credit facility by the amount of the prepayment.

The obligations of the Company under the Senior Secured Credit Agreement are
secured by substantially all of the assets of the Company and its
subsidiaries, including cash, accounts receivable, equipment, intellectual
property, and real property.

The Senior Secured Credit Agreement, as amended, will contain certain
financial tests which the Company is obligated to satisfy. These tests include
a leverage ratio, an interest coverage ratio, a fixed charges coverage ratio,
and a senior loan debt service coverage ratio. The Senior Secured Credit
Agreement will also contain a number of affirmative and negative covenants
covering such matters as maintenance of corporate existence, payment of taxes,
maintenance of properties, maintenance of insurance, the granting or existence
of certain liens, incurring of additional indebtedness, payment of dividends,
investments, capital expenditures, sales or other dispositions of property,
payments in respect of subordinated debt, and compliance with ERISA.

The financial and other covenants in the Senior Secured Credit Agreement may
prevent the Company from carrying out a transaction or taking other action
otherwise determined by the Board of Directors to be in the Company's best
interests. For example, the covenant regarding limitations on investments may
preclude the Company and its subsidiaries from making an acquisition (whether
by merger or in some other form). Although the Company would intend to seek a
waiver or modification of these covenants under appropriate circumstances,
there can be no assurance that the Company will be able to obtain such a
waiver or modification upon terms and conditions acceptable to the Company on
a timely basis, or at all. As a result, the covenants in the Senior Secured
Credit Agreement may effectively preclude the Company from pursuing its
strategy of growth through acquisitions or delay the Company's ability to
carry out that strategy.

The Senior Secured Credit Agreement will contain a number of events of
default (each an "Event of Default"), including, without limitation, failure
to make required payments or prepayments of principal or interest, breach of
an affirmative or negative covenant, breach of a representation or warranty in
a material respect, default in respect of other indebtedness in excess of
$500,000, insolvency of the Company or any of its subsidiaries, failure to
discharge or pay or obtain a stay in respect of a judgment in excess of
$100,000, certain events relating to ERISA involving a liability or payment in
excess of $100,000, a change of control, as defined below, and a material
adverse change in the business, assets, prospects, results of operation or the
financial condition of the Company or of the Company and its subsidiaries
taken as a whole. Change of control is defined under the Senior Secured Credit
Agreement as (i) the acquisition, by any person, of more than 25% of the total
voting power of all classes of the Company's equity securities (excluding the
Company's Common Stock to be sold to the Underwriters in the Offering) or (ii)
a change in the board of directors of CB Commercial Real Estate Group, Inc.
such that current board members no longer constitute a majority of the board
and the Company ceases to own 100% of the outstanding common stock of CB
Commercial Real Estate Group, Inc. Upon the occurrence of an Event of Default
(other than an Event of Default relating to insolvency), the lenders under the
Senior Secured Credit Agreement have the right, in addition to other available
remedies, to terminate the revolving credit facilities, to declare all
indebtedness outstanding thereunder immediately due and payable, and to
thereafter pursue applicable remedies against any and all collateral securing
payment of such indebtedness. Upon the occurrence of an Event of Default
relating to insolvency, Revolving Credit Facility A and Revolving Credit
Facility B under the Senior Secured Credit Agreement automatically terminate,
and all indebtedness outstanding under the Senior Secured Credit Agreement
automatically becomes immediately due and payable, and (subject to the
automatic stay provisions of the United States Bankruptcy Code, if applicable,
and in addition to other available remedies) the lenders thereunder may
thereafter pursue applicable remedies against any and all collateral securing
payment of such indebtedness.

65
<PAGE>

Senior Subordinated Debt Amendments

The terms of the Company's senior subordinated debt, of which approximately
$70.6 million is expected to be outstanding as of August 31, 1996, will also
be amended in connection with the Offering and Recapitalization. The Company
anticipates that the agreement as amended will contain the terms and
conditions described below. The financial and other covenants will be no more
restrictive than those under the Senior Credit Agreement. Interest on the
senior subordinated debt, all of which will be payable on a current basis,
will be LIBOR plus 125 basis points from the Offering through December 31,
1998, LIBOR plus 200 basis points during 1999, LIBOR plus 300 basis points
during 2000 and LIBOR plus 400 basis points during 2001 and beyond. Interest
in excess of LIBOR plus 125 basis points will be deferred and added to
principal until the final maturity date. The senior subordinated indebtedness
may not be prepaid while any amount is unpaid under the Senior Secured Credit
Agreement but may thereafter be prepaid without penalty.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is The Bank of New
York.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering there has been no active public market for the Common
Stock of the Company. Although the Company has applied for listing of the
Common Stock on the NYSE, no predictions can be made regarding the effect, if
any, that market sales of shares or the availability of shares for sale will
have on the market price prevailing from time to time. As described below,
only a limited number of shares will be available for sale shortly after the
Offering due to certain contractual and legal restrictions on resale.
Nevertheless, sales of substantial amounts of Common Stock of the Company in
the public market after the restrictions lapse could adversely affect the
prevailing market price.

Upon consummation of the Offering, the Company will have outstanding
shares of Common Stock, of which shares of Common Stock will be freely
tradable without restriction or registration under the Securities Act.
shares of Common Stock were issued and sold by the Company in private
transactions ("Restricted Shares") and are eligible for public sale if
registered under the Securities Act or sold in accordance with Rule 144
thereunder.

The Company's directors, executive officers and certain stockholders, who
collectively hold an aggregate of shares of Common Stock (including shares
represented by exercisable stock options, have agreed pursuant to certain
exceptions that they will not directly or indirectly (i) sell, grant any
option to purchase or otherwise transfer or dispose of any Common Stock or
securities convertible into or exchangeable or exercisable for Common Stock or
file a registration statement under the Securities Act with respect to the
foregoing or (ii) enter into any swap or other agreement or transaction that
transfers, in whole or in part, the economic consequence of ownership of the
Common Stock without the prior written consent of Merrill Lynch, Pierce,
Fenner & Smith Incorporated for a period of days from the date of this
Prospectus (the "Lockup Period"). Following the expiration of the Lockup
Period, approximately shares of Common Stock, including shares issuable
upon the exercise of certain options, will be available for sale in the public
market subject to compliance with Rule 144, including approximately shares
eligible for the sale under Rule 144(k). See "Underwriting."

Holders of the Company's 4,000,000 shares of outstanding Preferred Stock
have the right to convert such shares into Common Stock after the date of the
Offering at a conversion ratio ranging from .60 to .78 shares of Common Stock
for each share of Preferred Stock, depending on the market price of the Common
Stock. The holders of the Preferred Stock have agreed not to sell any shares
of Common Stock they acquire upon such conversion for 180 days from the date
of this Prospectus without the prior written consent of Merrill Lynch, Pierce,
Fenner & Smith Incorporated. The holders of the Preferred Stock have also
agreed that any purchaser of

66
<PAGE>

the Preferred Stock will be required to be bound by the same restrictions.
Thereafter, for an additional six months, such holders are contractually bound
to sell such shares only within the volume limitations of Rule 144 for sales
made at a price per share below the initial public offering price unless such
sales are pursuant to block trades which do not involve a broker's transaction
executed on any exchange or in the over-the-counter market. See "Description
of Capital Stock--Preferred Stock".

In general, under Rule 144 as currently in effect, an affiliate of the
Company, or a holder of Restricted Shares who beneficially owns shares that
were not acquired from the Company or an affiliate of the Company within the
previous two years, would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of 1% of the then
outstanding shares of Common Stock (approximately shares immediately
after the Offering, assuming no exercise of the Underwriters' over-allotment
option) or the average weekly trading volume of the Common Stock during the
four calendar weeks preceding the date on which notice of the sale is filed
with the Securities and Exchange Commission. Sales under Rule 144 are subject
to certain requirements relating to manner of sale, notice and availability of
current public information about the Company. However, a person (or persons
whose shares are aggregated) who is not deemed to have been an affiliate of
the Company at any time during the 90 days immediately preceding the sale and
who owns beneficially Restricted Shares is entitled to sell such shares under
Rule 144(k) without regard to the limitations described above, provided that
at least three years have elapsed since the later of the date the shares were
acquired from the Company or from an affiliate of the Company. The Securities
and Exchange Commission has recently proposed reducing the initial Rule 144
holding period from two years to one year and the Rule 144(k) holding period
from three years to two years. There can be no assurance as to when or whether
such rule changes will be enacted. The foregoing is a summary of Rule 144 and
is not intended to be a complete description of it.

Pursuant to the Registration Rights Agreement, until expiration of the Rule
144 Period (as defined below), if the Company proposes to register any of its
securities, it will use its best efforts to include in such registration
Common Stock acquired by the holders of the Preferred Stock upon conversion of
the Preferred Stock. The registration rights granted to the holders of the
Preferred Stock do not apply to the Offering, registrations at the request of
stockholders granted registration rights by the Company, registrations
relating to solely employee benefit plans, a corporate reorganization,
reclassification, merger, consolidation or acquisition or a registration that
does not permit secondary sales. The "Rule 144 Period" means the period
beginning at the date of this Prospectus and continuing until the Common Stock
acquired on conversion of the Preferred Stock is no longer subject to the
volume limitation provisions of Rule 144 of the Securities Act, either
pursuant to the provisions of the Registration Rights Agreement or operation
of law.

67
<PAGE>

UNDERWRITING

Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement") among the Company and each of the Underwriters named
below (the "Underwriters"), the Company has agreed to sell to each of the
Underwriters, and each of the Underwriters agreed to purchase from the
Company, the number of shares of Common Stock set forth opposite its name
below.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
------------ ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................................
Montgomery Securities.............................................
---
Total........................................................
===
</TABLE>

Merrill Lynch, Pierce, Fenner & Smith Incorporated and Montgomery Securities
are acting as representatives (the "Representatives") of the Underwriters.

The Representatives have advised the Company that the Underwriters propose
initially to offer the shares of Common Stock to the public at the public
offering price set forth on the cover page of this Prospectus, and to certain
dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may re-allow, a discount
not in excess of $ per share to certain other dealers. After the
initial public offering, the public offering price, concession and discount
may be changed.

The Company has granted the several Underwriters an option, exercisable
within 30 days after the date hereof, to purchase up to an aggregate of
additional shares of Common Stock to cover over-allotments, if any, at
the initial public offering price set forth on the cover of this Prospectus
less the underwriting discount. If the Underwriters exercise this option, each
of the Underwriters will be obligated, subject to certain conditions, to
purchase the number of shares of Common Stock proportionate to such
Underwriter's initial amount reflected in the foregoing table.

The Company's executive officers, directors and certain other stockholders
of the Company, who collectively hold in the aggregate approximately
shares of Common Stock (including shares represented by exercisable stock
options and shares issuable upon conversion of the Preferred Stock), and the
Company have agreed, subject to certain exceptions, not to, directly or
indirectly, (i) sell, grant any option to purchase or otherwise transfer or
dispose of any Common Stock or securities convertible into or exchangeable or
exercisable for Common Stock or file a registration statement under the
Securities Act with respect to the foregoing or (ii) enter into any swap or
other agreement or transaction that transfers, in whole or in part, the
economic consequence of ownership of the Common Stock, for a period of days
from the date of this Prospectus.

Prior to the Offering, there has been no established public market for the
Common Stock of the Company. The initial public offering price will be
determined through negotiations by and among the Representatives and the
Company. Among the factors to be considered in determining the initial public
offering price, in addition to prevailing market conditions, will be the
Company's historical performance, capital structure, estimates of the business
potential and earnings prospects of the Company, an assessment of the
Company's management, and the consideration of the above factors in relation
to market valuations of companies in related businesses.

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<PAGE>

The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute
to payments the Underwriters may be required to make in respect thereof.

LEGAL MATTERS

Certain legal matters with respect to the validity of the Common Stock
offered hereby will be passed upon for the Company by Pillsbury Madison &
Sutro LLP, San Francisco, California and for the Underwriters by Skadden,
Arps, Slate, Meagher & Flom, Los Angeles, California.

EXPERTS

The consolidated financial statements and related schedules of (i) the
Company as of December 31, 1995 and 1994 and for each of the three years in
the period ended December 31, 1995 and (ii) L.J. Melody as of December 31,
1995 and for the year then ended and L.J. Melody & Company of California as of
December 31, 1995 and for year then ended, in each case included in this
Prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.

The financial statements and related schedules of Westmark Realty Advisors
L.L.C. (formerly Westmark Realty Advisors, a partnership) as of December 31,
1994 and 1993, included in this Prospectus have been audited by KPMG Peat
Marwick LLP.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act with respect
to the Common Stock offered hereby. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock offered hereby, reference is hereby made to such Registration
Statement, exhibits and schedules. Statements contained in this Prospectus
regarding the contents of any contract or other document are not necessarily
complete; with respect to each such contract or document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference. A copy of the Registration
Statement, including the exhibits and schedules thereto, may be inspected
without charge at the principal office of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies of such material may be obtained from
such office upon payment of the fees prescribed by the Commission.
Additionally, the Company is subject to the public reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and thus
files with the Commission periodic reports pursuant to Section 13(d) and proxy
statements pursuant to Section 14 of the Exchange Act. These filings may also
be inspected at or obtained from the Commission. In addition, the Commission
maintains a World Wide Web site on the Internet at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission through the
Electronic Data Gathering, Analysis and Retrieval System.

The Company furnishes its stockholders with annual reports containing
financial statements audited by independent certified public accountants and
quarterly reports containing unaudited financial information for the first
three quarters of each fiscal year.

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<PAGE>

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma combined balance sheet as of June 30, 1996
and combined statements of operations for the six months ended June 30, 1996
and for the year ended December 31, 1995 ("the pro forma financial
statements") give effect to (i) the acquisitions of Westmark Realty Advisors
L.L.C., a Delaware limited liability company ("Westmark"), L.J. Melody &
Company, a Texas corporation, and L.J. Melody & Company of California, a Texas
corporation (together, "L.J. Melody"), by CB Commercial Holdings, Inc. and
Subsidiaries ("CB Commercial") (together with Westmark and L.J. Melody, the
"Company") and the Offering and the Recapitalization as if all transactions
occurred as of January 1, 1995 in the pro forma combined statement of
operations and (ii) the L.J. Melody acquisition, and the Offering and the
Recapitalization as if they occurred as of June 30, 1996 in the pro forma
combined balance sheet. See "Description of Capital Stock--The
Recapitalization." The pro forma financial statements also reflect the effects
of the financing obtained to conclude the acquisitions, as well as certain
other related assumptions.

The pro forma adjustments are based upon currently available information and
upon certain assumptions that management believes are reasonable. The
acquisitions have been accounted for by the Company as purchases. The
adjustments included in the pro forma financial statements represent the
effects of the Company's preliminary determination and allocation of the
purchase price to the fair value of the assets and liabilities acquired, based
upon currently available information. There can be no assurance that the
actual effects will not differ significantly from the pro forma adjustments
reflected in the pro forma financial statements.

The pro forma financial statements are not necessarily indicative of either
future results of operations or results that might have been achieved if the
transactions had been consummated as of the dates indicated. The pro forma
financial statements should be read in conjunction with the historical
consolidated financial statements and footnotes of CB Commercial, Westmark,
and L.J. Melody.

P-1
<PAGE>

UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS)
AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
L.J. ---------------------------- PRO FORMA
CB COMMERCIAL MELODY ACQUISITION OFFERING COMBINED
------------- ------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equiva-
lents................ $ 27,451 $ 375 $ (9,000)(a) $ -- $ 18,826
Receivables, net...... 29,739 -- -- -- 29,739
Prepaid expense and
other................ 7,828 115 -- -- 7,943
--------- ------ ---------- ----------- ---------
Total currents as-
sets............... 65,018 490 (9,000) -- 56,508
Property and equipment,
net.................... 42,972 317 -- -- 43,289
Other intangibles, net.. 9,370 432 3,296 (a) (1,468)(e) 11,630
Goodwill, net........... 58,373 4 8,692 (a) -- 63,637
(5,250)(b)
1,528 (c)
290 (d)
Inventoried property.... 7,355 -- -- -- 7,355
Deferred tax asset...... -- -- 5,250 (b) 14,272 (f) 17,994
(1,528)(c)
Other assets, net....... 6,675 37 -- -- 6,712
--------- ------ ---------- ----------- ---------
Total assets........ $ 189,763 $1,280 $ 3,278 $ 12,804 $ 207,125
========= ====== ========== =========== =========
Current Liabilities:
Compensation and em-
ployee benefits...... $ 23,566 $ 472 $ -- $ -- $ 24,038
Accounts payable and
accrued expenses..... 17,778 129 889 (d) -- 18,796
Senior revolving
credit lines......... 16,323 -- -- -- 16,323
Reserve for bonus and
profit sharing....... 5,805 -- -- -- 5,805
Current maturities of
long-term debt....... 11,002 -- 1,500 (a) -- 12,502
Current portion of
capital lease obliga-
tions................ 2,592 -- -- -- 2,592
--------- ------ ---------- ----------- ---------
Total current lia-
bilities........... 77,066 601 2,389 -- 80,056
--------- ------ ---------- ----------- ---------
Long-term debt, less
current maturities
Senior term loans..... 146,406 -- 1,500 (a) (69,350)(g) 78,556
Senior subordinated
term loans........... 82,108 -- -- -- 82,108
Inventoried property
loan................. 7,470 -- -- -- 7,470
Other long-term debt.. 3,275 -- 667 (a) -- 3,942
--------- ------ ---------- ----------- ---------
Total long-term
debt............... 239,259 -- 2,167 (69,350) 172,076
--------- ------ ---------- ----------- ---------
Other long-term liabili-
ties................... 24,445 -- -- -- 24,445
--------- ------ ---------- ----------- ---------
Total liabilities... 340,770 601 4,556 (69,350) 276,577
========= ====== ========== =========== =========
Stockholders' Equity
(Deficit)
Preferred stock, $.01
par value............ 40 -- -- -- 40
Common stock, $.01 par
value................ 95 104 (104)(a) -- 95
Common stock options
outstanding.......... 263 -- -- -- 263
Additional paid-in
capital.............. 112,116 575 (575)(a) 69,350 (g) 195,738
14,272 (f)
Accumulated deficit... (263,521) -- (599)(d) (1,468)(e) (265,588)
--------- ------ ---------- ----------- ---------
Total stockholders'
equity (deficit)... (151,007) 679 (1,278) 82,154 (69,452)
--------- ------ ---------- ----------- ---------
Total liabilities
and stockholders'
equity (deficit)... $ 189,763 $1,280 $ 3,278 $ 12,804 $ 207,125
========= ====== ========== =========== =========
</TABLE>
- -------
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
ACQUISITION:
(a) Reflects the effect of the L.J. Melody acquisition including the related
financing and purchase accounting adjustments to intangibles and goodwill.
Excludes the effect of distributions made to selling shareholders
concurrent with the acquisition, which are already included in the
historical L.J. Melody amounts.
(b) Reflects a deferred tax asset related to the L.J. Melody transaction. The
Company believes that as a result of the L.J. Melody transaction, it will
be able to generate additional taxable income in the future and,
therefore, will recognize a deferred tax asset.
(c) Reflects the deferred tax liability resulting from the difference between
the book basis and tax basis of intangibles resulting from the L.J. Melody
acquisition.
(d) Reflects an accrual for L.J. Melody acquisition costs incurred ($0.3
million) and the cost of closure of duplicate CB Commercial offices ($0.6
million).
OFFERING:
(e) Reflects pro-rata write-off of unamortized debt costs related to the
portion of debt to be extinguished.
(f) Reflects deferred tax asset that will be recognized as a result of the
Offering due to reduced interest expense as a result of the repayment, in
part, of the Company's senior secured indebtedness.
(g) Reflects the Offering, net of estimated underwriting discount and Offering
expenses, and use of proceeds from the Offering to repay, in part, the
Company's senior secured indebtedness.

P-2
<PAGE>

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
SIX MONTHS ENDED JUNE 30, 1996

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------
L.J. PRO FORMA
CB COMMERCIAL MELODY ACQUISITION OFFERING COMBINED
------------- ------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Revenue................. $ 243,695 $ 3,417 $ -- $ -- $247,112
Costs and Expenses:
Commissions, fees and
other incentives ..... 121,269 3,612 (1,070)(a) -- 124,044
233 (b)
Operating, administra-
tive and other........ 104,718 1,545 -- -- 106,263
Depreciation and amor-
tization ............. 4,894 163 355 (c) 5,412
---------- ------- ---------- ---------- --------
Operating income (loss). 12,814 (1,903) 482 -- 11,393
Interest income......... 749 145 -- -- 894
Interest expense........ 11,547 -- 216 (d) (2,427)(f) 9,979
(267)(g)
910 (h)
---------- ------- ---------- ---------- --------
Income (loss) before
provision (benefit) for
income taxes........... 2,016 (1,758) 266 1,784 2,308
Provision (benefit) for
income tax............. 390 -- (287)(e) 714 (i) 817
---------- ------- ---------- ---------- --------
Net income (loss)....... $ 1,626 $(1,758) $ 553 $ 1,070 $ 1,491
========== ======= ========== ========== ========
Per share data:
Net income per common
and common equivalent
share outstanding..... $ 0.12 $
========== ========
Weighted average common
and common equivalent
shares outstanding
(j)................... 13,449,967
========== ========
</TABLE>
- --------
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
ACQUISITION:
(a) Reflects the reversal of an accrual for a one-time acquisition related
bonus to L.J. Melody employees prior to the acquisition.
(b) Reflects additional compensation expense attributable to Lawrence J.
Melody's employment agreement.
(c) Reflects the amortization of net $9.0 million in intangible assets and
goodwill. Amortization period is 30 years.
(d) Reflects interest on acquisition financing.
(e) Reflects deferred tax benefit of certain pro forma adjustments relating to
L.J. Melody purchase accounting entries, consisting of additional
compensation expense, interest expense and amortization of intangible
assets.
OFFERING:
(f) Reflects interest expense savings resulting from the repayment of $69.4
million of the senior secured indebtedness, bearing interest estimated at
7.0%. Debt paydown results from the net proceeds of the Offering.
(g) Represents reduction in amortization expense for portion of unamortized
debt costs written off.
(h) Reflects the additional interest expense resulting from the higher
interest rate on senior subordinated indebtedness after the Offering.
(i) Represents tax effect of income and expenses from Offering adjustments.

P-3
<PAGE>

(j) Reflects the effect of the Recapitalization as follows:

<TABLE>
<S> <C>
Weighted average common and common equivalent shares--histori-
cal........................................................... 13,449,967
Remove the Preferred Stock which will not be a common stock
equivalent after the Offering................................. (4,000,000)
Net reduction in shares of common stock resulting from the con-
version of
Class C-1 stock............................................... ( )
Reduction in shares of common stock resulting from the repur-
chase
of Class C-R and Class J stock................................ ( )
Shares issued in the Offering..................................
----------
Weighted average common and common equivalent shares--pro
forma.........................................................
==========
</TABLE>

P-4
<PAGE>

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------
CB COMMERCIAL WESTMARK L.J. MELODY
YEAR ENDED SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, JUNE 30, DECEMBER 31, PRO FORMA
1995 1995 1995 ACQUISITIONS OFFERING COMBINED
------------- ---------------- ------------ ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue................. $ 468,460 $10,887 $10,337 $ -- $ -- $489,684
Costs and Expenses:
Commissions, fees and
other incentives...... 239,018 -- 6,546 -- -- 245,564
Operating,
administrative and
other................. 187,968 9,285 2,393 50 (a) -- 200,341
178 (b)
467 (c)
Depreciation and amor-
tization.............. 11,631 163 438 17 (d) 14,502
2,253 (e)
---------- ------- ------- ------- ------- --------
Operating income........ 29,843 1,439 960 (2,965) -- 29,277
Interest income......... 1,674 36 216 -- -- 1,926
Interest expense........ 23,267 19 -- 2,794 (f) (4,855)(i) 22,512
1,820 (j)
(533)(k)
---------- ------- ------- ------- ------- --------
Income (loss) before
provision (benefit) for
income taxes........... 8,250 1,456 1,176 (5,759) 3,568 8,691
Provision (benefit) for
income tax............. 841 -- -- 2 (g) 1,427 (l) 1,647
(623)(h)
---------- ------- ------- ------- ------- --------
Net income (loss)....... $ 7,409 $ 1,456 $ 1,176 $(5,138) $ 2,141 $ 7,044
========== ======= ======= ======= ======= ========
Per share data:
Net income per common
and common equivalent
share outstanding..... $ 0.56 $
========== ========
Weighted average common
and common equivalent
shares outstanding.... 13,168,975(m) (m)
========== ========
</TABLE>
- -------
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
ACQUISITION:

(a) Reflects elimination of Westmark's historical amortization of deferred
leasing concessions (free rent).
(b) Reflects increased compensation resulting from new employment agreements
with certain Westmark executives, and the straight-lining of rents from
the date of the Westmark acquisition.
(c) Reflects additional compensation expense relating to Lawrence J. Melody's
employment.
(d) Reflects increase in depreciation expense associated with reducing the
useful life of Westmark's computers from 5 to 3 years.
(e) Reflects the amortization of $41.4 million (Westmark) and net $9.0 million
(L.J. Melody) in intangible assets and goodwill. Amortization expense is
$1.5 million for Westmark and $0.7 million for L.J. Melody.
(f) Reflects interest on acquisition financing ($2.3 million for Westmark and
$0.5 million for L.J. Melody).
(g) Reflects the additional minimum tax resulting from combined operations of
Westmark.
(h) Reflects deferred tax benefit of certain pro forma adjustments relating to
L.J. Melody purchase accounting entries, consisting of additional
compensation expense, interest expense and amortization of intangible
assets.

P-5
<PAGE>

OFFERING:

(i) Reflects interest expense savings resulting from the repayment of $69.4
million of the senior secured indebtedness, bearing interest estimated at
7.0%, from Offering proceeds.
(j) Reflects additional interest expense resulting from the higher interest
rate on senior subordinated indebtedness after the Offering.
(k) Represents reduction in amortization expense for portion of unamortized
debt costs written off.
(l) Represents tax effect of income and expenses from Offering adjustments.
(m) Reflects the effect of the Recapitalization as follows:

<TABLE>
<S> <C>
Weighted average common and common equivalent shares--histori-
cal........................................................... 13,168,975
Remove the Preferred Stock which will not be a common stock
equivalent after the Offering................................. (4,000,000)
Net reduction in shares of common stock resulting from the con-
version of
Class C-1 stock............................................... ( )
Reduction in shares of common stock resulting from the repur-
chase of
Class C-R stock............................................... ( )
Shares issued in the Offering..................................
----------
Weighted average common and common equivalent shares--pro
forma.........................................................
==========
</TABLE>

P-6
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES (TO BE RENAMED CB COMMERCIAL
REAL ESTATE SERVICES GROUP, INC. EFFECTIVE UPON THE CONSUMMATION OF THE
OFFERING)
Report of Independent Public Accountants................................ F-3
Consolidated Balance Sheets as of June 30, 1996 (Unaudited), December
31, 1995 and 1994...................................................... F-4
Consolidated Statements of Operations for the six months ended June 30,
1996 and 1995
(Unaudited) and for the years ended December 31, 1995, 1994 and 1993... F-5
Consolidated Statements of Cash Flows for the six months ended June 30,
1996 and 1995 (Unaudited) and for the years ended December 31, 1995,
1994 and 1993.......................................................... F-6
Consolidated Statements of Stockholders' Equity (Deficit) for the six
months ended
June 30, 1996 and for the years ended December 31, 1995, 1994 and 1993. F-7
Notes to Consolidated Financial Statements.............................. F-8
WESTMARK REALTY ADVISORS
JUNE 30, 1995 AND 1994 (UNAUDITED)
Statements of Income for the six months ended June 30, 1995 and 1994.... F-23
Statements of Changes in Owners' Equity (Deficit) for the six months
ended June 30, 1995 and 1994........................................... F-24
Statements of Cash Flows for the six months ended June 30, 1995 and
1994................................................................... F-25
Notes to Financial Statements........................................... F-26
DECEMBER 31, 1994 AND 1993
Independent Auditors' Report............................................ F-28
Balance Sheets as of December 31, 1994 and 1993......................... F-29
Statements of Income for the years ended December 31, 1994 and 1993..... F-30
Statements of Changes in Partners' Capital for the years ended December
31, 1994 and 1993...................................................... F-31
Statements of Cash Flows for the years ended December 31, 1994 and 1993. F-32
Notes to Financial Statements........................................... F-33
L.J. MELODY & COMPANY
JUNE 30, 1996 (UNAUDITED)
Consolidated Balance Sheet as of June 30, 1996.......................... F-36
Consolidated Statement of Operations and Retained Earnings for the six
months ended June 30, 1996............................................. F-37
Consolidated Statement of Cash Flows for the six months ended June 30,
1996................................................................... F-38
Notes to Consolidated Financial Statements.............................. F-39
DECEMBER 31, 1995
Report of Independent Public Accountants................................ F-43
Consolidated Balance Sheet as of December 31, 1995...................... F-44
Consolidated Statement of Operations and Retained Earnings for the year
ended December 31, 1995................................................ F-45
Consolidated Statement of Cash Flows for the year ended December 31,
1995................................................................... F-46
Notes to Consolidated Financial Statements.............................. F-47
</TABLE>

F-1
<PAGE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
L.J. MELODY & COMPANY OF CALIFORNIA
JUNE 30, 1996 (UNAUDITED)
Balance Sheet as of June 30, 1996...................................... F-51
Statement of Operations for the six months ended June 30, 1996......... F-52
Statement of Shareholders' Equity for the six months ended June 30,
1996.................................................................. F-53
Statement of Cash Flows for the six months ended June 30, 1996......... F-54
Notes to Financial Statements.......................................... F-55
DECEMBER 31, 1995
Report of Independent Public Accountants............................... F-58
Balance Sheet as of December 31, 1995.................................. F-59
Statement of Operations for the year ended December 31, 1995........... F-60
Statement of Shareholders' Equity for the year ended December 31, 1995. F-61
Statement of Cash Flows for the year ended December 31, 1995........... F-62
Notes to Financial Statements.......................................... F-63
</TABLE>

F-2
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To CB Commercial Holdings, Inc.:

We have audited the accompanying consolidated balance sheets of CB
Commercial Holdings, Inc. (a Delaware corporation) and subsidiaries as of
December 31, 1995, and 1994, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the three years
in the period ended December 31, 1995. These financial statements and the
schedules referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CB Commercial Holdings,
Inc. and subsidiaries as of December 31, 1995, and 1994, and the results of
their operations and their cash flows for the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting
principles.

Los Angeles, California Arthur Andersen LLP
January 31, 1996 (Except with respect to the matters discussed in Notes 1 and
13, as to which the date is September 24, 1996)

F-3
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
JUNE 30,
1996 1995 1994
----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................... $ 27,451 $ 23,045 $ 28,770
Receivables, less allowance of $4,008,
$4,400 and $4,544 for doubtful
accounts at June 30, 1996, December 31,
1995, and 1994, respectively............... 29,739 28,322 23,723
Prepaid expenses and other.................. 7,828 5,654 3,682
--------- --------- ---------
Total current assets....................... 65,018 57,021 56,175
Property and equipment, net.................. 42,972 44,500 47,140
Goodwill, net................................ 58,373 59,491 22,251
Other intangible assets, net................. 9,370 10,783 6,192
Inventoried property......................... 7,355 7,355 7,355
Other assets, net............................ 6,675 11,804 10,987
--------- --------- ---------
Total assets............................... $ 189,763 $ 190,954 $ 150,100
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Compensation and employee benefits.......... $ 23,566 $ 28,324 $ 26,989
Accounts payable and accrued expenses....... 17,778 19,245 19,429
Senior revolving credit lines............... 16,323 -- --
Reserve for bonus and profit sharing........ 5,805 12,997 11,573
Current maturities of long-term debt........ 11,002 8,250 4,500
Current portion of capital lease obliga-
tions...................................... 2,592 2,592 1,493
--------- --------- ---------
Total current liabilities.................. 77,066 71,408 63,984
--------- --------- ---------
Long-term debt, less current maturities:
Senior term loans........................... 146,406 160,394 160,390
Senior subordinated term loans.............. 82,108 78,963 63,694
Inventoried property loan................... 7,470 7,470 7,470
Other long-term debt........................ 3,275 3,315 2,017
--------- --------- ---------
Total long-term debt....................... 239,259 250,142 233,571
--------- --------- ---------
Other long-term liabilities.................. 24,445 24,092 17,093
--------- --------- ---------
Total liabilities.......................... 340,770 345,642 314,648
--------- --------- ---------
Commitments and contingencies
Stockholders' Equity (Deficit):
Preferred stock, $.01 par value............. 40 40 40
Common stock, $.01 par value................ 95 93 89
Common stock options outstanding............ 263 263 294
Additional paid-in capital.................. 112,116 110,063 107,708
Accumulated deficit......................... (263,521) (265,147) (272,679)
--------- --------- ---------
Total stockholders' equity (deficit)....... (151,007) (154,688) (164,548)
--------- --------- ---------
Total liabilities and stockholders' equity
(deficit)................................. $ 189,763 $ 190,954 $ 150,100
========= ========= =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- --------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue................. $ 243,695 $ 208,287 $ 468,460 $ 428,988 $ 392,037
Costs and Expenses:
Commissions, fees and
other incentives...... 121,269 109,765 239,018 225,085 206,070
Operating, administra-
tive and other........ 104,718 88,118 187,968 170,234 160,073
Depreciation and amor-
tization.............. 4,894 3,682 11,631 8,091 49,606
---------- ---------- ---------- ---------- ----------
Operating income (loss). 12,814 6,722 29,843 25,578 (23,712)
Interest income......... 749 883 1,674 1,109 915
Interest expense........ 11,547 10,379 23,267 17,362 14,240
---------- ---------- ---------- ---------- ----------
Income (loss) before
provision for income
taxes.................. 2,016 (2,774) 8,250 9,325 (37,037)
Provision for income
tax.................... 390 100 841 152 112
---------- ---------- ---------- ---------- ----------
Net income (loss)....... $ 1,626 $ (2,874) $ 7,409 $ 9,173 $ (37,149)
========== ========== ========== ========== ==========
Per share data:
Net income (loss) per
common and common
equivalent share
outstanding........... $ .12 $ (.25) $ 0.56 $ 0.71 $ (3.34)
========== ========== ========== ========== ==========
Weighted average common
and common equivalent
shares outstanding.... 13,449,967 11,412,655 13,168,975 12,933,552 11,133,078
========== ========== ========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
---------------- --------------------------
1996 1995 1995 1994 1993
------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activ-
ities:
Net income (loss).............. $ 1,626 $(2,874) $ 7,409 $ 9,173 $(37,149)
Adjustments to reconcile net
income (loss) to net cash pro-
vided by (used in) operating
activities:
Depreciation and amortization
excluding deferred financing
fees......................... 4,894 3,682 11,631 8,091 49,606
Amortization of deferred fi-
nancing costs................ 710 680 1,392 1,551 1,784
Equity interest in (earnings)
loss of unconsolidated sub-
sidiaries.................... -- -- 180 (44) (35)
Provision for (reversal of)
doubtful accounts............ (64) 59 306 696 3,525
Deferred interest............. 4,267 3,319 7,738 2,338 --
Deferred compensation......... 1,059 974 1,762 877 --
(Decrease) increase in receiv-
ables......................... (1,365) 2,022 (1,778) 1,534 (6,319)
Decrease (increase) in prepaid
expenses and other assets..... 217 (34) 396 (885) 1,179
(Decrease) increase in compen-
sation and employee benefits
payable....................... (2,808) (5,052) 3,276 7,222 5,841
(Decrease) increase in other
operating liabilities......... (7,940) (11,313) (1,680) 865 1,177
------- ------- ------- ------- --------
Net cash provided by (used in)
operating activities......... 596 (8,537) 30,632 31,418 19,609
------- ------- ------- ------- --------
Cash flows from investing activ-
ities:
Purchases of property and
equipment..................... (1,512) (1,299) (2,143) (4,250) (4,841)
Proceeds from collections on
notes receivable.............. 2,716 194 215 445 121
Disposition of property and
equipment..................... 1 -- 128 195 107
Acquisitions of businesses in-
cluding net assets acquired,
intangibles and goodwill...... (1,321) (19,865) (22,376) -- --
Other investing activities,
net........................... -- (395) (712) (255) (1,016)
------- ------- ------- ------- --------
Net cash used in investing ac-
tivities..................... (116) (21,365) (24,888) (3,865) (5,629)
------- ------- ------- ------- --------
Cash flows from financing activ-
ities:
Proceeds from senior revolving
credit line................... 18,323 13,000 14,000 11,000 9,038
Repayment of senior revolving
credit line................... (2,000) -- (14,000) (11,000) (23,038)
Repayment of senior term loans. (12,358) (9,737) (18,997) (4,100) --
Proceeds from inventoried prop-
erty loan..................... -- -- -- -- 270
Repayment of capital leases.... -- -- (2,167) -- --
Proceeds from senior subordi-
nated loan.................... -- 10,000 10,000 -- --
Other financing activities,
net........................... (39) (160) (305) (823) (932)
------- ------- ------- ------- --------
Net cash provided by (used in)
financing activities......... 3,926 13,103 (11,469) (4,923) (14,662)
------- ------- ------- ------- --------
Net increase (decrease) in cash
and cash equivalents........... 4,406 (16,799) (5,725) 22,630 (682)
Cash and cash equivalents, at
beginning of period............ 23,045 28,770 28,770 6,140 6,822
------- ------- ------- ------- --------
Cash and cash equivalents, at
end of period.................. $27,451 $11,971 $23,045 $28,770 $ 6,140
======= ======= ======= ======= ========
Supplemental disclosures of cash
flow information:
Cash paid during the period
for:
Interest (none capitalized)... $ 6,666 $ 6,346 $14,410 $12,172 $ 12,610
Federal and state income tax-
es........................... 320 236 $ 497 $ 152 $ 162
Non-cash investing and financ-
ing activities:
Portion of Westmark acquisi-
tion financed by notes pay-
able......................... $ -- $20,283 $20,283 $ -- $ --
Equipment acquired under capi-
tal leases................... $ -- $ -- $ 3,347 $ 4,569 $ --
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
PREFERRED COMMON OPTIONS PAID-IN ACCUMULATED
STOCK STOCK OUTSTANDING CAPITAL DEFICIT TOTAL
--------- ------ ------------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1992................... $40 $86 $260 $105,945 $(244,687) $(138,356)
Net loss............... -- -- -- -- (37,149) (37,149)
Common stock issued for
bonus and profit
sharing............... -- 2 -- 668 -- 670
Common stock options
granted............... -- -- 34 -- -- 34
Foreign currency trans-
lation adjustment..... -- -- -- -- (59) (59)
--- --- ---- -------- --------- ---------
Balance, December 31,
1993................... 40 88 294 106,613 (281,895) (174,860)
Net income............. -- -- -- -- 9,173 9,173
Common stock issued for
deferred compensation,
bonuses and profit
sharing............... -- 1 -- 1,095 -- 1,096
Foreign currency trans-
lation adjustment..... -- -- -- -- 43 43
--- --- ---- -------- --------- ---------
Balance, December 31,
1994................... 40 89 294 107,708 (272,679) (164,548)
Net income............. -- -- -- -- 7,409 7,409
Common stock issued for
deferred compensation. -- 4 -- 2,322 -- 2,326
Common stock options
exercised............. -- -- (31) 33 -- 2
Foreign currency trans-
lation adjustment..... -- -- -- -- 123 123
--- --- ---- -------- --------- ---------
Balance, December 31,
1995................... 40 93 263 110,063 (265,147) (154,688)
Net income (unaudited). -- -- -- -- 1,626 1,626
Common stock issued for
deferred compensation,
bonuses and profit
sharing (unaudited)... -- 2 -- 2,053 -- 2,055
--- --- ---- -------- --------- ---------
Balance, June 30, 1996
(unaudited)............ $40 $95 $263 $112,116 $(263,521) $(151,007)
=== === ==== ======== ========= =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-7
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1995
(INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 IS UNAUDITED)

1.ORGANIZATION AND ACQUISITIONS

ORGANIZATION. CB Commercial Holdings, Inc. ("CB Holdings") was organized to
acquire Coldwell Banker Commercial Group, Inc. and had no operations prior
to the acquisition on April 19, 1989 (the "Acquisition"). In 1991 Coldwell
Banker Commercial Group, Inc. was renamed CB Commercial Real Estate Group,
Inc. CB Holdings is a holding company that conducts its operations solely
through CB Commercial Real Estate Group, Inc. and its subsidiaries
(collectively, the "Company"). Concurrently with the closing of the
Offering (as defined), CB Holdings will be renamed CB Commercial Real
Estate Services Group, Inc. (see Note 13). The results of operations for
interim periods are not necessarily indicative of results for a full year.

NATURE OF OPERATIONS. The Company provides a full range of services to
commercial real estate tenants, owners, and investors including: (i)
brokerage (facilitating sales and leases), investment properties
(acquisitions and sales), corporate services, property management, and real
estate market research (collectively, "Property and User Services"), and
(ii) mortgage banking (loan origination and servicing), investment
management and advisory services and valuation and appraisal services
(collectively, "Investor Services"). The Company's diverse client base
includes local, national and multinational corporations, financial
institutions, pension funds and other tax exempt entities, local, state and
national governmental entities, and individuals.

ACQUISITIONS. On June 30, 1995, CB Commercial Real Estate Group, Inc.,
through a general partnership ("WREAP") in which it directly or indirectly
owns all of the partnership interests, acquired Westmark Realty Advisors
L.L.C. ("Westmark"). Westmark is a realty advisory business headquartered
in Los Angeles. The purchase price consisted of an aggregate initial
purchase price of $37.5 million plus $2.9 million in net liabilities
assumed and an additional $1 million in costs related to the Westmark
acquisition. Approximately $20.0 million of the $37.5 million is payable to
the sellers ("Westmark Senior Notes") over periods ranging from one to five
years. The sellers may also be entitled to a supplemental purchase price
based on the operating results of Westmark payable over a period of six
years and subject to a maximum aggregate payment of $18.0 million. The
supplemental purchase price will be recorded as additional goodwill, if and
when earned. As of December 31, 1995, approximately $0.9 million was earned
and was paid to the sellers on March 31, 1996. Approximately $17.5 million
of the purchase price was paid in cash using $7.5 million contributed to
WREAP by CB Commercial Real Estate Group, Inc. and $10.0 million of
proceeds from a senior subordinated loan ("Westmark Senior Subordinated
Loan") bearing interest at 20% per annum issued to WREAP, which is
nonrecourse to CB Commercial Real Estate Group, Inc. (except for a portion
of the interest payable). The interest is deferred until the Westmark
Senior Notes are paid or cash collateralized in full and is, therefore,
reflected as an increase in principal amounts.

The acquisition was accounted for as a purchase. The Company has allocated
approximately $6.9 million of the total purchase price of $41.4 million to
identifiable intangible assets acquired, consisting of asset management
contracts, employment agreements, and trade name and the remaining $34.5
million was recorded as goodwill. The intangibles will be amortized over
their estimated useful lives or the lives of the underlying contracts, as
applicable, over periods ranging from five to ten years. Based on the
nature of the business, Westmark's market position, its workforce and other
factors, management estimates that the goodwill resulting from this
acquisition has a useful life of approximately thirty years and will be
amortized on a straight line basis over this period. Based upon future
experience, this useful life could be decreased. In that event, the charge
for intangibles and goodwill would be increased and earnings decreased.
(See Note 6).

F-8
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995
On April 11, 1995, the Company acquired certain assets of Langdon Rieder, a
tenant advisory business, for approximately $1.5 million in cash plus other
consideration. The purchase price has largely been allocated to intangibles
and goodwill, which will be amortized on a straight line basis over their
useful lives ranging from three to seven years.

The assets and liabilities of the acquired companies, along with the
related goodwill, intangibles and indebtedness, are reflected in the
accompanying consolidated financial statements as of December 31, 1995. The
results of operations of the acquired companies are included in the
consolidated results from the dates they were acquired, and were not
material to the Company's results for the year ended December 31, 1995. The
pro forma results of operations of the Company for the six months ended
June 30, 1995 and for the years ended December 31, 1995 and 1994, assuming
the acquisitions had occurred on January 1, 1994, would have been as
follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------
1995 1995 1994
---------------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Revenues........................... $220,093 $ 481,057 $ 452,284
Net income (loss).................. (5,459) 4,824 4,092
Net income (loss) per common and
common equivalent share
outstanding....................... (.48) .37 .32
</TABLE>

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INTERIM FINANCIAL INFORMATION

The accompanying unaudited consolidated financial statements as of June 30,
1996 and 1995 have been prepared in accordance with generally accepted
accounting principles and the requirements of Regulation S-X
for interim financial information. Accordingly, they do not include all of
the information required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments, consisting of normal recurring accruals, considered necessary
for a fair presentation, have been included. Operating results for the six
months ended June 30, 1996 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1996. The Company
provides for income taxes during interim periods based on the estimated
annual effective tax rate.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
the Company. All significant intercompany accounts and transactions have
been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and highly liquid investments
with an original maturity of less than three months.

INTANGIBLE ASSETS AND GOODWILL

The Company had approximately $214.0 million of intangible assets (other
than goodwill) arising from the Acquisition, comprised of a covenant not to
compete, a trademark, deferred financing costs and other items,

F-9
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995
which had been substantially amortized through December 31, 1993 partly
through shortening of their estimated lives. The change in useful lives
resulted in a $16.5 million increase in depreciation and amortization in
1993. Of the remaining intangibles of approximately $10.8 million at
December 31, 1995, approximately $4.8 million relates to deferred financing
costs, and $6.0 million are intangibles stemming from the Westmark and
Langdon Rieder acquisitions. (See Note 1) Other intangible assets at June
30, 1996 include approximately $4.1 million of deferred financing costs and
$5.3 million of intangibles stemming from the Westmark and Langdon Rieder
acquisitions.

Goodwill of $58.4 million and $59.5 million at June 30, 1996 and December
31, 1995, respectively, consists of $21.3 million and $21.6 million,
respectively, related to the Acquisition and $37.1 million and
$37.9 million, respectively, related to Westmark and other acquisitions.
Goodwill related to the Acquisition is being amortized over an estimated
useful life of 40 years. Goodwill related to the Westmark and other
acquisitions is being amortized over a useful life of 30 years.

The Company periodically evaluates the recoverability of the carrying
amounts of goodwill and other intangible assets. In this assessment the
Company considers the expected useful lives of its goodwill and intangibles
and the estimated future cash flows associated with these assets. If any of
the significant assumptions inherent in the estimated future cash flows
change in a material way due to market, economic and/or other factors, the
recoverability is assessed based on the revised assumptions, and any
resulting impairment would be recorded in the period such changes occur.

INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES

Investments in unconsolidated subsidiaries in which the Company does not
have majority control are accounted for under the equity method. (See Note
4)

INCOME RECOGNITION

Real estate commissions on sales are recorded as income upon close of
escrow or upon transfer of title. Real estate commissions on leases are
generally recorded as income upon date of occupancy. Realty advisor
incentive fees are recognized when earned under the provisions of the
related advisory agreements. Other commissions and fees are recorded as
income at the time the related services have been performed unless
significant future contingencies exist.

USE OF 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 certain assets and
liabilities at the date of the financial statements and the reported
amounts of certain revenues and expenses during the reporting period.
Actual results could differ from those estimates. Management believes that
these estimates provide a reasonable basis for the fair presentation of its
financial condition and results of operations.

CERTAIN SIGNIFICANT ESTIMATES

DEFERRED TAXES. The Company has net deferred tax assets of approximately
$87.5 million at December 31, 1995 all of which has been reserved through a
valuation allowance. The valuation allowance is based on management's
conclusion regarding the realizability of this asset on a more likely than
not basis,

F-10
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995
as defined in SFAS No. 109. In reaching this conclusion management
considered the Company's past operating results, the current year events
and trends, including the impact if any, of the acquisitions that were
concluded during the year and other factors. Management will continue to
evaluate the appropriateness of all or part of this valuation allowance on
a periodic basis and if its conclusions change with respect to
realizability, any necessary adjustments will be made at that time. The
impact of these adjustments, if any, could be material to the Company's
financial statements. (See Note 9)

PER SHARE INFORMATION

Earnings per share is calculated based on weighted average common shares
and dilutive stock options outstanding. When the Company is in a net loss
position for a particular reporting period, the Class C-1 and Class C-R
shares, as well as the stock options outstanding, are excluded as they are
anti-dilutive. This may result in variations in the weighted average number
of shares outstanding between periods.

Weighted average common and common equivalent shares outstanding are
comprised of the following:

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
30, YEAR ENDED DECEMBER 31,
--------------------- --------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Preferred stock:
Series A-1............. 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
Series A-2............. 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000
Series A-3............. 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
Common stock:
Class B-1.............. 1,854,106 1,850,000 1,850,034 1,850,000 1,850,000
Class B-2.............. 5,959,254 5,562,655 5,678,262 5,442,839 5,283,078
Class C-1.............. 800,000 -- 800,000 800,000 --
Class C-R.............. 800,000 -- 800,000 800,000 --
Stock options:
Service Providers Plan. 36,607 -- 40,679 40,713 --
---------- ---------- ---------- ---------- ----------
13,449,967 11,412,655 13,168,975 12,933,552 11,133,078
========== ========== ========== ========== ==========
</TABLE>

NEW ACCOUNTING PRONOUNCEMENTS

The Company adopted Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of," and Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," on January 1, 1996. These statements did not
have a material impact on the financial statements.

RESTATEMENT

Certain reclassifications have been made to the 1994 and 1993 financial
statements to conform to the 1995 presentation.

F-11
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

3.PROPERTY AND EQUIPMENT

Property and equipment is stated at cost and consists of the following (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1994
-------- --------
<S> <C> <C>
Land..................................................... $ 11,843 $ 11,843
Buildings and improvements............................... 26,553 26,646
Furniture and equipment.................................. 35,828 34,057
Equipment under capital leases........................... 7,916 4,569
-------- --------
82,140 77,115
Accumulated depreciation and amortization................ (37,640) (29,975)
-------- --------
Property and equipment, net.............................. $ 44,500 $ 47,140
======== ========
</TABLE>

The Company capitalizes expenditures that materially increase the life of
the related assets and charges the costs of maintenance and repairs to
expense. Upon sale or retirement, the costs and related accumulated
depreciation or amortization are eliminated from the respective accounts,
and the resulting gain or loss is included in income.

Depreciation is computed primarily using the straight-line method over
estimated useful lives ranging from 3 to 45 years. Leasehold improvements
are amortized over the term of the leases, excluding options to renew.
Equipment under capital leases is depreciated over the related term of the
leases.

4.OTHER ASSETS

Included in other assets at December 31, 1995 and 1994 are $1.7 million and
$2.4 million, respectively, of investments in limited partnerships managed
for a fee for institutional investors. The Company has a 1% general partner
interest in each of the limited partnerships which is accounted for under
the equity method. Although the Company is the general partner of each
limited partnership, it does not have majority control over investment
decisions in any of the limited partnerships. Management fee income from
the partnerships was approximately $11.0 million, $4.8 million and $5.7
million for the years ended December 31, 1995, 1994, and 1993,
respectively. The limited partnerships' total assets were approximately
$1.27 billion and $259.6 million and total liabilities were approximately
$162.4 million and $19.3 million as of December 31, 1995 and 1994,
respectively. The partnerships' net income (loss) for the years ended
December 31, 1995, 1994, and 1993 was approximately $22.0 million, $(18.3)
million and $2.5 million, respectively.

The general partner capital contributions for four of the partnerships are
in the form of unsecured notes payable totaling approximately $3.2 million
and $2.0 million at December 31, 1995 and 1994, respectively. (See Note 6)

F-12
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

Also included in other assets are investments in four and five
unconsolidated commercial real estate broker subsidiaries as of December
31, 1995 and 1994, respectively: 25% interest in CB Commercial Real Estate
Group Canada Inc.; 40% interest in CB Comercial de Mexico, S.A. de C.V.;
19% interest in DTZ Leung Pte Ltd.; and 50% interest in CB
Commercial/Hampshire L.L.C. On August 31, 1995, the Company increased its
interest in CB Commercial Real Estate Group of Hawaii, Inc., from 35.04% to
76%, thus making it a consolidated subsidiary. Investments in and advances
to (from) unconsolidated subsidiaries are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1994
------ ------
<S> <C> <C>
CB Commercial Real Estate Group Canada Inc................... $1,604 $1,523
CB Comercial de Mexico, S.A. de C.V.......................... (294) (221)
DTZ Leung Pte Ltd............................................ 210 --
CB Commercial/Hampshire L.L.C................................ 22 --
</TABLE>

Equity interest in earnings (losses) of the unconsolidated subsidiaries of
$180,000, $(44,000) and $35,000 for the years ended December 31, 1995, 1994
and 1993, respectively, have been included in "Operating, administrative
and other" on the Consolidated Statements of Operations.

In addition, included in other assets were notes receivable aggregating
$5.0 million and $5.2 million at December 31, 1995 and 1994, respectively.
During the second quarter of 1996, payment in full on the 9.0% note
totaling $2.7 million was received. The remaining 9.5% note has been
reclassified to current and is secured by a first mortgage lien on hotel
properties. Unpaid principal is due at maturity in July 1997.

5.EMPLOYEE BENEFIT PLANS

OPTION PLANS. One million shares of Class B-2 stock have been reserved for
issuance under the CB Commercial Holdings, Inc. 1990 Stock Option Plan.
Options for 1,000,000 shares, at an exercise price of $10 per share, were
granted pursuant to the plan and vest over one to four year periods,
expiring April 1999. Options for 960,000 shares are outstanding as of
December 31, 1995.

A total of 600,000 shares of Class B-1 stock have been reserved for
issuance under the CB Commercial Holdings, Inc. 1991 Service Providers
Stock Option Plan to enable the Company to pay certain service providers
with options to purchase shares of the Company's common stock instead of
with cash. In 1993 below market options were granted to certain directors
in partial payment of director fees. All options vested at grant date and
expire at various dates through October 2003. During 1995 options to
purchase 4,106 shares of Class B-1 stock were exercised. As of December 31,
1995, options to purchase 36,607 shares of Class B-1 stock are outstanding
at $262,500.

STOCK PURCHASE PLAN. The Company has a restricted stock purchase plan
covering certain key employees including senior management. A total of
550,000 shares of Class B-2 stock have been reserved for issuance under the
1996 Equity Incentive Plan of CB Holdings. The shares may be issued to
senior executives for a purchase price equal to the greater of $10 per
share or fair market value. The purchase price for shares under this plan
must be paid either in cash or by delivery of a full recourse promissory
note. In August 1996, the Company issued 422,773 of Class B-2 stock to
certain key employees at $10 per share and received promissory notes. The
Company expects to record compensation related to this issuance to the
extent the stock price was less than the prevailing market price.

F-13
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

BONUSES. The Company has bonus programs covering certain key employees,
including senior management. Awards are based on the position and
performance of the employee and the achievement of pre-established
financial, operating and strategic objectives. The amounts charged to
expense for bonuses were $10.2 million, $10.3 million and $8.7 million for
the years ended December 31, 1995, 1994, and 1993, respectively.

CAPITAL ACCUMULATION PLAN (THE "CAP PLAN"). The Cap Plan is a defined
contribution profit sharing plan under Section 401(k) of the Internal
Revenue Code and is the Company's only such plan. Under the Cap Plan, each
participating employee may elect to defer a portion of his or her earnings
and the Company may make additional contributions from the Company's
current or accumulated net profits to the Cap Plan in such amounts as
determined by the Board of Directors. The Company expensed, in connection
with the Cap Plan, $1.0 million, $1.0 million and $0.9 million for the
years ended December 31, 1995, 1994, and 1993, respectively. (See Note 8)

DEFERRED COMPENSATION PLAN (THE "DCP"). In the last quarter of 1993, the
Company's Board of Directors approved the adoption and implementation of
the DCP effective January 1, 1994. Under the DCP, a select group of
management and highly compensated employees can defer the payment of all or
a portion of their compensation (including any bonus). The DCP permits
participating employees to make an irrevocable election at the beginning of
each year to receive amounts deferred at a future date either in cash,
which accrues at a rate of interest determined in accordance with the DCP
and is an unsecured long term liability of the Company, or in newly issued
shares of Class B-2 stock of the Company which elections are recorded as
additions to Stockholders' Equity. For the year ended December 31, 1995
approximately $0.7 million (including interest) and $1.1 million has been
deferred in cash and stock, respectively, all of which was charged to
expense in 1995. The accumulated deferrals as of December 31, 1995 were
approximately $1.0 million in cash (including interest) and $1.6 million in
stock for a total of $2.6 million. The accumulated deferrals at June 30,
1996 were approximately $1.3 million in cash (including interest) and $2.6
million in stock, for a total of $3.9 million. Of the $2.6 million deferred
in stock, all but approximately $0.1 million, which will be issued in
September 1996, have been issued in Class B-2 stock. (See Note 8)

F-14
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

6.LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1994
-------- --------
<S> <C> <C>
Senior Term Loans, with interest at variable rates based
on LIBOR plus 2.5% (7% and 6.98% weighted average at
December 31, 1995 and 1994, respectively)
Senior Term Loan due in quarterly installments of $1,500
commencing June 30, 1995, $2,250 commencing June 30,
1996, and $2,750 commencing June 30, 1997, with the
remaining balance due March 31, 1999................... $130,021 $146,820
Mortgage Term Loan due in full March 31, 1999........... 18,340 18,070
Westmark Senior Notes, with interest at 12%, $1 million
due January 2, 1997, $5,722 million due June 30, 1998,
with the remaining balance due June 30, 2000............ 20,283 --
Senior Subordinated Term Loan, with interest at LIBOR
plus .25%
(6% and 6.5625% at December 31, 1995 and 1994,
respectively)
due in full on July 23, 2000............................ 67,896 63,694
Westmark Senior Subordinated Loan, with interest at 20%,
due in full July 31, 2001............................... 11,067 --
Inventoried Property Loan, secured by inventoried
property, with interest at
short-term commercial paper borrowing rate plus 3.5%
(9.37% and 8.5% at December 31, 1995 and 1994,
respectively) due in full April 30, 1997................ 7,470 7,470
Other Loans, secured by computer equipment with interest
at the prime rate plus .5% (9.25% at December 31, 1995). 164 --
Unsecured Notes Payable, with fixed interest ranging from
6% to 13% and variable interest at the higher of the
Applicable Federal Rate or Consumer Price Index plus 6%
(Note 4)................................................ 3,151 2,017
-------- --------
Total................................................... 258,392 238,071
Less current maturities................................. 8,250 4,500
-------- --------
$250,142 $233,571
======== ========
</TABLE>

Annual aggregate maturities of long-term debt as of December 31, 1995 are
as follows (in thousands): 1996--$8,250; 1997--$18,970; 1998--$16,722;
1999--$124,671; 2000--$75,561; and $14,218 thereafter.

The Company has two Senior Revolving Credit Lines of $10.0 million and
$20.0 million expiring in December 1996 and March 1999, respectively.
Commitment fees of 0.5% and 0.375% per annum are payable quarterly in
arrears on the unused portion of the lines. As of December 31, 1995, there
were no amounts outstanding under the lines. Up to $10.0 million of the
Senior Revolving Credit Lines may be used to secure letters of credit. As
of December 31, 1995, $1.0 million of letters of credit have been issued.

During 1994, the terms of the Senior Term Loans and Senior Subordinated
Term Loan were modified. Under the modified terms, the Company has the
right to invest a portion of its excess cash flow discretionarily and is
required to apply a portion of excess cash flow not available for
investments to the prepayment of principal. The other key provisions of the
debt modifications include: 1) lower scheduled principal payments on the
senior debt consisting of $1.5 million per quarter for four quarters,
commencing June 1995, increasing to $2.25 million for four quarters and
then increasing to $2.75 million per quarter until maturity; and 2)
interest on the senior secured indebtedness of LIBOR plus 2.5% and on the
senior

F-15
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995
subordinated indebtedness of LIBOR plus 0.25%. A portion of the interest
payments on the Senior Term Loans is deferred until maturity. All of the
interest on the Senior Subordinated Term Loan is deferred until repayment
of the Senior Term Loans. Deferred interest amounts are included in the
reported outstanding principal balances. These interest rates are effective
through the maturity of both the senior and the subordinated debt, in 1999
and 2000, respectively.

The Senior Term Loans, Mortgage Term Loan and the Senior Revolving Credit
Lines are secured by substantially all of the personal and real property
assets of CB Commercial Real Estate Group, Inc. and its subsidiaries.
Collectively these loans are guaranteed by CB Commercial Real Estate Group,
Inc. and all the common stock of CB Commercial Real Estate Group, Inc. is
pledged to secure the guarantee. The Senior Subordinated Term Loan is
secured by a second priority lien on the common stock of CB Commercial Real
Estate Group, Inc.

The Senior Term Loan agreement contains numerous restrictive covenants
that, among other things, limit the Company's ability to incur or repay
other indebtedness, make advances or loans to subsidiaries and other
entities, make capital expenditures, incur liens, enter into mergers or
effect other fundamental corporate transactions, sell its assets, or
declare dividends. In addition, the Company is required to meet certain
ratios relating to its adjusted net worth, level of indebtedness, fixed
charges and interest coverage. The Company is in compliance with all
covenants as of December 31, 1995.

The Company had an interest rate swap agreement on $50.0 million of its
Senior Subordinated Term Loan for the period from December 27, 1990 to
December 27, 1994 under which the Company made payments at the fixed rate
of 12.35% and received payments at a variable rate of LIBOR plus 4.0%.
During 1994, the net effect was to increase interest expense by
approximately 4.1 percentage points.

See Note 1 for indebtedness regarding the Westmark acquisition and Note 13
for contemplated amendments to the Company's long-term debt.

7.COMMITMENTS AND CONTINGENCIES

The Company is a party to a number of pending or threatened lawsuits
arising out of, or incident to, its ordinary course of business. Management
believes that any liability that may result from disposition of these
lawsuits will not have a material effect on the consolidated financial
position or results of operations of the Company.

Future minimum rental commitments for noncancelable operating leases at
December 31, 1995 are as follows (in thousands): 1996--$18,767; 1997--
$15,781; 1998--$13,505; 1999--$10,822; 2000--$8,448; and $14,430
thereafter.

Future minimum lease commitments for noncancelable capital leases at
December 31, 1995 are as follows (in thousands): 1996--$2,820; 1997--
$2,044; 1998--$482; 1999--$30; and $0 thereafter. The interest portion of
these payments totals $362. Capital lease payments due within one year are
classified as current liabilities.

Substantially all leases require the Company to pay maintenance, insurance
and property taxes, and generally may be renewed for five year periods.
Total rental expense under noncancelable operating leases was $22.5
million, $21.3 million and $22.2 million for the years December 31, 1995,
1994, and 1993, respectively.

F-16
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

8.STOCKHOLDERS' EQUITY

Stockholders' equity by class of stock as of December 31, 1995 and 1994 is
as follows:

<TABLE>
<CAPTION>
VOTES SHARES ORIGINAL PURCHASE
PER SHARES ISSUED AND PRICE OF SHARES
SHARE AUTHORIZED OUTSTANDING OUTSTANDING
----- ---------- ----------- -----------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1995
Preferred stock:
Series A-1................... 2 2,000,000 1,000,000 $10,000,000
Series A-2................... 1 4,000,000 2,000,000 20,000,000
Series A-3................... -- 2,000,000 1,000,000 10,000,000
---------- --------- -----------
8,000,000 4,000,000 $40,000,000
========== ========= ===========
Common stock:
Class B-1.................... 1 4,000,000 1,854,106 $18,532,892
Class B-2.................... 1 12,000,000 5,836,142 55,483,519
Class C-1.................... -- 1,600,000 800,000 8,000
Class C-R.................... -- 1,600,000 800,000 8,000
Class J...................... -- 2 2 --
---------- --------- -----------
19,200,002 9,290,250 $74,032,411
========== ========= ===========
DECEMBER 31, 1994
Preferred stock:
Series A-1................... 2 2,000,000 1,000,000 $10,000,000
Series A-2................... 1 4,000,000 2,000,000 20,000,000
Series A-3................... -- 2,000,000 1,000,000 10,000,000
---------- --------- -----------
8,000,000 4,000,000 $40,000,000
========== ========= ===========
Common stock:
Class B-1.................... 1 4,000,000 1,850,000 $18,500,000
Class B-2.................... 1 12,000,000 5,480,235 53,055,852
Class C-1.................... -- 1,600,000 800,000 8,000
Class C-R.................... -- 1,600,000 800,000 8,000
Class J...................... -- 2 2 --
---------- --------- -----------
19,200,002 8,930,237 $71,571,852
========== ========= ===========
</TABLE>

The preferred stock has a 10% preferential dividend which became cumulative
upon the earlier of the date on which certain thresholds were met or
January 2, 1992. Unpaid dividends were to bear interest at 12% if such
thresholds were met. Effective January 1, 1991 the Preferred Stockholders
waived their rights to dividends until such time as all amounts under the
Senior Term Loans and Senior Subordinated Term Loan are paid in full. (See
Note 13)

Extraordinary distributions to stockholders, if any, and any proceeds
available to stockholders from any sale of all or substantially all of the
Company's assets, or a merger or liquidation of the Company, will be
applied first to pay accumulated but unpaid preference dividends, should
they exist, and thereafter to the return of the original purchase price of
the shares outstanding to all stockholders on a pro rata basis, regardless
of class or series. After payment in full of the original purchase price,
additional distributions, if any, will be made on a share-for-share basis,
but each share of preferred stock will be counted as 60% of a share.

F-17
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

The Company's Class J stock does not participate in any dividends or
liquidation proceeds and has no voting rights except for the nomination and
election of Class J Directors or as required by law.

The Class C-1 and C-R shares are non-voting (other than as required by law)
and upon liquidation do not share in the return of the first $10 of capital
to stockholders to the extent of their par value of $.01 per share but
participate fully in proceeds in excess of $10 per share and in all
dividends declared on common stock.

In 1996 the Company issued 125,389 shares of its Class B-2 stock with a
stated value of approximately $1.0 million to the Cap Plan for the year
ended December 31, 1995, 8,501 shares to sales professionals who elected to
receive a portion of their annual premium on earnings payments in stock
rather than cash and 96,917 shares in connection with the DCP (including
bonuses deferred in stock). In 1995 the Company issued 159,432 shares of
its Class B-2 stock to the Cap Plan in connection with the profit sharing
contribution, 33,636 shares to sales professionals who elected to receive a
portion of their annual premium on earnings payments in stock rather than
cash and 162,839 shares in connection with the DCP, for a total of 355,907
Class B-2 shares issued in 1995. In 1994 the Company issued 134,270 shares
of its Class B-2 stock in connection with the profit sharing contribution.
(See Note 5)

As of June 30, 1996, 6,066,949 shares of Class B-2 stock were outstanding.

9.INCOME TAXES

The regular federal tax return loss carryforward is $221.0 million,
expiring in the years 2004 through 2008. Use of the federal tax loss
carryforward is limited to the lesser of 90.0% of the year's alternative
minimum taxable income or the remaining alternative minimum tax loss
carryforward. The loss carryforward for federal alternative tax purposes is
$218.0 million as of December 31, 1995 due to depreciation differences.
The current federal tax includes alternative minimum tax paid, for which
credit carryforwards are available, totaling $0.2 million as of December
31, 1995. Loss carryforwards for state income tax purposes expire in
various states beginning in 1996, 1997 and thereafter.

The tax provision for the years ended December 31, 1995, 1994 and 1993
consisted of the following:

<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current Federal............................................... $503 $ 47 $ --
Current State................................................. 338 105 112
---- ---- ----
$841 $152 $112
==== ==== ====
</TABLE>

The following is a reconciliation, stated as a percentage of pre-tax
income, of the U.S. statutory federal income tax rate to the Company's
effective tax rate on income (loss) from operations for the years ended
December 31, 1995, 1994 and 1993:

<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal statutory tax rate.................................. 34% 35% (35)%
Permanent differences, including goodwill, meals and enter-
tainment................................................... 14 9 1
State taxes, net of federal benefit......................... 3 6 (4)
Utilization of previously unrecognized net operating losses. (41) (48) --
Valuation allowance for net operating losses and other de-
ferred tax assets.......................................... -- -- 38
--- --- ---
Effective tax rate.......................................... 10% 2% 0%
=== === ===
</TABLE>

F-18
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

Beginning in 1992 the Company implemented Statement of Financial Accounting
Standards No. 109, the modified liability method of accounting for income
taxes. The resulting net deferred tax asset has been fully reserved except
for utilization against earnings as realized. Such asset is being
recognized to the extent of the tax effect of current taxable earnings.
Cumulative tax effects of temporary differences are shown below as of
December 31, 1995 and 1994 (in thousands):

<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
ASSET (LIABILITY)
Property and equipment.................................. $ 1,289 $ 1,655
Reserves for bad debts, building write down, legal ex-
penses................................................. 3,860 3,628
Intangible amortization................................. 1,213 4,211
Bonus, unexercised restricted stock, deferred compensa-
tion................................................... 1,901 1,819
Partnership income...................................... 608 705
Debt modification....................................... 1,549 1,470
Net operating loss carryforwards........................ 77,600 79,832
-------- --------
Total deferred tax assets............................. 88,020 93,320
Unconsolidated affiliates............................. (218) (218)
All other, net........................................ (273) (200)
-------- --------
Total deferred tax liabilities.......................... (491) (418)
-------- --------
Net deferred tax assets................................. 87,529 92,902
Valuation allowances.................................... (87,529) (92,902)
-------- --------
$ -- $ --
======== ========
</TABLE>

10.FIDUCIARY FUNDS

The consolidated balance sheets do not include the net assets of escrow,
agency and fiduciary funds, which amounted to $28.4 million and $24.2
million as of December 31, 1995 and 1994, respectively.

11.DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTES RECEIVABLE. The Company has determined that it is not practicable to
estimate the fair value of the notes receivable due to the cost involved in
developing the information as such notes are not publicly traded.

LONG-TERM DEBT. The Senior Term Loans, the Senior Subordinated Term Loan,
the Senior Revolving Credit Lines and the Westmark Senior Notes are
discussed in Note 6. Estimated fair values for these liabilities are not
presented because the Company determined it was impracticable to incur the
costs to engage an investment banker to perform a fair value analysis of
these liabilities.

The fair value of the Inventoried Property Loan discussed in Note 6 is not
materially different from the carrying value of the debt.

The Unsecured Notes Payable discussed in Note 6, which represent the
Company's share of unfunded equity participation, are not considered
financial instruments.

12.INDUSTRY SEGMENTS

The Company operates in two business segments--Property and User Services
and Investor Services. Property Services including brokerage (facilitating
sales and leases), investment properties (acquisitions and sales on behalf
of investors), corporate services, property management and real estate
market research. Investor Services includes mortgage banking (loan
origination and servicing), investment management and advisory services,
and valuation and appraisal services.

F-19
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenue
Property and User Services..................... $422,833 $400,250 $364,172
Investor Services.............................. 45,627 28,738 27,865
-------- -------- --------
$468,460 $428,988 $392,037
======== ======== ========
Operating income (loss)
Property and User Services..................... $ 26,142 $ 25,118 $(19,915)
Investor Services.............................. 3,701 460 (3,797)
-------- -------- --------
29,843 25,578 (23,712)
Interest income................................. 1,674 1,109 915
Interest expense................................ 23,267 17,362 14,240
-------- -------- --------
Income (loss) before provision for income taxes. $ 8,250 $ 9,325 $(37,037)
======== ======== ========
Depreciation and amortization
Property and User Services..................... $ 8,889 $ 7,485 $ 44,268
Investor Services.............................. 2,742 606 5,338
-------- -------- --------
$ 11,631 $ 8,091 $ 49,606
======== ======== ========
Capital expenditures (purchases)
Property and User Services..................... $ 1,987 $ 3,984 $ 4,509
Investor Services.............................. 156 266 332
-------- -------- --------
$ 2,143 $ 4,250 $ 4,841
======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
-----------------
1995 1994
-------- --------
<S> <C> <C>
Identifiable assets
Property and User Services................................ $ 85,182 $ 89,011
Investor Services......................................... 58,800 10,682
Corporate................................................. 46,972 50,407
-------- --------
$190,954 $150,100
======== ========
</TABLE>

Identifiable assets by industry segment are those assets used in the
Company operations in each segment. Corporate identified assets are
principally made up of cash and cash equivalents, inventoried property,
general prepaids and deferred taxes.

13.SUBSEQUENT EVENTS

ACQUISITION. Effective July 1, 1996, CB Commercial Mortgage Company, Inc.
("CB Mortgage"), a wholly-owned subsidiary of the Company, acquired all of
the outstanding capital stock of L.J. Melody & Company, a Texas
corporation, and L.J. Melody & Company of California, a Texas corporation

F-20
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995
("LJMCal"). On July 9, 1996, CB Mortgage merged into L.J. Melody & Company.
As a result, LJMCal is a wholly-owned subsidiary of L.J. Melody & Company.
L.J. Melody & Company and LJMCal (collectively "L.J. Melody") are
commercial mortgage banking firms engaged in loan origination and loan
servicing. L.J. Melody is headquartered in Houston, Texas.

The purchase consideration for L.J. Melody was $15.0 million, including a
$2.3 million note to the principal seller bearing 10.0% interest with
principal payments starting in 1998, $9.0 million in cash and $3.7 million
in additional notes. The notes bear interest of 10.0% per annum, with
maturities through June 2001. The $2.3 million note will be accounted for
as compensation over the term of the note. The payment of this note is
contingent upon the principal seller's continued employment with the
Company.

The acquisition was accounted for as a purchase. The Company allocated
approximately $3.7 million of the total purchase price to identifiable
intangible assets acquired, consisting of loan servicing and asset
management contracts, trade name, a covenant not to compete and other
intangibles. The remaining $9.0 million and a $1.5 million deferred tax
liability on identifiable intangibles were recorded to goodwill. The
intangibles are being amortized over their estimated useful lives or the
lives of the underlying contracts, as applicable, over periods ranging from
three to 13 years. Goodwill is being amortized on a straight line basis
over 30 years.

STOCK OFFERING. During August 1996 the Company announced its intent to
provide liquidity to its common stockholders by publicly registering its
common stock and to raise additional capital in an initial public offering
("IPO"). The proceeds from the IPO will be used to repay a portion of the
Company's senior secured indebtedness. The Company also announced a
recapitalization which will be contingent upon and executed in conjunction
with the IPO. The following summarizes the terms of the recapitalization:

. Class B-1 and B-2 stock of the Company will be converted into the common
stock to be issued in the IPO ("Common Stock") on a one-for-one basis;

. Class C-1 stock of the Company will be converted into the IPO Common
Stock at a conversion ratio based on the initial public offering price
per share;

. The Company will acquire all issued and outstanding shares of the Class
C-R and Class J stock at $.01 per share;

. The Preferred Stock is convertible into Common Stock at the holder's
option after the completion of this Offering at a ratio based upon the
per share market price of the Common Stock, ranging from .60 shares of
Common Stock per share of Preferred Stock at a market price of $30.00 or
more per share of Common Stock to .78 shares of Common Stock per share
of Preferred Stock at a market price of $10.00 to $21.99 per share of
Common Stock. No conversion of the Preferred Stock is permitted when the
market price of the Common Stock is below $10.00 per share.

DEBT MODIFICATIONS. In connection with the IPO, the Company's senior
secured lenders have agreed to amend the terms of the senior secured
indebtedness effective upon consummation of the IPO.

As amended, the senior secured indebtedness will bear interest at the rate
of LIBOR plus 2.5%, all of which interest will be payable currently, will
have a final maturity date of December 31, 2001 and will provide for
quarterly principal repayments of $2.625 million with a final payment of
$9.5 million on December 31, 2001.

F-21
<PAGE>

CB COMMERCIAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

The terms of the Company's senior subordinated indebtedness will also be
amended effective upon consummation of the IPO. As amended, from January 1,
1997 through December 31, 1998, the senior subordinated indebtedness will
bear interest at a rate of LIBOR plus 1.25%, all of which interest will be
payable currently. The interest rate will increase to LIBOR plus 2.0%
during 1999, LIBOR plus 3.0% during 2000 and LIBOR plus 4.0% during 2001
and subsequent periods. Interest in excess of LIBOR plus 1.25% would be
deferred and added to the principal balance of the senior subordinated
indebtedness until the final maturity of the senior subordinated
indebtedness. The senior subordinated indebtedness will have a final
maturity date of July 23, 2002. The senior subordinated indebtedness may be
prepaid at any time without penalty.

F-22
<PAGE>

WESTMARK REALTY ADVISORS L.L.C.

STATEMENTS OF INCOME

SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)

<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Revenues:
Fee income (note 2)................................... $10,873,613 $10,922,274
Other................................................. 44,225 51,714
----------- -----------
10,917,838 10,973,988
----------- -----------
Expenses:
Salaries and related expenses......................... 7,034,219 7,076,791
General and administrative expenses
(including interest expense of $61,088 in 1995 and
$21,979 in 1994)..................................... 1,324,877 1,085,573
Occupancy expense (note 4)............................ 569,546 676,671
Business promotion, travel and advertising expense.... 406,509 365,728
Office expense........................................ 269,447 298,679
----------- -----------
9,604,598 9,503,442
----------- -----------
Net income........................................... $ 1,313,240 $ 1,470,546
=========== ===========
</TABLE>

See accompanying notes to financial statements.

F-23
<PAGE>

WESTMARK REALTY ADVISORS L.L.C.

STATEMENTS OF CHANGES IN OWNERS' EQUITY (DEFICIT)

SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)

<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Owners' equity at beginning of six-month periods
ended June 30...................................... $ 2,108,326 $ 1,875,446
Net income.......................................... 1,313,240 1,470,546
Cash distributions.................................. (2,550,000) (1,055,000)
Noncash distribution................................ (2,177,244) --
------------ -----------
Owners' equity (deficit) at end of six-month periods
ended June 30...................................... $ (1,305,678) $ 2,290,992
============ ===========
</TABLE>

See accompanying notes to financial statements.

F-24
<PAGE>

WESTMARK REALTY ADVISORS L.L.C.

STATEMENTS OF CASH FLOWS

SIX-MONTH PERIODS ENDED JUNE 30, 1995 AND 1994
(UNAUDITED)

<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income........................................... $ 1,313,240 $1,470,546
----------- ----------
Adjustments to reconcile net income to net cash pro-
vided by operating activities:
Depreciation and amortization....................... 162,692 173,359
Distributions of income from TCW Realty Funds VB and
VIB................................................ 13,289 30,503
Decrease in fee income receivable................... 247,144 646,819
Increase in other assets............................ 65,959 51,326
Increase in accounts payable and other liabilities.. 634,208 800,456
Decrease in deferred leasing concessions............ (56,539) (56,539)
----------- ----------
Total adjustments................................. 1,066,753 1,645,924
----------- ----------
Net cash provided by operating activities......... 2,379,993 3,116,470
----------- ----------
Cash flows from investing activities--acquisition of
property and equipment............................... (148,268) (10,083)
----------- ----------
Net cash used in investing activities............. (148,268) (10,083)
----------- ----------
Cash flows from financing activities:
Repayments of notes payable to bank.................. (69,437) (81,480)
Distributions to owners.............................. (2,550,000) (1,055,000)
----------- ----------
Net cash used in financing activities............. (2,619,437) (1,136,480)
----------- ----------
Net (decrease) increase in cash................... (387,712) 1,969,907
Cash at beginning of six-month period ended June 30... 492,039 105,044
----------- ----------
Cash at end of six-month period ended June 30......... $ 104,327 $2,074,951
=========== ==========
Supplemental disclosures of cash flow information--in-
terest paid.......................................... $ 21,088 $ 21,979
=========== ==========
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITY:

As of the close of business on June 30, 1995, the Company was acquired by CB
Commercial Real Estate Group, Inc. In connection with such acquisition, a
distribution totaling $2,177,244 to the former owners was declared. Such amount
was paid by the Company subsequent to June 30, 1995.

See accompanying notes to financial statements.

F-25
<PAGE>

WESTMARK REALTY ADVISORS L.L.C.

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 1995 AND 1994
(UNAUDITED)

(1)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Westmark Realty Advisors, a California general partnership, was formed on
January 7, 1982 under the laws of the state of California and effective
January 1, 1995 became a limited liability company known as Westmark Realty
Advisors L.L.C. (hereinafter referred to as Westmark). The primary purpose
of Westmark is to provide real estate investment and property management
services. Effective as of the close of business on June 30, 1995, CB
Commercial Real Estate Group, Inc. acquired ownership of Westmark Realty
Advisors L.L.C.

INVESTMENT IN TCW REALTY FUNDS VB AND VIB

The equity method of accounting is used for Westmark's general partnership
interests in TCW Realty Fund VB, a limited partnership, and TCW Realty Fund
VIB, a limited partnership, as Westmark has significant influence as one of
the two general partners of these limited partnerships.

FEE INCOME

Fee income is recorded in the period in which it is earned.

PROPERTY AND EQUIPMENT

Property and equipment is carried at cost, less accumulated depreciation
and amortization.

Depreciation of furniture and equipment is calculated using the straight-
line method over the estimated useful lives (five years) of the assets.
Amortization of leasehold improvements is calculated using the straight-
line method over the shorter of the asset or remaining lease life.

INCOME TAXES

No income taxes are provided by Westmark since the owners' proportionate
shares of Westmark's operating results are includable in the owner's
respective income tax returns.

(2)FEE INCOME AND RECEIVABLE

Westmark has an agreement with Trust Company of the West (TCW) to form real
estate investment funds and to provide for the sale of participating
interests to qualified pension and profit sharing trusts or other permitted
investors for the purpose of investing in real estate or interests therein.
TCW serves as trustee of the various real estate investment funds. In
addition to providing real estate services to real estate investment funds,
TCW and Westmark provide similar services to individual pension plans that
invest in real estate.

Westmark has been engaged by TCW to provide administrative services and act
as investment consultant and portfolio manager. For these services,
Westmark is paid consulting fees up to a maximum of 85% of the fees
received by TCW from the real estate investment funds and pension plans.

(3)INVESTMENT IN TCW REALTY FUNDS VB AND VIB AND NOTES PAYABLE TO TCW REALTY
FUND VB

F-26
<PAGE>

WESTMARK REALTY ADVISORS L.L.C.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1995 AND 1996
(UNAUDITED)

(4)LEASES

In December 1991, Westmark moved its headquarters and the new landlord
granted leasing concessions to Westmark, including assumption of all of
Westmark obligations under the old lease and payment of a move-in bonus to
Westmark. These amounts have been deferred as leasing concessions and will
be amortized over the term of the lease.

Rental expense related to Westmark's office leases totaled $672,530 and
$779,655 for the six months ended June 30, 1995 and 1994, respectively, and
income related to space subleased by Westmark to other tenants totaled
$102,984 for the six months ended June 30, 1995 and June 30, 1994. Future
minimum rental commitments, net of minimum sublease payments for office
leases, are as follows:

<TABLE>
<CAPTION>
MINIMUM MINIMUM
RENTAL SUBLEASE
PAYMENTS PAYMENTS NET
----------- -------- -----------
<S> <C> <C> <C>
Year ending June 30:
July through December 1995................ $ 656,503 $131,820 $ 524,683
1996...................................... 1,539,150 167,332 1,371,818
1997...................................... 1,539,150 157,152 1,381,998
1998...................................... 1,501,278 161,079 1,340,199
1999...................................... 1,540,524 172,860 1,367,664
2000...................................... 1,540,524 72,025 1,468,499
Thereafter................................ 6,289,998 -- 6,289,998
----------- -------- -----------
$14,607,127 $862,268 $13,744,859
=========== ======== ===========
</TABLE>

(5)FAIR VALUE OF FINANCIAL INSTRUMENTS

CASH, RECEIVABLES AND ACCOUNTS PAYABLE

The fair value of these financial instruments is approximately equal to the
carrying value due to the short-term nature of the instruments.

NOTES PAYABLE

The fair value of the notes payable is approximately equal to the carrying
value as the interest rates on the notes payable to banks are variable
rates that are considered to be market rates, and the interest rates on the
notes payable to Fund VB are considered to be approximately equal to
current market rates for similar debt.

F-27
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Members of
Westmark Realty Advisors L.L.C.
(formerly Westmark Realty Advisors, a partnership):

We have audited the accompanying balance sheets of Westmark Realty Advisors
(a partnership) as of December 31, 1994 and 1993 and the related statements of
income, changes in partners' capital and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Westmark Realty Advisors
as of December 31, 1994 and 1993 and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.

KPMG Peat Marwick LLP

Los Angeles, California
February 25, 1995

F-28
<PAGE>

WESTMARK REALTY ADVISORS
(A PARTNERSHIP)

BALANCE SHEETS

DECEMBER 31, 1994 AND 1993

<TABLE>
<CAPTION>
1994 1993
---------- ----------
<S> <C> <C>
ASSETS
Cash...................................................... $ 492,039 $ 105,044
Fee income receivable (note 2)............................ 3,102,515 3,325,074
Property and equipment (note 3)........................... 623,311 788,333
Investment in TCW Realty Funds VB and VIB (note 4)........ 1,446,127 1,457,991
Other assets.............................................. 180,089 153,470
---------- ----------
$5,844,081 $5,829,912
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Notes payable to bank (note 5)............................ $ 381,430 $ 531,813
Notes payable to TCW Realty Fund VB (note 4).............. 952,172 952,172
Accounts payable and other liabilities.................... 1,046,117 1,001,442
---------- ----------
Total liabilities........................................ 2,379,719 2,485,427
Deferred leasing concessions (note 6)..................... 1,356,036 1,469,039
Partners' capital......................................... 2,108,326 1,875,446
---------- ----------
$5,844,081 $5,829,912
========== ==========
</TABLE>

See accompanying notes to financial statements.

F-29
<PAGE>

WESTMARK REALTY ADVISORS
(A PARTNERSHIP)

STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 1994 AND 1993

<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Revenues:
Fee income (note 2)................................... $22,035,883 $22,944,148
Other................................................. 151,293 378,683
----------- -----------
22,187,176 23,322,831
----------- -----------
Expenses:
Salaries and related expenses......................... 13,884,136 14,233,320
General and administrative expenses (including inter-
est expense of
$120,762 in 1994 and $95,688 in 1993)................ 2,259,390 2,857,709
Occupancy expense (note 6)............................ 1,369,230 1,507,359
Business promotion, travel and advertising expense.... 813,143 978,012
Office expense........................................ 553,397 670,858
----------- -----------
18,879,296 20,247,258
----------- -----------
Net income............................................ $ 3,307,880 $ 3,075,573
=========== ===========
</TABLE>

See accompanying notes to financial statements.

F-30
<PAGE>

WESTMARK REALTY ADVISORS
(A PARTNERSHIP)

STATEMENTS OF CHANGES IN PARTNERS' CAPITAL

YEARS ENDED DECEMBER 31, 1994 AND 1993

<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Balance at beginning of year.......................... $ 1,875,446 $ 2,042,274
Net income............................................ 3,307,880 3,075,573
Cash distributions.................................... (3,075,000) (3,242,401)
----------- -----------
Balance at end of year................................ $ 2,108,326 $ 1,875,446
=========== ===========
</TABLE>

See accompanying notes to financial statements.

F-31
<PAGE>

WESTMARK REALTY ADVISORS
(A PARTNERSHIP)

STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1994 AND 1993

<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................... $ 3,307,880 $ 3,075,573
----------- -----------
Adjustments to reconcile net income to net cash pro-
vided by operating activities:
Depreciation and amortization...................... 335,632 444,647
Equity in income from TCW Realty Funds VB and VIB.. (54,136) (20,824)
Distributions of income from TCW Realty Funds VB
and VIB........................................... 66,000 17,000
Decrease (increase) in fee income receivable....... 222,559 (256,124)
Increase in other assets........................... (26,619) (51,396)
Increase in accounts payable and other liabilities. 44,675 183,637
Decrease in deferred leasing concessions........... (113,003) (113,003)
----------- -----------
Total adjustments................................ 475,108 203,937
----------- -----------
Net cash provided by operating activities........ 3,782,988 3,279,510
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment............... (170,610) (214,751)
Investment in TCW Realty Fund VIB................... -- (75,000)
----------- -----------
Net cash used in investing activities............ (170,610) (289,751)
----------- -----------
Cash flows from financing activities:
Proceeds from notes payable to bank................. -- 400,000
Repayments of notes payable to bank................. (150,383) (84,626)
Distributions to partners........................... (3,075,000) (3,242,401)
----------- -----------
Net cash used in financing activities............ (3,225,383) (2,927,027)
----------- -----------
Net increase in cash............................. 386,995 62,732
Cash at beginning of year............................ 105,044 42,312
----------- -----------
Cash at end of year.................................. $ 492,039 $ 105,044
=========== ===========
Supplemental disclosures of cash flow information--
interest paid....................................... $ 38,000 $ 23,000
=========== ===========
</TABLE>

See accompanying notes to financial statements.

F-32
<PAGE>

WESTMARK REALTY ADVISORS
(A PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1994 AND 1993

(1)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Westmark Realty Advisors, a California general partnership, was formed on
January 7, 1982 under the laws of the state of California and effective
January 1, 1995 became a limited liability company known as Westmark Realty
Advisors, L.L.C. (hereinafter referred to as Westmark). The primary purpose
of Westmark is to provide real estate investment and property management
services.

INVESTMENT IN TCW REALTY FUNDS VB AND VIB

FEE INCOME

Fee income is recorded in the period in which it is earned.

ALLOCATION OF INCOME AND LOSSES

Net income and losses are allocated to the partners in accordance with the
partnership agreement, in proportion to their respective ownership
percentages.

PROPERTY AND EQUIPMENT

Property and equipment is carried at cost, less accumulated depreciation
and amortization.

INCOME TAXES

No income taxes are provided by Westmark since the partners' proportionate
shares of Westmark's operating results are includable in their respective
income tax returns.

(2)FEE INCOME AND RECEIVABLE

F-33
<PAGE>

WESTMARK REALTY ADVISORS
(A PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1993

(3)PROPERTY AND EQUIPMENT

Property and equipment as of December 31 is summarized as follows:

<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Furniture and equipment............................ $ 2,980,926 $ 2,853,643
Leasehold improvements............................. 72,467 96,623
----------- -----------
Total cost........................................ 3,053,393 2,950,266
Less accumulated depreciation and amortization..... (2,430,082) (2,161,933)
----------- -----------
$ 623,311 $ 788,333
=========== ===========
</TABLE>

(4)INVESTMENT IN TCW REALTY FUNDS VB AND VIB AND NOTES PAYABLE TO TCW REALTY
FUND VB

Westmark and an affiliate of TCW are general partners in TCW Realty Fund
VB, a limited partnership (Fund VB), and TCW Realty Fund VIB, a limited
partnership (Fund VIB). Westmark's percentage interest is .85% for Fund VB
and Fund VIB. The general partner capital contributions for Fund VB are in
the form of notes payable. As of December 31, 1994 and 1993, Westmark has
21 notes payable outstanding totaling $952,172 with interest rates ranging
from 8.25% to 9.01%. The interest, and then the principal, will be paid as
Westmark receives cash distributions of operating cash flow from Fund VB.
Any unpaid interest and principal will be due on December 31, 1997.

(5)NOTES PAYABLE TO BANK

Notes payable to bank as of December 31 consists of the following:

<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Principal of $6,667, payable monthly, and remaining
principal balance due on December 1, 1998. Interest
payable monthly at the prime rate (8.5% and 6.0% at
December 31, 1994 and 1993, respectively) plus .5%.... $321,222 $400,000
Principal of $6,021, payable monthly, and remaining
principal balance due on November 1, 1995. Interest
payable monthly at the prime rate (8.5% and 6.0% at
December 31, 1994 and 1993, respectively) plus 1%..... 60,208 131,813
-------- --------
$381,430 $531,813
======== ========
</TABLE>

Principal payments are as follows:

<TABLE>
<S> <C>
1995............................................................ $140,208
1996............................................................ 80,000
1997............................................................ 80,000
1998............................................................ 81,222
--------
Total......................................................... $381,430
========
</TABLE>

(6)LEASES

In December 1991, Westmark moved its headquarters and the new landlord
granted leasing concessions to Westmark, including assumption of all of
Westmark obligations under the old lease and payments of a move-in bonus to
Westmark. These amounts have been deferred as leasing concessions and will
be amortized over the term of the lease.

F-34
<PAGE>

WESTMARK REALTY ADVISORS
(A PARTNERSHIP)

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1993

Rental expense related to Westmark's office leases totaled $1,568,698 and
$1,575,241 for the years ended December 31, 1994 and 1993, respectively,
and income related to space subleased by Westmark to other tenants totaled
$199,468 and $68,508 for the years ended December 31, 1994 and 1993,
respectively. Future minimum rental commitments, net of minimum sublease
payments for office leases, are as follows:

<TABLE>
<CAPTION>
MINIMUM MINIMUM
RENTAL SUBLEASE
PAYMENTS PAYMENTS NET
----------- -------- -----------
<S> <C> <C> <C>
Year ending December 31:
1995...................................... $ 1,313,007 $206,016 $ 1,106,991
1996...................................... 1,539,150 167,332 1,371,818
1997...................................... 1,539,150 157,152 1,381,998
1998...................................... 1,501,278 161,079 1,340,199
1999...................................... 1,540,524 172,860 1,367,664
Thereafter................................ 7,830,522 72,025 7,758,497
----------- -------- -----------
$15,263,631 $936,464 $14,327,167
=========== ======== ===========
</TABLE>

(7)FAIR VALUE OF FINANCIAL INSTRUMENTS

CASH RECEIVABLES AND ACCOUNTS PAYABLE

The fair value of these financial instruments is approximately equal to the
carrying value due to the short-term nature of the instruments.

NOTES PAYABLE

The fair value of the notes payable is approximately equal to the carrying
value as the interest rates on the notes payable to banks are variable
rates that are considered to be market rates, and the interest rates on
the notes payable to Fund VB are considered to be approximately equal to
current market rates for similar debt.

F-35
<PAGE>

L.J. MELODY & COMPANY

CONSOLIDATED BALANCE SHEET

JUNE 30, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
1996
----------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents......................................... $ 375,706
Investment in mutual funds, at fair value......................... 2,403,590
Accounts receivable and other current assets...................... 480,178
Short-term investment in note receivable.......................... --
----------
Total current assets............................................. 3,259,474
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net.......................... 147,590
NOTES RECEIVABLE FROM OFFICER...................................... --
OTHER ASSETS, net.................................................. 44,856
----------
TOTAL ASSETS..................................................... $3,451,920
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued employee benefits......................................... $ 159,735
Accounts payable and accrued expenses............................. 127,575
Warehouse credit line............................................. --
----------
Total current liabilities........................................ 287,310
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, par value $100 per share, 3,000 shares authorized,
1,350 shares issued
and outstanding.................................................. 135,000
Unrealized depreciation on investment in mutual funds............. (75,021)
Retained earnings................................................. 3,104,631
----------
3,164,610
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY....................... $3,451,920
==========
</TABLE>

F-36
<PAGE>

L.J. MELODY & COMPANY

CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS

FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
1996
-----------
<S> <C>
REVENUES:
Loan placement and brokerage...................................... $ 958,096
Loan servicing and asset management............................... 987,016
Other income...................................................... 350,846
-----------
2,295,958
EXPENSES:
Salaries and other compensation................................... 2,536,662
General and administrative........................................ 920,922
Depreciation and amortization..................................... 35,711
-----------
3,493,295
NET LOSS........................................................... (1,197,337)
RETAINED EARNING AT BEGINNING OF PERIOD............................ 4,766,968
DISTRIBUTIONS TO SHAREHOLDERS...................................... (465,000)
-----------
RETAINED EARNINGS AT END OF PERIOD................................. $ 3,104,631
===========
</TABLE>

F-37
<PAGE>

L.J. MELODY & COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
1996
------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................................ $ (1,197,337)
Adjustments to reconcile net loss to net cash used in operating
activities--
Depreciation and amortization.................................. 35,711
Equity in loss of joint venture................................ 22,187
Loss on disposal of equipment.................................. 148,877
Reinvestment of dividends on investment in mutual funds........ (62,375)
Origination of multifamily mortgage loans for sale............. (20,550,000)
Proceeds from sales of multifamily mortgage loans.............. 27,950,000
Changes in operating assets and liabilities--
Accounts receivable and other current assets................... 244,998
Accrued employee benefits...................................... (344,335)
Accounts payable and accrued expenses.......................... (473,141)
------------
Net cash provided by (used in) operating activities............. 5,774,585
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment........................................... --
Payments received on notes receivable from officers............. 361,749
Purchase of other assets........................................ (4,092)
------------
Net cash provided by (used in) investing activities............. 357,657
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholders................................... (465,000)
Payment of dividends............................................ --
Advances on warehouse line...................................... 20,550,000
Payments on warehouse line...................................... (27,950,000)
------------
Net cash provided by (used in) financing activities............. (7,865,000)
------------
NET DECREASE IN CASH AND CASH EQUIVALENTS........................ (1,732,758)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD................. 2,108,464
------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD....................... $ 375,706
============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for interest........................ $ 218,967
Cash paid during the period for state income taxes.............. $ 43,192
</TABLE>

F-38
<PAGE>

L.J. MELODY & COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 1996
(UNAUDITED)

1.SIGNIFICANT ACCOUNTING MATTERS:

L.J. Melody & Company (the Company) is a commercial mortgage banker and is
registered with the Securities and Exchange Commission as an investment
adviser. The Company services commercial mortgages and manages real estate
investments for institutional clients. As of June 30, 1996, the Company was
servicing loans for others with principal balances aggregating
approximately $1.9 billion. During the six-month period ended June 30,
1996, approximately 25 percent of loan servicing and asset management fees
and 40 percent of loan placement and brokerage fees were earned from one of
the Company's clients. In addition, approximately 45 percent of loan
servicing and asset management fees and 10 percent of loan placement and
brokerage fees were earned from two separate clients. The Company primarily
operates in the southwestern United States; however, it pursues mortgage
banking operations in other areas of the country as they arise. L.J. Melody
Investments, Inc., a majority-owned subsidiary, operates as a commercial
mortgage broker doing business in Colorado. The following is a summary of
significant accounting matters.

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiary. Minority interest amounts relating to
such subsidiary are not material to the financial statements. All
significant intercompany transactions and balances have been eliminated
upon consolidation. In the opinion of management, the accompanying
consolidated financial statements reflect all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of
financial position and results of operation.

The consolidated financial statements for the interim period have been
prepared 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, although the Company believes that the
disclosures are adequate to make the information not misleading.

USE OF 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 assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

NEW ACCOUNTING STANDARD REGARDING IMPAIRMENT

In March 1995 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." Effective January 1, 1996, the Company adopted SFAS No. 121.
The adoption of this standard did not have a material effect on the
Company's financial position or results of operations.

F-39
<PAGE>

L.J. MELODY & COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1996
(UNAUDITED)

NEW ACCOUNTING STANDARD REGARDING ACCOUNTING FOR TRANSFERS AND SERVICING OF
FINANCIAL ASSETS AND EXTINGUISHMENT OF LIABILITIES

In June 1996 the FASB issued SFAS No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishment of Liabilities." This
statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishment of liabilities. This
statement is required to be adopted by the Company in 1997. Management of
the Company has not yet determined the impact, if any, that the adoption of
this statement will have on the Company's financial position or results of
operations.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and money market mutual funds,
the fair value of which approximates cost. The Company considers all
investments with an original maturity of less than three months to be cash
equivalents.

INVESTMENTS IN MUTUAL FUNDS

The Company accounts for its investments in mutual funds in accordance with
SFAS No. 115, "Accounting for Investments in Debt and Equity Securities,"
whereby investments classified as "available for sale" are reported at fair
value, with unrealized appreciation and depreciation excluded from earnings
and reported as a separate component of shareholders' equity. During the
six months ended June 30, 1996, interest received on the Company's
investments of $62,375 was reinvested in the mutual funds. Additionally,
unrealized appreciation/depreciation on investments reflected as a separate
component of shareholders' equity decreased $101,711 during the six months
ended June 30, 1996.

EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment and leasehold improvements are carried at cost. Direct costs
incurred in connection with software development for internal use are
capitalized. Depreciation and amortization are computed using the straight-
line or double-declining methods over the assets' estimated useful lives,
which range from three to ten years.

LOAN PLACEMENT AND BROKERAGE REVENUES

Revenue from loan placement and brokerage is recognized at the time that a
noncontingent commitment is obtained and the Company has no significant
remaining obligations for performance in connection with the transaction.
Loan placement and brokerage expenses are charged to income as incurred.

LOAN SERVICING AND ASSET MANAGEMENT REVENUES

F-40
<PAGE>

L.J. MELODY & COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1996
(UNAUDITED)

FEDERAL INCOME TAXES

The Company operates under Subchapter S of the Internal Revenue Code and,
consequently, is not subject to federal income tax. The shareholders
include the Company's taxable income or loss in their individual tax
returns.

2.INVESTMENT IN JOINT VENTURE:

In June 1994 the Company entered into a joint venture with W. L. Case
Holding Company (Case), an Ohio corporation, to form WLC Real Estate
Finance L.L.C. (WLC), a Delaware limited liability company. WLC was formed
for the purpose of developing and originating mortgage loans under programs
developed by certain lenders. The Company and Case each contributed
$100,000 for 50 percent interests in WLC. Case applied to Freddie Mac and
received approval as a Multifamily Program Plus Seller/Servicer. In
connection therewith, the Company signed an agreement effectively
guaranteeing the performance of Case to Freddie Mac of any and all
obligations, as defined, up to a maximum amount of $1,000,000. WLC has
entered into an exclusive mortgage correspondent agreement dated December
1, 1994, whereby WLC will serve as Case's exclusive mortgage correspondent
in connection with the origination, underwriting and closing of commercial
and multifamily mortgage loans for certain lenders.

WLC is jointly managed by Case and the Company and, accordingly, is
accounted for under the equity method of accounting. During the six months
ended June 30, 1996, the Company recorded equity in losses of WLC of
approximately $22,000, representing its pro rata share of WLC's net loss.
Such amount has been included as a component of other income on the
accompanying consolidated statements of operations while the Company's net
investment in the joint venture of approximately $13,000 at June 30, 1996,
has been included as a component of other assets in the accompanying
consolidated balance sheet.

3.WAREHOUSE CREDIT LINE:

During 1994, the Company entered into a warehouse credit line (the Line)
with a bank to provide funding for 99 percent of the principal balance of
multifamily loans originated and warehoused for sale to Freddie Mac. Under
the terms of the Line, interest is paid on outstanding borrowings at the
Freddie Mac-required net yield as specified in the Freddie Mac purchase
contract issued to the Company and borrowings are repaid upon purchase of
the notes receivable from Freddie Mac. The Line includes covenants which
require the Company to meet certain ratios and levels of tangible net worth
and debt coverage and maintain a minimum loan servicing portfolio. As of
June 30, 1996, the Company was in compliance with the covenants contained
in the Line. At June 30, 1996, no amount was outstanding under the line.

4.RELATED-PARTY TRANSACTIONS:

At June 30, 1995, the Company had unsecured notes receivable from two
officers (who are also shareholders of the Company) in the amounts of
$363,245 and $16,622. The outstanding borrowings have maturity dates
ranging from December 31, 1995, to December 31, 1999, and bear interest
ranging from 7.5 percent to 9 percent payable annually in arrears. The
Company recognized $14,622 of interest income on these notes for the six
months ended June 30, 1996. In May 1996 the notes, including accrued
interest, were repaid in full.

L.J. Melody & Company of California (LJMCal) is owned 99 percent by one of
the shareholders of the Company. The Company provides loan servicing on
certain loans obtained by LJMCal for which services

F-41
<PAGE>

L.J. MELODY & COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1996
(UNAUDITED)

the Company earned $130,608 during the six months ended June 30, 1996. The
Company also provides accounting and other administrative services for
LJMCal for which the Company received $36,000 during the six months ended
June 30, 1996.

5.REGULATORY REQUIREMENTS:

The Company is a Department of Housing and Urban Development (HUD) approved
Title II mortgagee as well as a Freddie Mac-approved Multifamily Program
Plus Seller/Servicer. The Company is subject to the minimum net worth
requirements of HUD and Freddie Mac. At June 30, 1996, the Company's net
worth, as calculated in accordance with HUD and Freddie Mac guidelines, was
in excess of the minimum required net worth. Additionally, as of June 30,
1996, the Company carried errors and omission insurance coverage of
$5,000,000 and fidelity bond insurance coverage of $4,000,000, which are in
excess of the minimum required insurance coverage of each program.

As a Freddie Mac Multifamily Program Plus Seller/Servicer, the Company is
obligated to advance funds to ensure the timely payment of insurance and
taxes on loans serviced on behalf of Freddie Mac. Advances are recovered
through subsequent collections from the borrower or from Freddie Mac in the
event of default by the borrower. At June 30, 1996, no amount was
outstanding for advances made by the Company for insurance and taxes on
behalf of Freddie Mac.

6.SUBSEQUENT EVENT:

Effective July 1, 1996, CB Commercial Mortgage Company, Inc. (CB Mortgage),
a wholly owned subsidiary of CB Commercial Real Estate Group, Inc.,
acquired all of the outstanding capital stock of the Company and of LJMCal.
Concurrent with this transaction the Company distributed approximately
$3.9 million of assets to its shareholders. On July 9, 1996, CB Mortgage
merged into the Company, with the Company surviving the merger. As a result
of the merger, LJMCal became a wholly owned subsidiary of the Company, and
it is intended that at the end of 1996 LJMCal will be merged into the
Company.

F-42
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
L.J. Melody & Company:

We have audited the accompanying consolidated balance sheet of L.J. Melody &
Company (a Texas corporation) and subsidiary as of December 31, 1995, and the
related consolidated statements of operations and retained earnings and cash
flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements 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 financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of L.J. Melody & Company and
subsidiary as of December 31, 1995, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.

Houston, Texas Arthur Andersen llp
March 18, 1996 (except with
respect to the matter discussed
in Note 10, as to which the date
is July 12, 1996)

F-43
<PAGE>

L.J. MELODY & COMPANY

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1995

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................ $ 2,108,464
Investment in mutual funds, at fair value................ 2,442,926
Accounts receivable and other current assets............. 725,176
Short-term investment in notes receivable................ 7,400,000
-----------
Total current assets.................................... 12,676,566
EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Furniture and fixtures................................... 558,879
Computer hardware and software........................... 750,672
Leasehold improvements................................... 229,404
-----------
1,538,955
Less--Accumulated depreciation and amortization.......... (1,206,777)
-----------
332,178
NOTES RECEIVABLE FROM OFFICER............................. 361,749
OTHER ASSETS, net......................................... 62,951
-----------
Total assets............................................ $13,433,444
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued employee benefits................................ $ 504,070
Accounts payable and accrued expenses.................... 600,716
Warehouse credit line.................................... 7,400,000
-----------
Total current liabilities............................... 8,504,786
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY:
Common stock, par value $100 per share, 3,000 shares au-
thorized,
1,350 shares issued and outstanding..................... 135,000
Unrealized appreciation on investment in mutual funds.... 26,690
Retained earnings........................................ 4,766,968
-----------
4,928,658
-----------
Total liabilities and shareholders' equity.............. $13,433,444
===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-44
<PAGE>

L.J. MELODY & COMPANY

CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS

FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<S> <C>
REVENUES:
Loan placement and brokerage....................................... $4,395,956
Loan servicing and asset management................................ 2,035,147
Other income....................................................... 643,002
----------
7,074,105
EXPENSES:
Salaries and other compensation.................................... 4,453,309
General and administrative......................................... 1,416,630
Depreciation and amortization...................................... 164,897
----------
6,034,836
NET INCOME.......................................................... $1,039,269
==========
RETAINED EARNINGS AT BEGINNING OF YEAR.............................. $4,254,490
DISTRIBUTIONS TO SHAREHOLDERS....................................... (526,791)
NET INCOME.......................................................... 1,039,269
----------
RETAINED EARNINGS AT END OF YEAR.................................... $4,766,968
==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-45
<PAGE>

L.J. MELODY & COMPANY

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................... $ 1,039,269
Adjustments to reconcile net income to net cash used in operating
activities--
Depreciation and amortization.................................. 164,897
Equity in loss of joint venture................................ 37,403
Reinvestment of dividends on investment in mutual funds........ (128,474)
Origination of multifamily mortgage loans for sale............. (33,169,500)
Proceeds from sales of multifamily mortgage loans.............. 25,769,500
Changes in operating assets and liabilities--
Accounts receivable and other current assets.................. 133,598
Accrued employee benefits..................................... 192,229
Accounts payable and accrued expenses......................... (196,138)
-----------
Net cash used in operating activities........................ (6,157,216)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment............................................ (103,747)
Payments received on notes receivable from officers.............. 18,118
Purchase of other assets......................................... (13,499)
-----------
Net cash used in investing activities........................ (99,128)
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholders.................................... (526,791)
Advances on warehouse line....................................... 33,169,500
Payments on warehouse line....................................... (25,769,500)
-----------
Net cash provided by financing activities.................... 6,873,209
-----------
NET INCREASE IN CASH AND CASH EQUIVALENTS......................... 616,865
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.................... 1,491,599
-----------
CASH AND CASH EQUIVALENTS AT END OF YEAR.......................... $ 2,108,464
===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for interest........................... $ 247,425
===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-46
<PAGE>

L.J. MELODY & COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1995

1.SIGNIFICANT ACCOUNTING MATTERS:

L.J. Melody & Company (the Company) is a commercial mortgage banker and is
registered with the Securities and Exchange Commission as an investment
adviser. The Company services commercial mortgages and manages real estate
investments for institutional clients. As of December 31, 1995, the Company
was servicing loans for others with principal balances aggregating
approximately $2.1 billion. Approximately 28 percent of loan servicing and
asset management fees and 41 percent of loan placement and brokerage fees
were earned from one of the Company's clients. In addition, approximately
44 percent of loan servicing fees and asset management fees and
approximately 11 percent of loan placement and brokerage fees were earned
from two separate clients. The Company primarily operates in the
southwestern United States; however, it pursues mortgage banking operations
in other areas of the country as they arise. L.J. Melody Investments, Inc.,
a majority-owned subsidiary, operates as a commercial mortgage broker doing
business in Colorado. The following is a summary of significant accounting
matters.

PRINCIPLES OF CONSOLIDATION

USE OF 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 assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

NEW ACCOUNTING STANDARD REGARDING IMPAIRMENT

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." This statement established the recognition and measurement standards
related to the impairment of long-lived assets. Effective January 1, 1996,
the Company adopted SFAS No. 121. The adoption of this standard did not
have a material effect on the Company's financial position or results of
operations.

NEW ACCOUNTING STANDARD REGARDING ACCOUNTING FOR MORTGAGE SERVICING RIGHTS

In May 1995, the Financial Accounting Standards Board issued SFAS No. 122,
"Accounting for Mortgage Servicing Rights." This statement requires that a
mortgage banking enterprise recognize as separate assets rights to service
mortgage loans for others, however those servicing rights are acquired.
This statement is required to be adopted by the Company in 1996. Management
of the Company has not yet determined the impact, if any, that the adoption
of this statement will have on the Company's financial position or results
of operations.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and money market mutual funds,
the fair value of which approximates cost.

F-47
<PAGE>

L.J. MELODY & COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

INVESTMENTS IN MUTUAL FUNDS

The Company accounts for its investments in mutual funds in accordance with
SFAS No. 115, "Accounting for Investments in Debt and Equity Securities,"
whereby investments classified as "available for sale" are reported at fair
value, with unrealized appreciation and depreciation excluded from earnings
and reported as a separate component of shareholders' equity. During the
year ended December 31, 1995, interest received on the Company's
investments of $128,474 was reinvested in the mutual funds. Additionally,
unrealized appreciation/depreciation on investments reflected as a separate
component of shareholders' equity increased $216,874 during the year ended
December 31, 1995.

EQUIPMENT AND LEASEHOLD IMPROVEMENTS

LOAN PLACEMENT AND BROKERAGE REVENUES

LOAN SERVICING AND ASSET MANAGEMENT REVENUES

Loan servicing revenue represents a participation in interest collections
on loans serviced for investors, normally based upon a stipulated
percentage of the outstanding monthly principal balance of such loans.
These revenues are credited to income as monthly principal and interest
payments are collected from mortgagors, and expenses of loan servicing are
charged to income as incurred. Also included in loan servicing are fees
earned under asset management contracts. At December 31, 1995, escrow funds
of $38,297,945, held in connection with servicing activities, were on
deposit in bank accounts held in trust for investors and are not included
in the accompanying balance sheet.

FEDERAL INCOME TAXES

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments are either carried at fair value or
cost. The carrying amounts of financial instruments reported at cost
approximate their fair values because of the short maturity, short lapse of
time between their issuance and year-end, and market interest rates, as
applicable, of those instruments.

F-48
<PAGE>

L.J. MELODY & COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

2.ACCOUNTS RECEIVABLE AND OTHER CURRENT ASSETS:

The components of accounts receivable and other current assets at December
31, 1995 are as follows:

<TABLE>
<CAPTION>
<S> <C>
Loan placement and brokerage fees receivable....................... $512,529
Asset management fees receivable................................... 29,222
Other receivables.................................................. 170,087
Other current assets............................................... 13,338
--------
$725,176
========
</TABLE>

3.SHORT-TERM INVESTMENT IN NOTES RECEIVABLE:

On December 20, 1995, the Company originated and funded two notes
receivable for $2,300,000 and $5,100,000, respectively, through advances on
its warehouse credit line (see Note 4). The Company had received purchase
commitments from the Federal Home Loan Mortgage Corporation (Freddie Mac)
as of the date of origination and subsequently sold the notes receivable to
Freddie Mac on January 19, 1996, and February 28, 1996, respectively.

4.INVESTMENT IN JOINT VENTURE:

In June 1994, the Company entered into a joint venture with W. L. Case
Holding Company (Case), an Ohio corporation, to form WLC Real Estate
Finance L.L.C. (WLC), a Delaware limited liability company. WLC was formed
for the purpose of developing and originating mortgage loans under programs
developed by certain lenders. The Company and Case each contributed
$100,000 for 50 percent interests in WLC. Case applied to Freddie Mac and
received approval as a Multifamily Program Plus Seller/Servicer. In
connection therewith, the Company signed an agreement effectively
guaranteeing the performance of Case to Freddie Mac of any and all
obligations, as defined, up to a maximum amount of $1,000,000. WLC has
entered into an exclusive mortgage correspondent agreement dated December
1, 1994, whereby WLC will serve as Case's exclusive mortgage correspondent
in connection with the origination, underwriting and closing of commercial
and multifamily mortgage loans for certain lenders.

WLC is jointly managed by Case and the Company and, accordingly, is
accounted for under the equity method of accounting. During the period
ended December 31, 1995, the Company recorded equity in losses of WLC of
approximately $37,000 representing its pro rata share of WLC's net loss.
Such amount has been included as a component of other income on the
accompanying consolidated statement of operations while the Company's net
investment in the joint venture of approximately $36,000 at December 31,
1995, has been included as a component of other assets in the accompanying
consolidated balance sheet.

5.WAREHOUSE CREDIT LINE:

During 1994, the Company entered into a warehouse credit line (the Line)
with a bank to provide funding for 99 percent of the principal balance of
multifamily loans originated and warehoused for sale to Freddie Mac. Under
the terms of the Line, interest is paid on outstanding borrowings at the
Freddie Mac-required net yield as specified in the Freddie Mac purchase
contract issued to the Company and borrowings are repaid upon purchase of
the notes receivable from Freddie Mac (see Note 2). The Line includes
covenants which require the Company to meet certain ratios and levels of
tangible net worth and debt coverage and maintain a minimum loan servicing
portfolio. As of December 31, 1995, the Company was in compliance with the
covenants contained in the Line. At December 31, 1995, $7,400,000 was
outstanding under the line.

F-49
<PAGE>

L.J. MELODY & COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

6.PROFIT-SHARING PLANS:

The Company has a 401(k) profit-sharing plan under which all employees of
the Company and its affiliates are eligible for participation after
completing six months of service. Participating employees can elect to make
contributions to the plan on a pretax salary deduction basis in accordance
with the provisions of Section 401(k) of the Internal Revenue Code. Under
the provisions of the plan, the Company may make discretionary matching
contributions. The Company's contribution to the plan in 1995 was $94,300.

7.RELATED-PARTY TRANSACTIONS:

At December 31, 1995, the Company had unsecured notes receivable from one
officer (who is also a shareholder) in the amounts of $31,749 and $330,000.
The outstanding borrowings have a maturity date of December 31, 1999, and
bear interest ranging from 7.5 percent to 9 percent payable annually in
arrears. The Company recognized $27,742 of interest income on these notes
in 1995.

L.J. Melody & Company of California (LJMCal) is owned 99 percent by one of
the shareholders of the Company. The Company provides loan servicing on
certain loans obtained by LJMCal for which services the Company earned
$261,246 during 1995. The Company also provides accounting and other
administrative services for LJMCal for which the Company received $72,000
during 1995.

8.LEASES:

Future minimum lease payments for noncancelable operating leases for office
space and equipment approximate $304,000, $49,000, $48,000, $19,000 and $0
for the years ended December 31, 1996 through 2000, respectively. Rent
expense under these operating leases aggregated approximately $327,000 for
the year ended December 31, 1995.

9.REGULATORY REQUIREMENTS:

The Company is a Department of Housing and Urban Development (HUD) approved
Title II mortgagee as well as a Freddie Mac-approved Multifamily Program
Plus Seller/Servicer. The Company is subject to the minimum net worth
requirements of HUD and Freddie Mac. At December 31, 1995, the Company's
net worth, as calculated in accordance with HUD and Freddie Mac guidelines,
was in excess of the minimum required net worth. Additionally, as of
December 31, 1995, the Company carried errors and omission insurance
coverage of $5,000,000 and fidelity bond insurance coverage of $4,000,000,
which are in excess of the minimum required insurance coverage of each
program.

As a Freddie Mac Multifamily Program Plus Seller/Servicer, the Company is
obligated to advance funds to ensure the timely payment of insurance and
taxes on loans serviced on behalf of Freddie Mac. Advances are recovered
through subsequent collections from the borrower or from Freddie Mac in the
event of default by the borrower. At December 31, 1995, there were no
advances outstanding for insurance and taxes.

10.SUBSEQUENT EVENT:

On July 1, 1996, CB Commercial Mortgage Company, Inc. (CB Mortgage), a
wholly owned subsidiary of CB Commercial Real Estate Group, Inc., acquired
all of the outstanding capital stock of the Company and of LJMCal.
Concurrent with this transaction the Company distributed approximately $3.1
million of assets to its shareholders. On July 9, 1996, CB Mortgage merged
into the Company, with the Company surviving the merger. As a result of the
merger, LJMCal became a wholly owned subsidiary of the Company, and it is
intended that, at the end of 1996, LJMCal will be merged into the Company.

F-50
<PAGE>

L.J. MELODY & COMPANY OF CALIFORNIA

BALANCE SHEET

JUNE 30, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
1996
----------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents......................................... $ 257,892
Accounts receivable and other current assets...................... 78,753
----------
Total current assets............................................. 336,645
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net.......................... 169,060
OTHER ASSETS:
Employment agreements and covenants not to compete, net........... 63,787
Purchased loan servicing rights and related assets, net........... 372,135
----------
TOTAL ASSETS..................................................... $ 941,627
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued employee benefits......................................... $ 197,491
Accounts payable and accrued expenses............................. 69,755
----------
TOTAL CURRENT LIABILITIES........................................ 267,246
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Voting common stock, par value $1 per share, 3,000 shares autho-
rized, $1,000 shares issued and outstanding...................... 1,000
Non-voting common stock, par value $1 per share, 1,000 shares au-
thorized, 1 share issued
and held in treasury............................................. --
Additional paid-in capital........................................ 1,179,974
Retained earnings................................................. (506,593)
----------
674,381
----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY....................... $ 941,627
==========
</TABLE>

F-51
<PAGE>

L.J. MELODY & COMPANY OF CALIFORNIA

STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
1996
----------
<S> <C>
REVENUES:
Loan placement and brokerage....................................... $ 942,981
Loan servicing..................................................... 326,798
Other income (loss)................................................ (3,350)
----------
1,266,429
EXPENSES:
Salaries and other compensation.................................... 1,074,529
General and administrative......................................... 624,358
Depreciation and amortization...................................... 128,382
----------
1,827,269
NET LOSS.......................................................... $ (560,840)
==========
</TABLE>

F-52
<PAGE>

L.J. MELODY & COMPANY OF CALIFORNIA

STATEMENT OF SHAREHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
VOTING ADDITIONAL RETAINED
COMMON PAID-IN EARNINGS
STOCK CAPITAL (DEFICIT) TOTAL
------ ---------- --------- ----------
<S> <C> <C> <C> <C>
Balance, December 31, 1995........... $1,000 $1,407,247 $ 54,247 $1,462,494
Distributions to or on behalf of
shareholders........................ -- (227,273) -- (227,273)
Net loss............................. -- -- (560,840) (560,840)
------ ---------- --------- ----------
Balance, June 30, 1996............... $1,000 $1,179,974 $(506,593) $ 674,381
====== ========== ========= ==========
</TABLE>

F-53
<PAGE>

L.J. MELODY & COMPANY OF CALIFORNIA

STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)

<TABLE>
<CAPTION>
1996
---------
<S> <C>
OPERATING ACTIVITIES:
Net Loss........................................................... $(560,840)
Adjustments to reconcile net loss to net cash used in operating
activties--
Depreciation and amortization..................................... 128,382
Loss on disposal on equipment..................................... 28,626
Changes in operating assets and liabilities--
Accounts receivable and other current assets..................... 1,089,436
Accrued employee benefits........................................ (227,116)
Accounts payable and accrued expenses............................ (60,860)
---------
Net cash provided by (used in) operating activities................ 397,628
INVESTING ACTIVITIES:
Purchase of other assets........................................... --
Purchase of equipment.............................................. (93,863)
---------
Net cash used in investing activities.............................. (93,863)
FINANCING ACTIVITIES:
Repurchase of non-voting common stock.............................. --
Distributions to shareholders...................................... (227,273)
---------
Net cash used in financing activities.............................. (227,273)
---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................ 76,492
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.................... 181,400
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.......................... $ 257,892
=========
</TABLE>

F-54
<PAGE>

L.J. MELODY & COMPANY OF CALIFORNIA

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 1996
(UNAUDITED)

1.SIGNIFICANT ACCOUNTING MATTERS:

L.J. Melody & Company of California (the Company) is a commercial mortgage
banker and servicer of commercial mortgages. As of June 30, 1996, the
Company was servicing loans for others with principal balances aggregating
approximately $1.6 billion. Approximately 50 percent of loan placement and
brokerage revenue and 70 percent of loan servicing revenue were earned from
one client. In addition, approximately 10 percent of loan placement and
brokerage revenue and 25 percent of loan servicing revenue were earned from
two separate clients. The Company primarily operates in southern California
and Arizona; however, it pursues mortgage banking operations in other areas
of the country as they arise. The following is a summary of the Company's
significant accounting matters.

BASIS OF PRESENTATION

The financial statements for the interim period have been prepared 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, although the Company believes that the disclosures are
adequate to make the information not misleading. In the opinion of
management, the accompanying consolidated financial statements reflect all
adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of financial position and results of operation.

USE OF 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 assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

NEW ACCOUNTING STANDARD REGARDING IMPAIRMENT

In March 1995 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." This statement established the recognition and measurement
standards related to the impairment of long-lived assets. Effective January
1, 1996, the Company adopted SFAS No. 121. The adoption of this standard
did not have a material effect on the Company's financial position or
results of operations.

NEW ACCOUNTING STANDARD REGARDING ACCOUNTING FOR TRANSFERS AND SERVICING OF
FINANCIAL ASSETS AND EXTINGUISHMENT OF LIABILITIES

F-55
<PAGE>

L.J. MELODY & COMPANY OF CALIFORNIA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1996
(UNAUDITED)

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and money market mutual funds.
Cash equivalents are carried at cost, which approximates fair value. The
Company considers all investments with an original maturity of less than
three months to be cash equivalents.

EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment and leasehold improvements are carried at cost. Depreciation and
amortization are computed using the straight-line or double declining
balance methods over the assets' estimated useful lives, which range from
three to ten years.

PURCHASED LOAN SERVICING RIGHTS

The cost of purchased loan servicing rights is being amortized in
proportion to and over the period of estimated servicing income and on a
straight-line basis. Adjustments are made for unexpected loan prepayments
as they occur.

EMPLOYMENT AGREEMENTS AND COVENANTS NOT TO COMPETE

Capitalized costs relating to employment agreements and covenants not to
compete are amortized on a straight-line basis over the term of the related
agreement.

LOAN PLACEMENT AND BROKERAGE

Revenue from loan placement and brokerage is recognized at the time that a
noncontingent commitment is obtained and the Company has no significant
remaining obligations for performance in connection with the transaction.
Related expenses are charged to income as incurred.

LOAN SERVICING

INCOME TAXES

2.RELATED-PARTY TRANSACTIONS:

L.J. Melody & Company provides loan servicing on certain loans obtained by
the Company and also provides administrative services for which the Company
paid $130,608 during the six months ended June 30, 1996.

F-56
<PAGE>

L.J. MELODY & COMPANY OF CALIFORNIA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1996
(UNAUDITED)
3.SUBSEQUENT EVENT:

Effective July 1, 1996, CB Commercial Mortgage Company, Inc. (CB Mortgage),
a wholly owned subsidiary of CB Commercial Real Estate Group, Inc.,
acquired all of the outstanding capital stock of the Company and of L.J.
Melody & Company (LJMCo), an affiliate of the Company. Concurrent with this
transaction the Company distributed approximately $66,000 of assets to its
shareholders. On July 9, 1996, CB Mortgage merged into LJMCo, with the
LJMCo surviving the merger. As a result of the merger, the Company became a
wholly owned subsidiary of LJMCo, and it is intended that at the end of
1996 the Company will be merged into LJMCo.

F-57
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
L.J. Melody & Company of California:

We have audited the accompanying balance sheet of L.J. Melody & Company of
California (a Texas corporation) as of December 31, 1995, and the related
statements of operations, changes in shareholders' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of L.J. Melody & Company of
California as of December 31, 1995, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.

Houston, Texas
March 18, 1996 (except with Arthur Andersen llp
respect to the matter discussed
in Note 6, as to which the date
is July 12, 1996)

F-58
<PAGE>

L.J. MELODY & COMPANY OF CALIFORNIA

BALANCE SHEET

DECEMBER 31, 1995

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................................... $ 181,400
Accounts receivable and other current assets...................... 1,168,189
----------
Total current assets............................................. 1,349,589
EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Furniture and fixtures............................................ 135,796
Computer hardware and software.................................... 23,744
Leasehold improvements............................................ 65,665
----------
225,205
Less--Accumulated depreciation and amortization................... (103,625)
----------
121,580
OTHER ASSETS:
Employment agreements and covenants not to compete,
net of accumulated amortization of $427,816...................... 111,624
Purchased loan servicing rights and related assets,
net of accumulated amortization of $540,490...................... 434,923
----------
Total assets..................................................... $2,017,716
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued employee benefits......................................... $ 424,607
Accounts payable and accrued expenses............................. 130,615
----------
Total current liabilities........................................ 555,222
COMMITMENTS AND CONTINGENCIES (Note 4)
SHAREHOLDERS' EQUITY:
Voting common stock, par value $1 per share, 3,000 shares
authorized,
1,000 shares issued and outstanding.............................. 1,000
Nonvoting common stock, par value $1 per share, 1,000 shares
authorized,
1 share issued and held in treasury.............................. --
Additional paid-in capital........................................ 1,407,247
Retained earnings................................................. 54,247
----------
1,462,494
----------
Total liabilities and shareholders' equity....................... $2,017,716
==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-59
<PAGE>

L.J. MELODY & COMPANY OF CALIFORNIA

STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<S> <C>
REVENUES:
Loan placement and brokerage....................................... $2,776,119
Loan servicing..................................................... 693,926
Other income....................................................... 8,970
----------
3,479,015
EXPENSES:
Salaries and other compensation.................................... 2,093,064
General and administrative......................................... 975,849
Depreciation and amortization...................................... 273,393
----------
3,342,306
----------
NET INCOME.......................................................... $ 136,709
==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-60
<PAGE>

L.J. MELODY & COMPANY OF CALIFORNIA

STATEMENT OF SHAREHOLDERS' EQUITY

FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
VOTING NONVOTING ADDITIONAL RETAINED
COMMON COMMON PAID-IN EARNINGS
STOCK STOCK CAPITAL (DEFICIT) TOTAL
------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994.. $1,000 $ 1 $1,205,025 $(81,268) $1,124,758
DISTRIBUTIONS TO OR ON BE-
HALF OF SHAREHOLDERS....... -- -- (25,000) -- (25,000)
CAPITAL CONTRIBUTIONS....... -- -- 227,222 -- 227,222
NET INCOME.................. -- -- -- 136,709 136,709
REPURCHASE OF NONVOTING
COMMON STOCK............... -- (1) -- (1,194) (1,195)
------ --- ---------- -------- ----------
BALANCE, December 31, 1995.. $1,000 $-- $1,407,247 $ 54,247 $1,462,494
====== === ========== ======== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-61
<PAGE>

L.J. MELODY & COMPANY OF CALIFORNIA

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net income......................................................... $ 136,709
Adjustments to reconcile net income to net cash used in operating
activities--
Depreciation and amortization..................................... 273,393
Changes in operating assets and liabilities--
Accounts receivable and other current assets..................... (991,917)
Accrued employee benefits........................................ 176,847
Accounts payable and accrued expenses............................ 59,031
---------
Net cash used in operating activities........................... (345,937)
INVESTING ACTIVITIES:
Proceeds from sale of equipment.................................... 1,577
Purchase of equipment.............................................. (69,483)
Purchase of loan servicing rights and related assets............... (41,124)
---------
Net cash used in investing activities........................... (109,030)
FINANCING ACTIVITIES:
Capital contributions.............................................. 227,222
Distributions to shareholders...................................... (25,000)
Repurchase of nonvoting common stock............................... (1,195)
---------
Net cash provided by financing activities....................... 201,027
---------
NET DECREASE IN CASH AND CASH EQUIVALENTS........................... (253,940)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR...................... 435,340
---------
CASH AND CASH EQUIVALENTS AT END OF YEAR............................ $ 181,400
=========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for state income taxes................... $ 800
=========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-62
<PAGE>

L.J. MELODY & COMPANY OF CALIFORNIA

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1995

1.SIGNIFICANT ACCOUNTING MATTERS:

L.J. Melody & Company of California (the Company) is a commercial mortgage
banker and servicer of commercial mortgages. As of December 31, 1995, the
Company was servicing loans for others with principal balances aggregating
approximately $1.4 billion. Approximately 52 percent of loan placement and
brokerage revenue and 71 percent of loan servicing revenue were earned from
one investor. In addition, 12 percent of loan placement and brokerage
revenue and 25 percent of loan servicing revenue were earned from two
separate investors. The Company primarily operates in Southern California
and Arizona; however, it pursues mortgage banking operations in other areas
of the country as they arise. The following is a summary of the Company's
significant accounting matters.

USE OF 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 assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

NEW ACCOUNTING STANDARD REGARDING IMPAIRMENT

NEW ACCOUNTING STANDARD REGARDING ACCOUNTING FOR MORTGAGE SERVICING RIGHTS

In May 1995, the Financial Accounting Standards Board issued SFAS No. 122,
"Accounting for Mortgage Servicing Rights." This statement requires that a
mortgage banking enterprise recognize as separate assets rights to service
mortgage loans for others, however those servicing rights are acquired.
This statement is required to be adopted by the Company in fiscal 1996.
Management of the Company has not yet determined the impact, if any, that
the adoption of this statement will have on the Company's financial
position or results of operations.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash and money market mutual funds.
Cash equivalents are carried at cost, which approximates fair value.

EQUIPMENT AND LEASEHOLD IMPROVEMENTS

F-63
<PAGE>

L.J. MELODY & COMPANY OF CALIFORNIA

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995
PURCHASED LOAN SERVICING RIGHTS

EMPLOYMENT AGREEMENTS AND COVENANTS NOT TO COMPETE

Capitalized costs relating to employment agreements and covenants not to
compete are amortized on a straight-line basis over the term of the related
agreement.

LOAN PLACEMENT AND BROKERAGE

Revenue from loan placement and brokerage is recognized at the time that a
noncontingent commitment is obtained and the Company has no significant
remaining obligations for performance in connection with the transaction.
Related expenses are charged to income as incurred.

LOAN SERVICING

Loan servicing revenue represents a participation in interest collections
on loans serviced for investors, normally based upon a stipulated
percentage of the outstanding monthly principal balance of such loans.
These revenues are credited to income as monthly principal and interest
payments are collected from mortgagors, and expenses of loan servicing are
charged to income as incurred. As of December 31, 1995, escrow funds of
$6,691,225, held in conjunction with servicing activities, were on deposit
in bank accounts held in trust for investors and are not included in the
accompanying balance sheet.

INCOME TAXES

FAIR VALUE OF FINANCIAL INSTRUMENTS

2.ACCOUNTS RECEIVABLE AND OTHER CURRENT ASSETS:

The components of accounts receivable and other current assets at December
31, 1995 are as follows:

<TABLE>
<CAPTION>
<S> <C>
Loan placement and brokerage fees receivable..................... $1,063,766
Other receivables................................................ 51,715
Other current assets............................................. 52,708
----------
$1,168,189
==========
</TABLE>

F-64
<PAGE>

L.J. MELODY & COMPANY OF CALIFORNIA

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1995

3.RELATED-PARTY TRANSACTIONS:

L.J. Melody & Company provides loan servicing on certain loans obtained by
the Company and also provides administrative services for which the Company
paid $261,246 and $72,000, respectively, during 1995.

4.LEASES:

Future minimum lease payments for noncancelable operating leases for office
space and equipment approximate $241,000, $230,000, $223,000, $207,000 and
$213,000 for the years ended December 31, 1996 through 2000, respectively.
Rent expense under these operating leases aggregated approximately $247,000
for the year ended December 31, 1995.

5.PROFIT-SHARING PLANS:

The Company has a 401(k) profit-sharing plan under which all employees are
eligible for participation after completing six months of service.
Participating employees can elect to make contributions to the plan on a
pretax salary deduction basis in accordance with the provisions of Section
401(k) of the Internal Revenue Code. Under the provisions of the plan, the
Company may make discretionary matching contributions. The Company's
contribution to the plan in 1995 was $42,867.

6.SUBSEQUENT EVENT:

On July 1, 1996, CB Commercial Mortgage Company, Inc. (CB Mortgage), a
wholly owned subsidiary of CB Commercial Real Estate Group, Inc., acquired
all of the outstanding capital stock of the Company and of L.J. Melody &
Company (LJMCo), an affiliate of the Company. On July 9, 1996, CB Mortgage
merged into LJMCo, with LJMCo surviving the merger. As a result of the
merger, the Company became a wholly owned subsidiary of LJMCo, and it is
intended that, at the end of 1996, the Company will be merged into LJMCo.

F-65
<PAGE>

Graphic on Inside Back Cover

Circular Diagram of arrows illustrating the integration
of all of the Company's commercial real estate services with
the needs of real estate owners and investors.
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED BY THE COMPANY, OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE COMMON STOCK IN ANY
JURISDICTION WHERE OR, TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.

----------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 14
The Company............................................................... 18
Use of Proceeds........................................................... 18
Dividend Policy........................................................... 18
Capitalization............................................................ 19
Selected Consolidated Financial and Other Data............................ 20
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 23
Business.................................................................. 35
Management................................................................ 48
Certain Transactions...................................................... 56
Principal Stockholders.................................................... 58
Description of Capital Stock.............................................. 61
The Company's Credit Agreements........................................... 64
Shares Eligible For Future Sale........................................... 66
Underwriting.............................................................. 68
Legal Matters............................................................. 69
Experts................................................................... 69
Additional Information.................................................... 69
Pro Forma Financial Statements............................................ P-1
Financial Statements...................................................... F-1
</TABLE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

[LOGO OF CB COMMERCIAL]

CB COMMERCIAL REAL ESTATE
SERVICES GROUP, INC.

COMMON STOCK

----------------

PROSPECTUS

----------------

MERRILL LYNCH & CO.
MONTGOMERY SECURITIES

, 1996

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses expected to be incurred
by the Registrant in connection with the sale and distribution of the
securities being registered hereby, other than underwriting discounts and
commissions. All amounts are estimated except the Securities and Exchange
Commission registration fee and the National Association of Securities
Dealers, Inc. filing fee.

<TABLE>
<CAPTION>
PAYABLE BY
REGISTRANT
----------
<S> <C>
SEC registration fee.............................................. $ 29,741
National Association of Securities Dealers, Inc. filing fee....... 9,125
New York Stock Exchange Listing Fee............................... 300,000
Blue Sky fees and expenses........................................
Accounting fees and expenses......................................
Legal fees and expenses........................................... 300,000
Printing and engraving expenses................................... 250,000
Registrar and Transfer Agent's fees............................... 15,000
Miscellaneous fees and expenses...................................
--------
Total......................................................... $
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law provides for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Act"). Article Six of the
Registrant's Fourth Amended Restated Certificate of Incorporation (Exhibit
3(i).2 hereto) provides for the indemnification of the Company's directors and
officers to the extent and under the circumstances permitted by the Delaware
General Corporation Law.

The Purchase Agreement (Exhibit 1.1) provides for indemnification by the
Underwriters of the Registrant, its directors and officers, and by the
Registrant of the Underwriters, for certain liabilities, including liabilities
arising under the Act, and affords certain rights of contribution with respect
thereto.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since January 1, 1996, the Company has sold 510,906 shares of Common Stock
to eight executive officers of the Company under the Company's 1996 Equity
Incentive Plan. These sales were made by private placement in reliance on the
exemption from registration provisions provided for in Section 4(2) of the
Securities Act.

The recipients of the above-described securities represented their intention
to acquire the securities for investment only and not with a view to
distribution thereof. Appropriate legends were affixed to the stock
certificates issued in such transactions. All recipients had adequate access,
through employment, to information about the Registrant.

II-1
<PAGE>

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1+ Form of Purchase Agreement.

3(i).1* Third Restated Certificate of Incorporation of Registrant
filed as Exhibit 3.1 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1989.
3(i).2+ Form of Fourth Restated Certificate of Incorporation of
Registrant to be filed after the effective date of this
Registration Statement.
3(ii).1* Second Amended and Restated Bylaws of the Registrant filed
as Exhibit 3.4 to Registrant's Post-Effective Amendment No.
1 to its Form S-1 Registration Statement, File No. 33-
29410.
3(ii).2+ Form of Third Amended and Restated Bylaws of the Registrant
to be adopted after the effective date of this Registration
Statement.
4.1+ Specimen Form of Common Stock Certificate.
4.2* Form of CB Commercial Holdings, Inc. Restricted Stock
Agreement between CB Commercial Holdings, Inc. and CB
Commercial Holdings, Inc.'s Officer or Employee, filed as
Exhibit 4.8 to the CB Commercial Holdings, Inc. Form S-1
Registration Statement, File No. 33-29410.
4.3* First Amendment to CB Commercial Holdings, Inc. Restricted
Stock Agreement files as Exhibit 4.9 to the CB Commercial
Holdings, Inc. Annual Report on Form 10-K for the year
ended December 31, 1989.
4.4 Agreement by and between CB Commercial Holdings, Inc. and
Kajima U.S.A., Inc., Fukoku Mutual Life Insurance Company,
Kasen Development, Inc. and S.R.E.S.--Fifth Avenue, Inc.
dated August 30, 1996.
5.1+ Opinion of Pillsbury Madison & Sutro LLP.
10.1(i)* CB Commercial Holdings, Inc. Omnibus Stock and Incentive
Plan filed as Exhibit 10.13 to the CB Commercial Holdings,
Inc. Post-Effective Amendment No. 1 to Form S-1
Registration Statement, File No. 33-29410.
10.1(ii)* First Amendment to the CB Commercial Holdings, Inc. Omnibus
Stock and Incentive Plan filed as Exhibit 10.16 to the CB
Commercial Holdings, Inc. Annual Report on Form 10-K for
the year ended December 31, 1990.
10.1(iii)* Second Amendment to the CB Commercial Holdings, Inc. Omnibus
Stock and Incentive Plan filed as Exhibit 10.16 (iii) to
the CB Commercial Holdings, Inc. Annual Report on Form 10-K
for the year ended December 31, 1993.
10.1(iv)* Third Amendment to the CB Commercial Holdings, Inc. Omnibus
Stock and Incentive Plan filed as Exhibit 10.4 (iv) to the
CB Commercial Holdings, Inc. Annual Report on Form 10-K for
the year ended December 31, 1994.
10.2(i)* 1990 Stock Option Plan filed as Exhibit 4(a) to the CB
Commercial Holdings, Inc. Quarterly Report on Form 10-Q for
the quarter ended June 30, 1990.
10.2(ii)* First Amendment to the 1990 Stock Option Plan, filed as
Exhibit 10.15(ii) to the CB Commercial Holdings, Inc.
Annual Report on Form 10-K for the year ended December 31,
1992.
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.2(iii)* Second Amendment to the 1990 Stock Option Plan filed as Exhibit
10.8 (iii) to the CB Commercial Holdings, Inc. Annual Report
on Form 10-K for the year ended December 31, 1993.
10.2(iv)* Third Amendment to the 1990 Stock Option Plan filed as Exhibit
10.5 (iv) to the
CB Commercial Holdings, Inc. Annual Report on Form 10-K for
the year ended December 31, 1994.
10.3* Form of Incentive Stock Option Agreement filed as Exhibit 4(b)
to the
CB Commercial Holdings, Inc. Quarterly Report on Form 10-Q for
the quarter ended June 30, 1990.
10.4* Form of Nonstatutory Stock Option Agreement filed as Exhibit
4(c) to the
CB Commercial Holdings, Inc. Quarter Report on Form 10-Q for
the quarter ended June 30, 1990.
10.5(i)* Second Amended and Restated Senior Secured Credit Agreement,
dated as of June 30, 1994 between CB Commercial Real Estate
Group, Inc. and The Sumitomo Bank, Limited filed as Exhibit
10.9 to the CB Commercial Holdings, Inc. Annual Report on Form
10-K for the year ended December 31, 1994.
10.5(ii)* Limited Waiver, Consent and Amendment No. 1 dated as of June
30, 1995 to Second Amended and Restated Senior Secured Credit
Agreement dated as of June 30, 1995 between CB Commercial Real
Estate Group, Inc. and The Sumitomo Bank, Limited, filed as to
the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
10.5(iii)* Amendment No. 2 dated as of June 30, 1996, to Second Amended
and Restated Senior Secured Credit Agreement dated as of June
30, 1994, between CB Commercial Real Estate Group, Inc. and
The Sumitomo Bank, Limited filed as Exhibit 10.6(iii) to the
Company's Quarterly Report on 10-Q for the quarter ended June
30, 1996.
10.5(iv)* Form of Third Amended and Restated Senior Secured Credit
Agreement between
CB Commercial Real Estate Group, Inc. and The Sumitomo Bank,
Limited.
10.6(i)* Senior Subordinated Credit Agreement among Coldwell Banker
Commercial Group, Inc., CB Commercial Holdings, Inc. and
certain subsidiaries of Coldwell Banker Commercial Group,
Inc., as guarantors and Sumitomo Finance (Dublin) Limited,
dated July 20, 1990 (the "Senior Subordinated Credit
Agreement") filed as Exhibit 4(e) to the CB Commercial
Holdings, Inc. Quarterly Report on Form 10-Q for the quarter
ended June 30, 1990.
10.6(ii)* Amendment No. 1 to Senior Subordinated Credit Agreement dated
as of October 10, 1991 among CB Commercial Real Estate Group,
Inc., as borrower,
CB Commercial Holdings, Inc. and certain subsidiaries of CB
Commercial Real Estate Group, Inc., as guarantors, and
Sumitomo Finance (Dublin) Limited, as lender filed as Exhibit
10.19 to CB Commercial Holdings, Inc. Current Report on Form
8-K dated March 27, 1992.
10.6(iii)* Amendment No. 2 to Senior Subordinated Credit Agreement dated
as of June 30, 1994 among CB Commercial Real Estate Group,
Inc., as borrower,
CB Commercial Holdings, Inc. and certain subsidiaries of CB
Commercial Real Estate Group, Inc., as guarantors, and
Sumitomo Finance (Dublin) Limited, as lender, filed as Exhibit
10.11 to the CB Commercial Holdings, Inc. Annual Report on
Form 10-K for the year ended December 31, 1994.
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.6(iv)* Limited Waiver, Consent and Amendment No. 3 dated as of June
30, 1995 to Senior Subordinated Credit Agreement dated as of
October 10, 1991 among CB Commercial Real Estate Group, Inc.,
as borrower, CB Commercial Holdings, Inc. and certain
subsidiaries of CB Commercial Real Estate Group, Inc., as
guarantors, and Sumitomo Finance (Dublin) Limited, as lender,
filed as exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.
10.6(v)* Amendment No. 4 dated as of June 30, 1996, to Senior
Subordinated Credit Agreement dated as of October 10, 1991,
among CB Commercial Real Estate Group, Inc. as borrower. CB
Commercial Holdings, Inc. and certain subsidiaries of CB
Commercial Real Estate Group, Inc., as guarantors, and
Sumitomo Finance (Dublin) Limited, as lender filed as Exhibit
10.7(v) to the Company's Quarterly Report on Form 10-Q for the
Quarter Ended June 30, 1996.
10.7* CB Commercial Holdings, Inc. 1991 Service Providers Stock
Option Plan filed as Exhibit 10.27 to the CB Commercial
Holdings, Inc. Current Report on Form 8-K dated April 1, 1992.
10.8(i)* CB Commercial Holdings, Inc. Deferred Compensation Plan filed
as Exhibit 10.21 to the CB Commercial Holdings, Inc. Annual
Report on Form 10-K for the year ended December 31, 1993.
10.8(ii)* First Amendment to the CB Commercial Holdings, Inc. Deferred
Compensation Plan filed as Exhibit 10.13 (ii) to the CB
Commercial Holdings, Inc. Annual Report on Form 10-K for the
year ended December 31, 1994.
10.8(iii)* Second Amendment to the CB Commercial Holdings, Inc. Deferred
Compensation Plan, filed as exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
10.9* 1996 Equity Incentive Plan of CB Commercial Holdings, Inc,
filed as exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.
10.10* Form of Indemnification Agreement between CB Commercial
Holdings, Inc., CB Commercial Real Estate Group, Inc. and
directors and officers, filed as Exhibit 10.29 to the CB
Commercial Holdings, Inc. Annual Report on Form 10-K for the
year ended December 31, 1992.
10.11* Purchase Agreement dated as of May 15, 1995 among CB Commercial
Real Estate Group, Inc., Westmark Real Estate Acquisition
Partnership, L.P., and certain individuals signatory thereto,
filed as Exhibit 10.1 to the CB Commercial Holdings, Inc.
Current Report on Form 8-K dated June 30, 1995.
10.12+ Employment Agreement between the Company and Lawrence J. Melody
dated July 1, 1996.
10.13+ Registration Rights Agreement among the Company and Kajima
U.S.A., Inc., Fukoko Mutual Life Insurance Company, Kasen
Development, Inc. and S.R.E.S.-Fifth Avenue, Inc. dated
, 1996.
11.1* Statement of computation of earnings per share.
22.1+ Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP regarding CB Commercial.
23.2 Consent of Arthur Andersen LLP regarding L.J. Melody.
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of Pillsbury Madison & Sutro LLP (included in its opinion
filed as Exhibit 5.1 to this Registration Statement).
24.1 Power of Attorney (see page II-6).
</TABLE>

- --------
* Incorporated by reference.
+ To be filed by amendment.

(b) FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Opinion of Arthur Anderson LLP.......................................... S-1
I--Condensed Financial Information of Registrant....................... S-2
II--Valuation and Qualifying Accounts................................... S-3
</TABLE>

All other schedules are not submitted because either they are not
applicable, not required or the information required is included in the
Consolidated Financial Statements, including the notes thereto.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Act, the information
omitted from the form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Act shall be deemed to be part of this registration statement as of the time
it was declared effective.

(2) For the purpose of determining any liability under the Act, each post-
effective amendment that contains a form of prospectus shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(3) It will provide to the underwriters at the closing(s) specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to each
purchaser.

II-5
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF LOS ANGELES, STATE OF
CALIFORNIA, ON THE 24TH DAY OF SEPTEMBER, 1996.

CB Commercial Holdings, Inc.

/s/ James J. Didion
By: _________________________________
JAMES J. DIDION
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints JAMES J. DIDION, WALTER V. STAFFORD and DAVID
A. DAVIDSON, and each of them, his true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities, to sign any and all
amendments, including post-effective amendments, to this Registration
Statement, and any registration statement relating to the offering covered by
this Registration Statement and filed pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that each of
said attorneys-in-fact and agents or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

NAME TITLE DATE

/s/ James J. Didion Chief Executive September 24,
- ------------------------------------- Officer (Principal 1996
JAMES J. DIDION Executive Officer)
and Director

/s/ David A. Davidson Senior Executive September 24,
- ------------------------------------- Vice President, 1996
DAVID A. DAVIDSON Chief Financial
Officer, Treasurer
(Principal
Financial Officer)

II-6
<PAGE>

NAME TITLE DATE

/s/ Ronald J. Platisha Executive Vice September 24,
- ------------------------------------- President 1996
RONALD J. PLATISHA (Principal
Accounting Officer)

/s/ Stanton D. Anderson Director September 24,
- ------------------------------------- 1996
STANTON D. ANDERSON

/s/ Gary J. Beban Director September 24,
- ------------------------------------- 1996
GARY J. BEBAN

/s/ Richard C. Blum Director September 24,
- ------------------------------------- 1996
RICHARD C. BLUM

Director September ,
- ------------------------------------- 1996
FRANK C. CARLUCCI

/s/ Richard C. Clotfelter Director September 24,
- ------------------------------------- 1996
RICHARD C. CLOTFELTER

Director September ,
- ------------------------------------- 1996
DANIEL A. D'ANIELLO

Director September ,
- ------------------------------------- 1996
HIROAKI HOSHINO

/s/ Paul C. Leach Director September 24,
- ------------------------------------- 1996
PAUL C. LEACH

/s/ George J. Kallis Director September 24,
- ------------------------------------- 1996
GEORGE J. KALLIS

/s/ Takayuki Kohri Director September 24,
- ------------------------------------- 1996
TAKAYUKI KOHRI

/s/ Frederic V. Malek Director September 24,
- ------------------------------------- 1996
FREDERIC V. MALEK

/s/ Lawrence J. Melody Director September 24,
- ------------------------------------- 1996
LAWRENCE J. MELODY

/s/ Jeffrey S. Morgan Director September 24,
- ------------------------------------- 1996
JEFFREY S. MORGAN

/s/ Richard A. Pogue Director September 24,
- ------------------------------------- 1996
RICHARD A. POGUE

Director September ,
- ------------------------------------- 1996
PETER V. UEBERROTH

/s/ Gary L. Wilson Director September 24,
- ------------------------------------- 1996
GARY L. WILSON

II-7
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To CB Commercial Holdings, Inc.

We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of CB Commercial Holdings, Inc. for the
years ended December 31, 1995, 1994, and 1993, and have issued our report
thereon dated January 31, 1996. We have also audited the Schedule of Condensed
Financial Information of the Company and the Schedule of Valuation and
Qualifying Accounts of the Company for purposes of complying with the
Securities Exchange Commission rules and are not part of the basic
consolidated financial statements. These schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
schedules based on our audits.

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

In our opinion, the schedules of the Company referred to above present
fairly, in all material respects, the financial data required to be set forth
therein in relation to the basic consolidated financial statements taken as a
whole.

ARTHUR ANDERSEN LLP

January 31, 1996
Los Angeles, California
<PAGE>

CB COMMERCIAL REAL ESTATE SERVICES GROUP, INC. AND SUBSIDIARIES

SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1994
----------- -----------
<S> <C> <C>
BALANCE SHEET
Advances to CB Commercial.............................. $ 42,918 $ 40,682
Investment in CB Commercial and subsidiaries........... 62,124 62,124
----------- -----------
Total assets......................................... $ 105,042 $ 102,806
=========== ===========
Stockholders' Equity................................... $ 105,042 $ 102,806
=========== ===========
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
INCOME STATEMENT
Expenses--other.............................................. $ 39 $(45) 47
Provision for income taxes................................... 51 -- 1
---- ---- ----
Net income (loss).......................................... $(90) $ 45 $(48)
==== ==== ====
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
STATEMENT OF CASH FLOWS
Net income (loss)............................................ $(90) $ 45 $(48)
Adjustments to reconcile net income (loss) to net cash used
in operating activities..................................... -- -- --
Advances to CB Commercial................................... 90 (45) 48
---- ---- ----
Net cash provided by operating activities................... -- -- --
Cash flows from investing activities......................... -- -- --
Cash flows from financing activities......................... -- -- --
Net change in cash and cash equivalents...................... -- -- --
Cash and cash equivalents, at beginning of period............ -- -- --
---- ---- ----
Cash and cash equivalents, at end of period.................. $ -- $ -- $ --
==== ==== ====
</TABLE>

NOTES TO CONDENSED FINANCIAL INFORMATION

Note 1--In connection with the Acquisition, the Company, together with all
other CB Commercial subsidiaries, has guaranteed any and all
obligations of CB Commercial.

S-2
<PAGE>

CB COMMERCIAL REAL ESTATE SERVICES GROUP, INC. AND SUBSIDIARIES

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
RESERVE FOR ALLOWANCE
EMPLOYEE FOR BAD LEGAL
LOANS DEBTS RESERVE
----------- --------- -------
<S> <C> <C> <C>
Balance, December 31, 1992....................... $ -- $1,238 $1,226
Charges to expense.............................. 1,810 4,275 1,500
Write-offs...................................... (42) (975) (117)
------ ------ ------
Balance, December 31, 1993....................... 1,768 4,538 2,609
Charges to expense.............................. -- 1,096 1,250
Write-offs...................................... (23) (1,090) (404)
------ ------ ------
Balance, December 31, 1994....................... 1,745 4,544 3,455
Charges to expense.............................. -- 346 --
Write-offs...................................... (210) (490) --
------ ------ ------
Balance, December 31, 1995....................... $1,535 $4,400 $3,455
====== ====== ======
</TABLE>

S-3

<PAGE>

EXHIBIT 4.4

AGREEMENT
---------

This Agreement is made this 30th day of August, 1996 by and between CB
Commercial Holdings, Inc., a corporation organized under the laws of the State
of Delaware ("Holdings"), Kajima U.S.A., Inc., a corporation organized under the
laws of Delaware ("Kajima"), Fukoku Mutual Life Insurance company, a corporation
organized under the laws of Japan ("Fukoku"), Kasen Development, Inc., a
corporation organized under the laws of Japan ("Kasen"), and S.R.E.S.-Fifth
Avenue, Inc., a corporation organized under the laws of Delaware ("SRESFA")
(Kajima, Fukoku, Kasen and SRESFA are hereinafter individually referred to as
"Preferred Stockholder" and collectively referred to as "Preferred
Stockholders").

W I T N E S S E T H:

WHEREAS the Preferred Stockholders own collectively 4,000,000 shares of
preferred stock of Holdings; and

WHEREAS Holdings and the Preferred Stockholders wish to amend and restate
Holdings' Certificate of Incorporation and By-laws, effective upon completion of
an IPO (as herein defined), in order to enhance Holdings' potential to complete
an IPO and increase the value of Holdings for the benefit of its stockholders;
and

WHEREAS Holdings and the Preferred Stockholders wish to terminate the
Stockholders' Agreement dated as of April 18, 1989 among Holdings and its
Stockholders (the "Stockholders' Agreement"), effective upon completion of an
IPO (as herein defined).

NOW, THEREFORE the parties hereto hereby agree as follows:

1. Amendment of Certificate of Incorporation. Holdings agrees to have
-----------------------------------------
prepared and the Preferred Stockholders agree to vote, within five (5) Business
Days after receipt of Holdings' written request, for the amendment and
restatement of Holdings' Certificate of Incorporation, effective upon the
completion of an IPO (as herein defined), to provide for the following:

a. The accrual of a preferred dividend of $0.25 per quarter on each
share of preferred stock commencing October 1, 1996. In the event an IPO is
completed on or before March 31, 1997, the accrual of such dividend shall be
retroactive to October 1, 1996. Such preferred dividend must be declared
and paid in cash within one year after the last day of the quarter to which
it relates. In the event such dividend is not declared and paid within one
year after the last day of the quarter to which it relates, it
<PAGE>

will bear compound interest at either (i) a fixed rate of 8% per annum or
(ii) the LIBOR Rate plus 2 1/2% per annum, as determined by each Preferred
Stockholder and indicated thereby next to such Preferred Stockholders'
signature hereto, in each case from such last day until such dividend and
outstanding interest thereon is paid; provided, however, that (i) in the
-------- -------
event Delaware law restricts or prohibits the declaration or payment of any
dividend, no dividend shall be required to be declared and paid to the
extent so restricted or prohibited and no interest shall accrue or be paid
on such dividend, and (ii) in the event a contractual restriction in a
credit agreement with a third party to which Holdings or one of its direct
or indirect subsidiaries is a party restricts or prohibits the declaration
or payment of any dividend, no dividend shall be required to be declared or
paid to the extent so restricted or prohibited other than in accordance with
such contractual restriction, but dividends shall accumulate and accrue as
set forth above, interest shall be paid on such unpaid dividends to the
extent permitted under Delaware law and any interest which remains unpaid
shall accrue as set forth above. Following an IPO, neither Holdings nor any
of its subsidiaries shall enter into any new agreement that restricts or
prohibits the accumulation or accrual of such dividend or the payment of any
interest thereon. No dividend may accrue or be declared or be paid on
common stock while there are any unpaid dividends on preferred stock. The
Company shall not voluntarily prepay any outstanding indebtedness pursuant
to the Senior Credit Agreement (as defined below) or the Subordinated Credit
Agreement (as defined below), or any other indebtedness for borrowed money
unless the Company shall have first paid all unpaid accrued dividends and
interest to the Preferred Stockholders.

"LIBOR Rate" means the rate per annum (rounded upwards, if any, to the
next higher 1/16th of 1%) on the basis of the offered rate of deposits in
U.S. dollars to The Sumitomo Bank, Limited in the London interbank market in
amounts comparable to the aggregate amount of any dividend which was
required to have been declared and paid and for a period of six months as of
approximately 11:00 a.m (London time) on the day any dividend was required
to have been declared and paid or, if such day is not a LIBOR Business Day,
the next succeeding LIBOR Business Day. On each day on which a LIBOR Rate
is determined pursuant to this Section 1(a), the Company shall promptly
provide written notice of the LIBOR Rate so determined to each Preferred
Stockholder.

"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in New York, New York, Los Angeles, California or
Tokyo, Japan are authorized or required to close.

-2-
<PAGE>

"LIBOR Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in New York, New York or Los Angeles,
California are authorized or required to close and any day on which banks
are not open for dealings in dollar deposits in the London interbank market.

b. An increase in the total number of shares which Holdings is
authorized to issue from 27,200,002 to 108,000,000 and an increase in the
number of shares of common stock which Holdings is authorized to issue from
19,200,002 to 100,000,000.

c. The creation of a single class of common stock, the conversion of
each outstanding share of Class B-1 and Class B-2 Common Stock into one
share of the new common stock, the purchase by Holdings for $0.01 per share
of all the outstanding shares of Class C-R and Class J Common Stock and the
conversion of the 800,000 shares of outstanding Class C-1 Common Stock into
a 50-year warrant to purchase 800,000 shares of new common stock for $10 per
share.

d. Except with respect to provisions relating to Sections 1(a) and
1(e) hereto, which provisions may not be amended, restated or otherwise
modified without the prior written approval of a majority of the Preferred
Stockholders, the elimination of all shareholder and director supermajority
or class votes, the elimination of classes of directors and the elimination
of qualifications for directors.

e. The establishment of a conversion right for each holder of
preferred stock which will permit such holder to convert from time to time
its preferred stock into common stock (with customary adjustments for stock
splits and stock dividends) as follows after the completion of an IPO:

<TABLE>
<CAPTION>
No. of Shares of Common Stock
Into Which Each Share of Preferred
Market Price Stock Will Be Converted
------------ ----------------------------------

<S> <C>
less than $10.00 No conversion permitted
$10.00-21.99 .78
$22.00-22.99 .76
$23.00-23.99 .74
$24.00-24.99 .72
$25.00-25.99 .70
$26.00-26.99 .68
$27.00-27.99 .66
$28.00-28.99 .64
$29.00-29.99 .62
$30.00 and above .60
</TABLE>

-3-
<PAGE>

Each Preferred Stockholder agrees that, if during the Restricted Period any
Preferred Stockholder sells, offers to sell or otherwise disposes of shares of
common stock acquired upon the conversion of the preferred stock, whether or not
in connection with a distribution, or participates or has a direct or indirect
participation in any such undertaking, at a price less than the price at which
common stock is sold to the public in the IPO, such holder shall comply with the
volume limitations set forth in Rule 144(e) of the Securities Act of 1933, as
amended (the "Securities Act"), regardless of whether the provisions of Rule 144
would otherwise apply to such a transaction, unless such sale, offer for sale or
other disposition is pursuant to one or more block trades made from time to time
which do not involve a brokers' transaction executed on any exchange or in the
over-the-counter market. The "Restricted Period" shall mean the period
commencing on the first date any of the common stock to be sold in the IPO is
released for sale to the public and continuing to and including a date twelve
(12) months thereafter.

The term "IPO" means an underwritten offering of shares of common stock by
Holdings which is completed on or before March 31, 1997 and which raises gross
proceeds of $75,000,000 or more and results in the listing of such common stock
on either NASDAQ or The New York Stock Exchange. The term "Market Price" means
(i) during the first 20 consecutive days in which the common stock is traded
after the closing of an IPO, the price at which the common stock was offered to
the public in the IPO and (ii) thereafter, the average closing price for a
period of consecutive days which includes 20 days on which the common stock was
traded. Such period will end with the first trading day following the date
Holdings receives an election to convert.

f. The elimination of the Operating Committee.

Any vote by the Preferred Stockholders pursuant to this Section 1 shall be
null and void and of no force or effect unless (i) on or prior to October 1,
1996, the parties to that certain Waiver, Consent and Agreement dated as of
September __, 1991 (the "Waiver") shall have agreed to terminate the Waiver,
effective October 1, 1996, (ii) on or prior to October 1, 1996, The Sumitomo
Bank, Limited ("Sumitomo") shall have agreed, effective upon an IPO, to amend
the Amended and Restated Senior Secured Credit Agreement dated as of July 1,
1994, as amended, between CB Commercial Real Estate Group, Inc. ("CBC") and
Sumitomo (the "Senior Credit Agreement"), and Sumitomo Finance (Dublin) Limited
("Sumitomo Dublin") shall have agreed, effective upon an IPO, to amend the
Senior Subordinated Credit Agreement dated as of July 20, 1990 between CBC and
Sumitomo Dublin (the "Subordinated Credit Agreement"), in each case to provide
for the accrual and payment of dividends and interest as provided herein on
terms and conditions no more restrictive than those set forth on Exhibit A
hereto, which terms and conditions may not be amended, restated or otherwise
modified without the

-4-
<PAGE>

prior written consent of the holders of a majority of the Preferred Stock and
(iii) the amended and restated Certificate of Incorporation is approved by the
requisite vote of the Board of Directors of Holdings and the holders of
Holdings' common stock on or before December 31, 1996. Holdings agrees to use
its best efforts to obtain such approvals.

2. Amendment of By-Laws. The Preferred Stockholders agree to vote, within
--------------------
five (5) Business Days after receipt of Holdings' written request, to amend the
Third Amended and Restated By-Laws attached hereto as Exhibit B, effective upon
the completion of an IPO, but any such vote shall be null and void and of no
force or effect unless (i) on or prior to October 1, 1996, the parties to the
Waiver shall have agreed to terminate the Waiver, effective upon an IPO, (ii) on
or prior to October 1, 1996, Sumitomo shall have agreed, effective upon an IPO,
to amend the Senior Credit Agreement, and Sumitomo Dublin shall have agreed,
effective upon an IPO, to amend the Subordinated Credit Agreement, in each case
to provide for the accrual and payment of dividends and interest as provided
herein on terms and conditions no more restrictive than those set forth on
Exhibit A hereto, which terms and conditions may not be amended, restated or
otherwise modified without the prior written consent of the holders of a
majority of the Preferred Stock and (iii) the Third Amended and Restated By-Laws
have been approved by the requisite vote of the Board of Directors of Holdings
and the holders of Holdings' common stock on or before December 31, 1996.
Holdings agrees to use its best efforts to obtain such approvals.

3. Termination of Stockholders' Agreement. The Preferred Stockholders
--------------------------------------
agree to vote, within five (5) Business Days after receipt of Holdings' written
request, to terminate the Stockholders' Agreement dated April 18, 1989,
effective upon the completion of an IPO, but such vote shall be null and void
and of no force or effect unless (i) on or prior to October 1, 1996, the parties
to the Waiver shall have agreed to terminate the Waiver, effective upon an IPO,
(ii) on or prior to October 1, 1996, Sumitomo shall have agreed, effective upon
an IPO, to amend the Senior Credit Agreement and Sumitomo Dublin shall have
agreed, effective upon an IPO, to amend the Subordinated Credit Agreement, in
each case to provide for the accrual and payment of dividends and interest as
provided herein on terms and conditions no more restrictive than those set forth
on Exhibit A hereto, which terms and conditions may not be amended, restated or
otherwise modified without the prior written consent of the holders of a
majority of the Preferred Stock and (iii) such amendment is approved by the
holders of a majority of the Class B-2 Common Stock on or before December 31,
1996.

4. Piggyback Registration Rights. Prior to the IPO, the Preferred
-----------------------------
Stockholders and the Company shall enter into an agreement (the "Piggyback
Registration Agreement") which provides that, until expiration of the Rule 144
Period, if the

-5-
<PAGE>

Company proposes to register any of its securities, the Company will use its
best efforts to include in such registration designated Common Stock acquired by
a Preferred Stockholder upon conversion of the Preferred Stock. The Piggyback
Registration Agreement will contain customary terms and conditions, including
without limitation an underwriter's cutback. Such registration rights will not
apply to the IPO, a registration relating to an employee benefit plan, a
dividend or interest reinvestment plan or other similar plans, a corporate
reorganization or other transaction under Rule 145 of the Securities Act, a
reclassification, merger, consolidation or acquisition, or a registration on any
registration form that does not permit secondary sales. The "Rule 144 Period"
shall mean the period beginning on the first date any of the common stock to be
sold in an IPO is released for sale to the public pursuant to an IPO and
continuing until the offer and sale of common stock acquired by a Preferred
Stockholder upon conversion of the preferred stock is no longer subject to the
provisions of Rule 144 of the Securities Act, either by this Agreement or by
operation of law.

5. Effectiveness. This Agreement shall be of no further force and effect
-------------
in the event an IPO does not occur on or before March 31, 1997.

6. Governing Law. This Agreement shall be governed by and construed under
-------------
the laws of the State of Delaware without reference to the principles of
conflict of laws thereof.

7. Counterparts. This Agreement may be executed in counterparts, each one
------------
of which shall be deemed an original and all of the counterparts together shall
constitute a single agreement. This Agreement shall inure to the benefit of and
be binding upon the successors and assigns of the parties.

[signature page follows]

-6-
<PAGE>

IN WITNESS WHEREOF, this Agreement has been executed this 30th day of
August, 1996.

CB COMMERCIAL HOLDINGS, INC.

By
--------------------------------------------------

Its
-------------------------------------------------

KAJIMA U.S.A., INC.

By /s/ Hiroaki Hoshino
--------------------------------------------------

Its Executive Vice President, Chief Financial Officer
-------------------------------------------------
Applicable Interest Rate:
[X] 8% [_] LIBOR Rate plus 2 1/2%

KASEN DEVELOPMENT, INC.

By Takashi Buto
--------------------------------------------------

Its /s/ President
-------------------------------------------------
Applicable Interest Rate:
[X] 8% [_] LIBOR Rate plus 2 1/2%

FUKOKU MUTUAL LIFE INSURANCE COMPANY

By /s/ Kenji Hirai
--------------------------------------------------

Its Deputy General Manager
-------------------------------------------------
Applicable Interest Rate:
[X] 8% [_] LIBOR Rate plus 2 1/2%

S.R.E.S.-FIFTH AVENUE, INC.

By /s/ M. Okuwama
--------------------------------------------------

Its Secretary
-------------------------------------------------
Applicable Interest Rate:
[_] 8% [X] LIBOR Rate plus 2 1/2%

-7-

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
report dated January 31, 1996 (except with respect to Notes 1 and 13, for
which the date is September 24, 1996) on the CB Commercial Holdings, Inc. and
Subsidiaries financial statements and to all references to our firm included
in or made a part of this registration statement.

ARTHUR ANDERSEN LLP

Los Angeles, California
September 26, 1996

<PAGE>

EXHIBIT 23.2

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports on the consolidated financial statements of L.J. Melody & Company and
the financial statements of L.J. Melody & Company of California, and to all
references to our firm included in or made a part of this registration
statement.

ARTHUR ANDERSEN LLP

Houston, Texas
September 26, 1996

<PAGE>

EXHIBIT 23.3

WESTMARK REALTY ADVISORS L.L.C.

We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.

KPMG PEAT MARWICK LLP

Los Angeles, California
September 24, 1996